2022 (9) TMI 1138 - AT - Income Tax

Unexplained cash credit u/s 68 - assessee has received share application money from those entities who were providing accommodation entries - CIT-A deleted the addition - HELD THAT - We do not find any justification in the order of the Ld.CIT(A) in deleting the said addition pertaining to the three concerns as these seem to be mere paper companies. It is also pertinent to point out that the statements of Shri Pradeep Poddar and Shri Anand Sharma are not the only reason for making the addition, but AO has further gone into enquiring the nature of the impugned transaction. Upon perusal of the financials of the alleged companies, it is also evident that the said companies financials did not corroborate with the amount of investment that was made by the said companies with the assessee company. CIT(A) has erred in deleting the addition made by the AO pertaining to three companies and by only sustaining the addition made with regard to four parties to the extent of Rs.1 crore on the ground that the financials of the four companies did not inspire confidence as to the genuineness of the transaction. Though the assessee has submitted details of the said transaction such as bank statements, profit and loss account, balance-sheet, copy of PAN, etc. the same did not inspire confidence as to the alleged impugned transaction because the credibility of the said concerns are questionable as per the financials of the same. The bank transactions of the investor companies seem to be ficitious and none of these alleged investor companies has shown the source of investment. From the above observation and by placing reliance on the decision of Sumati Dayal 1995 (3) TMI 3 - SUPREME COURT and Navodaya Castle (P) Ltd 2015 (4) TMI 481 - SC ORDER , NRA Iron Steel 2019 (3) TMI 323 - SUPREME COURT we hold that the order of Ld.CIT(A) is not sustainable and thereby we set aside the order of the Ld.CIT(A) and uphold the order of the Assessing Officer. Decided against assessee. Validity of reopening of assessment u/s 147 - HELD THAT - As it is evident that on the basis of the information received from the Investigation Wing that the assessee company is alleged beneficiary of having received share application money from other alleged companies. As evident that AO had received credible information from the Investigation Wing and also the statement of Shri Pradeep Poddar, director of the said companies has admitted the fact that the said companies were used for providing accommodation entries to various parties. This information received from the Investigation Wing is reliable source for the Assessing Officer to reopen the assessment and this reason is sufficient for the AO to have prima facie belief that income has escaped assessment. Upon this reasonable belief, the assessment order under section 143(3) r.w.s. 147 is valid. We find no absurdity in the reopening of the assessment by the Assessing Officer

Summary

Issues Involved:
1. Deletion of addition of Rs.11 crores as unexplained cash credit under section 68 of the Income-tax Act, 1961.
2. Validity of reopening the assessment under section 143(3) r.w.s. 147 of the Income-tax Act, 1961.
3. Whether the assessment order should have been passed under section 153C of the Income-tax Act, 1961.

Issue-Wise Detailed Analysis:

1. Deletion of Addition of Rs.11 Crores as Unexplained Cash Credit:
The Revenue appealed against the order of the Commissioner of Income-tax (Appeals) [CIT(A)], which deleted the addition of Rs.11 crores made by the Assessing Officer (AO) under section 68 of the Income-tax Act. The AO had treated the share application money received from M/s Rowland Trexim Pvt Ltd, M/s Bhawna Computers Pvt Ltd, and M/s Blue Jay Airlines Pvt Ltd as unexplained cash credits, alleging these entities were providing accommodation entries. The CIT(A) deleted the addition, holding that the assessee had proved the identity, genuineness, and creditworthiness of the investor companies. However, the Tribunal observed that the financials of these companies did not corroborate the investments made, and the statements of key individuals indicated these entities were merely paper companies. The Tribunal found the CIT(A)'s deletion of the addition unjustified and upheld the AO's order, relying on precedents such as Sumati Dayal vs CIT and Navodaya Castle (P) Ltd vs CIT.

2. Validity of Reopening the Assessment:
The assessee challenged the reopening of the assessment under section 143(3) r.w.s. 147, arguing it was invalid. The AO had reopened the assessment based on information from the Investigation Wing, which indicated the assessee received share application money from entities providing accommodation entries. The Tribunal noted that the information from the Investigation Wing and the statements from key individuals provided a credible basis for the AO's belief that income had escaped assessment. The Tribunal found the reopening of the assessment valid, dismissing the assessee's cross-objection.

3. Whether the Assessment Order Should Have Been Passed Under Section 153C:
The assessee contended that the assessment should have been conducted under section 153C following a search under section 132. The Tribunal observed that the AO had received credible information from the Investigation Wing, justifying the reopening under section 147. The Tribunal found no merit in the assessee's argument and upheld the validity of the assessment order under section 143(3) r.w.s. 147.

Conclusion:
The Tribunal allowed the Revenue's appeal, setting aside the order of the CIT(A) and upholding the AO's addition of Rs.11 crores as unexplained cash credit. The Tribunal also dismissed the assessee's cross-objection, affirming the validity of the assessment reopening and the assessment order under section 143(3) r.w.s. 147.