9911796707
TMI Blog2019 (3) TMI 327X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances of the case and in law, the Ld. CIT(A) erred in holding that re-assessment made under section 147 is invalid and bad in law accordingly quashing the same on the ground that if the issue is not discussed in the assessment order would not lead to a conclusion that no opinion was formed as to subject of the query, without appreciating the fact that assessment was reopened as per the provisions of section 147 of the Income Tax Act." 2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the appeal of the assessee holding that notice issued u/s 148 is bad in law and not on correct facts, by relying on the order of Bombay High Court dated 20.03.2017 in CIT Vs. Gangadeep Infrastructure Pvt. Ltd in ITA No. 1613 of 2014, which is not applicable to re-opening of the case." 3. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that re-assessment made under section 147 is invalid and bad in law without considering the fact that the A.O. passed a speaking order dated 20.03.2015, wherein he dealt with all the objections of the assessee against re-opening of the assessment." 4. "On the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 61 Act. The assessee raised objections to the re-opening of the assessment vide letter dated 11.09.2014 which were rejected by the AO vide letter No. Ref.Mum/ITO-6(3)(4)/2014-15 dated 20.03.2015. It was observed by the AO that the assessee has not done any substantial business operations during the impugned year under consideration and financial details of the assessee for Financial Year(FY) 2008-09 , 2009-10 and 2010-11 are as under:- The AO observed that the sum so introduced in the books of accounts of the assessee was utilised for the following purposes: i) Investment in Fixed Assets -Rs. - ii) Investment in Shares of other Companies -Rs.1,21,00,000/- iii) Given as Loans & Advances to others - Rs. 71,20,625/- iv)As Cash/bank balance -Rs. 2,65,907 v) In stock/WIP/Sundry Debtors -Rs.- The AO had also observed that assessee has shown meagre income of Rs. 15,712/- in its first year of operation ending on 31.03.2009, after its incorporation on 14.01.2009. The AO observed that the paid up share capital of the assessee was Rs. 20,39,300/- wherein 2,03,930 Equity Shares of Rs. 10/- each were issued at par/premium of Rs. 90 per share. It was observed by the AO that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by the assessee were disposed off/rejected by the AO , vide order dated 20.03.2015 which is reproduced here under:- The assessee having issued equity shares at a very high premium of Rs. 90/- per shares as against face value of Rs. 10/- per equity share, the re-opening was done to verify such a high share premium received by the assessee, which as per the AO encompasses enquiry as to the following aspects : A) In the case of the assessee company- (i) Back ground information of the assessee company, its real stake holders(shareholders) and management and control(Board of Directors) (ii) Scale of its business operations vis-a-vis its nature of business and financial outlay, number of years in existence. (iii) Intrinsic value of the shares vis a vis the performance of the company as evident from its past track record in terms of turnover and profitability ,dividend history , bonus issues and Earning Per Share(EPS). (iv) Outlook for the future-in terms of scope of business expansion and need for finance. (v) Basis of determining the value of the shares and premium thereon-availability of shares valuation report, its credibility vis a vis the parameters on which it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entries routed through paper concerns being used by entry providers. The AO then went on to explain the modus operandi adopted by these accommodation entry providers to route unexplained money into web of companies. The AO relied upon decision of ITAT, Kolkatta in the case of Bisakha Sales Private Limited v. CIT in ITA no. 1493/Kol/2013 and other decisions wherein additions have been sustained on account of these accommodation entries. The AO then went on to hold that the amount received by the assessee towards share capital is an unexplained cash credit which the assessee failed to substantiate through documentary evidences . The AO observed that the onus was on the assessee and the assessee failed to discharge its onus as to justifying issue of shares at a very huge share premium which was also above its fair value which led to the additions to the tune of Rs. 1,93,93,000/- to the income of the assessee by holding said share capital and share premium to be unexplained and unsubstantiated as to the genuineness and nature thereof which was brought to tax by the AO u/s 68 of the 1961 Act, vide assessment order dated 27.03.2015 passed u/s 143(3) read with Section 147 of the 1961 Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the following reasons: a) From the reasons recorded it would kindly be seen that you have issued the notice u/s. 148 on the scant fact of the issue of equity shares by us at a premium. This fact in itself cannot give reasons to believe to any judicious person that there is any escapement of income chargeable to tax from assessment. Hence, the notice issued by you is without any reason and therefore bad in law. b) From the reasons recorded it would kindly be seen that you yourself are not certain that there is escapement of income chargeable to-tax from assessment. You have issued the notice, in your own words "for verification of high rate of share premium and cash received". Thus, you have issued the notice for the purpose of' verification' or 'examination of facts' without having any reasons to assessment. Hence the notice is bad in law. c) From the reasons recorded it would kindly be seen that you have issued the notice u/s. 148 at the behest of the Chief Commissioner of Income-tax, Mumbai and not on your own. Hence, this notice is bad in law. d) From the reasons recorded it would kindly be seen that in the reasons recorded you have, interalia mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipt of information above hawala operators" . Thus, it is seen that the notice issued u/s 148 is bad in law. 9. During the course of appellate hearing, additional evidence was submitted and remand report was called for vide letter dated 13.2.2017 and the same was submitted which is reproduced as under: "To, The CIT(A)-12, Mumbai (Through the Jt. CIT, Rg.6(3), Mumbai) Sir/Madam, Sub: Remand Report in the case of M/s. Knowell Enterprises P. Ltd A.Y. 2009-10 - PAN AADCB6702E - reg Ref: Letter no. CIT(A)-12/Remand Report/16-17 dtd 24.11.2016 & 23.1.17 Kindly refer to the above letter on the above subject. A copy of the Paper Book containing various documents filed by the assessee before your honour in connection with the aforesaid appeal was forwarded to this office with a direction to submit a remand report after examination of the same. 2. At the outset, before going into the merits of the issue involved, it is humbly submitted that the assessee was given sufficient opportunities during the course of assessment proceedings. Before offering specific comments on the additional evidences submitted by the assessee, I would like to mention that the assessee's case is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal; or d) where the A.O. has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal". 4. It is observed that the assessee filed additional ground of appeal and no additional evidences for the appeal has been filed by assessee in this regard. In view of the above, it is respectfully submitted that the assessee's case does not fall in any criteria under Rule 46A(1) as discussed above and accordingly, the additional evidence needs to be rejected and action of the A.O. be sustained." 10. I have carefully considered all the above mentioned facts and also the remand report. For the sake of natural justice, the additional evidence is accepted as per various Hon'ble Judicial decisions. However, on the basis of the discussion at Para 6, it is seen that the reopening of the assessment is invalid and bad in law. So the question of going into the merits of the additional evidences also does not arise nor there is any reason for the undersigned to adjudicate on the merits of the case. Reliance is placed on Hon'ble jurisdictional High Court order dated 20.3.2017 in the case of CIT Vs Gaga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(3) of the Act while return of the income was only processed u/s. 143(1) of the Act. It was submitted that the turnover of the assessee is very low for the year ended 31.03.2009 and it is a new company which was incorporated only on 14.01.2009 . It was submitted by learned DR that the financials and credentials of the assessee does not justify issuing of equity share of face value of Rs. 10 each at share premium of Rs. 90 per share. 6. The Ld. Counsel for the assessee on the other hand submitted that the reopening was done to verify high share premium charged by the assessee for issuance of equity shares by the assessee. It was submitted that equity shares of face value of Rs. 10/- each were issued at a share premium of Rs. 90 per share . It was submitted that directions were issued by Ld. CCIT to AO to examine a very high share premium charged by the assessee to issue its equity share which reasons for reopening of the concluded assessment are bad in law as there is no independent application of mind by the AO. It was submitted that no doubt that initially return of income was processed u/s. 143(1) and no scrutiny assessment was framed by the AO u/s. 143(3) but that does not lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2010) 321 ITR 526 (Del) decided on 08.08.2018, g) Hon‟ble Supreme Court decision in the case of Chhugamal Rajpal v. S.P. Chaliha & Others (1971) 79 ITR 603 (SC). h) Hon‟ble Bombay High Court decision in the case of CIT v. Green Infra Limited in ITA no. 1162 of 2014 , dated 16.01.2017 i) Hon‟ble Bombay High Court decision in the case of CIT v. Gagandeep Infrastructure Private Limited in ITA No. 1613 of 2014 , dated 20.03.2017. j) Hon‟ble Delhi High Court in the case of CIT v. SFIL Stock Broking Limited (2010) 325 ITR 285(Del.) It was submitted by learned counsel for the assessee that the AO must have reasons to believe that the income has escaped assessment before invoking provisions of Section 147 of the 1961 Act. It was submitted that reopening was done on the directions of learned CCIT and there was no independent application of mind on the part of the AO which is bad in law . The learned counsel for the assessee relied upon the decision of Hon‟ble Bombay High Court in the case of PCIT v. Shodiman Investment Private Limited(supra) and submitted that own satisfaction of the AO is required for reopening of the assessment and AO cannot reopen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. The directions were then given by the Bench to Ld. Counsel for the assessee to submit a note as to applicability of the decision of Hon‟ble Supreme Court in the case of ACIT v. Rajesh Jhaveri Stock Brokers Private Ltd ( 2007) 161 taxman 316(SC) which the assessee duly submitted , which is placed in file. 8. We have considered rival contentions and perused the material on record including the orders of the authorities below and cited case laws. We have observed that the assessee is a domestic company incorporated on 14.01.2009. The assessee business as is stated in its Memorandum of Association is to render consultancy services. Presently , we are concerned with assessment year 2009-10 and the previous year is from 14.01.2009 (date of incorporation) till 31.03.2009. This is the first year of assesses existence as it was incorporated on 14.01.2009 only. The assessee for the previous year ended 31.03.2009 relevant to AY 2009-10 filed its return of income on 31.08.2009 , showing total income at Rs. 15,712/- . The said return of income was processed by the AO u/s 143(1) of the 1961 Act . The Revenue did not undertook scrutiny assessment u/s 143(3) read with Section 143(2) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed towards Share capital (In Rs.) Share Premium (In Rs.) Total (In Rs.) (1) (2) (3) (4) (5) (6) (7)=(3)*(4) (8)=(3)*(6) (7)+(8) 1 Bharat Mishra HUF 6250 10 100 90 62500 562500 625000 2 Bharat Mishra 10 100 90 12000 1080000 1200000 3 Bindal Prasad Varma 10 100 90 26300 236700 263000 4 Kellog Communication P. Ltd. 10 100 90 840000 7560000 8400000 5 Nemichand T HUF 10 100 90 45500 409500 455000 6 Santosh Gulgulia 10 100 90 70000 630000 700000 7 Star Fincap P. Ltd 10 100 90 430000 2025000 2250000 8 Thank You Management Consultant P. Ltd., 10 100 90 430000 3870000 4300000 9 Subh Management Consultant P. Ltd., 10 100 90 100000 900000 1000000 Systematic Marketing Concepts P. Ltd., 10 100 90 20000 180000 200000 Total 1939300 17453700 19393000 On perusal of the reasons recorded for reopening of concluded assessment by invoking provisions of Section 147 of the 1961 Act would transpire that the reasons recorded were due to issue of equity shares at a very ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d private company having no established background or track record of business issues shares at whopping premium of Rs. 90/- per share as against face value of Rs. 10/- per share and huge amount of funds are raised from outsiders , it certainly is a justifiable reason for triggering an enquiry into the funds raised by a newly incorporated company and to see that illegitimate money of promoters are not circulated back into the assessee company through circuitous route which is not uncommon in India , more-so when no scrutiny assessment is framed by Revenue originally u/s 143(3) of the 1961 Act as the return of income was originally processed u/s 143(1) of the 1961 Act and re-opening is sought to be done within four years from the end of the assessment year. The first proviso to Section 147 of the 1961 Act is clearly not applicable in the instant case. The receipt of information by AO from learned CCIT on the basis of information from DGIT (Intelligence and Criminal Investigation) to verify a very high share premium and share capital aggregating to Rs. 1,93,93,000/- and that too by a newly incorporated company having no business track record nor having any asset base, is a credible i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gaged in providing accommodation entries and definitely needed further probe/verification by Revenue , more-so no scrutiny assessment was so far conducted by the Revenue as returns were originally processed u/s 143(1) and reopening was sought to be done within four years from the end of the assessment year. Reference is drawn to order of Hon‟ble Supreme Court in the case of Rajmandir Estates Private Limited v. Pr. CIT reported in (2017) 245 Taxman 127(SC) wherein Hon‟ble Supreme Court dismissed SLP filed by the assessee against judgment of Hon‟ble High Court of Calcutta in Rajmandir Estates Private Limited v. Pr. CIT reported in (2016) 386 ITR 162(Cal. HC) . In this case Revenue invoked provisions of Section 263 of the 1961 Act . Initially Revenue invoked provisions of Section 147/148 of the 1961 Act on the basis of letter from the tax-payer that a sum of Rs. 61,000/- on account of consultancy fees was not disclosed inadvertently as income in the return of income filed with the Revenue. While framing reassessment the AO in-fact called for details of share application money received by the tax-payer including the names of the applicants, their address , date of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the steps of money laundering are described as follows:- "STEPS OF MONEY-LAUNDERING Although money-laundering often involves a complex series of transactions, it generally includes the following three basic steps: 1. Placement It involves introduction of the proceeds of crime into the financial system. This is accomplished by breaking up large amounts of cash into smaller sums that are then deposited directly into a bank account, or by purchasing monetary instruments, transferring the cash overseas for deposit in banking/financial institutions, use for purchase of high value things such as gold, precious stones, art works etc. and reselling the same through cheques or bank transfers etc. 2. Layering This involves formation of complex layers of financial transactions which distance the illicit proceeds from their source and disguise the audit trail. In this process a series of conversions or transactions are involved for moving the funds to places such as offshore financial centres operating in a liberal regulatory regime. Often "front" companies are formed to accomplish this task. These companies obscure the real owners of the money through the bank secrecy laws and at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. 15 out of the 39 applicants procured the requisite fund by selling shares. The rest of the applicants of shares, in the share capital of the assessee company, did not disclose the nature of receipt at their end though the source of fund was identified. What has not been specified is, as to on what account was the money received. (c) The forms of share application purporting to have been signed by the applicant companies have also been disclosed from which it appears that the date of allotment, number of allotment, number of shares allotted, share ledger folio, allotment register folio, application number, have all been kept blank. These particulars, Mr. Poddar, submitted should have been filled up by the assessee, but that has not been done. (d) Another significant fact admitted by the assessee in reply to the notice to show cause under Section 263 is that the "shares were offered to, and subscribed by the closely held companies owned by the Promoters/Directors or their close relatives and friends". (e) From the bank statements disclosed it appears that to have the cheques issued in favour of the asseessee honoured, matching amounts were credited to the acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause they did not have any money of their own. Each one of them received from somebody and that somebody received from a third person. Therefore, prima facie, the share-holders are mere name lenders. 25. For the reasons discussed in the preceding paragraph, we are satisfied that the judgement in the case of Steller Investment (supra) has no manner of application to the facts and circumstances of this case. The question as to whether there has been a device adopted for money laundering also did not crop up for consideration in that case. The Prevention of Money Laundering Act, 2002 was not also there on the statute at that point of time. Before the appeal in Steller Investment Ltd. was dismissed by the Apex Court, the question had cropped up in the case of Sophia Finance Ltd. (supra) wherein a special bench held as follows:- "As we read section 68 it appears that whenever a sum is found credited in the books of account of the assessee then, irrespective of the colour or the nature of the sum received which is sought to be given by the assessee, the Income-tax Officer has the jurisdiction to enquire from the assessee the nature and source of the said amount. When an explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses led by Subhlakshmi Vanijya Pvt. Ltd. v. CIT (ITA No.1104/Kol/2014) dated 30.07.2015 for the A. Y. 2009-10. Both the sides have fairly admitted that facts and circumstances of the cases under consideration are mutatis mutandis similar to those decided earlier, except for certain issues which we will advert to a little later. In our aforesaid order in Subhalakshmi Vanijya Pvt. Ltd. v. CIT (ITA No. 1104/Kol/2014 A.Y. 2009-10), we have drawn the following conclusions:- ** ** ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urisdiction it could not be said to be prejudicial to the interests of revenue." This Court set aside the order of the learned Tribunal. In an appeal by the assessee before the Apex Court their Lordships upheld the order of this Court holding, inter alia as follows:- "The learned advocate for the assessee contends that under section 33B the Commissioner had no jurisdiction to cancel the assessment made by the Income-tax Officer inasmuch as it cannot be said that where an assessee has been assessed to tax it was prejudicial to the interests of revenue on the ground that no assessment could have been made in respect of the income of which she made a voluntary return. This contention in our view is unwarranted by the language of section 33B. The words of the section enable the Commissioner to call for and examine the record of any proceeding under the Act and to pass such orders as he deems necessary as the circumstances of the case justify when he considers that the order passed was erroneous in so far as it is prejudicial to the interests of the revenue. It is not, as submitted by the learned advocate, prejudicial to the interests of the revenue only if it is found that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the assessee is discussed as under:" The issues relevant according to the assessing officer were a receipt of a sum of Rs. 61,000/- on account of consultancy charges and the preliminary expenses written off amounting to a sum of Rs. 60,000/-. He, therefore, completed the assessment after making addition of a sum of Rs. 1,21,000/-. When is an order erroneous in so far as the same is prejudicial to the interest of the revenue was considered by this Court in the case of Maithan International (supra) to which one of us (Girish Chandra Gupta, J.) was a party wherein the following views were expressed:- 'It is not the law that the Assessing Officer occupying the position of an investigator and adjudicator can discharge his function by perfunctory or inadequate investigation. Such a course is bound to result in erroneous and prejudicial orders. Where the relevant enquiry was not undertaken, as in this case, the order is erroneous and prejudicial too and, therefore, revisable. Investigation should always be faithful and fruitful. Unless all fruitful areas of enquiry are pursued the enquiry cannot be said to have been faithfully conducted. In a different context the apex c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... questions which arise for determination in this case. The assessee with an authorised share capital of Rs. 1.36 crores raised nearly a sum of Rs. 32 crores on account of premium and chose not to go in for increase of authorised share capital merely to avoid payment of statutory fees is an important pointer necessitating investigation. Money allegedly received on account of share application can be roped in under Section 68 of the Income Tax Act if the source of the receipt is not satisfactorily established by the assessee. Reference in this regard may be made to the judgement in the case of Sumati Dayal (supra) wherein Their Lordships held that any sum "found credited in the books of the assessee for any previous year, the same may be charged to income tax....". We are unable to accept the submission that any further investigation is futile because the money was received on capital account. The Special Bench in the case of Sophia Finance Ltd. (supra) opined that "the use of the words "any sum found credited in the books" in Section 68 indicates that the said section is very widely worded and an Income-tax Officer is not precluded from making an enquiry as to the true nature and so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce u/s.142(1) but he thereafter did not apply his mind thereto. The judgement in the case of J. L. Morrison (India) Ltd. has no manner of application because in that case the question essentially was whether the receipt was of a capital or revenue nature. The facts and circumstances were not in dispute. Moreover the view taken by the assessing officer was not shown nor was held by the Court to be an erroneous view. Whereas in this case we have demonstrated in some detail as to why is the order of the assessing officer erroneous and prejudicial to the revenue. The judgement in the case of Malabar Industrial Co. Ltd. (supra) and Max India Ltd. do not apply to the facts of this case for reasons already discussed by us. From the judgement of the learned Tribunal in the case of Subholaxmi, placed before us in great detail by Mr. Poddar, we find that all important issues placed for consideration by no other than Mr. Poddar himself were duly considered by the learned Tribunal. 30. For reasons already discussed we answer the issue No. (a) and (c) in the affirmative and the issue No. (b) and (d) in the negative. In the result the appeal fails and is dismissed. It is clarified that the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res of other Companies -Rs.1,21,00,000/- iii) Given as Loans & Advances to others - Rs. 71,20,625/- iv)As Cash/bank balance -Rs. 2,65,907 v) In stock/WIP/Sundry Debtors -Rs.- As could be seen from above, the assessee has invested in shares of other companies to the tune of Rs. 1,21,00,000/- , which were invested in companies namely Frontline Synthetics Private Limited (Rs. 75.0 lacs , Number of Shares 37,500), Sangam Shares Private Limited Rs. 26.0 lacs - 20800 shares, Sonoras Chemicals Private Limited Rs. 15 lacs -30000 shares and Swastik Foundations Private Limited Rs. 5.0 lacs-20000 shares) . These companies in which the assessee invested are all closely held private companies. The assessee has also advanced loans and advances to the tune of Rs. 71,20,625/- . The original assessment was never done u/s 143(3) read with Section 143(2) but only return of income was processed u/s 143(1) of the 1961 Act which as per decision of Hon‟ble Supreme Court in the case of ACIT v. Rajesh Jhaveri Stock Brokers Private Limited (2007) 161 Taxman 316(SC) cannot be termed as an „assessment‟ and the \v) Dividend Not Available Not Available Not Available Rs. 60196 reopenin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or outsiders not connected with Promoters/ Directors and management of the tax-payer company to make investments in a newly incorporated closely held private limited company having no assets/business which is merely a paper company at an unusual high share premium of Rs. 90 per share as against face value of Rs. 10 per share . No doubt in some cases such as companies belonging to reputed and successful business groups , the shares can be issued to outsiders at a premium in the initial stage itself keeping in view brand image, goodwill and successful established track record of promoters but for that there has to be some cogent material on record to come to conclusion that such huge share premium charged by the assessee is due to valid and genuine reasons and is warranted keeping in view factual matrix surrounding the tax-payer. It is equally quite unusual on the touchstone of preponderance of human probabilities that the outsiders who are not connected with the assessee company had pumped in 91.12% of the total funds in newly incorporated closely held private company having no asset base/visible business in hand and that too at an exorbitant high share premium of Rs. 90 per share a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llotted equity shares of Rs. 10 each at par and no share premium is charged from original shareholders. It is pertinent to mention that 3,60,000 equity shares of Rs. 10 each were issued to original promoters at face value of Rs. 10 per share in this year itself while new shareholders were allotted 60000 equity shares of Rs. 10 each at share premium of Rs. 490 per share i.e. at issue price of Rs. 500 per share. Thus, these three new parties inducted 89% out of the total share capital inclusive of share premium being Rs. 3 crore while the assessee's original promoters only inducted Rs. 37 lacs which consisted of 11% of the capital introduced in the assessee company. These three investing companies namely M/s. Motivate Financial Services Pvt. Ltd, Tej Corporate Services Pvt. Ltd. and Anumeeta Corporate Services Pvt. Ltd have subscribed to 60000 equity share by investing Rs. 300 lacs as against Rs. 37 lacs invested by the original promoters by subscribing to 3,70,000 equity shares of Rs. 10 each at face value. Thus by investing 89% of the total capital, these three new shareholders got 14% shares of the company while by investing merely 11% of the capital introduced, original promo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l statements, business model and financial indicators as are existing in its audited financial statements to justify charging of huge share premium of Rs. 490 per share as against face value of Rs. 10 per share from these new shareholders. The problem got further aggravated when the assessee does not bring on record project report or any other cogent material justifying issue of shares at huge premium which could reflects viability, higher profitability and bright future prospects of the assessee company by implementing project for which funds were raised at huge share premium to justify chargeability of such a huge share premium. The assessee's claim in statement of fact/written submissions as to justification of share premium/valuation etc are not substantiated through any cogent evidences on record and are merely bald statements which cannot be relied upon in the absence of cogent material/evidences brought on record by the assessee. The assessee raised funds to the tune of Rs. 300 lacs from these new shareholders and it was for the assessee to have brought on record cogent material to substantiate its contentions and if the evidences are withheld by the assessee then it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an make additions u/s. 68 of the Act as an income of the tax-payer. There are companies which are widely held companies in which public are substantially interested which comes out with an initial public offers(IPO) wherein shares are listed on stock exchanges and widely traded, wherein members of public make subscriptions in pursuance to the Prospectus issued by the company. Issue of shares in these cases to general public in India as well abroad are approved, regulated and monitored by various authorities who are engaged in regulating and managing securities market such as Securities and Exchange Board of India (SEBI), Stock Exchanges, Government of India etc.. Those members of public who make subscription in Public issues of securities are widely scattered all over the country or even outside India as any person entitle to apply as per the conditions prescribed in the prospectus can place an application subscribing to the shares of the company by depositing duly filled in application along with application money with the designated authorized recipients of the company stipulated in the prospectus such as bankers, brokers, under-writers, merchant bankers, company offices etc. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or. In our considered view, merely submission of the name and address of the share subscriber, Balance Sheet of affairs of the share subscriber and bank statement of the share subscribers is not sufficient as the AO is to be satisfied as to their identity and creditworthiness as well as to the genuineness of the transaction entered into. These three new share holders in this instant case are not traceable and their whereabouts are not known. The inspector has given adverse report after making field enquiries. The assessee could not give their latest addresses nor could produce them before the authorities below and even before us these shareholders could not be produced for their examination. These shareholders have contributed 86% of the capital deployed in the assessee company being Rs. 300 lacs out of total capital deployed of Rs. 337 lacs and still the major contributors of the capital are not available which itself cast serious apprehension about the genuineness of the transaction of raising share capital by the assessee company . Once the AO got field enquiries made through inspector who gave adverse report, the onus shifts back to the assessee to produce the shareholders befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd. which has common auditors namely N H Vyas and Company which is again indicator of the same persons controlling these companies. The assessee did not filed financial statements of Anumeeta Corporate Services Private Limited. The perusal of the financial statements of the two new shareholders so filed namely M/s Motivate Financial Services Pvt. Ltd and Tej Corporate Services Pvt. Ltd. revealed that both the said companies have miniscule paid up capital of Rs. 1 lacs while share application money raised by them are Rs. 250 lacs which is stated to be invested as shown under the head 'Investments' to the tune of Rs. 250 lacs, for which no details of investing companies as well invested companies are given in their financial statements. Their Income and cash flows are also not substantial but very modest and are not sufficient enough to justify that these companies are making genuine investments. The assessee has filed bank statement from 01-02-2012 to 31-03-2012 of M/s Motivate Financial Services Pvt. Ltd, Tej Corporate Services Pvt. Ltd. and Anumeeta Corporate Services Pvt. Ltd. The bank statement of Tej Corporate Servcies Private Limited filed in paper book did not reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scussed in details by us in this order. Similar was the fact situation in the case of Shakti Hardware Collections (P.) Ltd. (supra) wherein tribunal based on factual matrix of the case and evidence on record arrived at the decision that no additions are warranted u/s 68 as ingredients of Section 68 of the Act stood complied with in the said case and the taxpayer did discharged its onus caste u/s 68. The assessee reliance on the case of Orchid Industries (P.) Ltd. (supra) is also not correct as in that case the finding of fact is arrived at that the shareholders have sufficient funds in their bank accounts for making investment in the tax-payer company and their creditworthiness stood proved which was supported by the strength of their financial statements while in the instant case before us, we have undertaken detailed evaluation of evidence on record to come to conclusion that the creditworthiness of new shareholders is not proved as well genuineness of transaction of raising share capital also stood unproved. Similar is the case of Apeak Infotech's case (supra) relied upon by the assessee as in this case the shareholders confirmed the transaction during assessment proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of Bikram Singh (supra) wherein Hon'ble Bombay High Court confirmed additions as the taxpayer could not prove the financial strength of the lender to have lent such a huge sums of money to the taxpayer. The same is the factual matrix of the case before us as the three new shareholders financial capability and creditworthiness to invest Rs. 300 lacs could not be, inter-alia , stood proved apart from non proving of the genuineness of the aforesaid share transactions to the tune of Rs. 300 lacs with these three new shareholders. The learned DR also rightly relied upon decision of Hon'ble Bombay High Court in the case of Konark Structutal Engg. (P.) Ltd. (supra) wherein the summons issued by the AO to the shareholders u/s 131 returned unserved and also the shareholders were first time assessee's and were not earning enough income to make deposits in question, the Hon'ble Bombay High Court on that factual matrix of the case confirmed additions u/s 68. In the instant appeal before us, the inspector was deputed by the AO to make field enquiries who could not locate these three shareholders and the assessee also could not furnish the current addresses of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the share subscribers and that too at a huge share premium of Rs. 490 per share as no evidences as to the strength of its financial statement or details of some very lucrative profitable project carried on by the assessee is also not brought on record which could warrant justification of such as huge share premium as well justification for these unknown companies being new shareholders to have invested Rs. 300 lacs in the assessee company. These three new shareholders could not be traced and they could not be interrogated by the AO which was essential to unearth the truth as they were not traceable and assessee did not produced the shareholders before the authorities below. Merely saying that return of allotment in form no 2 was filed with the Ministry of Corporate Affairs or Resolutions were passed by the assessee or these companies have Corporate Identification Numbers is not sufficient as these are merely ministerial/administrative functions which needs to be done in any case by all the companies allotting shares but the moot question is as to the creditworthiness of these three new share holders to invest such a huge amount of Rs. 300 lacs in assessee company as well whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere made through accounts payee cheques/bank account; and mere deposit of cash in the bank accounts prior to issue of cheque/pay orders etc. would only raise suspicion and, it was for the Assessing Officer to conduct further investigation, but it did not follow that the money belonged to the assessee and was their unaccounted money, which had been channelized. 13. As we perceive, there are two sets of judgments and cases, but these judgments and cases proceed on their own facts. In one set of cases, the assessee produced necessary documents/evidence to show and establish identity of the shareholders, bank account from which payment was made, the fact that payments were received thorough banking channels, filed necessary affidavits of the shareholders or confirmations of the directors of the shareholder companies, but thereafter no further inquiries were conducted. The second set of cases are those where there was evidence and material to show that the shareholder company was only a paper company having no source of income, but had made substantial and huge investments in the form of share application money. The assessing officer has referred to the bank statement, financial posit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actory. It places no duty upon him to point to the source from which the money was received by the assessee. In A. Govindarajulu Mudaliar v CIT, (1958) 34 ITR 807, this argument advanced by the assessee was rejected by the Supreme Court. Venkatarama Iyer, J., speaking for the court observed as under (@ page 810): - "Now the contention of the appellant is that assuming that he had failed to establish the case put forward by him, it does not follow as a matter of law that the amounts in question were income received or accrued during the previous year, that it was the duty of the Department to adduce evidence to show from what source the income was derived and why it should be treated as concealed income. In the absence of such evidence, it is argued, the finding is erroneous. We are unable to agree. Whether a receipt is to be treated as income or not, must depend very largely on the facts and circumstances of each case. In the present case the receipts are shown in the account books of a firm of which the appellant and Govindaswamy Mudaliar were partners. When he was called upon to give explanation he put forward two explanations, one being a gift of Rs. 80,000 and the other being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een kept in view, the Tribunal could not have failed to draw the appropriate inference."' 12. The present case would clearly fall in the category where the Assessing Officer had not kept quiet and had made inquiries and queried the respondent-assessee to examine the issue of genuineness of the transactions. The Tribunal unfortunately did not examine the said aspect and has ignored the following factual position:- (a) The shareholder companies, 5 in number, were all located at a common addressi.e. 13/34, WEA, Fourth Floor, Main Arya Samaj Road, Karol Bagh, New Delhi. (b) The total investment made by these companies was Rs. 1,51,00,000/-, which was a substantial amount. (c) Evidence and material on bogus transactions found during the course of search of Tarun Goyal. Evidence and material that the companies were providing accommodation entries to beneficiaries was not considered. (d) The findings recorded as mentioned in the assessment order, which read as under:- "1. From the finding of search, it is evident and undeniable that all the companies including the alleged shareholders companies belong to Sh. Tarun Goyal. This is enforced even more from the following:- i. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom other sources of Rs. 16.38 lakhs in the year ending 31st March, 2008. The respondent-assessee had not incurred any expenditure in the year ending 31st March, 2007 and had incurred expenditure of Rs. 12.17 lakhs in the year ending 31st March, 2008. (f) Shares of face value of Rs. 10/- each were issued at a premium of Rs. 40/- (total Rs. 50/-). (g) The respondent-assessee had failed to produce Directors of the companies, though they had filed confirmations, and therefore, were in touch with the respondent-assessee. The respondent-assessee had also failed to produce the details and particulars with regard to issue of shares, notices etc. to the shareholders of AGM/EGM etc. 13. In view of the aforesaid factual position, we have no hesitation in holding that the transactions in question were clearly sham and make-believe with excellent paper work to camouflage their bogus nature. Accordingly, the order passed by the Tribunal is clearly superficial and adopts a perfunctory approach and ignores evidence and material referred to in the assessment order. The reasoning given is contrary to human probabilities, for in the normal course of conduct, no one will make investment of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT [2013] 350 ITR 651/30 taxmann.com 211 that reopening of an assessment is permissible when the original assessment order passed under s. 143(3) of the Act is silent in respect of the issue/point on which reassessment notice is issued. Further, no query with regard, to the above issue having been made during the assessment proceeding would also indicate, absence of application of mind the tangible material. 12. In this case non-receipt of convertible foreign exchange within a. period of 6 months from the end of the assessment year was not the Subject-matter of consideration nor the fact that the petitioner had declared its book profits after reducing the amount of deduction under s. 10AA of the Act during the original proceedings. Both these issues were not the subject-matter of consideration during the original assessment proceedings leading to assessment order dt. 18th May, 2010. In the above view, it is permissible for the AO to have a reasonable belief that income chargeable to tax has escaped assessment and the same does not stem from a change of opinion.. 13. The petitioner may have a good case on merits. However, the same would be considered by the AO during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lass of companies since share capital is received from the close knit circles who are mostly known to the company/promoters, the onus as required u/s. 68 of the Act is very heavy to prove identity and capacity of the shareholders and genuineness of the transaction as the special facts as to subscribers are within the knowledge of the tax-payer in such cases. The onus of widely held company could be discharged on the submissions of all the information contained in the statutory share application documents and on not being satisfied the AO may proceed against the shareholders u/s. 69 of the Act instead of proceeding against the company, but in the closely held companies as in the instant case before us the share capital are mostly raised from Promoters/Directors and from some persons who are within the knowledge of the assessee and in such situation the assessee is expected to know the share subscribers and the burden is very heavy on the assessee to satisfy cumulatively the ingredients of Section 68 of the Act as to identity and establish the credit worthiness of the creditors and genuineness of the transaction to the satisfaction of the AO, otherwise the AO shall be free to proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 143(3) and only return of income was processed u/s 143(1) of the 1961 Act and the re-opening was sought to be done within four years from the end of the assessment year. It is undisputed that first proviso to Section 147 of the 1961 Act is not applicable and it is immaterial whether the assessee has made a complete and true disclosure in the return of income filed with Revenue. As we have seen it is time and again admitted by the Hon‟ble Courts that there has been a large number of cases coming to Courts where in the tax-payers have introduced their ill-gotten money in the form of share capital, share application money, share premium, deposits , loans and advances in the shell companies created by them through circuitous routes via money laundering. The reference is drawn to observation of Hon‟ble Delhi High Court in the case of CIT v. D. K. Garg reported in (2018) 404 ITR 757(Delhi), wherein Hon‟ble Delhi High Court observed as under: "13. There have been numerous cases before the AO, CIT (A), the ITAT and for that matter even before this Court, where the question involved concerns the treatment of 'accommodation entries'. Basically, what an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rawn to the decision of Hon‟ble Supreme Court in the case of ACIT v. Rajesh Jhaveri Stock Brokers Private Limited reported in (2007) 291 ITR 500(SC), wherein Hon‟ble Supreme Court upheld reopening in the case wherein originally return of income was processed u/s 143(1) of the 1961 Act, by holding as under: "9. In order to consider the rival submissions, it is necessary to take note of section 143(1) (as it stood before and after amendment with effect from 1-6-1999), 147 and 148. The provisions read as follows : After amendment : "143. Assessment.-(1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142,- (i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid, any tax paid on self-assessment and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is due from him : Provided also that an intimation under this clause shall not be sent after the expiry of two years from the end of the assessment year in which the income was first assessable. 147. Income escaping assessment.-If the Assessing Officer, has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 143(1) without requiring the presence of the assessee or the production by him of any evidence in support of the return. Where the assessee objected to such an assessment or where the officer was of the opinion that the assessment was incorrect or incomplete or the officer did not complete the assessment under section 143(1), but wanted to make an inquiry, a notice under section 143(2) was required to be issued to the assessee requiring him to produce evidence in support of his return. After considering the material and evidence produced and after making neces-sary inquiries, the officer had power to make assessment under section 143(3). With effect from 1-4-1989, the provisions underwent substantial and material changes. A new scheme was introduced and the new substituted section 143(1) prior to the subsequent substitution with effect from 1-6-1999, in clause (a), a provision was made that where a return was filed under section 139 or in response to a notice under section 142(1), and any tax or refund was found due on the basis of such return after adjustment of tax deducted at source, any advance tax or any amount paid otherwise by way of tax or interest, an intimation was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to the assessee notwithstanding that no tax or refund was due from him after making such adjustments. With effect from 1-4-1998, the second proviso to section 143(1)(a) was substituted by the Finance Act, 1997, which was operative till 1-6-1999. The requirement was that an intimation was to be sent to the assessee whether or not any adjustment had been made under the first proviso to section 143(1) and notwithstanding that no tax or interest was found due from the assessee concerned. Between 1-4-1998 and 31-5-1999, sending of an intimation under section 143(1)(a) was mandatory. Thus, the legislative intent is very clear from the use of the word "intimation" as substituted for "assessment" that two different concepts emerged. While making an assessment, the Assessing Officer is free to make any addition after grant of opportunity to the assessee. By making adjustments under the first proviso to section 143(1)(a), no addition which is impermissible by the information given in the return could be made by the Assessing Officer. The reason is that under section 143(1)(a) no opportunity is granted to the assessee and the Assessing Officer proceeds on his opinion on the basis of the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee, or (b) no refund is due to him. It is significant that the acknowledgement is not done by any Assessing Officer, but mostly by ministerial staff. Can it be said that any "assessment" is done by them ? The reply is an emphatic "no". The intimation under section 143(1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assess-ment under section 143(1)(a), the question of change of opinion, as contended, does not arise. 14. Additionally, section 148 as presently stands is differently couched in language from what was earlier the position. Prior to the substitution by the Direct Tax Laws (Amendment) Act, 1987, the provision read as follows : "148. Issue of notice where income has escaped assessment.-(1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice containing all or any of the requirements which may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e "reason to believe" would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, 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 action under section 147(a) (as the provision stood at the relevant time) fulfilment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is "reason to believe", but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced on the decision of Hon‟ble Apex Court in the case of CIT v. Zuari Estate Development & Investment Company Limited reported in (2015) 373 ITR 661(SC) , wherein Hon‟ble Supreme Court held that when originally return of income is processed u/s 143(1), there is no formation of opinion and hence there cannot be any change of opinion, by holding as under: "2. After going through the detailed order passed by the High Court, we find that the main issue which is involved in this case is not at all addressed by the High Court. A contention was taken by the appellant-Department to the effect that since the assessee's return was accepted under Section 143(1) of the Income Tax Act, there was no question of "change of opinion" inasmuch as while accepting the return under the aforesaid provision no opinion was formed and therefore, on this basis, the notice issued was valid. We find that this aspect is squarely covered by the judgment of this Court in Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500/161 Taxman 316 in the following manner: - "15. In the scheme of things, as noted above, the intimation under Section 143(1)(a) cannot be treated to be an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Income Tax (Appeals) which was also dismissed. Further appeal was preferred before the Income Tax Appellate Tribunal. This appeal, however, has been allowed by the Tribunal vide orders dated 29.01.2004, simply following the impugned judgment of the High Court, whereby the assessment proceedings itself were quashed. Since we have set aside the judgment of the High Court, as a result, the orders dated 29.01.2004 passed by the Income Tax Appellate Tribunal also stands set aside. The matter is remitted back to the Income Tax Appellate Tribunal to decide the appeal of the respondent on merits." The Reference is also drawn to the decision of Hon‟ble Bombay High Court in the case of Avirat Star Homes venture Private Limited reported in (2019) 102 taxmann.com 60(Bom.), wherein Hon‟ble Bombay High Court upheld the reopening based on the information received from investigation wing and wherein the AO formed the belief that income chargeable to tax has escaped assessment , cannot be stated to have acted mechanically, wherein originally return of income was processed u/s 143(1) of the 1961 Act . The Hon‟ble Bombay High Court held as under: "7. As noted, the retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied firstly the Assessing Officer must have reason to believe that income profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either (i) 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 the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is however to be noted that both the conditions must be fulfilled if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income chargeable tax having escaped assessment. Therefore, it cannot be stated that the Assessing Officer did not have reason to believe that income chargeable to tax had escaped assessment. Being a case where return were accepted without scrutiny, we must leave the question of taxability of such allegedly escaped income to Assessing Officer to examine during scrutiny assessment. 11. The Assessing Officer perused the information supplied by the investigation wing and having formed the belief that income chargeable to tax had escaped assessment, cannot be stated to have acted mechanically. Further, mere fact that assessee had asked for certain information from the Assessing Officer, which at this stage was not supplied, would not invalidate the reasons recorded by the Assessing Officer in issuing the impugned notice. 12. In case of Pr. CIT v. Gokul Ceramics[2016] 71 taxmann.com 341/241 Taxman 1 in division bench of Gujarat High Court had in somewhat similar circumstances observed as under: 9. It can thus be seen that the entire material collected by the DGCEI during the search, which included incriminating documents and other such relevant materials, was alongwith report an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal outcome of the proceedings is not relevant. What is relevant is the existence of reasons to make the Income Tax Officer believe that there has been under assessment of the assessee's income for a particular year. We are satisfied that the first condition to invoke the jurisdiction of the Income Tax Officer under Section 147(a) of the Act was satisfied." 11. In case of Income Tax Officer v. Purushottam Das Bangur (supra) after completion of assessment in case of the assessee, the Assessing Officer received letter from Directorate of Investigation giving detailed particulars collected from Bombay Stock Exchange which revealed earning of share and price of share increased during period in question and quotation appearing at Calcutta Stock Exchange was as a result of manipulated transaction. On the basis of such information, the Assessing Officer issued notice for reopening of the assessment. The question, therefore, arose whether the information contained in the letter of Directorate of Investigation could be said to be definite information and the Assessing Officer could act upon such information for taking action under Section 147(b) of the Act. In such background, the Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the opinion of the officers of the Mining Department, there was under reporting of the raising figure to the extent indicated in the said letter. The report is made by a Government Department and that too after conducting a joint inspection. It gives a reasonably specific estimate of the excessive coal mining said to have been done by the respondent over and above the figure disclosed by it in its returns. Whether the facts stated in the letter are true or not is not the concern at this stage. It may be well be that the assessee may be able to establish that the facts stated in the said letter are not true but that conclusion can be arrived at only after making the necessary enquiry. At the stage of the issuance of the notice, the only question is whether there was relevant material, as stated above, on which a reasonable person could have formed the requisite belief. Since we are unable to say that the said letter could not have constituted the basis for forming such a belief, it cannot be said that the issuance of notice was invalid. Inasmuch as, as a result of our order, the reassessment proceedings have not to go on we don not and we ought not to express any opinion on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rfere. The same is not to be judged at that stage. In SFIL Stock Broking Ltd. (supra), the bench has interfered as it was not discernible whether the assessing officer had applied his mind to the information and independently arrived at a belief on the basis of material which he had before him that the income had escaped assessment. In our considered opinion, the decision rendered therein is not applicable to the factual matrix in the case at hand. In the case of Sarthak Securities Co. Pvt. Ltd. (supra), the Division Bench had noted that certain companies were used as conduits but the assessee had, at the stage of original assessment, furnished the names of the companies with which it had entered into transactions and the assessing officer was made aware of the situation and further the reason recorded does not indicate application of mind. That apart, the existence of the companies was not disputed and the companies had bank accounts and payments were made to the assessee company through the banking channel. Regard being had to the aforesaid fact situation, this Court had interfered. Thus, the said decision is also distinguishable on the factual score." 14. Learned Single Judge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer cannot be said to have merely suspected that income had escaped assessment. He is bound to give prima facie credence to the information coming from his own department, though from another wing. He cannot brush it aside or ignore it on the ground that it is a mere allegation. The letter constitutes material on the basis of which the Assessing Officer can hold the requisite "belief". It has a rational connection or live link with the formation of the belief that income chargeable to tax has escaped assessment in the hands of the assessee. It is not a mere pretence nor is it based on mere gossip or rumour. It is a belief bona fide held. No doubt the DCIT of the concerned range had, by letter dated 24-12-1997, asked the Assessing Officer to examine the issue and discuss it with him for further investigation, but simply because the Assessing Officer chose to issue the notice under section 148 without adhering to the directions of the DCIT it cannot be said that the Assessing Officer had proceeded to adopt a short-cut without forming the requisite belief. It is the satisfaction of the Assessing Officer who is empowered to issue the notice under section 148 that is relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out in the course of the reassessment proceedings to be insufficient to sustain the assessment of the alleged escaped income; it may not stand judicial scrutiny; or the assessee may be able to lead evidence to show that no income chargeable to tax had escaped assessment. All this has to be carried out during the reassessment proceedings but they have no place at the stage when the Assessing Officer proposes to issue notice under section 148. At that stage, it is only the relevancy of the reasons that can be looked into and not the sufficiency in S. Narayanappa's case (supra). In the case on hand, we are satisfied that the material before the Assessing Officer-the letter dated 16-12-1997 received from the CIB - had a rational connection or live link with the formation of the belief that income chargeable to tax has escaped assessment in the assessee's case. The belief was bona fide held, it was not a pretence. The material gave rise to "reason to believe" and not merely "reason to suspect". No doubt, as pointed out by the CIT(A), the list of 41 persons to whom Kochhar is supposed to have made gifts did not contain the name of the assessee. But the CIT(A) appears to have overlooked t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay High Court in the case of CIT v. Gagandeep Infrastructure Private Limited in ITA no. 1613 of 2014, dated 20.03.2017. In this case, the tribunal held that the taxpayer is able to establish identity , capacity and genuineness of the shareholders who have subscribed to its shares. The Hon‟ble Bombay High Court then held that concurrent finding of learned CIT(A) and that of the tribunal as to satisfaction of Section 68 of the 1961 Act could not be shaken by Revenue and hence the deletion of additions were upheld by Hon‟ble Bombay High Court in the case of Gagandeep Infrastructure Private Limited(supra), which led Hon‟ble Bombay High Court to hold that no substantial question of law arose. That was the ratio of decision of Hon‟ble Bombay High Court. . In the instant case, the assessee company has received 90.12% of the funding from outsiders who are not connected with Promoters/ Directors while the promoters inducted only 9.88% of the total funds raised by the assessee company. Thus, it is for the assessee to discharge its onus to establish identity, creditworthiness of the subscribers and genuineness of the transactions for raising share capital includin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inesh Kumar Shah (supra) to contend that reopening cannot be made for verification purposes by making roving and fishing enquiries. In the instant case before us, information was received from learned CCIT who based on intelligence from DGIT(Intelligence and Criminal Investigation) has passed on the information that the assessee has issued shares at a very rate of share premium , which information on the contextual factual matrix of the case cannot be termed as not credible warranting invocation u/s 147. The assessee being a new company having no asset base/business has issued equity shares of Rs. 10 each at a share premium of Rs. 90 per share . The 90.12% of the funds were invested by outsiders having no connection with promoters/directors and no participation in management while the promoters / Directors have merely invested 9.88% of the total fund infusion in the assessee company. Thus, keeping in view the entire contextual factual matrix, reopening of the concluded assessment u/s 147 under these circumstances cannot be held to be invalid more-so originally no assessment was framed u/s 143(3) and reopening was sought to be done within four years from the end of the assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .11.2018. This is a case wherein the taxpayer company issued shares at premium . The tribunal distinguished the order of tribunal in the case of Pratik Syntex private Limited(supra) and held that share premium in this case of Piramal Realty Private Limited (supra) was genuine. This case was decided on its own factual matrix and cannot be universally applied as factual matrix in each case are different. The assessee has relied upon decision of Hon‟ble Bombay High Court in the case of writ petition decided by Hon‟ble Bombay High Court in the case of Khubchandani Healthparks Private Ltd. v. ITO in W.P No. 3027 of 2015 decided on 10.02.2016. In this decision the Hon‟ble Bombay High Court has held that sine qua non for re-opening of the concluded assessment is reason to believe. The raising of huge share capital at a very rate of share premium by a paper company which is newly incorporated having no asset base/business from some parties who are not associated with the promoters/directors of the assessee company and these outsiders subscribing to 90.12% of shares as against subscription by promoters/directors to the tune of 9.88% is sufficient to trigger invocation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the financial statements filed before us. The assessee being a newly incorporated company has issued equity shares of Rs. 10 each at a premium of Rs. 90 per share. The outsiders having no connection with Promoters/Directors of the assessee company had subscribed 90.12% of the total fund infusion in the assessee company while the promoters/directors have infused 9.88% of the total fund infused in the assessee company. The AO acted on the information as to very high rate of share premium charged by the assessee company considering the same to be tangible incriminating material forming a belief that income has escaped assessment. Each case is to be decided on its own factual matrix and present case before us is a fit case for invocation of reopening of assessment u/s 147 of the 1961 Act. Reference is drawn to the decision of Hon‟ble Calcutta High Court in the case of Rajmandir Estates Private Limited(Supra). The SLP filed by assessee against this case stood dismissed by Hon‟ble Apex Court. The Reference is also drawn to the decision of Hon‟ble Delhi High Court in the case of NDR Promoters Private Limited(supra) . Thus, based on our detailed discussions as above, we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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