9911796707
TMI Blog2019 (4) TMI 555X X X X Extracts X X X X X X X X Extracts X X X X ..... able to be quashed being void ab initio. The ld. Pr. CIT, Ajmer has accorded approval for issuing notice u/s 148 in a very routine, mechanical manner 15,59,00,000/-, without undertaking any further inquiry, investigation etc. and without bringing anything new on record. AO has made addition purely on the basis of his suspicion without any evidence or basis at all which deserves to be deleted. - Decided against revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... 26AS. (iii) The appellant craves liberty to raise additional ground and to modify/amend the ground of appeal at the time of hearing. Grounds of assessee's C.O. That the Id. CIT(A) was fully justified in deleting the addition on merit. However, the Id. CIT(A) has erred on facts and in law in dismissing the appeal of the appellant on the following legal grounds raised before him, treating them to be academic & infructuous. 1. (i) the Id. AO has grossly erred in law in completing the assessment u/s 148/143 (3) of the Act, without issuance and service of notice u/s 143(2) within the specified period as mentioned in proviso to sec. 143(2). (ii) Notice u/s 143 (2) issued by the Id. AO on 14-11-2017 was beyond the specified period and thus barred by limitation. Assessment completed by the AO on the basis of such notice is bad in law and deserves to be quashed. 2. The Id. AO has issued notice u/s 148 on the basis of change of opinion which is not permitted in law. Therefore the same deserves to be quashed being bad in law. 3. Proceedings u/s 147/148 have been initiated after four years from the end of the relevant assessment year without fulfilling the mandate of proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor having any funds of its own for making huge investment in the share capital of the assessee company. 4. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition by concluding that the transactions have been done through Banking channels and there is no case of any cash deposition in the account of the immediate investors company. 5. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in ignoring the undisputed findings of fact that cash was deposited in the account Bearing No.909020042572 with Axis Bank Ltd. Burrabazar Branch Kolkata of M/s Shiv Kali Trade and through a series of transactions the funds were immediately transferred to the account of alleged share subscriber, M/s Pashupati Vinimay Pvt. Ltd. 6. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in observing that it is usual business practice, while making loans/investment to party, funds are required to be arranged by the lenders, and therefore, reflection of such entries in bank statement does not lead to draw any adverse inference against the assessee, completely ignoring the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 in a very routine, mechanical manner & without application of mind by simply putting her signatures below the rubber stamped 'Yes, satisfied'. Such mechanical approval does not fulfill the mandate of provisions of sec. 151 (1) of the Act. Notice issued u/s 148 on the basis of such approval is bad in law and deserves to be quashed." 6. The Id. CIT(A) was not justified in not upholding the ground of the appellant that interest under section 234B is chargeable on returned income and not on assessed income as held by the Hon'ble Jharkhand High Court in its decision dated 25.7.2012 in the case of Sh. Ajay Prakash Verma v. ITO in TA no.38 of 2010, reported in (2013)(1) TMI 140, being consistently followed by ITAT, Ranchi." 3. Rival contentions have been heard and record perused. Facts in brief are that originally the assessments were made U/s 143(3) on 21/12/2012 for A.Y. 2010-11 and on 10/06/2013 for A.Y. 2011-12. Thereafter information were received by the Assessing Officer for both the assessment years and the same were reopened U/s 148 on 29/03/2017. After giving opportunities to the assessee including disposing off the objections to reopening the assessments by written ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al for reopening the assessment and conclusion at Para 5 & 6 of the assessment as under:- "5. The submissions of the assessee has been considered, but the same is found to be not acceptable. This is because as per information available with the department, it is clear that mostly cash has been deposited in the bank accounts of Shiv Kali Trade. That such credit has been immediately transferred to other accounts, mainly to S K Impex on the same day or the subsequent day. From S K Impex the money has been transferred to Accent Commerce and from Accent Commerce to M/s Cuckoo Merchandise Pvt. Ltd. Carnation Trade link Pvt. Ltd. and M/s Blackbird Tieup Pvt. Ltd. From these entities fund has been transferred to RMB Finance and M/S. Pashupati Vinimay Pvt. Ltd.. From M/S. Pashupati Vinimay Pvt. Ltd. the fund has been transferred to the assessee M/s Kanchan India Limited. It is also seen that M/s Pashupati Vinimay Pvt. Ltd. is not having any business as such. 6. In view of the above facts, the transaction between M/s Pashupati Vinimay Pvt. Ltd. and M/s Kanchan India Limited cannot be held as genuine." 4.2 It was the submission of the appellant before the AO during the reassessment proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of ₹ 15,59,00,000/- for which the shares were allotted by the assessee company to PVPL, without any basis or discussion what so ever. It is argued from the above facts one can clearly infer that the AO has made addition purely on the basis of his suspicion without any evidence or basis at all. 4.6 The Appellant in discharge of its onus u/s 68 of the Act had filed confirmation of accounts as well as bank statement reflecting the transactions with other substantiating documents along with assessment orders in case of lender companies, as mentioned in Para 4.2 above. From these documentary evidences placed on record, identity, creditworthiness and genuineness of transactions was established. There is no gain saying that the onus squarely lies on the appellant to prove the identity, creditworthiness and genuineness of the cash credits. In the case of Addl. CIT v. Bahri Bros. (P) Ltd. [1985] 154 ITR 244 (Pat), the Hon'ble Patna High Court has held "if the loans are given by an account paying cheque, it amounts to identification of the parties and discharge of burden by the borrower." In view of the above, it is clear that Appellant discharged its burden u/s 68 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RTGS in favour of the Assessee. Therefore, in view of the settled judicial precedent in case of CIT V/s VARINDER RAWLLEY [2014] 366 ITR 232 (PUNJAB & HARYANA), CIT V/s VIJAY KUMAR JAIN 221 TAXMAN 180. CIT v. Victor Electrodes Ltd. [2010] 329 ITR 271, Addl. CIT v. Bahri Bros. (P) Ltd. [1985] 154 ITR 244 (Pat) and others as referred by the Appellant, I am of the considered view that Appellant duly discharged its burden casted upon it u/s 68 of the Act. 4.9 In my considered view, mere not believing an explanation cannot lead to a conclusion that the share application & premium is the income of the assessee from some undisclosed sources while in the present case, no evidences of any generation of undisclosed income or their utilization in the form of share application & premium has been found and brought on record. 4.10 It is further seen that AO has not brought any specific defect/discrepancies in the direct evidence kept on record by the Appellant. Referring the report of DDIT (Inv.) Kolkata, the AO has observed to the effect that on the date of debit in the account statement of investor company, there is corresponding credit entry of equal amount, however, this observation of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns on the issue. i. Hon'ble Supreme Court in the case of CIT Vs Lovely Exports (P) Ltd. (2008) 216 CTR 295 (S.C.) has held as under: "If share application money is received by the assessee company 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 assessee company." ii. The Hon'ble Rajasthan High Court in the case of M/S Barkha Synthetics Ltd v/s ACIT, 283 ITR 377 (Raj) has held as under: "The principle relating to burden of proof concerning the assessee is that where the matter concerns the money receipts by way of share application from investors through banking channel, the assessee has to prove existence of person in whose name share application is received. Once the existence of shareholder is proved, it is no further burden of assessee to prove whether that person itself has invested said money or some other person had made investment in the name of that person. The burden then shifts on revenue to establish that such investment has come from Assessee Company itself." iii. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Hon'ble Jharkhand High Court in the case of Sh. Ajay Prakash Verma V/s 1TO vide its order dated 25-07-2012 in TA no. 38 of 2010, reported in (2013) (1) TMI 140. 11.2 The Hon'ble Ranchi ITAT has consistently followed this view in the following cases and several other cases- (1) Sh. Girdhari Lal Sharma V. ITO, ITA No. 31/Ranchi/2013, AY 2009-10 DOJ 07-05-2013. (2) Sunil Kumar Sawa V. ITO ITA No. 112-115/Ranchi/2017 AY 2007-08, 2008-09. 2011-12 & 2012-13 DOJ 30-05-2018. (3) Durga Devi Gupta V. ITO ITA No. 156 Ranchi/2015 AY 2009-2010, DOJ 28-02-2018. (4) ITO Vs. Anand Vihar Promoters & Developers ITA No. 159/Ranchi/2015 AY 2010-11, DOJ 28-02-2018 (5) M/s Cement supply agencies V. DCIT/1TA No. 304/Ranchi/2016 AY 2012-13 DOJ 28-02-2018 (6) ITO V. Shree Tirupati Minerals (P) Ltd. ITA No. 09/Ranchi /2016, AY 200--09 DOJ 05-12-2016 11.3 The Hon'ble Supreme Court in the cases of CIT V/s Vegetable Products Ltd. (1973) 88 ITR 192 (SC) and CIT V. Vatika Township (P) Ltd. (2014) 367 1TR 466 (SC) has held that when two views are possible on any issue, the view which is favourable to the assessee should be adopted. In view of the afore said judicial pronouncem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(3) of the Act. As per the ld AR, the Assessing Officer has received communication from DDIT (Inv.), Kolkata on 21/3/2017 regarding some verification carried out by him in connection with some bank deposit of M/s Shiv Kali trade in Axix bank limited. On the basis of this letter of Investigation, the Assessing Officer has send the proposal to Pr.CIT seeking approval U/s 151(1) of the Act for initiating proceeding U/s 148 of the Act. Our attention was also invited to the reasons recorded for reopening. After reopening, the Assessing Officer issued notice U/s 143(2) and 142(1) of the Act and specific query letter dated 14/11/2017. The assessee had filed a written reply and evidences proving genuineness of the share capital so received. However, the Assessing Officer has made addition in respect of share capital/premium. Our attention was also invited to the fact that the notice issued U/s 143(2) of the Act was beyond the statutory time limit provided under the Act. As per the ld AR, notice was issued after six months from the end of the relevant assessment years. For this purpose, reliance was placed on the decision of the Hon'ble Supreme Court in the case of ACIT & Anr. Vs Hot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has also not given any specific co-relation of deposit of any cash in the account of M/s Shiv Kali trade (India) with the share application money given by PVPL to the assessee company. 14. As per the ld AR, even approval given by the Pr. CIT for issuing notice U/s 148 of the Act was in a very routine and mechanical manner which was without application of mind by simply putting her signatures below the rubber stamped 'Yes, satisfied'. As per the ld AR, such mechanical approval does not fulfill the mandate of provisions of Section 151(1) of the Act. Accordingly, notice issued U/s 148 of the Act on the basis of such approval is bad in law. For this purpose, reliance was placed on the proposition laid down by the Hon'ble Supreme Court in the case M/s Chuggamal Rajpal Vs SP Chaliha (1971), 79 ITR 603 (SC) and the decision of the Hon'ble Delhi High Court in the case of United Electrical Co. (P) Ltd. Vs. CIT 258 ITR 317. 15. With regard to the merit of the addition, it was contended by the ld AR that the addition was made merely on the suspicion and without bringing any incriminating material on record to substantiate that the share application money emanated from the coffers of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to allotment of shares. Relevant queries made by the ld. AO, vide his letter No. DCIT/Circle/BHL/2012-13 dated 04-09-2012 are reproduced as under:- "4. Furnish complete details of Share capital, Share application money, Cash creditors and squared up credit account holders if any, i.e. name and full address, total loan/capital taken, date and mode of deposits, received, sources of deposits by the creditors their, PAN No. and indicate ward, where they assessed to tax etc.. In this regard, please prove their identity, credit worthiness and genuineness of transaction with the help of documentary evidence i.e. copies of accounts, bank statements, copies of cash books, copies of balance sheet and return of income in respect of new creditors introduced in your books of account in the year under consideration. Furnish name, complete address and PAN in respect of old creditors. - - - - - - - - - - - - - - - - - - 13. In the assessment proceedings you have shown shares money/shares capital subscriptions in the name of M/s Gajanand Goods Pvt. Ltd., and M/s Pasupati Vinimay Pvt. Ltd., for verification the letters were issued to both concern the letters a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CP5869J)-1559000 shares as below- S. No Date of allotment Allotte's Name Amount of Shares allotted 1. 20.07.2009 M/s Pasupati Vinimay Pvt Ltd M/s Gajanand Goods Pvt Ltd 253000 225000 2. 13.08.2009 M/s Pasupati Vinimay Pvt Ltd. 315000 3. 31.08.2009 M/s Pasupati Vinimay Pvt Ltd. 220000 4. 03.10.2009 M/s Pasupati Vinimay Pvt Ltd. 55000 5. 16.11.2009 M/s Pasupati Vinimay Pvt Ltd. 370000 6. 26.12.2009 M/s Pasupati Vinimay Pvt Ltd. 170000 7. 09.03.2010 M/s Pasupati Vinimay Pvt Ltd. 82000 8. 27.03.2010 M/s Pasupati Vinimay Pvt Ltd. 94000 Total 1784000 We are enclosing herewith the complete master data of M/S GAJANAND GOODS PVT. LTD. Ltd. (PAN-AAECS0181P) and M/S PASUPATI VINIMAY PVT LTD. (PAN-AADCP5869J) for your kind reference to resolve the matter of communication. Further we are enclosing herewith confirmations in original, received from the above companies, stated & confirm the investment made to our company marked as annexure-D. Reply Dated : 29.11.2012 1. "Share Capital confirmations : - It has been brought to our knowledge that you are sending confirmation/query letters to M/s Gajanand Goods Pvt. Ltd and M/s Pasupati Vinimay Pvt. Ltd b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )-225000 Shares and M/s Pasupati Vinimay Pvt. Ltd. (PAN-AADCP5869J)-1559000 shares. The assessee company has submitted all required papers, ROC forms and records to reveals the sources, creditworthiness and justifies the transaction. Complete set of documents containing Confirmation with all detail of cheque no., date & amount, copy of Bank Statement, Copy of PAN Card, Copy of acknowledgement of Income Tax Return for the A.Y. 2010-11, Copy of Balance Sheet year ended 31.03.2010, Copies of Shares allotment letters, Copy of minutes books of extract of resolution permitting the company for investment in the share of Kanchan India Limited and copy of Memorandum & Article of Association of both the companies are received, which are placed on record." 19. Subsequently, the successor AO received communication from DDIT(Inv.), Unit-1(3), Kolkata on 21-03-2017 regarding some verification carried out by him in connection with some bank deposits in A/c No. 9090200425725 of some party M/s Shiv Kali Trade(India), in Axis Bank Ltd., Burrabazar. This report sent by the DDIT vide his letter dated 10-03- 2017 received by the ACIT, Bhilwara on 21-03-2017. 20. The reasons so recorded for reopeni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 14.07.2017 raised the following objections against the reasons recorded by the AO for reopening of the assessment completed u/s 143(3),which were disposed of by the AO on 26.10.2017 as under:- (1). Assessee : That nowhere in the reasons recorded there has been any whisper of any failure on the part of the assessee company to disclose fully and truly all material facts necessary for assessment which is pre condition under proviso to sec. 147, where reopening is made after 4 years from the end of the relevant assessment year. Assessing Officer : This objection has got no force at all. The recording or non recording of the words "Failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment" would not itself bestow or oust jurisdiction. One would necessarily have to read the reasons as a whole to find out whether or not there has been a failure to disclose fully and truly all necessary facts for assessment (2). Assessee : That the issue of share capital was thoroughly examined by the AO in the original assessment proceedings u/s 143(3) and he recorded his categorical finding of satisfaction in para 4 of the assessment order. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has been considered, but the same is found to be not acceptable. This is because as per information available with the department, it is clear that mostly cash has been deposited in the bank accounts of Shiv Kali Trade. That such credit has been immediately transferred to other accounts, mainly to S K Impex on the same day or the subsequent day. From S K Impex the money has been transferred to Accent Commerce and from Accent Commerce to M/s Cuckoo Merchandise Pvt. Ltd. Carnation Tradelink Pvt. Ltd. and M/s Blackbird Tie-up Pvt. Ltd. From these entities fund has been transferred to RMB Finance and M/S. Pashupati Vinimay Pvt. Ltd..From M/S. Pashupati Vinimay Pvt. Ltd. the fund has been transferred to the assessee M/s Kanchan India Limited. It is also seen that M/s Pashupati Vinimay Pvt. Ltd. is not having any business as such. 6. In view of the above facts, the transaction between M/s Pashupati Vinimay Pvt. Ltd. and M/s Kanchan India Limited cannot be held as genuine. Therefore, the fund received from Pashupati Vinimay in the guise of share/share premium amounting to ₹ 15,59,00,000/- during the year under consideration cannot be held as genuine transaction. The fund re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009) 120 TTJ 786 (Mumbai- ITAT) (v) Alpine Electronics Asia Pte. Ltd. V. DGIT (2012) 341 ITR 247 (Delhi HC) (vi) Zakia Begum V. ITO, ITA No. 3002/Delhi/2016, DOJ-09-01- 2017 (vii) CIT V. M. Chellappan, 281 ITR 444, (Madras H C) (viii) C. Ramaiah Reddy V. DCIT, ITA No. 121/ Bangalore/2011, DOJ 27-01-2012 (ix) ITO v. R K Gupta (2008) 115 ITD 384, (Delhi-ITAT) 26. We also found that the proceedings u/s 147/148 have been initiated after four years from the end of the relevant assessment year without fulfilling the mandate of proviso to Sec. 147 of the Act. Therefore, the notice issued u/s 148 is bad in law. 27. In so far as the contention of the ld AR with regard to change of opinion while reopening the assessment U/s 147 is concerned, we found that during original assessment proceeding the AO specifically required the assessee through his letter date 04-09-2012 to furnish the following details to find out the genuineness of the share capital/share premium. "4. Furnish complete details of Share capital, Share application money, Cash creditors and squared up credit account holders if any, i.e. name and full address, total loan/capital taken, date and mode of deposits, received, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of extract of resolution permitting the company for investment in the share of Kanchan India Limited and copy of Memorandum & Article of Association of both the companies are received, which are placed on record." (Emphasis supplied) 28. It is an established position of law that when an issue or query is raised and answered by the assessee in original assessment and yet, the Assessing Officer does not make any addition in the assessment order, in such situations, it would have to be accepted that the issue had been examined but the Assessing officer did not find any ground or reason to make any addition or reject the stand of the assessee. When such an exercise is undertaken by the ld. AO, it can be regarded as a case where the Assessing Officer forms an opinion and that reassessment on the very same ground would be invalid because the Assessing officer having once formed an opinion in the course of the original assessment, although he did not record the reasons for the same, cannot be permitted to change his opinion through the reassessment proceedings. The case of the appellant is better placed than the above preposition as in its case the ld. AO has given a definite fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to give a schematic interpretation to the words "reason to believe"….. Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to re-open. 6. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. 7. One must treat the concept of "change of opinion" as an inbuilt test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief." 12) Before interfering with the proposed re-opening of the assessment on the ground that the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 148 merely because of the fact that now the Assessing Officer is of the view that the deduction under Section 10A was allowed in excess, was based on nothing but a change of opinion on the same facts and circumstances which were already in his knowledge even during the original assessment proceedings." Reliance is also placed on a recent decision dated 10.08.2018 of Hon'ble Karnataka High Court in the case of M/s TTK Prestige Ltd. Vs. DCIT, W.P. No. 30388/2015 (T-IT) in which the aforesaid judgement of Hon'ble Supreme Court has been followed. On the basis of the facts mentioned above and the decisions of Hon'ble Supreme Court and Delhi & Karnataka High Court mentioned above it is clearly a case of change of opinion which is impermissible in law. 29. In so far as applicability of proviso to Section 147 of the Act i.e. reopening after four years when assessment has been completed U/s 143(3) of the Act, we found that the assessee had disclosed each and every fact regarding the share capital /share premium in its balance sheet & produced all documents during the course of original assessment proceedings including confirmations, bank statements, copies of ITRs, balance-sheet, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is liable to be quashed being void ab initio. 30. We also found that the AO has issued notice u/s 148 on the basis of communication received from the DDIT (Inv.), Kolkata, purely for verification and for conducting enquiries etc. without there being any tangible material, on the basis of his suspicion and assumption. The notice issued on the basis of such communication without any independent enquiries having been conducted by the AO and without application of mind is bad in law and deserves to be quashed. The AO has initiated proceedings u/s 148 and completed assessment u/s 148/143(3) in the case of the appellant solely on the basis of communication dated 10-03- 2017 of DDIT, Unit 1(3), Kolkata received in the office of the AO on 21-03- 2017, the contents of which have been reproduced earlier, without carrying out any further enquiry, verification or investigation etc.. The AO has reopened the assessment completed u/s 143(3) and disturbed the finality of assessment without any independent application of mind. On perusal of the aforesaid letter dated 10-03-2018 of the DDIT (Inv) Kolkata, as reproduced in para 4. above, it can be seen that he has not made any allegation of escapeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position of law that proceedings u/s 147/148 cannot be initiated without any tangible material or credible information simply for the sake of carrying out any verification/ enquiry/verification/investigation etc.. This legal position has been affirmed by various courts time and again. (i) The Hon'ble Supreme Court in the case of Indian Oil Corporation V. ITO, (1986) 159 ITR 956, 970(SC) has held that the "reason to believe is not the same thing as reason to suspect". (ii) Pyramid Software & Technologies Vs. DCIT, (2007) 105 ITD 305 (Amritsar) "8.1 The expression used in Section 147 is that if the AO has 'reason to believe' that any income chargeable to tax has escaped assessment. The expression "reason to believe" used in Section 147 has special significance. It does not mean 'reason to suspect'. It is reasonable belief of a honest and reasonable person based upon reasonable grounds. The expression used is not 'satisfied'. The 'reason to believe' requires higher level of evidence and material than the requirement of 'satisfaction' of the AO which essentially means the material which comes to the notice of AO must be a definite, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be based on mere suspicion, gossip or rumour. The Assessing Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. The court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the court" (Emphasis supplied). (iv) C M Mahadeva Vs. CIT, ITA No. 795/2009/ of Karnataka High Court, DOJ 24.08.0215 "10. From a bare perusal of the aforesaid reasons recorded for reopening the concluded assessment for the assessment year 2004-05, what we notice is that the Assessing Officer was of the opinion that further investigation was required for proceeding to commence for the assessment year 2004-05, and on such basis he opined that he had reason to believe that source of Investment of purchase of property was not acceptable, and for which further investigation was necessary. As such, the Assessing Officer concluded that he had 'reason to believe' that income subject to tax had escaped assessment within the meaning of Section 147 of the Act. while forming such opinion, in the first par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case of Shankarlal Nagji & Co. & Ors. vs. ITO (supra) has held that a completed assessment cannot be reopened merely to make inquiries. That is the domain of regular assessment. From the reasons recorded it is apparent that the AO has reopened the assessment merely to make inquiries. - - - - - - - - -- In the case of Chhugamal Rajpal vs. S.P. Chaliha (supra), where the AO had while recording reasons mentioned "hence, proper investigation regarding these loans is necessary", the Supreme Court has held that his conclusion was there is a case for investigating as to the truth of the alleged transactions. The Court held that it was not the same thing as saying that there are reasons to issue notice under s. 148. Before issuing a notice under s. 148, the ITO must have either reason to believe that by reason of the omission or failure on the part of the assessee to make a return under s. 139 for any assessment year to the ITO or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year or alternatively notwithstanding that there has been no omission or fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which a reasonable person could have formed the requisite belief. To elaborate, the conclusive proof is not germane at this stage, but the formation of belief must be on the base or foundation or platform of prudence which a reasonable person is required to apply In ITO & Ors. vs. Lakhmani Mewal Das 1976 CTR (SC) 220 : (1976) 103 ITR 437 (SC), the Supreme Court held that the powers of the ITO to reopen assessment, though wide, are not plenary. The words used by the statute are "reason to believe" and "not reason to suspect". In the present case, as noticed hereinabove, from the reasons recorded, it is apparent that the AO did not have any material before him so as to satisfy the requirements of s. 147 of the Act in as much as, there is no material whatsoever before the AO on the basis of which a reasonable man would come to the conclusion that any income chargeable to tax has escaped assessment. The reasons recorded reflect that the AO feels that the matter requires detailed investigation and further verification. Thus, it appears that the AO has reason to suspect and not reason to believe that income chargeable to tax has escaped assessment. This, however, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... despite which if the reasons recorded fail the test of validity on account of a sentence contained, it would be for the Revenue to examine reasons behind it.'' (Emphasis supplied). These observations of the Hon. High Court are exactly applicable to the fact of the case of the appellant. Ashima Securities (P) Ltd. Vs. ITO, Ward - 2(2), New Delhi, ITA No. 3400 & 3401/Delhi/2013, DOJ 29.09.2017 "6. Ld. counsel for the assessee at the outset drew the attention of the Bench to the reasons recorded by the Assessing Officer and submitted that the Assessing Officer has reopened the assessment to make investigation of the investments made by the Assessing Officer on assets leased to it. Referring to the decision of Hon'ble Supreme Court in the case of Chhugamal Rajpal vs. S.P. Chaliha reported in 79 ITR 603 and the following decisions : (i) Madhya Pradesh Industries Ltd. vs. ITO reported in 57 ITR 637 (SC); (ii) Ranbaxy Laboratories Ltd. vs. CIT reported in 336 ITR 136 (Del); (iii) Vipan Khanna vs. ITA Nos.3400 & 3401/Del/2013 CIT reported in 255 ITR 220 (P&H) and (iv) Travancore Cements Ltd. vs. ACIT reported in 305 ITR 170 (Kerla), he submitted that the provisions of section 147 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the Hon'ble High Court in the said decision has held that where information was received from investigation wing that assessee was beneficiary of accommodation entries but no further inquiry was undertaken by Assessing Officer, said information could not be said to be tangible material per se and, thus, reassessment on said basis was not justified. Hon'ble High Court while deciding the issue has relied on its earlier decision in the case of Pr.CIT vs. Meenakshi Overseas (P.) Ltd. reported in 395 ITR 677. He accordingly submitted that the reassessment proceedings initiated by the Assessing Officer and upheld by the CIT(A) should be held as void ab initio. 11. Ld. DR on the other hand heavily relied on the order of the CIT(A) upholding the validity of the reassessment proceedings. Referring to para 18 of the decision of Hon'ble Bombay High Court in the case of Nivi Trading Ltd. (supra), he drew the attention of the Bench to the following paragraph :- "18. The Hon'ble Supreme Court thus held that section 147 authorises and permits the Assessing Officer to assess or reassess the income chargeable to tax, if he has ITA Nos.3400 & 3401/Del/2013 reason t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 147 can be initiated merely on the basis of the report of the Investigation Wing. So far as the first plank of his argument that the reassessment proceedings cannot be initiated to make further enquiries is concerned, we find the Hon'ble Bombay High Court in the case of Nivi Trading Ltd. (supra) has held that where the assessee had shown gift of shares to a company, merely because the assessee had been called upon by the Assessing Officer for verification of value of shares in terms of section 47(iii), it would not enable the Revenue to resort to section 147 of the I.T. Act. We find the Hon'ble Gujarat High Court in the case of Krupesh Ghanshyambhai Thakkar (supra) has held that the reassessment cannot be initiated for the purposes of deep verification. The relevant observations of the Hon'ble High Court from para 11 to 14 of the order read as under :- "11. At the outset, it is required to be noted that by the impugned notice, the assessment for AY 2009-2010 is sought to be reopened in exercise of power under Section 147 of the I.T Act. The reasons recorded to reopen the assessment are already produced hereinabove. Thus, as per the reasons recorded, the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rved hereinabove. Even as per the Assessing Officer in the reasons recorded has specifically mentioned that for the purpose of verification/ deep verification of the claim, it is necessary to reopen the assessment. Under the circumstances, it cannot be said that the Assessing Officer had any tangible material to form an opinion that the income chargeable to tax has escaped the assessment. Under the circumstances, the impugned action of reopening of the assessment in exercise of power under Section 148 of the I.T Act for the reasons recorded hereinabove cannot be sustained. 14. Resultantly, both these writ petitions succeed. Impugned Notice issued by the Assessing Officer under Section 148 of the Income-tax Act, 1961 in each case is hereby quashed and set-aside." 14. Similar view has been taken by various other High Courts relied upon by the ld. counsel for the assessee. Therefore, we hold that reassessment proceedings cannot be initiated for the purposes of making verification in absence of any valuable material available with the Assessing Officer to show that the income has escaped assessment. In view of the above discussion, we hold that the reassessment proceedings ini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d'. Such mechanical approval does not fulfill the mandate of provisions of sec. 151(1) of the Act. Notice issued u/s 148 on the basis of such approval is bad in law and deserves to be quashed. The ld. Pr. CIT, Ajmer has accorded approval for issuing notice u/s 148 in a very routine, mechanical manner & without application of mind by simply putting her signatures below the rubber stamped 'Yes, satisfied'. The approval has been accorded by the ld. Pr. CIT, Ajmer simply for verifying the transactions mentioned in the letter of DDIT (Inv.), Kolkata received by the ACIT, Bhilwara on 21.03.2017. In his proposal the AO has not mentioned the fact that the reopening was being made after 4 years from the end of the relevant assessment year and in the original assessment proceedings this issue had been examined by the then AO. It is an established position of law that proceedings u/s 148 cannot be initiated for the purpose of verification or inquiry etc.. The reopening in the case of the assessee has been made after four years from the end of the relevant assessment year. Proviso to section 147 is clearly applicable in this case. There is no whisper of applicability of such proviso in the rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er s. 151 of the Act, to grant or not to grant approval to the AO to reopen an assessment, is coupled with a duty and an authority vested with such jurisdiction is required to apply his mind, to the proposal put up to him for approval, in the light of material relied upon by the AO. That power cannot be exercised casually and in a routine manner. (iii) The Hon'ble Delhi High Court in its judgment dated 11.1.2017 in ITA No. 335/2015 in the case of Pr. CIT v. M/s N.C. Cables Ltd. while answering the following question of law. "(a) Did the Tribunal fall into error in holding that the Commissioner of Income tax (CIT) they did not in fact record satisfaction under Section 151 of the Income tax Act, 1961 for issuing notice under section 147, in the circumstances of the case?" Held as 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Ltd. (Delhi ITAT) - Judgment dated 22.10.2014, ITO vs. M.B. Jewellers (P) Ltd. (Delhi ITAT) judgment dated 14.11.2014, Amar Lal Bajaj vs. ACIT (2013) 37 Taxmann.com 7 (Mum) (Trib), CIT vs. M/s S. Goyanka Lime and Chemicals Ltd. 2015 (5) TMI 217 and Pr. Commissioner of Income Tax vs. N.C. Cables Ltd. (ITA No. 335/2015), for the principle that where the authority to grant/sanction merely recorded "Yes, I am satisfied", such an approval/sanction is not sustainable. 10. We have gone through the decisions relied upon by the Ld. AR. In the decision reported in CIT vs. M/s S. Goyanka Lime and chemicals Ltd. (supra) it is held by the Hon'ble Madhya Pradesh High Court as follows: "7. We have considered the rival contentions and we find that while according sanction, the Joint Commissioner, Income Tax has only recorded so "Yes, I am satisfied". In the case of Arjun Singh (supra), the same question has been considered by a Coordinate Bench of this Court and the following principles are laid down" - "The Commissioner acted, of course, mechanically in order to discharge his statutory obligation properly in the matter of recording sanction as he mere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emanated from the coffers of the assessee, we found that the genuineness of the share capital/share premium was thoroughly examined by the then AO who completed the original assessment u/s 143 (3) on 21.12.2012 and he recorded a categorical finding of his satisfaction regarding identity, creditworthiness and genuineness of transaction of the two companies to whom the shares were allotted. Subsequently on the basis of report dated 10.03.2017 of the DDIT (Inv.) Kolkata, received by the ACIT Bhilwara on 21.03.2017, the successor AO initiated the reassessment proceedings. It has also been discussed earlier that there was nothing concrete against the assessee in the report and the DDIT (Inv) Kolkata had requested the jurisdictional AO i.e. ACIT Bhilwara to further investigate, analyse and verify the exact nature of transaction between the assessee company and M/s Shiv Kali Trade (India) in whose account some cash was introduced.. The DDIT (Inv) had clearly mentioned in his aforesaid letter that the nature and exact purpose of transactions of the said assessee M/s Shiv Kali Trade (India) could not be verified. During the course of reassessment proceeding the AO again asked the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h. Diamond Tools Pvt. Ltd., [2014] 44 Taxmann.com 460. CIT v/s Bhaval Synthetics (P) Ltd , (2013) 217 Taxman 23(Raj) The ITAT, Jaipur in the case of Shalimar Buildcon Pvt. Ltd. Vs. ITO, [2011] 136 TTJ 701 decided similar issue as under: "Shareholder companies having admitted to have subscribed to the share capital of the assessee company and accounted for the source of funds in their books of accounts which is not shown to be incorrect or false, no case is made out for making addition under s.68 in the absence of any evidence to show that the share capital represented accommodation entries". The Hon'ble Delhi High Court in the case of Value Capital Services (P) Ltd 307 ITR 334 (Delhi High Court) held that there is additional burden on the department to show that even if share applicants did not have the means to make investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as undisclosed income of the assessee." 33. The detailed finding so recorded by the ld. CIT(A) while deleting the addition has not been controverted by the revenue by bringing any positive material on record. Accordingly, we do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e year under consideration. Furnish name, complete address and PAN in respect of old creditors." In compliance, the assessee furnished all the details, confirmations, bank statements and other evidences etc. vide its reply dated 06.05.2013 to prove the genuineness of the share capital /share premium subscriptions in the names of M/s Sunflower Merchants Pvt. Ltd. and M/s. Pasupati Vinimay Pvt. Limited (hereinafter referred as PVPL). The relevant excerpts from the above reply are reproduced as under:- "(4) New addition of Share Capital & Cash Credit: - Further during the year under review the company has also taken fresh loans from twenty persons and these transactions are justifiable. Loan amounts had been given by the said persons from their available funds and out of sources of income for the year under review. We are enclosing herewith the confirmations with full Name, PAN & Address, Acknowledgement of Income Tax Return, Bank Statement, Capital a/c and Balance Sheet, which reveals the sources & creditworthiness marked as Annexure-B. Addition of Share Capital During the year under review, assessee company has made an addition of capital amounting to ₹ 92.90 Lacs by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lable with the undersigned it is observed that in the bank account bearing No.909020042572 in Axis Bank Ltd., Bumabazar branch, Kolkata of M/s Shiv Kali Trade, cash has been deposited directly or through clearing which was transferred on the same day or the subsequent day to M/s S.K. Impex. Further verification of bank accounts of M/s S. 1C impex revealed that the fund debited to Accent Commerce and then from there to M/s Cuckoo Merchandise Private Limited, M/s Carnation Trade Link Pvt. Ltd and M/s Blackbird Tie-up Pvt. Ltd. and from the above entities this fund debited to M/s Pasupati Vinimay Pvt. Ltd. who ultimately transferred the said fund to the assessee company i.e. Kanchan India Limited. The assessee company M/s Kanchan India Limited issued 1,94,000 shares to Pasupati Vinimay Pvt. Ltd against the aforesaid fund received. From the information available it is also seen that these above entities were not having any substantial business turnover and this fund was routed without economic rationale. After considering the whole scenario I have prima facie belief that Assessee Company received accommodation entry in the form of share application money. I therefore, have reason to ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
