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2019 (8) TMI 725

..... ssee company - HELD THAT:- On perusal of the assessment order itself, we are of the view that the assessee deserves to succeed in the matter. The reason for the same is evident from the “Office note” which forms part of the assessment order and which has been submitted by the Revenue before the Bench as part of the appeal documentation. Assessing Officer has given a finding that on verification of documents submitted by the assessee and called from the investor companies, it is found that the amount of investment agrees with the balance reflected in the books of the assessee as well as investors companies. We therefore find that the assessee company has duly discharged the initial onus cast on it u/s 68 and once initial onus has been satisfied by the assessee company to the satisfaction of the AO and once the AO is satisfied with the documentation so submitted by the assessee company and which has also been confirmed by him directly from the investor companies, we failed to understand as to why in the body of the assessment order, he has merely proceeded basis the information received from the Investigation Wing, Mumbai in respect of search and seizure operation in case .....

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..... n providing accommodation entries is proved from his statement and the statements of his brother-in-law and associates recorded on oath during the course of search proceedings. 2. Briefly stated, the facts of the case are that the search and seizure action u/s 132 of the Act was carried out on 26.09.2012 at the business and residential premises of Somani Rathi Kabra Group and the assessee company s premises were also covered under the said search and seizure operations. Thereafter, a notice u/s 153A was issued on 16.04.2013 and in response, the assessee company submitted its return of income dated 15.05.2013 declaring total income of ₹ 4,33,490/- and books profit of ₹ 3,95,900/- u/s 115JB of the Act. 3. During the course of assessment proceedings, the Assessing Officer observed that on review of the audited books of accounts of the assessee company, it is observed that the assessee company has issued shares of face value of ₹ 10 each at a premium of ₹ 20 each to various companies with value of investment in the assessee company totalling to ₹ 1,03,50,000/-. As per the Assessing Officer, the Investigation Wing of Income-tax Department, Mumbai has conduc .....

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..... w, ld. AO has erred in passing impugned assessment order: a in the absence of any incriminating material found during the course of search b without any corroborative documentary evidence on record c by drawing adverse inference on the basis of statement of Shri Praveen Kumar Jain d without allowing opportunity to cross examine Shri Praveen Kumar Jain e by not considering the explanation/submission of the Appellant during the assessment proceedings without assigning/providing any substantial reasoning or evidence in support. f without providing an adequate opportunity of being heard. 7. In the context of aforesaid ground of appeal, it was submitted by the assessee company before the ld CIT(A) that during the course of search proceedings, no incriminating material was found by the Income-tax Department which can establish any undisclosed income in the hands of the assessee company. It was further submitted that the statement of Shri Praveen Kumar Jain relied upon by the Assessing Officer was not provided to the assessee company and no finding has been recorded by the Assessing Officer as to how the said statement is held against the assessee company. It was further submitted that th .....

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..... providing accommodation entries. 4.3.2 For consideration of relevance of this statement and drawing inference from the same, not only the context and his complete statement is required but even subsequent developments in that matter are also important to be known. Without them, it would be incorrect to make any inference out of the same, particularly when the same was not offered for cross examination of the appellant before relying upon the same. 4.3.3 As against this, the appellant discharged its burden cast upon it u/s 68 of the Act by producing all the evidences such as affidavits of the present directors of the applicant companies confirming the investment made by their companies into the equity shares of the appellant in the AY 2007-08, confirmations, board resolutions, bank account statements reflecting the transactions made through banking channels or through RTGS, copies of share application forms, PAN Nos, certificate of incorporation etc. 4.3.4 All these evidences were also produced before the Ld. AO and inquiries were made by him u/s 133(6) of the Act in respect of five investors and all these investors have replied to the notices issued by the Ld. AO and confirmed the .....

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..... rkha Synthetics Ltd. V. Assistant Commissioner of Income-tax (2006) 155 TAXMAN 289 (RAJ.), Divine Leasing & Finance Limited [2008] 299 ITR 268 (Delhi) , Commissioner of Income-tax v. Rock Fort Metal & Minerals Ltd. [2011] 198 TAXMAN 497 (Delhi), Oasis Hospitalities (Pvt.) Ltd. Vs. CIT (Delhi HC) (2011) 333 ITR 119, CIT vs. Creative World Telefilms Ltd (2011) 333 ITR 100 (Born), which have been also been followed recently by Hon'ble Delhi Tribunal in case of ITO vs. Softline Creations (P) Ltd. in ITA No. 744/De1/2012 vide its order dated 10.02.2016. 4.3.10 In view of the above facts and circumstances of the present case, the legal position discussed in above referred judgments, this addition of ₹ 1,03,50,000/- on account of alleged unexplained credit is not sustainable and the same stands deleted. 9. During the course of hearing, the ld. DR supported the findings of the Assessing Officer and submitted that the Department was having necessary information pursuant to search and seizure operation in case of Praveen Kumar Jain Group and basis such information, the Assessing Officer has given the finding that the assessee has obtained the accommodation entries from thes .....

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..... g Officer, however, the Assessing Officer has ignored the documents so filed and has relied solely on the statement of Sh. Praveen Kumar Jain and others. It was further submitted that the Assessing Officer has further called for the information u/s 133(6) from the aforesaid investor companies and these companies have responded to the Assessing Officer. However, no cognizance has been taken by the Assessing Officer. He accordingly submitted that the ld CIT(A) has rightly appreciated the aforesaid contentions and the findings and the order the ld. CIT(A) may accordingly be confirmed. 13. We have heard the rival contentions and perused the material available on record. On perusal of the assessment order itself, we are of the view that the assessee deserves to succeed in the matter. The reason for the same is evident from the Office note which forms part of the assessment order and which has been submitted by the Revenue before the Bench as part of the appeal documentation. We deem it appropriate to reproduce the office note in verbatim as under: 1. The Directorate of Investigation Wing, Mumbai has passed on information in respect of investment in equity shares of the assessee by the f .....

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..... ts so made by them in the assessee company. Basis the same, the Assessing Officer has given a finding that on verification of documents submitted by the assessee and called from the investor companies, it is found that the amount of investment agrees with the balance reflected in the books of the assessee as well as investors companies. We therefore find that the assessee company has duly discharged the initial onus cast on it u/s 68 and once initial onus has been satisfied by the assessee company to the satisfaction of the Assessing officer and once the Assessing officer is satisfied with the documentation so submitted by the assessee company and which has also been confirmed by him directly from the investor companies, we failed to understand as to why in the body of the assessment order, he has merely proceeded basis the information received from the Investigation Wing, Mumbai in respect of search and seizure operation in case of Sh. Praveen Kumar Jain Group and has kept silent on the documentation and verification so carried out by him in respect of direct evidences so submitted by the assessee company. 15. Now coming to the information received from the Investigation Wing, Mum .....

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..... e AO has relied blindly on information supplied by the Investigation Wing Mumbai without carrying out any further examination of documents submitted during the course of assessment proceedings and independent investigation of these investor companies. As we have noted above, the information so received from the Investigation Wing, Mumbai and after due examination thereof, the AO has formed a prima facie view and a reason to believe that the income has escaped assessment and has thus assumed jurisdiction u/s 147 of the Act. At the same time, such a prima facie view has to be finalized and a firm view has to be taken on basis of examination of documents so brought on record and further investigation to be carried out before any tax liability is fastened on the assessee. In the instant case, we find that the assessee company has submitted detail documentation in regard to these companies from whom a total amount of ₹ 35 lakhs was received namely (i) share application form (ii) copy of Board Resolution (iii) Copy of Bank Statements reflecting payment through cheque (iv) Audited Statement of Accounts and Acknowledgement of ITR (v) Copy of certificate of lncorporation and Certifica .....

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..... the contentions of the ld AR that in absence of any falsity which have been found in the documents so submitted by the assessee company to prove the identity, creditworthiness and genuineness of the share transaction, these documents cannot be summarily rejected as has been done by the AO in the instant case. Further, we find that there is no action taken by the AO in terms of calling information from these companies under section 133(6) and/or issuing summons to directors of these companies under section 131 of the Act. Further, where the AO relies upon the statement of third parties (Praveen Jain and others) recorded u/s 132(4), without getting into controversy whether the said statement was retracted subsequently, the fact remains that the assessee deserves an opportunity to cross examine such persons as held by the Hon ble Supreme Court in case of Andaman Timber Industries (supra). During the course of assessment proceedings, the assessee company has made specific request to the AO to allow cross examination of these persons which has however not being provided to the assessee company. In light of above discussions, we don t find any basis for making addition under section 68 o .....

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