TMI Blog2018 (12) TMI 1457X X X X Extracts X X X X X X X X Extracts X X X X ..... held to be invalid in eyes of law and therefore we quash the orders passed by AO and CIT(A) and allow additional ground raised by assessee. We find that assessee has filed all evidences like share application form, board resolution confirming investment made, confirmation of share capital raised, Share certificate, income tax particulars of share holders, bank statement of share holders and form 2 for allotment of shares along with their audited final a/c in support of share capital recd. to establish its case - So we have no hesitation in accepting Ld AR’s argument that for mere reason of non production of directors in person of share holder companies same cannot be a justified ground to draw adverse inference u/s 68 of the Act. - Decided in favour of assessee. - I.T.A. No. 2332/Del/2018 - - - Dated:- 20-12-2018 - SHRI H. S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER For The Assessee : SH. KAPIL GOEL, ADVOCATE For The Revenue : SH. SRIDHAR DORA, SR. DR. ORDER PER H.S. SIDHU, JM This appeal is filed by assessee against the Order dated 08.3.2018 passed by the Ld. CIT(A), New Delhi relating to Assessment Year 2009-10 on the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anct without examination with reference to the seized material and the facts of the assessee's case. 11. That the Id CIT(A) has erred in importing approval of the higher authorities u/s 151 on assumptions without existence of the actual correspondence regarding approval and without confronting the assessee with the same.. 12. The appellant craves leave and sanction of the Hon'ble ITAT to file additional evidence, if so required for proper prosecution of the case, based on facts and circumstances, which has not been or could not be adduced or filed before lower authorities either because proper and sufficient opportunity was not provided or because it was not solicited or its need was not appreciated. 13. The appellant craves leave to and permission of the Hon'ble ITAT to add to or alter any of the grounds of appeal at any time up to the final decision of the appeal. 14. The assessment may please be set aside as null and void and addition of ₹ 1,85,00,000/- be deleted or such other relief as your Honors may deem fit under the circumstances of the case, be allowed. 2. The assessee has also filed the following additional ground under Rule 11 of the ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or is argued to be no valid reason for making addition u/s 68 of the Act dehors voluminous evidences filed which has not been objectively and lawfully controverted in manner known to law, in view of following coordinate benches decisions, where similar argument in identical circumstances of additions based on S.K.Jain group search has been deleted u/s 68 of the Act. Kautilya Monetary Services Pvt ltd ITA 5975/Del/2014 D bench (30/11/2018) ITAT Delhi Moti Adhesives P Ltd ITA: 3133/Del/2018 SMC 25/06/2018 ITAT Delhi Heat Flex Cables P Ltd ITA: 2376/Del/2018 SMC 1/8/2018 ITAT Delhi Alok Fintrade P Ltd ITA: 180/JP/2015 ITAT JAIPUR BENCH Signature Buildwell Pvt Ltd ITAT Delhi D Bench ITA: 4249/Del/2015 12/12/2018 SRM Securities Pvt Ltd ITAT G bench ITA 7825/Del/2017 11/12/2018 6. On the contrary, Ld. Sr. DR vehemently opposed the request of Ld. counsel for the assessee and prayed for dismissal of additional ground application. However, on the merit of the case, he argued that without production of director of share holder companies, addition u/s 68 may please be confirmed and accordingly, he relied upon the orders of the authorities below. 7. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been adverted to by the AO is patent from objection disposal order dated 17/05/2016 and further notices dated 09/08/2016 u/s 142(1) and show cause notice dated 13/10/2016. In none of these notices as placed in paper book, we could find the back material being confronted to assessee as specifically requested by assessee. We note here that the Tribunal in various decisions specially one which is referred by Ld counsel for the assessee extensively in case of Moti Adhesives (ITA 3133/Del/2018) in order dated 25/06/2018 copy placed before us, has been consistently holding while taking support from Hon ble Apex court leading decision in Andaman Timber Industries case (Civil Appeal No. 4228 OF 2006) reported at 127 DTR 241 that violation of principle of natural justice (here withholding of back material referred in reasons which is specifically requested for repeatedly) is a serious flaw and results in nullity of the order so passed, which is squarely applicable to present case. Be that as it may, even on merits, for the companies from where assessee recd. share capital assessee placed before Ld AO in its reply dated 07/06/2016 all evidences like share application form, board resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I.T.A .No. 901/DEL/2016 (A.Y .2006-07) order dated 14/05/2018 ii) Hon ble Delhi ITAT in Harsh Bhatia case ITA Nos. 1262/ 1263/DEL/2017 [A.Ys. 2008-09 2009-10] Order dated 17.10.2017 iii) Hon ble Delhi High Court in the case of Director of Income Tax Vs. Society for Worldwide Inter Bank Financial, Telecommunications in ITA No. 441/2010, reported at 323 ITR 249 iv) Section 292BB Section 143(2) are both dealt succinctly in Delhi High Court decision in case of Silver Line reported at 383 ITR 455 wherein it has been held as under:- 12. The Court first proposes to consider the question as to whether in terms of the proviso to Section 292BB of the Act, the Assessee was precluded, at the stage of the proceedings before the ITAT, from raising a contention regarding failure of the AO to issue a notice under Section 143(2) of the Act. The legal position appears to be fairly well settled that Section 292BB of the Act talks of the drawing of a presumption of service of notice on an Assessee and is basically a rule of evidence. In Commissioner of Income Tax v. Parikalpana Estate Development (P.) Ltd. (supra) in answering a similar question, the Court referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted in order itself, which is sine qua non u/s 143(2) of the Act which uses the phrase if considers it necessary or expedient , and on expression considers it necessary we draw our kind attention to Hon ble Apex Court decision in case of Bhikubhai Patel vs State of Gujarat (4 SCC 144) relevant extract of which is reproduced below for sake of ready reference (which directly fits in extant facts to support proposition put forth): 24. Proviso opens with the words where the State Government is of opinion that substantial modifications in the draft development plan and regulations are necessary ..These words are indicative of the satisfaction being subjective one but there must exist circumstances stated in the proviso which are conditions precedent for the formation of the opinion. Opinion to be formed by the State Government cannot be on imaginary grounds, wishful thinking, however, laudable that may be. Such a course is impermissible in law. The formation of the opinion, though subjective, must be based on the material disclosing that a necessity had arisen to make substantial modifications in the draft development plan. 25. The formation of the opinion by the Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion: Learned Counsel for the Assessee submitted that assessee filed reply to the notice under section 148 of the I.T. Act on dated 26.11.2013 which is noted in the assessment order, copy of which, is filed at page-11 of the paper book, in which, assessee explained that the return already filed under section 139(1) may be treated as return filed in response to notice under section 148 of the I.T. Act. He has submitted that on the same day A.O. issued notice under section 143(2) i.e., on 26.11.2013, copy of which, is filed at page-12 of the paper book. He has, therefore, submitted that the A.O. has not validly assumed jurisdiction under section 147 and 143(3) of the I.T. Act to pass the assessment order against the assessee. He has submitted that the issue is covered in favour of the assessee by the judgment of the Hon ble Delhi High Court in the case of Director of Income Tax vs. Society for Worldwide Interbank Financial Telecommunications (2010) 323 ITR 249 (Del.) in which it was held as under : Both the CIT(A) and the Tribunal have returned a concurrent and clear finding of fact that the notice under s. 143(2) was issued on 23rd March, 2000 and since the return was filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee are allowed. 7. On the other hand, Ld. D.R. submitted that assessee did not file return under section 148 within the specified period. Therefore, this ground of appeal of assessee may be dismissed. 8. After considering the rival submissions, I am of the view that the issue is covered in favour of the assessee by the Judgment of Hon ble Delhi High Court in the case of Director of Income Tax vs. Society for Worldwide Interbank Financial Telecommunications (supra) and Order of ITAT, Delhi Bench in the case of Shri Harsh Bhatia, New Delhi vs. ITO, Ward-50(3), New Delhi (supra). It is an admitted fact that assessee filed reply in response to the notice under section 148 of the I.T. Act on 26.11.2013 and submitted before A.O. that original return filed before him may be treated as return filed in response to the notice under section 148 of the I.T. Act. The A.O. on the same day served notice under section 143(2) upon assessee-company whose signature tally on the said notice. Therefore, notice issued under section 143(2) is invalid and resultantly, the assessment is vitiated and is liable to be quashed. I, accordingly, set aside the orders of the authorities below and quash th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmons have been duly served on them. Mere non production of share holder companies director is argued to be no valid reason for making addition u/s 68 of the Act dehors voluminous evidences filed which has not been objectively and lawfully controverted in manner known to law. For this Ld counsel for the assessee placed before us during the course of hearing a comprehensive chart of case laws from coordinate benches of ITAT where similar argument in identical circumstances of additions based on S.K.Jain group search has been deleted u/s 68 of the Act. Our view is fortified by the following decisions:- Kautilya Monetary Services Pvt ltd ITA 5975/Del/2014 D bench (30/11/2018) ITAT Delhi (held in crux that ..The Assessing Officer, after going through the evidences furnished by the assessee sat with folded hands and did not make any effort and not made any independent enquiry and made the addition only by relying on the report of the Investigation Wing ) Moti Adhesives P Ltd ITA: 3133/Del/2018 SMC 25/06/2018 ITAT Delhi (authored by one of us Hon ble JM) (held in crux that Whether once assessee places before Ld AO all the relevant and best documents in its possession to est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication or enquiry into the material placed before him by the assessee. If the Assessing Officer harbours any doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the Company. 22. Further, being the reassessment proceedings, where the AO is ceased of certain information and documents, it is incumbent upon him to confront the same to the assessee and allow the latter to file its objections and rebuttal. The additions made, merely relying on these information and documentation, without confronting the assessee cannot be accepted. Besides furnishing the reasons for reopening the assessment to the assessee company, there is nothing on record that such information/documentation was confronted to the assessee. Further, the AO has relied upon the statement of third parties namely, shri S.K. Jain, shri V.K. Jain, shri Assem Kumar Gupta and shri Rajesh Agarwal, the assessee again deserves an opportunity to cross examine such persons as held by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase as stated in reply to Ld AO dated 07/06/2016 (paper book pages 47 to 50). We further find that no where any shareholder company was found to be fictitious or non existing rather all share holder companies are duly found to be existing as summons have been served on them. (Refer Hon ble Supreme court in Orissa Corporation case 159 ITR 78). We further find that no cogent material is brought on records in assessment order by Ld AO to demolish the copious evidences furnished by assessee. We furtehr find that Ld AO has no where confronted any back material to assessee as stated in facts above. We find that Ld AO nowhere made any independent enquiry from concerned and competent AO of share holder companies etc. We find that only on basis of investigation wing report (unconfronted to assessee) acting purely on borrowed satisfaction without any independent application of mind addition has been made u/s 68 by Ld AO. We find that no where in entire assessment order Ld AO framed his own independent objective and rational opinion on basis of material placed on record within the meaning of provision of section 68 of the Act. Further Ld CIT-A has also simply and easily endorsed finding of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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