{"id":387692,"date":"2026-06-19T13:30:31","date_gmt":"2026-06-19T08:00:31","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=387692"},"modified":"2026-06-19T13:22:02","modified_gmt":"2026-06-19T07:52:02","slug":"mumbai-itat-section-68-accommodation-entry-reassessment-beyond-four-years-invalid","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2026\/06\/19\/mumbai-itat-section-68-accommodation-entry-reassessment-beyond-four-years-invalid\/","title":{"rendered":"Investigation Wing Report Alone Insufficient to Sustain Section 147 Proceedings; Reassessment Beyond Four Years quashed; Deleted \u20b95 Lakh Section 68 Addition: ITAT Mumbai"},"content":{"rendered":"<style>\n.animate-charcter{background-image: linear-gradient(-225deg, #231557 0%, #44107a 29%, #ff1361 67%, #fff800 100%); background-size: 200% auto; -webkit-background-clip: text; -webkit-text-fill-color: transparent; animation: textclip 0s linear infinite;}\n@keyframes textclip {to {background-position: 200% center;}}\n<\/style>\n<div style=\"text-align: justify; line-height: 150%;\">\n<p style=\"margin-bottom: 3%;\"><span style=\"font-weight: bold;\">ITAT, Mumbai:<\/span> In an appeal filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) &#8220;CIT(A)&#8217;&#8217;, the Mumbai Bench of the Income Tax Appellate Tribunal comprising <span style=\"font-weight: bold;\">Narender Kumar Choudhry, JM<\/span> and <span style=\"font-weight: bold;\">Arun Khodpia, AM<\/span> upheld the deletion of an addition made under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001559885\" target=\"_blank\">68<\/a>, <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002955939\" target=\"_blank\">Income-tax Act, 1961<\/a> and the consequential disallowance of interest\/TDS. The Tribunal held that where an assessment completed under Section 143(3) is reopened beyond four years from the end of the relevant assessment year (AY), the assessing officer must establish failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. In the absence of such a finding, the reassessment proceedings initiated under Sections 147 and 148 were held to be without jurisdiction and liable to be quashed.<\/p>\n<p>The Court observed that,<\/p>\n<p class=\"animate-charcter\" style=\"margin-left: 36pt; margin-bottom: 3%; font-style: italic;\">&#8220;Where assessment has already been completed under Section 143(3), reopening beyond four years is impermissible unless the Assessing Officer demonstrates failure of the assessee to disclose fully and truly all material facts necessary for assessment.&#8221;<\/p>\n<h3>Background<\/h3>\n<p style=\"margin-bottom: 3%;\">The assessee, <span style=\"font-weight: bold;\">Sneha Marketing<\/span>, had filed its return of income for AY 2012-2013 and the assessment was completed under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001559382\" target=\"_blank\">143(3)<\/a>, <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002955939\" target=\"_blank\">Income-tax Act, 1961<\/a>. Subsequently, the assessing officer received information from the Investigation Wing, Surat, based on enquiries conducted in the case of <span style=\"font-weight: bold;\">Deepak Kailash Babel<\/span> and his company, <span style=\"font-weight: bold;\">Delight Diam (P) Ltd.<\/span>, allegedly engaged in providing accommodation entries. On the basis of such information, the assessing officer formed a belief that the unsecured loan of &#8377;5,00,000 received by the assessee from Delight Diam (P) Ltd. represented a non-genuine transaction and income chargeable to tax had escaped assessment.<\/p>\n<p style=\"margin-bottom: 3%;\">Accordingly, notice under Section 148 was issued on 28 March 2019 and reassessment proceedings were initiated under Sections 147\/143(3) of the Act. During reassessment, the assessee contended that complete particulars relating to the loan had already been disclosed during the original scrutiny proceedings, the transaction had been undertaken through banking channels, the loan had been repaid on 17 June 2017, and the statement relied upon by the Department had subsequently been retracted. The assessee also sought cross-examination of the deponent, which ultimately could not be conducted.<\/p>\n<p style=\"margin-bottom: 3%;\">Rejecting the assessee&#8217;s explanation, the assessing officer treated the loan as an unexplained cash credit under Section 68 and made an addition of &#8377;5,00,000 along with a consequential disallowance of interest\/TDS amounting to &#8377;43,278. On appeal, CIT(A) deleted both additions, holding that the reassessment proceedings were not sustainable in law. Aggrieved thereby, the Revenue preferred an appeal before the Income Tax Appellate Tribunal.<\/p>\n<h3>Issues<\/h3>\n<p style=\"margin-bottom: 3%;\">Whether reassessment initiated beyond four years from the end of AY 2012-2013 was valid in absence of failure by the assessee to disclose fully and truly all material facts?<\/p>\n<p style=\"margin-bottom: 3%;\">Whether addition under Section 68 on account of unsecured loan from an alleged accommodation entry provider was sustainable?<\/p>\n<h3>Analysis, Law and Decision<\/h3>\n<p style=\"margin-bottom: 3%;\">The Tribunal examined the validity of the reassessment proceedings initiated under Sections <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001559391\" target=\"_blank\">147<\/a> and <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001559392\" target=\"_blank\">148<\/a>, <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002955939\" target=\"_blank\">Income-tax Act, 1961<\/a>. It noted that the assessee&#8217;s original assessment for AY 2012-2013 had already been completed under Section 143(3) and that the notice under Section 148 was issued on 28 March 2019, i.e., after the expiry of four years from the end of the relevant assessment year.<\/p>\n<p style=\"margin-bottom: 3%;\">The Tribunal observed that in cases where an assessment has been completed under Section 143(3), the <span style=\"font-weight: bold;\">First Proviso to Section 147<\/span> imposes a jurisdictional condition that reassessment after four years can be initiated only where income has escaped assessment by reason of the assessee&#8217;s failure to file a return or failure to disclose fully and truly all material facts necessary for assessment.<\/p>\n<p style=\"margin-bottom: 3%;\">Upon perusal of the reasons recorded for reopening and the reassessment records, the Tribunal found that the assessing officer had not recorded any allegation or finding that the assessee had failed to disclose fully and truly all material facts during the original assessment proceedings. Rather, the reassessment was founded exclusively on information subsequently received from the Investigation Wing, Surat, regarding alleged accommodation entry operations carried on by <span style=\"font-weight: bold;\">Delight Diam (P) Ltd.<\/span> and <span class=\"Strong\" style=\"font-weight: normal;\">Deepak Kailash Babel<\/span>.<\/p>\n<p style=\"margin-bottom: 3%;\">The Tribunal concurred with the finding of the CIT(A) that the statutory requirement contained in the First Proviso to Section 147 had not been satisfied. It held that the mere receipt of subsequent information from the Investigation Wing could not dispense with the mandatory requirement of establishing failure on the part of the assessee to make a full and true disclosure when reopening is sought beyond four years after completion of scrutiny assessment.<\/p>\n<p style=\"margin-bottom: 3%;\">The Tribunal further noted that the assessee had contended that the loan transaction had been disclosed during the original assessment proceedings, was routed through banking channels, and had been repaid prior to the investigation conducted by the Department. The assessee had also sought cross-examination of the person whose statement formed the basis of the reassessment; however, such cross-examination could not be conducted as the concerned person failed to appear before the assessing officer.<\/p>\n<p style=\"margin-bottom: 3%;\">While considering the merits of the addition, the Tribunal observed that repayment of a loan by itself does not conclusively establish the genuineness of the transaction. It also remarked that the financial affairs of the lender appeared to require deeper examination. However, having held the reassessment proceedings themselves to be invalid for want of jurisdiction, the Tribunal considered it unnecessary to render any conclusive finding on the merits of the loan transaction.<\/p>\n<p style=\"margin-bottom: 3%;\">Accordingly, the Tribunal upheld the order of the CIT(A) and held that the reassessment proceedings were liable to be quashed for non-compliance with the First Proviso to Section 147. Consequently, the addition of &#8377;5,00,000 made under Section 68 and the consequential disallowance of interest\/TDS amounting to &#8377;43,278 were deleted. The Revenue&#8217;s appeal was dismissed to that extent and the relief granted to the assessee was sustained.<\/p>\n<p style=\"margin-bottom: 3%;\">[<span style=\"font-weight: bold; color: #632423;\"><span style=\"font-style: italic;\">CIT<\/span> v. <span style=\"font-style: italic;\">Sneha Marketing<\/span>, ITA No. 6664\/Mum\/2025, decided on 8-6-2026<\/span>]<\/p>\n<p style=\"margin-bottom: 3%; text-indent: 18pt; border: 2px solid black; border-radius: 10px; text-align: center; width: 50%; margin-left: auto; margin-right: auto; background-color: #DCDCDC;\"><strong><span style=\"color: #000080;\">*Judgment authored by- Arun Khodpia, AM<\/span><\/strong><\/p>\n<hr\/>\n<p>Advocates who appeared in this case:<\/p>\n<p style=\"margin-left: 18pt;\"><span style=\"font-weight: bold;\">For the Assessee:<\/span> Bharat Kumar<\/p>\n<p style=\"margin-left: 18pt;\"><span style=\"font-weight: bold;\">For the Revenue:<\/span> Yaduraj Singh<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p style=\"font-style: italic;\">The Tribunal noted that where an assessment completed under Section 143(3) is sought to be reopened beyond four years, the Assessing Officer must record a specific finding that the assessee failed to disclose fully and truly all material facts.<\/p>\n","protected":false},"author":67527,"featured_media":387700,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3,11],"tags":[107605,107606,107613,9121,107607,107608,107609,107602,107614,107612,107610,107615,107603,107611,107601,107604,47390],"class_list":["post-387692","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-tribunals_commissions_regulatorybodies","tag-accommodation-entries","tag-bogus-loan","tag-consequential-disallowance","tag-cross-examination","tag-deepak-kailash-babel","tag-delight-diam-p-ltd","tag-failure-to-disclose-material-facts","tag-first-proviso-to-section-147","tag-interest-on-unsecured-loan","tag-investigation-wing-report","tag-jurisdictional-defect","tag-mumbai-itat","tag-reassessment-after-four-years","tag-reassessment-validity","tag-section-147-reopening","tag-section-68-addition","tag-unsecured-loan"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.4 (Yoast SEO v27.4) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Mumbai ITAT quashes reassessment beyond four years; 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