2018 (10) TMI 235 - AT - Income Tax

Reopening of assessment - assessee has taken accommodation entries in the form of bogus bills - Held that - The assessee was in employment in earlier Assessment Year and drawing salary. Therefore, the fact that the assessee started business in this year only is reiterated. From the perusal of the balance sheet, it can be seen that the figure of ₹ 4,14,86,563/- is a amount for purchases which was not correctly taken by the Assessing Officer. Thus, the Assessing Officer has totally ignored the balance sheet of the assessee, despite filing the audited books of account. Therefore, the reasons recorded itself are incorrect and does not substantiate the re-opening/reassessment. Thus, the re-opening itself is bad in law and needs to be quashed. - Decided in favour of assessee.

Summary

Issues:
1. Addition to income of the Assessee.
2. Reasons for reopening the case.
3. Notice not served at the address intimated to the ITO.
4. Principle of natural justice.
5. Failure to exercise powers under section 133(6).
6. Consideration of Assessee's qualifications and circumstances.

Analysis:

1. Addition to income of the Assessee:
The Assessing Officer added ?5,48,000 to the total income of the Assessee based on information that the Assessee had taken accommodation entry in the form of bogus bills. The Assessing Officer issued notices and show cause notices, but the Assessee did not comply, leading to the addition.

2. Reasons for reopening the case:
The reasons recorded by the Assessing Officer for reopening the case were related to alleged accommodation entries taken by the Assessee from M/s Karishma Diamond Pvt. Ltd. The Assessee contested the reopening, arguing that the reasons recorded were incorrect and did not justify the reassessment.

3. Notice not served at the address intimated to the ITO:
The Assessee raised concerns about the notice not being served at the address provided to the Income Tax Officer, highlighting procedural irregularities in the assessment process.

4. Principle of natural justice:
The Assessee contended that the addition to income was against the principle of natural justice as they were not allowed to see the evidence against them or cross-examine any informants. The Assessee argued for quashing the addition on these grounds.

5. Failure to exercise powers under section 133(6):
The Assessee argued that the Assessing Officer did not exercise powers under section 133(6) to confirm information from M/s Karishma Diamond Pvt. Ltd., which was crucial for the case. The Assessee emphasized that mere suspicion should not lead to income addition.

6. Consideration of Assessee's qualifications and circumstances:
The Assessee, a young qualified Gemologist, highlighted their lack of knowledge in financial matters and the dispute with their father, who previously managed their financial affairs. The Assessee's circumstances were presented to support the argument against the income addition.

In conclusion, the Appellate Tribunal allowed the Assessee's appeal, emphasizing procedural lapses, incorrect reasons for reopening, and the failure to consider the Assessee's circumstances and qualifications. The Tribunal found in favor of the Assessee, leading to the quashing of the addition to the income.