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2018 (4) TMI 1792 - AT - Income TaxValidity of reopening of assessment u/s 147 - Addition u/s 68 - reasons simply states that the assessee is a beneficiary of the accommodation entry provided by Sh. S.K Jain group as per the information received from Investigation wing, Delhi - HELD THAT:- Even though the AO was in receipt of specific information that the assessee was beneficiary of accommodation entry, the fact remains that the information so received from the Investigation wing was not supplied to the assessee along with the reasons recorded before the issuance of notice u/s 148 of the Act and even the reasons so recorded are extremely scanty and vague and there is no mention of nature and quantum of accommodation entries which has escaped assessment. We also wonder as to how the ld CIT has accorded his approval on such scanty reasoning by the AO. Merely by stating that certain information has been received from the Investigation wing that the assessee is beneficiary of certain accommodation entry is not sufficient enough for the AO in assuming jurisdiction under section 147 in the instant case and the order so passed by the AO is hereby quashed and set-aside. In the result, ground no. 1 of the assessee’s appeal is hereby allowed. Addition u/s 68 - in the instant case, the assessee company has filed copies of the share application form, return of allotment filed with ROC, copies of the bank statements, copies of the financial statements and confirmations of these parties. AO has issued letters u/s 133(6) to these parties and has also called for personal appearance of Sh G.L Gupta and one of the directors of the assessee company. It is also a fact that there notices have not returned back undelivered and at the same time, there has been no compliance. It is therefore a case which is shade different than the one we decided supra. At the same time, the fact remains that inspite of non-compliance of these notices and non-appearance which cannot be a sole basis for disallowance, the AO has to give a specific finding and record his satisfaction regarding non-acceptance of documents so submitted by the assessee. We are therefore of the view that that in absence of any falsity which have been found in the documents so submitted by the assessee company to prove the identity, creditworthiness and genuineness of the share transaction and any satisfaction to that effect recorded by the AO, these documents cannot be summarily rejected as has been done by the AO in the instant case - no basis for making the addition under section 68 - Decided in favour of assessee Disallowance of various expenses - as argued AO only on surmises made a lump sum disallowance of 50% of these expenses and the ld. CIT(A) without any basis restricted it to 25% - HELD THAT:- We find that it is a case of adhoc disallowance of expenses which is not permissible in the eye of law. No finding has been given by the lower authorities that these are bogus expenditure or the expenditure has not been incurred for the purposes of the business. It is not the case of the Revenue that the business of the assessee has not been set up. In light of the same, the disallowance so confirmed by the ld CIT(A) is hereby deleted. The ground taken by the assessee is thus allowed.
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