TMI Blog2016 (2) TMI 985X X X X Extracts X X X X X X X X Extracts X X X X ..... statement recorded by the Investigation Wing without any corroborative evidence and examination and cross-examination of the assessee is not sustainable. Therefore, no error or illegality in the order of the learned Commissioner of Income-tax (Appeals) in deleting the addition in question. - Decided in favour of assessee - I. T. A. No. 744/Delhi/2012 - - - Dated:- 10-2-2016 - N. K. Saini (Accountant Member) And Vijay Pal Rao (Judicial Member) For the Appellant : Amrapally Das, Departmental Representative For the Respondent : Ved Jain, Ashish Goel and Ashish Chadha, Chartered Accountants ORDER Vijay Pal Rao (Judicial Member) 1. This appeal of the Revenue is against the order dated August 30, 2011, of the learned CIT(A)-XII, New Delhi, for the assessment year 2003-04. The Revenue has raised the following grounds : 1. The learned Commissioner of Income-tax (Appeals) erred in law and on the facts and in the circumstances of the case in quashing the proceedings initiated under section 147 of the Act. 2. The learned Commissioner of Income-tax (Appeals) erred in law and on the facts and in the circumstances of the case in deleting the addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12-12-2002 Nishant Finvest 8. 4,00,000 2-1-2003 Division Trading Pvt. Ltd. 9. 10,00,000 3-12-2002 Performance Trading and Investment 10. 9,00,000 17-12-2002 Tecnno Com Associates P. Ltd. Total 73,00,000 The companies from which entries were received belong to the Mahesh Garg group. The statement of Shri Mahesh Garg was recorded on September 22, 2003, by the Investigation Wing in which he has admitted that 'I told you that I open this firm/company for providing entry'. It is further noted here that Mahesh Garg had opened about 70 bank accounts in the name of various companies/ firms and individuals. In the answer to the question regarding business activity of these companies, he has replied that these companies did not carry out any activity in reality. In these companies cash used to be deposite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e addition of ₹ 78 lakhs made by the Assessing Officer. The learned Departmental representative has submitted that the assessee has received an amount of ₹ 78 lakhs from 11 persons/entity which are only paper entities/companies belonging to Shri Mahesh Garg. These entities have no creditworthiness whatsoever coupled with no evidence to carry out any genuine business transaction. They do not carry any real business and are simply engaged in providing accommodation entries. These facts were duly acknowledged and accepted by Shri Mahesh Garg in his statement dated September 22, 2003, made before the Investigation Wing. The learned Departmental representative has submitted that the Assessing Officer granted a number of opportunities to the assessee to get the signature of the directors of these entities certified by the branch manager of the bank where directors have their own personal as well as the company accounts. Thus, the assessee failed to establish the authenticity of the signature on the affidavit filed by the assessee in support of the claim of genuineness of the transactions. The transactions in this case are receipts in the nature of share investment on private ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mine is not valid and such invalid evidence cannot be the basis for making any addition. In support of his contention he has relied upon the judgment of the hon'ble Supreme Court in the case of Andaman Timber Industries v. CCE [2016] 38 GSTR 117 (SC) (Civil Appeal No. 4228 of 2006, dated September 2, 2015). He has also relied upon the following judgments : 1. Prakash Chand Nahta v. Union of India [2000] 247 ITR 274 (SC) ; [2000] 163 CTR (SC) 310; 2. Kishinchand Chellaram v. CIT [1980] 125 ITR 713 (SC) ; 3. CIT v. SMC Share Brokers Ltd. [2007] 288 ITR 345 (Delhi) ; and 4. Alok Agarwal v. Deputy CIT [2000] 67 TTJ (Delhi) 109. 7. Alternatively, the learned authorised representative has submitted the alleged bogus shareholders are all incorporated and active companies as per the record of the Registrar of Companies and the master data detail along with permanent account number was also submitted before the Assessing Officer by the assessee. All these entities are having their bank accounts, payment were made by them to the assessee-company through banking channels, therefore, entities of shareholders stand duly accepted even by the Director of Income-tax (Investigati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the learned Commissioner of Income-tax (Appeals) and the Tribunal has observed that the Assessing Officer failed to come up with the material to disapprove what has been produced by the assessee. The learned authorised representative has further contended that the assessee expressed its inability to produce the director of the share applicants company and if the Assessing Officer wanted to examine the directors it was up to the Assessing Officer to summon these parties. In support of his contention, he has relied upon the judgment of the hon'ble jurisdictional High Court in the case of CIT v. Victor Electrodes Ltd. [2010] 329 ITR 271 (Delhi) and submitted that the hon'ble High Court has observed that there is no legal obligation on the assessee to produce some directors and other representative of the applicant's company before the Assessing Officer. A similar view has been taken by the co-ordinate Bench of this Tribunal in the case of Deputy CIT v. G. S. Controls (P) Ltd. (I. T. A. No. 1560/Delhi/2010, order dated March 13, 2015). Thus, the learned authorised representative has submitted that the Assessing Officer has made the addition merely on the basis of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial statement of the parties, copies of board's resolution, share applications form, affidavit of the directors of the subscriber companies, copies of share transfer deed and also information from the Registrar of Companies in respect of these share applicants. The Assessing Officer raised objections about the genuineness of the signature on the affidavits of the directors of these companies and asked the assessee to produce these directors for examination. The assessee expressed its inability to produce these directors and requested the Assessing Officer to summon these parties by issuing the notice under section 133(6) or seek the information by issuing notice under section 131 of the Act. The assessee has also demanded the cross-examination of Shri Mahesh Garg whose statement was relied upon by the Assessing Officer against the assessee. The Assessing Officer instead of taking any step to verify the genuineness of the signature on the affidavits has kept on asking the assessee to produce these parties and referring that the assessee could have done the signatures of the directors certified by the branch manager of the bank. Thus, it is manifest from the assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted without the examination of the said witness during the assessment proceeding and after giving an opportunity to cross-examine the assessee. Even otherwise the Assessing Officer has not conducted any enquiry whatsoever either in support of the information received from the Investigation Wing or to disapprove the evidence produced by the assessee. The Assessing Officer could have verified the signature of the directors of these entities from the bank by issuing the necessary summons/notices instead of insisting the assessee to furnish the bank certificate. Therefore, it is a case of complete lack of enquiry on the part of the Assessing Officer which ought to have been conducted while framing the assessment. In the case of CIT v. Rakam Money Matters Pvt. Ltd. (I. T. A. No. 778 of 2015, dated October 13, 2015) the hon'ble jurisdictional High Court by dealing with an identical question as observed in paragraph 13 as under : 13. It is not in dispute that extensive material was produced by the assessee in the present case is to prove the identity, genuineness and creditworthiness of the companies who had subscribed to its shares. Among the material produced were the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. For the reasons given in the preceding paragraphs, no substantial question of law arises for our consideration. 11. It was found by the hon'ble jurisdictional High Court that there is no legal obligation on the assessee to produce some directors and other representative of the applicant company before the Assessing Officer. The co-ordinate Bench of this Tribunal in Deputy CIT v. G. S. Controls (P) Ltd. (I. T. A. No. 1560/Delhi/2010, vide order dated March 13, 2015) while dealing with an identical issue has held in paragraph 14 as under : 14. We have considered the rival submission and perused the entire material available on record. The Assessing Officer had made addition of ₹ 80 lakhs out of the total share application money amounting to ₹ 2,40,00,000. Thus, rest of the amount had been accepted by the Assessing Officer. From the assessment order it is evident that the Assessing Officer has merely relied on general information regarding the impugned 4 companies in respect of which addition was made as they were known entry providers. The Assessing Officer has pointed out that details were provided by these companies but since the directors of these c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation along with the bank statements, etc., were filed. In case the Assessing Officer had conducted the said enquiries and investigation probably the challenge made by the Revenue would be justified. In the absence of these inquiries and non-verification of the details at the time of assessment proceedings, the factual findings recorded by the Assessing Officer were incomplete and sparse. The impugned order passed cannot be treated and regarded as perverse. The appeal is dismissed as no substantial question of law arises'. 12. The hon'ble jurisdictional High Court in the case of CIT v. Fair Finvest Ltd. [2013] 357 ITR 146 (Delhi) has taken a similar view while dealing with an identical issue in paragraphs 6 and 7 as under (page 152) : This court has considered the submissions of the parties. In this case the discussion by the Commissioner of Income-tax (Appeals) would reveal that the assessee has filed documents including certified copies issued by the Registrar of Companies in relation to the share application, affidavits of the directors, Form 2 filed with the Registrar of Companies by such applicants confirmations by the applicant for company's shares, cert ..... X X X X Extracts X X X X X X X X Extracts X X X X
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