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D.C.I.T., Circle-6, Kolkata Versus Great Wall Marketing (P) Ltd.

2016 (3) TMI 634 - ITAT KOLKATA

Validity of reopening of assessment - basis of a letter received from Investigation Wing - Held that:- It is clear from the reasons recorded by the AO that the AO acted only on the basis of a letter received from Investigation Wing , New Delhi. The reasons recorded does not give as to who has given the bogus entries to the assessee. The reasons recorded also does not mention as to on which dates and through which mode the bogus entries were made by the assessee. The reasons recorded which are ex .....

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013 (5) TMI 691 - DELHI HIGH COURT ) has taken a view that the reasons recorded were vague and uncertain and cannot be construed as satisfaction on the basis of the relevant material on the basis of which a reasonable person can form a belief that income has escaped assessment. Also the reasons recorded did not disclose the AO’s mind regarding escapement of income. The Hon’ble Delhi High Court ultimately held that initiation of proceedings u/s 148 of the Act was not valid and justified in the ey .....

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g to A.Y.2002-03. 2. The Assessee is a company. For A.Y.2002-03 the assessee filed return of income on 31.10.2002 declaring total loss of ₹ 1,53,241/-. Return was processed u/s 143(1)(a) on 31.03.2003 and assessed at a total income of ₹ 1,12,000/-. Thereafter the AO received information from Director of IT (Investigation), New Delhi that the assessee was a beneficiary of accommodation entries for receipt of share application money from four companies. The information received was to .....

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that the four companies referred to by the Director of Income Tax (Investigation) New Delhi were non-existent companies and did not have capacity to invest in the share capital of the assessee. Accordingly the following amounts received as share application money from the following companies were treated as unexplained by the AO a) Ram Sons Drugs Ltd. - 1/56, Sunder Vihar, N.Delhi-87 ₹ 5,00,000/- b) Prateek Securities (P)Ltd. ₹ 5,00,000/- c) Roopin Capital (P)Ltd-301, Dhaka Chamber, .....

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es u/s133 (6) were again sent to all the above parties on 11-11-2009. Out of which the following notices came back unserved in the new address provided by the assessee. No further address was provided by the assessee in respect of other parties. 1. Total Info. Solution Pvt. Ltd. 2. Argent Finvest Pvt. Ltd. 3. NSR Consultancy Services (P)Ltd. 4. Saviour Leasing Private Ltd. 5. Eco Star Securities Pvt. Ltd. 6. Welkin Commercial Pvt. Ltd. 7. Omni Present Credits Pvt. Ltd. 3.4. In the above circumst .....

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5-B, Paschim Vihar, N.Delhi-110063. Rs.10,00,000/- 3. Nemi Chand Sawani Near-MahadevTemple,Umed Chowk(Jodhpur),Rajasthan Rs.2,50,000/- 4. Welkin Commercials (P)Ltd. SFS 256 A-5/B-4, Gali No.7, Paschim Vihar, N.Delhi-110063. Rs.12,50,000/- 5. Saviour Leasing (P)Ltd. SFS 256 4-5-B, Paschim Vihar, N.Delhi-110063. Rs.8,00,000/- 6. N.S.R.Consultancy (P)Ltd. 21/18, 2nd Flr. Shakti Nagar, New Delhi-110007. Rs.12,50,000/- 7. Issant Pharmaceuticals (P)Ltd. 2250,Naya Bazar, N.Delhi-110006. Rs.6,00,000/- 8 .....

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Delhi-110092. Rs.9,00,000/- 14. Jay Shree Growth Funds (P)Ltd. 18/24, 1st Floor., Shakti Nagar, N.Delhi-110007. Rs.5,00,000/- 15. Total Inf.Solution (P)Ltd. 208, Agarwal Chamber-IV, 27-Ver Savarkar Block , Shakarpur, N.Delhi-110092. Rs.1,00,000/- Total Rs.77,50,000/- 3.5 Some of the above mentioned persons sent letter to the office of AO confirming that had invested monies in the form of share application money for subscription of share capital of the Assessee. The letters contained the followin .....

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e not in response to our notice u/s 133(6). The AO accordingly held that the existence and definitely the creditworthiness (the capacity to invest) is very much doubtful in respect of above mentioned 15 parties and the 4 parties reported by the DIT(Inv.) New Delhi. Therefore, ₹ 77,50,000/- introduced as share application money of such these 15 parties and ₹ 26,00,000/- introduced by 4 parties are treated as cash credit u/s 68 and added back to the income of the assessee. 4. Before CI .....

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cket involved in providing accommodation entries related to share capital was sufficient for the AO to initiate proceedings u/s 148 of the Act. CIT(A), however on merits of the addition made by the AO u/s 68 of the Act held that the same cannot be sustained. The following were the conclusions of the CIT(A) :- 1. In respect of 4 parties about whom the AO got information from DIT (lnv) Delhi the AO did not conduct any separate inquiry but made addition on the basis of mere information provided by .....

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the AO did not make any inquiries from these parties. Subsequently vide its letter dtd. 17.12.2009 the assessee also furnished the copies of the return of income, balance sheet and Profit & Loss account in respect of some of these parties for the relevant Assessment Year and also confirmation letters .from these parties) certificates of their incorporation as a company etc. For some parties the copy of the bank statement from where cheque was issued to the assessee was also submitted. Howeve .....

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assessee. 3. As regards 15 parties whose share application money has been treated by the AO as unexplained on the basis of his own inquiries, the CIT(A) was of the view that in respect of the 5 individual parties listed at Nos. 1,3,9, 10 and 11 in the list made on page 4 of the, assessment' order( and reproduced in the earlier part of this order) that in the assessment records the letters of confirmations sent by them through 'post' were available. The AO has rejected their confirmat .....

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14 and 15 in the list on page 4 of the assessment order the AO and set out in the earlier part of this order, the CIT(A) was of the view that the notices sent to these parties were returned unserved. However, in respect of all the 26 parties the Assessee submitted a full set of documents containing different types of evidences such as identity proofs, address proofs I.T. returns, balance sheets and Profit & loss account, confirmation letters, copies of bank statements etc. In these documents .....

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PAN numbers. In many of the cases the copies of the returns of income, balance sheet, P& L account, and bank statement have also been furnished. In view of these evidences the existence of these parties cannot be refuted. For the reasons given as above, the CIT(A) held that the share application money received from the above discussed 19 parties cannot be treated as unexplained in the hands of the assessee u/s 68 of the 1. T. Act. Hence, the addition of ₹ 1,02,80,000 made by the AO on .....

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ss could not be established by the assessee. 7. Before us the learned counsel for the assessee filed a petition under Rule 27 of ITAT Rules. As per Rule 27 of ITAT Rules 1963, a respondent in an appeal, though he may not have appealed, may support the order appealed against any of the grounds raised against him. Since the issue with regard to the validity of initiation of proceedings u/s 148 of the Act was decided against the asessee, the assessee without filing a cross objection has sought to c .....

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tiation of re-assessment proceedings are concerned the reasons recorded by the AO for initiating proceedings u/s 148 are as follows :- No.DCIT/Cir-6/reasons for reopening/09-10 Dated 22/04/2009 To The Principal Officer Greatwall Marketing (P) Ltd. clo Sri. S.M. Daga 11, Clive Row, Room No. 2 .z-. Fir. Kolkata- 700001. Sir. Sub: Recorded Reasons for Reopening in the case of Greatwall Marketing (P) Ltd. for Asst. Yr. 02-03 Ref: Your letter dated 02/04/09 Please refer to the above. As per informati .....

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parties. the entire introduced capital and share application money will be treated as your income for that year. I will therefore continue the proceedings for reassessment of your return u/s 147. Statutory notices u/s 143(2) and 142(1) are enclosed herewith. Yours faithfully. Sd/- ( Sanjay Mukherjee) DCIT /Cir-6/Kol 8.2. The submissions of the learned counsel for the assessee before us was that the reasons recorded by the AO were mere information received from D.I.T.(Investigation), New Delhi. T .....

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of the Hon ble Delhi High Court in the case of CIT vs Insceticides (India) Ltd 357 ITR 330 and CIT vs SFIL Stock Broking Ltd. 325 ITR 285 (Delhi). In both the aforesaid decisions the reasons recorded by the AO for initiating proceedings u/s 148 of the Act the Hon ble Delhi High Court upheld the order of the Tribunal quashing the proceedings. Reliance was also placed on the decision of ITAT, Kolkata C Bench in the case of M/s. Controlla Electrotech (P)Ltd vs DCIT in ITA Nos.1443 & 1444/Kol/2 .....

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