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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI PRASHANT MAHARSHI & KAVITHA RAJAGOPAL
ORDER Per Kavitha Rajagopal (JM):
This appeal has been filed by the assessee as against the order of the Ld.Commissioner of Income-tax (Appeals)-49, Mumbai dated 29/11/2018 passed under section 250 of the I.T. Act, 1961 pertaining to the assessment year 2009-10. 2. Grounds of appeal raised by the assessee are as under:-
1. The Id. CIT(A) erred in facts and law in not treating the Assessment Order passed U/s 147 r.w.s. 143(3) of the Act as invalid, bad in law and in violation of principles of natural justice.
2. (a) The Id. CIT (A) erred in facts and law in confirming the addition of Rs,65,00,000/- on account of loan received u/s. 68 made by the Id. Assessing Officer as unexplained cash credit. . (b) The Id. CIT (A) erred in facts and law in not appreciating the fact that the identity of the payer, genuineness of the transaction and capacity of the payer were duly established.
(c) The Id. CIT (A) and Id. Assessing Officer failed to provide any report of the inspector that the alleged lender is not found at the given address thereby denying the assessee any opportunity to controvert the same.”
The brief facts are that the assessee filed its return of income for the impugned assessment year on 30/09/2009 declaring total income at Rs.1,45,050/-. The return was processed under section 143(1) of the Act and subsequently the case was reopened and notice under section 148 dated 28/03/2016 was served upon the assessee. The assessment order under section 143(3) r.w.s. 147 of the I.T. Act dated 23/132/2016 was passed determining total income at Rs.66,45,047/-. Aggrieved by the said order, the assessee was in appeal before the Ld.CIT(A) on the ground of reopening of the assessment and on the addition made by the Assessing Officer. The Ld.CIT(A) confirmed the order of the Assessing Officer. Therefore, the assessee is in appeal before us.
3. The assessee has challenged the reopening of assessment under section 147 on the ground that the said order is invalid, bad in law and in violation of principles of natural justice. It is relevant to extract the reasons recorded by the Assessing Officer, which are as under:-
"1 The assesses did not file its return of income for the A Y 2009-10. 2. It is seen from the appraisal report prepared in the case of M/s. Lotus/Kamdhenu/Green Valley Group as a result of search action u/s. 132 conducted on 09.10.2014. That the assessee has received unsecured loans of Rs.65.00,000/- in FY 20088-09 relevant to A Y 2009- 10 from M/s. Seven Star Gems Pvt. Ltd.
M/s. Seven Star Gems Pvt. Ltd. is a company operated by Sh. Praveen Jain. Investigation wing of IT Department has conducted search and seizure action in the case of Praveen Kumar Jain Group. During the course of search it is established that Shri Praveen Kumar Jain indulged in providing accommodation entries like bogus purchases, sales, unsecured loans. Share capital through the companies operated by him which includes M/s. Seven Star Gems Pvt. Ltd.
From the appraisal report it is revealed that the assessee has obtained accommodation entry of unsecured loan of Rs.65,00,OOO/- during the period relevant to AY 2009-10. The detail of information regarding accommodation entry is as follows: Sr.No. Name of the Bogus Transaction Amount Entry 1. Seven Star Gems Pvt Ltd Unsecured 65,00,000 Loan
5. In view of above, I have reason to believe that the income chargeable to tax as indicated by the accommodation entry of unsecured loan of Rs. 65,00, OOO/- from the aforesaid party, has escaped assessment for AY 2009-10 within the meaning of sec. 147 of the IT Act, 1961.
6. Thus, it is seen that there has been a failure on the part of the assessee to disclose true income to the tune of Rs.65,00,000/- has escaped assessment and that this is a fir case for re-opening under section 147 of the Income Tax Act, 1961." It is stated by the Assessing Officer that information from Investigation Wing of the I.T. Department was received with regard to the bogus accommodation entries by Shri Pravinkumar Jain along with details of concerns, the beneficiary names and the amount of bogus purchases were received. The said information included the name of assessee as one of the beneficiaries. It is also stated that from the appraisal report prepared in the case of M/s Lotus/Kamdhenu/Green Valley group as a result of search action under section 132 dated 09/10/2014, the assessee was seen to have received unsecured loan to the tune of Rs.65,00,000/- in assessment year 2009-10 from M/s Seven Stars Gems Pvt Ltd which was operated by Shri Pravinkumar Jain. It was further stated that search and seizure action was also conducted in the case of Shri Pravinkumar Jain group which indulged in providing accommodation entries in the nature of bogus purchases, sales, unsecured loans, share capitals, etc. operated by Shri Pravinkumar Jain which also includes M/s Seven Stars Gems Pvt Ltd. The Assessing Officer had reopened the assessment of the assessee on the reason to believe that income chargeable to tax as specified in the accommodation entry of unsecured loan of Rs.65 lakhs from the aforesaid party has escaped assessment for the impugned year as per the provisions of section 147 of the I.T. Act. The Assessing Officer had specified that there was failure on the part of the assessee to disclose true income of Rs.65,00,000/- which according to the Assessing Officer has escaped assessment and that the assessee’s case was a fit case for reopening under section 147 of the I.T. Act. Aggrieved by this, the assessee was in appeal before the Ld.CIT(A), who confirmed the action of the assessing officer by relying on various decisions, viz. the decision of Apex Court in the case of ACIT vs Rajesh Jhaveri Stock Broker Pvt Ltd 291 ITR 500 (SC). The assessee is in appeal before us as against the order of the Ld.CIT(A).
4. The Ld.AR for the assessee contended that the Assessing Officer has erroneously stated that the assessee did not file its return of income for A.Y. 2009-10 in his reasons for reopening the assessee’s case which was brought to our notice by the Ld.AR by referring to page 34 of the paper book filed by the assessee. The Ld.AR stated that the assessee has filed its return of income for the impugned year dated 30/09/2009, the copy of which was said to have been furnished before the lower authorities. The Ld.AR further stated that the impugned addition of Rs.65,00,000/- as unexplained loan has already been duly disclosed in the balance-sheet filed by the assessee. The Ld.AR stated that the notice under section 148 dated 28/03/2012 was served upon the assessee after the expiry of 4 years from the end of the relevant assessment year which is bad in law unless any income chargeable to tax has escaped assessment for the impugned assessment year by reason of failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub section (1) of section 147 or section 148 or (b) to disclose fully and truly all material facts necessary for his assessment for that assessment year. The Ld.AR contended that the assessee has filed its return of income and has also disclosed the impugned amount for that year. The Ld.AR prayed that the order passed under section 143(3) r.w.s. 147 is to be treated as bad in law.
The Ld.DR, on the other hand, alleged that the assessee has failed to prove the creditworthiness of the parties from whom the assessee has availed the unsecured loan and the ld.DR relied on the order of the lower authorities.
We have heard the learned representatives and perused the materials on record. Upon perusal of the reasons for reopening as stated by the Assessing Officer wherein the Assessing Officer has specified that the assessee has failed to file his return of income for the impugned year has been rebutted by the assessee by furnishing the copy of the details of the returns. The learned Assessing Officer ought to have verified the same. The balance-sheet filed by the assessee reflects the unsecured loan of Rs.65 lakhs availed in F.Y. 2008-09 from M/s Seven Star Gems Pvt Ltd. The bank statements also corroborates the said transaction. We have also analysed the various decisions cited by the assessee pertaining to this issue, which are as below:-
S.No. Particulars Proposition 1 Ankita A Choksey vs ITO If the assessee claims the facts recorded (Writ Petition No.3344 of in the reasons are not correct, the order 2018)(Bom HC) on objection must deal with them. Otherwise an adverse inference can be drawn against the Revenue. 2 CIT v/s S.Goyanka Lime & Where Superior Authority recorded Chemical Ltd [(2015) 64 satisfaction in mechanical manner and taxmann.com 313(SC)] without application of mind to accord satisfaction or issuing notice u/s 148, reopening of assessment was invalid. 3 M/s Andaman Timber Failure to give the assessee the right to Industries vs Commr of cross-examine witnesses whose Central Excise (Civil Appeal statements are relied upon results in No.4228 of 2006(SC) breach of principles of natural justice. It is a serious flaw which renders the order a nullity 4 Tin Box Co vs CIT [(2001) Assessment order must be made after 116 Taxman 491(SC)] assessee has been given a reasonable opportunity of being heard. 5 H.K. Pujara Builders vs Add Where the appellant has discharged the CIT-21(1) [ITA initial onus placed upon it, addition u/s No.2034/Mum/2014](ITAT 68 cannot be made merely because Mumbai) interest had not been charged by the lenders
From the above decisions, we infer that the Assessing Officer has the jurisdiction to reopen an assessment only when he has reason to believe that income chargeable to tax has escaped assessment. This reason must be on concrete facts. In the present case in hand, it is observed that the Assessing Officer was of the view that the assessee has failed to file its return of income for the impugned year under section 139(1), which, in itself was an incorrect fact. We would like to place our reliance on the decision of the Hon’ble Bombay High Court in the case of Ankita A Choksey vs ITO (Writ Petition No.3344 of 2018)(Bom HC), wherein the Hon’ble jurisdictional High Court has held as under:-
“If the facts, as recorded in the reasons are not correct and the assessee points out the same in its objections, then the order on objection must deal with it and prima facie, establish that the facts stated by it in its reasons as recorded are correct. In the absence of the order of objections dealing with the assertion of the Assessee that the correct facts are not as recorded in the reason, it would be safe to draw an adverse inference against the Revenue .” It is also pertinent to point out that the assessee has raised the said objection before the lower authorities, the same was not considered.
The assessee has also relied on the fact that the said reopening was based on the confession statement of Shri Pravinkumar Jain who had retracted subsequently. The assessee alleged that the reopening was merely on the basis of the retracted statement which does not warrant merit on the reasons for reopening. The assessee has also stated that the assessee has furnished the name and address of the parties and the details of the transactions thereby discharging the onus on the part of the assesse. We would place our reliance on the decision of the Hon’ble Apex Court in the case of NRA Iron & Steel Pvt Ltd arising out of SLP (Civil) No.29855 of 2018) wherein the assessee has discharged the onus by furnishing details regarding the identity, creditworthiness and genuineness of the impugned transaction, the onus shifts to the Revenue. In the present case in hand, the Assessing Officer has failed to prove beyond doubt that the impugned transaction pertaining to the unsecured loan given by M/s Seven Stars Gems Pvt Ltd was only an accommodation entry.
From the above observation, we are of the considered opinion that the Assessing Officer has reopened the assessment only on the basis of ‘suspicion’ and not on “reason to believe”, we thereby allow this ground of appeal filed by the assessee.
As we have quashed the assessment itself, the issue on merit need not be adjudicated upon.
In the result, appeal is allowed.
Order pronounced in the open Court on 29th August, 2022.