TaxTMI 
TaxTMI 
2019 (3) TMI 1948
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....leting the addition of Rs. 10,00,000/- made on account of commission paid to entry operators out of its undisclosed income. 4. That the Ld. CIT(A) has erred in facts of the case of assessee deserves initiation of penalty u/s 271(1)(c) of the I.T. Act, 1961. 5. That the order of the Ld. CIT(A) is erroneous and is not tenable on facts and in law. 6. That the grounds of appeal are without prejudice to each other." 2. The brief facts of the case are that in this case original assessment was framed u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") on 08.12.2009 at an income of Rs. 2,18,162/- as against returned income of Rs. 1,08,405/-. Subsequently, after a lapse of four years, i.e., in the year 2013, information from Investigation Wing, New Delhi regarding some accommodation entry racket, operated by one Sh. Surender Kumar Jain group, was received along with list of beneficiaries of such accommodation entries. The name of the assessee-respondent was also reflected in the said list as one of the beneficiaries. The Assessing Officer, noting the modus operandi of entry provider, as reported by Investigation Wing, concluded that t....
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....the entry operators:- Chqeue Book Date From Company Name To Company Name Name of issuing Bank Cheque/RTGS/PO No. Cheque Date Amount (In Rs.) Name of the Middle-man Annexure No. Page No. 20-03-2007 Nisha Holding Ltd. Jai Gajanan Enterprises Pvt. Ltd. UTI Ch. No. 068294 20-03-2007 6000000 Arun Ji A-66 49 21-03-2007 Nisha Holding Ltd. Jai Gajanan Enterprises Pvt. Ltd. UTI Ch. No. 083775 21-03-2007 6000000 Arun Ji A-66 49 21-03-2007 Mega Top Promotors Pvt. Ltd. Jai Gajanan Enterprises Pvt. Ltd. UTI Ch. No. 011213 21-03-2007 6000000 Arun Ji A-66 49 21-03-2007 Nisha Holding Ltd. Jai Gajanan Enterprises Pvt. Ltd. UTI Ch. No. 083775 21-03-2007 6000000 Arun Ji A-66 49 21-03-2007 Mani Mala Delhi Property Pvt. Ltd. Jai Gajanan Enterprises Pvt. Ltd. UTI Ch. No. 008517 21-03-2007 6000000 Arun Ji A-66 49 24-03-2007 Euro Asia Venture Capital Jai Gajanan Enterprises Pvt. Ltd. UTI Ch. No. 050206 26-03-2007 8000000 Arun Ji....
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....olding the reopening of case as void. Aggrieved by the impugned order, the Revenue is in appeal before the Tribunal, inter alia, on the grounds, mentioned herein above. 3. During the course of hearing, the ld. DR, relying upon the findings reached by the Assessing Officer, submitted that the ld. CIT(A) was not justified in holding the reassessment as invalid and consequently in deleting the additions made by the Assessing Officer. The assessee failed to produce any of the directors of companies, from whom share application money was received. Barring directors of three companies, no response was received from directors of other companies in compliance to summons u/s. 131. Therefore, only because the assessee had submitted some documents pertaining to the investing companies, would not go to discharge the onus that lay on the assessee under section 68 of the Act. Reliance is placed on the decision of Hon'ble Delhi High Court in the case of CIT vs. Nova Promoters & Finlease (P) Ltd., 342 ITR 169 (Del) and CIT v. NR Portfolio Pvt. Ltd., 263 CTR 456 (Del.) as also relied by the Assessing Officer. Various other decisions have also been relied by the ld. DR in support of the reassessm....
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....ation of mind and the AO was mechanically persuaded by the report of the investigation wing. Hence, such a re-assessment due to this reason too is not sustainable. Reliance on this point is placed on the following decisions :- * Sarthak Securities Co. (P.) Ltd v. ITO [2010] 195 Taxman 262 (Delhi); * Signature Hotels (P.) Ltd. v. ITO [2012] 20 taxmann.com 797 (Delhi); * CIT v. Sfil Stock Broking Ltd. [2010] 325 ITR 285 (Delhi); * CIT v. Suren International (P.) Ltd. [2013] 35 taxmann.com 398 (Delhi); * Italica Floor Tiles Pvt. Ltd. and others v. ACIT 2015 (6) TMI 382 - ITAT RAJKOT 4.3 It has been next contended on validity of reopening of assessment has been that Proviso to Section 147 is not satisfied. The original assessment was done u/s 143(3). The factum of receipt of share capital is mentioned in the return as well as in the assessment order. The assessment is sought to be reopened after expiry of four years, which is against proviso to Section 147 according to which the assessment cannot be not reopened after expiry of four years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessme....
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....ard the submissions of both the sides and have gone through the entire material available on record and we find no justification to interfere with the decision reached by the ld. CIT(A) on validity of reassessment. For ready reference, the findings reached by the ld. CIT(A) read as under : "I have very carefully gone through the satisfaction note recorded by the AO as well as the written and oral submissions made by the appellant. The AO was present during the entire course of the hearing on 19th May 2015. It is settled now that the power under section 147 is not absolute and unbridled and the same have to be exercised within the four corners of law. It is also settled that the AO has no power to review his orders and what cannot be done directly can also not be done indirectly. Law enables reopening if the conditions for the same are satisfied and it cannot be on the basis of change of opinion. Conditions laid down by law for reopening are on several aspects like the time elapsed from the end of assessment year which is being sought to be reopened, whether the original proceedings were completed u/s 143(3) or not, how much is the income which has escaped assessment etc. ....
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....ed the rate of commission to the entry operators at the rate of 2 %. This also indicates that the suspicion of the alleged accommodation entry operator and its connection with the appellant is not well founded. 8. Copy of the reasons given to the appellant do not indicate that the permission of sanctioning authority as stipulated under section 151 of the Act was taken and application of mind by the sanctioning authority was made before according the sanction. 9. Copy of the reasons given to the appellant does not indicate that the AO applied mind on various parameters fixing the statutory time limits as provided u/s 149 to the facts of appellant's case. 10. The appellant has been very emphatic on the fact that in the case of the appellant scrutiny u/s 143(2) was earned out and the assessment order u/s 143(3) was passed on 08.12.2009. During the course of scrutiny proceedings, all the details w.r.t. the share capital received including the confirmations from the relevant parties were filed. The AO in reasons has not mentioned what material fact was not disclosed fully and truly by the appellant. For this reason alone it was argued that the reopening was ba....
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....ome of the appellant in gross violation of the principles of nature justice. " AND GROUND NO. 5 "The Ld. AO has erred on facts and in law in making an addition of Rs. 4,00,00,000/- under section 68 of the Income Tax Act, 1961 without mentioning any evidence/ documents against the appellant which indicate that the explanation given by the appellant was incorrect. " The appellant has argued that the AO has primarily made the additions for the reason that the directors of the investing companies did not appear before him. He has not mentioned any evidence, whatsoever, indicating the alleged entry operator racket and evidence pertaining to the appellant being related or beneficiary of that in any manner. The appellant has, therefore claimed that the reassessment is not at all based on any evidence. The AO has also not carried out any independent enquiry whatsoever and has taken the report of the investigation to be the gospel truth. If the AO had any evidence proving the appellant to be beneficiary he should have at least mentioned the same in the order. The appellant was never confronted with any of the evidence which apparently led the AO to re-ope....
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.... on 28.03.2013 by the same AO in the Central Circle- 23, New Delhi and the ITR filed by this company was duly and properly accepted by the department. M/s Mega Top Promoters (P) Ltd was also assessed for the AY 2007-08 under section 143(3) on 04.12.2009 and the ITR of this company has been accepted by the AO. The appellant has reemphasized the fact that that the assessment was originally completed u/s 143(3) after due verification of enhancement of the share capital. The appellant has submitted that the issue with respect to investment through share capital etc. has been one of the most controversial issues in the recent times. Judicial interpretation on the same has considerably varied over a period of last 7/8 years. After lot of application of mind by the judicial authorities including the High Courts and the Tribunals, now there seems to be lot of consistency in the interpretation of law. Honorable Delhi High Court in the very recent judgment in the case of Gangeshwari Metal (P) Ltd has categorized the ground situation in two broad categories. One are the cases where the A.O. carries out detailed investigation and finds out that the ostensible investors are ju....
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....y given copies of the bank accounts of the investing companies and no cash deposit was found to have been made in those bank accounts which clearly lead to the conclusion that these entities had the credit worthiness and the source was fully explained. Considering all these facts and circumstances of the case, it is submitted that the additions made by the AO u/s 68 of the Act are absolutely pre-mediated and have no merit whatsoever. I have gone through entire facts and circumstances of the case. It is undisputed that the appellant was earlier assessed u/s 143(3) and this aspect of enhancement of the share capital was verified by the AO. It is also true that the appellant was never confronted with any evidence of accommodation entry racket or the appellant being a part of the same. As a matter of fact no such evidence has even been mentioned in the assessment order. On the contrary the Assessing Officer in the central circle in the cases of some of the investing companies have not stated anything incriminating against them in the assessments made u/s 153C of the Act. Some of the investing companies have also been assessed u/s 143(3). I also take note of the fact t....
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....he alleged accommodation entry operator. The addition of Rs. 10, 00,000/- therefore deserves to be deleted according to the appellant. I have allowed ground number 4&5. This is directly connected and consequential to the same issue. This addition of Rs. 10,00,000/- is, therefore also directed to be deleted." 6. We also find that the Assessing Officer has acted mechanically on the information of investigation wing about the alleged accommodation entries and has drawn his conclusions without applying his mind or making any enquiry in the matter before forming the belief of escapement. In the case of CIT vs. Meenakshi Overseas Pvt. Ltd. (supra) in the identical facts, similar reasons were recorded 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 th....
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....the other, is the Investigation report of the DIT. Nothing from that report is set out to enable the reader to appreciate how the conclusions flow therefrom. 23. Thus, the crucial link between the information made available to the AO and the formation of belief is absent. The reasons must be self evident, they must speak for themselves. The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons. The entire material need not be set out. However, something therein which is critical to the formation of the belief must be referred to. Otherwise the link goes missing. 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 th....
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.... said proforma gave the Name of the Beneficiary, the value of entry taken, the " number of the instrument by which entry was taken, the date on which the entry was taken, Name of the account holder of the bank from which the cheque was issued, the account number and so on. 28.3 Analysing the above reasons together with the annexure, the Court observed: "14. The first sentence of the reasons states that information had been received from Director of Income-Tax (Investigation) that the petitioner had introduced money amounting to Rs. 5 lacs during financial year 2002-03 as per the details given in Annexure. The said Annexure. 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....