2015 (8) TMI 224 - AT - Income Tax

Reopening of assessment - validity of reassessment - notice u/s 148 was not issued/served upon the assessee within the statutory period of limitation as per assessee - Held that - On careful consideration of the facts in the light of submission of the appellant, it is evident that the ld. AO had sent the notice u/s 148 dated 18.3.2011 at the previous address of the appellant, which was changed 6 years ago by the appellant. Necessary information was specifically given to the AO in this regard and even the address was changed in the PAN data base. It is very likely that the AO, simply attached the information received from the Investigation wing with the return for the AY 2004-05 and issued the notice u/s 148, without bothering to find out whether the appellant continues to be at the same address at which it had filed the return 5 years ago. Neither did he check the address from the current return nor from PAN data base. It is thus evident that the notice sent at wrong address was to return back. Strangely the AO has also acknowledged these facts in the impugned order. Thus if the notice dated 18.3.2011 had returned before 31.3.2011, why the AO not applied mind in the matter to find out the correct address, by looking at data base of his assesses. The argument that it was the appellant, who had at some point of time given this address, is of no relevance, as the AO was in possession of the new address, which was duly informed by the appellant, and from which later returns were filed and which was also available in the PAN data base. Thus the reassessment proceedings in pursuance of the notice u/s 148, which was not served upon the appellant (within the prescribed time) as bad in law. Further, on perusal of the copy of the notice the same shows that the notice u/s 148 is silent about the assessment year for which the proceedings were to be reopened. Thus the notice u/s 148 as invalid.- Decided in favour of assessee. Addition u/s 68 - CIT(A) deleted the addition - Held that - The appellant had furnished all relevant information to substantiate the identity, genuineness and creditworthiness of the share applicants by filing conformation, their PAN/ITR Details, copy of bank statements, ROC documents for allotment of shares. Appellant had duly discharged the onus and it was the responsibility of the AO to have made necessary verification in respect of the evidences furnished by the Appellant. Since the ld. AO made no efforts at any stage, be at the stage of recording of the reason for reopening of the case or at the assessment stage, the Appellant had duly substantiated the necessary requirements for holding cash credit as explained. Factually also, there were no specific adverse observations nor any contradiction observed by the AO in respect of such evidences and hence the action of the AO in holding the same as unexplained cash credit was without any basis, cogent grounds and was therefore unjustified. See CIT vs. Lovely Exports P. Ltd. 2008 (1) TMI 575 - SUPREME COURT OF INDIA - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reassessment proceedings initiated based on information from the Investigation Wing.
2. Validity of notice issued under Section 148 at an old address.
3. Validity of reassessment order despite being a speaking assessment order.
4. Deletion of addition under Section 68 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of Reassessment Proceedings:
The Revenue challenged the CIT(A)'s decision to quash the reassessment order, arguing that the reassessment was based on credible and tangible information from the Investigation Wing about accommodation entries. The Tribunal noted that the AO did not apply his mind and merely acted on vague information. The CIT(A) found that the AO failed to verify the current address of the assessee before issuing the notice, which was a significant lapse. The Tribunal upheld the CIT(A)'s decision, emphasizing the importance of proper jurisdiction and due diligence by the AO before initiating reassessment proceedings.

2. Validity of Notice Issued Under Section 148:
The notice under Section 148 was sent to an old address, which the assessee had changed six years prior and had duly informed the AO and updated in the PAN database. The Tribunal agreed with the CIT(A) that the AO's failure to issue the notice to the correct address, despite having the updated address, rendered the notice invalid. The Tribunal highlighted the importance of issuing notices to the correct address and maintaining proper records, as per CBDT guidelines.

3. Validity of Reassessment Order Despite Being a Speaking Assessment Order:
The Revenue argued that the reassessment order was valid as it was a speaking order. However, the Tribunal found that the reassessment proceedings were void ab initio due to the invalidity of the notice under Section 148. Therefore, the reassessment order, despite being a speaking order, was quashed as it was based on an invalid notice.

4. Deletion of Addition Under Section 68:
The AO had made an addition of Rs. 32,00,000 under Section 68, questioning the genuineness of the share application money received by the assessee. The assessee provided extensive documentation, including share application forms, confirmations, PAN details, bank statements, and ROC documents, to substantiate the identity, genuineness, and creditworthiness of the share applicants. The CIT(A) found that the AO did not make any efforts to verify these documents and merely relied on vague information from the Investigation Wing. The Tribunal upheld the CIT(A)'s decision to delete the addition, noting that the AO failed to discharge his duty of verifying the evidence provided by the assessee.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to quash the reassessment proceedings and delete the addition under Section 68, emphasizing the importance of proper jurisdiction, due diligence, and verification by the AO. The appeal of the Revenue was dismissed.