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TMI Blog2024 (3) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the paper book which evidently demonstrates that the assessee has sold its shares which were held as investment and the amount has been received through proper banking channel from the companies, against the said sale of shares. We have also taken note of the basis of addition which has been noted by the authorities below as amount received towards issue of share capital and share premium by the assessee to the respective companies from whom the amount is received, as not a correct fact. Thus we hold that the reassessment proceeding initiated u/s. 147 are not in accordance with law. Further, on the merits of the case, assessee has evidently demonstrated the nature and source of the amount received in its bank account which is against the investment held by it in the Balance sheet. Accordingly, grounds taken by the assessee filed on the legal and merits of the case are allowed. Penalty u/s 271(1)(c) - HELD THAT:- Since the quantum appeal is held in favour of the assessee in terms of the observations and findings noted above, the penalty so imposed is not justified, since there is no tax sought to be evaded as contained in explanation to section 271(1)(c). Also notice issued fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was transferred to assessee s bank account from Shagun Shree Tradecom Pvt. Ltd. and from Sneha Cloth Merchants Pvt. Ltd., both alleged as fictitious Jamakharchi company. According to Ld. AO, no explanation was given by directors of such fictitious companies regarding cash deposit which does not commensurate with their known source of income or transaction. Accordingly, Ld. AO formed the reason to believe that undisclosed income of assessee was routed through such fictitious jamakharchi companies, to bring into books of account of the assessee an income of assessee which has escaped assessment u/s. 147 of the Act. 3.1. Assessee was asked to file its explanation who according to the Ld. AO failed to explain the nature of transaction. Ld. AO noted in the impugned assessment order that assessee failed to furnish the complete details of the aforesaid fictitious jamakharchi companies from whom Rs. 1,05,00,000/- was received by it during the year under consideration, hence, the identity and creditworthiness of the shareholders and genuine of the transaction could not be verified. He thus, completed the assessment and the entire amount of money received on account of issue of shares alon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anies. While drawing the reasons to believe, AO has arrived at a conclusion based on explanation not given by the directors of the said alleged companies over which assessee had no control. It was claimed that the reasons recorded are vague and not proper. There is no satisfaction about the creditworthiness or otherwise of the information which has not been verified as to its correctness but has been merely accepted as truth in a mechanical manner. According to the assessee, reopening was initiated solely on the basis of information received from the DIT (Inv.), Kolkata without independent application of mind by the AO on the information so received. 7. In respect of AY 2012-13, in the impugned assessment order, Ld. AO has made a noting in respect of approval obtained from the Addl. CIT and Pr. CIT. In this respect, it is stated as Yes. I am satisfied that it is a fit case for issue of notice u/s. 148 of the I. T. Act. On this, it was contested by the assessee that the said approval is mechanical in nature, without application of mind by the Addl. CIT and Pr. CIT while granting approval. 7.1. On the merits of the case, assessee had submitted that amounts were received through prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25.01.2012, held this issue in favour of the assessee: 12 .... In the present case, the amount in question was neither a loan or the deposit, it was also not on account of share application money, the said amount was on account of sale of investment therefore the provisions of Section 68 of the Act were not applicable and the AO was not justified in making the addition. In our opinion, the Ld. CIT(A) rightly deleted the addition made by the AO. iii). The Delhi 'G ' Bench of the Tribunal in ITA No. 2264/Del/2013 in the case of ITO vs M/s. Srishti Fincap Pvt. Ltd. Order dated 07.10.2015 held the issue in favour of the assessee as : 9. From the facts and circumstances of the case, submissions made by the parties and case law cited in this case, we are of the considered view that no ground is made out to interfere into the order passed by Ld. CIT(A) for the following reasons: i) that in the instant case, A.O. has merely acted upon information supplied by DIT (Inv.) and has not preferred to analyze the previous returns filed by the assessee to make out if he has already disclosed the purchase of shares in question. ii) that from the perusal of copies of assessment proceedings in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was having investment in shares etc. which were duly shown on the asset aside of the balance sheet, out of those investments some were sold and few new were purchased and if there was any gain on the sale the same was offered for taxation. It was further submitted that in earlier year 13 4325 4326/Del/2009 under similar circumstances, the case was reopened u/s 147 of the Act and the addition made by the AO was deleted by the I.T.A.T. It was further submitted that the assessee sold the shares which were earlier purchased in different years and duly shown in the balance sheet of the respective years and that the assessee had shown the sale proceeds in the books of accounts, the investments were reduced after making the sales. It was contended that there was no obligation under the law that the assessee was required to prove the source of payee. It was further contended that the AO had not rejected the books of accounts and the purchases were duly accepted so there was no reason to doubt the sales. It was submitted that the case of the assessee is squarely covered by the decision of this bench of the Tribunal in the case of ITO vs. M/s Vishal Holding and Capital Pvt. Ltd. in IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) upon its independent examination of the record. It also discounted the Revenue's submissions that the investment shown in the book of accounts and reflected as assets in the side of the balance sheet, should have been properly treated and that in the absence of such treatment Section 68 applies. The ITAT rejected this contention and held - based upon the principles enunciated in CIT v. Vishal Holding Capital Pvt. Ltd. (order of this Court dated 9.8.2010) that the invocation of Section'68 in the circumstances is unwarranted. 5. Learned counsel for the Revenue reiterated the grounds cited in some of the contentions made before the ITAT. Learned counsel especially emphasized on the submission that the incorrect reflection of the receipts in the balance sheet belied the true nature of the receipts as a justification for the application of Section 68 . 6. The ITAT in our opinion quite correctly appreciated the law and its application by the first appellate authority, i.e., CIT(A). Having regard to the facts and the nature of the analysis based upon the decisions of this Court, as well as the reliance on various decisions with respect to the true nature of section 68, we are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011-12 relevant to AY 2012-13. From this, ld. Counsel submitted that Ld. AO himself is not clear as to what was the nature of accommodation entries when he has mentioned several modes and forms which included share capital/share premium, bogus unsecured loan, bogus billing etc. 10.1. The real and correct nature of transaction undertaken by the assessee was sale of shares held by it as investments which were duly reported and accounted in its audited financial statement giving their opening balance from the preceding years. Thus, the reasons recorded are general and vague which tantamount to conduct of fishing and roving enquiries, without verifying the records of the assessee. This demonstrates non-application of mind while recording of reasons to believe on the information received from DIT (Inv.), Kolkata. 10.2. Ld. Counsel referred to the decision of Coordinate Bench of ITAT, Kolkata in the casse of Nabadwip Chandra Saha Vs. ITO in ITA No. 166/Kol/2023 dated 31.03.2023 wherein it has been held that approval granted by the Addl. CIT u/s. 151 of the Act by stating Yes, I am satisfied that it is a fit case to issue of notice u/s. 148 of the Act is without application of mind. Rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s already been stated above and he demonstrated from the audited financial statements that the transaction undertaken by the assessee in both the years under appeal were towards sale of shares held as investment. He referred to the list of companies in which assessee held the shares as investments duly reported in its audited balance sheet. The additions made by the Ld. AO and confirmed by the Ld. CIT(A) are on the misconceived premise that the amount received by the assessee is towards issue of its share capital along with share premium and the companies from whom the amount has been received are share subscribers. Thus, the additions made are not justified and ought to be deleted. 12. Per contra, Ld. Sr. DR placed reliance on the orders of the authorities below. Ld. DR submitted that assessee did not comply with the notice issued u/s. 142(1) nor any rebuttal was furnished against the contention of the Ld. AO and, therefore, additions have been made in the hands of the assessee. 13. We have heard the rival contentions and perused the material available on record. Admittedly, it is a fact on record that the transaction undertaken by the assessee in both the years under appeal befor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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