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TMI Blog2017 (1) TMI 1780X X X X Extracts X X X X X X X X Extracts X X X X ..... alf and based thereon, a survey action u/s 133A of the Income-tax Act, 1961 (in short "the Act") was carried out at the premises of Shri Pankaj Danawala, CA, Surat. During the course thereof, his statement on oath was recorded where he categorically admitted that :- (i) He has created large number of fictitious capital by alluring number of assessees, mainly by two methods. Firstly, by jumping of capital, i.e. showing opening balance of capital substantially more then available in immediate previous year and showing such increased capital as loans / advances etc. qua fictitious small loans or nonexistent investment to camouflage fictitious cash in hand. Secondly, showing false income /capital from different sources like agricultural income, gifts, interest, brokerage commission etc., for number of years in account statements, accumulating the same and introducing it in capital account while filing return of income for the first time before department. Such fictitious capital / income of his selected customers were reflected in their balance sheet as bogus loans / advances / sundry debtors, investment in plot / flat etc. Subsequently, in later years, these false assets were liquid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in effective terms, except the balance-sheet entries which are only paper entries, there is no allegation or finding that fictitious capital was ever used in any manner or any corresponding asset thereto were owned by the assessee. Thus, the assessees' fault is to the effect that - on the allurement of a qualified Chartered Accountant, Shri Pankaj Danawala, the assessees voluntarily signed on the income-tax papers prepared by him and on the paper balance-sheet as prepared by him. Ld. Assessing Officer, however, did not accept assessees' contentions on following reasoning: (i) The AO aware about any settlement petition by M.D. Patel Group; (ii) The assessees had objected to 148 proceedings on the ground that the capital in question was carried over from earlier years; therefore, there was no escapement of income in this year. 3.3 The Assessing Officer rejected these contentions by following observations:- "62. The submission filed by the assessee has been considered carefully. The assessee's argument that the capital raised pertains to A.Y. 2003-04 is not acceptable because the assessee neither shown the said amount in his capital account nor shown as corresponding -advances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn advance for immovable properties whose location was not explained by the assessees. Besides, small, small loans were given to other persons. The assessees explained that the very fact that there was no existence of any flat/immovable property as purported in returns was demonstrated by the fact that neither any description was given in the balance-sheet nor found by the Department. Similarly, the small loans had no existence at all. Shri Pankaj Danawala by his fictitious planning used to make false entries to avoid the question about the huge cash balance. Therefore, the advance in properties without naming the date, location, identification were made so also fictitious debtors were shown without there being any existence. Ld. CIT(A), however, held that the assessee(s) has not offered proper explanation and dismissed the appeals. 5. Aggrieved, the assessees are in second appeal before the Tribunal. 6. The ld. Counsel for the assessee contends that:- i. It is an undisputed fact that Shri Pankaj Danawala, CA, Surat was a kingpin of the whole racket in which small time assessees were allured to sign on the return forms and balance-sheets etc. prepared by him with a design to us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income is a legal document, which cannot be said to be rough paper and Learned Commissioner of Income Tax(Appeals) clearly erred in deleting the said addition of Rs. 15,00,000/-. 7. On the other hand, Smt. Poonam Joshi, ld. counsel appearing on behalf of the assessee vehemently supported the order of Learned Commissioner of Income Tax(Appeals). She pointed out that the entire exercise of reflecting capital represented by way of advances that too without preparation of any books of accounts was that of Shri Pankaj Danawala, about which a layman is not competent enough and cannot be expected to understand the implication and consequences of such an act. The ld. A.R. submitted that fictitious entries were neither supported by any independent corroborative evidence nor such capital was utilized, therefore, the view taken by the Learned Commissioner of Income Tax(Appeals) be upheld. 8. Having heard both the sides, we have carefully gone through the orders of authorities below. It is pertinent to note that the Assessing Officer, in the assessment order, himself observed that "considering the admission made by the Mohanbhai Dhanjibhai Patel Group, this is required to be taxed in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogus entries were created by him to be exploited by him; c. The entries were never used; hence never exploited and no benefit accrued to assessee's in appeal. d. The fictitious entry about investment in immovable property and giving small time advance have no basis as none of them existing and the Department has not indicated any cogent material that anything was in existence. vii. It is contended that the addition has been made only based on the balance-sheet which is accepted by Shri. Pankaj Danawala to be his creation and the assessee having no role and the fictitious capital having never been used, the additions deserves to be deleted. 6. The ld. Departmental Representative relied on the orders of the authorities below. 7. I have heard the rival contentions, perused the material available on record and gone through the orders of the lower authorities. I find merit in the contentions of the ld. Counsel for the assessee that additions have been made only based on the fictitious balance-sheet entries which are accepted by Shri. Pankaj Danawala to be his creation and the assessees had no role therein. Moreover, the fictitious capital has never been used which were paper ent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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