2008 (4) TMI 757 - AT - Income Tax

Appeal dismissed, confirming reassessment under section 147 & addition of unexplained cash credit. Tribunal upholds decision.

Ekta Agro Industries Ltd. Versus Income Tax Officer

The appeal was dismissed, confirming the validity of the reassessment under section 147 and the addition of Rs. 15,00,000 under section 68 as unexplained ... - Issues Involved:1. Reopening of assessment u/s 147.2. Addition of Rs. 15,00,000 u/s 68 in respect of share capital received from two companies.Summary:Issue 1: Reopening of Assessment u/s 147The appellant challenged the reopening of the assessment u/s 147, arguing that it was 'bad in law.' The original assessment was completed u/s 143(3), and the reassessment was initiated based on information from the Director of IT (Inv.) indicating that the appellant was involved in bogus accommodation entries. The AO recorded reasons for reopening, citing specific transactions with M/s Hallmark Healthcare Ltd. and M/s Finorg Chemicals Ltd., which were identified as bogus. The appellant contended that there was no valid material to form a 'reason to believe' that income had escaped assessment, relying on the decision in CIT vs. Gulati Industrial Fabrication (P) Ltd. However, the Departmental Representative argued that the reopening was valid, referencing the case of Highgain Finvest (P) Ltd., where similar circumstances justified reassessment. The Tribunal upheld the validity of the reassessment, noting that the AO had specific and reliable information to form a belief that income had escaped assessment.Issue 2: Addition of Rs. 15,00,000 u/s 68The appellant contested the addition of Rs. 15,00,000 u/s 68, arguing that the amount was received as share capital from M/s Hallmark Healthcare Ltd. and M/s Finorg Chemicals Ltd., and thus could not be added as unexplained cash credit. The AO found that the appellant failed to prove the identity, creditworthiness, and genuineness of the transactions, noting that equivalent cash was deposited in the bank accounts of the two companies before issuing cheques. The CIT(A) upheld the additions, and the Tribunal agreed, stating that the appellant did not furnish any details to prove the genuineness of the cash credits. The Tribunal referenced the Full Bench decision in CIT vs. Sophia Finance Ltd., which allows the AO to scrutinize the genuineness of cash credits even in the form of share capital. Consequently, the addition of Rs. 15,00,000 was sustained.Conclusion:The appeal was dismissed, affirming the validity of the reassessment u/s 147 and the addition of Rs. 15,00,000 u/s 68.