TaxTMI 
TaxTMI 
2021 (1) TMI 123
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....tice. (iii) That the order passed by CIT(A) is in contravention of provision of section 250(1) and 250(2)(a) of the Act. 2(i). That on facts and circumstances of the case, the Ld. CIT(A) was not justified in upholding the validity of notice u/s 148 of the Income Tax Act, 1961 even though the notice u/s 148 was issued without recording proper reasons to believe in terms of provisions of section 147 of the Act. (ii) That in the absence of any evidence or material in respect of any income escaping assessment, there is no ground or basis for assuming jurisdiction u/s 148 of the Income Tax Act, 1961 (iii) That the reasons having been recorded without application of mind and tangible material, the same are improper, invalid and fails to confer valid jurisdiction u/s 147 of the Act. (iv) That even otherwise, the notice u/s 148 having been issued without proper approval in terms of provisions of section 151 of the Act, the same is illegal and without jurisdiction. (v) That in any case, reasons being merely on the basis of information from investigation wing and in absence of any independent tangible material to establish the case of esc....
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....le of nature justice and not sustainable under the law. 5. That the entire share capital being fully supported from documentary evidences, the impugned order confirming the addition u/s 68 to the extent of Rs. 7,62,40,000/- is illegal, arbitrary and without proper opportunity. 6. That the orders of lower authorities are not justified on facts and are bad in law. 7. That the appellant craves leave to add, amend, alter or forgo any or all of the grounds as may be necessary and in the interest of justice." 2. The facts in brief are that the assessee is a private limited company and is mainly engaged in activities of NBFC. The return of income for the Assessment Year 2010-11 was filed on 18.09.2010 declaring income of Rs. 1,66,200/- which was duly processed u/s. 143(1) vide intimation dated 20.01.2012 and thus income of the assessee stood assessed. Later on, on the basis of information received from DCIT, CC 2(2), Mumbai containing allegation of assessee being a beneficiary of accommodation entry of Rs. 2.50 crores provided by M/s. Prraneta Industries Ltd. (now known as M/s. Aadhaar Ventures India Ltd.), the assessee's case was sought to be reopened.....
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....try from M/s Aadhaar Ventures India Ltd. The assessment of Sh. Shirish C Shah as well as assessment of the entry provider companies have been completed where-in details facts and modus operandi of the entities have been mentioned. In the assessment order it was held that impugned companies were engaged in providing accommodation entries to various beneficiaries. Perusal of assessment order of Sh. Shirish C Shah tantamount that M/s Aadhaar Ventures India Ltd. (P) Ltd was a dummy company and provided accommodation entry to various beneficiaries including the assessee company. 2.3 A data furnished by the DCIT CC-2(2) Mumbai demonstrates that the above named company is a meagre net profit deriving entity which clearly indicates that it does not have creditworthiness to invest in M/s IMS Finance & Investment Pvt. Ltd. During the assessment proceedings, M/s Aadhaar Ventures India Ltd. Pvt. Ltd. has failed to prove creditworthiness of the investment in the assess company 3. Analysis of Information Received 3.1. I have perused the information received from the DOT, CC-2(2), Mumbai. The following facts emerged from, the report, as. provided by the*. DOT, CC-2 (2),....
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....t as defined by section 147 of the ActforA.Y 2010-11. The income chargeable to tax has escaped assessment for this year by the reasons of the failure on the part of the assessee to disclose fully and truly all material facts. Therefore it is a fit case for the issuance of notice u/s 148 of the Act for A. Y. 2010-11." 3. In response, the assessee has filed a letter dated 25.04.2017 stating that earlier return filed u/s.139(1) should be treated as return filed in compliance to a notice u/s.148 dated 30.03.207. Later on, during the course of assessment proceedings, the Assessing Officer on the perusal of balance sheet observed that during the year assessee had issued 7,62,700 shares and had received Rs. 7,62,40,000/- as share capital/premium during the year under consideration. The assessee had filed its objection for reopening of assessment vide order dated 22.09.2017, which has been disposed off by the Assessing Officer vide order dated 04.10.2017. During the course of assessment proceedings, the Assessing Officer has initiated fresh inquiry with respect to share capital received from other parties, which was not part of the reasons recorded and observed that assessee had receive....
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....20000 10 90 20,00,000/- Prraneta Industries Ltd. S 574- 77 4^th Floor, Belgaum Square, Ring Road, Surat, Gujrat 250000 10 90 2^00,000 M/s Balaji Fineap .'Pvt-. Ltd., ISA, U-158, 2"4 Floor, Vats Complex, Vikas Marg, Shakarpur Delhi. 5000 10 90 5,00,000 M/s Anikaish Project Pvt. Ltd., 14, U/158, Floor, Vats Complex, Vikas Marg, Shakarpur, Delhi. 10000 10 90 10,00,000 7,62,40,000/- 4. The Assessing Officer noted that, a search u/s.132 was conducted and the premises of one, Shri Shirish Shah and also a sequential search was carried out at the residence of Shri Om Prakash Khandelwal, Director of M/s. Prraneta Industries Ltd. During the course of search, Shri Om Prakash Khandelwal had explained the activities of M/s. Prraneta Industries Ltd. and the relevant questions and answers have been reproduced in the impugned assessment order from pages 11 to 19 of the assessment order. In the statement Shri Om Prakash Khandelwal had explained the source of income when company was incorporated, i.e., in the year 1999 and also mentioned that the events of t....
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....nt by Shirishbhai for Income tax assessment purposes from Mumbai and the same were seized by the department during the course of search conducted at the registered office of the Company on 09.04.2013. Q.4 Please provide details of the promoters of M/s Prraneta Industries Limited and who manages and controls the affairs of the company including the day to day business activities like purchases, sales, investments, financial transactions like loans advances received and paid and other revenue generating activities. Ans. Sir, 1 along with my wife Smt. Rajshree Khandelwal, my brother Shri Vijay Narayan Sharma (Joshij and few other people promoted, this company in 1993 and share capital of Rs. 1 lacs. The company was listed at BSE in 1996 and true share capital was raised to Rs, 8,15,21,000/-. However, the entire inception til 2008, Thereafter, the entire affaires of the company are managed by Shirish Chandrakant Shah, Q.5 On perusal of the Annual Accounts for F.Y. 2008-09 to 2011-12 of M/s Prraneta Industries Limited filed with ROC and certified and signed by you as Managing Director of the company there has been significant receipt of funds in form ....
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....rom entry business, as agreed by him when the" control and management of the company was handed over to him, thus, I withdrew myself from the entry business of the company, 1 ham been requesting Shirishbhai since past 2-3 years for filing revised Form No. 32 with ROC and withdrawing me from the post of managing director of the company in Jan 2013. Q-6 Please company details of the business activities of M/s. Prraneta Industries Limited since inception. Arts. The company has been engaged in providing accommodation entries of purchase, sale, loans, advances and one time entry of share capital introduction to the clients. 1 managed the entire business till year 2008. In year 2006, I received the proposal from Shirish Chandrakant Shah of Mumbai whom I knew through some common friends. He informed me that he is in the business of providing accommodation entries of bogus LTCQ to various clients on receipt of commission. Shirishbhai proposed that he is interested in using M/s Prraneta Industries Limited for providing accommodation entries of LTCG and for this he told me that the commission received from providing the accommodation entries will be shared equally between m....
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....ver entries, Q.8 In reply to question above you have stated that since inception M/s Prraneta Industries Limited was engaged in providing accommodation entries of various types. Please explain the modus operandi of providing accommodation entries. Ans. Sir, the entry business in M/s Prraneta Industries Limited started mainly after the receipt of funds raised through IPO in the year 1996. Through IPO funds aggregating to 8,15,21,000/~ were managed to be raised. The funds raised through IPO were used to give entries of share capital, unsecured loans, advances or inter corporate deposits was provided used to give cheques to square off the account in their books. These cheques were used to provide accommodation entries to other parties whose accounts were squared off on receipt of cheques. One time entries of share capital was also provided to clients. In this type of entries two types of Modus operandi were employed. Firstly, share capital of the client company was subscribed from whom cash and commission were received. Along with the share application from share transfer forms Were handed over to the clients and finally the shares were transferred to the persons des....
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....lease also explain the types of bogus accommodation entries provided by Shirish Chandrakant Shah using the bank accounts and the books of accounts of M/s Prraneta Industries Limited. Ans. Sir, Shirishbhai was mainly engaged in providing bogus LTCG entries to his clients using the shares of M/s Prraneta Industries Limited. And the number of companies managed by him. The complete modus operandi followed by him is not known to me. However, as per my knowledge and understanding between us and discussed he used to convert cash received from the clients into LTCG using his expertise in dealing in shares and securities through synchronized trading. He also used the bank accounts of M/s Prraneta Industries Limited. To provide one time entries. Q. 12 As per the final accounts of M/S Prraneta Industries Limited. Signed and certified by you as managing Director for the Financial years 2008-09 to 2011-12 and filled with ROC it is seen that M/s Prraneta Industries Limited. Mas turnover, income and expenses as under: Particulars F.Y. 2008-09 F.Y. 2009-10 F.Y. 2010-11 2011-12 Total turnover 653.55,080 5366,72,892 2,655,541,196 1,727,097,811 Incom....
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....ed, {know Aadhar Ventures India Limited). Further, in reply to Question No. 9 he has stated that he has used the network of various companies managed and controlled by Mm for providing "one time" and bogus LTCG entries on receipt of cash from the clients. However, he has clarified that in case of listed companies he is involved only to the extent of providing accommodation entries and whatever, bogus bills of purchase and sale have been issued by the listed companies (including y our company) have been issued by the promoters and he has no role to play in the 'issue of such bogus bills. However, you have stated that the bogus turnover entries of purchases and sale of M/s Prraneta Industries Limited. Are being managed and controlled by Shirish Chandrakant Shah, whereas he has categorically denied to have issued bogus purchase and sale entries. Infact as per his statement referred above the bogus bills have been issued by the promoters and in your statement above you have clearly stated that on behalf of the promoters entire affairs of the company are being managed and controlled by you. In this regard you are requested to go through the statement of Sh....
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....mited, did not execute any land development contract in Tamil Nadu or any other part of the country till date. Q.17 Please produce the contract ag nts, invoice raise dby M/s Prraneta Industries Limited, and evidences including bills vouchers of the expenses incurred wih regard to the Road and Infrastructure projects executed by M/s Prraneta Industries Limited, in which context and income of Rs. 45.88 crores has been shown in the audited accounts for F.Y. 2011-12. Am. Sir, I do not have any idea with regard, to any Road Development Projects executed by M/s Prraneta Industries Limited, till date. As already stated in my statement that M/s Prraneta Industries Limited, is not engaged in any business activity, thus there is no question of executing any Road Development Project. No bills or invoices with regard to these contracts have been raised from the office of M/s Prraneta Industries Limited, neither any bills nor other details, contracts have been received from Shirishbhai pertaining to Road Development Projects. Q.18 You are given an opportunity to go through the statement given by you and confirm as to whether the same has been recorded as stated by you....
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....nation 3 to Section 147. Thereafter, Assessing Officer elaborated judicial principles with regard to burden of proof u/s.68 as laid down by various Courts which has been elaborated by him from pages 31 to 44. Finally, he has made the addition of Rs. 7,62,40,000/- after observing and holding as under: "28. The reply furnished by the assessee has been considered but the same is tenable. The AR has again raised the baseless ground that complete statements and other documents were not provided to him, though all relevant papers were handed over to earlier AR of the company. Moreover, the CD containing various statements and- copy of Inspector report was forwarded along with the final show cause notice. On the other hand, the AR still at the time of framing assessment order did not provided the information that were called vide this office notice issued u/s 142(1) dated 13/09/2017. Moreover the summons so issued also remained uncomplied with. 29. The assessee has tried hard to prove that he is aggrieved and action is being taken against him for nothing. Whereas the fact is that the assessee company has arranged bogus funds without paying any tax to the exchequ....
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....2(2) Mumbai without independent application of mind. It was further submitted M/s. Prraneta Industries Ltd. (now known as M/s. Aadhaar Ventures India Ltd.) is a listed company on Bombay Stock Exchange and the share capital received from the said company is authentic and genuine. The Ld. AR argued that reasons have been recorded on the basis of borrowed satisfaction and without proper application of mind and harped upon the fact that copy of information from DCIT Mumbai and statements of Shirish C Shah was not confronted to assessee and as such the same cannot be relied for recording reasons for reopening of the assessment u/s 147 of the Act. 10. The ld. AR drew our attention to order disposing objection placed at Paper book Pg 33-42 wherein the assessing officer relied on statement of Sh. Omprakash Khandelwal who was also the Director of M/s. Prraneta Industries Ltd. (now known as M/s. Aadhaar Ventures India Ltd.) in respect of whom there was no reference in the reasons recorded earlier. In these circumstances, it is self evident that the assessing officer attempted to improve upon the reasons recorded for issue of notice u/s 148 of the Act. The Ld. AR also pressed the issue of ....
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....acts we are unable to strike down the reopening of the case. At this stage, it is relevant to take note of the fact that assessee has not disputed the fact of receipt of share capital from M/s. Prraneta Industries Ltd. (now known as M/s. Aadhaar Ventures India Ltd.) and the assessing officer was in possession of certain credible information relating to this very party. On careful perusal of reasons, it emerges that assessing officer received detailed information from DCIT Circle 2(2), Mumbai as per which search action was undertaken on Shrish C Shah and it was found that the said person engaged in the business of providing accommodation entries. The reasons also make reference to impounded material wherein the name of assessee has been mentioned as beneficiary. In addition to above, the assessing officer also examined the return of the appellant company to corroborate the information from Investigation Wing and only thereafter the reasons were recorded. Further, the fact that M/s. Prraneta Industries Ltd. (now known as M/s. Aadhaar Ventures India Ltd.) is a listed company has no relevance as being listed on a stock exchange is not a certificate of sainthood and even the listed comp....
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....opy of information/material from investigation or statement of the parties on the basis of which adverse inference was drawn. The assessing officer even failed to provide opportunity of cross examination in case he wanted to rely on any such statement. 17. He further submitted that the entire premise of the Assessing Officer is for disbelieving the entire share application money of Rs. 2,50,00,000/- is based on statement of Shri Omprakash Khandelwal. However, now the statement was later on retracted and had also come up for consideration before the Co-ordinate Bench of the Tribunal in the case of ACIT vs. M/s. Bharat Securities Pvt. Ltd. and this judgment had come up for consideration in the appeal before the Madhya Pradesh High Court in the case of PCIT vs. Chain House International Pvt. Ltd. [IT Appeal Nos. 110 to 115 of 2018 dated 7th Aug 2018] wherein the credential of the share holder company M/s. Prraneta Industries Ltd. (now known as M/s. Aadhaar Ventures India Ltd.) were found to be genuine by three consecutive authorities right from CIT(A), ITAT and Hon'ble High Court. The main thrust of Ld. AR's argument was that since the very same company has already been scrutini....
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....blish the identity, creditworthiness of the party and genuineness of the transaction so as to avoid the rigours of the deeming provision. By 'identity' it means that the person/entity must have actual existence which is legally recognized. The word 'creditworthiness' in simple terms means the resources to pay money (investment in the present case) i.e. the person/entity should have necessary funds to pay. Now it is not necessary that those funds must be own funds or out of earnings but same could also be in the nature of borrowings. The sum and substance is that there should be explainable means in the hands of the investor. The last ingredient is 'genuineness' which apparently means that entire transaction must be real and there should not be any element of collusiveness or sham. Once these pre-requisites of section 68 are satisfied, the can be no case of any addition in the hands of the assessee. 21. When we examine the facts of the present case on the touchstone of pre-requisite of section 68, we find that M/s. Prraneta Industries Ltd. is a listed company and as such there can hardly be any dispute with regard to identity of the party which is subject to stringent of scrutiny....
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....no. 598, 599, 584, 595 and 597/Del/2017 order dated 27.12.2017. The relevant facts and the observation of the Tribunal in that case for the sake of better appreciation for our case also are reproduced hereunder: "3. During the course of assessment proceedings, the AO noticed that the assessee has received share application money and share premium amounting to Rs. 30 Crores in A. Y. 2012-13 and Rs. 25 Crores during for assessment year 2013-14. The details of share application money received during the year under consideration are as under: SN Name F. Y. 2012-13 Amount in Rs. F. Y. 2013-14 Amount in Rs. 1 M/s. Prraneta Industries Pvt. Ltd. ( Later named as M/s. Aadhaar Venture India Ltd. PAN NO AABCP4155F 15,75,00,000 25,00,00,000 2 M/s. Dhanus Technologies Ltd. PAN: AABCD3429L 9,75,00,000 3 M/s. Emporis Projects Ltd. PAN NO AABCN0273G 3,00,00,000 4 M/s. L. N. Polyesters Ltd. ( Later named as M/s. L N Industries India Ltd.) PAN NO AAACC4102B 75,00,000 5 M/s. Shri Ganesh Spinners Ltd. ( Later named as M/s. Yantra Natural Resources Ltd.) PAN NO AACCS4221Q 75,00,000 ....
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....nd the data hub services to various companies. He was also engaged in purchase and sale of shares. He also stated that he did not know Bharat Securities (P) Ltd. or its CA. He disowned his earlier statement and stated that the same was recorded under fear. An opportunity to cross examine was granted to the assessee company which was availed by the assessee company. Page-25 21. Shri Omprakash Anandilal Khandelwal, the then director of Aadhaar Ventures India Ltd. appeared before CIT (A) and his statement was recorded wherein he stated that his company was not engaged in any business of providing any accommodation entries. He also stated that SCS was not controlling the business of his company. He was only a financial consultant. He further submitted that it was not correct that SCS was appointing dummy directors for his company. Regarding investment in Bharat Securities (P) Ltd. he categorically stated that prior to investing the fund in Bharat Securities (P) Ltd. necessary enquiries were made and two directors of the company namely Shri Jils Raichand Madan and Shri. Subramanya Kusnur visited Delhi and discussed the matter of investment with the directors of Bharat ....
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.... repeated requests, CIT(A) had decided to summon such persons and record their statements and provide an opportunity of cross examination to the appellant company as per law, rule and procedure. The question, therefore, arose as to which of the two statements i.e. one recorded earlier and the other recorded by the CIT(A) herself deserves reliance. After considering the entire scenario of the case the CIT(A) found that the earlier statements did not merit acceptance for the reasons such as earlier statements were recorded behind the back of the assessee and also behind the back of the AO. No opportunity of cross examination was allowed despite specific and repeated requests. Even the opportunity of cross examination once sought to be provided was immediately snatched. The earlier statements were recorded much before the search on the appellant company. Bharat Securities was not in the picture and was not an issue during these statement. In such statements non had named Bharat Securities. We also observe that the Ld. CIT(A) held that the statements recorded by her are more authentic in all respect. Direct questions regarding investment in Bharat Securities were put up and replied. Bo....
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....is only objection was that Somabhai was not a director of the company at the time of making investment in Bharat Securities. Now two other directors of the same company namely Sh. Jils Raichand Madan and Sh. Omprakash Anandilal Khandelwal appeared before me and their statements were recorded. Both of them were directors of Aadhaar Ventures at the time of making the investment in Bharat Securities. Their tatements have already been discussed in the earlier paras and to avoid any repetition I simply want to reiterate that the present statements given by both the directors of Aadhaar Ventures before me are totally confirmatory and corroborative to the earlier statement of Somabhai Sunderbhai Meena recorded by the AO during the assessment proceedings". 32. The AO had stated at various places in the assessment order that the share capital has been received from paper companies. CIT(A) examined the issue and held as under: "I find that the position in the present case is otherwise. All the five companies have produced the books of accounts. There is an audit reports. All the investors have appeared personally. The books of accounts were examined thoroughly and ....
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....iber company has also been furnished ( PB-839 to 846) which reflected the payments by RTGS towards share capital evidencing sufficient availability of funds on the date of investment. There is no cash deposits before issue of RTGS and none of the entries are found to have been made out of the assessee's own account in this bank statement. Therefore genuineness of transaction is not to be doubted. The share of the assesse company was duly allotted to the investor company, which creates legal right of the investor. Unless proven otherwise with some documentary evidence, it cannot be alleged that all the apparent is not real who alleges to be so. It cannot be alleged merely on the basis of apprehensions and on third party statement, without allowing cross examination and bringing any concrete material on record to show that the money invested is assessee's money. 86. All the notices issued by the Revenue Authorities, i.e. investigation Wing, Assessing Officer and CIT(A) to this company were served and duly complied by the said company. We find that said company is a listed company and duly complying with all the statutory requirement of SEBI and Stock Exchange. The assessee h....
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....has not given any change to cross examination all the parties which even though demanded by the assessee company and said opportunity was denied to the assessee even the assessee has reached at Mumbai on given date. The AO is required to allow the opportunity of cross examination, in view of the decision of Hon'ble Supreme Court in the case of Andaman Timber Industries Vs. Commissioner of Central Excise (2015) 13 STD 805 (SC). 88. We further observed that the Ld.CIT(A) having convinced with this serious injustice rightly decide to summon the witness on whose statements the AO had placed reliance without giving the opportunity of cross examination to the assessee. All the witness appeared before the CIT(A) and they were examined by her and their statements were recorded and opportunity of cross examination was given to the appellate company. From careful perusal of such statement and logical analyses of thereof we are convinced that there statements were found to be strongly supporting the explanation and stand of the assessee company against the made by the AO u/s. 68 of Act. We also find that the Ld. CIT(A) send these statement and other relevant evidence for examination,....
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..... 91. Sh. Chandan Kumar Singh, a third party was duly appeared before the CIT(A) and he had denied of any accommodation entries provided, in his statement recorded by the CIT(A), his denial in invoking in any accommodation activities are placed at paper book page No. 303 to 311 and also reflected at page No. 229 to 234 of the order of Ld. CIT(A). Thereafter, the statement of both the directors and third parties recorded by the CIT(A) were provided to the AO for his comments ( second para last four line of page No. 130 of CIT(A) order and the AO submitted his comments and comments on the statement of directors and third parties were filed by the CIT(A) ( refer paper book page No. 313 to 322, page No. 144-146, ( OAK) 161-162 (SCS) 224-213, (CKS) and 224-225 (Jajoo) of the order of CIT(A). However, no adverse comments appears to have been made by the AO on these statements except merely saying that statement cannot be recorded at this stage. 92. In our considered opinion as per sub section (4) of section 250 of the Act, the Ld. CIT(A) before disposing any appeal may make such further any enquire as he thinks fit, or he may direct the AO to make such enquiry ....
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....thus, we uphold the same. In the present case, the AO has not brought any evidence on record that the amounts of share application money received from Aadhar Ventures India Ltd., Dhanus Technologies Ltd., M/s. Emporis Projects Ltd., L.N. Polyester Ltd. and M/s. Yantra Natural Resources Ltd. are merely accommodation entries. As mentioned earlier, the AO has acted merely on the basis of information received from the Investigation Wing. Therefore, the ratio laid down by Hon'ble Madhya Pradesh High Court in CIT Vs. Peoples General Hospital Ltd. (2013) 356 ITR 65 )MP), (2013) 216 Taxman 320(MP)/(2013) 35 Taxmann.com 444 (Madhya Pradesh) is squarely gives shelter to the assessee, wherein it was held that where the assessee establishes the identity of share applicant, burden of proving creditworthiness was not on assessee. 122. In the light of above discussion, we held that the AO was not justified in making addition of Rs. 30 crores by treating the share application money received by the assessee as unexplained cash credit u/s. 68 of the Act. Therefore, we are in agreement with the findings of Ld. CIT(A) in deleting the same, as there was no case for making such additio....
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....y Chain House International (P) Ltd. he also stated that he knew BSPL and its Directors. He had visited their residence and also visited business premises of its sister concerns. He stated that Shrish Chandrakant Shah was their financial consultant and he did not know Shri Sawan Kumar Jajoo. His company had made genuine investment in BSPL. He also denied to have received or collected any cash from anybody in exchange of RTGS made to BSPL for subscribing share capital. He further stated that the earlier affidavit was filed under fear and pressure. 20. After considering the entire factual scenario of the case, the appellate authority found that the earlier statements did not merit acceptance for the reasons such as earlier statements were recorded behind the back of the assessee and also behind the back of the AO. No opportunity of cross examination was allowed despite specific and repeated requests. The earlier statements were recorded much before the search on the appellant company. BSPL was not in the picture and was not an issue during these statements. In such statements none had named BSPL and held that the statement recorded by the CIT (Appeals) are more auth....
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....accounts or the documents produced or the fact of investment and source thereof. The AO had never disagreed with the various evidences and documents submitted before him by the director of the investor company." 23. After considering the statement of Shri Somabhai Sunderbhai Meena, Director of major investor company namely M/s. Aadhar Ventures India Ltd. which was recorded by the AO during assessment proceedings, the CIT(A) arrived to the following findings :- "The appellant company had purchased one director of Aaadhaar Ventures namely Shri Somabhai Sunderbhai Meena before the AO during assessment proceedings. He confirmed that his company had invested a sum of Rs. 40.75 crores in the share capital of the appellant company in Fys. 2011-12 and 2012-13. he produced the books of account of the company and was thoroughly examined by the AO. This investment was found recorded in the books of account as verified by the AO. He explained the source of investments with reference to the books of account. Such source was then examined by the AO also obtained copies of the necessary ledger accounts with reference to the source of investments. He explained that his c....
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....portunity was never provided to the appellant despite repeated requests during assessment proceedings. I hold that reliance on statements without cross examination is against the settled principle of natural justice. Even otherwise SCS and others have appeared before me and admitted that SCS was not managing and controlling these companies for the purpose of providing accommodation entries. All the companies are engaged in the real business having substantial turnover, paying rent, salaries, electricity bill etc. One of the companies is also paying excise duty and sales tax. Some of the companies have taken secured loans from banks. As I understand the reference to key associates could be the employee of SCS namely Chandan Kumar Singh. In the statement recorded by me he has denied all such allegations. He has admitted that SCS was not involved in any business of providing accommodation entries and nor he has ever seen SEC Controlling these five companies. Hence I do not agree with the conclusion arrived at by the AO." 51. The learned ITAT after due examination of the order of CIT (Appeals) and the documents on record insofar as identity creditworthiness, genuineness of tra....
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....worthiness and genuineness of the investors and, therefore, the same has been established beyond any doubt and there should not have been any question or dispute about premium paid by the investors therefore, unless there is a limitation put by the law on the amount of premium, the transaction should not be questioned merely because the assessing authority thinks that the investor could have managed by paying a lesser amount as Share Premium as a prudent businessman. The test of prudence by substituting its own view in place of the businessman's has not been approved by the Supreme Court in the decisions of CIT v. Walchand & Co. (P.) Ltd. [1967] 65 ITR 381 and J.K. Woollen Mfg. v. CIT [1969] 72 ITR 612 (SC). 55. The question of share premium has been considered by the Delhi High Court in the case of CIT v. Anshika Consultants (P.) Ltd.[2015] 62 taxmann.com 192 wherein it was held thus :- "The onus cast upon the assessee under Section 68 of the Act to satisfy the department about the true identity of an investor, its creditworthiness and genuineness of a transaction was explained by the Supreme Court in CIT v. Lovely Exports (P) Ltd., [2008] 216 CTR 195,. Whils....
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....ble High Court also noted that source of investment in the hands M/s. Prraneta Industries Ltd. (now known as M/s. Aadhaar Ventures India Ltd.) is explained and the company was not engaged in the business of providing accommodation entries. In fact, Sh. Omprakash Khandelwal himself, in that case, has categorically affirmed the genuineness of the affairs of M/s. Prraneta Industries Ltd. It is relevant to mention that in the said case, the alleged nexus of Shirish C Shah with Investor Company was also examined and it was found that Shrish C Shah was not even controlling the said concern. After examining the entire gamut of facts in the light of decision of Hon'ble MP High Court, there remains no shred of doubt in our mind that M/s. Prraneta Industries Ltd. is a genuine concern and veracity and authenticity of share capital received by the appellant from the said investor cannot be questioned. 25. Further, the issue of share premium as raised by Ld. DR also gets dispelled by above the decision of Hon'ble High Court wherein it has been held that issuance of share at premium is prerogative of the board and wisdom of the investor. Moreover, in absence of any prohibition with regard to ....
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....ries Ltd. v. CIT[2011] 336 ITR 136 (Del) and Bombay High Court in the case of Jet Airways [2011] 331 ITR 236 (Bom). It was held by Hon'ble Jurisdictional High Court that Explanation 3 to section 147 will not applicable if no addition is made in respect of issue which was subject matter of notice u/s 148. 30. In the present case, the reasons were recorded only with respect to issue of share of capital of Rs. 2.50 crores from M/s. Prraneta Industries Ltd. (now known as M/s. Aadhaar Ventures India Ltd.) and same having been deleted by us, the remaining addition of Rs. 5,12,40,000/- has no legs to stands and is hereby ordered to be deleted. 31. However, for sake of completeness and keeping in mind the gravity of issue, we feel appropriate to decide the legality of additions made over and above the reasons recorded in the light of scope of proceedings u/s 147 of the Act. As mentioned earlier, the provisions of section 147 are potent and its application is restricted to deserving cases having satisfied the defined criteria i.e. existence tangible material evidencing escapement of income and application of mind. Further, the act has inbuilt checks and balances to ensure proper exerc....
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.... proposing to make this addition of Rs. 52.91 crores. The issue is, therefore, covered in favour of the assessee against the Department by Judgment of Hon'ble Delhi High Court in the case of Ranbaxy Laboratories Limited vs., CIT [2011] 336 ITR 136 (Del.) in which in para 18 it was held as under : "We are in complete agreement with the reasoning of the Division Bench of the Bombay High Court in the case of CIT vs., Jet Airways (I) Limited [2011] 331 ITR 236 (Bom.). We may also note that the heading of section 147 is "income escaping assessment" and that of section 148 "issue of notice where income escaped assessment". Sections 148 is supplementary and complimentary to section 147. Subsection (2) of section 148 mandates reasons for issuance of notice by the Assessing Officer and sub-section (1) thereof mandates service of notice to the assessee before the Assessing Officer proceeds to assess, reassess or recompute the escaped income. Section 147 mandates recording of reasons to believe by the Assessing Officer that the income chargeable to tax has escaped assessment. All these conditions are required to be fulfilled to assess or reassess the escaped income chargeable to tax.....
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....lves in agreement with same. The intention of legislature behind enacting provisions of section 147 is not to create a parallel assessment proceeding akin to regular assessment framed u/s 143(3) of the Act. The purpose of section 147 is to catch in the tax net income escaping assessment based on tangible material. The requirement of tangible material and approval u/s 151 is to keep check on arbitrary exercise of power u/s 147 which necessarily means that assessing officer cannot convert reassessment proceedings into regular scrutiny proceedings at his/her sweet will. It goes without saying that Explanation cannot defeat the intention and purpose of a section and as such the application of Explanation 3 will have to be in accordance with checks and balances which are applicable at the time of issuance of notice u/s 148. 35. In the present case, in respect of share capital of Rs. 5,12,40,000/- received from 18 parties, the assessing officer initiated fresh enquiry during the course of reassessment proceedings on the basis of books of account of the appellant. There is no dispute that very same material was in existence when assessing officer recorded reasons and it is neither t....