TMI Blog2018 (2) TMI 2074X X X X Extracts X X X X X X X X Extracts X X X X ..... contention in this respect canvased by the counsel for the petitioner. As held by the Supreme Court in case of Rajesh Jhaveri Stock Brokers P. Ltd. [ 2007 (5) TMI 197 - SUPREME COURT] the sufficiency of reasons cannot be gone into at this stage. Nevertheless, the Assessing Officer must have tangible materials at his command to form a belief that the income chargeable to tax had escaped assessment. In this context, we may recall the Assessing Officer referred to the materials available with him which prima facie suggested that the assessee company had received share capital and share premium from various companies which were proved to be bogus companies engaged in providing mere accommodation entries. After analysing such materials, he came to the conclusion that share capital/share premium amounting to Rs. 1.55 crores received by the assessee during the financial year 2009-2010 relevant to the present assessment year was bogus. It cannot be stated that the Assessing Officer did not have tangible materials at his command to form such a belief. His reference to materials on record must be understood in the context of facts on record. The Assessing Officer was not writing a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings in the case of Nandini Dyeing and Printing Pvt. Ltd for AY 2008-09, it was noticed that the company had received share capital and share premium from the following company, which was proved to be bogus company, engaged in providing accommodation entries. Sr. No. Name of the Investor 1 Nakshatra Electricals Engg. (P) Ltd. 105, Nancy Muncy, No.2 Chandivali, Sakinaka, Mumbai Besides above, an intimation was received from the ITO Ward 1(1)(2), Surat that during the during the course of assessment proceedings in the case of Envro Infratech Pvt. Ltd for AY 2012-13, it was noticed that the company had received share capital and share premium from the following companies, which were proved to be bogus company engaged in providing accommodation entries. Sr. No. Name of the Investor 1 Nova Corporate Services (P) Ltd. office no, 3, Tara Apartment, Saki Vihar Road, Saki Naka, Andheri (E) Mumbai 2 Nupur Management Consultant Pvt. Ltd Office no.3, Tara Apartment, Saki Vihar Road, S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11737500 11737500 In view of above facts, since the above companies are proved to be bogus/paper companies and were given accommodation entires to the assessee company by way of share capital and share premium during the FY 2009-10. I have reason to believe that the share capital/share premium received to the extent of Rs.2,34,75,000/( Rs.1,17,37,500 share capital + Rs.1,17,37,500 share premium) had escaped the assessment for AY 201011 and the assessee company had failed to disclose full and true facts of its case, within the meaning of provisions of sec. 147 of the IT Act. Therefore, I am satisfied that this is a fit case for issue of notice u/s 148 r.w.s. 147 of the Act for action u/s. 147 of the Act for the AY 201011. 3. The petitioner raised objections to the notice of reopening under a communication dated 10.7.2017. Such objections were however, rejected by the Assessing Officer by order dated 28.8.2017. Hence this petition, 4. Taking us through the materials on record, counsel for the petitioner raised the following contentions in support of the challenge : 1) The sole ground mentioned in the rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ack of application of mind on his part. In short, he was proceeding on the borrowed satisfaction. 4) Counsel lastly contended that it is not clear whether the Commissioner of Incometax had accorded sanction for reopening of the assessment as required under the statute. 5. On the other hand, learned counsel Shri Nikunt Raval opposed the petition contending that the original assessment was not framed after scrutiny. There is no question of change of opinion. The Revenue would have much wider scope of reopening in such a case. In the present case, the Assessing Officer has recorded elaborate reasons suggesting that income chargeable to tax had escaped assessment. At this stage, the Court would not enter into sufficiency of such reasons. Since the Assessing Officer had formed a bona fide belief on the basis of tangible materials on record that the income chargeable to tax had escaped assessment, reopening should be permitted. Counsel submitted that the proposition that no matter what the nature of the transactions, no additions can be made in the hands of the company under section 68 of the Act, is not a correct position and does not flow from the judgment of the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the deeming provision. Therefore, there being no assessment under section 143(1)(a), the question of change of opinion, as contended, does not arise. 7. These principles were reiterated by Supreme Court in case of Deputy Commissioner of Incometax and another v. Zuari Estate Development and Investment Company Ltd. reported in (2015) 373 ITR 661 (SC) 8. In context of the phrase reason to believe , the Supreme Court in case of Rajesh Jhaveri Stock Brokers P. Ltd. (supra) further observed as under : 16. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word reason in the phrase reason to believe would mean cause or justification. If the Assessing Officer 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 be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(3) of the Act. A common requirement in both of cases is that the Assessing Officer should have reason to believe that any income chargeable to tax has escaped assessment. 16. It would, thus, emerge that even in case of reopening of an assessment which was previously accepted under section 143(1) of the Act without scrutiny, the Assessing Officer would have power to reopen the assessment, provided he had some tangible material on the basis of which he could form a reason to believe that income chargeable to tax had escaped assessment. However, as held by the Apex Court in the case of Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers P. Ltd., (2007) 291 ITR 500 (SC) and several other decisions, such reason to believe need not necessarily be a firm final decision of the Assessing Officer. 10.Within this legal structure, we need to examine the contentions of the counsel for the petitioner. Most contentious issue is his first contention where he argued that no matter what the nature of transaction of share applications, addition in the hands of the company can never be made under section 68 of the Act. Heavy reliance was placed on the decision of Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.33/, whereas shares have been allotted at Rs.1,000/per share, i.e. at a premium of Rs.967/per share. On the basis of such working out, he recorded his reason to believe that income to the extent of Rs. Rs.5.80 crores had escaped assessment. We do not find that the reasons are perverse or so untenable as to terminate the assessment at this stage on the ground that the Assessing Officer cannot be stated to have any reason to believe or tangible material to form such an opinion that income chargeable to tax had escaped assessment. Prima facie, the facts appear to be glaring. Whether the assessee will be able to discharge the minimal burden of establishing identity, source and creditworthiness of the depositors is a question not possible to answer without scrutiny. Whether the assessee had started its manufacturing activity and consequently its business operations so as to earn income or not are the issues which cannot be gone into at this stage and must be made part of the reopened assessment to be judged on the basis of evidence which may be brought on record. It is always open for the assessee company to contend before the assessing authority that there has not been over valuatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in case of Lovely Exports (P) Ltd. (supra). 16. In case of Commissioner of Incometax v. Nova Promoters and Finlease (P) Ltd reported in (2012) 342 ITR 169 (Delhi), Division Bench of Delhi High Court considered the judgment of the Tribunal by which addition made under section 68 of the Act of Rs. 1.18 crores (rounded off) was deleted in the hands of the company. The Court noticed the judgment of Lovely Exports (P) Ltd. (supra) and reversed the view of the Tribunal making the following observations : 43. In the case before us, not only did the material before the Assessing Officer show the link between the entry providers and the assessee-company, but the Assessing Officer had also provided the statements of Mukesh Gupta and Rajan Jassal to the assessee in compliance with the rules of natural justice. Out of the 22 companies whose names figured in the information given by them to the investigation wing, 15 companies had provided the socalled share subscription monies to the assessee. There was thus specific involvement of the assessee-company in the ITA No.342-2011 Page 45 of 46 modus operandi followed by Mukesh Gupta and Rajan Jassal. Thus, on crucial factual aspects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the creditors. The Court then proceeded to take note of other decisions noted above and observed as under : 29. We have further held that the Court or Tribunal should be convinced about the identity, creditworthiness and genuineness of the transactions. The onus to prove the three factum is on the Assessee as the facts are within the personal knowledge of the Assessee. Mere production of incorporation details, permanent account numbers or income tax returns may not be sufficient when surrounding and attending facts predicate a cover up. The production of incorporation details, PAN numbers or income tax details may indicate towards completion of paper work or documentation but genuineness, creditworthiness and identity of investment and the investors are deeper and obtrusive than mere completion of paper work or documentation. The Court dismissed the petition with the above observations. 19. In case of Commissioner of Incometax v. Empire Builtech P. Ltd. reported in (2014) 366 ITR 110 (Delhi), Division Bench of Delhi High Court allowed the Revenue's appeal and reversed the judgment of the Tribunal deleting addition under section 68 of the Act in the hands of the company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taches, also attaches on a company. There is a clear distinction between a situation where the company discharges its basic onus of providing details of the share applicants, genuineness of the transactions and their creditworthiness, but the Revenue still chases the company instead of inquiring with the investors if any mismatch or unexplained investments are found as compared to a situation where large scale share applications are found to be totally bogus transactions, are completely fictitious or stated to have been entered into by non existent persons or entities. The former is seen as a case where the company has discharged its own whereas the later would be a situation where the very genuineness of the transaction is in doubt. We therefore, do not accept the legal contention in this respect canvased by the counsel for the petitioner. 22. The contention that such an interpretation would defeat the very purpose of amendment in section 68 of the Act with effect from 1.4.2013 cannot be accepted. By such amendment, proviso was added, which reads as under : 68.... Provided that where the assessee is a company (not being a company in which the public are substantially int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... added by the Finance Act 2012 with effect from 1.4.2013, does not change this position.... 25.This brings us to the sufficiency of the reasons recorded by the Assessing Officer. As held by the Supreme Court in case of Rajesh Jhaveri Stock Brokers P. Ltd. (supra), the sufficiency of reasons cannot be gone into at this stage. Nevertheless, the Assessing Officer must have tangible materials at his command to form a belief that the income chargeable to tax had escaped assessment. In this context, we may recall the Assessing Officer referred to the materials available with him which prima facie suggested that the assessee company had received share capital and share premium from various companies which were proved to be bogus companies engaged in providing mere accommodation entries. After analysing such materials, he came to the conclusion that share capital/share premium amounting to Rs. 1.55 crores received by the assessee during the financial year 2009-2010 relevant to the present assessment year was bogus. It cannot be stated that the Assessing Officer did not have tangible materials at his command to form such a belief. 26. His reference to materials on record must be und ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
