2020 (12) TMI 605 - AT - Income Tax

Reopening of assessment u/s 147 - Unexplained loan - application for admission of additional evidences under Rule 46A explaining that due to change of address in the Registered Office and due to old age of one of the Director Mrs. Baleshwari Devi the documents could not be filed before the A.O - HELD THAT - In the reasons A.O. found escapement of income to the tune of ₹ 1.59 crores on account of purchase of plot at Noida, but, in the re-assessment order A.O. found it is a case of unexplained loan to the extent of ₹ 33,18,842/-, thus, the reasons recorded by the A.O. are non-existing, incorrect and wrong and thus, A.O. did not apply his mind to the information available to him through O/o. Sub-Registrar. In case incorrect, wrong and non-existing reasons are recorded by the A.O. for reopening of the assessment and A.O. failed to verify the information so received due to non application of mind to the information, reopening of the assessment would be unjustified and is liable to be quashed. The same view have been taken by ITAT, Delhi E- Bench, Delhi recently in the case of Shri Natrajan Monie, Gurgaon 2020 (12) TMI 345 - ITAT DELHI . In assessment year under appeal assessee has paid the installment of the impugned amount. Thus, even the information received from the O/o. Sub-Registrar was not gone into the entirety by the A.O. A.O. has not gone through the contents of the Lease Deed registered with the O/o. Sub- Registrar, Noida which clearly specify that no amount of ₹ 1.59 crore is paid by assessee in assessment year under appeal and the balance amount shall have to be paid by the assessee company in installments. There were no justification for the A.O. to record non-existing, incorrect and wrong facts in the reasons for reopening of the assessment.The entirety of the facts clearly show that A.O. recorded wrong, incorrect and non-existing reasons for reopening of the assessment without application of mind and such reopening of the assessment would be invalid and bad in Law. We are of the view that reopening of the assessment is illegal and bad in Law and is liable to be quashed. We, accordingly, set aside the Orders of the authorities below and quash the reopening of the assessment. Resultantly, all additions stand deleted - Appeal of the Assessee is allowed.

Summary

Issues Involved:
1. Reopening of the assessment under section 147/148 of the I.T. Act, 1961.
2. Refusal to admit additional evidence under Rule 46A of the I.T. Rules.
3. Addition of ?33,18,842/- on account of unsecured loan under section 68 of the I.T. Act, 1961.

Issue-wise Detailed Analysis:

1. Reopening of the assessment under section 147/148 of the I.T. Act, 1961:
The Assessee challenged the reopening of the assessment, arguing that the reasons recorded by the Assessing Officer (A.O.) were incorrect and not based on a proper application of mind. The A.O. had initially recorded that there was an escapement of income of ?1.59 crores due to the purchase of a plot in Noida, based on information from the Sub-Registrar's office. However, the Assessee provided evidence that only ?33,18,842/- was paid during the assessment year under appeal. The Tribunal noted that the A.O. did not make any addition of ?1.59 crores in the reassessment order but instead added ?33,18,842/- as unexplained unsecured loans. This contradiction indicated that the reasons recorded for reopening were non-existent, incorrect, and showed a lack of application of mind by the A.O. The Tribunal relied on several judicial precedents to conclude that reopening based on incorrect and non-existing reasons is invalid and bad in law. Therefore, the reopening of the assessment was quashed.

2. Refusal to admit additional evidence under Rule 46A of the I.T. Rules:
The Assessee had filed an application for the admission of additional evidence under Rule 46A, explaining that the documents could not be submitted earlier due to a change of address and the old age of one of the directors. The Ld. CIT(A) called for a remand report from the A.O., who filed it. The Assessee provided evidence that the loan amount of ?33,18,842/- was received from Shri Ram Kishan Dass, supported by bank statements and ledger accounts. Despite this, the Ld. CIT(A) did not admit the additional evidence and confirmed the addition on merit. The Tribunal observed that the Ld. CIT(A) should have admitted the additional evidence and decided the issue accordingly, especially since the reopening itself was based on incorrect facts.

3. Addition of ?33,18,842/- on account of unsecured loan under section 68 of the I.T. Act, 1961:
The A.O. added ?33,18,842/- as unexplained unsecured loans, which the Assessee contended was a loan from Shri Ram Kishan Dass. The Assessee provided bank statements and ledger accounts to support this claim. The Tribunal noted that the A.O. had not verified the figures correctly and had recorded wrong reasons for reopening the assessment. Given that the reopening itself was quashed, the Tribunal held that the addition of ?33,18,842/- was also unjustified and deleted it.

Conclusion:
The Tribunal allowed the appeal of the Assessee, quashing the reopening of the assessment and deleting all additions. The Tribunal emphasized that reopening based on incorrect, wrong, and non-existing reasons without proper application of mind is invalid and cannot be sustained in law. Consequently, there was no need to address other issues raised in the appeal, as they were rendered academic.