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2019 (2) TMI 786 - AT - Income TaxReopening of assessment - earlier income of the assessee was assessed u/s 153C - addition on loans received - Held that - In the present case, it is an admitted fact that the original assessment of the assessee was framed u/s 153C of the Act after making the deep scrutiny. In the original return, the assessee furnished the particulars of the loan received from M/s Nazar Impex Pvt. Ltd. in the Tax Audit Report wherein the details of the loans or deposits received from various persons have been mentioned, so it cannot be said that the facts relating to the receipt of loan from M/s Nazar Impex Pvt. Ltd. was not available to the AO who made the assessment after making proper scrutiny. Reopening was done on this basis that a search operation u/s 132 of the Act was carried out by the Directorate of Income Tax(Investigation), Mumbai on 03.10.2013 at Rajendra Jain Group, Sanjay Choudhary Group and Dharmichand Jain Group of Mumbai, only on the basis of the above information, this case was reopened which is evident from para 5 of the aforesaid reasons recorded wherein the AO had clearly stated that the said information was in his possession and on that basis he had reasons to believe that the assessee had concealed the fact regarding the amount of ₹ 31,50,000/- received from M/s Nazar Impex Pvt. Ltd. However, the said amount was considered as genuine earlier when the assessment was framed by the AO u/s 153C of the Act. AO simply acted upon the information received from the Investigation Wing and did not apply his own mind. Therefore, the reopening u/s 147 by issuing the notice u/s 148 of the Act only on the basis of information received from the Investigation Wing was not valid. Accordingly, the reassessment framed by the AO is quashed. - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction of the AO in reopening the case u/s 148 r.w.s. 147 of the Income Tax Act. 2. Addition on account of bogus unsecured loan from M/s Nazar Impex Pvt. Ltd. 3. Principles of natural justice regarding the opportunity to cross-examine Sh. Sanjay Chaudhary. 4. Validity of reassessment framed beyond four years. Detailed Analysis: 1. Jurisdiction of the AO in Reopening the Case u/s 148 r.w.s. 147 The assessee challenged the jurisdiction of the AO in reopening the case, arguing that there was no reason to believe that the income had escaped assessment and that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The original return of income was filed on 30.09.2008, and a search was conducted on 22.01.2009, leading to an assessment u/s 153C. The AO reopened the case based on a subsequent search on 03.10.2013, which allegedly revealed that the assessee had received a bogus loan from M/s Nazar Impex Pvt. Ltd. However, the assessee contended that the reopening was based solely on information from the Investigation Wing without independent application of mind by the AO, which is against the principles established in various judicial precedents, such as CIT Vs SFIL Stock Broking Ltd. and Sheo Nath Singh vs. ACIT. 2. Addition on Account of Bogus Unsecured Loan from M/s Nazar Impex Pvt. Ltd. The AO made an addition of ?31,50,000/- on the grounds that the loan from M/s Nazar Impex Pvt. Ltd. was bogus, based on the statement of Sh. Sanjay Chaudhary. The assessee argued that the loan was received through banking channels and repaid in the next year, and that the confirmation from M/s Nazar Impex Pvt. Ltd. had been furnished. The assessee also highlighted that the original assessment u/s 153C had scrutinized the loan and found no discrepancies. The CIT(A) upheld the addition, noting that the loan was not disclosed under 'unsecured loans' but under 'sundries,' suggesting an intention to conceal. 3. Principles of Natural Justice Regarding the Opportunity to Cross-Examine Sh. Sanjay Chaudhary The assessee argued that the AO relied on the statement of Sh. Sanjay Chaudhary without providing an opportunity for cross-examination, violating the principles of natural justice. The CIT(A) acknowledged that the AO did not provide this opportunity but still confirmed the addition. The assessee cited cases like Andaman Timber Industries Vs Commissioner of Central Excise to support the argument that such an addition is against natural justice principles. 4. Validity of Reassessment Framed Beyond Four Years The assessee contended that the reassessment was barred by limitation as it was framed beyond four years from the end of the relevant assessment year. The assessee argued that there was no failure on its part to disclose fully and truly all material facts necessary for the assessment, as the loan details were part of the Tax Audit Report and balance sheet. Judicial precedents like Principal Commissioner of Income Tax-4 Vs G & G Pharma Ltd. and Signature Hotels Pvt. Ltd. Vs ITO were cited to argue that reopening based solely on information from the Investigation Wing without independent application of mind by the AO is invalid. Conclusion The Tribunal quashed the reassessment framed by the AO, concluding that the reopening was invalid as it was based solely on information from the Investigation Wing without independent application of mind by the AO. The appeal of the assessee was allowed, and the reassessment order was set aside.
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