2020 (6) TMI 611 - AT - Income Tax

Reopening of assessment - addition in respect of receipt of share capital money as accommodation entry from M/s. Finage and Finance India Ltd. - HELD THAT - Assessee has not pointed out any distinguishable facts, therefore, no infirmity is found with regard to reopening of the assessment. Further, the A.O. has recorded reasons for reopening of the assessment based on material collected during the course of search operation in the case of Shri S.K. Jain and Shri V.K. Jain. Therefore, reliable and cogent evidences were found during the course of search and such information was considered genuine on which A.O. formed his opinion for reopening of the assessment, therefore, reopening of the assessment is valid in the matter in issue. See AVIRAT STAR HOMES 2018 (12) TMI 1397 - BOMBAY HIGH COURT - Decided against assessee. Addition u/s 68 - assessee failed to prove identity of the Investor, its creditworthiness of the and genuineness of the transaction in the matter. A.O. specifically found that on the basis of the documents filed by assessee before him that there were regular debit and credit entries of the equivalent amount within a span of 2-3 days and such phenomina is present in the case of entry providers - burden is upon assessee to prove through reliable and cogent evidence that it has received genuine money out of the genuine transaction. If A.O. had any doubt on the paper submitted by assessee before him, it is the duty of the assessee to produce the Principal Officer/Director of the Investor Company so that A.O. could record their statement and find-out the truth. However, assessee failed to do so. Therefore, the doubts of the A.O. have not been cleared by the assessee at any stage. The burden is upon assessee to prove the ingredients of Section 68 - in the present case assessee has failed to discharge the onus lay upon it to prove such ingredients. No justification to interfere with the Orders of the authorities below in making and confirming the addition - Decided against assessee.

Summary

Issues Involved:
1. Reopening of assessment under sections 147/148 of the I.T. Act.
2. Addition of ?6 lakhs in respect of receipt of share capital money under section 68 of the I.T. Act.

Issue-wise Detailed Analysis:

Reopening of Assessment under Sections 147/148:
The assessee challenged the reopening of the assessment under sections 147/148 of the I.T. Act. The initial return of income was filed on 29.11.2006, and the assessment was completed on 30.10.2008. The case was reopened based on search and seizure action conducted on 14.09.2010 at the premises of Shri S.K. Jain and Shri V.K. Jain, revealing that the assessee had taken accommodation entries of ?6 lakhs from M/s. Finage Lease and Finance India Ltd. The A.O. had reason to believe that income chargeable to tax had escaped assessment, leading to the issuance of notice under section 148. The Ld. CIT(A) found that the reasons recorded were based on tangible material collected during the search, proving that accommodation entries were taken by the assessee. The Tribunal confirmed the reopening of the assessment, stating that the A.O. had recorded proper reasons based on reliable and cogent evidence found during the search. This ground of appeal by the assessee was dismissed.

Addition of ?6 Lakhs under Section 68:
On the merits of the addition of ?6 lakhs under section 68, the assessee provided documentary evidence to prove the identity, creditworthiness, and genuineness of the transaction. However, the A.O. found regular debit and credit entries of equivalent amounts within a span of 2-3 days in the bank account of the investor, a common phenomenon in the case of entry providers. The assessee failed to produce the Principal Officer/Director of the investor company for examination. The Ld. CIT(A) noted that the shares were subscribed at a premium of ?40 per share, which was unreasonable. The Tribunal observed that the assessee did not show willingness to produce the Principal Officer/Director of the investor company, and the A.O.'s doubts remained unaddressed. Consequently, the burden to prove the genuineness of the transaction was not discharged by the assessee. The addition of ?6 lakhs was upheld, and this ground of appeal was dismissed. However, the assessee was given the liberty to seek relief under the VIVAD SE VISHWAS SCHEME 2020 if so advised.

Conclusion:
The appeal of the assessee was dismissed on both grounds: the reopening of the assessment under sections 147/148 and the addition of ?6 lakhs under section 68 of the I.T. Act. The Tribunal found no merit in the grounds of appeal and upheld the decisions of the lower authorities.