2015 (9) TMI 903 - AT - Income Tax

Addition u/s. 68 - CIT(A) deleted addition - Held that - All the transactions have been carried out through account payee cheque and confirmations, share application forms, written acknowledgement of these parties have been filed. The AO rejected the said explanation merely on the ground that the summons issued by him was not responded to. Since the concerned parties were assessed to tax and their return acknowledgements were submitted, the facts could have been verified from their assessment records. The appellant has furnished sufficient documents to prove the identity of the parties and therefore in view of the decision of Supreme Court in the case of Lovely Exports 2008 (1) TMI 575 - SUPREME COURT OF INDIA no additions in the company have been made as regards share application money. - Decided in favour of assessee. Reopening of assessment - Held that - As find from the records that earlier scrutiny assessment u/s. 143(3) was completed vide order dated 28.2.2005 and (ii) four years have elapsed on date of instant reopening (23.3.2009) and (iii) in reasons recorded allegation was made for income escaping assessment of ₹ 24.50 lacs as mentioned of the impugned order also whereas income escaping assessment was found to be ₹ 16 lacs in the very same order. On these reasons merely based on investigation wing information without surveillance of substantiation and without any statement being mentioned therein and without nature of transaction being narrated therein and without tangible material, and further without application of mind on amount of income escaping assessment, shows that the reopening is bad in law and needs to be quashed. In the background of the aforesaid discussions, we are of the considered view that only effective ground in this appeal is reassessment proceedings u/s. 148 of the I.T. Act, the Assessee has reiterated that reassessment proceedings are illegal and without jurisdiction in the absence of any tangible evidence or material in respect of any undisclosed income and recording of requisite satisfaction in respect of any such undisclosed income. See Signature Hotels P. Ltd. vs. Income Tax Officer 2011 (7) TMI 361 - Delhi High Court - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition under Section 68 of the Income Tax Act, 1961 for Assessment Year (AY) 2001-02.
2. Validity of reassessment proceedings under Section 147/148 of the Income Tax Act, 1961 for AY 2002-03.

Detailed Analysis:

1. Deletion of Addition under Section 68 for AY 2001-02:
The Revenue filed an appeal against the CIT(A)'s order which deleted an addition of Rs. 17,00,000 made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961. The assessee, an investor company dealing in shares and securities, had its return processed under Section 143(1) without scrutiny. Based on information from the DIT(Inv.), a notice under Section 148 was issued, leading to an assessment under Section 147, adding Rs. 26,00,000 as unexplained credits.

The CIT(A) found that the AO had considered certain payments twice, leading to a double addition. The correct amount received was Rs. 17,00,000, not Rs. 26,00,000. The CIT(A) noted that part of the amount was received against the sale of shares, which were reflected in the balance sheet, and the rest was share application money. The assessee provided confirmations, share application forms, and other documents, all transactions were through account payee cheques, and the identities of the parties were confirmed. The AO did not bring any material evidence to prove that the payments were accommodation entries. The CIT(A) relied on the Supreme Court decision in the case of Lovely Exports, which held that once the identity of the party is proved, no addition could be made regarding share application money.

The Tribunal upheld the CIT(A)'s order, agreeing that the addition was rightly deleted after considering all relevant evidence.

2. Validity of Reassessment Proceedings for AY 2002-03:
The assessee appealed against the CIT(A)'s order which upheld the reassessment proceedings initiated under Section 147/148. The original assessment was completed under Section 143(3), accepting the declared income. The reassessment was based on information from the DIT(Inv.) that the assessee received Rs. 34.50 lacs in accommodation entries. The AO recorded reasons for reopening, but the reassessment resulted in an addition of Rs. 16,00,000 under Section 68.

The assessee argued that the reassessment was based on a mere change of opinion and that all necessary documents and confirmations were provided during the original assessment. The Tribunal noted that the AO did not apply his own mind to the information and materials forming the basis of the reopening. The reassessment proceedings were found invalid as they were based on the same information already scrutinized during the original assessment.

The Tribunal referred to the Delhi High Court's decision in the case of Signature Hotels Pvt. Ltd., which held that reassessment proceedings based on mere information from the investigation wing without independent application of mind by the AO were invalid. The Tribunal quashed the reassessment proceedings, rendering other issues academic.

Conclusion:
The Revenue's appeal for AY 2001-02 was dismissed, and the assessee's appeal for AY 2002-03 was allowed. The Tribunal upheld the deletion of the addition under Section 68 and quashed the reassessment proceedings under Section 147/148.