2015 (9) TMI 1299 - AT - Income Tax

Addition u/s 68 - unexplained cash credit and unaccounted cash paid for obtaining accommodation entries - CIT(A) deleted the addition - Held that - The assessee has filed some additional evidences before the Ld. CIT(A) which has been verified by the AO and the Ld. CIT(A) on the basis of the additional evidence, after giving full opportunity to the AO has deleted the addition in dispute. Ld. CIT(A) has taken the Remand Report from the AO and also examined all particulars/ details of the share application form, copies of PAN cards, income tax returns, bank particulars and bank statements, the complete address of the share applicants and deleted the addition in dispute. Ld. CIT(A) has also cited various decision rendered by the Hon ble Jurisdictional High Court as well as the Hon ble Supreme Court of India which includes CIT vs. Lovely Exports Pvt. Ltd. 2008 (1) TMI 575 - SUPREME COURT OF INDIA ; CIT vs. Divine Leasing & Finance Ltd. (2006 (11) TMI 121 - DELHI HIGH COURT) and CIT vs. Value Capital Services Ltd. (2008 (4) TMI 263 - DELHI HIGH COURT ) - CIT(A) has rightly deleted the addition - Decided in favour of assessee. Validity of reassessment proceedings u/s. 147 - Held that - On the issue of validity of reassessment proceedings u/s. 147 of the Income Tax Act, 1961, we are of the view that on the specific information the case of the assessee has been reopened. We are of the view that the material in possession of the AO is a fresh material which has been examined by the AO, came to be valid reasonable believe that the income of the assessee has escaped assessment. After conducting the detailed investigation to prove that the income has escaped assessment in the hands of the assessee, the reassessment proceedings have been initiated by the AO. Therefore, in our considered opinion, there was existence of correct information which prompted to the AO to proceed to issue notice u/s. 148 of the I.T. Act and hence, this reassessment proceedings could not be declared as null and void.- Decided in favour of assessee.

Summary

Issues Involved:

1. Deletion of addition under Section 68 of the Income Tax Act for unexplained cash credit.
2. Validity of reassessment proceedings under Section 147 of the Income Tax Act.

Issue-Wise Detailed Analysis:

1. Deletion of Addition under Section 68 of the Income Tax Act for Unexplained Cash Credit:

The Revenue challenged the deletion of an addition of Rs. 13,70,000/- made under Section 68 of the Income Tax Act, which was deemed as unexplained cash credit, and an additional Rs. 27,400/- for obtaining accommodation entries. The Assessing Officer (AO) had concluded that the assessee received accommodation entries in the form of share application money from six companies. The AO's investigation revealed that these companies did not exist at the provided addresses and that the bank statements indicated dubious transactions.

The CIT(A) deleted the addition, stating that the assessee had provided sufficient evidence, including share application forms, PAN cards, income tax details, bank particulars, and addresses of the share applicants. The CIT(A) relied on various judicial precedents, including CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195, CIT vs. Divine Leasing & Finance Ltd. (2007) 299 ITR 268 (Del.), and CIT vs. Value Capital Services Ltd. (2008) 307 ITR 334 (Del.), which established that once the identity of the shareholders is proven, the onus shifts from the assessee.

The Tribunal upheld the CIT(A)'s decision, noting that the AO did not effectively utilize his powers under Sections 131 and 133(6) to verify the genuineness of the transactions. The Tribunal concluded that the CIT(A) had rightly deleted the addition based on documentary evidence and judicial precedents.

2. Validity of Reassessment Proceedings under Section 147 of the Income Tax Act:

The assessee contested the reassessment proceedings initiated under Section 147, arguing that the conditions and procedures prescribed under Sections 147 and 148 were not complied with. The CIT(A) upheld the reassessment, stating that the AO had received specific information from the Directorate of Income Tax (Investigations) regarding accommodation entries. This information constituted fresh material that justified the AO's belief that income had escaped assessment.

The Tribunal agreed with the CIT(A), emphasizing that the AO had valid reasons to believe that income had escaped assessment based on the new information received. The Tribunal also addressed the assessee's contention regarding the non-disposal of objections against the reopening of the assessment. It referred to the Supreme Court's judgment in GKN Driveshafts (India) Ltd. vs. ITO 259 ITR 19 (SC), which mandates that the AO must provide reasons for reopening the assessment and address any objections raised by the assessee.

The Tribunal concluded that the reassessment proceedings were valid, as the AO had followed due procedure and had sufficient fresh material to justify the reopening of the assessment.

Conclusion:

The Tribunal dismissed the Revenue's appeal regarding the deletion of the addition under Section 68 and upheld the CIT(A)'s decision. It also dismissed the assessee's cross-objection challenging the validity of the reassessment proceedings under Section 147, affirming the CIT(A)'s order. The Tribunal's decision was based on a thorough examination of documentary evidence, judicial precedents, and the AO's adherence to procedural requirements.