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TMI Blog2019 (5) TMI 1903X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer in charging interest u/s. 234B of the Act in a sum of Rs. 1,10,54,788/- which being wrong illegal and unjustified and in any case highly excessive must be annulled." 2. The brief facts of the case are that an information from the office of Addl. CIT, Range-5 Firozabad , was received by the Assessing Officer to the effect that the assessee company had made investment of Rs. 3,19,00,000/- in purchase of property at Aligarh from M/s. Tiger Hardware and Tools Ltd and M/s. Ansal Properties and Industries Ltd. It was also informed that the assessee company had made payment of purchase consideration of this property through its bank A/c. 0010002100071628/- with Punjab National Bank, Aligarh, which was credited with sizable entry before making transfer of money. Based on this information, the Assessing Officer issued notice to the assessee u/s. 148 after seeking approval of the competent authority, to reopen the case of the assessee. The reasons recorded for reopening the case read as under : Information/documents along with relevant details has been received from the office of Addl. Commissioner of Income Tax, Range- 5, Firozabad vide letter F.No. AIR-2008-09/Addl. CIT-R-5-Firoza ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved from the office of Addl. Commissioner of Income Tax, Range- 5, Firozabad I have reason to believe that the assessee has willfully and knowingly concealed its particulars of income to avoid tax and that income of Rs. 3,78,93,361/- chargeable to tax has escaped assessment for A.Y. 08-09, within the meaning of section 147 of the Income-tax Act, 1961. 3. In the reopening proceedings, the assessee was asked to explain the source of investment, which he explained to have been made out of share application money received from 34 share applicants to whom the shares of Assessee Company stood allotted, the list of which is given in the assessment order. The assessee also filed requisite documents to support genuineness of its claim. From the bank statements of the investor companies, the Assessing Officer observed that the cash deposit preceded the issuance of cheques and that since the authorized capital of the assessee company was only Rs. 10 Lakhs, the receipt of share application money worth Rs. 3.40 crores becomes doubtful without increasing the authorized capital. On being asked for explanation, the assessee explained that the payments were received through banking channel, some o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistrar-1, Aligarh. Director of purchasing company, M/s seven Heaven Construction Pvt Ltd, Sh. Sudish Kumar Singh S/o Sh. Sughad Pal Singh operates his business network vibrantly in Aligarh. The bank account of the above purchaser company where from sale consideration in respect of three plots transferred is 0010002100071628 at Punjab National Bank at Railway Roads Aligarh (UP). It has been further stated that this bank account has been credited with sizeable entries immediately before the transfer of purchase amount against all the three plots of land. Funds of Rs. 3,78,93,361/- credited in the above PNB account have been routed through the bank accounts of the family members of Sh. Sudhislt Kumar by depositing cash in their respective bank accounts. Requisite investigation under the law is required because the company was incorporated on 23.06.2006 and in the very next year it purchase a land measuring 9551 Sq. Yards at prime location in Aligarh and managed funds of Rs. 3,78,93,361/-. It is also worthwhile to mention that the case seems to belong to F.Y. 2008-09 relevant A.Y. 2009-10 however, the physical possession of the property under consideration and also the consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a course of action is to be taken then how notice U\S 148 was issued at this stage when further investigation was needed. This is really true that investigation was needed as the amount of Rs. 74,00,000/- contributed by one of the promoters vide cheques detailed above after transferring from loan accounts, copy of the statements of account placed at page No 38, 39, 40 and 41 of the paper book. Had a proper mind been applied the Ld. Assessing officer would not have considered above amount for issuance of notice. Then the amount escaped as alleged would have been less by 74,00,000/= and obviously this could not be the reason at all. This clearly indicates that there is no application of mind from the Id. Assessing officer to the reasons recorded when at this stage further investigation was required. Further If as a result of investigation or enquiry the reasons gets changed or focus gets shifted to some other person as was obvious in the present case, had proper enquiries been conducted before recording of the reasons then how the reason recorded for reopening of assessment of the assessee is justified when after proper investigation and enquiries the assessing officer would get com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when reason is factually incorrect and premature and not in accordance with the law how the agreement of Ld. JT CIT with the reasons recorded is according to the law when there is no application of mind at this stage also. Had the Jt. CIT told the A.O to look into the matter properly he would not have accorded satisfaction at all, at least for the reason that Rs. 74,00,000/- invested by Mr. Sudesh Kumar is invested after obtaining loan and loan statements have been submitted during the course of assessment. So the satisfaction accorded to the reasons recorded which are bad is also bad in law and not within the meaning of section 151 of the Income Tax Act 1961. Further if as per reasons of further investigation was required how the case is fit for issuance of provisions of section 147/148 of the Income Tax Act 1961. The Ld. Jt.CIT should have to ask the A.O to see the matter investigated properly then submit for approval. Had the matter been properly investigated then he would not recorded reason like this at least the total amount could have been less by 74,00,000/- secondly matter could have got shifted to the applicants instead of the appellant. The reason recorded is bad and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee escaped assessment was missing, reopening of assessment not justified." In Shree BhagwanVs. Income Tax officer (2015) 45 CCH 0040 Del Trib, Honorable Delhi Bench of ITAT has held that "Mere Annexure cannot be regarded as a material or evidence to prima facie show or establish nexus or link which discloses escarpments of income for warranting addition u/s 68." In Bir Bahadur Singh Sijwali Vs. Income Tax Officer (2015) 68 SOT 0197 (Delhi) (URO) it was held that "Reassessment proceedings cannot be resorted to only to examine facts of a case, no matter how desirable that be, unless there is a reason to believe, rather than suspect, that income has escaped assessment." The reason recorded is therefore bad and agreeing to the bad reasons and according approval to the bad reasons is also bad in law and not within section 151 of the Income Tax Act 1961. Therefore the order passed by the Ld. A.O and confirmed by Ld. CIT(A) deserved to be quashed. Ground No 2 During the course of assessment the assessee has submitted all the information against queries dated 11/03/2016 and 18/03/2016 which are placed on page No 13 to Page No 25 of the paper book. All the requisite informa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Here bank statements are furnished and the A.O. has been specifically requested for any information if needed and even has been requested for issuance of notice u/s. 133(6) or 131 of the Income Tax Act, 1961 4. None of the investors companies appeared before the A.O. but merely sent written response through DAK In fact A.O. has been specifically requested to issue 131 or 133(6) of the Income Tax Act 1961 and even the appellant could bear their cost of travel and food. 5. The companies Hema Trading and Eternity Multi Trade Pvt. Ltd. at Mumbai were found to be non existent at the address given and the premises was owned by some other person. No such instance is found in the present case. 6. The companies of Kolkata did not appear before A.O. nor did they produce their bank statements to substantiate their source. The A.O has been specifically requested for any other information, explanation etc. and has been requested to issue 131 or 133(6). The appellant will bear the costs. 7. The Two companies at Gowhati, Ispat Sheet Ltd and Novelty Traders Ltd were found Non existent. No such issue is reported here. The assessee has requested A.O for any further information needed And r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hment of satisfying provisions of section 68 of the Income Tax Act 1961. The appellant after submitting all the information required as per provisions of section 68 of the Income Tax and further requested the A.O for issuance of Notices U\S 133(6) of the Income Tax Act 1961 or 131 of the Income Tax Act 1961 and without rebutting anything which goes against the appellant still the A.O treated the amount as unexplained and taxed U\s 68 Of the Income Tax Act 1961. There is no any such specific finding which could state that any of the applicant is non existent or any specific reason where the appellant has not discharged its responsibility under law to prove credit worthiness of the creditors still the transaction has been treated under provisions of section 68 of the Income Tax Act 1961. However passing of orders by both Ld. CIT(A) and the Ld. A.O in a mechanical and hypothetical manner as nothing has been rebut further amount of Rs. 74,00,000/= invested by Mr. Sudesh Kumar has also been taxed when his loan account statements are submitted and placed at page No 38,39,40 and 41 of the paperbook. In both the orders below there is nothing mention of this transaction . This clearly pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where Hon'ble Gujarat High Court held that where sizeable amounts were deposited in cash in account of depositors only before their withdrawal through cheques in favour of assessee, addition was justified. 4. The authorized capital of assessee is only Rs. 10 lakhs where as assessee has accepted share application money of Rs. 3.40 or without increasing its authorized capital, which shows that assessee never intended to issue any shares against this share application money. Hence, genuineness of the transactions is not proved. 5. Many of the share applicants were agriculturist and not filing Income Tax Returns 6. The Ld CIT(A) has given remarks on pages 16 to 22 of his order with regard to each share applicant as to how their credit worthiness was not proved. 7. As held by Hon'ble Supreme Court in the case of PCIT Vs NRA Iron & Steel (P.) Ltd. 412 ITR 161 (SC), there was failure of assessee to establish credit worthiness of investor companies In the above case, it is humbly submitted that the following decisions may kindly be considered with regard to addition made u/s 68 of I.T.Act: 1. PCIT Vs NRA Iron & Steel (P.) Ltd. T20191 103 taxmann.com 48 (SC)/r20191 262 Taxman 74 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in view of the findings recorded by us hereinabove. 54. In view of the above, we are of the view that the Assessee has not discharged the onus satisfactorily and the additions made by the Assessing Officer were justified and sustainable." 5. CIT Vs Navodava Castle Pvt Ltd T20141 367 ITR 306 (Del) (Copy Enclosed) where Hon'ble Delhi High Court accepted that since the assessee was unable to produce the directors and the principal officers of the six shareholder companies and also that as per the information and details collected by the Assessing Officer from the concerned bank, the Assessing Officer had observed that there were genuine concerns about identity, creditworthiness of shareholders as well as genuineness of the transactions. "20. Now, when we go to the order of the Tribunal in the present case, we notice that the Tribunal has merely reproduced the order of the Commissioner of Incometax (Appeals) and upheld the deletion of the addition. In fact, they substantially relied upon and quoted the decision of its co-ordinate Bench in the case of MAF Academy P. Ltd., a decision which has been overturned by the Delhi High Court, vide its judgment in CIT v. MAF Academy P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examination by the Tribunal of the assessment proceedings in any detail in order to demonstrate that the assessee has discharged its onus to prove not only the identity of the share applicants, but also their creditworthiness and the genuineness of the transactions. No attempt was made by the Tribunal to scratch the surface and probe the documentary evidence in some depth, in the light of the conduct of the assessee and other surrounding circumstances in order to see whether the assessee has discharged its onus under Section 68. With respect, it appears to us that there has only been a mechanical reference to the case-law on the subject without any serious appraisal of the facts and circumstances of the case. 13. We, therefore, answer the substantial question of law framed by us in the negative, in favour of the revenue and against the assessee. The appeal of the revenue is allowed with no order as to costs." 9 CIT Vs Nova Promoters & Finlease (P) Ltd (18 taxmann.com 217, 206 Taxman 207. 342 ITR 169. 252 CTR 187) (Copy Enclosed) where Hon'ble Delhi High Court held that amount received by assessee from accommodation entry providers in garb of share application money, was to be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behind them who run and manage the said companies. It is the persons behind the company who take the decisions, controls and manage them." 11 CIT Vs Empire Builtech (P.) Ltd (366 ITR 110) (Copy Enclosed) where Hon'ble Delhi High Court held that u/s 68 it is not sufficient for assessee to merely disclose address and identities of shareholders; it has to show genuineness of such individuals or entities. 12.CIT Vs Focus Exports (P.) Ltd (51 taxmann.com 46 (Delhi)/r2015l 228 Taxman 88) (Copy Enclosed) where Hon'ble Delhi High Court held that where in respect of share application money, assessee failed to provide complete address and PAN of certain share applicants whereas in case of some of share applicants, there were transactions of deposits and immediate withdrawals of money from bank, impugned addition made under section 68 was to be confirmed 10 PCIT Vs Bikram Singh r20171 85 taxmann.com 104 (Delhi)/r20171 250 Taxman 273 (Delhi)/r2017l 399 ITR 407 (Delhi) (Copy Enclosed) where Hon'ble Delhi High Court held that even if a transaction of loan is made through cheque, it cannot be presumed to be genuine in the absence of any agreement, security and interest payment. Mere submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t did not strike to the assessee while making addition of the entire amount of share application money received, whereas the information was received with respect to investment in properties. This fact itself goes to substantiate the non-application of mind for reopening the case. 10. We have also gone through the reasons recorded, which eloquently speak that the formation of belief has been made only and only on the basis of information received without making any enquiry or pointing out any tangible material in the said reasons recorded. The basis of belief is self explanatory from the reasons recorded, where the Assessing Officer has mentioned that "in view of the additional information/documents received from the office of Addl. Commissioner of Income Tax Range-5, Firozabad, have reason to belief that the assessee has willfully and knowing concealed its particulars of income to avoid tax and that income of Rs. 3,78,93,361/- chargeable to tax has escaped assessment". This itself goes to show that the AO was mechanically persuaded by the report of Addl. CIT, Range-5, Firozabad and hence, such a reassessment, in our considered opinion, cannot be sustained being void in law, as al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation he has received from the Investigation Wing of the Revenue. This information is in the form of details of the amount of credit received, the payer, the payee, their respective banks, and the cheque number. This information by itself cannot be said to be tangible material. 20. Coming to the second part, this tells us what the AO did with the information so received. He says: "The information so received has been gone through." One would have expected him to point out what he found when he went through the information. In other words, what in such information led him to form the belief that income escaped assessment. But this is absent. He straightaway records the conclusion that "the abovesaid instruments are in the nature of accommodation entry which the Assessee had taken after paying unaccounted cash to the accommodation entry given (sic giver)". The AO adds that the said accommodation was "a known entry operator" the source being "the report of the Investigation Wing". 21. The third and last part contains the conclusion drawn by the AO that in view of these facts, "the alleged transaction is not the bonafide one. Therefore, I have reason to be believe that an income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Four years from the end of the relevant AY, it was not necessary For the AO to show that there was any Failure to disclose fully or truly all material facts necessary for the assessment. 26. The first part of Section 147(1) of the Act requires the AO to have "reasons to believe" that any 'income chargeable to tax has escaped assessment It is thus formation of reason to believe that is subject matter of examination. The AO being a quasi judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. While the report of the Investigation Wing might constitute the material on the basis of which he forms the reasons to believe the process of arriving at such satisfaction cannot be a mere repetition of the report of investigation. The recording of reasons to believe and not reasons to suspect is the pre- condition to the assumption of jurisdiction under Section 147 of the Act. The reasons to believe must demonstrate link between the tangible material and the formation of the belief or the reason to believe that income has escaped assessment. 27. Each case obviously turns on its own facts and no two cases are identical. However, there ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vague information in a mechanical manner. The Commissioner also acted on the same basis by mechanically giving his approval. The reasons recorded reflect that the Assessing Officer did not independently apply his mind to the information received from the Director of Income-Tax (Investigation) and arrive at a belief whether or not any income had escaped assessment." 13. It also appears that in the instant case, the reassessment proceedings were initiated by the Assessing Officer for making fishing enquiries, which is not permissible at all by resorting to the proceedings u/s. 147 of the Act. In Bir Bahadur Singh Sijwali vs. ITO (2015) 68 SOT 197 (Delhi), it was held that "Reassessment proceedings cannot be resorted only to examine facts of the case, no matter how desirable that be, unless there is a reason to believe, rather than suspect, that income has escaped assessment." 14. Thus, in view of various decisions, rendered in the cases cited above, in the light of reasons recorded in the instant case, we are of the considered opinion that the ld. Authorities below were not justified to sustain the validity of reassessment proceedings being invalid. The decisions relied upon by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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