2022 (12) TMI 178 - AT - Income Tax

Reopening assessment u/s 148 - allegation of failure of the assessee to disclose the material for assessment - HELD THAT - All the issues were examined in the original assessment proceedings by the AO by issuing notice to the assessee along with questionnaire as well as to the investors u/s 133(6) of the Act. We note that both the assessee as well the investors have filed the details/information as called for by the AO and thereafter the AO made an addition of Rs. 2,57,00,000/- to the income of the assessee in respect of share premium and share capital. Therefore the assessee cannot be attributed to have not disclosed any material fact which has led to escapement of income. In our considered view, the AO invalidly reopened the assessment u/s 147 as there was no valid reason to re-open the assessment u/s 147 of the Act. Accordingly the reassessment proceedings is held to be invalid in law and quashed. Unexplained amount of share capital and share premium - Assessee has issued shares to 5 parties who were allotted equity shares on 31.03.2012 and the said amounts were also paid through bank RTGS and all parties in response to notices issued u/s 133(6) confirmed the investments. CIT(A) misconstrued the facts in respect of two investors as stated above and wrongly noted the investments were taken two times in the table and this has attributed to the difference of Rs. 33,00,000/-.Therefore we find that the addition partly confirmed by the CIT(A) is without any basis. We have even examined the balance-sheet of both the investors placed in the paper book and found that the investments shown by the parties at sr. 3 was Rs. 55,00,000/- whereas investments at Sr. 4 5 was Rs. 30,00,000/- which was taken double the amount by taking the investment amount of Rs. 30,00,000/- two times at sr. 4 and 5. Considering these facts, we hold that even on merit that the addition was wrongly sustained by the Ld. CIT(A) upon wrong appreciation of facts on record. Accordingly the appeal of the assessee is allowed. Unexplained cash credit u/s 68 - HELD THAT - We are of the considered view that addition cannot be made on the ground that the investors were not personally produced or did not comply with the summons, when the evidences qua the transactions were filed before the AO. Therefore, considering the facts of the case in the light of the aforesaid decisions, we are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the addition. Appeal of assessee allowed.

Summary

Issues Involved:
1. Jurisdictional Issue: Validity of reopening assessment under Section 148 of the Income Tax Act, 1961.
2. Merit of the Reassessment: Legitimacy of the additions made on account of share capital and share premium under Section 68 of the Income Tax Act, 1961.

Detailed Analysis:

1. Jurisdictional Issue: Validity of Reopening Assessment under Section 148

Summary: The assessee challenged the reopening of the assessment under Section 148, arguing it was "bad in law" as the reasons recorded did not allege any failure on the part of the assessee to disclose material facts. The original assessment was completed under Section 143(3) on 26.03.2015 with an addition of Rs. 2,57,00,000/- for share capital and share premium. The case was reopened after four years based on information from the DDIT(Inv)-2(2), Kolkata, indicating that the assessee received Rs. 2,73,00,000/- from shell companies during FY 2011-12.

Tribunal's Findings:
- The Tribunal noted that the original assessment had already examined the share capital and share premium issues.
- The reopening was invalid as there was no indication of income escaping assessment due to non-disclosure of material facts by the assessee.
- The Tribunal held that the reopening under Section 147 was invalid and quashed the reassessment proceedings.

Key Judgment: The Tribunal relied on the first proviso to Section 147, which allows reopening after four years only if there is a failure to disclose material facts. Since all details were examined in the original assessment, the reopening was deemed invalid.

2. Merit of the Reassessment: Legitimacy of Additions under Section 68

Summary: On merit, the reassessment added Rs. 2,73,00,000/- for share capital and share premium, which was Rs. 33,00,000/- more than the original addition. The CIT(A) deleted Rs. 2,57,00,000/- as it was already added in the original assessment but sustained Rs. 33,00,000/- due to discrepancies in amounts received from investors.

Tribunal's Findings:
- The Tribunal found that all parties had confirmed transactions in response to notices under Section 133(6).
- The CIT(A) had wrongly noted investments twice, leading to the discrepancy of Rs. 33,00,000/-.
- On merit, the Tribunal held that the addition was without basis as all transactions were adequately explained and confirmed by the investors.

Key Judgment: The Tribunal emphasized that the addition cannot be made merely because the share subscribers were not produced before the AO when all necessary evidence was available. The Tribunal cited several judgments supporting the principle that once the assessee discharges the initial burden of proof, the onus shifts to the department to further verify the genuineness of the transactions.

Supporting Cases:
- M/s Anis Ahmad And Sons vs. CIT(A): The Supreme Court held that non-appearance of witnesses should not lead to adverse inference if satisfactory evidence is provided.
- H.R. Mehta vs. ACIT: The Bombay High Court stated that once the assessee identifies the source, the burden shifts to the revenue to verify the genuineness.
- PCIT-9, Kolkata vs. Sree Leathers: The Calcutta High Court held that the AO must record reasons for rejecting the evidence provided by the assessee.
- Crystal Networks (P) Ltd vs. CIT: The Calcutta High Court emphasized that non-appearance of creditors should not lead to an adverse inference if documentary evidence supports the transactions.

Conclusion: The Tribunal allowed the appeals, quashing the reassessment proceedings and directing the AO to delete the additions made under Section 68.

Order Pronounced: The order was pronounced in the open court on 28th November 2022.