TaxTMI 
TaxTMI 
2019 (5) TMI 1903
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....e Ld. CIT(A) erred in sustaining the action of the Assessing Officer in charging interest u/s. 234B of the Act in a sum of Rs. 1,10,54,788/- which being wrong illegal and unjustified and in any case highly excessive must be annulled." 2. The brief facts of the case are that an information from the office of Addl. CIT, Range-5 Firozabad , was received by the Assessing Officer to the effect that the assessee company had made investment of Rs. 3,19,00,000/- in purchase of property at Aligarh from M/s. Tiger Hardware and Tools Ltd and M/s. Ansal Properties and Industries Ltd. It was also informed that the assessee company had made payment of purchase consideration of this property through its bank A/c. 0010002100071628/- with Punjab National Bank, Aligarh, which was credited with sizable entry before making transfer of money. Based on this information, the Assessing Officer issued notice to the assessee u/s. 148 after seeking approval of the competent authority, to reopen the case of the assessee. The reasons recorded for reopening the case read as under : Information/documents along with relevant details has been received from the office of Addl. Commissioner of Income Tax....
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.... 3,78,93,361 Total 3,78,93,361 In view of the additional information/documents received from the office of Addl. Commissioner of Income Tax, Range- 5, Firozabad I have reason to believe that the assessee has willfully and knowingly concealed its particulars of income to avoid tax and that income of Rs. 3,78,93,361/- chargeable to tax has escaped assessment for A.Y. 08-09, within the meaning of section 147 of the Income-tax Act, 1961. 3. In the reopening proceedings, the assessee was asked to explain the source of investment, which he explained to have been made out of share application money received from 34 share applicants to whom the shares of Assessee Company stood allotted, the list of which is given in the assessment order. The assessee also filed requisite documents to support genuineness of its claim. From the bank statements of the investor companies, the Assessing Officer observed that the cash deposit preceded the issuance of cheques and that since the authorized capital of the assessee company was only Rs. 10 Lakhs, the receipt of share application money worth Rs. 3.40 crores becomes doubtful without increasing the authorized capital. On being asked for expl....
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....for consideration of Rs. 100,00,000/-, 50,00,000/-, and 1,69,00,000/- respectively through sale deeds executed in the office of Sub Registrar-1, Aligarh. Director of purchasing company, M/s seven Heaven Construction Pvt Ltd, Sh. Sudish Kumar Singh S/o Sh. Sughad Pal Singh operates his business network vibrantly in Aligarh. The bank account of the above purchaser company where from sale consideration in respect of three plots transferred is 0010002100071628 at Punjab National Bank at Railway Roads Aligarh (UP). It has been further stated that this bank account has been credited with sizeable entries immediately before the transfer of purchase amount against all the three plots of land. Funds of Rs. 3,78,93,361/- credited in the above PNB account have been routed through the bank accounts of the family members of Sh. Sudhislt Kumar by depositing cash in their respective bank accounts. Requisite investigation under the law is required because the company was incorporated on 23.06.2006 and in the very next year it purchase a land measuring 9551 Sq. Yards at prime location in Aligarh and managed funds of Rs. 3,78,93,361/-. It is also worthwhile to mention that the case seems to....
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.... If according to the Ld. Assessing officer requisite investigation under law is required in the matter and which is clear that the matter needs to be properly investigated and accordingly a course of action is to be taken then how notice U\S 148 was issued at this stage when further investigation was needed. This is really true that investigation was needed as the amount of Rs. 74,00,000/- contributed by one of the promoters vide cheques detailed above after transferring from loan accounts, copy of the statements of account placed at page No 38, 39, 40 and 41 of the paper book. Had a proper mind been applied the Ld. Assessing officer would not have considered above amount for issuance of notice. Then the amount escaped as alleged would have been less by 74,00,000/= and obviously this could not be the reason at all. This clearly indicates that there is no application of mind from the Id. Assessing officer to the reasons recorded when at this stage further investigation was required. Further If as a result of investigation or enquiry the reasons gets changed or focus gets shifted to some other person as was obvious in the present case, had proper enquiries been conducted bef....
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.... the A.O. is bad in law and the order passed at the instance of this reason is bad in law is liable to be quashed. B) SATISFACTION ACCORDED Since the Id. Jt. CIT has agreed with the contention of the A.O therefore when reason is factually incorrect and premature and not in accordance with the law how the agreement of Ld. JT CIT with the reasons recorded is according to the law when there is no application of mind at this stage also. Had the Jt. CIT told the A.O to look into the matter properly he would not have accorded satisfaction at all, at least for the reason that Rs. 74,00,000/- invested by Mr. Sudesh Kumar is invested after obtaining loan and loan statements have been submitted during the course of assessment. So the satisfaction accorded to the reasons recorded which are bad is also bad in law and not within the meaning of section 151 of the Income Tax Act 1961. Further if as per reasons of further investigation was required how the case is fit for issuance of provisions of section 147/148 of the Income Tax Act 1961. The Ld. Jt.CIT should have to ask the A.O to see the matter investigated properly then submit for approval. Had the matter been prop....
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....nion of the DVO." In Pr. Commissioner of Income Tax Vs G & G Pharma India Ltd. the Honorable High court of Delhi (2016) 384 ITR 0147 (Delhi), "When basic requirement that AO must apply his mind to material on record in order to have reasons to believe that income of the Assessee escaped assessment was missing, reopening of assessment not justified." In Shree BhagwanVs. Income Tax officer (2015) 45 CCH 0040 Del Trib, Honorable Delhi Bench of ITAT has held that "Mere Annexure cannot be regarded as a material or evidence to prima facie show or establish nexus or link which discloses escarpments of income for warranting addition u/s 68." In Bir Bahadur Singh Sijwali Vs. Income Tax Officer (2015) 68 SOT 0197 (Delhi) (URO) it was held that "Reassessment proceedings cannot be resorted to only to examine facts of a case, no matter how desirable that be, unless there is a reason to believe, rather than suspect, that income has escaped assessment." The reason recorded is therefore bad and agreeing to the bad reasons and according approval to the bad reasons is also bad in law and not within section 151 of the Income Tax Act 1961. Therefore the order passed....
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....k statements and ITRs are furnished and even detail agricultural produce sold has been produced. 2. Some Investor companies are Not Existent Here all the details are submitted and the A.O. has been requested to issue notices u/s 133(6) or 131 and the assessee will bear all the costs of bringing the applicants. Therefore, none of the applicants are non existent. 3. None of the companies produced bank Statements Here bank statements are furnished and the A.O. has been specifically requested for any information if needed and even has been requested for issuance of notice u/s. 133(6) or 131 of the Income Tax Act, 1961 4. None of the investors companies appeared before the A.O. but merely sent written response through DAK In fact A.O. has been specifically requested to issue 131 or 133(6) of the Income Tax Act 1961 and even the appellant could bear their cost of travel and food. 5. The companies Hema Trading and Eternity Multi Trade Pvt. Ltd. at Mumbai were found to be non existent at the address given and the premises was owned by some other person. No such instance is found in the present case. 6. The companies of Kolkata did not appear before A.O. nor did t....
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....lleged vide para 2 page 22 of CIT(A) order that the appellant has failed to satisfy the conditions as provided in section 68 of the Income Tax Act 1961 in case of any of the creditors. In none of the cases creditworthiness of the of the creditors could be ascertained. It is not understandable when all the details of the investors have been submitted as stated by Ld. CIT(A) in his order on page No 16 para 5.1 still the Ld. CIT(A) has given a finding with regard to no non establishment of satisfying provisions of section 68 of the Income Tax Act 1961. The appellant after submitting all the information required as per provisions of section 68 of the Income Tax and further requested the A.O for issuance of Notices U\S 133(6) of the Income Tax Act 1961 or 131 of the Income Tax Act 1961 and without rebutting anything which goes against the appellant still the A.O treated the amount as unexplained and taxed U\s 68 Of the Income Tax Act 1961. There is no any such specific finding which could state that any of the applicant is non existent or any specific reason where the appellant has not discharged its responsibility under law to prove credit worthiness of the creditors still the....
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....al of the assessee. Suman Gupta Vs ITO (ITA No.680/12 vide judgement dated 07.08.2012) (Allahabad High Court) (Copy Enclosed) where Hon'ble Allahabad High Court held that where identical amounts were found to have been deposited in accounts of half a dozen lenders prior to lending, and assessee could only produce one lender for examination, 'addition is to be made as assessee failed to prove genuineness of loans Blessing Construction Vs ITO T20131 32 taxmann.com 366 (Guiarat)/r20131 214 taxman 645 (Gujarat) (Copy Enclosed) where Hon'ble Gujarat High Court held that where sizeable amounts were deposited in cash in account of depositors only before their withdrawal through cheques in favour of assessee, addition was justified. 4. The authorized capital of assessee is only Rs. 10 lakhs where as assessee has accepted share application money of Rs. 3.40 or without increasing its authorized capital, which shows that assessee never intended to issue any shares against this share application money. Hence, genuineness of the transactions is not proved. 5. Many of the share applicants were agriculturist and not filing Income Tax Retur....
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....re to be regarded as bogus and, thus, amount received from said transactions was to be added to assessee's taxable income under section 68 It was held as follows: "53. In contrast to the above judgments, in the present case, the Assessee is a private limited company and in the factual matrix, we have held that the Assessee has not been able to discharge the initial onus and has not been able to establish the identity, creditworthiness of the share applicants and the genuineness of the transaction. Though, in our considered opinion, none of the above judgments, referred to by the Assessee respondent, are applicable in the facts of the present case and in view of the findings recorded by us hereinabove. 54. In view of the above, we are of the view that the Assessee has not discharged the onus satisfactorily and the additions made by the Assessing Officer were justified and sustainable." 5. CIT Vs Navodava Castle Pvt Ltd T20141 367 ITR 306 (Del) (Copy Enclosed) where Hon'ble Delhi High Court accepted that since the assessee was unable to produce the directors and the principal officers of the six shareholder companies and also that as per the in....
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....ailed to prove identityand capacity of subscriber companies to pay share application money, amount so received was liable to be taxed under section 68. It was held as follows: "12. A perusal of the order of the Tribunal shows that it has gone on the basis of the documents submitted by the assessee before the AO and has held that in the light of those documents, it can be said that the assessee has established the identity of the parties. It has further been observed that the report of the investigation wing cannot conclusively prove that the assessee's own monies were brought back in the form of share application money. As noted in the earlier paragraph, it is not the burden of the AO to prove that connection. There has been no examination by the Tribunal of the assessment proceedings in any detail in order to demonstrate that the assessee has discharged its onus to prove not only the identity of the share applicants, but also their creditworthiness and the genuineness of the transactions. No attempt was made by the Tribunal to scratch the surface and probe the documentary evidence in some depth, in the light of the conduct of the assessee and other surrounding circums....
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.... "30. What we perceive and regard as correct position of law is that the court or tribunal should be convinced about the identity, creditworthiness and genuineness of the transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee's knowledge. Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive. Companies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind the company who take the decisions, controls and manage them." 11 CIT Vs Empire Builtech (P.) Ltd (366 ITR 110) (Copy Enclosed) where Hon'ble Delhi High Court held that u/s 68 it is not sufficient for assessee to merely disclose address and identities of shareholders; it has to show genuineness of such individuals or ent....
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....out application of mind or making any enquiry, such re-assessment cannot be sustained being void. Some of the decisions are referred to as under : * PCIT v. Meenakshi Overseas (P.) Ltd. [2017] 82 taxmann.com 300 (Delhi); * Harikishan Sunderlal Virmani v. DCIT [2017] 88 taxmann.com 548 (Gujrat); * Kothi Steel Ltd. v. ACIT [2016] 72 taxmann.com 252 (Gujarat) * CIT v. SPL'S Siddhartha Ltd. [2012] 17 taxmann.com 138 (Delhi) 9. In the instant case, the non-application of mind to the information is apparent from the fact that the total amount involved was Rs. 3,19,00,000/- and the amount of Rs. 74,00,000/- was advanced by the promoters of the developer company through account payee cheque out of his saving bank account No. 010000103020454 with PNB, which was raised as loan by the assessee. This aspect did not strike to the assessee while making addition of the entire amount of share application money received, whereas the information was received with respect to investment in properties. This fact itself goes to substantiate the non-application of mind for reopening the case. 10. We have also gone through the reasons recorded, which eloquentl....
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.... CIT vs. Meenakshi Overseas Pvt. Ltd. (supra) case was reopened by the Assessing Officer on the basis of information of Investigation Wing where there was no independent application of mind to any tangible material which formed the basis of belief of escapement. In that case also, the information received contained (i) the names of beneficiaries (ii) bank name & branch of beneficiaries banks and entry giving banks, (iii) value of entries taken (iv) name of account holder of entry giving account and the Assessing Officer after going through the said information straightway derived its conclusion without application of his mind. In these facts, the Hon'ble Jurisdictional High Court after following various other decisions has held as under : "A perusal of the reasons as recorded by the A.O. reveals that there were three parts to it. In the first part, the AO has reproduced the precise information he has received from the Investigation Wing of the Revenue. This information is in the form of details of the amount of credit received, the payer, the payee, their respective banks, and the cheque number. This information by itself cannot be said to be tangible material. 20....
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....issing. 24. The reopening of assessment under Section 147 is a potent power not to be lightly exercised. It certainly cannot be invoked casually or mechanically. The heart of the provision is the formation of belief by the AO that income has escaped assessment. The reasons so recorded have to be based on some tangible material and that should be evident from reading the reasons. It cannot be supplied subsequently either during the proceedings when objections to the reopening are considered or even during the assessment proceedings that follow. This is the bare minimum mandatory requirement of the First part of Section 147 (1) of the Act. 25. At this stage it requires to be noted that since the original assessment was processed under Section 143(1) of the Act, and not Section 143 (3) of the Act, the proviso to Section 147 will not apply. In other words, even though the reopening in the present case was alter the expiry of Four years from the end of the relevant AY, it was not necessary For the AO to show that there was any Failure to disclose fully or truly all material facts necessary for the assessment. 26. The first part of Section 147(1) of the Act req....
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....reproduced above, relates to a cheque received by the petitioner on 9th October, 2002 from Swetu Stone PV from the bank and the account number mentioned therein. The last sentence records that as per the information, the amount received was nothing but an accommodation entry and the assessee was the beneficiary. 15. The aforesaid reasons do not satisfy the requirements of Section 147 of the Act. The reasons and the information referred to is extremely scanty and vague. There is no reference to any document or statement, except Annexure, which has been quoted above. Annexure cannot be regarded as a material or evidence that prima facie shows or establishes nexus or link which discloses escapement of income, Annexure is not a pointer and does not indicate escapement of income. Further, it is apparent that the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. The Assessing Officer accepted the plea on the basis of vague information in a mechanical manner. The Commissioner also acted on the same basis by mechanically giving his approval. The reasons recorded reflect that the Assessing Officer did not in....