TaxTMI 
TaxTMI 
2023 (5) TMI 1039
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....l income of Rs. 6,27,340/-. The return of income 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 ....
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....ee are not corroborated. (iii) the re-assessment order is marred by serious factual errors and conclusions 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 ....
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....al amounting to Rs. 4,946/-. *[Second Part] During the course of assessment proceedings for the AY. 2010-11 in the case of M/s Poltavsky TPS Power Services Ltd, the assessing officer 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 appli....
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....planations/documents in this regard. The assessee again grossly failed to furnish any conducive material and rather furnished a bunch of papers before the assessing officer which contained various confirmations/photocopies of declarations on stamp papers/etc, merits of which are being discussed 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 confi....
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....ven by the assessee previously as well as on the new set of confirmations which is evident from the report of the inspector placed on record and as reproduced above which is not merely a co-incident. 3. The assessee has not been able to furnish the details/documents to prove the authenticity of these companies and the facts and circumstances of the case prove beyond doubt that 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....
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....-11 it is found that the assessee had received share capital of Rs. 1,37,29,000/-and share premium of Rs. 5,48,80,000/-(Total 6,86,09,000/-) in the F. Y. 2008-09 relevant to A.V. 2009-10 and 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 notices issued by the then Assessing Officer in respect of said 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....
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.... propriety of the receipts as per points raised in questionnaire and show cause notices issued in AY 2010-11. The AO in this part thus relied upon the findings recorded in AY 2010-11 for the purposes of formation of belief towards purported escapement and alleged failure on the part of the Assessee to disclose material facts fully and truly for the year 2009-10 in question. 11.5. On the basis of such reasons, the notice under S. 148 was issued and served on 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 ....
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....g the belief towards alleged escapement. The requirement of main provision of S. 147 are thus apparently not met. 13.2. This apart, the impugned note, as per third part of reasons recorded, spells out a case for a mere 'scrutiny' of the transaction of share application money in the appropriate year of receipt of such money. A mere scrutiny proposed, giving rise to reassessment proceedings in the instant, does not meet the requirements of main provision which 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 t....
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....iled before AO in regular assessment proceedings, as adverted, are placed at pages 451-616 of the paper book. Alongside, evidences showing substantial business activities proposed to be carried out by the Assessee, list of projects/orders awarded to the assessee or its group co. which significantly bolster its substratum of Assessee co. and providing reasons for subscription were also produced before AO as per page 617 to 720 of the paper book. 14.2. As per the contentions 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 ....