TaxTMI 
TaxTMI 
2024 (5) TMI 1068
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....are application money, without appreciating the facts of the case; 3. The appellant craves to add, amend, alter, delete or modify the above grounds of appeal before or at the time of hearing. 2. Briefly the facts of the case are that the assessee-company is engaged in the business of trading & manufacturing of yarn & fabrics. It has filed its return on 25.09.2011 declaring total income of Rs. 64,57,350/- and book profit of Rs. 1,11,93,778/-. The assessment was completed u/s 143(3) on 24.03.2014 at total income of Rs. 67,56,610/-. The AO has observed vide para 2 as under: 2. A search action was carried out at the residence and offices of Shree Shirish Chandrakant Shah (hereinafter referred to as "SCS") and at the residence of his key employees and associates on 09.04.2013 by Unit- 1 (Investigation of Ahmedabad Investigation Directorate. During the course of search conducted in the case of SCS it was found that SCS is engaged in providing accommodation entries of share capital, share premium, share application money, unsecured Loans, Long term capital Gains, Short term capital gains wherein cash is received by him from various clients and against this cash he pro....
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....order). The AO has stated that on examination of stuff data seized and impounded during the course of search and survey proceedings, one time entries of Rs. 3 cores has been provided by SCS to M/s Esspal International Pvt. Ltd. (the appellant assessee) through a broker recorded as Hiren Shah. The AO has enlisted details of the date wise entries transaction entered into between the SCS and the appellant assessee. The AO has reproduced question no. 5 of the statement of Sh. Hiren Shah recorded u/s 132(4) of the Act wherein it was answered by the SCS, as under: "I would also like to state that day-wise receipt of cash and payment of accommodation entries is also recorded in the "Bips folder" seized from my computer wherein broker/client wise details/ accounts are maintained All the entries recorded in all the sheets contained in the excel filed acl.xls, ac2.xls, ac3.xls, ac4.xls and otparty.xls in" Being not satisfied with the reply of the assessee, the AO has held transaction made by the appellant assessee with concern owned by SCS as not genuine and as if only paper transaction took placed instead of actual transaction, although, the transactions were completed through b....
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....ndrakant Shah are not genuine and there are only paper transaction took place instead of actual transactions. Although the transactions are completed through banking channel after getting commission in cash. Therefore, share application money of Rs. 3,00,00,000/- shown by the assessee is treated as diversion of profits to evade the tax liabilities. Therefore, the amount of Rs. 3,00,00,000/- is added to the total income of the assessee. Penalty proceedings u/s. 271(1)(c) are initiated for concealing income by furnishing inaccurate particulars of income.'' 4.6 At para 4 of the assessment order the AO has mentioned "variousi ncriminating documents/ material was seized during the course of search showing Shri Shirish Chandrakant Shah is engaged in providing accommodation entries wherein cash is received by him from various clients and against this cash, he provides these accommodation entries. However, the AO has not discussed any incriminating document or material wherein payment of cash by the appellant to Shri Shirish Chandrakant Shah or his agent or mediator is recorded. 4.7 The AO has made the addition mainly relying on the statement of Shri Shirish Chandrakant S....
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.....Y 2010-11 • Copy of Balance sheet A.Y 2011-12 • From the balance sheet it can be noted that the networth of the company is Rs. 1,79,76,30,968 - which itself proves the creditworthiness of the shareholder. Hence the share capital received from this company is fully explained. Dhanus Technologies Ltd. 265- B, Mana Kampala Arcade, 113/114, Theyagarava Road, T Nagar,Chennai-) 600017 PAN -AABCD3429L 15,00,000/- • Copy of Share Application form of Rs. 15,00,000/- • Copy of Confirmation. • Copy of Affidavit. • Copy of PAN • Copy of ITR of A.Y 11-12 • Copy of Financial Statement • From the balance sheet it can be noted that the networth of the company is Rs. 44,19,78,352/- which itself proves the creditworthiness of the shareholder. Hence the share capital received from this company is fully explained. Sanguine Media Ltd., Old No. 6 & New No. 13-B, 3rd Street, Postal Colony, West Mambalam, Chennai- 600017 PAN- AAECS 2217C 35,00,000/- • Copy of Share Application form • Copy of Confirmation • Copy of Affidavit ....
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....nate Bench of ITAT Delhi in the case of CIT vs. Nishit Fincop. P. Ltd. (ITA No. 15/Del./2010), confirmed the order of the CIT(A), deleting the addition made u/s 68.Therefore, in view of the various decisions relied upon by appellant including the decision of Jurisdictional ITAT in the case of PSL Relmart and decision of Supreme Court in the case of Andman Tauber Industries (Civil Appeal No. 4228 order dated 02.09.2015) an de facts of the case, the addition of Rs. 3,00,00,000/- made by the AO u/s 68 is hereby deleted. 5.0 The 2nd Ground of appeal is as under: "2. Made addition of Rs. 75,000/- on account of commission on share application money." 5.1 This ground of appeal relates to addition of Rs. 7,50,000/- made by the AO respect of the commission paid by the appellant for obtaining accommodation entry of Rs. 3,00,00,000/- in the form of share application money. 5.2 The appellant has filed following written submission on this issue: "8. As explained in ground no. 1 supra, the share application money received by the assessee is genuine. Therefore, payment of brokerage/commission does not arise. Hence the disallowance made by the AO is unc....
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.... often tries to introduce the same in the books of account through cash credits. The Department always views cash credits with suspicion by way of authoritative judicial precedents listed as under: "1. Sumati Dayal v. CIT 214 ITR 801 (SC) 2. Sreelekha Banerjee v. CIT (1963) 49 ITR 112 (SC) 3. CIT v. M/s Nipun Builders & Developers (P) Ltd., 350 ITR 407 (Delhi High Court). 4. CIT v. Durga Prasad More (1971) 82 ITR 540 5. Pr. CIT Central-1, v. NRA Iron and Steel Pvt. Ltd. [2019] 103 taxmann.com 48 (SC). 6. CIT v. N. Tarika Properties Investment (P) Ltd. 221 Taxman 14 (Delhi) Nov. 28, 2013 7. N. Tarika Property Investment (P) Ltd. v. CIT 51 taxmann.com 387 (SC) Sept. 26, 2014" 6. Per contra, the ld. counsel for the assessee strongly supported the order of the ld. CIT(A) and contended that this issue is squarely covered in favour of assessee by the latest decision of Hon'ble Madhya Pradesh High Court in the case of PCIT v. Chain House International (P) Ltd. (2018) 408 ITR 561 where SLP has been dismissed against the judgment of Hon'ble Madhya Pradesh High Court in the case of PCIT v. Chain House International (P) Ltd. (s....
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....g authority thinks that the investor could have managed by paying a lesser amount as share premium as a prudent businessman. It is well- settled that if the creditworthiness of the Investor Company and genuineness of the transaction is proved no addition under s. 68 could be made and no substantial question of law arises. (Paras 52 to 54 & 57) The Tribunal on a very detailed examination was satisfied about identity, creditworthiness and genuineness of the investor companies and held that the assessee had discharged the primary onus to prove their creditworthiness and genuineness. The Tribunal in concurring with the first appellate authority found that the AO has made addition under s. 68 without any reasonable basis. The first appellate authority has analyzed the transaction with each and every creditor and assigned reasons as to why the loan(s) have to be treated as genuine and upheld the order of the first appellate authority i.e., CIT(A) and held that it did not suffer from any legal infirmity. The Court is not at all impressed with the submissions of the counsel for the Revenue. There is a clear finding of fact by the Tribunal and there is no reason to reverse this ....
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.... CIT vs. STL Extrusion (P) Ltd. (2011) 53 DTR (MP) 97 CIT vs. SVP Builders (India) Ltd. (2016) 67 taxmann.com 5 (Del) CIT vs. Walchand& Co. (P) Ltd. (1967) 65 ITR 381 (SC) J.K. Woollen Manufacturers vs. CIT (1969)72 ITR 612 (SC) K. Ravindranathan Nair vs. CIT (2000) 164 CTR (SC) 498 Kale Khan Mohammad Hanifvs. CIT (Civil Appeals Nos. 151 & 152 of 1961, dt. 8th Feb., 1963) Mangalore Ganesh Beedi Works vs. CIT (2015) 280 CTR (SC) 521: (2015) 126 DTR (SC) 233 : (2015) 378 ITR 640 (SC) Principal CIT vs. Goodview Trading (P) Ltd. (2017) 77 taxmann.com 204 (Del) Principal CIT vs. N.C. Cables Ltd. (2017) 149 DTR (Del) 90 : (2017) 391 ITR 11 (Del) Santosh Hazari vs. Purushottam Tiwari (Dead) by LRs (2001) 170 CTR (SC) 160 : (2001) 3 SCC 179 Shankar Industries vs. CIT (1978) 114 ITR 689 (Cal) Sreelekha Banerjee & Ors. vs. CIT (27th March, 1963-Supreme Court) 7. The ld. counsel has filed a detailed paper book and case laws comprising APB pages (1 to 79) to defend the decision of the ld. CIT(A). The relevant part is reproduced as under: 5. During the course of search, it ....
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....by issuing the summons under s. 131. The appellate authority recorded the statements of the persons who appeared before her. The statement of Shrish Chandrakant Shah (SCS) was recorded by the appellate authority wherein he stated that he was not engaged in providing any accommodation entries and on the contrary he was in the business of providing consultancy services and data hub services to various companies. He was also engaged in purchase and sale of shares. He also stated that he did not know BSPL or its CA. He disowned his earlier statement and stated that the same was recorded under fear. Sawan Kumar Jajoo (Jajoo) also appeared during the proceedings before first appellate authority and his statement was recorded by the appellate authority wherein he stated that neither he had provided any accommodation entries to BSPL nor acted as a broker in any such transactions. He never introduced BSPL to Shrish Chandrakant Shah (SCS). He also denied to provide any chart containing certain entries to the officers who had recorded his statement at his residence on 18th Dec., 2013. He also denied of any acquaintance with BSPL or any of its directors. He also denied to have received any cas....
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....claim of the assessee with the help of evidence, if any, received from the Investigation Wing, as has been claimed by the Revenue. The Revenue has nowhere proved that any mala fide is done by the assessee. Failure to do so, vitiate the addition made under the set of facts. Reference can be made of the decision in CIT vs. Orissa Corporation (P) Ltd. (1986) 52 CTR (SC) 138 :(1986) 159 ITR 78(SC) and the ratio laid down in the decision of Hon'ble Gauhati High Court in the case ofKhandelwal Constructionsvs. CIT (1998) 145 CTR (GauI 65: (19971 227 ITR 900 (Gau). The satisfaction has to be derived from the relevant facts and that to on the basis of proper enquiry by the AO and such enquiry must be reasonable and just. 45. In the present case, the AO has not brought any evidence on record that the amounts received from M/s Sonata Investment Ltd. presently known, as REL Utility Engineers Ltd. is merely accommodation entry. As mentioned earlier, the AO has acted merely on the basis ofstatement of Shri Naresh Kumar and high premium amount only. The ratio laid down by Hon'ble Madhya Pradesh High Court in CIT vs. Peoples General Hospital Ltd.(2013) 91 DTR (MP) 346 : (2013) 356 ITR....
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.... which says that the finding of the Tribunal on facts is perverse. Accordingly, we are of the view that there is no merit on the arguments of the learned counsel for the Revenue nor any substantial questions of law are arising in these appeals. The IT Appeal No. 112 of 2018, IT Appeal No. 110 of 2018, IT Appeal No. 113 of 2018, IT Appeal No. 114 of 2018, IT Appeal No. 115 of 2018 and IT Appeal No. 111 of 2018, filed by the appellant have no merit and are, accordingly, dismissed." 8. We have heard the rival contentions, perused material on record, written submissions, impugned order and case laws cited before us. Admittedly, the assessee-company have received share application money through banking channel and furnished required details of bank statements, copy of account, and confirmation in compliance to notices issued by the AO and therefore, identity, creditworthiness and genuineness of transaction have been accepted by the Ld. CIT(A) as proved by observing that the appellant has filed each and every documents required for proving the identity and creditworthiness of the share applicants and genuineness of the transactions. 9. It is noted that the AO has made the addition ....
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....s whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law but it cannot be regarded as undisclosed income of the assessee company. 11. The Ld. AR argued that the AO without any independent enquiry has simply relied on the report of the investigation wing and provided part statement of Shirish Chandrakant Shah recorded u/s 132(4) on 13.04.2013. From the extract of statement, it can be noted that he has nowhere stated that any accommodation entry is provided to the assessee. It is a general and sweeping reply which has no evidentiary value unless the assessee is provided an opportunity to cross examine him. It is noticed that Shirish Chandrakant Shah has retracted from his statement as stated by AO at Pg 5 of the assessment order. Hence, in our view, such retracted statement has no evidentiary value. Further, the AO has not provided any opportunity to the assessee to cross examine Shirish Chandrakant Shah even though it was specially asked by the assessee vide letter dt. 22.03.2016 (Pg 4-5 of assessment order), which is against the principle of natural justice, illegal and bad in law as held by Hon'ble S....
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....s and held that the assessee had discharged the primary onus to prove their creditworthiness and genuineness; if the creditworthiness of the investor company and genuineness of the transaction is proved no addition under s. 68 could be made. The Hon'ble High Court has also observed that all the investors including these investor in the appellant company namely u/s Emplis Projects Ltd., M/s Speciality Paper's Ltd. and M/s Sanguine Media Ltd. appeared before the appellate authority, and they were examined by the CIT(A) and their statements were recorded; and an opportunity of cross- examination was given to the assessee. The aforestated 3 out of 5 investor companies were major stake holder with investment of 2.75 crore out of 3.0 crore in the alleged shares of the appellant company which were accepted as genuine entity by the Hon'ble High Court (supra). Their statements were found to be strongly supporting the explanation and stand of the assessee- company. These statements and other relevant evidence for cross- examination, verification and comments of the AO. However, the AO has not made any adverse comments on these statements except contending the same cannot be considered in fav....
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....yment of brokerage/commission is uncalled for and needs to be deleted. Further, the assessee has not claimed any expenditure for this amount and the whole share capital has been booked in his capital account, however, while completing the assessment this amount has been held as spent out of undisclosed come of the assessee. The Ld. Counsel has submitted the required documents during the assessment proceedings, appellate proceedings and before us. We have gone through the assessment order, appellate order, statement of facts, written submission, and remand report carefully. The Ld. AR argued that the AO has not brought any material on record to show that for arranging the alleged accommodation entry, commission @ 2.50% is paid. Even Sh. Shirish Chandrakant Shah has retracted from his statement as stated by AO at Pg 5 of the assessment order. Hence no addition can be made based on the statement of Sh. Shirish Chandrakant Shah. Without prejudice to above, transaction of the assessee is genuine as explained above and therefore addition so made on surmises and conjectures is unwarranted. 18. We have already sustained the decision of the Ld. CIT(A) in deleting the addition of Rs. 3,00....