TaxTMI 
TaxTMI 
2017 (12) TMI 611
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....r companies." 2 "On the facts and circumstances of the case and in Law, the Ld.CITA) has erred in not considering the several case laws wherein the higher courts have held that mere payment by cheque does not prove the genuineness of the transaction." 3 "On the facts and circumstances of the case and in Law, the Ld.CIT(A) erred in deleting interest of Rs. 90,617/- ignoring the fact that the loans being non genuine were added u/s.68 of the Act, accordingly, the interest also needs to be added back to the total income". 4 "On the facts and circumstances of the case and in Law, the Ld.CIT(A) erred in deleting the notional commission of Rs. 67,500/- computed by the Assessing Officer ignoring the fact that the same needs to be paid for obtaining the accommodation entries." 3. The grounds of appeal raised in the cross objection read as under: 1. The learned CIT(A) erred in dismissing the Ground of appeal regarding reopening of the assessment u/s. 147 by issue of notice u/s. 148 without any valid reason. 2. The learned A.O. passed an order u/s. 147 r.w.s. 143(3) which is illegal and bad in law. 4. Brief facts of the case are as under: ....
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....Kumar Jain, through a web of concerns run and operated by him, is engaged in providing accommodation entries of various nature like bogus unsecured loans, bogus share application money and bogus sales (purchases for the beneficiaries) etc. Based on the findings of the search action and the statements of various persons covered under the search action, a report was forwarded by the DDIT(lnv.), which inter alia included a list of the entities controlled by Shri Praveen Kumar Jain and involved in providing bogus entries for loans, share application money and purchases, various statements stating the modus operand], list of beneficiaries who were involved in such transactions etc. * It is seen from the information so received that the present assessee's name appears in the list of beneficiaries who have taken accommodation entries. Further, the details furnished by the assessee also revealed that the assessee has taken unsecured loan of Rs. 45,00,000/- from M/s. Kush Hindustan Entertainment Ltd. & Olive industries Private Limited, which is one of the entities controlled by Shri Praveen Kumar Jain and is involved in providing accommodation entries. * During the sea....
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....cured loan raised by the assessee company. The entire gamut of transactions shows that the funds of Rs. 45,00,000/- have been brought in by way of 'unsecured loan' in the name of M/s. Kush Hindustan Entertainment Ltd & Olive Overseas Private Limited, whose very existence could not be established by the assessee company nor the source of these funds. Therefore, the purported unsecured loan of Rs. 45.00.000/- is hereby treated as a 'cash credit' in the books of the assessee company, whose nature and source is not explained and, therefore, deemed to be the assessee's income as envisaged in Section 68 of the Income Tax Act, 1961 and accordingly the same is added to income of the assessee company under the head "Income from other sources" and the same is hereby held to be not eligible for any deduction there against. Penalty proceedings u/s.271(1)(c) of the Act are hereby initiated for furnishing inaccurate particulars of income / concealment of income, separately. 8. Further, the Assessing Officer disallowed the interest expenditure and commission expenses in this regard by observing as under: Having held in the preceding paragraphs as to bogus / sham tr....
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....bserving as under: The issues raised in the above ground challenges the re-opening of assessment proceedings. In this case, information is received from Investigation Wing of the Income Tax Department that a search and survey action was carried out in the case of Shri Praveen kumar Jain and his group on 01.10.13. The Search action resulted into collection of evidence and other findings which conclusively proved that the Pravin Jain through a web of concerns run and operated by him, is engaged in providing accommodation entries of various nature like bogus unsecured loans, bogus share application and bogus sales(purchases for beneficiaries) etc. Even during the post search enquiries, several beneficiaries have confirmed the fact that they have taken accommodation entries through concerns run by Shri Praveen Jain. Also, enquires made in this regard have revealed that the statement of Shri Praveen Kumar Jain recorded on 01.10.13 u/s 132(4) of the IT Act, 1961 is not the only statement wheie he has divulged the details of the true nature of providing accommodation entries. Rather, at least three more statement u/s 131 of the IT Act, 1961 have been recorded by differen....
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....nnot assail the re-opening on the ground that the facts were already placed on record and the AO ought to have considered the facts. Secondly, the Hon'ble Supreme Court in the case of ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (291 ITR 510) observed that the word "reason", in the "reason to believe" will mean cause or justification. If the AO has cause or justification to know or suppose that income-had escaped assessment, it can be said to have "reason to believe" that the income had escaped assessment, It is further observed by the Honorable Court that the word 'expression1 cannot be read to mean that the AO should have finally ascertained the facts by legal evidence or conclusion. At this stage, what is required is reason to believe, but not the established facts of escapement of income. At the stage of issuance of notice, the only question is where there was a relevant material on which a reasonable person could have formed a requisite belief that income had escaped assessment. In the present case, it is evident from the reasons recorded that the AO received a specific and credible information from Investigation Wing, Mumbai and according to the i....
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.... is not akin to taking evidence behind the back of the assessee. The assessee also raised an objection that the sanction for the issuance of the notice was notice under section 149/151 of the IT Act 1961 was not obtained. I have called a remand report from the AO and the report so received prove that an approval has been obtained from the CIT for reopening of the assessment u/s 151(2) of the Act. Hence this contention of the assessee is not acceptable. The AO has very elaborately recorded the reasons before issue of notice u/s 148 and clearly narrated the facts and material on which the belief that income has escaped assessment is based. The belief is based on the relevant material and reasons were formed. Accordingly at the stage of issue of notice only question is whether the material prima facie shows escapement. Whether the material would conclusively prove the escapement is not the concern at the stage of issuance of the notice. I therefore hold that the AO was justified in reopening of the assessment u/s 147 of the Act. Therefore this ground of appeal is dismissed. 11. As regards the merits of the case, the ld. Commissioner of Income Tax (Appeals) deleted....
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..... It was never an averment of Shri. Pravin Kumar Jain that he had provided accommodation loan entries to the assessee through the above lender companies. The AO, in this case, has merely relied upon the statement of Shri Pravin Kumar Jain (which was already been retracted and does not refer the name of the appellant company as beneficiary) and did not make any inquiries with the lender companies to establish the genuineness of the transaction. It is settled law that when there are two contradictory statement of a person, the retracting statement is to be accepted unless it is provided otherwise by bringing in corroborative evidences. The assessee has also contended that an opportunity of cross examination was not granted to the assessee. In case of CIT v. Ashish International, High Court of Bombay (ITA NO. 4299 of 2009), the Jurisdictional the Hon'ble Bombay High Court has held that the Tribunal has recorded a finding of fact that the assessee had disputed the correctness of the statement of the Director of M/s. Thakkar Agro Industrial Chem Supplies P. Ltd. and admittedly the assessee was not given any opportunity to cross examine the concerned Director whose ....
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....uineness of the loan given. The AO has merely relied on the statements of Shri Praveen Kumar Jain ignoring the fact that the statement was later retracted by him. There is no investigation whatsoever made by the AO. No effort was made to obtain the evidence collected by the DGIT (Inv) and the conclusions drawn on such evidence if any by that authority. No material in the form of statements recorded from Shri Pravin Kumar Jain or the other evidence collected by the DGIT (Inv) Mumbai were given to the assessee or any opportunity of cross examination was granted. In CIT vs Lovely Exports (P) Ltd. [ITA No. 953/2006], Delhi ITAT held that when the AO has failed to react to the shifting of the burden to investigate into the creditworthiness of the share applicants, the addition cannot be sustained. In CIT v. Orissa Corporation P. Ltd. [1986] 159 ITR 78 (SC), the Hon'ble Supreme Court held that once the primary onus of establishing the genuineness of the transaction is done by the assessee by furnishing the details like name, address, PAN. confirmation, copy of tax return, etc, it was the duty of the AO to verify the genuineness of these transactions by strictly enfo....
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....rates that the A.O. merely went by the investigation done by the Office of D.G.I (Investigation), Mumbai. No enquiries or investigation was carried out. No evidence to controvert the claims of the assessee was brought on record by the A. O. Even the statement of Mr. Praveen Kumar was not supplied. Nothing is on record about the result of investigations done by DGIT (Inv.), Mumbai. The papers filed by the assessee do demonstrate the identity, credit worthiness and genuineness of the transaction. The addition is made merely on surmises end conjectures. In view of the above discussion, The Tribunal held that the addition made under section 68 of the Act is in bad in law. Recently the Hon'ble Bombay High Court in the case of Gagandeep Infrastructure (P) Ltd (2017) 80 taxmann.com272 (Bombay)- The proviso to section 68 has been introduced by the Finance Act, 2012 with effect from 1.4.2013. Thus, it would be effective only from the assessment year 2013-14 onwards and not for the subject assessment year. In fact, before the Tribunal, it was not even the case of the Revenue that section 68 as in force during the subject years has to be read/understood as though the pro....
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....f the assessee submitted that the reopening in this case is bad in law. He submitted that there is no application of mind by the Assessing Officer. He submitted that no enquiry whatsoever has been done by the Assessing Officer in this case. The ld. Counsel of the assessee further submitted that there is also no proper sanction/approval as per the provision of section 151(2) of the Act by the higher authority permitting the reopening. Despite assessee's objection in this regard, the same was not properly responded by the Assessing Officer. He submitted that the sanction/satisfaction of higher authority was reached on 30.3.2015 only after remand report was called from the Assessing Officer during appellate proceedings before the ld. Commissioner of Income Tax (Appeals). The ld. Counsel of the assessee further submitted that all the necessary documentary evidences were furnished by the assessee. The ld. Counsel of the assessee referred to the several case laws including one from ITAT Hyderabad Bench in the case of M/s. Komal Agrotech Pvt. Ltd. vs. ITO (in ITA No. 437/Hyd/2016 dated 25.11.2016), wherein case of loan from the same lender companies as in the present assessee's case and i....
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.... of sanction was requested to be given to the assessee vide letter dt. 09.04.2015 & 27.04.2015, he only makes a passing reference at p. 182 para (v) wherein he states that "the notice u/s. 148 was issued after considering the time limit and sanction of issue of notice u/s. 149/151 of the I. T. Act, 1961". The Letter now produced does not show any satisfaction by the Jt. CIT. Particularly when the reasons are recorded on 30.03.2015 and the same day notice is issued and served on 31.03.2015. The sanction/ approval is also dt. 30.03.2015. Hence it is presumed that no required sanction/ satisfaction is obtained from the Higher authorities and hence the assessment is vitiated. Reliance is placed: 1. C.I.T. v. Sunian Waman Choudhary (2010) 321ITR 495 (Bom) 2. Hirachand Kanuga v. D.C.I.T. 17. From the above, it transpires that it is the submission of the ld. Counsel of the assessee that there is no mention of approval/satisfaction of higher authority obtained u/s. 151(2) in the notice for reopening. That the assessee has raised objection to this effect vide letter dated 09.04.2015 and 27.4.2015, however, while disposing off the objection of the assessee, the Assessing....
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.... Sir/Madam, 1. Whereas I have reasons to believe that your income chargeable to ~ax for the assessment year 2008-09 has escaped assessment within the waning of section 147 of the Income Tax Act, 1961. 2. I, therefore, propose to assess/re-assess the income for the said assessment year and I hereby require you to deliver to me within 30 days from the service-of this notice, a return in the prescribed form of your income for the said assessment year. 3. This notice is being issued after obtaining the necessary satisfaction of the commissioner of Income Tax _____________ the Central Board of Direct Taxes. Sd/- Signature of Officer Name: _____________ Seal. Designation: Note: 1. If you feel any difficulty in the matter of filing in the return, form or desire clarification on any other matter pertaining to your Income Tax liability, you may contact the : Public Relation Officer Income-Tax Officer, Ward - 10(1)(2) 2. The prescribed form in the case of companies is Form No. 1. In the case of assessee other than companies the prescribed form is ordinarily form No. 2. However, if the assessee has n....
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....of the same in order to enable us to make further submission on the authority and jurisdiction for the issuance of notice u/s. 148. 21. Again in letter dated 14.07.2015 received at the Income Tax Office while submitting the objections to reopening, the assessee has inter alia mentioned as under: In this respect we humbly have to submit that as submitted by us vide our letters dated 09.04.2015 and 27.04.2015 (copies enclosed) we have requested your good self to give us the copy of the sanction obtained by you as provided u/s. 151(2) of the Act. however, we have not received the copy of such sanction obtained by you for the issuance of the notice u/s. 148 and hence it appears that necessary provisions of the law requiring prior sanction for the issue of notice as provided u/s. 151(2) of the Income Tax Act, 1961 has not been complied with, and therefore, in our humble submission the notice issued by your good self for the re-opening of the assessment is not a valid notice and therefore we object the reopening of our assessment u/s. 148. 22. While disposing off the assessee's objections, the Assessing Officer has not provided the assessee with sanction/approval letter u/....
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....e expiry of four years from the end of the relevant assessment year, notice under section 148 shall not be issued unless the Chief Commissioner or the Commissioner, as the case may be, is satisfied, on the reasons recorded by the Assessing Officer concerned, that it is a fit case for the issue of such notice. These are some in-builts safeguards to prevent arbitrary exercise of power by an Assessing Officer to fiddle with the completed assessment". The Hon'ble High Court further observed that "what disturbs us more is that even the Additional Commissioner has accorded his approval for action under section 147 mechanically. We feel that if the Additional Commissioner had cared to go through the statement of the said parties, perhaps he would not have granted his approval, which was mandatory in terms of the proviso to sub-section (1) of section 151 of the Act as the action under section 147 was being initiated after the expiry of four years from the end of the relevant assessment year. The power vested in the Commissioner to grant or not to grant approval is coupled with a duty. The Commissioner is required to apply his mind to the proposal put up to him for approval in the light....