TaxTMI 
TaxTMI 
TaxTMI 
2018 (4) TMI 1792
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....s. 31,171/-, being 25% of various expenses of Rs. 1,24,682/-." 2. The facts of the case are that assessee has filed its return of income u/s 139(1) on 26.09.2010 declaring Nil income. Thereafter, the AO issued noticed u/s 148 dated 28.03.2013 after recording the reasons and seeking the necessary approval from the CIT Jaipur. The copy of the reasons so recorded were made available to the assessee and the objections so received by the assessee were disposed off by an order dated 14.03.2014. Thereafter, after considering the submission of the assessee, an addition at Rs. 30,00,000/- was made u/s 68 of the Act. Further, certain expenses amounting to Rs. 62,341/- were also disallowed. 3. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the action of the AO in initiating the proceedings u/s 147 and has also confirmed the addition made u/s 68 of the Act. However, regarding disallowance of expenses, certain relief was provided to the assessee company. Now, the assessee is in appeal before us. 4. In Ground No. 1, the assessee has challenged the action of the ld. CIT(A) in upholding the validity of the order passed by the AO u/s 147 ....
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....hat is mentioned in the reasons recorded and not the subsequent information which the AO has gathered or the information which is not a part of reasons recorded. Therefore, the cases relied by CIT(A) are not applicable to the facts of the present case. 7. In support of his contentions, the ld. AR placed reliance on the decision of Hon'ble Bombay High Court in case of Hindustan Lever Ltd. Vs. R.B. Wadkar (2004) 268 ITR 332 (Bom) where it was held that "It is needless to mention that the reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the AO to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the AO to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the AO to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous....
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....he relevant finding of the ld. CIT(A) and submitted that the AO while assuming the jurisdiction u/s 147 has applied his mind and has not acted on borrowed satisfaction. Once information was received by the Assessing Officer from Investigation Wing, Delhi on the basis of search and survey operation conducted in case of S.K. Jain Group of cases, the AO thereafter examined all the relevant and necessary facts and circumstances of the case and there is a definite nexus between the material and formation of belief by the AO that income has escaped taxation within the meaning of section 147 of the Act. Further, the ld DR relied upon the decision of Hon'ble Delhi High Court in case of Rajat Export Import (P.) Ltd. 18 taxmann.com 311 (Del.). It was submitted that the Assessing Officer has brought out all the relevant and necessary facts and circumstances to show that share application money of Rs. 30,00,000/- received from the number of companies was not genuine and is in the nature of accommodation entries. It was further submitted that merely because the information was received from the Investigation Wing, Delhi would not vitiate this satisfaction arrived that by the Assessing Officer. ....
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....o the tune of Rs. 30 lacs and on the basis of said information, he has reasons to believe that the income has escaped assessment. It was accordingly submitted by the ld DR that the belief formed by the AO is after due examination of the material on record that the income of the assessee chargeable to tax during the impunged assessment year has escaped assessment therefore, it cannot be said to be arbitrary or irrational. In our view, the formation of belief by the AO that the income has escaped assessment is thus clearly based on certain specific information received from DIT(Inv-II), New Delhi and therefore, it cannot be said that there exists no rational and intelligible nexus between the reasons and the belief. At the same time, the question that arises for consideration is whether the satisfaction so recorded by the AO that the income has escaped assessment has to emerge in clear, unambiguous, and self-explanatory terms and discernable from the reasons so recorded itself or the same can be explained and supplemented subsequently where so challenged by the assessee. In the instant case, we find that there is no mention of nature of the accommodation entry whether in form of shar....
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....ation of mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced." 12. In light of above discussions and respectfully following the decision of the Hon'ble Bombay High Court referred supra, we are of the view that even though the AO was in receipt of....
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....ly stated that he was engaged in providing accommodation entries as per the requisition of the beneficiaries and the work of accommodation entry is brought to him by Sh. S.K. Jain. A search operation was carried out u/s 132 by the Investigation Wing in New Delhi on 18.01.2011 at the residential and business premises of Sh. Rajesh Aggarwal. In his statement, he stated that he was in constant touch with Sh. S.K Jain and Sh. V.K Jain and he knew that they are known accommodation entry operator who provides cheques against payment of cash after deducting specific premium from the parties. The AO, thereafter, issued letters u/s 133(6) for calling information from all these parties. However, no such information was received. The AO then required the assessee to produce Sh. G.L. Gupta, the middleman and Sh. Ghanshyam Agarwal, the director of assessee company. The assessee's AR vide letter dt.28.02.2014 and 08.02.2014 submitted that none of the director of the assessee company is in touch with or aware about Sh. G.L. Gupta and thus he cannot be produced. Further, Sh. Ghanshyam Agarwal has undergone a surgery on 06.01.2014 at Fortis Hospital and he is still not well and feeling problem in m....
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....able to produce the directors to testify regarding their own investments. Therefore, the AO was justified in holding these amounts as unexplained. He further relied on the decision of Delhi High Court in case of N.R. Portfolio P. Ltd. and CIT Vs. Navodaya Castels Pvt. Ltd. 16. During the course of hearing, the ld. AR submitted that from the facts stated above, the main reason for the addition is that the investment made by the above three companies in the shares of the assessee company, are paper companies which belong to Sh. S.K. Jain Group of companies. However, the lower authorities have neither provided nor confronted the assessee of any material in support of their assumption even when the assessee specifically requested the AO vide letter dt. 10.12.2013 to provide the copy of statement of all the persons of Sh. S.K. Jain Group and the investigation report and other documents suggesting that this group was engaged in providing accommodation entries. Further, the AO has not provided any opportunity to the assessee to cross examine any of the persons namely Sh. S.K Jain or Sh. V.K. Jain or Sh. Assem Kumar Gupta or Sh. Rajesh Aggarwal whose statements has been referred/relied in....
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....ication money, Confirmation, bank statement, balance sheet, RO C return. M/s Ultimate IT Solution U-23, Arvind Nagar, Ghonda, Delhi-53 PAN No.: AAACU9005G 20,000 Rs. 10,00,000/- Copy of share application money, Confirmation, bank statement, balance sheet, ROC return. From the above table it can be noted that the above companies are assessed to tax, their PAN No. is provided, the transaction is through banking channel and the shares has been allotted to them as is evident from Form 2 - Return of Allotment filed with ROC. From the Balance Sheet of these companies, their creditworthiness and genuineness of the transaction can be perceived in as much as they have substantial shareholders funds and the name of the assessee company is appearing in the detail of investment made by them. Thus, the assessee has discharged the onus which lay upon it u/s 68. Therefore, solely on the basis of the information received from Investigation Wing, Delhi, the share capital received by the assessee from these companies cannot be presumed to be accommodation entries. 19. The AO observed that director of the assessee company, Sh. Ghanshyam Agarwal was not produced. In this connection, it was submi....
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....ima facie view and a reason to believe that the income has escaped assessment and has thus assumed jurisdiction u/s 147 of the Act. At the same time, such a prima facie view has to be finalized and a firm view has to be taken on basis of examination of documents so brought on record and further investigation to be carried out before any tax liability is fastened on the assessee. In the instant case, we find that the assessee company has submitted detail documentation in regard to these companies from whom a total amount of Rs. 35 lakhs was received namely (i) share application form (ii) copy of Board Resolution (iii) Copy of Bank Statements reflecting payment through cheque (iv) Audited Statement of Accounts and Acknowledgement of ITR (v) Copy of certificate of lncorporation and Certificate of Commencement of Business (vi) Copy of PAN Card. Where the assessee furnishes the documentation and necessary explanation, the AO should examine whether the documents so submitted and explanation so offered establishes the three ingredients i.e. identity of the investor company, creditworthiness of investor company and genuineness of the transaction. Whether explanation of the assessee is reli....
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....rom these companies under section 133(6) and/or issuing summons to directors of these companies under section 131 of the Act. Further, where the AO relies upon the statement of third parties (Praveen Jain and others) recorded u/s 132(4), without getting into controversy whether the said statement was retracted subsequently, the fact remains that the assessee deserves an opportunity to cross examine such persons as held by the Hon'ble Supreme Court in case of Andaman Timber Industries (supra). During the course of assessment proceedings, the assessee company has made specific request to the AO to allow cross examination of these persons which has however not being provided to the assessee company. In light of above discussions, we don't find any basis for making addition under section 68 of the Act. In the result, ground no.2 taken by the assessee company is allowed." 22. In the instant case, we find that the assessee has requested the AO vide letter dt. 10.12.2013 to provide the copy of statement of all the persons of Sh. S.K. Jain Group and the investigation report and other documents suggesting that this group was engaged in providing accommodation entries, however, there is not....