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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.

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.