TaxTMI 
TaxTMI 
2021 (12) TMI 310
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....s return of income on 18th April, 2017 declaring the loss of Rs. 18,78,467/-. During the course of assessment proceedings, the AO noted that the assessee company during the year under consideration has received share application money from the following companies:- S.No. Name of the company Address Share application money 1. M/s Binapani Merchandise Pvt. Ltd. 7, Ganesh Chandra Avenue, 5th Floor, Kolkata 1,50,00,000 2. M/s Kansabati Tradecom Pvt. Ltd. 7, Ganesh Chandra Avenue, 5th Floor, Kolkata 40,00,000 Total 1,90,00,000 3.1 He noted that during the search and post search and survey proceedings in Kuber Group of companies, the details relating to companies giving accommodation entries of share application money, share premium, share capital and unsecured loan came to light. He observed that during the search and seizure operation u/s 132 of the Act on 9th October, 2014 in the Kuber Group of Companies, statement of Shri Mul Chand Malu was recorded u/s 132(4) of the Act in which he has offered to declare undisclosed income of Rs. 100 crore of the Kuber Group of companies and their directors under specific head of share....
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....tails in the form of copies of share application forms, confirmations, bank statement, ITR acknowledgement and annual financial statement of respective applicants. However, the assessee failed to produce the directors for examination of the AO. Since there was persistent non-compliance of the assessee to produce the directors of the assessee company or the directors of the investor companies, the AO, relying on various decisions held that the assessee failed to prove the identity and credit worthiness of the investor companies and the genuineness of the transaction. Invoking the provisions of section 68, the AO made addition of Rs. 1,90,00,000/- to the total income of the assessee. 6. Before the CIT(A), the assessee, apart from challenging the addition on merit, challenged the validity of reassessment proceedings. The assessee has also made elaborate submissions. The ld. CIT(A) called for a remand report from the AO. After considering the submissions of the assessee, remand report of the AO and the rejoinder of the assessee to such remand report, the ld. CIT(A) upheld the validity of the reassessment proceedings and also upheld the addition on merit. 7. Aggrieved with such or....
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.... sustaining the said addition arbitrarily rejecting the explanation and evidences brought on record by the appellant. 9. On the facts and in the circumstances of the case Ld. CIT (A) New Delhi has erred both on facts and in law, in sustaining the action of AO violating the principle of natural justice by not providing opportunity for cross- examination of persons, whose statements have been relied upon by the AO, in spite of specific request made by the appellant in assessment proceedings as well as before CIT(A). 10. On the facts and circumstances of the case, the learned Ld. CIT (A) New Delhi has erred, both on facts and in law, in sustaining the action of AO. As the proceedings initiated u/s 147/148 are invalid, the proceedings should have been initiated u/s 153C. 11.That the provisions of sections 234A, 234B and 234C of the Act are not at all applicable. 12.That the impugned appeal order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence. 13.The appellant craves leave to add, amend or alter any of the grounds of appeal." 8. Grounds of appeal No.1, 12 and 13 being general in n....
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....ore, the averment of the AO that during search and post search proceedings ,information relating to entities providing accommodation entries of share application money, share premium, share capital and unsecured loans to Kuber Group entities came to light is factually incorrect. 8.2 The ld. Counsel for the assessee submitted that the AO has alleged that M/s Binapani Mercentile (one of the investor) was a jama kharchi company. However, this fact is contrary to the report of commission. Referring to page 48 of the paper book, he submitted that the Calcutta wing has mentioned the name of Jama Kharchi companies and the name of BINAPANI was not there in that list. Further perusal of Page No- 50 would show that name of BINAPANI was at serial number-7 and covered in the category of those companies whose address were not traceable. Therefore the observation of the AO that BINAPANI was Jamakharchi Company is factually incorrect and contrary to the report of investigation wing which shows that the AO has not applied his mind at all. 8.3 Ld. Counsel for the assessee referring to Q 14 at Paper Book page 54, submitted that Mr Vikash Aggarwal in his statement, which is part of the assessme....
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....ed 17.02.2021. vii. Shri Natrajan Monie- ITA NO 1817/Del/2017- dated-07.12.2020. viii. SJM international in ITA No-3762/Del/2018 dated 09.08.2021 8.7 Referring to the following decisions, he submitted that the expression "reason" means cause or justification. It has to be based upon some material. Further the expression used in 147 is "has reason to believe" which does not mean "has reason to suspect". For the above proposition, he relied on the following judgments:- (i) Ganga Prasad Maheswari Vs CIT, 139 ITR 1043(AII); and (ii)Indian Oil Corporation v. ITO (1986) 159 ITR 956 (SC). 9. In his next plank of arguments, the ld. Counsel for the assessee submitted that there is no independent application of mind by the AO. He submitted that the AO must apply his mind to the information coming from outside and then entertain a belief that income has escaped assessment. Referring to the reasons recorded, he submitted that the AO has solely relied on stale information and hence it is case of borrowed satisfaction. Otherwise the AO would not have made incorrect observations and relied on the past events to assume the sanctity of future transactions. ....
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....t in these cases also the AO was same, date of recording of reasons was same, date of issuance of notice u/s 148 was same and the persons whose statements were relied were also same. 13. The ld. Counsel for the assessee submitted that third party statements cannot be relied upon for assuming jurisdiction. He submitted that during assessment proceedings the AO has relied on the statement of Mr. Vikash & Devesh without providing opportunity to cross examine them. During remand proceedings the AO, in the remand report has said that he has framed the assessment on the basis of statement of Shri Mul Chand Malu. He submitted that Mr Malu was neither the Director nor the employee of the assessee Company and hence all these statements cannot be relied upon. He submitted that the Tribunal in the case of Kuber Khadyan in ITA No.4223/Del/2018 has held that statement of third party cannot be relied upon for framing assessment u/s 153C. Though the present case is under section 147, however, the ratio laid down would apply mutatis mutandis in the present case. 14. So far as merits of the case is concerned, he submitted that assessee, in order to discharge his burden, has filed the followin....
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.... recorded by the Investigation Wing has not been got confirmed or corroborated by the person during the assessment proceedings. Section 142 of the Act contains the provisions relating to enquiry before assessment. It is provided u/s. 142 (2) of the Act that for the purpose of obtaining full information in respect of income or loss of any person, the Assessing Officer may make such enquiry as he considers necessary. In our considered view the Assessing Officer ought to have conducted a separate and independent enquiry and any information received from the Investigation Wing is required to be corroborated and reaffirm during the assessment by the Assessing Officer by examining the concerned persons who can affirm the statements already recorded by any other authority of the department. Facts narrated above cleariy show that the Assessing Officer has not made any enquiry and the entire assessment order and the order of the first Appellate Authority are devoid of any such enquiry" 15.2 He accordingly submitted that the grounds raised by the assessee be allowed. 16. The ld. DR, on the other hand, heavily relied on the order of the CIT(A). 17. We have considere....
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....e addresses were not traceable. Further, the statement of Shri Vikas Aggarwal were recorded during the previous enquiries/surveys/searches and not in connection with the present commission issued in Kuber Group. It is also his submission that Shri Vikas Aggarwal has never stated that he has given any accommodation entry to the assessee company which is evident from Question No.10 put to Shri Vikas Aggarwal and the name of the assessee company does not appear. So far as M/s Kansabati Tradecom Pvt. Ltd. is concerned, it is the submission of the ld. Counsel for the assessee that Shri Devesh Upadhyaya has never admitted that he has given any accommodation entry to the assessee. In his answer to questions No.7 and 8 Shri Devesh Upadhyaya has stated that accommodation entries of bogus long-term capital gain is provided to various entities and not share capital and premium. It is also his submission that during the assessment proceedings, the AO has relied on the statement of Shri Vikas Aggarwal and Shri Devesh Upadhyaya without providing any opportunity to the assessee to cross examine them. Even during the remand proceedings the AO himself has admitted that the assessment was made on th....
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....p of companies and their directors under specific head of share capital/ share premium/capital formation out of total undisclosed income of Rs. 150 crore. The relevant parts of the statements are reproduced as under:-" 21. We find, although the assessee has specifically asked for cross-examination of the persons whose statements were relied on by the AO, however, the same was not provided. 22. So far as the name of Mr. Devesh Upadhya is concerned, we find the AO has stated that in the commission report received from Kolkata office, statement of Vikas Agrawala, Devesh Upadhya and Praveen Kumar are mentioned. However, in none of these statements of entry operators, the name of the assessee is mentioned. Further, opportunity to cross examine has not been provided. A perusal of the chronology of date chart shows that the statements of all these persons were recorded prior to the date of search in the Kuber group of cases i.e., on 09.10.2014. 23. We find, identical issue had come up before the Tribunal in the case of sister concerns of the assessee, namely, Kuber Khanpan Udyog Pvt. Ltd. and Kuber Food Products India Pvt. Ltd. in ITA No.580/Del/2019 and ITA No.322/Del/2019, resp....
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....0 17. The reasons recorded in the first paragraph clearly refer to the search and seizure operation carried out on the coupe group of cases on 9/10/2014. During post search investigation summons were issued u/s 131 of the income tax act to comic sales private limited, which has provided the share capital to the assessee company. The summons returned unserved. Further enquiries were made issuing commission u/s 131 (1A) of the act and information was gathered from investigation wing that the share deposit company is not physically existing at the given address 125/1, cotton Street, Kolkata - 700007 whereas the correct address of this company was 16 A, Shakespeare Sarani, New B K Market, 5th Floor, Kolkatta 71. Thus, the learned assessing officer made the inquiries at the incorrect address. Furthermore, the learned assessing officer has heavily relied upon the statement of Mr. Vikas Agarwal residing at BC - 75, Akanskha apartment, 4th floor Calcutta 101 that was recorded on 9/1/2014. He is an alleged entry operator. He admitted this in answer to question number 6 of his statement. He named in answer to question number 7 - 12 companies, however, the name of the company who deposited sh....
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....tatement recorded of all these persons are prior to date of search on Kuber Group. Thus, statements are recorded by the investigation wing prior to search, naturally before the reasons were recorded. Before the learned CIT - A, on the specific request of the assessee that AO has not granted an opportunity of the cross-examination of those persons, even the learned CIT - A directed the AO to grant cross- examination of those person however AO expressed his inability to do so. With respect to the identity, creditworthiness and genuineness of the transactions the assessee submitted return of income of the share applicant, it is audited balance sheet, confirmation of the transactions and bank statement of the share applicants. Therefore, the claim of assessee is that it has discharged initial onus cast upon it under section 68 of the income tax act. The learned AO merely on the basis of the statement of the entry operators, who did not name the share deposit as 1 of the companies operated by them, the inspector report saying that share deposit and did not exist by inquiring at the incorrect address and failure to give cross- examination of those entry operators, which are the only stat....
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....Ltd, a Kuber Group company has received share application money from following companies: S.No. Name of the Address company No instru Share application money M/s Binapani 7, Ganesh Chandra Avenue, 5 1,50,00,000 Merchandise Pvt Floor, Kolkata ] Ltd 2. M/s Kansabti Tradecom Pvt Ltd 7, Ganesh Floor, Kolkata Chandra Avenue, 5 40,00,000 Total 1,90,00,000 2. During the post-search investigation, summons were issued u/s 131 of the Income Tax Act 1961 to M/s Binapani Merchandise Pvt. Ltd and M/s Kansabti Tradecom Pvt Ltd providing share application money to M/s Vijayshree Food Products Pvt. Ltd seeking evidence to verify the transactions made however no replies were filed nor did anyone appear on behalf of M/s Binapani Merchandise Pvt. Ltd and M/s Kansabti Tradecom Pvt Ltd. The summons were either returned un-served or no compliance was made. 3. During the assessment proceedings of Kuber group of companies, enquiries were conducted in the cases of M/s Binapani Merchandise Pvt. Ltd and M/s Kansabti Tradecom Pvt Lid by issuing commissions u/s 131(1d) of the IT. Act and information was gathered from the Invest....
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....aken accommodation entries in the form of share application money amounting to Rs. 1,90,00,000/- from entry providing company, M/s Binapani Merchandise Pvt. Ltd and M/s Kansabti Tradecom Pvt Ltd during the F.Y. 2013-14 relevant to A.Y. 2014-15. The assessee did not disclose fully and truly the above material facts necessary for his assessment for AY 2014-15. It is pertinent to mention that in the case of CIT v/s Nova Promoters & Finlease (P) Ltd. (ITA no.342 of 2011) dated 15.02.2012, the Hon'ble Delhi High Court, which is the jurisdictional High Court, held that as long as there is a 'live link' between the material which was placed before the assessing officer at the time when reasons for reopening were recorded, proceedings u/s 147 would be valid. The Court also held- "We are aware of the legal position that at the stage of issuing notice u/s 148, the merits of the matter are not relevant and the Assessing officer at that stage is required to form only a prima facie belief or opinion that income chargeable to tax has escaped assessment" Here it would be worthwhile to mention that in the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd. v AC....
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....0, 3rd Floor, E-2, ARA Center Jhandewalan Extension, New Delhi Sir, Dt: 25/11/2016 Sub: Report regarding commission u/s 131(1)(a) of the I. T. Act, 1961 in the. case of Kuber Group (D.O.S. 09.10.2-14) - Matter rearding. Ref: Your F. No. ACIT/CC-30/2016-17/964 Dated 10/11/2016 Please refer to the above. A list of 27 companies was received by this charge attached as enclosure with your above referenced letter for necessary enquiries u/s 131(1)(d) of the I. T Act, 1961. Out of these 27 companies 9 companies are such companies which are used for routing and providing accommodation entries to beneficiaries. The directors / key persons of the respective companies admitted the fact on oath during previous enquiries/surveys /searches etc. available with the official database. Copy of statements recorded u/s 131 of the I. T. Act, 1961 of related companies are enclosed as annexure for your necessary action. Sl. No. 1 2 Name of Entry Provider M/s Lotus Dealmark Pvt. Ltd. 151A, Utkalmani, Gopalbandhu Sarani, 2nd Floor, Kolkata-700007 (WB) M/s Kansabati Tradecom Pvt. Ltd. (WB)-700013, AAECK0758J Name of the directo....