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2022 (3) TMI 430 - AT - Income TaxReopening of assessment u/s 147 - Unexplained loan transaction - AO received information from DGIT (Inv.), Pune giving a list of beneficiaries of accommodation entries provided by Mr. Praveen Kumar Jain group of concerns AND name of the assessee appeared along with its address as beneficiary - HELD THAT - The initiation of reassessment proceedings requires the AO to form a prima facie view about the escapement of income. There is no need to conclusively establish at that stage itself that such and such income escaped assessment. If it emerges from the reasons recorded, which, in turn, are based on some cogent material, that the AO had prima facie reason to believe about income escaping assessment, the matter ends there insofar as the initiation of reassessment proceedings is concerned. No fault can be found with the jurisdiction of the AO to initiate reassessment. CIT(A) in the impugned order has referred to the judgment of Om Vinyls Pvt. Ltd. Vs. ITO 2015 (1) TMI 827 - BOMBAY HIGH COURT wherein the same Mr. Praveen Kumar Jain group of cases was involved for providing accommodation entries and on the basis of which the AO initiated re-assessment proceedings. The Hon ble High Court dismissed the assessee s writ petition challenging the initiation of re-assessment. CIT(A) has also referred to another judgment of the Hon ble Gujarat High Court in Pushpak Bullion Pvt. Ltd. 2016 (7) TMI 69 - GUJARAT HIGH COURT in which case again, that assessee was one of the beneficiaries of Mr. Praveen Kumar Jain group of cases, who had allegedly received accommodation entries from M/s. Mohit International, being the same concern and the same A.Y., from whom the assessee under consideration received the alleged loan. The writ petition filed by that assessee also came to be dismissed. There is a reference in the impugned order to still another judgment of the Hon ble High Court in Ankit Financial Services Ltd. Vs. DCIT 2017 (1) TMI 1041 - GUJARAT HIGH COURT . That case also involved one of the beneficiaries of Mr. Praveen Kumar Jain group of cases, who approached the Hon ble High Court challenging the issuance of notice u/s.148 but without success. In view of the above overwhelming legal position settled in favour of the Revenue we are of the considered opinion that no interference is warranted in the impugned order upholding initiation of re-assessment proceedings. Bogus loan transactions - M/s. Mohit International was one of the concerns which was apparently engaged in the business of Diamonds trading but actually providing accommodation entries, there remains no doubt that the transaction of loan of ₹ 25.00 lakh received by the assessee is nothing but a bogus loan received from M/s. Mohit International, through a proprietorship concern of Mr. Nilesh Parmar, which was actually controlled by Mr. Praveen Kumar Jain, with whom Mr. Nilesh Parmar was working as an Accountant. Not only that, even Mr. Praveen Kumar Jain also admitted before the authorities that he was engaged in giving accommodation entries through companies under his control and all of such companies were paper concerns with no real business transactions. He also admitted to have provided accommodation entries, inter alia, of unsecured loans/advances, sale and purchase in various commodities including Diamonds etc. He further admitted that his beneficiaries included, inter alia, builders. During the course of search, he provided a list of concerns controlled and managed by him along with name and address of the beneficiaries of accommodation entries. Such a list included the name of the assessee as a beneficiary of a loan of ₹ 25.00 lakh received on 26-02-2007 from the concern controlled and managed by him by the name of M/s. Mohit International. On a specific question, the ld. AR fairly admitted that loan of ₹ 25.00 lakh was received and recorded by the assessee from M/s. Mohit International on 26-02-2007, though he insisted on the genuineness of the transaction. It will not be out of place to refer to the judgment of the Hon'ble Supreme Court in CIT vs. Durga Prasad More 1971 (8) TMI 17 - SUPREME COURT as held that although the apparent must be considered as real, but, if there are reasons to believe that the apparent is not real, as is the case under consideration as well, then the apparent should be ignored to unearth the harsh reality. Thus no hesitation in countenancing the view of the ld. CIT(A) that the assessee received accommodation entry of loan from M/s. Mohit International. Adequate opportunity of hearing was not provided by the authorities below - The assessee was very well aware of the contents of the statements of Mr. Nilesh Parmar and Mr. Praveen Kumar Jain from the stage of the initiation of the reassessment proceedings and the argument of it being unaware to the statements, is nothing but a shield to defend an undefendable case. It is pertinent to mention that the assessee in its last reply dated 21-03-2015 submitted personally to the AO on 24.3.2015, stated all that it was to state by mentioning in para 3 that we have already filed with you all the relevant papers as Annexure 1 to 5 of our letter dated 27-06-2014. You have also acknowledged the same in Para 3 of your aforesaid letter. Under the circumstances, we fully explained the said loan . There is no reference to any socalled violation of principles of natural justice by the AO not supplying the statements of Mr. Nilesh Parmar and Mr. Praveen Kumar Jain. In view of the foregoing discussion, we are satisfied that the authorities below were justified in deciding the issue against the assessee.
Issues Involved:
1. Initiation of reassessment proceedings under Section 148 of the Income-tax Act, 1961. 2. Addition on merits regarding the alleged bogus loan of ?25 lakh. 3. Violation of principles of natural justice. Issue-wise Detailed Analysis: I. INITIATION OF REASSESSMENT The first issue concerns the assumption of jurisdiction under Section 148 of the Income-tax Act, 1961. The Assessing Officer (AO) received information from DGIT (Investigation), Pune, indicating that the assessee was a beneficiary of accommodation entries provided by Mr. Praveen K. Jain. The AO issued a notice under Section 148 based on this information, which included details of a ?25 lakh loan allegedly received by the assessee from M/s. Mohit International. The assessee contended that the AO did not record proper satisfaction and acted on borrowed satisfaction without conducting further inquiry. The AO’s action was argued to be based on 'reason to suspect' rather than 'reason to believe.' The Tribunal held that the AO had tangible material from DGIT (Investigation), Pune, which included the assessee’s name and the lender’s details. The AO's belief was based on prima facie grounds, satisfying the condition precedent for initiating reassessment. The Tribunal cited several judgments, including those from the Hon’ble Supreme Court and Hon’ble Delhi High Court, supporting the view that prima facie grounds are sufficient for initiating reassessment. The Tribunal found no fault with the AO’s jurisdiction to initiate reassessment and upheld the initiation of reassessment proceedings. II. ADDITION ON MERITS The second issue pertains to the merits of the addition of ?25 lakh. The AO found that the assessee received an accommodation entry of ?25 lakh from M/s. Mohit International, a concern controlled by Mr. Praveen K. Jain. Statements from Mr. Nilesh Parmar and Mr. Praveen K. Jain indicated that M/s. Mohit International was engaged in providing accommodation entries. The assessee provided various documents, including ledger extracts, bank statements, and confirmation from the lender, to support the genuineness of the transaction. The Tribunal examined the material provided by the assessee and found several discrepancies, including the lack of opening and closing stock in the annual accounts of M/s. Mohit International despite a huge turnover and the minimal fixed assets. The Tribunal noted that the bank account of M/s. Mohit International showed transactions running into crores, which was inconsistent with the profile of Mr. Nilesh Parmar, who was merely an accountant. The Tribunal concluded that the transaction was a bogus loan and upheld the addition on merits. III. PRINCIPLES OF NATURAL JUSTICE The third issue involves the alleged violation of principles of natural justice. The assessee argued that the statements of Mr. Nilesh Parmar and Mr. Praveen K. Jain were not provided, and adequate opportunity of hearing was not given. The Tribunal found that the assessee was well aware of the transaction under challenge and had submitted various documents in support of the genuineness of the transaction. The Tribunal noted that the AO had reproduced relevant parts of the statements in the assessment order, and the assessee did not provide any new evidence before the CIT(A) or the Tribunal. The Tribunal referred to the judgment of the Hon’ble Supreme Court in State of U.P. Vs. Sudhir Kumar Singh, which laid down that non-supply of a report does not invalidate an order if no prejudice is caused. The Tribunal concluded that the assessee was fully aware of the case against him and that there was no violation of principles of natural justice. The Tribunal dismissed the appeal, upholding the addition and the reassessment proceedings. Conclusion: The Tribunal upheld the initiation of reassessment proceedings under Section 148, the addition of ?25 lakh on merits, and found no violation of principles of natural justice. The appeal was dismissed.
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