2022 (3) TMI 642 - AT - Income Tax

Reopening of assessment u/s 147 - eligibility of reasons to believe - Addition u/s 68 - unexplained share capital - HELD THAT - We find that the Assessing Officer has accepted the objections of the assessee, and has not assessed or reassessed the income, which was the basis of the notice. Therefore, in the light of the judgment of JET AIRWAYS (I) LTD. 2010 (4) TMI 431 - HIGH COURT OF BOMBAY it would not be open to the Assessing Officer to assess income under some other issue independently. Considering all we quash the assessment order framed under section 147 read with section 143(3) of the Act. Since we have quashed the assessment order, we do not find it necessary to delve into the merits of the case.- Decided in favour of assessee.

Issues Involved:
1. Deletion of addition on account of unexplained share capital under Section 68 of the Income-tax Act, 1961.
2. Establishment of the identity of shareholders.
3. Establishment of the creditworthiness of shareholders.
4. Establishment of the genuineness of the transaction.
5. Reliance on the decision of the Supreme Court in CIT v. Lovely Exports (P.) Ltd.
6. Consideration of decisions relied upon by the Assessing Officer.
7. Challenge to the reopening of the assessment under Section 147/148.

Detailed Analysis:

1. Deletion of Addition on Account of Unexplained Share Capital:
The Revenue appealed against the deletion of ?6,01,00,000 added by the Assessing Officer as unexplained share capital under Section 68. The Commissioner of Income-tax (Appeals) had deleted this addition, but the Revenue contended that the addition was justified as the share capital was unexplained credit in the assessee's books.

2. Establishment of the Identity of Shareholders:
The Revenue argued that the Commissioner of Income-tax (Appeals) erred in holding that the assessee established the identity of the shareholders. It was noted that the companies were not found at the given addresses, and the premises did not belong to these companies, as evidenced by the Inspector's report.

3. Establishment of the Creditworthiness of Shareholders:
The Revenue claimed that the Commissioner of Income-tax (Appeals) incorrectly held that the assessee had established the creditworthiness of the shareholders. The Revenue maintained that the creditworthiness was not demonstrated adequately.

4. Establishment of the Genuineness of the Transaction:
The Revenue contended that the Commissioner of Income-tax (Appeals) erred in holding that the assessee established the genuineness of the transaction, especially when no shareholder's director responded to notices issued under Section 133(6), and the assessee could not produce any directors of the shareholder companies.

5. Reliance on the Decision of the Supreme Court in CIT v. Lovely Exports (P.) Ltd.:
The Revenue argued that the Commissioner of Income-tax (Appeals) erred in placing reliance on the Supreme Court's decision in CIT v. Lovely Exports (P.) Ltd., claiming that the facts of the assessee's case were different from those in the cited case.

6. Consideration of Decisions Relied Upon by the Assessing Officer:
The Revenue asserted that the Commissioner of Income-tax (Appeals) failed to consider the decisions relied upon by the Assessing Officer, which supported the addition made under Section 68.

7. Challenge to the Reopening of the Assessment:
The assessee challenged the reopening of the assessment under Section 147/148, arguing that the reasons recorded for reopening were not valid. The Tribunal found force in the assessee's claim and noted that the reopening of the assessment was challenged before the Commissioner of Income-tax (Appeals), who had dismissed this ground.

The Tribunal examined the reasons recorded by the Assessing Officer and found that the reasons pertained to an alleged accommodation entry of ?88,00,000. However, the assessment order did not make any addition based on these reasons but instead added ?6,01,00,000 on account of unexplained share capital.

The Tribunal referred to the judgment of the Bombay High Court in CIT v. Jet Airways (I.) Ltd., which held that if the Assessing Officer does not assess the income that was the basis for the reopening of the assessment, it is not open to him to assess other income independently. The Tribunal found that the Assessing Officer did not assess the ?88,00,000 mentioned in the reasons for reopening and thus quashed the assessment order dated March 26, 2015.

Conclusion:
The Tribunal quashed the assessment order dated March 26, 2015, framed under Section 147 read with Section 143(3) of the Income-tax Act, 1961, on the grounds that the Assessing Officer did not assess the income that was the basis for the reopening of the assessment. Consequently, the appeal filed by the Revenue was dismissed, and the Tribunal did not delve into the merits of the case. The decision was pronounced in the open court on November 15, 2021.

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