TaxTMI 
TaxTMI 
TaxTMI 
2016 (12) TMI 1816
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....s after recording of the reasons to form the belief that income has escaped assessment. ii) That the assessee did not file return of income under section 139(1) of the Act coupled with the fact that specific information was received with details from the investigation wing. 3. That on the fact and circumstances of the case Ld. CIT(A) has erred in law as much as in fact in holding that the requirement of 'application of mind by the Income Tax Officer' for valid initiation of reassessment proceedings can be substituted by nonfilling of return under section 139(1) and the existence of details received from the Investigation Wing of the Department. 4. That on the fact and circumstances of the case Ld. CIT(A) has erred in law as much as in fact in upholding the addition of Rs. 25,00,000/- added under section 68 of the Act as unexplained cash credit as she has completely ignored the fact that the addition has been made against well established principles of law relating to violation of natural justice. The addition is made without providing the opportunity of cross examination of the material on the basis of which reassessment proceedings are initiated and addition is ma....
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....notice u/s 148 of the Act. Accordingly, the AO issued the notice u/s 148 of the Act. In response to the said notice, the assessee filed its return of income on 13.05.2014 declaring income at Nil. During the course of assessment proceedings, the AO observed that the assessee had raised/taken total share capital of Rs. 5,32,000/- alongwith share premium of Rs. 1,27,68,000/- from the various companies including the share capital of Rs. 1,00,000/- alongwith share premium of Rs. 24,00,000/- as per following detail: S.No. Name of the company Share capital Share premium Total Amount (Rs.) 1. MARRASS Industries Pvt. Ltd. 60,000 14,40,000 15,00,000 2. BSA Fincap Private Ltd. 40,000 9,60,00 10,00,000 Total 25,00,000 6. The assessee during the course of assessment proceedings submitted names and addresses of the persons/company with confirmation, from whom share capital have been received. The AO issued the notices u/s 133(6) of the Act to prove the genuineness and creditworthiness of the share capital introducers, the said notices were received back unserved. He, therefore, was of the view that in the absence of confirmations, the creditworthines....
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....er receiving the relevant recordings and replies The Learned Assessing Officer has passed the order U/s 143 (3) dated 31.07.2014 by making Addition of Rs. 25,00,000 u/s 68 as income from undisclosed sources. We submit herewith our Submissions on Ground No -1 to 4 attached herewith. ASSESSING OFFICER'S CASE- BRIEF FACTS The Learned AO has contended that "An information has been received from Office of the commissioner of Income Tax -1 New Delhi that the survey operation was conducted on 23.08.2008 at the Premises of the Following Persons: a) Nirbhaya Shankar Gupta b) Shyam Shankar Gupta c) Rajiv Kumar Gupta d) Sh Madan Gupta" "The perusal of documents impounded during Survey operations reveals that the following persons have given/received accommodation entries through the above persons during the period relevant to Assessment year 2007- 08 The name of Assessee M/s Khatri Projects Private Limited New Delhi appears in the List of Beneficiaries who have taken accommodation entries in the garb of Share Application Money through the Bank Accounts existing in the names of Paper/ Dummy concerns/entities operated/Controlled by Shri Shyam Shankar Gupta, Entry Ope....
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....ted. Present reopening is not only on ground of change of opinion but also hit by proviso to section 147. In the case of Anirudhsinhii Jadega v. State of Guiarat (1995) 5 SCC 302, "the Hon'ble Supreme Court held that once a discretion is vested with a certain authority, he alone should exercise that discretion vested under the statute and if he acts in accordance with "the direction or any compliance with some higher authorities instruction" it would be a case of failure to exercise discretion altogether. This ground is covered by series of decisions of jurisdictional high court and This Hon'ble Tribunal enlisted next: i) CIT vs. SFIL Stock Braking Ltd. (2010) 325 ITR 285 (DHC). ii) Sarthak Securities Co. Pvt. Ltd. Vs. ITO., (2010) 329 ITR 110 (DHC). iii) Signature Hotels Pvt. Ltd, Vs. ITO & Anr., (2011) 338 ITR 51 (DHC). iv) Recent decision of Hon'ble Jurisdictional High Court of Delhi in the case of CIT vs Insecticides (India) Ltd. (2013) 357 ITR 330 v) Decision of ITAT Delhi Bench in the case of ITO vs On Exim Pvt. Ltd. (2013) 157 TTJ 633 (ITAT Delhi) vi) Recent Jurisdictional Delhi high court decision in case of G&G Pharma Ltd 8/10/2015 fo....
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....basis of such material, it was not possible for the AO to have simply concluded: "it is evident that the assessee company has introduced its own unaccounted money in its bank by way of accommodation entries". In the considered view of the Court, in light of the law explained with sufficient clarity by the Supreme Court in the decisions discussed hereinbefore, the basic requirement that the AO must apply his mind to the materials in order to have reasons to believe that the income of the Assessee escaped assessment is missing in the present case. "The Court would like to observe that this is in the nature of a post mortem exercise after the event of reopening of the assessment has taken place. While the CIT may have proceeded on the basis that the reopening of the assessment was valid, this does not satisfy the requirement of law that prior to the reopening of the assessment, the AD has to. applying his mind to the materials, conclude that he has reason to believe that income of the Assessee has escaped assessment. Unless that basic jurisdictional requirement is satisfied a post mortem exercise of analysing materialsproduced subsequent to the reopening will not rescue aninhere....
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....he assessee for the asstt. year in dispute is bad in law and deserves to be quashed. We draw our support from the judgments of the Hon'ble High Court of Delhi in the following cases:- (i) Signature Hotels (P) Ltd. vs. ITO and another reported in 338 ITR 51 (Del) has under similar circumstances as follows:- A notice uls.148 can be quashed if the/belief is not bona fide, or one based on vague, irrelevant and non-specific information. The basis of the belief should be discernible from the material on record, which was available with the Assessing Officer, when he recorded the reasons. There should be a link between the reasons and the evidence/material available with the Assessing Officer. (ii). In the case of CIT vs. Atul Jain reported in 299 ITR 383 it has been held as under:- "Held, dismissing the appeals, that the only information was that the assessee had taken a bogus entry of capital gains by paying cash along with some premium for taking a cheque for that amount. The information did not indicate the source of the capital gains which in this case were shares. There was no information which shares had been transferred and with whom the transaction had taken pl....
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....ee makes it dear that notice u/s. 148 was issued as per information received from Investigation wing from Mumbai. The reasons recorded by Assessing Officer only indicate that as per information of Investigation wing from Mumbai, certain companies of Mukesh Chokshi group were operating and allegedly providing accommodation entries and assessee has also received share application money from such company. Assessing Officer just made general observation about information supplied by Investigation Wing and sought to reopen the assessment without pointing out how information coming in his possession has nexus with escapement of income. The primary condition of Section 148 of the Act is that Assessing Officer must have reason to believe that income has escaped assessment and this satisfaction should be of Assessing Officer himself and not a borrowed satisfaction. Therefore, notice so issued to assessee was illegal and bad in law on fact of it. In this background, we find that language used in above reasons recorded is exactly same as in case of assessee. ii) Without cross examination of back party statements etc whole reopening is nullity At no stage statement/back material is co....
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....epted by the learned A.O in his order vide Para 3 of Page 4 The assessee had filed various documentary evidence s during the assessment proceedings in order to establish the identity and genuineness of the Transactions like PAN, Return of Income computation of Income Bank statements and confirmation of the parties from whom entire Share Capital and Share Premium was received. Hence it is argued that the contention of the Learned A.O that the assessee failed to prove the Identity, Credit worthiness of Persons/Companies genuineness of the Transactions is wrong as Reliance is placed on the recent Judgement of Delhi High Court in case of CIT Vs Ganoeshwari Metal Pvt. Ltd. 264 CTR 277 Wherein the high court has observed that ': Once the Assessee had furnished all the relevant material in order to establish the identity, Genuineness and creditworthiness of Share applicants the Assessing Officer was duty bound to carry out an exercise in order to conduct an enquiry" High court in this case indicted Two Types of cases - "One in which the Assessing Officer carries out the exercise which-isrequired in law and the other in which assessing Officer sits back till the assessee exhausts....
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....nce & Company Affairs, Department of Revenue Central Board of Direct Taxes, Room No. 254, North Block, New Delhi, the 10th march, 2003 To All Chief Commissioners of Income tax (Cadre Contra) & All Directors General of Income Tax Inv. Sir, Sub:- Confession of additional Income during the course of search & seizure and survey operation - regarding Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey ITA No. 6509/Del/2014 operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on' collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search it seizures and survey operations no attempt should b....
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....ing and after giving an opportunity of cross examine to the assessee. Even otherwise the AO has not conducted any enquiry whatsoever either in support of the information received from the Investigation Wing or to disapprove the evidence produced by the assessee. The AO could have verified the signature of the Directors of these entities from the bank by issuing the necessary summons/notices instead of insisting the assessee to furnish the bank certificate. Therefore it is a case of complete lack of enquiry on the part of the AO which ought to have been conducted while framing the assessment. In the case of CIT Vs. Rakam Money Pvt. Ltd. (supra) the Hon'ble Jurisdictional High Court by dealing with an identical question as observed in Para 13 as under ....... therefore the addition made by the AD merely on the basis of a statement recorded by the investigation Wing without any corroborative evidence and examinationand cross examination of the assessee, is not sustainable... IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH 'E' NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA No. 2515/Del/2010 AY: 2006-07 M/s Nis....
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....also, the director of the shareholder companies did not respond to the summon issued by the Assessing Officer. However, Hon'ble Jurisdictional High Court held that if the Assessing Officer did not make proper enquiries on the basis of income tax returns and PAN details of share applicant companies, the addition for unexplained credit cannot be sustained. In the case of the assessee, the facts are identical. The assessee produced confirmation, income tax return, balance sheet and bank statement of share applicant companies. The Assessing Officer did not make any effort to examine those evidences produced by the assessee. Therefore, the above decision of Hon'ble Delhi High Court would be squarely applicable. Similar views are expressed by their Lordships in the case of Vrindavan Farms (P) Ltd. (supra). Further it is argued that the Share application money so received should not be regarded as undisclosed income of the Assessee Company reliance is also placed on the Judgement of Supreme court of India ( Copy enclosed) in the matter of CIT Vs Lovely Exports Pvt. Ltd. 216 CTR 195 wherein while dismissing the Special Leave Petition the Apex court observed as under "If sh....
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....that under the deeming provisions of Section 68 of the Act, any sum, representing receipt or credit in the books of the assessee was itself an evidence against the assessee, unless the assessee explained the nature and source of such credits and if it fails to rebut the evidence available in the form of credit entry in its books, it can be added as income. A reference was made to the following decisions of the Hon'ble Supreme Court: * Govindaraju Mudaliyar 34 ITR 807 * Kale Khan Mohd. Hanif 50 ITR 1 * Devi Prasad Biswanath Prasad 72 ITR 194 * Sumati Dayal 214 ITR 801 * P. Mohana Kala 291 ITR 278 9. The ld. CIT(A) also referred to the judgment of the Hon'ble Jurisdictional High Court in the case of CIT Vs Focus Exports Pvt. Ltd. reported at 228 Taxman 88 wherein it has been held that where the assessee failed to offer a lucid, reasonable and acceptable explanation regarding the source and nature of credit, the AO is entitled to draw inference that the receipts were of an assessable nature. The ld. CIT(A) observed that where the courts have held that the onus is cast on the assessee to prove to the satisfaction of the AO, regarding the source of the cash credit then ....
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....rounding facts and circumstances have to be taken into account irrespective of the paper work in determining whether the transactions in question were genuine or not. The reliance was placed on the judgment of the Hon'ble Delhi High Court in the case of Global Securities and Finance Pvt. Ltd. reported at 264 ITR 481. The ld. CIT(A) confirmed the addition made by the AO on account of unexplained cash credit of Rs. 25,00,000/- u/s 68 of the Act by observing that neither the genuineness nor the creditworthiness of the companies had been proved and the explanation offered regarding the amounts credit in the books of the assessee had correctly been found to be unsatisfactory by the AO and that it was beyond human probability that the shares of the company could comment a premium of Rs. 96 per share leading to an infusion of share capital to the tune of Rs. 25,00,000/-. 11. Now the assessed is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the notice u/s 148 of the Act was issued on 27.03.2013 on the basis of information received from Commissioner of Income Tax, Central-1, New Delhi which is evident fr....
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....ce was placed on the following case laws: * Prashant S Joshi Vs ITO 230 CTR 232 * Hindustan Lever Ltd. Vs R.B Wadkar 268 ITR 332 (Bom.) * ITO Vs Laxmi Mewal Das 103 ITR 437 (SC) * Bhageria Finance and Investment Ltd. Vs DCIT 43 CCH 40 (Del.) * Signature Hotels Pvt. Ltd. Vs ITO 338 ITR 51 (Del.) * G & G Pharma India Ltd. Vs ITO 43 CCH 18 (Del. Trib.) * CIT Vs Atul Jain 299 ITR 383 (Del.) * ACIT Vs Dhariya Construction Company 328 ITR 515 (SC) 12. On merits the ld. Counsel for the assessee submitted that it was not denied by the AO nor by the ld. CIT(A) that the assessee had furnished all the requisite details regarding the identity and the transaction. The amount in question was received through banking channels, the details of which were made available to the AO. The addition had been simply made on the information on the ground that the notices sent to the parties had been received back and the assessee was unable to produce Principal Officer/Director of the investor companies. However, this contention of the assessee was not considered that as on the date of inquiry those companies were not the shareholders of the assessee as they had disposed off their ....
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....writ court, but existence on belief is the subject-matter of the scrutiny. A notice under section 148 can be quashed if the "belief" is not bonafide, or one based on vague, irrelevant and non-specific information. The basis of the belief should be discernible from the material on record, which was available with the Assessing Officer, when he recorded the reason. There should be a link between the reasons and the evidence/material available with the Assessing Officer. The "reasons to believe" would mean cause or justification of the Assessing Officer to believe that the income has escaped assessment and not that the Assessing Officer should have finally ascertained the fact by legal evidence or reached a conclusion, as is determined and decided in the assessment order, which is the final stage before the Assessing Officer. It has further been held that: "the reassessment proceedings were initiated on the basis of information received from the Director of Income-tax (Investigation) that the petitioner had introduced money amounting to Rs. 5 lakhs during financial year 2002-03 as stated in the annexure. According to the information, the amount received from a company, S, was no....