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Renuka Financial Services Ltd. Versus ITO, Ward 15 (4) , New Delhi

2016 (5) TMI 718 - ITAT DELHI

Reopening of assessment - receipt of accommodation entries - Held that:- In the instant case, the AO received information that the assessee has received accommodation entries in the nature of share capital/capital gains. He has not verified the same before issuing the notice. The assessee has not received any amount by way of share capital or by way of capital gains. As already explained the assessee has carried out share trading transactions during the year and received the payment thereof by c .....

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R ORDER Per Beena A. Pillai, JM The present appeal has been filed by the assessee against the order of the ld. CIT(A)-XVII, New Delhi, vide order dated 10th January, 2013 for assessment year 2004-05, on the following grounds of appeal:- 1. On facts and in the circumstances of the case and in law, the Id. Commissioner of Income Tax (Appeals)(CIT (A)) erred in confirming the addition of ₹ 1,06,06,355/- on account of income from undisclosed sources. 2. The CIT (A) erred in upholding the reass .....

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4. That the A.O. had no material whatsoever for formation of any belief that income of the appellant chargeable to tax had escaped assessment since the appellant had not received accommodation entries by way of share capital/capital gains. 5. That the A.O. erred in initiating the reassessment proceedings on mere change of opinion for reviewing order of assessment made earlier which is contrary to the law. 6. That in any case, the alleged undisclosed income was already offered by the appellant as .....

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mitted to add, amend or forego all or any of the above grounds of appeal. 2. Brief facts of the case as recorded by the AO are that the assessee had filed return declaring income of Nil after setting off brought forward losses to the extent of profit of ₹ 10,71,42,915/-. The income u/s 115JB was however shown at ₹ 10,50,87,168/-. The case was completed u/s 143(3) on 24.11.2006 at a book profit of ₹ 10,50,87,168/-. Later on, an information was received from the Investigation Win .....

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prove the identity, genuineness and creditworthiness of the persons who have allegedly entered into share transactions. As the assessee did not offer any explanation about the nature and source of the sums found credited in the books there was, prima facie, evidence against the assessee, viz., the receipt of money. The burden was on the assessee to rebut the same, and, it failed to rebut it, it can therefore be held against the assessee that it was a receipt of an income nature. The appellant h .....

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ring the above facts, the addition of ₹ 1,06,06,355/- made by the AO u/s 68 is confirmed. 3. Aggrieved by the order of the ld.CIT(A), the assessee is in appeal before us. 3.1. Grounds of appeal Nos.2, 3, 4 and 5 are directed against the reopening of the assessment u/s 147 as there was no failure on the part of the assessee to disclose fully and truly all materials for assessment and ground Nos.1, 6 and 7 are directed against the addition of ₹ 1,06,06,355/- on account of income from u .....

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he share trading in P&L Account under the head Profit on sale purchase of shares. The ld. AR submitted that during the course of the assessment proceedings, the AO had asked for the details of profit on sale and purchase of shares. 3.3. It is further submitted that vide letter dated 22nd November, 2006, the assessee had submitted all the relevant details in respect of the share purchase. The relevant letter dated 22nd November, 2006 is placed at pages 48 to 86 of the paper book. The ld. AR s .....

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grounds:- That the re-assessment proceedings initiated is beyond the jurisdiction and not in accordance with the provisions of the law; That there is no reason to believe that any income has escaped assessment which could be prejudicial to the interests of the revenue. That there is a non-application of mind by the ld. AO at the time of recording of reasons which leaves the re-assessment invalid; That the reopening is invalid in terms of the Proviso to section 147 of the Act; and That the reope .....

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us. 5.1. On perusal of the records before us, it is observed that the assessee had submitted all the details regarding the income from trading of shares amounting to ₹ 1,06,05,440/-. The ld. AO, while passing the original assessment order has gone through these details and has applied his mind before accepting the submissions made by the assessee in lieu of the profits earned from trading in shares. It is further observed that the assessee has disclosed the amount in the Profit & Loss .....

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e of reopening has been issued by the ld. AO on 30.3.2011 which is beyond four years from the end of the relevant assessment order. The ld. AO has proceeded with the re-assessment proceedings merely on the information received from the Investigation Wing, without verifying the same. In the light of the above, we shall evaluate the provisions u/s 147 of the Act as under. No reason to believe that income has escaped assessment 5.3. The initiation of reassessment proceedings on the basis of the abo .....

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ncorrect. Therefore, the very reason on the basis of which the case was reopened is non- existent and therefore the proceedings are void ab initio. 5.4. It is further submitted that the assessee has duly accounted the said profit in its books of account. The assessee has specifically disclosed the same under the heading "profit on sale-purchase of shares" at ₹ 1,06,05,440/- in the Profit and loss account (there is marginal difference of ₹ 915/-). Thus the said income has be .....

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ped assessment. In the instant case, the reasons do not show any application, nor the same show any belief independently arrived at, which is the basic pre-requisite for issuing notice u/s 148. Further, the alleged information provided by the Investigation Wing has been accepted as gospel truth without any verification by the Assessing Officer. 5.6. The law postulates the Assessing Officer (and not the Investigation Wing) to have reason to believe. Blind acceptance of the information furnished b .....

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share capital or by way of capital gains. As already explained the assessee has carried out share trading transactions during the year and received the payment thereof by cheques. Such profit has been duly accounted, disclosed and assessed. Therefore the AO could not form a belief at the time of issue of notice that income to that extent has escaped assessment. Therefore the reassessment notice is invalid and void ab initio. Reopening invalid in terms of proviso to section 147: 5.8. The present .....

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and raised a specific query. The assessee has filed detailed explanations along with supporting documents. Thus, the assessee has disclosed fully and truly all material facts necessary for assessment both at the time of filing the return of income as well as during the course of assessment proceedings. It is therefore observed that the present proceedings are bad, in terms of the proviso to section 147. 5.9. Proviso to the section 147 of the Act places fetters on the powers of the Assessing Offi .....

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assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment yea .....

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our years from the end of the assessment year 2004-05 without there being any failure on the part of the assessee to disclose fully and truly material facts necessary for assessment. That being so, the impugned reassessment proceedings have been initiated clearly beyond the period of limitation prescribed in proviso to section 147 of the Act, which is not permissible in law. The proceedings initiated are, therefore, clearly without jurisdiction, bad in law and void ab initio. 5.11. The ld.AR sub .....

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documents as detailed earlier. The AO after full application of mind passed the order u/s 143(3). In such a case, the reassessment notice is bad. The Supreme Court has in the case of Kelvinator of India in 320 ITR 561 has held that "the concept of change of opinion" on the part of Assessing Officer to reopen an assessment does not stand obliterated after the substitution of section 147 of the Income-tax Act, 1961, by the Direct Tax Laws (Amendment) Acts, 1987 and 1989. After the amendm .....

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pital gains and what the AO did was only to change the nomenclature from "capital gains" to "undisclosed income". The assessment has been reopened after a lapse of about eight years from the end of the relevant assessment year as noted by the Tribunal. If the assessment is sought to be reopened after a period of four years from the end of the relevant assessment year, it is incumbent upon the AO, under the first proviso to s. 147, to show that the escapement of income was on .....

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