The Delhi High Court has quashed the reassessment proceedings on the ground that the Assessing officer (AO) was not certain about allegations of accommodation entries.
The bench of Acting Chief Justice Vibhu Bakhru and Justice Swarana Kanta Sharma has observed that the AO is not required to conclusively decide whether the entries are accommodation entries. But the AO has to be reasonably certain that the alleged entries exist that could possibly be accommodation entries.
The petitioner/assessee is a company incorporated in India. Prior to 30.09.2019, the petitioner was known as Sonali Realtech Pvt. Ltd. The notices have been issued to initiate proceedings for re-assessment of income of M/s Tulsi Tracom Pvt. Ltd. . Tulsi was merged with the petitioner with effect from 01.04.2018 pursuant to an order dated 26.09.2019 passed by the National Company Law Tribunal (NCLT).
The AO had acted on the basis of certain information that was flagged by the Directorate of Income- Tax (System) on the insight portal. The allegations being that Tulsi had received funds in its bank accounts through banking channels from eleven entities controlled by Sh. Joginder Pal Gupta and had paid cash to Sh. Joginder Pal Gupta against the said entries.
The petitioner had denied that Tulsi had received any amount in its bank accounts from the aforesaid companies and also disclosed that Tulsi’s bank accounts, which were in operation during the relevant period.
However, the AO proceeded on the basis of the allegations that Tulsi has received accommodation entries from companies controlled by Sh. Joginder Pal Gupta had not been controverted. The AO had no material at any time, the AO has not referred to any such information which would substantiate that any amount had been remitted by the entities (eleven in numbers) mentioned in the notice and order to the bank accounts of Tulsi.
The information as available was accepted as correct notwithstanding the petitioner’s assertion that Tulsi has received no amount in its bank accounts from any of the entities as alleged.
The court held that the reassessment cannot be initiated on the basis of information which is contested as palpably incorrect without examining the material giving rise to the information.
The court held that the AO is required to ascertain whether the basic facts on which an assessment is sought to be reopened, are sustainable. An allegation that income has escaped assessment on account of accommodation entries availed by an assessee would be insufficient to reopen a closed assessment if the AO does not have material to establish that in fact there were entries in the bank accounts that could possibly support the allegations.
Case Details
Case Title: Sonansh Creations Pvt Ltd. Versus ACIT
Case No.: W.P.(C) 12316/2022
Date: 10.01.2025
Counsel For Petitioner: C.S. Aggarwal, Senior Advocate with Mr. Ravi Pratap Mall and Mr. Uma Shankar
Counsel For Respondent: Sunil Agarwal, Mr. Shivansh B. Pandya, Mr. Viplav Acharya & Mr. Utkarsh Tiwari, Advocates.
