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TMI Blog2019 (4) TMI 270X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the Ld. Counsel that, if there are such a huge amount of discrepancy and mistakes in the ‘reasons recorded’, divorced from the facts of the case, then such reasons cannot clothe the AO with the jurisdiction to reopen the assessment u/s 147. Here in this case AO in his remand report submitted before the Ld. CIT(A) and also in view of the observation made by the Ld. CIT(A), it is amply established that there are various discrepancies and it is for this reason alone, Ld. CIT(A) has deleted the various additions. Hence, we hold that such ‘reasons recorded’ cannot be held to be in accordance with law, and because of such huge discrepancy and errors, it cannot be held that AO could have entertained ‘reason to believe’ based on borrowed satisfaction of someone else. Thus, the entire reopening is held to be invalid. Addition u/s 68 - HELD THAT:- In absence of any inquiry, such a material or documents filed by the assessee cannot be discarded. AO has simply relied upon the information received from Investigation Wing, without even carrying out any prima facie inquiry so as to show that assessee’s contention or material filed by him cannot be relied upon. Even at the stage of CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AACCR0988D 3 Status Company 4. Ward/Circle : Ward-15(2) 5. Asstt. Year in respect of which it is proposed to issue notice u/s 148 : 2006-07 6. The quantum of income which has escaped assessment Rs.1,72,75,483/- 7. Whether the assessment is proposed to be made for the first time : Yes 8. If answer to item 7 is negative state (a) Income originally assessed NA (b) Whether it is a case of under assessment, at lower rate, assessment which has been made the subject of excessive relief or allowing excess loss/depreciation NO 9. Whether the provision of Sec. 150(1) are applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries from whom cash was received and cheques were issued by various companies controlled by him were recorded in the computer impounded by the department on 20- 11-2007 during survey at his premises. In view of the above statements it is also clear that Sh. S. K. Gupta worked as an entry operator and provided accommodation entries to various beneficiaries through a large number of entities controlled and managed by him. Cash was received from the beneficiaries through mediators and was deposited in the bank accounts of these entities and thereafter it was transferred to the bank accounts of the ultimate beneficiaries through conduit / intermediary companies floated by Sh. Gupta. Subsequently, Sh. S.K Gupta also filed petition before the Income tax Settlement commission, Delhi for the assessment year 2008-09 wherein he admitted an additional income ₹ 68,76,755/- on account of commission/premium earned for providing accommodation entries to various beneficiaries. In the Statement of Facts (SOF) filed by Sh. S.K Gupta before Hon'ble Settlement Commission, he admitted that he used to provide accommodation entries through 32 companies and two individuals which were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CH NO 765760 DTD CHAMP FINVEST SIB 1000000 Randeep Investment P. Ltd 18.04.05 CH NO 771505 DTD 28.03.05 CHAMP FINVEST SIB 1000000 Randeep Investment P. Ltd 19.04.05 CH NO 766199 DTD 28.03.05 CHAMP FINVEST SIB 1000000 Randeep Investment P. Ltd 23.04.05 CH NO 771507 DTD 28.03.05 CHAMP FINVEST SIB 250000 Randeep Investment P. Ltd 23.04.05 CH NO 771506 DTD 28.03.05 CHAMP FINVEST SIB 250000 Randeep Investment P. Ltd 23.04.05 CH NO 772488 DTD 29.03.05 OMNI FARMS SIB 25(^000 Randeep Investment P. Ltd 23.04.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment P. Ltd 25.06.05 CH NO 258962 DTD 20.06.05 GIRASHO COMPANY OBC 500000 Randeep Investment P. Ltd 25.06.05 CH NO 239011 DTD 22.06.05 CHANDERPRABHU OBC 200000 Randeep Investment P. Ltd 30.06.05 CH NO 717408 DTD 15.04.05 ZENITH ESTATES IPSB 250000 Randeep Investment P. Ltd 30.06.05 CH NO 717407 DTD 15.04.05 ZENITH ESTATES IPSB 250000 Randeep Investment P. Ltd 05.07.05 CH NO 258966 DTD 01.07.05 GIRASHO COMPANY OBC 500000 Randeep Investment P. Ltd 08.07.05 CH NO 238976 DTD 04.07.05 CHANDERPRABHU OBC 700000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HRUT MARKETING OBC 250000 29.03.06 CH NO 303186 DTD 27.03.06 CHANDERPRABHU OBC 300000 In view of the reports received from the ACIT Central Cir-22 and the above facts and findings, it is clear that the assessee company has not disclosed fully and truly all material facts necessary for its assessment for the assessment year under consideration. I am in possession of material that discredits and impeaches the particulars furnished by the assessee company and also establishes the link with the self-confessed accommodation entry providers , whose business is to help assesses bring into their books of account their unaccounted money. I have therefore, reasons to believe that income to the extent of ₹ 1,72,75,483/- has escaped assessment. Thus, the same is to be brought to tax under section 147/148 of the I.T. Act 1961. Notice u/s 148 may be issued, if approved. 4. AO on the basis of the aforesaid reasons observed that assessee company had obtained alleged accommodation entries from various companies f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of which adverse inference has been drawn against assessee which was not provided by the AO despite several request made from time to time. The material required by the assessee from the AO as per the letter were as under :- a) Copy of the report as received from ACIT, Central Circle 22, New Delhi as per the survey conducted by Investigation Wing of the Income Tax Department New Delhi on the basis of which reasons have been recorded and notice U/S 148 has been issued. b) Copy of statement recorded of Sh. SK. Gupta by AD, Central Circle 22, New Delhi and also the Investigation Wing of Income Tax Dept. on the basis of which reasons have been recorded and notice U/S 148 has been issued. c) It is further requested that the Assessee may be allowed to cross examine Sh. SK. Gupta. d) Notice u/s 148 has been issued after obtaining the necessary satisfaction of the Addl. CIT, Range 15, New Delhi as mentioned in the said notice. Copy of such sanction may please be issued. It was stated that the rest of the details would be filed after the abovementioned documents have been received by the Assessee so as to enable the Assessee to file further objections to proceedings-initia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is order. 9. The assessee after getting the copy of remand report has given its rejoinder. Most importantly, the assessee pointed out various mistakes and errors in the list of companies contained in the reasons recorded. It was clarified that, some of the share application monies were received in the preceding assessment year i.e., A.Y. 2005-06, which were duly accounted for in the books of accounts and shares were also allotted on 31.3.2005. It was also brought to the notice that the share application monies received from M/s. Champ Finvest Pvt. Ltd., have been duly accepted by the AO, vide his assessment order dated 28.3.2013, passed u/s 143(3)/147 for the A.Y. 2005-06. Thus, addition on account these amounts cannot be made in this assessment year u/s 68. The details of these cheques received in the earlier assessment year i.e., 2005-06 were as under: - S. No. Ch.No./PO/DD and Date Conduit Companies through which cheques issued Bank A/c of such conduit company issuing bank Amount (Rs.) 1 Ch. No. 765760 DTD 28.03.05 Champ Finv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A) held that, AO in his remand report has admitted that out of amount of ₹ 40 lacs received by assessee company as share application money, sum of ₹ 35 lacs were pertaining to Asstt. Year 2005-06 as the same was received prior to 31st March, 2005. Since this fact was admitted by the AO in his remand report, Ld. CIT(A) deleted the addition of ₹ 35,00,000/- in the case of Champ Finvest Pvt. Ltd. ii) M/s Omni Farms Pvt. Ltd. ₹ 10,00,000/- Here in this case also, Ld. CIT(A) after referring to the remand report of the AO, wherein AO has admitted that amount of ₹ 11,50,000/- was received by the assessee company the assessment year 2005-06. But, Ld. CIT(A) has sustained addition of ₹ 5,00,000/- in this year on the ground that the amount of ₹ 11,50,000/- was added in A.Y. 2005-06 and AO has added once again sum of ₹ 10,00,000/- during this year. Such reasoning though itself is unsustainable as there is no finding that amount of ₹ 5,00,000/- was received in this year. iii) M/s. Chander Prabhu Financial Services Pvt. Ltd. ₹ 23,00,000/- Ld. CIT(A) following the earlier year order in the assessment year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash has been deposited in the bank accounts of the share subscribers before cheques have been issued to the Appellant Co. for share application money is not verifiable. 4.5 I have perused the documents placed on record and find that the Appellant during the course of assessment proceedings had filed the requisite documentary evidence of the Share Applicants to justify the identity, genuineness and the creditworthiness with regard to the share application money received from the above parties. Summary of the documents submitted of each party is as under: Particular Advantage Software Pvt. Ltd Central Gum Chemical Ltd. Girihaso Company Pvt. Ltd. Vishrut Marketing Pvt. Ltd. Chander prabhu Financial Services Ltd. Zenith Estates Ltd. AGM Holding Pvt Ltd. Share Application Money Form Yes Yes Yes Yes Yes Yes Yes Board Resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed itself that such a reasons could not be sustained for reopening the assessment. Here in this case, firstly, cheques aggregating to ₹ 35,00,000/- were not received in the relevant assessment year as the same were received during the assessment year 2005-06 and shares were also allotted on 31.5.2005. This he pointed out that has been accepted by the AO in his remand report also. Secondly, in so far as cheques aggregating to ₹ 5,00,000/- received from Omni Farms, this again pertains to the earlier assessment year which again has been accepted by the AO in the remand proceedings. Thirdly, he pointed out that in case of following five companies as recorded in the reasons , assessee has not even received any cheque or amount: - S.No. Cheque No/PO/DD date Conduit Cos. through which cheque issued Amount (Rs.) 16. DD No.063418 Dt. 15.06.05 Sino Credits 1,75,483 17. Ch. No.239007 Dt.18.06.05 Chanderprabhu 5,00,000 29. Ch. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the paper book. Therefore, the Reasons as Recorded with regard to such amount is erroneous. 14. Ld. Counsel thus submitted that, when there are numerous discrepancies in the reasons recorded , then it cannot be held that there is any independent application of mind by the AO or there is any live link nexus between the material coming on record and income escaping assessment. Such reasons recorded at the outset, cannot clothe the AO with the jurisdiction to reopen the case u/s 147. In support of his various contentions, he has relied upon judgment of Hon ble Delhi High Court in the case of i) CIT vs. RMG Polyvinyl (I) Ltd. reported in 396 ITR 5; and ii) Principal CIT vs. SNG Developers Ltd. 404 ITR 312. 14. On merits, Ld. Counsel submitted that the assessee has raised fresh share capital of ₹ 3,67,03,000/-, out of which AO has made addition of share capital of ₹ 1,53,50,000/- from 9 share subscribers. All the share subscription money were received through account payee cheques, and all the entities were income tax assesses and to prove the identity, genuineness and creditworthiness of share subscriber Companies, following documents were submitted: - i. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used the relevant finding given in the impugned order as well as material referred to before us. It is a trite law that to acquire jurisdiction for reopening the assessment u/s 147, AO must have reason to believe that income chargeable to tax has escaped assessment and such a reason to believe should be based on tangible material having live link nexus with the income escaping assessment. Information or material received from Investigation Wing or any other wing of the department can constitute relevant material, however, based on such material AO has to first apply his mind on the facts and assessment records of the assessee and prima facie reach to a conclusion that there is some kind of link or nexus which such material/information, then he can clothe himself with the jurisdiction to reopen the case u/s 147. Here in this case, AO in his reasons recorded has referred to information received from ACIT, Central Circle, 22, New Delhi, stating that during survey u/s 133A conducted by the Investigation Wing, Delhi in the case of Shri S.K. Gupta on 20.11.2007, it was gathered that he had floated several companies /firms in which he and his family members as well as employees were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing any nexus with the information received and the facts and material pertaining to the assessee. 18. Coming to various mistakes/discrepancies in the reasons recorded vis- -vis the facts of the case, we find that assessee before the authorities below has demonstrated following defects: - * Firstly, assessee pointed out that it has received ₹ 35,00,000/- from Champ Finvest in the earlier year, the details given were as under: - S. No. Ch.No./PO/DD and Date Companies through which cheques issued Amount (Rs.) 1 Ch. No.765760 DTD 28.03.05 Champ Finvest 1000000 2 Ch. No.771505 DTD 28.03.05 Champ Finvest 1000000 3 Ch. No.766199 DTD 28.03.05 Champ Finvest 1000000 4 Ch. No.771507 DTD 28.03.05 Champ Finvest 250000 5 Ch. No.771506 DTD 28.03.05 Champ Finvest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 36. DD No.303186 Dt. 27.03.06 Vishrut Marketing 2,50,000 Total 19,25,483 This fact too has been verified and accepted by the AO in the remand report and also by the Ld. CIT (A). * Lastly, cheques aggregating to ₹ 15,00,000/- from Sino Credits O/D A/c as mentioned above, as pointed out has never been received by this company, in fact this amount was received from M/s. AGM Holdings Ltd. and from M/s. Chander Prabhu Financial Services Ltd. Thus, out of 37 alleged accommodation entries aggregating to ₹ 1,72,75,483/- as mentioned in the reasons recorded there were mistakes/discrepancies with regard to 15 entries, which indicates that AO has not applied his mind while recording the reasons. 19. Once AO receives any information or material from investigation wing or from elsewhere, then instead of recording the reasons from borrowed satisfaction, he has to independently apply his mind and verify the record of the assessee before forming his reason to believe for reopening the case u/s 147. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the facts. In fact, he proceeded on two wrong premises - one regarding alleged non-filing of the return and the other regarding the extent of the so-called accommodation entries. 12. Recently, in its decision dated 26th May, 2017 in ITA No.69212016 (Principal Commissioner of Income Tax-6 v. Meenakshi Overseas Pvt. Ltd.) (395 ITR 677), this Court discussed the legal position regarding reopening of assessments where the return filed at the initial stage was processed under Section 143(1) of the Act and not under Section 143(3) of the Act. The reasons for the reopening of the assessment in that case were more or less similar to the reasons in the present case, viz., information was received from the Investigation Wing regarding accommodation entries provided by a 'known' accommodation entry provider. There, on facts, the Court came to the conclusion that the reasons were, in fact, in the form of conclusions one after the other and that the satisfaction arrived at by the AO was a borrowed satisfaction and at best a reproduction of the conclusion in the investigation report. 13. As in the above case, even in the present case, the Court is unable to discern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mann.com 300 (Delhi), this Court observed as under: 22. As rightly pointed out by the ITAT, the 'reasons to believe' are not in fact reasons but only conclusions, one after the other. The expression 'accommodation entry' is used to describe the information set out without explaining the basis for arriving at such a conclusion. The statement that the said entry was given to the Assessee on his paying unaccounted cash is another conclusion the basis for which is not disclosed. Who is the accommodation entry giver is not mentioned. How he can be said to be a known entry operator is even more mysterious. Clearly the source for all these conclusions, one after the other, is the Investigation report of the DIT. Nothing from that report is set out to enable the reader to appreciate how the conclusions flow therefrom. 23. Thus, the crucial link between the information made available to the AO and the formation of belief is absent. The reasons must be self evident, they must speak for themselves. The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons. The entire material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal has followed the law and principle laid down by the Hon ble Jurisdictional High Court. For the sake of ready reference, the relevant observation and finding of the Tribunal is reproduced herein below: - We have considered the rival submissions of both the parties and have gone through the entire material available on record. As against the legal contentions of the assessee made by way of ground No. 1 in Assessee's appeal, the contention on behalf of the Revenue has been that the information received from the Investigation Wing of Income Tax Dept. was. sufficient for the AO to initiate proceedings u/s 147/148 of LT. Act and also relied on the findings as recorded by the Ld. CIT(A). 9. Copy of reasons recorded is placed in the paper book from which it is evident that reasons have been recorded on the basis of information received from the Investigation Wing of the Income Tax Department, New Delhi that the Assessee has taken accommodation entries from the following persons: Date of Entry in the Books From To Bank Cheque/RTGS Cheque Date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anderpra bhu Finvest P. Ltd. Randeep Investment P Ltd. SIB 806660 31 Mar,05 8,50,000 Deepak Jain 31.03.2005 Viagra Trading Co. P. Ltd. Randeep Investment P Ltd. SIB 772507 31 Mar,05 1,50,000 Deepak Jain 31.03.2005 Omni Farms P. Ltd. Randeep Investment P Ltd. SIB 772584 31 Mar,05 6,50,000 Deepak Jain 31.03.2005 Viagra Trading Co. P. Ltd. Randeep Investment P Ltd. SIB 772506 31 Mar,05 5,00,000 Deepak Jain As per the AO, Assessee received accommodation entries aggregating to ₹ 72,00,000 from 6 parties as referred above, the summary of which is again given as under: Name Amount fRs.J Giriasho 15,50,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch vide its order dated 14/08/2014 (ITA No. 4281/Delj2010) in the case of ITO vs. Comero Leasing Financial Pvt. Ltd. which was rendered after relying on Jurisdictional High Court judgment in the case of CIT vs. Suren International Pvt. Ltd. reported in 357 ITR 24, relevant portion of such ITAT judgment is reproduced below: From the above, we find that at paragraph Nos.l, 2 3, the Assessing Officer has discussed the facts in general i.e., the investigation carried on by the Director of Income Tax (Investigation) and the finding of such investigation the modus operandi, how the entry operator worked. The facts relating to assessee's case begin in ITA-4281 4949/D/2010 from paragraph 4. If we peruse the chart given by the Assessing Officer in the reasons recorded by which he formed an opinion that there was escapement of income of ₹ 53 lakhs, we find that several items have been considered twice. Item No.2 3, 4 5, 6 7, 8 9 and 10 11 are same. Thus, out of the total twelve items, five items have been considered twice by the Assessing Officer which is an apparent case of nonapplication of mind. We find that the identical case was considered by Hon ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Counsel, in the case of two additions sustained by the Ld. CIT(A) i.e., amount of ₹ 5,00,000/- received from M/s. Omni Farms Pvt. Ltd. and amount of ₹ 23 lacs from M/s. Chandra Prabhu Financial Services Pvt. Ltd., the Ld. CIT(A) has followed the earlier year appellate order. The order of the Ld. CIT(A) has been reversed by the Tribunal and now these additions stand deleted by the Tribunal in the assessment year 2005- 06. Whence, these additions are directly covered by the decision of the Tribunal, then respectfully following the same, we also delete the additions aggregating to ₹ 28,00,000/- 25. Apart from that, we find that assessee has submitted catena of documents before the AO and also before the Ld. CIT(A) which has also been placed in the book with regard to the each and every companies like: e) M/s Champ Finvest Pvt. Ltd. ₹ 35,00,000- The following cocuments were filed to prove the identity, genuineness and creditworthiness of such party: - Copy of share application - Copy of Board Resolution - Copies of Income Tax Return - Copies of Bank Statement of the above party - Copies of Confirmations - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 18 filed on 15-06-2010 evidencing the current registered office of the company - List of Current Directors with addresses as per MCA records enclosed. - Annual Return as per Form 23AC for the FY 2010-11 as filed with ROC, Delhi Haryana. h) M/s Advantage Software Pvt. Ltd. ₹ 19,00,000- The following documents were filed to prove the identity, genuineness and creditworthiness of such party: Copies of Share Application Money received. Copy of Board Resolutions authorizing Investment in the assessee company Copy of Confirmation Copy of Bank Statement of Kotak Mahindra Bank Ltd, of the share applicant Copies of Income Tax Returns PAN. Copy of the Balance Sheet, Profit Loss A/c alongwith schedules of the applicant company for the FY 2005-06. Copy of Memorandum of Association. Company Master Data from ROC site evidencing current registered office of the company and the status of annual filing. In the case of this share subscriber returns are updated up to 31-3-2013. Form No. 18 evidencing the current registered office of 247-248 the company List of Current Directors with addresses as per MCA 249 records ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per MCA records enclosed .. Annual Return as per Form 23AC for the FY 2008-09 as filed with ROC, Delhi Haryana Compliance Certificate from Qualified Company Secretary alongwith its filing with ROC. Income Tax particulars of Current Directors of the company as per Income Tax Site. k) M/s Vishrut Marketing Pvt. Ltd. ₹ 7,00,000- The following documents were filed to prove the identity, genuineness and. creditworthiness of such party: Copies of Share Application Money received Copy of Board Resolution authorizing Investment in the assessee company Copies of Confirmation Copies of Bank. Statement of Oriental Bank of Commerce, of the share applicant Copies of Income Tax Returns PAN. Copy of the Balance Sheet, Profit Loss A/c alongwith schedules of the applicant company for the FY 2005-06 Copy of Memorandum of Association. Company Master Data from ROC site evidencing current registered office of the company and the status of annual filing. In the case of this share subscriber returns are updated up to 31-3-2010. Form No. 18 evidencing the current registered office of the company List of Current Direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company List of Current Directors with addresses as per MCA records enclosed. Annual Return as per Form 23AC for the FY 2009-10 as filed with ROC, Delhi Haryana. Compliance Certificate from Qualified Company Secretary alongwith its filing with ROC. Income Tax particulars of Current Directors of the company as per Income Tax Site. n) M/s AGM Holding Pvt. Ltd. ₹ 5,00,000- The following documents were filed to prove the identity, genuineness and creditworthiness of such party: - Copies of Share Application Money received - Copy of Board Resolution authorizing Investment in the assessee company. - Copies of Confirmation - Copies of Bank Statement of Oriental Bank of Commerce, of the share applicant - Copies of Income Tax Returns PAN. - Copy of the Balance Sheet, Profit Loss A/c alongwith schedules of the applicant company for the FY 2005-06. - Copy of Memorandum of Association. - Company Master Data from ROC site evidencing current registered office of the company and the status of annual filing. In the case of this share subscriber returns are updated up to 31-3-2010. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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