MEGA MANAGEMENT SERVISES P.LTD,MUMBAI vs. DCIT CC-6(4), MUMBAI

Date of hearing 06-09-2021 Date of pronouncement 29-09-2021 O R D E R Per Saktijit Dey (JM) This is an appeal by the revenue against order dated 14-05-2018 of learned Commissioner of Income Tax (Appeals)-54, Mumbai for the assessment year 2009-10. 2. The grounds raised by the assessee in the Memorandum of Appeal are concerning the addition of Rs.6,20,000/-, being the commission income for providing accommodation entries through unsecured loans to two parties. Of 2 ITA 4913/Mum/2018 course, subsequently, the assessee, vide letter dated 01-12-2020 has filed additional ground challenging the validity of reopening of assessment under section 147 of the Income Tax Act, 1961 and also claiming set off of loss against income determined under section 115BBE of the Act.

3. Briefly the facts are, the assessee is a resident company stated to be engaged in the business of car rental. For the assessment year under dispute, assessee filed its return of income on 27-07-2009. Subsequently, the return of income so filed was revised by filing a revised return of income on 30-09-2009 declaring loss of R.4,26,445/-. The return of income filed by the assessee was processed under section 143(1) of the Act. Subsequently, the assessing officer received information from the Investigation Wing that in course of a survey conducted under section 133A of the Act in case of M/s Nina Concrete Systems Pvt Ltd it was found that the said party and M/s. Mekaul Construction Technology Private Ltd. have taken accommodation entries from the assessee by way of bogus unsecured loans to the extent of Rs1,55,00,000/-. Based on such information, the assessing officer reopened the assessment under section 147 of the Act. In course of the assessment proceedings, the assessing officer called upon the assessee to establish the genuineness of loans advanced to the concerned entities and further, to explain why the loan advanced should not be treated as accommodation entries provided on commission basis. Though, the assessee furnished its reply denying the allegation; however, assessing officer was not convinced. Ultimately, he concluded that unsecured loan provided to the above named entities are non genuine and are in the nature of accommodation entries. Having done so, the assessing officer estimated the commission income at 4% on the alleged unsecured loan of Rs.1,55,00,000/- and added an amount of 3 ITA 4913/Mum/2018 Rs.6,20,000/-. Against the assessment order so passed, assessee preferred an appeal before learned Commissioner (Appeals). However, learned Commissioner (Appeals) confirmed the addition made by the assessing officer. 4. At this stage, we must deal with the additional grounds raised by the assessee. In ground 1 of additional grounds, the assessee has challenged the validity of the reopening of assessment under section 147 of the Act. It is the contention of learned authorized representative of the assessee that no tangible material was available before the assessing officer to come to a conclusion that the unsecured loan provided by the assessee is in the nature of accommodation entry. He submitted, merely relying upon the information received from the Investigation Wing the assessing officer reopened the assessment. Thus, he submitted, the reopening of assessment since is based on borrowed satisfaction, is invalid. He submitted, in course of assessment proceedings, the assessing officer has not referred to any statement of the debtors, but held that the loans provided are bogus. Thus, he submitted, the reopening of assessment being invalid, the assessment order should be quashed.

5. The learned departmental representative strongly relying upon the observations of learned Commissioner (Appeals) submitted that the assessing officer has reopened the assessment based on concrete evidence. Therefore, the reopening of assessment is valid.

6. We have considered rival submissions and perused materials on record. Since, the additional grounds raised by the assessee are on jurisdictional and legal issues not requiring investigation into fresh facts, we admit them for adjudication on merit. As regards the issue relating to validity of reopening of assessment, admittedly, the return of income filed by the assessee was not subjected to 4 ITA 4913/Mum/2018 scrutiny and was simply processed under section 143(1) of the Act. Subsequently, the assessing officer received specific information from the Investigation Wing indicating that certain unsecured loans advanced by the assessee during the year are non genuine. Based on such opinion, the assessing officer reopened the assessment. Thus, it is very much clear since the return of income filed by the assessee was simply processed under section 143(1) of the Act, the assessing officer had no occasion to verify the genuineness of the loan transaction. Therefore, when the assessing officer received specific information concerning the genuineness of the loan transaction, he had tangible material available before him to reopen the assessment. While recording the reasons for reopening the assessment, the assessing officer has to prima facie form a belief that the material on record indicate escapement of income. At the stage of reopening, the assessing officer is not required to record any conclusive finding regarding the escapement of income, as, that is a matter which can be ascertained in course of assessment proceedings. Thus, in the facts of the present case, the assessing officer had tangible material to form a belief that income has escaped assessment. That being the case, in our considered view, the assessing officer has validly initiated proceedings under section 147 of the Act. Additional ground 1 is dismissed.