TMI Blog2018 (5) TMI 2103X X X X Extracts X X X X X X X X Extracts X X X X ..... efore dismissed. - ITA No. 5959/Del/2016 And C.O. No. 79/Del/2017 (In ITA No.5959/Del/2016) - - - Dated:- 24-5-2018 - Shri R. K. Panda, Accountant Member And Shri Sudhanshu Srivastava, Judicial Member For the Department : Ms. Rachna Singh, CIT-DR. For the Assessee : Shri Ajay Vohra, Sr. Adv., Ms. Deepashree Rao, CA Mr. Vibhu Gupta, CA. ORDER PER R. K. PANDA, AM : The appeal filed by the Revenue is directed against the order dated 16.09.2016 of CIT(A)- 30, New Delhi relating to assessment year 2007-08. The assessee has also filed the Cross Objection against the appeal filed by the Revenue. For the sake of convenience, these were heard together and are being disposed of by this common order. 2. Facts of the case, in brief, are that the assessee is a company and is engaged in the business of trading in shares and securities. It filed its return of income on 31.01.2008 declaring income of ₹ 6437/-. The return was processed u/s 143(1) of the I.T. Act, 1961 and subsequently the assessment was completed vide order passed u/s 143(3) on 02.04.2009 determining the income at ₹ 66,590/-. Subsequently, search and seizure operation u/s 132 of the I. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the need based requirement solicited by Sh. S.S. Jindal Group. During the search afterwards information was gathered that the various companies including the assessee company were acquired by SS Jindal group in order to realize and make use of bogus capital credited in this company. This company was a paper company without having any tangible assets and its investments were also in paper companies. So the share capital share premium was introduced in books was bogus. After raising share capital share premium the investments were made in 53 paper companies which did not have any sustentative business activities and some of them were found nonexistent at the addresses given. From the examination of accounts of the company, it is found that the share capital of the company increased from ₹ 28,20,000/- to ₹ 2,62,37,000/- and share premium increased from ₹ 28,80,000/- to ₹ 21,36.33,000/- during financial year 2006-07 and in aggregate ₹ 23.41 crores were raised during the year. The funds by way of share capital premium are shown to be received from 41 companies which are paper companies run by entry operators. Hence the source of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital raised during the year. Subsequently, during the search and seizure action u/s 132 that took place on 14.11.2011 in the B.C. Jindal Group of cases, survey was conducted in the business premises of the assessee. Notice u/s 153C was issued on 03.12.2013 and the assessee in response to such notice u/s 153C filed its return of income on 20.12.2013 declaring Nil income by way of filing the letter dated 09.12.2013 to consider the original return filed in response to this notice. However, the Assessing Officer vide letter dated 14.03.2014 communicated to the assessee for dropping the proceedings initiated u/s 153C of the I.T. Act by withdrawing the above notice. 5.1 It was submitted that the notice issued u/s 148 on 19.03.2014 for the assessment year 2007-08 was void ab-initio since the assessment was completed u/s 143(3) and there was no allegation by the Assessing Officer that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment. Various decisions were also cited. 6. Based on the argument advanced by the assessee, ld. CIT(A) held that the reopening of the completed assessment u/s 148 of the I.T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct : ₹ 23,41,70,000/- (vi) In the appellate proceedings, the appellant has submitted that at the time of original assessment u/s 143(3) the Act, the A.O. had obtained necessary documents and evidences in support of fresh share capital subscribed during the period relating to A.Y. 2007-08, by raising specific queries. Subsequently, on test check basis, A.O. issued notices u/s 133(6) of the Act, to some of the share applicants and replies were received from all of them. (vii) In the appellate proceedings, the appellant has also submitted that A.O. first issued notice u/s 153C of the Act, on 18.12.2013 and continued the assessment proceedings till the date of withdrawal of this notice vide letter dated 14.3.2014. Accordingly, AR has submitted that this action of the A.O. shows that there was no material was found at the time of search action u/s 132 of the Act, in the case of any other person. (viii) In the appellate proceedings, the appellant has also submitted that subsequently, A.O. initiated the proceedings u/s 147 of the Act, by issuing notice u/s 148 of the Act on 20.3.2014, on the change of opinion for the reasons recorded (which have been reproduced in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut bringing in any cogent/definite, specific material/evidence in support of his admittance and also without providing opportunity of cross examination to the appellant. Therefore, the same cannot be the basis for re-opening the completed assessment by having reason to suspect, instead of reason to believe. Therefore, it is submitted by the AR that period relating to year under consideration is F.Y. 2006-07, whereas in the affidavit, no reference of date or period was made with regard to the transactions mentioned and therefore, this statement is of no relevance to the period under consideration. For the above arguments, for reopening the assessment after expiry of 4 years u/s 147 of the Act read with proviso to section 151(1) of the Act, the case of the appellant had already assessed u/s 143(3) of the Act and there is no failure on the part of the appellant to disclose fully truly all the material facts to complete the assessment. Therefore, reopening of assessment u/s 148 of the Act, only on the basis of change of opinion or reviewing his own assessment, is bad in law and reassessment u/s 147 of the Act, is liable to be quashed. The AR has submitted that the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee had disclosed fully and truly all material facts necessary for assessment, then no action under section 147 of the Act, could have been taken after expiry of 4 years period. Relevant portion of this judgment is reproduced as under: ...... We have already noted above that in the assessment order itself the Assessing Officer has recorded that the details as required were filed and verified. This in itself indicates that the Assessing Officer had applied his mind to the issue of the share application money and had accepted the assessee's claim after due verification. Furthermore, in the impugned order dated 2-3-2005 itself the Assessing Officer has indicated that during the course of assessment proceedings, the petitioner had filed details in respect of share application money of ₹ 5 lakhs in the name Hallmarks Healthcare Limited. However, the Assessing Officer has now sought to wriggle out of his remarks in the assessment order by stating that only photocopies for the application for equity shares were filed and that the copy of the bank account with the Indian Bank which was available did not indicate that verification had been done incorrectly and tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. fresh share capital, was already inquired by the A.O. in the assessment proceedings u/s 143(3) of the Act and the same were considered as genuine/explained. However, the subsequent action initiated by the A.O. u/s 148 of the Act, forming reason to believe on the basis of statements/affidavit and in absence of any cogent material, is not as per law and at the best, can be considered as reason to suspect, in absence of specific information/ material. From the above, following facts emerged: The original assessment u/s 143(3) of the Act, was completed vide order dated 02.4.2009, at total income of ₹ 66,590/-, In the original assessment completed u/s 143(3) of the Act, the A.O. was satisfied for the fresh share capital subscribed, only after getting confirmations, other evidences and also collecting information directly u/s 133(6) of the Act, from some of the share applicants, The A.O. recorded the reasons u/s 148 of the Act, on 19.3.2014 and issued the notice u/s 148 of the Act, on 20.3.2014, on the basis of statements/affidavit recorded during search and survey action, and information u/s 133(6) of the Act, was also collected by the A.O. d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in not appreciating that the assessee company is a paper company without having any tangible assets with investments in paper companies and also failed to prove the credits in the books of account in the shape of share capital. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in not appreciating that the directors of the company were not traceable and during the enquiries of bank account of assessee/ investor companies, cash deposits were found in bank accounts. 5. That the order of the CIT(A) is perverse, erroneous and is not tenable on facts and in law. 6. That the grounds of appeal are without prejudice to each other. 7. That the appellant craves leave to add, amend, alter or forgo any ground(s) of appeal either before or at the time of hearing of the appeal. C.O. No.79/Del/2017 (Assessee) : 1. That on facts and circumstances of the case, the grounds of appeal preferred by the Department does not arise out of the order of the CIT(A). 2. That the CIT(A) erred on facts and in law in not appreciating that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 41 share applicants and thereby raising the capital of ₹ 23,41,70,000/-. The relevant observation of the Assessing Officer in the order passed u/s 143(3) on 02.04.2009 reads as under :- In the instant case, the assessee filed IT Return for Assessment Year 2007-08 on 31/01/2008 declaring income ₹ 6437/-. The return was processed u/s. 143(1) of the I.T. Act, 1961 and subsequently the case has been selected for scrutiny. Notices u/s 143(2) of the I.T. Act and u/s 142(1) of the I.T. Act has been issued and served upon the assessee. In response to the said notices Sri Binod Kumar Agarwal, A/R of the assessee company appeared time to time, submitted various details in support of return and explained the return. During the year the assessee company has issued 23,41,700 shares, each having a face value of ₹ 10/- with a premium of ₹ 90/- to 41 share applicants and thereby raised capital of ₹ 23,41,70,000/- Notice u/s. 133(6) were issued to twenty-five share allottees randomly selected to verify the transaction. The case was heard and discussed. . 12. We find the Assessing Officer in the original assessment order has not made any add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in the case of Wel Intertrade P. Ltd. and Another vs. ITO reported in 308 ITR 22 has observed as under :- A plain reading of the said proviso makes it more than clear that where the provisions of section 147 are being invoked after the period of four years from the end of the relevant assessment year, in addition to the Assessing Officer having reason to believe that any income chargeable to tax has escaped assessment, it must also be established as a fact that such escapement of assessment has been occasioned by either the assessee failing to make a return under section 139, etc., or by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, for that assessment year. In the present case, the question of making of a return is not in issue and the only question is with regard to the second portion of the proviso, which relates to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. In so far as this pre-condition is concerned, there is not a whisper of it in the reasons recorded by the Assessing Officer. In fact, as indicated above, the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... truly. This is a necessary condition for overcoming the bar set up by the proviso to section 147. If this condition is not satisfied, the bar would operate and no action under section 147 could be taken. We have already mentioned above that the reasons supplied to the petitioner does not contain any such allegation. Consequently, one of the conditions precedent for removing the bar against taking action after the said four year period remains unfulfilled. In our recent decision in Wel Inter trade Private Ltd. [2009] 308 ITR 22 (Delhi) we had agreed with the view taken by the Punjab and Haryana High Court in the case of Duli Chand Singhania [2004] 269 ITR 192 that, in the absence of an allegation in the reasons recorded that the escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, any action taken by the Assessing officer under section 147 beyond the four year period would be wholly without jurisdiction. Reiterating our view-point, we hold that the notice dated March 29, 2004, under section 148 based on the recorded reasons as supplied to the petitioner as well as the consequen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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