TMI Blog2024 (1) TMI 205X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO initiated proceedings under section 147 of the Act and issued a notice under section 148 Therefore, if there is relevant material on the basis of which a reasonable person can form a requisite belief that income chargeable to tax has escaped assessment, then proceedings under section 147 of the Act can be validly initiated. In the present case, as noted above, on the basis of information received from the Investigation Wing, reassessment proceedings in the case of the assessee were initiated. Further, it is also well settled that the sufficiency or correctness of the material is not a thing to be considered at the stage of recording the reasons. As a result, we find no infirmity in the reassessment proceedings initiated by the AO under section 147 of the Act, and the same are upheld. Addition u/s 68 - Unaccounted money through various layers and bank accounts of non-existing and shell companies - We find that additions on the basis of similar allegations also came for consideration in another decision in ITO v/s Supergold Properties Private Limited [ 2020 (11) TMI 46 - ITAT MUMBAI] wherein the addition made under section 68 was deleted by the coordinate bench of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /S LEENA POWER TECH ENGINEERS PVT LTD REPORTED IN (2021) 130 TAXNABB 341(MUM) On the facts and in the circumstances of the case, the Appellant submits that the Hon.CIT(A) erred in treating the facts of the case in case of the Appellant vis- -vis the addition of Rs. 1,50,00,000/- made by the assessing officer u/s 68 similar to the facts of the case in the decision of DCIT M/S Leena Power Tech Engineers Pvt Ltd reported in (2021) 130 Taxman 341(Mum) and upheld the addition of Rs. 1,50,00,000/- made by the assessing officer u/s 68 relying on the said decision. On the facts and in the circumstance of the case the Appellant submits that the facts of the case of the Appellant vis- -vis the addition of Rs. 1,50,00,000/- made u/s 68 are very different from the facts of case in the decision of Leena Power Tech Engineers Pvt Ltd and the Appellant further submits that the Hon.CIT(A) erred in applying the ration laid down in the aforesaid decision of Leena Power Tech Engineers Pvt Ltd and upholding the addition made by the assessing officer u/s 68. The Appellant submits that the ration laid down in the decision of Leena Power Tech Engineers Pvt Ltd not be applied in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id decision the addition made by the assessing officer and upheld by the Hon. CIT(A) be deleted. 4. ADDITION OF Rs. 1,50,00,000/- MADE U/S 68 BE DELETED . On the facts and in the circumstances of the case the Appellant submits that the Hon. CITA erred in confirming impugned addition of Rs. 1,50,00,000 made u/s 68 of The Income Tax Act, 1961 by the learned Assessing Officer. On the facts and in the circumstances of the case the Appellant Further submits that the Appellant has fully discharged its onus to prove identity, genuine and credit worthiness about amount of Rs. 1,50,00,000 received from Minaxi Suppliers Ltd by submitting various details and documents in the assessment proceedings and the Appellant proceedings. The Appellant submits that the Hon.CITA has erred in not considering details and documents filed by the Appellant before the assessment proceedings and Appellate proceedings to discharge its onus to prove identity, genuine and credit worthiness and treated the same as not genuine without bringing forth any deficiently in the details and documents filed by the Appellant. The Appellant submits that amount received is genuine and the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tune of Rs. 1.50 crore has been brought back into its bank account using banking channel after layering of funds through bank accounts of non-existing entities and shell companies. Accordingly, on the basis of aforesaid information, proceedings under section 147 of the Act were initiated and notice under section 148 of the Act was issued on 26/03/2018. In response to the aforesaid notice, the assessee filed the return of income on 18/04/2018, declaring a total income of Rs. 7,59,792. During the reassessment proceedings, the assessee was asked to explain as to why the amount of Rs. 1.50 crore received from M/s Minaxi Suppliers Private Limited should not be treated as unexplained cash credit under section 68 of the Act and added to its total income. The assessee was asked to produce copy of the return of income, balance sheet, audit report, etc. of M/s Minaxi Suppliers Private Limited along with explaining the money received from the said party. The assessee was also asked to produce the copy of the joint venture agreement and details of the project undertaken with the above party as per the joint venture. In response to the aforesaid notice, the assessee filed copy of return of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50,00,000 to his books of accounts in the name Joint Venture Investment. The AO has brought out in the assessment order that the transactions were layered and camouflaged to give the colour of genuineness and has concluded the ultimate beneficiary of the transaction is the appellant. The onus of proving the genuineness does not shift to the AO when these layers are unmasked. The appellant needs to prove that these transactions are genuine beyond doubt and the appellant has not proved the genuineness of the transaction to the satisfaction of the AO and the gamut of transactions show that the ultimate beneficiary is the appellant. Thus, relying on the decision of the Hon'ble ITAT DCIT vs Leena Power Tech Engineers Pvt. Ltd reported in [2021] 130 taxmann.com 341, this appellate authority is of the opinion that there is no need to interfere with the addition made by the Assessing Officer. Being aggrieved, the assessee is in appeal before us. 6. We have considered the submissions of both sides and perused the material available on record. On the basis of the information received from Investigation Wing, Kolkata that the assessee is a beneficiary of circuitous transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction ITO v. Selected Dalurband Coal Co. (P.) Ltd. [1996] 217 ITR 597 (SC); Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC). 7. Therefore, if there is relevant material on the basis of which a reasonable person can form a requisite belief that income chargeable to tax has escaped assessment, then proceedings under section 147 of the Act can be validly initiated. In the present case, as noted above, on the basis of information received from the Investigation Wing, reassessment proceedings in the case of the assessee were initiated. Further, it is also well settled that the sufficiency or correctness of the material is not a thing to be considered at the stage of recording the reasons. As a result, we find no infirmity in the reassessment proceedings initiated by the AO under section 147 of the Act, and the same are upheld. 8. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 68 of the Act on the basis of similar allegations as are made in the present case. While deciding the issue in favour of the taxpayer, after dealing with similar allegations, the coordinate bench of the Tribunal, vide order dated 25/06/2020, observed as under:- 5.1 Upon due consideration of rival submissions and material on record, we find that as per the provisions of Section 68 of the Income Tax Act, 1961, where any sum is found credited in the assessee s books and assessee offers no explanation about the nature and source thereof or the explanation furnished is found to be unsatisfactory, the sum so credited may be charged to Income-Tax as the income of the assessee of that previous year. A proviso has been inserted to the said section by Finance Act, 2012 w.e.f. 01/04/2013 to provide that where the assessee is a company and the sum so credited consists of share application money, share capital, share premium etc., the explanation furnished by the assessee shall be deemed to be not satisfactory unless the person in whose name such credit is recorded also offers an explanation about nature and source of sum so credited and such explanation is found to be satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue s Special Leave petition was dismissed by Hon ble Supreme Court which is reported at 107 Taxmann.com 85. Similar is the position of decision of Hon ble Delhi High Court rendered in Pr. CIT V/s Himachal Fibers Ltd. [98 Taxmann.com 72] against which revenue s Special Leave Petition was dismissed by Hon ble Supreme Court which is reported at 98 Taxmann.com 173. Similar is the decision of Hon ble High Court of Madhya Pradesh in Pr. CIT V/s Chain House International Pvt. Ltd. [98 Taxmann.com 47] against which revenue s Special Leave Petition has been dismissed by Hon ble Supreme Court on 18/02/2019 which is reported at 103 Taxmann.com 435. Similar is the recent decision of Hon ble Bombay High Court in Pr. CIT V/s Ami Industries (India) Pvt. Ltd. [ITA No. 1231 of 2017, dated 29/01/2020) which has been rendered after considering the principles laid down by Hon ble Supreme Court in its recent decision titled as Pr.CIT Vs. NRA Iron Steel Pvt. Ltd. [412 ITR 161]. 5.3 Keeping in mind the aforesaid legal position, we find that the assessee, in support of the stated transactions, furnished following documentary evidences with respect to M/s MSPL during assessment proceedings: - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares. The said fact has already been noted by us in preceding para 3.8 of the order. 5.6 The Ld.CIT-DR cited the decision of Hon ble High Court of Delhi in CIT V/s Navodaya Castles Pvt. Ltd. (367 ITR 306 25/08/2014). However, we find the same to be factually distinguishable since in that case, the assessment order specifically records that there were huge regular cash deposits and thereafter pay order / cheques were issued to the respondent assessee. The same is not the case here since Ld. Assessing Officer records a fact that loans were sourced by liquidating the unquoted investments. 5.7 The case law of Hon ble Delhi High Court in the case of CIT V/s Jansampark Advertising Marketing Pvt. Ltd. [2015 56 Taxmann.com 286], would also not apply since upon perusal of para-41 of the judgment, it is quite discernible that the assessee had come up with the proof of identity of some of the entities in question but failed to establish the genuineness and creditworthiness of the transactions. Therefore, the matter was set aside by Hon ble Court to the file of Ld. CIT(A) for fresh consideration / adjudication. The same is not the case here since the assessee has filed sufficient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n considered. Also perused the materials on record. 13. Section 68 of the Act deals with cash credits. As per Section 68, where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. Simply put, the section provides that if there is any cash credit disclosed by the assessee in his return of income for the previous year under consideration and the assessee offers no explanation for the same or if the assessee offers explanation which the Assessing Officer finds to be not satisfactory, then the said amount is to be added to the income of the assessee to be charged to income tax for the corresponding assessment year. 14. Section 68 of the Act has received considerable judicial attention through various pronouncements of the Courts. It is now well settled that under Section 68 of the Act, the assessee is required to prove identity of the creditor; genuineness of the transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cuments, such as, share application form etc. First appellate authority also noted that there was no requirement under Section 68 of the Act to explain source of source. It was not necessary that share application money should be invested out of taxable income only. It may be brought out of borrowed funds. It was further held that nonresponding to notice would not ipso facto mean that the creditors had no credit worthiness. In such circumstances, the first appellate authority held that where all material evidence in support of explanation of credits in terms of identity, genuineness of the transaction and creditworthiness of the creditors were available, without any infirmity in such evidence and the explanation required under Section 68 of the Act having been discharged, Assessing Officer was not justified in making the additions. Therefore, the additions were deleted. 19. In appeal, Tribunal noted that before the Assessing Officer, assessee had submitted the following documents of the three creditors: a) PAN number of the companies; b) Copies of Income Tax return filed by these three companies for assessment year 2010-11; c) Confirmation Letter in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or fictitious persons or that any part of the share capital represent company s own income from undisclosed sources. Accordingly, no addition can be made u/s. 68 of the Act. In view of above reasoned factual finding of CIT(A) needs no interference from our side. We uphold the same. 21. From the above, it is seen that identity of the creditors were not in doubt. Assessee had furnished PAN, copies of the income tax returns of the creditors as well as copy of bank accounts of the three creditors in which the share application money was deposited in order to prove genuineness of the transactions. In so far credit worthiness of the creditors were concerned, Tribunal recorded that bank accounts of the creditors showed that the creditors had funds to make payments for share application money and in this regard, resolutions were also passed by the Board of Directors of the three creditors. Though, assessee was not required to prove source of the source, nonetheless, Tribunal took the view that Assessing Officer had made inquiries through the investigation wing of the department at Kolkata and collected all the materials which proved source of the source. 22. In NRA Iro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is evident from para 6.5.1 of the impugned order that the aforesaid decision in Supergold Properties Private Limited (supra) was specifically relied upon by the assessee before the learned CIT(A), however without distinguishing the same, the learned CIT(A) dismissed the appeal filed by the assessee. On the other hand, the learned CIT(A), placed reliance upon another decision of the coordinate Bench of the Tribunal in Leena Power Tech Engineers Ltd. (supra). To distinguish the aforesaid decision, the assessee furnished the following distinction on the facts and merits of its case and in Leena Power Tech Engineers Ltd. (supra):- Sr. No. Issues Particulars In the case of Appellant In the case of Leena Power Tech Engineers Pvt. Ltd. (130 taxmann.com 341) 1. Type of Business Company engaged in the business of joint venture and real estate developments Company is an investment company. 2. Nature of credits in the books Amount received was for joint venture participation in form o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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