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TMI Blog2020 (9) TMI 1153X X X X Extracts X X X X X X X X Extracts X X X X ..... as been given in a mechanical manner and, therefore, such notice based on wrong facts and the approval given in a mechanical manner make the re-assessment proceedings invalid being not in accordance with law. Accordingly we hold that the reassessment proceedings initiated by the AO is not valid in the eyes of law. Accordingly the same is directed to be quashed. Since the assessee succeeds on this preliminary legal ground, the other legal grounds as well as the grounds on merit, in our opinion, do not require adjudication being academic in nature. Appeal filed by the assessee is allowed. - ITA No.5798/Del/2016 - - - Dated:- 21-9-2020 - Shri R.K. Panda, Accountant Member And Ms Suchitra Kamble, Judicial Member Assessee by: Shri Suresh Gupta, CA Revenue by: Shri Saras Kumar, Sr. DR ORDER R.K. Panda, This appeal filed by the assessee is directed against the order dated 14th September 2016 of the CIT(A)-28 New Delhi, relating to assessment year 2005 2006. 2. Facts of the case, in brief, are that the assessee is an individual and had filed its return of income on 31.03.2006 declaring loss of ₹ 2,79,76,590/- which was processed u/s 143(1) on 21.07. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings for the above mentioned assessment year are pending nor has the assessee company failed in filing it return of income. Therefore, issuance of notice under section 142(1) of the Act at this juncture is clearly bad in law and barred by limitation. 3. Further, the AO brought to the notice of the assessee that the notice under section 148 of the Act issued on 20th March, 2012 by his predecessor was sent through speed post and a copy of the same speed post was provided to the assessee. It was further informed to the assessee that the notice was sent on the same address on which notice under section 142(1) was sent. Since the assessee did not make any compliance to the notice under section 148 by filing the return of income, the AO did not provide the copy of reasons and other information as requested by the assessee. However, the AO rejected the objections of the assessee by passing a speaking order on 07.11.2012 which was served upon the assessee through speed post. 3.1 During the course of assessment proceedings, the AO noted that the assessee has received accommodation entry of ₹ 3,32,80,000/- from various companies controlled by Jain brothers. He asked the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gathered during the course of the search/ post search enquires it was found that the Assessee Company has introduced its own un accounted money in form of share application money by obtaining bogus accommodation entries Accordingly the case was reopened and show cause was issued vide letter dated 15.02.2013 to the assessee giving details in respect of companies from whom bogus entries has been received in form of shares application money and accordingly was also asked to explain why not the same should be added as income of the assessee . Further looking at the fact and circumstances of the case the assessee was also asked to explain why not the assessment should be completed after making following addition under section 68 of the Act aggregating to ₹ 3,32,8000/ detailed as under- (a) Addition to share capital during the year - ₹ 66,56,000/ (b) Addition to securities premium ₹ 2,66,23,000/- Total ₹ 3,32,80,000/- 3.2 In response the assessee filed detail explanation denying the allegatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant along with dates , amount and detail of cheque numbers. In CIT vs. Frostair (P.) Ltd. [2012] 25 taxmann. com 11 (Delhi), it was held that the assessee was under a burden to explain nature and source of share application money received in a given case and he had to establish shareholder s identity; genuineness of transaction; and creditworthiness of shareholders. However on being informed that assessee had accepted share capital from some companies which were engaged in providing bogus entries , noting was put forwarded by the assessee to disprove the findings except filing confirmations and copy of the balance sheet, etc of the so called share holders.. The issue of shifting of onus in the cases of cash credit is a complex one and each case has to be examined in it s own facts and circumstances. Hence, in the cases of bogus share capital from paper companies the theory of preponderance of human probability as pronounced by the Hon. Apex Court in the cases of CIT v. Durga Prasad More [1971] 82 ITR 540 and Sumati Dayal v. CIT [1995] 80 Taxman 89/214 ITR 801 (SC) is of utmost importance. In the cases where it has been established that the source company is a mere pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Delhi High Court in the case of Commissioner of Income-tax vs Independent Media (P.) Ltd.210 TAXMANN 14(Delhi)(2012), is significant as the observation were made by the Hon. Court while deciding the cases where entries have been taken from paper companies. In this case it was alleged by the Investigation wing that the assessee-company received share capital from those persons who had given statements before Investigation wing that they were entry providers giving accommodation entries after receiving cash and after charging their commission. Assessee furnished PAN of subscriber- companies, share application forms, board resolutions, copy of bank statement, pay orders, confirmation from subscribers, their income-tax returns, copies of their balance sheets, etc. However it was held by the Hon. Court that if explanation adduced by assessee with regard to identity and creditworthiness of subscriber-companies and genuineness of transactions was not acceptable for valid reasons, Assessing Officer could make addition under Section 58 and for that purpose he would not be under any duty to further show or establish that monies emanated from coffers of assessee-company. The Hon. Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en proved beyond doubt that the appellant has taken accommodation entry . Regarding the balance amount no supporting evidence regarding the source of the share application money received during the year amounting to ₹ 2,30,80,000/ has been furnished by the appellant during the course of the assessment proceeding . Hence the identity , credit worthiness and genuineness of the balance share application money amounting to ₹ 2,30,80,0000/ also remained unproved. Hence in result out of total addition of ₹ 3,32,80000/made by the A.O under section 68 of the Act ,the addition of ₹ 2,85,80000/ ( ₹ 55,00000/ +₹ 2,30,80000/) is confirmed. The appellant will get necessary relief ₹ 47,00,000/ accordingly. 6. Aggrieved with such order of the CIT(A), the assessee is in appeal before The Tribunal by raising the following Grounds:- 1. The Ld. CIT (A) has erred both in law and on facts in upholding the initiation of reassessment proceeding by the AO u/s 147 disregarding the fact that there was no independent application of the mind by the AO in the absence of any tangible material on record and that notice u/s 148 was never served upon the appellant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , at the time of hearing, the ld. counsel for the assessee did not press for the additional ground stating that this is a part of the grounds of appeal number 1 and 2 and therefore the same is not being pressed. 8.1 The ld. counsel for the assessee challenged the order of the CIT(A) in upholding the validity of the reassessment proceedings. He submitted that there is total non-application of mind by the AO on the information provided by the Investigation Wing at the time of assuming jurisdiction under section 147 of the Act. Referring to page 60 and 61 of the paper book, the ld. counsel drew the attention of the Bench to the reasons recorded. He submitted that the Assessing Officer has not seen the return of income of the assessee filed under Section 139 of the Act and audited balance sheet to verify whether the facts mentioned by the Investigation Wing in the information are applicable to the present case or not. The return of income and balance sheet of the assessee has not been referred to or considered by the AO. The AO while obtaining approval from the additional CIT under section 151(2) has recorded the fact that no return has been filed which is evident from item number 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td in ITA 108/2015 (Del); iv) Signature Hotels P. Ltd. Vs. ITO - [2011 ] 338 ITR 0051 (Del); v) Pr. CIT vs. Meenakshi Overseas Pvt. Ltd. 395 ITR 677 (Del); vi) CIT Vs. SFIL Stock Broking Ltd., 325 ITR 285 (Del); vii) Sarthak Securities Co. P. Ltd. Vs. ITO 329 ITR 110 (Del); viii) CIT Vs. Supreme Polypropolene (P) Ltd.ITA No.266/2011 (Del); ix) CIT vs. Multiplex Trading Industrial Co. Ltd., 378 ITR 351; x) Hindustan Lever Ltd. Reported in [2004] 137 TAXMAN 479 (BOM.); xi) CIT vs. Greenworld Corporation 314 ITR 81 (SC). 10. The ld. counsel for the assessee referred to page 14 to 20 of the assessment order and submitted that the AO has drawn support to designate the share capital accepted during the year from S.K. Jain group as escaped income on the basis of various evidences dealt in the report of the accommodation entry forwarded by the Investigation Wing. Referring to pages 5 to 24 of the assessment order, he drew the attention of the Bench to various annexures. He submitted that these annexures are relevant material non-consideration of which at the time of recording reasons amount to non application of mind on these vital evidences. The AO has tried t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solely on the information of the Investigation Wing. 14. The ld. counsel for the assessee, referring to pages 60 and 61 of the paper book, drew the attention of the Bench to the instances of so-called accommodation entries detailed out. He submitted that even in the said reasons also the AO did not have any adverse information with regard to the credit entry of ₹ 5 lakhs dated 28th December 2014 wherein the particulars of pay order is not given. Further, in the reasons recorded the AO has not identified the nature of accommodation entries accepted by the assessee. He submitted that the names forwarded by the Investigation Wing also are in abbreviated form and the AO has not conducted any enquiry to verify the incompetence of the reason which fact is further evidenced from the fact that the AO, during assessment proceedings, has requisitioned under section 133(6) the bank statement from the banks of the parties identified in the reason to confirm the veracity of transactions covered by the information from the Investigation Wing. 15. The ld. counsel for the assessee submitted that the notice under section 148 was never served on the assessee. Referring to various decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is placed at page 223 of the paper book. He submitted that since the order has been dispatched after 31.03.2013, therefore, the assessment should be quashed being passed beyond the period of limitation under section 153 of the Act. Referring to the decision of the Hon ble Gujarat High Court in the case of Kanu Bhai M. Patel (HUF) vs. Hiren Bhatt, 334 ITR 25 (Guj), he submitted that the Hon ble High Court in the said decision has held that the date of issue would be the date on which the same was handed over for service to the proper officer. Therefore, when last day of limitation for issuance of notice is 31.03.2010 and the same was sent for dispatch in the speed post centre on 7th April 2010, the date of issue of such notice was held to be 7th April 2010 and not the date of signature of the officer as on 31.03.2010 and accordingly it was held that the issuance of notice as barred by limitation. He submitted that since in the instant case also the order was dispatched to the speed post centre on 1st April 2013, therefore, the same is barred by limitation. The ld. counsel also referred to the following decisions for the above preposition:- i) CIT vs Chetan Gupta (2015) 94 CCH 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee submitted that so far as the amount of ₹ 55 lakhs is concerned, summons were issued to those companies which are duly served. There was compliance of summons in case of two companies, namely, M/s Avail Financial Services P. Ltd. and M/s Lovely Securities P. Ltd., through their common directors. So far as the other companies are concerned, he submitted that the assessee has produced sufficient documentary evidences which were completely ignored. Further, the AO has not confronted the adverse material to the assessee for cross-examination despite specific request made vide letter dated 4th March, 2013. Referring to the decision of the Hon ble Supreme Court in Andaman Timber Industries vs. CCE, 281 CTR 241 (SC), Kishinchand Chellaram v. CIT, 125 ITR 713 (SC) and various other decisions he submitted that in absence of denial of natural justice to the assessee makes the assessment a nullity. He accordingly submitted that the reassessment proceedings are not in accordance with law and the addition on merit also requires to be deleted. 21. The Ld. DR, on the other hand, heavily relied on the order of the AO and the CIT(A). Referring to the decision of the Hon ble Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find, the AO, in the instant case, based on the report of the Investigation Wing that the assessee has received accommodation entries from Shri Surendra Kumar Jain and Virendra Kumar Jain controlled/managed companies, reopened the assessment by recording the following reasons:- ANNEXURE- A M/s Shri Balkishan Agarwal Glass Industries Ltd. J-4-126-B, D.D.A. Flats Kalka Ji, New Delhi-110019 Assessment Year; 2005-06 Reasons for belief that income has escaped assessment; Enquiries were conducted by the Investigation Wing of the Dept in the case of Shri Surendra Kumar Jain Group. During the course of post search investigation and preparation of appraisal report it has been evidently established that SH. S.K, Jain and his brother Sh. Virendra Jain are known entry providers and are in the business of providing accommodation entries to various beneficiary companies/entities/persons through cheques through a number of paper dummy companies in lieu of cash. These dummy companies are totally managed and controlled by Sh. Surendra Kumar Jain and hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SMART EST Shri Balkishan Agarwal Glass industries Ltd. ABN PIO No. 974426 25- Nov-04 500.000 Neeraj A-148, 28 For Shri Balkishan Agrav Glass industries SMARTEST Shri Balkishan Agarwal Glass Industries Ltd.' ABN PIONo. 974427 25- Nov-04 500000 Neeraj A-148 28 LOVELY Shri Balkishan Agarwal Glass industries Ltd. ABN PJONo, 17.8048 20- Dec-04 500000 Neeraj A 149 12 LOVELY Shri Balkishan Agarwal Glass Industries Ltd. ABN 28- Dec- 04 500000 Neeraj A- 149 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Yum Restaurants Ltd. vs Dy. Director of Income Tax 99 CCH 232 has held that where authorities appear to have concurred with reasons for reopening assessment without applying their mind, reopening of assessment would be invalid. The Hon ble Bombay High Court in the case of Ankita A. Choksey vs. Income Tax Officer And Others (2019) 411 ITR 207 (Bom) has held that condition precedent for issue of notice for reassessment is that the reasons to believe that income has escaped assessment must be based on correct facts. Notice based on wrong facts is without jurisdiction and has to be quashed. The Delhi Bench of the Tribunal in the case of DCIT vs. M/s KLA Foods (India) Ltd. and Others, vide ITA No.2846/Del/2015, order dated 8th April 2019, has held that condition precedent for issue of notice for reassessment is that reason to believe that income has escaped assessment must be based on correct facts. Notice based on wrong facts is without jurisdiction and is to be quashed. The Hon ble Delhi High Court in the case of PCIT vs. M/s SNG Developers Limited, 404 ITR 312, has held that condition precedent for issue of notice for reassessment is that the reason to believe that income has escaped ..... X X X X Extracts X X X X X X X X Extracts X X X X
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