TaxTMI 
TaxTMI 
2019 (8) TMI 555
X X X X Extracts X X X X
X X X X Extracts X X X X
....see filed its return of income declaring total income of Rs. 6,43,630/-, which was processed by the Assessing Officer u/s. 143(1) of the Income Tax Act, 1961 (in short "Act") on 27.2.2009. AO noted in the assessment order that the Directorate of Income Tax (Investigation)-I, New Delhi vide its letter dated 19.3.2014 informed the Assessing Officer that Investigation Wing carried out enquiries in the matter of the assessee based upon three STRs in the name of Valiant Agencies, Senorita Enterprises Pvt. Ltd. And Enliven Developers Pvt. Ltd. Dated 5.3.2018, details of which, AO has reproduced in the assessment order at Page No. 2. On the basis of these STRs and upon further investigation conducted by the Investigation Wing, it was noticed that the Assessee Company had taken share capital of Rs. 465.98 lacs from Investee companies, but identity, genuineness and creditworthiness of the investors remained doubtful, in view of the various reasons mentioned by the AO in the assessment order at page no. 1 to 3. On the basis of the aforesaid information, the AO recorded the reasons u/s. 147 of the Act for reopening of the case, which the AO has reproduced in the assessment order at page no. 3....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... alongwith their confirmations, bank statements, ITR acknowledgements, balance sheet as on 31.3.2007 etc. so as to justify three ingredients as required u/s. 68 of the I.T. Act as identity, genuineness, creditworthiness etc. of the investors. After examining all the documentary evidences filed by the assessee and the objection filed by the assessee, the AO had made the addition of Rs. 4,60,00,000/- u/s. 68 of the Act on the basis of the details forwarded by the Investigation Wing, vide order dated 30.6.2014 passed u/s. 143(3) r.w.s. 147 of the I.T. Act, 1961. Aggrieved by the aforesaid assessment order, assessee appealed before the Ld. CIT(A), who vide his impugned order dated 10.6.2015 has allowed the appeal of the assessee on the merit as well as on the legal ground. Against the impugned order dated 10.6.2015, assessee is in appeal before the Tribunal. 4. At the time of hearing, Ld. Sr. DR relied upon the Order of the AO and reiterated the contentions raised in the grounds of appeal. In addition to that Ld. DR has also filed the Written Submissions in which he has supported the order of the AO with the help of various case laws mentioned in the said written submission. For the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....share premium, and 6) the case only having been processed earlier u/s 143(1) and no enquiry u/s 143(3) having been done. .. In this regard, it may be mentioned here that recent decisions of the Hon'ble Supreme Court, the Hon'ble Jurisdictional High Court as well as the Hon'ble Delhi Tribunal very clearly demonstrate the importance of these factors in arriving at the true state of affairs as regards the share premium received. Pr. CIT (Central-1) vs NRA Iron & Steel Pvt Ltd (SC] ITO (Exemption), Ward 7(4), New Delhi vs. M/s Synergie finlease Pvt Ltd. [Delhi Trib ] ITO ward-9(1), New Delhi vs. Sohail Financials Ltd [Delhi Trib.] • The second reason mentioned by the assessee is that there is no tangible material for forming 'reason to believe'. In this regard, as submitted above, there were numerous gaps in the submissions made and details provided by the assessee to the Inv. Wing which formed the reason to believe. Here it may be mentioned, as has been dealt with subsequently, that even upto the appellate stage, there is no sufficient material available to grant any benefit of doubt to the assessee in its transactions and that in light of the material a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at it is a fit case for issuance of notice u/s 148. He has not merely stated "yes" but clearly stated that he is satisfied that it's a fit case. It may also be mentioned again at the cost of repetition that exact accuracy of the quantum in 'reasons to believe' is not required at the stage of reopening and the assessee cannot be allowed relief only on the basis that the final amount added is different from the amount believed to have been subject to tax, particularly when the basis and the transactions involved were of the same nature with the same parties as alleged. • The fifth ground is regarding the speedy disposal of the objections on the same day. In this regard it may be mentioned here that when the assessee can inspect the record, file objections and supplementary objections on the same day, there is no reason why the AO cannot dispose of the same on the same day particularly when all the facts are already on record and the objections of the asseseee are of a repetitive nature. These were all a delaying tactics adopted by the assessee instead of filing the relevant details and substantiation to the AO how his reasons to believe were not well found. The assessee ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....CIT(A) in his findings at page 16 onwards of the impugned order has stated as follows: 1. From the letter dated 5-11-2012, it appears that the investigation wing has enquired all the bank deposits of the appellant - The Id. CIT(A) has omitted to mention and also to understand that in order to determine the identity, genuineness and creditworthiness u/s 68, it is imperative to have a detailed analysis of the bank details of the investors and merely stating that from the bank account of the assessee, it can be seen that amounts have come through banking channels is not enough. 2. The Ld. CIT(A) has stated that vide letter dated 16.11.2012, the assessee has furnished all relevant details and also furnished copy of Form no. 2. The said letter is placed at pages 83-87 of the paper book filed by the assessee. A perusal of the same will reveal that it contains not even one detail which is relevant for determining the issue at hand i.e. the identity, genuineness and creditworthiness of the investee companies. It has again mentioned its own bank statement, which, as per the settled position, is not sufficient to discharge its onus. No other relevant detail has bee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dmissibility of such documents as well as their merit. 4. The Ld. CIT(A) has mentioned that the AO did not make any enquiries himself, and has reproduced the contents of the letter of the investigation wing. As discussed in this note before, a perusal of the note received from the investigation wing revealed that details asked for by the ITO(lnv.) were not provided completely, and whatever details were provided only showed that the investing companies did not have the financial capacity and requisite strength to make huge investments in the assessee company. It was also mentioned that the assessee had failed to provide any justification as to how the exorbitant share premium of Rs. 240/- was commanded by the newly formed company. It was in light of these details that the AO arrived at his own conclusion that income had escaped assessment for which he formed his reason to believe. In light of the findings of the Inv. Wing, it was not necessary for the AO to conduct further enquiry in order to arrive at his satisfaction. It may be mentioned again that at the time of reassessment, the sufficiency or complete accuracy is not required and only a prima facie case needs to be mad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....edings cannot be an excuse to prevent the AO from acquiring jurisdiction to assess the income of the assessee. The argument is fallacious and so is the acceptance of the same by CIT(A). 9. The CIT(A) states that the AO has not made any enquiries other than asking justification for the high share premium. The claim is totally wrong and clearly shows total non-application of mind by the Ld. CIT(A). A perusal of the order sheet dated 23.06.2014 clearly proves that several details were asked from the AO which included-a) justification for share premium, b) copies of the P& L A/c of the investing companies, c) note on business of the investing companies, d) copies of bank a/c showing the details of investments, e) produce the directors of the investing companies. Further summons u/s 131 were also issued in case of certain directors of investing companies. The Ld. CIT(A) appears to have only relied on the claim of the assessee without making any effort whatsoever to determine the truth. It appears that he has not even made an effort to understand that if no enquiries were made by the AO, how did the assessee file its reply dated 30.06.2014 and in response to what. 10. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts in the assessee company. The onus on the assessee is not discharged by simply providing certain details with respect to these entities. If these people can provide confirmations, bank statements, huge funds to the assessee, it is incomprehensible how not even one of them could be produced before the AO. It may be reiterated that the assessee is not a public limited company where all investors cannot be expected to be known to the investee. It may also be mentioned that the CIT(A) has not made even one enquiry, either from the assessee or from the AO. He has not even bothered to find out that certain letters being cited before him may or may not have been submitted before the ITO(lnv) but they were apparently not submitted before the AO and hence would have constituted fresh evidence to be dealt with under rule 46A. Even though those letters are of no help to the assessee in discharging its onus, but reliance on them by CIT shows that there has not been adequate appreciation of the facts and law by him. (iii) As regards the details submitted by the assesee, it appears that the same has not been looked into in detail by the CIT(A). The following points need to be noted: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ount statement shows corresponding debit and credit entries. (vii) Namo Resorts (P) Ltd. No relevant details filed. (viii) Nipun Infotech 45 lacs invested with a total income of Rs. 19,890/- Only one fixed asset in computer. Share application and premium received which is further invested in companies including the asseessee. Bank account statement shows corresponding debit and credit entries. Closing balance after circulating the funds is Rs. 9,863/- (ix) Nepostel (India) 25 lacs invested but No relevant details supplied. (x) Pushpanjali Impex 50 lacs invested by a company with Total income of Rs. 20,019/- No annexures to B/s Filed. No P&L filed Share application and premium received which is further invested in companies including the asseessee. Bank account statement shows corresponding debit and credit entries. Closing balance after circulating the funds is Rs. 2,372/- (xi) Raahul Financial No P&L filed No fixed asset Share application and premium received which is further invested in companies including the asseessee. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessee in detail. Had he done so, he would have realised that several details which have been claimed by the assessee to have been filed have actually not been included in the submissions. He would have easily discovered that the so called investing companies lack the creditworthiness to make huge investments, that the transactions entered into by them with the assesee company are not genuine. He would have observed that assessee is taking refuge in submissions made before the ITO (Inv.) which have apparently not been presented before the AO (even though they are devoid of merit) and that if so, they would constitute new evidence to be dealt with as per Rule 46A. The Ld. CIT(A) has failed to remember that he has coterminus powers with the AO and he cannot hide behind the alleged gap in the enquiries of the AO without himself making any effort whatsoever to arrive at the truth. The CIT (A) has failed to appreciate that there are a catena of cases which explain the manner in which the onus has to be discharged by the assessee in such cases and how the assessee has failed to do so. In any case, the matter has now gained clarity with the decision of the Hon'ble Supreme Court in NRA ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons through accommodation entries, since assessee was beneficiary, initiation of re-opening was justified. 5. Aaspas Multimedia Ltd. Vs DCIT[20171 83 taxmann.com 82 (Gujarat) where Hon'ble Gujarat High Court held that where reassessment was made on basis of information received from Principal DIT (Investigation) that assessee was beneficiary of accommodation entries by way of share application provided by a third party, same was justified. 6. MohammedallyNoorbhoyBandukwala Trust Vs ITO (2017-TIQL-341-HC-MUM-IT) where Hon'ble Mumbai High Court held that assessment cannot be termed as invalid for non-consideration of assessee's objections, if there was undue delay on the part of assessee in objecting to the reasons. 7. Yogendrakumar Gupta Vs ITO (51 taxmann.com 383) (SC)/2014/227 Taxman 374 (SC) where Hon'ble Supreme Court held that where subsequent to completion of original assessment, Assessing Officer, on basis of search carried out in case of another person, came to know that loan transactions of assessee with a finance company were bogus as said company was engaged in providing accommodation entries, it being a fresh information, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fficer is bound to dispose of objections by passing a speaking order, would not make reassessment order void ab initio. 15. Indu Lata Rangwala vs. DCIT (2017) 80 taxmann.com 102 (Delhi) 384 ITR 337 (Delhi)/(2016) 286 CTR 474 (Delhi). where Hon'ble Delhi High Court held that where initial return of income is processed under section 143(1), it is not necessary in such a case for Assessing Officer to come across some fresh tangible material to form 'reasons to believe' that income has escaped assessment 16. Aravalilnfrapower Ltd. Vs DCIT(2017-TIQL-42-SC-IT) where Hon'ble Supreme Court confirmed the decision of High Court, whereby it was held that reopening of assessment is justified, when the bank statements as well as the ITR form disclosing returns, raises more questions than satisfying the queries already raised. Aravalilnfrapower Ltd. Vs DCIT T20171 77 taxmann.com 372 (Delhi)/[2017] 390 ITR 456 (Delhi) where Hon'ble Delhi High Court held that where assessee-company furnished only cheque numbers, but failed to provide bank details of share applicants and it was found that share applicants had meager income while investin....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... has merely reproduced the order of the Commissioner of Income-tax (Appeals) and upheld the deletion of the addition. In fact, they substantially relied upon and quoted the decision of its co-ordinate Bench in the case of MAF Academy P. Ltd., a decision which has been overturned by the Delhi High Court, vide its judgment in CIT v. MAF Academy P. Ltd. [2014] 206 DLT 277; [2014] 361 ITR 258 (Delhi)). In the impugned order it is accepted that the assessee was unable to produce directors and principal officers of the six shareholder companies and also the fact that as per the information and details collected by the Assessing Officer from the concerned bank, the Assessing Officer has observed that there were genuine concerns about identity, creditworthiness of shareholders as well as genuineness of the transactions. 21. In view of the aforesaid discussion, we feel that the matter requires an order of remit to the Tribunal for fresh adjudication keeping in view the aforesaid case law." Navodaya Castle Pvt Ltd Vs CIT (T20151 56 taxmann.com 18 (SC)/r20151 230 Taxman 268 (SC)) (Copy Enclosed) SLP of assessee dismissed by Hon'ble Supreme Court 5. Pratham ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be added to its taxable income under section 68. It Was held as follows: "41. In the case before us, not only did the material before the Assessing Officer show the link between the entry providers and the assessee-company, but the Assessing Officer had also provided the statements of Mukesh Gupta and Rajan Jassal to the assessee in compliance with the rules of natural justice. Out of the 22 companies whose names figured in the information given by them to the investigation wing, 15 companies had provided the so-called "share subscription monies" to the assessee. There was thus specific involvement of the assessee- company in the modus operandi followed by Mukesh Gupta and Rajan Jassal. Thus, on crucial factual aspects the present case stands on a completely different footing from the case of Oasis Hospitalities (P.) Ltd. (supra). 42. In the light of the above discussion, we are unable to uphold the order of the Tribunal confirming the deletion of the addition of Rs. 1,18,50,000 made under section 68 of the Act as well as the consequential addition of Rs. 2,96,250. We accordingly answer the substantial questions of law in the negative and in favour of the departme....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... give rise to a circumstance which the AO in this case proceeded to draw inferences from. Having regard to the totality of the facts, i.e., that the assessee commenced its business and immediately sought to infuse share capital at a premium ranging between Rs. 90-190 per share and was able to garner a colossal amount of Rs. 4.34 Crores, this Court is of the opinion that the CIT (Appeals) and the IT AT fell into error in holding that AO could not have added back the said amount under Section 68. The question of law consequently is answered in favour of the Revenue and against the assessee. " 9. CIT Vs Frostair (P.) Ltd (26 taxmann.com 11. 210 Taxman 221) where Hon'ble Delhi High Court held that where details furnished by assessee about share applicants were incorrect, addition under section 68 was proper. It was held as follows: 12 The application of the ratio of every decision by a quasi-judicial body like the IT AT has to be nuanced, and contextual. Thus, while the findings in Divine Leasing, Oasis International or even Lovely Exports might be preceded by a general discussion of the correct approach to be adopted by the AO, in a given case where addition....
X X X X Extracts X X X X
X X X X Extracts X X X X
....companies. It is the persons behind the company who take the decisions, controls and manage them. " 11 CIT Vs Empire Builtech (P.) Ltd (366 ITR 110) where Hon'ble Delhi High Court held that u/s 68 it is not sufficient for assessee to merely disclose address and identities of shareholders; it has to show genuineness of such individuals or entities. 12. CIT Vs Focus Exports (P.) Ltd (51 taxmann.com 46 (Delhi)/r20151 228 Taxman 88) where Hon'ble Delhi High Court held that where in respect of share application money, assessee failed to provide complete address and PAN of certain share applicants whereas in case of some of share applicants, there were transactions of deposits and immediate withdrawals of money from bank, impugned addition made under section 68 was to be confirmed 13. PCIT Vs Bikram Singh f20171 85 taxmann.com 104 (Delhi)/r20171 250 Taxman 273 (Delhi)/r20171 399 ITR 407 (Delhi) (Copy Enclosed) where Hon'ble Delhi High Court held that even if a transaction of loan is made through cheque, it cannot be presumed to be genuine in the absence of any agreement, security and interest payment. Mere submission of PAN Card of cr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Act for reopening of assessment which are totally applicable on the facts of the present case of the assessee. He further submitted that the Hon'ble Delhi High Court in the case of Pr. CIT-6 vs. Meenakshi Overseas Pvt. Ltd. (Supra) has discussed the various case laws and exactly on similar issue as involved in the present appeal and dismissed the appeal of the Revenue. Hence, he requested that by respectfully following the above ratio, the appeal of the Revenue may be dismissed. In this addition to this, he has also filed the following various orders passed by the ITAT, Delhi Bench on the issue in dispute which has been decided in the case of assessee and against the Revenue. - (On the issue of mechanical satisfaction u/s. 151 of the Act "Yes" I am satisfied, it is a fit case for issuance of notice u/s. 148 of the Act.) ITAT, Delhi decision dated 6.8.2018 in the case of Pioneer Town Planners Pvt. Ltd. Vs. DCIT in ITA No. 132/Del/2018 - Paras Land Developers Pvt. Ltd. Vs. ITO in ITA No. 6522/Del/2018 of ITAT, New Delhi dated 30.4.2019. - (On the issue where AO could not proceed within 4 weeks from service of order disposing off objections) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f section 147 of the IT Act". These words clearly indicate that AO has not applied his mind on the information received from the Investigation Wing. He has produced the content of the letter of the Investigation Wing. There is no reason to believe for escapement of any income. Content of the letter clearly indicates that this company has not started a business how it has charged a premium of Rs. 240/- per share? This creates a suspicion and the documents of the investing companies also indicate that they have received a huge amount as a share capital and that amount is forwarded to the assessee company as a share application money. On the basis of this fact, Investigation Wing was having doubt about the identity of the allottees companies, genuineness of the transaction and creditworthiness of the allottee companies. The content of the letter clearly indicates that Investigation Wing was having some suspicion and doubt and it was forwarded to the Assessing Officer. Without making any enquiries, Assessing Officer recorded the reason on the basis of only suspicion and doubt. Even Assessing Officer has not formed his own opinion based on any information gathered or based on any inf....
X X X X Extracts X X X X
X X X X Extracts X X X X
....see. It is also important to note that notice u/s 143(2) was issued on 11-06-2014 and the objections were disposed off on 27-06-2014. After 27-06-2014, no notice u/s 143(2) was issued. The order was passed on 30-06-2014, however, it was getting time barred on 31-03-2015. The action of the AO clearly indicates that proper opportunity to the assessee was not given. Even after disposing off the objections, no notice u/s 143(2) was issued. Hence, the Ld. CIT(A) agreed with the contentions of the Ld. ARs of the assessee that notice issued u/s 143(2) of the IT Act is premature and hence nonest. After considering the facts as narrated above, Ld. CIT(A) has rightly observed that the AO has wrongly assumed the jurisdiction u/s 147 of the IT Act and also not given proper opportunity to the assessee during the assessment proceedings. We draw support from the decision of the Hon'ble Delhi High Court in the case of Pr. CIT v. Meenakshi Overseas (P) Ltd. v. ITO 395 ITR 677 (Del) which is directly applicable in the present case wherein it has been held as under:- "36. In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the AO one....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Investigation Wing. Hence reply of the assessee is not acceptable and the assessee has failed in discharging its onus u/e 68 of the IT Act, 1961. 8. Assessee in its objections filed on 27-06-2014 mentioned filing of these documents before investigation wing and verification caused by investigation wing. Since re-assessment proceedings are independent and separate proceedings, therefore, assessee was required to discharge its onus before the AO. It is obvious from the above facts that transactions of assessee with the investee companies having received capital of Rs. 4.60 crores at a premium of Rs. 240 per share without any justification is not genuine. The ratio of the following case laws are in full support with this case. i) CIT v. Nupur Builders & Developers Pvt. Ltd. ITA No.120/2012, Delhi High Court. ii) CIT v. NR Portfolio Pvt. Ltd. ITA No.1018 of 2011, Delhi High Court. 9. Therefore, after careful examination of details forwarded by the Investigation Wing and also after considering the submissions of the assessee, Rs. Four crores sixty lakhs received by assessee as capital is added back to the income of the assessee u/s. 68 of the IT Act....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "As can be seen from the above extract, two types of cases have been indicated One in which the Assessing Officer carries out the exercise which is required in law and the other in which the Assessing Officer 'sits back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the Assessing Officer after noting the facts, merely rejected the same. This would be apparent from the observations of the Assessing Officer in the assessment order to the following effect- "Investigation made by the Investigation Wing of the department clearly showed that was nothing but a sham transaction of accommodation entry. The assessee was asked to explain as to why the said amount of Rs. 1,11,50,000/- may not be added to its income. In response, the assessee has submitted that there is no such credit in the books of the assessee. Rather, the assessee company has received the share application money for allotment of its share. It was stated that the actual amount received was Rs. 55,50,000/- and not Rs. 1,11,50,000/- as mentio....