2019 (7) TMI 680 - HC - Income Tax

Re-opening of assessment u/s 147 - original assessment u/s 14(3) - notice beyond 4 years - information alleging accommodation entry received from Investigation Wing - CIT(A) also noted that the incriminating documents relied upon by the AO were seized during the search u/s 132 and, therefore, the assessment proceedings should have been initiated u/s 153(C) - HELD THAT - As regards the reopening of the assessment u/s 147, the Court finds that CIT(A) was right in holding that with the Assessee having furnished all the details during the original assessment proceedings, the reopening of the assessment after the expiry of 4 years did not meet the jurisdictional requirement u/s 147 of the Act. - decided in favour of assessee Addition u/s 68 - receipt of share capital - information alleging accommodation entry received from Investigation Wing - AO disallowed 56,800 shares were issued to the 5 parties out of the 2,30,000 equity shares issued - AO had not issued notices u/s 133(6) for verification - ITAT held that once the Assessee had discharged the initial onus by furnishing a necessary document to prove the identity and creditworthiness of the share applicants, the onus shifted on to the Revenue - HELD THAT - This Court is not persuaded to take a different view in the matter. Indeed with the Assessee having furnished the complete details of the 5 parties necessary for proving their identity, genuineness and creditworthiness, it was for the AO to have made further inquiries if he were to doubt those details. Without undertaking that exercise, the AO is not justified in simply rejecting the explanation offered by the Assessee. - The Court is unable to find any illegality or infirmity in the impugned order of the ITAT. No substantial question of law arises. - The appeal is accordingly dismissed.

Summary

Issues:
1. Justification of upholding deletion of addition under Section 68 of the Income Tax Act.
2. Validity of initiation of reassessment proceedings under Section 147 instead of Section 153C of the Act.

Analysis:
1. The appeal involved a dispute regarding the addition of ?2.13 crores to the Assessee's income under Section 68 of the Income Tax Act. The Revenue challenged the decision of the ITAT upholding the Commissioner of Income Tax (Appeals) in deleting this addition. The Assessee, a private limited company engaged in non-banking finance business, had filed its return of income for the relevant Assessment Year declaring a loss. The Revenue alleged that the Assessee had received amounts from various entities as accommodation entries. Despite the Assessee providing bank accounts, PAN numbers, and confirmation letters to establish the genuineness of the transactions, the Assessing Officer added the amounts to the Assessee's income under Section 68. The CIT (A) and ITAT both held that the Revenue failed to discharge its onus of proving the transactions as bogus, especially since the Assessee had provided sufficient evidence of the identity and creditworthiness of the parties involved.

2. The second issue revolved around the validity of initiating reassessment proceedings under Section 147 instead of Section 153C of the Act. The Revenue had reopened the assessment based on information obtained during post-search investigations. However, the CIT (A) and ITAT found that all details related to the share applications were already on record during the original assessment proceedings under Section 143(3) of the Act. As such, the reopening of the assessment after the expiry of four years was deemed unjustified. The Courts emphasized that the Revenue should have conducted further inquiries if doubts existed regarding the Assessee's submissions. The failure to do so rendered the rejection of the Assessee's explanation unwarranted. The Courts also highlighted that the jurisdictional requirements under Section 147 were not met due to the Assessee's prior disclosure of all relevant details.

In conclusion, the High Court dismissed the Revenue's appeal, affirming the decisions of the ITAT and CIT (A). The Court found no legal flaws in the orders, emphasizing that the Revenue had failed to adequately substantiate its claims and that the reassessment proceedings were initiated improperly.