2022 (12) TMI 539 - AT - Income Tax

Reopening of assessment u/s 147 - necessity of serving notice u/s 143(2) - reliance on borrowed information or independent application of mind - information provided by the Joint Director of Income-tax (Inv.),Unit-1, New Delhi who carried out the search and seizure Operation u/s 132 - Addition u/s 68 - HELD THAT - We note that satisfaction recorded by the Income Tax Authority is in accordance with law. We have also gone through the online approval given by the CIT and noted that approval given by CIT is in accordance with law, therefore plea taken by the ld Counsel to the effect that approval was not given in accordance with law, hence it is not acceptable. Notice under section 143(2) of the Act, has been served on the assessee. The ld Counsel provided vague information before the Bench and contended that notice under section 143(3) of the Act, was not served on the assessee. Hence, we reject the contention raised by ld Counsel. Whether reasons recorded by the assessing officer is defective and original assessment was framed under section 143(3)? - We have gone through the reasons recorded by the Assessing Officer and noted that assessing officer has recorded the reasons after getting the information from the Directorate of Information New Delhi and applied his own mind in respect of the information received by him. The assessing officer examined the information received from the Directorate of Information and satisfied himself and applied his own mind to issue notice under section 147/148 of the Act. Therefore, assessing officer did not accept the information from the Directorate of Information blindly and without application of mind. We note that in the reasons recorded the figure mentioned at Rs.1,57,00,055/- is part of the total amount of Rs.2,40,00,000/-, therefore, reasons recorded by the assessing officer can not vitiate on account of arithmetical figure. Thus, the reasons recorded, by the Assessing Officer, are prima facie in accordance with law. In the reasons so recorded, there should not be any final adjudication of the issue involved, by the assessing officer, in fact the reasons are recorded prima facie as per the scheme of the Act. Therefore, we do not find any infirmity in the order of ld. CIT(A) in holding that reassessment proceedings are in accordance with law. Assessment was reopened after a period of four years and assessee has disclosed fully and truly all material facts in the original assessment u/s 143(3) of the Act, hence reopening is not valid? - As observed earlier not only there existed new information with the AO from the credible sources, but also he had applied his mind and recorded the conclusion that the assessee is engaged in accommodation entries, which were non-genuine and therefore bogus, (clearly meaning that what was disclosed in original assessment was false and untruthful). The requirements of section 147 r.w.s. 148 have clearly been met; and the reopening is held justified and legal. The Ld Counsel s contention that the report/information of the Directorate (Inv) of Income Tax Department, cannot constitute a reason to believe within the meaning of section 147 is misplaced in law and facts. As held in the case of Pushpak Bullion (P) Ltd 2017 (8) TMI 961 - GUJARAT HIGH COURT wherein the court held that the AO had tangible materials at his command to form a bonafide belief on the basis of the information received from Investigation Wing. At the stage of issuance of notice the only question is whether there was the relevant material on which a reasonable person could have formed a reasonable belief. - Decided against assessee. Addition u/s 68 - HELD THAT - We have observed from the above findings of CIT(A), that assessee has not furnished the important documents and evidences before the lower authorities for their examination and conclusion on the factual position. We note that assessee did not submit copy of the bank account in respect of certain parties, as noted by ld CIT(A) above, therefore loan transactions stood unverified. We have observed from the order of ld. CIT(A) that assessee-trust has failed to furnish certain evidences and documents before the lower authorities, as noted by us above, hence we are of the view that one more opportunity should be given to the assessee-trust to plead his case and furnish these documents and details before the ld. CIT(A).Therefore, we deem it fit and proper to set aside the order of the ld. CIT(A) and remit the matter back to the file of the ld. CIT(A) to adjudicate the issue afresh on merits. For statistical purposes, ground No. 2 and 4 are allowed. Disallowance of claim of depreciation and was not allowed set off against income added - HELD THAT - We have heard both the parties and note that depreciation claim of the assessee and claim of set off, if any, should be allowed as per the provisions of law, therefore, we direct the ld. CIT(A) to examine the claim of the assessee and adjudicate the issue in accordance with law. The ground no. 5 raised by the assessee is allowed for statistical purposes.

Issues Involved:
1. Validity of reassessment proceedings under section 147/148 of the Income Tax Act.
2. Confirmation of additions of cash credits under section 68.
3. Addition made beyond the recorded reasons for reopening without fresh information.
4. Denial of benefit of the amount added for application of income.
5. Non-allowance of depreciation and set-off against added income.

Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 147/148:
The assessee challenged the reassessment proceedings on the grounds that the original assessment was completed under section 143(3) and that the reasons recorded by the Assessing Officer (AO) were defective. The assessee argued that the approval for initiating reassessment was given by the Joint Commissioner of Income Tax (JCIT) instead of the Commissioner of Income Tax (CIT), and that no notice under section 143(2) was served.

The tribunal noted that the satisfaction recorded by the Income Tax Authority was in accordance with the law. The approval for reassessment was given by the CIT through an online system, and the notice under section 143(2) was served on time. The tribunal rejected the contention that the reasons recorded by the AO were defective, as the AO had applied his mind to the information received from the Directorate of Information and was satisfied that there was a reason to believe that income had escaped assessment. The tribunal also noted that the reopening of assessment after four years was valid as per the Supreme Court's decision in Phul Chand Bajrang Lal and the Gujarat High Court's decisions in Dishman Pharmaceuticals and Chemicals Ltd. and other cases.

2. Confirmation of Additions of Cash Credits under Section 68:
The AO made an addition of Rs.2,40,00,000/- under section 68, treating the unsecured loans received by the assessee trust from nine different companies as bogus accommodation entries provided by Jain Brothers. The AO relied on the information from the Investigation Wing and the modus operandi of the Jain Brothers in providing accommodation entries. The assessee's contention that the transactions were genuine because they were made through account payee cheques and TDS was deducted was rejected.

The tribunal upheld the AO's findings, noting that the assessee failed to provide satisfactory explanations and supporting documents to prove the genuineness of the transactions. The tribunal emphasized that mere payment by account payee cheque does not make a non-genuine transaction genuine, citing Precision Finance Pvt. Ltd. vs. CIT.

3. Addition Made Beyond the Recorded Reasons for Reopening without Fresh Information:
The assessee argued that the AO exceeded his authority by making an addition of Rs.2,40,00,000/- instead of Rs.1,57,00,055/- mentioned in the reasons for reopening. The tribunal noted that the issue was obtaining accommodation entries during the year under consideration, and the AO had examined the core issue in depth. The tribunal found that the reasons recorded by the AO were valid and did not vitiate the reassessment proceedings.

4. Denial of Benefit of the Amount Added for Application of Income:
The assessee contended that the amount added should be considered for the application of income. The tribunal directed the CIT(A) to re-examine the issue and adjudicate it afresh on merits, as the assessee had not furnished all necessary documents and evidences before the lower authorities.

5. Non-Allowance of Depreciation and Set-Off against Added Income:
The assessee argued that the claim of depreciation and set-off against the added income was not allowed. The tribunal directed the CIT(A) to examine the claim of depreciation and set-off as per the provisions of law and adjudicate the issue accordingly.

Conclusion:
The tribunal dismissed the grounds related to the validity of reassessment proceedings and the confirmation of additions under section 68. However, it allowed the grounds related to the denial of benefit of the amount added for application of income and the non-allowance of depreciation and set-off for statistical purposes, directing the CIT(A) to re-examine and adjudicate these issues afresh. The appeal was partly allowed for statistical purposes.

← Previous Next →