2019 (11) TMI 504 - AT - Income Tax

Reopening of assessment u/s 147 - addition on account of share capital u/s 68 - HELD THAT - From the reading of the reasons, we find that the value of the entry taken has been mentioned as ₹ 5,00,000/- twice along with the similar instrument number being 151129. The name of the account holder for each entry namely Keshav Sehkari and Umesneh Securities Pvt. Ltd. have been mentioned. Regarding the branch of entry giving bank, the reason mentioned Umesneh Securities Pvt. Ltd. and Keshav Sehkari. Not only this, the Assessing Officer has also mentioned same account number 625 for both the entries under the column account number entry giving account. Thus, AO has committed a number of mistake in the reasons recorded for issue of notice u/s 148. He also mentioned that he has reasons to believe that an income of ₹ 10,00,000/- represents the assessee s own unaccounted income which has escaped assessment whereas the amounts received as per the bank statements is only of ₹ 5,00,000/-. This shows as absolute lack of application of mind on the part of the AO which makes the assessment null and void ab initio . The amount of ₹ 10,00,000/- is not supported by any correct cheque number whereas the allegation is that the assessee has received accommodation entry to the tune of ₹ 10,00,000/-. In our considered opinion, the basis of reopening itself is based on wrong facts therefore, the same cannot be upheld. Since, the reasons recorded by the Assessing Officer suffered from infirmity, therefore, we quash the reassessment made by the Assessing Officer without jurisdiction. - Decided in favour of assessee.

Summary

Issues:
1. Validity of jurisdiction assumed by Assessing Officer under section 147 of the Income Tax Act.
2. Addition of ?10,00,000 on account of share capital under section 68 of the Income Tax Act.
3. Charging of interest under sections 234A, 234B, and 234D of the Income Tax Act.

Analysis:

Issue 1: Validity of Jurisdiction Assumed
The appeal raised concerns about the Assessing Officer's jurisdiction under section 147 without complying with mandatory conditions. The Tribunal examined the notice issued under section 147 to determine if it met the statutory requirements and guidelines. The reasons recorded by the Assessing Officer indicated that an income of ?10,00,000 had escaped assessment due to the assessee's failure to disclose material facts. However, discrepancies were found in the reasons recorded, such as incorrect amounts and details related to accommodation entries. The Tribunal noted that these errors demonstrated a lack of application of mind by the Assessing Officer, rendering the assessment null and void ab initio. Citing the case of Hindustan Lever Limited v. R.B. Wadkar, the Tribunal emphasized the importance of clear, unambiguous, and evidence-based reasons for reopening assessments. Ultimately, due to the infirmities in the reasons recorded, the Tribunal quashed the reassessment made by the Assessing Officer for lack of jurisdiction.

Issue 2: Addition of Share Capital
The appeal contested the addition of ?10,00,000 on account of share capital under section 68 of the Income Tax Act. The Tribunal's decision on the validity of jurisdiction also impacted this issue, as the basis for the addition was found to be erroneous due to incorrect facts in the reasons recorded. As a result of the quashing of the reassessment, the addition of share capital was deemed unsustainable and not supported by accurate information, leading to the allowance of the assessee's appeal on this ground.

Issue 3: Charging of Interest
Regarding the charging of interest under sections 234A, 234B, and 234D of the Income Tax Act, the Tribunal's decision to quash the reassessment due to jurisdictional defects rendered this issue moot. Since the reassessment itself was invalidated, any consequential actions, such as charging interest, were also set aside. Therefore, the Tribunal allowed the assessee's appeal on the grounds of charging interest under the specified sections.

In conclusion, the Tribunal's decision centered on the lack of proper jurisdiction in the reassessment process, leading to the quashing of the reassessment and the allowance of the assessee's appeal on all contested issues related to jurisdiction, addition of share capital, and charging of interest under the Income Tax Act.