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2015 (4) TMI 181 - ITAT DELHI

2015 (4) TMI 181 - ITAT DELHI - TMI - Unexplained cash credit and expenditure - accommodation entries - entry operators - CIT(A) deleted the addition - Held that:- All the shareholders are incorporated and registered with the concerned registar of companies under the Companies Act, 1956 and are allotted company identification number by the ROC, Ministry of Corporate Affairs, Government of India after they having completed necessary formalities and their status shown is active. He noted further t .....

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) has directed the Assessing Officer to delete the addition on the basis that the assessee has established the identity of the 16 share-subscribers, their creditworthiness and genuineness of the share transactions with documentary evidence as per law. Also that the assessee explained and substantiated the nature and source of credits found credited in the books of account during the relevant financial year. In absence of rebuttal of these material findings of the Learned CIT(Appeals) by the Reve .....

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ed in favour of assessee. - ITA No. 535/Del/2009, Cross Obj. No. 28/Del/2009 - Dated:- 31-3-2015 - Shri I. C. Sudhir And Shri. Pramod Kumar,JJ. For the Petitioner : Shri P. Damkaunjma, Sr. DR For the Respondent : Shri Ved Jain, CA ORDER Per I. C. Sudhir: Judicial Member ITA No.535/Del/2009: The Revenue has questioned First Appellate Order on the following grounds: 1. The order of the Learned CIT(Appeals) is erroneous & contrary to facts and law. 2. On the facts and in the circumstances of th .....

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plicants were not known to him personally & he also showed his inability to produce them. The Director was also not able to explain the reasons why these applicants would invest money in their concerns which were not listed in the stock exchange nor had they floated any public issue. b) the statement on oath of entry operators namely Mr. Mukesh Gupta, Surinder Pal Singh & Rajan Lasal who have categorically admitted on oath that they had floated the impugned entities from whom the said am .....

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801 in which Apex Court has laid down the proposition that the Courts & Tribunals should see the preponderance of probabilities while considering the evidence furnished by the assessee. e) that in respect of this case, the ratio of case laws relied upon by the first appellate authority are not applicable at all. The Learned CIT(Appeals) based his decision on the judgment of the Hon'ble Supreme Court in Divine Leasing & Finance Ltd. & Lovely Exports ignoring that the facts are ess .....

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.O. is duty bound u/s. 68 to enquire into the creditworthiness, identity of the creditors & genuineness of the transactions. The CIT(A) has erred in ignoring such findings recorded by the A.O. in the assessment order. 2. Heard and considered the arguments advanced by the parties in view of orders of the authorities below, material available on record and the decisions relied upon. 3. The facts in brief are that the assessee company is engaged in trading of various types of glasses. On 10.08. .....

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of unexplained cash credits. A further addition of ₹ 96,250 was made on account of unexplained expenditure being commission @ 25 paise per hundred rupees paid for arranging entry of ₹ 3,85,00,000. The Learned CIT(Appeals) has deleted these additions against which the Revenue is in appeal. 4. The Learned CIT(Appeals), however, did not allow the objection of the assessee on the validity of notice issued under sec. 148 of the Act and the assessment made in furtherance thereto. Against t .....

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1. 6. The Learned AR on the other hand tried to justify the First Appellate Order with this submission that all the necessary evidence to establish the genuineness of the claimed investment of share capital by the parties were furnished and in absence of rebuttal thereof by the Assessing Officer, the Learned CIT(Appeals) was justified in deleting the addition by passing a detailed order and discussing the objections raised by the Assessing Officer and submissions of the assessee meeting those ob .....

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ns Golden Estates Pvt. Ltd. ( ITA No.212 of 2012); & 5. ACIT vs. Panchanan Internatinal (P) Ltd. (Bench Bench) (ITA No. 50/Del/2011). 6.1 The Learned AR also referred page Nos. 1 to 425 of the paper book filed on behalf of the assessee to support its claim. These documents are copies of audited balance sheet with audit report for the years ending 31.3.2000, acknowledgment of return of income with computation of income for the year, statements of Mr. Arvind Kumar Gupta during the course of su .....

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are capital from the companies along with supporting documents proving identity, creditworthiness and genuineness of the transactions. 7. We find that the assessee had filed return declaring the income of ₹ 11,59,090 which was processed under sec. 143(1) of the Act. Survey under sec. 133A of the Act was conducted by the Investigation Wing of the Department wherein director of the assessee company offered ₹ 3.85 crores for taxation in the hands of the company. The Assessing Officer in .....

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cer has noted that the issued and subscribed share capital increased from ₹ 6,62,45,000 to ₹ 14,12,54,000 was resulted into an addition of ₹ 7,50,00,000. Out of the total addition, a sum of ₹ 3.85 crores was found to have been received from various outside parties about which the director of the assessee pleaded ignorance in the statement recorded at the time of the survey. The Assessing Officer had noted further that the survey action was based on the statements of vario .....

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iscussing the explanation of the assessee on the issue hold that the onus is on the assessee and not on the department to establish that the entries routed through such companies were not bogus entries as the entry-operator had categorically admitted the fact to the prejudice of the assessee. The Assessing Officer noted further that the assessee had provided evidences of mere existence of such paper companies which fact was admitted by the entry-operators themselves. No details of the sources fr .....

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ay be true that in the case of a public issues, the company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribers. The company must, however, maintained and make available to the Assessing Officer for his perusal all the information contained in the statutory share application documents. In the case of private placement, the legal regime would not be the same. The Assessing Officer has ultimately made the addition under .....

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g reproduced hereunder: 50. I have considered the rival contentions and the documentary supporting evidences in paper book. On careful perusal of the above the following material facts have emerged, considered and are pertinent for decision on these grounds: companies as cash credit u/s. 68 is duly accounted for as share capital in the books of accounts 1. The addition of ₹ 3.85 crores considering the impugned share capital raised from 16 as cash credit u/s 68 is accounted for as share cap .....

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tting to take up the assessment or reassessment or initiate investigation however these statements cannot be the basis to make the additions in assessment specifically when assessee has shown that contents of the said statements are doubtful and distinguished from the facts of assessee company and that all the sixteen shareholder companies I have confirmed the transactions with assessee company vide latest confirmations. copies available at page number 256 to 271 of paper book and all confirmati .....

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ial in available on record during assessment proceedings for the basis to justify any addition in these companies. 3. As regards the survey u/s. 133A it correctly involves a comprehensive & extensive view of the business activities of the assessee & is carried only at places where the business is carried and the books of accounts etc are maintained. In the present case nothing was found and bought on record to suggest incriminating or defective books of accounts or any incriminating docu .....

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Kumar Gupta on the basis of whose statement the addition of ₹ 3.85 crores is made has specifically admitted at question number 18 and 21 of the statement that details and , genuineness of the share capital is as per the share holders register and there is no incriminating material during survey to disregard the above replies. Also, it is noted that the very basis of question no. 22 that cheques are 'accommodating entries in lieu of cash deposits with them in any of their accounts' .....

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pronouncements reported at Paul Mathews & Sons 263 ITR 10 1 (Ker); Ashok Manilal Thakkar 279 ITR (AT) 143 (Ahm), Mukund V. Kapadia 82 ITD 489 (Mum.), Hyundai Engineering Co. Ltd ITA no. 3006/D/2003' (Del) it is clear that Income tax authorities have no jurisdiction to record sworn statement u/s, 13JA of the Act during the course of survey. Since the authority had no jurisdiction to administer oath and record swam statement so statement u/s, 133A(3) in the absence of any supporting materi .....

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ot;Instances have come to the notice of the board where assessee have claimed that they have been forced to confess the undisclosed income during the course of the search and seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessee while filing returns of income. In these circumstances, confessions during the course of search and seizure and survey operations do not serve any useful purpose. It is, therefore, advised that .....

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ing Officers should rely upon the evidence / materials gathered during the course of search / survey operations or thereafter while framing the relevant assessment orders. Therefore, the statement of Arvin Kumar Gupta and which in this case is also been found to be forcefully retracted later on by assessee would not have much evidentiary value in quasijudicial proceedings since not corroborated with material finding and documentary evidences either found during surveyor even brought on record la .....

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nd creditworthiness of shareholders and genuineness of share subscription transaction as tabulated hereunder:- I have noted from above that all the share holders are incorporated and registered with the concerned registrar of companies, under the Companies Act, 1956and are allotted unique company identification number by the ROC, Ministry of Corporate Affairs, Government of India after they having completed necessary formalities and there status shown is Active. This indicates that company are r .....

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the shareholders through latest confirmations confirmed share money transactions, which were filed before AO and are also available at page number 256-271 of paper book. The assessee's retraction and above submissions and documentary evidences have remained uncontroverted from AO and there is nothing on record from AO to disbelieve the IT assessment status or the bank account statements or the ROC certificate or share application forms or the latest confirmations of transactions of the shar .....

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ial facts w.r.t section 68 which provides 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 or explanation offered by him is not satisfactory in the opinion of AO the sum so credited may be charged to income tax as the income of assessee of that previous year. Therefore, tilt: section deal with circumstances in which the AO may consider such sum as cash credit due to lack of sufficient e .....

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creditors by treating the cash deposits in their bank accounts as unexplained investments of those creditors under s. 69. The assessee had furnished complete details of the creditors along with their GIR numbers and the PAN numbers, as well as the confirmations with the copies of the assessment orders of the individual creditors. The cash credits could not be said to be non-genuine on the ground that the summons that had been issued to some of the creditors could not be served or they failed to .....

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where ITO accepted returns of creditors it should go to mean that the amounts given by creditors are genuine. The same court in the case Khandelwal Constructions 227 ITR 900 (Gau) has laid down that section 68 empowers AO to make enquiry regarding cash credit. If he is satisfied that these entries are not genuine he has every right to add these as income from other sources. But before rejecting the assessee explanation the AO must make proper enquiries. And in the absence of proper enquiries ad .....

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acts and circumstances, I am of the view that assessee has established the identity of the 16 share subscriber's, their creditworthiness and the genuineness of the share transaction with documentary evidence and as per law. Also, the assessee explained and substantiated the nature and source of credits found credited in the books of accounts during the relevant financial year as per requirements of section 68 of the IT Act,1961. I therefore hold that addition ofRs. 3.85 crores as unexplained .....

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dition of ₹ 3,85,00,000/- has already been directed to be deleted in view or the detailed reasons contained in my preceding paras . 10. On perusal of the First Appellate Order on the issue, we find that the Learned CIT(Appeals) has discussed the issue in detail and has incorporated the case of the Assessing Officer and of the assessee meeting out the objections raised by the Assessing Officer justifying the additions which runs in page nos. 1 to 42 of the First Appellate Order. In his find .....

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ideration before the date of survey. S/Shri Mukesh Gupta, Surender Pal Singh and Rajan Jassal in their statements has not named the assessee company as hawala operator and they have not denied the investment in the assessee company. He noted that the statement of the above parties cannot be the basis to make the additions in assessments especially when assessee has shown that contents of the said statements are doubtful and distinguished from the facts of the assessee company and that all the si .....

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(P) Ltd. do nor find any mention in the statements of above three persons and no material is available on record during assessment proceedings for the basis to justify any addition in these companies. The Learned CIT(Appeals) has noted further that there is no nexus between the additions of ₹ 3.85 crores and survey material that could support the addition. The addition was made not on the basis of any evidence found during the course of survey but on the basis of statements of Shri Arvind .....

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rial or bank statement of any account produced on record either during survey or assessment to justify that question No.22 was factual and bona fide. The Learned CIT(Appeals) has noted further that as per material produced by assessee (page Nos. 253 to 255 of the paper book ), the subsource of share capital of ₹ 3.85 crores, except an insignificant amount of ₹ 84,858 that too is sum total of miscellaneous small amounts have been made through cheques duly credited in bank accounts of .....

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