2011 (4) TMI 1372 - AT - Income Tax

Summary

Issues Involved:
1. Validity of initiation of proceedings u/s 147.
2. Reopening of assessment after four years.
3. Assessment of share capital money as unexplained investment u/s 68.

Summary:

1. Validity of initiation of proceedings u/s 147:
The assessee challenged the validity of the initiation of proceedings u/s 147, arguing that the notice u/s 148/147 was issued after the expiry of four years from the end of the relevant assessment year (A.Y. 2001-2002). The original assessment was made u/s 143(3) on 27.1.2003, and the notice for reopening was issued on 25.3.2008. The assessee contended that there was no failure on their part to disclose all material facts necessary for the assessment, as required by the proviso to section 147.

2. Reopening of assessment after four years:
The Ld.CIT(A) held that the reopening was valid as the AO had formed a "reason to believe" based on specific information from the Investigation Wing, which indicated that the assessee had received accommodation entries from certain companies. The AO's belief was deemed rational and based on relevant material. The reopening was within six years from the end of the relevant A.Y., and the income alleged to have escaped assessment was more than Rs. 1,00,000/-. The Ld.CIT(A) concluded that the proceedings u/s 147 were validly initiated.

3. Assessment of share capital money as unexplained investment u/s 68:
The AO treated the share capital money received from three companies as unexplained investment u/s 68, based on statements from the directors of these companies. The assessee argued that all necessary details were disclosed during the original assessment, and the AO had made independent enquiries u/s 133(6). The Tribunal found that the reopening was based merely on information from the Investigation Wing without independent application of mind by the AO. Citing various judicial precedents, the Tribunal held that the reopening was not valid as there was no failure on the part of the assessee to disclose material facts fully and truly.

Conclusion:
The Tribunal quashed the reassessment on jurisdictional grounds, rendering the Revenue's appeal on the merits of the case academic and infructuous. The assessee's Cross Objection was allowed, and the Revenue's appeal was treated as infructuous.