TaxTMI 
TaxTMI 
2019 (1) TMI 681
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....CIT(A) quashing the reassessment by quashing notice under section 148 of the Act. For this Revenue has raised the following ground No. 1: - "1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in quashing the proceedings u/s 148 of the Income-tax Act, 1961 without appreciating that the information that (1) M/s Alka Diamond Industries P. Ltd. (2) M/s Artillegence Rio-Innovations Ltd. (3) M/s Microsoft Technology Put. Ltd. (4) M/s Nicco Securities Put. Ltd. and (5) M/s Navlakha Agrex Put. Ltd. were providing accommodation entries: was revealed during the course of search in the case of Praveen Kumar Jain and this particular information was not disclosed by the assessee either in the return of income or during the course of assessment proceedings under section 143(3) of the Income-tax Act, 1961 and the CIT(A) did not appreciate the ratio of the decision of Hon'ble Supreme Court in the case of Yogendra Kumar Gupta 57 taxmann.com 383 (SC)." 3. The Revenue has also raised the ground on merits challenging the deletion by CIT(A) raising ground No. 2 as under:- "2. On the facts and circumstances of the case and in law, the Ld. CIT(A....
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.... reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment." The assessee received total share application money of Rs. 4 crores during the FY 2006-07 relevant to AY 2007-08 from various parties, details of which are as under: - Sr. No. Name Amount 1. Alka Diamonds Industries Ltd. 1,00,00,000 2. Artillegence Bio-Innovations Ltd. 75,00,000 3. Macrosoft Technology Pvt. Ltd 75,00,000 4. Nlcco Securities Pvt. Ltd 75,00,000 5. Navlakha Agrex Pvt. Ltd. 75,00,000 6. Total 4,00,00,000 5. During the course of assessment proceedings, the assessee submitted the details and documents which include share application form, confirmation received from applicants and returns of allotment of shares filed with ROC to establish the identity of the parties and genuineness of the transactions. The AO issued notice under section 148 of the Act for the reason that the investment has been made by Alka Diamond Industries Ltd. in the shape of share capital, share application money and accordingly, notice under section 133(6) of the Act was issued to all the above mention....
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....,00,000/- by way of share application money is a bogus claim and is treated as unexplained cash credits of the assessee company. The amounts totaling to Rs. 4,00,00,000/- claimed to have been received from the above mentioned five parties under the garb of share application money is treated as unexplained cash credits and added u/s. 68 of the IT. Act to the total income of the assessee. Penalty proceedings u/s. 271(1)(c) of the I.T. act initiated separately for concealment of income and filing inaccurate particulars of income. Penalty proceedings u/s. 271 B of the IT. Act initiated for failure to get accounts audited u/s. 44 AB." Aggrieved, assessee preferred the appeal before CIT(A) and challenged the re-opening and CIT(A) first quashed the re-opening vide Para 3.4 as under: - "3.4 I have circumspected the entire facts & circumstances of the case and have carefully considered the finding of the Assessing Officer, rival submissions of the Appellant and evidences on record. I find that Ld. Assessing Officer has reopened the completed assessment after expiry of 4 years from the end of relevant A.Y. on the basis of information received from the office of the DGIT (Inv.) th....
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....n of belief that income has escaped assessment, but there must be also a rational connection or relevance bearing with the material for formation of belief. The Amritsar Bench of ITAT in the case of Pyramid Software and Technologies vs. DCIT 105 ITD 305 has held that the material which comes to the notice of Assessing Officer must be specifically evident, direct and not unspecific or vague. It is held that basis for initiating reassessment proceedings is to be judged solely on the basis of reasons recorded by the Assessing Officer. The Assessing Officer cannot support the reopening of the assessment by collecting the material or by making inquiry subsequently, after the date of initiation to the proceedings. The Hon'ble Patna High Court has held in the case of Commissioner of Income tax vs. Agarwalla Brothers, 189 ITR 786 (Pat) that it is only the recorded reasons which can indicate why the Assessing Officer was made to believe that the income has escaped assessment for the relevant assessment year. It is not authorized to refer to any other reason even if it can be otherwise inferred and/ or gathered from the reports. The Hon'ble Alahabad High Court has also held in the case of Da....
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....SC): Raj Mohan Saha v. CIT. (1964) 52 1W 231 (Assam). Also see, CIT v. Gokaldas Hukurnchand, (1943) 11 ITR 462,469 (Born); Ram Datta Sita Ram of Basti, In re, (1947) 15 ITR 61.85 (All); Narayan Chandra Baidya v. CIT. (1951) 20 1W 287,292 (Cal): Gopi Nath Agarwala v. CIT. (1955) 28 ITR 753, 762 (All): United Patel Construction Co v. CIT, (1966) 59 ITR 424, 426 (MP); CIT v. R. Y. DUFwbhji. (1995) 2111TR 178, 189 (Raj)). In other words, the assessment of any particular year must be based not on mere suspicion or bare guess, but on legitimate material from which a reasonable interference of income having been earned during the accounting year could be drawn and that the initial burden of finding such material, however slight, is on the income-tax authorities and not on the assessee vide: Banshidhar Onkarmall v CIT. (1953) 23 ITR 353. 361 (Orissa). It is certainly not a 'leap in the dark' The Assessing Officer is not entitled to make a guess without evidence vide: CIT v Kameshwar Singh, (1933) 1W 94, 106 (PC) Seth Nathuram Munnalal v. CIT, (1954) 25 ITR 216, 220 (Nag.). 3.6. Further, it is worthwhile to note that after receipt of share money appellant has allotted share....
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....come tax return acknowledgements of share applicants for assessment year 2007-08 establishing the fact that the share applicants are regular assessees' and that year on year, they file income tax returns. v) Copies of Audited Balance sheet and Profit & Loss Account of the share applicants to prove their creditworthiness. vi) Copies of Share Allotment Letters issued by the Appellant to the share applicants along with copies of the share certificate issued by the Appellant on allotment of shares against the share application money to prove that the shares have been allotted and issued." 9. These details submitted by the share applicants are also mentioned in the assessment order. We will find from the notice that the details submitted before the AO are sufficient enough to establish the identity of the share applicants and the genuineness of the transaction and creditworthiness of the parties. We are of the view that the assessee has duly discharged the primary onus casted upon it under the law to prove the identity of the share applicants and genuineness of the transactions. All the share applicants are registered with ROC (Registrar of companies) and they are a....
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....t that share applicant files income tax returns regularly; (viii) The copies of audited balance sheet and profit and loss account of the share applicants to prove their creditworthiness; and (ix) The copies of share allotment and share certificate issued by the appellant on allotment of shares against the share applicant money to prove that the shares have been allotted and issued." These details proved that the share applicant money received is genuine and explained in the absence of any contrary material brought in by Revenue. Hence, we are of the view that the CIT(A) has rightly quashed the reassessment and also deleted the addition on merits. We confirm the order of CIT(A). This appeal of Revenue is dismissed on both the issues. 10. The only issue in this appeal of assessee in ITA No 2091/Mum/2018 for AY 2008-09 is against the order of CIT(A) confirming the action of the AO in making addition of share application money of Rs. 35 lacs and consequently addition of adhoc expenditure on account of commission paid to obtain these bogus capital at the rate of 5% i.e. Rs. 1.75 lacs. For this assessee has raised the following two grounds: - "1. On the f....
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....no.2 of Diwali Capital & Finance Pvt. Ltd. Copies of bank accounts of the assessee which inter alia depicts the credit entries by way of transfer of the amounts given to the assessee company by cheque. Confirmation of the investing company has also been filed. 13. Further during the course of assessment proceeding the assessee also informed that the share application form received from the investor companies and some of the other documents i.e. copy of the resolution passed by the Board of Directors of assessee company for investment in shares of these companies Covering letter forwarding there with the required documents/ papers for investment in shares of the assessee company were seized in search action u/s 132 of the Act, in the office premises in November 2014. These papers have been seized and it is still lying with the assessing officer. Copies of the same have not been given to the assessee as yet. We find from the facts of the case that the assessee has filed the relevant pages of inventory listing the documents during the course of search us/ 132 for establishing the fact that the documents mentioned above have been seized and are in the possession of....