1996 (7) TMI 172 - AT - Income Tax

Summary

Issues Involved:
1. Validity of reopening the assessment under Section 148.
2. Addition of Rs. 1,00,000 and Rs. 3,08,000 under Section 68.
3. Addition of Rs. 1,42,800 under Section 68.

Detailed Analysis:

1. Validity of Reopening the Assessment under Section 148:
The primary contention raised was that the reopening of the assessment was unjustified. The assessee argued that no reasons were recorded by the Income Tax Officer (ITO) for reopening the assessment either in the notice or in the reassessment order. However, the Departmental Representative countered that the ITO had recorded reasons, stating that the assessee received bogus remittances under the Foreign Exchange Remittances (Immunity) Scheme, 1991, by paying a commission. The Tribunal agreed with the Departmental Representative, holding that the reopening of the assessment in respect of Rs. 1,00,000 and Rs. 3,08,000 was valid, as the remittances were not genuine and involved unexplained credits.

2. Addition of Rs. 1,00,000 and Rs. 3,08,000 under Section 68:
The assessee contended that the remittances were genuine gifts from NRE accounts and were deposited under the Voluntary Deposits (Immunities & Exemptions) Scheme, 1991. The ITO, however, found no evidence to support this claim and treated the remittances as unexplained credits, making additions under Section 68. The Tribunal examined the cash flow statements and the provisions of the VD (I&E) Act, 1991, which provided immunity for such deposits. It was held that the assessee had complied with the conditions of the VD (I&E) Act, 1991, and the Department was not entitled to question the source of the deposits. Consequently, the additions of Rs. 1,00,000 and Rs. 3,08,000 were deleted.

3. Addition of Rs. 1,42,800 under Section 68:
The addition of Rs. 1,42,800 was based on the statement of I.S. Prasad, who claimed that a commission at the rate of 35% was paid for arranging remittances. The assessee argued that he was not given an opportunity to cross-examine I.S. Prasad, violating the principles of natural justice. The Tribunal found merit in this argument, noting that Prasad's statement did not specifically mention that the commission was paid by the assessee. The reopening of the assessment in respect of Rs. 1,42,800 was deemed invalid, and the addition was deleted.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, holding that the reopening of the assessment for Rs. 1,42,800 was invalid, and the additions of Rs. 1,00,000 and Rs. 3,08,000 under Section 68 were unjustified. The orders of the lower authorities were cancelled, and the additions were deleted.