2024 (12) TMI 860 - AT - Income Tax

Validity of Reopening of assessment - addition u/s 68 - Reasons to believe - information received in respect to search conducted on the premises of Amarpali Group - HELD THAT - The assessee has established identity, creditworthiness and genuineness of share capital by adducing legal evidence on record. The law laid down in M/s Gagandeep Infrastructure Pvt. Ltd 2017 (3) TMI 1263 - BOMBAY HIGH COURT squarely applies to the facts in the assessee s case. Considering the same addition made in the case of assesseemis held to be unjustified and unsustainable. Addition made in the case of assessee under section 68 of the Act is unjustified and is directed to be deleted. It is seen that the regular assessment was framed under section 143(3). In the course of regular assessment, notice u/s 142(1) was issued seeking details of share capital. Details were furnished. Share capital contribution received was examined and regular assessment was completed accepting receipt of share capital contribution. No new tangible material has come on record subsequent to passing of order passed u/s 143(3). Reasons recorded merely indicate that information was received as regard to statement given by Shri Shirish Shah in the course of search conducted at his premises. The aforesaid statement given by Shri Shirish Shah, during the course of search at his premises was general statement and was not in respect to transaction of assessee. No date of transaction, as made by the assessee is noted/observed in the reasons recorded and linked-up with the statement of Shri Shirish Shah. Nowhere in the reasons recorded, it has been noted that Shri Shirish Shah, has made any adverse observation with regard to transaction of receipt of share capital by the assessee. Information found in search is sought to be utilized for issuance of notice u/s 148 of the Act, and it is not in accordance with law. AO has not indicated any reason as to how corporate entities contributing share capital received by assessee company are linked to Shri Shirish Shah. Hence notice issued u/s 148 of Act, in the assessee s case is not in accordance with law and hence re assessment framed is hereby cancelled.

Issues Involved:

1. Validity of notice issued under Section 148 of the Income Tax Act, 1961.
2. Justification of addition under Section 68 of the Income Tax Act, 1961.
3. Violation of principles of natural justice by not granting a personal hearing.
4. Liability to pay interest under Sections 234A, 234B, and 234C of the Income Tax Act, 1961.

Detailed Analysis:

1. Validity of Notice Issued Under Section 148:

The primary issue was whether the notice issued under Section 148 was valid. The assessee argued that the notice was illegal, invalid, and issued on a mere change of opinion without any tangible material. The notice was based on information from a search action under Section 132 on the Amarpali Group and Mr. Shirish Shah, who allegedly provided accommodation entries. The assessee contended that the reasons recorded for the notice were based on general statements not specific to the assessee's transactions and lacked independent enquiry by the Assessing Officer. The Tribunal found that the reasons recorded were insufficient as they did not establish a direct link between the assessee and the alleged accommodation entries. The Tribunal cited several judicial precedents, concluding that the notice under Section 148 was not in accordance with the law, and the re-assessment framed was cancelled.

2. Justification of Addition Under Section 68:

The assessee challenged the addition of Rs. 180 lakh under Section 68, arguing that it had provided sufficient evidence to explain the share capital contribution, including confirmations, financial statements, and bank statements of the corporate shareholders. The Tribunal noted that the assessee had discharged its onus by providing legal evidence to establish the identity, creditworthiness, and genuineness of the transactions. The Tribunal found that the addition was primarily based on the statement of Mr. Shirish Shah, which was not directly linked to the assessee's transactions. The Tribunal cited previous judgments where similar additions based on Mr. Shah's statements were deemed unjustified. The Tribunal held that the addition under Section 68 was unjustified and directed its deletion.

3. Violation of Principles of Natural Justice:

The assessee claimed that the CIT(A) erred by not granting a personal hearing, violating the principles of natural justice. The Tribunal acknowledged this claim but deemed it unnecessary to adjudicate independently since the main issues had been resolved in favor of the assessee.

4. Liability to Pay Interest Under Sections 234A, 234B, and 234C:

The assessee denied liability to pay interest under Sections 234A, 234B, and 234C, arguing that the levy was unjustified and excessive. However, the Tribunal did not provide a separate adjudication on this issue, as it was consequential to the main issues already decided.

Conclusion:

The Tribunal allowed the appeal filed by the assessee, concluding that the notice under Section 148 was invalid, and the addition under Section 68 was unjustified. The re-assessment framed was cancelled, and the grounds related to the personal hearing and interest liability were deemed consequential.

← Previous Next →