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TMI Blog2011 (10) TMI 667X X X X Extracts X X X X X X X X Extracts X X X X ..... f specific directions of the Assessing Officer instead of taking opportunities in this behalf. Keeping in view the fact for non-production of these parties coupled with the outcome of inquiry made by the Investigation Wing, the Assessing Officer has made the addition. The amount paid to the assessee by the share applicants has been shown to be debited in the respective bank accounts of the share applicants and if all these facts are seen, then, it will be a case where addition upheld by the CIT (A) cannot be held to be justified. Therefore, keeping in view the evidence placed on record by the assessee, we are of the opinion that the addition upheld by CIT (A) was not justified and the same requires deletion Assessee has charged high premium on the shares for which no justification has been rendered - Held that:- During the year under consideration, the assessee has issued 2,50,000 shares of face value of ₹ 10 at a premium of ₹ 90 by way of private placement. The list of these parties is furnished at pages 249 and 250. To be precise, shares have been issued to 19 parties. The Assessing Officer has doubted the genuineness of share application money with respect to afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Information has been received from DIT(Inv.) that the above said assessee has been beneficiary of accommodation entries being provided by certain entry operators. On the basis of the information chart forwarded by DIT(Inv.), New Delhi it is seen that the assessee has bogus transactions to the tune of ₹ 34,50,000/- during F.Y. 2002-03 relevant to A.Y. 2003-04. In view of above, I have reasons to believe that an amount of ₹ 34,50,000/- has escaped assessment within the meaning of sec. 147(c) of the I.T. Act, 1961 for the A.Y. 2003-04. Since four years have been elapsed, your approval is hereby sought as per sec. 151 of the I.T. Act, 1961 for issuance of notice u/s 148 of the I.T. Act, 1961. Sd/- (J.S. CHAWLA) Income Tax Officer Ward 8(2), New Delhi. The Jt.CIT, Range 8, N. Delhi. 3. The assessee having found that no details regarding the sum of ₹ 34,50,000/- was furnished to it had asked the AO to furnish the details which were supplied to the assessee by the AO vide letter dated 6th September, 2010 the contents of which are as under: - Dated 6.9.2010 To, M/s Shivank Udyog Limited, A 37/2, Mayapuri Indl. Area ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received accommodation entries from them. It was requested that all such type of statements, on the basis of which the department is inferring that these are accommodation entries, should be supplied to the assessee. It was pointed out that application money for allotment of shares was received by cheques from these parties and they are being assessed to Income tax under the PAN mentioned therein. The detail was furnished in the shape of chart, which is described in submission in aforementioned letter dated 18th October, 2010 the chart is reproduced as under: Name Address Amount Cheque Date Cheque No. Bank, Branch PAN Doc. Page no. Umesh Securities P. Ltd. No money was received from Umesh securities P. Ltd. 450000 9.7.02 105925 Onyx Exim Sales Ltd. 2842, Classic Apartments, Street Moti Mahal, Darya Ganj, N. Delhi110002 450000 8.7.02 106954 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares; (x) Form No. 2 for allotment of shares was duly filed u/s 75(1) of the Companies Act, 1956 on 21.02.2003. 6. At the end of the letter as Umesh Sneh Securities Pvt. Ltd., it was pointed out that the name was wrongly mentioned in the information as Umesh Securities Pvt. Ltd. . The said name is actually Umesneh Securities P. Ltd. and the particulars regarding that were given as under: Name Address Amount Cheque Date Cheque No. Bank, Branch PAN Doc. Page No. Umesneh Securities Pvt. Ltd. A-35, jain Nagar Ext., Kanjhawala Road, Delhi-81 450000 9.7.02 105925 KSBL, Arya Samaj Road, Dev Nagar, N.D. AAACU0451G 142-143 148-182 7. Along with the aforementioned letter, all aforementioned documents were furnished, the copy of which has also been filed in the paper book filed by the assessee. The AO issued summon to these parties and after issuing such summons the position has been summarized by the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts, it was pleaded by ld. AR that initiation of reassessment proceedings in the present case is illegal. Referring to the reasons recorded by the AO, it is the submission of ld. AR that as per the law explained by the Hon ble Jurisdictional High Court in the case of Sarthak Securities Co. P. Ltd. Vs. ITO in writ petition (civil no. 6087/2010) vide judgment pronounced on 18th October, 2010 valid initiation of reassessment requires independent application of mind by the Assessing Officer. He submitted that copy of this decision is placed in the paper book from pages 311 to 325, wherein their lordships referring to the provisions of sec. 147 and various judicial pronouncements have come to the conclusion that apart from reasons there should be independent application of mind by the AO. He submitted that as per decision of Bombay High Court in the case of IAC Vs. IBM Word Trade Corporation 216 ITR 811 (Bom.) only the reasons so recorded can be looked at for sustaining or setting aside a notice issued u/s 148 and any other material cannot be relied upon. As per decision of Bombay High Court in the case of Hindustan Liver Ltd. Vs. R.V. Wadkar 268 ITR 332, the reasons are required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ief must be on the base or foundation or platform of prudence which a reasonable person is required to apply. As is manifest from the perusal of the supply of reasons and the order of rejection of objections, the names of the companies were available with the authority. Their existence is not disputed. What is mentioned is that these companies were used as conduits. In that view of the matter, the principle laid down in Lovely Exports (P) Ltd. (supra) gets squarely attracted. The same has not been referred to while passing the order of rejection. The assessee in his objections had clearly stated that the companies had bank accounts and payments were made to the assessee company through banking channel. The identity of the companies was not disputed. Under these circumstances, it would not be appropriate to require the assessee to go through the entire gamut of proceedings. It is totally unwarranted. 24. Resultantly, the initiation of proceedings u/s 147 and issuance of notice u/s 148 of the Act are hereby quashed. In the facts and circumstances of the case, there shall be no order as to costs. 11. On merits, it was contended by ld. AR that in view of the evidence submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requirements of law to prove the genuineness of the money received as share application. She submitted that assessee had failed to prove the identity, creditworthiness and genuineness of the transaction. Therefore, she pleaded that addition has rightly been sustained by ld. CIT(A). Referring to the order passed by ld. CIT(A), she submitted that he has drawn following conclusion after going through the facts of the case as pointed out in para 5.10 of the order of CIT(A): (i) It is a fact that the appellant has received huge amount of fund in the relevant asstt. year from outside parties? (ii) It is further a fact that such company has not received any dividend or interest whatsoever from the appellant company in the past so many years. (iii) It is also a fact that repeated opportunities were issued by the AO to the investing companies. (iv) It is a fact that in spite of repeated opportunities, the principal officers of the investing companies neither appeared nor could be produced by the appellant who had positive information and knowledge regarding the whereabouts of the investing companies. (v) Any such person (including companies) would never simply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer will render re-assessment proceedings invalid and, for that purpose, reliance has been placed on the decision of Hon ble Delhi High Court in the case of Sarthak Securities Co. Pvt. Ltd. (supra). To examine such contention it has to be seen that whether or not the Assessing Officer has independent application of mind. The information received by the Assessing Officer is specific and the assessee has been found to have received share application from the specific entities to the extent of ` 34,50,000/-, the particulars of which were sent by the Investigation Wing to the Assessing Officer. The Assessing Officer has mentioned in the reasons it is seen that the assessee has bogus transactions to the tune of ` 34,50,000/- during financial year 2002-03 relevant to Assessment Year 2003-04. The Assessing Officer further observed in view of above I have reasons to believe that an amount of ` 34,50,000/- has escaped assessment within the meaning of Section 147 (c) of the Income-tax Act, 1961 for the Assessment Year 2003-04. Therefore, it cannot be said that the Assessing Officer had not applied his mind and has simply worked upon the report of DIT (Inv.). Moreover, in the later d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade aware of the situation and further the reasons recorded does not indicate application of mind. Therefore, the said case is distinguishable on facts and applying the decision in the case of Sarthak Securities Co. Pvt. Ltd. (supra), it cannot be held that initiation of re-assessment proceedings is invalid. 18. Moreover, as it has been pointed out earlier, in the present case, no assessment was originally framed u/s 143 (3). The decision of Hon ble Supreme Court in the case of ACIT vs. Rajesh Jhaveri (supra) has a bearing on the facts of the present case wherein while examining the question of validity of re-assessment proceedings in a case where originally no assessment u/s 143 (3) was framed, it was held under Section 147, as substituted w.e.f. 1st April, 1989 that if the Assessing Officer, for whatever reason, has reasons to believe that income has escaped assessment which confers jurisdiction to re-open the assessment where the case is not covered by proviso to Section 147. It was observed that the scope of effect of Section 147, as amended w.e.f. 1st April, 1989, as also Sections 148 to 152 are substantially different from the provisions as they stood prior to substitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Articles of Association, copy of Certificate of Incorporation, copy of application for allotment of shares, copy of resolution passed by the company of the share applicants were also submitted. All these evidences have been ignored by the Assessing Officer for the reason that summons were issued to these parties and they have been received back. Therefore, these parties are non-existent. This contention of the Assessing Officer cannot be accepted for the reason that in all the cases the assessee not only has given the permanent account Nos. of those parties, but also has placed on record copy of their bank accounts. The Assessing Officer has not made any inquiry with regard to these documents. These documents have certainly established the identity of the share applicants and in the absence of any material to the contrary, the evidence submitted by them has to be accepted and the said evidence cannot be rejected merely for the reason that summons sent to those parties have come back. Mere fact that the summons could not be served cannot be a ground to make the addition and this position has been accepted by Hon ble jurisdictional High Court in the case of CIT vs. Oasis Hospitalitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If for any reason the address given in the application were to be incorrect or for any reason if the said applicants have changes their residence or the notices sent by the Assessing Officer has not been received by such applicants, the assessee company cannot be blamed. Therefore, we are of the view that the Tribunal was not justified in allowing the appeal of the revenue only relying upon the statement of Shri Anil Raj Mehta, a Chartered Accountant. 21. It was further observed by their lordships that according to the decision of Hon ble Supreme Court in the case of Lovely Exports (supra), the department is free to proceed to reopen the individual assessment in the case of alleged bogus shareholders in accordance with the law and, thus, not remediless. It is, thus, for the Assessing Officer to make further inquiries with regard to the status of these parties to bring on record any adverse findings regarding their credit worthiness. Further reference can be made to the following observations of their lordships with regard to Oasis Hospitalities Pvt. Ltd. (ITA No.2093 of 2010 and ITA No.2095 of 2010) which were the appeals filed by the revenue: 28. The assessees filed copie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who is fastened with the liability. The Assessing Officer did not question M/s Diamond Protein Ltd. in this behalf. Ins0far as Assessing Company is concerned, it is not disputed that money was paid towards the aforesaid share application money by means of cheques. It is not for the assessee company to probe as to the source from where M/s Diamond Protein Ltd. collected the aforesaid money. It was for the Assessing Officer, in these circumstances to inquire into the affairs of M/s Diamond Protein Ltd. which is an independent company inasmuch as no finding is arrived at by the Assessing Officer that the two companies are umbrella companies or have any relationship with each other. 30. We are, therefore, of the opinion that there is no merit in these two appeals, which are accordingly dismissed at the admission stage itself. 22. If the aforementioned observations of their lordships are considered in the factual matrix of the present case, then, the same will be squarely applicable to the facts of the present case. In the present case, the assessee filed copies of PAN, acknowledgement of filing income-tax returns of the companies, their bank account, statements for the relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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