AGROHA CAPITAL SERVICES LTD,DELHI vs. ITO, WAR4D-1(4), NEW DELHI

The ld. Assessee’s representative (AR) submitted that the assessee does not want to press grounds No.1 and 2, hence, the same are dismissed as ‘not pressed.’

Grounds No.3 and 4 of the assessee read as under:- “3. That under the facts and circumstances, addition of Rs. 10 lacs u/s. 68 for alleged accommodation entry taken from Virgin capital Services (P) Ltd. is illegal, unjustified and unsustainable in law as well as on merits. 4. That in the absence of providing cross examination of relevant persons as specifically requested and also in the absence of confronting with all alleged adverse material, no cognise thereof can be taken for taking an adverse view.”

Apropos grounds No.3 and 4, the ld. AR submitted that the assessee received share capital of Rs.10 lakh from Virgin Capital Services (P) Ltd., the face value of which was Rs.10 per share issued for Rs.100/- per share after including share premium of Rs.90/- per share. The ld. AR submitted that the AO disbelieved the transaction on the ground of Investigation Wing Report on search of Shri S.K. Jain/Shri V.K. Jain on the basis of some diary found and statement of Shri S.K. Jain recorded by the Investigation Wing. The ld. AR submitted that the assessee submitted the following documents to show the genuineness of transaction:-

The ld. AR further submitted that no defect or deficiency was pointed out in any of these documents neither by the AO nor by the CIT(A) and no direct enquiry either u/s 133(6) or u/s 133(1) was made by the AO. The ld. AR vehemently pointed 2

The ld. AR further pointed out that to prove the identity of the investor the assessee submitted copy of assessment order, bank account and confirmation and to prove credit worthiness of the investor the assessee successfully proved that the payment has been made through bank account out of sufficient balance and in view of the judgement of the Hon’ble Calcutta High Court in the case of CIT vs. Dataware (P) Ltd, the AO is duty-bound to accept the genuineness of the transaction when the identity of the creditor and genuineness of the transaction through account payee cheque has been established. The ld. AR also submitted that during assessment proceedings, photocopy of page 1 of diary of Shri S.K. Jain/Shri V.K. Jain claimed to have been seized was provided, but, no other document was provided to the assessee and single isolated page is not capable to provide any adverse information against the assessee. The ld. AR submitted that during the assessment proceedings the assessee filed three letters dated 11.08.2016, 26.10.2016 and 17.11.2016 requesting the AO to provide copies of all such adverse material on the basis of which adverse inference has been drawn, but, the same was never provided to the assessee. The ld. AR submitted that the author of the page 1 of the diary is not known, pages of diary was without title, therefore, no logical meaning can be assigned to a single page. The ld. AR submitted that only few pages have been given as an annexure to the assessment order which was never confronted to the assessee during assessment proceedings, therefore, cannot be used against the assessee as per the principles of natural justice. The ld. AR also submitted that no copy of any statement of Shri S.K. Jain/Shri V.K. 3

The ld. AR submitted that the proposition rendered by the Hon’ble Supreme Court in the case of NRA Iron & Steel Pvt. Ltd., reported as 412 ITR 161 (SC) is not applicable to the present case as, in the present case, the copy of assessment order passed u/s 153C/153A in the case of investor M/s Virgin Capital Services (P) Ltd. for AY 2009-10, no addition has been made and books of account of the assessee as well as the return of income has been accepted by the AO which clearly shows that the AO, in the case of investor company had accepted the genuineness of the transaction of investment by the investor in the assessee company.

Replying to the above, the ld. Sr. DR strongly supported the orders of the authorities below and submitted that reassessment proceedings was initiated in the case of the assessee for AY 2009-10 on the information of the Investigation Wing that Shri S.K. Jain and Shri V.K. Jain has provided accommodation entries to the assessee company and on verification and examination, it was found that the transaction of

On careful consideration of the above, first of all, I note some glaring facts and circumstances of the present case. The ld. Sr. DR has not controverted that the assessee filed copies of bank statement of the assessee along with bank statement of M/s Virgin Capital Services (P) Ltd., confirmation issued by M/s Virgin Capital Services (P) Ltd., ITR acknowledgement and assessment order for AY 2009-10 of M/s Virgin Capital Services (P) Ltd., wherein no addition has been made by the AO in the hands of investor company. The ld. Sr. DR has also not controverted that the assessee filed objection letter on 11.08.2016 wherein the assessee requested to provide documents and statements relied on by the Investigation Wing and the AO. Further, from the copies of the letter dated 26.10.2016 and 17.11.2016, I further note that the assessee again requested to provide copies of the documents and statements and to provide opportunity of cross-examination, but, I am unable to see any action by the AO on the said consecutive three requests of the assessee.

I further respectfully note that their Lordships, speaking for the Hon’ble jurisdictional High Court of Delhi in the case of Pradeep Kumar Gupta (supra) held that the assessment proceedings on the basis of deposition of third party without allowing opportunity of cross-examination of the said party to the assessee despite specific demand was not valid. Further, the Hon’ble jurisdictional High Court of Delhi in the case of CIT vs. Best Infrastructure (India) Pvt. Ltd. (supra), in para 37, held as follows:-

In the present case also, the assessee discharged the onus lay on its shoulders as per the requirement of section 68 of the Act and submitted all relevant documentary evidences pertaining to the investor company including the bank statement, confirmation, copy of assessment order for AY 2009-10 wherein no addition had been made, application form for allotment of equity shares, Board Resolution, confirmation of application and receipts of shares by the investor company and form No.2 showing the allotment of shares to M/s Virgin Capital Services (P) Ltd. However, neither the AO nor the ld.CIT(A) pointed out any defects or discrepancy in the said documentary evidence and without providing copies of the documentary evidence and statements of the persons despite several requests by the assessee, the AO proceeded to make addition u/s 68 of the Act in the hands of the assessee. In my humble understanding, the grievance of the assessee is squarely covered in its favour by the judgement of the Hon’ble jurisdictional High Court of Delhi in the case of Pradeep Kumar (supra) and CIT vs. Best Infrastructure (India) Pvt. Ltd. (supra). Therefore, respectfully following the proposition rendered by the Hon’ble High Court, I am compelled to hold that the addition made by the AO and upheld by the ld.CIT(A) is not valid and sustainable, therefore, I direct the AO to delete the addition. Accordingly, grounds No.3 and 4 of the assessee are allowed. 6

In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on 14.03.2023. Sd/- (C.M. GARG) JUDICIAL MEMBER Dated: 14th March, 2023. dk Copy forwarded to : 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi