2015 (8) TMI 885 - AT - Income Tax

Reopening of assessment - bogus accommodation entry - Held that - A.O. has recorded the reasons which had very much linked with the material in possession of the A.O. and the assessee has not pointed out any infirmity in the reasons recorded by the A.O. before reopening of assessment u/s 147 of the Act. After perusing the orders passed by Revenue authorities, specific information from IT (Inv.) regarding bogus accommodation entry worth ₹ 20,.03,000/-, the notice was issued by the A.O. to the assessee. Secondly, the A.O. after receiving necessary approval from the competent authorities has issued notice u/s 148 to the assessee and also provided opportunity to the assessee to raise objection and file the reply if any. The A.O. has also recorded valid reasons on the basis of evidence available with him and reopening of the assessment in the case of the assessee and he has also provided reasons recorded to the assessee against which the assessee has raised objection and the same was elaborately discussed and decided by passing speaking order by the A.O. In view of the facts and circumstances, of the case, we are of the considered view that the A.O. has issued valid notice u/s 148 on the basis of material available with him and after prescribed procedure under law, therefore the issue raised is decided against the assessee Addition made u/s 143(3) for giving accommodation entries - Held that - communication between the assessee and M/s Polo Leasing and Finance Pvt. Ltd goes to prove that none of them had any intention to sell or purchase the property in question. It is further observed that the conduct of M/s Polo Leasing and Finance in not confronting the assessee after receipt of notice dated 30.07.2004 that since it has not complied with clause 4 of the agreement to sell in question. It (assessee) has no right to forfeit the earnest money of ₹ 20 lacs. Factum of non challenging the locus of the assessee to forfeit the earnest money of ₹ 20 lacs by Polo Leasing and Finance Pvt. Ltd goes to prove that both the parties have entered into agreement to sell in question just to provide accommodation entry. So the agreement to sell in question is a sham transaction and ingenuine document. It is further noted that the assessee after issuing the notice dated 30.07.2004 asking M/s. Polo Leasing & Finance Pvt. Ltd. to get the sale deed executed before the date fixed, failing which earnest money of ₹ 20 lacs shall be forfeited, has never intimated M/s Polo Leasing & Finance Pvt. Ltd that it s earnest money of ₹ 20 lacs stood forfeited. It is also noted that since the assessee has never rescinded the agreement dated 10.01.2003 the question of forfeiting the earnest money of ₹ 20 lacs, admittedly received from M/s. Polo Leasing and Finance Pvt. Ltd, does not arise and in such eventualities M/s. Polo Leasing Finance Company had the right to seek refund within three year commencing from 10th April 2004. Thus the agreement of sale in question is proved to be a sham transaction having been prepared to provide accommodation entry and as such, the question of providing protection to the same u/s 51 of the Income Tax Act does not arise. - Decided against assessee.

Summary

Issues:
1. Validity of notice u/s 148
2. Addition of Rs. 20,03,000 made by AO u/s 143(3)
3. Charging of interest u/s 234B

Issue 1: Validity of notice u/s 148

The appellant challenged the validity of the notice u/s 148, contending that it was issued without proper application of mind by the Assessing Officer (AO). The appellant argued that the AO must have jurisdiction over the assessee to initiate reassessment and the belief that income has escaped assessment must be bona fide. The appellant cited a case to support their claim. However, the Department contended that the notice was based on specific information from the Investigation Wing and was issued after due process. The Tribunal found that the AO had valid reasons linked to the material in possession and had followed the prescribed procedure. The Tribunal dismissed the appellant's claim, upholding the validity of the notice u/s 148.

Issue 2: Addition of Rs. 20,03,000 made by AO u/s 143(3)

The AO made an addition of Rs. 20,03,000 based on information from the Investigation Wing that the transaction with Polo Leasing and Finance Pvt. Ltd. was a sham. The CIT(A) upheld this addition. The Tribunal noted that the appellant failed to show compliance with necessary permissions for the property sale, indicating the transaction was bogus. The Tribunal scrutinized the details of the accommodation entry and found no evidence of genuine intent for the property transaction. It was observed that the agreement was a sham to provide accommodation entry. The Tribunal affirmed the CIT(A)'s decision, dismissing the appellant's appeal on this ground.

Issue 3: Charging of interest u/s 234B

This issue was deemed consequential and was not adjudicated at the present time, as it was dependent on the outcomes of the previous issues discussed. Consequently, no decision was made on this issue during the proceedings.

In conclusion, the Tribunal upheld the validity of the notice u/s 148 and the addition of Rs. 20,03,000 made by the AO. The issue regarding charging of interest u/s 234B was not addressed at that point. The appeal of the assessee was dismissed, and the order was pronounced in open court on 14th Aug., 2015.