Tribunal validates notice under section 147 but deletes Rs. 45 lakh addition under section 68

The Tribunal upheld the validity of the order passed by the Assessing Officer under section 147, finding that despite the notice being issued in the name of a non-existent entity, the company's PAN number remained valid, and there was no jurisdictional error in issuing the notice. However, the Tribunal allowed the appeal regarding the addition of Rs. 45 lakhs under section 68, ruling that the investments from various entities were genuine and rejecting the AO's assertion of unexplained cash credit. The addition was directed to be deleted, and the assessee's appeal was successful.

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Issues Involved:
1. Validity of the order passed by the Assessing Officer (AO) under section 147 of the Income Tax Act, 1961.
2. Confirmation of an addition of Rs. 45 lakhs under section 68 by treating the share capital money received as unexplained.

Issue-Wise Detailed Analysis:

1. Validity of the Order Passed by AO under Section 147:

The assessee challenged the validity of the order passed by the AO under section 147, arguing that the notice under section 148 was issued in the name of a non-existent entity and at an incorrect address. The AO issued a notice under section 148 on 27.03.2015 to reopen the assessment for AY 2008-09. The notice was issued to "M/s Shree Silica Products Pvt. Ltd." despite the company having changed its name to "M/s Rajshree Alloys India Ltd." The assessee argued that the AO did not verify the current name and address before issuing the notice, making it void ab initio.

The Tribunal referred to the binding decision of the Rajasthan High Court in CIT v. Poonam Chand Surana [2014] 221 Taxman 0151 (Raj.) and the Supreme Court decision in Principal Commissioner of Income-Tax v. Maruti Suzuki India Ltd. [2019] 107 taxmann.com 375 (SC), which held that issuing a notice and passing an assessment order in the name of a non-existent company is a substantive illegality and not a procedural violation.

However, the Tribunal found that the PAN No. AACCS4046D with the name "Shree Silica Products Pvt. Ltd." continued to exist in the Income Tax Department database, and the assessee company had been allotted a fresh PAN No. AADCB4084H with the name "Badaya Ispat Private Limited." The Tribunal concluded that the ITO Ward 4(1), Jaipur, continued to exercise jurisdiction over the assessee company, and there was no infirmity in the action of issuing the notice under section 148 and completing the assessment.

The Tribunal also addressed the second contention regarding non-application of mind by the AO while recording reasons before issuing the notice under section 148. The AO received tangible information from the Investigation Wing that the assessee had obtained accommodation entries, which constituted a tangible material for forming a belief that income had escaped assessment. The Tribunal found no infirmity in the AO's action in exercising jurisdiction under section 148.

2. Confirmation of Addition of Rs. 45 Lakhs under Section 68:

The AO made an addition of Rs. 45 lakhs under section 68, treating the share capital money received from VIP Leasing & Finance Pvt. Ltd., Singhal Securities Pvt. Ltd., and Finage Lease & Finance India Ltd. as unexplained cash credit. The assessee submitted various documents, including Share Application Forms, Confirmation of Accounts, ITR Acknowledgments, Financial Statements, List of Directors, Bank Statements, and assessment orders for AY 2005-06 to 2011-12 passed under sections 153C/153A.

The Tribunal found that in the assessment orders passed for these entities for AY 2008-09, there was no finding recorded by the AO that the companies were involved in providing accommodation entries. The investments made by these entities in the assessee company were accepted as genuine investments. The Tribunal concluded that once the assessee had furnished necessary documentation and the investments were accepted as genuine in the assessments of the shareholder entities, no adverse view could be taken in the hands of the investee assessee company under section 68.

The Tribunal also noted that the AO's finding that the assessee had introduced its unaccounted cash in the form of share capital was not corroborated by any material on record. The Tribunal referred to the decision in M/s Layak Fabrics Pvt. Ltd., where similar findings were recorded, and the reopening of the assessment was quashed due to lack of material evidence.

Conclusion:

The Tribunal dismissed the ground challenging the validity of the order passed under section 147 but allowed the ground challenging the addition of Rs. 45 lakhs under section 68. The addition made by the AO was directed to be deleted, and the appeal of the assessee was allowed.

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