TaxTMI 
TaxTMI 
2016 (6) TMI 899
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.... 143(3) of the Act without scrutiny. To re-open such assessment, the Assessing Officer has issued the impugned notice. Reasons recorded by the Assessing Officer read as under: "The assessee company has filed its return of income for A.Y. 2009-10 on 30/09/2009 declaring total income of Rs. 2,51,420/- and showing book profit u/s. 115JB of the I.T.Act of Rs. 3,19,898/-. 2. During the Survey proceedings u/s. 133A of the I.T.Act on 02/02/2015 and assessment proceedings u/s. 143(3) of the Act for A.Y. 2012-13, it is noticed that the assessee company has received following share capital and share premium during the F Y 2008-09 relevant to A Y 200-10. Sr. No Name of the Party Share Capital Rs. Share premium Rs. 1 Hiren Trivedi 1,50,000/- 28,50,000/- 2 Ness Nusil Wadia 11,60,000/- 2,78,40,000/- 3 Kajal Agro Farm Pvt. Ltd. 5,40,000/- 1,29,60,000/- 4 Pearl Plantation Pvt. Ltd. 3,88,000/- 93,12,000/- 5 Samrajya Agro Farm Pvt. Ltd. 5,16,000/- 1,23,84,000/- Total 27,54,000/- 6,53,46,000/- During the Survey proceedings, the assessee company has failed to produce share application form details of....
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....P) Ltd. was followed by this Court in case of Hindustan Inks and Resing Ltd. vs. Deputy Commissioner of Income Tax. reported in 60 DTR 18 (Guj.). 6. On the other hand, learned counsel for the Revenue opposed the petition contending that the original assessment was not framed after scrutiny. There is no question of change of opinion on part of the Assessing Officer. He has recorded proper reasons on the basis of which, he formed a belief that the income chargeable to tax has escaped assessment. Counsel would highlight that the details and whereabouts of the companies, which had made share investments in the assessee company, were not available and could not be provided by the assessee, clearly indicating that these were bogus investments. 7. We must be conscious that the original assessment in the present case was not made after scrutiny. The question of change of opinion, therefore, would not arise since the Assessing Officer cannot be stated to have formed any opinion during the original assessment. This was held by the Supreme Court in case of Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P. Ltd. reported in 291 ITR 500, in which, it was held and obs....
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....de to the decision of Supreme Court in case of Commissioner of Income Tax vs. Kelvinator of India Ltd. reported in 320 ITR 561, in which, it was held and observed that the Assessing Officer must have a tangible material to come to the conclusion that there was escapement of income from assessment and that the reason must have a live link with the formation of the belief. 9. Additionally, we may notice that the expression "reason to believe" came up for consideration before the Supreme Court in case of Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P. Ltd. (supra) in which, it was held that such expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The term "reason to believe" would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income has escaped assessment. It was observed as under: "16. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any ....
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....elieve that income chargeable to tax has escaped assessment. We do not find such reasons lacked validity or a live link with the material on record enabling the Assessing Officer to form such a belief. As held by the Supreme Court in case of Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P. Ltd. (supra) at this stage, it is not necessary for the Assessing Officer to conclusively establish that income would be invariably taxed. The inquiry of the Court while examining notices for re-opening, where original assessment is not framed after scrutiny is necessarily extremely narrow. The question whether said income can be taxed in the hands of the assessee or the department can proceed only against the investors would also depend on various facts and circumstances and only on such an assertion the reopening proceedings cannot be terminated. Undoubtedly, when share investment is made by the large number of persons, the company, in whose shares such investments are made, cannot be held responsible for unaccounted investments of such investors even if so found to have been made since it would be unaccounted investment of the investors not of the company. Nevertheless,....
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.... be produced before the AO as directed by him. These facts do not find any mention in the order of the Tribunal. The Tribunal did not refer to the observation of the Assessing Officer from a perusal of the bank accounts of the three companies which had applied for the shares. We have already referred to the inferences drawn by the AO. The Assessing Officer had examined the bank accounts and had deduced a pattern by which the bank accounts were used only as a conduit to receive the monies and pay them out on the same day. This pattern, coupled with the general admission made by Pradeep Kumar Jindal and the failure of the share applicants to produce the directors before the Assessing Officer, all taken cumulatively, should have excited suspicion in the mind of the Tribunal necessitating a deeper probe into the matter. The Tribunal, however, has chosen to rest its decision on the sole fact that the share applicants had established there identity by filing confirmation letters and copies of their income tax returns. This is hardly sufficient for the purpose of discharging the creditworthiness of the share applicants and the genuineness of the transactions. There can be no dispute that ....
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....re those where there was evidence and material to show that the shareholder company was only a paper company having no source of income, but had made substantial and huge investments in the form of share application money. The assessing officer has referred to the bank statement, financial position of the recipient and beneficiary assessee and surrounding circumstances. The primary requirements, which should be satisfied in such cases is, identification of the creditors/shareholder, creditworthiness of creditors/shareholder and genuineness of the transaction. These three requirements have to be tested not superficially but in depth having regard to the human probabilities and normal course of human conduct. 18. Lovely Exports Pvt. Ltd. (supra) was also considered and distinguished in N.R. Portfolio Pvt. Ltd. (supra) and it was held that the entire evidence available on record has to be considered, after relying upon CIT Vs. Nipun Builders and Developers, [2013] 350 ITR 407 (Delhi), wherein it has been held that a reasonable approach has to be adopted and whether initial onus stands discharged would depend upon facts and circumstances of each case. In case of private limited comp....