TMI Blog2020 (11) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... 197 - SUPREME COURT ] analyzed the distinction between the acceptance of a return u/s 143(1) and an assessment which is framed u/s 143(3) of the Act. In the former case, the AO would have much wider latitude to reopen the assessment. Intimation u/s 143(1) is not an assessment. Thus in the instant case, the AO has rightly issued notice u/s 148 for reopening the return of income processed u/s 143(1). Addition made on account of share application money u/s 68 - HELD THAT:- In the instant case, the onus clearly shifted to the AO. There was enough material before the AO in the shape of loan confirmation, ledger account, bank account statement to make further inquiry/verification in the above matter. In the instant case, the AO has not done even elementary/ preliminary inquiry to verify the genuineness of the transaction. The addition made by him is based on surmises and conjectures. The ratio laid down by the Hon ble Bombay High Court in the case of Orchid Industries Pvt. Ltd. [ 2017 (7) TMI 613 - BOMBAY HIGH COURT ] is squarely applicable here. Respectfully following the same, we delete the addition. Disallowance against cost of purchases and expenses - Addition from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the reasons recorded by the AO for reopening the assessment (para 5 of the assessment order dated 26.03.2015), which is reproduced below: In this case, assessee filed its return of income on 17/10/2007 declaring total income of ₹ 18,28,410/-. The return was processed u/s. 143(1) on 19/03/2009. In this case information has been received from the office of the DGIT (Inv), Mumbai vide his letter No. DGIT (Inv)/Information/PJ/2013-14 dated 07/3/2014, that a search action u/s 132 of the I.T. Act was conducted in the case Shri Pravin Kumar Jain Group on 01/10/2013. During the course of search proceedings statement of Shri Pravin Kumar Jain was recorded u/s. 132(4) of the I.T. Act, in which he admitted that he is indulged in providing accommodation entries and also explained the complete modus operands of providing such entries. The DGIT(Inv.) has given the extract of the statement of Q.66, from which it is observed that Shri Pravin Kumar Jain is engaged in the business of giving accommodation entries which are routed through the companies under his control. All the companies either owned by Shri Pravin Kumar Jain directly/indirectly under his control are paper companies wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. (supra) relied on the by the Ld. counsel, the assessee filed returns for the AY 2003-04 which was processed u/s 143(3) of the Act. Based on information received from the Directorate of Investigation about four entries, stated to have been received by the assessee on a single date, i.e., February 10, 2003, from four entities which were termed as accommodation entries, the AO issued notice to the assessee for reassessment for the AY 2003-04 on March 19, 2010 stating that it was evident that the assessee-company had introduced its own unaccounted money in its bank by way of accommodation entries. The assessee s appeal was dismissed by the CIT(A). The Tribunal concluded, from the reasons recorded, that the AO issued notice only on the basis of information received from the Investigation Wing but without coming to an independent conclusion for reason to believe that income had escaped assessment and allowed the appeal of the assessee. On appeal by the Revenue, the Hon ble Delhi High Court held : that once the date on which the so-called accommodation entries were provided was known, it would not have been difficult for Assessing Office, if he had in fact undertaken the exerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment 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 escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991] 191 ITR 662, for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfilment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is reason to believe , but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is stated by the AO that the appellant has invested ₹ 15 lacs in the concern of M/s, Javda India Impex Ltd., the Ld. CIT(A) ought to have held that the AO ought not to have assessed the loans obtained of ₹ 15 lacs from the said party as income for the year. 10. The facts are that during the Financial Year (FY) 2006-07 relevant to the AY 2007-08, the assessee received unsecured loan of ₹ 15,00,000/- from M/s Javda Impex Ltd. To verify the genuineness of transaction, the AO issued notice u/s 133(6) dated 16.02.2015 to M/s Javda Impex Ltd. which was served on 20.02.2015. The AO has recorded that the said concern did not file any reply. However, the assessee vide letter dated 09.02.2015 submitted the loan confirmation of M/s Javda India Impex Ltd. Further, it submitted that they had taken loan from Javda India Impex Ltd. and the said loan was recorded in their books of accounts and interest had been paid on the said loan. In this regard, the confirmation from the lender and their bank accounts were filed before the AO. However, the AO was not convinced with the above explanation of the assessee and observing that Javda India Impex failed to file any reply to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notice u/s 133(6) dated 16.02.2015 was served on M/s Javda Impex Ltd. on 20.02.2015, no compliance was made by the said concern to the AO. Further stating that the AO has rightly made the above additions, the Ld. DR relies on the order of the Ld. CIT(A). 14. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. In the case of Orchid Industries Pvt. Ltd. (supra), the Hon ble Bombay High Court, on the question whether the Appellate Tribunal was justified in deleting the addition made on account of share application money u/s 68 of the Act, relying only on the documentary evidence produced by the assessee though the entities were not traceable at their given address, held the following : That failure by the parties who had paid the share application money and to whom the share certificates were issued to appear before the Assessing Officer and the fact that the summons could not be served at the address given, as they were not traced and that in respect of some of the parties who had appeared before the Assessing Officer it was found that just before the issuance of cheques, the amounts were deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Respectfully following the same, we delete the addition of ₹ 15,00,000/- (unsecured loan) and ₹ 44,795/- (interest), made by the AO. Thus the 1st ground of appeal is allowed. 15. The 2nd ground of appeal In the facts and circumstances of the case and in law, the Ld. CIT(A) ought to have held that the addition made of ₹ 30,000/- representing expenditure assumed to have been incurred by the appellant for obtaining loan of ₹ 15 Lacs from M/s. Javda India Impex Limited is not sustainable in law as it is based on conjectures and surmises and hence, has to be deleted in assessing the income for the year. 16. In view of our decision, allowing the 1st ground of appeal, the 2nd ground of appeal is consequential and accordingly allowed. 17. The 3rd ground of appeal In the facts and circumstances of the case and in law, the Ld. CIT(A) ought to have held estimated disallowance made of ₹ 5 lacs against cost of purchases and expenses is not sustainable in law and accordingly ought to have directed the AO for deletion of the said disallowance. 18. In the assessment order dated 26.03.2015, the AO added back an amount of ₹ 5,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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