INCOME TAX ACT, 1961

Section 147

Reassessment - Addition under section 68 on account of accommodation entries - Assessee had discharged the primary onus of section 68 -

Assessee was engaged in manufacturing of corrugated boxes was subjected to an assessment under section 143(3) wherein assessee was saddled with addition under section 68. Pursuant to receipt of certain information from DGIT, it transpired that assessee received accommodation entries from 3 entities of Mr. P. Accordingly the case was reopened by issuance of notice under section 148. Assessee filed Income Tax Acknowledgements, Board Resolution and also submitted copies of Balance sheet, confirmation, counter-confirmation, bank statements, etc., of investor entities. Assessee also assailed reopening by submitting that it was not based on any material on record. However, these submissions could not convince AO who, inter alia, observed that assessee failed to produce any of the directors of the stated entities and therefore, these entities were dummy entities being operated by Mr. P. Held: Original return was processed under section 143(1) and the only requirement under law to initiate reassessment proceeding against the assessee was that AO had reasons to believe that certain income had escaped assessment. AO was clinched with specific information while forming such reasons which suggested possible escapement of income in the hands of assessee. Upon perusal of documents on record, assessee had furnished Income Tax Acknowledgements of investor entities, Board Resolutions passed by those entities to make investment in assessee entity, copies of Share Application form, audited annual accounts and the bank statements of investor entities. There were no immediate cash deposits in the bank accounts of these entities before making investment in assessee entity. Therefore, it could be said that assessee had discharged the primary onus of section 68 and it was incumbent on the part of AO to rebut assessee's claim. Therefore, addition was liable to be deleted.

Relied: National Thermal Power Company Ltd. v. CIT (1998) 229 ITR 383 (SC) : 1998 TaxPub(DT) 0342 (SC) Sumati Dayal v. CIT (1995) 214 ITR 801 (SC) : 1995 TaxPub(DT) 1173 (SC) CIT v. Durga Prasad More (1971) 82 ITR 540 (SC) : 1971 TaxPub(DT) 0375 (SC) Sumer S. Sanghvi & Co. v. ACIT [ITA No. 1424/Ahd/2016, dt. 6-2-2020] Pavankumar M. Sanghvi v. Income Tax Officer (2017) 81 taxman.com 308 (Ahd-Trib) : 2017 TaxPub(DT) 1389 (Ahd-Trib)Distinguished:Bakulbhai Ramanlal Patel v. Income Tax Officer (2011) 56 DTR 212 (Guj-HC) : 2011 TaxPub(DT) 2014 (Guj-HC)

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2007-08

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