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Tax Publishers
Dilip Baburao Dalvi v. ITO [ITA No. 1552/PUN/2019,
dt. 20-8-2020] : 2020 TaxPub(DT) 3293 (Pune-Trib.)
Reassessment with additions sustained under wrong
provisions
Facts:
Assessee was found to have been a bogus entry operator
arising out of a sales tax investigation thus their assessment was reopened on
the said reason and details called for after which the bogus transactions were
added under section 40A(3) by the assessing officer and sustained by the
Commissioner (Appeals). Aggrieved assessee went in appeal to ITAT against the
addition.
Held in favour of the assessee that the addition sustained
under a wrong head without considering the correct reason for reassessment
invalidated the addition under section 40A(3).
Editorial Note: The
touchstone is "re-assessment can be tested only on the basis of reasons
recorded and not otherwise". A wrong addition under a wrong heading made;
though on the basis of the reassessment reasons cannot by itself validate the
reassessment. As to whether this can be cured under section 292B also appears
difficult as it is the department who initiates reassessment in the first place
based on certain reasoning that income has escaped assessment. By alleging that
the addition was done under section 40A(3) the genuineness of the transaction
became unquestionable by the department itself (While factually it was bogus
transactions) thus the reason for reassessment itself goes against its
principle. It was this golden tenet which was upheld in this short/pithy
decision.
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