TaxTMI 
TaxTMI 
2016 (7) TMI 1182
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....147 of the Act itself was not warranted by the law as the reasons of reopening were not cogent and were not drawn on any tangible material. Thus, Appellate Order under section 250 of the Act ('Impugned Order') is bad in law 3. That in law and under the facts of the case, Ld. Commissioner has erred by not considering the ample evidences produced by the appellant during the course of assessment proceedings and upholding the additions by merely reproducing assessment order passed by the Ld. Assessing Officer . 4. That in law and under the facts of the case Ld. Commissioner has erred in upholding the addition of Rs. 11,00,000/- as unexplained credit in the bank accounts despite of the fact that appellant had discharged its initial onus as required under section 68 of the Act during the assessment proceedings itself. 5. That in law and under the facts of the case Ld. Commissioner has erred in upholding the addition of Rs. 22,000/- on account of notional commission charge at the rate of 2%, when the addition under section 68 of the Act was not warranted itself. 6. That in law and under the facts of the case Ld. AO has erred in initiating the penalty pr....
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.... effect that no such firm/company existed at the respective address. Thereafter, the Assessing Officer asked the Authorized Representative of the assessee to produce the Principal Officer of the said entities along with books of account for verification of the share capital applied by them, however, the assessee failed to produce those parties. The Assessing Officer also observed that the shares were subsequently transferred in the name of Directors of the assessee company, i.e.,Sh. Sukhdeo Singh and Mrs. Manjit Kaur as early as on 25th November, 2004. The Assessing Officer also recorded the statement of Sh. Sukhdeo Singh who claimed to be the Managing Director and looked after all the affairs of the company. However, in the his statement dated 7th December, 2010, Sh. Sukhdeo Singh failed to explain the details of the parties to whom the shares were issued, how the share price was decided, how the same were brought back at a huge discount without any justification etc. The Assessing Officer also called for the bank statement of the share applicant companies from the bank and found that there was inconsistency in the copy of bank accounts of those concerns submitted by the assessee.....
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....cash 08-05-02 961559 5,00,000/- - 5,005/- To CLG 13-05-02 S 003027 2,00,000 2,05,005/- By cash 13-05-02 961559 2,00,000/- 5,005/- To CLG 4. The Assessing Officer also distinguished the judgment of M/s. Lovely Export Pvt. Ltd. (2008) 216 CTR 195 (SC). Finally, the Assessing Officer concluded the following facts in respect of the issue in dispute and held that total amount of Rs. 11 lacs received from the above parties was only a camouflaged transaction and it was the money of the assessee, which was routed back and accordingly the addition under Section 68 of the Act was made: i) The assessee has received huge amount of fund from outside parties. ii) Such persons giving credit did not receive any dividend or Interest of whatsoever nature from the assessee while the money remained at the letter's disposal. iii) Repeated opportunities were given to the assessee to produce such persons or to furnish material evidence of their identity or even actual existence on the ground. The assesses has furnished only photocopies of confirmations which cannot be taken cognizance of for th....
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....y made the basis for reason to believe and no independent inquiry was made by the Assessing Officer and, therefore, reopening of the assessment without valid reason to believe was void-ab-initio. In support of the contention, the learned Authorized Representative relied on the judgment of the Hon'ble High Court of Delhi in the case of M/s. Sarthak Securities Company Pvt. Ltd. Vs. Income Tax Officer, reported in 329 ITR 110; CIT Vs. Indo Arab Air Services, [2016] 283 CTR 92 (Delhi) and the order of Tribunal in the case of Varun Tibrewal Vs. ITO, in ITA No. 2301 & 2302/Del/2012 (dated 31st October, 2013). 6.2 On the other hand, learned Sr. Departmental Representative, referring to the reasons recorded, submitted that the Investigation Wing of the Department had conducted inquiry at large scale in the cases of the entry operators and on the basis of those inquiries, specific information was sent to the Assessing Officer that the assessee received accommodation entry from those entry providers. The information received from the Investigation Wing contained instrument number by which the entry was taken, date on which the entry was taken, bank account and branch through which entry r....
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....ty of the companies was not disputed. Under these circumstances, it would not be appropriate to require the assessee to go through the entire gamut of proceedings. It is totally unwarranted." 6.4 The Hon'ble High Court has said that there must be relevant material on which a reasonable person could form belief and conclusive proof is not required or established facts of escaped income are not necessary at the stage of recording reasons to believe that income has escaped assessment. In the case of the assessee in hand the, the Investigation Wing of the Income Tax Department had unearthed a money laundering racket through enquiries and observed that the assessee has also obtained an accommodation entry from M/s. Gupteshwar Marketing Private Limited. The information contained all the details of amount received, instrument number, bank branch and account number through which it was received. In the case of the assessee, the return of income was only processed under section 143(1) of the Act and as such no detail of share applicants/share holders of the assessee company was available in the return of income and the information was received from credible source, the Assessing Officer ....
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....the AY in question it was noticed that the Assessee "had not disclosed these transactions in its books of account." Further the AO refers to the ED's information that Mr. Chetan Gupta, partner of the Assessee, failed to explain the sources of the cash deposits as shown in the books of account. However, that by itself could not have led the AO to even prima facie conclude that income of the Assessee had escaped assessment. The explanation or the lack of it of the entries in the books of account may have certain relevance as far as ED is concerned but that by itself does not provide the vital link for concluding that for the purposes of the Act any part of cash deposits constituted income that had escaped assessment. There is a long distance to travel between a suspicion that income had escaped assessment and forming reasons to believe that income had escaped assessment. While the law does not require the AO to form a definite opinion by conducting any detailed investigation regarding the escapement of income from assessment, it certainly does require him to form a prima facie opinion based on tangible material which provides the nexus or the link to having reason to believe that....
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....pened within four years from the expiry of the relevant assessment year, the Assessing Officer has to base his 'reasons to believe' that income has escaped assessment on some fresh tangible material that provides the nexus or link to the formation of such belief. In a case where the initial return is processed under Section 143(1) of the Act and an intimation is sent to the Assessee, the reopening of such assessment no doubt requires the Assessing Officer to form reasons to believe that income has escaped assessment, but such reasons do not require any fresh tangible material. 35.7 In other words, where reopening is sought of an assessment in a situation where the initial return is processed under Section 143(1) of the Act, the Assessing Officer can form reasons to believe that income has escaped assessment by examining the very return and/or the documents accompanying the return. It is no necessary in such a case for the Assessing Officer to come across some fresh tangible material to form 'reasons to believe' that income has escaped assessment." 6.7 In view of the above judgment, the ratio in the case of Indo Arab Air Services is no longer required to follow. 6.8 T....
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....3 on appellant's request. Notice dt. 26-07-2013 was issued fixing the appeal for 01-08-2013. On request from A.R. of the appellant, appeal was again fixed for 19-08-2013, 10-09-2013, 07-10-2013, 04-12- 2013, 10-02-2014, 03-03-2014, 10-03-2014, 09-04-2014, 10-07-2014, 28-07-2014 and 13-08-2014. On 13-08-2014, again an adjournment alter was submitted by Id. A.R. requesting for further adjournment and submitting therein that "the captioned proceedings for the AY 2003-04 in respect of appeal are fixed for hearing before your goodself for today. The records in respect of assessment proceedings are not available with me earlier counsel engaged for assessment proceedings, therefore, we are required to inspect and take copies of relevant document for filing our written submission and we require some more time to present our case before your goodself." It is observed that present Ld. A.R. has been engaged by the appellant through its Power of Attorney dt. 10-05-2013 and thereafter on one pretext or other, the adjournments are sought by them. After being engaged in the case since more than 15 months, taking such a ground that previous records are not available with them is nothing but an....
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.... of Rs. 132 only/-. The DR also referred to the various discrepancies in bank statements found by the Assessing Officer and also the fact that said shares have been bought back by the directors of the assessee company at very low rate and which established the full Circle of rotation of the money by the assessee. The DR accordingly submitted that the Assessing Officer has duly rebutted the onus of proof and it was the duty of the assessee to discharge the onus which was shifted upon it by the Assessing Officer and as the assessee miserably failed in discharging its onus, the addition was rightly made by the Assessing Officer under section 68 of the Act. 8.3 We have heard the rival submission and perused the material on record including the orders of the lower authorities. We find that the assessee has initially provided details in respect of the share applicants to the Assessing Officer, however, when the summons sent to the share applicants written unserved with the postal remarks that no such firms/companies existed on that address and the Assessing Officer asked to produce those parties before him, it was the onus of the assessee to either produce those parties before him or ....
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....any, observed that the director of the appellant company miserably failed to explain satisfactorily the transactions and he was completely unable to furnish any evidence in support of the identities of the parties, the genuineness of the transactions and the creditworthiness of the parties. His replies before the A.O. were incomplete and evasive. It cannot be accepted that the acre appellant company was having these three angel investors who just provided share capital to the appellant and thereafter just disappeared. The Hon'ble High Court in the case of CIT v. M/s N.R. Portfolio Pvt. Ltd. Li 16 & 1019 of 2011 has observed as under: "29. In CIT v. Nipun Builders and Developers [2013] 350 ITR 407 (Del), this principle has been reiterated holding that the and the Assessing Officer have to adopt a reasonable approach and when the initial onus on the assessee would stand discharged depends upon facts and circumstances of each case. In case of private limited companies, generally persons known to directors or shareholders, directly or indirectly, buy or subscribe to shares. Upon receipt of money, the share subscribers do not lose touch and become incommunicado. Call monies....
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.... appellant's own undisclosed income which was reflected in the shape of share application money in the names of untraceable three entities. It is further observed that the A.O. has gone a step further in tracing that the shares allotted to these three entities were ultimately bought back by the directors of the appellant company namely Sh. Sukhdev Singh and Mrs. Manjit Kaur. It clearly shows the full circle of rotation of money which establishes the modus operandi unearthed by the Investigation Wing of the Department. The A.O.'s action of making addition of Rs. 11,00,000/- in appellant's income u/s 68 Of the Act is, therefore, fully justified and the same is hereby upheld. As a corollary to the addition sustained in the appellant's case, since the modus operandi adopted by the appellant has been established and upheld, it is beyond reasonable doubt that for arranging such accommodation entries, the appellant must have spent certain amount which was estimated by the A.O. @2% of the amount on the basis of prevailing market rate as unearthed by the Investigation Wing of the Department. Therefore, in view of the justification made by the A.O. the addition of Rs....