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2017 (8) TMI 1325
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....lhi, 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 various wings of the Investigation Unit, a copy of which has not been provided to th....
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....nt 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 subject of excessive relief under the 1961 Act; or • excessive loss or d....
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....ively 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 Assessee Company, and accordingly was not authorized on its behalf. While again emphasizing....
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.... (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 that assessee was supplied with the reasons recorded and opportunity to raise objections the....
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....also in doubt. The ld. CIT (Appeals) has, however, deleted the addition, now questioned by the Revenue. 12. The relevant facts are that the appellant company had filed its original return of income declaring a total income of Rs. 573/- on 27.10.2007 vide receipt No.3945041271007. 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 under section 132 and 133A respectively of the Income Tax Act, 1961 was carried out in the Bhushan Group of cases on 3.03.2010. 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 2007-08 was reopened under section 147 of the Income Tax Act, 1961 and notice under section 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 27.10.2007 vide receipt No.3945041271007 may be treated as return filed in response thereto. 14. The assessment was compl....
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....ta-700007 90,00,000/- 5. Key Impex (I) P Ltd 28, Lal Building, 1st Floor,36, Goa Street Bellard Estate, Fort, Mumbai-400050 70,00,000/- 6. Devrat Engg Private Ltd 601, St. Annes Apartment, 329, St. Annes Road, Palimala Road, Bandra (W)-Mumbai-400050 85,00,000/- 7. Lalit Kunj Metal P Ltd 30, Boroda Street, Cabin-9, Carnac Bunder, Mumbai-400009 80,00,000/- Total 5,50,00,000/- (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 acknowledgements from all the parties to establish the identity, genuineness and sources of transaction regarding share capital and share premium. The entire amount had been received by the Appel....
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....r inquiry with the CA vasant S. Kothari Dy. General Manager Accounts of Bhushan Steel Ltd it was learnt that they had no idea of the whereabouts of the case so he contacted one Mr. Pankaj Agarwal Accountant of Bhushan Steel in his New Delhi Office having mobile no 09873055520 he provided with the details that Shri Rajendra Singh and Mr Harsh Khanna are the employee of Bhushan Steel who are the Directors of M/S BNR Consultancy P LTd but he also said that they are out of town and he does not have their mobile nos. On further inquiry with Shri Vasant Kothari Dy. General Manager Accountant of Bhushan Steel of Mumbai Branch but from the instruction on phone from Mr. Pankaj Agarwal he was ready to accept the summons and all the necessary required documents will be provided to this office on the date of hearing. Hence, the notice u/s 131 was served to shri Vasant S Kothari Dy. General Manager(Accountant) of Bhushan Steel Mumbai Branch on 30.11.2011 " 2. Anikesh Trading Co P Ltd Notice served on 29.11.2011 at the given address but no reply received till date. Copy of notice served enclosed(annexure-2) 3. Divya Infotech P Ltd Notice could not be served as....
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....ication money. (6) The Learned Assessing Officer has accordingly held that the creditworthiness of the investors and the genuineness of the transactions is in doubt and has accordingly treated share capital and share premium amounting to Rs. 5,50,00,000/- as unexplained and added this same to the taxable income of the Appellant Company u/s 68 of the Income -tax Act, 1961. (7) 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 applicants and also the genuineness of the transaction of all the parties situated at Mumbai and Kolkata from whom the share capital and share premium had been received. In response, the Appellant Company filed copies of confirmations, Income Tax Return acknowledgements and bank accounts from all the parties establishing the identity, genuineness and sources of transaction regarding share capital and share premium with the Assessing Officer. The entire share application money had been received by the Appellant Company through normal banking channels by account payee cheques/demand drafts. Furthermore, ....
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....funds. As long as the nature, source and identity of the investor is established, no further onus of proof can be enjoined on it. In the instant case no case can be made out to doubt the genuineness, existence or identity of the investors and as such no cause exists for the invocation of S. 68. (11) An analysis of the provisions of Section 68 of the Income-tax Act, 1961 would make it clear that in order to discharge the onus, the Assessee must prove the following:- (i) identity of the creditor; (ii) capacity of the creditor to advance money; and (iii) genuineness of the transaction. (12) The question of the manner in which the onus u/s 68 has to be discharged is to be looked at with different perspectives and varying parameters in each different circumstance and no standards/guidelines can be lead out in this regard. (13) In the instant case there is no material on record to prove or even remotely suggest that the share application money received actually emanated for the Appellant Company. In fact it may be reiterated that the share application money was received from independent legally incorporated companies through normal and regular banking ....
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.... share capital be regarded as undisclosed income of the assessee. It may be that there are some bogus shareholders in whose names shares had been issued and the money may have been provided by some other persons. If the assessment of the persons who are alleged to have really advanced the money is sought to be reopened, that would have made some sense but we fail to understand as to how this amount of increased share capital can be assessed in the hands of the company itself. " (16) 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. (17) The ld. AR also invited our attention 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)] holding as follows :- ....
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....t has been dismissed with the following remarks :- " We find no merit in this Special Leave Petition for the simple reason that if the share application money is received by the Assessee Company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgement ". (19) The above decision 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. (20) 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 Tax....
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....a racket of floating bogus companies with sole purpose of landing entries. But, it is unfortunate that all this exercise is going in vain as few more steps which should have been taken by the Revenue in order to find out causal connection between the cash deposited in the bank accounts of the applicant banks and the assessee were not taken. It is necessary to link the assessee with the source when that link is missing, it is difficult to fasten the 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 ass....
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....nly adequately but also completed satisfied. (26) Accordingly since it is clear that if the shareholders / share applicants are identified and it is established that they have invested money in the purchase of shares, no recourse can be made to the provisions of S 68. In the instant case the Appellant Company had provided all the requisite particulars to establish the identity of the share applicants in the confirmations already filed before the Assessing Officer. In support he referred page Nos. 43 to 64 of the paper book i.e. copies of confirmation of share applicants giving therein the name, complete address and PAN along with bank statements from where cheques were received and copy of ITR for assessment year 2007-08. 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....
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.... prove creditworthiness of the creditors and genuineness of share applications, failure to produce creditor is not material. In the case of CIT Vs. Winstral Petro Chemical P. Ltd. (supra) in the case of cash credits / share application money, the Hon'ble jurisdictional High Court of Delhi on the issue of burden of proof, has been pleased to hold that initial burden is on assessee to prove identity of creditors, the burden then shifts to Revenue to prove that credits were not genuine. In that case while dismissing the appeal of the Revenue, the Hon'ble High Court was pleased to hold that it had not been disputed that the share application money was received by the assessee company by way of account 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....
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.... than one company cannot have its Registered office at one address and that there is no law that companies cannot change their Registered offices. It was submitted that business raise capital and such capital is rotated in economy for increasing production and trade and for making more efficient use of capital. Companies change and, sometimes in quick succession. This is the normal formation of capital in any open economy and the process of capital formation cannot be taken to be representing only unaccounted funds or impeded. It was submitted that all the companies having Registered office at the premises undisputedly belonged to Bhushan 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 7 investor companies, notices could not be served in case of 3 companies as they were not available on the given addresses and in case of 1 company notice could not be served as the premises was found locked on various days. The remaining 3 ....