TaxTMI 
TaxTMI 
2018 (12) TMI 808
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....g the following reasons :- "Recording reasons for initiating proceedings u/s 148 r.w.s. 147 of the I.T. Act, 1961. A search u/s 132 of the Act was carried out on 15.10.2013 SRM group of companies on the basis of information that the SRM group has introduced its own unaccounted income in the books of its companies in the guise of share capital and share premium shown to have been received from various entry providing non-descript companies. 2. Accordingly, information was received from the Investigation Wing of Income Tax Department, New Delhi that during F.Y. 2011-12 relevant to A Y 2012-13, M/s Bhavya Gold Pvt. Limited, has received total amount of Rs. 6.0 Crore in the form of share capital and share premium from various paper/shell companies mainly based in Kolkata and Mumbai. During the assessment proceedings for A.Y. 2012-13 the assessee has submitted that Rs. 6 crores was introduced in the F. Y. 2010-11 relevant to A. Y. 2011-12. 3. Further, it has been gathered the director of M/s SRM group namely Shri Ashok Kumar Goel and Shri Pradeep Kumar Goel are also directors in this company. The paper/shell companies who have invested in M/s....
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....es Limited 2500000 15 M/s VSG Leasing and Finance Company Ltd. 2500000 Total 6,00,00,000/- 5. He noted that all the above 15 companies are paper/shell companies who have no business activities and are engaged in providing accommodation entry. He, therefore, asked the assessee to explain that the share capital and share premium received to the tune of Rs. 6,00,00,000/- be not treated as unexplained cash credit within the meaning of section 68 of the I.T. Act. 6. The assessee, in response to the same, submitted that it belongs to Shree Raj Mahal Jewellers Group (SRM Group) and the group has filed an application dated 11.07.2016 before Income Tax Settlement Commission (ITSC) which has been duly admitted u/s 245D(2) of the I.T. Act. In the statement of facts (SoF) attached to ITSC it has been clearly stated that stock found short at the time of search in various group entities was utilized for making sales outside books of accounts and the cash so generated was utilized for making investment in properties and introducing the money in the books of the group concern through share capital. The amount of Rs. 6,00,00,000/- allegedly received as share cap....
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....case. The sufficiency or correctness of the material is not a thing to be considered at this stage." (ii) Hon'ble Supreme Court in the case of Yogendr Kumar Gupta vs. ITO has held:- "Whether subsequent to completion of original assessment, AO, on basis of search carried out in case of another person, came to know that loan transaction of assessee with a finance company were bogus as said company was engaged in providing accommodation entries, it being a fresh information, he was justified in initiating reassessment proceeding in case of assessee" (iii) Hon'ble Delhi High Court in the case of Acorus Unitech Wireless P. Lid. Vs. ACIT has held:- "In terms of section 148, law only requires that information or material on which AO record his or her satisfaction has to be communicated to assessee, without mandating disclosure of any specific document. (iv) Hon'ble Delhi High court in the case of PCIT vs. Paramount Communication P. Ltd. has held : "Information regarding bogus purchase by assessee received by DRI from CCE which was passed on to revenue authorities was tangible material outside record to initiate val....
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....e case and in law the CIT (A) was not justified in upholding the action of AO in initiating reassessment proceedings which are invalid and illegal being void-ab-initio as the AO has not applied his mind and not came to an independent conclusion that he has reasons to believe that the income of the assessee has escaped assessment which was a jurisdictional requirement for reopening of the assessment u/s 147/148 of the I.T. Act. 3. That on the facts and circumstances of the case and in law the CIT (A) was not justified in upholding the action of AO in initiating reassessment proceedings which are invalid and illegal being void-ab-initio as there was no mention about existence of any tangible material in the reasons to believe formed by the A.O. hence the reassessment proceedings were not validly initiated. 4. That on the facts and circumstances of the case and in law the CIT (A) was not justified in upholding the action of AO in making an addition of Rs. 6,00,00,000/- by treating the share capital and share premium received during the assessment year under consideration as unexplained cash credit u/s 68 of the Income Tax Act. 5. That on facts and circumstan....
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.... and Delhi. On the basis of the same, the Assessing Officer has drawn a conclusion that investing companies are mere shell companies and, therefore, the amount of Rs. 6.00 crores received under the head share application is not genuine. He submitted that the Assessing Officer has referred to the statement of Shri Rajesh Kumar Aggarwal recorded by the Investigation Wing, Kolkata where it has been admitted by him that 22 out of 40 companies controlled and managed by him had made investments in share capital in group companies of SRM. He had stated that he provided entries to various companies like Ginni Gold, Goel Exim India Pvt. Ltd., PLB Infrastructure Pvt. Ltd., SRM Diamond Pvt. Ltd., Goel Impex Pvt. Ltd., SRM Securities Pvt. Ltd. and Bhavya Gold Pvt. Ltd.. Further, according to the Assessing Officer, all the 15 companies have been established as paper/shell companies who have no business activities and are engaged in providing accommodation entries to different company. 11. Referring to the statement of Shri Rajesh Kumar Aggarwal recorded u/s 131 of the I.T. Act by the DDIT (Investigation) on 22.01.2014, he drew the attention of the Bench to the Question No.9 wherein Shri Raje....
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.... 5, he submitted that the Hon'ble High Court in the said decision has held that where information was received from investigation wing that assessee was beneficiary of accommodation entries but no further enquiry was undertaken by Assessing Officer, said information could not be said to be tangible material per se and, thus, re-assessment on said basis was not justified. 16. Referring to the decision of Hon'ble Delhi High Court in the case of Sabh Infrastructure Ltd. vs. ACIT vide W.P.(C) 1357/2016 order dated 25.09.2017, he submitted that the Hon'ble High Court in the said decision has held that there has to be reasons to believe and not merely reasons to suspect that income has escaped assessment. 17. Relying on various decisions, he submitted that the re-assessment proceedings initiated by the Assessing Officer and upheld by the ld. CIT(A) being void ab-initio has to be quashed. 18. Ld. DR on the other hand heavily relied on the order of the ld. CIT(A). He submitted that ld. CIT(A) after carefully going through the reasons recorded by the Assessing Officer had upheld such re-assessment proceedings. He submitted that it is very clear from the details/documents....
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....and answer reads as under :- "Q.9 Please state the names of the companies/proprietorship concerns managed/controlled by you and also state who are the directors in these companies/proprietorship concerns? Ans. As far as my memory goes, as per the list provided by you related to SRM Group of cases of Delhi around 22 (approximately) shell/paper companies are being controlled by me. The books of accounts of those companies are maintained in the computers in my office. The directors of those companies are as under :- Sl.No. Name of the company Directors 1. Festino Agro Pvt. Ltd. Palat Mandal Ajay Sharma 2. Immortal Vinimay Pvt. Ltd. Mritnunjay Pal Saheb Ghosal 3. Active Suppliers Pvt. Ltd. Mritnunjay Pal Saheb Ghosal 4. Kushal Infotech Pvt. Ltd. Palat Mandal Saheb Ghoshal 5. Mahadhan Vyapar Pvt. Ltd. Saheb Ghosh Ajay Sharma 6. Gajanand Agrotech Ltd. Palat Mandal Saheb Ghoshal 7. Titanic Chemical Pvt. Ltd. Palat Mandal Saheb Ghoshal 8. Parijat Commodeal Pvt. Ltd. Mrituyanjay Pal Saheb Ghoshal 9. Goodfaith Pharmaceutical Pvt. Ltd. Mrituyanjay Pal Saheb Ghosal 10. Mayur Vanijy....
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....emonstrate link between tangible material and formation of reason to believe that income had escaped assessment, reassessment was not justified. The relevant observation of the Hon'ble High Court reads as under :- "19. A perusal of the reasons as recorded by the AO reveals that there are three parts to it. In the first part, the AO has reproduced the precise information he has received from the Investigation Wing of the Revenue. This information is in the form of details of the amount of credit received, the payer, the payee, their respective banks, and the cheque number. This information by itself cannot be said to be tangible material. 20. Coming to the second part, this tells us what the AO did with the information so received. He says: "The information so received has been gone through." One would have expected him to point out what he found when he went through the information. In other words, what in such information led him to form the belief that income escaped assessment. But this is absent. He straightaway records the conclusion that "the abovesaid instruments are in the nature of accommodation entry which the Assessee had taken after paying....
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....d or even during the assessment proceedings that follow. This is the bare minimum mandatory requirement of the first part of Section 147 (1) of the Act. xxxxx 36. In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the AO one after the other. There is no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a 'borrowed satisfaction'. The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment. 37. For the aforementioned reasons, the Court is satisfied that in the facts and circumstances of the case, no error has been committed by the ITAT in the impugned order in concluding that the initiation of the proceedings under Section 147/148 of the Act to reopen the assessments for the AYs in question does not satisfy the requirement of law." 23. The Hon'ble Delhi High Court in the case of RMG Polyvin....