B D Cotton Associates Vs ITO (ITAT Mumbai)
Reopening must be on the same reason on which addition is made- ₹1.30 Cr Addition Deleted
Loan from NBFC? AO Demands ‘Source of Source’ – ITAT Says: Not in 2012!
Assessee is an Association of Persons & an NBFC registered with the RBI. It filed its return of income for A.Y. 2012-13 declaring nil income. The assessment was later reopened u/s 147 by issuing notice u/s 148 on 30.03.2019 based on information received from the Investigation Wing that M/s Agrawal Enterprise had received ₹1.30 crore from Assessee & the transaction looked suspicious. AO assumed that Assessee lacked creditworthiness & therefore, the funds must be part of an accommodation entry chain.
However, while reopening was based on payments made by Assessee to Agrawal Enterprise, AO ultimately made an addition of ₹1.30 crore u/s 68 on the ground that Assessee received the money from M/s Omrim Securities Ltd., treating the loan received by Assessee as unexplained. Thus, the reason for reopening & the reason for addition were completely different, which itself makes the reopening legally defective.
Assessee produced complete documents of Omrim Securities Ltd. including loan confirmation, bank statements, financial statements, ITR & proof of repayment, & explained that Omrim Securities Ltd. is also an NBFC engaged in lending business. The amount received was part of a running account between two NBFCs, fully routed through bank & later repaid back, thereby establishing identity, creditworthiness & genuineness of the lender.
