2016 (4) TMI 1438 - AT - Income Tax

Tribunal quashes assessment citing lack of proper evaluation of evidence and invalid reopening

Kostub Investment Ltd. Versus DCIT, Circle-4 (1), New Delhi

The tribunal quashed the assessment due to the invalidity of the reopening, citing lack of proper application of mind by the Assessing Officer and absence ... Reopening of assessment u/s 147 - information received from the Investigation Wing of the Department that there was credit shown in the bank account of the assessee coming from the account of Rubik Exports Ltd. - HELD THAT:- Admittedly, the material and statements of some persons on the basis of which the Investigation Wing of the Department claimed to have arrived at a conclusion that the assessee had taken accommodation entry, despite request of the assessee made to the AO, were not supplied to the assessee nor any opportunity to cross examine those persons whose statements were used against the assessee was afforded to the assessee. Even approval of the competent officer has not been obtained as a token of his satisfaction on the reasons recorded by the AO for initiation of reopening proceedings in the manner prescribed under sec. 151 - We thus respectfully following the ratios laid down in the above cited recent decisions in the cases of G & G Pharma India Ltd. [2015 (10) TMI 754 - DELHI HIGH COURT] and Signatures Hotel P. Ltd. [2011 (7) TMI 361 - DELHI HIGH COURT] hold that initiation of reopening proceedings in the present case, merely based on the vague information received from the Investigation Wing of the Department, without application of mind by the Assessing Officer thereupon and in absence of obtaining of approval in the manner provided u/s 151 of the Act, was not valid and the assessment in question framed in furtherance thereto is held void-ab-initio and is accordingly quashed. The ground Nos. 1.1 and 2 are thus allowed. Addition u/s 68 - We find substance in the above submission of the learned senior counsel that by furnishing all the primary evidences like confirmation of share applicant, a public limited company containing their address and PAN, their balance sheet and profit and loss account for the assessment year under consideration, their income-tax return acknowledgement and with this admitted position that the share application money of Rs. 5 lacs has been paid by the share applicant to the assessee through account payee cheque, the assessee had discharged its primary onus to establish the genuineness of the claimed receipt of share application money and the onus was thereafter shifted upon the AO to rebut the same. AO instead has made the addition merely on the basis of information received from the Investigation Wing of the Department alleging that the share applicant is entry provider, summons issued to the share applicant returned unserved and an amount was deposited in the account of the share applicant immediately before issuing cheque for the amount to the assessee. In absence of such discharging of onus shifted upon the AO, AO was not justified in making the addition in question and the Learned CIT(A) without appreciating the above material facts has also erred in sustaining the said addition. We thus while setting aside orders of the authorities below in this regard direct the AO to delete the addition questioned in ground No.1. Issues Involved:1. Validity of reopening of assessment.2. Addition of Rs. 5 lakhs to income on account of unexplained share application money.Validity of Reopening of Assessment:The assessee challenged the first appellate order citing the invalidity of reopening the assessment. The Assessing Officer initiated the reopening based on information from the Investigation Wing that the assessee was involved with an accommodation entry operator. The Senior Counsel argued that the reasons for reopening were not approved by the Joint CIT and were solely based on vague information without proper verification. The assessee provided evidence of the genuineness of the share application money received, including confirmations, financial documents, and requests for cross-examination which were denied. The tribunal held that the reopening was not valid as it lacked proper application of mind by the Assessing Officer and approval as required under the law. Citing relevant case laws, the tribunal quashed the assessment as void-ab-initio.Addition of Rs. 5 Lakhs - Unexplained Share Application Money:The addition of Rs. 5 lakhs to the income of the assessee was contested on the grounds that the assessee had provided substantial evidence to prove the genuineness of the share application money received. The Senior Counsel presented confirmations, financial statements, and other relevant documents to establish the legitimacy of the transaction. It was noted that the share applicant was a public limited company with a significant turnover. The tribunal found that the assessee had fulfilled its burden of proof by providing primary evidence, shifting the onus to the Assessing Officer. However, the addition was made solely based on information from the Investigation Wing without proper rebuttal of the evidence provided by the assessee. The tribunal directed the Assessing Officer to delete the addition of Rs. 5 lakhs, as the authorities below had erred in sustaining it without proper evaluation of the evidence presented.In conclusion, the tribunal allowed the appeal, quashing the assessment due to the invalidity of the reopening and directing the deletion of the addition of Rs. 5 lakhs to the assessee's income.