AI Drafter 
TaxTMI 
TaxTMI 
2011 (10) TMI 667
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....8th October, 2003 declaring total income at Nil. The return was processed u/s 143(1). On the basis of specific information received by the AO of the assessee, reassessment proceedings have been started vide notice dated 19th March, 2010 issued u/s 148 of the Act. Copy of such notice is placed at page 235 of the paper book. Copy of reasons as recorded by the AO is placed at page 2 of the paper book and the same read as under: "Reasons for issuance of notice u/s 148 in the case of M/s Shivank Udyog Ltd. A 37/2, Maya Puri Indl. Area, New Delhi. As per office record the assessee has filed its return of income on 28th October, 2003 for the A.Y. 2003-04 declaring an income of Rs. Nil. Information has been received from DIT(Inv.) that the above said assessee has been beneficiary of accommodation entries being provided by certain entry operators. On the basis of the information chart forwarded by DIT(Inv.), New Delhi it is seen that the assessee has bogus transactions to the tune of Rs. 34,50,000/- during F.Y. 2002-03 relevant to A.Y. 2003-04. In view of above, I have reasons to believe that an amount of Rs. 34,50,000/- has escaped assessment withi....
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....arties and requested the AO to call these parties u/s 131 at the cost and expenses of the assessee and it was pointed out that any general statement made by any person would not be enough unless it is specifically mentioned that the assessee company had received accommodation entries from them. It was requested that all such type of statements, on the basis of which the department is inferring that these are accommodation entries, should be supplied to the assessee. It was pointed out that application money for allotment of shares was received by cheques from these parties and they are being assessed to Income tax under the PAN mentioned therein. The detail was furnished in the shape of chart, which is described in submission in aforementioned letter dated 18th October, 2010 the chart is reproduced as under: Name Address Amount Cheque Date Cheque No. Bank, Branch PAN Doc. Page no. Umesh Securities P. Ltd. No money was received from Umesh securities P. Ltd. 450000 9.7.02 105925 Onyx Exim & Sales Ltd. 2842, Classic Apartments, Street Moti Mahal, Darya Ganj, N. Delhi110002 450000 &....
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.... Name Address Amount Cheque Date Cheque No. Bank, Branch PAN Doc. Page No. Umesneh Securities Pvt. Ltd. A-35, jain Nagar Ext., Kanjhawala Road, Delhi-81 450000 9.7.02 105925 KSBL, Arya Samaj Road, Dev Nagar, N.D. AAACU0451G 142-143 & 148-182 7. Along with the aforementioned letter, all aforementioned documents were furnished, the copy of which has also been filed in the paper book filed by the assessee. The AO issued summon to these parties and after issuing such summons the position has been summarized by the AO in the assessment order as under: - S.No. Name of party Written back by postal authorities with following remarks 1. Onyx Exim & Sales Ltd. No such firm 2. Grassroots Marketing Pvt. Ltd. (new name) Shimmer Marketing Pvt. Ltd. (Old name) No such firm in this address 3. Sparkle Breweries Pvt. Ltd. (New name) old name was Maa Shakubari Stone Crust Ltd. Notice has not come back 4. Ibex Infotech Pvt. Ltd. No such firm at this address 5. Rabik Exports Pvt. Ltd. No such office on suc....
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....t in the case of IAC Vs. IBM Word Trade Corporation 216 ITR 811 (Bom.) only the reasons so recorded can be looked at for sustaining or setting aside a notice issued u/s 148 and any other material cannot be relied upon. As per decision of Bombay High Court in the case of Hindustan Liver Ltd. Vs. R.V. Wadkar 268 ITR 332, the reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No addition can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the AO to disclose and open his mind through reasons recorded by him. The reasons recorded by the AO cannot be supplemented by filing an affidavit or making an oral submission, otherwise, the reasons which are lacking in the material particulars would get supplemented, by the time the matter reaches to the court, on the strength of affidavit or oral submissions advanced. The reasons recorded must be based on evidence. According to decision of Hon'ble Supreme Court in the case of ACIT Vs. Rajesh Jhaweri Stock Brokers P. Ltd. 291 ITR 500 (SC) the word "reason" in the phrase "reason to believe" would mean cause or justification. If the AO....
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....hrough the entire gamut of proceedings. It is totally unwarranted. 24. Resultantly, the initiation of proceedings u/s 147 and issuance of notice u/s 148 of the Act are hereby quashed. In the facts and circumstances of the case, there shall be no order as to costs." 11. On merits, it was contended by ld. AR that in view of the evidence submitted by the assessee, the initial burden was discharged. The AO could not bring any material to suggest that the evidence filed by the assessee was not correct or was false and for this purpose, he relied upon the following decisions: - (i) CIT Vs. AltraTech Finance Investment Ltd., decision dated 12th August, 2010 in ITA No. 1122/2010 and copy of the decision is placed at pages 251 to 254 of the paper book. (ii) CIT Vs. M/s Creative Word Telefilms Ltd., decision dated 12th October, 2009 (Bombay High Court) in ITA(L) No. 2182/2009, copies placed at page 255 to 256 of the paper book. (iii) CIT Vs. Pryag Hospitals & Research, decision dated 22nd July, 2010 in ITA No. 917/2010, copy placed at pages 257 to 260 of the paper book. (iv) CIT Vs. Dwarka Dhish Investment P. Ltd., decision dated 2nd August, 20....
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....d opportunities were issued by the AO to the investing companies. (iv) It is a fact that in spite of repeated opportunities, the principal officers of the investing companies neither appeared nor could be produced by the appellant who had positive information and knowledge regarding the whereabouts of the investing companies. (v) Any such person (including companies) would never simply advance fund and would vanish from the scene. (vi) It is a fact that the appellant has no liability for any repayment of any amount to the investing companies. (vii) It is a fact that shares were not allotted to the investing companies and it was never sent through postal mode and no such evidence was ever produced either before the ld. AO or before me." 15. She also pleaded that the assessee has charged heavy premium of Rs. 90 on the shares having face value of Rs. 10/-. She submitted that the assessee has submitted no justification of charging such a high premium. The balance sheet of the assessee also does not support charging such high premium. The assessee has also not brought any material on record to show that the share allotted on such a huge premi....
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....2003-04." The Assessing Officer further observed "in view of above I have reasons to believe that an amount of ` 34,50,000/- has escaped assessment within the meaning of Section 147 (c) of the Income-tax Act, 1961 for the Assessment Year 2003-04. Therefore, it cannot be said that the Assessing Officer had not applied his mind and has simply worked upon the report of DIT (Inv.). Moreover, in the later decision, Hon'ble Delhi High Court in the case of AGR Investment Ltd. vs. Addl. CIT 330 ITR 146 (Del) had occasion to consider this aspect in which the aforementioned decision in the case of Sarthak Securities Co. Pvt. Ltd. (supra) was also considered. The reasons in that case are found in para 6 of the order and the reasons are almost same and their lordships after considering the various judicial pronouncements including the decision in the case of Sarthak Securities Co. Pvt. Ltd. (supra) have upheld the initiation of reassessment proceedings. Their lordships observed that "It is also noticeable that there was specific information received from the office of DIT (INV.V) as regards the transactions entered into by the assessee company with the number of concerns which had ....
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....t if the Assessing Officer, for whatever reason, has reasons to believe that income has escaped assessment which confers jurisdiction to re-open the assessment where the case is not covered by proviso to Section 147. It was observed that the scope of effect of Section 147, as amended w.e.f. 1st April, 1989, as also Sections 148 to 152 are substantially different from the provisions as they stood prior to substitution. Under the old provisions of Section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or re-assessed. To confer jurisdiction under Section 147 (a), two conditions were required to be satisfied; firstly, the Assessing Officer must have reasons to believe that income, profits or gains chargeable to income-tax has escaped assessment; and, secondly, he must also have reason to believe that such assessment has occurred by reason of either (i) omission or (ii) failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer c....
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....ts and in the absence of any material to the contrary, the evidence submitted by them has to be accepted and the said evidence cannot be rejected merely for the reason that summons sent to those parties have come back. Mere fact that the summons could not be served cannot be a ground to make the addition and this position has been accepted by Hon'ble jurisdictional High Court in the case of CIT vs. Oasis Hospitalities Pvt. Ltd. (supra) and this is clear from the following observations of their lordships from the said decision: "15. At this stage, we would like to refer to the judgment of the Bombay High Court in the case of CIT vs. M/s Creative World Telefilms Ltd. (in ITA No.2182 of 2009 decided on 12.10.2009). The relevant portion of this order is reproduced below: "In the case in hand, it is not disputed that the assessee had given the details of name and address of the shareholder, their PAN/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the Assessing Officer to make proper investigation and reach the shareholders. The Assessing Officer did nothing except issuing summons which were ultimately retur....
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....ith the law and, thus, not remediless. It is, thus, for the Assessing Officer to make further inquiries with regard to the status of these parties to bring on record any adverse findings regarding their credit worthiness. Further reference can be made to the following observations of their lordships with regard to Oasis Hospitalities Pvt. Ltd. (ITA No.2093 of 2010 and ITA No.2095 of 2010) which were the appeals filed by the revenue: "28. The assessees filed copies of PAN, acknowledgement income tax returns of the companies, their bank account statements for the relevant period, i.e., for the period when the cheques were cleared. However, the parties were not produced in spite of specific direction of the AO instead of taking opportunities in this behalf. Since the so-called Directors of these companies were not produced on this ground coupled with the outcome of the detailed inquiry made by the Investigating Wing of the Department, the AO made the addition. This addition could not be sustained as the primary onus was discharged by the assessee by producing PAN number, bank account, copies of income tax returns of the share applicants, etc. We also find that the Asses....
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....are, therefore, of the opinion that there is no merit in these two appeals, which are accordingly dismissed at the admission stage itself." 22. If the aforementioned observations of their lordships are considered in the factual matrix of the present case, then, the same will be squarely applicable to the facts of the present case. In the present case, the assessee filed copies of PAN, acknowledgement of filing income-tax returns of the companies, their bank account, statements for the relevant period i.e., for the period when the cheques were cleared and the parties were not produced in spite of specific directions of the Assessing Officer instead of taking opportunities in this behalf. Keeping in view the fact for non-production of these parties coupled with the outcome of inquiry made by the Investigation Wing, the Assessing Officer has made the addition. The amount paid to the assessee by the share applicants has been shown to be debited in the respective bank accounts of the share applicants and if all these facts are seen, then, it will be a case where addition upheld by the CIT (A) cannot be held to be justified. Therefore, keeping in view the evidence placed on record by ....