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2021 (6) TMI 734 - AT - Income TaxReopening of assessment u/s 147 - assessee was one of the beneficiaries of accommodation entries by way of share application provided by third party - Assessee argued that addition confirmed on the basis of statement of third person namely Mukesh Chokshi - HELD THAT - We find that after reopening u/s 147 notice u/s 148 dated 26.03.2014 was duly served upon the assessee on 29.03.2014. In response to notice under section 148, the assessee filed her reply stating therein that return filed originally on 29310.2007 may be treated as return in response to notice under section 148 - The assessee demanded reasons recorded. The reasons recorded were provided to the assessee on 29.05.2014. The assessee raised certain objections on 30.06.2014. The objection of assessee were disposed of in a speaking order on 23.09.2014. All these facts are not disputed by Assessee. After disposing of objection, AO proceeded to complete the reassessment. AO noted that despite repeated notices, the assessee neither furnished complete details not attended the proceedings before the AO - assessee vehemently argued that the reasons recorded are not valid as there was not sufficient material and specific information against the assessee and strongly relied upon the decision of Tribunal in Pratik Suryakant Shah 2017 (2) TMI 463 - ITAT AHMEDABAD wherein Tribunal has not given finding on validity of reopening rather the assessee was granted relief on merit, so we will consider the said decision at the time of discussion on merit. Revenue relied on the decision in Aaspas Multimedia Ltd 2017 (6) TMI 557 - GUJARAT HIGH COURT wherein held that where the reopening (reassessment) was made on the basis of information received from Pr.DIT (Investigation), and that the assessee was one of the beneficiaries of accommodation entries by way of share application provided by third party, the reopening was justified. Hon ble Supreme Court in Raymond Woollen Mills Ltd., 1997 (12) TMI 12 - SUPREME COURT held that at the time of reopening prima facie material on the basis of which Department could reopen the case is sufficient. Further, sufficiency or correctness of the material is not a thing to be considered at that stage. Considering the decision Hon ble Jurisdictional High Court and of the Apex Court (supra) we are of the view that the ld.AO was having sufficient prima facie material for reopening, thus, the ground no.1 raised by assessee is dismissed. Addition u/s 68 - Bogus LTCG - We find that the facts of the case in hand are similar as of facts in Pratik Suryakant Shah 2017 (2) TMI 463 - ITAT AHMEDABAD - We find that the AO made additions solely on the basis of information received from CCIT (investigation), and even without making any further investigation about the transaction shown by the assessee - in view of the above factual and legal discussions and respectfully following the decisions of coordinate bench of Tribunal as noted above we are of the view that the AO was not justified treating the long term capital gain as bogus solely on the basis of information, when the transaction is supported with sufficient evidence. The case law relied by revenue in Dhakeswari Cotton Mills Ltd. 1954 (10) TMI 12 - SUPREME COURT is not helpful to the revenue qua the facts of the present case. In the said the Hon ble Apex Court held that assessing officer in not fettered by the technical rule of evidence and pleadings and he is not entitled to accept the evidence just like court of law. At the same time the Hon ble Court held that the AO (ITO) is not entitled to make pure guess and make the assessment without reference to any evidence or any or any material at all and that there must be something more than bare suspicious to support the assessment.
Issues Involved:
1. Validity of reopening under Section 148 of the Income Tax Act. 2. Legitimacy of the addition of ?12,37,886/-. Detailed Analysis: Issue 1: Validity of Reopening under Section 148 The primary contention of the assessee was that the reopening of the assessment under Section 147 was solely based on the statement of a third party, Mukesh Choksi, without any independent inquiry by the Assessing Officer (AO). The assessee argued that the notice under Section 148 was issued based on general information from the Investigation Wing, which lacked specific and reliable material against the assessee. The assessee's objections were disposed of by a speaking order, and the AO proceeded with the reassessment. The Revenue, on the other hand, defended the reopening, stating that the Investigation Wing's search action revealed that the assessee was a beneficiary of accommodation entries provided by Mukesh Choksi's group. The AO had sufficient prima facie material for reopening the case, supported by decisions from the Gujarat High Court and the Supreme Court, which held that prima facie material is sufficient for reopening. The Tribunal concluded that the AO had sufficient prima facie material for reopening the case, thus dismissing the assessee's ground regarding the invalidity of the reopening. Issue 2: Legitimacy of the Addition of ?12,37,886/- The assessee contended that the transactions were genuine, supported by documentary evidence, and conducted through banking channels. The shares were purchased in physical form, later dematerialized, and sold through the stock exchange. The assessee argued that the AO made the addition solely based on the information from the CCIT (Investigation) without further investigation. The Revenue argued that the shares were purchased from an entity managed by Mukesh Choksi, who admitted to providing accommodation entries. The dramatic increase in the share value was cited as indicative of accommodation entries. The Tribunal found that the assessee's transactions were genuine, supported by sufficient evidence, and the AO had not conducted any independent investigation. The Tribunal relied on similar cases where transactions through the stock exchange and Demat accounts were held genuine, despite being linked to Mukesh Choksi. The Tribunal concluded that the AO was not justified in treating the long-term capital gain as bogus solely based on the information received. The Tribunal allowed the assessee's appeal on this ground, holding that the addition of ?12,37,886/- was not justified. Conclusion: The Tribunal dismissed the ground regarding the invalidity of reopening under Section 148 but allowed the appeal concerning the addition of ?12,37,886/-, concluding that the transactions were genuine and supported by sufficient evidence. The appeal of the assessee was thus allowed.
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