2020 (12) TMI 1199 - AT - Income Tax

Reopening of assessment - addition u/s 68 - Information was received from the investigation wing regarding the assessee was beneficiary of the accommodation entry - HELD THAT - As perused the order passed by the Revenue Authority especially assessment order and we are of the view that no doubt there is information from the investigation wing. But in this case no enquiry has been conducted by the Assessing Officer and the said information could not be said to be the tangible material. Therefore on this ground reassessment was not justified. See RMG POLYVINYL (I) LTD. 2017 (7) TMI 371 - DELHI HIGH COURT Case of the assessee was reopened on the basis of information received from the Investigation wing but the Assessing Officer has not made any enquiry on this information and reopened the case of the assessee and made the addition in dispute and completed the assessment. Similarly learned First Appellate Authority has also upheld the assessment order. In our view it is contrary to the various decision rendered by the Hon ble Delhi High Court. Therefore the reassessment on the basis of said information is not justified and legally valid we quash the assessment order - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the order passed by the CIT(A) under Section 250 of the Income Tax Act.
2. Limitation period for the order passed by the Assessing Officer (AO).
3. Jurisdiction of the AO in passing the order.
4. Addition of ?45,00,000 under Section 68 of the Income Tax Act.
5. Addition of ?90,000 under Section 69C of the Income Tax Act.
6. Validity of notice under Section 148 and consequential reassessment proceedings under Section 147.

Issue-wise Detailed Analysis:

1. Validity of the Order Passed by the CIT(A) under Section 250:
The assessee challenged the validity of the order dated 15.01.2019 passed by the CIT(A)-1, New Delhi. The Tribunal reviewed the facts and upheld that the CIT(A) had dismissed the appeal filed by the assessee, which led to the present appeal before the Tribunal.

2. Limitation Period for the Order Passed by the AO:
The assessee contended that the order passed by the AO was barred by limitation. However, the Tribunal did not specifically address this issue in detail in the judgment, focusing instead on the validity of the reassessment proceedings.

3. Jurisdiction of the AO in Passing the Order:
The assessee argued that the AO lacked jurisdiction in passing the reassessment order. The Tribunal did not explicitly rule on this issue, as it quashed the reassessment proceedings based on the lack of tangible material and independent enquiry.

4. Addition of ?45,00,000 under Section 68 of the Income Tax Act:
The AO added ?45,00,000 to the assessee's income under Section 68, based on information that the assessee received accommodation entries from dummy companies managed by Shri Shirish C. Shah. The Tribunal found that the AO did not conduct an independent enquiry or investigation to substantiate this information, thereby rendering the reassessment proceedings unjustified. The Tribunal cited judgments from the Delhi High Court, including Pr. CIT vs. RMG Polyvinyl Ltd. [2017] 396 ITR 5 (Delhi), which emphasized the need for tangible material and independent enquiry to justify reassessment.

5. Addition of ?90,000 under Section 69C of the Income Tax Act:
The AO also added ?90,000 as undisclosed expenditure under Section 69C, calculated as 2% commission for raising the bogus transaction. The Tribunal quashed this addition along with the ?45,00,000 addition, as both were based on the same flawed reassessment proceedings.

6. Validity of Notice under Section 148 and Consequential Reassessment Proceedings under Section 147:
The assessee argued that the notice under Section 148 and the reassessment proceedings under Section 147 were invalid due to the lack of proper reasons and independent enquiry. The Tribunal agreed, stating that the AO’s reliance on information from the investigation wing without conducting an independent enquiry rendered the reassessment proceedings invalid. The Tribunal cited several judgments, including Pr. CIT vs. G & G Pharma Ltd [2015] 384 ITR 147 (Del HC) and Signature Hotels P. Ltd. vs. Income-tax Officer [2011] 338 ITR 51 (Del), which supported the requirement for the AO to apply his mind and conduct an independent enquiry.

Conclusion:
The Tribunal quashed the reassessment proceedings and the additions made by the AO, declaring the notice under Section 148 as illegal and the reassessment as invalid. Consequently, the appeal filed by the assessee was allowed, and the impugned order passed by the CIT(A) was also cancelled. The Tribunal emphasized the necessity for the AO to conduct an independent enquiry and have tangible material to justify reassessment proceedings.