MRS. DEEPAL N MEHTA, MUMBAI V. THE INCOME TAX OFFICER-19(1)(4), MUMBAI

ITA 5295/MUM/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 7861 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 12-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Search and seizure; Tangible material; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 68; 148; 143(1)

Judgement Text

आयकर अपीलीय अिधकरण मुंबई पीठ “एस.एम.सी” मुंबई ŵी िवकास अव̾थी, Ɋाियक सद˟ IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “SMC”, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER आअसं.5295/मुं/2019(िन.व. 2009-10) ITA No. 5295/MUM/2019 (A.Y.2009-10) Mrs. Deepal N. Mehta 111, 11 th Floor, Enterprises Apartments, Opp. Bhatia Hospital, Tardeo, Mumbai-400007. PAN: AQNPM9178N ...... अपीलाथŎ /Appellant बनाम Vs. ITO-19(1)(4), Matru Mandir, Mumbai-400007. ..... Ůितवादी/Respondent अपीलाथŎ Ȫारा/ Appellant by : Sh. S. Venkatraman. Ůितवादी Ȫारा/Respondent by : Sh. Sanjay J. Sethi and Sh. T. Shankar, DR सुनवाई की ितिथ/ Date of hearing : 25/02/2022 घोषणा की ितिथ/ Date of pronouncement : 28/02/2022 आदेश/ ORDER PER VIKAS AWASTHY, JM: This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)- 30, Mumbai [hereinafter referred to as ‘the CIT(A)’] dated 24.05.2019 for the Assessment Year (AY) 2009-10. 2. The assessee in appeal has raised as many as seven grounds of appeal, however, all these grounds relates to only two issues i.e. challenge to re- opening of assessment and against the addition of Rs. 5,00,000/- on merits. In 2 आअसं. 5295/मुं/2019 (िन.व. 2009-10) ITA No. 5295/Mum/2019 (A.Y. 2009-10) ground no. 1 to 4 of appeal, the assessee has assailed re-opening of assessment and in ground no. 5 to 7 of appeal, the assessee has challenged addition of Rs. 5,00,000/- made under section 68 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). 3. Sh. S. Venkatraman appearing on behalf of the assessee assailing re- opening of assessment submitted that a perusal of reasons recorded for re- opening at page no. 1 of the Paper Book (PB) would show that re-opening has been done merely on the basis of information received from Investigation Wing. The Assessing Officer (AO) has not applied his independent mind for recording satisfaction for re-opening, as envisaged under the provisions of the Act. No independent enquiry was made by the AO before invoking the provisions of section 148 of the Act. The ld. Authorized Representative (AR) submitted that in the instant case re-opening has been done beyond the period of four years, the original return of income was accepted by the Revenue under section 143(1) of the Act. The AO has no reason to believe that income chargeable to tax has escaped assessment but has invoked the re- assessment proceedings merely on suspicion. The requirement of the law is reasons to believe and not reason to suspect. In support of his contentions, the ld. AR placed reliance on the decision rendered in the case of PCIT Vs. Shodiman Investments Pvt. Ltd. 422 ITR 337 (Bom.). 3.1 The ld. AR submitted that on merits, the AO has made addition of Rs. 5,00,000/- merely on suspicion that the lender M/s Daksh Diamonds from whom the assessee had taken unsecured loan of Rs. 5,00,000/- during the Financial Year (FY) 2008-09 has provided accommodation entry. The reason for such suspicion is that the lending firm purportedly belongs to Bhanwarlal Jain 3 आअसं. 5295/मुं/2019 (िन.व. 2009-10) ITA No. 5295/Mum/2019 (A.Y. 2009-10) Group. During the course of re-assessment proceedings, the AO vide notice dated 06.12.2016 directed the assessee to furnish following details: (i) Copy of confirmation of loan; (ii) Bank statement of the party advancing loan reflecting the transaction; (iii) Copy of return of income of the lender; and (iv) Copy of PAN Card of the lender. The assessee in reply to the said notice furnished all the documents as required by the AO. The ld. AR referred to the reply at page no. 18 to 24 of the PB. The ld. AR further referred to the Bank statement of the assessee at page 10 of the PB to show that the loan was taken by the assessee from M/s Daksh Diamonds through cheque, the cheque was deposited in the Bank. On 09.06.2008, the cheque was encased and Rs. 5,00,000/- were credited to the bank account of the assessee. On the same date Rs. 5,00,000/- were debited from the Bank Account of M/s Daksh Diamonds reflected in the Bank statement of M/s Daksh Diamonds at page 21 of the PB. The ld. AR pointed that the transactions details clearly mentions cheque number and the name of the assessee in the Bank statement of the lender i.e. M/s Daksh Diamonds. The ld. AR further submitted that the assessee has re-paid the entire unsecured loan amount along with interest on 16.09.2014. The ld. AR in support of his contentions referred to the statement of the assessee’s account with Bank of Baroda at page 31 of the PB, as well as, bank statement of M/s Daksh Diamonds at page 32 of the PB. The ld. AR pointed that a perusal of both the bank statements would show that on 16.09.2014 an amount of Rs. 5,45,000/- has been debited from the Bank Account of the assessee and on the same date, the same amount has been credited in the Bank Account of M/s Daksh Diamonds. The ld. AR also referred to the Bank statements of the assessee 4 आअसं. 5295/मुं/2019 (िन.व. 2009-10) ITA No. 5295/Mum/2019 (A.Y. 2009-10) during the intervening period to show that the assessee has been paying interest on the loan amount every year and the interest amount has been paid by the assessee from his Bank Account. The ld. AR submitted that re- assessment proceedings have been initiated in illegal and arbitrary manner, therefore, the same are liable to be set-aside. Even on merits, the assessee has proved the identity, creditworthiness and genuineness of the transactions, therefore, no addition is warranted. 4. Per contra, Sh. Sanjay J. Sethi representing the Department vehemently defended the impugned order. The ld. Departmental Representative (DR) submitted that a perusal of the reasons recorded for re-opening would show that the AO has applied his mind and has thereafter issued notice under section 148 of the Act. The ld. DR submitted that the decision rendered in the case of PCIT V/s. Shodiman Investments Pvt. Ltd. (supra) is distinguishable on facts. In the said case, the reasons mentioned ‘suspicion’ and ‘time barring’ as reasons for re-opening whereas in the present case there is no such mention of suspicion. The AO has given a categorical findings that the assessee has obtained accommodation entries of unsecured loan from M/s Daksh Diamonds. The ld. DR prayed for dismissing appeal of the assessee and to uphold re-opening of assessment, as well addition on merits. 5. Submissions made by rival sides heard, orders of the authorities below and the documents furnished by the assessee in the form of PB examined. The assessee is in appeal against an ex-parte order by the CIT(A). The CIT(A) in a summary manner has rejected the appeal on merits. The assessee in grounds of appeal before the Tribunal has not assailed ex-parte proceedings by the First Appellate Tribunal. Nor oral ground/submission was raised by the ld. AR of the 5 आअसं. 5295/मुं/2019 (िन.व. 2009-10) ITA No. 5295/Mum/2019 (A.Y. 2009-10) assessee assailing ex-parte proceedings by the CIT(A). Hence, I proceed to decide the appeal on the grounds raised in appeal. 6. In ground no. 1 to 5 of appeal, the assessee has assailed re-opening of assessment. The contention of the assessee is that assessment has been re- opened merely on the basis of information received from Investigation Wing. The AO has neither applied his mind nor carried out any independent enquiry before issuing notice under section 148 of the Act. Hence, re-opening on the basis of borrowed information is unsustainable. A perusal of reasons for re- opening at page 1 of the PB reveal that the AO had received information from Investigation Wing. The said information emanates from search and seizure action carried out on Bhanwarlal Jain Group on 03.10.2013. Purportedly, on the basis of documentary evidences gathered and statements recorded during the course of search on Bhanwarlal Jain Group, information was forwarded to the AO of the assessee that the assessee had obtained accommodation entries of unsecured loan from M/s Daksh Diamonds, one of the group concerns of Bhanwarlal Jain Group. The AO taking cognizance of documents forwarded by the Investigation Wing initiated proceedings for re-opening the assessment. It is a settled legal position that before issuing notice under section 148 of the Act, the AO has to record “reasons to believe” that the income chargeable to tax had escaped assessment and such reason to believe should be of the AO and not based on any borrowed information. In the instant case there is no reference of any tangible material available with AO that could become basis for reason to believe that the income has escaped assessment. It was merely on the documents forwarded by the Investigation Wing that the AO recorded his reasons to re-open the assessment. Therefore, in my considered view, the reasons recorded by the AO for re-opening assessment fall short of the legal 6 आअसं. 5295/मुं/2019 (िन.व. 2009-10) ITA No. 5295/Mum/2019 (A.Y. 2009-10) requirement. Consequently, the notice issued under section 148 of the Act is bad-in-law and the subsequent proceedings arising there from are vitiated. In light of above findings, the assessee succeeds on ground no. 1 to 4 of the appeal. 7. As regards, addition on merits, it is observed that the assessee had taken unsecured loan from M/s Daksh Diamonds. During the course of re-assessment proceedings, the AO directed the assessee to furnish details/documents to substantiate genuineness of the loan transaction and the identity of the lender. As required by the AO the assessee furnished copy of confirmation of loan from M/s Daksh Diamonds, copy of acknowledgement of return of income of Ritesh Sumer Mal Siroya, Proprietor of M/s Daksh Diamonds and copy of PAN Card of the aforesaid lender. Thus, the assessee discharge his onus in proving genuineness of the transaction, identity of the lender and creditworthiness of the lender. The AO brushed aside all the evidences furnished by the assessee and made addition merely for the reason that the lender M/s Daksh Diamonds is one of the associates of Bhanwarlal Jain Group and in statement recorded during the course of search. Bhanwarlal Jain had admitted that he has floated various concerns to provide accommodation entries. In the entire assessment order, there is no mention of the documents furnished by the assessee to substantiate genuineness of the transaction. Infact, the AO in para-7 & 8 of the order has recorded that the assessee failed to provide the evidence to establish genuineness of the loan, creditworthiness and genuineness of the lender the said remarks of the AO are contrary to the documents on record, the assessee has certified that the documents furnished in the Paperbook were filed during reassessment proceedings and are on the record of the Department. It is pertinent to mention here that the assessee in 7 आअसं. 5295/मुं/2019 (िन.व. 2009-10) ITA No. 5295/Mum/2019 (A.Y. 2009-10) subsequent AY i.e. in AY 2015-16 has repaid the loan. During intervening period, the assessee paid interest on loan. The documents furnished by assessee establish creditworthiness and identity of the lender and genuineness of the transaction. The addition made by the AO under section 68 of the Act is unsustainable, hence, deleted. The assessee succeeds on ground nos. 5 to 7 of the appeal. 8. In the result, impugned order is set-aside and appeal of the assessee is allowed. Order pronounced in the open court on Monday, the 28 th day of February, 2022. Sd/- (VIKAS AWASTHY) Ɋाियक सद˟/JUDICIAL MEMBER मुंबई/ Mumbai, िदनांक/Dated: 28/02/2022 S.K., Sr. PS Ůितिलिप अŤेिषतCopy of the Order forwarded to : 1. अपीलाथŎ/The Appellant , 2. Ůितवादी/ The Respondent. 3. आयकर आयुƅ(अ)/ The CIT(A)- 4. आयकर आयुƅ CIT 5. िवभागीय Ůितिनिध, आय.अपी.अिध., मुबंई/DR, ITAT, Mumbai 6. गाडŊ फाइल/Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Mumbai