2015 (12) TMI 497 - AT - Income Tax

Reopening of assessment - Addition u/s 68 on receipt of accommodation entries - information received from the investigation wing of the Department - Held that - The assessment was reopened on the basis of information received from the investigation wing of the Department about the existence of accommodation entry providers and their modus operandi and the assessee s name has also figured in the list of beneficiaries. Although the assessee had filed documents relating to the transactions at the time of original assessment proceedings, it is again an undisputed fact that the persons who were summoned u/s 131 of the Act to depose before the AO failed to do so. The Ld. AR had nothing to say as to why the persons could not present themselves before the AO. The fact that the share application money had been received through account payee cheques is, at best, neutral. Section 68 permits the AO to add the credit appearing in the books of accounts of the assessee if the latter offers no explanation regarding the nature and source of credit or if the explanation offered by him is not satisfactory. The failure on the part of the assessee in producing the share applicants for deposition before the AO lends credence to the theory that the monies emanated from the coffers of the assessee company. As decided in CIT vs. Nova Promoters and Finlease (P) Ltd. (2012 (2) TMI 194 - DELHI HIGH COURT) wherein held that where sums were shown as share application moneys and information had been received from investigation wing about the assessee being a beneficiary of accommodation entries, failure on the part of the share applicants to respond to summons would absolve the AO from the duty of proving that the monies emanated from the coffers of the assessee. - Decided against assessee.

Summary

Issues:
1. Reopening of assessment under section 148 of the Income Tax Act based on information received.
2. Addition of Rs. 5 lacs to the income of the assessee under section 68 of the Income Tax Act.
3. Failure of the assessee to discharge the onus placed on him by the Act.
4. Appeal challenging the addition of Rs. 5 lacs under section 68 of the Income Tax Act.

Issue 1: Reopening of assessment under section 148 of the Income Tax Act based on information received:
The appellant's appeal was against an order passed by the Ld. CIT(A) -19, New Delhi, based on information received from the Director of Income Tax(Investigation), New Delhi regarding beneficiaries who received accommodation entries. The AO recorded reasons for escaped income and issued notice u/s 148 of the Act. The appellant claimed that the original return filed may be considered in response to the notice. The assessment u/s 143(3) was completed earlier, accepting the returned income.

Issue 2: Addition of Rs. 5 lacs to the income of the assessee under section 68 of the Income Tax Act:
The AO added Rs. 5 lacs to the income of the assessee under section 68 of the Act due to the failure of the assessee to discharge the onus placed on him. Despite submitting documents during the original assessment, the summoned individuals did not depose before the AO. The Ld. CIT(A) upheld the addition based on various case laws, including a judgment of the Hon'ble Delhi High Court.

Issue 3: Failure of the assessee to discharge the onus placed on him by the Act:
The appellant argued that the assessment was completed after examining details of share application money during the original assessment proceedings. The AR contended that the AO had accepted the assessee's claim after due deliberation and without any failure to disclose material facts. However, the failure of the summoned individuals to depose before the AO raised doubts about the source of the funds, leading to the addition under section 68.

Issue 4: Appeal challenging the addition of Rs. 5 lacs under section 68 of the Income Tax Act:
In the appeal before the Tribunal, the Ld. AR reiterated the contentions made earlier, emphasizing that the assessment order was passed after thorough examination by the AO. However, the Tribunal, after considering the facts and legal precedents, upheld the order of the Ld. CIT(A) and dismissed the appeal of the assessee based on the failure to produce the share applicants for deposition, as per section 68 of the Act.

This judgment highlights the importance of substantiating claims and providing necessary documentation during assessment proceedings. The failure to produce essential witnesses or evidence can lead to adverse implications, as seen in the case where the appellant's appeal was dismissed due to the absence of summoned individuals. The judgment underscores the significance of complying with legal procedures and fulfilling the onus placed on the assessee to avoid adverse consequences in income tax assessments.