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TMI Blog2014 (11) TMI 593X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner has accorded sanction after applying his mind and after recording his satisfaction - the reopening is bad in law for the reason that the Ld.CIT-V, Delhi has not recorded his satisfaction as contemplated u/s 151 of the Act. Addition u/s 68 – Unexplained credits – Held that:- The assessee has furnished the following documents in support of transactions entered into by him – CIT(A) rightly was of the view that the transaction regarding share application money and loan received by it were genuine transactions and the it were not accommodation entries – there was no evidence collected by the AO which could prove otherwise - Accordingly, the AO was not justified in treating the amount of share application money and loan received by the appellant as its undisclosed income - there is no enquiry whatsoever by the AO and as the additions are not based on any material or evidence – Decided against revenue. - ITA No. 4122/Del/2009, CO No. 388/Del/2009 - - - Dated:- 22-10-2014 - J. Sudhakar Reddy, AM And Rajpal Yadav, JM,JJ. For the Appellants : Dr. Rakesh Gupta, Adv. Shri Ashwani Taneja, Adv. Shri, Rohan Khare, Adv. For the Respondent : Shri J P Chandraker, Sr. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation money and ₹ 35 lakhs on account of unsecured loan) made by the AO u/s 68 of the IT. Act ignoring the adverse evidences including pattern of transactions in the bank statement, the absence of real identity, creditworthiness and genuineness, filing of undated confirmations, non productions of concerned persons and their non-availability at the given addresses and the collusive evasion of enquiries into source of deposit etc. as clearly and elaborately brought out in the Assessment Order. (2) On the facts and circumstances of the case as well as in law, the Id. CIT (A) has erred in deleting the addition of ₹ 2,70,0001- being commission paid for obtaining accommodation entries for the so called share application money and loans ignoring the adverse evidences including pattern of transactions in the bank statements, the absence of real identity, creditworthiness, filing of undated confirmations, non productions of concerned persons and their non-availability at the given addresses and genuineness, and the collusive evasion of enquiries into source of deposit etc. as clearly and elaborately brought out in the Assessment Order. . (3) The Id. CIT (A) has, while gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nipun Builders Developers P.Ltd., 350 ITR 407 (Delhi) ii. CIT vs. N.R.Portfolio Ltd. (2013) 214 Taxman 408 (Delhi) iii. CIT vs. Nova Promoters Finlease P.Ltd. (2012) 342 ITR 169 (Del) iv. CIT vs. M/s T.S.Kishan Co.Ltd., 2014-TIOL-1651-HC-Del-IT 7. The Ld.Counsel for the assessee on the other hand relied on the order of the Ld.CIT(Appeals) and submitted that the assessee had filed all required evidences, a list of which is given in the Ld.CIT(A)'s order. He argued that the assessee had allotted shares of ₹ 1 crore to 13 companies as shareholders, who are all income tax assesses and that the money has come through banking channels and confirmation letters etc. were filed before the AO. On the total loan received, he submitted that 7 parties gave loan of ₹ 5 lakhs each totalling to ₹ 35 lakhs and out of this loan received from 3 parties was refunded on 6.6.2003 and a further loan of ₹ 5 lakhs was refunded to another party on 1.3.2004 by account payee cheques. The sum and substance of his contention is that the assessee has discharged the onus that lay on it by providing all necessary evidences at its command and the AO has not brought out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. We first take up the arguments on reopening of assessment. On the issue of reopening, we find that the reasons recorded for reopening are as under. Reasons for issuing notice u/s 148 of the Act in the case of M/s N.C. Cables Limited, for the A.Y. 2001-02-reg . Information has been received from the Investigation Wing of the Income Tax Department that the above named assessee is a beneficiary of accommodation entries received from certain established entry operators identified by the Wing during the period laundering for the beneficiaries and on the basis of investigation carried out and evidences collected, a report has been forwarded. I have perused the information contained in the report and the evidences gathered. The report provides details of the modus oparandi of the 'money laundering seam' and explain how the unaccounted money of the beneficiaries are ploughed back in its books of account in the form of bogus share capital/capital gains etc. after routing the same through the bank account (s) of the entry operators. Entry operators were identified after thorough investigation on the basis of definitive analysis of their identity, creditworthiness and the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reditworthiness and genuineness of transactions with the persons found to be entry operators cannot be established. I therefore have reasons to believe that on account of failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment for above AY, the income chargeable to tax to the extent of accommodation entry mentioned above, has escaped assessment within the meaning of S.147 of the Act. Since four years has been expired from the end of the relevant year, and assessment u/s 143(3) of the Act was made in the case of the assessee for the said AY, the reasons recorded above for the purpose of reopening of assessment is put up for kind satisfaction of the CIT, Delhi V, New Delhi in terms of the Proviso to Section 151 of the Act. Sd/- (ITO) Ward 13(1). The ACIT, Range 13, New Delhi For kind approval of CIT-V, New Delhi CIT-V, Delhi: Approved Sd/- 10.1. A perusal of the above demonstrates that the Ld.CIT(A)-V, Delhi has written approved on 25.3.2008. The issue is whether such approval would meet the requirements prescribed u/s 151 of the Act. 10.2. The Mumbai 'E' Bench of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecorded by the AO. In the present case, the order sheet which is placed on record show that the Commissioner has simply affixed approved at the bottom of the note sheet prepared by the ITO technical. Nowhere the CIT has recorded his satisfaction. In the case before the Hon'ble Supreme Court (supra) that on AO's report the Commissioner against the question whether the Commissioner IS satisfied that it is a fit case for the issue of notice under section 148 merely noted 11 Yes 11 and affixed his signature there under. On these facts, the Hon'bIe Supreme Court observed that the important safeguards provided in sections 147 and 151 were lightly treated by the officer and the Commissioner. The Hon'ble Supreme Court further observed that the ITO could not have had reason to believe that income had escaped assessment by reasons of the appellant-firm's failure to disclose material facts and if the Commissioner had read the report carefully he could not have come to the conclusion that this was a fit case for issuing a notice under section 148. The notice issued under section 148 was therefore, invalid. It would be pertinent here to note the reasons recorded by the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Commissioner has simply put approved and signed the report thereby giving sanction to the AO. Nowhere the Commissioner has recorded a satisfaction note not even in brief. Therefore, it cannot be said that the Commissioner has accorded sanction after applying his mind and after recording his satisfaction. 8. Hon'ble Delhi High Court in the case of' United Electrical Co. Pvt. Ltd. Vs CIT 258 has held that the proviso to sub-section (1) of section 151 of the Act provides that after the expiry of four years from the end of the relevant assessment year, notice under section 148 shall not be issued unless the Chief Commissioner or the Commissioner, as the case may be, is satisfied, on the reasons recorded by the Assessing Officer concerned, that it is a fit case for the issue of such notice. These are some in-builts safeguards to prevent arbitrary exercise of power by an Assessing Officer to fiddle with the completed assessment . The Hon'ble High Court further observed that what disturbs us more is that even the Additional Commissioner has accorded his approval for action under section 147 mechanically. We feel that if the Additional Commissioner had cared to go thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34 2. Acknowledgement of ITR for A.Y. 2001-02 PB 35 3. Copy of Bank Statement PB 36 4. Company Master Details PB 130 Details regarding M/s Swetu Stone Pvt. Ltd. 1. Confirmation of loan of ₹ 5,00,000/- PB 7-38 2. Copy of Bank Statement PB 39 3. Acknowledgement of ITR for A.Y. 2001-02 PB 40 4. Company Master Details PB 131 Details regarding M/s Kuberco Sales Private Limited 1. Confirmation of loan of ₹ 5,00,000/- PB 41-42 2. Acknowledgement of ITR for A.Y. 2001-02 PB 43 3. Copy of Bank Statement PB 44 4. Company Master Details PB 132 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ster Details PB 133 Details regarding M/s Sekhawati Finance Pvt. Ltd. 1. Share Application Form dated 30-11-2000 applying for 80,000 equity shares Of ₹ 10 each PB 61 2. Extract of Board Resolution PB 62,68 3. Confirmation regarding share application money of ₹ 8,00,000/- PB 66 4. Affidavit of director certifying that company had applied and allotted 80,000 equity shares of ₹ 10 each of assessee co. at par PB 79 5. Company Master Details PB 139 Details regarding M/s Sparrow Marketing Pvt. Ltd. 1. Share Application Form dated 1-12-2000 applying for 90,000 equity shares of ₹ 10 each PB 63,67 2. Extract of Board Resolution PB 64,68 3. Acknowledgement of ITR for A.Y. 2004-05 PB 65,71 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee co. at par PB 94-95 Details regarding M/s Shree Dinanath Luhariwala Spinning Mills Pvt. Ltd. 1. Share Application Form dated 13-12-2000 for 60,000 equity shares ofRs.10 each PB 97,100 2. Extract of Board Resolution signed on 13-12-2000 resolving that Co. shall apply for 60,000 equity shares of ₹ 10 each PB 98,101 3. Acknowledgement of ITR for A.Y. 2003-04 PB 99, 104 4. Affidavit of director certifying that company had applied and allotted 60,000 equity shares of ₹ 10 each of assessee co. at par PB 102-103 5. Company Master Details PB 143 Details regarding M/s New Generation Finvest Pvt. Ltd. 1. Share Application Form dated 30-12-2000 for 90,000 equity shares of ₹ 10 each PB 105,108 2. Extract of Board Resolution signed on 13-12-2000 resolving that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 22-11-2000 resolving that Co. shall apply for 80,000 equity shares of ₹ 10 each PB 127 3. Affidavit of director certifying that company had applied and allotted 80,000 equity shares of ₹ 0 each of assessee co. at par PB 128-129 4. Company Master Details PB 146 Details regarding M/s Royal Finvest Pvt. Ltd. 1. Company Master Details PB 148 Details regarding M/s Sober Associates Ltd. 1. Company Master Details PB 148 12. A perusal of the above demonstrates that the assessee has furnished before the AO evidences to establish the identity of the persons who either invested in share capital or granted a loan. In fact some of the loans were repaid. On the other hand the AO has not conducted any investigation nor did he have any of the material gathered by the Investigation Wing based on which the addition can be made. He merely relied on a report of the Investigation Wing. 13. The legal p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit in the hands of the assessee and added to its income. Since I am satisfied that the assessee has furnished inaccurate particulars of its income, penalty proceedings under Section 271(1)(c) are being initiated separately. The facts of Nova Promoters and Finlease (P) Ltd. (supra) fall in the former category and that is why this Court decided in favour of the revenue in that case. However, the facts of the present case are clearly distinguishable and fall in the second category and are more in line with facts of Lovely Exports (P) Ltd. (supra). There was a clear lack of inquiry on the part of the Assessing Officer once the assessee had furnished all the material which we have already referred to above. In such an eventuality no addition can be made under Section 68 of the Income Tax Act, 1961. Consequently, the question is answered in the negative. The decision of the Tribunal is correct in law. The case on hand clearly falls in the category where there is lack of enquiry on the part of the A.O. as in the case of Gangeshwari Metals (supra). b) In the case of Finlease Pvt.Ltd. 342 ITR 169 (supra) in ITA 232/2012 judgement dt. 22.11.2012 at para 6 to 8, it is held a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Thus a clear distinction has been made out in cases where the AO has conducted certain investigations and in cases where the AO merely rejected the evidences filed by the assessee and made an addition based on presumptions. 15. The Ld.CIT(A) has in his order observed that - (1) that the AO during the course of original assessment proceedings made direct enquiries with the creditors and share applicants and accepted the same as genuine. Thus the existence cannot be doubted. (2) confirmations were filed both before the AO and the CIT(A) in support of the genuineness and creditworthiness of the creditors. (3) The AO has neither discussed in the assessment order nor provided to the assessee, copies of any statement of any person or other material on the basis of which it was held that the said investment companies were in the business of providing accommodation entries. (4) The AO has made additions by relying upon the information provided by the Investigation Wing which appears to be based on some statement of entry operator which is never brought on record. (5) The AO has not verified the facts contained in this so called statement, nor the assessee was provided ..... X X X X Extracts X X X X X X X X Extracts X X X X
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