TaxTMI 
TaxTMI 
TaxTMI 
2022 (6) TMI 288
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....ce of Rs.3,88,42,025/- by rejecting the claim of deduction under section 80IA made by the assessee. 2.1. The Assessee challenged the order of the Ld. CIT(A) who allowed the claim of deduction under section 80IA. On appeal by the Revenue the Tribunal vide ITA.No.1920/Del./2013 order dated 13.01.2016 dismissed the appeal filed by the Revenue. 3. Subsequently, the A.O. reopened the assessment under section 147 of the I.T. Act, 1961 after recording the following reasons : "A search and seizure operation u/s 132 of the I.T. Act, 1961 was carried out in the case of Shri. Raj Gopal Agarwal, Sh Madho Gopal Agarwal, Sh. Gopal Agarwal and M/S. K R Pulp & Papers Ltd. group of companies at various residential and business premises in Delhi, Shahjahanpur and other places on 08.07.2015 by DDIT(inv.), Unit-2(3), New Delhi. During pre and post search proceedings it was found that the group companies have received share capital with exorbitant premium from large number of non-descript companies mainly based in Kolkata and Delhi from the period between 1.4.2008 to 31.3.2009. The enquiries were also got conducted by the Inspectors of the Investigation Wing at Delhi and Kolkata. Most of the entry ....
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.... 30,000 2,500,000 2,000,000 13. Impex Services Ltd. 0, Raja Santosh load, Kolkata-700027 50,000 2,500,000 1,000,000 14. Raina commodities (P) Ltd. 32, Weston Street, Kolkala-700012 30,000 2,500,000 1,000,000 15. Limitex Investsments Ltd. 6, G.C. Avenue, 7th loor, Kolkata-700013 30000 2,500,000 1,000,000 16. 'rema Mercantile (P) Ltd. i, Synogone Street, Kolkata-700001 100,000 5,000,000 1,000,000 17. VDR Consultants (P) Ltd. 72/12, Desh Bandhu load, Kolkata-700035 100,000 5,000,000 1,000,000 18 Amber Credit co. Ltd. 115, College Street, Write Tower, Kolkat - 700012 100,000 5,000,000 1,000,000 19 Abharani Vinimay(P) Ltd. 85, N.s. Road, Kolkata-700001 60000 3,000,000 2,400,000 20 Adequate Transport & tburs Ltd. D-5/3111, 3ri1 floor, Awadh Complex, Laxminagar, Delhi 20000 1,000,000 800,000 21. Agile Conglomerate (P) Ltd. 27, Mullick Street, Kolkala-700007 100000 5,000,000 4,000,000 22. Ahy foods Products Ltd. 50/12, Ashok Nagar, New Delhi-110027 20000 1,000,000 800,000 23. Bell Indus Fi....
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.... bogus and nonexistent, the share capital received by M/s K R Pulp and Paper Ltd. amounting to Rs.36,64,35,000/- in the F.Y. 2008-09 from these large number of non-descript companies is nothing but its own unaccounted income routed through these companies. Keeping in view all above, 1 have reason to believe that an amount at least of Rs.36,64,35,000/- has escaped assessment in the case of M/s K R Pulp and Paper Ltd. for the A.Y. 2009-10 within the meaning of Section 147/148 of Income Tax Act, 1961. The re-assessment proceedings in this case for A.Y. 2009-10 pertain to period beyond four years but before the expiry of six years from the date of issue of notice. In this case, since, the assessment has already been made u/s 143(3) of the I T. Act for A.Y. 2009-10 the first proviso to section 147 (as reproduced below) is applicable in this case as the assessee has not disclosed material facts, necessary during the course of assessment which now has that the share capital received by M/s K R Pulp and Paper Ltd. amounting to Rs.36,64,35,000/- in the F.Y. 2008- 09 from these large number of non-descript companies is nothing but its own unaccounted income routed through these companies....
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.....2016 asked for supply of the copy of the reasons for reopening of the case, which were provided to the assessee on 11.07.2016. The objection filed by the assessee vide letter dated 26.08.2016 for such reopening was disposed of by the A.O. by passing a speaking order on 29.08.2016. 2.3. During the course of assessment proceedings the A.O. noted that assessee has received share capital of Rs.25,32,35,000/- and share premium of Rs.20,22,88,000 on account of issue of 50,64,700 shares to 58 companies. He noted that either these companies are Delhi based or the companies are having Kolkata based address. In order to verify their identity and creditworthiness, the A.O. issued notice under section 133(6) of the I.T. Act, 1961 to confirm the share capital/share premium amount received. He noted that most of the 133(6) notices sent to these companies were either returned back unserved or no information at all has come from these companies. From the bank statements and other details in respect of these companies furnished by the assessee, he noted that these companies were just rotating the funds and no worthwhile business has been done by them. From the copies of the return of income filed....
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....eturned income of Rs.39,450/- for the AY 2009-10. There is a cash deposit of Rs.25,00,000/- on 02.09.2016 and the same amount was credited on 02.09.2016. b) M/s. Mapple Mercantile Pvt. Ltd. at SI. No. 47 the company has a small income of Rs.22,660/- for A.Y. 2009-10 share application money has been given subsequent to four clearing entries i.e. Rs.25,00,000/- on 28.01.2009 and Rs.25,00,000/- on 04.02.2009. c) M/s. Sekhar Commerce Pvt. Ltd. at SI. No. 18 in the above mentioned table in para 10 - returned income for A.Y. 2009-10 is Nil and share application money Rs.10,00,000/- has been give through cheque dated 17.09.2008. d) Most of the cheques for share application money have been issued from the following banks only : * Central Bank of India, 85, WS Road, Kolkata - 700001 * Union Bank of India Axis Bank, Kankurgachi Br. Kolkata (e) Money in the bank account of applicants were deposited two to three days before the issue of cheque of share application money. It is also interesting that the dates appearing on cheques issued are almost same as those of the dates on which money was deposited in the accounts of the applicants. This means that the applicants have issued the....
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....g to Rs.25,32,35,000/- is added to the assessee's total income u/s. 68 of the I.T. Act, 1961. Penalty u/s 271(l)(c) of the I.T. Act, 1961 is initiated for furnishing concealment of income/inaccurate particulars of income. 2.5. The A.O. accordingly determined the total income of the assessee at Rs.27,28,32,150/-. 3. Before Ld. CIT(A) the assessee, apart from challenging the addition on merit, challenged the validity of re-assessment proceedings. The Ld. CIT(A) not only quashed the re-assessment proceedings, but, also deleted the addition on merit. 3.2. So far as the addition on merit is concerned, the Ld. CIT(A) relying on various decisions deleted the addition on the ground that assessee has discharged the onus cast on it by providing the identity and creditworthiness of the share applicants and genuineness of the transaction. So far as the validity of re-assessment proceedings are concerned, the Ld. CIT(A) relying on various decisions quashed the same on the ground that the original assessment was completed under section 143(3) and the case was reopened after a period of 04 years from the end of the relevant assessment year and there is no allegation of any failure on the part ....
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....paragraphs. The Ld. CIT(A) without proper appreciation of facts of the case has deleted the addition which is not justified. 5.1. The Ld. D.R. in support of her contention relied on the following decisions : 1. Navodaya Castle [56 taxmann.com 18 (SC)] 2. CIT v. Sophia Finance Ltd. 205 ITR 98 (Dei.) (F.B.) 3. Titan Securities Ltd. 357 ITR 184 (Del.) 4. N.R. PORTFOLIO PVT. LTD 87 DTR 0162 (Del.) 5. MAF ACADEMY P. L TD. [361ITR 02858 (Delhi)] 6. Tarika Properties Investment Pvt Ltd 221 TAXMAN 0014 (Del.) 7. Globus Securities & Finance Pvt Ltd 224 TAXMAN 237 (Delhi) 8. Empire Buittech Pvt. Ltd 366ITR 110 (Delhi) 9. ONASSIS AXLES PRIVATE LIMITED 364 ITR 53 (Delhi) 10. FOCUS EXPORTS PVT. LTD. 111 DTR 0012 (Del) 11. RathiFinlease Ltd 215 CTR 429 MP 12. Kundan Investment Ltd 263 ITR 626 (Cat) 13. Korlay Trading Co. Ltd 232 ITR 820 (Cat) 14. SumatiDayai 214 ITR 801 (SC) 15. Power Drugs Ltd. 245 CTR 623 P & H 16. Nova Promoters &Finiease (P) Ltd 342 ITR 169 (Del.) 17. AZEEM INVESTMENT PVT LTD 252 CTR 0217 Del.) 18. MAJOR METALS LTD 359 ITR 0450 (Bom) 19. INDEPENDENT MEDIA PVT. LTD. 25 taxmann.com 276 (Delhi) 20. NEELKANTHISPAT UDHYOG PVT LTD 81 DTR 02....
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....ully and truly all material facts necessary for completion of the assessment. Therefore, in view of First proviso to Section 147 of the I.T. Act, 1961, the reopening is not in accordance with law and is liable to be quashed. Referring to a plethora of decisions placed in the case law compilation, Learned Counsel for the Assessee submitted that when the original assessment has been completed under section 143(3) of the I.T. Act, 1961 and there is no allegation by the A.O. of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment, such reopening after a period of 04 years from the end of the relevant assessment year is null and void. Further, the reasons so recorded do not indicate how and why the assessee had failed to make full and true disclosure of the material facts. 6.3. Even otherwise also he submitted that the reopening made by the A.O. is based on borrowed satisfaction and there is no application of mind by the A.O. Further the approval has been given by the Superior Authorities without application of mind. He submitted that not only the foundational material not confronted to the assessee, but, also....
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....(P) Ltd., vide ITA.No.679/Del./2015 dated 28.02.2018. 7.1. Learned Counsel for the Assessee submitted that there is no material to even allege much less conclude that such funds have originated from the coffers of the assessee company. In absence of such allegation, no addition can be made under section 68 of the I.T. Act, 1961. In support of this contention, the Learned Counsel for the Assessee relied upon the following decisions: 1. CIT vs., Value Capital Services Ltd., 307 ITR 334 (Del.) 2. CIT vs., Real Time Marketing (P) Ltd., 306 ITR 55 (Del.) 3. CIT vs., Kamdhenu Steel and Alloys Ltd., 361 ITR 220 (Del.) 4. CIT vs., Five Vision Promoters (P) Ltd., 380 ITR 289 (Del.). 7.2. He submitted that out of the 54 shareholders, response duly accepted as received in the case of 46 shareholders and only in respect of one shareholder notice remained unserved and in case of 07 shareholders no reply was received. Learned Counsel for the Assessee referring to the following decisions submitted that non-service of notice under section 133(6) of the I.T. Act, 1961 or nonappearance of the shareholder in response to notice under section 133(6) is not a ground for making the addition und....
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....of the assessee. We have also considered the various decisions cited before us. We find the original assessment in this case was completed under section 143(3) on 22.11.2011 determining the total income of the assessee at Rs.5,84,39,170/- as against the returned income of Rs.1,95,97,150/- wherein the A.O. had disallowed deduction under section 80IA of the I.T. Act, 1961 amounting to Rs.3,88,42,025/-. We find on appeal filed by the assessee the Ld. CIT(A) vide order dated 17.01.2013 allowed the claim of deduction under section 80IA and on appeal by the Revenue against the order of the Ld. CIT(A), the Tribunal vide ITA.No.1920/Del./2013 order dated 13.01.2016 dismissed the appeal filed by the Revenue. We find subsequently the A.O. reopened the assessment under section 147 of the I.T. Act, 1961 by recording the reasons that income to the tune of Rs.36,64,35,000/- has escaped assessment within the meaning of Section 147/148 of the Income Tax Act, 1961, the contents of which have already been reproduced in the preceding paragraph. We find after considering the various submissions made by the assessee, the A.O. made addition of Rs.25,32,35,000/- only to the total income of the assessee b....
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....ed Capital of the Company is not enhanced during the year." 8.2. We find the AO after analyzing the various details filed by the assessee had passed the order u/s 143(3) without drawing any adverse inference in respect of the share capital/share premium during original assessment proceedings. However, we find the AO in the reasons recorded had merely stated that there is failure to disclose fully and truly all material facts necessary for completion of assessment which do not satisfy the statutory preconditions provided in Section 147 of the Income Tax Act, 1961. It has been held in various decisions that the reasons must indicate how and why the assessee had failed to make full and true disclosure of the material facts and mere repetition or quoting the language of the proviso is not sufficient. The basis of the averment or statement should be either stated or should be apparent or explained from the record. However, in the instant case, as mentioned earlier, the reasons do not specify which material facts the assessee failed to disclose during the original proceedings. 8.3. We find the Hon'ble Delhi High Court in the case of Atma Ram Properties Pvt. Ltd. vs. DCIT reported in 34....
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.... and 29.12.2016, copies of which are placed in Paper Book at Pages 180 and 374 of Volume-I respectively. It has been held in various decisions that if any material collected at the back of the assessee is not confronted and no opportunity is given to cross examine the same, then such material cannot be utilized for making the addition. 8.8 We find the Ld. CIT(A) while quashing the re-assessment proceedings has observed as under : "Ground 2 relates to the contention that action under section 147 was without jurisdiction. 27.1. The facts as emerged from record are as under: 27.2. The appellant is a public limited company. The appellant company received share application money of Rs.25,32,35,000/- (including premium of Rs. 20,25,88,000/-) from 58 shareholders who all are corporate entities except one individual and are also duly assessed to tax. It allotted share capital of Rs.36,64,35,000/- (including security premium) out of which Rs.11,32,00,000/- was received in the preceding assessment year. During the course of original assessment proceedings, AO had issued a questionnaire dated 21.6.2011 wherein at point no.10 he required the assessee to submit the details of subscribed ....
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.... assessment has already been made u/s 143(3) of the I.T. Act for A.Y. 2009-10 the first proviso to section 147 (as reproduced below) is applicable in this case as the assessee has not disclosed fully and truly all material facts necessary during the course of assessment which now has been established on the basis of enquiries/statement recorded that the share capital received by M/s KR Pulp and Paper Ltd. amounting to Rs.36,64,35,000/- in the F.Y. 2008-09 from these large number of non- descript companies is nothing but its own unaccounted income routed through these companies. Provided that where an assessment under sub section (3) of section 143 of this section has been made for the relevant assessment year, no action shall be taken this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub- section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year....
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....n the contrary he has stated that Assessing officer is not bound by the restriction impounded by the proviso that no action can be taken unless any income chargeable to tax has escaped income by reason of failure as the part of the assessee to make a return under section 139 or in response to a notice issued under sub- section (1) of section 142 or section 148 or to disclose fully and truly all materials facts necessary for his assessment, for that assessment year. This assumption is contrary to his own observations when he records that the first proviso to section 147 is applicable in this case as the assessee has not disclosed fully and truly all material facts necessary during the course of assessment which has now been established that since on the basis of enquiries/statement recorded it is established that the share capital received by M/s KR Pulp and Paper Ltd. amounting to Rs.36,64,35,000/- in the FY 2008-09 from these large number of non-descript companies is nothing but its own unaccounted income routed through these companies. Be that as it may, a careful appraisal of the reasons recorded reveals that there is no whisper as to the manner and mode of failure on the part o....
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....ed to be fully and truly disclosed by the Assessee. It is therefore, not possible to conclude that the jurisdictional 'trigger' for re-opening the assessment was present. As observed in Madhukar Khosla v. Asstt. CIT 120141 367 ITR 165/120151 55 taxmann.com 391 (Delhi): The foundation of the AO's jurisdiction and the raison d'etre of a reassessment notice are the "reasons to believe". Now this should have a relation or link with an objective fact, in the form of information or facts external to the materials on the record. Such external facts or material constitute the driver, or the key which enables the authority to legitimately re-open the completed assessment. In absence of this objective 'trigger', the AO does not possess jurisdiction to re-open the assessment.' In CIT v. Kelvinator of India Ltd. 120021 256 ITR 1/123 Taxman 433 (Delhi) it was observed that an order that has been purportedly passed without application of mind could not itself confer jurisdiction upon the AO to reopen the proceeding "without anything further" as that would amount to "giving a premium to an authority exercising quasi-judicial function to take benefit of its own wron....
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....fronted to the appellant during the course of assessment proceedings through specifically requested vide replies dated 10.11.2016 and 29.12.2016 by the appellant company. In such circumstances all such enquiries cannot mechanically be made a basis to assume jurisdiction. The appellant has highlighted the following aspects in respect of the reasons recorded : i) That the reasons recorded do not contain name of any single entity which was inquired by the Investigation Wing, the reasons only mention that during pre and post search proceedings it was found that the group companies have received share capital with exorbitant premium from large number of non descript companies mainly based in Kolkata and Delhi from the period between 1.4.2008 to 31.03.2009. ii) Further the reasons just mention that share capital with exorbitant premium was received from large number of non descript companies, but no definite/specific amount of premium has been mentioned in the reasons. iii) Further it has been mentioned in the reasons that enquiries were also conducted by the Inspectors of the Investigation Wing at Delhi and Kolkata; but no date of report of such inquiry has been mentioned and furt....
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....year under consideration and not the amount received by the assessee company as mentioned in the reasons. During the year under consideration assessee has received share application of only Rs.25,32,35000/ - and Rs.11.32.00.000/- was received during the financial year 2007- 08 relevant to assessment year 2008-09. The column of total amount of the table as produced in the reason works out to Rs.15,43,75,000/- as against Rs.36,64,35,000/- mentioned in the reasons recorded, hence it could not be understood that why the total amount of Rs.36,64,35,000/- be treated as income which escaped assessment in the reasons. In the table produced in the reasons at S.No.1 the total amount is mentioned as Rs.3,62,00,000/- and the security premium as Rs.27,00,000/-, however the security premium should be Rs.2,89,60,000/-, further at S.No.31,36 and 40 the total amount mentioned is Rs.10,00,000/- and security premium Rs.80.00.000/-, it is also not written correctly." 27.8. In essence it is apparent reasons contain scanty, general, vague observations and not refer to any objective, tangible relevant material. Further even the figures adopted are factually incorrect and do not pertain to the instant....
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....articularly since he did not describe what those materials were. Once the date on which the so called accommodation entries were provided is known, it would not have been difficult for the AO, if he had in fact undertaken the exercise, to make a reference to the manner in which those very entries were provided in the accounts of the Assessee, which must have been tendered along with the return, which was filed on 14th November 2004 and was processed under Section 143(3) of the Act. Without forming a prima facie opinion, on the basis of such material, it was not possible for the AO to have simply concluded: "it is evident that the assessee company has introduced its own unaccounted money in its bank by way of accommodation entries". In the considered view of the Court, in light of the law explained with sufficient clarity by the Supreme Court in the decisions discussed hereinbefore, the basic requirement that the AO must apply his mind to the materials in order to have reasons to believe that the income of the Assessee escaped assessment is missing in the present case. 13. Mr. Sawhney took the Court through the order of the CIT(A) to show how the CIT (A) discussed the materials pr....
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.... to the assessee company through banking channel. The identity of the companies was not disputed. Under these circumstances, it would not be appropriate to require the assessee to go through the entire gamut of proceedings. It is totally unwarranted. 24. Resultantly, the initiation of proceedings under Section 147 and issuance of notice under Section 148 of the Act are hereby quashed. In the facts and circumstances of the case, there shall be no order as to costs." 27.11. Further in the case of Signature Hotels (P) Ltd. v. ITO 338 ITR 51 (Del) it was held as under: "5. Before dealing with the facts of the case, we may notice some judgments of the Supreme Court when proceedings under Section 147/148 of the Act can be initiated on statements made by third person on the account of "accommodation entry". In ITO versus Lakhmani Mewal Das, [1976] 103 ITR 437 (SC), the Supreme Court affirmed the decision of the High Court and held that there was nothing to show in the confession made by a third party related to the loan taken by the assessee much less a loan which was shown to have advanced by that person to the assessee and, therefore, live link or close nexus, which should be ther....
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....ded by the assessee. We are wholly unable to find any material point of distinction between the facts of the present case and those considered by the Supreme Court in the case of Lakhmani Mewal Das [1976] 103 ITR 437." 6. The view taken by the Supreme Court in Lakhmani Mewal Das (supra) was followed in Ganga Saran and Sons Private Limited versus Income-Tax Officer-I, [1981] 130 ITR 1 (SC). The matter was again examined by the Supreme Court in Phool Chand Bajrang Lai and Another versus Income-Tax Officer and Another, [1993] (203) ITR 456 (SC). In the said case, information was received by the Assessing Officer that the third company had never actually advanced loans to any person and the said third company was in the business consisting entirely of name lending. Noticing the judgment in Lakhmani Mewal Das (supra) it was held that the nature of information which was available was vastly different. In the case of Lakhmani Mewal Das (supra), the information was extremely vague and scanty whereas in the case of Phool Chand Bajrang Lai (supra), the information was specific, unambiguous and clear. 15. The aforesaid reasons do not satisfy the requirements of Section 147 of the Act. The....
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....quires the petitioner to give a list, source, genuineness, identity of the shareholders along with confirmation copies of the ledger account of the party including confirmation of the mode, date, address and acknowledgement of return, etc. from the said party along with source and relevant bank entries. The said information was provided by the assessee. After receipt of the said information, Assessing Officer did not think it fit to make an addition and, under these circumstances, no addition itself amounts to forming an opinion as has been held in Usha International Ltd. (supra). 11. Therefore, in our view, the present exercise of issuing the notice under Section 148 of the Act would amount to nothing but a change of opinion, which is not permissible." 27.14. The Delhi High Court in the case of Amsa India (P) Ltd. v. CIT 393 ITR 154 has held as under: "5. It is evident from the above factual discussion that the entire basis for the reassessment notice impugned by the petitioner is Sanjay Rastogi's statement. His questioning and his answers nowhere implicate the petitioner. He specifically names 2-3 concerns as the beneficiaries of the bogus entry business/activity that he wa....
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....or the information from the concerned share applicants and/or did not issue any notice to the concerned share applicants under Section 133 of the IT Act is concerned, it is required to be noted that the assessee did furnish all the necessary details with respect to share applicants including the names, address and even the PAN card number. Thereafter, if the Assessing Officer is doubting the same, it is for the Assessing Officer to issue the notices under Section 133 of the IT Act. If the learned Assessing Officer is satisfied that the reply given by the assessee and/or the details furnished by the assessee, the learned Assessing Officer may not even thereafter issue the notice under Section 133 of the IT Act. However, on the aforesaid ground the reopening is not permissible. [6.3] In view of the above and for the reasons stated above, when it has been found that the reasons/grounds on which the assessment is sought to be reopened were already gone into in detail by the learned Assessing Officer while framing the scrutiny assessment and after raising the specific queries with respect to increase in the share capital, with respect to share application money and the income of the a....
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....y a vague feeling that they may be bogus transactions. Such a conclusion does not fulfill the requirements of section 151(2). What that provision requires is that he must give reasons for issuing a notice under section 148. In other words he must have some prima facie grounds before him for taking action under section 148. Further his report mentions : "Hence proper investigation regarding these loans is necessary". In other words his conclusion is that there is a case for investigating as to the truth of the alleged transactions. That is not the same thing as saying that there are reasons to issue notice under section 148. Before issuing a notice under section 148, the Income-tax Officer must have either reasons to believe that by reason of the omission or failure on the part of the assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year or alternatively notwithstanding that there has been no omission or failure as mentioned above on the part of the assessee, the Income-tax Officer has in c....
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....f disposing of objection dated 26.8.2016 has observed that after search and seizure operation, new facts shows that assessee has taken bogus share premium. He has also stated that AO is fully authorized to see all the issues in light of facts and findings from search and seizure operation and other information and take necessary action. All require procedure followed by AO. However from the reasons recorded it is apparent that no material much less incriminating material was detected as result of search on the appellant or gathered during the assessment proceedings to allege, observe or assume that the same has taken bogus share capital. The reference to inquiries is vitiated for being vague and general and non specific, apart from the fact they have not been confronted to the appellant. 27.19. In nutshell, the AO did not apply his own mind to the information and examine the foundation/accuracy of such material of the information. The AO accepted the plea on the basis of vague information in a mechanical manner. The reasons recorded reflect that the AO did not independently apply his mind to the information received from the Investigation Wing to arrive at a belief that income of....