2019 (6) TMI 651 - AT - Income Tax

Reopening of assessment u/s. 147 - proof of proper service of notice to the assessee and within period of limitation - addition u/s.68 in respect of share application money received - HELD THAT - As the Revenue could not prove that there was proper issue and service of notice u/s. 148 of the Act on the assessee within the time prescribed i.e. on or before 31.03.2016 for the A.Y. 2009-10, the Ld. CIT(A) has rightly concluded that the reopening u/s. 147 is bad in law. On this ground alone the assessment framed u/s. 143(3) r.w.s 147 of the Act is liable to be quashed. Even on merits the CIT(A) examined the addition made by Assessing Officer with references to the evidences furnished by the assessee and the averments of the Assessing Officer and concluded that the assessee has proved the identity, genuineness, creditworthiness of the creditor Once the assessee furnished all the details in respect of the loan transactions assessee has discharged its initial burden and the burden shifts to the assessee. It was held that no addition can be made only on the basis of information received from the investigation wing without there being any evidences to disprove the loan transactions from the creditors. See M/S SHREE LAXMI ESTATE PVT LTD, M/S SHREE LAXMI DEVELOPERS VERSUS ITO, WD. 15 (3) (3) , WD. 26 (3) (2) , MUMBAI 2017 (12) TMI 1699 - ITAT MUMBAI . The decision relied on by the Ld. DR in the case of CIT v. NRE Iron and Steel (P.) Ltd 2019 (3) TMI 323 - SUPREME COURT is distinguishable on facts. Thus we uphold the order of the Ld.CIT(A) in quashing the reassessment order and deleting the addition made u/s. 68 - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the reopening of assessment under Section 147 of the Income Tax Act.
2. Validity of the service of notice under Section 148 of the Income Tax Act.
3. Addition made under Section 68 of the Income Tax Act regarding unexplained cash credit.

Issue-wise Detailed Analysis:

1. Validity of the reopening of assessment under Section 147 of the Income Tax Act:
The Revenue challenged the order of the Ld. CIT(A) quashing the reopening of the assessment for A.Y. 2009-10 under Section 147. The Ld. CIT(A) quashed the reassessment on the ground that there was no proper service of notice under Section 148 within the prescribed time limit, rendering the assessment time-barred. The Ld. CIT(A) observed that the notice dated 30.03.2016 was not issued to the correct address of the assessee, and the subsequent notice dated 25.04.2016 was time-barred. The Tribunal upheld the Ld. CIT(A)’s finding, noting that the Revenue failed to rebut the evidence showing improper service of notice, thus concluding that the reopening under Section 147 was invalid.

2. Validity of the service of notice under Section 148 of the Income Tax Act:
The Ld. CIT(A) found that the notice under Section 148 dated 30.03.2016 was issued to an incorrect address despite the correct address being known to the Assessing Officer. The notice was allegedly served by affixture, but this was also done at the wrong address. The Tribunal noted that the Assessing Officer issued a second notice on 25.04.2016, which was time-barred, indicating that the first notice was not properly served. The Tribunal agreed with the Ld. CIT(A) that the service of notice was improper and thus invalid, leading to the quashing of the reassessment.

3. Addition made under Section 68 of the Income Tax Act regarding unexplained cash credit:
The Assessing Officer treated the share application money received from M/s. Arena Textiles and Industries Pvt. Ltd. as unexplained cash credit under Section 68, based on the findings that the shareholder company was a paper company and statements from Mr. Mantosh Kumar Yadav indicating accommodation entries. The Ld. CIT(A) deleted the addition, noting that the assessee provided sufficient evidence to prove the identity, genuineness, and creditworthiness of the shareholders, including income tax returns, balance sheets, and bank statements. The Tribunal upheld the Ld. CIT(A)’s decision, emphasizing that the assessee had discharged its burden of proof and the Assessing Officer failed to provide contrary evidence. The Tribunal also referenced multiple judicial precedents supporting the deletion of additions made under similar circumstances, where the burden of proof shifted to the Revenue after the assessee provided initial evidence.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the Ld. CIT(A)’s order quashing the reassessment under Section 147 due to improper service of notice under Section 148 and deleting the addition under Section 68 for unexplained cash credit, as the assessee had sufficiently proved the identity, genuineness, and creditworthiness of the transactions.