2014 (5) TMI 963 - AT - Income Tax

Validity of reopening of assessment u/s 147 of the Act Reason to believe Held that - There was merit in the argument of the assessee in as much as the AO s reasons for reopening are not correct on two counts - assessee had not given any cash to VPS Valves & Tubes P. Ltd. - the investigation information in possession was qua one M/s Manorath Securities Pvt. Ltd and not the assessee AO had no information from Investigation wing against the assessee - On both the counts the action of reopening the assessment is not tenable - The reasons recorded being not based on correct and valid information, pertaining to assessee the reopening is set aside Decided in favor of Assessee.

Summary

Issues:
1. Validity of reopening assessment under section 147 of the Income-tax Act.
2. Treatment of share application money received as unexplained income.

Analysis:

Issue 1: Validity of reopening assessment under section 147 of the Income-tax Act:
The appellant challenged the initiation of proceedings under section 147, arguing that the assessing officer (AO) lacked valid reasons to believe that income had escaped assessment. The AO's notice was based on incorrect information that the appellant had given cash to an entry operator, which was later clarified to be a cheque transaction. The appellant contended that the AO's reasons were unfounded and not supported by valid information. The CIT(A) confirmed the reopening without addressing the lack of valid information against the appellant. The Tribunal found that the investigation information pertained to a different entity, not the appellant, rendering the reasons for reopening invalid. As the reasons were not based on correct and valid information related to the appellant, the Tribunal quashed the reopening of assessment.

Issue 2: Treatment of share application money received as unexplained income:
The appellant provided all relevant information regarding the share application money, including confirmations, bank accounts, and statements. The appellant argued that the burden under section 68 was discharged by furnishing evidence of the identity, genuineness, and creditworthiness of the share applicant, as no further inquiry was conducted by the assessing officer. The appellant cited Delhi High Court judgments to support the proposition that when the primary onus is met, the burden under section 68 is discharged. The Departmental Representative contended that the notices sent to the new address of the share applicant returned unserved, implying further action was taken. However, the Tribunal, having quashed the reopening of assessment, did not delve into the merits of the case and allowed the appellant's appeal.

In conclusion, the Tribunal found the reopening of assessment invalid due to lack of valid information against the appellant, and as a result, allowed the appeal without considering the merits of the treatment of share application money.