AI Drafter 
TaxTMI 
TaxTMI 
2023 (10) TMI 690
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....sly erred in facts of the case in holding that the appellant company has not furnished necessary evidence required to substantiate its case. 4. That the order passed by Ld. PCIT u/s 263 of the Act is further illegal and not tenable under the law because of mechanically holding it to be prejudicial to the interest of revenue because the Ld. AO has accepted one of the two possible legal views." 3. The assessee is a company and filed the return of income for A.Y. 2011-12 declaring a loss of Rs. 563/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. During the proceedings the AO noticed that the assessee has issued 262250 equity shares of face value of Rs. 490/- aggregating to Rs. 12,99,72,500/-. The assessee out of the amount received has advanced loan of Rs. 6,45,03,125/- to one M/s Empower Industries India Ltd. The AO further noticed that the assessee and the Empower group are part of entry provider group i.e. Shirish Chandrakant Shah group. The Assessing Officer called on the assessee to provide the basis for the share premium. The Assessing Officer also issued notice under section 133(6) to parties who have subscribed to t....
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.... same for denovo after affording a reasonable opportunity to the assessee." 6. During the remanded proceedings, the Assessing Officer called on the assessee to furnish the details by issue of notice under section 142(1) which is extracted below:- "The Hon'ble ITAT vide order dated 28.01.2018 set aside the order of the Ld. CIT(A) and restored the matter to the file of the AC) with the direction to decide the issue after affording a reasonable opportunity of being heard. In this regard you are requested to furnish the following details:- a) In your case the Hon'ble ITAT has set aside the issue observing that the co-ordinate bench of the Tribunal in the case of the M/s. Nishottam Traders Pvt. Ltd. has observed that it has to be ascertained in whose hand the income is to be assessed, whether in the hands of Shri Shirish Chandrakant Shah or the assessee. Since vou have claimed before the Hon'ble ITAT that your case is similar to the issue involved in the case of M/s. Nishottam Traders Pvt. Ltd You are requested to provide the evidences to prove that you were used as a conduit for providing accommodation entries and the real beneficial'}'' of ....
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....ny is the group company of M/s. Empower Industries Limited. As the entire share capital received by the assessee company was deployed in M/s. Empower India Limited, the Ld. CIT(A) in the case of M/s. Empower India Limited has treated the assessee company as the conduit company and he further held that M/s. Empower India Limited was being used by Sh. Shirish C Shah for providing accommodation entries. Also from the reconciliation sheet submitted by the assessee of the amounts credited to its bank account and seized material of Sh. Shirish Shah during the search proceedings, it becomes evident that the assessee company is a conduit company monitored by Sh. Shirish C. Shah with the help of Sh. Devang Master who is the director in the said company. 5. On going through the details filed by the assessee, it is noticed that the assessee stated that as a part of layering process, the amount received by the assessee company was first transferred to M/s. Empower India Limited and thereafter transferred to the beneficiaries. Also, the assessee contended that the estimated commission income for such layering of funds has already been assessed as income of Shri Shirish C. Shah on actua....
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..... However, it is observed that assessee has made no independent submissions to support its claim of conduit company and has relied on the order of Ld. CIT(AJ-48 in the case of Empower India Pvt. Ltd. to prove itself as a conduit company. The AO also during assessment proceedings has merely accepted the claim of the assessee without conducting any independent enquiry and verification regarding how the assessee is a conduit company and if it is a conduit company then who is the ultimate beneficiary of the transactions being effected by the assessee. The assessee has stated that such cash credits have already been taxed in the hands of Shri Shirish C. Shah. But no such evidence is submitted and also no enquiry has been made by the AO to verify the claims of the assessee that whether such cash credits to the tune of Rs. 13,26,25,000/- have actually been assessed in the hands of the beneficiary of accommodation entries. 7.1 By claiming itself to be a conduit company, assessee admits that it has no explanation for the identity of creditors, genuineness of the transactions and creditworthiness of the creditors. Unless the sum of Rs. 13,26,25,0007- is assessed in the hands of the ....
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.... the assessee has clearly established the fact that assessee conduit company for providing accommodation entries. The Ld.AR also submitted that the list of ultimate beneficiaries to whom funds are transferred from M/s. Empower India Limited was also submitted which the Assessing Officer has recorded in his order as a finding to state that the assessee is a conduit of layering of funds. The Ld.AR also argued that the reconciliation statement submitted before the AO clearly explains the source of receiving funds by the assessee. Thus, the Ld.AR summarized that the Assessing Officer has applied his mind and took a conscious call to assess only the commission income in the hands of the assessee. The ld AR further relied on many judgments in this regard. 12. The Ld. DR, on the other hand, submitted that the direction of the Tribunal has not been properly followed by the Assessing Officer whereby the Tribunal remitted the issue with a direction to verify in whose hands the income is to be assessed whether in the hands of the assessee or Shirish C Shah. The Ld. DR also submitted that it is important for the assessee to explain the source which the assessee did not do. The Ld. DR furthe....
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....oming out clearly from the assessment order. The assessee in the above table is referring to the various dates in the bank statement and also certain lines in the excel sheet seized. However, there is no evidence to show that the Assessing Officer had called for any further details such as bank statement or there is no explanation as to how the same reconciles to the excel sheet seized. It is relevant here to mention that the Assessing Officer in the original proceedings under section 143(3) had issued notices under section 133(6) to check the source of the capital contribution and had received a reply from the parties that they had not made any capital contribution [para 4.3.1, page 2 of AO's order under section 143(3)]. Given this, in our considered view, the Assessing Officer in the remanded proceedings ought to have looked into further details based on the reconciliation to verify how each line in the bank statement relates to the seized material of Shirish C Shah. The reconciliation statement as it is does not establish the fact that the source for the capital contribution is from material seized without further enquiry or verification of details. Therefore we are inclined to ....
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....he Principal 95[Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person." 17. The phrase 'should have been done' as provided in the newly inserted Explanation means the verification/ enquiry which ought to have been done. In other words, as per clause (a) to Explanation to section 263, the order passed without making enquiries or verification which should have been made is erroneous insofar as it is prejudicial to the interests of the revenue. It may be said that the Income Tax Act nowhere provides the exact modalities to be followed to verify a specific claim made by the assessee and it is the prerogative of th....
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....whose hands the income needs to be assessed i.e. whether in the hands of Shirish Chandrakant Shah or the assessee. There was no direction given by the Tribunal to assess only the commission as income in case the assessee is found to be only a conduit. Therefore, without prejudice to our earlier findings that the Assessing Officer has not made proper enquiry before concluding that the assessee is only a conduit entity, we are of the view that the Assessing Officer has not followed the directions of the Tribunal correctly. From the perusal of records, it is noticed that the Assessing Officer has issued only one notice under section 142(1) calling for details and based on the details submitted (which is elaborately discussed herein above) concluded the assessment accepting that the assessee is only a conduit without calling for any other documents or evidences. The Assessing Officer has not carried out any enquiry with regard to in whose hands the income is to be assessed and no finding recorded as per the directions of the Tribunal to hold in whose hands the income is to be assessed. The Assessing Officer has recorded that the estimated commission is already taxed as income in the ha....