2024 (12) TMI 37 - AT - Income Tax

Validity of reopening u/s. 147 - issuance of notice u/s. 148 beyond the period of four years - addition towards share application money u/s. 68 - HELD THAT - From the perusal of the aforesaid list of companies and the companies from whom assessee had received share application money, it can be seen that nowhere these companies have been mentioned by Shri Pravin Jain that any of the 6 entities were managed and controlled by him. Thus, the very premise of the ld. AO while recording the reasons is based on wrong assumption of facts. It is a very well settled law that ld. AO has acquired jurisdiction based on valid reasons and material and information referred to in the reasons recorded should have live link nexus with the income escaping assessment. If there is no such material and information relevant to the assessee, then ld. AO cannot reopen the case based on incorrect assumption of facts recorded and the reasons recorded. Reasons recorded by the AO do not clothe the him with the jurisdiction to reopen the assessment u/s 147 for the second time and accordingly, the reason recorded as well as the notice issued u/s. 148 is invalid and accordingly, same is quashed. Thus, the entire re-assessment order is quashed. Appeal of the assessee is allowed on jurisdictional issue.

Summary

Issues:
Validity of reopening u/s. 147 and issuance of notice u/s. 148 beyond four years, Addition of Rs. 99,00,000 towards share application money u/s. 68.

Analysis:
The assessee challenged the validity of the reopening u/s. 147 and issuance of notice u/s. 148 beyond the four-year period, along with the addition of Rs. 99,00,000 towards share application money u/s. 68. The return of income was filed on 29/09/2009, and the assessment was completed u/s. 143(3) on 23/12/2011. Subsequently, notice u/s. 148 was issued on 29/01/2013, and a second reopening was done on 30/03/2016 based on information received regarding accommodation entry amounting to Rs. 20,00,000. The AO added Rs. 99,00,000 towards share application money from six entities controlled by Pravin Jain group, considering it as an accommodation entry. The CIT(A) upheld this addition. The assessee contended that the reopening was based on wrong assumptions, as the companies providing share application money were not linked to Pravin Jain group.

The AO's contention was that since the assessee failed to prove the genuineness and creditworthiness of the parties providing share application money, the reopening was valid. However, the Tribunal found that there was a lack of correlation between the reasons recorded and the actual facts. The reasons for reopening mentioned an accommodation entry of Rs. 20,00,000, but the actual entries in the books showed share application money from different entities totaling Rs. 99,00,000. The Tribunal noted that the AO did not specify the nature of the alleged accommodation entry or its connection to Pravin Jain group. The Tribunal emphasized that for a valid reopening, there must be a live link nexus between the information and income escaping assessment.

The Tribunal further highlighted that the list of companies provided by Pravin Jain did not include the entities from which the share application money was received. This discrepancy indicated a flawed premise for the reopening. The Tribunal concluded that the reasons recorded did not confer jurisdiction to reopen the assessment u/s. 147 for the second time. Consequently, the Tribunal quashed the reassessment order based on the invalid reasons recorded and notice issued u/s. 148. Ultimately, the appeal of the assessee was allowed on the jurisdictional issue.