TaxTMI 
TaxTMI 
2018 (8) TMI 983
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.... On obtaining bank details and after getting approval of Ld.CIT, letter for provisional attachment was sent to HDFC Bank, Ahmedabad but the same returned unserved. The assessee submitted Annual Report and other details before the AO. The AO noticed that the assessee is a listed company which during the previous year increased its share capital by Rs. 16.95 crores. This increase was not through public issue but by way of investment in equity share directly through fully convertible warrants. The assessee filed copy of the Audited Account and ITR. The assessee made sale and purchase only from two parties. The assessee is selling as well as purchasing from the same parties and the same items i.e. Maize Grain. AO noted that the assessee is merely showing bogus sale and purchase. The assessee submitted that it is a listed company and all the issues of the shares are done as per SEBI Guidelines. The AO noted that approval of SEBI allows issue of such fully convertible warrants but it does not certify the genuineness, creditworthiness or identity of the applicants as required u/s 68 of the Act. The AO noted the names of various entities who invested in assessee company in assessment order....
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....ts in connection with the return of income submitted by you for the A. Y. 2009-10 on which I would like some further information. You are hereby required to attend my office on 29th September, 2010 at 2.45 P.M either in person or by a representative duly authorized in writing in this behalf or produce or cause there to be produced at the said time any documents, accounts and any other evidence on which you may reply in support of the return filed by you." From the above notice it is very clear that the assessee from the day of receiving notice knows that he is required to file documents basis on which the return of income has been filed. The assessee cannot say that this is a formal notice only. This case was fixed for hearing on 29.9.2010. However, on the same day nobody attended nor any application for adjournment has been filed. Again on 17-1- 2011 detailed questionnaire along with notice u/s. 143(2) of IT Act was issued to the assessee. The case was fixed for 28-1-2011. However. on 28.1.2011 nobody attended the proceedings nor any reply or adjournment has been filed by the assessee. Again the case was fixed on 28.2.2011 for 7.3.2011. Again on 7.3.2011 none att....
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.....12.2011 he did not file all the details, again he was asked to file balance details. On 19.1.2011 he was again asked to file balance details. On 26.12.2011 Shri Ashish Jain again attended but did no file all the details as asked earlier vide various notices issued or query raised by note sheet entry, therefore, again he was asked to file balance details. The case was adjourned to 28.12.2011. From the above facts, it is very clear the assessee and his Authorized representative deliberately avoiding the proceeding by non-filing complete details. On 29-12- 2011 Shri Ashish Jain, CA attended and filed part details. The AO has made assessment order u/s. 143 (3) of IT Act on 30-12-2011 being time barring assessment. Therefore, the assessing officer being time barring assessment had left with no option but to t60 pass the assessment order on 30.12.2011. In assessment order, in absence of any explanation given by the assessee the AO has made an addition of Rs. 16.95 crores as the assessee has failed to prove the creditworthiness of the investors. 2. In second ground of appeal the assessee has challenged the jurisdiction for issue of notice u/s. 143(2)/142(1) of IT Act. I....
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....e to produce the evidences." 5. The Remand Report was provided to the assessee. The assessee filed the re-joinder which is reproduced in the appellate order which reads as under:- "2. At the outset, the appellant feels highly obliged for affording us an opportunity to submit our counter submission in rebuttal of the AO's report under reference. 3. Vide opera 1, the AO has denied that the notice u/s. 143(2) of the Act was formal one. Conversely, he has reproduced the format of the notice and has supplied emphasis on the wordings "to be produced at the said time any documents, accounts and any other evidence on which you may rely in support of the return filed by you." This itself goes to establish that it was neither a specific notice u/s. 142(1) nor a questionnaire therewith. The assessing officer's proposition is against the letters and spirit of instruction No. 1367 dated 18.11.1980 which reads as under:- "Hearing fixed by the Income Tax officers for completion of the assessments: 1. It has been time and again brought to the notice of the board that the Income Tax Officers are issuing notices u/s. 143(2) indiscriminately and mechanically....
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....r limbs of this para are misleading and exhibits non- application of kind. As submitted in the appellant's letter dated 3.7.2012, the first and foremost questionnaire was issued only on 14.11.2011 and the appellant on each and every hearing attended and submitted replies vide letters dated 23.11.2011, 28/11/2011, 5/12/2011, 17/12/2011 & 28/12/2011. The present AO having failed to offer any comments on these compliances, his report is untrue and reveals unfair attitude with a prejudiced mind. 6. Vide para 2, the AO summarily dealt with the jurisdiction issue saying that the case was transferred to ITO, Wd. 18(4) having jurisdiction over company cases. What the appellant want to bring on record is that the then AO didn't possess even a return of income and it is the appellant who has supplied hard copy of re3turn of income along with requisite audit reports and Annexures/Schedules etc. on 30/10/2011 as incorporated in para 3 of the assessment order. Therefore, in the fitness of things, the then AO didn't have any jurisdiction to issue statutory notice u/s. 143(2) of the Act prior to that date. 7. Vide para 3 the AO has rejected the contention of the appe....
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....e AO has furnished his comments on the appellant's letter dated 3-7-2012 but he has opted not to examine the documents produced by the appellant nor he has produced any evidence to the contrary. The AO has not made any attempt to cross verify the facts on record by making any reference to the evidence produced by the appellant though all the parties are assessed to tax. In fact copies of their Bank Statements evidencing the identity and source of payment are placed on record and it remains undisputed as issued by the respective banks. Even a cursory look at these Bank Statements goes to eveal that there was no introduction of cash deposit in any of such bank accounts. 11. The submission of the A 0 vide the last para of his report is of general nature for the sake of defence. 12. In view of the above, it may kindly be appreciated that the appellant was prevented by sufficient cause from producing the evidence before the AO which is relevant to the grounds raised in appeal and the appellant is entitled to its right to defend its case within the parameters of provisions of Rule 46A. This should be found in accordance with the Rule of Natural Justice. Your honour ....
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....ng the issue. The evidences pertain to additions made by AO by making adverse observation against the appellant which have been properly supported by the appellant during the course of the appellate proceedings. In this regard reliance is placed on the judgment of Hon'ble Delhi High Court in the case of CIT vs. Virgin Securities and Credits P. Ltd., reported at 332 ITR 396 (Delhi), wherein, Hon'ble Delhi High Court has held as under.- "Held-dismissing the appeal, (i) that before admitting the additional evidence the Commissioner (Appeals) had obtained a remand report from the assessing officer. The additional evidence was crucial to the disposal of the appeal and had a direct bearing on the quantum of the claim made by the assessee. Rule 46A of the Income-tax Rules, 1962, permits the Commissioner (Appeals) to admit additional evidence if he finds that the same is crucial for disposal of the appeal. " 4.1 In view of the above discussion, in my considered opinion, case is fit to admit additional evidence under Rule 46A(1)(c) treating that appellant was prevented by a sufficient cause during the course of the assessment proceedings. 5. After admittin....
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....6949-78 576 -do- 1250000 576A 15. Vashi Construction Pvt. Ltd. 3321899-74 577-579, 580, 581 -do- 5398289-74 580-581 -do- 3125289-74 580-581 16. Rudra Securities & Capital Ltd. 5010029-38 258 -do- 312500-15 582 -do- 10002500-09 582A -do- 3127250-00 582A 17. Induram Develops Pvt. Ltd. 3278609-02 319-320 -do- 1280785-85 583 -do- 3134826-00 584 -do- 5109029-02 585 -do- 3278609-02 586 18. Suchak Trading Co. Ltd. 201052-39 123 -do- 5010048-39 124 19. Corporate Strategic Allianz Pvt Ltd. 3300344-03 379 -do- 1350116-49 587 -do- 5339173-75 588 -do- 3356623-75 589 6.1 All the bank statements are available at various pages of Paper Book, which were perused by me and were sent to AO during the remand proceedings. Furthermore, Id. AR of the appellant has also submitted that A....
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....ubmission before AO, address, PAN No, details of amount, bank details and cheque details and copy of balance sheet have been furnished and I have gone through the same and it is found that appellant has submitted full details before AO on different dates. It has also been found that AO has issued notice as on 14.11.2011 and after that appellant has submitted five replies on various dates, but no independent inquiry has .been conducted u/s. 133(6) of the Act so as to disapprove the claim of the appellant. in this regard vide letter dated 2.11.2012 Id. AR of the appellant has relied on the judgment of Hon'ble Supreme Court in the case of CIT- II, New Delhi vs. Khamdhenu Steel & Alloys Limited, wherein, Hon 'ble Supreme Court has affirmed the decision of Hon'ble Delhi High Court in the above mentioned case, reported at 248 CTR 33. The reply of the appellant is reproduced hereunder:- "In addition to what is being submitted early the appellant most respectfully craves liberty to place on record copies judgments of the order passed by Honorable Supreme Court of India rendered in the case of CIT-II, New Delhi versus Khamdhenu Steel & Alloys Limited in petition for spe....
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....er:- "There was a clear lack of inquiry on the part of the assessing officer once the assessee had furnished all the material which we have already referred to above. In such an eventuality no addition can be made under section 68 of the Act. " The above mentioned judgment of Hon'ble Delhi High Court is squarely applicable on the facts of the case as AO has not carried out any exercise. All details were made available to AO during the course of assessment proceedings as well as during the course of remand proceedings, AO has not bothered to conduct any inquiry in this regard. So, there was a clear lack of inquiry on the part of the AO, though, all the details were furnished before AO during the course of assessment proceedings as is evident from reply filed by the appellant on five dates as mentioned above. So, appellant's reliance on the judgment of Hon'ble Supreme Court in the case of Khamdhenu Steel & Alloys Limited is appreciated. Furthermore, judgment of Hon'ble Delhi High Court in the case of Gangeshwari Metal Pvt. Ltd., as discussed, clearly applies on the facts of the case. So, in my considered opinion addition made by AO amounting to Rs. 1....
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.... the documentary evidences were filed before A.O. as well as before Ld. CIT(A). There is no challenge to the admission of the additional evidences in the present appeal before the Tribunal. Opportunity was given to the A.O. to examine and rebut the evidence produced on record. But A.O. did not verify and examine the facts and the documents on record either at the assessment stage or at the appellate stage (remand proceedings). It is well settled law that no source of the source is to be proved by the assessee. he has filed chart of all the investor companies supported by confirmation, ledger account, PAN, acknowledgment of ITR, balance-sheet, annual accounts, share application form and bank statements of all the investor companies. He has submitted that since assessee company is a listed company, therefore, permission of SEBI for allotment of additional shares were also obtained. Copies of the same are filed in the paper book. Learned Counsel for the Assessee submitted that it was explained before the authorities below that assessee-company is a listed company and all the issuance of shares are done as per SEBI guidelines and during the year, assessee company has increased its paid....
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.... Communication (P) Ltd., (2010) 327 ITR 560 in which it was held as under : "In view of the decision of the Supreme Court in the case of CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195, the Tribunal was justified in upholding the order of the CIT(A) deleting addition made on account of share application money when substantial evidence was produced by the assessee to establish the identity of share applicant." 9.5. Judgment of Hon'ble jurisdictional Delhi High Court in the case of CIT & Ors. Vs. Five Vision Promoters Pvt. Ltd., & Ors. (2016) 380 ITR 289 (Del.) in which it was held as under : "Provisions of s 68 can be invoked only where assessee offers no explanation at all or explanation offered is unsatisfactory; and addition thereunder can be made only on that condition." 9.6. Judgment of Hon'ble jurisdictional Delhi High Court in the case of CIT vs. Shiv Dhooti Pearls & Investment Ltd., (2016) 237 Taxman 104 (Del.) in which it was held as under : "In terms of section 68, assessee is liable to disclose only source(s) from where he has himself received credit and it is not burden of assessee to show source(s) of his ....
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....sufficient documentary evidence before the authorities below to prove identity, creditworthiness of the investors and genuineness of the transaction in the matter with regard to payments like cheque no. date, confirmation copy of the ledger account with explanation for credit entries, bank statement, PAN, ITR and copy of the balance sheet of all the investor companies before A.O. The A.O. instead of making any inquiry on the documents filed before him, ignored the same and made the addition against the assessee without application of mind. When the assessee filed all the documents before the Ld. CIT(A) and requested for admission of the additional evidences, same were again referred to the A.O. for examination/verification and comments. The A.O. however, did not verify and examine the additional evidences and merely objected to the admission of the same. The Ld. CIT(A) on perusal of the same, correctly noted that these documents are relevant and essential for disposal of the matter. The Ld. CIT(A) vide impugned order admitted the additional evidences under Rule 46A of the I.T. Rules. However, the Revenue Department did not challenge those finding of fact recorded by the Ld. CIT(A) ....
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....r concerned A.O. to investigate the source held by them. Further, no such attempt have also been made in this case. It is well settled law that no source of the source shall have to be proved by the assessee. It is, therefore, clear that A.O. did not make any inquiry on the documentary evidences filed by the assessee. The A.O. merely rejected the explanation of assessee because none of the investors have their creditworthiness and copies of the bank statement and audited accounts are not filed and that they did not have any assets for business. However, the finding of fact recorded by the Ld. CIT(A) clearly prove that the investor companies have their creditworthiness to make investment in assessee company and the copies of the bank statement and audited accounts have been filed on record. Therefore, finding of fact recorded by the Ld. CIT(A) have not been rebutted by the authorities below. The details furnished by the assessee also shows that prior to assessment year under appeal, 11 investor companies have also made investment in assessee company in earlier years which would strengthen the case of the assessee that it has received the amount from genuine parties having creditwort....
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....o whether truly the transactions were genuine. The assessee provided details of share applicants i.e. copy of the PAN, Assessment particulars, mode of amount invested through banking channel, copy of resolution and copies of the balance sheet. The AO failed to conduct any scrutiny of the document, the departmental appeal was accordingly dismissed. 10.4. Decision of the Hon'ble Supreme Court in the case of Earth Metal Electric Pvt. Ltd., vs. CIT dated 30th July, 2010 in SLP.No.21073 of 1999, in which it was held as under : "We have examined the position, we find that the shareholders are genuine parties. They are not bogus and fictitious therefore, the impugned order is set aside." 10.5. Decision of Hon'ble jurisdictional High Court in the case of Divine Leasing & Finance Ltd., 299 ITR 268, in which it was held as under : "No adverse inference should be drawn if shareholders failed to respond to the notice by A.O. 10.6. Decision of Hon'ble M.P. High Court in the case of CIT vs. Peoples General Hospital Ltd., (2013) 356 ITR 65, in which it was held as under : "Dismissing the appeals, that if the assessee had received subscriptions to the public or ....
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....ght an explanation of the assessee about this addition in the share capital. The assessee offered a detailed explanation. However, according to the Assessing Officer, the assessee failed to explain the addition of share application money from five of its subscribers. Accordingly, the Assessing Officer made an addition of Rs. 35,50,000/- with the aid of section 68 of the Act, 1961 on account of unexplained cash credits appearing in the books of the assessee. However, in appeal, the Commissioner of Income-tax (Appeals) deleted the addition on the ground that the assessee had proved the existence of the shareholders and the genuineness of the transaction. The Income-tax Appellate Tribunal confirmed the order of the Commissioner of Income-tax (Appeals) as it was also of the opinion that the assessee had been able to prove the identity of the share applicants and the share application money had been received by way of account payee cheques. On appeal to the High Court: Held, dismissing the appeals, that the deletion of addition was justified." 10.8. Decision of Hon'ble jurisdictional High Court in the case of CIT vs. Winstral Petrochemicals P. Ltd., 330 ITR 603, in which it was held ....