TaxTMI 
TaxTMI 
2017 (8) TMI 1303
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....e Income Tax Act, 1961 by the ld. Commissioner of Income Tax (Appeals)-I, New Delhi, is against law and facts on the file and bad in law in as much as he was not justified to uphold the action of the ld. Assessing Officer in resorting to the provisions of Section 148 of the Income Tax Act, 1961. " 3. Validity of initiation of reopening of assessment proceedings under section 147 / 148 as well as validity of assessment framed in furtherance thereto upheld by the ld. CIT (Appeals) has been objected by the assessee. 4. In support of the above objection, the ld. AR has basically reiterated submissions made in this regard before the ld. CIT (A). The main thrust of his argument is that initiation of reopening proceedings by the Assessing Officer was based on report filed by the Investigation Wing of the Department, which was never confronted to the assessee and there was no application of independent mind of the Assessing Officer for forming his reasons to believe for initiation of reopening proceedings. 5. The ld. AR submitted that a perusal of the assessment order and history of the assessment proceedings would show that various references have been made to the findings of var....
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.... any other allowance, as the case may be • for the relevant assessment year. (iii) Further the Explanation 2 to section 147(not reproduced supra) clarifies that, for the purposes of section 147, the following are also to be deemed to be cases where income chargeable to tax has escaped assessment:- • where no return of income has been furnished by the assessee although • his total income or • the total income of any other person in respect of which he is assessable under this Act. • during the previous year exceeded the maximum amount which is not chargeable to income-tax. • where a return of income has been furnished by the assessee but no assessment has been done and it is noticed by the Assessing Officer that the assessee - has understand the income, or • has claimed excessive loss, deduction, allowance or relief in the return; • where an assessment has been made, but • income chargeable to tax has been under assessed; or • income chargeable to tax has been assessed at too low a rate; or • income chargeable to tax has been made the subj....
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....g Officer to such material; and (iv) an inference based on reason drawn tentatively by the officer that income has escaped assessment. 5.5 A review of the reasons recorded for resorting to reassessment proceedings and consequent issue of notice u/s 148 would make it clear that basis for the formation of an opinion is a statement recorded, of an employee of Bhushan Steels Ltd., during the course of survey u/s 133A at the Registered Office of the Company from which it was sought to be concluded that the Assessee Company belonged to the Bhushan Group of Companies and was allegedly a "Paper Company" established for introducing money from unexplained sources. The fact remains that the existence of the Company incorporated as a separate legal entity following the rigorous and due process of law laid down in the Companies Act, 1956 has not been denied. In fact, such a negation of its corporate existence is neither suggestible nor inferable either from the said statement or from the Office of the Registrar of Companies, the statutory regulatory body, in this regard. The conclusion has sought to be drawn on the basis of a statement of a person who had no locus standi in the Asse....
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....R 696 (SC); (viii) Bagsu Devi Bafna Vs. CIT (1966) 62 ITR 506 - 512 (Cal.); (ix) Kishanchand Chellaram Vs. CIT, Bombay City-II (1980) 125 ITR 713 (SC); (x) R.B. Shreeram Durga Prasad and Fatechand Nursing Das Vs. Settlement Commission (IT and WT) and another (1989) 176 R 169 (SC); (xi) Rajesh Kumar & Others Vs. DCIT & Others (2006) 287 R 91 (SC); (xii) C. B. Gautam Vs. Union of India (1993) 199 R 530 (SC); & 1 SSC 78; (xiii) Prakash Chand Nahta Vs. CIT (2008) 301 ITR 134 (MP). 8. The ld. Sr. DR, on the other hand, opposed the cross objection with this submission that the assessee was given opportunity to raise objection before the Assessing Officer against the initiation of reopening proceedings. The assessee filed its objections and it was duly disposed off by the Assessing Officer, hence there is no substance in the contention of the ld. AR that assessee was not given opportunity to cross examine on the basis of whose submissions reported by the Investigation Wing of the Department reopening proceedings were initiated. 9. Having gone through the orders of the authorities below in view of the above submissions, we find th....
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.... 12. The Appellant Company had filed its original return of income declaring a total income of Rs. 546/- on 29.09.2009 vide e-filing Acknowledgement No. 95415871290909. The return was processed under section 143(1) of the Income-tax act, 1961 at the returned income. Subsequently, a search, seizure and survey operation u/s 132 and 133A respectively of the Income-tax Act, 1961 was carried out in the Bhushan Group of cases on 03-03-2010. The Appellant Company was also covered in the said survey operation and its jurisdiction was subsequently transferred to the Office of the ACIT, Central Circle-13, New Delhi. 13. The case of the Appellant Company for the assessment year 2009-10 was reopened u/s 147 of the Income -Tax Act, 1961 and notice u/s 148 was issued on 19.09.2011. In response to the said notice the Appellant Company filed a reply dated 26-09-2011 stating that original return of income filed earlier by it on 29.09.2009 vide receipt No. 95415871290909 may be treated as return filed in response thereto. 14. The assessment was completed vide order dated 28-03-2013 at an income of Rs. 9,30,00,546/- wherein the Ld. Assessing Officer has proceeded to unjustifiably add back....
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....ers Pvt Ltd 9, Old China Bazar Street, 5^th Floor, R/No. 84, Kolkata- 700001 90,00,000/- 8 Shivlaxmi Exports Ltd 102, Stephen House, 4 BBD BAG(E), Kolkata-700001 90,00,000/- 9 Sital Mercantile & Credit Pvt Ltd 32/C/1, MLB Road, Gound Floor, Bally, Howrah-711201 95,00,000/- 10 Pentium Tech Pvt Ltd 32/34, Bombay, chamber, 5^th Floor, Anandilal Paodar Marg, Dhobi Tolao, Mumbai-400002 40,00,000/- 11 Realgold Trading company Pvt Ltd BIG TREE BLDG., Chamber No. 6, 1st Floor, Marine Street, Mumbai-400002 50,00,000/- Total 9,30,00,000/- (2) The Assessing Officer in the course of assessment proceedings had desired the Appellant Company to furnish the details of the amount received and evidence in support of identity and creditworthiness of the parties and also the genuineness of the transaction of all the parties from whom the share capital and share premium had been received. In response, the Appellant Company vide letter dated 13.08.2012 filed with the Assessing Officer copies of bank accounts, confirmation and Income Tax Return acknowledgeme....
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....and office of Amit Textiles. As per report of inspector dated 30.11.2011, no such person has ever resided in such premises- Report of Shri Ajay Kumar Inspector is enclosed as annexure (Annexure-20) 2 Eternity Multitrade Pvt Ltd The address was not found. Report of Shri Ajay Kumar Inspector is enclosed as annexure (Annexure-21) 3 Pentium Tech Pvt Ltd Party has responded to the summons and the details are annexed. Details annexed as Exhibit-E 4 Real gold Trading Company Pvt Ltd The address is office address of N Chandulal & Co., CA. As per report of Inspector dated 30.11.2011, no such person has ever resided in such premises. Report of Shri Ajay Kumar Inspector is enclosed as annexure (Annexure-20) Report from Kolkata S No. Name of the Shareholder Report as received in response to commission from Kolkata 1 Gromore Fund Management Co. Ltd Assessee made a submission through dak and submitted that the company has applied for 90,000 equity shares of Rs. 10/- of M/S Adamine Construction Pvt Ltd in FY 2008-09 each at a premium of Rs. 90/- The assessee has not given the reason for paying such a high....
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....dak and submitted that the company has applied for 90,000 equity share of M/s Adamine Construction Pvt Ltd. each at a premium of Rs. 90/- each and allotted the same. The assessee has not given reason for paying such high premium. The assessee has enclosed bank statement showing payment was made by cheque no 675388 dt 02.05.2008 for Rs. 50,00,000/- and cheque no 675289 dt 02.05.2008 for Rs. 40,00,000/- drawn on Centurion Bank of Punjab, India Exchange Place. The assessee has not enclosed the bank statement showing the source of fund for share application money. The company has shown total income of Rs. 10,626/- for A.Y 2009-10. 6 Shivlaxmi Exports Ltd Assessee made a submission through dak and submitted that the company has applied for shares of M/s Adamine Construction Pvt Ltd in FY 2008-09. The assessee has applied for 90,000 equity share of Rs. 10/- of Adamine Construction Pvt Ltd each at premium of Rs. 90/- and allotted the same. The assessee has enclosed bank statement showing payment was made by cheque no 861812 dt 02.05.2008 for Rs. 30,00,000/- and cheque no 861811 dt 02.05.2008 for Rs. 60,00,000/- drawn on Deutsche Bank. The assessee has not enclosed the ba....
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....ad been received by the Appellant Company through normal banking channels by account payee cheques/demand drafts. Furthermore, the said confirmations also clearly reveal the source of funds, particulars of the bank account through which payment has been received and the Income-Tax particulars which go on to establish the identity and creditworthiness of the various parties authoritatively and conclusively. (8) As a result of the above documents being filed before the Learned Assessing Officer in respect of all the parties in respect of which no cause exists as to recourse to the provisions of Section 68 of the Income-tax Act, 1961 in as much as the onus cast on the Appellant Company vis-à26 vis the genuineness of the transaction and credit worthiness of the parties has been effectively and completely discharged. The action of the Learned Assessing Officer is not only against the spirit but also letter of the provisions relating to establishing the identity of cash creditors as embodied in the Income -tax Act, 1961. Independent investigations from parties over which an Appellant Company does not have any control cannot be used to form any conclusion, adverse of otherwise i....
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.... that the share application money was received from independent legally incorporated companies through normal and regular banking channels which fact stands duly corroborated and confirmed by the confirmations bank statements and Income Tax Returns of the share applicants duly placed on record. In fact, no evidence, direct or indirect, conclusive, or even circumstantial, exists to doubt in any manner the identity and credit worthiness of the parties and genuineness of the transactions entered into. (14) The Appellant Company has discharged its onus by satisfactorily dealing with all the issues in respect of which onus has been cast on it u/s 68 of the Income-tax Act, 1961 as would be clear from the following discussion:- (i) With respect to the identity of the creditors the names, addresses and PANs of the Assessee has been duly furnished and provided to the Ld Assessing Officer during the course of the assessment proceedings and no error or short coming has either been determined or pointed out therein since all the share applicants are duly identified with duly allotted PANs which are subsisting in the record of the Income Tax Department. Moreover all the share applic....
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....) Subsequent to the above an appeal filed by the Department against the judgement/observations of the Supreme Court was also dismissed and the Hon'ble Supreme Court did not find any reason to interfere with the order of the High Court in the case of CIT vs Steller Investment Ltd [(2001) 251 ITR 263 (SC)]. As such the observations of the Hon'ble Delhi High Court have obtained the approval of their Lordship of the Supreme Court and accordingly attained judicial finality and stamp of approval. (18) In addition, Your Honor's kind attention is also invited to the following judgement of the Delhi High Court in the case of Commissioner of Income Tax v Lovely Exports Pvt Ltd [(2008) 299 ITR 268 (Delhi)] has held as follows:- "In the case of a company the following are the propositions of law under section 68. The assessee has to prima facie prove (1) the identity of the creditor/ subscriber; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels; (3) the creditworthiness or financial strength of the creditor / subscriber; (4) if relevant details of the address or PAN identity of the creditor / subscriber ar....
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....ision of the Hon'ble Supreme Court follows the earlier decision of the Hon'ble Supreme Court in the case of Steller Investment Ltd, cited supra and further reinforces the arguments put forward for and on behalf of the Appellant Company. (21) In particular, with regard to the issue of establishing the creditworthiness of the parties, Your Honour's attention is invited to the following recent judgements wherein it has been conclusively held, relying on the decisions in the case of M/s Lovely Exports Pvt Ltd cited above, that as long as the identity of the share applicant was proved, the burden of proving the creditworthiness was not on the Assessee:- • Commissioner of Income-tax, Udaipur v. Bhaval Synthetics [(2013) 35 Taxmann.com 83 (Rajasthan)]; • Shree Barkha Synthetics Ltd v. Assistant Commissioner of Incometax [(2006) 155 Taxman 289 (Raj)]; • Commissioner of Income-tax, Bhopal (M.P) v. Peoples General Hospital Ltd [(2013) 35 taxmann.com 444(Madhya Pradesh); • Commissioner of Income-tax, Meerut v. Kamna Medical Centre (P) Ltd [(2013) 35 taxmann.com 470(Allahabad)]; • Commissioner of Income-tax, Faridabad v. GP In....
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....assessee with such a liability. 39. We may repeat what is often said, that a delicate balance has to be maintained while walking on the tight rope of sections 68 and 69 of the Act. On the one hand, no doubt, such kind of dubious practices are rampant, on the other hand, merely because there is an acknowledgement of such practices would not mean that in any of such cases coming before the Court, the Court has to presume that the assessee in questions as indulged in that practice. To make the assessee responsible, there has to be proper evidence. It is equally important that an innocent person cannot be fastened with liability without cogent evidence. One has to see the matter from the point of view of such companies (like the assessee herein) who invite the share application money from different sources or even public at large. It would be asking for a moon if such companies are asked to find out from each and every share applicant/subscribers to first satisfy the assessee companies about the source of their funds before investing. It is for this reason the balance is struck by catena of judgements in laying down that the Department is not remediless and is free to proceed ....
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....ore the Assessing Officer. " The ld. AR also placed reliance on the following decisions :- (i) CIT Vs. Gangeshwari Metal Pvt. Ltd. ITA. No. 597/2012 [judgement dated 21.01.2013 (Delhi High Court); (ii) Pr. CIT Vs. N. C. Cables Ltd. (2017) 391 ITR 11 (Del.); (iii) Pr. CIT Vs. Softline Creations P. Ltd. (2016) 387 ITR 636 (Del.); (iv) CIT Vs. Real Time Marketing P. Ltd. (2008) 306 ITR 35 (Del.); (v) CIT Vs. Value Capital Sergvices P. Ltd. (2008) 307 ITR 334 (Del.); (vi) CIT Vs. Orbital Communication (P) Ltd. (2010) 327 ITR 560 (Del.); (vii) CIT Vs. Winstral Petrochemicals P. Ltd. (2011) 330 ITR 603 (Del.); (viii) CIT Vs. Kamdhenu Steel and Alloys Ltd. (2014) 361 ITR 220 (Del.). 17. Having gone through the above cited decisions, we find that the ratio laid down therein is that the primary onus lies upon the assessee to establish identity and creditworthiness of the creditors / investors as well as genuineness of the transaction and after discharging of the same, onus shifts upon the Revenue to prove the documents filed by the assessee while discharging its primary onus, as false to attract addition under sec....
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....payee cheques through normal banking channels. Admittedly, copies of application for allotment of shares were also provided to the Assessing Officer. Since the applicant companies were duly incorporated, were issued PAN Cards and had bank accounts from which money was transferred to the assessee by way of account payee cheques, they could not be said to be non-existent, even if they, after submitting the share applications, had changed their addresses or had stop functioning, held the Hon'ble High Court. 18. When we examine the facts of the present case in view of the above cited ratio laid down by the Hon'ble jurisdictional High Court of Delhi, we find that facts are almost similar. In the present case there were 11 investor companies claimed to have invested Rs. 9,30,00,000/- in total in the assessee company. In support of their identity and creditworthiness as well as genuineness of the transactions, as discussed above, the assessee had filed before the Assessing Officer, their (investor companies) confirmations, Income Tax return acknowledgements (except in the case of Real Gold Trading Company Pvt. Ltd.), bank accounts with this submission that entire amount had been receiv....
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.... Group. The sources of capital introduced in these companies were established during the respective assessment proceedings. It was further contended that no evidence was found during search to indicate introduction of cash in the form of share capital. It is also pertinent to mention over here that out of total 11 investor companies, notices could not be served in case of 3 companies as they were not available on the given addresses. The remaining 8 companies had responded and had filed their submissions. However, there is no dispute that in case of all the 11 investor companies, the assessee had filed primary documents and had accordingly discharged its initial onus to establish identity and creditworthiness of the investor companies and genuineness of the transaction as there is no dispute that all the transactions have been done through banking channels i.e. through account payee cheques and demand drafts. We thus find that the Assessing Officer has failed to discharge its onus to prove that the documents filed by the assessee, as discussed above, were false or fabricated as the Assessing Officer has not made any efforts to verify those documents especially when there is no disp....