DCIT Vs Ashok Jasraj Jain (ITAT Mumbai)
No reassessment based on “certain presumptions” without concrete material evidence for doubting source of funds as Loans in Bank Statement
Conclusion: Once the company had shown the source of giving loan from various transactions reflected in the bank statement and had given the details, there were no reason to doubt the source of funds. Therefore, reassessment for doubting source of funds as loans in Bank statement was unjustified.
Held: Assessee had filed his income tax return on in which he declared a total income of Rs. 35,00,611, accepted under Section 143(1). A subsequent search and seizure operation on Pipavav Defence and Offshore Engineering Co. brought assessee’s finances under scrutiny, as he was allegedly linked to the company. This led to a reassessment under Section 143(3) of ITA read with Section 153A of the tax legislature, increasing the assessee’s taxable income to Rs. 49,06,660. In March 2018, the Income Tax Department’s Investigation Wing informed AO that assessee had purchased property for Rs. 3.44 crore in 2010-11, despite reporting an income of Rs. 29,15,842 in his return. Revenue raised concerns over the loan of Rs. 2.65 crore provided by Sneha Ferromet Pvt. Ltd., questioning its financial capacity given its net worth of Rs. 24,41,033 and gross receipts of Rs. 21 lakh. Department argued that the loan’s source appeared “suspicious,” prompting the reopening of the assessee’s assessment under Section 148 of the tax statute. Assessee argued that his funds and property transactions had been adequately explained and scrutinized in the original assessment. He provided detailed documents, including loan confirmations, bank statements, purchase agreements, and financial statements, to prove the loan’s legitimacy and the source of funds. Assessee contended that the reassessment was baseless, amounting to a “change of opinion,” which was impermissible under tax law. However, AO dismissed his objections, citing legal precedents supporting the reassessment based on “credible information.” During the reassessment, assessee reiterated that the loan of Rs. 1,96,50,000 received from Sneha Ferromet Pvt. Ltd. was genuine, presenting confirmations, bank statements, and tax returns as evidence. Despite this, AO concluded that the lending-company lacked sufficient capital to make the loan and thus added Rs. 3.44 crore to the assessee’s taxable income, along with a penalty under Section 271(1)(c) for alleged concealment of income. It was held that the initial reopening relied solely on data from the Investigation Wing, based on property value and income comparisons without direct inquiries into Sneha Ferromet’s financial operations. Tribunal highlighted that no further investigation into the company’s records was conducted to substantiate the claims. Additionally, the ITAT stressed that the addition was based on the current market value of Rs. 3.44 crore rather than the assessee’s actual investment of Rs. 2.79 crore. Tribunal pointed out that the major portion of the investment was made in the prior year, which AO overlooked. ITAT observed that assessee had sufficiently discharged his burden of proof, presenting documents that established the transaction’s genuineness and the lender’s financial capacity. Tribunal found no tangible evidence from the Revenue to dispute assessee’s claims, ruling that reliance on assumptions was inadequate to justify the addition. Thus, the tribunal quashed the assessment.
