ITO Vs Allegiance Management Services Private Limited (ITAT Delhi)
AO Forgot the Original Scrutiny While Reopening It: ₹3.25 Crore Addition u/s 68 Quashed with Reassessment u/s 147
Background
Allegiance Management Services Pvt. Ltd., incorporated on 20.04.2010, was engaged in consultancy & allied business services. For AY 2012-13, it filed its return on 31.03.2013, declaring income of ₹5,63,150 under the normal provisions & book profit of ₹9,23,115 u/s 115JB.
The case was selected for scrutiny under CASS. During the original assessment, the AO issued detailed questionnaires seeking information regarding share application money, share premium, purchase of a Mumbai property & reserves reflected in the balance sheet.
The company furnished confirmations from investors, their income-tax returns, balance sheets, bank statements, board resolutions authorising the share allotment & proof of filing the return of allotment with the Registrar of Companies. The documents covered share capital & premium of ₹3.25 crore received from five parties.
After examining these materials, the AO completed assessment u/s 143(3) on 22.12.2014, accepting the returned income.
Investigation Leads to Reopening
Several years later, the AO received information from the Investigation Wing stating that the assessee had purchased immovable property in Mumbai for ₹3 crore during FY 2011-12.
The Investigation Wing noticed that the company had paid-up capital of only ₹8.71 lakh, general reserves of approximately ₹3.17 crore & little operating income. It had issued 77,500 shares at a substantial premium. Statements of the company’s directors allegedly revealed limited knowledge about some investor entities.
