2012 (12) TMI 94 - AT - Income Tax

Validity of Re-assessment Proceedings Unexplained Addition u/s 68 bogus credit - accommodation entries - credit worthiness and genuineness of transaction - Following the decision of court in case of Commissioner of Income-tax Versus Vishal Holding & Capital (P.) Ltd. 2010 (8) TMI 634 - DELHI HIGH COURT Held that - Assessee had produced copies of accounts, bills and contract notes issued by M/s. MKM Finsec Pvt. Ltd., and had been maintaining books of account as per Companies Act - Assessing Officer has simply acted on the information received from the Investigation Wing without verifying the details furnished by the assessee. The assessee has also produced best possible evidence to support its claim - AO has not verified details in respect of the material, which has been relied upon by him, he has not provided any findings of the investigation to the assessee. Therefore, in these circumstances, the addition made by the Assessing Officer cannot be said to be on the basis of some evidence that was put to the assessee in the course of assessment proceedings. CIT(A) has correctly deleted the addition - order of CIT(A) on the issue in question is upheld - In the result, revenue s appeal is dismissed.

Issues Involved:
1. Deletion of addition of Rs. 45,00,000/- on account of bogus credit under Section 68 of the IT Act.
2. Validity of reopening of the assessment under Section 148 of the IT Act.
3. Principles of natural justice regarding the opportunity to cross-examine.
4. Charging of interest under Section 234B of the IT Act.

Detailed Analysis:

1. Deletion of Addition of Rs. 45,00,000/- on Account of Bogus Credit under Section 68:
The revenue challenged the deletion of the addition of Rs. 45,00,000/- made under Section 68 of the IT Act, contending that the assessee failed to prove the creditworthiness and genuineness of the transaction. The Assessing Officer (AO) based the addition on information from the Investigation Wing, which indicated that the assessee received accommodation entries from M/s MKM Finsec Pvt. Ltd. The AO referred to the statement of Shri Mahesh Batra, Director of M/s MKM Finsec Pvt. Ltd., who admitted to providing accommodation entries. However, the CIT (A) deleted the addition, noting that the assessee provided substantial evidence, including contract notes, share certificates, confirmation letters, and audited accounts, to prove the genuineness of the transaction. The Tribunal upheld the CIT (A)'s decision, citing the absence of any tangible evidence from the AO to disprove the assessee's claims and referring to the decision in ITO vs. M/s Vaishali Financial Services Pvt. Ltd., where similar additions were deleted.

2. Validity of Reopening of the Assessment under Section 148:
The assessee contested the validity of the reopening of the assessment under Section 148, arguing that the basis for re-initiation was erroneous. The CIT (A) upheld the validity of the reassessment proceedings, relying on the decision of the Hon'ble jurisdictional High Court in CIT vs. Highgain Finvest Pvt. Ltd., which allowed reassessment based on specific information from the Investigation Wing. The Tribunal did not address this issue further, considering it academic after upholding the deletion of the addition.

3. Principles of Natural Justice - Opportunity to Cross-Examine:
The assessee argued that the assessment order violated the principles of natural justice as the AO did not provide an opportunity to cross-examine Shri Mahesh Batra, whose statement was pivotal in making the addition. The CIT (A) did not find merit in this argument, and the Tribunal did not specifically address this issue, focusing instead on the adequacy of the evidence provided by the assessee to substantiate the genuineness of the transaction.

4. Charging of Interest under Section 234B:
The assessee also challenged the charging of interest amounting to Rs. 15,65,114/- under Section 234B of the IT Act. The Tribunal held that the levy of interest under Section 234B is mandatory and consequential, directing the AO to recalculate the interest after giving effect to the Tribunal's order.

Conclusion:
The Tribunal dismissed the revenue's appeal, upholding the CIT (A)'s deletion of the addition of Rs. 45,00,000/-. The Tribunal found that the assessee had provided sufficient evidence to prove the genuineness of the transaction and that the AO did not bring any contrary evidence to disprove the assessee's claims. The Cross Objections filed by the assessee were disposed of, with the Tribunal holding that the issue of reassessment validity was academic in light of the deletion of the addition. The order was pronounced in the open court on 25.01.2012.

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