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2008 (6) TMI 285 - AT - Income TaxValidity of reopening of assessment u/s 147 - Additions u/s. 68 - chit fund contributions - non-furnishing of reason for reopening the assessment - Contributions to chit are in the nature of deposit or investment within the meaning of s. 13(1)(d) r/w s. 11(5) of the Act? Validity of reopening of assessment u/s 147 - Additions u/s. 68 - chit fund contributions - non-furnishing of reason for reopening the assessment - AO, in all the three years, has made the addition u/s. 68 on cash credits - without furnishing the details of such cash credits - CIT(A) deleted the said addition, that the AO has failed to make proper enquiries - HELD THAT:- We find from the assessment order that during the course of proceedings for granting recognition u/s. 80G of the Act, the Department has noticed the chit fund contributions and according to the Department, these deposits have been made in contravention of provisions of s. 11(5) of the Act. Consequent to the abovesaid information, the AO reopened the assessments - When the question is raised about the validity of reassessment notice, it is only to be seen whether there are reasonable grounds with the AO to initiate the proceedings of reopening of assessment and not whether the omission or failure and escapement of income is established. This view is supported by the decision of Hon'ble Supreme Court in Sri Krishna (P) Ltd. Etc. vs. ITO [1996 (7) TMI 2 - SUPREME COURT]. The letter issued by the AO also addresses upon certain objections raised by the assessee with regard to applicability of s. 11(5). However, the moot point here is that the assessee has not raised any objection to tile reopening, after furnishing the reasons letter, though a new ground has been raised before us. On a conspectus of the matter, we hold that the reopening of assessments u/s 147 of the Act is in accordance with the law and hence, the assessee fails on this issue. Contributions to chit are not in the nature of deposit or investment within the meaning of s. 13(1)(d) r/w s. 11(5) of the Act - main contention of the ld AR is that the contribution to chit fund cannot be regarded as either an investment or deposit and hence the provisions of s. 11 (5) would not be applicable - HELD THAT:- The undisputed fact is that the chit fund scheme also constitutes a convenient instrument for savings. If one bids at the fag end of the chit period, it may result in a gain. In that case this instrument can be termed as income producing property and hence contributions to chit fund, in that case, will fall under the category of "investment" - the contributions made to chit fund scheme of Model Chit Fund Corporation are an investment and since this investment is not in the form or mode prescribed u/s. 11(5) of the Act, the provision of s. 13(1)(d) is attracted. Hence, we do not find any infirmity in the orders of learned CIT(A) - We find from the record that the AO has initially issued commissions to the ITOs located at Kakinada, Vizianagaram and Srikakulam. However, only the ITO, Kakinada, responded to the commission and sent the sworn statements recorded from some of the creditors. Subsequently, the AO issued summons to the assessee asking it to produce all the creditors. However, the assessee expressed its inability to produce all the creditors. Finally the AO made additions u/s. 68 without making further enquiries and without furnishing the details of such cash credits - From the assessment order we find that the AO has rejected the confirmation letter furnished by four creditors on surmises only. The AO should have listed out the cash credits on which he wanted details and then sought for the information from the assessee. Without affording such details to the assessee, the assessee cannot be expected to discharge the initial burden of proof placed upon it. Hence, we do not find any reason to interfere with the order of learned CIT(A) on this issue also. In the result, the appeals filed by the assessee as well as Revenue are dismissed.
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