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TMI Blog2024 (11) TMI 952X X X X Extracts X X X X X X X X Extracts X X X X ..... nformation is made as basis to infer escapement of income, same could only be done if at all under special and specific provision of sec 153C of 1961 Act; therefore first appeal order dated 14.03.2024 is also invalid. Both order may please be quashed and set aside; 1.2 Impugned Assessment order dated 23.03.2016 passed u/s 147/143 is invalid being based on invalid notice issued u/s 148 of 1961 Act dated 25.03.2015 which lacks valid/requisite legal foundation and there under; therefore first appeal order dated 14.03.2024 is also invalid. Both order may please be quashed and set aside. 1.3 Impugned Assessment order dated 23.03.2016 passed u/s 147/143 is invalid being based on invalid notice issued u/s 148 of 1961 Act dated 25.03.2015 which is based on mechanical /borrowed "satisfaction" and without any valid "tangible" material and thereunder; therefore first appeal order dated 14.03.2024 is also invalid. Both order may please be quashed and set aside. PART-2 GROUNDS ON MERITS: ABRITRARY AND NON APPLICATION OF MIND ON PART OF LD AO AND LD CIT-A 2. That Impugned Assessment order dated 23.03.2016 passed u/s 147/143 and first appeal order dated 14.03.2024 are totally invalid an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d notice u/s 148 of the Act was issued on 25.03.2015 and duly served upon the assessee. In response to the notice u/s 148 of the Act, the assessee company stated that the return of income already filed, to be treated as return filed in response to notice u/s 148 of the Act. Thereafter, notice u/s 143(2) and 142(1) of the Act was issued to the assessee. In response to the notice issued u/s 143(2) of the Act, the Director the company, Shri Ashok Garg alongwith Ld.AR on behalf of the assessee attended the proceedings. Thus, Assessing Officer ("AO") framed the assessment u/s 143 r.w.s. 147 of the Act vide assessment order dated 23.03.2016 and made addition of INR 25,00,000/- i.e. share application money received by the assessee as accommodation entry from M/s. Tauraus Iron & Steel Co. Pvt. Ltd.. Further, a sum of INR 50,000/- was added to the income of the assessee as commission expenses. Thus, the AO assessed income of the assessee at INR 25,51,950/- against the income disclosed by the assessee at INR 1,954/-. 4. Aggrieved against this, the assessee preferred appeal before Ld.CIT(A), who after considering the submissions, dismissed the appeal of the assessee. Thereby, he sustained th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , dehors the information or material is based on the search proceedings. In respect of addition that it fails the test of genuineness and creditworthiness. For this, he re-iterated the contents of written submissions. For the sake of clarity, written submissions filed by the Revenue is reproduced as under:- "In the above case, it is humbly submitted that the following material facts and relevant case laws may kindly be considered with regard to issue of accommodation having been taken by the assessee from non-descript entities being operated, managed and controlled by an accommodation entry provider Mr. Tarun Goyal. Factual Matrix & Background: There was a search conducted at the premises of Mr. Tarun Goyal resulting in the seizure of large number of incriminating documents. Inquires during the post search investigations established that Mr. Tarun Goyal was engaged in providing accommodation entries. He had floated and operated large number entities for the purpose of providing accommodation entries to various beneficiaries in the form share capital, share application money and loans etc. routing the cash received from them through non-descript paper entities/companies. He used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f receipt of letter it did not mean that ITO did not apply his mind to the information. Further, the Hon'ble Jurisdictional Delhi High Court in the case of Paramount Communications Ltd. Vs Pr. CIT 392 ITR 444(Del) has held that the information by the investigation or the other authority is valid material for initiating reassessment proceedings. This judgment of Delhi High Court has been approved in by Hon'ble Supreme Court in 250 Taxmann 100 (SC). Hon'ble Calcutta High Court in a recent decision delivered on 13.09.2022 in the case of PCIT 1 Kolkata Vs Arshia Global Tradecom P Ltd in ITAT/175/2021 [IA No:GA/02/2021] has categorically held that when sufficient material evidence has been passed on to the AO by Inv. Wing and reassessment having been done on new facts does not amount to change of opinion. The main proposition made by the Hon'ble Court was that crucial factual aspects which are relevant to the reopening of the assessment cannot be ignored in deciding the validity of reopening merely going on the basis as to what are the conditions to be fulfilled in order to reopen an assessment. Hon'ble Jurisdictional Delhi High Court in the case of Pratibha Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of specific and credible information about the assessee to record reasons for reopening of the assessment. The important question is......... Whether there was relevant material on which a reasonable person could have formed a belief which definitely was there in this case? Whether or not, the material would conclusively establish the escapement is not important. This aspect has to be examined subsequently in the reassessment proceedings. It is noted that the AO has applied his mind to the information available independently to arrive at the belief on the basis of material which was available with him. Hence, the AO had validly assumed jurisdiction u/s 148 of the Act by recording the reasons to believe in accordance with the provisions of the Act u/s 147 of the Act and, therefore, the ground of appeal on this is deserve to be dismissed. Additional Grounds of Appeal with any specific application: As regards challenge to initiation of proceedings under section 147, the assessee has raised a ground that the assessment proceedings should have been completed under section 153C of the Act, it is submitted that a. Notice under section 148 dated 25.3.2015 was i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The impugned order is consequently set aside; the question of law urged by the Revenue is answered in its favour. The matter is remitted for consideration on the merits of the appeal concerning the additions made in the reassessment proceedings. 7. The Appeal is allowed is above terms." In view of the above as the assessee did not raise objections at the initial stage and therefore the above decision of Hon'ble Delhi High Court is clearly applicable to the case of the assessee. c. In addition to the above it is further submitted that the assertion of the assessee that the assessment in his case should have been made u/s 153C is legally not tenable as in this case there is no satisfaction of the AO of the searched person where such AO has recorded his satisfaction that any assets and documents seized belong to the assessee (being a person other than the searched person). Provisions of section 153C are specific provision and they cannot be applied without following the procedures laid down in the said section. These are not the provisions that get automatically attracted in respect of any seizure of material/documents relating to the different persons other than the searc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he searched person). The AO of the Assessee, on receiving the documents and the assets seized, would have jurisdiction to commence proceedings under Section 153C of the Act. The AO of the searched person is not required to examine whether the assets or documents seized reflect undisclosed income. All that is required for him is to satisfy himself that the assets or documents do not belong to the searched person but to another person. Thereafter, the AO has to transfer the seized assets/documents to the AO having jurisdiction of the Assessee to whom such assets/documents belong. Section 153C(1) of the Act clearly postulates that once the AO of a person, other than the one searched, has received the assets or the documents, he is to issue a notice to assess/re-assess the income of such person that is, the Assessee other than the person searched - in accordance with provisions of Section 153A of the Act. Further, the proviso to Section 153C(1) of the Act expressly indicates that reference to the date of initiation of search for the purposes of second proviso to Section 153A shall be construed as a reference to the date on which valuable assets or documents are received by the AO o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion or control of any person in the course of a search it may be presumed that such document belongs to such person. It is similarly provided in section 292C(1)(1). In other words, whenever a document is found from a person who is being searched the normal presumption is that the said document belongs to that person. It is for the Assessing Officer to rebut that presumption and come to a conclusion or 'satisfaction' that the document in fact belongs to somebody else. There must be some cogent material available with the Assessing Officer before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of 'satisfaction'. 11. It is evident from the above satisfaction note that apart from saying that the documents belonged to the petitioner and that the Assessing Officer is satisfied that it is a fit case for issuance of a notice under section 153C, there is nothing which would indicate as to how the presumptions which are to be normally raised as indicated above, have been rebutted by the Assessing Officer. Mere use or mention of the word "satisfaction" or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss or reassess income of such other person in accordance with the provisions of section 153A. Thus, there are two stages: The first stage comprises of a search and seizure operation under Section 132 or proceeding under Section 1324 against a person, who may be referred as 'the searched person'. Based on such search and seizure, assessment proceedings are initiated against the 'searched person' under Section 1534. At the time of initiation of such proceedings against the 'searched person' or during the assessment proceedings against him or even after the completion of the assessment proceedings against him, the Assessing Officer of such a 'searched person', may, if he is satisfied, that any money, document etc. belongs to a person other than the searched person, then such money, documents etc, are to be handed over to the Assessing Officer having jurisdiction over 'such other person'. The second stage commences from the recording of such satisfaction by the Assessing Officer of the 'searched person' followed by handing over of all the requisite documents etc. to the Assessing Officer of such other person thereafter followed by i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those particulars are false and can not be acted upon, then no action can be made in the hands of the company under section 68 and the remedy open to the Revenue is to go after the share applicants in accordance with law. We are afraid that we can not apply the ration to a case, such as the present, where the Assessing Officer is in possession of material that discredits and impeaches the particulars furnished by the assessee and also establishes the link between self confessed accommodation entry providers', whose business is to help assessee's bring into their books of account their unaccounted monies through the medium of share subscription and the assessee,... The existence with the Assessing Officer of material showing that the share subscriptions were collected as part of a premeditated plan-a smoke screen-conceived and executed with the connivance or involvement of the assessee excludes the applicability of the ratio. Hon'ble Jurisdictional High Court Delhi CIT II vs Jan Sampark Advertising & Marketing P.Ltd. 2015 TIOL-600-HC-Del-IT Since Section 68 itself declares that the credited sum would have to be included in the income of the assessee in the absence of explan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vance money towards capital, genuineness of the transactions. It the assessee has adduced evidences to establish the prima facie, the aforesaid onus shifts to the Department. However, mere furnishing of particulars or the mere fact of payment by account payee cheque or the mere submission confirmation letter by the share applicant is by itself, not enough to shift the onus to the department although these facts may along with other facts be relevant in establishing the genuineness of the transactions. Hon'ble Jurisdictional High Court of Delhi CIT Vs Navodaya Castles P Ltd in Appeal No.320/2012 dated 25.08.2014 14. Certificate of incorporation, PAN etc. are relevant for purpose of identification, but have their limitation when there is evidence and material to show that the subscriber was a paper company and not a genuine investor..... Hon'ble High Court of Delhi CIT Vs Sophia Finance Ltd 205 ITR 98 [Delhi Provisions of Section 68 are applicable even to share application money and if on inquiry it is found that shareholders do not exist, sum credited may be treated as assessee's income Hon'ble Jurisdictional High Court of Delhi Titan Securities Ltd 357 ITR 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Del 295 The right of hearing does not include a right to cross examine. The right to cross examine must depend upon the circumstances of each case and also n the statue concerned. Hon'ble ITAT Bombay GTC Industries Ltd Vs ACIT [1998] 60 TTJ [Bomb-Trib] It was held that where statement of third parties are only the secondary and subordinate material which were used to buttress the main matter connected with the amount of addition, denial or opportunity to cross examine did not amount to violation of natural justice. Hon'ble Supreme Court N K Proteins Ltd Vs CIT (2017-TIOL 23-SC-IT) Where Hon'ble Supreme Court held that entire undisclosed income generated out of bogus transactions, deserves to be added to total income Hon'ble Gujarat High Court N K Proteins Ltd Vs CIT (2016-TIOL-3165-HCAHM-IT) Hon'ble Gujarat High Court held that addition on basis of undisclosed income cannot be restricted to a certain percentage, when the entire transaction was found as bogus. Hon'ble Jurisdictional CIT VS Ultra Modern Exports (P.) Ltd (40 Hon'ble Delhi High Court held that where in order to ascertain genuineness of assessee's claim relating to High Court of D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejected. 9. I have heard Ld. Authorized Representatives of the parties and perused the material available on record and gone through the orders of the authorities below. The challenge to the assessment order is two folds; one, being against legality of re-opening of assessment and two, the AO has borrowed opinion on the facts since no independent inquiry has been made. The assessee in this regard has raised multiple grounds. It is submitted by the Ld. Counsel for the assessee that the issue raised against validity of re-opening of assessment is squarely covered by the judicial pronouncements. There is no dispute that the re-opening of assessment u/s 147 of the Act has it genesis in the search operation carried out by the Revenue at the premises of one Shri Tarun Goyal wherein it was found that the assessee had obtained entry of INR 25,00,000/- from the entry operator. This transaction is the subject matter of dispute between the parties herein. The AO made addition of this amount of INR 25,00,000/- being share application received from M/s. Tauraus Iron & Steel Company Ltd. u/s 68 of the Act treating non-genuine transaction and accommodation entry. Ld. Counsel for the assessee du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revenue against this decision was dismissed by the Hon'ble Supreme Court in SLP (Civil) Diary No. 7976/23 dated 27.03.2023. 6. In view of the aforesaid observations and respectfully following the judicial precedents relied upon herein above, we hold that the ld CIT(A) had rightly quashed the reassessment proceedings u/s 147 of the Act in the facts and circumstances of the instant case. We do not find any infirmity in the said order. Accordingly, the grounds raised by the revenue are dismissed." 10. I find that the case laws relied by Ld. Sr. DR for the Revenue, are not on the point in issue. The contention of Ld. Sr. DR for the Revenue that the AO of the searched person, has not recorded his satisfaction regarding seized material is belonging to the assessee hence, information passed on by the Investigation Wing remained mere an information only, the provisions of section 153C of the Act, would not be applicable is too far fetched. Undisputedly, the factum of alleged accommodation entry was unearthed during the course of search and is stated to be part of seized material. I am in agreement and bound by the view expressed by the Hon'ble Division bench of this Tribunal in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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