2021 (6) TMI 67 - AT - Income Tax

Reopening of assessment u/s 147 - Addition u/s 68 - optionally convertible debentures issued to the Infotel technologies Ltd. - HELD THAT - Merely because the investor has incurred losses it cannot be said that the investment made by such investor is not genuine. However even otherwise for saying so there is no corroborative material available with the assessing officer. Even otherwise how can an assessee have control over the affairs of the lender to the lender‟ to assessee. Any inference against the assessee for that reason cannot be sustained. Now it is to be seen that assessee has filed a substantial evidences before the learned assessing officer, even the representative of the investor company also remained present in response to the summons issued u/s 131 of the income tax act confirming the above investment, but to rebut all those evidences the learned assessing officer has not made any enquiry to show that the documentary evidences submitted by the assessee does not exhibit a genuine transaction. Merely saying that assessee has a small capital of ₹ 1 lakh and nobody would invest in such a company of the sum to the magnitude of ₹ 67 crores remains merely conjectures and surmises in view of the overwhelming evidences submitted by the assessee and absence of any inquiry by the revenue. for several years , assessee, Investor, Investor in the investor are assessed u/s 143 (3) of the act , such assessment orders are produced by the assessee before the assessing officer, it cannot be said that the investment made by Infotel technologies Ltd in the assessee company of ₹ 67 crores is failing the test of genuineness u/s 68 Accordingly, we direct the learned assessing officer to delete the addition in the hands of the assessee made u/s 68 of the income tax act with respect to the optionally convertible debentures issued to the Infotel technologies Ltd. Thus, we reverse the finding of the lower authorities and allow ground of assessee.

Issues Involved:
1. Validity of the order passed by CIT (A) u/s 250(6).
2. Legitimacy of the assessment order passed u/s 147/143(3) without proper jurisdiction.
3. Validity of the additions/disallowances made without considering the submissions of the appellant.
4. Legitimacy of the addition of ?67,00,00,000/- made u/s 68 without considering the submissions of the assessee.
5. Justification of the additions made u/s 68 despite the source being explained and confirmed.
6. Validity of interest charged u/s 234A/234B/234C.
7. Validity of penalty proceedings initiated u/s 271(1)(c).

Detailed Analysis:

1. Validity of the order passed by CIT (A) u/s 250(6):
The appellant contended that the CIT (A) passed the impugned order without considering their submissions. However, the Tribunal found that the CIT (A) had indeed taken into account the available evidence and submissions. The Tribunal did not find any procedural lapse in the order passed by CIT (A).

2. Legitimacy of the assessment order passed u/s 147/143(3) without proper jurisdiction:
The assessee argued that the assessment order was passed without assuming proper jurisdiction to issue notice u/s 148. The Tribunal reviewed the reasons recorded for reopening the assessment and found that the AO had tangible material to believe that income had escaped assessment. The reopening was based on credible information from the investigation wing, and the Tribunal upheld the reopening of the assessment.

3. Validity of the additions/disallowances made without considering the submissions of the appellant:
The assessee argued that the AO did not properly consider their submissions regarding the unsecured loan of ?67 crores. The Tribunal noted that the AO had asked the assessee to prove the identity, creditworthiness, and genuineness of the transaction, which the assessee failed to do satisfactorily. Despite the submissions, the AO found inconsistencies and lack of evidence to substantiate the claims.

4. Legitimacy of the addition of ?67,00,00,000/- made u/s 68 without considering the submissions of the assessee:
The Tribunal found that the assessee had provided details of the loan from Infotel Technologies Pvt. Ltd., including ledger accounts, balance sheets, confirmations, and income tax returns. However, the AO and CIT (A) found that the transactions were not genuine and lacked proper agreements. The Tribunal observed that the AO's rejection of the assessee's contentions was based on valid grounds, and the addition was justified.

5. Justification of the additions made u/s 68 despite the source being explained and confirmed:
The Tribunal noted that the AO had questioned the genuineness of the transactions and the creditworthiness of the lender, Infotel Technologies Pvt. Ltd. The Tribunal found that the assessee failed to provide satisfactory evidence to prove the genuineness of the transactions and the creditworthiness of the lender. The Tribunal upheld the addition made by the AO u/s 68.

6. Validity of interest charged u/s 234A/234B/234C:
The Tribunal found that the interest charged u/s 234A, 234B, and 234C was consequential in nature. Since the addition made by the AO was upheld, the interest charged was also justified and upheld by the Tribunal.

7. Validity of penalty proceedings initiated u/s 271(1)(c):
The Tribunal found that the initiation of penalty proceedings u/s 271(1)(c) was premature at this stage. Since the addition made by the AO was upheld, the penalty proceedings would follow the outcome of the assessment. The Tribunal dismissed this ground as premature.

Conclusion:
The Tribunal upheld the reopening of the assessment u/s 147/143(3) and the addition of ?67 crores made u/s 68. The interest charged u/s 234A, 234B, and 234C was also upheld. The initiation of penalty proceedings u/s 271(1)(c) was dismissed as premature. The appeal filed by the assessee was partly allowed.

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