2014 (9) TMI 1023 - AT - Income Tax

Validity of reopening of assessment - Held that - In the case on hand we find that the Ld. CIT has granted approval and Ld. JCIT has not granted the necessary approval as the assessment reopened with the approval of Commissioner of Income-tax, whereas the statute required the approval of the joint Commissioner of Income-tax. Hence we quash the reopening of the assessment as bad in law. In the result, the C.O. of the assessee is allowed. Since we have allowed the C.O. of the assessee, consistent with the view taken therein, we dismiss the Revenue s appeal. - Decided in favour of assessee

Summary

Issues:
1. Addition of unexplained receipts of share application money and share premium along with commission payment.
2. Validity of notice u/s 148 for reopening assessment.

Analysis:

Issue 1: Addition of Unexplained Receipts
The Revenue appealed against the deletion of additions made under section 68 for unexplained receipts of share application money and share premium, and commission payment. The Revenue argued that the assessee failed to provide confirmations, bank statements, and balance sheets of share applicants, and notices sent to share applicants were returned unserved. It was contended that the share premium paid was illogical for a company declaring Nil income. The documents submitted did not establish the creditworthiness of share applicants, as confirmed by the Investigation Wing. The Tribunal upheld the deletion of additions, emphasizing the lack of proper evidence and the share applicants being accommodation entry providers.

Issue 2: Validity of Notice u/s 148
The assessee challenged the validity of the notice for reopening assessment under section 148, citing non-compliance with the approval requirement under section 151(2). The approval was granted by the CIT, whereas the statute mandated approval from the Joint Commissioner. The Tribunal referred to a similar case where the High Court quashed the reopening due to lack of proper approval. As the Joint Commissioner did not grant necessary approval, the reopening of assessment was deemed invalid. Consequently, the assessment orders were quashed, and the Revenue's appeal was dismissed while the assessee's Cross Objection was allowed.

In conclusion, the Tribunal ruled in favor of the assessee on both issues, quashing the additions of unexplained receipts and share premium, and commission payment, as well as declaring the notice for reopening assessment as invalid. The judgment highlighted the importance of complying with statutory requirements for assessment procedures.