TaxTMI 
TaxTMI 
2020 (2) TMI 1143
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....r consideration, the assessee received share capital of Rs. 3,98,00,000/- from M/s. Abhishek Advisory Pvt. Ltd.. The AO questioned the genuineness of the receipt of the said amount on account of share capital at a premium of Rs. 790/- per share of Rs. 10/- each. The AO proposed to make the addition u/s 68 of the Act on the basis that search and survey action was carried out in the case of one Shri Anand Sharma, Kolkata on 02-07-2013 whereby various incriminating documents were seized and impounded. The said search action revealed and proved that Shri Ananad Sharma through a web of companies run and operated by him is engaged in providing accommodation entries of various natures like bogus unsecured loans, bogus share application and bogus sales etc. The AO referred to the statement of Shri Anand Sharma recorded by the Investigation Wing, Kolkata, in the search and seizure action carried out on 02-07-2013 and observed that Shri Anand Sharma in his statement admitted to have engaged in providing the accommodation entries for commission. The AO came to the conclusion that M/s. Abhishek Advisory Pvt. Ltd. is one of the companies owned and controlled by Shri Anand Sharma for the purpose....
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....s not referred to any seized materials or any other materials which could prove that the assessee has received the accommodation entries in the form of share application money. Aggrieved by the impugned order of the ld. CIT(A), the Revenue filed the present appeal. 2.2 Before us, the ld. DR has submitted that the assessee issued the shares of Rs. 10/- each at a premium of Rs. 790/- per share without justifying the value of its shares to carry such a high premium. The ld. DR has further submitted that the assessee was duly confronted with the search and seizure action in the case of M/s. Abhishek Advisory Pvt. Ltd., by the DCIT (Inv.) and also shown the statement of Shri Anand Sharma in which all the statements were narrated by the Investigation Wing. Thus the assessee was given the opportunity by issuing show cause notice as to why share capital of Rs. 3.98 crores introduced during the year under consideration from the said company may not be treated as non-genuine as the same is only diversion of profit to evade the tax liability. The ld. DR has referred to the statement of Shri Anand Sharma and submitted that he has explained the modus operandi of creating the paper company fo....
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....ailed to prove the identity, creditworthiness and genuineness of the transactions as required u/s 68 of the I.T. Act, 1961. The ld. DR has also referred various documents which have been filed first time before the Tribunal as additional evidence and submitted that these documents are nothing but the returns filed by M/s. Abhishek Advisory Pvt. Ltd. with R.O.C. which discloses the facts relevant to the issue. The ld. DR submitted that the said company is now owned by three group companies of the assessee namely (1) M/s. Skyway Colonizers Pvt.Ltd. (2) Skyway Ispat Pvt.Ltd and (3) Skyway Township Pvt. Ltd.. Therefore, this company is one of the group companies of the assessee and the assessee was required to furnish all the requisite details to prove the genuineness of the transactions. The ld. DR further contended that the shares of M/s. Abhishek Advisory Pvt. Ltd. were purchased by the group concerns from the assessee at less than Rs. 2/- per share whereas the assessee issued the shares at huge premium of Rs. 790/- per share . The ld. DR has submitted that the ld. CIT(A) has not appreciated the facts as well as the materials brought on record by the AO which establishes that ....
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....the said amount available with M/s. Abhishek Advisory Pvt. Ltd. cannot be doubted. The theory of no income or very less income cannot be applied when the said company was enough funds to receive as share capital as well as reserved funds and the investment shown from the said funds and not the income from operation. Once the funds in the hands of the Investor Company are not in dispute and transaction is through banking channel then creditworthiness and genuineness of the transaction is also proved. The ld.AR of the assessee relied on the order of the ld. CIT(A) and submitted that the ld. CIT(A) has specifically asked the AO to clarify certain facts and also furnish the requisite information including the statement of Shri Anand Sharma but despite repeated directions of the ld. CIT(A), the AO did not furnish the requisite information. Further, the AO has relied on the statement of Shri Anand Sharma without any corroborative evidence to show that the assessee has received accommodation entries. The ld.AR of the assessee thus contended that even from the statement of Shri Anand Sharma, it cannot be concluded that the investor company M/s. Abhishek Advisory Pvt. Ltd. was managed and c....
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....nded. The search action resulted into collection of evidences and other findings which conclusively proved that Shri Anand Sharma through a web of concerns run and operated by him, is engaged in providing accommodation entries of various nature like bogus unsecured loans, bogus share application and bogus sales etc.'' It is clear that the AO has proceeded on the basis of the statement of Shri Anand Sharma recorded by Investigation Wing, Kolkata during search and survey action carried out on 02-07-2013. There is no dispute that in his statement recorded by the Investigation Wing, Kolkata, Shri Anand Sharma has admitted that he is engaged in providing the accommodation entries in respect of share application money, unsecure loans etc. However, in the entire statement Shri Anand Sharma has not stated that M/s. Abhishek Advisory Pvt. Ltd. is one of the concerns / companies controlled or managed by him in providing such accommodation entries. Even otherwise when the statement was recorded on 02-07-2013, M/s. Abhishek Advisory Pvt. Ltd. was not a company either owned or controlled by Shri Anand Sharma directly or indirectly. This fact is manifest from the records as produced by ....
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....g notice u/s 148. Accordingly, notices u/s 143(2) & 143(1) along with questionnaire were issued and served upon the assessee. In response to the aforesaid notices, Sri Sanjoy Kr. Fogla, the A/R of the assessee company being duly authorised by the assessee company, appeared for hearing from time to time. The A/R during the course of hearing, explained the return, filed some relevant documents in support of its return and has also produced its books of accounts for examination. The case was discussed and heard. In this case, the assessee company was incorporated on 01.10.2007 and as on 31.03.2008, it had paid up capital amounting to Rs. 56,97,500/- and share premium reserve amounting to Rs. 10,03,33,500/-. During the course of hearing, inquires were conducted with various shareholders of the assessee company by issuing notices u/s 133(6). During the year under consideration, the assessee had not carried out any business except investment on the other hand, it has incurred expenses amounting to Rs. 11,725/-. Therefore, the expenses so claimed are not allowed for deduction as the assessee has not carried out any business during the relevant previous year. ....
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....non-delivery of the notice. As regards the Commission issued by the AO, it was only for conducting an enquiry from Shri Anand Shrma and not from the investor company. The DDIT (Inv.), Kolkata has clearly submitted the report without conducting any enquiry by giving the reasons that despite summon issued to Shri Anand Sharma, he did not turn up. Therefore, this was an empty and futile exercise. Once Shri Anand Sharma was not controlling or managing the investor company either directly or indirectly at the relevant time then the so-called enquiry would not have resulted any positive outcome. Further, we note that the AO has not supplied any documentary or incriminating evidences to the assessee. Even the statement of Shri Anand Sharma was not supplied to the assessee but it is stated in the assessment order that the assessee was apprised the facts of the case in brief in respect of search of Shri Anand Sharma. The relevant part of the assessment order in para 4 (iii) is as under:- ''4(iii). It is important to mention here that the assessee was apprised the facts of the case in briefly in respect of search action of Shri Anand Sharma by DGIT (Inv), Kolkatta and also shown the....
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....ny operated and controlled by him. However, the AO has not brought on record any evidence to show that the appellant company has paid cash for obtaining the accommodation entry in the form of share application money from M/s Abhishek Advisory Pvt. Limited. From page no. 4 to 10 of the assessment order, the AO has quoted the statement of Shri Anand Kumar Sharma recorded during the course of search. In reply to question no. 7 and 8, Shri Anand Sharma has stated as under: "Q.7 Please state the name of the companies in which you and your family members are associated with? Ans. I am a Director in Quality Jewel Box & Display Pvt. Ltd apart from that I am also a director in my other companies. My wife Smt. Sobha Sharma is also another Director in Quality Jewel Box & Display Pvt. Ltd. apart from that I am also a director in many other companies. The details for the above will be furnished subsequently. Q.8 Please state the name of the companies managed/ controlled by you and also state who are the directors in these companies? be submitted later on . Ans. As far as my knowledge is concerned, around 500 companies approximately are being controll....
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....opy of the screen shot pasted at 2, page no. 11 has mentioned that "as per the above list it is very much clear that M/s Abhishek Advisory Pvt. Ltd. from whom the assessee had taken share application money, which are controlled by Shri Anand Sharma and to accommodation entry has been provided". As already / discussed above, neither in the assessment order nor during the course of appellate proceedings, the AO has given the source of the screen pasted at page 11 of the assessment order. 5.6 At para 4(viii), the AO has stated "In view of above, all the books of account and all the relevant paper of these persons act only as their stooges. All the books of account and all the relevant paper of these companies were found at the business premises. This clearly shows that these companies are run by Sh. Anand Sharma and he controlled all these companies through dummy directors/ principal officers of these companies. This could be established by a careful examination of seized material, including the computer hard discs, PAN drive and tally data, which contain the books of account of these companies. During the course of search daily cash books, balance sheet and cheque b....
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....cation money from the dummy companies floated by Shri Anand Sharma". However he has not discussed what are the evidences available on record which according to AO clearly establishes that the assessee company is one of the beneficiary who obtained accommodation entry in the form of share application_money_from the dummy company floated by Shri Anand Sharma. 5.10 During the course of assessment proceedings, the appellant vide its letter dated 21.01.2015 (at para 6) had requested the AO to supply any adverse material and allow the opportunity of cross examination. Para 6 of letter dated 21.01.2015 of the appellant is reproduced here under for ready reference: "It is also submitted that there is no material to suggest that the share capital contributed to the company is not genuine. No material has been provided which indicates that the said company or its director had stated anything about the company. If there is any such adverse material the same may kindly be supplied to the assessee, and further the opportunity of cross examination may kindly be allowed. The general statements cannot be used against the assessee unless the same is given for the specific company ....
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....panies" pasted at page 11 of the assessment order has not been clarified by the AO. The AO has not discussed any seized material or the investigation carried out by Investigation Wing Kolkata which proves that the appellant company received accommodation entry in the form of share application money from ,M/s Abhishek Advisory Pvt. Ltd. by making cash payment to Shri Anand Sharma or his agent/ middle man. Though the AO has relied upon the statement of Shri Anand Sharma but inspite of having been requested specifically by the appellant, the AO did not provide any opportunity to the appellant to cross examine Shri Anand Sharma. In view of the above discussion, I am of the considered opinion that the appellant has furnished each documentary evidence to prove identity and creditworthiness of the share applicant and genuineness of the transactions. Whereas, the AO has failed to bring on record any evidence to show that the appellant had received accommodation entry in the form of share application money from M/s Abhishek Advisory Pvt. Ltd. by paying cash from undisclosed sources of income either to Shri Anand Sharma or to any of his agent/ middle man. Therefore, in view of the various de....