2019 (2) TMI 1057 - AT - Income Tax

Reopening of assessment - unexplained share application money - completed assessment has been reopened after four years - Held that - A perusal of the reasons recorded as mentioned elsewhere clearly shows that there is no allegation in the reasons recorded that there is failure on the part of the assessee to disclose fully and truly of material facts necessary for assessment u/s 147 of the Act, the notice issued u/s 148 of the Act after a period of four years from end of assessment year in case where assessment has been framed u/s 147/143 (3) of the Act is illegal and invalid and the notice u/s 148 of the Act deserves to be set aside. Our view is fortified by the decision of the Hon ble Delhi High Court in the case of CIT Vs. Viniyas Finance and Investment (P) Ltd. 2013 (3) TMI 35 - DELHI HIGH COURT We find that during the course of the original assessment proceedings the assessee was specifically asked to discharge its onus u/s 68 of the Act for any fresh loans taken during the year and share application money received. We further find that the FFA has also called for a remand report from the Assessing Officer to submit copies of the reply of the assessee filed during the course of the original assessment proceedings and related documents submitted by the assessee. Thus during the course of original assessment proceedings the Assessing Officer had made elaborate enquiry to examine the share application money in the light of section 68 of the Act and after satisfying himself he accepted the same as genuine. Therefore, in our considered opinion in the light of the proviso to section 147 of the Act there is no failure on the part of the assessee to disclosed fully and truly all material facts relating to the assessment - assessment framed u/s 147 of the Act has been rightly quashed by the CIT(A). - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the order under Section 147 of the Income Tax Act.
2. Alleged introduction of unaccounted money as share application money.
3. Deletion of additions made by the Assessing Officer (AO) on account of unexplained share application money and unexplained expenditure.

Issue-Wise Detailed Analysis:

1. Validity of the Order Under Section 147:
The primary issue raised by the revenue was the validity of the order under Section 147 of the Income Tax Act. The CIT(A) quashed the order under Section 147 on the grounds that it was a mere change of opinion and there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.

The Tribunal found that the reasons recorded for reopening the assessment did not indicate any failure by the assessee to disclose fully and truly all material facts. The Tribunal referred to the decision of the Hon’ble Delhi High Court in the case of CIT Vs. Viniyas Finance and Investment (P) Ltd., which held that the absence of such an allegation renders the notice under Section 148 invalid. The Tribunal concluded that the notice issued under Section 148 after four years from the end of the assessment year was illegal and invalid, and thus, the assessment framed under Section 147 was rightly quashed by the CIT(A).

2. Alleged Introduction of Unaccounted Money as Share Application Money:
The revenue contended that the CIT(A) erred in ignoring fresh evidence in the form of a survey report from the Investigation Wing, which suggested that the assessee introduced its own money in the form of share application money through non-descript companies.

The Tribunal observed that during the original assessment proceedings, the AO had made elaborate inquiries to examine the share application money under Section 68 of the Act. The assessee had provided detailed documents, including applications for shares, affidavits, income tax returns, audited balance sheets, and bank statements of the share applicants, which the AO had accepted as genuine. The Tribunal noted that the documents collected by the AO during the reassessment were the same as those provided during the original assessment, indicating no new tangible material evidence.

3. Deletion of Additions Made by the AO:
The AO had made additions of ?1.85 crores on account of unexplained share application money and ?3.33 lacs on account of unexplained expenditure in the form of commission paid to entry operators. The CIT(A) deleted these additions by annulling the reassessment order.

The Tribunal upheld the CIT(A)’s decision, stating that the AO had already examined the share application money during the original assessment and was satisfied with the genuineness of the transactions. The Tribunal emphasized that the AO’s satisfaction during the original assessment precluded the need for reassessment based on the same set of documents. The Tribunal dismissed the revenue’s appeal, affirming that the reassessment was invalid and the additions were rightly deleted by the CIT(A).

Conclusion:
The Tribunal dismissed the revenue’s appeal, upholding the CIT(A)’s decision to quash the reassessment order under Section 147 and delete the additions made by the AO. The Tribunal found that there was no failure on the part of the assessee to disclose fully and truly all material facts, and the reassessment was based on a mere change of opinion without any new tangible material evidence. The cross-objection filed by the assessee was dismissed due to an unconvincing reason for the delay. The order was pronounced in the open court on 02.01.2019.