2016 (2) TMI 1106 - AT - Income Tax

Reopening of assessment - receipt of gift - reopening on the basis of report of Deputy Director(Inv.) - Held that - General information was taken as good enough to make addition. The other material which their Lordships of Supreme Court called specific material was required to be collected. As noted earlier, general material collected about a creditor to be hawala is not sufficient even to validly initiate a reassessment proceeding. It cannot be good material to sustain an assessment. Therefore, on facts and circumstances of the case, it is not possible to hold that genuineness of entry, creditworthiness of the creditor etc. has not been established on record. Thus find no good ground to sustain addition of cash credit or commission allegedly paid by the assessee to obtain fictitious entry. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of the assessment under sections 148/143(3) of the Income Tax Act, 1961.
2. Validity of action taken under section 148 of the Income Tax Act, 1961.
3. Legality of reopening the assessment considering the already accepted gift.
4. Addition of Rs. 5 lakhs to the income of the assessee treating the gift as bogus.
5. Arbitrary and illegal nature of the addition.
6. Whether the assessment completed under sections 148/143(3) is barred by limitation.

Detailed Analysis:

1. Legality of the assessment under sections 148/143(3) of the Income Tax Act, 1961:
The assessee challenged the completion and confirmation of the assessment under sections 148/143(3). The original return was filed on 29.10.2001, and the assessment was completed on 23.02.2004 at the declared income of Rs. 85,010. A notice under section 148 was issued based on information from Addl. DIT(Inv.), Meerut, indicating a bogus gift of Rs. 5 lakhs. The AO assessed the income at Rs. 5,85,010 on 15.09.2006. The CIT(A) upheld the reassessment proceedings as valid.

2. Validity of action taken under section 148 of the Income Tax Act, 1961:
The assessee argued that the action under section 148 was illegal and arbitrary. The reopening was based on a report from the Deputy Director(Inv.), which indicated that the assessee received a bogus gift from Sanjay Mohan Agarwal. The Tribunal referenced the case of Shri Vinod Bahl Vs ITO, where a similar reopening under section 147 was deemed valid due to specific and reliable information.

3. Legality of reopening the assessment considering the already accepted gift:
The assessee contended that the gift was already considered and accepted in the regular assessment completed on 23.02.2004. The AO had initially accepted the gift, but later, based on further investigation, it was treated as bogus. The Tribunal noted that the reopening was based on specific information from the DDI, which justified the reassessment.

4. Addition of Rs. 5 lakhs to the income of the assessee treating the gift as bogus:
The AO added Rs. 5 lakhs to the assessee's income, treating the gift as bogus. The Tribunal referred to the case of Shri Vinod Bahl Vs ITO, where a similar addition was deleted. The Tribunal found no material evidence to prove that the cheque was bogus or a hawala entry. The genuineness of the entry was established as the cheque was realized and credited to the assessee's bank account. The creditor's capacity to advance the amount was also not in doubt.

5. Arbitrary and illegal nature of the addition:
The assessee claimed the addition was arbitrary and illegal. The Tribunal observed that the revenue's evidence was general in nature and did not specifically pertain to the assessee's transaction. The Tribunal held that general information about hawala transactions was insufficient to sustain the addition without specific material evidence.

6. Whether the assessment completed under sections 148/143(3) is barred by limitation:
The assessee argued that the assessment completed on 15.09.2006 was barred by limitation. However, the Tribunal did not find merit in this argument and proceeded to consider the case on its merits.

Conclusion:
The Tribunal, following the precedent set in the case of Shri Vinod Bahl Vs ITO, deleted the addition of Rs. 5 lakhs made by the AO and sustained by the CIT(A). The appeal of the assessee was allowed, and the reassessment proceedings were deemed invalid due to the lack of specific and reliable evidence against the assessee. The Tribunal emphasized that general information about hawala transactions could not justify the addition without concrete evidence.