TaxTMI 
TaxTMI 
2019 (11) TMI 935
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....ntry provider M/s Aadhar Ventures India Ltd. (which was earlier known as M/s Pranetta Industries Ltd.) was not served. The petitioner states that the notice was not issued to the said party at the correct address. The petitioner states that this information has been gathered on inspection of the records of the respondents. The petitioner has also stated in its communication dated 16.08.2019 and 09.09.2019 that when the notice was initially issued to M/s Aadhar Ventures India Ltd., they had duly complied with the same. There are other issues also raised by the petitioner in its challenge to the issuance of notice under Section 147 of the Act and to the orders passed on the objections raised by the petitioner. Before looking into any other aspect, we call upon the respondents to file an affidavit dealing with these two factual aspects. Let a short affidavit in this regard be filed within a week. The original record shall also be kept available before the Court on the next date of hearing. List on 31.10.2019." 2. In terms of the last order, an affidavit has been filed on behalf of respondent No.2. From the said affidavit, it appears that the Assessing Officer issued notice....
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....een completed wherein it had been held that impugned companies were engaged in providing accommodation entries. The assessment of Shri Shirish C Shah has also been completed wherein detailed facts and modus operandi etc had been described. 4. I have perused the information received & available on record. Assessment in this case has been completed u/s 143 (3) to verify the addition of share capital of Rs. 3,00,00,000/- taken from M/s Prraneta Industries Ltd. Now the information received from DCIT, CC 2 (2), Mumbai is that M/s Prraneta Industries Ltd. Is the company of Shri Shirish C Shah who is engaged in providing accommodation entry. The information also state that the assessment in the case of Shrish C Shah . has been completed wherein detailed facts and modus operandi etc. had been described. The assessments of the companies providing accommodation entries have also been completed wherein it had been held that impugned companies were engaged in providing accommodation entries. During the assessment proceedings of these companies, they were asked to establish the source of funds. At this stage, all these companies filed letter which is either annexed or part of the order....
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.... capital infusion, was found to be engaged in the business of providing accommodation entries. This fact came to the notice of the Assessing Officer only upon receiving the investigation report from the DCIT, Central Circle-2(2), Mumbai which, itself, is premised on search conducted under Section 132 of the Act on the premises of Shri Shirish C Shah, who was managing the affairs of M/s Prraneta Industries Ltd. The reasons record that assessment proceedings in respect of Shri Shirish C Shah, as well as the company providing accommodation entries has been completed, wherein the said fact, viz, that they are engaged in providing accommodation entries, has been established. 5. Before proceeding further, we may also take note of the recent decision of the Supreme Court in Principal Commissioner of Income Tax (Central)- I v. NRA Iron & Steel Pvt. Ltd., (2019) 412 ITR 161 (SC) decided on 05.03.2019. The respondent assessee had shown receipt of share capital/ premium during the financial year 2009-10 aggregating to Rs. 17.60 crore from 19 companies - some of which were based in Mumbai, some in Kolkata and some in Gauhati. Shares having face value of Rs. 10 were subscribed by the said 19....
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....uiries revealed that they were nonexistent at the given address." 8. On the basis of the detailed inquiry, the AO found that: "i. None of the investor-companies which had invested amounts ranging between Rs. 90,00,000 and Rs. 95,00,000 as share capital in the Respondent Company - Assessee during the A.Y. 2009-10, could justify making investment at such a high premium of Rs. 190 for each share, when the face value of the shares was only Rs. 10; ii. Some of the investor companies were found to be nonexistent; iii. Almost none of the companies produced the bank statements to establish the source of funds for making such a huge investment in the shares, even though they were declaring a very meagre income in their returns; iv. None of the investor-companies appeared before the A.O., but merely sent a written response through dak. The AO held that the Assessee had failed to discharge the onus by cogent evidence either of the credit worthiness of the socalled investor-companies, or genuineness of the transaction." 9. Consequently, the AO added back the amount of Rs. 17.60 crores to the total income of the assessee for the assessment year....
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....963) 50 ITR 1 (SC) and Roshan Di Hatti v. CIT, (1977) 107 ITR (SC), wherein it had laid down the onus of proving the source of money found to have been received by the assessee, is on the assessee. Once the assessee has submitted the documents relating to identity, genuineness of the transactions and creditworthiness of the payee, then the AO must conduct an inquiry and call for more details before invoking section 68. If the assessee is not able to provide a satisfactory explanation of the nature and source of investment made, it is open to the revenue to hold that such investment is the income of the assessee, and that there would be no further burden on the revenue to show that the income is from any particular source. The Supreme Court also observed that with respect to the genuineness of the transaction, it is for the assessee to prove the same by cogent and credible evidence, since the investment was claimed to have been made in the share capital of the assessee company, it was for the assessee to establish that it was a genuine investment, since the facts are exclusively within the assessees knowledge. The Supreme Court also noticed the decision of this Court in CIT v. Oasis....
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....e receipt of money, and if he fails to rebut the same, the said evidence being unrebutted can be used against him by holding that it is a receipt of an income nature. While considering the explanation of the assessee, the department cannot, however, act unreasonably" ii. In CIT v. P. Mohankala, 291 ITR 278, this Court held that: "A bare reading of section 68 of the Incometax Act, 1961, suggests that (i) there has to be credit of amounts in the books maintained by the assessee ; (ii) such credit has to be a sum of money during the previous year ; and (iii) either (a) the assessee offers no explanation about the nature and source of such credits found in the books or (b) the explanation offered by the assessee, in the opinion of the Assessing Officer, is not satisfactory. It is only then that the sum so credited may be charged to Income-tax as the income of the assessee of that previous year. The expression "the assessee offers no explanation" means the assessee offers no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. The burden is on the assessee to take the plea that, even if the e....
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....quantum of money invested, credit-worthiness of the recipient, object and purpose for which payment/investment was made, etc. The incorporation of a company, and payment by banking channel, etc. cannot in all cases tantamount to satisfactory discharge of onus. vii. Other cases where the issue of share application money received by an assessee was examined in the context of Section 68 are CIT v. Divine Leasing & Financing Ltd. (2007) 158 Taxman 440, and CIT v. Value Capital Service (P.) Ltd. [2008] 307 ITR 334." 17. The principles culled out by the Supreme Court are contained in para 11 of its judgment, which read as follows: "11. The principles which emerge where sums of money are credited as Share Capital/Premium are: i. The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and credit-worthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. ii. The Assessing Officer is duty bound to investigate the creditworthiness of the creditor/subscriber, verify the identity of the....
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....oney through the cloak of Share Capital/Premium must be subjected to careful scrutiny. This would be particularly so in the case of private placement of shares, where a higher onus is required to be placed on the Assessee since the information is within the personal knowledge of the Assessee. The Assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the Assessee. 15. On the facts of the present case, clearly the Assessee Company - Respondent failed to discharge the onus required under Section 68 of the Act, the Assessing Officer was justified in adding back the amounts to the Assessee's income." (emphasis supplied) 19. Consequently, the appeal preferred by the Revenue was allowed by the Supreme Court. 20. Though the said decision was rendered by the Supreme Court while dealing with a Civil Appeal arising from a decision of this Court dismissing the appeal under section 260A of the Act, the findings returned by the Supreme Court, as extracted herein above, are extremely pertinent and relevant in the present context as well. 21....
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.... and duly served upon the assessee within the statutory time period. In response to notice Shri Anil Jain, Chartered Accountant of the assessee company attended from time to time and filed necessary details and the case was discussed with him. The details filed by the assessee were examined and have been placed on record. The books of accounts of assessee were test checked. The assessee company is exploring the mining activity for supply of coal to various big Industrial client as well as to provide consultancy in the field of real estate and mining. Assessed at Nil. Issue demand notice and challan and a copy of ITNS 150. " 23. We may also refer to Explanation 1 to Section 147 of the Act which reads "Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. 24. The information/ knowledge that M/s Prraneta Industries Ltd. (now known as M/s Adhar Venture India Ltd.) is engaged in the business of providing accommodation entries dawned upon the Assessin....
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....e limitation period, and the same is not merely a case of change of opinion on the same set of facts. A serious and well founded doubt about the genuineness of the transaction would justify formation of the reasonable belief that taxable income has escaped assessment in the light of the scheme of Section 68 of the Act, which provides that cash credits which, in the opinion of the Assessing Officer are not satisfactorily explained, would be charged to income tax as the income of the assessee. The subsequent acquisition of knowledge that the monetary transaction (including of the kind discussed above) undertaken by the assessee was with a bogus entity/ person such as an accommodation entry provider - which knowledge was not available to the Assessing Officer at the time of completion of the scrutiny assessment, would be a material change of circumstances, and the formation of belief that taxable income has escaped assessment would not suffer from the taint of simplicitor change of opinion. 28. One cannot lose sight of the fact that once the proceedings are reopened, the assessee would have full opportunity to meet the material/ evidence that the Assessing Officer may seek to rely ....
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....spect sought to be examined in the reassessment proceedings." 42. Consequently, even in the cases of Mr. Chetan Sabharwal in view of the fact that the original assessment orders are totally silent on this aspect of the matter, it cannot be said that the reason to believe constitutes a "change of opinion‟. 43. At this juncture it must be stated that on a perusal of the report of the investigation which was produced before this Court, it appears prima facie that there was sufficient material to justify the reopening of the assessment in both sets of cases. Further, upon reading the reasons to believe as a whole the "live link"between the material in the form of the investigation report and the formation of belief that income that has escaped assessment is prima facie discernable. The Court hastens to add that this is a prima facie view which is all that is necessary at this stage. 44. The Court in this context would like to refer to the following observations of the Supreme Court in ITO v. Selected Dalurband Coal Limited (supra) where it was considering the effect of a letter of the Chief Mining Officer which emerged after the conclusion of the assess....
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....rovider, most certainly, there was reasonable cause for belief that the monies received by the petitioner from Pranetta Industries Ltd. may also be part of the bogus entries provided by Pranetta Industries Ltd. and, consequently, the taxable income of the petitioner had escaped the assessment. 31. We, therefore, do not find any merit in the present petition, so far as the challenge to the issuance of notice under Section 148 of the Act is concerned, on the ground of wrong assumption of jurisdiction. The notice dated 29.03.2019 is sustained. 32. Another grievance raised by the petitioner is that along with the reasons to believe, the petitioner was not provided with any material on the basis of which the reasons are recorded. The submission is that due to the relevant material and documents not being provided, the right of the petitioner to raise objections has been effectively curtailed. 33. Ms. Malhotra has submitted that she is carrying the Assessment orders in respect of M/s Adhar Venture India Ltd. and Shri Shirish C Shah, which form the basis of the reasons recorded by the Assessment Officer. She has provided copies of the same to learned counsel for the petitioner in....