2021 (12) TMI 94 - AT - Income Tax

Reopening of assessment u/s 147 - addition u/s 68 - eligibility of reason to believe - onus to prove - Whether failure on the part of assessee to disclose full and true material facts? - HELD THAT - Assessee had filed during original assessment proceedings, copy of PAN card, copy of Bank Accounts of investors, acknowledgment of return of income of investors, confirmation of invest and a copy of such documents. These are all primary evidences which the assessee had filed and there was no further query from Assessing Officer and therefore, there is no failure on the part of assessee as the assessee had disclosed all the material facts which it was bound to disclose and if the Revenue wanted to further investigate the matter at that stage it could have easily directed the assessee to furnish more facts. The above documents filed during original assessment proceedings clearly contains the names, addresses, PAN numbers and copy of returns and copy of Bank account of investors and the Assessing Officer could have investigated further to examine as to whether these entities were entry providers or not. These documents also contain the fact that new shares of ₹ 10/- each were issued to new shareholders at a premium of ₹ 240/- each. The assessee during original assessment proceedings had filed copy of bank accounts of investors also and Assessing Officer could have examined bank accounts of such investors to examine as to whether any funds were rotated to make available funds in these bank accounts for making investment in the assessee s company. Nothing has been done by Assessing Officer and now it cannot be said that there was failure on the part of assessee to disclose full and true material facts - Decided in favour of assessee.

Issues Involved:

1. Whether the CIT(A) erred in holding that the assessee had proved the identity, creditworthiness, and genuineness of the share application money and premium.
2. Whether the CIT(A) erred in deleting the addition of ?5,46,83,750/- made by the Assessing Officer.
3. Whether the CIT(A) erred in accepting the apparent facts as real.
4. Whether the CIT(A) failed to appreciate the manipulation of share premium by the assessee.
5. Whether the reassessment proceedings initiated u/s 147/143(3) were without jurisdiction and bad in law.
6. Whether the CIT(A) erred in upholding the reassessment proceedings despite the assessee's full disclosure of material facts.
7. Whether the CIT(A) erred in upholding the addition of ?65,00,000/- on account of share capital and premium received from Supriya Fincom Pvt. Ltd.
8. Whether the CIT(A) erred in relying on the statement of Shri Sanjay Singhi.
9. Whether the CIT(A) erred in upholding the addition of ?1,62,500/- on account of commission allegedly incurred for procuring share capital.

Issue-wise Detailed Analysis:

1. Proving Identity, Creditworthiness, and Genuineness:
The Revenue argued that the CIT(A) erred in holding that the assessee had proved the identity, creditworthiness, and genuineness of the share application money and premium of ?5,46,83,750/- merely by submitting PAN, acknowledgment of income tax returns, and bank statements. The CIT(A) accepted these documents as sufficient evidence, but the Revenue contended that these did not establish the creditworthiness of the investing company, which had no substantial income to justify such investments.

2. Deletion of Addition:
The CIT(A) deleted the addition of ?5,46,83,750/- made by the Assessing Officer, who had argued that the investing company lacked creditworthiness and had merely transferred the share application money and premium received from other parties to the assessee company. The CIT(A) ignored these findings and accepted the apparent facts as real.

3. Apparent Facts vs. Real Facts:
The CIT(A) was criticized for accepting the apparent facts as real, despite the Investigation Wing's actions and subsequent data mining by the Assessing Officer, which suggested that the apparent facts were not real. The Revenue argued that the CIT(A) failed to comprehend the total facts indicating tax evasion by corporate bodies through mischievous modes and that it was a case of lifting the corporate veil.

4. Manipulation of Share Premium:
The CIT(A) failed to appreciate that the assessee manipulated the share premium to plough back its unaccounted income in the garb of share capital/premium. The Revenue pointed out that the assessee charged a huge premium in one year, which was reduced significantly in the subsequent year without any justification. Additionally, shares issued at a premium of ?240/- were repurchased by the directors and related entities at undisclosed rates, suggesting manipulation of share prices.

5. Reassessment Proceedings:
The assessee contended that the reassessment proceedings initiated u/s 147/143(3) were without jurisdiction and bad in law. The original assessment was completed u/s 143(3), and all necessary information was furnished. The reassessment was initiated after four years, which is not permissible unless there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.

6. Full Disclosure of Material Facts:
The CIT(A) upheld the reassessment proceedings despite the assessee's argument that there was no failure to disclose material facts. The Supreme Court in NDTV vs. DCIT held that for reopening beyond four years, the Revenue must establish the assessee's failure to disclose fully and truly all material facts. The assessee had provided all required information during the original assessment, and the Assessing Officer did not raise further queries.

7. Addition of ?65,00,000/-:
The CIT(A) upheld the addition of ?65,00,000/- on account of share capital and premium received from Supriya Fincom Pvt. Ltd. The assessee argued that this addition was unjustified as all necessary documents, including share application forms, confirmations, PAN, income tax returns, and bank statements, were provided. The CIT(A) relied on the statement of Shri Sanjay Singhi, which was recorded behind the assessee's back and did not mention the assessee's name.

8. Reliance on Statement of Shri Sanjay Singhi:
The CIT(A) relied on the statement of Shri Sanjay Singhi, which was recorded behind the assessee's back and did not relate to the assessee. The statement did not form part of the reasons for reopening the assessment and was never confronted to the assessee. The reliance on this statement was considered misplaced and against the principles of natural justice.

9. Addition of ?1,62,500/- on Account of Commission:
The CIT(A) upheld the addition of ?1,62,500/- on account of commission allegedly incurred for procuring the share capital of ?65,00,000/-. The assessee argued that this addition was contrary to the provisions of law and unwarranted.

Conclusion:
The tribunal found that the original assessment was completed u/s 143(3) with all necessary information provided by the assessee. The reassessment was initiated after four years without establishing any failure on the part of the assessee to disclose material facts. The tribunal quashed the reassessment proceedings and the consequential CIT(A)'s order. The appeal filed by the Revenue was dismissed as infructuous. The cross appeal filed by the assessee was partly allowed on the legal issue, and other grounds were dismissed as not pressed.

← Previous Next →