9911796707
TMI Blog2019 (4) TMI 270X X X X Extracts X X X X X X X X Extracts X X X X ..... the share capital. 3. The facts in brief are that assessee has filed its return of income on 29.3.2007 which was duly processed u/s 143(1). Thereafter a notice u/s 148 was issued on 16.3.2013. Before issuing of notice, AO has recorded following reasons: - 1. Name and address of the assessee:_ M/s Randeep Investments P. Ltd. 202, Mohan Place, LSCC Block, Saraswati Vihar, Delhi-110014 2. PAN AACCR0988D 3 Status Company 4. Ward/Circle : Ward-15(2) 5. Asstt. Year in respect of which it is proposed to issue notice u/s 148 : 2006-07 6. The quantum of income which has escaped assessment Rs.1,72,75,483/- 7. Whether the assessment is proposed to be made for the first time : Yes 8. If answer to item 7 is negative state (a) Income originally assessed NA (b) Whether it is a case of under assessment, at lower rate, assessment which has been made the subject of excessive relief or allowing excess loss/depreciation NO 9. Whether the provision of Sec. 150(1) are applicable. If the reply is in affirmative the relevant facts may be stated against Item No. 11 and 8 may also be bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove statements it is also clear that Sh. S. K. Gupta worked as an entry operator and provided accommodation entries to various beneficiaries through a large number of entities controlled and managed by him. Cash was received from the beneficiaries through mediators and was deposited in the bank accounts of these entities and thereafter it was transferred to the bank accounts of the ultimate beneficiaries through conduit / intermediary companies floated by Sh. Gupta. Subsequently, Sh. S.K Gupta also filed petition before the Income tax Settlement commission, Delhi for the assessment year 2008-09 wherein he admitted an additional income Rs. 68,76,755/- on account of commission/premium earned for providing accommodation entries to various beneficiaries. In the Statement of Facts (SOF) filed by Sh. S.K Gupta before Hon'ble Settlement Commission, he admitted that he used to provide accommodation entries through 32 companies and two individuals which were used as conduits/ routes from where cheques used to be given to be beneficiaries. This fact has also been endorsed by the Hon'ble Settlement Commission vide its order dated 22.06.2012 in settlement application number DL/DC53/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 771506 DTD 28.03.05 CHAMP FINVEST SIB 250000 Randeep Investment P. Ltd 23.04.05 CH NO 772488 DTD 29.03.05 OMNI FARMS SIB 25(^000 Randeep Investment P. Ltd 23.04.05 CH NO 772489 DTD 29.03.05 OMNI FARMS SIB 250000 Randeep Investment P. Ltd 27.04.05 CH NO 000031 DTD 22.04.05 ADVANTAGE KOTAK 1000000 Randeep Investment P. Ltd 27.04.05 CH NO 000032 DTD 23.04.05 ADVANTAGE KOTAK 500000 Randeep Investment P. Ltd 27.04.05 CH NO 000033 DTD 25.04.05 ADVANTAGE KOTAK 400000 Randeep Investment P. Ltd 11.05.05 CH NO 754665 DTD 07.05.05 CENTRAL GUMS REGAL SIB 850000 Randeep Investment P. Ltd 06.06.05 CH NO 219271 DTD 01.06.05 GIRASHO COMPANY OBC 500000 Randeep Investment P. Ltd 06.06.05 CH NO 219272 DTD 01.06.05 GIRASHO COMPANY OBC 300000 Randeep Investment P. Ltd 06.06.05 CH NO 219299 DTD 02.06.05 VISHRUT MARKETING OBC 500000 Randeep Investment P. Ltd 13.06.05 CH NO 258955 DTD 11.06.05 GIRASHO COMPANY OBC 500000 Randeep Investment P. Ltd 16.06.05 DO NO 063418 DTD 15.6.05 DRAWN SINO CREDITS SYNDICATE 175483 Randeep Investment P. Ltd 26.06.05 CH NO 239007 DT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee company and also establishes the link with the self-confessed "accommodation entry providers", whose business is to help assesses bring into their books of account their unaccounted money. I have therefore, reasons to believe that income to the extent of Rs. 1,72,75,483/- has escaped assessment. Thus, the same is to be brought to tax under section 147/148 of the I.T. Act 1961. Notice u/s 148 may be issued, if approved." 4. AO on the basis of the aforesaid reasons observed that assessee company had obtained alleged accommodation entries from various companies for sums aggregating to Rs. 1,72,75,483/-. Before the Ld. AO, assessee raised objections challenging the validity of reopening on various counts, however, AO rejected most the objections, except for the fact that the assessee had pointed out that out of the sums mentioned in the reasons, sum of Rs. 19,25,483/- was never received by the assessee at all or the cheques have been returned unpaid, the details of which were given, which has been accepted by the AO. Ld. AO, while making the addition has mostly harped upon the fact that Shri S.K. Gupta during the course of the statement recorded on 20.11.2007 and again su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons have been recorded and notice U/S 148 has been issued. c) It is further requested that the Assessee may be allowed to cross examine Sh. SK. Gupta. d) Notice u/s 148 has been issued after obtaining the necessary satisfaction of the Addl. CIT, Range 15, New Delhi as mentioned in the said notice. Copy of such sanction may please be issued. It was stated that the rest of the details would be filed after the abovementioned documents have been received by the Assessee so as to enable the Assessee to file further objections to proceedings-initiated u/s 147/148 of IT Act. However, the AO without even making available all the documents asked has disposed off the objections, except for the statement of Shri S.K. Gupta recorded on 20.11.2007 and general note given by ACIT, Central Circle on accommodation entry provided by Shri S.K. Gupta. From the statement of Shri S.K. Gupta it was pointed out before the Ld. CIT(A) that: - a) The name of the assessee company is not at all mentioned in above statement. b) The following companies mentioned in the reasons recorded who have allegedly given accommodation entries to the assessee company are also not mentioned in such statement: i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 147 for the A.Y. 2005-06. Thus, addition on account these amounts cannot be made in this assessment year u/s 68. The details of these cheques received in the earlier assessment year i.e., 2005-06 were as under: - S. No. Ch.No./PO/DD and Date Conduit Companies through which cheques issued Bank A/c of such conduit company issuing bank Amount (Rs.) 1 Ch. No. 765760 DTD 28.03.05 Champ Finvest SIB 1000000 2 Ch. No. 771505 DTD 28.03.05 Champ Finvest SIB 1000000 3 Ch. No. 766199 DTD 28.03.05 Champ Finvest SIB 1000000 4 Ch. No. 771507 DTD 28.03.05 Champ Finvest SIB 250000 5 Ch. No. 771506 DTD 28.03.05 Champ Finvest SIB 250000 Total 35,00,000 10. Apart from that, it was also pointed out that AO himself has admitted in the remand report that certain cheques have been considered in the assessment year 2005-06. The relevant portion of the remand report of the AO reads as under:- S. No. Ch.No./PO/DD and Date Conduit Companies through which cheques issued Bank A/c of such conduit company issuing bank Amount (Rs.) 6 Ch. No. 772448 DTD 29.03.05 Omni Farms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting Pvt. Ltd. Rs. 700000 e) Zenith Estates Ltd. Rs. 500000 f) AGM Holdings Pvt. Ltd. Rs. 500000 Rs.85,50,000 The relevant observation and finding of the Ld. CIT(A) are as under: - "4.3 The addition on account of share application money has been made by the AO on the basis of statements of Sh. S.K. Gupta recorded on 20/11/2007 and 26/12/2008 by the Investigation Wing of the Income-tax Dept. in which he has admitted of providing bogus accommodation entries to various entities. However, the Appellant has submitted that addition could not be made on the basis of such statements as such statements had been recorded behind the back of the Appellant in some other proceedings not related to the Appellant Co. It has further been submitted that despite several requests made by the Appellant, the AO did not allow cross-examination of Sh. S.K. Gupta. The Appellant has also contended that it is nowhere mentioned in such statements of Sh. S.K. Gupta that accommodation entries have been given to the Appellant. Besides, the above submissions of the Appellant have not been controverted by the AO in the remand report. 4.4 Further, according to the AO in the remand repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a 'reasons' could not be sustained for reopening the assessment. Here in this case, firstly, cheques aggregating to Rs. 35,00,000/- were not received in the relevant assessment year as the same were received during the assessment year 2005-06 and shares were also allotted on 31.5.2005. This he pointed out that has been accepted by the AO in his remand report also. Secondly, in so far as cheques aggregating to Rs. 5,00,000/- received from Omni Farms, this again pertains to the earlier assessment year which again has been accepted by the AO in the remand proceedings. Thirdly, he pointed out that in case of following five companies as recorded in the 'reasons', assessee has not even received any cheque or amount: - S.No. Cheque No/PO/DD & date Conduit Cos. through which cheque issued Amount (Rs.) 16. DD No.063418 Dt. 15.06.05 Sino Credits 1,75,483 17. Ch. No.239007 Dt.18.06.05 Chanderprabhu 5,00,000 29. Ch. No.242331 Dt.18.07.05 AGM Holdings Ltd. 5,00,000 30. Ch. No.242330 Dt.18.07.05 AGM Holdings Ltd. 5,00,000 36. DD No.303186 Dt. 27.03.06 Vishrut Marketing 2,50,000 Total 19,25,483 He submitted that with regard to the above entries, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious contentions, he has relied upon judgment of Hon'ble Delhi High Court in the case of i) CIT vs. RMG Polyvinyl (I) Ltd. reported in 396 ITR 5; and ii) Principal CIT vs. SNG Developers Ltd. 404 ITR 312. 14. On merits, Ld. Counsel submitted that the assessee has raised fresh share capital of Rs. 3,67,03,000/-, out of which AO has made addition of share capital of Rs. 1,53,50,000/- from 9 share subscribers. All the share subscription money were received through account payee cheques, and all the entities were income tax assesses and to prove the identity, genuineness and creditworthiness of share subscriber Companies, following documents were submitted: - i. Copy of Share Application Forms ii. Copy of Board Resolutions authorizing Investment in the assessee company. iii. Copy of Confirmation. iv. Copy of the Bank Statement of the share subscriber Cos. v. Copy of Income Tax Return and PAN vi. Copy of the Balance Sheet and Profit & Loss Account. vii. Copy of Memorandum of Association. viii. Company Master Data from ROC site evidencing current registered office of the company and the status of annual filing. (ix) Form No. 18 evidencing the current registered office of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to first apply his mind on the facts and assessment records of the assessee and prima facie reach to a conclusion that there is some kind of link or nexus which such material/information, then he can clothe himself with the jurisdiction to reopen the case u/s 147. Here in this case, AO in his 'reasons recorded' has referred to information received from ACIT, Central Circle, 22, New Delhi, stating that during survey u/s 133A conducted by the Investigation Wing, Delhi in the case of Shri S.K. Gupta on 20.11.2007, it was gathered that he had floated several companies /firms in which he and his family members as well as employees were providing accommodation entries to the beneficiaries through banking channels to give colour of genuineness of the transactions. In a statement recorded u/s 131, Mr. S.K.Gupta has admitted that he is controlling around 30 companies through which he was carrying out the business of providing accommodation entries to various beneficiaries. From the list of the entries, it was noticed that assessee company too has taken as much 37 accommodation entries. Nowhere from the details mentioned in the 'reasons recorded' it is borne out, what kind of benefit asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28.03.05 Champ Finvest 1000000 2 Ch. No.771505 DTD 28.03.05 Champ Finvest 1000000 3 Ch. No.766199 DTD 28.03.05 Champ Finvest 1000000 4 Ch. No.771507 DTD 28.03.05 Champ Finvest 250000 5 Ch. No.771506 DTD 28.03.05 Champ Finvest 250000 Total 35,00,000 The aforesaid amounts were clearly received in the earlier assessment year 2005-06, which fact has been accepted by the AO and Ld. CIT(A) also. This shows that certain portion of the information re ceived by the AO did not pertained to the assessment year in question, i.e., assessment year 2006-07. In fact, this amount of Rs. 35,00,000/- has been accepted by the AO in the scrutiny assessment passed u/s 143(3)/147 for the assessment year 2005-06. Thus, AO has not even examined the assessment record properly. * The second glaring mistake is that cheques from Omni Farms aggregating to Rs. 5,00,000/- the details of which are as under: - S. No. Cheque No/PO/DD & date Conduit Cos. through which cheque issued Amount (Rs.) 6. Ch. No.772448 DTD 29.03.05 Omni Farms 2,50,000 7. Ch. No.772489 DTD 29.03.05 Omni Farms 2,50,000 Total 5,00,000 This amount too was rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of, CIT vs RMG Polyvinyl (I) Ltd., (reported in 396 ITR 5) in the following manner: - "9. The two glaring errors in the reasons in the present case are, in fact, unusual. What the AO might have done if he was aware, even at the stage of consideration of reopening of the assessment that a return had in fact been filed by the Assessee and that the extent of the accommodation entries was to the tune of Rs. 78 lakh and not Rs. 1.56 crore would be a matter of pure speculation at this stage. He may or may not have come to the same conclusion. But that is not the point. The question is of application of mind by the AO to the material available with him before deciding to reopen the assessment under Section 147 of the Act. 10. In this context the following observations of this Court in CIT v. Suren International (2013) 357 ITR 24 (Del) are relevant: "....In the first instance, we do not find the reasons as recorded by the Assessing Officer to be reasons in law, at all. A bare perusal of the table of alleged accommodation entries included in the reasons as recorded, discloses that the same entries have been repeated six times. This is clearly indicative of the callous manne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. For the aforementioned reasons, the Court is satisfied that no error was committed by the ITAT in holding that reopening of the assessment under Section 147 of the Act was bad in law." 20.1 Similarly, in the case of Principal CIT vs. SNG Developers Ltd. (reported in 404 ITR 312) again the Hon'ble Jurisdictional High Court has held that, in wake of various discrepancies found in the reasons recorded and in the actual facts, the reasons for reopening assessment cannot be sustained. The relevant observation and finding of the Hon'ble High Court reads as under :- "11 In the considered view of the Court, neither of the above two cases come to the aid of the Revenue in the present case where the facts speak for themselves. The reasons for reopening the assessment have already been set out hereinbefore. The Court has again perused Annexure - B thereto. As already noticed by the ITAT, there is a repetition of at least five entries. In other words, the total amount constituting the so-called accommodation entries would therefore not work out to Rs. 95,65,510. On the face of it, therefore, there is a non-application of mind by the AO. What is further unacceptable is that the AO persis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 147 (1) of the Act. " 13. In view of the said decision, the Court has no hesitation in concluding in the present case that the reasons recorded by the AO for reopening the assessment under Section 47 of the Act do not meet the requirement of the law. The ITAT was, therefore, perfectly justified in confirming the order, of the CIT(A) and holding the reopening of the assessment to be bad in law". 21. Accordingly, we agree with the contentions of the Ld. Counsel that, if there are such a huge amount of discrepancy and mistakes in the 'reasons recorded', divorced from the facts of the case, then such reasons cannot clothe the AO with the jurisdiction to reopen the assessment u/s 147. Here in this case AO in his remand report submitted before the Ld. CIT(A) and also in view of the observation made by the Ld. CIT(A), it is amply established that there are various discrepancies and it is for this reason alone, Ld. CIT(A) has deleted the various additions. Hence, we hold that such 'reasons recorded' cannot be held to be in accordance with law, and because of such huge discrepancy and errors, it cannot be held that AO could have entertained 'reason to believe' based on borrowed s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mar,05 5,00,000 Deepak Jain 16.03.2005 Vashudeva Farms Pvt. Ltd Randeep Investment P Ltd. SIB 766991 14 Mar,05 5,00,000 Deepak Jain 16.03.2005 Vashudeva Farms Pvt. Ltd Randeep Investment P Ltd. SIB 766992 23 Feb,05 5,00,000 Deepak Jain 11.03.2005 Chanderpra bhu Finvest P. Ltd. Randeep Investment P Ltd. SIB 806660 31 Mar,05 8,50,000 Deepak Jain 31.03.2005 Viagra Trading Co. P. Ltd. Randeep Investment P Ltd. SIB 772507 31 Mar,05 1,50,000 Deepak Jain 31.03.2005 Omni Farms P. Ltd. Randeep Investment P Ltd. SIB 772584 31 Mar,05 6,50,000 Deepak Jain 31.03.2005 Viagra Trading Co. P. Ltd. Randeep Investment P Ltd. SIB 772506 31 Mar,05 5,00,000 Deepak Jain As per the AO, Assessee received accommodation entries aggregating to Rs. 72,00,000 from 6 parties as referred above, the summary of which is again given as under: Name Amount fRs.J Giriasho 15,50,000 S.J. SEC 20,00,000 Vashudeva 15,00,000 Chanderprabhu 8,50,000 Viagra 6,50,00.0 Omni 6,50,000 Total 72,00,000 However, as per assessment order, assessee received share application money from the above mentioned 6 parties aggregating to Rs. 73,50,000 as per detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer which is an apparent case of nonapplication of mind. We find that the identical case was considered by Hon 'ble Jurisdictional High Court in the case of Suren International P. Ltd. [supra], wherein at page 32 of the Report, their Lordships held as under: - "13. We have heard counsel for the parties at length. 14. The learned counsel for the appellant contended that even though there is no specific allegation that the assessee had failed to disclose all the material facts but the same can be gleaned from the reasons itself. We are unable to accept this contention. In the first instance, we do not find the reasons as recorded by the Assessing Officer to be reasons in law, at all. A bare perusal of the table of alleged accommodation entries included in the reasons as recorded, discloses that the same entries have been repeated six times. This is clearly indicative of the callous manner in which the reasons for initiating reassessment proceedings are recorded and we are unable to countenance that any belief based on such statements can ever be arrived at. The reasons have been recorded without any application of mind and thus no belief that income has escaped assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above party - Copies of Confirmations - Print out of assessment particular of their directors from income tax site - Copy of Assessee's letter dated 08/03/2013 alongwith latest income tax returns as filed by the above share subscriber for the following assessment years: - Assessment Year 2012-13 - Assessment Year 2011-12 (original and revised) - Assessment Year 2010-11 - Copy of notice issued by the AO u/s 133(6) dated 06/03/2013 to such party for confirmation of the above transaction for the assessment year 2005-06 Copy of reply of such party dated 18/03/2013 alongwith the following documentary evidences confirming theshare application money paid by the said party to the Assessee Co. f) M/s Omni Farms Pvt. Ltd. Rs. 5,00,000 received in AY 2005- 06- The following documents were filed to prove the identity, genuineness and creditworthiness of such party: - Copy of letter dated 01/03/2013 - Copy of share application - Copies of Income Tax Return - Copies of Bank Statement of the above party - Copies of Confirmations Print out of assessment particular of their directors from income tax site - Copy of latest income tax returns as filed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ificate from Qualified Company 261-267 Secretary alongwith its filing with ROC. Income Tax particulars of Current Directors of the 268-271 company as per Income Tax Site. i) M/s Central Gum & Chemicals Ltd. Rs. 8,50,000- The following documents were filed to prove the identity, genuineness and creditworthiness of such party: Copy of Share Application Money received Copy of Board Resolution authorizing Investment in the assessee company Copy of Confirmation. Copy of Bank Statement of South Indian Bank Ltd, of the share applicant Copies of Income Tax Return & PAN. schedules of the applicant company for the FY 2005-06. Copy of Memorandum of Association. Company Master Data from ROC site evidencing current registered office of the company and the status of annual filing. In the case of this share subscriber returns are updated up to 31-3-2010. Form No. 18 evidencing the current registered office of the company List of Current Directors with addresses as per MCA records enclosed. Annual Return as per Form 23AC for the FY 2009-10 as filed with ROC, Delhi & Haryana. Compliance Certificate from Qualified Company Secretary alongwith its filing wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Current Directors of the company as per Income Tax Site. I) M/s Chanderprabhu Financial Services Pvt. Ltd Rs. 23,00,000- The following documents were filed to prove the identity, genuineness and creditworthiness of such party: Copies of Share Application Money received. Copy of Board Resolution authorizing Investment in the assessee company. Copies of Confirmation Copies of Bank Statement of Oriental Bank of Commerce, of the share applicant Copies of Income Tax Returns & PAN. Copy of the Balance Sheet, Profit & Loss A/c alongwith schedules of the applicant company for the FY 2005-06. Copy of Memorandum of Association. Company Master Data from ROC site evidencing current registered office of the company and the status of annual .filing. In the case of this share subscriber returns are updated up to 31-3-2012. Form No. 18 evidencing the current registered office of the company List of Current Directors with addresses as per MCA records enclosed. Annual Return as per Form 23AC for the FY 2011-12 as filed with ROC, Delhi & Haryana. Compliance Certificate from Qualified Company Secretary alongwith its filing with ROC. Income Tax particulars of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per Income Tax Site. 0) Copy of Punjab & Sind Bank state~he Assessee Co. for the year under consideration. 25. Once these documents were furnished before the AO, he did not carry out any sort of prima facie inquiry from these companies nor he has issued any notices u/s 133(6) to these companies to examine the veracity of assessee's claim that nature and source of credit has been proved and the identity, creditworthiness and genuineness of the transaction has been established. AO has to bring some material on record to dislodge the veracity of the evidences filed by the assessee. In absence of any inquiry, such a material or documents filed by the assessee cannot be discarded. AO has simply relied upon the information received from Investigation Wing, without even carrying out any prima facie inquiry so as to show that assessee's contention or material filed by him cannot be relied upon. Even at the stage of Ld. CIT(A) no such inquiry has been done and most of the additions otherwise also stands deleted for the reasons that they were not received in this year but in the earlier years. We do not find any iota of evidence of material so as to confirm these additions on merits an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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