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TMI Blog2019 (8) TMI 705X X X X Extracts X X X X X X X X Extracts X X X X ..... at the order of the AO was erroneous on the issue on which it was reopened relating to undisclosed service charges. We, therefore, find no merit in the case of the assessee that the reopening of assessment itself being bad in law, the assessment made by the AO u/s 143(3)/147 as well as the consequential order passed by the Ld. CIT u/s 263 are invalid. The assessee has challenged the impugned order passed by the Ld. CIT u/s 263 on various counts. At the time of hearing before us, the learned counsel for the assessee however has not raised any contention in support of the said ground raised by the assessee. As rightly submitted by the learned DR, a similar order passed by the Ld. CIT u/s 263 in the case of Rajmandir Estates Pvt. Ltd. [ 2016 (5) TMI 801 - CALCUTTA HIGH COURT] involving identical facts and circumstances was upheld by the Hon ble Calcutta High Court. Although the learned counsel for the assessee has submitted that the decision of Hon ble Calcutta High Court in the case of Rajmandir Estates Pvt. Ltd. (supra) relied upon by the learned DR in support of the revenue s case is distinguishable on fact, he has not been able to point out any material distinction in the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 30.12.2010 determining the total income of the assessee at ₹ 55,426/- after making addition on account of income from service charges amounting to ₹ 52,730/- and disallowance of preliminary expenses amounting to ₹ 2400/-. 3. The records of the assessment made by the AO u/s 143(3)/147 came to be examined by the concerned Ld. CIT and on such examination, he found that proper enquiry was not made by the AO in respect of the share capital of ₹ 12.42 lacs raised by the assessee during the year under consideration with a premium of ₹ 4.97 crores in order to ascertain the identity and creditworthiness of the concerned shareholders as well as the genuineness of the relevant transactions. He accordingly issued a notice u/s 263 requiring the assessee to show cause as to why the assessment made by the AO u/s 143(3)/147 should not be set aside u/s 263 by treating the same as erroneous as well as prejudicial to the interest of the revenue. In reply, it was submitted by the assessee that the AO had conducted proper enquiry regarding the identity and creditworthiness of the shareholders and after having satisfied himself with the documentary e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 3 to 4 times using different companies and thus rotating the money into 3 to 4 layers. After 3 to 4 layers, the money reaches its intended destination and this company is then sold off to the group or person who will ultimately use the money. He in turn, returns the amount of share capital and premium in cash to the person from whom the company is purchased. Thus, when share capital is introduced of huge premium in new formed companies with no business, it should raise the suspicion of the A.O. In fact, such high premium is not commanded even by blue chip quoted companies. Under these circumstances, the A.O. is duty bound to carry out through detailed inquiries and go beyond the layers created by the so called entry operators so that it may be established that the share capital is bogus. This has not been done in the present case and the AO had just taken on record the confirmations, bonk statements etc. of some of the subscriber companies and passed the assessment order. It also needs to be pointed out that this assessee s case is not an isolated example. There are hundreds of such cases in this charge and other charges where the modus operandi is identica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no such file and accordingly, the first ingredient as to the identity of the creditors had not been established. If the identity of the creditors had not been established consequently the question of establishment of the genuineness of the transactions or the creditworthiness of the creditors did not and could not arise. The Tribunal did not apply its mind to the facts of this particular case and proceeded on the footing that since the transactions were through the bank account, accordingly, it is to be presumed that the transactions were genuine. It was not for the ITO to find out by making investigation from the bank accounts unless the assessee proved the identity of the creditors and their creditworthiness. Mere payment by account payee cheque is not sacrosanct nor can it make a non-genuine transaction genuine. In that view of the matter, the question before us is answered in the negative and in favour of the revenue. Attention is also invited to the Delhi High Court decision in the case of CIT vs Nova Promoters Finlease Pvt. Ltd. (342 ITR 0169) where it was observed that the fact that the share application money had come through cheques and the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the validity of the preliminary proceedings for want of proper jurisdiction can be challenged even in the appellate proceedings arising out of collateral proceedings. The Tribunal in the said case found that initiation of reassessment proceedings was not valid as the mandatory requirement of section 147 had not been satisfied. Consequently it was held by the Tribunal that the reassessment order passed by the AO as well as the consequential order passed u/s 263 was liable to be quashed being invalid. Keeping in view the decision of the coordinate bench of this Tribunal in the case of M/s. Classic Flour Food Processing (P) Ltd. (supra), the additional ground raised by the assessee is admitted by us and the issue raised therein is being decided on merit after hearing the argument of both the sides. 5. The learned counsel for the assessee submitted that there was no tangible material that had come to the possession of the AO to form a belief about the escapement of income of the assessee from assessment and in the absence of such material, the reopening of assessment itself was bad in law. He invited our attention to the reasons recorded by the AO as furnished at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide the order passed by the AO for lack of enquiry on the issue of increase of share capital including premium has been upheld by the Hon ble Calcutta High Court in the case of Rajmandir Estates Pvt. Ltd. (386 ITR 162) and even the SLP filed by the assessee in the said case has already been dismissed by the Hon ble Supreme Court. 7. In the rejoinder, the learned counsel for the assessee submitted that the facts involved in the present case are different from the case of Rajmandir Estates Pvt. Ltd. (supra) decided by the Hon ble Calcutta High Court and the reliance of the learned DR on the said decision of the jurisdictional High Court is clearly misplaced. 8. We have considered the rival submissions and also perused the relevant material available on record. It is observed that the impugned order passed by the Ld. CIT u/s 263 is mainly assailed by the learned counsel for the assessee on the basis of issue raised in the additional ground challenging the validity of the assessment made by the AO u/s 143(3)/147 which is revised by the Ld. CIT vide his impugned order passed u/s 263. The main thrust of the arguments of the learned counsel for the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while computing its total income. The assessee also sought that such income should be accounted for by the AO by way of rectification u/s 154. Although the request of the assessee for rectification u/s 154 was not accepted by the ASSESSING OFFICER as the mistake pointed out was not apparent from records, we are of the view that the self declaration made by the assessee vide letter dated 11.10.2010 regarding non-consideration of the service charges of ₹ 52,730/- received in cash while computing the total income as declared in the return of income filed originally was sufficient to establish that there was escapement of income of the assessee to that extent. As rightly contended by the learned DR, the letter dated 11.10.2010 submitted by the AO on 11.10.2010 was a tangible material that had come to the possession of the AO and since the same was sufficient to form a belief about the escapement of income of the assessee from assessment on account of undisclosed service charges of ₹ 52,730/- the reopening of assessment by the AO was in accordance with law. 10. As regards the contention raised by the learned counsel for the assessee that non-consideration o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Hon ble Calcutta High Court. He has also filed a copy of judgement passed by the Hon ble jurisdictional High Court in the said case, the head note of which is reproduced hereunder: Section 68, read with section 263 of the Income-tax Act, 1961 - Cash credit (Share application money) - Assessment year 2009-10 - During relevant year, assessee-company had increased its share capital by issuing 7.93 lakh shares of ₹ 10 each at a premium of ₹ 390 - Assessee originally filed a return showing a gross total income of ₹ 24,658 however, thereafter wrote to Assessing Officer that due to inadvertence it had not disclosed receipt of a sum of ₹ 61,000 on account of consultancy fees - Assessing Officer completed assessment without holding requisite investigation except for calling for records - Commissioner passed order under section 263 and opined that this was or could be a case of money laundering which went undetected due to lack of requisite enquiry into increase of share capital including premium received by assessee and non-application of mind - He thus held that assessment order passed under section 143(3)/147 was erroneous and prejudicial t ..... 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