2015 (7) TMI 1305 - AT - Income Tax

Tribunal upholds income reassessment under Section 148 of Income Tax Act.

Sh. Ishwar Dass Garg Versus The A.C.I.T., Circle V, Ludhiana.

Sh. Ishwar Dass Garg Versus The A.C.I.T., Circle V, Ludhiana. - TMI Issues Involved:1. Validity of reopening the case under Section 148 of the Income Tax Act, 1961.2. Whether the reassessment proceedings were initiated without independent application of mind by the Assessing Officer.3. Confirmation of addition of Rs. 10,02,500 towards the income of the assessee.Detailed Analysis:1. Validity of Reopening the Case under Section 148:The assessee challenged the validity of reopening the assessment under Section 147/148 r.w.s. 143(3) of the Income Tax Act, 1961. The original return was processed under Section 143(1), and subsequently, based on information from the Director of Investigation, proceedings under Section 147 were initiated, and notice under Section 148 was issued. The Assessing Officer formed an opinion that the assessee's income to the extent of Rs. 10,02,500 had escaped assessment, leading to the issuance of the notice.The CIT (Appeals) upheld the reopening, stating that the AO had applied his mind to the information received and had reasons to believe that income had escaped assessment. The CIT (Appeals) cited various case laws, including the decision in Money Growth Investment & Consultants (P) Ltd. v. ITO, which supported the validity of the notice under Section 148 based on information received from the Investigation Wing.The Tribunal referenced the decision in Ms. Sushila Singla Vs. ACIT, where similar facts were present, and upheld the reopening of the assessment. The Tribunal reiterated that at the stage of issuing notice, the AO needs to have a prima facie reason to believe that income has escaped assessment, not conclusive proof. The Tribunal found that the information received by the AO provided a live link or nexus to the formation of the belief that income had escaped assessment.2. Independent Application of Mind by the Assessing Officer:The assessee argued that there was no independent application of mind by the AO, which is a requirement for reopening the case under Section 148. The CIT (Appeals) dismissed this contention, stating that the AO had compared the information received with the return of income and had reasons to believe that income had escaped assessment. The Tribunal upheld this view, citing that the AO had relevant material to form a prima facie belief, and the adequacy of the AO's satisfaction is not justiciable.3. Confirmation of Addition of Rs. 10,02,500:The assessee challenged the addition of Rs. 10,02,500, allegedly borrowed from S/Shri Vipin Kumar and Ashok Kumar Vindal. The CIT (Appeals) confirmed the addition, stating that the assessee failed to establish the genuineness of the transactions and the creditworthiness of the creditors. The Tribunal upheld this decision, noting that the assessee did not provide relevant evidence for the assessment year 2002-03 to prove the creditworthiness of the creditors and the genuineness of the transactions.The Tribunal emphasized that the assessee must prove the identity of the creditor, the capacity of the creditor to advance money, and the genuineness of the transaction. The documents submitted by the assessee pertained to the previous assessment year and did not establish the creditworthiness of the creditors for the relevant assessment year. The Tribunal concluded that the assessee failed to discharge the onus of proving the genuineness of the transactions and the creditworthiness of the creditors.Conclusion:The Tribunal dismissed the appeal, upholding the validity of the reopening of the assessment and the addition of Rs. 10,02,500 to the income of the assessee. The Tribunal found that the AO had a prima facie reason to believe that income had escaped assessment based on credible information and that the assessee failed to prove the genuineness of the transactions and the creditworthiness of the creditors.