M/S. SHREEM PACKAGING PRODUCTS P. LTD,AHMEDABAD vs. INCOME TAX OFFICER, WARD-4(1)(3),, AHMEDABAD

आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aggrieved by confirmation of addition of Rs.75 Lacs u/s 68 for Assessment Year [in short referred to as ‘AY’] 2007-08 by Ld. Commissioner of Income-Tax (Appeals)-8, Ahmedabad, [in short referred to as ‘CIT(A)’], Appeal No. CIT(A)-154/14-15 dated 16/08/2017, the assessee under appeal before us with following grounds: -

1. The order passed by the Learned CIT(A) is against law, equity and justice.

3. The Ld. CIT(A) has erred in law and on facts in upholding addition made by the Ld. AO u/s.68 of the I.T. Act of Rs.75,00,000/-

M/s Shreem Packaging Products Private Limited Assessment Year :2007-08 The assessee filed an application for admission of additional grounds u/r 35A which read as under: - The reasons recorded for reopening of assessment does not reflect that the income having escaped assessment Is more than rupees one lakh or likely to be more than rupees one lakh as laid down under the provisions of s. 149(1)(b) of the Act as reopening is made beyond four years hence reopening of assessment is not valid and bad in law.

Since additional ground is merely a legal ground and do not require appreciation of new facts, the same is admitted and taken on record in terms of decision of Hon’ble Apex Court rendered in National Thermal Power Corporation Ltd. V/s. CIT. (229 ITR 383).

M/s Shreem Packaging Products Private Limited Assessment Year :2007-08 3.2 Pursuant to receipt of certain information from DGIT (Investigation), Mumbai, it transpired that the assessee received accommodation entries aggregating to Rs.75 Lacs from 3 entities of Shri Praveen Kumar Jain. These entities were (i) Kush Hindustan Entertainment Ltd.; (ii) Olive overseas Private Limited; & (iii) Yash-v-Jewels Ltd. Accordingly the case was reopened as per due process of law vide issuance of notice u/s 148 dated 27/03/2014. In response, the assessee filed return of income on 26/05/2014. The original return was filed on 29/10/2007 which was processed u/s 143(1). The notices u/s 143(2) & 142(1) were issued in due course wherein the assessee was called to file requisite information / documentary evidences in support of stated transactions.

3.3 In defense, the assessee filed Income Tax Acknowledgements, Board Resolution and copies of Share Application form. In later submissions, the assessee submitted copies of Balance sheet, confirmation, counter-confirmation, bank statements, Form No.2-return of allotment etc. of investor entities. A copy of affidavit made by Shri Praveen Kumar Jain denying accommodation entries with assessee was also filed. Relying upon various judicial pronouncements, it was submitted that the onus as placed by Sec. 68 was discharged. This onus was to prove the identity of the investor entities, their respective creditworthiness and genuineness of the transactions. The assessee also assailed reopening by submitting that it was not based on any material on record.

M/s Shreem Packaging Products Private Limited Assessment Year :2007-08 3.4 However, these submissions could not convince Ld.AO who, inter- alia, observed that the assessee failed to produce any of the directors of the stated entities and therefore, a conclusion was to be drawn that these entities were dummy entities being operated by Shri Praveen Kumar Jain. Reliance was placed on the decision of Hon’ble Apex Court in Durga Prasad More 82 ITR 640 & Sumati Dayal 214 ITR 801 to conclude that looking at surrounding circumstances, the share application money against allotment of preference share was not genuine transactions. The retraction affidavit of Shri Praveen Kumar Jain was termed as mere after-thought. Therefore, it was held that the assessee failed to demonstrate the fulfillment of primary ingredients of Sec. 68 and therefore, the said amount of Rs.75 Lacs was added to the income of the assessee.

by the assessee and also confirmed the quantum additions primarily by relying upon the decision of this Tribunal rendered in Pavankumar M.Sanghvi V/s ITO 2017

81. Taxman.com 308). Aggrieved the assessee is in further appeal before us.

Adjudication on legal submissions: 5.1 At the outside, we deem it fit to appreciate the reasons recorded by Ld. AO to reopen the assessee’s case, in following manner: - The assessee company has filed its Return of Income electronically on 29.10.2007 declaring total income of Rs. NIL. The case was processed u/s 143(1) of the I. T. Act on 21 .03.2009. The assessee is engaged in the packaging materials.

2. This Office has received the information from the DGIT(Inv.), Unit-III(2), Mumbai vide letter dated 07.03.2014, it is informed that a search and survey was conducted in the case of Shri Pravinkumar Jain & his Group on 01.10.2013 at the various M/s Shreem Packaging Products Private Limited Assessment Year :2007-08 business premises of the assessee. During the course of search conducted, it is revealed that Shri Pravinkumar Jain himself is a Director in few concerns. However Through dummy Directors/Proprietors to control, operates and manages a large number of concerns. All such concerns are not carrying out any genuine business. All such concerns are indulged in the activity of providing entries only. Shri Pravinkumar Jain is engaged in providing accommodation entries of various nature like bogus unsecured loans, bogus share application and bogus sales etc.

The Ld. AR, by way of additional ground, asserted that the stated reasons does not reflect the fact that income having escaped assessment is more than rupees one lakh or likely to be more than rupees one lakh as laid down under the provisions of Sec.149(1)(b) of the Act as reopening was beyond four years and therefore, the reopening was bad in law in terms of certain judicial pronouncements.

5.2 Upon careful consideration, the plea raised by Ld. AR do not convince us since the quantum of escapement of income has already been explicitly mentioned by Ld. AO in para-3. Not only aggregate amount but entity wise amount has been indicated. Therefore, separate recording of that fact, in our opinion, was not necessary. The Ld. AR has relied on the decision of SMC bench of this Tribunal in Sumer S.Sanghvi V/s ACIT (ITA No.1424/Ahd/2016 dated 06/02/2020) in support of the submissions. However, after going through the reasons recorded in that case, which are extracted a para-7 of the order, it is M/s Shreem Packaging Products Private Limited Assessment Year :2007-08 quite discernible that the quantum was nowhere mentioned in the reasons and therefore, the said decision is clearly distinguishable. That decision draw strength from the decision of Hon’ble Gujarat High Court rendered in Bakulbhai Ramanlal Patel V/s ITO (56 DTR 212 Guj) which has similar factual matrix and therefore, not applicable to the fact of the present case.

5.3 Another plea raised by Ld. AR is the fact that, as stated in para 3 of the recorded reasons, the assessee has not invested any amount in any of the entities rather the 3 entities made investment in the assessee and therefore, for the stated reason alone, the assessment proceedings are liable to be quashed. However, the said plea also does not convince us in view of factual matrix as clearly brought down on record by Ld. AO in para-2. Therefore, quashing reassessment proceedings merely on that reason alone would be too technical in nature and we are not convinced with the same.

5.4 Proceeding further, we find that original return was processed u/s 143(1) and the only requirement under law to initiate reassessment proceeding against the assessee was that Ld.AO had reasons to believe that certain income had escaped assessment. We find that Ld.AO was clinched with specific information while forming such reasons which suggested possible escapement of income in the hands of the assessee. Nothing more, in our opinion, was required at that stage to reopen the assessee’s case and formation of a prima-facie opinion was sufficient to trigger the reassessment proceedings.

M/s Shreem Packaging Products Private Limited Assessment Year :2007-08 5.5 Therefore, not convinced with legal grounds / submissions made by Ld. AR, we dismiss the same and hold that reassessment proceedings were validly initiated against the assessee. Ground Nos. 1 to 2 as well as additional ground stands dismissed.

Adjudication on Merits 6. So far as the merit of the case are concerned, we find that the onus to demonstrate the fulfilment of primary ingredients of Sec.68 was on assessee. This onus was to prove the identity of the investor entities, their respective creditworthiness and genuineness of the transactions. This onus was more in the factual matrix which led to trigger reassessment proceedings against the assessee. Upon perusal of documents on record, we find that the assessee had furnished Income Tax Acknowledgements of the investor entities, Board Resolutions passed by those entities to make investment in the assessee entity, copies of Share Application form, audited annual accounts and the bank statements of investor entities. There are no immediate cash deposits in the bank accounts of these entities before making investment in the assessee entity. The allotment was authorized by Board Resolution of the assessee and Return of Allotment in Form No.2 was filed with appropriate authorities. Upon perusal of these documents, it could be said that the assessee had discharged the primary onus of Sec.68 and it was incumbent on the part of Ld.AO to rebut assessee’s claim. However, we find that no material has been brought on record to suggest that any cash got exchanged between the assessee and the investor entities and the assessee’s unaccounted money was channelized in the books in the M/s Shreem Packaging Products Private Limited Assessment Year :2007-08 garb of share application. Mere non-appearance of directors alone could not support the impugned additions in the hands of the assessee. Therefore, concurring with the stand of Ld.AR, in this regard, we delete the impugned additions u/s 68. Ground No.3 stand allowed.

Order pronounced in the open court on 04/03/2020 Sd/- Sd/- (Mahavir Prasad) (Manoj Kumar Aggarwal) �या�यक सद�य / Judicial Member लेखा सद�य / Accountant Member Ahmedabad; Dated :04/03/2020 SS, PS आदेशक���त�ल�पअ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकरआयु�त(अपील) / The CIT(A) 4. आयकरआयु�त/ CIT– concerned 5. �वभागीय��त�न�ध, आयकरअपील�यअ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड�फाईल / Guard File