AI Drafter 
TaxTMI 
TaxTMI 
2020 (4) TMI 527
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....ote recorded below assessment order for A. Y. 2012-13. 3. The Ld. CIT(A) has erred in law and on facts in upholding an invalid reassessment order which was vitiated due to not passing of a speaking order disposing off the objections to 'reasons recorded' as mandated in GKN Driveshafts (India) Ltd. Vs. ITO (2003) 259 ITR (SC) (Refer Deepak Extrusions Pvt. Ltd. vs. DCIT 80 taxamnn.com 77 (Kar). 4. The Ld. CIT(A) has erred in law & on facts by upholding the addition of Rs. 1,64,00,000 of share premium money without application of mind and by ignoring the entire evidences such as PAN No., confirmatory letters, copies of IT returns filed, active status report etc. establishing the identity, creditworthiness and genuineness of the transactions of the share applicant companies. 5. The Ld. CIT(A) has erred in law & on facts by ignoring the evidences provided for and reasons given for non service of letters under section 133 (6) of the Income Tax Act, 1961. 6. The Ld. CIT(A) has erred in law and on facts by ignoring that the Ld. A.O. had....
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....referred an appeal before Ld. CIT(A) , who after considering the submissions sustained the addition and thereby the appeal filed by the assessee was dismissed. Now, the assessee is in further appeal before this Tribunal. The assessee has taken grounds in respect of the legality of the assessment in the form of additional grounds as well as on merit of the additions. It is pertinent to mention here that the assessee has taken against legality of the reopening of assessment in the form of ground Nos. 1, 2 &3 and the additional grounds. The additional grounds so raised are as under: 1. The CIT(A) has erred in law and on facts in upholding illegal reopening of the tax assessment for A. Y 2009-10 made u/ s 147/ 148 of I. T Act, 1961 in the absence of any reason to believe that income had escaped assessment and, therefore, the reopening of the assessment requires to be quashed. 2. The CIT(A) has erred in law and on facts in failing to appreciate that there was no application of mind by the authorities u/ s 151 while according sanction to the issue of notice u/ s 148 o....
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....r, in the office note recorded below the assessment order, it was mentioned that the case was selected for scrutiny under CASS for verification of share premium received at Rs. 1,64,00,000/- For about 1 year from the date of submission of information mentioned above till 29.3.2016, there was no communication from the A.O. He further contended that on 30.3.2016 notice u/ s 148 was received by the assessee company regarding escapement of income for the assessment year 2009-10. In response thereto, the assessee company filed IT return on 24.6.2016 declaring the same total income which was shown in the original return filed on 23.9.2009. The Ld. A.O. supplied a copy of reasons recorded for initiating the reassessment proceedings. He pointed out that it can be seen from para 5 that the A.O. had referred to the compliance made by the assessee company in response to notice dated 16.3.2015. In para 6 of the reasons recorded, the Ld. A.O. has mentioned that these documentary evidences do not prove the creditworthiness of subscribers and genuineness of transactions. It is noteworthy th....
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.... entry, the Ld. A.O. recorded about un-served letters and no response from others. Vide the same order sheet entry, the Ld. A.O. confronted the assessee's counsel about the same. The Ld. A.O. did not ask the appellant company either to get the letters served or to produce the directors of the share applicant companies. The Ld. A.O. did not consider the evidences given by the appellant company about identity of the subscriber companies, their creditworthiness and genuineness of the transactions and passed the assessment order on 20.12.2016 raising demand of Rs. 1,07,86,910/-. Thus, the enquiry was initiated by dispatching letters u/ s 133(6) on 24.11.2016 mostly at old addresses and was concluded within 6 days on 30.11.2016 merely on the basis of non service of some letters and no response from others. The appellant company was only intimated about it and not even asked to submit any response. Thus, the huge addition of Rs. 1,64,OO,OOO/ was made without giving any opportunity whatsoever and blatantly violating the principle of natural justice. The Ld. A.O. has even n....
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....t the basic ingredient necessary for making addition u/ s 68 of the Act. He submitted that the first requirement is to prove identity of subscriber companies. He submitted that the subscriber companies were very well in existence at the time of their application for share application money. These companies continue to be in existence even now. He submitted that Ld. CIT(A) did not consider the search report submitted by the assessee company in this regard. It was further contended that the Government has not deregistered any of the said companies. The said companies are not paper or shell companies as has been presumed by the Id. A.O. and endorsed by the Ld. CIT(A). the Ld. CIT(A) did not consider the detailed table given by the appellant company about non service of letter in each case. These subscriber companies got introduced to the appellant company because both the Directors are related to Mr. Radheshyam Maheshwari, age 74 who was earlier residing in Kolkata. While residing in Kolkata, he was a very senior officer in companies owned and managed by Bangur family. As ....
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....ders of the authorities below. The first objection of the assessee is that there is nothing on record suggesting that the A.O. had reason to believe that income had escaped assessment. The contention of the assessee is that the first requirement of the law for reopening is that the A.O. has to record a reason that income has escaped assessment. However, the contention of the revenue is that the reasons were recorded and duly supplied to the assessee. Such reasons were also disposed of by the A.O. We find before the Ld. CIT(A) also the assessee had raised an objection regarding not addressing all the issues raised in the objection by the assessee. However, the Ld. CIT(A) disposed of the objection in para 4.0 of his order by observing as under: "4.0 This ground of appeal is with regard to reopening of the assessment u/ s 147. I have gone through the assessment order as well as the reasons for reopening of the assessment u/ s 147 of the Income Tax Act. The A.O. has clearly outlined the reasons which the appellant himself has produced as Annexure-Z The A.O. has mentione....
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.... assessee in the form of additional ground and ground Nos. 1 & 2 of the assessee's appeal are disposed of for statistical purposes. Since we have set aside the assessment for making de-novo assessment we are not expressing any view on the merit of the addition. The same would be open to the assessee to press before the assessing authority. The other grounds are not adjudicated for the reasons stated hereinabove. 11. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order was pronounced in the open court on 05.02.2020. ============= Document 1 Govt. of India Ministry of Finance (Department of Revenue) OFFICE OF THE INCOME TAX OFFICER-4(2), INDORE "Aayakar Bhawan". Room No. 312. Residency Area, Opp. White Church, Indore. D F.No. ITO-4(2)/Ind./Remand Report/18-19/ To. The Addl. Commissioner of Income Tax (DR). ITAT. Indore Sir. कारà¥à¤¯à¤¾à¤²à¤¯ आयकर आयà¥à¤•à¥à¤¤ वि Dated: 12.04.201 12 APR 2019 आराकर nome Tex App....
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....of companies struck off in respect of various ROCs as additional evidence. However as discussed above, the same is not relevant from proving the genuineness of share capital received. (iii) The assessee has also furnished copy of Business Line news paper report dated 08.08.2017 regarding announcement of Hon'ble Prime Minister regarding struck off companies which again is not relevant for deciding the issue of addition on account of unexplained Share Capital of Rs.1.64 crores received from various companies. (iv) The assessee has also filed copies of registration u/s 12A of the IT Act and (v) copy of certificate u/s 80G in the case of Rukamiden Pannalal Maheshwari Trust from which the assessee derives its name. This again is irrelevant to prove the source of share capital from subscribers. The assessee has also filed copy of return of income filed by Shri Radheshyam Maheshwarl and copies of mark sheet of School/College. education of his son Amit Maheshwai who are the director of the company to prove the background of the directors and the company at Kolkatta. It is not understood as to how these are relevant from proving genuineness....
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....on of 37 judgments of Supreme Court/ High Courts/ ITAT's relied upon by the appellant were also submitted. In addition, a Table showing Ground of appeal and relevant judgment. from the compilation was also submitted. Para-wise comments on the remand report received on 25.07.2019 are as under: Paral of the report regarding Facts of case: These are only Facts of the case and hence no comments. Pare 2 & 3 of the report regarding Additional Evidences: Point No. (i) to (iii) of Para 2: The Ld. AO has referred to the list of 8078 companies struck of u/s 248 (5) of Companies Act 2013. This list was given by the appellant to show that none of the subscriber companies was appearing in the said list and hence these were not paper companies and were in actual existence. The Ld. AO has stated that what is material is source of funds invested and not the existence of subscriber companies. In this regard, it is stated that the list was given only to prove the identity' of subscriber companies. For showing the investment of funds, the appellant had filed other details with the Ld. AO such as copy of share application form, PAN Card copy, confirmatio....
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....corded (Ground No.1 & Additional Ground No. 1): (i) (ii) Para 1 and Para 2 of the reasons recorded show that reopening of assessment has nexus with the assessment proceedings for AY 2012-13. It may be added here that this assessment was selected for scrutiny on the limited issue of investment in mutual fund and not for verification of share capital. The Ld. AO has stated in these reasons that he called for details of share premium of Rs, 1,64,00,000/- vide letter dated 14.08.2014 [ Annexure 9 Page 93-94 of PB submitted before CIT (A) Q.No. 8]. This statement is, however, not factually correct. This is because this letter was a general questionnaire calling for information pertaining to AY 2012 13. It did not contain any mention whatsoever of the share premium money of Rs. 1, 64,00,000/-. Moreover, this letter was issued not by the Ld. AO who recorded reasons for reopening, but by the Ld. AO Ward1 (1) with whom this case was being assessed earlier. It was only on 20.11.2014 that the case was received on transfer by the Ld. AO Ward 1(2), Indore, who has recorded the reasons for reopening. It is evident from the copy of order sh....
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.... by appellant about share premium money. Without making any inquiry or verification of the information submitted the Ld. AO on 29.03.2016 recorded reasons that documentary evidences do not prove the creditworthiness of subscribers and genuineness of the transactions of the share premium money of Rs. 1,64,00,000/- and accordingly, issued notice u/s 148 on 30.03.2016 to the appellant company for AY. 2009-10. Document 7 (vii) It is noteworthy that the Ld.AO did not have any adverse information either about the appellant or any of the subscribers companies from Investigation Wing or any other external agency. The Reasons recorded show that the Ld. AO did not have any information for having reason to believe that income had escaped assessment as per the principle enshrined by Hon'ble Apex Court in the case of CIT v Kelvinator of India Ltd [2010] 320 ITR 561 (SC). In this judgment, while interpreting the phrase 'reason to believe' the Apex Court have held as under: "Hence after 1-4-1989, AO has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must ....