2015 (9) TMI 1423 - AT - Income Tax

Validity of assessment against non existing person - Held that - CIT-A erred in not quashing the instant assessment framed on non existing person. CIT-A erred in not quashing the instant reopening being made in apparent violation of mandatory jurisdictional conditions stipulated under the law. CIT-A erred in not quashing the instant reopening made on basis of borrowed satisfaction, without independent application of mind and merely on information supplied by investigation wing and without any valid approval required under the law. Invalid addition u/s 68 for share application money etc. - Held that - CIT-A erred in sustaining addition u/s 68 & 69C on account of alleged unexplained share application money and alleged commission paid on said share application money dehors the fact that i. In enquiry, bank has confirmed the aforesaid transaction to Ld AO; ii. In enquiry, share applicant u/s 133(6) has confirmed the subject transaction to Ld AD as evident from para 3.1 of AO s order; iii. The adversarial statement never mentions assesee s name and hence not reliable for reopening and addition (lack of nexus & untested allegation); iv. Assessee has adduced all relevant and required evidence to discharge its onus u/s 68 of the Act; v. No visible effort is made by Ld AD to validly convert and translate stated directions of CIT-II (Central) into requisite findings;

Issues:
1. Invalid assessment framed on non-existing person.
2. Invalid reopening of assessment.
3. Invalid addition of Rs. 500,500 u/s 68 for share application money.

Analysis:

Issue 1: Invalid assessment framed on non-existing person
The appeal challenged an assessment framed on a non-existing person due to the amalgamation of the assessee company with another entity, duly intimated to the assessing officer. The appellant contended that the assessment was invalid as the jurisdictional notice and assessment order were issued after the amalgamation. The CIT-A upheld the assessment, citing the appellant's cooperation and the mention of the new company's name in the order. However, the appellant argued that these factors did not cure the jurisdictional defect. The Tribunal referred to various precedents, including CIT vs. Radha Apparels P.Ltd., and quashed the assessment, following the principle that assessing a dissolved company is a procedural defect that renders the assessment null and void.

Issue 2: Invalid reopening of assessment
The appellant also challenged the reopening of the assessment, alleging a violation of mandatory jurisdictional conditions and reliance on borrowed satisfaction without independent application of mind. The Tribunal found merit in the appellant's arguments, noting that the reopening was made without valid approval and solely based on information from the investigation wing. The Tribunal emphasized the necessity of complying with legal requirements for reopening assessments and ruled in favor of the appellant, quashing the reopening.

Issue 3: Invalid addition of Rs. 500,500 u/s 68 for share application money
Regarding the addition of Rs. 500,500 under sections 68 and 69C for share application money, the appellant contested the validity of the addition, providing evidence of bank confirmation and statements from the share applicant. The appellant argued that the adversarial statement lacked nexus and reliability, and sufficient evidence was presented to discharge the onus under section 68 of the Act. The Tribunal noted the lack of effort by the assessing officer to convert directions into findings and ruled in favor of the appellant, allowing the appeal and setting aside the addition.

In conclusion, the Tribunal allowed the appeal, quashing the invalid assessment framed on a non-existing person, the reopening of assessment, and the addition of Rs. 500,500 for share application money. The decision was based on legal precedents and the requirement for proper compliance with jurisdictional conditions in assessment proceedings.

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