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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 ..... in the case of assessees in question, the fictitious capital was not at all used or derived any benefit from Shri Danawala or M/s. M.D. Patel Group and the Department has not controverted these facts. Thus, the assessees at the most are guilty of falling prey to the design of an unscrupulous Chartered Accountant who created nefarious design and allured the assessees without any advantage having accrued to them. In the light of these facts, circumstances, observations and following ITAT judgment in the case of Smt Leenaben Kantilal Nakrani (supra), there is no justification in making addition in each case, which is deleted. The assessees appeals are thus allowed. - ITA No. 883/Ahd/2013, ITA No. 884/Ahd/2013 - - - Dated:- 20-1-2017 - SHRI R.P. TOLANI, JUDICIAL MEMBER For the Assessee : Shri Vijay Mehta, AR For the Revenue : Shri Ashish Pophare, DR ORDER These are two appeals by the assessees one in individual case and another in HUF case; and both the appeals are directed against the separate orders of the Learned Commissioner of Income-Tax (Appeals)-I, Surat of even dated 17.01.2013 for Assessment Year 2004-2005. 2. The common ground raised in both th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he concerns of said M. D. Patel Group, during the course of which a statement of one Mr. Kiritbhai Patel (main person handling the affairs of said group), was recorded. He confirmed Danawala s statement and further stated that fund of said Group has been routed through said 154 parties (including the assessees), income tax files of which were maintained and operated by said Pankaj Danawala at the instruction of the said Group. Through said 154 files, bogus capital was created by showing fictitious opening capital / income etc. It was also stated that said Group has carried out cash transactions by rotating cash over and again, several times in various accounts maintained and operated with the said bank. (iv) The said M.D. Patel Group filed settlement petitions before Hon ble Settlement Commission, Additional Bench, Mumbai, for settlement of their cases. (v) By creating artificial capital, the assessees in question claimed that they have not earned any real income, only fictitious capital created on papers by Danawal for the future benefits of said M. D. Patel Group. The assessee is merely a name lender Mr. Pankaj Danawala, C.A., also admitted the factum of manipulating in thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances the differential amount of ₹ 17,00,000/- -in capital account remains unexplained and require to be added to the total income of the assessee. The fact of increase in capital account of the assessee is apparent and has not been denied. Therefore, an addition of ₹ 17,00,000/- is made to the total income of the assessee on account of unexplained capital. In view of the above facts I am of the considered view that this is a fit case for initiating penalty proceedings u/s 274 r.w.s. 271(1)(c) of the Act for concealment of income by furnishing inaccurate particulars. 6. In the return of income filed in response to notice u/s 148 of the Act the assessee has shown total income at Rs. Nil whereas in the original return of income, the assessee had shown total income at ₹ 54,495/-. During the course of assessment proceeding, the assessee has not furnished any reasons/explanation for such decrease in showing total income, hence the same is not acceptable and the income shown in original return is considered while computing the total income of the assessee. 4. Aggrieved, the assessees preferred first appeals where the assessees contended that Shri Pankaj Danaw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee cannot be make to pay tax on the capital which neither belong to them nor shown by the Department in any manner to be owned by them. iii. It is trite law that only paper entries cannot the basis for making the additions. The record demonstrates that the authorities below could never indicate any earning or investment by the assessee, either in the description as shown in the balance-sheets or to M/s. M.D. Patel Group. iv. Both the assessees were caught before Shri Pankaj Danawala to over utilized their fictitious entries. Thus, this is a case where use of the fictitious entries could be carried out by the kingpin or M/s. M.D. Pate Group. Thus, the assessee has neither advanced any amount to M/s. M.D. Patel Group nor made any investments in the property or advanced to loanees as shown in their balance-sheet. v. The ld. Counsel for the assessee then adverted to ITAT judgment in the case of Smt Leenaben Kantilal Nakrani (supra). In this case, ld. CIT(A) accepted the assessee s contention and deleted the additions against which the Revenue came in appeal. The ITAT held as under:- 6. At the time of hearing before us, on behalf of Revenue Shri H.P. Meena, Sr. D.R. app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Assessing Officer made the addition of ₹ 15,00,000/- on the basis of fictitious entries in loose sheets of paper found from the premises of the C.A. Shri Pankaj Danawala, who had admitted to have created such amounts himself. Therefore, the Learned Commissioner of Income Tax(Appeals) is legally and factually correct in deleting the addition of ₹ 15,00,000/-, which was made by the Assessing Officer in the hands of assessee on protective basis. Resultantly, the ground of appeal raised by the Revenue is rejected. vi. The ld. Counsel further contends that the facts and circumstances about creation of fictitious entries prompted by Shri. Pankaj Danawala, are same between the case of Smt. Leenaben Kantilal Nakrani (supra) and the assessees. However, the assessees cases stand on better footing in as much as: (i) in the case of Smt. Leenaben Kantilal Nakrani, the capital was used by M/s. M.D. Patel Group. Still the same has been deleted. (ii) Whereas, in assessees cases, the capital has not at all used and it has not been disputed that Shri. Pankaj Danawala has accepted that the capital entries in both the assessees in question are fictitious and made by his ..... X X X X Extracts X X X X X X X X Extracts X X X X
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