TaxTMI 
TaxTMI 
TaxTMI 
2022 (1) TMI 476
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....that the assessee is a Company incorporated on 19.04.1993 and is engaged in the business of Finance being NBFC Registered Company. It filed its return of income on 15.10.2010 declaring total income of Rs. 1,06,610/-. Subsequently, on the basis of information received from the Investigation Wing, the A.O. reopened the assessment as per the provisions of Section 147 of the I.T. Act, 1961 on the ground that assessee has taken accommodation entry of Rs. 17,32,00,000/- from companies controlled by Shri S.K. Jain and Shri Virender Kumar Jain Group of Companies. The A.O. accordingly issued notice under section 148 of the I.T. Act, 1961 on 15.04.2013. The assessee-company vide letter dated 14.10.2013 stated that the return filed under section 139 on 15.10.2010 declaring taxable income of Rs. 1,06,610/- may be treated as return in response to notice under section 148 of the I.T. Act, 1961. 2.1. During the course of assessment proceedings the A.O. called for information under section 133(6) from all the parties from whom the assessee-company has received accommodation entries in shape of share application money and share premium fixing the date for hearing on 07.03.2014. However, no reply w....
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..... further noted that assessee-company has shown receipt of Rs. 21,69,49,267/- from sale of securities. The assessee has claimed salary expenses of Rs. 1,92,000/- which was shown as payable. He, held that there is no employer-employee relationship and the expenses were shown to reduce the tax liability. In absence of any satisfactory explanation given by the assessee, the A.O. made addition of the same to the total income of the assessee. Thus, the A.O. determined the total income of the assessee at Rs. 17,70,53,360/-. 3. Before the Ld. CIT(A), the assessee apart from challenging the addition on merit, challenged the validity of the reopening of the assessment. However, the Ld. CIT(A) upheld the action of the A.O. in reopening of the assessment. While doing so, he noted that the Hon'ble Delhi High Court in the case of Ambica Steel Ltd., vs., DCIT 118 TTJ 116 (Del.) has held that reopening of the assessment on the basis of information received from the Investigation Wing is valid. Further the A.O. in the instant case has noted that the assessee-company was beneficiary of receiving Rs. 17,32,00,000/-. This according to the Ld. CIT(A) was a sufficient reason to form the belief that in....
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....14 in response to the above said summons. The AO recorded his statement on 30.06.2014 wherein he had confirmed that the above companies had made investment in the shares of the appellant. This fact is missing in the assessment order. 6.6.4. The other documents filed by the appellant, in support of the arguments, have also been examined and it was found that:- * All the investors are companies incorporated by law. * Unique identification no, named as Company Identity Number (CIN) is allotted to all the investors by the MCA. * CIN is allotted on the basis of certain set of documents duly certified by CA or CS. * PAN is allotted to all the investors by the department. * Being artificial persons, companies work through their directors, towhom identity (DIN) is allotted by the MCA. * Again DIN is allotted on the basis of certain set of documents duly certified by CA or CS. * Appellant had issued shares to all the investors. Copy of Form 2, filed with the ROC has been filed. It is pertinent to note that shares cannot be allotted to any non existing entity. * Under these circumstances, non existence of a company cannot be imagined. * Further ail the investors have file....
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....inging sufficient material on record to disbelieve the claim of the appellant. However, the AO has failed to bring any material on record that the amount of Rs. 17,32,00,000/- is nothing but the appellant's own unaccounted money which was routed through the alleged company. Therefore; the addition made by the AO without any evidence deserves to be deleted. 6.6.8. The action of the AO clearly establishes that there was no adverse material with him other than the information from the Investigation Wing (which was not sufficient in the face of the evidences furnished by the A.O. during assessment proceedings) and the addition has been made contrary to the facts and circumstances of the case and against the settled propositions of law and thus the addition of Rs. 17,32,00,000/- is hereby deleted. 6.6.9. My above view is fortified by the following decisions:- "Where assesses had furnished income-tax returns, balance sheets, RoC particulars and bank account statements of shareholders, source of share application money had been satisfactorily explained. Section 68 .of the Income-tax Act, 1961 - Cash credits (Share application money) - Assessment year 2000-01 - Assesses received shar....
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....9;s taxable income under section 68 - Commissioner (Appeals) found that lenders were regular income-tax assessee and their PANs were on record - Further, amount had been advanced through account payee cheques and before issuing cheques, lenders had got balance in their accounts - Amount of loan had also been repaid through account payee cheques - In aforesaid circumstances, Commissioner (Appeals) opined that identity and creditworthiness of lenders had duly been proved - Accordingly, addition made by Assessing Officer was deleted -Tribunal confirmed order of Commissioner (Appeals) - Whether on facts, impugned order passed by appellate authorities did not suffer from any infirmity and, thus, revenue's appeal was to be dismissed - Held, yes [Para 6] [In favour of assessee] In an identical case before high court of Gujarat in the matter related to CIT v .Apex Therm Packaging (P.) Ltd. 121)14] 42 taxmann.com 473 (Gujarat) it has been held that when full particulars, inclusive of confirmation with name, address and PAN Number, copy of income tax returns, balance sheet, profit and loss account and computation of total income in respect of all creditors/lenders were furnished and wh....
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....0/- towards Commission is concerned, the Ld. CIT(A) also deleted the same on the ground that the substantive addition has been deleted. 5. As regards disallowance of Rs. 90,745/- under section 14A of the I.T. Act, 1961 is concerned, the Ld. CIT(A) deleted the addition on the ground that assessee has invested a sum of Rs. 3,47,17,000/- as advance against the property. None of the amounts represents investment in shares. Therefore, the action of the A.O. is contrary to the facts, for which, the Ld. CIT(A) deleted the addition. 6. So far as the addition of Rs. 1,92,000/- on account of disallowance of salary expenses is concerned, the Ld. CIT(A) deleted the same on the ground that A.O. made the addition without raising any query. Further being registered as NBFC Company with the RBI, the assessee has to comply with the legal requirements on this account. Therefore, disallowance of the entire salary is without any cogent reasons and unjustified, for which, he deleted the addition. 7. Aggrieved with such order of the Ld. CIT(A) giving relief to the assessee, the Revenue [ITA.No.5278/Del./2016 - A.Y. 2010-11] is in appeal before the Tribunal by raising the following grounds : 1. Whet....
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....ng an opportunity of being heard to the A.O. ? 7. Whether in facts and circumstances of the case and in law, the Ld. CIT(A) is legally justified in deleting the disallowance of 'salary expenses' amounting to Rs. 1,92,000/- even when the assessee has failed to discharge its onus u/s 37 of the Act during assessment proceedings and also at appellate stage that it had actually received any services in lieu of payment of Rs. 1,92,000 ? 8. That the appellant craves leave to add, alter, amend or forgo any ground(s) of appeal either before or at the time of hearing of the appeal." 8. The assessee has filed Appeal [ITA.No.5318/Del./ 2016 - A.Y. 2010-2011] challenging the order of the Ld. CIT(A) in upholding the validity of re-assessment proceedings and has raised the following grounds : 1. "The Ld. CIT (Appeals) has erred on facts and in law in upholding the action of the AO in reopening the assessment in gross violation of substantive and procedural requirements of law for reopening of assessments. 2. The Ld. CIT (Appeals) has erred on facts and in law in upholding the action of the AO of reopening of assessment by summarily rejecting the contention of the appellant on facts and o....
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....itted that assessment cannot be reopened without application of mind by the A.O. 1. Basesar Properties Pvt. Ltd., [2017] 88 taxmann.com 634 (Del.) (HC). 2. Kelvinator of India Ltd., [2010] 187 Taxman 312 (SC). 3. Chugmal Rajput vs., S.P. Chellaiah 79 ITR 603 (SC). 4. Sheonath Singh [1971] 82 ITR 147 (SC). 5. Lakhmali Mewaldas [1976] 103 ITR 437 (SC). 6. Kishanchand Chellaram vs., CIT [1980] 4 Taxman 29 (SC). 7. CIT vs., PV Kalyana Sundaram 164 Taxman 78 (SC). 8. CIT vs., Viniyas Finance & Inv. Pvt. Ltd., 33 Taxman 86 (Del.) (HC).. 9. CIT vs., Living Media India Ltd., [2013] 35 taxmann.com 105 (Del.) (HC). 10. PCIT vs., NC Cables Ltd., 88 taxmann.com 649 (Del.) (HC). 11. United Electric Co. Pvt. Ltd., vs., CIT 125 Taxman 775 (Del.) (HC). 12. Sarthak Securities Co. (P) Ltd., [2010] 195 Taxman 262 (Del.) (HC). 13. Signature Hotels P. Ltd., [2012] 20 taxmann.com 797 (Del.) (HC). 14. SFIL Stock Broking Ltd., 325 ITR 285 (Del.) (HC). 15. Suren International Pvt. Ltd., vs., Commissioner of Income Tax [2013] 35 taxmann.com 398 (Del.) (HC).. 16. Pr. CIT vs., G And G Pharma India Ltd., [2017] 81 taxmann.com 109 (Del.) 17. Pr. CIT vs., Meenakshi Overseas (P) ....
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....ts. He submitted that all the share applicants are income tax assessees and their orders were passed under sections 143(3)/153A/153C of the I.T. Act, 1961. Therefore, their existence is established. Further the Director of 06 Companies namely Shri Deepak Tyagi had appeared before the A.O. on 30.03.2014 in response to the summons issued by the A.O. and his statement was recorded on oath wherein he had confirmed that the above companies have made investment in the shares of the assessee-company. However, the A.O. had conveniently ignored this fact. He submitted that the Ld. CIT(A) after considering the various submissions made before the A.O. and the assessment orders of the investor companies passed under sections 143(3)/ 153A/153C of the I.T. Act, 1961, has deleted the addition. He accordingly submitted that the order of the Ld. CIT(A) being in accordance with law so far as the quantum of deletion is concerned, should be upheld and the grounds raised by the Revenue on this issue should be dismissed. 11. The Ld. D.R. on the other hand heavily relied on the order of the Ld. CIT(A) so far as the validity of reassessment proceedings are concerned. So far as the order of the Ld. CIT(A)....
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....ases are assessed to tax in some other charge, it is required that the cases may be transferred to the CIT concerned for immediate action. Yours Sincerely Sd/-M.V. Bhanumathi Director of Income Tax (Inv.)-II New Delhi 12.2. Thus, a perusal of the communication received from the Investigation Wing and reasons recorded for reopening of the assessment shows that the A.O. has acted solely on the communication received from the Director of Income Tax (Inv.)-2, New Delhi regarding the alleged entry operator racket run by Shri S.K. Jain group. The satisfaction note nowhere indicates that the A.O. verified the facts on record with regard to the return of income filed by assessee on 15.10.2010, since there is no mention of the return filed by the assessee in the satisfaction note. Further, the A.O. has not even tried to ascertain how the alleged accommodation entries from the Investor Companies were reflected in the return. We find the A.O. has made no enquiries about the companies alleged to have provided accommodation entries to the assessee-company and ignored the very fact that those companies were assessed under sections 153A/153C in March, 2013 after the search in the case of all....
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....sections 153C/153A of the I.T. Act, 1961 due to the very same search and seizure operation at the premises of Shri S.K. Jain group of companies. We, therefore, find merit in the arguments of the Learned Counsel for the Assessee that had the A.O. applied his mind to the facts on record, he would have come to a different conclusion especially when all the investor companies are assessed to tax under sections 153C/153A of the I.T. Act, 1961 before recording reasons and their assessment is the out-come of the search at the premises of Shri S.K. Jain Group of companies. 12.5. It has been held in various decisions that assessment cannot be reopened without application of mind by the A.O. Hon'ble Delhi High Court in the case of Signature Hotels Pvt. Ltd., (supra) has held that information given by the Director of Income Tax (Inv.) that amount received by the assessee from other company was nothing, but, accommodation entry and assessee was a beneficiary was not sufficient to reopen the assessment when A.O. did not apply his own mind to that information. The relevant Head Notes of the order of the Hon'ble High Court reads as under : "Section 147 of the Income-tax Act, 1961 - Income esca....
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....shed nexus or link which disclosed escapement of income. The annexure was not a pointer and did not indicate escapement of income. Further, it was 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. Therefore, the proceedings under section 148 were to be quashed. ..... 4. The aforesaid section is wide but it is not plenary. We have to consider and examine the crucial expression "reason to believe" used in the said section. The Assessing Officer must have "reason to believe" that an income chargeable to tax has escaped assessment. This is mandatory and the "reasons to believe" are required to be recorded in writing by the Assessing Officer. Sufficiency of reasons is not a matter, which is to be decided by the writ court, but existence of belief is the subject-matter of the scrutiny. A notice under section 148 can be quashed if the "belief' is not bona fide, or one based on vague, irrelevant and non-specific inform....
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....information/opinion/advise received from some other authorities. The A.O. has to apply his independent mind for exercising the jurisdiction under section 147 of the I.T. Act, 1961. The Hon'ble Delhi High Court in the case of SPL Siddharth Ltd., reported in [2012] 17 taxmann.com 138 (Del.) has held that "if an authority is given expressly by affirmative words upon a defined condition, the expression of that condition excludes the doing of the Act authorised under other circumstances than those as defined. It is also established principle of law that if a particular authority has been designated to record his/her satisfaction on any particular issue, then it is that authority alone who should apply his/her independent mind to record his/her satisfaction and further mandatory condition is that the satisfaction recorded should be "independent" and not "borrowed" or "dictated" satisfaction". 12.9. The Hon'ble Patna High court in the case of Shiv Naryan Jaiswal vs., ITO 176 ITR 352 (Patna) has held that where the A.O. does not himself exercise his jurisdiction under section 147, but, merely acts at the behest of any superior authority, it must be held that assumption of jurisdiction was....
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....0/- made by the A.O. under section 68 of the I.T. Act, 1961. We, therefore, uphold the same and the grounds of appeal numbers 1 to 4 by the Revenue are dismissed. 14. So far as grounds of appeal number.5 is concerned, the same relates to the order of the Ld. CIT(A) in deleting the addition of Rs. 34,64,000/- under section 69C of the I.T. Act, 1961 made by the A.O. being expenditure incurred for arranging the bogus accommodation entry. 14.1. Since in the preceding paragraph we have already deleted the addition of Rs. 17,32,00,000/- by quashing the re-assessment proceedings as well as the addition on merit, the order of the A.O. on this issue cannot be sustained. Therefore, we uphold the order of the Ld. CIT(A) on this issue and the ground of appeal number.5 raised by the Revenue on this issue is dismissed. 15. So far as grounds of appeal number.6 of the Revenue is concerned, the same relates to the order of the Ld. CIT(A) in deleting the disallowance of Rs. 90,745/- made by the A.O. under section 14A read with Rule 8D of the I.T. Act, 1961. 15.1. After hearing both the sides, we find the Ld. CIT(A) had given a finding that the amount of Rs. 3,47,17,000/- invested by the assessee....
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....th Fund Ltd. Copy of TDS return filed for the year. 2. Month wise and Person wise details of Salaries. Also file details of Salaries paid during the year and explanation that why out of total salary of Rs. 25,40,000/-, Rs. 20,17,000/- was outstanding as on 31.03.2011, which reflects that there was no employer-employee relationship and the expenses were shown to reduce the tax liability. Also Produce the Original Salary Register, Attendance Register and details of ESIC and PF deducted and deposited in government account. 3. Person wise details of Audit Fees and Legal & Professional Charges and evidence of TDS deducted thereon 4. Details of Other Expenses amounting to Rs. 11,05,000/- along with copy of bills. 5. Month wise and Party wise details of Sales and Justification how Sales were made without any purchases or opening stock. 6. Party wise details of Interest and Other Income along with details of TDS deducted by them and Also file Reconciliation of Income as per 26AS and Profit & Loss Account. 7. Name & Address (complete & present) of the person / parties to whom Advances given for purchase of properties and Loan to others. 8. Please file copy of ITR of M/s Transa....
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....own income of Rs. 14,17,438.44 from sale of securities. The A.O. asked the assessee to file month wise and party wise details of sales and justification as to how sales were made without any purchase or opening stock. Rejecting the various explanations given by the assessee and observing that no actual transaction were conducted by the assessee-company, but, to show certain income, entry was taken and shown as sale on securities, the A.O. made addition of Rs. 25,40,000/- being expenditure incurred towards salary expenses. Similarly, the A.O. made addition of Rs. 11,05,000/- being other expenses claimed by the assessee in absence of proper bills and vouchers. Thus, the A.O. determined the total income of the assessee at Rs. 10,04,44,930/-. 19. In appeal, the Ld. CIT(A) deleted all the additions made by the A.O. 19.1. So far as the amount of Rs. 9,37,50,244/- added by the A.O. under section 68 of the I.T. Act, 1961 is concerned, the Ld. CIT(A) deleted the same by observing as under : "I have gone through the assessment order and the written submission of the appellant compiled in the shape of paper book. I have found that assessee has furnished complete details of the transacti....
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..... 8. That the appellant craves leave to add, alter, amend or forgo any ground(s) of the appeal raised above at the time of the hearing." 21. Grounds of appeal numbers 1 and 2 by the Revenue relates to the order of the Ld. CIT(A) in deleting the addition of Rs. 9,37,50,244/- made by the A.O. 21.1. The Ld. D.R. heavily relied on the order of the A.O. 22. Learned Counsel for the Assessee on the other hand heavily relied on the order of the Ld. CIT(A). He submitted that the A.O. has made the addition of Rs. 9,37,50,244/- which is the amount received from M/s Transnational Growth Fund Ltd. [in short "M/s Transnational"] which belonged to the alleged entry operator Shri Surender Kumar Jain. He submitted that the aforesaid sum was not a cash credit or capital received by the assessee from the aforesaid entity but in effect was the return of loans made by the assessee in the preceding year. The Learned Counsel for the Assessee drew the attention of the Bench to Page-6 of the assessment order where the A.O. has mentioned that the above amount was given in A.Y. 2010-11. 22.1. The Learned Counsel for the Assessee accordingly submitted that the A.O. has totally misdirected himself in mak....
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....rtant to mention here that amount of Rs. 9,27,31,868/- was given by the assessee company to M/s Transnational Growth Fund Ltd for the Asst. Year 2010-11 during the period of 04.03.2010 to 31.03.2010 and the amount was returned back from 10.04.2010 and the major amount were received back till July, 2010 which is nothing but the own unaccounted money of the assessee company which was routed through M/s Transnational Growth Fund Ltd during the Asst. Year under consideration to give up the colourful shape of natural business transaction. If, the assessee company has so much requirement of money why the same was given to M/s Transnational Growth Fund Ltd for few days without any security taken from them." 23.1. A perusal of the above shows that the A.O. has totally misdirected himself in making the addition of Rs. 9,37,50,244/- which is not the cash credit or capital received by the assessee, but, is the return of the loans and advances given by the assessee in the preceding year. Further all relevant documents such as copy of income tax return, audited balance-sheet, assessment order, confirmations, bank statements etc., of M/s. Transnational Growth Fund Ltd., were filed before the A.....