2021 (1) TMI 172 - HC - Income Tax

Reopening of assessment u/s 147 - addition u/s 68 - whether the provisions of Section 151 of the Act have been complied with in the instant case? - HELD THAT - AO had specific information about cash deposits, supported by statement of witnesses which confirmed that the donors were bogus. These facts disclose a vital link and nexus between the information received by the AO and the reason to believe for reopening the assessment, which fulfilled the threshold required for assuming jurisdiction by the AO in order to reopen the assessment. There was, thus, some tangible material with the AO to form a prima facie opinion that the income of the Appellant had indeed escaped assessment, thereby justifying the action under Section 147. There is no perversity in the reasoning given by the Tribunal, based on findings of fact which would give rise to the questions of law numbered (i) and (ii), as noted in para 11 above. The law regarding reopening of assessment is well-settled. The reliance placed upon the findings of the earlier assessment proceedings is misplaced. If the assumption of jurisdiction is held to be valid, the Appellant cannot place undue credence on the earlier assessment proceedings. Once an assessment is reopened, the initial order for assessment ceases to be operative and the proceedings start afresh. The Appellant s contention that since the AO had originally accepted the donations to be genuine, he is precluded from treating them to be bogus and making additions, is untenable. Tribunal has noted that though the Assessee had initially submitted the confirmation of donation at the time of original assessment, however during investigation by the CBI, some of the donors have confessed that they have not given any such donation. Under interrogation of the donors it was unearthed that the donation detail submitted by the Assessee in the original assessment proceedings was false. The genuineness of the donors could not be established. This case invited deeper scrutiny owing to the discovery of facts during CBI investigation that adversely impinged the findings determined in the earlier round of assessment. However, the Appellant failed to discharge the onus of proof cast upon it. No attempt was made to produce credible material to corroborate the transactions or to explain the contradictory evidence that it was confronted with. Appellant also never took any steps to examine the witnesses and as a result, on the basis of the material on record, the tax authorities concluded that the genuineness, creditworthiness remained unsubstantiated. In wake of this factual position, the donations were treated as bogus, justifying the additions. Therefore, the third question of law, premised on findings that are purely based on fact calls for no interference. No question of law, much less any substantial question of law arises for our consideration.

Summary

Issues Involved:
1. Reopening of assessment under Section 147 of the Income Tax Act.
2. Addition of income under Section 68 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Reopening of Assessment under Section 147:

The appeals challenge the reopening of assessments for AY 2006-07 and AY 2007-08 under Section 147 of the Income Tax Act, 1961. The Appellant, an educational trust, argued that the Assessing Officer (AO) lacked "reason to believe" for reopening the assessments and acted on mere information without independent enquiry. The Tribunal found that the AO had credible information from the Central Bureau of Investigation (CBI) revealing that the Appellant received bogus donations. The CBI report disclosed that the Appellant's Chairman, along with others, fraudulently deposited cash into the Appellant's accounts and created bogus donors and donations. Witnesses examined by the CBI denied making any donations to the Appellant. The Tribunal upheld the reopening of assessments, stating that the AO had specific information about cash deposits and statements confirming the donors were bogus, fulfilling the threshold for reopening the assessment.

2. Addition of Income under Section 68:

For AY 2006-07, the AO added ?40,00,000 under Section 68 as unexplained cash credits and ?35,00,000 as unexplained receipts. The CIT(A) upheld the addition of ?40,00,000 but deleted the ?35,00,000 addition, stating it should be assessed in AY 2007-08. For AY 2007-08, the AO added ?60,00,000 as unexplained cash credits. The CIT(A) enhanced the income to ?95,00,000, including the ?35,00,000 from AY 2006-07. The Tribunal upheld these additions, noting that the Appellant failed to prove the genuineness and creditworthiness of the donors. The CBI investigation revealed that the donations were bogus, and the Appellant did not provide credible evidence to counter this. The Tribunal concluded that the donations were treated as bogus, justifying the additions under Section 68.

Arguments by the Parties:

The Appellant argued that the Tribunal failed to appreciate the evidence proving the genuineness, creditworthiness, and identity of the donors. They contended that the AO did not make an independent enquiry before issuing the notice for reassessment and that the donations were genuine, supported by confirmation and bank statements. The Appellant also argued that the Tribunal erred in not considering its earlier order for AY 2006-07, which accepted the donations as genuine. The Respondent-Revenue argued that the reopening of assessments and additions were justified based on the CBI report and the lack of credible evidence from the Appellant.

Reasoning:

The Tribunal found that the AO had credible information from the CBI, revealing that the Appellant received bogus donations. The CBI report disclosed that the Appellant's Chairman, along with others, fraudulently deposited cash into the Appellant's accounts and created bogus donors and donations. Witnesses examined by the CBI denied making any donations to the Appellant. The Tribunal upheld the reopening of assessments, stating that the AO had specific information about cash deposits and statements confirming the donors were bogus, fulfilling the threshold for reopening the assessment.

Regarding the addition of income under Section 68, the Tribunal noted that the Appellant failed to prove the genuineness and creditworthiness of the donors. The CBI investigation revealed that the donations were bogus, and the Appellant did not provide credible evidence to counter this. The Tribunal concluded that the donations were treated as bogus, justifying the additions under Section 68.

Conclusion:

The appeals were dismissed, and the Tribunal's decision to uphold the reopening of assessments and the addition of income under Section 68 was affirmed. The Tribunal found that the AO had credible information from the CBI, revealing that the Appellant received bogus donations, and the Appellant failed to prove the genuineness and creditworthiness of the donors.