TaxTMI 
TaxTMI 
2016 (7) TMI 1182
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.... 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 proceedings under section 271( 1 )(c) of the Act. 7. The Appellant craves for leave t....
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....h 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. The findings of the Assessing Officer in respect of bank accounts of the share applicant entity are reproduced as under: 1. Immediately before the withdrawal of funds in favour of the assessee company i.e. on 13.05.....
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....d 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 the simple reasons that these are only copies and they are und-dated iv) Despite repeated opportunities, the persons have neither appeared nor could be produced by the assesses who cannot but be presumed to have positive information and knowledge regarding the whereabouts of the investing persons. v) Shares subscribed at a huge premium were subsequently bought by the directors of the ass....
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....; 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 received was by the assessee. She further submitted that at the stage of reopening of the statement a prima facie reason to believe was required and as the information was from a credible source, the Assessing Officer recorded the reasons and reopened the assessment. She further submitted that in this case only the processing was done and no other information in respect of introduction of the share capital was available on th....
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....ons 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 formed belief that assessee obtained an accommodation entry from M/s Gupteshwar Marketing Private Limited in the form of share capital. Further, in the cited judgment of Sarthak Securities Company Private Limited (supra), the assessee objected to the reasons recorded and the Assessing Officer in the rejection of objection did not refer to the principle laid down in Lovely Exports Private Limited(supra), whereas in the case in hand as p....
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....ck 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 income has escaped assessment. 21. It is in this context that the Court finds that the decision in Mitsui & Co. India (P.) Ltd. v. ITO [2012] 26 taxmann.com 1/[2013] 213 Taxman 32 (Delhi), on which considerable reliance was placed by Mr. Kamal Sawhney, is distinguishable on facts. The nature of the information provided by the governmental agency in that case did not itself refer to any amounts or entries in the books of account of the Assessee. In ....
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....e 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 The facts in the case in hand are also different from the case of Varun Tibrewal (supra) as in the case in hand the Assessing Officer has referred to the exercise of unearthing the huge racket of money laundering carried out through bogus entry operators. A detailed report in this respect was received by the Assessing Officer which is mentioned on page 3 of the assessment order. Thus in the case in hand some material or evidence was available with the Assessing Officer while reopening the ass....
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....aring 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 excuse for seeking adjournment. In such circumstances it was made known to the appellant that no further adjournment shall be granted to the appellant. However, if written submissions are received by 19-08-2014, the same shall be entertained or else the appeal shall be decided on merits. On 19-08-2014, again nobody appeared nor any written submissions were filed. Since the appellate has been taking adjournments since beginning and the appeal is old now, I have no other option but to decide the appeal on mer....
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....s 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 provide their new addresses as in the case of private limited companies, the shares are allotted through private circulation only. The Assessing Officer also observed deposit of cash in the bank account of the share applicant just before issue of cheques to the assessee. The Assessing Officer gathered copy of bank statements of the share applicants directly from the banks through notice under section 133(6) of the Act and pointed out discrepancy in the copy of the bank statement of one of the share applicant supplied ....
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....n'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, dividends, warrants etc. have to be sent and the relationship is/was a continuing one. In such cases, therefore, the assessee cannot simply furnish details and remain quiet even when summons issued to shareholders under Section 131 return unserved and uncomplied. This approach would be unreasonable as a general proposition as the assessee cannot plead that they had received money, but could do nothing more and it was for the assessing officer to enforce share holders attendance. Some cases might require or justify visit by the In....
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....f 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. 22,000/- made by the A.O. in appellant's income treating the same as unexplained expenditure made by the appellant in arranging the accommodation entry is justified and upheld. In view of the above both additions of Rs. 11,00,000/- and Rs. 22,000/- are upheld. Ground he.2 of appeal is dismissed." 8.4 In the background of the above discussion, we are of the opinion that the assessee has failed to discharge its onus in respect of the credit received in the form of share capital by the assessee of Rs. 11 lakh from the parties and, therefore, there ....