TaxTMI 
TaxTMI 
2019 (6) TMI 1296
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....est 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 dated 12.03.2013. 3. The brief facts of the case shows that the assessee is a company eng....
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....e 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 75,00,000 is brought in the books of the assessee company through RTGS in the name of Messer Shalin....
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.... 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 of the income tax act was passed on 24/3/2017, which is under challenge in this appeal. 8. At th....
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....er 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 argued that the learned assessing officer has completely verified all the details asked for by the AO. He further referred to ....
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....dicial 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 Calcutta High Court was dismissed. Further the factual matrix is also identical to the decision of the honourable Calcutta High Court in c....
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....ceeds 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 estates, business and, etc. The stages at which money-laundering could be easily detected are those where cash enters into the domestic financial system, either formally or informally, where it is sent abroad to be integrated into the financia....
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....ant 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 of 15 subscribers in substance had the share-scrips held by them substituted by the share-scrips of the assessee. (g) Though, Mr. Poddar made extensive submissions scanning the order under section 263 in between the lines, he did not criticize the finding of the Commissioner that "the Assessing Officer did not e....
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.... 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 not. Secondly, depending upon the facts of each case, the Income-tax Officer may even be justified in trying to ascertain the source of the depositor, assuming he is identified, in order to determine whether that depositor is a mere name-lender or not. Be that as it may, it is clear that the Income-tax Officer has jurisdiction to make enquiries with regard to the nature and sour....
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.... 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 conducted by the Assessing Officer result ing in drawing incorrect assumption of facts, makes the orders erro neous 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 (page 327) : "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 b....
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....een 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 someone else. An identical attempt is involved in this case. Who is the per son sought to be assisted by the assessee ? This question can only be answered after a thorough enquiry, directed by the Commissioner of Income-tax, 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 interests of the Revenue. (28) We have indicated above the pieces of evidence which g....
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.... (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 of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genu ineness, creditworthiness, identity are deeper and obtrusive. Compa nies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and man age the said companies. It is the persons behind the company who take the decisions, control and manage them." The persons behind the assessee-co....
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....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) held that "the Income-tax Officer may even be justified in trying to ascertain the source of the depositor". Therefore, the submission that the source of source is not a relevant enquiry does not appear to be correct. We find no substance in the sub mission 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 Commissioner of Income-tax was unable to point out any error in the explanation furnished by the assessee. Whereas in the present case we have tabulated the eviden....