This case involves an appeal by the Assistant Commissioner of Income Tax (ACIT), Central Circle-30, New Delhi, against MK Wood India Pvt. Ltd. The matter pertains to reassessment orders for the assessment years 2011-12 and 2012-13, where the ACIT challenged the deletions of additions made under sections 68 and 69C of the Income-tax Act, 1961.
MK Wood India Pvt. Ltd. was incorporated in 1998 and is engaged in the business of trading and selling timber, plywood, etc. The company filed its returns of income under section 139 of the Income-tax Act, declaring total income of Rs. 1,72,92,735/- for AY 2011-12 and Rs. 2,32,50,410/- for AY 2012-13. Initial scrutiny assessments under section 143(3) and reassessments under section 153A did not reveal any incriminating material or concealment of income. However, subsequent reassessment under section 147 resulted in significant additions.
In the reassessment orders dated 27.12.2018 for AY 2011-12 and 24.12.2019 for AY 2012-13, the ACIT assessed the income at Rs. 4,66,41,890 and Rs. 4,56,64,235 respectively. Additions were made on account of sums received through alleged bogus sales treated as unexplained cash credits under section 68 and purported commission on these sales taxed under section 69C.
The Revenue’s grounds of appeal focused on the deletion of these additions by the CIT(A). The key grounds were:
MK Wood India Pvt. Ltd. filed cross objections challenging the jurisdiction of the ACIT to reassess under section 147. The main contentions were:
The tribunal examined the recorded reasons and found that the ACIT’s reassessment was based solely on information from a third party’s search proceedings, lacking independent application of mind. It highlighted the absence of specific material indicating the nature of alleged accommodation entries and criticized the mechanical approach of the ACIT.
The tribunal allowed the cross objections by MK Wood India Pvt. Ltd., quashing the reassessment orders for AY 2011-12 and 2012-13 due to improper jurisdiction and lack of tangible material. Consequently, the Revenue’s appeals were dismissed.
This decision underscores the necessity for a rigorous and independent verification process before initiating reassessment proceedings and reaffirms the importance of adhering to principles of natural justice.
ITA 571/DEL/2021: ACIT CC-30, New Delhi vs. MK Wood India Pvt. Ltd., New Delhi
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