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2016 (2) TMI 985 - ITAT DELHI

2016 (2) TMI 985 - ITAT DELHI - [2016] 51 ITR (Trib) 460 - Receipt of accommodation entries - Held that:- In the case in hand it was not mere transfer of money by these share applicants to the assessee but the assessee has produced on record the board's resolution, share applicants form, copy of share transfer deeds and information from the Registrar of Companies in respect of the share applicants. It established the existence of real transaction of transfer of shares and, therefore, it rebuts t .....

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tement of Shi Mahesh Garg and the report of the Investigation Wing, therefore, the addition made by the Assessing Officer merely on the basis of a 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 .....

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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 ₹ 78,00,000 made by the Assessing Officer under section68 of the Act." 2. The assessee filed its return of income on November 28, 2003, declared a total income of ₹ 1,850. Subs .....

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ot;It is observed from the details provided by the Investigation Wing that M/s. Soft Line Creations Pvt. Ltd. had received the amount of ₹ 73,00,000 during the financial year 2002-03 relevant to the assessment year 2003-04 from the concerns shown hereunder, which were found by the Investigation Wing to be the companies which were non-genuine entities and were giving only accommodation entries. The companies from which entries were received belong to Mahesh Garg group. This group has operat .....

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00 1-1-2003 Right Choice Const. P. Ltd. 7. 10,00,000 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/ .....

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anies used to sign the blank cheque book only. He further admitted that 'I made some people as directors to so many companies, they are directors for namesake, they used to put the signature on the blank cheque book'. He admitted that he was only a matriculate and used to issue cheques in lieu of cheques to various parties after charging 0.5 per cent. commission. In view of the above, I have reasons to believe that a sum of ₹ 73,00,000 represents income of M/s. Soft Line Creations .....

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est, vide letter dated November 8, 2010. In response to the notice the Assessing Officer supplied the copies of the statement of Mahesh Garg dated September 10, 2003, September 22, 2003, along with a declaration as well as the copies of the notice issued under section 148 along with the reasons recorded by the Assessing Officer for reopening of the assessment. The Assessing Officer while passing the reassessment order dated December 31, 2010, made an addition of ₹ 78,39,000 on account of a .....

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on made by the Assessing Officer in respect of the accommodation entries. 4. Aggrieved by the impugned order of the learned Commissioner of Income-tax (Appeals) the Revenue has preferred this appeal. 5. First I will take up the issue on the merits regarding the 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 .....

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ortunities 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 placement which has to be proved by stri .....

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essee failed to prove the genuineness of the transaction and genuineness of the signature of the directors of these entities in the affidavit filed by the assessee. The learned Departmental representative relied upon the judgment of the hon'ble Supreme Court in the case of Navodaya Castle P. Ltd. v. CIT [2015] 230 Taxman 268 (SC), and submitted that the hon'ble Supreme Court has confirmed the judgment of the hon'ble High Court by holding that the certificate of incorporation, permane .....

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e of assessment proceedings, the assessee duly discharged the onus cast on it by submitting various documentary evidence which proved the identity, creditworthiness of the creditors and the genuineness of the transactions. However, the Assessing Officer relied upon the statement of Shri Mahesh Garg which was recorded by the Director of Income-tax (Investigation) and did not examine the said person himself. Even the Assessing Officer has not given the assessee an opportunity to cross-examine the .....

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dgment 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. Alte .....

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by the Director of Income-tax (Investigation) at whose information the Assessing Officer has initiated the reopening proceedings. The assessee produced all the relevant documents to establish the identity of the subscriber and also all transactions are through banking channels. The Assessing Officer has not controverted the documents produced by the assessee in support of the claim as well as the transactions took place through banking channel. Therefore, creditworthiness of the parties was also .....

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es, copies of share transfer register and also record from the Registrar of Companies in respect of all the share applicants. However, the Assessing Officer has not pointed out any defect or any error in the said evidence filed by the assessee. The Assessing Officer raised only objection with the signatures of Shri Trilok Chand Bansal, Bharat Bhusan Bansal and Ajay Mittal, Narender Kumar Gupta, Anil Kumar Sharma and Vinod Garg on their affidavits filed by the assessee do not match with their sig .....

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to summon or issue notice to the parties for examination and verification of the genuineness of the signature which was doubted by the Assessing Officer. The learned authorised representative has relied upon the judgment of the hon'ble jurisdictional High Court in the case of CIT v. Rakam Money Matters Pvt. Ltd. (I. T. A. No. 778 of 2015, dated October 13, 2015) and submitted that the hon'ble High Court while confirming the finding of the learned Commissioner of Income-tax (Appeals) and .....

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le 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, .....

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; 2. CIT v. Fair Finvest Ltd. [2013] 357 ITR 146 (Delhi) ; 3. CIT v. Goel Sons Golden Estate Pvt. Ltd. (I. T. A. No. 212/2012, dated April 11, 2012) ; 4. CIT v. Gangeshwari Metal Pvt. Ltd. [2014] 361 ITR 10 (Delhi) ; and 5. CIT v. Vrindavan Farms P. Ltd. [2016] 6 ITR-OL 502 (Delhi) (I. T. A. No. 71, 72, 84/Del/2015, dated August 12, 2015). 8. Thus, the learned authorised representative has argued that in the case of the assessee the evidence and material adduced has been thrown by the Assessing .....

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rein it was pointed out that the assessee has received accommodation entries of ₹ 78 lakhs from various persons/entities which are mentioned in the reasons recorded and reproduced in the foregoing paragraphs. In this connection, the Investigation Wing recorded the statement of Shri Mahesh Garg who was considered as the main person and all these entities were belonging to the said person. It is pertinent to note that in the entire assessment order the Assessing Officer has repeatedly reprod .....

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py of ITRs, copies of 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 as .....

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ept 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 order and the proceedings that the Assessing Officer instead of taking any step under section 133(6)/131 of the Act was asking the assessee to produce the parties or getting the signature on the affidavits certified through banks. The entire assessment has been framed by the Assess .....

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ot confirmed or corroborated by the person during the assessment proceedings. The Assessing Officer ought to have conducted a separate and independent enquiry and any information received from the Investigation Wing is required to be corroborated and reasserted/reaffirmed during the assessment proceedings by examining the concerned persons who can affirm the statement already recorded by other authority of the Department. There is no dispute that the statement which was relied upon by the Assess .....

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ortunity of cross-examination and used the statement of Shri Mahesh Garg against the assessee which is not permissible under the law. As it is a case of clear violation of the rules of the principles of natural justice and the statement which is recorded at the back of the assessee cannot be used against the assessee without giving any opportunity of cross-examination. Thus, the addition on account of accommodation entries of ₹ 78 lakhs made by the Assessing Officer solely on the basis of .....

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uld 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 w .....

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Officer, it was not impossible for the Assessing Officer to make proper enquiries to ascertain the genuineness of these entities and satisfy himself of their creditworthiness. As pointed out by the Commissioner of Income-tax (Appeals), the Assessing Officer failed to make any effort in that direction. He did not take to the logical and the half-hearted attempt at getting the directors to appear before him. He did not even seek the assistance of the Assess ing Officers of the concerned companies .....

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) the hon'ble jurisdictional High Court an identical issue has held in paragraph 9 as under (page 275) : "There was no legal obligation on the assessee to produce some director or other representative of the applicant-companies before the Assessing Officer. Therefore, failure of the assessee to produce them could not, by itself, have justified the additions made by the Assessing Officer, when the assessee had furnished documents, on the basis of which, the Assessing Officer, if he so wa .....

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ssioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal, in our view, were justified in holding that the identity of the share applicants and the genuineness of the transactions had been established by the assessee. 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 repr .....

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₹ 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 companies were not produced, he made the addition. No inquiries were conduc .....

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se of CIT v. Nova Promoters and Finlease (P) Ltd. [2012] 342 ITR 169 (Delhi) also the hon'ble Delhi High Court had clearly distinguished between the cases where the Assessing Officer had carried out detailed inquiry and then arrived at a finding regarding accommodation entries and those cases where the Assessing Officer did not carry out any inquiry and merely made addition on general basis. The inquiry for arriving at a proper conclusion is a sine qua non and that cannot be dispensed with b .....

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clusively proves that share money of ₹ 30,00,000 allegedly received by the respondent-assessee from 5 companies are sham and bogus transactions. 3. We have examined the said contention and find that the asses see during the course of assessment proceedings has filed confirmation letters from the companies, their permanent account number, copy of bank statements, affidavits and balance-sheet. Thereafter, the Assessing Officer had asked the assessee to produce the said directors/parties. The .....

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d 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 d .....

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#39;s shares, certificates by the auditors, etc. Unfortunately, the Assessing Officer chose to base himself merely on the general inference to be drawn from the reading of the investigation report and the statement of Mr. Mahesh Garg. To elevate the inference which can be drawn on the basis of reading of such material into judicial conclusions would be improper, more so when the assessee produced material. The least that the Assessing Officer ought to have done was to enquire into the matter by, .....

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umstances, the court is satisfied that the finding of the Tribunal in this case accords with the ratio of the decision of the Supreme Court in CIT v. Lovely Exports Pvt. Ltd. [2009] 319 ITR (St.) 5 (SC)." 13. In the case in hand it was not mere transfer of money by these share applicants to the assessee but the assessee has produced on record the board's resolution, share applicants form, copy of share transfer deeds and information from the Registrar of Companies in respect of the shar .....

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