TaxTMI 
TaxTMI 
2020 (1) TMI 1358
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....-assessment order from paras 1 to 8 reproduced the copy of the reasons recorded under section 148 of the I.T. Act. Thereafter, A.O. noted that assessee was provided copy of the reasons and objections raised have been disposed of. The assessee has filed submissions giving confirmation copy of the account and copy of the ITR in respect of the parties from whom share capital/share premium were raised during the year under consideration. The A.O. issued notices under section 133(6) of the I.T. Act for verification. Only one party responded. The assessee has not produced the Directors of the concerned parties. Therefore, the A.O. made addition of Rs. 7 crores under section 68 of the I.T. Act and also made addition of Rs. 14 lakhs on account of Commission paid @ 2%. The assessment order was passed under section 147/143(3) of the I.T. Act. The assessee challenged the reopening of the assessment as well as additions on merit before the Ld. CIT(A). The detailed submissions of the assessee are reproduced by the Ld. CIT(A), however, the Ld. CIT(A) dismissed the appeal of assessee. 3. Learned Counsel for the Assessee referred to proceedings recorded for reopening of the assessment, copy of ....
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....d upon Judgment of Hon'ble Delhi High Court in the case of SABH Infrastructure Ltd., vs. ACIT [2017] 398 ITR 198 (Del.) (HC) in which the Hon'ble Delhi High Court has directed the Revenue Department to adhere to the following guidelines in the matter of reopening of the assessment. "(i) while communicating the reasons for reopening the assessment, the copy of the standard form used by the Assessing Officer for obtaining the approval of the Superior Officer should itself be provided to the assessee. This would contain the comment or endorsement of the Superior Officer with his name, designation and date. In other words, merely stating the reasons in a letter addressed by the Assessing Officer to the assessee is to be avoided. (ii) the reasons to believe ought to spell out all the reasons and grounds available with the Assessing Officer for reopening the assessment - especially in those cases where the first proviso to section 147 is attracted. The reasons to believe ought to also paraphrase any investigation report which may form the basis of the reasons and any enquiry conducted by the Assessing Officer on the same and if so, the conclusions thereof; (iii....
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....of the report of the SFIO was not provided to the assessee. 5. We have considered the rival submission and perused the material on record. It is well settled Law that validity of re-assessment proceedings shall have to be determined with reference to the reasons recorded for reopening of the assessment. Learned Counsel for the Assessee filed copy of the reasons recorded for reopening of the assessment at pages 16 to 22 of PB. The same reads as under: 5.1. The reasons are un-dated. The A.O. in the assessment order has reproduced the same reasons without application of his mind to the relevant material and thereafter by referring to notice under section 133(6) and non-production of the Directors of the Investor Companies made the addition against the assessee. The A.O. in the reasons has mentioned that information was forwarded by Serious Fraud Investigation Office, Delhi which were received through Pr. CIT vide Letter Dated 05.01.2017. The A.O. has also referred to such report based on search and seizure in the case of third parties. The assessee made a request to the A.O. to supply complete copy of the reasons along with Annexures and Report of SFIO Dated 05.01.2017 and appro....
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.....02.2011 for the A.Y. 2010-2011 declaring loss of Rs. 9,616/- which was processed under section 143(1) of the I.T. Act, 1961. The assessee declared income from brokerage and commission, interest on loan and profit on sale of investment also. 2.1. An information was received from the O/o. CIT, Central-2, New Delhi, vide letter Dated 14.02.2014 mentioning therein that a search/survey operation under section 132/133A of the Income Tax Act, 1961 was conducted by the Investigation Wing at the business and residential premises of Shri Himanshu Verma and his Group on 29.03.2012 wherein after intensive and extensive inquiry and examination of documents seized during the course of search, it has been gathered that the said persons are involved in providing accommodation entries to the persons who were named in the report. During the course of inquiry made by the Investigation Wing, it also came to the notice that Shri Himanshu Verma was engaged in the business of providing accommodation entries through cheques/PO/DD in lieu of cash to large number of beneficiary companies through various paper and dummy companies floated and controlled by him. The cash received from the parties for....
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....ot accept the replies filed by the 26 investor companies on the reasons that replies have been received in bunch for similar style of envelopes and posted from three post offices. The A.O. also noted that none of the parties explained as to why high premium was paid and parties have not explained source of the investment. The A.O. also noted that 26 parties filed copy of the ITR, balance sheet, P & L A/c and bank statement, but, it shows that their income shown is very meagre in the return of income. The assessee was asked to produce the persons/Principal Officers of these entities for verification. However, assessee did not produce the same. The A.O. also analysed the statement of Shri Himanshu Verma through whom amount have been received and the A.O. ultimately rejected the explanation of assessee on genuine share application money received from 38 parties and made addition of Rs. 11.05 crores. The A.O. further noted that assessee has paid commission in cash for arranging these entries, on which, addition was made of Rs. 22,10,000/- i.e., @ 2% of the amount in question which was also added to the returned income. 3. The assessee challenged the reopening of the assessment....
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....y time. The assessee further submitted that approval under section 151 have been granted in a most mechanical manner without applying independent mind by the Pr. Commissioner of Income Tax. He has submitted that Pr. Commissioner of Income Tax has recorded in the approval as under : "Form for recording the reasons for initiating proceedings u/s 147 and for obtaining the approval of the Ad CIT/CIT/CBDT 1. Name and address of the assessee M/s. Ganesh Ganga Investment P. Ltd., A-52, Top Floor Street No.l, Guru Nanak Pura, Laxmi Nagar, Delhi 110092 2. PAN AAACG2710J 3. Status Company 4. Ward/Circle Ward-10(1) 5. Asstt. Year in respect of which it is proposed to issue notice u/s 148 2010-11. 6. The quantum of income which has escaped assessment Rs. 2,45,00,000/- 7. Whether the provisions of section 147(a) or 147(b) are applicable or both the sections are applicable. 147(b) 8. Whether the assessment is proposed to be made for the first time. If the reply is affirmative, ....
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....upon Judgment of Hon'ble Supreme Court in the case of Commissioner of Income Tax vs., S. Goyanka Lime & Chemical Ltd., [2015] 64 taxmann.com 313 (SC) approving the Judgment of Hon'ble Madhya Pradesh High Court in the case of Commissioner of Income Tax, Jabalpur vs., S. Goyanka Lime & Chemical Ltd., [2015] 56 taxmann.com 390 (M.P.) in which the Departmental SLP has been dismissed on the same reason because the Joint Commissioner of Income Tax recorded satisfaction in a mechanical manner and without application of mind. The assessee also relied upon Judgment of Hon'ble Madhya Pradesh High Court in the case of Arjun Singh vs., ADIT [2000] 246 ITR 363 (M.P.) in which also similarly worded sanction under section 148 was not found valid. The assessee also relied upon Judgment of Hon'ble Delhi High Court in the case of Pr. Commissioner of Income Tax vs., N.C. Cables Ltd., [2017] 88 taxmann.com 649 (Del.) in which also on similarly worded sanction, it was held that re-assessment was not valid. The assessee also submitted that since no right of cross-examination have been allowed to the statement of Shri Himanshu Verma, therefore, such statement cannot be read in evidence against the assess....
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.... cross-examination on behalf of assessee, despite making a request to the A.O. [PB-19]. In the statement of Shri Himanshu Verma filed on record, no such companies have been mentioned, therefore, no adverse inference could be drawn against the assessee. The assessee did not receive any notice for production of the parties before A.O. There is no evidence on record of any payment of commission paid by assessee for arranging share capital. Learned Counsel for the Assessee relied upon Order of the ITAT, Delhi Bench in the case of Pioneer Town Planners Pvt. Ltd., vs. DCIT ITA.No.132/Del./2018 Dated 06.08.2018 in which in similar circumstances the re-assessment have been quashed which case also relates to entry provided by Shri Himanshu Verma. Learned Counsel for the Assessee submitted that the A.O. issued notices to all the parties under section 133(6) of the I.T. Act. In response to the same, 26 parties filed reply supported by documentary evidences to prove genuine share application money have been received. The A.O. did not take help of any handwriting export before forming any opinion. If replies were not in order, assessee should have been confronted with the material so that asses....
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....atter. The A.O. made enquiry from Investors and assessee did not produce parties before A.O. Even a premium have been charged for allotment of shares for which no reasons have been explained. The companies are having meagre income only. Apart from statement of Shri Himanshu Verma, there is enough material to justify the addition on merit. The assessee also did not prove identity and creditworthiness of the Investors even if no cross-examination to the statement of Shri Himanshu Verma have been allowed. The Ld. D.R. relied upon Judgment of Hon'ble Supreme Court in the case of Raymond Woollen Mills 236 ITR 34 (SC). He has submitted that information is prima facie relevant and there is sufficient material on record to justify the initiation of re-assessment proceedings. The assessee failed to prove that no notice Dated 11.12.2017 have been received. The Ld. D.R. relied upon the following decisions. 1. PCIT vs., Paramount Communication (P.) Ltd., 2017TIOL-253-SC-IT. 2. PCIT vs., Paramount Communication (P.) Ltd., [2017] 392 ITR 444 (Del.) (HC) 3. Aradhna Estate (P.) Ltd., vs. DCIT [2018] 91 taxmann.com 119 (Gujarat) (HC). 4. Pushpak Bullion (P.) Ltd.....
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....u Verma through a complex trail of transactions, so as to hide the actual sources of funds of the last set of recipient companies of Sh. Himanshu Verma In this way, the reserve & surpluses and the capital account of a specific set of companies are enhanced with the help of the unexplained cash received by Himanshu Verma, which is routed to these companies through their dummy firm/companies. Once the funds of these companies have been enhanced sufficiently, accommodation entries through RTGS/ Cheque in the shape of the share capital, capital gains or loans as per the specific requirement of the recipient clients were provided to them in lieu of the cash received from them. In this way, the chain for providing an accommodation entry gets completed. It is noticed from the list of entries that the assessee M/s Ganesh Ganga Investment P. Ltd. has taken following accommodation entries during the financial year 2009-10 :- S.No. Amount Conduit companies through which cheque issued. 1. 4000000 Shubh Propbuild P Ltd., 2. 4000000 Jaguar Softech P. Ltd., 3. 4000000 Join....
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....igh Court in the case of United Electricals Company (supra) in which the Addl. Commissioner of Income Tax similarly recorded the approval "Yes" I am satisfied that it is a fit case for issue of notice under section 148 of the I.T. Act." In this case the Hon'ble Delhi High Court held as under : "On a careful perusal of the statement made by V' it was found that facts mentioned in reasons were de hors the facts available on record. It was evident that the said statement was too general. It did not mention any name much less the name of the assessee. It was not the stand of the revenue that a list of the creditors, which included the name of the assessees, was furnished by V' subsequently and the same was forwarded to the Assessing Officer of the assessee. Applying the aforenoted settled principles governing an action under section 147, there could be no hesitation in holding that there was no information on record which could provide foundation for the Assessing Officer's belief that the assessee's transaction with 'V' Ltd. was not genuine and its income had escaped assessment on that account. Therefore, the impugned action of the Assessing Officer could not be s....
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.... proceedings and reopening of assessment u/s. 147/148 of the Act. The ld. AR submitted that the impugned order of assessment is invalid and unsustainable in law as the same has been passed by the AO without providing the reasonable time of four weeks for taking remedy against the order of disposal of preliminary objection against the incorrect assumption of jurisdiction by the AO u/s. 147 of the Act in violation of principles enunciated by Bombay High Court in the case of Asian Paints Ltd. 296 ITR 90. He further submitted that the Impugned orders of authorities below need be set aside as the reassessment proceedings have been initiated without obtaining a subjective satisfaction by the Pr. CIT Delhi-7, New Delhi as the approval u/s 151 is mechanical and without application of mind. 8. The ld. AR vehemently pointed out that the reassessment proceedings initiated by the Ld. AO is based on the information received from investigation wing and there was no material before him to substantiate the allegation contained in the information and therefore initiation of proceedings is bad in law. He also contended that the order under appeal is bad in law as the assessing officer has p....
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....f DSJ Communication vs. DCIT 222 Taxman 129 (Bom.). 11. On the issue of validity of reopening and initiation reassessment proceedings u/s. 147 of the Act the ld. AR also pointed out that as per ratio of the decision of Hon'ble Bombay High Court in the case of Asian Paints Ltd. 296 ITR 90 (Bom), the AO to wait for four weeks to begin assessment after disposing of the objection and non-compliance of the same renders assessment proceedings void. He submitted that in the present case the objections of the assessee vide dated 29.11.2016 filed before the AO were disposed of/dismissed by the AO by the order dated 12.12.2016 and he passed impugned reassessment order u/s. 143(3) r/w s. 147 of the Act on 22.12.2016 which is clear violation of directions given by Hon'ble High Court in the case of Asian Paints (supra) and on this count also reassessment proceedings and consequent orders are void and thus, bad in law. This view was again approved by Hon'ble High Court of Bombay itself in the subsequent decision in the case of Aroni Commercials Ltd. vs. DCIT reported in 362 ITR 403 (Bom) and followed by ITAT, Bombay in the case of Shri Hirachand Kanuga vs. DCIT in ITA No.426....
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....the assessee company taken bogus/ accommodation entries. The ld. AR vehemently pointed out that thereafter in last para 9 & 10, the AO, without applying mind to the information received from the Investigation Wing, recorded that he has reason to believe that the an income has escaped assessment which clearly shows that the AO proceeded to initiate initiatory assessment proceedings and reopening of assessment without having any valid satisfaction on the basis of borrowed satisfaction as there was no independent application of mind to the tangible material received from Investigation Wing, which could form the basis reason to believe that income has escaped assessment. 14. Further placing reliance on the decision of Hon'ble High Court of Delhi in the case of PCIT vs. G&G Pharma India Ltd. reported in 384 ITR 147 (Del), the ld. AR submitted that reopening of assessment by an AO based on the information received from the Director of Investigation without making any effort to discuss the materials on the basis on which he formed a prima facie opinion that income had escaped assessment. The Court held that the basic requirement of s. 147 of the Act that AO should apply indep....
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....s and framing of reassessment orders. The ld. DR submitted that the proforma of approval u/s. 151 of the Act is being followed all over India and the ACIT applied his mind to the all material placed before him by the AO prior to granting approval u/s. 151 of the Act in column 12 of the proforma. Therefore, allegations made by the ld. AR are not sustainable and tenable and the same may kindly be dismissed. 18. Placing rejoinder to the above, the ld. AR submitted that in the reasons para 6 the information of DDIT (Investigation) has been given and reference of various entry providers such as Shri Himanshu Verma, Shri Praveen Aggarwal etc. who are engaged in providing accommodation entries through dummy companies with dummy directors. The ld. AR submitted that in the table given in para 3 is taken along with para 6 of the reasons recorded then, it is clear that the names of companies are 13 and above named two persons at serial No. 11 & 12 have been noted and there is no name of entry provider in the other 11 columns and there is no link in the reasons recorded with regard to these 11 companies. The ld. AR submitted that these facts clearly show that the AO has acted on suspi....
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....has noted facts of the information received from DDIT (Investigation), Faridabad, further, in para 6 modus operandi of entry providers has been noted thereafter, in para 7 & 8, it has been arisen that either during survey or post survey proceedings the assessee company has not submitted satisfactory explanation to prove identity, genuineness and creditworthiness of share capital/premium introducers and thus, the same is from paper companies of entry operator and then, he recorded satisfaction that the assessee company taken bogus/accommodation entries. Thereafter, the AO in last para 9 & 10, without applying mind to the information received from the Investigation Wing states/writes that he has reason to believe that the income has escaped assessment. The text and words used by the AO in the reasons recorded for reopening of assessment clearly show that the AO proceeded to initiatory assessment proceedings and reopening of assessment without having any valid satisfaction and only on the basis of borrowed satisfaction as there was no independent application of mind by the AO to the tangible material received from Investigation Wing which could form the valid basis and reason to belie....
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....even prima facie, with the such information. Therefore, in our considered opinion the initiation of reassessment proceedings u/s. 147 of the Act, notice u/s. 148 of the Act, reassessment proceedings and all consequent proceeding and orders, including impugned reassessment and first appellate order, are bad in law and thus, not sustainable and we hold so. Accordingly, on the basis of foregoing discussion, grounds No.2, 3, 4 and additional ground of the assessee are allowed and impugned proceedings, notice u/s. 148 of the Act and all consequent orders are quashed." 8.5. The statement of Shri Himanshu Verma is also filed on record which did not find mention if M/s. Shubh Propbuild Pvt. Ltd., as mentioned in the reasons belong to Shri Himanshu Verma. There is no investor exist in the name of M/s. Management Services Pvt. Ltd., and no addition in respect of the same company have been made by the A.O. The A.O, therefore, recorded incorrect facts in the reasons for reopening of the assessment. Thus the same cannot be approved under the Law. It is well settled Law if wrong facts and wrong reasons are recorded for reopening of the assessment, reopening of the assessment would be in....
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....reasons. The reasons recorded by the A.O. are also incorrect as noted above. The reasons failed to demonstrate the link between the alleged tangible material and the formation of reasons to believe that income chargeable to tax has escaped assessment. The decisions relied upon by the Learned Counsel for the Assessee in the cases of Pr. Commissioner of Income Tax vs., RMG Polyvinyl (I) Ltd., 396 ITR 5 (Del.), Pr. Commissioner of Income Tax vs., Meenakshi Overseas (P) Ltd., 395 ITR 677 (Del.), Pr. Commissioner of Income Tax vs., G and G Pharma India Ltd., 384 ITR 147 (Del.) and Sarthak Securities Co. (P) Ltd., 329 ITR 110 (Del.), clearly apply to the facts and circumstances of the case. Learned Counsel for the Assessee also relied upon Order of ITAT, Delhi Bench in the case of Pioneer Town Planners Pvt. Ltd., (supra) in which on identical facts reopening of the assessment have been quashed. The Ld. D.R. relied upon certain decisions in support of the contention that reopening of the assessment is justified, but, the same are distinguishable on facts of the present case. Considering the facts and circumstances of the case in the light of above discussion and decisions referred to in t....
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....age_text_project\google\google_doc_api.py", line 345 elif mime_type in ["image/gif"]: IndentationError: expected an indented block after 'if' statement on line 341 Document 2 0 BEHAT HOLDINGS PVT. LTD. MOU FROM 6/26/2009 Euro (M) Axis 191138 1,000,000.00 17 Beneficiary company Behat Holdings Pvt. Ltd. Mediator P'K Aggarwal Behat Holdings 6/26/2009 Hum Tum Indusind 446194 500,000.00 Pvt. Ltd. PK Aggarwal Behat Holdings 3 6/26/2009 Hum Tum Indusind 446193 PK Aggarwal 500,000.00 Pvt. Ltd. Behat Holdings 4 6/26/2009 Mega Top Axis 120173 PK Aggarwal 1,000,000.00 Pvt. Ltd. Behat Holdings #5 6/26/2009 Zenith HSBC PK Aggarwal 1,000,000.00 HSBC Pvt. Ltd. Behat Holdings 6 6/27/2009 Victory Axis 12480 PK Aggarwal 1,000,000.00 Pvt. Ltd. Behat Holdings 7/7/2009 1,000,000.00 Apoorva Axis RTGS Pvt. Ltd. PK Aggarwal DO 7/7/2009 500,000.00 Hum Tum Behat Holdings Axis RTGS PK Aggarwal Pvt. Ltd. Behat Holdings 7/7/2009 Karishma Axis RTGS PK Aggarwal ....
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.... Pvt. Ltd. PK Aggarwal 32 Behat Holdings 32 7/28/2009 1,000,000.00 Euro (M) Axis RTGS Pvt. Ltd. PK Aggarwal 33 7/28/2009 Hum Tum Behat Holdings Axis RTGS PK Aggarwal 1,000,000.00 Pvt. Ltd. 34 7/28/2009 Shalini Axis Behat Holdings RTGS 1,000,000.00 Pvt. Ltd. PK Aggarwal Behat Holdings 35 7/28/2009 1,000,000.00 Victory Axis RTGS Pvt. Ltd. PK Aggarwal Behat Holdings 36 7/28/2009 Zenith Axis RTGS PK Aggarwal 1,000,000.00 Pvt. Ltd. 37 7/29/2009 Aasheesh Behat Holdings Axis RTGS PK Aggarwal 1,000,000.00 Pvt. Ltd. Behat Holdings 38 7/29/2009 Apoorva Axis RTGS PK Aggarwal 1,000,000.00 Pvt. Ltd. 39 7/29/2009 Attractive Axis RTGS Behat Holdings 1,000,000.00 PK Aggarwal Pvt. Ltd. 40 7/29/2009 Karishma Axis Behat Holdings RTGS PK Aggarwal 1,000,000.00 Pvt. Ltd. Behat Holdings 41 7/29/2009 1,000,000.00 Mega Top Axis RTGS Pvt. Ltd. PK Aggarwal 12 13 42 7/30/2009 Euro (M) Behat Holdings Axis RTGS 1....
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....009 Victory Axis RTGS PK Aggarwal 1,000,000.00 Pvt. Ltd. 70,000,000.00 5. Summary of evidences relating to the assessee: (a) Return of income: The return of income in this case was filed on 15-10-2010 for the assessment year 2010-11 declaring income/loss of Rs. 95,916. Thereafter the return was processed under 143(1) of the I.T. Act on 13-042011. The case was not selected for scrutiny for A.Y. 2010-11. The assessee has declared in its return of income that it has received share application money of Rs. 2,81,00,000/- which is more than the amount mentioned in the information received from the investigation wing, which prima facie indicates that the information is reliable because the amount of share capital and premium is not less than the amount of accommodation entry mentioned in the information. (b) Relevant seized documents: I have gone through various documents (relevant to the instant case) seized from the premises of Shri S.K. Jain Group during the course of search. These documents Document 5 20 have been supplied by the Investigation Wing in the form of scanned copies of seized document in a CD. It is noted fro....
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....led by the group do not have any known business activities and lack of independent existence as a separate entity and were a part of group of companies engaged in providing accommodation entries. The above conclusion was corroborated with the following evidences found and seized during the course of search from their custody and control S.K. Jain Group: . Seizure of passbooks and/or cheque books in the name of approx. 200 persons/firms companies i.e. entry provider companies. Computer hard disks containing confidential details namely user name, password, id of various companies etc. to miming Documents containing the details of funds transferred through cheque/ RTGS/pay order to various entities/persons through these entries provider. Seizure of daily cash books wherein details of cash received from beneficiary companies/ persons through various middlemen/agents by Jain Brothers in lieu of accommodation entries provided to beneficiary on different dates. Document 6Traceback (most recent call last): File "C:\inetpub\vhosts\taxmanagementindia.com\httpdocs\python_image_text_project\google\direct_extract_text.py", line 19, in from goog....