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TMI Blog2017 (11) TMI 1764X X X X Extracts X X X X X X X X Extracts X X X X ..... advances u/s 68 in the case of the appellant is deleted. - decided in favour of assessee. - ITA No.3754/Mum/2017, ITA No.3755/Mum/2017, ITA No.3756/Mum/2017 And ITA No.2948/Mum/2017 - - - Dated:- 14-11-2017 - SHRI R. C. SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER For The Assessee : Sh. Neelkanth Khandelwal-Advocate For The Revenue : Represented by-- Sh. V. Justine DR Order Under Section 254(1) of Income Tax Act Per Pawan Singh, Judicial Member: 1. This group of four appeals are directed against different orders of Commissioner (Appeals)-21, Mumbai, dated 20.03.2017 for assessment years (AY) 2008-09, 2009-10 and 2012-13. Out of which three appeals by revenue for AY 2008-09, 2009-10 and 2012-13 and one cross appeal by assessee for assessment year 2012-13. In all appeals the revenue has raised identical grounds of appeal except variation of figures in additions, thus, all the appeals were clubbed together, heard and are decided by consolidated order. For appreciation of facts first we are taking appeal for assessment year 2008 -09. The revenue has raised following grounds of appeal; ( 1) Whether on the facts and circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the details contained in the Pen drive of Praveen Kumar Jain (P.K.Jain). Notice under section 131was sent to Praveen Kumar Jain, who did not appeared before assessing officer. The allegation of assessee before Commissioner (Appeals) that no opportunity for cross examination of P.K. Jain was given to the assessee was wrong. P.K. Jain was the witness of the assessee. There was sufficient circumstantial evidence against the assessee. In support of his submission the ld DR for the revenue relied on the decision of Hon ble Apex Court in CIT Vs P. Mohankala [2007] 161 Taxman 169 (SC)/ [2007] 291 ITR 278 (SC)/ (291 ITR 278), CIT Vs Divine leasing and Finance Ltd [2008] 299 ITR 68(SC), decision of Mumbai Tribunal in Royal Rich Developer Vs DCIT ITA No. 1836/M/2014 dated 24.08.2016, Disha N. Lalwani Vs ITO in ITA No.6398/M/2012, decision of Hon ble Calcutta High Court in Rajmandir Estate Pvt Ltd Vs PCIT in ITA No.113 of 2016, Delhi High Court in CIT Vs Jansamparak Advertising and Marketing (P) Ltd in ITA 525/2014 and in CIT Vs N.R. Portfolio ITA No.134/2012. The ld. DR prayed that the order of ld Commissioner (Appeals) be set-aside and the order of assessing officer be restored. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the documentary evidence and the written submission furnished by assessee. On the submission of assessee, learned Commissioner (Appeals) referred the submission of assessee to the assessing officer for his comment in writing. The ld. assessing officer furnished his submission/ report before the learned Commissioner (Appeals). After considering the remand report of the assessing officer the learned Commissioner (Appeals) granted relief to the assessee. In support of his submission the landed AR of the assessee relied upon the following decision; (a) On the issue of cross examination; (i) Kishin Chand Chellaram Vs CIT 125 ITR 713(SC) (ii) Anand Ram Timber Industries Vs CCE, Civil Appeal No.4228 of 2006 (SC) (iii) H.R. Mehta Vs ACIT 378 ITR 561(Bom) (iv) Sunil Prakash Vs ACIT ITA No. 6494/M/2014 (b) On addition under section 68 of Act (i) CIT Vs Gagandeep Infrastructure (P) Ltd 349 ITR 680(Bombay), (ii) CIT Vs Orchard industries Private Ltd ITA 1433 of 2014(Bom), (iii) CIT Vs Laxman Industrial Resources Ltd ITA No. 169 of 2017(Del), (iv) CIT Vs Supertech Diamonds Tools (P) limited 44 taxman.com 460 (Raj) (v) CIT Vs Ashish International ITA No 4299 of 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and not the witness of Department. The assessing officer rejecting the contention of the assessee made the addition of aggregate of share application money as unexplained crash credit under section 68 of the Act. The assessee urged the similar contention and filed all documentary evidences before the Commissioner (Appeals). The assessee also made the submission that the assessing officer disregarded the evidences furnished by assessee had made addition of the money received against share applications. The assessing officer made addition without bringing any incriminating evidence against the assessee. The assessing officer is relying on the statement of Praveen Kumar Jain. The assessee specifically contended before Commissioner (Appeals) that assessee vide its application dated 22nd Mach 2016 prayed to the assessing officer to allow the opportunity of cross examination of witnesses, on which the assessing officer was relying, however, no such opportunity of cross examination was provided to the assessee. We have further seen that the assessee has given its detailed reply to the comments of assessing officer which have been recorded by learned Commissioner (Appeals) in par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t statement recorded at the time of search was under undue pressure and that such statements had been retracted. 16. The facts remains that investor companies are assessed to tax and have filed their returns of income. The parties have responded to the notices u/s 133(6). The appellant has filed audited accounts of the investors and contended that they have genuine business activity. The appellant has submitted that notices were served on the investors in all cases. Therefore it cannot be said that the parties did not exist at their addresses. Documentary evidences were already filed by the appellant earlier in the assessment proceedings. Confirmation letters with copy of PAN and address, bank statements of applicants, Income Tax return acknowledgement, and audited accounts balance sheet and P L account of the investor companies have been filed before the assessing officer and also in the appellate proceedings. 17. I do not find any merit in the contention of the appellant that the investment being a share capital is a capital receipt and therefore cannot be considered as income in the hands of the appellant. The credits fall within the scope of section 68 which is a de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o put together appellant specific evidence justifying the addition. 21. It can be seen from the observation of the Assessing Officer that he has only referred to the information related to the outcome of search in the case of Shri Pravin Kumar Jain Group who were allegedly providing accommodation entries but the Ld. Assessing Officer has failed to demonstrate any such specific evidence that the appellant has in reality obtained any accommodation entries. There is no direct specific mention of the appellant by the director or key persons of the investor companies. There is no evidence of cash deposits linked to the investors. The assessing officer did not bring specific incriminating evidence linking the investor to the appellant. The only link is that the investors have invested in appellant company. That the appellant has given cash to the investors in lieu of entry is merely alleged but not demonstrated. Layering of transactions is alleged but not demonstrated. Opportunity for cross examination is not provided to the appellant. Papers/evidence found in the search action raises presumption but the same is available in the case of person searched but not in the case of third ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they are creditworthy. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the respondent could not do anything further. In the premises, if the Tribunal came to the conclusion that the Respondent had discharged the burden that lay on it, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence . Reliance is also placed on the following decisions: i. Hon'ble Delhi High Court in case of Commissioner of Income Tax v/s Value Capital Services P.Ltd. (2008) 307 ITR 334 (Delhi). ii. Hon'ble Punjab and Haryana High Court in the case of Commissioner of Income Tax v/so GP International Ltd. (2010) 325 ITR 25 (P H). iii. Hon'ble Madras High Court in the case of Commissioner of Income Tax v/so Electro Polychem Ltd (2007) 294 ITR 661 (Mad). iv. Hon'ble Rajasthan High Court in case of Commissioner of Income Tax v/so AKJ Granites P. Ltd. (2008) 301 ITR 298 (Raj.) v. Hon'ble Delhi High Court in case of Commissioner of Income Tax v/s Oa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reasoning, we cancel the entire addition made and confirmed by the lower authorities here also. The above decision of ITAT also related to Mr.Mukesh Choksi's case of investment in share application money. On perusal of above case it is clear that if a bogus shareholder has invested the money and if appellant receives such money as share application money and appellant during assessment proceedings provides the details like name address of the corporate entity, PAN No., ROC No., then ITAT held that this may be referred to the concerned A.O. for proceeding against such bogus shareholders instead of adding the amount u/s. 68 of the IT Act in the name of the company. 23. It is noted that no specific incriminating material linking investor to the appellant or showing the investment to be bogus is provided. Also opportunity for cross examination also was not provided to the appellant. The assessing officer has not been able to bring on record any direct or corroborative evidence that the share application money received is unexplained as covered u/s 68 even after opportunity was given in the remand proceedings. The original statement of Shri Praveen Jain does not name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, ( c) Certificate of Commencement of Business, ( d) Acknowledgment of the Return of Income AY 08-09, ( e) Affidavit of the Director confirming the investment, ( f) Application for allotment of shares, ( g) Photocopy of the share certificate ( h) Audited account and Directors report thereon including balance sheet, Profit and Loss Account and schedules for the year ended 31.03.2009, ( i) Audited account and Directors report thereon including balance sheet, Profit and Loss Account and schedules for the year ended 31.03.2010, ( j) The Bank Statement highlighting receipt of the amount by way of RTGS, ( k) Banks certificate certifying the receipt of the amount through Banking channels 6. On going through the documents which have been produced which are basically from the public offices, which maintain the records of the Companies. The documents also include assessment Orders for last three preceding years of such Companies. 7. The Appellants have failed to explain as to how such Companies have been assessed though according to them such Companies are not existing and are fictitious companies. Beside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existence of such Companies, the burden would shift on the Revenue- Appellants herein to establish their case. In the present case, the Appellants are seeking to rely upon the statements recorded of two persons who have admittedly not been subjected to cross examination. In such circumstances, the question of remanding the matter for reexamination of such persons, would not at all be justified. The Assessing Officer, if he so desired, ought to have allowed the Assessee to cross examine such persons in case the statements were to be relied upon in such proceedings. Apart from that, the voluminous documents produced by the Respondents cannot be discarded merely on the basis of two individuals who have given their statements contrary to such public documents. 10. We find no infirmity in the findings arrived at by the ITAT as well as CIT Appeals on the contentions raised by the Appellants-Revenue in the present case and, as such, the question of interference by this Court in the present proceedings under Section 260A of the Income Tax Act would not at all be justified. Apart from that, as rightly pointed out by the learned Counsel appearing for the Respondents, the CIT Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nished by assessee. The assessing officer made additions without considering the submissions and the evidences furnished before him. The ld Commissioner (Appeals) passed the order after careful consideration of the facts and the evidences. The ld. AR made reliance on all decisions which are relied in appeal for assessment year for 2008-09. 12. We have considered the rival submissions of the parties and perused the record and the orders of the authorities below. We have noted that the assessing officer passed the assessment order on the similar lines as made for earlier year. The assessing officer has not given specific finding on the documentary evidences furnished by the assessee. We have further noted that similar contentions were made before ld Commissioner (Appeals) by assessee, which were considered the him. We have seen that the ld Commissioner (Appeals) passed the following order; 18. I have examined the contentions of the appellant as well as the assessment order and the remand report carefully. A perusal of the assessment order shows that though the conclusions of the investigation wing has been referred to in the assessment order, there are no specific reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o not find any merit in the contention of the appellant that the investment being a share capital is a capital receipt and therefore cannot be considered as income in the hands of the appellant. The credits fall within the scope of section 68 which is a deeming provision. Several case laws including those of the Apex Court and High Court have considered credits made to capital account of the assessee's to be covered under the provisions of section 68 and therefore deemed income. The rule for application of section 68 is that the identity and credit worthiness of the investor/lender/creditor has to be established and the genuineness of the transaction has to be established. I also do not find merit in the argument that merely because there is a specific amendment to section 68 in respect of credit in the form of share capital or share application money in the case of private company, requiring the person in whose name such credit is there to explain the nature and source of such sum, which is brought on statute w.e.f. 1.4.2013, hence no such addition u/s 68 can be made in earlier years. The amendment only makes the onus more severe in such cases but it is incorrect to read it as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansactions is alleged but not demonstrated. Opportunity for cross examination is not provided to the appel lant . Papers/evidence found in the search act ion raises presumption but the same is available in the case of person searched but not in the case of third parties unless proved and corroborated. Similarly, retraction may be rejected as motivated, but the same can be considered only against the person who has ret racted in his assessment . Such Statement in the case of another person loses its sanctity unless opportunity of cross examination is granted and/or is corroborated with other evidences. When the investor company is filing regular return of income and there is a transaction through banking channel, no addition can be made without having any contrary or cogent evidences in possession. Over such issue there are plethora of judgments to support the appellant. Some of them are discussed here below. ( i) The Hon ble Supreme Court in the case of CIT vs Lovely Export 6 DTR 308 has held as under:- If the share application money is received by the assessee company from alleged bogus share holders who's name are given to the Assessing Officer then the depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 007) 294 1TR 661 (Mad). iv. Hon'ble Rajasthan High Court in case of Commissioner of Income Tax v/s. AKJ Granites P.Ltd. (2008) 301 ITR 298 (Raj.) v. Hon'ble Delhi High Court in case of Commissioner of Income Tax v/s. Oasis Hospitalities (Put.) Ltd. (2011) 51 DTR 74 Delhi). Sec. 69 places the burden of proof on the tax payer to explain the nature and source of any credit found in the books. But, when assessee proves or submit the basic information like identification, genuineness of transactions and creditworthiness of the creditors, onus is discharged by him and if Assessing Officer disbelieve the genuineness of the same, he has to prove otherwise, merely, doubting or pointing out some discrepancy is not the foundation for discarding the genuineness of the deposit or share money or substance of the matter, held by the Hon'ble Supreme Court in the case of CIT v. Gujarat Heavy Chemicals Ltd. (2002) 256 ITR 795 (SC). In view of the above the question of making any addition u/ s. 68 of the Act does not arise. 25. Further the Hon ble jurisdictional ITAT in the case of ITO-10(2)(3) vs. M/s J.J. Multitrade Pvt. Ltd. ITA No.2158 2159/Mum/2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record any direct or corroborative evidence that the share application money received/ advances received is unexplained as covered u/s 68 even after opportunity was given in the remand proceedings. The original statement of Shri Praveen Jain does name the appellant specifically. He has subsequently retracted even that original statement. In any case, it is cardinal principle of natural justice, that before conclusions are drawn against a person based on statement of a third party, he must be allowed an opportunity for cross examination. This has not been provided. There is a limit to the capacity or responsibility expected of an assessee to prove facts. The assessing officer has not inquired into or reported on assessment in the case of the investor companies. If the statements recorded of Shri Pravin Jain and others (which were retracted) are ignored, there is no specific evidence cited by the assessing officer in respect of the investor companies and the appellant which would shift the burden back on the appellant u/s 68. The assessing officer has stated that the appellant has not disproved the findings of the department. Now the question is what are the appellant specific fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without considering the submissions and the evidences furnished before him. The findings of the assessing officer are perverse. The ld. Commissioner (Appeals) passed the order after careful consideration of the facts and the evidences. The ld AR relied on all the decision relied for earlier years. 16. We have considered the rival submissions of the parties and have gone through the material and the orders of the authorities below. We have noted that the assessing officer passed the assessment order on the similar lines as made for earlier year. The assessing officer has not given specific finding on the documentary evidences furnished by the assessee. The assessing officer while passing the assessment order has not given different finding though the facts for the year under consideration were at variance. The assessee specifically contented that they have paid interest on the loan availed and deducted TDS. The ld Commissioner (Appeals) while considering the facts noted that the assessing officer has not correctly appreciated the loan amount from Raghuveer Sales nor its share capital and reserve funds. Similar, other discrepancies were pointed out about Viraj Merchantile P. Ltd, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are listed as Praveen Jain company but has been considered as parties who have given bogus entries by the assessing officer. 9.20. It is further noted from details called and submitted by the appellant that the advances were repaid as follows. Sr. No. Name of the Company Amount Date of repayment 1. Viraj Mercantile Pvt. ltd. 5000000 2500000 11.3.2013 24.10.2013 2. Raghuveer Sales Pvt. Ltd. 600000 21.8.2013 3. Park Tools Ltd. 2500000 24.7.2012 4. Real Stone Exports Ltd. 3500000 25.7.2012 5. Utkantha Trading and properties Pvt. Ltd. 65,00,000 20,00,000 20,00,000 4.6.2012 24.7.2012 25.7.2012 Total 24600000 9.21. The fact remains that the investor companies are assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the investor companies. There is no evidence of cash deposits linked to the investors. The assessing officer did not bring specific incriminating evidence linking the investor to the appellant. The only link is that the investors have lent to the appellant company. That the appellant has given cash to the investors in lieu of entry is merely alleged but not demonstrated. Layering of transactions is alleged but not demonstrated. Opportunity for cross examination is not provided to the appel l ant . Paper s / evidence found in the s earch act ion rai s es presumption but the same is available in the case of person searched but not in the case of third parties unless proved and corroborated. Similarly, retraction may be rejected as motivated, but the same can be considered only against the person who has ret racted in his assessment . Such statement in the case of another person loses its sanctity unless opportunity of cross examinat ion is granted and /or is cor roborated wi th other evidences When the investor company is filing regular return of income and there is a transaction through banking channel, no addition can be made without having any contrary or cogent evidences in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. Value Capital Services P. Ltd. (2008) 307 ITR 334 (Delhi). ii. Hon'ble Punjab and Haryana High Court in the case of Commissioner of Income Tax v/s. GP International Ltd. (2010) 325 ITR 25 (P H). iii. Hon ble Madras High Court in the case of Commissioner of income Tax v/s. Etectro Polychem Ltd (2007) 294 ITR 661 (Mad). iv. Hon ble Rajasthan High Court in case of Commissioner of Income Tax vs AKJ Granites P. Ltd. (2008) 301 ITR 298 (Raj.) v. V. Hon'ble Delhi High Court in case of Commissioner of Income Tax v/s. Oasis Hospitalities (Pvt.) L W. (2011) 51 DTR 74 (Delhi). Sec. 69 places the burden of proof on the taxpayer to explain the nature and source of any credit found in the books. But, when assessee proves or submit the basic information like identification, genuineness of transactions and creditworthiness of the creditors, onus is discharged by him and if Assessing Officer disbelieve the genuineness of the same, he has to prove otherwise, merely, doubting or pointing out some discrepancy is not the foundation for discarding the genuineness of the deposit or share money or substance of the matter, held by the FIon'ble Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of the I.T. Act in the name of the company. 9.26. It is noted that no specific incriminating material linking investor to the appel lant or showing the lending to be bogus is provided. Also opportunity for cross examination also was not provided to the appellant. The assessing officer has not been able to bring on record any direct or corroborative evidence that the share application money received/ advances received is unexplained as covered u/s 68 even after opportunity was given in the remand proceedings. The original statement of Shri Praveen Jain does not name the appellant specifically. He has subsequently retracted even that original statement. In any case, it is cardinal principle of natural justice, that before conclusions are drawn against a person based on statement of a third party, he must be allowed an opportunity for cross examination. This has not been provided. There is a limit to the capacity or responsibility expected of an assessee to prove facts. The assessing officer has not inquired into or reported on assessment in the case of the investor companies. If the statements recorded of Shri Pravin Jain and others (which were retracted) ignored, there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the website of Maharashtra Sale tax Department and was involved in providing accommodation entries. The appellants contend that on the facts and in the circumstances of the case and in law, the Commissioner (Appeals) ought not to have upheld the action of assessing officer inasmuch as the assessing officer has not brought any material on record to support the impugned reduction from work in progress and that the Commissioner (Appeals) is not correctly appreciated the facts of the case and hence, the reduction of the purchases from work in progress is untenable in law. ( 3) The Commissioner (Appeals) erred in upholding the action of assessing officer in reducing compensation paid on cancellation of flat booking ₹ 1,00,000/- from work in progress in view of section 40(a)(ia) of the Act on the ground that the payment is in nature of penal interest and that the payments is made without deduction of tax at source. The appellants contend that on the facts and in the circumstances of the case and in law the Commissioner (Appeals) ought not to have upheld the action of assessing officer inasmuch as the impugned payment, being in the nature of compensation for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presentative. However, inadvertently, certain parts of papers and documents were not sent due to bona fides mistake and due to lake of coordination between him and the authorised representative, hence, those document could not be filed before Commissioner (Appeals). In support of the application the assessee has filed affidavit of Anjan Bhavsar CA of the assessee company. 20. It was argued by learned AR of the assessee that all these documents have direct bearings on the grounds No.1 to 5 of grounds of appeal raised by the assessee. It was further prayed that the assessee would suffer prejudice if the document is not considered for adjudication of the grounds of appeal raised by assessee. On the other hand learned DR for the revenue opposed the admission of additional ground of appeal at this stage. The learned DR for the revenue further contended that if the documents are admitted, will require verification at the end of assessing officer. And in case this Tribunal arrives at a conclusion to admit the additional evidences, all the grounds of appeal may be restored to the file of assessing officer for verification of the evidence furnished by assessee and to decide the claims in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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