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2019 (11) TMI 210

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..... f 16 parties have not been mentioned in the information supplied by the Investigation Wing, then there were no reason for the A.O. to say that both these amounts are accommodation entries received by the assessee in assessment year under appeal. These facts clearly show that A.O. recorded incorrect facts in the reasons recorded for reopening of the assessment. There is no independent application of mind by the A.O. to any tangible material which form the basis of reasons to believe that income chargeable to tax has escaped assessment. The conclusion of the A.O. are at best re-production of the conclusion of investigation report. A.O. in the reasons has not recorded as to from whom assessee has received unaccounted money. The A.O. has merely referred to Annexure-A in the reasons which is credit side of the bank account of the assessee which ultimately found to be correct that the entire bank deposits are not accommodation entries. There were no proceeding pending before the A.O. at the time of recording of reasons, thus, there was no reason for assessee to establish the creditworthiness of the Investors as is noted in the reasons. - Decided against revenue - ITA.No.5731/Del./2014, C .....

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..... Tax Ack. receipt and share application forms and copy of the bank statement showing amounts have been given through cheques. It was submitted that all the share applicants are income tax assessees and in all cases amounts have been received through the account payee cheques only. The assessee relied upon Judgment of Hon ble Supreme Court in the case of CIT vs., M/s Lovely Exports (P) Ltd., [2009] 319 ITR (St.) 5 (SC). The A.O, however, did not accept the contention of assessee and noted that summons under section 131 have been issued to the Investors to attend the O/o. Assessing Officer personally, but, none of the Investor attended, but, documents have been filed through post. The A.O. noted that the verification from the Investors could not be done, therefore, documentary evidences and confirmations filed by assessee were rejected. The A.O. noted that assessee has received credit of ₹ 3,24,50,000/- on account of share premium and share capital through transaction where no real transaction was took place. The A.O, therefore, made an addition of this amount under section 68 of the I.T. Act. The A.O. also made addition of 1% of this amount i.e., ₹ 3,24,500/- and made to .....

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..... dhish Investment (P) Ltd., [2010] 45 DTR 281 (Del.). Several other case Law were also relied upon. The Ld. CIT(A) asked the A.O. to file remand report. However, no remand report was furnished. Reminder was further issued and ultimately, remand report Dated 13.12.2013 was received from the A.O. In the remand report A.O. has reproduced the contentions of earlier remand report and also attached copies of statements of various persons recorded on 16.01.2004 by Addl. DIT (Inv.). The A.O. reiterated the addition made by A.O. at assessment stage. The assessee also filed rejoinder in which it was also explained that A.O. himself has stated that statement of 08 parties have been recorded. The parties have also filed confirmations. Since all documentary evidences have been filed and A.O. did not make any enquiry on the same, therefore, the addition is wholly unjustified. 5. The Ld. CIT(A) examining the record noted that remand report was silent on issue of examination on oath of various shareholders confirming their investments with the assessee company. The assessment record also shows A.O. had sent communication Dated 04.04.2013 confirming that 08 parties had appeared before him till the d .....

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..... ry of Investigation Wing iv. Information received from Investigation Wing. v. Conclusion reached by the A.O. that assessee has taken accommodation entries vi. Statement that income of assessee has escaped assessment. 7.1. The perusal of above reasons would show that A.O. has straightaway concluded that assessee had taken accommodation entries. The A.O. has not brought anything on record on the basis of which any nexus could have been established between the material and escapement of income. In the instant case, the reasons recorded do not show any application of mind nor the same shows any belief independently arrived at by the A.O. which is the basic prerequisite for issuance of notice under section 148 of the I.T. Act, 1961. The A.O. recorded incorrect facts in the reasons. Annexure-A attached to the reasons shows credit side of bank account of the assessee for a sum of ₹ 10,24,42,961/-. However, A.O. made a small addition against the assessee. PB-7 is balance-sheet as on 31.03.2003 which shows share capital of assessee of ₹ 2,60,92,500/-and as on 31.03.2002 it was ₹ 2,44,70,000/-. It is, therefore, not clear that on what account the amount is received and how .....

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..... ntral Provindes Manganese Ore Co. Ltd., vs. JTO [1991] 191 ITR 662 (SC) iii. Raymond Woollen Mills Ltd., vs. ITO [1999] 236 ITR 34 (SC) iv. Phool Chand Bajrang Lal vs., ITO [1003] 203 ITR 456 (SC) v. Calcutta Discount Co., Ltd., vs. ITO [1961] 41 ITR 191 (SC). 8.1. The Ld. D.R, therefore, submitted that reopening of the assessment is justified in the matter. 9. We have considered the rival submissions. It is well settled Law that validity of re-assessment proceedings is determined on the basis of the reasons recorded by A.O, for reopening of the assessment. The assessee has filed copy of the reasons recorded for reopening of the assessment at pages 16 and 17 of the paper book. The same reads as under : M/s KVF Securities P Ltd ASSTT. YEAR 2003-2004 Investigations were conducted by the Investigation wing of the Department on certain persons engaged in providing accommodation entries to beneficiaries of their services, in return of commission, it has been revealed that many persons were using services' of accommodation entry operators to channelise their own unaccounted money in their regular books of accounts by routing the same through the accounts of Accommodation entry provid .....

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..... Actually, many of them were not even aware of the tax implications etc. Their only concern was with the few thousand rupees given to them by the entry operators. 3. Summing up, the report as a result of these extensive enquiries carried out by the D.I.T. (Inv.), New Delhi has established the non-genuineness of transactions, whether shown by beneficiaries as inflow of Share Capital or receipt of Gifts or consideration for sale-purchase. The creditworthiness of the persons/ persons controlling the concerns who have given these credit entries/share capital/gifts/sale consideration has also not been established as they have been seen to be man of no means. 4. The said report of Investigation wing of the Department, on the investigations conducted in the case of various accommodation entry providers along with the list of the beneficiaries of their services, was forwarded to this office through Addl.CIT, Range-5, vide letter F.No.Addl.CIT/Range-5/2005-06/759, dated 13.3.2006. 4.1. Enquiries revealed that one Shri GOVIND RAM SAINI along with his close associates and confidents Shri Vinesh, Sarique Kamal, Pradeep Kumar etc. was controlling a number of bank accounts in various names & .....

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..... ases. Therefore, A.O. did not apply his mind to the information received from Investigation Wing. vide letter Dated 13.03.2006 which is also not produced before the Tribunal for examination as it was not part of the record. It has also shown that the credit side of the assessee Bank account contain several items, therefore, entire amount could not have been representing share application money. The A.O. ultimately accepted this fact and did not make addition of the entire amount reflecting on the credit side of Bank account of the assessee. It may also be noted here that out of the total addition, ₹ 29 lakhs in which shares have been allotted to 04 parties pertain to the preceding assessment year as no amount have been received in assessment year under appeal of ₹ 29 lakhs which fact have been accepted by the Ld. CIT(A). The assessee also explained before the authorities below that ₹ 80,50,000/- in respect of 16 parties have not been mentioned in the information supplied by the Investigation Wing, then there were no reason for the A.O. to say that both these amounts are accommodation entries received by the assessee in assessment year under appeal. These facts cle .....

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