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2017 (5) TMI 1036 - AT - Income TaxReopening of assessment - addition on account of accommodation entries - Held that - The matter requires reconsideration at the level of the Assessing Officer. The assessee claimed that sufficient documentary evidences were filed before Assessing Officer to prove that assessee company took genuine loan from both the said companies and in support of the explanation assessee filed their ITR, bank statement and confirmation. However, AO has not discussed anything in the assessment order with regard to filing of these documentary evidences in support of explaining genuine loans. The Assessing Officer has not mentioned anywhere if the report of investigation wing or copy of statement of Shri Aseem Kumar Gupta was provided to the assessee at reassessment stage. Similarly there is no mention if the assessee also asked for the copies of the same or requested the Assessing Officer to produce Shri Aseem Kumar Gupta for cross examination on his behalf. The assessee however made such statement before Ld. CIT(A) that documentary evidences were filed and assessee has not been afforded to cross examine the statement of Shri Aseem Kumar Gupta Hon ble Supreme Court in the case of Kishinchand Chellaram vs. CIT 1980 (9) TMI 3 - SUPREME Court held that when any incriminating material collected at the back of the assessee, the same cannot be read in evidence against the assessee unless same is confronted to assessee and right to cross examination have been provided to the assessee. In the absence of any details mentioned in the assessment order and that no finding to that effect have been given, therefore, in my view the matter requires reconsideration at the level of the Assessing Officer- Appeal of assessee is partly allowed for statistical purpose.
Issues Involved:
1. Reopening of assessment under Section 147 of the Income Tax Act. 2. Addition on account of accommodation entries. Issue-Wise Detailed Analysis: 1. Reopening of Assessment under Section 147 of the Income Tax Act: The primary issue was whether the reopening of the assessment under Section 147 was justified. The Assessing Officer (AO) reopened the assessment based on information from the investigation wing, which unearthed an accommodation entry racket operated by Shri Aseem Kumar Gupta. The AO issued a notice under Section 148, to which the assessee responded by filing a return of income declaring NIL income. The AO had tangible material indicating that the assessee had received accommodation entries amounting to ?10 lakhs through banking channels from companies floated by Shri Aseem Kumar Gupta. The assessee challenged the reopening, arguing that the reasons recorded did not show any independent application of mind by the AO and lacked a live link with the formation of belief that income had escaped assessment. However, the Commissioner of Income Tax (Appeals) [CIT(A)] upheld the reopening, citing tangible material and a prima facie case for reopening. The CIT(A) relied on decisions from the Supreme Court and the Delhi High Court to support this finding. The Tribunal found that the AO had applied his mind independently to the information provided by the investigation wing and had a specific tangible material indicating an escapement of income. Therefore, the reopening of the assessment was justified, and this ground of appeal by the assessee was dismissed. 2. Addition on Account of Accommodation Entries: On the merits, the assessee argued that the report of the investigation wing and the statement of Shri Aseem Kumar Gupta were not provided to them, and no cross-examination was allowed. The assessee claimed to have provided sufficient documentary evidence, including income tax returns, bank statements, and confirmations from the lender companies, to prove the genuineness of the loans. However, the CIT(A) noted that the assessee never requested cross-examination before the AO and upheld the addition based on the incriminating material found during the search operation. The Tribunal observed that the AO did not discuss the documentary evidence provided by the assessee in the assessment order and did not mention whether the report and statement were provided to the assessee. Citing the Supreme Court's decision in Kishinchand Chellaram vs. CIT, the Tribunal held that any incriminating material collected at the back of the assessee must be confronted to the assessee, and the right to cross-examination must be provided. Therefore, the Tribunal set aside the orders of the authorities below on merit and restored the issue to the AO for reconsideration. The AO was directed to provide the report and statement to the assessee and allow cross-examination if requested, and then pass a reasoned order discussing the material on record. Separate Judgments: For the assessment year 2010-11, the Tribunal followed the same reasoning as for the assessment year 2008-09. The reopening of the assessment was confirmed, but the addition on merit was restored to the AO for reconsideration. Conclusion: Both appeals by the assessee were partly allowed for statistical purposes, with the reopening of assessments upheld and the additions on merit remanded to the AO for fresh consideration.
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