2017 (6) TMI 1183 - AT - Income Tax

Reopening of assessment under section 147/148 - addition on account of alleged finance provided by the assessee to Shri Shriram H. Soni and also of interest - Held that - The issue raised by the assessee against the reopening of assessment has no merit since against the return of income filed by the assessee, no scrutiny assessment was initiated and no order was passed under section 143(3) of the Act. The Assessing Officer after receiving information had recorded reasons for reopening the assessment and thereafter, had issued notice under section 148 of the Act. Following the ratio laid down by the Hon ble Supreme Court in ACIT Vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007 (5) TMI 197 - SUPREME Court), we uphold the initiation of re-assessment under section 147/148 of the Act. In the absence of any seized material found or produced before us relating to the year under appeal, there is no merit in the addition of ₹ 34 lakhs alleged to have advanced by the assessee during the year. It may further be pointed out that the Assessing Officer while computing interest in the case of assessee on such advancement of loan, had computed the interest for the period of 12 months. In other words, case of Revenue is that the amount was invested for the full 12 months with Shri Soni, on which interest had been worked out at ₹ 7,14,000/-. In case interest of 12 months is added in the hands of assessee, then no addition can be made on account of investment made by the assessee, since the amount would have been advanced in the preceding year and not in the year under consideration. In any case, once we have deleted the addition of ₹ 34 lakhs, consequent addition of interest earned on the said advance of ₹ 34 lakhs also stands deleted. The onus for substantiating that the entries belonged to the assessee was strongly upon the Revenue and the Revenue has failed to discharge its onus and in the absence of the same and in view of various other points / issues, we find no merit in the orders of authorities below. - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Validity of reopening assessment under sections 147/148 of the Income-tax Act, 1961.
2. Justification of additions made under section 69 of the Act for alleged finance provided by the assessee.
3. Justification of interest addition on the alleged finance amount.

Detailed Analysis:

1. Validity of Reopening Assessment under Sections 147/148:

The assessee challenged the reopening of the assessment under sections 147/148, asserting that the reasons recorded were based on suspicion and presumption, and thus, the reopening was invalid. The assessee also argued that the case should have been reopened under section 153C instead of section 148, as the documents were found with a third party, Shri Shriram Soni.

The Tribunal upheld the reopening of the assessment, citing that no scrutiny assessment was initiated against the original return filed by the assessee. The Assessing Officer had recorded reasons for reopening after receiving information and issued a notice under section 148. The Tribunal relied on the Supreme Court's decision in ACIT Vs. Rajesh Jhaveri Stock Brokers (P) Ltd., which allowed for reopening under such circumstances. Consequently, the grounds of appeal challenging the reopening were dismissed.

2. Justification of Additions Made Under Section 69:

The primary contention was the addition of ?34 lakhs as unaccounted investment and ?7,14,000 as interest income based on documents seized from Shri Soni, who was involved in money lending. The assessee argued that the documents did not explicitly mention his name and that the entries were in abbreviated forms like "Nanduseth Birla" or "BIRA NK," which did not conclusively identify him.

The Tribunal noted that the documents referred to by the authorities related to the subsequent financial year and not the year under consideration. The Tribunal found no merit in the authorities' conclusion that the entries belonged to the assessee, as the signatures did not match and no direct evidence was provided linking the assessee to the transactions for the relevant year.

The Tribunal also referred to previous cases, such as M/s. Kejals Furnishings Vs. ACIT and Jagannath Eknath Lahoti (HUF) Vs. ITO, where similar issues were resolved in favor of the assessee due to lack of conclusive evidence. The Tribunal emphasized that the onus was on the Revenue to provide substantial evidence, which they failed to do. Consequently, the addition of ?34 lakhs under section 69 was deleted.

3. Justification of Interest Addition on the Alleged Finance Amount:

The interest addition of ?7,14,000 was based on the presumption that the ?34 lakhs was invested for the entire year. The Tribunal clarified that if the interest for 12 months was considered, the principal amount would have been invested in the preceding year, not the year under consideration. Since the principal addition was deleted, the interest addition also stood deleted.

The Tribunal further cited the Allahabad High Court's decision in CIT Vs. Salek Chand Agarwal, which held that provisions of section 69 were not attracted if the assessee denied making any advances and no material evidence linked the advance to the assessee.

Conclusion:

The Tribunal concluded that the Revenue failed to substantiate the additions with concrete evidence linking the assessee to the alleged unaccounted investments and interest income. Thus, the appeal was partly allowed, dismissing the reopening challenge but deleting the additions under sections 69 and 56 of the Act.