2022 (5) TMI 442 - AT - Income Tax

Reopening of assessment u/s 147 - accommodation entry receipts - information received from the Investigation Wing that the assessee is allegedly one of the beneficiaries of having accommodation entries from a bogus concern operated by Shri Praveen Kumar Jain and group concerns - onus to substantiate your claim of the transaction - HELD THAT - CIT(A) is correct in upholding the reopening. The Assessing Officer was in possession of tangible material which had live link with the prima facie belief that income has escaped assessment in as much as assessee was obtaining bogus accommodation entry. As regards merits of the case Assessing Officer has issued notice which had remained uncompliance with. The assessee s plea of the assessee having no onus to prove the creditworthiness of the party is not sustainable on the touchstone of Hon'ble Bombay High Court Goa Bench decision in CIT Vs. Sadiq Sheikh 2020 (10) TMI 1028 - BOMBAY HIGH COURT - Decided against assessee.

Summary

Issues:
1. Validity of reopening of assessment proceedings u/s 147 of Income Tax Act, 1961
2. Addition of Rs 13,00,000 received as Share application as cash credit u/s 68

Validity of Reopening of Assessment Proceedings:

The appeal challenged the action of the Assessing Officer in reopening the assessment under section 147 of the Income Tax Act, 1961. The appellant argued that the reassessment proceedings were not in accordance with the laws, rules, and regulations as the AO relied on information from DGIT (Investigation) without conducting an independent inquiry. The appellant contended that the entire reassessment proceedings were flawed. However, the CIT(A) upheld the reopening, stating that the AO had sufficient tangible material to form a prima facie belief that income had escaped assessment due to the appellant obtaining bogus accommodation entries. The CIT(A) cited relevant legal precedents to support the decision, emphasizing that the AO was well within jurisdiction to issue the notice under section 148.

Addition of Rs 13,00,000 as Cash Credit u/s 68:

The Assessing Officer made an addition of Rs 13,00,000 as unexplained cash credit under section 68, relating to share application money received. The AO found that the appellant had taken share application money from a company controlled by Praveen Kumar Jain, which was admitted to be a paper concern created for providing entries. Despite notices and opportunities provided to the appellant to substantiate the transactions and establish the genuineness of the share application money, the appellant failed to produce necessary evidence. The appellant's inability to verify the identity, creditworthiness of the lender, and the genuineness of the transactions led to the conclusion that the appellant had taken accommodation entries through Praveen Kumar Jain's group. The CIT(A) confirmed the addition, highlighting the appellant's failure to comply with requirements and the principles of natural justice.

In conclusion, the ITAT Mumbai dismissed the appeal by the assessee, upholding the reopening of assessment proceedings under section 147 and confirming the addition of Rs 13,00,000 as unexplained cash credit under section 68. The decision was based on the presence of tangible material supporting the belief of income escapement and the appellant's failure to substantiate the transactions and provide necessary evidence.