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TMI Blog2022 (9) TMI 769X X X X Extracts X X X X X X X X Extracts X X X X ..... vestigation Wing, New Delhi vide Dy. Director of Income Tax(Inv), Unit 1(2), New Delhi and also from the office of CBI, New Delhi that Shri Tarun Goyal, M/s. Yogesh Trading Co and others were engaged in purchasing of existing companies and formation of new one. At least 35 companies were found operating on the same address, 13/34 WEA, 4th Floor, Main Arya Samaj Road, Karol Bagh, New Delhi. Mr. Tarun Goyal was suspected to be engaged in depositing of cash in various bank accounts and transactions were finally shown as subscription of equity in companies. The equity was mainly subscribed at high premium. The non group companies were found to be carrying out normal business activities. Some of the companies were found inducting capital/margin money to avail credit facilities from financial institution. In this process tainted money was converted into bonafide investment in equity resulting in evasion of tax. At least 35 companies along with details of 45 bank accounts were taken up by CBI for scrutiny and rest of same banks were found in facilitating money laundering activities. It was further informed that Shri Hari Das Securities and Credit Pvt. Ltd by which the present Assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td Vs. ITO (2003) 259 ITR 19 (SC).The ld. AO proceeded to complete the assessment on the basis of information available on record. During the assessment proceeding on 11.12.2017 the ld AR of the Assessee had submitted bank statement revealing an amount of Rs. 21.70 crores has mainly been carried out by M/s. Vertex Drugs Pvt. Ltd and the amount credited in above account of the Assessee has been credited by the company and filed all documentary evidence in this respect. The ld AR of the Assessee was asked to produce the Directors of M/s. Vertex Drugs Pvt. Ltd for verification on next date of hearing. But no such director was produced. The ld AO examined the bank statement of M/s. Vertex Drugs Pvt. Ltd A/c No. 223010200020323/- for the relevant period i.e. 01.04.2009 to 31.03.2010 and concluded that the amount has been received/ credited into the account from Yogesh Trading Company and subsequently transferred into the account of M/s. Shri Hari Das Securities Pvt. Ltd and subsequently into the account of M/s. Priya Tissues Pvt. Ltd i.e. These three entities were found to be situated at the same address. Accordingly, an addition u/s 68 of the Act was made for a sum of Rs. 22,70,06,000/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isclose fully and truly all material facts necessary for reassessment." 6. Resultantly the ld CIT(A) found that the assessment order tainted on aforesaid ground. Now the revenue has raised the following grounds of appeal:- "1. Whether the ld CIT(A) has erred in deleting the addition of Rs. 22,92,76,060/- merely on the basis of technical grounds without discussing the merits of the case and ignoring the apparent credible information and the fact that the Assessee is a beneficiary of accommodation entry to that extent? 2. Whether, the ld CIT(A) has erred in ignoring the fact that Pr. CIT has categorically recorded that there is a failure of the Assessee to disclose material is a accommodation entries?" 7. Heard and perused the record. 8. On behalf of the revenue the ld DR submitted that the first appellate authority has fallen an error in not considering the case on wholesome basis and merely on technical ground benefitted the Assessee. It was submitted that the ld CIT(A) has failed to take note of the fact that it was not a simple case of reopening of assessment but in the back drop was the money laundering activity disclosure not of the revenue department alone but also inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vious assessment proceeding on 29.10.2012 to 22.03.2013 and which shows that he had malafide intention to mislead the previous AO. 8.4 He submitted that the ld CIT(A) relied on certain decisions which were distinguishable and in that context he submitted that:- i. The decision of Hon'ble Delhi High Court in the case of Haryana Acrylic Manufacturing Ltd. v/s CIT (2009) 308 ITR 38 (Delhi) was considered and distinguished by the subsequent decision in the case of RDS Project Ltd. v/s ACIT, New Delhi 421 ITR 624 (Delhi). The Hon'ble Delhi High Court, in this case also referred to the recent decision of the Supreme Court in Pr. CIT v. NRA Iron & Steel (P.) Ltd. (2019) 412 ITR 161 and several other cases in respect of addition made u/s 68 on account of bogus share capital. ii. Also in the case of Aravali Infrapower Ltd. V DCIT [2017] 390 ITR 456(Delhi) and PCIT v Paramount Communication (P) Ltd [2017] 79 taxmann.com 409(Delhi), the decision of Haryana Acrylic Manufacturing Co(supra)has been considered and distinguished. iii. In the case of Vedanta Ltd. V ACIT in WP(c) No. 13036 of 2019, assessment was reopened on the basis of information received from the Investigation Win ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portion of the reasons recorded is reproduced herewith: " the company filed its original return of income on 26.03.2012 for the A Y 2010- 11 declaring total income of Rs. 500/-. Perusal of the return of income reveal that during the year under there is no purchase or sale or even authorised share capital or share application money has been shown at NIL... "(page 4 of reasons) 3. Reasons recorded by the AO nowhere state that income escaping assessment is on account of receipt of share capital from M/s Vertex Druga Pvt. Ltd. In fact on the contrary it has been concluded in the reasons that "at least an income of Rs. 4,54,01,200/- (approx.) i.e 20% of Rs. 22.70 crores chargeable to tax has escaped assessment for A Y2010-11 "(para 11 page 5 of the reasons). 4. Reasons state that - "copy of the bank statement has been called for from the Axis Bank and as per the above information from the Investigation Wing there are huge cash deposits to the extent of Rs. 22.70 crores during the period 1.4.2009 to 31.3.2010 of the assessee in its bank account maintained with Axis Bank, Karol Bagh, New Delhi to verify the same." (Page 4 of the reasons). Whereas, only amount of cash deposited in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment proceedings after expiry of four years from end of relevant assessment year merely on basis of report of investigation wing, was not sustainable. FACTS In the original assessment proceedings the assessee had furnished all material facts viz. Copy of share application form (41-43 P/B), copy of bank statement of investor company (44- 53 P/B), audited balance sheet of investor company as on 31.03.2010 (54-64 P/B), scrutiny assessment order of investor company for A.Y. 2010-11 (65- 67 P/B), ITR of investor company for A.Y. 2009-10 (74 P/B). 10. He also relied following judgments in support of his submissions; 1. As for first proposition he relied on the following judgments/ order; a. Pr. CIT Vs. Meenakshi Overseas Pvt. Ltd 395 ITR 677 b. Pr. CIT Vs. RMG Ployvinyl (I) Ltd 396 ITR 5 c. Pr. CIT Vs. G &G Pharma India Ltd 384 ITR 147 d. Karan Khurana Vs. ITO, ITA NO. 1783/Del/2019 AY 2010-11 2. As for second proposition he relied on the following judgments/ order:- a. Surani Steel Tubes Ltd Vs. ITO 136 taxmann.com 139 (Gujarat) 3. As for third proposition he relied on the following judgments/ order:- a. CIT-III Vs. Suren International (P) Ltd 35 taxmann.com 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then Ld. AO deserved an opportunity to explain, possible and reasonable explanation, if any, available with the Ld. AO. Then ld CIT(A) could have sought a remand report from Ld. AO as to if there was any reason for recording this fact that no assessment u/s 143(3) was done in the case of the Assessee company. 11.2 Further, when any authority is working within the time bound manner such a mistake of fact is likely to occur due to rush of work. The Assessee is under an obligation to impress the appellate authority that such mistake of fact has caused grave prejudice, which certainly is not so, in the present case in hand. 12. In regard to alleged second incorrect facts recorded in the reasons "that authorized share capital and share application money has been shown as Nil". The ld AR has relied a balance sheet and profit and loss account statement available at page Nos. 22 to 27 of the paper book. It has been submitted that subscribed, issued and paid up capital is mentioned and is shown to have increased from Rs. 57,80,000/- to Rs. 79,50,000/-. In this context if balance-sheet extract and companies general business profile at Para 2.12, available at page No. 26 of the paper book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot he read to mean that the AO should have finally ascertained the fact by legal evidence or conclusion". 16. Thus the, final outcome of the proceeding was not relevant. In other words, at the initiation stage, what was required is "reason to believe", but not the established fact of escapement of income. The issue raised by the Ld AR in present case about mention of "cash deposit" or " that there was only cash deposit of Rs 5000/-" are not such as can be said to discredit the satisfaction of Ld. that there has been an escapement due to some bogus entry operator"s involvement. How much or by what means, assessee succeeded to evade that escaped income to be considered in the assessment, were not required to be reflected exhaustively. At the stage of issue of notice, the only question was whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement was not the concern at that stage. This is so becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aised as to whether the same is based on the change of opinion or not, whether the reopen is based on the available materials or not and whether fresh tangible material is available or not and whether the reopening of the assessment is barred by limitation are all matters subject to facts and circumstances of each case. In all the cases, uniform method cannot be adopted. Every case is based on the facts and circumstances depending on the merits of its relevant particulars and the same has to be decided by the fact finding authority. The scope of the writ is very limited. Unless it is shown that there is violation of Fundamental Rights or infringement of rights of citizen, or the order passed is against principles of law or violation of principles of natural justice, the writ court cannot interfere in the case where there is no violation of principles of natural justice or fundamental right or non compliance of statutory requirements in any manner." 19. Hon"ble Supreme Court of India in M/S. Phool Chand Bajrang Lal And vs. Income-Tax Officer And Another AIR 1993 SC 2390, reiterated the principles in regard to reopening of concluded assessments by referring to judgment in A.LA. Firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee company had filed its e-rectum of income for the A.Y. 2010-11 on 26-03-2012 declaring taxable income of Rs.500/-. 2. Notice u/s 143(2) of the Income Tax Act, 1961 was issued on 10-09-2012 and was duly served upon the assessee company. Notice u/s 142(1) dated 17-10-2012 along with detailed questionnaire was issued and was duly served upon the assessee company. In response to the notices issued, Sh. Tarun Goyal, CA and authorized representative of the assessee company attended the proceedings from time to time and submitted necessary details and clarifications and the same are placed on record. After discussion with the authorized representative of the assessee company, the assessment is completed at returned income. 3. Assessed at an income of Rs. 500/-. Give credit for prepaid taxes. Issue demand notice and challan." 22. The Assessee although claims that questionnaire was issued u/s 142(1) as mentioned in the proceedings recorded by the ld AO and available at page No. 147 of the PB. However, the details of the questionnaire is not available. What is made available is copy of the reply to the notice dated 17.10.2012, at page 129 to 144 of the PB. What comes up from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estor 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 are not satisfactorily explained, would be charged to income tax as the income of the assessee. The subsequent acquisition of knowledge that the monetary transaction (including of the kind discussed above) undertaken by the assessee was with a bogus entity/ person-such as an accommodation entry provider - which knowledge was not available to the Assessing Officer at the time of completion of the scrutiny assessment, would be a material change of circumstances, and the formation of belief that taxable income has escaped assessment would not suffer from the taint of simplic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings, it does not emerge that the assessee had discharged the onus of establishing the credit worthiness of the Companies which had ostensibly invested the amount or in regard to the genuineness of the transaction. Hence, though the reopening of the assessment in the present case is beyond the period of four years but the Assessing Officer was satisfied that the condition stipulated in the first proviso to Section 147 was duly fulfilled" 26. What is established is that in the previous assessment order the Assessee was able to withhold and did not disclose all the facts in honest manner and at that time revenue did not have any means to know, that the Assessee is dealing with companies promoted by Shri Tarun Goyal, who is engaged in the business of providing accommodation entries. Hon"ble Delhi High court in the case of PR. COMMISSIONER OF INCOME TAX -6, NEW DELHI versus NDR PROMOTERS PVT. LTD. ( Supra) while considering an appeal of Revenue against order of Tribunal, observed with regard to the modus operandi of Sh Tarun Goyal, in para 13; "In view of the aforesaid factual position, we have no hesitation in holding that the transactions in question were clearly ..... 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