2017 (3) TMI 1305 - AT - Income Tax

Reopening of assessment - accommodation entries - Held that - In the reasons recorded by the AO there is no mention of names of the persons who are alleged to have given the accommodation entries. It simply says that the concern party has provided the accommodation entries to various parties. However, it does not specify as to which concerned party has provided the accommodation entries. The reasons recorded also does not mention as to who are the persons whose statement was recorded and what those persons have stated in their statements and whether they have stated anything specifically against the appellant. We further find that the name of the entry provider is not mentioned in the reasons recorded by the A.O. We further find that the AO has mentioned that as per the information available, the amount of RS.30,OO,000/- was an accommodation entry. Hon ble Delhi High Court in the case of Haryana Acrylic Manufacturing Co. Vs. CIT 2008 (11) TMI 2 - DELHI HIGH COURT has held that if in the reasons supplied to the assessee, there was no allegation that it had failed to disclose full and truly all material facts necessary for assessment and because of its failure there had been escapement of income Chargeable to tax, reopening of assessment after expiry of four years from end of relevant assessment year was without jurisdiction. - Decided in favour of assessee

Summary

Issues:
Reopening of assessment u/s. 147 based on accommodation entries and subsequent assessment, validity of notice u/s. 148, addition of ?30,00,000 under section 68 of the Act, charging of interest u/s. 234B.

Analysis:
1. Reopening of Assessment u/s. 147:
The Revenue appealed against the Ld. CIT(A)'s decision regarding the validity of reopening the assessment. The AO had initiated reassessment proceedings based on information received about accommodation entries provided by a concerned party. However, the reasons recorded did not specify the names of the parties providing the entries. The Ld. CIT(A) found this lack of specificity to be a crucial flaw, citing legal precedents that require allegations of non-disclosure of material facts for valid reassessment. The Tribunal upheld the Ld. CIT(A)'s decision, emphasizing the importance of providing specific details in the reasons recorded for reopening assessments.

2. Validity of Notice u/s. 148:
The Assessee's Cross Objection challenged the mechanical approval given by the Additional Commissioner of Income Tax for reopening the assessment without proper satisfaction as required by law. The Ld. CIT(A) quashed the notice u/s. 148, citing precedents that highlight the necessity of examining evidence before issuing such notices. The Tribunal upheld this decision, emphasizing the need for proper grounds and specific details in notices for reopening assessments.

3. Addition under Section 68 of the Act:
The Assessee contested the addition of ?30,00,000 under section 68 of the Act, arguing that the share capital raised from private limited companies was genuine and supported by necessary documentation. However, since the notice u/s. 148 was deemed invalid, the Tribunal did not adjudicate on this issue, rendering it academic due to the quashing of the notice.

4. Charging of Interest u/s. 234B:
The Assessee raised a ground against the charging of interest u/s. 234B of the Income Tax Act. However, this issue was not specifically addressed in the detailed analysis provided by the Tribunal, indicating that it might not have been a significant point of contention in the judgment.

In conclusion, the Tribunal dismissed the Revenue's appeal and the Assessee's Cross Objection, upholding the Ld. CIT(A)'s decision to quash the notice u/s. 148 due to lack of specific details and grounds in the reasons recorded for reopening the assessment. The judgment underscores the importance of providing clear and detailed information when initiating reassessment proceedings to ensure procedural validity and fairness in tax assessments.