The Income Tax Appellate Tribunal (ITAT), Delhi Bench quashed the reopening of the assessment and consequently deleted addition on account of share application money and commission paid.
The assessee company, M/s. Sungrow Impex Private Limited filed its return of income declaring NIL income, which was processed under section 143(1). Subsequently, an information was received from CIT that Shri Aseem Kumar Gupta, C.A. had provided accommodation entries to several beneficiaries after taking unaccounted cash from the beneficiaries which was routed through different entities by layering of accounts.
All these entities were controlled by Shri Aseem Kumar Gupta who has stated on oath during search proceedings as well as during assessment proceedings that cash and other unexplained deposits in the bank accounts controlled by him belong to the beneficiaries and should be taxed in their hands.
The AO after going through the ITR of the assessee found that share capital and share premium of the assessee has increased by Rs.95 lakhs in assessment year under appeal. The AO reopened the assessment under section 147 of the Income Tax Act, 1961 and issued notice under section 148, in response to which, assessee filed the return of income declaring NIL income.
The AO noted that assessee has received Rs.95 lakhs from Modern Credit Corp. Ltd., controlled by Shri Aseem Kumar Gupta. The assessee was, therefore, requested to produce the Director of the Investor company.
The assessee challenged the reopening of the assessment as well as additions on merits before the CIT(A). However, the appeal of assessee has been dismissed.
The coram of N.K.Billaiya and Bhavnesh Saini noted that Pr.CIT has recorded his satisfaction for reopening of the assessment in a most mechanical manner without considering even the assessment records or the return of income filed by assessee and his satisfaction appears to be in a ritualistic and formal rather than meaningful.
“The reassessment order, thus, passed is also invalid and bad in Law. In view of the above, we set aside the Orders of the authorities below on this ground and quash the reopening of the assessment. All additions stand deleted,” the ITAT ruled.
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