2018 (9) TMI 1301 - AT - Income Tax

Tribunal rules in favor of assessee-company, quashing re-assessment & penalty, citing lack of evidence.

M/s. RL Travels Pvt. Ltd. Versus The DCIT, Central Circle-12 And The ACIT, Central Circle-7, New Delhi

M/s. RL Travels Pvt. Ltd. Versus The DCIT, Central Circle-12 And The ACIT, Central Circle-7, New Delhi - TMI Issues Involved:1. Initiation of re-assessment proceedings under section 148 of the Income Tax Act, 1961.2. Addition of Rs. 2,21,00,788/- as unexplained credit under section 68 of the Income Tax Act, 1961.3. Cancellation of penalty imposed by the Assessing Officer.Detailed Analysis:1. Initiation of Re-assessment Proceedings under Section 148:The assessee-company challenged the initiation of re-assessment proceedings under section 148, arguing that there was no material to justify the reopening. The original return was filed on 27.10.2005, and a notice under section 148 was issued on 29.03.2012 based on information from a pen-drive recovered from Shri Chetan Gupta, a director of the company. The pen-drive allegedly contained ledger accounts indicating undisclosed financial transactions. However, the assessee-company contended that the pen-drive had no relevance to its affairs and that Shri Chetan Gupta had denied ownership of the pen-drive during his income tax proceedings. The Tribunal concluded that the Assessing Officer (A.O.) did not apply his mind to the alleged pen-drive before initiating re-assessment proceedings, leading to a lack of tangible material connecting the assessee-company with escapement of income. Consequently, the Tribunal quashed the reopening of the assessment.2. Addition of Rs. 2,21,00,788/- as Unexplained Credit under Section 68:The A.O. added Rs. 2,21,00,788/- as unexplained credit in the hands of the assessee-company under section 68, based on entries in the pen-drive. The assessee-company argued that the entries in the pen-drive had no correlation with its accounts and were not found in its books of account. The Tribunal noted that the pen-drive was recovered from Shri Chetan Gupta, and the entries had already been considered for calculating peak credit in his hands. The Tribunal referred to its previous decisions in the case of Shri Chetan Gupta, where it was held that the entries in the pen-drive belonged to him. Therefore, the Tribunal concluded that no addition could be made in the hands of the assessee-company, as the entries had already been accounted for in Shri Chetan Gupta's case. The Tribunal set aside the orders of the authorities below and deleted the addition of Rs. 2,21,00,788/-.3. Cancellation of Penalty Imposed by the Assessing Officer:The Revenue appealed against the cancellation of penalty imposed on the assessee-company. The Ld. CIT(A) had cancelled the penalty, relying on the Tribunal's decision in the case of Shri Chetan Gupta, which held that the same amounts could not be assessed as income in the hands of the assessee-company. Since the Tribunal quashed the re-assessment proceedings and deleted the addition on merit, it upheld the Ld. CIT(A)'s decision to cancel the penalty. Consequently, the Tribunal dismissed the Revenue's appeal.Conclusion:The Tribunal allowed the appeal of the assessee-company, quashing the re-assessment proceedings and deleting the addition of Rs. 2,21,00,788/-. The Tribunal also dismissed the Revenue's appeal, upholding the cancellation of the penalty imposed on the assessee-company.