2022 (5) TMI 500 - AT - Income Tax

Validity of reopening of assessment u/s 147 - Eligibility of reason to believe - bogus accommodation entry - HELD THAT - We fully agree with learned CIT(A) that the Assessing Officer was in receipt of tangible material from the reliable source of Investigation Wing of the Income Tax Department. Information so received had live link with the reason to believe that income has escaped assessment. The reliance by learned CIT(A) appears on the decision of Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd. 2007 (5) TMI 197 - SUPREME COURT is fully applicable. Hence, we do not find any infirmity in the order of learned CIT(A). Addition u/s 68 - As regards the merits of the case we note that consequent upon information that the assessee has engaged in obtaining bogus accommodation entry the tune of Rs. 3.10 crore, assessee has except for denial not provided any cogent material to respond to the query raised in this regard. Assessee has not submitted the relevant details called for. The assessing officer has noted that assessee has wanted time to provide the necessary details but had failed to do so despite repeated notices. The learned CIT(A) has also given the finding that assessee s denial that the transaction was not entered cannot be accepted as assessee has failed to submit full bank account and submitted only part of Bank account. We find learned CIT(A) is correct in holding that when the assessee has been found to be engaged in bogus accommodation entry by investigation wing and assessee simply denies the same without submitting complete details of bank statement assessee's plea has no legs to stand. In this view of the matter we do not find any infirmity in the orders of authorities below. - Decided against assessee.

Issues Involved:
1. Validity of reopening of assessment under Section 147 of the Income Tax Act.
2. Addition of Rs. 3,10,00,000/- made by the Assessing Officer.
3. Allegation of inexistent facts for the addition.
4. Lack of material evidence in the appellant's assessment records.
5. Reliance on unverified communication for the addition.
6. Failure to provide documentary evidence to support the appellant's explanation.
7. Failure to produce involved parties before the Assessing Officer.

Detailed Analysis:

1. Validity of Reopening of Assessment under Section 147:
The appellant challenged the reopening of the assessment under Section 147, arguing that the CIT(A) erred in upholding its validity. The CIT(A) held that the Assessing Officer (AO) had "tangible material from a reliable source," specifically the Investigation Wing of the Income Tax Department, which indicated that the appellant had received accommodation entries from bogus entities. The CIT(A) referenced the Supreme Court decision in CIT(A) vs. Rajesh Jhaveri Stock Brokers P. Ltd, which clarified that at the stage of issuing notice under Section 148, the AO only needs a "reason to believe" that income has escaped assessment, not conclusive proof. The procedural requirements, including serving notice and recording reasons, were duly followed. Therefore, the reopening of the assessment was upheld as valid.

2. Addition of Rs. 3,10,00,000/- by the Assessing Officer:
The appellant contested the addition of Rs. 3,10,00,000/- made by the AO, claiming it was based on inexistent facts. The AO noted that the appellant had received accommodation entries from entities like Empower Industries India Ltd. and Shri Ganesh Spinners Ltd. The AO issued notices under Sections 143(2) and 142(1) to the appellant, who failed to provide satisfactory explanations or documents. The CIT(A) confirmed the addition, noting that the appellant did not submit the full bank account statements and failed to counter the findings from the Investigation Wing.

3. Allegation of Inexistent Facts for the Addition:
The appellant argued that the addition was based on inexistent facts. However, the AO and CIT(A) found that the appellant had indeed received accommodation entries, supported by ledger confirmations and bank statements from Empower Industries India Ltd. The appellant's failure to provide complete bank statements and other relevant documents further weakened their case.

4. Lack of Material Evidence in the Appellant's Assessment Records:
The appellant contended that the addition was made without any material evidence in their assessment records. The AO, however, had tangible evidence from the Investigation Wing and confirmed transactions through bank statements and ledger accounts from the involved entities. The CIT(A) upheld that the AO had sufficient material to justify the addition.

5. Reliance on Unverified Communication for the Addition:
The appellant claimed that the addition was based on unverified communication. The AO had received information from the Investigation Wing and verified it through bank statements and ledger accounts. The CIT(A) noted that the AO's reliance on this information was justified and that the appellant failed to provide any contradictory evidence.

6. Failure to Provide Documentary Evidence to Support the Appellant's Explanation:
The appellant failed to provide documentary evidence such as bank statements, financial statements, and confirmations from the involved entities to support their explanation. The CIT(A) noted that the appellant did not produce these documents despite being given multiple opportunities, thereby justifying the addition under Section 68 of the Income Tax Act.

7. Failure to Produce Involved Parties Before the Assessing Officer:
The appellant did not produce the involved parties before the AO for verification. The CIT(A) highlighted that the appellant was aware of the tangible materials against them but failed to provide any credible evidence or produce the parties involved. This failure further justified the addition made by the AO.

Conclusion:
The appeal by the assessee was dismissed. The Tribunal found no infirmity in the orders of the CIT(A) and AO, upholding the validity of the reopening of the assessment and the addition of Rs. 3,10,00,000/-. The appellant's failure to provide complete and relevant evidence, coupled with the tangible material from the Investigation Wing, justified the actions taken by the tax authorities.

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