TaxTMI 
TaxTMI 
2011 (10) TMI 667
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....rn 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 within the meaning of sec. 147(c) of the I.T. Act, 1961 for the A.Y. 2003-04. Since fou....
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....fically 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 8.7.02 106954 KSBL, Arya Samaj Road, Dev Nagar, N. Delhi AAACI1979R 617 & 142-143 Shimmer Marketing P. Ld. 2842, Classic Appartments, Street Moti Mahal, darya Ganj, N. Delhi110002 400000 5.7.02 106981 ....
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....ch 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 such address 6. Kohinoor Oil Mills Ltd. 8. The AO also noted that assessee did not supply new addresses for Umesh Sneh Securities P. Ltd. and Kohinoor Oil Mills Ltd., therefore, the summons were not issued again. In respect of Maa Shakubhari Stone Crushers Ltd. (old name) & M/s Sparkle Brewaries P. Ltd. (new name) the summons were issued twice, but there was no compliance. In respect of M/s Rabik Export P. Ltd., the AO discarded the appearance of one Shri ....
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....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 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 had escaped assessment. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the material would conclusively prove the statement is not the concern at that stage. He submitted that referring to all these decisions, it was observed by the Hon'ble....
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....ect 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, 2010 in ITA No. 911/2010, copy of decision is placed at pages 261 to 269 [(2010) 6 taxman.com 84 (Del.)]. (v) CIT Vs. Oasis Hospitality & Others P. Ltd., decision dated 31st January, 2011 in ITA No. 2093/2010, copies placed at pages 276 to 302 of the paper book. 12. In this manner, the ld. AR contended that addition has wrongly been sustained by the ld. CIT(A) and the same should be deleted. 13. On the other hand, it was submitted by ld. DR that ld. CIT(A) has rightly upheld the validity of reassessment proceedings. She subm....
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....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 premium were not brought back at a lower price by the persons interested in the assessee company. 16. In view of above arguments, she pleaded that order of CIT(A) should be upheld and the appeal filed by the assessee should be dismissed. 16. We have carefully considered the rival submissions in the light of the material placed before us. It is a case where original assessment has not been framed u/s 143 (3) of the Act and re-assessment proceedings have been initiated vide notice dated 19th March, 2010. The reason for initiating re-assessment proceedings have already been reproduced in the ab....
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....thak 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 made accommodation entries and they were not genuine transactions. As we perceive, it is neither a change of opinion nor does it convey a particular interpretation of a specific provision which was done in a particular manner in the original assessment and sought to be done in a different manner in the proceeding under section 147 of the Act. The reason to believe has been appropriately understood by the Assessing Officer and there is material on the basis of which the notice was issued. As has been held in Phool Chand Bajrang Lal (supra), Bombay Pharma Products (supra) and Anant Kumar Saharia (supra)....
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..... 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 could have jurisdiction to issue notice u/s 148 read with Section 147 (a). But, under the substituted Section 147, existence of only the first condition suffices. In other words, if the Assessing Officer for whatever reasons has reason to believe that income has escaped assessment, it confers jurisdiction to reopen the assessment. It is, however, to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to Section 147. It cannot be even the case of the assessee that its case is covered by the proviso u/s 147 as for application of proviso it is a condition precedent tha....
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....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 returned back with an endorsement 'not traceable.' In our considered view, the Assessing Officer ought to have found out their details through PAN cards, bank account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the Assessing Officer. In the above circumstances, the view taken by the Tribunal cannot be faulted. No substantial question of law is involved in the appeal. In the result, the appeal is dismissed in limine with no order as to costs. (emphasis supplied.)" 16. The court thus clearly held that once documents like PAN....
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....e 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 Assessing Officer was influenced by the information received by the Investigating Wing and on that basis generally modus operandi by such Entry Operators is discussed in detail. However, whether such modus operandi existed in the present case or not was not investigated by the A.O. The assessee was not confronted with the investigation carried out by the Investigation Wing or was given an opportunity to cross-examine the persons whose statements were recorded by the Investigating Wing. 29. As regards discrepancies found by the AO in the bank statement suffice is to mention that the bank statements that were filed by the assessee were provided by the shareholders and were....
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....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 the assessee, we are of the opinion that the addition upheld by CIT (A) was not justified and the same requires deletion. We accordingly, delete the addition and allow ground No.2. 23. So as it relates to the contention of the learned DR that the assessee has charged high premium on the shares for which no justification has been rendered, it may be mentioned that the assessee has authorized share capital of ` 3 crores as against the previous year authorized capital of ` 1 crore. During the year under consideration, the assessee has issued 2,50,000 shares of face value of ` 10 at a premium of ` 90 by way of private placement. The list of these parties is furnished at pages 249 and 250. To b....