2018 (3) TMI 1731 - AT - Income Tax

Reopening of assessment u/s 148 - addition u/s 68 - addition on account of commission - information received from Investigation Wing that assessee has received accommodation entry from SK Jain Group - recorded reasons for reopening - RTI application seeking copies of the documents received from Investigation Wing rejected - HELD THAT - The assessee filed list of the Directors in which 03 Directors have been mentioned who are conducting business of the Investor and no evidence has been brought on record to establish if they are connected with SK Jain Group of cases. The assessee also filed RTI application seeking copies of the documents received from Investigation Wing, but, the same were denied to assessee being confidential in nature. These facts supports the explanation of the Assessee that assessee has not been provided any material collected by the Investigation Wing during the course of search from the premises of SK Jain Group of cases and no statement of any person have been provided to assessee which were recorded by Investigation Wing during the course of search which is used against assessee. Therefore, the material which was collected at the back of assessee and used against the assessee without confronting the same to the assessee, cannot be read in evidence against the assessee. Thus in the absence of any further enquiry on the documents filed by assessee and in the absence for any confrontation of adverse material to the assessee, no addition could be made in the hands of the assessee - decided in favour of assessee.

Summary

Issues:
Reopening of assessment under section 148 of the Income Tax Act, 1961, addition of ?15 lacs under section 68, addition of ?30,000 on account of commission.

Reopening of Assessment:
The case involved a company that received fresh share application money of ?15 lacs, which was flagged due to its connection with a group providing accommodation entries. The Assessing Officer (A.O.) reopened the assessment under section 148 based on this information. The assessee contested the reopening, citing lack of opportunity for cross-examination and delay in initiating proceedings after receiving the information. The A.O. made additions based on the belief that the funds were sourced from a dubious group. However, the Tribunal found the reassessment proceedings flawed due to lack of proper evidence and cross-examination rights, ultimately setting aside the reopening.

Addition under Section 68:
The A.O. added ?15 lacs under section 68, suspecting the source of funds and the genuineness of the transaction. The assessee provided various documents to establish the identity and creditworthiness of the investor, including an affidavit, ITR, balance sheet, and bank statement. Despite the A.O.'s reliance on the Investigation Wing's report, the Tribunal noted that the assessee was not provided with crucial information or witness statements used against them. Relying on case law, the Tribunal concluded that without proper confrontation of adverse material and in the absence of further inquiry, the addition could not be sustained. The Tribunal set aside the addition under section 68.

Addition of Commission:
Additionally, the A.O. added ?30,000 as commission without substantial evidence. The Tribunal found no basis for this addition and deleted it along with the ?15 lacs addition under section 68. The Tribunal's decision was based on the lack of concrete evidence against the assessee and the failure to provide crucial information for cross-examination. The appeal of the assessee was allowed, and the additions were deleted on merit.

In conclusion, the Tribunal ruled in favor of the assessee, setting aside the additions of ?15 lacs and ?30,000. The decision highlighted the importance of providing proper evidence, allowing cross-examination, and ensuring a fair assessment process in such cases.