TMI Blog2018 (7) TMI 1080X X X X Extracts X X X X X X X X Extracts X X X X ..... undisclosed income for receiving bogus accommodation entries in the form of share capital of ₹ 30,50,000, is concerned - Held that:- In view of deletion of connected addition on account of share application money, the addition made u/s. 69C of the Act cannot be sustained. Accordingly, ground No. 3 of assessee’s appeal also deserves to be allowed. Addition on account of high premium paid for shares cannot be sustained unless and until some material was brought on record by the AO to show that confirmation and other evidences placed by the Assessee were not genuine. No such material is available on record before us. Accordingly, the impugned order of ld. CIT(A) does not suffer from any infirmity while deleting the addition - ITA No. 4991/Del./2014 And ITA No. 4853/Del/2014 - - - Dated:- 6-7-2018 - Shri H.S. Sidhu, Judicial Member And Shri L.P. Sahu, Accountant Member For The Assessee : Shri Sandeep Sapra, Advocate For The Revenue : Shri Atiq Ahmed, Sr. DR ORDER Per L.P. Sahu, A.M.: These cross-appeals at the instance of assessee and the Revenue are directed against the order dated 20.06.2014 of the Ld. CIT(A)-XVIII, New Delhi for Assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue s appeal : 1) On the facts in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of ₹ 62,62,000/- (including commission of ₹ 62,000/-) made by the AO u/s 68 of the Income Tax Act holding that the appellant has been able to prove the identity, creditworthiness and genuineness of the transaction ignoring the fact that as per the information received from the Investigation Wing of the department the said entities are doing no business except to provide accommodation entries on commission basis. 2) On the facts in the circumstances of the case, the Ld. CIT(A) has erred in deleting the above addition ignoring the statement of the entry operators, whereby they have categorically admitted to have accepted cash of an equivalent amount before issuing cheques for allotment of shares. 3) On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the above addition ignoring the fact that the assessee has not been able to justify the payment of high premium for shares, when the company is running in loss. 2. Briefly stated, the facts leading to the present cases are that the assessee filed its return of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided to them out of undisclosed sources. The Assessing Officer, accordingly, made an addition of ₹ 73,50,000/- u/s. 68 of the IT Act and of ₹ 73,500/- u/s. 69C of the Act, being the expenditure incurred on receiving said accommodation entries. 2.1 The Assessing Officer further observed that the assessee had also shown receipt of share application money from M/s. Arun Finvest Pvt. Ltd. of ₹ 4,00,000/- and FNS Consulting Pvt. Ltd. of ₹ 15,00,000/-, which too were treated as bogus accommodation entries received from these two companies, which were being controlled by another entry operation group involving Shri Mukesh Gupta, whose statements recorded by Investigation Wing on the same line, are also reproduced in the assessment order. Accordingly, the Assessing Officer also added these receipts of ₹ 19,00,000/- u/s. 68 being the bogus accommodation entries received by assessee and of ₹ 1900/- as expenditure incurred on receiving such entries u/s. 69C of the Act. 3. The assessee assailed the assessment order in appeal before the ld. CIT(A), where the assessee, apart from filing a detailed written submissions, also filed additional evidences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enable inter alia because: (i) Reasons have been recorded by the AO on borrowed satisfaction i.e. on the information received from the Investigation Wing of I.T. Department. In other words, reasons have been recorded without making any independent enquiries as is evident from the last para of the reasons recorded which are reproduced below: In view of the report received from Investigation Unit, and in view of the facts narrated above it is clear that the assessee has not disclosed fully and truly all material facts necessary for its assessment for the assessment year. I have therefore, reason to believe that the sum of ₹ 72,00,000/- chargeable to tax has escaped assessment. Thus, the same is to be brought to tax under section 147/148 of the I.T. Act, 1961. (ii) Reasons recorded indicate that the AO has acted on mere surmises and suspicion for making fishing and roving enquires. The requirement of law is reason to believe and not reason to suspect . (iii) AO has not applied his mind so as to come to an independent satisfaction that he has reason to believe that income has escaped assessment. This is evident from the reasons recorded (copy placed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry having been undertaken by the AO. In other words, reasons have been recorded on borrowed satisfaction which fails to demonstrate a live link between the tangible material and formation of belief that income has escaped assessment. Therefore, on such facts, reopening of assessment u/s 147/148 is bad in law. In this connection, reliance is placed on various case laws attached as Annexure - A placed at pages 16-17 of the Synopsis. In view of the above, reopening of assessment u/s 147/148 is bad in law and therefore, the impugned assessment order passed u/s 147/143(3) of I.T. Act deserves to be annulled/quashed. 5.1 With reference to ground No. 2, the ld. Counsel for the assessee submitted as under : Ground No. 2: is against the addition of ₹ 30,50,000 sustained by the Ld. CIT(A) on account of share capital received from the following parties: - M/s Omni Farms Pvt. Ltd. ₹ 11,50,000 - M/s Chandra Prabhu Finvest Pvt. Ltd. ₹ 8,50,000 - M/s Viagra Trading Company Pvt. Ltd. ₹ 6,50,000 - M/s Arun Finvest Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O as ₹ 90,50,000 in the assessment order) on account of fresh share capital raised from all 8 Cos. without controverting or disproving the documentary evidence as filed before him on the basis of information/reports received from the Investigation Wing. 5. The Ld. CIT(A) deleted addition of ₹ 62,00,000/- on account of share capital received from 4 share subscribers who had filed replies in response to notice u/s 133(6), a fact also admitted by the AO in the remand report dated 25/04/2014, copy placed at pages 454-457. However, addition of ₹ 30,50,000/- with regard to 4 share subscribers was confirmed by Ld CIT(A), who had not filed replies in response to notices u/s 133(6) though such notices had duly been served on them. Documentary evidence with regard to four Cos. whose share capital has been confirmed by the Ld. CIT(A) is placed in the paper book as under: (i) Omni Farms Pvt. Ltd. at pages 58 110. (ii) Chandra Prabhu Finvest Pvt. Ltd. at pages 184 241. (iii) Viagra Trading Company Pvt. Ltd. at pages 371 426 (iv) Arun Finvest Pvt. Ltd. at pages 428 435. 6. The findings of the Ld. CIT(A) at page 38 of the appellate ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the addition of ₹ 30,500/- sustained by the Ld. CIT(A) on account of commission/premium allegedly paid @1% to entry operators out of Assessee s undisclosed income for receiving bogus accommodation entry in the form of share capital of ₹ 30,50,000/-. As this ground is interconnected with Ground No. 2 above, therefore, Assessee relies on the submissions/case laws made with regard to Ground No. 2 which are not being repeated here for the sake of brevity. In view of the above facts, circumstances and the legal position of the case, the addition of ₹ 30,500/- deserves to be deleted. At any rate, the addition as made is excessive. 6. The learned DR, on the other hand, relying on the order of Assessing Officer, submitted that the ld. CIT(A) was justified in sustaining the addition u/s. 68 and in rejecting the legal plea of the assessee challenging the validity of reopening proceedings. He, however, in support of Revenue s appeal submitted that the ld. CIT(A) has fallen in error while giving partial relief to the assessee by deleting the addition in part out of that made by Assessing Officer u/s. 68 and 69C of the IT Act. The additions made were supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year under consideration from four share subscribers by ignoring the fact that the Assessee has not been able to justify payment of high premium for shares. 1. The above ground of the Revenue that Assessee has not been able to justify high premium paid for shares by the share subscribers is wholly misplaced as the same does not emanate either from the assessment order or CIT(A) order. Such issue was not raised by the authorities below and therefore, the ground is untenable and deserves to be dismissed. 2. Without prejudice to above, even otherwise, no adverse inference could be drawn against the Assessee on account of premium charged for shares as the identity, genuineness and creditworthiness of the shares subscribers stood proved. 3. In this connection, Assessee relies on the Jurisdictional Delhi High Court judgment dated 03/07/2017 in the case of Pr. CIT vs. A.R. Leasing Pvt. Ltd, copy placed at pages 122-124 of this Synopsis in which it was held as under: The CIT (A) has in para 9.1 of his order noted that the Assessee had placed before the AO the following documents of the investing companies: Memorandum of Association, Articles of Association, certifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 FEB,05 5,50,000 Deepak Jain 22.02.2005 Giriasho Co. Randeep OBC 210791 19 FEB,05 5,00,000 Deepak P. Ltd. Investment P Ltd. Jain 25.02.2005 S.J. Scurity Pvt. Ltd. Randeep Investment P Ltd. HDFC 271376 23FEB,05 5,00,000 Deepak Jain 12.03.2005 Vashudeva Farms Pvt. Ltd Randeep Investment P Ltd. SIB 766990 10 Mar,05 5,00,000 Deepak Jain 12.03.2005 S.J. Scurity Pvt. Ltd. Randeep Investment P Ltd. HDFC 271395 10 Mar,05 5,00,000 Deepak Jain 12.03.2005 S.J. Scurity Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 72,00,000 However, as per assessment order, assessee received share application money from the above mentioned 6 parties aggregating to ₹ 73,50,000 as per details below: Name of the Co. Amount (Rs.) Omni Farms P. Ltd. 11,50,000 Vasudeva Farms P Ltd. 16,50,000 Chander Prabhu Finvest P Ltd. 8,50,000 Griasho Co. P Ltd. 15,50,000 S.J. Security P Ltd. 15,00,000 Viagra Trading Co. P Ltd. 6,50,000 Total 73,50,000 From the above, it is evident that reasons have been recorded by the AO solely on the basis of information received from the Investigation Wing of the department without making any independent enquiries with regard to share application money received from the above 6 parties. On comparison of the reasons recorded before issuance of notice u/s 148 with the assessment order, the following discrepancies are apparent in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecific allegation that the assessee had failed to disclose all the material facts but the same can be gleaned from the reasons itself. We are unable to accept this contention. In the first instance, we do not find the reasons as recorded by the Assessing Officer to be reasons in law, at all. A bare perusal of the table of alleged accommodation entries included in the reasons as recorded, discloses that the same entries have been repeated six times. This is clearly indicative of the callous manner in which the reasons for initiating reassessment proceedings are recorded and we are unable to countenance that any belief based on such statements can ever be arrived at. The reasons have been recorded without any application of mind and thus no belief that income has escaped assessment can be stated to have been formed based on such reasons as recorded. 8. The facts in the assessee's case are identical. In this case also, the Assessing Officer, except preparing the table of alleged accommodation entries from the details claimed to have been received from the Investigation Wing, has not at all applied his mind. From a bare perusal of the table of the alleged accommodation entri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Finvest Pvt. Ltd. ₹ 4,00,000 Total ₹ 92,50,000 12. It is also born out on record that in order to prove the identity, creditworthiness of the share applicants and genuineness of the transactions, the assessee had filed plenty of documents during the course of assessment proceedings which are also placed by the Assessee in the paper book. It is, however, surprising that the Assessing Officer has not referred to even a single document in the assessment order. The documents available before the Assessing Officer either in the assessment proceedings or in remand proceedings were as under : (i) Copy of Share Application Forms (ii) Copy of Board Resolutions authorizing Investment in the assessee company. (iii) Copy of Confirmation. (iv) Copy of the Bank Statement of the share subscriber Cos. (v) Copy of Income Tax Return. (vi) Copy of the Balance Sheet (vii) Copy of Memorandum of Association. (viii) Form No. 18 evidencing the current registered office of the company. (ix) Company Master Data from ROC site evidencing current registered office of the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfronted to the Assessee and therefore, from this angle also, no adverse inference could be drawn against the assessee particularly when the documentary evidences viz. share application form, confirmations, bank statements, balance sheets, ITRs, PANs and their ROC returns etc. as filed by the assessee had not been controverted or disproved by the authorities below. In view of this matter it is hard to infer that it was assessee s own undisclosed money which was received from the alleged share subscribers in the garb of share application money, as no documentary evidence goes to suggest such an adverse inferences to be drawn against the assessee. In the decision of Hon ble Supreme Court, CIT vs. Orissa Corporation P. Ltd., 159 ITR 78, it has been held as under : The assessee produced before the Income- tax Officer letters of confirmation, the discharged Hundis and particulars of the different creditors general index numbers were with the Income-tax Department. Attempts had been made to bring those creditors therefore the Income-tax Officer by issue of notices under Section 131 of the Act, but the said notices were returned with the endorsement 'left'. The Income-tax Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordinate Bench of Tribunal in ITA No. 1834/Del/2015 for AY 2004-05 in the case of Espirit Finco Pvt. Ltd., has observed as under: The fact remains that the notices have been served upon these parties. Thus, in a case where 4 out of 6 concerns admittedly reply the two who though do not reply but their evidences remain unassailed per se cannot be the reason for sustaining the addition in the facts and circumstances of the present case. In the facts where all details are available notice u/s 133(6) have been served, four have replied thus, if the department still had any further doubts about their existence or genuineness then their presence should have been enforced as the whereabouts of these two concerns were known to the department as notices were served upon these parties at the address given is a fact on record. In the afore-mentioned peculiar facts and circumstances, the request of the Revenue to direct yet another remand does not make any sense. It is seen that when the evidences on record are considered qua the stated business of the assessee, I find that the addition on merits cannot be sustained . The relevant observations of Hon ble Jurisdictional High Court in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocess to the logical end. He cannot draw adverse inference merely because reply has not been received. Submission of the reply in an independent enquiry being carried out by the AO by issue of notice under Section 133(6) from the person concerned directly is not in the hands of the assessee. The AO may be justified in certain circumstances when notice is not served or when an adverse reply is received in response to notice issued by him under Section 133(6), but merely nonreceipt of reply can be a justification for drawing adverse inference. Our this view is supported by the judgment of the Hon ble Supreme Court in the case of CIT vs. Orissa Corporation 159 ITR 78 where a similar issue has come up . 14. The Ld. AR also relied on the following case laws in which it has been held that unless and until the documentary evidences as filed by the assessee to prove the identity, genuineness and creditworthiness is not controverted or disproved by the AO by bringing some material on record, the onus which lay on the assessee stood discharged and the addition made u/s 68 of the I T Act could not be sustained: (i). 319 ITR (Statutes) 5 (Supreme Court) while dismissing the S. L. P. a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee deserves to be allowed. 15. As far as ground No. 3 regarding addition sustained u/s. 69C on account of commission/premium allegedly paid @ 1% to entry operators out of assessee s undisclosed income for receiving bogus accommodation entries in the form of share capital of ₹ 30,50,000, is concerned, in view of deletion of connected addition of ₹ 30,50,000/- on account of share application money, the addition made u/s. 69C of the Act cannot be sustained. Accordingly, ground No. 3 of assessee s appeal also deserves to be allowed. 16. Adverting to Revenue s appeal, we observe that firstly, as per our above findings, once the assessment order stands quashed being void ab ignitio on legal aspect of the case, the appeal of the Revenue does not survive. Secondly, we further observe that the facts with regard to fresh share application money received during the year under consideration have already been discussed above while disposing of Ground No. 2 of Assessee s appeal. Admittedly, fresh share application money of ₹ 62,00,000 was raised from 4 Companies, namely Vasudeva Farms Pvt. Ltd. , Griasho Co. Pvt. Ltd. , S.J Securities Pvt. Ltd. and FNS Consulting Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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