DCIT, CIRCLE - 1(1), PANAJI vs. M/S KAGAL IRON AND STEEL LTD, PANAJI
In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal upheld the order of the CIT(A) and dismissed the appeal filed by the Revenue. The Tribunal observed that the Assessing Officer made the addition based on information from the Investigation Wing regarding alleged accommodation entry providers, Shri Surendra Kumar Jain and Shri Virendra Kumar Jain. However, no specific information was received directly linking the assessee to taking accommodation entries. The assessee, a Limited Company, had furnished a complete chain of documents, including share application forms, board resolutions, share receipt letters, confirmations, PAN details of applicants, bank statements, and annual reports, to explain the nature and source of the share application money. The Assessing Officer made the addition relying solely on the Investigation Wing's report without providing a copy of this information to the assessee. The CIT(A) had also considered these documents and concluded that the assessee had discharged its primary onus under Section 68, and the Assessing Officer failed to bring any corroborative material to prove the transactions were bogus. The Tribunal found no discrepancy in the documents furnished by the assessee and agreed with the CIT(A)'s deletion of the addition.
What were the facts?
The Revenue appealed against the order of the CIT(A) for Assessment Year 2010-11, which had deleted an addition of Rs. 1.90 crore made by the Assessing Officer. The addition was based on information received from the DDIT (Investigation) Wing, New Delhi, concerning search actions against Shri Surendra Kumar Jain and Shri Virendra Kumar Jain. The Assessing Officer alleged that the share application money received by the assessee, M/s. Kagal Iron and Steel Ltd., was in the nature of accommodation entries. The assessee had initially filed a Nil income return. The Assessing Officer reopened the assessment under Section 147 and added the entire amount of share application money received, Rs. 1.90 crore, to the assessee's income under Section 68. The assessee had provided various documents to substantiate the genuineness of the share application money.
What were the issues?
1. Whether the CIT(A) erred in deleting the addition of Rs. 1.90 crore made by the Assessing Officer under Section 68 of the Income Tax Act, 1961, on account of alleged accommodation entries in the form of share application money? Assessee's Contentions: - The assessee, a Limited Company, had duly accounted for the share application money received. - All requisite documents to prove the genuineness of the share application money, including share application forms, board resolutions, share receipt letters, confirmations, PAN registration numbers of applicants, bank statements, annual reports, and PAN cards, were furnished. - The Assessing Officer failed to provide the assessee with the incriminating documents based on which the addition was made, violating principles of natural justice. - Relied on decisions in Lovely Exports Pvt. Ltd., CIT Vs. Vacmet Packaging (India) (P.) Ltd., and CIT Vs. Gangeshwari Metal Pvt. Ltd. Revenue's Contentions: - The Assessing Officer's additions were based on information from the DDIT (Inv.)-II, New Delhi, gathered during search actions against Shri Surendra Kumar Jain and Shri Virendra Kumar Jain. - Incremental material found during the search and subsequent inquiries established the allegation of accommodation entries. - Documents submitted by the assessee, such as share application forms and board resolutions, were merely for the transfer of funds and did not reveal the motive of accommodation entries. - Alleged share applicant companies were registered at common addresses, and during post-search actions, these addresses were found to be small dwelling units incapable of accommodating multiple companies.
Which sections of the Income-tax Act were involved?
Section 68,Section 143(3),Section 147,Section 148,Section 142(1),Section 132,Section 133A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PANAJI DB BENCH, PANAJI
Before: DR.MANISH BORAD & SHRI VINAY BHAMORE
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
The captioned appeal at the instance of Revenue and Cross Objection by the assessee pertaining to A.Y. 2010-11 are directed against the order dated 22.09.2020 of ld. CIT(A)-2, Panaji emanating out of Assessment Order dated 14.03.2014 passed u/s.143(3) r.w.s.147 of the Income Tax Act, 1961 (in short ‘the Act’).
Revenue has raised following grounds of appeal :
“1. The order of the Ld. CIT(A) is opposed to law and facts of the case.
That the Ld. CIT(A) failed to appreciate that the Assessing Officer was made additions based on the information received from DDIT(Inv.)-II, New Delhi which was gathered after exercising search action u/s.132 in the residential and business premises of the alleged person Shri Surendra Kumar Jain and Shri Virendra Kumar Jain.
That the Ld. CIT(A) failed to appreciate that based on the incremental material found during search action and further enquiry after search, the above cited allegation of accommodation entries was established.
That the Ld. CIT(A) failed to appreciate that the submission made by the assessee (such as share application form, board resolution of the company, share receipt letter and confirmation, etc.) as proof for genuine transfer of money can not be acceptable as the same was document for transfer of fund and these were not revealing the actual motive of receipt i.e. accommodation entries.
For these and other grounds that may be adduced at the time of the hearing, the order of the CIT(A) may be set aside and the order of the Assessing officer restored.”
Brief facts of the case as culled out from the record are that the assessee is a Limited Company and declared Nil income in the return for A.Y. 2010-11 furnished on 25.03.2011. Subsequently, based on the information about the alleged accommodation entries amounting to Rs.1,77,50,000/- received through Paper/Dummy companies the reopening proceedings were carried out u/s.147 of the Act by issuance of notice u/s.148 of the Act on 30.03.2013 followed by serving of statutory notices u/s.143(2) and 142(1) of the Act. Various details called for by the Assessing Officer were duly submitted by the assessee which also included the details of share applicants who have paid share application money to the assessee company during year amounting to Rs.1.90 crore. Ld. Assessing Officer referred to the search and survey u/s.132/133A of the Act in the case of another assessee namely Mr. Surendra Kumar Jain and his brother Mr. Virendra Kumar Jain at New Delhi where they admitted that they have floated various companies and have their control through various persons appointed by them and used for the purpose of providing accommodation entries. Based on this information received from DDIT (Investigation) Wing, New Delhi, ld. Assessing Officer came to a conclusion that share application money of Rs.1.90 crore received by the assessee during the year is in the nature of accommodation entry and deserves to be added u/s.68 of the Act and accordingly after making the addition of Rs.1.90 crore income assessed at the same amount.
Aggrieved assessee preferred appeal before ld.CIT(A) and furnished complete set of documents to explain the nature and source of the share application money and furnished share application form, board resolution, share receipt letter and confirmation, PAN Registration Number of the share applicant companies along with bank statement and annual report and PAN card of the company and submitted that the onus/burden of proof has been duly discharged and ld. Assessing Officer failed to bring on record any contrary material to dislodge the veracity of evidence filed by the assessee. Ld.CIT(A) on duly considering the ratios laid down in the case of Kale Khan Mohammad Hanif Vs. CIT (1963) 50 (SC) and other judgments concluded that since the assessee has discharged the primary onus u/s.68 of the Act ld. Assessing Officer failed to bring any corroborative material on record to establish that the transactions are bogus, therefore, ld. Assessing Officer grossly erred in invoking section 68 of the Act and accordingly deleted the impugned addition. Now the Revenue is in appeal before this Tribunal.
Ld. Departmental Representative vehemently argued supporting the order of the Assessing Officer and further submitted that as per the report of the Investigation Wing, New Delhi the alleged share applicant companies are mostly registered at common address and during the course of post search/seizure action, these companies did not exist on those addresses and infact their addresses were very small dwelling units which are incapable of accommodating so many companies.
On the other hand, ld. Counsel for the assessee firstly placed heavy reliance on the finding of ld.CIT(A) and subsequently also made reference made to the written submissions filed before ld.CIT(A) placed at paper book 1 to 23. He also submitted that assessee is a Limited Company and the share application money received has been duly accounted for. Assessee has no relationship with these parties, all the requisite documents required to prove the genuineness of the share application money have been duly furnished. He also submitted that even though it is an established law that the assessee should be confronted or make available of any incriminating documents against the assessee and to give fair opportunity to explain, establishing the facts, deny or relate of such documents etc. but then in the present case assessee was never made available with the documents based on which ld. Assessing Officer has made the impugned addition which is contrary to the natural justice to punish or penalise the appellant on some alleged documents which have not been made available to the assessee. Reliance placed on the following decisions :
i. Lovely Exports Pvt. Ltd. (2008) 216 ITR 195 (SC) ii. CIT Vs. Vacmet Packaging (India) (P.) Ltd. [2014]. 45
We have heard the rival submissions and perused the record placed before us. The grievance of the Revenue in various grounds of appeal are mainly centred against the finding of ld.CIT(A) relating to addition of Rs.1.90 crore made by the Assessing Officer for the alleged accommodation entry in the form of share application money received by the assessee Limited Company from following Private limited/Limited Companies :
We observe that the assessee which is a Limited Company has filed its regular return of income and has submitted its audited balance sheet which contains the transaction of receiving share application money from various share applicants. We note that ld.
Assessing Officer based on the information given by DDIT (Investigation) Wing mentioning that out of Search/Survey carried out in the case of Mr. Surendra Kumar Jain and Mr. Virendra Kumar Jain took note that these two persons have floated various companies which have been allegedly used for providing accommodation entries and that funds are transferred through cheque/RTGS to various entities through these dummy companies. Admittedly no information was specifically received about the assessee of taking any accommodation entry but only because the companies which were allegedly controlled by Mr. Surendra Kumar Jain and Mr. Virendra Kumar Jain were found to have made application in share capital to various other companies including the assessee, the impugned addition has been made by the Assessing Officer. It is also noted that assessee furnished complete chain of documents to explain the nature and source of the alleged sum but without indicating any discrepancy in these details ld. Assessing Officer has mainly relied upon the information provided by the Investigation Wing and without providing the copy of information received by the DDIT (Investigation) Wing, New Delhi has made the impugned addition. Subsequently, when the matter travelled before ld.CIT(A) assessee has furnished detailed submissions including the following documents regarding received by the appellant.
➢ Share application form. ➢ Board resolution of the company. ➢ Share receipt letter and confirmation. ➢ List of directors and their address. ➢ Affidavit confirming the companies registration number and PAN no. ➢ Income tax return filled acknowledgement.
➢ Pan card copy. ➢ Bank statement of the company. ➢ Annual report of the company. ➢ Memorandum and Article of association of the company.g the share application money received from various Limited/Private Limited Companies :
Ld. CIT(A) on duly examining these details and also observing that assessee being Limited Company has furnished all necessary documents with
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