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TMI Blog2019 (6) TMI 651X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the assessment for the A.Y. 2009-10. The assessee was asked to provide justification and past performance of the company to receive huge share premium and also to provide details such as income tax returns, copies of balance sheets, copy of bank statements of the shareholders namely M/s. Arena Textiles and Industries Pvt. Ltd., and from Shri Madanlal Paliwal, where the assessee received share application money of Rs. 1,99,20,000/- and Rs. 1,45,25,000/- respectively. 4. Assessee filed basic documents relating to the said share application money in respect of both the investors such as the income tax returns, copy of balance sheets and their bank statements to prove the identity, genuineness and creditworthiness of the shareholders. Assessee filed valuation report of the premium received from the shareholders. In the course of the assessment proceedings assessee also contended that the notice u/s. 148 of the Act dated 30.03.2016 which was sent though speed post was not served on the assessee within the time prescribed and therefore the assessment is time barred. However, not convinced with the submissions made by the assessee the Assessing Officer treated share application money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any case he submits that since the assessee has attended for the subsequent notices as per the provisions of section 292BB of the Act it shall be deemed that any notice under any provisions of this Act has been duly served in accordance with the provisions of the Act. 7. Coming to the merits of the case, the Ld. DR submitted that shareholder company could not be found by the investigation wing of Kolkata and therefore the Assessing Officer could not serve summons u/s. 131 of the Act. Ld. DR submits that the Inspector deputed could not found the company. Ld. DR also submits that the Statement of one Mr. Mantosh Kumar Yadav who provided only accommodation entries was recorded wherein he has stated that he is the Director of 66 Companies all these companies are paper companies and the shareholder from which the assessee has obtained share application money is one of such company. Ld. DR also submits that shareholder company has shown negligible taxable income. It is therefore submitted that the assessee has not provided any details to the Assessing Officer to prove the identity, genuineness and creditworthiness of the transactions. Reliance is placed in the case of CIT v. NRE Iron a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stand of the Assessing Officer is full of contradictions, irrelevant and against the just and fair view. Rather, the attempt has been made by the Assessing Officer to conceal the fact and report patently false facts. This can be verified from the assessment record as well as report of the Assessing Officer. dated 9/8/2017. It is submitted that having noticed that the notice u/s. 148 of the Act dated 25.04.2016 was time barred for A. Y. 2009-10, Assessing Officer sent notice dated 30/3/16 with a view to cover the failure of proper service of notice in time. Therefore, it is submitted that the contention of the Assessing Officer that valid issue and/service of notice u/s 148 was made is not tenable in law. 10. Ld. Counsel for the assessee further submits that the Appellant never participated in the assessment due to pendency of application u/s.144A. Therefore, he submits that the Assessing Officer has erroneously placed reliance u/s 292BB of the Act, and it is the settled law that legal defects cannot be cured even u/s 292BB particularly when the application u/s I44A remained unattended. Therefore, this plea of the Assessing Officer does not hold good on the facts and in law. Rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case under appeal and have carefully considered the finding of the Assessing Officer in assessment order, counter representation of the Appellant, evidences on record, application under rule 46A, counter comments dated 09.08.2017 of the Assessing Officer and rival submission of the appellant. I find that Appellant has demonstrated with necessary evidences that no notice under 148 was ever issued in time on correct address of the Appellant i.e. " M/s Re N Raga Media Pvt. Ltd., Bunglow No. A8, SVP Nagar, Nr., Versova Tel.Exchange Andheri (W), Mumbai 400 053. The notice u/s 148 dated 25.04.2016 issued by ACIT Cir-2, Thane and served on assessee on 30.04.2016 was time barred because for issuing notice u/s 148 for AY 2009-10, limitation was upto 31.03.2016. For ready reference, copy of notice is demonstrated as under: - NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT, 1961 PAN - AAKCS8934L Office of the Asst. Commissioner of Income-tax, Circle-2, Thane, Ashar I.T. Park, Road No. 16Z, Wagle estate, Ambika Nagar, Thane (W) Dated 25/04/2016 To, M/s Re N Raga Media Pvt. Ltd. Bungalow No. A/8, SVP Nagar, Near Versova Tel Exchange, Andheri (W), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osures. This letter is issued in vow of the provisions of Sec 129 of the I.T.Act 1961. Yours faithfully (DHIRAJ KUMAR) Asstt. Commissioner of Income-tax, Circle-2, Thane 3.8 When same Assessing Officer has intimated the appellant about change of incumbency at new and correct address in 2015, it is not understood as to why subsequently on 30.03.2016, he has issued notice on different or wrong address. However, a new notice u/s 148 dated 25.04.2016 was issued on correct address which was time barred, hence the factual clarification made by the learned A R cannot be ignored. Obviously, no such notice dated 30.03.2016 was ever issued on correct address. Similarly, no proper affixture was made at correct address on 31.03.2016 by the inspector. Further it is noteworthy that so called affixture has also been done, if at all has been done, at wrong address, therefore it is very evidence that while submitting the counter comment dated 09.08.2017, learned Assessing Officer has concealed the basic facts that inspite of knowing correct address, such notices wers really issued, if these were issued, at wrong address. The authenticity of service through affixture has been successfully chal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the appellant. It is pertinent to mentioned that by letter dated 24.12.2016, appellant has submitted its objection nevertheless, Assessing Officer had not refuted it with any reliable evidence in possession, hence such reassessment proceeding is bad in law as held by Hon'ble Bombay High Court in the case of Bayer Material Science Pvt.Ltd. vs. DCIT (2016)382 ITR 333(Bombay) and Bharat Jayantilal Patel Vs. Union of India (2015) 378 ITR 596(Bombay)." 13. None of these findings of the Ld. CIT(A) have been rebutted with evidences before us. As the Revenue could not prove that there was proper issue and service of notice u/s. 148 of the Act on the assessee within the time prescribed i.e. on or before 31.03.2016 for the A.Y. 2009-10, the Ld. CIT(A) has rightly concluded that the reopening u/s. 147 is bad in law. On this ground alone the assessment framed u/s. 143(3) r.w.s 147 of the Act is liable to be quashed. 14. Even on merits the Ld. CIT(A) examined the addition made by Assessing Officer with references to the evidences furnished by the assessee and the averments of the Assessing Officer and concluded that the assessee has proved the identity, genuineness, creditworthine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CENTRAL Circle)-XIII, Kolkata, creating demand of Rs. 3,07,560/- has been submitted. This is not new or additional evidence, but the basic evidence available with department. Similarly assessment order of AY 2009-10 dated 26.12.2011 of M/s Arena Textiles And Industries Ltd. has been submitted which proves the identity of the investor company. Similarly, copy of bank statement submitted reveals the advancement of money through proper channel, hence genuineness of transaction is also visible. Further, as clarified by the appellant, investor company was having sufficient fund to advance the share application money. It has got share holding funds of Rs. 48,15,43,667/- in AY 2009-10, hence creditworthiness is also established by the appellant. Therefore, unless contrary evidence is brought on record by the Assessing Officer, no such addition can be made on the basis of presumption and surmises. In making any assessment under section 143(3) or 147, the Assessing Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under section 143(3) vide; { ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) ITA No. 3644/Mum/2014: ITO 10(2)(4) vs M/s Sitara Properties Pvt Ltd. iii) ITA No. 3646/Mum/2014: ITO 10(2)(4) vs M/s Samsung Builder & Developer Pvt Ltd. iv) ITA No. 3647/Mum/2014: ITO 10(2)(4) vs M/s Soumya Trading & Finance Pvt Ltd. v) ITA No. 3648/Mum/2014: ITO 10(2)(2) vs M/s Prarup Properties Pvt Ltd vi) ITA No. 3650/Mum/2014: ITO 10(2)(2) vs M/s Roop Darshan Real Estate Pvt Ltd vii) ITA No. 3651/Mum/2014: ITO 10(2)(2) vs M/s Sumangal Builder & Developer PLtd. In all the above cases the Assessing Officers have made additions u/s 68 of Income Tax Act of Share Application Money received based on information provided by the Investigation Wing of Income Tax Department. However, the additions were deleted by the respective learned CIT(A) against which the department had filed Appeals before the Hon'ble ITAT, Mumbai. The Hon'ble ITAT Mumbai dismissed the Appeals filed by the department following the Ratio laid down by earlier decisions of the Hon'ble Tribunal, more particularly the case of ITAT E Bench in M/s. SDB Estate Pvt Ltd. vs. ITO - 5(3)(2) in ITA No. 584/Mum/2015; and deleted the addition. Thus in the light of above factual analysis, refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the preponderance of evidence indicates absence of culpability and complexity of the assessee it should not be harassed by the Revenue's insistence that it should prove the negative. In the case of a public issue. the Company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribers. The Company must, however, maintain and make available to the Assessing Officer for his perusal, all the information contained in the statutory share application documents. In the case of private placement the legal regime would not be the same. A delicate balance must be maintained while walking the tightrope of sections 68 and 69 of the IT Act. The burden of proof can seldom be discharged to the hilt by the assessee: if the Assessing Officer harbours doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the Company. 16. In this analysis, a distillation of the precedents yie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill produce all parties before the AO during remand proceedings." 2. Mr. Pinto, the learned counsel for the Assessee submits that the Assessing Officer upon considering all the facts had added Rs. 95 lakhs as income under Section 68 of the Income Tax Act. It needs to be considered that the Assessee had not discharged its onus to establish that the amount was received by the Assessee from the share holders as share application money. The Assessee could not prove the identity of the creditors, their credit worthiness and the genuineness of the transactions. The party from whom the Assessee had received the share amount never responded to the summons issued by the Assessing Officer. The Assessing Officer has considered the said aspect and thereafter has added the amount under Section 68 of the Income Tax Act. According to the learned counsel, the Tribunal only on the basis that documents are available has accepted the case of the Assessee. The Tribunal has failed to consider the circumstances and the facts which are relevant. 3. The learned counsel for the Assessee supports the order and submits that the Assessee had discharged its onus. The Assessee had produced the PAN of all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no order as to costs." 18. The Hon'ble Delhi High Court in the case of MOD Creations Pvt. Ltd., v. ITO [354 ITR 282] held as under: - "13. In the light of the above principle, let us examine as to what the authorities below found vis-à-vis the genuineness of the transactions and the creditworthiness of their creditors. (i) The fact that there was sufficient balance available with the creditors when cheques have been issued to the assessee company was established. (ii) It was also established that the funds available at the relevant point in time were not infused into the bank accounts of the creditors by way of cash but were in fact credited to their account again by way of cheques largely on account of commissions received by them save and except two transactions of Rs. 1 lac each received by two creditors from verifiable donors. (iii) The bank accounts as well as returns filed by the creditors who were assessable to tax alongwith their PANs‟ were also available with the A.O. (iv) The assessee in turn had received the monies by way of cheques in respect of which credits were made in their books of accounts. (v) The creditors had also placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "9. We have heard the rival submissions, perused the orders of the authorities below, the case laws relied on and the material furnished before us. The only issue involved in this appeal relates to the deletion of addition of Rs. 20 lakhs made by the Assessing Officer towards unexplained unsecured loans and interest thereon amounting to Rs. 2,35,246/. Search and seizure action u/s. 132 of the Act has been conducted in the case of Shri Pravin Kumar Jain and statements were recorded from him and he is said to have been deposed that he is providing only accommodation entries through various concerns. On the basis of this information received from DGIT(investigation), Mumbai the Assessing Officer noted that assessee was one of the beneficiaries of accommodation entries given by Shri Pravin Kumar Jain. Assessee was required to explain the unsecured loans obtained in the name of M/s Mohit International and M/s.Natasha enterprises of Rs. 10 lakhs each and prove the genuineness of the transactions. Assessee furnished information in respect of the above transactions i.e. copy of Loan confirmation and Affidavit establishing identity of the lender, copy of ledger giving detail towards loan t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced copy of a comprehensive Affidavit of Shri. Pravin Kumar Jain dated 25.04.2014 retracting, the statements made before the Investigation Wing. Assessing officer has not given opportunity to the appellant for cross examination of Shri Pravin Kumar Jain. Going by the discussion contained above, it is obvious that the inference drawn by the Assessing officer against the appellant is not sustainable for the simple reason that the principles of natural justice have not been followed. First and foremost, the appellant has not been given any access to the material (reports, intimations, statement etc.) used against it. Secondly, by withholding the said material the assessing officer has denied to the appellant an opportunity to refute the evidence by cross examining the witnesses, statements, if any made by whom, incriminated the appellant. On both counts, the impugned assessment order fails squarely. 6.4. It has to be said that the appellant had done everything in its power to prove the three ingredients required to prove the satisfactory nature of the loan transactions. He has submitted confirmation from the parties. filed Audit Reports of the parties alongwith copy of their IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties, the appellant submitted that the AO has also ignored the fact that the said interest expenses were incurred wholly, exclusively & necessarily for business of the Appellant. The interest paid on loans was subject to TDS. During the present proceedings, the appellant also submitted the details of the TDS made on the loans wherever it is applicable and the details of amount of TDS paid into the Government account. In the appellant case the addition made towards the said loans is deleted after discussing the issue in detail in the above paragraphs. 6.6. Thus, above discussion and various explanations leads to the conclusions that the Ld. Assessing officer has made addition of Rs. 20,00,000/- and interest given to the parties, disregarding the evidence on record and without discharging his onus and without establishing anything to the contrary to the submissions of the appellant and without verifying the bank account, existence of entities who have extended loans to the appellant and without making fruitful investigation. Therefore, the Assessing officer is directed to delete the addition made of Rs. 20,00,000/- on account of unexplained unsecured loans and Rs. 2,35,246/- ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rious evidences to establish that the transactions are genuine, creditors are identifiable and credit worthiness is proved. Following information is furnished by the assessee. (1) Confirmation of A/c. by the parties. (2) Income tax returns of the parties for A.Y.2012-13. (3) Bank Statements of the parties showing the loan transactions. 7. By providing all this information to the Assessing Officer the assessee has discharged the initial onus of proving genuineness of the transactions u/s. 68 of the Act. Even the assessee requested Assessing Officer for issue of notices u/s. 133(6) of the Act to the lenders to find out the genuineness of the transactions with the assessee. Therefore, once the initial onus is discharged by the assessee the burden shifts to the Revenue to disprove the claim of the assessee. We notice that all the loans were taken through banking channels and the repayments for the same was also made through banking channels. The Assessing Officer ignored the documentary evidences submitted by the assessee and has exclusively relied on statements of third party in making the addition. In spite of request by the assessee the Assessing Officer did not provide a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of statements of Mr. Mukesh Choksi and Mr. I.C. Choksi and associated brokerage companies. The Hon'ble ITAT on the analysis of the findings made in the assessment orders has reached to the conclusion that the re-opening itself is bad in law and quashed the orders accordingly. The ratio of these judgments is applicable to the facts of the instant case. This is confirmed by the Delhi Bench of the Income Tax Appellate Tribunal in the case of DCIT v. Nipun Builders & Developers P. Ltd. (ITA No.557/DEL/2010) wherein the Tribunal dismissed the Revenue appeal by holding that the Assessing Officer has primarily relied upon the Report of the Investigation wing which cannot conclusively prove that assessee's own money was invested in the form of share application money. 5.12. Further, in the recent judgment of Shri.Jafferali K Rattonsey V. DCIT reported in 5068/Mum/209, the Mumbai Bench of the Income Tax Appellate Tribunal has also held that the mere statement of a person cannot be a deciding factor for rejecting the genuineness of the purchase of shares by the assessee specially when all other supporting evidences filed by the assessee were neither proved to be fals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of the assessment proceedings and accordingly had duly discharged its onus by furnishing the identity and address of the parties. Further, the source of receipt through banking channels to substantiate the genuineness of the credits reflected in its books of Account. 5.14. Further, it may be pointed out that section 68 under which the addition has been made by the Assessing Officer reads as under-: "68. Where any sum is found credited in the books of an assesses maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. 5.15. The phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this, case the legislative mandate is not in terms of the words "shall be charged to income-tax as the income of the assessee of that previous year". The Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuine and made addition u/s 68 of the I.T Act on the basis of the statement of Shri Nilesh Parmar, one of the associate of Shri Praveen Kumar Jam, Director of Mohit International and one of the dummy Director of some of the companies of Shri Praveen Kumar Jam. Although said statement has been immediately retracted by him by filing an affidavit with the CBDT, the CIT(A) has deleted the said addition as in his opinion the assessee has duly discharged his onus as laid down on it u/s. 68 of the I.T.Act. It was also noted by the CIT(A) that the assessee has proved the identity, credit worthiness as well as genuineness of the transactions and, therefore, no addition u/s. 68 can be made. 7. The learned AR before us relied on the order of the CIT(A) and has also pointed out that the loan received by the assessee has been returned to the respective parties through cheques and in none of the case the respective party has deposited any cash. He relied on the following Tribunal decisions: * Arceli Realty Ltd vs. ITO [ITA No.6492/Mum/2016 dated 21.04.2017 (Mumbai)] * M/s Komal Agrotech Pvt. Ltd. vs. ITO [ITA No.437/Hyd/2016 dated 25.11.2016 (Hyderabad)] * Sudhanshu Suresh Pandhare vs. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied upon by the learned AR. We noted that this Tribunal in similar circumstances in the case of Komal Agrotech Pvt. Ltd. vs. ITO in ITA No. 437/Hyd/2016 vide its order dated 25.11.2016 has held as under: A plain reading of the assessment order demonstrates that the AO merely went by the Investigation done by the office of D G. I T (Investigation), Mumbai. No enquiries or investigation was carried out. No evidence to controvert the claims of the Assessee was brought on the record by the AO. Even the statement of Shri Praveen Kumar was supplied. Nothing is on record about the result If investigations done by DGIT (Inv), Mumbai. The papers filed by the assessee do demonstrate the identity, creditworthiness and genuineness of the transaction. The addition is made merely on surmises and conjectures. In view of the above, we hold that the addition made under section 68 of the Act is bad in law. We noted that in the said case also loan had been received from Javda India Impex Ltd. 12. Being consistent with the view taken by this co-ordinate Bench in the case of Komal Agrotech Pvt. Ltd. (supra), and in view of the facts and circumstances, we do not find any illegality or infirmity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocuments. The assessee further submitted that it has furnished confirmation letters alongwith copies of their bank statement and acknowledgement of IT returns showing the above transactions. The assessee further contended that in response to notices u/s 133(6) issued by AO, the above parties replied alongwith documents mentioned in the notice, therefore, there is no reason for the AO to doubt the transactions only on the basis of information received from Investigation Wing that too, without providing any opportunity of cross examination of the parties. In this regard, he relied upon plethora of judgements including the judgement of Hon'ble Bombay High Court in the case of CIT vs Gagandeep Infrastructure Pvt Ltd 349 ITR 680 (Bom) and Hon'ble Supreme Court in the case of Lovely Exports Pvt Ltd vs CIT 216 CTR 295(SC). "5. We have heard both the parties, perused the material available on record and gone through the orders of authorities below. The AO made addition towards unsecured loans received from Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd on the basis of information received from Investigation Wing which revealed that the assessee is the beneficiary of bogus acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction and creditworthiness of the creditors. Once the assessee discharges initial burden placed upon him, then the burden todis prove the said claim shifts upon the AO. In this case, the assessee has discharged his onus cast u/s 68 by filing identity of the creditors, genuineness of transactions and creditworthiness of the parties which is evident from the fact that the assessee has furnished financial statements of the creditors wherein the said transaction has been disclosed in the relevant financial years. We further notice that the assessee also filed financial statements of the creditors which are enclosed in paper book filed. On perusal of the financial statements filed by the assessee, we find that both the companies are active in the website of Ministry of Corporate Affairs. This fact has been further supported by the letter of AO wherein the AO has accepted that both companies, viz. Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd are active in MCA website. We further notice that both the companies have filed financial statements for the year ending 31-03-2006. Therefore, we are of the considered view that the assessee has discharged its initial burden cast u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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