AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2020 (3) TMI 339
X X X X Extracts X X X X
X X X X Extracts X X X X
....erved with remarks ' Not Known'. 1(b) not appreciating the fact that the identity & creditworthiness of these paper companies and genuineness of the transaction is not proved in absence of any reply received from these companies on the information called u/s 133(6) by the AO. 2. Not appreciating the finding of the AO that assessee company issued shares at Par to Shruti Agarwal, Kanika Agarwal and Kapil Agarwal whereas shares to the paper companies were issued at premium of Rs. 490/- per share without any justification. 3. Deleting addition of Rs. 2,15,00,000/- on account of bogus share application money received from various paper companies disregarding the decision rendered by the Hon'ble Jurisdictiona High Court of Rajasthan in the case of Rameshwar Lal Mali vs CIT [2012] 256 ITR 536 (Raj) while placing reliance on unconnected case Andman Timber Industries vs Commissioner of Central Excise.'' 2.1 The assessee is a company and engaged in the business of Hotels & Resorts. The assessee filed its return of income on 30-03-2013 declaring total income of Rs. 88,350/-. During the course of scrutiny assessment, the AO issued notice u/s 142(1) of the Act ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h includes confirmations of investment made by these companies, copy of share application forms, bank statements of the share applicants showing remittances of the amount, copy of Board Resolution of the share applicant authorizing their directors to make the investment, copy of income tax returns of share applicant companies and copy of allotment letter issued by the assessee to each share applicants. Aggrieved by the impugned order of the ld. CIT(A), the Revenue has filed the present appeal. 2.2 Before us, the ld. DR submitted that the AO has given a finding that these companies are controlled and managed by Shri Praveen Kumar Jain, Group and Shri Praveen Kumar Jain in his statement recorded by the Investigation Wing, Mumbai has admitted his indulgence in providing the bogus accommodation entries including the share application money. The ld. DR further contended that financial position of the assessee company as on the date of issue of shares did not carry such a huge premium of Rs. 490/- per share. The ld. DR thus contended that on one hand the assessee issued the shares at par to the promoters whereas at the same time the share were issued to these three companies at a prem....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as genuine. Once the share application money received from other three companies is accepted by the AO then the same cannot be disputed in respect of other three companies when there is no difference in the price at which the shares were issued to these six companies. The ld.AR of the assessee thus submitted that identical issue has been considered by ITAT Jodhpur Bench in the case of ITO vs Divya Finlease Pvt.Ltd vide order dated 24-01-2019 in ITA No.424/Jodh/2016 for the Assessment Year 2012-13 and pointed out that these three share applicant companies which invested in the shares of the assessee company were also the share applicants in the case of Divya Finlease Pvt.Ltd. The Tribunal has given the findings regarding the genuineness of the transactions of share application money and allotment of shares to these three companies. Therefore, this issue is covered by the decision of ITAT Jodhpur Bench in the case of Divya Finlease Pvt.Ltd. (supra). The ld.AR of the assessee relied on the decision of Hon'ble Madhya Pradesh High Court in the case of Pr. CIT (1), Indore vs Chain House International Pvt. Ltd (2018( 98 taxmann.com 47 (M.P.) and submitted that Hon'ble High Court ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hom shares were issued at premium of Rs. 490/- per share, the AO questioned the genuineness of the transactions in respect of 03 companies namely (1) M/s. Duke Business Pvt. Ltd (2) M/s. Nakshatra Business Pvt. Ltd and (3) M/s. Olive Overseas Pvt. Ltd. The reason for doubting these transactions of share capital received from these 03 companies was that these entities are controlled by Shri Praveen Kumar Jain who was found to be a bogus entry provider. The AO has made the reference to the information received from Investigation Wing, Mumbai wherein the statement of Shri Praveen Kumar Jain was recorded. Except the said statement of Shri Praveen Kumar Jain, no other material or record was found with the AO to show that the transaction of share applications and allotment of shares to these 03 companies are bogus, though the AO has stated in his assessment order that these 03 companies were asked to furnish the information by issuing notice u/s 133(6) of the Act. However, the AO has not given details as to when such notice was issued. Only a passing reference has been made in respect of the notice issued u/s 133(6) of the Act. Without going into the controversy of issuance of notice u/s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. 490/- per share. Once the assessee has discharged its primary onus by filing the documentary evidences, proving the identity and creditworthiness of these companies as well as transactions then the burden is shifted on the AO to bring the material on record to controvert the documentary evidences filed by the assessee. In the absence of any such material brought on record by the AO to disprove or controvert the documentary evidences filed by the assessee, the mere statement of Shri Praveen Kumar Jain, recorded by Investigation Wing, Mumbai and that too was subsequently retracted cannot be a basis for making the addition by treating the transaction as bogus accommodation entry. The Revenue has not disputed the documentary evidences filed by the assessee which have been mentioned by the ld. CIT(A) in para 4.5 as under:- ''4.5 The appellant has furnished, in respect of each share applicant following documentary evidences to prove the identity and creditworthiness of the persons from whom the appellant has received share application money and genuineness of the transactions:- ` a. Confirmation of the directors of the Applicant companies confirming the investment ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the share applicants. The CIT (A) further observed that without controverting these documentary evidences furnished by the assessee, AO has merely on suspicion treated the share application money as unexplained. The CIT (A) has also found that the statement on the basis of which AO made addition have already been retracted and this fact has already been recorded by AO in his assessment order. Thereafter, considering various documentary evidences filed before AO, the CIT (A) applied proposition laid down in the various judicial pronouncements as referred in his order to the facts of the case and reached to the conclusion that AO was not justified in treating the share application money as unexplained. The detailed finding so recorded by CIT (A) are as per material on record which do not require any interference on our part. Accordingly, we do not find any reason to interfere in the order of CIT (A) for deleting the addition made on account of share application money.'' Similarly in the case of Shivalik Kinema Pvt Ltd vs DCIT (supra), ITAT Jaipur Bench has considered this issue at paras 18 to 24 as under:- ''18. It was further submitted that in respect of the above three....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oned to the AO that the directors are not aware of G.L. Gupta. Further, when assessee has filed all the evidences to prove the genuineness of the share capital, no adverse inference is called for simply because the other director of the assessee company is not produced when their presence was not required by the AO. 20. In support, reliance was placed on following cases:- * CIT Vs. Vacmet Packaging (India) Pvt. Ltd. 367 ITR 0217 (All.) (HC) * ACIT Vs. VIP Growth Fund Pvt. Ltd. 46 CCH 0231 (Del.) (Trib.) * CIT Vs. Supertech Diamond Tools Pvt. Ltd. 229 Taxman 62 (Raj.) * ITO Vs. Rakam Money Matters P. Ltd. (2014) 41 CCH 0155 (Del.) (Trib.) * Jadau Jewellers & Manufacturing (P) Ltd. Vs. ACIT 45 CCH 0442 (Jpr.) (Trib.) decision dt. 14.12.2015 * Ganga Projects (P) Ltd. and B.S. Traders (P.) Ltd. in ITA No. 175 & 176/JP/15 and 179/JP/15 and CO No. 15 & 16/JP/15 and 19/JP/15 order dated 22.06.2016 * Anchal Fintrade Pvt. Ltd. Vs. ITO in ITA No. 131/JP/16 for A.Y. 05- 06. * M/s Choice Buildstate Private limited vs ITO in ITA No. 431/JP/2016 dated 28.03.2018 21. In case of M/s Choice Buildestate Private....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 explanation so made, without carrying out any verification or enquiry into the material placed before him by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be accepted. Further, where the AO relies upon the statement of third parties, the fact remains that the assessee 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, we find that in the instant case, the assessee company has filed copies of the share application form, return of allotment filed with ROC, copies of the bank statements, copies of the financial statements and confirmations of these parties. We also find that the AO has issued letters u/s 133(6) to these parties and has also called for personal appearance of Sh G.L Gupta and one of the directors of the assessee company. It is also a fact that there notices have not returned back undelivered and at the same time, there has been no compliance. It is therefore a case which is shade different than the one we decided supra. At the same time, the fact remains that inspite of non-compliance of these notices and non-appearance which cannot be a sole basis for disallowance, the AO has to give a specific finding and record his satisfaction regarding non-acceptance of documents so submitted by the assessee. We are therefore ....