2015 (11) TMI 65 - AT - Income Tax

Reopening of assessment - receipt of accommodation entry - Held that - n a perusal of the reasons recorded for re-opening of the assessment in the impugned assessment year as well as the reasons recorded for re-opening the assessment in assessee s own case in the assessment year 2003-04, which is extracted in entirety in the order of the co-ordinate bench under reference, the reasons are found to be identical. No sufficiency of evidence or material for forming the belief is not open to scrutiny but the existence of belief is must for a valid exercise of power. If it is impossible for any prudent person to form a belief on the basis of material or evidence that the income chargeable to tax has escaped assessment and reason which have been recorded would not lead to a prudent person to form an opinion that the income has escaped assessment within the meaning of section 147 then the action of the Assessing Officer in reopening the assessment u/s 147/148 is contrary to the powers permitted under the said provisions of Act. In the case in hand, the reasons recorded by the Assessing Officer do not indicate even a remote nexus between the application money received by the assessee with the alleged accommodation entries provided by Shri Giriraj Vijayvargiya or the alleged beneficiary of the accommodation entries. Accordingly, in the facts and circumstances of the case, we hold that the reopening in these cases are not valid and consequently the same is quashed - Decided in favour of assessee

Summary

Issues:
Re-opening of assessment under section 147 of the Income Tax Act, 1961.

Analysis:
The appeal pertains to the re-opening of assessment for the assessment year 2004-05 under section 147 of the Income Tax Act. The Assessing Officer re-opened the assessment based on information from a search conducted in another case, alleging unexplained cash credits due to accommodation entries. The assessee objected to this treatment, leading to the assessment order adding a significant amount to the income. The assessee appealed to the Commissioner (Appeals) but the appeal was disposed of ex-parte, confirming the additions made. The assessee then appealed to the Tribunal, arguing that a similar case in a previous year had the re-opening of assessment quashed. The Tribunal found the reasons for re-opening the assessment to be identical to the previous case and held that the re-opening was invalid. The Tribunal emphasized the necessity of a valid belief for re-opening under section 147 and concluded that the action of the Assessing Officer was contrary to the provisions of the Act. Consequently, the assessment order was quashed.

The Tribunal's decision was based on the lack of a nexus between the alleged accommodation entries and the share application money received by the assessee. The Tribunal highlighted the importance of a valid belief for re-opening an assessment under section 147, emphasizing that the reasons recorded must have a tangible link to income escapement. The Tribunal referenced legal precedents to support its decision, emphasizing that the sufficiency of evidence or material for forming a belief is crucial for a valid exercise of power under section 147. As the reasons for re-opening lacked a connection between the share application money and the alleged accommodation entries, the Tribunal deemed the re-opening invalid and quashed the assessment order.

The Tribunal's ruling rendered the other grounds raised by the assessee moot, as the primary issue of re-opening the assessment was found to be invalid. Consequently, the assessee's appeal was partly allowed, and the assessment order was quashed.