2009 (7) TMI 892 - AT - Income Tax

Long-term capital gains on sale shares - assessee claimed exempted under section 54F of the Act - Information from the Deputy Director of Income-tax (Investigation), was received by the Assessing Officer regarding a bogus claim of long-term capital gains shown against sale/purchase of shares routed through bank account - Certain beneficiaries have taken accommodation entries by making the payment in cash and by accepting the equivalent amount by draft and cheque and certain premium was paid on that account - It was also revealed that no actual sale/purchase of shares had taken place - operator of the aforesaid account admitted that no genuine transactions of sale/purchase of shares have taken place through this account, and he received cash from beneficiaries deposited in the bank account then issued a cheque or draft to the beneficiaries - assessee submitted that transactions of sale of shares and the capital gain arising therefrom has been declared in the Voluntary Disclosure of Income Scheme Held that - no justification in giving one more opportunity to the assessee, in the light of the submissions made by the assessee before the Assessing Officer, where the assessee himself has made a submission that amount of capital gain on shares was declared under the Voluntary Disclosure of Income Scheme meaning there by that the transaction was not disclosed in the regular return, it was never the case of the assessee that the transactions of sale and purchase of shares transacted through M/s. R. K. Aggarwal & Co. were genuine and the amount deposited in the bank account cannot be considered to be unexplained money introduced by the assessee by way of depositing in her various bank accounts, order of the Commissioner of Income-tax (Appeals) in confirming the addition upheld Unexplained credit or loans - whether the Assessing Officer can make the addition on account of unexplained credit or loans taken Held that - It is not clear whether in the course of reassessment proceedings the Assessing Officer recorded any other reasons after having noticed that the income to the extent of Rs. 1,35,00,000 had also escaped assessment - additions were made in the absence of details or confirmation of loans furnished by the assessee - Commissioner of Income-tax (Appeals) has confirmed the addition for the assessee s failure to file any confirmation from respective creditors as well as copy of agreement for taking loans and advances from various companies - assessee has also submitted that the assessee was prevented by sufficient reasons and cause from furnishing necessary details as various litigations were running between the assessee and the lenders under section 138 of the Negotiable Instruments Act and other provisions matter remanded to Commissioner of Income-tax (Appeals), appeal filed by the assessee is partly allowed in the manner as indicated above.

Issues Involved:
1. Validity of the reassessment proceedings initiated under section 147 of the Income-tax Act, 1961.
2. Addition of Rs. 8,97,950 as unexplained cash credit from alleged bogus share transactions.
3. Addition of Rs. 1,35,00,000 as unexplained credit or loans from Kuber group of companies.

Issue-wise Detailed Analysis:

1. Validity of the reassessment proceedings initiated under section 147 of the Income-tax Act, 1961:

The assessee raised an additional ground challenging the jurisdiction of the Assessing Officer (AO) to initiate reassessment proceedings under section 147 of the Act, arguing that the AO did not comply with the mandatory conditions of sections 147 to 151. The Tribunal admitted this additional ground as it was purely legal and could be decided based on the material on record.

The AO had reopened the assessment based on information from the Deputy Director of Income-tax (Investigation), Gurgaon, indicating that the assessee had made a bogus claim of long-term capital gains on the sale of shares. The AO recorded reasons for reopening the assessment, stating that the assessee had credited specific sums in her bank accounts, which were suspected to be accommodation entries.

The assessee contended that the AO issued the notice under section 148 without applying his mind to the information received and merely acted on vague information. However, the Tribunal held that the AO had sufficient and relevant material to form a belief that income had escaped assessment. The Tribunal cited the Supreme Court's decision in Rajesh Jhaveri Stock Brokers (P.) Ltd., which clarified that at the stage of issuing notice, the AO only needs to have "reason to believe" based on relevant material, not conclusive proof of escapement of income.

The Tribunal concluded that the reasons recorded by the AO were sufficient to satisfy the condition of section 147 for issuing a notice under section 148. The approval granted by the Commissioner of Income-tax was also found to be valid as per law. Thus, the additional ground challenging the validity of the reassessment proceedings was rejected.

2. Addition of Rs. 8,97,950 as unexplained cash credit from alleged bogus share transactions:

The assessee claimed that the capital gains from the sale of shares through M/s. R. K. Aggarwal & Co. were declared under the Voluntary Disclosure of Income Scheme (VDIS) for the assessment years 1994-95 and 1995-96. However, the AO did not accept this explanation, as the transactions in question related to the assessment year 1996-97, and the VDIS declaration did not cover this period.

The Tribunal upheld the AO's decision, noting that the assessee had not provided any details or evidence to prove the genuineness of the share transactions. The assessee's submission that the capital gains were declared under VDIS indicated that the transactions were not disclosed in the regular return. Therefore, the addition of Rs. 8,97,950 as unexplained cash credit was confirmed.

3. Addition of Rs. 1,35,00,000 as unexplained credit or loans from Kuber group of companies:

The assessee argued that this addition could not be a subject matter of the reassessment proceedings initiated under section 147, as the proceedings were initiated with reference to the share transactions and not the loans from Kuber group of companies. This plea was raised for the first time before the Tribunal.

The Tribunal noted that the issue raised was a pure question of law, but the relevant facts necessary to decide this issue were not available on record. It was unclear whether the AO had recorded any other reasons during the reassessment proceedings regarding the loans. Additionally, the addition was made due to the assessee's failure to provide details or confirmation of the loans.

The Tribunal decided to restore the issue to the file of the Commissioner of Income-tax (Appeals) for fresh adjudication, allowing the assessee to produce evidence and giving the AO an opportunity to respond. The Tribunal ordered accordingly.

Conclusion:

The Tribunal rejected the additional ground challenging the validity of the reassessment proceedings and confirmed the addition of Rs. 8,97,950 as unexplained cash credit. However, the issue of the addition of Rs. 1,35,00,000 as unexplained credit was remanded back to the Commissioner of Income-tax (Appeals) for fresh adjudication. The appeal was partly allowed in the manner indicated.

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