TMI Blog2016 (7) TMI 1182X X X X Extracts X X X X X X X X Extracts X X X X ..... ummons sent to the share applicants written unserved with the postal remarks that no such firms/companies existed on that address and the Assessing Officer asked to produce those parties before him, it was the onus of the assessee to either produce those parties before him or provide their new addresses as in the case of private limited companies, the shares are allotted through private circulation only. The Assessing Officer also observed deposit of cash in the bank account of the share applicant just before issue of cheques to the assessee. The Assessing Officer gathered copy of bank statements of the share applicants directly from the banks through notice under section 133(6) of the Act and pointed out discrepancy in the copy of the bank statement of one of the share applicant supplied by the assessee. The Assessing Officer also observed that the shares issued at higher premium were subsequently bought back by the directors of the assessee company at very low value. In view of all the evidences, the learned Commissioner of Income-tax (Appeals) also upheld the finding of the Assessing Officer. Thus the assessee has failed to discharge its onus in respect of the credit received in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Commissioner has erred by not considering the ample evidences produced by the appellant during the course of assessment proceedings and upholding the additions by merely reproducing assessment order passed by the Ld. Assessing Officer . 4. That in law and under the facts of the case Ld. Commissioner has erred in upholding the addition of ₹ 11,00,000/- as unexplained credit in the bank accounts despite of the fact that appellant had discharged its initial onus as required under section 68 of the Act during the assessment proceedings itself. 5. That in law and under the facts of the case Ld. Commissioner has erred in upholding the addition of ₹ 22,000/- on account of notional commission charge at the rate of 2%, when the addition under section 68 of the Act was not warranted itself. 6. That in law and under the facts of the case Ld. AO has erred in initiating the penalty proceedings under section 271( 1 )(c) of the Act. 7. The Appellant craves for leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal. 2. The facts in brief are that the assessee filed return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y existed at the respective address. Thereafter, the Assessing Officer asked the Authorized Representative of the assessee to produce the Principal Officer of the said entities along with books of account for verification of the share capital applied by them, however, the assessee failed to produce those parties. The Assessing Officer also observed that the shares were subsequently transferred in the name of Directors of the assessee company, i.e.,Sh. Sukhdeo Singh and Mrs. Manjit Kaur as early as on 25th November, 2004. The Assessing Officer also recorded the statement of Sh. Sukhdeo Singh who claimed to be the Managing Director and looked after all the affairs of the company. However, in the his statement dated 7th December, 2010, Sh. Sukhdeo Singh failed to explain the details of the parties to whom the shares were issued, how the share price was decided, how the same were brought back at a huge discount without any justification etc. The Assessing Officer also called for the bank statement of the share applicant companies from the bank and found that there was inconsistency in the copy of bank accounts of those concerns submitted by the assessee. The findings of the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original bank statement (obtained from the bank) is as under: Date Ref No. Debits Credits Balance Narration 08-05-02 S 003065 3.00,000/- 3,05,005/- By cash 08-05-02 S 003067 - 2,00,000/- 5,05,005/- By cash 08-05-02 961559 5,00,000/- - 5,005/- To CLG 13-05-02 S 003027 2,00,000 2,05,005/- By cash 13-05-02 961559 2,00,000/- 5,005/- To CLG 4. The Assessing Officer also distinguished the judgment of M/s. Lovely Export Pvt. Ltd. (2008) 216 CTR 195 (SC). Finally, the Assessing Officer concluded the following facts in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment. In the absence of any submission, the learned Commissioner of Income Tax(Appeals) decided the issue in favour of the Revenue dismissing the legal grounds as well as merit of the addition. Aggrieved with the findings of the learned Commissioner of Income Tax(Appeals), the assessee is in appeal before the Tribunal. 6. In grounds no. 1 2, the assessee has challenged the jurisdiction assumed by the Assessing Officer to reopen the assessment proceedings under Section 147 of the Act. 6.1 The learned Authorized Representative of the assessee addressing the grounds and referring to the reasons recorded for reopening of the assessment, placed on pages 41 42 of the assessee s paper book, submitted that the information received from the Investigation Wing was only made the basis for reason to believe and no independent inquiry was made by the Assessing Officer and, therefore, reopening of the assessment without valid reason to believe was void-ab-initio. In support of the contention, the learned Authorized Representative relied on the judgment of the Hon ble High Court of Delhi in the case of M/s. Sarthak Securities Company Pvt. Ltd. Vs. Income Tax Officer, reported in 329 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne at this stage but the formation of belief must be on the base or foundation or platform of prudence which a reasonable person is required to apply. As is manifest from the perusal of the supply of reasons and the order of rejection of objections, the names of the companies were available with the authority. Their existence is not disputed. What is mentioned is that these companies were used as conduits. In that view of the matter, the principle laid down in Lovely Exports (P.) Ltd.'scase (supra) gets squarely attracted. The same has not been referred to while passing the order of rejection. The assessee in his objections had clearly stated that the companies had bank accounts and payments were made to the assessee- company through banking channel. The identity of the companies was not disputed. Under these circumstances, it would not be appropriate to require the assessee to go through the entire gamut of proceedings. It is totally unwarranted. 6.4 The Hon ble High Court has said that there must be relevant material on which a reasonable person could form belief and conclusive proof is not required or established facts of escaped income are not necessary at the stage of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is seen that as far as Indo Arab is concerned while the AO set out the information received from the ED, he failed to examine if that information provided the vital link to form the 'reason to believe' that income of the Assessee had escaped assessment for the AY in question. While the AO has referred to the fact that the ED gave information regarding cash deposits being found in the books of the Assessee, the AO did not state that he examined the returns filed by the Assessee for the said AY and detected that the said cash deposits were not reflected in the returns. In fact, the AO contradicted himself in the reasons recorded by him by noticing the information of the ED to the above effect and then stating that on perusal of the records for the AY in question it was noticed that the Assessee had not disclosed these transactions in its books of account. Further the AO refers to the ED's information that Mr. Chetan Gupta, partner of the Assessee, failed to explain the sources of the cash deposits as shown in the books of account. However, that by itself could not have led the AO to even prima facie conclude that income of the Assessee had escaped assessment. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Limited (2015) 373 ITR 661 (SC) cannot be said to reflect the correct legal position. In para-35.5 to 35.7, the Hon ble High Court has summarized the legal position emanating from the judgment of the Zuari Estate Development and Investment Company Limited (supra) as under: 35.5 As explained by the Supreme Court in Rajesh Jhaveri Stock Brokers P. Ltd. (supra) and reiterated by it in Zuari Estate Development and Investment Co. Ltd. (supra) and intimation under Section 143(1)(a) cannot be treated to be an order of assessment. There being no assessment under Section 143(1)(a), the question of change of opinion does not arise. 35.6 Whereas in a case where the initial assessment order is under Section 143(3), and it is sought to be reopened within four years from the expiry of the relevant assessment year, the Assessing Officer has to base his reasons to believe that income has escaped assessment on some fresh tangible material that provides the nexus or link to the formation of such belief. In a case where the initial return is processed under Section 143(1) of the Act and an intimation is sent to the Assessee, the reopening of such assessment no doubt requires the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner of Income-tax (Appeals) has given details of reasons to decide the appeal in absence of any reply from the assessee. The relevant para of the impugned order is as under: 2. Several notices u/s 250 of the Act were issued to the appellant for hearing the appeal. Notice dt. 30-01-2013 fixing the appeal for 27-02-2013 and thereafter notice dt. 16-04-2013 fixing for 13-05-2013 were issued. On 13-05-2013, an adjournment letter was received from the A.R., M/s K.K. Kohli, CA, requesting for further adjournment and the appeal was adjourned to 30-05-2013. On 30-05-2013, Sh. Sunil Kr from M/s. K.K. Kohli, CA appeared and on his request the appeal was adjourned to 11-07-2013. On 11-07-2013, appeal was again adjourned to 25-07-2013 on appellant's request. Notice dt. 26-07-2013 was issued fixing the appeal for 01-08-2013. On request from A.R. of the appellant, appeal was again fixed for 19-08-2013, 10-09-2013, 07-10-2013, 04-12- 2013, 10-02-2014, 03-03-2014, 10-03-2014, 09-04-2014, 10-07-2014, 28-07-2014 and 13-08-2014. On 13-08-2014, again an adjournment alter was submitted by Id. A.R. requesting for further adjournment and submitting therein that the captioned proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enu Steel and Alloys reported in 361 ITR 220 (Del). 8.2 On the other hand, learned Sr. D.R. submitted that summons sent under section 131 of the Act were written unserved with the postal remarks that no such firms/companies existed on those addresses and the assessee also failed to either produce or provide their current addresses. Further, referring to the page no. 18 of the assessee s paper book, the Sr. DR submitted that creditworthiness of Shree Gupteshwar Marketing Private Limited was doubtful as it has shown a loss of ₹ 3,563/- in the return of income filed. Further, he referred to page no. 27 of the assessee s paper book and according to which another share applicant M/s. DKC India Private Limited filed return declaring income of ₹ 132 only/-. The DR also referred to the various discrepancies in bank statements found by the Assessing Officer and also the fact that said shares have been bought back by the directors of the assessee company at very low rate and which established the full Circle of rotation of the money by the assessee. The DR accordingly submitted that the Assessing Officer has duly rebutted the onus of proof and it was the duty of the assessee t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ten submissions for the reasons best known to it. It appears that the appellant has nothing to say on the merits of the case. It is a case where the A.O. has made proper enquiries by issuing the summons u/s 131 of the Act and the entities from whom accommodation entries were received by the appellant remained untraceable. Such facts were confronted to the appellant company during the assessment proceedings itself. In such circumstances the evidences in the shape of ROC registration, copy of balance sheet, etc. are the dumb evidences created only on paper. Not only that the A.O. examined the director of the appellant company and confronted the director with the whereabouts of the entities from accommodation entries were received by the appellant company, observed that the director of the appellant company miserably failed to explain satisfactorily the transactions and he was completely unable to furnish any evidence in support of the identities of the parties, the genuineness of the transactions and the creditworthiness of the parties. His replies before the A.O. were incomplete and evasive. It cannot be accepted that the acre appellant company was having these three angel investors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owledge. Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income rax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive. Companies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind the company who take the decisions, controls and manage them. It is, therefore, beyond doubt that the accommodation entries of Rs.l 1,00,000/- were nothing but the appellant's own undisclosed income which was reflected in the shape of share application money in the names of untraceable three entities. It is further observed that the A.O. has gone a step further in tracing that the shares allotted to these three entities were ultimately bought back by the directors of the appellant company namely Sh. Sukhdev Singh and Mrs. Manjit Kaur. It clearly shows the full circle of rotation of money which establishes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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