2020 (11) TMI 856 - AT - Income Tax

Commission income for providing accommodation entries of marble sales - HELD THAT - The assessee is also having two proprietorship concerns from where the assessee has admitted to have issued bills regarding bogus accommodation entries of sale. The Department has accepted this explanation of the assessee that the amount deposited in the bank account of the assessee is on account of bogus accommodation sale entries provided by the assessee to various parties and the assessee has earned only commission income on such deposit. AO as well as the ld. CIT(A) has applied 10% of the total cash deposit as commission income of the assessee by - In the absence of any contrary material the impugned order of the ld. CIT(A) confirmed - Decided against assessee.

Issues involved:
1. Validity of notice issued under section 148 by the Ld. AO
2. Jurisdiction of Ld. AO in reopening the assessment
3. Compliance with provisions of section 151 of the Act
4. Addition of income in hands of assessee
5. Proper inquiries conducted by Ld. AO
6. Assessment of income by Ld. CIT(A)
7. Grounds of appeal and leave to add, alter, amend, or substitute

Issue 1: Validity of notice issued under section 148 by the Ld. AO
The appeal challenged the validity of the notice issued under section 148 by the Ld. AO, asserting it was bad in law and should be quashed. The appellant argued that the notice lacked legal basis for various reasons. However, the absence of representation on behalf of the assessee during the hearing led to the appeal being disposed of ex-parte.

Issue 2: Jurisdiction of Ld. AO in reopening the assessment
The Ld. AO's jurisdiction in reopening the assessment without proper reasons to believe that income had escaped assessment was contested. The appellant claimed that the assessment was reopened without the necessary jurisdiction and sanction under section 151 of the Act. The grounds for quashing the assessment were based on the lack of valid reasons for reopening and the absence of appropriate authorization.

Issue 3: Compliance with provisions of section 151 of the Act
The issue of compliance with the provisions of section 151 of the Act arose concerning the reopening of the assessment. The appellant argued that the Ld. AO erred in not obtaining the required sanction as provided under section 151, rendering the assessment void ab initio. The challenge was centered on the procedural aspect of obtaining the necessary approval before reopening the assessment.

Issue 4: Addition of income in hands of assessee
A significant issue revolved around the addition of income in the hands of the assessee, specifically related to commission income for providing accommodation entries of marble sales. The AO made an addition of a substantial amount on account of commission income, which was contested by the appellant. The contention was based on the nature of the income and the validity of attributing it to the assessee.

Issue 5: Proper inquiries conducted by Ld. AO
The appellant raised concerns about the adequacy of inquiries conducted by the Ld. AO during the assessment process. The argument was that the assessment was concluded arbitrarily without proper investigations into the matter. The lack of thorough inquiries and the arbitrary nature of the assessment were highlighted as grounds for quashing the assessment.

Issue 6: Assessment of income by Ld. CIT(A)
The Ld. CIT(A) confirmed the action of the Ld. AO regarding the addition of income in the hands of the assessee. The appellant disputed the assessment made by the Ld. CIT(A), particularly concerning the percentage of commission income added. The challenge focused on the assessment methodology and the justification for the addition of income by the appellate authority.

Issue 7: Grounds of appeal and leave to add, alter, amend, or substitute
The appellant sought leave to add, alter, amend, or substitute grounds of appeal during the hearing. This procedural issue was mentioned in the grounds raised by the appellant, indicating a request for flexibility in modifying the grounds of appeal as deemed necessary during the proceedings.

In summary, the judgment addressed various issues related to the validity of the notice, jurisdiction of the Ld. AO, compliance with statutory provisions, addition of income, adequacy of inquiries, assessment by the Ld. CIT(A), and procedural aspects of grounds of appeal. The decision upheld the actions of the authorities, leading to the dismissal of the appeal by the assessee.

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