ITAT Jaipur Judgments — April 2019

The Tribunal restored the matter back to the AO to decide the issue afresh. The AO is to consider the audited balance sheets of the assessee for the current and preceding years to determine if the share capital and premium were received in the preceding year.

The Tribunal held that the reassessment proceedings initiated under Section 147/148 were not valid. The AO had reopened the assessment based on information received from the DDIT (Inv.), Kolkata, which indicated a web of transactions involving cash deposits and subsequent transfers to M/s Pashupati Vinimay Pvt. Ltd., who then transferred funds to the assessee. The AO recorded reasons for reopening, stating a prima facie belief that the assessee received accommodation entries and that income to the extent of Rs. 1,94,00,000/- had escaped assessment. However, the Tribunal found that the AO's approval under Section 151(1) was obtained on the very next day of receiving the information, suggesting a mechanical application of mind without independent verification or application of mind to the facts. The Tribunal also noted that the initial assessment under Section 143(3) had accepted the share capital as genuine. Given the invalidity of the reopening proceedings, the additions made by the AO were quashed. Consequently, the appeal filed by the revenue was dismissed, and the cross objections of the assessee were allowed in part, specifically concerning the quashing of reassessment proceedings. The issue regarding interest under Section 234B was not explicitly decided as the primary issue of invalid reassessment rendered it academic.

The Tribunal held that the reassessment proceedings initiated under Section 147/148 were not valid. The AO had reopened the assessment based on information received from the DDIT (Inv.), Kolkata, which indicated a web of transactions involving cash deposits and subsequent transfers to M/s Pashupati Vinimay Pvt. Ltd., who then transferred funds to the assessee. The AO recorded reasons for reopening, stating a prima facie belief that the assessee received accommodation entries and that income to the extent of Rs. 1,94,00,000/- had escaped assessment. However, the Tribunal found that the AO's approval under Section 151(1) was obtained on the very next day of receiving the information, suggesting a mechanical application of mind without independent verification or application of mind to the facts. The Tribunal also noted that the initial assessment under Section 143(3) had accepted the share capital as genuine. Given the invalidity of the reopening proceedings, the additions made by the AO were quashed. Consequently, the appeal filed by the revenue was dismissed, and the cross objections of the assessee were allowed in part, specifically concerning the quashing of reassessment proceedings. The issue regarding interest under Section 234B was not explicitly decided as the primary issue of invalid reassessment rendered it academic.