2012 (9) TMI 474 - AT - Income Tax

Addition on account of accommodation entries - Reopening of assessment u/s 147 - Weather notice u/s 148 can be issued on the basis of information which AO already have AO issue notice u/s 143(2) and 142(1) Assessee did not appear before the AO - AO re-assess income u/s 144 read with section 147 Held that - During assessment u/s 143(3) AO gets information about search from investment wing before completion of assessment u/s 143(3) - Assessing Officer did not get any chance to examine the depositors Case remanded back to AO

Issues:
- Addition of Rs.1 crore on account of accommodation entries
- Characterization of investment in share application as a business transaction
- Reopening of the case based on information from the Investigation Wing
- Proper application of mind by the Assessing Officer in reopening the case
- Examination of depositors by the Assessing Officer
- Opportunity for the assessee to be heard during assessment

Analysis:
1. Addition of Rs.1 crore on account of accommodation entries:
The case involved the revenue appealing against the deletion of the addition of Rs.1 crore by the CIT(A). The revenue contended that the CIT(A) erred in deleting the addition. The Assessing Officer had made the addition based on information regarding accommodation entries provided by the Investigation Wing. The assessee argued that the share application money received was part of a legitimate business transaction and not an accommodation entry. The CIT(A) accepted the assessee's submissions and deleted the addition.

2. Characterization of investment in share application as a business transaction:
The assessee maintained that the share application money received was for genuine business purposes and not as accommodation entries. The CIT(A) agreed with the assessee and held that the investment in share application should be considered a business transaction. The assessee's cross objection was upheld, leading to the deletion of the addition of Rs.1 crore.

3. Reopening of the case based on information from the Investigation Wing:
The case was reopened by the Assessing Officer based on information received from the Investigation Wing regarding the activities of a certain individual and his group companies. The assessee argued that there was no new information available for reopening the case, as the information was already known to the Assessing Officer during the original assessment. The CIT(A) considered this argument and ruled in favor of the assessee.

4. Proper application of mind by the Assessing Officer in reopening the case:
The assessee raised concerns about the lack of independent application of mind by the Assessing Officer in reopening the case. The CIT(A) noted that the reasons recorded for initiating proceedings did not demonstrate an independent belief by the Assessing Officer. This lack of proper application of mind was a crucial factor in the decision to delete the addition.

5. Examination of depositors by the Assessing Officer:
During the appeal, the Department argued that the Assessing Officer did not get a chance to examine the depositors, leading to a request for the case to be remanded for fresh examination. The Tribunal agreed with this request and remitted the case back to the Assessing Officer for proper examination, emphasizing the importance of giving the assessee a fair opportunity to be heard.

6. Opportunity for the assessee to be heard during assessment:
The Tribunal stressed the importance of ensuring that the assessee is given a proper opportunity to be heard during the assessment process. In the interest of justice, the Tribunal remitted the case back to the Assessing Officer for fresh examination, highlighting the need for a fair and thorough assessment process.

In conclusion, the Tribunal allowed the revenue's appeal for statistical purposes and dismissed the cross objections filed by the assessee. The case highlighted the significance of proper application of mind by the Assessing Officer, the characterization of transactions, and the necessity of providing the assessee with a fair opportunity to present their case during assessment proceedings.

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