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TMI Blog2021 (5) TMI 414X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Even no evidences whether Ld PCIT examined the material relied upon by the Ld AO for reopening, was produced before us. Mere mentioning of yes for approval, without any other evidence of application of the mind, amounts to mechanical approval by the LearnedPr.CIT. Further in Column No. 7 of the proforma, the section for invoking reassessment has been recorded as 147(b) of the Act. During the relevant period, section 147(b) was no longer in existence. This shows that the Ld. AO has filed the Proforma in mechanically manner and Ld. CIT has also approved the same mechanically. As following case of M/S N.C. CABLES LTD. [ 2017 (1) TMI 1036 - DELHI HIGH COURT] and M/S. MADHU APARTMENT PRIVATE LIMITED [ 2021 (2) TMI 709 - ITAT DELHI] we quash the reassessment proceeding in the case of the assessee. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... f unexplained credits u/s 68 of the Income-tax Act, 1961 on account of share capital/share premium in its books of accounts and commission paid thereon, despite the fact thn* he assessee was not able to establish the creditworthiness of the creditors and genuineness of transactions as required under section 68 of the Income- tax Act, 1961?" 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the said addition despite the fact that most of the notices u/s 133(6) of the Act sent to the 80 subscriber companies were either received back unserved or no reply was received; most of the e-mails sent to them had bounced back; status of most of the subscriber companies on MCA website was either struck-off or inactive and in response to commission issued under section 131(1)(d) of the Act to the DDIT (Inv.), Unit-3(4), Kolkata, he reported that no such company. M/s Joyprit Hotels Pvt. Ltd. or M/s Joyprit Plastic Builders Pvt. Ltd., existed at the addresses in Kolkata, provided in the confirmations received from them and genuineness of transactions ane Tidentity and creditworthiness of the creditors cannot be proved merely on paper?" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the Act for commencing scrutiny proceedings. During the proceedings on 16.08.2016, the assessee filed details of subscribers of share capital, including name and address. (vii) the objections raised by the assessee against the reopening of the assessment on 23/11/2016 and 06/12/2016 were disposed off by the Assessing Officer on 28/11/2016 and 09/12/2016 respectively. The Assessing Officer also provided complete Annexures to the reasons recorded on 28/11/2016 but the request of the assessee to allow cross examination of the witnesses was denied at that stage. (viii) the assessee vide letter dated 14/12/2016 and 16/12/2016 filed detailed confirmation of account, latest address, bank statements, copy of acknowledgement of Income Tax Return, certificate of incorporation along with Memorandum of Association (MOA) and Article of Association (AOA) of all share subscriber companies. (ix) the Assessing Officer for verification of shares subscriber issued notice under section 133(6) of the Act to all 80 share subscribers. On 27/12/2016, the Assessing Officer informed the assessee that some of the notices were returned unserved and other remained uncomplied and thus he asked the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to establish identity, creditworthiness of shares subscriber companies and genuineness of the transaction of cash credit. He also made addition for the commission at the rate of 2% presumed to have been paid for obtaining the accommodation entries from entry operators, which was worked out at₹ 1,29,63,600/-. In this manner, the Assessing Officer made total addition of ₹ 65,96,13,600/- under section 68 of the Act in the assessment order dated 29/12/2016 under section 147 read with section 143(3) of the Act. (xiv) Before the Ld. CIT(A), the assessee challenged reassessment assessment proceeding on the ground of borrowed satisfaction, approval granted in mechanical manner, completion of assessment without jurisdiction, non-disposal of objections filed against reopening of assessment, non-examination of persons named in reasons recorded, change of opinion, cross-examination of witnesses not allowed, additions made against the law and the procedure specified, notice under section 133(6) of the Act issued at old addresses of subscriber companies, non-adjudication of the evidences furnished by the assessee, show cause notice not issued/served etc. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of ₹ 99,98,400/- ( =24,99,600 x4 ) under section 68 of the Act and also corresponding commission at the rate of 2%. In respect of the balance share subscription, the Ld. CIT(A) deleted the addition observing as under: "Respectfully following the above judgment, which is on similar factual matrix, it can be reasonably inferred that material found during the search in respect of the equity received by the assessee cannot lead to the conclusions drawn by the AO. No specific corroborative evidence has been brought on record by the AO to prove that the equity subscription is an accommodation entry. Besides, appellant has also discharged its onus and submitted all the documentary evidence in respect of the investment. The details submitted in this regard by the appellant have also been made part of order by Assessing officer. It is also undisputed fact that the director of the appellant companies have never made any statement regarding the share capital / share premium / share application money and no disclosure have been made with regard to share capital / share premium / share application money / unsecured loan. As such, the addition made by the Assessing officer is unsusta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord the reasons for reopening of assessment proceedings in a mechanical manner. 6.2 He further, assailed the reasons recorded and submitted that from the perusal of the information received and the reasons recorded by Ld. AO, the assessment proceedings were initiated on the basis of Suspicious Transaction Report (STR) in the case of Sh. Manohar Jaykishan Shah. There was no reference of any other material. However, as evident from the assessment order, the Ld. AO has relied upon statements of Sh. Pramod Ramdin Sharma and Sh. Praveen Aggarwal which were not the basis of recording of reasons. The same amounts to modification of the reasons recorded and as per the guidelines issued by the Hon'ble Jurisdictional High Court in the case of Sabh Infrastructure Ltd. vs. ACIT (2017) 398 ITR 0198, no modification to the reasons recorded could be possible. 6.3 The Learned Counsel further referred to reply dated 05.01.2021received from the Assessing Officer in response to queries raised on 07.12.2020 (subsequent to the assessment proceedings) under Right to Information (RTI) Act. He submitted that the Ld. AO in reply to Q. No. 2(b) of RTI has stated that from perusal of bank statements an am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is not permissible under the law. He also referred to Column No. 7 of the said Proforma wherein relevant section for reopening has been quoted as Section 147(b) of the Act, which is no longer in operation/existence. 7.1 He further submitted that the copies of the order sheet forming part of the approval (available on page 23 of PB-1) accorded by the Learned Pr.CIT do not have his signature. He submitted that all these observations conclusively proves that approval under section 151 of the Act is without application of mind and on the basis of said mechanical approval given by the Pr. CIT-7, New Delhi, the notice has been issued by the AO to the appellant company on 22.03.2016 u/s 148 of the I.T. Act. 7.2 In support of his contention that in view of mechanical approval, the orders passed u/s 147/143(3) by the Assessing Officer need to be quashed, the Learned Counsel relied on the decision of the Hon'ble Delhi High Court in the case of PCIT Vs NC Cable Ltd. in ITA 335/2015 and decision of the Tribunal Delhi bench in the case of Madhu Apartment Private Limited in ITA No. 3869/Del./2018. 7.3 In support of ground No.3, the learned Counsel submitted that the Ld. CIT(A) has accepted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Ld. CIT(A) is justified in rejecting the contention of the assessee challenging the validity of the reassessment. In support of her contention that material available with the Assessing Officer was tangible material outside record, which were sufficient to initiate valid reassessment proceeding, she relied mainly on the decision in the case of Paramount Communication Private Limited, (2017) 392 ITR 444 (Delhi)by the Hon'ble Delhi High Court, the SLP filed against which has been dismissed by the Hon'ble Supreme Court as reported in 2017-TIOL-253-SC-IT. She also relied on the list of other decisions which revolve around the ratio as to whether the material received from Investigation Wing could be considered as tangible material for reopening of the assessment. 8.1 With reference to the arguments of the LearnedCounsel that approval was granted by LearnedPr.CIT in mechanical manner and without application of the mind, the Learned DR submitted that absence of signature on the order-sheet, does not mean that the Ld. CIT(A) has not perused the reasons recorded by the Assessing Officer and the information enclosed. As regarding the mention of section 147(b) of the Act in Column No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his contention. She also drawn attention to a long list of the companies in which, Sh. Sharma was Director during the period of investment in share capital of the assessee. The Learned DR submitted that genuineness of the transaction was not established in the case of the assessee in view of the decision of the Hon'ble Supreme Court in the case of NRA Iron and Steel Private Limited, (2019) 412 ITR 161 (SC). In view of the arguments, the Ld. DR submitted that entire addition made by the Assessing Officer, might be sustained. 9. On the other hand, in relation to ground raised by the Revenue, the Learned Counsel of the assessee relied on the order of the Learned CIT(A) and submitted that assessee has furnished all the documents to discharge its onus under section 68 of the Act. Regarding notices under section 133(6) returned back, the learned Counsel submitted that notices were issued at the old addresses despite the new addresses provided by the assessee. Regarding finding of non-existence of shares subscriber companies on the basis of the Inspector's Report, the Learned Counsel submitted that said report was not confronted to the assessee and the two parties under reference had sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in few accounts there were deposits also. In pursuance to the said report. Bank Statements of various entities have been obtained and on investigation, it has been noticed that Omkam Developers Pvt. Ltd (Pan AAACO5036B] was one of the beneficiaries during the F.Y 2008-09 relevant A.Y.2009-10 and the amount brought through I accommodation entries by the above mentioned company is ₹ 193.00 Lakhs. Copy of the Status Report in the case of Manohar Jay kishan Shah in connection with FIU-IND-STR No.1000010583 is reproduced below:- A. Background: • One Suspicious Transaction Report was received in the month November, 2009 from FIU-IND. In the said report, 31 related accounts were reported out of which 12 accountswere found to be associated, with business of Metal Trading Wherein Mr. ManoharJaykishan Shah is a Proprietor/Signatory. There are other 19 outstation Branch Accountswhich are linked/connected to main 12 accounts and having non-related business/not in the same line of business accounts. During the financial year 2008-09, high, value cheques totaling around ₹ 2030 crore are deposit at outstation branches in these accounts. Subsequent to which on realisa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as non-existence of real business of most of the entities mentioned in Annexure-C, C1 and l and S. Flow Chart of Cash Flow Cash deposit in proprietorship concerns Layering of funds through dummy Proprietorships and Shell companies Fund transfer to Shell/Paper Company Fund to the Beneficiaries Conclusion (i) In retrospect it can be rightly conceded that, the beneficiary companies have introduced n cash in primary accounts discussed in Annexure-C and s symbolized by various companies (created for the purpose re-1, Annexure-S) operated by entry operators by entry operators, the unaccounted funds have been entered In the regular books of accounts of the beneficiary companies. (ii) in view of the above, the total amount which has been transferred to the beneficiaries or the recipient companies from the bank accounts of paper companies during F.Y. 2008-09 is details in Annexure-8. The A.O. of the all beneficiary (Annexure-B) companies is being appraised of ] regarding accommodation entry accepted by the companies in F.Y. 2008-09. Further, A.O. of V concerns listed in Annexure-C, C-l and S is also being intimated regarding, cash deposit and credit made in different bank cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of reopening of assessment is put up for kind satisfaction of Pr.CIT, Delhi-7, New Delhi in terms of proviso, to Section 151 of the Income Tax and approval for issue of notice u/s 147 may kindly be accorded." 10.1 On perusal of the proforma for the approval granted by the PCIT, it is evident that in the relevant column No.13 for satisfaction of the Pr.CIT, he has only mentioned "yes". No other information is available on record or provided by the ld. DR, which could establish application of mind by the CIT, while granting sanction/approval for issue of notice u/s 148 of the Act. No other evidence was produced as to substantiate that matter was ever discussed between the Assessing Officer or Addl. CIT and the Learned Pr.CIT for arriving at satisfaction of Learned Pr.CIT on the reasons recorded by the Assessing Officer. Even no evidences whether Ld PCIT examined the material relied upon by the Ld AO for reopening, was produced before us. In similar circumstances, Hon'ble Delhi High Court in the case of NC Cable Ltd (supra) held that section 151 of the Act clearly stipulates that Learned CIT, who is the competent authority to authorize the reassessment notice, has to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted. Accordingly, appeals of the Assessee are allowed." 10.3 In the instant case before us, also the Learned DR has argued that the mistake of noting section under section 147(b) of the Act for reassessment proceeding is a clerical mistake, however, the Tribunal in the above decision has rejected the said contention and quashed reassessment proceeding on the ground of non-application of mind while granting approval for reopening of the assessment under section 151 of the Act. 10.4 Respectfully, following the decision of the Hon'ble Delhi High Court in the case of NC Cable Ltd (supra) and decision of the Tribunal in the case of Madhu Apartment Pvt. Ltd (supra), we quash the reassessment proceeding in the case of the assessee. 10.5 Since we have quashed the reassessment proceeding while adjudicating ground No.1 of the appeal of the assessee, no additions made by the Assessing Officer could be sustained. As far as other grounds of appeal of the assessee challenging validity of reassessment proceeding are concerned, same are rendered merely academic in nature and, therefore, we are not adjudicating upon those grounds. As far as grounds of the parties challenging merit of the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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