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TMI Blog2007 (1) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... nce the facts in the two assessment years are on identical footing, we refer to the appeal for assessment year 2000-01 to appreciate the factual matrix of the case. The assessee before us is a company incorporated under the provisions of the Companies Act, 1956. It filed its return of income for assessment year 2000-01 declaring income of Rs. 13,73,450 on 29-11-2000. The business of the assessee is that of manufacture and sale of industrial filters. The return so filed was processed by the Assessing Officer under section 143(1)( a ) of the Act on 19-6-2001. Subsequently, the assessment was reopened under section 147 of the Act. As per the discussion in the assessment order, the reason for reopening was on the basis of the survey conducted at the premises of one Shri Sanjay Rastogi, Chartered Accountant. It was alleged that various companies promoted by the said Shri Sanjay Rastogi were engaged in providing accommodation entries. The assessee was found to have received money towards share capital from two such companies allegedly manned by said Shri Sanjay Rastogi. The assessee in the year under consideration was found to have received share application money from the two companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies but with no response. The Assessing Officer has observed in para 10 of his order that the Inspector was also deputed to require presence of the two investor companies who submitted a report that the two companies did not exist at the addresses provided. In the absence of any response to the summons issued under section 131, the Assessing Officer based on the information gathered during the survey proceedings held that the amounts aggregating to Rs. 7.5 lakhs represented "bogus accommodation entries received by the assessee from M/s. Frenzy Products (P.) Ltd. and M/s. Adhunik Systems (P.) Ltd.". He therefore, treated the amount of Rs. 7.5 lakhs as income of the assessee from undisclosed sources. 5. The assessee carried the matter in appeal before the CIT(A). Before the CIT(A), the submissions of the assessee were on the following lines : ( i )That the statement of Shri Sanjay Rastogi was vague and general in nature. There was no mention of any irregularity in the investment made towards the share capital of the assessee-company; ( ii )That the alleged statement of Shri Sanjay Rastogi was not recorded by the Assessing Officer and that the same has been used to mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said statement itself was not provided to the assessee in spite of objections raised. The ld. Counsel also pointed out that even at the stage of the CIT(A), when the assessee was provided with the copies of statements of Shri Sanjay Rastogi, no opportunity to cross-examine the said person was allowed in spite of specific request in this regard. It is, therefore, a case where material has been sought to be used against the assessee which is not tested. Further, it is submitted that the assessee has fully discharged its onus on the basis of the material and evidences produced before the Assessing Officer and the CIT(A) regarding the amount of credits in question. 7. The ld. D.R., on the other hand, defended the orders of the lower authorities. The ld. D.R. pointed out that the Assessing Officer has concluded in his order that the share capital in question remained unexplained and in view of the statement of Shri Sanjay Rastogi, the impugned amount was income of the assessee from undisclosed sources. The ld. D.R. pointed out that during assessment proceedings as well as during the remand proceedings before the CIT(A), the Assessing Officer had issued summons under section 131 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded on 10-4-2003 and also subsequently on 20-4-2003. Copies of the statements have been placed on record wherein said Shri Sanjay Rastogi admitted that various companies were promoted by him which were engaged in providing accommodation entries to various concerns. The investor-companies appear in the list of the companies claimed to be promoted by the said Shri Sanjay Rastogi and since the moneys have been received by the assessee from the said companies, the revenue contends that such entries are bogus. The assessee has challenged the so-called disclosure by the said Shri Sanjay Rastogi. Various arguments have been led by the assessee on this count before the lower authorities as well as before us whereby the contents of the statements have not only been assailed on merits but also on grounds of their evidentiary value. We find on the basis of the material on record that the entire case of the revenue is based on the statement of Shri Sanjay Rastogi. If the said statement has to be used by the Assessing Officer against the assessee, it cannot be so done without it being tested under cross-examination. It is a trite law that in the absence of the statement adverse to the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany. In the circumstances, we do not think that there is cogent and sufficient material to endorse the basic stand of the revenue that the investor-companies had merely provided accommodation entries to the assessee. In fact, the two investor-companies are duly incorporated under the Companies Act, 1956. The amounts in question have been received by the assessee through normal banking channels by way of account-payee cheques. The remand report of the Assessing Officer dated 23-12-2005 and also the letter of the Assessing Officer dated 20-2-2006 to the assessee during the remand proceedings and the accompanying documents, namely, report of inquiry at the office of the Registrar of Companies in respect of the investor companies etc., clearly suggest that the investor-companies exist on the records of the Registrar of Companies. Therefore, in the absence of any material to suggest that the two investor-companies were sham or nominal companies, it is not possible to disregard their corporate identity. While remaining on this issue, we may refer to the Full Bench judgment of the Hon ble Delhi High Court in the case of CIT v. Sophia Finance Ltd. [1994] 205 ITR 98, wherein it is la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emerges is squarely governed by the ratio of the decision of the Hon ble Apex Court in the case of Kishinchand Chellaram ( surpa ). Needless to repeat, in our view, the addition made by the Assessing Officer and thereafter sustained by the CIT(A) suffers from a primary infirmity in the sense that the same has been made without testing the alleged evidence available with the Assessing Officer, in spite of specific request by the assessee for cross examination of Shri Sanjay Rastogi. Hence, on this count, the addition deserves to be deleted. Accordingly, the orders of lower authorities are set aside and the addition is deleted. 13. In the result, the appeal of the assessee for assessment year 2000-01 is allowed. 14. As regards assessee s appeal for assessment year 2001-02, it was common ground between the parties that the factual matrix and the issue involved is identical to those considered by us in assessee s appeal for assessment year 2000-01. Therefore, our decision in assessment year 2000-01 applies mutatis mutandis to the assessee s appeal for assessment year 2001-02 as well. The order of Assessing Officer as well as that of the CIT(A) are set aside and the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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