TMI Blog2015 (8) TMI 653X X X X Extracts X X X X X X X X Extracts X X X X ..... AKAR REDDY, ACCOUNTANT MEMBER This is an appeal filed by the assessee directed against the order of Ld. CIT(A) dated 14.2.2013 for the assessment year 2004-05. 2. Facts in brief : The assessee is a private Ltd. Company and it filed its return of income on 23.8.2004 declaring income of ₹ 11,000/-. The return of Income was processed u/s 143(1). Later notice u/s 148 of the Act dated 31.3.2011 was issued to the assessee. The assessee filed a reply dated 11.4.2001, wherein it has stated that, the return of income filed u/s 139 of the Act on 23.8.2004, be treated as a return filed in response to notice u/s 148 of the Act. The assessment was completed on 15.12.2011 u/s 147 r.w.section 143(3) determining total income of ₹ 2,14,38,400/-. Aggrieved the assessee carried the matter in appeal, challenging both the reopening of assessment as well as the merits of the addition. The first appellate authority dismissed the appeal of the assessee. Aggrieved the assessee filed this appeal on the following grounds :- 1. (i)That CIT(A) was not justified in confirming reassessment under section 148 without appreciating facts of the case, provisions of law and submission of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of Shri S.K. Gupta, the assessment order was passed for the assessment year 2005-06 and no addition was made by the AO on account of alleged accommodation entries. 4. The Ld. Counsel for the asessee relied on the following case laws in support of his argument :- 1. CIT vs. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC) 2. CIT vs. Central Warehousing Corporation (Delhi High Court) (dated 15/1/15) 3. CIT vs. Kelvinator India (2010) 320 ITR 561 (SC) 4. Mohan Gupta (HUF) vs. CIT (2014) 366 ITR 115 (Delhi High Court) 5. On merits he submitted that statement recorded during the course of survey u/s 133A, as no evidentiary value and hence no reliance can be placed on the alleged statement in the possession of the Revenue . 6. He argued that initiation of reassessment proceedings was in respect of an amount of ₹ 20 lacs but the AO considered, other additions in an arbitrary manner and without recording proper reasons, had issued a notice u/s 148 illegally. He argued that no other addition can be in the reassessment proceeding beyond the material based to which reasons for reopening was recorded and notice under section 148 cannot be given, unless tangible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he genuineness of these loans and hence this issue is no more res integra. He relied on the following case laws :- 1. CIT vs. Kamdhenu Steel Alloys Ltd. (2014) 361 ITR 220 2. CIT vs. Rhombus International Pvt. Ltd. (Delhi High Court) ITA No. 223/13 3. CIT vs. Metaphor Exports P. Ltd. judgment dated 13.1.2015 4. CIT vs. Diamond Products Ltd. 177 Taxman 331 (Delhi) 10. The Ld. DR Shri Vikram Sahay on the other hand supported the order of the first appellate authority and submitted that Shri S.K. Gupta was admittedly an entry provider and that Smt. Anjali Gupta is the wife of Shri S.K. Gupta. He referred to answer given to question No. 11 by Shri S.K. Gupta, copy of which was furnished by way of paper book by the revenue and submitted that Shri S.K. Gupta has given details of the bank account maintained by him and his family members and this includes the account of Smt. Anjali Gupta. He referred to page 26 of the assessee s paper book which is a statement of account of Shri R.C. Goel with Oriental Bank of Commerce. He pointed out that, the income of Shri R.C. Goel is by way of salary of ₹ 72,000/- page 18 of the paper book and whereas the cumulative transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entification of entry operators engaged in the business of money laundering for the beneficiaries and on the basis of investigation carried out and evidences collected, a report has been forwarded. I have perused the information contained in the report and the evidences gathered. The report provides details of the modus operandi of the 'money laundering scam' and explain how the unaccounted money of the beneficiaries are ploughed back in its books of account in various forms including the form of bogus share capital/ capital gains etc after routing the same through the bank account (s) of the entry operators. Entry operators were identified after thorough investigation on the basis of definitive analysis of their identity, creditworthiness and the source of the money ultimately received by the beneficiaries, These entry operators are found to be mostly absconding/noncomplying after the unearthing of the 'Money Laundering Scam' leaving the said money at the disposal of the beneficiaries without any associated cost or liability. In the instant case, the assessee is found to be the beneficiary of accommodation entry 'from such entry operators as per the following s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he has come to the conclusion that income has escaped assessment. When the allegation of the investigation wing is that the assessee is itself an entry provider, to believe that the assesee has received accommodation entries from its directions is not a correct or cogent reason to believe that assessee s own money has been routed through an entry operator. The report of the investigation wing, has been accepted by the AO, without independent application of mind. No reference has been made to any material gathered by the investigation wing, either by way of statements or by way of bank statement evidences etc. There is no prima facie material, to take a prima facie view that the assesee s own money has been introduced by way of accommodation entries. When Name of the entry provider Amount Date Anjali Gupta/R.C. Goel Mitsu ₹ 20,00,000 24.12.2010 the directiors are alleged to be entry providers for others. The allegation is that the assessee received accommodation entries from its Director Smt. Anjali Gupta. When it is clear that Shri S.K. Gupta is an entry provider himself, the allegation that, the company controlled by himself and other family members has taken accommodation e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hange of opinion. The concept of change of opinion must be treated as an in-built test to check the abuse of power. Hence after April 1, 1989, the Assessing Officer has power to reopen an assessment, provided there is tangible material to come to the conclusion that there was escapement of income from assessment. Reason must have a link with the formation of the belief. 3. Madhukar Khosla vs. ACIT (2014) 367 ITR 165 (Del) held as follows :- S. 147: If reasons to believe art not based on new, tangible materials , the reopening amounts to an impermissible review. In AY 2006-07 the AO passed an assessment order u/s 143(3). Thereafter, after the expiry of four years from the end of the AY, he issued a notice u/s 148 reopening the assessment on the ground that the records showed that an amount of ₹ 25L had to been added to the capital account for which the assessee had offered no explanation and that the same constituted undisclosed income u/s 68. The assessee challenged the reopening on the ground that there was no failure 011 its part to make a disclosure or material facts and the reopening was based on change of opinion. The department relied Oil the Full Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the assessee. The Tribunal had found that the Assessing Officer did not mention the details of the transactions that represented unexplained income of the assessee. The information on the basis of which the Assessing Officer had initiated proceedings under section 147 of the Income-tax Act, 1961, was vague and uncertain and could not be construed to be sufficient and relevant material on the basis of which a reasonable person could have formed a belief that income had escaped assessment. The notice of reassessment was not valid and was liable to be quashed. 5. Orient Craft Ltd. vs. CIT (2013) 354 ITR 536 (Del) held as follows :- Dismissing the appeal, that the reasons disclosed that the Assessing Officer reached the belief that there was escapement of income on going through the return of income filed by the assessee after he accepted the return under section 143(1) without scrutiny, and nothing more. This was nothing but a review of the earlier proceedings and an abuse of power by the Assessing Officer. The reasons recorded by the Assessing Officer did confirm the apprehension about the harm that a less strict interpretation of the words reason to believe vis- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Assessing Officer did not verify the correctness of the information received by him but merely accepted the truth of the vague information in a mechanical manner. The Assessing Officer had not even recorded his satisfaction about the correctness or otherwise of the information for issuing a notice under section 148 .. What had been recorded by the Assessing Officer 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 Assessing Officer had clearly substituted form for substance and therefore the action of the Assessing Officer was not sustainable. 19. Applying the proposition laid down in these case laws to the facts of this case, we uphold the contentions of the Ld. Counsel for the assessee that the reopening is bad in law for the reason that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these conditions were required to be fulfilled to assess or reassess the escaped income chargeable to tax. Under Explanation 3 if during the course of the proceedings the Assessing Officer comes to the conclusion that some items have escaped assessment, then notwithstanding that those items were not included in the reasons to believe as recorded for initiation of the proceedings and the notice, he would be competent to make assessment of those items. For every new issue coming before the Assessing Officer during the course of proceedings of assessment or reassessment of escaped income, and which he intends to take into account, he would be required to issue a fresh notice under section 148. b. CIT v. Living Media India Ltd. [2013] 359 ITR 106 (Delhi) held as follows :- Reassessment - Notice - Validity - To be judged on basis of Reasons recorded prior to issue of notice - additions based on reasons recorded prior to notice deleted and that order becoming final - reassessment 011 other grounds recorded after issue of notice not valid. c. Jay Bharat Maruti Ltd. v. CIT (Delhi High Court) [ITA No. 50112007] held as follows :-- Applying the aforesaid principle, it is clear th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the AO for the assessment year 2005-06, cannot in any way influence the proceedings for this assessment year. Each assessment year is an independent proceedings and the additions during the impugned assessment year has to be decided based on the merits and evidence of the current assessment year. Thus this contention of the assessee is rejected. 24. On merits, we find that the assessee has received share capital and loans from its directors and their family members and associated concerns. Evidences were filed consisting of a) Confirmation of account letters alongwith PAN number b) Copy of IT return and acknowledgement c) Copy of computation of income d) Bank statement e) In the case of company, copy of audit report alongwith balance sheet and profit and loss account , director s reports and in certain cases copy of assessment orders u/s 143(3) have been filed. 25. The assessee, in this case has furnished evidences in support of the transactions. There is no investigation whatsoever by the AO. No specific reasons are recorded by the AO or by the Ld. CIT(A), as to why the evidence filed by the assessee, casewise, cannot be accepted. No attempt has been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odation entry. The assessee was asked to explain as to why the said amount of Rs.l,11,50,000/- may not be added to its income. In response, the assessee has submitted that there is no such credit in the books of the assessee. Rather, the assessee company has received the share application money for allotment of its share. It was stated that the actual amount received was ₹ 55, 50, 000/- and not Rs.l,11,50,000/- as mentioned in the notice. The assessee has furnished details of such receipts and the contention of the assessee in respect of the amount is found correct. As such the unexplained amount is to be taken at ₹ 55,50,000/-. The assessee has further tries to explain the source of this amount of ₹ 55,50,000/- by furnishing copies of share application money, balance4 sheet, etc. of the parties mentioned above and asserted that the question of addition in the income of the assessee does not arise. This explanation of the assessee has been duly considered and found not acceptable. This entry remains unexplained in the hands of the assessee as has been arrived by the Investigation wing of the department. As such entries of ₹ 55, 50, 000/- received by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concluded on the basis of enquiry report, which collected certain facts and the statements of Mr. Mahesh Garg that the income sought to be added fell within the description of S. 68 of the Income Tax Act, 1961. 7. Having regard to the entirety of facts and circumstances, the Court is satisfied that the finding of the Tribunal in this case accords with the ratio of the decision of the Supreme Court in Lovely Exports (supra). 8. The decision in this case is based on the peculiar facts which attract the ratio of Lovely Exports (supra). Where the assessee adduces evidence in support of the share application monies, it is open to the Assessing Officer to examine it and reject it on tenable grounds. In case he wishes to rely on the report of the investigation authorities, some meaningful enquiry ought to be conducted by him to establish a link between the assessee and the alleged hawala operators, such a link was shown to be present in the case of Nova Promoters Finlease (P) Ltd. (supra) relied upon by the revenue. We are therefore not to be understood to convey that in all cases of share capital added under Section 68, the ratio of Lovely Exports (supra) is attracted, irrespecti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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