2024 (1) TMI 205 - AT - Income Tax

Reopening of assessment u/s 147 - addition u/s 68 - information received from Investigation Wing, Kolkata that the assessee is a beneficiary of circuitous transaction of cash deposits through various layers and bank accounts and has received unaccounted money after layering of funds through bank channels of various non-existing and shell companies - HELD THAT - It is undisputed that the original return of income filed by the assessee was merely processed under section 143(1) of the Act and there was no scrutiny assessment of the return filed by the assessee and its books of accounts. Further, the only data available with the AO was the data provided along with the income tax return. Therefore, we are of the considered view that the information received subsequently from the Investigation Wing, Kolkata constitutes new and tangible material for initiating the reassessment proceedings in the case of the assessee, and on the basis of the aforesaid information, the AO initiated proceedings under section 147 of the Act and issued a notice under section 148 Therefore, if there is relevant material on the basis of which a reasonable person can form a requisite belief that income chargeable to tax has escaped assessment, then proceedings under section 147 of the Act can be validly initiated. In the present case, as noted above, on the basis of information received from the Investigation Wing, reassessment proceedings in the case of the assessee were initiated. Further, it is also well settled that the sufficiency or correctness of the material is not a thing to be considered at the stage of recording the reasons. As a result, we find no infirmity in the reassessment proceedings initiated by the AO under section 147 of the Act, and the same are upheld. Addition u/s 68 - Unaccounted money through various layers and bank accounts of non-existing and shell companies - We find that additions on the basis of similar allegations also came for consideration in another decision in ITO v/s Supergold Properties Private Limited 2020 (11) TMI 46 - ITAT MUMBAI wherein the addition made under section 68 was deleted by the coordinate bench of the Tribunal - We also find that in ITO v/s Nextgen Construction Private Limited 2020 (6) TMI 634 - ITAT MUMBAI assessee has discharged the primary onus to demonstrate fulfilment of primary ingredients of Sec.68 and it was incumbent upon revenue to dislodge the assessee s claim by bringing on record, cogent material to establish that the assessee s unaccounted money was routed in its books of account in the garb of unsecured loans. However, we are unable to find any such material except for the fact that additions were made merely on suspicious, conjectures and surmises. Therefore, no infirmity could be found, in the impugned order, in this regard. DR could neither bring any material on record to controvert the findings of the coordinate bench of the Tribunal rendered in a similar factual matrix in Nextgen Construction Private Limited (supra) and Supergold Properties Private Limited (supra) nor could bring any material on record to controvert the aforesaid distinction drawn by the assessee. Thus the impugned order passed by the learned CIT(A) is set aside and the addition made under section 68 of the Act is directed to be deleted. Assessee appeal is partly allowed.

Issues Involved:
1. Reopening of the assessment under Section 148.
2. Reliance on the decision of DCIT v. M/s Leena Power Tech Engineers Pvt Ltd.
3. Non-consideration of the decision in ITO v. M/s Super Gold Properties Ltd.
4. Addition of Rs. 1,50,00,000 under Section 68.
5. Treating Minaxi Suppliers Pvt Ltd as a shell company.
6. Proving the source of the source of the amount received under Section 68.
7. Consideration of the joint venture agreement with Minaxi Suppliers Pvt Ltd.
8. Leave to amend grounds of appeal.

Summary:

1. Reopening of the Assessment under Section 148:
The Tribunal upheld the reopening of the assessment under Section 148 of the Income Tax Act, 1961, based on new and tangible material received from the Investigation Wing, Kolkata. The information indicated that the assessee was a beneficiary of circuitous transactions involving unaccounted money. The Tribunal cited the Supreme Court's decision in ACIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd, affirming that the sufficiency or correctness of the material is not a concern at the stage of recording the reasons for reopening.

2. Reliance on the Decision of DCIT v. M/s Leena Power Tech Engineers Pvt Ltd:
The learned CIT(A) relied on the decision in DCIT v. M/s Leena Power Tech Engineers Pvt Ltd to uphold the addition of Rs. 1.50 crore under Section 68. However, the Tribunal found that the facts of the present case differed significantly from those in the Leena Power Tech Engineers case.

3. Non-Consideration of the Decision in ITO v. M/s Super Gold Properties Ltd:
The assessee argued that the decision in ITO v. M/s Super Gold Properties Ltd, which dealt with similar facts and was in favor of the taxpayer, was not considered by the CIT(A). The Tribunal noted this omission and found it significant.

4. Addition of Rs. 1,50,00,000 under Section 68:
The Tribunal found that the assessee had provided sufficient documentary evidence to prove the identity, genuineness, and creditworthiness of Minaxi Suppliers Pvt Ltd. The Tribunal cited several judicial precedents, including Lovely Exports P. Ltd and CIT v. Gagandeep Infrastructure Private Limited, to support the view that the assessee had discharged its primary onus under Section 68.

5. Treating Minaxi Suppliers Pvt Ltd as a Shell Company:
The Tribunal found no substantive evidence to support the AO's and CIT(A)'s conclusion that Minaxi Suppliers Pvt Ltd was a shell company. The assessee had provided sufficient documentation to prove the legitimacy of Minaxi Suppliers Pvt Ltd.

6. Proving the Source of the Source of Amount Received under Section 68:
The Tribunal reiterated that the requirement to prove the source of the source under Section 68 applies only from the assessment year 2013-14 onwards. Therefore, for the assessment year 2011-12, the assessee was not required to prove the source of the source once the primary onus was discharged.

7. Consideration of the Joint Venture Agreement with Minaxi Suppliers Pvt Ltd:
The Tribunal found that the joint venture agreement between the assessee and Minaxi Suppliers Pvt Ltd was a valid document and should not have been disregarded by the AO and CIT(A).

8. Leave to Amend Grounds of Appeal:
The Tribunal allowed the assessee the leave to add, amend, modify, or delete any grounds of appeal.

Conclusion:
The Tribunal set aside the impugned order passed by the CIT(A) and directed the deletion of the addition made under Section 68 of the Act. The appeal by the assessee was partly allowed.

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