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TMI Blog2019 (6) TMI 543X X X X Extracts X X X X X X X X Extracts X X X X ..... anies was found during the course of search and post search enquiries. The information was passed on to the AO of the assessee by the investigation wing and no material belonging to the assessee was either found from the residence of this S. K. Jain or handed over to the AO of the assessee by the Assessing Officer of the searched person. Therefore, the Assessing Officer in the instant case has rightly invoked jurisdiction u/s. 147 and not u/s 153C of the IT Act,1961. The ground appeal No. 1 by the assessee is accordingly dismissed. Bogus share capital and share premium - the assessee was not provided with the copy of the statement given by Sh. S. K. Jain / Virender K. Jain which has been utilized against the assessee. Considering the totality of the facts of the case and in the interest of justice we deem it proper to restore this issue to the file of the Assessing Officer with a direction to grant one more opportunity to the assessee to substantiate with evidence to his satisfaction regarding the identity and creditworthiness of the share applicants and the genuineness of the transactions. The Assessing Officer shall decide the issue as per fact and law after giving due oppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. As per information provided by investigation wing, the Assessing Officer noted that the assessee has obtained accommodation entries amounting to ₹ 56,00,000/- from S. K. Jain group of companies as below :- MANNAT HOSPITALITY P. LTD. CHEQUE BOOK ENTRIES Date From To Bank Mode of payment Amount Remarks 12.01.2009 Manimala Delhi Properties P. Ltd. Mannat Hospitality Axis Bank PLO No.026127 16,00,000 A-27 Page 33 13.02.2009 Virgin Capital Services P. Ltd Mannat Hospitality Axis Bank PLO No.026633 20,00,000 A-26 page 61 13.02.2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in para 6 above. 11.2 It is indeed surprising to note that the assessee has made unsuccessful efforts to prove that these transactions were genuine. It is quite possible that the assessee could have succeeded in its scheme but for the: search in the case of Jain Brothers where complete evidence of scheme of tax: evasion used by the assessee were seized. The incriminating seized documents are selfspeaking and give graphic picture of the modus operandi adopted by the parties involved. It is quite disturbing to note the ease with which the assessee has been conducting its affair by laundering its unaccounted money at: into regular transactions. The law allows the Assessing Officer to lift the corporate veil to unmask the real from the apparent and also to go behind the transaction to understand their true import. The law also allows the authorities to test the transactions on a touches tone of human probability to arrive at a conclusion which the rationale mind would arrive at. After going behind the transactions on paper and after lifting the corporate veil, as discussed in earlier paragraphs, it has been proved that the apparent was not real. 11.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 292BB, the assessee is precluded from taking any objection to the said notice u/s.148 . 10. So far as the arguments of the assessee that only 153 C proceedings could have been taken and not u/s. 147, the Ld. CIT (A) relying on the decisions of the Ahemdabad Bench of the Tribunal in the case of Shailesh S. Patel Vs. ITO vide ITA No.3063/Ahem/2016 held that the Assessing Officer is justified in initiating reassessment proceedings u/s.147 of the IT Act, since the Assessing Officer of the assessee (person other than the search person) cannot be compelled to pursue the remedy u/s. 153C of the IT Act. 11. So far as the addition on merit of the case is concerned, the Ld. CIT(A) also upheld the action of the Assessing Officer by observing as under :- 5.2 The revised ground of appeal No. 3 challenges the addition of ₹ 56,00,000/- under section 68. The revised ground of appeal No. 4 challenges the addition of ₹ 1,08,000/- o account of commission paid. Since these grounds of appeal are interlinked, these are being adjudicated together. 5.2.1 On the issue of addition under section 68 on account of unexplained cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and genuineness of the said company, for which copy of audited Balance Sheet alongwith annexures, copy of ITR for that year and copy of bank statement evidencing debit in favour of the appellant have been furnished. 5.2.3 On examination of the issue it is seen that during the appellate proceedings, no further documentary evidence, whatsoever, has been produced to prove the genuineness of the transaction. Apart from written submission, the appellant has produced copies of documents produced, which as per the appellant, were before the AO. These documents has been examined and it is seen that instead of supporting the case of appellant, these documents only reinforce the findings of the AO which are based on the facts and circumstances of the case alongwith deep and wide Investigation carried out by the Department in the case of Shri S.K. Jain and Shri Virendra Jain group of cases as these documents are in tune with modus-operandi through which accommodation entries have been provided by the said group. 5.2.4 From the analysis of their financial statements it is apparent that the companies which have given share capital to the appellant company a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of seized documents in which its name appears as a beneficiary and the company giving the loan is found to be an entry provider. 5.2.5 In a recent decision, on similar facts and on analysis of bank statements of the entities giving share application money, the Hon'ble IT AT, Delhi in the case of Pee Aar Securities Ltd. vs. DCIT, Circle- 14(l), New Delhi[(2018) 96 taxmann.com 602 (Delhi - Trib.)] have held as under: 20.0 . 28. We are unable to lay hands on any of the decisions of Hon ble jurisdictional High Court which is contrary to the approach so adopted in this judicial precedent. Let us, in this light, revert to the facts of the case before us. The assessee before us is a private limited company which is, by law, prohibited from offering its securities for subscription by general public. It cannot, therefore, be really open to the assessee to say that we have no clue about who the subscribers to the share capital are; these cannot be rank outsiders or walk in subscribers- as perhaps in the cases of public limited companies. Yet, all that the company has to offer, to establish genuineness of transactions of subscribing to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tries from 1st Tune 2004 to 30th June 2004. On 1st June, this bank statement shows a credit balance of ₹ 46,681. On 1st June, there is a credit of ₹ 60,000 and the immediately following day, there is a withdrawal of ₹ 50,000. On 8th June, there is a credit of ₹ 10,00,000 and on the same day a debit of the same amount is also made. On 11th June, there are deposits of Rs credit of ₹ 20,00,000 and on the same day, a debit of ₹ 20,00,000 is given showing payment to the assessee. On 22nd June, there are credits there credits of ₹ 19,97,995/- and, on the same day a debit of ₹ 20,00,000 and on the same day a debit of ₹ 20,00,000 is given showing payment to some other company. On 25th June and 28th June, it is the same story again though the amounts or debits and credits are ₹ 15,00,0000 and ₹ 10,00,000 respectively. As regards the other bank account of Geefcee in ABN Amro Bank is concerned, the situation is no better. On 3rd June, i.e. opening day of this bank statement, there is a credit balance of Rs 5,742.32. On June 9, there are deposits of ₹ 20,10,000 and, on the same day, a payment of Rs 20,15,000 is made le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndi of shell entities. There were, therefore, not many questions raised about genuineness of transactions in respect of shell entities. That is not the case any longer. Just because these issues were not raised in the past does not mean that these issues cannot be raised now as well, and, to that extent, the earlier judicial precedents cannot have blanket application in the current situation as well. As Hon'ble Supreme Court has observed in the case in Mumbai Kamgar Sabha v. Abdulbahi Faizullabhai AIR 1976 SC 1455 It is trite, going by Anglophonic principles that a ruling of a superior court is binding law. It is not of scriptural sanctity but of ratio-wise luminosity within the edifice of facts where the judicial lamp plays the legal flame. Beyond those walls and de hors the milieu we cannot impart eternal vernal value to the decisions, exalting the precedents into a prison house of bigotry, regardless of the varying circumstances and myriad developments. Realism dictates that a judgment has to be read, subject to the facts directly presented for consideration and not affecting the matters which may lurk in the dark . Genuineness of transactions thus cannot be decided on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rranging the accommodation entries on the basis of 2.5% commission. We, therefore, confirm this addition as well. (Emphasis supplied by me) 5.2.6 Since the appellant claimed that the share application money was genuine, the onus was on the appellant under section 101 of the Evidence Act, 1972 to produce the directors/principal officers of share applicant companies as its own witness for cross examination by the Revenue. The appellant should have discharged its duty as a taxpayer by producing the directors of these companies particularly in a scenario in which the company has given share application money to the appellant. In this connection, the following observation of Hon'ble ITAT of Ahmat Bench in the case of Nakoda Fashion Pvt. Ltd. in ITA No. 1716/ Ahd./2012 dated 18.08.2i relevant, wherein it has been held as under:- 19. From going through all the above judgments and decision, we find that along with evidence surrounding circumstances, human probability and intentional acts are also to be taken note off accepting the identity, creditworthiness and genuineness of the cash creditors which in this case is the applicants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of individual . 21. We further observe that Hon. Delhi High Court in the case of CIT V Empire Biotech P Ltd 361 ITR 258 (Del), has held that when Asst. Year 2009-10 assessee does not produce evidence or tries to avoid the appearance before the Assessing authority it necessarily creates difficulties and prevents ascertainment of the truth and correct facts as the Assessing Officer is denied the advantage of the attendance or factual assertion by the assessee before him. If an assessee deliberately and intentionally fails to produce evidence before the Assessing Officer with the desire to prevent enquiry or investigation an adverse opinion should be drawn. The assessee had not discharged the initial onus to establish the identity, creditworthiness of the share applicants and the genuineness of the transactions. The additions made by the Assessing Officer were justified and sustainable. 22. We are, therefore, of the view that in the given facts and circumstances of the case and respectfully following the judgments of Hon. Supreme Court, High Court and the decision of Co-ordinate Bench as discussed above, we are of the confirmed view that assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19. In N. R. Portfolio Pvt. Ltd. (supra), it has been held as under:- 18. In the remand report, the Assessing Officer referred to the provisions of Section 68 of the Act and their applicability. The word identity as defined, it was observed meant the condition or fact of a person or thing being that specified unique person or thing. The identification of the person would include the place of work, the staff, the fact that it was actually carrying on business and recognition of the said company in the eyes of public. Merely producing PAN number or assessment particulars did not establish the identity of the person. The actual and true identity of the person or a company was the business undertaken by them. This according to us is the correct and true legal position, as identity, creditworthiness and genuineness have to be established. PAN numbers are allotted on the basis of applications without actual de facto verification of the identity or ascertaining active nature of business activity. PAN is a number which is allotted and helps the Revenue keep track of the transactions. PAN number is relevant but cannot be blindly and without considering sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... background of the facts of that case. So understood, it will be seen that where the complete particulars of the share applicant$ such as their names and addresses, Income-tax file numbers, their creditworthiness, share application forms and shareholders' register, share transfer register, etc., are furnished to the Assessing Officer and the Assessing Officer has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false and cannot be acted upon, then no addition can be made in the hands of the company under section 68 and the remedy open to the Revenue is to go after the share applicants in accordance with law. We are afraid that we cannot apply the ratio to a case, such as the present one, where the Assessing Officer is in possession of material that discredits and impeaches the particulars furnished by the asses see and also establishes the link between self-confessed 'accommodation entry providers', whose business it is to help assessees bring into their books of account their unaccounted monies through the medium of share subscription, and the assessee . . . The existence with the Assessing Officer of materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... When surrounding circumstances and attending facts predicate a cover-up, the taxing authorities cannot put on blinkers while looking at documents but are required to go beyond documents to look into surrounding circumstances to segregate the real from apparent. 5.2.12 Once the appellant was made aware of the result of investigation which proved that share application money transaction was not genuine, the onus was on the assessee to prove the genuineness of transaction under section 101 of the Indian Evidence Act, 1972 as it is the assessee who is asserting a claim that it has received genuine share money. It is relevant to note here that Hon'ble Supreme Court in the case of Shri Charan Singh versus Chandra Bhan Singh AIR 1988 SC 637 has clarified that the burden of proof lies on the party who substantially asserts the affirmative of the issue and not upon the party who denies it. It has been further held that the party cannot, on failure to establish a prima facie case, take advantage of the weakness of his adversary's case. The party must succeed by the strength of his own right and the clearness of his own proof. He cannot be heard to say tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Group; iii Reassessment pursuant to material found in search can be done through recourse to section 153C only and not by invoking provisions of section 147/148. The provisions of section 153C are over-riding in nature and contain non- obstante clause for sections 139, 147, 148, 149, 151 and 153; iv Section 147 and 153C are not interchangeable but are mutually exclusive sections. It is not the choice of the revenue to invoke either of the two sections at its whims. The scope of the two sections have been legislated differently with a definite purpose; v Assessing Officer has no jurisdiction to make assessments u/s. 143(3) r.w.s. 148 of the Act in respect of those 6 assessment years immediately preceding the assessment year in which search is conducted or requisition is made. The period under consideration falls within the exclusive domain of Section 153C r.w.s 153A(1)(b) and 1st Proviso to Sec. 153A(1) of the Act; the impugned assessment order passed u/s 143(3), r.w.s. 148 of the Income tax Act, 1961 is illegal, arbitrary and without any jurisdiction. 1 That CIT(A) failed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnished the following documents regarding the two share applicants namely :- 1. Confirmation letter 2. Share Application Form 3. List of directors 4. Affidavit of Director of the Company 5. Bank Statement 6. Copy of ITR and acknowledgement 7. Copy of Audit Report and Audited Balance Sheet 15. Referring to various decisions he submitted that the assessee in the instant case has filed sufficient evidence to show that the share holders do exist and identity of the share holders was proved by filing documents such as name, address and PAN etc. Therefore, the assessee has discharged the initial onus cast on it and the onus has shifted to the revenue. Therefore, the addition on merit is also not sustainable. The Ld. Counsel for the assessee also relied on a series of decisions and filed copies of the same. 16. The Ld. DR on the other hand heavily relied on the order of the CIT(A) in confirming the validity of the reassessment proceedings as well as the addition on merit. 17. So far as the addition on merit is concerned, the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer of the S. K. Jain Group i.e. the Assessing Officer of the searched person. No documents belonging to the asesssee was found and S. K. Jain Group had never stated that the documents so seized from their premises do not belong to them. We find the coordinate bench of the Tribunal in the case of Surya Financial Services Limited Vs. PCIT in ITA No.28915/Del/2017 order dated 08.01.2018 while deciding an identical issue on the validity of reassessment proceedings u/s. 147 as against 153C on the basis of the same S. K. Jain Dairies entries has observed as under :- 6.2 Now coming to the one of the main contention raised by the Id. counsel of the assessee that the proceedings under section 147 of the Act was itself bad in law and therefore, proceedings u/s 263 of the Act could not have been invoked. The reasons given for this proposition is that, here in this case, material on the basis of which proceedings for reopening the assessment has been sought to be initiated u/s 147 of the Act has been found from the search conducted at the premises cf third party and if material found from the premises of the searched person is being utilized, then in such a situation th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Id, counsel on this point is out rightly rejected that the proceedings under section 153C of the Act: should have been initiated instead c f under section 147 of the Act. 21. Further in the instant case it can be seen that no material belonging to the assessee was found from the residence of Shri S. K. Jain and only evidence of accommodation entries given by Sh. S. K. Jain Group of cases, through their various shell companies was found during the course of search and post search enquiries. The information was passed on to the Assessing Officer of the assessee by the investigation wing and no material belonging to the assessee was either found from the residence of this S. K. Jain or handed over to the Assessing Officer of the assessee by the Assessing Officer of the searched person. Therefore, the Assessing Officer in the instant case has rightly invoked jurisdiction u/s. 147 and not u/s 153C of the IT Act,1961. The ground appeal No. 1 by the assesee is accordingly dismissed. 22. So far as the ground No.2 relating to the addition on merit is concerned, we find subsequent to order of the CIT(A) decisions on the issue of bogus share capital and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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