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2019 (2) TMI 1846

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....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 facts and circumstances of the case, the Ld. CIT(A) has erred both on facts and i....

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....h 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/- on 31.3.2008 and 24.12.2009. The investigation was stated to be monitored by the Hon'ble Supreme Court of India. The case of ....

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....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-production of director of the investing company without considering the fact that there is no adverse material emerging against the ....

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....33 (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 proceedings. On the nature of approval, the Ld. CIT(DR) has relied on the judgment of Mrs Sonia Gandhi to support the nature of satisfaction arrived at by the Pr. CIT u/s 151 and on the issue of application of mind by the AO at the time of initiation of proceedings u/s 147, the Ld. CITDR emphasised....

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....14 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 vs. Ultra Moderns Exports P Ltd. 40 taxmann.com 458 (Delhi) - CIT vs. NR Portfolio P Ltd. 29 taxmann.com 291 (Delhi) - CIT vs. Frostair P Ltd. 26 taxmann.com 11 (Delhi) - Beutex India (P) Ltd. vs. CIT 18 taxmann.com 9 (Delhi) - CIT vs. P. Mohankala dated 15.5.2007 (SC) - Pr. CIT vs. Bikram Singh 85 taxmann.com 104 - CIT vs. Precision Finance P Ltd. 208 ITR 465. - CIT vs. Durga Prasad More, (1971) 82 ITR 540 (SC) - Sumati Dayal 214 ITR ....

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....ument 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 not available. Regarding the reliance placed on Sonia Gandhi Judgment, the assessee's counsel submitted that the Hon'ble Supreme Court judgment on the issue need be followed in preference to the judgment of jurisdiction of High Court. He further submitted that the Sonia Gandhi judgment follows the Meeankshi overseas judgment passed in 11.01.2016 and the Hon'ble Delhi High Court in the subsequent decision in N.C. Cable P Ltd dated 11.01.2017 supports the case of the assessee. On the contention of Ld. CIT(DR) on the issue of Application of Mind by the AO at the time of initiation of proceedings u/s 147, the Ld. counsel for the assessee submitt....

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....e 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 the Ld. CIT(DR) that the issue of shares at different premium is not in accordance with the companies Act and also the Income Tax Act, Ld. counsel for the assessee submitted that the issue of the shares to the existence shareholders were at the lower rate of premium and this fact has been discussed by the Ld. CIT(A) on page 14 in para 8.29 and 8.30 and as per the decision of Mumbai Bench in SudhirMenon HUF 148 ITD 260, the issue of shares to existing shareholders at lower premium cannot be compared with those issued to new shareholders at higher premium. There is no violation of Income Tax Law as applicable to AY 2008-09 (prior to introduction of sec 56....

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....n 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, Written Submissions and the rejoinder of the assessee's counsel and the case laws cited by both the parties. From the assessment order, we find that 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 Enf....

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....d 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 no material forwarded with the above information which could help the AO to reach such a prima facie belief. We note that the AO communicated with the Director of Income Tax (Investigation) Kolkatta requiring the later to investigate into the affairs of these companies. The para 3 of the letter read as under :- 3. You are requested to kindly investigate into affairs of these companies and inform any adverse information regarding the identity, creditworthiness and source of funding of these companies, which may enable this office to take appropriate remedial measures in the case of my assessee at the earliest. Kindly appreciate that the time limit for taking rem....

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....nt 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) [affirming CIT vs. Kelvinator of India Ltd. [2002] 256 ITR 1 (Delhi) (FB)] J. Kapadia held that the concept of 'change of opinion' must be treated as an in-built test to check abuse of power by Assessing Officer and that the reasons must have a live link with formation of belief. 6.4 Coming to the other observation which is so called material in support of formation of belief under section 147, the AO has relied on the general perception aided by his personal belief unsupported by any material on record terming the companies in Kolkatta to be entities engaged in the accommodation entry providing activity. The above perception dehors the specific material is a witch hunt which is....

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....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 in response to notice u/s 142(1) or 148 of the IT Act or to disclose fully and truly material facts necessary for assessment for the assessment year under reference. The assessee had objected to reassessment proceedings on the ground that under proviso to section 147 on page 16 to 17 that the assessee had faltered in disclosing fully or truly any specific material facts necessary for assessment. The perusal of the reasons will reveal that there is just a whisper in the reasons of the failure of the assessee to disclose fully and truly or material facts. The objections of the assessee before the AO vide letter dated 02.11.2015 are on pages 40-44 and the reference may be made to para 2.1 on page....

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....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 material facts necessary for the assessment as required by the AO the precondition for invoking the proviso to S. 147 was not satisfied and therefore AO acted wholly without jurisdiction in issuing notice u/s. 148 beyond four years period mentioned in S. 147. The judgment of the Hon'ble Chennai High Court in the case of Fenner India Ltd v DCIT 241 ITR 672(Mad) also subscribed to the above judicial proposition propounded by the Hon'ble Delhi High Court in Haryana Acrylic Manufacturing case (supra). The judgment of the Mumbai High Court in the case of Hindustan Lever Ltd. v/s R.B. Wadkar, Assistant Commissioner of Income Tax and others, reported in [2004] 268 ITR 332 is categorical on the....

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....xercise 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 adversarial material (statement etc.) and also has not described exact nature of transaction in the reasons and has used share application / share capital / unsecured loans etc. In the reasons and has miserably failed to bring during entire reopening proceedings any specific tangible material which established assessee is beneficiary of accommodation entries, which all are sufficient to nullify the extant reopening action. Even there is no annexure/enclosure to reasons to corroborate the same. No reference and details of investigation wing information is available. There is no live nexus / rational connection between Investigation Wing information and belief that assessee's certain income has escaped assessment....

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....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 reproduced in its entirely in the impugned order of the ITAT. He submitted that the AO was himself present in the Court and further efforts would be made to locate the materials on the basis of which the AO formed his opinion regarding reopening of the assessment. The Court was not prepared to grant further time for this purpose since it was not clear that the materials were, in fact, available with the Department. 12. In the present case, after setting out four entries, stated to have been received by the Assessee on a single date i.e. 10th February 2003, from four entities which were termed as accommodation entries, which information was given to him by the Directorate of Investigation, the AO stated: "I have also perused ....

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....IT 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 to be recorded of the given case which can be reflected in the briefest possible manner. In the present case, the exercise appears to have been ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer, For these reasons, the Court is satisfied that the findings by the ITAT cannot be disturbed." (B). Hon'ble High Court of Madhya Pradesh in the case of CIT vs. S. Goyanka Lime & Chemicals Ltd. reported in (2015) 56 taxmann.com 390 (MP) has held as under:- "7. We have considered the rival contentions and we find that while according sanction, the Joint Commissioner, Income Tax has only recorded so "Yes, I am Satisfied". In the case of ARjun Singh vs. Asstt. DIT (2000) 2....