2023 (10) TMI 1391 - AT - Income Tax

Reassessment proceedings under Section 147 quashed for impermissible change of opinion on share capital transactions

Artex Property Consultants (P) Ltd. Versus ITO, Ward-4 (3), Kolkata.

ITAT Kolkata quashed reassessment proceedings u/s 147 where AO added 1% commission income on share capital raised by assessee for facilitating ... Reopening of assessment u/s 147 - addition of a sum @1% of the share capital raised by the assessee holding the same to be the commission income earned by the assessee by facilitating accommodation entry - HELD THAT:- We notice that the assessee declared loss in the return of income which was subjected to scrutiny proceedings and the same were completed u/s 143(3). Perusal of the assessment order dated 25.03.2014 indicates that the assessee was asked for various information u/s 142(1) of the Act and details as called for were submitted and produced by the assessee. The order also indicates that notices u/s 133(6) of the Act were issued to all the investors who have paid the share capital and share premium to the assessee company towards allotment of 2,50,125 equity shares. After examining all these details and making a disallowance u/s 14A of the Act income assessed at Rs. NIL. We observe that thereafter based on the information received from DDIT (Inv.) it was found that the assessee is one of the beneficiaries of an alleged accommodation entry of Rs. 81 Lakh from M/s. Ashtavinayak Commodity Trade Pvt. Ltd. Based on this information re-assessment proceedings were carried out. AO did not make any addition for the alleged accommodation entry received from M/s. Ashtavinayak Commodity Trade Pvt. Ltd. AO made an addition for commission income at the rate of 1% of the total amount of share capital and share premium received during the year. The facts narrated above clearly indicates that ld. AO has not made any addition on the basis of the reasons for which the re-assessment proceedings were carried out and even though in the regular assessment proceedings complete details of the amount received towards share capital and share premium received were examined by way of issuing notice u/s 133(6) of the Act and no addition has been made by the AO, examining very same details in the re-assessment proceedings and making addition towards commission income clearly tantamount to change of opinion. Since AO did not make any addition for the reasons recorded and has made an addition for estimated commission income, such re-assessment proceedings become bad, illegal and deserves to be quashed. We, accordingly quash the re-assessment proceedings, set aside the order of ld. CIT(A) and allow ground raised by the assessee on legal issue. Decided in favour of assessee. Issues Involved: Appeal against order u/s 250 of the Income Tax Act, 1961 for AY 2011-12; Condonation of delay in filing appeal.Summary:The appeal was filed against the order passed u/s 250 of the Income Tax Act, 1961 for AY 2011-12. The appeal was initially found to be time-barred by 9 days, but the delay was condoned after perusing the reasons provided by the assessee. The appeal was admitted for adjudication.The assessee raised grounds challenging the assessment made u/s 147 of the Income Tax Act, 1961 and the addition of a sum of Rs. 52,68,500 as commission income. The assessee contended that the re-assessment proceedings were bad in law and should be quashed. The AO had made an addition for commission income without addressing the original reason for re-opening the case.After hearing both parties, the Tribunal observed that the AO had not made any addition based on the original reasons for re-opening the case, which amounted to a change of opinion. Citing a judgment of the Hon'ble Bombay High Court, the Tribunal concluded that the re-assessment proceedings were illegal and deserved to be quashed. The Tribunal allowed the appeal on this legal issue.As the re-assessment proceedings were quashed, the grounds raised on merits were rendered infructuous. The general ground raised by the assessee required no adjudication. Consequently, the appeal filed by the assessee was allowed.The judgment was delivered by the Appellate Tribunal ITAT Kolkata on 16th October 2023.