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2016 (9) TMI 293 - ITAT DELHI

2016 (9) TMI 293 - ITAT DELHI - TMI - Reopening of assessment - information supplied by Investigation Wing - Held that:- AO has merely acted in mechanical manner on receipt of the report from the Investigation Wing that “he has reason to believe that income of ₹ 54,00,000/- has escaped assessment for the assessment year 2002-03 due to failure on the part of the assessee to disclose fully or truly all material facts necessary for assessment. - AO has not even satisfied himself to prima .....

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share application forms containing names, addresses, PAN, bank details and confirmation of the investors, the onus stood shifted to the AO to prove that these are the shell companies and not to fasten the liability of the assessee on the ground that assessee has failed to produce the aforesaid six investor companies, moreso assessee cannot be called upon to prove negative. - Thus forming an opinion merely on the basis of information supplied by Investigation Wing of the revenue that such and .....

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e common questions of facts and law have been raised in both the aforesaid appeal and cross objection, the same are being disposed off by way of consolidated order to avoid repetition of discussion. 2. Present appeal is the outcome of order dated 25.08.2014 passed by the Hon ble jurisdictional High Court in ITA 320/2012 vide which appeal has been remitted to the Tribunal to decide the whole issue afresh along with cross objections dismissed as infructuous by the Tribunal. For ready reference, op .....

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vide its judgment in C.I.T vs. MAF Academy P. Ltd [ (2014) 206 DLT 277). In the impugned order it is accepted that the assessee was unable to produce directors and principal officers of the six shareholder companies and also the fact that as per the information and details collected by the Assessing Officer from the concerned bank, the Assessing Officer has observed that there were genuine concerns about identity, creditworthiness of shareholders as well as genuineness of the transactions. 21. .....

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ere dismissed as infructuous and even if we decide the issue on merits in favour of the Revenue, the cross objections would got revived and require adjudication. The appeal is accordingly disposed of. 3. Appellant, Income Tax Officer, Ward 13 (1), New Delhi (hereinafter referred to as the revenue ), by filing the present appeal sought to set aside the impugned order dated 02.08.2010 passed by the Commissioner of Income-tax (Appeals)-XVI, New Delhi qua the assessment year 2002-03 on the grounds i .....

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ed to discharge its onus to establish the identity and creditworthiness of the share applicants and the genuineness of transaction. 3. That on the facts and circumstances of the case and in law the Ld. CIT(A) erred in relying upon the decision given in the case of Lovely Exports (P) Ltd. In the case of Lovely Exports P.Ltd., the A.O. did not ask the assessee to produce any of the investor shareholders. However, in the instant case the assessee was specifically asked and given a number of opportu .....

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that :- 1. That having regard to the facts and circumstances of the case Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in assuming jurisdiction u/s 147 and that too without complying with the mandatory conditions as prescribed under section 147 to 153 of the Income Tax Act, 1961. 2. That in any case and in any view of the matter action of Ld. CTT (A) in not quashing the assessment order is bad in law and against the facts and circumstances of the case. 3. That the .....

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ry under the garb of share application money/share capital/share premium from the following entry operators :- Beneficiary Beneficiary Value of Entry taken Instrument No. by which Entry taken Date on which entry taken Name of a/c Account Holder of Entry of giving A/c Bank from which entry given Branch of entry giving bank A/c No. of entry giving account HDFC Bank Rajender Nagar Mkt., ND 70000 972521 07.3.02 Sekhawati Finance P. Ltd. SBP Daryaganj 50111 HDFC OLD Rajender Nagar, ND 1000000 13.3.02 .....

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the assessment of income of ₹ 54,00,000/- received on account of share application money, consequently assessment was reopened u/s 147 of the Act and service of notice u/s 148 of the Act was effected on 25.03.2009. 7. Assessee preferred that return filed u/s 139(1) be treated as reply to the notice u/s 148 of the Act. Reasons recorded by the AO were communicated to the assessee to which assessee raised objections that the reasons recorded for reopening the assessee did not contain the ful .....

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ts onus to establish the identity and creditworthiness of the aforesaid six parties and also the genuineness of the transaction made addition of ₹ 54,00,000/- u/s 68 of the Act apart from making an addition to the tune of ₹ 1,08,000/- @ 2% of the aforesaid amount paid as commission to the entry operators. CIT (A) however deleted the addition. 8. In the first round of litigation, the revenue as well as assessee challenged the impugned order passed by ld. CIT (A) before the appellate T .....

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ndisputedly, it is settled principle of law that the AO is required to reach at an independent conclusion by applying his own mind that he has reason to believe that the income of the assessee has escaped assessment to assume the jurisdiction for reopening of the assessment u/s 147 / 148 of the Act. 11. Now before proceeding further, we would like to peruse the reasons rendered by the AO for reopening of the assessment u/s 147 of the Act which are reproduced for ready reference as under :- Infor .....

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dences collected, a report has been forwarded. The Assessing Officer has perused the information contained in the report and the evidences gathered. The report providers 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 .....

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om such entry operators as per the following specific details of transaction :- Beneficiary Bank Name Beneficiary Bank Branch Value of Entry taken Instrument No. by which Entry taken Date on which entry taken Name of a/c Account Holder of Entry giving A/c Bank from which entry given Branch of entry giving bank A/c No. of entry giving account HDFC Bank 79, Old Rajender Nagar Mkt., ND 70000 TO CLG. 00972521 7-Mar- 02 Sekhawati Finance P. Ltd. SBP DG 50111 HDFC Old Rajender Nagar 1000000 13- Mar-02 .....

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00 33834 16- Mar-02 Technocom Associates P.Ltd. Innova tive Wazirpur 220 HDFC Old Rajender Nagar 850000 33834 16- Mar-02 Technocom Associates P.Ltd. Innova tive Wazirpur 220 HDFC Old Rajender Nagar 1000000 18- Mar-02 Chintpuri Credits SBP DG 50058 HDFC Old Rajender Nagar 1000000 18- Mar-02 Chintpuri Credits SBP DG 50058 The assessee has received unexplained sums from the entry operators as per the above details as per information available with the undersigned. As explained above, the identity, .....

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e aforesaid facts and circumstances of the case, the sole question arises for determination in this case is :- as to whether AO is empowered to initiate the proceedings u/s 147/148 of the Act merely on the basis of report received from the Investigation Wing that the assessee has been provided with accommodation entry to the tune of ₹ 54,00,000/- by the entry operators, without applying his mind? 13. Identical issue has come up before the Hon ble Supreme Court in judgment cited as Chhugama .....

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rima facie conclusion that the transactions to which he referred were not genuine transactions. He appeared to have had only a vague felling that they may be bogus transactions. It was further explained by the Supreme Court that : 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 ne .....

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under S. 148. The Supreme Court concluded that it was not satisfied that the ITO had any material before him which could satisfy the requirements under Section 147 and therefore could not have issued notice under Section 148. 14. Identical issue has also come up before Hon ble jurisdictional High Court in judgment cited as G & G Pharma India Ltd. (supra) wherein Hon ble High Court, by following the judgment delivered by Hon ble Supreme Court, entitled Chhugamal Rajpal vs. S.P. Chaliha (supr .....

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count by way of above accommodation entries. The above conclusion is unhelpful in understanding whether the AO applied his mind to the materials that he talks about particularly since he did not describe what those materials were. Once the date on which the so called accommodation entries were provided is known, it would not have been difficult for the AO, if he had in fact undertaken the exercise, to make a reference to the manner in which those very entries were provided in the accounts of the .....

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the Supreme Court in the decisions discussed hereinbefore, the basic requirement that the AO must apply his mind to the materials in order to have reasons to believe that the income of the Assessee escaped assessment is missing in the present case. 15. Furthermore, similar issue has cropped up before the ITAT, Delhi Bench H in M/s. USG Buildwell Pvt. Ltd. (supra), wherein addition of ₹ 20,00,000/- was made by the AO on the basis of similar intimation sent by ACIT, Central Circle 19, New D .....

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considered view inter alia that :- (i) the AO has merely acted in mechanical manner on receipt of the report from the Investigation Wing that he has reason to believe that income of ₹ 54,00,000/- has escaped assessment for the assessment year 2002-03 due to failure on the part of the assessee to disclose fully or truly all material facts necessary for assessment ; (ii) the AO has not even satisfied himself to prima facie make out that income of ₹ 54,00,000/- has escaped assessment i .....

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addresses, PAN, bank details and confirmation of the investors, the onus stood shifted to the AO to prove that these are the shell companies and not to fasten the liability of the assessee on the ground that assessee has failed to produce the aforesaid six investor companies, moreso assessee cannot be called upon to prove negative; (v) that forming an opinion merely on the basis of information supplied by Investigation Wing of the revenue that such and such company has provided an accommodation .....

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