TaxTMI 
TaxTMI 
2023 (5) TMI 1039
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....e filed by the assessee was subjected to scrutiny assessment and the assessment order was passed under Section 143(3) dated 29.12.2011 whereby the income was assessed at Rs. 8,19,264/-. Thereafter, the assessment so completed earlier under Section 143(3) of the Act was reopened under Section 147 of the Act by issuance of notice dated 11.03.2015 under Section 148 of the Act. The reopening notice was stated to be issued with the previous approval of CIT under Section 151 of the Act. The re-assessment order was framed under Section 147 r.w. Section 143(3) of the Act vide order dated 30.03.2016 whereby the income was re-assessed at Rs. 6,70,19,264/-and addition of Rs. 6,62,00,000/-made under Section 68 of the Act on account of unexplained credits in the books of account of the assessee being share application money received during the year. 4. Aggrieved by the re-assessment of income, the assessee preferred appeal before the CIT(A). Before the CIT(A), the assessee has challenged the jurisdiction assumed by the Assessing Officer under Section 147 r.w. Section 148 of the Act and claimed that notice was issued for reopening the assessment without meeting the prerequisites of Section 147 ....
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....nclusions arrived overlooking relevant facts. (iv) the re-assessment was made on pure guess without reference to any material. (v) the additions made are squarely opposed to the statutory provision. (vi) the assertions made in justification of additions are a mere ipse dixit and not objectively justifiable on facts. (vii) the Assessing Officer overlooked factual evidences, misinterpreted and misconstructed the documents placed. (viii) The additions made bear no direct nexus between conclusion of facts arrived at and the primarily facts on which such conclusion is based. 6.3. The ld. counsel further submitted that CIT(A) has not applied its mind to all considerations and the circumstances germane to the issue. The ld. counsel submitted that voluminous documents filed before the revenue authorities to support the share subscription are testament to the fact that share application money received and share allotted to the subscribers at premium are bona fide and carried commercial substance. We shall deal with the arguments canvassed on merits at appropriate place. 7. The ld. DR for the Revenue, on the other hand, pointed out that all the conditions prescribed for confermen....
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....ficer has found that the assessee has introduced share capital of Rs. 1,37,29,000/-and share premium of Rs. 5,48,80,000/-was received by the assessee. The assessee was sought to furnish the requisite details w.r.t. share application money/share application premium amounts received during the year under consideration. The query in this regard raised by the Assessing Officer is reproduced hereunder: b) As per information contained in the balance sheet during the relevant previous year the company has raised share capital of Rs. 13729000/-which it has also received premium of Rs. 54880000/-in this regard you are required to furnish following information : S.No. Name & Address of the person/Entity applicant with PAN Amount Instrument No. of Mode Source/ Assessment Bank Account Further furnish following information: * Complete accounts of all the applicants in respect of share application. * Details of distinctive numbers issued to each applicant. Furnish copy of annual return submitted to the ROC showing details about holders of share capital as on 31.03.2010. * Produce all, the person who have contributed towards share "capital of Rs. 20000/-and above for examinat....
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.... by the AO as under: "Identical bunch of documents have been submitted for as money as 25 share applicant companies which are identical and seem to be prepared at one place and at one go. Moreover, the assessee has failed to furnish even the manufactured/ manipulated confirmations w.r.t. the three companies before the Assessing Officer." The assessing officer vide his assessment order dated 28.03.2013 had concluded that the transactions with all companies have been managed/ manipulated by the same person/set of persons as in evident from careful perusal of the documents given by the assessee in its last submission in the form of bunch of papers without any covering letter. The main characteristics of these documents were discussed by the Assessing Officer which is reproduced as under: a) The set of papers w.r.t all the companies contain application al confirmation affidavit (Photocopy), share certificate (photocopy) and copy of cheque; exactly in the same sequence. b) All the application for shares and confirmation are printed in similar fonts, in similar manner, on similar quality of paper, c) Even the stamps affixed on the application for shares and confirmations are ....
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....at the assessee has engaged in introduction of its own funds in the books of accounts in the guise of share application money by sham/paper companies controlled by same person(s) for providing a rout to channels funds as is evident from the observation made in the show cause notice as well as above. 4. The assessee has not been able to produce any of the signatories/ Directors of the above companies despite having been sought to do so. 5. The assessee has grossly failed to provide the contact details of the Directors, copies of mutual correspondences, etc, to prove that the share transactions (involving payment of share premium @4009 of face value of shares) with the said companies was genuine and as per the normal course of business practice." The Assessing Officer found that it is a matter of record that the assessee company grossly failed to produce the books of accounts and answers! explanations/justification in context of the points raised in the questionnaire as well as show cause notice. The assessee has failed to substantiate the claim made by it and rather there is ample evidence on record to implicate the assessee on various aspects and the assessee has not been abl....
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.... share application money. On the facts and circumstances of the case and findings recorded by the AO for the assessment year 2010-11, I have reasons to believe that an amount of Rs. 6,86,09,000/-has escaped from the AY. 2009-10 which was chargeable to tax. I am also satisfied that on account of failure on the part of the assessee to disclose truly and fully all the material facts necessary for assessment for the above assessment year, the income chargeable to tax to the tune of Rs. 6,86,09,000/-has escaped assessment with the meaning of Section 147 of the I.T. Act 1961." Note: * insertions represent compartmentalization of reasons recorded. Such insertion is ours and have been done with an object to dissect various parts of reasons for nuanced understanding of challenge to basis of reopening. 10. To begin with, it may be pertinent to observe that S. 147 is a substantive provision vesting jurisdiction to reopen a concluded assessment and therefore conditions stipulated for assumption of jurisdiction are required to be adhered strictly. Section 147 is structured with inbuilt safeguards. The AO is not permitted to exercise the powers under S. 147 arbitrarily or mechanically. The ....
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....the assessee to reopen the assessment concluded earlier, after the end of 4 years from the AY 2009-10 in question. 12. As per main provision of erstwhile S. 147 of the Act, the AO is vested with powers to reopen the assessment subject however to presence of some tangible material which is capable of formation of belief towards escapement of income. The reasons or material thus must have a live link with the formation of belief. The cause of action is 'reason to believe' towards escapement. Apart from the primary conditions of main provision, the first proviso casts further obligation on the revenue to overcome the embargo of limitation of 4 years. 13. We shall now advert to test the reasons for reopening on the touchstone of main provision of S. 147 of the Act. The main provision essentially provides that belief must be built on some material or reasons which are specific in nature and reliable in character. In the present case, the basis for formation of belief is the 'Note' culminated from the assessment proceedings in subsequent assessment year. 13.1. To reiterate, the observations culled out in subsequent year as recorded in second part of reasons are very ge....
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.... calls for holding reason to belief before commencement of reassessment proceedings. The conferment of powers under section 147 of the Act is wide but not plenary. It postulates that the Assessing officer must have reason to believe that the chargeable income has escaped assessment. The expression 'reason to believe' is the most valuable safeguard available to prevent arbitrary exercise of jurisdiction. It is trite that the 'reason to suspect' can not be equated with expression 'reason to believe'. The AO, in the instant case, has based its belief on an 'office Note' containing observations in other assessment year, which note, in turn, only suggests a case for 'scrutiny' into the impugned transactions. A proposed scrutiny to find out whether any escapement exists is at best a case of 'reasons to suspect'. It is well settled that the notice of reopening can be supported within the confines of reasons recorded by the AO. The AO cannot supplement the reasons. Other principle which is equally well settled and which would apply to present case is that reopening of the assessment would not be permitted for a fishing or a roving inquiry. Th....
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....of the Assessee, except for bald allegation of failure to disclose material facts by the assessee in the original assessment, no foundation has been laid in this regard in the reasons recorded. It is not known what material facts have not been disclosed which the assessee was privy to. A condition towards disclosure of facts presupposes knowledge of facts by an assessee. The law can not expect an assessee to unfold something which the Assessee has no knowledge of. The AO, in the instant case, has rather reopened the case on the premise of inadequacy in the information collected in subsequent assessment year and not on account of any failure on the part of the assessee to disclose material facts qua AY 2009-10 in question. There is no allegation in the reasons recorded that onus cast upon the assessee in the original assessment was not discharged or any fact was not disclosed which the assessee was aware of and ought to have disclosed. Needless to say, the onus of disclosure does not extend beyond the full and truthful disclosure of all primary facts. Once, all such facts are disclosed, the onus stands discharged and it is not for assessee to tell the assessing officer, what inferen....