The case number ITA 1723/DEL/2020 was filed by Astral Properties & Constructions Pvt Ltd, New Delhi against the ITO Ward-3(3), New Delhi. This appeal pertains to the assessment year 2010-11 and was filed on October 19, 2020. The final order was pronounced on April 12, 2022, by the Income Tax Appellate Tribunal (ITAT) Delhi Bench ‘SMC’. The tribunal’s decision highlights significant issues regarding the invalid reopening of assessment and unexplained investment under section 69 of the Income Tax Act.
Appellant: Astral Properties & Constructions Pvt Ltd, located at 20-A, Green Meadows Farm Satbari, Mehrauli, New Delhi-110030 (PAN: AAACA8109P).
Respondent: Income-tax Officer, Ward-3(3), New Delhi.
The case was heard by Shri Kul Bharat, Judicial Member.
The appeal filed by Astral Properties & Constructions Pvt Ltd was against the order dated July 30, 2020, passed by CIT(A)-32, New Delhi for the assessment year 2010-11. The primary contention of the appellant was that the reassessment order passed by the AO under section 147 of the Income Tax Act was invalid due to improper service of notice under section 148 and lack of sufficient evidence to justify the reopening.
The appellant raised several grounds in their appeal, including:
The appellant’s counsel, Sh. Arun Kishore, CA and Sh. Alok Suri, CA, argued that the reassessment was initiated without a valid basis. They contended that the information used to reopen the assessment was not supplied to the assessee, and the objections raised were not considered appropriately. The counsel emphasized that the reassessment proceedings were unjustified and arbitrary.
The respondent, represented by Sh. Sanjay Kumar, Sr. DR, supported the orders of the authorities below and argued that sufficient opportunities were provided to the assessee. The respondent maintained that the reassessment was validly initiated based on information received and that the assessee failed to furnish supporting evidence for the investment.
The tribunal noted that the AO reopened the assessment based on information regarding an investment made by the assessee in another company, which was not disclosed as the assessee had not filed its return of income for the assessment year 2010-11. The AO issued a notice under section 148 and, after obtaining necessary approvals, proceeded with the reassessment.
The tribunal reviewed the arguments and evidence presented by both parties. It was observed that the AO received information from JCIT, Range-3, Indore, and reopened the case based on the undisclosed investment of Rs. 16,00,000/-. The tribunal found that the AO had sufficient reason to believe that the income had escaped assessment and rightly invoked the provisions of section 147 and issued notice under section 148.
However, the tribunal also noted that the assessee provided certain evidence that the amount was received from one of its directors, who had filed her return of income. The AO should have investigated further to verify the veracity of the transaction and the creditworthiness of the director.
In light of the evidence provided by the assessee and the lack of further investigation by the AO, the tribunal concluded that the addition made under section 69 was not justified. The tribunal deleted the addition of Rs. 16,00,000/- and allowed the appeal in favor of the assessee.
As a result, the appeal filed by Astral Properties & Constructions Pvt Ltd (ITA No. 1723/DEL/2020) for the assessment year 2010-11 was partly allowed.
The order was pronounced in the open court on April 12, 2022, by the tribunal member, Shri Kul Bharat, Judicial Member.
Conclusion: This case underscores the importance of following procedural requirements and conducting thorough investigations before making additions under section 69 of the Income Tax Act. The tribunal’s decision highlights the necessity for the Income Tax Department to adhere to statutory mandates and ensure fairness in reassessment proceedings.
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