9911796707
TMI Blog2024 (12) TMI 860X X X X Extracts X X X X X X X X Extracts X X X X ..... capital contribution. No new tangible material has come on record subsequent to passing of order passed u/s 143(3). Reasons recorded merely indicate that information was received as regard to statement given by Shri Shirish Shah in the course of search conducted at his premises. The aforesaid statement given by Shri Shirish Shah, during the course of search at his premises was general statement and was not in respect to transaction of assessee. No date of transaction, as made by the assessee is noted/observed in the reasons recorded and linked-up with the statement of Shri Shirish Shah. Nowhere in the reasons recorded, it has been noted that Shri Shirish Shah, has made any adverse observation with regard to transaction of receipt of share capital by the assessee. Information found in search is sought to be utilized for issuance of notice u/s 148 of the Act, and it is not in accordance with law. AO has not indicated any reason as to how corporate entities contributing share capital received by assessee company are linked to Shri Shirish Shah. Hence notice issued u/s 148 of Act, in the assessee s case is not in accordance with law and hence re assessment framed is hereby cancelled. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Brief:- In this case, the assessee, for the year under consideration, filed its return of income on 29/09/2012, which was accepted by the Assessing Officer during the regular assessment framed under section 143(3) of the Income Tax Act, 1961 ( the Act ). During the year, share capital of Assessee Company was subscribed by four corporate shareholders to the tune of ₹ 180 lakh. The issue of share capital was examined by the Assessing Officer by issue of notice u/s 142(1) of the Act during the regular assessment framed under section 143(3) of Act. All corporate shareholders were assessed to income tax and transactions of subscription of share capital were through proper banking channel. Regular assessment was framed under section 143(3) of the Act, on 23/03/2015, by accepting share capital contribution and income as shown in return of income. Notice under section 148 of the Act has been issued on 29/03/2017, and share capital issued was re-examined by the Assessing Officer in the light of information received from Investigation Wing of the Department. The assessment has been framed under section 143(3) r/w section 147 of the Act 1961 by the Asstt. Commissioner of Income Tax, Ak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns/shall companies/paper companies (both listed and unlisted) to provide accommodation entries and charges commission in return. 3. During the course of search and assessment proceedings of Mr. Shirish Shah the following modus operandi was found: Sale/Purchase of the Shares of the companies controlled by Shirish Shah, for the purpose of introducing the unaccounted income of the Beneficiary in the form of Long Term Capital Gain or Short Term Capital Gain, receipt and payment of cash against such purchase and sale of shares. The records of transactions for the purpose of giving the entries of bogus share application money, share capital, share premium, share purchase known as one time entries or unsecured loan entries. The accommodation entry includes providing share application money, share premium at huge figures to the beneficiaries. 16.1 One time accommodation entries referred to as OT Entries by the assessee i.e. Shri Shirish C Shah. This is a type of accommodation entry wherein the recipient party does not have liability to repay the funds received in its books of account e.g. share capital, share premium, purchase and sale of shares of unlisted private limited companies etc. i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the clients/beneficiaries from whom cash has been received. This payment of funds into the beneficiary companies is recorded as investment in the books of the listed company and the beneficiary company shows at as receipt of share capital/premium or share application money in its books of accounts. Relevant extract of answer to Q. No.18 of the Statement of the assessee i.e. Shri Shirish C Shah dated 13.01.2014 Ans: Sir I have rightly said in my statement dated 11.06.2013 that these funds paid into Jhaveri Trading Investment Private Limited are one time accommodation entries against receipt of cash. Sir, One Time accommodation entries are of two types in one case first shares are subscribed by my companies at premium against receipt of cash, in other case already issued shares are shown to have been purchase against payment of funds. In both cases the investments are not genuine but, are only used to give the transactions a color of investment. Infact, these are squaring off transactions wherein the liability to square off the books of accounts of the recipient for the funds received from my companies does not arise in future. In both the cases he share transfer forms duly filled by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs . 6. The gist of submissions, as submitted by learned Counsel for the assessee in respect of grounds no.1 to 4, is reproduced hereunder for ready reference:- Validity of notice issued u/s 148 of I.T. Act 1961. A) In the case of assessee regular assessment was framed u/s 143(3) on 23/03/2015 accepting income as declared. Share capital contribution received was accepted after due verification. i) Notice u/s 142(1)Seeking details of share capital (P- 166 167) (Vol. I] ii) Details of share capital submitted (P- 168 170) [Vol. I] iii) Assessment order (P- 171 173) [Vol. I] B) Reasons recorded are at page 6 to 9 of order of CIT(A). Perusal of reasons recorded indicates that search action was carried out at the premises of Amarpali group in October 2012 and on Shri Shirish Chandrakant Shah on 13/04/2013. On the basis of statement of Shri Shirish Shah it has been concluded that assessee is one of the beneficiary of bogus accommodation entries. It has been further concluded that share capital contribution of M/s Alpha Graphic India Ltd. and M/s ACIL Cotton Industries Ltd. at Rs. 50 lacs and Rs. 30 lacs respectively needs thorough investigation in reassessment proceedings. Notice u/s 148 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delwal vs. ACIT (P- 250 256) (254, 255) [Vol. II] ii) Hon ble High Court of Karnataka at Bengaluru order in ITA No.32 of 2020 in the case of M/s. VSL Mining Company Pvt. Ltd. vide order dated 20/09/2024 (P- 257 270) (268 270) [Vol. II] iii) ITAT, B Bench, Bangalore in the case of M/s Ickon Projects in ITA Nos.771 772/Bang/2017 vide order dated 26/10/2023. (P- 74 81) (79, 80) [Vol. II] iv) ITAT, E Bench, Delhi in the case of Narendra Kumar in ITA No.1218/Del/2019 vide order dated 19/07/2023. (P- 82 89) (85, 86) [Vol. II] G) Share capital contribution in respect to M/s Alpha Graphic India Ltd. and M/s ACIL Cotton Industries Ltd. has been noted in reasons recorded to require thorough investigation in reassessment proceedings. It is settled proposition of law that reasons recorded for verification of transaction are not in accordance with law. H) Reasons recorded does not indicate any date, year of transaction and link of assessee with statement of Shri Shirish Shah and thus it is no valid reasons for issue of notice u/s 148 in the case of assessee. I) It is settled proposition of law that reasons to suspect is not sufficient to issue notice u/s 148 of I.T. Act 1961. i) [1981] 130 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ismissed by Hon ble Rajasthan High Court in ITA No.25/2024 in the case of M/s. Esspal International Pvt. Ltd. vide judgement dated 03/09/2024. (P- 243- 249) (248) [Vol. II] E) Perusal of details of corporate shareholders (P- 32, 57, 93 152) (Vol. - I] does not indicate that Shri Shirish Shah is director or subscriber of the aforesaid company. Allegation of A.O. in the assessment order as aforesaid company is under the control of Shri Shirish Shah is not borne out of any legal evidence on record. Allegation made not based on any evidence on record does deserves no credence. Addition made in the case of assessee is thus unjustified and unsustainable. F) No cross examination was offered/allowed of Shri Shirish Shah before making addition at the hands of assessee. Assessee had made specific request before A.O. Evidence collected behind the back of assessee and not stood to the test of cross examination cannot be used to make addition at the hands of assessee. Reliance on: i) [2015] 281 CTR 0241 (SC) Andaman Timber Industries vs. CCE ii) (2010) 327 ITR 0290 (Guj) Heirs and Lrs of Late Laxmanbhai S Patel vs CIT (P- 59 73) (72) [Vol. II] G) Reliance on: i) Hon ble High Court of Judicature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share capital contribution in the assessment framed under section 143(3) of the Act on 23/03/2015, by accepting income as shown in the return of income. 11. The Assessing Officer has issued notice under section 148 of the Act pursuance to information received in respect to search conducted on the premises of Amarpali Group in October 2012 and Shri Shirish Chandrakant Shah, on 13/04/2013. The notice under section 148 of the Act was issued on 29/03/2017. The assessee filed return of income declaring same income on 05/05/2017. The reasons recorded for issue of notice under section 148 of the Act were provided to assessee on 20/06/2017. 12. Perusal of reasons recorded indicates that the search action was carried out at the premises of Amarpali Group in October 2012 and Shri Shirish Shah on 13/04/2013. It is on the basis of statement of Shri Shirish Shah, it was concluded that the assessee is one of the beneficiaries of the bogus accommodation entry. In the reasons recorded, it has been concluded that share capital contribution received from M/s. Prabhav Industries Ltd., and M/s. Secundrabad Healthcare Ltd. at ₹ 100 lakh is the bogus allotment of share capital accommodation entri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord genuineness of transaction is established. It is worthwhile to note that the Assessing Officer has made no independent verification/enquiry in respect to legal evidence placed on record. No shred of adverse evidence is brought on record subsequent to the assessee having furnished legal evidence to discharge its onus to explain the credits. The Assessing Officer merely on the basis of information of statement given by Shri Shirish Shah, during his search has taken adverse view in the case of assessee to make addition under section 68 of the Act. The reasons recorded and discussion in the assessment order do not indicate that the statement of Shri Shirish Shah, was in respect to any enquiry or verification of transaction of contribution of share capital received by assessee company. There is nothing on record to show that the share contribution received from corporate shareholders has nexus with Shri Shirish Shah, except for mere observation in the reasons recorded. Considering the facts and evidences on record, we are of the considered view that assessee had discharged its onus to explain the share capital contribution of corporate entities. Identity, creditworthiness and genu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. are placed at Paper Book at Page 213 to 249. In the aforesaid case, the addition made on account of bogus share application money based on statement of Shri Shirish Shah, has been held to be unjustified and unsustainable. The facts and law laid down by the Hon ble High Court of Rajasthan fully supports the case of assessee and there remains no case for making any addition under section 68 of the Act on the basis of statement of Shri Shirish Shah, at the hands of the assessee. Respectfully following the same addition made in the case of assessee at ₹ 180 lakh on the basis of statement of Shri Shirish Shah is held to be unjustified and unsustainable. 17. We also find that various submissions made by the assessee, as reproduced at Para 8 of the order hereinabove has substantial force. The statement of Shri Shirish Shah, was not tested on cross examination before making addition at the hands of the assessee. Request for grant of cross examination and providing of statement in communication dated 19/12/2017, was not acceded to by Assessing Officer before making the addition (P- 179 of Paper Book) [Vol. I]. The addition made is not in accordance with law considering the judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction of receipt of share capital by the assessee. Information found in search is sought to be utilized for issuance of notice under section 148 of the Act, and it is not in accordance with law. The Assessing Officer has not indicated any reason as to how corporate entities contributing share capital received by assessee company are linked to Shri Shirish Shah. Ratio laid down in the following case laws fully supports the case of the assessee: i) (2010) 320 ITR 561(SC). Kelvinator of India Ltd. ii) [2019] 104 taxmann.com 216 (Bom.) South Yarra Holdings vs. ITO iii) [2017] 395 ITR 0677 (Delhi) PCIT vs. Meenakshi Overseas Pvt. Ltd. iv) (2020) 422 ITR 0337 (Bom.) CIT vs. Shodiman Investments Pvt. Ltd. v) (2024) 161 taxmann.com 255 (Raj.) Shyam Sunder Khandelwal vs. ACIT vi) Hon ble High Court of Karnataka at Bengaluru order in ITA No.32 of 2020 in the case of M/s. VSL Mining Company Pvt. Ltd. vide order dated 20/09/2024 vii) ITAT, B Bench, Bangalore in the case of M/s Ickon Projects in ITA Nos.771 772/Bang/2017 vide order dated 26/10/2023. viii) ITAT, E Bench, Delhi in the case of Narendra Kumar in ITA No.1218/Del/2019 vide order dated 19/07/2023. ix) [1981] 130 ITR 0001 (SC) Gan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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