TaxTMI 
TaxTMI 
2019 (8) TMI 555
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 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. 3-4. After obtaining the approval from the Competent Authori....
X X X X Extracts X X X X
X X X X Extracts X X X X
....edgements, 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 sake of convenience, the three written submissions filed by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 available, the only conclusion possible is the culpability of the assessee u/s 68 as arrived at by the AO. * It may also be mentioned i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t 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 claims that there is violation of the settled principles of law in disposing of the objections also. However, it has failed to substantiate what those settled principles are and how they ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....- 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 been submitted in this letter. How the CIT(A) considers this letter as supporting the cause of the assessee is beyond comprehension. It may also be mentioned that apparently the same have not been filed before the AO in response to his qu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l 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 made as has been held by the Hon'ble Supreme Court in Raymond Woollen Mills (supra). The AO had sufficient details available at his disposal from which he formed his opinion. 5. The Ld. CIT(A) has given benefit to the assessee even as regards the difference i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r 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. The Ld. CIT(A) has arrived at the conclusion that the reply filed by the assessee on 30.06.2014 fulfills all the requirements of section 68. However, he has not made even a slight effort to examine the said reply on merits. According to him, justification of charging high premium can be asked fr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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: A) Certain companies which have no financial strength appear to have common directors and authorized signatories. E.g. Incorp Securities Pvt Ltd and Raahul financial Services Pvt Ltd have one Rajesh Aggarwal as the common director and signatory; Jyoti Softsules Pvt Ltd and Kirthi Hitech textiles have Dharmenra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. 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. Bank account statement shows corresponding debit and credit entries. (xii) SC Industries 15 No relevant detail provided. (xiii) Sharda India 35 lacs invested on a total income of Rs. 8540/- Only one Ac in Fixed assets 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 of 1,600/-. No real business activity. (xiv) Sony Financial Services No relevant detail provided (xv) Shri Vishnupriya Total income of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 Iron (supra). In light of the above, it is submitted that since the assessee has failed to discharge its onus u/s 68, in light of the above submissions demonstrating lack of creditworthiness of the investor companies and non-genuineness of the transactions, the order of the AO be restored by deleting the findings of the Ld. CIT(A)." "Sub: Written Submission in the above case- reg. In the above case, it is humbly submitted that the following decisions may kindly be considered with regard to reopening of cases u/s 147 of I.T.Act: 1 PCIT Vs Paramount Communication (P.) Ltd. (2017- TIQL-253-SC-IT) where Hon'ble Supreme Court dismissed SLP of assessee. Information regarding bogus purchase by assessee received by DRI from CCE which was passed on to reve....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le 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, he was justified in initiating reassessment proceeding in case of assessee. 8 Raymond Woollen Mills Ltd. v. ITO And Othersf236 ITR 34] Where Hon'ble Supreme Court held that in determining whether commencement of reassessment proceedings was valid it has only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. 9 R.K. Malhotra ITO Vs KasturbhaiLalbhairi9771 109 ITR 537 (SC) where Hon'ble Supreme Court held that the intimation which the Income-tax Officer received from the audit department would constitute "information" within the meaning of section 147(b). 10.ACIT Vs Rajesh Jhaveri Stock Brokers (P.) Ltdr20071 161 Tay " 316 (SC)/[2007] 291 ITR 500 (SC)/r20071 210 CTR 30 (SC) where Hon'b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 investing huge sum of Rs. 8 crores, reopening notice was justified." "Sub: Written Submission in the above case- reg. In the above case, it is humbly submitted that the following decisions may kindly be considered with regard to addition made u/s 68 of I.T.Act: 1. PCIT Vs NRA Iron & Steel (P.) Ltd. T20191 103 taxmann.com 48 (SC) (Copy Enclosed) where Hon'ble Supreme Court reverse order of lower Authorities holding that where there was failure of assessee to establish credit worthiness of investor companies, Assessing Officer was justified in passing assessment order making additions under section 68 for share capital / premium received by assessee company. Merely because assessee company had filed all primary evidence, it could not be said that onus on assessee to establish credit worthiness of investor companies stood discharged 2. PCIT Vs NDR PROMOTERS PVT LTD (f20191 102 taxmann.com 182 (Delhi)/r20191 261 Taxman 270 (Delhi)/r20191 410 ITR 379 (Delhi)) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....axmann.com 18 (SC)/r20151 230 Taxman 268 (SC)) (Copy Enclosed) SLP of assessee dismissed by Hon'ble Supreme Court 5. Pratham Telecom India Pvt Ltd Vs DCIT (2018-TIQL- 1983-HC-MUM-IT) where Hon'ble Bombay High Court held that mere production of PAN numbers & bank statements is not sufficient enough to discharge the burden on taxpayer to escape the realms of Section 68 6 CIT Vs Nipun Builders & Developers (P.) Ltd (30 taxmann.com 292, 214 Taxman 429, 350 ITR 407, 256 CTR 34) (Copy Enclosed) where Hon'ble Delhi High Court held that where assessee failed to prove identity and capacity of subscriber companies to pay share application money, amount so received was liable to be taxed under section 68. It was held as follows: "12. A perusal of the order of the Tribunal shows that it has gone on the basis of the documents submitted by the assessee before the AO and has held that in the light of those documents, it can be said that the assessee has established the identity of the parties. It has further been observed that the report of the investigation wing cannot conclusively prove that the assessee's own monies were brought back in the form of share application money....
X X X X Extracts X X X X
X X X X Extracts X X X X
....swer the substantial questions of law in the negative and in favour of the department. The assessee shall pay costs which we assess at Rs. 30,000/-. " 8 CIT Vs Ultra Modern Exports (P.) Ltd (40 taxmann.com 458, 220 Taxman 165) where Hon'ble Delhi High Court held that where in order to ascertain genuineness of assessee's claim relating to receipt of share application money, Assessing Officer sent notices to share applicants which returned unserved, however, assessee still managed to secure documents such as their income tax returns as well as bank account particulars, in such circumstances, Assessing Officer was justified in drawing adverse inference and adding amount in question to assessee's taxable income under section 68. It was held as follows: "9. As noticed previously, the CIT (A) was of the opinion that the assessee had discharged the basic onus which was cast upon it after considering the ruling in Lovely Exports (P.) Ltd. 's case (supra). The material and the records in this case show that notice issued to the 5 of the share applicants were returned unserved. The particulars of returns made available by the assessee and taken into consideration in para....
X X X X Extracts X X X X
X X X X Extracts X X X X
....opted by the AO, in a given case where additions are sought to be made on account of share application moneys not found to be genuine, the basic facts of the case cannot be lost sight of. On a proper application of the ratio in Oasis - and subsequently, the Division Bench ruling in CIT v. Nova Promoters & Finlease (P) Ltd [2012] 206 Taxman 207/18 taxmann.com 217 (Delhi) it is evident that the AO took into account - if we may say so, in exhaustive detail, after a painstaking examination of the records after two or three layers of scrutiny- all the materials and held that the claim that the amounts claimed to be received on account of share applications were not based on genuine transactions. The CIT (A) upheld that order, after calling for a remand report. In these circumstances, the conclusion of the Tribunal, that the assessee had discharged its onus, appears to be based on a superficial understanding of the law, and an uninformed one about the overall facts and circumstances of the case. 13. In view of the above reasons, the questions of law in these appeals are answered in favour of the revenue. The orders of the Assessing Officer are restored. The appeals are to succeed and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot establish the authenticity of a huge loan transaction particularly when the ITR does not inspire such confidence. Mere submission of ID proof and the fact that the loan transactions were through the banking channel, does not establish the genuineness of transactions. Loan entries are generally masked to pump in black money into banking channels and such practices continue to plague Indian economy." 4.1 Finally, Ld. Sr. DR stated that the case of the assessee was reopened on the basis of the various documentary evidences and on the information received from the Directorate of Income Tax (Investigation) by the Assessing Officer wherein, it was mentioned that based upon three STRs in the name of Valiant Agencies, Senorita Enterprises Pvt. Ltd. And Enliven Developers Pvt. Ltd., 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, hence, the AO made the addition in dispute as per law and the Ld. CIT(A) has wrongly deleted the same which are contrary to the material available on record as well as various decisions rendered by the Hon'ble Supreme Court of India and t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 296 ITR 90 (Bombay). - (On the issue of discharge of onus u/s. 68 of the Act) CIT vs. Gangeshwari Metal Pvt. Ltd. In ITA No. 597/2012 of Hon'ble Delhi High Court dated 21.1.2013. Baba Bhootnath Trade & Commerce Ltd. Vs. ITO in ITA No. 1494/Kol/2017 of ITAT, Kolkata dated 5.4.2019. CIT vs. Ms. Mayawati 338 ITR 563 (Delhi). 6. We have heard both the parties and perused the relevant records, especially the orders of the revenue authorities as well as the written submissions/ case laws relied by both the parties. We note that in this case a complaint was received in the Investigation Wing and it has started investigation on 14.8.2008 by issuing a summon u/s. 131(1A). Vide letter dated 04-09-2008, assessee filed written details about the functioning of the company to the Investigation Wing. Apart from enquiring the facts of the assessee by the Investigation Wing, notice u/s 133(6) was also issued to the parties which were duly responded and complied with by them. From the letter dt. 05-11-2012, it appears that Investigation Wing has enquired all the bank deposit entries above Rs. 5,0000/- of the assessee. Vide letter dt. 16-11-2012, assessee furnished all the details befo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eturn of income filed by the appellant, it is clearly mentioned that the share capital amount alongwith premium was only Rs. 4.60 crores, however, in the reasons recorded Assessing Officer has mentioned the share capital amount as Rs. 4,65,98,000/-. Assessing Officer has copied this figure from the letter of the Investigation Wing. This clearly indicates that AO has not formed its own reason of belief and he has only believed the content of the letter of the Investigation Wing. This content also clearly indicates that while granting the satisfaction by the Addl. CIT, he has not gone through the records and not verified the facts sent by the Investigation Wing. The mismatch of the figure of share capital, whether or its Rs. 4,65,98,000/- has not been looked into by the Addl.CIT, at the time of giving approval for issuing the notice u/s 148 of the IT Act. Therefore, the Ld. CIT(A) has agreed with the contention of the AR of the assessee that there is no tangible material available at the time of recording the reasons for reopening the case. The main observation of the Investigation Wing is that assessee company has charged share premium @Rs. 240/- per share which is very high but how....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a 'borrowed satisfaction'. The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment. 37. For the aforementioned reasons, the Court is satisfied that in the facts and circumstances of the case, no error has been committed by the ITAT in the impugned order in concluding that the initiation of the proceedings under Section 147/148 of the Act to reopen the assessments for the AYs in question does not satisfy the requirement of law. 38. The question framed is answered in the negative, i.e., in favour of the Assessee and against the Revenue. The appeal is, accordingly, dismissed but with no orders as to costs. 6.1 The judicial decisions relied upon by the Ld. DR have been duly considered. In our considered view, we do not find any parity in the facts of the decisions relied upon with the peculiar facts of the case in hand. Therefore, in view of these facts and circumstance....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Investigation Wing to prove the identity of the companies, their creditworthiness and genuineness of the transaction. AO has rejected these documents on the ground that these are routine documents. Regarding the charging of premium @Rs. 240/- per share, AO commented that this explanation was filed before the Investigation Wing, since reassessment proceeding is different from the proceedings of the Investigation Wing, appellant has not discharged its onus. From the comments mentioned in Para 8 reproduced above clearly indicates that assessee has given explanation for charging the high rate of premium. Without considering those facts and explanation, he has just set aside the explanation on the ground that these explanations were filed before the Investigation Wing. However, the AO was supposed to give reasons for not accepting those explanations. AO has relied upon the case of (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. The facts of these cases are entirely different from the facts of this case. In the present case, AO has proceeded entirely on the findings of the Inves....