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TMI Blog2016 (6) TMI 899X X X X Extracts X X X X X X X X Extracts X X X X ..... y or a live link with the material on record enabling the Assessing Officer to form such a belief. As held by the Supreme Court in case of Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P. Ltd. (2007 (5) TMI 197 - SUPREME Court ) at this stage, it is not necessary for the Assessing Officer to conclusively establish that income would be invariably taxed. The inquiry of the Court while examining notices for re-opening, where original assessment is not framed after scrutiny is necessarily extremely narrow. The question whether said income can be taxed in the hands of the assessee or the department can proceed only against the investors would also depend on various facts and circumstances and only on such an assertion the reopening proceedings cannot be terminated. Undoubtedly, when share investment is made by the large number of persons, the company, in whose shares such investments are made, cannot be held responsible for unaccounted investments of such investors even if so found to have been made since it would be unaccounted investment of the investors not of the company. Nevertheless, if it is found that the entire transaction of the so called investment is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 Pearl Plantation Pvt. Ltd. 3,88,000/- 93,12,000/- 5 Samrajya Agro Farm Pvt. Ltd. 5,16,000/- 1,23,84,000/- Total 27,54,000/- 6,53,46,000/- During the Survey proceedings, the assessee company has failed to produce share application form details of shares allotted to the so called share holders and proof of attendance of Annual General Board Meeting of the said so called share holders. Further, it is worthwhile to mention here that during the Survey proceedings, Shri Kartik M Joshi, Director of the company, himself verified the identity of the so called share holders and found that these companies/persons are not existing at the addresses available with the company. 2.1 The assessee company has forfeited the above share capital and share premium during the F Y 2011-12 relevant to A Y 2012-13, however, during the Survey proceedings, the assessee company has failed to produce any details which prove the action taken by the assessee company regarding forfeited of the share capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bogus investments. 7. We must be conscious that the original assessment in the present case was not made after scrutiny. The question of change of opinion, therefore, would not arise since the Assessing Officer cannot be stated to have formed any opinion during the original assessment. This was held by the Supreme Court in case of Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P. Ltd. reported in 291 ITR 500, in which, it was held and observed as under: 13. ... ... ... ... ...In the scheme of things, as noted above, the intimation under section 143(1)(a) cannot be treated to be an order of assessment. The distinction is also well brought out by the statutory provisions as they stood at different points of time. Under section 143(l)(a) as it stood prior to April 1, 1989, the Assessing Officer had to pass an assessment order if he decided to accept the return, but under the amended provision, the requirement of passing of an assessment order has been dispensed with and instead an intimation is required to be sent. Various circulars sent by the Central Board of Direct Taxes spell out the intent of the Legislature, i.e., to minimize the departmenta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scertained the fact by legal evidence or conclusion. The term reason to believe would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income has escaped assessment. It was observed as under: 16. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word reason in the phrase reason to believe would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991 (191) ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t can proceed only against the investors would also depend on various facts and circumstances and only on such an assertion the reopening proceedings cannot be terminated. Undoubtedly, when share investment is made by the large number of persons, the company, in whose shares such investments are made, cannot be held responsible for unaccounted investments of such investors even if so found to have been made since it would be unaccounted investment of the investors not of the company. Nevertheless, if it is found that the entire transaction of the so called investment is wholly bogus, routing unaccounted income of the company itself through large scale allotment of shares to bogus entities and so-called investors, the question of taxing the company itself may arise. 11. In case of Riddhi Promoters P. Ltd. vs. Commissioner of Income Tax reported in 377 ITR 641, Delhi High Court observed as under: 6. It is not sufficient that the identity of the share applicant or the creditor should be established for the assessee to discharge the initial onus, which is upon the assessee. Under the requirement of Section 68, the assessee has to further satisfy the Revenue as to the gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer, all taken cumulatively, should have excited suspicion in the mind of the Tribunal necessitating a deeper probe into the matter. The Tribunal, however, has chosen to rest its decision on the sole fact that the share applicants had established there identity by filing confirmation letters and copies of their income tax returns. This is hardly sufficient for the purpose of discharging the creditworthiness of the share applicants and the genuineness of the transactions. There can be no dispute that Section 68 applies equally to share application monies received by an assessee and, therefore, the burden is on the assessee to prove the nature and source thereof, to the satisfaction of the Assessing Officer. It involves three ingredients, namely, the proof regarding identity of the share applicants, their creditworthiness to purchase the shares and the genuineness of the transaction as a whole. The Tribunal failed to keep in mind these aspects of the matter and has chosen to dispose of the appeal on the limited question of the identity of the share holders. A Division Bench of this Court in the case of CIT vs. Nova Promoters and Finlease P. Ltd. (2012) 342 ITR 169 po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... babilities and normal course of human conduct. 18. Lovely Exports Pvt. Ltd. (supra) was also considered and distinguished in N.R. Portfolio Pvt. Ltd. (supra) and it was held that the entire evidence available on record has to be considered, after relying upon CIT Vs. Nipun Builders and Developers, [2013] 350 ITR 407 (Delhi), wherein it has been held that a reasonable approach has to be adopted and whether initial onus stands discharged would depend upon facts and circumstances of each case. In case of private limited companies, generally persons known to directors or shareholders, directly or indirectly, buy or subscribe to shares. Upon receipt of money, the share subscribers do not lose touch and become incommunicado. Call money, dividends, warrants, etc. have to be sent and the relationship remains a continuing one. Therefore, an assessee cannot simply furnish some details and remain quiet when summons issued to shareholders remain un-served and uncomplied. As a general proposition, it would be improper to universally hold that the assessee cannot plead that they had received money, but could do nothing more and it was for the Assessing Officer to enforce shareholders attenda ..... X X X X Extracts X X X X X X X X Extracts X X X X
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