2020 (8) TMI 93 - AT - Income Tax

Validity of reopening of assessment u/s 147 - nexus between reasons recorded for reopening of assessment and escapement of income - disallowance of expenditure incurred under the head business counseling charges - HELD THAT - We find no merits in the arguments advanced by the assesee because the Ld. AO has reopened the assessment on sound footing which is based on fresh tangible material come to his possession in the form of information of investigation wing which suggest escapement of income within the meaning of section 147 - there is a nexus between reasons recorded for reopening of assessment and escapement of income which is clearly evident from reasons recorded for reopening of assessment where the Ld. AO has brought out clear facts with reference to information received from investigation wing the escapement of income on account of booking expenditure in the name of two non existing entities. Further the assessment in this case was reopened beyond four years but within six years from the end of the relevant assessment year. The original assessment has been completed u/s 143(1) of the Act. Further when original assessment has been completed u/s 143(1) of the Act then the assessment can be reopened within a period of six years from the end of the relevant assessment year if escapement of income is within specified limit. In this case there is no doubt with regard to escapement of income as per reasons recorded by the Ld. AO which is beyond the prescribed limit provided under the Act. Once original assessment was completed u/s 143(1) of the Act then reopening of assessment can be made on the basis of reasons to believe that prima-facie there is escapement of income. This principle is supported by the decision of Hon ble Supreme Court in the case of ACIT vs Rajesh Jhaveri Stock Brokers Pvt.Ltd 2007 (5) TMI 197 - SUPREME COURT where it was clearly held that reasons to believe does not mean that the reasons for reopening should have been factually ascertained by legal evidence or conclusion before the reopening of assessment. Report of the investigation wing might constitute tangible material. The decision to reopen a case on the basis of report of the investigation wing cannot always be condemned or dubbed as fishing and roving inquiry. The expression reasons to believe appearing in section 147 suggest that if the Ld. AO acts as a reasonable and prudent man on the basis of information secured by him that there is a case of reopening then section 147 can well be pressed into service and assessment can be reopen. - Reopening of assessment in this case is on valid grounds and hence the grounds taken by the assessee is rejected. Bogus expenditure - So called expenditure incurred under the head business counseling charges and paid to M/s Sarvottam Advisory Pvt.Ltd. and M/s Avrons Consultancy Services Pvt.Ltd is non genuine expenditure booked in collusion with entry providers to reduce profit for the year which is clearly evident from facts gathered during course of survey u/s 133A in the case of M/s Altius Finserve Pvt.Ltd and subsequent investigation carried out during the course of assessment proceedings. Further although the assessee has filed affidavit of Dipen Patel to justify her case but on perusal of affidavit filed by the Dipen Patel we find that it is only an afterthought to circumvent the findings recorded by the Ld. AO in light of facts gathered during the course of survey proceeding and only a self serving document. Further the affidavit of Mr.Vishwas Joshi dated 17/12/2018 is also a self serving document is of no help to the assesee because Mr.Vishwas Joshi had try to contradict his earlier admissions. From the above it is very clear that expenditure booked in the name of two entities is a bogus expenditure. Therefore we are of the considered view that the Ld. AO as well as the Ld.CIT(A) were completely right in disallowed expenditure incurred under the head business counseling charges - Decided against assessee.

Summary

Issues Involved:
1. Validity of reopening of assessment under Section 148.
2. Alleged violation of Section 144A.
3. Investigation gaps and time lapse.
4. Short notice for recording statement.
5. Overlooking performance and merit of the appellant.

Issue-wise Detailed Analysis:

1. Validity of Reopening of Assessment under Section 148:
The appellant challenged the reopening of assessment for AY 2011-12, asserting that the notice issued under Section 148 was without jurisdiction and lacked material evidence. The Tribunal upheld the reopening, stating that the Assessing Officer (AO) had tangible material and information from the Investigation Wing, which suggested that income had escaped assessment. The Tribunal emphasized that the AO had applied his mind to the information received and formed a belief that there was escapement of income, which is a valid ground for reopening under Section 147. The Tribunal cited the Supreme Court's decision in ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd., which supports reopening based on tangible material.

2. Alleged Violation of Section 144A:
The appellant contended that the AO proceeded with a premeditated view and that the Joint Commissioner of Income Tax (JCIT) evaded responsibility by not providing directions under Section 144A. The Tribunal found that the JCIT had directed the AO to conduct further investigations and examine the case laws relied upon by the appellant. The Tribunal concluded that the AO had examined the matter as per the JCIT's directions and found no violation of Section 144A.

3. Investigation Gaps and Time Lapse:
The appellant argued that the investigation by the ADIT and AO was conducted after a significant time gap of seven years, which could have affected the accuracy of the findings. The Tribunal noted that the AO had conducted thorough investigations, including field verification and issuing notices under Section 133(6) and summons under Section 131. The Tribunal found that the investigation revealed that the entities, M/s Avron Consultancy Services Pvt. Ltd. and M/s Sarvottam Advisory Pvt. Ltd., were shell companies and not operational from their given addresses, supporting the AO's conclusion of non-genuine transactions.

4. Short Notice for Recording Statement:
The appellant claimed that the AO issued a summons to Mr. Dipan Patel on short notice, giving him only one day to produce documents from FY 2010-11. The Tribunal observed that Mr. Patel's statement, recorded on 21/12/2018, was evasive and inconclusive, and he failed to provide any evidence to support his affidavit. The Tribunal found that the short notice did not affect the credibility of the investigation, as Mr. Patel's responses did not substantiate the appellant's claims.

5. Overlooking Performance and Merit of the Appellant:
The appellant argued that the AO overlooked the appellant's performance and the role of business counseling fees in securing assignments from corporates. The Tribunal found that the appellant failed to provide documentary evidence of services rendered by the entities and correspondence between the appellant and the entities. The Tribunal noted that the entities were not traceable, and their existence and services were not proven. The Tribunal upheld the AO's conclusion that the expenditure incurred under the head business counseling charges was non-genuine and booked to reduce profit for the year.

Conclusion:
The Tribunal dismissed the appeal, upholding the reopening of assessment and the disallowance of business counseling charges. The Tribunal found that the AO had valid grounds for reopening the assessment and that the appellant failed to substantiate the genuineness of the transactions with the entities. The Tribunal concluded that the expenditure was booked with shell companies to reduce taxable income, confirming the AO's findings.