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TMI Blog2025 (2) TMI 644X X X X Extracts X X X X X X X X Extracts X X X X ..... m from three parties of Rs. 10.5 crores and has given loans and advances of Rs. 10.46 crores. The Assessing Officer issued notices to provide the share applicant's/subscribers details, proof of identity, credit worthiness, bank transaction and copy of the Returns filed by the above applicants. The assessee failed to comply with the notices and when A.O. issued notices u/s. 133(6) to the share applicants, the same were also not replied by them. Thereby the Assessing Officer treated the share application money of Rs. 10.5 crores as unexplained income of the assessee and also treated the commission expenses calculated at 2.5% on the above amount of Rs. 26,25,000/- as unexplained expenditure u/s. 69C of the Act and demanded tax thereon as follows: Sr. No. Name of the applicant Number of shares Amount of share capital Amount of share premium Total share capital 1. Iscon Aviation Pvt. Lid 2000000 2,00,00,000 0 2,00,00,000 2. M/s. Adamina Traders Pvt. Ltd. 130000 6,50,000 6,43,50,000 6,50,00,000 3. M/s.Acacio Tradelink Pvt. Ltd. 40000 2,00,000 1,98,00,000 2,00,00,000 Total 2170000 20850000 8,41,50,000 10,50,00,000 3. Aggrieved against the assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue in the present case of the appellant is duly covered by the decisions of the Hon'ble Bombay High Court in the case of Orchid Industries Pvt. Ltd (2017) 397 ITR 139 (Bom), wherein, the Hon'ble High Court has considered the decision of the division Bench of Bombay High Court in the case of CIT vs. Gagandeep Infrastructure Pvt. Ltd 12017) 394 ITR 680 (Bom.) and the Hon'ble Supreme Court in the case of CIT vs. Lovely Exports (P) Ltd 216 CTR 195 (SC) and held as under:- "... 5. The Assessing Officer added Rs. 95 lakhs as income under section 68 of the Income tax Act only on the ground that the parties to whom the share certificates were issued and who had paid the share money had to appeared before the Assessing Officer and the summons could be served on the address given as they were not traced and in respect of some of the parties who had appeared, it was observed that just before issuance of cheques the amount was deposited in their account. 6. 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 pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T[A] further held that the No opportunity of Cross examination of Shirish Chandrakant Shah and others whose statements have been relied upon by the AO, but the copy of which has not been provided to the assessee company nor provided during the Remand report proceedings so the additions are liable to be rejected by observing as follows: "... 9.18. Further, the appellant company was not confronted with the material collected by the ITO, Ward 4(1)(1), Ahmedabad by the A.O and no opportunity of examination of such documents and cross examination of the persons, whose statements have been recorded and relied upon by the AO has been provided to the appellant company. The principles of natural justice demand that the appellant company should be given an opportunity to verify and examine all such adverse and incriminating materials, which the AO has utilized against it. This is a clear mandate which emerges from the various judicial pronouncements. These facts have not been established by the A.O so far and therefore, the AO has not been able to establish the allegation that the appellant company has failed to offer any satisfactory explanation of credits in the name of share application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is much later vis-a-vis the search carried out in the case of Shri Shirish C Shah on 09-04-2013 and the subsequent returning of funds as per the condition laid down by Shri Shirish C Shah in December, 2013, and thus the veracity of the alleged documents or incriminating evidence found on the aforementioned search date at the premises of Shri Shirish C Shah at Mumbai is highly debatable and unlikely, as no evidence corresponding to the aforementioned cash payments as alleged by the AO have been placed on record for either cross verification or cross- examination by the appellant company. 9.47. The aforesaid facts establish that the share capital along with premium issued by J.A. Infracon Pvt. Ltd. to the respective companies were genuine share capital funds received by J.A. Infracon Pvt. Ltd, and J.P. Iscon Group are not the ultimate beneficiaries of the said funds except the said funds were available with J.P. Iscon Group only for a temporary period as Unsecured Loan Inter Corporate Deposits in J.P. Iscon Group and as soon as J.P. Fincorp Services Pvt. Ltd decided not to come up with public issue, the said funds received by way of share capital including premium were returned bac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justify the allegation of cash payment and in support of this the reliance is placed on decision of Hon'ble Supreme Court rendered in the case of C.B.I. vs. V.C. SHUKLA & Ors., Criminal Appeal Nos. 247 of 1998 - 256 of 1998 and in the case of Common Cause (A Registered Society and Others vs. Union of India and Ors. (2017) 77 taxmann.com 245 (SC). 9.15 That it can be accepted that the presumption u/s. 132(4A) r.w.s.292C is applicable to the third party in whose case seized material has been recovered and not in case of the Appellant. The AO has not brought on record any cogent material and independent clinching evidences to establish on record that the Investor companies were shell I paper companies controlled by Shri Shirish C. Shah. The complete addresses, PAN Nos, details of payments and confirmation from the sellers as well as the purchasers were available on record with the AO which prima facie proved the genuineness of the transactions of the shares. Thus in absence of adverse observations about the authenticity of these supporting documents, the payments having been routed through account payee cheques and no cash having been taken by the appellant from the purchasers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the statements it has been asked from Shri Shirish C. Shah that how and in what manner the accommodation entry has taken place. In other words, how the share capital investment in the appellant company has been exchanged with receipt of the cash by Shri Shirish C. Shah and in which bank account such cash was deposited and thereafter that deposit was channelised with different bank accounts till the final bank account from where the cheque of the share capital was given to the appellant company. So there was no details of the route through such accommodation entry travelled as the same was very important to judge the valacity of the statement of Shri Shrishi C. Shah. Mere self serving statement Shri Shirish C. Shah without any corroborative evidence does not have any relevance. Further it has been noticed in the remand report as noted by the AO that in answer to Q.No.7 Shri Shirish C. Shah has answered that the accommodation entry pertains to Shri Jayesh Kotak of JP Iscon Group. From the above answer of Shri Shirish C. Shah it is apparent that the accommodation entry may be pertaining to Shri Jayesh Kotak who was not the director in the appellant company and hence on the basis o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, 2012 in the bank account of J.A. Infracon Pvt Ltd. maintained with Citi Bank, Ahmedabad Branch and the same funds were advanced to J.P. Fincorp Services Pvt. Ltd as unsecured Loan Inter corporate deposit so that as and when J.P. Fincorp Services Pvt. Ltd comes into public issue, against the said unsecured loan inter corporate deposit, the funds given by the appellant company can be converted into equity shares and J.P. Fincorp Services Pvt. Ltd would make the allotment of shares to J.A. Infracon Pvt. Ltd. & Satya Retail Pvt Ltd in consultation with the management of the companies that invested in the share capital issued at premium in JA Infracon Pvt Ltd and Satya Retail Pvt. Ltd. 9.69. Hence, as per the modalities decided, J.P. Pincorp Services Pvt.Ltd returned the funds taken as Unsecured Loan/Inter Corporate Deposit from J.A. Infracon Pvt. Ltd in the month of December, 2013 and the funds received by J.P. Fincorp Services Pvt.Ltd in its bank account with Allahabad Bank, Sardar Patel Nagar Branch, Ahmedabad bearing account Number- 50069254068& Citi Bank, Ahmedabad bearing account number 00 14723668 was transferred to the bank account of the company M/s. J.A. Infracon Pvt.Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he management of the companies who have invested in the share capital including premium in the company JA. Infracon Pvt. Ltd and Satya Retail Pvt. Ltd. way back as on 29th December 2012. Furthermore, what needs to be noted is that according to the condition laid down by Shri Shirish C Shah, if JP Iscon Group would not have returned the funds in the event of non fulfillment of the public issue clause, then JP Fincorp Services Pvt Ltd. would've had to wind up as a consequence, so the ultimate beneficiary of the said funds which are the subject matter of the addition are enjoyed by none other than Shri Shirish C Shah. 9.72. The said funds so raised through share capital including premium were received in the bank accounts maintained with Axis Bank, Ahmedabad opened and operated by the new management and thereafter the same funds have been under the use and control of the newly formed management and they were the ultimate beneficiaries of the said funds having their directors as a signatory in the bank. So as to briefly summarise that the funds went back in the hands of the same entities ie. J. A Infracon Pvt Ltd controlled and managed by the directors nominated by the companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on record including the Paper Books filed by the assessee. The assessee company has received share application money with premium from three parties of Rs. 10.5 crores but partially complied with the notices issued by Ld A.O. and the share applicants also filed to reply to the notices u/s.133(6) of the Act. However during the appellate proceedings the assessee invoked Rule 46A of the 1.T Rules, with regard to the identity of the share applicants/subscribers in respect of amount share capital of Rs. 2 crores from M/s.Iscon Aviation Pvt. Ltd and amount of share premium of Rs. 6,43,50,000/- and Rs. 1,98,00,000/- from M/s. Adamina Traders Pvt. Ltd and M/s.Acacio Tradelink Pvt. Ltd respectively. The assessee company further submitted [i) Confirmations from the Subscribers; ii) Copy of Bank Statements; iii) Acknowledgement copy of ITR alongwith copy of Annual Reports; iv) Bank Statements; v) Share Application in Form No. 2; vi) Master Data with Directors-details available from the website of ROC; vii) Memorandum and Articles of Association; viii) Copy of Board Resolutions; ix) Details of Net worth Share Applicants. 8. Further Ld CIT[A] called for a Remand Report from the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affidavits/declarations but none of these statements/affidavit/ declarations are placed on record proving that those companies have received cash from JP Iscon Group in lieu of share capital received in the assessee company. Thus the LdAO has also not placed on record any bank statement of the aforesaid companies who have invested in the share capital of the assessee company, identifying any cash being deposited in those companies bank accounts. 10. In the remand report the Ld AO has mentioned about the affidavits of some of the directors of the investee companies. However, Ld CIT[A] on verification of the MCA website as provided by the assessee company, held that neither those persons were not directors in the year under consideration nor thereafter. So when a person was not director or director for few months during the year under consideration then the specific knowledge about the investment in share capital in the assessee company could not be expected from him. So their affidavits does not have any evidentiary value against the assessee company more so when their affidavits have not been provided to the assessee company for rebuttal during the assessment proceedings. Similar ..... 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