TMI Blog2022 (2) TMI 1297X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year. The law does not mandate that an Assessing Officer should act on the dictate of any other authority ipso facto for initiating the proceedings under section 148 of the Act. However, if it s done so by the AO, then it would tantamount to borrowed satisfaction which cannot be the basis for issue of notice u/s 148 of the Act. Thus, it is the satisfaction of the AO having jurisdiction over the assessee for initiating the proceedings under section 148 of the Act after application of mind on the information received from outside, indicating about the escapement of income. In this case, the information has been received from the Investigation Wing Ahmedabad that the assessee has received credit in the Bank account from M/s. Rachna Finlease Pvt. Ltd. - M/s.Rachna Finlease Pvt. Ltd. is a non-filer of return of Income Tax and the enquiry conducted by the Investigation wing has made it clear that the creditworthiness of M/s. Rachna Finlease Pvt. Ltd. is not proved. Therefore the credit of Rs. 18,42,50,000/- received by M/s. Ambe Tradecorp Pvt. Ltd., is unexplained cash credits. From the above, it is revealed that the proceedings under section 147 of the Act have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring ITA no. 1235/Ahd/2019 for the Assessment Year 2010-2011. 2. The solitary issue raised by the Revenue is that the learned CIT (A) erred in deleting the addition of Rs. 39,05,50,000/- made by the AO under section 68 of the Act. 3. The facts in brief are that the assessee in the present case is a private limited company and engaged in the business of providing funds and finance facilities. There was a search and seizure action under section 132 of the Act in the case of Iscon group dated 25th February 2016. During the search proceedings, the ledger copy of the assessee in the books of M/s Rachna Finelease Pvt. Ltd. was found and seized wherein it was shown that the assessee company has received share application money of Rs. 42,74,50,000/- including opening balance of Rs. 3,69,00,000/- only. Similarly, the bank statement of M/s Rachna Finelease Pvt. Ltd. was also found and seized from where it was revealed that amount was traveled from Smt. Hansaben Patel and Shri Ramesh Thakor which was immediately transferred to the Assesse Company. It was also found that the aforesaid company as well as Smt. Hansaben Patel and Shri Ramesh Thakor are non-filer of Income Tax returns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee before the learned CIT (A) submitted that it has, during the assessment proceedings, furnished the PAN and company master data to establish the identity of investor. It has furnished contra ledger copies, bank statements, financial statements, annual return in order to establish genuineness of the transaction. There was sufficient balance in the bank account of investor which justifies the credit worthiness. Thus, the assessee has discharged the obligation cast under section 68 of the Act. Once, the onus is discharged, there cannot be any addition unless the AO brings other materials showing the amount credited represent income of the assessee. The assessee in support of its contention made reference to various case laws. 5.1 The assessee further submitted that the investor company has received fund from Smt. Hansaben Patel and Shri Ramesh Thakor as share application money. This fact can also be verified from the finding of the AO that Smt. Hansaben Patel has sold immovable property and proceeds from such property was utilized for the purpose of making investment and advancing loan. The assessee in support of its contention has filed the sale deed of property, chart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the funds is one Srnt. Hansaben Manibhai Patel who has allegedly sold lands to M/s. Applewoods Estate Pvt. Ltd. and the consideration thereof was given by her to one Shri Rameshbhai Thakor and to M/s. Rachana Finlcase Pvt. Ltd. Shri Ramcshbhai Thakor has also given money to M/s. Rachana Finlease Pvt. Ltd. The appellant has attached the copy of sale deed of land between Srnt. Hansaben Patel anri M/s. Applewoods Estate Pvt. Ltd. All the flow of funds from Smt. Hansaben Patr.1 to ultimately the appellant company has been evidenced through copies of respective bank statements. It is not the case of the AO that Smt. Hansaben Patel is non-existent or is a fictitious person. Smt. Hansaben Patel's photograph and address appears in the relevant sale deed(s) and that her bank account has proper KYC and she has been filing the return of income, though it appears and is alleged by the AO that the return for the A.Y. 2010-11 was not filed by Smt, Hansaben Patel. In my considered view, merely not filing the return of income cannot be the basis for an Income-tax Authority to conclude that the capacity/creditworthiness is not established and that the genuineness of the transactions is not abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and purchase of immovable property by Smt. Hansabcn Patel was also obtained and it is matter of record that she earned sale consideration of Rs.l02,93,92,000/~ as short term as the properties were purchased in January lu March, 2008 and sold in July and October, 2008. However, as neither any submission was made nor any evidences in response to show cause notices were furnished, the AO treated the entire sale proceed as her income by way of short term capital gain and completed the said assessments. 7.7 It is noted from the paper book filed in the case of Shri Asit Surenderbhai Shah (PAN; AFUPS6469Q) for appeals against the assessment orders for various assessment years before roe that during the post search proceedings in his case, it was discovered that he had advanced huge amount of loan to various persons and Srnt. Hansaben Patel had advanced loan of Rs.5,00,00,000/- to Asit S. Shah HUF, Rs.13,25,00,000/-Surendra Managaldas HUF, Rs.5,00,00,000/- to Shri Surendra M. Shah and Rs.5,00,00,000/- to Shri Chetnaben Shah and that she had earned huge profits from sale of agricultural land and she had advanced huge unsecured loans and earned interest income thereon. The paper bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the same Financial Year to the extent of Rs. 1.35 crore through account payee cheques and remaining amount was also paid through regular banking channel in the next financial year. ............... Regarding creditworthiness of the creditor, there is no doubt about the fact that Smt. Hansaben M. Patel sold plots of land worth Rs.149 crores during the year and she has been assessed at Rs. 103.02 crore by her Assessing Officer. These facts prove her creditworthiness............ These facts proved that the appellant satisfactorily established the identity of the creditor, genuineness of the transactions and creditworthiness of the creditor with documentary evidences. Hence, the additions made by the AO are not found justified. Regarding the financial relations of the appellant with J.P. /scon Group, the appellant did not deny and admitted that he had financial relations with Kotak family since his father's days, but all these transactions have been found entered into regular books of accounts. Therefore, any adverse inference without any substantial documentary evidence is not legally sustainable. 7.8 It is noted from the paper book filed in the case of Shri Asit Suren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company which has given share application money to the assessee. Thus, in the absence of income tax return, the creditworthiness of the company is in doubt. Therefore, the share application money provided by the company is not fee from suspicions. Therefore, the same is liable to be added as unexplained cash credit under section 68 of the Act. It was also pointed out by the learned DR that the repayment of share application money by the assessee in the subsequent year cannot extend the benefit. It is for the reason that the provisions of section 68 of the Act restricts the amount credited in the year under consideration. 8. On the contrary, the learned AR before us filed a paper book running from pages 1 to 564 and contended that the creditworthiness of the company based on the documentary evidence was justified before the authorities below. No adverse inference can be drawn against the assessee merely on the reasoning that the company has not filed the income tax return. Furthermore, no defect was pointed out in the details furnished by the assessee justifying the identity and creditworthiness of the party as well as genuineness of the transactions. 8.1 Both the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn. In this connection, we find that the finding of the AO is not correct to some extent. It is for the reason that the company namely M/s Rachna Finelease Pvt. has filed income tax return in response to the notice issued under section 148 of the Act and accordingly the assessment was completed under section 147 read with section 143(3) of the Act where huge additions were made in the hands of the company on account of unexplained cash credit under section 68 of the Act. However, subsequently the learned CIT (A) was pleased to delete the addition made by the AO in the hands of the company. The copy of assessment order under section 147 of the Act and the order of the learned CIT (A) is placed on pages 421-425 and 426 to 476 of the paper book filed along with ITA No. 53/AHD/2021. Therefore, the finding of the AO is not correct up-to this extent. 9.2 Furthermore, once the source of fund in the hand of above company was held as explained by learned CIT (A) then amount received by the assessee from that company cannot be held as unexplained under section 68 of the Act in the absence of contrary information. Likewise, there cannot be addition of one item in the hands of two different p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of the party i.e. share application money was not proved does not hold well in view of above discussion. As the assessee was able to establish the identity of the share applicant by furnishing PAN and company master data and proving the genuineness of transaction by adducing bank statements and also explained the sources of fund in the hands of the party, which are placed on pages of the paper book as discussed above, no addition is warranted. 9.7 In view of the above facts and after considering the details in totality, we do not find any reason to interfere in the finding of the learned CIT (A) and direct the AO to delete the addition made by him. Hence, the ground of appeal of the Revenue is dismissed. 9.8 In the result, the appeal filed by the Revenue is dismissed. Coming to C.O. No. 189/AHD/2019 (in ITA No.1235/Ahd/2019) for A.Y. 2010-11 filed by the assessee 10. The assessee in ground No. 1 and 2 of the CO has challenged the validity of the assessment framed under section 147 of the Act. 11. The assessee has challenged the validity of the assessment framed under section 143(3) read with section 147 of the Act vide order dated 13 December ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N. Drive Shafts (India) Ltd. Vs. DCIT 259 ITR 19. I do not find any infirmity in the action of the AO in the terms of section 148 and 147 and I do not find any basis as to how the appellant is protected in any way by various case laws relied upon by it and mentioned in its written submission. I find that the appellant company is not justified in contending that the A:O has merely relied upon the information received from the investigation conducted by the Investigation Wing, Ahmedabad and has made no efforts to form an independent and conclusive opinion of his own. It is also evident from the assessment order that the AO had given adequate opportunity in relation to the issues involved and had provided the materials relied upon for reopening and completion of the assessment u/s 147. The grounds related to legality of notice u/s 148 and assessment u/s 143(3) r.w.s. 147 are rejected. 13. Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us. 14. The learned AR before us submitted that the proceedings under section 147 of the Act have been initiated by the AO without the application of mind. Therefore, the reopening based on the informat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese informations indicate the escapement of income of the particular assessee. However, the law does not mandate that an Assessing Officer should act on the dictate of any other authority ipso facto for initiating the proceedings under section 148 of the Act. However, if it s done so by the AO, then it would tantamount to borrowed satisfaction which cannot be the basis for issue of notice u/s 148 of the Act. Thus, it is the satisfaction of the AO having jurisdiction over the assessee for initiating the proceedings under section 148 of the Act after application of mind on the information received from outside, indicating about the escapement of income. 16.4 Thus, upon receiving the information which can only raise a suspicion and therefore may trigger for further enquiry by the AO before he arrives at reasons to believe that the income having escaped assessment. Thus, the information received, at the best, can be termed as allegations which can only raise a suspicion in the mind of the authorities, based on which an enquiry can be triggered to find out whether there is any material leading to formation of reason to believe. Thus the mandate of law is for the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sum of ₹ 18,42,50,000/- from M/s Rachna Finlease private Ltd through the banking channel. ii. M/s Rachna Finlease private Ltd is non-filer of income tax return. iii. The enquiries conducted by the investigation wing makes clear that the creditworthiness of M/s Rachna Finlease private Ltd was not proved. 16.8 Based on the above information received from the investigation wing, the AO has derived his reasons to believe that income of the assessee has escaped assessment. In other words, there is nothing discernible from the reasons recorded suggesting that the AO upon receiving the information from the investigation wing has conducted any enquiry to form his believe that income has escaped assessment. What appears from the above reasons recorded is this that the AO based on the information from the investigation wing has initiated the proceedings under section 147 the Act without application of his mind. Such reasons recorded represents the borrowed satisfaction based on the information received from the investigation wing. 16.8 We also note that the amount received by the assessee from M/s Rachna Finlease private Ltd stands at ₹39.05 crores wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormation was received from investigation wing that assessee was beneficiary of accommodation entries, but no further inquiry was undertaken by assessing officer, said information could not be said to be tangible material per se and, thus, reassessment on said basis was not justified. 16.11 We also draw support and guidance from the another judgment of Hon ble Delhi High Court in case of Principal Commissioner of Income-Tax v Meenakshi Overseas Pvt Ltd [(2017) 82 taxmann.com 300 / 395 ITR 677 (Delhi)], the relevant finding of the Hon ble Bench extracted below: That while the report of the Investigation Wing might have constituted material on the basis of which the Assessing Officer formed the reasons to believe, the process of arriving at such satisfaction could not be a mere repetition of the report of investigation. In the assessee's case, the crucial link between the information made available to the Assessing Officer and the formation of belief was absent. The reasons to believe recorded were not reasons but only conclusions and a reproduction of the conclusion in the investigation report received from Director (Investigation). It was a borrowed satisfacti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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