2011 (7) TMI 1329 - AT - Income Tax

Reason to Believe - Assessment/ Re-Assessment of Income u/s 147 - AO initiated proceedings u/s 147, as he believed that assessee did not co-operate with the department and not submitted any return in reply to notice u/s. 148 - CIT(A) held the reasons recorded for initiating proceedings u/s 147 are not valid HELD THAT - We noted that the apex court in the case of INCOME-TAX OFFICER VERSUS PURUSHOTTAM DAS BANGUR AND ANOTHER 1997 (1) TMI 477 - SUPREME COURT has settled the law on the issue in question, that at the time of initiation of the proceedings u/s. 147, the AO should have the material relevant to the assessee. The information received from the Investigation Wing is also material if it contains the information regarding the assessee. The Assessing Officer at the time of recording of the reasons/formation of belief is not supposed to counter the evidence or material collected by him with the assessee. Even the source of the material cannot be asked by the assessee. If the material or the information belongs to the assessee, in our opinion, the Assessing Officer has a bona fide belief to record the reasons. The court cannot look into the sufficiency of the material held by the Assessing Officer for the formation of the belief. Once the proceedings are initiated, the onus is on the Assessing Officer to prove that the assessee has escaped the income and for that he has to give the hearing to the assessee and give all the material and evidence collected by him so that the assessee may contradict the same. If the Assessing Officer does not have the material, the reasons cannot be regarded to be bona fide and the initiation of the proceedings can be quashed. If the initiation is valid and subsequently, the assessee proves that there is no escapement of income, the assessment so framed could be quashed/cancelled. We noted that in the decisions relied on by the learned AR, the decision of the Hon ble Supreme Court, which has settled the position of law has not been discussed. The law pronounced by the Supreme Court is the law of land and is binding on all the courts what to talk of this Bench of the Tribunal. We, therefore, set aside the order of the CIT(A) on this issue as, in our opinion, the Assessing Officer has bona fide reason to believe that the income has escaped in the case of the assessee - Decision against Assessee. Unexplained Cash Credits u/s 68 - Assessee expressed his inability to produce the brokers - AO treated the amount received by the assessee from brokers credited in Saving Account as unexplained. - HELD THAT - We noted that the issue on merits is covered in the case of BAIJNATH AGARWAL VERSUS ACIT 2010 (2) TMI 892 - ITAT, AGRA , where it was held that The transaction was treated as non genuine as the assessee could not produce the broker. This in my opinion cannot be the ground to hold the transaction to be a non-genuine transaction. The assessee has given the address of the broker and proved the identity of the broker, even the bank account of the broker is also on record of the department . Respectfully following the decision, we confirm the order of the CIT(A) i.e such amount does not come u/s Sec. 68 - Decision in favour of Assessee.

Summary

Issues Involved:
1. Validity of proceedings initiated under Section 147 of the Income Tax Act.
2. Deletion of addition of Rs. 8,39,212 under Section 68 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of Proceedings Initiated Under Section 147 of the Income Tax Act:

The revenue challenged the quashing of proceedings initiated under Section 147 by the CIT(A). The Assessing Officer (AO) had initiated proceedings based on information from the Investigation Wing indicating that the assessee had taken accommodation entries for Rs. 8,39,212 through M/s. Ayushi Stock Brokers (P) Ltd. The AO issued a notice under Section 148, which the assessee did not respond to by filing a return. The AO proceeded under Sections 147/144, treating the amount received as unexplained and completing the assessment on an income of Rs. 9,44,168.

The CIT(A) quashed the notice under Section 148, finding the reasons recorded by the AO invalid. The revenue contended that the information received was specific and related to the assessee, providing a valid basis for initiating proceedings under Section 147. The AO had received detailed information, including the broker's name, the amount received, and the cheque details, which were specific to the assessee.

The Tribunal held that for Section 147 to apply, the AO must have "reason to believe" that income has escaped assessment. This belief must be based on relevant material, which need not conclusively prove escapement but should justify the initiation of proceedings. The Tribunal found that the AO had a bona fide belief based on specific information from the Investigation Wing, which was sufficient for initiating proceedings. The Tribunal referenced several case laws, including CIT vs. Rajesh Jhaveri Stock Brokers and ITO vs. Purushottam Das Bangur, supporting the view that the AO's belief was reasonable and based on relevant material. Consequently, the Tribunal set aside the CIT(A)'s order, upholding the validity of the proceedings initiated under Section 147.

2. Deletion of Addition of Rs. 8,39,212 Under Section 68 of the Income Tax Act:

On the merits, the CIT(A) had deleted the addition of Rs. 8,39,212 made by the AO under Section 68, treating the amount as unexplained. The Tribunal noted that the issue was covered by the decision in Shri Baijnath Agarwal vs. ACIT, where similar additions were deleted under identical circumstances.

The Tribunal observed that the assessee had provided documentary evidence, including contract notes, share certificates, and bank statements, proving the genuineness of the share transactions. The AO's suspicion was based on the high sale price of shares and the inability to produce the broker, but there was no direct evidence proving the transactions were bogus. The Tribunal emphasized that the burden of proof lies on the revenue to establish that the transactions were not genuine, which was not discharged in this case.

The Tribunal cited several decisions, including CIT vs. Anupam Kapoor and ITO vs. Smt. Kusumlata, supporting the view that mere suspicion or statements from brokers without corroborative evidence cannot justify treating genuine transactions as bogus. The Tribunal concluded that the assessee had successfully proved the genuineness of the share transactions, and the AO had failed to establish that the amount represented undisclosed income. Therefore, the Tribunal confirmed the CIT(A)'s order deleting the addition of Rs. 8,39,212.

Conclusion:

The Tribunal upheld the validity of the proceedings initiated under Section 147, finding the AO's belief to be reasonable and based on specific information. However, on the merits, the Tribunal confirmed the deletion of the addition of Rs. 8,39,212, holding that the assessee had provided sufficient evidence to prove the genuineness of the transactions, and the revenue failed to establish that the amount represented undisclosed income. The appeal was partly allowed, upholding the initiation of proceedings under Section 147 but confirming the deletion of the addition under Section 68.