TaxTMI 
TaxTMI 
2021 (12) TMI 310
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....g the loss of Rs. 18,78,467/-. During the course of assessment proceedings, the AO noted that the assessee company during the year under consideration has received share application money from the following companies:- S.No. Name of the company Address Share application money 1. M/s Binapani Merchandise Pvt. Ltd. 7, Ganesh Chandra Avenue, 5th Floor, Kolkata 1,50,00,000 2. M/s Kansabati Tradecom Pvt. Ltd. 7, Ganesh Chandra Avenue, 5th Floor, Kolkata 40,00,000 Total 1,90,00,000 3.1 He noted that during the search and post search and survey proceedings in Kuber Group of companies, the details relating to companies giving accommodation entries of share application money, share premium, share capital and unsecured loan came to light. He observed that during the search and seizure operation u/s 132 of the Act on 9th October, 2014 in the Kuber Group of Companies, statement of Shri Mul Chand Malu was recorded u/s 132(4) of the Act in which he has offered to declare undisclosed income of Rs. 100 crore of the Kuber Group of companies and their directors under specific head of share capital/share premium/ capital formation out of total undisclosed income of Rs. ....
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...., ITR acknowledgement and annual financial statement of respective applicants. However, the assessee failed to produce the directors for examination of the AO. Since there was persistent non-compliance of the assessee to produce the directors of the assessee company or the directors of the investor companies, the AO, relying on various decisions held that the assessee failed to prove the identity and credit worthiness of the investor companies and the genuineness of the transaction. Invoking the provisions of section 68, the AO made addition of Rs. 1,90,00,000/- to the total income of the assessee. 6. Before the CIT(A), the assessee, apart from challenging the addition on merit, challenged the validity of reassessment proceedings. The assessee has also made elaborate submissions. The ld. CIT(A) called for a remand report from the AO. After considering the submissions of the assessee, remand report of the AO and the rejoinder of the assessee to such remand report, the ld. CIT(A) upheld the validity of the reassessment proceedings and also upheld the addition on merit. 7. Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal by raising the following....
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....e circumstances of the case Ld. CIT (A) New Delhi has erred both on facts and in law, in sustaining the action of AO violating the principle of natural justice by not providing opportunity for cross- examination of persons, whose statements have been relied upon by the AO, in spite of specific request made by the appellant in assessment proceedings as well as before CIT(A). 10. On the facts and circumstances of the case, the learned Ld. CIT (A) New Delhi has erred, both on facts and in law, in sustaining the action of AO. As the proceedings initiated u/s 147/148 are invalid, the proceedings should have been initiated u/s 153C. 11.That the provisions of sections 234A, 234B and 234C of the Act are not at all applicable. 12.That the impugned appeal order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence. 13.The appellant craves leave to add, amend or alter any of the grounds of appeal." 8. Grounds of appeal No.1, 12 and 13 being general in nature are dismissed. Ground of appeal No.11 being consequential in nature is dismissed. So far as the other grounds are concerned, the ld. Counsel for the assessee strongly challenge....
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....rect. 8.2 The ld. Counsel for the assessee submitted that the AO has alleged that M/s Binapani Mercentile (one of the investor) was a jama kharchi company. However, this fact is contrary to the report of commission. Referring to page 48 of the paper book, he submitted that the Calcutta wing has mentioned the name of Jama Kharchi companies and the name of BINAPANI was not there in that list. Further perusal of Page No- 50 would show that name of BINAPANI was at serial number-7 and covered in the category of those companies whose address were not traceable. Therefore the observation of the AO that BINAPANI was Jamakharchi Company is factually incorrect and contrary to the report of investigation wing which shows that the AO has not applied his mind at all. 8.3 Ld. Counsel for the assessee referring to Q 14 at Paper Book page 54, submitted that Mr Vikash Aggarwal in his statement, which is part of the assessment order as Annexure B, has provided accommodation share capital to some other companies and that too in some other Assessment years and not in AY 2014-15. He submitted that the AO in the reasons recorded has admitted in last para at 1st page of the reasons recorded that statem....
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.... used in 147 is "has reason to believe" which does not mean "has reason to suspect". For the above proposition, he relied on the following judgments:- (i) Ganga Prasad Maheswari Vs CIT, 139 ITR 1043(AII); and (ii)Indian Oil Corporation v. ITO (1986) 159 ITR 956 (SC). 9. In his next plank of arguments, the ld. Counsel for the assessee submitted that there is no independent application of mind by the AO. He submitted that the AO must apply his mind to the information coming from outside and then entertain a belief that income has escaped assessment. Referring to the reasons recorded, he submitted that the AO has solely relied on stale information and hence it is case of borrowed satisfaction. Otherwise the AO would not have made incorrect observations and relied on the past events to assume the sanctity of future transactions. For the above proposition, he relied on the following decisions:- (a) G&G Pharma- 384 ITR 147(Del); & (b) CIT v. Smt. Pramjit Kaur (2009) 311 ITR 38 (P&H). 10. The ld. Counsel for the assessee in yet another plank of argument submitted that the date of reasons recorded, the date of sanction and the date of issuance of notice coupled with factual inacc....
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....ross examine them. During remand proceedings the AO, in the remand report has said that he has framed the assessment on the basis of statement of Shri Mul Chand Malu. He submitted that Mr Malu was neither the Director nor the employee of the assessee Company and hence all these statements cannot be relied upon. He submitted that the Tribunal in the case of Kuber Khadyan in ITA No.4223/Del/2018 has held that statement of third party cannot be relied upon for framing assessment u/s 153C. Though the present case is under section 147, however, the ratio laid down would apply mutatis mutandis in the present case. 14. So far as merits of the case is concerned, he submitted that assessee, in order to discharge his burden, has filed the following details as mentioned in the order of assessment at Para 6.6. a. ITR of the investor companies b. Share application forms c. Confirmations d. Bank Statements. e. MCA Data 14.1 He submitted that the AO discarded the above evidence without bringing on any material on record and without providing any opportunity to cross examine the so called entry providers and relying on the stale informations which was related to past events and made th....
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....dent enquiry and any information received from the Investigation Wing is required to be corroborated and reaffirm during the assessment by the Assessing Officer by examining the concerned persons who can affirm the statements already recorded by any other authority of the department. Facts narrated above cleariy show that the Assessing Officer has not made any enquiry and the entire assessment order and the order of the first Appellate Authority are devoid of any such enquiry" 15.2 He accordingly submitted that the grounds raised by the assessee be allowed. 16. The ld. DR, on the other hand, heavily relied on the order of the CIT(A). 17. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find, the AO, in the instant case, on the basis of a search operation conducted u/s 132 of the Act on 9th October, 2014 in the Kuber group of cases and on the basis of the statement recorded of Shri Mul Chand Malu and on the basis of post search enquiries, reopened the assessment after recording reasons. The reasons are alre....
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....mission of the ld. Counsel for the assessee that Shri Devesh Upadhyaya has never admitted that he has given any accommodation entry to the assessee. In his answer to questions No.7 and 8 Shri Devesh Upadhyaya has stated that accommodation entries of bogus long-term capital gain is provided to various entities and not share capital and premium. It is also his submission that during the assessment proceedings, the AO has relied on the statement of Shri Vikas Aggarwal and Shri Devesh Upadhyaya without providing any opportunity to the assessee to cross examine them. Even during the remand proceedings the AO himself has admitted that the assessment was made on the basis of statement of Shri Mul Chand Malu, who is neither a director nor employee of the assessee company and, therefore, his statement cannot be relied upon. It is thus the submission of the ld. Counsel for the assessee that the reassessment proceedings initiated by the AO are not in accordance with the law. Further, the assessee has filed all the relevant documents to substantiate the identity and credit worthiness of the loan creditor and genuineness of the transaction and without allowing the cross-examination the AO could....
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....ikas Agrawala, Devesh Upadhya and Praveen Kumar are mentioned. However, in none of these statements of entry operators, the name of the assessee is mentioned. Further, opportunity to cross examine has not been provided. A perusal of the chronology of date chart shows that the statements of all these persons were recorded prior to the date of search in the Kuber group of cases i.e., on 09.10.2014. 23. We find, identical issue had come up before the Tribunal in the case of sister concerns of the assessee, namely, Kuber Khanpan Udyog Pvt. Ltd. and Kuber Food Products India Pvt. Ltd. in ITA No.580/Del/2019 and ITA No.322/Del/2019, respectively, order dated 22nd October, 2019 for AY 2011-12. We find, the Tribunal, in the case of Kuber Khanpan Udyog Pvt. Ltd., while deciding the issue had noted the following facts at para 4 of the order:- "4. Brief facts of the case is that Kuber Khanpan Udyog Pvt. Ltd filed its return of income on 29.09.2011 for Rs. 320270/-. The assessment of the company was reopened u/s 148 of the Act on 31.03.2017. The Assessee filed return in response to that notice on 13.04.2017 declaring the same income. The assessment u/s 143(3) read with section 147 of the Ac....
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....on Street, Kolkata - 700007 whereas the correct address of this company was 16 A, Shakespeare Sarani, New B K Market, 5th Floor, Kolkatta 71. Thus, the learned assessing officer made the inquiries at the incorrect address. Furthermore, the learned assessing officer has heavily relied upon the statement of Mr. Vikas Agarwal residing at BC - 75, Akanskha apartment, 4th floor Calcutta 101 that was recorded on 9/1/2014. He is an alleged entry operator. He admitted this in answer to question number 6 of his statement. He named in answer to question number 7 - 12 companies, however, the name of the company who deposited share capital with the assessee was not appearing in the statement. Further, in none of the other statements recorded by the investigation wing Kolkata, the name of the company who deposited money with the assessee was appearing. During the course of appellate proceedings before the learned CIT - A, assessee submitted a remand report dated 25/10/2018, which is at page number 22 of 38 of the appellate order. In para number 5 the learned AO stated that the assessment order are based on the statement of Shri Moolchand Malu, post search investigation and investigation during ....
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....submitted return of income of the share applicant, it is audited balance sheet, confirmation of the transactions and bank statement of the share applicants. Therefore, the claim of assessee is that it has discharged initial onus cast upon it under section 68 of the income tax act. The learned AO merely on the basis of the statement of the entry operators, who did not name the share deposit as 1 of the companies operated by them, the inspector report saying that share deposit and did not exist by inquiring at the incorrect address and failure to give cross- examination of those entry operators, which are the only statement against the assessee, the addition made by the learned assessing officer cannot be sustained. Honourable Supreme Court in CIVIL APPEAL NO. 4228 OF 2006 M/S ANDAMAN TIMBER INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE,KOLKATA-II has held that when except the statement of the 3rd party is the only evidence available with the revenue authorities, addition cannot be made on that solitary evidence without granting the cross-examination of such 3rd party to the assessee when asked for. In the present case the assessee asked for cross-examination before the assessing ....