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TMI Blog2018 (12) TMI 816X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified - no addition was warranted under Section 68 - Decided in favour of assessee Addition of bogus purchases - ddition at 4% of the bogus purchases - Held that:- We find that the CIT(A) has rightly applied the profit rate at the rate of 4% and we confirm the same. This issue of assessee’s appeal is dismissed. - ITA No. 3697/Mum/2017 - - - Dated:- 12-10-2018 - Sri Mahavir Singh, JM AND Sri Nk Pradhan, AM For the Appellant : Shri P Daniel, AR For the Respondent : Shri Jitendra Kumar, DR ORDER PER MAHAVIR SINGH, JM: This appeal filed by the assessee is arising out of the order of Commissioner of Income Tax-21, Mumbai [in short CIT(A)], in appeal No. CIT(A)-21/ITO-13(2)(3)/IT-107/2015-16, order dated 20.03.2017. The Assessment was framed by the Income Tax Officer, Ward-13(2)(3), Mumbai (in short ITO/ AO ) for the A.Y. 2009-10 vide order dated 23.03.2015 under section 143(3) read with sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2850000 Nicco Securities Pvt. Ltd 5200000 Hingora Finvest Pvt. Ltd. 1650000 Sidh Housing Development Co. Ltd. 1650000 Total Share Application money received 61500000 6. The AO added this share premium of ₹ 61050000/- as unexplained cash credit under section 68 of the Act due to the following reasons given in Para 9 of the assessment order: - Conclusion 9.1 From the foregoing discussion, following uncontroverted and undisputed facts emanate which are summarized as under 1) Assessee Company is a closely held private limited company. 2) Directors or the persons of the investors are not related to the Assessee 3) Assessee has not produced any responsible person from investor Companies for examination during the course of the assessment proceeding. 4) From the Bank Statement of the investors companies, layering of the. transactions is found evident. 5) There is no communication on record placed either by the subscribing company or the assessee to demonstrate as to how the wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this case noted is that the director of the 7 appellant company was summoned and his statement recorded at the time of the assessment proceedings itself. The statement is reproduced in the assessment order. In the summons, the director was informed that investor parties from whom share application money is received were summoned but the notices could not he served as they were not found at the address provided by the assessee. It is clearly seen that Shri Agrawal was clear about the questions and the issue at hand while his statement was recorded. He stated that the information not provided will be produced on 16.3.2015. He did not attend on 16.3.20 15 and no reasons are forthcoming. It is clear that he did not want to cornered. The parties were asked to be produced. At no stage after the statement was recorded or even in the statement of facts or submissions, this statement was denied, though it is part of the assessment order. I find in the present case that the Director of the Appellant company specifically asked to provide information regarding how the investor company were identified, who were persons who were contacted, how the investment were received by the appellant compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of above parties as the ledger account or extracts were filed before the Assessing Officer. In view of these arguments, the learned Counsel for the assessee relied on the decision of Hon ble Bombay High Court in the case of CIT vs. Orchid Industries Pvt. Ltd. (2017) 397 ITR 136 (Bom.) wherein honorable High court has considered the decision of division Bench of Bombay High Court in the case of CIT vs. Gagandeep Infrastructure P. Ltd (2017) 394 ITR 680 (Bom). 9. On the other hand, the learned Sr. Departmental Representative relied on the assessment order and the order of the CIT(A). He argued that once the parties have not attended the proceedings, the AO has no alternative except to make addition. 10. We have heard the rival contentions and gone through the facts and circumstances of the case. We find from the facts of the case that In this case on hand, the assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants, thereafter the onus shifted to AO to disprove the documents furnished by assessee cannot be brushed aside by the AO to draw adverse view cannot be countenanced. In the absence of any investigation, much les ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement, audit report balance sheet 31.3.09 of Radhe Krishna chemicals minerals private limited (xii) Company master details, AO jurisdiction, ITR acknowledgement, confirmation dated 1/7.14 bank statement, submission letter, application form, share certificate, ledger, audit report balance sheet 31.3.09 of rajyash jewelers private limited (formerly known as ambuj mercantile pvt. Ltd.) (xiii) Company master details, AO jurisdiction, ITR acknowledgement, confirmation dated 3.9.14, bank statement, audit report balance sheet 31.3.09 of Hingora Finvest private limited (xiv) Company master details, AO jurisdiction, ITR acknowledgement, confirmation dated 3.9.14, bank statement, audit report balance sheet 31.3.09 of Nicco securities private limited (xv) Company master details, AO jurisdiction, ITR acknowledgement, confirmation dated 3.9.14, bank statement, audit report balance sheet 31.3.09 of Clifton securities private limited (xvi) Company master details, AO jurisdiction, ITR acknowledgement, conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 payment of share application money. It was also observed by the Tribunal that the Assessee has also produced the entire record regarding issuance of shares i.e. allotment of shares to these parties, their share application forms, allotment letters and share certificates, so also the books of account. The balance sheet and profit and loss account of these persons discloses that these persons had sufficient funds in their accounts for investing in the shares of the Assessee. In view of these voluminous documentary evidence, only because those persons had not appeared before the Assessing Officer would not negate the case of the Assessee. The judgment in case of Gagandeep Infrastructure (P.) Ltd. (supra) would be applicable in the facts and circumstances of the present case. 13. Respectfully following the ratio of Hon ble Bombay High court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existing legal position, the 12.5% of purchases of ₹ 14,815,693/- i.e. the amount of ₹ 1,851,960/- is added back to the total income of the assessee. As the assessee has filed inaccurate particulars of income, the penalty proceedings are initiated separately under section 271(1)(c) of the Income-tax act 1961. Aggrieved, assessee preferred the appeal before CIT(A), who restricted the addition at 4% of the bogus purchases amounting to ₹ 5,92,630/- by observing as under: - 6.6 I have considered the submissions carefully. The parties were not produced before the assessing officer nor in the appellate proceedings. Thus the genuineness of purchases is not fully established and disallowance is in order. When the parties from whom purchases are claimed are untraceable, there cannot be a question of allowing cross examination. The assessing officer has accepted the contention that there cannot be sales without purchases. Accordingly, he has restricted the disallowance to 12.5% of the impugned purchases as noted in para 3.8 of the assessment order. No specific basis has been mentioned for the 12.5 % adopted. 6.7. The gross profit as per the books of appella ..... X X X X Extracts X X X X X X X X Extracts X X X X
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