Case summary, Income Tax

Whether reopening of the assessment is valid on doubts of the authorities under section 147 R/W 143(3) of the Income Tax Act, 1961

Case: ACIT Khandwa V. M/s. Rajshree Fibres Bistan Road Khargone (M.P) ITAT Indore

Listen to the case summary  ACIT Khandwa V. M/s. Rajshree Fibres Bistan Road Khargone (M.P), ITAT Indore here


a) The case of the assessee was reopened for assessment and the assessment under section 147 r.w.s 143(3) of the income tax act, 1961 was framed.

b) The basis of the reopening of the assessment was that on inquiry by DDIT (Inv)-II, Indore, it was revealed that entries regarding the purchase of goods and its payment to farmers having been recorded in the books of accounts were not found satisfactory.

c) Aggrieved by the order, assessee preferred an appeal before Ld. CIT(A), the same was partly allowed by quashing the action of reopening of the assessment but an addition to the extent of Rs. 14,77,718 was made.

d) Aggrieved by the same the revenue and the assessee have challenged the finding of the CIT(A)

Revenue’s arguments

The revenue contended that as per section 147 of the Act, the A.O is well within the power to reassess the income if he has reason to believe that any income chargeable to tax has escaped assessment for an assessment year.

Assessee’s Arguments

The Assessee argued that the reopening of the assessment is ex-facie contrary to the provisions of law as further supported by the judicial pronouncements. The reopening was after a lapse of four years from the end of the relevant assessment year. The counsel for the assessee submitted that the reopening was purely on the ground that DDIT (Inv) had doubts about the payments to the farmers and application of the decision of this tribunal in the case of Amar Aggarwal in ITA No. 611/ Ind/ 20112 dated 20.8.2013 to the present matter was not relevant as the facts are totally different and not material. Further, certain amount of purchases were made through the registered sellers and the payment was made through the banking channels.

Tribunal’s holding

  1. No material facts have been concealed by the assessee neither the suppression of the facts was contended by the revenue. The only basis for reopening was the doubt of the DDIT (Inv) about the payment to the farmers which lead to the application of the Amar Agarwal case in the present matter.
  2. The tribunal held that application of the above case is not proper and correct as the facts and the value does not correspond
  3. Further, the delayed payment made to the farmers would not affect the income unless the payment is made from the undisclosed sources
  4. The reopening the assessment was bad in law and any addition made therein would not survive. Therefore the AO was directed to delete the additions made.
  5. The appeal of the revenue was dismissed and the appeal filed by the assessee for the year A.Y. 2010-11 was allowed

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