2017 (7) TMI 660 - AT - Income Tax

Reopening of assessment - no notice under section 143(2) issued before completing the assessment proceedings by AO - reason to believe - Held that - The failure by the AO to issue a notice to the Assessee under Section 143(2) of the Act when the Assessee made a statement before the AO to the effect that the original return filed should be treated as a return pursuant to a notice under Section 148 of the Act, is fatal to the order of re-assessment. See Principal CIT vs. Jai Shiv Shankar Traders Pvt. Ltd. 2015 (10) TMI 1765 - DELHI HIGH COURT Also at the time of recording the reasons, the Assessing Officer should have prima-facie belief but that belief must be arisen out of the material. Until and unless the ingredients stipulated under section 147 of the Act are not complied with, the reasons recorded cannot be regarded to be bona-fide. We accordingly on this basis also, following the decision in the case of Principal CIT vs. G & G Pharma India Ltd. (2015 (10) TMI 754 - DELHI HIGH COURT) quash the assessment order. - Decided in favour of assessee. Addition u/s 68 - Held that - CIT(A) has categorically held that the assessee has discharged his onus to prove all the ingredients as stipulated under section 68 of the Act inasmuch as he has clearly stated that the Assessing Officer has not made any enquiry to examine the contents of the information submitted by the assessee. The assessee has received subscription for share capital from four corporate entities through cheque and these corporate entities are duly registered with ROC and they are active as per the website of the Ministry of Corporate Affairs. They are also having permanent account number and regularly filing their returns. The Assessing Officer without discharging his onus or bringing any material to the contrary, just rejected the evidences filed by the assessee. Hon ble Supreme Court in the case of CIT vs. Orisssa Corporation(1986 (3) TMI 3 - SUPREME Court) has categorically held that for inaction of the Assessing Officer, the assessee cannot be penalized. - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition of ?98.50 lakhs under Section 68 of the Income Tax Act, 1961.
2. Validity of the assessment proceedings under Section 147/148 due to non-issuance of notice under Section 143(2).
3. Validity of reasons recorded by the Assessing Officer (AO) for reopening the assessment.

Detailed Analysis:

1. Deletion of Addition of ?98.50 Lakhs under Section 68:
The Revenue challenged the deletion of ?98.50 lakhs added by the AO as unexplained credit under Section 68. The CIT(A) held that the assessee had discharged its onus by providing necessary evidence such as the identity of the investors, their PAN numbers, bank statements, and ROC registration details. The AO did not conduct any further inquiry or verification after receiving these documents. The CIT(A) relied on the Supreme Court decision in CIT vs. Orissa Corporation and the Delhi High Court decision in CIT vs. Goel Sons Golden Estate Pvt. Ltd., which emphasized that the burden shifts to the Revenue once the assessee provides prima facie evidence. The Tribunal upheld the CIT(A)'s decision, noting that the AO's failure to conduct further inquiries invalidated the addition.

2. Validity of Assessment Proceedings under Section 147/148:
The assessee argued that the entire assessment was invalid due to the non-issuance of notice under Section 143(2) after the issuance of notice under Section 148. The Tribunal noted that despite multiple directives, the Revenue failed to produce the assessment record to prove the issuance of such notice. Drawing an adverse inference under Section 114 of the Evidence Act, the Tribunal concluded that no notice under Section 143(2) was issued, rendering the assessment invalid and void ab-initio. This conclusion was supported by the Delhi High Court's decision in Principal CIT vs. Jai Shiv Shankar Traders Pvt. Ltd., which held that compliance with Section 143(2) is mandatory for a valid reassessment under Section 147/148.

3. Validity of Reasons Recorded by the AO for Reopening the Assessment:
The assessee contended that the reasons recorded by the AO were based on borrowed satisfaction from the Investigation Wing and lacked independent application of mind. The Tribunal examined the reasons, which merely stated that the assessee had taken accommodation entries totaling ?98.50 lakhs based on information from the Investigation Wing. The Tribunal found that the AO did not provide specific details or independently verify the information, thus failing to form a bona fide belief. The Tribunal relied on the Delhi High Court's decision in Principal CIT vs. G & G Pharma India Ltd., which emphasized that the AO must apply his mind to the material before reopening an assessment. Consequently, the Tribunal quashed the assessment on this ground as well.

Conclusion:
The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's cross-objection. It upheld the deletion of the ?98.50 lakhs addition under Section 68 and quashed the assessment proceedings due to the non-issuance of notice under Section 143(2) and the lack of bona fide reasons for reopening the assessment.