9911796707
TMI Blog2020 (1) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... ies M/s Shail Investments Pvt. Ltd. and M/s New Delhi Credits Pvt. Ltd. have been found to be promoted by an accommodation entry provider, most certainly, there was reasonable cause for belief that the monies received by the petitioner from M/s Shail Investments Pvt. Ltd. and M/s New Delhi Credits Pvt. Ltd. may also be part of the bogus entries provided by them and, consequently, the taxable income of the petitioner had escaped the assessment. The submission of learned counsel that the impugned notice and reasons suffer from non-application of mind, merely because the respondents have failed to take into consideration the fact that the earlier assessment was a scrutiny assessment, is neither here nor there. This is for the reason that the reasons for re-opening are detailed, and clearly bring out the justification and cause for re-opening. Moreover, when we see the original assessment order dated 07.07.2014, we find that there is absolutely no examination or discussion with regard to the genuineness of the transactions undertaken by the petitioner assessee with M/s Shail Investments Pvt. Ltd. and M/s New Delhi Credits Pvt. Ltd. during the Financial Year 2011-12. Considering the cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the previous year, relevant to the assessment year in question. Both these companies were amongst the 90 companies promoted by Sh. Tarun Goyal and registered at the same address at which the other companies engaged in providing accommodation entries were registered by Sh. Tarun Goyal. The assessment was reopened on the ground that the credit entries as received by the assessee remain unexplained, and that the assessee had not disclosed its true income in its ITR. (iii) The assessee preferred its objections to the said reopening, which were rejected vide order dated 04.09.2019. The said order has also been challenged in these proceedings. (iv) The relevant extract from the reasons recorded by the A.O. read as follows: "3. Analysis of Information Received 3.1 As per the information gathered by the investigation wing, it was found that M/s Shail Investments Private Limited was being operated by Sh. Tarun Goyal, an entry operator. A brief summary of the adjudications by the Hon'ble ITAT, New Delhi in the cases of Sh. Tarun Goyal and the shell companies operated by him are as below: I.T.A. Nos. Assessment Years Name of assesse PAN 4636 & 4367/Del/2012 2003-04 & 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /34, W.E.A. Karol Bagh. AACCC1903B 2521/Del/2012 2009-10 Kanha Fats & Oils Pvt. Ltd., 13/34, W.E.A. Karol Bagh. AAACK2400M 2520/Del/2012 2009-10 Ordinary Financial Services Pvt. Ltd., 13/34, W.E.A. Karol Bagh. AAAC03637K 2527 to 2533/Del/2012 2003-04 to 2009-10 Mahanivesh (India) Ltd., 13/34, W.E.A. Karol Bagh. AAAM1750C 2524 to 2526/Del/2012 2006-07, 2007-08 & 2009-10 Tejasvi Investments Pvt. Ltd.,13/34, W.E.A. Karol Bagh. AABCT3249G 3739 to 3741/Del/2012 2004-05, 2005-06 & 2008-09 Tejasvi Investments Pvt. Ltd, 13/34, W.E.A. Karol Bagh. AABCT3249G 3745 to 3749/Del/2012 2003-04 to 2007-08 Adonis Financial Services Pvt. Ltd., 13/34, W.E.A. Karol Bagh. AADCA5949G 3750 to 3753/Del/2012 2005-06 to 2008-09 Unique Capital Pvt. Ltd., 13/34, W.E.A. Karol Bagh. AAACU5693G 3737 & 3738/Del/2012 2005-06 & 2006-07 M/s Vivek Plantations Pvt. Ltd., 13/34, W.E.A. Karol Bagh. AAACV2617D 3.2 A gist of the judgment of Hon'ble ITAT is as below: "3 Facts in brief: A search and seizure operation was carried out u/s 132 of the IT Act 1961, on Tarun Goyal Group of Companies on 15.9.2008. Mr. Tarun Goyal is a tax consultant. He was r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in this group of companies and getting salary from Shri Tarun Goyal and sign the papers as per his direction. These companies are registered with ROC and main business of most of the companies was reflected as share trading and investments. There were no physical assets of these companies. In fact, these are paper companies run by Shri Tarun Goyal for providing accommodation entries to the beneficiaries by taking cash and in order to disguise his transaction as genuine have been following layering of accounts, through these companies. 4. Statements were recorded from Shri Tarun Goyal as well as some of the directors of Tarun Goyal Group of Companies. 5. Mr. Tarun Goyal confessed and admitted to the charge of providing accommodation entries by floating numerous companies and following layering of accounts, after cash was introduced in various companies. 6. Letter dated 14.12.2010 given by Mr. Tarun Goyal as given by the AO is extracted for ready reference: "6. During the course of assessment proceedings the assessee submitted vide letter dated 14-122010, "It is respectfully submitted: 1. That the Investigation Wing of the Department during the search proceedings and dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. u/s 68. Further, in the case of Pr. Commissioner Of Income Tax -6, New Delhi vs NDR Promoters Pvt. Ltd. vide ITA 49/2018 dated 17.01.2019, the Hon'ble Delhi High Court has reversed the deletion of additions made u/s 68 of the Income Tax Act, 1961 in the case of a beneficiary of the accommodation entries provided by Sh. Tarun Goyal and upheld the findings of the assessing officer as below: "12. The present case would clearly fall in the category where the Assessing Officer had not kept quiet and had made inquiries and queried the respondent-assessee to examine the issue of genuineness of the transactions. The Tribunal unfortunately did not examine the said aspect and has ignored the following factual position:- a. The shareholder companies, 5 in number, were all located at a common address i.e. 13/34, WEA, Fourth Floor, Main Arya Samaj Road, Karol Bagh, New Delhi. b. The total investment made by these companies was ₹ 1,51,00,000/-, which was a substantial amount. c. Evidence and material on bogus transactions found during the course of search of Tarun Goyal. Evidence and material that the companies were providing accommodation entries to beneficiaries was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of taxes, Sh Tarun Goyal has been indulging in violation of other provisions of the law of the land. This matter has also been taken up by REIC for multi-agency probe." e. The respondent-assessee did not have any business income in the year ending 31st March, 2007 and had income from other sources of ₹ 16.38 lakhs in the year ending 31st March, 2008. The respondent-assessee had not incurred any expenditure in the year ending 31st March, 2007 and had incurred expenditure of ₹ 12.17 lakhs in the year ending 31st March, 2008. f. Shares of face value of ₹ 10/- each were issued at a premium of ₹ 40/- (total ₹ 50/-). g. The respondent-assessee had failed to produce Directors of the companies, though they had filed confirmations, and therefore, were in touch with the respondent-assessee. The respondent-assessee had also failed to produce the details and particulars with regard to issue of shares, notices etc. to the shareholders of AGM/EGM etc." 13. In view of the aforesaid factual position, we have no hesitation in holding that the transactions in question were clearly sham and make-believe with excellent paper work to camouflage their bogus nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the assessee company is remain unexplained. Name PAN Debits Credits Jurisdiction RDS Project Ltd AAACR4761J 4,10,00,000 Circle 20(2), Delhi" (emphasis supplied) 3. Learned counsel appearing on behalf of the petitioner submits that the reopening of assessment was done merely on the basis of the investigation report, and that there was no independent application of mind by AO while recording reasons, which is manifest by the fact that Ld. AO was not even aware that original assessment was made under section 143(3) and, that the reasons recorded by AO were based on borrowed satisfaction of some other authority. He submits that there is no cause and effect relationship between material found and formation of belief. Learned counsel for the petitioner also submitted that there is no nexus between the order of the ITAT and the High Court referred in the reason recorded, with the petitioner. M/s. Shail Investment Pvt. Ltd. and M/s. New Delhi Credits P. Ltd. are not amongst the companies which have been found either by the ITAT, or the High Court, to have been used to provide bogus entries. 4. Further, it is argued that reason recorded do not mention the satisfaction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash. The two companies viz. M/s. Shail Investments Private Ltd., and M/s. New Delhi Credits Private Ltd. are amongst the 90 odd companies floated by Tarun Goyal at the same address and they were used to provide accommodation entries to the petitioner. 9. The questions that arise for consideration are: whether there has been application of mind, or is it merely a case of change of opinion which forms the basis of the re-opening of assessment, and; whether, the objections of the petitioner have been properly dealt with, and; whether, the AO has acted on mere suspicion, or he had a good reason to believe that taxable income had escaped assessment. 10. In Assistant CIT Vs. Rajesh Jhaveri Stock Broker Pvt. Ltd., (2008) 14 SCC 208, the Supreme Court has held that the expression 'reason' in Section 147 of the Act means a "cause" or "justification". The Assessing Officer can be said to have reason to believe that income has escaped assessment, if he has a cause or justification to know, or suppose, that income has escaped assessment. 11. Counsel for the respondents relied on Sri Krishna Pvt. Ltd. V. Income Tax Officer, (1996) 87 Taxman 315 (SC), where it was emphasised that the enquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-assessment proceedings at this stage. This is for the reason that there is nothing to show that while passing the assessment order, the Assessing Officer had examined the aspect of genuineness of the transaction undertaken by the petitioner with M/s Shail Investments Pvt. Ltd. and M/s New Delhi Credits Pvt. Ltd. A perusal of the original assessment order shows that the Assessing Officer had accepted the claim made by the petitioner/ assessee with regard to the genuineness of the transaction without any scrutiny and by accepting the statement of the petitioner as truthful. At that stage, the material information, which the petitioner withheld and did not disclose, was that it was dealing with companies promoted by Sh. Tarun Goyal, who was engaged in the business of providing accommodation entries. 15. We may take note of the recent decision of the Supreme Court in Principal Commissioner of Income Tax (Central)- I v. NRA Iron & Steel Pvt. Ltd., (2019) 412 ITR 161 (SC) decided on 05.03.2019. The respondent assessee had shown receipt of share capital/ premium during the financial year 2009-10 aggregating to ₹ 17.60 crore from 19 companies - some of which were based in Mumbai, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade. With respect to the Guwahati companies - Ispat Sheet Ltd. and Novelty Traders Ltd., enquiries revealed that they were nonexistent at the given address." 18. On the basis of the detailed inquiry, the AO found that: "i. None of the investor-companies which had invested amounts ranging between ₹ 90,00,000 and ₹ 95,00,000 as share capital in the Respondent Company - Assessee during the A.Y. 2009-10, could justify making investment at such a high premium of ₹ 190 for each share, when the face value of the shares was only ₹ 10; ii. Some of the investor companies were found to be nonexistent; iii. Almost none of the companies produced the bank statements to establish the source of funds for making such a huge investment in the shares, even though they were declaring a very meagre income in their returns; iv. None of the investor-companies appeared before the A.O., but merely sent a written response through dak. The AO held that the Assessee had failed to discharge the onus by cogent evidence either of the credit worthiness of the socalled investor-companies, or genuineness of the transaction." 19. Consequently, the AO added back the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o took note of its decision in Kale Khan Mohammad Harif v. CIT, (1963) 50 ITR 1 (SC), and Roshan Di Hatti v. CIT, (1977) 107 ITR (SC), wherein it had laid down the onus of proving the source of money found to have been received by the assessee, is on the assessee. Once the assessee has submitted the documents relating to identity, genuineness of the transactions and creditworthiness of the payee, then the AO must conduct an inquiry and call for more details before invoking section 68. If the assessee is not able to provide a satisfactory explanation of the nature and source of investment made, it is open to the revenue to hold that such investment is the income of the assessee, and that there would be no further burden on the revenue to show that the income is from any particular source. The Supreme Court also observed that with respect to the genuineness of the transaction, it is for the assessee to prove the same by cogent and credible evidence, since the investment was claimed to have been made in the share capital of the assessee company, it was for the assessee to establish that it was a genuine investment, since the facts are exclusively within the assessees knowledge. The Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, vis., the receipt of money, and if he fails to rebut the same, the said evidence being unrebutted can be used against him by holding that it is a receipt of an income nature. While considering the explanation of the assessee, the department cannot, however, act unreasonably" ii. In CIT v. P. Mohankala, 291 ITR 278, this Court held that: "A bare reading of section 68 of the Income-tax Act, 1961, suggests that (i) there has to be credit of amounts in the books maintained by the assessee ; (ii) such credit has to be a sum of money during the previous year ; and (iii) either (a) the assessee offers no explanation about the nature and source of such credits found in the books or (b) the explanation offered by the assessee, in the opinion of the Assessing Officer, is not satisfactory. It is only then that the sum so credited may be charged to Income-tax as the income of the assessee of that previous year. The expression "the assessee offers no explanation" means the assessee offers no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. The burden is on the assessee to take the plea that, even if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rthiness of the recipient, object and purpose for which payment/investment was made, etc. The incorporation of a company, and payment by banking channel, etc. cannot in all cases tantamount to satisfactory discharge of onus. vii. Other cases where the issue of share application money received by an assessee was examined in the context of Section 68 are CIT v. Divine Leasing & Financing Ltd. (2007) 158 Taxman 440, and CIT v. Value Capital Service (P.) Ltd. [2008] 307 ITR 334." 27. The principles culled out by the Supreme Court are contained in para 11 of its judgment, which read as follows: "11. The principles which emerge where sums of money are credited as Share Capital/Premium are: i. The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and credit-worthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. ii. The Assessing Officer is duty bound to investigate the credit-worthiness of the creditor/subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subjected to careful scrutiny. This would be particularly so in the case of private placement of shares, where a higher onus is required to be placed on the Assessee since the information is within the personal knowledge of the Assessee. The Assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the Assessee. 15. On the facts of the present case, clearly the Assessee Company - Respondent failed to discharge the onus required under Section 68 of the Act, the Assessing Officer was justified in adding back the amounts to the Assessee's income." (emphasis supplied) 29. Consequently, the appeal preferred by the Revenue was allowed by the Supreme Court. 30. Though the said decision was rendered by the Supreme Court while dealing with a Civil Appeal arising from a decision of this Court dismissing the appeal under section 260A of the Act, the findings returned by the Supreme Court, as extracted herein above, are extremely pertinent and relevant in the present context as well. 31. One is known by the company one keeps. Sh. Tarun Goyal has been est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable income illegal or unreasonable since, at the time of the conduct of scrutiny assessment proceedings, the assessee did not disclose the material fact that the so called investor - in this case M/s Shail Investments Pvt. Ltd. and M/s New Delhi Credits Pvt. Ltd., are promoted by Sh. Tarun Goyal, who is engaged in the business of providing accommodation entries, and the Assessing Officer had no basis to so assume. In fact, the assessment order dated 07.07.2014 passed by him is completely silent and innocuous on the said aspect. 35. Pertinently, no addition under Section 68 of the Income Tax Act was sought to be made on any account, much less on account of unexplained investments. A perusal of the assessment order dated 07.07.2014 shows that the Assessing Officer made disallowance under Section 14A read with Rule 8D to the tune of ₹ 38,94,340/-, apart from making disallowance under Section 43B of the Act to the tune of ₹ 8,92,505/-. The aspect of receipt of capital investment from the said two companies, namely, M/s Shail Investments Pvt. Ltd. and M/s New Delhi Credits Pvt. Ltd. is not even noticed in the assessment order. 36. We may also refer to Explanation 1 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Section 147 of the Act. 40. No doubt, on the one hand, sanctity of concluded assessment proceedings needs to be protected, and an assessee should be protected against undue harassment by the taxation authorities by resort to re-opening of the concluded assessment. However, when subsequently, it comes to light that the assessee has had financial/ monetary dealings with dubious entities/ persons - such as bogus accommodation entry providers, including of the kind noticed hereinabove, giving rise to a serious and well founded doubt about the creditworthiness of the investor and genuineness of the transaction, the endeavour of the Assessing Officer to re-open the assessment in terms of section 147/148 of the Act should normally not be thwarted by the Court, if the same is done within the limitation period, and the same is not merely a case of change of opinion on the same set of facts. A serious and well founded doubt about the genuineness of the transaction would justify formation of the reasonable belief that taxable income has escaped assessment in the light of the scheme of Section 68 of the Act, which provides that cash credits which, in the opinion of the Assessing Officer a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, itself to a given aspect sought to be examined in the reassessment proceedings." 42. Consequently, even in the cases of Mr. Chetan Sabharwal in view of the fact that the original assessment orders are totally silent on this aspect of the matter, it cannot be said that the reason to believe constitutes a "change of opinion'. 43. At this juncture it must be stated that on a perusal of the report of the investigation which was produced before this Court, it appears prima facie that there was sufficient material to justify the reopening of the assessment in both sets of cases. Further, upon reading the reasons to believe as a whole the "live link" between the material in the form of the investigation report and the formation of belief that income that has escaped assessment is prima facie discernable. The Court hastens to add that this is a prima facie view which is all that is necessary at this stage. 44. The Court in this context would like to refer to the following observations of the Supreme Court in ITO v. Selected Dalurband Coal Limited (supra) where it was considering the effect of a letter of the Chief Mining Officer which emerged after the conclusion of the assessments: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provider, most certainly, there was reasonable cause for belief that the monies received by the petitioner from M/s Shail Investments Pvt. Ltd. and M/s New Delhi Credits Pvt. Ltd. may also be part of the bogus entries provided by them and, consequently, the taxable income of the petitioner had escaped the assessment. 44. The submission of learned counsel that the impugned notice and reasons suffer from non-application of mind, merely because the respondents have failed to take into consideration the fact that the earlier assessment was a scrutiny assessment, is neither here nor there. This is for the reason that the reasons for re-opening are detailed, and clearly bring out the justification and cause for re-opening. Moreover, when we see the original assessment order dated 07.07.2014, we find that there is absolutely no examination or discussion with regard to the genuineness of the transactions undertaken by the petitioner assessee with M/s Shail Investments Pvt. Ltd. and M/s New Delhi Credits Pvt. Ltd. during the Financial Year 2011-12. In view of the aforesaid discussion, and in the facts of the present case, reliance placed by learned counsel for the petitioner on Himson Text ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of a specific provision which was done in a particular manner in the original assessment and sought to be done in a different manner in the proceeding under Section 147 of the Act. The reason to believe has been appropriately understood by the assessing officer and there is material on the basis of which the notice was issued." 48. In Pankaj Hospital Ltd. v. Commissioner of Income tax, (2014) 44 taxman. Com 230 (All), the Division Bench of Allahabad High Court was faced with similar facts, and information was received about the same Tarun Goyal who was providing accommodation entries to beneficiary companies. The court held: "Now, it is true that during the course of the assessment proceedings, the Assessing Officer had required the assessee to disclose information pertaining to the share applicants, the amounts and their source, the mode in which payment was made and confirmatory letters together with PAN details. For the purpose of these proceedings, the Court must proceed on the basis of the reply furnished by the assessee to the notice under Section 142(1). The assessee had indicated the names of the companies, their addresses, the application money, date of payment, mode ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
