TaxTMI 
TaxTMI 
TaxTMI 
2019 (9) TMI 91
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....ration was conducted at the premises of the assessee company. At the time of survey, the assessee had surrendered a sum of Rs. 7 Crore as mentioned at Page No. 5 of the survey report which is relevant far the Financial year 2008-09 i.e. assessment, year 2009- 10. The assessee paid taxes thereon at Delhi. Out of total tax liability on the surrendered amount of Rs. .7 crore for F.Y. 2008-09 relevant to Asstt. Year 2009-10, the assessee has already paid Rs. 1 Crore of Income tax (Rs. 50 lakh vide BSR Code 0302275 Chnllan Sr. No. 00571 dated 12.12.2008 and Rs. 50 lakh vide BSR Code 0302275 Chaikin No. 00144 dated 31.01.2009} From the perusal of the documents found and impounded from the office of M/s Dwarkadhis Buildwell Pvt. Ltd. At BN 57 East, Shalimar Bagh, New Delhi, during the course of Survey operation under section 133A of the Income tax Act, 1961, it reveals that the assessee has received share capital at huge premium from a number of Companies in the F.Y. 2005-06. Most of these companies have address at 13/34 WEA, Karol Bagh, which is controlled by Shri Tarun Goel who is an Entry Operator as established by the Search & Seizure operation conducted by the Unit IV of DIT (Inv....
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....nd undeniable that all the Companies belonged to Shri Tarun Goyal and were fictitious. He has made an annexure of such beneficiary companies and M/s Dwarkadhis Buildwell P Ltd. is one of them where an amount of Rs. 7.10 crore relevant for assessment year 2006-07 has been taken by this company from the following entry provider companies Sr. No. Name of the entry provider company Amount of share application money (in Rs.) 1. Adonis Financial Services Pvt, Ltd. 13/34, WEA, Arya Samaj Road, Karol Bagh, 2500000 2. Aries Crafts Pvt. Ltd, 13/34, WEA, Arya Samaj Road, Karol Bagh, 5000000 3. Bhawani Portfolio Pvt. Ltd, 13/34, WEA, Arya Saihaj Road, Kami Bagh, 3000000 4. Campari Fiscal Services Pvt. Ltd. 13/34, WEI, 4" Floor, Main Aryn Sttmuj Road. Karol Bagh. 6000000 5 Corporate Finlease Pvt. Ltd. 13/34, WEA, Arya Samaj Road 5500000 6 Deep Sea Drilling Pvt. Ltd. 13/34, WEA, Arya Samaj Road, Karol Bagh, 5500000 7 D U Securities Pvt. Ltd. 13/34, WEA, Arya Saniaj Road, . Karol Bagh, 3000000 8. Ebony Investment Pvt. Ltd. 13/34, WEA, Arya Samaj Road, Karol Bagh, 2500000 9. Karol Bagh Trading Ltd. 203 Dhaka Chambers, 2069/39, Naivvala, Karol Bagh, Ne....
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....oney through banking channel and hence the transactions were claimed to be genuine. The assessee company relied upon the judgment of Hon'ble Supreme Court in the case of Lovely Exports Ltd. (2008) 216 CTR 195 6DTR (SC) 308 in support of its claim. Assessee further stated that if identity of the investor is established, the assessment in the case of investors can be reopened as per law, but no addition can be made in the hands of the company who has received the share application money. 5. According to Ld. CIT the Assessing officer did not make any investigation/ verification with regard to the genuineness of the identity of the investor companies inspite of the fact that the record had sufficient material which necessitated further enquiries. According to the Ld. CIT, the ratio of the decision of Hon'ble Supreme Court was examined subsequently by various courts including, the Hon'ble Delhi High Court in the case of CIT Vs. Nova Promoters & Finlease (P) Ltd reported in 342 ITR 169. Although in normal course, addition can be made only in the hands of the investors, however, in this case, these share holders/ investors are not doing any real business but are being used as a vehicle ....
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....ion 271(1) (c) of the Income Tax Act, 1961, for furnishing of inaccurate particulars of its income and concealment of income in respect of above stated issues." 12.2. The assessment order is, therefore, set aside u/s. 263 91) of the Income Tax Act, 1961 to the above stated extent. The aforementioned issues are restored back to the file of the Assessing Officer. The AO is directed to make fresh assessment after gathering relevant material by making necessary and proper inquiries / investigation, in the light of discussions made in the preceding paras (but not necessarily limiting to the same) and make a judicious and logical order as per law, providing opportunity of being heard to the assessee. Of course, any adverse inference made would require recomputation of income and tax thereon. 7. Aggrieved with such order of the CIT, the assessee is in appeal before the Tribunal by raising following grounds :- 1. That the order of ACIT, Circle Bhiwani U/s 143(3)/147 dated 13.12.2011 itself is void ab initio, illegal and without jurisdiction being contrary to provisions of law, based on surmises and conjectures. As such action of Ld CIT -Hisar for setting aside order which is void ab....
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.... assessee has escaped assessment as such order U/s 263 is liable to be quashed. 8. The Ld. Commissioner of Income Tax - Hisar erred in holding that the assessment order passed u/s. 143(3)/147 is erroneous and prejudicial to the Interest of the Revenue, which is based on audit objection against which proceedings U/s 154 initiated by Ld AO has been pending and without application of his independent mind as such order U/s 263 on the basis of Audit Objection is void-ab-initio and needs to be quashed. 9. That Ld Commissioner of Income Tax - Hisar exceeded his jurisdiction by relying on documents collected as a result of subsequent inquiry after initiating the proceedings U/s 263 which is not part of record of assessment or reassessment proceedings or available to Ld CIT, as such setting aside the re-assessment order U/s 143(3)/147 by exercising powers U/s 263 relying on such documents needs to be quashed being void- ab-initio. 10. That in the facts and circumstance of the case the Ld. CIT Hisar is not justified in law in setting aside the well reasoned order of the ACIT Bhiwani dated. 13/12/11 passed u/s 143(3) /147 dropping the proceedings by following the ratio laid down by the ....
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....e premium of Rs. 12,43,35,000/- and the share holders capital Rs. 1,41,15,000/-. He submitted that there is no dispute about the share capital amount of Rs. 6,71,500/- and share premium of Rs. 6,74,50,000/- and the dispute is only regarding share application money of Rs. 7,10,00,000/-. Referring to various pages of the paper book he submitted that on three occasions the department had accepted the valuation of shares after making thorough enquiry. Even the AO who passed the order u/s. 147 / 143 (3) on 13.12.2011 did not find any mistake in the valuation for which he did not make any addition and accepted the returned income by dropping the proceedings. Referring to the office note of the Assessing Officer he submitted that the Assessing Officer has forwarded the names of the various investor companies who have applied in the shares of the assessee company to the respective Assessing Officers for taking necessary action. 8.2 The Ld. Counsel for the assessee referring to the decision of Hon'ble Delhi High Court in the case of CIT Vs. Sunbeam Auto Limited reported in 189 taxman 436 submitted that the Hon'ble High Court in the said decision has held that if while making assessment, th....
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....he AO could not be said to have erred in law. The fact that this Court had subsequently reversed the decision of the High Court would not justify the CIT in treating the Assessing Officer's decision as erroneous. The power of the CIT under section 263 of the Act must be exercised on the basis of the material that was available to him when he exercised the power. At that time, there was no dispute that the issue whether the power subsidy should be treated as capital receipt had been concluded against the revenue. The satisfaction of the CIT, therefore, was based on no material either legal or factual which would have given him the jurisdiction to take action under section 263 of the Act. 10. Referring to various other decisions he submitted that as per provisions of section 263 the CIT can call for and examine the record of any proceeding under the Act only on the basis of his being satisfied that the Assessing Officer was erroneous in passing the orders and (2) that the decision of the Assessing Officer was prejudicial to the interest of the revenue. Further, the satisfaction must be one which is objectively justifiable and cannot be the mere ipse dixit of the commissioner. 11. R....
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....s he submitted that when the view taken by the AO was one of the plausible view then the Ld.CIT cannot invoke jurisdiction u/s. 263. He submitted that for invoking the justification under section 263 of the IT Act 1961 the twin conditions namely the order is erroneous and the order is prejudicial to the interest of the revenue must be satisfied. In the instant case although the order may be prejudicial to the interest of the revenue as per the Ld. CIT, however, it cannot be said that the order is erroneous since the AO has taken a plausible view in the light of the decision of Hon'ble Supreme Court in the case of Lovely Exports (P) Ltd. (supra) prevailing at that time. Therefore, the Ld. CIT could not have invoked jurisdiction u/s 263 of the IT Act. He accordingly submitted that the order of the CIT be set aside and the grounds raised by the assessee be allowed. 17. The Ld. DR on the other hand heavily relied on the order of the Ld. CIT. He submitted that the very basis on which the reopening was made was not addressed by the AO. No deeper enquiry was conducted by the Assessing Officer to tax the bogus share capital and share premium in the hands of the assessee. He submitted that....
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....efore us by both the sides. We find the original assessment in the instant case was completed by the Assessing Officer u/s. 143 (3) on 31.12.2008 accepting the returned income at Nil. We find the case of the assessee was reopened by issue of notice u/s. 148 after recording reasons and subsequently the Assessing Officer completed the assessment u/s. 143 (3)/147 on 13/12/2011 accepting the returned income and thereby dropping the proceedings initiated u/s.147 of the IT Act. We find the Ld. CIT held the order passed by Assessing Officer u/s 143 (3)/147 as erroneous and prejudicial to the interest of the revenue on the ground that the Assessing Officer simply accepted the case decision relied on by the assessee in the case of Lovely Exports (P) Limited (supra) and the AO had not made any further enquiry regarding such share applicants. According to the Ld. CIT after the decision of Hon'ble Supreme Court various other courts had occasion to consider the said decision and one such decision was decision of Hon'ble Delhi High Court in the case of CIT Vs. Nova Promoters Finlease Private Limited reported in 342 ITR 169. He was also of the opinion that the AO should have appreciated the evid....
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.... furnished information alongwith supporting documentary evidence with regard to amount of share application money and after verification of these amounts from the relevant books of a/c as well as from the bank statements, no addition is required to be considered in the said assessee company case. The information of the following company are being referred/ sent to the concerned Assessing Officer for taking further necessary action against the below companies. Sr. No. Name of the entry provider entry Amount of share application money ( in Rs.) 1 Adonis Financial Services Pvt. Ltd. 13/34, WEA, Arya Samaj Road, Karol Bagh, 2500000 2 Aries Crafts Pvt. Ltd. 13/34, WEA, Arya Samaj Road, Karol Bagh 5000000 3 Bhawani Portfolio Pvt. Ltd. 13/34, WEA, Arya Samaj Road, Karol Bagh 3000000 4 Campari Fiscal Services Pvt. Ltd. 13/34, WEA, 4th Floor, Main Arya Samaj Road, Karol Bagh 6000000 5 Corporate Finlease Pvt Ltd. 13/34, WEA, Arya Samaj Road, Karol Bagh 5500000 6 Deep Sea Driling Pvt. Ltd. 13/34, WEA, Arya Samaj Road, Karol Bagh 5500000 7 DU Securities Pvt. Ltd. 13/34, WEA, Arya Samaj Road, Karol Bagh 3000000 8 Ebony Investment Pvt. Ltd. 13/34, WEA, ....
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....d been concluded as against the revenue. The satisfaction of the CIT, therefore, was based on no material either legal or factual which would have given him the jurisdiction to take action under section 263 of the Act." 24. So far as the allegation of the Ld. CIT that the AO should have conducted further enquiry which were necessary to gather relevant material which the AO failed to do and there was non application of mind on the part of the AO is concerned, we find in the instant case thorough enquiries were conducted by the AO both at the time of original assessment and at the time of reassessment proceedings. Full details giving the names, addresses, number of shares of nominal value and share premium amount of all the share holders alongwith their bank statements, copy of IT returns, PAN etc. were filed before the AO. Even if the share holders were bogus as per allegation of the revenue in view of the reasons recorded for reopening, however, as per prevailing law at that time in view of decision of Hon'ble Supreme Court in the case of Lovely Exports (P) Limited (surpa) addition could not have been made in the hands of the assessee and addition, if any, could have been made onl....