2017 (3) TMI 1521 - HC - Income Tax

Addition u/s 68 - proof of genuineness of transactions - Held that - This Court notices that the assessee had provided several documents that could have showed light into whether truly the transactions were genuine. It was not a case where the share applicants are merely provided confirmation letters. They had provided their particulars, PAN details, assessment particulars, mode of payment for share application money, i.e. through banks, bank statements, cheque numbers in question, copies of minutes of resolutions authorizing the applications, copies of balance sheets, profit and loss accounts for the year under consideration and even bank statements showing the source of payments made by the companies to the assessee as well as their master debt with ROC particulars. The AO strangely failed to conduct any scrutiny of documents and rested content by placing reliance merely on a report of the Investigation Wing. This reveals spectacular disregard to an AO s duties in the remand proceedings which the Revenue seeks to inflict upon the assessee in this case. No substantial question of law

Summary

Issues:
1. Challenge to the ITAT's order upholding the CIT(A)'s opinion on additions made during reassessments.
2. Reassessment notice issued to the assessee for AY 2002-03 based on information from the Investigation Wing.
3. AO added a sum under Section 68 in the reassessment proceedings.
4. CIT(A) directed deletion of amounts brought to tax based on precedents and legal principles.
5. Confirmation of CIT(A)'s opinion by the ITAT.
6. Revenue's argument against the ITAT's decision.
7. Failure of AO to conduct scrutiny of documents provided by the assessee.

Analysis:

1. The High Court dealt with the challenge to the ITAT's order upholding the CIT(A)'s opinion on additions made during reassessments. The Revenue contested the decision, which was based on a reassessment notice issued to the assessee for AY 2002-03 following information from the Investigation Wing.

2. The AO added a sum under Section 68 during the reassessment proceedings. However, upon appeal, the CIT(A) directed that the amounts brought to tax should be deleted, citing legal precedents and principles, including the burden of proof on the assessee and the duties of the Assessing Officer.

3. The ITAT confirmed the CIT(A)'s opinion, leading to the Revenue arguing that appropriate steps should have been taken to remit the matter, as the Investigation Wing's report raised suspicions about the genuineness of the transactions.

4. The Court noted that the assessee had provided extensive documentation, including PAN details, bank statements, and other financial records, to establish the genuineness of the transactions. Despite this, the AO failed to conduct a thorough scrutiny of the documents and relied solely on the Investigation Wing's report.

5. The Court found that the AO's failure to scrutinize the documents provided by the assessee was a significant lapse in fulfilling their duties during the remand proceedings. As a result, the Court dismissed the Revenue's appeal, stating that no substantial question of law arose from the case.

In conclusion, the High Court upheld the CIT(A)'s decision to delete the amounts brought to tax, emphasizing the importance of thorough scrutiny by the Assessing Officer and adherence to legal principles in such cases.