2019 (1) TMI 681 - AT - Income Tax

Reopening of assessment - addition u/s 68 - status of the investing companies - Held that - We find from the facts of the case that the assessee has filed the relevant pages of inventory listing the documents during the course of search us/ 132 for establishing the fact that the documents mentioned above have been seized and are in the possession of the assessing officer. The above documents are enough to establish the credibility and the genuineness of the transactions. So far as present status of the investing companies is concerned, the assessee has filed data of Company Master Data from the website of Ministry of Corporate Affairs (MCA). Such data are in respect of investing company Alka Diamond Industries Ltd. The state of the investing company as on 25.10.2017 is active. Therefore, the company is still in existence and active. The master data also discloses that Balance sheet up to 31.03.2016 has been filed in respect of each of the companies mentioned above. Therefore, there cannot be any doubt about the identity of the company. The amounts have been received from investing company have Come through banking channel which are duly reflected in the Balance sheet of the assessee company. Therefore, there cannot be any doubt about the genuineness of the transaction. So far as credit worthiness is concerned the investing company is regularly assessed to income tax and they are disclosing substantial income. Even these transactions are disclosed in the audited accounts filed along with the return of income. As the facts are identical to AY 2007-08 and the reason recorded by CIT(A) while deleting the addition in AY 2007-08 are also exactly identical. In such circumstances, we have already confirmed the order of CIT(A) deleting the addition and hence, following the earlier years order as decided above, we delete the addition. - Decided in favour of assessee

Issues Involved:

1. Quashing of reassessment by quashing notice under section 148 of the Income Tax Act, 1961.
2. Deletion of addition of ?4 crores as unexplained share application money.
3. Addition of ?35 lakhs as unexplained share application money for AY 2008-09.
4. Addition of ?1.75 lakhs as estimated unexplained expenditure under section 69C of the Income Tax Act.

Detailed Analysis:

1. Quashing of Reassessment by Quashing Notice under Section 148 of the Income Tax Act, 1961:

The first issue in ITA No. 3986/Mum/2017 pertains to the CIT(A)'s decision to quash the reassessment proceedings initiated by the Assessing Officer (AO) under section 148 of the Income Tax Act, 1961. The Revenue argued that the CIT(A) erred in quashing these proceedings without appreciating the information obtained during a search in the case of Praveen Kumar Jain, which revealed that certain companies provided accommodation entries. The CIT(A) found that the AO reopened the completed assessment after four years based on general information without specific evidence. The CIT(A) cited various judicial precedents to support the view that reopening based on vague information or suspicion is not permissible. The Tribunal upheld the CIT(A)'s decision, confirming that the reassessment proceedings were not sustainable.

2. Deletion of Addition of ?4 Crores as Unexplained Share Application Money:

The second issue involved the deletion of an addition of ?4 crores made by the AO as unexplained share application money under section 68 of the Act. The AO had added this amount based on the statement of Praveen Kumar Jain, who admitted to providing accommodation entries. The assessee provided extensive documentation, including share application forms, confirmations, bank statements, and income tax returns of the share applicants, to establish the genuineness of the transactions. The CIT(A) found that the AO did not bring any contrary evidence to dispute these documents and concluded that the addition was made based on mere suspicion. The Tribunal agreed with the CIT(A), noting that the assessee had discharged its burden of proof and that the AO's addition was not justified.

3. Addition of ?35 Lakhs as Unexplained Share Application Money for AY 2008-09:

In ITA No. 2091/Mum/2018 for AY 2008-09, the issue was the addition of ?35 lakhs as unexplained share application money received from Alka Diamond Industries Limited. The AO reopened the assessment based on information from the DGIT (Investigation), which indicated that the assessee was a beneficiary of accommodation entries. The assessee provided various documents, including income tax returns, bank statements, and confirmations from the investing company, to establish the genuineness of the transactions. The CIT(A) confirmed the addition, but the Tribunal found that the documents provided were sufficient to establish the credibility and genuineness of the transactions. The Tribunal deleted the addition, following the reasoning applied in the earlier year.

4. Addition of ?1.75 Lakhs as Estimated Unexplained Expenditure under Section 69C of the Income Tax Act:

The final issue was the addition of ?1.75 lakhs as estimated unexplained expenditure under section 69C of the Act, representing a 5% commission allegedly paid to obtain the bogus share capital. The AO made this addition based on the presumption that the assessee must have paid a commission to obtain the accommodation entries. The Tribunal, following its decision to delete the addition of ?35 lakhs, also deleted this estimated expenditure, as there was no evidence to support the AO's presumption.

Conclusion:

The Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal, confirming the CIT(A)'s decisions to quash the reassessment proceedings and delete the additions made by the AO. The Tribunal found that the assessee had provided sufficient evidence to establish the genuineness of the share application money and that the AO's additions were based on mere suspicion without any concrete evidence.

← Previous Next →