AO cannot reopen case without establishing that assessee's own money has been routed back in form of share capital : ITAT

AO cannot reopen case without establishing that assessee's own money has been routed back in form of share capital : ITAT

AO cannot reopen case without establishing that assessee's own money has been routed back in form of share capital. While he can rely on the report of the Investigation Wing, he has to carry out further examination and analysis in order to establish the nexus between the material and formation of belief that income has escaped assessment. In absence thereof, the assumption of jurisdiction u/s 147 has no legal basis and resultant reassessment proceedings deserve to be set-aside.

Jaipur ITAT in matter of M/s Balaji Health Care Pvt. Ltd., vs The ITO

Relevant extract of Order is given below for reference:

In light of above discussions and in the entirety of facts and circumstances of the case, the assumption of jurisdiction and initiation of the proceedings under Section 147 of the Act to reopen the assessment proceedings does not satisfy the requirement of law and is hereby set-aside. In the result, ground no. 1 of the assessees appeal is allowed.

21. Now, coming to the merits of the addition made by the Assessing officer, we find that the assessee has discharged the initial onus cast on it in terms of identity, creditworthiness and genuineness of the transaction. Notably, the assessment proceedings u/s 143(3) have been completed in case of the investor company M/s Pelicon Finance & lease for A.Y 2006-07 wherein investment in the assessees company has been accepted by the Revenue. There cannot be a situation where the same transaction is held to be genuine in hands of Investor Company and disputed in the hands of the Investee company. Further, M/s Pelicon Finance & lease has responded to notice u/s 133(6) and has confirmed the amount invested by way of share capital in the assessee company. Besides, necessary documentation in terms of Board resolution, share application form, bank statements of the investor company, annual financial statements, etc has been submitted by the assessee company before the Assessing officer. Further, we find that there is no mention of either the assessee company or the investor company in the statements so recorded of Surendra Kumar Jain and Virendra Kumar Jain. The statement of the so called mediator P C Agarwal is also not on record who is claimed by the Revenue to have facilitated the transaction. Therefore, we donot find any linkage which can be said to have been established by the Revenue between the assessees undisclosed income which is routed back in form of share capital. In light of the same, merely relying on the report of the Investigation Wing without any further examination or investigation or disputing the documentation submitted by the assessee company, the addition cannot be sustained in the hands of the assessee company and is hereby directed to be deleted. In the result, ground no. 2 of the assessees appeal is allowed.

22. In the result, the appeal of the assessee is allowed.