TaxTMI 
TaxTMI 
2016 (1) TMI 1416
X X X X Extracts X X X X
X X X X Extracts X X X X
....e decision of Hon'ble Delhi High Court in the case of CIT vs. Nova Promoters and Finlease Pvt. Ltd. in ITA No. 342/2011. 4. The appellant craves leave to add, alter or amend any ground of appeal raised above at the time of hearing. 2. The brief facts of the case are that the assessee has filed its return on 28.10.2003 declaring a loss of Rs. 49,953/- and return was processed u/s. 143(1) of the I.T. Act. Thereafter, information was received from Director of Investigation, New Delhi that assessee has received accommodation entries of Rs. 46,50,000/- from various parties. The AO reopened the case of the Assessee u/s. 147 of the I.T. Act after taking prior approval of the Addl. CIT vide his letter dated 16.3.2010 by issuing a notice u/s. 148 of the I.T. Act on 17.3.2010. In response to said notice assessee vide its letter dated 11.6.2010 submitted that return filed u/s. 139 of the I.T. Act may be treated as filed in response u/s. 148 of the I.T. Act. In the assessment order the AO treated the said share application money as accommodation entry and the amount of Rs. 46,50,000/- was treated as unexplained income of the assessee and the same was added u/s. 68 of the I.T. Act vide or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nds decided against the assessee. He stated that Ld. CIT(A) has decided the legal issue against the assessee and deleted the addition made by the AO. But assessee has not filed the Appeal or Cross Objection against the impugned order passed by the Ld. CIT(A), but now assessee is invoking Rule 27 of the ITAT Rules, 1963 and raising the legal issue by challenging the action of the AO for issuing the notice u/s. 148 of the I.T. Act. In support of his contention relating to invoking of Rule 27 is concerned, he referred the decision of ITAT, Delhi Benches I:2, New Delhi passed in ITA No. 1313/Del/2015 (AY 2011-12) on 2.12.2015 in the case of SIS Live vs. ACIT wherein, the similar issue was dealt with and request of the Department of invoking the Rule 27 was accepted. As regards the legal issue relating to reopening is concerned, he stated that this issue is also squarely covered by the various decisions of the Hon'ble Jurisdictional High Court which includes Pr. CIT vs. G&G Pharma India Ltd. in ITA No. 545/2015 dated 8.102.2015 and Signatures Hotels (P) Ltd. vs. ITO & Anr. 338 ITR 51 (Del.). Ld. Counsel of the Assessee also filed the Written Submissions to support his argument on the is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s satisfied. 7.2 The next element is the scope of interference by the respondent. This is contained in the later part of the rule, which provides that the respondent `may support the order appealed against on any of the grounds decided against him'. A cursory reading of this part divulges that the respondent can support the impugned order on any of the grounds which were decided against him. It can be understood with the help of a simple example in which the AO initiates reassessment and makes an addition by disallowing some expenses. The assessee challenges the assessment order before the CIT(A) on both the counts, that is, the initiation of reassessment and also the addition made by AO. The CIT(A) upholds the initiation of reassessment but deleted the addition on merits. In an appeal by the Revenue before the tribunal against the deletion of addition. The assessee under Rule 27 argued that the initiation of reassessment may be declared as invalid. This is a situation in which the assessee is supporting the impugned order (that are, the deletion of additions made by AO) under rule 27 on the ground decided against it (that is, upholding of the initiation of reassessment). Crux o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l which established assessee is beneficiary of accommodation entries, which all are sufficient to nullify the extant reopening action. Even there is no annexure/enclosure to reasons to corroborate the same. No reference and details of investigation wing information is available. There is no live nexus / rational connection between Investigation Wing information and belief that assessee's certain income has escaped assessment. Mere banking transactions will not justify reopening action to suspect the transactions. In order to support his contention, he referred the following case laws:- - Hon'ble Delhi High Court Order dated 8.10.2015 passed in ITA No. 545/2015 in the case of Pr. CIT vs. G&G Pharma India Ltd., upholding the decision of the ITAT in assessee's favour in assessee's case in ITA No. 3149/Del/2013 (AY 2003-04) dt. 9.1.2015. - Hon'ble Delhi High Court decision dated 4.8.2015 in the case of Govind Kripa Builders Pvt. Ltd. in ITA No. 486/2015 - ITAT 'G' Delhi Bench decision dated 10.9.2015 in ITA No. 3475/Del/2009 (AY 2001-02) ITO vs. M/s Shakti Securities Pvt. Ltd. & 3129/Del/2010 (AY 2002-03) M/s Shakti Securities Pvt. Ltd. vs. ITO has allowed th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... him from the Directorate of Income Tax (Investigation), New Delhi. Keeping in view of the facts and circumstances of the present case and the law applicable in the case of the assessee, we are of the considered view that the reopening in the case of the assessee for the Asstt. Year in dispute is bad in law and deserves to be quashed. Our view is supported by the following judgments/decisions:- (a) Pr. CIT vs. G&G Pharma India Ltd. in ITA No. 545/2015 dated 8.10.2015 of the Delhi High Court wherein the Hon'ble Court has adjudicated the issue as under:- "12. In the present case, after setting out four entries, stated to have been received by the Assessee on a single date i.e. 10th February 2003, from four entities which were termed as accommodation entries, which information was given to him by the Directorate of Investigation, the AO stated: "I have also perused various materials and report from Investigation Wing and on that basis it is evident that the assessee company has introduced its own unaccounted money in its bank account by way of above accommodation entries." The above conclusion is unhelpful in understanding whether the AO applied his mind to the mater....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct, 1961 and was not selected for scrutiny. Subsequently, the Assessing Officer issued notice u/s.148 which was objected by the assessee. The Assessing Officer rejected the objections. The assessee company filed writ petition and challenged the notice and the order on objections. The Delhi High Court allowed the writ petition and held as under: "(i) Section 147 of the Income-tax Act, 1961, is wide but not plenary. The Assessing Officer must have 'reason to believe' that income chargeable to tax has escaped assessment. This is mandatory and the 'reason to believe' are required to be recorded in writing by the Assessing Officer. (ii) A notice u/s.148 can be quashed if the 'belief' is not bona fide, or one based on vague, irrelevant and non-specific information. The basis of the belief should be discernible from the material on record, which was available with the Assessing Officer, when he recorded the reasons. There should be a link between the reasons and the evidence/material available with the Assessing Officer. (iii) The reassessment proceedings were initiated on the basis of information received from the Director of Income-tax (Investigation)....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....03 SBH 50042 KR Fincap P Ltd. 400000 7.2.03 SBP 50072 Technoco M Associates Pvt Ltd. 400000 7.2.03 SBP 50060 Jar Metails Industries P Ltd. 500000 5.3.02 PNB 2538 Labh- tronics Overseas P Ltd. 250000 19.3.02 Ratnakar 54 MK Dal Milling P Ltd. 500000 31.3.03 SBP 7384 Rizzer Exim P Ltd. 500000 31.3.03 SBP 7385 VR Traders P Ltd. 500000 25.3.03 SBP 7379 Shilpa Holdings Ltd. 1000000 27.3.03 UCO Bank 10015 The AO has made an addition of the said Share capital in the hands of the appellant company based on the information received and on the basis of statements made by the promoters or Directors of such companies before the Investigation Wing of the Department. The Assessing Officer issued summons on 16.12.2010 uls 131 of the IT Act to the parties who had given share application money to the appellant on the addresses given in the conformations of share applications for personal deposition. However none of the share applicants attended before the Assessing Officer. Vide order sheet entry dated 24.12.2010 the AR of the appellant company was asked to produce share applicants ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... received from above mentioned companies by the appellant, through a/c payee cheques and the said companies are duly registered with ROC and same were active as per the website of the Ministry of Corporate Affairs. It has also submitted by the appellant that the said companies are having PAN number and are regularly filing their return of income. With regard to the various evidences submitted by the appellant, during the course of assessment proceedings, AO disregarded the said evidences and has emphasized that identity and creditworthiness were not proved and held that the amount of Rs. 46,50,000/- received as share application money from the above mentioned investor companies cannot be treated as genuine and are only accommodation entries. The AO in his Assessment Order has not brought any material on records to show that confirmation filed by the directors of the said investor companies were not genuine. It is also seen that no enquiry was conducted to examine the contents of the confirmations filed by the investor companies. During the course of appellate proceedings, the appellant took specific objection with regard to the findings of the AO and stated that t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en controverted nor disproved by the Assessing Officer, then no interference is called for." The appellant has cited various other case laws also in its submissions wherein it has been held that the Share Capital issued cannot be treated- as undisclosed income of the appellant and cannot be added u/s 68 of the Income Tax Act. The facts of the cases cited by the appellant are identical with that of the instant case. Further, the reliance is also placed on following decisions of Apex Court:- 1 CIT Vs. Orissa Corporation 159 ITR 78 9SC); ` 2 Divine Leasing and Finance Ltd. 299 ITR 268. The appellant in its submission has also relied upon the latest judgment of the Apex Court in the case of CIT Vs. Lovely Export 299 ITR 268 (SC) which has confirmed the order of the Delhi High Court. It has been held by the Hon'ble Court that once the identify of the share holders have been established, even if there is a case of bogus share capital, it cannot be added in the hands of the company unless any adverse evidence is not on record. In the instant case, the appellant has provided evidence in the form of PAN, ROC details, copies of IT return filed and copi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ay kindly be held so. The Hon 'ble Delhi High Court in the case of Kamdhenu Steel '& Alloys Ltd. ITA No. 972/2009 has again retreated the same position and held that once identity is proved the share capital cannot be added in the hands of the recipient company. In view of the factual position as well as the judicial pronouncement on the subject, discussed above, I am of the considered view that the appellant has discharged the initial onus of establishing the bona-fides of the transactions and the AO was not justified in ignoring various evidences provided to him by the appellant. Nothing adverse has been brought on record by the AO to establish that the amount of share application money of Rs. 46,50,000/- received by the appellant from the said parties represents its own undisclosed income. If there was doubt about the source of investment of the said companies, then additions should have been made in the cases of investor companies and not in the hands of the appellant company. The appellant has relied upon the decision of Hon'ble Supreme Court in CIT Vs DIVINE LEASING & FINANCE LTD. (CC 375/2008) dated 2110112008 wherein it was held- ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....transaction regarding Share Application Money received by' the assessee were genuine transactions and the same were not accommodation entries. We also do not find any evidence collected by the A.O. which could prove otherwise. Accordingly, the AO was not justified in treating the amount of share application money received by the assessee as its undisclosed income. Therefore, Ld. CIT(A) has rightly deleted the addition of Rs. 46,50,000/- made by the AO u/s. 68 of the I.T. Act, 1961 and has passed a well reasoned order on the issue in dispute. 16. In the result, the Appeal filed by the Revenue stand dismissed. Order pronounced in the Open Court on 08/01/2016. ============= Document 1 Beneficiary's Beneficiary's Value of Instrument Date on Name of Bank Branch A/c no. bank name bank Branch entry no. by which account from of entry taken which entry holder of which entry giving entry taken entry entry giving account taken giving given bank account Karur Vysya Karol Bagh 600000 8488 27.3.03 Dignity SBH Karol 50042 Bank New Delhi Finvest (P) ....