Case Law Details

Case Name : Nishit Fincap Pvt Ltd. Vs ITO (ITAT Delhi)
Appeal Number : ITA No. 2323/DEL/2017
Date of Judgement/Order : 16/09/2020
Related Assessment Year : 2007-08
Courts : All ITAT (7317) ITAT Delhi (1713)

Nishit Fincap Pvt Ltd. Vs ITO (ITAT Delhi)

Query No. 7 is in relation to share capital and share application money received. This means that specific query was raised in respect of share application money and vide reply dated 16.11.2009, the assessee furnished all details as required by the Assessing Officer.

Pursuant to the reply of the assessee and on perusal of the details, the Assessing Officer issued notice u/s 133(6) of the Act to the three share applicant companies. Not only these companies complied with the notices received u/s 133(6) of the Act from the Assessing Officer, but all of them filed confirmations, confirming the transactions along with bank statements and copies of Income Tax returns.

On the basis of these documents, which are part of the paper book, I have no hesitation to hold that the observation of the Assessing Officer that the share applicant companies are non-est is without any basis.

The original assessment was completed after due verification from share applicant companies and share applicant companies have been assessed to tax u/s 153C read with section 153A of the Act post search and post enquiries made by the Assessing Officer.

In my considered opinion, considering the totality of the facts of the case in hand, I find that reopening is nothing but change of opinion when every aspect was examined in the original assessment proceedings.

Considering the facts in light of the aforesaid ruling of the Hon’ble High Court, notice u/s 148 of the Act is set aside and assessment order framed pursuant to such notice is, accordingly, quashed.

FULL TEXT OF THE ITAT JUDGEMENT

This appeal by the assessee is preferred against the order of the Commissioner of Income Tax [Appeals] – 6, New Delhi dated 15.02.2017 pertaining to assessment year 2007-08.

2. Vide Ground Nos 1 to 1.6, the assessee has challenged the validity of the reassessment proceedings by raising several issues and claiming that the notice issued u/s 148 of the income tax Act is bad in law.

3. Ground Nos. 2, 3 and 4 challenge the addition on merits of the case.

4. Representatives of both the sides were heard at length, case records carefully perused and with the assistance of the ld. Counsel, we have considered the documentary evidences brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules and have also perused the judicial decisions relied upon by both the sides.

5. Facts on record show that, in this case, the original assessment was framed u/s 143(3) of the Income tax Act, 1961 [hereinafter referred to as ‘The Act’ for short]. Subsequently, the Assessing Officer came to notice that the assessee company had received accommodation entries to the tune of Rs. 38 lakhs during the year under consideration. This was pursuant to the information received from the Investigation Wing and on the basis of the report of the Investigation Wing notice u/s 148 of the Act was issued and served upon the assessee. The reasons for belief that income had escaped assessment read as under:

Nishit Fincap Pvt. Ltd.

A perusal of the aforementioned reasons show that the basis for reopening a completed assessment after four years relate to the information that the assessee has received share application money from three companies which were alleged to be paper companies/ dummy companies and were nothing but accommodation entry providers.

7. Notice u/s 148 of the Act is dated 26.03.2014. The three companies alleged to be entry providers are:

1. Vogue Leasing and Finance Pvt Ltd

2. Pelicon Finance & Lease Ltd

3. Hillridge Investments Ltd

8. Facts on record show that two of the aforementioned three companies, namely, Pelicon Finance & Lease Ltd and Hillridge Investments Ltd. were subjected to assessment u/s 153C r.w.s 153A of the Act and their assessment orders are dated 28.03.2013. This means that the alleged entry providers pertaining to some Jain group were assessed months before the issue of notice u/s 148 of the Act by the Assessing Officer in the present case. This means that there was no application of mind by the Assessing Officer before issuing the notice because he was very much aware of assessments of these two companies.

9. I have carefully perused the assessment orders which are placed in the paper book. The assessments of both these companies were framed on the returned income and no adverse inference whatsoever has been drawn in their case.

10. Observations of the AO at Para 5 are very relevant to show that the entire reopening is devoid of any application of mind. Para 5 reads as under:

“During the post search investigation, spot visit enquiries made by the Investigation Wing revealed that the companies from whom cheques in lieu of cash were received by the assessee were non est. Spot visit enquiries were also made by deputing the Inspector of this Ward in respect of the above companies as mentioned in the chart in para-1 which as stated above are admitted by Shri Surinder Kumar Jain as his paper/dummy companies and the spot visit enquiries so made have revealed that these companies are not in existence. Report of the Inspector is placed on record.”

11. As mentioned elsewhere, the assessments of the aforementioned two companies were framed u/s 153C r.w.s 153A of the Act. Therefore, the observations by the Assessing Officer that these companies are non-est and only paper companies are without any basis, keeping in mind that the assessments of the two companies were completed months before the issue of notice u/s 148 of the Act.

12. Further, as mentioned elsewhere, reopening is after more than four years and therefore, first proviso to section 147 of the Act squarely applies and nowhere the Assessing Officer has mentioned that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment.

13. Let us now consider the original assessment proceedings.

14, Vide letter dated 25.09.2009, the Assessing Officer raised the following queries:

“1. Copy of your return tiled for the A.Y. 2007-08. computation of your income, audited Profit & Loss Accounts, Balance sheet. Audit Report and fax Audit Report in Form No.3CO with all the Annnexure/schedule.

2. A brief history of the case along with description on the nature of business activities carried out by the assessee company during the financial year relevant to Asstt. Year. 2007-08 and the date of it’s starting. In case of any change in the business activity from that of the immediately preceding year or apart from existing business any new business started during the year, please elaborate the same.

3. A comprehensive note on all sources of income. Details of premises occupied for business activities specifying whether these premises are on rent, on lease or self owned and their use i.e. office, factory, godown, show room, guest house, store, branch office etc. with their complete addresses and telephone numbers.

4. Name and complete addresses of all the Directors of the company with jurisdiction where they are being assessed to tax at present.

5. Name and addresses of shareholders with percentage of their shareholding.

6. Name andaddress of your entire sister concern with jurisdiction where they are being assessed to income tax.

7. Please furnish the detail of the share capital introduced/share application money received.

8. Details about all employees along with their present and permanent residential addresses. PAN and details of Ward/Circle where being assessed to tax with copy of acknowledgement of latest 1.1. Return filed.

9. Please inform whether the same employees are continuing as on date, if no, details regarding their change be furnished.

10. Scrip wise details of investments

11. Details ofloans, deposits, advances taken or given & squared up accounts of loans/ advances during the accounting period alongwith complete addresses of the parties with source, credit worthiness, genuineness and necessary copy of confirmation having PAN & copy of Acknowledgement of latest I.T. Return filed.

12. Complete details of’ interest paid & received duringthe  year alongwith copy of account in the Books of Account for the
period from 01.04.2006 to 31.03.2007.

13. Complete details of new investments made duringthe year giving source of investment & mode of its payment.

14. Complete details of (i) Cash Receipts & (ii) Cash Payments separate) exceeding Rs20,000/- as per Cash-Book for the period 01.04.2006 to 31.03.2007 in the following format: –

S.No. Date Name & address of the Party Amount Nature of Transaction

15. Comparative trading results for the last three years, shortfall if any. reasons thereof.

16. Copies of Sales tax return filed, if applicable in your case.

17. Details of month-wise & party-wise sales and purchases made during the year with total purchases and sales made till February 2007 and purchases and sales made in the month of March-2007 specifying credit purchases credit sales giving names, addresses and confirmation from the parties.

18. Cash flow statement for the year ending 31.03.2007.

19. Please furnish the details of your bank accounts such as Account No., name and address of the branch. Copies of all bank statement with complete narration of debit and credit entries mentioned therein for the previous year ending 31.03.2007. the details of l-’D account, if any maintained may also arc furnished.

20. Bank reconciliation statement of the previous years ending 3 1.03.2007.

21. Details of all movable assests and immovable properties for the year ending 31.03.2006 and 31.03.2007. .

22. Statement of affairs or B/S in respect of the company and the directors as well for the previous year ending 3 1.03.2006 and 3 1.03.2007.

23. Nature, month-wise details and documentary evidence of all expenses exceeding Rs. 20.000/- debited in accounts and copies of ledger accounts.

24. Details of complete addresses of sundry debtors. Circle/Ward in which they arc- getting assessed and their PANs alongwith confirmation of amounts in cases exceeding Rs. 50. 000/­.

25. Details of complete addresses of sundry creditors. Circle/Ward in which they arc- getting assessed and their PANs alongwith confirmations of amounts in cases exceeding Rs. 50,000/-.

26. Furnish comprehensive details of Opening and Closing stock in terms of quality, quantity and value alongwith supporting evidence.

28. Furnish copy of M.O.A. and copy of certificate of ROC showing date of incorporation of the company.

29. Copy of latest assessment order u/s 143(3) passed in your case in the earlier year.”

15. Query No. 7 is in relation to share capital and share application money received. This means that specific query was raised in respect of share application money and vide reply dated 16.11.2009, the assessee furnished all details as required by the Assessing Officer.

16. Pursuant to the reply of the assessee and on perusal of the details, the Assessing Officer issued notice u/s 133(6) of the Act to the three share applicant companies. Not only these companies complied with the notices received u/s 133(6) of the Act from the Assessing Officer, but all of them filed confirmations, confirming the transactions along with bank statements and copies of Income Tax returns.

17. On the basis of these documents, which are part of the paper book, I have no hesitation to hold that the observation of the Assessing Officer that the share applicant companies are non-est is without any basis.

18. The original assessment was completed after due verification from share applicant companies and share applicant companies have been assessed to tax u/s 153C read with section 153A of the Act post search and post enquiries made by the Assessing Officer.

19. In my considered opinion, considering the totality of the facts of the case in hand, I find that reopening is nothing but change of opinion when every aspect was examined in the original assessment proceedings.

20. The Hon’ble Supreme Court in the case of Marico Limited SLP (CIVIL) Diary No.7367/2020 arising out of final judgement and order dated 21.08.2019 in WP No. 1917/2019 passed by the Hon’ble High Court of Judicature at Bombay has dismissed the SLP by holding as under:

“In the present matter, the assessment order was passed on 30.01.2018 as regards the Assessment Year 2014-15.

According to the record, certain queries were raised by the Assessing Officer on 25.09.2017 during the assessment proceedings which were responded to by the Assessee vide letters dated 10.10.2017 and 21.12.2017.

After considering said responses, the assessment order was passed on 30.01.2018. Subsequently, by notice dated 27.03.2019 issued under Section 148 of the Income-Tax Act, the matter was sought to be re-opened. While accepting the challenge to the issuance of notice, the High Court in para 12 of its judgment observed as under:

“12. Thus we find that the reasons in support of the impugned notice is the very issue in respect of which the Assessing Officer has raised the query dated 25 September 2017 during the assessment proceedings and the Petitioner had responded to the same by its letters dated 10 December 2017 and 21 December 2017 justifying its stand. The non-rejection of the explanation in the Assessment Order would amount to the Assessing Officer accepting the view of the assessee, thus taking a view/forming an opinion. Therefore, in these circumstances, the reasons in support of the impugned notice proceed on a mere change of opinion and therefore would be completely without jurisdiction in the present facts. Accordingly, the impugned notice dated 27 March 2019 is quashed and set-aside.”

21. Considering the facts in light of the aforesaid ruling of the Hon’ble High Court, notice u/s 148 of the Act is set aside and assessment order framed pursuant to such notice is, accordingly, quashed.

22. Since I have quashed the assessment, I do not find it necessary to dwell into the merits of the case.

23. In the result, the appeal filed by the assessee in ITA No. 2323/DEL/2017 is allowed.

The order is pronounced in the open court on 16.09.2020.

Download Judgment/Order

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