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TMI Blog2018 (5) TMI 1375X X X X Extracts X X X X X X X X Extracts X X X X ..... where the AO is ceased of certain information and documents, it is incumbent upon him to confront the same to the assessee and allow the latter to file its objections and rebuttal. The additions made, merely relying on these information and documentation, without confronting the assessee cannot be accepted. Besides furnishing the reasons for reopening the assessment to the assessee company, there is nothing on record that such information/documentation was confronted to the assessee. Further, the AO has relied upon the statement of third parties namely, shri S.K. Jain, shri V.K. Jain, shri Assem Kumar Gupta and shri Rajesh Agarwal, the assessee again deserves an opportunity to cross examine such persons which was not provided. No nexus has been established by the Revenue and the suspicion however strong cannot be basis for making the addition. Therefore, no presumption can be drawn without establishing the necessary nexus that share application money received is assessee’s own undisclosed money. We don't find any basis for making addition under section 68 of the Act and the findings of the CIT(A) are hereby confirmed. - Decided in favour of assessee. - ITA No. 180/JP/2015 And ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05-06 Alok Fintrade Pvt. Ltd. 1000000 389937 26/05/2004 2004-05 2005-06 Total 1500000 Name of Account holder of entry giving account Bank from which entry given Branch of entry giving bank A/c No. entry giving account Fine Finance leasing Pvt. Ltd. Corpn Kb 3834 Creative Capital Services Ltd. Nainital bank 109 On the basis of such information and other relevant facts circumstances I have reason to believe that assessee's income to the tune of ₹ 15,00,000/- has escaped assessment for the A.Y. 2005-06 within the meaning of section 147 of the I.T. Act, 1961. 4. The assessee has challenged the reopening before the ld. CIT(A). However, following the decision of Hon'ble Supreme Court in the case of Raymond s Wool ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is not about sufficiency or correctness of material rather it is a case of no material or irrelevant material inasmuch as nothing is mentioned in the reasons recorded as to who carried out the investigation and in whose case the investigation is carried out. Therefore, such vague information as mentioned in the reasons cannot be equated with the sufficiency or correctness or relevancy of the material. It was further submitted that the notice issued U/s 148 of the Act is illegal and bad in law and the same may be quashed. 7. On the contrary, the ld DR has vehemently argued the matter and relied on the orders of the lower authorities and submitted that it is a case where no assessment was framed earlier under section 143(3) and basis specific information which has been received by the Assessing Officer and thereafter, on due application of mind, the AO has come to a prima facie belief that income has escaped assessment. The AO has thereafter recorded the reasons that the income has escaped assessment and after seeking necessary approval, notice has been issued to the assessee under section 148. The ld DR accordingly submitted that the reasons recorded are specific identifying th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial statements are also the same as disclosed by Shri Praveen Jain, the belief formed by the AO after due examination of the material on record that the income of the assessee chargeable to tax during the relevant assessment year has escaped assessment cannot be said to be arbitrary or irrational and it cannot be said that there exists no rational and intelligible nexus between the reasons and the belief. It is true that the reasons recorded or the material available on record must have nexus to the subjective opinion formed by the AO regarding the escapement of the income but then, while recording the reasons for belief formed, the AO is not required to finally ascertain the factum of escapement of the tax and it is sufficient that the AO had cause or justification to know or suppose that income had escaped assessment. It is also well settled the sufficiency and adequacy of the reasons which have led to formation of a belief by the Assessing Officer that the income has escaped the assessment cannot be examined for the purposes of determining the assumption of jurisdiction by the AO u/s 147 of the Act. The decision of the Hon'ble Delhi High Court in case of Singature Hot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, what is relevant and found to be well in order is that there is possession of certain tangible material by the Assessing officer, the contents of such information in terms of value, instrument, date and bank details not being disputed and basis such material, formation of a prima facie view that income has escaped assessment. There thus exist a rational and intelligible nexus between the reasons and the formation of belief that income has escaped assessment. In our considered opinion, in the instant case where the return filed by the assessee was not subjected to scrutiny assessment and the entries are available in the case of the assessee from the companies which have provided the accommodation entries and the amounts recorded in the assessee's financial statements are also the same (not being disputed before us), the belief formed by the AO after due examination of the material on record that the income of the assessee chargeable to tax during the relevant assessment year has escaped assessment cannot be said to be arbitrary or irrational. Therefore, it is not a case of borrowed satisfaction as contended by the ld AR. There is no bar that the information received from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd functioning. (iii) From a single address a number of companies were shown to have registered and these addresses were mostly the residential address of directors of different dummy companies/ proprietors of various firms. (iv) The survey u/s 133A was conducted by the department in the office premises of Sh. Assem Kumar Gupta in Delhi. In the statement he had stated that he was engaged in providing accommodation entries as per the requisition of the beneficiaries and the work of accommodation entry is brought to him by Sh. S.K. Jain. (v) A search operation was carried out u/s 132 by the Investigation Wing at the residential and business premises of Sh. Rajesh Aggarwal. In the statement he admitted that he was in constant touch with Sh. S.K Jain and Sh. V.K Jain and he knew that they are known accommodation entry operator who provides cheques against payment of cash after deducting specific premium form the parties. (vi) In case of four other companies of this group also, the assessment was reopened on the ground of receipt of accommodation entries from companies of Sh. S.K. Jain. On examination of records of these four group cases and on correlating the information/de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso noted that in the assessment order, AO has incorrectly noted that in all cases, money has been routed by these companies through the same bank whereas out of five companies for which addition is made by AO, only two concerns namely M/s Lehra Investments Pvt. Ltd. M/s Smartest Corporate Services Pvt. Ltd. have bank account with the given bank i.e. ABN AMRO Bank. Even from the assessment order, it is also not discernible that any of these person had stated that investment made by these companies in the share capital of appellant company is bogus/ accommodation entries. AO has merely collected details/ documents by which it cannot be demonstrated that these companies are not in existence. As against this, assessee company has provided all the best possible evidences. The observations made by the AO are very casual and it clearly shows that he has completed re-assessment with a preconceived notion by indulging into surmises and conjectures. Further, In view of the decisions of the Jurisdictional Rajasthan High Court in Barkha Synthetics Ltd. v. Asstt. CIT [2005] 197 CTR (Raj.) 432 CIT Vs. AKJ Granites P Ltd 301 ITR 298, where the share applications are receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amine 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. 15. It was further submitted that the AO has made addition of ₹ 66 lacs in respect of share capital received from eight companies namely M/s Fine Finance Leasing Pvt. Ltd., M/s Creative Capital Services Ltd., M/s Lehra Investment Pvt. Ltd., M/s Sam Portfolio Pvt. Ltd., M/s Smartest Corporate Services Pvt. Ltd., M/s S.G. Portfolio Pvt. Ltd., M/s Chotti Leasing Finance Pvt. Ltd. and M/s Ravnet Solution Pvt. Ltd. Out of these eight companies, the AO in the course of reassessment proceedings required the assessee to file information only in respect of five companies namely M/s Fine Finance Leasing Pvt. Ltd., M/s Creative Capital Services Ltd., M/s Lehra Investment Pvt. Ltd., M/s Sam Portfolio Pvt. Ltd. and M/s Smartest Corporate Services Pvt. Ltd.. In respect of other three companies namely M/s S.G. Portfolio Pvt. Ltd., M/s Chotti Leasing Finance Pvt. Ltd. and M/s Ravnet Solution Pvt. Ltd., no information whatsoever was called for in the course of reassessment proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k account with ABN Amro Bank. Therefore, solely on the basis of the information received from Investigation Wing, Delhi, the share capital received by the assessee from these companies cannot be presumed to be accommodation entries. 18. In support of his contentions, the ld. AR has relied on the decisions of the Hon ble Rajasthan High Court in the case of Barkha Synthetics Ltd. Vs ACIT 197 CTR 432 (Raj) and CIT Vs AKJ Granites P Ltd. 301 ITR 298(Raj). Besides the same, he has relied upon the following decisions: (i) CIT Vs. Vacmet Packaging (India) Pvt. Ltd. 367 ITR 0217 (ALL) (HC) decision dated 11/02/2014, wherein the survey was carried at Sh. Assem Gupta and additions were made which the Hon'ble High Court has deleted. It was submitted that in assessee s case also, the addition is made with reference to the survey/search carried out in case of Sh. Assem Kumar Gupta and others. Therefore, in view of the above decision, which is directly applicable in the assessee s case, the ld. CIT(A) has rightly deleted the addition. (ii) CIT Vs Supertech Diamond Tools Pvt. Ltd. 229 Taxman 62 (Raj)(HC) (iii) Jadau Jewellers Manufacturing (P) Ltd. Vs. ACIT 45 CCH 0442 (Jpr.) ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Incorporation and Certificate of Commencement of Business (vi) Copy of PAN Card. Where the assessee furnishes the documentation and necessary explanation, the AO should examine whether the documents so submitted and explanation so offered establishes the three ingredients i.e. identity of the investor company, creditworthiness of investor company and genuineness of the transaction. Whether explanation of the assessee is reliable or acceptable? If yes, no further action is required and the sum so credited may not be charged to income tax. If the explanation so offered by the assessee is not acceptable or reliable, the AO should give a detailed reasoning in the assessment order for not accepting the same. The order passed by the AO should be speaking one bringing on record all the facts, explanation furnished by the assessee in respect of nature and source of the credit in its books of accounts and reasons for not accepting the explanation of the assessee. In the instant case, we find that the AO has not taken any efforts to examine these documents so submitted by the assessee company during the course of assessment proceedings and has simply gone by his prima facie view formed at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making addition under section 68 of the Act. In the result, ground no.2 taken by the assessee company is allowed. 21. In the instant case, we find that the Assessing officer has relied solely on the information received from the Investigation Wing Delhi without carrying out any further examination of documents submitted during the course of reassessment proceedings and without carrying any independent investigation of these companies. The information so received from the Investigation Wing Delhi is sufficient to form a prima facie view and acquiring jurisdiction under section 147 of the Act. However, such a prima facie view has to be finalized and a firm view has to be taken on basis of examination of documents so brought on record and further investigation to be carried out before any tax liability is fastened on the assessee. In the instant case, we find that the assessee company has submitted documentation in respect of these companies from whom a total amount of ₹ 46 lakhs was received namely share application form, return of allotment filed with Registrar of Companies evidencing allotment of shares, copy of bank statements reflecting payment through cheque, confirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors of these companies under section 131 of the Act. 22. Further, being the reassessment proceedings, where the AO is ceased of certain information and documents, it is incumbent upon him to confront the same to the assessee and allow the latter to file its objections and rebuttal. The additions made, merely relying on these information and documentation, without confronting the assessee cannot be accepted. Besides furnishing the reasons for reopening the assessment to the assessee company, there is nothing on record that such information/documentation was confronted to the assessee. Further, the AO has relied upon the statement of third parties namely, shri S.K. Jain, shri V.K. Jain, shri Assem Kumar Gupta and shri Rajesh Agarwal, the assessee again deserves an opportunity to cross examine such persons as held by the Hon'ble Supreme Court in case of Andaman Timber Industries (supra). 23. Further, Hon ble Rajasthan High Court in case of AKJ Granites (P) (ltd) (supra), in context of addition of share application money under section 68, has held as under: So far as question No. 1 is concerned, it is stated by learned counsel for the appellant that the issue embedded ..... X X X X Extracts X X X X X X X X Extracts X X X X
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