COVERT TRADING P. LTD,MUMBAI vs. ITO 6(2)(1), MUMBAI

When the appeal was called for hearing, no one was present on behalf of the assessee to represent the case. Even, no application has been filed by the assessee seeking adjournment of the appeal. In view of the aforesaid, I proceed to dispose off the appeal ex–parte qua the assessee after hearing the learned Departmental Representative.

The assessee has raised two major issues in the present appeal. The first issue relates to validity of re–opening of assessment under section 147 of the Income Tax Act, 1961 (for short “the Act”). The second issue relates to the merits of addition made of ` 15 lakh under section 68 of the Act.

Brief facts are, the assessee company filed its return of income for the impugned assessment year on 30th September 2009, declaring total income of ` 39,450. The return of income filed by the assessee was initially processed under section 143(1) of the Act. Subsequently, on the basis of a search and seizure operation conducted under section 132 of the Act in case of Mahasagar Securities Pvt. Ltd. it was found that one Shri Mukesh M. Choksi, has promoted / floated about 36 companies which are only providing accommodation entries to various parties by way of bogus share application money, bogus bills for providing long term capital gain / loss, etc. As per the material unearthed during search and seizure operation, it was found that the assessee is a beneficiary of accommodation entry of ` 15 lakh from M/s. Buniyad Chemicals Ltd. a company promoted by Mukesh M. Choksi. On the basis of such information, the Assessing Officer re– opened the assessment under section 147 of the Act. During the assessment proceedings, the Assessing Officer called upon the assessee to prove the genuineness of the share application money

Though, the assessee challenged the addition before the first appellate authority, however, the addition was sustained by the learned Commissioner (Appeals).

I have considered the submissions of learned Departmental Representative and perused material on record. As could be seen from the facts on record, on the basis of specific information received and available on record the Assessing Officer found that the so called share application money of ` 15 lakh received by the assessee is merely in the nature of accommodation entry. It is also a fact on record that the return of income filed by the assessee was processed under section 143(1) of the Act and no scrutiny assessment had taken place earlier. Therefore, the Assessing Officer never had an occasion to look into the genuineness of the aforesaid transaction. In the aforesaid circumstances, when the Assessing Officer received specific information that the transaction relating to receipt of share application money is in the nature of accommodation entry, he had sufficient material before him to entertain a prima–facie belief that income chargeable to tax has escaped assessment. Therefore, the Assessing Officer was wholly within his jurisdiction to re–open the assessment under section 147 of the Act. Therefore, I hold the re–opening of assessment under section 147 of the Act to be valid.

As regards the merits of the addition made under section 68 of the Act, it is relevant to observe that the assessee has not furnished the details called for by the Assessing Officer to prove the genuineness of the share application money. Even, in response to the notice issued under section 133(6) of the Act, no information was provided by the share applicant. The assessee has not brought on record any other evidence either before the Assessing Officer or before the first appellate authority or even at this stage to conclusively prove the genuineness of the transaction relating to receipt of share application money. Since, the finding of the departmental authorities remains uncontroverted before me, I have no hesitation in upholding the addition made by the Assessing Officer and sustained by the learned Commissioner (Appeals). Grounds raised are dismissed.

The other grounds relating to levy of interest under section 234A, 234B ad 234C of the Act as well as initiation of penalty proceedings under section 271(1)(c) of the Act being mandatory and consequential do not require specific adjudication at this stage, hence, dismissed.

In the result, appeal is dismissed. Order pronounced in the open Court on 11.01.2019 SD/– SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 11.01.2019