2019 (2) TMI 279 - AT - Income Tax

Reopening of assessment u/s 147/148 - receipt of accommodation entries by assessee - whether Department does not know the name of the party from whom the alleged accommodation entries were received and the reassessment was done merely on the basis of suspicion? - Held that - In the case of a cash entry, it is necessary for the assessee to prove not only the identity of the creditor but also the capacity of the creditor and genuineness of the transactions. The onus lies on the assessee, under the facts available on record. A harmonious construction of section 106 of the evidence Act and section 68 of the Income Tax Act will be that apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of the creditors. As during hearing of these appeals, the Bench asked the Ld. DR is there any evidence of cash transaction, the DR fairly and judiciously agreed that there was no cash deposit before the issuance of cheque. Another question raised by the Bench, whether in the statement, the name of the assessee has been specifically mentioned to this also, the ld. DR fairly agreed that the name of the assessee has not been specifically mentioned. Thus, considering all the grounds decided in favour of the assessee. Addition made u/s 69C on account of commission expenses - Held that - We note that while deliberating upon the issue in the appeal of the assessee, we have deleted the addition by an elaborate discussion, therefore, this ground of the Revenue also fails as the part addition sustained by the Ld. Commissioner of Income Tax (Appeal) has been deleted by the Tribunal. Thus, there is no merit in the impugned ground raised by the Revenue. Disallowance u/s 14A - Held that - Commissioner of Income Tax (Appeal) fairly noted that the ld. Assessing Officer wrongly disallowed the expenditure without pointing out as to which expenditure relates to any exempt income. The interest expenditure of ₹ 3,14,431/- is the interest expenditure of the bank which was not utilized for any investment nor relates to exempt income. In view of this factual matrix, we find no infirmity in the conclusion of the CIT(Appeal) decided in favour of the assessee.

Issues Involved:
1. Reopening of assessment under section 147/148 of the Income Tax Act, 1961.
2. Addition made under section 68 of the Act concerning share capital/premium.
3. Addition made under section 69C of the Act on account of commission expenses.
4. Disallowance made under section 14A of the Act r.w.s. 8D of the Rules.

Detailed Analysis:

1. Reopening of Assessment under Section 147/148:
The assessee challenged the reopening of the assessment on the grounds that the reasons recorded by the Assessing Officer (AO) were incomplete and did not specifically name the party from whom the share capital was received. The AO defended the reopening, stating that he had received information regarding transactions indicating that income had escaped assessment. The Tribunal upheld the reopening, stating that the AO had sufficient reason to believe that income had escaped assessment based on the information received. The Tribunal emphasized that the AO's belief must be reasonable and based on tangible material, which was satisfied in this case.

2. Addition under Section 68:
The AO made an addition of ?4,02,20,000 under section 68, citing that the share capital/premium received from twelve parties was unexplained. The First Appellate Authority deleted the addition of ?2,76,70,000, noting that the AO's conclusion was based on presumptions without corroborating evidence. The Tribunal upheld this deletion, emphasizing that the assessee had provided sufficient evidence, including PAN details, bank statements, and confirmations from the parties. The Tribunal noted that the AO failed to prove that the share application money was bogus or that the transactions were not genuine. The Tribunal relied on various judicial precedents, including CIT vs. Lovely Exports Pvt. Ltd. and CIT vs. Creative World Telefilms Ltd., which held that the burden shifts to the Revenue once the assessee provides prima facie evidence.

3. Addition under Section 69C:
The AO assumed that the assessee paid a commission of ?2,51,000 for obtaining accommodation entries and made an addition under section 69C. The Tribunal deleted this addition, noting that the AO's conclusion was based on mere assumptions without any concrete evidence. The Tribunal emphasized that the AO must provide specific evidence to support such an addition, which was lacking in this case.

4. Disallowance under Section 14A r.w.s. 8D:
The AO disallowed ?2,57,349 under section 14A, stating that the assessee incurred interest expenditure. The Tribunal upheld the deletion of this disallowance by the First Appellate Authority, noting that the AO did not point out any specific expenditure related to exempt income. The Tribunal emphasized that disallowance under section 14A must be based on actual expenditure incurred for earning exempt income, which was not demonstrated by the AO.

Conclusion:
The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's appeal, upholding the deletion of additions and disallowances made by the AO. The Tribunal emphasized the importance of concrete evidence and reasonable belief in making additions and disallowances under the Income Tax Act.

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