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TMI Blog2021 (1) TMI 728X X X X Extracts X X X X X X X X Extracts X X X X ..... y basis in law and any valid reason to believe that Income has escaped the assessment and without application of mind by relying upon the information received from ADIT (Inv.), Unit 7(4) and in violations of various provisions of law. 2. Your appellant submits that Ld. CIT(A) was not in possession of any information nor any mind was applied by him to such alleged information and had violated the provisions of law and of natural justice. 3. Your appellant prays that the re-opening and the consequent re-assessment be held as bad-in-law and consequently the re-assessment order be quashed. II. Invalid Proceedings 1. The Id. CIT(A)/ AO erred in law and on facts in upholding an order of reassessment passed in pursuance of the invalid proceedings initiated in the names of and against the amalgamating companies which companies were amalgamated with your appellant with effect from 20.03.2015 under an order u/s. 391 of the Companies Act dt. 04.04.2014 passed by the High Court much before the date of recording reasons and issue of notice u/s. 148 dt. 31.03.2016. 2. Your appellant strongly submits that the proceedings for re-opening and re-assessment were in gross violation of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies operated by Shri Vipul Vidur Bhatt (hereafter call VVB), notice u/s. 148 dated 31.03.2016 was issued in the cases of amalgamating companies i.e. M/s. Raja Food Products Pvt. Ltd. and M/s. Teejay Sugars Ltd. In response the assessee company stated that the return of income earlier filed by the amalgamating companies should be treated as return filed in compliance to notices issued u/s. 148. Assessment u/s. 143(3) rws 147 was completed on 29.12.2016 determining the total income at Rs. 1,40,00,000/-. 6. During the course of assessment the AO issued notice u/s 142(1) on 14.12.2016. In this notice, the appellant was asked to establish the identity and creditworthiness along with genuineness of the transactions with several entities from whom money has been received during the year. Similar notice was issued in respect of money received by erstwhile Teejay Sugars Pvt. Ltd., on similar lines. The first notice has been issued in respect of money received by Raja Food Products Pvt. Ltd. Replies were filed by the assessee in respect of Raja Foods Pvt. Ltd. Similar reply was filed in respect of second amalgamated company Teejay Sugars Pvt. Ltd., which was also on similar lines. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it for the unaccounted income of the two amalgamating companies. The investor companies did not have any significant genuine profit. No commercial activity could be seen in the case of the investor companies. The details of the tax payment and the TDS in the hands of the investor companies were also noted. The investor companies were shell companies which are usually involved as a conduit in providing entries to beneficiaries. To corroborate the same, the AO referred to the findings of the search action carried out on Shri Vipul Vidur Bhatt on 05.02.2016. The AO deputed an Inspector to serve the notice u/s. 133(6) of the investor company M/s Victory Sales Pvt. Ltd., having address at 60/A, Tariwala Building, 3rd floor, SANE Guruji Road, Tardeo, Mumbai-400 034. The Inspector reported that there was no trace of any such company at the address mentioned. The AO asked the appellant to produce the shareholders of RFPPL and TSPL. However, the investors could not be produced for examination. The appellant furnished confirmations from the investors of RFPPL & TSPL on 23.12.2016 and 26.12.2016. Copy of the ITR, annual accounts and relevant bank statements of the investors of RFPPL and TSPL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad More and other case laws. 11. He finally concluded that tax return filed by the seven entities established the identity. However the creditworthiness and genuineness was not established. Hence he upheld the addition. 12. Against the above order the assessee has filed appeal before the ITAT. 13. We have heard both the parties and perused the records. Learned counsel of the assessee assailed the order of the learned CIT(A) on various grounds. He challenged the validity of reopening and reassessment after four years. In this regard he referred to a Catena of case laws. He submitted that the reopening is also invalid in as much as notice was given to non-existent companies in as much as those companies had ceased to exist after the amalgamation with the assessee company, which was duly approved by honourable Bombay High Court. He submitted that this issue is squarely covered in favour of the assessee by the decision of honourable Supreme Court in the case of Maruti Suzuki India Ltd 107 Taxmann.com 375. He submitted that it was clearly held by Hon'ble Supreme Court that assessment pursuant to notice on non-existent companies is a nullity. The learned counsel of the assessee fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entry operation. That the impugned companies where beneficiary of the bogus entry operation as share capital. The learned departmental representative extensively relied upon the finding of search in the case of VVB. He further submitted that the investing companies did not have the wherewithal for investing large amount of money in the assessee company who did not have the capacity to command share capital investment. 15. Upon careful consideration we note that assessee companies in the present case which are subject matter of addition were not in existence at the time when the share application and capital was received. The assessment was reopened pursuant to notice issued in the name of non-existent companies. The share application and the capital were received by erstwhile companies which had amalgamated pursuant to an order of the honourable Bombay High Court and subsequent thereto the assessee company had come into existence. Thereafter subsequent to search and survey activity in the case of VVB notice to the erstwhile companies was issued for reopening of the assessment. This learned Counsel of the assessee submits renders the assessment a nullity on the touchstone of Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer was done in case of only one party for A.Y. 2009-10 and the veracity of which is itself in doubt. 18. We find ourselves in agreement with the submissions of the assessee's counsel. We note that except for the statement of the entry operator which was also retracted the addition made by the authorities below is devoid of cogent material. In this regard we note that in similar circumstances honourable Bombay High Court in the case of CIT Vs. Orchid Industries Pvt. Ltd. (ITA No. 1433 of 2014 dated 5.7.2017) held as under :- "The Assessing Officer added Rs. 95 lakhs as income under Section 68 of the Income Tax Act only on the ground that the parties to whom the share certificates were issued and who had paid the share money had not appeared before the Assessing Officer and the summons could not be served on the addresses given as they were not traced and in respect of some of the parties who had appeared, it was observed that just before issuance of cheques, the amount was deposited in their account. The Tribunal has considered that the Assessee has produced on record the documents to establish the genuineness of the party such as PAN of all the creditors along with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entity) of the shareholders i.e. they are bogus. The Apex Court in CIT v/s. Lovely Exports (P)Ltd. 317 ITR 218 in the context to the preamended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit. 20. Similarly Hon'ble Bombay High Court in the case of CIT Vs. Apeak Infotech (3971 ITR 148) has held as under :- "Amendment to Section 68 of the Act by the addition of proviso thereto took place with effect from 1st April, 2013. Therefore, it was not applicable for the subject Assessment year 2012-13, So for as the pre-amended Section 68 of the Act was concerned, the same cannot be invoked in this case, as evidence was led by the Respondents- Assessee before the Assessing Officer with regard to identity, capacity of the investor as well as the genuineness of the investment Therefore, admittedly, the Assessing Officer did not invoke Section 68 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject Assessment year 2012-13 and cannot be invoked. It may be pointed out that High Court in Commissioner of Income Tax vs. M/s. Gangadeep Infrastructure (P) ltd (Income Tax Appeal No. 1613 of 2014 decided in 20 March 2017) has while refusing to entertain a question with regard to Section 68 of the Act has held that the proviso to Section 68 of the Act introduced with effect from 1 April 2013 will not have retrospective effect and would be effective only from Assessment year 2013-14. In view of the above, Question No .B as proposed also does not give rise any substantial question of law as it is an issue concluded by the decision of High Court in M/s Vodafone India Services Pvt. Ltd. (Supra) and in the Apex Court in M/s G.S. Homes & Hotels P. Ltd. (supra). Thus not entertained. " 21. Accordingly in the background of aforesaid discussion and precedent in our considered opinion assessee has given all the necessary details required for establishment of identity creditworthiness and genuineness under extant provisions of section 68 of the IT Act. The onus cast upon the assessee stands discharged. The addition by invoking amended provisions of section 68 of the Act which are not ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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