TaxTMI 
TaxTMI 
2019 (2) TMI 1846
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....f reasons without there being any specific allegation of the failure on part of the assessee to disclose fully and truly and particular material fact having bearing on computation of income, as the same has been reopened after a period of four years from the end of relevant assessment year and the assessment has already been made under section 143(3). 1.2 On the facts and circumstances of the case, the Ld. CIT(A) has ignored the contention of the assessee that in the absence of any cogent material available with the AO, the satisfaction of the AO that income chargeable to tax has escaped assessment is based on change of opinion on the issue already adjudicated in the original proceedings u/s. 143(3) of the Act. 1.3 On the facts and circumstances of the case, the Ld. CIT(A) has not appreciated the contention of the assessee that the reassessment proceedings have been initiated after approval by the Pr. CIT, Delhi-7, New Delhi and the said approval was mechanical and without application of mind by the above authority in as much as there is no date of satisfaction by the either of the authorities mentioned in the performa of obtaining sanction. 2. On the fac....
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....rtunity to rebut the same. 9. The assessee craves leave to add, delete, modify / amend the above grounds of appeal with the permission of the Hon'ble appellate authority. 2. The facts in brief are that the assessee filed its return of income on 30.9.2008 for the assessment year 2008-09 declaring income of Rs. 3,32,390/-. The Assessing Officer passed the order u/s. 143(3) of the Income Tax Act, 1961 (in Short "Act") on 31.3.2016, by assessing the income at Rs. 4,12,390/-. The order was rectified u/s. 154 of the Act and determining the assessed income at Rs. 8,84,600/-. Subsequently, information was received from the Joint Director, Directorate of Enforcement, New Delhi. The Joint Director, Directorate of Enforcement, New Delhi vide his letter intimated that during the course of investigation in coal scam matter in which the assessee was accused of being involved they have found certain information regarding issue of shares by the assessee company. It was informed that the assessee had issued shares of its group companies and family members at different rates. On 28.2.2008 shares were issued at a premium of Rs. 40/- however, shares were issued at premium of Rs. 490/- ....
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....vitally important for adjudicating the issue of unexplained cash credit u/s. 68 of the Act. It was the further contention that Ld. CIT(A) has acted against the principles of natural justice in not allowing the opportunity of cross examination of the person whose testimony is relied on the AO to draw adverse inference and also ignoring the fact that the AO has himself recorded the fact in para 7.1 at page 10 of the impugned assessment order that due to paucity of time the opportunity could not be allowed to the assessee to cross examine the witness and such opportunity be allowed by the Ld. CIT(A) is so desired by the assessee. It was the further contention of the ld. counsel for the assessee that lower authorities erred in not admitting additional ground under which the legality of the order of assessment under appeal was challenged on the ground of the order being passed beyond the period of limitation prescribed u/s. 153(1) of the I.T. Act. On merit of the case, the Ld. Counsel for the assessee submitted that Ld. CIT(A) has upheld the rejection of explanation in respect of cash credit of Rs. 12,45,00,000/- by the AO, simply drawing adverse inference against the assessee for non-p....
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..... GOYANKA LIME AND CHEMICALS LTD. ITA NO. 82 TO 89/2012 DATED 15.10.2014. - CIT vs. Orissa Corporation (P) Ltd. 159 ITR 78 - CIT vs. Sophia Finance Ltd. (1994) 205 ITR 0098 (Del.) - CIT vs. Makhni and Tyagi P Ltd. (2004) 267 ITR 433 (Del.) - CIT vs. Lovely Export 299 ITR 268 (SC) - CIT vs. Gangour Investment Ltd. ITA No. 34/2007 - CIT vs. Pradeep Gupta 207 CTR 115 - CIT vs. Divine Leasing & Finance Ltd. CC 375/2008 - CIT vs. Anshika Consultants Pvt. Ltd. ITA No. 467/2014 vide order dated 16.4.2015. 4. On the contrary, Ld. CIT(DR) relied upon the orders of the authorities below and on the issue of Non-Disclosures/Incorrect Disclosure of Material, she submitted that the fact of acceptance of share application money with share premium was something was not disclosed to the department by the assessee in the original proceedings completed u/s 143(3) of the Act. On the issue of non-application of mind u/s 151, she relied on sec 292B of the Act as per which any mistake or defect or omission in the ROI, assessment, notice, summon or other proceedings will not be valid will not invalidate the assessment and the proce....
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....hi (1977) 109 ITR 537 (SC) - CIT vs. PVS Beedies (P) Ltd. (1999) 103 Taxman 294 (SC) - ACIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 161 Taxman 316 (SC) - Yuvraj vs. Union Of India 315 ITR 84 SC - Ankit Financial Servicse Ltd. vs. DCIT (2017) 78 taxmann.com 58 (Gujarat) - Pee Aar Securities Ltd. vs. DCIT ITA No. 4978/Del/2014 dated 23.8.2018 - Sonia Gandhi vs. ACIT Others WP(c) 8482/2018 CM Appeal 32580-32582/2018 order dated 10.9.2018. - PCIT vs. Meenakshi Overseas Pvt. Ltd. ITA No. 651/2015 of Delhi High Court. order edated 11.1.2016. - Pr. CIT vs. Matchless Glass Servicse (P) Ltd. 65 taxmann.com 310 (Delhi) - Onasis Axies P Ltd. vs. CIT 44 taxmann.com 408 (Delhi) - CIT vs. N. Tarika Properties Pvt. Ltd. 40 tasxmann.com 525 (Delhi). - CIT vs. Nipun Builders & Developers P ltd. 30 taxmann.com 292 (Delhi) - CIT vs. MAF Academy P Ltd. 42 taxmann.com 377 (Delhi) - CIT vs. Titan Securities Ltd. 32 taxmann.com 306 (Delhi) - CIT vs. Nova Promoters & Finlease (P) Ltd. - CIT vs. Youth Construction (P) Ltd. 44 taxmann.com 364 (Delhi) - CIT ....
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.... 68 of IT Act and such acceptance by the AO of the share application money which is received at different rates of premium, is the fact specifically coming to the knowledge of the AO in original proceedings. He further stated that the balance sheet of the assessee at page 12 and its Schedules A & B at page 14 of the paper book was before the AO on the basis of which the assessment proceedings were initiated and completed. Further, the notice u/s 142(1) dated 30.04.2010 and the questionnaire enclosed therewith at paper book at page 27 in item No.4 clearly requires the assessee to submit detail of share capital/share premium. There is no force in the argument of the Ld CITDR that this fact is not in the knowledge of the AO in the original proceedings. On the contention of the Ld. CIT(DR), on the issue of Non-Application of Mind u/s 151, he stated that the Hon'ble Bombay High Court in the case of Smt. Kalpana Shatilal Haraia case (Judgment compilation PB 136-137) in para 8 (PB 136) held that mistake or error committed by AO while taking sanction is not the issue, the issue is due application of mind by the authority granting sanction u/s 151. Therefore, the protection u/s 151 is n....
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....verse view against the assessee. In reply, to the contention of the Ld. CIT(DR), Ld. counsel for the assessee submitted on the limitation issue that the term used in sec 153B is making an order of assessment before the prescribed date and in view of the judgments of the Kerala High Court in the cases of CAGIT vs Kappumalai Estate 234 ITR 187 (Ker) and another judgment reported in 69 STC 62 and other decisions of 327 STC 303 (AP) and 93 STC 406 (SC), the order to make the assessment is complete and effective once the same goes beyond the control of authority concerned. It was also submitted on behalf of the assessee that the assessing officer in any case should have taken care to pass the order before the limitation date in the manner that he is able to get the process completed by posting the assessment order/demand notice. Without prejudice to above, the Ld. CIT DR is not correct in saying that the post office is open in office hours only for accepting speed post but this facility is available round the clock in Delhi. Therefore the assessing officer had time to get the speed post article handed over to speed post authority till 12.0 clock at night. However, on the contention of t....
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....e.f 01.04.2009 is on record of the AO and dealt in para 4 at page 4 of the assessment order, The company M/s Jaisri came to be a legal entity and the summon u/s 131 was issued to the common director Sh. Sulekh Chand Jain. This fact is also noted in above para. In view of these facts, the above allegation of non furnishing of addresses is baseless and farfetched. He further submitted that the Ld. CIT(A) has relied on various judgments in support of contention that in case of so called entry provider companies, entire onus is on the assessee to prove that the cash credit by way of share capital is an unaccounted money introduced in the books of account in the garb of share capital. However, the assessee has submitted in the written synopsis, various authorities which say that the AO should consider the evidence produced in support of cash credit and charging of higher premium is no ground for invoking sec 68 of IT Act and also failure to comply with the summon by the share applicant companies is no ground for taking adverse view. 6. We have heard both the parties and carefully considered the case laws and the relevant documents available on record, especially the impugned order, W....
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.... shares were issued at a premium of Rs. 490/- on 31/03/2008 and 24/12/2009. The investigation is stated to be monitored by tire Hon'ble Supreme Court The information received from Directorate of Enforcement has been considered with reference to the return of income available on record. It is noticed that these shares were issued at exorbitantly high premium of Rs. 490/- per share to Kolkatta based companies as per the following details. Remaining investment at a premium of Rs. 40 per shares was received from directors, promoters and their family members during the year. 6.1 After perusing the aforesaid reasons recorded, we find that the reasons recorded is based on general perception of the AO regarding Kolkata companies providing accommodation entries to the beneficiaries. We further note that the information is as per the Directorate of Enforcement communication did not reveal that any new facts/ material or evidence indicating the state of affairs, contrary to what was already on record, duly examined by the competent authority. This information was neither a fresh material nor did it indicate the escapement of income by the assessee in one way or the other. There is n....
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....f would not give him a ground to conclude that income has escaped assessment and, therefore, the assessment needed to be reopened." 6.2.1 The Hon'ble Supreme Court of India in the case of ITO vs. Techspan India Private Limited and Another in the Heads Notes has observed as under:- Reassessment - conditions precedent - general principles - exemption - export of computer software - assessee having income from software development and human resource development - claiming exemption in respect of income from software development but claiming common expenses - show cause notice issued in original assessment proceedings with regard to allocation of common expenses and assessment made thereafter - question to what extent deduction to be allowed under section 10A well considered in original assessment proceedings - notice for reassessment on ground deduction under section 10A allowed in excess - merely a change of opinion on facts already available in original assessment proceedings - reassessment not permissible - Income Tax Act, 1961 as ss. 10A, 147, 148." 6.3 The Hon'ble Supreme Court of India in the case of CIT vs. Kelvinator of India Ltd. [2010] 320 ITR 561 (SC)....
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....ecific input by applying the same on the assessee by linking the share applicant companies to the company dealt by the ITAT in the case of Bishaka Sales. In the absence of such nexus or linkage established by the AO with the facts of the assessee company or the shareholder companies, the cognizance of such a judgment amounts to acting on mere suspicion and nothing more. Any action on such basis is nothing but an exercise in the nature of carrying a roving enquiry in order to carry investigation, much short of a belief which is the requirement of law. The AO is not entitled to act on suspicion but act with the prima facie belief of escapement of income. 6.6 The assessment of the assessee for the assessment year under consideration was originally completed u/s 143 (3) of the IT Act on 24.08.2012. Further the reassessment proceedings have been initiated after expiry of four years from the end of the above assessment year. By virtue of proviso to section 147, the initiation of reassessment proceedings is not valid unless the income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to either make a return u/s 139 or....
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.... reassessment is therefore invalid and need be quashed. A simple statement of failure of the assessee to fully and truly disclose all material facts, as is done in the order disposing off the objection, leaves the compliance by the AO midway. It falls short of the requirement of the proviso and therefore fails to address the demands of the above proviso. . The Hon'ble Delhi High Court in the case of Dalmia (P) Ltd v CIT & ANR64 DTR 417 held that the onus is on the revenue to show that the assessee had stated incorrect facts and wrong material facts resulting in the AO proceeding on the basis of such facts. It was held by the Court that the reason recorded and the documents on record are of paramount importance and will have to be examined to determine whether the stand of the Revenue is correct. It was further emphasized that failure to make full and true disclosure material facts is a precondition which should be satisfied if reopening is after four years of end of the assessment year. It was held by the Hon'ble Jurisdictional High Court in the case of WelIntertrade (P) Ltd. &Anr. vs. ITO (2009) 308 ITR 22 (Del) that where assessee having fully and truly disclosed all the ....
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....nless and until there is failure on the part of the assessee to disclose fully and truly all the material facts necessary for assessment. In the present case, it has not been specifically indicated as to which material fact or facts was/were not disclosed by the petitioner in the course of its original assessment under Section 143(3) of the said Act." 6.9 We find that the judgment of the Hon'ble Delhi High Court in the case of CIT vs Tirathram Ahuja (HUF) (2008) 6DTR 335 (Del.) is also cited to highlight the proposition that conditions laid down in proviso to section 147 need be strictly full filled as this power is an exceptional power and in the absence of strict compliance of conditions of proviso, the exercise of power held to be unsustainable in law. 6.10 We also note that the order is bad in law because the reason recorded are vague and without application of mind and are based on the information of the Enforcement Directorate with no incriminating material which is coming to the possession of the AO for the first time and which was not there with him at the time of original proceedings. In the reasons recorded in instant case the AO has not referred to any specific....
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....f recording reasons and providing satisfaction u/s 151. 6.11 We also note that the action of the AO has been taken mechanically on the basis of alleged report of Enforcement Department. The mere recording/ formulation of reasons on the basis of reproduction of information from Investigation Wing and, issuing notice for initiation of re-assessment proceedings does not constitute application of mind much less independent application of mind. Hence, the proceedings are without jurisdiction. It is settled law that AO cannot act mechanically on the basis of report of Enforcement Directorate and to show that the AO has applied his mind, he must distinct all those materials and he must also show that what was material on record. Hence, initiation of proceedings is also based on non-application of mind much less independent application of mind. This view is fortified by the decision of the Hon'ble Delhi High Court in the case of Pr. CIT v. G&G Pharma India Ltd. reported at 384 ITR 147 (Del), wherein it has been held as under:- "Today when the case was called out, Mr. Sawhney produced before the Court the very same letter of the AO dated 15th September 2010 which has been re....
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....a fit case for the issue of notice u/s. 148." which establishes that the competent authority has not recorded proper satisfaction / approval, before issue of notice u/s. 148 of the I.T. Act. Thereafter, the AO has mechanically issued notice u/s. 148 of the Act, on the basis of information allegedly received by him from the Directorate of Enforcement. Keeping in view of the facts and circumstances of the present case and the case law applicable in the case of the assessee, we are of the considered view that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. Our aforesaid view is fortified by the following decisions:- (A) Hon'ble Delhi High Court in the case of Pr. CIT vs. M/s NC Cables Ltd. in ITA No. 335/2015 has held as under:- 11. Section 151 of the Act clearly stipulates that the CIT(a), who is the competent authority to authorize the reassessment notice, has to apply his mind and form an opinion. The mere appending of the expression 'approved' says nothing. It is not as if the CIT(A) has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has....
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....sment was invalid - Whether Special Leave Petition filed against impugned order was to be dismissed - Held, Yes (in favour of the Assessee)." 7. In the background of the aforesaid discussions, we find that case laws relied by the Ld. CIT(DR) on the legal issue are distinguished on facts, hence, does not support the case of the Revenue. However, the case laws discussed by us in this order, as aforesaid are directly applicable on the issues raised in ground no. 1. Therefore, respectfully following the precedents, as aforesaid on the issues of legal grounds, we are of the considered view that proceedings initiated by invoking the provisions of section 147 of the Act by the AO and upheld by the Ld. CIT(A) are nonest in law and without jurisdiction, hence, the re-assessment is quashed. Since we have already quashed the re-assessment, the other grounds have become academic and are therefore not adjudicated and accordingly, the assessee's appeal is allowed. 8. In the result, the Appeal filed by the Assessee stands allowed Order pronounced on 07-02-2019. ============= Document 1 FORM FOR RECORDING THE REASONS FOR INITIATING PROCEEDINGS U/S 148 AND FOR OBTAINING THE APPROV....
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....ecome group companies as their share holding have been bought by the promoters of the assessee company. As per the typical scheme of money laundering utilizing these companies, it is seen that these companies were having huge reserve and surplus. The ownership of the investing companies has changed hands and the promoters of the assessee company have become owner of the company either directly or through group entities. The investments made by the companies before taking over are liquated by using accommodation entry channels in cash and the laundered sale consideration of investment is now made in the assessee company. As stated above, the entire scheme has been unearthened as discussed in the order of the ITAT. From the details available on record it is clear that the assessee company has also utilized the typical money laundering route to obtain cash credits at such unexplainable premium. As such, it is clear that the cash credits received by the asssessee at such a high premium are nothing but routing of unaccounted money through such Kolkatta based intermediary companies. Thus the cash credits received clearly falls within the scope of pr....