2015 (6) TMI 205 - AT - Income Tax

Reopening of assessment - addition made on account of unsecured loan taken - addition u/s 2(22)(e) - Held that - There was no obligation on the part of the Assessing Officer to furnish the reasons recorded along with the issuance of notice under Section 148 of the Act. The assessee himself could request for the reasons after the expiry of the said period of six year and the reasons were furnished within a period of less than 4 months. This cannot be treated as unreasonable time and the ratio laid down by the Hon ble Delhi High Court in the case of Haryana Acrylic Manufacturing Co. (2008 (11) TMI 2 - DELHI HIGH COURT) is not applicable to the facts of the present case. In that case, the reasons were asked within the period of six years from the end of the relevant assessment year and the Assessing Officer failed to furnish the same before the expiry of six years from the end of the relevant assessment year. Hence, the reassessment proceedings are valid in law. Addition on account unsecured loans - Held that - It is noticed by the Assessing Officer that the transactions in question are merely book entries and the allegation made against the assessee company is that the assessee had provided cash to M/s Nishant Finvest P. Ltd. and M/s Performance Trading & Investment, who after depositing the cash in the bank account had issued cheques in favour of the assessee company which means that the cash deposited in the bank account of those concerns really belongs to the assessee. This fact is proved by deposit of cash in equivalent amount in the bank accounts of those two concerns preceding the issue of cheques in favour of the assessee. The appellant failed to rebut this allegation. The appellant also failed to produce the Directors of those concerns before the Assessing Officer. In other words, the appellant also failed to prove the genuineness of the transactions in the light of the fact that those concerns are alleged to be indulged in providing book entires. It is settled proposition of law that just because credits were accepted by account payee cheques and confirmation letters were filed, the transactions cannot be called sacrosanct. In our considered view, the assessee had failed to discharge his onus that was lying upon it in proving the credits under the provisions of Section 68 of the Act and therefore, we hereby confirm the addition of ₹ 4 lakhs. Addition under Section 2(22)(e) - Held that - It is settled proposition of law that the transactions which are undertaken during the course of normal business activity shall not come within the purview of the provisions of Section 2(22)(e) of the Act. In this regard the reliance is placed on the decision of Hon ble Jurisdictional High Court in the case of CIT Vs. Raj Kumar, 2009 (5) TMI 17 - DELHI HIGH COURT . In the light of the above decision, we hereby delete the addition of ₹ 27 lakhs on account of deemed dividend.

Summary

Issues:
1. Jurisdiction under Section 147/148 of the Act.
2. Addition of unsecured loans.
3. Addition under Section 2(22)(e) of the Act.

Jurisdiction under Section 147/148 of the Act:
The appeal challenged the jurisdiction under Section 147/148 of the Act, citing delay in furnishing reasons recorded. The Tribunal held that the reasons were furnished within a reasonable time, not exceeding four months, after the assessee's request. Referring to the G.K.N. Drive Shafts India Ltd. case, it was established that the reassessment proceedings were valid, distinguishing the Haryana Acrylic Manufacturing Co. case. The Tribunal dismissed the challenge on jurisdiction grounds.

Addition of unsecured loans:
Regarding the addition of unsecured loans, the assessee received Rs. 4,00,000 from two entities by account payee cheques. The Tribunal noted that although confirmation letters were provided, further investigation revealed the transactions were merely book entries. The assessee allegedly provided cash to the entities, who then issued cheques back. The Tribunal found the assessee failed to prove the genuineness of the transactions and confirmed the addition of Rs. 4 lakhs under Section 68 of the Act.

Addition under Section 2(22)(e) of the Act:
In the case of the addition under Section 2(22)(e) of the Act, the Tribunal analyzed a building contract with an associate concern, where a bill of Rs. 27 lakhs was raised but not actually paid. Citing the CIT Vs. Smt. Savithiri Sam case, the Tribunal held that no actual payment was made, thus not constituting deemed dividend. Referring to the CIT Vs. Raj Kumar case, transactions within normal business activity do not fall under Section 2(22)(e). Consequently, the Tribunal deleted the addition of Rs. 27 lakhs on account of deemed dividend. The appeal was partly allowed for statistical purposes.

This detailed analysis of the judgment covers the issues raised in the appeal comprehensively, providing insights into the Tribunal's reasoning and decisions on each matter.