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TMI Blog2014 (8) TMI 835X X X X Extracts X X X X X X X X Extracts X X X X ..... ng disallowance u/s 14A as no expenditure was incurred by the assessee and Assessing Officer without recording any finding with respect to incurring of any expenditure, has made the addition in accordance with the provisions of Rule 8D. It was submitted that the Hon'ble Delhi High Court in the case of Maxopp Investment Ltd. and others Vs CIT reported at 347 ITR 272 has held that the Assessing Officer shall determine the amount of expenditure with respect to actual expenditure incurred and if the claim of the assessee that no expenditure was incurred is rejected the Assessing Officer has to give cogent reasons for rejecting such claim. He further relied upon the case law of Hero Cycles Ltd. as decided by Hon'ble High Court of Punjab & Haryana reported at 323 ITR 518 wherein the Hon'ble Court has rejected the contention of the Revenue that directly or indirectly, some expenditure is always incurred and he invited our attention to Ld. CIT(A)'s order which had upheld the disallowance u/s 14A on the same pretext. Continuing his arguments he submitted that the assessee had not made any investment during the year and in support of his argument, he invited our attention to pape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed cash credit, the Ld. A.R. submitted that during the course of assessment proceedings, the assessee had filed all relevant documents like confirmation copy of the bank account, copy of acknowledgement of Income tax return and, therefore the action of the Assessing Officer and further confirmation of it by Ld. CIT(A) was jot justified which was only on account of non production of share applicants. He further submitted that the assessment in this case was completed after reopening under the provisions of Section 147/148 but the reasons recorded were not made available to the assessee. He submitted that as per paper book page 1, there is a copy of notice u/s 148 of the Act wherein, it has been mentioned that the reasons recorded u/s 148 are enclosed however, these were never provided to the assessee. Inviting our attention to page 8 of the paper book, Ld. A.R. submitted that in respect of all share applicants, all documents including PAN, Bank Statement, Balance Sheet, copy of return, identity proof etc. were enclosed but the Assessing Officer without considering the above documentary evidence, proceeded to disallow the claim on the basis of assumptions that these were bogus share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & Haryana in the case of Hero Cycles 323 ITR 518 has held as under: "Contention that even where the assessee claimed that no expenditure had been incurred, the correctness of such claim could be gone into by the Assessing Officer and in the present case, the claim of the assessee that no expenditure was incurred was found to be not acceptable by the Assessing Officer and thus disallowance was justified is not sustainable. In view of finding of the Tribunal, it is clear that the expenditure on interest was set off against the income from interest and the investments in the share and funds were out of the dividend proceeds. In view of this finding of fact, disallowance under s.14A was not sustainable. Whether, in a given situation, any expenditure was incurred which was to be disallowed, is a question of fact. The contention of the Revenue that directly or indirectly some expenditure is always incurred which must be disallowed under s.14A and the impact of expenditure so incurred cannot be allowed to be set off against the business income which may nullify the mandate of s.14A, cannot be accepted. Disallowance under s.14A requires finding of incurring of expenditure; where it is fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition made by the Assessing Officer by holding as under: "4.2 I have carefully considered the assessment order and the submissions filed by the appellant. I find that the reopening u/s 147/148 has been done by the AO after recording of reasons as per law showing "reason to believe", based on information received from the Investigation Wing, and after approval of competent authority. In this connection reference is also placed on the following judicial pronouncements. In CIT Vs. India Terminal Connector Systems Ltd. dated 21.03.2012, the Hon'ble Delhi High Court has held that assessment can be reopened on the basis of information provided by the DIT(investigation) which was not available with the AO during the course of original proceeding. The Hon'ble High Court thus held as under: "In the present case it cannot be disputed at a/l that the material present before the Assessing Officer at the time of recording reasons for reopening the assessment did show link between M/s. Shivam Softech Ltd., described as an entry provider, with the petitioner herein. Not only was there a link between the two names, but the met-riel a/s,) disclosed the date on which the entry was taken the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have been served. An inspector of the Revenue endeavoured to serve a notice on the assessee at her Humayun Road, New Delhi residence, in the course of which he was informed that she had shifted her residence to 3, Nehru Road, Cantonment, Lucknow, Uttar Pradesh where the notice should now be delivered. It was in these circumstances that the inspector dispatched the notice dated March 25, 2008 by speed post on March 29, 2008 to the Lucknow address furnished to her. On a writ petition on the ground that there was no proper service of notice: Held,_ dismissing, he petition, that it was evident that the assessee declined to accept the notice, firstly at Humayun Road, New Delhi, secondly at Nehru Road, Cantonment, Lucknow, Uttar Pradesh and, thirdly, at Kalidas Marg, Lucknow, Uttar Pradesh. All the three addresses belonged to 'the assessee at the relevant time. The notice must be presumed to have been served on the- addressee by virtue of the provisions of section ::'7 of the General Clauses Act." Further, the appellant has not raised any objection during the course of assessment proceedings regarding issue of notice under section 148. Grounds of appeal directed against assu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by evidence on record since the capital is not available in liquid form, but stands already .invested. The liquid funds available in the hands of the alleged investors are hardly enough to explain the source of investment being carried out by them does not generate income commensurate with the amount of investment reflected by them. It is also surprising that in response to summons issued by the Assessing Officer, there was no compliance by the various Companies and in fact, one of the summons i.e. of Deepchand Gupta was received back, but inspite of that the confirmations were received from all the parties including Shri Deepchand Gupta. This shows a preconceived plan on part of the appellant to file the confirmations. The entire transaction is against human probability. Thus there is enough material to raise a very strong suspicion, to question the authenticity of the transaction and reject the paper trail created by the appellant and require the assessee to show that the transaction is really one which is above board which the appellant has failed. Hon'ble Supreme Court in the case of Sumiti Dayal 214 ITR 801 has held that the genuineness of t. re transaction is to be considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from any particular source. The essessee-company filed a return declaring a loss of Rs. 4,93,218/-. During the course of assessment proceedings, the Assessing Officer noticed an increase in the share application money account as compared to the preceding assessment year and that a sum of Rs. 11.82 lakhs had been deposited in the account of the director. He further noticed that no shares were allotted during the previous year and in the year under consider: lion and that the share application money retained the same form and character even in two subsequent years. Thus the Assessing Officer. treated this amount as unsecured amount and not as share application money. As the assessee had r)t produced any evidence in respect of the source of the deposits, the Assessing Officer added the sum of Rs. 11.82 and also added Rs. 5 lakhs as shown in the company's books as deposits made against bookings for flats in the scheme of the company but which were cancelled by the parties. The Commissioner (Appeals) as well as the Tribunal dismissed the appeal filed by the assessee. On further appeal: Held,_ dismissing the appeal, (i) that as no shares were allotted to the director during the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee about the nature and source of the sums found credited in the books is not satisfactory there is, prima facie, evidence against the assessee, viz., the receipt of money. The burden is on the assessee to rebut the same, and, if he fails to rebut it, it can be held against the assess1e that it was receipt of an income nature. The burden is on the assessee to take the plea that, even if the explanation is not acceptable, the material and attending circumstances available 6n record do not justify the sum found credited in the books being treated as a receipt of income nature. The assessees received foreign gifts from one common donor. The payments were made to them by instruments issued by foreign banks and credited to the respective account of the essessees by negotiation through a bank in India. Most of the cheques sent from abroad were drawn on the Citibank, N. A. Singapore. The evidence indicated that the donor was to receive suitable compensation from the assessees. On this material the Assessing Officer held that the gifts though apparent were not real and accordingly treated all those amounts which were credited in the account books of the assessees as their income applyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Income-tax (Investigation) regarding entry operators accommodation providers, informing the Assessing Officer that there were 16 entry operators who had given accommodation entries to several persons of which the assessee was one, Olaf there were statements recorded from persons confirming the facts, that the assessee had obtained accommodation entries of Rs. 1,18,50,000 from these persons if' the garb of share application monies during the relevant year, the Assessing Officer issued notice under section 148 of the Act reopening the assessment of the assessee. In the course of the reassessment proceedings, the Assessing Officer issued a questionnaire to the assessee, The assessee sought copies of the documents / material in the possession of the Assessing Officer and opportunity to cross-examine the person in charge of the 16 companies with regard to the contents of the statements recorded from them, The Assessing Officer issued summons to two individuals and to the companies, some of which were received back un-served and the other summons remained uncomplied with. The Assessing Officer sent an Inspector to the addresses to which summons Were issued, The Inspector reported t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Held,_ that the assessment was reopened: on the basis of information received from the investigation wing of the Department about the existence of accommodation entry; providers and their modus operandi in which the assessee was also found to be involved. The Tribunal had recorded, while dealing with the assesee's cross objections challenging the jurisdiction of the Assessing Officer to reopen the assessment, that the information was specific, not general or vague, and referred to transactions entered into by the assessee during the year under consideration, that as per the information of the investigation wing, the names of the persons issuing the cheques, the cheque amounts, dates, etc., were also mentioned providing a link between the entry providers and the assessee. In the statements recorded from R and M by the investigation wing, they had implicated the assessee- company also, inter alia. A perusal of the names of the entities from whom the assessee had received share application monies showed that 15 names appeared in the list of 22 companies mentioned in the letter of M and R to the Additional Commissioner. This established the link between the materials which was presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eques was, at best,' neutral. The question required a thorough examination and not a superficial examination. The fact that the companies which subscribed to the shares were borne on the file of the Registrar of Companies was again a neutral fact. That these companies were complying with such formalities did not add any credibility or evidentiary Value. In any case, it did not ipso facto prove 'hat the transactions were genuine. Material was gathered by the investigation wing and made available to the Assessing Officer, who in turn had made it available to me assessee. The Tribunal had ignored relevant material. The Tribunal also erred in law in holding that the Assessing Officer ought to have proved that the monies emanated from the coffers of the assessee-company and came back as share capital Section 68 permits the Assessing Officer to add the credit appearing in the books of account of the assess1ee if the latter offers no explanation regarding the nature. and source of the credit or the explanation offered is not satisfactory. It places no duty upon him to point to the source from which the money was received by the assessee. Even if one were to hold that the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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