2021 (2) TMI 131 - AT - Income Tax

Reopening of assessment u/s 147 - reopening after expiry of four years - unexplained share capital under section 68 and addition on account of Commission paid under section 69C - HELD THAT - As in the case of ACIT vs., Marico Ltd. 2020 (6) TMI 436 - SC ORDER we are of the view that assessee disclosed complete details of receipt of share application money in assessment year under appeal to the A.O. at the original assessment stage along with documentary evidences, which have been accepted by the A.O. Thus, on mere change of opinion, the A.O. cannot reopen the assessment - no failure on the part of assessee to disclose fully and truly all material facts necessary for assessment. The reopening on mere change of opinion is bad in Law and void abinitio and is liable to be quashed. Original assessment have been passed under section 143(3) on Dated 14.12.2011 and A.O. recorded the reasons for reopening of the assessment in March, 2016. Since, there is no failure on the part of assessee to disclose fully and truly all material facts necessary for assessment, therefore, action under section 147 initiated after expiry of 04 years from the end of the relevant assessment year, the re-assessment would be bad in Law and is clearly hit by First Proviso to Section 147 . A.O. did not apply his mind to the reasons recorded for reopening of the assessment and without verifying the record of the Investor Companies also which have been accepted in the assessments under section 153C/153A prior to recording of the reasons clearly show that A.O. has not applied his mind to the facts already available on record. Reopening of the assessment is clearly bad in Law and liable to be quashed. In view of the above discussion, we set aside the Orders of the authorities below and quash the reopening of the assessment in the matter - Decided in favour of assessee.

Summary

Issues Involved:
1. Reopening of the assessment under section 143(3) r.w.s. 147 of the I.T. Act, 1961.
2. Addition of ? 95 lakhs on account of unexplained share capital under section 68 of the I.T. Act, 1961.
3. Addition of ? 1,90,000/- on account of Commission paid under section 69C of the I.T. Act, 1961.

Issue-wise Detailed Analysis:

1. Reopening of the Assessment:
The assessee challenged the reopening of the assessment under section 143(3) r.w.s. 147 of the I.T. Act, 1961. The original assessment was completed on 14.12.2011. The A.O. issued a notice under section 142(1) asking for details of share capital/share application money, which the assessee provided along with confirmations, bank statements, and income tax returns of the share applicants. The A.O. verified these details and accepted the explanation. However, based on information from the Investigation Wing received in March 2013, the A.O. reopened the assessment in March 2016, citing non-compliance and accommodation entries from certain companies.

The assessee argued that all primary facts were disclosed during the original assessment, and there was no failure to disclose material facts necessary for assessment. The reopening was claimed to be based on a mere change of opinion, which is not permissible as per the Hon'ble Supreme Court's ruling in CIT vs. Kelvinator of India Ltd., 320 ITR 561 (SC). The Tribunal agreed, stating that the A.O. did not apply his mind to the reasons recorded for reopening and failed to verify the records of the investor companies. Thus, the reopening was deemed bad in law and void ab initio.

2. Addition of ? 95 Lakhs on Account of Unexplained Share Capital:
The A.O. added ? 95 lakhs as unexplained share capital under section 68, claiming the assessee failed to explain the genuineness of the share application money received from 11 parties. The assessee provided confirmations, bank statements, and ITRs of the share applicants during the original assessment, which were accepted by the A.O. The Tribunal noted that the A.O. had already scrutinized and accepted these details in the original assessment. Reopening the assessment on the same grounds was considered a change of opinion, which is not permissible. Consequently, the addition of ? 95 lakhs was deleted.

3. Addition of ? 1,90,000/- on Account of Commission Paid:
The A.O. also added ? 1,90,000/- as unexplained expenditure under section 69C, claiming the assessee paid commission for accommodation entries. The Tribunal found that since the primary addition of ? 95 lakhs was deleted, the consequential addition of ? 1,90,000/- on account of commission was also unjustified and liable to be deleted.

Conclusion:
The Tribunal quashed the reopening of the assessment, deeming it based on a mere change of opinion and not on any failure to disclose material facts. Consequently, the additions of ? 95 lakhs and ? 1,90,000/- were deleted. The appeal of the assessee was allowed, and the orders of the authorities below were set aside.