2014 (10) TMI 314 - AT - Income Tax

Reopening of assessment proceedings u/s 147 Addition u/s 68 and 69 Genuineness of loan taken - Held that - The reopening has been done only on the basis of the statement and disclosure petition filed by Shri Suresh Kejriwal - This so-called statement and disclosure are the foundation along with the appraisal report - a perusal of the statement from Shri Kejriwal shows that this is the statement taken in the course of survey - This statement loses its evidentiary value in so far as the statement recorded in the course of survey has no conclusive evidentiary value. It is not recorded under oath - the reference to the statement recorded from Shri Kejriwal for the purposes of reopening in the case of the assessee again fails without a foundation as the assessee s name is nowhere referred to in the statement recorded on the confessional disclosure - even if an attempt to protect the reopening is made by reference to the disclosure made by Shri Kejriwal even there there is no reference to the assessee - prima facie there is no live link nor direct nexus to the statement of Shri Kejriwal of having provided any accommodation entry to the assessee - the reopening is liable to be held to be bad in law. Relying upon Income-Tax Officer I Ward Distt. VI Calcutta And Others Versus Lakhmani Mewal Das 1976 (3) TMI 1 - SUPREME Court - reopening of assessment in the case of the assessee for both the assessment years stand cancelled and the assessment orders passed for both the assessment years as a consequence of such reopening also stand cancelled - revenue has not been able to produce any evidence to show that the loan taken by the assessee is an accommodation entry - There is neither any statement nor documentary evidence to question the genuineness of the loan taken and repaid by the assessee there is no reason to accept the submissions of the department that the additions are required to be made as suggested by the department - the genuineness of the loan transaction of the assessee with M/s. Saket Vinimay Pvt. Ltd. is liable to be treated as a genuine transaction and the additions upheld by the CIT(A) are to be set aside Decided in favour of assessee.

Issues Involved:
1. Validity of the initiation of proceedings under Section 147 of the Income Tax Act, 1961.
2. Compliance with requisitions issued by the Assessing Officer (A.O.).
3. Basis for reopening the assessment.
4. Applicability of case laws relied on by the appellant.
5. Justification for additions made under Sections 68 and 69 of the Income Tax Act, 1961.

Detailed Analysis:

1. Validity of the initiation of proceedings under Section 147 of the Income Tax Act, 1961:
The appellant argued that the reopening of the assessment was initiated based on the statement of Shri Suresh Kejriwal, which did not mention the appellant. The Tribunal noted that the statement was taken during a survey and lacked conclusive evidentiary value. The Tribunal observed that the statement did not include the appellant's name, and there was no direct nexus or live link between the statement and the appellant. Consequently, the Tribunal held that the reopening of the assessment was invalid.

2. Compliance with requisitions issued by the Assessing Officer (A.O.):
The appellant contended that they had disputed the validity of the notice under Section 147 and thus did not comply with the requisitions. The Tribunal noted that the appellant had requested and received the reasons recorded for reopening. The Tribunal found that the reasons did not establish a direct connection between the appellant and the alleged accommodation entries. Therefore, the appellant's non-compliance was justified as the reopening itself was invalid.

3. Basis for reopening the assessment:
The Tribunal examined the reasons recorded for reopening, which were based on an appraisal report and the statement of Shri Suresh Kejriwal. The Tribunal found that the statement did not mention the appellant and thus could not form a valid basis for reopening. Additionally, the Tribunal noted that the A.O.'s attempt to improve the reasons recorded was not permissible, as only the reasons recorded for obtaining sanction could be considered. The Tribunal concluded that the reopening was invalid due to the lack of a direct nexus between the statement and the appellant.

4. Applicability of case laws relied on by the appellant:
The appellant cited several case laws to support their argument against the reopening. The Tribunal referred to the decisions in Signature Hotels Pvt. Ltd., Sukhdeo Prasad Agarwalla, and Lakhmani Mewal Das, which emphasized the need for a direct nexus and live link between the reasons recorded and the alleged income escaping assessment. The Tribunal agreed with the appellant that the reopening was invalid in light of these precedents.

5. Justification for additions made under Sections 68 and 69 of the Income Tax Act, 1961:
On the merits, the appellant provided evidence to substantiate the genuineness of the loan transaction with M/s. Saket Vinimay Pvt. Ltd. The Tribunal noted that the loan was reflected in the balance sheet of Saket Vinimay Pvt. Ltd., and the A.O. did not disprove the genuineness of the transaction. The Tribunal also referred to the Hon'ble Settlement Commission's order in the case of Mani Square Ltd. group, which accepted the genuineness of similar transactions. Consequently, the Tribunal held that the additions made under Sections 68 and 69 were unjustified and deleted them.

Conclusion:
The Tribunal allowed the appeals filed by the assessee, holding that the reopening of the assessments was invalid and the additions made under Sections 68 and 69 were unjustified. The Tribunal's decision was based on the lack of a direct nexus between the reasons recorded for reopening and the appellant, as well as the genuine nature of the loan transaction.

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