TaxTMI 
TaxTMI 
2024 (7) TMI 1089
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....investigation was fresh information to initiate reassessment proceedings? 2. Whether on the facts and circumstances of the case, the CIT(A) erred in holding that the AO re-opened the case on the basis of incorrect information to the extent of escapement of Rs. 1.47 crores and assessed the escapement at Rs. 5.60 crores ignoring the settled law that the reasons for re-opening could be a starting point for completing assessment but the assessment need not be restricted to the said amount when fresh facts were brought to light before the AO in the course of reassessment proceedings? 3. Whether on the facts and circumstances of the case, the CIT(A) was right to hold that the assessee successfully established the identity, creditworthiness and genuineness of the investors ignoring the fact the assessee did not discharge its onus of producing the said investors despite the AO giving ample time to do so? 4. Whether on the facts and circumstances of the case, the CIT(A) was right to hold that the assessee's contention of not being given the opportunity of cross examination of witness was correct despite the fact that the assessee itself submitted alleged affid....
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....r also referred to the report of Investigation Wing, Kolkata and the same is reproduced below:- "4. Reports of investigation wing Kolkata, Ground of suspicion: Mr. Arun Behera Director of i) Aadita Construction P. Ltd, ii) Priyank Myultitrade P. Ltd, iii) Akshaj Multitrade PLtd, iv) Adhik Multitrade P. Ltd and u) KCA Allied services P. Ltd. Mr. Vimlesh Kumar Singh, Director of the following companies i) Priyank MultitradePvt. Ltd. ii) Adhik Multitrade P. Ltd, Mr. Ranjit kumar Das Director of i) M/s Aadita Construction P. Ltd and ii) Aarjav Commodities P. Ltd Mr. Jay PrakashKandoi, Director of Aarjav Commodities Pvt. Ltd. and ii) Akshaj Multitrade Pvt. Lt. And Mr. Shyam Singh director of i) KCA Allied Services Pvt. Ltd. All the entities maintained current account with the Union Bank of India as under:- Sr. No. Name of Company Account no. 1. Aarajav Commodities Pvt. Ltd. 607701010050043 2. Akshaj Multitrade Pvt. Ltd. 607701010050044 3. Akul Multitrade Pvt. Ltd. 607701010050045 4. Anantika Infrastructure Pvt. Ltd. 607701010050046 5. Czaee Infrastructure Pvt. Ltd. 607701010050047 6. Hitee Infrastructure Pvt. Ltd. 6....
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....n lieu of commission. He also mentioned the name of other operators with whom he was working and has submitted that he has provided accommodation entries in the form of share capital to Baazar Group of Companies in lieu of commission to the tune of Rs. 0.20 per hundred rupees. The Assessing Officer denied the cross-examination of Shri Rajesh Kumar Bhutoria, and has added Rs. 5.60 lakh to the return of income. However, he did not mention any charging provisions for making the addition. The assessee being not satisfied, preferred appeal before the first appellate authority. 7. Before the learned CIT(A), the assessee submitted as under:- "5.0 During the appellate proceedings, the following submissions were made: With reference to the above appeal and under instructions from our above named client, we submit herewith their following submissions with a request that the same may please be accepted on record and sympathetically considered for allowing the relief as prayed for in the grounds of appeal: The brief facts of their case, are as under. They had filed their original return for the abovementioned Asst. Year on 28/09/2011, declaring Total Inco....
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....dings as the same are void ab-initio. In this regard, we also rely on the following judgements: The Hon. Andhra Pradesh High Court has held "Income Tax Department cannot be permitted to bring fresh litigations because of new views they entertain on facts or new versions which they present as to what should be the inference or proper inference either of the facts disclosed or the weight of the Circumstances - Sirpur paper mills Ltd. v. ITO[1978] 114 ITR 404 (AP). Further, the Hon. Kolkata High Court has held "A mere confessional statement by a third party (who is a lender of the assessee) that he was a mere name-lender and that all his transactions of Loans were bogus, without naming the assessee as one who had obtained bogus loans, would not be sufficient to hold that the assessee's income had escaped assessment" S.P. Agarwalla alias Sukhdeo Prasad Agarwalla. ΤΟ [1983] 140ITR 1010(Cal.). Also in a recent decision of Hon. Bombay High Court in case of Paradise Inland Shipping Pvt. Ltd., 400 ITR 439, on appeal by the Revenue, the Bombay High Court upheld the decision of the Tribunal and held as under- The notice of reassessment had been issue....
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....,00,000 Akshaj MultitradePvt. Ltd. 41,00,000 AkulMultitradePvt. Ltd. 65,00,000 Anantika Infrastructure Pvt. Ltd. 15,00,000 Czaee Infrastructure Pvt. Ltd. 10,00,000 Hitee Infrastructure Pvt. Ltd. 15,00,000 Jasum Real Estate Pvt. Ltd. 15,00,000 Powered MultitradePvt. Ltd. 20,00,000 Sanobar Infrastructure Pvt. Ltd. 15,00,000 Spectarcular Infrastructure Pvt. Ltd. 25,00,000 Taurus ViniyogPvt. Ltd. 1,25,00,000 Vidya BuildconPvt. Ltd. 10,00,000 Adhik MultitradePvt. Ltd. 53,00,000 Total: 5,60,00,000 Further, during the assessment proceedings the assessee company had filed the following details of all the above-mentioned companies before the Ld. A.O. as can be appreciated from the paper book submitted and which is on Your Honour's record: - The copy of their PAN card issued to them by the Income Tax Department. - Income Tax Return alongwith their computation of total income for the relevant year. - Copy of memorandum of association and articles of association alongwith the copy of certificate of incorporation. - Complete set of audited financial statements of all th....
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....tion of those Companies, which could have been easily appreciated from the Financial Statements of those Companies submitted to the Ld. A.O.: Name of Company Total Share Holders Funds Available With the Company as per their Balance Sheet Total Investment made by those Companies Aadita Construction Pvt. Ltd. 5,97,00,789 5,60,00,789 53,00,000 Aarjav Commodities Pvt. Ltd. 6,22,00,205 5,43,00,205 79,00,000 Priyank Multitrade Pvt. Ltd. 5,60,00,640 5,25,00,640 35,00,000 Akshaj Multitrade Pvt. Ltd. 4,50,50,691 4,09,50,691 41,00,000 Akul Multitrade Pvt. Ltd. 8,47,00,525 7,82,00,525 65,00,000 Anantika Infrastructure Pvt. Ltd. 6,44,25,464 6,29,25,464 15,00,000 Czaee Infrastructure Pvt. Ltd. 2,77,00,307 2,67,00,307 10,00,000 Hitee Infrastructure Pvt. Ltd. 4,43,00,447 4,28,00,447 15,00,000 Jasum Real Estate Pvt. Ltd. 4,47,50,486 4,34,50,486 15,00,000 Powered Multitrade Pvt. Ltd. 6,76,00,440 6,56,00,440 20,00,000 Sanobar Infrastructure Pvt. Ltd. 4,60,47,775 4,45,47,775 15,00,000 Spectacular Infrastructure Pvt. Ltd. 4,50,30,562 4,25,30,562 25,00....
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....possession of any unaccounted money, in the First Place. Further, the Ld. A.O. has failed to appreciate the simple fact that No Prudent Businessman would keep his funds idle and would always like to use it for the purpose of the business of the company, especially when the funds are compulsorily to be maintained in current account, on which no interest is received. The above facts will enable Your Honour to appreciate the fact that in business the funds are never kept idle and are continuously rotated for business purposes. It is also to be noted that time and again, the Ld. A.O. was made aware of the fact that investment itself is a business activity and when a company is engaged in the consistent activity of investing funds in other companies, the same should have been considered as a business activity. Therefore the Ld. A.O. is not justified in contending that these companies do not have any business activities. In view of the above details and evidences, which proved the bonafide of the receipt of Share Application Money and that too by Cheque/RTGS, the Ld. A.O.'s Adamant Attitude of not Applying his mind to any of the Details, which were....
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....eholders, the Genuineness of the Transaction and the Creditworthiness of the Shareholders. Assessee explaining Source of money Identities of Applicants and their Creditworthiness established Burden of Proof Discharged by Assessee Onus Shifted to Department No Evidence to show Transactions were not Genuine - Section 68 and 69 Not Applicable." The Hon. Supreme Court in case of Lovely Exports Put. Ltd. 216 CTR 195 has held that "if Share Application Money is received by Assessee Company from Alleged Bogus Shareholders, whose names are given to A.O. then Department is free to proceed to reopen their individual assessments, but it cannot be regarded as undisclosed income of assessee company." We would like to draw Your Honour's attention to the fact that the Ld. A.O. has simply contended that Identity, Capacity of those Companies and the Genuineness of the transactions are not proved merely on the basis of the Statement of Shri Rajesh Bhutoria recorded in 2014, without even verifying the Affidavit of Mr. Rajesh Bhutoria, dated 27/12/2017, before the Metropolitan Magistrate, Kolkata, submitted to him, in which he had clearly and unambiguously affirmed that ....
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....s, the Ld. A.O. has relied on the Supreme Court's Judgements, in the case of Roshan Di Hatti and Kale Khan Mohammad Hanif, wherein the Hon. Apex Courth as held that "where the nature and source of a receipt, whether it be money or other property, cannot be satisfactorily explained by the Assessee, it is open for the revenue to hold that it is income of the Assessee and no further burden lies on the Revenue to show that the income is from any particular source." However, the Ld. A.O. has miserably failed to show as to how the Assessee, even after submitting all the details that are required, has not satisfactorily explained the transaction, even when he has not examined or verified the same by enforcing the attendance of the persons on whose statements, he is relying on. As regards the reliance of the Ld. A.O. on the Allahabad High Court in case of Motilal Padampat Udyog Ltd. for not allowing Cross examination, the Ld. A.O. has disregarded the Hon. Bombay High Court's Judgment in the case of M/s. Ashish International wherein it has been held that "That A.O. should have given an Opportunity to the assessee to cross examine the witness. That veracity of the i....
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....re are no additional evidences or additional facts that have been brought on record. As regards the other observations of the Ld. A.O. in the remand report, we would like to state and submit as under: The Remand Report once again establishes the fact that the Ld. A.O., because of his prejudicial mind and high handedness, though has perused all the said documents that were submitted before him, has not carried out any judicious verification worth its name nor has conducted any independent inquiry as is requested and required of him. He has just blindly relied on the statement of Mr. Bhutoria dated 14/11/2014 and that too without appreciating/understanding the fact that Mr. Bhutoria, in his statement, had specifically mentioned the name of Bazar Group companies only. Further, the Ld. A.O. has also not been able to differentiate between the paper companies and investment companies and has considered all the companies as paper companies without bringing on record any cogent or clinching evidence clearly establishing the fact that the said companies were paper companies. It is to be noted that even though the Ld. A.O., time and again has been....
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....e has made up his mind to sit with folded hands and put the blame on assessee company for not producing Mr. Bhutoria without appreciating the fact that the primary responsibility to produce Mr. Bhutoria, was casted on him, especially when he was relying on the statement of Mr. Bhutoria. Further, as regards the contention of the Ld. A.O. that "all the corroborative and circumstantial evidences clearly state that the transactions are sham and are way to route Assessee's own unaccounted money back to its books of accounts", we have to state that No evidence has been brought on record to prove that the Assessee was having unaccounted money, in the first place. As regards the other judgement relied on by the Ld. A.O., we have to state that the same is relating to the Loan transactions and not relating to Share Application Money and hence is not applicable to Our Client's case. We would also like to point out here that the Ld. A.O. was not justified in assuming and presuming that the "paper companies have taken entries from the group companies of the assessee (which in turn are also mere shell companies) itself to advance loan to assessee", without even....
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....nt proceedings and were always available with the A.O. These were sent back to the AO for re-examination, and the remand report was obtained. I find that the AO has not made any further enquiries with the ROC, nor with the AOs of the other companies, and nor has the AO deemed it fit to investigate the money trail through bank account to ascertain the grave allegations being levelled at the appellant. Seemingly, this non-action of the AO reveals a pre-determined mind because no other reason appears evident from the reluctance of the AO to carry out independent investigations in the present case. 7.1 find that the AO has placed a heavy reliance on the statement of one Mr. Shutoria to prove the contentions of unexplained cash credits. However, I find substance in the submissions of the appellant that even though the said statement of Mr. Bhutoria, was with the department since 14/11/2014, no action was taken by the AO on the said statement till 30/03/2017. Further, the said statement is not supported by any cogent or clinching evidence proving the escapement of income in the hands of Greenedge Construction P. Ltd (appellant), nor has the AO enforced the attendance of Mr. Bhut....
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....the affidavit the fact of the making of such affidavit before him, and for the purpose of identification, mark, date, and initial every exhibit referred to in the affidavit. It is pertinent to note that under Order XIX, Rule 3 of the Code of Civil Procedure it was mandatory for the affiant to disclose the nature and source of his knowledge and information with sufficient particulars. Affidavit attested by a magistrate and an affidavit attested by a notary are equally accepted by all courts in India. The authenticity of the attestation by a magistrate or a notary is at par in the eyes of law and equal weightage is given to both of the said documents when entertained in evidence. Both of the said affidavits are appraised equally in all Spheres wherever they intend to take effect. Therefore, to dismiss such evidence as Having no evidentiary value is itself an act of imprudence and thoughtless, and portrays a lack of understanding of law. 7.5 It is noted that Mr. Bhutoria has given a sworn affidavit that the share application money invested in the appellant company was in the normal course of business. He has further stated that no accommodation entries were given. It was thus....
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....itworthiness of the said party but also to establish the genuineness of the transactions i.e. source of the monies, and has also provided all the documents to prove the source of source as well. 7.8 It was the duty of the AO to make independent enquiries with said companies or with their jurisdictional AOs to come to a considered conclusion with regard to the genuineness of the documents furnished and with regard to the various claims of the appellant. In the absence of contrary evidence being brought on record, the assertions and the submissions of the appellant are required to be accepted. It is also important to take note of the evidence that have been submitted by the appellant during the course of assessment proceedings to establish the identity, creditworthiness and genuineness of the transaction entered into by the appellant with the said companies, which have not been faulted by the AO. 7.9 To establish the identity of the said company the appellant had provided PAN, copies of Income Tax Return and Form No. 18 filed by the appellant with ROC. The appellant has also filed full set of Audited Financial Statements of the said companies. The amount of investme....
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....hareholders, whose names are given to A.O. then Department is free to proceed to reopen their individual assessments, but it cannot be regarded as undisclosed income of assessee company." 7.11 In the case of the appellant there is no evidence that there was any activity of providing accommodation entry at any point in the chain of movement of funds. No fresh confessional statement by any party has been brought on record by the AO. in the assessment order to establish the fact that accommodation entries were provided by the alleged company at any point in the movement of fund. In light of the above facts, it is incorrect to add the entire amounts just because the said companies have meagre profit especially when the appellant has given plethora of information of the said companies to establish the identity and creditworthiness of the creditors and the genuineness of the transaction. It is also to be noted that all the audited financial statements of all the said companies, which have been discussed in the assessment order, have been accepted by the AO and he has not doubted the genuineness of those audited statements. In such circumstances, the AO was not justified in simpl....
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....ions and treat the subscribed capital as the undisclosed income of the Company. 16. In this analysis, a distillation of the precedents yields the following propositions of law in the context of Section 68 of the Income Tax Act. The assessee has to prima facie prove (1) the identity of the creditor/subscriber; (2) the genuineness of the transaction, namely: whether it has been transmitted through banking or other indisputable channels: (3) the creditworthiness or financial strength of the creditor/subscriber: (4) If relevant details of the address or PAN identity of the creditor/subscriber are fumished to the Department along with copies of the Shareholders Register, Share Application Forms, Share Transfer Register etc. it would constitute acceptable proof or acceptable explanation by the assessee. (5) The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices: (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessee nor should the Assessing Officer take such repudiation at face value and construe it, without more,....
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.... Finance Act, 2012 inserted two provisos to Section 68, with effect from 1-4-2013 (assessment year 2013-14). First proviso is to enlarge the onus of a closely held company and provides that if a closely held company receives any share application money or share capital or share premium or the like, it should also establish the source of source (that is, the resident from whom such money is received). Second proviso provides that the first proviso will not apply if the receipt of sum (representing share application money or share capital or share premium etc.) is from a VCC or VCF [referred in Section 10(23FB)]. However, in the year under consideration, no such provisions or stipulation existed. The amended provisions therefore, would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In any view of the matter, the three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts, namely, the genuineness of the transaction, identity and the capacity of the investor have all been examined and on facts it is found satisfied. 9.0 Lastly, the appellant is aggrieved that the assessment has been r....
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.... of the evidence on record, concurrently came to the conclusion that the existence of the companies was based on documents produced from public records. vi) The revenue was seeking to rely upon the statements recorded of two persons who had admittedly not been subjected to cross examination. Hence the question of remanding the matter for re-examination of such persons would not at all be justified. The notice was not valid and had to be quashed. The appeal stands rejected. 9.3 In view of the above facts and circumstances of the case and in view of the judgments of Andhra Pradesh High Court in the case of Sirpur paper mills Ltd. v. ITO[1978] 114 ITR 404 (AP), the Hon. Kolkata High Court in the case of S. P. Agarwalla alias Sukhdeo Prasad Agarwalla, ITO [1983] 140 ITR 1010(Cal.) and the jurisdictional High Court in the case of Paradise Inland Shipping Pvt. Ltd., 400 ITR 439, I am of the considered opinion that the said notice issued u/s.148 is void ab initio and hence the assessment framed on such a void notice is required to be cancelled. 10.0 Considering the above totality of facts and clear evidences furnished by the appellant to establish the identity a....
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....L.N. Industries (formarly known as L.N. Polyster) came to the conclusion that the assessee company having receipt share application money through bank channel and furnished complete details of bank statements, copy of accounts and complied with notices issued and the directors of the subscriber company also appeared with books of account before the appellate authority and confirmed the investment made by them with the assessee company, therefore, the identity and creditworthiness of investor and genuineness of transaction of the share applicant has been proved in the light of the ratio laid down by the M.P. High Court, Delhi High Court and the Supreme Court and were of the opinion that the onus cast upon the assessee as provided under section 68 has been duly discharged by the assessee the identity of the share subscriber, creditworthiness and genuineness of the transaction is not to be doubted. The Tribunal considered the case of the each company in great detail and recorded its finding. Such finding of fact recorded by the Tribunal is based on the material available on record which is a finding based on appreciation of evidence on record. Issuing the share at a premium w....
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.... has been accepted by the appellate authorities thus, the same cannot be reconsidered in these appeals as it is a pure question of fact. 12. We have heard both the parties and gone through the entire material available before us. The addition was made solely on the basis of the statement of Shri Rajesh Bhutoria, which has been retracted subsequently just two days before passing the assessment order. However, the Assessing Officer has not made any independent enquiry of the detailed and voluminous evidences adduced by the assessee. Even the statement so relied upon does not specifically implicate the assessee and it is apparent that the same has been taken in connection with the investigation of one Baazar Group of Companies. Further, the reasons for re-opening his full of infirmities and mismatch in the amount and in the name of investors. We are surprised to note that the statement was available with the Department right from November 2014, but till the date of re-opening, no enquiry whatsoever to carry out the authenticity of the report of the Investigation Wing as applicable to the present case. The learned CIT(A) has correctly concluded that the entire re-assessment has been....