TaxTMI 
TaxTMI 
2020 (9) TMI 1153
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.... of account and other related papers of these companies were found from the residence of Shri Surendra Kumar Jain and Shri Virendra Kumar Jain itself and nothing was found at the other addresses. Detailed information regarding the accommodation entries being given by Shri Surendra Kumar Jain and Virendra Kumar Jain controlled / managed companies was received by the AO from the Directorate of Income-tax (Investigations), Delhi. Looking at the gravity of the information, the AO recorded reasons as required under section 147/ 148(2) and issued notice under section 148 of the Act to the assessee on 28th March 2012. Since the assessee did not file the return of income within 30 days of service of such notice and nobody attended before him, the AO issued a letter dated 15th October 2012 along with notice under section 142(1) and copy of notice under section 148 issued earlier through speed post fixing the hearing for 23rd October 2012. In response to the said letter dated 15th October 2012 and notice under section 142(1), the assessee submitted a letter dated 27th October 2012 through Speed Post wherein the assessee denied accepting of any accommodation entry and objected to the proceedi....
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....t Rs. 2,79,76,590/-. 4. Before the CIT(A), the assessee, apart from challenging the addition on merit, challenged the validity of the reassessment proceedings. However, the ld. CIT(A) dismissed all the grounds raised before him. So far as the validity of the reopening of the assessment is concerned the ld. CIT(A) dismissed the same by observing as under:- "2.6 Thus, all these decisions have clearly stated that where specific information is received by AO from the investigation wing and the AO applies his mind on such information and forms a reason to believe that income has escaped assessment, then reopening of the assessment will be a valid reopening. Considering above and taking the fact into consideration that the A.O has issued the notice under section 148 after obtaining the statutory approval of the JCIT. Further the A.O has also duly disposed the objection of the appellant against issue of notice vide order dated 07.11.2012 ,hence it is held that the case under consideration has been duly reopened after complying the provision of section 147 to 151 of the Act and order under section 147/143(3) dated 28.03.2013 is a legally valid order. Accordingly the additional ....
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....ustify their subscription of share capital money in the assessee company. Accordingly it was held by the A.O that the assessee had failed to discharge the onus by proving the identity of the creditors/subscribers, genuineness of the transactions and the creditworthiness and, accordingly, made an addition in the hands of the assessee. Further since no supporting documents related to the share application money / share capital received from other parties was filed , total addition of Rs. 3,32,80,000/ was made under section 68 of the Act. 3.3 During the course of the appellate proceeding it has been submitted by the L.d A.r that the assessee had filed confirmation along with copy of balance sheet, ITR, bank statement, etc and thus, assessee had discharged its burden of proving basic details that were required for verification to fulfill the conditions i.e. identity of creditors, creditworthiness of the creditors and genuineness of transactions in relation to the share application money of Rs. 55,000,00/ is proved. Regarding the other amount received during the year it was submitted that Rs. 30,00,000/ was received from sister concern , Rs. 80,0000/ from Smt. Puneta Aggarwal a....
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....s in response to the show cause notice issued by the A.O and accordingly the additions made by the Assessing Officer was justified and sustainable. * The assessee in private limited company and shares are not offered to the public at large. * The persons who are subscribing to the share capital of the company should be well known i.e. either they may be friends/relatives. * From the subscriber's bank account statements it was apparent that the account is fabricated as there were corresponding cheque deposits in the bank accounts before issue of share application money cheques. * The subscribers did not bother and ensure protection of their investment by making compliance to the summon issued by the A.O. * Merely submission of the PAN number of allottees does not render the transactions as genuine since PAN Numbers are allotted on the basis of applications without actual de facto verification of the identity or ascertainment of the active nature of business activity. PAN number is allotted as a facility to revenue to keep track of transactions and thus, the PAN number cannot be blindly and without consideration of surrounding circumstance....
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....rgument was advanced before the Supreme Court on behalf of assessee. The argument was rejected by the Court." 3.6 The Hon'ble Supreme Court in the case of N. Tarika Property Invest (P) Ltd V CIT while affirming of the order of the Hon'ble jurisdictional High Court has opined that where fabricated evidence has been adduced by the assessee to give colour of genuineness to bogus entries , the assessing officer was justified in making addition under section 68 of the Income Tax Act. Considering above and the fact that the addition in question under section 68 of the Act has been made by the A.O as the cash credit entries in the books of account of the assessee in the form of share application money were found to be not genuine transactions . Accordingly the addition on account of bogus share application money amounting to Rs. 55,00000/ received from S.K. Jain group of companies is confirmed . 3.7 Regarding the other addition of Rs. 2,77,80000/( Rs. 3,328,0000/Rs. 55,0000) it is noted that during the year under consideration the appellant has reqeived total share application of only Rs. 2,85,00000/ . Breakup of the same is as under a) From S.K .Jain group of comp....
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....nt. 5. The Ld. CIT (A) has erred both in law and on facts in not quashing the order under appeal ignoring the fact that the assessment has been completed and Assessment Order has been passed by the learned AO after the statutory period of completion of assessment as provided u/s 153 of the I T Act. 6. The Ld. CIT has erred in conforming Addition of Rs. 2,85,80,000/- u/s 68 of the IT Act ignoring the facts that the Assessee had received the share application money of Rs. 55,00,000/- from the entities named in the reasons for which the assessee has discharged its burden u/s 68 and there was no adverse material and basis with the AO/CIT to support addition of the balance amount of Rs. 2,30,80,000/-. 7. The charging of Interest u/s 234B ignoring the provisions of 234B(3) need be quashed and the same need be rectified. 8. The appellant craves leave to add, delete, modify / amend the above grounds of appeal." 7. The ld. counsel for the assessee has also raised an additional ground which reads as under:- "On the facts and circumstances of the case and also in law, the impugned reassessment orderpassed by the Ld AO u/s 147/143(3) of the Act i....
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.... v) DCIT vs M/s KLA Foods (India) Ltd and othrs ITA No.2846/Del/2015 dt: 08.04.2019; vi) Pr CIT vs M/S SNG Developers Ltd., 404 ITR 312 (Del) SLP of revenue dismissed in SLP (c) 42379/2017 Dt: 09.02.2018; vii) M/s SPJ Hotels P Ltd., ITA No.2857/Del/2017 viii) M/s Superior Buildwell P Ltd., ITA No.3301/Del/2017 ix) M/s Superior Technologies P LtdITA No.2269/Del/2017 x) M/s Shiv Sai Infrastructure P. Ltd., ITA No.2527/Del/2017. 9. The ld. counsel for the assessee submitted that the AO, while recording the reasons has simply relied on the conclusion/inference drawn by the investigation wing and the reason does not demonstrate how the AO, after due application of mind, has reached to the above belief. Referring to the decision of the Hon'ble Delhi High Court in the case of Sabh Infrastructure vs. ACIT, 398 ITR 198 (Del), he submitted that the Hon'ble High Court has held that the reasons to believe have to be self-explanatory. He submitted that satisfaction reached by the AO in the instant case is borrowed satisfaction from other authority, i.e., DDIT (Investigation). Referring to page 4 of the assessment order, the ld. counsel ....
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....terial not referred to in the reasons recorded is bad in law. 12. Referring to the decision of the Hon'ble Delhi High Court in the case of Sabharwal Properties Industries Pvt. Ltd. vs. ITO, 382 ITR 547, he submitted that the jurisdictional High Court has held that 'having regard to the entire scheme and purpose of the Act the validity of the assumption of jurisdiction under section 147 can be decided only by reference to the reasons recorded under section 148(2) of the Act and the AO is not authorised to refer to any other reason even if it can be otherwise inferred and/or gathered from the records. He is confined to the recorded reasons to support the assumption of Jurisdiction. He cannot refer only some of the reasons and keep the others up his sleeves to be disclosed before the Court if his action is ever challenged in a court of law.' 13. He submitted that the AO in the reasons recorded on page 61 of the paper book mentions that escapement of income is on account of failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment. The above statement presupposes the verification by the AO from the records available with him such ....
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....ns:- i) GKN Driveshafts (India) Ltd. v ITO (259 ITR 19) (SC) ii) Sabh Infrastructure vs ACIT in W.P.(c) 1357/2016 Dated: 25.09.2017 (Del) iii) Allana Cold Storage Ltd. v ITO (287 ITR 1) (Bom.) iv) CIT vs M/s Trend Electronics in ITA No. 1867 of 2013 dated 16.09.2015 (Bom) v) CIT v Videsh Sanchar Nigam Ltd. 340 ITR 66 (Bom) vi) Inderjeet Singh Sachdeva vs. DCIT in ITA No.6611/Del/2013 vii) Ujagar Holdings Pvt Ltd vs ITO in ITA No.2205/Del/2015 viii) Sh. Balwant Rai Wadhwa Vs ITO in ITA 4806/Del/2010 ix) M/s. Kothari Metals Vs. ITO in Writ Appeal No. 218/2015, dated 14/08/2015 (Kar) x) KSS Petron Private Ltd vs. ACIT ITA No.224 of 2014, dated 03.10.2016 (Bom); xi) CIT vs. IDBI Ltd., ITA No.494 of 2014, dated 19.09.2016 (Bom); xii) M/s Synopsys International Ltd vs The DDIT (International Taxation) in ITA No.549/Bang/2011; xiii) Tata International Ltd Vs DCIT in ITA No.3359 to 3361/Mum/2009 xix) ACIT vs Sh. M.R. Seetharam in ITA no. 926,927/Jp/2014 dated 09.10.2015. 16. He submitted that approval in the instant case was given in a mechanical manner and....
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....d, the counsel submitted that the assessee has accepted an amount of Rs. 55 lakh from companies named in the reasons and amount of Rs. 2 crores was accepted by cheques on 30th March 2005 which were never encashed and were returned back on 01.04.2005 and an amount of Rs. 30,80,000/- from other entities. So far as the amount of Rs. 55 lacs is concerned, he submitted that the assessee has substantiated the identity and credit worthiness of the loan creditors and genuineness of the transaction by furnishing copy of income tax return, audited balance sheet, list of directors, share application form, loan confirmation, bank statement and copy of cheques received which are available on page 83 to 189 of the paper book. 19. So far as the amount of Rs. 2 crores is concerned, he submitted that the cheques were returned without encashing them and the ledger accounts of the parties for assessment year 2005-06 and 2006-07 are available at pages 194 to 271 of the paper book. He submitted that the cheques were never encashed and were returned back. Although this fact was brought to the notice of the CIT(A) vide statement dated 19th August 2014, copy of which is placed at page 250 of the paper ....
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.... were recorded on the basis of information obtained from Investigation Wing. Referring to the decision of the Hon'ble Supreme Court in the case of Raymond woolen Mills Limited vs. ITO, 236 ITR 34, he submitted that the Hon'ble Supreme Court in the said decision has held that sufficiency and correctness of the material is not to be considered at the time of initiation of reassessment proceedings. It is only to be seen as to whether there was prima facie some material on the basis of which the Department could reopen the case. It was accordingly held that the court cannot strike down the reopening of the case and it will be open to the assessee to prove that the assumption of facts made in the notice was erroneous. So far as the service of notice is concerned, he submitted that the CIT(A) has given justifiable reasons while dismissing the ground raised by the assessee on this issue. 22. The ld. counsel in his rejoinder submitted that the decision in the case of NRA Iron & Steel (P) Ltd., is not applicable to the facts of the present case since the facts are different. In that case, there was no proper enquiry whereas in the present case there was full enquiry and summons were serv....
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.... 11- Nov-04 500000 Neeraj A- 148 22 AVAIL Shri Balkishan Agarwal Glass Industries Ltd, ABN PIO No. 947829 11- Nov-04 500000 Neeraj A- 148 22 AVAIL Shri Balkishan Agarwal Glass Industries Ltd. ABN PIO No. 947830 11- Nov-04 500000 Neeraj A- 148 23 GRAPH Shri Balkishan Agarwal Glass Industries Ltd. ABN PIO No. 947827 11- Nov-04 500000 Neeraj A- 148' 23 GRAPH Shri Balkishan Agarwal Glass Industries Ltd. ABN PIO No! 947826 11- Nov-04 500000 Neeraj A- 148 23 GRAPH Shri Balkishan Agarwal Glass Industries Ltd. ABN PIO No. 974556 24- Nov-04 500000 Chawla A- 148 27 SMARTEST Shri Balkishan Agarwal Glass Industries Ltd. ABN PIO No. 974425 25- Nov- 04 500000 Neeraj A- 148 28 SMART EST Shri Balkishan Agarwal Glass industries Ltd. ABN PIO No. 974426 25- Nov-04 500.000 Neeraj A-148, 28 For Shri Balkishan Agrav Glass industries SMARTEST Shri Balkishan Agarwal Glass Industries Ltd.' ABN PIONo. 974427 25- N....
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....8." The Hon'ble Bombay High Court in the case of Kalpana Shantilal vs ACIT 100 CCH 0165 has held that sanction granted by higher authority for issuing of reopening notice had to be on due application of mind and it could not be mechanical approval without examining proposal sent by AO. The Hon'ble Delhi High Court in the case of Yum Restaurants Ltd. vs Dy. Director of Income Tax 99 CCH 232 has held that where authorities appear to have concurred with reasons for reopening assessment without applying their mind, reopening of assessment would be invalid. The Hon'ble Bombay High Court in the case of Ankita A. Choksey vs. Income Tax Officer And Others (2019) 411 ITR 207 (Bom) has held that condition precedent for issue of notice for reassessment is that the reasons to believe that income has escaped assessment must be based on correct facts. Notice based on wrong facts is without jurisdiction and has to be quashed. The Delhi Bench of the Tribunal in the case of DCIT vs. M/s KLA Foods (India) Ltd. and Others, vide ITA No.2846/Del/2015, order dated 8th April 2019, has held that condition precedent for issue of notice for reassessment is that reason to believe that income has escaped asse....
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...., such notice based on wrong facts and the approval given in a mechanical manner make the re-assessment proceedings invalid being not in accordance with law. Accordingly we hold that the reassessment proceedings initiated by the AO is not valid in the eyes of law. Accordingly the same is directed to be quashed. Since the assessee succeeds on this preliminary legal ground, the other legal grounds as well as the grounds on merit, in our opinion, do not require adjudication being academic in nature. 28. In the result, the appeal filed by the assessee is allowed. The decision was pronounced in the open court on 21.09.2020. ============= Document 1 Form for recording the reasons for initiating proceedings u/s 148 and for Obtaining the approval of the Addl. Commissioner of Income Tax, Delhi-III, New Delhi 1. Name and address of the assessee 2. PAN 3. Status 4. 5. 6. Circle/Range Assessment year in respect of which it is Proposed to issue notice u/s 148 The quantum of income which has Escaped assessment. Whether the assessment is proposed to be made for the first time M/s Shri Balkishan Agarwal Glass Industries Ltd.....