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TMI Blog2018 (10) TMI 1087X X X X Extracts X X X X X X X X Extracts X X X X ..... proposition and however on the facts of the case, there is no tangible material and therefore, action u/s. 148 of the Act is invalid. Thus the notice issued u/s 148 of the Act was held invalid and therefore, I confirm the action of the Ld. CIT(A) in treating the assessment order passed u/s. 147 r.w.s. 143(3) of the Act as ab-initio-void and reject the ground raised by the revenue. Even on merits, it is noted that the issue is squarely covered by order of the Tribunal in the case of ACIT vs. M/s. Kapis Impex Pvt. Ltd. [2018 (3) TMI 1607 - ITAT DELHI] - no enquiries whatsoever have been made by the Assessing Officer by deputing Inspector or directing the assessee to produce shareholders. All what has happened is that summons under section 133(6) of the Act which was complied with by one shareholder and in the other case summon stood served. The conclusion of the learned CIT(A) to delete the addition by holding that once shareholders do exist, have their own independent identity, source of income, maintain books of accounts, carry on their business and earn income from investments not only in assessee but also shares of other companies, then the inevitable conclusion is tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue of reopening of assessment as well as on merits of the case, who vide his impugned order dated 22.5.2007 has allowed the appeal of the assessee thereby deleting the addition in dispute and holding the reopening as invalid. 4. Aggrieved with the aforesaid impugned order of the ld. CIT(A), Revenue is in appeal before the Tribunal. 5. During the hearing, Ld. DR field her written submission and contended that credible and specific information was received in the case of the assessee company from the investigation wing that it had received bogus share capital from the paper entities and based on the above information and after properly recording the reasons and after taking necessary approval from the competent authority, the case was reopened by the Assessing Officer u/s 148 of the Act. It was submitted by her that Ld. CIT(A) has grossly erred in holding that assumption of jurisdiction is improper as there is no incriminating material and it was further submitted that since the assessment is completed under section 147 of the Act and not under section 153A or 153C and, therefore, finding of incriminating material during the course of search was not necessary. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision order of the Ld. CIT(A) as well as the decision of the Tribunal in Revenue s Appeal in the case of M/s Kapis Impex (P) Ltd. ITA No. 4929/D/2017 AY 2009-10 dated 15.3.2018 and had contended that since on identical facts the Tribunal has already held that assumption of jurisdiction u/s 148 of the Act was bad in law and also on merits the addition was untenable. Hence, he requested that said order may be followed for rejecting the appeal filed by the revenue. Further the Ld. counsel of the assessee submitted that Ld. CIT(A) has specifically held in the order that no enquiries had been confronted to the assessee during the course of assessment proceedings though specifically requested vide replies dated 10.11.2016 and 29.12.2016 by the assessee company. It was also pointed that the reasons do not point out any specific evidence that either the companies are bogus non-existent or the money received represented unaccounted income. It was thus submitted that Ld. CIT(A) was justified in holding that AO did not apply his own mind to the information or independently examine the accuracy of information and merely accepted the same in a mechanical manner and therefore both notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in Kolkata and Delhi from the period between 1.4.2008 to 31.03.2009. The enquiries were also conducted by the Inspectors of the Investigation Wing at Delhi and Kolkata. Most of the entry providing companies was not found existing at the given offices in Kolkata. That all entry providing companies were covered under various search conducted by Kolkata Investigation Wing and all the companies were found bogus and non- existent. That in the statement of directors managing the alleged bogus companies, they admitted that they were in the business of providing accommodation entries; That on the basis of enquiries conducted and statements recorded, it has been established that the companies were bogus and non existent. That the share capital received by the assessee company amounting to ₹ 40,00,000/- in the FY 2008-09 from these large number of non-descript companies is nothing but assessee own unaccounted income through these companies. The AO has observed that keeping in view all above, have reason to believe that amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A No. 4929/D/2017 AY 2009-10, appeal filed by the revenue against the order of CIT(A) quashing the assumption of jurisdiction by issue of notice under section 148 of the Act stands dismissed by holding as under: 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 confronted to the assessee during the course of assessment proceedings through specifically requested vide replies dated 10.11.2016 and 29.12.2016 by the assessee company. In such circumstances all such enquiries cannot mechanically be made a basis to assume jurisdiction. 7.3 It is apparent that reasons contain scanty, general, vague observations and not refer to any objective, tangible relevant material. No specific evidence has been highlighted to arrive at an opinion that either the companies are bogus and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 clarity by the Supreme Court in the decisions discussed hereinbefore, the basic requirement that the AO must apply his mind to the materials in order to have reasons to believe that the income of the Assessee escaped assessment is missing in the present case. 13. Mr. Sawhney took the Court through the order of the CIT(A) to show how the CIT (A) discussed the materials produced during the hearing of the appeal. The Court would like to observe that this is in the nature of a post mortem exercise a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances, 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 entry . In ITO versus Lakhmani Mewal Das, [1976/ 103 ITR 437 (sq, the Supreme Court affirmed the decision of the High Court and held that there was nothing to show in the confession made by a third party related to the loan taken by the assessee much less a loan which was shown to have advanced by that person to the assessee and, therefore, live link or close nexus, which should be there between the material and the belief formed by the Assessing Officer was missing or was too tenuous to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 Lakhmani Mewal Das (supra) It was held that the nature of information which was available was vastly different. In the case of Lakhmani Mewal Das (supra), the information was extremely vague and scanty whereas in the case of Phool Chand Bajrang Lal (supra), the information was specific, unambiguous and clear. 15. The aforesaid reasons do not satisfy the requirements of Section 147 of the Act. The reasons and the information referred to is extremely scanty and vague. There is no refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that this is a fit case to issue notice under section 148. The material that he had before him for issuing notice under section 148 is not mentioned in the report. In his report he vaguely refers to certain communications received by him from the Commissioner of Income-tax, Bihar and Orissa. He does not mention the facts contained in those communications. All that he says is that from those communications it appears that these persons (alleged creditors) are name lenders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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 could never have come to the conclusion on the material before him that this is a fit case to issue notice under section 148. The important safeguards provided in sections 147 and 151 were lightly treated by the Income-tax Officer as well as by the Commissioner. Both of them appear to have taken the duty imposed on them under these provisions as of little importance. They have substituted the form for the substance. In the result this appeal is allowed, the order of the Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aipur and based on the said information, notices were issued under section 148 of the Act. The Hon ble Court held that such information constitute tangible material as it discloses the source of the information and also it revealed that such information related to suppression of material facts including false claims of the nature of bogus purchases from a company which did not even have a manufacturing facility. The above judgment has no application to the facts of the assessee. In the instant case, the finding of fact recorded by the ld. CIT(A) is that assumption of jurisdiction was stated to be based on the enquiries conducted by Inspector of Investigation Wing of Delhi and Kolkata but no such enquiries had been confronted to the assessee during the course of assessment proceedings despite the fact that the specific request were made by the assessee vide replies dated 10.11.2016 and 29.12.2016. In such circumstances, Ld. CIT(A) held that there was no specific evidence which could constitute tangible material or relevant material to issue notice under section 148 of the Act and as such, the Assessing Officer could not have issued mechanically notice under section 148 of the Act. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, Authorized capital, paid up capital, names of Directors, certificate issued by Registrar of Companies and return filed before ROC, net worth of all the companies, confirmation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the shareholder. vii) Copy of PAN of shareholder. viii) Audited financial statements of shareholders x) Certificate of incorporation of share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Investment Ltd. reported in 251 ITR 263 by upholding the view taken by the Hon ble Delhi High Court reported in 192 ITR 287 that in case of a company, even if the subscriber to the share capital are not genuine then too, it would not be regarded as undisclosed income fo the assessee company. Keeping in view of the facts and circumstances of the case as explained above and respectfully following the aforesaid precedents, 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. 16. The Ld. Sr. DR during the course of hearing pointed that the reliance placed by the assessee s counsel on the decision of Tribunal is misplaced since the factum of non-disclosure of bank account of the purported shareholder had not been brought on record. It is noted that bank statement was not filed in the case of M/s Kapis Impex (P) Ltd. is factually incorrect as the AO himself notes that so far as one of the shareholders namely M/s Joyprit Plastic Dealers (P) Ltd. filed a bank statement in response to the notice u/s 133(6) of the Act. Moreover bank statement of the assessee duly established that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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