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TMI Blog2019 (8) TMI 555X X X X Extracts X X X X X X X X Extracts X X X X ..... that while granting the satisfaction by the Addl. CIT, he has not gone through the records and not verified the facts sent by the Investigation Wing. The main observation of the Investigation Wing is that assessee company has charged share premium @₹ 240/- per share which is very high but how this charging of heavy share premiums indicate the escapement of income is not narrated in the letter. AO has also not applied his mind to find out how there is an escapement of income in the form of share capital and share premium. After considering these facts, we find that AO has wrongly assumed the jurisdiction u/s 147 - AO has not given proper opportunity to the assessee to file the objection against the issue of notice u/s 148. The objections disposed off by the AO are also not a speaking one - the grounds raised against the assumption of jurisdiction u/s 147 were rightly allowed by the CIT(A), which does not need any interference on our part, hence, we uphold the action of the CIT(A) on the legal issue and reject the ground no. 1 raised by the Revenue before us. Addition u/s 68 - remarks of the AO clearly indicate that assessee has filed all the necessary documents before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n holding that the AO has wrongly assumed the jurisdiction over the assessee u/s. 148 of the I.T. Act. ii) On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of ₹ 4,60,00,000/- made by the AO u/s. 68 of the I.T. Act. iii) The appellant craves to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of his appeal. 3. The brief facts of the case are that assessee filed its return of income declaring total income of ₹ 6,43,630/-, which was processed by the Assessing Officer u/s. 143(1) of the Income Tax Act, 1961 (in short Act ) on 27.2.2009. AO noted in the assessment order that the Directorate of Income Tax (Investigation)-I, New Delhi vide its letter dated 19.3.2014 informed the Assessing Officer that Investigation Wing carried out enquiries in the matter of the assessee based upon three STRs in the name of Valiant Agencies, Senorita Enterprises Pvt. Ltd. And Enliven Developers Pvt. Ltd. Dated 5.3.2018, details of which, AO has reproduced in the assessment order at Page No. 2. On the basis of these STRs and upon further invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter providing details as asked for by the order sheet entry dated 23.6.2014 and notice dated 25.6.2014. AO disposed off the objections filed by the assessee on 27.6.2014 alongwith supplementary objections on the same date i.e. 27.6.2014 as mentioned in the assessment order dated 30.6.2014 at page no. 6-8 and fixed the case of the assessee for hearing on 30.6.2014 at 10 AM and informed that no further adjournment would be possible. Some documents were filed by the assessee s counsel on 30.6.2014 of share holders as on 31.3.2007 alongwith their confirmations, bank statements, ITR acknowledgements, balance sheet as on 31.3.2007 etc. so as to justify three ingredients as required u/s. 68 of the I.T. Act as identity, genuineness, creditworthiness etc. of the investors. After examining all the documentary evidences filed by the assessee and the objection filed by the assessee, the AO had made the addition of ₹ 4,60,00,000/- u/s. 68 of the Act on the basis of the details forwarded by the Investigation Wing, vide order dated 30.6.2014 passed u/s. 143(3) r.w.s. 147 of the I.T. Act, 1961. Aggrieved by the aforesaid assessment order, assessee appealed before the Ld. CIT(A), who vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he elaborate discussion by the ITO(lnv) in this regard. At page 10 of the order, the assessee has claimed that the following reasons mentioned in the relevant report are not enough to warrant reason to believe for reopening: 1. Huge reserves with no corresponding business activity; 2) non-furnishing of P L a/c by most investing companies; 3) profit shown by all investing companies is either very small or loss; 4) most investee companies not doing any worthwhile business; 5) most investee companies appear to be sham and existing only onpapers, how have they raised such huge share premium, and 6) the case only having been processed earlier u/s 143(1) and no enquiry u/s 143(3) having been done. .. In this regard, it may be mentioned here that recent decisions of the Hon ble Supreme Court, the Hon ble Jurisdictional High Court as well as the Hon ble Delhi Tribunal very clearly demonstrate the importance of these factors in arriving at the true state of affairs as regards the share premium received. Pr. CIT (Central-1) vs NRA Iron Steel Pvt Ltd (SC] ITO (Exemption), Ward 7(4), New Delhi vs. M/s Synergie finlease Pvt Ltd. [Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The fourth ground raised is that the satisfaction of the Addl. CIT is a pretended satisfaction. In this regard, it may be mentioned that the Addl. CIT had the entire material available at his disposal while recording his satisfaction. The same has been provided to the assessee also during the course of the assessment proceedings. The facts have been clearly spelled out by the AO while putting up his case for approval accompanied with the details of the case sent by the investigation wing. The details are self explanatory and based on appreciation and analysis of the same, the Addl. CIT has stated that he is satisfied that it is a fit case for issuance of notice u/s 148. He has not merely stated yes but clearly stated that he is satisfied that it s a fit case. It may also be mentioned again at the cost of repetition that exact accuracy of the quantum in reasons to believe is not required at the stage of reopening and the assessee cannot be allowed relief only on the basis that the final amount added is different from the amount believed to have been subject to tax, particularly when the basis and the transactions involved were of the same nature with the same parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is that it has discharged the burden in light of the decision in Lovely Exports. In this case, reference is drawn to the recent decision of the Hon ble Supreme Court in NRA Iron (supra), several decisions of the High Courts and of the Hon ble Tribunal wherein the manner in which the burden has to be discharged by the assessee has been clearly spelled out. The same are being submitted herewith. How the assessee has failed to discharge its burden and how the CIT(A) has failed not only to appreciate the facts properly, but also to make any reasonable enquiry at his end is also being discussed in this submission. The Ld CIT(A) in his findings at page 16 onwards of the impugned order has stated as follows: 1. From the letter dated 5-11-2012, it appears that the investigation wing has enquired all the bank deposits of the appellant - The Id. CIT(A) has omitted to mention and also to understand that in order to determine the identity, genuineness and creditworthiness u/s 68, it is imperative to have a detailed analysis of the bank details of the investors and merely stating that from the bank account of the assessee, it can be seen that amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments readily available in public domain. It may also be mentioned that in the paper book filed by the assessee, it has not even mentioned which documents were submitted before the AO and which were submitted before the CIT(A). under these circumstances, it is not understood as to how the CIT(A) has even attempted to give credit to the assessee in respect of the documents which are claimed to have been filed before the ITO(lnv.), and there is not even a mention whether they were ever brought to the notice of the AO at all. It clearly shows non-application of mind by the CIT(A) who has simply reiterated the claim of the assessee without using his own analysis both regarding the admissibility of such documents as well as their merit. 4. The Ld. CIT(A) has mentioned that the AO did not make any enquiries himself, and has reproduced the contents of the letter of the investigation wing. As discussed in this note before, a perusal of the note received from the investigation wing revealed that details asked for by the ITO(lnv.) were not provided completely, and whatever details were provided only showed that the investing companies did not have the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly that assessee not only filed objections but supplementary objections also which were duly disposed of. The CIT claims that the objections disposed of are not speaking one. However, as can be seen that while the objections may be lengthy, the main issue that they raise are the same and have been addressed both times by the AO. 8. The CIT(A) has stated that as per GKN Driveshaft, a notice was required u/s 143(2) even after the disposing of objections. The premise is wrong. A notice u/s 143(2) is required after the assessee files a return in response to notice u/s 148 or writes a letter to this effect. The AO has issued the same properly. A series of objections that the assessee may keep filing till the later part of the proceedings cannot be an excuse to prevent the AO from acquiring jurisdiction to assess the income of the assessee. The argument is fallacious and so is the acceptance of the same by CIT(A). 9. The CIT(A) states that the AO has not made any enquiries other than asking justification for the high share premium. The claim is totally wrong and clearly shows total non-application of mind by the Ld. CIT(A). A perusal of the order shee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been received by the assessee company. That the LD. CIT(A) has given credence to this argument and incorporated the same in his findings clearly shows that he has not analysed the submissions objectively while arriving at his finding. The assessee has failed to produce even one director even though categorically asked for by the AO. There is not even a mention regarding that in the letter. Here it is pertinent to respond to the attempt by the assessee to seek refuge in Lovely Exports case. Assessee is a private limited company where investment is invited by way of approaching people who are known to the directors or members of the company. Linder these circumstances, it is not acceptable that they are not ready to come out and state the facts even though they have made huge investments in the assessee company. The onus on the assessee is not discharged by simply providing certain details with respect to these entities. If these people can provide confirmations, bank statements, huge funds to the assessee, it is incomprehensible how not even one of them could be produced before the AO. It may be reiterated that the assessee is not a public limited company where all investors cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt shows corresponding debit and credit entries. No real business activity. (iii) Jyoti Softsules ₹ 40 lacs invested by a company with total income of ₹ 33,788/- Only one computer as fixed asset. Share application and premium received which is further invested in companies including the asseessee. Bank account statement shows corresponding debit and credit entries. Balance of ₹ 1,239/- No real business activity. (iv) Gewapur Water Purification No B/s filed No P L filed No ITR filed No bank statement filed. (v) Kirti Hitech 35 lacs invested but No B/s filed No P L filed No ITR filed (vi) MMJ Investment Only one fixed asset in computer Share application and premium received which is further invested in companies including the asseessee. Bank account statement shows corresponding debit and credit entries. (vii) Namo Resorts (P) Ltd. No relevant details filed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Share application and premium received which is further invested in companies including the asseessee. Bank account statement shows corresponding debit and credit entries. Closing balance of 23,688/-. Almost nil fixed assets. No real business activity. (xvii) Udhav Fashion Total income of 24,988/- Share application and premium received which is further invested in companies including the asseessee. Bank account statement shows corresponding debit and credit entries. Closing balance of 1,950/-. NIL fixed assets. No real business activity. (xviii) Warsi Overseas Total income of 27,833/- Share application and premium received which is further invested in companies including the asseessee. Bank account statement shows corresponding debit and credit entries. Closing balance of 2,371/-. Only one computer and Ac in fixed assets. No real business activity. A perusal of the above details clearly show that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide record' to initiate valid reassessment proceedings. PCIT Vs Paramount Communication (P.) Ltd.[2017] 79 taxmann.com 409 (Delhi)/r20171 392 ITR 444 (Delhi) where Hon ble Delhi High Court held that Information regarding bogus purchase by assessee received by DRI from CCE which was passed on to revenue authorities was 'tangible material outside record' to initiate valid reassessment proceedings. 2 Aradhna Estate (P.) Ltd.Vs PCIT [2018] 91 taxmann.com H9 (Gujarat) where Hon ble Gujarat High Court held that where reassessment proceedings were initiated on basis of information received from Investigation w:ng that assessee had received certain amount from shell companies working as an accommodation entry provider, merely because these transactions were scrutinised by Assessing Officer during original assessment, reassessment could not be held unjustified 3. Pushp Bullion (P.) Ltd. Vs DCIT [2017] 85 taxmann.com 84 (Gujarat) where Hon ble Gujarat High Court held that where investigation wing of department had during course of investigation in case of a third party found that he was indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the meaning of section 147(b). 10.ACIT Vs Rajesh Jhaveri Stock Brokers (P.) Ltdr20071 161 Tay 316 (SC)/[2007] 291 ITR 500 (SC)/r20071 210 CTR 30 (SC) where Hon ble Supreme Court held that so long as the conditions of section 147 are fulfilled, the Assessing Officer is free to initiate proceedings under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings, even when intimation under section 143(1) has been issued. ADANI EXPORTS v. DCIT[1999] 240 ITR 224 (Guj) was distinguished. 11 Yuvraj v. Union of lndia[315 ITR 841 (Bom) where Hon ble Court held that points not decided while passing assessment order under section 143(3) was not a case of change of opinion. It was held that assessment was reopened validly. 12. CIT vs. Madhya Bharat Energy Corporation Ltd. 245 CTR 35 (Delhi) High Court. where Hon'ble Delhi High Court held that issuance of notice u/s 143(2) subsequent to 148 notice not mandatory. 13. Thakorbhai Maganbhai Patel vs. ITO 245 Taxman 333 (SC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investor companies, Assessing Officer was justified in passing assessment order making additions under section 68 for share capital / premium received by assessee company. Merely because assessee company had filed all primary evidence, it could not be said that onus on assessee to establish credit worthiness of investor companies stood discharged 2. PCIT Vs NDR PROMOTERS PVT LTD (f20191 102 taxmann.com 182 (Delhi)/r20191 261 Taxman 270 (Delhi)/r20191 410 ITR 379 (Delhi)) where Hon ble Delhi High Court held that where Assessing Officer made additions to assessee's income under section 68 in respect of amount received as share capital from several companies, in view of fact that all of these companies were maintained by one person who was engaged in providing accommodation entries through paper companies and all such companies were located at same address, impugned addition was justified 3. ITO Vs Synergy Finlease Pvt. Ltd (ITA No.4778/Del/2013) where Hon ble ITAT Delhi held that where investor of share application money had nominal income and cheques had been received just before issue of cheques for share a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where Hon ble Delhi High Court held that where assessee failed to prove identity and capacity of subscriber companies to pay share application money, amount so received was liable to be taxed under section 68. It was held as follows: 12. A perusal of the order of the Tribunal shows that it has gone on the basis of the documents submitted by the assessee before the AO and has held that in the light of those documents, it can be said that the assessee has established the identity of the parties. It has further been observed that the report of the investigation wing cannot conclusively prove that the assessee's own monies were brought back in the form of share application money. /As noted in the earlier paragraph, it is not the burden of the AO to prove that connection. There has been no examination by the Tribunal of the assessment proceedings in any detail in order to demonstrate that the assessee has discharged its onus to prove not only the identity of the share applicants, but also their creditworthiness and the genuineness of the transactions. No attempt was made by the Tribunal to scratch the surface and probe the documentary evidence in some depth, in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer sent notices to share applicants which returned unserved, however, assessee still managed to secure documents such as their income tax returns as well as bank account particulars, in such circumstances, Assessing Officer was justified in drawing adverse inference and adding amount in question to assessee's taxable income under section 68. It was held as follows: 9. As noticed previously, the CIT (A) was of the opinion that the assessee had discharged the basic onus which was cast upon it after considering the ruling in Lovely Exports (P.) Ltd. 's case (supra). The material and the records in this case show that notice issued to the 5 of the share applicants were returned unserved. The particulars of returns made available by the assessee and taken into consideration in paragraph 3.4 by the AO in this case would show that the said parties/applicants had disclosed very meager income. The AO also noticed that before issuing cheques to the assessee, huge amounts were transferred in the accounts of said share applicants. This discussion itself would reveal that even though the share applicants could not be accessed through notices, the assessee wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2012] 206 Taxman 207/18 taxmann.com 217 (Delhi) it is evident that the AO took into account - if we may say so, in exhaustive detail, after a painstaking examination of the records after two or three layers of scrutiny- all the materials and held that the claim that the amounts claimed to be received on account of share applications were not based on genuine transactions. The CIT (A) upheld that order, after calling for a remand report. In these circumstances, the conclusion of the Tribunal, that the assessee had discharged its onus, appears to be based on a superficial understanding of the law, and an uninformed one about the overall facts and circumstances of the case. 13. In view of the above reasons, the questions of law in these appeals are answered in favour of the revenue. The orders of the Assessing Officer are restored. The appeals are to succeed and are therefore allowed. 10. CIT Vs N R Portfolio Pvt Ltd T20141 42 taxmann.com 339 (Delhi)/r2014l 222 Taxman 157 (Delhi)(MAG)/r20141 264 CTR 258 (Delhi) (Copy Enclosed) where Hon ble Delhi High Court held that if AO doubts the documents produced by assessee, the onus shift ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransactions were through the banking channel, does not establish the genuineness of transactions. Loan entries are generally masked to pump in black money into banking channels and such practices continue to plague Indian economy. 4.1 Finally, Ld. Sr. DR stated that the case of the assessee was reopened on the basis of the various documentary evidences and on the information received from the Directorate of Income Tax (Investigation) by the Assessing Officer wherein, it was mentioned that based upon three STRs in the name of Valiant Agencies, Senorita Enterprises Pvt. Ltd. And Enliven Developers Pvt. Ltd., the Assessee Company had taken share capital of ₹ 465.98 lacs from Investee companies, but identity, genuineness and creditworthiness of the investors remained doubtful, hence, the AO made the addition in dispute as per law and the Ld. CIT(A) has wrongly deleted the same which are contrary to the material available on record as well as various decisions rendered by the Hon ble Supreme Court of India and the Hon ble High Court as mentioned by him in the Written Submissions. He requested that the appeal filed by the Revenue may be allowed by cancelling the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onus u/s. 68 of the Act) CIT vs. Gangeshwari Metal Pvt. Ltd. In ITA No. 597/2012 of Hon ble Delhi High Court dated 21.1.2013. Baba Bhootnath Trade Commerce Ltd. Vs. ITO in ITA No. 1494/Kol/2017 of ITAT, Kolkata dated 5.4.2019. CIT vs. Ms. Mayawati 338 ITR 563 (Delhi). 6. We have heard both the parties and perused the relevant records, especially the orders of the revenue authorities as well as the written submissions/ case laws relied by both the parties. We note that in this case a complaint was received in the Investigation Wing and it has started investigation on 14.8.2008 by issuing a summon u/s. 131(1A). Vide letter dated 04-09-2008, assessee filed written details about the functioning of the company to the Investigation Wing. Apart from enquiring the facts of the assessee by the Investigation Wing, notice u/s 133(6) was also issued to the parties which were duly responded and complied with by them. From the letter dt. 05-11-2012, it appears that Investigation Wing has enquired all the bank deposit entries above ₹ 5,0000/- of the assessee. Vide letter dt. 16-11-2012, assessee furnished all the details bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the appellant. From the return of income filed by the appellant, it is clearly mentioned that the share capital amount alongwith premium was only ₹ 4.60 crores, however, in the reasons recorded Assessing Officer has mentioned the share capital amount as ₹ 4,65,98,000/-. Assessing Officer has copied this figure from the letter of the Investigation Wing. This clearly indicates that AO has not formed its own reason of belief and he has only believed the content of the letter of the Investigation Wing. This content also clearly indicates that while granting the satisfaction by the Addl. CIT, he has not gone through the records and not verified the facts sent by the Investigation Wing. The mismatch of the figure of share capital, whether or its ₹ 4,65,98,000/- has not been looked into by the Addl.CIT, at the time of giving approval for issuing the notice u/s 148 of the IT Act. Therefore, the Ld. CIT(A) has agreed with the contention of the AR of the assessee that there is no tangible material available at the time of recording the reasons for reopening the case. The main observation of the Investigation Wing is that assessee company has charged share premium @₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There is no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a borrowed satisfaction'. The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment. 37. For the aforementioned reasons, the Court is satisfied that in the facts and circumstances of the case, no error has been committed by the ITAT in the impugned order in concluding that the initiation of the proceedings under Section 147/148 of the Act to reopen the assessments for the AYs in question does not satisfy the requirement of law. 38. The question framed is answered in the negative, i.e., in favour of the Assessee and against the Revenue. The appeal is, accordingly, dismissed but with no orders as to costs. 6.1 The judicial decisions relied upon by the Ld. DR have been duly considered. In our considered view, we do not find any parity in the facts of the decisions rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee as capital is added back to the income of the assessee u/s. 68 of the IT Act. 6.3 We find that the remarks of the AO clearly indicate that assessee has filed all the necessary documents before the Investigation Wing to prove the identity of the companies, their creditworthiness and genuineness of the transaction. AO has rejected these documents on the ground that these are routine documents. Regarding the charging of premium @₹ 240/- per share, AO commented that this explanation was filed before the Investigation Wing, since reassessment proceeding is different from the proceedings of the Investigation Wing, appellant has not discharged its onus. From the comments mentioned in Para 8 reproduced above clearly indicates that assessee has given explanation for charging the high rate of premium. Without considering those facts and explanation, he has just set aside the explanation on the ground that these explanations were filed before the Investigation Wing. However, the AO was supposed to give reasons for not accepting those explanations. AO has relied upon the case of (i) CIT v. Nupur Builders Developers Pvt. Ltd. ITA No.120/2012, Delhi High Court (ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion money for allotment of its share. It was stated that the actual amount received was ₹ 55,50,000/- and not ₹ 1,11,50,000/- as mentioned in the notice. The assessee has furnished details of such receipts and the contention of the assessee in of the parties mentioned in the notice. The assessee has furnished details of such receipts and the contention of the assessee in respect of the amount is found correct. As such the unexplained amount is to be taken at ₹ 55,50,000/-. The assessee has further tried to explain the source of this amount of ₹ 55,50,000/- by furnishing copies of share application money, balance sheets etc. of the parties mentioned above and asserted that the question of addition in the income of the assessee does not arise. This explanation of the assessee has been duly considered and found not acceptable. This entry remains unexplained in the hands of the assessee as has been arrived by the Investigation Wing of the Department. As such entries of ₹ 55,50,000/- received by the assessee are treated as an unexplained cash credit in the hands of the assessee and added to its income. Since I am satisfied that the assessee has furnished in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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