2017 (7) TMI 137 - AT - Income Tax

Genuineness of the transaction - accommodation entries - reopening of assessment - Held that - In view of the incriminating evidence/by way of statement of Shri Narendra R. Shah, the Revenue has doubted the genuineness of the transaction. Once the Revenue has doubted the genuineness of the transaction, the onus shifts back to the assessee to prove by the cogent evidences/material that the above said transaction in shares was genuine. The assessee during the course of proceedings before us has raised legal issues which goes to the root of the matter that the Assessing Officer has does not have the original records of the assessment and also that no approval of CIT-A was taken before reopening of the assessment. Further contention was raised that the statement of Shri Narendera R. Shah was not provided to the assessee nor opportunity to cross examine said Narendra R Shah was given to the assessee. Further the assessee has raised the contention that said narendra R. Shah is not connected with M/s Surya Deep Salt Refinery and Chemical Works Ltd.. All these contentions are legal contention, which requires investigation of facts, therefore, the interest of justice will be best sub served if the matter is set-aside and restored to the file of the Assessing Officer to denovo determine the issue on merits after giving opportunity of being heard to the assessee. Appeal of the assessee is allowed for statistical purposes only.

Summary

Issues Involved:

1. Legality of the reopening of assessment under Sections 147/148 of the Income Tax Act.
2. Validity of the order passed under Section 147 for disposal of objections against notice under Section 148.
3. Justification for the addition of ?15,00,000 under Section 68 as unexplained cash credit.
4. Alleged denial of natural justice due to non-provision of statements and cross-examination opportunities.

Issue-Wise Detailed Analysis:

1. Legality of the Reopening of Assessment under Sections 147/148:

The assessee challenged the reopening of the assessment, arguing that it was based on mere surmises and conjectures without proper application of mind. The reopening was initiated after the Assessing Officer received information that the assessee received share application money from a company engaged in providing accommodation entries. The Tribunal noted that the original return was processed under Section 143(1) and no assessment was made under Section 143(3). The reopening was based on specific information from a search and seizure operation, where the controller of the company admitted to providing bogus accommodation entries. The Tribunal held that the Assessing Officer acted on specific information and had a reason to believe that income had escaped assessment, thus justifying the reopening.

2. Validity of the Order Passed under Section 147 for Disposal of Objections Against Notice under Section 148:

The assessee contended that the objections to the notice under Section 148 were not appropriately dealt with. The Tribunal observed that the Assessing Officer followed the directions of the Hon'ble Supreme Court in G.K.N. Driveshafts (India) Ltd. vs. Income Tax Officer, dealing with the objections through a separate order. The Tribunal upheld the CIT(A)'s decision that the order was proper and not bad in law, as the objections were appropriately addressed by the Assessing Officer.

3. Justification for the Addition of ?15,00,000 under Section 68 as Unexplained Cash Credit:

The assessee argued that the share application money was genuine and provided evidence of the transaction through banking channels, board resolutions, and the creditworthiness of the company. However, the Assessing Officer was not satisfied with the genuineness of the transaction, especially since the company did not respond to notices under Section 133(6) and summons under Section 131. The Tribunal noted that the CIT(A) confirmed the addition, observing that the assessee failed to substantiate the genuineness, creditworthiness, and identity of the party. The Tribunal emphasized that once the genuineness of the transaction was doubted, the onus shifted back to the assessee to prove it with cogent evidence.

4. Alleged Denial of Natural Justice:

The assessee claimed that natural justice was denied as the statement of Mr. Narendra R. Shah was not provided, and no opportunity for cross-examination was given. The Tribunal found that the CIT(A) had remanded the matter to the Assessing Officer, who issued summons and notices but received no compliance. The Tribunal directed the Assessing Officer to provide the statement of Mr. Narendra R. Shah to the assessee and allow cross-examination. The Tribunal also allowed the assessee to raise all legal contentions and submit necessary evidence during the remand proceedings.

Conclusion:

The Tribunal set aside the assessment and remanded the matter to the Assessing Officer for a denovo determination, emphasizing the need to provide the assessee with due opportunity to cross-examine Mr. Narendra R. Shah and to present all relevant evidence. The appeal was allowed for statistical purposes only.