TaxTMI 
TaxTMI 
2021 (5) TMI 662
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....assessee was requested to file return of income under section 148 of the I.T. Act. In response to the same, the assessee filed letter Dated 21.04.2010 that original return filed on 30.05.2003 may be treated as return filed in response to notice issued under section 148 of the I.T. Act. The assessee asked for copy of the reasons recorded under section 148 of the I.T. Act which have been supplied. The A.O. asked the assessee to give details of the shareholders from whom share application was received during assessment year under appeal. The assessee submitted before A.O. that it has received share capital/premium money totalling to Rs. 98 lakhs from 14 parties mentioned at Pages 1 and 2 of the assessment order. The assessee furnished share application form, affidavit, copy of the return of income and copy of the bank account of all the share applicants. However, the summons issued under section 131 of the I.T. Act returned un-served. The assessee was asked to produce the Principal Officers of the share applicants, however, assessee failed to produce the same. The A.O, therefore, made addition of Rs. 98 lakhs under section 68 of the I.T. Act, 1961. The A.O. also made addition of Rs. ....
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....le Delhi High Court preferred SLP against the Judgment of the Hon'ble Delhi High Court Dated 04.02.2015 in which notice was issued. Ultimately, the assessee filed an I.A.No.31031/2021 in Civil Appeal No.5105/2015 and submitted before the Hon'ble Supreme Court that assessee does not want to proceed with this appeal. The appeal of assessee was accordingly dismissed as withdrawn vide Order Dated 09.04.2021. Copy of the Judgment is placed on record by the Learned Counsel for the Assessee. 4.4. In the background of the above facts, Learned Representatives of both the parties submitted that the appeal of the assessee may be decided on merits barring the issue of jurisdiction of the A.O. which has already been decided by the Hon'ble Delhi High Court. 4.5. Considering the above facts, it is clear that the issues which are to be decided now are mainly two i.e., (1) Challenge to the re-assessment proceedings under section 147/148 of the I.T. Act and (2) Addition of Rs. 98 lakhs under section 68 of the I.T. Act with addition of Rs. 1.96 lakhs on account of Commission. We proceed to decide both the issues as under : ISSUE No.1 - [Challenge to re-assessment proceedings under section 147/148 ....
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....entry giving account. K.R. Fincap P. Ltd., Transpan Financial Services, Shriniwas Leasing Finance, Basant Agency P. Ltd., Changia Steels P. Ltd., Chintpurni Credits, Division Trading P. Ltd., Right Choice Const. P. Ltd., Sekhawati Finance P. Ltd., Ganga Infin P. Ltd., Nishant Finvest P. Ltd., Sober Associates P. Ltd., Sparrow Marketing P. Ltd., Particular Manage Finlease P. Ltd., Bank of entry given bank Account No. entry giving account. SBBJ, SBP 26422, 24625, 24657, 24645, 50104, 50058, 50105, 50124, 50111, 50122, 50080, 60061, 50083, 50050 I have therefore reason to believe that an amount of Rs. 1,47,000/- has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961. Since 4 years have since been elapsed, the facts are submitted for your kind perusal and approval of the Addl./Jt. CIT, Range-8, New Delhi as per section 151(2) of the Income Tax Act, 1961 for issuance of notice u/s. 148 of the Income Tax Act. Sd/- J.S. Nagar, Income Tax Officer, Ward 8 (1), New Delhi. Jt. CIT, R-8, New Delhi." 5.3. He has submitted that the A.O. in the above reasons has mentioned name of the beneficiary as "M/s. Shalom Exim Pvt. Ltd.," and value of the entr....
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....or reopening of the assessment. 7. We have considered the rival submissions as well as taken into consideration written submissions filed by assessee and considered the material available on record. It is well settled law that validity of the reopening of the assessment is 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 Page-18 of PB-1 which is reproduced above. The Hon'ble Punjab & Haryana High Court in the case of CIT vs., Atlas Cycle Industries [1989] 180 ITR 319 held as under : "Held, (i) that the Tribunal was right in cancelling the reassessment as both the grounds on which the reassessment notice was issued were not found to exist, and, therefore, the Income-tax Officer did not get jurisdiction to make the reassessment." 7.1. The Hon'ble Delhi High Court in the case of Pr. CIT vs., SNG Developers Ltd., [2018] 404 ITR 312 (Del.) in which it was held as under : "Held, dismissing the appeal, that the reasons recorded by the Assessing Officer for reopening the assessment under section 147, issuing a notice under section 148 did not ....
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....and the withdrawals therefrom substantiated the donation made. Therefore, the reopening of the assessment was unsustainable in law and the notice issued under section 147 of the Act was to be quashed." 7.3. The Hon'ble Bombay High Court in the case of Siemens Information Systems Ltd., vs., ACIT & Others [2007] 293 ITR 548 (Bom.) held as under : "The petitioner had several EOU/STP units engaged in the business of export of software. In response to the notice for reopening the assessment for the assessment year 1999-2000, the petitioner, objecting to the issuance of the notice, stated that the reasons furnished by the authority had quoted the provisions of section 10A as amended by the Finance Act, 2000, with effect from the assessment year 2001-02 and as such could not have been made applicable to the assessment year 1999-2000 and the notice had been issued under the mistaken belief about the correct position of law. However, opportunity to show cause was given to the petitioner as to why the loss claimed should not be disallowed to be carried forward. On a writ petition : Held, allowing the petition, (i) that it would be clear from the reasons given that the authority proceede....
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....eposits in the bank accounts are fully explained and therefore no addition is called for. 9. I find force in the above arguments advanced by the learned counsel for the assessee. A perusal of the notice issued under section 148 shows that the notice has been issued in a very casual manner, Clause 3 of the notice reads as under :- "Notice under section 148 of the Income Tax Act, 1961. 3. This notice is being issued after obtaining the necessary satisfaction of the commissioner of Income Tax.../the Central Board of Direct Taxes. " 10. Similarly, a perusal of the bank account maintained with Vijaya Bank account no. 004427, copy of which has been placed at page no. 25 and 26 of the paper book, shows that an amount of Rs. 2,50,000/- was by way of clearing of Cheque No.719443 and not cash deposit. If the same is excluded from the total deposits made during the year from the two bank accounts then there is no such cash deposit of Rs. 4,97,452/ - in the two bank accounts maintained by the assessee. Therefore, I find force in the argument of learned counsel for the assessee that the reasons recorded are either vague reasons or not based on ITA.No.4253/Del./2018 & ITA.No.4254/Del. /2....
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....on record which clearly reveal that reasons recorded by the A.O. are wrong, incorrect and based on no evidence. It is, therefore, clear case of non-application of mind by the A.O. at the time of recording reasons for reopening of the assessment. We also rely upon following decisions in support of our conclusion. 7.6. In the case of Pr. CIT vs., RMG Polyvinyl (I) Ltd., [2017] 396 ITR 5 (Del.) the Hon'ble Delhi High Court held as under : "Where information was received from investigation wing that assessee was beneficiary of accommodation entries but no further inquiry was undertaken by Assessing Officer, said information could not be said to be tangible material per se and, thus, reassessment on said basis was not justified." 7.7. In the case of Pr. CIT vs., Meenakshi Overseas (P) Ltd., 395 ITR 677 (Del.), the Hon'ble Delhi High Court held as under : "Reassessment notice condition precedent recording of reasons to believe that income has escaped assessment mere reproduction of investigation report in reasons recorded absence of link between tangible material and formation of ceding illegal Income Tax Act, 1961, Sec.147, 148" 7.8. In the case of Pr. CIT vs., G And G Pharma Ind....
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.... were far more than the amount invested in assessee company. He has submitted that since it was the initial year of the assessee and assessee is incorporated on 27.02.2003 only i.e., at the end of the financial year, therefore, assessee would not have earned the amount of Rs. 98 lakhs as unaccounted income. Therefore, on this reason only the addition is liable to be deleted. He has submitted that the A.O. issued summons under section 131 of the I.T. Act after lapse of 7 to 8 years and also directed the assessee to produce the Principal Officers of the share applicants after gap of 7 to 8 years, therefore, assessee was not in a position to produce the Principal Officers of the Investors. The assessee has made a request to the A.O. to issue summons under section 131 of the I.T. Act to the Investors vide letter Dated 16.12.2010 [PB-5/Page-841]. But, the Investors were not summoned on the request of the assessee and they were not produced, therefore, there is no fault of the assessee in production of the Investors at the assessment proceedings. He has submitted that the matter was remanded by the Ld. CIT(A) to the A.O. and the A.O. issued notice Dated 9/13.01.2012 [PB-5/Page-864] to t....
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....rom the Investor Companies. The assessee filed copies of the Share Application Forms, Affidavits, Board Resolution, Confirmations, Copy of Income Tax Returns, Balance-Sheet and Profit & Loss A/c, Bank Statements, Certificates of Incorporation, PAN and Jurisdiction of the A.O. in respect of the Share Applicant Companies. Copies of the same are also filed in the PB. All the Investors have confirmed making investment in assessee company. The bank statements of the Investors shows that they are having sufficient balances with them to make investment in assessee company. All are assessed to tax and are Incorporated Companies. Their balance-sheets shows that they have net worth to make investment in assessee company. The Investors have made investments in small amounts of Rs. 4.5 lakhs to Rs. 9 lakhs only in assessee company and the net worth of the Investor Companies are in several lakhs. The details of the same are mentioned in the written submissions of the assessee. The documentary evidences filed by the assessee have not been doubted by the A.O. The A.O. did not accept the explanation of assessee because the summons issued under section 131 of the I.T. Act were returned un-served a....
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....of CIT vs. Kamdhenu Steel and Alloys Ltd., &Ors. 361 ITR 220 (Del.) in which it was held as under : "Once adequate evidence/material is given, which would prima facie discharge the burden of the assessee in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter in case such evidence is to be discarded or it is proved that it has "created" evidence, the Revenue is supposed to make thorough probe before it could nail the assessee and fasten the assessee with such a liability under s.68; AO failed to carry his suspicion to logical conclusion by further investigation and therefore addition under s.68 was not sustainable." 10.3. Decision of Hon'ble jurisdictional High Court in the case of CIT vs. Vrindavan Farms Pvt. Ltd., etc. ITA.No.71 of 2015 dated 12th August, 2015 (Del.), in which it was held as under : "The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their return of income. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the documents submitted by the assessee, the departmental appeal was dismissed by the Hon'ble ....
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....s nobody's case that the non-resident Indian company was a bogus or non-existent company or that the amount subscribed by the company by way of share subscription was in fact the money of the assessee. The assessee had established the identity of the investor who had provided the share subscription and that the transaction was genuine. Though the assessee's contention was that the creditworthiness of the creditor was also established, in this case, the establishment of the identity of the investor alone was to be seen. Thus, the addition was rightly deleted. CIT v. Lovely Exports P. Ltd. [2009] 319ITR (St.) 5 (SC) applied." 10.8. Decision of Hon'ble jurisdictional High Court in the case of CIT vs. (i) Dwarakadhish Investment P. Ltd., (ITA.No. 911 of 2010) and (ii) Dwarkadhish Capital P. Ltd., (ITA.No.913 of 2010) (2011) 330 ITR 298 (Del.) (HC), in which it was held as under : "In any matter, the onus of proof is not a static one. Though in section 68 of the Income Tax Act, 1961, the initial burden of proof lies on the assesses yet once he proves the identity of the creditors/share applicants by either furnishing their PAN number or income-tax assessment number and shows ....
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....s from which money was transferred to the assessee by way of account payee cheques, they could not be said to be non-existent, even if they, after submitting the share applications had changed their addresses or had stopped functioning. Therefore, the Commissioner (Appeals) and the Tribunal were justified in holding that the genuineness of the transactions had been duly established by the assessee." 10.10. Decision of Hon'ble jurisdictional High Court in the case of CIT vs. Value Capital Services Pvt. Ltd., (2008) 307 ITR 334 (Del.) (HC), in which it was held as under : "Dismissing the appeal, that the additional burden was on the Department to show that even if the share applicants did not have the means to make the investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. No substantial question of law arose." 10.11. Judgment of Hon'ble Supreme Court in the case of Commissioner of Income Tax, Orissa vs., Orissa Corporation P. Ltd., [1986] 159 ITR 78 (SC) in which it was held as follows : "Held, that in this case the respondent had given the names and addresses of the....