AI Drafter 
TaxTMI 
TaxTMI 
2018 (6) TMI 1268
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....l of Rs. 1,09,00,000/- received from fourteen (14) companies as unexplained and made the addition. 3. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld. CIT(A), who after considering the facts and submissions of the case, deleted the addition by holding as under: "3.3.2 I have duly considered A/O's contention and appellant's submission, perused the materials on record, factual matrix of the case and also applicable legal position. The case was re-opened on 30/03/2012 on the basis of information received from Investigation Wing Delhi, with regard to share application money received by the assessee. Assessee has filed its objection for re-opening of assessment on 20.02.2013 but AO was unconvinced with that and rejected the same. During the reassessment proceeding, assessee provided all prima facie details such as Name with complete address, PAN, confirmation, bank statement, share application from & allotment etc. Assessee vide letter dated 25.03.2013 has requested AO to provide an opportunity to cross-examine Sh. Aseem Gupta and other directors of these beneficiary companies. However, the same was not o....
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.... 320 T.S Venketation 74 ITD 298 Amarjit Singh Bakshi (HUF) 263 ITR 75 SMC Share Broker Ltd 159 Taxman 306 Jafferali K Rattonsey 53 SOT 220 Nipuan Auto P Ltd 89 DTR 342 Kamdhenu Steel & Alloys Ltd and others 68 DTR 38 Dolphine Marbles (P) Ltd 57 DTR 58 Dadhimati Syntex P Ltd 259/Jodh/2013 Dt 31/7/13. Hon'ble ITAT Jodhpur Bench Bharti Syntex Ltd 52 DTR 73 ( Hon'ble ITAT Jaipur Bench) 3.3.2.2 Further, I also find that the established legal position on the subject under consideration as adopted in a large number of case laws is as follows:- (i) As held in the case of R.B. Mittal v. CIT 246 ITR 283 (AP) in an enquiry u/s 68 of the Act, the rule of audi alteram parterm has to be observed and the assessee must be given a fair and reasonable hearing to discharge the burden cast on him u/s 68 of the Act. (ii) Jurisdictional ITAT Bench Jaipur in case of Bharti Syntex Ltd 52 DTR 73 has held inter alia as under: " .................Held that certificate of incorporation of investor companies was placed on record. It means that they were registered companies under the Companies Ac....
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....n 440 (Raj.) and Laxman Bhai Patel (order of Hon'ble Gujarat High Court dated 22/07/2008 in ITR no. 41/1997). Admittedly, these statements were not recorded by the AO but were recorded by the Investigation Wing Delhi at the back of the assessee. AO has even not referred to the relevant portion of such statement so as to establish the collusive arrangement the assessee company had with these persons. (iv) Further, in the case of N.P. Garodia (order dated13/01/2009 of Hon'ble P & H High Court in ITA no. 808 of 2008) and in the case of Brij Pal Sharma (order dated 17.02.2009 in ITA no. 685 of 2008 of Hon'ble P & H High Court) it was held that where the assessee provides identity and details pertaining to the lenders/creditors but is unable to produce them and requests the AO to issue summons u/s 131 of the Act for their attendance, it is the duty of the AO to issue such summons, failing which the addition would get deleted. It is also held in CIT v. Orissa Corporation Pvt. Ltd. 158 ITR 78 (SC) and Anis Ahmed 297 ITR 441 (SC) that mere non- production of the lender/shareholder cannot be a ground for making addition u/s 68 of the Act. (v) Similarly....
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....eholders, whose names are given to the assessing officer, then the department can always proceed against them and if necessary reopen their individual assessments. In the case in hand, it is not disputed that the assessee has given the details of name and address of the shareholders, their PANIGIR number and had also given the cheque number, name of the bank. It was expected on the part of the assessing officer to make proper investigation and reach the shareholders. The assessing officer did nothing except issuing summons which was ultimately returned back with an endorsement 'not tenable'. In our considered view, the assessing officer ought to have found out their details through PAN Card, Bank Account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the assessing officer. In the above circumstances, the view taken by the Tribunal cannot be faulted. No substantial question of law is involved in the appeal. In the result, the appeal is dismissed in liminni with no order as to costs. " Similar decision has also been taken by the Hon'ble Chhattisgath High Court in ....
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....hat the present appeals amount to relitigation. The Supreme Court in KK Modi Vs. KN. Modi and Ors., (1998) 3 SCC 573 has held, "It is an abuse of the process of the court and contrary to justice and public policy for a party to relitigate the same issue which has already been tried and decided earlier against him. The re-agitation may or may not be barred as res judicata. But if the same issue is sought to be re agitated, it also amounts to an abuse of the process of the court .........." 12. Though we were initially inclined to impose costs yet we are of the opinion that ends of justice would be met by giving a direction to the Revenue to be more careful before filing appeals in a routine manner. In our view, appeal should not be filed in matters where either no question of law arises or the issue of law is a settled one. We give this direction because the "judicial capital in terms of manpower and resources is extremely limited. 13. Registry is directed to communicate copies of this order to all the Chief Commissioners of Income Tax in Delhi for necessary action. With the aforesaid direction, the present appeals are dismissed in limine but without any order as t....
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....dded under section 68, the ratio of Lovely Exports (supra) is attracted, irrespective of the facts, evidence and material. No substantial question of law arises. The appeal is accordingly dismissed." (ix) Recently, in the case of ITO Ward (2) New Delhi Vs. M/s Rakam Money Matters P Ltd ITA no. 2821/Del/2011 dated 16/10/2014, the Hon'ble ITAT Bench Delhi has deleted the entire addition made on account of share application money by the assessee u/s 68 of the Act, relevant extract of which are reproduced as under:- "..................................................................................................................................... 16. In the present case, as noted above, the AO has not been able to bring on record any valid material or evidence to discredit the evidences and the explanation given by the assessee company. The only evidence which has been referred by the AO is statement of third parties recorded by the Investigation Wing. Admittedly these statements were not recorded by the AO but were recorded by the Investigation Wing at the back of the assessee. The AO has not even referred to the relevant portion of such statement so as to establis....
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....ng the course of search operation as well as copies of bank accounts and related documents were provided to the assessee." 4. The appellant craves the indulgence to modify, alter, add and amend any other ground of appeal. 5. The only issue involved in the revenue's appeal is against deleting the addition of Rs. 1,09,00,000/- lacs made by the Assessing Officer U/s 68 of the Act as unexplained cash credit in the form of share capital issued by the assessee. The ld. CIT(A) has allowed the appeal of the assessee by holding that the assessee has discharged its onus by establishing the identity, creditworthiness and genuineness with regard to the transactions for allotment of shares. 6. While pleading on behalf of the revenue with regard to the grounds raised in the appeal, the ld DR has relied on the orders of the Assessing Officer and submitted that the assessee has not discharged the onus. The ld. CIT(A) is not justified in deleting the addition. She submitted that the Assessing Officer has issued inquiry letters U/s 133(6) of the Act to the addresses provided by the assessee. No response was received in respect of ten companies who has invested in the shares. Shri Asee....
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....n providing accommodation entries through this company. - Assessee has not produced the director. 3 M/s Ravnet Solutions Pvt. Ltd. DA-4, Vikas Marg, Shakarpur, Delhi-110092 New Address: 305, Agarwal Arcade, Plot No.6, Sector- 12, Dwarka, Delhi-110075 PAN: AAEER6878G 10,00,000 - In response to summons balance sheet filed but it did not furnish Schedule-5 of the Balance Sheet which shows investment of Rs. 2,11,76,030/- to verify whether it has invested in share capital of the assessee or not - Sh. Aseem Kumar Gupta in his statement has stated that he was engaged in providing accommodation entries through this company. - Assessee has not produced the director. 4 M/s S.G. Portfolio Pvt. Ltd. WP-501, IIIrd Floor, Shiv Market, Ashok Vihar, New Delhi-110052 New Address: House No.191. IInd Floor, Naya Bans, Delhi-110006 PAN: AAHCS6809H 20,00,000 - Company has shown its inability in furnishing the requisite information and requested to grant two months time which is not possible as the assessee was only required to furnish the routine information. - Sh. Aseem Kumar Gupta in his statement has stated that he was engaged in providing accommodation entries through this c....
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....bank account (PB 40) investment of Rs. 5,00,000/- made by it is fully verifiable. Even Aseem Gupta in his statement while providing the list of entities providing the accommodation entries has not stated that J&K Bank of SAM portfolio Pvt. Ltd. has been used by him for providing the accommodation entries. Further inspite of the specific request made by the assessee vide letter dated 18.03.2013 (PB 37), the AO has not utilised his power under the Act to enforce the attendance of the director. The assessee was also not provided an opportunity to cross examine Sh. Aseem Kumar Gupta who is alleged to have stated to provide accommodation entry inspite of the specific request of the assessee vide letter dated 05.03.2013 and 25.03.2013 (PB 34-36). It may be noted that in respect of this company assessee has filed the share application form, confirmation and the bank statement (PB 38-40). Thus, assessee has discharged his primary burden of proving the identity of the share applicant, genuineness of the transaction and creditworthiness of the creditor. Thus, the share capital money received from this company is fully explained and the addition made by the AO is rightly deleted by the CIT(A)....
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.... accommodation entries. In these circumstances, assessee has discharged his primary burden of proving the identity of the share applicant, genuineness of the transaction and creditworthiness of the creditor. Thus, the share capital money received from this company is fully explained and the addition made by the AO is rightly deleted by the CIT(A). 5. In respect of parties mentioned at S. No. 5 to 14 it is to submit that assessee has given the latest address available with him. This is proved from the fact that the summons issued to them is not returned back unserved. If these parties did not turn up then necessary actions should have been taken against these companies and for that reason no adverse view can be taken in case of the assessee. The assessee had furnished complete details to the AO regarding the transactions in question, which include confirmation, share application form, copy of bank account and their permanent account numbers (PB 51-78). These companies are not referred as providing accommodation entries in the notice issued u/s 148. These companies (except M/s Chhoti Leasing & Finance Pvt. Ltd.) are also not covered in the list given by Sh. Aseem Gupta in hi....
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....tained in a black diary which had been impounded during the course of survey. AO in the assessment u/s 153A, made an addition of an amount which was received by assessee as share application money from M/s KMC Portfolio Pvt. Ltd. on the ground that amount was only a movement of money belonging to the assessee through various channels in a colourable manner. CIT(A) deleted the addition by holding that AO had erred in relying upon the contents of the black diary, as it consisted of entries which related to AY 2005-06 and not to current AY 2007-08. Further, during the course of assessment proceedings, the AO had issued notice u/s 133(6) inter alia to M/s KMC Portfolio Pvt. Ltd. as well as to another company in response whereto both the companies had confirmed investments made by them and filed share receipt confirmation, bank statements of the relevant period, acknowledgments of the income tax returns and balance sheet. Tribunal while sustaining the view of the CIT(A) observed that assessee had filed documentary evidence to prove genuineness of share application money consisting of (i) share application forms; (ii) copies of bank accounts of share applicants; (iii) copies of income ta....
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..../s 148 and completed the assessment disbelieving a part of share application money/share capital of Rs. 40,00,000/-. Findings of the case The Hon'ble ITAT affirmed the findings of the Ld. CIT(A) who deleted the addition by holding that nothing adverse was found in the details of share application money/share capital furnished by the assessee in the course of assessment proceedings. The AO has not verified the details furnished by the assessee and I.T. records of the shareholders/investing companies. The assessee has discharged its burden of providing basic details which were required for verification to fulfill the conditions viz. identity of the creditor, credit worthiness of the creditor and genuineness of transaction. The assessee has provided necessary details including the ward/circle where the share applicants/ investing companies were assessed to income tax and discharged the onus cast on it. All the amounts were received, through banking channels by way of cheques issued in favour of the appellant company towards share application money. The shares were allotted as per the documents furnished before ROC. The assessee has produced possible/best evidence to ....
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....he director of the companies from whom the share application money has been received, it has failed to discharge its onus to prove the genuineness of the share application and accordingly made addition u/s 68 of the IT Act, 1961. The Ld. CIT(A) observed that assessee company has filed all the necessary details which include copies of share application form, copies of bank statements, copies of income tax returns, copies of PAN cards, balance sheet, copy of Certificate of Incorporation and Memorandum of Articles of Association of the companies, that the status of these companies is 'active' on the ROC Website and that the opportunity of cross examination was not provided to the appellant in respect of the allegation of the Investigation Wing. Thus, on the basis of the above facts and by relying upon the various judgments, the Ld. CIT(A) held that assessee has discharged its onus and accordingly deleted the addition. The Hon'ble ITAT held as under:- 13. We have heard both the parties. The only issue here is the addition of Rs. 60 lacs made by the Assessing Officer as unexplained credit on account of the share application money. On going through the facts of the case, we noti....
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....portion of such statement so as to establish the collusive arrangement the assessee company had with these persons. 17. Accordingly we are of the view that the CIT(A) was justified in deleting the addition made by the AO. Jadau Jewellers & Manufacturing (P) Ltd. Vs. ACIT 45 CCH 0442 (Jpr.) (Trib.) decision dated 14.12.2015 Assessee was engaged in business of trading and manufacturing of jewellery-Search and seizure operation was carried by department u/s 132 and survey u/s 133A was made on Members of 'X' of which Assessee was one of Members-AO issued notice u/s 153A and Assessee was asked to file true and correct return of income as prescribed under r 12 of the Income Tax Rules, 1962-In return of income filed in response to notice u/s 153A no disclosed income pertaining to relevant year was declared by Assessee-AO observed that during year under consideration, assessee showed total turnover of Rs. 2.05 crores on which assessee returned a net loss of Rs. 13,29,220-AO observed that assessee had obtained share capital and share application money from various companies-AO held that amount received from stated companies in form of share capital was only accomm....
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....onsidering the decision of jurisdictional High Court in case of CIT Vs. Supertech Diamond Tolls Pvt. Ltd. 229 Taxman 460 and the decision of Allahabad High Court in case of CIT Vs. Vacmet Packaging India Pvt. Ltd. 367 ITR 217 deleted the addition confirmed by CIT(A). In view of above, the Ld. CIT(A) has rightly deleted the addition and thus the grounds of the department be dismissed. The ld. AR has also relied on the recent decision of the Hon'ble ITAT, Jaipur Bench in the case of ITO Vs M/s Alok Fintrade (P) Ltd. in ITA No. 180/JP/2015 order dated 14/5/2018 and in the case of M/s Choice Buildstate Pvt. Ltd. Vs ITO in ITA No. 431/JP/2016 order dated 28/3/2018. 8. The Bench have heard both the sides on this issue and perused the material available on the record. The Assessing Officer has treated the share capital received from M/s SAM Portfolio Pvt.Ltd. as unexplained for the reason that the company has not furnished Schedule-5 of the balance sheet, which shows the details of investments. Only because Schedule-5 to the balance sheet is not furnished by the company, the investment made by it in the share capital of the assessee cannot be considered as unexplained. This....
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....l attendance, the same was not issued. In case of M/s S.G. Portfolio Pvt. Ltd., the assessee had furnished the confirmation, share application form and copy of bank account. From the statement of Sh.Aseem Kumar Gupta, it has been verified that the bank a/c no. 5982, 247, 03, 4996 of Corporation Bank and bank a/c no. 10400, 563 of J&K Bank was used by him for providing accommodation entries whereas assessee has received the amount from bank a/c no. 0241 of J&K Bank as evident from the bank statement placed at page No.50 of the paper book. In these circumstances, assessee has discharged his primary burden of proving the identity of the share applicant, genuineness of the transaction and creditworthiness of the creditor.In respect of ten companies mentioned at S.No. 5 to 14 of the chart mentioned in earlier paragraphs, it has been stated that the assessee has given the latest address available with him. This is proved from the fact that the summons issued to them is not returned back unserved. The assessee had furnished complete details to the AO regarding the transactions in question, which include confirmation, share application form, copy of bank account and their permanent account....
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.....2006. In the course of the said proceedings, the details of share application money/share capital were furnished. The AO received information from the Investigation Wing of the Department, that the companies / persons which contributed towards share application money / share capital were involved in providing accommodation entries. In view of the specific information, the AO initiated action u/s 148 and completed the assessment disbelieving a part of share application money/share capital of Rs. 40,00,000/-. Findings of the case The Hon'ble ITAT affirmed the findings of the Ld. CIT(A) who deleted the addition by holding that nothing adverse was found in the details of share application money/share capital furnished by the assessee in the course of assessment proceedings. The AO has not verified the details furnished by the assessee and I.T. records of the shareholders/investing companies. The assessee has discharged its burden of providing basic details which were required for verification to fulfill the conditions viz. identity of the creditor, credit worthiness of the creditor and genuineness of transaction. The assessee has provided necessary details including the wa....
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....see has received accommodation entries by way of share application money from certain companies. The AO required the assessee to prove the genuineness of the share application money received by it. In response to same, the assessee filed details in the form of share application form, PAN, affidavit of the directors of shareholder companies, confirmation, bank statement etc. The AO, however, held that as assessee has not produced the director of the companies from whom the share application money has been received, it has failed to discharge its onus to prove the genuineness of the share application and accordingly made addition u/s 68 of the IT Act, 1961. The Ld. CIT(A) observed that assessee company has filed all the necessary details which include copies of share application form, copies of bank statements, copies of income tax returns, copies of PAN cards, balance sheet, copy of Certificate of Incorporation and Memorandum of Articles of Association of the companies, that the status of these companies is 'active' on the ROC Website and that the opportunity of cross examination was not provided to the appellant in respect of the allegation of the Investigation Wing. Thus, on the b....
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....not been able to bring on record any valid material or evidence to discredit the evidences and the explanation given by the assessee company. The only evidence which has been referred by the AO is statement of third parties recorded by the Investigation Wing. Admittedly these statements were not recorded by the AO but were recorded by the Investigation Wing at the back of the assessee. The AO has not even referred to the relevant portion of such statement so as to establish the collusive arrangement the assessee company had with these persons. 17. Accordingly we are of the view that the CIT(A) was justified in deleting the addition made by the AO. The Coordinate Bench of ITAT, Jaipur Bench in the case of Jadau Jewellers & manufacturing (P) Ltd. Vs. ACIT (supra) has held as under: "Assessee was engaged in business of trading and manufacturing of jewellery-Search and seizure operation was carried by department u/s 132 and survey u/s 133A was made on Members of 'X' of which Assessee was one of Members-AO issued notice u/s 153A and Assessee was asked to file true and correct return of income as prescribed under r 12 of the Income Tax Rules, 1962-In return of income....
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....ITAT, Jaipur in the case of ITO Vs. M/s Alok Fintrae (P) Ltd. vide order dated 14/05/2018 has decided as under: 20. We have heard the rival contentions of both the parties and perused the material available on the record. We find that a similar issue has come up before this Bench in the case of M/s Choice Buildstate Pvt. Ltd. Vs ITO (supra) wherein we have held as under: "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....
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....cer cannot sit back with folded hands and then come forward to merely reject the explanation so made, without carrying out any verification or enquiry into the material placed before 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 Id 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)rec....
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....0 lacs has been received as share capital, the addition has been made by the AO without even asking the assessee to submit the desired information during the reassessment proceedings which cannot be accepted at first place. It is thus a case where the AO was in receipt of material information from the Investigation Wing, Delhi that the assessee company has received accommodation entries in form of share application/investment from two companies as divulged during the course of search and seizure operations in case of S K Jain group. In these situations, the Courts have held that the Assessing Officer cannot sit back with folded hands and then come forward to merely reject the explanation so made, without carrying out any verification or enquiry into the material placed before 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 are therefore of the view that there ....
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....usiness has flowed from the assessee's own money. In coming to this conclusion, the court relied on CTT v. Stellar Investment Ltd. [1991] 192 ITR 287 (Delhi) which has since been affirmed by the Supreme Court in CIT v. Steller Investment Ltd. [2001] 251 ITR 263 . In view thereof, this question need not be decided again." 24. In the instant case, no such nexus has been established by the Revenue and the suspicion however strong cannot be basis for making the addition. Therefore, no presumption can be drawn without establishing the necessary nexus that share application money received is assessee's own undisclosed money. 25. In light of above discussions and in the entirety of facts and circumstances of the case, we don't find any basis for making addition under section 68 of the Act and the findings of the ld CIT(A) are hereby confirmed. In the result, grounds taken by the Revenue are hereby dismissed. " The ITAT, Jaipur Bench in the case of M/s Choice Buildstate Pvt. Ltd. Vs. ITO in ITA No. 431/JP/2016 order dated 28/03/2018 has held as under" "9. We have heard the rival contentions and perused the material available on record including the leg....
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....ement of the tax and it is sufficient that the AO had cause or justification to know or suppose that income had escaped assessment. It is also well settled the sufficiency and adequacy of the reasons which have led to formation of a belief by the Assessing Officer that the income has escaped the assessment cannot be examined for the purposes of determining the assumption of jurisdiction by the AO u/s 147 of the Act. The decision of the Hon'ble Delhi High Court in case of Singature Hotels (P) ltd (supra) is distinguishable on facts as in that case, the Court observed that the information and the reasons are extremely scanty and vague and there is no reference to any document or statement except certain annexure which cannot be regarded as a material or evidence that prima facie shows or establishes escapement of income. Similarly, other decisions quoted by the Id AR which are rendered by the Coordinate Benches in case of M/s TRN Energy Pvt ltd and M/s Superline Construction P Ltd were rendered in peculiar facts and circumstances in those cases and are thus distinguishable on facts. The decision of Hon'ble Delhi High Court in case of Rajat Exports India (supra) among others r....
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.... 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. In the instant case, we find that the AO has not taken any efforts to examine these documents so submitted by the assessee company during the course of assessment proceedings and has simply gone by his prima facie view formed at the time of assumption of jurisdiction u/s 147 and such a prima facie view without further examination/investigation cannot be a basis for forming a final view of making the addition in the hands of the assessee company. It is a case where the AO was in receipt of material information from the Investigation Wing, Mumbai that the assessee company has received accommodation entries in form of share application/investment from seven companies who are not doing genuine business activities as divulged during the course of search and seizure operations in case of Praveen Jain group. In these situations, the Courts have held that the Assessing Officer cannot sit back with folded hands and then come forward to merely reject the expl....