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TMI Blog2019 (6) TMI 1296X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. We do not find any reason to not to uphold the order of the learned Pr. CIT u/s 263 of the income tax act as the order passed by the learned assessing officer u/s 147 read with section 143 (3) of the income tax act is erroneous and prejudicial to the interest of the revenue. Accordingly, all the grounds raised by the assessee in this appeal are dismissed. - ITA No 2791/Del/2017 - - - Dated:- 26-6-2019 - Shri Prashant Maharishi, Accountant Member And Shri K.N. Chary, Judicial Member For the Assessee : Shri R. C Rai, CA, Ms. Kamal Sharma, CA For the Revenue : Shri S. S. Rana, CIT DR ORDER PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the assessee against the order of the ld Pr. CIT-8, New Delhi dated 24.03.2017 for the Assessment Year 2009-10 passed u/s 263 of The Income Tax Act [ The Act] holding that assessment order passed u/s 147 read with section 143 (3) of the Act by The Income Tax Officer, Ward 22 (4), New Delhi [ The AO] dated 31/7/2014 is erroneous and prejudicial to the interest of the revenue. 2. The assessee has raised the follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btaining necessary approval from the higher authorities by issuing notice u/s 148 on 18/3/2014. In response to the above notice, assessee submitted a letter dated 23/5/2014 stating that the original return filed u/s 139 of the income tax act may be treated to have been filed in response to notice u/s 148 of the income tax act. 4. As assessment proceedings u/s 147 commenced, The learned assessing officer asked the assessee to prove the cash credit of INR 7,500,000 under section 68 of the income tax act. The assessee filed confirmation and copy of the income tax return as well as other necessary details to discharge the onus cast upon under section 68 of the income tax act. The notices u/s 133 (6) were further issued and notices u/s 131 has also been issued. The statements were also recorded of the directors in this regard. Consequently assessment order u/s 143 (3) read with section 147 of the income tax act was passed on 31/7/2014 accepting the returned income of the assessee. 5. During the course of the review of the assessment work of some of the charges, it was noticed by the learned principal Commissioner of income tax that though the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hare 9 substantially less than at what the shares were acquired by entry operator). Thereafter the learned principal Commissioner of income tax discussed the various seized materials found during the course of search wherein the name of the middlemen, the date of the transaction, the instrument numbers and the bank account were mentioned. He further referred to several seized material along with the cash book found. He then held that as he has perused case records of the assessee for the relevant assessment year and found that there is nothing on record to show that the learned assessing officer has ever confronted the assessee on such seized documents. He further held that had the AO examined the seized material, there should have been some noting either in the order sheet or in the questionnaire issued to the assessee by the AO or in the submission of the assessee before the assessing officer. He further held that the learned assessing officer has merely tried to verify the existence and the creditworthiness of the parties investing in the shares of the assessee company. He failed to make inquiries regarding the genuineness of the transactions whether the cheque was issued in lie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted in terms of the decision of the honourable Supreme Court of India in the case of NTPC Ltd vs CIT 229 ITR 383 (SC). 10. The learned departmental representative vehemently opposed the additional ground raised by the assessee and stated that it has never been raised before the lower authorities and there is no reasons stated by the assessee that why it has not been raised before the lower authorities and therefore now it cannot be raised by the assessee. 11. We have carefully considered the rival contention and find that the assessee has raised a legal ground, which is going to the root of the matter and does not require investigation of any fresh facts. Further legal grounds can be raised at any time. In view of this, we admit the additional ground raised by the assessee. 12. As it has been requested by the learned authorised representative to first decide the additional ground raised by the assessee, we proceed to hear the same. 13. The assessee submitted that notice u/s 143 (2) of the income tax act has never been served on the assessee and therefore the assessment order passed by the learned AO is invalid. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the order passed by the learned assessing officer cannot be held to be erroneous and prejudicial to the interest of the revenue. He therefore submitted that the order passed by the learned principal Commissioner of income tax under section 263 of the income tax act is liable to be quashed. 17. Countering the argument of the learned authorised representative, the learned departmental representative stated that the learned assessing officer has failed to examine the seized material found during the course of the search which was required to be verified by him before making an assessment u/s 147 of the income tax act. He further stated that the case of the assessee was reopened for the purpose of the verification of the cash credit which has resulted into seizure of huge documents which clearly showed that the assessee has obtained an accommodation entry and therefore failure of the assessing Officer to examine these seized material clearly vitiate the assessment proceedings and therefore the order passed by the learned assessing officer is erroneous and prejudicial to the interest of the revenue. He further referred to para number 5 onwards of the order of the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir Estate P Ltd 386 ITR 162 has held as under :- (21) After hearing the learned advocates, we are of the opinion that the following questions arise for consideration : (a) Whether in the light of the views expressed in the case of Lovely Exports (supra) and Steller Investment (supra), the order under section 263 directing further investigation is legal ? (b) Is the finding of the Commissioner of Income-tax that unac counted money was or could have been laundered as clean share capital by creating facade of paper work, routing the money through several bank accounts and getting it the seal of statutory approval by getting the case reopened under section 147 suo motu perverse ? (c) Whether the order passed by the Assessing Officer under section 143(3)/147 of the Income-tax Act is erroneous and also prejudicial to the interests of the Revenue ? (d) Whether the impugned judgment of the learned Tribunal is per verse ? (22) We shall consider the second question first. In a commentary on the Prevention of Money Laundering Act, 2002 by Dr. M. C. Mehanathan published by Le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned author as follows : It has to be kept in view that India has a problem of black eco nomy, which is unaccounted and many a time the holders of black money also launder the black money in order to acquire legitimate assets. Legal or illegal income which evades tax and illegal income that comes within the exempted taxation slab constitute the unre ported Gross Domestic Product or black economy. Laundering the black money and laundering proceeds of crime are two different issues, although there is frequent overlap between the two. While laundering black money is to be handled through taxation laws or similar laws, the laundering of proceeds of crime is to be handled through special anti-money-laundering laws. (23) The following pieces of evidence are noticeable : (a) 39 corporate subscribers purchased 7,92,737 shares of ₹ 10 each at a premium of ₹ 390 per share. In the process the assessee-company raised a paid up share capital of ₹ 79.27 lakhs with a premium of ₹ 31.7 crores. (b) From the information made available by the assessee, it appears that 19 out of 39 applicants secured f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany or of the subscribing company which goes to show that correctness of this assertion is not in dispute. (24) From the aforesaid evidence the following, prima facie, infer ences can safely be drawn : (a) The promoter/directors of the assessee and their close relatives and friends had united with the common object of creating at least 20 (19+1) companies apparently having a large capital base, but, in fact these are mere paper companies having no real worth. The transaction of sale and purchase of shares was nominal rather than real. (b) The allegation, in response to the notice to show-cause under section 263 that it bears importance to state here that the investor com panies of shares were interested to subscribe shares of the assessee com pany as, according to them, the assessee-company had prospect in future, is a plain lie. (c) The blank share application forms, etc., tabulated above go to show that the alleged application for shares and the alleged allotment were not in the usual course of the business. (d) In the light of the aforesaid pieces of evidence and the prima facie finding, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer has jurisdiction to make enquiries with regard to the nature and source of a sum credited in the books of account of an assessee and it would be immaterial as to whether the amount so credited is given the colour of a loan or a sum representing the sale proceeds or even receipt of share application money. The use of the words 'any sum found credited in the books' in section 68 indi cates that the said section is very widely worded and an Income-tax Officer is not precluded from making an enquiry as to the true nature and source thereof even if the same is credited as receipt of share application money. In the case of Sumati Dayal v. CIT [1995] 214 ITR 801 (SC). Their Lordships held that a capital receipt can become taxable if the explanation offered by the assessee about the nature and source thereof is not satis factorily explained. The judgment in the case of CIT v. Lovely Exports Pvt. Ltd. reported in [2008] 299 ITR 268 (Delhi) lends no assistance to the assessee because in that case the Division Bench reiterated that omission to make an enquiry, where such an exercise is provoked, shall render the order of the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 323 (SC), the Tribunal had held as follows (page 327) : The Tribunal further held that if the orders for 1955-56 to 1959-60 were left out and the assessment order for 1960-61 was considered by itself, it could not be said that the assessment order was prejudicial to the interests of the Revenue. It was also observed that the factum of advance of initial capital, realization of amounts by sale of gold orna ments and the carrying on of the money-lending and speculative business had already been accepted and assessed in the previous years, that even in the year of assessment in question the Income-tax Officer had added ₹ 1,499 to the disclosed income from speculative business and ₹ 1,270 to the disclosed income from interest and made the assessment on a total income of ₹ 9,037 ; as such it could not be said that the assessment was prejudicial to the interests of the Revenue and that at the most it could be said that the assessee could not have carried on any business at the addresses given by her but where an assessment has been made without territorial jurisdiction it could not be said to be prejudicial to the interests of the Revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Commissioner of Income-tax, is held. The assessee is interested in stalling that investigation on the plea that the order of the Assessing Officer is neither erroneous nor prejudicial to the interests of the Revenue. (28) We have indicated above the pieces of evidence which go to show that the Commissioner had reasons to entertain the belief that this was or could be a case of money laundering which went unnoticed because the Assessing Officer did not hold the requisite investigation except for calling for the records. The evidence which we have tabulated above and the prima facie inference drawn by us is deducible from the documents also submitted before the Assessing Officer. The fact that the Assessing Officer did not apply his mind to those pieces of evidence would be evident from the assessment order itself which reads as follows : During the financial year the assessee-company has issued 792737 No. of equity share with a face value of ₹ 10 along with a premium of ₹ 390. Thereafter, notices under section 133(6) of the Income-tax Act, 1961 were also issued to verify the transactions of the assessee on test ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s predicate a cover up. These facts indicate and reflect proper paper work or documentation but genu ineness, creditworthiness, identity are deeper and obtrusive. Compa nies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and man age the said companies. It is the persons behind the company who take the decisions, control and manage them. The persons behind the assessee-company and the persons behind the subscribing companies were not interrogated which was essential to unearth the truth. Reference may also be made to the judgment of this court in the case of CIT v. Active Traders Pvt. Ltd. (supra). The question for consideration is whether in the presence of materials discussed above the Commissioner was justified in treating the assessment order erroneous and prejudicial to the interests of the Revenue. That question in the facts and circumstances has to be answered in the affirmative. (28) We find no substance in the submission that the order of the learned Tribunal is perverse, after examining all the submissions advanced by Mr. Poddar. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even be justified in trying to ascertain the source of the depositor . Therefore, the submission that the source of source is not a relevant enquiry does not appear to be correct. We find no substance in the sub mission that the exercise of power under section 263 by the Commissioner was an act of reactivating stale issues. In the case of Gabriel India Ltd. (supra) the Commissioner of Income-tax was unable to point out any error in the explanation furnished by the assessee. Whereas in the present case we have tabulated the evidence which was before the Assessing Officer which should have provoked him to make further investigation. The Assessing Officer did not attach any importance to that aspect of the mat ter as discussed above by us. The judgment in the case of Leisure Wear Exports Ltd. (supra) relied upon by Mr. Poddar has no applicability because the evidence furnished by the assessee in this case does suggest a cover up. We also have held prima facie that neither the transaction appears to be genuine nor are the applicants of share are creditworthy. The judgment in the case of Omar Salay Mohamed Sait (supra) cited by Mr. Poddar has no applica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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