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TaxTMI 
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2025 (10) TMI 577
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.... the assessee. 2. That on the facts and in the circumstances of the case and in law the ld. CIT (A) grossly erred in confirming the proceeding u/s 148 of the Act initiate by the ld. Assessing Officer when the assessee was already assessed u/s 143(3) of the Act and all material were provided before the ld. Assessing Officer. 3. That on the facts and in the circumstances of the case and in law the ld. CIT (A) grossly erred in re-opening and confirming the assessment on the basis of information received from Investigation wing, without providing the material evidence and statement recorded u/s 132 of the Act of Shri Mukwesh Banka during the search proceeding and without providing the opportunity of cross examination to the assessee appellant. 4. The appellant craves leave to add, alter, modify or amend any ground on or before the date of hearing." 3. The brief facts of the case are that the assessee company filed its Return of Income under section 139(1) of the Income Tax Act, 1961 declaring income at Rs. (-) 9464/- on 21.03.2014 which was assessed under section 143(3) on 26.11.2014 at returned income. Later on, specific information was received from DDIT....
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....proceedings, the AO noted that the assessee company has issued 36,664 shares at Rs. 150/- per share having face value of Rs. 10/share at a premium of Rs. 140 per share thus the assessee company has introduced its own undisclosed income Rs. 55,00,000/- in the garb of share capital of including share premium from the following five companies which are proven paper/shell companies as per the reports of the investigation wing : S. No. Name of Company Shares Allotted Amount 1 Harsharatna Finance & Investment Pvt. Ltd 10,000 15,00,000 2 Liberal Infrastructure Private Limited 6,666 10,00,000 3 ShowfallimpexPvt. Ltd. 6,666 10,00,000 4 Newedge Realtors Pvt Ltd 6,666 10,00,000 5 Agrani Credit and Finvest Pvt Ltd 6,666 10,00,000 Total 36,664 55,00,000 During the reassessment proceedings the AO considered various documents available with him and completed the assessment under section 147/143(2) of the IT Act, 1961 vide his order dated 21.11.2019 by making an addition of Rs. 55,00,000/- and assessed the total income at Rs. 54,90,536/- against returned income of Rs. (-) 9,464/-. Being aggrieved by the o....
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....as originally completed u/s 143(3) of I. Tax Act, 1961 vide order dated 26.11.2014 (Copy at PB Page 120-124). During the course of original assessment proceedings, the query on the issue on which the case is reopened i.e. share capital raised during the year, was duly raised in the questionnaire issued dated 04.11.2014 (Point No.8) (Copy at PB Page 15-16). The assessee duly replied (along with the documentary evidences such as share application form, bank account statement and financial statements of the applicants) for the same in reply dated 11.11.2014 and 24.11.2014 (Copy at PB Page 17-20). During the course of original assessment proceedings, the following documents relating to the identity, genuineness and creditworthiness of all the share investor companies were duly submitted: - (i) Share application containing the name/address/PAN of share Applicant Company and detail of payment received etc., which is itself a confirmation of finds given to the assessee company. (ii) Bank statement of share applicant showing the entry of payment made to assessee company. (iii) Acknowledgement of ITR of AY 2012-13. (iv) Audit report, audited balance sheet....
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....nd decided issue, under the grab of section 147 is legally bad in law and prohibited by various judicial pronouncements. The obligation of the assessee is to disclose fully and truly the primary or material facts during the course of assessment proceedings which has been done by the assessee during the course of assessment proceedings u/s 143(3) of Income Tax Act, 1961. The assessee has fulfilled its duties by disclosing fully and truly all material fact and documents/books necessary for assessment. It is not obligation of the assessee to indicate and state what the legal inference can be drawn from such facts. In the present case, there was no indication that the assessee had failed or omitted to disclose the material or primary facts and all these facts were already available on record. There is no allegation in the reasons so recorded that there was any subsequent factual information on the basis of which it was found that the assessee had not fully disclosed the primary facts or had falsified or disclosed incorrect primary facts. 4. Though, in the reasons recorded by ld. AO for reopening of the case he considered this aspect also but there is certain inconsist....
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.... and the same do not empower to revenue authorities to play a second inning by taking the shelter of section 148 of I Tax Act. Without prejudice to above submission it is submitted that Hon'ble Supreme Court in CIT vs. Corporation Bank Ltd. (2002) 254 ITR 791 (SC) has held that disclosure in balance sheet also amounts to disclosure. c) From the assessment record of original assessment proceedings and as submitted in forgoing paras in is apparent that during the course of original assessment proceedings this issue by duly raised by ld. AO, replied by assessee and verified by then AO. Thus, this issue was duly examined during the course of original assessment proceeding and the finding of ld. AO that "It is evident from the above discussion that in this case, the issues under consideration were never examined by the AO during the course of regular assessment/reassessment." is completely perverse, dehors the material available in the assessment record of original proceedings and perhaps made without actually examining the assessment record of original proceedings. 5. Thus, the re-opening after expiry of four years in absence of failure on the part of the assessee to ....
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....atently illegal, cannot be faulted with. The ITAT having arrived at the categorical finding that reopening of the completed assessment without any fresh material, merely on the basis of change of opinion of the AO, is without jurisdiction and erroneous, the appeal preferred by the Revenue has rightly been dismissed as having become infructuous. - Decided in favour of assessee ii) Parashuram Pottery Works Co. Limited Versus Income-Tax Officer, Circle I, Ward A, Rajkot [1977] 106 ITR 1 (SC) Hon'ble Supreme Court has specifically considered the issue and has held that the responsibility of the assessee is only to place the materials before the assessing officer and the assessee would not be responsible for the inferences made by the assessing authority on the basis of the materials that he has placed before the concerned authority. As further held by the Apex Court that a change in the opinion or a later decision on the legal aspects cannot be a reason for re-opening an assessment which has been concluded on the basis of the material which is made available in cases where the re-opening is attempted after 4 years, unless the assessee failed to disclose relevant infor....
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.... Once he has done that his duty ends. It is for the Income-tax Officer to draw the correct inference from the primary facts. It is no responsibility of the assessee to advice the Income-tax Officer with regard to the inference which he should draw from the primary facts. If an Incometax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment. The grounds or reasons which lead to the formation of the belief contemplated by section 147 (a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the Income-tax Officer to form the above belief, that would be sufficient to clothe him with jurisdiction to issue notice. Whether the grounds are adequate or not is not a matter for the court to investigate. The sufficiency of the grounds which induce the Income-tax Officer to act is, therefore, not a justiciable issue. It is, of course, open to the assessee to contend that the ....
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.... Such could not be the intention of the legislature. The said provision was incorporated in the scheme of the IT Act so as to empower the Assessing Authorities to re-assess any income on the ground which was not brought on record during the original proceedings and escaped his knowledge; and the said fact would have material bearing on the outcome of the relevant assessment order. 9. Section 147 of the IT Act does not allow the reassessment of an income merely because of the fact that the assessing officer has a change of opinion with regard to the interpretation of law differently on the facts that were well within his knowledge even at the time of assessment. Doing so would have the effect of giving the assessing officer the power of review and Section 147 confers the power to re-assess and not the power to review. To check whether it is a case of change of opinion or not one has to see its meaning in literal as well as legal terms. The word change of opinion implies formulation of opinion and then a change thereof. In terms of assessment proceedings, it means formulation of belief by an assessing officer resulting from what he thinks on a particular question. It is a result of u....
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.... matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Income Tax Officer could not have reason to believe that any such escapement was by reason of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid." (v) CIT V/s Bhanji Lavji [1971] 79 ITR 582 (SC), Held that:-Reassessment under s. 34(1)(a) of 1922 Act-Full and true disclosure-In original assessment, all primary facts were disclosed-It was stated that payments were received by cheques and transferred to Porbandar-ITO had passed an order in effect holding that assessee had no income in British India chargeable to tax-He could not now seek to reassess the assessee on the ground of failure to disclose fully and truly the facts neces....
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....ed on the basis of particulars furnished by the assessee- Reasons recorded do not allege any failure on the part of the assessee to disclose fully and truly all material facts required for the assessments in question-Basic requirement for reopening of assessments beyond the period of four years from the end of the relevant assessment years thus not satisfied-Therefore, impugned notices under s. 148 issued on the basis that the claim for deduction under ss. 80HH, 80HHA and 80-I was not fully examined are quashed and set aside. (ix) Bhot Industries Ltd V/s ACIT (2004) 267 ITR 161 (Bomb.), Reassessment-Full and true disclosure-Notice after expiry of four years-Assessments for the relevant years were completed under s. 143(3) after detailed investigation-Reliefs under ss. 80HH, 80HHA and 80-I were granted on the basis of particulars furnished by the assessee- Reasons recorded do not allege any failure on the part of the assessee to disclose fully and truly all material facts required for the assessments in question-Basic requirement for reopening of assessments beyond the period of four years from the end of the relevant assessment years thus not satisfied-Therefore, ....
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....(HC) f) CIT vs. Fair Invest Ltd. (2013) 357 ITR 146 (Del.)(HC) 1.2 The information received from other authority cannot be considered as material for reopening:- 1. In view of submission made hereinabove, there was no failure on the part of the assessee to disclose any material, which was now in possession of ld. AO while initiating the re-assessment proceedings. Hence such re-opening of a completed assessment, beyond a period of four years from the relevant assessment year, without pointing any default of the assessee to disclose all necessary facts, is illegal, unjustified. The re-opening after expiry of four years in absence of failure on the part of the assessee to truly and fully disclose all material facts required for making assessment and in absence of any fresh material is illegal, unjustified and bad in law. The information received from some other authority, which is not backed with any evidence and without making own inquiry on part of ld. AO cannot constitute the new material. It is well settle position of law that the ld. AO cannot be guided for his decisions by what the other officer preparing the report/information says. As per se....
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....appears that the AO was satisfied with the details and information provided by the Petitioner. 14. A perusal of the order disposing of the objections reveals that it proceeds on the basis that the information sought for by the Petitioner which formed the basis for the reasons to believe, including the evidence collected, was required to be provided only in the further assessment proceedings. The said order overlooks the fact that the reasons for reopening do not mention as to what fact or information was not disclosed by the Petitioner. This is very vital and in fact goes to the root of the matter. An allegation that the companies are `paper companies' without further facts is by itself insufficient to reopen assessments that stand closed after passing of orders under Section 143 (3) of the Act. 15. The assessment proceedings, especially those under Section 143 (3) of the Act, have to be accorded sanctity and any reopening of the same has to be on a strong and sound legal basis. It is well settled that a mere conjecture or surmise is not sufficient. There have to be reasons to believe and not merely reasons to suspect that income has escaped assessment. In thi....
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....pecific and the information would be provided to the Petitioner during the assessment proceedings. Thus, if the Revenue had any basis to show that the primary facts were incorrect, the same ought to have been set out in the reasons to believe. That has not been done in the present case. 18. Thus, the Petitioner cannot be said to have failed to disclose fully and truly all the material facts. This being a jurisdictional issue, the assumption of jurisdiction under Sections 147 and 148 of the Act was erroneous. The notice dated 20th March, 2015 and the subsequent order dated 1st February, 2016 deserve to be and are hereby quashed. 19. Before parting with the case, the Court would like to observe that on a routine basis, a large number of writ petitions are filed challenging the reopening of assessments by the Revenue under Sections 147 and 148 of the Act and despite numerous judgments on this issue, the same errors are repeated by the concerned Revenue authorities. In this background, the Court would like the Revenue to adhere to the following guidelines in matters of reopening of assessments: (i) while communicating the reasons for reopening the assessment,....
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....ad induced the assessing authority to come to a wrong conclusion by any failure on the part of the assessee to disclose the relevant details. Apparently, what has occurred was a mistake on the part of the assessing authority in accepting the approval produced by the assessee to be an approval as required under Explanation 2 to Section 10B. It appears that later, the High Court of Delhi [2012 (9) TMI 627 - DELHI HIGH COURT] had held that the approval for the purpose of Section 10B can only be an approval granted by the Board constituted by the Central Government under the provisions of Industries (Development and Regulation) Act. This judgment of the Delhi High Court is the reason cited in respect of all the re-assessments. However, neither in the notices or the assessment orders, nor in the counter affidavit is it stated that the assessee had failed to disclose any relevant information or had produced any fraudulent material during the assessment proceedings. The Apex Court in Parashuram Pottery Works Co. L.t.d v. Income Tax Officer [1976 (11) TMI 1 - SUPREME COURT] has specifically considered the issue and has held that the responsibility of the assessee is only to place the mater....
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....the reasons recorded, it is well apparent that before initiating the reassessment proceeding, the ld. AO did not make any independent inquiries. In the reasons so recoded Page 2, Para 4 the ld. AO himself mention, "Since the enquiry has already been made by investigation unit, no further enquiry is required at this stage". Thus, the reassessment proceedings were initiated by blindly relying on the information of report of some other authorities and even the ld. AO did not apply his own mind on such information to find out actual substance of such information from the income of the assessee. Hon'ble Delhi High Court in the case of PCIT V/s RMG Polyvinyl (I) Limited 396 ITR 5 has held as under: - Reopening of assessment - reasons to believe - accommodation entries addition - Held that:- In the present case, the Court is unable to discern the link between the tangible material and the formation of the reasons to believe that income had escaped assessment. In the present case too, the information received from the Investigation Wing cannot be said to be tangible material per se without a further inquiry being undertaken by the AO. In the present case the AO deprived himself of....
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....f the AO to reopen the assessment under s. 147 of the said Act. It is trite that both the conditions afore-mentioned are cumulative. It is also a well settled principle of law that, in the event, it is found that any of the said two conditions is not fulfilled the notice issued by the AO would be wholly without jurisdiction. The expression "reason to believe" finds place both in cls. (a) and (b) of s. 147 of the Act. Sub-s. (2) of s. 148 of the Act mandates that before jurisdiction under s. 147 of the Act is invoked by the AO he is to record his reasons for doing so or before issuing any notice under s. 147 of the said Act. Therefore, formation of reason to believe and recording of reasons were imperative before the AO could reopen a completed assessment." From the perusal of above observations of Hon'ble High Court it is unambiguous clear that 'reason to believe' that income chargeable to tax has escaped assessment should be of Assessing Officer. It is Assessing Officer's 'reason to believe' that taxable income has escaped assessment that forms bedrock for reopening assessment u/s. 147 of the Act. Information from other authority cannot in any manner be construed as Asses....
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....05,00,165/- but from the reasons so recorded it is not clear that how such accommodation entries were introduced in books of accounts of assessee. There is no whispering in the reasons so recorded that whether such entries were in form of share application or unsecured loans or in other form. This shows that the ld. AO blindly relied on the information received from some other authority and before proceeding for re-assessment proceeding did not apply his own mind to verify the genuineness and correctness of such information. Even the Ld A.O. not bother to analyze the Balance Sheet of the assessee before initiating reassessment proceeding. Had the balance sheet of the assessee would have been analyzed in the light of the information received, it would be clear that the total size of the balance sheet of the assessee is only of Rs. 59,63,545/- (Copy of balance sheet at PB Page 8), comprising share capital & reserves Rs. 55,55,905/-, short term borrowings Rs. 4,00,000/- and trade payables Rs. 8,000/-, then how it can be beneficiary of the accommodation entry of Rs. 1,05,00,165/-. The ld. AO maintained the same reasons to believe during almost entire assessment proceedings and....
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.... Private Limited & Other related companies Rs. 20,00,000/- 5 M/s Orchid Trexim Private Limited & Other related companies Rs. 15,00,000/- Total Rs. 1,05,00,165/- However, in fact, which is verifiable from the material available on record with ld. AO at the time of reopening of the assessment proceedings, during the year under scrutiny the assessee has not received any unsecured loans from the abovementioned parties. During the year under scrutiny, from the parties as appearing in the list provided by ld. AO the assessee has received share application money only from following parties: - S. No. Name Amount 1 Harsharatna Finance & Investment Private Limited Rs. 15,00,000/- 2 Snowfall Impex Private Limited Rs. 10,00,000/- 3 Newedge Realtors Private Limited Rs. 10,00,000/- 4 Agrani Credit &Finvest Private Limited Rs. 10,00,000/- Total Rs. 45,00,000/- Share application of Rs. 10,00,000/- was also received from the company M/s Liberal Infrastructure Private Limited but against this company there was no material with Ld. A.O. of whatsoever nature and despite to that this sum was added....
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....t recorded of Shri Mukesh Banka or any documents which alleged that the Mukesh Banka has given accommodation entry to the assessee. The assessee by making its own efforts, through its known persons find out the correctness of the statement of Shri Mukesh Banka and on inquiry, it revealed that Shri Mukesh Banka retracted from his statement and to this effect he filed an affidavit on 05.09.2019 (Copy at PB Page 125- 131). Thus, without further examining to Shri Mukesh Banka by the Ld. A.O. at his own and without providing the opportunity of cross examination to the assessee made the addition more so when the retracted statement of Shri Mukesh Banka had no more evidentiary value against the assessee. The contents of the original statement of Shri Mukesh Banka are not known to the assessee as copy of his statement was not provided to the assessee by Ld. A.O. and also could not be available to assessee. From the reasons so recoded as well as of assessment order, it is well apparent that the reopening was not belief of Ld. AO but the same reopened solely & blindly relying on the information received from some other authority, which is not backed with any evidences, and without further in....
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....d non-existent reasons in the reasons recorded for reopening of the assessment and, as such, did not apply his independent mind. The alleged amount of escapement has mentioned incorrect, the amount alleged to be received from certain entities which was actually not received and form & nature of alleged accommodation entries not mention in reasons so recorded. The AO without applying his mind to the information received from DDIT recorded wrong and incorrect facts in the reasons for reopening of the assessment. In view of above submission and also from material available on record it is clear that the ld. AO has recorded wrong, incorrect and non-existing facts in the reasons recorded for reopening of the assessment and has not applied his mind for forming the belief that income chargeable to tax has escaped assessment. It is well settled law that if wrong facts and wrong reasons are recorded for reopening of the assessment, such assessment is bad in law. In support of his contention we relied upon following judgments: - a) ITAT Delhi Bench in the case of M/s Ganesh Ganga Investments P. Ltd. Vs. ITO in ITA No. 1579/Del/2019 dated 07.11.2019 only in paras 8.5 to 9 are reprodu....
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....usion of the A.O. In the case of Meenakshi Overseas Pvt. Ltd., (supra), the A.O. in the reasons has even mentioned that he has gone through the information received which is lacking in the present case. The A.O. being a quasi-judicial authority is expected to arrive at subjective satisfaction independently on his own. The A.O. however, merely repeated the report of the Investigation Wing in the reasons and formed his belief that income chargeable to tax has escaped assessment without arriving at his satisfaction. Thus, there is no independent application of mind by the A.O. to the report of Investigation Wing to form the basis for recording the reasons. The reasons recorded by the A.O. are also incorrect as noted above. The reasons failed to demonstrate the link between the alleged tangible material and the formation of reasons to believe that income chargeable to tax has escaped assessment. The decisions relied upon by the Learned Counsel for the Assessee in the cases of Pr. Commissioner of Income Tax vs., RMG Polyvinyl (I) Ltd., 396 ITR 5 (Del.), Pr. Commissioner of Income Tax vs., Meenakshi Overseas (P) Ltd., 395 ITR 677 (Del.), Pr. Commissioner of Income Tax vs., G and G Pharma....
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....ded incorrect amount, which escaped assessment. His conclusion was merely based on observations and information received from DIT(Inv.), New Delhi, which is not brought on record and his conclusion is merely based on doubts because he was not sure whether transaction in question is genuine or not. Therefore, the decisions relied upon by the Ld. Counsel for the assessee squarely apply to the facts and circumstances of the case. The decisions relied upon by the Ld. DR would not support the case of the Revenue. Since, there is a total lack of mind while recording the reasons for reopening of the assessment, therefore, assumption of jurisdiction under section 147/148 of the I.T. Act, 1961, is bad and illegal. The AO was not justified in assuming jurisdiction under section 147/148 of the I.T. Act, 1961. We, therefore, hold that reopening of the assessment in the matter is bad in law and illegal, as such, same cannot be sustained in law. We, accordingly, set aside the orders of the authorities below and quash the reopening of the assessment. Resultantly, all additions stand deleted." c) Hon'ble Delhi High Court in the case of Pr. CIT Vs. SNG Developers Ltd., [2018] 404 ITR 312 (....
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....lication of mind especially since the Assessing Officer had not examined the return filed, which would have revealed that the assessee had filed regular returns, had sufficient opening balance in his account and the withdrawals therefrom substantiated the donation made. Therefore, the reopening of the assessment was unsustainable in law and the notice issued under section 147 of the Act was to be quashed." e) Hon'ble Bombay High Court in the case of Siemens Information Systems Ltd. Vs. ACIT & Others [2007] 293 ITR 548 (Bom.) held as under: "The petitioner had several EOU/STP units engaged in the business of export of software. In response to the notice for reopening the assessment for the assessment year 1999-2000, the petitioner, objecting to the issuance of the notice, stated that the reasons furnished by the authority had quoted the provisions of section 10A as amended by the Finance Act, 2000, with effect from the assessment year 2001-02 and as such could not have been made applicable to the assessment year 1999-2000 and the notice had been issued under the mistaken belief about the correct position of law. However, opportunity to show cause was given to the p....
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....ion for holding any escapement of income for invoking section 147/148 of the IT Act, 1961. It is submitted that reopening is solely based on general information received from DDIT and admittedly having no positive evidences against the assessee. From bear reading of the reasons so recorded it is apparent that there was no evidence in the information supplied by the DDIT regarding the factum of the assessee having introduced its undisclosed income in the shape of alleged accommodation entries. Therefore, information received throws only doubt or suspicion and cannot be basis of 'reasons to believe'. Suspicion however strong cannot take the place of evidence as laid down by the Hon'ble Apex Court in the case of Dhakeswari Cotton Mills Ltd. Vs. CIT (1955) AIR 65 (1955 SCR 011941). Therefore, information received throws only doubt or suspicion and cannot be basis of 'reasons to believe'. Hon'ble Supreme Court in the case of Uma Charan Shaw & Bros Co Vs CIT 37 ITR 271 has held that suspicion cannot take the place of proof. Hon'ble Punjab & Haryana High Court in the case of CIT Vs Anupam Kapoor (2008) 299 ITR 179 (P & H) also held that suspicion, howsoever strong cann....
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....dings and not to be swayed and carried away under some report. Hon'ble Apex Court has held in the case of Dakeshwari Cotton Mills Ltd Vs CIT 26 ITR 775-" that one who hears must decide the case." From the plain reading of reasons so recorded as well as assessment order and discussion made therein your honour will find that there is nothing positive material in the assessment order which prove that the share capital and premium thereon is not genuine and unaccounted money of the assessee. It is settled law that the AO is quasi-judicial authority and should be governed in his function by judicial consideration and must conform to the rules of natural justice and must proceed without bias as held by Hon'ble Supreme Court in the case of Tin Box Co. Vs CIT 249 ITR 216 (SC). It is also settled law that the AO must act honestly on the material before him and not vindictively, capriciously, or arbitrarily as held by Hon'ble Supreme Court in the case of Gurumukh Singh Vs CIT 12 ITR 393, 427 (FB), DakeshwariCotton Mills Ltd Vs CIT 26 ITR 775. The taxing authority should not act in a manner as might indicate that scales are weighted against the assessee CIT V/s Simon Carves Ltd (1976....
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....oner of Income Tax, Udaipur Vs. M/s. Shree Rajasthan Syntex Ltd.313 ITR 231(Raj) has held as under : - After a thorough analysis of the facts of the case and the law applicable, this Court found unjustified the process of re-opening by the AO on the basis of the assessments made in relation to the lessee at Mumbai; and the order of the ITAT was upheld, inter alia, with the following observations: - ".....Thus the net result which comes to is that simply be- cause after the Assessing Officer here had formed a particular opinion on a particular set of documents simply because the Assessing Officer at Mumbai had formed a different opinion on the same set of documents the action was sought to be initiated here for re-assessment which, in our view, has rightly been found by the learned Tribunal that it was a "borrowed satisfaction" under the opinion of the Assessing Officer at Mumbai and has rightly D.B. Income Tax Appeal No.16/2012 been found to be not sufficient to confer power on the Assessing Officer to initiate reassessment proceedings. Likewise, we may just take another hypothesis that if the Assessing Officer at Mumbai had not allowed depreciation al- l....
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....that income of an assessee has escaped assessment c) CIT vs. SFIL Stock Broking Ltd. [2010] 325 ITR 285 (DHC) "Held that, in the present case, the first sentence of the so-called reasons recorded by the Assessing Officer was mere information received from the Deputy Director of Income-tax (Inv.). The second sentence was a direction given by the very same Deputy Director of Income-tax (Inv.) to issue a notice under section 148 and the third sentence again comprised a direction given by the Additional Commissioner of Income-tax to initiate proceedings under section 148 in respect of cases pertaining to the relevant ward. It was clear that the Assessing Officer referred to the information and the two directions as 'reasons' on the basis of which he was proceeding to issue notice under section 148. These could not be the reasons for proceeding under section 147/148. From the so-called reasons, it was not at all discernible as to whether the Assessing Officer had applied his mind to the information and independently arrived at a belief that, on the basis of the material which he had before him, income had escaped assessment. Therefore, the reassessment was not ....
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....8 (Agra)(Trib), the Tribunal held that; If the reopening is based on information received from the investigation dept, the reasons must show that the AO independently applied his mind to the information and formed his own opinion. If the reopening is done mechanically, it is void. Also, if the reasons refer to any document, a copy should be provided to the assessee. Failure to do so results in breach of natural justice and renders the reopening void. i) Hon'ble Delhi High Court in case of Pr. CIT vs. Meenakshi Overseas Pvt. Ltd. ITA 692/2016 dated May 26, 2017, (2017) 99CCH 0028 DelHC; 395 ITR 677; 154 DTR 0100 (Del); (2017) 395 ITR 0677 (Delhi)) has held that there is no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed, it is a 'borrowed satisfaction'. The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment. j) In Delhi High Court in case of Agya Ram vs. CIT ....
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....ition precedent to assume jurisdiction and for that he took our attention to the expression used in sec. 147 of the Act which states that AO should have 'reason to believe' escapement of income. According to ld Counsel, the expression "reason to believe" postulates a foundation based on information and belief based on reasoning. According to ld Counsel, even after there is a foundation based on information is there, still there must be some reasons warrant holding a belief that income chargeable to tax has escaped assessment, which expression used by Parliament is stronger than the expression 'satisfied' and in the present case such requirement as contemplated by law has not been met in the 'reason recorded' by the AO before venturing to re-open the assessment which vitiates the re-opening itself. According to Ld. Counsel, even if the information given by the DIT (Inv.) is adverse against the assessee, at the most it may trigger "reason to suspect"; then AO has to make reasonable enquiry and collect material which would make him believe that there is in fact an escapement of income. Without doing so, the jurisdictional fact necessary to usurp jurisdiction to reopen the regular asse....
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....and reported a gross profit of Rs 3,41,752. As held by the Bombay High Court in case of M/s Shodiman Investments, the material in possession of the AO has to be further linked by any reason to come to conclusion that the assessee has indulged in any activity which could give rise to reason to believe that income chargeable to tax has escaped assessment. In other words, unless the AO carries out the further examination after receipt of initial information from the Investigation wing, how can he conclude that income has escaped assessment. It is a fact that the assessee has filed her return of income. The AO should have examined her return of income and carried out initial investigation before coming to the conclusion that income has escaped assessment. In the entirety of facts and circumstances of the case, the notice issued under section 148 cannot be sustained and the same is held to be bad in law. In the result, the reassessment proceedings are hereby quashed and set-aside. The grounds on merit have thus become infructous and are not adjudicated upon." q) Other cases relied on this issues: - (i) M/s Dwarka Gems Ltd. Vs DCIT ITA No. 71/JP/2017 order dated 27/03/2....
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.... reasons so recorded it is apparent that the higher authority granted such sanction in mechanical manner without examining the record and applying their own mind. Had before granting the sanction the assessment record or/and other evidences placed on record would have been examined and analyze by the higher authority than perhaps they would considered that it is not fit case for issuance of notice u/s 148 of the Act and perhaps did not sanction the proposed of re-assessment. 2. Learned AO while recording the reasons under the heading "1. Brief details of information collected/received by AO 2. Analysis of information collected/received" held that the specific information was received from DDIT (Inv.), Unit 1(3), Kolkata regarding accommodation entries taken by the assessee during the year under consideration. There is no whispering in the reasons so recorded that what sort of information was receive and what were the evidences therewith which proves that information is correct. The ld. AO did not give his own remark that what short of analysis was did by him at his own end and as such, no separate inquiries were also made. Except to the information received from DDIT, whic....
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....ce sheet an assessment record of the assessee was clearly not made. Therefore, the formation of belief by ld. AO and also sanctioned by higher authorities, that income of the assessee chargeable to tax had escaped assessment, was unreasonable and irrational, as it could not be related to the underlining information, something which is discernible from a bare reading of the order recording reasons. Therefore the higher authority who accorded sanction for triggering the process under Section 147 of the Act, simply rubberstamped the reasons furnished by ld. AO for issuance of notice under Section 148 of the Act without applying the mind. 3. The provisions of Section 151(1) of the Act required the higher authority to satisfy himself as to whether it was a fit case in which sanction should be accorded for issuance of notice under Section 148 of the Act and, thus, triggering the process of reassessment under Section 147. The sanction should had been granted after analyzing the entire record & evidences, which had not been done in the intent case. The satisfaction arrived at by ld. AO should be discernible from the sanction-order passed under Section 151 of the Act. ....
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....O was to be agreed upon, the least, which is expected, is that an appropriate endorsement is made in this behalf setting out brief reasons. Reasons are the link between the material placed on record and the conclusion reached by an authority in respect of an issue, since they help in discerning the manner in which conclusion is reached by the concerned authority. Our opinion is fortified by the decision of the Apex Court in Union of India v. M.L. Capoor and Ors. MANU/SC/0405/1973 : AIR 1974 SC 87 wherein it was observed as under: 27. ... We find considerable force in the submission made on behalf of the Respondents that the "rubber-stamp" reason given mechanically for the supersession of each officer does not amount to "reasons for the proposed supersession". The most that could be said for the stock reason is that it is a general description of the process adopted in arriving at a conclusion. ... ... ... ... 28. ... If that had been done, facts on service records of officers considered by the Selection Committee would have been correlated to the conclusions reached. Reasons are the links between the materials on which certain conclusions are based and the actual ....
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....rovided to the assessee. 3. Finally, in the assessment order, though not appears to be as a result of own inquiry of ld. AO and appears to be on basis of inquiries made by DDIT, the ld. AO made whispering regarding certain inquiries, material, documents, evidences, analysis and statement of some Shri Mukesh Banka. However, the same are not forming part of the assessment order. 4. Thus, no evidences/documents/statements etc. either not apparent in the reasons so recorded, did not provide to assessee during assessment proceeding and even not forming part of the assessment order. It's appears that entire finding in the assessment order is based on the information received from DDIT/ITO (Investigation) and at his own the ld. AO is not possessing any evidences/documents/statements. 5. It is settled law that all the inquiries or material including statements of the parties, if any available with the AO, relying on which the assessment pretended to be framed and which was gathered behind the back of the assessee is to be provided to the assessee and opportunity to confrontation and cross examination to the witness is to be provided to the assessee. In the case o....
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....he Income Tax Act have to act judicially and one of the requirements of judicial action is to give a fair hearing to a person before deciding against him. That Ld. AO had not afforded opportunity for confrontation and cross examination of witnesses by Appellant is violation of principle of natural justice. The purpose of appeal would also frustrated if violation of the principle of natural justice is taken place during initial proceedings of assessment itself. The Hon'ble Apex Court in Ram Chandran Vs. Union of India 1986 SCC (4) 12 has observed that "in principle, there ought to be an observance of natural justice called equally at both stages.........If natural is violated at the first stage, the right of appeal is not so much a true right of appeal as a corrected initial hearing, instead of fair trial followed by appeal, the procedure is reduce to unfair trial followed by fair trial". That the principles of natural justice have been elevated to the status of Fundamental Rights guaranteed in the constitution of India as is evident from the decision of the Full Bench of the Hon'ble Supreme Court in the case of Union of India Vs. Tulsiram Patel AIR 1985 SC 1416 at....
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....ere are other rules of common law to the same effect. Reliance is placed on Peerless General Finance & Investment Co. Ltd Vs DCIT (1999) 236 ITR 671, 682. (Cal) In view of the above submission, we submit that the ld. AO assessed the income of the assessee without providing the reasonable opportunity. The Assessing Officer is not absolved of the obligation to comply with the fundamental rules of justice, which have come to be known in administrative law as the principles of jurisprudence. Compliance with the audi alteram partem rule of natural justice is an indispensable requirement of a valid assessment order. kindly see, Jagadambika Pratap Narain Singh (Raja) v. CBDT (1975) 100 ITR 698 (SC), Government of India v. Maxim A Lobo (1990) 83 CTR (Mad) 103; CIT v. VimladenBhagwandas Patel (Smt.) (1979) 118 ITR 134 (Guj); Gangadharan Pillai (P) v. ACED (1980) 126 ITR 356 (Ker); A Sociedade de Fomento Industrial Pvt. Ltd. v. Lahiri (KC) (1983) Tax LR 2664 (Goa); MallappaKallappaUgare v. Ag ITO (1973) 91 ITR 529 (Mys); State Bank of Patiala v Union of India (1973) 91 ITR 630 (P&H); CIT v Sham Lal (1981) 127 ITR 816 (P&H); Jai Prakash Singh v CIT (1978) 111 ITR 507 (Gau); Thomakutt....
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....ioner also acted on the same basis by mechanically giving his approval. The reasons recorded reflect that the Assessing Officer did not independently apply his mind to the information received from the Director of Income-tax (Investigation) and arrive at a belief whether or not any income had escaped assessment." b) Sarthak Securities Pvt. Ltd. vs. ITO [2010] 329 ITR 110 (DHC) "23. The Assessing Officer was aware of the 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 believe must be on the base or foundation or platform....
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....tors Pvt Ltd 6666/- 10,00,000/- 5 Agrani Credit and Finvest Pvt Ltd 6666/- 10,00,000/- Total 36,664/- 55,00,000/- Out of the amount of Rs. 55,00,000/-, on allotment of shares the amount of Rs. 3,66,640/- adjusted in share Capital and balance amount of Rs. 51,33,360/- adjusted towards Share premium. However, the Ld. AO made the addition of Rs 55,00,000/- by considering the share application money received as undisclosed income of the assessee. The ld. AO has not specified the section under which addition of receipt the share application money was made. 2. During the course of assessment proceedings u/s 143(3) which was completed vide order dated 26/11/2014 and the assessee submitted the following documents to prove the identity, creditworthiness and genuineness - a) Form of Application of Equity Shares b) Bank Statement reflecting the payment to assessee for share application c) Copy of ITR filed for AY 2012-13 d) Copy of Director Report, Auditor Report and Audited financial statement for the year ended on 31/03/2012 The copies of above documents are submitted at PB Page 21-119. ....
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....g new investments etc. he will never considered as capable to make such new investment. It is not possible that each once having the income in each year in commensurate to his previous accumulated wealth. Therefore, for considering the creditworthiness of the income of a person his previous earning, wealth etc. is also to be taken into consideration and on the basis of income of a single year it may not be considered that such person is not capable to make the investment. If the lender is able to demonstrate from the balance sheet that she was having sufficient funds available with it to invest, then creditworthiness can be said to have been established. The Hon'ble Delhi High Court in case of CIT vs. Ms. Mayawati - 338 ITR 0563 (Del)has held that the capacity of any person does not mean how much they earn monthly or annually, but the term capacity has wide meaning and the same can be perceived by how wealthy a person is. iii) Genuineness In the case of company allottee the assessee has submitted the Share Application Form received from investor companies against the share application received from the companies. The share application is supported by Board Resolut....
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....r/shall companies controlled and managed by him. In this regard at the outset, we submit that the statement of Shri Mukesh Banka was never brought on record by Ld. A.O. Only ng some whispering, regarding his statement has been made in the assessment order but copies of his statement was never shared with the assessee and also the contents of such statement is not apparent from the assessment order also. Its proves that the Ld. A.O. was also not having the copy of statement of this person. Further, without examining the statement it cannot be ascertained that whether there was any positive admission, on the basis of evidence gathered during search over Shri Mukesh Banka, against the share application received by the assessee company. Only on the basis of some generalized statement, without examining to such witness independently and without providing the opportunity of cross examination, such statement cannot be treated as admissible evidence. The assessee by making its own efforts, through its known persons find out the correctness of the statement of Shri Mukesh Banka and on inquiry, it revealed that Shri Mukesh Banka retracted from his statement and to this effect he filed an aff....
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....een accepted as genuine and out of that net worth, something is being invested in shares of assessee companies by realizing the funds from previous investments (which has been accepted as genuine) than the for the investment in shares of assessee cannot be hold that the shareholder company has no creditworthiness. 8. The case of the assessee squarely covered from the judgement of Hon'ble ITAT, Jaipur Bench, Jaipur, in the case of Multimetals Ltd V/s DCIT, ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 order dated 29.01.2019, wherein tribunal by placing the reliance on its earlier judgment in the case of Kota Dal Mills ITA No. 997 to 1002/JP/2018 & 1119/JP/2018 dated 31.12.2018 give the following findings: - At Page 54 of the order: - "the addition made by the Assessing Officer on the basis of the information/report of the DDIT (Investigation), Kolkata as well as the statements of Shri Anand Sharma and Shri Ankit Bagri without giving an opportunity of cross examination is not sustainable as the addition is solely based on the statement and information which is nothing but summary of statements recorded by the DDIT(Inv), Kolkata." A....
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....elevant factors have been taken into account and considered by the appellate authorities before returning the findings in favour of the assessee. Even as regards the three referred share capital contributors, it is noticed that they are existing assessee's having PA numbers; and are being regularly assessed to tax. The appellate authorities cannot be said to have erred in deleting the additions in their regard too at the hands of assessee-company. 11. Ultimately, the question as to whether the source of investment or of credit has been satisfactorily explained or not remains within the realm of appreciation of evidence; and the Courts have consistently held that such a matter does not give rise to any substantial question of law. In the case of CIT v. Orissa Corpn. (P.) Ltd. [1986) 159 ITR 78 (SC), the Hon'ble Supreme Court held as under:- "13. In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessee's. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did ....
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....ng out of such order. 10. In our opinion, therefore, once the CIT(A) and Tribunal accepted the explanation of assessee and accordingly, deleted certain additions made by AO holding the transaction of shares to be genuine, then it would not involve any substantial issue of law as such. In other words, this Court in its appellate jurisdiction under s. 260A ibid, would not again de novo hold yet another factual inquiry with a view to find out as to whether explanation offered by assessee and which found acceptance to the CIT(A) and Tribunal is good or bad, or whether it was rightly accepted, or not. It is only when the factual finding recorded had been entirely de hors the subject, or that it had been based on no reasoning, or based on absurd reasoning to the extent that no prudent man of average judicial capacity could ever reach to such conclusion, or that it had been found against any provision of law, then a case for formulation of substantial question of law on such finding can be said to have been made out. 11. In our view, no such error could be noticed by us in the impugned order because as observed supra, the Tribunal did go into the details of explanation o....
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....nd that identity of 9 out of 10 investors has been established and they have confirmed the fact of making investment in the shares of the assessee-company and no further enquiry was directed by the AO-Thus, additions were sustained only in respect of investments said to have been made by U, an individual investor and by W Ltd., for the reason that such investments were not proved- Finding of the Tribunal is essentially a finding of fact which is not vitiated in law-No substantial question of law arise for consideration. (iv) CIT vs. First Point Finance Ltd. (2006) 206 CTR (Raj) 626 : (2006) 286 ITR 477 (Raj HC). Income-Cash credit-Share application money-Tribunal found that the investors are genuinely existing persons and they have filed confirmations in respect of investments made by them and their statements were also recorded-Amount of share capital/share application money could not be treated as unexplained cash credits and no addition could be made under s. 68-No substantial question of law arises. (v) Commissioner of Income Tax Vs. Bhaval Synthetics (Raj HC) (2013) 84 DTR 0449 (Raj) Held that even in case of doubt about subscribers to increased shar....
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....n of the assessee. The amount under consideration of Rs. 1.89 crore has been received by the assessee as share application money from M/s Jalkanta Technical & Financial Service (P) Ltd. (JTFSPL) after a proper resolution passed by the board of directors of the aforesaid company through banking channel. M/s JTFSPL is having permanent account and filing its return of income regularly. The AO has nowhere mentioned that money belongs to the assessee company and therefore, provisions of s. 68 cannot be invoked. The learned CIT(A) has rightly relied upon the decision of Hon'ble Delhi High Court in the case of CIT vs. Steller Investment Ltd. (2000) 164 CTR (SC) 287 which has been confirmed by the Hon'ble Supreme Court of India. The learned CIT(A) has also relied upon the decision of Hon'ble jurisdictional High Court in the case of Barkha Synthetics Ltd. vs. Asstt. CIT (2005) 197 CTR (Raj) 432 and also the decision of Tribunal, Jodhpur Bench in the case of Uma Polymers (P) Ltd. vs. Dy. CIT (dt. 27th Feb., 2006) [reported at (2006) 101 TTJ (Jd)(TM) 124-Ed.] where it has been held that the assessee has to prove the existence of the shareholders which in the present case is not under dispute.....
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....cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company-If relevant details of address and identity of the subscribers are furnished to the Department along with copies of the shareholders registers, share application forms, share transfer register etc. it would constitute acceptable proof or explanation by the assessee-Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices- Tribunal has noted that the assessee company is a public limited company which had received subscriptions to the public issue through banking channels and the shares were allotted in consonance with the provisions of Securities Contract (Regulation) Act, 1956, as also the rules and regulations of Delhi Stock Exchange-Complete details were furnished-Tribunal has further found that the AO has not brought any positive material or evidence which would indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company's own income from undisclosed sources." 28.7 The Hon'ble apex Court in the case o....
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.... conducted by the ITO, Investigation Wing, Kolkata but the ld Assessing Officer of the assessee has not clarified what inquiry had been conducted and what evidences collected which goes against the assessee. The notice U/s 131 issued by the ITO, Investigation Wing, Kolkata were served in case of Vidya Agencies Pvt. Ltd. and ShivarpanMercantiles Pvt. Ltd., but compliance could not be made on the given date because concerned officer was on leave. In case of Middleton Goods Pvt. Ltd. And Lactrodryer Marketing Pvt. Ltd., notices were served on the assessee and in compliance to the notice, the party submitted all the documents in the IT office. The case law referred by the ld CIT(A) i.e. decision of Hon'ble Delhi High Court in the case of Nipun Builders and Developers Pvt. Ltd. Vs. CIT and Vijay Power Generator Ltd. Vs CIT (supra) are not squarely applicable on the facts of the case as there was short time available with the Assessing Officer as well as Investigation Wing of Kolkata. The copy of inquiry has not been provided by the Assessing Officer to the assessee. As per findings of the Hon'ble Delhi High Court in the case Nipun Builders and Developers Pvt. Ltd. Vs. CIT (....
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....of share capital money could be made in the hands of the assessee-company. (iv) The ld. Jaipur Tribunal in the case of DCIT V M/s Kamdhenu Steel and Alloys Ltd. 2014-TIOL-709-ITAT- Case relates to search and issue of shares on premium. Held that the assessee had submitted the particulars of registration of the applicant company, the confirmation from the share applicants, bank account details from which payment through account payee cheques, so the assessee had discharged its initially onus. (v) M/s. ARL Infratech Ltd. vs. The ACIT ITA No. 619/JP/2013ITAT Jaipur. The findings of Hon'ble ITAT was as under:- Before, we proceed to decide the issue on merits, we would like to discuss the scheme of the Act and precedents on the issue involved in this appeal as under:- ''In cases where share application money is found recorded in the books of an assessee which may represent credit in the books and the share applicant is identified, that amount cannot be added in the assessee's hands u/s 68 of the Act. The Hon'ble Rajasthan High Court has repeatedly reiterated the above legal position. These cases are: (i) CIT vs. Shree Barkha Synthetic....
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....nds allowed. The department filed appeal before Hon'ble Rajasthan High Court. Hon'ble Rajasthan High Court confirmed the findings of Hon'ble ITAT by deciding the appeal of revenue in DB ITA No 24/2014 vide order dated 28/09/2016 (C) Other High Courts (i) 2014 (8) TMI 605 - MADRAS HIGH COURTThe Commissioner of Income Tax Versus Pranav Foundations Ltd.T. C. (A). No. 262 of 2014 Dated - 12 August 2014 Addition u/s 68 - Share application and share premium amount credited but not proved - Whether the Tribunal was right in upholding the order of the CIT(A) who deleted the addition made u/s 68, being the share application money and share premium amount credited by the assessee which was not proved - Held that:- Following the decision in CIT v. Lovely Exports (P) Ltd. [2008 (1) TMI 575 - SUPREME COURT OF INDIA] - all the four parties, who are subscribers of the shares, are limited companies and enquiries were made and received from the four companies and all the companies accepted their investment - the assessee has categorically established the nature and source of the sum and discharged the onus that lies on it in terms of Section 68 of the Act - When the natur....
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.... v/s Value Capital services P Ltd. 307 ITR 334 (Delhi) held that there is additional burden on the department to show that even if share applicants did not have the means to make investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as undisclosed income of the assessee. (v) CIT v/s STL Extrusion (P) Ltd. 333 ITR 269 (MP) Income-Cash credit-Share application money-Assessee has duly established the identity and source of credits-Additions not sustainable. (vi) CIT v/s Arunanda Textiles (P) Ltd., 333 ITR 116 (Karnataka) Share application money-Assessee able to identify the shareholders-It is not for the assessee-company to establish but it is for the Department to enquire with the investors about the capacity to invest the amount in the shares. (vii) Bhav Shakti Steel Mines (P) Ltd. vs. CIT (2009) 18 DTR (Del) 194Income-Cash credit-Genuineness-CIT(A) not only found that the identity of each of the shareholders stood established, but also examined the fact that each of them were income-tax assessee's and had disclosed the share application money in their accounts which were duly reflected ....
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....shed identity, creditworthiness and genuineness of transaction by banking instruments with documentary evidences-Assessee company substantiated details with documentary evidences as extracted from website of Ministry of Corporate Affairs, Government of India before AO-These facts had not been rebutted on behalf of Revenue-ITAT was not inclined to interfere with findings of CIT(A) who thus rightly deleted entire impugned additions of Rs. 40 lakhs made by AO u/s 68 on account of share capital subscription received by assessee-company Held: It was pointed out in the case of CIT vs. M/s. Lovely Exports (Pvt) Ltd, reported in [2008] 216 CTR 195 (SC) that if the share application money is received by the assessee company from alleged bogus shareholders whose name are given to the AO then the department is free to proceed to reopen their individual assessments in accordance with law but it cannot be regarded as undisclosed income of assessee company. (para 2.3) In this background, it was submitted on behalf of the assessee that the Assessing Officer failed to appreciate that there was no documentary evidence against the assessee-company to support such ....
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....Del) 604 : (2002) 80 ITD 43 (Del);Income-Cash credit-Subscription to share capital and loan-In case of limited companies jurisdiction of AO would be limited only to see whether identity of shareholders is established and whether they exist or not-Once identity is established, then, possibly no further enquiries need to be made-Since the shareholders of assessee-company were in existence, they were assessed to tax, complete details were available, share capital money as well as loan were received through account payee cheques and they were cleared through proper banking channels, AO was not justified in disbelieving the capital invested by the shareholder companies- Similarly, AO was not justified in disbelieving the loan taken from DTL as the cheques were cleared through bank channels and confirmation and supporting evidence was filed-CIT(A) was justified in deleting the additions. (v) 2017 (3) TMI 1047-ITAT AHMEDABAD Income Tax Officer, Ward 8 (1), Ahmedabad Versus Seven Star Aviation Services Pvt. Ltd Addition u/s 68 - share application money and unsecured loan received. Held that:- When the depositors are regular tax payers and the advances made by such depositors as al....
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....pugned addition is not justified as non-mentioning the precise provision of law makes the impugned addition bad in law. ii) Shree Ramareddy Ramesh -vs.- ITO ITA No. 2027/Bang/2016 2020 (3) TMI 1385 - ITAT BENGALURE wherein it has been held as under: "About the third amount of Rs. 30,21,961/-, we find that this is a fact that no section is mentioned by the AO or CIT (A) for making this addition and for this reason alone, the addition is bad in law as per the tribunal order cited by the learned AR Of the assessee having been rendered in the case of Smt. Sudha Loyalka vs. ITO (Supra) wherein it was held that non mentioning the precise section makes the addition bad in law." To support the contention so raised in the written submission, reliance was placed on the following evidence/ records : PAPER BOOK INDEX S.NO. PARTICULAR Page No.. From To 1. Copy of Written Submission dated 17.10.2024 filed before Ld. CIT(A). 01 72 2. Copy of ITR, Computation and Audit Report for the AY 20122013. 73 86 3. Copy of notice dated 04.11.2014 issued u/s 142(1) of the Act. 87 88 4. Copy of Reply to the notice dated ....
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.... Copy of Reply to the notice u/s 148 of the Act along with the ITR filed in compliance to notice issued u/s 148 of the Act. 208 211 27. Copy of notice issued u/s 143(2) dated 18.11.2019 along with the Reason Recorded for initiation of proceeding u/s 148 of the Act. 212 218 28. Copy of objection dated 24.11.2019 filed against the initiation of proceeding u/s 148 of the Act. 219 223 5. On the other hand, the ld. DR relied on the orders of the lower authorities. 6. We have heard the rival contentions, perused the material on record and gone through the orders of the lower authorities. For the sake of convenience, we first take ground no. 2 for adjudication, which is purely a legal ground and challenge to very initiation of reassessment proceedings. Ground no. 2 relates to challenging the order of the ld. CIT (A) confirming the proceedings under section 148 of the Act initiated by AO when the assessee was already assessed under section 143(3) of the Act and all the material were provided before the AO. In this case assessment had already been completed u/s 143(3) of the Income Tax Act, 1961 wherein the very issue of raising fresh share capital was e....
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....e objected before the AO that they have not obtained any unsecured loans as alleged in the reasons recorded but in fact companies referred subscribed to its share capital for which the necessary verification has been done after scrutinizing the details so filed, no adverse inference was drawn in respect of anyone. Thus, there was no failure on the part of the assessee to disclose any material, and accordingly, assessment has already been completed on 26.11.2014 and therefore, the said issue again cannot be taken up as settled by the legal precedents. The fact that the AO mentioned unsecured loan in the reasons for reopening shows that he mechanically issued notice under section 148 of the Act, based on information allegedly received by him from the Directorate of Income Tax (Investigation) without proper application of mind and independent analysis and investigation even though all the information was available on record. In the column seeking details about enquiries conducted by the ld. AO, it has been mentioned that since all enquiries have been undertaken by DDIT, Kolkata and hence no such enquiry was needed at that time by him. It shows that no efforts were made by the AO about....
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..../s 148 of the Act, we find that on the basis certain information received from the Investigation Wing Mumbai, the AO has not just formed an opinion but has finally concluded that the assessee has benefitted by obtaining accommodation entries from M/s New Planet Trading Co Ltd. Further, the AO has stated that since the assessee has not filed the return of income as per AST system of the department, he has reasons to believe that income has escaped assessment. To our mind, such an approach of the AO where, based on information received in context of a third party, even before issuance of notice u/s 148 has concluded that assessee has obtained accommodation entries and income to that extent has escaped assessment is not a correct approach in the eyes of law. In the instant case, it is an undisputed fact that the assessee has filed her return of income on 31.07.2007 where she has shown purchases of Rs 36,64,300 and which are the only purchases during the year and which are alleged to be accommodation entry as per the reasons issued u/s 148 of the Act. The assessee has shown the corresponding sales of Rs 39,44,220 and reported a grossprofit of Rs 3,41,752. As held by the Bombay High Cou....
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....ial is placed on record. Further, the AO did not point out any specific instance or any information in the statements recorded by the Investigation Wing in the case of Shri Mukesh Banka which reveals the alleged involvement of assessee in taking accommodation entries. In the absence of any specific information about the assessee against the evidence on record it is not correct to make addition merely on the basis surmises and presumptions of a statement of the third party Shri Mukesh Banka. The evidence placed on record clearly proves the identity, capacity and genuineness of the transactions were proved and thus the criteria as prescribed in section 68 has been fulfilled and it does not warrant the source of source to be proved. The decision cited by the AO does not match with the facts of the case. Considering that aspect of the matter, once the credential of the investor is proved about the identity, genuineness and creditworthiness of the investor there is no reason to sustain the addition. We get strength to our view from the decision of the Apex Court in the case Lovely Exports (Supra) wherein it has been held that where the Revenue urges that the amount of share application ....