Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

M/s D.D. Agro Industries Ltd. Versus The ACIT, Circle-7, Ludhiana

2017 (10) TMI 525 - ITAT CHANDIGARH

Reopening of assessment u/s 148 - receipt of share application money and addition u/s 68 - Held that:- Instead of referring in the reasons recorded to the specific facts of assessee's case for justifying the assumption of jurisdiction, the AO addresses the legal position on what would constitute information. Even on merits, it is seen that the AO has proceeded selectively. No justification has been given why share application on a premium is considered not questionable for two concerns when the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ons, we note, have not been rebutted. Considering the law as it stands and the provisions of the Act, neither assumption of jurisdiction can be upheld nor the addition made on the basis of suspicions, surmises and conjectures. The statement of the Director by itself recorded u/s 133A having no evidentiary value in the face of the documentary evidence on record in the peculiar facts of the present case cannot be brushed aside by the tax authorities on the basis of suspicions and surmises. Accordi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he separate orders dated 30.012017 of ld. CIT(Appeals) 3 Ludhiana pertaining to 2007-08 and 2008-09 assessment years. It was the common stand of the parties before the Bench that the issues raised in the present appeals are identical in both the years, as such the arguments advanced in ITA 349/CHD/2017 would fully apply to ITA 350/CHD/2017 also. Accordingly, for ready reference, grounds raised in the said appeal are reproduced hereunder : 1. That the Worthy CIT (A) has erred in confirming the ac .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

M/s Genesis Fashions P. Ltd. 4. That the assessee having proved the identity, capacity and genuineness of transfer of contribution of ₹ 50 lacs as made by M/s Genesis Fashions P. Ltd., and therefore, such addition as confirmed by the CIT (A) is bad in law and deserves to be quashed. 5. That the CIT (A) has also erred in taking cognizance of the statement recorded during course of survey of one of the director in view of the judgment of Hon'ble Supreme Court in the case of Khader Khan S .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the assessment order. 2.1 Apart from arguing why addition was not maintainable on the basis of reasons recorded, the assessee also offered its explanation on merit vide letter dated 12.02.2015. It was stated that shares had been allotted to the following persons : Person Amount received (Rs.) Genesis Fashions P. Ltd 50,00,000/- Malkiat Singh 1,00,000/- Ludhiana Scrips P. Ltd. 28,50,000/- 2.2 The AO accepted the reply of the assessee as satisfactory in regard to the share application money receiv .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e following reasons : • M/s Genesis Fashions P. Ltd. has filed return of income of almost NIL • There is never sufficient credit in the bank account of the assessee. Money is credited almost immediately before being debited. • All the amounts being transferred are in round figures of lacs. Usually in the bank account of an investment company there are credits of interest which are seldom round figures. This means there is simply movement of huge funds through the bank accounts. &b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

that the Director was not produced. Accordingly, in the circumstances, it was concluded that the assessee could not establish its case. The case law relied upon by the assessee was held to be inapplicable leading to the addition of ₹ 50 lacs. 3. The assessee agitated the issue unsuccessfully in appeal before the CIT(A). Still aggrieved, the assessee is in appeal before ITAT. 4. The ld. AR submitted that he would be addressing his arguments on the basis of the synopsis filed wherein respec .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

income has escaped assessment. It was his argument that in-fact there was no reason available as per record before the AO even to suspect as no tangible material has been referred to in the reasons recorded by the AO for taking recourse to Section 148. It was submitted that merely on the basis of a routine information by the Directorate of Income Tax that in same companies, share applications had been received on a premium, the AO without going into any fact or evidence, blindly accepted the rou .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. 4.2 Carrying us through the reasons recorded, it was submitted that no tangible material has been referred to by the AO who has blindly proceeded to suspect and not cared to form any belief. It was his submission that firstly the information received was a general information. Secondly, even if the information is considered, it would show that by itself, there was no allegation that Share Application money itself was bogus. In the circumstances, it was his submission that the AO proceeded blin .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ving statement and by itself do not demonstrate that facts actually have been seen. To elaborate this argument, it was submitted that the notice refers to Share Application money of ₹ 1.50 Crores whereas the amount actually was ₹ 1.49 Crores. Thus, even this basic fact was also not cross checked by the AO. It was argued that the AO acting in haste on pure suspicions, shirking his responsibility as even without looking at the basic facts has taken the action and unsettled the settled .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hat shares at a premium in a specific year for the assessee company were not justified but accepts the Share Application money from the other two parties on the very same reasons and selectively chose to only consider addition in the hands of this one party, the said exercise is arbitrary and it is self evident on the face of the record. It was his submission that he would not want to go to the other reasons and just leave his arguments to highlight the arbitrariness and whimsical action of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mium on share application to the tune of ₹ 1 Crore was to be accepted and for the remaining ₹ 50 lacs, he has added. Addressing the reasons again, it was submitted that there is no hint let alone an allegation that the shares have not been allotted as till date the said company is a shareholder in assessee's case. 4.5 It was submitted that nothing has been brought on record to show that the investment by M/s Genesis Fashions Pvt. Ltd. was not genuine or identity was not disclosed .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nt material for the action taken. The AO in the facts of the present case, it was submitted, did not apply his independent mind. He has merely used terms like analyzed all facts and figures , in the last para at page 5 of the assessment order without referring to either any fact or any figure. It was submitted, the use of such words does not by itself support the self serving statement that facts have been considered or analyzed as stated by him. 4.6 Reason to believe it was submitted, is the si .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

land, it was submitted, requires that reasons to believe should be coming out from the reasons recorded and in the facts of the present case, it was submitted, there is no live link let alone a close nexus between the so called general routine information/material before the AO. The routine information of the Directorate of Income Tax, it was submitted, did not either hint or point to anything for any reason justifying the action. In the facts of the present case, it was reiterated it was a rou .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ITO V/s M/s Comero Leasing & Financial Pvt. Ltd [Pgs 23-32] ITA No.4281/DEL/2010, ITAT, Delhi Bench at New Delhi III Sunita Jain V/s Income Tax Officer [Pages 33-42] ITA No.501/ADH/2016, ITAT, Ahmedabad Bench, Ahmedabad 4.8 Reverting again to page 5 of the assessment order, it was submitted that the AO has not cared to point out the failure on the part of the assessee to disclose its income fully and truly. No reference to any document or statement except quoting general decisions on human .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ns cited before the ITAT referred to at pages 13 to 15 namely; Inductotherm (India) P.Ltd. Vs M.Gopalan, DCIT 356 ITR 481 (Gujrat), CIT Vs Smt. Paramjit Kaur 311 ITR 38 (P&H), Signature Hotels P. Ltd. Vs ITO & another 338 ITR 51 (Delhi), CIT Vs Atul Kumar Swami 362 ITR 693 (Delhi), CIT Vs Orient Craft Ltd. 354 ITR 536 (Delhi) and CIT Vs Atlas Cycle Industries 180 ITR 319 (P&H) of the said decision were also heavily relied upon. Similarly, the proposition of law as addressed by the Ch .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ngible material for re-opening was clearly made in the facts of the present case justifying quashing of the order. It was his submission that in-fact, the assessee in the facts of the present case has a much better case as there is no allegation of any accommodation entry. 4.9 Reliance was also placed upon decision of the jurisdictional High Court in the case of Paramjit Kaur 311 ITR 381 (P&H) (copy placed at pages 33 to 36; and the order dated 11.05.2016 of the Amritsar Bench of the ITAT in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

TAT Mum) (copy separately filed) dated 03.03.2017 so as to submit that being the latest on point of law, it comprehensively sums up the cases on the issue and specific attention was invited to the conclusion drawn at page 28, 29 & 30 namely it was a borrowed satisfaction that also on incorrect facts; ITO V Shri Nilesh Thakur, Green World Corporation V ITO (2009) 314 ITR 81 (S.C), Syntex Ltd. (2009) 313 ITR 221. SLP by the Department against this decision, it was submitted was dismissed by th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ti), CIT Vs Sambhar Salt Ltd. (2003) 262 ITR 675 (Raj). Considered in the said decision, it was submitted, fully support the case of the assessee in the present set of facts. Reliance was also placed on Aventis Pharma Ltd. V ACIT 323 ITR 570 (Bom), Shri Krishna Pvt. Ltd. V ITO 221 ITR 538 (S.C). and the decisions relied upon therein for the proposition that if after independent application of mind, reason to believe is missing, the law does not permit action u/s 148. Thus, if in the absence of r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ers P.Ltd., A.L.A.Firm V CIT, Raymond Woollen Mills Ltd., Phool Chand Bajrang Lal & another V ITO it was submitted, have been incorrectly considered to support the conclusion as they operate on different set of facts and circumstances and were not applicable to the facts of the present case as the facts were distinguishable. Consequently, the ratio of the said decisions, it was submitted, was not attracted. The following chart highlighting the distinction was heavily relied upon : Judgement .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssessment had been framed u/s 143(1) and there was no reason to believe and the reliance is being placed on the Judgment of M/s Shiva Exports as per Pages 1 to 16 relevant Pages 6 and 7 of the Judgment Set-ll. A.L.A.Firm Vs CIT (1991) 189 ITR 285 (S.C) This judgment also states that there has to be reason to believe on the basis of specific and relevant information and in our case, no such information much less specific/relevant information was there Raymond Woollen Mills Ltd. V/s ITO 236 ITR 34 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

such statement or any adverse material against the assessee. 4.11 In the circumstance, reliance was placed upon the decision of the Apex Court in the case of Lakhmani Mewal Dass 103 ITR 437 (SC), (copy placed at pages 1 to 4). Carrying us through the principles laid down in the said decision, it was his prayer that the proceedings deserve to be quashed. 5. On merits also, it was submitted that the addition was not maintainable. Attention was invited to the copies of the confirmations/share appl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ained. The list of shareholders, it was submitted is with the Registrar of Companies and copy of the same is at pages 19 to 31 wherein the name of M/s Genesis Fashions P.Ltd. appears in the record of the Registrar of Companies. Thus, it was submitted that sufficient evidence has been led and in-fact it was submitted, the said company is still a shareholder as on date and there has been no re-purchase of shares by the Directors. Unless the documents on record are upset the genuineness, it was sub .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ector during the course of survey relied upon by the Revenue, it was submitted that in terms of the decision of the Apex Court in the case of Khadar Khan Sons 300 ITR 0157 (Mad) approved by the Apex Court in 352 ITR 480 (S.C) (copy placed at page 63-65 and 66 of the Paper Book respectively) it has been well settled that survey u/s 133 does not empowers any IT authority to examine any person on oath, hence any such statement has no evidentiary value. The said decision, it was submitted, has been .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the case at hand. Referring to the said decision, it was submitted that in the facts of that decision, wrong PAN numbers were furnished and wrong identity was established i.e. in effect, identity could not be established which was not a fact in the present case. 5.2 Reliance was also placed upon the order dated 03.02.2016 of the Amritsar Bench of the ITAT in the case of Amravati Infrastructure Developers Pvt. Ltd. in ITA 122/ASR/2013 placed at page 55 to 69 of second set of judgement wherein on .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ment and reliance was also placed upon order dated 05.09.2016 of the ITAT Delhi Bench in the case of M/s Anshika Investments 61 IT Reps.517-DEL-TRIB, copy placed at page 50-54 in the facts of the said decision also the case of the Revenue was that share application money had been paid on a premium and if identity is established, transaction is covered up, service stands explained, the genuineness stands established. Accordingly, it was his submission that even on merit, addition could not be sus .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

per Book. The ld. AR seeking permission to intervene, submitted that he has available with him copy of the balance sheet in 2007-08 assessment year, however, it has not been included in the Paper Book. However, in the Paper Book for 2008-09 assessment year, copy of the balance sheet is included and available at pages 6-17 of the said Paper Book. It was his submission that in case the ld. Sr.DR would want to go through the balance sheet for 2007-08 assessment year, it is available. Ld. Sr.DR acce .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n reproduced in the assessment order itself conveniently by the AO, it was submitted that the decision of the Chandigarh Bench in the case of ACIT Vs Som Nath Maini 100 TTJ 91 (CHD) has been relied upon. The decisions relied upon by the assessee, it was submitted, did not apply as the assessee company has been demonstrated to be a worthless company. Referring to reasons recorded at page 5, it was submitted that the information was sufficient for the formation of belief. Heavily relying upon the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ned by the Assessing Officer by relying on various case laws and also, the basis of addition made by the Assessing Officer on merits alongwith detailed submissions of the counsel of the appellant. The Assessing Officer has in the reasons brought out in detail, the reason to believe, with regard to the reopening of the case u/s 148 and on the other hand, the appellant had contended that there was no reason to believe with regard to the escapement of income. As is brought out in the reasons record .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

at in those cases, which have been relied upon by the counsel of the appellant, the facts were entirely different. Therefore, such case laws are not applicable to the facts of the present case. There are several judicial pronouncements on the sufficiency of belief for reopening the assessement. Reliance is being placed on these decisions: • ACIT Vs Rajesh Jhaveri Stock Brokers P. Limited.291 ITR 500 SC At the time of initiation of re-assessment proceedings only reason to believe that income .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ent, it can be said to have reason to believe that an income had escaped assessment The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991] 191 ITR 662. for initiation of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (see ITO v. Selected Dalurband Coal Co. P. Ltd. [1996] 217 ITR 597 (SC) ; Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC). The scope and effect of section 147 as substituted with effect from April 1,1989, as also sections 148 to 152 are substantially different from the prov .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

so have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147 existence of only the first condition suffices. In other words if th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued. • A.L.A. Firm v. CIT [19911189 ITR 285 (SO The jurisdiction of the Income-tax Officer to reassess income arises if he has, in consequence of specific and relevant information coming into his possession subsequent to the previous concluded assessment, reason to believe that income chargeable to tax had escaped assessment .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ive a final decision as to whether there is suppression of material facts by the assessee or not. We have only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. We are of the view that the court cannot strike down the reopening of the case in the facts of this case. It will be open to the assessee to prove that the assumption of facts made in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d Bairanq Lai And Another.Vs ITO 203 ITR 456 SC Failure to disclose fully and truly material facts. Cash loan claimed to be taken by assessee from company. Accepted as genuine and original assessments made allowing interest thereon as deduction. Subsequent information from officer assessing company that its managing director had confessed that company had not advanced any loan to any person during period covering date of cash loan Belief of ITO that income had escaped assessment Notice for reass .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

148 are dismissed and the action of the AO is confirmed. 6.3. Addressing the arguments advanced on the merits of the addition, it was submitted that in the course of the survey, statement of Director was recorded and carrying us through the specific questions and answers to the questions raised, it was submitted that the Director accepts that M/s Genesis Fashions Pvt. Co. was a paper company. Attention was also invited to page 8 of the assessment order so as to contend that the assessee has no c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ments, ITRs, bank account, etc. but has no physical existence. 6.4 Referring to the record, it was submitted that the address of M/s Genesis Fashions P.Ltd. was same as the assessee. Attention was invited to page 17 of the assessment order so as to submit that despite three specific opportunities, the assessee failed to produce the specific Director before the AO. It was submitted that the primary onus was upon the assessee to substantiate his facts and in the circumstances, the findings of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the appellant company has procured share application money during the year under consideration. It is relevant to note that during the year the appellant company has received ₹ 50 lakh as share application money from M/s Genesis Fashions Private Limited. The assessing officer has mentioned in the assessment order page 7 that the assessing officer had the doubt over the genuineness of M/s Genesis Fashions Private Limited as it has filed return of income of almost nil income. The bank accou .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

/s Genesis Fashions Private Limited. The survey was carried out on the premises of the appellant on 2 September 2014 and during the said proceedings, it was found that there is no physical existence of the company M/s Genesis Fashions Private Limited existed at the address of the appellant there are no assets, no business, no staff pertaining to M/s Genesis Fashions Private Limited. It was merely a company floated to provide entries and insist only own people in our of the documents, ITR is, ban .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rvey has been reproduced by the Assessing Officer from pages 9 to 12 of the assessment order, which justifies the action of the Assessing Officer in making the addition of ₹ 50 lacs. 3.9 Based on these facts the assessing officer rightly held that there is no identity of the company and genuineness and creditworthiness cannot be proven at all by the appellant company. The assessing officer has also relied upon the statement of the Director of the company wherein the Director has admitted c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

OC, however, in view of the admittance on the part of the Director at the time of survey and after considering the relevant facts there is no doubt that M/s Genesis Fashions Private Limited is paper company which was used to give the commission entry and has been a used to bring back the appellant's own out of books funds to its books of accounts. It is also seen that the assessing officer has pointed out to the appellant to produce the director of M/s Genesis Fashions Private Limited, at th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

A in the premises of the appellant itself wherein M/s Genesis Fashions Private Limited also exists on paper. 3.11 As regards, the addition of ₹ 50 lacs as made by the Assessing Officer on account of contribution of share/share premium made by M/s Genesis Fashions Pvt. Ltd, it is clear that there was no net worth of the company, who had contributed a sum of ₹ 50 lacs towards the share capital and share premium in the appellant company and the Assessing Officer has discussed in detail .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d/2009 has also confirmed the addition on account of non-genuine share capital and share premium and the identity of subscribers could not be established. 3.12 The issue is also directly covered by the ratio of the decision of honourable jurisdictional High Court as well as the jurisdictional ITAT, Chandigarh, In the case of Smt. Harjeet Kaur versus ACIT in ITA No. 280 of 2013 wherein the honourable Punjab and Haryana High Court has upheld the finding and the decision of the honourable ITAT, Cha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t Section 68 is attracted where an entry relating to a sum is found to have been credited in the books of the assessee, which thus implies, existence of books and recording of a sum which the Assessing Officer considers as doubtful. i) Smt.Shanta Devi v. CIT [1988] 171 ITR 532 (Punj. & Har.). ii) Decision by Hon. Indore Bench of ITAT in case of Agrawal Coal Corpn. (P.) Ltd. v. Asstt CIT63DTR201. iii) CIT vs. Frostair (P.) Ltd. [2012] 26 taxmann.com 11 (Delhi) iii) CIT Vs Prescision Finance P .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

(P) Ltd. V CIT (Kolkata) xii) CIT Vs Korlay Trading Co. Ltd. (1998) 232 ITR 820 (Cal) xiii) K.M. Sadhukhan & Sons (P) Ltd. V CIT (1999) 239 ITR 77/107 Taxman 403 (Cal) xiv) CIT V Precision Finance (P) Ltd. (1994) 208 ITR 465/ (1995) 82 Taxman 31 (Cal) 6.5 On the basis of these facts and reasoning, the Conclusion drawn by the CIT(A) in para 3.18 was heavily relied upon by the Revenue. For ready reference, para 3.18 is reproduced hereunder : 3.18. The Ld. Counsel of the appellant has relied up .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n u/s 68 is upheld. In view of the detailed discussion above, it is held that the appellant has failed to discharge its onus of proving the genuineness and creditworthiness of the above transaction and it is beyond any doubt that transaction was just a cover-up to bring its own unaccounted money into its books of accounts. Therefore, the disallowance of ₹ 50,00,000/- u/s 68 of the Act on account of unexplained cash credit is ordered to be confirmed. Resultantly these grounds of appeal are .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s a vested right in a concluded assessment and in case the Revenue wants to reopen the concluded assessment, then it can do that only on the basis of reasons recorded. The Revenue can only rely on the reasons recorded to show that the exercise of authority is in terms of the statutory provisions and there is some material on record to show that there was reason to believe that income has escaped assessment. It was his submission that before addressing the departmental arguments, he would respond .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nd at all and has acted on a routine information blindly on mere suspicions. The assessee company, it was submitted, has done a business of ₹ 20 Crores in the earlier assessment year and ₹ 23 Crores in the year under consideration. Its Balance Sheet, it was submitted, is available and the profits earned may be ₹ 75 lakh and ₹ 54 lakh respectively and Reserves and surplus of ₹ 1 Crore and ₹ 3.5 Crore in a specific year itself and may appear to be negligible to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y ₹ 50 lacs relatable to the said party as opposed to the Share Application Money from the remaining two parties which all cumulatively totaled to ₹ 1.49 Crores. However, even though the ld. Sr.DR is trying to make out a case which was never the case of the AO by referring to balance sheet which admittedly has not been referred to by the AO, it was his submission that though he has addressed the merits of the argument, however, he would also agree that it is a settled legal position .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ted by the AO and the Sr.DR has failed to refer to any fact or evidence to assail this consistent argument on record. The action of the AO, it was submitted, is against the settled legal position. Carrying us through the reasons recorded which have been extracted in the assessment order itself, it was submitted, that no where it is reflected in the routine information that the claim of share application money on a premium was bogus. The facts relatable to the assessee have not even been hinted t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

have wrongly referred to receipt of share application amounting to ₹ 1.50 Crores and would have noticed that it was infact ₹ 1.49 Crores. 7.1 It was submitted that the entire case of the tax authorities rests on this statement of the Director of the assessee company who, it is noted has stated that it was a paper company. The arguments that there is no independent application of mind by the AO; routine general information has been blindly accepted as a gospel truth; it is a case of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng evidences as required by the AO, it was submitted, are available on record which have been discarded purely on suspicions. Accordingly, it was his prayer that the addition may be deleted even on merits. 8. We have heard the rival submissions and perused the material available on record. Before adverting to the specific arguments of the parties before the Bench, it would be appropriate to first refer to the salient facts on record; namely that after issuance of notice u/s 148 and recording of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

een blindly accepted by the AO without even caring to form his independent belief that action u/s 148 was warranted etc. We propose to deal with the arguments thereon subsequently but before that, the admitted facts may be referred to namely that the assessee received share application money from three parties totaling ₹ 1,49,50,000/- in the year under consideration. The AO after recording of reasons and issuance of Show Cause Notice that share application money was received in 2007-08 ass .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

has been received by the AO who has extracted the following chart at page 7 of his order as under : Person Amount received (Rs.) Genesis Fashions P. Ltd 50,00,000/- Malkiat Singh 1,00,000/- Ludhiana Scrips P. Ltd. 28,50,000/- 8.1. The AO, admittedly considering the explanation, only questioned the receipt of share application money from M/s Genesis Fashions Pvt. Ltd. The receipt of share application money from Shri Malkiat Singh and M/s Ludhiana Scrips Pvt. Ltd. was not questioned. Explanation o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ittedly, the assessee was required to prove the identity, genuineness and creditworthiness of the M/s Genesis Fashions Pvt.Ltd. only and consequently was asked to produce various documents pertaining to the introduction of Share Capital. 8.3 Admittedly, again the following information vide letter dated 09.02.2015 u/s 142(1) was sought from the assessee as per page 8 of the assessment order reproduced as under : • Amount and date of receiving share capital • Mode of transaction (cash/ch .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

found to be unacceptable on account of the following reasons by the AO as per page 8 of the assessment order reproduced as under: • M/s Genesis Fashions P. Ltd. has filed return of income of almost NIL • There is never sufficient credit in the bank account of the assessee. Money is credited almost immediately before being debited. • All the amounts being transferred are in round figures of lacs. Usually in the bank account of an investment company there are credits of interest wh .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

es rests on this statement given. The assessee as is evident, has assailed the jurisdictional issue on the ground that there is no independent application of mind by the AO; routine general information has been blindly accepted as gospel truth by the AO it is a case of borrowed satisfaction which has been frowned upon by Courts; no independent formation of belief exercise can be said to have been embarked upon by the AO. It has been is argued that if such an exercise had been done then it would .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ngh and M/s Ludhiana Scrips P.Ltd. can be accepted then the very same logic and rationale would apply to reasons for allotment of share application money on a premium to M/s Genesis Fashion P.Ltd. also. Thus, the jurisdiction issue, it has been canvassed, fails even on this fact emanating from the record. In fact, the ld. AR has strongly objected to the repeated stance of the Departmental Representative describing the assessee company as a worthless company. He has invited attention to the copie .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

st in a specific company or not cannot be dictated to by the tax authorities. If the decision of Shri Malkiat Singh and M/s Ludhiana Scrips P.Ltd. could be accepted as a justified decision to purchase shares on a premium in the very same company at the very same time, then the Department not having questioned those transactions, had no basis to question the rationale of M/s Genesis Fashions Pvt. Ltd. to apply for those specific shares in that specific period of time at a premium. The decision to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rns/documents with ROC etc. are all available on record and it has been stated, have not been assailed by way of any evidence. Simply because the Director was not produced, it has been submitted the Department has proceeded on suspicions. Addressing the said suspicion, it was submitted, that he would not want to get into a debate on the reasons why the Director did not present himself. The fact of selective targeting of a specific company ignoring the other two major parties who too had applied .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ailable at Paper Book pages 6 to 10. Copies of the ledger account of Broker in the books of M/s Genesis Fashions Pvt.Ltd., M/s Mayank Financial Services is available at page 11, copies of the bank statements of M/s Genesis Fashions Pvt.Ltd. is available at Paper Book page 12 and 13, copy of ledger account of share application money for the period 01.04.2006 to 31.03.2007 is available at Paper Book pages 14 to 18. The details of the specific cheques co-relating with the date and the specific cheq .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ur considered view, considering the facts of the present case, we hold that the AO has assumed jurisdiction relying upon non specific routine information blindly without caring to first independently consider the specific facts of the assessee's case. The AO in his wisdom, instead of caring to refer to the facts of the case at hand which he ought to have first considered, has instead considering the facts as considered by the ITAT in the case of Som Nath Maini and that too without first cari .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

onstitute information. Even on merits, it is seen that the AO has proceeded selectively. No justification has been given why share application on a premium is considered not questionable for two concerns when the facts and circumstances of assessee's case remained identical i.e. if the assessee company was worth investing into on a premium in a specific year by two other concerns why only for M/s Genesis Fashions Pvt. Ltd., the share application money on a premium is questioned. The existenc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version