2015 (12) TMI 393 - AT - Income Tax

Reopening of assessment - assessee has also assailed the action of the authorities below on merits and pleaded that the additions made are totally devoid of merits and are unsustainable in law - unexplained loan - Held that - We find as a matter of fact that the impugned Annexure 4 showing loan received from Shri L.K. Jain (HUF) to the tune of ₹ 47.21 lacs was annexed along with the tax audit report filed and placed before the Assessing Officer in the course of the original assessment proceedings. It is also abundantly clear from the records and the assessment order that the Assessing Officer failed to take notice of the aforesaid Annexure 4 while completing the original assessment. After completion of the original assessment, it was found that the aforesaid loan has not been reflected in the Balance Sheet and accordingly was not subject-matter of the assessment in the original proceedings. Therefore, it is clear that the view taken by the Assessing Officer that there was a failure on the part of the assessee to disclose material facts fully and truly in tune with the authenticated tax audit report cannot be faulted. It is also clear that no conscious view was taken or no opinion was formed based on the impugned Annexure 4 to the tax audit report in the original assessment proceedings. Accordingly, it is not a case for change of opinion or a case of review. Therefore, the case laws cited by the assessee are clearly distinguishable on facts. The action of the Assessing Officer cannot be held to be hit by the embargo placed as per first proviso to section 147 of the Act. Thus, the objection raised by the assessee on lack of jurisdiction is not sustainable in law. - Decided against assessee. We find that the impugned Annexure 4 does not reflect the name of the assessee anywhere. Therefore, when seen independent of the tax audit report, the aforesaid Annexure 4 does not show any nexus with the assessee per se. We also find that Annexure 4 has no reference in the tax audit report and thus is not an integral part of tax audit report. This also establishes on facts that there is no nexus or live link between the impugned Annexure and the tax audit report. In view of these to important features, we find no difficulty in accepting the plea of the assessee that owing to some inadvertent error Annexure 4 not pertaining to assessee has crept in along with the tax audit report filed. The said Annexure 4 therefore appears extraneous. In our considered view, the assessee has discharged its onus of proving that the impugned loan is non-existent by furnishing the bank statements and confirmatory letters from the parties and co-relating the same with the Balance Sheet already placed on record. The facts and circumstances of the case as noted above clearly establishes the bonafides of the plea of the assessee. In view thereof, we hold that the impugned addition under section 68 of the Act is not sustainable on facts and law. - Decided in favour of assessee.

Summary

Issues:
1. Validity of reopening of assessment under section 147 of the Income-tax Act, 1961.
2. Merits of the addition made under section 68 of the Act.

Issue 1: Validity of Reopening of Assessment:
The appeal was against the order of CIT(A)-II, Pune relating to the assessment year 2003-04 under section 143(3) r.w.s. 147 of the Income-tax Act. The Assessing Officer reopened the assessment under section 147 by issuing a notice under section 148. The reasons for reopening included the unexplained cash credit of Rs. 47,21,887, which was not reflected in the accounts of the lender. The Assessing Officer treated this amount as an unexplained cash credit under section 68 of the Act. The CIT(A) confirmed this addition, leading to the appeal before the ITAT. The ITAT directed the CIT(A) to consider the jurisdiction issue, which was done, and it was concluded that the objection against reopening lacked merit. The ITAT held that the Assessing Officer rightly exercised power under section 147. The objection on lack of jurisdiction was dismissed.

Issue 2: Merits of the Addition under Section 68:
Regarding the merits of the addition made under section 68, the assessee contended that the loan was given to Shri L.K. Jain (HUF) and not received as alleged. The CIT(A) upheld the addition, but the ITAT allowed the appeal on this ground. The ITAT found that the Annexure 4, showing the loan received, did not reflect the name of the assessee and had no nexus with the tax audit report. It was considered extraneous and not integral to the report. The assessee provided bank statements and confirmatory letters to prove the non-existence of the loan. The ITAT held that the addition of Rs. 47,21,887 under section 68 was not sustainable on facts and law. Therefore, the Ground No.3 of the assessee was allowed, and the appeal was partly allowed.

In conclusion, the ITAT upheld the reopening of the assessment under section 147 but found the addition made under section 68 to be unsustainable. The assessee's appeal was partly allowed on the grounds related to the merits of the addition.