2019 (8) TMI 1499 - ITAT DELHI

Validity of reopening of assessment u/s 147 - no mechanical satisfaction from the Addl. CIT - addition in respect of receipt of share capital money as accommodation entry - HELD THAT:- Even if the Addl. CIT grants approval for issuance of notice u/s 148 by recording that he is satisfied on the reasons recorded by the AO then that would suffice to come to a conclusion that there is a proper application of mind on the reasons recorded by the AO. How and in which manner and how many words the approving authority should record his satisfaction is purely subjective and it has to be seen whether satisfaction is discernible from overall facts and materials before him. Thus, in our opinion the approval grant by the Addl. CIT cannot be held to be purely mechanical or without application of mind. Thus, such a contention raised by the Ld. Counsel is rejected.

Information supplied and reasons not provided in the proforma in which satisfaction of approving authority was granted - AO has duly given the reasons as asked by the assessee and before us the entire proforma has been placed by the assessee in the paper book before us. This goes to show that such proforma was given to the assessee at some point of time and therefore, this contention of the assessee is not tenable. If reason to believe has been recorded by the AO in writing which has been duly approved by the higher authority, then it is sufficient to clothe the AO with jurisdiction reopen the assessment and proceed for making the assessment reassessment. Thus, this contention of the Ld. Counsel is also rejected.

Non application of mind on the information report by the DDIT Investigation Wing - Here in this case AO has solely relied upon the report received from the Investigation Wing, but in such a report there was a clear cut information regarding assessee and the companies who have given cheque to the assessee along with details of annexure and the amount paid which has been tabulated in the reasons recorded which are prima facie in the nature of accommodation entry, and if AO has found that such amounts are also recorded in the books of the assessee, then it does gives rise to reason to believe that such credits are not genuine. AO then has all the powers to examine the credits and call for explanation of assessee and carry out detail scrutiny based on his own inquiry and verification /examination of all the evidences and explanation of the assessee. If after any inquiry some adverse material is found to controvert the assessee’s explanation, then he can make the addition and if he is satisfied, then he may accept the assessee’s evidence/ explanation. On the facts and circumstances of the present case and on perusal of the reasons recorded, we are of the opinion it cannot be held that AO did not have prima facie reason to belief based on report of investigation wing which is very specific entailing the details of the assessee along with annexure bank account, cheque no. etc. If there are such direct and specific reports which have been sent to the AO along with all the annexures, then it cannot be held that AO was not having any material in his possession to entertain prima facie reason to belief. Accordingly the validity of reopening as challenged by the assessee on all counts are dismissed.

Addition u/s 68 - Nothing has been brought by the AO that any of the subscribing companies are related or controlled by these persons. Thus, the reasoning given by the CIT (A) sans any specific link found about these companies or assessee with the S.K. Jain and others, that they have actually provided the bogus transaction to the assessee, especially when they have stated that they were providing finance assistance to the companies and assisting as professionals for the share subscription etc, cannot be accepted. Atleast something should have found linking the assessee with accommodation entry from these persons through these companies.

Nowhere has it been brought on record before us that there is any specific trail of routing of unaccounted money of the assessee which has been received in the form of share application money nor these alleged persons have anywhere admitted that assessee was any kind of beneficiary of accommodation entry. Under these facts and circumstances, it would be very difficult to discard by the evidences collected by the AO as well as furnished by the assessee during the course of the assessment proceedings conducted by him. Extraneous information or report from the Investigation wing can form basis for reopening, but when AO is making the assessment then he must scrutinise himself all the documents and carry out his own inquiry. If he makes his own inquiry and nothing adverse has been found, then he cannot make his assessment on borrowed reasoning and rely upon the report of the investigation wing. Thus, on these peculiar facts and circumstances of the case, and in absence of any further inquiry by the AO to dislodge the evidence furnished by the assessee as well as gathered by him u/s 133(6), it would be very difficult to hold that the share application money received by the assessee is either non-genuine or bogus so as to sustain addition under the deeming provision of section 68. Accordingly, same are directed to be deleted.

Penalty u/s 271(1)(c) - As quantum of addition received by way of share application money as already deleted the quantum on merits, therefore, levy of penalty u/s 271(1)(C) has become infructuous.

Share application money to the assessee has been found to be in the nature of accommodation entry - notice u/s 133(6) - AY 2010-11 - HELD THAT:- In this case when the parties have not responded and have not furnished the relevant evidences to the AO in response to notice u/s 133(6), then it cannot be held that the facts and circumstances of the earlier years are the same. Though AO should have confronted these facts of non-compliance to the assessee that these parties have not responded or the notices could not be served, then it was the duty of the assessee to furnish all the relevant details of the companies, so that proper inquiry could have been done. Thus, for these two appeals, we are of the opinion that the entire issue of receiving of share application money should be remanded back to the file of the AO to examine the issue afresh, after seeking all the details from the assessee regarding the addresses and whereabouts of these companies and their creditworthiness so that AO can directly inquire from these parties. Assessee shall cooperate with the AO in providing all the details and evidences in support of the facts of the transactions and also the creditworthiness of the parties.