2021 (7) TMI 792 - AT - Income Tax

Validity of reopening of assessment u/s 147 - assessee raised the contention that the reopening was done on mistaken identity - HELD THAT - The name of the assessee is Shri Dholan Das and not Shri Dholu Mal. This issue has been discussed by the A.O. in detail and held that the assessee agreed and confirmed that both the names are of same person. Reopening was done on borrowed satisfaction and Shri K.K. Khilnani, on whose statement, they relied upon, never mentioned the name of the assessee - AO recorded the reasons for reopening and also provided the copy of the same to the assessee. The objections raised by the assessee were dealt by the A.O. in the assessment order. The assessee demanded the copy of the statement of Shri K.K. Khilnani which was also provided by the A.O. to him. The A.O. had also provided opportunity to the assessee to cross examine Shri K.K. Khilnani, but the assessee did not avail the opportunity of cross examination. In view of the above facts and circumstances, we are of the considered view that ld. CIT(A) has passed a well-reasoned speaking order discussing all the material facts. The ld. AR has not brought out any new material to controvert the findings recorded by the ld. CIT(A) qua violation reopening the assessment. Unexplained income - violation of the provisions of section 269SS of the Act warranting penalty proceedingsu/s 271D - HELD THAT - Both the provisions of Act i.e. Section 68 69 are not applicable in the present case. As Section 68 of the Act comes into operation only when no satisfactory explanation is coming forth in respect of the cash credit found recorded in the books. In the present case, however, no such credit entry is recorded as evident from the books. Thus this section is not applicable in this case. Again, Section 69 of the Act is not applicable in the present case as the assessee was never found in 'possession' of such sum at any stage in any manner. Thus both the provisions of law are not operative in the present case. Copies of the alleged 'Prints Outs' received from the Investigation Wing, Ahmedabad and forwarded to the assessee subsequently in the assessment proceedings were 'deaf and dumb document' for all the purposes and had carried no evidentiary value in absence of the 'corroborative evidences'. Number of vital details like 'Dates of Payments' 'Re-payments' of the funds under consideration, the 'Money Receipts' acknowledging the receipt and re-payment of these funds, 'Final Destination' of these funds and the Nature' of the transactions reflected in the printed sheets i.e. whether such transaction was a 'loan' or 'payment' in lieu of any other transaction etc. were missing. In absence of such vital details, no 'logical' conclusion could be arrived at. Lastly, the assessee was never confronted about all these missing details in the assessment proceedings. As assessee has discussed his case in detail and we find merit in his contention, therefore, we direct to delete the addition made qua this issue. Decided partly in favour of assessee.

Issues Involved:
1. Validity of statutory notice issued under sections 147/148 in an incorrect name.
2. Validity of reassessment proceedings under sections 147/148.
3. Addition of ?8,00,000 as unexplained income.
4. Initiation and upholding of penalty proceedings under section 271D for violation of section 269SS.

Detailed Analysis:

1. Validity of Statutory Notice Issued Under Sections 147/148 in an Incorrect Name:
The assessee contended that the statutory notice issued under sections 147/148 was in an incorrect name, making it invalid. The authorities below dismissed this contention, stating that the assessee had confirmed that both names, 'Dholan Das Khatwani' and 'Dholumal,' referred to the same person. The ITAT upheld this finding, noting that the assessee had agreed and confirmed the identity during the assessment proceedings. Thus, the notice was considered valid.

2. Validity of Reassessment Proceedings Under Sections 147/148:
The assessee argued that the reassessment proceedings were initiated based on "borrowed satisfaction" and that the reasons recorded did not indicate any "escapement of income." The authorities below dismissed this argument, emphasizing that the information from the Investigation Wing was a valid basis for forming a "reasonable belief" for reassessment. The ITAT upheld this view, stating that the AO had provided reasons for reopening and addressed the objections raised by the assessee. The ITAT found no reason to interfere with the findings of the CIT(A), thus confirming the validity of the reassessment proceedings.

3. Addition of ?8,00,000 as Unexplained Income:
The assessee challenged the addition of ?8,00,000 as unexplained income, arguing that the statement of Shri K.K. Khilnani, which was the basis for the addition, did not specifically mention the assessee. The assessee also contended that the material relied upon was found from a third party and lacked corroborative evidence. The ITAT observed that the assessee was a small-time finance broker, similar to Shri K.K. Khilnani, and the sources of the funds were self-explained as per the seized material. The ITAT noted that the addition was made without invoking any specific charging section like 68 or 69 of the Act and that no valid addition could be made based on material found from a third party. The ITAT directed the deletion of the addition, finding merit in the assessee's contention.

4. Initiation and Upholding of Penalty Proceedings Under Section 271D for Violation of Section 269SS:
The assessee argued that accepting the alleged loan in cash in violation of section 269SS would attract only penalty provisions under section 271D and not constitute "escaped income" under section 147. The authorities below did not specifically address this point, focusing instead on the sufficiency of the reasons for reassessment. The ITAT did not provide a separate analysis for this issue, as the primary focus was on the validity of the reassessment and the addition of unexplained income.

Conclusion:
The ITAT upheld the validity of the statutory notice and the reassessment proceedings but directed the deletion of the addition of ?8,00,000 as unexplained income, finding that the material relied upon lacked corroborative evidence and was found from a third party. The appeal was partly allowed, with the addition being deleted.

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