2021 (1) TMI 7 - AT - Income Tax

Reopening of assessment - approval in respect of reasons - addition u/s 68 - HELD THAT - The approval in respect of reasons given by the Assessing Officer for reopening are just and proper and as per the provisions of the Income Tax Act 1961. As the case laws referred by the Ld. AR are distinguishable as in those case laws the reasons and the competent authority has not given an approval as per the provisions of Section 147/148. Therefore the legal issue raised by the assessee does not stand and is dismissed. Addition u/s 68 - AR submitted that there is an additional evidence which was obtained after assessment proceedings and appellate proceedings before CIT(A) was over. Therefore it will be appropriate to look into the additional evidence. While going through the additional evidence we noticed that these are the primary evidences which will show the creditworthiness of the source of source which was asked by the Assessing Officer as well as CIT(A). Therefore we are admitting additional evidence and remanding back the entire issue to the file of the Assessing Officer for verifying this additional evidence and after going through the said evidence arrive at a proper conclusion as to whether the addition in respect of Section 68 is sustainable or not Appeal of the assessee is partly allowed for statistical purpose.

Summary

Issues:
Reopening of assessment, Addition under Section 68 of the Income Tax Act, Admissibility of additional evidence.

Reopening of Assessment:
The appeal was filed against the order passed by CIT(A) for Assessment Year 2010-11. The assessee challenged the reopening of the assessment, arguing that it was not in compliance with the statutory conditions prescribed under Section 147 read with 148. The Assessing Officer had initiated the reassessment proceedings based on information received from the Investigation Wing without independent application of mind. The assessee provided details of the credentials of the companies labeled as dummy entities and submitted ITRs of these parties showing substantial income. The AR contended that the reasons to believe were formed without proper application of mind and solely on borrowed satisfaction. The AR also sought to introduce additional evidence under Rule 29 of the Income Tax Rules, 1962, including family settlement deed and financial statements of a company for the relevant assessment year.

Addition under Section 68:
The Assessing Officer had made an addition of ?6,60,00,000 under Section 68 of the Income Tax Act as unexplained cash credit. The CIT(A) upheld this addition despite detailed explanations and evidence provided by the assessee to establish the identity, creditworthiness, and genuineness of the transaction. The assessee claimed that the money invested in share capital was received through inheritance by Mrs. Sumita Pandey. The AR argued that the entities were not paper entities as suggested and had substantial income and net worth. The AR emphasized that the Assessing Officer's actions were based on alleged information without independent assessment. The Tribunal admitted additional evidence submitted by the assessee to establish the creditworthiness of the source of funds and remanded the issue back to the Assessing Officer for further verification, ensuring principles of natural justice were followed.

Admissibility of Additional Evidence:
The Tribunal admitted the additional evidence submitted by the assessee under Rule 29 of the Income Tax Rules, 1962, as primary evidence crucial to determining the creditworthiness of the source of funds. The additional evidence included documents such as family settlement deed and financial statements, which were obtained after the assessment and appellate proceedings. The Tribunal remanded the issue back to the Assessing Officer for a thorough examination of the additional evidence and directed a proper conclusion on the sustainability of the addition under Section 68. The Tribunal emphasized that the assessee should be given a fair opportunity of hearing during the reassessment process.

In conclusion, the Tribunal partly allowed the appeal for statistical purposes, admitting the additional evidence and remanding the matter back to the Assessing Officer for further examination in light of the new evidence.