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TaxTMI 
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2019 (3) TMI 327
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....d as under:- 1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that re-assessment made under section 147 is invalid and bad in law accordingly quashing the same on the ground that if the issue is not discussed in the assessment order would not lead to a conclusion that no opinion was formed as to subject of the query, without appreciating the fact that assessment was reopened as per the provisions of section 147 of the Income Tax Act." 2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the appeal of the assessee holding that notice issued u/s 148 is bad in law and not on correct facts, by relying on the order of Bombay High Court dated 20.03.2017 in CIT Vs. Gangadeep Infrastructure Pvt. Ltd in ITA No. 1613 of 2014, which is not applicable to re-opening of the case." 3. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that re-assessment made under section 147 is invalid and bad in law without considering the fact that the A.O. passed a speaking order dated 20.03.2015, wherein he dealt with all the objections of t....
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....me filed on 31.08.2009 as return of income filed in response to notice u/s 148 of the 1961 Act. The assessee raised objections to the re-opening of the assessment vide letter dated 11.09.2014 which were rejected by the AO vide letter No. Ref.Mum/ITO-6(3)(4)/2014-15 dated 20.03.2015. It was observed by the AO that the assessee has not done any substantial business operations during the impugned year under consideration and financial details of the assessee for Financial Year(FY) 2008-09 , 2009-10 and 2010-11 are as under:- The AO observed that the sum so introduced in the books of accounts of the assessee was utilised for the following purposes: i) Investment in Fixed Assets -Rs. - ii) Investment in Shares of other Companies -Rs.1,21,00,000/- iii) Given as Loans & Advances to others - Rs. 71,20,625/- iv)As Cash/bank balance -Rs. 2,65,907 v) In stock/WIP/Sundry Debtors -Rs.- The AO had also observed that assessee has shown meagre income of Rs. 15,712/- in its first year of operation ending on 31.03.2009, after its incorporation on 14.01.2009. The AO observed that the paid up share capital of the assessee was Rs. 20,39,300/- wherein 2,03....
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.... of Rs. 90/- per share raised by a private company, aggregating to Rs. 1,74,53,700/- on issue of 1,93,930 equity shares of face value of Rs. 10 each. The said reasons for reopening of the concluded assessment are reproduced hereunder: The assessee filed an objection against the reopening of concluded assessment and the objections raised by the assessee were disposed off/rejected by the AO , vide order dated 20.03.2015 which is reproduced here under:- The assessee having issued equity shares at a very high premium of Rs. 90/- per shares as against face value of Rs. 10/- per equity share, the re-opening was done to verify such a high share premium received by the assessee, which as per the AO encompasses enquiry as to the following aspects : A) In the case of the assessee company- (i) Back ground information of the assessee company, its real stake holders(shareholders) and management and control(Board of Directors) (ii) Scale of its business operations vis-a-vis its nature of business and financial outlay, number of years in existence. (iii) Intrinsic value of the shares vis a vis the performance of the company as evident from its past track ....
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....poor EPS and also funds were not utilised for business purposes or were invested in non income generating areas wherein funds were diverted. It was also observed that the investor companies were all paper companies having no real business activities and the sources of the funds reveal modus operandi of entry providers wherein the money has been introduced in the guise of loans, advances, share capital and share premium by creating layers of smokescreen and intricate web of entries routed through paper concerns being used by entry providers. The AO then went on to explain the modus operandi adopted by these accommodation entry providers to route unexplained money into web of companies. The AO relied upon decision of ITAT, Kolkatta in the case of Bisakha Sales Private Limited v. CIT in ITA no. 1493/Kol/2013 and other decisions wherein additions have been sustained on account of these accommodation entries. The AO then went on to hold that the amount received by the assessee towards share capital is an unexplained cash credit which the assessee failed to substantiate through documentary evidences . The AO observed that the onus was on the assessee and the assessee failed to discharge ....
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.... "To Income Tax Officer 8(2)(2) Aayakar Bhavan, M.K. Road, Mumbai 400 020 Sir, Sub: Objection to Notice u/s. 148 ******* We thank your good self for having furnished us with the reasons recorded by you u/s. 148(@) (copy enclosed for your ready reference). We hereby object these reasons as also the notice u/s, 148 issued by you on that basis in our case for A.Y. 2009-10. With utmost respect we state and submit that on the facts and in the circumstances of our case and in law, the notice above mentioned is bad in law and bereft of merit for the following reasons: a) From the reasons recorded it would kindly be seen that you have issued the notice u/s. 148 on the scant fact of the issue of equity shares by us at a premium. This fact in itself cannot give reasons to believe to any judicious person that there is any escapement of income chargeable to tax from assessment. Hence, the notice issued by you is without any reason and therefore bad in law. b) From the reasons recorded it would kindly be seen that you yourself are not certain that there is escapement of income chargeable to-tax....
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....ssessee company had taken such entries and claimed the same as purchases expenses, the assessment was taken up for the first time by way of issue of notice u/s. 148 on 31.3.2014 for the limited purpose of bringing to tax the income so escaped by way of bogus purchases". So it is seen that now there is no mention whatsoever of the so called "verification of high rate of share premium and cash received" as held by the earlier A.O. who had reopened the assessment vide notice u/s. 148 dated 31.3.2014 on the basis of Pr. CCIT's letter. Now the incumbent A.O. who passes order for rejection dated 20.3.2015 gives another reason for the issuance of notice u/s. 148 on 31.3.2014 which is "receipt of information above hawala operators" . Thus, it is seen that the notice issued u/s 148 is bad in law. 9. During the course of appellate hearing, additional evidence was submitted and remand report was called for vide letter dated 13.2.2017 and the same was submitted which is reproduced as under: "To, The CIT(A)-12, Mumbai (Through the Jt. CIT, Rg.6(3), Mumbai) Sir/Madam, Sub: Remand Report in the case of M/s. Knowell Enterp....
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....refore, reopening of assessment is valid and good in law. Keeping in the view of the above, the additional evidence filed in the case should not be admitted. 3. Rule 46A(1) clearly specifies that the appellant shall not be entitled to produce before the Ld. CIT(A), other than the evidence produced by him during the course of assessment proceedings, before the A.O. except the following circumstances: "a) Where the A.O. has refused to admit evidence which ought to have been admitted; or b) Where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the A.O. or c) Where the appellant was prevented by sufficient cause from producing before the A.O. any evidence which is relevant to any ground of appeal; or d) where the A.O. has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal". 4. It is observed that the assessee filed additional ground of appeal and no additional evidences for the appeal has been filed by assessee in this regard. In view of the above, it is respectfully submit....
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....d that the AO made additions towards share capital and share premium raised by the assessee by invoking provisions of Section 68 of the 1961 Act , to the tune of Rs. 1,93,93,000/- on account of the fact that the assessee has failed to prove identity , creditworthiness of the subscribers and genuineness of the transaction . It was submitted by learned DR that Ld. CIT(A) decided the issue in favour of the assessee by quashing reassessment proceedings u/s 147 of the 1961 Act on legal ground. Our attention was drawn to the appellate order passed by Ld. CIT(A). It was submitted by learned DR that reopening of the assessment is held to be bad in law by learned CIT(A) and it was submitted that the assessment was reopened within four years from the end of the assessment year and initially no assessment was framed by the AO u/s. 143(3) of the Act while return of the income was only processed u/s. 143(1) of the Act. It was submitted that the turnover of the assessee is very low for the year ended 31.03.2009 and it is a new company which was incorporated only on 14.01.2009 . It was submitted by learned DR that the financials and credentials of the assessee does not justify issuing of equity s....
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....evenue appeal be dismissed: a) Hon‟ble Bombay High Court decision in the case of CIT v. Maniben Valji Shah (2006) 204 CTR 249 (Bom), b) Hon‟ble Gujarat High Court decision in the case of PCIT v. Manzil Dinesh Kumar Shah in ITA no. 451 of 2018 (Guj.) decided on 07.05.2018, c) Hon‟ble Bombay High Court decision in the case of PCIT v. Shodiman Investment Private Ltd. in ITA no. 1297 of 2015 (Bom) decided on 16th April, 2018, d) Mumbai-tribunal decision in the case of DCIT v. Piramal Reality Private Ltd. in ITA no. 2317/Mum/2017 decided on 16.11.2018, e) Writ Petition decided by Hon‟ble Bombay High Court in the case of Khubchandani Healthparks Private Ltd. v. ITO in W.P No. 3027 of 2015 decided on 10.02.2016, f) Hon‟ble Delhi High Court decision in the case of CIT v. Batra Bhatta Company (2010) 321 ITR 526 (Del) decided on 08.08.2018, g) Hon‟ble Supreme Court decision in the case of Chhugamal Rajpal v. S.P. Chaliha & Others (1971) 79 ITR 603 (SC). h) Hon‟ble Bombay High Court decision in the case of CIT v. Green Infra Limited in ITA no. 1162 of 2014 , dated 16.01.2017 ....
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....ceed against the subscribers. It was submitted that the AO has not brought on record any adverse remarks/incriminating material against the subscribers of the shares before making additions . It was submitted that the money was received through banking channel and subscriptions have been paid by the subscribers through banking channel. 7. On the other hand Ld. DR submitted in rejoinder that information was received from learned CCIT which was based on information from DGIT (Intelligence and Criminal Investigation ) and based on credible information, the reopening was done. The learned DR relied on decision of Delhi ITAT in the case of ITO v. Smt. Gurinder Kaur (2006)( 6) TMI 144-ITAT DELHI-A BENCH ( (2007) 288 ITR (A.T.) 207 dated 16.06.2006. It was submitted that there is a live link between incriminating information received by Revenue and reasons to believe that the income has escaped assessment. The directions were then given by the Bench to Ld. Counsel for the assessee to submit a note as to applicability of the decision of Hon‟ble Supreme Court in the case of ACIT v. Rajesh Jhaveri Stock Brokers Private Ltd ( 2007) 161 taxman 316(SC) which the assessee duly submitted....
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....e u/s 148 of the 1961 Act. The assessee raised objections to the re-opening of the assessment vide letter dated 11.09.2014 which were rejected by the AO vide letter No. Ref.Mum/ITO-6(3)(4)/2014-15 dated 20.03.2015, which order of the AO is reproduced hereunder:- It is observed that the paid up share capital of the assessee was Rs. 20,39,300/- wherein 2,03,930 Equity Shares of Rs. 10/- each were issued at par/premium of Rs. 90 per share. It is observed that the assessee had introduced a sum of Rs. 1,74,53,700/- on account of share premium wherein total share capital inclusive of share premium of Rs. 1,93,93,000/- consisting of 1939300 equity share of Rs. 10 each were issued at a premium of Rs. 90 /- per equity shares , to the following persons as detailed hereunder:- S.No Name of the erson with address No of shares Face value (In Rs.) Issue price (In Rs.) Premium per share (In Rs.) Money Received towards Share capital (In Rs.) Share Premium (In Rs.) Total (In Rs.) (1) (2) (3) (4) (5) (6) (7)=(3)*(4) (8)=(3)*(6) (7)+(8) 1 Bharat Mishra HUF 6250 10 100 90 62500 562500 625000 2 Bharat Mishra....
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....th the promoters/Directors of the assessee company nor with the management of the assessee company, while the Promoters/Directors of the assessee company had pumped in only Rs. 19,25,000/- in the assessee company towards share capital/share premium. The contribution of the promoters is barely 9.88% in total funds raised by the assessee in the shape of share capital and share premium , while 90.12% of the total fund infusion in the assessee company was from outsiders having no connection with the assessee company and that too the share capital was subscribed by outsiders at a premium of Rs. 90/- per share as against face value of Rs. 10/- per share in a newly incorporated company i.e. assessee having no asset base or visible business activities as is discernible from the financial statements placed before the tribunal. The assessee company is a newly incorporated private company and large amount of fund infusion took place in the assessee company from outsiders who are not connected with the assessee company while promoters only infused 9.88% of the total fund infused in the assessee company. Thus, when a newly incorporated private company having no established background or track r....
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....t year of operation ending on 31.03.2009 with gross turnover of Rs. 1,89,000/- coming from Interest and Maintenance as reported in financial statements produced before the tribunal, after its incorporation on 14.01.2009. The assessee did not have any asset base as on 31.03.2009 which could reflect visible business activities being persued by the assessee and no business was being run per-se as the gross income reported is from interest and maintenance to the tune of Rs. 1,89,000/- . The asset base consisted of investments in shares of other private companies to the tune of Rs. 1.20 crores and advancing certain loans and advances to the tune of Rs. 71 lacs. This is how the proceeds of raising of share capital and share premium was deployed by the assessee which indicates diversion of funds for non business purposes. There is no project per-se being undertaken by the assessee company as is emanating from the records before us. The assessee has claimed that valuation report was filed using Discounted Cash flow method but the same is not filed before the Bench. The Balance Sheet typically represented of the entry operators engaged in providing accommodation entries and definitely neede....
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....the decision of Hon‟ble Apex Court in the case of Lovely Exports (supra) as under: "21. After hearing the learned advocates, we are of the opinion that the following questions arise for consideration:- (a) Whether in the light of the views expressed in the case of Lovely Exports (supra) & Steller Investment (supra) the order under Section 263 directing further investigation is legal? (b) Is the finding of the Commissioner of Income Tax that unaccounted money was or could have been laundered as clean share capital by creating facade of paper work, routing the money through several bank accounts and getting it the seal of statutory approval by getting the case reopened under Section 147 suo motu perverse? (c) Whether the order passed by the assessing officer under Section 143(3)/147 of the Income Tax Act is erroneous and also prejudicial to the interest of the revenue? (d) Whether the impugned judgement of the learned Tribunal is perverse? 22. We shall consider the second question first. In a commentary on the Prevention of Money Laundering Act, 2002 by Dr. M. C. Mehanathan published by Lexis Nexis, 2014, the steps ....
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.... holders of black money also launder the black money in order to acquire legitimate assets. Legal or illegal income which evades tax and illegal income that comes within the exempted taxation slab constitute the unreported Gross Domestic Product or black economy. Laundering the black money and laundering proceeds of crime are two different issues, although there is frequent overlap between the two. While laundering black money is to be handled through taxation laws or similar laws, the laundering of proceeds of crime is to be handled through special anti-money-laundering laws." 23. The following pieces of evidence are noticeable:- (a) 39 corporate subscribers purchased 7,92,737 shares of Rs. 10 each at a premium of Rs. 390/- per share. In the process the assessee company raised a paid up share capital of Rs. 79.27 lakhs with a premium of Rs. 31.7 crores. (b) From the information made available by the assessee, it appears that 19 out of 39 applicants secured funds, for the purpose of contributing to the share capital of the assessee, on account of share application money. In other words, those 19 applicants collected funds on account of share application m....
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....e assessee and their close relatives and friends had united with the common object of creating at least 20 (19+1) companies apparently having a large capital base, but, in fact these are mere paper companies having no real worth. The transaction of sale and purchase of shares was nominal rather than real. (b) The allegation, in response to the notice to show-cause u/s. 263 that "it bears importance to state here that the investor companies of shares were interested to subscribe shares of the assessee company as, according to them, the assessee company had prospect in future," is a plain lie. (c) The blank share application forms etc. tabulated above go to show that the alleged application for shares and the alleged allotment were not in the usual course of the business. (d) In the light of the aforesaid pieces of evidence and the prima facie finding, we are emboldened to say that the three requirements: (A) identity of the share-holders; (B) genuineness of the transaction and (C) the creditworthiness of the share-holders repeatedly impressed, by Mr. Poddar, upon us, have not been satisfied. Identity of the alleged share-holders is known but the transactio....
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.... 68 indicates that the said section is very widely worded and an Income-tax Officer is not precluded from making an enquiry as to the true nature and source thereof even if the same is credited as receipt of share application money." In the case of Sumati Dayal (supra). Their Lordships held that a capital receipt can become taxable if the explanation offered by the assessee about the nature and source thereof is not satisfactorily explained. The judgement in the case of Lovely Exports (P.) Ltd. (supra) lends no assistance to the assessee because in that case the Division Bench reiterated that omission to make an enquiry, where such an exercise is provoked, shall render the order of the assessing officer both erroneous and prejudicial to the revenue. The Division Bench went on to hold that the revenue should not harass the assessee where "the preponderance of evidence indicates absence of culpability". In the present case there exists reasonable suspicion if not prima facie evidence of culpability. 26. The learned Tribunal in the impugned judgement in paragraphs 3, 4 and 5 observed, inter alia as follows:- "We have heard the rival submissions and ....
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....egory of 'no enquiry' conducted by the AO, what to talk of charactering it as an 'inadequate enquiry'. In our considered opinion, the highly inadequate enquiry conducted by the AO resulting in drawing incorrect assumption of facts, makes the orders erroneous and prejudicial to the interests of the revenue." 27. In the case of Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC) the Tribunal had held as follows:- "The Tribunal further held that if the orders for 1955-56 to 1959-60 were left out and the assessment order for 1960-61 was considered by itself, it could not be said that the assessment order was prejudicial to the interests of revenue. It was also observed that the factum of advance of initial capital, realization of amounts by sale of gold ornaments and the carrying on of the money-lending and speculative business had already been accepted and assessed in the previous years, that even in the year of assessment in question the Income-tax Officer had added Rs. 1,499 to the disclosed income from speculative business and Rs. 1,270 to the disclosed income from interest and made the assessment on a total income of Rs. 9,037; as such it could ....
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....t of the assessee, it was apprehended in the case of Smt. Tara Devi Aggarwal (supra) was to assist someone else. An identical attempt is involved in this case. Who is the person sought to be assisted by the assessee? This question can only be answered after a thorough enquiry, directed by the CIT, is held. The assessee is interested in stalling that investigation on the plea that the order of the assessing officer is neither erroneous nor prejudicial to the interest of the revenue. 28. We have indicated above the pieces of evidence which go to show that the Commissioner had reasons to entertain the belief that this was or could be a case of money laundering which went unnoticed because the assessing officer did not hold requisite investigation except for calling for the records. The evidence which we have tabulated above and the prima facie inference drawn by us is deducible from the documents also submitted before the assessing officer. The fact that the assessing officer did not apply his mind to those pieces of evidence would be evident from the assessment order itself which reads as follows:- "During the Financial Year the assessee company has issued 792737 No....
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....ufficient when surrounding and attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive. Companies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind the company who take the decisions, control and manage them." The persons behind the assessee company and the persons behind the subscribing companies were not interrogated which was essential to unearth the truth. Reference may also be made to the judgement of this Court in the case Active Traders (P.) Ltd. (supra). The question for consideration is whether in the presence of materials discussed above the Commissioner was justified in treating the assessment order erroneous and prejudicial to the interest of the revenue. That question in the facts and circumstances has to be answered in the affirmative. We find no substance in the submission that the order of the learned Tribunal is perverse, after examining all the submissions advanced by Mr. Poddar. 29.....
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....submission that the source of source is not a relevant enquiry does not appear to be correct. We find no substance in the submission that the exercise of power under Section 263 by the Commissioner was an act of reactivating stale issues. In the case of Gabriel India Ltd. (supra) the CIT was unable to point out any error in the explanation furnished by the assessee. Whereas in the present case we have tabulated the evidence which was before the assessing officer which should have provoked him to make further investigation. The assessing officer did not attach any importance to that aspect of the matter as discussed above by us. The judgement in the case of Leisure Wear Exports Pvt. Ltd. (supra) relied upon by Mr. Poddar has no applicability because the evidence furnished by the assessee in this case does suggest a cover up. We also have held prima facie that neither the transaction appears to be genuine nor are the applicants of share are creditworthy. The judgement in the case of Omar Salay Mohamed Sait (supra) cited by Mr. Poddar has no application for reasons already discussed. It is not true that the Commissioner in this case has merely on the basis of suspicion held t....
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....uity shares of a newly incorporated company having no asset base/visible business in hand were issued at an hefty premium of Rs. 90 per share as against face value of Rs. 10 per share. The financial statement of the assessee company indicate that it was merely a paper company having no assets base/business at all. The proceeds of share capital inclusive of share premium raised are utilised to invest money as investment in shares of other private companies and in granting loans and advances. It has also earned meagre income of Rs. 1,89,000/- in the previous year ended 31.03.2009 from interest and maintenance. The financial details are as under: Sr. No. Last Year FY 2007-08(AY 2008-09) This year FY 2008-09 ( AY 2009-10) Next Year FY 2009-10 (AY 2010-11) Year after FY 2010-11(AY 2011-12) i) Total turnover Not Available Rs.189000 Rs.70,51,274 Rs.2,07,40,730 ii) Net Profit after taxes Not Available Rs.9000 Rs. 109145 Not Available iii) EPS Not Available Rs.0.05 Not Available Not Available iv) Dividend Not Available Not Available Not Available Rs....
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....ad undergone substantial change and we are presently concerned with amended provisions of both these Sections. Thus, intimation u/s 143(1) by no stretch of imagination can be called as an „assessment‟ and also by virtue of amended definition of Section 147, there is necessity of having reasons to believe that income has escaped assessment to reopen the assessment wherein no assessment is framed by the Revenue originally u/s 143(3) and re-opening is sought to be done within four years from the end of the assessment year. Since , first proviso to Section 147 is not applicable , then it is not relevant whether the assessee has made true and complete disclosure in the return of income filed with the Revenue. Similarly , since the assessment was not initially made u/s 143(3) , it could not be said that the AO has made any opinion on the share capital and share premium raised by the assessee and now it could not be said that there is any change of opinion by the AO. The decision of Hon‟ble Supreme Court in the case of ACIT v. Rajesh Jhaveri Stock Brokers Private Limited (2007) 161 Taxman 316(SC) and in the case of DCIT v. Zuari Estate Development and Investment Co. Limi....
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....ssessee. At this stage , we would like to refer to decision of co-ordinate Benches of the tribunal, Mumbai in which one of us (Accountant Member)was part of the Division Bench who pronounced this order, in the case of Pratik Syntex Private Limited v. ITO reported in (2018) 94 taxmann.com 12(Mum-trib.) , wherein additions on account of bogus share capital raised by the said tax-payers were confirmed by tribunal, by holding as under: "6. We have considered rival contentions and perused the material on record including orders of the authorities below, paper book filed by the assessee running into 1-32 pages and case laws relied upon by the both the parties. The assessee is engaged in the business as dealers of textiles yarn & commission agent. The assessee has share capital (inclusive of share premium) issued to the tune of Rs. 337 lacs out of which Rs. 37 lacs is invested by original promoters namely Shri. Viharilal Jhawar, Smt. Urmila Devi Jhawar and Shri Pratik Jhawar(hereinafter called "original promoters") while the assessee raised balance share capital(inclusive of share premium) to the tune of Rs. 3 crores from three new parties namely M/s. Motivate Financial Services ....
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....s to the tune of 86% are held by the original promoters who merely invested 11% of the total capital introduced in the assessee's company. Thus, within this relevant year under consideration shares were allotted to original promoters at par value of Rs. 10 per share while new shareholders were allotted shares at a price of Rs. 500 per share. No justification for such different issue price even within this relevant year under consideration is brought on record. No doubt situations could arise in genuine investments also about the differential pricing of shares to outsiders vis-a-vis promoters, but the problems of the assessee got aggravated by non tracing of these three new shareholders as the assessee also could not furnish the current addresses of these new shareholders and the whereabouts of these new shareholders are also not known. The inspector who was deputed by the AO to make field enquiries reported that these three new shareholders are not available at the given addresses and their whereabouts are not known. The assessee was confronted with the adverse inspector report but the assessee could not produce current addresses of these three new shareholders. The assessee di....
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.... impugned AY under consideration is AY 2012-13 but when the genuineness of the transaction of raising of share capital at huge valuations is itself in question then parameters of Section 68 are to be compulsorily fulfilled and the onus is on the assessee to prove that the transaction is genuine. Thus, to contend that Section 56(2)(viib) r.w.s. 2(24)(xvi) are placed in statute by Finance Act, 2012 w.e.f. 01-04-2013 and no question can be raised as to the valuation of shares at an huge share premium is not correct as in the instant case, the genuineness of the transaction of raising of share capital inclusive of share premium to the tune of Rs. 300 lacs from these three new shareholders is itself not proved and the assessee was asked by the authorities to prove the same keeping in view mandate of Section 68 of the 1961 Act which assessee failed to prove. Section 68 of the Act cast obligation on the assessee where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source of credit thereof or the explanation offered by the assessee is found not satisfactory in the opinion of the AO, the sum....
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....ty of the shareholders and genuineness of the transaction. The onus of widely held company could be discharged on the submissions of all the information contained in the statutory share application documents and on not being satisfied the AO may proceed against the shareholders u/s. 69 of the Act instead of proceeding against the company, but in the closely held companies as in the instant case before us the share capital are mostly raised from family, close relatives and friends and the assessee is expected to know the share subscribers and the burden is very heavy on the assessee to satisfy cumulatively the ingredients of Section 68 of the Act as to identity and establish the credit worthiness of the creditors and genuineness of the transaction to the satisfaction of the AO, otherwise the AO shall be free to proceed against the assessee company and make additions u/s. 68 of the Act as unexplained cash credit. The use of the word 'any sum found credited in the books' in Section 68 indicates that it is widely worded and the AO can make enquiries as to the nature and source thereof. The AO can go to enquire/investigate into truthfulness of the assertion of the assessee regar....
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....Whether a receipt is to be treated as income or not, must depend very largely on the facts and circumstances of each case. In the present case the receipts are shown in the account books of a firm of which the appellant and Govindaswamy Mudaliar were partners. When he was called upon to give explanation he put forward two explanations, one being a gift of Rs. 80,000 and the other being receipt of Rs. 42,000 from business of which he claimed to be the real owner. When both these explanations were rejected, as they have been, it was clearly open to the Income-tax Officer to hold that the income must be concealed income. There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipts are of an assessable nature. The conclusion to which the Appellate Tribunal came appears to us to be amply warranted by the facts of the case. There is no ground for interfering with that finding, and these appeals are accordingly dismissed with costs." Now. Let us evaluate the quality of evidences furnished ....
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....re transferring huge amount of money into their bank accounts such as Loyana Mercantile Private Limited, Olympia Sales Agency Private Limited and Girivar Infrastructures Private Limited etc on several occasions. The perusal of the Balance Sheet of the two companies namely Motivate Financial Services Pvt. Ltd and Tej Corporate Services Pvt. Ltd. clearly reveals that they do not have any financial strength of their own to justify such a huge investment in the assessee company and that too at share premium of Rs. 490 per share as against face value of share of Rs. 10 each. The perusal of the financial statements does not reveal that these companies are into any organised business of certain magnitude while perusal of the financial statements typically reveals and points towards peculiarity of being typical a shell companies which instead of doing any genuine business are undertaking huge voluminous movement of money from one entity to another entity. Now, coming to the case laws relied upon by both the rival parties. First, we will deal with the case laws relied upon by the assessee. The assessee relied upon decision of ITAT-Mumbai in the case of Arceli Realty Ltd. (supra) bu....
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..../240 Taxman 306/386 ITR 162 at para 25 that 'the judgement in the case of Lovely Exports (P.) Ltd. (supra) lends no assistance to the assessee because in that case the Division Bench reiterated that omission to make an enquiry, where such an exercise is provoked, shall render the order of the assessing officer both erroneous and prejudicial to the revenue. The Division Bench went on to hold that the revenue should not harass the assessee where "the preponderance of evidence indicates absence of culpability". In the present case there exists reasonable suspicion if not prima facie evidence of culpability' The decision of Hon'ble Calcutta High Court in the case of Rajmandir Estates (P.) Ltd. (supra) stood affirmed by Hon'ble Supreme Court in the case of Rajmandir Estates (P.) Ltd. v. Pr. CIT [2017] 77 taxmann.com 2845/245 Taxman 127 and SLP stood dismissed. This takes us to the decision of Hon'ble Bombay High Court in the case of Gagandeep Infrastructure (P.) Ltd. (supra) wherein Hon'ble Bombay High Court considered the factual matrix of the case wherein it was observed that the taxpayer satisfied the three ingredients of Section 68 which sto....
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....nt is miniscule, on that factual matrix the Hon'ble Gujarat High Court affirmed the additions. In the instant case before us, the factual matrix is similar as the investment in assessee company by these new shareholders as detailed by us is preceded by the credit entries in the bank account of these new shareholders of equivalent amount and the bank balance regularly maintained by these new shareholders is miniscule. Thus, in our considered view based upon our detailed discussions and reasoning as given above, we are of the view that the assessee is not able to prove creditworthiness of these three investing companies and genuineness of these transactions of issuing share capital of Rs. 300 lacs (inclusive of share premium) by the assessee company could also not be proved and the additions were rightly made by the AO within deeming fiction of Provisions of Section 68 of the Act. The onus was on the assessee company to bring on record the cogent evidences to prove the creditworthiness of the share subscribers and genuineness of the transaction which in the instant case the assessee is not able to prove the same as per the facts emerging from the records and materi....
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.... It is also important at this stage to refer to recent decision of Hon‟ble Delhi High Court in the case of Pr. CIT v. NDR Promoters Private Limited reported in (2019) 410 ITR 379(Delhi) wherein Hon‟ble Delhi High Court reversed the decision of ITAT, Delhi and upheld the additions made u/s 68 of the 1961 Act , by holding as under: "11. Issue of bogus share capital in the form of accommodation entries has been subject matter of several decisions of this Court and we would like to refer to decision in CIT v. Navodaya Castles (P.) Ltd. [2014] 50 taxmann.com 110/226 Taxman 190 (Mag.)/367 ITR 306, wherein the earlier judgments were classified into two separate categories observing as under:- '11. We have heard the Senior Standing counsel for the Revenue, who has relied upon decisions of the Delhi High Court in Commissioner of Income Tax v. Nova Promoters and Finlease (P) Ltd. [2012] 342 ITR 169 (Delhi), Commissioner of Income Tax v. N.R. Portfolio Pvt. Ltd., 206 (2014) DLT 97 (DB) (Del) and Commissioner of Income Tax-II v. MAF Academy P. Ltd., 206 (2014) DLT 277 (DB) (Del). The aforesaid decisions mentioned above refer to the earlier decisions of Delhi ....
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....r company and not a genuine investor. It is in this context, the Supreme Court in CIT v. Durga Prasad More [1971] 82 ITR 540 (SC) had observed:- "Now we shall proceed to examine the validity of those grounds that appealed to the learned judges. It is true that the apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents." 15. ....
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....e amply warranted by the facts of the case. There is no ground for interfering with that finding, and these appeals are accordingly dismissed with costs." (emphasis supplied) Section 68 recognizes the aforesaid legal position. The view taken by the Tribunal on the duty cast on the Assessing Officer by section 68 is contrary to the law laid down by the Supreme Court in the judgment cited above. Even if one were to hold, albeit erroneously and without being aware of the legal position adumbrated above, that the Assessing Officer is bound to show that the source of the unaccounted monies was the coffers of the assessee, we are inclined to think that in the facts of the present case such proof has been brought out by the Assessing Officer. The statements of Mukesh Gupta and Rajan Jassal, the entry providers, explaining their modus operandi to help assessee's having unaccounted monies convert the same into accounted monies affords sufficient material on the basis of which the Assessing Officer can be said to have discharged the duty. The statements refer to the practice of taking cash and issuing cheques in the guise of subscription to share capital, for a consider....
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....these companies etc. iv. The statement of auditors of Sh. Tarun Goyal is on record. They have stated to have never meet (sic) the directors of the companies and audited the accounts only on the directions of Sh Tarun Goyal. As per the statement of auditors, the employees of Sh Tarun Goyal were directors of the companies run by them, also they could not ascertain the so called share capital subscribed by Sh Tarun Goyal as documentary proof of the same was lacking. v. During the course of search, all the passbooks, cheque books, PAN Cards etc. were always in possession of Sh Tarun Goyal. On his directions all the employees signed all the documents. vi. All the bank account opening forms appear to be in the handwriting of Sh Tarun Goyal. vii. All the books of accounts of all the companies have been retrieved from the computers/laptop of Sh Tarun Goyal. viii. Sh Tarun Goyal has given letters for the release of bank accounts of companies put under restraints after search. No such application was received from so called directors of the companies. ix. Sh Tarun Goyal appears in all the scrutiny assessments as well as appeals of his com....
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....mited v. CIT reported in (2014) 364 ITR 232(Bom.), wherein Hon‟ble Bombay High Court upheld validity of reopening of concluded assessment u/s 147 of the 1961 Act by holding as under: "10. We have considered the rival submissions. We find that, in this case, there has been a full and true disclosure of all relevant material necessary by the petitioner for the purpose of assessment. However, as the assessment sought to be reopened i.e., asst. yr. 2008-09 by a notice dt. 25th March, 2013 is less than 4 years from the end of the assessment year, the jurisdictional requirement of there being a failure to make full and true disclosure would not be applicable. In such cases of less than 4 years from the end of the relevant assessment year even if there has been no failure to make full and true disclosure of all relevant material necessary for assessment, there is no bar/prohibition for issuing a notice under s. 147/148 of the Act for reopening of an assessment. 11. Therefore, in this particular case the only thing to be examined is whether or not the AO had reason to believe that income chargeable to tax has escaped assessment while issuing the impugned noti....
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....und with the impugned notice dt. 25th March, 2013 issued under s. 148 of the Act. 14. In the above circumstances, we see no reason to interfere with the impugned notice dt. 25th_Mamh_2013. Accordingly, petition is dismissed with no order as to costs." There are companies which are widely held companies in which public are substantially interested which comes out with an initial public offers(IPO) wherein shares are to be listed on stock exchanges and widely traded on stock exchanges, wherein members of public make subscriptions in pursuance to the Prospectus issued by the company. Issue of shares in these companies to general public in India as well abroad are approved, regulated and monitored by various authorities who are engaged in regulating and managing securities and money market such as Securities and Exchange Board of India (SEBI), Stock Exchanges, Government of India through Ministry of Corporate Affairs, Ministry of Finance etc.. Those members of public who make subscription in Public issues of securities are widely scattered as any person eligible to apply as per the conditions prescribed in the Prospectus can place an application subscribing to the sh....
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....the source of the credit in its books of accounts and in case the AO is not satisfied with the explanation of the assessee with respect to establishing identity and credit worthiness of the creditor and the genuineness of the transactions, the AO is empowered to make additions to the income of the assessee u/s.68 of the Act as an unexplained credit in the hands of the assessee company raising the share capital because the AO is both an investigator and adjudicator. In our considered view, merely submission of the name and address of the share subscriber, Balance Sheet of affairs of the share subscriber and bank statement of the share subscribers is not sufficient as the AO is to be satisfied as to to their identity and creditworthiness as well as to the genuineness of the transaction entered into. An attempt has been made by the learned counsel of the assessee to hair-split the order passed by the AO disposing objections to contend that in some place it is written in the said order dated 20.03.2015 that the assessment was reopened based on the information received that the assessee has made some bogus purchases. This could be due to some error in typing due to copying of the mat....
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....o explain the source of such credit in his account - i.e. by demonstrating the identity of the provider of the credit, the creditworthiness of such entity, and the genuineness of the transaction - the credit entry is treated as unexplained and the income is treated under Section 68 of the Act as the income of the Assessee." It is also been observed that in these types of cases of accommodation entries , the paper work is perfect as observed by Hon‟ble Delhi High Court in the case of Pr. CIT v. NDR Promoters Private Limited reported in (2019) 410 ITR 379(Delhi) , wherein Hon‟ble Court observed as under: "11. Issue of bogus share capital in the form of accommodation entries has been subject matter of several decisions of this Court ........ 12.**** 13. In view of the aforesaid factual position, we have no hesitation in holding that the transactions in question were clearly sham and make-believe with excellent paper work to camouflage their bogus nature. Accordingly, the order passed by the Tribunal is clearly superficial and adopts a perfunctory approach and ignores evidence and material referred to in the assessment orde....
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....b-section where either no sum if payable by the assessee or no refund is due to him; Provided further that no intimation under this sub-section shall be sent after the expiry of two years from the end of the assessment year in which the income was first assessable...." Before amendment : 10. Section 143(1) as it stood at the point of time when the intimation was given under the said provision, so far as relevant, read as follows : "143. (1)(a) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142,- (i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly; and (ii) if any refund is due on the basis of such return, it shall be granted to the assessee : ....
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....ecessary for his assessment for that assessment year. Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could, with due diligence, have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely : (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not charge-able to income-tax; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (c) where an assessment has been made, but- (i) income chargeable to tax has been under-assessed; or (ii) s....
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.... deemed to be a notice of demand issued under section 156. The first proviso to section 143(1)(a) allowed the Department to make certain adjustments in the income or loss declared in the return. They were as follows : (a) an arithmetical error in the return, accounts and documents accompanying it were to be rectified; (b) any loss carried forward, deduction, allowance or relief which on the basis of the information available in such return, accounts or documents, was prima facie admissible, but which was not claimed in the return was to be allowed; (c) any loss carried forward, relief claimed in the return which on the basis of the information as available in such returns accounts or documents were prima facie inadmissible was to be disallowed. 12. What were permissible under the first proviso to section 143(1)(a) to be adjusted were, (i) only apparent arithmetical errors in the return, accounts or documents accompanying the return, (ii) loss carried forward, deduction allowance or relief, which was prima facie admissible on the basis of information available in the return but not claimed in the return and similarly (iii) those claims which were ....
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.... 143(1)(a) indicates that the Assessing Officer has to proceed accepting the return and making the permissible adjustments only. As a result of insertion of the Explanation to section 143 by the Finance (No. 2) Act of 1991 with effect from 1-10-1991, and subsequently with effect from 1-6-1994, by the Finance Act, 1994, and ultimately omitted with effect from 1-6-1999, by the Explanation as introduced by the Finance (No. 2) Act of 1991 an intimation sent to the assessee under section 143(1)(a) was deemed to be an order for the purposes of section 246 between 1-6-1994, to 31-5-1999, and under section 264 between 1-10-1991, and 31-5-1999. It is to be noted that the expressions "intimation" and "assessment order" have been used at different places. The contextual difference between the two expressions has to be understood in the context the expressions are used. Assessment is used as meaning sometimes "the computation of income", sometimes "the determination of the amount of tax payable" and sometimes "the whole procedure laid down in the Act for imposing liability upon the tax payer". In the scheme of things, as noted above, the intimation under section 143(1)(a) cannot be treated to ....
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....s Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section. (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so." 15. Section 147 prior to its substitution by the Direct Tax Laws (Amendment) Act, 1987, stood as follows : "147. Income escaping assessment.-If- (a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the deprecia....
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....conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction ITO v. Selected Dalurband Coal Co. (P.) Ltd. [1996] 217 ITR 597 (SC); Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC). 17. The scope and effect of section 147 as substituted with effect from 1-4-1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied firstly the Assessing Officer must have reason to believe that income profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either (i) omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these....
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....ction 143(1)(a) cannot be treated to be an order of assessment. The distinction is also well brought out by the statutory provisions as they stood at different points of time. Under Section 143(1)(a) as it stood prior to 1-4-1989, the assessing officer had to pass an assessment order if he decided to accept the return, but under the amended provision, the requirement of passing of an assessment order has been dispensed with and instead an intimation is required to be sent. Various circulars sent by the Central Board of Direct Taxes spell out the intent of the legislature i.e. to minimise the departmental work to scrutinise each and every return and to concentrate on selective scrutiny of returns. These aspects were highlighted by one of us (D.K. Jain, J.) in Apogee International Ltd. v. Union of India. 16. It may be noted above that under the first proviso to the newly substituted Section 143(1), with effect from 1-6-1999, except as provided in the provision itself, the acknowledgment of the return shall be deemed to be an intimation under Section 143(1) where (a) either no sum is payable by the assessee, or (b) no refund is due to him. It is significant that the acknowled....
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....223;ble Bombay High Court held as under: "7. As noted, the return of the petitioner was accepted without scrutiny. Thus, there was no scrutiny assessment in the present case. Under the circumstances, the question of change of opinion would not arise since the Assessing Officer had not formed any opinion on any of the issues arising out of the return filed by the petitioner. The Supreme Court in case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd.[2007] 161 Taxman 316/291 ITR 500. in this context observed as under: "16. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word 'reason' in the phrase reason to believe would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer ....
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.... assessment. It is however to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso." The Supreme Court analyzed the distinction between the acceptance of return under Section 143(1) of the Act and assessment which has been framed under Section 143(3) of the Act. The Court held that in the former case the Assessing Officer would have much wider latitude to reopen the assessment. In the said judgment the Court also discussed the concept for reason to believe. Referring the earlier judgments of the Supreme Court, the Court reiterated that the term "reason to believe" does not imply with certainty that the addition would be invariably made in the assessment. 8. This aspect was reiterated by Supreme Court in later judgment in case of Dy. CIT v. Zuari Estate Development & Investment Co. Ltd.[2016] 236 Taxman 1/[2015] 63 taxmann.com 177/373 ITR 66 (Mag.). 9. With this background, in my mind we may revisit the reasons recorded by the Assessing Officer. In the reasons the Assessing Officer referred to the report of the investigatio....
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....ected by the DGCEI during the search, which included incriminating documents and other such relevant materials, was alongwith report and show-cause notice placed at the disposal of the Assessing Officer. These materials prima facie suggested suppression of sale consideration of the tiles manufactured by the assessee to evade excise duty. On the basis of such material, the Assessing Officer also formed a belief that income chargeable to tax had also escaped assessment. When thus the Assessing officer had such material available with him which he perused, considered, applied his mind and recorded the finding of belief that income chargeable to tax had escaped assessment, the re-opening could not and should not have been declared as invalid, on the ground that he proceeded on the show-cause notice issued by the Excise Department which had yet not culminated into final order. At this stage the Assessing Officer was not required to hold conclusively that additions invariably be made. He truly had to form a bona fide belief that income had escaped assessment. In this context, we may refer to various decisions cited by the counsel for the Revenue. 10. In case of Central Provinces....
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....definite information and the Assessing Officer could act upon such information for taking action under Section 147(b) of the Act. In such background, the Supreme Court observed as under: "12. Ms. Gauri Rastogi, the learned counsel appearing for the respondents, has urged that the letter of Shri Bagai was received by the Income tax Officer on March 26, 1974 and on the very next day, that is, on March 27, 1974, he issued the impugned notice under Section 147(b) of the Act and that he did not have conducted any inquiry or investigation into the information sent by Shri Bagai. Merely because the impugned notice was sent on the next day after receipt of the letter of Shri Bagai does not mean that the Income Tax Officer did not apply his mind to the information contained in the said letter of Shri Bagai. On the basis of the said facts and information contained in the said letter, the Income Tax officer, without any further investigation, could have formed the opinion that there was reason to believe that the income of the assessee chargeable to tax had escaped assessment. The High Court, in our opinion, was in error in proceeding on the basis that it could not be said that the I....
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....e issuance of notice was invalid. Inasmuch as, as a result of our order, the reassessment proceedings have not to go on we don not and we ought not to express any opinion on the merits." 13. In case of A.G.R. Investment Ltd. v. Additional Commissioner of Income Tax and anr. (supra), a Division Bench of Delhi High Court considered the validity of reopening of assessment where the notice was based on information received from Directorate of investigation that the assessee was beneficiary of bogus accommodation entries. The Court while upholding the validity of reopening observed that sufficiency of reason cannot be considered in a writ petition. It was observed as under: "23 The present factual canvas has to be scrutinized on the touchstone of the aforesaid enunciation of law. It is worth noting that the learned counsel for the petitioner has submitted with immense vehemence that the petitioner had entered into correspondence to have the documents but the assessing officer treated them as objections and made a communication. However, on a scrutiny of the order, it is perceivable that the authority has passed the order dealing with the objections in a very careful an....
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....anking channel. Regard being had to the aforesaid fact situation, this Court had interfered. Thus, the said decision is also distinguishable on the factual score." 14. Learned Single Judge of Madras High Court in case of Sterlite Industries (India) Ltd. v. Assistant Commissioner of Income Tax reported in MANU/TN/0471/2008MANU/TN/0471/2008 : [2008] 302 ITR 275 (Mad) upheld the notice for reopening which was based on information from enforcement directorate showing possible inflation of purchases made by the assessee. 13. The decisions cited before us do not involve controversy as we are examining in this petition. In the case of Chhugamal Rajpal (supra) as noted, the Supreme Court held the re-opening of assessment invalid upon finding that the Assessing Officer had not set out any reasons for coming to the conclusion that it was a fit case for issuing notice under Section 148 of the Act. In case of Amar Jewellers Ltd. (supra) the Gujarat High Court was examining the validity of re-opening of assessment in a case where original assessment was carried out under Section 153(A) of the Act, pursuant to search carried out by the Revenue Authorities. Further, the conclusi....
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.... the Assessing Officer had proceeded to adopt a short-cut without forming the requisite belief. It is the satisfaction of the Assessing Officer who is empowered to issue the notice under section 148 that is relevant and in arriving at the same he is not bound by the directions of his superiors. It has to be remembered that at the stage of recording reasons and issuing notice under section 148 it is only expected of the Assessing Officer to reach a prima facie conclusion that income chargeable to tax has escaped assessment. At that stage, he is not expected to build a fool-proof or cast-iron case against the assessee before proceeding to issue the notice. He is not expected to make a complete investigation before issuing the notice. In R. Dalmia v. Union of India [1972] 84 ITR 616, a judgment of the Hon'ble Delhi High Court cited by the learned Senior DR, it was held (page 619) that all that was required of the Assessing Officer is that he must have reason to believe "and not that he should launch an investigation and come to a positive finding before issuing the notice..." and that "the facts on the basis of which he entertained the belief need not at this stage be irrebuttably con....
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....rely "reason to suspect". No doubt, as pointed out by the CIT(A), the list of 41 persons to whom Kochhar is supposed to have made gifts did not contain the name of the assessee. But the CIT(A) appears to have overlooked that this list was not the material on the basis of which the notice was issued. The Assessing Officer had not relied on the Tribunal's order in the case of Sanjeet Batra, in which all the 41 names are given. Indeed, he could not have, since the order of the Tribunal was passed in July 1998 whereas the notice under section 148 was issued on 5-2-1998. The Assessing Officer had relied on the letter of the CIB which contained a clear statement that the investigation wing has noticed that the assessee has purchased the gifts from Kochhar by paying cash including the premium. This letter, in our view, constitutes relevant material for the formation of the belief, not mere suspicion, that income chargeable to tax has escaped assessment in the assessee's case. 21. We are thus unable to concur with the view taken by the CIT(A) that the notice under section 148 was prompted by reason to "suspect" and not reason to "believe". 22. The matter has to go back to....
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....y 9.88% of the total funds raised by the assessee company. Thus, it is for the assessee to discharge its onus to establish identity, creditworthiness of the subscribers and genuineness of the transactions for raising share capital including share premium. It was held by Hon'ble Calcutta High Court in the case of Rajmandir Estates (P.) Ltd. v. Pr. CIT [2016] 70 taxmann.com 124/240 Taxman 306/386 ITR 162 at para 25 that 'the judgement in the case of Lovely Exports (P.) Ltd. (supra) lends no assistance to the assessee because in that case the Division Bench reiterated that omission to make an enquiry, where such an exercise is provoked, shall render the order of the assessing officer both erroneous and prejudicial to the revenue. The Division Bench went on to hold that the revenue should not harass the assessee where "the preponderance of evidence indicates absence of culpability". In the present case there exists reasonable suspicion if not prima facie evidence of culpability' The assessee has also relied upon decision of Hon‟ble Bombay High Court in the case of CIT v. Smt. Maniben Valji Shah (supra). This case belong to pre-amended provisions of Sect....
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.... matrix, reopening of the concluded assessment u/s 147 under these circumstances cannot be held to be invalid more-so originally no assessment was framed u/s 143(3) and reopening was sought to be done within four years from the end of the assessment year. The judgment of Hon‟ble Delhi High Court relied upon by the assessee in the case of CIT v. Batra Bhatta Company(supra) also had similar issue before the Hon‟ble Court as to making fishing and roving enquiry in the case of Manzil Dinesh Kumar Shah(supra) which we dealt in this paragraph. The assessee has also relied upon the decision of Hon‟ble Bombay High Court decision in the case of PCIT v. Shodiman Investment Private Ltd. in ITA no. 1297 of 2015 (Bom) decided on 16th April, 2018. In this case , the tribunal noted that the reasons as recorded for reopening of the concluded assessment revealed that there was no assessee such as the tax-payer in its charge. It was also held by the tribunal that there was no nexus established in the reasons recorded of the taxpayer with Mahasagar Securities Private Limited which was engaged in suspicious transaction, which led to escapement of income. The AO also did not provid....
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....ness from some parties who are not associated with the promoters/directors of the assessee company and these outsiders subscribing to 90.12% of shares as against subscription by promoters/directors to the tune of 9.88% is sufficient to trigger invocation of Section 147 of the 1961 Act more-so the return of income was originally processed u/s 143(1) of the 1961 Act and reopening is sought to be done within four years from the end of the assessment year. Each case is to be decided on its own merits and so far as reopening is concerned, the same is to be viewed on the reasons to believe as recorded while issuing notice. The assessee has also relied upon decision of Hon‟ble Supreme Court in the case of Chhugamal Rajpal v. S.P. Chaliha & Others (1971) 79 ITR 603 (SC), this is a case pertaining to pre-amended Section 147 and where twin conditions were to be satisfied as to reasons to believe that income has escaped assessment and omission on the part of the assessee to truly and fully disclose all material facts necessary for his assessment,while presently we are concerned with post amended Section 147 of the 1961 Act which in the instant case only required that the AO be having....
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....led by assessee against this case stood dismissed by Hon‟ble Apex Court. The Reference is also drawn to the decision of Hon‟ble Delhi High Court in the case of NDR Promoters Private Limited(supra) . Thus, based on our detailed discussions as above, we have no hesitation in upholding invocation of provisions of Section 147 of the 1961 Act for reopening of the concluded assessment based on factual matrix of the case as discussed in details as above and we overturn the decision of learned CIT(A) on the legal ground of reopening of concluded assessment by invocation of provisions of Section 147 of the 1961 Act and hold that invocation of provisions of Section 147 of the 1961 Act was correctly undertaken by the AO and the AO was having reasons to believe that income has escaped assessment and they were not merely reason to suspect. At the stage of invocation of provisions of Section 147 of the 1961 Act for reopening of the assessment, it is not the water tight proof which is required that income has escaped assessment to re-open the case u/s 147 but a prima facie bonafide belief that the income has escaped assessment. In this case before us, the assessment was never origi....
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....al of the Revenue is allowed as indicated above. Order pronounced in the open court on 27.02.2019. ============= Document 1 Sr. No. Last Year FY 2007- This year FY 2008- Next Year FY 2009-10 Year after FY 2010- 08(AY 2008-09) 09 (AY (AY 2010- 11(AY 2011- 2009-10) 11) 12) i) Total turnover Not Rs. 189000 Rs. 70,51,274 Rs.2,07,40,730 Available ii) Net Profit Not Rs.9000 Rs. 109145 Not Available after taxes Available iii) EPS Not Rs.0.05 Available Not Available Not Available 5.1 The sum ed in the bo \v) Dividend Not Not Available Available Not Available ii) Investment in urco by viner computics sessee company was foun Rs.60196 no. 1,21,00,000/- Document 2 Name of the Address of the assessee PAN Asstt. Year Status Date Knowell Enterprises Pvt. Ltd., Room No.9, 2nd Floor, Tawawala Building, 99, Abdul Rehman Street, Mumbai-400003. AADCB6702E 2009-10 Company 30/03/2014 REASON OF SELECTION The return of Income was filed on 31/08/2009 with E-filing Acknowledgement Number 855538303108....
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....operators providing accommodation entries from whom the assessee company nad Tax Of• Document 4 taken such entries and claimed the same as purchases expenses, the assessment was taken up for the first time by way of issue of notice u/s.148 on 31.03.2014 for the limited purpose of bringing to tax the income so escaped by way of bogus purchases. 1.3 On assessee's request, the copy of reasons recorded was provided to the assessee on 11.09.2014. 1.4 The company was incorporated on 14.01.2009. During the relevant previous year, i.e., F.Y.2008-09, the assessee company had introduced a sum of Rs.1,74,53,700/- as share premium. When the factum of share premium came to the notice of the Assessing Officer, it was sought to be verified u/s.133(6) as to the nature and justification thereof. As there was no response from the assessee, the Assessing Officer came to the prima facie satisfaction that there are reasons to believe that income to the extent of share premium received over and above the intrinsic value has escaped assessment. 2.1 As the issue was not examined in the proceedings concluded earlier u/s.147 and as there was neither....
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....ess_single_document File "C:\inetpub\vhosts\taxmanagementindia.com\httpdocs\python_image_text_project\google\google_doc_api.py", line 345 elif mime_type in ["image/gif"]: IndentationError: expected an indented block after 'if' statement on line 341 Document 7 3.2 be regarded as of a capital nature. Ex facie, the Assessing Officer had missed the fact that the assessee had clearly stated that the amount of Rs.29.23 lakhs was not in the nature of capital expenditure. In CIT V Batra Bhatta Company [220 CIT 531, the assessee-company had sold its agricultural land and claimed exemption under section 2(14) on the ground that the agricultural land sold by it was not a capital asset and, consequently, no capital gains accrued in its hands. Its, return was processed under section 14311][a]. Subsequently, the Assessing Officer reopened the assessment on the ground that the claim of assessee, that the land was agricultural in nature and, hence, not a capital asset, required much deeper scrutiny. These decisions were rendered on the specific facts of each one of them and hence cannot be applied in Toto to the assessee's case which is clearly ....
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....s reason to believe that income had escaped assessment and whether the Assessing Officer had tangible material before him for the formation of that belief. A reason to believe is what is relevant, not an established fact of the escapement of income. [Para 9]. The salient aspect of the case that merits emphasis is that the order of the assessment that was passed by the Assessing Officer under section 143(3) was completely silent in respect of each one of the five points on the basis of which the assessment is sought to be reopened. There is merit in the contention which has been urged on behalf of the revenue that no query had been raised during the course of the assessment and the assessment order would ex-facie disclose that the Assessing Officer had not applied his mind at all to any of the points on the basis of which the assessment is now sought to be reopened. That there exists tangible material for the Assessing Officer to reopen the assessment in the present case is evident from the record. All that is relevant is whether there is reason to believe on the part of the Assessing Officer that income had escaped assessment. Where t....
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....ed that he must have examined the claim/deduction or the entry, and therefore, it is the case of 'change of opinion. When at the first instance, in the original assessment proceedings, no opinion is formed principle of 'change of opinion' cannot and does not apply. There is a difference between change of opinion and failure or omission of the Assessing Officer to form an opinion on a subject matter, entry, claim, deduction. When the Assessing Officer fails to examine a subject matter, entry, claim or deduction, he forms no opinion. It is a case of no opinion. [Para 25] If a particular subject matter, item, deduction or claim is not examined by the Assessing Officer, it will nevertheless be a case of change of opinion and the reassessment proceedings will be barred. [Para 36"]" Thus, it is evident from the foregoing that the objections raised by the assessee on the issue of notice u/s.147 are not tenable in law and on facts. Further, as held in the case of Eleganza Jewellery P Ltd V CIT [Writ (L) 2763 of 2013 by the Hon'ble High Court of Mumbai vide its order dated 18.02.2014 SLP by assessee dismissed TS-176-SC-2014] that when the [ ....
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.... (S.Kumar) Income Tax Officer 8(2)(2), Mumbai कà¥à¤®à¤¾à¤° LUMAR 2) सई INCLUFICER 2) (MUMBAI Document 12 मनमेव जय No.ITO-6(3)(4)/2014-15 Office of the INCOME TAX OFFICER 6(3)(4), Room No.524, 5th Floor, Aayakar Bhavan, M. K. Road, Mumbai - 400 020. Ext.2524. Tel No.22075570 : Date 20.03.2015 Sub: Reopening proceedings for Assessment Year- 2009-10 - reg. 1 Name of the assessee 2 Address : M/s.Knowell Enterprises Pvt.Ltd. (Previously known as M/s.Balaji Infolink Pvt.Ltd.) : Room No.9, 2nd Floor, Tawawala Building, 99, Abdul Rehman Street, Mumbai 400 003. : Company AADCB6702E 3 Status 4 PAN : 5 Assessing Officer : ITO Ward-6(3) (4), Mumbai 6 Previous Year/ Accounting period : 01.04.2008-31.03.2009 7 Assessment Year : 2009-10 8 Nature of Business/ sources of income : 9 Method of accounting : Mercantile System 10 Dates of hearing : As per order 11 Date of order : अधिकारी-8 st7 12 Order passed u/s.147 ....
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....e on 31.03.2014. 2.3 The assessee company sought to raise objections against the issue of notice u/s. 148 dated 31.03.2014 vide its letter dated 11.09.2014. 3. The objections raised were duly considered and are disposed off as under: 3.1 First Contention of the assessee: "The copy of the reasons provided does not bear any signature or seal and hence such reasons cannot be regarded as valid reasons in the eyes of law." 3.1.1 Rejection with reasons: It was clearly mentioned in the letter in ref.No.DCIT-6(2) Reasons u/s.147/14-15 dated 08.08.2014 that a copy of reasons recorded is being provided which was a verbatim extract of the original duly signed by the Assessing officer. The objections are therefore not valid and untenable in law. 3.2. Second Contention of the assessee: "What is relevant is the reassessment of the escaped income and not review of already assessed Document 14Traceback (most recent call last): File "C:\inetpub\vhosts\taxmanagementindia.com\httpdocs\python_image_text_project\google\direct_extract_text.py", line 19, in from google_doc_api import process_single_document File "C:\inetpub\vhosts\taxmanageme....
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....e material and reason to believe that income has escaped assessment - Held, yes [Para 10]. At the stage when the Assessing Officer reopens an assessment, it is not necessary that the material before the Court should conclusively prove or establish that income has escaped assessment. A reason to believe at the stage of reopening is all that is relevant. (Para 7). To hold that the Assessing Officer must be deemed to have accepted what he has plainly overlooked or ignored in the assessment order would be to stretch the interpretation of section 147 to a point where the provision would cease to have meaning and content. Such an exercise of excision by judicial interpretation is impermissible. Document 17 3.3 When an assessment is sought to be reopened within a period of four years from the end of the relevant assessment year, the test to be applied is whether there is tangible material to do so. What is tangible is something which is not illusory, hypothetical or a matter of conjecture. Something which is tangible need not be something which is new. An Assessing Officer who has plainly ignored relevant material in arriving at an assessm....
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....e Assessing Officer proposes or wants to take a different view [Para 6] Document 18 3.4 Correct material facts can be ascertained from the assessment records also and it is not necessary that the same may come from a third person or source, i.e., from source other than the assessment records. It is not the requirement that the Assessing Officer should have finally ascertained escapement of income by recording conclusive findings. The final ascertainment takes place when the final or reassessment order is passed. It is enough if the Assessing Officer can show tentatively or prima facie on the basis of the reasons recorded and with reference to the documents available on record that income has escaped assessment. There cannot be deemed formation of opinion even when the particular subject matter, entry or claim/deduction is not examined. [Para 23] The Explanation stipulates that mere production of books of account and other documents, from which the Assessing Officer could have with due diligence inferred facts does not amount to full and true disclosure. The sequitor is that when the proviso does not apply, the re-assessment proceedi....