2026 Supreme(Online)(ITAT) 9074

INCOME TAX APPELLATE TRIBUNAL (NAGPUR BENCH)
Pawan Singh, Judicial Member, Khettra Mohan Roy, Accountant Member
Sunrise Structural & Engineering P. Ltd. – Appellant
Versus
ACIT/DCIT, Circle-4, Nagpur – Respondent
ITA No. 167/NAG/2025

Reassessment proceedings initiated on 'borrowed satisfaction' without independent application of mind are invalid. An Assessing Officer must provide all relied-upon material to the assessee, and additions cannot be sustained when an assessee provides comprehensive documentary evidence substantiating transactions and where those transactions were previously accepted as genuine.

Headnote:(A) Income Tax Act, 1961 - Sections 147, 148, 148A, 69C, 115BBE - Reassessment proceedings - Validity of notice and addition of alleged bogus purchases - Notice u/s 148 issued without independent application of mind by the Assessing Officer constitutes 'borrowed satisfaction' - Once reassessment proceedings for an associate entity are dropped on identical facts and evidence, a contrary view regarding the same transactions without new material is legally unsustainable - Reversal of input tax credit under tax laws is not conclusive proof of non-genuineness of purchases - Provisions of Section 69C cannot be invoked when the assessee has sufficiently explained the source of expenditure through banking channels, supporting evidence, and confirmation of transactions. (Paras 5, 8, 9, 10, 11, 14, 19, 21, 24, 25)

(B) Reassessment - Procedure - Mandatory requirement to supply materials and results of enquiries relied upon by the Assessing Officer to the assessee along with the notice - Failure to confront the assessee with the material used for reopening assessment violates principles of natural justice and renders the reassessment proceedings invalid. (Paras 20, 22, 23)

Facts of the case:
An appeal was filed against an order confirming an addition of over six crores under Section 69C as deemed income from unexplained expenditure. The authorities treated purchases as bogus based on investigation reports and the reversal of input tax credit. The appellant contended that the reopening of the assessment was based on borrowed satisfaction, lack of independent enquiry, and failure to provide relied-upon material. It was further asserted that the transactions were genuine, supported by banking records, transport documents, and that these same transactions were accepted as genuine in the case of an associate company.

Findings of Court:
The court noted that all documentary evidence, including invoices, transportation receipts, and bank statements, were provided to the Assessing Officer. Crucially, the same transactions had been accepted as genuine in the assessment of an associate entity. The court found that the authorities failed to conduct an independent enquiry, instead relying solely on information received from an external portal, which constitutes borrowed satisfaction.

Issues: Whether the reopening of assessment u/s 148 was valid and whether the addition of alleged bogus purchases u/s 69C was justified in the absence of independent verification.

Ratio Decidendi: An assessment cannot be reopened on 'borrowed satisfaction' without the Assessing Officer applying their own independent mind to the facts. When an assessee has discharged the initial onus by providing comprehensive documentary evidence, supported by banking channels and subsequent sales, the burden shifts to the department to bring on record cogent adverse evidence. The department cannot adopt a contradictory stance regarding the same transactions between related entities without new findings.

Result: Appeal allowed; reassessment notice and consequent order quashed.