M P Ferrous And Non Ferrous India Pvt. Ltd. Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that initiation of reassessment proceedings under section 147 of the Income Tax Act based on the information received from the investigation wing is valid and sustainable in law.
Facts- AO vide order passed u/s. 143(3) read with section 147 of the Act did not agree with the submissions of the assessee and held that mere payment by cheques is not sufficient to prove that the transaction is genuine. The AO further held that the assessee has not proved the genuineness of the existence of the party and no serious efforts were made by the assessee to discharge such burden. The AO held that Bhoomidevi Credit Corporation Ltd. is only a paper company that does not exist in reality and works only to show accommodation entries after charging a small amount of commission. The AO placed reliance upon the statement of the director of Bhoomidevi Credit Corporation Ltd. recorded u/s. 131 of the Act, wherein he admitted that he was providing accommodation entries to various business establishments and charged a commission ranging from 1.5% to 2% of the transaction. Accordingly, the AO made an addition of Rs.14 lakh, to the total income of the assessee u/s. 68 of the Act.
CIT(A) dismissed the appeal. Being aggrieved, the present appeal is filed.
Conclusion- Held that if there had been a relevant material on the basis of which a reasonable person can form a requisite belief that income chargeable to tax had escaped assessment, then proceedings under Section 147 of the Act could be validly initiated. In the present case, on the basis of information received from the investigation wing, reassessment proceedings in the case of the assessee were initiated. Further, it is also well settled that sufficiency or correctness of the material is not a thing to be considered at the stage of recording the reasons. As a result, we find no infirmity in the reassessment proceedings initiated by the AO under section 147 of the Act.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The present appeals have been filed by the assessee challenging the separate impugned orders of even date 17/02/2023, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment years 2009–10 and 2010–11.
ITA no.1248/Mum./2023
Assessment Year – 2009–10
2. In this appeal, the assessee has raised the following grounds:–
The Grounds of Appeal mentioned hereunder are without prejudice to one another:
1. On the facts and circumstances of the case, the learned Assessing Officer erred in issuing the Notice u/s.148 on 31.03.2016 without bringing out any tangible material as to failure on the part of the Assessee to disclose truly and fully all material facts necessary for assessment and therefore the Reasons Recorded u/s.147 are bad in law and consequently the assessment proceedings deserve to be annulled.
2. On the facts & circumstances of the case, the Learned CIT(A) erred by upholding the addition of INR 14,00,000 which was merely out of suspicion relying on statement recorded of director of BCCL wherein nowhere in statement recorded it was mentioned that assessee has taken accommodation entries moreover no cross examination was provided to the assessee.
3. On the facts & circumstances of the case, the Learned CIT(A) erred in upholding the addition of treating the unsecured loan as unexplained expenditure & also making addition u/s 69 of the IT Act as unexplained investment.
4. On the facts and circumstances of the case, the Learned Assessing Officer erred by making addition of unsecured loan notwithstanding the fact that interest paid on it was allowed as business expenditure.
5. On the facts & circumstances of the case, the Learned CIT(A) erred by upholding the addition without appreciating the documentary evidence submitted duly substantiating the genuineness of loan transaction.
The Appellant craves the leave to add, amend, alter and/or delete any of the above revised rounds of appeal at or before the time of hearing.”
3. The brief facts of the case as emanating from the record are: The assessee is a dealer in ferrous and non-ferrous metals. For the year under consideration, the assessee filed its return of income on 29/09/2009, declaring a total income of Rs.1,20,770. The return of income was processed under section 143(1) of the Act. Subsequently, on the basis of information received from the ADIT (Investigation)-1, Rajkot that the assessee is a beneficiary of accommodation entries of bogus advances from the concerns engaged in providing bogus entries, proceedings under section 147 were initiated and notice under section 148 of the Act was issued to the assessee on 31/03/2016. In response to the aforesaid notice, the assessee filed a letter stating that the return of income originally filed on 29/09/2009, be considered as a return filed in response to the notice issued under section 148 of the Act. As per the aforesaid information received from the ADIT (Investigation)-1, Rajkot, the assessee availed loan from Bhoomidevi Credit Corporation Ltd., which is engaged in providing accommodation/bogus entries. During the proceedings under section 147 of the Act, the assessee furnished the balance sheet, ITR, ledger account of Bhoomidevi Credit Corporation Ltd. for the financial year 2008-09 and bank statements with regard to the aforesaid transaction by cheque. The assessee also stated that it has paid interest on deposits to Bhoomidevi Credit Corporation Ltd. by account payee cheques for the assessment years 2009-10 and 2010-11.
4. The Assessing Officer (“AO”) vide order dated 27/12/2016, passed under section 143(3) read with section 147 of the Act did not agree with the submissions of the assessee and held that mere payment by cheques is not sufficient to prove that the transaction is genuine. The AO further held that the assessee has not proved the genuineness of the existence of the party and no serious efforts were made by the assessee to discharge such burden. The AO held that Bhoomidevi Credit Corporation Ltd. is only a paper company that does not exist in reality and works only to show accommodation entries after charging a small amount of commission. The AO placed reliance upon the statement of the director of Bhoomidevi Credit Corporation Ltd. recorded under section 131 of the Act, wherein he admitted that he was providing accommodation entries to various business establishments and charged a commission ranging from 1.5% to 2% of the transaction. Accordingly, the AO made an addition of Rs.14 lakh, to the total income of the assessee under section 68 of the Act.
5. The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee. Being aggrieved, the assessee is in appeal before us.
6. Vide affidavit dated 19/07/2023, sworn by the director of the assessee, it has been submitted that ground no.1 is raised as an additional ground and prayed for admission of same. In ground no.1, the assessee has challenged the validity of proceedings initiated under section 147 of the Act. Since, the issue raised by way of additional ground is a legal issue, which can be decided on the basis of material available on record, we are of the view that the same can be admitted for consideration and adjudication in view of the ratio laid down by the Hon’ble Supreme Court in NTPC Ltd vs CIT: 229 ITR 383 (SC).
7. We have considered the submissions of both sides and perused the material available on record. As is evident from the record, in the present case return of income filed by the assessee was not selected for scrutiny. The AO based on the information received from the ADIT (Investigation)-1, Rajkot initiated the reassessment proceedings. The reasons recorded by the AO, while reopening the assessment, are as under:-
“REASONS FOR RE-OPENING OF ASSESSMENT U/S 147 OF THE IT.ACT, 1961
The assessee M/s MP Ferrous & Non-Ferrous (India) Private Limited, having PAN AADCS4956R is assessed to tax in this charge. The assessee filed its return of income on 29.09.2009 stating total income at Rs 1,20,774/-. The same was processed under section 143(1) on 03.11.2010.
In the instant case for AY 2009-10, information was received from DIT(Inv.) Rajkot vide letter No. Rjt/ADIT(Inv.)-1/Bhoomidev Beneficiaries/2015-16/4813 dated 22.03.2016 with subject “Dissemination of information in respect of beneficiary companies who have allegedly taken entry of share application money/ premium/ advances from M/s Bhoomidex Credit Corporation Ltd.”
A thorough Investigation was done by DDIT, Ahmedabad wherein it was found that an entity by the name of M/s Bhoomidev Credit Corporation Ltd. (BCCL) has been giving accommodation entries to various persons.
in view of this background an exercise was undertaken to identify beneficiaries of BCCL it was found that the assessee has obtained share application money / premium / advances as accommodation entries from this party in the FY 200809. Details of the same are given as follows:
