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TMI Blog2022 (3) TMI 301X X X X Extracts X X X X X X X X Extracts X X X X ..... try from four companies, the details of which are given in the reasons recorded. We find, the AO after going through the various statements filed by the assessee from time to time, made addition being the share application money/share capital received by the assessee by invoking the provisions of section 68 of the Act and made further addition being 1.5% of the above amount which the assessee incurred as commission for arranging the accommodation entries. CIT(A) dismissed the ground challenging the validity of the reassessment proceedings as well as the addition on merit. It is the submission of the ld. Counsel that the assessee during the assessment proceedings had categorically asked for the corss-examination of Shri S.K. Gupta, whose statement was the basis for making the addition to the total income of the assessee. Despite the request of the assessee for cross-examination of Shri S.K. Gupta, whose statement is the basis of addition made by the AO, the AO has not provided the opportunity of cross-examination to the assessee. Since, in the instant case also the reopening was made on the basis of the report of the Investigation Wing in the case of Mukesh Gupta group along w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the investigations it was seen that the Bank Accounts held by the assessee was used by the above person for providing accommodation entries. During the course, of investigations by the DIT(Inv.) it was discovered that the assessee who have unaccounted money (hereinafter called as entry takers or beneficiaries) and want to introduce the same in the books of accounts without paying tax approach another person (entry operator) and hand over cash (plus commission) and take cheques/DDs/Pos. The cash is deposited by the entry operator in a bank account either in his own name or in the name of relative/friends or other person hired by him, for the purpose of opening bank account. The entry operator thereafter issues cheque/DD/PO in the name of beneficiary from the same account (in which the cash is deposited) or another account in which funds are transferred through clearing in two or more stages. The beneficiary in turn deposits these instruments in his bank accounts and the money comes to his regular books of account in the form of gifts, share application money, loan etc. through banking Channels and the transaction looks genuine. It is noticed from the list of entries that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the return already filed u/s 139 of the Act be treated as the return filed in response to notice u/s 148 of the Act. Subsequently, the AO issued notice u/s 143(2) in response to which the assessee filed certain details as asked for. 4. The assessee filed objection to the reopening of the assessment which was disposed of by the AO by passing a speaking order. 5. During the course of assessment proceedings, the AO asked the assessee to substantiate the amount received from share applicants by proving their identity and credit worthiness and the genuineness of the transaction. The assessee filed the copy of the income-tax returns, their bank statements, share application forms, certificate of incorporation of new business, PANs, Board Resolutions for investments, etc. The AO asked the assessee to produce the principal officers of the above companies who have invested in the shares of the assessee company. However, the assessee failed to produce the said persons. Summons issued u/s 131 to the alleged share applicants were returned unserved in some cases and in certain other cases, the concerned persons did not comply to the summons. The AO, therefore, asked the assessee to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved with such order of the CIT(A), the assessee is in appeal by raising the following grounds:- 1. Whether the Ld. CIT(A) was justified in sustaining the Assumption of Jurisdiction under section 147/148 by holding that it is based on definite information / material as well as notice issued u/s 148 after taking proper Approval 2. Whether the Ld. CIT (A) was justified in upholding the reasons recorded by the Ld. A.O. ,after application of judicial mind , are according to the law, however it is not so, because at the time of recording the reasons, he has only piece of information and not a single evidence in any form/manner. 3. Whether the Ld. CIT (A) was justified in upholding that Approval u/s 151(2) was well as per law whereas the approval obtained in a hassled manner as appeared from the copy of Approval. 4. Whether the Ld. CIT (A) was justified in treating the disposal of objection raised by the appellant in a manner in which they were objected as a valid exercise. However, the disposal order is contrary to the settled law . 5. Whether the Ld. CIT (A) was justified by holding the actions of Ld. A.O. in not allowing an opportunity to cross examine the alle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessee strongly challenged the order of the ld. CIT(A) in upholding the validity of the reassessment proceedings as well as the addition on merit. The ld. Counsel for the assessee submitted that the AO has alleged that the assessee has received accommodation entry of ₹ 23.50 lakh from these concerns as per the reasons, namely, ₹ 5 lakhs from Dhamaka Trading ₹ 5 lakh from AGM Holdings Ltd. ₹ 4.5 lakh and ₹ 5 lakh respectively from Central Gums Regal and ₹ 1 lakh and ₹ 3 lakh respectively from Chanderprabhu. However, the ld. Counsel submitted that the assessee has not received any accommodation entry, but, share application money was received and subsequently shares were allotted which resulted in all the companies becoming shareholders of the assessee company. Therefore, it is clear that there is no occasion for application of independent judicial mind and the reasons were recorded based upon information obtained from the Investigation Wing. The ld. Counsel, referring to the reasons, submitted that the AO has mentioned that DIT (Inv.) during the investigation in the case of Mukesh Gupta group and Rajan Jassal and Sh. Surinder Pal Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee whose statement was the basis for making the addition. Referring to the decision of the Hon ble Supreme Court in the case of Kishan Chand Chellaram Vs. CIT, (1980) 125 ITR 713 (SC) Andaman Timber Industries vs CCE reported in 281 CTR 214 and the decision of the Delhi Coordinate Bench of the Tribunal in the case of Magan Behari Lal vs DCIT in ITA No.4558/Del/2019, order dated 16.09.2019, he submitted that it has been held in these decisions that the statement recorded in the back of the assessee cannot be relied upon against the assessee without giving opportunity of cross explanation. Referring to the decision of the Hon ble Bombay High Court in the case of RW Promoters Pvt. Ltd. vide ITA No.1489/2013, order dated 13th July, 2015, he submitted that the Hon ble High Court in the said decision has held that the right to cross-examination is a part of audi altrem partem principle and the same cannot be denied. He submitted that similar view has been taken by the Nagpur Bench of the Hon ble Bombay High Court vide order dated 23.07.2019 in ITA No.30/2018, and the Hon ble Gujarat High Court in Laxman Bhai S. Patel reported in 327 ITR 291 where it has been held by the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as received accommodation entry of ₹ 23,50,000/- from four companies, the details of which are given in the reasons recorded. We find, the AO after going through the various statements filed by the assessee from time to time, made addition of ₹ 55,85,000/- being the share application money/share capital received by the assessee by invoking the provisions of section 68 of the Act and made further addition of ₹ 83,775/- being 1.5% of the above amount which the assessee incurred as commission for arranging the accommodation entries. We find, the ld.CIT(A) dismissed the ground challenging the validity of the reassessment proceedings as well as the addition on merit. It is the submission of the ld. Counsel that the assessee during the assessment proceedings had categorically asked for the corss-examination of Shri S.K. Gupta, whose statement was the basis for making the addition of ₹ 55,85,000/- to the total income of the assessee. However, we find from the assessment order that the AO rejected the request for cross-examination by observing as under:- 4.1 On 11.3.2014, another Counsel, Sh. V.K. Tulsian, CA attended on behalf of the assessee company but filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned in the reason as 'Sh. Kapur'. It may be clarified here that Sh. Kapoor mentioned in the form for recording reason is the middleman engaged by Sh. S.K. Gupta and he is a team of the entry provider, Sh.S.K. Gupta. To say that the name of Kapoor has not appeared except in the reason is factually wrong because this name has appeared as one of the intermediaries at page 8 of the sworn statement of S.K. Gupta, This trifle objection does not effect the nature of transactions , done by the assessee using the mode of accommodation entries to bring back its unaccounted income to its books. The assessee's has not discharged its onus cast u/s 68 as required. To say that the assessee has no control over the share applicants with whom it had many dealings is nothing but an admission of the fact that the entries taken by it are its own money shown in the garb of share application money and has no concern for those paper companies because his purpose has been served. Moreover, this office has already issued summons u/s 131 to the alleged share applicants on 15.10.2013 but some were returned back unserved and others did not comply with these summons. It is surprising to note t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying to shift the burden of proof on the Department. Therefore, request of assessee was declined. The Ld. CIT(A) instead of deciding the issue in proper perspective as per Law has also held that right of cross-examination to the statements of witnesses used against the assessee is not an absolute in nature. However, it is well settled Law that any material collected at the back of assessee or statement recorded at the back of assessee cannot be used in evidence against the assessee, unless the same is confronted to the assessee at assessment proceedings and right of cross-examination have been granted to assessee to such statements. We rely upon the Judgments of Hon ble Supreme Court in the cases of Kishan Chand Chellaram (supra) and Andaman Timber Industries 281 CTR 214 (SC) and Judgment of Hon ble Delhi High Court in the case of CIT vs., SMC Share Broker Ltd., (supra). In view of the above, it is clear that right of assessee have been denied by the authorities below in not allowing the assessee to cross-examine the statements of Shri Deepak Agarwal and Shri Mukesh Kumar. Thus, these statements recorded at the back of the assessee which were adverse in nature to the interest of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is left with academic discussion only. Accordingly, appeal of the Assessee is allowed. 7. In the result, appeal of the Assessee allowed. 15. Similar view has been taken by the coordinate Bench of the Tribunal in the case of Vijayshree Food Products Pvt. Ltd. (supra) where the Tribunal, following the decision of the Tribunal in the case of Kuber Khan Paan Udyog (P) Ltd. and Kuber Food Products India Pvt. Ltd. vide ITA Nos.580/Del/2019 and 322/Del/2019, order dated 22nd October, 2019 for AY 2011-12 has deleted the addition on account of non-granting of opportunity of cross-examination to the assessee of the person whose statement was the basis for making the addition and which has been recorded behind the back of the assessee. Since, in the instant case also the reopening was made on the basis of the report of the Investigation Wing in the case of Mukesh Gupta group along with its close confidants Sh. Rajan Jassal and Sh. Surinder Pal Singh, but the addition was made on the basis of the statement of Shri S.K. Gupta recorded during the course of survey on 20.11.2007 in the case of M/s Sino Credits Liasing Limited, M/s Rapid Packaging Limited, Girisho Company (P.) Lim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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