2017 (6) TMI 1320 - AT - Income Tax

Tribunal upholds reassessment validity under Income Tax Act, dismisses objections.

M/s. Hopewin Admark & Counseltancy Services (Pvt.) Ltd. Versus Income Tax Officer, Ward -12 (4), New Delhi

M/s. Hopewin Admark & Counseltancy Services (Pvt.) Ltd. Versus Income Tax Officer, Ward -12 (4), New Delhi - TMI Issues Involved:1. Validity of reassessment proceedings under sections 147 to 151 of the Income Tax Act.2. Non-disposal of objections raised by the assessee.3. Violation of natural justice due to lack of corroboration, cross-examination, and proper show cause notice.4. Legitimacy of additions under section 68 treating unexplained income.5. Legality of consequent demands of Income Tax, interest, and penalties.Issue-wise Detailed Analysis:1. Validity of Reassessment Proceedings:The assessee challenged the reassessment proceedings on the grounds that the reasons recorded were vague, lacked application of mind, and were without necessary approval from the Joint Commissioner of Income Tax. The Tribunal found that the Assessing Officer (AO) had recorded detailed reasons, including statements from the Director and her son admitting involvement in providing accommodation entries. The Tribunal held that the reasons were neither vague nor recorded in a mechanical manner and were with due application of mind and necessary approval from the Additional CIT. Therefore, the reassessment proceedings were valid under sections 147 to 151 of the Act.2. Non-disposal of Objections:The assessee contended that objections to the reassessment proceedings were not disposed of by the AO. The Tribunal found that the objections raised by the assessee were general and not specific. Furthermore, the objections were raised at the fag end of the assessment period, and no effective objections were filed as per the decision of the Hon’ble Supreme Court in GKN Driveshaft India Ltd. vs. ITO. Hence, the ground challenging the non-disposal of objections was dismissed.3. Violation of Natural Justice:The assessee argued that the reassessment order was passed in violation of natural justice, as incriminating material was not provided for rebuttal, and no cross-examination was allowed. The Tribunal noted that the statements relied upon by the AO were from the Director and the authorized signatory of the assessee company, who admitted to providing accommodation entries. Since these were not third-party statements, the question of cross-examination did not arise. Moreover, the assessee failed to discharge its onus under section 68 of the Act by not providing sufficient evidence of identity, creditworthiness, and genuineness of the transactions. Therefore, the ground of violation of natural justice was dismissed.4. Legitimacy of Additions under Section 68:The assessee claimed that the AO did not make any inquiry into the transactions and rejected the explanations without assigning any reason. The Tribunal observed that the assessee failed to provide evidence supporting the identity, creditworthiness, and genuineness of the transactions. The Tribunal restored the issue to the file of the AO for deciding afresh, directing the assessee to produce all relevant documents and allowing the AO to carry out necessary inquiries.5. Legality of Consequent Demands:The assessee challenged the legality of consequent demands of Income Tax, interest, and penalties. Given that the Tribunal restored the issue of additions under section 68 for fresh consideration, the legality of the consequent demands would depend on the outcome of the reassessment proceedings.Separate Judgments:The Tribunal delivered a consolidated order for both assessment years 2000-01 and 2001-02, addressing identical issues except for the amount of addition. The findings and directions for both years were consistent, resulting in the appeals being allowed partly for statistical purposes.