TaxTMI 
TaxTMI 
2014 (7) TMI 713
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....d to the facts and circumstances of the case, the ld CIT(A) has erred in law and on facts in confirming the action of the ld A.O. in making aggregate addition of Rs. 4,00,000/- on account of share application money received from M/s. Winsome Portfolio (P) Ltd. and M/s. Weal Iron and Steel Co. (P) Ltd. u/s 68 of Income Tax Act, 1961. 4. That in any case and in any view of the matter, action of ld CIT(A) in confirming the action of ld Assessing Officer in making the impugned addition and framing the impugned assessment order is contrary to law and facts, void ab initio, beyond jurisdiction, and without giving adequate opportunity of hearing, by recording incorrect facts and finding and the same is not sustainable on various legal and factual grounds. 5. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other." 3. Brief facts and background of the case as stated by the ld CIT(A) is as follows. During the year under consideration, the appellant carried on the financing business. The return of income for the Assessment Year 2002-03 was filed on 5.07.2002 decla....
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....ment; and the ld AR stated that there must be cause and effect relationship between material which has come in his possession and for formation of his belief and reasons thus recorded must bring out the nexus and relationship to come to the said conclusion that income has escaped assessment in order to reopen the case. Therefore, according to the ld AR Ashwani Taneja, since these ingredients are missing reassessment order is nothing but a nullity. The ld AR stated that there should be material which has a live nexus for formation of belief and the reasons to reopen cannot be based on a mere gossip or rumour. The ld AR emphasized that there should be definite material before him, based on which only the Assessing Officer can base his reasons to reopen, and that reason should form the foundation for reopening; and not that whatever any agency forwards to the Assessing Officer, he simply reproduces the same and jumps into conclusion that income has escaped assessment; and the formations of reason must be independently taken by the Assessing Officer after evaluating the material supplied to it; and this exercise by the Assessing Officer cannot be an idle formality or a proceeding in pr....
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....he desired evidence in its favor, the assessment was finalized on 30.11.2007.The ld DR submitted that the fact of genuineness of the transaction and creditworthiness of the claimed share applicants was in serious doubt. 9. It was further submitted by the ld DR that the assessee had in fact submitted a copy of the acknowledgement of filling return of income of the two companies for the Assessment Year 2001-02 only and not of Assessment Year 2002-03. Even in that year, these companies had declared loss for the said year. The entries in their respective bank accounts shows huge amount of cash deposits/ transfer of funds and immediate issue of cheque/ pay order of almost identical amount. The summons issued to the party from whom these two companies had allegedly received money in its bank account before claiming investment in share capital of the assessee company during previous year, was not found at the furnished address. The assessee did not even produce the said persons during the course of assessment proceedings for necessary verification. According to the ld DR, both these applicants have the same address, account in the same bank, similar kind of transaction in the bank accoun....
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....ntered into by the assessee with concerns which had made accommodation entries and that they were not genuine transaction. The reason to believe has been properly stated by the Assessing Officer and there was material basis on which the notice was issued. Therefore we find that there was prima-facie evidence before the Assessing Officer to believe that income has escaped assessment. Therefore we do not agree with the assessee that there was no basis to issue notice u/s 148 and we are inclined to uphold the order of ld CIT(A) on this issue and resultantly this ground of the assessee fails and therefore it is dismissed. 12. Apropos confirmation of the addition of Rs. 4,00,000/- on account of share application money received from M/s. Winsome Portfolio (P) Ltd. and M/s. Weal Iron and Steel Co. (P) u/s 68 of the Act. 13. Since we have included the arguments of both sides on merits of the case too in para 7, 8 (Supra) we are not repeating the same in order to avoid repetition. We have heard both the parties and have perused the records carefully and have gone through the case laws cited before us. 14. We find that in the assessment order the Assessing Officer has held as follows:- "....
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....tries, which is clearly established by way of evidences/ details collected during the assessment proceedings which corroborated with the information received from the investigation wing. Hence it is requested that the submission of the assessee for acceptance of additional evidences at this stage may please be rejected, and the issue may kindly be decided on the basis of details/ evidence available on record." 16. A perusal of the same will reveal that Assessing Officer has made the allegations in a vague manner. He ought to have stated clearly the date when the cash was supposed to have been deposited in M/s Gupta & Gupta account and how much amount was it and stated the date on which M/s Gupta & Gupta issued the cheque and amount to M/s Winsome & Winsome and the other share applicant and then the date of issue of cheque for issuance of shares as share application amount. Rather than doing the said exercise and recording the same in the assessment order, Assessing Officer has described the modus operandi of entry creditors. Without the details stated above, the chain of facts needed to link even M/s. Gupta & Gupta to the share-applicants fails and has not been established as a ma....
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....fter discharging this burden only, the onus shifts to the shoulder of the assessee. We find that nothing has been brought on record by the assessing officer to substantiate his serious allegation that these two entries are accommodation entries which was the sole ground and basis for reopening. Reliance is placed on CIT Vs. Pradeep Kumar Gupta(Delhi)" 303ITR95 (Delhi), in which it was held that when section 147 and 148 of the Act was resorted to, the AO must first discharge the burden of showing that income had escaped assessment. And it was only thereafter that the assessee had to provide all the answers. However in the instant case, the assessee had produced the aforesaid documents before the authorities below and by doing so, the assessee has discharged the obligation to explain the transaction with it; and thereafter, if the Assessing Officer was still not satisfied with the aforesaid documents & explanation of the assessee, he should have resorted to section 131 and other provisions in the Act to investigate and check the veracity of the documents; and in the absence of it, we are afraid we cannot uphold the order impugned before us. 19. It may be noted that a cloud of suspic....
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....the assessee in respect of the amount is found correct. As such the unexplained amount is to be taken at Rs. 55,50,000/-. The assessee has further tries to explain the source of this amount of Rs. 55,50,000/- by furnishing copies of share application money, balance4 sheet etc. of the parties mentioned above and asserted that the question of addition in the income of the assessee does not arise. This explanation of the assessee has been duly considered and found not acceptable. This entry remains unexplained in the hands of the assesse as has been arrived by the Investigation wing of the department. As such entries of Rs. 5~50/000/- received by the assessee are treated as an unexplained cash credit in the hands of the assessee and added to its income. Since I am satisfied that the assessee has furnished inaccurate particulars of its income/ penalty proceedings under Section 271(1)(c) are being initiated separately. The facts of Nova Promoters and Finlease (P) Ltd. (supra) fall in the former category and that is why this Court decided in favour of the revenue in that case. However, the facts of the present case are clearly distinguishable and fall in the second category and are more....