TaxTMI 
TaxTMI 
TaxTMI 
2024 (7) TMI 495
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....eived information from the DDIT (Inv.-II), Jodhpur exhibiting the fact that the assessee has received share application money along with premium from M/s. Matrix Systel Pvt. Ltd. This company is managed by one Mr. Jagdish Prasad Purohit and during the search this person has admitted that it is a paper company who is engaged in providing accommodation entry. On the strength of this information, ld. AO has recorded the reasons and reopened the assessment. In response to the show cause notice issued u/s 143(2) & 142(1) of the Act Sh. S.K. Roy, Advocate appeared before the ld. AO and submitted computation of income, the copy of return, audited accounts, ledger copy of M/s. Matrix Systel Pvt. Ltd. and bank statement. It has also submitted other papers from the share applicant. The ld. AO thereafter, conducted a detailed enquiry and observed that he has directed the appearance of both the directors i.e. share applicant company as well as the directors of the assessee company because the assessee is a newly incorporated company. It had received premium at the rate of Rs. 390/- per share against the face value of Rs. 10/-. It was not probable in this case unless it is being demonstrated th....
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....y named M/s. Matrix Systel Pvt. Ltd. The assessee company is not a blue chip company with virtually unknown Directors having nil or insignificant net worth. The company was incorporated during the F.Y. 2010-11 which shows that the company does not have any substantial established business and also have not any substantial real or fixed asset. Therefore, considering the above it is highly unlikely that any person of sound mind would invest in the shares at a premium (Face Value of Rs. 10/- & premium of Rs. 390/- per share) which had been allegedly allotted by the assessee. It is also observed that the assessee transferred identical amount i.e. Rs. 35,00,000/- immediately. This clearly shows that the assessee is just rotating the money and not doing any actual business. 10. As regards the applicant M/s. Matrix Systel Pvt. Ltd. notice u/s. 133(6) was issued on 27.11.2018 for confirmation of transaction asking to file certain details. Vide its letter dated 30.11.2018 received by this office on 05.12.2018 Matrix Systel furnished its reply stating that they had received advance against sale of shares investment from M/s. Gopikar Supply Pvt. Ltd. of Rs. 35,00,000/- on 22.05.2010 and th....
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....ness or assets or any renowned director. The appellant company issued 8750 shares of face value of Rs. 10/- each at a hefty premium of Rs. 390/- per share. The AO inter alia found that valuation was unbelievable. The AO was also in possession of information from Investigation Wing. Jodhpur that Mr. Jagdish Prasad Purohit has provided accommodation entries to many persons through 246 companies controlled by him and that MSPL was one of Them. The AO was also in possession of statement of Mr. Jagdish Prasad Purohit recorded under oath by DDIT (Inv.), Kolkata in which he admitted to giving accommodation entries to many persons including to the appellant through MSPL The retraction of statement under affidavit does not serve the purpose of the. appellant because statement given before an Income Tax Authority is not akin to statement given before Police Authority. Further, it is not mere statement or retraction rather a set of facts pointing to outflow of money from appellant's account on 24/05/2018 after the receipt of share application money on 22/05/2010 through multiple layers of intermediaries which have formed the basis of AO's satisfaction. Assuming that the transaction was bo....
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....spect of addition u/s.68 of the I.T. Act. 1961, your appellant humbly submits that the action of the Assessing Officer in completing the Asstt. by making arbitrary disallowance and addition in share premium of Rs. 34,12,500/- as unexplained cash credit by invoking sec.68 of the I.T. Act, 1961 which is without any basis and in utter disregard of the material on record. In the impugned order, the Assessing Officer has treated both the share premium received along with face value of share of Rs. 35,00,000/- as undisclosed income of the appellant company and added back the same to the total income of the assessee misconceiving that the application money received by the appellant on account of subscription of shares constituted as an accommodation entry into their books. There is no dispute that the appellant maintained books of accounts which were duly audited. In fact, the details of such amount received by the appellant on account of share application money were duly incorporated therein. The provisions of sec. 68 of the I.T.Act 1961 come into play only where the Assessing Authority finds that a cash credit is recorded in the books and the tax payer offers no explanation as to the na....
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....f the share applicants as well as the lenders. The appellant did not fall short of such yardstick by any stretch of imagination. In the instant case, identities of the share applicants are that they are body corporates (duly incorporated under the Companies Act, 1956). They are also independently assessed to tax. The assessing officer have stated in the assessment order passed u/s 147/143(3) of the I.T. Act 1961, "The assessee company only filed objections against the proceeding. Despite repeated opportunities given to the assessee, it seems that they are not-willing to confront the issue and took the evasive stand to by pass the issue" Whereas the appellant have rightfully filed the reply to the show cause notice vide letter on 12/12/2018. Each and every notice issued by the assessing officer during the course of assessment proceeding has been complied with. The details are categorically submitted containing the amount of investment, the source thereof, the copy of Bank Statements which were acknowledged by their return of income and audited accounts. In fact, their identities were established beyond any doubt before the Assessing Officer. Further, the share application t....
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....apital cannot be treated as bogus if they are registered and have been assessed. Once the assessee has produced documentary evidence to establish the evidence of such companies, the burden shifts to the revenue to establish their case. Reliance on statement of third parties who have not been subjected to cross examination is not permissible. Voluminous documents produced by the assessee cannot be discarded merely on the basis of statements of individual contrary to such public documents". In the present case it can be seen that the statement of third party (Mr. Jagdish Prasad Purohit) taken u/s 132(4) dated 21/01/2015 taken by DDIT (Inv.), Kolkata, has formed the basis for all decisions for making addition. Inspite of the said individual retracting the said statement no heed was paid by the assessing officer and simply the assessee's documents were rejected by virtue of the statement given by the individual which was contrary to the documents furnished. The act of the assessing officer on relying on the statement of third party is also highly condemned by this judgement passed by DELHI HIGH COURT in case of Pr. CIT vs Best Infrastructure (India) Pvt. Ltd. on 1st August'2017, cit....
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....treated as bogus if the documentation shows the genuineness of the transaction ". In connection to the above case law, your learned authority can very well see from the submission made before the assessing officer that the genuineness of the parties were well established beyond any doubt inspite of which the A.O. formed the belief of the said transaction to be an accommodation entry in nature. Further, in the case of Arceli Realty Limited vs ITO, 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 the banking channel and even the source of source, therefore the assessee has proved the conditions laid down u/s 68 of the I.T.Act. It is also noted that inspite of repeated request, the Ld. Assessing officer did not provide the opportunity to cross examine the concerned persons and even the relevant information and allegation, if any, made therein, which has been used against the assessee and not provided to the assessee. At this stage we add here that mere information is. not enough rather it has to be substantiated with facts. The information may or may not be cor....
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....llant exhausts all the evidence or material in his possession. Moreover, the Assessing officer does not even confront the appellant with his findings, if any. Had any suspicion remained in the mind of the Assessing Officer, he could have initiated 'coercive process' but this course of action has not been adopted. However, the primary onus has been discharged by the appellant. Therefore, the addition made by the Assessing Officer of Rs. 35,00,000/- to the total income of the assessee is not sustainable as per law. In this context, your appellant relies upon the decision of different higher authorities which are enumerated as under:- (i) Hon'ble Delhi High Court held in case of CIT vs Laxman Industrial Resources Private Limited on 14th March'2017, "Fact that the investigation wing s report alleged that the assessee was beneficiary to bogus transactions and that the identity of shareholders, genuineness etc was upset is not sufficient. The A.O. is bound to conduct scrutiny of documents produced by the assessee and cannot rest content by placing reliance on the report of the Investigation Wing". (ii) Hon'ble ITAT, MUMBAI Bench held in the case of Anil Chhaganlal Jain vs ACIT ....
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....nds of the company unless the Department is able to show that the amount received towards share capital actually emanated from the coffers of the assessee company. (ix) Where assessee furnishes correct name, address, P.A.No. & confirmation letter of creditor, the revenue should issue summons to the creditors to find the genuineness. Where revenue does not summon creditor u/s. 131, addition of cash credit in assessee's hands will not be justified. This was held in Addl. C.I.T. -Vs- Hanuman Agarwal (1985) 151 ITR 150 (Pat). Once the assessee has furnished the true identity, the correct address, the correct P.A. No. of the creditor, he fulfils his obligation. The assessee is not supposed to know the capacity of the lender or cash creditor. (x) In Rajaram Rajender Bhandari & Party -Vs- Asst. C.I.T. (2005) 5 (11) ITC1 340 (JP-Trib) (2005) 95 TTJ JP (Trib) 97, it was held that where all details of payments and confirmation of creditors were furnished by the assessee addition u/s.68 could not be made on nonproduction of creditors as the assessing officer did not issue Summons u/s.131. (xi) According to Pragati Construction Co. -Vs- ITO (1997) 60ITD 201 (Del- Trib) addition u/s.68....
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....cer has remarked, "It is also observed that the assessee transferred identical amount i.e. 35,00,000/- immediately. This clearly shows that the assessee is just rotating the money and not doing any actual business." Sir, in this regard we like to submit before your honour that this remark also seems to be a silly remark by the Assessing Officer. Because business house's current account never remains idle. As soon as an amount is being credited in the account, before that payment programme remains scheduled for making payment to others. Sir, again in Para 11 of Page 5 of the assessment order, the Assessing Officer has remarked, The Authorised Representative of the assessee has relied upon various case laws. However, as the investor company's directors were not presented by the assessee for verification of the transaction with them, the case law cited are distinguishable from the facts of the case of the assessee. Sir, nothing is distinguishable from the facts of the case of the assessee. All the case laws which were submitted before the Assessing Officer were squarely applicable to your appellant's case. Sir, one practical fact we like to submit before your honour that ....
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....of the CIT(A). We accordingly, dismiss the grounds raised by the revenue in this respect. In the result, appeal of the revenue is dismissed. Sir, whenever identity of the creditors, their creditworthiness and genuinely of transactions have been proved by submitting various documents before the Assessing Officer the assessee would have satisfactorily discharged the onus cast upon him but the Assessing Officer acted in total disregard of the evidence indulging in whims and fancies. Sir, a plain reading of the assessment order reveals that before establishing the conditions specified under section 68 of the LT. Act, 1961, the Assessing Officer has treated the transactions as "the intention of giving colour in the guise of receipt of share application money with premium" which clearly shows his preconceived mindset not to treat the assessee's business transaction as genuine. Further, it has also been held by various courts that the Assessing Officer must bring on record some positive material or evidence to indicate that the shareholders were benaminders, fictitious persons or that any part of the share capital money represents the company's own income from undisclosed sour....