TMI Blog2021 (10) TMI 910X X X X Extracts X X X X X X X X Extracts X X X X ..... o arranged these accommodation entries. Therefore, there is no infirmity in the reasons recorded, hence ground No. 2 of the appeal is dismissed. AO has not applied his mind and, therefore, 148 issued by the ld. Assessing Officer is invalid - We find that the ld. Assessing Officer has written detailed reasons after perusal of the return of income filed by the assessee. The reasons recorded, according to us, prima facie shows reason to believe with the Assessing Officer. Accordingly ground No. 3 is dismissed. Non-granting of opportunity and not considering the explanation furnished by the assessee - We find that the ld. CIT has granted more than 5 opportunities of hearing and considered the explanation of the assessee at page No. 20 of his order. Therefore, ground No. 4 is dismissed. Not a case of no enquiry, but of inadvertent enquiry - We find that the ld. CIT has himself verified the records and after verification of the records took out the relevant pages of the information. He further looked at the return of income filed by the assessee and perused the information supplied by the assessee during the course of assessment proceedings. Based on this the ld. CIT has p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led information available with the Assessing Officer about accommodation entries obtained by the assessee from M/s. Jain Brothers i.e. Mr. S.K. Jain, the name of the middleman is mentioned. The documents were also found where assessee is mentioned as a beneficiary and the name of the facilitator Mr. Goyal Sahab as mediator for arranging the accommodation entries was also found. The details of the cash trail was also shown from the documents from Mr. S.K. Jain and Mr. Virendra Kumar Jain. Despite all these information, the ld. Assessing Officer did not make any enquiry. He ignored the above facts and passed the assessment order in a cryptic manner without making any enquiries. Thus, the ld. CIT issued notice under Section 263 of the Act that why the order passed should not be held as erroneous and prejudicial to the interest of Revenue. 4. During the course of proceedings assessee submitted that the revision proceedings have been initiated for examining the same issue which has been already examined by the ld. Assessing Officer in re-assessment proceedings and, therefore, same may be quashed. 5. The ld. CIT rejected the contention of the assessee and held that the ld. Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. In view of this, according to us, the ld. Assessing Officer has correctly assumed jurisdiction under Section 148 of the Act. Therefore, ground No. 1 is dismissed. 9. The second ground relates to some infirmity in the reasons recorded. However, on perusal of the reasons recorded by the ld. Assessing Officer, we find that there is no infirmity in the reasons recorded by the ld. Assessing Officer. He has given the complete details including the name of the middleman and mediator, who arranged these accommodation entries. Therefore, there is no infirmity in the reasons recorded, hence ground No. 2 of the appeal is dismissed. 10. Ground No. 3 is that the ld. Assessing Officer has not applied his mind and, therefore, 148 issued by the ld. Assessing Officer is invalid. We find that the ld. Assessing Officer has written detailed reasons after perusal of the return of income filed by the assessee. The reasons recorded, according to us, prima facie shows reason to believe with the Assessing Officer. Accordingly ground No. 3 is dismissed. 11. Ground No. 4 is regarding non-granting of opportunity and not considering the explanation furnished by the assessee. We find that the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer, simply directed the Assessing Officer to carry thorough and detailed inquiry. It is this order which is upheld by the High Court. We see no reason to interfere with the order of the High Court. The Special Leave Petitions are dismissed. 14. Further honourable Calcutta High Court in Rajmandir estate private limited versus PCIT [2016] 386 ITR 162 (Cal) has also dealt with identical issue and upheld the action u/s. 263 of the income tax act holding as Under:- (21) After hearing the learned advocates, we are of the opinion that the following questions arise for consideration: (a) Whether in the light of the views expressed in the case of Lovely Exports (supra) and Steller Investment (supra), the order under section 263 directing further investigation is legal? (b) Is the finding of the Commissioner of Income-tax that unaccounted money was or could have been laundered as clean share capital by creating facade of paper work, routing the money through 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 sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncial systems of tax haven countries and where it is repatriated in the form of transfers. The role of the revenue authorities in tackling the menace of laundering black money was commented by the learned author as follows: It has to be kept in view that India has a problem of black economy, which is unaccounted and many a time the holders of black money also launder the black money in order to acquire legitimate assets. Legal or illegal income which evades tax and illegal income that comes within the exempted taxation slab constitute the unreported Gross Domestic Product or black economy. Laundering the black money and laundering proceeds of crime are two different issues, although there is frequent overlap between the two. While laundering black money is to be handled through taxation laws or similar laws, the laundering of proceeds of crime is to be handled through special anti-money-laundering laws. (23) The following pieces of evidence are noticeable: (a) 39 corporate subscribers purchased 7,92,737 shares 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 wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner that the Assessing Officer did not examine a single director of the assessee-company or of the subscribing company which goes to show that correctness of this assertion is not in dispute. (24) From the aforesaid evidence the following, prima facie, inferences can safely be drawn: (a) The promoter/directors of the assessee and their close relatives and friends had united with the common object of creating at least 20 (19+1) companies apparently having a large capital base, but, in fact these are mere paper companies having no real worth. The transaction of sale and purchase of shares was nominal rather than real. (b) The allegation, in response to the notice to show-cause under section 263 that it bears importance to state here that the investor companies of shares were interested to subscribe shares of the assessee company as, according to them, the assessee-company had prospect in future, is a plain lie. (c) The blank share application forms, etc., tabulated above go to show that the alleged application for shares and the alleged allotment were not in the usual course of the business. (d) In the light of the aforesaid pieces of evidence and the pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to make enquiries with regard to the nature and source of a sum credited in the books of account of an assessee and it would be immaterial as to whether the amount so credited is given the colour of a loan or a sum representing the sale proceeds or even receipt of share application money. 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. In the case of Sumati Dayal v. CIT [1995] 214 ITR 801 (SC). Their Lordships held that a capital receipt can become taxable if the explanation offered by the assessee about the nature and source thereof is not satisfactorily explained. The judgment in the case of CIT v. Lovely Exports Pvt. Ltd. reported in [2008] 299 ITR 268 (Delhi) lends no assistance to the assessee because in that case the Division Bench reiterated that omission to make an enquiry, where such an exercise is provoked, shall render the order of the Assessing Officer both erroneous and prejudicial to the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e left out and the assessment order for 1960-61 was considered by itself, it could not be said that the assessment order was prejudicial to the interests of the Revenue. It was also observed that the factum of advance of initial capital, realization of amounts by sale of gold ornaments and the carrying on of the money-lending and speculative business had already been accepted and assessed in the previous years, that even in the year of assessment in question the Income-tax Officer had added ₹ 1,499 to the disclosed income from speculative business and ₹ 1,270 to the disclosed income from interest and made the assessment on a total income of ₹ 9,037; as such it could not be said that the assessment was prejudicial to the interests of the Revenue and that at the most it could be said that the assessee could not have carried on any business at the addresses given by her but where an assessment has been made without territorial jurisdiction it could not be said to be prejudicial to the interests of the Revenue. This court set aside the order of the learned Tribunal. In an appeal by the assessee before the apex court their Lordships upheld the order of this court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Revenue. (28) We have indicated above the pieces of evidence which go to show that the Commissioner had reasons to entertain the belief that this was or could be a case of money laundering which went unnoticed because the Assessing Officer did not hold the requisite investigation except for calling for the records. The evidence which we have tabulated above and the prima facie inference drawn by us is deducible from the documents also submitted before the Assessing Officer. The fact that the Assessing Officer did not apply his mind to those pieces of evidence would be evident from the assessment order itself which reads as follows: During the financial year the assessee-company has issued 792737 No. of equity share with a face value of ₹ 10 along with a premium of ₹ 390. Thereafter, notices under section 133(6) of the Income-tax Act, 1961 were also issued to verify the transactions of the assessee on test check basis. The case is discussed and heard. Issue relevant for determination of total income of the assessee is discussed as under : The issues relevant according to the Assessing Officer were a receipt of a sum of ₹ 61,000 on account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the company who take the decisions, control and manage them. The persons behind the assessee-company and the persons behind the subscribing companies were not interrogated which was essential to unearth the truth. Reference may also be made to the judgment of this court in the case of CIT v. Active Traders Pvt. Ltd. (supra). The question for consideration is whether in the presence of materials discussed above the Commissioner was justified in treating the assessment order erroneous and prejudicial to the interests of the Revenue. That question in the facts and circumstances has to be answered in the affirmative. (28) We find no substance in the submission that the order of the learned Tribunal is perverse, after examining all the submissions advanced by Mr. Poddar. (29) Whether receipt of share capital was a taxable event prior to April 1, 2013 before introduction of clause (viib) to the sub-section (2) of section 56 of the Income-tax Act; whether the concept of arm's length pricing in a domestic transaction before introduction of sections 92A and 92BA of the Income-tax Act was there at the relevant point of time are not questions which arise for determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any error in the explanation furnished by the assessee. Whereas in the present case we have tabulated the evidence which was before the Assessing Officer which should have provoked him to make further investigation. The Assessing Officer did not attach any importance to that aspect of the matter as discussed above by us. The judgment in the case of Leisure Wear Exports Ltd. (supra) relied upon by Mr. Poddar has no applicability because the evidence furnished by the assessee in this case does suggest a cover up. We also have held prima facie that neither the transaction appears to be genuine nor are the applicants of share are creditworthy. The judgment in the case of Omar Salay Mohamed Sait (supra) cited by Mr. Poddar has no application for reasons already discussed. It is not true that the Commissioner in this case has merely on the basis of suspicion held that this was or could be a case of money laundering. We as a matter of fact have discussed this issue in great detail and need not reiterate the same. The order passed by the Commissioner is by no means an act of substituting his own views to that of the Assessing Officer. It is true that the Assessing Officer had requisi ..... 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