TaxTMI 
TaxTMI 
2017 (10) TMI 525
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....believe or any tangible material with regard to reopening of the case u/s 148 and, therefore, the whole proceedings are void ab-initio. 3. Notwithstanding the above said ground of appeal, the Ld. CIT(A) has erred in confirming the addition of Rs. 50 lacs as made by the Assessing Officer on account of contribution of share capital/share premium by M/s Genesis Fashions P. Ltd. 4. That the assessee having proved the identity, capacity and genuineness of transfer of contribution of Rs. 50 lacs as made by M/s Genesis Fashions P. Ltd., and therefore, such addition as confirmed by the CIT (A) is bad in law and deserves to be quashed. 5. That the CIT (A) has also erred in taking cognizance of the statement recorded during course of survey of one of the director in view of the judgment of Hon'ble Supreme Court in the case of Khader Khan Sons. 2. The relevant facts of the case are that the assessee returned an income of Rs. 54,30,750/- on 26.10.2007. Notice u/s 148 was issued on 31.03.2014 after recording of reasons which have been reproduced in the assessment order itself. Based on the reasons recorded, the assessee was issued a show cause notice to explain....
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.... held to be inapplicable leading to the addition of Rs. 50 lacs. 3. The assessee agitated the issue unsuccessfully in appeal before the CIT(A). Still aggrieved, the assessee is in appeal before ITAT. 4. The ld. AR submitted that he would be addressing his arguments on the basis of the synopsis filed wherein respective pages of the impugned order and the assessment order alongwith the documents already on record having been filed before the AO and the CIT(A) available in the consolidated Paper Book filed on 19.04.2017 in the two appeals would be referred to. 4.1 Addressing ground Nos. 1 and 2, it was submitted that considering the material available on record, the assessment itself deserves to be quashed as on a plain reading of the reasons recorded, it would show that there was no reason to believe that income has escaped assessment. It was his argument that in-fact there was no reason available as per record before the AO even to suspect as no tangible material has been referred to in the reasons recorded by the AO for taking recourse to Section 148. It was submitted that merely on the basis of a routine information by the Directorate of Income Tax that in same companies,....
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....he addition should have been made of the entire amount. The selective choosing of part of the share application money only from one party cannot be said to be a fair exercise of power. If the AO, as per record, considers that shares at a premium in a specific year for the assessee company were not justified but accepts the Share Application money from the other two parties on the very same reasons and selectively chose to only consider addition in the hands of this one party, the said exercise is arbitrary and it is self evident on the face of the record. It was his submission that he would not want to go to the other reasons and just leave his arguments to highlight the arbitrariness and whimsical action of the AO by stating and referring to the fact that addition of only Rs. 50 lacs has been made and not of the entire amount of Rs. 1.49 Crores. Elaborating and reiterating the argument, it was submitted that if for a moment it was to be considered that share application on a premium to the tune of Rs. 1.50 Crores was doubted then the same reason should have been good for the entire amount which should have been added. The AO, it was submitted, has selectively accepted on same fact....
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....o anything for any reason justifying the action. In the facts of the present case, it was reiterated it was a routine information available with the AO on which nothing was done by the AO who without looking into any fact proceeded to issue notice without forming his belief to satisfy himself about escapement of income. It was reiterated that nowhere in the reasons recorded, it has been stated that what facts were considered or seen. 4.7 Reliance was also placed upon the following decisions placed in the second set of judgements : I. Income Tax Officer V/s Arti Khattar [Pgs 17 to 22] 41 CCH 25 DEL-ITAT II. ITO V/s M/s Comero Leasing & Financial Pvt. Ltd [Pgs 23-32] ITA No.4281/DEL/2010, ITAT, Delhi Bench at New Delhi III Sunita Jain V/s Income Tax Officer [Pages 33-42] ITA No.501/ADH/2016, ITAT, Ahmedabad Bench, Ahmedabad 4.8 Reverting again to page 5 of the assessment order, it was submitted that the AO has not cared to point out the failure on the part of the assessee to disclose its income fully and truly. No reference to any document or statement except quoting general decisions on human probability has been done. Reliance was placed on the deci....
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....017) 63 ITR 10 (ITAT Mum) (copy separately filed) dated 03.03.2017 so as to submit that being the latest on point of law, it comprehensively sums up the cases on the issue and specific attention was invited to the conclusion drawn at page 28, 29 & 30 namely it was a borrowed satisfaction that also on incorrect facts; ITO V Shri Nilesh Thakur, Green World Corporation V ITO (2009) 314 ITR 81 (S.C), Syntex Ltd. (2009) 313 ITR 221. SLP by the Department against this decision, it was submitted was dismissed by the Apex Court (C.No. 8167 of 2009), Kelvinator of India Ltd. (2002) 181 I.T. Reps 460 (Del) (FB)=(2002) 256 (Del), Sheth Brothers Vs JCIT (2001) 251 ITR 270 (Guj), CIT V Corporation Bank Ltd. (2002) 254 ITR 791 (S.C), Garden Silk Mills P.Ltd. Vs DCIT (1999) 237 ITR 668 (Guj), CIT V Hickson & Dadajee Ltd. (1980) 121 ITR 368 (Bom.), Garden Silk Mills V DCIT (1996) 222ITR 68 (Guj.), Mercury Travels V DCIT (2002) 258 ITR 533 (Cal.), JCIT Vs George Williamson (Assam) Ltd. (2002) 258 ITR 126 (Gauhati), CIT Vs Sambhar Salt Ltd. (2003) 262 ITR 675 (Raj). Considered in the said decision, it was submitted, fully support the case of the assessee in the present set of facts. Reliance was als....
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....ma-facie material with the department or not and in our case, there is no prima facie material and no doubt has been raised on the capital contribution by the other company. Phool Chand Bajrang Lai V/s ITO 203 ITR 456 (SC) In this case, the Managing Director had confessed that the company had not advanced any loan to any other person and, therefore, there was sufficient material for formation of belief. In our case, there is no any such statement or any adverse material against the assessee. 4.11 In the circumstance, reliance was placed upon the decision of the Apex Court in the case of Lakhmani Mewal Dass 103 ITR 437 (SC), (copy placed at pages 1 to 4). Carrying us through the principles laid down in the said decision, it was his prayer that the proceedings deserve to be quashed. 5. On merits also, it was submitted that the addition was not maintainable. Attention was invited to the copies of the confirmations/share applications made to the assessee company for shares placed at pages 1 to 10 of the Paper Book. Copy of the bank account of M/s Genesis Fashions P.Ltd. from where the amount had been deposited, it was submitted is at page 12-13 of the Paper Book. Copy of th....
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....y was established i.e. in effect, identity could not be established which was not a fact in the present case. 5.2 Reliance was also placed upon the order dated 03.02.2016 of the Amritsar Bench of the ITAT in the case of Amravati Infrastructure Developers Pvt. Ltd. in ITA 122/ASR/2013 placed at page 55 to 69 of second set of judgement wherein on similar set of facts and circumstances, it has been held that the identity, genuineness and credit worthiness of the share applicant company stands proved. Another order of the Chandigarh Bench in the case of Radhey Sham Diamond Jewellers of ITAT Chandigarh was also relied upon. Further reliance was placed upon the decision of the Bombay High Court dated 20th March,2017 in the case of Gagandeep Infrastructure Pvt. Ltd. in ITA 1613 of 2014 copy placed at page 43-49 of the second set of the judgement and reliance was also placed upon order dated 05.09.2016 of the ITAT Delhi Bench in the case of M/s Anshika Investments 61 IT Reps.517-DEL-TRIB, copy placed at page 50-54 in the facts of the said decision also the case of the Revenue was that share application money had been paid on a premium and if identity is established, transaction is cover....
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....considering the decisions of the Apex Court relied upon, it was submitted, fully justify the conclusion drawn in para 3.6 Heavy reliance was placed on the following paras : 3.4 I have gone through the reasons for reopening of assessment u/s 148 as mentioned by the Assessing Officer by relying on various case laws and also, the basis of addition made by the Assessing Officer on merits alongwith detailed submissions of the counsel of the appellant. The Assessing Officer has in the reasons brought out in detail, the reason to believe, with regard to the reopening of the case u/s 148 and on the other hand, the appellant had contended that there was no reason to believe with regard to the escapement of income. As is brought out in the reasons recorded by the Assessing Officer, the net worth of the appellant company did not commensurate with the share application money as well as share premium viz the net worth and reserves of the appellant company and that alone was sufficient for forming a belief for the issuance of notice u/s 148. 3.5. I have also gone through the detailed submissions of the counsel of the appellant and different case laws as relied upon by him on is....
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....Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC). The scope and effect of section 147 as substituted with effect from April 1,1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such 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 reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied: firstly the Assessing Officer must have reason to believe that income, profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or 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 under section 148 read with section 147(a). But under the substituted section 147 existence of only the first condition suffices. In....
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....titled to take all the points before the assessing authority. The appeals are dismissed. . * Phool Chand Bairang Lai And Another. Phool Chand Bairanq Lai And Another.Vs ITO 203 ITR 456 SC Failure to disclose fully and truly material facts. Cash loan claimed to be taken by assessee from company. Accepted as genuine and original assessments made allowing interest thereon as deduction. Subsequent information from officer assessing company that its managing director had confessed that company had not advanced any loan to any person during period covering date of cash loan Belief of ITO that income had escaped assessment Notice for reassessment Not mere change of opinion Sufficiency of reasons for forming the belief is not for the court to judge subsequent information definite, specific and reliable Notice for reassessment valid. 3.6 What is required for the purposes of forming a belief for taking recourse to action u/s 148 is sufficiency of belief and by going through the reasons for re-opening, it is quite clear that there was a reasonable belief with the AO for re-opening of the case u/s 148 and hence grounds with regard to 148 are dismissed and the action ....
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....hions Private Limited as it has filed return of income of almost nil income. The bank account of the above concern showed that never sufficient credit was there and money was credited almost immediately after being debited. All the amounts being transferred are in round figures which is very unlikely in the case of investment companies. Very importantly the address of M/s Genesis Fashions Private Limited is same as of the assessee M/s the DDA Grew Industries Private Limited. 3.8 The assessing officer decided to carry out a survey under section 133A to clear the doubts with regard to M/s Genesis Fashions Private Limited. The survey was carried out on the premises of the appellant on 2 September 2014 and during the said proceedings, it was found that there is no physical existence of the company M/s Genesis Fashions Private Limited existed at the address of the appellant there are no assets, no business, no staff pertaining to M/s Genesis Fashions Private Limited. It was merely a company floated to provide entries and insist only own people in our of the documents, ITR is, bank account etc. but has no physical existence. The most important fact is that during the course of s....
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....er section 133A in the premises of the appellant itself wherein M/s Genesis Fashions Private Limited also exists on paper. 3.11 As regards, the addition of Rs. 50 lacs as made by the Assessing Officer on account of contribution of share/share premium made by M/s Genesis Fashions Pvt. Ltd, it is clear that there was no net worth of the company, who had contributed a sum of Rs. 50 lacs towards the share capital and share premium in the appellant company and the Assessing Officer has discussed in detail after giving reasonable and sufficient opportunity to the appellant to prove the identity, capacity and genuineness of transaction and which the appellant has miserably failed to establish such essential ingredients of section 68. The assessing officer has also relied upon several judicial decision in this matter. The honourable ITAT, Indore in the case of the pressure of plant agree one Dashrath lal agarwal, Ratlam vs Department of incomevtax in its decision dated 9 November 2011 ITA No. 158/ind/2009 has also confirmed the addition on account of non-genuine share capital and share premium and the identity of subscribers could not be established. 3.12 The issue is als....
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....reunder : 3.18. The Ld. Counsel of the appellant has relied upon the various judgments of different High Courts and ITAT. Such judgments are not at all applicable, since there is admission by the appellant itself during the course of survey that the share transactions were bogus coupled with the fact that there was no justification of such a high premium as allegedly contributed by M/s Genesis Fashions Pvt. Ltd and also the capacity of 'M/s Genesis Fashions Pvt. Ltd has not been proved and thus, the action of the Assessing Officer in making the addition u/s 68 is upheld. In view of the detailed discussion above, it is held that the appellant has failed to discharge its onus of proving the genuineness and creditworthiness of the above transaction and it is beyond any doubt that transaction was just a cover-up to bring its own unaccounted money into its books of accounts. Therefore, the disallowance of Rs. 50,00,000/- u/s 68 of the Act on account of unexplained cash credit is ordered to be confirmed. Resultantly these grounds of appeal are dismissed" 6.6 Accordingly, it was her submission that the additions on merit also deserves to be sustained. 6.7 In view of the....
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....opposed to the Share Application Money from the remaining two parties which all cumulatively totaled to Rs. 1.49 Crores. However, even though the ld. Sr.DR is trying to make out a case which was never the case of the AO by referring to balance sheet which admittedly has not been referred to by the AO, it was his submission that though he has addressed the merits of the argument, however, he would also agree that it is a settled legal position that the Revenue at best could only rely upon the reasons recorded by the AO and these reasons now at this stage cannot be supplemented by the Revenue by making derogatory and provoking references to the business of the assessee. It was his submission that the ld. Sr.DR has necessarily to justify assumption of jurisdiction relying upon the reasons recorded which admittedly do not reflect any application of mind of the AO. The routine information received, it was submitted, has been blindly accepted by the AO and the Sr.DR has failed to refer to any fact or evidence to assail this consistent argument on record. The action of the AO, it was submitted, is against the settled legal position. Carrying us through the reasons recorded which have been....
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....s recorded do not indicate in any manner what-so-ever, that the AO has applied his independent mind to the facts of the case. The information received and relied upon is stated to be a routine information which no-where indicated anything to suggest that assessee's income had escaped assessment. The information received is stated to have been blindly accepted by the AO without even caring to form his independent belief that action u/s 148 was warranted etc. We propose to deal with the arguments thereon subsequently but before that, the admitted facts may be referred to namely that the assessee received share application money from three parties totaling Rs. 1,49,50,000/- in the year under consideration. The AO after recording of reasons and issuance of Show Cause Notice that share application money was received in 2007-08 assessment year from the named parties to whom shares were allotted in the 2008-09 assessment year which fact is recorded in the assessment order itself in page 3 by the AO. The assessee admittedly as per the final Show Cause Notice dated 24.06.2016 issued by the AO evident from the scanned copy reproduced in page 2 of the assessment order itself had issued 24....
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....almost NIL * There is never sufficient credit in the bank account of the assessee. Money is credited almost immediately before being debited. * All the amounts being transferred are in round figures of lacs. Usually in the bank account of an investment company there are credits of interest which are seldom round figures. This means there is simply movement of huge funds through the bank accounts. * As per the return, the address of Genesis Fashions P. Ltd. is same as that of the assessee M/s D.D.Agro Industries P. Ltd. 8.5 The AO further takes note of the fact that in the survey u/s 133A conducted on the premises of the assessee on 02.09.2014, the Director of the assessee company itself had stated that it was a paper company. It is seen that the entire case of the tax authorities rests on this statement given. The assessee as is evident, has assailed the jurisdictional issue on the ground that there is no independent application of mind by the AO; routine general information has been blindly accepted as gospel truth by the AO it is a case of borrowed satisfaction which has been frowned upon by Courts; no independent formation of belief exercise can be ....
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....ions of the tax authorities, it has been canvassed, cannot decide the issues. The source of funds, the availability of funds, the bank through which it was transferred, the days/dates/amounts/the Income Tax Returns/documents with ROC etc. are all available on record and it has been stated, have not been assailed by way of any evidence. Simply because the Director was not produced, it has been submitted the Department has proceeded on suspicions. Addressing the said suspicion, it was submitted, that he would not want to get into a debate on the reasons why the Director did not present himself. The fact of selective targeting of a specific company ignoring the other two major parties who too had applied for shares of assessee company on a premium is self evident. He has instead relying on the decision of the Apex Court in the case of Khadar Khan & Sons (cited supra) has rebutted the department stand stating that statements recorded u/s 133A do not have any evidentiary value. No rebuttal to the said legal proposition has been advanced by the Revenue. The record shows that the assessee as per record has made available copies of the confirmations from M/s Genesis Fashions Pvt.Ltd. which....
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....nly for M/s Genesis Fashions Pvt. Ltd., the share application money on a premium is questioned. The existence of M/s Genesis Fashions Pvt.Ltd. at the very same address by itself, we hold, does not give cause to any infirmity. On the contrary, the existence in-fact stands proved. The documents in support of the transactions, we note, have not been rebutted. Considering the law as it stands and the provisions of the Act, neither assumption of jurisdiction can be upheld nor the addition made on the basis of suspicions, surmises and conjectures. The statement of the Director by itself recorded u/s 133A having no evidentiary value as per settled legal position as considered by the Apex Court in the face of the documentary evidence on record in the peculiar facts of the present case cannot be brushed aside by the tax authorities on the basis of suspicions and surmises. Accordingly, we allow relief to the assessee both on the jurisdictional issue addressed in Ground No. 1 and 2 and on merits addressed in Ground Nos. 3 to 5. Before parting, we deem it appropriate to note that the case laws relied upon by the parties for the various propositions of law as brought out in the arguments of the....