ITAT rejects IT department's re-assessment order

ITAT rejects IT department's re-assessment order

The Commissioner of Income Tax (Appeals) had also said that the taxation was completed on a faulty ground

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has quashed an order for re-assessment passed under the Income Tax Act, 1961. The bench noted that the assessing officer (AO) had issued a notice with flawed explanations.

The Commissioner of Income Tax (Appeals) had held that the validity of the notice could be tested only after considering the reasons recorded while issuing a notice under the IT Act. Also, if those were flawed, the re-assessment could be nullified. The IT department had filed an appeal before the tribunal against the order.

The Coram of judicial member Amarjit Singh and accountant member S Rifaur Rahman observed that the AO had completed the assessment based on a wrong premise. The reasons recorded by him were that the assessee received the share application money from Shirish C Shah, the person who provided the accommodation entries. Thus, ITAT dismissed the appeal.

The tribunal stated, "The remand report filed before the Ld. CIT(A) had mentioned that the AO had agreed that the share applicants did not belong to the Shah Group. Accordingly, it was held that on wrongful evidence the AO had issued a notice. This was bad in law. We do not see any reason to interfere with the findings of the Ld. CIT(A)."