TMI Blog2018 (12) TMI 808X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not be said to be tangible material per se and, thus, reassessment on said basis was not justified. - Decided in favour of assessee. - ITA No.1391/Del/2018 - - - Dated:- 27-6-2018 - Shri R. K. Panda, Accountant Member And Ms. Suchitra Kamble, Judicial Member For the Assessee : Shri Hiren Mehta And Shri Sanjeev Kwatra, CA For the Department : Shri Atiq Ahmad, Sr.DR ORDER PER R. K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 25.01.2018 of the CIT(A)- 29, New Delhi relating to assessment year 2011-12. 2. Facts of the case, in brief, are that the assessee is a private limited company engaged in the business of trading of diamond jewellery. It filed its return of income on 28.09.2011 declaring Nil income. Subsequently, on the basis of information received from the Investigation Wind of the Income Tax Department that the assessee has received share application money/share premium amounting to ₹ 6,00,00,000/- from different entry providing companies in financial year 2010-11, the Assessing Officer reopened the assessment by issue of notice u/s 148 of the I.T. Act after recording the following reasons :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 139(1) on 28.09.2011 may be treated as return filed in response to the notice u/s 148 of the I.T. Act. 4. During the course of assessment proceedings, the Assessing Officer observed that the following 15 companies have invested in the share capital/share premium of M/s Bhavya Gold Pvt. Ltd. i.e. the assessee company :- S.No. Name of Indiv./Comp. (Sh./Smt./M/s) Share capital and premium 1 M/s Roopali Marketing Limited 1000000 2 M/s Lombard Realty Pvt. Ltd. 2500000 3 M/s Penant Commotrade Pvt. Ltd. 2500000 4 M/s Raga Tradecon Pvt. Ltd. 5000000 5 M/s Ashok Investors Trust Ltd. 2500000 6 M/s Albino Investment Consultants Pvt. Ltd. 2500000 7 M/s Welkin Investment Consultants Pvt. Ltd. 2500000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in annexure- F (Utilization Chart) at Sl. No.18. In view of the above, it was submitted that no separate addition is warranted on account of alleged unexplained share capital since the amount of ₹ 6,00,00,000/- has already been included in the settlement application of the SRM Group companies. 7. However, the Assessing Officer was not satisfied with the explanation given by the assessee. He perused the bank statement obtained from Tamilnad Mercantile Bank Ltd. Karol Bagh Branch and noted that the pattern of debt and credit entries clearly depict that these are accommodation entries. Rejecting the explanation given by the assessee, the Assessing Officer made addition of ₹ 6,00,00,000/- u/s 68 of the I.T. Act. 8. Before the ld. CIT(A), the assessee apart from challenging the quantum addition also challenged the validity of reopening of the case u/s 147 of the I.T. Act. However, ld. CIT(A) was not satisfied with the explanation given by the assessee and dismissed the appeal on both the issues. So far as validity of reassessment proceedings is concerned, he decided the issue against the assessee by observing as under :- 5.2 I have considered the facts and circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Ankit Financial Services Ltd. vs. DCIT has held :- .......... Where material recovered in search of another person indicated that assessee had received bogus share applications through accommodation entries, since assessee was beneficiary, initiation of reopening was justified. (vii) Hon'ble Gujarat High Court in the case of Aaspas Multimedia Ltd. vs. DCIT has held:- ..... where reassessment was made on basis of information received from Pr. DIT (Investigation) that assessee was beneficiary of accommodation entries by way of share application provided by third party, same was justified. 5.3 In view of above discussion and the case laws, I find that there was no infirmity in the AO's order. The appellant was asked to prove the genuineness of the share applicant/share application money by filing the relevant documents/details but they failed to do so. Therefore, the case was not reopened in mechanical manner but the same was reopened after proper application of mind. So far as the other case laws relied upon by the appellant are concerned neither the present case was reopened based on mere information received from the investigation wing, nor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) is not sustainable as proper and reasonable opportunity was not provided to the assessee during the course of assessment proceedings. 7. That on the facts and circumstances of the case and in law the CIT(A) was not justified in upholding the action of AO that he has not confronted the bank statements received from respective branch manager during the course of assessment proceedings for rebuttal nor the contents of such inquiries were made available to the assessee for clarification. 8. That on the facts and circumstances of the case and in law the CIT(A) was not justified in upholding the action of AO in treating the debit and credit entries of the bank account of the appellant as accommodation entries. 9. That the appellant craves leave to add, alter, modify any of the grounds at the time of hearing or before the hearing. 10. Although a number of grounds have been raised, the ld. counsel for the assessee confined his argument only to ground no.2 and 3 in which the assessee has challenged the validity of reassessment proceedings. Referring to the reasons recorded by the Assessing Officer, copy of which is placed at page 11 of the Paper Book, he submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for formation of belief is completely missing in the reasons :- (a) Names of the investing companies, (b) Amount invested by each company, (c) Accommodation entry provider s bank details, (d) Alleged instrument number, date, amount by which accommodation entry was received, (e) Name of the bank and branch and account number from which the alleged entry originated. 12. In absence of the above, the reasons being not specific but vague and general and would not lead to arriving at a satisfaction regarding escapement of income. 13. He submitted that there is a complete non-application of mind and independent enquiry by the Assessing Officer. He has merely reproduced the observation of the Investigation Wing regarding alleged weak financials of the investing companies and the peculiar characteristics of the bank account of entry provider companies. He submitted that after the information received from Investigation Wing, the Assessing Officer has straightway derived conclusion regarding the escapement of income. There is no live link between the formation of the Assessing Officer s belief and tangible material. 14. Referring to the decision of the Hon ble Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cisions, which were relied on by the ld. CIT(A) while deciding the issue. 19. We have considered the rival arguments made by both the sides, perused the material available on record and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer on the basis of information received from the Investigation Wing of the Income Tax Department, New Delhi that M/s PLB Infrastructure Pvt. Ltd. has received share application money/share premium amounting to ₹ 6,00,00,000/- from different entry providing companies in financial year 2010-11 had reopened the assessment by issue of notice u/s 148 of the I.T. Act, the reasons for which are already reproduced in the preceding paragraph. We find the ld. CIT(A) upheld the action of the Assessing Officer in reopening of the assessment, the reasons of which are also reproduced in the preceding paragraph. It is the submission of the ld. counsel for the assessee that the assumption of jurisdiction by the Assessing Officer u/s 147 of the I.T. Act is void ab-initio since there is (a) non-application of mind by the Assessing Officer in recording reasons, (b) Lack of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. Mayur Vanijya Pvt. Ltd. Mrityunjay Pal Saheb Ghosal 11. Monalisa Commercial Pvt. Ltd. Saheb Ghoshal Ajay Sharma 12. Navrekha Commotrade Pvt. Ltd. Saheb Ghoshal Ajay Sharma 13. Octal Commodities Pvt. Ltd. Palat Mandal Saheb Ghoshal 14. Mukul Mills Pvt. Ltd. Mrityunjay Pal Saheb Ghoshal 15. Gajeshwar Sales Pvt. Ltd. Palat Mandal Ajay Sharma 16. Exotica Commodity Pvt. Ltd. Mrityunjay Pal Saheb Ghoshal 17. Bhavtarani Sales Pvt. Ltd. Saheb Ghoshal Ajay Sharma 18. Eversite Commodity Pvt. Ltd. Saheb Ghoshal Ajay Sharma 19. Fastino Agencies Pvt. Ltd. Palat Mandal Saheb Ghoshal 20. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payer, the payee, their respective banks, and the cheque number. This information by itself cannot be said to be tangible material. 20. Coming to the second part, this tells us what the AO did with the information so received. He says: The information so received has been gone through. One would have expected him to point out what he found when he went through the information. In other words, what in such information led him to form the belief that income escaped assessment. But this is absent. He straightaway records the conclusion that the abovesaid instruments are in the nature of accommodation entry which the Assessee had taken after paying unaccounted cash to the accommodation entry given (sic giver) . The AO adds that the said accommodation was a known entry operator the source being the report of the Investigation Wing . 21. The third and last part contains the conclusion drawn by the AO that in view of these facts, the alleged transaction is not the bonafide one. Therefore, I have reason to be believe that an income of ₹ 5,00,000 has escaped assessment in the AY 2004- 05 due to the failure on the part of the Assessee to disclose fully and truly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investigation report. Indeed it is a 'borrowed satisfaction'. The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment. 37. For the aforementioned reasons, the Court is satisfied that in the facts and circumstances of the case, no error has been committed by the ITAT in the impugned order in concluding that the initiation of the proceedings under Section 147/148 of the Act to reopen the assessments for the AYs in question does not satisfy the requirement of law. 23. The Hon ble Delhi High Court in the case of RMG Polyvinyl (I) Ltd. (supra) following the above decision has held that where information was received from Investigation Wind that assessee was beneficiary of accommodation entries but not further enquiry was undertaken by the Assessing Officer, said information could not be said to be tangible material per se and, thus, reassessment on said basis was not justified. 24. Since in the instant case none of the companies from whom the assessee company has received share capital/share premium are mentioned in the statement of Shri Rajesh Kumar Aggarwal, therefore, it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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