2024 (9) TMI 1445 - AT - Income Tax

Reassessment under Section 148 invalid when issue already adjudicated in original assessment, mere change of opinion insufficient

H. Sherul & Co Versus ACIT-19 (1), Mumbai

ITAT Mumbai held that reassessment proceedings under section 148 were invalid as the AO had already adjudicated the unexplained loan receipts issue during ... Validity of reassessment proceedings - reason to believe - unexplained loan receipts - A.Y. 2011-12 - HELD THAT:- We find that theLd.AO has already adjudicated the issue by issuing notice under section 142(1) during the impugned assessment year by the order passed U/s 143(3) of the Act. The same issue was reopened by the report of the Investigation department. During the assessment, we find that the Ld.AO had not made any separate investigation against the unsecured loan which was treated as accommodation entry. Mere change of opinion cannot be the reason for reopening. We respectfully relied on the order of Seimens Financial Services P. Ltd [2023 (9) TMI 552 - BOMBAY HIGH COURT] and Aditi Constructions vs DCIT [2023 (5) TMI 281 - BOMBAY HIGH COURT] and Engineers & Allied Elastomers (2024 (9) TMI 1371 - ITAT MUMBAI] which have the common legal issue. Accordingly, the notice issued under section 148 is bad in law. The ld. AO acted beyond jurisdiction to reopen the assessment. We set aside the impugned appeal order and direct the ld. AO to delete the addition amount. Decided in favour of assessee. Addition of loan and interest thereon - AY 2013-14 - We find that the entire addition was made on the basis of the report of the investigation department. The Ld.AO has not made any separate verification about the loan creditors and the interest payment. The assessee has shifted its onus to the revenue by submitting all relevant documents in relation to the loan-creditors. In case of interest, the assessee deducted TDS and paid the amount through banking channel. AO was not able to bring any contrary fact and not even nullified the documents submitted by the assessee. The ld. AO & ld. CIT(A) only relied on the report of the investigating authority. CIT(A) only followed the order of the Ld.AO and confirmed the addition. We find that the entire addition was made without proper verification. The assessee had shifted its onus by submitting the evidence before the revenue authority. No further investigation was done. The ld. AO was unjustified for addition the same. Decided in favour of assessee. Issues Involved:1. Validity of reassessment under section 147 of the Income-tax Act, 1961.2. Addition of alleged bogus loan and interest amounts to the total income of the assessee.Issue-wise Detailed Analysis:1. Validity of Reassessment under Section 147:The assessee challenged the jurisdiction for reopening the case under section 147 by issuing notice under section 148 of the Income-tax Act. The original assessment for A.Y. 2011-12 was completed under section 143(3) on 06/03/2014. The assessee had submitted all relevant documents, including details of unsecured loans, during the original assessment. The reassessment was initiated based on a report from the Investigation Department without any independent inquiry by the Assessing Officer (AO).The tribunal referred to several judgments, including *Seimens Financial Services P. Ltd vs. DCIT* and *Aditi Constructions vs DCIT*, which emphasized that a reassessment cannot be justified merely on a change of opinion. The tribunal concluded that the AO acted beyond jurisdiction by reopening the assessment based on the Investigation Department's report without conducting an independent investigation. Consequently, the notice issued under section 148 was deemed invalid, and the addition of Rs. 1,85,50,000/- was directed to be deleted.2. Addition of Alleged Bogus Loan and Interest Amounts:A.Y. 2011-12:The AO added back a loan amount of Rs. 1,85,50,000/- received from M/s Mani Prabha Impex Pvt Ltd, treating it as bogus based on the Investigation Department's report. The tribunal found that the AO had not conducted any independent verification and relied solely on the Investigation Department's report. The assessee had submitted all necessary documents, including confirmations and bank statements, proving the genuineness of the loan. The tribunal held that the AO's action was based on suspicion and conjecture, and the addition was not sustainable. The appeal for A.Y. 2011-12 was allowed, and the addition was deleted.A.Y. 2013-14:The AO added Rs. 20,00,000/- as a non-genuine loan from M/s Dharm Impex and disallowed Rs. 21,42,678/- as interest on alleged non-genuine loans from M/s Dharm Impex and M/s Mani Prabha Impex Pvt Ltd. The tribunal noted that the assessee had provided all relevant documents, including confirmations from the lenders, bank statements, and TDS details. The AO did not conduct any independent verification and relied solely on the Investigation Department's report. The tribunal found that the assessee had shifted the onus to the revenue by submitting all necessary documents, and the AO failed to bring any contrary evidence. The appeal for A.Y. 2013-14 was allowed, and the addition of Rs. 41,42,678/- was deleted.Conclusion:The tribunal allowed both appeals, quashing the reassessment proceedings and deleting the additions made by the AO for both assessment years. The reassessment was deemed invalid due to lack of independent verification and reliance on the Investigation Department's report without tangible material. The tribunal emphasized the importance of independent inquiry and the inadmissibility of reassessment based on mere suspicion or change of opinion.