TMI Blog2014 (12) TMI 1282X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication money received by the assessee is bogus transaction and consequently the income assessable to tax has escaped assessment. From the reasons recorded by the Assessing Officer, there is no indication about the relation between the share application money and the bogus accommodation entries given by Shri Giriraj. The sufficiency of evidence or material for forming the belief is not open to scrutiny but the existence of belief is must for a valid exercise of power. The reasons recorded by the Assessing Officer do not indicate even a remote nexus between the application money received by the assessee with the alleged accommodation entries provided by Shri Giriraj Vijayvargiya or the alleged beneficiary of the accommodation entries. - Decided in favour of assessee. - ITA No. 1159, 1160 & 1161/Mum/2013 - - - Dated:- 31-12-2014 - Vijay Pal Rao (Judicial Member) And D. Karunakara Rao (Accountant Member) For the Assessee : Hari S. Raheja For the Revenue : R. N. D souza ORDER Vijay Pal Rao (Judicial Member) These three appeals by the assessee are directed against three separate orders of CIT(A) in the case of three assessee s who were subsequently amal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee does not want to press ground nos. 1 and 2 of these appeals and the same may be dismissed as not pressed. 3. Ld. DR raised no objection if the ground no. 1 and 2 of these appeals are dismissed as not pressed. 4. Accordingly, we dismiss ground nos. 1 and 2 of these appeals which is common in all appeals as being not pressed. 5. Ground no. 3 is regarding validity of reopening of assessment. 6. The original return filed by the assessee was processed u/s 143(1). Subsequently, the Assessing Officer reopened the assessment by issuing notice u/s 148 on 30.03.2010 on the reason that search action u/s 132 of the Act took place in the case of Shri Giriraj Vijayvargiya on 26.04.2007, who is a member of group called Ankur Group. During the course of search, it was found that Shri Giriraj Vijayvargiya has given accommodating entries in the form of gifts, loans and share application money. In the assessment proceedings, of Shri Giriraj Vijayvargiya, it was found that he had given accommodating entries to 45 persons. It was also seen that various concerns controlled by Shri Vikas Berlia have introduced unaccounted money in the form of shares allocated to Shri Giriraj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the basis of which it could be inferred that the income assessable to tax particularly the share application money has escaped assessment on account of unaccounted money of the assessee was introduced in the system. It is further contended that the reopening is after four years from the end of the assessment year, hence in the absence of any allegation that the assessee failed to disclose all the material facts fully and truly necessary for assessment, the reopening is not permissible. In support of his contention he has relied upon the judgment of Hon'ble Supreme Court in the case of CIT Vs. Kelvinator of India Ltd. ( 320 ITR 561). He has also relied upon the following decisions: (i) Prashant S. Joshi Vs. ITO 324 ITR 154 (Bom) (ii) ITO Vs. Lakhani Mewal Das 103 ITR 437 (SC) (iii) Hindustan Dorr Oliver Ltd. Vs. DCIT 305 ITR 282 (Bom) (iv) Sarthak Securities Co. P. Ltd. Vs. ITO 329 ITR 110. 9 The above judgments were also relied upon by the assessee before CIT(A). 10. On the other hand, the Ld. DR has submitted that there was a new information came to the possession of the Assessing Officer regarding the introduction of fresh capital through the mode of bogus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Giriraj has stated that in all these transactions the actual amounts were paid by the recipients of these entries in cash along with 2-3.5% as commission. It is also found that Shri. Giriraj is not having any means of gift/loan these amounts. During the assessment proceedings, all the recipients of these entries were summoned u/s 131. Bank accounts of Shri. Giriraj and his family members were verified and it was found that before making these entries cash was deposited in their accounts. It is also seen that other than these deposits, these accounts were having only negligible amounts. 2.1. Most of the persons who appeared in response to the summons have agreed that these gifts/loan entries are bogus. In view of the same, 20' assessees who have received entries for ₹ 1.06 crores in 47 entries have paid additional taxes/revised returns for A. Y. 's 2002-03 to 2005-06. 2.2. Two assessee's who are companies have paid additional taxes disclosing an amount of ₹ 59 Lakhs which they introduced as bogus share application money in the name of Shri. Giriraj and his family members. 3. Berlia Plastochem Pvt. Ltd is a family concern of Shri Vikas Berlia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Smt. Premlata Vijayvargiya Rs.4,00,000/- 2001-02 Total Rs.4,00,000/- M/s. Beri Finvest Pvt. Ltd. Sr No. Name of Person Total Amount of entries given Financial of entries 1 Smt. Sonal Vijayvargiya Rs.2,20,000/- 2003-04 Total Rs.2,20,000/- During the course of assessment proceedings in the' case of Shri Giriraj, statement of Shri Vikas Berlia, Director of M/s Major Metals Ltd was recorded u/s 131 of the Act. This statement was confronted to Shri Giriraj. Shri Giriraj in his statement u/s . 131 has reiterated that the above transaction of introduction of share capital by M/s Major Metals Ltd was not genuine and it was only cheque issued by him/his family members (on his behalf) in lieu of cash and commission of 2-3.5%. The statements of above family members of Shri Giriraj were also rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated that Mr. Giriraj was well known to his late father. This was again denied by Shri Giriraj in his statement u/s 1312. Also he stated that Mr. Giriraj was well known to his late father. This was again denied by Shri Giriraj. 6. M/s Major Metals Ltd is not a listed company and never declared any dividends. It was showing only nominal profit in its Profit and Loss account but they were introducing huge amounts as share application money which the claim to have received for issuing shares at a substantial premiums. The following chart shows year-wise capital, profit, amount introduced in the form of share application money/share premium, earning per share (EPS), and premium for shares allotted during the year. F.Y. Capital Profit Amount introduced as share application money/premium EPS (Earning per Share) Premium per share 2002-03 88,58,500 6,06,438 1,91,84,500 0.68 490 2003-04 90,96,500 16, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me in its books in the form of bogus share application/share capital. Therefore, I had reasons to believe that the assessee's paid-up capital and share capital in financial year 2002-03 was also bogus. In view of this I have reason to believe that income of ₹ 18,70,000/- being increase in share capital and share premium during the year, has escaped assessment in the case of M/s Ginni Finvest Pvt. Ltd for A. Y. 2003-04 'as per the provisions of section 147 of the Act. On verification of records for A. Y. 2003- . 04.is seen that the case was not scrutinized u/s 143(3) in that year. Hence, notice u/148 is issueds after obtaining prior approval of the Addl CIT(A), Central Range 4, Mumbai 12. These reasons are nothing but the summary of statement of Shri Giriraj Vijayvargiya during the search as well as the assessment proceedings of Shri Giriraj. It is manifest from these reasons recorded by the Assessing Officer that four concerns are mentioned which are controlled by Shri Vikas Berlia in which the allegation of giving accommodation entries in the shape of share application money was made by Shri Giriraj in his statement . It is pertinent to note that these three con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 147. Explanation (2) to section 147 creates a deeming fiction of cases where income chargeable to tax has escaped assessment. Clause (b) deals with a situation where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return. For the purpose of clause (b) to Explanation (2), the Assessing Officer must notice that the assessee has understated his income or has claimed excessive loss, deduction, allowance or relief in the return. The taking of such notice must be consistent with the provisions of the applicable law. The act of taking notice cannot be at the arbitrary whim or caprice of the Assessing Officer and must be based on a reasonable foundation. The sufficiency of the evidence or material is not open to scrutiny by the Court but the existence of the belief is the sine qua nonfor a valid exercise of power. In the present case, having regard to the law laid down by the Supreme Court it was impossible for any prudent person to form a reasonable belief that the income h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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