TaxTMI 
TaxTMI 
2018 (2) TMI 860
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....e necessary at the time hearing". 3. Briefly stated facts are that assessee had filed his return of income on 27-11-1998 declaring a total income of Rs. 55,000/- and claiming a refund of Rs. 5,000/-. This return was processed u/s 143(1). However, a notice u/s. 148 of the Income Tax Act [Act] has been issued dt. 18-03-2005 on the reason that the income has escaped assessment. The Assessing Officer (AO) has completed the assessment u/s. 143(3) r.w.s. 147 vide order dt. 31-03-2006 by making the following additions and raising the demand. i. Unexplained investment : Rs. 22,30,000/- ii. Unexplained investment said to be from sale of gold and saving : Rs. 10,13,000/- 3.1. Assessee had filed a rectification application u/s. 154 dt. 12-04-2006 stating that Rs. 10,13,000/- was reflected in the balance sheet and the addition made to this account was unwarranted. The AO after duly considering assessee's petition has reduced the amount. 4. Before the Ld.CIT(A), assessee raised two grounds mainly one was that the issuance of notice u/s. 148 and reopening of assessment is bad in law and other was the addition of Rs. 22,30,000/- on account of unexplained investment. It ....
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....at the enquiries were originally caused in the case of company and there, the promoters' investment was enquired but the addition was made as unexplained investment in Machinery. During the assessment proceedings, the DDIT, Vijayawada made enquiries of sources of source and that too behind the back of assessee's promoters after a lapse of time and no cross-examination was provided. Assessees filed detailed replies in the case of company's appeal and Ld.CIT(A) deleted the additions so made. Anticipating an adverse order, the JCIT, Bhubaneswar has written a letter to the officers in Hyderabad to reopen the assessments of promoters and that was the basis for issuance of notice. Even though assessee filed the returns of income disclosing the investments and sources, the AO who has no jurisdiction, had reopened the assessment and without further enquiries relied on the earlier reports and completed the assessment. 5.4. Referring to the order of Ld.CIT(A), it was submitted that the fact is that the reasons for reopening were not communicated by AO and communicated only during the present appeal proceedings recently, that too in the form of paper book filed before this forum and referr....
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....aya Talkies & Distributors 398 13 Delhi iv. CIT Vs. Kothari Mills 377 581 Karnataka 6. Ld.DR, however, defended the order of the AO/CIT(A) vehemently. Regarding the letter of AO denying the recording of reasons, it was stated that the letter is not correct and how the same reached assessee is not known. While admitting that the reasons recorded were traced and provided to assessee recently (in pg.17, in the form of paper book filed), it was submitted that the enquiries were conducted and assessee is aware of all the proceedings and there was non-co-operation from assessee. He referred to various orders- that of Ld.CIT(A), Bhubaneswar, the order of AO and CIT(A)- to support the AO's action. 7. I have considered the rival contentions and perused the orders and documents placed on record and precedents relied. Before adverting to the adjudication of issues, the following facts are to be noted: A) Assessee filed the return of income on 27-11-1998 with the jurisdiction of Asst. Commissioner of Income Tax, Circle-4(2), admitting incomes and stating the sources of investment of Rs. 22,30,000/- in M/s. Sankya Infotech Ltd., and necessary confirmations....
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.... it may, the enquiry report does not indicate that the sources of source, i.e., the loans advanced by the farmers to the Directors/shareholders; were totally bogus or that they completely lack creditworthiness. But, there appears to be some substance in the assertion of the AO/Jt.CIT that certain elements like the genuineness of the transactions and complete creditworthiness of the farmers was not conclusively established. These matters nevertheless require further enquiry as only sixteen out of seventy five farmer-creditors, who have advanced loans to the four share holders have been examined. No enquiry has been conducted in respect of loans availed by the two promoter-directors; namely Shri N. Srinivas and Shri N. Sridhar. Therefore the AO or the concerned AOs can conduct further enquiries and if it is found that the loans given by the farmers were neither credible nor genuine; the additions could be made in the hands of the shareholders who have subscribed to the shares of the appellant-company. The sources of funds in such cases can be tackled by the AO in the hands of the subscribers to the equity shares who have availed the loans. Therefore, the AO is free to conduct further....
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....rdingly is submitted to the Addl.CIT". F) Assessee received notice u/s. 148 dt. 18-03-2005, but the reasons recorded were not communicated either during assessment proceedings or during appeal proceedings. In fact the letter of ACIT, Circle-12(1), dt. NIL filed by assessee has this noting; Office of the Asst. Commissioner of Income tax, Circle 12(1), Hyderabad PAN NO ABNPN2619N To, The Commissioner of Income Tax (Appeals-II) Hyderabad, Sir, Sub: Appellate Proceedings in the case of Sri N. Sridhar-A.Y.1998- 99 Submission of Report - Reg. Ref: CIT(Appeals-II), Hyd, Letter No. 0079&0081/CIT-(A)-II/06-07 Dt: 26-11-2007 Kind Reference is invited to the above. I have gone through the written submissions filed by the assessee and the entire record, also the order sheet maintained for the year under consideration and found that no where in the order sheet(s) reasons for issuing notice(s) issued u/s. 148 is noted, though the assessee has requested reasons for initiating action u/s. 147(a) and re-opening the Assessment has not been recorded. No evidence of issuing any Notice(s) to the loan credito....
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....iance on CIT(A), Bhubaneswar order by the present CIT(A), Hyderabad is also misplaced. In fact, the order of CIT(A) has this to state: "............But, be that as it may, the enquiry report does not indicate that the sources of source, i.e., the loans advanced by the farmers to the Directors/shareholders; were totally bogus or that they completely lack creditworthiness. But, there appears to be some substance in the assertion of the AO/Jt.CIT that certain elements like the genuineness of the transactions and complete creditworthiness of the farmers was not conclusively established. These matters nevertheless require further enquiry as only sixteen out of seventy five farmer-creditors, who have advanced loans to the four share holders have been examined. No enquiry has been conducted in respect of loans availed by the two promoterdirectors; namely Shri N. Srinivas and Shri N. Sridhar. Therefore, the AO or the concerned AOs can conduct further enquiries and if it is found that the loans given by the farmers were neither credible nor genuine; the additions could be made in the hands of the shareholders who have subscribed to the shares of the appellant-company. The sources o....