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2015 (11) TMI 426 - ITAT AHMEDABAD

2015 (11) TMI 426 - ITAT AHMEDABAD - TMI - Revision u/s 263 - lack of verification in respect of 11 share and premium applicants to the tune of ₹ 56 lacs - Held that:- As find from the case file that the Assessing Officer issued section 142(1) notice dated 25-05-2011 assessee placed on record necessary details. The CIT himself acknowledges the very fact. A perusal of the reassessment framed on 29-08-2011 states these facts. That being the case the question that arises for our consideration .....

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and premium. We observe in these facts that the Assessing Officer examined this issue and confirmed this addition of ₹ 26 lacs only. The hon’ble Bombay high court in case of CIT vs. Garbiel India (1993 (4) TMI 55 - BOMBAY High Court) deals with a similar situation wherein the CIT revised an assessment on the ground that the same did not contain discussion in regard to a deduction claim which alleging non application of mind. Their lordship observe that the Assessing Officer had made inqui .....

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required to give detailed reasons in respect of each and every item. Their lordship draw a fine distinction between lack of inquiry; and inadequate inquiry and hold that if there was an inquiry even inadequate that would not by itself give an occasion to the Commissioner to invoke jurisdiction u/s. 263 of the Act. We reiterate the facts of the instant case making it amply clear that the present is not a case of lack of inquiry. The CIT is of the opinion that no proper verification appears to ha .....

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d Shri S. S. Godara, Judicial Member For The Revenue : Smt. Vasundhara Upmanyu, Sr. D.R. For The Assessee : Shri Rasesh Shah, A.R. ORDER PER : S. S. GODARA, JUDICIAL MEMBER:- This assessee s appeal for A.Y. 2005-06, arises from order of the CIT-I, Surat dated 24-03-2014 in proceedings under section 263 of the Income Tax Act, 1961; in short the Act . 2. Facts of the case are in a narrow compass. The assesseecompany is engaged in textile business. It filed its return on 20-09- 2005 showing nil inc .....

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g the assessment: The return of income was filed on 20.09.2005 declaring the income of Rs. NIL/. Order u/s!43(3) of the Act was completed on 28.12.2007 making an addition of ₹ 85,005/- on account of excess depreciation and ₹ 73,766/- on account of valuation of work in progress. A search and seizure action u/s. 132 of the Income tax act was conducted in case of M/s. Mahasagar Securities Private Limited by Investigation wing of Income-tax department, Mumbai, on 25-11- 2009. The search .....

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Agencies Private Limited, M/s. Goldstar Finvest Private Limited etc. all run by Mukesh Choksi) were engaged in fraudulent bilting activities and in the business of providing Bogus speculation profit/loss, short term/long term capital gain/loss, Share application money, commodities profit/loss on commodity trading (Through MCX) and had been continuing this business for Many years. In the list of clients who have taken accommodation entries from these companies, the name of this assessee i.e. Harm .....

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-05 (A.Y. 2005-06). In view of this new feet, I have reason to believe that income chargeable to tax has escaped assessment within the meaning of section 147 of the Act The approval of the CJT-I, Surat is therefore sought for issue of notice under the provisions of section 151(2) of the Act. 3. The assessee reiterated its original return filed in its letter dated 27-11-2007. The Assessing Officer took up re-assessment and issued notices u/s. 143(2) of the Act dated 16-05-2011 and the one u/s. 14 .....

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of ₹ 26 lacs i.e. ₹ 11 lacs of share application money in case of M/s. Mihir Agency Pvt. Ltd and ₹ 15 lacs relating to M/s. Buniad Chemcial Pvt. Ltd as bogus and unreliable. He invoked section 68 of the Act and added gross sums of ₹ 26 lacs as unexplained cash credits. The assessee preferred appeal on 12-09-2011. The CIT(A) dismissed it on 26-06-2012. The assessee submits that its appeal against the CIT(A) s order is pending before the tribunal. 4. It is to be seen post .....

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hasagar Securities Pvt. Ltd. and its group companies run by Shri Mukesh M. Choksi, Director of the companies. During the course of re-assessment proceedings, the A.O. had found , another company also indulging in-billing entry and total addition of ₹ 26 lakh were made as under: 1) Mihir Agency Pvt. Ltd. ₹ 11,00,000/- 2) Buniyad Chemicals Pvt. Ltd. ₹ 15,00,000/- Total ₹ 26,00,000/- 2. However, from the examination of records it is found that no proper verification appears .....

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aper Mills Pvt. Ltd. 60,000 2,40,000 6 15.03.2005 M/s. Felicity Finance &. Leasing Pvt. Ltd, 60,000 2,40,000 7 15.03.2005 M/s. J.M.D. Mercantiles Pvt. Ltd. 1,00,000 4,00,000 8 15.03.2005 M/s. Sunflower Vinimay Pvt. Ltd 1,00,000 4,00,000 9 15.03.2005 M/s. Hiteshwari Marketing Pvt. Ltd. 1,00,000 4,00,000 10 15.03.2005 M/s. Sugam Commercial Pvt. Ltd 1,00,000 4,00,000 11 15.03.2005 M/s. Bhagya Laxmi Mercantile Pvt. Ltd. 1,00,000 4,00,000 3,1,20,000 24,80,00 0 3. On going through the records, it .....

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377; 41,62,437/- and ₹ 73,51,474/-, respectively. 6. Therefore the order under reference appears to be erroneous and therefore, prejudicial to the interest of revenue within the meaning of section 263 of the I.T. Act, 1961. 7. You are: therefore requested to show cause, why the assessment framed by the ITO, Wd -1(2), Surat dated 29.08.2011 should not be revised u/s. 263 of the I.T. Act. For this purpose, hearing, in your case is fixed on 19-.02.2014 at 12.30 P.M. If in case, you do not wis .....

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as follows: 5. The contention of the assessee is that complete details with respect to all the share applicants were submitted even in reassessment proceedings and were verified by the A.O. For this the assessee relied on the order of the A.O, and stated that since all the required details, were submitted and accepted by the A.O, onus in respect of every share applicant with regard to the genuineness and creditworthiness had been discharged. 5.1 It would be pertinent to-mention the fact leading1 .....

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ng the course of search it was revealed that M/s. Mahasagar Securities Pvt. Ltd. and its related group of 34 odd companies were engaged in the business of fraudulent billing activities and providing bogus speculation profit/loss, short term/long term capital gain/loss, share application money, profit/loss on commodity trading which activities had been continuing, for many years. In tie statement recorded on oath on 25.11.2009, Shri Mukesh M Choksi had admitted these transactions to be bogus. The .....

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Total ₹ 26,00,000/- 5.3. However, in the same accounting year, the assessee has shown to have received share application money from the following parties also:- Sr. No. Date of allotment Name of party Amount of shares Amount of premium 1 28.02.05 M/s. Venus Dealing Pvt. Ltd. 10,00,000 2 28.02.05 M/s. Kashmikal Mercantile. Pvt. Ltd. 5,00,000 3 28.02.05 M/s. Clarion Merchants Pvt. Ltd. 5,00,000 4 28.02.05 M/s. SatiTraxim Pvt. Ltd. 5,00,000 5 15.03.05 M/s. Akkal Paper Mills Pvt. Ltd. 60,000 .....

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he assessee had failed, to establish nature and source of credit recorded in its books of account in respect of M/s. Mihir Agency Pvt. Ltd. and M/s Buniyad Chemicals Pvt. Ltd. in the form of share .application money and share premium. However, while finalizing the assessment order, the AO has not verified the genuineness of share application/share premium and the creditworthiness of the above mentioned 11 parties/share applicants in the light of the hew evidence that the assessee was taking bogu .....

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y is taken by one S. Das and Mrinal Chakraborty by 100 shares each. The company has shown interest income only and sources of fund as share capital and loans. 2 Kashmikal Mercantile Pvt. Ltd ₹ 5,00,000/- The company has filed its return showing income of ₹ 784/- only. The shares of the company is taken by one Ramesh Kedia and Jatan Lai Bhansali by 100 shares each. No other details are filed in respect, of this party. 3 M/s. Clarion ₹ 5,00,000/- The company has filed its return .....

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l Paper Mills Pvt. Ltd. Rs.3,00,000/- The company has filed its return showing loss of ₹ 6,72,167/-. The shares of the company is taken by one Raghubir Prasad Dudhwawala and Shankar Prasad Dudhwawala by 10 shares each. M/s. J.M.D. Mercantiles Pvt. Ltd. 6 M/s. Felicity finance & Leasing Pvt. Ltd. Rs.3,00,000/- The company has filed its return showing loss of ₹ 2,30,386/- The shares of the company is taken by one Pradip Kumar Kundu and Nikhil Jana by 10 shares each. 7 M/s J.M. D. M .....

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ss of ₹ 9,91,344/-. The shares of the company is taken by one Mahesh Kedia and Majit Rathi by 100 shares each 10 M/s. Sugam Commercial Pvt. Ltd Rs.5,00,000/- The company has filed its return showing loss of ₹ 7,43,460/-. The shares of the company is taken by one Sitaram Goyal and Subhash Chandra Goyal by 100 shares each. 11 M/s. Bhagya Laxmi Mercantile Pvt. Ltd. Rs.5,00,000/- The company has filed its return showing loss of ₹ 6,00,341/-. The shares of the company is taken by on .....

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Choksi, before deciding on their genuineness. 5.7. M/s Pankaj Enka Pvt Ltd. assessed with 'ITO Ward l(4), Surat had also taken accommodation entries, in the garb of share applications, from the companies mentioned in para 5.5. During the course of assessment proceedings of M/s Pankaj Enka Pvt Ltd, it was noticed by the A.O that M/s Pankaj Enka Pvt Ltd had taken share application money from the following parties in addition to share application money received from M/s Buniyad Chemicals Pvt. .....

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re application money to the assessee, i.e. M/s. Harmony Yarn Pvt, Ltd and whose names are appearing in table given in paragraph 5.5. 5.7.1. During the course of assessment proceedings in the case of M/s Pankaj Enka Pvt Ltd, the identity, genuineness and credit worthiness of the share applicants were examined in detail by the A.O. It is, also noticed from the assessment folder of M/s Pakaj' Enka Pvt Ltd, that the; A.O has issued notice U/s' 133(6) in all these case, and on verification of .....

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cash and bank balance during the current year as well as in the preceding year. In view of the above, show cause notice was issued by the A.O to M/s Pankaj Enka Pvt Ltd, which is reproduced as under:- "In response to notice u/s. 133(6.) the parties mentioned at Sr. No 1,2,3,4,6,10,12,and 14 of above mentioned table has submitted their reply. On verification of the reply submitted, it is notice that all the reply received after reminder dated 03.04.2012, and also all the reply received at a .....

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ollowing parties has not replied till date. 1. M/s. Ednumd Commercial Pvt Ltd. 2. M/s. Study Sales Pvt Ltd. 3. M/s Dhaval Marketing Pvt Ltd. 4. M/s. Emarald System Engg. Ltd. 2.11 Since the above mentioned parties have not given any reply in response to notice u/s. 133 (6) and reminder dated 03.04.2012 which are already served upon them. 2.12 On this basis, you are requested to go through the list and arrange to supply the Information as required from these parties along with their confirmation( .....

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.2. There was no reply to the show cause and the share application money was held as unexplained as to its nature and source and addition was made in the case of M/s. Pankaj Enka Pvt. Ltd. is an associate concern of the assessee, M/s. Harmony Yarn Pvt. Ltd. 5 of the transactions of share application held to be non genuine in the ease of M/s Pankaj Enka Pvt. Ltd are with persons who also appear in the list of 41 persons applying for shares of M/s. Harmony Yarn Pvt. Ltd (the Assessee). 6. In view .....

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s of details already on record in the original assessment, makes the assessment order erroneous in as much as it is prejudicial to the interest of Revenue. It is wrong on the part of the assessee to say that the documents were verified in respect of these 11 parties and only then accepted by the AO in re-assessment proceedings. It is true that the details were submitted by the assessse but the A.O did not make any independently verification to establish the identity and credit worthiness of the .....

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o the assessee before making the assessment. 6. We have heard both the parties and gone through the case file. Relevant facts stand narrated in the preceding paragraphs. The CIT s sole reason for invoking section 263 jurisdiction alleges lack of verification in respect of 11 share and premium applicants to the tune of ₹ 56 lacs. This has made him to restore the matter back to the Assessing authority for carrying out necessary inquiries with reference to identity and creditworthiness of 11 .....

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o inquiry by the Assessing Officer or not. In view of the above said facts and circumstances and specific inquiry of the Assessing Officer and equally elaborate assessee s reply, we hold that this case does not fall in the above stated category. We notice from the case file that the assessee s details forming part of discussion in reassessment led to addition of ₹ 26 lacs being made on account of bogus share application and premium. We observe in these facts that the Assessing Officer exam .....

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