9911796707
TMI Blog2021 (1) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... asons are based on borrowed satisfaction is devoid of any merits as the assessing officer has recorded the reasons only after analysing the information from investigation wing and matching the same with return of income filed by the appellant. Even though we agree that assessing officer should have also carried out preliminary enquiry vis- -vis M/s. Prraneta Industries Ltd. (now known as M/s. Aadhaar Ventures India Ltd.) so as to verify the allegations of accommodation entry, however, in our view, non carrying of out such exercise will have little effect on validity of notice u/ 147 which is based on specific information from investigation wing. In view of above, we find that the reasons recorded for issue notice u/s 148 satisfies the jurisdictional requirement of section 147 of the Act and as such the validity of notice u/s 147 is upheld. AO has not properly disposed off the objections to notice u/s 148 - It is also the contention of Ld. AR that assessing officer has not properly disposed off the objections to notice u/s 148 of the Act. On examination of order disposing objections, it is evident that assessing officer has para-wise dealt with the objections of the appellant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nformation after calling for bank statement from the bank as evident from para 10 of the assessment order. It is classic case of roving enquiry where the assessing officer is exceeding its jurisdiction in total disregard to scheme and intent of section 147 of the act. Such action of the assessing officer not only renders the purpose of approval u/s 151 otiose but also strikes at the root of section 147 of the Act. We are of the view that assessing officer was not justified in expanding the scope of reassessment proceedings u/s 147 without following the due course and as such the addition is in the teeth of provisions of section 147. - I.T.A. No.9266/DEL/2019 - - - Dated:- 29-10-2020 - Shri Amit Shukla, Judicial Member And Dr. B.R.R. Kumar, Accountant Member For the Appellant : Shri R.S. Singhvi, CA For the Respondent : Shri M. Baranwal, Sr.D.R. ORDER PER AMIT SHUKLA, J.M.: The aforesaid appeal has been filed by the assessee against the impugned order dated 29.12.2017, passed by Ld. Commissioner of Income Tax (Appeals)-XLIV, New Delhi for the quantum of assessment passed u/s.147/143(3) for the Assessment Year 2010-11. In the grounds of appeal the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- received from M/s. Pranneta Industries Ltd., the remaining additions are wholly without jurisdiction and against the spirit of provisions of section 147 of the Act particularly when there is no adverse information or material on record. (iii) That the scope of reassessment proceedings u/s 147 is defined with reference to reasons recorded and in absence of any fresh notice u/s 148 or approval u/s 151 in respect of other issues, the assessing officer was bereaved from making roving enquiry or investigation in respect of issues falling outside the reasons. (iv) That assessing officer having exceeded his jurisdiction u/s 147 and there being no case of any tangible material, the Ld. CIT(A) was not justified in confirming the impugned addition u/s 68 of the Act as same is illegal, unwarranted and not sustainable under the law. 4(i). That on facts and circumstances of the case, the Ld. CIT(A) was not justified in confirming addition of ₹ 2,50,00,000/- u/s 68 in respect of share capital issued to M/s. Pranneta Industries Ltd., a listed company, even though same is duly supported from documentary evidences. (ii) That the assessing officer having not disputed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esses is finance and investment. The directors of the Assessee company are Ms. Megha Goel, Sh, Naresh Goel and Sh. Raj Kdinar Gael. The company fried its Return of income for A.Y.2010-11 on 18/09/2010 declaring income of ₹ 1,66,200/-. Thereafter the return was processed u/s 143(1) of IT. Act The case was not picked up for scrutiny , so assessment u/s 143(3) was not made. 2. Information received from DCIT.CC 2(2 ) Mumbai 2.1. The DOT, CO-2(2), Mumbai vide letter F. No. Mum/ DCIT CC 2(2)/Intimation/ 2016-17/ dated 26/04/2016 intimated that M/s INS Finance Investment Pvt. Ltd. (PAN : AABCI4418E) has taken accommodation entry amounting to ₹ 2,50,00,000/-in financial year 2009- 10 relevant to assessment year 2010-11 from the entity controlled and operated by Sh. Sirish C Shah entry provider, mentioned below. Sr No Name of the entry provider Name of the Beneficiary Company F.Y A.Y Amount (Rs.) 01 M/s Praneta Industries Ltd. (now known as M/s Aadhaar Ventures India Ltd.) M/s INS Finance Inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. (P) Ltd. admitted in its own assessment proceedings that he was accommodation entry provider and gave accommodation entry to various persons in lieu of cash received. 4. Independent Enquiries Conducted pursuant to information received from DCIT. CC-212h Mumbai: 4.1 The return of income of Assessee Company has been downloaded from the ITD system and the same was examined in the light of information received from DCIT ,CC 2(2) Mumbai. During the year under consideration, the company has shown security premium more than ₹ 2.5 crore which strengthen the belief that the company has received accommodation entry of ₹ 2.5 crore or more in the guise of share premium/ share application money. 4.1.2 From the above it is evident that the assessee company has raised its share application money/ including share premium amounting to ₹ 2,50,00,000/- . The balance sheet of M/s INS Finance 8s Investment Pvt. Ltd, for the A. Y. 2010-11 was also perused and it was found that this company invested ₹ 2,50,00,000/- or more and has earned income of ₹ 1,66,200/- The ITR-6 of the company is also showing, cash in hand is cf ₹ 5,93,123/- and balance w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Premium (Rs) 1 Mrigiya Electronic Industries Pvt. bid,, 27A, Matcalf Streeet, 3rd Floor, Kolkata, (WB) 25000 10 90 25,00,000/- 2 Marubhumi Finance Developers :Pvt. Ltd. Room No.205, 2nd Floor, 10A Hospital Street, .Kolkata 70072 (WB) 25000 10 90 25,00,000/- 3 Makesworth Project Developers (F) Ltd. 156A, 3rd Floor, Lanin Sarani, Koikata (WB) 48400 10 90 48,40,000/- 4 : Link Point Infrastructure (P) Ltd. 10A Hospital Street, Kolkata 70072 (WB) 39000 10 90 39,00,000/- . 5 Abhilasha Export (P) Ltd. 3, Sakelat Place, Kolkata (WB) 25000 10 90 25,00,000/- 6 Chandimata Management (P) Ltd. 27A, Matcalf Streeet, 3 ! Floor, Kolkata, (WB) 55000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 90 5,00,000 M/s Anikaish Project Pvt. Ltd., 14, U/158, Floor, Vats Complex, Vikas Marg, Shakarpur, Delhi. 10000 10 90 10,00,000 7,62,40,000/- 4. The Assessing Officer noted that, a search u/s.132 was conducted and the premises of one, Shri Shirish Shah and also a sequential search was carried out at the residence of Shri Om Prakash Khandelwal, Director of M/s. Prraneta Industries Ltd. During the course of search, Shri Om Prakash Khandelwal had explained the activities of M/s. Prraneta Industries Ltd. and the relevant questions and answers have been reproduced in the impugned assessment order from pages 11 to 19 of the assessment order. In the statement Shri Om Prakash Khandelwal had explained the source of income when company was incorporated, i.e., in the year 1999 and also mentioned that the events of the company has been managed by Shri Shirish Shah and when it was required to justify its share capital and var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch conducted at the registered office of the Company on 09.04.2013. Q.4 Please provide details of the promoters of M/s Prraneta Industries Limited and who manages and controls the affairs of the company including the day to day business activities like purchases, sales, investments, financial transactions like loans advances received and paid and other revenue generating activities. Ans. Sir, 1 along with my wife Smt. Rajshree Khandelwal, my brother Shri Vijay Narayan Sharma (Joshij and few other people promoted, this company in 1993 and share capital of ₹ 1 lacs. The company was listed at BSE in 1996 and true share capital was raised to Rs, 8,15,21,000/-. However, the entire inception til 2008, Thereafter, the entire affaires of the company are managed by Shirish Chandrakant Shah, Q.5 On perusal of the Annual Accounts for F.Y. 2008-09 to 2011-12 of M/s Prraneta Industries Limited filed with ROC and certified and signed by you as Managing Director of the company there has been significant receipt of funds in form of share capital, Share application money, securities premium. The details of the same are as under: Particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the utilization of the funds also I am not aware as these funds were received in the bank accounts operated and controlled by Shirish Bhai at Mumbai and paid to various parties from those bank accounts. However, I can surety say that these funds were ot used for any of the business activities of the company like purchase, sate, investments etc. The receipt and payment of funds both are not genuine transactions, but, part of the accommodation entry business of Shirishbhai operated through my company M/s Prraneta Industries Limited. I would like to clarify that Shirishbhai did not pay me the commission earned by him from entry business, as agreed by him when the control and management of the company was handed over to him, thus, I withdrew myself from the entry business of the company, 1 ham been requesting Shirishbhai since past 2-3 years for filing revised Form No. 32 with ROC and withdrawing me from the post of managing director of the company in Jan 2013. Q-6 Please company details of the business activities of M/s. Prraneta Industries Limited since inception. Arts. The company has been engaged in providing accommodation entries of purchase, sale, loans, advances a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entire affairs of M/s Prraneta Industries Limited were being managed and controlled by shirishbhai. On perusal of the bank accounts of M/ Prraneta Industries Limited at Surat held with the Karur Vysya bank Limited, Parle Point, and operated by me, it would be clear that no significant deposits or withdrawals are made in these banks accounts relating to the business activities of this company. Similarly, the bank accounts operated and maintained by Shirishbhai at Mumbai will be having all the deposits and withdrawals relating to the entry business of Prraneta Industries Limited including turnover entries, Q.8 In reply to question above you have stated that since inception M/s Prraneta Industries Limited was engaged in providing accommodation entries of various types. Please explain the modus operandi of providing accommodation entries. Ans. Sir, the entry business in M/s Prraneta Industries Limited started mainly after the receipt of funds raised through IPO in the year 1996. Through IPO funds aggregating to 8,15,21,000/~ were managed to be raised. The funds raised through IPO were used to give entries of share capital, unsecured loans, advances or inter corporate deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advances, inter corporate deposits, investments that have been provided by you through M/s Prraneta Industries Limited. Ans. Sir, All the loan, advances inter corporate deposits, investment entries appearing in the books of accounts of M/s Prraneta. Industries Limited. Are accommodation entries as there has not been any business activity I the company since its inception, as already stated by me above. Thus, on perusal of the books of M/s Prraneta Industries Limited. You can identify the clients to whom accommodation entries have been provided. Q. 11 Please also explain the types of bogus accommodation entries provided by Shirish Chandrakant Shah using the bank accounts and the books of accounts of M/s Prraneta Industries Limited. Ans. Sir, Shirishbhai was mainly engaged in providing bogus LTCG entries to his clients using the shares of M/s Prraneta Industries Limited. And the number of companies managed by him. The complete modus operandi followed by him is not known to me. However, as per my knowledge and understanding between us and discussed he used to convert cash received from the clients into LTCG using his expertise in dealing in shares and securities t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, is bogus and a mere book entry, in some cases bogus entries of purchase and expenses might have been provided to certain parties. More details in this regard can only be provided by Shirish Bhai for the period after 2008-09. However, being the managing Director of the Company lean surely say that there is no real business activity in the company and the entire turnover and expenses credited and debited to the P/L account except for few day to day maintenance and salary expenses are bogus. As no real goods were purchased and sold evidences with regard to the delivery and receipt of goods cannot be produced by me. I would like to clarify that annual accounts filed with ROC for F.Y. 2011-12 have not been signed by me and my signatures on the annual return have been forged. Q.13 I am showing you the statement of Shirish Chandrakant Shah recorded under section 132(4) of the Act, during the course search on 13.04.2013. In reply to question no. 8, he has stated that he is managing and controlling the affairs of various listed companies including M/s Prraneta Industries Limited, {know Aadhar Ventures India Limited). Further, in reply to Question No. 9 he has stated that he has used the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am Sharma, my employee from Shirish Bhai s residence at Meghdoot, Marin Lines Mumbai. He asked us to keep the filed at the registered office of th company in case some enquiry is conducted by income tax or any of the Department. In reply to various questions in this statement you have stated that M/s sta Industries Limited, does not have any real business activities, but, is only engaged in the business of providing accommodation entries. Please explain as to how such big contracts of land development were awarded to your company. Also explain as to how these contracts were executed and the key persons responsible for execution of this contract. Ans. Sir, it is true that M/s Prraneta Industries Limited, does not have any business activities other than providing accommodation entries. The contract with M/s PACL India Limited is also not a genuine contract. It might be a turnover entry or bogus billing entry done by Shirish Chandrakant Shah. As managing Director of the Company I can surely say that my company M/s Prraneta Industries Limited, did not execute any land development contract in Tamil Nadu or any other part of the country till date. Q.17 Please produce the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecorded u/s.132 that the company was involved in providing accommodation entries and was not doing any other business and all the entries appearing in the books are bogus. He further observed that the same statements were reproduced in the assessment order of M/s. Prraneta as well as Shri Shirish Shah. Thereafter, he observed certain inquiries done by the Investigation Wing, Kolkata with regard to share capital received from Kolkata based companies and also the information and inquiries done by the Investigation Wing, Kolkata and from there he observed that the investor companies has found to be bogus. Before the Assessing Officer the assessee has filed the various materials and documents which according to Assessing Officer were not substantiated. The assessee had raised the specific objection that in the re-assessment proceedings the Assessing Officer cannot made addition on the issues which are mentioned in the reasons recorded. However, the ld. Assessing Officer rejected the assessee s contention after referring to Explanation 3 to Section 147. Thereafter, Assessing Officer elaborated judicial principles with regard to burden of proof u/s.68 as laid down by various Courts which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een contended by Sh. R.S. Singhvi, AR that CIT (A) has not afforded proper opportunity of hearing while deciding the appeal and the appeal has been decided on the basis of written submissions filed before erstwhile CIT (A). 8. On perusal of impugned order of CIT (A), it is noted that detailed submissions filed by the appellant has been reproduced therein and has been dealt with by the CIT (A) while deciding the appeal. No specific instance has been brought to our notice to show that opportunity to file necessary submissions or documents was not given. In these circumstances, we don t find any merit in this ground of the appeal and same is dismissed. 9. On the issue of assumption of jurisdiction u/s.147/148, ld. counsel for the assessee made elaborate submissions on this issue and also filed paper book of documents containing copy of reasons, objections filed and order disposing objections. It was vehemently argued that assessing officer has assumed jurisdiction u/s 148 merely on the basis of information from DCIT CC-2(2) Mumbai without independent application of mind. It was further submitted M/s. Prraneta Industries Ltd. (now known as M/s. Aadhaar Ventures India Ltd.) is a l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scapement of income. The pre-condition of tangible material and application of mind is in place so as to prevent misuse and arbitrary use of power which will otherwise lead to chaos and never ending tax litigation for the assesses. However, requirement of existence of tangible material and application of mind should not be stretched too far which would otherwise handicap the assessing officer in exercising the power vested by the statute in deserving cases. At this juncture, we feel appropriate to refer the decision of Apex Court in the case Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34(SC) which acts as a guiding principle for adjudging the validity of reopening u/s 147 of the Act and been reiterated by Apex Court in the case of ACIT v. Rajesh Jhaveri Stock Brokers P. Ltd. 291 ITR 500 (SC). 13. We have to see, whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. On these facts we are unable to strike down the reopening of the case. At this stage, it is relevant to take note of the fact that assessee has not disputed the fact of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile rejecting the objections as the same is of academic nature since we have already upheld the validity of notice u/s 148 of the Act. Accordingly, the Ground No.2 is dismissed. 16. Now coming to the issue of addition of ₹ 2,50,00,000/- added u/s. 68 being share capital received during the year from M/s. Prraneta Industries Ltd. (now known as M/s. Aadhaar Ventures India Ltd.), ld. counsel submitted that M/s. Prraneta Industries Ltd. (now known as M/s. Aadhaar Ventures India Ltd.) is a listed company on Bombay Stock Exchange and as such the identity of the party is not in dispute. It was further argued that there is no adverse material on record in support of allegation of accommodation entry and the assessing officer has considered the addition merely on the basis of so called statement of Director of Shareholder Company Sh. Om Prakash Khandelwal is unreliable as later on he has retracted from his above statement. It was vehemently submitted that assessing officer, despite repeated requests, did not provide the copy of information/material from investigation or statement of the parties on the basis of which adverse inference was drawn. The assessing officer even failed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for affording opportunity of cross examination of person whose statements are being relied upon since same is secondary material and as such there is no contravention of principles of natural justice. Reference was made decision of Supreme Court in the case of NRA Iron Steel P. Ltd. 412 ITR 161 (SC) and other revenue favoring decisions of High Courts and ITAT. However, the Ld. DR fairly conceded that issue of share capital relating to very same company was considered by ITAT and MP High Court. 20. We have considered the rival submissions and perused the material available on record. The issue in hand for our consideration is applicability of provisions of section 68 to share capital received by the appellant company from M/s. Prraneta Industries Ltd. (now known as M/s. Aadhaar Ventures India Ltd.). Before discussing the facts of the case, it is relevant to understand the pre-requisites of section 68 and under what circumstances the provisions is triggered. As per the plain language of section 68, the appellant is obligated to establish the identity, creditworthiness of the party and genuineness of the transaction so as to avoid the rigours of the deeming provision. By ident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investor, if any. 22. The entire edifice of the Assessing Officer is the reliance placed by him on the statement of Shri Om Prakash Khandelwal which though assessee has claimed was not provided to the assessee nor any opportunity of cross-examination was offered and the statement of Shri Shirish Shah for which assessee has objected that same has been recorded without opportunity of cross-examination. In so far as Shri Shirish Shah is concerne, he is neither the Director nor the shareholder in the investor company and it is not even in the case of the Assessing Officer that Shri Shirish Shah or Om Prakash Khandelwal has specifically taken the name the assessee. The main charge of the Department is that Shri Om Prakash Khandelwal through his company, M/s. Prrenata Industries has been providing accommodation entries to varios persons. This precise issue and allegations had come up for consideration before the coordinate bench of the Tribunal in the case of Bharat Securities Pvt. Ltd., Chain House International and Rohtak Chain Co. Pvt. Ltd. in ITA no. 598, 599, 584, 595 and 597/Del/2017 order dated 27.12.2017. The relevant facts and the observation of the Tribunal in that case f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the course of search on SCS. Page-17 14. It is also notice that during the proceedings on 12.02.2016, the assessing Officer directed the assessee company to produce the Directors of the investor companies and consequently on 19.02.2016, the assessee company produced Shri Somabhai Sunderbhai Meena (SS Meena), director of major investor company namely Aadhaar Ventures India Ltd. Who contributed ₹ 40.75 Crores out of total investment of ₹ 55 crores, before the Assessing Officer. He was examined and his statement was recorded. He produced the books of accounts of the company. He confirmed the investment made by his company in the share capital of the assessee company. The books of accounts produced by him were examined by assessing Officer. The books of accounts contained such investment made in the share capital of the assessee company. The books of accounts also explained the source of investment. 17. The CIT (A) recorded the statements of the persons who appeared before her. For the sake of completeness in our findings we find it necessary to briefly note the facts emerged from the said statement as follows. 18. The alleged SCS appeared during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery statement. The AO did not raise any objection on the contents of these statements. He almost accepted all the factual position. He also agreed with the nature of the business of investor companies. The AO almost accepted the contents of the statements. However, he opined that there was mismatch between the two statements, such statements may not be relied upon and also statements should not be accepted at this stage. But finally the AO requested the CIT(A) that the appeal may be decided on merits of the case by ignoring the said statements. 27. The Ld. CIT(A) after recording the statements, calling the comments and report from the Assessing Officer on the statements and submission of the assessee and also taking on record the submissions of the assessee company, filed during first appellate proceeding, the CIT(A) perused the entire assessment proceedings, examined the material on record and facts of the case had recorded her finding on various issues involved in appeal. Such findings are recorded on pages 274 to 316 of the CIT(A) order. 28. The Ld. CIT(A) observed the AO has treated the amount of ₹ 55 crores as taxable u/s. 68 on the basis of statements of certa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced one director of Aadhaar Ventures namely Sh. Somabhai Sunderbhai Meena before the AO during assessment proceedings. He confirmed that his company had invested a sum of ₹ 40.75 crores in the share capital of the appellant company in FY 2011-12 and 2012-13. He produced the books of accounts of the company and was thoroughly examined by the AO. This investment was found recorded in the books of accounts as verified by the AO. He explained the source of investments with reference to the books of accounts. Such source was then examined by the AO and the AO also obtained copies of the necessary ledger accounts with reference to the source of investments. He explained that his company was never engaged in providing accommodation entire and on the contrary was carrying on real business where the turnover runs into approx. 171 crores and 133 crores in FY 2011-12 and 2012-13 respectively. He also produced the bank accounts of his company with reference to the share capital invested in Bharat Securities. The AO also required him to send certain documents. Consequently copy of resolution, shareholding pattern, copy of share certificate, copy of MOU, copy of arbitration award, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of their source of the investment made in Bharat Securities Pvt. Ltd. including the amount of premium after considering the submissions of both the sides and relevant documentary evidence the CIT(A) held as under: All the listed companies have given the required evidences to prove the source of their investments in Bharat Securities Pvt.Ltd. One of the major investing companies appeared before the AO with the books of accounts and demonstrated the source of the share capital. Similar is the position with regard to other companies whose directors appeared before me and produced the books of accounts except Dhanus showing the source of the investment. Dhanus was under liquidation. Its director had produced the confirmation admitting the investment and also containing the source thereof. The balance sheets of all the companies are audited. The auditors have given a clean report. Looking to the entire scenario of the case I am satisfied with the source of the investment of all the five listed companies and hold that the source is fully explained and hence the conclusion is rejected. 85. We find that in the case of M/s. Aadhaar Ventures India Ltd. (formerly known as P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor company ( page No. 33 34 of CIT(A) order and reply dtd. 26.11.2015 filed by investor company ( PB-834-883), reply dtd. 12.02.2016 filed by Investor company duly confirming investment made by it in the share of the assessee company along with relevant documents ( page No. 144 171 of assessment order) in support of the claim that identity and credit worthiness of investor and genuineness of transaction of said investor/share applicant is duly established. It was further submitted that opportunity of cross examination was grained to the assesse for examination in the case of Sh. Shirish Chandrakant Shah and Sh. Sawan Kumar Jajoo for which the assesse reached Mumbai at the time as given and the Venue, but since prior to the date of cross examination opportunity scheduled, ( reference page No. 134,135,170 and 171 of assessment order) the same was withdrawn by ADIT (Inv.)-Delhi and therefore, the opportunity did not actually materialise (PB-884-894). Thereafter opportunity for cross examination was demanded by the assessee in time and again before the AO but the same was never provided by the AO. In support of this claim the learned counsel for the assesse referred page No. 133 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued by the CIT(A) invoking his power under section 250(4) of the Act, Sh. Jils Raichand Madan, along with books of accounts duly appeared before the CIT(A) and duly confirmed the investment made in the shares of the assesse company, in his statement recorded by the Ld. CIT(A). Refer paper book page No. 244 to 256 and page No. 132 to 142 of order of CIT(A). Similarly, Sh. Omprakash Anandilal Khandelwal, the then director of the company, appeared before the CIT(A) and duly the investment in his statement recorded before the Ld. CIT(A) (refer page No. 151 to 158 of the order of CIT(A) and paper book page No. 257 to 266) 90. Further, in response to summons u/s. 131 of the Act issued by the CIT(A) by invoking power u/s. 250(4) of the Act, Sh. Chandrakant Shah, a third party, duly appeared before the CIT(A) and denied in any invoking of accommodation activities. (Paper book page No. 296 to 302 and page No. 217 to 223 of the order of CIT(A)). Similarly, Sh. Sawan Kumar Jajoo, being third party, who already as per the Revenue worked as broker, has also appeared before the CIT(A) and had explained that he does not know the name of the assesse company and name, chart and other figu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... summon issued by investigation wing and also by the AO conforming the investment made in the BSPL. 93. We further find that the Ld. CIT(A), during the course of first appellate proceeding in exercising powers mandated in the section 250(4) of the Act has rightly decided to summons all the ten person out of which except two namely Smt. Jyoti Dhiresh Munver and Sh. Manish Mirg, have attended before her and their statements were recorded by the CIT(A) personally. The appellant has been given opportunity to cross examination and he appellant availed the cross examination . All the statements were send to the AO for his comments. The Ld. AR of the assessee on 17.10.2016 filed reply submissions and explanation on the said remand report of the AO on behalf of the assessee BSPL. The submissions dated 17.10.2016 of the assessee were reproduced by the CIT(A) verbatim at page No. 130 to 263 of her appellate order. Accordingly, identify credit worthiness and genuineness of transaction has been duly proved and established. Therefore, the addition of ₹ 15.75 crore in A.Y. 2012-13 and ₹ 25 crores in A.Y. 2013-14 made in respect of this subscriber and alleged assumed payment of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty (A) and his statement was recorded wherein he stated that his company was not engaged in any business of providing any accommodation entries. He also stated that Shrish Chandrakant Shah was not controlling the business of his company. He was only a financial consultant. He stated that his company was engaged in the business of textiles, finance and investment. He produced the books of account for the Assessment Years 2012- 13 and 2013-14 consisting of cash book, ledger, journal, bank book etc. The investment made in the appellant company was found recorded and source of such investment was also explained. He stated that audited balance sheet of the company for both the years reflecting the investment made in shares of BSPL. These books of account were examined by CIT (A). He also stated that prior to making the investment a due diligence enquiry from a company secretary regarding BSPL was also made. He also stated that a share valuation report of shares of BSPL was provided to them. He also stated that his company subscribed 105000 shares @ of ₹ 1500/- per share in the Assessment Year 2012-13. He further stated that his company subscribed to 80,00,000 shares @ ₹ 125/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hold that there is no generation of cash outside the books of account and also there is no transfer of any such cash by te appellant company to anyone else and, therefore, I old that there is no accommodation entry and the share capital received is genuine. 21. The appellate authority (A) held that the assessee company was not connected with the money trial and the assessee company was only concern with the source of share capital which stands proved. The appellate authority also examined the issue of share capital and held as under :- I find that the position in the prsent case is otherwise. All the five companies have produced the books of account. There is an audit reports. All the investors have appeared personally. The books of account were examined thoroughly and I find that such books of accounts contain purchases and sales transactions, payments and receipts by banking channels, incurring of various expenses such as payments of rent, electricity excise duty, sales tax, bank interest, staff salaries etc. He himself examined the director of major shareholder Aaadhaar Ventures namely Somabhai Sunderbahi Meena and also examined the books of account produced by him d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irties. Their statements have already been discussed in the earlier para and to avoidany repetition I simply want to reiterate that the present statements given by both the directors of Aaadhaar Ventures before me are totally confirmatory and corroborative to the earlier statement of Somanbhai Sunderbahai Meena Recorded by the AO during the assessment proceedings. 27. In respect of the allegation against the five listed companies for providing accommodation entries, the appellate authority has held as under :- The basis of such conclusion is the statement of SCS and some others as recorded in the search of others and also on the back of the appellant company. The appellant had argued that such statements are outside the jurisdiction of the assessment u/s 153A since they were recorded not in connection with the search on the appellant company. No cross examination was done. It is pertinent to note here that the appellant was very keen to cross examine the persons. This keenness is proved by the fact that on 18.09.2014 when the opportunity of cross examination of SCS and Jajoo was offered to the appellant, the director Naresh Kumar reached at the designated placed at Mumb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h company in great detail in paras 85 to 110 of the impugned order and recorded its finding. The aforesaid finding of fact recorded by the ITAT are based on the material available on record which is a finding based on appreciation of evidence on record. 52. Issuing the share at a premium was a commercial decision. It is the prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of shareholder whether they want to subscribe the shares at such a premium or not. This was a mutual decision between both the companies. In day to day market, unless and until, the rates is fixed by any Govt. Authority or unless there is any restriction on the amount of share premium under any law, the price of the shares is decided on the mutual understanding of the parties concerned. 53. Once the genuineness, creditworthiness and identity are established, the revenue should not justifiably claim to put itself in the armchair of a businessman or in the position of the Board of Directors and assume the role of ascertaining how much is a reasonable premium having regard to the circumstances of the case. 54. There is no dispute about the receip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N details etc. While arriving at the conclusion that he did, the AO did not consider it worthwhile to make any further enquiry but based his order on the high nature of the premium and certain features which appeared to be suspect, to determine that the amount had been routed from the assessee's account to the share applicants' account. As held concurrently by the CIT (Appeals) and the ITAT, these conclusions were clearly baseless and false. This Court is constrained to observe that the AO utterly failed to comply with his duty considers all the materials on record, ignoring specifically the most crucial documents. 56-57. It is well settled that if the creditworthiness of the investor company and genuineness of the transaction is proved no addition under Section 68 could be made and no substantial question of law arises. 25. The aforesaid judgment of Hon ble High Court clearly clinches the issue in so far as reliance placed on the statement of Shri Omprakash Khandelwal which has been the sole foundation of the Assessing Officer and same stands negated and does not have any evidentiary value because the same was retracted subsequently which fact has been analyzed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. Aadhaar Ventures India Ltd.). Accordingly, the assessing officer is directed to delete the addition u/s 68. Ground No. 4 is allowed. 28. The Ground No. 3 and 5 are taken together as they deal with addition of aggregate share capital of ₹ 5,12,40,000/- u/s 68 of the Act. It is a case of reassessment proceedings u/s 147 where reopening was made in respect of share capital of ₹ 2.50 crores received from M/s. Prraneta Industries Ltd. However, during the course of reassessment proceedings, the assessing officer noted that appellant has also raised share capital from other parties and accordingly enquiry was initiated in respect of share of capital of ₹ 5,12,40,000/- received from 18 investor companies. The assessing officer being not satisfied with genuineness of share capital from the said parties, considered the addition u/s 68 of the Act. 29. At the threshold, since we have deleted the addition of ₹ 2.50 crores which was the sole basis of notice u/s 148, there remains no valid ground for any addition of ₹ 5,12,40,000 in view of the fact that foundational base of reassessment proceedings gets vitiated. The legal position to this effect is wel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including such other item in the scope of ongoing reassessment proceedings u/s 147 iii. Fresh approval must be obtained u/s 151 and notice u/s 148 must also be issued. 33. In support of above proposition, the ld. AR has relied upon the decision of Hon ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. v. CIT[2011] 336 ITR 136 (Del) and coordinate bench in the case of Sh. Devki Nandan Bindal v. ITO (ITA No. 4271/D/19 dated 18/12/2019). The finding of coordinate bench is reproduced hereunder: 35. It may also be noted here that the A.O. in the reasons recorded for reopening of the assessment has merely recorded that ₹ 15 lacs accommodation entry taken by the assessee has escaped assessment. However, at the re-assessment stage, A.O. made further addition of ₹ 52.91 crores on account of deposits in the bank account of the assessee. No reasons have been mentioned as to why such addition have been made and what was the purpose in making the addition. The entire deposit in the Bank account of the assessee could never be unexplained. Even the Investigating Agency have not made any allegation against the assessee if that amount was an accommodation entry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs., ITO 6(3)(3), Mumbai (supra). Considering the totality of the facts and circumstances, we are of the view that A.O. has recorded non-existing, incorrect and wrong facts in the reasons recorded for reopening of the assessment. The A.O. did not applied his mind to the report of Investigation Wing. The A.O. merely believed report of Investigation Wing without making further scrutiny at the assessment. The A.O. merely reproduced report of Investigation Wing without making further scrutiny of the same. The A.O. merely reproduced report of Investigation Wing and crux of statement of Shri Kishori Sharan Goel for reopening of the assessment in the matter. Therefore, it was merely a borrowed satisfaction without application of mind. We, therefore, held that initiation of re-assessment proceedings in the instant case is illegal, bad in law and is liable to be quashed. In this view of the matter, we set aside the orders of the authorities below and quash the reopening of assessment under section 147/ 148 of the Income Tax Act, 1961. Resultantly, all additions stand deleted. In view of the above, there is no need to adjudicate the issues on merit which are left with academic discussion on ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
