ITAT Pune: Reopening Under Section 148 Struck Down For Vague Search-Based Information And Lack Of Evidence
Background Of The Dispute
The Pune Bench of the ITAT, in the case of Someshwar Nandkishor Tapde Vs ITO (ITAT Pune), examined the validity of a reassessment initiated under Section 147 read with Section 148 and the consequential addition of ₹51,35,000 for AY 2017-18. The reassessment was based on information uploaded on the INSIGHT portal arising out of a search on one Mr. Sachin Nahar, alleged to be a broker arranging cash loans.
The Assessing Officer (AO) claimed that the assessee had received a cash loan of ₹50,00,000 and paid interest of ₹1,35,000 during F.Y. 2016-17, treating the total of ₹51,35,000 as income that had escaped assessment. The assessee challenged both:
- The jurisdictional foundation of the reassessment under
Section 147/Section 148; and - The substantive addition made in the assessment order passed under
Section 147read withSection 144B.
Ultimately, the ITAT Pune quashed the notice issued under Section 148, annulled the reassessment proceedings, and ordered deletion of the entire addition of ₹51,35,000.
Facts Presented On Behalf Of The Assessee
Personal And Educational Status During The Relevant Year
The assessee’s Authorised Representative (AR) pointed out that during a part of AY 2017-18, the assessee was still a minor, enrolled in 12th standard, and later continued into engineering studies. This was highlighted to demonstrate that the assessee was not engaged in any organised business or financial activity that could reasonably involve large cash loans of ₹50,00,000.
Challenge To The Validity Of Notice Under Section 148
The ITAT’s attention was drawn to the recorded reasons for reopening, which were reproduced in the order. The AR argued that:
- The only foundation for reopening was general information fed onto the INSIGHT portal claiming that “various parties have taken cash loans from other parties through Shri Sachin Nahar”.
- In the recorded reasons, it was merely alleged that “Shri Someshwar Nandkishor Tapde has taken cash loan from various parties through Shri Sachin Nahar of Rs. 50,00,000/- and paid interest of Rs. 1,35,000/-”.
However, the recorded reasons:
- Did not mention the identity of any alleged lender;
- Did not specify the dates of the alleged loan transactions;
- Did not refer to any particular seized or impounded document from the search on Mr. Sachin Nahar in which the assessee’s name appeared;
- Did not identify any recorded answer or statement of Mr. Sachin Nahar specifically linking the assessee to a cash loan of ₹50,00,000.
The AR stressed that there was no independent verification or application of mind by the AO. The AO simply relied on a vague line of information without undertaking any further enquiry or collecting corroborative material. Accordingly, the reasons were argued to be vague, hearsay, and legally inadequate to trigger jurisdiction under Section 147.
Further, the AR stated that the sanctioning authority had mechanically granted approval under Section 151 without scrutinising the reasons or underlying material, rendering the approval itself defective.
Submissions On Merits Of The Addition
On merits, the assessee categorically denied any connection whatsoever with Mr. Sachin Nahar.
Affidavit:
- An affidavit was filed before the AO stating unequivocally that the assessee did not know any person by the name of Mr. Sachin Nahar.
Request For Primary Documents And Cross-Examination:
- The assessee requested copies of all documents, statements, or materials allegedly relied upon by the Revenue to assert that a loan was taken.
- The assessee also sought an opportunity to cross-examine Mr. Sachin Nahar.
- Neither the documents were provided nor was cross-examination allowed.
Police Complaint:
- During the assessment proceedings, the assessee lodged an FIR alleging that his name had been misused and that false information was given to the Income Tax Department.
- Copies of the FIR (appearing at pages 32–33 of the paper book) were submitted to the AO.