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2015 (12) TMI 1330 - ITAT MUMBAI

2015 (12) TMI 1330 - ITAT MUMBAI - TMI - Addition u/s 68 - assessment u/s 153A - CIT(A) deleted the addition - Held that:- Hon'ble Supreme Court in the case of Lovely Exports Pvt. Ltd. [2008 (1) TMI 575 - SUPREME COURT OF INDIA] has clearly laid down the law that once the assessee has given the complete details and the information of the investors who have made investments in the share capital of the company and proved identify then no addition can be made in the hands of the assessee company an .....

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. - Decided against revenue - ITA Nos. 6106 & 6107/M/2012 - Dated:- 18-12-2015 - Shri G. S. Pannu, Accountant Member And Shri Sanjay Garg, Judicial Member For the Petitioner : Shri Alok Johri, D.R. For the Respondent : Shri D.V. Lakhani, A.R. ORDER Per Sanjay Garg, Judicial Member: The above titled appeals have been preferred by the Revenue against the common order dated 27.07.2012 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to AY 2008-09 and AY 2 .....

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bad Street, Carnac Bunder, Mumbai. During the course of search it was found that assessee had been maintaining its books of accounts at another premises situated at 20, Bhatia Niwas, 233/235, Samuel Street, Masjid Bunder, Mumbai - 400 009. Therefore, the said premise was covered for survey action u/s. 133A of the I.T. Act. During the survey action, it was revealed that seven other companies have also been operating from the said premise Bhatia Niwas. It revealed that the assessee and all the abo .....

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t. Ltd. and M/s Reva Properties Pvt. Ltd. Similarly Shri Om Hari Halan has been a director in M/s Archive Realty Developers Pvt. Ltd. and M/s. Vedisa Properties Pvt. Ltd.; Similarly Sh. Narayan Hari Halan was director in M/s. Martand Properties Pvt. Ltd., M/s. Karburi Proprties Pvt. Ltd. and M/s. Cikura Properties Pvt. Ltd. Further, it was also revealed that all the above said Directors were closely related to each other. The case of the assessee was thus covered under section 153A and the other .....

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companies have been obtained by paying cash in lieu of the cheques received as share capital. The said money received as share capital by the assessee company and other group companies was further invested in his company 'M/s Shree Global trade fin. Ltd.; This statement of Shri Jose Mathew was confronted to Shri Ajay Kumar, one of the Directors of the assessee company who in turn offered the amount received as share capital from the companies as mentioned in the assessment order as unexplai .....

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he same place and that these concerns were also not well established companies. A total of ten companies (8 companies in AY 2008-09 & 2 companies in AY 2009-10), names of which have been mentioned in the assessment order, had subscribed to the shares of these companies including the assessee. The AO further noted that the above concerns were sister concerns and their nature and the modus operandi was same as that of the assessee company. The AO further observed that the search and seizure op .....

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that Shri Ajay Kumar, Director of the company had offered the amount received as share capital from above said companies as unexplained credits in AY. 2008-09 & AY 2009-10. Since the undisclosed income declared in the statement was not offered for taxation in the return filed, therefore, the AO gave a show cause notice to the assessee to submit complete details of share application money received and utilized. The AO also asked the assessee to submit the complete evidences to prove the iden .....

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ided in some cases or that the directors of the company were not produced for cross examination. The AO thereafter discussed the issue of retraction of statement given by the Director of the company, Shri Ajay Kumar and observed that the statement recorded by the income-tax authorities u/s. 131 has evidentiary value even after its retraction and that the same can be used against the assessee. The AO further held that the documents filed relating to share application money were all result of an a .....

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Ys. 2008-09 & 2009-10 respectively as undisclosed income of the assessee company u/s. 68 of the I.T. Act. Being aggrieved by the above additions, the assessee filed appeal before the CIT(A). 5. The Ld. CIT(A), after considering the submissions of the assessee and analyzing the facts and circumstances of the case, observed that 10 companies had subscribed the share application money in the assessee company. The papers relating to the identity, creditworthiness and genuineness of the transacti .....

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that these companies had been registered with the registrar of companies. These companies had subscribed to the shares of the assessee company in AY 2009-10. The Ld. CIT(A) in this respect observed that during assessment proceedings, the Ld. AR of the assessee had submitted all the details relating to these companies. All the companies were having PAN and independently and regularly assessed to tax. Complete details of cheque number., date of cheque, bank a/c. share allotment letters giving deta .....

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pplication money. There was no mention in the said statement that transaction with the assessee company was not genuine. No incriminating document was found and seized during search operation to prove that cash was given against cheques received from these companies. Even independent enquiry made in respect of the bank accounts of these companies, the AO could not find any instance of cash deposit against issuing of cheques. The Ld. CIT(A) thereafter examined the applicability of section 68 of t .....

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iness and genuineness of transaction were fulfilled. Thus reliance cannot be placed on a general statement of Mr. Choksi alone which was not corroborated by any documentary evidence. He therefore held that in totality of facts & circumstances, the case was covered by the decision of Hon'ble Supreme Court in case of Lovely Exports Pvt. Ltd.[216 CTR 195 (SC)].He therefore deleted the additions so made by the Assessing Officer u/s. 68 of the Act. Being aggrieved by the above deletion of the .....

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quent retraction is nothing but an afterthought of the assessee. The Ld. DR has further contended that Sh. Mukesh Chokshi was a hawala dealer, hence the share application money received by the assessee was the result of a bogus transaction. The Ld. DR in this respect has relied upon the decision of the co-ordinate bench of the Tribunal in the case of "Gold Star Finvest (p) Ltd."[2013] 33 Taxmann.com 129. The Ld. DR has also referred to the decisions of the Tribunal in the case of " .....

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record relating to AY 2008-09, the Ld. AR has pointed out that none of the companies who had invested in the assessee company in the AY 2008-09 belonged to Sh. Mukesh Chokshi. He has further invited our attention to the various documents filed in the paper book to contend that the assessee had submitted all the required details such as balance sheet, return filed giving the full particulars about the company, the confirmations from the investing companies regarding the investments made in the sh .....

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notice issued by the assessee company for holding the meetings of the shareholders and the proof of dispatch of the notice to the shareholder were also submitted. The Ld. AR has further submitted that even in respect the 2 companies which belonged to Sh. Mukesh Chokshi, who had invested in the assessee company in the AY 2009-10, the assessee had submitted all the requisite details such as the name, address, PAN number, Registration number with Registrar of Companies, details of the bank account, .....

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each of the objections raised by the AO in respect of the evidences submitted in relation to each of the 8 companies was duly replied and dealt with. It has been explained that the assessee had provided the complete details of the share application money received together with confirmations and that there was no statutory obligation to obtain the application form from the investor. The investor companies had given a ledger account confirmations. Complete details about the bank account giving che .....

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material against the assessee was found during the search action, he, however, has contended that it is a case of circumstantial evidence which is corroborated with the admission of one of the directors of the assessee company. At this stage the Ld. AR has pointed to the question No. 15 in the statement of Sh. Ajay Kumar, Director of the company, wherein it was pointed out to him that one Mr. Jose Mathews had on 4.3.2010, during the course of survey in the case of Shree Global Trade fin. Ltd., h .....

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nt which was recorded during the course of survey u/s. 133A and the necessary proof and evidence for the same was also produced before the AO. The AO had also thereafter not issued any notice to Mr. Jose Mathews. The Ld. AR therefore has submitted that no reliance can be placed in the statement of Mr. Jose Mathews. 9. We have considered the above submissions of the Ld. AR of the assessee. We have also gone through the statement of Sh. Ajay Kumar Halan, recorded under section 131 of the Act. The .....

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bogus by the AO. When the said person was neither the employee of the assessee company nor was in any way related to the investing companies, his statement in the circumstances could not be said to have any evidentiary value. Mr. Jose Mathews was the employee of the company in which the assessee had made the investments, which was a totally different transaction. He was not in any manner connected to the transactions in question before us. As regards the statement of Shri Ajay Kumar Halan, the .....

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rther pointed out that there was no direct admission of Sh. Ajay Kumar about any unexplained income. He has demonstrated that he was given an impression that in view of the statement of Sh. Mukesh Chokshi and Sh. Mr. Jose Mathews in some other search or survey actions, it was established that the assessee had received unexplained investment, in response to which he stated that he has come to know about these facts then only as revealed by the department and taking into consideration the fact and .....

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unreliable statements of Mukesh Chokshiand Mr. Jose Mathews. 10. The Ld. AR has further explained that during the assessment proceedings, the assessee vide different letters including letter dated November 30, 2011 had explained to the Assessing Officer all the above facts and that the disclosure was made solely on the basis of information provided to him by the investigation wing and purely on the mistaken belief that the transaction of share investments by nine companies could not be explaine .....

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erusal of the statement of Sh. Ajay Kumar, recorded under section 131 of the Act, as reproduced above, reveals that the acceptance or offer of the unexplained income was not based on his own knowledge or admission of facts but on the basis of facts and statements presented by the revenue before him. He has never admitted that the transactions were not genuine or the same were bogus. In answer to question No.13 put to him, he has stated to the investigation wing that he did not know Mr. Mukesh Ch .....

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AR has duly brought on the file that he was not connected to the company when the transactions took place. Under such circumstances, in the absence of any corroborating evidence and solely on the basis of retracted statement of the said Sh. Ajay Kumar, a perusal of which reveals that the same was not based on his own knowledge of the relevant facts/transaction in question, additions made by the AO cannot be held to be justified in any manner. The Ld. AR has further brought our attention in this .....

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minating material was found during the search action. The addition is made purely on the basis of declaration made by Sh Ajay Kumar, Director. The Ld. AR has relied upon the following decisions in this respect. (a) DCIT vs Pramukh Builders ITA No. 2170/Ahd./1999 A.Y. 1994-95 dated 6.7.2007 Reported in 115TTJ p. 330 (Third Member) (b) CIT vs. K. Bhuvanendra and Others 303 ITR p. 235 (Madras High Court) (c) S. Khader Khan Son Reported in 300 ITR p. 157 (Madras High Court) (d) Oriental Containers L .....

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not be said that it is conclusive; it is open to the person who made the admission to show that it is incorrect and that merely on the basis of statement recorded during the search under mistaken belief and which has been retracted subsequently and without there being any corroborative evidence or incriminating material found, no addition can be made. As regards the statement of Mr. Mukesh Choksi relied upon by the revenue, the Ld. AR has submitted that he had never stated that assessee had giv .....

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liance can be placed on the statement of Mr. Mukesh Choksi when the assessee has independently established the genuineness of the transaction. The Ld. AR has further relied upon the following decisions wherein it has been held that once the assessee submits the basic information about the investor company and substantiates the same no addition can be made by invoking the provisions of Section 68 of the Income Tax Act, 1961. a) Lovely Exports Pvt. Ltd. - 299 ITR (Delhi High Court) page 268 and SL .....

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High Court) h) CIT vs HLT Finance Pvt. Ltd. (2011) 201 Taxman p. 28 (Delhi High Court) 13. On the other hand the Ld. DR has relied upon one decision of Mumbai ITAT in the case of Gold Star Finvest Pvt. Ltd. (supra) wherein while determining the income of that assessee, the Tribunal has estimated the income at certain percentage. The Ld. AR has however submitted that the ratio of this decision cannot overrule the decisions of Bombay High Court and several Mumbai ITAT decisions as relied upon by h .....

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10.2014 5. M/s SDB Estate private ltd. vs. ITO ITA No. 584/M/2015 decided on 15.04.2015 6. M/s. Yamuna Estate Pvt. Ltd. vs. ITO ITA No.2672/M/2012 decided on 09.09.2015 7. CIT vs. Rajni Devi A. Choudhry (Bom. HC) ITA NO. 1333of 2008 decided on 27.4.2009 8. "Shri Mukesh R. Marolia vs. Additional CIT" (2006) 6 SOT 247 (Mum) 9. "CIT vs. Shri Mukesh R. Marolia" in ITA No.456 of 2007 decided on 07.09.2011 (Bom HC) 10. SLP No.20146/2012 styled as "CIT vs. Shri Mukesh R. Maroli .....

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Star Finvest Pvt. Ltd. run by Mukesh Chokshi, the income has been determined on percentage/commission basis treating the said company as accommodation entry provider, that itself cannot hold a justification to completely ignore the facts and evidences brought on the file by the assessee. The case of the assessee has to be adjudged on the basis of its own set of facts and evidences. Moreover the facts and circumstances of the case of the assessee are squarely covered by the various decisions of .....

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en the director of M/s. Richmond Securities Pvt. Ltd. The Tribunal, after considering the overall facts and circumstances of the case, observed inter-alia that on the basis of evidence available and there being no incriminating material found during the search action, observed that the assessment has to be completed on the basis of records and material available before the Assessing Authority. The personal knowledge and excitement on events should not lead the AO to a state of affairs where sali .....

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issue in the case styled as "CIT vs. Shri Mukesh R. Marolia" in ITA No.456 of 2007 decided on 07.09.2011, observed that though there was some discrepancy in the statement of director (Mr. Mukesh Chokshi) of M/s. Richmond Securities Pvt. Ltd. regarding the sale transaction, but owing to the factual finding given by the Tribunal on the basis of evidences furnished by the assessee, the decision of the Tribunal cannot be faulted. The Hon'ble Bombay High Court upheld the finding of the .....

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arious accommodation entries to various parties. The Hon'ble Bombay High Court observed that where the assessee had brought the relevant evidences regarding the genuineness of transaction and that in his statement Mr. Mukesh Chokshi had not mentioned the name of the respondent/assessee as one to whom accommodation entries were given, the Hon'ble Bombay High Court upheld the findings of the Ld. CIT(A) which were further confirmed by the Tribunal holding that the transactions were genuine .....

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sion of the Hon'ble Bombay High Court in the case of "Shri Mukesh R. Marolia" (supra). Even in the case of "Smt Rajni S Chowdhry" (supra), the Hon'ble Bombay High Court has upheld the decision of the Tribunal given on the basis of appreciation of evidence and factual finding, accepting the transaction carried carries through broker M/s Gold Star Finvest (P) ltd. as genuine. 15. We further find that the issue is squarely covered by the various decisions of the Tribunal .....

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