TaxTMI 
TaxTMI 
2018 (5) TMI 1375
X X X X Extracts X X X X
X X X X Extracts X X X X
....orded are reproduced as under: "The assessee company is assessed to tax with this ward. Enquiries of investigation Wing, Delhi have unearthed huge accommodation entry racket being operated by various groups of operators. The report clearly indicates that accommodation entries have been taken to plough back unaccounted income in shape of gifts, share application money, loans etc. The investigation Wing's list of beneficiaries (of such accommodation entries), gives comprehensive details of Beneficiary's Name, Beneficiary Bank Name, Beneficiary's Bank Branch, Account No of Beneficiary in which entry is taken, date on which entry taken, Name of Account Holder of Entry giving Account, Bank from which Entry given, Branch of entry giving Bank and entry giving account. The list contains the name of M/S ALOK FINTRADE PVT. LTD which has taken entries amounting to Rs. 15,00,000/- during April, 2004 to March, 2005 which are as under:- Beneficiary's Name Value of, Entry Taken Instrument, No. By Which entry taken Date on which entry taken Financial year Assessment year Alok Fintrade Pvt. Ltd. 500000 198959 16/06/2004 2004-05 2005-06 Alok Fintrade Pvt. Ltd. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the reopening of assessment is not justified as the same is reopened only at the instance of investigation carried out by the department. 6. Further, the ld AR has relied on the decision of the Hon'ble Delhi High Court in the case of Sarthak Securities Co. (P) Ltd. Vs. ITO reported in 329 ITR 0110 (Del) and the another decision in the case of CIT Vs. SFIL Stock Broking Ltd. reported in 325 ITR 285 (Del). Regarding the decision of Hon'ble Supreme Court in the case of Raymond's Woolen Ltd. Vs. ITO (supra), it was submitted by the ld AR that the said decision has laid down the principle that sufficiency or correctness of the matter is not a thing to be considered at the stage of issuance of notice U/s 148 of the Act. However, in the present case, the issue is not about sufficiency or correctness of material rather it is a case of no material or irrelevant material inasmuch as nothing is mentioned in the reasons recorded as to who carried out the investigation and in whose case the investigation is carried out. Therefore, such vague information as mentioned in the reasons cannot be equated with the sufficiency or correctness or relevancy of the material. It was further submitted t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....accommodation entries in the nature of bogus investment/share application and the investor companies are not carrying on any genuine business activities and was providing accommodation entries in lieu of cash obtained from the beneficiaries. In view of the same, it was held by the AO that he has reasons to believe that income to the extent of Rs. 35 lacs has escaped assessment within the meaning of section 147 of the Act. In our considered opinion, in the instant case where the return filed by the assessee was not subjected to scrutiny assessment and the entries are available in the case of the assessee from the companies which were named by Shri Praveen Jain to providing accommodation entries and the amounts recorded in the assessee's financial statements are also the same as disclosed by Shri Praveen Jain, the belief formed by the AO after due examination of the material on record that the income of the assessee chargeable to tax during the relevant assessment year has escaped assessment cannot be said to be arbitrary or irrational and it cannot be said that there exists no rational and intelligible nexus between the reasons and the belief. It is true that the reasons recorde....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the bank, the branch and the bank account number from whom the entry has been given. The said information is not general in nature but specific to the assessee company and therefore, we are unable to agree to the contention of the ld AR that there is no material with the Assessing officer to form a view that the income has escaped assessment. Further, we donot agree with the contentions of the ld AR that the information so obtained is irrelevant material as it is not clear in whose case the investigation was carried out and who carried out such investigation. In our view, unlike the case of search cases where there is relevancy of determining the person searched and the person to whom the search material belongs, in the present case, what is relevant and found to be well in order is that there is possession of certain tangible material by the Assessing officer, the contents of such information in terms of value, instrument, date and bank details not being disputed and basis such material, formation of a prima facie view that income has escaped assessment. There thus exist a rational and intelligible nexus between the reasons and the formation of belief that income has escaped asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has introduced its unaccounted cash in form of share capital through the said racket of entry providers and made addition for the same by making the following observations:- (i) On the basis of information received from Investigation Wing, New Delhi it was found that the assessee was one of the beneficiaries of accommodation entry provided by Shri Suresh Kumar Jain group. (ii) No. of companies were running from the residential as well as business address of Sh. S.K Jain and his brother Sh. V.K. Jain. These companies were found to be run and controlled by these two persons through dummy directors. Survey was carried out at the given addresses of these dummy companies and at many places no proper offices were found functioning. (iii) From a single address a number of companies were shown to have registered and these addresses were mostly the residential address of directors of different dummy companies/ proprietors of various firms. (iv) The survey u/s 133A was conducted by the department in the office premises of Sh. Assem Kumar Gupta in Delhi. In the statement he had stated that he was engaged in providing accommodation entries as per the requisition of the beneficiaries an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hi but he has not referred any of the eight (8) concerns. On perusal of case record, it is noted that during re-assessment proceeding, no adverse evidence was found, whereas during original assessment, assessee had filed the confirmation and bank statement of these concerns. Without finding any adverse evidence in the documents filed, AO made addition on account of share application money received from all eight concerns, whereas in respect of all concerns, assessee has provided confirmation and bank statement confirming the no. of share applied/allotted, share capital raised etc. The immediate source in the bank account of shareholders is through transfer and not by cash. Further, it is also noted that in the assessment order, AO has incorrectly noted that in all cases, money has been routed by these companies through the same bank whereas out of five companies for which addition is made by AO, only two concerns namely M/s Lehra Investments Pvt. Ltd. & M/s Smartest Corporate Services Pvt. Ltd. have bank account with the given bank i.e. ABN AMRO Bank. Even from the assessment order, it is also not discernible that any of these person had stated that investment made by thes....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ity to cross examine these persons has made the addition which is against the principle of natural justice and illegal & bad in law. Even from the assessment order it is not discernible that any of these persons had stated that investment made by these companies in the share capital of the assessee is bogus/accommodation entries. Therefore, the addition made by the AO at the threshold is liable to be quashed. Apart from the decisions already submitted before the CIT(A), reliance is further placed on Supreme Court decision dated 02.09.2015 in case of Andaman Timber Industries Vs. CCE 127 DTR 0241 wherein it was held that denial of opportunity to the assessee to cross-examine the witnesses whose statements were made the sole basis of the assessment is a serious flaw rendering the order a nullity in as much as it amounted to violation of principles of natural justice. 15. It was further submitted that the AO has made addition of Rs. 66 lacs in respect of share capital received from eight companies namely M/s Fine Finance & Leasing Pvt. Ltd., M/s Creative Capital Services Ltd., M/s Lehra Investment Pvt. Ltd., M/s Sam Portfolio Pvt. Ltd., M/s Smartest Corporate Services Pvt. Ltd., M/s ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... all the cases money has been routed by these companies through ABN Amro Bank, Bara Khamba Road, New Delhi whereas out of these five companies, only two companies i.e. M/s Lehra Investments Pvt. Ltd. and M/s Smartest Corporate Services Pvt. Ltd. has bank account with ABN Amro Bank. Therefore, solely on the basis of the information received from Investigation Wing, Delhi, the share capital received by the assessee from these companies cannot be presumed to be accommodation entries. 18. In support of his contentions, the ld. AR has relied on the decisions of the Hon'ble Rajasthan High Court in the case of Barkha Synthetics Ltd. Vs ACIT 197 CTR 432 (Raj) and CIT Vs AKJ Granites P Ltd. 301 ITR 298(Raj). Besides the same, he has relied upon the following decisions: (i) CIT Vs. Vacmet Packaging (India) Pvt. Ltd. 367 ITR 0217 (ALL) (HC) decision dated 11/02/2014, wherein the survey was carried at Sh. Assem Gupta and additions were made which the Hon'ble High Court has deleted. It was submitted that in assessee's case also, the addition is made with reference to the survey/search carried out in case of Sh. Assem Kumar Gupta and others. Therefore, in view of the above decision, which....
X X X X Extracts X X X X
X X X X Extracts X X X X
....was received namely (i) share application form (ii) copy of Board Resolution (iii) Copy of Bank Statements reflecting payment through cheque (iv) Audited Statement of Accounts and Acknowledgement of ITR (v) Copy of certificate of Incorporation and Certificate of Commencement of Business (vi) Copy of PAN Card. Where the assessee furnishes the documentation and necessary explanation, the AO should examine whether the documents so submitted and explanation so offered establishes the three ingredients i.e. identity of the investor company, creditworthiness of investor company and genuineness of the transaction. Whether explanation of the assessee is reliable or acceptable? If yes, no further action is required and the sum so credited may not be charged to income tax. If the explanation so offered by the assessee is not acceptable or reliable, the AO should give a detailed reasoning in the assessment order for not accepting the same. The order passed by the AO should be speaking one bringing on record all the facts, explanation furnished by the assessee in respect of nature and source of the credit in its books of accounts and reasons for not accepting the explanation of the assessee. I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gs, the assessee company has made specific request to the AO to allow cross examination of these persons which has however not being provided to the assessee company. In light of above discussions, we don't find any basis for making addition under section 68 of the Act. In the result, ground no.2 taken by the assessee company is allowed." 21. In the instant case, we find that the Assessing officer has relied solely on the information received from the Investigation Wing Delhi without carrying out any further examination of documents submitted during the course of reassessment proceedings and without carrying any independent investigation of these companies. The information so received from the Investigation Wing Delhi is sufficient to form a prima facie view and acquiring jurisdiction under section 147 of the Act. However, such a prima facie view has to be finalized and a firm view has to be taken on basis of examination of documents so brought on record and further investigation to be carried out before any tax liability is fastened on the assessee. In the instant case, we find that the assessee company has submitted documentation in respect of these companies from whom a to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ejected as has been done by the AO in the instant case. Further, we find that there is no action taken by the AO in terms of calling information from these companies under section 133(6) and/or issuing summons to directors of these companies under section 131 of the Act. 22. Further, being the reassessment proceedings, where the AO is ceased of certain information and documents, it is incumbent upon him to confront the same to the assessee and allow the latter to file its objections and rebuttal. The additions made, merely relying on these information and documentation, without confronting the assessee cannot be accepted. Besides furnishing the reasons for reopening the assessment to the assessee company, there is nothing on record that such information/documentation was confronted to the assessee. Further, the AO has relied upon the statement of third parties namely, shri S.K. Jain, shri V.K. Jain, shri Assem Kumar Gupta and shri Rajesh Agarwal, the assessee again deserves an opportunity to cross examine such persons as held by the Hon'ble Supreme Court in case of Andaman Timber Industries (supra). 23. Further, Hon'ble Rajasthan High Court in case of AKJ Granites (P) (ltd) (....