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TMI Blog2019 (6) TMI 1531X X X X Extracts X X X X X X X X Extracts X X X X ..... cation money in the books of accounts are bogus accommodation entries which have been provided by Mr. Vipul Bhatt and his key employee and associate group in the form of share application in F. Y. 2008-09 pertaining to A. Y. 2009-10." 2. "The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 4. The brief facts of the present case are that the assessee is engaged in the business of 'development of properties'. The return of income for the year under consideration was filed on 12.09.09 declaring total income at NIL. Subsequently, information was received by the AO from ADIT(Inv.), Mumbai related to bogus purchase entries. Thereafter, the case was selected for scrutiny and after serving statutory notices and seeking reply of the assessee, the case was reopened and assessment order was passed u/s 143(3) r.w.s. 147 of the Act on 28.12.16 thereby making additions of Rs. 1,75,00,000/- to the total income of the assessee u/s 68 of the Act. 5. Aggrieved by the order of the AO, the assessee preferred appeal before Ld. CIT(A), Mumbai and Ld.CIT(A) after considering the case of both the parties, partly allowed the appeal of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 21/04/2016 23/04/2016 The Appellants filed a reply along with acknowledgement of original return of income filed, Computation of Income, copy of Audited Accounts and also requested for providing reasons on the basis of which the assessment is reopened. The copies are placed at Page 2 to 17 of the Paper Book. 10/05.2016 The Assessing Officer furnished the reasons dated 29th March, 2016 for reopening of the assessment and the copy is placed at Page 19 and 19 of the Paper Book. 04/07/2016 The Assessing Officer issued a show cause notice for non compliance of Notice dated 20th April, 2016 u/s 142(1) and 143(2) of the Act, 07/07/2016 The Appellants filed objections to the reasons for reopening and asked for further details such as, copies of information available with Assessing Officer and/or office of ADIT (investigation) including copies of statements recorded of the parties wherein those parties have allegedly stated that they have given accommodation entry to the Appellants. The Appellants further stated that the above particulars will enable the appellant to make further submission. The copy of letter dated 5th July, 2016 objecting to the reopening is placed at Pages 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 252 (Guj) d) CIT v/s Akot Ginning and Pressing Factory Ltd., 66 taxmann.com 80 (Bombay) 7.7) The reasons further states that - "the true natures of all these transactions with above entities are not known. As a result the income of the Assessee Company has been understated and further there was failure on the part of the Assessee Company to fully disclose the details for year under consideration." 7.8) That in the first line it is stated that true nature of transaction is not known. In such case, how it is concluded in the second line that the income of the Appellant Company has been understated. This shows the assessment has been reopened to make enquiries. 7.9) That it further states that there was a failure on the part of the Appellant Company to fully disclose the details for year under consideration. It is respectfully submitted that all the details required as per return of income under efiling system has been furnished. The reasons do not specify what is the information which was required to be disclosed and not disclosed by the Appellant. 7.10) That the amount is received as share application money and it is a capital receipt which is not in the nature of taxable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fresh confirmation and copies of ITR-V for the A. Y. 2009-10, 2011-12 and 2015-16 for all above four parties. Please refer Pages 244 to 268 of the Paper Book. 29/08/2016 Summons to the Assessee u/s 131 of the Act. received by the Appellant on 01/09/16 02/09/2016 The Appellants requested for adjournment 16/09/2016 Show Cause Notice for non compliance of summons. 10/10/2016 Summarizing all the details submitted during the course of hearing. Please refer Page 271 of the Paper Book. 8.2) The Assessing Officer has not issued any fresh notice u/s 142(1) and/or 143(2) of the Act after passing of the order u/s 148 read with section 147 rejecting the objections of the Appellant. He started with the reassessment proceedings. The Appellant furnished all the details vide letter dated 5th July, 2016 (filed with the Assessing Officer on 8th July, 2016) with the Assessing Officer. The details included following particulars in respect of each of the four parties referred to in the reasons for reopening: i) Copies of Share Application Forms ii) Copy of resolution passed by the Company for investment in shares of Appellants. iii) Copy of Memorandum and Article of Associa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copy of the proposal given to Commissioner of Income Tax/Additional Commissioner of Income Tax for issuing the said Notice; and (b) A copy of the approval received from the office of the Commissioner of Income Tax, Mumbai City or Additional Commissioner of Income Tax Mumbai. These details are not yet furnished to the Appellant. 8.8)The Appellant made request vide letters dated 5th July, 2016 and 18th August, 2016 to the Assessing Officer to arrange to furnish following particulars to the Appellant Company: i) Copy of information available with ADIT (Investigation), Unit 7(4), Mumbai. ii) Copy of information available with Your Honour, iii) Copies of statements recorded of the above parties wherein these parties have allegedly stated that they have issued accommodation entries to the Company. These particulars are not furnished to the Appellant. 8.9) The Assessing Officer has used certain evidence/information against the Appellants without providing the copies of the same to the appellant and also an opportunity to make submission or rebut the same. The Appellant relies on the following decisions: i) KishinchandChellaram v. CIT (1980) 125 ITR 713 (SC) ii) CIT v. J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT v/s Lovely Exports Pvt. Ltd., 216 CTR 195 (SC); ii) CIT v/s Gagandeep Infrastructure Pvt. Ltd., 80 taxmann.com 272 (Bombay) iii) CIT v/s Green Infra Ltd., 392 ITR 7 (Bombay) iv) Pr. CIT v/s Jatin Investment Pvt. Ltd., ITA Nos. 43 & 44 of 2016 (www.itatonline.org) v) Pr. CIT v/s Laxman Industrial Resources Ltd., ITA No. 169 of 2017 (www.itatonline.org). 8.13) A proviso is added to section 68 by Finance Act, 2012 with effect from 1st April, 2013. It is submitted that the proviso is prospective and not retrospective. This view has been taken by the Hon'ble Bombay High Court in the case of CIT v/s Gagandeep Infrastructure Pvt. Ltd., 80 taxmann.com 272. Without prejudice all the four companies have furnished the information along with the supporting for furnishing the return of income and the Assessing Officer has not pointed out any mistakes or any requirement in respect of the same. 8.14) In view of the above, Your Honour may be pleased to give a direction to delete the addition of Rs. 1,75,00,000/-u/s 68 of the Act." 2.4) Ground No. 17 regarding rate of tax: 2.4.1) The learned AR has submitted the following arguments: "9.1) In Tax Calculation, the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pul Vidhur Bhatt dated 2nd September, 2016 wherein he has retracted the statement made before the Department at the time of search, 2.4.24. Ld. AR argued that the copies of evidence / information against the appellant were not provided to it and no opportunity to make submission or rebut the same was given to appellant. Therefore, such evidence / information, according to him, could not be used against the appellant. For this, the Ld. AR has relied on the decision of Hon'ble Supreme Court in the case of Kishanchand Chellaram 125 ITR 713 and also the jurisdictional High Court decision in the case of M/s. R. W. Promotions Pvt. Ltd. v/s ACIT. Ltd. AR also relied on various other decisions. 2.4.25. Ld. AR further stated that the Appellant had explained the nature and source of amount received as share application money and the Ld.AO had not pointed out any mistake on any of the particulars furnished by the appellant and/or the parties directly. In the instant case, in response to notices issued by Ld.AO, all the 4 parties have filed the required particulars. He, thereafter, furher relied on following decisions: i) CIT v/s Lovely Exports Pvt. Ltd., 216 CTR 195 (SC); ii) CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money accepted by the assessee from Pravin Jain Group of companies and the information in this regard had been received by the AO from the DGIT (Inv) Mumbai. In that case also the assessee had submitted the supporting documentary evidences such as copy of ITR, Balance Sheet and bank statement of the investor companies, Board Resolution, confirmation, ROC return etc. In that case, the Hon'ble ITAT held that - "The assessee duly furnished the proof of identity like PAN, bank account details from the bank, other relevant material, genuineness of the transaction, payment through banking channel and even the source of source, therefore, the assessee has proved the conditions laid down u/s 68 of the Act. It is also noted that in spite of repeated request, the Id AO did not provide opportunity to cross examine the concerned persons and even the relevant information and allegation, if any, made therein, which has been used against the assessee, was not provided to the assessee. At this stage, we add here that mere information is not enough rather it has to be substantiated with facts. The information may and may not be correct. For fastening the liability upon anybody, the Departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were produced and thus, the genuineness of the transaction and identity and credit worthiness of the parties had been established. Thus, the addition of Rs. 95,00,000/- was deleted by Hon'ble ITAT vide its order dated 07-02-2014. 2.4.31. The Department filed an appeal to Hon'ble Bombay High Court raising the following Questions of Law: "Whether on the facts and in the circumstances of the case and in law, orders of the Tribunal was perverse in deleting the addition of Rs. 95,00,000/made u/s. 68 of the Act, relying only on the documentary evidence produced by the Respondent Company while ignoring the key factor that these entities were not-traceable at their given addresses? Whether on the facts and in the circumstances of the case and in law, the Tribunal erred in not appreciating the observations made by the Delhi High Court in Nova Promoters and Fin/ease Pvt. Ltd. 18 Taxman.com 217 wherein the Court has observed that cases of this type cannot be decided only on the basis of documentary evidences above and there is need to take into account the surrounding circumstances? The Tribunal ought to have taken note of the fact that the assesses was not able to produce eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the addition, this ground becomes infructuous and is accordingly, Dismissed. 2.4.36. Ground No. 18 is against charging of interest u/s. 234B of the Act and the same being mandatory as well as consequential, this ground is Dismissed. 2.5. In the result, the appeal for A.Y. 2009-10 is Partly Allowed. 10.1 After having gone through the facts of the present case as well as considering the orders passed by revenue authorities and submissions made by both the parties, we find from the records that the assessee had received share application money from four parties i.e. M/s Victor sales Pvt. Ltd, M/s Shipra Fabrics Pvt. Ltd, M/s Santoshima Lease Finance & Investment India Pvt. Ltd and M/s Dolex Commercial Pvt. Ltd. The AO made additions by holding that the identity, credit worthiness of the lender and the genuineness of the transaction were not proved. Whereas the assessee had placed on record the documents in the shape of share application form, resolution of respective companies, memorandum and articles of the companies, copies audited statement of accounts, bank statements of respective companies and also copies of acknowledgement of income tax return filed for A.Ys. 2009-10, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company, copy of audited statement of account as on 31st March 2009, copy of acknowledgement of Return of Income filed for AY 2009-10, copy of ITR, computation of total income and financial statement alongwith their annexures for AY 2009-10, details of bank statement highlighting payments made in assessee company, copy of statement explaining the source of funds alongwith documents confirming the transactions, copy of share allotment evidence. 10.4 All the above documents goes to prove the identity of the investors, creditworthiness and genuineness of the transactions. Ld. DR has not been able to pin point any defects in the documents so supplied by the assessee/parties. 10.5 We find that Coordinate Benches of the Tribunal, different Hon'ble High Courts, Hon'ble Supreme Court had already dealt with similar situations and there are a plethora of judgments on the identical grounds. For instance, the Jurisdictional High Court in the case of CIT vs. Creative World Telefilms Ltd (2011) 333 ITR 100 (Bom) has held that when the assessee had given the details of name and address of the shareholder, their PAN/GIR Number and had also given cheque number, name of bank, and the AO d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. At this stage, we add here that mere information is not enough rather it has to be substantiated with facts. The information may and may not be correct. For fastening the liability upon anybody, the Department has to provide the authenticity of the information to the person against whom such information is used. The principle of natural justice, demands that without confronting the assessee of such evidence, if any, or the information, no addition can be made. Even otherwise, as per Article 265 of the Constitution only legitimate taxes have to be levied and collected. In our humble opinion, the assessee has duly discharged the onus caste upon it, therefore, respectfully following the decisions of Hon'ble Courts, we reverse the order -of the Ld. CIT(A) , resultantly, this ground of the assessee is allowed." 10.7 In the recent decision of Hon'ble Bombay High Court in the case of CIT v Orchid Industries Ltd (ITXA 1433 of 2014) dated 5th July 2017, the additions were deleted as in that case, a survey was conducted u/s 133A of the Income Tax Act, 1961 on 24.11.2004. In the assessment order passed u/s 143(3) dated 29-12-2006, an addition of Rs. 95,00,000/- was made in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) that it will produce all parties before the AO during Remand proceedings." 10.8 The Hon'ble Bombay High Court observed that the assessee had produced the documents such as PAN, confirmation, bank statement, allotment letters, and financial statements. The Balance Sheets showed significant funds to invest in shares of the assessee. The Hon'ble Bombay High Court held that considering the voluminous documentary evidence, only because those persons had not appeared before the Ld.AO would not negate the case of the assessee. The Hon'ble Bombay High Court held as under: "The Tribunal has considered that the Assessee has produced on record the documents to establish the genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing payment of share application money. It was also observed by the Tribunal that the assessee has also produced the entire record regarding issuance of shares i.e. allotment of shares to these parties, their share app/icationforms, allotment letters and share certificates, so also the books of account. The Balance sheet and profit and loss account of these persons discloses that these person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AR submitted that the present CO could not be filed within time because of the reasons mentioned in affidavit and thus there was a delay of 32 days in filing the present Cross Objection. 16. On the other hand, Ld. DR requested for dismissal of the said application. 17. We have heard the counsels for both the parties on the application for seeking condonation of delay and while taking into consideration the contents of application filed by the assessee, supporting affidavit, whereby the assessee has mentioned the reasons in detail for not filing the CO within limitation, therefore keeping in view the reasons mentioned in the affidavit and following the principles laid down by Hon'ble Supreme Court in case of "Land Acquisition Collector Vrs. MstKitzi, AIR 1987 S.C. 1353/(1987) 167 ITR 471 (SC), we condone the delay of 32 days in filing the CO. Resultantly, this application is allowed and CO is admitted to be heard on merits. 18. Since we have already upheld the order of Ld. CIT(A) and dismissed the appeal of revenue. Therefore in view of our above findings in ITA No. 6691/Mum/2017, the present Cross Objection filed by the assessee has become academic. 19. In the net result, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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