GOPAL EXTRUSIONS PVT LTD,,JALGAON vs. INCOME-TAX OFFICER, WARD - 1(2),, JALGAON

IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCHES “A”, PUNE

BEFORE DR.MANISH BORAD, ACCOUNTANT MEMBER
AND SHRI VINAY BHAMORE, JUDICIAL MEMBER

आयकर अपील सं. / ITA. No.1633/PUN/2017
Assessment Year : 2008-09

Gopal Extrusions Pvt. Ltd.,
G-51, MIDC Area,
Jalgaon 425 003
Maharashtra
PAN : AAACG8418K
Vs. ITO, Ward-1(2),
Jalgaon
Appellant

Respondent

आदेश / ORDER

PER DR. MANISH BORAD, ACCOUNTANT MEMBER :

This appeal filed at the instance of assessee pertaining to the Assessment Year 2008-09 is directed against the order dated 01.05.2017 passed by CIT(A)-2, Nashik which in turn is arising out of the Assessment order dated 29.03.2016 passed u/s.143(3) r.w.s.147 of the Act.

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more opportunity to the assessee, subject to following conditions :

"(I).The impugned Order is quashed and set aside and the matter is relegated before the Tribunal on condition that the Appellant deposits
Rs.25,000/-) Rs Twenty Five Thousand Only) with the Income Tax
Officer, Ward.1(2), Jalgaon within a period of two weeks from today.

(II) The parties shall appear before the Tribunal 16.03.2022. (III) The Appellant shall produce the receipt of the deposit of costs of Rs. 25,000/-(Twenty Five Thousand only) with the Respondent/Sole before the Tribunal.

(IV) The Tribunal shall, thereafter decide the Appeal on it's own merits.

(V) As the date of appearance has been given by this Court, it is not necessary for the Tribunal to issue fresh notice to the parties."

“6. On careful reading of the above said direction of Hon’ble High
Court, we note that the order of this Tribunal was quashed and set aside and the matter is relegated to this Tribunal on a condition that the appellant shall deposit Rs.25,000/- with the Income Tax Officer,
Ward-1(2), Jalgaon within a period of two weeks from the date of order.

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8. On perusal of the said challan issued by the HDFC Bank Limited on 03-03-2022, shows that a sum of Rs.25,000/- was paid under the head “basic tax”, whereas, the direction of Hon’ble High Court was to deposit the said amount with the Income Tax Officer, Ward-1(2),
Jalgaon as cost.

“3. The undisputed aspect in this matter is that the Petitioner deposited the said amount of Rs.25,000/- on 03.03.2022. However, in the appeal that was remitted, the Income Tax Appellate Tribunal passed an order on 05.12.2022 and recorded in paragraphs 7 and 8
that, as the amount has been deposited under the head "Basic Tax", there is non-compliance of the order of this Court and, therefore, the appeal of the Petitioner was dismissed.

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submits that the cost amount may be utilised as the Court may deem appropriate.

(a) The Petitioner shall deposit Rs.25,000/- (Rupees Twenty
Five Thousand) in this Court within 07 days. The Registry shall transmit the said amount to the Medical Officer, High Court
Dispensary, Aurangabad.

(b) The order dated 05.12.2022 passed by the Income Tax
Appellate Tribunal shall stand set aside and Appeal No.ITA
No.1663/PUN/2017/ Assessment Year 2008-09, shall stand remitted to the Income Tax Appellate Tribunal "A" Bench at Pune.

(c) The Petitioner shall appear before the said Tribunal on 01.04.2024 and a notice of hearing need not be issued. Further hearing in the matter to take shape in accordance law.”

“[1] On the facts and in the prevailing circumstances of the case as well as in law, the learned CIT(A) has grossly erred in confirming the reassessment proceedings u/s.147 of the IT Act, which was initiated- in-absence of any valid material showing escapement of income in the hands of appellant Company and hence it is bad in law and void ab initio and may please be quashed.

[2] On the facts and in the prevailing circumstances of the case as well as in law, the learned CIT(A) has grossly erred in confirming the reassessment proceedings u/s.147 of the IT Act, though the impugned notice is bad in law, null, and void ab initio and without juri iction for the following reasons and hence the same may please be quashed,

(a) In the absence of fulfillment of conditions precedent for issuance of notice u/s 148 of the Income Tax Act, 1961;

(b) The reasons recorded for issue of notice do not indicate any failure on the part of the appellant to disclose fully and truly all material facts necessary for assessment, and hence, the juri ictional requirement to reopen the assessment after four years from the end of the relevant assessment, ie AY 2008-
2009 is not satisfied, and hence, an impugned notice issued u/s.148 dt.31-03-2015 is illegal and bad in law;
Gopal Extrusions Pvt. Ltd.

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(c) Validity of re-opening the assessment has to be decided only on the basis of reason recorded for issue of notice u/s.148 and not on the basis of other materials. Therefore, an impugned notice issued u/s.148 dt.31-03-2015 is illegal and bad in law, void ab initio and may please be squashed..

(d) The CIT(A) has erred in confirming A.O's allegation that appellant Company's fund are circulated by way of loan to wife of director and then from wife to the director and therefore the amount was introduced by the directors as his share capital without ascertaining the correctness of the facts and consideration of appellant's submission. Though appellant has proved that this allegation are totally false, incorrect and not tenable.

(e) In absence of proper tenable reasons contain in the said proposal, no approval could have been granted by the Addl.CIT.
The grant of approval was not a mere formality. Therefore, approval accorded on the said improper reasons by the Add.CIT, is certainly bad in law and thus, subsequently proceedings u/s.147/148 of the IT Act, too.

[3] On the facts and in the prevailing circumstances of the case as well as in law, the learned CIT(A) has grossly erred in confirming addition of Rs 8,40,00,000/- on account of share capital and share premium received by the appellant Company, treating it as unexplained credits u/s 68 of the Income Tax Act.

[4] On the facts and in the prevailing circumstances of the case as well as in law, the learned CIT(A) has failed to appreciate the facts of case and in confirming the addition of Rs.8,40,00,000/-, u/s.68 of the IT Act, for the following reasons:

(a) Merely on doubt, assumption, presumption, surmises, for the only reasons that the said enquiry letters issued u/s.133(6) of the 1 T Act, were either not served or returned back or served but not complied, and without bringing any evidence on the record by A.O in support of his contentions;

(b) Even though the appellant had furnished all the relevant details so as to establish the identity, creditworthiness and genuineness of the transactions and filing their financial statements and duly discharged its burden under the Act.

Thus, addition may please be deleted.

[5] On the facts and in the prevailing circumstances of the case as well as in law, the learned CIT(A) has grossly erred in confirming the interest charged of Rs.2,72,53,728/-,u/s.234B of the IT Act, even though, appellant was not liable to pay Advance tax in view of the provision of section 208 of the I T Act, and hence, provision of section 234 B of the Act, is not attracted. Therefore, appellant denied the Gopal Extrusions Pvt. Ltd.

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liability of interest u/s.234 B of the IT Act. Thus entire huge interest is requires to be deleted.

[6] It is humbly prayed that the reliefs as prayed and such other and further reliefs as may be justified by the facts and circumstances of the case and as may meet the ends of justice, may please be granted.

[7] The Appellate craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of the appeal, if deemed necessary at the time of hearing of the appeal.”

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income has escaped assessment and he accordingly issued notice u/s.148 of the Act and gave reasons recorded to the assessee and the objections filed by the assessee were duly disposed off by ld. AO and the assessment proceedings carried out after validly serving statutory notices. During the course of assessment proceedings, ld. AO observed that the business activity of the assessee company of manufacturing goods was closed down from F.Y. 2006-07. However, for the year under consideration, assessee company issued 23,28,050 equity shares of face value of Rs.10/- with the share premium of Rs.30/- totaling to Rs.9,31,22,000/- from 29 share applicants.
Out of such 29 share applicants, 15 were Private Limited companies based at Mumbai and Kolkata who had invested
Rs.8.40 crore of share capital and share premium of the assessee company. Thereafter, summons u/s.131 of the Act were issued to the Director of the assessee company namely
Sanjay Kumar Tapadia and the reply given by the Director was general in nature and for many of the questions he stated that he did not remember exactly the reply to questions asked by the ld. AO. Ld. AO thus concluded that no genuine investor would have invested in a company whose business is closed down and further no such genuine company would pay premium of Rs.30/- for each of the equity share. Ld. AO observed that the entire method and manner shows that the assessee company has only obtained accommodation entries in the garb of share application money. He also observed that the assessee has only tried to give colour of genuineness to the non-genuine transactions and ld. AO after referring to the various judgments including that of Hon’ble Apex Court in the case of CIT Vs. Durga Prasad More 82 ITR 540 held that entire credits appearing in the account of the assessee in the shape of Gopal Extrusions Pvt. Ltd.

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alleged share application money of Rs.8.40 crore from 15 share holding companies are unexplained credits and deserves to be added u/s.68 of the Act. Income assessed at Rs.8,40,49,890/-.

“Now I proceed to decide the technical /legal grounds.

"On the facts and in the prevailing circumstance of the case and in law, and in the absence of condition precedent for issuance of notice u/s. 148 of the Income-tax Act, 1961, the impugned notice is bad in law, null and void ab initio and without juri iction and hence the same may please be squashed."

"147- 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 section 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 recomputed, the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned thereafter in this section and in section 148 to 153 referred to as the relevant assessment year.

Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant
Gopal Extrusions Pvt. Ltd.

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assessment year, no action shall be taken under the 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 year by reason of the failure on the part of the assessee to make a return under section 139 or in reasons 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."

From the above provision, it is evident that what is required from A.Y. 1989-90 for issuing notice for reassessment is that the A.O.
should have reason to believe that income has escaped assessment.
In the case under appeal, the A.O. had noticed that the appellant company’s funds are circulated by way of loan to wife of director and then from wife to the director and thereafter the amount was introduced by the director as his share capital. It has also been noticed by the A.O. that the appellant company had issued share capital by issuing shares of 10/- each with a premium of 30/- per share and inspite of no business activity and meager income, the 15
companies from Mumbai and Kolkata have invested huge amount of ₹
8,40,00,000/- with the appellant company. The A.O. observed that the above subscription of 8,40,00,000 is not probable and hence had issued notices u/s. 133(6) to the above mentioned 15 companies. Out of 15 notices issued, 9 notices remained un-served and 5 notices were served but no compliance was received. In view of the facts of the case, the A.O. certainly had reason to believe that income has escaped assessment. It is also worth mentioning here that one of the company has replied in response to notice u/s. 133(6) that it had not contributed any share capital claimed by the appellant company. In view of the above facts and discussion, the contention of the appellant that in the absence of condition precedent for issue of notice u/s. 148, the notice and assessment is bad in law and void ab initio, is rejected. Ground No.1 is dismissed.

"On the facts and in the prevailing circumstance of the case and in law, that the proposal made by the A.O. for issue of notice u/s. 148, merely on the basis of enquiry letters issued u/s.
133(6) of the I.T. Act, were either not served or returned back or served but not complied and hence that cannot be considered as information and reasonable belief that income chargeable to tax has escaped assessment in respect of those creditors.
Therefore in absence of proper tenable reasons contain in the said proposal no approval could have been granted by the Addl. CIT. The grant of approval was not a mere formality.
Therefore, approval accepted on the said improper reasons by the Addl. CIT is certainly bad in law and hence, impugned notice issued u/s. 148 dtd. 31/3/2015 is illegal and bad in law, void ab initio and may please be squashed."
Gopal Extrusions Pvt. Ltd.

"3]- On the facts and in the prevailing circumstance of the case and in law, as the reasons received for issue of notice do not indicate any failure on the part of the appellant to disclose fully and truly all material facts necessary for assessment and hence the juri ictional requirement to reopen the assessment after four years from the end of the relevant assessment Le.
A.Y. 2008-09 is not satisfied, and hence an impugned notice issued u/s. 148 on 31/03/2015 is illegal and bad in law, void ab initio and may please be squashed."

4)- On the facts and in the prevailing circumstance of the case and in law, as the reasons recorded for issue of notice do not indicate that A.O. has recorded that "he has reasons to believe that income chargeable to tax has escaped assessment and he must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee." Both these conditions should co-exist to confer juri iction on the A.O. In absence of such recording, the A.O.
do not have juri iction for issue of an impugned notice u/s.
148 of the LT. Act, dtd. 31/03/2015 and hence proceedings initiate u/s. 147/148 are invalid, bad in law, void ab initio, and hence requires to be squashed."

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the part of the assessee to disclose true information is also evident from the reason recorded by the A.O. for reopening the assessment. In view of the above facts, I am of the considered view that the A.O. is justified in issuing notice u/s. 148 and reassessing the income of the appellant. Ground Nos. 3 & 4 are dismissed.

Section 234A, 234B and 234C in clear terms impose a mandate to collect interest at the rates stipulated therein. The expression
'shall' used in the said sections cannot by any stretch of imagination be construed as "may". This is clear from the fact that prior to the amendment brought about by the Finance Act,
1987, the legislature in the corresponding section pertaining to imposition of interest used the expression "may" thereby giving a discretion to the authorities concerned to either reduce or wave interest. The change brought about by the Amending Act
(Finance Act, 1987) is a clear indication of the fact that the intention of the Legislature was to make the collection of statutory interest mandatory.

In view of the above facts and discussion and the above mentioned decision of Hon'ble Supreme Court, the contention of the appellant is rejected. Ground No.7 is dismissed.”

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10. Ld. Counsel for the assessee referring to the legal grounds challenging the validity of the re-assessment proceedings stated that there was no proper reason to believe with the AO, no proper reasons are recorded, no proper approval obtained u/s.151 of the Act at it is merely mechanical in nature. She stated that the proposal for reopening of the assessment is bad and without any tangible material. She also referred to the decision of Hon’ble Delhi High Court in the case of Capital
Broadways (P) Ltd. Vs. ITO (2024) 167 taxmann.com 533 (Delhi) in support of its contention that no valid approval was granted for reopening. On merits of the case, she stated that the details of Addresses, PAN numbers along with copy of resolution passed by the alleged share applicant companies, their returns of income with audit reports and bank statements were filed before the lower authorities and the assessee has discharged its burden u/s.68 of the Act and the Revenue authorities failed to find any discrepancy in such details furnished. She further referred to the following written submissions :

“1. VALIDITY OF REASSESSMENT:

a. No reasons are recorded The proposal for reopening as part of the Approval has been placed on record. The said document states that it is a proposal for recording reasons for initiating action u/s 147 and not the reasons recorded by AO. In the said document, there is no whisper about reason to believe by the AO. It only states that the action u/s 147 is being proposed and has been referred for approval.

b. No Approval obtained as required u/s 151:

The copy of the Approval has been placed on record. It is submitted that the approval has been obtained on the proposal for reopening.
The Proposal itself expressly state that the approval is granted as proposed and further directed the AO to record reasons. It is submitted that the legal requisite u/s 147 is to obtain Approval u/s 151 on the reasons recorded. The record produced regarding approval clearly shows that the approval so obtained was not on reasons recorded but on the proposal. This being in clear violation of the juri ictional condition for reopening u/s 147, the impugned assessment proceedings are not valid in law.
Gopal Extrusions Pvt. Ltd.

Without prejudice to the above:

c. Approval mechanical:

The Approval is mechanical and does not show any application of mind on escapement of income and the material so as to show escapement of income. The approval is granted on the proposal and further directs the AO to record reasons. The remark that "I am satisfied on the satisfaction note" does not independently refer to any material and is been granted mechanically.

The proposal for reasons are dated 31.03.2015 and the approval granted is on the same date. It clearly indicates that the approval has been granted without proper application of mind.

Reliance is placed on decision of Delhi High Court in case of Capital
Broadways P Ltd V ITO reported in 167 taxmann.com 533. Held that-

Request for approval under section 151 in a printed format was placed before the Assistant Commissioner, who after according his satisfaction, placed the same before the Principal Commissioner. The Principal Commissioner granted the approval on the very same day.

The satisfaction arrived at by the concerned Officer should be discernible from the sanction order passed under section 151. However, as may be seen, the approval order is bereft of any reason.
There is no whisper of any material that may have weighed for the grant of approval.

The High Court has referred to the decision of Delhi High Court in case of Yum! Restauants Asia P Ltd reported in DCIT 397 ITR 665. It further refers decision of MP High Court in case of CIT V S Goyanka
Lime & Chemicals Ltd ITA 82/2012, 56 taxmann.com 390 wherein the High Court observed that the exercise of approval is shown to have been performed in less than 24 hours of time which also goes to indicate that the Commissioner did not apply his mind at all while granting sanction. The satisfaction has to be with objectivity on objective material.

The SLP challenging the decision rendered by the Madhya Pradesh
High Court was dismissed by the Supreme Court CIT) v. S. Goyanka
Lime & Chemical Ltd. [2015] 64 taxmann.com 313. Without prejudice to the above:

d. Proposal vague and without any tangible material:

i The proposal for reasons are vague and are not based on any tangible material to show escapement of income.
Gopal Extrusions Pvt. Ltd.

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The tenor of the proforma proposal clearly states that the notices issued u/s 133 were returned back. This is the sole basis provided by the Id AO to come to the belief that there is escapement of income in the hands of the appellant. The notices were issued in the year
2015 relating to the year FY 2007-08. Apart from the fact that notices were returned back, no other material has been referred to indicate that the share capital invested by the Companies was in fact the income of the appellant Company.

ii. The amount of Rs 6,98,10,000/- as stated in the proposal is also not ascertainable as the addition made in assessment is Rs
8,40,00,000/-. There is no application of mind even on the amount of escapement of income.

Detailed Address and PAN
Copy of Resolution passed by the said Companies
Return of Income with Audit Report
Memorandum and Articles of Association of Company
Bank Statement of Assessee in which Share Application was credited.

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lower authorities and before Hon ITAT. Mr Sachin Lohia, husband of Mrs Lohia never invested in the appellant Company. The allegation of the Id AO that assessee company's funds circulated in the form of share capital through these persons are baseless.

"A mere bald assertion by the A.O. that the credits were a circular route adopted by the appellant company to plough back its own undisclosed income into its accounts, can be of no avail. The AO was required to prove this allegation. An allegation by itself which is based on assumption will not pass muster in law. The revenue authorities would be required to bridge the gap between the suspicions and proof in order to bring home this allegation".

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company Tulsi Extrusion has not been considered nor examined. The appellant has explained the commercial reasons for the said investment by the company.

A. No reasons are recorded by the AO and the impugned reassessment proceedings are bad in law.

B. No Approval u/s 151 is obtained on the reasons recorded.

C. The Approval alongwith proposal clearly shows that it was only proposal and there is no finding about the reason to believe.

D. The appellant has discharged the burden u/s 68 by furnishing the supporting documents.

E. There is no material to show that the money is unaccounted income of the appellant.”

“1. Return of income, Audit Report, Bank statement and Ledger account of investment and Master Data of MCA in case of Signet
Commercial P Ltd. for AY 2008-09

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17. Resolution, ITR, Share Application, Form Bank Statement MOM &
AOA of Pingle Commerce Pvt Ltd

1 to 8
1. Where false evidence had been adduced by assessee to give colour of genuineness to bogus entries through bank accounts and deposits which were mostly by cash,
Assessing Officer was justified in making addition under section 68. Gopal Extrusions Pvt. Ltd.

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2. PANs are issued without de-facto verification, these can't solely divulge real identity of individual
2
Rick Lunsford Trade and Investment Ltd. Vs CIT [2017]
77 taxmann.com 110 (SC)
67 to 68
SLP dismissed upholding that it is open to the Revenue Department to make addition on account of alleged share capital u/s 68, where the assessee company has failed.
genuineness of its shareholders to show genuineness of its shareholders
6
Navodaya Castle (P.) Ltd. Vs
CIT [2015] 56 taxmann.com
18 (SC)
69 to 70
SLP dismissed against High Court ruling that certificate of incorporation,
PAN etc., are not sufficient for purpose of identification of subscriber company when there is material to show that subscriber was a paper company and not a genuine investor
7
Konark Structural Engineers
(P.) Ltd. Vs DCIT [2018] 96
taxmann.com 255 (SC)
71 to 72
Where assessee-company received certain amount as share capital from various shareholders, in view of fact that summons to shareholders under section 131 could not be served as addresses were not available, and, moreover, those shareholders were first time assessees and were not earning enough income to make deposits in question, addition made by Assessing Officer under section 68
was to be confirmed; SLP dismissed
Gopal Extrusions Pvt. Ltd.

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8
Konark Structural Engineers
8 (P.) Ltd. Vs DCIT [2018] 90
taxmann.com 56 (Bombay)
73 to 80
Where assessee-company received certain amount as share capital from various shareholders, in view of fact that summons served to shareholders under section 131 were unserved with remark that addressees were not available, and, moreover, those shareholders were first time assessees and were not earning enough income to make deposits in question, impugned addition made by AO under sec. 68, was to be confirmed
9
Where High Court upheld Tribunal's order confirming addition under section 68 in respect of share capital on ground that documents pertaining to share applicants produced by assessee did not demonstrate that such alleged applicants had invested in assessee's share capital, SLP filed against said decision was to be dismissed
10
J. J. Development (P.) Ltd. Vs
CIT [2018] 100 taxmann.com
101 (Cal.)

82 to 85
Officer made additions to assessee's income under section 68 in respect of amount received as share capital from several companies, in view of fact that all of these companies were maintained by one person who was engaged in providing accommodation entries through paper companies and all such companies were located at same address, impugned addition was justified
12
[2019]
110
taxmann.com 491 (SC)
104
to 111
Where assessee received share capital/premium, however there was failure of assessee to establish creditworthiness of investor companies, Assessing Officer was justified in passing assessment order making additions under section 68
for share capital / premium received by assessee company
13
[2020]
117
taxmann.com 38 (Delhi-Trib.)
114
Where share capital of assessee- company had been routed through two companies, existence and operation of which remained only on paper and enquries conducted showed that huge amounts were brought in assessee's books as share application money through said companies by shareholders, who could not properly explain their source, provisions of section 68 got attracted
16
Where assessee, a private limited company, sold its shares to unrelated parties at a huge premium and thereupon within short span of time those shares were purchased back even at a loss, share transactions in question were to be regarded as bogus and, thus, amount received from said transactions was to be added to assesee's taxable income under section 68

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14(a).
So far as the legal issues are concerned, the assessee has challenged the re-assessment proceedings on the ground that there was no tangible material with the AO to form a belief that income has escaped assessment and secondly no valid approval was obtained u/s.151 of the Act. We note that the AO in the instant case after having the information about the alleged circulation of funds between the assessee company through two individuals wherein the interest bearing funds of the assessee company were utilised for giving the funds and then again receiving such funds in the companies accounts in the mode of share application money. Ld. AO had issued notice u/s.148 based on this information alone and the reasons recorded by the ld. AO for reopening of the reassessment proceedings are as follows :

“The Income Tax Department have carried out enquiries and investigated in this case, wherein the DCIT Cir-1, Jalgaon after obtaining prior approval of the Commissioner of Income Tax-2, Nashik have issued letters u/s.133(6) to the investors which are 15 in Nos and postal remarks are as under :

S.No. Name of the person making investment
Date of issue of 133(6) letters
Remarks
1
Nico
Securities
Pvt.
Ltd.,
Jogeshwari (W), Mumbai
21/11/2013
Return back
“Left”
2
Doldrem Investment & Finance
Pvt. Ltd., Dahisar (E), Mumbai
21/11/2013
Refused
3
Ocean Investment & Finance
Pvt. Ltd., Dahisar (E), Mumbai
21/11/2013
Refused
4
Veena Credit & Holding Pvt.
Ltd., Kolkatta
21/11/2013
Address moved
5
Saumitra
Investment
&
Finance Pvt. Ltd., Dahisar (E),
Mumbai
21/11/2013
Refused
6
VDR Consultants Pvt. Ltd.,
Kolkatta
21/11/2013
Address moved
7
Pingle Commerece Pvt. Ltd.,
Kolkatta
21/11/2013
Addressee cannot be located
8
Pentium Hi Tech Pvt. Ltd.,
Goregaon (W), Mumbai
21/11/2013
Unclaimed return to sender
Gopal Extrusions Pvt. Ltd.

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9
Avanti
Vyapar
Pvt.
Ltd.,
Kolkatta
21/11/2013
Unclaimed return to sender
10
Vivek
Tracom
Pvt.
Ltd.,
Kolkatta
21/11/2013
No reply received
11
Sugreev Traders
Pvt. Ltd.,
Kolkatta
21/11/2013
No reply received
12
Malinath Trading Pvt. Ltd.,
Kolkatta
21/11/2013
Not complied till
21/12/2013
13
Novaflex cab case systems
Ltd., Kolkatta
21/11/2013
No reply received
14
Signet Commercial Pvt. Ltd.,
Kolkatta
21/11/2013
No reply received
15
Sarthak Traders
21/11/2013
No reply received

These investors have invested in the company Gopal Extrusions (P)
Ltd., Jalgaon by paying share premium. Out of 15 letters issued u/s.133(6), 9 letters have been received back by the postal department. In 5 cases, letters have been served but there is no response/compliance.

Thus, it is clear that the so called investors, i.e. Venture Capital
Companies either do not exist at the given address or are front persons to introduce non income tax paid money of the beneficiary company, i.e. Gopal Extrusions (P) Ltd., Jalgaon.

In view of the facts mentioned above, there is evidence to show that there is an escapement of income to the tune of Rs.6,98,41,500/- within the meaning of section 147(c) of the Income Tax Act, 1961 for the A.Y. 2008-09. Since the assessment for the A.Y. 2008-09 exceeds four years and there is no assessment u/s.143(3) completed, sanction for issue of notice u/s.148 of the Income Tax Act, 1961 of the Hon’ble Addl.
Commissioner of Income Tax, Range-1, Jalgaon for reopening of proceedings u/s.151 of the I T Act, 1961 for the A.Y. 2008-09 by issue of notice u/s.148 is requested. Hence, the proposal.”

14(b)
He has further proceeded to examine the books of the assessee company and noted that share application money has been received from 15 Private Limited Companies based at Mumbai and Kolkata. Ld. AO issued notices u/s.133(6) of the Act to the alleged share applicants for necessary verification as to whether genuine investments have been received. This exercise of the AO gave the result that 09 of the notices could not be served as the share applicant companies were not found
Gopal Extrusions Pvt. Ltd.

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at those addresses. Out of the remaining, five companies did not responded to the AO and one company which responded, stated that “we have never invested any amount in M/s. Gopal
Extrusions P. Ltd. and nor have had any transaction with them whatsoever and neither the above mentioned company is known to us.” Under these facts noted by the ld. AO, in our view, are sufficient for ld. AO to form a reason to believe that income has escaped the assessment. Hon’ble Supreme Court in the case of Raymond Woolen Mills vs. ITO (1999) 236 ITR 34 (SC) has held that there should be some reason to believe about the escapement of income at the stage of initiation of reassessment proceedings. Sufficiency or correctness of such material cannot be considered at that stage. Thus, when the AO had sufficient material to form reason to believe then he validly proceeded to issue notice u/sl.148 of the Act because for issuing a valid notice u/s.148 of the Act it only needs the reason to believe about the escapement of income and not any conclusive evidence of escapement and such aspect can be dealt during the course of assessment proceedings itself. Also if the AO does all the exercise of correctly calculating the escapement of income prior to issuance of notice u/s.148 of the Act, then carrying out the re-assessment proceedings would be a mere formality rather of no use. Thus, if the AO has reason to believe that there may be escapement of income then he is well within his juri iction to issue notice u/s.148 of the Act.
Further, we find that the objections raised by the assessee have been duly dealt by the AO prior to framing the re-assessment order. Therefore, we are of the considered view that a valid notice u/s.148 of the Act has been issued for carrying out the re-assessment proceedings.
Gopal Extrusions Pvt. Ltd.

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14(c)
As far as another legal issue raised by the assessee that the approval granted u/s.151 is mechanical in nature, we fail to find any merit in such contention because the detailed reasons were recorded providing each and every aspect of the working carried out by the AO prior to recording the reasons and they were in itself sufficient for the approving authority to accord the permission. In case the reasons were not recorded, merely mentioning ‘yes’ for approving the issuance of notice u/s.148 may be questioned. But under the given facts of the case, we find that valid approval u/s.151 of the Act has been granted. Thus all the legal grounds raised by the assessee vide grounds of appeal No.1 and 2 in the instant appeal are hereby dismissed.

“Cash credits.
68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year :
Gopal Extrusions Pvt. Ltd.

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[Provided that where the sum so credited consists of loan or borrowing or any such amount, by whatever name called, any explanation offered by such assessee shall be deemed to be not satisfactory, unless,—

(a) the person in whose name such credit is recorded in the books of such assessee also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:

Provided further that] where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless—

(a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:

[Provided also] that nothing contained in the first proviso 86[or second proviso] shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.”

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satisfactory explanation of the nature and source, of the investments made, it is open to the Revenue to hold that it is the income of the assessee, and there would be no further burden on the revenue to show that the income is from any particular source. Thereafter the Hon’ble Supreme Court summed up the principles, which emerged after deliberating upon various case laws, as under:

“i.
The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and credit-worthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus.

ii.
The Assessing Officer is duty bound to investigate the credit- worthiness of the creditor/subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name-lenders.

iii.
If the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the transaction would not be established.”