VILSON ROOFING PRODUCTS PRIVATE LIMITED,KOLHAPUR vs. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOLHAPUR

Briefly stated facts of the case are that; 2.1 Assessee Company filed its return of income [in short ‘ITR’] declaring NIL total income. Upon information from investigating wing that assessee is ultimate beneficiary of cash transaction arising to it in the form of share subscription, Ld. AO after recording reasons & obtaining prior approval from jurisdictional authority has reopened assessee’s case u/s 148 r.w.s.147 of the Act.

We have heard rival contentions of both parties on legal issue raised in first three ground and meritare ground number 4 of the appeal; and subject to provisions of rule 18 of ‘ITAT Rules’, perused material placed on record, case laws relied upon by parties and duly considered the facts of the case in light of settled legal position which are also forewarned to respective parties.

We find that, legal issue raised through first three grounds is similar to the issue raised before first appellate authority, wherein the Ld. CIT(A) after examining claim of the assessee & elaborated discussion has adjudicated the issue against the appellant. The appellants submission is no different than before tax authorities below, therefore we deem no necessary to multiply authorities on this point in confirming the adjudication laid in para 11-15 of the impugned order in absence of any deprecative evidence; “11. I have considered the submissions made by the appellant. Before reaching to any decision as to whether the reopening u/s 147 of the Act in the present case is valid or otherwise, it is Important to ITAT-Pune Page 3 of 14 Vilson Roofing Products Pvt. Ltd., Act as well as various judicial pronouncements on this issue. As per the provisions of Section 147 of the Act, for reopening of assessment within a period of 4 years from the end of the assessment year, the only requirement for reopening the case is “reason to believe”. For a period beyond 4 years in cases where an original assessment was made u/s 143(3), further requirement is the non-disclosure of material facts necessary for assessment by the assesses. However, in cases where no scrutiny assessment has been made even beyond a period of 4 years, the only requirement for reopening the case is “reason to believe”.

Following are few other case laws, where, the reopening has been upheld by various courts in the similar circumstances. i) Yogendra kumar Gupta Vs ITO 51 taxmann.com 383 (SC) where Hon‟ble Supreme Court dismissed the SLP against the High Court judgment which held that where subsequent to completion of original assessment, Assessing Officer, on basis of search carried out in case of another person, came to know that loan transactions of assessee with a finance company were bogus as said company was engaged in providing accommodation entries, it being a fresh information, he was justified in initiating reassessment proceeding in case of assessee. ii) In the case of Avirat Star Homes Venture (P.) Ltd. [2019] 102 taxmann.com 60 (Bombay), Hon‟ble Bombay High Court has held- Where information was received from investigation wing about certain companies that were involved in giving accommodation entries of various natures to several beneficiaries and assessee was one of them, information supplied by investigation wing to Assessing Officer, thus, formed a prima facie basis to enable Assessing Officer to form a belief of income chargeable tax having escaped assessment. iii) In the case of PCIT Vs Paramount Communication (P.) Ltd. (2017-TIOL-253-SC-IT), Hon‟ble Supreme Court dismissed SLP of assessee. Information regarding bogus ITAT-Pune Page 7 of 14 Vilson Roofing Products Pvt. Ltd., DRI from CCE which was passed on to revenue authorities was 'tangible material outside record' to initiate valid reassessment proceedings. iv) In the case of Aradhna Estate (P.) Ltd.Vs DCIT [2018] 91 taxmann.com 119 (Gujarat), Hon‟ble Gujarat High Court held that where reassessment proceedings were initiated on basis of information received from Investigation wing that assessee had received certain amount from shell companies working as an accommodation entry provider, merely because these transactions were scrutinised by Assessing Officer during the original assessment, reassessment could not be held unjustified. v) In the case of Pushpak Bullion (P). Ltd. Vs DCIT [2017] 85 taxmann.com 84 (Gujarat), Hon‟ble Gujarat High Court held that where investigation wing of department had during the course of investigation in case of a third party found that he was indulged in providing accommodation entries and bogus bills, and assessee had made sizeable purchases from him, reopening notice against assessee was justified. vi) In the case of Ankit Financial Services Ltd. Vs DCIT [2017] 78 taxmann. Com 58 (Gujrat), Hon‟ble Gujrat High Court held that where material recovered in search of another person indicated that assessee had received bogus share applications through accommodation entries, since assessee was beneficiary, initiation of re-opening was justified.

In the present case, the appellant has not claimed that original assessment was completed u/s 143(3) of the Act, therefore, the only requirement for issue of notice u/s 148 of the Act is that there should be a fresh Information with the Assessing Officer Indicating that some income has escaped. Moreover, as discussed above, the sufficiency or correctness of the material is not a thing to be considered at this stage. The reasons recorded by the Assessing Officer clearly suggests that the Investigation Wing of Kolkata carried out an extensive investigation regarding the network of accommodation entry providers wherein it was found that a total amount of Rs. 259.63 crore was deposited in cash in DCB, Kolkata and after multilayering the transactions, the said amount was ultimately transferred to beneficiaries. As per the investigation conducted by the investigation Wing, the appellant was a beneficiary of such accommodation entries and received an amount of Rs. 37,50,000/- and the name of the ITAT-Pune Page 9 of 14 Vilson Roofing Products Pvt. Ltd., 5th layer. Thus, the case was re-opened on the basis of fresh and specific information which was received by the Assessing Officer on 29/03/2016 and therefore, the requirement as provided u/s 147 of the Act is getting fulfilled in the present case because as discussed earlier in this order in the present case the only requirement is that there should be a fresh information with the Assessing Officer indicating that some income has escaped.

To sum up, in this case credible information was received by the Assessing Officer which was examined by him. After examination, a reasonable belief was formed by the Assessing Officer that the income for A.Y. 2009-10 escaped assessment. He therefore, issued notice u/s 148 of the Act, after recording „reasons to believe‟ and taking approval. On receipt of request from the appellant, copy of reasons recorded was provided to the appellant. The objections filed by the appellant challenging the reopening were also disposed by the Assessing Officer vide his order dated 30/11/2016. Thus, the Assessing Officer has followed the due procedure for reopening the assessment. In view of the totality of facts, provisions of the Act and relevant case laws as discussed above, it is held that notice u/s 148 of the Act was validly issued in this case. Accordingly, ground no. 1 challenging the reopening of the assessment is DISMISSED.”

Now coming to solitary meritorious ground number 4 whereby the appellant alleged that, Ld. AO has not conclusively proved the receipt of share application money as not genuine or bogus or sham. It is apt to state here that, three-tier onus i.e. identification, creditworthiness and genuineness relating to entries credited in the books of account lies with or shouldered on the claimant ITAT-Pune Page 10 of 14 Vilson Roofing Products Pvt. Ltd., assessee. In case assessee fails to discharge this three-tier onus in a row for each of the credit transactions undertaken by the appellant in any previous year, then such failure would not create any negative onus on the Revenue. That is to say failure of appellant to prove creditworthiness and genuineness do not confer a right against the Revenue to prove otherwise. The moment appellant assessee fails to prove creditworthiness of subscriber and genuineness of transaction with cogent and satisfactory evidences, this de-facto sufficient to hold the credit transaction as sham or bogus and nothing more is required to prove it. Therefore, the appellant’s ground in our considered view prima-facie is meritless thus deserves to be dismissed.

In addition to above, in so far as merits of the case is concerned, we observed that in absence of cogent material to prove credit worthiness and genuineness of share application/subscription transaction qua cash credit, the Ld. CIT(A) pressing into service catena of judicial precedents and threadbare discussion dilated from para 18 to 22 (placed at page 22 to 36, reproduction of which deemed unnecessary) have upheld the addition concurring with tax authority below as; “23. Coming to the facts of the present case, a perusal of page 7 and 8 of the assessment order clearly suggests that the appellant could not satisfactorily reply to many of the queries raised by the Assessing Officer. Further, the Assessing Officer issued various notices to M/s SIL and ABIL, however, all the notices were returned unserved / unclaimed/not known/insufficient address, etc. When confronted ITAT-Pune Page 11 of 14 Vilson Roofing Products Pvt. Ltd., with the appellant he provided fresh addresses. Although, replies were received from these companies from fresh addresses but the reply contained only basic information and most of the information was not provided by these two companies by saying that there has been a change in management. The Assessing Officer has discussed these issues on page 10, 11 and 12 of the assessment order. In short, the appellant has only provided the paper documents however as discussed earlier that on several occasions, various courts including Hon. Supreme Court have held that in the case of private placement of shares, the make-believe documents are not sufficient. The appellant has relied on the decision of Hon. Supreme Court in the case of Lovely Exports (supra), however, in the subsequent decision of NRA Iron (supra), the Hon. Supreme Court after considering the decision in the case of Lovely Exports (supra) have held that in case of private placement of shares, a higher onus is required to be placed on the Assessee since the information is within the personal knowledge of the Assessee and the Assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the Assessee. In the present case, during the appellate proceedings, the appellant has relied merely on case laws however it has not made any effort to substantiate the creditworthiness of these two companies and the genuineness of the transaction. In fact, no document such as confirmation, copy of ITR, copy of bank statement, copy of Financial Statement, etc, of these creditors have been filed before me. The Assessing Officer has already held that the creditworthiness of these companies remains unsubstantiated and a number of queries regarding the genuineness of transactions remained unanswered. For example, the Assessing Officer wanted to know that how the transaction between a Kolhapur ITAT-Pune Page 12 of 14 Vilson Roofing Products Pvt. Ltd., Kolkata based companies was arranged, how the premium was worked out, copies of correspondence prior to this investment, whether the said companies have sold shares to any person related to the appellant company and at what rate the shares were transferred by M/s SIL and ABIL to these persons. These questions are very relevant in order to ascertain the genuineness of the transaction under dispute, however as noted by the Assessing Officer, these important questions remained unanswered. Considering the totality of facts of the case, we are of the considered opinion that the appellant has failed to prove the creditworthiness of the companies from whom amount of Rs.3,00,00,000/- was received and also has failed to substantiate the genuineness of transaction. Accordingly, the addition of Rs.3,00,00,000/- made by the Assessing Officer u/s 68 of the Act is upheld.” (Emphasis supplied)

It is not out of box to state that, even in the present proceedings, the appellant other than making bald claims did place no cogent material on record to showcase the creditworthiness of companies based out of Kolhapur which subscribed alleged 2000 shares of face value of ₹1000/-each at a premium of ₹14000/-each in the appellant’s company. Further, apart from making bare assertion that share subscription routed through banking channel, the appellant failed to discharge casted onus of proving genuineness of impugned transaction with convincing material on record. Therefore, in our considered view, the addition made u/s 68 of the Act and confirmed by Ld. CIT(A) do not call for any change in view of decision of Hon’ble Apex Court in ‘PCIT Vs NRA Iron & steel’ reported in 412 ITR 161(SC).

In view hereof we deem not necessary to multiply authorities on this point. In result we neither find any merits in the ground raised nor any reasons to interfere with the impugned order under challenge. Ergo this ground also stands dismissed.

In result, the appeal of the assessee is DISMISSED. In terms of rule 34 of ITAT Rules, order pronounced in open court on this Tuesday 12th day of December, 2023.