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TMI Blog2021 (5) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... his appeal: 1. That order passed u/s 250(6) of the Income Tax Act, 1961 by the Learned Commissioner of Income Tax (Appeals)-3, Ludhiana is against law and facts on the file in as much as she was not justified to uphold the action of the Ld. Assessing Officer in initiating proceedings u/s 148 of the Income Tax Act, 1961 merely on the basis of suspicion. 2. That the Learned CIT(A) was further not justified to arbitrarily uphold the action of the Ld. Assessing Officer in making an addition of Rs. 1,17,00,000/- on account of share premium received from various parties by resort to provisions of Section 56(vii)(b) of the Act. 3. That the Learned CIT(A) was not justified to arbitrarily hold that the addition made by the Ld. Assessing Officer by resort to provisions of Section 56(vii)(b) is to be upheld u/s 68 of the Income Tax Act, 1961. 4. That she was further not justified to arbitrarily enhance the income of the appellant by Rs. 13,00,000/- on account of share capital received from various parties by invoking the provisions of Section 251(2) of the Income Tax Act, 1961. 5. That she gravely erred in invoking the provisions of Section 251(2) of enhancement of income whereas in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dt. 22/07/2015 which were disposed off by the A.O. vide letter dt. 24/07/2015 by mentioning that the A.O. had sufficient reasons to form the belief that the income of the assessee had escaped assessment by reasons of omission of failure on part of the assessee to disclose fully and truly all material facts necessary for this assessment. The reliance was placed on the following judgments of the Hon'ble Apex Court : Phool Chand Bajrang Lal Vs. I.T.O. (1993) 203 ITR 456 M/s Raymond Woolen Mills Ltd. Vs. I.T.O (1999) 236 ITR 34 The reliance was also placed on the judgment of the Hon'ble Delhi High Court in the case of Mahangar Telephone Nigam Ltd. (2000) 246 ITR 173 (Del). 5.4 The A.O. held that since no assessment was completed in the case of the assessee, the notice issued under section 148 of the Act was very much within the provisions of the Act, and that in the case of the assesse there were sufficient reasons to form the belief that the income had escaped the assessment within the meaning of Section 147/148 of the Act. 5.5 The A.O. also observed that to confer the jurisdiction under section 147(a) of the Act two conditions are required to be satisfied, firstly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant seeks to place on record, its preliminary legal assertions, challenging the legitimacy of the addition effected in the assessment order, as under: A. That the Ld. Assessing Officer has erred both in law and on the facts of the case by initiating proceedings U/s 148 of the Act * on the basis of Suspicion; * inspite of the fact that there is no new, fresh, reliable and tangible material before the Ld. Assessing Officer while forming the belief that the assessee has escaped income. * on acting upon the directions of the other authorities and also on the borrowed satisfaction and there is no independent satisfaction recording reasons. * inspite of the fact that there is no information before the Ld. Assessing Officer while forming the belief that the assessee has escaped income. B. That the Ld. Assessing Officer has erred both in law and on the facts of the case by interpreting the various judgements wrongly and hence the initiation of proceedings U/s 147/148 of the Act are illegal, arbitrary and unreasonable. The reassessment proceedings U/s 147 of the Income-Tax Act, 1961 have been initiated based on information received from the Director of Income Tax (Intellig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on received from the investigation wing that the income chargeable to tax has escaped assessment, and, accordingly a notice issued U/s 148 of the Income-Tax Act, 1961 would be an invalid notice, as under: - I. The Hon'ble High Court of Punjab and Haryana in the case of Commissioner of Income-Tax Vs. Anupam Kapoor reported at [2008] 299ITR 179 has held as under: "The assessee had made investment in a company in which he was neither a director nor was he in control of the company. The assessee had taken shares from the market, the shares were listed and the transaction took place through a registered broker of the stock exchange. There was no material before the Assessing Officer, which could have led to a conclusion that the transaction was simplicitor a device to camouflage activities, to defraud the revenue. No such presumption could be drawn by the Assessing Officer, merely on surmises and conjectures. It was for the Assessing Officer, who had reopened the assessment to have sought some evidence on record, to substantiate his formulation of consideration that the assessee has not filed a return bona fide. In the absence of any cogent material in this regard, having been place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Both the orders clearly exposited that the Assessing Officer was made aware of the situation by the investigation wing and there was no mention that those companies were fictitious companies. Neither the reasons in the initial notice nor the communication providing reasons remotely indicated independent application of mind. True it is, at that stage, it was not necessary to have the fact of escapement of income established but what was necessary was that there was material on record on which a reasonable person could have formed the requisite belief. To elaborate, the conclusive proof was not germane at that stage but the formation of belief had to be on the basis or foundation or platform of prudence, which a reasonable person was required to apply. As was manifest from the perusal of the supply of reasons and the order of rejection of objections, the names of the companies were available with the authority. Their existence was not disputed. What was mentioned was that those companies were used as conduits. In that view of the matter, the principle laid down in CITv. Lovely Exports (P.) Ltd. f20081 216 CTR (SC 195 got squarely attracted. The same had not been referred to while pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut the A.O. had mentioned that the details claimed by the assessee were not part of the return filed by the assessee, therefore, notice under section 148 of the Act was issued. He also observed that the A.O. disposed off all the objections raised by the assessee. 6.3 Ld. CIT(A) was of the view that the informations received in the assessee's case were specific and clear which were correlated by the A.O. with Income Tax Return filed by the assessee before issuing the notice under section 148 of the Act and that the A.O. after having preliminary satisfaction with respect to information received, issued letter under section 133(6) of the Act to the assessee for detailed explanation in order to verify the veracity of the information received and the assessee's explanation with regard to the same. After having satisfaction over the basis of information and verifying the assessee's Income Tax Return wherein the income returned was Rs. 2,55,860/- which could not justify such large premium received. The A.O. issued notice under section 148 of the Act and the initiation of reopening proceedings under section 148 of the Act had been based on solid information which was specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Vs. ACIT 260 ITR 202 (P&H) * Phool Chand Bajrang Lal Vs. ITO 203 ITR 456 (SC) 6.5 The Ld. CIT(A) further observed that the reasons recorded by the A.O. revealed that the A.O. applied his mind to the information by verifying the assessment record wherein he found that the assessee had no income as per the Income Tax Return filed for the assessment year under consideration and that the assessee had received huge share premium without any obvious reasons therefore the A.O. had reason for forming the belief and the application of mind and opportunity to the assessee, the AO had initiated proceedings under section 147 of the Act, therefore, the AO was fully justified in initiating the proceedings under section 147 r.w.s 148 of the Act. 7. Now the assessee is in appeal. 8. Ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the AO acted on the information received from the Director of Income Tax (Intelligence & Criminal Investigation) Chandigarh therefore the reopening of the assessment was bad in law. Reliance was placed on the decision of the ITAT Delhi Bench in the case of M/s Rajshikha Enterprises Pvt. Ltd. Vs. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly submitted that all the documents were available to the A.O. who acted only on the basis of the report of the investigating wing, therefore reopening under section 148 of the Act was not justified. 8.5 It was further stated that the case of the assessee was reopened on the basis of share premium by invoking the provisions of Section 56 of the Act which were not applicable in assessee's case for the year under consideration. It was contended that all the companies who applied for the shares were in existence, their Director furnished the affidavits, therefore on merits also the addition made by the AO and sustained by the Ld. CIT(A) was not justified and that the Ld. CIT(A) wrongly enhanced the addition made by the AO. 8.6 It was further submitted that an identical issue having similar facts had already been adjudicated by this Bench of the ITAT in ITA No. 1616/Chd/2018 for the A.Y. under consideration i.e; A.Y. 2010-11 in the case of M/s Indo Global Techno Trade Limited Vs. ITO, Ward-1(5), Ludhiana vide order dt. 15/06/2020 wherein the reasons recorded were the same as were in the assessee's case. He drew our attention towards page no. 12 to 19 of the assessee's pap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application / share premium. The Assessing Officer thereafter proceeded to discuss / mention various case laws running into 4 -5 pages, wherein, in the facts and circumstances of those case it was held that the share premium shown to be received in those cases was result of bogus transactions. However, how those decisions were applicable to the facts and circumstances of the present case has not been pointed out by the Assessing Officer in the reasons recorded. The Assessing Officer in this case had received the only information that the assessee had received a high premium along with share application money. However, this information alone, in our view, does not constitute any tangible material or to say any incriminating material to form a belief by the Assessing Officer that the income of the assessee had escaped assessment or to say in other words that the share application money received by the assessee was an unaccounted money of the assessee. The Assessing Officer has not recorded that he had received any information that the assessee had received share application money from some bogus / paper companies. No information has been pointed out in the reasons recorded or receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason to believe" suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Income- tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The Income-tax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. The court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the court. The entire law as to what would constitute "reason to believe" had summed up by Supreme Court in Income Tax Officer v Lakhmani Mewaldas (1976) 103 ITR 437. Reliance in this respect can also be placed on the decision of the Hon'ble Punjab & Haryana High Court in the case of 'CIT vs Paramjit Kaur' (2008) 311 ITR 38 (P&H), wherein, making identical observations the Hon'ble High Court held that in the absence of sufficient material to form satisfaction of the Assessing Officer that income of the assessee had escaped assessment , the issuance of notices u/s 148 of the Act was not vali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tainable in the eyes of law, the same is accordingly quashed. 10.1 Since the facts of the present case are similar to the facts involved in the aforesaid referred to case of M/s Indo Global Techno Trade Limited Vs. ITO, Ward-1(5), Ludhiana (supra) so respectfully following the aforesaid referred to order dt. 15/06/2020, we are of the view that reopening by the AO in the present case was not justified. Moreover the AO himself admitted that the reopening in this case was based on the information received from Director of Income Tax (Intelligence & Criminal Investigation) Chandigarh which is evident from the observation of the Ld. CIT(A) in para 3 of the impugned order which read as under: " Facts of the case in a nutshell are that the appellant company has filed it return of income for the year under consideration on 20.09.2010 declaring therein an income of Rs. 2,55,000/-. Subsequently, the Assessing Officer received an information from DIT(I&CI), Chandigarh as per which the appellant company has received share premium amounting to Rs. 1,17,00,000/-. On the basis of the information the Assessing Officer, after recording reasons for escapement of Income to the extent of Rs. 1,17, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... From the aforesaid noting, of the AO in the assessment order dated 21.03.2013, reasons recorded on 28.03.2012 for issuing the notice u/s 148 of the Act and observations of the Id. CIT(A) in para 7 of the impugned order, it is crystal clear that the reopening was done only on the basis of the report of the Investigation Wing of the department and the AO did not apply his independent mind. 13. On a similar issue, the Hon'ble Jurisdictional High Court in the case of Pr. CIT Vs G & G Pharma India Ltd. (2016) 384 ITR 147 (supra) held as under: "That once the date on which the so-called accommodation entries were provided was known, it would not have been difficult for the Assessing Officer, if he had in fact undertaken the exercise, to make a reference to the manner in which those very entries were provided in the accounts of the assessee, which must have been tendered along with the return, which was filed on November 14,2004 and was processed under section 143(3) of the Act. Without forming a prima facie opinion, on the basis of such material it was not possible for him to have simply concluded that it was evident that the assessee company has introduced its own unaccounted mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly, the Hon'ble Jurisdictional High Court in the case of Pr. CIT Vs Laxman Industrial Resources Ltd. (2017) 397 ITR 106 (supra) held as under: "That the assessee had provided severed documents that could have thrown light on whether truly the transactions were genuine. It was not a case where the share applicants merely provided confirmation letters. They had provided their particulars, permanent account number details, assessment particulars, mode of payment for share application money, i.e., through banks, bank statements, cheque numbers, copies of minutes of resolutions authorizing the applications, copies of balance-sheets, profit and loss accounts for the year under consideration and even bank statements showing the source of payments made by the companies to the assessee and their master debt with the Registrar of Companies particulars. The Assessing Officer failed to conduct any scrutiny of documents and was content to place reliance merely on a report of the Investigation Wing. This revealed disregard of an Assessing Officer's duties in the remand proceedings which the Department sought to inflict upon the assessee in this case. No substantial question of law a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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