2017 (3) TMI 1264 - HC - Income Tax

Reopening of assessment - apllying provisions of Section 55-A and 142-A-(i) - Held that - Reassessment proceedings initiated against the assessee upon information of undisclosed investment in immovable property relying on the report of the Income Tax Inspector and the report of the District Valuation Officer is valid in view of the distinguishing features of this case that admittedly investments were made in such property and further nature of investment made is from undisclosed income, the assessee having not filed its returns of income for the years in which such investment was made. The Tribunal was not in error in so far as it has upheld the initiation of re-assessment proceedings. Accordingly, question nos. A and B raised in the memo of appeal are decided against the assessee and in favour of the revenue. Unexplained investment in the building - Held that - We find essentially the issue raised in question no. C is a question of fact on which the Tribunal has recorded its finding after due appraisal of the evidence and material existing on record. In view of the above, the finding of the Tribunal sustaining the part of ₹ 6,76,441/- does not suffer from any infirmity. The question is answered accordingly. Addition in part claimed as deduction made by the wife of assessee - Held that - Tribunal has recorded its finding upholding disallowance of certain cash credit entries in the books of account of the assessee, the Tribunal has considered the material and evidence at length and has thereafter sustained part disallowance. While the identity of the creditors may have been established by the assessee, the other essential ingredients of their credit worthiness and genuineness of the transaction were not found established by the Tribunal. These findings of fact are again based on appraisal of evidence. Again, we do not find any infirmity in these finding of fact recorded by the Tribunal. Question no. D is also answered accordingly.

Summary

Issues involved:
1. Validity of reassessment proceedings under Section 148 of the Income Tax Act.
2. Competency of the Assessing Officer to issue notice under Section 148.
3. Sustainment of addition as unexplained investment in the building.
4. Disallowance of certain cash credit entries in the books of account.

Issue 1: Validity of reassessment proceedings under Section 148:
The appeals arose from a common order of the Tribunal regarding reassessment proceedings for the assessment years 1992-93 to 1995-96. The CIT (Appeals) had allowed the appeals on the ground of lack of jurisdiction due to invalid initiation of proceedings under Section 148. The Tribunal upheld the initiation of reassessment proceedings based on the report of the District Valuation Officer (DVO) and the Income Tax Inspector, stating that there was sufficient material to issue the notice under Section 148. The Tribunal found that the assessee had not disclosed investments in constructions, justifying the initiation of reassessment proceedings.

Issue 2: Competency of the Assessing Officer to issue notice under Section 148:
The assessee challenged the notice under Section 148, arguing that the Income Tax Officer was not competent to issue it after the expiry of four years from the end of the relevant assessment year. The Tribunal dismissed the cross-objections, stating that the Assessing Officer could issue the notice after the specified period. The Tribunal upheld the initiation of reassessment proceedings, emphasizing the undisclosed investments made by the assessee.

Issue 3: Sustainment of addition as unexplained investment in the building:
The Tribunal sustained the addition of ?6,70,441 as unexplained investment in the building, rejecting the grounds raised by the assessee. The Tribunal found that the assessee failed to provide evidence regarding the source of income and upheld the CIT (Appeals) decision. The Tribunal concluded that the addition was justified, and the department did not raise any objections against this relief.

Issue 4: Disallowance of certain cash credit entries in the books of account:
The Tribunal upheld the disallowance of certain cash credit entries in the books of account, stating that while the identity of the creditors was established, their creditworthiness and the genuineness of the transactions were not proven. The Tribunal considered the evidence and material before sustaining the partial disallowance. The Tribunal's findings were based on an appraisal of the evidence, and no infirmity was found in these findings.

In conclusion, the High Court dismissed the appeals as lacking merit, upholding the Tribunal's decisions on the validity of reassessment proceedings, competency of the Assessing Officer, sustainment of additions, and disallowance of cash credit entries. The Court found no errors in the Tribunal's factual findings and ruled in favor of the revenue department on the issues raised in the appeals.