The Income Tax Appellate Tribunal’s decision in ITA No. 1084/DEL/2021 deals with a critical reassessment case involving Krishna Enterprises, Delhi, and the Assistant Commissioner of Income Tax (ACIT), Circle-37(1), New Delhi for the assessment year 2011-12. The case presents significant questions about the validity of reassessment proceedings under sections 147, 148, and 151 of the Income Tax Act, 1961.
Krishna Enterprises faced reassessment that it contested on several grounds, including procedural irregularities and the absence of reasonable grounds for initiating the proceedings. This appeal by Krishna Enterprises challenges the order dated December 6, 2019, by the CIT(A), Delhi-13, which upheld the reassessment made by the assessing officer (AO) under section 143(3) read with section 147 of the Income Tax Act.
The appellant argued that the reassessment was initiated without proper application of mind by the AO, citing a lack of independent investigation into the material that supposedly necessitated the reassessment. Furthermore, the approval under section 151 was argued to be mechanical, a claim often raised in such proceedings to question the validity of reassessment.
The Tribunal, in its decision, addressed these arguments specifically dismissing some of the procedural challenges as not pressed but took a critical stance on the estimation of income. The Tribunal found that the AO’s estimation of additional income at 8% of the impugned amount was arbitrary and without basis. It instead set the estimation at 1%, aligning with precedents from the jurisdictional High Court and other ITAT orders which suggested a more reasonable estimation for similar cases.
This ruling is significant for taxpayers and practitioners alike, highlighting the necessity for the AO to adhere strictly to procedural requirements in reassessment cases and ensuring that any estimations made are grounded in evidence and precedents. It underscores the importance of judicial scrutiny in maintaining fairness in tax assessments and the need for detailed justification when deviating from established benchmarks.
The partial relief granted to Krishna Enterprises by reducing the estimated addition serves as a reminder of the checks and balances inherent in the tax adjudication process. This case serves as a reference point for similar cases where the estimation of undisclosed income is in dispute or where procedural irregularities are claimed.
Reassessment Proceedings Under Scrutiny in ITA No. 1084/DEL/2021: Krishna Enterprises vs. ACIT
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