2020 (6) TMI 399 - AT - Income Tax

Assessee wins appeal on reassessment validity and transaction genuineness under Section 68

M/s. Shreem Packaging Products P. Ltd. Versus ITO, Ward-4 (1) (3), Ahmedabad.

M/s. Shreem Packaging Products P. Ltd. Versus ITO, Ward-4 (1) (3), Ahmedabad. - TMI Issues:Confirmation of addition of Rs. 75 Lacs u/s 68 for AY 2007-08 by CIT(A) - Validity of assessment when no addition made for reason of reopening - Reopening of assessment beyond four years - Onus to prove identity, creditworthiness, and genuineness of transactions u/s 68 - Legal grounds raised by assessee - Merits of the case.Analysis:Confirmation of addition of Rs. 75 Lacs u/s 68 for AY 2007-08 by CIT(A): The case involved the confirmation of an addition of Rs. 75 Lacs u/s 68 for the assessment year 2007-08 by the CIT(A). The assessee challenged the validity of the assessment, arguing that no addition was made for the reason the assessment was reopened. The Tribunal examined the legal submissions and the merits of the case to reach a conclusion.Validity of assessment when no addition made for reason of reopening: The assessee contended that the assessment was invalid as no addition was made for the reason the assessment was reopened. The Tribunal analyzed the reasons recorded by the AO to reopen the assessment and found that the quantum of income escapement had been explicitly mentioned. The Tribunal dismissed the legal grounds raised by the assessee, holding that the reassessment proceedings were validly initiated against the assessee.Reopening of assessment beyond four years: The assessee raised an additional ground challenging the reopening of assessment beyond four years. The Tribunal admitted the ground as it was a legal ground and did not require appreciation of new facts. However, the Tribunal found that the quantum of escapement of income had been clearly stated by the AO, making the separate recording of that fact unnecessary.Onus to prove identity, creditworthiness, and genuineness of transactions u/s 68: The Tribunal emphasized that the onus to prove the identity of the investor entities, their creditworthiness, and the genuineness of the transactions lay with the assessee. The Tribunal examined the documents provided by the assessee, including Income Tax Acknowledgements, Board Resolutions, and bank statements. It was noted that the assessee had discharged the primary onus of Sec. 68, and the AO failed to rebut the claim effectively. The Tribunal concluded that the impugned additions u/s 68 were deleted.Legal grounds raised by assessee: The Tribunal considered and dismissed the legal grounds raised by the assessee, including arguments related to the quantum of escapement of income and the nature of investments made by the entities. The Tribunal found the reassessment proceedings valid and not liable to be quashed based on the reasons recorded by the AO.Merits of the case: Upon analyzing the merit of the case, the Tribunal found that the assessee had fulfilled the primary onus of proving the identity, creditworthiness, and genuineness of the transactions. The Tribunal noted the lack of evidence suggesting cash exchanges between the assessee and the investor entities, leading to the deletion of the impugned additions u/s 68.In conclusion, the appeal was partly allowed, with the Tribunal ruling in favor of the assessee on the grounds related to the merits of the case and the validity of the reassessment proceedings.