2013 (11) TMI 151 - AT - Income Tax

Reopening the case u/s 147/148 Held that - The investigation wing has information on record to show the assessee company was engaged in providing accommodation entries to its group companies - the company has introduced its own unaccounted money in its bank by way of accommodation entries Decided against assessee. Addition on account of unaccounted cash deposit in bank The assessee has maintained cash book recording deposit and withdrawals of cash and duly get it audited - Held that - No specific reason was assigned by the authorities for non-reliance on the audited cash book maintained by the assessee-company - Assessee is not liable to explain the source of cash deposit The issue was set aside for fresh adjudication. Addition on account of credits appearing in the bank account The A.O. issued letter dated 8.12.2008 to the assessee to produce 10 parties for the transactions on 15.12.2008. The said notice was received only on 16.12.2008 in compliance to which the assessee appeared on 16.12.2008 - Held that - The assessee was not given sufficient time to produce the parties in person from whom amounts have been received - Also the AO didn t considered the documents and submissions made by the assessee - In view of natural justice The issue was set aside for fresh adjudication.

Issues Involved:
1. Reopening the case u/s 147/148.
2. Addition of Rs. 1,306,000/- for cash deposited out of cash in hand from the cash book.
3. Additions of Rs. 2,606,000/- on account of credit entries reflecting in the bank account.
4. Non-consideration of case laws.

Detailed Analysis:

Ground Nos. 1 to 3: Reopening the case u/s 147/148

The assessee, a Pvt. Ltd. Company engaged in financing and share trading, filed its return of income for A.Y. 2001-02 declaring a loss of Rs. 2,611/-. The return was processed u/s 143(1). Subsequently, proceedings were initiated u/s 147, and an assessment was framed with an addition of Rs. 39,12,000/-. The assessee questioned the validity of the notice issued u/s 148 based on information from the investigation wing.

The assessee argued that the information was vague and general, insufficient to form a prima facie view that the assessee was providing accommodation entries. The AO issued the notice without applying his mind, based on information that the assessee was part of a group providing accommodation entries. The assessee relied on several legal precedents to support their claim.

The department contended that specific information indicated the assessee's involvement in providing accommodation entries, justifying the AO's belief that income had escaped assessment.

The tribunal held that there was sufficient reason for the AO to believe that income chargeable to tax had escaped assessment. The AO had recorded reasons after applying his mind to the information from the investigation wing. The tribunal upheld the validity of the notice issued u/s 148, rejecting ground nos. 1, 2, and 3.

Ground Nos. 4, 5, and 6: Addition of Rs. 1,306,000/- for cash deposited out of cash in hand from the cash book

The assessee contested the addition of Rs. 1,306,000/- on account of unaccounted cash deposits in the bank, arguing that the cash book was duly audited and showed no discrepancies. The assessee claimed the deposits were from earlier cash in hand and prior withdrawals from the regular bank account.

The department argued that the assessee failed to provide necessary evidence and vouchers to explain the source of the cash deposits.

The tribunal noted that the authorities did not provide reasons for disregarding the opening cash balance and prior withdrawals shown in the audited accounts. The tribunal set aside the matter to the AO for fresh examination, allowing ground nos. 4, 5, and 6 for statistical purposes.

Ground Nos. 7, 8, 9, and 10: Additions of Rs. 2,606,000/- on account of credit entries reflecting in the bank account

The assessee challenged the addition of Rs. 2,606,000/- for credits appearing in the bank account, arguing that they had provided complete addresses, income particulars, and confirmations from the parties involved. The AO did not find discrepancies in these confirmations.

The department relied on the assessment order.

The tribunal observed that the assessee had submitted confirmations, PAN, bank statements, and returns of the parties. The AO did not consider these documents and passed the assessment order without adequate verification. The tribunal set aside the matter to the AO for fresh consideration, allowing ground nos. 7 to 10 for statistical purposes.

Ground Nos. 11, 12, and 13: Non-consideration of case laws

These grounds were deemed general and did not require independent adjudication.

Conclusion:

The appeal was partly allowed. The tribunal upheld the validity of the notice issued u/s 148 but set aside the additions of Rs. 1,306,000/- and Rs. 2,606,000/- for fresh consideration by the AO.

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