2017 (3) TMI 319 - AT - Income Tax

Reopening of assessment - accommodation entries from the bogus companies - Held that - The assessee had received the money as share application money from the companies which were genuine, their creditworthiness was proved, the transaction was genuine through banking channel and all the requisite details asked by the AO were furnished. Therefore, the addition made by the AO was rightly deleted by the ID. CIT(A). - Decided in favour of assessee.

Summary

Issues:
1. Whether the credits could be considered unexplained despite evidence of companies being conduits.
2. Whether the addition was rightfully deleted by the CIT (A) due to lack of confrontation with primary documents.
3. Whether the AO's addition of ?63,00,000 as escaped income was justified.

Analysis:
1. The AO initiated proceedings based on information from the Investigation Wing regarding accommodation entries received by the assessee from certain companies. The AO alleged that the companies were conduits and made an addition of ?43,00,000. The CIT (A) deleted the addition, emphasizing that the companies were genuine as per Ministry of Corporate Affairs data and stock exchange listings. The CIT (A) held that the burden of proof shifts between parties, and the AO failed to conduct necessary investigations, citing the Mithla Credit Service Ltd. case.

2. The department contended that the addition was valid as the companies were bogus and linked to an entry provider. However, the assessee proved the transactions' genuineness through banking channels and provided all required details. The CIT (A) upheld the deletion, citing a similar case decided by ITAT Panji bench and Bombay High Court, where identical facts led to deletion of additions.

3. The AO issued a notice u/s 148, alleging escaped income of ?63,00,000. The assessee denied knowing the entry provider and claimed genuine transactions. The AO added ?43,00,000 based on the companies' alleged bogus nature. The CIT (A) deleted the addition, relying on the Goa Sponge and Power Ltd. case, where similar additions were deleted by ITAT and upheld by the Bombay High Court. The Tribunal dismissed the department's appeal, citing the similarity with the aforementioned case and upholding the CIT (A)'s decision.

In conclusion, the Tribunal dismissed the department's appeal, upholding the CIT (A)'s decision to delete the addition based on the genuineness of the transactions and the burden of proof shifting between parties. The judgment relied on precedents and emphasized the importance of conducting thorough investigations before making additions based on suspicions alone.