2020 (1) TMI 157 - AT - Income Tax

Appeal granted, reassessment notice quashed, additions deleted due to lack of evidence

Integrated Global Solutions Pvt Ltd [Formerly known as Spice Global Pvt Ltd Versus The A.C.I.T Central Circle – 9, New Delhi

Integrated Global Solutions Pvt Ltd [Formerly known as Spice Global Pvt Ltd Versus The A.C.I.T Central Circle – 9, New Delhi - TMI Issues Involved:1. Assumption of jurisdiction under Section 147 of the Income-tax Act, 1961.2. Validity of the additions made during the reassessment proceedings.Issue-wise Detailed Analysis:1. Assumption of Jurisdiction under Section 147 of the Income-tax Act, 1961:The primary grievance of the assessee was regarding the assumption of jurisdiction under Section 147 for framing the assessment order under Section 143(3) read with Section 147. The assessment was originally completed under Section 143(3) on 10.07.2008. Subsequently, a notice under Section 148 was issued based on information obtained from a search and seizure operation conducted on Shri S.K. Gupta and his associated companies. The reasons for reopening included transactions amounting to Rs. 3,05,22,660 with M/s Camsoft (India) Pvt Ltd and M/s BT Technet Ltd, which were allegedly accommodation entries.The Tribunal observed that the reasons for reopening were based on the statement of Shri S.K. Gupta and seized documents, but there was no specific mention of the relationship between Shri S.K. Gupta and the companies involved. The Tribunal noted that during the original assessment, specific queries regarding the transactions were raised, and the assessee provided detailed replies with supporting documents. The Tribunal emphasized that the Assessing Officer (AO) did not conduct further inquiries or issue notices under Sections 133(6) or 131.The Tribunal held that the reopening was based on a change of opinion, which is not permissible as per the Supreme Court's ruling in Kelvinator of India Ltd. The Tribunal cited the Delhi High Court's judgment in Meenakshi Overseas Pvt. Ltd, which stressed that reasons to believe must be based on tangible material. The Tribunal concluded that the notice under Section 148 and the subsequent assessment were bad in law.2. Validity of the Additions Made During the Reassessment Proceedings:On the merits of the case, the assessee contended that the software purchases from M/s Camsoft (India) Pvt Ltd and M/s BT Technet Ltd were genuine. During the original assessment, the assessee provided confirmations and invoices supporting the transactions. The Tribunal noted that the AO did not confront the assessee with any adverse findings or conduct further inquiries regarding the confirmations.The Tribunal observed that the assessee's business required updated software, and the revenue generated from call center services increased significantly during the relevant period. The Tribunal found no evidence suggesting that the sales were bogus or that the software purchases were not genuine. The AO's decision to allow depreciation on the software further contradicted the claim that the purchases were bogus.The Tribunal directed the AO to delete the additions made during the reassessment proceedings, as there was no demonstrative evidence to support the AO's claims.Conclusion:The Tribunal allowed the appeal, setting aside the notice under Section 148 and quashing the reassessment order. The Tribunal also directed the AO to delete the additions made during the reassessment proceedings, emphasizing the lack of tangible evidence and the improper assumption of jurisdiction under Section 147.