2022 (1) TMI 476 - AT - Income Tax

Tribunal Quashes Reassessment, Upholds Assessee's Evidence

M/s. More Credit Securities (P) Ltd. Versus The Income Tax Officer, Ward – 17 (1), Delhi And (Vice-Versa) And The Income Tax Officer, Ward – 5 (4), New Delhi Versus M/s. More Credit Securities (P) Ltd.

M/s. More Credit Securities (P) Ltd. Versus The Income Tax Officer, Ward – 17 (1), Delhi And (Vice-Versa) And The Income Tax Officer, Ward – 5 (4), New ... Issues Involved:1. Validity of reopening of assessment under Section 147 of the I.T. Act, 1961.2. Addition under Section 68 of the I.T. Act, 1961 for unexplained credits.3. Addition under Section 69C of the I.T. Act, 1961 for alleged commission paid.4. Disallowance under Section 14A read with Rule 8D of the I.T. Act, 1961.5. Disallowance of salary expenses.Issue-wise Detailed Analysis:1. Validity of Reopening of Assessment:The assessee challenged the reopening of the assessment, arguing it was based solely on information from the Investigation Wing without independent verification by the Assessing Officer (A.O.). The Tribunal agreed, noting that the A.O. did not apply his independent mind and mechanically accepted the information. The Tribunal cited several precedents, including the Delhi High Court’s decision in Signature Hotels Pvt. Ltd., emphasizing that reopening based on vague information without independent verification is invalid. Consequently, the reassessment proceedings were quashed.2. Addition under Section 68 for Unexplained Credits:The A.O. added Rs. 17,32,00,000/- under Section 68, alleging the amount was unexplained share capital from companies controlled by entry operators. The Ld. CIT(A) deleted the addition, noting the assessee had provided comprehensive documentation, including income tax returns, audited balance sheets, and confirmations from the share applicants. The Tribunal upheld the deletion, emphasizing that the assessee had discharged its onus by providing sufficient evidence to prove the identity, creditworthiness, and genuineness of the transactions. The Tribunal also noted that the A.O. failed to bring any material evidence to disprove the assessee’s claims.3. Addition under Section 69C for Alleged Commission Paid:The A.O. added Rs. 34,64,000/- under Section 69C, alleging it was commission paid for arranging accommodation entries. The Ld. CIT(A) deleted this addition, reasoning that since the substantive addition under Section 68 was deleted, the related commission could not be sustained. The Tribunal upheld this deletion, aligning with its decision to quash the reassessment and delete the substantive addition.4. Disallowance under Section 14A read with Rule 8D:The A.O. disallowed Rs. 90,745/- under Section 14A read with Rule 8D, claiming the assessee had not made any disallowance for expenses related to exempt income. The Ld. CIT(A) deleted the disallowance, noting the investment was an advance against property, not shares. The Tribunal upheld this deletion, finding no factual basis for the A.O.’s disallowance.5. Disallowance of Salary Expenses:The A.O. disallowed Rs. 1,92,000/- in salary expenses, doubting the employer-employee relationship. The Ld. CIT(A) deleted the disallowance, stating the assessee, being an NBFC, had to comply with legal requirements, and the disallowance was without cogent reasons. The Tribunal upheld this deletion, noting the A.O. did not raise any queries during the assessment proceedings and the Ld. CIT(A)’s findings were factually supported.Separate Judgments:The Tribunal issued a common order for all appeals, addressing each issue comprehensively and consistently across the appeals.