Ajay Singh vs. ACIT Circle 28(1), New Delhi, I.T.A No.1934/Del/2023, ITAT Delhi
The Income Tax Appellate Tribunal (ITAT) Delhi delivered significant relief to the assessee in I.T.A. No. 1934/Del/2023 for AY 2012-13, holding that reassessment proceedings initiated solely on the basis of an Investigation Wing report — without independent application of mind — are invalid. The Tribunal also deleted the ₹25 lakh addition made under section 68.
Background
The case involved reassessment proceedings initiated based on information from the Investigation Wing, alleging unexplained credits in the assessee’s bank account totaling ₹25 lakhs. The AO reopened the assessment without conducting any independent inquiries or verification.
The credits in question were:
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₹10 lakhs received from a friend, Krishan Bans Bahadur, through proper banking channels (now deceased).
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₹15 lakhs refunded by PAN India Motors Pvt. Ltd., an associate company, backed by confirmation, PAN, and bank statements.
Despite these details, the AO made an addition of the full amount under section 68, questioning the genuineness and creditworthiness of the transactions.
Tribunal’s Key Findings
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Reopening was based on borrowed satisfaction
The AO did not apply independent mind or conduct any verification. Reopening based solely on an Investigation Wing report is invalid, as laid down in:-
PCIT vs. Meenakshi Overseas Pvt. Ltd. (395 ITR 677)
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PCIT vs. G&G Pharma India Ltd. (384 ITR 147)
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Misreading of Return of Income
The AO only picked up income from other sources (₹6.10 lakhs), ignoring dividend income of ₹15.26 lakhs exempt under section 10. For AY 2011–12, the assessee had declared exempt income over ₹16 crores, establishing sufficient financial standing. -
Adequate explanation of credits
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PAN India Motors Pvt. Ltd. refund was clearly explained with supporting documents.
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Though Krishan Bans Bahadur had passed away, the loan was via banking channels and duly repaid.
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Final Verdict
The ITAT quashed the reopening and deleted the ₹25 lakh addition under section 68, concluding that:
“Reassessment based on borrowed satisfaction without independent verification is bad in law, and the assessee had duly discharged the onus under section 68.”
Takeaway:
This case highlights that:
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Reopening requires application of mind, not just third-party reports.
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Section 68 additions must be backed by concrete evidence, not mere suspicion.
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Proper documentation and banking trail go a long way in defending cash credits.