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TMI Blog2018 (3) TMI 1607X X X X Extracts X X X X X X X X Extracts X X X X ..... dents, the action of the Ld. CIT(A) of deletion of addition of ₹ 40 lacs is upheld and accordingly, the ground 2 & 3 raised by the Revenue are also rejected. - I.T.A. No. 4929/DEL/2017 - - - Dated:- 15-3-2018 - SHRI H.S. SIDHU, JUDICIAL MEMBER For The Department : Sh. V.K. Jiwani, Sr. DR For The Assessee : S h . Gautam Jain, Adv. And Sh. Lalit Mohan, CA ORDER Revenue has filed this Appeal against the impugned Order dated 31.3.2009 passed by the Ld. CIT(A)-V, New Delhi relevant to assessment year 2001-02 on the following grounds:- 1) The Ld. CIT(A) has erred in holding that the assumption of jurisdiction u/s. 147 is not proper as reason for reopening was not properly recorded when the same were recorded in order and duly approved by the competent authority. 2. The Ld. CIT(A) has erred in law and on the facts in deleting the addition of ₹ 40 lacs made by AO on account of unexplained cash credit u/s. 68 of the I.T. Act, 1961 when the assessee fails to prove creditworthiness and genuineness of parties. 3. That the Ld. CIT(A) has erred in ignoring the facts as the assessee company failed to discharge the onus u/s. 68 of the I.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning in the present case is illegal, hence, the same was rightly quashed by the Ld. CIT(A), which does not need any interference. On this legal issue, he further stated that the reasons recorded are vague, highly non-specific and, reflect complete non-application of mind much less independent application of mind . The action has been mechanically on the basis of alleged report of investigation wing, and, not on independent application of mind and therefore on this ground, the proceedings are without jurisdiction. It was further stated that no valid approval had been obtained in terms of section 151 of the Act. In view of above, he submitted that reopening of assessment is bad in law in this case. In order to support his contention, he submitted that the present case is squarely covered by the various decisions including the Hon ble High Court Decision dated 8.10.2015 passed in ITA No. 545/2015 in the case of Pr. CIT-4 vs. G G Pharma India Ltd and the decision of Hon ble Delhi High Court in the case of Pr. CIT vs. Meenakshi Overseas Pvt. Ltd., 395 ITR 677. As regards, merit of the case is concerned, i.e. addition of ₹ 40 lacs made u/s. 68 of the Act is concerned, it was state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 5 (St.) has observed that, even if the share capital money is received by the assessee from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of the assessee company. In view of above, he requested to uphold the order of the Ld. CIT(A) and dismiss the appeal of the Revenue. 7. I have heard both the parties and perused the relevant records available with us, especially the orders of the revenue authorities and the case laws cited by the assessee s counsel of the assesee as well as the Ld. CIT(A) in his impugned order. In this case the assessee is a private limited company. The assessee received share application money of ₹ 40,00,000/- (including premium of ₹ 36,00,000/-) from 2 shareholders who are corporate entities and are also duly assessed to tax. In the reasons as recorded by the AO, it has been stated as under: During pre and post search proceedings it was found that the group companies had received share capital with exorbitant premium from large number of non descript companies mainly based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason of failure as the part of the assessee to make a return under section 139 or in response to a notice issued under sub- section (1) of section 142 or section 148 or to disclose fully and truly all materials facts necessary for his assessment, for that assessment year. Therefore, the AO has reason to believe that this amount of ₹ 40,00,000/- represents income of M/ s Kapis Impex (P) Ltd. chargeable to tax which has escaped assessment for A. Y. 2009- 10. As the case pertains to a period beyond four years from the end of relevant assessment year at the time issue of notice, necessary sanction has to be obtained from Pr. Commissioner of Income Tax, in view of the amended provision of section 151 w.e.f. 01.06.2015. 7.2 The assumption of jurisdiction u/s 147 of the Act is stated to be based on the enquiries conducted by Inspectors of the Investigation Wing -at Delhi and Kolkata to form an opinion albeit prima-facie that appellant company has received share capital with exorbitant premium from large number of non descript companies mainly based in Kolkatta and Delhi from the period between 1.4.2008 to 31.3.2009. It is a matter of record that such enquiries had not been con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, the AO stated: I have a/so perused various materials and report from Investigation Wing and on that basis it is evident that the assessee company has introduced its own unaccounted money in its bank account by way of above accommodation entries. The above conclusion is unhelpful in understanding whether the AO applied his mind to the materials that he talks about particularly since he did not describe what those materials were. Once the date on which the so called accommodation entries were provided is known, it would not have been difficult for the AO, if he had in fact undertaken the exercise, to make a reference to the manner which those very entries were provided in the accounts of the Assessee, which must have been tendered along with the return, which was filed on 14th November 2004 and was processed under Section l43(3) of the Act. Without forming a prima facie opinion, on the basis of such material, it was not possible for the AO to have simply concluded: it is evident that the assessee company has introduced its own unaccounted money in its bank by way oj accommodation entries . In the considered view of the Court, in light of the law explained with sufficient cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce 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 hank 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 under Section 147 and issuance of notice under Section 148 of the Act are hereby quashed. In the [acts and circumstances of the case, there shall be no order as to costs. 7.6 Further in the case of Signature Hotels (.P) Ltd. v. ITO 338 ITR 51 (Del) it was held as under:- 5 Before dealing with the facts oj the case, we may notice some judgments of the Supreme Court when proceedings under Section 147/ 148 of the Act can be initiated on statements made by third person on the account of accommodation e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no live connection or link established between the information or the facts, in the possession of the ITO, and the genuineness of the particular loans recorded in the assessee's books. The mere fact that the names of the some of the creditors figured in a list made out by the department would be too general and vague to lead to an inference regarding the truth or otherwise o] the loans recorded by the assessee. We are wholly unable to find any material point of distinction between the acts of the present case and those considered by the Supreme Court in the case of Lakhmani Mewal Das 1976 103 ITR 437. 6. The view taken by the Supreme Court in Lakhmani Mewal Das [supra] was followed in Ganga Saran and Sons Private Limited versus Income-Tax Officer, (1981 J 130 ITR 1 (SC). The matter was again examined by the Supreme Court in Phool Chand Bajrang Lal and Another versus Income-Tax Officer and Another, (1993J (203) ITR 456 (SC). In the said case, information was received by the Assessing Officer that the third company had never actually advanced loans to any person and the said third company was in the business consisting entirely of name lending. Noticing the judgment in L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approval as obtained does not meet the test laid by the judgment of Hon'ble Delhi High Court in the case of Pr. CIT V. NC Cables ITA No. 335/2015 dated 11.1.2017 wherein it has been held under:- 11. Section 151 of the Act clearly stipulates that the CIT (A), who is the competent authority to authorize the reassessment notice, has to apply his mind and form an opinion. The mere appending of the expression 'approved' says nothing. It is not as if the CIT (A) has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. In the present case, the exercise appears to have been ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer. For these reasons, the Court is satisfied that the findings by the ITAT cannot be disturbed 7.9 Similar view has also been expressed in the case of Chhugamal Rajpal P. Chaliha and Others 79 ITR 603 (SC). It has held therein as under: In his report the Income-tax Officer does not set out any reason for coming to the conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or his assessment for the accounting year in question, income chargeable to tax has escaped assessment for that year; nor could it be said that he, as a consequence of information in his possession, had reasons to believe that the income chargeable to tax has escaped assessment for that year. We are not satisfied that the Income-tax Officer had any material before him which could satisfy the requirements of either clause (a) or clause (b) of section 147. Therefore, he could not have issued a notice under section 148. Further, the report submitted by him under section 151(2) does not mention any reason for coming to the conclusion that it is a fit case Jar the issue of a notice under section 148. We are also of the opinion that the Commissioner has mechanically accorded permission. He did not himself record that he was satisfied that this was a fit case for the issue of a notice under section 148. To question No. 8 in the report which reads Whether the Commissioner is satisfied that it is a fit case for the issue of notice under section 148 , he just noted the word Yes and affixed his signature thereunder. We are of the opinion that if only he had read the report carefully, he co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. addition of ₹ 40 lacs made u/s. 68 of the Act which represents sums received from the shareholders as share capital / share premium and erroneously held as unexplained cash credits u/s. 68 of the Act. During the year the assessee company had received share capital and share premium to the tune of ₹ 40,00,000/- from two shareholders namely Ahiliya Trading Finance (P) Ltd. and M / s Joyprit Plastic Dealers (P) Ltd. The AO asked the assessee to details of share capital pending allotments, detail of share capital premium received during year including complete detail of party i.e. name, address, PAN, Number of share allotted, total amount, allotment letter and transaction mode. He has also directed to detail of share capital/premium received during FY 2008-09 alongwith the highlight entry in bank statement in which amount received in order to prove identity, creditworthiness and genuineness of the transaction. The assessee admittedly produced several documentary evidence before the AO in order to prove the above ingredients of section 68 of the Act i.e. the assessee furnished the address of the share applicants, CIN No., Incorporation date of com pan , PAN, Authorize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.1 Also on the anvil of the judgment in the case of CIT vs. Kamdhenu Steel and Alloys Ltd. 361 ITR 220 the initial burden is upon the assessee to explain the nature and source of the share application money received by the assessee and held that in order to discharge this burden, the assesee is required to prove the identity of shareholder; the genuineness of transaction and the creditworthiness of shareholders. And mere noncompliance by M/s Ahilya Trading and Finance (P) Ltd. of summons cannot be a ground to shift the burden on the assessee. In any case, once the evidence furnished remains unrebutted in absence of any enquiries from ROC, income tax and bankers, no adverse inference can be drawn. The assesssee has complete documentary evidence in respect of share holders from who it had received share capital and furnished various evidence of each share holder, as per the details given below:- i) Name, address and complete particulars of the share holder, ii) Confirmation from shareholders. iii) Copy of share application form. iv) Copy of bank statement of assessee. v) Copy of bank statement of shareholder. vi) Copy of acknowledgement of return of income of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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