2018 (11) TMI 548 - AT - Income Tax

Reopening of assessment u/s 147 - addition u/s 68 as unexplained cash credit - reasons to believe - information received from Revenue Intelligence Authority (DRI) - Held that - In the instant case, the information is specific having detail of value of the amount of accommodation entry taken, the instrument and date through which entry was taken, name and account number of the entry provider were available before the AO and thus we cannot hold the information was vague. Further, in the case of PCIT Vs Paramount Communication Private Limited 2017 (7) TMI 621 - SUPREME COURT , after considering various decisions held that the information received from Revenue Intelligence Authority constitute a tangible material and, thus, assessment was reopened validly. In the instant case before us, the information has been received from the Director of Income Tax (Investigation) after carrying out detailed enquiries from the accommodation entry providers. As held in the case of Raymond Woollen Mills Ltd. 1997 (12) TMI 12 - SUPREME COURT the sufficiency or correctness of the information is not to be seen at the stage of the reopening of the assessment. In our opinion, the reassessment proceeding is a kind of enquiry, where the assessee is granted opportunity to explain his stand on the correctness of reasons to believe escapement of income. Further, the Assessing Officer is not empowered in law to carry out any enquiry, if no assessment proceeding are pending. The reassessment proceedings thus, empower the Assessing Officer to verify correctness of the information. In the case of Ankit Financial Services Ltd. 2017 (1) TMI 1041 - GUJARAT HIGH COURT material indicating that assessee has received bogus share application through accommodation entry is one of the beneficiary, was recovered in the search of another person. In such circumstances, the initiation of reopening was justified. CIT(A) is not justified in holding that reassessment proceeding are invalid. Accordingly, we set-aside the order of the Ld. CIT(A) to the extent of holding the proceedings under section 147 of the Act is invalid. - Decided in favour of revenue

Summary

Issues Involved:

1. Validity of proceedings under section 148 of the Income Tax Act, 1961.
2. Quashing of assessment on technical grounds despite additions made by the Assessing Officer (AO).
3. Allegation of borrowed satisfaction by the AO without independent enquiry.

Issue-wise Detailed Analysis:

1. Validity of proceedings under section 148 of the Income Tax Act, 1961:

The Revenue challenged the order of the CIT(A) which held the proceedings under section 148 as invalid. The AO initiated proceedings under section 147 based on information from the Investigation Wing that the assessee received accommodation entries in the form of share application money, amounting to ?91.25 lakhs. The AO issued a notice under section 148 after recording detailed reasons to believe that income had escaped assessment.

The Tribunal noted that the return of income was initially processed under section 143(1), and no detailed scrutiny was carried out. The CIT(A) had rejected the plea of reopening on mere change of opinion, as the original proceedings were under section 143(1) and not 143(3). The CIT(A) had relied on several judicial decisions to hold that the AO borrowed satisfaction without independent enquiry. However, the Tribunal found that the AO recorded his satisfaction based on specific information from the DIT (Investigation), which constituted new information. Thus, the Tribunal held that the AO did not act mechanically and the reassessment proceedings were validly initiated.

2. Quashing of assessment on technical grounds despite additions made by the AO:

The CIT(A) quashed the assessment on technical grounds, despite upholding the AO's addition of ?91.25 lakhs under section 68 as unexplained cash credit. The Tribunal found that the CIT(A) erred in relying on judicial decisions that were not applicable to the facts of the case. The information received was specific and detailed, not vague or scanty, and the AO had valid reasons to believe that income had escaped assessment. The Tribunal emphasized that sufficiency or correctness of the material is not to be considered at the stage of reopening, as held by the Supreme Court in Raymond Woollen Mills Ltd. Thus, the Tribunal set aside the CIT(A)'s order quashing the assessment on technical grounds.

3. Allegation of borrowed satisfaction by the AO without independent enquiry:

The CIT(A) held that the AO borrowed satisfaction from the Investigation Wing without conducting independent enquiries. The Tribunal disagreed, noting that the AO had specific information about the accommodation entries, including details of the amounts, instruments, dates, and entry providers. The Tribunal referred to the Delhi High Court's decision in PCIT vs Paramount Communication Private Limited, which held that information from Revenue Intelligence constitutes tangible material for valid reassessment. The Tribunal concluded that the AO recorded his satisfaction based on credible information and did not act on borrowed satisfaction.

Conclusion:

The Tribunal allowed the Revenue's appeal, holding that the reassessment proceedings under section 147 were validly initiated. The Tribunal set aside the CIT(A)'s order to the extent it held the proceedings invalid and upheld the AO's addition of ?91.25 lakhs as unexplained cash credit. The order was pronounced in the open court on 24th October 2018.