TaxTMI 
TaxTMI 
2015 (12) TMI 1526
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....share capital received from others. Name of the party No of shares allotted Amount against shares Amount against premium Total Vindya Agencies Pvt. Ltd. 25,000 2,50,000 7,50,000 10,00,000 Shivarpan Mercantiles Pvt. Ltd. 25,000 2,50,000 7,50,000 10,00,000 Middleton Good Pvt. Ltd. 75,000 7,50,000 22,50,000 30,00,000 Lactrodryer Marketing Pvt. Ltd. 25,000 2,50,000 7,50,000 10,00,000 2. The assessee is engaged in the business of trading and manufacturing of jewellery. Return for A.Y. 2008-09 was filed U/s 139(1) of the Income Tax Act, 1961 (in short the Act) on 30/09/2008 -. There was a search and seizure operation carried by the department U/s 132 and survey U/s 133A of the Act on the Members of KGK Group on 06/5/2010 of which the assessee is one of the Members. The ld Assessing Officer issued notice U/s 153A on 16/09/2011 and the assessee was asked to file a true and correct return of income as prescribed under Rule 12 of the Income Tax Rules, 1962 (in short the Rules) within 30 days from the service of said notice. The assessee in response to said notice filed return declaring a loss of Rs. 8,07,....
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....ree parties the summons were received back and rest of parties did not comply to notice issued U/s 131 of the Act. The fact was brought to the knowledge of the assessee vide office letter dated 28/03/2013 and the assessee was asked to prove the genuineness, creditworthiness and identity of share holders. The assessee vide its reply dated 28/03/2013 filed his justification emphasizing that the assessee has submitted sufficient documents which well proved the genuineness, creditworthiness and identity of the share holders. There was no reason with the department to presume that the amount received from the above companies was accommodation entries. After considering the assessee's reply, the ld Assessing Officer observed as under:- (a) The assessee was first asked to produce the share holders but he refused to produce the share holders. Now, the assessee is submitting certain documents to prove that share holders complied with the notices issued to them. This shows that the assessee is in contact with the share holders and intentionally has not produced the share holders for examination. (b) Merely, by filing the certain documents do not prove the creditworthiness o....
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....n the matter. The report of the inquiry conducted by the Investigation Wing of Kolkata was given to the assessee during the assessment proceedings to give it an opportunity to rebut the evidence collected by the department. The assessee was required to discharge its onus which could have been done only by producing the principal officers of the shareholding companies before the Assessing Officer. The assessee failed to do so. The ld CIT(A) found that the assessee was in constant communication with these principal officers because in its written submissions during the course of appellate proceedings it was mentioned that two parties had informed it that compliance had been made by them but on the date of hearing the office in Kolkata was on leave. This has been submitted in the cases of Vindya Agencies Pvt. Ltd. and Shivarpan Mercantile Pvt. Ltd. For the other two companies, it has been submitted that as they had filed a copy of all the relevant documents in response to these summons compliance to notice U/s 131 of the Act. The ld CIT(A) has further held that this was not sufficient compliance because the documents filed in Kolkata were already with the department and filing of a co....
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....sessee for the period between 1/7/2007 to 31/1/2007 it is seen that the opening balance as on 01/7/2007 was only Rs. 7293/-. An amount of Rs. 10 lakh was transferred from an account No. 1077630 on 03/7/2007 which was then transferred vide cheque to the appellant company on 04/7/2007. This pattern was repeated continuously 11 times for different companies during the span of a month. For example an amount of Rs. 10 lacs was transferred from account NO. 80308 on 06/7/2007 which was transferred in favour of Goldway Enterprises Pvt. Ltd. on the same date, another amount of Rs. 7,50,000/- was transferred in from account No. 7506071 on 12/7/2007 and it was transferred vide cheque to Vinayak Industries. No other transactions apart from these substantial inflows and outflows were undertaken. It is also interesting to note that all the cheques were coming from different accounts. While there are notings regarding the concerns to whom the amounts were given there are no notings from whom there advances were being received. This was required to be clarified from the Principal Officers of these companies to whom summons were issued for personal attendance. Another interesting observation mad....
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....t clear why four different companies chose to pay a premium of Rs. 30/- on these shares which was valued at Rs. 1.80/-. In fact this assessment year was a bad financial year for jewellers in view of the international financial crisis where most jewellers had shown decrease in profits. The appellant company has shown losses at both its branches, so it could not possibly have been a case of strong sentiment to justify the premium of Rs. 30/- on its share which further affirms the doubts about the authenticity of the transaction. The fact that these companies were registered under the Company Act and had a PAN also does not signify much in view of these enquiries because at the point of allotting PAN or registration of the companies the concerned departments do not conduct any enquiry regarding the legitimacy of the business activities of the companies. The subsequent enquiries have revealed that though these concerns obtained PAN their financial capacity to have made the investments in the appellant company are dubious. Regarding the various case laws regarding prohibition of investigation of source of source in the case of share application money it is observed that it should not....
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....o confirmed that no such companies functioned from the addresses furnished by the assessee. It was not open to the assessee to direct the AO to go to the website of the Company Law Department/Registrar of Companies and search for the addresses of the share applicants and then communicate with them for proof of the genuineness of the share subscription. That was the onus of the assessee, not of the A.O. The ld CIT(A) further held that the observations made by the Hon'ble Delhi High Court in the case of Nipun Builders & Developers Pvt. Ltd. Vs. CIT (supra) are particularly applicable to the facts of the case of the appellant. The assessee failed to produce the principal officers of these companies in spite of repeated opportunities. The AO has observed that during the assessment proceedings it was admitted by the assessee that it was unable to do so even though it was in constant touch with them. The AR of the appellant relied upon the decision of Hon'ble Rajasthan High Court in the case of CIT Vs. Shri Barkha Synthetic (2004) 270 ITR 477 has held distinguishable by the ld CIT(A) wherein the Hon'ble Court held that transactions were made through banking channel, confirmation of th....
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....ause evidence was found during search regarding investment in property by the appellant for which the source was not apparent. So even on facts, initiation of assessment proceedings U/s 153A and determining the total income in the case by the A.O. was not beyond the provisions of Income Tax law as enunciated by the Hon'ble Rajasthan High Court in the case of Jai Steel (India) Vs. ACIT. Accordingly, she confirmed the addition. 4. Now the assessee is in appeal before us. The ld AR of the assessee has submitted that the assessee filed return U/s 139(1) of the Act on 30/09/2008 declaring loss of Rs. 10,71,546/-. He has drawn our attention on page No. 3 to 5 of paper book. There was search & seizure operations on assessee on 06/05/2010. The ld Assessing Officer issued notice u/s 153A and in response to this notice, the assessee filed its return on 31/03/2012 declaring the same income which had been declared in original return i.e. loss of Rs. 10,71,546/-. The ld Assessing Officer completed the assessment on 31/03/2013 by adding Rs. 60 lacs. The assessee before the ld proved the identity, genuineness and creditworthiness of the share holders by submitting the following evidence: ....
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....to the assessee. He has particularly drawn our attention on page No. 29 and 30 of the paper book. The assessee further enquired from the share holders and submitted after collecting information from the share holders as under:- Name of Companies Result of enquiries of as given in letter of AO Comments of the assessee Vindya Agencies Pvt. Ltd Summons u/s 131 was issued but there was no compliance to the summons by the above referred parties. The notice duly served to party but the compliance could not be made as the officer who issued the notice was on leave. Shivpran Mercantiles Pvt. Ltd. The notice duly served to party but the compliance could not be made as the officer who issued the notice was on leave. Middleton Goods Pvt. Ltd The notice duly served to party and in compliance to the notice the party submitted all the documents in Income Tax office. The copy of letter submitted by the party is enclosed herewith. (The copy of letter filed is at PB Page 118.) Lactrodryer Marketing Pvt. Ltd The notice duly served to party and in compliance to the notice the party submitted all the documents in Income Tax office. ....
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....icer made assessment for the year under consideration U/s 153A read with Section 143(3) of the Act. The return for the year under consideration was filed U/s 139(1) on 30/09/2008, which can be selected for scrutiny by 30/09/2009 as such no scrutiny notice U/s 143(2) was issued for the year under consideration. Therefore, proceeding were completed and were not abated as per law, therefore, assessment made by the Assessing Officer U/s 153A read with Section 143(3) is void ab initio. The ld AR relied on the decision of the Hon'ble Rajasthan High Court in the case of Jai Steel (India) Vs. ACIT (supra) and Hon'ble Mumbai ITAT Special Bench decision in the case of All Cargo Global Logistics Ltd. Vs DCIT 2012-TIOL-391-ITAT-Mum-Special Bench and argued that assessment made by the A.O. U/s 153A is not valid as per law. He further relied on the following decisions on this issue:- (i) CIT V/s Smt. Shaila Agarwal, 204 Taxman 276 (Allahabad High Court) (ii) Vishal Dembla Vs Deputy Commissioner of Income Tax ITAT, JODHPUR BENCH ITA Nos. 304 to 308/Jd/2013; 22nd July, 2013 (2013) 93 DTR (Jd)(Trib) 1 (2013) 36 CCH 484 Jodh Trib (2014) 61 SOT 10 (Jodhpur)(URO). (iii) Mari....
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.... enquiry report to the appellant, the ld Assessing Officer asked to prove the identity, genuineness and creditworthiness of the share holders before three days of completion of assessment order. The assessee replied on 28/3/2013 itself and submitted all the evidences to the Assessing Officer in support of share application money received from the respective parties. The assessee never refused to produce the parties, there should be some time available with the Assessing Officer as well as party to produce the cash creditors. As the parties belonged to Kolkata, it is difficult to approach them in a short notice. The ld CIT(A) also has not directed to produce the share holders for cross examination verification. The case laws referred by the ld CIT(A) and Assessing Officer are not squarely applicable on the facts of the case. Therefore, he prayed to hold the proceeding invalid and also on merit, this appeal is deserved to be allowed in favour of the assessee. 5. At the outset, the ld CIT DR has vehemently supported the order of the ld CIT(A) and has drawn our attention on findings given by the ld CIT(A) and case laws referred by her and argued that the assessee has not discharg....