AAA POWER PROJECTS PVT LTD,NEW DELHI vs. ITO WARD - 1(1), NEW DELHI

ORDER

PER ANIL CHATURVEDI, AM:

2 amounting to Rs.1,13,86,760/- during the F.Y. 2010-11 & had failed to file the return of income for A.Y. 2011-12. Accordingly, the case of the assessee was reopened u/s 147 of the Act and notice u/s 148 of the Act dated 31.03.2018 was issued and served on the assessee. Notices u/s 142(1) were also issued by AO. AO has noted that assessee filed the return of income in response to notice u/s 148 on 18.09.2018 declaring Nil income. AO has noted that notices u/s 143(2)/142(1) of the Act were issued to the assessee and assessee was asked to furnish the full details of paid up share capital/share application money during the year along with the other details as noted in the notice. AO noted that assessee did not file the full details called for by the AO but only filed the name and addresses of the share applicant. To verify the identity, creditworthiness and genuineness of the parties from whom assessee had claimed to have received the share application money, information u/s 133(6) of the Act was called from the share applicants. AO at page 4 of the order has noted party-wise status of the notices issued. The sum and substance of the same is that in some cases the notices were received back un-served and the cases where the notices were served, no information were filed by the respective parties. AO has also noted that thereafter, assessee was issued a final show-cause notice wherein the assessee was asked to explain the nature and source of the transactions with respect to the identity, creditworthiness and genuineness of the share application money, and to produce the directors of the company who have subscribed to the share capital of assessee. AO noted that 3 assessee did not produce the directors, nor filed the required details called for by the AO. AO, thereafter, for reasons noted in the assessment order concluded that the funds received on account of share capital cannot be accepted as genuine transactions of raising share capital and by merely complete the paper trail it cannot be said that assessee has discharged its onus to prove genuineness of transactions. AO, thereafter, by relying on the decision of Hon’ble Delhi High Court in the case of CIT vs. N.R. Portfolio Private Ltd. in and other decisions cited in his order concluded that assessee had not discharged the onus cast on it to prove the genuineness of the transaction more so, as all the notices issued to the parties calling for information were returned unserved. AO, therefore, held the amount of share application money of Rs.1,02,00,000/- received by the assessee to be as unexplained and made its addition u/s 68 of the Act.

4 5. Aggrieved by the order of AO, assessee carried the matter before CIT(A). Before CIT(A), assessee inter alia challenged the initiation of proceedings u/s 148 of the Act and on merits challenged the addition made by AO.

6. On the issue of initiation of proceedings u/s 148 of the Act, CIT(A) at para 7.2 of his order after considering the submissions of the assessee has inter alia noted that AO had not acted mechanically before recording the reasons to believe of escapement of income and that AO had applied his mind by considering all the information before him. He has further noted that AO had taken the approval of higher authorities as required u/s 151 of the Act before issuing notice u/s 148 of the Act and has not acted under the borrowed belief or under any direction. He has further noted that the reasons recorded by the AO were based upon specific information. He, thereafter, concluded that AO had validly assumed jurisdiction u/s 148 of the Act by recording the reasons to believe in accordance with the provisions of the Act u/s 147 of the Act and therefore, held reopening to be valid.

1. The Ld. CIT(A) has erred in law and on facts to uphold the initiation of proceedings u/s 148 disregarding the fact that the copy of reasons recorded for the reopening of the assessment were not provided to the appellant and they had no opportunity to raise their objections to the notice issued by the AO.

2. The Ld. CIT(A) has erred in law and on facts by confirming the addition of Rs.1,02,00,000/- u/s 68 of the Act on account of alleged unexplained share application money received, without taking into consideration the documents filed by the appellant and the absence of any material from the AO to raise any doubt on the veracity and the genuineness of the documents so filed.

3. The Ld. CIT(A) has erred in law as well as in facts by confirming the addition of Rs.2,04,000/- on account of alleged commission paid on receipt of share application money.

4. The Ld. CIT(A) has erred in law as well as in facts by confirming the above additions disregarding the documentary evidences filed by the appellant and by merely relying on the fact that the directors of the share applicant company could not be produced assuming a burden on the appellant which is not conceived under the law.

6 5. The Ld. CIT(A) has erred in law and on facts in confirming the additions made by the AO despite the appellant having fully discharged the onus cast on them under the law.

7 order has held the reopening of the assessment u/s 148 to be in accordance with law. As far as addition on merits is concerned, he has given a finding that assessee has not discharged the onus of proving the creditworthiness of the companies who had invested in the assessee company, the genuineness of the transaction nor the assessee could produce the directors of the investing companies before the authorities. Before us, assessee has not placed any material on record to controvert the findings of lower authorities. In such a situation, we find no reason to interfere with the order of CIT(A). Thus the grounds of assessee are dismissed.

Order pronounced in the open court on 19.09.2022