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TMI Blog2024 (12) TMI 860X X X X Extracts X X X X X X X X Extracts X X X X ..... the premises of Amarpali group in October 2012. 4. The learned CIT(A) erred in upholding the validity of notice u/s 148 of I.T. Act 1961 and dismissing the grounds challenging the validity of notice u/s 148 in the case of assessee. 5. The addition made by A.O. at Rs. 180 lacs u/s 68 of I.T. Act 1961 in respect to share capital contribution is unjustified, unwarranted and bad in law. 6. The learned A.O. erred in making addition at Rs. 180 lacs u/s 68 of I.T. Act 1961 on account of share capital at the hands of assessee. 7. The learned A.O. ought to have accepted the issue of share capital as shown in books of account and accepted in regular assessment framed u/s 143(3) of I.T. Act 1961. No addition ought to have made of same u/s 68 of I.T. Act 1961. 8. The learned CIT(A) erred in upholding the addition u/s 68 of I.T. Act 1961 by A.O. and thereby dismissing the ground of appeal of assessee. 9. The learned CIT(A) erred in not granting personal hearing as prayed in written submission at pra 8 uploaded on 21/10/2023. Order passed by CIT(A) is in violation of principles of natural justice and is not in accordance with law. 10. The assessee denies liability to pay interest u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for issuance of notice u/s 148 The assessee has filed the return of income for A Y 2012-13 on 28.09.2012 declaring total income of Rs. 52,08,020/-. The order u/s 143(3) was passed on 23.03.2015 and the total income was assessed at Rs. 52,08,020/- 2. As per information in hand, a search and seizure action u/s 132 of the Income Tax Act 1961 was conducted in the cases of Amrapali Group in October 2012. The said group had introduced capital of 100 crores. It was revealed that actually there was no business conducted and the said companies had dummy directors. The companies had given accommodation entries regarding share capital, share premium, bogus LTCG etc. which are controlled by Mr. Shirish Chandrakant Shah of Mumbai. A search & seizure action u/s 132 was carried out at residential and business premises of Mr. Shirish Chandrakant Shah on 13.04.2013. His statement u/s 132(4) was recorded. During the search the incriminating documents were found. It was revealed that there was a chain of transfer of funds by way of cash/RTGS/cheques through bank accounts of various listed companies to ultimate beneficiaries. The accommodation entries were provided by the companies controlled by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viding accommodation entries to various clients/beneficiaries against cash received from them through various modes such as subscription to share capital at high premium, booking bogus expenditures extending funds by way of loans and advances, raising capital through Long Term Capital Gain (LTCG). Please explain in detail all such modes employed by you for providing accommodation entries. Ans. Sir, The modes employed by me for providing accommodation entries against commission are as under: 1. Subscription to share capital at premium:- Sir, in such cases shares of the companies of clients/beneficiaries are subscribed at high premium by the companies floated/managed/controlled by me against the cash received from such clients/beneficiaries. The funds received from such clients/beneficiaries are rotated through various companies controlled/floated/managed by me (termed as "Chakri Ghumana" in our parlances) and ultimately introduced in the client"s/beneficiary companies. Such types of accommodation entries are referred by us as one time entry (OT). It is called as one time entry because the client has no liability to pay it back. Sir, primarily cash is generally collected from "An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.5, Jubliee Hall, Hyderabad AACCS2_____ 25000 125000 4875000 50,00,000/- From the case records it was seen that the assessee has furnished the share application forms which confirms that the bogus share allotment accommodation entries was obtained by way of preferential allotment. The shares are not applied for & also not purchased online. The above two companies are camouflage of companies managed & controlled by Mr. Shirish Shah. All the funds were arranged by Mr. Shirish Shah. The companies allowed their bank accounts with user ID and password to Shirish Shah. By using the bank accounts of various companies including even public limited companies the funds were managed and accommodation entries were provided. In view of above credible information revealed in search & seizure action u/s 132 in the case of Mr. Shirish Shah, I have reason to believe that M/s Dayal Cotspins Ltd. has taken bogus accommodation entries regarding investment in shares and thus the income to the extent of Rs. 1,00,00,000/- plus incidental expenses/returns of investment etc. has escaped assessment within the meaning of provisions of section 147 Explanation 2(c) of the Income Tax Act 1961. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been issued on the basis of mere receipt of information received in respect to search at the premises of Shri Shirish Shah through Intra Departmental Authorities. Reasons recorded does not indicate that A.O. has made any independent enquiry before concluding that assessee is in receipt of accommodation entries by way of share capital contribution. Reasons recorded does not indicate date, year or name of person to whom any cash is given as alleged for obtaining accommodation entry. Reasons recorded does not indicate any evidence on the basis of which it is concluded that corporate entities contributing share capital are of Shri Shirish Shah. It does not refer to any enquiry made by JAO. It is settled proposition of law that notice u/s 148 cannot be issued on the basis of mere receipt of information and in the absence of any tangible material/evidence on record. Reliance on: i) [2019] 104 taxmann.com 216 (Bom.) South Yarra Holdings vs. ITO (P- 42 - 45) (45) [Vol. - II] ii) [2017] 395 ITR 0677 (Delhi) PCIT vs. Meenakshi Overseas Pvt. Ltd. (P- 46 - 58) (53 to 58) [Vol. - II] iii) (2020) 422 ITR 0337 (Bom.) CIT vs. Shodiman Investments Pvt. Ltd. (P- 13 - 20) (20) [Vol. - II] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicates substantial creditworthiness to contribute share capital. B) CIT(A) has reproduced the written submission at pages 22 to 27 partly. The complete submission as made before CIT(A) is at of CIT(A) has recorded no justification/reasons for not accepting the submission of assessee. Rejection of explanation of assessee by CIT(A) is unjustified and not in accordance with law. C) A.O. has made the addition primarily on the basis of statement of Shri Shirish Shah. The aforesaid person was examined by Income Tax Authorities in the case of Chain House International Pvt. Ltd. Attention of CIT(A) was invited to facts of Shri Shirish Shah as noted in judgment of Hon'ble High Court of Madhya Pradesh dated 07/08/2018. It has been concluded by Hon'ble High Court that addition made on the basis of statement of Shri Shirish Shah is unjustified and unsustainable. Attention was invited to observation in the judgement of Hon'ble High Court at para 14 to 19, 26, 52 & 53 to submit that there is nothing adverse from the statement of Shri Shirish Shah to make addition in respect to share capital/loan in the aforesaid case SLP filed by Revenue in respect to decision of Hon'ble High Court of Madhy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sa Corporation (P) Ltd. (P- 197 - 203) [Vol. - II] viii) (2013) 358 ITR 0295 (SC) CIT vs. Excel Industries Ltd. (P- 204 - 212) [Vol. II] 9. The learned D.R. relied upon order of the Assessing Officer and the learned CIT(A). He submitted that detailed reasons indicated in the assessment order and in order of the learned CIT(A) clearly explain that there is no merit in the submission of assessee. The addition made by the Assessing Officer and upheld by the learned CIT(A) is correct and proper and thus learned D.R. submitted that no interference is called for in the order of learned CIT(A) and appeal of assessee needs to be dismissed. 10. We have heard the arguments of rival parties, perused the material available on record and gone through the orders of the authorities below. The assessee submitted various documents and judicial precedents which are placed in Paper Books in two Volumes (I & II) comprising of 179 pages and 270 pages. It is seen that the assessee furnished voluminous evidence before the authorities below and the same is also furnished before us which are placed on record. We find that the addition made is in respect to share capital contribution of four corporate s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Book. The details submitted by the assessee to explain share capital contribution before the Assessing Officer and/or the learned CIT(A) and before us is as under:- "a) M/s. ACIL Cotton Industries Limited Audited Financial Statement P- 32 - 53 [Vol. - I] Share Application Form P- 54 [Vol. - I] Extract of Bank Account P- 55 [Vol. - I] Acknowledgement of ITR P- 56 [Vol. - I] b) M/s. Alpha Graphics India Ltd. Audited Financial Statement P- 57 - 85 [Vol. - I] Confirmation of company affirming share capital contribution P- 86 [Vol. - I] Share Application Form P- 87 - 88 [Vol. - I] Extract of Bank Account P- 89 - 90 [Vol. - I] Acknowledgement of ITR P- 91 [Vol. - I] c) M/s. Secundrabad Health Care Ltd. Audited Financial Statement P- 92 -147 [Vol.- I] Confirmation of company affirming share capital contribution P-148 [Vol. - I] Share Application Form P-149 - 150 [Vol. - I] Extract of Bank Account P-151 [Vol. - I] d) M/s. Prabhav Industries Limited Company/LLP Master data P- 152 [Vol. - I] Confirmation of company affirming share capital contribution P-153 [Vol. - I] Share Application Form P- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Shirish Shah, is unjustified and unsustainable. The judgment of the Hon'ble High Court of Madhya Pradesh in ITA no.112/2018 in the Chain House International Pvt. Ltd. vide order dated 07/08/2018, has been upheld by dismissing the SLP by the Hon'ble Supreme Court, vide judgment dated 18/02/2019 vide SLP(C) Diary no(s).1992/2019. The aforesaid judgments are placed in Paper Book at Pages-90 to 166 [Vol. - II]. Attention was invited to the observation in the judgment of Hon'ble Madhya Pradesh High Court at Para-14 to 19, 26, 52 & 53 to submit that the addition in respect to share capital/loan in the aforesaid case based on statement of Shri Shirish Shah, was held to be not justified. We have perused the relevant paragraphs of judgment placed in the Paper Book and find that the submission made before us fully supports case of assessee that there is no warrant or justification to make addition under section 68 of the Act on the basis of mere statement of Shri Shirish Shah. Respectfully following the decision of the Hon'ble High Court of Madhya Pradesh cited supra, we find that the addition of Rs. 180 lakh made is unjustified and unsustainable. 16. It is also seen that the Hon'ble Raja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cing legal evidence on record. The law laid down by the Hon'ble Jurisdictional High Court in M/s Gagandeep Infrastructure Pvt. Ltd. ITA no.1613 of 2014, vide order dated 20/03/2017, squarely applies to the facts in the assessee's case. Considering the same addition made in the case of assessee at Rs. 180 lakh is held to be unjustified and unsustainable. Various judicial precedents referred to in the submission of assessee in support of grounds no.5 to 8 reproduced hereinabove supports the case of assessee. Respectfully following various judicial precedents discussed hereinabove, it is held that addition made in the case of assessee under section 68 of the Act is unjustified and is directed to be deleted. 19. It is seen that the regular assessment was framed under section 143(3) of the Act on 23/03/2015. In the course of regular assessment, notice under section 142(1) of the Act was issued seeking details of share capital (Pages 166 & 167) dated 16/12/2014. Details were furnished on 16/01/2015 (Pages 167 to 170). Share capital contribution received was examined and regular assessment was completed accepting receipt of share capital contribution. No new tangible material has come on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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