2008 (1) TMI 946 - AT - Income Tax

Summary

Issues Involved:
1. Validity of addition of Rs. 50,00,000 u/s 68 by treating the gifts as non-genuine.
2. Validity of invocation of provisions of s. 147 and issuance of notice u/s 148 for asst. yr. 2000-01.

Summary:

Issue 1: Validity of addition of Rs. 50,00,000 u/s 68 by treating the gifts as non-genuine

The assessee received gifts aggregating to Rs. 50 lakhs from three individuals by cheques. The AO considered these gifts as bogus and made an addition of Rs. 50 lakhs u/s 68 of the IT Act, 1961. The CIT(A) confirmed the AO's order, stating that neither the AO could establish that the gifts were bogus nor the assessee could prove the genuineness of the transactions. The CIT(A) noted that the donors were regular taxpayers and had confirmed the gifts through affidavits. However, the assessee failed to produce the donors for corroboration, and the AO did not provide sufficient evidence to prove the gifts were mere accommodation entries. The Tribunal held that the assessee could not discharge the onus of proving the genuineness of the gifts, thus justifying the AO's addition of Rs. 50 lakhs u/s 68.

Issue 2: Validity of invocation of provisions of s. 147 and issuance of notice u/s 148 for asst. yr. 2000-01

The AO reopened the assessment based on information from a search at the premises of Mr. Manoj Agarwal, who was found to be in the business of providing accommodation entries. The CIT(A) upheld the reopening, stating that the AO had recorded detailed reasons for it. The Tribunal, however, found that the reasons for reopening were based on suspicion rather than concrete evidence. The Tribunal noted that the statements and records of Mr. Manoj Agarwal did not mention the assessee or the gifts in question. The Tribunal held that the reopening of the assessment was invalid as it was based on irrelevant information and lacked a nexus with the facts on record. Consequently, the reassessment was quashed.

Conclusion:

The Tribunal quashed the reassessment, holding it invalid due to lack of valid reasons and relevant information. The assessee's appeals were allowed, and the Department's appeal was dismissed.