2015 (10) TMI 1514 - AT - Income Tax

Tribunal upholds assessment reopening, deletes Rs. 41,25,550 addition, reverses disallowance of business loss

M/s. Yamuna Estate Pvt. Ltd. Versus Income Tax Officer, Ward - 8 (3) (4), Mumbai

M/s. Yamuna Estate Pvt. Ltd. Versus Income Tax Officer, Ward - 8 (3) (4), Mumbai - [2016] 45 ITR (Trib) 517 Issues Involved:1. Reopening of assessment under section 147 instead of section 153C.2. Addition of Rs. 41,25,550/- under section 68 as unexplained credits.3. Disallowance of set off of business loss by applying explanation to section 73(4).4. Validity of assessment framed under section 147 without jurisdiction due to lack of sanction from authorities as per section 151.Detailed Analysis:1. Reopening of Assessment under Section 147 Instead of Section 153C:The assessee contended that the reopening should have been done under section 153C, not section 147, as the search was conducted on a third party, and no documents belonging to the assessee were found. The Tribunal held that the documents found during the search belonged to the searched person and not the assessee. The name of the assessee appeared in the list of persons provided accommodation entries by the searched person. The Tribunal cited the Gujarat High Court's decision in Vijaybhai N. Chandrani vs. ACIT and the Delhi High Court's decision in Pepsico India Holding (P.) Ltd. vs. ACIT, which clarified that section 153C applies only when seized documents belong to the other person. Thus, the reopening under section 147 was justified.2. Addition of Rs. 41,25,550/- Under Section 68 as Unexplained Credits:The assessee argued that the transactions were genuine, supported by contract notes, purchase and sale invoices, and payments received through cheques. The CIT(A) upheld the addition as the assessee failed to produce Mr. Mukesh Chokshi, who allegedly provided accommodation entries. The Tribunal noted that the AO did not raise any queries on the documents submitted by the assessee and relied solely on the general statement of Mr. Chokshi. The Tribunal emphasized that the AO had the power to summon Mr. Chokshi under section 131 but did not exercise it. The Tribunal referred to precedents where similar additions were deleted due to lack of direct evidence against the assessee. Consequently, the addition under section 68 was deleted.3. Disallowance of Set Off of Business Loss by Applying Explanation to Section 73(4):This issue was consequential to the addition made under section 68. Since the Tribunal deleted the addition, the disallowance of set off of business loss was also decided in favor of the assessee.4. Validity of Assessment Framed Under Section 147 Without Jurisdiction:The assessee claimed that no sanction was obtained from the authorities as required by section 151. The Tribunal observed that this issue was not raised before the lower authorities and lacked specific evidence. Therefore, the Tribunal did not find merit in this contention.Conclusion:The Tribunal concluded that the reopening under section 147 was valid, but the addition under section 68 was unwarranted due to lack of corroborative evidence. The disallowance of set off of business loss was reversed, and the appeal was allowed in part.