ITAT confirms re-opening of assessment based on information from investigation unit

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The Income Tax Appeal Tribunal (ITAT), Bombay benchrecently, in an appeal filed before it, ruled that the reopening of the assessment based on the information of the investigation wing is valid, when it is found that the company is an alleged beneficiary receiving the money from demand for shares.

The above observation was made by the Tribunal when an appeal was filed before it by the Inland Revenue against the Order of the Commissioner of Income Tax (Appeals), Mumbai, dated 30/07/2019, enacted under Section 250 of the Revenue- Tax Act, 1961, relating to the tax year 2008-09.

The brief facts were that the assessed company had filed its tax return on 14/09/2008, declaring a total income of Rs.17,40,372/, following which the assessee’s case was reopened under notice in under Section 148 dated 03/16/2015, upon information received from the Investigation Wing during a search/investigation action conducted in the case of the Lotus Group / Kamadhenu / Green Valley dated 10/09 /2014, that the assessed company is one of the beneficiaries, having received the 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, totaling Rs. 12 crores.

As the above companies are alleged to be the concerns of Shri Pradeep Poddar, the assessee argued that the tax return filed under Section 139(1) of the Act should be treated as a return filed under the section 148 notice.

The assessor who made the assessment order under section 143(3) rws 147 of the Computers Act 1961 dated 31/03/2016 valuing the total income at Rs.12,17,40,370/ he added Rs.12 crores credited in the books under the heading ‘share the money of application” by treating the same as unexplained cash credit under Section 68 of the Information Technology Act. And being aggrieved by said order, the assessee had preferred to appeal to Ld.CIT(A), which removed said addition relating to M/s Rowland Trexin Pvt Ltd, M/s Bhawna Computers P Ltd and M/s Blue Jay Airlines Pvt Ltd in the amount of Rs.11 crore, and confirmed an addition of Rs.1 crore for the remaining parts.

And it is against this order of the CIT(A), removing the addition to the measure of Rs.11 crores made by the assessment officer, that the tax authorities preferred the present appeal to the Tribunal.

The assessee’s counterclaim challenging the assessment order passed under s 143(3) rws 147 on the grounds that the reopening is wrong in law and the assessment order should have been passed in under Section 153C of the Act, it was submitted by the RA for the assessee, that the Assessing Officer in his reasons for reopening erroneously specified the transaction as Rs.20 lakhs and R.40 lakhs of Bhawna Computers Pvt Ltd and Rowland Trexin Pvt Ltd instead of Rs.2 crores and Rs.4 crores, and further that the Inland Revenue has failed to substantiate its position that the assessed company is not worth the premium charged.

With the AR further asserting that mere low investment does not mean the business is not capable of attracting huge bonuses, the IRS DR argued that the reopening was done on the basis of information received from the Investigative Wing as a result of the research carried out in the Lotus Group/Kamdhenu/Green Valley case and that the alleged parties were accommodation entry providers, on the basis of which the assessment added the disputed amounts.

The DR also said that according to the P&L account of the assessee, placed on pages 25-29 of the paper book, the net profit shown was only Rs 11,16,674/- and that the assets and liabilities reported by the ‘assessed’ are also fictitious since the assets have only movables and no high value assets, and furthermore the charging of the premium by the assessee was itself dubious.

In hearing the opposing arguments of the two parties and reviewing the documents available in the file, the Tribunal composed of Amarjit Singh, the accounting member and Kavitha Rajagopal, the judicial member, observed:

“After hearing the rival submissions and reading the documents on file, it is evident that based on the information received from the investigation wing, the assessed company is presumed to be a beneficiary of having received a request for action from 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 other alleged companies It is evident that the agent assessment had received credible information from the investigative wing and also the statement of Shri Pradeep Poddar, Director of the said companies admitted the fact that the said companies were used to provide accommodation entrances to various parties .

“This information received from the investigation wing is a reliable source for the assessment officer to reopen the assessment and this reason is sufficient for the assessment officer to have a prima facie belief that the income has escaped assessment. On this reasonable belief, the assessment order under s 143(3) rws 147 is valid,” the bench added.

Thus, allowing the appeal of the tax authorities while rejecting the counterclaim filed by the assessee, the Court ruled:

“We find no absurdity in the re-opening of the assessment by the assessment officer. In this context, the cross-objection filed by the assessee must be rejected. »

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Deputy Commissioner of Income Tax v M/s Nishrin Trading and Investment Pvt Ltd

Counsel for the Appellant: Shri Rushabh Mehta

Counsel for the Respondent: Shri Dharam Vir Yadav



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