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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
AadoSa / O R D E R महावीर स िंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:
These cross appeals are arising out of the order of Commissioner of Income Tax (Appeals)-9, Mumbai [in short CIT(A)], Appeal No. CIT(A)- 9/Cir.4/590/2015-16 vide order dated 16.01.2017. The Assessment was framed by the Dy. Commissioner of Income Tax, Circle-4(3)(1), Mumbai (in short ‘DCIT/ITO/ AO’) for the A.Y. 2009-10 vide order dated 23.03.2016 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
At the outset, the learned Counsel for the assessee stated that assessee in its CO has challenged the reopening of assessment and raised the legal grounds. Hence, he stated that let the assessee be allowed to argue the assessee’s CO first. Accordingly, we take up the CO and the ground raised by assessee reads as under: - “On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in dismissing the following legal grounds raised by the appellant relating to reopening of assessment and consequent assessment order passed u/s. 143(3) r.w.s 147 of the Act:-
(a) On the facts and in the circumstances of the appellant's case and in law, the Ld. A.O erred in re-opening the assessment u/s. 147 by issue of 3 CO No. 316/Mum/2018 notice u/s. 148 dated 24.03.2015, which is barred by limitation, illegal, bad in law, void-ab- initio or otherwise void for want ,of Jurisdiction.
(b) On the facts and in the circumstances of the appellant's case and in law, the Ld. A.O, erred in re-opening the assessment uls. 147 by issue of notice dated 24.03.2015 u/s 148 which is barred by limitation in view of the first proviso to Section 147 of the I.T. Act, 1961."
Briefly stated facts ae that the assessee filed original return of income under section 139(1) of the Act on 25.09.2009 and the same was processed under section 143(1) of the Act. Subsequently, the AO reopened the assessment by issuing notice under section 148 of the Act dated 21.03.2014 and inconsequence to notice under section 148 of the Act, the assessee filed its return of income as originally filed by assessee on 15.04.2014. The relevant reasons recorded for issuance of notice under section 148 of the Act vide notice dated 21.03.2014 reads as under (which is enclosed at page 20 of assessee’s paper book): - “Reasons for issuing of notice under section 148 ………….
The assessee filed Return of Income for AY. 2009-10 on 25.09.2009 returning a Total Income of Nil. The return was processed u/s. 143(1) of the I.T. act, 1961 on 03.01.2011. As per information received from the Director of Income Tax (Intell&CR.Inv.), Mumbai, vide letter 4 CO No. 316/Mum/2018 No.DlT(I&Cl)/F.No.233/ROC/2013-14 dated 26.03.2014 through CCIT(CCA), Mumbai, it was seen that the assessee has issued shares at a price which is over and above the nominal value of the shares the detail of which are as under:
Company name PAN Share No. of Face Total Allotment shares Value premium Type issued Perfect Corporate AADCP0907H Cash 190500 10 17,145,000 Services Ltd. The pre-requisite for issue of shares at premium is that there should be a substantial Increase in the net worth of the company. It is mainly profitability, credibility, goodwill of the concern which creates the opportunity and requirement of premium. On perusal of the balance sheet which has been e-filed there appears to be no corresponding accretion to the assets of the company which could justify the unreasonable high premium received from the issue of preference shares. The sale price of the preference/equity shares having face value of Rs.10 and a premium of Rs.90 per share is not correct as per the net worth of the shares of the company. The Intrinsic value of the shares in comparison to the premium received on the shares is not substantiated. Therefore, the large premium received by the assessee company amounting to Rs.17,145,000/- is unconvincing and unjustified.
5 CO No. 316/Mum/2018 In view of the above information, the total share premium amounting to Rs.17,145,000/-is extremely unjustified excessive and are not genuine. The premium amount of the preference/equity shares Is not correct as per the net worth of the company. On account of having a look at this fact, for bringing this amount to tax and as also the failure on the part of the assessee to disclose fully the details, I have reasons to believe that income to the extent of Rs.17,145,000/- has escaped assessment for the A.Y. 2009-10 within the meaning of section 147 of the Income Tax Act. I am satisfied that the assessee has not made a true and fair disclose in its return of income filed and that this is a fit case for issue of notice u/s. 148 read with section 149(1)(a) and Section 151(2) of the Income Tax Act, 1961. Hence, I proposed to re-open the assessment u/s. 147 of the I.T. Act, 1961 by Issuing notice u/s. 148 of the Income Tax Act, 1961.; From the above, it seems that the notice under section 148 of the Act was issued and assessment was reopened in order to verify the genuineness of share capital raised by the assessee during the previous year 2008-09 relevant to AY 2009-10. The assessee during the course of reassessment proceedings in response to notice under section 142(1) dated 13.10.2014, filed various details including the details of share capital, share premium receipt by assessee along with the confirmations, 6 CO No. 316/Mum/2018 name, address, PAN No. of applicant of shares and various other details relating to the same as well as justification for share premium receipt by assessee. The assessee filed these details vide letter dated 28.10.2014. The AO after considering all the details completed the assessment and passed the assessment order under section 147 read with section 143(3) of the Act vide order dated 31.10.2014, which is enclosed in assessee’s paper book at pages 22 to 35, wherein the AO has accepted the entire share capital including the share premium issued by the assessee during the year under consideration amounting to ₹ 1,71,45,000/-. No addition on this account was made despite the reasons recorded by the AO on this very reason.
Subsequently, again the AO issued notice under section 148 of the Act to reopen the complete assessment under section 147 read with section 143(3) of the Act dated 31.10.2014 vide notice issued under section 148 of the Act dated 24.03.2015. For this, the AO recorded the reasons which are enclosed in assessee’s paper book at page 41 and the relevant reasons reads as under: - “Reasons for issuing of notice u/s 148 ……….
The assessee filed its return of income on 25.09.2009 returning total income Nil. The same was processed under section 143(1) of the I.T. Act, 1961 on 03.01.2001. Scrutiny assessment completed under section 143(3) read with section 147 of the AY 2009-10 on 31.10.2014. 7 CO No. 316/Mum/2018 A search and seizure action was carried out in the case of Shri Praveen Kumar Jain group on 01.10.2013. In the statement recorded during the course of search proceedings, Shri Pravin Kumar Jain admitted that the only activity carried out by all concerns controlled by him is providing accommodation entries in the nature of bogus unsecured loans, share application money, bogs sales and LTCG etc. Further from the statements of dummy directors/ proprietors it was revealed that they were used to sign different papers for normal consideration given by Shri Pravin Kumar Jain, Pravin Kumar Jain himself is a director in few concerns only. However, through various dummy directors/ proprietors he controls, operates and manages a large number of concerns. All these concerns are not carrying out any genuine business. They do not have aby physical stock of goods. Further these concerns have not employed any persons except a few common accountants who manage accounts and banking transactions of all such concerns and all these concerns are indulged in the activity of providing accommodation entries only.
Subsequent to the search action in the case of Shri Pravin Kumar Jain, search and seizure action was carried out by the Mumbai 8 CO No. 316/Mum/2018 Investiation Wing in Kamla Land Mark Group and Subhlaxmi Group.
Kamla Land Mark Group involved in the business of real estate had taken accommodation entries on unsecured loans from various concerns including those run and operated by Shri Pravin Kumar Jain. During the course of search action, Shri Jity Jain the promoter of the group admitted in his statement recorded on oath under section 132(4) that the group had taken unsecured loans taken from two bogus entities viz. Faststone Trading Co. Pvt. Ltd. and New Planet Trading Co. Ltd controlled by Shri Praveen Kumar Jain.
Similarly, subhalaxmi Group engaged in the business of manufacturing of textiles, had taken accommodation entries of bogus share capital from various entry providers including the concerns of Shri Pravin Kumar Jain. In his statement recorded on oath under section 132(4), Shri Yogesh Agarwal, Promoter of the group admitted that such entries of share capital are in the nature of accommodation entries only.
The above search findings corroborate that all the concerns run, controlled and operated by Shri Pravin Kumar Jain are 9 CO No. 316/Mum/2018 indulged in the activity of providing accommodation entries only.
From the information received it is seen that the assessee has taken accommodation entries in the nature of purchase from the following accommodation entry operators run, controlled and operated by Shri Pravin Kumar Jain. The details are as under: - Sl Name of Hawala Entry Operator Amount Nature of AY No. transaction 1. Ansh Mercandise Pvt. Ltd. (New 7,00,000 SAP 2009-10 Planet Trading Co. Pvt. Ltd) 2. Ansh Mercandise Pvt. Ltd (New 25,00,000 SAP 2009-10 Planet Trading Co. Pvt. Ltd) 3. Ansh Mercandise Pvt. Ltd (new 16,50,000 SAP 2009-10 Planet Trading Co. pvt. Ltd.) 4. Kush Hindustran Pvt. Ltd 16,20,000 SAP 2009-10 5. Olive Overseas Pvt. 16,20,000 SAP 2009-10 Ltd.(Realgold Trading P Ltd.) 6. Raghunandan Rayons Ltd. 16,20,000 SAP 2009-10 7. Triangular Infocom Ltd. (Lexus 25,00,000 SAP 2009-10 Infotech Ltd.) 8. Triangular Infocom Ltd. (Lexus 16,20,000 SAP 2009-10 infotech Ltd.) 9. Triangular Infocom Ltd. (Lexus 16,20,000 SAP 2009-10 infotech Ltd.) Total 1,54,30,000 In view of the above information, the total share application received by the assessee amounting to ₹ 1,54,30,000/- are not genuine and accordingly I have reason to believe that the same has escaped assessment for AY 2009-10 within the meaning of section 147 and am satisfied that this is a fit case of issue of notice under section 148 r.w.s 149(1)(a) and section 151(1) of the Income Tax Act, 1961. 10 CO No. 316/Mum/2018
The learned Counsel for the assessee in view of the above reasons, tried to explain that the AO has applied his mind to the facts of the case mechanically to reopen the assessment on the basis of information received from Investigation Wing. He explained, that, it is particularly evident and established from the fact that the assessee has received share application money from the following three parties only: - Sl Name of Hawala Entry Operator Amount No. 1. Ansh Mercandise Pvt. Ltd (new Planet 16,50,000 Trading Co. pvt. Ltd.) 2. Raghunandan Rayons Ltd. 16,20,000 3. Triangular Infocom Ltd. (Lexus 25,00,000 Infotech Ltd.) Whereas in the reasons recorded, the AO has satisfied that the assessee has received share application money of ₹ 1,54,30,000/- from the five parties, but the AO in the reasons have mentioned that 9 parties, which has been duplicated. Thus, in view of the above recording of the reasons, the AO has neither verified the assessment record nor applied is own mind but simply reopen the assessment mechanically on the basis of information received from investigation Wing. The assessee carried the matter before CIT(A) on jurisdictional issue as well as on merits. The CIT(A) decided the issue on merits in favour of assessee by observing in para 6.3.22 to 6.3.23 as under: - “6.3.22 In the case before me the record also shows that to prove genuineness of impugned share application money from the said parties, the appellant has furnished to the AO the various details which has been also produced during the course of appellant proceedings and may be seen from the 11 CO No. 316/Mum/2018 appellant’s submissions reproduced above and therefore, for the sake of brevity not being repeated here.
Details of share Contributor Shareholde Amount Remark applicant/s ’s capital r’s Funds/ of Capital s (share Net Worth/ contribut capital + Equity of ed by this Share the party to capital Applicant Appellant reserves) Company/ as on ies 31.03.200 8 of the previous year (Preceedin g FY prior to FY in which contributio n made) Ansh Merchandise Pvt. 174,79,98 Share 25,00,00 An Ltd 2 Capital ₹ 0 account Office No. 211, Balaji 48,15,000/- payee Arcade Buuilding, SV Reserve & cheque Road, Kandivali (West), Surplus etc. has Mumbai-400 067. ₹ been PAN AABCN8176E 1,26,64,982 issued CIN /- out of U51909MH2003PT3142 its own 392 funds through banking channel Raghunandan Rayons 452,47,10 Share 16,00,00 An Ltd. 504, Pawan Wing, 4 capital ₹ 0 account Indraprastha Complex, 56,18,610/- payee Satya nagar, Borivali Reserves & cheque (West) Mumbai-400 092 Surplus etc. has PAN AABCR1177R ₹ been 3,96,28,494 issued 12 CO No. 316/Mum/2018 out of its own funds through banking channel Triangular Infocom Ltd. 310,81,68 Share 25,00,00 An CS-1, Silver Anklet, Yari 2 Capital ₹ 0 account Road, Versova, Andheri 2,48,22,000 payee (West), Mumbai-400 053 /- Reserve cheque PAN AAACL4648G & Surplus has CIN etc. ₹ been U74999MH1998PLC116 62,59,682/- issued 845 out of its own funds through banking channel The above chart has been culled out from various details filed by the appellant and will show that the relevant parties/ companies were in existence since they were having PAN number and regularly filing IT returns and also having ON number and were in existence in the records of