TMI Blog2019 (3) TMI 327X X X X Extracts X X X X X X X X Extracts X X X X ..... formation of a belief that income has escaped assessment. The assessee was incorporated only on 14.01.2009 and this is the first year of its operation. There is a meagre income earned by the assessee for the year ended 31.03.2009. There are no assets base nor any business of the assessee as is discernible from the financial statements filed before us. The assessee being a newly incorporated company has issued equity shares of ₹ 10 each at a premium of ₹ 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. We have no hesitation in upholding invocation of provisions of Section 147 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made without discussing the same on merit. 5. The Appellant prays that the order of the CIT (Appeals) on the above grounds be set aside and that of the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 - ₹ 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 ₹ 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 ₹ 20,39,300/- wherein 2,03,930 Equity Shares of ₹ 10/- each were issued at par/premium of ₹ 90 per share. It was observed by the AO that the assessee had introduced a sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Santosh Gulgulia 7000 10 100 90 70000 630000 700000 7 Star Fincap P. Ltd 22500 10 100 90 225000 2025000 2250000 8 Thank You Management Consultant P. Ltd., 43000 10 100 90 430000 3870000 4300000 9 Subh Management Consultant P. Ltd., 10000 10 100 90 100000 900000 1000000 10 Systematic Marketing Concepts P. Ltd., 2000 10 100 90 20000 180000 200000 Total 1939300 17453700 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness Profile and Performance (iii) Capacity to invest (iv) Creditworthiness (v) Sources of funds C) Attendant Circumstances and Preponderance of Human Probabilities (i) Nature of Transaction (ii) Probability-whether the impugned transaction appeals to the normal mind, its believability and feasibility. (iii) Available Proof of genuineness of the transaction (iv) Quality of proof and its Adequacy D) Substance over Form It is pertinent to mention that originally no assessment was framed by the AO u/s 143(3) read with Section 143(2) of the 1961 Act wherein the return of income was processed u/s 143(1) of the 1961 Act and the reopening is sought to be done within four years from the end of the assessment year. The AO observed that the assessee has failed to discharge its primary onus as the assessee failed to furnish complete documentary evidences in connection with share issued by assessee at huge share premium. The AO observed that based on material on record , the assessee has failed to prove genuineness of the transaction and also the assessee having failed to prove creditworthiness and capacity of accommodation entry providers . It was also observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r selection The return of income was filed on 31/8/2009 with E-filing Acknowledgement Number 85553830310809 declaring total income is NIL. The return was processed u/s. 143(1) as per the I.T. Act on 4/11/2010. A letter has been issued by Office of the Chief Commissioner of Income-tax, Mumbai vide letter no. MUM/ CCIT /COORD/ U-III/SHARE PREMIUM/2013-14/1701 dated 13.3.2014 regarding issue of EQTY shares on huge premium by private company as under: Sr. No. ROC Sr. no. Face Value in Rs Total No. of share premium issued Total amount received in(Rs) cash 679 1261 10 193,930 1,74,53,70 In view of aforesaid facts, I hereby propose to reopen the case u/s. 147 for verification of high rate of share premium and cash received. As per directions of CCIT, same is required to be examined. Issue notice u/s. 148 as per I.T. Act, 1961. Thus, here it is seen that the case has been reopened by the A.O. on the sole fact that the A.O. proposes to reopen the case u/s. 147 for verification of hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notice issued is bad in law and bereft of merit. f) Without prejudice to any of the objections enumerated at a), b), c), d) and e) above, we submit that, in the absence of anything to the contrary in the reasons recoded by you, it would suffice to state that we have issued the shares in question to existing tax payers at the premium justified on the facts and in the circumstances of our case. Sir, we most humbly submit that our assessment for A.Y. 2009-10 has been reopened u/s. 147 for no reasons at all or entirely untenable reasons and therefore we most humbly pray that the notice u/s. 148 issued in our case be withdrawn or proceedings u/s. 147 initiated thereby may kindly be dropped. We hope that the contents of this letter would convince your goodself that the notice u/s. 148 has wrongly been issued in our case and needs to be cancelled, withdrawn or dropped. However, if there are any doubts remaining or clarifications called for, we pray that w may be allowed a reasonable opportunity of being heard before any order averse to us is passed. Submitted for your kind consideration and orders. 8. Again, perusal of the order dated 20.3.2015 shows that at para 1.2 of P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocuments submitted by the assessee as additional evidences may kindly be not admitted. Further, it is seen that no fresh evidence/material is sought to be admitted before the Ld. CIT(A) in respect of most of the issues raised by the assesee. In the meantime, brief comments regarding the issues raised by the assessee are submitted as follows: Additional evidences Brief comments The assessing office erred in reopening the assessment u/s, 147 by issuing notice u/s. 148 of the IT. Act, 1961. The A.O. has erred in law as well as under the circumstances of the case in not issuing notice u/s. 143(2) of the I..T. Act before passing the assessment order. The case was reopened after recording the reason and due approval of competent authority. It is pertinent to mention here that from the date of service of notice u/s. 148 of the Act i.e. 29.3.2014 till the date of passing of the order u/s. 143(3) rws 147 on 26.3.2015, the assesses has never challenged the reopening of the assessment. The reasons recorded for the issue of notice u/s. 148 were also provided to the assessee. While making submissions during the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjudicate the issue in appeal on merits but rather it quashed reopening of the concluded assessment u/s 147 of the 1961 Act. The Ld. CIT(A) has also relied upon the decision of Hon‟ble Bombay High Court in the case of CIT v. Gagandeep Infrastructure P. Ltd. (ITA No. 1613 of 2014 dated 20.03.1997 reported in (2017) 394 ITR 680(Bom.)) to hold that the AO should instead proceed against the subscribes of the shares rather than bringing to tax income by way of unexplained cash credit by way of share capital and share premium in the hands of the assessee by invoking provisions of Section 68 of the 1961 Act. With these remarks, the learned CIT(A) went ahead and allowed all the grounds of appeal raised by the assessee in its appeal which even included grounds of appeal on merits. 5. Now, the Revenue has filed this appeal before the tribunal. Before us Ld. DR submitted that assessment of the assessee was reopened u/s. 147 of the Act. Notices u/s. 148 were issued by the AO. It was submitted that originally return of income was processed u/s 143(1) of the 1961 Act and no scrutiny assessment was framed by the Revenue u/s 143(3) of the 1961 Act. It was submitted by learned DR that reo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challenging reopening of the assessment u/s 147 which were rejected by the AO. It was submitted by learned counsel for the assessee that the AO had no incriminating material before him to come to the conclusion that income has escaped assessment while disposing of the objections filed by the assessee challenging reopening of the concluded assessment. On being asked by the Bench , it was submitted that Mr. Bharat Mishra and Mrs. Manju Lahoti are the Promoters/Directors of the assessee. It was also explained by learned counsel for the assessee that rest of the subscribers of the shares are outsiders having no connection with Promoters/Directors of the assessee company nor are they connected with management of the affairs of the assessee company. Our attention was drawn to assessment order passed by the AO and the appellate order passed by learned CIT(A). It was submitted that Ld. CIT(A) dealt with merit of the case also wherein learned CIT(A) relied upon decision of Hon‟ble Bombay High Court in the case of Gagandeep Infrastructure P. Ltd. (ITA No. 1613 of 2014 dated 20.03.1997 reported in (2017) 394 ITR 680(Bom.)) to allow grounds of appeals raised by the assessee in its appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellate order passed by learned CIT(A). The learned counsel for the assessee also drew our attention to the paper book filed with the tribunal wherein it was submitted that complete details of the subscribers and issue of shares were given before the AO . Reliance was placed by learned counsel for the assessee on the decision of Gagandeep Infrastructure P. Ltd. in ITA no. 1613 of 2014 , order dated 20.03.2017 passed by Hon‟ble Bombay High Court and it was submitted that AO should have proceeded against the subscriber. The learned counsel for the assessee also relied upon the decision of Hon‟ble Supreme Court in the case of CIT v. Lovely Exports P. Ltd., (2008) 216 CTR 195(SC) to contend that the AO cannot proceed against the assessee but the Revenue ought to have proceeded against the subscribers who subscribed to the equity shares of the assessee of ₹ 10 each at share premium of ₹ 90/- per equity shares. It was submitted by learned counsel for the assessee that the impugned assessment year is AY 2009-10 which is a year prior to amendment in Section 68 of the 1961 Act vide Finance Act , 2012 w.e.f. 01.04.2013. and for the impugned assessment year 2009-10, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO from learned CCIT that the assessee has issued equity shares on huge premium amounting to ₹ 1,74,53,700/- , which as explained by learned DR was based on intelligence from DGIT(Intelligence and Criminal Investigation) . Since, this issue of raising share capital and share premium was never examined earlier by the AO as no scrutiny assessment was originally framed u/s 143(3) read with Section 143(2) of the 1961 Act as the return of income was originally processed u/s 143(1) of the 1961 Act, the case of the assessee was re-opened by the AO within provisions of Section 147 of the 1961 Act and notice u/s 148 dated 31.03.2014 was issued to the assessee by the AO which was undisputedly served on the assessee. Thus, the reopening of the concluded assessment was done by the AO u/s 147 of the 1961 Act within four years from the end of the assessment year and initially no assessment was framed by the AO u/s 143(3) read with Section 143(2) of the 1961 Act. Thus, first proviso to Section 147 of the 1961 Act is undisputedly not applicable to the assessee. The reasons for re-opening of the concluded assessment were supplied to the assessee by the AO, which are reproduced hereund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 10/- per share in a newly incorporated company i.e. assessee having no asset base or visible business activities as is discernible from the financial statements placed before the tribunal. The assessee company is a newly incorporated private company and large amount of fund infusion took place in the assessee company from outsiders who are not connected with the assessee company while promoters only infused 9.88% of the total fund infused in the assessee company. Thus, when a newly incorporated private company having no established background or track record of business issues shares at whopping premium of ₹ 90/- per share as against face value of ₹ 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-open ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d advancing certain loans and advances to the tune of ₹ 71 lacs. This is how the proceeds of raising of share capital and share premium was deployed by the assessee which indicates diversion of funds for non business purposes. There is no project per-se being undertaken by the assessee company as is emanating from the records before us. The assessee has claimed that valuation report was filed using Discounted Cash flow method but the same is not filed before the Bench. The Balance Sheet typically represented of the entry operators engaged 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh several bank accounts and getting it the seal of statutory approval by getting the case reopened under Section 147 suo motu perverse? (c) Whether the order passed by the assessing officer under Section 143(3)/147 of the Income Tax Act is erroneous and also prejudicial to the interest of the revenue? (d) Whether the impugned judgement of the learned Tribunal is perverse? 22. We shall consider the second question first. In a commentary on the Prevention of Money Laundering Act, 2002 by Dr. M. C. Mehanathan published by Lexis Nexis, 2014, 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 wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares of ₹ 10 each at a premium of ₹ 390/- per share. In the process the assessee company raised a paid up share capital of ₹ 79.27 lakhs with a premium of ₹ 31.7 crores. (b) From the information made available by the assessee, it appears that 19 out of 39 applicants secured funds, for the purpose of contributing to the share capital of the assessee, on account of share application money. In other words, those 19 applicants collected funds on account of share application money in their respective companies and that money was contributed to the share capital 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allotment were not in the usual course of the business. (d) In the light of the aforesaid pieces of evidence and the prima facie finding, we are emboldened to say that the three requirements: (A) identity of the share-holders; (B) genuineness of the transaction and (C) the creditworthiness of the share-holders repeatedly impressed, by Mr. Poddar, upon us, have not been satisfied. Identity of the alleged share-holders is known but the transaction was not a genuine transaction. The transaction was nominal rather than real. The creditworthiness of the alleged share holders is also not established because 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, 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivision Bench went on to hold that the revenue should not harass the assessee where the preponderance of evidence indicates absence of culpability . In the present case there exists reasonable suspicion if not prima facie evidence of culpability. 26. The learned Tribunal in the impugned judgement in paragraphs 3, 4 and 5 observed, inter alia as follows:- We have heard the rival submissions and perused the relevant material on record. It is relevant to mention that we have disposed of more than 500 cases involving same issue through certain orders with the main order having been passed in a group of cases 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 ..... , 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 assessment for the year was disclosed on the basis that an income had been earned which is assessable. Even where an income has not been earned and is not assessable, merely because the assessee wants it to be assessed in his or her hands in order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to a sum of ₹ 60,000/-. He, therefore, completed the assessment after making addition of a sum of ₹ 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 court observed contra veritatem lex nunquam aliquid permittit : implies a duty on the court to accept and accord its approval only to a report which is the result of faithful and fruitful investigation (See ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 source thereof even if the same is credited as receipt of share application money. Mere fact that the payment was received by cheque or that the applicants were companies, borne on the file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion 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 views expressed herein are for the purpose of disposal of this appeal and shall not preclude the statutory authority from arriving at its own conclusion in accordance with law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) Investment in Fixed Assets - Rs.- ii) Investment in shares of other companies - ₹ 1,21,00,000/- 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 - ₹ 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 ₹ 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 ₹ 26.0 lacs - 20800 shares, Sonoras Chemicals Private Limited ₹ 15 lacs -30000 shares and Swastik Foundations Private Limited ₹ 5.0 lacs-20000 shares) . These com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07) 161 Taxman 316(SC) and in the case of DCIT v. Zuari Estate Development and Investment Co. Limited(2015) 279 CTR 527(SC) are relevant to this effect. The learned CCIT based on intelligence inputs from DGIT (Intelligence and Criminal Investigation ) has passed on information to the AO about a very high share premium raised by the assessee which is a closely held newly incorporated private company having no asset base/visible business in hand, while issuing equity capital at a very high share premium. It is quite unusual and against preponderance of human probabilities for 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 ₹ 90 per share as against face value of ₹ 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusive of share premium) to the tune of ₹ 3 crores from three new parties namely M/s. Motivate Financial Services Pvt. Ltd, Tej Corporate Services Pvt. Ltd. and Anumeeta Corporate Services Pvt. Ltd each subscribing ₹ 1 crores each. These three new parties have invested ₹ 3 crores in 60000 equity share of the assessee company of the face value of ₹ 10 each at a premium of ₹ 490 per equity share. Thus, the issue price to these three new share holders was at ₹ 500 per share as against the face value of equity share of ₹ 10 each of the assessee company while the original promoters are allotted equity shares of ₹ 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 ₹ 10 each were issued to original promoters at face value of ₹ 10 per share in this year itself while new shareholders were allotted 60000 equity shares of ₹ 10 each at share premium of ₹ 490 per share i.e. at issue price of ₹ 500 per share. Thus, these three new parties inducted 89% out of the total share capital inclusive of share premium being ₹ 3 crore while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dresses and their whereabouts are not known. The assessee was confronted with the adverse inspector report but the assessee could not produce current addresses of these three new shareholders. The assessee did not file any cogent material/evidences to justify chargeability of such a huge share premium from these three new shareholder vis-a-vis issuing shares at par to the original promoters within the same relevant year under consideration. The assessee did not placed reliance even on its own audited financial statements to prove and justify chargeability of huge share premium of ₹ 490/- per share as against face value of ₹ 10 per share. The assessee did not rely on its own financial statements, business model and financial indicators as are existing in its audited financial statements to justify charging of huge share premium of ₹ 490 per share as against face value of ₹ 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source of credit thereof or the explanation offered by the assessee is found not satisfactory in the opinion of the AO, the sum so credited may treated as income and charged to income-tax as income of the assessee of that previous year. The burden/onus is cast on the assessee and the assessee is required to explain to the satisfaction of the AO cumulatively about the identity and capacity/creditworthiness of the creditors along with the genuineness of the transaction to the satisfaction of the AO. All the constituents are required to be cumulatively satisfied. If one or more of them is absent, then the AO can 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny sum found credited in the books' in Section 68 indicates that it is widely worded and the AO can make enquiries as to the nature and source thereof. The AO can go to enquire/investigate into truthfulness of the assertion of the assessee regarding the nature and the source of the credit in its books of accounts and in case the AO is not satisfied with the explanation of the assessee with respect to establishing identity and credit worthiness of the creditor and the genuineness of the transactions, the AO is empowered to make additions to the income of the assessee u/s. 68 of the Act as an unexplained credit in the hands of the assessee company raising the share capital because the AO is both an investigator and adjudicator. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellate Tribunal came appears to us to be amply warranted by the facts of the case. There is no ground for interfering with that finding, and these appeals are accordingly dismissed with costs. Now. Let us evaluate the quality of evidences furnished by the assessee before the authorities below which are placed in paper book filed before us containing 1-32 pages. The assessee has filed confirmation from these three parties which is signed by the same person namely one Mr. Pradeep Sharma in all the three cases (pb/page 1, 11 and 21) which is indicative of the fact that one person controlled all these three new shareholders. The assessee did filed unsigned financial statements of M/s Motivate Financial Services Pvt. Ltd and Tej Corporate Services Pvt. 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 mini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f money from one entity to another entity. Now, coming to the case laws relied upon by both the rival parties. First, we will deal with the case laws relied upon by the assessee. The assessee relied upon decision of ITAT-Mumbai in the case of Arceli Realty Ltd. (supra) but the said case is distinguishable as in this case , the tax-payer duly discharged onus caste on it per Section 68 , existence of shareholders were not in doubt and all the primary evidences were duly submitted by the tax-payer satisfying all the ingredients of Section 68 which led tribunal to rule in favour of assessee, while in the instant case before us, these three new shareholders are not traceable , their creditworthiness is not proved and genuineness of the entire share transaction was not proved as discussed 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Bombay High Court in the case of Gagandeep Infrastructure (P.) Ltd. (supra) wherein Hon'ble Bombay High Court considered the factual matrix of the case wherein it was observed that the taxpayer satisfied the three ingredients of Section 68 which stood proved namely identity and creditworthiness of shareholders and genuineness of the transaction and on that factual matrix decision of the tribunal was accepted wherein tribunal ruled in favour of the assessee by holding that the tax-payer did satisfied all the three ingredients of Section 68. Thus all the case laws relied upon by the assessee are distinguishable keeping in view factual matrix of the case before us. The learned DR on the other hand has rightly relied upon the decision of Hon'ble Bombay High Court 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 ₹ 300 lacs could not be, inter-alia , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee company to bring on record the cogent evidences to prove the creditworthiness of the share subscribers and genuineness of the transaction which in the instant case the assessee is not able to prove the same as per the facts emerging from the records and material before us as set out above and in our considered view in the instant case the transactions were nominal rather than real. The creditworthiness of the shareholders is not proved because they did not had their own money as every payments made by them towards share money in favour of the assessee is preceded by deposit in the bank account of the new shareholders and the balance maintained regularly in their bank accounts was miniscule. The genuineness of the transactions is also not proved as to how such a huge sum of money got invested by the share subscribers and that too at a huge share premium of ₹ 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 sharehol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12] 342 ITR 169 (Delhi), Commissioner of Income Tax v. N.R. Portfolio Pvt. Ltd., 206 (2014) DLT 97 (DB) (Del) and Commissioner of Income Tax-II v. MAF Academy P. Ltd., 206 (2014) DLT 277 (DB) (Del). The aforesaid decisions mentioned above refer to the earlier decisions of Delhi High Court in Commissioner of Income Tax v. Sophia Finance Ltd., [1994] 205 ITR 98 (FB)(Delhi), CIT v. Divine Leasing and Finance Limited [2008] 299 ITR 268 (Delhi) and observations of the Supreme Court in CIT v. Lovely Exports P. Ltd. [2008] 319 ITR (St.) 5 (SC). 12. The main submission of the learned counsel for the assessee is that once the assessee had been able to show that the shareholder companies were duly incorporated by the Registrar of Companies, their identity stood established, genuineness of the transactions stood established as payments were 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 channeliz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents. 15. Summarizing the legal position in Nova Promoters and Finlease (P) Ltd. (supra), and highlighting the legal effect of section 68 of the Act, the Division Bench has held as under:- 32. The tribunal also erred in law in holding Assessing Officer ought to have proved that the monies emanated from the coffers of the assessee-company and came back as share capital. Section 68 permits the Assessing Officer to add the credit appearing in the books of account of the assessee if the latter offers no explanation regarding the nature and source of the credit or the explanation offered is not satisfactory. 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 appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficient material on the basis of which the Assessing Officer can be said to have discharged the duty. The statements refer to the practice of taking cash and issuing cheques in the guise of subscription to share capital, for a consideration in the form of commission. As already pointed out, names of several companies which figured in the statements given by the above persons to the investigation wing also figured as share-applicants subscribing to the shares of the assessee-company. These constitute materials upon which one could reasonably come to the conclusion that the monies emanated from the coffers of the assessee-company. The Tribunal, apart from adopting an erroneous legal approach, also failed to keep in view the material that was relied upon by the Assessing Officer. The CIT (Appeals) also fell into the same error. If such material had been 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 unfortunate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on was received from so called directors of the companies. ix. Sh Tarun Goyal appears in all the scrutiny assessments as well as appeals of his companies himself before various income' tax authorities. From verification carried out in respective wards/ circles where the above mentioned companies are assessed, it is' evident that Sh Tarun Goyal is appearing in all the income tax proceedings on behalf of all the companies. He is not charging any fees for appearing in these cases. x. During the post search investigation it was revealed that besides, aiding and abetting the evasion of taxes, Sh Tarun Goyal has been indulging in violation other provisions of the law of the land. This matter has also been taken up by REIC for multi-agency probe. (e) The respondent-assessee did not have any business income in the year ending 31st March, 2007 and had income from other sources of ₹ 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 ₹ 12.17 lakhs in the year ending 31st March, 2008. (f) Shares of face value of ₹ 10/- each were issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or not the AO had reason to believe that income chargeable to tax has escaped assessment while issuing the impugned notice dt. 25th March, 2013. It is well-settled that the reason to believe cannot be founded merely on change of opinion, in this case the grounds/reasons recorded for reopening the assessment were not the issues which were considered by the AO while passing the assessment order dt. 18th May, 2010 in respect of asst yr. 2008-09. This is evident from the fact that during the assessment proceeding no query was raised by the AO with regard to the grounds /reasons now recorded for reopening the assessment under s. 147/148 of the Act. Therefore, there was no occasion for the AO to apply his mind to the tangible material to form any opinion with regard to it during the original assessment proceeding. It has been held by this Court in Export Credit Guarantee Corpn. of India Ltd. v. Addl. 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 havi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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. These shareholders who are member of public are un-known persons to the company issuing shares and the company issuing shares have no control/mechanism to verify their creditworthiness etc. and the burden of proof in such cases is different, but there is another class of companies which are closely held private companies in which public are not substantially interested which are mostly family controlled closely held private companies and these companies raise their share capital from their family members, relatives and close friends and in these class 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 subscri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de some bogus purchases. This could be due to some error in typing due to copying of the matter from some other order but is not sufficient to erase the entire reassessment proceedings and such contentions stood rejected., keeping in view provisions of Section 292B of the 1961 Act. Thus, keeping in view the factual matrix of the case, the aforesaid information received by the AO from learned CCIT which was based on intelligence form DGIT(Intelligence and Criminal Investigation) about the assessee which is a newly incorporated closely held private company raising huge share premium on the equity shares issued by it within short span of its incorporation without having any asset base/business in hand , in our considered view , did give rise to reasons to believe and having a live link with formation of belief that the income has escaped assessment, more-so original assessment was not framed 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 ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 huge amounts without being concerned about the return and safety of such investment. Thus , it is an harsh reality that India is facing a menace of parallel economy which the Courts can not shut their eyes to these realities plaguing the Indian economy and destroying the economic fabric of India. It is in this directions to control these menace , measures like Prevention of Money Laundering Act , Benami Transactions (Prohibition) Act ,1988 and Prohibition of Benami Property Transactions Act,1988 were brought into statute by Parliament. The drastic measures like demonetisation of currency notes of ₹ 500 and ₹ 1000 taken by Government Of India are the steps to curb these menace only. Reference is drawn 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in computing the tax or interest payable by, or refundable to, the assessee, the following adjustments shall be made in the income or loss declared in the return, namely:- (i) any arithmetical errors in the return, accounts or documents accompanying it shall be rectified; (ii) any loss carried forward, deduction, allowance or relief, which, on the basis of the information available in such return, accounts or documents, if prima facie admissible but which is not claimed in the return, shall be allowed; (iii) any loss carried forward, deduction, allowance or relief claimed in the return, which, on the basis of the information available in such return, accounts or documents, is prima facie inadmissible, shall be disallowed : Provided further that an intimation shall be sent to the assessee whether or not any adjustment has been made under the first proviso and notwithstanding that no tax or interest 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 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed. 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 be included in a notice under sub-section (2) of section 139; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section. (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so. 11. It is to be noted that substantial changes have been made to section 143(1) with effect from June 1, 1999. Up to March 31, 1989 , after a return of income was filed the Assessing Officer could make an assessment under section 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 incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s correction of errors apparent on the basis of the documents accompanying the return. The Assessing Officer had no authority to make adjustments or adjudicate upon any debatable issues. In other words, the Assessing Officer had no power to go behind the return, accounts or documents, either in allowing or in disallowing deductions, allowance or relief. 13. One thing further to be noticed is that intimation under section 143(1)(a) is given without prejudice to the provisions of section 143(2). Though technically the intimation issued was deemed to be a demand notice issued under section 156, that did not per se preclude the right of the Assessing Officer to proceed under section 143(2). That right is preserved and is not taken away. Between the period from 1-4-1989 to 31-3-1998, the second proviso to section 143(1)(a), required that where adjustments were made under the first proviso to section 143(1)(a), an intimation had to be sent 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. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 143(1)(a) as it stood prior to 1-4-1989, the Assessing Officer had to pass an assessment order if he decided to accept the return , but under the amended provision, the requirement of passing of an assessment order has been dispensed with and instead an intimation is required to be sent. Various circulars sent by the Central Board of Direct Taxes spell out the intent of the Legislature, i.e., to minimize the departmental work to scrutinize each and every return and to concentrate on selective scrutiny of returns. These aspects were highlighted by one of us (D.K. Jain J) in Apogee International Ltd. v. Union of India [1996] 220 ITR 248 (Delhi). It may be noted above that under the first proviso to the newly substituted section 143(1), with effect from 1-6-1999, except as provided in the provision itself, the acknowledgement of the return shall be deemed to be an intimation under section 143(1) where (a) either no sum is payable by the assessee, 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 . Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:- (a) where income chargeable to tax has been under assessed; or (b) where such income has been assessed at too low rate; or (c) where such income has been made the subject of excessive relief under this Act or under the Indian Income-tax Act, 1922 (11 of 1922); or (d) where excessive loss or depreciation allowance has been com- puted. Explanation 2.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not neces-sarily amount to disclosure within the meaning of this section. 16. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word reason in the phrase 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 esc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso. 18. So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued. 19. Inevitable conclusion is that High Court has wrongly applied Adani Exports case (supra) which has no application to the case on the facts in view of the conceptual difference between section 143(1) and section 143(3) of the Act. The Reliance is also placed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent 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 assessment under Section 143(1)(a), the question of change of opinion, as contended, does not arise. 3. The offshoot of the aforesaid discussion is to hold that judgment of the High Court is erroneous and warrants to be set aside. We allow this appeal setting aside the impugned judgment of the High Court. 4. We find that pursuant to the notice issued under Section 143 of the Income Tax Act, the assessing officer had computed the income by passing the assessment orders on merits and rejecting the contention of the respondent that the aforesaid transaction did not amount to a sale in the assessment year in question. Against that assessment order, the respondent had preferred the appeal before the Commissioner 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, sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the relevant time) fulfillment 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 conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (see ITO v. Selected Dalurband Coal Co. Pvt. Ltd. [1996 (217) ITR 597 (SC)]; Raymond Woollen Mills Ltd. v. ITO[1999] 236 ITR 34 (SC). 17. The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the provisions as they stood 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report also referred to the said company income and tax paid for various years between financial years 2010-11, 2012-13 and noted that the gross profit and profit before tax were negligible and the tax paid in all three years was nil. The investigation wing also provided copies of the bank's statement of FSPL for the period between 22nd May, 2012 to 31st March, 2012 and conveyed that from the bank statement and further investigation it was clear that the funds had been routed through the accounts of the said company. The funds thus received were immediately transferred or remitted to other accounts by way of RTGS fund transfer pointing out that the real beneficiaries were the petitioner and other similar companies, in whose account the unaccounted money was brought through regular books of accounts. 10. In our opinion, the information supplied by the investigation wing to the Assessing Officer thus formed a prima facie basis to enable Assessing Officer to form a belief of 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Customs authorities found that the assessee was systematically under- voicing the value of Manganese as compared with the prevailing market price. The Income Tax Officer on coming to know about the proceedings before the Customs Collector in this respect issued notice for reopening of the assessment. In the reasons that the Assessing Officer relied on the facts as found by the Customs Authorities that the assessee had under-voiced goods during export. Under such circumstances, upholding the validity of the notice for reopening, the Supreme Court held and observed as under: So far as the first condition is concerned, the Income Tax Officer, in his recorded reasons, has relied upon the fact as found by the Customs Authorities that the appellant had under invoiced the goods it exported. It is not doubt correct that the said finding may not be binding upon the income tax authorities but it can be a valid reason to believe that the chargeable income has been under assessed. The final 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the High Court is set aside and the Writ Petitions filed by the respondents are dismissed. No order as to costs. 12. In case of Income Tax Officer v. Selected Dalurband Coal Co. Pvt. Ltd. (supra), the assessment was reopened on the basis of the information contained in letter from Chief Mining Officer that the colliery of the assessee had been inspected and there had been under reporting of coal raised. Upholding the validity of re-opening of assessment, the Supreme Court held and observed as under: After hearing the learned counsel for the parties at length, we are of the opinion that we cannot say that the letter aforesaid does not constitute relevant material or that on that basis, the Income Tax Officer could not have reasonably formed the requisite belief. The letter shows that a joint inspection was conducted in the colliery of the respondent on January 9, 1967, by the officers of the Mining Department in the presence of the representatives of the assessee and according 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue and full disclosure of facts. It is also noticeable that there was specific information received from the office of the DIT (INV-V) as regards the transactions entered into by the assessee company with number of concerns which had made accommodation entries and they were not genuine transactions. As we perceive, it is neither a change of opinion nor does it convey a particular interpretation of a specific provision which was done in a particular manner in the original assessment and sought to be done in a different manner in the proceeding under Section 147 of the Act. The reason to believe has been appropriately understood by the assessing officer and there is material on the basis of which the notice was issued. As has been held in Phool Chand Bajrang Lal (supra), Bombay Pharma Products (supra) and Anant Kumar Saharia (supra), the Court, in exercise of jurisdiction under Article 226 of the Constitution of India pertaining to sufficiency of reasons for formation of the belief, cannot interfere. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 288 ITR(A.T.) 207, also vide para 19 upheld reopening of concluded assessment u/s 147 of the 1961 Act, by holding as under: 19. We now turn to the main question whether the CIT(A) was right in holding that the Assessing Officer did not have reason to believe that income had escaped assessment, but merely had reason to suspect . The CIB had written to the Assessing Officer on 16-12-1997 that during the financial year 1992-93 the assessee has received a gift of ₹ 21 lakhs from an NRE Shri Jagjit Singh Kochhar and that the investigation wing has noticed that the gift is bogus and arran- ged by a chartered accountant by name S.L. Batra through NRE accounts (account numbers given) and that the assessee had made cash payments along with premium to obtain the gifts. This is definite information coming to the possession of the Assessing Officer from another wing of the income-tax department which is entrusted with the task of collecting information relevant to the detection of tax evasion. The Assessing 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proceeding is not relevant and what is required is reason to believe but not the established fact of escapement of income . It was held that 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 conclusively prove the escapement is not the concern at that stage . Therefore, there is no force in the submission of the learned counsel for the assessee that the Assessing Officer had not held any enquiry into the veracity of the letter received from the CIB or had not conducted an investigation to check the allegation in the letter before issuing the notice. 20. We have to remember the fundamental proposition that when the Assessing Officer initiates action to reopen the assessment, he may do so on the basis of material which may lead him to the formation of a prima facie or tentative conclusion that income chargeable to tax has escaped taxation. Such material may turn 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that ingredients of Section 68 of the 1961 Act stood complied with and on that finding of fact, the Hon‟ble Bombay High Court came to conclusion that no perversity in the order of the tribunal was shown by Revenue . It came to conclusion that no substantial question of law arose and was not entertained. While adjudicating this appeal, the Hon‟ble Bombay High Court noted that 98% of the equity was subscribed by IDFC Private Equity Fund-II which is manager of IDFC Limited. 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 which is a closely held private company to discharge its onus to establish identity, creditworthiness of the subscribers and genuineness of the transactions for raising share capital including share premium. The assessee has also relied upon the decision of Hon‟ble 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment. The amendment was brought by Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and now the AO can reopen the assessment if he has reasons to believe that income has escaped assessment and in case assessment is not framed u/s 143(3) and the case is to be reopened within four years from the end of assessment year,there is no requirement as to the failure or omission on the part of the assessee to disclose truly and fully all material facts necessary for assessment. The Hon‟ble Apex Court in the case of ACIT v. Rajesh Jhaveri Stock Brokers Private Ltd ( 2007) 161 taxman 316(SC) has elaborately discussed about the implication of amendment in provisions of Section 147 of the 1961 Act, which we have reproduced in preceding para‟s of this order. Thus, this decision we are afraid is not of any help to the assessee as it relates to pre-amended provisions of Section1 47 of the 1961 Act. The assessee has also relied upon decision of Hon‟ble Gujarat High Court in the case of PCIT v. Manzil Dinesh 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, informa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us, we have elaborately discussed about the reasons for reopening and factual matrix of the assessee case and are of the view that there was a nexus of the reasons recorded for reopening of the concluded assessment with the formation of belief that income has escaped assessment. The raising of huge share capital at a very high 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 Section 147 of the 1961 Act more-so the return of income was originally processed u/s 143(1) of the 1961 Act and reopening is sought to be done within four years from the end of the assessment year. The assessee has also relied upon decision of Mumbai-tribunal in the case of DCIT v. Piramal Realty Private Ltd. in ITA no. 2317/Mum/2017 decided on 16.11.2018. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncluded assessment. In the instant case, the learned CCIT based on intelligence inputs from DGIT(Intelligence and Criminal Investigation) has informed the AO that the assessee has issued equity shares at a high premium. The return of income was originally processed u/s 143(1) and no scrutiny assessment was framed u/s 143(3) of the 1961 Act. The reopening u/s 147 was sought to be done within four years from the end of the assessment year and amended provisions of Section 147 shall be applicable. The processing of return of income u/s 143(1) cannot be called as an assessment as was held by Hon‟ble Apex Court in the case of Rajesh Jhaveri Stock Brokers Private Limited(supra) . The AO must have tangible material to come to formation of a belief that income has escaped assessment. The assessee was incorporated only on 14.01.2009 and this is the first year of its operation. There is a meagre income earned by the assessee for the year ended 31.03.2009. There are no assets base nor any business of the assessee as is discernible from the financial statements filed before us. The assessee being a newly incorporated company has issued equity shares of ₹ 10 each at a premium of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the one hand has stated that since the issue is decided by her on legal ground wherein reopening of the assessment was considered as invalid and bad in law , thus, there is no reason for her to adjudicate the issue on merits and at the same breath she has placed reliance on decision of Hon‟ble Bombay High Court in the case of CIT v. Gagandeep Infrastructures Private Limited in ITA no. 1613 of 2014, order dated 20.03.2017 to allow grounds of appeal raised by the assessee challenging assessment order on the merits of the issue. The learned CIT(A) passed a very cryptic order which in our opinion is not sustainable in the eyes of law as the learned CIT(A) whose powers are co-terminus with the powers of the AO is required to adjudicate on the factual matrix of the case keeping in view provisions of Section 68 of the 1961 to see whether evidence on record satisfy the ingredients of provisions of Section 68 of the 1961 Act as to identity and creditworthiness of the subscribers and genuineness of the transaction of raising of share capital and share premium. Thus, on merits also the appellate order passed by learned CIT(A) is not sustainable in the eyes of law and we set aside the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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