2019 (8) TMI 705 - AT - Income Tax

Revision u/s 263 - reopening of assessment u/s 147 - addition u/s 68 - HELD THAT - We are sufficient to establish the escapement of income of the assessee from the assessment and there was a valid reason for the AO to reopen the assessment to bring to tax the said escaped income. The refusal by the AO to rectify the mistake as pointed out by the assessee in the said letter also does not support the case of the assessee as the same was done by the AO by giving a valid reason that the mistake pointed out by the assessee not being apparent from record was beyond the scope of rectification u/s 154. As regards the contention of the learned counsel for the assessee that even the Ld. CIT vide his impugned order passed u/s 263 has held the order of the AO passed u/s 143(3)/147 as erroneous, we find that the error allegedly pointed out by the Ld. CIT in the order passed by the AO u/s 143(3)/147 is entirely on a different issue relating to the share capital and share premium received by the assessee during the year under consideration and there is nothing in the said order to show that the order of the AO was erroneous on the issue on which it was reopened relating to undisclosed service charges. We, therefore, find no merit in the case of the assessee that the reopening of assessment itself being bad in law, the assessment made by the AO u/s 143(3)/147 as well as the consequential order passed by the Ld. CIT u/s 263 are invalid. The assessee has challenged the impugned order passed by the Ld. CIT u/s 263 on various counts. At the time of hearing before us, the learned counsel for the assessee however has not raised any contention in support of the said ground raised by the assessee. As rightly submitted by the learned DR, a similar order passed by the Ld. CIT u/s 263 in the case of Rajmandir Estates Pvt. Ltd. 2016 (5) TMI 801 - CALCUTTA HIGH COURT involving identical facts and circumstances was upheld by the Hon ble Calcutta High Court. Although the learned counsel for the assessee has submitted that the decision of Hon ble Calcutta High Court in the case of Rajmandir Estates Pvt. Ltd. (supra) relied upon by the learned DR in support of the revenue s case is distinguishable on fact, he has not been able to point out any material distinction in the facts involved in the present case vis-a-vis the facts involved in the case of Rajmandir Estates Pvt. Ltd. (supra). As submitted by the learned DR, the SLP filed by the assessee in the case of Rajmandir Estates Pvt. Ltd. has already been dismissed by the Hon ble Supreme Court. In the facts of the present case are considered in the light of the decision in the case of Rajmandir Estates Pvt. Ltd. (supra), we find that there is no infirmity in the impugned order passed by the Ld. CIT u/s 263 and upholding the same, we dismiss this appeal of the assessee.

Summary

Issues Involved:
1. Validity of the reopening of assessment under section 147 of the Income Tax Act, 1961.
2. Examination of share capital and share premium received by the assessee.
3. Order passed by the Commissioner of Income Tax (CIT) under section 263 of the Income Tax Act, 1961.

Detailed Analysis:

1. Validity of the Reopening of Assessment under Section 147:

The assessee filed its return of income declaring a total income of ?296. Subsequently, a letter dated 11.10.2010 was submitted by the assessee pointing out that service charges of ?52,730/- received in cash were not taken into account while preparing the final accounts. The Assessing Officer (AO) did not rectify this mistake under section 154, observing that the mistake was not apparent from records. Instead, the AO issued a notice under section 148 for the reassessment of income, leading to the determination of total income at ?55,426/-.

The Tribunal considered the reasons recorded by the AO for reopening the assessment. The AO relied on the letter submitted by the assessee, which indicated that service charges of ?52,730/- were not accounted for. The Tribunal held that the self-declaration made by the assessee was sufficient to establish escapement of income. Thus, the reopening of assessment by the AO was deemed valid and in accordance with law.

2. Examination of Share Capital and Share Premium:

The CIT examined the records of the assessment made by the AO and found that proper enquiry was not made regarding the share capital of ?12.42 lacs raised by the assessee with a premium of ?4.97 crores. The CIT observed that the AO did not conduct thorough enquiries to ascertain the identity and creditworthiness of the shareholders and the genuineness of the transactions. The CIT noted that the AO failed to collect bank statements for the full financial year, did not conduct independent inquiries, and did not examine the directors of the assessee or the subscribing companies.

The CIT highlighted the common practice of introducing unaccounted money as share capital in dummy companies and directed the AO to carry out detailed inquiries about the various layers through which the share capital was rotated. The AO was instructed to summon and examine the directors of the assessee and the subscriber companies and to verify the source of the funds.

3. Order Passed by the CIT under Section 263:

The CIT passed an order under section 263, setting aside the AO's assessment order and directing a fresh assessment with specific instructions. The assessee challenged this order before the Tribunal, arguing that the original reassessment order under section 143(3)/147 was invalid, and consequently, the order under section 263 was also invalid.

The Tribunal admitted the additional ground raised by the assessee but ultimately dismissed it. The Tribunal found that the reopening of assessment by the AO was based on valid reasons and that the CIT's order under section 263 was justified. The Tribunal referred to the decision of the Hon'ble Calcutta High Court in the case of Rajmandir Estates Pvt. Ltd., where a similar order under section 263 was upheld, and the SLP filed by the assessee was dismissed by the Hon'ble Supreme Court.

The Tribunal concluded that the CIT was justified in treating the assessment order as erroneous and prejudicial to the interest of the revenue due to the lack of requisite enquiry into the share capital and premium received by the assessee. The appeal of the assessee was dismissed, and the order passed by the CIT under section 263 was upheld.

Conclusion:

The Tribunal upheld the reopening of assessment under section 147, the detailed examination of share capital and premium by the CIT, and the order passed under section 263. The appeal of the assessee was dismissed in its entirety.