TaxTMI 
TaxTMI 
2017 (7) TMI 605
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....ion, has no legs to stand and hence must be quashed. 3. The Ld. CIT(A) erred in confirming the addition of Rs. 75 lakhs U/s.68 of the I.T. Act, 1961. 4. The Ld. CIT(A) failed to note that the entire evidence and proof for the receipt of Rs. 75 lakhs by way of share application money and premiums were filed which has not been dispatched by any of the authorities and therefore the CIT(A) fell into error in confirming the addition of Rs. 75 lakhs. 5. The Ld. CIT(A) at page 7.2 of the order erred in holding that the assessee failed to produce Mr. Praveen Kumar Jain for cross examination who was a witness for the department and failed to note that it was not the duty of the appellant to produce any person to substantiate the claim of the department and therefore the addition of Rs. 75 lakhs is to be deleted. 6. The Ld. CIT(A) failed to note while confirming the addition or Rs. 75 lakhs that the entire enquiry by DGIT (Inv.), Mumbai and the information received by the Assessing Officer about Mr. Praveeen Kumar Jain was used against the appellant without giving a copy of the evidence/statement received from the DGIT (Inv.), Mumbai, thus violating the pr....
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....s never provided to the assessee. Mr. K. Praveen Kumar Jain filed an affidavit before the DGIT (Inv.), Mumbai retracting the statement and consequently, his statement cannot form the basis for making the addition. (f) The statement was obtained behind the back of the assessee and an opportunity of cross-examination has not been provided. Hence, the statements in question cannot be used against the assessee. (g) A perusal of the assessment order reveals that, the entire addition is based on the so-called investigation by the DGIT (Inv.) Office at Mumbai. The nature of investigation, the evidences collected, during the investigation, the conclusions drawn etc., are not known to the A.O. No material relating to that investigation is furnished to the assessee. Hence, the addition has to be quashed. 3. The Ld. D.R. Smt. U. Minichandran on the other hand, controverted the submissions of the assessee and argued that : (a) Mr. K. Praveen Kumar Jain is a well-known entry provider and has admitted this fact before the DGIT (Inv.) Mumbai. (b) The Director of the assessee company in a statement recorded under section 131 on 15.09.2014 stated that Mr. Prav....
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....t that Sri Praveen Kumar Jain has been controlling various dummy/paper companies whose only function has been to provide accommodation entries to other companies towards sales, unsecured loans and share application money. During the relevant previous year, three of such companies, namely M/s Javda India Impex Ltd., M/s Kush Hindustan Entertainment Ltd., M/s Olive Overseas Pvt. Ltd., have provided accommodation entries of Rs. 25,00,000 each to the assessee company towards share capital of Rs. 15,00,000 and Securities premium of Rs. 60,00,000. These accommodation entries totaling to Rs. 75,00,000 have been provided to facilitate the assessee to regularize its unaccounted money of Rs. 75,00,000 which has escaped assessment." 5.2. On perusal of these reasons demonstrates that, the assessment of the assessee has been reopened only on the basis of intimation received from DGIT (Inv.) Bombay without verification or application of mind. It was done in a mechanical manner. 5.3. Under similar circumstances, the Hon'ble Delhi High Court in the case of (i) Pr. CIT vs. G & G Pharma India Ltd., in ITA.No.545/2015 vide order dated 08.10.2015 at paras 12 and 13 held as follows : ....
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....eason to believe that income of the Assessee has escaped assessment. Unless that basic jurisdictional requirement is satisfied a post mortem exercise of analysing materials produced subsequent to the reopening will not rescue an inherently defective reopening order from invalidity." (ii) Signature Hotels Pvt. Ltd. vs. ITO (2011) 338 ITR 51 (Del) held as follows:- Allowing the petition, that the reassessment proceedings were initiated on the basis of information received from the Director of Income-tax (Investigation) that the petitioner had introduced money amounting to Rs. 5 lakhs during financial year 2002-03 as stated in the annexure. According to the information, the amount received from a company, S, was nothing but an accommodation entry and the assessee was the beneficiary. The reasons did not satisfy the requirements of section 147 of the Act. There was no reference to any document or statement, except the annexure. The annexure could not be regarded as a material or evidence that prima facie showed or established nexus or link which disclosed escapement of-income. The annexure was not a pointer and did not indicate escapement of income. Further, the Asses....
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....n". HELD by the High Court allowing the Petition: (i) In the recorded reasons. no details are provided as to what such information is which excited the AO's notice and attention. The reasons must indicate specifically what such objective and new material facts are, on the basis of which a reopening is initiated u/s 148. This reassessment is clearly not on the basis of new (or "tangible") information or facts that which the Revenue came by. It is in effect a re-appreciation or review of the facts that were provided along with the original return filed by the assessee; (ii) The foundation of the AO's jurisdiction and the raison d'etre of a reassessment notice are the "reasons to believe". Now this should have a relation or a link with an objective fact in the form of information or facts external to the materials on the record. Such external facts or material constitute the driver, or the key which enables the authority to legitimately re-open the completed assessment. In absence of this objective "trigger", the AO does not possess jurisdiction to reopen the assessment. It is at the next stage that the question. whether the re- opening of assessment amou....
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....e possession of the Assessing Officer subsequent to the issue of the intimation. The notice ref1ected an arbitrary exercise of the power conferred under section 147. (vii) Sarthak Securities Co. P Ltd. vs. ITO (2010) 329 ITR 110 (Delhi) held as follows:- Allowing the petition, that the formation of belief was a condition precedent as regards the escapement of the tax pertaining to the assessment year by the Assessing Officer. The Assessing Officer was required to form an opinion before he proceeded to issue a notice. The validity of reasons, which were supposed to sustain the formation of an opinion, was challengeable. The reasons to believe were required to be recorded by the Assessing Officer. Once the ingredients of section 147 were fulfilled, the Assessing Officer was competent in law to initiate the proceedings under section 147. The Assessing Officer was aware of the existence of" the four companies with whom the assessee had entered into transaction. Both the orders showed that the Assessing Officer was made aware of the situation by the investigation wing and there was no mention that these companies were fictitious companies. Neither the reasons in the in....
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....the assessee that necessary approval under section 151(2) has not been obtained. We hold that this ground is devoid of merits as the Ld. D.R. has produced the record to prove that an approval has been obtained from the Addl. CIT for reopening of assessments under section 151(2) of the Act. Hence this argument of the assessee is dismissed. 7. Coming to the merits of the case, we find that the assessee has filed the following information. A. Javda India Impex Ltd. 1. Confirmation letter filed for investment of 25 lakhs (page 32) 2. I.T. Return filed on 27.11.2006 (Page 39). 3. Balance Sheet as on 31.3.2006 (page 33) 4. Return of income filed on 22.10.2007 disclosing an income of Rs. 15,73,632 (Page 113) 5. Share capital is Rs. 4,50,00,000 and reserves and surplus is Rs. 28,74,056. B. Hindusthan Entertainment Ltd., 1. Return filed on 29.10.2007 on an income of Rs. 6,21,991 (page 143). 2. Confirmation letter for investment of 25lakhs filed (page 34) 3. Balance sheet as on 31.3.2007 (Page 195) 4. Share capital is Rs. 300,00,000. Reserves & Surplus is Rs. 58,30,148. C. Real Gold....
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....on Wing of the department clearly showed that this was nothing but a sham transaction of accommodation entry. The assessee was asked to explain as to why the said amount of Rs. 1,11,50,000 may not be added to its income. In response, the assessee has submitted that there is no such credit in the books of the assessee. Rather, the assessee company has received the share application money for allotment of its share. It was stated that the actual amount received was Rs. 55,50,000 and not Rs. 1,11,50,000 as mentioned in the notice. The assessee has furnished details of such receipts and the contention of the assessee in respect of the amount is found correct. As such the unexplained amount is to be taken at Rs. 55,50,000. The assessee has further tries to explain the source of this amount of Rs. 55,50,000 by furnishing copies of share application money, balance sheet, etc. of the parties mentioned above and asserted that the question of addition in the income of the assessee does not arise. This explanation of the assessee has been duly considered and found not acceptable. This entry remains unexplained in the hands of the assessee as has been arrived by the Investigation wing of the d....
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....ing that the material disclosed was untrustworthy or lacked credibility the Assessing Officer merely concluded on the basis of enquiry report, which collected certain facts and the statements of Mr. Mahesh Garg that the income sought to be added fell within the description of S. 68 of the Income Tax Act, 1961. 7. Having regard to the entirety of facts and circumstances, the Court is satisfied that the finding of the Tribunal in this case accords with the ratio of the decision of the Supreme Court in Lovely Exports (supra). 8. The decision in this case is based on the peculiar facts which attract the ratio of Lovely Exports (supra). Where the assessee adduces evidence in support of the share application monies, it is open to the Assessing Officer to examine it and reject it on tenable grounds. In case he wishes to rely on the report of the investigation authorities, some meaningful enquiry ought to be conducted by him to establish a link between the assessee and the alleged hawala operators, such a link was shown to be present in the case of Nova Promoters & Finlease (P) Ltd. (supra) relied upon by the revenue. We are therefore not to be understood to convey that in all cases of sha....