ITAT Delhi quashed reassessment proceedings where undisclosed investment in property was alleged solely based on ledger entries, holding that lack of buyer/seller status and absence of notice under Section 143(2) vitiated the proceedings.
Ledger Entries Insufficient to Trigger Reassessment
ITAT Delhi invalidated reassessment proceedings initiated under Section 147 of the Income Tax Act where the only basis for suspicion was a ledger entry referencing property transactions. The tribunal emphasized that mere mention in accounts, without documentary evidence or ownership linkage, cannot justify re-opening of assessment when the assessee was neither buyer nor seller.
The ITAT noted that non-issuance of a notice under Section 143(2) prior to re-opening was fatal to the proceedings. The department had failed to establish possessory interest or transfer of funds.
“Mere recording in books does not amount to income unless linked to actual receipt or accrual”, the tribunal observed, affirming the principle that books of account alone, especially unverified ledgers, cannot form a valid basis for incriminating an assessee.
For practitioners, this reinforces procedural rigor in reassessment cases—proper notice under Section 143(2), cogent material, and nexus to income are indispensable. Assessing Officers must go beyond ledger names and establish factual foundation for incrimination.
Citations
- Section 143(2), Section 147, Income Tax Act, 1961
