Whether retracted statement can form the basis of reopening of assessment under section 147 of Income Tax Act and whether Protective assessment without substantive assessment is permissible?

Last updated: 30 July 2014

Court :
ITAT Delhi

Brief :
The assessee company is a non-banking finance company engaged in the business of consultancy, investments, finance and trading in shares.During the course of a survey conducted by investigation wing of the department on Shri Subodh Gupta, CA in 2003, he admitted that his company is involved in providingbogus accommodation entries to various entities in a statement recorded onoath. Subsequently, the CA retracted from his statementrecorded on oath and informed the DDIT that the statement was recorded under coercion and threat which is contrary to the record seized during the course of survey proceedings.The AO vide notice in 2007 assumed jurisdiction reassessment u/s 147, 148 of the Act alleging that the assessee is providing accommodation entries to various concerns. the assesse company filed its objections contending that the assessment is reopened without application of mind on the basis of surmises and conjectures. The AO dismissed the objections. Aggrieved, the assessee appealed before the CIT(A) which was also dismissed by the CIT(A). Aggrieved with the order of the CIT(A), the assessee company has preferred this appeal. Held that retracted statement cannot be a basis of assumption of jurisdiction u/s 147 and protective reassessment assessment is not permissible.

Citation :
G.K. Consultants Limited – Appellant – Versus – Income Tax Officer - Respondent