TaxTMI 
TaxTMI 
2019 (4) TMI 555
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..... Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition by observing that the identity, creditworthiness and genuineness of the transaction was established by the assessee without even considering the financial statements of the alleged share subscriber. 3. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in ignoring the fact that the alleged share subscriber M/s Pashupati Vinimay Pvt. Ltd. was neither having any substantial business turnover nor having any funds of its own for making huge investment in the share capital of the assessee company. 4. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition by concluding that the transactions have been done through Banking channels and there is no case of any cash deposition in the account of the immediate investors company. 5. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in ignoring the undisputed findings of fact that cash was deposited in the account Bearing No.909020042572 with Axis Bank Ltd. Burrabazar Branch ....
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.... bad in law, invalid, void ab initio and deserve to be quashed. 4. The Id. AO has issued notice u/s 148 on the basis of communication received from the DDIT (lnv.), Kolkata, purely for verification and for conducting enquiries etc. without there being any tangible material, on the basis of his suspicion and assumption. The notice issued on the basis of such communication without any independent enquiries having been conducted by the AO and without application of mind is bad in law and deserves to be quashed. 5. The Pr. CIT, Ajmer has accorded approval for issuing notice u/s 148 in a very routine, mechanical manner & without application of mind by simply putting her signatures below the rubber stamped 'Yes, satisfied'. Such mechanical approval does not fulfill the mandate of provisions of sec. 151 (1) of the Act. Notice issued u/s 148 on the basis of such approval is bad in law and deserves to be quashed." 2. The Id. CIT(A) was not justified in not upholding the ground of the appellant that interest under section 234B is chargeable on returned income and not on assessed income as held by the Hon'ble Jharkhand High Court in its decision dated 25.7.2012 in the case of Sh.....
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....ering of the funds through a web of transactions as stated in the assessment order is not a usual business practice and has been done with the sole intent of obfuscating the source. The appellant crave, leave or reserving the right to amend modify, alter add or forego any ground(s) of appeal at any time before or during the hearing of this appeal." (ii) On the facts and circumstances of the case, CIT(A) has erred in deleting the addition of Rs. 13,73,734/- made by the A.O. on account of difference in ITS data 26AS. (iii) The appellant craves liberty to raise additional ground and to modify/amend the ground of appeal at the time of hearing. Grounds of assessee's C.O. That the Id. CIT(A) was fully justified in deleting the addition on merit. However, the Id. CIT(A) has erred on facts and in law in dismissing the appeal of the appellant on the following legal grounds raised before him, treating them to be academic & infructuous. 1. (i) the Id. AO has grossly erred in law in completing the assessment u/s 148/143 (3) of the Act, without issuance and service of notice u/s 143(2) within the specified period as mentioned in proviso to sec. 143(2). ....
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....en orders, the reassessments were completed U/s 147 r.w.s. 143(3) on 18/12/2017 at Rs. 2,41,80,860/- and Rs. 7,50,91,190/- after making additions of Rs. 15.59 crores and Rs. 1.94 crores for the A.Y. 2010-11 and 2011-12 respectively on account of the share application money U/s 68 of the Act. 4. Before the ld. CIT(A) the assessee was aggrieved of on several counts such as, reopening of assessments on the basis of change of opinion, reopening of assessments without fulfilling the mandate of proviso to sec. 147, reopening of assessments with the approval for issuing notice u/s 148 in mechanical manner & without application of mind, completing the reopened assessments without issuance and service of notice u/s 143(2) within the specified period as mentioned in proviso to sec. 143(2),completing the reopened assessments without any independent enquiries and making additions Rs. 15.59 crores and Rs. 1.94 crores for the A.Y. 2010-11 & 2011-12 respectively on account of the share application money u/s 68 of the Act. 5. By the impugned order, the ld. CIT(A) has observed that facts in both the assessment years under consideration are same, accordingly all the grounds taken by the assess....
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.... that the genuineness of the share capital/share premium was thoroughly examined by the then AO who completed the original assessment u/s 143(3) on 21.12.2012 and then recorded a categorical finding during the original assessment proceeding for his satisfaction regarding identity, creditworthiness and genuineness of transaction of the two companies to whom the shares were allotted. The appellant also referred the original assessment proceedings in which incompliance of AO's directions, the assessee furnished all the details, confirmations, bank statements and other evidences etc. vide its replies dated 02/07/2012, 07/11/2012 and 29/11/2012 to prove the genuineness of the share capital /share premium subscriptions in the names of M/s. Gajanand Goods Pvt. Limited and M/s. Pasupati Vinimay Pvt. Limited (hereinafter referred as PVPL).The appellant referred all the submissions made by it during the original assessment and during the re-assessment proceeding in compliance of the direction of the AO the assessee again filed all the documentary evidences, confirmations etc. before the AO on 28.11.2017 and 08.12.2017. 4.3 It is the submission of the appellant before me that in spite of a....
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....ore, in the absence of any independent inquiry and any adverse findings to rebut the evidences kept on record by the Appellant, I find that the addition in respect of Share application & share premium from company namely, M/s M/s Pasupati Vinimay Pvt. Ltd. totaling to Rs. 14.64 crores (addition wrongly made by AO of Rs. 15.59crores) is unjustified; firstly, on the ground that no inquiries were made to rebut the evidences kept on record by the Appellant and secondly, on the ground that Appellant duly discharged its burden casted upon u/s 68 of the Act to explain nature and source of the transactions by proving the identity, creditworthiness of creditor and genuineness of the transaction. Notably, the transactions with the said three companies are duly verifiable from share application form & confirmation with supporting bank statements as mentioned in Para 4.2 above and transaction have been carried out through banking channels only and thus, appellant has duly proved the identity, creditworthiness and genuineness of the transactions. 4.7 The reliance of the AO on some observations raising some suspect in the report of DDIT (Inv.), Unit-1(3), Kolkata on 21/03/2017 for necessary v....
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....icient to prove beyond doubt that Appellant routed its unaccounted income by these companies rather it proves the source in the hands of the Appellant. It is usual business practice, while making loans/investment to party, funds are required to be arranged by the lender, therefore, reflection of such entries in bank statement doesn't lead to draw any adverse inference against the Appellant. Needless to say that Appellant is not required to prove source of the source u/s 68 of the Act in view of the settled judicial precedents. 4.11 It is settled judicial precedents that under the income tax law primary burden u/s 68 of the Act is on the Appellant and once this burden is discharged u/s 68 of the Act, no addition u/s 68 of the Act is justifiable in the hands of the Assessee in view of the judgments in case of Shree Barkha Synthetics Ltd. V/s Assistant Commissioner of Income-tax (2006) 155 TAXMAN 289 (RAJ.), COMMISSIONER OF INCOME-TAX, JAIPUR -II V. MORANI AUTOMOTIVES (P.) LTD. [2014] 264 CTR 86 (RAJASTHAN-HC), CIT v. Orissa Corpn. (P.) Ltd. [1986) 159 ITR 78/25 Taxman 80F (SC), Commissioner of Income-tax v/s Mark Hospitals (P.) Ltd. [2015] 373 ITR 115 (Madras)(MAG.), Commissioner ....
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....rst Point Finance Ltd.[2006] 286 ITR 477, iv. CIT Vs. Morani Automobiles Pvt. Ltd., [2014] 45 Taxmann.com 473 v. CIT Vs. Super Tech. Diamond Tools Pvt. Ltd., [2014] 44 Taxmann.com 460. vi. CIT v/s Bhaval Synthetics (P) Ltd,(2013) 217 Taxman 23(Raj) vii The ITAT, Jaipur in the case of Shalimar Buildcon Pvt. Ltd. Vs. ITO, [2011] 136 TTJ 701 decided similar issue as under: "Shareholder companies having admitted to have subscribed to the share capital of the assessee company and accounted for the source of funds in their books of accounts which is not shown to be incorrect or false, no case is made out for making addition under s. 68 in the absence of any evidence to show that the share capital represented accommodation entries ". 4.13 In view of the above discussion of relevant facts and following the several ratios on the subject from Hon'ble Apex Court, High Courts including jurisdictional High Courts, Tribunals including jurisdictional Tribunals, and in particular, under the fact non-rebuttal of host of evidence in favour of the appellant cited above, the additions made by the AO of Rs. 15.59 crores and Rs. 1.94 crores for the A.Y. 20....
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.... adopted. In view of the afore said judicial pronouncements the interest charged u/s 234 B on assessed income may kindly be directed to be reduced to nil, as the assessee has nil returned income." 5.2 This ground being consequential in nature, therefore, AO is directed to give effect to findings of this appellate order in computation of total income and allow credit of taxes paid by the Appellant and set off or carry forward of losses which are allowable to assessee after verification of the same from record. As regards charging of interest u/s 234A, 234B & 234C of Income Tax Act it is stated that as held in case of Anjum MH Ghaswala (2001) 119 Taxman 352 (Supreme Court) and in case of Hari Narayan Soni (322 ITR 444) by Jurisdictional High Court) interest chargeable u/s 234A, 234B & 234C of Income Tax Act is compensatory and mandatory in nature. The same is of consequential nature and therefore the AO is directed to recompute the interest u/s 234A, 234B & 234C of Income Tax Act after giving effect to this appellate order. Thus, the ground no. 7 in both these appeals is allowed to the extent indicated above. 8. Against the above said order of the ld. CIT(A), the reven....
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....n of the Hon'ble Supreme Court in the case of ACIT & Anr. Vs Hotel Blue Mood 321 ITR 362 and the decision of the Hon'ble Bombay High Court in the case of Sanjiv Goel Vs DCIT 2018, TIOL 1594 (Bom). Reliance was also placed on the various decisions of the Hon'ble Supreme Court, Hon'ble High Courts as well as Special Bench of the Tribunal in the case of Raj Kumar Chawla Vs ITO (2005) 94 ITD 1 (Delhi ITAT (SB). 10. As per the ld AR, even the proceeding U/s 147/148 of the Act was initiated after four years from the end of the relevant assessment year without fulfilling the mandate of proviso to Section 147 of the Act. Accordingly, notice U/s 148 of the Act was bad in law. 11. As per the ld AR, it is clear from the facts of the case that during the original assessment proceedings, the Assessing Officer has specifically required the assessee to furnish various details to establish genuineness and creditworthiness of the share applicants and in compliance to the same, the assessee has filed details through letter dated 02/7/2012, 07/11/2012 and 29/11/2012. Being fully satisfied with the details so filed and after examining the same, the Assessing Officer has accepted the ....
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....o substantiate that the share application money emanated from the coffers of the assessee and there being no evidence directly or indirectly with the Assessing Officer that the assessee has routed its undisclosed money in the guise of share capital. Relying on the decision of the Hon'ble Delhi High Court in the case of Value Capital Services (P) Ltd. 307 ITR 334 (Del) wherein it was held that there is additional burden on the department to show that even if share applicants did not have the means to make investment of the share applicants, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as undisclosed income of the assessee. Reliance was also placed on the decision of the NC Cables Limited (2017) 391 ITR 11 (Del) and the decision of the Hon'ble Madhya Pradesh High Court in the case of Pr.CIT Vs. Chain House International Pvt. Ltd. (2018) 408 ITR 561 (MP). The ld AR has further relied on the detailed findings recorded by the ld. CIT(A) so as to justify the identity, genuineness and creditworthiness of the share applicants. 16. On the other hand, the ld DR has argued that there was information with the Assessing Offic....
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.... M/s Pasupati Vinimay Pvt. Ltd., for verification the letters were issued to both concern the letters are returned by postal department with the remarks that Not Know (M/s Pasupati Vinimay Pvt. Ltd.), In sufficient address (M/s. Gajanand Goods Pvt. Ltd.,). Due to these reasons the genuineness of existence of both concern is doubtful,please furnish your explanation" In compliance, the assessee furnished all the details, confirmations, bank statements and other evidences etc. vide its replies dated 02-07-2012, 07-11-2012 and 29-11-2012 to prove the genuineness of the share capital /share premium subscriptions in the names of M/S.Gajanand Goods Pvt.Limited and M/S.Pasupati Vinimay Pvt. Limited (hereinafter referred as PVPL). The relevant excerpts from the above replies are reproduced as under: Reply Dated: - 02.07.2012 "Addition of Share Capital During the year under review assessee Company has made an addition of capital amounting to Rs. 178.40 Lacs by issuing 1784000 equity shares detail as to M/S GAJANAND GOODS PVT. LTD. Ltd. (PAN-AAECS0181P)-225000 Sahres and M/S PASUPATI VINIMAY PVT LTD.(PAN-AADCP5869J)-1559000 shares as below- S. No Date of allotment Allotte....
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....the above companies, stated & confirm the investment made to our company marked as annexure-D. Reply Dated : 29.11.2012 1. "Share Capital confirmations : - It has been brought to our knowledge that you are sending confirmation/query letters to M/s Gajanand Goods Pvt. Ltd and M/s Pasupati Vinimay Pvt. Ltd but those letters were returned as undelivered to your good office. We would like bring your kind attention that you good office is sending confirmation/query letters to M/s Gajanand Goods Pvt. at 32, ERS Street, 6th Floor, Kolkata (WB) which was the previous address of the company. The new address is 159, Ravindra sarni 5th Floor Kolkata (WB)-700007. The master data as per ROC department of the companies containing the correct registered office addresses is enclosed herewith for your kind reference marked as Annexure - A, your good office may again sending confirmation/query letter to correct address as stated above. Further the same case is in matter of M/s Pasupati Vinimay Pvt, the new & complete address is 692/1B, Patuli, Shibtolla, P.O. Abdalpur Madhyamgram, Kolkata (WB)-700153. The master data as per ROC department of the companies containing the correct regist....
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....g some verification carried out by him in connection with some bank deposits in A/c No. 9090200425725 of some party M/s Shiv Kali Trade(India), in Axis Bank Ltd., Burrabazar. This report sent by the DDIT vide his letter dated 10-03- 2017 received by the ACIT, Bhilwara on 21-03-2017. 20. The reasons so recorded for reopening of assessment reads as under: "The assessee has filed its return of income for AY 2010-11 on 11.10.2010 declaring total loss of Rs. 13,17,19,143/- and assessment u/s 143(3)completed on 21.12.2012 at total loss of Rs. 12,64,02,743/-. The assessee issued 1559000 shares to M/s Pasupati Vinimay Pvt. Ltd. and received a sum of Rs. 15,59,00,000/- during the year under consideration. Information available with the undersigned it is observed that in the bank account bearing No.909020042572 in Axis Bank Ltd., Burrabazar branch, Kolkata of M/s Shiv Kali Trade, cash has been deposited directly or through clearing which was transferred on the same day or the subsequent day to M/s S.K. Impex. Further verification of bank accounts of M/s S. K. Impex revealed that the fund debited to Accent Commerce and then from there to M/s Cuckoo Merchandise Private Limited, M/s Ca....
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....ot there has been a failure to disclose fully and truly all necessary facts for assessment (2). Assessee : That the issue of share capital was thoroughly examined by the AO in the original assessment proceedings u/s 143(3) and he recorded his categorical finding of satisfaction in para 4 of the assessment order. The present reopening is nothing but mere reappraised of the existing facts already on record, therefore, it is clearly a case of change of opinion, which is impermissible in law. Assessing Officer : The contention of the assessee that present reassessment proceedings are just another opinion is also not acceptable. In the present case the material on the basis of which the belief has been formed is a report from the Investigation Wing of the department. This is certainly fresh material and cannot be considered to be the same material which was available with the then AO at the time of original assessment proceedings. In a case where information obtained during the original assessment proceedings is subsequently discovered as false, the question of change of opinion does not arise. (3). Assessee : There is no tangible material for reopening and the reasons recorded....
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.... the transaction between M/s Pashupati Vinimay Pvt. Ltd. and M/s Kanchan India Limited cannot be held as genuine. Therefore, the fund received from Pashupati Vinimay in the guise of share/share premium amounting to Rs. 15,59,00,000/- during the year under consideration cannot be held as genuine transaction. The fund received amount to Rs. 15,59,00,000/- is therefore held as unexplained as per the provisions of section 68 of the I.T. Act. and added to the total income. Further, it is seen that M/s Pashupati Vinimay Pvt. Ltd. is not having business as such." 23. We also found that in this case notice u/s 148 for the A.Y. 2010-11 was issued by the AO i.e. ACIT Circle, Bhilwara on 29-03-2017. In compliance the assessee filed its return on 30-03-2017 vide acknowledgment No. 722689431300317. A letter was also sent to the AO on the same day intimating him that the return originally filed on 11-10- 2010 may be treated to have been filed in compliance to the notice u/s 148 dated 29-03-2017. 24. On the basis of the said return dated 30-03-2017 the AO issued notice u/s 143(2) & 142(1) on 14-11-2017 and proceeded to complete the assessment u/s 148/143 (3) of the Act on 18-12-2017. 25.....
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....etter date 04-09-2012 to furnish the following details to find out the genuineness of the share capital/share premium. "4. Furnish complete details of Share capital, Share application money, Cash creditors and squared up credit account holders if any, i.e. name and full address, total loan/capital taken, date and mode of deposits, received, sources of deposits by the creditors their, PAN No. and indicate ward, where they assessed to tax etc.. In this regard, please prove their identity, credit worthiness and genuineness of transaction with the help of documentary evidence i.e. copies of accounts, bank statements, copies of cash books, copies of balance sheet and return of income in respect of new creditors introduced in your books of account in the year under consideration. Furnish name, complete address and PAN in respect of old creditors." In compliance, the assessee furnished the following details/ documents etc. through its letters dated 02-07-2012, 07-11-2012 and 29-11-2012 as discussed earlier. (i) Confirmation with all details of cheque No., date & amount, of PVPL (ii) Copy of Bank statement of PVPL (iii) Copy of PAN Card of PVPL (iv) Copy of Income Tax Ret....
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....id because the Assessing officer having once formed an opinion in the course of the original assessment, although he did not record the reasons for the same, cannot be permitted to change his opinion through the reassessment proceedings. The case of the appellant is better placed than the above preposition as in its case the ld. AO has given a definite finding in Para 4 of his order. Reliance is placed in this regard on Full Bench decision in - CIT V. Usha International Limited: (2012) 348 ITR 485 (Delhi) (FB) wherein it was, inter alia, held as under: "Re-assessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the assessment order. In such situations it should be accepted that the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The re-assessment will be invalid because the Assessing Officer had formed an opinion in the original assessment, though he had not recorded his reasons." In a recent decision dated 24.04.2018 in the....
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....ssing Officer has power to re-open, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief." 12) Before interfering with the proposed re-opening of the assessment on the ground that the same is based only on a change in opinion, the court ought to verify whether the assessment earlier made has either expressly or by necessary implication expressed an opinion on a matter which is the basis of the alleged escapement of income that was taxable. If the assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to the assessing officer any opinion on the questions that are raised in the proposed re-assessment proceedings. Every attempt to bring to tax, income that has escaped assessment, cannot be absorbed by judicial intervention on an assumed change of opinion even in cases where the order of assessment does not address itself to a given aspect sought to be examined in the re-assessment proceedings. 13) The fact in controversy in this case is with regard to the deduction under Section 10A of the IT Act which was all....
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.... been completed U/s 143(3) of the Act, we found that the assessee had disclosed each and every fact regarding the share capital /share premium in its balance sheet & produced all documents during the course of original assessment proceedings including confirmations, bank statements, copies of ITRs, balance-sheet, share allotment letters, copies of Minute's Book etc. of PVPL as discussed earlier. In the case of the appellant notice u/s 148 has been issued for the A.Y. 2010-11 on 29-03-2017 i.e. after 4 years from the end of the relevant assessment year and as per proviso to sec. 147, in a case where assessment has been completed u/s 143 (3) no action shall be taken u/s 147 after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, for that assessment year. In the case of Duli Chand Singhania V. ACIT: 269 ITR 192 (P & H), the Hon'ble Punjab and Haryana High Court had noted that the sine qua non for assuming jurisdiction under section 147 of the I.T. Act, i....
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....estigation etc.. The AO has reopened the assessment completed u/s 143(3) and disturbed the finality of assessment without any independent application of mind. On perusal of the aforesaid letter dated 10-03-2018 of the DDIT (Inv) Kolkata, as reproduced in para 4. above, it can be seen that he has not made any allegation of escapement of income in the case of the appellant. He has also not given any specific co-relation of deposit of any cash in the account of M/s. Shiv Kali Trade (India) with the share application money given by PVPL to the assessee company. He has simply forwarded a report of investigation carried out by him regarding the bank deposit in the case of M/s Shiv Kali Trade (India). The last 2 paras of his said letter are again reproduced here as under, even at the cost of repetition- "From the ITD it has been found that both the entities Kanchan India limited and MSP Metallics are genuine companies having high turnover. The funds so received by the companies in the years 2009-10 and 2010-11 require further analysis, investigation and verification by the jurisdictional assessing officer Kanchan India limited [PAN: AABCK0452J] and MSP Metallics [PAN: AACA5907D] of at ....
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....honest and reasonable person based upon reasonable grounds. The expression used is not 'satisfied'. The 'reason to believe' requires higher level of evidence and material than the requirement of 'satisfaction' of the AO which essentially means the material which comes to the notice of AO must be a definite, specific and direct and not unspecific or vague. This issue was considered by the Hon'ble Supreme Court in the case of ITO v. Lakhmani Mewal Dass where the apex Court observed that "reason to believe" does not mean "reason to suspect". The reasons for the formation of the belief on templated under Section 147 necessary for reopening of an assessment must have a rational connection or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct, nexus or live link between the material coming to the notice of the ITO and the formation of his belief that there has been escapement of income of the assessee. The apex Court further observed that it was not every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to the escapement ....
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.... of purchase of property was not acceptable, and for which further investigation was necessary. As such, the Assessing Officer concluded that he had 'reason to believe' that income subject to tax had escaped assessment within the meaning of Section 147 of the Act. while forming such opinion, in the first paragraph the Assessing Officer has given details of the income of the assessee for the relevant assessment year, in which he had made a purchase of a residential house for Rs. 10 lacs. -- -- -- -- -- -- -- -- -- -- 12. Section 147/148 of the Act is not meant for reopening an already concluded assessment by first issuing notice and then proceeding to investigate and find out if there was any lacuna in the accounts. If such further investigation, by reopening a concluded assessment, is permitted, it would give rise to fishing and rowing enquiries, because, in every case, the Assessing Officer can then issue notice for the purpose of investigation, and thus reopen any concluded assessment 13. An assessment which has attained finality can be reopened only on cogent grounds when the Assessing Officer has, on the basis of some evidence, 'reason to bel....
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.... of the assessee to make a return under s. 139 for any assessment year to the ITO 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 alternatively notwithstanding that there has been no omission or failure as mentioned above on the part of the assessee, the ITO has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year. Unless the requirements of cl. (a) or cl. (b) of s. 147 are satisfied, the ITO has no jurisdiction to issue a notice under s. 148 of the Act. In the present case also it is apparent that the case of the AO is that investigation is required to be made in relation to the vague transactions referred to in the reasons recorded. In the case of CIT vs. Batra Bhatta Company (supra), the Delhi High Court held that the proceedings under s. 147 are not to be invoked at the mere whim and fancy of an AO and it has to be seen in every case as to whether the invocation is arbitrary or reasonable. In the facts of the said case, the Court held that merely because the AO felt that the....
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....e reasons recorded reflect that the AO feels that the matter requires detailed investigation and further verification. Thus, it appears that the AO has reason to suspect and not reason to believe that income chargeable to tax has escaped assessment. This, however, is not a valid ground for invoking the provisions of s. 147 of the Act. The reason to believe that income chargeable to tax has escaped assessment must be based upon material on record. In the facts of the present case, there is no such material. In the circumstances, in the absence of basic requirements of s. 147 of the Act being satisfied, the assumption of jurisdiction by the AO is invalid and as such, the impugned notice under s. 148 of the Act cannot be sustained." (vi) Pr. CIT V/s Manzil Dinesh Kumar Shah in ITA No 451 of 2018 with R/Tax Appeal No 457 of 2018 with R/Tax Appeal No 458 of 2018. (Gujarat High Court) "8. With this background, we may revert to the reasons recorded by the Assessing Officer. Information from the Value Added Tax Department of Mumbai was placed for his consideration. This information contained list of allegedly bogus purchases made by various beneficiaries from Hawala dealers. Assessee....
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....y Laboratories Ltd. vs. CIT reported in 336 ITR 136 (Del); (iii) Vipan Khanna vs. ITA Nos.3400 & 3401/Del/2013 CIT reported in 255 ITR 220 (P&H) and (iv) Travancore Cements Ltd. vs. ACIT reported in 305 ITR 170 (Kerla), he submitted that the provisions of section 147 cannot be resorted to only to verify or to make further enquiry. 7. Referring to the decision of Hon'ble Bombay High Court in the case of Nivi Trading Ltd. vs. Union of India reported in 375 ITR 308, he submitted that the Hon'ble High Court in the said decision has held that where the assessee had shown gift of shares to a company, merely because assessee had been called upon by Assessing Officer for verification of value of shares in terms of section 47(iii), it would not enable revenue to resort to section 147 of the I.T. Act. 8. Referring to the decision of Hon'ble Gujarat High Court in the case of Krupesh Ghanshyambhai Thakkar vs. DCIT reported in 77 taxmann.com 293, he submitted that the Hon'ble High Court in the said decision has held that where assessee explained that amounts transferred many times among group concerns were required for banking purposes and capital investment in shares were....
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....rew the attention of the Bench to the following paragraph :- "18. The Hon'ble Supreme Court thus held that section 147 authorises and permits the Assessing Officer to assess or reassess the income chargeable to tax, if he has ITA Nos.3400 & 3401/Del/2013 reason to believe that income chargeable to tax 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. Thus, at that stage, what is required is "reason to believe", but not the established fact of escapement of income. At the stage of issuance of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. The substantive satisfaction in that case of the Assessing Officer was therefore ....
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....assessment for AY 2009-2010 is sought to be reopened in exercise of power under Section 147 of the I.T Act. The reasons recorded to reopen the assessment are already produced hereinabove. Thus, as per the reasons recorded, the notice has been issued and assessment is sought to be reopened for deep verification of the claims. Even in the order disposing of the objections, it has been specifically stated that to verify whether all the criteria are met by the said transaction of Rs. 50 lakhs routed through the group and also to verify the claim of having recorded these transactions in the regular books of account, notice under Section 148 has been issued. Even with respect to investment in shares of M/s. Rushil Decor, it has been submitted that whether the investment in shares of M/s. Rushil Decor were acquired from the capital of the assessee and the same is duly recorded in the books of account, needs to be verified and for that purpose, the assessment for A.Y 2009-2010 is sought to be reopened. 12. In case of Inductotherm [India] P. Limited v. M. Gopalan, Deputy Commissioner of Income-Tax [Supra], Division Bench of this Court has observed that for a mere verification of the clai....
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....urposes of making verification in absence of any valuable material available with the Assessing Officer to show that the income has escaped assessment. In view of the above discussion, we hold that the reassessment proceedings initiated by the Assessing Officer and upheld by the CIT(A) are not justified. Since the assessee succeeds on this preliminary issue, the various grounds on merit are not being adjudicated being academic in nature. The appeal filed by the assessee is accordingly allowed."(Emphasis supplied) In the following cases it has been held that the information received from the Investigation Wing cannot be said to be tangible material per se without a further enquiry being under taken by the AO and without independent application of mind by him. (i) Pr. CIT, Vs Meenakshi Overseas Pvt. Ltd. ITA 692/2016/ (Delhi High Court) 26. The first part of Section 147 (1) of the Act requires the AO to have "reasons to believe" that any income chargeable to tax has escaped assessment. It is thus formation of reason to believe that is subject matter of examination. The AO being a quasi judicial authority is expected to arrive at a subjective satisfaction independently on an ....
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....g in the case of the assessee has been made after four years from the end of the relevant assessment year. Proviso to section 147 is clearly applicable in this case. There is no whisper of applicability of such proviso in the reasons recorded by the AO and approved by the ld. Pr. CIT, Ajmer. If she had read over the reasons and applied her mind she must not have accorded the permission under such circumstances in absence of any cogent material at all. The approval granted by her is clearly without application of mind and is not as per the mandate of the provision of section 151 of the I.T. Act, 1961. The notice issued u/s 148 on the basis of such approval and consequent assessment made on the basis of such notice are bad in law and deserve to be quashed. (i) Further more reliance is placed on judgement of the Hon'ble Supreme Court in the case of M/s Chuggamal Rajpal Vs. SP Chaliha [1971 79 ITR 603 (SC) where the Hon'ble Supreme Court has held as under: - "Reopening of assessment cannot be based on vague reasons and duty is cast upon the officer exercising jurisdiction under s. 151(2) of the Act to satisfy himself with the reasons and should not merely affix his signatur....
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.... apply his mind and form an opinion. The mere appending of the expression 'approved' says nothing. It is not as if the CIT (A) has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. In the present case, the exercise appears to have been ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer. For these reasons, the Court is satisfied that the findings by the ITAT cannot be disturbed. 12. The substantial questions of law framed are answered in favour of the assessee and against the Revenue. The appeal is dismissed." (iv). The Hon'ble ITAT, Delhi in its decision dated 24.10.2017 in ITA No. 450/Del./2014 in the case of Metro Decorative (P) Ltd. v. ITO after considering the decision of Hon'ble Supreme Court & Madhya Pradesh High Court in CIT v. M/s Goyanka Lime and Chemicals Ltd. and considering other decisions on the subject held as under:- "6.We have carefully gone through the record, the documents and decisions relied upon by either side. In so ....
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....en considered by a Coordinate Bench of this Court and the following principles are laid down" - "The Commissioner acted, of course, mechanically in order to discharge his statutory obligation properly in the matter of recording sanction as he merely wrote on the format "Yes, I am satisfied" which indicates as if he was to sign only on the dotted line. Even otherwise also, the exercise is shown to have been performed in less than 24 hours of time which also goes to indicate that the Commissioner did not apply his mind at all while granting sanction. The satisfaction has to be with objectivity on objective material." 11. This decision of the Madhya Pradesh High Court was challenged by the Revenue before the Hon'ble Supreme Court by way of the Special Leave Petition and the Hon'ble Supreme Court was pleased to dismiss the Special Leave Petition vide order reported in (2015) 64 taxmann.com 313 (SC). 12. In the circumstances surrounding this case, in view of the decisions referred to above, we are of the considered opinion that the decisions reported in Sarthak Securities Pvt. Ltd. (supra), Signature Hotels (supra), Kamdhenu Steels & Alloys Ltd. (2012) 19 Taxma....
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.... had clearly mentioned in his aforesaid letter that the nature and exact purpose of transactions of the said assessee M/s Shiv Kali Trade (India) could not be verified. During the course of reassessment proceeding the AO again asked the assessee to prove the genuineness of the share capital and the assessee again filed all the documentary evidences, confirmations etc. before the AO on 28.11.2017 and 08.12.2017. Yet, the Assessing Officer has made addition of Rs. 15,59,00,000/-, without undertaking any further inquiry, investigation etc. and without bringing anything new on record. It is also interesting to note that against the name of the assessee transactions of Rs. 14.64 crores have been mentioned in the aforesaid letter of the DDIT (Inv) but the ld. AO has added the total amount of Rs, 15,59,00,000/- for which the shares were allotted by the assessee company to PVPL, without any basis or discussion what so ever. From the above facts it has clearly been proved that the ld. AO has made addition purely on the basis of his suspicion without any evidence or basis at all which deserves to be deleted. The Hon'ble Supreme Court in the Case of CIT v/s Lovely Exports (P) Ltd., (2008) 216....
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....as undisclosed income of the assessee." 33. The detailed finding so recorded by the ld. CIT(A) while deleting the addition has not been controverted by the revenue by bringing any positive material on record. Accordingly, we do not find any reason to interfere in the finding so recorded by the ld. CIT(A). 34. In the result, the appeal of the revenue is dismissed whereas the C.O. filed by the assessee is allowed in terms indicated hereinabove. 35. Now we take the appeal of the revenue and the C.O. of the assessee for the A.Y. 2011-12. From the record we found that the assessee company filed its original return of income for the assessment year 2011-12 on 03-09-2011 showing loss of Rs. 9,66,21,653/-. The case was selected for scrutiny. The assessee filed copies of Balance-sheet, Manufacturing, Profit & Loss account etc. alongwith tax audit report u/s 44 AB in form No. 3CA & 3CD dated 21.07.2011, during the course of assessment proceedings. Notice u/s 143 (2) was issued on 03.08.2012. Notice u/s 142 (1) & query letter was issued by the AO on 22.04.2013 calling for details on various points. Sh. Sandeep Baldi CA attended before the AO from time to time and filed the requisi....
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....and Balance Sheet, which reveals the sources & creditworthiness marked as Annexure-B. Addition of Share Capital During the year under review, assessee company has made an addition of capital amounting to Rs. 92.90 Lacs by issuing 9,29,000 equity shares to M/s Sunflower Merchants Pvt. Ltd. (PAN-AALCS2570D)-7,35,000 Shares and M/S Pasupati Vinimay Pvt Ltd.(PAN-AADCP5869J)-1,94,000 shares as below- S. No Date of allotment Allotte's Name Amount of Shares allotted 1. 18.12.2010 M/s Pasupati Vinimay Pvt. Ltd. M/s Sunflower Merchants Pvt. Ltd. 194000 575000 2. 28.03.2011 M/s Sunflower Merchants Pvt. Ltd. 160000 Total 929000 We are enclosing herewith the Form -2 of the respective allotments evidencing them as well as all the details as filed with the Registrar of Companies, Jaipur in this regard. Further we are also enclosing herewith the Copy of Balance Sheet, acknowledgement of Income Tax return of M/s Sunflower Merchants Pvt. Ltd. as well as M/s Pasupati Vinimay Pvt. Ltd., which reveals the sources & creditworthiness marked as Annexure-C" Being fully satisfied with the reply of the assessee, the ld. AO complete....
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.... having any substantial business turnover and this fund was routed without economic rationale. After considering the whole scenario I have prima facie belief that Assessee Company received accommodation entry in the form of share application money. I therefore, have reason to believe that the income to the extent of Rs. 1,94,00,000/- has escaped assessment within the meaning of section 147 of the Act and this is a fit case for re-opening of assessment and issuing notice u/s 148 of the Act." 38. All the arguments with regard to validity of reopening and the justification for addition deleted by the ld. CIT(A), both by the ld AR and the ld DR are same as discussed above in the A.Y. 2010-11. Following the reasoning given hereinabove for the A.Y. 2010-11, the appeal filed by the revenue is dismissed whereas the C.O. of the assessee are allowed in part in terms indicated hereinabove. 39. In the result, both the appeals of the Revenue are dismissed whereas both C.Os of the assessee are allowed in terms indicated hereinabove. Order pronounced in the open court on 01st April, 2019. ============= Document 1 In this regard, it is submitted that this office received an inform....