TaxTMI 
TaxTMI 
2016 (4) TMI 1341
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....asis. Credits in the accounts of the appellant company represented the sale proceeds of the shares made through them. The entire amount deserved to be deleted. 3. That order passed by the Ld. CIT (Appeals) is against law and facts on the file in as much as no reasonable opportunity was provided to the appellant to defend its case and lot of irrelevant data has been marshaled against the appellant without confronting the same." 3. In assessment year 2000-01, the assessee has raised the following identical grounds : "1. That order passed u/s 250(6) is against law and facts on the file in as much as the Ld. Commissioner of Income (Appeals) was not justified/to uphold the action of the Ld. Assessing Officer in reopening the assessment by resort to provisions of Sec. 148. 2. the Ld. CIT( Appeals) was further not justified to hold that the addition made by the Ld. Assessing Officer at Rs. 40,00,000/- on protective basis was to be assessed in the hands of appellant on substantive basis. Credits in the accounts of the appellant company represented the sale proceeds of the shares made through them. The entire amount deserved to be deleted. 3. That orde....
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....deposits and details of drafts prepared from these deposits are reproduced at pages 3 to 5 of the assessment order which give the details as draft number, date, amount, clearing credit on and the name of the bank on which cheques have been drawn. It is, thus, noted that assessee received various cheques which were credited to the account of the assessee in a sum of Rs. 2.10 Cr. The A.O. as regards the source of these drafts noted that firstly the amount was transferred through cheques from three brokers into the bank account of the assessee company with Bank of Baroda, Ludhiana. Out of these amounts, the drafts were prepared in the name of M/s Taranjit Singh & Co., Chandigarh. 7. In order to ascertain the financial status of the assessee company and how the money was transferred to the account of M/s Taranjit Singh & Co., Chandigarh, reproduced the statement of Shri Bharat Bhushan Goyal, Director of the assessee company recorded by the DDIT (Investigation) Chandigarh on 03.09.2002 in the assessment order at pages 3 to 7. The Assessing Officer, considering the statement of Shri Bharat Bhushan Goyal noted that he did not know how Shri Tarajnit Singh could manage to encash the inve....
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.... cheques were handed over to the representative of the assessee company. Shri Hari Kishan Punni has failed to furnish the information regarding name of the companies whose shares were purchased/sold on behalf of the assessee company, the name and complete address of the buyers and distinct number of the shares sold. The Assessing Officer, therefore, observed that Directors have introduced the money in the bank account of the company from the source best known to them from which the amount was further advanced to M/s Taranjit Singh & Co., Chandigarh. 8(ii). The Assessing Officer further noted that during the assessment proceedings for assessment year 2000 01 in the case of the assessee, statement of Shri Sudhir Kumar Sharma, Proprietor, M/s S.K.Sharma & Co., Ludhiana Stock Exchange was recorded on 11.03.2005 by the Assessing Officer and relevant portion is reproduced in the assessment order at page 13. The Assessing Officer from this statement noted that M/s S.K. Sharma and Co. on 21.03.2005 furnished copies of account of assessee in their books but failed to furnish name and address of the company whose shares were sold by him, hence it was held in assessment year for asse....
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....completed as Shri Taranjit Singh expired in April,2000 and Shri Taranjit Singh sold the investments of the assessee company. Shri Taranjit Singh might have sold investments of the company in order to bring his own unaccounted money into the assessee company. Since the amount was paid out of the bank account of the assessee maintained with Bank of Baroda, Ludhiana, addition of Rs. 2.10 Cr is made on protective basis in the hand of the assessee company without prejudice to any action in the hands of M/s Taranjit Singh & Co., Chandigarh. 10. The Assessing Officer further noted that counsel for the assessee company confirmed that facts of this case are similar as noted in the assessment year 2010-11 and claimed that the similar addition is made by ACIT, Central Circle in the case of M/s Taranjit Singh & Co., Chandigarh, therefore, it would amount to double addition. The Assessing Officer, however, noted that in assessment year 2000-01, addition of Rs. 40 lacs was made on protective basis in respect of the entries pertaining to that year. In the assessment year under appeal, the entries pertain to Rs. 2.10 Cr, therefore, protective assessment would not amount to double addition....
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.... no worth and these have been sold at more hefty price and these were accommodation entries only. The ld. CIT(Appeals) referred to the statement of Director of the assessee company and the brokers recorded by the DDIT (Investigation) and the Assessing Officer and considered the issue in the light of human probability, confirmed the addition on substantive basis. The ld. CIT(Appeals) also confirmed the re-opening of the assessment in the light of judgement of the Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd. 291 ITR 500. The ld. CIT(Appeals), accordingly, dismissed the appeal of assessee for assessment year 1999-2000. Following the findings in assessment year 1999-2000, the ld. CIT(Appeals) also dismissed the appeal of the assessee for assessment year 2000-01. 14. The ld. counsel for the assessee reiterated the submissions made before authorities below. The ld. counsel for the assessee referred to reasons recorded for re-opening of the assessment under section 148 of the Income Tax Act, copy of which is filed at PB-40 dated 30.03.2004 and submitted that the Assessing Officer was of the view that assessee had only given entry to M/s Taranjit Singh....
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....s, there was no reason for the Assessing Officer to believe that income chargeable to tax has escaped assessment in the case of the present assessee company. PB-121 is the order of the ld. CIT(Appeals)-XVIII dated 12.09.2005 in the case of Smt. Mohinder Kaur, legal heir of Shri Taranjit Singh in which the addition of Rs. 2.50 Cr have been deleted by him holding that since the deposits from the assessee company have been disclosed in the books of account therefore, it could not be treated as undisclosed income within the meaning of Chapter XIV-B of the Income Tax Act i.e. assessment for block period. The ld. counsel for the assessee submitted that there was no cash deposited in the bank account of the assessee company. 14(ii) The ld. counsel for the assessee referred to pages 2 to 5 of the assessment order to show that the Assessing Officer has mentioned that assessee company is investment company and during assessment year under consideration, assessee company has advanced Rs. 2.10 Cr through demand drafts to M/s Taranjit Singh & Co., Chandigarh. The source of the deposits are on account of credit entries appearing in the bank account of the assessee on various dates in which am....
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....f Shri Taranjit Singh. He has relied upon following decisions : 1. Decision of Hon'ble Punjab & Haryana High Court in the case of CIT Vs Anupam Kapoor 299 ITR 179, in which it was held as under : "Held, dismissing the appeal, that there was no material before the Assessing Officer, which could have led to a conclusion that the transaction was a device to camouflage activities to defraud the Revenue. No such presumption could be drawn by the Assessing Officer merely on surmises and conjectures. The Tribunal took into consideration that it was only on the basis of a presumption that the Assessing Officer concluded that the assessee had paid cash and purchased the cheque. In the absence of any cogent material in this regard, having been placed on record, the Assessing Officer could not have reopened the assessment. The assessee had made an investment in a company, evidence whereof was with the Assessing Officer. Therefore, the Assessing Officer could not have added the income, which was rightly deleted by the Commissioner (Appeals) as welI as the Tribunal". 2. Decision of Hon'ble Punjab & Haryana High Court in the case of CIT Vs Paramjit Kaur 311 ITR....
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....tax pertaining to the assessment year by the Assessing Officer. The Assessing Officer was required to form an opinion before he proceeded to issue a notice. The validity of reasons, which were supposed to sustain the formation of an opinion, was challengeable. The reasons to believe were required to be recorded by the Assessing Officer. Once the Ingredients of sect/on 147 were fulfilled, the Assessing Officer was competent in law to initiate the proceedings under section 147 . The Assessing Officer was aware of the existence of the four companies with whom the assessee had entered into transaction. Both the orders showed chat the Assessing Officer was made aware of the situation by the investigation wing and there was no mention that these companies were fictitious companies. Neither the reasons in the initial notice nor the communication providing reasons remotely indicated independent application of mind. Though conclusive proof was not germane at this stage the formation of belief must be on the base or foundation or platform of prudence which a reasonable person was required to apply. From the perusal of the reasons recorded and the order of rejection of objections, the names o....
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....d. The Tribunal was justified in not upholding the additions which was made on a protective basis and directing the Revenue now to proceed with the substantive assessment (see p. 448E, F). 2. Decision of Hon'ble Allahabad High Court in the case of Smt. Hemlata Agarwal Vs CIT 64 ITR 428 (All) in which it was held as under : Held, the condition precedent for the issue of a notice under section 34(l)(a) is "reason to believe", which means, anything but reason to suspect that income had escaped assessment. There must be some material on the record for the reason entertained by the Income-tax Officer. When the Tribunal itself is not able to make up its mind, and the Income-tax Officer also not able to make up his mind, it is impossible to say that the Income-tax officer entertained a reasonable belief that some income of the assessee had escaped assessment. The Income-tax Officer cannot blow had and cold in the same breath. The notice under section 34 on the assessee and the assessment based on that notice were, therefore, illegal." 4. Decision of Hon'ble Gujrat High Court in the case of Sagar Enterprises Vs Asstt. Commissioner 257 ITR 335 (Guj)....
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.... brokers and brokers have confirmed sale of the shares/investments of the assessee and giving sale consideration through banking channels. The sources have been accepted by the brokers alongwith genuineness of the transaction. The substantive addition on merit was made in the case of late Shri Taranjit Singh. Therefore, there was no reason to make substantive addition in the case of the assessee company. He has submitted that Assessing Officer has wrongly recorded in the assessment order that ld. counsel for the assessee made the statement that substantive addition made in the case of Shri Taranjit Singh because the reasons for re-opening of assessment were recorded earlier prior to the block assessment order passed in the case of late Shri Taranjit Singh. The ld. counsel for the assessee, therefore, submitted that there was no justification to reopen the assessment in the case of the assessee under section 148 of the Act and also there was no justification to make the addition on merits. 16(i) On the other hand, ld. DR relied upon orders of the authorities below. Ld. DR submitted that assessee entered into sham transaction on account of receipt of money from three brokers, ther....
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....ildcon (P) Ltd. Vs ITO, Ward 2(2), Jaipur 128 ITD 396 in which the assessee was shown to have credited certain amounts to his share capital account and share premium account and as per documents attached with the return, it was not made clear as to whom shares had been allotted. In such circumstances, reasons recorded by the Assessing Officer initiating re-assessment proceedings could not be termed as irrational. 18. The ld. DR further submitted that it is settled law that income should be assessed in the correct hands and relied upon decision of Hon'ble Supreme Court in the case of ITO Vs Ch. Atchaiah 218 ITR 239. The ld. DR submitted that Assessing Officer received information from Investigation Wing that assessee has received accommodation entries, therefore, on such information, re-opening of the assessment is justified. The ld. DR relied upon following decisions in support of the above contention :- i) Order of ITAT Chandigarh Bench in the case of Ishwar Dass Garg Vs ACIT ITA 977/2012 dated 06.07.2015. ii) Judgement of Hon'ble Punjab & Haryana High Court in the case of M/s Piyush Infrastructure Ltd. Vs CIT, CWP No. 5926/2014 dated 28.03.2014. iii) ....
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....p; Chandigarh . 20. The record revealed that search & seizure operation under section 132 of the Income Tax Act was conducted at the residential and business premises of Smt. Mohinder Kaur and others on 23.05.2002. Late Shri Taranjit Singh was husband of Smt. Mohinder Kaur, had been doing liquor business at Chandigarh and Panchkula. After his death on 19.04.2000, business was taken over and carried out by his wife Smt. Mohinder Kaur till the date of the search. The reasons recorded would, therefore, clearly suggest that information was received from ADIT (Investigation) Panchkula vide letter dated 04.09.2003, was in reference to the search conducted in the cases of Smt. Mohinder Kaur, legal heir of late Shri Taranjit Singh. 21 In the reasons, the Assessing Officer on the basis of information received from ADIT (Investigation) noted that assessee company has invested Rs. 2.10 Cr with M/s Taranjit Singh & Co., Chandigarh, liquor Contractor in assessment year under appeal and till date, this amount has not been repaid as per enquiries conducted by Investigation Wing. It is also noted in the reasons for re-opening of the assessment that assessee had given only entry and actual....
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....ng Officer has referred to statements recorded by DDIT (Investigation) Chandigarh of Shri Bharat Bhushan Goyal, Director of the assessee company in which he has briefly explained that since incorporation of the assessee company, there were no manufacturing activities. Therefore, assessee company started making inter-corporate investments. List of many investments was produced and filed. 23. Shri Taranjit Singh, who was friend of the Director, wanted to control the assessee company but the formalities could not be completed but actually he started controlling the co, he sold/liquidated the investments of company. Original certificates and transfer deeds were given to him. Bank account opened and operated in his consultation. Shri Taranjit Singh, by that time expired. Since Shri Taranjit Singh wanted to take over control of the assessee company, therefore, he sold/liquidate the shares of the assessee company and for that purpose, he wanted to make him as a partner in his liquor business. The Board of Directors of the assessee company passed a resolution for selling the investments. The investments were to be sold through Shri Taranjit Singh. He has conformed in his statement that ....
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....ue. He was having no tangible material with him to show that there was any reason to believe that income chargeable to tax in the hands of the assessee has escaped assessment. There were no reference to any document or material except the information received from ADIT (Investigation), Panchkula which could not be recorded as a material or evidence that prima-facie showed or established nexus or link which disclosed escapement of income. The information received from ADIT (Investigation) was not a pointer and did not indicate escapement of income in the case of the assessee. 24. Hon'ble Gujrat High Court in the case of Inductotherm (India) P. Ltd. V M. Gopalan, DCIT, 356 ITR 481 held as under : The power to reopen an assessment is available either in a case where a return has been accepted under Section 143(1) of the Income Tax Act,1961, or a scrutiny assessment has been framed under section 143(3) of the Act. A common requirement in both cases is that the Assessing Officer should have reason to believe that any income chargeable to tax has escaped assessment. There should be tangible material to come to the conclusion that there is escapement of income from assessm....
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....arding the source of funds for the purchase had not been furnished. The Tribunal held that notice was not valid. On appeal to the High Court: Held, dismissing the appeal, that a bare perusal of the notice dated October 10, 1991, clearly indicated that the officer wanted to know the details with regard to the source of funds for purchase of the flat for a sum of Rs. 2,50,000. Obviously there was no question of the Assessing Officer having any basis to reasonably entertain the belief that any part of the income of the assessee had escaped assessment. The notice was not valid. 25. The Assessing Officer in the reasons further noted that since the amount of Rs. 2.10 Cr was first deposited in the account of the assessee company maintained with Bank of Baroda, Ludhiana and source of this amount remained unexplained within the meaning of Section 148 of the Act, therefore, he has reason to believe that income chargeable to tax has escaped assessment. This alleged belief was also not tenable in law because once it is a stand of the Revenue Department that the entire undisclosed money belong to Shri Taranjit Singh as per block assessment order passed in the case of Smt. Mohinder K....
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....inder Kaur, legal heir of late Shri Taranjit Singh, therefore, no block assessment order could be framed in this case. It would, therefore, show that technically, the addition has been deleted in the case of Shri Taranjit Singh by quashing the block assessment proceedings but the finding of fact recorded by the Revenue Department would remain same that Shri Taranjit Singh disclosed the fact of receipt of Rs. 2.50 Cr from the assessee company in his books of account. Therefore, the finding given by the Assessing Officer in the block assessment that the entire money was of Shri Taranjit Singh routed through the name of the assessee company in his business remain unchallenged and as such, Revenue Department cannot take a somersault in the case of the assessee for the purpose of re-opening of the assessment or to make addition on substantive basis later on. 26. We may note here again that the Assessing Officer in the case of the present assessee, first passed the assessment order under section 148/143(3) on 30.03.2005 for assessment year 2000-01 and no block assessment order was passed by that date in the case of late Shri Taranjit Singh, therefore, passing of the protective assessm....
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..../investments. The Assessing Officer did not record anywhere in the assessment order if these statements recorded by DDIT (Investigation) of the brokers have been supplied to the assessee for the comments of the assessee and whether assessee has been given any opportunity to cross-examine these brokers. In the absence of any evidence or material on record, it is difficult to believe that assessee has been given any opportunity to cross-examine the statements of these three brokers on behalf of the assessee. Therefore, when these brokers have confirmed selling the shares on behalf of the assessee company and giving sale consideration through banking channel to the assessee company and their statements are not adverse in nature against assessee, but in the absence of giving right of cross-examination of their statement, their statements cannot be read in evidence against the assessee on certain points which have been considered by Assessing Officer to be adverse in nature. We rely upon decision of Hon'ble Supreme Court in the case of Kishan Chand Chela Ram (supra). 29. It may also be noted here that Assessing Officer has recorded two statements in both assessment year as per as....