AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (3) TMI 1596
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....ed 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, including a copy of report received from DDIT (Inv.) Un....
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....ess 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 accounts 4. Kush Hindustan Entertain Ltd CS-2, Silver Anklet Yari Road, Versova, Andheri (W), Mumbai AA CC K3 59 7M 50000 500000 (i) Share a....
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.... 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 from DDIT (Inv) Unit-III(2), Mumbai. It is noticed that during the course of search conducted in the case of Shri Praveen Kumar Jain on 01.10.2013 statements were recorded of the following persons: (i) Shri Praveen Kumar Jain (ii) Shri Uttam C. Hinger (Brother-in-law of Shri Praveen K....
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....d 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. (Para 11 of the affidavit). In the affidavit he has reiterated again and again his retraction of the statement recorded u/s 132(4). In view of this retraction nothing material was left in the hands of the revenue for suggesting action in the hands of the assessee. In view of the contents of the affidavit of Shri Praveen Kumar Jain,....
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....he 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 received by the assessee was nothing but accommodation entries except statement of the following persons recorded before and during the search: (i) Shri Praveen Kumar Jain (ii) Shri Uttam c. Hinger (Brother-in-law of Shri Praveen Kumar Jain) (iii) Shri Dinesh Kumar choudhary (Director of Ansh Merchadise Pvt. Ltd. (iv) Shri Chandra Sheka....
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.... 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 well as of the Territorial High court of Rajasthan. It is prayed that the additions made by the Learned Assessing officer and so confirmed by the Learned CIT(A) deserves to be deleted." 8. Per contra, the ld DR has vehemently argued the matter and relied upon the order of the lower authorities. He also referred to the relevant findings of the ld CIT(A) and submitted that the AO while assuming jurisdiction under section 147 has applied his mind and has....
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....t 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 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 di....
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....stigation 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, we find that the assessee company has submitted detail documentation in regard to these companies from whom a total amount of Rs. 35 lakhs 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 lncorporation and Certificate of Commencement of Business (vi) Copy of PAN Card. Where the....