2015 (5) TMI 81 - HC - Income Tax

Reopening of assessment - unaccounted loans - revenue submitted that all the four parties concerned had facilitated accommodation entries to assessee - Held that - Unable to agree with revenue since the Petitioner has clearly stated that all the payments were made by account payee cheques which were encashed in the bank account of the Petitioner in the regular course of business. We find that the Petitioner has also paid interest on this loans after deduction of tax at source and TDS returns are also accordingly filed. There is no dispute in regard to the above. We find nothing to support the said contentions of the revenue. The revenue's contention in the affidavit in reply has no merit. On the other hand, the loans appear to be taken in the regular course of business and were found amongst the 45 members in respect of which all particulars have already been furnished by the assessee to the Assessing Officer No such reasons for the Assessing Officer or the revenue to come to a conclusion that income had escaped assessment. All the communication and evidence provided by the Petitioner to the revenue authorities disclosed that the loans were bonafide, taken in the regular course of business through account payee cheques. Thus the proposed reopening lacks justification and the impugned notice deserves to be quashed had set aside. - Decided in favour of assessee.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 and rejection of objection to reasons for issuing the notice.

Analysis:
The petitioner challenged the notice dated 26th March, 2014, issued under Section 148 of the Income Tax Act, 1961, and the order dated 19th December, 2014, rejecting the objection to the reasons for issuing the notice. The petitioner, a partnership firm, had previously completed the original assessment under Section 143(3) of the Act. During the assessment scrutiny, the petitioner was required to answer specific questions related to loans, advances, and interest. Subsequently, the Assessing Officer sought details regarding certain parties, alleging unaccounted cash through bogus loans. The petitioner contended that the notice for reopening was issued beyond the stipulated period and was based on a change of opinion rather than tangible material indicating income escapement.

Upon receiving objections, the Assistant Commissioner of Income Tax rejected them, asserting that the reopening for the assessment year 2007-08 was lawful. The petitioner argued that all necessary information had been disclosed, and the loans were legitimate business transactions. The revenue, however, maintained that the loans were not genuine and were accommodation entries. Despite the revenue's claims, the petitioner had provided evidence of payments through account payee cheques, with tax deductions and TDS returns filed accordingly.

The court analyzed the evidence and contentions presented by both parties. It found that the loans appeared to be taken in the regular course of business, with proper documentation provided to the authorities. The court concluded that there was no tangible material to support the belief that income had escaped assessment. Therefore, it deemed the proposed reopening unjustified and ordered the quashing of the notice and the rejection order passed by the Commissioner of Income Tax (Appeals). Consequently, the court set aside the notice dated 26th March, 2014, and the order dated 19th December, 2014, without costs.