TaxTMI 
TaxTMI 
2018 (10) TMI 1298
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....the facts and circumstances of the case and in law, the learned 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 ca....
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....lude blank unsigned as well as blank signed cheque book,acknowledgement of filing of return of these companies, 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 docum....
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....Jain. . vi. That daily cash books, balance sheet and cheque books found and seized from Sh. Surendra Kumar Jain and Sh. Virendra Kumar Jain wherein details of cash received from different 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 recover....
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....ho was running his courier business from in the name and style of M/s Linkers Couriers since Aug. 2006. Mr. Tikku had told the survey team that he was a tenant of Sh. Surendra Kumar Jain and was paying him monthly rent of Rs. 3,000/- in cash every month. It is evident 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 ....
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....ooks were not recorded in their regular books of accounts, To introduce and channelize this unexplained cash in their books, they have shown the sales of various items including Rice etc., made through the bogus proprietary! partnerships firms dire~t1y controlled by them. b. Thus, the cash received from' the recipient parties for providing the 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....
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.... in lieu of accommodation entries provided to beneficiary on different dates. ' That entry provider companies were running their activities from the residential and the other premises of Sh. Surendra Kumar Jain and Sh. Virendra Kumar Jain through entry provider companies. That third party correspondence with entry provider companies were seized from the custody of Sh. Surendra Kumar Jain and Sh. Virendra Kumar Jain. 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....
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....n has to be obtained from Chief Commissioner of Income Tax or Pr. Commissioner of Income Tax or Commissioner Income Tax, in view of the amended provision of section 151(1) w.e.f. 01.06.2015 necessary sanction in this regard is being obtained separately from Pr. Commissioner Income Tax, Delhi -7 before the issue of notice u/s 148." 3. In the reassessment proceedings, the assessee submitted that the return filed originally u/s. 139 may be treated as the return filed in response to notice u/s. 148. Thereafter, the 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 : N....
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....uestionnaire by issuing notice u/s. 142(1) dated 03.03.2011, requiring the details of share capital at Sl. No. 6 & 7, which was duly complied by the assessee and accepted by the Assessing Officer. There was no failure on the part of the assessee to disclose fully and truly all material facts for completing the assessment and therefore, the reopening of order beyond the period of four years is not justified at all. Reliance is placed on the following decisions : (i). Sabh Infrastructure Ltd. v. ACIT (WP(C) 1357/2016 dated 25.09.2017 (Delhi H.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. ....
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....sessee and did not make any addition on this count. The case of the assessee has been reopened on the same issue regarding the share application money received from the above five parties on the basis of information received from Investigation Wing. The assessee, thus, had disclosed all material facts necessary for completion of assessment. The Assessing Officer has not spelled out in the assessment order as to what material facts or evidences were not disclosed/produced by the assessee relating to share capital increased during the year under consideration. Therefore, in our considered opinion, the Assessing 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 onl....
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.... the companies are 'paper companies' without further facts is by itself insufficient to reopen assessments that stand closed after passing of orders under Section 143 (3) of the Act. 15. The assessment proceedings, especially those under Section 143 (3) of the Act, have to be accorded sanctity and any reopening of the same has to be on a strong and sound legal basis. It is well settled that a mere conjecture or surmise is not sufficient. There have to be reasons to believe and not merely reasons to suspect that income has escaped assessment. In this case, the reasons failed to mention what facts or information was withheld by the Petitioner. 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 ....
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....e to be and are hereby quashed. 19. Before parting with the case, the Court would like to observe that on a routine basis, a large number of writ petitions are filed challenging the reopening of assessments by the Revenue under Sections 147 and 148 of the Act and despite numerous judgments on this issue, the same errors are repeated by the concerned Revenue authorities. In this background, the Court would like the Revenue to adhere to the following guidelines in matters of reopening of assessments: (i) while communicating the reasons for reopening the assessment, the copy of the standard form used by the AO for obtaining the approval of the Superior Officer should itself be provided to the Assessee. This would contain the comment or endorsement of the Superior Officer with his name, designation and date. In other words, merely stating the reasons in a letter addressed by the AO to the Assessee is to be avoided; (ii) the reasons to believe ought to spell out all the reasons and grounds available with the AO for re-opening the assessment - especially in those cases where the first proviso to Section 147 is attracted. The reasons to believe ought to also par....