The Income Tax Appellate Tribunal ( ITAT ), Mumbai Bench, has recently, in an appeal filed before it, held that reopening of assessment based on investigation wing’s information is valid, when the company is found to be an alleged beneficiary receiving share application money.
The aforesaid observation was made by the Tribunal when an appeal was filed before it by the Revenue as against the order of the Commissioner of Income-tax (Appeals), Mumbai, dated 30/07/2019, passed under section 250 of the Income-tax Act, 1961, pertaining to assessment year 2008-09.
The brief facts were that the assessee company had filed its return of income on 14/09/2008, declaring total income at Rs.17,40,372/, subsequent to which the case of the assessee was reopened vide notice under section 148 dated 16/03/2015, upon information received from the Investigation Wing during search / survey action conducted in the case of Lotus / Kamadhenu / Green Valley group dated 09/10/2014 ,that the assessee company is one of the beneficiaries , having received share application money of Rs.2 crores and Rs.4 crores from M/s Bhawna Computers Pvt Ltd and M/s Rowland Trexin Pvt Ltd, respectively ,along with other companies, totalling Rs. 12 crores.
The above companies being alleged to be the concerns of Shri Pradeep Poddar, it was submitted by the assessee that the return of income filed under section 139(1) of the Act shall be treated as return filed in compliance to section 148 notice.
The Assessing Officer having passed the assessment order under section 143(3) r.w.s. 147 of the I.T. Act, 1961 dated 31/03/2016 assessing total income at Rs.12,17,40,370/, he added Rs.12 crores credited in the books under the head ‘share application money’ by treating the same as unexplained cash credit under section 68 of the I.T. Act. And being aggrieved by the said order, the assessee had preferred an appeal before the Ld.CIT(A), who deleted the said addition pertaining to M/s Rowland Trexin Pvt Ltd, M/s Bhawna Computers P Ltd and M/s Blue Jay Airlines Pvt Ltd to the tune of Rs.11 crores, and confirmed an addition of Rs.1 crore pertaining to the remaining parties.
And it is against this order of the CIT(A), deleting the addition to the extent of Rs.11 crores made by the Assessing Officer, that the Revenue has preferred the instant appeal before the Tribunal.
The assessee’s cross objection being filed challenging the assessment order passed under section 143(3) r.w.s. 147 on the ground that the reopening is bad in law and that the assessment order ought to have been passed under section 153C of the Act, it was submitted by the AR for the assessee, that the Assessing Officer in his reasons for reopening has erroneously specified the transaction as Rs.20 lakhs and R.40 lakhs from Bhawna Computers Pvt Ltd and Rowland Trexin Pvt Ltd instead of Rs.2 crores and Rs.4 crores, and further that the Revenue has not substantiated its stand that the assessee company is not worth for the premium charged.
With the AR further contending that mere low investment does not infer that the company is not capable of attracting huge premium, it was contended by the DR for the Revenue that the reopening was upon information received from the Investigation Wing pursuant to the search conducted in the case of Lotus / Kamdhenu / Green Valley group and that the alleged parties were said to be accommodation entry providers, based on which the Assessing Officer made addition of the impugned amounts.
The DR also stated that as per the assessee’s P&L Account, placed at pages 25 to 29 of the paper book, the net profit shown was only Rs.11,16,674/- and that the assets and liabilities declared by the assessee are also fictitious since the assets have only furniture and no assets of high value, and further that the charging of premium by the assessee was itself doubtful.
Hearing the opposing contentions of both the sides and perusing the materials available on record, the Tribunal consisting of Amarjit Singh, the Accountant Member and Kavitha Rajagopal, the Judicial Member, observed:
“Having heard the rival submissions and perused the materials on record, it is evident that on the basis of the information received from the Investigation Wing that the assessee company is alleged beneficiary of having received share application money of Rs.2,00,00,000/- and Rs.4,00,00,000/- from M/s Bhawna Computers P Ltd and M/s Rowland Trexim P Ltd, respectively, and from other alleged companies. It is evident that the Assessing Officer had received credible information from the Investigation Wing and also the statement of Shri Pradeep Poddar, director of the said companies has admitted the fact that the said companies were used for providing accommodation entries to various parties.”
“This information received from the Investigation Wing is reliable source for the Assessing Officer to reopen the assessment and this reason is sufficient for the Assessing Officer to have prima facie belief that income has escaped assessment. Upon this reasonable belief, the assessment order under section 143(3) r.w.s. 147 is valid.”,the Bench added.
Thus, allowing the Revenue’s appeal while dismissing the cross objection filed by the assesse, the Tribunal ruled:
“We find no absurdity in the reopening of the assessment by the Assessing Officer. In this context, the Cross Objection filed by the assessee is to be dismissed.”
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