2001 (3) TMI 239 - AT - Income Tax

Summary

Issues Involved:
1. Validity of re-assessment proceedings under section 147(a) read with section 148 of the Income-tax Act, 1961.
2. Genuineness of loan transactions with M/s. Ram Kumar Parshotam Dass, Jaitu.
3. Application of mind by the Commissioner of Income-tax in granting approval for re-assessment.
4. Onus of proof regarding genuineness of entries in books of account during re-assessment proceedings.

Detailed Analysis:

1. Validity of Re-assessment Proceedings:
The primary contention was that the re-assessment proceedings under section 147(a) read with section 148 of the Income-tax Act, 1961, were invalid and void ab initio. The reasons for issuing the notice under section 148 were based on information obtained during a search at the residence of an associated person, revealing that certain parties had introduced their own money in the names of the assessee and associated concerns. The assessee argued that all necessary facts had been disclosed during the original assessment, and thus, the re-assessment was unjustified. The Tribunal noted that the Commissioner of Income-tax (CIT) had granted approval for re-assessment using a rubber stamp, which was challenged as mechanical and without proper application of mind. The Tribunal referred to the judgment of the Hon'ble Allahabad High Court in the case of Raj Kishore Prasad, emphasizing that the CIT's sanction should not be mechanical and must involve application of mind.

2. Genuineness of Loan Transactions:
The Tribunal examined the genuineness of loan transactions with M/s. Ram Kumar Parshotam Dass, Jaitu. The assessee had provided confirmations during the original assessment, and the transactions were conducted through account-payee cheques. The Tribunal observed that the creditor was a regular income-tax assessee, and the amounts were received and repaid through banking channels. The Tribunal emphasized that the onus to prove the genuineness of entries in books of account shifts to the Revenue during re-assessment proceedings. The Tribunal found that there was no denial of transactions by the creditor, and thus, the addition of Rs. 1,40,000 was unjustified.

3. Application of Mind by the Commissioner:
The Tribunal scrutinized the process of granting approval for re-assessment by the CIT. It was noted that the CIT had used a rubber stamp to grant approval, which was challenged as mechanical. The Tribunal referred to judicial precedents, including the Hon'ble Supreme Court's judgment in Phool Chand Bajrang Lal, which emphasized the need for proper application of mind by the CIT before granting approval. The Tribunal concluded that the approval was mechanical and lacked proper scrutiny, rendering the re-assessment proceedings void ab initio.

4. Onus of Proof in Re-assessment Proceedings:
The Tribunal reiterated the principle that the onus to prove the genuineness of entries in books of account lies with the assessee during regular assessment proceedings. However, during re-assessment proceedings initiated under section 147, the onus shifts to the Revenue. The Tribunal referred to the Amritsar Bench's decision in the case of Kirpa Ram Ramji Dass, which emphasized that the Revenue must prove the non-genuineness of entries during re-assessment. The Tribunal found that the Revenue failed to discharge this onus, and thus, the addition made in re-assessment was unjustified.

Separate Judgments Delivered by Judges:
The Judicial Member held that the re-assessment proceedings were wholly void ab initio and that the loan transactions with M/s. Ram Kumar Parshotam Dass could not be held to be non-genuine. The Accountant Member, however, upheld the re-assessment proceedings but restored the matter to the Assessing Officer for further verification of the genuineness of the loan transactions. The Third Member concurred with the Accountant Member, holding that the re-assessment proceedings were valid and the matter should be remanded to the Assessing Officer for further inquiry.

Conclusion:
The Tribunal concluded that the re-assessment proceedings were void ab initio due to the mechanical approval by the CIT. Additionally, on merits, the loan transactions with M/s. Ram Kumar Parshotam Dass were found to be genuine, and the addition made in re-assessment was unjustified. The appeals were allowed, and the re-assessment orders were cancelled.