2017 (11) TMI 856 - AT - Income Tax

Validity of reopening of assessment - reopening relying on the information received from Investigation Wing that the assessee has taken accommodation entry from Sh. Harish Pawar - no independent application of mind by AO - borrowed satisfaction of AO - allegation in reasons cannot be treated equivalent to material in eyes of law - Held that - No substance in the contention of the assessee that the assessment has been made without disposing of the objections of assessee. In this regard, we find that the CIT(A) has rightly dealt with this issue. It is not discernible either from the assessment order or from the remand report that the assessee did file any such objections before the AO, which he claims to have been filed. The AO categorically denied any objection filed by the assessee on record. CIT(A) also examined the case records of the assessee, where no such objections to the reasons recorded were found. Moreover, the assessee itself has failed to file even the copy of any such objection either before the ld. CIT(A) or before us. Therefore, ld. CIT(A) was justified to reject this contention of the assessee. As regards the contention of the assessee regarding invalid reasons recorded by the AO for forming a belief of escapement, we find considerable substance in this submission of the assessee. It is notable that the ld. Assessing Officer has formed his belief of escapement of income simply by relying on the information received from Investigation Wing that the assessee has taken accommodation entry from Sh. Harish Pawar, prop. M/s. Amit Impex (India) through its bank account. A perusal of the reasons recorded shows that the Assessing Officer appears to have simply concluded on the said information to form the belief of escapement of income, without applying his own mind and bringing on record any tangible material to record his satisfaction. It is worthwhile to note that though the AO has observed in the assessment order that the alleged donor, Shri Harish Pawar in his statement recorded by the Investigation Wing had deposed that the bank account of its proprietary concern, M/s. Amit Impex was being used for providing only accommodation entries, but no such fact regarding deposition of alleged donor is found mentioned in the reasons recorded by the AO so as to form a belief on some tangible material. The ld. Assessing Officer has felt satisfied only by concluding the information and therefore, the belief formed by AO on such conclusion is not tenable to justify the initiation of proceedings u/s. 147/148. See Pr. CIT vs. Meenakshi Overseas Pvt. Ltd. 2017 (5) TMI 1428 - DELHI HIGH COURT - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of proceedings initiated under Section 148 of the Income-tax Act, 1961.
2. Non-disposal of objections raised by the appellant against the reopening of the assessment.
3. Additions made under Section 69A and Section 69C of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Validity of Proceedings Initiated Under Section 148:
The assessee challenged the initiation of proceedings under Section 148, arguing that there were no valid reasons recorded for the belief of income escapement. The Tribunal found that the Assessing Officer (AO) relied solely on information from the Investigation Wing without applying his own mind or bringing any tangible material on record. The recorded reasons were deemed conclusions rather than reasons, lacking the necessary link between the information and the belief of income escapement. The Tribunal cited the decision in Pr. CIT vs. Meenakshi Overseas Pvt. Ltd., emphasizing that the reasons must be self-evident and demonstrate a link between tangible material and the belief of income escapement. The Tribunal concluded that the initiation of proceedings under Section 147/148 was invalid.

2. Non-disposal of Objections Raised by the Appellant:
The assessee contended that the AO did not dispose of the objections raised against the reopening of the assessment, violating the principles laid down by the Hon’ble Supreme Court in GKN Driveshafts (India) Ltd. Vs. ITO. However, the Tribunal found no evidence of such objections being filed by the assessee. The AO and the Commissioner of Income Tax (Appeals) [CIT(A)] both confirmed that no objections were recorded. The Tribunal upheld the CIT(A)'s finding that the assessee failed to provide any copy of the objections, thus rejecting this contention.

3. Additions Made Under Section 69A and Section 69C:
The AO made additions of ?6,00,000 under Section 69A, treating the gifts received as income from undisclosed sources, and ?12,000 under Section 69C as unexplained expenditure for commission paid to obtain accommodation entries. The AO's decision was based on the statements of the alleged donor, who admitted that the bank accounts were used for providing accommodation entries, casting doubt on the creditworthiness and genuineness of the transactions. The CIT(A) confirmed these additions. However, since the Tribunal found the initiation of proceedings under Section 147/148 invalid, it did not delve into the merits of these additions.

Conclusion:
The Tribunal set aside the CIT(A)'s order, holding the initiation of proceedings under Section 147/148 as invalid, thereby quashing the reassessment. Consequently, the Tribunal did not consider the merits of the additions made under Sections 69A and 69C. The appeal of the assessee was allowed, and the reassessment was quashed due to the invalid initiation of proceedings.

Order Pronouncement:
The order was pronounced in the open court on 14.11.2017.