2014 (11) TMI 1037 - AT - Income Tax

Reopening of assessment - transaction of shares - accommodation entries - Held that - At the time of hearing before us it was pointed out by the learned counsel that the assessee was having 50, 000 shares of 10/- each and the said shares were sold at cost to M/s Shimmer Marketing Pvt. Ltd. and the sum of 5 lakhs has been received as a sale consideration of shares which were already disclosed in the assessee s books of account. The purchase of shares as well as sale of shares both have been disclosed in the assessee s books of account and it has not generated either any profit or loss in the books of account nor any additional flow of capital in the assessee s books of account. These facts stated by the learned counsel could not be controverted by the Revenue. Thus we hold that the reopening of assessment under Section 148 on the above facts was not justified. We therefore quash the issue of notice under Section 148 and consequently the assessment order passed in pursuance to such notice is also quashed. - Decided in favour of assessee

Summary

Issues Involved:
Validity of Reopening u/s 148

Analysis:
The appeal challenged the order of the learned CIT(A)-XVIII, New Delhi for the AY 2004-05. The main issue raised in Ground No.1 of the appeal was the validity of the reopening under section 148. The reasons recorded for the belief that income had escaped assessment were based on information received regarding accommodation entries. The Assessing Officer's reasoning outlined a general modus operandi followed by individuals with unaccounted money to introduce it into their books through entry operators. However, specific details justifying the belief that income had escaped assessment in the case of the assessee were lacking. The reasoning did not specify how the money was introduced in the assessee's books or whether it was unaccounted. The assessee's contention that the amount received was from the sale of disclosed shares and not an accommodation entry was supported by facts that were not disputed by the Revenue.

The Tribunal referred to a relevant High Court decision where reassessment proceedings were quashed due to insufficient reasoning and lack of evidence establishing a nexus indicating income escapement. Following this precedent, the Tribunal held that the reopening of assessment under Section 148 was not justified. Consequently, the notice issued under Section 148 and the assessment order based on it were quashed. Since the assessment order was quashed, other grounds raised by the assessee were not adjudicated upon. Ultimately, the appeal of the assessee was allowed, and the decision was pronounced on 14th November 2014.