The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has quashed reassessment proceedings initiated under Sections 147 and 148 of the Income-tax Act, 1961 against three real estate entities, holding that reopening based merely on assumptions and uncorroborated statements is unsustainable in law.
The bench of Satbeer Singh Godara (Judicial Member) and Naveen Chandra (Accountant Member) relied on the CBDT Circular dated 10.03.2003, which cautions against reliance solely on confessional statements without corroborative evidence. It further referred to the Supreme Court’s landmark judgment in CIT vs. Kelvinator of India Ltd. (2010), reiterating that “reason to believe” must be founded on tangible material and not on mere suspicion. Additionally, the Bombay High Court ruling in Hindustan Lever Ltd. vs. R.B. Wadkar was cited to underline that reopening reasons must stand on their own and cannot be improved later.
The appeals were filed by M/s Grand Realcon Pvt. Ltd., M/s Focus Realcon Pvt. Ltd., and M/s Starlite Builders Pvt. Ltd. against the orders of the Commissioner of Income Tax (Appeals), Gurgaon, pertaining to Assessment Years 2011–12 and 2012–13.
The central issue before the Tribunal was the validity of reassessment proceedings initiated by the Assessing Officer (AO), who had alleged that the assessees were shell companies engaged in providing accommodation entries in lieu of commission. The AO had relied on information received from the Investigation Wing and statements recorded during search proceedings involving the M3M group, concluding that income in the form of commission at the rate of 1% on alleged transactions had escaped assessment.
However, the Tribunal found that the reopening was not backed by any tangible material demonstrating actual receipt of such commission income. It noted that the AO’s conclusions were primarily based on general allegations and third-party statements, without any direct evidence linking the assessees to real income generation from accommodation entries.
The Tribunal emphasized that reassessment must be based on concrete and credible material, not on conjectures or presumptions. It observed that merely because there were large banking transactions or allegations of being part of an entry network, it cannot automatically lead to the inference of taxable commission income without substantive proof.
The Tribunal held that there was no material—either from search or post-search investigations—demonstrating that the assessees had actually earned commission income. The estimation of 1% commission was found to be arbitrary and unsupported.
The ITAT concluded that the initiation of reassessment proceedings was legally untenable and declared the same as “non-est” in the eyes of law. As a result, the reassessment notices and consequent proceedings were quashed, and all appeals of the assessees were allowed.
Case Details
Case Title: M/s. Grand Realcon Pvt. Ltd. Versus ACIT
Citation: JURISHOUR-1044-ITA-2026(DEL)
Case No.: ITA Nos.1261&1262/Del/2025
Date: 30.04.2026
Counsel For Appellant: S.S. Nagar, CA
Counsel For Respondent: Ankush Kalra, Sr. DR
