The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has quashed a second reassessment initiated against an assessee under Section 148 of the Income Tax Act, holding that the Assessing Officer (AO) had relied on information already available and examined during an earlier reassessment proceeding.
The bench of Satbeer Singh Godara (Judicial Member) and Naveen Chandra (Accountant Member) has observed that while the first reassessment proceedings were still pending, the Revenue had already initiated the second reassessment by issuing proceedings under Section 148A(d) and a fresh notice under Section 148.
The assessee had filed its return declaring an income of ₹1.70 crore. The original scrutiny assessment under Section 143(3) had accepted the returned income without making any additions.
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Subsequently, the department initiated reassessment proceedings alleging that the company had received accommodation entries through M/s Sirsa Deposits and Advances Ltd., an entity allegedly controlled by entry operators Deepak Agarwal and Himanshu Verma. During the reassessment, the AO made additions of: ₹95 lakh under Section 68 as unexplained cash credit; ₹2.85 lakh under Section 69C towards alleged commission paid for obtaining accommodation entries; and ₹3.23 lakh by disallowing interest claimed under Section 36(1)(iii).
The Commissioner of Income Tax (Appeals) upheld the reassessment as well as the additions, leading the assessee to approach the Tribunal.
Before the ITAT, the assessee argued that the second reopening was legally unsustainable because the very same information had already been examined during an earlier reassessment.
It contended that the department had reopened the assessment merely on a change of opinion; no fresh tangible material had surfaced after completion of the earlier reassessment; the Department failed to produce copies of the panchnama or seized documents allegedly connecting the assessee with the search conducted on the Galaxy Group; and the reopening violated the safeguards contained in Sections 148 and 148A of the Income Tax Act.
The assessee also relied upon the Delhi High Court’s decision in Rasalika Trading & Investment Co. (P.) Ltd. v. DCIT, which held that reassessment cannot be based on information already available with the Assessing Officer at the time of the earlier assessment.
The department defended the reassessment by contending that the search conducted on the Galaxy Group on 17 November 2021 had yielded fresh material revealing a detailed accommodation entry racket operated by Deepak Agarwal and Himanshu Verma.
According to the Department, statements recorded during the search and seized electronic records constituted fresh tangible material justifying the reopening.
After examining the record, the Tribunal rejected the Revenue’s stand.
It observed that the assessee’s case had already undergone an earlier reassessment under Sections 147/144B based on information received from the Investigation Wing regarding the very same alleged accommodation entry from M/s Sirsa Deposit and Advance Private Ltd.
In that earlier reassessment, completed on 23 March 2023, the Assessment Unit had accepted the loan of ₹95 lakh as genuine after examining the available material.
The Tribunal noted that the information relied upon for initiating the second reassessment was not new. The Investigation Wing had merely forwarded the same material—including the alleged modus operandi, statements of the entry operators and transaction details—which was already before the Assessing Officer during the first reassessment.
The Bench held that the Assessing Officer had failed to undertake any independent inquiry or gather corroborative evidence before issuing the second notice.
According to the Tribunal, the AO simply accepted the Investigation Wing’s report as conclusive without applying independent mind.
The Tribunal categorically observed that there was no fresh tangible material available to justify reopening the assessment once again.
The Tribunal also highlighted another significant legal defect.
According to the Tribunal, this circumstance itself rendered the second reassessment legally unsustainable.
The Tribunal held that the present case was squarely covered by the Delhi High Court’s ruling in Rasalika Trading & Investment Co. (P.) Ltd., which prohibits reopening an assessment on information that was already available to the Assessing Officer before passing the earlier assessment order.
Allowing the appeal, the ITAT held that the impugned reopening under Section 148 was void ab initio and consequently quashed both the reassessment notice and the reassessment order dated 31 March 2025.
Since the appeal succeeded on the legal issue itself, the Tribunal declined to examine the merits of the additions made under Sections 68, 69C and 36(1)(iii).
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