Sufficiency or Correctness of Material need not be Considered at the Stage of Recording Reasons: ITAT upholds Reassessment u/s 147 of Income Tax Act [Read Order]

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has upheld the reassessment under Section 147 of the Income Tax Act 1961, as the sufficiency or correctness of material need not be considered at the stage of recording reasons.

The assessee, M P Ferrous and Non Ferrous India Pvt. Ltd was a dealer in ferrous and non-ferrous metals. For the year under consideration, the assessee filed its return of income and it was processed under S143(1) of the Income Tax Act. Subsequently, on the basis of information received from the ADIT (Investigation) that the assessee was a beneficiary of accommodation entries of bogus advances from the concerns engaged in providing bogus entries, proceedings under Section 147 of the Income Tax Act were initiated and notice under Section 148 of the Income Tax Act was issued to the assessee on 31/03/2016.

As per the aforesaid information the assessee had availed loan from Bhoomidevi Credit Corporation Ltd., which was engaged in providing accommodation/bogus entries. During the proceedings under Section 147 of the Income Tax Act, the assessee had furnished the balance sheet, ITR, ledger account and bank statements with regard to the aforesaid transaction by cheque.

The Assessing Officer passed an order under section 143(3) read with Section 147 of the Income Tax Act did not agree with the submissions of the assessee and held that mere payment by cheques was not sufficient to prove that the transaction was 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 placed reliance upon the statement of the director of Bhoomidevi Credit Corporation Ltd. recorded under Section 131 of the Income Tax 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 Income Tax Act.

Yeshwant Gupta on behalf of the assessee submitted that the reassessment proceedings had been initiated entirely based on the satisfaction borrowed from the Investigation Wing and no independent inquiry was conducted by the assessee to come to such conclusion.

Prashant Barate, appeared on behalf of the revenue.

The two-member Bench of B.R. Baskaran, (Accountant Member) and Sandeep Singh Karhail, (Judicial Member) observed 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 Income Tax Act could be validly initiated.

The Bench dismissed this ground of appeal filed by the assessee holding that, In the present case, as noted above, on the basis of information received from the investigation wing, the reassessment proceedings were initiated thus, sufficiency or correctness of material could not be a thing to be considered at stage of recording reasons for initiation of reassessment proceeding.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates