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TMI Blog2024 (5) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case; 3. The appellant craves to add, amend, alter, delete or modify the above grounds of appeal before or at the time of hearing. 2. Briefly the facts of the case are that the assessee-company is engaged in the business of trading & manufacturing of yarn & fabrics. It has filed its return on 25.09.2011 declaring total income of Rs. 64,57,350/- and book profit of Rs. 1,11,93,778/-. The assessment was completed u/s 143(3) on 24.03.2014 at total income of Rs. 67,56,610/-. The AO has observed vide para 2 as under: 2. A search action was carried out at the residence and offices of Shree Shirish Chandrakant Shah (hereinafter referred to as "SCS") and at the residence of his key employees and associates on 09.04.2013 by Unit- 1 (Investigation of Ahmedabad Investigation Directorate. During the course of search conducted in the case of SCS it was found that SCS is engaged in providing accommodation entries of share capital, share premium, share application money, unsecured Loans, Long term capital Gains, Short term capital gains wherein cash is received by him from various clients and against this cash he provides these accommodation entries. 2(i). As per information availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by SCS to M/s Esspal International Pvt. Ltd. (the appellant assessee) through a broker recorded as Hiren Shah. The AO has enlisted details of the date wise entries transaction entered into between the SCS and the appellant assessee. The AO has reproduced question no. 5 of the statement of Sh. Hiren Shah recorded u/s 132(4) of the Act wherein it was answered by the SCS, as under: "I would also like to state that day-wise receipt of cash and payment of accommodation entries is also recorded in the "Bips folder" seized from my computer wherein broker/client wise details/ accounts are maintained All the entries recorded in all the sheets contained in the excel filed acl.xls, ac2.xls, ac3.xls, ac4.xls and otparty.xls in" Being not satisfied with the reply of the assessee, the AO has held transaction made by the appellant assessee with concern owned by SCS as not genuine and as if only paper transaction took placed instead of actual transaction, although, the transactions were completed through banking channel. Accordingly, the AO has treated the share application money of Rs. 3 crores shown by the assessee as diversion of profits to evade tax liability and added to the return inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, share application money of Rs. 3,00,00,000/- shown by the assessee is treated as diversion of profits to evade the tax liabilities. Therefore, the amount of Rs. 3,00,00,000/- is added to the total income of the assessee. Penalty proceedings u/s. 271(1)(c) are initiated for concealing income by furnishing inaccurate particulars of income.'' 4.6 At para 4 of the assessment order the AO has mentioned "variousi ncriminating documents/ material was seized during the course of search showing Shri Shirish Chandrakant Shah is engaged in providing accommodation entries wherein cash is received by him from various clients and against this cash, he provides these accommodation entries. However, the AO has not discussed any incriminating document or material wherein payment of cash by the appellant to Shri Shirish Chandrakant Shah or his agent or mediator is recorded. 4.7 The AO has made the addition mainly relying on the statement of Shri Shirish Chandrakant Shah. The appellant during the course of assessment proceedings before AO, vide letter dated 22.03.2016 had requested the AO to provide the appellant the opportunity to cross examine Shri Shirish Chandrakant Shah but the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of Rs. 15,00,000/- * Copy of Confirmation. * Copy of Affidavit. * Copy of PAN * Copy of ITR of A.Y 11-12 * Copy of Financial Statement * From the balance sheet it can be noted that the networth of the company is Rs. 44,19,78,352/- which itself proves the creditworthiness of the shareholder. Hence the share capital received from this company is fully explained. Sanguine Media Ltd., Old No. 6 & New No. 13-B, 3rd Street, Postal Colony, West Mambalam, Chennai- 600017 PAN- AAECS 2217C 35,00,000/- * Copy of Share Application form * Copy of Confirmation * Copy of Affidavit * Copy of PAN * Copy of ITR * Copy of bank statement * Copy of Financial Statement * From the balance sheet it can be noted that the networth of the company is Rs. 1,24,63,33,573/- which itself proves the creditworthiness of the shareholder. Hence the share capital received from this company is fully explained. 3,00,00,000/- 4.10 It is seen that the appellant has filed each and every documents required for proving the identity and creditworthiness of the share applicants and genuineness of the transactions. The AO has made the addition relying on the statement of Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round of appeal relates to addition of Rs. 7,50,000/- made by the AO respect of the commission paid by the appellant for obtaining accommodation entry of Rs. 3,00,00,000/- in the form of share application money. 5.2 The appellant has filed following written submission on this issue: "8. As explained in ground no. 1 supra, the share application money received by the assessee is genuine. Therefore, payment of brokerage/commission does not arise. Hence the disallowance made by the AO is uncalled for and be deleted." (ii) The written submission filed by the appellant were forwarded to the A 3. The AO has submitted the remand report as under: "5. Commission Expenses As per discussion made in the assessment order, used above, it is evident that Shri Shirish Chandrakant Shah and his agents charge 2.5% to 5% commission for such bogus entries/ share capital etc. Therefore, in the case of the assessee this commission amount comes to Rs. 7,50,000/- ( i.e.2.5% of Rs. 3,00,00,000/-). Since the assessee has not claimed any expenditure for this amount and the whole share capital has been booked in his capital account, while completing the assessment this amount has been held as spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the assessee strongly supported the order of the ld. CIT(A) and contended that this issue is squarely covered in favour of assessee by the latest decision of Hon'ble Madhya Pradesh High Court in the case of PCIT v. Chain House International (P) Ltd. (2018) 408 ITR 561 where SLP has been dismissed against the judgment of Hon'ble Madhya Pradesh High Court in the case of PCIT v. Chain House International (P) Ltd. (supra) (2019) 262 Taxman 207. The counsel referred to the held part of the Judgment delivered by Hon'ble Madhya Pradesh High Court in the case of PCIT v. Chain House International (P) Ltd.which reads as under: "Held : All the investors appeared before the appellate authority and they were examined by the CIT(A) and their statements were recorded; and an opportunity of cross- examination was given to the assessee. Their statements were found to be strongly supporting the explanation and stand of the assessee-company. These statements and other relevant evidence for cross-examination, verification and comments of the AO providing due opportunity to him. However, the AO has not made any adverse comments on these statements except contending the same cannot he consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach and every creditor and assigned reasons as to why the loan(s) have to be treated as genuine and upheld the order of the first appellate authority i.e., CIT(A) and held that it did not suffer from any legal infirmity. The Court is not at all impressed with the submissions of the counsel for the Revenue. There is a clear finding of fact by the Tribunal and there is no reason to reverse this finding of fact particularly since nothing has been shown to conclude that the finding of fact was perverse in any manner whatsoever. There is a clear finding of fact by the appellate authority and the Tribunal after examining the same upheld the same. A decision on the facts of Tribunal can be gone into by the Court only if a question has been referred to it which says that the finding of the Tribunal on facts is perverse. Accordingly, there is no merit on the arguments of the counsel for the Revenue nor any substantial questions of law are arising in these appeals. (Paras 75 to 77) Conclusion: Tribunal on a very detailed examination was satisfied about identity, creditworthiness and genuineness of the investor companies and held that the assessee had discharged the primary onus to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. counsel has filed a detailed paper book and case laws comprising APB pages (1 to 79) to defend the decision of the ld. CIT(A). The relevant part is reproduced as under: 5. During the course of search, it has been revealed that the assessee has received an unsecured loan of Rs. 30 crores from M/s Bharat Securities (P) Ltd. (herein after referred as 'BSPL') who shown to have got a bogus share application money and premium of Rs. 55 crores from 5 entry providing companies viz., M/s Aadhaar Ventures India Ltd. (Rs. 40.75 crores), Emporis Project Ltd. (Rs. 3 crores), Dhanus Technologies Ltd. (Rs. 9.75 crores), L.N. Polyester Ltd. (Rs. 0.75 crores) and Yantra Natural Resources Ltd. (Rs. 0.75 crores) during the financial years 2011-12 and 2012-13 in the form of accommodation entries and the some share capital with exorbitant premium from the said 5 companies against payment of unaccounted cash which was inter alia routed back as share capital and share premium during financial years 2011-12 & 2012-13. Further, it was found that M/s BSPL has transferred the said receipts of Rs. 55 crores of bogus share capital and premium to the main group companies i.e., Rs. 30 crores during the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in entries to the officers who had recorded his statement at his residence on 18th Dec., 2013. He also denied of any acquaintance with BSPL or any of its directors. He also denied to have received any cash from BSPL or from any other person on its behalf. He also denied his earlier statement and stated that the same was recorded under fear and misrepresentation. He was extensively cross- examined by the assessing-company. 41 In the instant case, the assessee-company having received share application money through banking channel and furnished complete details of bank statements, copy of accounts and complied with notices issued, therefore, identity, creditworthiness and genuineness of transaction have been proved in the light of ratio laid down by the Hon'ble High Court in above decision. Therefore, respectfully following the decision of Hon'ble jurisdictional High Court as referred above, no addition can be made under s. 68 of the Act. There is no finding of the AO that any point or stage of investigation regarding source of funds he caught any instance of cash deposit by the Investor/share applicant or of its sources account. 42. We further note that decision of the Hon'ble a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd high premium amount only. The ratio laid down by Hon'ble Madhya Pradesh High Court in CIT vs. Peoples General Hospital Ltd.(2013) 91 DTR (MP) 346 : (2013) 356 ITR 65 (MP): (20131 35 taxmann.com 444 (MP) is squarely gives shelter to the assessee, wherein it was held that where the assessee establishes the identity of share applicant, burden of proving creditworthiness was not on assessee. 46. In view of the above facts, circumstances and discussion, we are of the view that if the identity and other details of share applicant are available, the share application money cannot be treated as undisclosed income in the hands of the company. In the present case, the assessee even has proved the source of source, therefore, the creditworthiness was also proved, consequently, no addition made under s. 68 of the Act can be said to be justified. Therefore, respectfully following the decisions from Hon'ble apex Court, Hon'ble High Courts and Hon'ble jurisdictional High Court, we find no infirmity in the order of learned CIT(A), resultantly, the grounds of appeal of the Revenue are dismissed." 75. The Tribunal on a very detailed examination was satisfied about identity, cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tworthiness of the share applicants and genuineness of the transactions. 9. It is noted that the AO has made the addition relying on the statement of Shri Shirish Chandrakant Shah recorded during the course of search and passing reference to various incriminating documents/ material seized during the course of search by holding that M/s Ganesh Spinners Ltd., M/s Emplis Projects Ltd., M/s Speciality Papers Ltd., M/s Dhanus Technologies Ltd. and M/s Sanguine Media Ltd. were used to provide accommodation entries. The Ld. Counsel argued that the CIT(A) has deleted the addition after considering the fact that the appellant has filed each and every document required for proving the identity and creditworthiness of the applicants, and genuineness of the transactions, whereas the AO has made the addition mainly relying on the statement of Shri Shirish Chandrakant Shah without affording any opportunity to the appellant for cross examination. In our considered view, no addition perse can be made by the AO, on the basis of the statement of the third party recorded at the back of the assessee without allowing any opportunity to the assessee to cross examine such third person. Further, no mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -5 of assessment order), which is against the principle of natural justice, illegal and bad in law as held by Hon'ble Supreme Court in its order dt. 02.09.2015 in case of Andaman Timber Industries Vs. CCE 127 DTR 0241 wherein it was held that denial of opportunity to the assessee to cross- examine the witnesses whose statements were made the sole basis of the assessment is a serious flaw rendering the order a nullity in as much as it amounted to violation of principles of natural justice. Thus, the observation of AO at Para 4.4 of the remand report and contention of the Ld DR that the onus is upon the assessee to produce Sh. Shirish Chandrakant Shah during the course of assessment proceedings is illegal. We observed that the contention of ld. DR that the department has provided opportunity to the appellant to cross examine Shirish Chandrakant Shah is factually incorrect. 12. From the record, it is evident that the appellant has furnished each and every document required for proving the identity, creditworthiness of the share applicants and genuineness of the transactions whereas the AO or the DR has not been able to brought on record any evidence to show that cash was paid by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO has not made any adverse comments on these statements except contending the same cannot be considered in favour of the assessee. The Hon'ble High Court observed that the Tribunal held that the first appellate authority was right in considering the same in right perspective and found no valid reason to interfere with the finding recorded by the appellate authority. The SLP filed against the said judgment of the Hon'ble Madhya Pradesh High Court in the case of PCIT v. Chain House International (P) Ltd. (supra) has been dismissed. The case law cited by the Department are distinguished on peculiar facts of the case. 14. That the Ld. CIT(A) on a very detailed examination was satisfied about identity, creditworthiness and genuineness of the investor companies and held that the assessee had discharged the primary onus to prove their identity, creditworthiness, and genuineness. We, therefore, concur with the finding of the Ld. CIT(A) that the AO has made an addition under section 68 of the Act without any basis. In our view, the CIT(A) has analyzed the transaction with each share holder and assigned reasons as to why the share capital have to be treated as genuine and has rightly d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anted. 18. We have already sustained the decision of the Ld. CIT(A) in deleting the addition of Rs. 3,00,00,000/- made u/s 68, and therefore, decision of the CIT(A) deleting the addition of Rs. 7,50,000/- made by the AO in respect of the commission paid by the appellant for obtaining the accommodation entry of Rs. 3,00,00,000/- in the form of share application money would also be liable to be deleted. There is no finding of the AO that any point or stage of investigation regarding source of funds, he caught any instance of cash deposit by the Investor/share applicant or of its sources account regarding commission or brokerage payment. Accordingly, we uphold the decision of the Ld. CIT(A) in deleting the addition of Rs. 7,50,000/-, so made on surmises and conjectures being unwarranted. Thus, the 2nd ground of the department is rejected. 19. The assessee has raised an additional ground before Ld. CIT(A) challenging the validity of notice issued u/s 148 and order passed u/s 147 of the Act. The Ld. CIT(A) did not adjudicate this ground by holding that since the addition made by the AO have already been deleted, this ground has become academic in nature. The Ld AR argued that since, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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