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Judgment
PER YOGESH KUMAR, U.S. JM:
The present appeal is filed by the Assessee against the order of Ld. Commissioner of Income Tax (Appeals)- (‘Ld. CIT(A)’ for short), New Delhi dated 05/06/2025 for the Assessment Year 2012-13.
Brief facts of the case are that, an assessment order came to be passed under Section 147/143(3) of the Income Tax Act, 1961 ('Act' for short) on 26/12/2019 by making certain additions. Aggrieved by the assessment order dated 26/12/2019, Assessee preferred an Appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 05/06/2025, dismissed the Appeal filed by the Assessee. As against the order of the Ld. CIT(A) dated 05/06/2025, Assessee preferred the captioned Appeal.
None appeared for the Assessee even after issuing several notices, therefore, we are constrained to decide the Appeal on hearing the Ld. Departmental Representative.
The Ld. Departmental Representative submitted that the Assessee has not able to substantiate its grounds of Appeal before the Ld. CIT(A) by producing cogent documents even before the A.O. Assessee could not discharge its burden cast upon as per Section 68 of the Act. Thus, submitted that, the Ld. CIT(A) has rightly dismissed the Appeal of the Assessee, which requires no interference at the hands of the Tribunal.
We have heard the Ld. Departmental Representative and perused the material available on record. The Ld. CIT(A) dismissed the Appeal of the Assessee in following manners: -
“6. Ground nos.l, 2, 5 to 10: Validity of Reassessment Proceedings
The reassessment proceedings under Section 147 of the Act were triggered by credible and specific intelligence received from the Investigation Wing, New Delhi. This information pinpointed unexplained financial transactions aggregating to ?5.10 crores, linked to share capital and share premium received by the appellant during the relevant assessment year. The Investigation Wing’s report highlighted that these funds were sourced from entities identified as being engaged in the systematic provision of accommodation entries a practice involving the layering of cash deposits by real beneficiaries through shell companies, which then funnelled these amounts into entities like the appellant under the pretext of share application money. The specificity of the information, including the identification of entities and the quantum of transactions, provided a robust foundation for the Assessing Officer (AO) to form a reasonable belief that income chargeable to tax had escaped assessment. The department’s reliance on such precise and actionable data underscores the legitimacy of initiating the reassessment, negating any contention of arbitrariness or lack of basis.
6.1.Contrary to the appellant’s assertion that the reassessment was a mechanical exercise, the AO demonstrated a diligent and independent application of mind. Upon receiving the Investigation Wing’s report, the AO undertook a thorough examination of the appellant’s financial statements of A.Y. 2012-13. The reasons recorded by the AO for initiating reassessment were detailed and specific, highlighting glaring inconsistencies such as the infusion of substantial share capital and premium from investors whose financial profiles did not align with their purported investment capacity. Furthermore, the AO secured the requisite sanction under Section 151 of the Act from the competent authority, presenting a comprehensive factual narrative that justified the reopening. The approval process was far from perfunctory; it reflected a reasoned concurrence based on the material presented, thereby fulfilling the statutory safeguards enshrined in the Act. This meticulous approach by the AO effectively rebuts the appellant’s claim of a mindless or borrowed satisfaction.
6.2The appellant had raised objections to the reassessment notice, alleging that the proceedings were jurisdictionally flawed and mechanically instituted. These objections were not brushed aside but were addressed through a detailed speaking order issued by the AO on 23.11.2019. The issuance of this speaking order prior to finalizing the reassessment adheres to the mandatory procedural requirement under the Act, as laid down by judicial precedents, ensuring that the appellant’s right to contest the reopening was duly respected. The department’s adherence to this process fortifies the validity of the reassessment.
6.3The appellant’s contention that the reassessment stemmed from a mere change of opinion lacks factual grounding. The subsequent reopening under Section 147 was prompted by fresh and tangible evidence unearthed by the Investigation Wing, including detailed reports of money laundering and the involvement of accommodation entry operators. This new material, unavailable during the initial processing, constituted “reason to believe” that income had escaped assessment, distinct from any prior opinion. The absence of scrutiny of this issue in the original proceedings and the emergence of post facto evidence unequivocally establish that the reassessment was not a rehash of an earlier view but a lawful response to new facts.
6.4.The appellant pointed to an alleged inconsistency in the reasons recorded, noting references to 5.10 crores and 1.20 crores, suggesting a lack of clarity or coherence in the AO’s basis for reopening. This argument is misconceived and warrants clarification. The figure of ?5.10 crores is miscalculated as the chart in page 15 of AO’s order establishes figure as 51 lakh ?1.20 crores specifically pertains to transactions involving entities linked to the Jain Brothers Group, a subset of the broader pool of dubious investments flagged by the Investigation Wing. This delineation does not signify inconsistency but reflects a logical categorization of the transactions under scrutiny. The AO’s reasons, when read holistically, exhibit a clear and consistent thread, undermining the appellant’s attempt to portray them as contradictory or vague. 6.4
6.5The appellant further argued that the reopening relied solely on thirdparty information from the Investigation Wing without independent verification by the AO, rendering it invalid. This assertion is factually untenable. The AO did not blindly adopt the Investigation Wing’s findings but supplemented them with an independent analysis of the appellant’s financial records. The AO correlated these findings with the known modus operandi of accommodation entry providers, such as cash deposits followed by layered transfers, as documented in the investigation report. This cross-verification lent credence to the suspicion of unaccounted income, fulfilling the jurisdictional prerequisites under Section 147. The department’s case, therefore, rests on a robust blend of external intelligence and internal validation, decisively upholding the reassessment’s legality. These grounds are dismissed.
7. Ground nos.3, 11 to 16: Additions under Section 68
The central issue in the reassessment is the addition of 2,49,90,000 under Section 68 and 69 C of the Act, attributed to unexplained share capital and premium received from various entities and unexplained expenditure . Section 68 imposes a clear statutory obligation on the assessee to establish three critical elements regarding any sum credited in its books: the identity of the investor, the creditworthiness of the investor, and the genuineness of the transaction. Failure to substantiate these elements empowers the AO to treat the amount as unexplained income, taxable in the assessee’s hands. In this case, the onus rested squarely on the appellant to dispel the AO’s suspicions, raised on the basis of concrete evidence linking the investments to accommodation entry operators. The department’s invocation of Section 68 was not an arbitrary measure but a reasoned response to the appellant’s inability to meet this burden.
7.1.Despite being afforded multiple opportunities through notices issued under Sections 143(2) and 142(1) of the Act, the appellant failed to produce credible evidence to substantiate the impugned transactions. The AO sought comprehensive documentation, including bank statements of the investors, their audited financial statements and income tax returns. However, the appellant’s responses were evasive and incomplete, lacking the substantive proof required to establish the legitimacy of the investments. For a finance company with a returned income of merely 90,230, the infusion of 2.04 crores demanded a compelling economic justification, such as exceptional business performance or asset valuation, none of which was forthcoming. This glaring deficiency in evidence significantly weakens the appellant’s defense and justifies the AO’s adverse inference.
7.2Record reveals that M/ s Omexpo Enterprises Pvt. Ltd., Rising Finance Co. Pvt Ltd. and New Millenium Consultants were explicitly flagged by the Investigation Wing as an accommodation entry provider. During statement recordings under oath, its representative, Himanshu Verma admitted to facilitating such entries, a fact corroborated by independent inquiries. The appellant, however, submitted no financials, bank trails, or other documents to counter this damning evidence or to affirm these entities creditworthiness, leaving the transaction’s genuineness unproven.
7.3The AO also rightly estimated cash expenditure as commission for accommodation entries, amounting to Rs. 4.90 lakhs. This figure aligns with the typical commission rates of 1-2% charged by entry operators, a pattern well documented in tax evasion cases. The appellant offered no credible explanation for these transactions. Hence the addition is upheld.
7.4In light of the foregoing, the appellant utterly failed to discharge its statutory onus under Section 68. The AO, conversely, meticulously established the nexus between the appellant and entry operators, supported by financial mismatches, unverifiable investors, and a clear pattern of tax evasion. The additions of ?2,49,90,OOO/- are not only procedurally sound but also substantively justified.
8.Ground no.4: Alleged Violation of Natural Justice The appellant alleged a violation of natural justice, claiming it was denied a fair opportunity to respond to the proposed additions. This contention is belied by the procedural record. The AO issued multiple statutory notices under Sections 143(2) and 142(1), explicitly calling for explanations and supporting documents regarding the share capital transactions. Adequate time was granted for compliance, and the appellant availed itself of these opportunities by filing written submissions. These submissions were not ignored but were thoroughly evaluated, as evidenced by the AO’s detailed discussion in the reassessment order. The process adhered to the principles of audi alteram partem (hear the other side), ensuring that the appellant’s perspective was considered before finalizing the assessment. No procedural lapse or denial of opportunity can be inferred, and the department’s conduct aligns impeccably with the tenets of natural justice.
9.Ground no.17: Interest Charged: The appellant challenged the levy of interest under Sections 234A, 234B, and 234C of the Act, which amounted to a consequential demand following the reassessment. These provisions are mandatory and automatic.
10.Ground no.18: Incorrect Head of Income: A scrutiny of the reassessment order reveals that the additions under Section 68 were correctly categorized as “Income from Business,” consistent with the appellant’s declared status as a finance company engaged in business activities. No portion of the income was attributed to house property, and the appellant’s argument appears to stem from a computation sheet which is clearly a clerical error. The department’s classification in assessment order is factually accurate and comprehensive.”
Before us, the Assessee neither produced any document nor made any effective submission in support of the grounds of Appeal. Considering the fact that the Assessee failed to discharge its burden cast upon u/s 68 of the Act, either before the Lower Authorities or before us, we find no merits in the grounds of Appeal of the Assessee. Accordingly, Appeal of the Assessee is dismissed.