2020 (11) TMI 222 - AT - Income Tax

Reassessment proceeding u/s 148 - accommodation entries received - Notice on the basis of the information of ADIT (Inv.)-Unit- 2(1), New Delh i - as argued mechanical approval granted by the Pr. CIT u/s 151 - HELD THAT - There is no whisper in the recorded reason that there was any omission or failure on the part of the assessee in disclosing fully and truly material facts in the return of income. The contentions of the Ld. AR that the information received by the AO nowhere in reasons recorded mentioned the name of the bank, cheque number through which assessee have received the amount from the parties, appears to be correct in our opinion. In reasons recorded, AO has merely mentioned that the assessee received ₹ 45,00,000/- as share capital but from whom the same has been received is not mentioned in the said reasons. In reasons recorded, it is mentioned that the AO has the information that the assessee received ₹ 65,00,000/- from Focus Industrial Resources Ltd. while addition to share capital share premium shows that the assessee company has received the accommodation entry of at least ₹ 45,00,000/- from various entities as bogus share capital share premium during the year. But the Assessing Officer has not made out any case from the transaction specific valid material which can justify the reopening action u/s 148 - Reassessment cannot be merely based on the basis of the information of ADIT (Inv.)-Unit-2(1), New Delhi. Such reassessment shall not be valid as the Assessing Officer held no belief on his own at any point of time, that income of assessee has escaped assessment on account of non disclosure of the relevant income. The reasons recorded must be based on evidence. The reasons recorded by the Assessing Officer cannot be supplemented by assessment order, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of assessment order - reasons of the Assessing Officer for reopening should be based on direct and circumstantial evidence. All these aspects are missing in the reasons recorded in the present assessee s case - Decided in favour of assessee.

Summary

Issues involved:
Challenge to initiation, continuation, and conclusion of reassessment proceedings; Jurisdiction of reassessment proceedings; Approval granted by Pr. CIT; Addition under section 68; Cross-examination of witnesses; Source of source requirement under section 68; Addition on account of commission under section 69.

Analysis:

1. Reopening of Assessment Proceedings:
The appellant challenged the initiation of reassessment proceedings under section 148 of the Income Tax Act, 1961. The appellant argued that the reasons recorded lacked independent application of mind and were based on vague and non-specific information. The appellant contended that the Assessing Officer did not have valid reasons to believe that income had escaped assessment. The appellant cited various legal precedents to support the argument that the reasons recorded were merely based on suspicion rather than belief. The appellant also raised concerns about the mechanical approval granted by the Principal Commissioner of Income Tax (Pr. CIT) without proper application of mind. The tribunal agreed with the appellant, noting that the reasons recorded did not provide specific details or evidence to justify the reopening of the assessment. The tribunal emphasized the importance of clear, unambiguous, and evidence-based reasons for initiating reassessment proceedings. It held that the reassessment was invalid and void ab initio due to the lack of proper satisfaction recorded by the Assessing Officer and the mechanical nature of the approval by the Pr. CIT.

2. Merits of the Appeal:
Given the invalidation of the reassessment proceedings, the tribunal did not delve into the merits of the additions made by the Assessing Officer under sections 68 and 69 of the Act. The tribunal noted that since the assessment order itself was quashed due to procedural irregularities, there was no need to address the substantive issues raised by the appellant regarding the additions made to the appellant's income. Consequently, the tribunal allowed the appeal of the assessee solely on the legal issue related to the validity of the reassessment proceedings.

This detailed analysis of the judgment highlights the procedural and jurisdictional aspects of the case, focusing on the challenges to the initiation of reassessment proceedings and the subsequent invalidation of the assessment order. The tribunal's decision underscores the importance of adherence to legal requirements and the necessity of clear and evidence-based reasons for reopening assessments under the Income Tax Act.