2019 (12) TMI 977 - AT - Income Tax

Reopening of the assessment u/s 147 - addition on account of accommodation entry - addition of unexplained deposit - HELD THAT - Notice u/s 148 have not be served upon the assessee and no further evidence have been produced on record, if any attempt have been made to serve the notice upon the assessee personally. A.O. in the assessment order has noted that notice u/s 148 have been served later on through affixture for which no record have been produced to satisfy the requirements of Law whether notice through affixture have been served in accordance with Law. These facts considering the fact that incorrect address have been recorded in the speed post record would clearly reveal that no notice under section 148 have been served upon the assessee. Therefore, assumption of jurisdiction under section 147 is clearly illegal and bad in Law. It may also be noted here that the A.O. in the reasons recorded for reopening of the assessment has merely recorded that ₹ 15 lacs accommodation entry taken by the assessee has escaped assessment. However, at the re-assessment stage, A.O. made further addition of ₹ 52.91 crores on account of deposits in the bank account of the assessee. No reasons have been mentioned as to why such addition have been made and what was the purpose in making the addition. The entire deposit in the Bank account of the assessee could never be unexplained. Even the Investigating Agency have not made any allegation against the assessee if that amount was an accommodation entry taken by the assessee ? D.R. admitted that no notice have been issued by the A.O. while proposing to make this addition of ₹ 52.91 crores. We are of the view that A.O. has recorded non-existing, incorrect and wrong facts in the reasons recorded for reopening of the assessment. A.O. did not applied his mind to the report of Investigation Wing. A.O. merely believed report of Investigation Wing without making further scrutiny at the assessment. The A.O. merely reproduced report of Investigation Wing without making further scrutiny of the same. The A.O. merely reproduced report of Investigation Wing and crux of statement of Shri Kishori Sharan Goel for reopening of the assessment in the matter. It was merely a borrowed satisfaction without application of mind. Initiation of re-assessment proceedings in the instant case is illegal, bad in law and is liable to be quashed. In this view of the matter, we set aside the orders of the authorities below and quash the reopening of assessment under section 147/ 148 - Decided in favour of assessee.

Summary

Issues Involved:
1. Reopening of assessment under section 147 of the I.T. Act, 1961.
2. Addition of ?15 lakhs on account of accommodation entry.
3. Addition of unexplained deposit of ?52,91,51,396/-.

Issue-wise Detailed Analysis:

1. Reopening of Assessment under Section 147 of the I.T. Act, 1961:
The assessee challenged the reopening of the assessment, arguing that the notice issued under section 148 was barred by time and not properly served. The reasons recorded for reopening were considered to be merely borrowed satisfaction from the Investigation Wing's report without proper application of mind by the Assessing Officer (A.O.). The Tribunal noted that the A.O. recorded inconsistent and incorrect findings, indicating non-application of mind. It was established that the A.O. acted on borrowed satisfaction without verifying the details independently. The Tribunal relied on precedents, including the case of M/s. KLA Foods (India) Ltd., where reopening based on non-existing and incorrect reasons was held invalid. The Tribunal concluded that the reopening of the assessment was illegal and bad in law due to incorrect and non-existing reasons, lack of proper service of notice, and borrowed satisfaction.

2. Addition of ?15 Lakhs on Account of Accommodation Entry:
The A.O. made an addition of ?15 lakhs, treating it as an accommodation entry based on the statement of Shri Kishori Sharan Goel. The Tribunal observed that the A.O. recorded contradictory findings regarding the nature of the transaction, initially treating it as an accommodation entry received by the assessee and later as an unexplained expenditure. The Tribunal found that the A.O. did not apply his mind to the information received and merely borrowed the satisfaction from the Investigation Wing's report. It was highlighted that the assessee made a payment to M/s. JMD International, which could not be treated as unexplained expenditure. The Tribunal concluded that the addition of ?15 lakhs was based on incorrect and inconsistent findings and was therefore invalid.

3. Addition of Unexplained Deposit of ?52,91,51,396/-:
The A.O. made a further addition of ?52,91,51,396/- based on unexplained deposits in the bank account of the assessee. The Tribunal noted that the A.O. did not provide any reasons for this addition in the recorded reasons for reopening the assessment. The Tribunal referred to the judgment in the case of Ranbaxy Laboratories Limited, which held that for any new issue arising during reassessment, a fresh notice under section 148 is required. Since no such notice was issued for the additional amount, the addition was held to be invalid. The Tribunal emphasized that the entire deposit in the bank account could not be treated as unexplained without proper investigation and reasons.

Conclusion:
The Tribunal quashed the reopening of the assessment under section 147/148 of the I.T. Act, 1961, and deleted all additions made by the A.O., including ?15 lakhs on account of accommodation entry and ?52,91,51,396/- as unexplained deposits. The appeal of the assessee was allowed, and the orders of the authorities below were set aside.