No reopening of assessment when the alleged accommodation entries have been repaid
Tribunal Invalidates Reopening of Assessment for Amee Govindbhai Patel, Income Tax Appellate Tribunal Finds No Escapement of Income; Assessee's Transactions Verified as Genuine
In a significant ruling, the Income Tax Appellate Tribunal ("B" Bench, Ahmedabad) has invalidated the reopening of assessment for Amee Govindbhai Patel, determining that there was no escapement of income. The ruling, delivered on 18th September 2025, was presided over by Shri Sanjay Garg, Judicial Member, and Smt. Annapurna Gupta, Accountant Member.
The case revolved around the alleged receipt of accommodation entries by Patel, amounting to INR 55,00,000, from several parties as unsecured loans. The Income Tax Officer had reopened the assessment under Section 147 of the Income Tax Act, 1961, based on information from the Investigation Wing which suggested that the transactions were part of a broader scheme operated by entry provider Amit Jayantilal Shah.
However, the Tribunal found that the amounts allegedly received as accommodation entries were repaid by Patel, establishing that no income had escaped assessment. During the assessment proceedings, Patel provided confirmations, Income Tax Returns (ITRs), and bank statements to verify the genuineness of the transactions. The Department accepted the repayment of loans, thereby negating the justification for any addition under Section 68 of the Act.
The Tribunal underscored the importance of independent application of mind by the Assessing Officer (AO). It noted that the AO relied solely on information from the Investigation Wing without examining the facts that the amounts were returned. The Tribunal emphasized that borrowed belief without thorough scrutiny and application of mind is impermissible for reopening assessments.
Supporting this stance, the Tribunal cited precedents, including the jurisdictional High Court ruling in CIT-Rajkot v. Ayachi Chandrashekhar Narsangji, which held that no addition is warranted under Section 68 where credits are repaid subsequently.
In its ruling, the Tribunal concluded that the jurisdiction assumed by the AO for reopening the assessment was bad in law, rendering the assessment order invalid. Consequently, Patel's appeal was allowed, and the reopening of assessment was deemed unjustified.
This judgment reinforces the accountability of tax authorities to substantiate claims of income escapement and highlights the judiciary's role in upholding principles of fairness and thorough examination in tax proceedings.
Bottom Line:
Reopening of assessment under Section 147 of the Income Tax Act, 1961 is invalid when the alleged accommodation entries received by the assessee have been repaid, and no escapement of income has been established.
Statutory provision(s): Income Tax Act, 1961 Section 147, Income Tax Act, 1961 Section 68
