TaxTMI 
TaxTMI 
2021 (4) TMI 626
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....ficer on the basis of information received from DDIT (Inv)-II, Mumbai, that based on the information collected during search proceedings in the case of Mr Praveen Kumar Jain Group, it was observed by the wing in the above case that various persons were not doing any genuine business activity but was engaged in the activity of providing accommodation entries of various nature like bogus loans, bogus share application and bogus sales etc. As per the information received, the AO percieived that assessee had also taken accommodation entries of Rs. 547,50,000/- in the nature of bogus share application money from the 5 parties namely M/s Alka Diamond Industries Ltd, M/s Ansh Merchandise Private Limited (formerly New Planet Trading Company Private Limited), M/s Triangular Infocom Ltd (formerly Lexus Infotech Ltd), M/s Vanguard Jewels Ltd and M/s Yash-V-jewels Ltd. during the relevant previous year. In order to verify the genuineness of the transaction, AO issued show cause notices under section 133 (6) of the Act for furnishing the details to the addresses available on record. However, all notices were returned unserved, later assessee provided the new address of the companies to the AO a....
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....may be stated that the source of source in respect of share application can be verified by the assessing officer only from the assessment year 2013-14 as per Proviso to Section 68 of the Act which was added only with effect from 01104/2013. The Proviso was added by Finance Act 2012 w.e.f 01/04/2013. However, it may be stated that the assessee company has proved source of the fund. 3. The said parties have filed the confirmations in respect of the shore application. 4. The appellant has filed the following documents during the assessment proceedings. * Share application form along with Board Resolution to investment and certificate of investment made. * Confirmation along with full name and address of the parties who have been allotted shares. * Copy of Acknowledgement of Income Tax Return filed. * Copy of accounts as on 3 1.03.2010. * Copy of the bank statements showing the amounts paid by the Said Companies to the appellant company. * The affidavit by the Directors of the said companies confirming the investment. * Share Certificate issued by the Company. * Return of allotment filed with registrar of company (MCA) allotting the shares. * Copy of PAN Card. 5....
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....legation made by the said third party. However, in the appellant case no such cross examination was given. I) Analysis of Provision of section 68 of the Income Tax Act 1961 "Cash credits. 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year: Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall he deemed to be not satisfactory, unless- (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be sat....
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.... submits that credit worthiness on the lenders has also been established. As regards Genuineness of the Loan On this point Your Appellant would like to make the following submissions: * They have been reflected in the books of account of the appellant as well as the investor company. * Mr. Praveen Kumar Join as well as the directors of respective companies whom the share application money was taken by way of their affidavits, have not only confirmed the transactions of share application money but also Categorically deposed that these loan were through account payee cheques Banking channels are absolutely genuine The fact of share application money being received through proper banking channels was also verified by the Assessing Officer. * During the course of assessment proceedings no further inquiries were made as regards alleged bogus share application money and no further statements were recorded in case of Your Appellant. * Similarly, no specific questions were asked either to Mr. Praveen Kumar Jain and his associates during the entire search operation or subsequently despite the fact that the subsequently many statement in his case were recorded. No specific query ....
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....pellant further relies on following judgments to prove the point that having established the identity of lenders, the creditworthiness of the creditors and the genuineness of the loan, he was thereafter not required to prove anything further and no duty was cast upon him to establish as to how the lenders had arranged their funds to advance loans to him:- * CIT Vs Orrisa Corporation (P) Ltd 159 ITR 0078 * Nemi Chand Kothari Vs CIT 264 ITR 0254 * Murlidhar Lahorimal Vs CIT 280 ITR 0512 * Labh chand Bohra v. ITO 219 CTR 0571 * CIT v. Dwarkadhish Investment Put. Ltd. 330 ITR 0298 * CIT v. Value capita Services Put. Ltd 307 ITR 0334 * Netscape Software Ltd. v. DCID ITA/38528M/2009 * ACID v. Divine (India) Infrastructure Pvt. Ltd. IDA No.2082/Del/2009 * ACIT, CC-32, Mumbai Vs M/s Archieve Realty Developers Ltd ITA Nos. 6104&6105/Mum/2012 dated 18/11/2016 * M/s Shree Laxmi Estate Put Ltd Vs ITO, Wd.1513)13), Mumbai. ITA No.5954/Mum/2016) dated 29/12/2017. The Mumbai Tribunal had occasion to consider the similar facts where allegation was made in respect of money received from Companies alleged to be belonged to Praveen Kumar Join. The Hon'ble Tribunal considerin....
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....pening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit. * Arceli Realty Limited (Formerly known as Ellora Electricals Ltd.) Vs. Income Tax Officer (ITA NO.6492/Mum./2016) dated 19.04.2017-ITAT (Mum.) It has been held in the said case that the appellant having provided the details the addition cannot be made under section 68 of the Act. The said case is in respect of money received from Mr. Pravin Jam. It is reiterated that the AO had merely relied upon the statements of third parties and brushed aside the evidences led by the appellant and not discharged his own onus while making addition u/s 68 of the Act. In view of above submissions, it is prayed that the addition of Rs. 5,47,50,000/- made by the AO should be deleted.‖ 5. Considering the submissions of the assessee in detail and Ld CIT(A) in reference to the financials of the investment companies and allowed the appeal of the assessee with the following observations:- "The above reproduced financials of the investor companies indicate that these investors are in regular busi....
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....ntry is merely a surmise but not demonstrated. I have considered above submissions/arguments and it is concluded as under Papers/ evidence found in the search action raises presumption but the same is available in the case of person searched but not in the case of third parties unless proved and corroborated, Similarly, retraction may he rejected as motivated, but the same can be considered against the person who has retracted in his assessment. Such statement in the case of another person loses its sanctity unless it is corroborated with other evidences. When the investor company is filing regular Income tax returns of income and there is a transaction through banking channel, no addition can be made without having any contrary or cogent evidences in possession. The AR relied and brought to my notice the judgments to support the appellant which are equally applicable to the appellant's case. Some of them are discussed here below:- 1. The Hon'ble Supreme Court in the case of CIT V/s Lovely Exports 6 DTR308 has held asunder: "If the share application money is received by the assessee company from alleged bogus share holders who's name are given to the Assessing Offic....
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.... proviso to Section 68 of the Act which was introduced with effect from 1st April, 2023 would apply in the facts of the present case even for A. Y. 2008-09. The basis of the above submission was that the de hors the proviso also the requirements as set out therein would have to be satisfied. HELD by. the High Court dismissing the appeal: (i) We find that the proviso to Section 68 of the Act has been introduced by the Finance Act 2022 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-24 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April. 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced 'for removal of doubts" or that it is 'declaratory". Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 6....
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....e. The Revenue has nowhere proved that any malafide is done by the assessee. Failure to do so, vitiate the addition made under the set of facts. Reference can be made to the decision in CIT vs Orissa Corporation Pvt. Ltd. 158 ITR 78 (SC) and the ratio laid down in Khandelwal Construction vs CIT 227 ITR 900 (Guw.). The satisfaction has to he derived from the relevant facts and that to on the basis of proper enquiry by the Assessing Officer and such enquiry must be reasonable and just In the present case, the Assessing Officer has not brought any evidence on record that the amounts received from M/s Alka Diamond Industries Ltd. arid M/s Yash-V-Jewels Ltd. are merely accommodation entries. As mentioned earlier, the Ld. Assessing Officer has acted merely on the basis of information received from the Investigation wing. The ratio laid down by Hon'ble Delhi High Cowl in CIT vs Vrindaban Farms Pvt. Ltd. squarely gives shelter to the assessee, wherein, it was held that if the identity and other details of share applicant are available, the share application money cannot be treated as undisclosed income in the hands of the company. in the present case, the assessee even has proved the s....
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....,47,50,000/- made by the AC) u/s 68 in the case of the appellant is not justified. Therefore, the said addition is to be deleted. Grounds No.2&3 taken up by the appellant are accordingly allowed.‖ 6. Aggrieved with the above order revenue is in appeal before us raising following grounds of appeal:- "i) Whether On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition made on account of bogus share application money without appreciating the fact that the inv3esting companies were paper entities providing accommodation entries of share application managed by Shri Pravin Jain Group? ii) Whether On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition of bogus share application money without appreciating the provisions of section 68 of the I.T. Act, 1961. Further, once it was established during search u/s 132 on Pravin Jain and Associate Concerns that the investing companies were paper entities providing accommodation entries of share application, the confirmation filed in response to notice under section 133(6) of the Act holds no ground?‖ 7. Before us, learne....
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.... and after these transactions, are minimal. ii. Taj Impex and Paras Gems form part ofthe bank statements in all the 5 entities. iii. All transactions are in round figures. 2. Perusal of the Return of Income of Yash V Jewels on page 48 of PB, Triangular Infocom Ltd on page 87 of PB, and Vangaurd Jewels Ltd on page 125 of PB, shows that they were all filed on 14/10/2010 from IP address 115.96.142.59, though the Directors, Auditors as well as the addresses of the companies are different. It is also seen that the Return of Income for Alka Diamond was also filed from the same IP address, though on 15/10/2010. This vindicates the cause of the Assessing Officer that these are entities controlled by the Pravin Jain Group. 3. Further, the bank accounts of Triangular Infocom (page 84 of PB), Vanguard Jewels Ltd (page-121 of PB), and Ansh Merchandise (page 215 of PB) are managed by the same person ie. [email protected], which is again indicative of entities controlled by a common person. 4. The Notice for AGM on page 53 of PB for Yash V Jewels, on page 91 of PB for Triangular Infocom, on page 130 of PB for Vanguard Jewels Ltd and on page 165 of PB for Alka Diamond Industries Ltd; al....
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....nus now shifted to the AO. He noticed that assessing officer could have carried out independent verification of all the parties by issuing summons under section 131 of the Act. The assessing officer has not made any further investigation to controvert the claims of the assessee but proceeded to make the addition heavily relying on the information of investigation wing and merely on the fact that these transactions involving Shri Praveen Kumar Jain. 10. We notice that Ld DR in her submission brought to our notice from the information contained in bank statements of the parties filed in the paper book. She brought to our notice that the amounts transferred by the parties to the assessee were received from another concern and transferred on the same day. She does not dispute the fact that all the transactions were routed through banking channel and assessee has submitted all the information which were before the assessing officer. The assessing officer should have investigated all the information and could have controverted the submissions made by the assessee or could have found the sources of the money transferred and he could have traced whether any involvement of cash deposits. I....
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....As mentioned earlier, the Ld. Assessing Officer has acted merely on the basis of information received from the Investigation wing. The ratio laid down by Hon'bie Delhi High Court in CIT vs Vrindaban Farms Pvt. Ltd. squarely gives shelter to the assessee, wherein, it was held that if the identity and other details of share applicant are available, the share application money cannot be treated as undisclosed income in the hands of the company. In the present case, the assessee even has proved the source of source, therefore, the creditworthiness was also proved, consequently, no addition made u/s 68 of the Act can be said to be justified. The ratio laid down in Creative World Telefilms Ltd. (supra) by Hon'ble jurisdictional High Court squarely comes to the rescue of the assessee. The assessee duly furnished the proof of identity like PAN, bank account details from the bank, other relevant material, genuineness of the transaction, payment through banking channel and even the source of source, therefore, the assessee has proved the conditions laid down u/s 68 of the Act. It is also noted that in spite of repeated request, the Ld. Assessing Officer did not provide opportunity to....