9911796707
TMI Blog2018 (8) TMI 983X X X X Extracts X X X X X X X X Extracts X X X X ..... approval of Ld.CIT, letter for provisional attachment was sent to HDFC Bank, Ahmedabad but the same returned unserved. The assessee submitted Annual Report and other details before the AO. The AO noticed that the assessee is a listed company which during the previous year increased its share capital by Rs. 16.95 crores. This increase was not through public issue but by way of investment in equity share directly through fully convertible warrants. The assessee filed copy of the Audited Account and ITR. The assessee made sale and purchase only from two parties. The assessee is selling as well as purchasing from the same parties and the same items i.e. Maize Grain. AO noted that the assessee is merely showing bogus sale and purchase. The assessee submitted that it is a listed company and all the issues of the shares are done as per SEBI Guidelines. The AO noted that approval of SEBI allows issue of such fully convertible warrants but it does not certify the genuineness, creditworthiness or identity of the applicants as required u/s 68 of the Act. The AO noted the names of various entities who invested in assessee company in assessment order with their details and after going though t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u are hereby required to attend my office on 29th September, 2010 at 2.45 P.M either in person or by a representative duly authorized in writing in this behalf or produce or cause there to be produced at the said time any documents, accounts and any other evidence on which you may reply in support of the return filed by you." From the above notice it is very clear that the assessee from the day of receiving notice knows that he is required to file documents basis on which the return of income has been filed. The assessee cannot say that this is a formal notice only. This case was fixed for hearing on 29.9.2010. However, on the same day nobody attended nor any application for adjournment has been filed. Again on 17-1- 2011 detailed questionnaire along with notice u/s. 143(2) of IT Act was issued to the assessee. The case was fixed for 28-1-2011. However. on 28.1.2011 nobody attended the proceedings nor any reply or adjournment has been filed by the assessee. Again the case was fixed on 28.2.2011 for 7.3.2011. Again on 7.3.2011 none attended. On 12.8.2011 the case was again refixed for 24.8.2011 by notices issued under section 142(1) of IT Act with detailed questionnaire and 143( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Ashish Jain again attended but did no file all the details as asked earlier vide various notices issued or query raised by note sheet entry, therefore, again he was asked to file balance details. The case was adjourned to 28.12.2011. From the above facts, it is very clear the assessee and his Authorized representative deliberately avoiding the proceeding by non-filing complete details. On 29-12- 2011 Shri Ashish Jain, CA attended and filed part details. The AO has made assessment order u/s. 143 (3) of IT Act on 30-12-2011 being time barring assessment. Therefore, the assessing officer being time barring assessment had left with no option but to t60 pass the assessment order on 30.12.2011. In assessment order, in absence of any explanation given by the assessee the AO has made an addition of Rs. 16.95 crores as the assessee has failed to prove the creditworthiness of the investors. 2. In second ground of appeal the assessee has challenged the jurisdiction for issue of notice u/s. 143(2)/142(1) of IT Act. In this regard it is submitted that the First notice u/s. 143(2) of IT Act was issued by the ACIT Circle 18(1), New Delhi as the jurisdiction over the PAN was lying with him a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bliged for affording us an opportunity to submit our counter submission in rebuttal of the AO's report under reference. 3. Vide opera 1, the AO has denied that the notice u/s. 143(2) of the Act was formal one. Conversely, he has reproduced the format of the notice and has supplied emphasis on the wordings "to be produced at the said time any documents, accounts and any other evidence on which you may rely in support of the return filed by you." This itself goes to establish that it was neither a specific notice u/s. 142(1) nor a questionnaire therewith. The assessing officer's proposition is against the letters and spirit of instruction No. 1367 dated 18.11.1980 which reads as under:- "Hearing fixed by the Income Tax officers for completion of the assessments: 1. It has been time and again brought to the notice of the board that the Income Tax Officers are issuing notices u/s. 143(2) indiscriminately and mechanically without acquainting themselves in advance as to what is their requirement. This has been a source of harassment to the taxpayers and also delaying the completion of assessment proceedings, more particularly so in Salary Circles. 2. In the Action Plan for 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /11/2011, 5/12/2011, 17/12/2011 & 28/12/2011. The present AO having failed to offer any comments on these compliances, his report is untrue and reveals unfair attitude with a prejudiced mind. 6. Vide para 2, the AO summarily dealt with the jurisdiction issue saying that the case was transferred to ITO, Wd. 18(4) having jurisdiction over company cases. What the appellant want to bring on record is that the then AO didn't possess even a return of income and it is the appellant who has supplied hard copy of re3turn of income along with requisite audit reports and Annexures/Schedules etc. on 30/10/2011 as incorporated in para 3 of the assessment order. Therefore, in the fitness of things, the then AO didn't have any jurisdiction to issue statutory notice u/s. 143(2) of the Act prior to that date. 7. Vide para 3 the AO has rejected the contention of the appellant that nothing was heard from the department between August, 2011 to 30/10/2011. As mentioned in para 3 of the appellant's letter dated 3/7/2012, the appellant's representative, su-motto met the then AO on 30/10/2011 to enquire about the fate of pending assessment, as stated in para 2 of the impugned order its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties are assessed to tax. In fact copies of their Bank Statements evidencing the identity and source of payment are placed on record and it remains undisputed as issued by the respective banks. Even a cursory look at these Bank Statements goes to eveal that there was no introduction of cash deposit in any of such bank accounts. 11. The submission of the A 0 vide the last para of his report is of general nature for the sake of defence. 12. In view of the above, it may kindly be appreciated that the appellant was prevented by sufficient cause from producing the evidence before the AO which is relevant to the grounds raised in appeal and the appellant is entitled to its right to defend its case within the parameters of provisions of Rule 46A. This should be found in accordance with the Rule of Natural Justice. Your honour is, therefore, earnestly requested to kindly consider the evidence produced by the appellant on merits and decide the same sympathetically in the interest of justice. 13. The appellant therefore crave liberty to submit a consolidated chart in respect of all the nineteen parties reflecting the names of such parties and the details of evidences submitted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein, Hon'ble Delhi High Court has held as under.- "Held-dismissing the appeal, (i) that before admitting the additional evidence the Commissioner (Appeals) had obtained a remand report from the assessing officer. The additional evidence was crucial to the disposal of the appeal and had a direct bearing on the quantum of the claim made by the assessee. Rule 46A of the Income-tax Rules, 1962, permits the Commissioner (Appeals) to admit additional evidence if he finds that the same is crucial for disposal of the appeal. " 4.1 In view of the above discussion, in my considered opinion, case is fit to admit additional evidence under Rule 46A(1)(c) treating that appellant was prevented by a sufficient cause during the course of the assessment proceedings. 5. After admitting the additional evidences, ground-wise issues are decided hereunder.- Determination: 6. Grounds No.1, 2 and 3 are taken together as these are interlinked. In this regard during the course of appellate proceedings ld. AR of the appellant has filed a letter dated 20-8-2012, wherein, in the relevant paragraph various credit balances in the bank have been explained by submitting a chart as under: S. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al submissions made during the course of assessment proceedings and addition of Rs.l6.95 crores has been made without cross verification of the facts and without doing any independent inquiry and not serving any show cause notice before making huge addition which is in utter disregard to the settled principles of law and in violation of principles of natural justice. It has been further submitted that appellant has received fund from entities which have their identity and creditworthiness and details with regard to payments, like cheque number, date, ledger account with explanation for credit entries, bank statement, PAN No, I.T.R., copy of balance sheet, all details were produced so as to prove identity, genuineness and creditworthiness. It has also been submitted that all the companies who have invested are Public Limited Companies. In this regard appellant has relied on various case laws as under.- 1. ACIT v. Venkateshwar Ispat (P) Ltd [2009] 319 ITR 393 (Chhattisgarh) 2. CITv. Samir Bio-Tech (P) Ltd. [20I0] 325 ITR 294 (Delhi) 3. AGM Protection Devices Ltdv. Dy. CIT [2010] 191 Taxman 4. CITv. Fibers Ltd [20I0] 187 Taxman 53 (Delhi) 5. CITv. Winstral Petrochemicals (P) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relies on the judgment of jurisdictional High Court of New Delhi as affirmed by the Honorable Supreme Court of India being binding on the subordinate authorities. The facts of appellant's case are on much better and sound footing then that of the relied case. The same is discussed hereunder:- The appellant has inter-alia amongst others submitted the following documentary evidences as supplied by the subscribers to the appellant company for subscribing to the share capital as satisfactory explanation to prove the share application money subscribed by the respective shareholders in its public issue as the appellant is a listed public limited company: 1. Permanent Account No. 2. Acknowledgement of income tax return being proof as existing assesses 3. Balance sheet and Annual account. 4. Confirmation in the form of copy of ledger account and contra account. 5. Share application forms. 6. Bank statements. 6.3 I have gone through the submission and has found that respective shareholders have given full details and appellant is a listed Public Limited Company and PAN No., acknowledgement of ITR, balance sheet, annual account, confirmation and contra account and share a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the statutory notices at assessment stage. Notice under section 133(6) were issued which were partly complied by the assessee. Copy of the same is filed at pages 74 and 75 of the paper book. The sale and purchase are made with the two parties only. The Ld. CIT(A) admitted the additional evidence without any reasons. The creditworthiness of all the creditors/investors are doubtful. The A.O. made the addition under section 68 of the I.T. Act because its conditions are not satisfied. In case, A.O. has not made further enquiry of the documents furnished by the assessee, the Ld. CIT(A) could have made inquiry at appellate stage having co-terminus powers to that of the A.O. In support of this contention, he has relied upon the decision of the Hon'ble jurisdictional Delhi High Court in the case of Jen Sampark Advertising & Marketing Ltd., 375 ITR 373. Bank statement of the investors are on the same pattern and only one investor transferred the funds in the investor companies which is source of payment of share application money. Therefore, the findings of the Ld. CIT(A) may be reversed. He has relied upon decision of the Hon'ble jurisdictional Delhi High Court in the case of Nova Promo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice of the authorities below. All the details were furnished before the authorities below. However, A.O. has not made any investigation on the same. Learned Counsel for the Assessee submitted that assessment record was summoned in this case which have not been produced by the Department to verify the facts on the record. He has relied upon the following the decisions. 9.1. Judgment of the Hon'ble jurisdictional Delhi High Court in the case of CIT vs. Value Capital Services (P) Ltd., (2008) 307 ITR 334 (Del.) in which it was held as under : "CIT(A) having accepted the existence of the share applicants and the Revenue having not shown that the applicants did not have the means to make the investment and that such investment actually emanated from the coffers of the assessee company, addition was rightly deleted by the Tribunal; no substantial question of law arises." 9.2. Judgment of the Hon'ble Punjab & Haryana High Court in the case of CIT vs. G.P. International Ltd., (2010) 325 ITR 25 (P & H) in which it was held as under : "AO having not doubted the identity of the persons from whom the assessee company has shown receipt of share application money, impugned transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application money brought on record various documents such as names and addresses of share applicants, etc., no addition could be made in respect of same under section 68." And submitted that in the case of CIT vs. Gangeshwari Metal (P.) Ltd., the Hon'ble jurisdictional Delhi High Court considered its decision in the case of Nova Promoters Finlease Pvt. Ltd., (supra), relied upon by the Ld. D.R. He has, therefore, submitted that order of the Ld. CIT(A) may be confirmed and appeal of the Revenue may be dismissed. 10. We have considered the rival submissions, It may be noted here that before the appeal was finally heard, the Ld. D.R. was directed to produce the assessment record for perusal of the Bench. Even last opportunity was given to the Ld. D.R. to produce the assessment record. However, assessment record has not been produced for the inspection of the Bench. The assessee in this case has categorically submitted before Ld. CIT(A) that various replies were filed before A.O. at assessment stage along with the documents, on which, no inquiry have been conducted by the A.O. and no further query have been raised from the assessee. The Ld. CIT(A), after verification of the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejected that additional evidences should not be admitted by the Ld. CIT(A). In this case, it is an admitted fact that assessee produced the documentary evidences before the authorities below to prove the identity of the investors, their creditworthiness and genuineness of the transaction in the matter. The shares of the assessee are listed with the Bombay Stock Exchange and permission of the SEBI for allotment of the additional shares have been obtained in this case. Copies of the approval are filed in the paper book. Further, the bank statements of the investors shows they are having sufficient funds with them to make investment in the assessee company and all the transactions are recorded in their books of account and the audited accounts and balance sheet. The A.O. instead of making inquiry on the documentary evidence at assessment stage as well as at appellate stage by the Ld. CIT(A), merely rejected the claim of assessee, without any just reasons. The A.O. did not make any independent inquiry on the documents furnished by the assessee and no further inquiry have been conducted under section 133(6) of the I.T. Act. No cash was found to have been deposited in the bank account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Steel and Alloys Ltd., & Ors. 361 ITR 220 (Del.) in which it was held as under : "Once adequate evidence/material is given, 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 before it could nail the assessee and fasten the assessee with such a liability under s.68; AO failed to carry his suspicion to logical conclusion by further investigation and therefore addition under s.68 was not sustainable." 10.2. Decision of Hon'ble jurisdictional High Court in the case of CIT vs. Vrindavan Farms Pvt. Ltd., etc. ITA.No.71 of 2015 dated 12th August, 2015 (Del.), in which it was held as under : "The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their return of income. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the documents submitted by the assessee, the departmental appeal was dismissed by the Hon'ble High Court. 10.3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the non- resident Indian company was a bogus or non-existent company or that the amount subscribed by the company by way of share subscription was in fact the money of the assessee. The assessee had established the identity of the investor who had provided the share subscription and that the transaction was genuine. Though the assessee's contention was that the creditworthiness of the creditor was also established, in this case, the establishment of the identity of the investor alone was to be seen. Thus, the addition was rightly deleted. CIT v. Lovely Exports P. Ltd. [2009] 319ITR (St.) 5 (SC) applied." 10.7. Decision of Hon'ble jurisdictional High Court in the case of CIT vs. (i) Dwarakadhish Investment P. Ltd., (ITA.No. 911 of 2010) and (ii) Dwarkadhish Capital P. Ltd., (ITA.No.913 of 2010) (2011) 330 ITR 298 (Del.) (HC), in which it was held as under : "In any matter, the onus of proof is not a static one. Though in section 68 of the Income Tax Act, 1961, the initial burden of proof lies on the assesses yet once he proves the identity of the creditors/share applicants by either furnishing their PAN number or income-tax assessment number and shows the genuineness of tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sferred to the assessee by way of account payee cheques, they could not be said to be non-existent, even if they, after submitting the share applications had changed their addresses or had stopped functioning. Therefore, the Commissioner (Appeals) and the Tribunal were justified in holding that the genuineness of the transactions had been duly established by the assessee." 10.9. The Hon'ble jurisdictional Delhi High Court in the case of CIT vs. Gangeshwari Metal (P.) Ltd., (supra), considering its decision in the case of Nova Promoters Finlease Pvt. Ltd., (supra), relied upon by the Ld. D.R. has decided the issue in favour of the assessee. 11. Considering the facts of the case in the light of material on record, it is clear that assessee produced sufficient documentary evidences before A.O. at the assessment as well as appellate proceedings to prove the ingredients of Section 68 of the I.T. Act. The A.O. however, did not make any further inquiry on the documents filed by the assessee. Thus, the A.O. failed to conduct scrutiny of the documents at assessment stage and merely suspected the transaction between investor companies and the assessee on irrelevant reasons which were dispr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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