Citation Codes

Equivalent Citations

citation codes

Case Number

ITA 7303/DEL/2017

Attorney(S)

Acts

SECTION 143 INCOME TAX ACT 1961
section 148 of the I.T. Act, 1961.
Section 68 of the I.T. Act, 1961.
section 147 of the Income Tax Act, 1961. Date : 26.08.2015 Sd/-Gautam Deb DCIT, Central Circle-25, New Delhi" 2.2.
u/s 148 r.w.s. 147 of the 1. T. Act. 1961.
u/s 147/143(3) of the IT Act,
section 68 of the I.T. Act, 1961. 2.3.
provisions of Section 147 of the I.T. Act, 1961
u/s 68 of the IT Act, 1961.

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Smart Summary

Structured Summary of the Opinion: ITA No.7303/Del./2017 (A.Y. 2012-2013)

Factual and Procedural Background

The assessee, M/s. Priya Diamonds Pvt. Ltd., a company engaged in manufacturing and trading of gold jewellery, filed its return for A.Y. 2012-2013 on 20.09.2012 declaring income of Rs.3,74,279. A survey under section 133A was conducted at the assessee's business premises on 19.12.2013. During the survey it was found that Rs.1,00,00,000 (Rs.1 crore) had been introduced in the books as share capital/share premium for FY 2011-12 (relevant to A.Y. 2012-13). The assessee failed during survey and post-survey proceedings to produce documents envisaged by section 68 (share application forms, allotment register, shareholder register, share certificates etc.). Based on information (including an enquiry/commission to the Investigation Wing, Kolkata and a recorded statement of an entry operator, Shri Pramod Kumar Sharma, who admitted providing entries), the Assessing Officer (AO) recorded reasons under section 147 and issued notice under section 148. After dismissing the assessee's objections to reopening, the AO added Rs.1 crore to the assessee's income under section 68. The First Appellate Authority (Ld. CIT(A)) upheld both the validity of reassessment and the Rs.1 crore addition. The assessee appealed to the Income Tax Appellate Tribunal (ITAT).

Legal Issues Presented

Whether the initiation of reassessment proceedings (reopening under section 147 read with section 148) was illegal, without jurisdiction and time-barred — i.e., whether the AO's reopening was a mechanical/borrowed satisfaction without independent application of mind.
Whether the assessment order passed under sections 147/143(3) was illegal, without jurisdiction or contrary to facts.
Whether the assessment proceedings violated principles of natural justice by denying the assessee a reasonable opportunity to be heard, including the opportunity to cross-examine a third party whose statement formed the basis of the addition.
Whether the addition of Rs.1,00,00,000 as unexplained credit under section 68 (increase in share capital and share premium) was justified on merits.

Arguments of the Parties

Assessee's Arguments

The AO reopened the assessment mechanically and on borrowed satisfaction of the Investigation Wing without independent application of mind; therefore reassessment is invalid and must be quashed. The assessee relied on PCIT vs. Meenakshi Overseas Pvt. Ltd. and other decisions in support.
The approval by the Addl. CIT under section 151 was inadequate/informal (a mere statement of sanction without recorded satisfaction) and therefore did not cure the defect in reopening; reliance was placed on Synfonia Tradelinks and ESS Advertising (Mauritius) decisions.
On merits, the assessee was not given opportunity to cross‑examine Shri Pramod Kumar Sharma (the entry operator), whose statement was relied upon by the AO; the addition based on third-party statement without cross-examination violates principles set out in Andaman Timber Industries and other authorities and must be quashed.
The assessee submitted that transactions were through banking channels and contended it was denied adequate opportunity to substantiate the share capital/share premium entries.

Revenue's Arguments

The assessee failed to produce any documentary evidence during survey, post-survey enquiries, assessment or appellate proceedings as to identity, capacity of share applicants and genuineness of the transaction; thus the AO's addition under section 68 was justified.
The AO had conducted enquiries (including commission to Kolkata and recording of statements) and recorded reasons under section 147; the Addl. CIT recorded satisfaction and sanctioned reopening; therefore reopening was lawful and the Ld. CIT(A)'s upholding of reassessment was correct.
The grounds raised by the assessee challenging reopening and the addition should be dismissed given the absence of supporting documents and the investigative findings that some companies were not found at given addresses and that an entry provider admitted providing accommodation entries.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court (from the opinion)
CIT vs. M/s Kelvinator of India Ltd.	Cited (by appellant) as authority on invalidity of reopening where there is a change of opinion; generally referenced in reopening jurisprudence.	The Ld. CIT(A) observed Kelvinator was not applicable in this case because there was no change of opinion and the case was reopened after enquiries/investigations; the Tribunal accepted that distinction.
PCIT vs. Meenakshi Overseas Pvt. Ltd. (Del. HC)	Cited by the assessee to argue reopening was invalid on facts similar to that case.	The assessee relied on this decision; the Tribunal held the facts were not identical and found the reopened proceedings here were supported by in‑situ survey findings and subsequent enquiries, therefore the reliance did not persuade the Tribunal to quash reopening.
CIT vs. Atul Jain [2008] 299 ITR 383 (Del.)	Cited to support the proposition that reopening based on borrowed satisfaction/mechanical approach is invalid.	Assessee relied on it; Tribunal concluded that the present facts (survey at assessee's premises, failure to produce documents by director/accountant, and investigative findings) distinguished those precedents and did not support quashing of reopening.
Signature Hotels (P) Ltd. vs ITO, 338 ITR 51 (Del.)	Cited by the assessee in support of the proposition that reopening may be invalid in certain circumstances.	The Tribunal considered it among other precedents relied upon by the assessee but found the present facts distinguishable and upheld the validity of reopening.
Nancy Sales Pvt. Ltd. vs ITO, ITA No.4129/Del./2017 (SMC Bench)	Cited to support the assessee's contention about impropriety in reopening.	The Tribunal noted the decision was cited but found the circumstances of the present case different and did not accept that it invalidated reopening here.
SABH Infrastructure Ltd. vs ACIT, W.P.(C) No.1357/2016 (Del. HC)	Cited by the assessee on reopening/approval issues.	The Tribunal treated it as part of the precedent matrix relied upon by the assessee but held the present facts (survey at assessee premises; no documents produced; entry provider admission) distinguished that line of authority.
Synfonia Tradelinks Pvt. Ltd. vs. Income Tax Officer, W.P.(C)12544/2018 (order dated 26.03.2021)	Cited by the assessee to argue that the Addl. CIT's approval was inadequate and not in accordance with law.	The assessee relied on it to contest the approval; the Tribunal found the Addl. CIT had recorded his satisfaction in this case and therefore the approval was proper and did not invalidate reopening.
ESS Advertising (Mauritius) S.N.C. ET Compagnie vs. ACIT, WP(C).10939/2018 (order dated 05.07.2021)	Cited to challenge sufficiency of approval by sanctioning authority.	The Tribunal noted the citation but held that the Addl. CIT had recorded satisfaction here; thus the approval was acceptable and did not vitiate reopening.
Andaman Timber Industries vs. Commissioner of Central Excise, Civil Appeal No.4228 of 2006 (order dated 02.09.2015)	Cited by the assessee for the proposition that additions based on statements of third parties require opportunity to cross‑examine in the interests of natural justice.	The Tribunal accepted the underlying natural justice principle: the assessee had not been given an opportunity to cross‑examine the entry operator whose statement was relied upon. The Tribunal therefore restored the matter to the AO and directed that the assessee be given an opportunity to substantiate/ rebut and, if demanded, to cross‑examine the third party.

Court's Reasoning and Analysis

The Tribunal first examined the validity of the reassessment. It noted the following facts from the record: (i) a survey under section 133A was conducted at the assessee's premises which disclosed Rs.1 crore shown as share application/share premium; (ii) the assessee's director and accountant disclaimed knowledge of share documentation and the assessee failed to produce documents required under section 68; (iii) investigative enquiries (a Commission to Kolkata) led to recording of a statement of an entry operator (Pramod Kumar Sharma) who admitted providing entries; and (iv) enquiries revealed many of the purported share applicant companies could not be located at given addresses.

The Tribunal considered the assessee's contention that the AO had recorded satisfaction mechanically, on borrowed satisfaction from the Investigation Wing, and that the Addl. CIT's approval was perfunctory. The Tribunal rejected that line of argument on the facts: it distinguished earlier precedents where reopening followed search/seizure directed at entry providers, by noting that here the survey was in the assessee's own premises and the assessee's own officers failed to produce required documents. The Tribunal also observed the Addl. CIT had recorded his satisfaction when granting approval. On this basis the Tribunal upheld the Ld. CIT(A)'s conclusion that reopening under section 147 was valid and not vitiated by borrowed satisfaction.

On the merits (addition under section 68), the Tribunal noted that neither the AO's order nor the CIT(A)'s order indicated that the assessee had been given any opportunity to cross‑examine the entry provider whose statement formed the foundation for the addition. The Tribunal emphasized the principles of natural justice: when a third-party statement is the basis for an addition, the assessee should be given an opportunity to rebut that statement and, if requested, to cross‑examine the declarant. Considering the totality of facts and in the interest of justice, the Tribunal concluded it was appropriate to remit the issue to the AO with a direction to grant the assessee one more opportunity to substantiate the alleged share capital/share premium and to give due opportunity of being heard (including cross‑examination if demanded). The Tribunal therefore did not finally adjudicate the addition but remanded it for fresh consideration consistent with the directions.

Holding and Implications

Core Ruling: The appeal is PARTLY ALLOWED FOR STATISTICAL PURPOSES.

Specific holdings and immediate consequences:

The Tribunal upheld the validity of the reassessment under section 147/148: it found the AO had recorded reasons based on survey findings and subsequent enquiries and that the Addl. CIT had recorded satisfaction when sanctioning reopening.
On the substantive addition of Rs.1,00,00,000 under section 68, the Tribunal remanded the issue to the AO with directions to grant the assessee one more opportunity to substantiate the introduction of funds as share capital/share premium and to give due opportunity to be heard; the AO must decide the issue as per fact and law. The remand explicitly contemplates opportunity to rebut and, if demanded, cross‑examine the third party whose statement was relied upon.
The grounds challenging reopening were dismissed; the grounds challenging the addition on merits were allowed for the limited/statistical purpose of remand.

Broader implications: The Tribunal did not purport to lay down a new precedent; it distinguished the authorities cited by the assessee on the facts and applied established principles on both validity of reassessment and natural justice. The direct effect is (i) reassessment stands, and (ii) AO must reconsider the addition after providing the procedural opportunities directed by the Tribunal.

Order pronounced on 27.01.2022 by the ITAT, Delhi Benches ("F"), Members: Shri Kul Bharat (Judicial Member) and Shri R.K. Panda (Accountant Member).

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Priya Diamonds Pvt. Ltd., Delhi v. ACIT, Central Circle- 25, New Delhi

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCHES "F" : DELHI

BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER

AND

SHRI KUL BHARAT, JUDICIAL MEMBER

ITA.No.7303/Del./2017

Assessment Year 2012-2013 M/s. Priya Diamonds The ACIT, Pvt. Ltd., Delhi - 005 PAN AAGCP1547G Central Circle - 25, C/o. Anil Jain DD & vs. Jhandewalan, Co. 611, Surya Kiran Building, 19, KG Marg, New Delhi.

New Delhi - 110 001

(Appellant) (Respondent)

For Assessee : Shri Anil Jain, C.A.

For Revenue : Shri Parikshit Singh, Sr.D.R.

Date of Hearing : 14.12.2021

Date of Pronouncement : 27.01.2022

ORDER

PER R.K. PANDA, A.M.

This appeal filed by the Assessee is directed against the Order dated 04.09.2017 of the Ld. CIT(A)-29, New Delhi, relating to the A.Y. 2012-2013.

M/s. Priya Diamonds Pvt. Ltd., Delhi. 2. Facts of the case, in brief, are that the assessee is a Company engaged in the business of Manufacturing

&Trading of Gold Jewellery. It filed its return of income on

20.09.2012 declaring income of Rs.3,74,279/- which was

processed under section 143(1) of the IT Act, 1961. In this

case, a survey operation under section 133A of the Act was

carried out at the business premises of the assessee on

19.12.2013 by the Investigation Wing of the Unit-1(1).

During the course of survey operation, it was found that an

amount of Rs.1,00,00,000/- had been introduced in the

garb of share capital/share premium in the assessee

company in F.Y. 2011-12 relevant to A.Y. 2012-13. Most of

the share applicant companies/concerns are found based in

Kolkata. On being asked to justify the genuineness of such

share capital/share premium during the course of survey

proceedings, the assessee could not produce any supporting

details/documents as envisaged in section 68 of the IT Act.

Neither the main director, Sh, Karan Singh Soni, nor the

accountant, Sh. Yogendra Chauhan has any knowledge of

share application form, share issue certificate, share

M/s. Priya Diamonds Pvt. Ltd., Delhi. allotment register, share holder registers or any other documentary evidence regarding induction of share capital

/share premium in the assessee company. Even during the

post survey proceedings no documentary evidence was filed

by the assessee to establish genuinity of aforesaid share

capital/share premium.

2.1. Accordingly, on the basis of information received

from the Investigation Wing, the A.O. reopened the assessment as per the provisions of Section 147 of the I.T. Act, 1961 by recording the following reasons :

"Recording reasons for initiating proceedings u/s 148 r.w.s. 147 of the 1. T. Act. 1961.

An Information was received from the Investigation Wing of the Income Tax Department, New Delhi that a survey u/s 133 A of the Act was carried out on 19.12.2013 at the premises of M/s Priya Diamonds private Limited.

2. During the course of survey proceedings, it was found that an amount of Rs. 1,00,00,000/- had. been

M/s. Priya Diamonds Pvt. Ltd., Delhi. introduced in the garb of share capital/share premium in the assessee company in FY 2011-12 relevant to AY 2012-13.

Most of the share applicant companies/concerns are found to

be based in Kolkata. On being asked to justify genuineness

of such share capital/share premium during the course of

survey proceedings 1961, the assessee company could not

produce any supporting details/documents as envisaged in

section 68 of the IT Act. Neither the main director, Sh. Karan

Singh Soni, nor the accountant, Sh. Yogendra Chauhan has

any knowledge of share application form, share issue

certificate, share allotment register, share holder registers or

any other documentary evidence regarding issue of share

capital/share premium in the assessee company. Even

during the post survey proceedings, no documentary evidence

was filed by the assessee to establish genuinity of aforesaid

share application /share premium.

3. A Commission dated 27.12.2013 was sent to enquire

the details of Kolkata based companies to the DDIT (Inv.) Unit-IV(l), Kolkata to enquire the genuineness of the transaction. The DDIT has recorded statement of Sh. Pramod

M/s. Priya Diamonds Pvt. Ltd., Delhi. Kumar Sharma, one of the entry operators who have admitted that he has provided entries to Assessee Company.

Further enquiry/investigation also revealed that most of the

companies are not found located at their given address.

Hence, an amount of Rs. 1,00,00,000/- is liable to be added

to the total income of the assessee u/s 68 of the IT Act, 1961.

4. In view of the above, as income chargeable to tax has

escaped assessment y way of failure to disclose all the material facts truly and fully, I have reasons, to believe that income chargeable to tax has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961.

Date : 26.08.2015 Sd/-Gautam Deb DCIT, Central Circle-25, New Delhi"

2.2. In response to notice under section 148 of the I.T. Act, 1961, the assessee submitted that the original return of income filed under section 139(1) maybe treated as return filed in response to notice under section 148 of the I.T. Act, 1961. The assessee raised objections to the reasons recorded under section 148 of the I.T. Act, 1961 which were

M/s. Priya Diamonds Pvt. Ltd., Delhi. disposed of by the A.O. by passing a detailed order on 06.09.2016 dismissing the objections raised by the

assessee. During the course of assessment proceedings, the

A.O. noted that to enquire and verify the genuineness of the

transaction details of the Kolkata based companies, a

Commission dated 27.09.2013 was sent to the DDIT who

recorded statement of Shri Pramod Kumar Sharma, one of

the entry operators, who has admitted that he has provided

entries to the assessee company. Further enquiry/

investigation also revealed that most of the companies are

not found located at their given address. In view of the

above and in absence of any documentary evidences to the

satisfaction of the A.O. within the meaning of Section 68 of

the I.T. Act, 1961, the A.O. made addition of Rs.1 crore to

the total income of the assessee under section 68 of the I.T.

Act, 1961.

2.3. Before the Ld. CIT(A), the assessee apart from

challenging the addition on merit, challenged the validity of re-assessment proceedings. However, the Ld. CIT(A) was also not satisfied with the arguments advanced by the

M/s. Priya Diamonds Pvt. Ltd., Delhi. assessee and upheld the addition made by the A.O. as well as validity of re-assessment proceedings.

2.4. So far as validity of re-assessment proceedings

are concerned, the Ld. CIT(A) upheld the same by observing as under :

"7. Ground nos.1, 2 and 3 relate to contention of the appellant against reopening the case under section 147 of the IT Act. The fact of the case is that a survey action was carried out in the business premises of the appellant simultaneously enquiries were also carried out by the investigation wing, Kolkata and it was gathered that the appellant had introduced a sum of Rs.l crore in the garb of share application money in their books of accounts but the same was not found to be genuine. On investigation carried out, the appellant could not file any supporting document/detail in favour of the genuineness of the share application money shown to have been received by them. Therefore, after recording the reasons and following due procedure the

M/s. Priya Diamonds Pvt. Ltd., Delhi. case was reopened under section 147 of the IT Act. The reasons recorded by the A.O was got approved from the

sanctioning authority u/s 151 of the IT Act who after

recording his satisfaction approved the case for

reopening. Under these circumstances, the case laws

relied upon by the appellant in the case of CIT vs. M/s

Kelvinator of India Ltd. is not applicable as in the

present case there is no change of opinion but the case

was reopened after carrying out proper

enquiries/investigations. The entry provider Sh. Pramod

Kumar Sharma admitted the fact that the concerns

controlled/managed by him were engaged only in giving

accommodation entries and the appellant was also one

of the beneficiary of the same. The appellant was asked

to prove the genuineness of the share applicant/share

application money by filing the relevant

documents/details but they failed to do so. Therefore,

the case was not reopened in mechanical manner but

the same was reopened after proper application of

mind. So far as the other case laws relied upon by the

M/s. Priya Diamonds Pvt. Ltd., Delhi. appellant are concerned neither the present case was reopened based on mere information received from the

investigation wing, nor the reasons recorded were

vague. Before reopening the case proper exercise was

carried out by the A.O. to investigate the matter and

when he satisfied himself on proper application of his

mind to the material then only he concluded that he had

reason to believe that the income of the appellant had

escaped assessment. In view of the above discussion,

the ground raised by the appellant are dismissed."

2.5. So far as addition on merit is concerned, the Ld.

CIT(A) upheld the same by observing as under :

"8. Ground no.4 relates to the contention of appellant against addition of Rs.l crore made by the AO. The fact of the case is that a survey action was carried out at the business premises of the appellant. It was found that the appellant had shown to have received share application money of Rs.1 crore, however, the same was not found to be genuine as the appellant could not file

M/s. Priya Diamonds Pvt. Ltd., Delhi. any supporting document/detail to prove the transactions to be genuine. Further, Sh. Karan Singh

Soni, Director had also admitted the fact that they

received share application money from the Kolkata

based companies which were not genuine. Further, on

investigation carried out by the investigation wing of

Kolkata, it was gathered that Sh. Pramod Kumar

Sharma has admitted that he was engaged in giving

accommodation entries through the concerns

managed/controlled by him and the appellant was also

one of the beneficiary in this regard. Since, it was

established by the AO that the unaccounted income of

the appellant was routed by them through the entry

operators in their books of accounts in the garb of share

application money which was proved to be non genuine

as discussed in the earlier paras, under these

circumstances, I do not find any infirmity in the AO's

order."

M/s. Priya Diamonds Pvt. Ltd., Delhi. 3. Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal by raising the

following grounds :

1. "That on the facts and circumstances of the case and the provision of law the Ld CIT(A) has failed to appreciate that initiation of reassessment proceeding and notice u/s 147 r.w.s. 148 is illegal, bad in law, without jurisdiction and time barred.

2. That on the facts and circumstances of the case and the provision of law the Ld CIT(A) has failed to appreciate that impugned order passed u/s 147/143(3) of the IT Act, is illegal, bad in law, without jurisdiction and contrary to the facts.

3. That on the facts and circumstances of the case and the provision of law the Ld CIT(A) has failed to appreciate that assessment order passed by the Ld AO is against the principles of natural justice and has been passed without reasonable opportunity of being heard.

M/s. Priya Diamonds Pvt. Ltd., Delhi. 4. That on the facts and circumstances of the case and the provisions of the law, the Ld. CIT Appeal has

erred in sustaining an addition of Rs.1,00,00,000/-

on account of increase in Share Capital and Premium

as Unexplained Credit u/s 68.

5. That the appellant craves leave to reserve to itself the

right to add, alter amend, vary, modify and/or withdraw and ground(s) of appeal at or before the time of hearing."

4. Learned Counsel for the Assessee strongly challenged the order of the Ld. CIT(A) in upholding the validity of re-assessment proceedings. He submitted that the A.O. in the instant case without independent application of mind of his own and in a mechanical manner and on borrowed satisfaction has reopened the assessment on the basis of the report of the Investigation Wing. Therefore, the same being not in accordance with law, the re-assessment proceedings should be quashed. For the above proposition, he relied on the decision of Hon'ble Delhi High Court in the case of PCIT vs., Meenakshi Overseas Pvt. Ltd.,

M/s. Priya Diamonds Pvt. Ltd., Delhi. ITA.No.692/2016 order dated 26.05.2017. He submitted that the facts of the instant case are identical to the facts of the case decided by the jurisdictional Delhi High Court in

the above said case and, therefore, the re-assessment

proceedings initiated by the A.O. and upheld by the Ld.

CIT(A) should be quashed. He also relied on the following

decisions for the above proposition.

1. CIT vs., Atul Jain reported in [2008] 299 ITR 383

(Del.).

2. Signature Hotels (P) Ltd., vs., ITO and Anr. 338 ITR 51 (Del.) .

3. Nancy Sales Pvt. Ltd., New Delhi vs., ITO, Ward- 13(1), New Delhi vide ITA.No.4129/Del./2017 dated 19.01.2018 [SMC Bench].

4. SABH Infrastructure Ltd., vs., ACIT vide W.P. (C) No.1357/2016 order dated 25.09.2017 [Delhi-High Court].

4.1. Relying on various other decisions, he submitted that since the A.O. has reopened the assessment in a

M/s. Priya Diamonds Pvt. Ltd., Delhi. mechanical manner without independent application of mind and on borrowed satisfaction, such reopening of the

assessment is invalid.

4.2. Referring to the approval granted by the Addl.

CIT, he submitted that he has simply granted his approval by observing as under :

"Sanction under section 151 accorded in view of the reasons recorded and information available on record."

4.3. He submitted that this type of approval is not correct approval as per law as held by the Hon'le Delhi High Court in the cases of Synfonia Tradelinks Pvt. Ltd., vs. Income Tax Officer, Ward-22(4) vide W.P.(C) 12544/2018 order dated 26.03.2021 and ESS Advertising (Mauritius) S.N.C. ET Compagnie vs., ACIT vide WP(C).10939/2018 and CM.No.42617/2018 etc., order dated 05.07.2021. Therefore, the approval granted by the Addl. CIT being not in accordance with law, such reopening of the assessment is also invalid.

M/s. Priya Diamonds Pvt. Ltd., Delhi.

4.4. So far as the merit of the case is concerned, he submitted that the assessee was not given any opportunity to cross-examine the person whose statement was the basis for making the addition by the A.O. Further, the A.O. without confronting the assessee and merely observing that assessee has not substantiated with documentary evidence made the addition and the Ld. CIT(A) also upheld the same which is not in accordance with law. Referring to the decision of Hon'ble Supreme Court in the case of Andaman Timber Industries vs., Commissioner of Central Excise, Kolkata-II vice Civil Appeal No.4228 of 2006 order dated 02.09.2015 and various other decisions filed in the case law compilation, he submitted that without affording cross- examination, when addition is made on the basis of statement of third party, such addition being not in accordance with law, has to be quashed. He submitted that the entire transaction was through banking channel and since the addition was made without affording any opportunity to the assessee in any manner, such addition is not being in accordance with law should be deleted.

M/s. Priya Diamonds Pvt. Ltd., Delhi. 5. The Ld. D.R. on the other hand relied on the order of the A.O. and the Ld. CIT(A). He submitted that

assessee in the instant case has failed to file any

documentary evidences either during the course of survey or

post-survey enquiries or during the course of assessment

proceedings or during the appellate proceedings or even

before the Tribunal regarding the identity and capacity of

the share applicants and genuineness of the transaction.

Therefore, such addition made by the A.O. under section 68

of the I.T. Act, 1961 and upheld by the Ld. CIT(A) being in

accordance with law, such addition should be upheld and

the grounds raised by the assessee on this issue should be

dismissed.

5.1. So far as the validity of re-assessment

proceedings are concerned, he submitted that the Ld. CIT(A) has given justifiable reasons as to how and why the re- assessment proceedings are correct under the facts and circumstances of the case. Even approval given by the Addl. CIT is also justified who after recording his satisfaction has given approval for reopening of the case. Therefore, the

M/s. Priya Diamonds Pvt. Ltd., Delhi. reopening of the assessment is also in accordance with law and, therefore, the ground raised by the assessee on this

issue should be dismissed.

6. We have considered the rival arguments made by

both the sides, perused the orders of the A.O. and the Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the A.O. in the instant case reopened the assessment as per the provisions of Section 147 of the I.T. Act, 1961 after recording reasons which has already been reproduced in the preceding paragraph. It is the submission of the Learned Counsel for the Assessee that the A.O. has reopened the assessment on the basis of report of the Investigation Wing and in a mechanical manner without independent application of mind and on borrowed satisfaction and, therefore, such reopening of assessment being not in accordance with law should be quashed. It is also his submission that approving authority has not given approval in accordance with the provisions of law since there is no proper satisfaction recorded by the Addl. CIT

M/s. Priya Diamonds Pvt. Ltd., Delhi. before granting approval. We do not find any force in the above arguments of the Learned Counsel for the Assessee.

Admittedly, the survey operation under section 133A of the

I.T. Act, 1961 was carried-out at the business premises of

the assessee itself during which it was found that an

amount of Rs.1 crore was introduced in the garb of share

application/share premium in the assessee company in the

F.Y. 2011-12. It was also found that most of the share

applicant companies/concerns are Kolkata based

companies and the assessee during the course of survey

proceedings could not produce any supporting details/

documents as provided in Section 68 of the I.T. Act, 1961.

The Director of the assessee company namely Shri Karan

Singh Soni and the Accountant Yogesh Chouhan had no

knowledge of the share application forms, share issue

certificate, share allotment register, share holder register or

any other documentary evidences regarding the introduction

of share capital/share premium in the assessee company.

Since the assessee failed to provide any documentary

evidences during the course of survey or post-survey

M/s. Priya Diamonds Pvt. Ltd., Delhi. proceedings, the A.O. has reopened the assessment after recording reasons and the reasons are already reproduced

in the preceding paragraph. Therefore, the various decisions

relied on by the Learned Counsel for the Assessee in the

instant case that the A.O. has recorded the satisfaction in a

mechanical manner without application of independent

mind and on borrowed satisfaction do not hold good. In all

those cases the reopening had taken place on the basis of

search and seizure operation or survey proceedings in the

case of entry providers. But, here is a case where the survey

had taken place in assessee's own premises and the

Director as well as Accountant of the assessee company had

failed to provide any evidence regarding introduction of

share capital. Further the Addl. CIT while granting approval

has also recorded his satisfaction. Under these

circumstances, we do not find any infirmity in the order of

the Ld. CIT(A) in upholding the validity of re-assessment

proceedings. Accordingly, grounds raised by the assessee

challenging the validity of re-assessment proceedings are

dismissed.

M/s. Priya Diamonds Pvt. Ltd., Delhi.

6.1. So far as the merits of the case is concerned, we find from the order of the A.O. as well as Ld. CIT(A) that there is not a whisper regarding any opportunity to the assessee to substantiate the introduction of Rs.1 crore towards share capital as well as share premium. The so- called statement of Shri Pramod Kumar Sharma, the entry operator who admitted to have provided entries to the assessee company has not been provided to the assessee nor the assessee was given an opportunity to cross-examine the entry provider Shri Pramod Kumar Sharma. Principles of natural justice demands that the assessee should be given an opportunity to rebut the statement of third party which is the basis for addition and an opportunity to cross- examine the same person, if demanded. Considering the totality of the facts and circumstances of the case and in the interest of justice, we deem it proper to restore the issue to the file of A.O. with a direction to grant one more opportunity to the assessee to substantiate the introduction of Rs.1 crore towards share capital/share premium and decide the issue as per fact and law. Needless to say the

M/s. Priya Diamonds Pvt. Ltd., Delhi. A.O. shall give due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds

challenging the addition on merit is accordingly allowed for

statistical purposes.

7. In the result, appeal filed by the assessee is partly

allowed for statistical purposes.

Order pronounced in the open Court on 27.01.2022. Sd/- Sd/-

(KUL BHARAT) (R.K. PANDA)

JUDICIAL MEMBER ACCOUNTANT MEMBER

Delhi, Dated, 27 th January, 2022 VBP/-

Copy to

1.	The appellant
2.	The respondent
3.	CIT(A) concerned
4.	CIT concerned
5.	D.R. ITAT ‘F’ Bench, Delhi
6.	Guard File.

// By Order //

Assistant Registrar : ITAT Delhi Benches :

Delhi.

M/s. Priya Diamonds Pvt. Ltd., Delhi.

Date of dictation on	20.01.2022
Date on which the typed draft order is placed before the dictation Member	21.01.2022
Date on which the approval draft comes to the Sr. PS	.01.2022
Date on which the fair order is placed before the Dictation member for pronouncement	.01.2022
Date on which the fair order comes back to the Sr. P.S.	.01.2022
Date on which the final order is uploaded on the website of ITAT	.01.2022
Date on which the file goes to the Bench Clerk	.01.2022
Date on which the file goes to the Head Clerk
The date on which the file goes to the Assistant Registrar for signature on the order
Date of dispatch of the Order.

Priya Diamonds Pvt. Ltd., Delhi v. ACIT, Central Circle- 25, New Delhi

Structured Summary of the Opinion: ITA No.7303/Del./2017 (A.Y. 2012-2013)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Assessee's Arguments

Revenue's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Priya Diamonds Pvt. Ltd., Delhi v. ACIT, Central Circle- 25, New Delhi

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