TaxTMI 
TaxTMI 
TaxTMI 
2018 (10) TMI 1298
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....ned CIT (Appeals) has erred in upholding an addition of Rs. 50 lacs as income of the assessee by treating the share capital as unaccounted money of assessee. On the facts and circumstances of the case and in law, the learned CIT(Appeals) has erred in upholding an addition of Rs. 90000/- made by the learned AO as unexplained investment." 2. The brief facts of the case are that the assessment of the assessee was completed u/s. 143(3) on 30.12.2011. The case was reopened by issuing notice u/s. 148 dated 21.03.2016 after obtaining approval of the appropriate authority. The reasons for reopening of assessment were recorded as under : The company filed its return of Income on 29.09.2009 for- the assessment year 2009-10 declaring income at Nil thereafter the return was processed under 143(1) of the I.T. Act on 02.11.2010. 2. In this case, the information has been received from the office of the Director of Income-Tax (Investigation-II) Jhandewalan Ext. New Delhi vide letter No. F. No. DIT(lnv)II/U/s.148/2012-13/197, dated 12.03.2013 mentioning therein that a searchoperation- was carried out in the case of Sh. Surendra Kumar Jain group of cases (herein after known as Entry operat....
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....panies, user ill and password of all companies of e-filing of their return, bank account opening and closing letters, authorization letters for attending assessment proceedings, book of account in tally format as well as format for filing the return, proof of use of mobile numbers of Sh. Surendra Kumar Jain and Sh. Virendra Kumar Jain in bank account opening forms where option of mobile banking was required. The companies were used- in business of providing accommodation entries. C. The investigation wing has listed 99 companies which were controlled by S.K. Jain Group. 5. The investigation wing has sent relevant details of accommodation entries to the Assessing Officers having jurisdiction over beneficiaries which had obtained accommodation entries from S.K. Jain Group. Scanned copy of the relevant documents seized from S.K.Jain Group wherein the relevant details of accommodation entry taken by the beneficiary from S.K. Jain Group Company were recorded were also sent along with the report. 6. A careful scrutiny of the details and copies of seized documents have revealed that the assessee company has taken accommodation entry amounting to Rs. 50,00,000/- in F.Y. 2008-09 fr....
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....t beneficiary companies/ persons through various middleman/ agents in lieu of accommodation entries provided to them on different dates have been recorded . vii. That one of the mediators Sh. Rajesh Aggarwal admitted that he arranged accommodation entries for a group through a person named Sh. Ravinder Goel through various. companies directly controlled by Sh. Surendra Kumar Jain and Sh. Virendra Kumar Jain and also accepted the fact that he knew since long that Sh. Surendra Kumar Jain and Sh. Virendra Kumar Jain are engaged in the business of providing the accommodation entries in lieu of cash charging a certain amount of commission for the same. viii. That these dummy companies are running their activities from the residential and the other premises of Sh. Surendra Kumar Jain and Sh. Virendra KumarJain. ix. That existence of third' party correspondence with these companies in the custody of Sh. Surendra Kumar Jain and Sh. VirendraKumar Jain have been recovered from S.K. Jain Group Company. x. That S.K. Jain! Virendra Jain are / were director in many of these companies in these companies presently or at one point of time in the past. 8. It has been further notic....
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....dent from the findings of the survey that the companies controlled by Shri S.K. Jain having registered office at the abovementioned three addresses, did not exist at those addresses. Neither books of account and document relating to business nor was employee of these companies found at those addresses. From a single address a number of companies were registered as well as this address was also declared as the residential address of various directors of different companies and partners/ proprietors of various firms engaged in providing accommodation entries. As mentioned above, during the course of survey operation at these-addresses, the premises were found to be very small dwelling units. 10. I have taken note of another fact that was highlighted by investigation wing that : during the course of post search enquiries, they had obtained the bank details of companies of S.K. Jain Group for example account opening forms, introducers' form and statement of accounts etc. for last few years. It was pointed out that in some cases where the option of mobile banking was exercised, the mobile numbers of either of Sh. Surendra Kumar Jam and Sh. Virendra Kumar Jain were provided, in th....
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....e accommodation entries was first deposited in the accounts of these dummy firms! companies in the disguise of the cash received against the bogus sales; duly shown in the books of accounts. Later, this Cash was transferred to different paper companies floated by Sh. Surendra Kumar Jain and Sh.Virendra Kumar Jain through complex series of transactions, so as to hide the actual sources of funds. c. As part of well devised modus operandi the reserve & surpluses and the capital account of a specific set of companies were enhanced with the help of the unexplained: cash received by sh. Surendra Kumar Jan and Sh. Virendra Kumar Jain, which was routed to these companies through their dummy concern/ firm /companies. Once the funds of these companies were increased sufficiently, accommodation entries through RTGS/Cheque/P.O. in the shape of the share capital, share premium, capital gains or loans as per the specific requirement of the recipient clients were provided to beneficiary in lieu of the cash received from them. In this way, the chain for providing an accommodation entry gets completed. d. The above findings corroborated with the seizure of documents by investigation wing evid....
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.... That S.K. Jain / Virendra Jain and there close associates were directors of these entry provider companies during relevant but different time period. Seizure of documents had revealed that commission income were earned by Jain Brothers and mediator. d. It was further proved that evidence relating to all the steps involved in providing accommodation entries by entry provider companies in lieu of cash payment to Jain Brothers on charging commission were seized from custody and control of Jain Brothers. e. A perusal of documents as seized from the premises of Shri S.K. Jam Group and enclosed along with this note as Annexture has revealed that accommodation entry amounting to Rs. 50,00,000/- by assessee from S.K.Jain Group Companies were noted on the seized documents. 14. A careful scrutiny of information received from the investigation wing and subsequent analysis of report of investigation wing, copies of seized document and verification of assessment and appeal order in case of Jain Brothers lead to an irresistible conclusion that in business of providing accommodation entries in lieu of cash payment by beneficiary including assessee by charging commission, according....
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....Assessing Officer issued notice u/s. 143(2) on 03.05.2016 and the assessee filed objections against reopening of completed assessment on 09.06.2016 which were disposed of by the Assessing Officer on 04.08.2016 through speaking order. As per information received from the Investigation Wing, the assessee has received Rs. 50.00 lacs from above five parties as share capital. Accordingly, to verify the transactions, notices u/s. 133(6) dated 06.09.2016 were issued at the addresses provided by the assessee asking for the details as mentioned in the notices for such transactions. In some cases, the notices returned back and in other cases, no reply was received as follows : Name of Entry Operators Comments Ad Fin Capital Services P. Ltd. No reply received Shalini Holdings Ltd. Notice returned back Mani Mala Delhi Pro. P. Ltd. No reply received VIP Leasing & Finances P. Ltd. No reply received Virgin Capital Services P. Ltd. Notice returned back Various opportunities were given to the assessee and notices u/s. 131 were also issued to produce the directors, but neither they attended on the appointed date nor any reply received from the assessee. On 25.11.2016, Shri Sunil J....
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.....C.) (ii). CIT vs. Suren International (P) Ltd. (Appeal No. 289 of 2012) dated 07.05.2013 (Delhi High Court) (iii). Allied Strips Ltd. vs. ACIT, (2016) 69 taxmann.com 444(Delhi). 5. He further submitted that reopening on the basis of information received from the investigation wing is also not justified because same issue had already been examined by the Assessing Officer in original assessment proceedings. Therefore, it is a complete change of opinion. Therefore, the reopening is unjustified. The assessee also filed a paper book containing 161 pages and copies of submissions made before the Assessing Officer also. 6. On the other hand, the ld. DR relied on the order of the lower authorities and submitted that the assessee has not disclosed fully and truly all material facts during the course of assessment proceedings. Therefore, on the basis of information received from the investigation wing, the reopening is justified beyond four years. As per reasons recorded, S.K. Jain group had accepted clearly that they were engaged in providing accommodation entries and the assessee is one of the beneficiaries. The amounts accepted before the investigation wing, are reflected in the b....
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....sing Officer was not justified to reopen the assessment only on the basis of information received from Investigation Wing, that too beyond period of limitation of four years. For this view of ours, we stand fortified by a recent decision of Hon'ble Delhi High Court in the case of Sabh Infrastructure Ltd. (supra), where, the Hon'ble jurisdictional High Court has held as under : Analysis and Findings 10. The law on this subject is well settled. As held in Kelvinator (supra), the powers under Section 147of the Act have to be exercised after a period of four years only if there is a failure to disclose fully and truly all material facts and information, by the Assessee. This legal position has been reiterated recently by this Court in Oracle India Pvt. Ltd. v. ACIT 2017 SCC OnLine Del 9360, Unitech Limited v. DCIT 2017 SCC OnLine Del 9408, BDR Builders and Developers Pvt. Ltd. v. ACIT 2017 SCC OnLine Del 9425 and in judgment dated 30th August, 2017 in W.P.(C) 5807/2014 (Swarovski India Pvt. Ltd. v. Deputy Commissioner of Income Tax). 11. Thus, it is also now well settled that the reasons to believe have to be self explanatory. The reasons cannot be thereafter supported by any e....
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....tioner. Merely relying upon the statement of Mr. Navneet Kumar Singhania that the companies in question were 'paper companies', by itself, is insufficient to reopen the assessment, unless the AO had further information that these companies were non-existent after making further inquiries into the matter. It is clear that the AO did not make any inquiry or investigation, if these companies were in fact 'paper companies'. No effort has been made to establish the connection between the statement of Mr. Navneet Kumar Singhania and the five companies. 16. Mr. Chaudhary's submission that this Court cannot dictate the manner and content of what is to be written in the reasons to believe is correct as a legal proposition. However, the Court has to examine the reasons to believe to see if it satisfies the rigour of the provisions. The observations of this court in Multiplex (supra) are relevant in this respect and are set out below: "24. In our view, the question whether the Assessee could have been stated to disclosed fully and truly all material facts have to be examined in the light of facts of each case and also the reasons that led the AO to believe that incom....