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Income Tax Appellate Tribunal, “SMC” BENCH,
Before: SHRI ABY T. VARKEY, JM & SHRI S RIFAUR RAHMAN, AM
PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)/(NFAC), Delhi dated 03.01.2023 for the assessment year 2009-10. 2. The main grievance of the assessee is against the action of the Ld. CIT(A) confirming the addition of Rs.45,00,000/- made by the AO on account of receipt of Share Application Money only on the basis of statement given by Shri Pravin Kumar Jain.
Brief facts are that the assessee is a Private Limited Company engaged in the business of Shares and Securities. Return for AY. 2009- 10 was filed on 15.09.2009 declaring total income of Rs.3,333/-. During this assessment year, the assessee raised/received share
2 A.Y. 2009-10 Savita Mercantiles Pvt. Ltd. application money of Rs.45,00,000/- from four (4) parties named as under. Ansh Merchandise Pvt. Ltd. (M/s. AMPL) Rs.10,00,000/- Atharav Business Pvt. Ltd. (M?s. ABPL) Rs.10,00,000/- Duke Business Pvt. Ltd. (M/s. DBPL) Rs.12,50,000/- Raghunandan Rayons Ltd (M/s.RRL) Rs.12,50,000/- Total 45,00,000/-
Based on information from the DGIT(Inv.), Mumbai, the AO reopened the assessment. According to the information, Shri Pravin Kumar Jain was searched u/s 132 of the Income Tax Act, 1961 (hereinafter “the Act”) and he admitted that he was providing accommodation entries through his bogus concerns. According to the AO, in the year under consideration, the assessee had received Rs.45,00,000/- from the aforesaid concerns of Shri Pravin Kumar Jain. And thus Rs.45,00,000/- escaped assessment and he reopened the assessment of the assessee. Thereafter, he noted at para no. 5 of his assessment order that pursuant to notice u/s 133(6) of the Act issued at new/old address of four share-subscribers i.e. M/s.Ansh Merchandise Pvt. Ltd., Atharav Business Pvt. Ltd., Duke Business Pvt. Ltd. and Raghunandan Rayons Ltd, they filed details called for by him as noted by him (infra). Even though, the assessee brought to the notice of the AO about the fact that the four companies named (supra) has subscribed for shares of the assessee company to the tune of Rs.45,00,000/- and the same was confirmed by four share-subscribing companies pursuant to the notice issued by AO, the AO noted the following facts in respect of four share subscribers as under: -
“16. From the copies of bank statement filed by the parties viz. Ansh Merchandise P. Ltd.(Newplanet Trading Co. P. Ltd.),
3 A.Y. 2009-10 Savita Mercantiles Pvt. Ltd. Atharv Business Private Ltd. (Faststone Trad (I) P. Ltd.). Duke Business P. Ltd. (JPK Trading I Pvt. Ltd.).and Raghunandan Rayors Ltd. in response to notice u/s 183(6) of the I. T. Act it is found as under:
i) Duke Business P. Ltd. (JPK Trading I Pvt. Ltd.): M/s. Duke Business P. Ltd. PK Trading I Pvt. Ltd.) vide letter dated 03.11.2015 filed xerox copy of bank statement (A/c No.246010200005579-UTI Bank, Pawai, standing in the name of M/s. JPK Trading I Pvt. Ltd.) for the period 01.02. 2009 to 28.02.2009. On 27.02.2009. There is a deposit of Rs.19,50,000/- from Mohit International and on the same day Rs.12,50,000/- debited in the name of the a assessee.
ii) Atharv Business Private Ltd. (Faststone Trad (I) P. Ltd.): M/s. Atharv Business Pvt. Ltd vide letter dated 16.03.2016 filed. xerox copy of bank statement (A/c No.0155201002639- Cannera Bank,. Khetwadi, standing in the name of M/s. Faststone Trading Company) for the period 01.02.2009 to 28.02.2009. It is seen from the statements that on 26.02.2009 there is a deposit ‘for an amount of Rs.10,00,000/- “by clearing” and on the same day one more deposit of Rs.7,30,000/-“FT 015526101257" and another deposit on the same day of Rs.4,90,000/- “FT 0155201002410" and thereafter on the same day an amount of Rs.10,00,000/- debited “TO CLG Savita”,
iii) Raghunandan Rayons Ltd:
M/s. Raghunandan: Rayons Ltd. vide letter dated’ 16.03.2016 filed xerox copy of bank statesmen (A/c No.233010200019017-Axis Bank, New Marine Lines, standing
4 A.Y. 2009-10 Savita Mercantiles Pvt. Ltd. in the name of M/s. Raghunandan Rayons Ltd) for the period 01.02.2009 to 28.02.2009. On 26.02.2009 and on 27.02.2009 there is deposits: of Rs.9,50,000/- and Rs.3,00,000/- in the name of “Faststone Trading” and “New Planet Trading” respectively and on 27.02.2009 there is a debit entry ‘Inward CLG High value 26”.
iv) Ansh Merchandise P. Ltd. (Newplanet Trading Co. Ltd): M/s. Ansh Merchandise P.Ltd. (Newplanet Trading Co, P. Ltd.) vide letter dated 16.03.2016 filed xerox copy of bank, statement (A/c No.0155201002431-Cannera Bank, Khetwadi, standing in the name of M/s. New Planet Trading Company) for the period 01.02.2009 to 03.03.2009. It is seen from the. statements that on --.02.2009 (date not legible) there is a deposit for an amount of Rs.59,60,010/- “by clearing” and on 26.02.2009 deposit of Rs.30,00,000/- “FT 0155261012129" and another deposit on the same day of Rs.12,50,000/- “FT 0155201002427” and thereafter on: the same day an amount of Rs,10,00,000/- debited “TO CLG Savita”.
Xerox copies of bank statements filed by the above parties are forming part of this order. From the bank statements, in some cases, it can be seen that before issuing cheques to the assessee there is deposits of cheques from the companies/concerns controlled and managed by Shri Praveen Kumar Jain.”
According to the AO, during the search conducted in the premises of Shri Pravin Kumar Jain, Shri Pravin had explained the modus operandi of him floating several concerns including the four companies named (supra), which were utilized for providing
5 A.Y. 2009-10 Savita Mercantiles Pvt. Ltd. accommodation entries in the form of share application/loan etc. On the basis of the aforesaid statement and the fact that assessee received share-application money of Rs.45 Lakhs from four concerns controlled by Shri Pravin Kumar Jain, the AO drew adverse inference against the share application money received to the tune of Rs.45 Lakhs and framed the assessment order on 28.03.2016 u/s 143(3)/147 of the Act and inter-alia added an amount of Rs.45,00,000/- as unexplained cash credit u/s 68 of the Act. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who confirmed the action of the Ld. CIT(A). Aggrieved, assessee is before us.
We have heard both the parties and perused the records. According to the assessee, the assessee has raised share application of Rs.45,00,000/- from the following four parties (i) M/s.Ansh Merchandise Pvt. Ltd., (ii) Atharav Business Pvt. Ltd., (iii) Duke Business Pvt. Ltd. and (iv) Raghunandan Rayons Ltd. S. Name of share ITR filed PAN Bank Share Capital Investment No applicant or not and Statement and reserves in PB assessee’s company 1 M/s. Ansh Yes (page AABCN8176E Page 41-43PB 2,1583,081 10,00,000/- Merchandise Pvt. Ltd. 16 PB) 2 M/s. Atharv Business Yes (page AAACF9430A Page 67-68PB 1,34,63,322 10,00,000/- Pvt. Ltd. 43 PB) 3 M/s. Duke Business YES (page AABCJ6245N Page 97-98PB 1,77,55,319 12.50 lakhs Pvt. Ltd 69 PB) 4 M/s. Raghunandan Yes (page AABCR1177R Page 116- 4.99.40,631 12.50 lakhs Rayons Ltd 99 PB) 117PB
During the course of assessment proceedings, the AO had issued notice u/s 133(6) of the Act to the four share applicants and pursuant to which they confirmed to AO that they have subscribed to the shares of the assessee company as well as filed the details called for by AO,
6 A.Y. 2009-10 Savita Mercantiles Pvt. Ltd. which fact has been acknowledged by AO at para 5 of the assessment order. Despite assessee filing the primary documents to prove the identity, creditworthiness and genuineness of the four share- subscribers who invested Rs.45 Lakhs in assessee company and they confirmed to AO, the AO took adverse view against the assessee based on the statement given by Shri Pravin Kumar Jain that the four shares applicant companies (supra) were one of the concerns controlled by him; and that they were involved in providing accommodation entries in the form of share capital etc, he treated the same to be undisclosed income of the assessee and made addition us/ 68 of the Act which action was confirmed by Ld. CIT(A). We cannot countenance such an action of the Ld. CIT(A) for the reason that the statement relied upon by the AO to draw adverse view against the assessee was recorded during the search of premises of Shri Pravin Kumar Jain on 01.10.2013 and the relevant year under consideration AY. 2009-10. Admittedly his statement was recorded behind assessee’s back and no opportunity was given to assessee to cross-examine Shri Pravin Kumar Jain, which was the only basis for making the impugned addition in the hands of the assessee. Such a statement of Shri Praveen Kumar Jain could not have been relied upon by AO for making addition and for such a preposition, we rely on the decision of the Hon’ble Supreme Court in the case of Andaman Timber Industries Vs. CCE reported in (2015) 281 CTR 241 (SC) wherein it was held that not providing cross- examination of statement relied upon by assessing authority is a serious flaw which render the whole action a nullity. Same view was 7 A.Y. 2009-10 Savita Mercantiles Pvt. Ltd. reiterated in the decision of the Hon’ble Supreme Court in the case of CIT v Odeon Builders Pvt. Ltd. (2019) 418 ITR 315. Further, we note that the assessee has shown the nature of the receipt i.e. Rs.45,00,000/- as share application money, and has discharged the onus casted upon it u/s 68 of the Act by providing proof at investor i.e. identity of the shares subscriber by furnishing their PAN details, their ITR acknowledgment for AY. 2009-10; and from a perusal of the relevant financials of share subscribers, we note that they share have sufficient creditworthiness to make investment in assessee company; and from perusal of the bank statement it reveals that share application money was paid through banking channel and the source of the payment has also been brought to the notice of the AO. We further note that AO has not been able to find any infirmity in the aforesaid evidence furnished by the assessee. In such a scenario, we are unable to agree with the impugned action of the Ld. CIT(A) and direct deletion of the addition of Rs.45 Lakhs. Moreover, the assessee has brought to our notice that the aforesaid four share subscribers are still active as on date and has filed copy of the Ministry of Corporate Affairs relevant documents to substantiate the same. Therefore, we direct the deletion of addition.
Before parting, we note that the Ld. DR’s reliance on the order of the Tribunal in the case of Shri Pravin Kumar Jain v DCIT (ITA. Nos. 7191/Mum/2018 and Others) dated 19.01.2023 in favour of the revenue cannot be treated as a binding judicial precedent because it is is an exparte order qua assessee; whereas the assessee had relied on the decision of the Tribunal in the case of ACIT v M/s. Meena Elastomers
8 A.Y. 2009-10 Savita Mercantiles Pvt. Ltd. Pvt. Ltd. (ITA. No.2641/Mum/2019 for AY. 2011-12) dated 23.11.2021 wherein the Tribunal held in favour of the assessee by holding as under: -
“5. On appraisal of the above mentioned finding, we noticed that the CIT(A) has considered the relevant documents produced before him in accordance with law. The assessee furnished the copies of returns of investor companies accompanied by their audited financial statements, bank accounts of the investor companies and sworn affidavits of the directors investor companies confirming the investments. All the lender companies had duly filed their returns for assessment year under consideration. A perusal of bank accounts nowhere speaks about the immediate deposit of cash prior to the issuance of cheques towards investors money to the assessee. The transactions were effected through cheques i.e. normal banking channels. The assessee submitted necessary documents with regard to the identity creditworthiness of the creditors and genuineness of the transactions. The AO nowhere bring any evidence to controvert the claim of the assessee. The AO nowhere issued the summon u/s 131 of the Act to the investor companies. The AO did not discharge his obligation to disprove the evidences adduced by assessee. The CIT(A) has relied upon the number of decisions mentioned in the appellate order while allowing the appeal of the assessee. Taking into account of all the facts and circumstances, we are of the view that the CIT(A) has decided the issue judiciously and correctly which is not liable to be interfered with at this appellate stage.”
9 A.Y. 2009-10 Savita Mercantiles Pvt. Ltd.
And also we rely on the decision of the Hon’ble Bombay High Court in the case of CIT v Gagandeep Infrastructure Pvt. Ltd. (394 ITR 680) and rely on the decision of the Hon’ble Punjab & Haryana High Court in the case of CIT Vs. Varinder Rawlley (366 ITR 0232) to delete the addition made u/s 68 of the Act.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on this 12/12/2023. (S RIFAUR RAHMAN) JUDICIAL MEMBER मुंबई Mumbai; दिनांक Dated : 12/12/2023. Vijay Pal Singh, (Sr. PS) आदेश की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. आयकर आयुक्त / CIT 3. 4. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, मुंबई / DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file.
आदेशधिुसधर/ BY ORDER, सत्यादपत प्रदत //// उि/सहधयक िंजीकधर /(Dy./Asstt.