FOREVER FLOURISHING FIN & INV. PVT LTD,MUMBAI vs. DCIT-CC-3(4), MUMBAI, MUMBAI

were heard together and disposed off by way of this consolidated were heard together and disposed off by way of this consolidated were heard together and disposed off by way of this consolidated order for convenience. order for convenience.

A. Validity of Assessment Validity of Assessment

1. The CIT (A) erred in holding that the assessment was 1. The CIT (A) erred in holding that the assessment was 1. The CIT (A) erred in holding that the assessment was validly re-opened. opened. 1.i. In doing so, he did not appreciate that facts narrated in In doing so, he did not appreciate that facts narrated in In doing so, he did not appreciate that facts narrated in the reasons recorded for reopening of the assessment were the reasons recorded for reopening of the assessment were the reasons recorded for reopening of the assessment were already before the A in the course already before the A in the course of original assessment of original assessment proceedings pursuant to notice u/s 143(2) of the Act dt. proceedings pursuant to notice u/s 143(2) of the Act dt. proceedings pursuant to notice u/s 143(2) of the Act dt. 23.09.2013 which assessment was pending when the case 23.09.2013 which assessment was pending when the case 23.09.2013 which assessment was pending when the case was transferred to his charge by CIT was transferred to his charge by CIT-8 by his order dt. 8 by his order dt. 20.08.2014 for these very facts but for the reasons best 20.08.2014 for these very facts but for the reasons best 20.08.2014 for these very facts but for the reasons best known to AO he did not pass the order us 143(3) though he AO he did not pass the order us 143(3) though he AO he did not pass the order us 143(3) though he was having sufficient time available with him as the case was having sufficient time available with him as the case was having sufficient time available with him as the case record were transferred to him by CIl's order dt. 20.08.2014 record were transferred to him by CIl's order dt. 20.08.2014 record were transferred to him by CIl's order dt. 20.08.2014 and the assessment was getting barred by limitation of time and the assessment was getting barred by limitation of time and the assessment was getting barred by limitation of time on 31.03.2015 and the AO cou on 31.03.2015 and the AO could not have taken recourse to ld not have taken recourse to section 147 of the Act to cover up the lapse on his part. section 147 of the Act to cover up the lapse on his part. section 147 of the Act to cover up the lapse on his part. 1 ii. In any event, the CIT(A) did not appreciate that the In any event, the CIT(A) did not appreciate that the In any event, the CIT(A) did not appreciate that the return of income filed us 139(1) of the Act which was return of income filed us 139(1) of the Act which was return of income filed us 139(1) of the Act which was selected for scrutiny was deemed to have been accepted selected for scrutiny was deemed to have been accepted selected for scrutiny was deemed to have been accepted in law us 143(3) of the Act having regard to all the material law us 143(3) of the Act having regard to all the material law us 143(3) of the Act having regard to all the material and the information available on record and, therefore, the and the information available on record and, therefore, the and the information available on record and, therefore, the issue of notice us 148 of the Act on the same set of facts issue of notice us 148 of the Act on the same set of facts issue of notice us 148 of the Act on the same set of facts and circumstances is nothing but change of opinion which and circumstances is nothing but change of opinion which and circumstances is nothing but change of opinion which is not permissible is not permissible in law as held by the Apex Court in the in law as held by the Apex Court in the case of Kelvinator of India Ltd. case of Kelvinator of India Ltd. 1.iii. Further, in any event, the CIT (A) erred in holding that Further, in any event, the CIT (A) erred in holding that Further, in any event, the CIT (A) erred in holding that information received by the AO through Departmental information received by the AO through Departmental information received by the AO through Departmental channels was credible and actionable and was sufficient to channels was credible and actionable and was sufficient to channels was credible and actionable and was sufficient to invoke the provisions of section 147 of the Act ignoring the the provisions of section 147 of the Act ignoring the the provisions of section 147 of the Act ignoring the settled position of law that the AO before assuming settled position of law that the AO before assuming settled position of law that the AO before assuming jurisdiction us 147 of the Act is required to make some jurisdiction us 147 of the Act is required to make some jurisdiction us 147 of the Act is required to make some Forever Flourishing Fin & Inv. Pvt. Ltd. 3 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 preliminary enquiry and has to form his independent enquiry and has to form his independent opinion of income escaping assessment whic opinion of income escaping assessment which facts are h facts are totally missing in the appellant's case. totally missing in the appellant's case.

2. The CIT(A) in justifying the validity of assumption of The CIT(A) in justifying the validity of assumption of The CIT(A) in justifying the validity of assumption of jurisdiction u/s 147 of the Act did not appreciate that the jurisdiction u/s 147 of the Act did not appreciate that the jurisdiction u/s 147 of the Act did not appreciate that the information received by the AO was vague and the crucial information received by the AO was vague and the crucial information received by the AO was vague and the crucial link between the information link between the information made available and the made available and the formation of belief was absent in as much nowhere in the formation of belief was absent in as much nowhere in the formation of belief was absent in as much nowhere in the reasons recorded as well as in the order disposing of reasons recorded as well as in the order disposing of reasons recorded as well as in the order disposing of objections to the reasons recorded the AO has listed out objections to the reasons recorded the AO has listed out objections to the reasons recorded the AO has listed out name of the companies from whom Rs.10.50 crs. were name of the companies from whom Rs.10.50 crs. were name of the companies from whom Rs.10.50 crs. were received by t received by the appellant towards share capital and he appellant towards share capital and premium which were alleged to be bogus and in any event, premium which were alleged to be bogus and in any event, premium which were alleged to be bogus and in any event, the CIT(A) could not have improved upon from what has the CIT(A) could not have improved upon from what has the CIT(A) could not have improved upon from what has already been stated in the reasons recorded. already been stated in the reasons recorded.

5. Without prejudice to the above, the CIT(A) did not 5. Without prejudice to the above, the CIT(A) did not 5. Without prejudice to the above, the CIT(A) did not appreciate that in appreciate that in drawing the inference that the appellant drawing the inference that the appellant is an entry provider, then consistent with his said stand, no is an entry provider, then consistent with his said stand, no is an entry provider, then consistent with his said stand, no addition could have been made in the hands of the addition could have been made in the hands of the addition could have been made in the hands of the appellant.

6. The CIT(A) erred in not appreciating that if the financials 6. The CIT(A) erred in not appreciating that if the financials 6. The CIT(A) erred in not appreciating that if the financials of the appellant did not jus of the appellant did not justify receiving of share capital at tify receiving of share capital at a huge premium and the financials of the companies who a huge premium and the financials of the companies who a huge premium and the financials of the companies who have invested in share capital of the appellant also did not have invested in share capital of the appellant also did not have invested in share capital of the appellant also did not justify receiving of share capital at a huge premium then no justify receiving of share capital at a huge premium then no justify receiving of share capital at a huge premium then no addition could have been made in the hands o addition could have been made in the hands o addition could have been made in the hands of the appellant and the same, if at all, was required to be made appellant and the same, if at all, was required to be made appellant and the same, if at all, was required to be made in the hands of Mahavir Group of cases who have availed in the hands of Mahavir Group of cases who have availed in the hands of Mahavir Group of cases who have availed loans from the appellant in as much as the genesis of notice loans from the appellant in as much as the genesis of notice loans from the appellant in as much as the genesis of notice u/s 148 of the Act on the appellant was the search action u/s 148 of the Act on the appellant was the search action u/s 148 of the Act on the appellant was the search action on the said grou on the said group to verify huge loans taken by them p to verify huge loans taken by them including from the appellant. including from the appellant. Your appellant, therefore, submits that the order under Your appellant, therefore, submits that the order under Your appellant, therefore, submits that the order under appeal be quashed and in the alternative addition made be appeal be quashed and in the alternative addition made be appeal be quashed and in the alternative addition made be directed to be deleted. directed to be deleted.

Forever Flourishing Fin & Inv. Pvt. Ltd. 5 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 2.1 The grounds raised in ITA No. 6120/Mu The grounds raised in ITA No. 6120/Mu The grounds raised in ITA No. 6120/Mum/2019 are reproduced as under: reproduced as under:

2. The CIT (A) erred in 2. The CIT (A) erred in confirming the addition u/s 68 of the confirming the addition u/s 68 of the Act of Rs.9,16,35,375/ Act of Rs.9,16,35,375/- in respect of share capital and in respect of share capital and securities premium. securities premium. 2.1. In confirming the addition as above, the CIT(A) erred in 2.1. In confirming the addition as above, the CIT(A) erred in 2.1. In confirming the addition as above, the CIT(A) erred in a. not appreciating that the primary onus which lay on the a. not appreciating that the primary onus which lay on the a. not appreciating that the primary onus which lay on the appellant stood fully appellant stood fully discharged and the same shifted to discharged and the same shifted to the AO who neither dislodged the material and evidence the AO who neither dislodged the material and evidence the AO who neither dislodged the material and evidence placed on record nor made any independent enquiry, placed on record nor made any independent enquiry, placed on record nor made any independent enquiry, b. not appreciating that, the A merely relied upon the b. not appreciating that, the A merely relied upon the b. not appreciating that, the A merely relied upon the statements of alleged entry providers and / or dummy statements of alleged entry providers and / or dummy statements of alleged entry providers and / or dummy directors without bringing any corroborative material in ors without bringing any corroborative material in ors without bringing any corroborative material in support of the same and in any event, the statements of support of the same and in any event, the statements of support of the same and in any event, the statements of alleged entry providers were recorded by other officers of alleged entry providers were recorded by other officers of alleged entry providers were recorded by other officers of the Dept. in the enquiries unconnected with the appellant, the Dept. in the enquiries unconnected with the appellant, the Dept. in the enquiries unconnected with the appellant, c. relying upon various judicia . relying upon various judicial pronouncements which are l pronouncements which are distinguishable on facts and by distinguishable on facts and by-passing the decisions of the passing the decisions of the jurisdictional high court as well as persuasive decisions of jurisdictional high court as well as persuasive decisions of jurisdictional high court as well as persuasive decisions of other high courts relied upon by the appellant which are on other high courts relied upon by the appellant which are on other high courts relied upon by the appellant which are on identical facts, identical facts, d. not appreciating that no ad d. not appreciating that no addition can be made u/s 68 of dition can be made u/s 68 of the Act in respect of share capital if the identities of the the Act in respect of share capital if the identities of the the Act in respect of share capital if the identities of the share applicants were established, and share applicants were established, and e. holding that the AO has observed that the alleged bogus e. holding that the AO has observed that the alleged bogus e. holding that the AO has observed that the alleged bogus shareholders have within a short span of time sold the shareholders have within a short span of time sold the shareholders have within a short span of time sold the shares of the shares of the appellant to entities of the appellant group at appellant to entities of the appellant group at face value and thereby incurred huge losses, a fact not face value and thereby incurred huge losses, a fact not face value and thereby incurred huge losses, a fact not borne out from the record. borne out from the record. 3. Without prejudice to the above, the CIT(A) did not 3. Without prejudice to the above, the CIT(A) did not 3. Without prejudice to the above, the CIT(A) did not appreciate that in drawing the inference that the appellant appreciate that in drawing the inference that the appellant appreciate that in drawing the inference that the appellant Forever Flourishing Fin & Inv. Pvt. Ltd. 6 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 is an entry provider, then consistent with his said stand no entry provider, then consistent with his said stand no entry provider, then consistent with his said stand no addition could have been made in the hands of the addition could have been made in the hands of the addition could have been made in the hands of the appellant. 3. On perusal of the grounds raised

in these two appeals, we find On perusal of the grounds raised in these two appeals, we find On perusal of the grounds raised in these two appeals, we find that on merit grounds raised in both the appeals are identical that on merit grounds raised in both the appeals are identical that on merit grounds raised in both the appeals are identical except the difference of amount involved. The ground challenging difference of amount involved. The ground challenging difference of amount involved. The ground challenging validity of the reassessment has only been raised in assessment validity of the reassessment has only been raised in assessment validity of the reassessment has only been raised in assessment year 2012-13. As far as merit of the additions is concerned s far as merit of the additions is concerned s far as merit of the additions is concerned, before us, the Ld. Counsel argued appeal for assessment year 2013 the Ld. Counsel argued appeal for assessment year 2013 the Ld. Counsel argued appeal for assessment year 2013-14 and requested for following those arguments ested for following those arguments in the assessment year in the assessment year 2012-13 also. The grounds challenging validity have been argued . The grounds challenging validity have been argued in . The grounds challenging validity have been argued AY 2012-13 and grounds on merit have been stated to be covered and grounds on merit have been stated to be covered and grounds on merit have been stated to be covered by the arguments for assessment year 2013 by the arguments for assessment year 2013-14. In view of the 14. In view of the submission of the parties in assessment year 2012 sion of the parties in assessment year 2012-13, we are sion of the parties in assessment year 2012 adjudicating adjudicating adjudicating the the the grounds grounds grounds challenging challenging challenging the the the validity validity validity of of of the the the reassessment and as far as merit is concerned, we are adjudicating reassessment and as far as merit is concerned, we are adjudicating reassessment and as far as merit is concerned, we are adjudicating on the grounds of the assessment year 2013 the grounds of the assessment year 2013-14 and 14 and said finding shall be followed in assessment year 2012 wed in assessment year 2012-13. The Validity of the Reassessment in Assessment Year 2012-13 The Validity of the Reassessment in Assessment Year 2012 The Validity of the Reassessment in Assessment Year 2012

4. Briefly stated facts of the case are that the assessee filed its Briefly stated facts of the case are that the assessee filed its Briefly stated facts of the case are that the assessee filed its return of income for the assessment year consideration on return of income for the assessment year consideration on return of income for the assessment year consideration on 29.09.2012 declaring total income of 29.09.2012 declaring total income of Rs.5,12,240/-. A search action . A search action u/s 132 of the Income u/s 132 of the Income-tax Act, 1961 (in short ‘the Act’) was carried tax Act, 1961 (in short ‘the Act’) was carried out by the Investigation Wing of the Income out by the Investigation Wing of the Income-tax Department, in tax Department, in “Mahavir Group” of cases including M/s Mahavir Road, & of cases including M/s Mahavir Road, & of cases including M/s Mahavir Road, & Forever Flourishing Fin & Inv. Pvt. Ltd. 7 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 Infrastructure P. Ltd. i.e. Flagship C Infrastructure P. Ltd. i.e. Flagship Company of Mahavir Group. ompany of Mahavir Group. During search, it was observed that it was observed that “Mahavir Group Mahavir Group” of Companies received unsecured loan from the assessee company, t loan from the assessee company, therefore, the loan from the assessee company, t assessee company was covered under survey proceedings u/s 133A assessee company was covered under survey proceedings u/s 133A assessee company was covered under survey proceedings u/s 133A of the Act on 21.11.2013. During survey action it was observed that 21.11.2013. During survey action it was observed that 21.11.2013. During survey action it was observed that assessee issued shares at huge premium to various issued shares at huge premium to various share applicant issued shares at huge premium to various companies. The Investigation Wing was of the opinion that share companies. The Investigation Wing was of the opinion that share companies. The Investigation Wing was of the opinion that share premium received by the assessee was without any basis and huge premium received by the assessee was without any basis and huge premium received by the assessee was without any basis and huge premium was not justified considering the investments of the was not justified considering the investments of the was not justified considering the investments of the assessee. The Investigation Wing further carried out inquiries about assessee. The Investigation Wing further carried out inquiries about assessee. The Investigation Wing further carried out inquiries about the share holders who invested in the the share holders who invested in the company. The Investigation he Investigation Wing observed that the shareholder companies of the assessee the shareholder companies of the assessee the shareholder companies of the assessee were not available at their their stated address. It was further t was further noticed by the Investigation wing that wing that 15 shareholder companies of the assessee, of the assessee, were concerns of “Shri Deepak Patwari Shri Deepak Patwari” and “Sh Devesh Upadhyay Devesh Upadhyay”, both entry operators both entry operators, who had floated more than 100 compan floated more than 100 companies with dummy director with sole purpose of providing accommodation with dummy director with sole purpose of providing accommodation with dummy director with sole purpose of providing accommodation entries to the various beneficiaries. The Investigation Wing referred entries to the various beneficiaries. The Investigation Wing referred entries to the various beneficiaries. The Investigation Wing referred to statement of “Shri Deepak Patwari Shri Deepak Patwari” recorded on oath u/s 132(4) recorded on oath u/s 132(4) on 14.11.2011 and subsequent statement u/s 131 on 01.02.2012 on 14.11.2011 and subsequent statement u/s 131 on 0 on 14.11.2011 and subsequent statement u/s 131 on 0 and 27.07.2013. In those statements, Shri Deepak Patwari had n those statements, Shri Deepak Patwari had n those statements, Shri Deepak Patwari had identified the alleged alleged dummy director of those concerns. The investigation wing also recorded statement of the alleged dummy investigation wing also recorded statement of the alleged dummy investigation wing also recorded statement of the alleged dummy directors. The Investigation Wing supplied the material con The Investigation Wing supplied the material con The Investigation Wing supplied the material containing statements of relevant persons to statements of relevant persons to the Assessing Officer, who the Assessing Officer, who, after Forever Flourishing Fin & Inv. Pvt. Ltd. 8 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 recording reasons to believe ecording reasons to believe that income escaped assessment that income escaped assessment, issued a notice u/s 148 of the A issued a notice u/s 148 of the Act on 01.02.2016. The assessee in ct on 01.02.2016. The assessee in response, requested requested to treat original return of incom original return of income filed on 29.09.2012 as being filed in response to notice u/s 148 of the Act. 29.09.2012 as being filed in response to notice u/s 148 of the Act. 29.09.2012 as being filed in response to notice u/s 148 of the Act. After providing opportunity of being heard, the Assessing Officer After providing opportunity of being heard, the Assessing Officer After providing opportunity of being heard, the Assessing Officer completed the reassessment proceedings u/s 147 r.w.s. 143(3) of completed the reassessment proceedings u/s 147 r.w.s. 143(3) of completed the reassessment proceedings u/s 147 r.w.s. 143(3) of the Act on 30.06.2017, wherein the Act on 30.06.2017, wherein, he added the share capital along are capital along with share premium received from 15 shareholders during the year with share premium received from 15 shareholders during the year with share premium received from 15 shareholders during the year under consideration amounting to Rs.10,50,00,000/- in terms of under consideration amounting to Rs.10,50,00,000/ under consideration amounting to Rs.10,50,00,000/ section 68 of the Act. On further appeal, the Ld. CIT(A) rejected the section 68 of the Act. On further appeal, the Ld. CIT(A) rejected the section 68 of the Act. On further appeal, the Ld. CIT(A) rejected the grounds challenging validity of the reas grounds challenging validity of the reassessment as well as upheld sessment as well as upheld the addition made u/s 68 of the Act on merit. the addition made u/s 68 of the Act on merit.

Forever Flourishing Fin & Inv. Pvt. Ltd. 10 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019

Forever Flourishing Fin & Inv. Pvt. Ltd. 13 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 10.1 We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. In our dispute and perused the relevant material on record. In our dispute and perused the relevant material on record. In our opinion, this is an issue in dispute which has b opinion, this is an issue in dispute which has been examined while een examined while deciding on merit of addition and initiation of the proceedings u/s deciding on merit of addition and initiation of the proceedings u/s deciding on merit of addition and initiation of the proceedings u/s 147 cannot be quashed merely for the reason that during the 147 cannot be quashed merely for the reason that during the 147 cannot be quashed merely for the reason that during the course of the reassessment proceedings, the assessee has not been course of the reassessment proceedings, the assessee has not been course of the reassessment proceedings, the assessee has not been provided opportunity for cross provided opportunity for cross-examining the persons whose e persons whose statement have been related by the Assessing Officer and this issue statement have been related by the Assessing Officer and this issue statement have been related by the Assessing Officer and this issue shall be adjudicated while deciding the merit of the addition. shall be adjudicated while deciding the merit of the addition. shall be adjudicated while deciding the merit of the addition. Accordingly, the ground Accordingly, the grounds challenging validity of the reassessment of challenging validity of the reassessment of the assessee is dismissed. the assessee is dismissed.

Adjudication of Addition on Merit Addition on Merit:

Original Details of Shareholders to whom shares were first allotted Details of Shareholders to whom shares were first allotted Share Holder Date of Nos Nos of of Face Total Amount Premium/ Total Total Grand Total allotment Shares Shares value/shar Received (FV) Share Premium Premium (FV+Premiu allotted allotted e Received Received m) Adopt 30/03/2013 4100 4100 100 410000 875 3587500 3587500 3997500 Developers 875 Assemble 30/03/2013 6650 6650 100 665000 5818750 5818750 6483750 Construction Pvt. Ltd. 875 Barbie 30/03/2013 7175 7175 100 717500 6278125 6278125 6995625 Tradelink Pvt. Ltd. 875 Binapani 30/03/2013 4600 4600 100 460000 4025000 4025000 4485000 Forever Flourishing Fin & Inv. Pvt. Ltd. 14 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 Merchanddise Pvt. Ltd. 875 Blossom 30/03/2013 7175 7175 100 717500 6278125 6278125 6995625 Dealcom Pvt. Ltd. 875 Comfort 30/03/2013 4100 4100 100 410000 35875000 35875000 3997500 Dealtrade Pvt. Ltd. 875 Evernew 30/03/2013 14850 14850 100 1485000 12993750 12993750 14478750 Conclave Pvt. Ltd. 875 Faster Trade 30/03/2013 2526 2526 100 2526000 2240000 2240000 2496000 Venture Pvt. Ltd. 875 Gayatri 30/03/2013 5100 5100 100 510000 4462500 4462500 4972500 Dealtrade Pvt. Ltd. 875 Intimate 30/03/2013 3575 3575 100 357500 3128125 3128125 3485625 Buildcon Pvt. Ltd. 875 Positive 30/03/2013 9025 9025 100 9025000 7896875 7896875 8799375 Devcon Pvt. Ltd. 875 Sraboni Sales 30/03/2013 1525 1525 100 152500 1334375 1334375 1486875 Pvt. Ltd. 875 Variety 30/03/2013 4100 4100 100 410000 1334375 1334375 1486875 Trade-Link Pvt. Ltd. 875 Visible 30/03/2013 4100 4100 100 410000 3587500 3587500 3997500 Realestate 875 Wonder 30/03/2013 17925 17925 100 1792500 15684375 15684375 17476875 Procon Pvt. Ltd. Total 93985 93985 9398500 82236875 82236875 9,16,35,375 11.1 In response to the query by the Assessing Officer for justifying In response to the query by the Assessing Officer for justifying In response to the query by the Assessing Officer for justifying the genuineness of the share capital the genuineness of the share capital/premium, the assessee filed /premium, the assessee filed name, address and PAN of the shareholders along with confirmation PAN of the shareholders along with confirmation PAN of the shareholders along with confirmation from them. The assessee also filed balance sheet he assessee also filed balance sheet of share he assessee also filed balance sheet holders/subscribers, their holders/subscribers, their bank statement and acknowledgement of bank statement and acknowledgement of the income tax return filed. the income tax return filed. But according to the Assessing Officer, But according to the Assessing Officer, the share premium charged from the share subscriber/shareholder the share premium charged from the share subscriber/shareholder the share premium charged from the share subscriber/shareholder was excessive looking to the valuation of the as was excessive looking to the valuation of the assessee company. sessee company. The referred, firstly, to statement of accountant of the Assessing Officer referred, ccountant of the assessee company recorded on 21.11.2013 recorded on 21.11.2013 (during (during the course of survey action) u/s 131 of the Act wherein u/s 131 of the Act wherein, he submitted that he submitted that Forever Flourishing Fin & Inv. Pvt. Ltd. 15 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 assessee company was planning to start a n assessee company was planning to start a new business i.e. ew business i.e. construction and land development and for which the investors had construction and land development and for which the investors had construction and land development and for which the investors had invested their money in the assessee company invested their money in the assessee company but but he could not justify the quantum of share premium. He stated that the amount justify the quantum of share premium. He stated that the amount justify the quantum of share premium. He stated that the amount received by way of share premium was further ut received by way of share premium was further utilized for shares ilized for shares and securities and giving loans and advances. and securities and giving loans and advances. Secondly Secondly, the ld AO referred to statement referred to statement of the director of the assessee company of the director of the assessee company, Shri Krishan Kumar, which Kumar, which was recorded 03.12.2013 before the ACIT of was recorded 03.12.2013 before the ACIT of the Investigation Kalyan, Thane the Investigation Kalyan, Thane, wherein he was asked to explain he was asked to explain genuineness of the share premium transactions genuineness of the share premium transactions of the assessee of the assessee company however, he requested for further time for filing relevant , he requested for further time for filing relevant , he requested for further time for filing relevant details but ultimately ultimately no such details were filed before the no such details were filed before the Investigation Wing. Thirdly Thirdly, The Assessing Officer has g Officer has relied on the statement of Shri Deepak statement of Shri Deepak Patwari, wherein he stated that wherein he stated that shareholder companies shareholder companies, who invested in assessee invested in assessee, were dummy companies floated by him engaging dummy directors. The said companies floated by him engaging dummy directors. companies floated by him engaging dummy directors. statement of Shri Deepak Patwari was recorded u/s 132 of the Act statement of Shri Deepak Patwari was recorded u/s 1 statement of Shri Deepak Patwari was recorded u/s 1 on 14.11.2011 and subsequently u/s 131 on 01.02.2012 and on 14.11.2011 and subsequently u/s 131 on 01.02.2012 and on 14.11.2011 and subsequently u/s 131 on 01.02.2012 and 22.07.2013 by the Investigation Wing, Kolkata. The Assessing 22.07.2013 by the Investigation Wing, Kolkata. The Assessing 22.07.2013 by the Investigation Wing, Kolkata. The Assessing Officer relying on the statement of Officer relying on the statement of sh Deepak Patwari and dummy Deepak Patwari and dummy directors including Shri Guha, Shri Ajay Kumar Thakkar etc. that directors including Shri Guha, Shri Ajay Kumar Thakkar etc. that directors including Shri Guha, Shri Ajay Kumar Thakkar etc. that the assessee had obtained accommodation entry of share capital. the assessee had obtained accommodation entry of share capital. the assessee had obtained accommodation entry of share capital. The Assessing Officer has extensively The Assessing Officer has extensively referred to the statement of referred to the statement of those persons from para 11.2 to 14 se persons from para 11.2 to 14 ( on page 7 to 64 page 7 to 64 )of the impugned order. The Assessing Officer concluded his finding in impugned order. The Assessing Officer concluded his finding in impugned order. The Assessing Officer concluded his finding in Forever Flourishing Fin & Inv. Pvt. Ltd. 16 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 para 19 of the assessment order. For ready reference said para 19 of the assessment order. For ready reference said para 19 of the assessment order. For ready reference said conclusion is reproduced as under: conclusion is reproduced as under:

“19. For the following reasons, the inevitable finding of fact is 19. For the following reasons, the inevitable finding of fact is 19. For the following reasons, the inevitable finding of fact is that the issue of shares is not genuine and therefore the issue of shares is not genuine and therefore the issue of shares is not genuine and therefore the share capital issued by the company needs to be taxed share capital issued by the company needs to be taxed share capital issued by the company needs to be taxed under Section 68 of the Act under Section 68 of the Act - a premium of Rs. 875 per share on a face value of Rs. 100 a premium of Rs. 875 per share on a face value of Rs. 100 a premium of Rs. 875 per share on a face value of Rs. 100 was alleged to have been paid by various companies in the was alleged to have been paid by various companies in the was alleged to have been paid by various companies in the case of an unlisted private company with a level of assets f an unlisted private company with a level of assets f an unlisted private company with a level of assets and earnings per share as displayed by the assessee. No and earnings per share as displayed by the assessee. No and earnings per share as displayed by the assessee. No dividends have ever been declared by the company. For dividends have ever been declared by the company. For dividends have ever been declared by the company. For Assessment Year 2012 Assessment Year 2012-13 the company had a profit of 13 the company had a profit of Rs.5,47,964 on a capital employed of Rs. Rs.5,47,964 on a capital employed of Rs. 15,30,84,461 15,30,84,461 (Share capital Rs. 1,54,40,000 + (Share capital Rs. 1,54,40,000 + Share Premium Rs. Share Premium Rs. 13,76,44,461) i.e. the return on capital was 0.35% as against 13,76,44,461) i.e. the return on capital was 0.35% as against 13,76,44,461) i.e. the return on capital was 0.35% as against which share premium of Rs. 8,22,36,875 was collected. which share premium of Rs. 8,22,36,875 was collected. which share premium of Rs. 8,22,36,875 was collected. Neither the past performance of the company nor its Neither the past performance of the company nor its Neither the past performance of the company nor its present earnings justify present earnings justify the amount of premium the amount of premium which has been charged; has been charged; which company? (ii) even the most reputed companies do not command such a even the most reputed companies do not command such a even the most reputed companies do not command such a high premium on their share value when their return on high premium on their share value when their return on high premium on their share value when their return on capital employed is 0.35% per annum. It is incomprehensible capital employed is 0.35% per annum. It is incomprehensible capital employed is 0.35% per annum. It is incomprehensible as to why any person as to why any person will invest in the shares of a company will invest in the shares of a company which is earning just 0.35% per annum; which is earning just 0.35% per annum; the assessee has not furnished any details as to how not furnished any details as to how (iii) the assessee has and on what basis the share premium amount was and on what basis the share premium amount was and on what basis the share premium amount was fixed; (iv) if the value of the premium was worked out on the basis if the value of the premium was worked out on the basis if the value of the premium was worked out on the basis of the advice of financial consultants and advisors the the advice of financial consultants and advisors the the advice of financial consultants and advisors the assessee would have certainly furnished the details about assessee would have certainly furnished the details about assessee would have certainly furnished the details about such consultants and advisors; such consultants and advisors; (v) there are no indicators as to the date on which the pricing there are no indicators as to the date on which the pricing there are no indicators as to the date on which the pricing was arrived at; was arrived at; (vi) the net worth as disclosed by the net worth as disclosed by the balance sheet, the the balance sheet, the potential earnings as disclosed by earnings per share or potential earnings as disclosed by earnings per share or potential earnings as disclosed by earnings per share or Forever Flourishing Fin & Inv. Pvt. Ltd. 17 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 even the vague protestations of future prospects would not even the vague protestations of future prospects would not even the vague protestations of future prospects would not justify a high premium of Rs. 875/ justify a high premium of Rs. 875/- per share. If such a high per share. If such a high figure was fixed in consultation with experts or finan figure was fixed in consultation with experts or finan figure was fixed in consultation with experts or financial institutions, it is inconceivable as to why the assessee was institutions, it is inconceivable as to why the assessee was institutions, it is inconceivable as to why the assessee was unable to provide even the barest of details of such unable to provide even the barest of details of such unable to provide even the barest of details of such consultation; consultation; (vii) the only inference that could be drawn was that no such the only inference that could be drawn was that no such the only inference that could be drawn was that no such consultation took place, the rate of premium was fixed the rate of premium was fixed consultation took place, unilaterally by the assessee without any reference erally by the assessee without any reference erally by the assessee without any reference point to past records, present earnings or future point to past records, present earnings or future point to past records, present earnings or future prospects. The object was not to attract genuine investors . The object was not to attract genuine investors . The object was not to attract genuine investors by pegging the premium at a realistic level but to bring in by pegging the premium at a realistic level but to bring in by pegging the premium at a realistic level but to bring in large amounts of unaccounted funds in the large amounts of unaccounted funds in the guise of share guise of share premium; (viii) It is not known as to why any of the existing ) It is not known as to why any of the existing ) It is not known as to why any of the existing shareholders / directors did not subscribe shareholders / directors did not subscribe to the shares to the shares issued by the assessee company and whether the issue was issued by the assessee company and whether the issue was issued by the assessee company and whether the issue was made on rights basis and whether all the compliances of the made on rights basis and whether all the compliances of the made on rights basis and whether all the compliances of the provisions of Companies Act were done; sions of Companies Act were done; (ix) the Minutes of Meetings of the Board of Director and of the Minutes of Meetings of the Board of Director and of the Minutes of Meetings of the Board of Director and of the Members were called for the Members were called for but have not been furnished; but have not been furnished; (x) it is not clear as to how the assessee company it is not clear as to how the assessee company it is not clear as to how the assessee company approached these subscribers in Kolkata when it is approached these subscribers in Kolkata when it is approached these subscribers in Kolkata when it is stated that these companies are not related to the assessee that these companies are not related to the assessee that these companies are not related to the assessee company; (xi) the confirmations from the shareholders are in the same the confirmations from the shareholders are in the same the confirmations from the shareholders are in the same format with not a single word being different in any of the format with not a single word being different in any of the format with not a single word being different in any of the confirmations and surprisingly date being missing from each confirmations and surprisingly date being missing from each confirmations and surprisingly date being missing from each of the confirmations; confirmations; (xii) copies of bank statements of the shareholders which copies of bank statements of the shareholders which copies of bank statements of the shareholders which have been furnished show that they have received the funds have been furnished show that they have received the funds have been furnished show that they have received the funds on the same date on which the cheque issued by them to the on the same date on which the cheque issued by them to the on the same date on which the cheque issued by them to the assessee company was presented to their bankers; assessee company was presented to their bankers; assessee company was presented to their bankers; (xiii) though c though called for however the assessee company has alled for however the assessee company has not furnished the details called for vide the aforementioned not furnished the details called for vide the aforementioned not furnished the details called for vide the aforementioned questionnaire issued vide notice dated 14 questionnaire issued vide notice dated 14-03-2016. 2016.

Forever Flourishing Fin & Inv. Pvt. Ltd. 18 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 (xiv) the companies which have subscribed to shares of the companies which have subscribed to shares of the companies which have subscribed to shares of the assessee company have subsequently transfe the assessee company have subsequently transfe the assessee company have subsequently transferred the shares of the assessee company to its promoters / the shares of the assessee company to its promoters / the shares of the assessee company to its promoters / group warp concerns group warp concerns so that the control of the assessee so that the control of the assessee company comes back to its promoters. The transfer of shares company comes back to its promoters. The transfer of shares company comes back to its promoters. The transfer of shares is at a loss of about 90% and these companies have not even is at a loss of about 90% and these companies have not even is at a loss of about 90% and these companies have not even reflected this loss i reflected this loss in their tax returns; (xv) the directors of the companies which have invested in the the directors of the companies which have invested in the the directors of the companies which have invested in the capital of the assessee company were not able to answer the capital of the assessee company were not able to answer the capital of the assessee company were not able to answer the questions as to what was the basis of their deciding to invest questions as to what was the basis of their deciding to invest questions as to what was the basis of their deciding to invest in the share capital of the assessee company; in the share capital of the assessee company;” 11.3 The Assessing Officer after making The Assessing Officer after making factual observation factual observations as above, relied on various decisions of the Hon’ble Courts and , relied on various decisions of the Hon’ble Courts and , relied on various decisions of the Hon’ble Courts and concluded that the amount of Rs.93,98,500/ concluded that the amount of Rs.93,98,500/- received received as share capital and Rs.8,22,36,875/ capital and Rs.8,22,36,875/- towards share premium totaling to towards share premium totaling to Rs.9,16,35,375/- was unexplained cash credit in terms of section as unexplained cash credit in terms of section as unexplained cash credit in terms of section 68 of the Act. The relevant finding of the Assessing Officer is 68 of the Act. The relevant finding of the Assessing Officer is 68 of the Act. The relevant finding of the Assessing Officer is reproduced as under: reproduced as under:

“20. The fact that the share application monies have come 20. The fact that the share application monies have come 20. The fact that the share application monies have come through account payce cheques is, at best, neutral. The through account payce cheques is, at best, neutral. The through account payce cheques is, at best, neutral. The question requires a thorough examination and not a question requires a thorough examination and not a question requires a thorough examination and not a superticial examination. It anything, in the light of the superticial examination. It anything, in the light of the superticial examination. It anything, in the light of the material gathered by the investigation wing about the modus material gathered by the investigation wing about the modus material gathered by the investigation wing about the modus operandi followed by the entry providers, the fact that the operandi followed by the entry providers, the fact that the operandi followed by the entry providers, the fact that the money was sent through bank money was sent through banking channels loses all force. ing channels loses all force. The modus operandi involves receipt by the entry providers The modus operandi involves receipt by the entry providers The modus operandi involves receipt by the entry providers of equivalent amount of cash from the assessee. The fact that of equivalent amount of cash from the assessee. The fact that of equivalent amount of cash from the assessee. The fact that the companies which subscribed to the shares were borne on the companies which subscribed to the shares were borne on the companies which subscribed to the shares were borne on the file of the ROC is again a neutral fact. E the file of the ROC is again a neutral fact. Every company very company incorporated under the Companies Act, 1956 has to comply incorporated under the Companies Act, 1956 has to comply incorporated under the Companies Act, 1956 has to comply with statutory formalities. That these companies were with statutory formalities. That these companies were with statutory formalities. That these companies were complying with such formalities does not add any credibility complying with such formalities does not add any credibility complying with such formalities does not add any credibility or evidentiary value. In any case, it does not ipso facto prove or evidentiary value. In any case, it does not ipso facto prove or evidentiary value. In any case, it does not ipso facto prove that the transactions are genuine Investigation by the e transactions are genuine Investigation by the e transactions are genuine Investigation by the Investigation Wing has revealed that hundreds of companies Investigation Wing has revealed that hundreds of companies Investigation Wing has revealed that hundreds of companies Forever Flourishing Fin & Inv. Pvt. Ltd. 19 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 are floated and acquired, this is even corroborated by the are floated and acquired, this is even corroborated by the are floated and acquired, this is even corroborated by the facts recorded in several decisions of the Courts and facts recorded in several decisions of the Courts and facts recorded in several decisions of the Courts and Triounals some or which are Triounals some or which are - CIT v. Focus Exports Pvt. Ltd. (Del HC)(ITA No. 218/2012; Focus Exports Pvt. Ltd. (Del HC)(ITA No. 218/2012; Focus Exports Pvt. Ltd. (Del HC)(ITA No. 218/2012; order dated 16.9.2014); order dated 16.9.2014); CIT v. Nova Promoters & Finlease (P.) Ltd. [2012] 18 CIT v. Nova Promoters & Finlease (P.) Ltd. [2012] 18 CIT v. Nova Promoters & Finlease (P.) Ltd. [2012] 18 taxmann.com 217 (Delhi HC); taxmann.com 217 (Delhi HC); Gagan Gagan Gagan Industries Industries Industries Private Private Private Ltd. Ltd. Ltd. V. V. V. ACIT ACIT ACIT (ITA (ITA (ITA No. No. No. 230/Ind/2012; AY 2005 230/Ind/2012; AY 2005-06; Order dated 16.7.2012)(Ind 06; Order dated 16.7.2012)(Indore Tribunal) Balaji Coal Private Limited v. DCIT (ITA No. 366/Ind/2012; Balaji Coal Private Limited v. DCIT (ITA No. 366/Ind/2012; Balaji Coal Private Limited v. DCIT (ITA No. 366/Ind/2012; AY 2007-08; Order dated 30.4.2013)(Indore Tribunal); 08; Order dated 30.4.2013)(Indore Tribunal); 08; Order dated 30.4.2013)(Indore Tribunal); Shri Jai Shiv Shankar Traders Pvt. Ltd. V. ITO (ITA No. Shri Jai Shiv Shankar Traders Pvt. Ltd. V. ITO (ITA No. Shri Jai Shiv Shankar Traders Pvt. Ltd. V. ITO (ITA No. 1068/Del/2013; AY 2008 1068/Del/2013; AY 2008-09; Order dated 18.2.2015)(Delhi Order dated 18.2.2015)(Delhi 'G' Bench); Shree Astha Vinayak Traders Pvt. Ltd. v. ITO (ITA No. Astha Vinayak Traders Pvt. Ltd. v. ITO (ITA No. Astha Vinayak Traders Pvt. Ltd. v. ITO (ITA No. 1069/Del/2013; AY 2008 1069/Del/2013; AY 2008-09; Order dated 18.2.2015)(Delhi Order dated 18.2.2015)(Delhi 'G' Bench); 21. Compliance with statutory norms and requirements is Compliance with statutory norms and requirements is Compliance with statutory norms and requirements is only one aspect, out in the only one aspect, out in the present case bona fide and present case bona fide and genuineness genuineness of of the the transacti transactions ons is is the the issue. issue. The The genuineness of the transaction critically hinges on the truth genuineness of the transaction critically hinges on the truth genuineness of the transaction critically hinges on the truth and veracity of the claim made by the assessee. The and veracity of the claim made by the assessee. The and veracity of the claim made by the assessee. The assessee was provided copy of relevant extracts of was provided copy of relevant extracts of was provided copy of relevant extracts of Statements u/s 131 of the I.T. Act, 1961 of aforementioned Statements u/s 131 of the I.T. Act, 1961 of aforementioned Statements u/s 131 of the I.T. Act, 1961 of aforementioned Kolkata based Companies on 18 based Companies on 18-03-2016 22. The Hon'ble Delhi High Court has in the case of CIT v.

22. The Hon'ble Delhi High Court has in the case of CIT v. Nova Promoters & Finlease (P.) Nova Promoters & Finlease (P.) Ltd. (2012] 18 taxmann.com Ltd. (2012] 18 taxmann.com 217 (Delhi) observed as follows 217 (Delhi) observed as follows - "The Tribunal also erred in law in holding that the "The Tribunal also erred in law in holding that the "The Tribunal also erred in law in holding that the Assessing Officer ought Assessing Officer ought to have proved that the monies to have proved that the monies emanated from the coffers of the emanated from the coffers of the assessee assessee-company and came back as share capital. Section 68 permits and came back as share capital. Section 68 permits and came back as share capital. Section 68 permits the Assessing Officer to add the credit appearing in the the Assessing Officer to add the credit appearing in the the Assessing Officer to add the credit appearing in the books of account of the assessee if the latter offers no books of account of the assessee if the latter offers no books of account of the assessee if the latter offers no Forever Flourishing Fin & Inv. Pvt. Ltd. 20 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 explanati explanation regarding the nature and source of the on regarding the nature and source of the credit or the explanation offered is not satisfactory. It credit or the explanation offered is not satisfactory. It credit or the explanation offered is not satisfactory. It places no duty upon him to point to the source from places no duty upon him to point to the source from places no duty upon him to point to the source from which the money was received by the assessee. The which the money was received by the assessee. The which the money was received by the assessee. The view taken by the Tribunal on the duty cast on the view taken by the Tribunal on the duty cast on the view taken by the Tribunal on the duty cast on the Assessing Officer by section 68 is contrary to the law. essing Officer by section 68 is contrary to the law. essing Officer by section 68 is contrary to the law. Even if one were to hold, albeit erroneously and Even if one were to hold, albeit erroneously and Even if one were to hold, albeit erroneously and without being aware of the legal position adumbrated without being aware of the legal position adumbrated without being aware of the legal position adumbrated above, that the Assessing Officer is bound to show above, that the Assessing Officer is bound to show above, that the Assessing Officer is bound to show that the source of the unaccounted monies was the that the source of the unaccounted monies was the that the source of the unaccounted monies was the coffers of the coffers of the assessee , in the facts of the present case assessee , in the facts of the present case such proof has been brought out by the Assessing such proof has been brought out by the such proof has been brought out by the Officer. The statements of 'M' and 'R', the entry Officer. The statements of 'M' and 'R', the entry Officer. The statements of 'M' and 'R', the entry providers, explaining their modus operandi to help providers, explaining their modus operandi to help providers, explaining their modus operandi to help assessee's having unaccounted monies convert the assessee's having unaccounted monies convert th assessee's having unaccounted monies convert th same into accounted monies affords sufficient material same into accounted monies affords sufficient material same into accounted monies affords sufficient material on the basis of which the Assessing Officer can be on the basis of which the Assessing Officer can be on the basis of which the Assessing Officer can be said to hove discharged the duty. The statements refer said to hove discharged the duty. The statements refer said to hove discharged the duty. The statements refer to the practice of taking cash and issuing cheques in to the practice of taking cash and issuing cheques in to the practice of taking cash and issuing cheques in the guise of subscription to share capital, for a the guise of subscription to share capi the guise of subscription to share capi consideration in the form of commission. As already consideration in the form of commission. As already consideration in the form of commission. As already pointed out, names of several companies which figured pointed out, names of several companies which figured pointed out, names of several companies which figured in the statements given by the above persons to the in the statements given by the above persons to the in the statements given by the above persons to the investigation wing also figured as share. applicants investigation wing also figured as share. applicants investigation wing also figured as share. applicants subscribing to the shares of the a subscribing to the shares of the assessee ssessee-company. These constitute These constitute materials upon which one could materials upon which one could reasonably come to the reasonably come to the conclusion that the monies conclusion that the monies emanated from the coffers of the assessee-company. emanated from the coffers of the assessee emanated from the coffers of the assessee The Tribunal, apart from adopting an erroneous legal The Tribunal, apart from adopting an erroneous legal The Tribunal, apart from adopting an erroneous legal approach, also failed to keep in view approach, also failed to keep in view the material that the material that was relied upon by the Assessing Officer. The was relied upon by the Assessing Officer. The was relied upon by the Assessing Officer. The Commissioner (Appeals) also fell into the same error. If Commissioner (Appeals) also fell into the same error. If Commissioner (Appeals) also fell into the same error. If such material had been kept in view, the Tribunal such material had been kept in view, the Tribunal such material had been kept in view, the Tribunal could not have failed to draw the appropriate could not have failed to draw the appropriate could not have failed to draw the appropriate inference. (Para 31] inference. (Para 31] Where the complet Where the complete particulars of the share applicants e particulars of the share applicants such as their names and addresses, income tax file such as their names and addresses, income tax file such as their names and addresses, income tax file numbers, their creditworthiness, share application numbers, their creditworthiness, share application numbers, their creditworthiness, share application forms and share holders' register, share transfer forms and share holders' register, share transfer forms and share holders' register, share transfer register etc. are furnished to the Assessing Officer and register etc. are furnished to the Assessing Officer and register etc. are furnished to the Assessing Officer and the Asses the Assessing Officer has not conducted any enquiry sing Officer has not conducted any enquiry into the same or has no material in his possession to into the same or has no material in his possession to into the same or has no material in his possession to Forever Flourishing Fin & Inv. Pvt. Ltd. 21 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 show that those particulars are false and cannot be show that those particulars are false and cannot be show that those particulars are false and cannot be acted upon, then no addition can be made in the acted upon, then no addition can be made in the acted upon, then no addition can be made in the hands of the company under section 68 and the hands of the company under section 68 and the hands of the company under section 68 and the remedy open t remedy open to the revenue is to go after the share o the revenue is to go after the share applicants in accordance with law. However, the Court applicants in accordance with law. However, the Court applicants in accordance with law. However, the Court cannot apply the ratio to a case, such as the present cannot apply the ratio to a case, such as the present cannot apply the ratio to a case, such as the present one, where the Assessing Officer is in possession of one, where the Assessing Officer is in possession of one, where the Assessing Officer is in possession of material that discredits and impeaches the particulars material that discredits and impeaches the particulars material that discredits and impeaches the particulars furnished by the assessee and also establishes the urnished by the assessee and also establishes the urnished by the assessee and also establishes the link between self link between self-confessed 'accommodation entry confessed 'accommodation entry providers', whose business it is to help assessees providers', whose business it is to help assessees providers', whose business it is to help assessees bring into their books of account their unaccounted bring into their books of account their unaccounted bring into their books of account their unaccounted monies through the medium of share subscription, and monies through the medium of share subscription, and monies through the medium of share subscription, and the assessee. The ratio is inapplicable to a case, again he assessee. The ratio is inapplicable to a case, again he assessee. The ratio is inapplicable to a case, again such as the present one, where the involvement of the such as the present one, where the involvement of the such as the present one, where the involvement of the assessee in such modus operandi is clearly indicated assessee in such modus operandi is clearly indicated assessee in such modus operandi is clearly indicated by valid material made available to the Assessing by valid material made available to the Assessing by valid material made available to the Assessing Officer as a result of investigations carri Officer as a result of investigations carried out by the ed out by the revenue authorities into the activities of such 'entry revenue authorities into the activities of such 'entry revenue authorities into the activities of such 'entry providers'. The existence with the Assessing Officer of providers'. The existence with the Assessing Officer of providers'. The existence with the Assessing Officer of material showing that the share subscriptions were material showing that the share subscriptions were material showing that the share subscriptions were collected as part of a premeditated plan - a collected as part of a premeditated plan collected as part of a premeditated plan smokescreen • conceived and execute smokescreen • conceived and executed with the d with the connivance or involvement of the assessee excludes connivance or involvement of the assessee excludes connivance or involvement of the assessee excludes the applicability of the ratio. The ratio is attracted to a the applicability of the ratio. The ratio is attracted to a the applicability of the ratio. The ratio is attracted to a case where it is a simple question of whether the case where it is a simple question of whether the case where it is a simple question of whether the assessee has discharged the burden placed upon him assessee has discharged the burden placed upon him assessee has discharged the burden placed upon him under section 68 to prove and est under section 68 to prove and establish the identity ablish the identity and creditworthiness of the share applicant and the and creditworthiness of the share applicant and the and creditworthiness of the share applicant and the genuineness of the transaction. In such a case, the genuineness of the transaction. In such a case, the genuineness of the transaction. In such a case, the Assessing Officer cannot sit back with folded hands till Assessing Officer cannot sit back with folded hands till Assessing Officer cannot sit back with folded hands till the assessee exhausts all the evidence or material in the assessee exhausts all the evidence or material in the assessee exhausts all the evidence or material in his possession and th his possession and then come forward to merely reject en come forward to merely reject the same, without carrying out any verification or the same, without carrying out any verification or the same, without carrying out any verification or enquiry into the material placed before him. The enquiry into the material placed before him. The enquiry into the material placed before him. The instant case does not fall under this category and it instant case does not fall under this category and it instant case does not fall under this category and it would be a trovesty of truth and justice to express a would be a trovesty of truth and justice to express a would be a trovesty of truth and justice to express a view to the con view to the contrary. [Para 38] 23. In the instant case, not only does the material show the 23. In the instant case, not only does the material show the 23. In the instant case, not only does the material show the link between the entry providers and the assessee link between the entry providers and the assessee link between the entry providers and the assessee-company, but the same has also been provided to the assessee in but the same has also been provided to the assessee in but the same has also been provided to the assessee in compliance with the rules of natural justice. Out of the list of compliance with the rules of natural justice. Out of the list of compliance with the rules of natural justice. Out of the list of Forever Flourishing Fin & Inv. Pvt. Ltd. 22 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 companies whose names figured in the information given by companies whose names figured in the information given by companies whose names figured in the information given by them to the investigation wing. 12 companies had provided them to the investigation wing. 12 companies had provided them to the investigation wing. 12 companies had provided the so-called "share subscription monies' to the assessee. called "share subscription monies' to the assessee. called "share subscription monies' to the assessee. There was, thus, specific involvement of the assessee There was, thus, specific involvement of the assessee There was, thus, specific involvement of the assessee- company in the modus opera company in the modus operandi followed by Mr. Patwari. ndi followed by Mr. Patwari.

i. The taxable incomes shown by the share applicant The taxable incomes shown by the share applicant The taxable incomes shown by the share applicant companies are very meagre. companies are very meagre. ii. Though Though Though the the the financials financials financials of of of the the the share share share applicant applicant applicant companies are extremely weak, still, they have companies are extremely weak, still, they have companies are extremely weak, still, they have managed to receive huge share premium in the range managed to receive huge share premium in the range managed to receive huge share premium in the range of Rs. 30 crores to Rs. 48 of Rs. 30 crores to Rs. 48.2 crores. iii. The entire funds at the disposal of the share applicant The entire funds at the disposal of the share applicant The entire funds at the disposal of the share applicant companies companies companies have have have been been been deployed deployed deployed for for for making making making investments and/or advancing loans & advances. investments and/or advancing loans & advances. investments and/or advancing loans & advances. iv. There are no fixed assets shown in the form of There are no fixed assets shown in the form of There are no fixed assets shown in the form of building, plant & "machinery, computers etc. building, plant & "machinery, computers etc. building, plant & "machinery, computers etc. v. The admini The administrative, expenses shown by these share strative, expenses shown by these share applicant companies are nominal. applicant companies are nominal. 11.5 Before the Ld. CIT(A), the assessee mainly raised following Before the Ld. CIT(A), the assessee mainly raised following Before the Ld. CIT(A), the assessee mainly raised following contentions which are reproduced by the Ld. CIT(A) in para 5.5 of contentions which are reproduced by the Ld. CIT(A) in para 5.5 of contentions which are reproduced by the Ld. CIT(A) in para 5.5 of Forever Flourishing Fin & Inv. Pvt. Ltd. 28 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 the impugned order for ready reference said contentions are the impugned order for ready reference said contenti the impugned order for ready reference said contenti reproduced as under: reproduced as under:

The assessee in the appellate proceedings has broadly The assessee in the appellate proceedings has broadly The assessee in the appellate proceedings has broadly raised the following contentions in its written submissions : raised the following contentions in its written submissions : raised the following contentions in its written submissions :- (i) It had discharged its onus by submitting full details of It had discharged its onus by submitting full details of It had discharged its onus by submitting full details of the said share applicants in the form of name, the said share applicants in the form of name, the said share applicants in the form of name, address, address, address, PAN, PAN, PAN, bank bank bank statement, statement, statement, balance balance balance sheet, sheet, sheet, confirmations etc. and thus, it had duly discharged its confirmations etc. and thus, it had duly discharged its confirmations etc. and thus, it had duly discharged its primary primary primary onus onus onus of of of proving proving proving the the the identity identity identity and and and creditworthiness creditworthiness creditworthiness of of of the the the share share share appliants appliants appliants and and and genuineness of the transactions. genuineness of the transactions. (ii) It was not allowed to cross It was not allowed to cross-examine Shri Deepak hri Deepak Patwari, Shri Patwari, Shri Devesh Upadhyay and their dummy Devesh Upadhyay and their dummy directors, on the basis of whose statements, an directors, on the basis of whose statements, an directors, on the basis of whose statements, an adverse inference was drawn by the AO. adverse inference was drawn by the AO. (iii) The onus was on the AO to demonstrate that the funds The onus was on the AO to demonstrate that the funds The onus was on the AO to demonstrate that the funds introduced by way of alleged accommodation entries introduced by way of alleged accommodation entries introduced by way of alleged accommodation entries of share of share capital at a huge premium had emanated capital at a huge premium had emanated from the coffers of the assessee. from the coffers of the assessee.

11.6 The Ld. CIT(A) referred to the decision of the Hon’ble Delhi The Ld. CIT(A) referred to the decision of the Hon’ble Delhi The Ld. CIT(A) referred to the decision of the Hon’ble Delhi High Court in the case of Nova Prom High Court in the case of Nova Promoters Pvt. Ltd. (supra) and then oters Pvt. Ltd. (supra) and then analyzed financials of the each of the sharehol analyzed financials of the each of the shareholders. T . The Ld. CIT(A) again relied on the statement of the directors of shareholder again relied on the statement of the directors of again relied on the statement of the directors of companies and Shri Deepak Patwari. Shri Deepak Patwari. The Ld. CIT(A) in para 5.9 he Ld. CIT(A) in para 5.9 of impugned order held that the assessee failed to discharge its onus held that the assessee failed to discharge its onus held that the assessee failed to discharge its onus in respect of share capital and share pre in respect of share capital and share premium introduced mium introduced, observing as under:

“5.9 From the aforesaid discussion, it can be observed that the 5.9 From the aforesaid discussion, it can be observed that the 5.9 From the aforesaid discussion, it can be observed that the AO was in possession of incriminating material seized as AO was in possession of incriminating material seized as AO was in possession of incriminating material seized as well as incriminating statements recorded during the well as incriminating statements recorded during the well as incriminating statements recorded during the search conducted on Shri Deepak Patwari and Devesh search conducted on Shri Deepak Patwari and Devesh search conducted on Shri Deepak Patwari and Devesh Upadhyay, Entry operators, statements recorded during Upadhyay, Entry operators, statements recorded during Upadhyay, Entry operators, statements recorded during the survey conducted on the assessee grou the survey conducted on the assessee grou the survey conducted on the assessee group and the Forever Flourishing Fin & Inv. Pvt. Ltd. 29 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 subsequent investigations carried out on the alleged 15 subsequent investigations carried out on the alleged 15 subsequent investigations carried out on the alleged 15 bogus share applicant companies based at Kolkata. bogus share applicant companies based at Kolkata. bogus share applicant companies based at Kolkata. From these investigations carried out, it was clear that the assessee these investigations carried out, it was clear that the assessee these investigations carried out, it was clear that the assessee and other entities of its group had availed of accommodation and other entities of its group had availed of accommodation and other entities of its group had availed of accommodation entries from the said 15 share applicant companies, who were rom the said 15 share applicant companies, who were rom the said 15 share applicant companies, who were connected with the entry operators, Shri Deepak Patwari. In connected with the entry operators, Shri Deepak Patwari. In connected with the entry operators, Shri Deepak Patwari. In statements recorded, Shri Deepak Patwari had identified the statements recorded, Shri Deepak Patwari had identified the statements recorded, Shri Deepak Patwari had identified the dummy directors of his dummy concerns to be J Rao, Birja dummy directors of his dummy concerns to be J Rao, Birja dummy directors of his dummy concerns to be J Rao, Birja Kumar Sharma, Girija Kumar Kumar Sharma, Girija Kumar Sharma, Amit Agarwal, Baikunth Sharma, Amit Agarwal, Baikunth Nath Pandey, Radhe Shyam Sharma, Dibakar Mahato, Manoj Nath Pandey, Radhe Shyam Sharma, Dibakar Mahato, Manoj Nath Pandey, Radhe Shyam Sharma, Dibakar Mahato, Manoj Kumar Singh, G. Vinod Kumar, Jaydeep Singh, Kamala Kanta Kumar Singh, G. Vinod Kumar, Jaydeep Singh, Kamala Kanta Kumar Singh, G. Vinod Kumar, Jaydeep Singh, Kamala Kanta Bhuiyan, Akash Shrivastava, Aarti Panda, Suraj Kumar Panda, Bhuiyan, Akash Shrivastava, Aarti Panda, Suraj Kumar Panda, Bhuiyan, Akash Shrivastava, Aarti Panda, Suraj Kumar Panda, Krishna Jaiswal, Biplab Guha, Navin Kumar Singh, Gopa Krishna Jaiswal, Biplab Guha, Navin Kumar Singh, Gopa Krishna Jaiswal, Biplab Guha, Navin Kumar Singh, Gopal Sonkar, Avnish Singh, Jasminder Singh, Chittranjan Bhuiyan, Sonkar, Avnish Singh, Jasminder Singh, Chittranjan Bhuiyan, Sonkar, Avnish Singh, Jasminder Singh, Chittranjan Bhuiyan, etc.: It was found by the AO that the directors of the said 15 etc.: It was found by the AO that the directors of the said 15 etc.: It was found by the AO that the directors of the said 15 share holder companies are out of the dummy directors listed share holder companies are out of the dummy directors listed share holder companies are out of the dummy directors listed by Shri Deepak. Patwari in his statements recorded. Thus, by Shri Deepak. Patwari in his statements recorded. Thus, by Shri Deepak. Patwari in his statements recorded. Thus, there was a there was a direct link established between the assessee and direct link established between the assessee and the said 15. share applicant companies which were not the said 15. share applicant companies which were not the said 15. share applicant companies which were not carrying out any genuine business but solely engaged in but solely engaged in carrying out any genuine business providing accommodation entries and therefore, the onus providing accommodation entries and therefore, the onus providing accommodation entries and therefore, the onus cast upon the assessee was of a higher de cast upon the assessee was of a higher de cast upon the assessee was of a higher degree which cannot be said to have been discharged by only cannot be said to have been discharged by only cannot be said to have been discharged by only submitting name, address, PAN, Annual Report, bank submitting name, address, PAN, Annual Report, bank submitting name, address, PAN, Annual Report, bank statement etc statement etc.. The onus could have been discharged by .. The onus could have been discharged by producing before the AO the share applicants as its witness producing before the AO the share applicants as its witness producing before the AO the share applicants as its witness alongwith their books of account alongwith their books of accounts and supporting evidences etc. s and supporting evidences etc. or atleast providing their latest addresses. However, it is or atleast providing their latest addresses. However, it is or atleast providing their latest addresses. However, it is observed that though most of the observed that though most of the said 15 share applicants said 15 share applicants were found to be not existing at the stated addresses, the were found to be not existing at the stated addresses, the were found to be not existing at the stated addresses, the assessee did not even provide their latest addr assessee did not even provide their latest addr assessee did not even provide their latest addresses to the AO. Therefore, the assessee has clearly failed in Therefore, the assessee has clearly failed in Therefore, the assessee has clearly failed in discharging its onus of proving the genuineness of the discharging its onus of proving the genuineness of the discharging its onus of proving the genuineness of the transactions entered into with the said 15 share applicants of transactions entered into with the said 15 share applicants of transactions entered into with the said 15 share applicants of introduction of funds in the form of share capital at a huge introduction of funds in the form of share capital at a huge introduction of funds in the form of share capital at a huge premium.” 11.7 The Ld. CIT(A) also rejected the contention of the assessee The Ld. CIT(A) also rejected the contention of the assessee The Ld. CIT(A) also rejected the contention of the assessee seeking cross-examination examination, observing as under:

“5.10 The assessee further contends that it was not allowed to The assessee further contends that it was not allowed to The assessee further contends that it was not allowed to cross-examine Shri eepak Patwari, entry operator as well as examine Shri eepak Patwari, entry operator as well as examine Shri eepak Patwari, entry operator as well as Forever Flourishing Fin & Inv. Pvt. Ltd. 30 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 the dummy directors, whos the dummy directors, whose statements were relied upon by e statements were relied upon by the A to draw adverse inference. Therefore, it was contended the A to draw adverse inference. Therefore, it was contended the A to draw adverse inference. Therefore, it was contended by the assessee that the principles of natural justice have been by the assessee that the principles of natural justice have been by the assessee that the principles of natural justice have been violated and accordingly the assessment order is vitiated. It is violated and accordingly the assessment order is vitiated. It is violated and accordingly the assessment order is vitiated. It is observed that there is no disput observed that there is no dispute that the said 15 alleged share e that the said 15 alleged share applicant companies were not found at the stated addresses applicant companies were not found at the stated addresses applicant companies were not found at the stated addresses and the assessee could not provide their latest addresses. and the assessee could not provide their latest addresses. and the assessee could not provide their latest addresses. It is also a fact that the said share capital at a premium was fact that the said share capital at a premium was fact that the said share capital at a premium was received by way of private placement and t received by way of private placement and therefore, it is herefore, it is surprising that the said 15 alleged share applicant companies surprising that the said 15 alleged share applicant companies surprising that the said 15 alleged share applicant companies who are based at Kolkata and are not at all related to the who are based at Kolkata and are not at all related to the who are based at Kolkata and are not at all related to the assessee group have subscribed. assessee group have subscribed. Further, in statements Further, in statements recorded, Shri Deepak Patwari had recorded, Shri Deepak Patwari had identified the dummy identified the dummy directors of his dummy concerns to be J Rao, Birja Kumar of his dummy concerns to be J Rao, Birja Kumar of his dummy concerns to be J Rao, Birja Kumar Sharma, Girija Kumar Sharma, Amit Agarwal, Baikunth Nath, Sharma, Girija Kumar Sharma, Amit Agarwal, Baikunth Nath, Sharma, Girija Kumar Sharma, Amit Agarwal, Baikunth Nath, Pandey, Radhe. Shyam Sharma, Dibakar Mahato, Manoj Pandey, Radhe. Shyam Sharma, Dibakar Mahato, Manoj Pandey, Radhe. Shyam Sharma, Dibakar Mahato, Manoj Kumar Singh, G Vinod Kumar, Jaydeep Singh, Kamala Kanta Kumar Singh, G Vinod Kumar, Jaydeep Singh, Kamala Kanta Kumar Singh, G Vinod Kumar, Jaydeep Singh, Kamala Kanta Bhuiyan, Akash Shrivastava, Aarti Panda, Su Bhuiyan, Akash Shrivastava, Aarti Panda, Suraj Kumar Panda, raj Kumar Panda, Krishna Jaiswal, Biplab Guha, Navin Kumar Singh, Gopal Krishna Jaiswal, Biplab Guha, Navin Kumar Singh, Gopal Krishna Jaiswal, Biplab Guha, Navin Kumar Singh, Gopal Sonkar, Avnish: Singh, Jasminder Singh, Chittranjan Bhuiyan, Sonkar, Avnish: Singh, Jasminder Singh, Chittranjan Bhuiyan, Sonkar, Avnish: Singh, Jasminder Singh, Chittranjan Bhuiyan, etc. It was found by the AO that the directors of the said 15 etc. It was found by the AO that the directors of the said 15 etc. It was found by the AO that the directors of the said 15 share holder companies are out of the dummy directors listed share holder companies are out of the dummy directors listed share holder companies are out of the dummy directors listed by Shri Deepak Patwari in his statements recorded. Moreover, by Shri Deepak Patwari in his statements recorded. Moreover, by Shri Deepak Patwari in his statements recorded. Moreover, from the discussion in the preceding paras, it is apparent that from the discussion in the preceding paras, it is apparent that from the discussion in the preceding paras, it is apparent that the primary onus of proving the genuineness of the transactions the primary onus of proving the genuineness of the transactions the primary onus of proving the genuineness of the transactions of receipt of share capital at a premium from the said 15 of receipt of share capital at a premium from the said 15 of receipt of share capital at a premium from the said 15 companies has clearly not been discharged. An opportunity to has clearly not been discharged. An opportunity to has clearly not been discharged. An opportunity to cross-examine is not an absolute. right. It is to be provided only examine is not an absolute. right. It is to be provided only examine is not an absolute. right. It is to be provided only once the basic onus cast upon the assessee is discharged. In once the basic onus cast upon the assessee is discharged. In once the basic onus cast upon the assessee is discharged. In the instant case, the basic onus to prove the genuineness of the the instant case, the basic onus to prove the genuineness of the the instant case, the basic onus to prove the genuineness of the transaction by producing the alleged 15 share applicants or by producing the alleged 15 share applicants or atleast providing their latest addresses has clearly not been atleast providing their latest addresses has clearly not been atleast providing their latest addresses has clearly not been discharged by the assessee. In view of the factual scenario, the discharged by the assessee. In view of the factual scenario, the discharged by the assessee. In view of the factual scenario, the assessee cannot insist on being granted an opportunity to assessee cannot insist on being granted an opportunity to assessee cannot insist on being granted an opportunity to cross. examine the all cross. examine the alleged hawala/bogus suppliers and on eged hawala/bogus suppliers and on being provided the evidences relied upon by the AO. being provided the evidences relied upon by the AO. being provided the evidences relied upon by the AO.” 11.8 The Ld. CIT(A) he Ld. CIT(A) for the first time , relied on statement of Shri relied on statement of Shri Rakesh Sahewal, Accountant of the assessee group Accountant of the assessee group Accountant of the assessee group recorded on 13/06/2014 and statement of sh Devesh 13/06/2014 and statement of sh Devesh Upadhyay dated Upadhyay dated Forever Flourishing Fin & Inv. Pvt. Ltd. 31 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 30/12/2014. The relevant observation of ld CIT(A) is reproduced as 30/12/2014. The relevant observation of ld CIT(A) is reproduced as 30/12/2014. The relevant observation of ld CIT(A) is reproduced as under:

5.14 It is also noted that search action was simultaneously 5.14 It is also noted that search action was simultaneously 5.14 It is also noted that search action was simultaneously conducted on the Assesseee Group along with the search conducted on the Assesseee Group along with the search conducted on the Assesseee Group along with the search action on R K Kedia group of cases on 1306 2044. action on R K Kedia group of cases on 1306 2044. action on R K Kedia group of cases on 1306 2044. Kishan kinadara is tie nain person of the Assessee Group, In course kinadara is tie nain person of the Assessee Group, In course kinadara is tie nain person of the Assessee Group, In course NO of the search action, the residential premises of Rakesh NO of the search action, the residential premises of Rakesh NO of the search action, the residential premises of Rakesh Sahewal, accountant of the Assessee Group was also covered. Sahewal, accountant of the Assessee Group was also covered. Sahewal, accountant of the Assessee Group was also covered. In the statement recorded of Rakesh and he works under his In the statement recorded of Rakesh and he works under his In the statement recorded of Rakesh and he works under his instructions. It was also admitted that the assessee and a ons. It was also admitted that the assessee and a ons. It was also admitted that the assessee and a number of other entities of the group controlled by Krishan number of other entities of the group controlled by Krishan number of other entities of the group controlled by Krishan Khadaria are engaged in receiving as well as providing Khadaria are engaged in receiving as well as providing Khadaria are engaged in receiving as well as providing accommodation entries of share application, loan etc. It was accommodation entries of share application, loan etc. It was accommodation entries of share application, loan etc. It was also explained that the cheque also explained that the cheque investment by the investors in investment by the investors in share application, loan, etc is returned back by them in cash share application, loan, etc is returned back by them in cash share application, loan, etc is returned back by them in cash and similarly the investments made by them by way of and similarly the investments made by them by way of and similarly the investments made by them by way of cheque is received back in cash from the investees. cheque is received back in cash from the investees. cheque is received back in cash from the investees. Moreover, as noted earlier, even Shri Devesh Upadhyay in as noted earlier, even Shri Devesh Upadhyay in his statement his statement on oath recorded on 30.12.2014 has admitted to be in the on oath recorded on 30.12.2014 has admitted to be in the on oath recorded on 30.12.2014 has admitted to be in the dubious business of providing accommodation entries and has dubious business of providing accommodation entries and has dubious business of providing accommodation entries and has also listed out some of his controlled concerns through dummy also listed out some of his controlled concerns through dummy also listed out some of his controlled concerns through dummy directors. The concern listed out includes M/s Barbie directors. The concern listed out includes M/s Barbie directors. The concern listed out includes M/s Barbie Tradelink Pvt. Pvt. Ltd., Ms Blossom Dealcom Pvt. Ltd. and M/s Ltd., Ms Blossom Dealcom Pvt. Ltd. and M/s Comfort Dealtrade Pvt. Ltd.. The relevant portion of the Comfort Dealtrade Pvt. Ltd.. The relevant portion of the Comfort Dealtrade Pvt. Ltd.. The relevant portion of the statement on oath of Shri Devesh Upadhyay is reproduced as statement on oath of Shri Devesh Upadhyay is reproduced as statement on oath of Shri Devesh Upadhyay is reproduced as under: Q.3 • Kindly state in brief about your sources of income. Q.3 • Kindly state in brief about your sources of income. Q.3 • Kindly state in brief about your sources of income. Ans. My main business Ans. My main business activity is that of an accommodation activity is that of an accommodation entry provider. and main source of my income is from entry provider. and main source of my income is from entry provider. and main source of my income is from commission commission commission earned earned earned by by by providing providing providing various various various types types types of of of accommodation accommodation accommodation entries entries entries through through through various various various jama, "jama, "jama, khare companies" under my control. A companies" under my control. A small portion of my income small portion of my income also comes from financial and Tax consultancy.. I run my s from financial and Tax consultancy.. I run my s from financial and Tax consultancy.. I run my business from my office located at P 39, Prince Street, business from my office located at P 39, Prince Street, business from my office located at P 39, Prince Street, Kolkata-13. Q.

4. Please state as to what do you mean by "accommodation Q.

4. Please state as to what do you mean by "accommodation Q.

Forever Flourishing Fin & Inv. Pvt. Ltd. 33 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 Q.

7. Kindly. furnish names of your such companies which are . furnish names of your such companies which are . furnish names of your such companies which are used for routing and providing accommodation entries to used for routing and providing accommodation entries to used for routing and providing accommodation entries to beneficiaries. beneficiaries. Ans. I don't remember all my such companies at present. Ans. I don't remember all my such companies at present. Ans. I don't remember all my such companies at present. However, some of these However, some of these companies are as follows: companies are as follows: "a). M/s Albino Overseas "a). M/s Albino Overseas Private Limited. b) M/s Amanat Suppliers Private Limited b) M/s Amanat Suppliers Private Limited c) M/s Anjali Suppliers Private Limited c) M/s Anjali Suppliers Private Limited d) M/s Barbie Tradelink Private Limited d) M/s Barbie Tradelink Private Limited c) M/s Beagle Vyapaar Private Limited c) M/s Beagle Vyapaar Private Limited f: M/s Blossom Dealcom Private Limited f: M/s Blossom Dealcom Private Limited 8) MIs Camellia Vinimay Private Limited 8) MIs Camellia Vinimay Private Limited h) M/s Chaturbhuj Marketing Private Limited M/s Chaturbhuj Marketing Private Limited ¡) M/s Comfort Dealcom Private Limited ¡) M/s Comfort Dealcom Private Limited j) 'MIs Comfort Dealtrade Private Limited j) 'MIs Comfort Dealtrade Private Limited k) M/s Devatma Distributors Private Limited k) M/s Devatma Distributors Private Limited 1) M/s Eash Vyapaar Private Limited 1) M/s Eash Vyapaar Private Limited m) Ms Eden Vyapaar Private Limited m) Ms Eden Vyapaar Private Limited n) M/s Ekta. Trade n) M/s Ekta. Tradecom Private Limited. "o) M/s Gallant Commosales Private Limited "o) M/s Gallant Commosales Private Limited "P) M/s Graceful Tie "P) M/s Graceful Tie-Up Private Limited q) M/s Hemlata Vinimay Private Limited ) M/s Hemlata Vinimay Private Limited r) M/s Inova Commotrade Private Limited ) M/s Inova Commotrade Private Limited s) M/s Kansabati Tradecom Private Limited s) M/s Kansabati Tradecom Private Limited t) . MIs Kapeeshwar. Vintrade ) . MIs Kapeeshwar. Vintrade Private Limited u) MIs Lavender Exim Private Limited u) MIs Lavender Exim Private Limited v). MIs Mahamani Tradelink Private Limited v). MIs Mahamani Tradelink Private Limited”

Forever Flourishing Fin & Inv. Pvt. Ltd. 34 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 11.9 Thereafter, relying on the various decisions cited relying on the various decisions cited relying on the various decisions cited, the Ld. CIT(A) upheld the addition made u/s 68 of the Act. addition made u/s 68 of the Act.

Forever Flourishing Fin & Inv. Pvt. Ltd. 38 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 “Kindly refer to the meeting which our CA Shri Ajay Daga Kindly refer to the meeting which our CA Shri Ajay Daga Kindly refer to the meeting which our CA Shri Ajay Daga had with your goodself yesterday whereat the relevant had with your goodself yesterday whereat the relevant had with your goodself yesterday whereat the relevant extract of statements of Shri Deepak Patwari and his so extract of statements of Shri Deepak Patwari and his so extract of statements of Shri Deepak Patwari and his so called dummy called dummy directors were furnished by you in the pen directors were furnished by you in the pen- drive for our comments. drive for our comments. At the outset it is submitted with all the emphasis at our At the outset it is submitted with all the emphasis at our At the outset it is submitted with all the emphasis at our command that you have given the above extract of the command that you have given the above extract of the command that you have given the above extract of the statements at the fag end of this month by which time the statements at the fag end of this month by which time the statements at the fag end of this month by which time the assessment is to be assessment is to be finalised, the same is totally against finalised, the same is totally against the settled principle of law of affording a reasonable time the settled principle of law of affording a reasonable time the settled principle of law of affording a reasonable time to the assessee for rebutting such statements. In the to the assessee for rebutting such statements. In the to the assessee for rebutting such statements. In the circumstances, it is not only difficult but impossible to give circumstances, it is not only difficult but impossible to give circumstances, it is not only difficult but impossible to give adequate response to the same within th adequate response to the same within the short time e short time available. However, with a view to co However, with a view to co-operating with the Dept. we operating with the Dept. we have examined the statements have examined the statements superficially having regard superficially having regard to almost no time available to us and our observations on to almost no time available to us and our observations on to almost no time available to us and our observations on the same are as under: the same are as under: i. We have not received any share applicat We have not received any share application money ion money from from from the the the companies companies companies listed listed listed in in in the the the statement statement statement dt22.7.13 of Shri Deepak Patwart averred to be the dt22.7.13 of Shri Deepak Patwart averred to be the dt22.7.13 of Shri Deepak Patwart averred to be the companies companies controlled by him. Thus on this limited controlled by him. Thus on this limited issue alone the said statement of Shri Patwari has issue alone the said statement of Shri Patwari has issue alone the said statement of Shri Patwari has no relevance and, therefore, no further comments no relevance and, therefore, no further comments no relevance and, therefore, no further comments are necessary. e necessary. ii. Even the statements of so called employees / Even the statements of so called employees / Even the statements of so called employees / dummy directors of Shri Patwari dummy directors of Shri Patwari furnished to us furnished to us have no relevance at all as their names do not have no relevance at all as their names do not have no relevance at all as their names do not appear in the name of persons listed out in the appear in the name of persons listed out in the appear in the name of persons listed out in the statement of Shri Patwari as his employees/dummy statement of Shri Patwari as his employees/dummy statement of Shri Patwari as his employees/dummy directors. The said statements also cannot be used ors. The said statements also cannot be used ors. The said statements also cannot be used against us. against us. iii. Even otherwise on going through the statements of Even otherwise on going through the statements of Even otherwise on going through the statements of so called dummy directors so called dummy directors strangely it emerges that strangely it emerges that most of the said persons are puny persons, were not most of the said persons are puny persons, were not most of the said persons are puny persons, were not in employment since last two to three years w employment since last two to three years w employment since last two to three years with M/s. M/s. M/s. Deepak Deepak Deepak Patwari, Patwari, Patwari, have have have no no no educational educational educational background, and the answers to each of the background, and the answers to each of the background, and the answers to each of the questions raised are stereotyped which is quiet questions raised are stereotyped which is quiet questions raised are stereotyped which is quiet impossible of different persons giving exactly the impossible of different persons giving exactly the impossible of different persons giving exactly the same answers implying thereby that either the same answers implying thereby that either the same answers implying thereby that either the Forever Flourishing Fin & Inv. Pvt. Ltd. 39 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 answers answers were were put put in in their the ir mouth mouth or or the the investigation. officer recorded the answer and made investigation. officer recorded the answer and made investigation. officer recorded the answer and made them sign. Such statements cannot have any them sign. Such statements cannot have any them sign. Such statements cannot have any evidentiary value. evidentiary value. iv. Moreover no information has been brought on record Moreover no information has been brought on record Moreover no information has been brought on record as to the treatment of the as to the treatment of the said statements in the said statements in the assessments of Shri Deepa assessments of Shri Deepak Patwari and /or the k Patwari and /or the companies controlled by him. companies controlled by him. v. In any event if you are relying upon the statements In any event if you are relying upon the statements In any event if you are relying upon the statements of these persons, then they constitute Deptt's of these persons, then they constitute Deptt's of these persons, then they constitute Deptt's witness and we hereby request you to allow us to witness and we hereby request you to allow us to witness and we hereby request you to allow us to cross examine them to ascertain the veracity of their cross examine them to ascertain the veracity of their cross examine them to ascertain the veracity of their statements. Unless that is done please note that in tements. Unless that is done please note that in tements. Unless that is done please note that in law the Dept, cannot draw adverse inference law the Dept, cannot draw adverse inference law the Dept, cannot draw adverse inference against us. against us.” 13.1 Thus, the Assessing Officer for making addition the Assessing Officer for making addition the Assessing Officer for making addition has merely relied on the statement relied on the statements of third party i.e. Director of the subscriber of third party i.e. Director of the subscriber companies and another person claimed to being an entry provider another person claimed to being an entry provider another person claimed to being an entry provider but no cross-examination of those persons have been provided to examination of those persons have been provided to examination of those persons have been provided to the assessee.

13.2 In our opinion, cross In our opinion, cross-examination of the witnesses is one of examination of the witnesses is one of the essential ingredients of the principle of natural justice and in the essential ingredients of the principle of natural justice the essential ingredients of the principle of natural justice absence of which the oral evidence absence of which the oral evidences given by the persons cannot be given by the persons cannot be utilized against the assessee. utilized against the assessee. The Assessing Officer cannot gather The Assessing Officer cannot gather material or evidence at the back of the assessee and use it material or evidence at the back of the assessee and use it material or evidence at the back of the assessee and use it unilaterally. Evidence has to be tested on cross examination. unilaterally. Evidence has to be tested on cross examination. unilaterally. Evidence has to be tested on cross examination. Failure to afford opportunity to the assessee to cross-examine a Failure to afford opportunity to the assessee to cross Failure to afford opportunity to the assessee to cross third party whose evidence is sou third party whose evidence is sought to be utilised would make the ght to be utilised would make the assessment void as held in the cases of Kishinchand Chellaram v. assessment void as held in the cases of Kishinchand Chellaram v. assessment void as held in the cases of Kishinchand Chellaram v. CIT (1980) 4 Taxman 29 (SC), Sona Electric Co. v. CIT (1984) 19 CIT (1980) 4 Taxman 29 (SC), Sona Electric Co. v. CIT (1984) 19 CIT (1980) 4 Taxman 29 (SC), Sona Electric Co. v. CIT (1984) 19 Forever Flourishing Fin & Inv. Pvt. Ltd. 40 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 Taxman 160 (Delhi), Nathu Ram Prem Taxman 160 (Delhi), Nathu Ram Prem Chand v. CIT (1963) 49 ITR Chand v. CIT (1963) 49 ITR 561(All). In case of CIT v. Ash In case of CIT v. Ashwani Gupta (2010) 322 ITR 396 (Del (2010) 322 ITR 396 (Del), the Delhi High Court while dealing with the issue of not providing the Delhi High Court while dealing with the issue of not providing the Delhi High Court while dealing with the issue of not providing the opportunity to cross examine the witnesses has held that once the opportunity to cross examine the witnesses has held that once the opportunity to cross examine the witnesses has held that once there is a violation of principles of natural justice inasmuch as there is a violation of principles of natural justice inasmuch as there is a violation of principles of natural justice inasmuch as seized material is n seized material is not provided to the assessee nor is cross ot provided to the assessee nor is cross examination of the person on whose statement the AO relied upon, examination of the person on whose statement the AO relied upon, examination of the person on whose statement the AO relied upon, granted, then, such deficiencies would amount to denial of granted, then, such deficiencies would amount to denial of granted, then, such deficiencies would amount to denial of opportunity and consequently would be fatal to the proceedings. opportunity and consequently would be fatal to the proceedings. opportunity and consequently would be fatal to the proceedings.

13.3 Before us, the Ld. C Before us, the Ld. Counsel of the assessee has relied on the ounsel of the assessee has relied on the decision of the Hon’ble Supreme Court in the case of Andaman decision of the Hon’ble Supreme Court in the case of Andaman decision of the Hon’ble Supreme Court in the case of Andaman Timber Industries (supra) Industries (supra) and submitted that in absence of cross and submitted that in absence of cross- examination of third parties examination of third parties, no addition can be sustained. no addition can be sustained. The relevant part of the deci relevant part of the decision in the case of Andman Timber sion in the case of Andman Timber Industries (supra) is reproduced as under: Industries (supra) is reproduced as under:

“We have heard Mr. Kavin Gulati, learned senior counsel We have heard Mr. Kavin Gulati, learned senior counsel We have heard Mr. Kavin Gulati, learned senior counsel appearing for the assessee, and Mr. K. Radhakrishnan, appearing for the assessee, and Mr. K. Radhakrishnan, appearing for the assessee, and Mr. K. Radhakrishnan, learned senior counsel who appeared for the Revenue. learned senior counsel who appeared for the Revenue. learned senior counsel who appeared for the Revenue. According to us, According to us, not allowing the assessee to cross not allowing the assessee to cross- examine the witnesses by the Adjudicating Authority examine the witnesses by the Adjudicating Authority examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the though the statements of those witnesses were made the though the statements of those witnesses were made the basis of the impugned order is a serious flaw which basis of the impugned order is a serious flaw which basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to makes the order nullity inasmuch as it amounted to makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which of principles of natural justice because of which of principles of natural justice because of which the assessee was adversely affected. It is to be borne in the assessee was adversely affected. It is to be borne in the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon mind that the order of the Commissioner was based upon mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even the statements given by the aforesaid two witnesses. Even the statements given by the aforesaid two witnesses. Even when the assessee disputed the corr when the assessee disputed the correctness of the ectness of the statements and wanted to cross statements and wanted to cross-examine, the Adjudicating examine, the Adjudicating Forever Flourishing Fin & Inv. Pvt. Ltd. 41 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 Authority did not grant this opportunity to the assessee. It Authority did not grant this opportunity to the assessee. It Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order would be pertinent to note that in the impugned order would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically passed by the Adjudicating Authority he has specifically passed by the Adjudicating Authority he has specifically mentioned th mentioned that such an opportunity was sought by the at such an opportunity was sought by the assessee. However, no such opportunity was granted and assessee. However, no such opportunity was granted and assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the the aforesaid plea is not even dealt with by the the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is Adjudicating Authority. As far as the Tribunal is Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally concerned, we find that rejection of this plea is totally concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross enable. The Tribunal has simply stated that cross- enable. The Tribunal has simply stated that cross examination of the said dealers could not have brought out examination of the said dealers could not have brought out examination of the said dealers could not have brought out any material which would not be in possession of the any material which would not be in possession of the any material which would not be in possession of the appellant themselves to explain as to why their ex appellant themselves to explain as to why their ex appellant themselves to explain as to why their ex-factory prices remain static. It was not fo prices remain static. It was not for the Tribunal to have r the Tribunal to have guess work as to for what purposes the appellant wanted guess work as to for what purposes the appellant wanted guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the examine those dealers and what extraction the examine those dealers and what extraction the appellant wanted from them. appellant wanted from them. 13.4 We find that the sole basis of the addition in the case of the We find that the sole basis of the addition in the case of the We find that the sole basis of the addition in the case of the assessee is the statement assessee is the statements of Shri Deepak Patwari and directors of of Shri Deepak Patwari and directors of the shareholder companies. We may like to mention here that the the shareholder companies. We may like to mention here that the the shareholder companies. We may like to mention here that the statement of Shri Deepak Patwari referred by the Assessing Officer statement of Shri Deepak Patwari referred by the Assessing Officer statement of Shri Deepak Patwari referred by the Assessing Officer pertains to the period prior to the survey carried out in the case of pertains to the period prior to the survey carried out in the case of pertains to the period prior to the survey carried out in the case of the assessee. Shri Deepak Patwari has mentioned that Shri Deepak Patwari has mentioned that those Shri Deepak Patwari has mentioned that companies who have companies who have invested in the assessee were operated by him invested in the assessee were operated by him through dummy director. But he has not stated that the share dummy director. But he has not stated that the share dummy director. But he has not stated that the share capital invested in the assessee company was capital invested in the assessee company was in the in the nature of accommodation entry. Si accommodation entry. Since, the Assessing Officer has merely relied nce, the Assessing Officer has merely relied on the statement of Shri Deepak Patwari and the directors of the on the statement of Shri Deepak Patwari and the directors of the on the statement of Shri Deepak Patwari and the directors of the shareholder companies without any other corroborative material or shareholder companies without any other corroborative material shareholder companies without any other corroborative material any independent inquiry inquiry carried out by the AO at his own and no t his own and no cross examination of those persons have been provided , which n of those persons have been provided , which n of those persons have been provided , which being in violation of principle of natural justice, t being in violation of principle of natural justice, therefore, we herefore, we set Forever Flourishing Fin & Inv. Pvt. Ltd. 42 Forever Flourishing Fin & Inv. Pvt. Ltd. & 6120/Mum/2019 6040 & 6120/Mum/2019 aside the order of ld CIT(A) on merit and delete the addition . The aside the order of ld CIT(A) on merit and delete the addition . aside the order of ld CIT(A) on merit and delete the addition . grounds of the assessee challenging the merit of the additions are grounds of the assessee challenging the merit of the additions are grounds of the assessee challenging the merit of the additions are accordingly allowed for AY 2013 for AY 2013-14. The facts and circumstance in The facts and circumstance in AY 2012-13 being identical, the ground on merit of addition are 13 being identical, the ground on merit of addition are 13 being identical, the ground on merit of addition are allowed for AY 2012-13 also. 13 also.