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TMI Blog2020 (9) TMI 1153X X X X Extracts X X X X X X X X Extracts X X X X ..... these companies were found from the residence of Shri Surendra Kumar Jain and Shri Virendra Kumar Jain itself and nothing was found at the other addresses. Detailed information regarding the accommodation entries being given by Shri Surendra Kumar Jain and Virendra Kumar Jain controlled / managed companies was received by the AO from the Directorate of Income-tax (Investigations), Delhi. Looking at the gravity of the information, the AO recorded reasons as required under section 147/ 148(2) and issued notice under section 148 of the Act to the assessee on 28th March 2012. Since the assessee did not file the return of income within 30 days of service of such notice and nobody attended before him, the AO issued a letter dated 15th October 2012 along with notice under section 142(1) and copy of notice under section 148 issued earlier through speed post fixing the hearing for 23rd October 2012. In response to the said letter dated 15th October 2012 and notice under section 142(1), the assessee submitted a letter dated 27th October 2012 through Speed Post wherein the assessee denied accepting of any accommodation entry and objected to the proceedings initiated under section 148. The rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee, apart from challenging the addition on merit, challenged the validity of the reassessment proceedings. However, the ld. CIT(A) dismissed all the grounds raised before him. So far as the validity of the reopening of the assessment is concerned the ld. CIT(A) dismissed the same by observing as under:- "2.6 Thus, all these decisions have clearly stated that where specific information is received by AO from the investigation wing and the AO applies his mind on such information and forms a reason to believe that income has escaped assessment, then reopening of the assessment will be a valid reopening. Considering above and taking the fact into consideration that the A.O has issued the notice under section 148 after obtaining the statutory approval of the JCIT. Further the A.O has also duly disposed the objection of the appellant against issue of notice vide order dated 07.11.2012 ,hence it is held that the case under consideration has been duly reopened after complying the provision of section 147 to 151 of the Act and order under section 147/143(3) dated 28.03.2013 is a legally valid order. Accordingly the additional ground and the ground no 1 to 4 taken by the appellant is di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld by the A.O that the assessee had failed to discharge the onus by proving the identity of the creditors/subscribers, genuineness of the transactions and the creditworthiness and, accordingly, made an addition in the hands of the assessee. Further since no supporting documents related to the share application money / share capital received from other parties was filed , total addition of Rs. 3,32,80,000/ was made under section 68 of the Act. 3.3 During the course of the appellate proceeding it has been submitted by the L.d A.r that the assessee had filed confirmation along with copy of balance sheet, ITR, bank statement, etc and thus, assessee had discharged its burden of proving basic details that were required for verification to fulfill the conditions i.e. identity of creditors, creditworthiness of the creditors and genuineness of transactions in relation to the share application money of Rs. 55,000,00/ is proved. Regarding the other amount received during the year it was submitted that Rs. 30,00,000/ was received from sister concern , Rs. 80,0000/ from Smt. Puneta Aggarwal and Rs. 2,00,000,00/ from various companies , which was refunded on 1.04.2005. 3.4 I have carefully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r was justified and sustainable. * The assessee in private limited company and shares are not offered to the public at large. * The persons who are subscribing to the share capital of the company should be well known i.e. either they may be friends/relatives. * From the subscriber's bank account statements it was apparent that the account is fabricated as there were corresponding cheque deposits in the bank accounts before issue of share application money cheques. * The subscribers did not bother and ensure protection of their investment by making compliance to the summon issued by the A.O. * Merely submission of the PAN number of allottees does not render the transactions as genuine since PAN Numbers are allotted on the basis of applications without actual de facto verification of the identity or ascertainment of the active nature of business activity. PAN number is allotted as a facility to revenue to keep track of transactions and thus, the PAN number cannot be blindly and without consideration of surrounding circumstances treated as sufficiently disclosing identity of the individual. * Mere production of PAN number or assessment particulars does not establish the id ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty Invest (P) Ltd V CIT while affirming of the order of the Hon'ble jurisdictional High Court has opined that where fabricated evidence has been adduced by the assessee to give colour of genuineness to bogus entries , the assessing officer was justified in making addition under section 68 of the Income Tax Act. Considering above and the fact that the addition in question under section 68 of the Act has been made by the A.O as the cash credit entries in the books of account of the assessee in the form of share application money were found to be not genuine transactions . Accordingly the addition on account of bogus share application money amounting to Rs. 55,00000/ received from S.K. Jain group of companies is confirmed . 3.7 Regarding the other addition of Rs. 2,77,80000/( Rs. 3,328,0000/Rs. 55,0000) it is noted that during the year under consideration the appellant has reqeived total share application of only Rs. 2,85,00000/ . Breakup of the same is as under a) From S.K .Jain group of companies Rs. 55,00000/ b) From other companies Rs. 2,30,00000/ c) From Puneeta Aggarwal Rs. 80,000/ Total Rs. 2,85,80,000/ The share was allotted from the b/f sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etion of assessment as provided u/s 153 of the I T Act. 6. The Ld. CIT has erred in conforming Addition of Rs. 2,85,80,000/- u/s 68 of the IT Act ignoring the facts that the Assessee had received the share application money of Rs. 55,00,000/- from the entities named in the reasons for which the assessee has discharged its burden u/s 68 and there was no adverse material and basis with the AO/CIT to support addition of the balance amount of Rs. 2,30,80,000/-. 7. The charging of Interest u/s 234B ignoring the provisions of 234B(3) need be quashed and the same need be rectified. 8. The appellant craves leave to add, delete, modify / amend the above grounds of appeal." 7. The ld. counsel for the assessee has also raised an additional ground which reads as under:- "On the facts and circumstances of the case and also in law, the impugned reassessment orderpassed by the Ld AO u/s 147/143(3) of the Act is invalid and void-ab-initio for want of valid notice u/s. 143(2) as per law as evident from fact that when return in response to notice u/s. 148 was admittedly filed on 04.03.2013, the notice u/s. 143(2) is issued on very same day i.e. 04.03.2013 which shows non application of mind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ix) M/s Superior Technologies P LtdITA No.2269/Del/2017 x) M/s Shiv Sai Infrastructure P. Ltd., ITA No.2527/Del/2017. 9. The ld. counsel for the assessee submitted that the AO, while recording the reasons has simply relied on the conclusion/inference drawn by the investigation wing and the reason does not demonstrate how the AO, after due application of mind, has reached to the above belief. Referring to the decision of the Hon'ble Delhi High Court in the case of Sabh Infrastructure vs. ACIT, 398 ITR 198 (Del), he submitted that the Hon'ble High Court has held that the reasons to believe have to be self-explanatory. He submitted that satisfaction reached by the AO in the instant case is borrowed satisfaction from other authority, i.e., DDIT (Investigation). Referring to page 4 of the assessment order, the ld. counsel for the assessee drew the attention of the bench to the direction issued by the ADIT (Investigations) to the AO for initiation of proceedings under section 148 of the Act. Referring to the following decisions, he submitted that reassessment proceedings cannot be initiated on the basis of direction of the Investigation Wing and the AO has to apply his indepe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corded under section 148(2) of the Act and the AO is not authorised to refer to any other reason even if it can be otherwise inferred and/or gathered from the records. He is confined to the recorded reasons to support the assumption of Jurisdiction. He cannot refer only some of the reasons and keep the others up his sleeves to be disclosed before the Court if his action is ever challenged in a court of law.' 13. He submitted that the AO in the reasons recorded on page 61 of the paper book mentions that escapement of income is on account of failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment. The above statement presupposes the verification by the AO from the records available with him such as return of income, audited balance sheet etc. However the AO in the performa says that the return is not filed. This fact is also corroborated from the non-discussion in the reason of the return of income and balance sheet. Since it is a case of assessment for the first time, therefore, there was no question of he having any opportunity to examine any records whatsoever to give such a finding. He submitted that there is no provision to di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 205/Del/2015 viii) Sh. Balwant Rai Wadhwa Vs ITO in ITA 4806/Del/2010 ix) M/s. Kothari Metals Vs. ITO in Writ Appeal No. 218/2015, dated 14/08/2015 (Kar) x) KSS Petron Private Ltd vs. ACIT ITA No.224 of 2014, dated 03.10.2016 (Bom); xi) CIT vs. IDBI Ltd., ITA No.494 of 2014, dated 19.09.2016 (Bom); xii) M/s Synopsys International Ltd vs The DDIT (International Taxation) in ITA No.549/Bang/2011; xiii) Tata International Ltd Vs DCIT in ITA No.3359 to 3361/Mum/2009 xix) ACIT vs Sh. M.R. Seetharam in ITA no. 926,927/Jp/2014 dated 09.10.2015. 16. He submitted that approval in the instant case was given in a mechanical manner and without application of mind by the concerned authority and therefore granting of approval in a mechanical manner under section 151 of the Act makes the reassessment proceedings invalid. Referring to various decisions he submitted that such mechanical approval given by the superior authority is not valid in law. 17. The ld. counsel for the assessee further submitted that the assessment order has been passed beyond the statutory period of limitation under section 153 of the Act. He submitted that the AO has passed the order on 28th March 2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n form, loan confirmation, bank statement and copy of cheques received which are available on page 83 to 189 of the paper book. 19. So far as the amount of Rs. 2 crores is concerned, he submitted that the cheques were returned without encashing them and the ledger accounts of the parties for assessment year 2005-06 and 2006-07 are available at pages 194 to 271 of the paper book. He submitted that the cheques were never encashed and were returned back. Although this fact was brought to the notice of the CIT(A) vide statement dated 19th August 2014, copy of which is placed at page 250 of the paper book, however, the ld.CIT(A) has completely ignored the same. He submitted that no enquiry was conducted by the AO with regard to the amount of Rs. 2 crores. Relying on various decision he submitted that when the assessee has not encashed those cheques and were returned on the very first day of the next financial year, the addition made by the AO and sustained by the CIT(A) is not justified. 20. So far as the amount of Rs. 30,80,000/- is concerned, he submitted that the above amount was received from group concerns and nowhere related to Jain brothers and, therefore, in absence of any adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case and it will be open to the assessee to prove that the assumption of facts made in the notice was erroneous. So far as the service of notice is concerned, he submitted that the CIT(A) has given justifiable reasons while dismissing the ground raised by the assessee on this issue. 22. The ld. counsel in his rejoinder submitted that the decision in the case of NRA Iron & Steel (P) Ltd., is not applicable to the facts of the present case since the facts are different. In that case, there was no proper enquiry whereas in the present case there was full enquiry and summons were served. So far as the decision in the case of Raymond Woolen Mills Ltd. is concerned, he submitted that relevance of the reasons has to be gone into and there should be some live link between the reasons recorded and the material on which the case is being reopened. Further, the reasons should not be vague and it should clearly convey for which the case is being reopened due to escapement of income for failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. He accordingly submitted that the reassessment proceedings not being in accordance with law s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48 27 SMARTEST Shri Balkishan Agarwal Glass Industries Ltd. ABN PIO No. 974425 25- Nov- 04 500000 Neeraj A- 148 28 SMART EST Shri Balkishan Agarwal Glass industries Ltd. ABN PIO No. 974426 25- Nov-04 500.000 Neeraj A-148, 28 For Shri Balkishan Agrav Glass industries SMARTEST Shri Balkishan Agarwal Glass Industries Ltd.' ABN PIONo. 974427 25- Nov-04 500000 Neeraj A-148 28 LOVELY Shri Balkishan Agarwal Glass industries Ltd. ABN PJONo, 17.8048 20- Dec-04 500000 Neeraj A 149 12 LOVELY Shri Balkishan Agarwal Glass Industries Ltd. ABN 28- Dec- 04 500000 Neeraj A- 149 18 5500000 The escapement of income has been clearly on account of failure on the part of the assessee to truly and fully disclose all the material fact necessary for assessment. Thus it is a fit case for initiation of proceedings u/s 148 of I.T.Act, 1961. Therefore, I have reason to believe that an income of Rs,55,00,0QQ/- lias escaped assessment within the meaning of section 147 of the Income Tax Act 1961. No assessment u/s 143(3) has been done e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and has to be quashed. The Delhi Bench of the Tribunal in the case of DCIT vs. M/s KLA Foods (India) Ltd. and Others, vide ITA No.2846/Del/2015, order dated 8th April 2019, has held that condition precedent for issue of notice for reassessment is that reason to believe that income has escaped assessment must be based on correct facts. Notice based on wrong facts is without jurisdiction and is to be quashed. The Hon'ble Delhi High Court in the case of PCIT vs. M/s SNG Developers Limited, 404 ITR 312, has held that condition precedent for issue of notice for reassessment is that the reason to believe that income has escaped assessment must be based on correct facts. Notice based on wrong facts is without jurisdiction and has to be quashed. The above decision of the Hon'ble High Court was challenged by the Revenue before the apex court and the apex court dismissed the SLP vide SLP No.42379/2007, order dated 9th February 2018. Since, in the instant case, although the assessee has filed return of income which was processed u/section 143(1), however, the AO proceeded to reopen the assessment by mentioning that no voluntary return has been filed by the assessee and, thus, proceeded to reo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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