2019 (6) TMI 543 - AT - Income Tax

Reassessment proceedings u/s. 147 as against 153C - Addition u/s 68 - proof of identity and creditworthiness of the share applicants and the genuineness of the transaction - HELD THAT - It is an admitted fact that in the instant case the information was passed on by the DDIT (Investigation) and not by the Assessing officer of the S. K. Jain Group i.e. the AO of the searched person. No documents belonging to the assessee was found and S. K. Jain Group had never stated that the documents so seized from their premises do not belong to them. We find the coordinate bench of the Tribunal in the case of Surya Financial Services Limited Vs. PCIT 2018 (1) TMI 1360 - ITAT DELHI while deciding an identical issue on the validity of reassessment proceedings u/s. 147 as against 153C on the basis of the same S. K. Jain Dairies. Further in the instant case it can be seen that no material belonging to the assessee was found from the residence of Shri S. K. Jain and only evidence of accommodation entries given by Sh. S. K. Jain Group of cases, through their various shell companies was found during the course of search and post search enquiries. The information was passed on to the AO of the assessee by the investigation wing and no material belonging to the assessee was either found from the residence of this S. K. Jain or handed over to the AO of the assessee by the Assessing Officer of the searched person. Therefore, the Assessing Officer in the instant case has rightly invoked jurisdiction u/s. 147 and not u/s 153C of the IT Act,1961. The ground appeal No. 1 by the assessee is accordingly dismissed. Bogus share capital and share premium - the assessee was not provided with the copy of the statement given by Sh. S. K. Jain / Virender K. Jain which has been utilized against the assessee. Considering the totality of the facts of the case and in the interest of justice we deem it proper to restore this issue to the file of the Assessing Officer with a direction to grant one more opportunity to the assessee to substantiate with evidence to his satisfaction regarding the identity and creditworthiness of the share applicants and the genuineness of the transactions. The Assessing Officer shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. Further while doing so the Assessing Officer shall keep in mind the decision of M/s. NRA Iron Steel (P) Limited 2019 (3) TMI 323 - SUPREME COURT and NDR Promoters Limited 2019 (1) TMI 1089 - DELHI HIGH COURT . The ground of appeal No.2 is accordingly allowed for statistical purpose.

Summary

Issues Involved:
1. Validity of reassessment proceedings under Section 147 versus Section 153C.
2. Addition under Section 68 for unexplained share capital.
3. Addition for commission expenses related to unexplained investment.
4. Levy of interest under Sections 234A, 234B, and 234C.
5. General grounds and penalty proceedings under Section 271(1)(c).

Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 147 versus Section 153C:
The appellant challenged the reassessment proceedings initiated under Section 147, arguing that the correct procedure should have been under Section 153C due to the search operation. The CIT(A) upheld the reassessment under Section 147, stating that the information from the investigation wing constituted new information, and the Assessing Officer (AO) followed due process in reopening the assessment. The Tribunal confirmed this, noting that no documents belonging to the assessee were found during the search of the third party (S.K. Jain Group), and the AO rightly invoked Section 147 instead of Section 153C.

2. Addition under Section 68 for Unexplained Share Capital:
The AO added ?56,00,000 to the assessee's income under Section 68, citing that the assessee failed to prove the genuineness of the share capital received from Virgin Capital Services Pvt. Ltd. and Manimala Delhi Properties Pvt. Ltd. Despite the assessee providing confirmation letters, share application forms, bank statements, and other documents, the AO and CIT(A) found these insufficient. The Tribunal referred to recent judicial precedents, emphasizing the need for deeper scrutiny beyond mere documentary evidence to establish the genuineness of transactions. The Tribunal restored the issue to the AO for fresh adjudication, considering the decisions of the Hon'ble Supreme Court in NRA Iron & Steel Pvt. Ltd. and the Hon'ble Delhi High Court in NDR Promoters Pvt. Ltd.

3. Addition for Commission Expenses Related to Unexplained Investment:
The AO added ?1,00,800 as commission expenses for arranging the unexplained investment, calculated at 1.8% of the accommodation entry. The CIT(A) upheld this addition, and the Tribunal also restored this issue to the AO for fresh adjudication along with the primary addition under Section 68.

4. Levy of Interest under Sections 234A, 234B, and 234C:
The assessee contested the interest levied under Sections 234A, 234B, and 234C. The Tribunal dismissed this ground, stating that the levy of interest under these sections is mandatory and consequential.

5. General Grounds and Penalty Proceedings under Section 271(1)(c):
The Tribunal dismissed the general grounds and noted that the penalty proceedings under Section 271(1)(c) were not a part of the current appeal.

Conclusion:
The Tribunal partly allowed the appeal for statistical purposes, restoring the issues related to the addition under Section 68 and the related commission expenses to the AO for fresh adjudication. The reassessment proceedings under Section 147 were upheld, and the levy of interest was confirmed as mandatory and consequential.