2017 (11) TMI 1554 - HC - Income Tax

Reopening of assessment - whether the shareholders who have invested in the shares of the Respondents are fictitious or not? - evidence to establish the existence of such Companies - Held that - Once the Assessee has produced documentary evidence to establish the existence of such Companies, the burden would shift on the Revenue-Appellants herein to establish their case. In the present case, the Appellants are seeking to rely upon the statements recorded of two persons who have admittedly not been subjected to cross examination. In such circumstances, the question of remanding the matter for re-examination of such persons, would not at all be justified. The Assessing Officer, if he so desired, ought to have allowed the Assessee to cross examine such persons in case the statements were to be relied upon in such proceedings. Apart from that, the voluminous documents produced by the Respondents cannot be discarded merely on the basis of two individuals who have given their statements contrary to such public documents. We find no infirmity in the findings arrived at by the ITAT as well as CIT Appeals on the contentions raised by the Appellants-Revenue in the present case and, as such, the question of interference by this Court in the present proceedings under Section 260A of the Income Tax Act would not at all be justified. Apart from that, as rightly pointed out by the learned Counsel appearing for the Respondents, the CIT Appeals had also noted that proceedings under Section 147 of the Income Tax Act cannot lead to reverification of the records. These findings of the CIT Appeals have not been assailed before the Income Tax Appellate Court. - Decided in favour of assessee.

Summary

Issues involved:
1. Challenge to Orders passed under Section 147 of the Income Tax Act on the ground of escaped assessment.
2. Existence of fictitious Companies investing in shares.
3. Burden of proof on the assessee regarding the existence of investment Companies.
4. Validity of Orders passed without giving an opportunity for cross-examination.
5. Reliance on documentary evidence to establish the existence of Companies.
6. Jurisdiction of the Assessing Officer under Section 147 of the Income Tax Act.
7. Applicability of substantial questions of law under Section 260-A of the Income Tax Act.

Detailed Analysis:
1. The challenge in the appeal was against Orders passed under Section 147 of the Income Tax Act for escaped assessment. The Assessing Officer's basis for assessment was the alleged investment by fictitious Companies. The Appellant contended that the Respondents failed to establish the existence of these Companies, pointing out discrepancies in the documents produced by the Respondents.

2. The Respondents, on the other hand, argued that they had fulfilled their burden of proof by providing extensive documentation, including incorporation details, financial statements, and other records. They emphasized that the burden of proof initially lay on the assessee, which they had discharged. They also highlighted that the Authorities had concluded based on documentary evidence that the Companies existed.

3. The Court examined the documents produced by the Respondents, which were sourced from public records and included assessment Orders of the Companies for preceding years. The Authorities found no material to rebut these documents, concluding that the findings were not perverse. The Court emphasized that under Section 260-A, it could not re-evaluate evidence unless there was a clear error.

4. Referring to legal precedents, the Court reiterated that once the Assessee establishes the existence of Companies through documentation, the burden shifts to the Revenue to prove otherwise. The Court dismissed the argument for remanding the matter for cross-examination of two individuals, noting the significance of documentary evidence over individual statements.

5. The Court upheld the findings of the lower Authorities, emphasizing that the Appellants had not shown any infirmity in the conclusions reached. It was noted that the CIT Appeals had also highlighted that Section 147 proceedings do not involve reverification of records. Consequently, the Court rejected the Appeal, finding no grounds for interference in the Orders passed by the lower Courts.