Appeal Details
Counselvise Citation
[2019] 118 COUNSELVISE.COM (IT) 3240 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 7 month(s) 28 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
27-02-2019
Appeal Filed By
Department
Order Result
Allowed
Bench Allotted
H
Assessment Year
2009-2010
Appeal Filed On
29-06-2017
Judgement Text
H IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI PAWAN SINGH , JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.4648/ MUM/2017 ( / ASSESSMENT YEAR : 2009 - 10 ) ITO 6(3)(4), ROOM NO. 524, 5 TH FLOOR, AAYAKAR BHAWAN, MAHARISHI KARVE ROAD, MUMBAI - 400020 / V. M/S. KNOWELL ENTERPRISES P RIVATE LTD., 104, BHARAT HOUSE, 2 ND FLOOR, R OOM NO. 9, MUMBAI SAMACHAR MARG, FORT, MUMBAI 400023 ./ PAN : AADCB6702E ( / APPELLANT ) .. ( / RESPONDENT ) REVENUE BY: SHRI. MANOJ KUMAR SINGH (DR) ASSESSEE BY: SHRI. U.C. BOTHRA & SHRI. G.S TOSHNIWAL / DATE OF HEARING : 13.12 .2018 / DATE OF PRONOUNCEMENT : 27 .02.2019 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER: THIS APPEAL, FILED BY REVENUE , BEING ITA NO. 4648/ MUM/2017 , IS DIRECTED AGAINST APPELLATE ORDER DATED 12.04 .2017 IN APPEAL NO. CIT(A) - 12 /IT O - 6(3)(4)/205/ 15 - 16 , PASSED BY LEARNED COMMIS SIONER OF INCOME TAX (APPEALS) - 12 , MUMBAI (HEREINAFTER CALLED THE CIT(A)), FOR ASSESSMENT YEAR 2009 - 10 , THE APPELLATE PROCEEDINGS HAD ARISEN BEFORE LEARNED CIT(A) FROM THE ASSESSMENT ORDER DATED 27.03.2015 PASSED BY L EARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S 143(3) I.T.A. NO.4648/MUM/2017 2 R.W.S. 147 OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) FO R AY 2009 - 10 . 2. THE GROUNDS OF APPEAL RAISED BY R EVENUE IN THE MEMO OF APPEAL FILED WITH THE INCOME - TAX APPELLATE TRIBUNAL, MUMBAI (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER: - 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE L D. CIT(A) ERRED IN HOLDING THAT RE - ASSESSMENT MADE UNDER SECTION 147 IS INVALID AND BAD IN LAW ACCORDINGLY QUASHING THE SAME ON THE GROUND THAT IF THE ISSUE IS NOT DISCUSSED IN THE ASSESSMENT ORDER WOULD NOT LEAD TO A CONCLUSION THAT NO OPINION WAS FORMED AS TO SUBJECT OF THE QUERY, WITHOUT APPRECIATING THE FACT THAT ASSESSMENT WAS REOPENED AS PER THE PROVISIONS OF SECTION 147 OF THE INCOME TAX ACT.' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE APPE AL OF THE ASSESSEE HOLDING THAT NOTICE ISSUED U/S 148 IS BAD IN LAW AND NOT ON CORRECT FACTS, BY RELYING ON THE ORDER OF BOMBAY HIGH COURT DATED 20.03.2017 IN CIT VS. GANGADEEP INFRASTRUCTURE PVT. LTD IN ITA NO. 1613 OF 2014, WHICH IS NOT APPLICABLE TO RE - OPENING OF THE CASE.' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT RE - ASSESSMENT MADE UNDER SECTION 147 IS INVALID AND BAD IN LAW WITHOUT CONSIDERING THE FACT THAT THE A.O. PASSED A SPEAKING OR DER DATED 20.03.2015, WHEREIN HE DEALT WITH ALL THE OBJECTIONS OF THE ASSESSEE AGAINST RE - OPENING OF THE ASSESSMENT.' 4. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE WITHOUT DISCUSSI NG THE SAME ON MERIT.' 5. 'THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (APPEALS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED.' 6. 'THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR TO SUBMIT ADDITIONAL NEW GROUND, WHICH MA Y BE NECESSARY.' 3. THE ASSESSEE IS A DOMESTIC COMPANY INCORPORATED ON 14.01.2009. THE ASSESSEE S BUSINESS AS IS STATED IN ITS MEMORANDUM I.T.A. NO.4648/MUM/2017 3 OF ASSOCIATION IS TO RENDER CONSULTANCY SERVICES . PRESENTLY , WE ARE CONCERNED WITH ASSESSMENT YEAR 2009 - 10 AND THE PREVIOUS YEAR IS FROM 14.01.2009 (DATE OF INCORPORATION) TILL 31.03.2009. THIS IS FIRST YEAR OF ASSESSES EXISTENCE AS IT WAS INCORPORATED ON 14.01.2009 ONLY . THE ASSESSEE FOR THE PREVIOUS YEAR ENDED 31. 03.2009 RELEVANT TO AY 2009 - 10 FILED ITS RETURN OF INCOME ON 31.08.2009 , SHOWING TOTAL INCOME AT RS. 15,712/ - . THE SAID RETURN OF INCOME WAS PROCESSED BY THE AO U/S 143(1) OF THE 1961 ACT . THE REVENUE DID NOT UNDERTOOK SCRUTINY ASSESSMENT U/S 143(3) REA D WITH SECTION 143(2) OF THE 1961 ACT FOR THE IMPUGNED ASSESSMENT YEAR 2009 - 10 . THE INFORMATION WAS RECEIVED BY THE AO FROM TH E OFFICE OF CHIEF COMMISSIONER OF INCOME TAX, MUMBAI (HEREINAFTER CALLED THE CCIT) THAT THE ASSESSEE HAS ISSUED EQUITY SHARES O N HUGE PREMIUM AMOUNTING TO RS. 1,74,53,700/ - . SINCE, T HIS ISSUE WAS NEVER EXAMINED EARLIER BY THE AO AS NO SCRUTINY ASSESSMENT WAS ORIGINALLY FRAMED U/S 143(3) READ WITH SECTION 143(2) OF THE 1961 ACT , THE ASSESSMENT OF THE ASSESSEE WAS RE - OPENED BY THE AO WITHIN PROVISIONS OF SECTION 147 OF THE 1961 ACT AND NOTICE U/S 148 , DATED 31.03.2014 WAS ISSUED TO THE ASSESSEE BY THE AO WHICH WAS SERVED ON THE ASSESSE E . THUS, THE REOPENING OF THE CONCLUDED ASSESSMENT WAS DONE BY THE AO U/S 147 OF THE 1961 ACT WITH IN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR AND INITIALLY NO ASSESSMENT WAS FRAMED BY THE AO U/S 143(3) READ WITH SECTION 143(2) OF THE 1961 ACT. THUS, FIRST PROVISO TO SECTION 147 OF THE 1961 ACT IS UNDISPUTEDLY NOT APPLICABLE TO THE ASSESSEE. THE ASSESSEE VIDE LETTER DATED 25.05.2014 ASKED FOR THE REASONS FOR RE - OPENING OF THE CONCLUDED ASSESSMENT WHICH WERE SUPPLIED BY THE AO. THE ASSESSEE THEN ASKED THE AO TO TREAT RETURN OF INCOME FILED ON 31.08.2009 AS RETURN OF INCOME FILED IN RESPONSE TO NOTI CE U/S 148 OF THE 1961 ACT. THE ASSESSEE RAISED OBJECTIONS TO THE RE - OPENING OF THE ASSESSMENT VIDE LETTER DATED 11.09.2014 WHICH WERE REJECTED BY THE AO VIDE LETTER NO. REF.MUM/ITO - 6(3)(4)/2014 - 15 DATED 20.03.2015. IT WAS OBSERVE D BY THE AO THAT THE ASSESSEE HAS NOT DONE ANY SUBSTANTIAL BUSINES S OPERATION S DURING THE IMPUGNED YEAR UNDER CONSIDERATION I.T.A. NO.4648/MUM/2017 4 AND FINANCIAL DETAIL S OF THE ASSESSEE FOR FINANCIAL YEAR(FY) 2008 - 09 , 2009 - 10 AND 2010 - 11 ARE AS UNDER: - 5.1 THE SUM SO INTRODUCED IN THE BOOKS OF THE ASSESSEE COMPANY WAS FOUND TO HAVE BEEN UTILIZED IN THE FORM OF THE FOLLOWING: I) INVESTMENT IN FIXED ASSETS - RS. - II) INVESTMENT IN SHARES OF OTHER COMPANIES - RS. 1,21,00,000/ - THE AO OBSERVED THAT THE SUM SO INTRODUCED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE WAS UTILISED F OR THE FOLLOWING PURPOSES: I ) INVESTMENT IN FIXED ASSETS - RS. - II ) INVESTMENT IN SHARES OF OTHER COMPANIES - RS.1,21,00,000/ - III) GIVEN AS L OAN S & A DVANCE S TO OTHERS - RS. 71,20,62 5 / - IV)AS CASH/BANK BALANCE - RS. 2,65,907 V) IN STOCK/WIP/SUNDRY DEBTORS - RS. - THE AO HAD ALSO OBSERVED THAT ASSESSEE HAS SHOWN MEAGRE INCOME OF RS. 15,712/ - IN ITS FIRST YEAR OF OPERATION ENDING ON 31.03.2009, AFTER ITS INCORPORATION ON 14.01.2009. THE AO OBSERVED THAT THE PAID UP SHARE CAPITAL OF THE ASSESSEE WAS RS. 20,39,300/ - WHEREIN 2,03,930 EQUITY SHARES OF RS. 10/ - EACH WERE ISSUED AT PAR/PREMIUM OF RS. 90 PER SHARE. IT WAS OBSERVED BY THE AO THAT THE ASSESSEE HAD INTRODUCED A SUM OF RS. 1,74,53,700/ - ON ACCOUNT OF SHARE PREM IUM WHEREIN TOTAL SHARE CAPITAL INCLUSIVE OF SHARE PREMIUM WAS RS. 1,93,93,000/ - CONSISTING OF 1939300 EQUITY SHARE OF RS. 10 EACH WHICH WERE ISSUED SR. NO. LAST YEAR FY 2007 - 08(AY 2008 - 09) THIS YEAR FY 2008 - 09 ( AY 2009 - 10) NEXT YEAR FY 2009 - 10 (AY 2010 - 11) YEAR AFTER FY 2010 - 11(AY 2011 - 12) I) TOTAL TURNOVER NOT AVAILABLE RS.1 89000 RS.70,51,274 RS.2,07,40,730 II) NET PROFIT AFTER TAXES NOT AVAILABLE RS.9000 RS. 109145 NOT AVAILABLE III) EPS NOT AVAILABLE RS.0.05 NOT AVAILABLE NOT AVAILABLE \ V) DIVIDEND NOT AVAILABLE NOT AVAILABLE NOT AVAILABLE RS.60196 I.T.A. NO.4648/MUM/2017 5 AT A PREMIUM OF RS. 9 0 / - PER EQUITY SHARES , TO THE FOLLOWING PERSONS AS DETAILED HERE UNDER: - S.NO NAME OF THE PERSON WITH ADDRESS NO OF SHARES FACE VALUE (IN RS.) ISSUE PRICE (IN RS.) PREMIUM PER SHARE (IN RS.) MONEY RECEIVED TOWARDS SHARE CAPITAL (IN RS.) SHARE P REMIUM (IN RS.) T OTAL (IN RS.) (1) (2) (3) (4) (5) (6) (7)=(3)*(4) (8)=(3)*(6) (7)+(8) 1 BHARAT MISHRA HUF 6250 10 100 90 62500 562500 625000 2 BHARAT MISHRA 12000 10 100 90 12000 1080000 120000 0 3 BINDAL PRASAD VARMA 2630 10 100 90 26300 236700 263000 4 KELLOG COMMUNICATION P. LTD. 84000 10 100 90 840000 7560000 8400000 5 NEMICHAND T HUF 4550 10 100 90 45500 409500 455000 6 SANTOSH GULGULIA 7000 10 100 90 70000 630000 700000 7 STAR FINCAP P. LTD 22500 10 100 90 225000 2025000 2250000 8 THANK YOU MANAGEMENT CONSULTANT P. LTD., 43000 10 100 90 430000 3870000 4300000 9 SUBH MANAGEMENT C ONSULTANT P. LTD., 10000 10 100 90 100000 900000 1000000 10 SYSTEMATIC MARKETING CONCEPTS P. LTD., 2000 10 100 90 20000 180000 200000 TOTAL 1939300 17453700 19393000 ON PERUSAL OF THE REASONS RECORDED FOR REOPENING OF CONCLUDED ASSESSMENT BY INVOKING PROVISIONS OF SECTION 147 OF THE 1961 ACT WOULD TRANSPIRE THAT THE REASONS RECORDED WERE DUE TO ISSUE OF SHARES AT A VERY HIGH SHARE PREMIUM OF RS. 90/ - PER SHARE RAISED BY A PRIVATE COMPANY, AGGREGATING TO RS.1,74,53,700/ - ON ISSUE OF 1,93,930 EQUITY SHARES OF FACE VALUE OF RS. 10 EACH. THE SAID REASONS FOR REOPENING OF THE CONCLUDED ASSESSMENT ARE REPRODUCED HEREUNDER: I.T.A. NO.4648/MUM/2017 6 THE ASSESSEE FILED AN OBJECTION AGAINST THE REOPENING OF CONCLUDED ASSESSMENT AND THE OBJECTIONS RAISED BY THE ASSESSEE WERE DISPOSED OF F /REJECTED BY THE AO , VIDE ORDER DATED 20.03.2015 WH ICH IS REPRODUCED HERE UNDER: - I.T.A. NO.4648/MUM/2017 7 I.T.A. NO.4648/MUM/2017 8 I.T.A. NO.4648/MUM/2017 9 I.T.A. NO.4648/MUM/2017 10 I.T.A. NO.4648/MUM/2017 11 I.T.A. NO.4648/MUM/2017 12 I.T.A. NO.4648/MUM/2017 1 3 I.T.A. NO.4648/MUM/2017 14 THE ASSESSEE HAVING ISSUED EQUITY SHARES AT A VERY HIGH PREMIUM OF RS. 90 / - PER SHARES AS AGAINST FACE VALUE OF RS. 10 / - PER EQUITY SHARE, THE RE - OPENING WAS DONE TO VERIFY SUCH A HIGH SHARE PREMIUM RECEIVED BY THE ASSESSEE, WHICH AS PER THE AO ENCOMPASSES ENQUIRY AS TO THE FOLLOWING ASPECTS : A ) IN THE CASE OF THE ASSESSEE COMPANY - ( I ) BACK GROUND INFORMATION OF THE ASSESSEE COMPANY, ITS REAL STAKE HOLDERS(SHAREHOLDERS) AND MANAGEMENT AND CONTROL(BOARD OF DIRECTORS) ( II ) SCALE OF ITS BUSINESS OPERATIONS VIS - A - VIS ITS NATURE OF BUSINESS AND FINANCIAL OUTLAY, NUMBER OF YEARS IN EXISTENCE. ( III ) INT RINSIC VALUE OF THE SHARES VIS A VIS THE PERFORMANCE OF THE COMPANY AS EVIDENT FROM ITS PAST TRACK RECORD IN TERMS OF TURNOVER AND PROFITABILITY ,DIVIDEND HISTORY , BONUS ISSUES AND EARNING PER SHARE(EPS). ( IV ) OUTLOOK FOR THE FUTURE - IN TERMS OF SCOPE OF BUSINE SS EXPANSION AND NEED FOR FINANCE. ( V ) BASIS OF DETERMINING THE VALUE OF THE SHARES AND PREMIUM THEREON - AVAILABILITY OF SHARES VALUATION REPORT , ITS CREDIBILITY VIS A VIS THE PARAMETERS ON WHICH IT IS BASED, AND THE ACCEPTABILITY OF SUCH METHODS IN NORMAL BUSINESS TRANSACTIONS. I.T.A. NO.4648/MUM/2017 15 ( VI ) PERFORMANCE OF THE LATER PERIOD TO JUSTIFY THE ISSUE PRICE, VIS A VIS THE SHARE PREMIUM CHARGED AND RETURN GENERATED FOR THE INVESTOR ( VII ) ACTUAL USER OF THE FUNDS SO RAISED , WHETHER IT REMAINED IN CIRCULATION OF ASSESSEES BUSINESS OR H AS MERELY ROUTED THROUGH ITS BOOKS TO THE BENEFICIAL ENJOYMENT OF PERSONS OTHER THAN THE ASSESSEE COMPANY. B ) IN THE CASE OF THE IMPUGNED INVESTORS - ( I ) IDENTITY OF PERSONS ( II ) BUSINESS PROFILE AND PERFORMANCE ( III ) CAPACITY TO INVEST ( IV ) CREDITWORTHINESS ( V ) SOURCES OF FUNDS C ) ATTENDANT CIRCUMSTANCES AND PREPONDERANCE OF HUMAN PROBABILITIES ( I ) NATURE OF TRANSACTION ( II ) PROBABILITY - WHETHER THE IMPUGNED TRANSACTION APPEALS TO THE NORMAL MIND, ITS BELIEVABILITY AND FEASIBILITY. ( III ) AVAILABLE PROOF OF GENUINENESS OF THE TRANSACTION ( IV ) QUALITY OF PROOF AND ITS ADEQUACY D ) SUBSTANCE OVER FORM IT IS PERTINENT TO MENTION THAT ORIGINALLY NO ASSESSMENT WAS FRAMED BY THE AO U/S 143(3) READ WITH SECTION 143(2) OF THE 1961 ACT WHEREIN THE RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE 1961 ACT AND THE REOPENING IS SOUGHT TO BE DONE WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. THE AO OBSERVED THAT THE ASSESSEE HAS FAILED TO DISCHARGE ITS PR I MARY ONUS AS THE ASSESSEE FAILED TO FURNISH COMPLETE DOCUMENTARY EVIDENCES IN CONNECTION WITH SHARE ISSUED BY ASSESSEE AT HUGE SHARE PREMIUM. THE AO OBS ERVED THAT BASED ON MATERIAL ON RECORD , THE ASSESSEE HAS FAILED TO PROVE GENUINENESS OF THE TRANSACTION AND ALSO THE ASSESSEE HAVING FAILED TO PROVE CREDITWORTHINESS AND CAPACITY OF ACCOMMODATION ENTRY PROVIDERS . IT WAS ALSO OBSERVED BY THE AO THAT THE A SSESSEE HAS FAILED TO PROVE THE NATURE OF TRANSACTION OF ISSUING SHARE CAPITAL AT A VERY HIGH SHARE PREMIUM. IT WAS ALSO OBSERVED BY THE AO THAT THE ASSESSEE DOES NOT HAVE ANY BUSINESS, HAVE POOR EPS AND ALSO FUNDS WERE NOT UTILISED FOR BUSINESS PURPOSES O R WERE INVESTED IN NON INCOME GENERATING AREAS WHEREIN FUNDS WERE DIVERTED. IT WAS ALSO OBSERVED THAT THE INVESTOR COMPANIES WERE ALL PAPER COMPANIES HAVING NO REAL BUSINESS ACTIVITIES AND THE SOURCES OF THE FUNDS REVEAL MODUS OPERANDI OF ENTRY PROVIDERS I.T.A. NO.4648/MUM/2017 16 W HEREIN THE MONEY HAS BEEN INTRODUCED IN THE GUISE OF LOANS, ADVANCES, SHARE CAPITAL AND SHARE PREMIUM BY CREATING LAYERS OF SMOKESCREEN AND INTRICATE WEB OF ENTRIES ROUTED THROUGH PAPER CONCERNS BEING USED BY ENTRY PROVIDERS. THE AO THEN WENT ON TO EXPLAIN THE MODUS OPERANDI ADOPTED BY THESE ACCOMMODATION ENTRY PROVIDERS TO ROUTE UNEXPLAINED MONEY INTO WEB OF COMPANIES. THE AO RELIED UPON DECISION OF ITAT, KOLKATTA IN THE CASE OF BISAKHA SALES PRIVATE LIMITED V. CIT IN ITA NO. 1493/KOL/2013 AND OTHER DECIS IONS WHEREIN ADDITIONS HAVE BEEN SUSTAINED ON ACCOUNT OF THESE ACCOMMODATION ENTRIES. THE AO THEN WENT ON TO HOLD THAT THE AMOUNT RECEIVED BY THE ASSESSEE TOWARDS SHARE CAPITAL IS AN UNEXPLAINED CASH CREDIT WHICH THE ASSESSEE FAILED TO SUBSTANTIATE THROUGH DOCUMENTARY EVIDENCES . THE AO OBSERVED THAT THE ONUS WAS ON THE ASSESSEE AND THE ASSESSEE FAILED TO DISCHARGE ITS ONUS AS TO JUSTIFYING ISSUE OF SHARES AT A VERY HUGE SHARE PREMIUM WHICH WAS ALSO ABOVE ITS FAIR VALUE WHICH LED TO THE ADDITIONS TO THE TUN E OF RS. 1,93,93,000/ - TO THE INCOME OF THE ASSESSEE BY HOLDING SAID SHARE CAPITAL AND SHARE PREMIUM TO BE UNEXPLAINED AND UNSUBSTANTIATED AS TO THE GENUINENESS AND NATURE THEREOF WHICH WAS BROUGHT TO TAX BY THE AO U/S 68 OF THE 1961 ACT, VIDE ASSESSMENT ORDER DATED 27.03.2015 PASSED U/S 143(3) READ WITH SECTION 147 OF THE 1961 ACT. 4. THE MATTER WENT IN APPEAL BEFORE LD. CIT(A) AT THE BEHEST OF THE ASSESSEE. THE LD. CIT(A) VIDE APPELLATE ORDER DATED 12.04.2017 QUASHED REOPENING OF THE ASSESSMENT U/S 147 OF THE 1961 ACT BY HOLDING AS UNDER: 6. GROUND NO. 1 TO 7 ARE DISPOSED OFF IN TOTALITY . I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND THE APPELLANT'S WRITTEN SUBMISSIONS. IT IS SEEN THAT THE REOPENING ITSELF IS BAD IN LAW. THE NOTICE U/S. 148 HAS BEEN ISSUED BY THE A.O. AS QUOTED BELOW VERBATIM. REASON FOR SELECTION THE RETURN OF INCOME WAS FILED ON 31/8/2009 WITH E - FILING ACKNOWLEDGEMENT NUMBER 85553830310809 DECLARING I.T.A. NO.4648/MUM/2017 17 TOTAL INCOME IS NIL. THE RETURN WAS PROCESSED U/S. 143 (1) AS PER THE I .T. ACT ON 4/11/2010. A LETTER HAS BEEN ISSUED BY OFFICE OF THE CHIEF COMMISSIONER OF INCOME - TAX, MUMBAI VIDE LETTER NO. MUM/ CCIT /COORD/ U - III/SHARE PREMIUM/2013 - 14/1701 DATED 13.3.2014 REGARDING ISSUE OF EQTY SHARES ON HUGE PREMIUM BY PR IVATE COMPANY AS UNDER: SR. NO. ROC SR. NO. FACE VALUE IN RS TOTAL NO. OF SHARE PREMIUM ISSUED TOTAL AMOUNT RECEIVED IN(RS) CASH 679 1261 10 193,930 1,74,53,700 IN VIEW OF AFORESAID FACTS, I HEREBY PROPOSE TO REOPEN THE CASE U/S. 147 FOR VERIFICATION OF HIGH RATE OF SHARE PREMIUM AND CASH RECEIVED. AS PER DIRECTIONS OF CCIT, SAME IS REQUIRED TO BE EXAMINED. ISSUE NOTICE U/S. 148 AS PER I.T. ACT, 1961.' THUS, HERE IT IS SEEN THAT THE CASE HAS BEEN REOPENED BY THE A.O. ON THE SOLE FACT THAT THE A.O. PROPOSES TO 'REOPEN THE CASE U/S. 147 FOR VERIFICATION OF HIGH RATE OF SHARE PREMIUM AND CASH RECEIVED'. THERE IS NO MENTION WHATSOEVER OF ANY 'REASON TO BELIE VE' AND THAT THERE IS 'ESCAPEMENT OF INCOME' WH ICH ARE MANDATORY FOR THE A.O. T O ISSUE NOTICE U/S. 148 7. THE APPELLANT HAS OBJECTED TO THIS NOTICE U/S. 148 VIDE ITS LETTER DATED 11.9.2014 WHICH IS QUOTED BELOW VERBATIM: TO INCOME TAX OFFICER 8(2)( 2) AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 SIR, SUB: OBJECTION TO NOTICE U/S. 148 ******* I.T.A. NO.4648/MUM/2017 18 WE THANK YOUR GOOD SELF FOR HAVING FURNISHED US WITH THE REASONS RECORDED BY YOU U/S. 148(@) (COPY ENCLOSED FOR YOUR READY REFERENCE). WE HEREBY OBJECT THESE REASONS AS ALSO THE NOTICE U/S, 148 ISSUED BY YOU ON THAT BASIS IN OUR CASE FOR A.Y. 2009 - 10. WITH UTMOST RESPECT WE STATE AND SUBMIT THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF OUR CASE AND IN LAW, THE NOTICE ABOVE MENTIONED IS BAD IN LAW A ND BEREFT OF MERIT FOR THE FOLLOWING REASONS: A) FROM THE REASONS RECORDED IT WOULD KINDLY BE SEEN THAT YOU HAVE ISSUED THE NOTICE U/S. 148 ON THE SCANT FACT OF THE ISSUE OF EQUITY SHARES BY US AT A PREMIUM. THIS FACT IN ITSELF CANNOT GIVE REASONS TO BELIE VE TO ANY JUDICIOUS PERSON THAT THERE IS ANY ESCAPEMENT OF INCOME CHARGEABLE TO TAX FROM ASSESSMENT. HENCE, THE NOTICE ISSUED BY YOU IS WITHOUT ANY REASON AND THEREFORE BAD IN LAW. B) FROM THE REASONS RECORDED IT WOULD KINDLY BE SEEN THAT YOU YOURSELF ARE NOT CERTAIN THAT THERE IS ESCAPEMENT OF INCOME CHARGEABLE TO - TAX FROM ASSESSMENT. YOU HAVE ISSUED THE NOTICE, IN YOUR OWN WORDS 'FOR VERIFICATION OF HIGH RATE OF SHARE PREMIUM AND CASH RECEIVED'. THUS, YOU HAVE ISSUED THE NOTICE FOR THE PURPOSE OF' VERIFIC AT ION' OR 'EXAMINATION OF FACTS' WITHOUT HAVING ANY REASONS TO ASSESSMENT. HENCE THE NOTICE IS BAD IN LAW. C) FROM THE REASONS RECORDED IT WOULD KINDLY BE SEEN THAT YOU HAVE ISSUED THE NOTICE U/S. 148 AT THE BEHEST OF THE CHIEF COMMISSIONER OF INCOME - TAX, MUMBAI AND NOT ON YOUR OWN. HENCE, THIS NOTICE IS BAD IN LAW. D) FROM THE REASONS RECORDED IT WOULD KINDLY BE SEEN THAT IN THE REASONS RECORDED YOU HAVE, INTERALIA MENTIONED, 'CASH RECEIVED' FOR WHICH YOU HAVE NO MATERIAL OR BASIS. HENCE, THE NOTICE ISSUED IS BAD IN LAW AND BEREFT OF MERIT. E) FROM THE RE ASONS RECORDED IT WOULD KINDLY BE SEEN THAT YOU HAVE USED THE ADJECTIVES 'HUGE' AND 'HIGH RATE OF PREMIUM FOR WHICH YOU HAVE NO MATERIAL OR BASIS. HENCE, THE NOTICE ISSUED IS BAD IN LAW AND BEREFT OF MERIT. F) WITHOUT PREJUDICE TO ANY OF THE OBJECTIONS ENUMERATED AT A), B), C), D) AND E) ABOVE, WE SUBMIT THAT, IN THE ABSENCE OF ANYTHING TO THE CONTRARY IN I.T.A. NO.4648/MUM/2017 19 THE REASONS RECODED BY YOU, IT WOULD SUFFICE TO STATE THAT WE HAVE ISSUED THE SHARES IN QUESTION TO EXIS TING TAX PAYERS AT THE PREMIUM JUSTIFIED ON THE FACTS AND IN THE CIRCUMSTANCES OF OUR CASE. SIR, WE MOST HUMBLY SUBMIT THAT OUR ASSESSMENT FOR A . Y. 2009 - 10 HAS BEEN REOPENED U/S. 147 FOR NO REASONS AT ALL OR ENTIRELY UNTENABLE REASONS AND THEREFORE WE MOST HUMBLY PRAY THAT THE NOTICE U/S. 148 ISSUED IN OUR CASE BE WITHDRAWN OR PROCEEDINGS U/S. 147 INITIATED THEREBY MAY KINDLY BE DROPPED. WE HOPE THAT THE CONTENTS OF THIS LETTER WOULD CONVINCE YOUR GOODSELF THAT THE NOTICE U/S. 148 HAS WRONGLY BEEN ISSUED IN OUR CASE AND NEEDS TO BE CANCELLED, WITHDRAWN OR DROPPED. HOWEVER, IF THERE ARE ANY DOUBTS REMAINING OR CLARIFICATIONS CALLED FOR, WE PRAY THAT W MAY BE ALLOWED A REASONABLE OPPORTUNITY OF BEING HEARD BEFORE ANY ORDER AVERSE TO US IS PASSED. SUBMITTED F OR YOUR KIND CONSIDERATION AND ORDERS.' 8. AGAIN, PERUSAL OF THE ORDER DATED 20.3.2015 S HOWS THAT AT PARA 1.2 OF PAGE 1 - 2, THE A.O. HAS STATED AS UNDER UNDER THE HEADING 'FACTS OF THE CASE', 'HOWEVER, ON RECEIPT OF INFORMATION ABOUT BOGUS PURCHASES FROM HA WALA OPERATORS PROVIDING ACCOMMODATION ENTRIES FROM WHOM THE ASSESSEE COMPANY HAD TAKEN SUCH ENTRIES AND CLAIMED THE SAME AS PURCHASES EXPENSES, THE ASSESSMENT WAS TAKEN UP FOR THE FIRST TIME BY WAY OF ISSUE OF NOTICE U/S. 148 ON 31.3.2014 FOR THE LIMITED PURPOSE OF BRINGING TO TAX THE INCOME SO ESCAPED BY WAY OF BOGUS PURCHASES'. SO IT IS SEEN THAT NOW THERE IS NO MENTION WHATSOEVER OF THE SO CALLED 'VERIFICATION OF HIGH RATE OF SHARE PREMIUM AND CASH RECEIVED' AS HELD BY THE EARLIER A.O. WHO HAD REOPENED THE ASSESSMENT VIDE NOTICE U/S. 148 DATED 31.3.2014 ON THE BASIS OF PR. CCIT'S LETTER. NOW THE INCUMBENT A.O. WHO PASSES ORDER FOR REJECTION DATED 20.3.2015 GIVES ANOTHER REASON FOR THE ISSUANCE OF NOTICE U/S. 148 ON 31.3.2014 WHICH IS 'RECEIPT OF INFORMAT ION ABOVE HAWALA OPERATORS' . THUS, IT IS SEEN THAT THE NOTICE ISSUED U/S 148 IS BAD IN LAW. 9. DURING THE COURSE OF APPELLATE HEARING, ADDITIONAL EVIDENCE WAS SUBMITTED AND REMAND REPORT WAS CALLED FOR VIDE LETTER DATED 13.2.2017 AND THE SAME WAS SUBMITTE D WHICH IS REPRODUCED AS UNDER: I.T.A. NO.4648/MUM/2017 20 'TO, THE CIT(A) - 12, MUMBAI (THROUGH THE JT. CIT, RG.6(3), MUMBAI) SIR/MADAM, SUB: REMAND REPORT IN THE CASE OF M/S. KNOWELL ENTERPRISES P. LTD A.Y. 2009 - 10 - PAN AADCB6702E - REG REF: LETTER NO. CIT(A) - 12/REMAND REPORT/16 - 17 DTD 24.11.2016 & 23.1.17 KINDLY REFER TO THE ABOVE LETTER ON THE ABOVE SUBJECT. A COPY OF THE PAPER BOOK CONTAINING VARIOUS DOCUMENTS F IL ED BY THE ASSESSEE BEFORE YOUR HONOUR IN CONNECTION WITH THE AFORESAID APPEAL WAS FORWARDED TO THIS OFFI CE WITH A DIRECTION TO SUBMIT A REMAND REPORT AFTER EXAMINATION OF THE SAME. 2. AT THE OUTSET, BEFORE GOING INTO THE MERITS OF THE ISSUE INVOLVED, IT IS HUMBLY SUBMITTED THAT THE ASSESSEE WAS GIVEN SUFFICIENT OPPORTUNITIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS. BEFORE OFFERING SPECIFIC COMMENTS ON THE ADDITIONAL EVIDENCES SUBMITTED BY THE ASSESSEE, I WOULD LIKE TO MENTION THAT THE ASSESSEE'S CASE IS NOT COVE RED BY ANY OF THE EXCEPTIONS GIVEN IN RULE 46 A OF THE I.T. RULES , 1961 IN AS MUCH AS THE EVID ENCES PRODUCED BY THE ASSESEE WAS NEVER REFUSED BY THE A.O., NOR THE ASSESSEE WAS PREVENTED FROM SUBMISSION OF ADDITIONAL EVIDENCES, IT IS RESPECTFULLY SUBMITTED THAT THE DETAILS AND DOCUMENTS SUBMITTED BY THE ASSESSEE AS ADDITIONAL EVIDENCES MAY KINDLY BE NOT ADMITTED. FURTHER, IT IS SEEN THAT NO FRESH EVIDENCE/MATERIAL IS SOUGHT TO BE ADMITTED BEFORE THE LD. CIT(A) IN RESPECT OF MOST OF THE ISSUES RAISED BY THE ASSESEE. IN THE MEANTIME, BRIEF COMMENTS REGARDING THE ISSUES RAISED BY THE ASSESSEE ARE SUBMIT TED AS FOLLOWS: ADDITIONAL EVIDENCES BRIEF COMMENTS THE ASSESSING OFFICE ERRED IN REOPENING THE ASSESSMENT U/S, 147 BY ISSUING NOTICE U/S. 148 OF THE IT. ACT, 1961. THE A.O. HAS ERRED IN LAW AS WELL AS UNDER THE CIRCUMSTANCES OF THE CASE IN NOT IS SUING NOTICE U/S. 143(2) OF THE I..T. ACT BEFORE PASSING THE ASSESSMENT THE CASE WAS REOPENED AFTER RECORDING THE REASON AND DUE APPROVAL OF COMPETENT AUTHORITY. IT IS PERTINENT TO MENTION HERE THAT FROM THE DATE OF SERVICE OF NOTICE U/S. 148 OF THE ACT I.E. 29.3.2014 TILL THE DATE OF PASSING OF THE ORDER I.T.A. NO.4648/MUM/2017 21 ORDER. U/S. 143(3) RWS 147 ON 26.3.2015, THE ASSESSES HAS NEVER CHALLENGED THE REOPENING OF THE ASSESSMENT. THE REASONS RECORDED FOR THE ISSUE OF NOTICE U/S. 148 WERE ALSO PROVIDED TO THE ASSESSEE. W HILE MAKING SUBMISSIONS DURING THE COURSE OF REASSESSMENT PROCEEDINGS ALSO, THE ASSESSEE HAS NEVER RECORDED ANY PROTEST AGAINST THE ISSUE OF NOTICES U/S. 148 AND U/S. 143(2) WHICH IS ALREADY ISSUED AND SERVED ON THE ASSESSEE. THEREFORE, REOPENING OF ASSESS MENT IS VALID AND GOOD IN LAW. KEEPING IN THE VIEW OF THE ABOVE, THE ADDITIONAL EVIDENCE FILED IN THE CASE SHOULD NOT BE ADMITTED. 3. RULE 46A(1) CLEARLY SPECIFIES THAT THE APPELLANT SHALL NOT BE ENTITLED TO PRODUCE BEFORE THE LD. CIT(A), OTHER THAN THE EVIDENCE PRODUCED BY HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS, BEFORE THE A.O. EXCEPT THE FOLLOWING CIRCUMSTANCES: 'A) WHERE THE A.O. HAS REFUSED TO ADMIT EVIDENCE WHICH OUGHT TO HAVE BEEN ADMITTED; OR B) WHERE THE APPELLANT W AS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPON TO PRODUCE BY THE A.O. OR C) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING BEFORE THE A.O. ANY EVIDENCE WHICH IS RELEVANT TO ANY GROUND OF A PPEAL; OR D) WHERE THE A.O. HAS MADE THE ORDER APPEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE APPELLANT TO ADDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL'. 4. IT IS OBSERVED THAT THE ASSESSEE FILED ADDITIONAL GROUND OF APPEAL AND NO ADDIT IONAL EVIDENCES FOR THE APPEAL HAS BEEN FILED BY ASSESSEE IN THIS REGARD. IN VIEW OF THE ABOVE, IT IS RESPECTFULLY SUBMITTED THAT THE ASSESSEE'S CASE DOES NOT FALL IN ANY CRITERIA UNDER RULE 46A(1) AS DISCUSSED ABOVE AND ACCORDINGLY, THE ADDITIONAL EVIDENC E NEEDS TO BE REJECTED AND ACTION OF THE A.O. BE SUSTAINED.' 10. I HAVE CAREFULLY CONSIDERED ALL THE ABOVE MENTIONED FACTS AND ALSO THE REMAND REPORT. FOR THE SAKE OF NATURAL JUSTICE, THE ADDITIONAL EVIDENCE IS ACCEPTED AS PER VARIOUS HON'BLE JUDICIAL DECISIONS. HOWEVER, ON THE BASIS OF THE I.T.A. NO.4648/MUM/2017 22 DISCUSSION AT PARA 6, IT IS S EEN THAT THE REOPENING OF THE ASSESSMENT IS INVALID AND BAD IN LAW. SO THE QUESTION OF GOING INTO THE MERITS OF THE ADDITIONAL EVIDENCES ALSO DOES NOT ARISE NOR THERE IS ANY REASON FOR THE UNDERSIGNED TO ADJUDICATE ON THE MERITS OF THE CASE. RELIANCE IS PL ACED ON HON'BLE JURISDICTIONAL HIGH COURT ORDER DATED 20.3.2017 IN THE CASE OF CIT VS GAGANDEEP INFRASTRUCTURE P. LTD. IN ALLOWING THESE GROUNDS OF APPEAL. SO GROUNDS NO. 1 TO 7 ARE ALLOWED. AS COULD BE SEEN FROM THE APPELLATE ORDER DATED 12.04.2017 PA SSED BY LEARNED CIT(A) , THE LD. CIT(A) DID NOT ADJUDICATE THE ISSUE IN APPEAL ON MERIT S BUT RATHER IT QUASHED REOPENING OF THE CONCLUDED ASSESSMENT U/S 147 OF THE 1961 ACT. T HE LD. CIT(A) HAS ALSO RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN T HE CASE OF CIT V. GAGANDEEP INFRASTRUCTURE P. LTD. (ITA NO. 1613 OF 2014 DATED 20.03.1997 REPORTED IN (2017) 394 ITR 680(BOM.)) TO HOLD THAT THE AO SHOULD INSTEAD PROCEED AGAINST THE SUBSCRIBES OF THE SHARES RATHER THAN BRINGING TO TAX INCOME BY WAY OF UNE XPLAINED CASH CREDIT BY WAY OF SHARE CAPITAL AND SHARE PREMIUM IN THE HANDS OF THE ASSESSEE BY INVOKING PROVISIONS OF SECTION 68 OF THE 1961 ACT . WITH THESE REMARKS, THE LEARNED CIT(A) WENT AHEAD AND ALLOWED ALL THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN ITS APPEAL WHICH EVEN INCLUDED GROUNDS OF APPEAL ON MERITS. 5. NOW, THE REVENUE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. BEFORE US LD. DR SUBMITTED THAT ASSESSMENT OF THE ASSESSEE WAS REOPENED U/S. 147 OF THE ACT . NOTICES U/S. 148 WERE ISSUED BY THE AO. IT WAS SUBMITTED THAT ORIGINALLY RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE 1961 ACT AND NO SCRUTINY ASSESSMENT WAS FRAMED BY THE REVENUE U/S 143(3) OF THE 1961 ACT. IT WAS SUBMITTED BY LEARNED DR THAT REOPENING WAS DONE WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR AND FIRST PROVISO TO SECTION 147 OF THE 1961 ACT IS NOT APPLICABLE . I T WAS SUBMITTED THAT THE AO MADE ADDITION S TOWARDS SHARE CAPITAL AND SHARE PREMIUM RAISED BY THE ASSESSEE BY INVOKING I.T.A. NO.4648/MUM/2017 23 PROVISIONS OF SECTION 68 OF TH E 1961 ACT , TO THE TUNE OF RS. 1,93 ,93,000/ - ON ACCOUNT OF THE FACT THAT THE ASSESSEE HAS FAILED TO PROVE IDENTITY , CREDITWORTHINESS OF THE SUBSCRIBERS AND GENUINENESS OF THE TRANSACTION . IT WAS SUBMITTED BY LEARNED DR THAT LD. CIT(A) DECIDED THE ISSU E IN FAVOUR OF THE ASSESSEE BY QUASHING REASSESSMENT PROCEEDINGS U/S 147 OF THE 1961 ACT ON LEGAL GROUND. OUR ATTENTION WAS DRAWN TO THE APPELLATE ORDER PASSED BY LD. CIT(A). IT WAS SUBMITTED BY LEARNED DR THAT REOPENING OF THE ASSESSMENT IS HELD TO BE BA D IN LAW BY LEARNED CIT(A) AND IT WAS SUBMITTED THAT THE ASSESSMENT WAS REOPENED WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR AND INITIALLY NO ASSESSMENT WAS FRAMED BY THE AO U/S. 143(3) OF THE ACT WHILE RETURN OF THE INCOME WAS ONLY PROCESSED U/ S. 143(1) OF THE ACT . I T WAS SUBMITTED THAT THE TURNOVER OF THE ASSESSEE IS VERY LOW FOR THE YEAR ENDED 31.03.2009 AND IT IS A NEW COMPANY WHICH WAS INCORPORATED ON LY ON 14.01.2009 . IT WAS SUBMITTED BY LEARNED DR THAT THE FINANCIALS AND CREDENTIALS OF T HE ASSESSEE DOES NOT JUSTIFY ISSUING OF EQUITY SHARE OF FACE VALUE OF RS. 10 EACH AT SHARE PREMIUM OF RS. 90 PER SHARE. 6. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND SUBMITTED THAT THE REOPENING WAS DONE TO VERIFY HIGH SHARE PREMIUM CHARGED BY THE ASSESSEE FOR ISSUANCE OF EQUITY SHARES BY THE ASSESSEE . IT WAS SUBMITTED THAT EQUITY SHARES OF FACE VALUE OF RS. 10/ - EACH WERE ISSUED AT A SHARE PREMIUM OF RS. 90 PER SHARE . IT WAS SUBMITTED THAT DIRECTION S WERE ISSUE D BY LD. CCIT TO AO TO EXAMINE A VERY HIGH SHARE PREMIUM CHARGED BY THE ASSESSEE TO ISSUE ITS EQUITY SHARE WHICH REASONS FOR REOPENING OF THE CONCLUDED ASSESSMENT ARE BAD IN LAW AS THERE IS NO INDEPENDENT APPLICATION OF MIND BY THE AO . I T WAS SUBMITTED THAT NO DOUBT THAT INIT IALLY RETURN OF INCOME WAS PROCESSED U/S. 143(1) AND NO SCRUTINY ASSESSMENT WAS FRAMED BY THE AO U/S. 143(3) BUT THAT DOES NOT LEAD TO CONCLUSION THAT SHARE PREMIUM RAISED BY THE ASSESSEE HAS LED TO ESCAPEMENT OF INCOME. I T WAS SUBMITTED THAT THERE IS NO SUPPRESSION OF INCOME AND OBJECTIONS WERE RAISED BY I.T.A. NO.4648/MUM/2017 24 THE ASSESSEE CHALLENGING REOPENING OF THE ASSESSMENT U/S 147 WHICH WERE REJECTED BY THE AO. IT WAS SUBMITTED BY LEARNED COUNSEL FOR THE ASSESSEE THAT T HE AO HAD NO INCRIMINATING MATERIAL BEFORE HIM TO COM E TO THE CONCLUSION THAT INCOME HAS ESCAPED ASSESSMENT WHILE DISPOSING OF THE OBJECTIONS FILED BY THE ASSESSEE CHALLENGING REOPENING OF THE CONCLUDED ASSESSMENT. ON BEING ASKED BY THE BENCH , I T WAS SUBMITTED THAT MR . BHARAT MISHRA AND MRS. MANJU LA HOTI ARE THE PROMOTERS/D IRECTORS OF THE ASSESSEE. IT WAS ALSO EXPLAINED BY LEARNED COUNSEL FOR THE ASSESSEE THAT REST OF THE SUBSCRIBERS OF THE SHARES ARE OUTSIDERS HAVING NO CONNECTION WITH PROMOTERS/DIRECTORS OF THE ASSESSEE COMPANY NOR ARE THEY CONNECTE D WITH MANAGEMENT OF THE AFFAIRS OF THE ASSESSEE COMPANY. OUR ATTENTION WAS DRAWN TO ASSESSMENT ORDER PASSED BY THE AO AND THE APPELLATE ORDER PASSED BY LEARNED CIT (A). I T WAS SUBMITTED THAT LD. CIT(A) DEALT WITH MERIT OF THE CASE ALSO WHEREIN LEARNED CIT( A) RELIED UPON DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GAGANDEEP INFRASTRUCTURE P. LTD. (ITA NO. 1613 OF 2014 DATED 20.03.1997 REPORTED IN (2017) 394 ITR 680(BOM.) ) TO ALLOW GROUNDS OF APPEALS RAISED BY THE ASSESSEE IN ITS APPEAL WITH LEARNED CIT(A) ON MERITS . THE LD. COUNSEL FOR THE ASSESSEE ALSO RELIED UPON FOLLOWING CASE LAWS TO CONTEND THAT APPELLATE ORDER PASSED BY LEARNED CIT(A) BE UPHELD AND REVENUE APPEAL BE DISMISSED : A ) HONBLE BOMBAY HIGH COURT DECISION IN THE CASE OF CIT V. MANIBEN VA LJI SHAH (2006) 204 CTR 249 (BOM), B ) HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF PCIT V. MANZIL DINESH KUMAR SHAH IN ITA NO. 451 OF 2018 (GUJ . ) DECIDED ON 07.05.2018 , C ) HONBLE BOMBAY HIGH COURT DECISION IN THE CASE OF PCIT V. SHODIMAN INVESTMENT PRIVATE LTD. IN ITA NO. 12 97 OF 2015 (BOM) DECIDED ON 16 TH APRIL , 2018, I.T.A. NO.4648/MUM/2017 25 D ) MUMBAI - TRIBUNAL DECISION IN THE CASE OF DCIT V. PIRAMAL REALITY PRIVATE LTD. IN ITA NO. 2317/MUM/2017 DECIDED ON 16.11.2018, E ) WRIT P ETITION DECIDED BY HONBLE BOMBAY HIGH COURT IN TH E CASE OF KHUBCHANDANI HEALTHPARKS P RIVATE LTD. V. ITO IN W.P NO. 30 27 OF 2015 DECIDED ON 10.02.2016 , F ) HONBLE DELHI HIGH COURT DECISION IN THE CASE OF CIT V . BATRA BHATTA COMPANY (2010 ) 321 ITR 526 (DEL) DECIDED ON 08.08.2018 , G ) HONBLE SUPREME COURT DECIS ION IN THE CASE OF CHHUGAMAL RAJPAL V . S.P. CHALIHA & OTHERS (1971) 79 ITR 603 (SC) . H ) HONBLE BOMBAY HIGH COURT DECISION IN THE CASE OF CIT V. GREEN INFRA LIMITED IN ITA NO. 1162 OF 2014 , DATED 16.01.2017 I ) HONBLE BOMBAY HIGH COURT DECISION IN THE CASE OF CIT V. GAGANDEEP INFRASTRUCTURE PRIVATE LIMITED IN ITA NO. 1613 OF 2014 , DATED 20.03.2017. J ) HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. SFIL STOCK BROKING LIMITED (2010) 325 ITR 285(DEL.) I T WAS SUBMITT ED BY LEARNED COUNSEL FOR THE ASSESSEE THAT THE AO MUST HAVE REASONS TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT BEFORE INVOKING PROVISIONS OF S ECTION 147 OF THE 1961 ACT. I T WAS SUBMITTED THAT REOPENING WAS DONE ON THE DIRECTION S OF LEARNED CCIT AND THERE WAS NO INDEPENDENT APPLICATION OF MIND ON THE PART OF THE AO WHICH IS BAD IN LAW . T HE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF P CIT V . SHODIMAN INVESTMENT PRIVATE LIMITED (SUPRA) AND SUBMITTED THAT O W N SATISFACTION OF THE AO IS REQUIRED FOR REOPENING OF THE ASSESSMENT AND AO CANNOT REOPEN THE CONCLUDED ASSESSMENT BASED ON BORROWED SATISFACTION OF LEARNED CCIT. O N MERITS , THE ASSESSEES COUNSEL DREW OUR ATTENTION TO THE ASSESSMENT O RDER PASSED BY THE AO I.T.A. NO.4648/MUM/2017 26 AND APPELLATE ORDER PASSED BY LEARNED CIT(A). THE LEARNED COUNSEL FOR THE ASSESSEE ALSO DREW OUR ATTENTION TO THE PAPER BOOK FILED WITH THE TRIBUNAL WHEREIN IT WAS SUBMITTED THAT COMPLETE DETAILS OF THE SUBSCRIBERS AND ISSUE OF SHARES WERE GIVEN BEFORE THE AO . R ELIANCE WAS PLACED BY LEARNED COUNSEL FOR THE ASSESSEE ON THE DECISION OF GA GANDEEP INFRASTRUCTURE P. LTD. IN ITA NO. 1613 OF 2014 , ORDER DATED 20.03.2017 PASSED BY HONBLE BOMBAY HIGH COU RT AND IT WA S SUBMITTED THAT AO SHOULD HAV E PRO CE E DED AGAINST THE SUBSCRIBER . TH E LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT V. LOVELY EXPORTS P. LTD., (2008) 216 CTR 195 (SC) TO CONTEND THAT T HE AO CANNOT PROCEED AGAINST THE ASSESSEE BUT THE REVENUE OUGHT TO HAVE PROCEEDED AGAINST THE SUBSCRIBERS WHO SUBSCRIBED TO THE EQUITY SHARES OF THE ASSESSEE OF RS. 10 EACH AT SHARE PREMIUM OF RS. 90/ - PER EQUITY SHARES . I T WAS SUBMITTED BY LEARNED COUNSEL FOR THE ASSESSEE THAT THE IMPUGNED ASSESSMENT YEAR IS AY 2009 - 10 WHICH IS A YEAR PRIOR TO AMENDMENT IN SECTION 68 OF THE 1961 ACT VIDE FINANCE ACT , 2012 W.E.F. 01.04.2013. AND FOR THE IMPUGNED ASSESSMENT YEAR 2009 - 10 , PRE - AMENDED S ECTION 68 WILL BE APPLI CABLE . IT WAS SUBMITTED THAT THE AO CANNOT PROCEED AGAINST THE ASSESSEE BUT HAS TO PROCEED AGAINST THE SUBSCRIBERS. IT WAS SUBMITTED THAT THE AO HAS NOT BROUGHT ON RECORD ANY ADVERSE REMARKS /INCRIMINATING MATERIAL AGAINST THE SUBSCRIBERS OF THE SHARES BEFO RE MAKING ADDITIONS . IT WAS SUBMITTED THAT THE MONEY WAS RECEIVED THROUGH BANKING CHANNEL AND SUBSCRIPTIONS HAVE BEEN PAID BY THE SUBSCRIBER S THROUGH BANKING CHANNEL. 7. O N THE OTHER HAND LD. DR SUBMITTED IN REJOINDER THAT INFORMATION WAS RECEIVED FROM LEARNED CCIT WHICH WAS BASED ON INFORMATION FROM D G IT ( INTELLIGENCE AND CRIMINAL INVESTIGATION ) AND BASED ON CREDIBLE INFORMATION, THE REOPENING WAS DONE. THE LEARNED DR RELIED ON DECISION OF DELHI ITAT IN THE CASE OF ITO V . SMT. GURINDER KAUR (200 6) ( 6 ) TMI 144 - ITAT DELHI - A BENCH ( (2007) 288 ITR (A.T.) 207 DATED 16.06.2006. I T WAS SUBMITTED THAT THERE IS A LIVE LINK BETWEEN I.T.A. NO.4648/MUM/2017 27 INCRIMINATING INFORMATION RECEIVED BY REVENUE AND REASONS TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT . THE DIRECTIONS WER E THEN GIVEN BY THE BENCH TO LD. COUN SEL FOR THE ASSESSEE TO SUBMIT A NOTE AS TO APPLICABILITY OF THE DECISION OF HONBLE SUPREME COU RT IN THE CASE OF ACIT V. RAJESH JHAVERI STOCK BROKERS PRIVATE LTD ( 2007) 161 TAXMAN 316(SC) WHICH THE ASSESSEE DULY SUBMI T TED , WHICH IS PLACED IN FILE. 8 . WE HAVE CONSIDERED RIVAL CONTENTION S AND PERUSED THE MATERIAL ON RECORD INCLUDING THE ORDERS OF THE AUTHORITIES BELOW AND CITED CASE LAWS. WE HAVE OBSERVED THAT THE ASSESSEE IS A DOMESTIC COMPANY INCORPORATED ON 14.01.2009. THE ASSESSEE BUSINESS AS IS STATED IN ITS MEMORANDUM OF ASSOCIATION IS TO RENDER CONSULTANCY SERVICES. PRESENTLY , WE ARE CONCERNED WITH ASSESSMENT YEAR 2009 - 10 AND THE PREVIOUS YEAR IS FROM 14.01.2009 (DATE OF INCORPORATION) TILL 31.03.2009. T HIS IS THE FIRST YEAR OF ASSESSES EXISTENCE AS IT WAS INCORPORATED ON 14.01.2009 ONLY. THE ASSESSEE FOR THE PREVIOUS YEAR ENDED 31.03.2009 RELEVANT TO AY 2009 - 10 FILED ITS RETURN OF INCOME ON 31.08.2009 , SHOWING TOTAL INCOME AT RS. 15,712/ - . THE SAID RET URN OF INCOME WAS PROCESSED BY THE AO U/S 143(1) OF THE 1961 ACT . THE REVENUE DID NOT UNDERTOOK SCRUTINY ASSESSMENT U/S 143(3) READ WITH SECTION 143(2) OF THE 1961 ACT FOR THE IMPUGNED ASSESSMENT YEAR 2009 - 10 AND THE RETURN OF INCOME WAS ORIGINALLY PROCES SED U/S 143(1) OF THE 1961 ACT . THE INFORMATION WAS RECEIVED BY THE AO FROM LEARNED CCIT THAT THE ASSESSEE HAS ISSUED EQUITY SHARES ON HUGE PREMIUM AMOUNTING TO RS. 1,74,53,700/ - , WHICH AS EXPLAINED BY LEARNED DR WAS BASED ON INTELLIGENCE FROM DGIT(INTELL IGENCE AND CRIMINAL INVESTIGATION) . SINCE, THIS ISSUE OF RAISING SHARE CAPITAL AND SHARE PREMIUM WAS NEVER EXAMINED EARLIER BY THE AO AS NO SCRUTINY ASSESSMENT WAS ORIGINALLY FRAMED U/S 143(3) READ WITH SECTION 143(2) OF THE 1961 ACT AS THE RETURN OF INC OME WAS ORIGINALLY PROCESSED U/S 143(1) OF THE 1961 ACT , THE CASE OF THE ASSESSEE WAS RE - OPENED BY THE AO WITHIN PROVISIONS OF SECTION 147 OF THE 1961 ACT AND NOTICE U/S 148 DATED 31.03.2014 WAS ISSUED TO THE ASSESSEE BY THE AO WHICH I.T.A. NO.4648/MUM/2017 28 WAS UNDISPUTEDLY SERVE D ON THE ASSESSEE. THUS, THE REOPENING OF THE CONCLUDED ASSESSMENT WAS DONE BY THE AO U/S 147 OF THE 1961 ACT WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR AND INITIALLY NO ASSESSMENT WAS FRAMED BY THE AO U/S 143(3) READ WITH SECTION 143(2) OF THE 1961 ACT. THUS, FIRST PROVISO TO SECTION 147 OF THE 1961 ACT IS UNDISPUTEDLY NOT APPLICABLE TO THE ASSESSEE. THE REASONS FOR RE - OPENING OF THE CONCLUDED ASSESSMENT WERE SUPPLIED TO THE ASSESSEE BY THE AO, WHICH ARE REPRODUCED HEREUNDER: THE ASSESSEE THE N ASKED THE AO TO TREAT RETURN OF INCOME FILED ON 31.08.2009 AS RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S 148 OF THE 1961 ACT. THE ASSESSEE RAISED OBJECTIONS TO THE RE - OPENING OF THE I.T.A. NO.4648/MUM/2017 29 ASSESSMENT VIDE LETTER DATED 11.09.2014 WHICH WERE REJECTED BY THE AO VIDE LETTER NO. REF.MUM/ITO - 6(3)(4)/2014 - 15 DATED 20.03.2015 , WHICH ORDER OF THE AO IS REPRODUCED HEREUNDER: - I.T.A. NO.4648/MUM/2017 30 I.T.A. NO.4648/MUM/2017 31 I.T.A. NO.4648/MUM/2017 32 I.T.A. NO.4648/MUM/2017 33 I.T.A. NO.4648/MUM/2017 34 I.T.A. NO.4648/MUM/2017 35 I.T.A. NO.4648/MUM/2017 36 I.T.A. NO.4648/MUM/2017 37 IT IS OBSERVED THAT THE PAID UP SHARE CAPITAL OF THE ASSESSEE WAS RS. 20,39,300/ - WHEREIN 2,03,930 EQUITY SHARES OF RS. 10/ - EACH WERE ISSUED AT PAR/PREMIUM OF RS. 90 PER SHARE. IT IS OBSERVED THAT THE ASSESSEE HAD INTRODUCED A SUM OF RS. 1,74,53,700/ - ON ACCO UNT OF SHARE PREMIUM WHEREIN TOTAL SHARE CAPITAL INCLUSIVE OF SHARE PREMIUM OF RS. 1,93,93,000/ - CONSISTING OF 1939300 EQUITY SHARE OF RS. 10 EACH WERE ISSUED AT A PREMIUM OF RS. 90 / - PER EQUITY SHARES , TO THE FOLLOWING PERSONS AS DETAILED HEREUNDER: - S.NO NAME OF THE PERSON WITH ADDRESS NO OF SHARES FACE VALUE (IN RS.) ISSUE PRICE (IN RS.) PREMIUM PER SHARE (IN RS.) MONEY RECEIVED TOWARDS SHARE CAPITAL (IN RS.) SHARE P REMIUM (IN RS.) T OTAL (IN RS.) (1) (2) (3) (4) (5) (6) (7)=(3)*(4) (8)=(3)*(6) (7)+(8) 1 BHARAT MISHRA HUF 6250 10 100 90 62500 562500 625000 I.T.A. NO.4648/MUM/2017 38 2 BHARAT MISHRA 12000 10 100 90 12000 1080000 120000 0 3 BINDAL PRASAD VARMA 2630 10 100 90 26300 236700 263000 4 KELLOG COMMUNICATION P. LTD. 84000 10 100 90 840000 7560000 8400000 5 NEMICHAND T HUF 4550 10 100 90 45500 409500 455000 6 SANTOSH GULGULIA 7000 10 100 90 70000 630000 700000 7 STAR FINCAP P. LTD 22500 10 100 90 225000 2025000 2250000 8 THANK YOU MANAGEMENT CONSULTANT P. LTD., 43000 10 100 90 430000 3870000 4300000 9 SUBH MANAGEMENT C ONSULTANT P. LTD., 10000 10 100 90 100000 900000 1000000 10 SYSTEMATIC MARKETING CONCEPTS P. LTD., 2000 10 100 90 20000 180000 200000 TOTAL 1939300 17453700 19393000 ON PERUSAL OF THE REASONS RECORDED FOR REOPENING OF CONCLUDED ASSESSMENT BY INVOKING PROVISIONS OF SECTION 147 OF THE 1961 ACT WOULD TRANSPIRE THAT THE REASONS RECORDED WERE DUE TO ISSUE OF EQUITY SHARES AT A VERY HIGH SHARE PREMIUM OF RS. 90/ - PER SHARE R AISED BY A PRIVATE COMPANY VIZ. A SSESSEE COMPANY , AGGREGATING TO RS.1,74,53,700/ - ON ISSUE OF 1,93,930 EQUITY SHARES OF FACE VALUE OF RS. 10 EACH ON SH A RE PREMIUM OF RS.90 PER SHARE . THE REOPENING IS BASED ON THE INFORMATION RECEIVED BY THE AO FROM LEARNE D CCIT AS TO VERY HIGH PREMIUM CHARGED BY THE ASSESSEE ON ISSUE OF EQUITY SHARES. THE SAID INFORMATION AS EXPLAINED BY LEARN ED DR WAS BASED ON INFORMATION FROM DGIT (INTELLIGENCE AND CRIMINAL INVESTIGATION ) . ON BEING ASKED BY THE BENCH IT WAS SUBMITTED BY LD. COUNSEL FOR THE ASSESSEE THAT MR. BHARAT MISHRA AND MRS. MANJU LAHOTI ARE THE TWO P ROMOTERS /DIRECTORS OF THE ASSESSEE COMPANY. IT WAS EXPLAINED THAT THE FUNDS SO RAISED BY WAY OF SHARE CAPITAL/SHARE PREMIUM FROM ALL OTHER PERSONS EXCEPT MR BHARAT MI SHRA, M/S. BHARAT MISHRA, HUF I.T.A. NO.4648/MUM/2017 39 AND MRS. MANJU LAHOTI , WERE FROM OUTSIDERS HAVING NO CONNECTION WITH PROMOTERS/DIRECTORS AND HAVING NO PARTICIPATION IN MANAGEMENT OF THE ASSESSEE COMPANY . IT IS PERTINENT TO MENTION HERE THAT THE ASSESSEE IS A CLOSELY HELD PRIVATE COMPANY. THUS MAJORITY OF THE FUNDS TO THE TUNE OF RS. 1,75,68,000/ - , OUT OF TOTAL FUNDS OF RS. 1,94,93,000/ - RAISED BY THE ASSESSEE, WERE RECEIVED FROM OUTSIDERS WHO ARE NOT CONNECTED WITH THE PROMOTERS/DIRECTORS OF THE ASSESSEE COMPANY NOR WITH THE MANAGEMENT OF THE ASSESSEE COMPANY , WHILE THE PROMOTERS/DIRECTORS OF THE ASSESSEE COMPANY HAD PUMPED IN ONLY RS.19,25,000/ - IN THE ASSESSEE COMPANY TOWARDS SHARE CAPITAL/SHARE PREMIUM . THE CONTRIBUTION OF THE PROMOTERS IS BARELY 9.88% IN TOTAL FUNDS RA ISED BY THE ASSESSEE IN THE SHAPE OF SHARE CAPITAL AND SHARE PREMIUM , WHILE 90.12% OF THE TOTAL FUND INFUSION IN THE ASSESSEE COMPANY WAS FROM OUTSIDERS HAVING NO CONNECTION WITH THE ASSESSEE COMPANY AND THAT TOO THE SHARE CAPITAL WAS SUBSCRIBED BY OUTSID ERS AT A PREMIUM OF RS. 90/ - PER SHARE AS AGAINST FACE VALUE OF RS. 10/ - PER SHARE IN A NEWLY INCORPORATED COMPANY I.E. ASSESSEE HAVING NO ASSET BASE OR VISIBLE BUSINESS ACTIVITIES AS IS DISCERNIBLE FROM THE FINANCIAL STATEMENTS PLACED BEFORE THE TRIBUNAL . THE ASSESSEE COMPANY IS A NEWLY INCORPORATED PRIVATE COMPANY AND LARGE AMOUNT OF FUND INFUSION TOOK PLACE IN THE ASSESSEE COMPANY FROM OUTSIDERS WHO ARE NOT CONNECTED WITH THE ASSESSEE COMPANY WHILE PROMOTERS ONLY INFUSED 9.88% OF THE TOTAL FUND INFUSED IN THE ASSESSEE COMPANY. THUS, WHEN A NEWLY INCORPORATED PRIVATE COMPANY HAVING NO ESTABLISHED BACKGROUND OR TRACK RECORD OF BUSINESS ISSUES SHARES AT WHOPPING PREMIUM OF RS. 90/ - PER SHARE AS AGAINST FACE VALUE OF RS. 10/ - PER SHARE AND HUGE AMOUNT OF FUNDS ARE RAISED FROM OUTSIDERS , IT CERTAINLY IS A JUSTIFIABLE REASON FOR TRIGGERING AN ENQUIRY INTO THE FUNDS RAISED BY A NEWLY INCOR PORATED COMPANY AND TO SEE THAT ILLEGITIMATE MONEY OF PROMOTERS ARE NOT CIRCULATED BACK INTO THE ASSESSEE COMPANY THROUGH CIRCUITOUS ROUTE WHICH IS NOT UNCOMMON IN INDIA , MORE - SO WHEN NO SCRUTINY ASSESSMENT IS FRAMED BY REVENUE ORIGINA LLY U/S 143(3) OF T HE 1961 ACT AS THE R ETURN OF INCOME WAS I.T.A. NO.4648/MUM/2017 40 ORIGINALLY PROCESSED U/S 143(1) OF THE 1961 ACT AND RE - OPENING IS SOUGHT TO BE DONE WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. THE FIRST PROVISO TO SECTION 147 OF THE 1961 ACT IS CLEARLY NOT APPLICABLE IN THE INSTANT CASE. THE RECEIPT OF INFORMATION BY AO FROM LEARNED CCIT ON THE BASIS OF INFORMATION FROM DGIT (INTELLIGENCE AND CRIMINAL INVESTIGATION ) TO VERIFY A VERY HIGH SHARE PREMIUM AND SHARE CAPITAL AGGREGATING TO RS.1,93,93,000/ - AND THAT TOO BY A NEWLY INCORPORATE D COMPANY HAVING NO BUSINESS TRACK RECORD NOR HAVING ANY ASSET BASE , IS A CREDIBLE INCRIMINATING INFORMATION TO TRIGGER AN ENQUIRY KEEPING IN VIEW SURROUNDING CIRCUMSTANCES AND IT CANNOT BE SIMPLY BRUSHED ASIDE AS MERELY MAKING A FISHING ENQUIRY MORE - SO IT IS WELL KNOWN THAT INDIAN ECONOMY IS PLAGUED WITH A MONSTROUS PARALLEL ECONOMY AND NEFARIOUS MONEY LAUNDERING ACTIVITIES WHICH IS EATING INTO ECONOMIC FABRIC OF INDIA WHICH EVEN LED TO DRASTIC STEPS BEING TAKEN BY GOVERNMENT OF INDIA BY WAY DEMONETISATION OF ITS CURRENCY NOTES OF RS. 500 AND RS. 1000 OVERNIGHT IN 2016. THUS, UNDER THESE CIRCUMSTANCES IT BECAME ABSOLUTELY ESSENTIAL TO LOOK INTO HUGE AMOUNT OF MONEY RAISED BY THE COMPANY FROM OUTSIDER SOON AFTER ITS INCORPORATION BY WAY OF SHARE CAPITAL AT HUGE SHARE PREMIUM WHILE ITS FINANCIAL STATEMENTS DID NOT SUPPORTED ISSUING SHARES AT SUCH A HUGE SHARE PREMIUM AS IT DID NOT HAVE ASSET BASE NOR HAD ANY VISIBLE BUSINESS IN HAND AND THAT TOO TO THE OUTSIDERS WHO INVESTED AS MUCH AS 90.12 % OF TOTAL SHARE CAPITAL INCLUDING SHARE PREMIUM WHILE PROMOTERS/DIRECTORS MERELY INVESTED 9.88% AND INITIALLY NO SCRUTINY ASSESSMENT U/S 143(3) WAS MADE WHEREIN RETURN WAS ACCEPTED U/S 143(1) AND REOPENING IS SOUGHT TO BE DONE WITHIN 4 YEARS FROM THE END OF ASSESSMENT YEAR. THE ASSESSEE HAS SHOWN MEAGRE INCOME OF RS. 15,712/ - IN ITS FIRST YEAR OF OPERATION ENDING ON 31.03.2009 WITH GROSS TURNOVER OF RS. 1,89,000/ - COMING FROM INTEREST AND MAINTENANCE AS REPORTED IN FINANCIAL STATEMENTS PRODUCED BEFORE THE TRIBUNAL , AFTER ITS INCORPORATION ON 14.01.2009. THE ASSESSEE DID NOT HAVE ANY ASSET BASE AS ON 31.03.2009 WHICH COULD REFL ECT VISIBLE BUSINESS ACTIVITIES BEING PERSUED BY THE ASSESSEE AND NO BUSINESS WAS BEING RUN PER - SE I.T.A. NO.4648/MUM/2017 41 AS THE GROSS INCOME REPORTED IS FROM INTEREST AND MAINTENANCE TO THE TUNE OF RS.1,89,000/ - . THE ASSET BASE CONSISTED OF INVESTMENTS IN SHARES OF OTHER PRIV ATE COMPANIES TO THE TUNE OF RS. 1.20 CRORES AND ADVANCING CERTAIN LOANS AND ADVANCES TO THE TUNE OF RS. 71 LACS . THIS IS HOW THE PROCEEDS OF RAISING OF SHARE CAPITAL AND SHARE PREMIUM WAS DEPLOYED BY THE ASSESSEE WHICH INDICATES DIVERSION OF FUNDS FOR NON BUSINESS PURPOSES . THERE IS NO PROJECT PER - SE BEING UNDERTAKEN BY THE ASSESSEE COMPANY AS IS EMANATING FROM THE RECORDS BEFORE US. THE ASSESSEE HAS CLAIMED THAT VALUATION REPORT WAS FILED USING DISCOUNTED CASH FLOW METHOD BUT THE SAME IS NOT FILED BEFORE THE BENCH. THE BALANCE SHEET TYPICALLY REPRESENTED OF THE ENTRY OPERATORS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES AND DEFINITELY NEED ED FURTHER PROBE /VERIFICATION BY REVENUE , MORE - SO NO SCRUTINY ASSESSMENT WAS SO FAR CONDUCTED BY THE REVENUE AS RETURNS WERE ORIGINALLY PROCESSED U/S 143(1) AND REOPENING WAS SOUGHT TO BE DONE WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR . REFERENCE IS DRAWN TO ORDER OF HONBLE SUPREME COURT IN THE CASE OF RAJMANDIR ESTATES PRIVATE LIMITED V. PR. CIT REPORTED IN ( 2017) 245 TAXMAN 127(SC) WHEREIN HONBLE SUPREME COURT DISMISSED SLP FILED BY THE ASSESSEE AGAINST JUDGMENT OF HONBLE HIGH COURT OF CALCUTTA IN RAJMANDIR ESTATES PRIVATE LIMITED V. PR. CIT REPORTED IN (2016) 386 ITR 162(CAL. HC) . IN THIS CASE REVENUE INV OKED PROVISIONS OF SECTION 263 OF THE 1961 ACT . INITIALLY REVENUE INVOKED PROVISIONS OF SECTION 147/148 OF THE 1961 ACT ON THE BASIS OF LETTER FROM THE TAX - PAYER THAT A SUM OF RS. 61,000/ - ON ACCOUNT OF CONSULTANCY FEES WAS NOT DISCLOSED INADVERTENTLY AS INCOME IN THE RETURN OF INCOME FILED WITH THE REVENUE. WHILE FRAMING REASSESSMENT THE AO IN - FACT CALLED FOR DETAILS OF SHARE APPLICATION MONEY RECEIVED BY THE TAX - PAYER INCLUDING THE NAMES OF THE APPLICANTS, THEIR ADDRESS , DATE OF RECEIPT AND TOTAL AMOUNT RECEIVED. THE TAX - PAYER FILED ALL PARTICULARS AS REGARDS THE APPLICANT OF THE SHARES INCLUDING THE MONEY RECEIVED FROM THEM DURING REASSESSMENT PROCEEDINGS . THE REVENUE INVOKED PROVISIONS OF I.T.A. NO.4648/MUM/2017 42 SECTION 263 OF THE 1961 ACT ON THE GROUND THAT REASSESSMENT WAS COMPLETED WITHOUT APPLICATION OF MIND AND WITHOUT REQUISITE ENQUIRY INTO THE INCREASE OF THE SHARE CAPITAL INCLUDING THE SHARE PREMIUM RECEIVED BY THE TAX - PAYE R BY HOLDING THAT THE REASSESSMENT ORDER PASSED BY THE AO WAS ERRONEOUS SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE AS ENQUIRY CONDUCTED BY THE AO DURING REASSESSMENT PROCEEDINGS WAS SUPERFLUOUS . THE MAIN ALLEGATION OF THE REVENUE WAS THAT THE AO DID NOT MAKE ANY REQUISITE ENQUIRY ON THE ISSUE AS TO WHAT PROMPTED THE SUBSCRIBERS TO SUBSCRIBE SHARES AT A VERY HIGH PREMIUM, ISSUED BY A CLOSELY HELD COMPANY AND THAT THERE IS NO EVIDENCE ON RECORD WH ICH CAN SHOW THAT THE ISSUE OF SUBSCRIPTION OF SHARES HAD BEEN EXAMINED OBJECTIVELY AND, THEREFORE , THE REVENUE HELD THAT THE RE - ASSESSMENT ORDER WAS PASSED WITHOUT APPLICATION OF MIND. THE HONBLE CALCUTTA HIGH COURT UPHELD PROCEEDINGS U/S 263 OF THE 19 61 ACT TO MAKE FURTHER INVESTIGATIONS , WHEREIN THE HONBLE HIGH COURT HELD AFTER CONSIDERING THE DECISION OF HONBLE APEX COURT IN THE CASE OF LOVELY EXPORTS (SUPRA) AS UNDER: 21. AFTER HEARING THE LEARNED ADVOCATES, WE ARE OF THE OPINION THAT THE FOLLOW ING QUESTIONS ARISE FOR CONSIDERATION: ( A ) WHETHER IN THE LIGHT OF THE VIEWS EXPRESSED IN THE CASE OF LOVELY EXPORTS ( SUPRA ) & 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 RE OPENED UNDER SECTION 147 SUO MOTU PERVERSE? ( C ) WHETHER THE ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3)/147 OF THE INCOME TAX ACT IS ERRONEOUS AND ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE? ( D ) WHETHER THE IMPUGNED JUDGEMENT OF T HE LEARNED TRIBUNAL IS PERVERSE? 22. WE SHALL CONSIDER THE SECOND QUESTION FIRST. IN A COMMENTARY ON THE PREVENTION OF MONEY LAUNDERING ACT, 2002 BY DR. M. C. MEHANATHAN PUBLISHED BY LEXIS NEXIS, 2014, THE STEPS OF MONEY LAUNDERING ARE DESCRIBED AS FOLLOWS: I.T.A. NO.4648/MUM/2017 43 ' STEPS OF MONEY - LAUNDERING ALTHOUGH MONEY - LAUNDERING OFTEN INVOLVES A COMPLEX SERIES OF TRANSACTIONS, IT GENERALLY INCLUDES THE FOLLOWING THREE BASIC STEPS: 1. PLACEMENT IT INVOLVES INTRODUCTION OF THE PROCEEDS OF CRIME INTO THE FINANCIAL SYSTEM. THIS IS ACCOMPLISHED BY BREAKING UP LARGE AMOUNTS OF CASH INTO SMALLER SUMS THAT ARE THEN DEPOSITED DIRECTLY INTO A BANK ACCOUNT, OR BY PURCHASING MONETARY INSTRUMENTS, TRANSFERRING THE CASH OVERSEAS FOR DEPOSIT IN BANKING/FINANCIAL INSTITUTIONS, USE FOR PURCHASE OF HIGH VALUE THINGS SUCH AS GOLD, PRECIOUS STONES, ART WORKS ETC. AND RESELLING THE SAME THROUGH CHEQUES OR BANK TRANSFERS ETC. 2. LAYERING THIS INVOLVES FORMATION OF COMPLEX LAYERS OF FINANCIAL TRANSACTIONS WHICH DISTANCE THE ILLICIT PROCEEDS FR OM THEIR SOURCE AND DISGUISE THE AUDIT TRAIL. IN THIS PROCESS A SERIES OF CONVERSIONS OR TRANSACTIONS ARE INVOLVED FOR MOVING THE FUNDS TO PLACES SUCH AS OFFSHORE FINANCIAL CENTRES OPERATING IN A LIBERAL REGULATORY REGIME. OFTEN 'FRONT' COMPANIES ARE FORME D TO ACCOMPLISH THIS TASK. THESE COMPANIES OBSCURE THE REAL OWNERS OF THE MONEY THROUGH THE BANK SECRECY LAWS AND ATTORNEY - CLIENT PRIVILEGE. THE TECHNIQUES USED FOR THE PURPOSE ARE TO LEND THE PROCEEDS BACK TO THE OWNER AS LOANS, GIFTS AND ETC., UNDER INVO ICING THE ITEMS EXPORTED TO THE REAL OWNER OR ETC. IN SOME CASES, THE TRANSFERS MAY BE DISGUISED AS PAYMENTS FOR GOODS OR SERVICES, THUS GIVING THEM A LEGITIMATE APPEARANCE. 3. INTEGRATION THIS INVOLVES INVESTMENT IN THE LEGITIMATE ECONOMY SO THAT THE MONE Y GETS THE COLOUR OF LEGITIMACY. THIS IS ACHIEVED BY TECHNIQUES SUCH AS LENDING THE MONEY THROUGH 'FRONT' COMPANIES ETC. THE MONEY MAY BE INVESTED IN REAL ESTATES, BUSINESS AND ETC. THE STAGES AT WHICH MONEY - LAUNDERING COULD BE EASILY DETECTED ARE THOSE WH ERE CASH ENTERS INTO THE DOMESTIC FINANCIAL SYSTEM, EITHER FORMALLY OR INFORMALLY, WHERE IT IS SENT ABROAD TO BE INTEGRATED INTO THE FINANCIAL SYSTEMS OF TAX HAVEN COUNTRIES AND WHERE IT IS REPATRIATED IN THE FORM OF TRANSFERS.' THE ROLE OF THE REVENUE AUT HORITIES 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 UNACOUNTED 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 I.T.A. NO.4648/MUM/2017 44 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 L AUNDERING 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 SPEC IAL ANTI - MONEY - LAUNDERING LAWS.' 23. THE FOLLOWING PIECES OF EVIDENCE ARE NOTICEABLE: ( A ) 39 CORPORATE SUBSCRIBERS PURCHASED 7,92,737 SHARES OF RS.10 EACH AT A PREMIUM OF RS.390/ - PER SHARE . IN THE PROCESS THE ASSESSEE COMPANY RAISED A PAID UP SHARE CAPITAL OF RS.79.27 LAKHS WITH A PREMIUM OF RS.31.7 CRORES. ( B ) FROM THE INFORMATION MADE AVAILABLE BY THE ASSESSEE, IT APPEARS THAT 19 OUT OF 39 APPLICANTS SECURED FUNDS, FOR THE PURPOSE OF CONTRIBUTING TO THE SHARE CAPITAL OF THE ASSESSEE, ON ACCOUNT OF SHARE APPLICATION MONEY. IN OTHER WORDS, THOSE 19 APPLICANTS COLLECTED FUNDS ON ACCOUNT OF SHARE APPLICATION MONEY IN THEIR RESPECTIVE COMPANIES AND THAT MONEY WAS CONTRIBUTED TO THE SHARE CAPITAL OF THE ASSESSEE. 15 OUT OF THE 39 APPLICANTS PROCURED TH E REQUISITE FUND BY SELLING SHARES. THE REST OF THE APPLICANTS OF SHARES, IN THE SHARE CAPITAL OF THE ASSESSEE COMPANY, DID NOT DISCLOSE THE NATURE OF RECEIPT AT THEIR END THOUGH THE SOURCE OF FUND WAS IDENTIFIED. WHAT HAS NOT BEEN SPECIFIED IS, AS TO ON W HAT ACCOUNT WAS THE MONEY RECEIVED. ( C ) THE FORMS OF SHARE APPLICATION PURPORTING TO HAVE BEEN SIGNED BY THE APPLICANT COMPANIES HAVE ALSO BEEN DISCLOSED FROM WHICH IT APPEARS THAT THE DATE OF ALLOTMENT, NUMBER OF ALLOTMENT, NUMBER OF SHARES ALLOTTED, SHARE LEDGER FOLIO, ALLOTMENT REGISTER FOLIO, APPLICATION NUMBER, HAVE ALL BEEN KEPT BLANK. THESE PARTICULARS, MR. PODDAR, SUBMITTED SHOULD HAVE BEEN FILLED UP BY THE ASSESSEE, BUT THAT HAS NOT BEEN DONE. ( D ) ANOTHER SIGNIFICANT FACT ADMITTED BY THE ASSESSEE IN REPLY TO THE NOTICE TO SHOW CAUSE UNDER SECTION 263 IS THAT THE 'SHARES WERE OFFERED TO, AND SUBSCRIBED BY THE CLOSELY HELD COMPANIES OWNED BY THE PROMOTERS/DIRECTORS OR THEIR CLOSE RELATIVES AND FRIEND S' . ( E ) FROM THE BANK STATEMENTS DISCLOSED IT APPEARS THAT TO HAVE THE CHEQUES ISSUED IN FAVOUR OF THE ASSEESSEE HONOURED, MATCHING AMOUNTS WERE CREDITED TO THE ACCOUNTS OF THE SUBSCRIBERS SHORTLY BEFORE THE CHEQUES ISSUED IN FAVOUR OF THE ASSESSEE WERE PRESENTED FOR COLLECTION. ( F ) 19 APPLICANTS OF SHARES WITHIN A PERIOD OF LESS THAN SIX MONTHS HAD I.T.A. NO.4648/MUM/2017 45 MONEY CONTRIBUTED TO THEIR SHARE CAPITAL WHICH IN THEIR TURN THEY CONTRIBUTED TO THE SHARE CAPITAL OF THE ASSESSEE. SO THAT, THE 19 COMPANIES WHICH CONTRIBUTED TO THE SHARE CAPITAL OF THE ASSESSEE IN THE NAME OF ASSETS WERE LEFT MERELY WITH THE SHARE - SCRIPTS OF THE ASSESSEE. THE OTHER LOT OF 15 SUBSCRIBERS IN SUBSTANCE HAD THE SHARE - SCRIPTS HELD BY THEM SUBSTITUTED BY THE SHARE - SCRIPTS OF THE ASSESSEE . ( G ) THOUGH, MR. PODDAR MADE EXTENSIVE SUBMISSIONS SCANNING THE ORDER UNDER SECTION 263 IN BETWEEN THE LINES, HE DID NOT CRITICIZE THE FINDING OF THE COMMISSIONER THAT 'THE A.O. DID NOT EXAMINE A SINGLE DIRECTOR OF THE ASSESSEE COMPANY OR OF THE SUBSCRIBING COM PANY' WHICH GOES TO SHOW T HAT 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 U/S. 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 PRIMA FACIE FINDING, WE ARE EMBOLDENED TO SAY THAT THE THREE REQUIREMENTS: (A) IDENTITY OF THE SHARE - HOLDERS; (B) GENUINENESS OF THE TRANSACTION AND (C) THE CREDITWORTHINESS OF THE SHARE - HOLDERS REPEATEDLY IMPRESSED, BY MR. PODDAR, UPON US, HAVE NOT BEEN SATISFIED. IDENTITY OF THE ALLEGED SHARE - HOLDERS IS KNOWN BUT THE TRANSACTION WAS NOT A GENUINE TRANSACTION. THE TRANSACTION WAS NOMINAL RATHER THAN REAL. THE CREDITWORTHINESS OF THE ALLEGED SHARE HOLDERS IS ALSO NOT EST ABLISHED BECAUSE THEY DID NOT HAVE ANY MONEY OF THEIR OWN. EACH ONE OF THEM RECEIVED FROM SOMEBODY AND THAT SOMEBODY RECEIVED FROM A THIRD PERSON. THEREFORE, PRIMA FACIE, THE SHARE - HOLDERS ARE MERE NAME LENDERS. 25. FOR THE REASONS DISCUSSED IN THE PRECEDING PARAGRAPH, WE ARE SATISFIED THAT THE JUDGEMENT IN THE CASE OF STELLER INVESTMENT ( SUPRA ) HAS NO MANNER OF APPLICATION TO THE FACTS AND CIRCUMSTANCES OF THIS I.T.A. NO.4648/MUM/2017 46 CASE. THE QUESTION AS TO WHETHER THERE HAS BEEN A DEVIC E ADOPTED FOR MONEY LAUNDERING ALSO DID NOT CROP UP FOR CONSIDERATION IN THAT CASE. THE PREVENTION OF MONEY LAUNDERING ACT, 2002 WAS NOT ALSO THERE ON THE STATUTE AT THAT POINT OF TIME. BEFORE THE APPEAL IN STELLER INVESTMENT LTD. WAS DISMISSED BY THE APEX COURT, THE QUESTION HAD CROPPED UP IN THE CASE OF SOPHIA FINANCE LTD. ( SUPRA ) WHEREIN A SPECIAL BENCH HELD AS FOLLOWS: 'AS WE READ SECTION 68 IT APPEARS THAT WHENEVER A SUM IS FOUND CREDITED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE THEN, IRRESPECTIVE OF T HE COLOUR OR THE NATURE OF THE SUM RECEIVED WHICH IS SOUGHT TO BE GIVEN BY THE ASSESSEE, THE INCOME - TAX OFFICER HAS THE JURISDICTION TO ENQUIRE FROM THE ASSESSEE THE NATURE AND SOURCE OF THE SAID AMOUNT. WHEN AN EXPLANATION IN REGARD THERETO IS GIVEN BY TH E ASSESSEE, THEN IT IS FOR THE INCOME - TAX OFFICER TO BE SATISFIED WHETHER THE SAID EXPLANATION IS CORRECT OR NOT. IT IS IN THIS REGARD THAT ENQUIRIES ARE USUALLY MADE IN ORDER TO FIND OUT AS TO WHETHER, FIRSTLY, THE PERSONS FROM WHOM MONEY IS ALLEGED TO HA VE BEEN RECEIVED ACTUALLY EXISTED OR NOT. SECONDLY, DEPENDING UPON THE FACTS OF EACH CASE, THE INCOME - TAX OFFICER MAY EVEN BE JUSTIFIED IN TRYING TO ASCERTAIN THE SOURCE OF THE DEPOSITOR, ASSUMING HE IS IDENTIFIED, IN ORDER TO DETERMINE WHETHER THAT DEPOSI TOR IS A MERE NAME - LENDER OR NOT. BE THAT AS IT MAY, IT IS CLEAR THAT THE INCOME - TAX OFFICER HAS JURISDICTION 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 W HETHER 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 ( SUPRA ). 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 JUDGEMENT IN THE CASE OF LOVELY EXPORTS (P.) LTD. ( SUPRA ) 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. THE DIVISION BENCH WENT ON TO HOLD THAT THE REVENUE SHOULD NOT HARASS THE ASSESSEE WHERE 'THE PREPONDERANCE OF EVIDENCE INDICATES ABSENCE OF CULPABILITY'. IN THE PRESENT CASE THERE EXISTS REASONABLE SUSPICION IF NOT PRIMA FACIE EVIDENCE OF CULPABILITY. 26. THE LEARNED TRIBUNAL IN THE IMPUGNED JUDGEMENT IN PARAGRAPHS 3, 4 AND 5 OBSERVED, INTER ALIA AS FOLLOWS: - 'WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS RELEVANT TO MENTION THAT WE HAVE DISPOSED OF MORE THAN 500 CASES INVOLVING SAME ISSUE THROUGH CERTAIN ORDERS WIT H I.T.A. NO.4648/MUM/2017 47 THE MAIN ORDER HAVING BEEN PASSED IN A GROUP OF CASES LED BY SUBHLAKSHMI VANIJYA PVT. LTD. V. CIT (ITA NO.1104/KOL/2014) DATED 30.07.2015 FOR THE A. Y. 2009 - 10. BOTH THE SIDES HAVE FAIRLY ADMITTED THAT FACTS AND CIRCUMSTANCES OF THE CASES UNDER CONSIDERA TION ARE MUTATIS MUTANDIS SIMILAR TO THOSE DECIDED EARLIER, EXCEPT FOR CERTAIN ISSUES WHICH WE WILL ADVERT TO A LITTLE LATER. IN OUR AFORESAID ORDER IN SUBHALAKSHMI VANIJYA PVT. LTD. V. CIT (ITA NO. 1104/KOL/2014 A.Y. 2009 - 10), WE HAVE DRAWN THE FOLLOWING CONCLUSIONS: - ** ** **' IT IS NOTICED THAT ALL OR SOME OF THE ABOVE CONCLUSIONS ARE APPLICABLE TO THE APPEALS IN THIS BATCH.' THE APPELLANT HAS DISCLOSED A COPY OF THE JUDGEMENT DELIVERED BY THE LEARNED TRIBUNAL IN SUBHALAXMI VANIJYA (P.) LTD. V. CIT . THE LEARNED TRIBUNAL IN PARAGRAPH 17.I. OPINED AS FOLLOWS: - 'ALL THE CASES UNDER CONSIDERATION HAVE THE SAME COMMON FEATURE OF PASSING ASSESSMENT ORDERS IN UNDUE HASTE. WHEN WE CONSIDER THE ABOVE FACTUAL MATRIX, THERE CAN BE NO ESCAPE FROM AN AXIOMATIC CON CLUSION THAT IN ALL THESE CASES THE ENQUIRY CONDUCTED BY THE AOS IS EXCEEDINGLY INADEQUATE AND HENCE FALL IN THE CATEGORY OF 'NO ENQUIRY' CONDUCTED BY THE AO, WHAT TO TALK OF CHARACTERING IT AS AN 'INADEQUATE ENQUIRY'. IN OUR CONSIDERED OPINION, THE HIGHLY INADEQUATE ENQUIRY CONDUCTED BY THE AO RESULTING IN DRAWING INCORRECT ASSUMPTION OF FACTS, MAKES THE ORDERS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE.' 27. IN THE CASE OF SMT. TARA DEVI AGGARWAL V. CIT [1973] 88 ITR 323 (SC) THE TRIBUNAL HAD HELD AS FOLLOWS: - 'THE TRIBUNAL FURTHER HELD THAT IF THE ORDERS FOR 1955 - 56 TO 1959 - 60 WERE 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 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 SPECU LATIVE 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 RS.1,499 TO THE DISCLOSED INCOME FROM SPECULATIVE BUSINESS AND RS.1,270 TO THE DISCLOSED INCOME F ROM INTEREST AND MADE THE ASSESSMENT ON A TOTAL INCOME OF RS.9,037; AS SUCH IT COULD NOT BE SAID THAT THE ASSESSMENT WAS PREJUDICIAL TO THE INTERESTS OF 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 REVENUE.' I.T.A. NO.4648/MUM/2017 48 THIS COURT SET ASIDE THE ORDER OF THE LEARNED TRIBUNAL. IN AN APPEAL BY THE ASSESSEE B EFORE THE APEX COURT THEIR LORDSHIPS UPHELD THE ORDER OF THIS COURT HOLDING, INTER ALIA AS FOLLOWS: 'THE LEARNED ADVOCATE FOR THE ASSESSEE CONTENDS THAT UNDER SECTION 33B THE COMMISSIONER HAD NO JURISDICTION TO CANCEL THE ASSESSMENT MADE BY THE INCOME - TAX OFFICER INASMUCH AS IT CANNOT BE SAID THAT WHERE AN ASSESSEE HAS BEEN ASSESSED TO TAX IT WAS PREJUDICIAL TO THE INTERESTS OF REVENUE ON THE GROUND THAT NO ASSESSMENT COULD HAVE BEEN MADE IN RESPECT OF THE INCOME OF WHICH SHE MADE A VOLUNTARY RETURN. THIS CONTENTION IN OUR VIEW IS UNWARRANTED BY THE LANGUAGE OF SECTION 33B. THE WORDS OF THE SECTION ENABLE THE COMMISSIONER TO CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THE ACT AND TO PASS SUCH ORDERS AS HE DEEMS NECESSARY AS THE CIRCUMSTANCES OF THE CASE JUSTIFY WHEN HE CONSIDERS THAT THE ORDER PASSED WAS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IT IS NOT, AS SUBMITTED BY THE LEARNED ADVOCATE, PREJUDICIAL TO THE INTERESTS OF THE REVENUE ONLY IF IT IS FOUND THAT THE ASSESSMENT FOR THE YEAR WAS DISCLOSED ON THE BASIS THAT AN INCOME HAD BEEN EARNED WHICH IS ASSESSABLE. EVEN WHERE AN INCOME HAS NOT BEEN EARNED AND IS NOT ASSESSABLE, MERELY BECAUSE THE ASSESSEE WANTS IT TO BE ASSESSED IN HIS OR HER HANDS IN ORDER TO ASSI ST SOMEONE ELSE WHO WOULD HAVE BEEN ASSESSED TO A LARGER AMOUNT, AN ASSESSMENT SO MADE CAN CERTAINLY BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF SO AND WE THINK IT IS SO THE COMMISSIONER UNDER SECTION 33B HAS AMPLE JURISDICTION TO CANC EL THE ASSESSMENT AND MAY INITIATE PROCEEDINGS FOR ASSESSMENT UNDER THE PROVISIONS OF THE ACT AGAINST SOME OTHER ASSESSEE WHO ACCORDING TO THE INCOME - TAX AUTHORITIES IS LIABLE FOR THE INCOME THEREOF.' THE REASONING ADVANCED BY THEIR LORDSHIPS IN RESPECT O F AN ALLEGED REVENUE RECEIPT IS, ACCORDING TO US, EQUALLY APPLICABLE TO AN ALLEGED CAPITAL RECEIPT WHICH, IN FACT, WAS RECEIVED ONLY IN PAPERS. THE ATTEMPT OF THE ASSESSEE, IT WAS APPREHENDED IN THE CASE OF SMT. TARA DEVI AGGARWAL ( SUPRA ) WAS TO ASSIST SOM EONE ELSE. AN IDENTICAL ATTEMPT IS INVOLVED IN THIS CASE. WHO IS THE PERSON SOUGHT TO BE ASSISTED BY THE ASSESSEE? THIS QUESTION CAN ONLY BE ANSWERED AFTER A THOROUGH ENQUIRY, DIRECTED BY THE CIT, IS HELD. THE ASSESSEE IS INTERESTED IN STALLING THAT INVEST IGATION ON THE PLEA THAT THE ORDER OF THE ASSESSING OFFICER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. 28. WE HAVE INDICATED ABOVE THE PIECES OF EVIDENCE WHICH GO TO SHOW THAT THE COMMISSIONER HAD REASONS TO ENTERTAIN THE BELIEF T HAT THIS WAS OR COULD BE A CASE OF MONEY LAUNDERING WHICH WENT UNNOTICED BECAUSE THE ASSESSING OFFICER DID NOT HOLD 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: I.T.A. NO.4648/MUM/2017 49 'DURING THE FINANCIAL YEAR THE ASSESSEE COMPANY HAS ISSUED 792737 NO. OF EQUITY SHARE WITH A FACE VALUE OF RS.10/ - ALONG WITH A PREMIUM OF RS.390/ - . THEREAFTER, NOTICES U/S. 133(6) OF THE I.T. 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 RS.61,000/ - ON ACCOUNT OF CONSULTANCY CHARGES AND THE PRELIMINARY EXPENSES WRITTEN OFF AMOUNTING TO A SUM OF RS.60,000/ - . HE, THEREFORE, COMPLETED THE ASSESSMENT AFTER MAKING ADDITION OF A SUM OF RS.1,21,000/ - . WHEN IS AN ORDER ERRONEOUS IN SO FAR AS THE SAME IS PREJUDICIAL TO THE INTEREST OF THE REVENUE WAS CONSIDERED BY THIS COURT IN THE CASE OF MAITHAN INTERNATIONAL ( SUPRA ) TO WHICH ONE OF US (GIRISH CHANDRA GUPTA, J.) WAS A PARTY WHEREIN THE FOLLOWING VIEWS W ERE EXPRESSED: 'IT IS NOT THE LAW THAT THE ASSESSING OFFICER OCCUPYING THE POSITION OF AN INVESTIGATOR AND ADJUDICATOR CAN DISCHARGE HIS FUNCTION BY PERFUNCTORY OR INADEQUATE INVESTIGATION. SUCH A COURSE IS BOUND TO RESULT IN ERRONEOUS AND PREJUDICIAL ORD ERS. WHERE THE RELEVANT ENQUIRY WAS NOT UNDERTAKEN, AS IN THIS CASE, THE ORDER IS ERRONEOUS AND PREJUDICIAL TOO AND, THEREFORE, REVISABLE. INVESTIGATION SHOULD ALWAYS BE FAITHFUL AND FRUITFUL. UNLESS ALL FRUITFUL AREAS OF ENQUIRY ARE PURSUED THE ENQUIRY CA NNOT BE SAID TO HAVE BEEN FAITHFULLY CONDUCTED . IN A DIFFERENT CONTEXT THE APEX COURT OBSERVED 'CONTRA VERITATEM LEX NUNQUAM ALIQUID PERMITTIT : IMPLIES A DUTY ON THE COURT TO ACCEPT AND ACCORD ITS APPROVAL ONLY TO A REPORT WHICH IS THE RESULT OF FAITHFUL AND FRUITFUL INVESTIGATION' (SEE SIDHARTHA VASHISHT ALAIS MANU SHARMA V. STATE (NCT OF DELHI) REPORTED IN [2010] 6 SCC 1 PARAGRAPH 200 AT PAGE 80)' IN THE CASE OF N.R. PORTFOLIO (P.) LTD. ( SUPRA ) THE FOLLOWING VIEWS WERE EXPRESSED: 'WHAT WE PERCEIVE AND REGARD AS CORRECT POSITION OF LAW IS THAT THE COURT OR TRIBUNAL SHOULD BE CONVINCED ABOUT THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. THE ONUS TO PROVE THE THREE FACTUM IS ON THE ASSESSEE AS THE FACTS ARE WITHIN THE ASSESSEE'S KNOWLEDGE. MERE PRODUCTION OF INCORPORATION DETAILS, PANS OR THE FACT THAT THIRD PERSONS OR COMPANY HAD FILED INCOME - TAX DETAILS IN CASE OF A PRIVATE LIMITED COMPANY MAY NOT BE SUFFICIENT WHEN SURROUNDING AND ATTENDING FACTS PREDICATE A COV ER UP. THESE FACTS INDICATE AND REFLECT PROPER PAPER WORK OR DOCUMENTATION BUT GENUINENESS, CREDITWORTHINESS, IDENTITY ARE DEEPER AND OBTRUSIVE . COMPANIES NO DOUBT ARE ARTIFICIAL OR JURISTIC PERSONS BUT THEY ARE SOULLESS AND ARE DEPENDENT UPON THE INDIVIDU ALS BEHIND THEM WHO RUN AND MANAGE THE SAID COMPANIES. IT IS I.T.A. NO.4648/MUM/2017 50 THE PERSONS BEHIND 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 WHI CH WAS ESSENTIAL TO UNEARTH THE TRUTH. REFERENCE MAY ALSO BE MADE TO THE JUDGEMENT OF THIS COURT IN THE CASE ACTIVE TRADERS (P.) LTD. ( SUPRA ). THE QUESTION FOR CONSIDERATION IS WHETHER IN THE PRESENCE OF MATERIALS DISCUSSED ABOVE THE COMMISSIONER WAS JUSTI FIED IN TREATING THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THAT QUESTION IN THE FACTS AND CIRCUMSTANCES HAS TO BE ANSWERED IN THE AFFIRMATIVE. WE FIND NO SUBSTANCE IN THE SUBMISSION THAT THE ORDER OF THE LEARNED TRIBUNA L IS PERVERSE, AFTER EXAMINING ALL THE SUBMISSIONS ADVANCED BY MR. PODDAR. 29. WHETHER RECEIPT OF SHARE CAPITAL WAS A TAXABLE EVENT PRIOR TO 1ST APRIL, 2013 BEFORE INTRODUCTION OF CLAUSE (VII B) TO THE SUB - SECTION 2 OF SECTION 56 OF THE INCOME TAX ACT; WHETHER THE CONCEPT OF ARMS LENGTH PRICING IN A DOMESTIC TRANSACTION BEFORE INTRO DUCTION OF SECTION 92A AND 92BA OF THE INCOME TAX ACT WAS THERE AT THE RELEVANT POINT OF TIME ARE NOT QUESTIONS WHICH ARISE FOR DETERMINATION IN THIS CASE. THE ASSESSEE WITH AN AUTHORISED SHARE CAPITAL OF RS.1.36 CRORES RAISED NEARLY A SUM OF RS.32 CRORES ON ACCOUNT OF PREMIUM AND CHOSE NOT TO GO IN FOR INCREASE OF AUTHORISED SHARE CAPITAL MERELY TO AVOID PAYMENT OF STATUTORY FEES IS AN IMPORTANT POINTER NECESSITATING INVESTIGATION. MONEY ALLEGEDLY RECEIVED ON ACCOUNT OF SHARE APPLICATION CAN BE ROPED IN UN DER SECTION 68 OF THE INCOME TAX ACT IF THE SOURCE OF THE RECEIPT IS NOT SATISFACTORILY ESTABLISHED BY THE ASSESSEE. REFERENCE IN THIS REGARD MAY BE MADE TO THE JUDGEMENT IN THE CASE OF SUMATI DAYAL ( SUPRA ) WHEREIN THEIR LORDSHIPS HELD THAT ANY SUM 'FOUND CREDITED IN THE BOOKS OF THE ASSESSEE FOR ANY PREVIOUS YEAR, THE SAME MAY BE CHARGED TO INCOME TAX.'. WE ARE UNABLE TO ACCEPT THE SUBMISSION THAT ANY FURTHER INVESTIGATION IS FUTILE BECAUSE THE MONEY WAS RECEIVED ON CAPITAL ACCOUNT. THE SPECIAL BENCH IN T HE CASE OF SOPHIA FINANCE LTD. ( SUPRA ) OPINED THAT '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 T RUE NATURE AND SOURCE THEREOF EVEN IF THE SAME IS CREDITED AS RECEIPT OF SHARE APPLICATION MONEY. MERE FACT THAT THE PAYMENT WAS RECEIVED BY CHEQUE OR THAT THE APPLICANTS WERE COMPANIES, BORNE ON THE FILE OF REGISTRAR OF COMPANIES WERE HELD TO BE NEUTRAL F ACTS AND DID NOT PROVE THAT THE TRANSACTION WAS GENUINE AS WAS HELD IN THE CASE OF NOVA PROMOTERS AND FINLEASE (P) LTD. ( SUPRA ). SIMILAR VIEWS WERE EXPRESSED BY THIS COURT IN THE CASE OF PRECISION FINANCE (P.) LTD. ( SUPRA ). WE NEED NOT DECIDE IN THIS CASE AS TO WHETHER THE PROVISO TO SECTION 68 OF THE INCOME TAX ACT IS RETROSPECTIVE IN NATURE. TO THAT EXTENT THE QUESTION IS KEPT OPEN. WE MAY HOWEVER I.T.A. NO.4648/MUM/2017 51 POINT OUT THAT THE SPECIAL BENCH OF DELHI HIGH COURT IN THE CASE OF SOPHIA FINANCE LTD. (SUPRA) HELD THAT 'TH E ITO MAY EVEN BE JUSTIFIED IN TRYING TO ASCERTAIN THE SOURCE OF DEPOSITOR'. THEREFORE, THE SUBMISSION THAT THE SOURCE OF SOURCE IS NOT A RELEVANT ENQUIRY DOES NOT APPEAR TO BE CORRECT. WE FIND NO SUBSTANCE IN THE SUBMISSION THAT THE EXERCISE OF POWER UNDE R SECTION 263 BY THE COMMISSIONER WAS AN ACT OF REACTIVATING STALE ISSUES. IN THE CASE OF GABRIEL INDIA LTD. ( SUPRA ) THE CIT WAS UNABLE TO POINT OUT ANY ERROR IN THE EXPLANATION FURNISHED BY THE ASSESSEE. WHEREAS IN THE PRESENT CASE WE HAVE TABULATED THE E VIDENCE 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 JUDGEMENT IN THE CASE OF LEISURE WEA R EXPORTS PVT. 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 APP LICANTS OF SHARE ARE CREDITWORTHY. THE JUDGEMENT 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 REQUISITIONED THE NECESSARY DET AILS BY HIS NOTICE U/S.142(1) BUT HE THEREAFTER DID NOT APPLY HIS MIND THERETO. THE JUDGEMENT IN THE CASE OF J. L. MORRISON (INDIA) LTD. HAS NO MANNER OF APPLICATION BECAUSE IN THAT CASE THE QUESTION ESSENTIALLY WAS WHETHER THE RECEIPT WAS OF A CAPITAL OR REVENUE NATURE. THE FACTS AND CIRCUMSTANCES WERE NOT IN DISPUTE. MOREOVER THE VIEW TAKEN BY THE ASSESSING OFFICER WAS NOT SHOWN NOR WAS HELD BY THE COURT TO BE AN ERRONEOUS VIEW. WHEREAS IN THIS CASE WE HAVE DEMONSTRATED IN SOME DETAIL AS TO WHY IS THE ORD ER OF THE ASSESSING OFFICER ERRONEOUS AND PREJUDICIAL TO THE REVENUE. THE JUDGEMENT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. ( SUPRA ) AND MAX INDIA LTD. DO NOT APPLY TO THE FACTS OF THIS CASE FOR REASONS ALREADY DISCUSSED BY US. FROM THE JUDGEMENT OF THE LEARNED TRIBUNAL IN THE CASE OF SUBHOLAXMI, PLACED BEFORE US IN GREAT DETAIL BY MR. PODDAR, WE FIND THAT ALL IMPORTANT ISSUES PLACED FOR CONSIDERATION BY NO OTHER THAN MR. PODDAR HIMSELF WERE DULY CONSIDERED BY THE LEARNED TRIBUNAL. 30. FOR REASONS ALREADY DISCUSSED WE ANSWER THE ISSUE NO. (A) AND (C) IN THE AFFIRMATIVE AND THE ISSUE NO. (B) AND (D) IN THE NEGATIVE. IN THE RESULT THE APPEAL FAILS AND IS DISMISSED. IT IS CLARIFIED THAT THE VIEWS EXPRESSED HEREIN ARE FOR THE PURPOSE OF DISPOSAL OF THIS APPEAL AND I.T.A. NO.4648/MUM/2017 52 SHALL NOT PRECLUDE THE STATUTORY AUTHORITY FROM ARRIVING AT ITS OWN CONCLUSION IN ACCORDANCE WITH LAW. THE SLP FILED BY THE ASSESSEE WITH HONBLE APEX COURT AGAINST THE DECISION OF HONBLE C A LCUTTA HIGH COURT IN THE AFORESAID CASE OF RAJMANDIR ESTAT ES PRIVATE LIMITED(SUPRA) STOOD DISMISSED BY HONBLE SUPREME COURT IN (2017) 77 TAXMANN.COM 285(SC). THE CONVERSION OF BL ACK MONEY VIA CIRCUITOUS ROUTE AND BRINGING IT BACK IN THE FORM OF SHARE CAPITAL AND LOANS BY PROMOTERS OF THE COMPANIES IS NOT UNCOMMON IN INDIA AND THE SHELL COMPANIES ARE USED AS DEVICE BY PROMOTERS TO LAUNDER THEIR ILL - GOTTEN MONEY AND BRING IT BACK INTO THE SYSTEM IN THE FORM OF SHARE CAPITAL , LOANS AND ADVANCES. IN THE INSTANT CASE BEFORE US, T HE EQUITY SHARES OF A NEWLY INCORPORATED COMPANY HAVING NO ASSET BASE/ VISIBLE BUSINESS IN HAND WERE ISSUED AT AN HEFTY PREMIUM OF RS.90 PER SHARE AS AGAINST FACE VALUE OF RS. 10 PER SHARE. THE FINANCIAL STATEMENT OF THE ASSESSEE COMPANY INDICATE THAT IT WAS MERELY A PAPER COMPANY HA VING NO ASSETS BASE /BUSINESS AT ALL. THE PROCEEDS OF SHARE CAPITAL INCLUSIVE OF SHARE PREMIUM RAISED ARE UTILISED TO INVEST MONEY AS INVESTMENT IN SHARES OF OTHER PRIVATE COMPANIES AND IN GRANTING LOANS AND ADVANCES. IT HAS ALSO EARNED MEAGRE INCOME OF RS. 1,89,000/ - IN THE PREVIOUS YEAR ENDED 31.03.2009 FROM INTEREST AND MAINTENANCE. THE FINANCIAL DETAILS ARE AS UNDER: SR. NO. LAST YEAR FY 2007 - 08(AY 2008 - 09) THIS YEAR FY 2008 - 09 ( AY 2009 - 10) NEXT YEAR FY 2009 - 10 (AY 2010 - 11) YEAR AFTER FY 2010 - 11(AY 2011 - 12) I) TOTAL TURNOVER NOT AVAILABLE RS.189000 RS.70,51,274 RS.2,07,40,730 II) NET PROFIT AFTER TAXES NOT AVAILABLE RS.9000 RS. 109145 NOT AVAILABLE III) EPS NOT AVAILABLE RS.0.05 NOT AVAILABLE NOT AVAILABLE I.T.A. NO.4648/MUM/2017 53 5.1 THE SUM SO INTRODUCED IN THE BOOKS OF THE ASSESSEE COMPANY WAS FOUND TO HAVE BEEN UTILIZED IN THE FORM OF THE FOLLOWING: I) INVESTMENT IN FIXED ASSETS - RS. - II) INVESTMENT IN SHARES OF OTHER COMPANIES - RS. 1,21,00,000/ - THE AO OBSERVED THAT THE SUM SO INTRODUCED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE WAS UTILISED FOR THE FOLLOWING PURPOSES: I ) INVESTMENT IN FIXED ASSETS - RS. - II ) INVESTMENT IN SHARES OF OTHER COMPANIES - RS.1,21,00,000/ - III) GIVEN AS L OAN S & A DVANCE S TO OTHERS - RS. 71,20,62 5 / - IV)AS CASH/BANK BALANCE - RS. 2,65,907 V) IN STOCK/WIP/SUNDRY DEBTORS - RS. - AS COULD BE SEEN FROM ABOVE, THE ASSESSEE HAS INVESTED IN SHARES OF OTHER COMPANIES TO THE TUNE OF RS. 1,21,00,000/ - , WHICH WERE INVESTED IN COMPANIES NAMELY FRONTLINE SYNTHETICS PRIVATE LIMITED (RS. 75.0 LACS , NUMBER OF SHARES 37,500), SANGAM SHARES PRI VATE LIMITED RS.26.0 LACS - 20800 SHARES, SONORAS CHEMICALS PRIVATE LIMITED RS. 15 LACS - 30000 SHARES AND SWASTIK FOUNDATIONS PRIVATE LIMITED RS. 5.0 LACS - 20000 SHARES) . THESE COMPANIES IN WHICH THE ASSESSEE INVESTED ARE ALL CLOSELY HELD PRIVATE COMPANIES . THE ASSESSEE HAS ALSO ADVANCED LOANS AND ADVANCES TO THE TUNE OF RS.71,20,625/ - . THE ORIGINAL ASSESSMENT WAS NEVER DONE U/S 143(3) READ WITH SECTION 143(2) BUT ONLY RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE 1961 ACT WHICH AS PER DECISION OF HO NBLE SUPREME COURT IN THE CASE OF ACIT V. RAJESH JHAVERI STOCK BROKERS PRIVATE LIMITED (2007) 161 TAXMAN 316(SC) CANNOT BE TERMED AS AN ASSESSMENT AND THE \ V) DIVIDEND NOT AVAILABLE NOT AVAILABLE NOT AVAILABLE RS.60196 I.T.A. NO.4648/MUM/2017 54 REOPENING IS SOUGHT TO BE DONE BY REVENUE WITH IN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. T HE FIRST PROVISO TO SECTION 147 OF THE 1961 ACT IS NOT APPLICABLE IN THE INSTANT CASE AND IF THE AO HAS REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT , THEN HE CAN VALIDLY REOPEN THE CONCLUDED ASSESSMENT EVEN IF THE ASSESSEE HAS MADE COMPLETE AND T RUE DISCLOSURE IN THE RETURN OF INCOME FILED WITH THE REVENUE . AT THE STAGE OF RE - OPENING WHAT IS REQUIRED IS A PRIMA - FACIE BONAFIDE REASONS TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT AND AT THIS STAGE A WATER TIGHT CASE THAT INCOME HAS INFACT ESCAP ED ASSESSMENT IS NOT REQUIRED. IT IS ALSO PERTINENT TO MENTION HERE THAT BOTH SECTION 143 (1) AND 147 OF THE 1961 ACT HAD UNDER GONE SUBSTANTIAL CHANGE AND WE ARE PRESENTLY CONCERNED WITH AMENDED PROVISIONS OF BOTH THE SE SECTIONS. THUS, INTIMATION U/S 143(1) BY NO STRETCH OF IMAGINATION CAN BE CALLED AS AN ASSESSMENT AND ALSO BY VIRTUE OF AMENDED DEFINITION OF SECTION 147, THERE IS NECESSITY OF HAVING REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT TO REOPEN THE ASSESSMENT WHEREIN NO ASSESSMENT IS FRA MED BY THE REVENUE ORIGINALLY U/S 143(3) AND RE - OPENING IS SOUGHT TO BE DONE WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. SINCE , FIRST PROVISO TO SECTION 147 IS NOT APPLICABLE , THEN IT IS NOT RELEVANT WHETHER THE ASSESSEE HAS MADE TRUE AND COM PLETE DISCLOSURE IN THE RETURN OF INCOME FILED WITH THE REVENUE. SIMILARLY , SINCE THE ASSESSMENT WAS NOT INITIALLY MADE U/S 143(3) , IT COULD NOT BE SAID THAT THE AO HAS MADE ANY OPINION ON THE SHARE CAPITAL AND SHARE PREMIUM RAISED BY THE ASSESSEE AND NO W IT COULD NOT BE SAID THAT THERE IS ANY CHANGE OF OPINION BY THE AO . THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ACIT V. RAJESH JHAVERI STOCK BROKERS PRIVATE LIMITED (2007) 161 TAXMAN 316(SC) AND IN THE CASE OF DCIT V. ZUARI ESTATE DEVELOPMENT AND INVESTMENT CO. LIMITED(2015) 279 CTR 527(SC) ARE RELEVANT TO THIS EFFECT . THE LEARNED CCIT BASED ON INTELLIGENCE INPUTS FROM DGIT (INTELLIGENCE AND CRIMINAL INVESTIGATION ) HAS PASSED ON INFORMATION TO THE AO ABOUT A VERY HIGH SHARE PREMIUM RAISED BY T HE ASSESSEE WHICH IS A CLOSELY HELD NEWLY INCORPORATED I.T.A. NO.4648/MUM/2017 55 PRIVATE COMPANY HAVING NO ASSET BASE/VISIBLE BUSINESS IN HAND, WHILE ISSUING EQUITY CAPITAL AT A VERY HIGH SHARE PREMIUM . IT IS QUITE UNUSUAL AND AGAINST PREPONDERANCE OF HUMAN PROBABILITIES FOR OUTSID ERS NOT CONNECTED WITH PROMOTERS/ DIRECTORS AND MANAGEMENT OF THE TAX - PAYER COMPANY TO MAKE INVESTMENT S IN A NEWLY INCORPORATED CLOSELY HELD PRIVATE LIMITED COMPANY HAVING NO ASSETS/BUSINESS WHICH IS MERELY A PAPER COMPANY AT AN UNUSUAL HIGH SHARE PREMIUM OF RS. 90 PER SHARE AS AGAINST FACE VALUE OF RS. 10 PER SHARE . NO DOUBT IN SOME CASES SUCH AS COMPANIES BELONGING TO REPUTED AND SUCCESSFUL BUSINESS GROUPS , THE SHARES CAN BE ISSUED TO OUTSIDERS AT A PREMIUM IN THE INITIAL STAGE ITSELF KEEPING IN VIEW BR AND IMAGE, GOODWILL AND SUCCESSFUL ESTABLISHED TRACK RECORD OF PROMOTERS BUT FOR THAT THERE HAS TO BE SOME COGENT MATERIAL ON RECORD TO COME TO CONCLUSION THAT SUCH HUGE SHARE PREMIUM CHARGED BY THE ASSESSEE IS DUE TO VALID AND GENUINE REASONS AND IS WARRA NTED KEEPING IN VIEW FACTUAL MATRIX SURROUNDING THE TAX - PAYER . IT IS EQUALLY QUITE UNUSUAL ON THE TOUCHSTONE OF PREPONDERANCE OF HUMAN PROBABILITIES THAT THE OUTSIDERS WHO ARE NOT CONNECTED WITH THE ASSESSEE COMPANY HAD PUMPED IN 91.12% OF THE TOTAL FUN DS IN NEWLY INCORPORATED CLOSELY HELD PRIVATE COMPANY HAVING NO ASSET BASE/VISIBLE BUSINESS IN HAND AND THAT TOO AT AN EXORBITANT HIGH SHARE PREMIUM OF RS. 90 PER SHARE AS AGAINST FACE VALUE OF RS. 10 PER SHARE , WHILE THE PROMOTERS/DIRECTORS THEMSELVES PUM PED IN ONLY 9.88% OF THE TOTAL SUBSCRIBED CAPITAL INCLUDING SHARE PREMIUM. THIS ALSO SHOWS LACK OF CONFIDENCE OF PROMOTERS/DIRECTORS IN THEIR OWN COMPANY WHICH GOES AGAINST THE NORMAL HUMAN CONDUCT CASTING SERIOUS ASPERSIONS AND SHADOW OF DOUBT ON THE GENU INENESS OF THE RAISING OF THE ENTIRE SHARE CAPITAL INCLUSIVE OF SHARE PREMIUM BY THE ASSESSEE WHICH TRANSACTION PRIMA - FACIE APPEARS TO BE CLANDESTINE IN NATURE. IT IS FOR THE ASSESSEE TO HAVE BRING ON RECORD COGENT MATERIAL ON RECORD TO REBUT SUCH DOUBT AN D JUSTIFY ITS CONDUCT WHICH IS AGAINST NORMAL HUMAN PROBABILITIES AS THESE SPECIAL FACTS ARE WITHIN THE KNOWLEDGE OF THE ASSESSEE. AT THIS STAGE , WE WOULD LIKE TO REFER TO DECISION OF CO - ORDINATE BENCHES OF THE I.T.A. NO.4648/MUM/2017 56 TRIBUNAL , MUMBAI IN WHICH ONE OF US (ACCOUNTANT MEMBER) WAS PART OF THE DIVISION BENCH WHO PRONOUNCED THIS ORDER, IN THE CASE OF PRATIK SYNTEX PRIVATE LIMITED V. ITO REPORTED IN (2018) 94 TAXMANN.COM 12(MUM - TRIB.) , WHEREIN ADDITIONS ON ACCOUNT OF BOGUS SHARE CAPITAL RAISED BY THE SAID TAX - P A YERS WERE CONFIRMED BY TRIBUNAL , BY HOLDING AS UNDER: 6. WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD INCLUDING ORDERS OF THE AUTHORITIES BELOW, PAPER BOOK FILED BY THE ASSESSEE RUNNING INTO 1 - 32 PAGES AND CASE LAWS RELIED UPO N BY THE BOTH THE PARTIES. THE ASSESSEE IS ENGAGED IN THE BUSINESS AS DEALERS OF TEXTILES YARN & COMMISSION AGENT. THE ASSESSEE HAS SHARE CAPITAL (INCLUSIVE OF SHARE PREMIUM) ISSUED TO THE TUNE OF RS. 337 LACS OUT OF WHICH RS. 37 LACS IS INVESTED BY ORIGIN AL PROMOTERS NAMELY SHRI. VIHARILAL JHAWAR, SMT. URMILA DEVI JHAWAR AND SHRI PRATIK JHAWAR(HEREINAFTER CALLED 'ORIGINAL PROMOTERS') WHILE THE ASSESSEE RAISED BALANCE SHARE CAPITAL(INCLUSIVE OF SHARE PREMIUM) TO THE TUNE OF RS. 3 CRORES FROM THREE NEW PARTI ES NAMELY M/S. MOTIVATE FINANCIAL SERVICES PVT. LTD, TEJ CORPORATE SERVICES PVT. LTD. AND ANUMEETA CORPORATE SERVICES PVT. LTD EACH SUBSCRIBING RS. 1 CRORES EACH. THESE THREE NEW PARTIES HAVE INVESTED RS. 3 CRORES IN 60000 EQUITY SHARE OF THE ASSESSEE COMP ANY OF THE FACE VALUE OF RS. 10 EACH AT A PREMIUM OF RS. 490 PER EQUITY SHARE. THUS, THE ISSUE PRICE TO THESE THREE NEW SHARE HOLDERS WAS AT RS. 500 PER SHARE AS AGAINST THE FACE VALUE OF EQUITY SHARE OF RS. 10 EACH OF THE ASSESSEE COMPANY WHILE THE ORIGIN AL PROMOTERS ARE ALLOTTED EQUITY SHARES OF RS. 10 EACH AT PAR AND NO SHARE PREMIUM IS CHARGED FROM ORIGINAL SHAREHOLDERS. IT IS PERTINENT TO MENTION THAT 3,60,000 EQUITY SHARES OF RS. 10 EACH WERE ISSUED TO ORIGINAL PROMOTERS AT FACE VALUE OF RS. 10 PER SH ARE IN THIS YEAR ITSELF WHILE NEW SHAREHOLDERS WERE ALLOTTED 60000 EQUITY SHARES OF RS. 10 EACH AT SHARE PREMIUM OF RS. 490 PER SHARE I.E. AT ISSUE PRICE OF RS. 500 PER SHARE. THUS, THESE THREE NEW PARTIES INDUCTED 89% OUT OF THE TOTAL SHARE CAPITAL INCLUS IVE OF SHARE PREMIUM BEING RS. 3 CRORE WHILE THE ASSESSEE'S ORIGINAL PROMOTERS ONLY INDUCTED RS. 37 LACS WHICH CONSISTED OF 11% OF THE CAPITAL INTRODUCED IN THE ASSESSEE COMPANY. THESE THREE INVESTING COMPANIES NAMELY M/S. MOTIVATE FINANCIAL SERVICES PVT. LTD, TEJ CORPORATE SERVICES PVT. LTD. AND ANUMEETA CORPORATE SERVICES PVT. LTD HAVE SUBSCRIBED TO 60000 EQUITY SHARE BY INVESTING RS. 300 LACS AS AGAINST RS. 37 LACS INVESTED BY THE ORIGINAL PROMOTERS BY SUBSCRIBING TO 3,70,000 EQUITY SHARES OF RS. 10 EACH AT FACE VALUE. THUS BY INVESTING 89% OF THE TOTAL CAPITAL, THESE THREE NEW I.T.A. NO.4648/MUM/2017 57 SHAREHOLDERS GOT 14% SHARES OF THE COMPANY WHILE BY INVESTING MERELY 11% OF THE CAPITAL INTRODUCED, ORIGINAL PROMOTERS GOT HOLD OF 86% OF SHARES. IT IS INCOMPREHENSIBLE THAT THE AS SESSEE COMPANY IS NOT AWARE OF THE WHEREABOUTS OF THE NEW SHAREHOLDER WHO HAD SUBSTANTIALLY CONTRIBUTED TO THE CAPITAL OF THE ASSESSEE COMPANY TO THE TUNE OF RS. 300 LACS OUT OF TOTAL CAPITAL DEPLOYED OF RS. 337 LACS. IT IS WELL KNOWN THAT THE OWNERSHIP, M ANAGEMENT AND CONTROL OVER THE COMPANIES IS EXERCISED BY PERSONS HOLDING MAJORITY OF SHARES. THUS, THE SHAREHOLDERS WHO INVESTED AS MUCH 89% OF THE CAPITAL INTRODUCED HAVE BEEN ALLOTTED 14% OF THE COMPANY'S SHARES I.E. THEY ARE REDUCED TO MINORITY SHAREHOL DERS ALBEIT THEY CONTRIBUTED BULK OF CAPITAL INTRODUCED IN THE ASSESSEE'S COMPANY WHILE THE MAJORITY SHAREHOLDING HOLDING SHARES TO THE TUNE OF 86% ARE HELD BY THE ORIGINAL PROMOTERS WHO MERELY INVESTED 11% OF THE TOTAL CAPITAL INTRODUCED IN THE ASSESSEE'S COMPANY. THUS, WITHIN THIS RELEVANT YEAR UNDER CONSIDERATION SHARES WERE ALLOTTED TO ORIGINAL PROMOTERS AT PAR VALUE OF RS. 10 PER SHARE WHILE NEW SHAREHOLDERS WERE ALLOTTED SHARES AT A PRICE OF RS. 500 PER SHARE. NO JUSTIFICATION FOR SUCH DIFFERENT ISSUE PRICE EVEN WITHIN THIS RELEVANT YEAR UNDER CONSIDERATION IS BROUGHT ON RECORD. NO DOUBT SITUATIONS COULD ARISE IN GENUINE INVESTMENTS ALSO ABOUT THE DIFFERENTIAL PRICING OF SHARES TO OUTSIDERS VIS - A - VIS PROMOTERS, BUT THE PROBLEMS OF THE ASSESSEE GOT AGGR AVATED BY NON TRACING OF THESE THREE NEW SHAREHOLDERS AS THE ASSESSEE ALSO COULD NOT FURNISH THE CURRENT ADDRESSES OF THESE NEW SHAREHOLDERS AND THE WHEREABOUTS OF THESE NEW SHAREHOLDERS ARE ALSO NOT KNOWN. THE INSPECTOR WHO WAS DEPUTED BY THE AO TO MAKE F IELD ENQUIRIES REPORTED THAT THESE THREE NEW SHAREHOLDERS ARE NOT AVAILABLE AT THE GIVEN ADDRESSES AND THEIR WHEREABOUTS ARE NOT KNOWN. THE ASSESSEE WAS CONFRONTED WITH THE ADVERSE INSPECTOR REPORT BUT THE ASSESSEE COULD NOT PRODUCE CURRENT ADDRESSES OF TH ESE THREE NEW SHAREHOLDERS. THE ASSESSEE DID NOT FILE ANY COGENT MATERIAL/EVIDENCES TO JUSTIFY CHARGEABILITY OF SUCH A HUGE SHARE PREMIUM FROM THESE THREE NEW SHAREHOLDER VIS - A - VIS ISSUING SHARES AT PAR TO THE ORIGINAL PROMOTERS WITHIN THE SAME RELEVANT YE AR UNDER CONSIDERATION. THE ASSESSEE DID NOT PLACED RELIANCE EVEN ON ITS OWN AUDITED FINANCIAL STATEMENTS TO PROVE AND JUSTIFY CHARGEABILITY OF HUGE SHARE PREMIUM OF RS. 490/ - PER SHARE AS AGAINST FACE VALUE OF RS. 10 PER SHARE. THE ASSESSEE DID NOT RELY O N ITS OWN FINANCIAL STATEMENTS, BUSINESS MODEL AND FINANCIAL INDICATORS AS ARE EXISTING IN ITS AUDITED FINANCIAL STATEMENTS TO JUSTIFY CHARGING OF HUGE SHARE PREMIUM OF RS. 490 PER SHARE AS AGAINST FACE VALUE OF RS. 10 PER SHARE FROM THESE NEW SHAREHOLDERS . THE PROBLEM GOT FURTHER AGGRAVATED WHEN THE ASSESSEE DOES NOT BRING ON RECORD PROJECT REPORT OR ANY OTHER COGENT MATERIAL JUSTIFYING ISSUE OF SHARES AT HUGE PREMIUM WHICH COULD REFLECTS VIABILITY, HIGHER PROFITABILITY AND BRIGHT FUTURE I.T.A. NO.4648/MUM/2017 58 PROSPECTS OF THE A SSESSEE COMPANY BY IMPLEMENTING PROJECT FOR WHICH FUNDS WERE RAISED AT HUGE SHARE PREMIUM TO JUSTIFY CHARGEABILITY OF SUCH A HUGE SHARE PREMIUM. THE ASSESSEE'S CLAIM IN STATEMENT OF FACT/WRITTEN SUBMISSIONS AS TO JUSTIFICATION OF SHARE PREMIUM/VALUATION ET C ARE NOT SUBSTANTIATED THROUGH ANY COGENT EVIDENCES ON RECORD AND ARE MERELY BALD STATEMENTS WHICH CANNOT BE RELIED UPON IN THE ABSENCE OF COGENT MATERIAL/EVIDENCES BROUGHT ON RECORD BY THE ASSESSEE. THE ASSESSEE RAISED FUNDS TO THE TUNE OF RS. 300 LACS F ROM THESE NEW SHAREHOLDERS AND IT WAS FOR THE ASSESSEE TO HAVE BROUGHT ON RECORD COGENT MATERIAL TO SUBSTANTIATE ITS CONTENTIONS AND IF THE EVIDENCES ARE WITHHELD BY THE ASSESSEE THEN IT IS AT ASSESSEE'S OWN PERIL AS PRESUMPTION WILL BE DRAWN AGAINST THE A SSESSEE. THE ASSESSEE HAS RAISED SHARE CAPITAL INCLUSIVE OF SHARE PREMIUM FROM THESE THREE PARTIES TO THE TUNE OF RS. 3 CRORES AND ONUS IS ON THE ASSESSEE TO PROVE GENUINENESS OF THE TRANSACTION FOR RAISING OF SHARE CAPITAL TO THE TUNE OF RS. 300 LACS AS W ELL TO PROVE IDENTITY AND CREDITWORTHINESS OF THESE THREE SHAREHOLDERS. THIS IS THE MANDATE OF SECTION 68 OF THE 1961 ACT AND IT WAS FOR THE ASSESSEE TO HAVE BROUGHT COGENT EVIDENCES TO SATISFY THE INGREDIENTS OF SECTION 68 OF THE 1961 ACT. NO DOUBT SECTIO N 56(2)(VIIB) OF THE 1961 ACT READ WITH SECTION 2(24)(XVI) ARE PLACED IN THE STATUTE BY FINANCE ACT, 2012 W.E.F. 01 - 04 - 2013 AND THE IMPUGNED AY UNDER CONSIDERATION IS AY 2012 - 13 BUT WHEN THE GENUINENESS OF THE TRANSACTION OF RAISING OF SHARE CAPITAL AT HUG E VALUATIONS IS ITSELF IN QUESTION THEN PARAMETERS OF SECTION 68 ARE TO BE COMPULSORILY FULFILLED AND THE ONUS IS ON THE ASSESSEE TO PROVE THAT THE TRANSACTION IS GENUINE. THUS, TO CONTEND THAT SECTION 56(2)(VIIB) R.W.S. 2(24)(XVI) ARE PLACED IN STATUTE BY FINANCE ACT, 2012 W.E.F. 01 - 04 - 2013 AND NO QUESTION CAN BE RAISED AS TO THE VALUATION OF SHARES AT AN HUGE SHARE PREMIUM IS NOT CORRECT AS IN THE INSTANT CASE, THE GENUINENESS OF THE TRANSACTION OF RAISING OF SHARE CAPITAL INCLUSIVE OF SHARE PREMIUM TO TH E TUNE OF RS. 300 LACS FROM THESE THREE NEW SHAREHOLDERS IS ITSELF NOT PROVED AND THE ASSESSEE WAS ASKED BY THE AUTHORITIES TO PROVE THE SAME KEEPING IN VIEW MANDATE OF SECTION 68 OF THE 1961 ACT WHICH ASSESSEE FAILED TO PROVE. SECTION 68 OF THE ACT CAST OBLIGATION ON THE ASSESSEE 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 OF CREDIT THEREOF OR THE EXPLANATION OFFERED BY THE ASSESSEE IS FOUND NOT SATISFACTORY IN THE OPINION OF THE AO, THE SUM SO CREDITED MAY TREATED AS INCOME AND CHARGED TO INCOME - TAX AS INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. THE BURDEN/ONUS IS CAST ON THE ASSESSEE AND THE ASSESSEE IS REQUIRED TO EXPLA IN TO THE SATISFACTION OF THE AO CUMULATIVELY ABOUT THE IDENTITY AND CAPACITY/CREDITWORTHINESS OF THE CREDITORS ALONG WITH THE I.T.A. NO.4648/MUM/2017 59 GENUINENESS OF THE TRANSACTION TO THE SATISFACTION OF THE AO. ALL THE CONSTITUENTS ARE REQUIRED TO BE CUMULATIVELY SATISFIED. IF ONE OR MORE OF THEM IS ABSENT, THEN THE AO CAN MAKE ADDITIONS U/S. 68 OF THE ACT AS AN INCOME OF THE TAX - PAYER. THERE ARE COMPANIES WHICH ARE WIDELY HELD COMPANIES IN WHICH PUBLIC ARE SUBSTANTIALLY INTERESTED WHICH COMES OUT WITH AN INITIAL PUBLIC OFFERS(I PO) WHEREIN SHARES ARE LISTED ON STOCK EXCHANGES AND WIDELY TRADED, WHEREIN MEMBERS OF PUBLIC MAKE SUBSCRIPTIONS IN PURSUANCE TO THE PROSPECTUS ISSUED BY THE COMPANY. ISSUE OF SHARES IN THESE CASES TO GENERAL PUBLIC IN INDIA AS WELL ABROAD ARE APPROVED, RE GULATED AND MONITORED BY VARIOUS AUTHORITIES WHO ARE ENGAGED IN REGULATING AND MANAGING SECURITIES MARKET SUCH AS SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI), STOCK EXCHANGES, GOVERNMENT OF INDIA ETC.. THOSE MEMBERS OF PUBLIC WHO MAKE SUBSCRIPTION IN PUB LIC ISSUES OF SECURITIES ARE WIDELY SCATTERED ALL OVER THE COUNTRY OR EVEN OUTSIDE INDIA AS ANY PERSON ENTITLE TO APPLY AS PER THE CONDITIONS PRESCRIBED IN THE PROSPECTUS CAN PLACE AN APPLICATION SUBSCRIBING TO THE SHARES OF THE COMPANY BY DEPOSITING DULY FILLED IN APPLICATION ALONG WITH APPLICATION MONEY WITH THE DESIGNATED AUTHORIZED RECIPIENTS OF THE COMPANY STIPULATED IN THE PROSPECTUS SUCH AS BANKERS, BROKERS, UNDER - WRITERS, MERCHANT BANKERS, COMPANY OFFICES ETC. THESE SHAREHOLDERS WHO ARE MEMBER OF PU BLIC ARE UN - KNOWN PERSONS TO THE COMPANY ISSUING SHARES AND THE COMPANY ISSUING SHARES HAVE NO CONTROL/MECHANISM TO VERIFY THEIR CREDITWORTHINESS ETC. AND THE BURDEN OF PROOF IN SUCH CASES IS DIFFERENT, BUT THERE IS ANOTHER CLASS OF COMPANIES WHICH ARE CLO SELY HELD COMPANIES IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED WHO ARE MOSTLY FAMILY CONTROLLED CLOSELY HELD COMPANIES AND THEY RAISE THEIR SHARE CAPITAL FROM THEIR FAMILY MEMBERS, RELATIVES AND FRIENDS AND IN THESE COMPANIES SINCE SHARE CAPITAL IS R ECEIVED FROM THE CLOSE KNIT CIRCLES WHO ARE MOSTLY KNOWN TO THE COMPANY/PROMOTERS, THE ONUS AS REQUIRED U/S. 68 OF THE ACT IS VERY HEAVY TO PROVE IDENTITY AND CAPACITY OF THE SHAREHOLDERS AND GENUINENESS OF THE TRANSACTION. THE ONUS OF WIDELY HELD COMPANY COULD BE DISCHARGED ON THE SUBMISSIONS OF ALL THE INFORMATION CONTAINED IN THE STATUTORY SHARE APPLICATION DOCUMENTS AND ON NOT BEING SATISFIED THE AO MAY PROCEED AGAINST THE SHAREHOLDERS U/S. 69 OF THE ACT INSTEAD OF PROCEEDING AGAINST THE COMPANY, BUT IN THE CLOSELY HELD COMPANIES AS IN THE INSTANT CASE BEFORE US THE SHARE CAPITAL ARE MOSTLY RAISED FROM FAMILY, CLOSE RELATIVES AND FRIENDS AND THE ASSESSEE IS EXPECTED TO KNOW THE SHARE SUBSCRIBERS AND THE BURDEN IS VERY HEAVY ON THE ASSESSEE TO SATISFY CUM ULATIVELY THE INGREDIENTS OF SECTION 68 OF THE ACT AS TO I.T.A. NO.4648/MUM/2017 60 IDENTITY AND ESTABLISH THE CREDIT WORTHINESS OF THE CREDITORS AND GENUINENESS OF THE TRANSACTION TO THE SATISFACTION OF THE AO, OTHERWISE THE AO SHALL BE FREE TO PROCEED AGAINST THE ASSESSEE COMPANY AND MAKE ADDITIONS U/S. 68 OF THE ACT AS UNEXPLAINED CASH CREDIT. THE USE OF THE WORD 'ANY SUM FOUND CREDITED IN THE BOOKS' IN SECTION 68 INDICATES THAT IT IS WIDELY WORDED AND THE AO CAN MAKE ENQUIRIES AS TO THE NATURE AND SOURCE THEREOF. THE AO CAN GO TO ENQUIRE/INVESTIGATE INTO TRUTHFULNESS OF THE ASSERTION OF THE ASSESSEE REGARDING THE NATURE AND THE SOURCE OF THE CREDIT IN ITS BOOKS OF ACCOUNTS AND IN CASE THE AO IS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE WITH RESPECT TO ESTABLISHING IDENTIT Y AND CREDIT WORTHINESS OF THE CREDITOR AND THE GENUINENESS OF THE TRANSACTIONS, THE AO IS EMPOWERED TO MAKE ADDITIONS TO THE INCOME OF THE ASSESSEE U/S. 68 OF THE ACT AS AN UNEXPLAINED CREDIT IN THE HANDS OF THE ASSESSEE COMPANY RAISING THE SHARE CAPITAL BECAUSE THE AO IS BOTH AN INVESTIGATOR AND ADJUDICATOR. IN OUR CONSIDERED VIEW, MERELY SUBMISSION OF THE NAME AND ADDRESS OF THE SHARE SUBSCRIBER, BALANCE SHEET OF AFFAIRS OF THE SHARE SUBSCRIBER AND BANK STATEMENT OF THE SHARE SUBSCRIBERS IS NOT SUFFICIEN T AS THE AO IS TO BE SATISFIED AS TO THEIR IDENTITY AND CREDITWORTHINESS AS WELL AS TO THE GENUINENESS OF THE TRANSACTION ENTERED INTO. THESE THREE NEW SHARE HOLDERS IN THIS INSTANT CASE ARE NOT TRACEABLE AND THEIR WHEREABOUTS ARE NOT KNOWN. THE INSPECTOR HAS GIVEN ADVERSE REPORT AFTER MAKING FIELD ENQUIRIES. THE ASSESSEE COULD NOT GIVE THEIR LATEST ADDRESSES NOR COULD PRODUCE THEM BEFORE THE AUTHORITIES BELOW AND EVEN BEFORE US THESE SHAREHOLDERS COULD NOT BE PRODUCED FOR THEIR EXAMINATION. THESE SHAREHOLD ERS HAVE CONTRIBUTED 86% OF THE CAPITAL DEPLOYED IN THE ASSESSEE COMPANY BEING RS. 300 LACS OUT OF TOTAL CAPITAL DEPLOYED OF RS. 337 LACS AND STILL THE MAJOR CONTRIBUTORS OF THE CAPITAL ARE NOT AVAILABLE WHICH ITSELF CAST SERIOUS APPREHENSION ABOUT THE GEN UINENESS OF THE TRANSACTION OF RAISING SHARE CAPITAL BY THE ASSESSEE COMPANY . ONCE THE AO GOT FIELD ENQUIRIES MADE THROUGH INSPECTOR WHO GAVE ADVERSE REPORT, THE ONUS SHIFTS BACK TO THE ASSESSEE TO PRODUCE THE SHAREHOLDERS BEFORE THE AO AND IF THE ASSESSE E FALTERS THE ADDITIONS CAN BE MADE U/S 68 OF THE ACT.. THE HON'BLE SUPREME COURT DEALT WITH THIS ISSUE IN A. GOVINDARAJULU MUDALIAR V. CIT [1958] 34 ITR 807 , AS UNDER: ' NOW THE CONTENTION OF THE APPELLANT IS THAT ASSUMING THAT HE HAD FAILED TO ESTABLISH THE CASE PUT FORWARD 'BY HIM, IT DOES NOT FOLLOW AS A MATTER OF LAW THAT THE AMOUNTS IN QUESTION WERE INCOME RECEIVED OR ACCRUED DURING THE PREVIOUS YEAR, THAT IT WAS THE DUTY OF THE DEPARTMENT TO ADDUCE EVIDENCE TO SHOW FROM WHAT SOURCE THE INCOME WAS DERIVED AND WHY IT SHOULD BE TREATED AS CONCEALED INCOME. I.T.A. NO.4648/MUM/2017 61 IN THE ABSENCE OF SUCH EVIDENCE, IT IS ARGUED, THE FINDING IS ERRONEOUS. WE ARE UNABLE TO AGREE. WHETHER A RECEIPT I S TO BE TREATED AS INCOME OR NOT, MUST DEPEND VERY LARGELY ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. IN THE PRESENT CASE THE RECEIPTS ARE SHOWN IN THE ACCOUNT BOOKS OF A FIRM OF WHICH THE APPELLANT AND GOVINDASWAMY MUDALIAR WERE PARTNERS. WHEN HE WAS CA LLED UPON TO GIVE EXPLANATION HE PUT FORWARD TWO EXPLANATIONS, ONE BEING A GIFT OF RS. 80,000 AND THE OTHER BEING RECEIPT OF RS. 42,000 FROM BUSINESS OF WHICH HE CLAIMED TO BE THE REAL OWNER. WHEN BOTH THESE EXPLANATIONS WERE REJECTED, AS THEY HAVE BEEN, I T WAS CLEARLY OPEN TO THE INCOME - TAX OFFICER TO HOLD THAT THE INCOME MUST BE CONCEALED INCOME. THERE IS AMPLE AUTHORITY FOR THE POSITION THAT WHERE AN ASSESSEE FAILS TO PROVE SATISFACTORILY THE SOURCE AND NATURE OF CERTAIN AMOUNT OF CASH RECEIVED DURING TH E ACCOUNTING YEAR, THE INCOME - TAX OFFICER IS ENTITLED TO DRAW THE INFERENCE THAT THE RECEIPTS ARE OF AN ASSESSABLE NATURE. THE CONCLUSION TO WHICH THE APPELLATE TRIBUNAL CAME APPEARS TO US TO BE AMPLY WARRANTED BY THE FACTS OF THE CASE. THERE IS NO GROUND FOR INTERFERING WITH THAT FINDING, AND THESE APPEALS ARE ACCORDINGLY DISMISSED WITH COSTS.' NOW. LET US EVALUATE THE QUALITY OF EVIDENCES FURNISHED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW WHICH ARE PLACED IN PAPER BOOK FILED BEFORE US CONTAINING 1 - 32 PAGES. THE ASSESSEE HAS FILED CONFIRMATION FROM THESE THREE PARTIES WHICH IS SIGNED BY THE SAME PERSON NAMELY ONE MR. PRADEEP SHARMA IN ALL THE THREE CASES (PB/PAGE 1, 11 AND 21) WHICH IS INDICATIVE OF THE FACT THAT ONE PERSON CONTROLLED ALL THESE THREE NE W SHAREHOLDERS. THE ASSESSEE DID FILED UNSIGNED FINANCIAL STATEMENTS OF M/S MOTIVATE FINANCIAL SERVICES PVT. LTD AND TEJ CORPORATE SERVICES PVT. LTD. WHICH HAS COMMON AUDITORS NAMELY N H VYAS AND COMPANY WHICH IS AGAIN INDICATOR OF THE SAME PERSONS CONTROL LING THESE COMPANIES. THE ASSESSEE DID NOT FILED FINANCIAL STATEMENTS OF ANUMEETA CORPORATE SERVICES PRIVATE LIMITED. THE PERUSAL OF THE FINANCIAL STATEMENTS OF THE TWO NEW SHAREHOLDERS SO FILED NAMELY M/S MOTIVATE FINANCIAL SERVICES PVT. LTD AND TEJ CORPO RATE SERVICES PVT. LTD. REVEALED THAT BOTH THE SAID COMPANIES HAVE MINISCULE PAID UP CAPITAL OF RS. 1 LACS WHILE SHARE APPLICATION MONEY RAISED BY THEM ARE RS. 250 LACS WHICH IS STATED TO BE INVESTED AS SHOWN UNDER THE HEAD 'INVESTMENTS' TO THE TUNE OF RS. 250 LACS, FOR WHICH NO DETAILS OF INVESTING COMPANIES AS WELL INVESTED COMPANIES ARE GIVEN IN THEIR FINANCIAL STATEMENTS. THEIR INCOME AND CASH FLOWS ARE ALSO NOT SUBSTANTIAL BUT VERY MODEST AND ARE NOT SUFFICIENT ENOUGH TO JUSTIFY THAT THESE COMPANIES AR E MAKING GENUINE INVESTMENTS. THE ASSESSEE HAS FILED BANK STATEMENT FROM 01 - 02 - 2012 TO 31 - 03 - 2012 OF M/S MOTIVATE I.T.A. NO.4648/MUM/2017 62 FINANCIAL SERVICES PVT. LTD, TEJ CORPORATE SERVICES PVT. LTD. AND ANUMEETA CORPORATE SERVICES PVT. LTD. THE BANK STATEMENT OF TEJ CORPORATE SE RVCIES PRIVATE LIMITED FILED IN PAPER BOOK DID NOT REVEAL THE TRANSACTION OF INVESTING OF RS. 100 LACS BY THE SAID COMPANY IN THE ASSESSEE COMPANY AS NO SUCH BANK ENTRY TOWARDS TRANSFER OF RS. 100 LACS TO THE ASSESSEE COMPANY COULD BE SEEN FROM THE BANK ST ATEMENTS FILED BEFORE THE TRIBUNAL (PB/PAGE 13 - 14). THE PERUSAL OF THE BANK STATEMENT OF THESE THREE PARTIES OTHERWISE CLEARLY REVEALS THAT THE MONEY IS JUST RECEIVED IN THEIR BANK ACCOUNT ON SEVERAL OCCASIONS WHICH IS IMMEDIATELY TRANSFERRED OUT OF THEIR BANK ACCOUNT TO SOME OTHER ENTITIES AND THE BALANCE MAINTAINED AT ANY GIVEN POINT OF TIME IN THEIR BANK ACCOUNT IS MINUSCULE. IT IS ALSO OBSERVED FROM THEIR BANK STATEMENT FOR THE PERIOD OF FEBRUARY 2012/MARCH 2012 THAT COMMON PARTIES ARE TRANSFERRING HUGE AMOUNT OF MONEY INTO THEIR BANK ACCOUNTS SUCH AS LOYANA MERCANTILE PRIVATE LIMITED, OLYMPIA SALES AGENCY PRIVATE LIMITED AND GIRIVAR INFRASTRUCTURES PRIVATE LIMITED ETC ON SEVERAL OCCASIONS. THE PERUSAL OF THE BALANCE SHEET OF THE TWO COMPANIES NAMELY MOT IVATE FINANCIAL SERVICES PVT. LTD AND TEJ CORPORATE SERVICES PVT. LTD. CLEARLY REVEALS THAT THEY DO NOT HAVE ANY FINANCIAL STRENGTH OF THEIR OWN TO JUSTIFY SUCH A HUGE INVESTMENT IN THE ASSESSEE COMPANY AND THAT TOO AT SHARE PREMIUM OF RS. 490 PER SHARE AS AGAINST FACE VALUE OF SHARE OF RS. 10 EACH. THE PERUSAL OF THE FINANCIAL STATEMENTS DOES NOT REVEAL THAT THESE COMPANIES ARE INTO ANY ORGANISED BUSINESS OF CERTAIN MAGNITUDE WHILE PERUSAL OF THE FINANCIAL STATEMENTS TYPICALLY REVEALS AND POINTS TOWARDS PE CULIARITY OF BEING TYPICAL A SHELL COMPANIES WHICH INSTEAD OF DOING ANY GENUINE BUSINESS ARE UNDERTAKING HUGE VOLUMINOUS MOVEMENT OF MONEY FROM ONE ENTITY TO ANOTHER ENTITY. NOW, COMING TO THE CASE LAWS RELIED UPON BY BOTH THE RIVAL PARTIES. FIRST, WE WILL DEAL WITH THE CASE LAWS RELIED UPON BY THE ASSESSEE. THE ASSESSEE RELIED UPON DECISION OF ITAT - MUMBAI IN THE CASE OF ARCELI REALTY LTD . ( SUPRA ) BUT THE SAID CASE IS DISTINGUISHABLE AS IN THIS CASE , THE TAX - PAYER DULY DISCHARGED ONUS CASTE ON IT PER SECTION 68 , EXISTENCE OF SHAREHOLDERS WERE NOT IN DOUBT AND ALL THE PRIMARY EVIDENCES WERE DULY SUBMITTED BY THE TAX - PAYER SATISFYING ALL THE INGREDIENTS OF SECTION 68 WHICH LED TRIBUNAL TO RULE IN FAVOUR OF ASSESSEE, WHILE IN THE INSTANT CASE BEFORE US, THESE THREE NEW SHAREHOLDERS ARE NOT TRACEABLE , THEIR CREDITWORTHINESS IS NOT PROVED AND GENUINENESS OF THE ENTIRE SHARE TRANSACTION WAS NOT PROVED AS DISCUSSED IN DETAILS BY US IN THIS ORDER. SIMILAR WAS THE FACT SITUATION IN THE CASE OF SHAKTI HARDWARE COLLECTIONS (P.) LTD . ( SUPRA ) WHEREIN TRIBUNAL BASED ON FACTUAL MATRIX OF THE CASE AND EVIDENCE ON RECORD ARRIVED AT THE DECISION THAT NO ADDITIONS ARE WARRANTED U/S 68 AS INGREDIENTS OF SECTION 68 OF THE ACT STOOD COMPLIED WITH IN THE SAID CASE AND THE TA XPAYER DID DISCHARGED ITS ONUS CASTE U/S 68 . THE ASSESSEE RELIANCE ON THE CASE OF ORCHID INDUSTRIES (P.) LTD . I.T.A. NO.4648/MUM/2017 63 ( SUPRA ) IS ALSO NOT CORRECT AS IN THAT CASE THE FINDING OF FACT IS ARRIVED AT THAT THE SHAREHOLDERS HAVE SUFFICIENT FUNDS IN THEIR BANK ACCOUNTS F OR MAKING INVESTMENT IN THE TAX - PAYER COMPANY AND THEIR CREDITWORTHINESS STOOD PROVED WHICH WAS SUPPORTED BY THE STRENGTH OF THEIR FINANCIAL STATEMENTS WHILE IN THE INSTANT CASE BEFORE US, WE HAVE UNDERTAKEN DETAILED EVALUATION OF EVIDENCE ON RECORD TO COM E TO CONCLUSION THAT THE CREDITWORTHINESS OF NEW SHAREHOLDERS IS NOT PROVED AS WELL GENUINENESS OF TRANSACTION OF RAISING SHARE CAPITAL ALSO STOOD UNPROVED. SIMILAR IS THE CASE OF APEAK INFOTECH'S CASE ( SUPRA ) RELIED UPON BY THE ASSESSEE AS IN THIS CASE TH E SHAREHOLDERS CONFIRMED THE TRANSACTION DURING ASSESSMENT PROCEEDINGS BEFORE THE AO WHILE IN THE INSTANT CASE, THE SHAREHOLDERS ARE NOT TRACEABLE. IN THAT CASE OF APEAK INFOTECH ( SUPRA ), THE TAX - PAYER LED THE EVIDENCE TO SATISFY INGREDIENTS OF SECTION 68 AS TO IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION WHILE IN THE INSTANT CASE WE HAVE ARRIVED AT FINDING OF FACT THAT CREDITWORTHINESS OF THE SHAREHOLDERS AND GENUINENESS OF THE TRANSACTION WAS NOT PROVED. THIS TAKES US TO THE LANDMARK JUDG MENT OF HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (P.) LTD . ( SUPRA ) REPLIED UPON BY THE ASSESSEE. IT WAS HELD BY HON'BLE CALCUTTA HIGH COURT IN THE CASE OF RAJMANDIR ESTATES (P.) LTD . V. PR. CIT [2016] 70 TAXMANN.COM 124/240 TAXMAN 306/386 ITR 162 AT PARA 25 THAT 'THE JUDGEMENT IN THE CASE OF LOVELY EXPORTS (P.) LTD. (SUPRA) LENDS NO ASSISTANCE TO THE ASSESSEE BECAUSE IN THAT CASE THE DIVISION BENCH REITERATED TH AT 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. THE DIVISION BENCH WENT ON TO HOLD THAT THE REVENUE SHOULD NOT HARASS THE ASSESSEE WHERE 'THE PREPONDERANCE OF EVIDENCE INDICATES ABSENCE OF CULPABILITY'. IN THE PRESENT CASE THERE EXISTS REASONABLE SUSPICION IF NOT PRIMA FACIE EVIDENCE OF CULPABILITY' THE DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF RAJMANDIR ESTATES (P.) LTD . ( SUPRA ) STOOD AFFIRMED BY HON'BLE SUPREME COURT IN THE CASE OF RAJMANDIR ESTATES (P.) LTD . V. PR. CIT [2017] 77 TAXMANN.COM 2845/245 TAXMAN 127 AND SLP STOOD DISMISSED. THIS TA KES US TO THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GAGANDEEP INFRASTRUCTURE (P.) LTD . ( SUPRA ) WHEREIN HON'BLE BOMBAY HIGH COURT CONSIDERED THE FACTUAL MATRIX OF THE CASE WHEREIN IT WAS OBSERVED THAT THE TAXPAYER SATISFIED THE THREE INGREDIE NTS OF SECTION 68 WHICH STOOD PROVED NAMELY IDENTITY AND CREDITWORTHINESS OF SHAREHOLDERS AND GENUINENESS OF THE TRANSACTION AND ON THAT FACTUAL MATRIX DECISION OF THE TRIBUNAL WAS ACCEPTED WHEREIN TRIBUNAL RULED IN FAVOUR OF THE ASSESSEE BY HOLDING THAT T HE TAX - PAYER DID SATISFIED ALL THE THREE INGREDIENTS OF SECTION 68 . I.T.A. NO.4648/MUM/2017 64 THUS ALL THE CASE LAWS RELIED UPON BY THE ASSESSEE ARE DISTINGUISHABLE KEEPING IN VIEW FACTUAL MATRIX OF THE CASE BEFORE US . THE LEARNED DR ON THE OTHER HAND HAS RIGHTLY RELIED UPON THE DE CISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF BIKRAM SINGH ( SUPRA ) WHEREIN HON'BLE BOMBAY HIGH COURT CONFIRMED ADDITIONS AS THE TAXPAYER COULD NOT PROVE THE FINANCIAL STRENGTH OF THE LENDER TO HAVE LENT SUCH A HUGE SUMS OF MONEY TO THE TAXPAYER. THE S AME IS THE FACTUAL MATRIX OF THE CASE BEFORE US AS THE THREE NEW SHAREHOLDERS FINANCIAL CAPABILITY AND CREDITWORTHINESS TO INVEST RS. 300 LACS COULD NOT BE, INTER - ALIA , STOOD PROVED APART FROM NON PROVING OF THE GENUINENESS OF THE AFORESAID SHARE TRANSACT IONS TO THE TUNE OF RS. 300 LACS WITH THESE THREE NEW SHAREHOLDERS. THE LEARNED DR ALSO RIGHTLY RELIED UPON DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF KONARK STRUCTUTAL ENGG. (P.) LTD . ( SUPRA ) WHEREIN THE SUMMONS ISSUED BY THE AO TO THE SHAREHOLD ERS U/S 131 RETURNED UNSERVED AND ALSO THE SHAREHOLDERS WERE FIRST TIME ASSESSEE'S AND WERE NOT EARNING ENOUGH INCOME TO MAKE DEPOSITS IN QUESTION, THE HON'BLE BOMBAY HIGH COURT ON THAT FACTUAL MATRIX OF THE CASE CONFIRMED ADDITIONS U/S 68 . IN THE INSTANT APPEAL BEFORE US, THE INSPECTOR WAS DEPUTED BY THE AO TO MAKE FIELD ENQUIRIES WHO COULD NOT LOCATE THESE THREE SHAREHOLDERS AND THE ASSESSEE ALSO COULD NOT FURNISH THE CURRENT ADDRESSES OF THESE THREE NEW SHAREHOLDERS. THESE IN THE INSTANT CASE BEFORE US, THESE THREE SHAREHOLDERS DID NOT HAVE SUFFICIENT INCOME TO JUSTIFY MAKING THESE HUGE INVESTMENTS AND FACTUAL MATRIX OF THE INSTANT APPEAL BEFORE US JUSTIFY CONFIRMING ADDITIONS U/S 68 WHICH ARE SIMILAR TO THE FACTUAL MATRIX IN THE CASE OF K ONARK STRUCTURAL ENGG. (P.) LTD . ( SUPRA ). SIMILARLY, LEARNED DR RIGHTLY RELIED UPON DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF PAVANKUMARM M. SANGHVI ( SUPRA ) AS IN THIS CASE THE LOANS MADE BY THE LENDERS TO THE TAX - PAYER ARE PRECEDED BY CREDIT E NTRY OF SIMILAR AMOUNTS IN THEIR BANK ACCOUNT AND THE BANK BALANCE MAINTAINED IN THEIR BANK ACCOUNT IS MINISCULE, ON THAT FACTUAL MATRIX THE HON'BLE GUJARAT HIGH COURT AFFIRMED THE ADDITIONS. IN THE INSTANT CASE BEFORE US, THE FACTUAL MATRIX IS SIMILAR AS THE INVESTMENT IN ASSESSEE COMPANY BY THESE NEW SHAREHOLDERS AS DETAILED BY US IS PRECEDED BY THE CREDIT ENTRIES IN THE BANK ACCOUNT OF THESE NEW SHAREHOLDERS OF EQUIVALENT AMOUNT AND THE BANK BALANCE REGULARLY MAINTAINED BY THESE NEW SHAREHOLDERS IS MINIS CULE. THUS, IN OUR CONSIDERED VIEW BASED UPON OUR DETAILED DISCUSSIONS AND REASONING AS GIVEN ABOVE, WE ARE OF THE VIEW THAT THE ASSESSEE IS NOT ABLE TO PROVE CREDITWORTHINESS OF THESE THREE INVESTING COMPANIES AND GENUINENESS OF THESE TRANSACTIONS OF ISSU ING SHARE CAPITAL OF RS. 300 LACS I.T.A. NO.4648/MUM/2017 65 (INCLUSIVE OF SHARE PREMIUM) BY THE ASSESSEE COMPANY COULD ALSO NOT BE PROVED AND THE ADDITIONS WERE RIGHTLY MADE BY THE AO WITHIN DEEMING FICTION OF PROVISIONS OF SECTION 68 OF THE ACT. THE ONUS WAS ON THE ASSESSEE COMPAN Y TO BRING ON RECORD THE COGENT EVIDENCES TO PROVE THE CREDITWORTHINESS OF THE SHARE SUBSCRIBERS AND GENUINENESS OF THE TRANSACTION WHICH IN THE INSTANT CASE THE ASSESSEE IS NOT ABLE TO PROVE THE SAME AS PER THE FACTS EMERGING FROM THE RECORDS AND MATERIAL BEFORE US AS SET OUT ABOVE AND IN OUR CONSIDERED VIEW IN THE INSTANT CASE THE TRANSACTIONS WERE NOMINAL RATHER THAN REAL. THE CREDITWORTHINESS OF THE SHAREHOLDERS IS NOT PROVED BECAUSE THEY DID NOT HAD THEIR OWN MONEY AS EVERY PAYMENTS MADE BY THEM TOWARD S SHARE MONEY IN FAVOUR OF THE ASSESSEE IS PRECEDED BY DEPOSIT IN THE BANK ACCOUNT OF THE NEW SHAREHOLDERS AND THE BALANCE MAINTAINED REGULARLY IN THEIR BANK ACCOUNTS WAS MINISCULE. THE GENUINENESS OF THE TRANSACTIONS IS ALSO NOT PROVED AS TO HOW SUCH A HU GE SUM OF MONEY GOT INVESTED BY THE SHARE SUBSCRIBERS AND THAT TOO AT A HUGE SHARE PREMIUM OF RS. 490 PER SHARE AS NO EVIDENCES AS TO THE STRENGTH OF ITS FINANCIAL STATEMENT OR DETAILS OF SOME VERY LUCRATIVE PROFITABLE PROJECT CARRIED ON BY THE ASSESSEE IS ALSO NOT BROUGHT ON RECORD WHICH COULD WARRANT JUSTIFICATION OF SUCH AS HUGE SHARE PREMIUM AS WELL JUSTIFICATION FOR THESE UNKNOWN COMPANIES BEING NEW SHAREHOLDERS TO HAVE INVESTED RS. 300 LACS IN THE ASSESSEE COMPANY. THESE THREE NEW SHAREHOLDERS COULD N OT BE TRACED AND THEY COULD NOT BE INTERROGATED BY THE AO WHICH WAS ESSENTIAL TO UNEARTH THE TRUTH AS THEY WERE NOT TRACEABLE AND ASSESSEE DID NOT PRODUCED THE SHAREHOLDERS BEFORE THE AUTHORITIES BELOW. MERELY SAYING THAT RETURN OF ALLOTMENT IN FORM NO 2 W AS FILED WITH THE MINISTRY OF CORPORATE AFFAIRS OR RESOLUTIONS WERE PASSED BY THE ASSESSEE OR THESE COMPANIES HAVE CORPORATE IDENTIFICATION NUMBERS IS NOT SUFFICIENT AS THESE ARE MERELY MINISTERIAL/ADMINISTRATIVE FUNCTIONS WHICH NEEDS TO BE DONE IN ANY CAS E BY ALL THE COMPANIES ALLOTTING SHARES BUT THE MOOT QUESTION IS AS TO THE CREDITWORTHINESS OF THESE THREE NEW SHARE HOLDERS TO INVEST SUCH A HUGE AMOUNT OF RS. 300 LACS IN ASSESSEE COMPANY AS WELL WHETHER THESE SHARE TRANSACTIONS RAISING RS. 300 LACS FROM THESE THREE NEW SHAREHOLDERS AT HUGE VALUATION/SHARE PREMIUM WERE GENUINE AND JUSTIFIED WHICH WE HAVE WIDE DETAILED REASONING ABOVE HELD OTHERWISE. UNDER THESE CIRCUMSTANCES KEEPING IN VIEW OF CUMULATIVE REASONS AND SUMMATION OF OUR DISCUSSIONS AS SET OUT ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE REVENUE HAS RIGHTLY MADE THE ADDITION OF RS. 300 LACS RECEIVED AS SHARE SUBSCRIPTION AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT WHICH WE SUSTAINED AND WE DONOT FOUND ANY INFIRMITY IN THE ORDERS OF I.T.A. NO.4648/MUM/2017 66 THE LEARN ED CIT(A) WHICH WE SUSTAIN/UPHELD. THE ASSESSEE FAILS IN THIS APPEAL. WE ORDER ACCORDINGLY. IT IS ALSO IMPORTANT AT THIS STAGE TO REFER TO RECENT DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF PR. CIT V. NDR PROMOTERS PRIVATE LIMITED REPORTED IN (201 9) 410 ITR 379(DELHI) WHEREIN HONBLE DELHI HIGH COURT REVERSED THE DECISION OF ITAT, DELHI AND UPHELD THE ADDITIONS MADE U/S 68 OF THE 1961 ACT , BY HOLDING AS UNDER: 11. ISSUE OF BOGUS SHARE CAPITAL IN THE FORM OF ACCOMMODATION ENTRIES HAS BEEN SUBJECT MATTER OF SEVERAL DECISIONS OF THIS COURT AND WE WOULD LIKE TO REFER TO DECISION IN CIT V. NAVODAYA CASTLES (P.) LTD. [2014] 50 TAXMANN.COM 110/226 TAXMAN 190 (MAG.)/367 ITR 306 , WHEREIN THE EARLIER JUDGMENTS WERE CLASSIFIED INTO TWO SEPARATE CATEGORIES OBSERVING AS UNDER: '11. WE HAVE HEARD THE SENIOR STANDING COUNSEL FOR THE REVENUE, WHO HAS RELIED UPON DECISIONS OF THE DELHI HIGH COURT IN COMMISSIONER OF INCOME TAX V. NOVA PROMOTERS AND FINLEASE (P) LTD. [2012] 342 ITR 169 (DELHI) , COMMISSIONER OF INCOME TAX V. N.R. PORTFOLIO PVT. LTD., 206 (2014) DLT 97 (DB) (DEL) AND COMMISSIONER OF INCOME TAX - II V. MAF ACADEMY P. LTD., 206 (2014) DLT 277 (DB) (DEL). THE AFORESAID DECISIONS MENTIONED ABOVE REFER TO THE EARLIER DECISIONS OF DELHI HIGH COURT IN COMMISSIONER OF INCOME TAX V. SOPHIA FINANCE LTD., [1994] 205 ITR 98 (FB)(DELHI) , CIT V. DIVINE LEASING AND FINANCE LIMITED [2008] 299 ITR 268 (DELHI) AND OBSERVATIONS OF THE S UPREME COURT IN CIT V. LOVELY EXPORTS P. LTD. [2008] 319 ITR (ST.) 5 (SC). 12. THE MAIN SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE IS THAT ONCE THE ASSESSEE HAD BEEN ABLE TO SHOW THAT THE SHAREHOLDER COMPANIES WERE DULY INCORPORATED BY THE REGISTRA R OF COMPANIES, THEIR IDENTITY STOOD ESTABLISHED, GENUINENESS OF THE TRANSACTIONS STOOD ESTABLISHED AS PAYMENTS WERE MADE THROUGH ACCOUNTS PAYEE CHEQUES/BANK ACCOUNT; AND MERE DEPOSIT OF CASH IN THE BANK ACCOUNTS PRIOR TO ISSUE OF CHEQUE/PAY ORDERS ETC. WO ULD ONLY RAISE SUSPICION AND, IT WAS FOR THE ASSESSING OFFICER TO CONDUCT FURTHER INVESTIGATION, BUT IT DID NOT FOLLOW THAT THE MONEY BELONGED TO THE ASSESSEE AND WAS THEIR UNACCOUNTED MONEY, WHICH HAD BEEN CHANNELIZED. 13. AS WE PERCEIVE, THERE ARE TWO SETS OF JUDGMENTS AND CASES, BUT THESE JUDGMENTS AND CASES PROCEED ON THEIR OWN FACTS. IN ONE SET OF CASES, THE ASSESSEE PRODUCED NECESSARY DOCUMENTS/EVIDENCE TO SHOW AND ESTABLISH IDENTITY OF THE SHAREHOLDERS, BANK ACCOUN T FROM WHICH PAYMENT WAS MADE, THE I.T.A. NO.4648/MUM/2017 67 FACT THAT PAYMENTS WERE RECEIVED THOROUGH BANKING CHANNELS, FILED NECESSARY AFFIDAVITS OF THE SHAREHOLDERS OR CONFIRMATIONS OF THE DIRECTORS OF THE SHAREHOLDER COMPANIES, BUT THEREAFTER NO FURTHER INQUIRIES WERE CONDUCTED . THE SECOND SET OF CASES ARE THOSE WHERE THERE WAS EVIDENCE AND MATERIAL TO SHOW THAT THE SHAREHOLDER COMPANY WAS ONLY A PAPER COMPANY HAVING NO SOURCE OF INCOME, BUT HAD MADE SUBSTANTIAL AND HUGE INVESTMENTS IN THE FORM OF SHARE APPLICATION MONEY. THE AS SESSING OFFICER HAS REFERRED TO THE BANK STATEMENT, FINANCIAL POSITION OF THE RECIPIENT AND BENEFICIARY ASSESSEE AND SURROUNDING CIRCUMSTANCES. THE PRIMARY REQUIREMENTS, WHICH SHOULD BE SATISFIED IN SUCH CASES IS, IDENTIFICATION OF THE CREDITORS/SHAREHOLDE R, CREDITWORTHINESS OF CREDITORS/SHAREHOLDER AND GENUINENESS OF THE TRANSACTION. THESE THREE REQUIREMENTS HAVE TO BE TESTED NOT SUPERFICIALLY BUT IN DEPTH HAVING REGARD TO THE HUMAN PROBABILITIES AND NORMAL COURSE OF HUMAN CONDUCT. 14. CERTIFICATE OF INCOR PORATION, PAN NUMBER ETC. ARE RELEVANT FOR PURCHASE 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. IT IS IN THIS CONTEXT, THE SUPREME COURT IN CIT V. DURGA PRASAD MORE [1971] 82 ITR 540 (SC) HAD OBSERVED: 'NOW WE SHALL PROCEED TO EXAMINE THE VALIDITY OF THOSE GROUNDS THAT APPEALED TO THE LEARNED JUDGES. IT IS TRUE THAT THE APPARENT MUST BE CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS NOT THE REAL. IN A CASE OF THE PRESENT KIND A PARTY WHO RELIES ON A RECITAL IN A DEED HAS TO ESTABLISH THE TRUTH OF THOSE RECITALS, OTHERWIS E IT WILL BE VERY EASY TO MAKE SELF - SERVING STATEMENTS IN DOCUMENTS EITHER EXECUTED OR TAKEN BY A PARTY AND RELY ON THOSE RECITALS. IF ALL THAT AN ASSESSEE WHO WANTS TO EVADE TAX IS TO HAVE SOME RECITALS MADE IN A DOCUMENT EITHER EXECUTED BY HIM OR EXECUTE D IN HIS FAVOUR THEN THE DOOR WILL BE LEFT WIDE OPEN TO EVADE TAX. A LITTLE PROBING WAS SUFFICIENT IN THE PRESENT CASE TO SHOW THAT THE APPARENT WAS NOT THE REAL. THE TAXING AUTHORITIES WERE NOT REQUIRED TO PUT ON BLINKERS WHILE LOOKING AT THE DOCUMENTS PR ODUCED BEFORE THEM. THEY WERE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY OF THE RECITALS MADE IN THOSE DOCUMENTS .' 15. SUMMARIZING THE LEGAL POSITION IN NOVA PROMOTERS AND FINLEASE (P) LTD. ( SUPRA ), AND HIGHLIGHTING THE LEG AL EFFECT OF SECTION 68 OF THE ACT, THE DIVISION BENCH HAS HELD AS UNDER: '32. THE TRIBUNAL ALSO ERRED IN LAW IN HOLDING ASSESSING OFFICER OUGHT TO HAVE PROVED THAT THE MONIES EMANATED I.T.A. NO.4648/MUM/2017 68 FROM THE COFFERS OF THE ASSESSEE - COMPANY AND CAME BACK AS SHARE CAPITAL. SECTION 68 PERMITS THE ASSESSING OFFICER TO ADD THE CREDIT APPEARING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IF THE LATTER OFFERS NO EXPLANATION REGARDING THE NATURE AND SOURCE OF THE CREDIT OR THE EXPLANATION OFFERED IS NOT SATISFACTORY. IT PLACES NO DUTY UPON HIM TO POINT TO THE SOURCE FROM WHICH THE MONEY WAS RECEIVED BY THE ASSESSEE. IN A. GOVINDARAJULU MUDALIAR V CIT, (1958) 34 ITR 807 , THIS ARGUMENT ADVANCED BY THE ASSESSEE WAS REJECTED BY THE SUPREME COURT. VENKATARAMA IYER, J., SPEAKING FOR THE COURT OBSERVED AS UNDER (@ PAGE 810): 'NOW THE CONTENTION OF THE APPELLANT IS THAT ASSUMING THAT HE HAD FAILED TO ESTABLISH THE CASE PUT FORWARD BY HIM, IT DOES NOT FOLLOW AS A MATTER OF LAW THAT THE AMOUNTS IN QUESTION WERE INCOME RECEIVED OR ACCRUED DURING THE PREVIOUS YEAR, THAT IT WAS THE DUTY OF THE DEPARTMENT TO ADDUCE EVIDENCE TO SHOW FROM WHAT S OURCE THE INCOME WAS DERIVED AND WHY IT SHOULD BE TREATED AS CONCEALED INCOME. IN THE ABSENCE OF SUCH EVIDENCE, IT IS ARGUED, THE FINDING IS ERRONEOUS. WE ARE UNABLE TO AGREE. WHETHER A RECEIPT IS TO BE TREATED AS INCOME OR NOT, MUST DEPEND VERY LARGELY ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. IN THE PRESENT CASE THE RECEIPTS ARE SHOWN IN THE ACCOUNT BOOKS OF A FIRM OF WHICH THE APPELLANT AND GOVINDASWAMY MUDALIAR WERE PARTNERS. WHEN HE WAS CALLED UPON TO GIVE EXPLANATION HE PUT FORWARD TWO EXPLANATIONS , ONE BEING A GIFT OF RS. 80,000 AND THE OTHER BEING RECEIPT OF RS. 42,000 FROM BUSINESS OF WHICH HE CLAIMED TO BE THE REAL OWNER. WHEN BOTH THESE EXPLANATIONS WERE REJECTED, AS THEY HAVE BEEN IT WAS CLEARLY UPON TO THE INCOME - TAX OFFICER TO HOLD THAT THE INCOME MUST BE CONCEALED INCOME. THERE IS AMPLE AUTHORITY FOR THE POSITION THAT WHERE AN ASSESSEE FAILS TO PROVE SATISFACTORILY THE SOURCE AND NATURE OF CERTAIN AMOUNT OF CASH RECEIVED DURING THE ACCOUNTING YEAR, THE INCOME - TAX OFFICER IS ENTITLED TO DRAW THE INFERENCE THAT THE RECEIPT ARE OF AN ASSESSABLE NATURE. THE CONCLUSION TO WHICH THE APPELLATE TRIBUNAL CAME APPEARS TO US TO BE AMPLY WARRANTED BY THE FACTS OF THE CASE. THERE IS NO GROUND FOR INTERFERING WITH THAT FINDING, AND THESE APPEALS ARE ACCORD INGLY DISMISSED WITH COSTS.' (EMPHASIS SUPPLIED) SECTION 68 RECOGNIZES THE AFORESAID LEGAL POSITION. THE VIEW TAKEN BY THE TRIBUNAL ON THE DUTY CAST ON THE ASSESSING OFFICER BY SECTION 68 IS CONTRARY TO THE LAW LAID DOWN BY THE SUPREME COURT IN THE JUDGMENT CITED ABOVE. EVEN IF ONE WERE TO HOLD, ALBEIT E RRONEOUSLY AND WITHOUT BEING AWARE I.T.A. NO.4648/MUM/2017 69 OF THE LEGAL POSITION ADUMBRATED ABOVE, THAT THE ASSESSING OFFICER IS BOUND TO SHOW THAT THE SOURCE OF THE UNACCOUNTED MONIES WAS THE COFFERS OF THE ASSESSEE, WE ARE INCLINED TO THINK THAT IN THE FACTS OF THE PRESENT CASE SUCH PROOF HAS BEEN BROUGHT OUT BY THE ASSESSING OFFICER. THE STATEMENTS OF MUKESH GUPTA AND RAJAN JASSAL, THE ENTRY PROVIDERS, EXPLAINING THEIR MODUS OPERANDI TO HELP ASSESSEE'S HAVING UNACCOUNTED MONIES CONVERT THE SAME INTO ACCOUNTED MONIES AFFORDS SUF FICIENT MATERIAL ON THE BASIS OF WHICH THE ASSESSING OFFICER CAN BE SAID TO HAVE DISCHARGED THE DUTY. THE STATEMENTS REFER TO THE PRACTICE OF TAKING CASH AND ISSUING CHEQUES IN THE GUISE OF SUBSCRIPTION TO SHARE CAPITAL, FOR A CONSIDERATION IN THE FORM OF COMMISSION. AS ALREADY POINTED OUT, NAMES OF SEVERAL COMPANIES WHICH FIGURED IN THE STATEMENTS GIVEN BY THE ABOVE PERSONS TO THE INVESTIGATION WING ALSO FIGURED AS SHARE - APPLICANTS SUBSCRIBING TO THE SHARES OF THE ASSESSEE - COMPANY. THESE CONSTITUTE MATERIA LS UPON WHICH ONE COULD REASONABLY COME TO THE CONCLUSION THAT THE MONIES EMANATED FROM THE COFFERS OF THE ASSESSEE - COMPANY. THE TRIBUNAL, APART FROM ADOPTING AN ERRONEOUS LEGAL APPROACH, ALSO FAILED TO KEEP IN VIEW THE MATERIAL THAT WAS RELIED UPON BY THE ASSESSING OFFICER. THE CIT (APPEALS) ALSO FELL INTO THE SAME ERROR. IF SUCH MATERIAL HAD BEEN KEPT IN VIEW, THE TRIBUNAL COULD NOT HAVE FAILED TO DRAW THE APPROPRIATE INFERENCE.'' 12. THE PRESENT CASE WOULD CLEARLY FALL IN THE CATEGORY WHERE THE ASSESSING OFFICER HAD NOT KEPT QUIET AND HAD MADE INQUIRIES AND QUERIED THE RESPONDENT - ASSESSEE TO EXAMINE THE ISSUE OF GENUINENESS OF THE TRANSACTIONS. THE TRIBUNAL UNFORTUNATELY DID NOT EXAMINE THE SAID ASPECT AND HAS IGNORED THE FOLLOWING FACTUAL POSITION: ( A ) THE SHAREHOLDER COMPANIES, 5 IN NUMBER, WERE ALL LOCATED AT A COMMON ADDRESSI.E. 13/34, WEA, FOURTH FLOOR, MAIN ARYA SAMAJ ROAD, KAROL BAGH, NEW DELHI. ( B ) THE TOTAL INVESTMENT MADE BY THESE COMPANIES WAS RS.1,51,00,000/ - , WHICH WAS A SUBSTANTIAL AMOUNT. ( C ) EVIDENCE AND MATERIAL ON BOGUS TRANSACTIONS FOUND DURING THE COURSE OF SEARCH OF TARUN GOYAL. EVIDENCE AND MATERIAL THAT THE COMPANIES WERE PROVIDING ACCOMMODATION ENTRIES TO BENEFICIARIES WAS NOT CONSIDERED. ( D ) THE FINDINGS RECORDED A S MENTIONED IN THE ASSESSMENT ORDER, WHICH READ AS UNDER: - '1. FROM THE FINDING OF SEARCH, IT IS EVIDENT AND UNDENIABLE THAT ALL THE COMPANIES INCLUDING THE ALLEGED SHAREHOLDERS I.T.A. NO.4648/MUM/2017 70 COMPANIES BELONG TO SH. TARUN GOYAL. THIS IS ENFORCED EVEN MORE FROM THE FOLLOWING: I . ALL THE COMPANIES ARE OPERATED FROM THE - OFFICE PREMISES OF SH. TARUN GOYAL. II . ALL THE DIRECTORS ARE EITHER HIS EMPLOYEES OR CLOSE RELATIVES. SH. TARUN GOYAL COULD NEVER PRODUCE THE DIRECTORS NOR FURNISH THEIR RESIDENTIAL ADDRESS. III . THE STATEMENT OF EMPLOYEES OF SH. TARUN GOYAL IS ON RECORD, WHEREBY THEY HAVE CLEARLY STATED THAT THEY SIGNED ON THE PAPERS PRODUCED BEFORE THEM BY SH TARUN GOYAL THEY DO NOT KNOW ABOUT THE BASIC DETAILS OF THE COMPANIES LIKE SHAREHOLDING PATTERNS, NATURE OF BUSINESS OF THESE COMPANIES ETC. IV . THE STATEMENT OF AUDITORS OF SH. TARUN GOYAL IS ON RECORD. THEY HAVE STATED TO HAVE NEVER MEET (SIC) THE DIRECTORS OF THE COMPANIES AND AUDITED THE ACCOUNTS ONLY ON THE DIRECTIONS OF SH TARUN GOYAL. AS PER THE STATEMENT OF AUDITORS, THE EMPLOYEES OF SH TARUN GOYAL WERE DIRECTORS OF THE COMPANIES RUN BY THEM, ALSO THEY COULD NOT ASCERTAIN THE SO CALLED SHARE CAPITAL SUBSCRIBED BY SH TARUN GOYAL AS DOCUMENTARY PROOF OF THE SAME WAS LACKING. V . DURING THE COURSE OF SEARCH, ALL THE PASSBOOKS, CHEQUE BOOKS, PAN CARDS ETC. WERE ALWAYS IN POSSESSION OF SH TARUN GOYAL. ON HIS DIRECTIONS ALL THE EMPLOYEES SIGNED ALL THE DOCUMENTS. VI . ALL THE BANK ACCOUNT OPENING FORMS APPEAR TO BE IN THE HANDWRITING OF SH TARUN GOYAL. VII . ALL THE BOOKS OF ACCOUNTS OF ALL THE COMPANIES HAVE BEEN RETRIEVED FROM THE COMPUTERS/LAPTOP OF SH TARUN GOYAL. VIII . SH TARUN GOYAL HAS GIVEN LETTERS FOR THE RELEASE OF BANK ACCOUNTS OF COMPANIES PUT UNDER RESTRAINTS AFTER SEARCH. NO SUCH APPLICATION WAS RECEIVED FROM SO CALLED DIRECTORS OF THE COMPANIES. IX . SH TARUN GOYAL APPEARS IN ALL THE SCRUTINY ASSESSMENTS AS WELL AS APPEALS OF HIS COMPANIES HIMSELF BEFORE VARIOUS INCOME' TAX AU THORITIES. FROM VERIFICATION CARRIED OUT IN RESPECTIVE WARDS/ CIRCLES WHERE THE ABOVE MENTIONED COMPANIES ARE ASSESSED, IT IS' EVIDENT THAT SH TARUN GOYAL IS APPEARING IN ALL THE INCOME TAX PROCEEDINGS ON BEHALF OF ALL THE COMPANIES. HE IS NOT CHARGING ANY FEES FOR APPEARING IN THESE CASES. I.T.A. NO.4648/MUM/2017 71 X . DURING THE POST SEARCH INVESTIGATION IT WAS REVEALED THAT BESIDES, AIDING AND ABETTING THE EVASION OF TAXES, SH TARUN GOYAL HAS BEEN INDULGING IN VIOLATION OTHER PROVISIONS OF THE LAW OF THE LAND. THIS MATTER HAS A LSO BEEN TAKEN UP BY REIC FOR MULTI - AGENCY PROBE.' ( E ) THE RESPONDENT - ASSESSEE DID NOT HAVE ANY BUSINESS INCOME IN THE YEAR ENDING 31ST MARCH, 2007 AND HAD INCOME FROM OTHER SOURCES OF RS.16.38 LAKHS IN THE YEAR ENDING 31ST MARCH, 2008. THE RESPONDENT - ASSESSEE HAD NOT INCURRED ANY EXPENDITURE IN THE YEAR ENDING 31ST MARCH, 2007 AND HAD INCURRED EXPENDITURE OF RS.12.17 LAKHS IN THE YEAR ENDING 31ST MARCH, 2008. ( F ) SHARES OF FACE VALUE OF RS.10/ - EACH WERE ISSUED AT A PREMIUM OF RS.40/ - (TO TAL RS.50/ - ). ( G ) THE RESPONDENT - ASSESSEE HAD FAILED TO PRODUCE DIRECTORS OF THE COMPANIES, THOUGH THEY HAD FILED CONFIRMATIONS, AND THEREFORE, WERE IN TOUCH WITH THE RESPONDENT - ASSESSEE. THE RESPONDENT - ASSESSEE HAD ALSO FAILED TO PRODUCE THE DETAILS AND PARTICULARS WITH REGARD TO ISSUE OF SHARES, NOTICES ETC. TO THE SHAREHOLDERS OF AGM/EGM ETC. 13 . IN VIEW OF THE AFORESAID FACTUAL POSITION, WE HAVE NO HESITATION IN HOLDING THAT THE TRANSACTIONS IN QUESTION WERE CLEARLY SHAM AND MAKE - BELIEVE WITH EXCELLENT PAPER WORK TO CAMOUFLAGE THEIR BOGUS NATURE. ACCORDINGLY, THE ORDER PASSED BY THE TRIBUNAL IS C LEARLY SUPERFICIAL AND ADOPTS A PERFUNCTORY APPROACH AND IGNORES EVIDENCE AND MATERIAL REFERRED TO IN THE ASSESSMENT ORDER. THE REASONING GIVEN IS CONTRARY TO HUMAN PROBABILITIES, FOR IN THE NORMAL COURSE OF CONDUCT, NO ONE WILL MAKE INVESTMENT OF SUCH HUG E AMOUNTS WITHOUT BEING CONCERNED ABOUT THE RETURN AND SAFETY OF SUCH INVESTMENT. 14. ACCORDINGLY, THE APPEAL IS ALLOWED. THE SUBSTANTIAL QUESTION OF LAW FRAMED ABOVE IS ACCORDINGLY ANSWERED IN FAVOUR OF THE APPELLANT - REVENUE AND AGAINST THE RESPONDENT - ASS ESSEE. THERE WOULD BE NO ORDER AS TO COSTS. IT IS ALSO PERTINENT TO REFER HERE THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ELEGANZA JEWELLERY LIMITED V. CIT REPORTED IN (2014) 364 ITR 232(BOM.), WHEREIN HONBLE BOMBAY HIGH COURT UPHELD VALIDITY OF REOPENING OF CONCLUDED ASSESSMENT U/S 147 OF THE 1961 ACT BY HOLDING AS UNDER: I.T.A. NO.4648/MUM/2017 72 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT, IN THIS CASE, THERE HAS BEEN A FULL AND TRUE DISCLOSURE OF ALL RELEVANT MATERIAL NECESSARY BY THE PETITIONER FOR THE PURPOSE OF ASSESSMENT. HOWEVER, AS THE ASSESSMENT SOUGHT TO BE RE OPENED I.E., ASST. YR. 2008 - 09 BY A NOTICE DT. 25TH MARCH, 2013 IS LESS THAN 4 YEARS FROM THE END OF THE ASSESSMENT YEAR, THE JURISDICTIONAL REQUIREMENT OF THERE BEING A FAILURE TO MAKE FULL AND TRUE DISCLOSURE WOULD NOT BE APPLICABLE. IN SUCH CASES OF LES S THAN 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR EVEN IF THERE HAS BEEN NO FAILURE TO MAKE FULL AND TRUE DISCLOSURE OF ALL RELEVANT MATERIAL NECESSARY FOR ASSESSMENT, THERE IS NO BAR/PROHIBITION FOR ISSUING A NOTICE UNDER S. 147/148 OF THE ACT F OR REOPENING OF AN ASSESSMENT. 11. THEREFORE, IN THIS PARTICULAR CASE THE ONLY THING TO BE EXAMINED IS WHETHER OR NOT THE AO HAD REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WHILE ISSUING THE IMPUGNED NOTICE DT. 25TH MARCH, 2013. IT IS WELL - SETTLED THAT THE REASON TO BELIEVE CANNOT BE FOUNDED MERELY ON CHANGE OF OPINION, IN THIS CASE THE GROUNDS/REASONS RECORDED FOR REOPENING THE ASSESSMENT WERE NOT THE ISSUES WHICH WERE CONSIDERED BY THE AO WHILE PASSING THE ASSESSMENT ORDER DT. 1 8TH MAY, 2010 IN RESPECT OF ASST YR. 2008 - 09. THIS IS EVIDENT FROM THE FACT THAT DURING THE ASSESSMENT PROCEEDING NO QUERY WAS RAISED BY THE AO WITH REGARD TO THE GROUNDS /REASONS NOW RECORDED FOR REOPENING THE ASSESSMENT UNDER S. 147/148 OF THE ACT. THERE FORE, THERE WAS NO OCCASION FOR THE AO TO APPLY HIS MIND TO THE TANGIBLE MATERIAL TO FORM ANY OPINION WITH REGARD TO IT DURING THE ORIGINAL ASSESSMENT PROCEEDING. IT HAS BEEN HELD BY THIS COURT IN EXPORT CREDIT GUARANTEE CORPN. OF INDIA LTD. V. ADDL. CIT [2013] 350 ITR 651/30 TAXMANN.COM 211 THAT REOPENING OF AN ASSESSMENT IS PERMISSIBLE WHEN THE ORIGINAL ASSESSMENT ORDER PASSED UNDER S. 143(3) OF THE ACT IS SILENT IN RESP ECT OF THE ISSUE/POINT ON WHICH REASSESSMENT NOTICE IS ISSUED. FURTHER, NO QUERY WITH REGARD, TO THE ABOVE ISSUE HAVING BEEN MADE DURING THE ASSESSMENT PROCEEDING WOULD ALSO INDICATE, ABSENCE OF APPLICATION OF MIND THE TANGIBLE MATERIAL. 12. IN THIS CASE N ON - RECEIPT OF CONVERTIBLE FOREIGN EXCHANGE WITHIN A. PERIOD OF 6 MONTHS FROM THE END OF THE ASSESSMENT YEAR WAS NOT THE SUBJECT - MATTER OF CONSIDERATION NOR THE FACT THAT THE PETITIONER HAD DECLARED ITS BOOK PROFITS AFTER REDUCING THE AMOUNT OF DEDUCTION UN DER S. 10AA OF THE ACT DURING THE ORIGINAL PROCEEDINGS. BOTH THESE ISSUES WERE NOT THE SUBJECT - MATTER OF CONSIDERATION DURING THE ORIGINAL ASSESSMENT PROCEEDINGS LEADING TO ASSESSMENT ORDER DT. 18TH MAY, 2010. IN THE ABOVE VIEW, IT IS PERMISSIBLE FOR THE A O TO HAVE A REASONABLE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND THE SAME DOES NOT STEM FROM A CHANGE OF OPINION.. I.T.A. NO.4648/MUM/2017 73 13. THE PETITIONER MAY HAVE A GOOD CASE ON MERITS. HOWEVER, THE SAME WOULD BE CONSIDERED BY THE AO DURING THE REASSESSM ENT PROCEEDING AND IT IS LIKELY THAT ON THE BASIS OF THE EVIDENCE PRODUCED BY THE PETITIONER THE REVENUE MAY COME TO THE SAME CONCLUSION THAT IT HAD COME IN THE EARLIER PROCEEDING LEADING TO ASSESSMENT ORDER. IT IS TRITE LAW THAT AT THIS STAGE ONLY A PRIMA FACIE VIEW OF THE AO IS NECESSARY TO ISSUE NOTICES AND NOT A. CAST IRON CASE OF ESCAPEMENT OF INCOME. THEREFORE, NO FAULT CAN BE FOUND WITH THE IMPUGNED NOTICE DT. 25TH MARCH, 2013 ISSUED UNDER S. 148 OF THE ACT. 14. IN THE ABOVE CIRCUMSTANCES, WE SEE NO REASON TO INTERFERE WITH THE IMPUGNED NOTICE DT. 25TH_MAMH_2013. ACCORDINGLY, PETITION IS DISMISSED WITH NO ORDER AS TO COSTS. THERE ARE COMPANIES WHICH ARE WIDELY HELD COMPANIES IN WHICH PUBLIC ARE SUBSTANTIALLY INTERESTED WHICH COMES OUT WITH AN INITIA L PUBLIC OFFERS(IPO) WHEREIN SHARES ARE TO BE LISTED ON STOCK EXCHANGES AND WIDELY TRADED ON STOCK EXCHANGES , WHEREIN MEMBERS OF PUBLIC MAKE SUBSCRIPTIONS IN PURSUANCE TO THE PROSPECTUS ISSUED BY THE COMPANY. ISSUE OF SHARES IN THESE COMPANIES TO GENERAL PUBLIC IN INDIA AS WELL ABROAD ARE APPROVED, REGULATED AND MONITORED BY VARIOUS AUTHORITIES WHO ARE ENGAGED IN REGULATING AND MANAGING SECURITIES AND MONEY MARKET SUCH AS SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI), STOCK EXCHANGES, GOVERNMENT OF INDIA THROUGH MINISTRY OF CORPORATE AFFAIRS, MINISTRY OF FINANCE ETC.. THOSE MEMBERS OF PUBLIC WHO MAKE SUBSCRIPTION IN PUBLIC ISSUES OF SECURITIES ARE WIDELY SCATTERED AS ANY PERSON ELIGIBLE TO APPLY AS PER THE CONDITIONS PR ESCRIBED IN THE P ROSPECTUS CAN PLACE AN APPLICATION SUBSCRIBING TO THE SHARES OF THE COMPANY BY DEPOSITING DULY FILLED IN APPLICATION ALONG WITH APPLICATION MONEY WITH THE DESIGNATED AUTHORIZED RECIPIENTS OF THE COMPANY STIPULATED IN THE PROSPECTUS SUCH AS BANKERS, BROKERS, UNDER - W RITERS, MERCHANT BANKERS, COMPANY OFFICES ETC. THESE SHAREHOLDERS WHO ARE MEMBER OF PUBLIC ARE UN - KNOWN PERSONS TO THE COMPANY ISSUING SHARES AND THE COMPANY ISSUING SHARES HAVE NO CONTROL/MECHANISM TO VERIFY THEIR CREDITWORTHINESS ETC. AND THE BURDEN OF P ROOF IN SUCH CASES IS DIFFERENT, BUT THERE IS ANOTHER CLASS OF COMPANIES WHICH ARE I.T.A. NO.4648/MUM/2017 74 CLOSELY HELD PRIVATE COMPANIES IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED WHICH ARE MOSTLY FAMILY CONTROLLED CLOSELY HELD PRIVATE COMPANIES AND THESE COMPANIES RAISE THEIR SHARE CAPITAL FROM THEIR FAMILY MEMBERS, RELATIVES AND CLOSE FRIENDS AND IN THESE CLASS OF COMPANIES SINCE SHARE CAPITAL IS RECEIVED FROM THE CLOSE KNIT CIRCLES WHO ARE MOSTLY KNOWN TO THE COMPANY/PROMOTERS, THE ONUS AS REQUIRED U/S. 68 OF THE ACT I S VERY HEAVY TO PROVE IDENTITY AND CAPACITY OF THE SHAREHOLDERS AND GENUINENESS OF THE TRANSACTION AS THE SPECIAL FACTS AS TO SUBSCRIBERS ARE WITHIN THE KNOWLEDGE OF THE TAX - PAYER IN SUCH CASES. THE ONUS OF WIDELY HELD COMPANY COULD BE DISCHARGED ON THE SU BMISSIONS OF ALL THE INFORMATION CONTAINED IN THE STATUTORY SHARE APPLICATION DOCUMENTS AND ON NOT BEING SATISFIED THE AO MAY PROCEED AGAINST THE SHAREHOLDERS U/S. 69 OF THE ACT INSTEAD O F PROCEEDING AGAINST THE COMPANY , BUT IN THE CLOSELY HELD COMPANIES A S IN THE INSTANT CASE BEFORE US THE SHARE CAPITAL ARE MOSTLY RAISED FROM PROMOTERS/DIRECTORS AND FROM SOME PERSONS WHO ARE WITHIN THE KNOWLEDGE OF THE ASSESSEE AND IN SUCH SITUATION THE ASSESSEE IS EXPECTED TO KNOW THE SHARE SUBSCRIBERS AND THE BURDEN IS VERY HEAVY ON THE ASSESSEE TO SATISFY CUMULATIVELY THE INGREDIENTS OF SECTION 68 OF THE ACT AS TO IDENTITY AND ESTABLISH THE CREDIT WORTHINESS OF THE CREDITORS AND GENUINENESS OF THE TRANSACTION TO THE SATISFACTION OF THE AO, OTHERWISE THE AO SHALL BE FRE E TO PROCEED AGAINST THE ASSESSEE COMPANY AND MAKE ADDITIONS U/S. 68 OF THE ACT AS UNEXPLAINED CASH CREDIT. THE USE OF THE WORD 'ANY SUM FOUND CREDITED IN THE BOOKS' IN SECTION 68 INDICATES THAT IT IS WIDELY WORDED AND THE AO CAN MAKE ENQUIRIES AS TO THE N ATURE AND SOURCE THEREOF. THE AO CAN GO TO ENQUIRE/INVESTIGATE INTO TRUTHFULNESS OF THE ASSERTION OF THE ASSESSEE REGARDING THE NATURE AND THE SOURCE OF THE CREDIT IN ITS BOOKS OF ACCOUNTS AND IN CASE THE AO IS NOT SATISFIED WITH THE EXPLANATION OF THE ASS ESSEE WITH RESPECT TO ESTABLISHING IDENTITY AND CREDIT WORTHINESS OF THE CREDITOR AND THE GENUINENESS OF THE TRANSACTIONS, THE AO IS EMPOWERED TO MAKE ADDITIONS TO THE INCOME OF THE ASSESSEE U/S. 68 OF THE ACT AS AN UNEXPLAINED CREDIT IN THE HANDS OF THE I.T.A. NO.4648/MUM/2017 75 AS SESSEE COMPANY RAISING THE SHARE CAPITAL BECAUSE THE AO IS BOTH AN INVESTIGATOR AND ADJUDICATOR. IN OUR CONSIDERED VIEW, MERELY SUBMISSION OF THE NAME AND ADDRESS OF THE SHARE SUBSCRIBER, BALANCE SHEET OF AFFAIRS OF THE SHARE SUBSCRIBER AND BANK STATEMENT OF THE SHARE SUBSCRIBERS IS NOT SUFFICIENT AS THE AO IS TO BE SATISFIED AS TO TO THEIR IDENTITY AND CREDITWORTHINESS AS WELL AS TO THE GENUINENESS OF THE TRANSACTION ENTERED INTO. AN ATTEMPT HAS BEEN MADE BY THE LEARNED COUNSEL OF THE ASSESSEE TO HAIR - SPLI T THE ORDER PASSED BY THE AO DISPOSING OBJECTIONS TO CONTEND THAT IN SOME PLACE IT IS WRITTEN IN THE SAID ORDER DATED 20.03.2015 THAT THE ASSESSMENT WAS REOPENED BASED ON THE INFORMATION RECEIVED THAT THE ASSESSEE HAS MADE SOME BOGUS PURCHASES. THIS COULD BE DUE TO SOME ERROR IN TYPING DUE TO COPYING OF THE MATTER FROM SOME OTHER ORDER BUT IS NOT SUFFICIENT TO ERASE THE ENTIRE REASSESSMENT PROCEEDINGS AND SUCH CONTENTIONS STOOD REJECTED., KEEPING IN VIEW PROVISIONS OF SECTION 292B OF THE 1961 ACT. THUS, KEEPING IN VIEW THE FACTUAL MATRIX OF THE CASE, THE AFORESAID INFORMATION RECEIVED BY THE AO FROM LEARNED CCIT WHICH WAS BASED ON INTELLIGENCE FORM DGIT(INTELLIGENCE AND CRIMINAL INVESTIGATION) ABOUT THE ASSESSEE WHICH IS A NEWLY INCORPORATED CLOSELY HELD PRIVATE COMPANY RAISING HUGE SHARE PREMIUM ON THE EQUITY SHARES ISSUED BY IT WITHIN SHORT SPAN OF ITS INCORPORATION WITHOUT HAVING ANY ASSET BASE/BUSINESS IN HAND , IN OUR CONSIDERED VIEW , DID GIVE RISE TO REASONS TO BELIEVE AND HAVING A LIVE LINK WITH FORMATION OF BELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT, MORE - SO ORIGINAL ASSESSMENT WAS NOT FRAMED U/S 143(3) AND ONLY RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE 1961 ACT AND THE RE - OPENING WAS SOUGHT TO BE DONE WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. IT IS UNDISPUTED THAT FIRST PROVISO TO SECTION 147 OF THE 1961 ACT IS NOT APPLICABLE AND IT IS IMMATERIAL WHETHER THE ASSESSEE HAS MADE A COMPLETE AND TRUE DISCLOSURE IN THE RETURN OF INCOME FILED WITH REVENUE. AS WE HAVE SE EN IT IS TIME AND AGAIN ADMITTED BY THE HONBLE I.T.A. NO.4648/MUM/2017 76 COURTS THAT THERE HAS BEEN A LARGE NUMBER OF CASES COMING TO COURTS WHERE IN THE TAX - PAYERS HAVE INTRODUCED THEIR ILL - GOTTEN MONEY IN THE FORM OF SHARE CAPITAL, SHARE APPLICATION MONEY, SHARE PREMIUM , DEPOSIT S , LOANS AND ADVANCES IN THE SHELL COMPANIES CREATED BY THEM THROUGH CIRCUITOUS ROUTES VIA MONEY LAUNDERING. THE REFERENCE IS DRAWN TO OBSERVATION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. D. K. GARG REPORTED IN (2018) 404 ITR 757(DELHI), WHEREIN HONBLE DELHI HIGH COURT OBSERVED AS UNDER: 13. THERE HAVE BEEN NUMEROUS CASES BEFORE THE AO, CIT (A), THE ITAT AND FOR THAT MATTER EVEN BEFORE THIS COURT, WHERE THE QUESTION INVOLVED CONCERNS THE TREATMENT OF 'ACCOMMODATION ENTRIES'. BASICALLY, WHAT AN A CCOMMODATION ENTRY PROVIDER DOES IS TO ACCEPT CASH FROM AN ASSESSEE AND ARRANGES TO HAVE A CHEQUE ISSUED FROM HIS OWN ACCOUNT OR SOME OTHER ACCOUNT, USUALLY OF 'PAPER' OR FAKE ENTITIES, TO MAKE IT APPEAR TO BE A LOAN OR AN INVESTMENT IN SHARE CAPITAL. THE ACCOMMODATION ENTRY PROVIDER USUALLY CHARGES A COMMISSION WHICH IS DEDUCTED UPFRONT. WHERE THE ASSESSEE IS UNABLE TO EXPLAIN THE SOURCE OF SUCH CREDIT IN HIS ACCOUNT - I.E. BY DEMONSTRATING THE IDENTITY OF THE PROVIDER OF THE CREDIT, THE CREDITWORTHINESS O F SUCH ENTITY, AND THE GENUINENESS OF THE TRANSACTION - THE CREDIT ENTRY IS TREATED AS UNEXPLAINED AND THE INCOME IS TREATED UNDER SECTION 68 OF THE ACT AS THE INCOME OF THE ASSESSEE. IT IS ALSO BEEN OBSERVED THAT IN THESE TYPES OF CASES OF ACCOMMODATION ENTRIES , THE PAPER WORK IS PERFECT AS OBSERVED BY HONBLE DELHI HIGH COURT IN THE CASE OF PR. CIT V. NDR PROMOTERS PRIVATE LIMITED REPORTED IN (2019) 410 ITR 379(DELHI) , WHEREIN HONBLE COURT OBSERVED AS UNDER: 11. ISSUE OF BOGUS SHARE CAPITAL IN THE FORM OF ACCOMMODATION ENTRIES HAS BEEN SUBJECT MATTER OF SEVERAL DECISIONS OF THIS COURT ........ 12.**** 13. IN VIEW OF THE AFORESAID FACTUAL POSITION, WE HAVE NO HESITATION IN HOLDING THAT THE TRANSACTIONS IN QUESTIO N WERE CLEARLY SHAM AND MAKE - BELIEVE WITH EXCELLENT PAPER WORK TO CAMOUFLAGE THEIR BOGUS I.T.A. NO.4648/MUM/2017 77 NATURE. ACCORDINGLY, THE ORDER PASSED BY THE TRIBUNAL IS CLEARLY SUPERFICIAL AND ADOPTS A PERFUNCTORY APPROACH AND IGNORES EVIDENCE AND MATERIAL REFERRED TO IN THE ASS ESSMENT ORDER. THE REASONING GIVEN IS CONTRARY TO HUMAN PROBABILITIES, FOR IN THE NORMAL COURSE OF CONDUCT, NO ONE WILL MAKE INVESTMENT OF SUCH HUGE AMOUNTS WITHOUT BEING CONCERNED ABOUT THE RETURN AND SAFETY OF SUCH INVESTMENT. THUS , IT IS AN HARSH RE ALITY THAT INDIA IS FACING A MENACE OF PARALLEL ECONOMY WHICH THE COURTS CAN NOT SHUT THEIR EYES TO THESE REALITIES PLAGUING THE INDIAN ECONOMY AND DESTROYING THE ECONOMIC FABRIC OF INDIA . IT IS IN THIS DIRECTIONS TO CONTROL THESE MENACE , MEASURES LIKE PREVENTION OF MONEY LAUNDERING ACT , BENAMI TRANSACTIONS (PROHIBITION) ACT ,1988 AND PROHIBITION OF BENAMI PROPERTY TRANSACTIONS ACT,1988 WERE BROUGHT INTO STATUTE BY PARLIAMENT . THE DRASTIC MEASURES LIKE DEMONETISATION OF CURRENCY NOTES OF RS. 500 AND RS. 1000 TAKEN BY G OVERNMENT O F I NDIA ARE THE STEPS TO CURB THESE MENACE ONLY . REFERENCE IS DRAWN TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ACIT V. RAJESH JHAVERI STOCK BROKERS PRIVATE LIMITED REPORTED IN (2007) 291 ITR 500(SC), WHEREIN HONBLE SUPREME COURT UPHELD REOPENING IN THE CASE WHEREIN ORIGINALLY RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE 1961 ACT, BY HOLDING AS UNDER: 9. IN ORDER TO CONSIDER THE RIVAL SUBMISSIONS, IT IS NECESSARY TO TAKE NOTE OF SECTION 143(1) (AS IT STOOD BEFO RE AND AFTER AMENDMENT WITH EFFECT FROM 1 - 6 - 1999), 147 AND 148. THE PROVISIONS READ AS FOLLOWS : AFTER AMENDMENT : '143. ASSESSMENT. (1) WHERE A RETURN HAS BEEN MADE UNDER SECTION 139, OR IN RESPONSE TO A NOTICE UNDER SUB - SECTION (1) OF SECTION 142, ( I ) IF ANY TAX OR INTEREST IS FOUND DUE ON THE BASIS OF SUCH RETURN, AFTER ADJUSTMENT OF ANY TAX DEDUCTED AT SOURCE, ANY ADVANCE TAX PAID, ANY TAX PAID ON SELF - ASSESSMENT AND ANY AMOUNT PAID OTHERWISE BY WAY OF TAX OR INTEREST, THEN, WITHOUT PREJUDICE TO THE PROVISIONS OF SUB - SECTION (2), AN INTIMATION SHALL BE SENT TO THE ASSESSEE SPECIFYING I.T.A. NO.4648/MUM/2017 78 THE SUM SO PAYABLE, AND SUCH INTIMATION SHALL BE DEEMED TO BE A NOTICE OF DEMAND ISSUED UNDER SECTION 156 AND ALL THE PROVISIONS OF THIS ACT SHALL APPLY ACCORDINGLY; AND ( II ) IF ANY REFUND IS DUE ON THE BASIS OF SUCH RETURN, IT SHALL BE GRANTED TO THE ASSESSEE AND AN INTIMATION TO THIS EFFECT SHALL BE SENT TO THE ASSESSEE : PROVIDED THAT EXCEPT AS OTHERWISE PROVIDED IN THIS SUB - SECTION, THE ACKNOWLEDGEMENT OF THE RETU RN SHALL BE DEEMED TO BE AN INTIMATION UNDER THIS SUB - SECTION WHERE EITHER NO SUM IF PAYABLE BY THE ASSESSEE OR NO REFUND IS DUE TO HIM; PROVIDED FURTHER THAT NO INTIMATION UNDER THIS SUB - SECTION SHALL BE SENT AFTER THE EXPIRY OF TWO YEARS FROM THE END OF THE ASSESSMENT YEAR IN WHICH THE INCOME WAS FIRST ASSESSABLE....' BEFORE AMENDMENT : 10. SECTION 143(1) AS IT STOOD AT THE POINT OF TIME WHEN THE INTIMATION WAS GIVEN UNDER THE SAID PROVISION, SO FAR AS RELEVANT, READ AS FOLLOWS : '143. (1)( A ) WHERE A RETURN HAS BEEN MADE UNDER SECTION 139, OR IN RESPONSE TO A NOTICE UNDER SUB - SECTION (1) OF SECTION 142, ( I ) IF ANY TAX OR INTEREST IS FOUND DUE ON THE BASIS OF SUCH RETURN, AFTER ADJUSTMENT OF ANY TAX DEDUCTED AT SOURCE, ANY ADVANCE TAX PAID AND ANY AM OUNT PAID OTHERWISE BY WAY OF TAX OR INTEREST, THEN, WITHOUT PREJUDICE TO THE PROVISIONS OF SUB - SECTION (2), AN INTIMATION SHALL BE SENT TO THE ASSESSEE SPECIFYING THE SUM SO PAYABLE, AND SUCH INTIMATION SHALL BE DEEMED TO BE A NOTICE OF DEMAND ISSUED UNDE R SECTION 156 AND ALL THE PROVISIONS OF THIS ACT SHALL APPLY ACCORDINGLY; AND ( II ) IF ANY REFUND IS DUE ON THE BASIS OF SUCH RETURN, IT SHALL BE GRANTED TO THE ASSESSEE : PROVIDED THAT IN COMPUTING THE TAX OR INTEREST PAYABLE BY, OR REFUNDABLE TO, THE ASSESSEE, THE FOLLOWING ADJUSTMENTS SHALL BE MADE IN THE INCOME OR LOSS DECLARED IN THE RETURN, NAMELY: ( I ) ANY ARITHMETICAL ERRORS IN THE RETURN, ACCOUNTS OR DOCUMENTS ACCOMPANYING IT SHALL BE RECTIFIED; ( II ) ANY LOSS CARRIED FORWARD, DEDUCTION, ALL OWANCE OR RELIEF, WHICH, ON THE BASIS OF THE INFORMATION AVAILABLE IN SUCH RETURN, ACCOUNTS OR DOCUMENTS, IF PRIMA FACIE ADMISSIBLE BUT WHICH IS NOT CLAIMED IN THE RETURN, SHALL BE ALLOWED; ( III ) ANY LOSS CARRIED FORWARD, DEDUCTION, ALLOWANCE OR RELIEF CLAIMED IN THE RETURN, WHICH, ON THE BASIS OF THE INFORMATION AVAILABLE IN SUCH I.T.A. NO.4648/MUM/2017 79 RETURN, ACCOUNTS OR DOCUMENTS, IS PRIMA FACIE INADMISSIBLE, SHALL BE DISALLOWED : PROVIDED FURTHER THAT AN INTIMATION SHALL BE SENT TO THE ASSESSEE WHETHER OR NOT ANY ADJUSTMENT HAS BEEN MADE UNDER THE FIRST PROVISO AND NOTWITHSTANDING THAT NO TAX OR INTEREST IS DUE FROM HIM : PROVIDED ALSO THAT AN INTIMATION UNDER THIS CLAUSE SHALL NOT BE SENT AFTER THE EXPIRY OF TWO YEARS FROM THE END OF THE ASSESSMENT YEAR IN WHICH T HE INCOME WAS FIRST ASSESSABLE. 147. INCOME ESCAPING ASSESSMENT. IF THE ASSESSING OFFICER, HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR A NY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR) : PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB - SECTION (3) OF SECTION 143 OR THIS SE CTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YE AR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB - SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. EXPLANATION 1. PRODUCTION BEFORE THE ASSESSING OFFICER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD, WITH DUE DILIGENCE, HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL NOT NECESSARILY AMOUNT TO DISCLOS URE WITHIN THE MEANING OF THE FOREGOING PROVISO. EXPLANATION 2. FOR THE PURPOSES OF THIS SECTION, THE FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, NAMELY : ( A ) WHERE NO RETURN OF INCOME HAS BEEN FURNIS HED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INCOME OF ANY OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DURING THE PREVIOUS YEAR EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARGE - ABLE TO INCOME - TAX; ( B ) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO I.T.A. NO.4648/MUM/2017 80 ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN; ( C ) WHERE AN ASSESSMENT HAS BEEN MADE, BUT ( I ) INCOME CHARGEABLE TO TAX HAS BEEN UNDER - ASSESSED; OR ( II ) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW RATE; OR ( III ) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THIS ACT; OR ( IV ) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED. 148. ISSUE OF NOTICE WHERE INCOME HAS ESCAPED ASSESSMENT. (1) BEFORE MAKING THE ASSESSMENT, REASSESSMENT OR RECOMPUTATION UNDER SECTION 147, THE ASSESSING OFFICER SHALL SERVE ON THE ASSESSEE A NOTICE CONTAINING ALL OR ANY OF THE REQUIREMENTS WHICH MAY BE INCLUDED IN A NOTICE UNDER SUB - SECTION (2) OF SECTION 139; AND THE PROVISIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF THE NOT ICE WERE A NOTICE ISSUED UNDER THAT SUB - SECTION. (2) THE ASSESSING OFFICER SHALL, BEFORE ISSUING ANY NOTICE UNDER THIS SECTION, RECORD HIS REASONS FOR DOING SO.' 11. IT IS TO BE NOTED THAT SUBSTANTIAL CHANGES HAVE BEEN MADE TO SECTION 143(1) WITH EFFECT FR OM JUNE 1, 1999. UP TO MARCH 31, 1989, AFTER A RETURN OF INCOME WAS FILED THE ASSESSING OFFICER COULD MAKE AN ASSESSMENT UNDER SECTION 143(1) WITHOUT REQUIRING THE PRESENCE OF THE ASSESSEE OR THE PRODUCTION BY HIM OF ANY EVIDENCE IN SUPPORT OF THE RETURN. WHERE THE ASSESSEE OBJECTED TO SUCH AN ASSESSMENT OR WHERE THE OFFICER WAS OF THE OPINION THAT THE ASSESSMENT WAS INCORRECT OR INCOMPLETE OR THE OFFICER DID NOT COMPLETE THE ASSESSMENT UNDER SECTION 143(1), BUT WANTED TO MAKE AN INQUIRY, A NOTICE UNDER SEC TION 143(2) WAS REQUIRED TO BE ISSUED TO THE ASSESSEE REQUIRING HIM TO PRODUCE EVIDENCE IN SUPPORT OF HIS RETURN. AFTER CONSIDERING THE MATERIAL AND EVIDENCE PRODUCED AND AFTER MAKING NECES - SARY INQUIRIES, THE OFFICER HAD POWER TO MAKE ASSESSMENT UNDER SEC TION 143(3). WITH EFFECT FROM 1 - 4 - 1989, THE PROVISIONS UNDERWENT SUBSTANTIAL AND MATERIAL CHANGES . A NEW SCHEME WAS INTRODUCED AND THE NEW SUBSTITUTED SECTION 143(1) PRIOR TO THE SUBSEQUENT SUBSTITUTION WITH EFFECT FROM 1 - 6 - 1999, IN CLAUSE ( A ), A PROVISION WAS MADE THAT WHERE A RETURN WAS FILED UNDER SECTION 139 OR IN RESPONSE TO A NOTICE UNDER SECTION 142(1), AND ANY TAX OR REFUND WAS FOUND DUE ON THE BASIS OF SUCH RETURN AFTER ADJUSTMENT OF TAX DEDUCTED AT SOURCE, ANY ADVANCE TAX OR ANY AMOUNT PAID OTHERW ISE BY WAY OF TAX OR INTEREST, AN INTIMATION WAS TO BE SENT WITHOUT PREJUDICE TO THE PROVISIONS OF SECTION 143(2) TO THE ASSESSEE SPECIFYING THE SUM SO PAYABLE AND SUCH INTIMATION WAS DEEMED TO BE I.T.A. NO.4648/MUM/2017 81 A NOTICE OF DEMAND ISSUED UNDER SECTION 156. THE FIRST PROV ISO TO SECTION 143(1)( A ) ALLOWED THE DEPARTMENT TO MAKE CERTAIN ADJUSTMENTS IN THE INCOME OR LOSS DECLARED IN THE RETURN. THEY WERE AS FOLLOWS : ( A ) AN ARITHMETICAL ERROR IN THE RETURN, ACCOUNTS AND DOCUMENTS ACCOMPANYING IT WERE TO BE RECTIFIED; ( B ) ANY LOSS CARRIED FORWARD, DEDUCTION, ALLOWANCE OR RELIEF WHICH ON THE BASIS OF THE INFORMATION AVAILABLE IN SUCH RETURN, ACCOUNTS OR DOCUMENTS, WAS PRIMA FACIE ADMISSIBLE, BUT WHICH WAS NOT CLAIMED IN THE RETURN WAS TO BE ALLOWED; ( C ) ANY LOSS CARRIED FORWARD, RELIEF CLAIMED IN THE RETURN WHICH ON THE BASIS OF THE INFORMATION AS AVAILABLE IN SUCH RETURNS ACCOUNTS OR DOCUMENTS WERE PRIMA FACIE INADMISSIBLE WAS TO BE DISALLOWED. 12. WHAT WERE PERMISSIBLE UNDER THE FIRST PROVISO TO SECTIO N 143(1)( A ) TO BE ADJUSTED WERE, ( I ) ONLY APPARENT ARITHMETICAL ERRORS IN THE RETURN, ACCOUNTS OR DOCUMENTS ACCOMPANYING THE RETURN, ( II ) LOSS CARRIED FORWARD, DEDUCTION ALLOWANCE OR RELIEF, WHICH WAS PRIMA FACIE ADMISSIBLE ON THE BASIS OF INFORMATION AVAI LABLE IN THE RETURN BUT NOT CLAIMED IN THE RETURN AND SIMILARLY ( III ) THOSE CLAIMS WHICH WERE ON THE BASIS OF THE INFORMATION AVAILABLE IN THE RETURN, PRIMA FACIE INADMISSIBLE, WERE TO BE RECTIFIED/ALLOWED/DISALLOWED. WHAT WAS PERMISSIBLE WAS CORRECTION OF ERRORS APPARENT ON THE BASIS OF THE DOCUMENTS ACCOMPANYING THE RETURN. THE ASSESSING OFFICER HAD NO AUTHORITY TO MAKE ADJUSTMENTS OR ADJUDICATE UPON ANY DEBATABLE ISSUES. IN OTHER WORDS, THE ASSESSING OFFICER HAD NO POWER TO GO BEHIND THE RETURN, ACCOUNTS OR DOCUMENTS, EITHER IN ALLOWING OR IN DISALLOWING DEDUCTIONS, ALLOWANCE OR RELIEF. 13. ONE THING FURTHER TO BE NOTICED IS THAT INTIMATION UNDER SECTION 143(1)( A ) IS GIVEN WITHOUT PREJUDICE TO THE PROVISIONS OF SECTION 143(2). THOUGH TECHNICALLY THE INTIM ATION ISSUED WAS DEEMED TO BE A DEMAND NOTICE ISSUED UNDER SECTION 156, THAT DID NOT PER SE PRECLUDE THE RIGHT OF THE ASSESSING OFFICER TO PROCEED UNDER SECTION 143(2). THAT RIGHT IS PRESERVED AND IS NOT TAKEN AWAY. BETWEEN THE PERIOD FROM 1 - 4 - 1989 TO 31 - 3 - 1998, THE SECOND PROVISO TO SECTION 143(1)( A ), REQUIRED THAT WHERE ADJUSTMENTS WERE MADE UNDER THE FIRST PROVISO TO SECTION 143(1)( A ), AN INTIMATION HAD TO BE SENT TO THE ASSESSEE NOTWITHSTANDING THAT NO TAX OR REFUND WAS DUE FROM HIM AFTER MAKING SUCH ADJUSTMENTS. WITH EFFECT FROM 1 - 4 - 1998, THE SECOND PROVISO TO SECTION 143(1)( A ) WAS SUBSTITUTED BY THE FINANCE ACT, 1997, WHICH WAS OPERATIVE TILL 1 - 6 - 1999. THE REQUIREMENT WAS THAT AN INTIMATION WAS TO BE SENT TO THE ASSESSEE WHETHER OR NOT ANY ADJUSTMENT HAD BEEN MADE UNDER THE FIRST PROVISO TO SECTION 143(1) AND NOTWITHSTANDING THAT NO TAX OR INTEREST WAS FOUND DUE FROM THE ASSESSEE CONCERNED. BETWEEN 1 - 4 - 1998 AND 31 - 5 - 1999, SENDING OF AN INTIMATION UNDER SECTION 143(1)( A ) WAS MANDATORY . THUS, THE LEGISL ATIVE INTENT IS VERY CLEAR FROM THE USE I.T.A. NO.4648/MUM/2017 82 OF THE WORD 'INTIMATION' AS SUBSTITUTED FOR 'ASSESSMENT' THAT TWO DIFFERENT CONCEPTS EMERGED. WHILE MAKING AN ASSESSMENT, THE ASSESSING OFFICER IS FREE TO MAKE ANY ADDITION AFTER GRANT OF OPPORTUNITY TO THE ASSESSEE. BY MAKING ADJUSTMENTS UNDER THE FIRST PROVISO TO SECTION 143(1)( A ), NO ADDITION WHICH IS IMPERMISSIBLE BY THE INFORMATION GIVEN IN THE RETURN COULD BE MADE BY THE ASSESSING OFFICER. THE REASON IS THAT UNDER SECTION 143(1)( A ) NO OPPORTUNITY IS GRANTED TO T HE ASSESSEE AND THE ASSESSING OFFICER PROCEEDS ON HIS OPINION ON THE BASIS OF THE RETURN FILED BY THE ASSESSEE. THE VERY FACT THAT NO OPPORTUNITY OF BEING HEARD IS GIVEN UNDER SECTION 143(1)( A ) INDICATES THAT THE ASSESSING OFFICER HAS TO PROCEED ACCEPTING THE RETURN AND MAKING THE PERMISSIBLE ADJUSTMENTS ONLY. AS A RESULT OF INSERTION OF THE EXPLANATION TO SECTION 143 BY THE FINANCE (NO. 2) ACT OF 1991 WITH EFFECT FROM 1 - 10 - 1991, AND SUBSEQUENTLY WITH EFFECT FROM 1 - 6 - 1994, BY THE FINANCE ACT, 1994, AND ULTI MATELY OMITTED WITH EFFECT FROM 1 - 6 - 1999, BY THE EXPLANATION AS INTRODUCED BY THE FINANCE (NO. 2) ACT OF 1991 AN INTIMATION SENT TO THE ASSESSEE UNDER SECTION 143(1)( A ) WAS DEEMED TO BE AN ORDER FOR THE PURPOSES OF SECTION 246 BETWEEN 1 - 6 - 1994, TO 31 - 5 - 199 9, AND UNDER SECTION 264 BETWEEN 1 - 10 - 1991, AND 31 - 5 - 1999. IT IS TO BE NOTED THAT THE EXPRESSIONS 'INTIMATION' AND 'ASSESSMENT ORDER' HAVE BEEN USED AT DIFFERENT PLACES. THE CONTEXTUAL DIFFERENCE BETWEEN THE TWO EXPRESSIONS HAS TO BE UNDERSTOOD IN THE CONT EXT THE EXPRESSIONS ARE USED. ASSESSMENT IS USED AS MEANING SOMETIMES 'THE COMPUTATION OF INCOME', SOMETIMES 'THE DETERMINATION OF THE AMOUNT OF TAX PAYABLE' AND SOMETIMES 'THE WHOLE PROCEDURE LAID DOWN IN THE ACT FOR IMPOSING LIABILITY UPON THE TAX PAYER ' . IN THE SCHEME OF THINGS, AS NOTED ABOVE, THE INTIMATION UNDER SECTION 143(1)( A ) CANNOT BE TREATED TO BE AN ORDER OF ASSESSMENT. THE DISTINCTION IS ALSO WELL BROUGHT OUT BY THE STATUTORY PROVISIONS AS THEY STOOD AT DIFFERENT POINTS OF TIME. UNDER SECTION 143(1)( A ) AS IT STOOD PRIOR TO 1 - 4 - 1989, THE ASSESSING OFFICER HAD TO PASS AN ASSESSMENT ORDER IF HE DECIDED TO ACCEPT THE RETURN, BUT UNDER THE AMENDED PROVISION, THE REQUIREMENT OF PASSING OF AN ASSESSMENT ORDER HAS BEEN DISPENSED WITH AND INSTEAD AN INT IMATION IS REQUIRED TO BE SENT. VARIOUS CIRCULARS SENT BY THE CENTRAL BOARD OF DIRECT TAXES SPELL OUT THE INTENT OF THE LEGISLATURE, I.E., TO MINIMIZE THE DEPARTMENTAL WORK TO SCRUTINIZE EACH AND EVERY RETURN AND TO CONCENTRATE ON SELECTIVE SCRUTINY OF RET URNS. THESE ASPECTS WERE HIGHLIGHTED BY ONE OF US (D.K. JAIN J) IN APOGEE INTERNATIONAL LTD. V. UNION OF INDIA [1996] 220 ITR 248 (DELHI) . IT MAY BE NOTED ABOVE THAT UNDE R THE FIRST PROVISO TO THE NEWLY SUBSTITUTED SECTION 143(1), WITH EFFECT FROM 1 - 6 - 1999, EXCEPT AS PROVIDED IN THE PROVISION ITSELF , THE ACKNOWLEDGEMENT OF THE RETURN SHALL BE DEEMED TO BE AN INTIMATION UNDER SECTION 143(1) WHERE ( A ) EITHER NO SUM IS PAYABL E BY THE ASSESSEE, OR ( B ) NO REFUND IS DUE TO HIM. IT IS SIGNIFICANT THAT THE ACKNOWLEDGEMENT IS NOT DONE BY ANY ASSESSING OFFICER, BUT MOSTLY BY MINISTERIAL STAFF. CAN IT BE SAID THAT ANY 'ASSESSMENT' IS DONE BY THEM ? THE REPLY IS AN EMPHATIC 'NO'. THE INTIMATION UNDER SECTION 143(1)( A ) WAS DEEMED TO BE A NOTICE OF DEMAND UNDER SECTION 156, FOR THE I.T.A. NO.4648/MUM/2017 83 APPARENT PURPOSE OF MAKING MACHINERY PROVISIONS RELATING TO RECOVERY OF TAX APPLICABLE. BY SUCH APPLICATION ONLY RECOVERY INDICATED TO BE PAYABLE IN THE INTIM ATION BECAME PERMISSIBLE. AND NOTHING MORE CAN BE INFERRED FROM THE DEEMING PROVISION. THEREFORE, THERE BEING NO ASSESS - MENT UNDER SECTION 143(1)( A ), THE QUESTION OF CHANGE OF OPINION, AS CONTENDED, DOES NOT ARISE. 14. ADDITIONALLY, SECTION 148 AS PRESENTL Y STANDS IS DIFFERENTLY COUCHED IN LANGUAGE FROM WHAT WAS EARLIER THE POSITION. PRIOR TO THE SUBSTITUTION BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, THE PROVISION READ AS FOLLOWS : '148. ISSUE OF NOTICE WHERE INCOME HAS ESCAPED ASSESSMENT. (1) BEFORE MAKING THE ASSESSMENT, REASSESSMENT OR RECOMPUTATION UNDER SECTION 147, THE ASSESSING OFFICER SHALL SERVE ON THE ASSESSEE A NOTICE CONTAINING ALL OR ANY OF THE REQUIREMENTS WHICH MAY BE INCLUDED IN A NOTICE UNDER SUB - SECTION (2) OF SECTION 139; AND THE PRO VISIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF THE NOTICE WERE A NOTICE ISSUED UNDER THAT SUB - SECTION. (2) THE ASSESSING OFFICER SHALL, BEFORE ISSUING ANY NOTICE UNDER THIS SECTION, RECORD HIS REASONS FOR DOING SO.' 15. SECTION 147 PR IOR TO ITS SUBSTITUTION BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, STOOD AS FOLLOWS : '147. INCOME ESCAPING ASSESSMENT. IF ( A ) THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT, BY REASON OF THE OMISSION OR FAILURE ON THE PART OF AN ASSESSEE TO MAKE A RETURN UNDER SECTION 139 FOR ANY ASSESSMENT YEAR TO THE ASSESSING OFFICER OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR, INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THAT YEAR, OR ( B ) NOTWITHSTANDING THAT THERE HAS BEEN NO OMISSION OR FAILURE AS MENTIONED IN CLAUSE ( A ) ON THE PART OF THE ASSESSEE, THE ASSESSING OFFICER HAS IN CONSEQUENCE OF INFORMATION IN HIS POSSESSION REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSM ENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, ASSESS OR REASSESS SUCH INCOME OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR). EXPLANATION 1. FOR THE PURPOSES OF THIS SECTION, THE FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, NAMELY: ( A ) WHERE INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED; OR I.T.A. NO.4648/MUM/2017 84 ( B ) WHERE SUCH INCOME HAS BEEN ASSESSED AT TOO LOW RATE; OR ( C ) WHERE SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THIS ACT OR UNDER THE INDIAN INCOME - TAX ACT, 1922 (11 OF 1922); OR ( D ) WHERE EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE HAS BEEN COM - PUTED. EXPLANATION 2. PRODUCTION BEFORE THE ASSESSING OFFICER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL NOT NECES - SARIL Y AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THIS SECTION.' 16. SECTION 147 AUTHORISES AND PERMITS THE ASSESSING OFFICER TO ASSESS OR REASSESS INCOME CHARGEABLE TO TAX IF HE HAS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSMENT YEAR HAS ESCAPED ASSESSMENT. THE WORD 'REASON' IN THE PHRASE 'REASON TO BELIEVE' WOULD MEAN CAUSE OR JUSTIFICATION. IF THE ASSESSING OFFICER HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEVE THAT AN INCOME HAD ES CAPED ASSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE ASSESSING OFFICER SHOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL EVIDENCE OR CONCLUSION. THE FUNCTION OF THE ASSESSING OFFICER IS TO ADMINISTER THE STATUTE WITH SOLICITUDE FOR THE PUBLIC E XCHEQUER WITH AN INBUILT IDEA OF FAIRNESS TO TAXPAYERS. AS OBSERVED BY THE SUPREME COURT IN CENTRAL PROVINCES MANGANESE ORE CO. LTD. V. ITO [1991] 191 ITR 662 , FOR INITIATION OF ACTION UNDER SECTION 147( A ) (AS THE PROVISION STOOD AT THE RELEVANT TIME) FULFILMENT OF THE TWO REQUISITE CONDITIONS IN THAT REGARD IS ESSENTIAL. AT THAT STAGE, THE FINAL OUTCOME OF THE PROCEEDING IS NOT RELEVANT. IN OTHER WORDS, AT THE INITI ATION STAGE, WHAT IS REQUIRED IS 'REASON TO BELIEVE', BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. AT THE STAGE OF ISSUE 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 3 4 (SC) . 17. THE SCOPE AND EFFECT OF SECTION 147 AS SUBSTITUTED WITH EFFECT FROM 1 - 4 - 1989, AS ALSO SECTIONS 148 TO 152 ARE SUBSTANTIALLY DIFFERENT FROM THE PROVISIONS AS THEY STOOD PRIOR TO SUCH SUBSTITUTION. UNDER THE OLD PROVISIONS OF SECTION 147, SEPARATE CLAUSES ( A ) AND ( B ) LAID DOWN THE CIRCUMSTANCES UNDER WHICH INCOME ESCAPING ASSESSMENT FOR THE PAST ASSESSMENT YEARS COULD BE ASSESSED OR REASSESSED. TO CONFER JURISDICTION UNDER SECTION 147( A ) TWO CONDITIONS WERE REQUIRED TO BE SATISFIED FIRSTLY THE ASSESSING OFFI CER MUST HAVE REASON TO BELIEVE THAT INCOME PROFITS OR GAINS CHARGEABLE TO INCOME TAX HAVE ESCAPED ASSESSMENT, AND SECONDLY HE MUST ALSO HAVE REASON TO BELIEVE THAT SUCH ESCAPEMENT HAS OCCURRED BY REASON OF EITHER ( I ) OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT OF THAT YEAR. BOTH THESE CONDITIONS WERE CONDITIONS PRECEDENT TO BE SATISFIED I.T.A. NO.4648/MUM/2017 85 BEFORE THE ASSESSING OFFICER COULD HAVE JURISDICTION TO ISSUE NOTICE UNDER SECTION 148 READ W ITH SECTION 147( A ). BUT UNDER THE SUBSTITUTED SECTION 147 EXISTENCE OF ONLY THE FIRST CONDITION SUFFICES. IN OTHER WORDS IF THE ASSESSING OFFICER FOR WHATEVER REASON HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT IT CONFERS JURISDICTION TO REOPEN THE ASSESSMENT. IT IS HOWEVER TO BE NOTED THAT BOTH THE CONDITIONS MUST BE FULFILLED IF THE CASE FALLS WITHIN THE AMBIT OF THE PROVISO TO SECTION 147. THE CASE AT HAND IS COVERED BY THE MAIN PROVISION AND NOT THE PROVISO. 18. SO LONG AS THE INGREDIENTS OF SECTION 147 ARE FULFILLED, THE ASSESSING OFFICER IS FREE TO INITIATE PROCEEDING UNDER SECTION 147 AND FAILURE TO TAKE STEPS UNDER SECTION 143(3) WILL NOT RENDER THE ASSESSING OFFICER POWERLESS TO INITIATE REASSESSMENT PROCEEDINGS EVEN WHEN INTIMATION UNDE R SECTION 143(1) HAD BEEN ISSUED. 19. INEVITABLE CONCLUSION IS THAT HIGH COURT HAS WRONGLY APPLIED ADANI EXPORTS CASE ( SUPRA ) WHICH HAS NO APPLICATION TO THE CASE ON THE FACTS IN VIEW OF THE CONCEPTUAL DIFFERENCE BETWEEN SECTION 143(1) AND SECTION 143(3) O F THE ACT. THE RELIANCE IS ALSO PLACED ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT V. ZUARI ESTATE DEVELOPMENT & INVESTMENT COMPANY LIMITED REPORTED IN (2015) 373 ITR 661(SC) , WHEREIN HONBLE SUPREME COURT HELD THAT WHEN ORIGINALLY RETURN OF INCOME IS PROCESSED U/S 143(1), THERE IS NO FORMATION OF OPINION AND HENCE THERE CANNOT BE ANY CHANGE OF OPINION, BY HOLDING AS UNDER: 2. AFTER GOING THROUGH THE DETAILED ORDER PASSED BY THE HIGH COURT, WE FIND THAT THE MAIN ISSUE WHICH IS INVOLVED IN THIS CASE IS NOT AT ALL ADDRESSED BY THE HIGH COURT. A CONTENTION WAS TAKEN BY THE APPELLANT - DEPARTMENT TO THE EFFECT THAT SINCE THE ASSESSEE'S RETURN WAS ACCEPTED UNDER SECTION 143(1) OF THE INCOME TAX ACT, THERE WAS NO QUESTION OF 'CHANGE OF OPINION' INA SMUCH AS WHILE ACCEPTING THE RETURN UNDER THE AFORESAID PROVISION NO OPINION WAS FORMED AND THEREFORE, ON THIS BASIS, THE NOTICE ISSUED WAS VALID. WE FIND THAT THIS ASPECT IS SQUARELY COVERED BY THE JUDGMENT OF THIS COURT IN ASSTT. CIT V. RAJESH JHAVERI ST OCK BROKERS (P.) LTD. [2007] 291 ITR 500/161 TAXMAN 316 IN THE FOLLOWING MANNER: '15. IN THE SCHEME OF THINGS, AS NOTED ABOVE, THE INTIMATION UNDER SECTION 143(1)(A) CA NNOT BE TREATED TO BE AN ORDER OF ASSESSMENT. THE DISTINCTION IS ALSO WELL BROUGHT OUT BY THE STATUTORY PROVISIONS AS THEY STOOD AT DIFFERENT POINTS OF TIME. UNDER SECTION 143(1)(A) AS IT STOOD PRIOR TO 1 - 4 - 1989, THE ASSESSING OFFICER HAD TO PASS AN ASSESS MENT ORDER IF HE I.T.A. NO.4648/MUM/2017 86 DECIDED TO ACCEPT THE RETURN, BUT UNDER THE AMENDED PROVISION, THE REQUIREMENT OF PASSING OF AN ASSESSMENT ORDER HAS BEEN DISPENSED WITH AND INSTEAD AN INTIMATION IS REQUIRED TO BE SENT. VARIOUS CIRCULARS SENT BY THE CENTRAL BOARD OF DIREC T TAXES SPELL OUT THE INTENT OF THE LEGISLATURE I.E. TO MINIMISE THE DEPARTMENTAL WORK TO SCRUTINISE EACH AND EVERY RETURN AND TO CONCENTRATE ON SELECTIVE SCRUTINY OF RETURNS. THESE ASPECTS WERE HIGHLIGHTED BY ONE OF US (D.K. JAIN, J.) IN APOGEE INTERNATIO NAL LTD. V. UNION OF INDIA . 16. IT MAY BE NOTED ABOVE THAT UNDER THE FIRST PROVISO TO THE NEWLY SUBSTITUTED SECTION 143(1), WITH EFFECT FROM 1 - 6 - 1999, EXCEPT AS PROVIDED IN THE PROVISION ITSELF, THE ACKNOWLEDGMENT OF THE RETURN SHALL BE DEEMED TO BE AN INT IMATION UNDER SECTION 143(1) WHERE (A) EITHER NO SUM IS PAYABLE BY THE ASSESSEE, OR (B) NO REFUND IS DUE TO HIM. IT IS SIGNIFICANT THAT THE ACKNOWLEDGMENT IS NOT DONE BY ANY ASSESSING OFFICER, BUT MOSTLY BY MINISTERIAL STAFF. CAN IT BE SAID THAT ANY 'ASSES SMENT' IS DONE BY THEM? THE REPLY IS AN EMPHATIC 'NO'. THE INTIMATION UNDER SECTION 143(1)(A) WAS DEEMED TO BE A NOTICE OF DEMAND UNDER SECTION 156, FOR THE APPARENT PURPOSE OF MAKING MACHINERY PROVISIONS RELATING TO RECOVERY OF TAX APPLICABLE. BY SUCH APP LICATION ONLY RECOVERY INDICATED TO BE PAYABLE IN THE INTIMATION BECAME PERMISSIBLE. AND NOTHING MORE CAN BE INFERRED FROM THE DEEMING PROVISION. THEREFORE, THERE BEING NO ASSESSMENT UNDER SECTION 143(1)(A), THE QUESTION OF CHANGE OF OPINION, AS CONTENDED, DOES NOT ARISE.' 3. THE OFFSHOOT OF THE AFORESAID DISCUSSION IS TO HOLD THAT JUDGMENT OF THE HIGH COURT IS ERRONEOUS AND WARRANTS TO BE SET ASIDE. WE ALLOW THIS APPEAL SETTING ASIDE THE IMPUGNED JUDGMENT OF THE HIGH COURT. 4. WE FIND THAT PURSUANT TO THE NOTICE ISSUED UNDER SECTION 143 OF THE INCOME TAX ACT, THE ASSESSING OFFICER HAD COMPUTED THE INCOME BY PASSING THE ASSESSMENT ORDERS ON MERITS AND REJECTING THE CONTENTION OF THE RESPONDENT THAT THE AFORESAID TRANSACTION DID NOT AMOUNT TO A SALE IN THE AS SESSMENT YEAR IN QUESTION. AGAINST THAT ASSESSMENT ORDER, THE RESPONDENT HAD PREFERRED THE APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) WHICH WAS ALSO DISMISSED. FURTHER APPEAL WAS PREFERRED BEFORE THE INCOME TAX APPELLATE TRIBUNAL. THIS APPEAL, HOWEVER, HAS BEEN ALLOWED BY THE TRIBUNAL VIDE ORDERS DATED 29.01.2004, SIMPLY FOLLOWING THE IMPUGNED JUDGMENT OF THE HIGH COURT, WHEREBY THE ASSESSMENT PROCEEDINGS ITSELF WERE QUASHED. SINCE WE HAVE SET ASIDE THE JUDGMENT OF THE HIGH COURT, AS A RESULT, T HE ORDERS DATED 29.01.2004 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL ALSO STANDS SET ASIDE. THE MATTER IS REMITTED BACK TO THE INCOME I.T.A. NO.4648/MUM/2017 87 TAX APPELLATE TRIBUNAL TO DECIDE THE APPEAL OF THE RESPONDENT ON MERITS. THE REFERENCE IS ALSO DRAWN TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF AVIRAT STAR HOMES VENTURE PRIVATE LIMITED REPORTED IN (2019) 102 TAXMANN.COM 60(BOM.) , WHEREIN HONBLE BOMBAY HIGH COURT UPHELD THE REOPENING BASED ON THE INFORMATION RECEIVED FROM INVESTIGATION WING AND WHEREIN THE AO FORMED THE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT , CANNOT BE STATED TO HAVE ACTED MECHANICALLY, WHEREIN ORIGINALLY RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE 19 61 ACT . THE HONBLE BOMBAY HIGH COURT HELD AS UNDER: 7. AS NOTED, THE RETURN OF THE PETITIONER WAS ACCEPTED WITHOUT SCRUTINY. THUS, THERE WAS NO SCRUTINY ASSESSMENT IN THE PRESENT CASE. UNDER THE CIRCUMSTANCES, THE QUESTION OF CHANGE OF OPINION WOULD NOT ARISE SINCE THE ASSESSING OFFICER HAD NOT FORMED ANY OPI NION ON ANY OF THE ISSUES ARISING OUT OF THE RETURN FILED BY THE PETITIONER. THE SUPREME COURT IN CASE OF ASSTT. CIT V. RAJESH JHAVERI STOCK BROKERS (P.) LTD. [2007] 161 T AXMAN 316/291 ITR 500 . IN THIS CONTEXT OBSERVED AS UNDER: '16. SECTION 147 AUTHORISES AND PERMITS THE ASSESSING OFFICER TO ASSESS OR REASSESS INCOME CHARGEABLE TO TAX IF HE HAS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSMENT YEAR HAS ESCAPED ASSESSMENT. T HE WORD 'REASON' IN THE PHRASE REASON TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATION. IF THE ASSESSING OFFICER HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEVE THAT AN INCOME HAD ESCAP ED ASSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE ASSESSING OFFICER SHOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL EVIDENCE OR CONCLUSION. THE FUNCTION OF THE ASSESSING OFFICER IS TO ADMINISTER THE STATUTE WITH SOLICITUDE FOR THE PUBLIC EXCH EQUER WITH AN INBUILT IDEA OF FAIRNESS TO TAXPAYERS. AS OBSERVED BY THE SUPREME COURT IN CENTRAL PROVINCES MANGANESE ORE CO. LTD. V. ITO [1991 (191) ITR 662 , FOR INITIATIO N OF ACTION UNDER SECTION 147(A) (AS THE PROVISION STOOD AT THE RELEVANT TIME) FULFILLMENT OF THE TWO REQUISITE CONDITIONS IN THAT REGARD IS ESSENTIAL. AT THAT STAGE, THE FINAL OUTCOME OF THE PROCEEDING IS NOT RELEVANT. IN OTHER WORDS, AT THE INITIATION ST AGE, WHAT IS REQUIRED IS 'REASON TO BELIEVE', BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. AT THE STAGE OF ISSUE 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 I.T.A. NO.4648/MUM/2017 88 CONCERN AT THAT STAGE. THIS IS SO BECAUSE THE FORMATION OF BELIEF BY THE ASSESSING OFFICER IS WITHIN THE REALM OF SUBJECTIVE SATISFACTION (SEE ITO V. SELECTED DALURBAND COAL CO. PVT. LTD. [ 1996 (217) ITR 597 (SC) ]; RAYMOND WOOLLEN MILLS LTD. V. ITO [1999] 236 ITR 34 (SC) . 17. THE SCOPE AND EFFECT OF SECTION 147 AS SUBSTITUTED WITH EFFECT FROM APRIL 1, 1989, AS ALSO SECTIONS 148 TO 152 ARE SUBSTANTIALLY DIFFERENT FROM THE PROVISIONS AS THEY STOOD PRIOR TO SUCH SUBSTITUTION. UNDER THE OLD PROVISIONS OF SECTION 147, SEP ARATE CLAUSES (A) AND (B) LAID DOWN THE CIRCUMSTANCES UNDER WHICH INCOME ESCAPING ASSESSMENT FOR THE PAST ASSESSMENT YEARS COULD BE ASSESSED OR REASSESSED. TO CONFER JURISDICTION UNDER SECTION 147(A) TWO CONDITIONS WERE REQUIRED TO BE SATISFIED FIRSTLY THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME PROFITS OR GAINS CHARGEABLE TO INCOME TAX HAVE ESCAPED ASSESSMENT, AND SECONDLY HE MUST ALSO HAVE REASON TO BELIEVE THAT SUCH ESCAPEMENT HAS OCCURRED BY REASON OF EITHER (I) OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT OF THAT YEAR. BOTH THESE CONDITIONS WERE CONDITIONS PRECEDENT TO BE SATISFIED BEFORE THE ASSESSING OFFICER COULD HAVE JURISDICTION TO ISSUE NOTICE UNDER SEC TION 148 READ WITH SECTION 147(A) BUT UNDER THE SUBSTITUTED SECTION 147 EXISTENCE OF ONLY THE FIRST CONDITION SUFFICES. IN OTHER WORDS IF THE ASSESSING OFFICER FOR WHATEVER REASON HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT IT CONFERS JURISDIC TION TO REOPEN THE ASSESSMENT. IT IS HOWEVER TO BE NOTED THAT BOTH THE CONDITIONS MUST BE FULFILLED IF THE CASE FALLS WITHIN THE AMBIT OF THE PROVISO TO SECTION 147. THE CASE AT HAND IS COVERED BY THE MAIN PROVISION AND NOT THE PROVISO.' THE SUPREME COURT ANALYZED THE DISTINCTION BETWEEN THE ACCEPTANCE OF RETURN UNDER SECTION 143(1) OF THE ACT AND ASSESSMENT WHICH HAS BEEN FRAMED UNDER SECTION 143(3) OF THE ACT. THE COURT HELD THAT IN THE FORMER CASE THE ASSESSING OFFICER WOULD HAVE MUCH WIDER LATITUDE TO R EOPEN THE ASSESSMENT. IN THE SAID JUDGMENT THE COURT ALSO DISCUSSED THE CONCEPT FOR REASON TO BELIEVE. REFERRING THE EARLIER JUDGMENTS OF THE SUPREME COURT, THE COURT REITERATED THAT THE TERM 'REASON TO BELIEVE' DOES NOT IMPLY WITH CERTAINTY THAT THE ADDIT ION WOULD BE INVARIABLY MADE IN THE ASSESSMENT. 8. THIS ASPECT WAS REITERATED BY SUPREME COURT IN LATER JUDGMENT IN CASE OF DY. CIT V. ZUARI ESTATE DEVELOPMENT & INVESTMENT CO. LTD. [2016] 236 TAXMAN 1/[2015] 63 TAXMANN.COM 177/373 ITR 66 (MAG.) . 9. WITH THIS BACKGROUND, IN MY MIND WE MAY REVISIT THE REASONS RECORDED BY THE ASSESSING OFFICER. IN THE REASONS THE ASSESSING OFFICER REFERRED TO THE REPORT OF THE INVESTIGATION WING IN WHICH IT WAS FOUND THAT ONE COMPANY NAMELY FINELINK SUPPLIERS PRIVATE L IMITED THROUGH ITS CURRENT ACCOUNT IN INDUSIND BANK BETWEEN THE SPECIFIED PERIOD, HAD I.T.A. NO.4648/MUM/2017 89 RELEASED HUGE FUNDS TO SEVERAL COMPANIES. IT SEEMS THAT NOTICE UNDER SECTION 131 OF THE ACT WAS ISSUED TO SAID FSCI WHICH WAS RECEIVED UNSERVED. THE REPORT ALSO REFERRED TO THE SAID COMPANY INCOME AND TAX PAID FOR VARIOUS YEARS BETWEEN FINANCIAL YEARS 2010 - 11, 2012 - 13 AND NOTED THAT THE GROSS PROFIT AND PROFIT BEFORE TAX WERE NEGLIGIBLE AND THE TAX PAID IN ALL THREE YEARS WAS NIL. THE INVESTIGATION WING ALSO PROVIDED COPIE S OF THE BANK'S STATEMENT OF FSPL FOR THE PERIOD BETWEEN 22ND MAY, 2012 TO 31ST MARCH, 2012 AND CONVEYED THAT FROM THE BANK STATEMENT AND FURTHER INVESTIGATION IT WAS CLEAR THAT THE FUNDS HAD BEEN ROUTED THROUGH THE ACCOUNTS OF THE SAID COMPANY. THE FUNDS THUS RECEIVED WERE IMMEDIATELY TRANSFERRED OR REMITTED TO OTHER ACCOUNTS BY WAY OF RTGS FUND TRANSFER POINTING OUT THAT THE REAL BENEFICIARIES WERE THE PETITIONER AND OTHER SIMILAR COMPANIES, IN WHOSE ACCOUNT THE UNACCOUNTED MONEY WAS BROUGHT THROUGH REGUL AR BOOKS OF ACCOUNTS. 10. IN OUR OPINION, THE INFORMATION SUPPLIED BY THE INVESTIGATION WING TO THE ASSESSING OFFICER THUS FORMED A PRIMA FACIE BASIS TO ENABLE ASSESSING OFFICER TO FORM A BELIEF OF INCOME CHARGEABLE TAX HAVING ESCAPED ASSESSMENT. THEREFORE , IT CANNOT BE STATED THAT THE ASSESSING OFFICER DID NOT HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. BEING A CASE WHERE RETURN WERE ACCEPTED WITHOUT SCRUTINY, WE MUST LEAVE THE QUESTION OF TAXABILITY OF SUCH ALLEGEDLY ESCAP ED INCOME TO ASSESSING OFFICER TO EXAMINE DURING SCRUTINY ASSESSMENT. 11. THE ASSESSING OFFICER PERUSED THE INFORMATION SUPPLIED BY THE INVESTIGATION WING AND HAVING FORMED THE BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT, CANNOT BE STATED T O HAVE ACTED MECHANICALLY. FURTHER, MERE FACT THAT ASSESSEE HAD ASKED FOR CERTAIN INFORMATION FROM THE ASSESSING OFFICER, WHICH AT THIS STAGE WAS NOT SUPPLIED, WOULD NOT INVALIDATE THE REASONS RECORDED BY THE ASSESSING OFFICER IN ISSUING THE IMPUGNED NOTIC E. 12. IN CASE OF PR. CIT V. GOKUL CERAMICS [2016] 71 TAXMANN.COM 341/241 TAXMAN 1 IN DIVISION BENCH OF GUJARAT HIGH COURT HAD IN SOMEWHAT SIMILAR CIRCUMSTANCES OBSERVED A S UNDER: 9. IT CAN THUS BE SEEN THAT THE ENTIRE MATERIAL COLLECTED BY THE DGCEI DURING THE SEARCH, WHICH INCLUDED INCRIMINATING DOCUMENTS AND OTHER SUCH RELEVANT MATERIALS, WAS ALONGWITH REPORT AND SHOW - CAUSE NOTICE PLACED AT THE DISPOSAL OF THE ASSESSING OFFICER. THESE MATERIALS PRIMA FACIE SUGGESTED SUPPRESSION OF SALE CONSIDERATION OF THE TILES MANUFACTURED BY THE ASSESSEE TO EVADE EXCISE DUTY. ON THE BASIS OF SUCH MATERIAL, THE ASSESSING OFFICER ALSO FORMED A BELIEF THAT INCOME CHARGEABLE TO TAX HAD ALS O ESCAPED ASSESSMENT. WHEN THUS THE ASSESSING OFFICER HAD SUCH MATERIAL AVAILABLE WITH HIM WHICH HE PERUSED, CONSIDERED, APPLIED HIS MIND AND RECORDED THE FINDING OF BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT, THE RE - OPENING COULD NOT AND SHOULD NOT HAVE BEEN DECLARED AS INVALID, ON THE GROUND THAT HE PROCEEDED ON THE SHOW - CAUSE NOTICE ISSUED I.T.A. NO.4648/MUM/2017 90 BY THE EXCISE DEPARTMENT WHICH HAD YET NOT CULMINATED INTO FINAL ORDER. AT THIS STAGE THE ASSESSING OFFICER WAS NOT REQUIRED TO HOLD CONCLUSIVELY THAT ADDITIONS INVARIABLY BE MADE. HE TRULY HAD TO FORM A BONA FIDE BELIEF THAT INCOME HAD ESCAPED ASSESSMENT. IN THIS CONTEXT, WE MAY REFER TO VARIOUS DECISIONS CITED BY THE COUNSEL FOR THE REVENUE. 10. IN CASE OF CENTRAL PROVINCES MANGANESE ORE CO. LTD. V. I NCOME TAX OFFICER , NAGPUR ( SUPRA ) THE SUPREME COURT NOTED THAT IN CASE OF THE ASSESSEE WHICH HAD AN OFFICE IN LONDON, THIS CUSTOMS AUTHORITY HAD COME TO KNOW THAT THE ASSESSEE HAD DECLARED VERY LOW PRICE IN RESPECT OF THE CONSIGNMENT OF MANGANESE EXPORTED BY THEM OUT OF INDIA. AFTER DUE INQUIRIES AND INVESTIGATIONS, THE CUSTOMS AUTHORITIES FOUND THAT THE ASSESSEE WAS SYSTEMATICALLY UNDER - VOICING THE VALUE OF MANGANESE AS COMPARED WITH THE PREVAILING MARKET PRICE. THE INCOME TAX OFFICER ON COMING TO KNOW AB OUT THE PROCEEDINGS BEFORE THE CUSTOMS COLLECTOR IN THIS RESPECT ISSUED NOTICE FOR REOPENING OF THE ASSESSMENT. IN THE REASONS THAT THE ASSESSING OFFICER RELIED ON THE FACTS AS FOUND BY THE CUSTOMS AUTHORITIES THAT THE ASSESSEE HAD UNDER - VOICED GOODS DURIN G EXPORT. UNDER SUCH CIRCUMSTANCES, UPHOLDING THE VALIDITY OF THE NOTICE FOR REOPENING, THE SUPREME COURT HELD AND OBSERVED AS UNDER: 'SO FAR AS THE FIRST CONDITION IS CONCERNED, THE INCOME TAX OFFICER, IN HIS RECORDED REASONS, HAS RELIED UPON THE FACT AS FOUND BY THE CUSTOMS AUTHORITIES THAT THE APPELLANT HAD UNDER INVOICED THE GOODS IT EXPORTED. IT IS NOT DOUBT CORRECT THAT THE SAID FINDING MAY NOT BE BINDING UPON THE INCOME TAX AUTHORITIES BUT IT CAN BE A VALID REASON TO BELIEVE THAT THE CHARGEABLE INCOM E HAS BEEN UNDER ASSESSED. THE FINAL OUTCOME OF THE PROCEEDINGS IS NOT RELEVANT. WHAT IS RELEVANT IS THE EXISTENCE OF REASONS TO MAKE THE INCOME TAX OFFICER BELIEVE THAT THERE HAS BEEN UNDER ASSESSMENT OF THE ASSESSEE'S INCOME FOR A PARTICULAR YEAR. WE ARE SATISFIED THAT THE FIRST CONDITION TO INVOKE THE JURISDICTION OF THE INCOME TAX OFFICER UNDER SECTION 147(A) OF THE ACT WAS SATISFIED.' 11. IN CASE OF INCOME TAX OFFICER V. PURUSHOTTAM DAS BANGUR ( SUPRA ) AFTER COMPLETION OF ASSESSMENT IN CASE OF THE ASSES SEE, THE ASSESSING OFFICER RECEIVED LETTER FROM DIRECTORATE OF INVESTIGATION GIVING DETAILED PARTICULARS COLLECTED FROM BOMBAY STOCK EXCHANGE WHICH REVEALED EARNING OF SHARE AND PRICE OF SHARE INCREASED DURING PERIOD IN QUESTION AND QUOTATION APPEARING AT CALCUTTA STOCK EXCHANGE WAS AS A RESULT OF MANIPULATED TRANSACTION. ON THE BASIS OF SUCH INFORMATION, THE ASSESSING OFFICER ISSUED NOTICE FOR REOPENING OF THE ASSESSMENT. THE QUESTION, THEREFORE, AROSE WHETHER THE INFORMATION CONTAINED IN THE LETTER OF DIR ECTORATE OF INVESTIGATION COULD BE SAID TO BE I.T.A. NO.4648/MUM/2017 91 DEFINITE INFORMATION AND THE ASSESSING OFFICER COULD ACT UPON SUCH INFORMATION FOR TAKING ACTION UNDER SECTION 147(B) OF THE ACT. IN SUCH BACKGROUND, THE SUPREME COURT OBSERVED AS UNDER: '12. MS. GAURI RASTOGI, THE LEARNED COUNSEL APPEARING FOR THE RESPONDENTS, HAS URGED THAT THE LETTER OF SHRI BAGAI WAS RECEIVED BY THE INCOME TAX OFFICER ON MARCH 26, 1974 AND ON THE VERY NEXT DAY, THAT IS, ON MARCH 27, 1974, HE ISSUED THE IMPUGNED NOTICE UNDER SECTION 147(B) OF THE ACT AND THAT HE DID NOT HAVE CONDUCTED ANY INQUIRY OR INVESTIGATION INTO THE INFORMATION SENT BY SHRI BAGAI. MERELY BECAUSE THE IMPUGNED NOTICE WAS SENT ON THE NEXT DAY AFTER RECEIPT OF THE LETTER OF SHRI BAGAI DOES NOT MEAN THAT THE INCOME TAX OFFICE R DID NOT APPLY HIS MIND TO THE INFORMATION CONTAINED IN THE SAID LETTER OF SHRI BAGAI. ON THE BASIS OF THE SAID FACTS AND INFORMATION CONTAINED IN THE SAID LETTER, THE INCOME TAX OFFICER, WITHOUT ANY FURTHER INVESTIGATION, COULD HAVE FORMED THE OPINION TH AT THERE WAS REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. THE HIGH COURT, IN OUR OPINION, WAS IN ERROR IN PROCEEDING ON THE BASIS THAT IT COULD NOT BE SAID THAT THE INCOME TAX OFFICER HAD IN HIS POSSESSION INF ORMATION ON THE BASIS OF WHICH HE COULD HAVE REASONS TO BELIEVE THAT INCOME OF THE ASSESSEE CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT FOR THE RELEVANT ASSESSMENT YEARS. FOR THE REASONS AFOREMENTIONED, WE ARE UNABLE TO UPHOLD THE IMPUGNED JUDGMENT OF THE HIG H COURT. THE APPEAL IS, THEREFORE, ALLOWED, THE IMPUGNED JUDGMENT OF THE HIGH COURT IS SET ASIDE AND THE WRIT PETITIONS FILED BY THE RESPONDENTS ARE DISMISSED. NO ORDER AS TO COSTS.' 12. IN CASE OF INCOME TAX OFFICER V. SELECTED DALURBAND COAL CO. PVT. LTD . ( SUPRA ), THE ASSESSMENT WAS REOPENED ON THE BASIS OF THE INFORMATION CONTAINED IN LETTER FROM CHIEF MINING OFFICER THAT THE COLLIERY OF THE ASSESSEE HAD BEEN INSPECTED AND THERE HAD BEEN UNDER REPORTING OF COAL RAISED. UPHOLDING THE VALIDITY OF RE - OPENIN G OF ASSESSMENT, THE SUPREME COURT HELD AND OBSERVED AS UNDER: 'AFTER HEARING THE LEARNED COUNSEL FOR THE PARTIES AT LENGTH, WE ARE OF THE OPINION THAT WE CANNOT SAY THAT THE LETTER AFORESAID DOES NOT CONSTITUTE RELEVANT MATERIAL OR THAT ON THAT BASIS, THE INCOME TAX OFFICER COULD NOT HAVE REASONABLY FORMED THE REQUISITE BELIEF. THE LETTER SHOWS THAT A JOINT INSPECTION WAS CONDUCTED IN THE COLLIERY OF THE RESPONDENT ON JANUARY 9, 1967, BY THE OFFICERS OF THE MINING DEPARTMENT IN THE PRESENCE OF THE REPRESEN TATIVES OF THE ASSESSEE AND ACCORDING TO THE OPINION OF THE OFFICERS OF THE MINING DEPARTMENT, THERE WAS UNDER REPORTING OF THE RAISING FIGURE TO THE EXTENT INDICATED IN THE SAID LETTER. THE REPORT IS MADE BY A GOVERNMENT DEPARTMENT AND THAT TOO AFTER COND UCTING A JOINT INSPECTION. IT GIVES A I.T.A. NO.4648/MUM/2017 92 REASONABLY SPECIFIC ESTIMATE OF THE EXCESSIVE COAL MINING SAID TO HAVE BEEN DONE BY THE RESPONDENT OVER AND ABOVE THE FIGURE DISCLOSED BY IT IN ITS RETURNS. WHETHER THE FACTS STATED IN THE LETTER ARE TRUE OR NOT IS NOT THE CONCERN AT THIS STAGE. IT MAY BE WELL BE THAT THE ASSESSEE MAY BE ABLE TO ESTABLISH THAT THE FACTS STATED IN THE SAID LETTER ARE NOT TRUE BUT THAT CONCLUSION CAN BE ARRIVED AT ONLY AFTER MAKING THE NECESSARY ENQUIRY. AT THE STAGE OF THE ISSUANCE OF TH E NOTICE, THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIAL, AS STATED ABOVE, ON WHICH A REASONABLE PERSON COULD HAVE FORMED THE REQUISITE BELIEF. SINCE WE ARE UNABLE TO SAY THAT THE SAID LETTER COULD NOT HAVE CONSTITUTED THE BASIS FOR FORMING SUCH A BELIEF, IT CANNOT BE SAID THAT THE ISSUANCE OF NOTICE WAS INVALID. INASMUCH AS, AS A RESULT OF OUR ORDER, THE REASSESSMENT PROCEEDINGS HAVE NOT TO GO ON WE DON NOT AND WE OUGHT NOT TO EXPRESS ANY OPINION ON THE MERITS.' 13. IN CASE OF A.G.R. INVESTMENT L TD. V. ADDITIONAL COMMISSIONER OF INCOME TAX AND ANR. ( SUPRA ), A DIVISION BENCH OF DELHI HIGH COURT CONSIDERED THE VALIDITY OF REOPENING OF ASSESSMENT WHERE THE NOTICE WAS BASED ON INFORMATION RECEIVED FROM DIRECTORATE OF INVESTIGATION THAT THE ASSESSEE WA S BENEFICIARY OF BOGUS ACCOMMODATION ENTRIES. THE COURT WHILE UPHOLDING THE VALIDITY OF REOPENING OBSERVED THAT SUFFICIENCY OF REASON CANNOT BE CONSIDERED IN A WRIT PETITION. IT WAS OBSERVED AS UNDER: '23 THE PRESENT FACTUAL CANVAS HAS TO BE SCRUTINIZED ON THE TOUCHSTONE OF THE AFORESAID ENUNCIATION OF LAW. IT IS WORTH NOTING THAT THE LEARNED COUNSEL FOR THE PETITIONER HAS SUBMITTED WITH IMMENSE VEHEMENCE THAT THE PETITIONER HAD ENTERED INTO CORRESPONDENCE TO HAVE THE DOCUMENTS BUT THE ASSESSING OFFICER TRE ATED THEM AS OBJECTIONS AND MADE A COMMUNICATION. HOWEVER, ON A SCRUTINY OF THE ORDER, IT IS PERCEIVABLE THAT THE AUTHORITY HAS PASSED THE ORDER DEALING WITH THE OBJECTIONS IN A VERY CAREFUL AND STUDIED MANNER. HE HAS TAKEN NOTE OF THE FACT THAT TRANSACTIO NS INVOLVING RS. 27 LAKHS MENTIONED IN THE TABLE IN ANNEXURE P - 2 CONSTITUTE FRESH INFORMATION IN RESPECT OF THE ASSESSEE AS A BENEFICIARY OF BOGUS ACCOMMODATION ENTRIES PROVIDED TO IT AND REPRESENTS THE UNDISCLOSED INCOME. THE ASSESSING OFFICER HAS REFERRE D TO THE SUBSEQUENT INFORMATION AND ADVERTED TO THE CONCEPT OF TRUE AND FULL DISCLOSURE OF FACTS. IT IS ALSO NOTICEABLE THAT THERE WAS SPECIFIC INFORMATION RECEIVED FROM THE OFFICE OF THE DIT (INV - V) AS REGARDS THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE COMPANY WITH NUMBER OF CONCERNS WHICH HAD MADE ACCOMMODATION ENTRIES AND THEY WERE NOT GENUINE TRANSACTIONS. AS WE PERCEIVE, IT IS NEITHER A CHANGE OF OPINION NOR DOES IT CONVEY A PARTICULAR INTERPRETATION OF A SPECIFIC PROVISION WHICH WAS DONE IN A PARTI CULAR MANNER IN THE ORIGINAL ASSESSMENT AND SOUGHT TO BE DONE IN A DIFFERENT MANNER IN THE PROCEEDING UNDER SECTION 147 OF THE ACT. THE REASON TO BELIEVE HAS BEEN I.T.A. NO.4648/MUM/2017 93 APPROPRIATELY UNDERSTOOD BY THE ASSESSING OFFICER AND THERE IS MATERIAL ON THE BASIS OF WHICH THE NOTICE WAS ISSUED. AS HAS BEEN HELD IN PHOOL CHAND BAJRANG LAL ( SUPRA ), BOMBAY PHARMA PRODUCTS ( SUPRA ) AND ANANT KUMAR SAHARIA ( SUPRA ), THE COURT, IN EXERCISE OF JURISDICTION UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PERTAINING TO SUFFICIENCY OF REASONS FOR FORMATION OF THE BELIEF, CANNOT INTERFERE. THE SAME IS NOT TO BE JUDGED AT THAT STAGE. IN SFIL STOCK BROKING LTD. ( SUPRA ), THE BENCH HAS INTERFERED AS IT WAS NOT DISCERNIBLE WHETHER THE ASSESSING OFFICER HAD APPLIED HIS MIND TO THE INFORMATION AND INDEPENDENTLY ARRIVED AT A BELIEF ON THE BASIS OF MATERIAL WHICH HE HAD BEFORE HIM THAT THE INCOME HAD ESCAPED ASSESSMENT. IN OUR CONS IDERED OPINION, THE DECISION RENDERED THEREIN IS NOT APPLICABLE TO THE FACTUAL MATRIX IN THE CASE AT HAND. IN THE CASE OF SARTHAK SECURITIES CO. PVT. LTD. ( SUPRA ), THE DIVISION BENCH HAD NOTED THAT CERTAIN COMPANIES WERE USED AS CONDUITS BUT THE ASSESSEE H AD, AT THE STAGE OF ORIGINAL ASSESSMENT, FURNISHED THE NAMES OF THE COMPANIES WITH WHICH IT HAD ENTERED INTO TRANSACTIONS AND THE ASSESSING OFFICER WAS MADE AWARE OF THE SITUATION AND FURTHER THE REASON RECORDED DOES NOT INDICATE APPLICATION OF MIND. THAT APART, THE EXISTENCE OF THE COMPANIES WAS NOT DISPUTED AND THE COMPANIES HAD BANK ACCOUNTS AND PAYMENTS WERE MADE TO THE ASSESSEE COMPANY THROUGH THE BANKING CHANNEL. REGARD BEING HAD TO THE AFORESAID FACT SITUATION, THIS COURT HAD INTERFERED. THUS, THE SA ID DECISION IS ALSO DISTINGUISHABLE ON THE FACTUAL SCORE.' 14. LEARNED SINGLE JUDGE OF MADRAS HIGH COURT IN CASE OF STERLITE INDUSTRIES (INDIA) LTD. V. ASSISTANT COMMISSIONER OF INCOME TAX REPORTED IN MANU/TN/0471/2008MANU/TN/0471/2008 : [2008] 302 ITR 275 (MAD) UPHELD THE NOTICE FOR REOPENING WHICH WAS BASED ON INFORMATION FROM ENFORCEMENT DIRECTORATE SHOWING POSSIBLE INFLATION OF PURCHASES MADE BY THE ASSESSEE. 13. THE D ECISIONS CITED BEFORE US DO NOT INVOLVE CONTROVERSY AS WE ARE EXAMINING IN THIS PETITION. IN THE CASE OF CHHUGAMAL RAJPAL ( SUPRA ) AS NOTED, THE SUPREME COURT HELD THE RE - OPENING OF ASSESSMENT INVALID UPON FINDING THAT THE ASSESSING OFFICER HAD NOT SET OUT ANY REASONS FOR COMING TO THE CONCLUSION THAT IT WAS A FIT CASE FOR ISSUING NOTICE UNDER SECTION 148 OF THE ACT. IN CASE OF AMAR JEWELLERS LTD. ( SUPRA ) THE GUJARAT HIGH COURT WAS EXAMINING THE VALIDITY OF RE - OPENING OF ASSESSMENT IN A CASE WHERE ORIGINAL A SSESSMENT WAS CARRIED OUT UNDER SECTION 153(A) OF THE ACT, PURSUANT TO SEARCH CARRIED OUT BY THE REVENUE AUTHORITIES. FURTHER, THE CONCLUSIONS OF THE COURT WERE BASED ON FACTS OF THAT CASE. LASTLY, THIS COURT IN CASE SHODIMAN INVESTMENTS (P.) LTD. ( SUPRA ) WAS EXAMINING THE REVENUE'S INCOME TAX APPEAL AGAINST THE JUDGMENT OF THE TRIBUNAL HOLDING THAT THE RE - OPENING OF ASSESSMENT WAS BAD IN LAW. THE CO - ORDINATE BENCHES OF THE TRIBUNAL IN THE CASE OF ITO V. I.T.A. NO.4648/MUM/2017 94 SMT. GURIDNER KAUR REPORTED IN 2006(6) TMI 144 IT AT - DELHI A ( (2007) 288 ITR(A.T.) 207, ALSO VIDE PARA 19 UPHELD REOPENING OF CONCLUDED ASSESSMENT U/S 147 OF THE 1961 ACT, BY HOLDING AS UNDER: 19. WE NOW TURN TO THE MAIN QUESTION WHETHER THE CIT(A) WAS RIGHT IN HOLDING THAT THE ASSESSING OFFICER DID NOT HAVE REASON TO BELIEVE THAT I NCOME HAD ESCAPED ASSESSMENT, BUT MERELY HAD 'REASON TO SUSPECT'. THE CIB HAD WRITTEN TO THE ASSESSING OFFICER ON 16 - 12 - 1997 THAT DURING THE FINANCIAL YEAR 1992 - 93 THE ASSESSEE HAS RECEIVED A GIFT OF RS. 21 LAKHS FROM AN NRE SHRI JAGJIT SINGH KOCHHAR AND T HAT THE INVESTIGATION WING HAS NOTICED THAT THE GIFT IS BOGUS AND ARRAN - GED BY A CHARTERED ACCOUNTANT BY NAME S.L. BATRA THROUGH NRE ACCOUNTS (ACCOUNT NUMBERS GIVEN) AND THAT THE ASSESSEE HAD MADE CASH PAYMENTS ALONG WITH PREMIUM TO OBTAIN THE GIFTS. THIS IS DEFINITE INFORMATION COMING TO THE POSSESSION OF THE ASSESSING OFFICER FROM ANOTHER WING OF THE INCOME - TAX DEPARTMENT WHICH IS ENTRUSTED WITH THE TASK OF COLLECTING INFORMATION RELEVANT TO THE DETECTION OF TAX EVASION. THE ASSESSING OFFICER CANNOT BE S AID TO HAVE MERELY SUSPECTED THAT INCOME HAD ESCAPED ASSESSMENT. HE IS BOUND TO GIVE PRIMA FACIE CREDENCE TO THE INFORMATION COMING FROM HIS OWN DEPARTMENT, THOUGH FROM ANOTHER WING. HE CANNOT BRUSH IT ASIDE OR IGNORE IT ON THE GROUND THAT IT IS A MERE ALL EGATION. THE LETTER CONSTITUTES MATERIAL ON THE BASIS OF WHICH THE ASSESSING OFFICER CAN HOLD THE REQUISITE 'BELIEF'. IT HAS A RATIONAL CONNECTION OR LIVE LINK WITH THE FORMATION OF THE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT IN THE HAN DS OF THE ASSESSEE. IT IS NOT A MERE PRETENCE NOR IS IT BASED ON MERE GOSSIP OR RUMOUR. IT IS A BELIEF BONA FIDE HELD. NO DOUBT THE DCIT OF THE CONCERNED RANGE HAD, BY LETTER DATED 24 - 12 - 1997, ASKED THE ASSESSING OFFICER TO EXAMINE THE ISSUE AND DISCUSS IT WITH HIM FOR FURTHER INVESTIGATION, BUT SIMPLY BECAUSE THE ASSESSING OFFICER CHOSE TO ISSUE THE NOTICE UNDER SECTION 148 WITHOUT ADHERING TO THE DIRECTIONS OF THE DCIT IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAD PROCEEDED TO ADOPT A SHORT - CUT WITHOUT FORMING THE REQUISITE BELIEF. IT IS THE SATISFACTION OF THE ASSESSING OFFICER WHO IS EMPOWERED TO ISSUE THE NOTICE UNDER SECTION 148 THAT IS RELEVANT AND IN ARRIVING AT THE SAME HE IS NOT BOUND BY THE DIRECTIONS OF HIS SUPERIORS. IT HAS TO BE REMEMBERED T HAT AT THE STAGE OF RECORDING REASONS AND ISSUING NOTICE UNDER SECTION 148 IT IS ONLY EXPECTED OF THE ASSESSING OFFICER TO REACH A PRIMA FACIE CONCLUSION THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. AT THAT STAGE, HE IS NOT EXPECTED TO BUILD A FOO L - PROOF OR CAST - IRON CASE AGAINST THE ASSESSEE BEFORE PROCEEDING TO ISSUE THE NOTICE. HE IS NOT EXPECTED TO MAKE A COMPLETE INVESTIGATION BEFORE ISSUING THE NOTICE. IN R. DALMIA V. UNION OF INDIA [1972] 84 ITR 616 , A JUDGMENT OF THE HONBLE DELHI I.T.A. NO.4648/MUM/2017 95 HIGH COURT CITED BY THE LEARNED SENIOR DR, IT WAS HELD (PAGE 619) THAT ALL THAT WAS REQUIRED OF THE ASSESSING OFFICER IS THAT HE MUST HAVE REASON TO BELIEVE 'AND NOT THAT HE SHOUL D LAUNCH AN INVESTIGATION AND COME TO A POSITIVE FINDING BEFORE ISSUING THE NOTICE...' AND THAT 'THE FACTS ON THE BASIS OF WHICH HE ENTERTAINED THE BELIEF NEED NOT AT THIS STAGE BE IRREBUTTABLY CONCLUSIVE TO SUPPORT HIS TENTATIVE CONCLUSION'. IN MAHANAGAR TELEPHONE NIGAM LTD. V. CHAIRMAN, CBDT [2000] 246 ITR 173 1 THE HONBLE DEIHI HIGH COURT, REFERRING TO THE JUDGMENT OF THE SUPREME COURT IN CENTRAL PROVINCES MANGANESE ORE CO. LTD. V. ITO [1991] 191 ITR 662 2 HELD THAT AT THE TIME OF INITIATION OF ACTION TO REOPEN THE ASSESSMENT (BY ISSUING NOTICE UNDER SECTION 148) THE FINAL OUTCOME OF THE PROCEEDING IS NOT RELEVANT AND WHAT IS REQUIRED IS 'REASON TO BELIEVE' BUT 'NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME'. IT WAS HELD THAT AT THE STAGE OF ISSUE OF NOTICE, 'THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABL E PERSON COULD HAVE FORMED A REQUISITE BELIEF. WHETHER THE MATERIALS WOULD CONCLUSIVELY PROVE THE ESCAPEMENT IS NOT THE CONCERN AT THAT STAGE'. THEREFORE, THERE IS NO FORCE IN THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ASSESSING OFFICE R HAD NOT HELD ANY ENQUIRY INTO THE VERACITY OF THE LETTER RECEIVED FROM THE CIB OR HAD NOT CONDUCTED AN INVESTIGATION TO CHECK THE ALLEGATION IN THE LETTER BEFORE ISSUING THE NOTICE. 20. WE HAVE TO REMEMBER THE FUNDAMENTAL PROPOSITION THAT WHEN THE ASSES SING OFFICER INITIATES ACTION TO REOPEN THE ASSESSMENT, HE MAY DO SO ON THE BASIS OF MATERIAL WHICH MAY LEAD HIM TO THE FORMATION OF A PRIMA FACIE OR TENTATIVE CONCLUSION THAT INCOME CHARGEABLE TO TAX HAS ESCAPED TAXATION. SUCH MATERIAL MAY TURN OUT IN THE COURSE OF THE REASSESSMENT PROCEEDINGS TO BE INSUFFICIENT TO SUSTAIN THE ASSESSMENT OF THE ALLEGED ESCAPED INCOME; IT MAY NOT STAND JUDICIAL SCRUTINY; OR THE ASSESSEE MAY BE ABLE TO LEAD EVIDENCE TO SHOW THAT NO INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESS MENT. ALL THIS HAS TO BE CARRIED OUT DURING THE REASSESSMENT PROCEEDINGS BUT THEY HAVE NO PLACE AT THE STAGE WHEN THE ASSESSING OFFICER PROPOSES TO ISSUE NOTICE UNDER SECTION 148. AT THAT STAGE, IT IS ONLY THE RELEVANCY OF THE REASONS THAT CAN BE LOOKED IN TO AND NOT THE SUFFICIENCY IN S. NARAYANAPPAS CASE ( SUPRA ). IN THE CASE ON HAND, WE ARE SATISFIED THAT THE MATERIAL BEFORE THE ASSESSING OFFICER THE LETTER DATED 16 - 12 - 1997 RECEIVED FROM THE CIB - HAD A RATIONAL CONNECTION OR LIVE LINK WITH THE FORMATION OF THE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT IN THE ASSESSEES CASE. THE BELIEF WAS BONA FIDE HELD, IT WAS NOT A PRETENCE. THE MATERIAL GAVE RISE TO 'REASON TO BELIEVE' AND NOT MERELY 'REASON TO SUSPECT'. NO DOUBT, AS POINTED OUT BY T HE CIT(A), THE LIST OF 41 PERSONS TO WHOM KOCHHAR IS SUPPOSED TO HAVE MADE GIFTS DID NOT CONTAIN THE NAME OF THE I.T.A. NO.4648/MUM/2017 96 ASSESSEE. BUT THE CIT(A) APPEARS TO HAVE OVERLOOKED THAT THIS LIST WAS NOT THE MATERIAL ON THE BASIS OF WHICH THE NOTICE WAS ISSUED. THE ASSESS ING OFFICER HAD NOT RELIED ON THE TRIBUNALS ORDER IN THE CASE OF SANJEET BATRA, IN WHICH ALL THE 41 NAMES ARE GIVEN. INDEED, HE COULD NOT HAVE, SINCE THE ORDER OF THE TRIBUNAL WAS PASSED IN JULY 1998 WHEREAS THE NOTICE UNDER SECTION 148 WAS ISSUED ON 5 - 2 - 1998. THE ASSESSING OFFICER HAD RELIED ON THE LETTER OF THE CIB WHICH CONTAINED A CLEAR STATEMENT THAT THE INVESTIGATION WING HAS NOTICED THAT THE ASSESSEE HAS PURCHASED THE GIFTS FROM KOCHHAR BY PAYING CASH INCLUDING THE PREMIUM. THIS LETTER, IN OUR VIEW, CONSTITUTES RELEVANT MATERIAL FOR THE FORMATION OF THE BELIEF, NOT MERE SUSPICION, THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT IN THE ASSESSEES CASE. 21. WE ARE THUS UNABLE TO CONCUR WITH THE VIEW TAKEN BY THE CIT(A) THAT THE NOTICE UNDER SECTIO N 148 WAS PROMPTED BY REASON TO 'SUSPECT' AND NOT REASON TO 'BELIEVE'. 22. THE MATTER HAS TO GO BACK TO THE FILE OF THE CIT(A) FOR DECISION ON MERITS WHICH HE HAS NOT DEALT WITH, IN THE VIEW HE HAD TAKEN OF THE JURISDICTIO N OF THE ASSESSING OFFICER TO REOPEN THE CASE. WE DIRECT ACCORDINGLY. THE ASSESSEE HAS REFERRED TO THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. GREEN INFRA PRIVATE LIMITED IN ITA NO 1162 OF 2014 , DATED 16.01.2017. IN THIS CASE , TRIBUNAL HAS COME TO THE FINDIN G OF FACT THAT INGREDIENTS OF SECTION 68 OF THE 1961 ACT STOOD COMPLIED WITH AND ON THAT FINDING OF FACT, THE HONBLE BOMBAY HIGH COURT CAME TO CONCLUSION THAT NO PERVERSITY IN THE ORDER OF THE TRIBUNAL WAS SHOWN BY REVENUE . IT CAME TO CONCLUSION THAT NO SUBSTANTIAL QUESTION OF LAW AROSE AND WAS NOT ENTERTAINED. WHILE ADJUDICATING THIS APPEAL, THE HONBLE BOMBAY HIGH COURT NOTED THAT 98% OF THE EQUITY WAS SUBSCRIBED BY IDFC PRIVATE EQUITY FUND - II WHICH IS MANAGER OF IDFC LIMITED. IN THE INSTANT CASE, THE ASSESSEE COMPANY HAS RECEIVED 90.12% OF THE FUNDING FROM OUTSIDERS WHO ARE NOT CONNECTED WITH PROMOTERS/DIRECTORS WHILE THE PROMOTERS INDUCTED ONLY 9.88% OF THE TOTAL FUNDS RAISED BY TH E ASSESSEE COMPANY. THUS, IT IS FOR THE ASSESSEE WHICH IS A CLOSELY HELD PRIVATE COMPANY TO DISCHARGE ITS ONUS I.T.A. NO.4648/MUM/2017 97 TO ESTABLISH IDENTITY, CREDITWORTHINESS OF THE SUBSCRIBERS AND GENUINENESS OF THE TRANSACTIONS FOR RAISING SHARE CAPITAL INCLUDING SHARE PR EMIUM. THE ASSESSEE HAS ALSO RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. GAGANDEEP INFRASTRUCTURE PRIVATE LIMITED IN ITA NO. 1613 OF 2014, DATED 20.03.2017. IN THIS CASE, THE TRIBUNAL HELD THAT THE TAXPAYER IS ABLE TO E STABLISH IDENTITY , CAPACITY AND GENUINENESS OF THE SHAREHOLDERS WHO HAVE SUBSCRIBED TO ITS SHARES. THE HONBLE BOMBAY HIGH COURT THEN HELD THAT CONCURRENT FINDING OF LEARNED CIT(A) AND THAT OF THE TRIBUNAL AS TO SATISFACTION OF SECTION 68 OF THE 1961 ACT COULD NOT BE SHAKEN BY REVENUE AND HENCE THE DELETION OF ADDITIONS WERE UPHELD BY HONBLE BOMBAY HIGH COURT IN THE CASE OF GAGANDEEP INFRASTRUCTURE PRIVATE LIMITED(SUPRA), WHICH LED HONBLE BOMBAY HIGH COURT TO HOLD THAT NO S UBSTANTIAL QUESTION OF LAW AROSE. THAT WAS THE RATIO OF DECISION OF HONBLE BOMBAY HIG H COURT. . IN THE INSTANT CASE, THE ASSESSEE COMPANY HAS RECEIVED 90.12% OF THE FUNDING FROM OUTSIDERS WHO ARE NOT CONNECTED WITH PROMOTERS/ DIRECTORS WHILE THE PROMOT ERS INDUCTED ONLY 9.88% OF THE TOTAL FUNDS RAISED BY THE ASSESSEE COMPANY. THUS, IT IS FOR THE ASSESSEE TO DISCHARGE ITS ONUS TO ESTABLISH IDENTITY, CREDITWORTHINESS OF THE SUBSCRIBERS AND GENUINENESS OF THE TRANSACTIONS FOR RAISING SHARE CAPITAL INCL UDING SHARE PREMIUM. IT WAS HELD BY HON'BLE CALCUTTA HIGH COURT IN THE CASE OF RAJMANDIR ESTATES (P.) LTD . V. PR. CIT [2016] 70 TAXMANN.COM 124/240 TAXMAN 306/386 ITR 162 AT PARA 25 THAT 'THE JUDGEMENT IN THE CASE OF LOVELY EXPORTS (P.) LTD. (SUPRA) LENDS NO ASSISTANCE TO THE ASSESSEE BECAUSE IN THAT CASE THE I.T.A. NO.4648/MUM/2017 98 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. THE DIVISION BENCH WENT ON TO HOLD THAT THE REVENUE SHOULD NOT HARASS THE ASSESSEE WHERE 'THE PREPONDERANCE OF EVIDENCE INDICATES ABSENCE OF CULPABILITY'. IN THE PRESENT CASE TH ERE EXISTS REASONABLE SUSPICION IF NOT PRIMA FACIE EVIDENCE OF CULPABILITY' THE ASSESSEE HAS ALSO RELIED UPON DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. SMT. MANIBEN VALJI SHAH (SUPRA). THIS CASE BELONG TO PRE - AMENDED PROVISIONS OF SECTIO N 147 OF THE 1961 ACT AND RELATE TO AY 1988 - 89. THE PROVISIONS OF SECTION 147 AS IT STOOD IN PRE - AMENDED ACT REQUIRED TWIN CONDITIONS FOR RE - OPENING NAMELY THAT THE AO MUST HAVE REASONS TO BELIEVE THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT AND , SECONDLY , THE SAID ESCAPEMENT IS BY REASON OF THE OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. THE AMENDMENT WAS BROUGHT BY DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E .F. 1 - 4 - 1989 AND NOW THE AO CAN REOPEN THE ASSESSMENT IF HE HAS REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND IN CASE ASSESSMENT IS NOT FRAMED U/S 143(3) AND THE CASE IS TO BE REOPENED WITHIN FOUR YEARS FROM THE END OF ASSESSMENT YEAR,THERE IS NO REQUIREMENT AS TO THE FAILURE OR OMISSION ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. THE HONBLE APEX COURT IN THE CASE OF ACIT V. RAJESH JHAVERI STOCK BROKERS PRIVATE LTD ( 2007) 161 TAXMAN 316(SC) HAS ELABORATELY DISCUSSED ABOUT THE IMPLICATION OF AMENDMENT IN PROVISIONS OF SECTION 147 OF THE 1961 ACT, WHICH WE HAVE REPRODUCED IN PRECEDING PARAS OF THIS ORDER. THUS, THIS DECISION WE ARE AFRAID IS NOT OF ANY HELP TO THE ASSESSEE AS IT RELATES TO PRE - AMENDED PROVISIONS OF SECTION1 47 OF THE 1961 ACT. I.T.A. NO.4648/MUM/2017 99 THE ASSESSEE HAS ALSO RELIED UPON DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF PCIT V. MANZIL DINESH KUMAR SHAH (SUPRA) TO CONTEND THAT RE OPENING CANNOT BE MADE FOR VERIFICATION PURPOSES BY MAKING ROVING AND FISHING ENQUIRIES. IN THE INSTANT CASE BEFORE US, INFORMATION WAS RECEIVED FROM LEARNED CCIT WHO BASED ON INTELLIGENCE FROM DGIT(INTELLIGENCE AND CRIMINAL INVESTIGATION) HAS PASSED ON THE INFORMATION THAT THE ASSESSEE HAS ISSUED SHARES AT A VERY RATE OF SHARE PREMIUM , WHICH INFORMATION ON THE CONTEXTUAL FACTUAL MATRIX OF THE CASE CANNOT BE TERMED AS NOT CREDIBLE WARRANTING INVOCATION U/S 147 . THE ASSESSEE BEING A NEW COMPANY HAVING NO ASSET BASE/BUSINESS HAS ISSUED EQUITY SHARES OF RS. 10 EACH AT A SHARE PREMIUM OF RS. 90 PER SHARE . THE 90.12% OF THE FUNDS WERE INVESTED BY OUTSIDERS HAVING NO CONNECTION WITH PROMOTERS/DIRECTORS AND NO PARTICIPATION IN MANAGEMENT WHILE THE PROMOTERS / DIRECTORS HAVE MERELY INVESTED 9.88% OF THE TOTAL FUND INFUSION IN THE ASSESSEE COMPANY. THUS, KEEPING IN VIEW THE ENTIRE CONTEXTUAL FACTUAL MATRIX, REOPENING OF THE CONCLUDED ASSESSMENT U/S 147 UNDER THESE CIRCUMSTANCES CANNOT BE HELD TO BE INVALID MORE - SO ORIGINALLY NO ASSESSMENT WAS FRAMED U/S 143(3) AND REOPENING WAS SOUGHT TO BE DONE WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR . THE JUDGMENT OF HONBLE DELHI HIGH COURT RELIED UPON BY T HE ASSESSEE IN THE CASE OF CIT V. BATRA BHATTA COMPANY(SUPRA) ALSO HAD SIMILAR ISSUE BEFORE THE HONBLE COURT AS TO MAKING FISHING AND ROVING ENQUIRY IN THE CASE OF MANZIL DINESH KUMAR SHAH(SUPRA) WHICH WE DEALT IN THIS PARAGRAPH. THE ASSESSEE HAS A LSO RELIED UPON THE DECISION OF H ONBLE BOMBAY HIGH COURT DECISION IN THE CASE OF PCIT V. SHODIMAN INVESTMENT PRIVATE LTD. IN ITA NO. 1297 OF 2015 (BOM) DECIDED ON 16 TH APRIL , 2018. IN THIS CASE , THE TRIBUNAL NOTED THAT THE I.T.A. NO.4648/MUM/2017 100 REASONS AS RECORDED FOR REOPENING OF THE CONCLUDED ASSESSMENT REVEALED THAT THERE WAS NO ASSESSEE SUCH AS THE TAX - PAYER IN ITS CHARGE. IT WAS ALSO HELD BY THE TRIBUNAL THAT THERE WAS NO NEXUS ESTABLISHED IN THE REASONS RECORDED OF THE TAXPAYER WITH MAH ASAGAR SECURITIES PRIVATE LIMITED WHICH WAS ENGAGED IN SUSPICIOUS TRANSACTION, WHICH LED TO ESCAPEMENT OF INCOME. THE AO ALSO DID NOT PROVIDED REASONS FOR REOPENING OF THE ASSESSMENT TO THE ASSESSEE. FURTHER, IT WAS OBSERVED BY HONBLE HIGH COURT THAT THERE MUST BE REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT BEFORE REOPENING OF THE CONCLUDED ASSESSMENT AND SUCH REASONS MUST HAVE LIVE LINK /NEXUS TO THE CONCLUSION THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT , WHICH WAS FOUND TO BE MISSING IN THAT CASE . IN THE INSTANT CASE BEFORE US, WE HAVE ELABORATELY DISCUSSED ABOUT THE REASONS FOR REOPENING AND FACTUAL MATRIX OF THE ASSESSEE CASE AND ARE OF THE VIEW THAT THERE WAS A NEXUS OF THE REASONS RECORDED FOR REOPENING OF THE CONCLU DED ASSESSMENT WITH THE FORMATION OF BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. THE RAISING OF HUGE SHARE CAPITAL AT A VERY HIGH RATE OF SHARE PREMIUM BY A PAPER COMPANY WHICH IS NEWLY INCORPORATED HAVING NO ASSET BASE/BUSINESS FROM SOME PARTIES WHO A RE NOT ASSOCIATED WITH THE PROMOTERS/DIRECTORS OF THE ASSESSEE COMPANY AND THESE OUTSIDERS SUBSCRIBING TO 90.12% OF SHARES AS AGAINST SUBSCRIPTION BY PROMOTERS/DIRECTORS TO THE TUNE OF 9.88% IS SUFFICIENT TO TRIGGER INVOCATION OF SECTION 147 OF THE 1961 ACT MORE - SO THE RETURN OF INCOME WAS ORIGINALLY PROCESSED U/S 143(1) OF THE 1961 ACT AND REOPENING IS SOUGHT TO BE DONE WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR . THE ASSESSEE HAS ALSO RELIED UPON DECISION OF MUMBAI - TRIBUNAL IN THE CASE OF DCIT V. PIRAMAL REAL TY PRIVATE LTD . IN ITA NO. 2317/ MUM/2017 DECIDED ON 16.11.2018. THIS IS A CASE I.T.A. NO.4648/MUM/2017 101 WHEREIN THE TAXPAYER COMPANY ISSUED SHARES AT PREMIUM . THE TRIBUNAL DISTINGUISHED THE ORDER OF TRIBUNAL IN THE CASE OF PRATIK SYNTEX PRIV ATE LIMITED(SUPRA) AND HELD THAT SHARE PREMIUM IN THIS CASE OF PIRAMAL REALTY PRIVATE LIMITED (SUPRA) WAS GENUINE. THIS CASE WAS DECIDED ON ITS OWN FACTUAL MATRIX AND CANNOT BE UNIVERSALLY APPLIED AS FACTUAL MATRIX IN EACH CASE ARE DIFFERENT. THE ASSE SSEE HAS RELIED UPON DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF WRIT P ETITION DECIDED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF KHUBCHANDANI HEALTHPARKS PRIVATE LTD. V. ITO IN W.P NO. 3027 OF 2015 DECIDED ON 10.02.2016 . IN THIS DECISION THE HONBLE BOMBAY HIGH COURT HAS HELD THAT SINE QUA NON FOR RE - OPENING OF THE CONCLUDED ASSESSMENT IS REASON TO BELIEVE. THE RAISING OF HUGE SHARE CAPITAL AT A VERY RATE OF SHARE PREMIUM BY A PAPER COMPANY WHICH IS NEWLY INCORPORATED HAVING NO ASSET BASE/BUSINESS FROM SOME PARTIES WHO ARE NOT ASSOCIATED WITH THE PROMOTERS/DIRECTORS OF THE ASSESSEE COMPANY AND THESE OUTSIDERS SUBSCRIBING TO 90.12% OF SHARES AS AGAINST SUBSCRIPTION BY PROMOTERS/DIRECTORS TO THE TUNE OF 9 .88% IS SUFFICIENT TO TRIGGER INVOCATION OF SECTION 147 OF THE 1961 ACT MORE - SO THE RETURN OF INCOME WAS ORIGINALLY PROCESSED U/S 143(1) OF THE 1961 ACT AND REOPENING IS SOUGHT TO BE DONE WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. EACH CA SE IS TO BE DECIDED ON ITS OWN MERITS AND SO FAR AS REOPENING IS CONCERNED, THE SAME IS TO BE VIEWED ON THE REASONS TO BELIEVE AS RECORDED WHILE ISSUING NOTICE. THE ASSESSEE HAS ALSO RELIED UPON DECISION OF HONBLE SUPREME COURT IN THE CASE OF CHHUGAMAL RAJPAL V. S.P. CHALIHA & OTHERS (1971) 79 ITR 603 (SC), THIS IS A CASE PERTAINING TO PRE - AMENDED SECTION 147 AND WHERE TWIN CONDITIONS WERE TO BE SATISFIED AS TO REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND OMISSION ON THE PART OF T HE I.T.A. NO.4648/MUM/2017 102 ASSESSEE TO TRULY AND FULLY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT,WHILE PRESENTLY WE ARE CONCERNED WITH POST AMENDED SECTION 147 OF THE 1961 ACT WHICH IN THE INSTANT CASE ONLY REQUIRED THAT THE AO BE HAVING REASONS TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT AS IN THE INSTANT CASE FIRST PROVISO TO SECTION 147 IS CLEARLY NOT APPLICABLE . THE ASSESSEE HAS ALSO PLACED RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. SFIL STOCK BROKING LIMITED ( 2010) 325 IT R 285(DEL.) , WHEREIN IT WAS HELD THAT AN INDEPENDENT APPLICATION OF MIND BY THE AO IS A SINE QUA NON FOR REOPENING OF THE CONCLUDED ASSESSMENT. IN THE INSTANT CASE, THE LEARNED CCIT BASED ON INTELLIGENCE INPUTS FROM DGIT(INTELLIGENCE AND CRIMINAL INVESTIGA TION) HAS INFORMED THE AO THAT THE ASSESSEE HAS ISSUED EQUITY SHARES AT A HIGH PREMIUM. THE RETURN OF INCOME WAS ORIGINALLY PROCESSED U/S 143(1) AND NO SCRUTINY ASSESSMENT WAS FRAMED U/S 143(3) OF THE 1961 ACT. THE REOPENING U/S 147 WAS SOUGHT TO BE DONE W ITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR AND AMENDED PROVISIONS OF SECTION 147 SHALL BE APPLICABLE. THE PROCESSING OF RETURN OF INCOME U/S 143(1) CANNOT BE CALLED AS AN ASSESSMENT AS WAS HELD BY HONBLE APEX COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS PRIVATE LIMITED(SUPRA) . THE AO MUST HAVE TANGIBLE MATERIAL TO COME TO FORMATION OF A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. THE ASSESSEE WAS INCORPORATED ONLY ON 14.01.2009 AND THIS IS THE FIRST YEAR OF ITS OPERATION. THERE IS A MEAGRE INCOME EARNED BY THE ASSESSEE FOR THE YEAR ENDED 31.03.2009. THERE ARE NO ASSETS BASE NOR ANY BUSINESS OF THE ASSESSEE AS IS DISCERNIBLE FROM THE FINANCIAL STATEMENTS FILED BEFORE US. THE ASSESSEE BEING A NEWLY INCORPORATED COMPANY HAS ISSUED EQUITY SHARES OF RS. 10 EACH AT A PREMIUM OF RS. 90 PER SHARE. THE OUTSIDERS HAVING NO CONNECTION WITH PROMOTERS/DIRECTORS OF THE ASSESSEE COMPANY HAD SUBSCRIBED 90.12% OF THE TOTAL FUND INFUSION IN THE ASSESSEE COMPANY WHILE THE PROMOTERS/DIRECTORS HAVE INFUSED 9.88% OF THE TOTAL FUND INFUSED IN I.T.A. NO.4648/MUM/2017 103 THE ASSESSEE COMPANY. THE AO ACTED ON THE INFORMATION AS TO VERY HIGH RATE OF SHARE PREMIUM CHARGED BY THE ASSESSEE COMPANY CONSIDERING THE SAME TO BE TANGIBLE INCRIMINATING MATERIAL FORMING A BELIEF THAT INCOME HAS ESCAPED ASS ESSMENT. EACH CASE IS TO BE DECIDED ON ITS OWN FACTUAL MATRIX AND PRESENT CASE BEFORE US IS A FIT CASE FOR INVOCATION OF REOPENING OF ASSESSMENT U/S 147 OF THE 1961 ACT. REFERENCE IS DRAWN TO THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF RAJMA NDIR ESTATES PRIVATE LIMITED(SUPRA). THE SLP FILED BY ASSESSEE AGAINST THIS CASE STOOD DISMISSED BY HONBLE APEX COURT. THE REFERENCE IS ALSO DRAWN TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF NDR PROMOTERS PRIVATE LIMITED(SUPRA) . THUS, BA SED ON OUR DETAILED DISCUSSIONS AS ABOVE, WE HAVE NO HESITATION IN UPHOLDING INVOCATION OF PROVISIONS OF SECTION 147 OF THE 1961 ACT FOR REOPENING OF THE CONCLUDED ASSESSMENT BASED ON FACTUAL MATRIX OF THE CASE AS DISCUSSED IN DETAILS AS ABOVE AND WE OVERTURN THE DECISION OF LEARNED CIT(A) ON THE LEGAL GROUND OF REOPENING OF CONCLUDED ASSESSMENT BY INVOCATION OF PROVISIONS OF SECTION 147 OF THE 1961 ACT AND HOLD THAT INVOCATION OF PROVISIONS OF SECTION 147 OF THE 1961 ACT WAS CORRECTLY UNDERTAKEN BY THE AO AND THE AO WAS HAVING REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND THEY WERE NOT MERELY REASON TO SUSPECT . AT THE STAGE OF INVOCATION OF PROVISIONS OF SECTION 147 OF THE 1961 ACT FOR REOPENING OF THE ASSESSMENT, IT IS NOT THE WATER TIGHT PROOF WHICH IS REQUIRED THAT INCOME HAS ESCAPED ASSESSMENT TO RE - OPEN THE CASE U/S 147 BUT A PRIMA FACIE BONAFIDE BELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT. IN THIS CASE BEFORE US, THE ASSESSMENT WAS NEVER ORIGINALLY FRAMED U /S 143(3) OF THE 1961 ACT BUT RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE 1961 ACT AND THE REOPENING IS SOUGHT TO BE DONE WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT. THUS, WE HOLD REOPENING U/S 147 AS WAS DONE BY THE AO TO BE VALID AND SET A SIDE THE APPELLATE I.T.A. NO.4648/MUM/2017 104 ORDER OF LEARNED CIT(A). HOWEVER , SO FAR AS MERITS OF THE ISSUES ARE CONCERNED, WE HAVE OBSERVED THAT LEARNED CIT(A) HAS ON THE ONE HAND HAS STATED THAT SINCE THE ISSUE IS DECIDED BY HER ON LEGAL GROUND WHEREIN REOPENING OF THE ASSESSMENT WAS CONSIDERED AS INVALID AND BAD IN LAW , THUS, THERE IS NO REASON FOR HER TO ADJUDICATE THE ISSUE ON MERITS AND AT THE SAME BREATH SHE HAS PLACED RELIANCE ON DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. GAGANDEEP INFRASTRUCTURES PRIVATE LIMITED IN ITA NO. 1613 OF 2014, ORDER DATED 20.03.2017 TO ALLOW GROUNDS OF APPEAL RAISED BY THE ASSESSEE CHALLENGING ASSESSMENT ORDER ON THE MERITS OF THE ISSUE. THE LEARNED CIT(A) PAS SED A VERY CRYPTIC ORDER WHICH IN OUR OPINION IS NOT SUSTAINABLE IN THE EYES OF LAW AS THE LEARNED CIT(A) WHOSE POWERS ARE CO - TERMINUS WITH THE POWERS OF THE AO IS REQUIRED TO ADJUDICATE ON THE FACTUAL MATRIX OF THE CASE KEEPING IN VIEW PROVISIONS OF SECTION 68 OF THE 1961 TO SEE WHETHER EVIDENCE ON RECORD SATISFY THE INGREDIENTS OF PROVISIONS OF SECTION 68 OF THE 1961 ACT AS TO IDENTITY AND CREDITWORTHINESS OF THE SUBSCRIBERS AND GENUINENESS OF THE TRANSACTION OF RAISING OF SHARE CAPITAL AND SHA RE PREMIUM. THUS, ON MERITS ALSO THE APPELLATE ORDER PASSED BY LEARNED CIT(A) IS NOT SUSTAINABLE IN THE EYES OF LAW AND WE SET ASIDE THE SAME ON MERITS TOO. THUS, WE ARE SETTING ASIDE THE ISSUES IN THIS APPEAL ON MERITS TO THE FILE OF LEARNED CIT(A) FO R DENOVO ADJUDICATION OF THE ISSUE OF RAISING SHARE CAPITAL AND SHARE PREMIUM TO BE ADJUDICATED KEEPING IN VIEW PROVISIONS OF SECTION 68 AND ALL OTHER RELEVANT PROVISIONS OF THE 1961 ACT. NEEDLESS TO SAY THAT THE LEARNED CIT(A) SHALL PROVIDE PROPER A ND ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN DENOVO ADJUDICATION PROCEEDINGS IN ACCORDANCE WITH LAW IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUSTICE. THE LEARNED CIT(A) SHALL ALLOW ASSESSEE TO FILE NECESSARY AND RELEVANT EVIDENCES/EXPLANATIONS IN ITS DEFENCE IN DENOVO ADJUDICATION PROCEEDINGS IN I.T.A. NO.4648/MUM/2017 105 ACCORDANCE WITH LAW. THE R EVENUE APPEAL IS ALLOWED AS INDICATED ABOVE . WE ORDER ACCORDINGLY. 9 . IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED AS INDICATED ABOVE . ORDER PRONOUNCED IN THE OPEN COURT ON 2 7 .02.2019. 2 7 .02.2019 S D / - S D / - ( PAWAN SINGH ) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 2 7 .02.2019 NISHANT VERMA SR. PRIVATE SECRETARY COPY TO 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) CONCERNED, MUMBAI 4 . THE CIT - CONCERNED, MUMBAI 5 . THE DR BENCH, 6 . MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI
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