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TMI Blog2018 (4) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... will be barred by limitation For unexplained receipt of share capital addition there is a difference in making an allegation and sustaining the allegation. On the basis of allegation, the AO can carry out the investigation but the addition can be sustained only when there are sufficient evidences to support the allegation. In the present case, it is of the view that the assessee has fairly discharged this onus. - Decided in favour of assessee - ITA No. 4776/DEL/2017, CO No. 230/DEL/2017 - - - Dated:- 9-3-2018 - Shri B. P. Jain, Accountant Member Assessee by : Shri Ved Jain, Adv Shri Ashish Goel, CA Ms. Devina Revenue by : Shri V. K. Jiwani, Sr. DR ORDER This is an appeal filed by the Revenue against the order of the CIT(A) dated 23rd March, 2017 whereby she has deleted the addition of ₹ 35,00,000/- made by the AO. The assessee has filed cross objection challenging the order of the CIT(A), rejecting its contention on the issue of reopening of the assessment. 2. The assessee is a company, it filed its return of income for the A.Y. 2007-08, the year under consideration declaring Nil income on 17th October, 2007. The said return was selected for scru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reditworthiness and genuineness is proved but failed to appreciate the facts that both the alleged share applicants had no net worth to invest such huge amounts. 4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in observing and holding that once the appellant had provided all the documentary evidence to prove the three ingredients of section 68, the onus shifted to the AO and what was the required of him was to rebut the evidences produced by the appellant, which he has not been able to do so, but the Ld. CIT(A) has completely failed to appreciate the fact that when the alleged two share subscribers had not sent the complete documents, then summons u/s 131 were sent two times to Jain brothers who were controlling the said entities but none of them appeared for personal deposition. 5. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in holding that the judgments relied upon by the Assessing Officer in the assessment order are not applicable to the facts of the appellant s case. 6. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or such A.Y. by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. However, a plain reading of the reasons recorded in the case of assessee would show that there is no allegation against the petitioner of failing to disclose fully and truly all material facts necessary for its assessment for the A.Y. 2007-08. It is a settled law that merely having a reason to believe that income had escaped assessment is not sufficient to reopen assessments beyond the four year period. The escapement of income from assessment must also be occasioned by the failure on the part of the assessee to disclose material facts, fully and truly. This is a necessary condition for overcoming the bar set up by the proviso to section 147. If this condition is not satisfied, the bar would operate and no action under section 147 could be taken. 7. Further, a perusal of the reasons recorded by the AO would clearly show that the AO has merely relied upon the report received from the Investigation Wing, and there are no independent findings of his own. The reasons recorded by the AO clearly show that the AO has simply acted upon the inform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of MRY Auto Components Ltd. v. ITO in ITA No. 2418/Del/2014 dated 15.09.2017 13. On the basis of the above facts and the position of law, the learned AR submitted that the reassessment proceedings initiated by the AO are without due application of mind, and thus, the reassessment proceedings should be quashed. 14. On merit, in respect of the appeal filed by the Revenue, it was submitted by the Ld. AR that the CIT(A) was justified in holding that assessee has discharged its onus. The Ld. DR submitted that during the year under consideration, assessee has received share capital from two shareholders namely: (a)Sunny Cast Forge Ltd. ₹ 25,00,000/- (b)Pitambra Securities Pvt. Ltd. ₹ 10,00,000/- It is an admitted fact, both by the AO as well as by the Ld. CIT(A), that during the course of reassessment proceedings, the assessee has duly submitted the details with regard to these share applicant companies, which included the following: (a) Copies of confirmations (b) Copies of their share application forms (c) Copies of their Board Resolutions (d) Copies of Affidavits confirming investment in assessee company (e) Copies of their audited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of Hon ble Bombay High Court in the case of Pr. CIT v. Paradise Inland Shipping Pvt. Ltd. in ITA No. 66 of 2016 dated 10.04.2017. 20. The Ld. AR also placed reliance on following judgments: (a) Delhi High Court in the case of CIT v. Russian Technology Centre (P.) Ltd. in ITA Nos. 547/2013 dated 15.12.2016 (b) ITAT Delhi in the case of ITO v. Softline Creations (P.) Ltd. in ITA No. 744/Del/2012 dated 10.02.2015, which has been upheld by the Hon ble jurisdictional High Court in ITA No. 504 of 2016 dated 31.08.2016 (c) Delhi High Court in the case of CIT v. Fair Finvest Ltd [2013] 357 ITR 146 21. In reply, the Ld. DR supported the order of the AO and the CIT(A) on the issue of reopening of assessment. It was submitted that the AO has received definite information from the Investigation Wing about the accommodation entry having been received by the assessee. The Investigation Wing has recorded the statement of accommodation entry providers whereby they have confessed having provided accommodation entry to the assessee. It was submitted that at the stage of reopening of assessment, the AO need to have only prima facie opinion. It is not for AO to conclusively establis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the limitation bar of 4 years. In the present case, ongoing through the reasons recorded, placed at PB. Pg. 22-23, I note that there is no such averment in the reasons recorded that there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Thus, this primary condition itself is not fulfilled by the AO while reopening the assessment. It may be important to point out that this condition is there in the statute as AO after receiving the information and before formation of the belief has to first look at the assessment record. It is only after examination of the assessment record, the AO can ascertain that whether there is a failure on the part of the assessee to disclose fully and truly all material facts or not. After a period of 4 years, it is not merely the formation of the belief but such formation of belief should also be on the ground that assessee has failed to disclose fully and truly all material and facts which have led to the income has escaped assessment. The limitation period for reopening of assessment ordinarily is 6 years, however, where original assessment has been framed under Section 143, the limitation p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO drew adverse inference was that the documents received are the same as submitted by the assessee. The AO has not pointed out or referred to any other adverse feature or material in the assessment order in respect of the explanation and evidences submitted by the assessee in support of its contention. Ongoing through the paper book, we note that assessee has submitted complete details in respect of both the shareholders to substantiate the identity, creditworthiness and genuineness as under: (a) Copies of confirmations (b) Copies of their share application forms (c) Copies of their Board Resolutions (d) Copies of Affidavits confirming investment in assessee company (e) Copies of their audited Balance Sheets (f) Copies of Acknowledgment of ITRs (g) Copies of relevant extracts of Bank Statements reflecting the said transactions 26. The CIT(A) has gone through each of the document and has recorded a categorical finding that the appellant has been able to establish the identity and creditworthiness of the share applicants and genuineness of the transactions. Further, the CIT(A) has recorded a finding of fact that onus on the appellant stood discharged under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g adverse inference on this account. In case AO was not satisfied with the reply received from these two shareholders, he could have further made the enquiry. Having failed to do so, he cannot shift the burden and draw adverse inference. Ongoing through the assessment order I note that it is not the case of the AO that notices have come back unserved or these shareholders were not available at the address given by the assessee. If that be so, I am of the view that no adverse inference can be drawn against the assessee. The AO having issue the notice and such notice having been served on the person concerned, the AO has to take the process to the logical end. Submission of the reply in an independent enquiry being carried out by the AO by issue of notice under Section 133(6) from the person concerned directly is not in the hands of the assessee. The AO may be justified in certain circumstances when notice is not served or when an adverse reply is received in response to notice issued by him under Section 133(6). My view is supported by the judgment of the Hon ble Supreme Court in the case of CIT vs. Orissa Corporation 159 ITR 78 where a similar issue has come up. The finding of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansactions were genuine. It was not a case where the share applicants are merely provided confirmation letters. They had provided their particulars, PAN details, assessment particulars, mode of payment for share application money, i.e. through banks, bank statements, cheque numbers in question, copies of minutes of resolutions authorizing the applications, copies of balance sheets, profit and loss accounts for the year under consideration and even bank statements showing the source of payments made by the companies to the assessee as well as their master debt with ROC particulars. The AO strangely failed to conduct any scrutiny of documents and rested content by placing reliance merely on a report of the Investigation Wing. This reveals spectacular disregard to an AO s duties in the remand proceedings which the Revenue seeks to inflict upon the assessee in this case. 32. Similarly, in the case of CIT Vs. Rakam Money Matters Pvt. Ltd. in ITA No. 778 of 2015, the Hon ble Delhi High Court on this issue has held as under: This Court notices that the assessee had provided several documents that could have showed light into whether truly the transactions were genuine. It was no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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