2018 (10) TMI 1298 - AT - Income Tax

Reopening of assessment u/s 147 - reopening of assessment beyond the period of four years - validity of reasons to believe - information received from Investigation Wing - non independent application of mind - share application money received - Held that - Assessee had submitted the reply before the Assessing Officer along with ITRs, share application forms, acknowledgement of receipts of shares, bank statements of the share applicants, names and addresses of the share holders and value and quantity of shares etc. and other evidences as required by the Assessing Officer. AO had accepted the reply of the assessee and did not make any addition on this count. The case of the assessee has been reopened on the same issue regarding the share application money received from the above five parties on the basis of information received from Investigation Wing. The assessee, thus, had disclosed all material facts necessary for completion of assessment. The Assessing Officer has not spelled out in the assessment order as to what material facts or evidences were not disclosed/produced by the assessee relating to share capital increased during the year under consideration. Therefore, in our considered opinion, the Assessing Officer was not justified to reopen the assessment only on the basis of information received from Investigation Wing, that too beyond period of limitation of four years. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the notice under section 148 of the Income Tax Act.
2. Limitation period for issuing the notice under section 148.
3. Addition of ?50 lakhs as unaccounted income.
4. Addition of ?90,000 as unexplained investment.

Issue-wise Detailed Analysis:

1. Validity of the notice under section 148 of the Income Tax Act:
The assessee challenged the validity of the notice issued under section 148 dated 21.03.2016, arguing it was wrong and bad in law. The notice was issued based on information from the Director of Income-Tax (Investigation-II) regarding accommodation entries provided by the S.K. Jain group. The Tribunal noted that the reasons recorded for reopening the assessment were based on the information received from the investigation wing, which indicated that the assessee had received accommodation entries amounting to ?50 lakhs. The Tribunal found that the reopening of the assessment was not justified as it was based solely on the information received without any new material or inquiry conducted by the Assessing Officer (AO).

2. Limitation period for issuing the notice under section 148:
The notice under section 148 was issued beyond the period of four years but within six years from the end of the assessment year. The Tribunal observed that for reopening an assessment beyond four years, it is necessary to establish that the assessee failed to disclose fully and truly all material facts necessary for the assessment. The Tribunal found that the assessee had disclosed all material facts during the original assessment proceedings, and the AO had accepted the explanations provided by the assessee. Therefore, the Tribunal held that the reopening of the assessment beyond four years was not justified.

3. Addition of ?50 lakhs as unaccounted income:
The AO added ?50 lakhs to the income of the assessee, treating it as unaccounted money received as share capital from various entities controlled by the S.K. Jain group. The AO relied on the information received from the investigation wing and the non-compliance of the assessee in producing the directors of the share applicant companies. The Tribunal noted that the assessee had provided all necessary details and documents during the original assessment proceedings, which were accepted by the AO. The Tribunal held that the AO was not justified in making the addition based on the same set of facts and information that were already examined during the original assessment.

4. Addition of ?90,000 as unexplained investment:
The Tribunal did not specifically address the addition of ?90,000 as unexplained investment in the detailed judgment. The focus was primarily on the validity of the notice under section 148 and the addition of ?50 lakhs as unaccounted income.

Conclusion:
The Tribunal allowed the appeal of the assessee, holding that the reopening of the assessment beyond the period of four years was not justified as the assessee had disclosed all material facts during the original assessment proceedings. The addition of ?50 lakhs as unaccounted income was also not justified as it was based on the same set of facts and information already examined by the AO. The Tribunal did not address the addition of ?90,000 as unexplained investment in detail. The appeal was allowed on the ground of the invalidity of the notice under section 148.