2020 (9) TMI 466 - AT - Income Tax

Assessment u/s 147 - Validity of reopening of assessment - Assessment u/s 153A - whether assessee has failed to substantiate that relevant accommodation entry transactions were already considered in the block assessment proceedings? - HELD THAT - In the case of the assessee the regular return of income filed was only processed and no regular assessment under section 143(3) of the Act was completed. The block assessment under section 158BC has been completed in respect of the undisclosed income unearthed during the course of the search carried out at the premises of the assessee. Under the block assessment only incriminating material found during the course of the search can be basis for the block assessment and it is distinct from the regular assessment . The Assessing Officer has put the facts that no scrutiny assessment u/s 143(3) of the Act i.e. regular assessment was carried in case of the relevant assessment year. In our considered opinion, there is no incorrectness of the fact on the part of the Assessing Officer - No incorrectness of the facts in the reasons recorded. Borrowed satisfaction of AO - reference of the entries obtained from M/s RK Agrawal and Co. The Assessing Officer has reproduced all the four entries with details of the amount, date of transaction, bank account from which entry was given, instrument number etc. the Assessing Officer has also mentioned that no scrutiny assessment under section 143(3) of the Act was completed in the case of the assessee and therefore no information relating to the transaction was available on record. Assessing Officer has formed his belief on the analysis of credible information received from the Investigation Wing and satisfaction recorded on said information, cannot be said as borrowed satisfaction. We may also like to point out here that the Assessing Officer can issue notice under section 133(6) of the Act during pendency of the assessment proceeding and not authorised to carry out enquiry invoking section 133(6) of the Act prior to recording of reasons and reopening of the assessment. We reject the contention of assessee that Assessing Officer has not applied mind while recording the reasons and he recorded the reasons on the basis of the borrowed satisfaction. Whether no notice under section 148 of the Act can be issue after completion of the block assessment proceedings? - In the instant case, the Assessing Officer has reopened regular assessment and not block assessment. The regular assessment and block assessment are both separate proceedings and even can run parallel. Assessing Officer has noted that the assessee has failed to substantiate that relevant accommodation entry transactions were already considered in the block assessment proceedings. We also reject the contention of the Learned Counsel of the assessee that no notice under 148 of the Act can be issued in the case of the assessee in view of the block assessment completed prior to issue of notice u/s 148 of the Act. Addition u/s 68 - accommodation entries in the block assessment order - HELD THAT - The onus is on the assessee to discharge the responsibility of substantiating that in case of RK Agrwal and company only commission income was earned. The assessee has neither produced those parties for statement alongwith documentary evidences to support that only commission income was earned. In view of the failure on the part of the assessee to discharge his onus, the addition made by the Assessing Officer is sustained and we reject the contention of Learned Counsel of the assessee seeking telescoping of the addition with the income already assessed in the block assessment order. The ground of the appeal of the assessee is accordingly dismissed.

Issues Involved:
1. Validity of reassessment proceedings under sections 147/148 of the Income Tax Act.
2. Alleged non-application of mind and borrowed satisfaction by the Assessing Officer.
3. Whether reassessment can be initiated post block assessment.
4. On merits, whether the addition of ?10,10,000/- as accommodation entries was justified.

Detailed Analysis:

1. Validity of Reassessment Proceedings under Sections 147/148:
The assessee challenged the reassessment proceedings on the grounds that the reasons recorded were based on non-independent application of mind and borrowed satisfaction from the Investigation Wing. The Tribunal noted that the reasons recorded by the Assessing Officer (AO) included specific details about the transactions and the entities involved, which were sufficient to form a "reason to believe" that income had escaped assessment. The Tribunal referenced the Supreme Court's decision in ACIT vs. Rajesh Jhaveri Stock Brokers P Ltd, emphasizing that at the initiation stage, the AO only needs a "reason to believe" based on relevant material, and not conclusive proof of income escapement.

2. Alleged Non-Application of Mind and Borrowed Satisfaction:
The assessee argued that the AO did not apply his mind independently and relied solely on the Investigation Wing's report. The Tribunal rejected this contention, noting that the AO had analyzed the report and recorded detailed reasons, including specific entries and transactions. The Tribunal cited multiple judgments, including the Delhi High Court's decision in PCIT vs. Paramount Communication Pvt. Ltd., which upheld reassessment based on credible information from external sources. The Tribunal concluded that the AO's satisfaction was not borrowed but based on credible information and analysis.

3. Whether Reassessment Can Be Initiated Post Block Assessment:
The assessee contended that no notice under section 148 could be issued after the completion of block assessment proceedings. The Tribunal distinguished between block assessment and regular assessment, noting that both are separate proceedings. The Tribunal referenced the Gujarat High Court's decision in Cargo Clearing Agency vs. JCIT, which held that sections 147/148 are not applicable to block assessments. However, in this case, the AO had reopened the regular assessment, not the block assessment. Thus, the Tribunal rejected the assessee's contention, stating that the AO was justified in initiating reassessment proceedings under section 148.

4. On Merits, Whether the Addition of ?10,10,000/- as Accommodation Entries Was Justified:
The assessee argued that the commission income on accommodation entries had already been assessed in the block assessment, and no separate addition should be made. The Tribunal noted that the assessee failed to substantiate that the specific entries from M/s RK Agarwal & Co. were included in the block assessment. The Tribunal emphasized that the onus was on the assessee to prove that only commission income was earned and that the entire amount of accommodation entries could not be treated as unexplained cash credit under section 68. The Tribunal upheld the AO's addition of ?10,10,000/- as the assessee failed to provide sufficient evidence to support his claim.

Conclusion:
The Tribunal dismissed the appeal, upholding the reassessment proceedings and the addition of ?10,10,000/- as accommodation entries. The Tribunal found that the AO had valid reasons to believe that income had escaped assessment, applied his mind independently, and was justified in initiating reassessment proceedings post block assessment. The assessee's failure to substantiate his claims on merits led to the dismissal of the appeal.

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