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TMI Blog2017 (8) TMI 1325X X X X Extracts X X X X X X X X Extracts X X X X ..... law in as much as he was not justified to uphold the action of the ld. Assessing Officer in resorting to the provisions of Section 148 of the Income Tax Act, 1961." 3. Validity of initiation of reopening of assessment proceedings under section 147 / 148 as well as validity of assessment framed in furtherance thereto upheld by the ld. CIT (Appeals) has been objected by the assessee. 4. In support of the above objection, the ld. AR has basically reiterated submissions made in this regard before the ld. CIT (A). The main thrust of his argument is that initiation of reopening proceedings by the Assessing Officer was based on report filed by the Investigation Wing of the Department, which was never confronted to the assessee and there was no application of independent mind of the Assessing Officer for forming his reasons to believe for initiation of reopening proceedings. 5. The ld. AR submitted that a perusal of the assessment order and history of the assessment proceedings would show that various references have been made to the findings of various wings of the Investigation Unit, a copy of which has not been provided to the Appellant Company at any stage of the assessment proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases where income chargeable to tax has escaped assessment:- * where no return of income has been furnished by the assessee although * his total income or * the total income of any other person in respect of which he is assessable under this Act. * during the previous year exceeded the maximum amount which is not chargeable to income-tax. * where a return of income has been furnished by the assessee but no assessment has been done and it is noticed by the Assessing Officer that the assessee - has understand the income, or * has claimed excessive loss, deduction, allowance or relief in the return; * where an assessment has been made, but * income chargeable to tax has been under assessed; or * income chargeable to tax has been assessed at too low a rate; or * income chargeable to tax has been made the subject of excessive relief under the 1961 Act; or * excessive loss or depreciation allowance or any other allowance under the 1961 Act has been computed. 5.2 Thus Section 147 of the Income-tax Act, 1961 authorizes and permits an Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that the said income for any assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Office of the Company from which it was sought to be concluded that the Assessee Company belonged to the Bhushan Group of Companies and was allegedly a "Paper Company" established for introducing money from unexplained sources. The fact remains that the existence of the Company incorporated as a separate legal entity following the rigorous and due process of law laid down in the Companies Act, 1956 has not been denied. In fact, such a negation of its corporate existence is neither suggestible nor inferable either from the said statement or from the Office of the Registrar of Companies, the statutory regulatory body, in this regard. The conclusion has sought to be drawn on the basis of a statement of a person who had no locus standi in the Assessee Company, and accordingly was not authorized on its behalf. While again emphasizing the separate legal existence of the Assessee Company, it needs also to be understood that there is nothing in law to prohibit several companies having their Registered Offices at the same address or for companies to share common infrastructure and facilities so as to economize the costs. In addition, the fact that the Directors of the Company being employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Sr. DR, on the other hand, opposed the cross objection with this submission that the assessee was given opportunity to raise objection before the Assessing Officer against the initiation of reopening proceedings. The assessee filed its objections and it was duly disposed off by the Assessing Officer, hence there is no substance in the contention of the ld. AR that assessee was not given opportunity to cross examine on the basis of whose submissions reported by the Investigation Wing of the Department reopening proceedings were initiated. 9. Having gone through the orders of the authorities below in view of the above submissions, we find that assessee was supplied with the reasons recorded and opportunity to raise objections thereto was given to him. It was availed as the assessee raised the objections against the validity of initiation of reopening proceedings and the Assessing Officer duly disposed off the said objections. The reason to believe was based on search operation in Bhushan Steel Group and survey at the assessee. We thus do not find substance in the contention of the ld. AR that initiation of reopening proceedings against the assessee was not valid. It is well estab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 was carried out in the Bhushan Group of cases on 3.03.2010. The appellant company was also covered in the said survey operation and its jurisdiction was subsequently transferred to the Office of the ACIT, Central Circle - 13, New Delhi. 13. The case of the appellant company for the assessment year 2007-08 was reopened under section 147 of the Income Tax Act, 1961 and notice under section 148 was issued on 19.09.2011. In response to the said notice the appellant company filed a reply dated 26.09.2011 stating that original return of income filed earlier by it on 27.10.2007 vide receipt No.3945041271007 may be treated as return filed in response thereto. 14. The assessment was completed vide order dated 28.03.2013 at an income of Rs. 5,50,00,573/- wherein the ld. Assessing Officer has proceeded to add back a sum of Rs. 5,50,00,000/- on account of alleged unexplained share capital received by the appellant company from various companies situated at Mumbai and Kolkata. The ld. CIT (Appeals) has, however, deleted the addition being convinced with the submissions of the assessee. 15. In support of the ground, the ld. Sr. DR has basically placed reliance on the assessment order with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of identity and creditworthiness of the parties and also the genuineness of the transaction of all the parties from whom the share capital and share premium had been received. In response, the Appellant Company vide letter dated 13.08.2012 filed with the Assessing Officer copies of bank accounts, confirmation and Income Tax Return acknowledgements from all the parties to establish the identity, genuineness and sources of transaction regarding share capital and share premium. The entire amount had been received by the Appellant Company through normal banking channels by account payee cheques/demand drafts. Furthermore, the said confirmations also clearly reveal the source of funds, particulars of the bank account through which payment has been received and the Income-Tax particulars which go on to establish the identity and creditworthiness of the respective share applicants authoritatively and conclusively. (3) On the basis of the documents/details submitted, the Learned Assessing Officer, has summarized as follows :- S.No. Name of the Share Holder Returned Income Assessment Year 1 BNR Consultancy P Ltd Rs. 1,013/- 2007-08 2. Anikesh Trading Co P Ltd Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved to shri Vasant S Kothari Dy. General Manager(Accountant) of Bhushan Steel Mumbai Branch on 30.11.2011 " 2. Anikesh Trading Co P Ltd Notice served on 29.11.2011 at the given address but no reply received till date. Copy of notice served enclosed(annexure-2) 3. Divya Infotech P Ltd Notice could not be served as assessee not available at the address given The premises are owned by Shri Deepak Jhaveri as per report of Inspector Shri Anshu Gotwal enclosed(annexure-3) 4. Key Impex (I) P Ltd Notice could not be served as assessee not available at the address given. The premises are owned by Shri Mahendra B. Makhwana the owner of New India Marine works as per report of Inspector Shri Anshu Gotwal enclosed(annexure-4) 5. Devrat Engg Private Ltd Notice could not be served as assessee not available at the address given. The premises are owned by Shri Deepak Jhaveri as per report of Inspector Shri anshu gotwal enclosed(annexure-3) 6. Lalit Kunj Metal P Ltd Notice could not be served as premises found locked on various days of visit as per report of inspector Shri Hemant Kumar enclosed(annexure-5) Report from Kolkata S No. Name of the Shareholder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding share capital and share premium with the Assessing Officer. The entire share application money had been received by the Appellant Company through normal banking channels by account payee cheques/demand drafts. Furthermore, the said confirmations also clearly reveal the source of funds, particulars of the bank account through which payment has been received and the Income-Tax particulars which go on to establish the identity and creditworthiness of the various parties authoritatively and conclusively. (8) As a result of the above documents being filed before the Learned Assessing Officer in respect of all the parties in respect of which no cause exists as to recourse to the provisions of Section 68 of the Income-tax Act, 1961 in as much as the onus cast on the Appellant Company vis-àvis the genuineness of the transaction and credit worthiness of the parties has been effectively and completely discharged. The action of the Learned Assessing Officer is not only against the spirit but also letter of the provisions relating to establishing the identity of cash creditors as embodied in the Income -tax Act, 1961. Independent investigations from parties over which an Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted for the Appellant Company. In fact it may be reiterated that the share application money was received from independent legally incorporated companies through normal and regular banking channels which fact stands duly corroborated and confirmed by the confirmations bank statements and Income Tax Returns of the share applicants duly placed on record. In fact, no evidence, direct or indirect, conclusive, or even circumstantial, exists to doubt in any manner the identity and credit worthiness of the parties and genuineness of the transactions entered into. (14) The ld. AR submitted that the appellant company has discharged its onus by satisfactorily dealing with all the issues in respect of which onus has been cast on it u/s 68 of the Income-tax Act, 1961 as would be clear from the following discussion :- (i) With respect to the identity of the creditors the names, addresses and PANs of the Assessee has been duly furnished and provided to the Ld Assessing Officer during the course of the assessment proceedings and no error or short coming has either been determined or pointed out therein since all the share applicants are duly identified with duly allotted PANs which are subsist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgement of the Delhi High Court in the case of Commissioner of Income Tax v Lovely Exports Pvt Ltd [(2008) 299 ITR 268 (Delhi)] holding as follows :- " In the case of a company the following are the propositions of law under section 68. The assessee has to prima facie prove (1) the identity of the creditor/ subscriber; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels; (3) the creditworthiness or financial strength of the creditor / subscriber; (4) if relevant details of the address or PAN identity of the creditor / subscriber are furnished to the Department alongwith copies of the shareholders' register, share application forms, share transfer register, etc, it would constitute acceptable proof or acceptable explanation by the assessee; (5) the Department would not be justified in drawing an adverse inference only because the creditor/ subscriber fails or neglects to respond to its notices; (6) the onus would not stand discharged if the creditor / subscriber denies or repudiates the transaction set up by the assessee nor should the Assessing Officer take such repudiation at face value and construe it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itworthiness was not on the Assessee :- * Commissioner of Income-tax, Udaipur v. Bhaval Synthetics [(2013) 35 Taxmann.com 83 (Rajasthan)]; * Shree Barkha Synthetics Ltd v. Assistant Commissioner of Incometax [(2006) 155 Taxman 289 (Raj)]; * Commissioner of Income-tax, Bhopal (M.P) v. Peoples General Hospital Ltd [(2013) 35 taxmann.com 444(Madhya Pradesh); * Commissioner of Income-tax, Meerut v. Kamna Medical Centre (P) Ltd [(2013) 35 taxmann.com 470(Allahabad)]; * Commissioner of Income-tax, Faridabad v. GP International Ltd [(2010) 186 Taxman 229 (Pun &Har)]; * CIT v Dwarkadhish Investment Pvt Ltd and Dwarkadhish Capital Pvt Ltd [(2011) 330 ITR 298 (Delhi)]; * CIT v. Winstral Petrochemicals Pvt Ltd [(2011) 330 ITR 603 (Delhi)]; * Commissioner of Income Tax v. Gangour Investment Ltd [(2011) 335 ITR 359 (Delhi)]; * MOD Creations Pvt Ltd vs. Income Tax Officer [(2012) 354 ITR 282(Delhi)]. (21) It should be specifically noted in the instant case there was no denial at any stage of the investigation or the assessment proceedings by any of the subscribers to the share capital of their having invested money by way of share application money in the Appellant Company. Mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite the share application money from different sources or even public at large. It would be asking for a moon if such companies are asked to find out from each and every share applicant/subscribers to first satisfy the assessee companies about the source of their funds before investing. It is for this reason the balance is struck by catena of judgements in laying down that the Department is not remediless and is free to proceed to reopen the individual assessment of such alleged bogus shareholders in accordance with the law. That was precisely the observation of the Supreme Court in Lovely Export (supra) which holds the fields and is binding. 40. In conclusion, we are of the opinion that once adequate evidence/material is given, as stated by us above, which would prima facie discharge the burden of the assessee in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter in case such evidence is to be discarded or it is proved that it has 'created" evidence, the Revenue is supposed to make thorough probe of the nature indicated above before it could nail the assessee and fasten the assessee with such a liability unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10) 327 ITR 560 (Del.); (vii) CIT Vs. Winstral Petrochemicals P. Ltd. (2011) 330 ITR 603 (Del.); (viii) CIT Vs. Kamdhenu Steel and Alloys Ltd. (2014) 361 ITR 220 (Del.). 17. Having gone through the above cited decisions, we find that the ratio laid down therein is that the primary onus lies upon the assessee to establish identity and creditworthiness of the creditors / investors as well as genuineness of the transaction and after discharging of the same, onus shifts upon the Revenue to prove the documents filed by the assessee while discharging its primary onus, as false to attract addition under section 68 of the Act. In its recent decision dated 11.01.2017 in the case of Pr. CIT Vs. N. C. Cables Ltd. (supra) the Hon'ble jurisdictional High Court of Delhi has been pleased to hold that no addition can be made under section 68 of the I. T. Act where assessee in the case of share application money had furnished documents to evidence genuineness of transactions and identity and creditworthiness of parties, but there was failure on the part of the Assessing Officer to conduct adequate and proper enquiry into materials while invoking section 68 of the Act. Again in the case of Pr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ratio laid down by the Hon'ble jurisdictional High Court of Delhi, we find that facts are almost similar. In the present case there were 7 investor companies claimed to have invested Rs. 5,50,00,000/- in total in the assessee company. In support of their identity and creditworthiness as well as genuineness of the transactions, as discussed above, the assessee had filed before the Assessing Officer, their (investor companies) confirmations, Income Tax return acknowledgements, bank accounts with this submission that entire amount had been received by the assessee company through normal banking channels by account payee cheques / demand drafts. The confirmations filed revealed the source of funds, particulars of the bank account through which payments were received and the Income Tax particulars establishing the identity and creditworthiness of the respective share applicants. We thus find that the assessee had discharged its primary onus to establish identity and creditworthiness of the investor companies as well as genuineness of the transactions, as per the ratio laid down in the above cited decisions of the Hon'ble High Court. The Assessing Officer, on the other hand, had doubted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of all the 7 investor companies, the assessee had filed primary documents and had accordingly discharged its initial onus to establish identity and creditworthiness of the investor companies and genuineness of the transaction as there is no dispute that all the transactions have been done through banking channels i.e. through account payee cheques and demand drafts. We thus find that the Assessing Officer has failed to discharge its onus to prove that the documents filed by the assessee, as discussed above, were false or fabricated as the Assessing Officer has not made any efforts to verify those documents especially when there is no dispute that all the investor companies were filing their returns of income and were being assessed by the Department. The Assessing Officer on the contrary remained suspicious on the claimed receipt from the investor companies on some other factors like some of them were not found on their given addresses, some of them had furnished their submissions through posts and some of them were not having sufficient income etc. as discussed above. Under these circumstances, we are of the view that the ld. CIT (Appeals) was justified in deleting the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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