2024 (4) TMI 593 - AT - Income Tax

Tax officer can reopen assessment with investigation wing information but must properly investigate cash credit evidence before making additions

P and Y Enterprises Pvt. Ltd. Versus ITO Ward 5 (2) 1, Mumbai

ITAT Mumbai upheld reopening of assessment u/s 147 based on investigation wing information regarding accommodation entries from Sarwaria Investments ... Reopening of assessment u/s 147 - Addition u/s 68 - applicability of section 115BBE - HELD THAT:- Information received from investigation wing, while recording the reasons AO categorically mentions that escapement of income has arisen on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. However, assessee has already assessed u/s 143(3). The search on Mr. Dilip Kumar Gupta, his statement and information about accommodation entries received by the assessee from Sarwaria Investments Consultants Pvt. Ltd. as a result into formation of belief that income of the assessee has escaped assessment cannot be found fault with. AO has received a tangible material and therefore, found if the assessment u/s 143(3) of the Act has been made, the reopening of the assessment on receipt of new information cannot be found fault with. As the assessee is also not challenging reopening of the assessment, same stands confirmed. Thus, ground no. 1 of the appeal is dismissed. Addition u/s 68 - onus to prove the identity, creditworthiness of the lender and genuineness of the transaction - Assessee produces material to discharge onus cast up on it in reassessment proceedings showing identity and creditworthiness of the lender as well as genuineness of the Transaction. If we hold that such material is enough, it will result in to blurring distinction between reopening of an assessment and reassessment of income. Reopening is door to make a reassessment. Assessee has accepted a loan from Sarwaria Investments Consultants Pvt. Ltd. To prove the identity of the above company, assessee has submitted the PAN No. of the lender as well as the fact that it is assessed with ITO, ward 2(1), Kolkata. With respect to the credit worthiness of the above loan, assessee has submitted the copy of the bank account of the lender with IndusInd bank. In the bank account when the loans were given to the assessee company, lender had received the sum from other entities. With respect to the genuineness of the transaction, assessee has submitted the copy of account of the lender from the books of the assessee and the confirmation of the lender from the books of lender providing copy of account of the assessee. The bank account of the lender and bank account of the assessee is also shown at the time of taking of the loan and on repayment of the loan. Form no. 26 AS, which is the annual tax statement of the lender, also shows that assessee has paid interest to the lender is deducted. In view of the above information provided before the lower authorities it is clear that assessee has discharged its initial onus to prove the identity, creditworthiness of the lender and genuineness of the transaction as per provision of Section 68 of the Act. Failure of the learned Assessing Officer to make any further inquiry on the document submitted by the assessee and throwing back onus on the assessee is fatal to the addition made in this case. Ld AO is not correct in holding that inquiry made by the Investigation wing is clear-cut. According to us AO should have conducted inquiry on the evidences submitted during reassessment proceedings either by (i) deputing inspectors (ii) issuing summons u/s 131 or (iii) by issuing inquiry letter u/s 133 (6), (iv) by asking assessee to produce the directors of the company. If none of the above steps or any other efforts are made by the ld AO on the evidences submitted, AO cannot make addition u/s 68 - we reverse the orders of the Ld. lower authorities and direct the learned Assessing Officer to delete the addition u/s 68 - Appeal of the assessee is partly allowed. Issues Involved:- Validity of notice u/s 148- Addition under Section 68 of Rs. 1,00,00,000- Reopening of assessmentSummary:- Validity of notice u/s 148: The assessee challenged the validity of the notice issued under Section 148, contending that it lacked fresh tangible material and was based on borrowed satisfaction. The CIT(A) confirmed the notice, leading to an appeal. The Tribunal dismissed this ground, upholding the reopening based on new information indicating potential income escapement. - Addition under Section 68 of Rs. 1,00,00,000: The Assessing Officer added Rs. 1,00,00,000 under Section 68, alleging non-establishment of the lender's creditworthiness despite documentary evidence. The CIT(A) upheld this addition, citing lack of proof for genuineness. However, the Tribunal found the assessee had sufficiently demonstrated the lender's identity, creditworthiness, and transaction genuineness, reversing the lower authorities' decision and directing deletion of the addition.- Reopening of assessment: The Tribunal noted the information received post-search on an accommodation entry provider, linking the assessee to unaccounted income. Despite the initial assessment under Section 143(3), the Tribunal upheld the reopening due to new evidence. The assessee did not challenge the reopening, leading to its confirmation by the Tribunal.In conclusion, the Tribunal partially allowed the assessee's appeal, dismissing the challenge to the notice u/s 148, reversing the addition under Section 68, and confirming the reopening of assessment based on new information.