TaxTMI 
TaxTMI 
2023 (3) TMI 1348
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....round 2: That on the facts and in the circumstances of the case, the learned assessing officer had no reason to believe or had formed no belief regarding the escapement of income of the assessee and has issued notices u/s.147 merely on the basis of information supplied by allied officer and on the basis of suspicion, surmises and conjectures. 3. Ground 3: That on the facts and in the circumstances of the case the learned assessing officer erred in rejecting the objection to the assumption of the jurisdiction by the learned assessing officer. 4. Ground 4: That assessee Company is yet to start commercial operation, no Income, whether taxable or exempt, has been earned and no expenses have been incurred of revenue nature, there is no question of assessee earning undisclosed income. Thus, addition made is bad in law, against law of natural justice, uncalled for and may kindly be deleted. 5. Ground 5: That on the facts and in the circumstances of the case the learned assessing officer erred in holding that the shareholder of the appellant company had no credit worthiness. 6. Ground 6: That on the facts and in the circumstances of the case the learned ....
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....s bad in law and may kindly be deleted. 15. Ground 15: That on the facts and in the circumstances of the case the learned assessing officer has erred in completing the assessment without reference to any seized document pursuant to search at the premises of the assessee. 16. Ground 16: That on the facts and in the circumstances of the case the learned assessing officer erred in completing the assessment based on suspicion, surmises and conjectures. 17. Ground 17: That on the facts and in the circumstances of the case appeal dismissed by the CIT(A) rejecting the plea of the assessee without considering the evidences filed before AO and additional evidences filed before Ld. CIT(A). Thus addition made by AO and sustained by CIT(A) is bad in law and may kindly be quashed. 18. The appellant craves leave to add, amend, alter and delete the ground(s) of appeal at time of hearing the appeal." 2. Succinctly stated, the assessee company which had yet not started its business operations during the year under consideration had filed its return of income for A.Y. 2011-12 on 31.03.2012, declaring an income of Rs. Nil. Search and seizure operations under Sec....
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....,29,00,000 Vikash Tradecom Pvt.Ltd. 7,34,00,000 Muskan Dealers Pvt. Ltd. 4,41,00,000 Puja Dealcom Pvt. Ltd. 11,98,50,000 Sethia Services Pvt. Ltd. 2,12,00,000 Maharaja Tradecom Pvt. Ltd. 10,00,000 Total 38,30,50,000 The A.O after deliberating at length on the modus operandi that was adopted by bogus/shell companies to provide accommodation entries was of the view that the assessee company in garb of receipt of share application money/share capital from the aforementioned paper/shell companies had in fact laundered its unaccounted income. It was observed by the A.O that as per the discreet inquiries carried out in the course of the pre-search investigations the aforementioned share applicant companies were neither found available at the addresses that were provided by them in their respective returns filed with the registrar of companies (ROC) nor were they carrying out any actual business. It was further observed by the A.O that though during the course of the aforesaid search and seizure proceedings survey proceedings under Sec. 133A of the Act were initiated in the hands of the aforesaid shareholder companies but as the said companies were n....
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....e year claimed to have allotted shares at a substantial amount of premium to a number of Kolkata based companies, but the fact that there was neither any material which would reveal that it had while allotting such shares scrupulously followed the rules/procedure prescribed under law nor had maintained the statutory records at its registered office, viz. 35/75, Punjabi Colony, Katora Talab, Raipur in itself was a strong circumstantial evidence which proved the falsity of its claim of having received genuine share application money/share capital from the aforementioned companies. It was observed by the A.O that the fact that neither the share allotter nor the share allottee had bothered to follow the basic statutory requirements involved in allotment of shares through private placements in itself fortified the fact that the funds received in the form of share capital/premium were artificially arranged. The A.O in order to support her aforesaid conviction also referred at length to the modus-operandi that was adopted by the Kolkata based shareholder companies for sale/issue/transfer of their shares. The A.O further in her attempt to unfold the artificial arrangement of funds by the K....
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....not been found from any of the premises of Investee company or from where investment received. No submission made by any of the party regarding above related documents. Shri Satpal Singh Bhatia, Director M/s Sona Power Pvt Ltd in his statement recorded u/s 132(4) of I T Act 1961 stated that he has no knowledge of these documents. (vii) Bank accounts of Kolkata based companies were opened in Punjab National Bank, Raipur and Dena Bank, Rajnandgaon. (viii) Statements of Dummy Directors shows that, it was an arrangement/sham Transaction to garb unaccounted income of Sona (Bhatia) Group to introduced in the books of account of companies through colorable device i.e. Share Capital/Share Premium." 6. It was further observed by the A.O that some of the directors of the share subscriber companies were found to be under the control of certain accommodation entry providers, viz. (i) S/ssh. Kali Kant Chowdhury, Arihant Jain and Chandresh Kumar Jain, directors were under the control of an infamous entry operator, viz. Sh. Narender Kumar Jain; and (ii) Sh. Sandeep Sharma, director was under the control of infamous entry providers, viz. S/sh. Anant Sharma and Janardan Chokhan....
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....I T Act, 1961 passed 2013-14 Order u/s. 143(1) of the I T Act, 1961 passed 2014-15 Order u/s. 143(1) of the I T Act, 1961 passed 2015-16 Order u/s. 143(3) of the I T Act, 1961 passed (copy of order enclosed) 2016-17 Order u/s. 143(1) of the I T Act, 1961 passed 2017-18 Order u/s. 143(1) of the I T Act, 1961 passed 2018-19 The return filed. (iv)that the details of audited financial statements of the aforesaid company for the F.Y. 2010-11 to F.Y. 2017-18 were furnished/provided as under : Assessment Year Available records/documents 2011-12 Audited financial statement, Balance Sheet and Profit & Loss A/c (copy enclosed) 2012-13 No documents available 2013-14 No documents available 2014-15 No documents available 2015-16 Audited financial statement, Balance Sheet and Profit & Loss A/c (copy enclosed) 2016-17 No documents available 2017-18 No documents available 2018-19 No documents available (v) that the details of all bank accounts/statements of the aforesaid company for the period 01.04.2010 to 31.03.2018 were furnished/provided as under Assessment Year Available records/documents ....
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.... No documents available 2013-14 No documents available 2014-15 Audited financial statement, Balance Sheet and Profit & Loss A/c (copy enclosed) 2015-16 Audited financial statement, Balance Sheet and Profit & Loss A/c (copy enclosed) 2016-17 No documents available 2017-18 No documents available 2018-19 No documents available (v) that the details of all bank accounts/statements of the aforesaid company for the period 01.04.2010 to 31.03.2018 were furnished/provided as under Assessment Year Available records/documents 2011-12 All bank statements (copy enclosed) 2012-13 No documents available 2013-14 No documents available 2014-15 All bank statements (copy enclosed) 2015-16 All bank statements (copy enclosed) 2016-17 No documents available 2017-18 No documents available 2018-19 No documents available (vi) that as regards the source of investment out of which investment had been made by the aforesaid company for acquiring the shares of the assessee company it was stated in the report so filed by the A.O as under : "No Original scrutiny assessment in this case was made in A.Y. 2011....
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.... 2011-12 All bank statements (copy enclosed) 2012-13 No documents available 2013-14 No documents available 2014-15 All bank statements (copy enclosed) 2015-16 No documents available 2016-17 No documents available 2017-18 No documents available 2018-19 No documents available (vi) that as regards the source of investment out of which investment had been made by the aforesaid company for acquiring the shares of the assessee company it was stated in the report so filed by the A.O as under: "No Original scrutiny assessment in this case was made in A.Y. 2011-12 and the same year has been re-opened with information that the assessee company receipt money out of sale of un-quoted shares which were kept in stock-intrade. In balance sheet of A.y. 2011-12 it is shown that the assessee company had paid share application money of Rs. 12,16,00,000/- during the year. For A.Y. 2014-15 was in scrutiny through CASS and on going through the schedule of Investment. It is seen that investment in shares of Indian companies raised from Rs. 2,54,43,110/- to Rs. 1,40,28,110/- during the year." 4. Puja Tie-up P Ltd. (i). that the investor c....
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....se as per records, funds received from M/s Sandalwood Tie Up Pvt. Ltd Of Rs. 31,00,000/-, M/s Debdaru Vinimay Pvt. Ltd. of Rs.17,00,000/-, M/s Sanmukh Vincom Pvt. Ltd. of Rs.88,00,000/-, M/s Nawab Vyapaar Pvt. Ltd. of Rs. 48,00,000/- and M/s Narottarnka Trade & Vyapaar Pvt. Ltd. of Rs. 45,00,000/- during the F.Y. 2010-11." 5. Vikash Tradecom P Ltd. (i). that the investor company had no physical existence at the address provided. (ii) that as per records the aforesaid company was engaged in the business of trading in shares & securities and granting of loans (iii) that scrutiny assessments/processing of the returns of income of the said company during A.Y. 2011-12 to A.Y. 2018-19 was as under : Assessment Year Order passed 2011-12 The proceedings of re-assessment u/s.148 of the I T Act, 1961 are going on which will be barred on 31.12.2018. 2012-13 The proceedings of re-assessment u/s.148 of the I T Act, 1961 are going on which will be barred on 31.12.2018. 2013-14 Order u/s. 143(1) of the I T Act, 1961 passed 2014-15 Order u/s. 143(3) of the I T Act, 1961 passed (copy of order enclosed) 2015-16 Order u/s. 144) of the I T Act, 196....
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.... the A.O issued summons under Sec. 131 of the Act calling upon it to produce certain specific documents in order to substantiate its claim of having raised genuine share application money/share capital from the aforesaid tainted share subscriber companies. As the assessee company failed to comply with the summons issued under Sec. 131 of the Act, therefore, on a reference made by the A.O to the JCIT(Central), Raipur penalty under Sec. 272A(1)(c) of the Act was imposed on it. 10. The A.O in the absence of the requisite details having been made available by the assessee company carried out further enquiries and downloaded the annual reports of the aforesaid investor companies. It was observed by the A.O that almost all of the said companies were located in Kolkata and in majority of cases they shared a common address. Apart from that, it was observed by the A.O that even those companies whose address was other than that of Kolkata had their origin in Kolkata and the subsequent change of their address was on account of acquisition of such jamakharchi companies by their beneficiaries. The A.O analyzed the authorized/subscribed capital of the aforesaid investor companies by way of a ....
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....nvestment Income/turnover Profit (PBT) 1 Accurate Ashray P Ltd. 2010-11 5,218,000 256,003,931 76,305,721 102,634,000 1,960 2 Consistent Vinimay P. Ltd. 2010-11 4,330,000 211,604,244 15,642,248 32,598,470 2,490 3 Maharaja Tradecom P Ltd. 2010-11 6,827,000 336,453,086 5,228,808 7,463,610 290 4 Muskan Dealer P Ltd. 2010-11 3,126,080 148,276,434 56,406,279 291,630,599 27,212 5 Nawab Vyapar P Ltd. 2010-11 3,124,700 148,258,771 120,389,275 327,054,075 13,988 6 Puja Dealcom P Ltd. 2010-11 3,384,050 160,943,252 131,983,488 533,567,026 17,227 7 Puja Tieup P Ltd. 2010-11 3,232,160 153,531,748 30,408,746 554,208,351 37,541 8 Sethia Services P Ltd. 2010-11 1,660,000 31,357,556 2,049,130 518,529 142,550 9 Vikash Tradecom P Ltd. 2010-11 3,657,130 174,299,370 94,464,128 400,422,172 24,740 12. The A.O after considering the aforesaid facts as were gathered by him both in the course of the search proceedings as well as on the basis of independent enquiries, therein, vide his 'Sh....
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....tantial investments, held a strong conviction that the assessee company had merely laundered its unaccounted money in the garb of share application money/share capital that was claimed to have been received from the aforementioned investor companies. As regards the claim of the assessee company that in case of some of the investor companies scrutiny assessments had been framed, it was observed by the A.O that as the factum of money laundering through the aforesaid investor companies had surfaced only pursuant to search operations conducted on the assessee group, therefore, no weightage could be given to the assessments which were framed by the A.O's in the case of the investor companies de hors any actual verification and investigation on the issue in hand. The A.O on the basis of her exhaustive deliberations dubbed the transactions of receipt of share application money/share capital by the assessee company from the aforesaid 9 share subscriber companies as a colorable device that was adopted by it to camouflage the real transactions and facilitate infusion of its unaccounted money in the garb of share application money/share capital. Accordingly, the A.O after relying on a host of....
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.... From the perusal of the details/document filed by the appellant, it is clear that the lenders were not having any business activity. They were having meager income from which it is clear that it was paper/shell companies of meager means and engaged in giving accommodation entries to the beneficiaries in the garb of share capital including share premium (high). 4.1.4 Onus was on the appellant to prove genuineness of the transactions shown by them but they failed to do so. The above mentioned companies were not doing any business activities and these were engaged in giving accommodation entries. In this regard, judgements of Hon'ble Delhi High Court in the cases of CIT Vs. Nova Promoters and Finlease (P) Ltd. (2012) 342 ITR 169 (Del) and CIT Vs. N.R.portfolio Pvt. Ltd. (2014) 264 CTR 258 (Del) are relied upon. Further, the judgement of Hon'ble Kolkata High Court in the case of Rajmandir Estate Pvt. Ltd. (2016) reported in 70 Taxmann.com 124 (Cal) and the judgement of ITAT, 'D' Bench, Mumbai in ITA no.1835/Mum/2014 dated 24.8.2016 in the case of Royal Rich Developers Pvt. Ltd. are also relied upon. In view of above facts, I am of the considered view that this....
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....isfied as to their identity and creditworthiness as well as to the genuineness of the transaction entered into. The alleged lenders were not found to be in existence and thus, the onus shifts back to the appellant to produce the lenders before the AO and if the appellant falters, the additions can be made u/s 68 of the Act. Section 68 of the Act has been amended by Finance Act, 2012 w.e.f. 01- 04- 2013 whereby the onus is cast upon the appellant to justify the source of share capital including share premium, to explain the source of the source of raising the share capital including share premium which has been held to be clarificatory in nature. In the present case, the appellant could not prove the identity and credit worthiness of the alleged lenders and the genuineness of the share capital including share premium. Being company, it was therefore, viable and proper and duty on the part of the appellant to Trove genuineness of the transaction but the fact remains that the appellant could not prove the same. The lenders were having nominal income. This company is having very insignificant amount of income for the period under consideration and hence their creditworthiness is also n....
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....n Vanijya Niyojan Ltd. [2003] 130 Taxman 153 (Cal.). 2. Share Application Money -- Addition is called for - Assessee obtained loan and also received share application money - AO doubted the identity, genuineness and creditworthiness of these credits - AO made addition for same u/s. 68 - CIT(A) held that the ingredients of section 68 are not satisfied . However, in one of the cases, CIT(A) held that addition, shall be made substantively in the hands of assessee and protectively in the hands of alleged investors in terms of ITAT Judgement in Asst. CIT v. Narmada Extrusion Ltd. (2012) 19 ITJ 202 (Trib.-Indore) - HELD - Assessee has not established the ingredients of section 68; credits cannot be accepted - Also, in Asst. CIT v. Narmada Extrusion Ltd. (2012) 19 ITJ 202 (Trib.-Indore), it was found that additions has already been made in the hands of investor - In the present case, assessee is unable to establish the ingredients of section 68 - Addition is called for. Pramila Investment and Finance Ltd. v. ITO (2013) 22 ITJ 149 (Trib. - Indore). 3. Share Application Money - Assessee has not discharged the genuine of the transaction - Additions justified - Share Applica....
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....be some more evidence of positive nature to show that the subscribers had made genuine investment - SLP against this decision of Delhi High Court has been dismissed. Navodaya Castle (P) Ltd. v. CIT (2015) 25 ITJ 552 (SC) : (2015) 12 STD 463: (2015) 230 Taxman 268. 6. Share Application Money - There is evidence and material to show that subscriber was paper company and not a genuine investor - Share application money - It was held by the Delhi High Court that Certificate of incorporation, PAN etc. are relevant for purchase of identification, but have their limitation when there is evidence and material to show that the subscriber was paper company and not a genuine investor - SLP against this decision of Delhi High Court has been dismissed. Navodaya Castle (P) Ltd. v. CIT (2015) 25 ITJ 552 (SC) : (2015) 12 STD 463: (2015) 230 Taxman 268. 7. Share Capital and Loan - Assessee not able to establish identity of investor - Merely filing PAN, IT returns, Certificate of incorporation, Balance Sheet etc. do not establish the identity - Share Capital and Loan -"HCL" and "OTIL" had subscribed in shares of assessee company - In some cases, "HCL" and "OTIL" had given loans to ....
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....m of the considered view that the AO was justified to make addition u/s 68 of the IT Act. Further, in various case across India it has been observed that commission is also paid for acquiring bogus share capital and premium. Hence, the AO was justified in adopting commission @ 0.05%. Therefore, the AO was fully justified in making addition on account of unexplained cash credit u/s.68 of the Act. Thus, addition made by the AO amounting to Rs.38,32,41,525/-(38,30,50,000/- + Rs.1,91,525/-) is Confirmed. Therefore, appeal on these grounds is Dismissed." 14. The assessee being aggrieved with the order of the CIT(Appeal) has carried the matter in appeal before us. 15. We have heard the Learned Authorized Representatives of the both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. 16. The Ld. AR at the very outset of the hearing of the appeal challenged the validity of the assessment framed by the A.O u/s.143(3) r.w.s. 147 of the Act dated 28.12.2018 on the basis of his two-fold contentions, viz. (i....
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.... search is initiated u/s.132 after the 31st day of May, 2003 ( but on or before 31st day of March, 2021)...." clearly ousted the applicability of the provisions of section 147 along with all other sections which regulated the service of notice, obtaining of sanction, time limit for initiation of proceedings and the statutory time limit provided for framing of an assessment or re-assessment under the latter statutory provision. It was submitted by the Ld. AR that the overriding effect of the clearly worded section 153A over the provisions of section 147 and such other provisions which aided/facilitated the framing of an assessment or re-assessment under the said provision made it clear beyond any doubt that the assessment in the case of an assessee who was subjected to search u/s.132 of the Act was mandatorily to be framed under the said statutory provision. In sum and substance, it was the claim of the Ld. AR that once the conditions envisaged in Section 153A of the Act were satisfied then the A.O was divested of his jurisdiction to frame the consequential assessment u/s. 147 of the Act. The Ld. A.R had on the basis of his aforesaid contentions tried to impress upon us that the ass....
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....r arriving at a belief that the share application money/share capital received by the assessee company from the companies in which the said respective persons were directors was its unaccounted money that was routed back to its coffers by round tripping its funds. It was submitted by the Ld. AR that as the A.O for initiating the impugned proceedings u/s.147 of the Act had, inter alia, acted upon the statements of the aforementioned persons recorded u/s.132(4) of the Act, therefore, the said statements were beyond doubt an "evidence" in his possession. The Ld. AR in order to buttress his aforesaid claim had drawn our attention to sub-section (4) of Section 132 of the Act. It was submitted by the ld. A.R that sub-section (4) of Section 132 contemplated that any statement made by a person during the course of search or seizure proceedings may thereafter be used in evidence in any proceedings under the Act. It was, thus, the claim of the Ld. AR that the respective statements of the aforementioned dummy directors of the share subscriber companies was clearly in the nature of an "evidence" within the meaning of Clause (a) of the "4th Proviso" to Section 153A of the Act. It was submitted ....
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....ernatively, it was submitted by the Ld. AR that now when the A.O had in the "reasons to believe" observed that the share capital capital/premium of Rs.38,30,50,000/- received by the assessee company from 9 paper/shell companies was its unaccounted income for the year under consideration i.e. A.Y.2011-12, therefore, it stood proved to the hilt that the requisite conditions contemplated in the "4th proviso" to Section 153A were satisfied and assessment in its case could have only been framed u/s.153A of the Act. Our attention was once again drawn by the Ld. AR to sub-section (1) of Section 153A, which categorically provided a non-obstante clause on the basis of which the operation of Section 139, Section 147, Section 148, Section 149, Section 151 and Section 153 in the case of a person who had been subjected to search u/s.132 of the Act; or where books of account, other documents or any assets were requisitioned u/s.132A of the Act after the 31st May, 2003 (but on or before the 31st day of March, 2021) was jeopardized. The Ld. AR vehemently stressed upon the word "shall" used in sub-section (1) of Section 153A of the Act. It was the claim of the Ld. AR that now when the requisite con....
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....ent mind. The Ld. AR in order to buttress his aforesaid claim had taken us through a letter dated ..02.2018 issued by the ADIT (Inv.)-1, Raipur to the DCIT/ACIT, Circle-2, Raipur, Page 263-265 of APB. Taking us through the contents of the aforesaid letter, it was submitted by the Ld. AR that the ADIT (Inv.)-1, Raipur, had therein clearly directed the A.O to reopen the case of the assessee company on the basis of information that was unearthed in the course of the search proceedings conducted u/s.132 of the Act on 24.05.2017 on Sona Group (Bhatia Group). The Ld. AR specifically took us through Para 5 of the aforesaid order. Also, the Ld. AR took us through a letter dated 26.03.2018 issued by the ACIT, Circle-2, Raipur to the ADIT(Inv.)-1, Raipur, wherein the latter was intimated by the A.O that the case of the assessee company in compliance to the direction received from the office of the ADIT(Inv.)-1, Raipur was reopened u/s.147 of the Act, Page 292-293 of APB. On the basis of the aforesaid facts, it was the claim of the Ld. AR that though the assessment in the case of the assessee company could have only been framed u/s.153A of the Act, but even otherwise as the very assumption of....
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.... through Page 72 - Para 15.4 of the assessment order, wherein the A.O had declined the request of the assessee company for allowing a cross-examination of the aforementioned persons, viz. S/sh. Narendra Jain and Champak Mandal on the ground that the same was not deemed to be necessary. The ld. A.R in order to support his claim that the declining of the assessee's specific requests for cross-examination of the aforementioned persons, viz. S/sh. Narendra Jain and Champak Mandal had divested it of its innate statutory right to defend its case and was in flagrant violation of the principles of natural justice, had relied on the judgment of the Hon'ble Supreme Court in the case of M/s Andaman Timber Industries Vs. Commissioner of Central Excise, Kolkata-II, C.A No. 4228 of 2006 (SC) dated 02.09.2015 and those of the Hon'ble High Court of Delhi in the case of CIT Vs. Ashwani Gupta (2010) 322 ITR 396 (Del) and CIT Vs. SMC Share Brokers Ltd. (2007) 288 ITR 345 (Del). 20. Adverting to the merits of the case, it was the claim of the Ld. AR that both the lower authorities had erred in recharacterizing the receipt of genuine share application money/share capital by the assessee company from....
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.... Ltd. (2015) 373 ITR 661 (SC) and Central Provinces Manganese Ore Vs. ITO (1991) 191 ITR 662 (SC) and that of the Hon'ble High Court of Gujarat in the case of Sameer Gulabchand Shah, HUF Vs. ITO, Ward-1(3) (2021) 131 taxmann.com 42 (Gujarat). 22. Rebutting the claim of the Ld. DR that the proceedings u/s.147 of the Act were initiated by the A.O not on the basis of seized material but on the basis of independent material, the Ld. AR once again took us through the "reasons to believe" that formed the very basis for initiation of proceedings u/s.147 of the Act. It was submitted by the Ld. AR that the A.O had acted upon the information and statements of S/shri Khushpal Singh Bhatia and Sameer Das Gupta that were made available to her by the ADIT (Inv.)-1, Raipur vide his letter dated ../02/2018, Page-3 of APB. The Ld. A.R in order to substantiate his aforesaid claim carried out a conjoint reading of the aforesaid letter dated .../02/2018 (supra) and the "reasons to believe". It was submitted by the Ld. AR that the "reasons to believe" clearly referred to the search and seizure operations that were conducted u/s 132 of the Act on Sona Group (Bhatia group) on 24.05.2017, and the fact ....
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....ave in a whimsical manner done so u/s.147 of the Act. 23. Considering the issue in hand in the backdrop of the contentions advanced by the ld. Authorized Representatives of both the parties, we find that the adjudication of the same would require answering the following issues stemming therefrom: (1) Whether or not in a case where a search is initiated under section 132 of the Act, and the assesee for the "relevant assessment year" (i.e the extended period of 4 assessment years) had cumulatively satisfied the pre-conditions set-out in the "4th proviso" of Section 153A of the Act, the assessment has to be mandatorily framed by the A.O u/s. 153A of the Act? (2) Whether in a case where a search is initiated u/s.132 of the Act, and the framing of the assessment or reassessment falls within the realm of Section 153A of the Act, then can the A.O frame such assessment or reassessment u/s.147 of the Act? (3) What all are the pre-conditions set out in the "4th proviso" to Section 153A of the Act, and as to whether or not the assessee company had cumulatively satisfied the same for the "relevant assessment year" i.e. A.Y.2011-12? (4) Whether or not the ....
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....e relevant extracts of the statements of S/Shri Narendra Jain and Champak Mandal. The assessee company considering the fact that proper inferences could not be drawn from extracts of the statements of the aforementioned persons that were made available by the A.O, thus, vide its letter dated 21.12.2018 had brought the said fact to his notice and requested him to make available complete copies of the statements of the said respective persons. In order to drive home his aforesaid claim that proper inferences could not be drawn on the basis of extracts of the statements of the aforesaid persons, the assessee had categorically submitted before the A.O that as the extract of the Question no. 18 with respect to the statement of Shri Narendra Kumar Jain as was made available made a reference to the reply given by the said person in response to Question no. 17 which was not made available, therefore, it was impractical to comment on the details mentioned in Question no. 18. Apart from that it was the claim of the assessee that no nexus could be established between the relevant extracts of the statements of the aforementioned persons and adverse inferences which were sought to be drawn agai....
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....the aforementioned persons vide its letter dated 21.12.2018 (supra) is culled out as under (relevant extract):- "1. Your honour has referred to the statement of one shri Narendra Kr. Jain and Shri Champak Mondal recorded on 11.04.2014 by Investigation Wing, Kolkata. Apparently, your honour is relying on the statement recorded by some other officers and your honour has not examined the purported witness yourself. Thus no negative inference should be drawn against the assessee without examining the said persons by your honor herself. 3. Assessee does not have any relation with the said Shri Narendra Kr. Jain nor is he known to the assessee, thus, no negative presumption may be drawn on the basis of any comment made by him without being cross examined by the assessee. 5. We find that there is no nexus between the statement given and the adverse inference being sought to be drawn against us. If such is the case your honor may kindly allow the assessee to cross examine the purported witness. 8. Prayer :- It is prayed that the assessee be provided with an opportunity to cross examine the said persons who have allegedly made the statements on t....
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....thoughtful consideration and are unable to persuade ourselves to subscribe to the refusal by the A.O of the assessee's request for copies of the complete statements of the aforementioned persons, viz. S/Shri Narendra Jain and Champak Mandal that were, inter alia, acted upon both for initiating proceedings u/s 147 of the Act as well as for drawing of adverse inferences as regards the receipt of share application money/share capital by the assessee company. Also, we are unable to concur with both the lower authorities who had declined the assessee's specific written request for allowing an opportunity to cross-examine the aforementioned persons, viz. S/Shri Narendra Jain and Champak Mandal, both of whom were stated to be not unrelated/not acquainted with the assessee company. Although it is a matter of fact borne from record that the A.O had made available to the assessee company extracts of the statements of the aforementioned persons, i.e to the extent the same as per her were relevant to its case, but the same in our considered view could by no means be held to be sufficient. We, say so, for the reason that as pointed out by the assessee company in its letter dated 21.12.2018 it w....
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.... of the Ld. AR that the A.O by declining the assessee's specific written requests for allowing of cross-examination of the aforementioned persons, viz. S/Shri Narendra Jain and Champak Mandal i.e. third parties who were in no way related/acquainted to the assessee company, had acted in a flagrant violation of the basic tenements of the principles of natural justice, we find substance in the same. As observed by us hereinabove, the assessee company vide its letter dated 21.12.2018 (supra) had specifically requested the A.O for facilitating a cross-examination of the aforementioned persons whose statements were pressed into service by her both for initiating proceedings u/s 147 of the Act; as well as for drawing of adverse inferences as regards the authenticity of the transactions of receipt of share application money/share capital in its hand. It was specifically stated before the A.O that as the statements of the aforementioned persons were not recorded by him but by the Investigation Wing, Kolkata, therefore, no adverse inferences be drawn without carrying out a personal examination of the said persons and allowing their cross examination to the assessee company. Also, as noticed ....
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....no reason to disturb the Commissioners orders." On appeal, the Hon'ble Apex Court was of the view that the failure on the part of the adjudicating authority to allow the assessee an opportunity to cross-examine the aforementioned persons whose statements were made the very basis of the impugned order was a serious flaw which rendered the order as nullity inasmuch as it amounted to violation of the principles of natural justice. It was observed by the Hon'ble Apex Court that though the assessee had requested for an opportunity to cross-examine the aforementioned persons but the said requests were turned down by the adjudicating authority. Considering the fact that the Tribunal had upheld the orders of the lower authorities which had turned down the assessee's request for a cross-examination, the Hon'ble Apex Court held the order of the Tribunal as totally untenable. Referring to the observations of the Tribunal that cross-examination of the persons concerned would not serve any purpose, the Hon'ble Apex Court was of the view that it was not for the Tribunal to have taken recourse to any guess work as to for what purposes would have been served by the assessee appellant by carryin....
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.... as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause Notice. We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal." 31. Our aforesaid view that cross examination of a person whose statement is relied upon by the A.O for drawing of adverse inferences is statutorily required to be facilitated to the assessee is also supported by the judgment of the Hon'ble High Court of Delhi in the case of Commissioner of Income Tax Vs. Ashwani Gupta (2010) 322 ITR 396 (Delhi). It was observed by the Hon'b....