TaxTMI 
TaxTMI 
2026 (3) TMI 669
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....e assessee are challenging the addition made on account of receipt of share application money in the sum of Rs. 2,40,00,000/- from Concise Exim Pvt Ltd and Reinforce Recruiter Private Ltd as unexplained cash credit under section 68 of the Act together with alleged commission expenditure thereon in the sum of Rs. 4,80,000/-. 3. The assessee has also filed additional grounds expanding the original grounds on the validity of assumption of jurisdiction under section 147 of the Act by bringing in various facets thereon. These additional grounds go to the root of the matter and the facts relevant for its adjudication are already placed on record. Hence in view of the decision of the Hon'ble Supreme Court in the case of NTPC Limited reported in 229 ITR 383 (SC), these additional grounds are hereby admitted and taken up for adjudication along with the original grounds. The additional ground numbers 6 and 7 raised by the assessee are akin to the original grounds 2 and 3 raised by the assessee in Form No. 36. 4. We have heard the rival submissions and produced the materials available on record. The assessee company was incorporated on 07-03-2006. The return of income for the Assessment....
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.... The assessee company M/s Ultra Modern Exports Private Limited was incorporated on 07.03.2006 As per ITD data, the assessee company has filed its return of income for the relevant assessment year i.e. 2011-12 on 30.09.2011 declaring loss of Rs. 11,74,50,000/- and also shown income from short term capital gain amounting to Rs. 1,39,055/-. The return of income in the case was processed u/s. 143(1) on 30.01.2012 on total income of Rs. 48,640/-. The regular assessment u/s. 143(3) of the I.T. Act, 1961 has not been made in the case. 2. Details of Information received by AÓ. Information in the case has been received by e-mail on 21.03.2018 from DDIT(Inv.), Unit-1(1), Mumbai vide their letter F.No. DDIT(Inv.)/Unit1(1)/Information/UMEPL/17-18 dated 16.03.2018. Further original letter of the DDIT(Inv.), Unit(1)(1) was received on 22.03.2016. As per information, it has been informed that huge amount of bank account transactions carried out by M/s Concise Exim Pvt. Ltd. with many concerns and one of the company is M/s Ultra Modern Exports Pvt. Ltd. (PAN No.- AAACU8087G). It was also informed that during the investigation M/s Concise Exim Pvt. Ltd. could not be found at the re....
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....mpany has not shown any assets from the A.Y. 2008-09 to 2011-12. Hence, prima facie it appears that the transactions made between M/s Concise Exim Pvt. Ltd. and M/s Ultra Modern Exports Pvt. Ltd is not genuine and both companies are engaged in rotation of huge amounts of funds without any genuine economic rationale. 4. Independent, Enquiries Conducted pursuant to information received: In connection with the aforesaid information received from Investigation of the department, Mumbai, the perusal of the return of income for the A.Y. 2011-12 revealed that the assessee has shown gross /receipt of business or profession Nil, however, the assessee company has shown loss of Rs. 11,72,53,684/- at loss on sale of other investment. Perusal of the balance sheet also reveals that the assessee company has not shown fixed assets. Our assessee has the following financials for the F.Y. 2009-10 and 2010-11. S No. Date Amount received in M/s. Concise Exim Pvt. Ltd account Amount transferred from M/s. Concise Exim Pvt. Ltd account 1 08.03.2011 1,20,00,000/- 2. 13.02.2015 1,20,00,000 ---- Total 1,20,00,000 1,20,00,000/- ....
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....isclosed income in its business through banking channel by taking entries of Rs. 2,40,00,000/- and also booked loss of Rs. 11,74,00,000/- on sale of other investment by making sham transaction. Thus, I have reason to believe that the income of Rs. 14,14,00,000/- has escaped assessment as defined under section 147 of the Act for assessment year 2011-12. The escapernent of income has been clearly on account of failure on the part of the assessee company to furnish correct particulars of income. Therefore, this is a fit case for initiation of proceedings u/s. 147 of the Act and action is required to be taken by reopening the case to tax the escaped income. 7. Applicability of the provisions of section 147/151:- In this case the assessee has filed its return of income for the A.Y. 2011-12 in which the assessment u/s. 143(3) of the Act has not been made. In view of the above, the provisions of clause (b) of Explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income of Rs. 14,14,00,000/-chargeable to tax has escaped assessment. Since more than four years have been elapsed from t....
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....produced the financials from the said balance sheet in the reasons recorded and found that a sum of Rs. 2.40 crores has been found credited in the books in the form of share application money. Thereafter, he relies on the information received from Investigation Wing wherein Concise Exim Private limited and Reinforce Recruiter Private limited had been stated to be shell entities. The Learned AO also merely forms the same belief and conclusion and concludes that these two entities are shell entities and accordingly monies received from these two shell entities by the assessee company takes the character of accommodation entries warranting addition as unexplained cash credit under section 68 of the Act. This goes to prove that there is absolutely no tangible material available with the Learned AO which would have a live link to form a belief that income of the assessee had escaped assessment warranting reopening. There is absolutely no basis for the Learned AO to conclude that assessee company had introduced its own undisclosed income in its business through banking channels by taking in accommodation entries of Rs. 2.40 crores from these two entities . Hence, it could be safely concl....
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....chargeable to tax has escaped assessment. This is mandatory and the "reasons to believe" are required to be recorded in writing by the Assessing Officer. Sufficiency of reasons is not a matter, which is to be decided by the writ court, but existence of belief is the subject-matter of the scrutiny. A notice under section 148 can be quashed if the "belief" is not bona fide, or one based on vague, irrelevant and non-specific information. The basis of the belief should be discernible from the material on record, which was available with the Assessing Officer, when he recorded the reason. There should be a link between the reasons and the evidence/ material available with the Assessing Officer. However, as we are dealing with initiation of proceedings, it is not necessary that the material should conclusively prove the escapement. The "reasons to believe" would mean cause or justification of the Assessing Officer to believe that the income has escaped assessment and do not mean that the Assessing Officer should have finally ascertained the said fact by legal evidence or reached a conclusion, as this is determined and decided in the assessment order, which is the final stage before the A....
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....of the creditors whose credits had been accepted in the assessee's case fell within this category and raised an audit objection which was the immediate provocation for the reopening of the assessment. In this case also, as in the case before the Supreme Court, there is no live connection or link established between the information or the facts, in the possession of the Income-tax Officer, and the genuineness of the particular loans recorded in the assessee's books. The mere fact that the names of some of the creditors figured in a list made out by the Department would be too general and vague to lead to an inference regarding the truth or otherwise of the loans recorded by the assessee. We are wholly unable to find any material point of distinction between the facts of the present case and those considered by the Supreme Court in the case of Lakhmani Mewal Das [1976] 103 ITR 437 (SC)." 6. The view taken by the Supreme Court in Lakhmani Mewal Das [1976] 103 ITR 437 (SC) was followed in Ganga Saran and Sons P. Ltd. v. ITO [1981] 130 ITR 1 (SC). The matter was again examined by the Supreme Court in Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456 (SC). In the said ca....
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.... name of Swetu Stone Pvt. Ltd. had applied for and was allotted shares in the petitioner-company on payment by cheque of Rs. 5 lakhs. As noticed above, in the annexure the name of the company/account holder is mentioned as Swetu Stone PV. The same is also mentioned in the undated reasons mentioned above. 17. In the counter-affidavit it is stated that M/s Swetu Stone Pvt. Ltd. had applied for allotment of shares worth Rs. 5 lakhs and the same were allotted by the petitioner. It is further stated that statements of Mahesh Garg and Shubhash Gupta were recorded by the Director of Income-tax (Investigation) and on the basis of the statements they have come to the conclusion that the said persons were entry operators. Copy of the statements of Mahesh Garg and Shubhash Gupta have not been placed on record by the respondent. The petitioner has, however, enclosed a copy of statements of Mahesh Garg and Shubhash Gupta recorded on different dates. The said persons have not specifically named the petitioner though other parties have been named and details have been given and it is stated that they were provided accommodation entries. However, it is stated that the entries were made by....
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....sion Bench had noted that certain companies were used as conduits but the assessee had, at the stage of original assessment, furnished the names of the companies with which it had entered into transaction and the Assessing Officer was made aware of the situation and further the reason recorded does not indicate application of mind. That apart, the existence of the companies was not disputed and the companies had bank accounts and payments were made to the assessee-company through the banking channel. Regard being had to the aforesaid fact situation, this court had interfered. Thus, the said decision is also distinguishable on the factual score." 18. The facts indicated above do not show that M/s. Swetu Stone Pvt. Ltd. is a non-existing and a fictitious entity/person. Decision in AGR Investment Ltd. [2011] 333 ITR 146 (Delhi), therefore, does not help the case of the respondent. 19. For the reasons stated above, the present writ petition is allowed and writ of certiorari is issued quashing the proceedings under section 148 of the Act. In the facts of the case, there will be no order as to costs. 10. We find that the Hon'ble Jurisdictional High Court in yet anoth....
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...." 34. Recently in Agya Ram (supra), it was emphasized that the reasons to believe "should have a link with an objective fact in the form of information or materials on record..." It was further emphasized that "mere allegation in reasons cannot be treated equivalent to material in eyes of law. Mere receipt of information from any source would not by itself tantamount to reason to believe that income chargeable to tax has escaped assessments." 35. In the decision of this Court dated 16th March 2016 in W.P. (C) No. 9659 of 2015 (Rajiv Agarwal) it was emphasized that "even in cases where the AO comes across certain unverified information, it is necessary for him to take further steps, make inquiries and garner further material and if such material indicates that income of an Assessee has escaped assessment, form a belief that income of the Assessee has escaped assessment." 36. In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the AO one after the other. 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 esca....
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....stment. The fact that Concise Exim Private Limited having filed the requisite details called for under section 133(6) of the Act had been duly admitted by the Learned AO at the end of paragraph 11 of the assessment order. 11.2. The Learned AO noted that the notice under section 133(6) of the Act issued to Reinforce Recruiter Private Limited was not complied with by the said party. But assessee on its part had filed the ITR acknowledgement of the said investor company for the Assessment year 2011-12 which is enclosed in page 102 of the paper book; bank statements of investor company which is enclosed in page 115 of the paper book; confirmation from the said subscriber enclosed in page 116 of the paper book and audited balance sheet of the said subscriber enclosed in pages 103 to 114 of the paper book. Since the said party had not complied with the notice under section 133(6) of the Act, the assessee requested the Learned AO to issue summons under section 131 of the Act to the said investor which was not carried out by the Learned AO. Hence, it could be safely concluded that assessee had duly furnished all the requisite documents that are available at its side. Merely because the ....
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....gov.in 1. No. DDIT(Inv.)/Unit 1(1)/Information/UMEPL/17-18 Date: 16.03.2018 To The Income-Tax Officer Ward-27(1), Delhi Sub .- Forwarding of Information in the case of M/s Ultra Modern Exports Pvt. Ltd. (PAN-AAACU8087G) Please refer to the above. 2. This office has received Information from credible sources in respect of huge amount of bank account transactions carried out by Concise Exim Private Limited with many concerns and one of the company is M/s Ultra Modern Exports Pvt. Ltd. (PAN-AAACU8087G). 3 During the course of investigation M/s. Concise Exim Private Limited could not be found at the registered address and address reported in ITRs. On perusal of financials reported by Concise Exim Pvt. Ltd. it is observed that company is not having fixed assets and reporting meager income since its formation and carried out huge amount of banking transactions with many concerns. It is further gathered that monies were transferred from concise to ULTRA has been shown as non-current investments/equity Instruments. It is also observed that share capital on huge amount of premium has been received by Concise from many concerns. 4 The details of bank transactions b....