TaxTMI 
TaxTMI 
2019 (6) TMI 1296
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....d 31.07.2014 is erroneous and prejudice to the interest of Revenue and passing the order U/s 263 of the Income Tax Act, 1961 without any cogent ground. 2. On the facts and in the circumstances of the case as well as in the law the Ld. Pr. Commissioner of Income Tax grossly erred in alleging that the Ld. Assessing Officer has completed the reassessment without examining the details and incriminating documents. 3. On the facts and in the circumstances of the case as well as in the law the Ld. Pr. Commissioner of Income Tax grossly erred in exceeding the inquiry beyond the show cause notice issued U/s 263 of the Act without providing adequate opportunity. 4. On the facts and in the circumstances of the case as well as in the law the Ld. Pr. Commissioner of Income Tax grossly erred in:- i. Setting aside the original assessment order passed by the Ld. Assessing Officer and claiming it is erroneous and prejudice to interest of the Revenue, ii. Alleging that the Ld. Assessing Officer did not examined the details and other materials viz. hard copy of appraisal report of Shri S.K. Jain group forwarded by jurisdictional Commissioner, Delhi-III dat....
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....s of cheques issued by such concerns seized from the premises of Sri SK Jain during search. He further noted that the investigation wing, Delhi forwarded the hard copy of the appraisal report to the then jurisdictional Commissioner, Delhi as per the letter dated 12/3/2013 which was received by him on 15/3/2013 along with the relevant seized material containing thousands of pages. However at the time of completion of the assessment u/s 147 of the income tax act by the learned assessing officer, referred the appraisal report but did not look into the relevant seized material in soft copy furnished to him. And therefore consequent to that a show cause notice u/s 263 of the income tax act was issued on 25/1/2017. In the show cause notice, the learned principal Commissioner of income tax has noted that AO has failed to consider the seized material in the case of Sri SK Jain group of cases wherein in annexure A - 101 page number 13 dated 9/5/2008, there were certain entries relating to the transactions. After noting the various transactions from the seized paper, learned principal Commissioner of income tax stated that from the above information, it is clear that the amount of INR 75,00,....
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....ecision of the honourable jurisdictional High Court in case of paramount communications Ltd dated 14/2/2017 in ITA number 725, 726 and 727 of 2016 where validity of proceedings under section 148 on the basis of the report of the investigating agencies were upheld. He further held that the reassessment order was passed without making proper verification and inquiries, and is therefore, deemed to be erroneous insofar as it is prejudicial to the interest of the revenue and hence can be revised u/s 263 of the income tax act as per the amended provisions of section 263 with effect from 1/6/2015. Accordingly he held that the order passed by the learned assessing officer is erroneous and prejudicial to the interest of the revenue and therefore directed the learned assessing officer to look into the seized material and confront the same to the assessee. He further directed that the assessing officer would also examine the reasons for transferring shares later on at nominal rates to the directors or the relatives of the concerns in which the assessee company is interested and pass a speaking order after affording an opportunity of being heard to the assessee. Accordingly, the order u/s 263 ....
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....43 (2) of the income tax act on 7/7/2014 and therefore the contention of the assessee that no notice has been issued under section 143 (2) of the income tax act is devoid of any merit. Further on reading the assessment order at para number 2 of the learned assessing officer has categorically mentioned that statutory notices have been issued under section 143 (2) and 142 (1) of the income tax act. Further in the present case in response to notice u/s 148 of the income tax act dated 18/3/2014, assessee has submitted as per letter dated 23/5/2014 that the return of income filed under section 139 of the income tax act may be treated to have been filed in response to notice u/s 148 of the income tax act 1961. After receipt of the above letter on 7/7/2014, learned assessing officer has shown issue of notice u/s 143 (2) of the income tax act which is also corroborated by the copies of the order sheet. In view of this, we dismiss the additional ground raised by the assessee. 16. Coming to the merits of the issue whether the order passed by the learned assessing officer is erroneous and prejudicial to the interest of the revenue or not, learned authorised representative vehemently ....
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....n law and its erroneous and prejudicial to the interest of the revenue. 18. Both the parties referred to the plethora of the judicial precedents supporting their own views and arguments. 19. We have carefully considered the rival contention and perused the orders of the lower authorities. Identical issue has been decided by the coordinate bench in ITA number 6905/del/2017 for assessment year 2007 - 08 along with 4 other assessees having similar facts , where in the order passed by the learned principal Commissioner of income tax u/s 263 of the income tax act was upheld. The case of the assessee is also falling into the similar factual matrix including the name of the accommodation entry provider and the similar seized material. The coordinate bench vide para number 10 and 11 has considered the two decisions of the coordinate benches for upholding the order passed by the Commissioner of income tax u/s 263 of the income tax act. Further in para number 12 , coordinate bench also considered the decision of the honourable Supreme Court in case of Daniel merchant's private limited vs ITO dated 29/11/2017 where the special leave petition against the decision of the honourable Calcut....
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....s gold, precious stones, art works, etc. and reselling the same through cheques or bank transfers, etc. 2. Layering This involves formation of complex layers of financial transactions which distance the illicit proceeds from their source and disguise the audit trail. In this process a series of conversions or transactions are involved for moving the funds to places such as offshore financial centres operating in a liberal regulatory regime. Often 'front' com panies are formed to accomplish this task. These companies obscure the real owners of the money through the bank secrecy laws and attorney-client privilege. The techniques used for the purpose are to lend the proceeds back to the owner as loans, gifts and, etc., under invoicing the items exported to the real owner or, etc. In some cases, the transfers may be disguised as payments for goods or services, thus giving them a legitimate appearance. 3. Integration This involves investment in the legitimate economy so that the money gets the colour of legitimacy. This is achieved by techniques such as lending the money through 'front' companies, etc. The money may be invested in real....
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.... date of allotment, number of allotment, number of shares allotted, share ledger folio, allotment register folio, application number, have all been kept blank. These particulars, Mr. Poddar, submitted should have been filled up by the assessee, but that has not been done. (d) Another significant fact admitted by the assessee in reply to the notice to show cause under section 263 is that the "shares were offered to, and subscribed by the closely held companies owned by the promoters/ directors or their close relatives and friends". (e) From the bank statements disclosed it appears that to have the cheques issued in favour of the assessee honoured, matching amounts were credited to the accounts of the subscribers shortly before the cheques issued in favour of the assessee were presented for collection. (f) 19 applicants of shares within a period of less than six months had money contributed to their share capital which in their turn they con tributed to the share capital of the assessee. So that, the 19 companies which contributed to the share capital of the assessee in the name of assets were left merely with the share-scrips of the assessee. The other lot....
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....s of this case. The question as to whether there has been a device adopted for money laundering also did not crop up for consideration in that case. The Prevention of Money Laundering Act, 2002 was not also there on the statute at that point of time. Before the appeal in Steller Investment Ltd. was dismissed by the apex court, the question had cropped up in the case of CIT v. Sophia Finance Ltd. reported in [1994] 205 ITR 98 (Delhi) [FB] wherein a special bench held as follows (page 104) : "As we read section 68 it appears that whenever a sum is found credited in the books of account of the assessee then, irrespective of the colour or the nature of the sum received which is sought to be given by the assessee, the Income-tax Officer has the jurisdiction to enquire from the assessee the nature and source of the said amount. When an explanation in regard thereto is given by the assessee, then it is for the Income-tax Officer to be satisfied whether the said expla nation is correct or not. It is in this regard that enquiries are usually made in order to find out as to whether, firstly, the persons from whom money is alleged to have been received actually existed or no....
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....e cases under consideration are mutatis mutandis similar to those decided earlier, except for certain issues which we will advert to a lit tle later. In our aforesaid order in Subhlakshmi Vanijya P. Ltd. v. CIT (I. T. A. No. 1104/Kol/2014), dated July 30, 2015 [2015] 43 ITR (Trib) 48 (Kol), we have drawn the following conclusions . . . : It is noticed that all or some of the above conclusions are appli cable to the appeals in this batch." The appellant has disclosed a copy of the judgment delivered by the learned Tribunal in Subhlakshmi Vanijya P. Ltd. v. CIT. The learned Tri bunal in paragraph 17.i opined as follows (page 87 of 43 ITR (Trib)) : "All the cases under consideration have the same common feature of passing assessment orders in undue haste. When we consider the above factual matrix, there can be no escape from an axiomatic con clusion that in all these cases the enquiry conducted by the Assessing Officers is exceedingly inadequate and hence fall in the category of 'no enquiry' conducted by the Assessing Officer, what to talk of char actering it as an 'inadequate enquiry'. In our considered opinion, the highly inadequate enquiry....
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.... prejudicial to the interests of the Revenue. It is not, as submitted by the learned advocate, pre judicial to the interests of the Revenue only if it is found that the assessment for the year was disclosed on the basis that an income had been earned which is assessable. Even where an income has not been earned and is not assessable, merely because the assessee wants it to be assessed in his or her hands in order to assist someone else who would have been assessed to a larger amount, an assessment so made can certainly be erroneous and prejudicial to the interests of the Revenue. If so-and we think it is so-the Commissioner under sec tion 33B has ample jurisdiction to cancel the assessment and may ini tiate proceedings for assessment under the provisions of the Act against some other assessee who according to the Income-tax autho rities is liable for the income thereof." The reasoning advanced by their Lordships in respect of an alleged revenue receipt is, according to us, equally applicable to an alleged capital receipt which, in fact, was received only in papers. The attempt of the assessee, it was apprehended in the case of Tara Devi (supra) was to assist someo....
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....was not undertaken, as in this case, the order is erroneous and prejudicial too and, therefore, revisable. Investigation should always be faithful and fruitful. Unless all fruitful areas of enquiry are pursued the enquiry cannot be said to have been faithfully conducted. In a dif ferent context the apex court observed 'contra veritatem lex nunquam aliquid permittit : implies a duty on the court to accept and accord its approval only to a report which is the result of faithful and fruitful investigation.' (See Sidhartha Vashisht alias Manu Sharma v. State (NCT of Delhi) reported in [2010] 6 SCC 1 paragraph 200 at page 80)" In the case of CIT v. N. R. Portfolio P. Ltd. [2014] 2 ITR-OL 68 (Delhi), the following views were expressed (page 86) : "What we perceive and regard as correct position of law is that the court or tribunal should be convinced about the identity, creditwor thiness and genuineness of the transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee's knowledge. Mere production of incorporation details, PANs or the fact that third persons or company had filed Income-tax details in case ....
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.... . . ". We are unable to accept the submission that any further investigation is futile because the money was received on capital account. The Special Bench in the case of Sophia Finance Ltd. (supra) opined that "the use of the words "any sum found credited in the books" in section 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. Mere fact that the payment was received by cheque or that the applicants were companies, borne on the file of the Registrar of Companies were held to be neutral facts and did not prove that the transaction was genuine as was held in the case of CIT v. Nova Pro moters and Finlease (P.) Ltd. (supra). Similar views were expressed by this court in the case of CIT v. Precision Finance Pvt. Ltd. (supra). We need not decide in this case as to whether the proviso to section 68 of the Incometax Act is retrospective in nature. To that extent the question is kept open. We may however point out that the Special Bench of Delhi High Court in the case of Sophia Finance Ltd. (supra) ....