TaxTMI 
TaxTMI 
TaxTMI 
2022 (2) TMI 1297
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.... the present case is a private limited company and engaged in the business of providing funds and finance facilities. There was a search and seizure action under section 132 of the Act in the case of Iscon group dated 25th February 2016. During the search proceedings, the ledger copy of the assessee in the books of M/s Rachna Finelease Pvt. Ltd. was found and seized wherein it was shown that the assessee company has received share application money of Rs. 42,74,50,000/- including opening balance of Rs. 3,69,00,000/- only. Similarly, the bank statement of M/s Rachna Finelease Pvt. Ltd. was also found and seized from where it was revealed that amount was traveled from Smt. Hansaben Patel and Shri Ramesh Thakor which was immediately transferred to the Assesse Company. It was also found that the aforesaid company as well as Smt. Hansaben Patel and Shri Ramesh Thakor are non-filer of Income Tax returns. 3.1 Based on above, the assessment of the assessee was reopened under section 147 of the Act and show cause notice was issued proposing to treat the amount of Rs. 39,05,50,000/ (Rs. 42,74,50,000.00 minus 3,69,00,000) received during the year as unexplained cash credit under section 68 ....
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....ransaction. There was sufficient balance in the bank account of investor which justifies the credit worthiness. Thus, the assessee has discharged the obligation cast under section 68 of the Act. Once, the onus is discharged, there cannot be any addition unless the AO brings other materials showing the amount credited represent income of the assessee. The assessee in support of its contention made reference to various case laws. 5.1 The assessee further submitted that the investor company has received fund from Smt. Hansaben Patel and Shri Ramesh Thakor as share application money. This fact can also be verified from the finding of the AO that Smt. Hansaben Patel has sold immovable property and proceeds from such property was utilized for the purpose of making investment and advancing loan. The assessee in support of its contention has filed the sale deed of property, chart showing flow of fund and bank statement of Smt. Hansaben Patel and Shri Ramesh Thakor. Accordingly, the assessee claimed that all the transactions at all the stages have been carried out through banking channel without involving any element of cash. Thus, the addition under section 68 of the Act in the given fac....
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....ttached the copy of sale deed of land between Srnt. Hansaben Patel anri M/s. Applewoods Estate Pvt. Ltd. All the flow of funds from Smt. Hansaben Patr.1 to ultimately the appellant company has been evidenced through copies of respective bank statements. It is not the case of the AO that Smt. Hansaben Patel is non-existent or is a fictitious person. Smt. Hansaben Patel's photograph and address appears in the relevant sale deed(s) and that her bank account has proper KYC and she has been filing the return of income, though it appears and is alleged by the AO that the return for the A.Y. 2010-11 was not filed by Smt, Hansaben Patel. In my considered view, merely not filing the return of income cannot be the basis for an Income-tax Authority to conclude that the capacity/creditworthiness is not established and that the genuineness of the transactions is not above board. 7.5 In connection with the appeal proceedings in the case of Shri Asit Sunderbhai Shah (PAN:AFUPS64692), the A.R. of the person had produced before me the details of lands sold by Smt. Hansaben Patel and also the ledger accounts giving the bank details of Smt. Hansaben Patel, the assessment order in the case of S....
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....esponse to show cause notices were furnished, the AO treated the entire sale proceed as her income by way of short term capital gain and completed the said assessments. 7.7 It is noted from the paper book filed in the case of Shri Asit Surenderbhai Shah (PAN; AFUPS6469Q) for appeals against the assessment orders for various assessment years before roe that during the post search proceedings in his case, it was discovered that he had advanced huge amount of loan to various persons and Srnt. Hansaben Patel had advanced loan of Rs.5,00,00,000/- to Asit S. Shah HUF, Rs.13,25,00,000/-Surendra Managaldas HUF, Rs.5,00,00,000/- to Shri Surendra M. Shah and Rs.5,00,00,000/- to Shri Chetnaben Shah and that she had earned huge profits from sale of agricultural land and she had advanced huge unsecured loans and earned interest income thereon. The paper book also contains the appellate order dated 12.02.2018 by the Ld. C1T (A)-l 1, Ahmedabad in the case of Shri Asit Surendrabhai Shah (against the assessment order for the A.Y. 2009-10 dated 23.12.2016 u/s.143(3) r.w.s. 147 by ACIT, Central Circle1(3), Ahmedabad). From the perusal of the said appellate order, it is noted that the Ld. CIT (A) h....
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....ring the year and she has been assessed at Rs. 103.02 crore by her Assessing Officer. These facts prove her creditworthiness............ These facts proved that the appellant satisfactorily established the identity of the creditor, genuineness of the transactions and creditworthiness of the creditor with documentary evidences. Hence, the additions made by the AO are not found justified. Regarding the financial relations of the appellant with J.P. /scon Group, the appellant did not deny and admitted that he had financial relations with Kotak family since his father's days, but all these transactions have been found entered into regular books of accounts. Therefore, any adverse inference without any substantial documentary evidence is not legally sustainable." 7.8 It is noted from the paper book filed in the case of Shri Asit Surenderbhai Shah (PAN: AFUPS6469Q) for appeals in his case that the Ld. CIT(A)-5, Ahmedabad also in the appellate order dated 13.03.2018 in the case of Surendra Mangaidas Shah HUF (PAN: AACHS6590R) against the assessment order for AY 2009-10 u/s 143(3} nvs 147 by the ITO, Ward 5(2)(4), Ahmedabad deleted the addition of Ks.13.25 crores u/s.68 implying the....
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....the learned DR that the repayment of share application money by the assessee in the subsequent year cannot extend the benefit. It is for the reason that the provisions of section 68 of the Act restricts the amount credited in the year under consideration. 8. On the contrary, the learned AR before us filed a paper book running from pages 1 to 564 and contended that the creditworthiness of the company based on the documentary evidence was justified before the authorities below. No adverse inference can be drawn against the assessee merely on the reasoning that the company has not filed the income tax return. Furthermore, no defect was pointed out in the details furnished by the assessee justifying the identity and creditworthiness of the party as well as genuineness of the transactions. 8.1 Both the learned DR and the AR vehemently supported the order of the authorities below to the extent favourable to them. 9. We have heard the rival contentions of both the parties and perused the materials available on record. There was a search operation under section 132 of the Act dated 25th February 2016, carried out in case of group company of assessee i.e. JP Iscon Group. During the se....
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....f the company on account of unexplained cash credit under section 68 of the Act. However, subsequently the learned CIT (A) was pleased to delete the addition made by the AO in the hands of the company. The copy of assessment order under section 147 of the Act and the order of the learned CIT (A) is placed on pages 421-425 and 426 to 476 of the paper book filed along with ITA No. 53/AHD/2021. Therefore, the finding of the AO is not correct up-to this extent. 9.2 Furthermore, once the source of fund in the hand of above company was held as explained by learned CIT (A) then amount received by the assessee from that company cannot be held as unexplained under section 68 of the Act in the absence of contrary information. Likewise, there cannot be addition of one item in the hands of two different persons. 9.3 Nevertheless, the assessee has submitted PAN, address, ledger confirmation, own bank statement and bank statement of M/s Rachna Finelease Pvt. showing amount received through banking channel. The assessee also claimed before the learned CIT (A) that M/s Rachna Finelease Pvt. has received money from Smt. Hansaben Patel and Shri Ramesh Thakor which can be verified from the bank sta....
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....e, no addition is warranted. 9.7 In view of the above facts and after considering the details in totality, we do not find any reason to interfere in the finding of the learned CIT (A) and direct the AO to delete the addition made by him. Hence, the ground of appeal of the Revenue is dismissed. 9.8 In the result, the appeal filed by the Revenue is dismissed. Coming to C.O. No. 189/AHD/2019 (in ITA No.1235/Ahd/2019) for A.Y. 2010-11 filed by the assessee 10. The assessee in ground No. 1 and 2 of the CO has challenged the validity of the assessment framed under section 147 of the Act. 11. The assessee has challenged the validity of the assessment framed under section 143(3) read with section 147 of the Act vide order dated 13 December 2017. As per the assessee there was no tangible material available with the AO leading to form the reasons to believe that income of the assessee has escaped assessment. As such, the AO has initiated the proceedings under section 147 of the Act merely on the information received from the investigation wing in connection with the search under section 132 of the Act carried out in the group company of M/s JP Iscon dated 25 February 2016. There wa....
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....Investigation Wing, Ahmedabad and has made no efforts to form an independent and conclusive opinion of his own. It is also evident from the assessment order that the AO had given adequate opportunity in relation to the issues involved and had provided the materials relied upon for reopening and completion of the assessment u/s 147. The grounds related to legality of notice u/s 148 and assessment u/s 143(3) r.w.s. 147 are rejected. 13. Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us. 14. The learned AR before us submitted that the proceedings under section 147 of the Act have been initiated by the AO without the application of mind. Therefore, the reopening based on the information received from the investigation wing is invalid. 15. On the contrary the learned DR before us vehemently supported the order of the authorities below. 16. We have heard both the parties and perused the materials available on record before us, especially the impugned orders and the case law cited therein and also cited by the learned AR of the assessee. The proceedings under section 147 of the Act can be initiated if the assessing officer has reasons to beli....
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....r initiating the proceedings under section 148 of the Act after application of mind on the information received from outside, indicating about the escapement of income. 16.4 Thus, upon receiving the information which can only raise a suspicion and therefore may trigger for further enquiry by the AO before he arrives at reasons to believe that the income having escaped assessment. Thus, the information received, at the best, can be termed as allegations which can only raise a suspicion in the mind of the authorities, based on which an enquiry can be triggered to find out whether there is any material leading to formation of reason to believe. Thus the mandate of law is for the Assessing Officer to undertake independent inquiry and through due diligence and application of mind to convert the information into reason to believe. The inquiry necessitates analysis of information as well as collection of additional material that would make him to believe that the information in his possession can lead to reason to believe for escapement of income. 16.5 Now, in the light of the above discussion, we analyze the reasons recorded in the given facts and circumstances, as extracted below: ....
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....ble from the reasons recorded suggesting that the AO upon receiving the information from the investigation wing has conducted any enquiry to form his believe that income has escaped assessment. What appears from the above reasons recorded is this that the AO based on the information from the investigation wing has initiated the proceedings under section 147 the Act without application of his mind. Such reasons recorded represents the borrowed satisfaction based on the information received from the investigation wing. 16.8 We also note that the amount received by the assessee from M/s Rachna Finlease private Ltd stands at Rs.39.05 crores whereas the investigation wing alleges to have received a sum of Rs. 18,42,50,000.00. Furthermore, the amount received by the assessee from M/s Rachna Finlease Private Ltd was duly recorded in its books of accounts. 16.9 There were enquiries conducted by the investigations wing which made clear that creditworthiness of M/s Rachna Finlease private Ltd was not proved. Again, it was the satisfaction of the investigation wing that M/s Rachna Finlease private Ltd lacks creditworthiness and there was no satisfaction of the AO qua such fact indicating ....
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....ow: "That while the report of the Investigation Wing might have constituted material on the basis of which the Assessing Officer formed the reasons to believe, the process of arriving at such satisfaction could not be a mere repetition of the report of investigation. In the assessee's case, the crucial link between the information made available to the Assessing Officer and the formation of belief was absent. The "reasons to believe" recorded were not reasons but only conclusions and a reproduction of the conclusion in the investigation report received from Director (Investigation). It was a "borrowed satisfaction". The expression "accommodation entry" was used to describe the information set out without explaining the basis for arriving at sch a conclusion. The basis for the statement that the entry was given to the assessee on his paying "unaccounted cash" was not disclosed. Who was the accommodation entry giver and how he could be said to be a "known entry operator" were not mentioned the source for all the conclusion was the investigation report? The tangible material which formed the basis for the belief that income had escaped assessment must be evident from a reading ....