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2020 (3) TMI 339

..... tigation wing that these are paper companies leads to the conclusion / destination, as the information called for u/s 133(6) of the I.T. Act, 1961 at the known addresses of these companies returned back unserved with remarks ’ Not Known’ - HELD THAT:- The information filed by the assessee as required by the AO is incompliance of the said letter/notice. Moreover, the AO has not given the finding about the genuineness of these documents filed by the assessee which means that the AO has not found any defect in the documents filed by the assessee. The assessee has clearly filed all the documents which include share application money, Resolution of share applicant companies whereby the directors were authorized to make investment in the shares of the assessee company, bank statements showing payment through banking channel and return of income filed by those companies. Once these documents were filed then the identity of the share applicant companies stand proved. The assessee also produced the bank statements and the AO has not even pointed out that the funds transferred from the bank account of these companies are actual money of the assessee routed through these companies .....

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..... es and genuineness of the transaction is not proved in absence of any reply received from these companies on the information called u/s 133(6) by the AO. 2. Not appreciating the finding of the AO that assessee company issued shares at Par to Shruti Agarwal, Kanika Agarwal and Kapil Agarwal whereas shares to the paper companies were issued at premium of ₹ 490/- per share without any justification. 3. Deleting addition of ₹ 2,15,00,000/- on account of bogus share application money received from various paper companies disregarding the decision rendered by the Hon'ble Jurisdictiona High Court of Rajasthan in the case of Rameshwar Lal Mali vs CIT [2012] 256 ITR 536 (Raj) while placing reliance on unconnected case Andman Timber Industries vs Commissioner of Central Excise. 2.1 The assessee is a company and engaged in the business of Hotels & Resorts. The assessee filed its return of income on 30-03-2013 declaring total income of ₹ 88,350/-. During the course of scrutiny assessment, the AO issued notice u/s 142(1) of the Act alongwith questionnaire calling for information / details / documents from the assessee regarding the share applications received by the as .....

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..... icants showing remittances of the amount, copy of Board Resolution of the share applicant authorizing their directors to make the investment, copy of income tax returns of share applicant companies and copy of allotment letter issued by the assessee to each share applicants. Aggrieved by the impugned order of the ld. CIT(A), the Revenue has filed the present appeal. 2.2 Before us, the ld. DR submitted that the AO has given a finding that these companies are controlled and managed by Shri Praveen Kumar Jain, Group and Shri Praveen Kumar Jain in his statement recorded by the Investigation Wing, Mumbai has admitted his indulgence in providing the bogus accommodation entries including the share application money. The ld. DR further contended that financial position of the assessee company as on the date of issue of shares did not carry such a huge premium of ₹ 490/- per share. The ld. DR thus contended that on one hand the assessee issued the shares at par to the promoters whereas at the same time the share were issued to these three companies at a premium of ₹ 490/- per share. The ld. DR further contended that neither the assessee's financial conditions support the pre .....

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..... sputed in respect of other three companies when there is no difference in the price at which the shares were issued to these six companies. The ld.AR of the assessee thus submitted that identical issue has been considered by ITAT Jodhpur Bench in the case of ITO vs Divya Finlease Pvt.Ltd vide order dated 24-01-2019 in ITA No.424/Jodh/2016 for the Assessment Year 2012-13 and pointed out that these three share applicant companies which invested in the shares of the assessee company were also the share applicants in the case of Divya Finlease Pvt.Ltd. The Tribunal has given the findings regarding the genuineness of the transactions of share application money and allotment of shares to these three companies. Therefore, this issue is covered by the decision of ITAT Jodhpur Bench in the case of Divya Finlease Pvt.Ltd. (supra). The ld.AR of the assessee relied on the decision of Hon'ble Madhya Pradesh High Court in the case of Pr. CIT (1), Indore vs Chain House International Pvt. Ltd (2018( 98 taxmann.com 47 (M.P.) and submitted that Hon'ble High Court has discussed this issued exhaustively and held that issuing the shares at a premium was a commercial decision and prerogative of .....

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..... (3) M/s. Olive Overseas Pvt. Ltd. The reason for doubting these transactions of share capital received from these 03 companies was that these entities are controlled by Shri Praveen Kumar Jain who was found to be a bogus entry provider. The AO has made the reference to the information received from Investigation Wing, Mumbai wherein the statement of Shri Praveen Kumar Jain was recorded. Except the said statement of Shri Praveen Kumar Jain, no other material or record was found with the AO to show that the transaction of share applications and allotment of shares to these 03 companies are bogus, though the AO has stated in his assessment order that these 03 companies were asked to furnish the information by issuing notice u/s 133(6) of the Act. However, the AO has not given details as to when such notice was issued. Only a passing reference has been made in respect of the notice issued u/s 133(6) of the Act. Without going into the controversy of issuance of notice u/s 133(6) of the Act, we note that the AO has allegedly called for the information in the said letter/notice issued u/s 133(6) as under:- 1. Copy of ledger a/c of M/s. Shefali Hotels & Resorts Pvt. Ltd for the F.Y. 2 .....

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..... e material on record to controvert the documentary evidences filed by the assessee. In the absence of any such material brought on record by the AO to disprove or controvert the documentary evidences filed by the assessee, the mere statement of Shri Praveen Kumar Jain, recorded by Investigation Wing, Mumbai and that too was subsequently retracted cannot be a basis for making the addition by treating the transaction as bogus accommodation entry. The Revenue has not disputed the documentary evidences filed by the assessee which have been mentioned by the ld. CIT(A) in para 4.5 as under:- 4.5 The appellant has furnished, in respect of each share applicant following documentary evidences to prove the identity and creditworthiness of the persons from whom the appellant has received share application money and genuineness of the transactions:- a. Confirmation of the directors of the Applicant companies confirming the investment made by their companies into the equity shares of the appellant in the A.Y. 2012-13 alongwith relevant details. b. Copy of share Application Form duly signed by the Applicant companies received by the appellant in the A.Y. 2012-13 alongwith their covering letter. .....

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..... ct has already been recorded by AO in his assessment order. Thereafter, considering various documentary evidences filed before AO, the CIT (A) applied proposition laid down in the various judicial pronouncements as referred in his order to the facts of the case and reached to the conclusion that AO was not justified in treating the share application money as unexplained. The detailed finding so recorded by CIT (A) are as per material on record which do not require any interference on our part. Accordingly, we do not find any reason to interfere in the order of CIT (A) for deleting the addition made on account of share application money. Similarly in the case of Shivalik Kinema Pvt Ltd vs DCIT (supra), ITAT Jaipur Bench has considered this issue at paras 18 to 24 as under:- 18. It was further submitted that in respect of the above three companies, the assessee has furnished the following documents to establish the identity, genuineness of the transaction and the creditworthiness of these entities: Name, address and PAN no. Shares applied/allotted Share Capital Evidences produced before the AO M/s Zenith Automotive P. Ltd. 106, Palco House, T-10, Main Patel Road, Patel Nagar, New Del .....

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..... (India) Pvt. Ltd. 367 ITR 0217 (All.) (HC) • ACIT Vs. VIP Growth Fund Pvt. Ltd. 46 CCH 0231 (Del.) (Trib.) • CIT Vs. Supertech Diamond Tools Pvt. Ltd. 229 Taxman 62 (Raj.) • ITO Vs. Rakam Money Matters P. Ltd. (2014) 41 CCH 0155 (Del.) (Trib.) • Jadau Jewellers & Manufacturing (P) Ltd. Vs. ACIT 45 CCH 0442 (Jpr.) (Trib.) decision dt. 14.12.2015 • Ganga Projects (P) Ltd. and B.S. Traders (P.) Ltd. in ITA No. 175 & 176/JP/15 and 179/JP/15 and CO No. 15 & 16/JP/15 and 19/JP/15 order dated 22.06.2016 • Anchal Fintrade Pvt. Ltd. Vs. ITO in ITA No. 131/JP/16 for A.Y. 05- 06. • M/s Choice Buildstate Private limited vs ITO in ITA No. 431/JP/2016 dated 28.03.2018 21. In case of M/s Choice Buildestate Private limited vs ITO (supra), we have recently examined an identical matter and we find that our findings therein applies equally in the instant case. The relevant findings are reproduced as under: 10. Now, coming to the merits of addition of ₹ 35 lacs made by the AO under section 68 of the Act. On careful examination of material available on record, we find that it is a case where the AO has relied blindly on information supplied by the In .....

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..... ther examination/investigation cannot be a basis for forming a final view of making the addition in the hands of the assessee company. It is a case where the AO was in receipt of material information from the Investigation Wing, Mumbai that the assessee company has received accommodation entries in form of share application/investment from seven companies who are not doing genuine business activities as divulged during the course of search and seizure operations in case of Praveen Jain group. In these situations, the Courts have held that the Assessing Officer cannot sit back with folded hands and then come forward to merely reject the explanation so made, without carrying out any verification or enquiry into the material placed before him by the assessee. If the Assessing Officer harbours any doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the Company. We therefore agree with the contentions of the ld AR that in absence of any falsi .....

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..... nts and confirmations of these parties. We also find that the AO has issued letters u/s 133(6) to these parties and has also called for personal appearance of Sh G.L Gupta and one of the directors of the assessee company. It is also a fact that there notices have not returned back undelivered and at the same time, there has been no compliance. It is therefore a case which is shade different than the one we decided supra. At the same time, the fact remains that inspite of non-compliance of these notices and non-appearance which cannot be a sole basis for disallowance, the AO has to give a specific finding and record his satisfaction regarding non-acceptance of documents so submitted by the assessee. We are therefore of the view that 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 and any satisfaction to that effect recorded by the AO, these documents cannot be summarily rejected as has been done by the AO in the instant case. 24. In light of above discussions and in the entirety of facts and circumstances of the case, we don t find any basis for .....

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