2012 (9) TMI 665 - HC - Income Tax

Reopening of assessment - undisclosed benefit of accommodation entries - Held that - The findings recorded by the AO, CIT (A) and ITAT in proceedings u/s 148 are findings of fact. The assessee could not satisfy the Income-tax authorities regarding the identity of Shri Trilok Chand Bansal, the Director of M/s Performance Trading and Investment Company Pvt Ltd and the genuineness of transactions. The story set up by the assessee, that Shri Trilok Chand Bansal executed the agreement paid three demand drafts totaling Rs. 15, 02, 700/- and thereafter did not claim either the property or the amount, and consequently the amount was forfeited, was not established and was not worthy of belief. The Income Tax Authorities did not commit any error in adding the amount to the income of the assessee as unaccounted undisclosed income. The findings recorded by the Income-tax authorities, that the three demand drafts were by way of accommodation entries of the unaccounted moneys of the assessee, thus, does not suffer from any error of law - aginst assessee.

Summary

Issues:
1. Delay condonation application for filing the appeal.
2. Validity of reopening the assessment under Section 147.
3. Genuineness of transactions related to the receipt of demand drafts.
4. Findings of fact by the Income Tax Authorities regarding undisclosed income.

Delay Condonation Application:
The delay of 27 days in filing the appeal was condoned after no serious objection was raised by the respondents. The delay condonation application was allowed, the defect removed, and a regular number was assigned to the appeal.

Validity of Reopening Assessment:
The case involved an Income Tax Appeal under Section 260-A arising from a judgment and order of the Income Tax Appellate Tribunal. The Assessing Officer reopened the assessment based on information indicating undisclosed income from accommodation entries. Despite the assessee's explanation of receiving demand drafts for a property sale that did not materialize, the authorities found discrepancies in the story and the lack of evidence to support it.

Genuineness of Transactions:
The Tribunal analyzed the facts and found that the transactions involving demand drafts from a company were not genuine. The assessee failed to prove the identity of the involved parties and the authenticity of the transactions. The Tribunal emphasized the importance of establishing the credibility of transactions beyond mere documentation, especially in cases of unexplained income.

Findings of Fact by Income Tax Authorities:
The High Court upheld the findings of the Income Tax Authorities, stating that the assessee could not substantiate the story presented regarding the receipt of demand drafts and the subsequent forfeiture of the amount. The authorities concluded that the demand drafts were part of accommodation entries for the assessee's undisclosed income, leading to the addition of the amount to the assessee's income.

In summary, the High Court dismissed the Income Tax Appeal, emphasizing that no legal questions arose from the factual findings of the Income Tax Authorities. The judgment highlighted the importance of establishing the genuineness of transactions and the burden of proof on the assessee in cases of undisclosed income.