TaxTMI 
TaxTMI 
2018 (3) TMI 1596
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....fly stated, the facts of the case are that assessee filed its return of income declaring loss of Rs. 2,247 which was processed u/s 143(1), thereafter notice under section 148 was issued and assessment u/s 147 read with 143(3) of the Act was completed wherein the AO made an addition of Rs. 35,00,000/- u/s 68 in respect of share application money received by the assessee company during the year under consideration. 3. In respect of ground No. 1, the assessee has challenged the action of the Assessing officer u/s 147 of the Act. It was submitted by the ld. AR that there was no independent application of mind by the ld. Assessing Officer who was guided exclusively in taking action u/s 148 on the basis of the report received from DDIT (Inv.), Mumbai. It was submitted by the ld. AR that in the reasons so recorded by the AO, it is no where clear as to how the assessee was found beneficiary of so called accommodation entries. Further, the ld. AO has not caused any enquiry before having reason to form a belief that income has escaped in the hands of the assessee company. It was further submitted by the ld. AR that in the statement recorded u/s 139(2) of Shri Praveen Kumar Jain and others....
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....ares Share application money Documents furnished regarding genuineness 1 Vanguard Jewels Ltd. G-3, Silver Anklet Yari Road, Versova, Andheri (W), Mumbai AA AC V3 48 0A 50000 500000 (i) Share Application money Form (ii) Copy of Board resolution (iii) Copy of PAN Card (iv) Copy of Bank statement (v) Acknowledgement of ITR (vi) Copy of certificate of incorporation (vii) Audited statement of accounts 2. Yash - V-Jewels Ltd. A-43, Happy Home Apartment Saibaba Nagar, Borivali (W), Mumbai- 400092 AA AC Y1 11 9P 50000 500000 (i) Share application money Form (ii) Copy of Board resolution (iii) Copy of PAN Card (iv) Copy of Bank statement (v) Acknowledgement of ITR (vi) Copy of certificate of incorporation (vii) Audited statement of accounts 3. Akla AA 50000 500000 (i) Share application money Form Diamond Industries Ltd 233, Panchratna, Opera House, Mumbai- 400004 CA 52 36 D (ii) Copy of Board resolution (iii) Copy of PAN Card (iv) Copy of Bank statement (v) Acknowledgement of ITR (vi) Copy of certificate of incorporation (vii) Audited statement of account....
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.... (2) In all the cases share application money has been received through banking channels. (3) Copies of PAN cards have been furnished establishing the identity of share applicants. (4) Copies of bank accounts have been furnished which establish that the transaction through banking channel and hence genuine. (5) Copies of audited accounts have been furnished. It is submitted that the Learned Assessing Officer has accepted the identity of all the share applicants. The Learned Assessing Officer/Learned CIT(A) have not accepted the share application money only on the ground that a report was received from the Investigation Wing Mumbai reporting that the share applicant companies were paper companies and the assessee had received accommodation entries. In this regard the action of the Learned Assessing Officer as well as of the ld. CIT(A) is assailed as under:- 2. Nothing adverse in the report of investigation wing:- It is further submitted that the Learned Assessing Officer under letter dated 26.12.2014 furnished to the assessee a copy of statement recorded u/s 132(4) of Shri Praveen Jain and others including a copy of report received by him ....
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....f a statement or of two of the ex-employees who always have an exe to grind. Therefore it is submitted that in the report of the investigation wing there is nothing untowards in respect of assessee's transactions. Therefore the same deserve to be accepted. The share application money cannot be rejected on the basis of wild generalization. 3. No action on the basis of retraction by Shri Praveen Kumar Jain - It is submitted that the report of the Investigation Wing, Mumbai is based mainly on the statement of Shri Praveen Kumar Jain. It is on the basis of this statement that the DDIT recommended action in the case of the assessee. In this regard it is submitted that long before the report of the DDIT Shri Praveen Kumar Jain furnished an affidavit dated 15.05.2014 retracting his statement given during the course of search. However there is no mention of this retraction in the report of the DDIT. The main part of the retraction is that Shri Praveen Kumar Jain has stated that during the course of search which lasted from 01.10.2013 to 09.10.2013, his statement was recorded under duress. At that stage of time, he was ready to state anything to get rid of the search operation.....
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....erating these companies and providing accommodation entries. There is no documentary evidence supporting this finding. On the other hand the assessee had furnished a number of documentary evidences which establish the genuineness of the existence of the companies, genuineness of the share application money being routed banking channels. The companies are having PAN. In view of this the Learned Assessing Officer was not justified to disregard all the documentary evidence and treat the share application money as bogus. The Learned Assessing officer was not justified in taking action on the basis of statements and disbelieving the documentary evidences. The Learned CIT(A) also erred in confirming the additions. 5. Principle of natural justice violated by not allowing cross examination- It is submitted that the entire addition in the case has been made by the Learned Assessing officer following the report of the Investigation wing Mumbai. The Learned CIT(A) has also confirmed the addition on the basis of this report. As discussed in the forgoing paras, the report does not consists of any documentary evidence which may lead to establish or infer that the share application money re....
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....T vs. Steller Investment Ltd. (2001) 251 ITR 263 (SC) * CIT vs. Lovely Export (P) Ltd. (2008) 216 CTR (SC) 195 It is submitted that the Learned CIT(A) has quoted certain decision of the Hon'ble Delhi High court in support of his order. It is submitted that the Judicial Disciple requires that the Learned CIT(A) should have followed the decisions of the Territorial High Court of Rajasthan and of the Hon'ble ITAT Bench Jaipur which were quoted before him. This was not done nor the Learned CIT(A) controverted any of the decisions quoted before him. It is settled position of law that if there are two opinions on the same issue then one favourable to the assessee has to be followed as held in CIT vs. Vegetable Products (SC) 88 ITR 192 and CIT Strawboard Manufacturing Ltd. (sc) 177 ITR 431. 7. In view of the aforesaid facts, it is submitted that the Learned Assessing officer and the Learned CIT(A) have acted by placing uncalled for and blind reliance on the report of the Investigation Wing Mumbai disregarding the documentary evidences furnished by the assessee. They have also not been able to controvert a number of decisions on the issue both of the Apex court as we....
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....corded before issuance of notice under section 148, it is stated therein that on the basis of information brought on record, the assessee company has taken accommodation entries of Rs. 35 lacs in the nature of bogus investments/share application from seven companies whose complete details in terms of name, address, date of payment, amount of investment, bank account and the branch through which the payment has been made were stated therein the reasons. It was further stated in the reasons that these companies are indulged in providing accommodation entries in lieu of cash obtained from the beneficiaries and not doing any genuine business activity as divulged during the course of search and seizure proceedings in case of Praveen Jain Group, Mumbai. It was further stated in the reasons so recorded that the assessee company is a beneficiary who has taken the 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 t....
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.... the considered view that there is no illegality in action of the AO in assuming jurisdiction under section 147 in the instant case. In the result, ground no. 1 of the assessee's appeal is hereby dismissed. 10. Now, coming to the merits of addition of Rs. 35 lacs made by the AO under section 68 of the Act. On careful examination of material available on record, we find that it is a case where the AO has relied blindly on information supplied by the Investigation Wing Mumbai without carrying out any further examination of documents submitted during the course of assessment proceedings and independent investigation of these investor companies. As we have noted above, the information so received from the Investigation Wing, Mumbai and after due examination thereof, the AO has formed a prima facie view and a reason to believe that the income has escaped assessment and has thus assumed jurisdiction u/s 147 of the Act. At the same time, 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,....
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....him by the assessee. If the Assessing Officer harbours any doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the Company. We therefore agree with the contentions of the ld AR that in absence of any falsity which have been found in the documents so submitted by the assessee company to prove the identity, creditworthiness and genuineness of the share transaction, these documents cannot be summarily rejected 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. Further, where the AO relies upon the statement of third parties (Praveen Jain and others) recorded u/s 132(4), without getting into controversy whether the said statement was retracted subsequently, the fact remains that the assessee deserves an opportunity to cross examine ....