TMI Blog2016 (12) TMI 1816X X X X Extracts X X X X X X X X Extracts X X X X ..... time of date of inquiry, was brushed aside. In the instant case, the assessee furnished documentary evidences in support of the receipt of the share application money which was through banking channels from the companies and also stated that those corporate entities were duly assessed to tax. But the AO held that even when the share capital had been received through banking channels and from corporate entities who were duly assessed to tax was not enough to accept the claim of the assessee. However, it was not brought on record to substantiate that the share application money was in fact the money of the assessee which rotated through banking channels. Therefore, the addition made by the AO and sustained by the ld. CIT(A) was not justified. Accordingly, the same is deleted. In the result, the appeal filed by the assessee is allowed. - ITA No. 4353/Del/2016 - - - Dated:- 16-12-2016 - Sh. N. K. Saini, J. Appellant By : Sh. Vivek Bansal, Adv. Respondent by : Sh. Rajesh Kumar, Sr. DR This is an appeal by the assessee against the order dated 30.05.2016 of ld. CIT(A)-36, New Delhi. 2. The following grounds have been raised in this appeal: 1. That on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition has relied upon her own decision which is not applicable to the facts of the present case, therefore, also the decision of CIT(A) is perverse. 7. That on the facts and circumstances of the case and in law, the AO has erred in charging interest under sections 234B and 234A of the Act. Each of the above grounds is independent and without prejudice to the other grounds of appeal preferred by the Appellant. The Appellant prays for leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing, of the appeal. 3. Vide Ground Nos. 1 to 6, the grievance of the assessee relates to the validity of the reassessment proceedings and the sustenance of addition of ₹ 25,00,000/- made by the AO u/s 68 of the Income Tax Act, 1961 (hereinafter referred to as the Act). 4. Facts of the case in brief are that the AO received an information from office of the CIT(Central)-I, New Delhi that the survey operation was conducted on 23.08.2008 at the premises of the following persons: a) Sh. Nirbhay Shankar Gupta b) Sh. Shyam Shankar Gupta c) Sh. Rajiv Kumar Gupta d) Sh. Madan Gupta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipal officer/director of M/s MARRASS Industries Pvt. Ltd. and M/s BSA Fincap Pvt. Ltd. for their deposition who had introduced total share capital of ₹ 25,00,000/-. The assessee submitted that the said companies were not shareholders as on the date and they had already sold their shares to other parties. The AO observed that the share capital had been received through banking channel and from the corporate entities who was duly assessed to tax was not enough to accept the claim of the assessee when the revenue had the adverse information. He further observed that merely producing confirmation with PAN number or assessment particulars did not establish the identity of the person and as regards question of creditworthiness and genuineness. The AO also observed that although money was received through banking channel but did not reflect actual business activities. The AO further observed that in the present case no benefit was provided to the investor and that any person who give share capital would certainly seek return or income or consideration. Accordingly, the addition of ₹ 25,00,000/- was made treating the same as unexplained income within the provision of Section 68 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lieu of certain percentage of commission paid mostly in cash by the beneficiaries of Such entries. As per the details received during the year the Following entries have been taken by the assessee from following entry operators- S. No. Name of Company From Company Cheque No. Cheque Date Amount Ks. By Whom 1. Khatri Projects (P) Ltd. Marrass (P) Ltd. 714175 29.11.06 15,00,000 Gutka 2. Khatri Projects (P) Ltd. BSA 714172 29.11.06 10,00,000 Gutka 25,00,000 The Learned A. O further on Page 3 of his order states that Having Perused and considered the information received as discussed above and in the circumstances of the case I have reason to believe that Income of the Assessee to the extent o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature Hotels Pvt. Ltd, Vs. ITO Anr., (2011) 338 ITR 51 (DHC). iv) Recent decision of Hon'ble Jurisdictional High Court of Delhi in the case of CIT vs Insecticides (India) Ltd. (2013) 357 ITR 330 v) Decision of ITAT Delhi Bench in the case of ITO vs On Exim Pvt. Ltd. (2013) 157 TTJ 633 (ITAT Delhi) vi) Recent Jurisdictional Delhi high court decision in case of G G Pharma Ltd 8/10/2015 followed by Delhi benches of ITAT in next mentioned decisions. Hon'ble Jurisdictional Delhi high court in very recent decision in case of G G Pharma Ltd (order dated 08/10/2015) after survey of all previous decisions it is pithily held that: The issue sought to be projected by the Revenue is whether the ITAT was correct in holding that the Assessing Officer ( AO) has not applied his mind and not come to an independent conclusion that he has reason to believe that the income of the Assessee has escaped assessment which was the jurisdictional requirement for reopening of the assessment under Section 1471148 of the Act. The Assessee (8 further appeal was allowed by the ITAT by the impugned order dated 9th January 2015. The ITAT set out in the impugned order t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the assessment was valid, this does not satisfy the requirement of law that prior to the reopening of the assessment, the AD has to. applying his mind to the materials, conclude that he has reason to believe that income of the Assessee has escaped assessment. Unless that basic jurisdictional requirement is satisfied a post mortem exercise of analysing materialsproduced subsequent to the reopening will not rescue aninherently defective reopening order from invalidity. 14. In the circumstances, the conclusion reached by the ITAT cannot be said to be erroneous. No substantial Question of law arises. Reference is made in this decision to Hon'ble Supreme Court decision in case of Chhugmal Rajpal 79 ITR 603; the Supreme Court was dealing with a case Before issuing a notice under S.148, the ITO must have either reasons to believe that by reason of the omission or failure on the part of the assessee to make a return under S. 139 for any assessment year to the ITO or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year or alternatively notwithstanding that there has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in reported in 299 ITR 383 it has been held as under:- Held, dismissing the appeals, that the only information was that the assessee had taken a bogus entry of capital gains by paying cash along with some premium for taking a cheque for that amount. The information did not indicate the source of the capital gains which in this case were shares. There was no information which shares had been transferred and with whom the transaction had taken place. The AO did not verify the correctness of information received by him but merely accepted the truth of the vague information in a mechanical manner. The AO had not even recorded his satisfaction about the correctness or otherwise of the information for issuing a notice u/s 148. What had been recorded by the AO as his reasons to believe was nothing more than a report given by him to the Commissioner. The submission of the report was not the same as recording of reasons to believe for issuing a notice. The AO had clearly substituted form for substance and therefore the action-of the AO was not sustainable. IN THE HIGH COURT OF DELHI AT NEW DELHI 5. + W.P.(C) 9299/2014 CM 21069/2014 VIP GROWTH FUND PVT LTD 17.03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information of Investigation wing from Mumbai, certain companies of Mukesh Chokshi group were operating and allegedly providing accommodation entries and assessee has also received share application money from such company. Assessing Officer just made general observation about information supplied by Investigation Wing and sought to reopen the assessment without pointing out how information coming in his possession has nexus with escapement of income. The primary condition of Section 148 of the Act is that Assessing Officer must have reason to believe that income has escaped assessment and this satisfaction should be of Assessing Officer himself and not a borrowed satisfaction. Therefore, notice so issued to assessee was illegal and bad in law on fact of it. In this background, we find that language used in above reasons recorded is exactly same as in case of assessee. ii) Without cross examination of back party statements etc whole reopening is nullity At no stage statement/back material is confronted to assessee for rebuttal at any stage till final assessment, no cross examination of any person is provided (despite specific request), assessment order laying cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs in order to establish the identity and genuineness of the Transactions like PAN, Return of Income computation of Income Bank statements and confirmation of the parties from whom entire Share Capital and Share Premium was received. Hence it is argued that the contention of the Learned A.O that the assessee failed to prove the Identity, Credit worthiness of Persons/Companies genuineness of the Transactions is wrong as Reliance is placed on the recent Judgement of Delhi High Court in case of CIT Vs Ganoeshwari Metal Pvt. Ltd. 264 CTR 277 Wherein the high court has observed that ': Once the Assessee had furnished all the relevant material in order to establish the identity, Genuineness and creditworthiness of Share applicants the Assessing Officer was duty bound to carry out an exercise in order to conduct an enquiry High court in this case indicted Two Types of cases - One in which the Assessing Officer carries out the exercise which-isrequired in law and the other in which assessing Officer sits back till the assessee exhausts all the evidence or material in his Possession and then comes to merely reject the same on the presumptions It is submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... march, 2003 To All Chief Commissioners of Income tax (Cadre Contra) All Directors General of Income Tax Inv. Sir, Sub:- Confession of additional Income during the course of search seizure and survey operation - regarding Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search seizure and survey ITA No. 6509/Del/2014 operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on' collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search it seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtunity of cross examine to the assessee. Even otherwise the AO has not conducted any enquiry whatsoever either in support of the information received from the Investigation Wing or to disapprove the evidence produced by the assessee. The AO could have verified the signature of the Directors of these entities from the bank by issuing the necessary summons/notices instead of insisting the assessee to furnish the bank certificate. Therefore it is a case of complete lack of enquiry on the part of the AO which ought to have been conducted while framing the assessment. In the case of CIT Vs. Rakam Money Pvt. Ltd. (supra) the Hon'ble Jurisdictional High Court by dealing with an identical question as observed in Para 13 as under ....... therefore the addition made by the AD merely on the basis of a statement recorded by the investigation Wing without any corroborative evidence and examinationand cross examination of the assessee, is not sustainable... IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH 'E' NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA No. 2515/Del/2010 AY: 2006-07 M/s NishitFin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rakam Money Matters Pvt. Ltd, also, the director of the shareholder companies did not respond to the summon issued by the Assessing Officer. However, Hon'ble Jurisdictional High Court held that if the Assessing Officer did not make proper enquiries on the basis of income tax returns and PAN details of share applicant companies, the addition for unexplained credit cannot be sustained. In the case of the assessee, the facts are identical. The assessee produced confirmation, income tax return, balance sheet and bank statement of share applicant companies. The Assessing Officer did not make any effort to examine those evidences produced by the assessee. Therefore, the above decision of Hon'ble Delhi High Court would be squarely applicable. Similar views are expressed by their Lordships in the case of Vrindavan Farms (P) Ltd. (supra). Further it is argued that the Share application money so received should not be regarded as undisclosed income of the Assessee Company reliance is also placed on the Judgement of Supreme court of India ( Copy enclosed) in the matter of CIT Vs Lovely Exports Pvt. Ltd. 216 CTR 195 wherein while dismissing the Special Leave Petition the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As regards to the merit of the case, the ld. CIT(A) observed that under the deeming provisions of Section 68 of the Act, any sum, representing receipt or credit in the books of the assessee was itself an evidence against the assessee, unless the assessee explained the nature and source of such credits and if it fails to rebut the evidence available in the form of credit entry in its books, it can be added as income. A reference was made to the following decisions of the Hon ble Supreme Court: Govindaraju Mudaliyar 34 ITR 807 Kale Khan Mohd. Hanif 50 ITR 1 Devi Prasad Biswanath Prasad 72 ITR 194 Sumati Dayal 214 ITR 801 P. Mohana Kala 291 ITR 278 9. The ld. CIT(A) also referred to the judgment of the Hon ble Jurisdictional High Court in the case of CIT Vs Focus Exports Pvt. Ltd. reported at 228 Taxman 88 wherein it has been held that where the assessee failed to offer a lucid, reasonable and acceptable explanation regarding the source and nature of credit, the AO is entitled to draw inference that the receipts were of an assessable nature. The ld. CIT(A) observed that where the courts have held that the onus is cast on the assessee to prove to the sati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ried out by the Investigation Wing. The ld. CIT(A) observed that the surrounding facts and circumstances have to be taken into account irrespective of the paper work in determining whether the transactions in question were genuine or not. The reliance was placed on the judgment of the Hon ble Delhi High Court in the case of Global Securities and Finance Pvt. Ltd. reported at 264 ITR 481. The ld. CIT(A) confirmed the addition made by the AO on account of unexplained cash credit of ₹ 25,00,000/- u/s 68 of the Act by observing that neither the genuineness nor the creditworthiness of the companies had been proved and the explanation offered regarding the amounts credit in the books of the assessee had correctly been found to be unsatisfactory by the AO and that it was beyond human probability that the shares of the company could comment a premium of ₹ 96 per share leading to an infusion of share capital to the tune of ₹ 25,00,000/-. 11. Now the assessed is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the notice u/s 148 of the Act was issued on 27.03.2013 on the basis of informat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for reopening the assessment, therefore, the reopening itself was bad-in-law. The reliance was placed on the following case laws: Prashant S Joshi Vs ITO 230 CTR 232 Hindustan Lever Ltd. Vs R.B Wadkar 268 ITR 332 (Bom.) ITO Vs Laxmi Mewal Das 103 ITR 437 (SC) Bhageria Finance and Investment Ltd. Vs DCIT 43 CCH 40 (Del.) Signature Hotels Pvt. Ltd. Vs ITO 338 ITR 51 (Del.) G G Pharma India Ltd. Vs ITO 43 CCH 18 (Del. Trib.) CIT Vs Atul Jain 299 ITR 383 (Del.) ACIT Vs Dhariya Construction Company 328 ITR 515 (SC) 12. On merits the ld. Counsel for the assessee submitted that it was not denied by the AO nor by the ld. CIT(A) that the assessee had furnished all the requisite details regarding the identity and the transaction. The amount in question was received through banking channels, the details of which were made available to the AO. The addition had been simply made on the information on the ground that the notices sent to the parties had been received back and the assessee was unable to produce Principal Officer/Director of the investor companies. However, this contention of the assessee was not considered that as on the date of inquir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in writing by the Assessing Officer. Sufficiency of reasons is not a matter, which is to be decided by the writ court, but existence on belief is the subject-matter of the scrutiny. A notice under section 148 can be quashed if the belief is not bonafide, or one based on vague, irrelevant and non-specific information. The basis of the belief should be discernible from the material on record, which was available with the Assessing Officer, when he recorded the reason. There should be a link between the reasons and the evidence/material available with the Assessing Officer. The reasons to believe would mean cause or justification of the Assessing Officer to believe that the income has escaped assessment and not that the Assessing Officer should have finally ascertained the fact by legal evidence or reached a conclusion, as is determined and decided in the assessment order, which is the final stage before the Assessing Officer. It has further been held that: the reassessment proceedings were initiated on the basis of information received from the Director of Income-tax (Investigation) that the petitioner had introduced money amounting to ₹ 5 lakhs during financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced before issuing the notice for reassessment. Without analysing and forming a prima facie opinion on the basis of material produced, it was not possible for the Assessing Officer to conclude that he had reason to believe that income had escaped assessment. 18. In the present case also the AO had issued notice u/s 148 of the Act only on the basis of information received from CIT, Central-1, New Delhi and not on the basis of reasons recorded by him by applying his own mind. 19. Therefore by following the ratio laid down by the Hon ble Jurisdictional High Court in the aforesaid cases, the notice issued u/s 148 of the Act was not valid and the reassessment framed deserves to be quashed. As regards to the merit of the case is concerned, it is not in dispute that the assessee furnished the confirmation from the share applicants to whom shares were allotted, the amount was received by the assessee through banking channels. The addition was made simply on this basis that the notice issued u/s 133(6) of the Act were received back and the assessee was unable to produce principal officer/director of the investor companies. However, the explanation of the assessee that the sha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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