TaxTMI 
TaxTMI 
2022 (6) TMI 288
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....,84,39,170/- wherein the A.O. made disallowance 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 Inv....
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....(P) Ltd., Road, Kolkata - 700001 50,000 2,50,000 2,000,000 12. Paramveer Distributor (P) Ltd. B-2,Sector-III, Salt ,ake City, Kolkata- 700098 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....
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....New Delhi-110 018 20000 1,000,000 800,000 39 United Buildmart (P) Ltd. 17/118, 2nd floor, subhash Nagar, New Delhi-110 027 20000 1,000,000 800,000 40 Vairavi Electrical (P) Ltd. 2B, Grant Lane, KolkaLa-700012 200000 1,000,000 8,000,000 Since, on the basis of enquiries conducted and statements recorded, it has been established that the above companies are 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 t....
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.... as recorded by the A.O. It is a fit case for reopening and issue of notice u/s.148 of the Act. Sd/- N.P. Sinha Pr. CIT, Central-II, New Delhi. 2.2. Accordingly, notice under section 148 of the I.T. Act, 1961 dated 29.03.2016 was issued and served on the assessee. The assessee vide letter dated 31.03.2016 submitted that the original return filed on 26.09.2009 may be considered as return filed in response to notice under section 148 of the I.T. Act, 1961. The assessee vide letter dated 04.05.2016 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....
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.... Road, Malad (W), Mumbai, O- 334, Mangolpuri, New Delhi-110002 etc. iii) Most of the replies have been sent on the same date. iv)Most of the company from which share capital/share premium received have very weak financials and company acted as pass through entity to transfer money, there is equal amount of credit in bank account of company from which share capital premium received on same day or immediate previous day for example : i) TRAMMEL TRADING PRIVATE LIMITED at SI. No. 49 in the above mentioned table in para 10.- the company has a returned 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 cheq....
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....dend from the company or gain on account of appreciation in share price both of which are absent in the instant case. From the above, mentioned facts as well as after considering the facts/submission of the assessee, it is found that the above mentioned companies are not doing any business activity which justify for investment in assessee company are only passing funds it is clear from bank state of the party, it can be said that the above mentioned companies are paper company and provide bogus share premium to assessee company. And the entries are nothing but accommodation entries and the total amount of share application money as detailed in the table above amounting 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 proceeding....
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....nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee for that previous year. The burden of proof is heavily cast on the assessee. She submitted that the assessee first of all must furnish an explanation as otherwise the cash credit will be treated as his income. Secondly, the explanation offered must be to the satisfaction of the Assessing Officer. Relying on various decisions, she submitted that the assessee in the instant case has failed to satisfy the three ingredients of provisions of Section 68 of the I.T. Act, 1961 which has been narrated by the A.O. in his concluding 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 (D....
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.... is concerned, the Learned Counsel for the Assessee submitted that the assessee filed an appeal before the Ld. CIT(A) and the Ld. CIT(A) vide order dated 17.01.2013 has allowed the claim of deduction under section 80IA, copy of which is placed at pages 71 to 87 of the PB. He submitted that against the order of the Ld. CIT(A) granting deduction under section 80IA, the Revenue filed an appeal before the Tribunal and the Tribunal vide ITA.No,.1920/Del./2013 order dated 13.01.2016 dismissed the appeal filed by the Revenue. 6.2. Referring to the contents of reasons recorded for reopening of the assessment, he submitted that the assessment has been reopened after the expiry of 04 years from the end of the relevant assessment year 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. 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 asse....
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....pplicants and the genuineness of the transaction. He submitted that out of 53 Companies incorporated under the provisions of Companies Act, 1956, 20 Investor Companies were registered with the Reserve Bank of India as NBFC. Further the relevant criteria to measure the creditworthiness of an entity is not the return of income, but, the net worth of such entities for the relevant financial year. For the above proposition, he relied on the following decisions : 1. PCIT vs., Goodview Trading Pvt. Ltd., vide ITA.No.377/2016 of Hon'ble Delhi High Court. Copy of which is placed at pages 162 to 165 of PB in case law compilation. 2. Decision of Hon'ble Delhi High Court in the case of CIT vs., Vrindavan Farms (P) Ltd., vide ITA.No.71/2015. [Pages 156-159 of PB] 3. Decision Coordinate Bench of Delhi Tribunal in the case of Zion Promoters & Developers (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, 19....
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....ITA.No.3104/DeI/2013 dated 10.05.2016. 7.4. Learned Counsel for the Assessee referring to the following decisions submitted that lack of enquiry by the A.O. to rebut the fundamental facts on record by the assessee company makes the addition a nullity. 1. CIT vs., Gangeshwari Metal (P) Ltd., 361 ITR 10 (Del.). 2. CIT vs., Fair Finvest Ltd., 357 ITR 146 (Del.). 3. CIT vs., Goel Sons Golden Estate (P) Ltd., ITA.No.212/2012 dated 11.04.2012 (Del.). 7.5. Further the A.O. in the instant case has not made any enquiry in respect of each of the subscribers of share capital to falsify the various documents filed by the assessee. He accordingly submitted that the Ld. CIT(A) is legally and factually correct in quashing the re-assessment proceedings and also deleting the addition on merit. 8. We have considered the rival arguments made by both the sides, perused the orders of the A.O. and the Ld. CIT(A) and the paper book filed on behalf 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.5,84,39,1....
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....er section 143(3) on 22.11.2011. We find the assessee in response to Question No.10 issued by the A.O. during original assessment proceedings has given the following reply in respect of subscribed and paid-up share capital. "10. (Q.No.10) Details of Subscribed and Paid-up Share Capital i. Details of Subscribed & paid up Share Capital as on 31.03.2009 is attached in Annexure - I. ii. Share Application Forms in respect of Shares allotted/applied during the period 01.04.2008 to 31.03.2009 are attached. During the year the Company has issued 5064700 Equity Shares of Rs.10 each at a premium of Rs.40 per share. Detailed Chart showing the Name of the subscriber, PAN, Address, name of Bank, cheque No, date of Application and date of allotment along with the following is attached * Share Application Form * Proof of Identity (Incorporation certificate issued by ROC). * Copy of PAN/ITR Acknowledgement * Bank Statement in Annexure - II. iii. Authorised 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) wit....
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....)." 8.5 We further find there are certain errors in the reasons recorded. The reasons recorded stated the figure of share capital / share premium at Rs. 36,64,35,000/- which includes Rs. 11,32,00,000/- representing share capital raised in AY 2008-09 which stand accepted in the order passed u/s. 143(3) of the I.T. act, 1961. 8.6 We find the assessments have been framed u/s. 153A of the I.T. Act, 1961 for the AY 2010-11 to 2015-16 as a result of search u/s. 132(1) on 08.7.2015 and addition of an amount of Rs. 3,50,00,000/- was made on account of alleged unexplained share capital in AY 2010-11. However, the said addition was deleted by the Tribunal vide order dated 11.1.2022 passed in ITA No. 6177/Del/2018 on the ground that there is no incriminating material found as a result of search to support the addition made. 8.7 We find although certain references were made in the reasons recorded to various enquiries conducted, however, they were never confronted to the assessee despite specific requests made vide reply dated 11.11.2016 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....
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....M/s KR Pulp and Paper Ltd is one of them which has received shares capital at exorbitant premium from large numbers of these non- descript companies mainly based in Delhi and Kolkata amounting to Rs.36,64,35,000/- in the financial year 2008-09 and, - That since, on the basis of enquiries conducted and statements recorded, it has been established that the above companies are 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 through these companies. 27.3. It has been then concluded as under : "Keeping in view all above, I have reason to believe that an amount at least of Rs.36,64,35,000/- has escaped assessment in the case of M/s KR 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. ....
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....assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under 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'' 27.5 In view of the foregoing, merely having a reason to believe that income had escaped assessment, is not suffice to reopen assessment beyond the stipulated period of four years, unless it is alleged and proved that a particular income has escaped assessment due to failure on the part of assessee to disclose fully and truly all material facts necessary for assessment. 27.6 In the instant case, it is noted that AO has not established in any manner that there was failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment year. On....
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....d true disclosure of all the relevant materials in the first instance when the original assessment was framed. This included the account books, tax audit reports etc. The return was picked up for scrutiny and after two questionnaires were answered to the AO's satisfaction by the Assessee, the assessment was framed under Section 143 (3) of the Act. In the circumstances, the reference by the AO to Explanation I to Section 147 of the Act is, misconceived for the simple reason that once the original return was picked up for scrutiny and the accounts and other documents were subjected to a detailed examination by the AO, the question of there being no full and true disclosure of the material facts did not arise. Significantly, the reasons for re-opening fail to mention which material was failed to be disclosed by the Assessee. In similar circumstances in Global Signal Cables (India) [P.) Ltd. vs, Dy- CIT 12014} 368 ITR 609/120151 229 Taxman 608/54 taxmann.com 114 (Delhi) this Court invalidated the re-opening of the assessment under Section 148 of the Act. Here again it requires to be observed that the reason for re-opening the assessment, specific to reason (2), fails to sp....
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....91/235 Taxman 337 (Dehli) this Court reiterated the settled legal position that once a regular assessment is completed in terms of Section 143 (3) a presumption can be raised that such an order was passed by the AO on a proper application of mind. In the present case apart from a bland statement at the end of the reasons that the assessee failed to truly disclose the material particulars, it is not pointed out which material particular was not disclosed in the course of the original assessment by the assessee. Consequently, the Court has no hesitation in holding that reason (2) for reopening the assessment is based merely on a change of opinion and not on any tangible material warranting reopening of the assessment under Section 147/148 of the Act. " 27.7 Apart from the above the assumption of jurisdiction u/s 147 of the Act is stated to be based on the enquiries conducted by Inspectors of the Investigation Wing at Delhi and Kolkata to form an opinion albeit prima-facie that appellant company has received share capital with exorbitant premium from large number of non descript companies mainly based in Kolkatta and Delhi from the period between 1.4.2008 to 31.3.2009. It is ....
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....elhi and Kolkata amounting. The reasons do not mention the name of the entry provider who confirmed that assessee-company had received accommodation entries. Further no date of such statement has been mentioned, nor have the modes of such receipt or any details in terms of cheque number or bank been mentioned. vii) Further the reasons do not mention the modus operandi of alleged routing of unaccounted money of the assessee through shareholder companies. It was highlighted that reasons recorded suffer following factual infirmities and errors which prove that the reasons have been drafted without application of mind: "During the year under consideration assessee has issued share capital including share premium to the tune of Rs.36,64,35,000/ - to various parties, out of which Rs.11,32,00,000/- was received in the immediately preceding previous year i.e. during the financial year 2007-08, detail of Share Application Money was already submitted during the course of assessment proceedings vide submission dated 05.08.2011. However, the Ld. AO has mentioned that assessee has received Rs.36,64,35,000/- as share application money during the year and issued the sha....
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....to two decisions of the Supreme Court. In Chhugamal Rajpal v. SP Chaliha (1971) 79 ITR 603, the Supreme Court was dealing with a case where the AO had received certain communications from the Commissioner of Income Tax showing that the alleged creditors of the Assessee were "name-lenders and the transactions are bogus." The AO came to the conclusion that there were reasons to believe that income of the Assessee had escaped assessment. The Supreme Court disagreed and observed that the AO "had not even come to a prima facie conclusion that the transactions to which he referred were not genuine transactions. He appeared to have had only a vague felling that they may be "bogus transactions'." 12. In the present case, after setting out four entries, stated to have been received by the Assessee on a single date i.e. 10th February 2003, from four entities which were termed as accommodation entries, which information was given to him by the Directorate of Investigation, the AO stated : "I have also perused various materials and report from Investigation Wing and on that basis it is evident that the assessee company has introduced its own unaccounted money in its bank account b....
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....he existence of four companies with whom the assessee had entered into transaction. Both the orders clearly exposit that the assessing officer was made aware of the situation by the investigation wing and there is no mention that these companies are fictitious companies. Neither the reasons in the initial notice nor the communication providing reasons remotely indicate independent application of mind. True it is, at that stage, it is not necessary to have the established fact of escapement of income but what is necessary is that there is relevant material on which a reasonable person could have formed the requisite belief. To elaborate, the conclusive proof is not germane at this stage but the formation of belief must be on the base or foundation or platform of prudence which a reasonable person is required to apply. As is manifest from the perusal of the supply of reasons and the order of rejection of objections, the names of the companies were available with the authority. Their existence is not disputed. What is mentioned is that these companies were used as conduits. In that view of the matter, the principle laid down in Lovely Exports (P) Ltd. (supra) gets squarely attracted. ....
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....e of the original assessment all the facts relating to the cash credits in question were fully disclosed. This has been found by the learned Judge at page 960 (of 118 ITR) and indeed this is the accepted position on the basis of which even the proposal of the ITO to the Commissioner (set out at page 964) proceeded. Thereafter, the only material received by the ITO appears to be that the revenue authorities had carried out certain investigations, that they had discovered the existence of bogus hundi brokers who were allegedly lending their names to assessee and that a list had been circulated to various ITOs of the hundi brokers who were allegedly indulging in malpractices. The internal audit party appears to have discovered that some of the creditors whose credits had been accepted in the assessee's case fell within this category and raised an audit objection which was the immediate provocation for the reopening of the assessment. In this case also, as in the case before the Supreme Court, there is no live connection or link established between the information or the facts, in the possession of the ITO, and the genuineness of the particular loans recorded in the assessee's ....
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....7.12. Likewise in the case of CIT v. Suren International (P) Ltd. 357 ITR 24 (Del), it was held as under: 14. The learned counsel for the appellant contended that even though there is no specific allegation that the assessee had failed to disclose all the material facts but the same can be gleaned from the reasons itself. We are unable to accept this contention. In the first instance, we do not find the reasons as recorded by the Assessing Officer to be reasons in law, at all. A bare perusal of the table of alleged accommodation entries included in the reasons as recorded, discloses that the same entries have been repeated six times. This is clearly indicative of the callous manner in which the reasons for initiating reassessment proceedings are recorded and we are unable to countenance that any belief based on such statements can ever be arrived at. The reasons have been recorded without any application of mind and thus no belief that income has escaped assessment can be stated to have been formed based on such reasons as recorded. " 27.13. Also Hon'ble Delhi High Court in the case of Allied Strips Ltd. v. AC1T 384 ITR 424 held in almost similar circumstances tha....
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....ase (supra) is also authority to the proposition that the material should have a live or proximate link with the assessee's suspected/concealed income or nondisclosure of a material fact. Precisely that kind of live link is absent in the facts of this case." 27.15 Further Gujarat High Court in the case of Orient News Prints Ltd. v. DCIT 393 ITR 527 has held as under: "Similar information of material / details were supplied by the assessee with respect to the share application money. It appears that thereafter the learned Assessing Officer having satisfied with the genuineness with respect to the increase in the share capital as well as share application money and also with respect to the income of the assessee from trading in the fabrics framed scrutiny assessment under Section 143(3) of the IT Act. Therefore, subsequent reopening on the aforesaid grounds can certainly be said to be on a mere change of opinion by the subsequent Assessing Officer. As held by the Hon'ble Supreme Court in the case of Kelvinator India Ltd. (Supra) and the Division Bench of this Court in the case of Gujarat Power Corporation Ltd. (Supra), on mere change of opinion by a subsequent Offic....
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....nt notice, has to apply his mind and form an opinion. The mere appending of the expression 'approved' says nothing. It is not as if the CIT (A) has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. In the present case, the exercise appears to have been ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer. For these reasons, the Court is satisfied that the findings by the IT AT cannot be disturbed" 27.17 Similar view has also been expressed in the case of Chhugamal Rajpal vs. S. P. Chaliha and Others 79 ITR 603 (SC). It has held therein as under: "In his report the Income-tax Officer does not set out any reason for coming to the conclusion that this is a fit case to issue notice under section 148. The material that he had before him for issuing notice under section 148 is not mentioned in the report. In his report he vaguely refers to certain communications received by him from the Commissioner of Income-tax, Bihar and Orissa. He does not menti....
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.... that the Income-tax Officer had any material before him which could satisfy the requirements of either clause (a) or clause (b) of section 147. Therefore, he could not have issued a notice under section 148. Further, the report submitted by him under section 151(2) does not mention any reason for coming to the conclusion that it is a fit case for the issue of a notice under section 148. We are also of the opinion that the Commissioner has mechanically accorded permission. He did not himself record that he was satisfied that this was a fit case for the issue of a notice under section 148. To question No. 8 in the report which reads "Whether the Commissioner is satisfied that it is a fit case for the issue of notice under section 148", he just noted the word "Yes" and affixed his signature thereunder. We are of the opinion that if only he had read the report carefully, he could never have come to the conclusion on the material before him that this is a fit case to issue notice under section 148. The important safeguards provided in sections 147 and 151 were lightly treated by the Income-tax Officer as well as by the Commissioner. Both of them appear to have taken the duty imposed on....