ITO, JAIPUR vs. ALOOK FINETRADE P LTD, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 180/JP/2015 fu/kZkj.k o"kZ@Assessment Year : 2005-06 cuke Income Tax Officer, M/s Alok Fintrade (P) Ltd., 411, 3rd Floor, Shalimar Complex, Vs. Ward-2(2), Jaipur. Church Road, M.I. Road, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAECA 6776 G vihykFkhZ@Appellant izR;FkhZ@Respondent izR;k{ksi.k@C.O. No. 20/JP/2015 (Arising out of vk;dj vihy la-@ITA No. 180/JP/2015) fu/kZkj.k o"kZ@Assessment Year 2005-06 cuke M/s Alok Fintrade (P) Ltd., Income Tax Officer, 411, 3rd Floor, Shalimar Complex, Vs. Ward-2(2), Church Road, M.I. Road, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAECA 6776 G izR;k{ksid@Objector izR;FkhZ@Respondent jktLo dh vksj ls@ Revenue by : Smt. Seema Meena (JCIT) fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (CA) lquokbZ dh rkjh[k@ Date of Hearing : 17/04/2018 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 14/05/2018 vkns'k@ ORDER

PER: VIKRAM SINGH YADAV, A.M.: This is the appeal filed by the Revenue and the cross objection filed by the assessee against the order of the ld. CIT(A)-I, Jaipur dated 30/12/2014 pertaining to the A.Y. 2005-06.

ITA 180/JP/2015 & C.O. 20/JP/2015_ 2 ITO Vs Alok Fintrade P Ltd. 2. Firstly, we will take up the cross objection filed by the assessee wherein it has challenged the action of the ld. CIT(A) in upholding the validity of the order passed U/s 147 of the Income Tax Act, 1961 (in short the Act).

The investigation Wing's list of beneficiaries (of such accommodation entries), gives comprehensive details of Beneficiary's Name, Beneficiary Bank Name, Beneficiary's Bank Branch, Account No of Beneficiary in which entry is taken, date on which entry taken, Name of Account Holder of Entry giving Account, Bank from which Entry given, Branch of entry giving Bank and entry giving account.

The list contains the name of M/S ALOK FINTRADE PVT. LTD which has taken entries amounting to Rs. 15,00,000/- during April, 2004 to March, 2005 which are as under:- Beneficiary’s Value Instrument, Date on Financial Assessment Name of, Entry No. By which year year Taken Which entry taken entry taken Alok 500000 198959 16/06/2004 2004-05 2005-06 Fintrade

ITA 180/JP/2015 & C.O. 20/JP/2015_ 3 ITO Vs Alok Fintrade P Ltd. Pvt. Ltd. Alok 1000000 389937 26/05/2004 2004-05 2005-06 Fintrade Pvt. Ltd. Total 1500000

Name of Account Bank from Branch of A/c No. entry holder of entry which entry entry giving giving account giving account given bank Fine Finance & Corpn Kb 3834 leasing Pvt. Ltd. Creative Capital Nainital bank 109 Services Ltd.

On the basis of such information and other relevant facts & circumstances I have reason to believe that assessee's income to the tune of Rs. 15,00,000/- has escaped assessment for the A.Y. 2005-06 within the meaning of section 147 of the I.T. Act, 1961."

ITA 180/JP/2015 & C.O. 20/JP/2015_ 4 ITO Vs Alok Fintrade P Ltd. statement etc. In the present case, the reasons simply says that assessee has received Rs.15 lacs from Fine Finance & Leasing Pvt. Ltd. and Creative Capital Services Ltd. The AO has not examined this information with reference to the return and the financial statements to verify whether any such amount is reflected in the accounts of the assessee or not and if reflected in which account i.e. as loan or share capital or otherwise. He has simply relied on the investigation carried out by the department without specifying who carried out such investigation and without applying his own mind to information received to arrive at the believe that income of the assessee has escaped assessment. Hence, the reopening of assessment is not justified as the same is reopened only at the instance of investigation carried out by the department.

ITA 180/JP/2015 & C.O. 20/JP/2015_ 5 ITO Vs Alok Fintrade P Ltd. assessment was framed earlier under section 143(3) and basis specific information which has been received by the Assessing Officer and thereafter, on due application of mind, the AO has come to a prima facie belief that income has escaped assessment. The AO has thereafter recorded the reasons that the income has escaped assessment and after seeking necessary approval, notice has been issued to the assessee under section 148. The ld DR accordingly submitted that the reasons recorded are specific identifying the transactions relating to the assessee company which has escaped assessment and there is nexus between the material and the formation of belief that income has escaped assessment and there is thus, no infirmity in action of the AO in taking action under section 147 of the Act.

“9. We have heard the rival contentions and perused the material available on record including the legal authorities relied upon by both the parties. On perusal of the reasons recorded before issuance of notice under section 148, it is stated therein that on the basis of information brought on record, the assessee company has taken accommodation entries of Rs 35 lacs in the nature of bogus investments/share application from seven companies whose complete details in terms of name, address, date of payment, amount of investment, bank account and the branch through which the payment has been made were stated therein the reasons. It was further stated in the reasons that these companies are indulged in providing accommodation entries in lieu of

ITA 180/JP/2015 & C.O. 20/JP/2015_ 6 ITO Vs Alok Fintrade P Ltd. cash obtained from the beneficiaries and not doing any genuine business activity as divulged during the course of search and seizure proceedings in case of Praveen Jain Group, Mumbai. It was further stated in the reasons so recorded that the assessee company is a beneficiary who has taken the accommodation entries in the nature of bogus investment/share application and the investor companies are not carrying on any genuine business activities and was providing accommodation entries in lieu of cash obtained from the beneficiaries. In view of the same, it was held by the AO that he has reasons to believe that income to the extent of Rs 35 lacs has escaped assessment within the meaning of section 147 of the Act. In our considered opinion, in the instant case where the return filed by the assessee was not subjected to scrutiny assessment and the entries are available in the case of the assessee from the companies which were named by Shri Praveen Jain to providing accommodation entries and the amounts recorded in the assessee's financial statements are also the same as disclosed by Shri Praveen Jain, the belief formed by the AO after due examination of the material on record that the income of the assessee chargeable to tax during the relevant assessment year has escaped assessment cannot be said to be arbitrary or irrational and it cannot be said that there exists no rational and intelligible nexus between the reasons and the belief. It is true that the reasons recorded or the material available on record must have nexus to the subjective opinion formed by the AO regarding the escapement of the income but then, while recording the reasons for belief formed, the AO is not required to finally ascertain the factum of escapement of the tax and it is sufficient that the AO had cause or justification to know or suppose that income had escaped assessment. It is also well settled the sufficiency and adequacy of the reasons which have led to formation of a belief by the Assessing Officer that the income has escaped the assessment cannot

ITA 180/JP/2015 & C.O. 20/JP/2015_ 7 ITO Vs Alok Fintrade P Ltd. be examined for the purposes of determining the assumption of jurisdiction by the AO u/s 147 of the Act. The decision of the Hon'ble Delhi High Court in case of Singature Hotels (P) ltd (supra) is distinguishable on facts as in that case, the Court observed that the information and the reasons are extremely scanty and vague and there is no reference to any document or statement except certain annexure which cannot be regarded as a material or evidence that prima facie shows or establishes escapement of income. Similarly, other decisions quoted by the Id AR which are rendered by the Coordinate Benches in case of M/s TRN Energy Pvt ltd and M/s Superline Construction P Ltd were rendered in peculiar facts and circumstances in those cases and are thus distinguishable on facts. The decision of Hon'ble Delhi High Court in case of Rajat Exports India (supra) among others relied upon by the Id DR supports the case of the Revenue. In view of the same, we are of the considered view that there is no illegality in action of the AO in assuming jurisdiction under section 147 in the instant case. In the result, ground no. 1 of the assessee's appeal is hereby dismissed.”

ITA 180/JP/2015 & C.O. 20/JP/2015_ 8 ITO Vs Alok Fintrade P Ltd. material with the Assessing officer to form a view that the income has escaped assessment. Further, we donot agree with the contentions of the ld AR that the information so obtained is irrelevant material as it is not clear in whose case the investigation was carried out and who carried out such investigation. In our view, unlike the case of search cases where there is relevancy of determining the person searched and the person to whom the search material belongs, in the present case, what is relevant and found to be well in order is that there is possession of certain tangible material by the Assessing officer, the contents of such information in terms of value, instrument, date and bank details not being disputed and basis such material, formation of a prima facie view that income has escaped assessment. There thus exist a rational and intelligible nexus between the reasons and the formation of belief that income has escaped assessment. In our considered opinion, in the instant case where the return filed by the assessee was not subjected to scrutiny assessment and the entries are available in the case of the assessee from the companies which have provided the accommodation entries and the amounts recorded in the assessee's financial statements are also the same (not being disputed before us), the belief formed by the AO after due examination of the material on record that the income of the assessee chargeable to tax during the relevant assessment year has escaped assessment cannot be said to be arbitrary or irrational. Therefore, it is not a case of borrowed satisfaction as contended by the ld AR. There is no bar that the information received from the Investigation wing cannot be used as a basis for formation of belief and satisfaction by the AO that the income has escaped assessment. In view of the above discussions and in the entirety of facts and circumstances of the case, we are of the considered view that there is no illegality in action of the AO in assuming jurisdiction and passing the order under section 147 in the instant case. In the result, cross objection taken by the assessee is hereby dismissed.

ITA 180/JP/2015 & C.O. 20/JP/2015_ 9 ITO Vs Alok Fintrade P Ltd. the addition of Rs. 66.00 lacs made U/s 68 of the Act on account of unexplained cash credit in the form of share capital issued by the assessee.

(i) On the basis of information received from Investigation Wing, New Delhi it was found that the assessee was one of the beneficiaries of accommodation entry provided by Shri Suresh Kumar Jain group.

(ii) No. of companies were running from the residential as well as business address of Sh. S.K Jain and his brother Sh. V.K. Jain. These companies were found to be run and controlled by these two persons through dummy directors. Survey was carried out at the given addresses of these dummy companies and at many places no proper offices were found functioning.

(iii) From a single address a number of companies were shown to have registered and these addresses were mostly the residential address of directors of different dummy companies/ proprietors of various firms.

ITA 180/JP/2015 & C.O. 20/JP/2015_ 10 ITO Vs Alok Fintrade P Ltd.

(iv) The survey u/s 133A was conducted by the department in the office premises of Sh. Assem Kumar Gupta in Delhi. In the statement he had stated that he was engaged in providing accommodation entries as per the requisition of the beneficiaries and the work of accommodation entry is brought to him by Sh. S.K. Jain.

(v) A search operation was carried out u/s 132 by the Investigation Wing at the residential and business premises of Sh. Rajesh Aggarwal. In the statement he admitted that he was in constant touch with Sh. S.K Jain and Sh. V.K Jain and he knew that they are known accommodation entry operator who provides cheques against payment of cash after deducting specific premium form the parties.

(vi) In case of four other companies of this group also, the assessment was reopened on the ground of receipt of accommodation entries from companies of Sh. S.K. Jain. On examination of records of these four group cases and on correlating the information/details obtained from the investigation wing, Delhi, it is revealed that apart from M/s Fine Finance & Leasing Pvt. Ltd. and M/s Creative Capital Services Ltd., the assessee has also taken entries from M/s Lehra Investment Pvt. Ltd., M/s Sam Portfolio Pvt. Ltd., M/s Smartest Corporate Services Pvt. Ltd.

(vii) All the group companies of the assessee are operating from the same address. All of them had taken entries in the same form of share application money and the accommodation provider companies also happened to be same. In all the cases, the money was routed through the same accounts numbers maintained with ABN-AMRO Bank, New Delhi.

ITA 180/JP/2015 & C.O. 20/JP/2015_ 11 ITO Vs Alok Fintrade P Ltd. Court in the case of Barkha Synthetics Ltd. Vs ACIT 197 CTR 432 (Raj) and CIT Vs AKJ Granites P Ltd. 301 ITR 298(Raj) and the relevant findings are contained at para 3.2.2.4, which is reproduced as under:

“3.2.2.4 In the present case share applications are received from eight (8) different concerns accompanied with share application money, no presumption can be drawn that same belong to assessee; these application moneys cannot be assessed in his hands as his undisclosed income unless some nexus is established that share application money for augmenting investment in business has flown from assessee’s own money which AO has failed to do so.

In the reason recorded for re-opening of assessment, AO has made general reference with regard to information received from Investigation Wing Delhi but he has not referred any of the eight (8) concerns.

On perusal of case record, it is noted that during re-assessment proceeding, no adverse evidence was found, whereas during original assessment, assessee had filed the confirmation and bank statement of these concerns. Without finding any adverse evidence in the documents filed, AO made addition on account of share application money received from all eight concerns, whereas in respect of all concerns, assessee has provided confirmation and bank statement confirming the no. of share applied/allotted, share capital raised etc. The immediate source in the bank account of shareholders is through transfer and not by cash.

Further, it is also noted that in the assessment order, AO has incorrectly noted that in all cases, money has been routed by these companies through the same bank whereas out of five companies for which addition is made by AO, only two concerns namely M/s Lehra

ITA 180/JP/2015 & C.O. 20/JP/2015_ 12 ITO Vs Alok Fintrade P Ltd. Investments Pvt. Ltd. & M/s Smartest Corporate Services Pvt. Ltd. have bank account with the given bank i.e. ABN AMRO Bank.

Even from the assessment order, it is also not discernible that any of these person had stated that investment made by these companies in the share capital of appellant company is bogus/ accommodation entries.

AO has merely collected details/ documents by which it cannot be demonstrated that these companies are not in existence. As against this, assessee company has provided all the best possible evidences. The observations made by the AO are very casual and it clearly shows that he has completed re-assessment with a preconceived notion by indulging into surmises and conjectures.

Further, In view of the decisions of the Jurisdictional Rajasthan High Court in Barkha Synthetics Ltd. v. Asstt. CIT [2005] 197 CTR (Raj.) 432 & CIT Vs. AKJ Granites P Ltd 301 ITR 298, where the share applications are received from different places accompanied with share application money, no presumption can be drawn that the same belong to the assessee; and the application moneys cannot be assessed in assessee’s hands as its undisclosed income unless some nexus is established that share application money for augmenting the investment in business has flown from the assessee’s own money.

In view of facts and circumstances as discussed and also ratio of the above decisions in favour of appellant as discussed in above para 3.2.2.2, the addition of Rs. 66,00,000/- made u/s 68 of the Act cannot, be justified, hence deleted. Assessee gets a relief of Rs.66,00,000/-.”

ITA 180/JP/2015 & C.O. 20/JP/2015_ 13 ITO Vs Alok Fintrade P Ltd. lacs from two companies which according to the information received from the investigations carried out by the department are only providing accommodation entries. However, in the course of assessment proceedings, the AO has not provided/confronted to the assessee with any such information. This is also evident from the query letter issued with notice u/s 148 where the AO only refers to the information available with the department but has not provided/confronted to the assessee with such information nor provided any opportunity to the assessee to cross examine any of the person namely Sh. S.K Jain or Sh. V.K. Jain or Sh. Assem Kumar Gupta or Sh. Rajesh Agarwal whose statements has been referred/ relied in the assessment order. In fact, the AO without providing any opportunity to the assessee to rebut the so called information available with the department or providing any opportunity to cross examine these persons has made the addition which is against the principle of natural justice and illegal & bad in law. Even from the assessment order it is not discernible that any of these persons had stated that investment made by these companies in the share capital of the assessee is bogus/accommodation entries. Therefore, the addition made by the AO at the threshold is liable to be quashed. Apart from the decisions already submitted before the CIT(A), reliance is further placed on Supreme Court decision dated 02.09.2015 in case of Andaman Timber Industries Vs. CCE 127 DTR 0241 wherein it was held that denial of opportunity to the assessee to cross-examine the witnesses whose statements were made the sole basis of the assessment is a serious flaw rendering the order a nullity in as much as it amounted to violation of principles of natural justice.

ITA 180/JP/2015 & C.O. 20/JP/2015_ 14 ITO Vs Alok Fintrade P Ltd. respect of five companies namely M/s Fine Finance & Leasing Pvt. Ltd., M/s Creative Capital Services Ltd., M/s Lehra Investment Pvt. Ltd., M/s Sam Portfolio Pvt. Ltd. and M/s Smartest Corporate Services Pvt. Ltd.. In respect of other three companies namely M/s S.G. Portfolio Pvt. Ltd., M/s Chotti Leasing & Finance Pvt. Ltd. and M/s Ravnet Solution Pvt. Ltd., no information whatsoever was called for in the course of reassessment proceedings. The confirmation, share application form and bank statement of these three companies is at PB 54-63. Therefore, the addition made in respect of these three companies from whom share capital of Rs.20 lacs is raised is illegal and bad in law.

ITA 180/JP/2015 & C.O. 20/JP/2015_ 15 ITO Vs Alok Fintrade P Ltd. Creative Capital 10,000 Rs, Confirmation, Services Ltd. 312, 10,00,000/- Share S-524, Vikas application Marg, Shakarpur, form, bank Delhi-110092 statement Fine Finance & 5,000 Rs.5,00,000/- Confirmation, Leasing Pvt. Ltd. Share 301, Dhaka application Chamber, form, bank 2068/39, statement Nalwala, Karol Bagh, New Delhi- 110005

(i) CIT Vs. Vacmet Packaging (India) Pvt. Ltd. 367 ITR 0217 (ALL) (HC) decision dated 11/02/2014, wherein the survey was carried at Sh. Assem Gupta and additions were made which the Hon'ble High Court has deleted. It was submitted that in assessee’s case also, the addition is made

ITA 180/JP/2015 & C.O. 20/JP/2015_ 16 ITO Vs Alok Fintrade P Ltd. with reference to the survey/search carried out in case of Sh. Assem Kumar Gupta and others. Therefore, in view of the above decision, which is directly applicable in the assessee’s case, the ld. CIT(A) has rightly deleted the addition.”

(ii) CIT Vs Supertech Diamond Tools Pvt. Ltd. 229 Taxman 62 (Raj)(HC)

(iii) Jadau Jewellers & Manufacturing (P) Ltd. Vs. ACIT 45 CCH 0442 (Jpr.) (Trib) decision dt. 14/12/2015.

(iv) Ganga projects (P) Ltd. and B.S. Traders (P) Ltd. in ITA NO. 175 & 176/JP/2015 and 179/JP/2015 and CO No. 15&16/JP/2015 and 19/JP/2015 order dated 22/06/2016 where the Coordinate Bench in the similar facts of the case involving the same companies have deleted the addition.

(v) M/s Choice Buildestate Private Limited (ITA No. 431/JP/2016 and 432/JP/2016 dated 28.03.2018)

ITA 180/JP/2015 & C.O. 20/JP/2015_ 17 ITO Vs Alok Fintrade P Ltd. during the course of assessment proceedings and independent investigation of these investor companies. As we have noted above, the information so received from the Investigation Wing, Mumbai and after due examination thereof, the AO has formed a prima facie view and a reason to believe that the income has escaped assessment and has thus assumed jurisdiction u/s 147 of the Act. At the same time, such a prima facie view has to be finalized and a firm view has to be taken on basis of examination of documents so brought on record and further investigation to be carried out before any tax liability is fastened on the assessee. In the instant case, we find that the assessee company has submitted detail documentation in regard to these companies from whom a total amount of Rs.35 lakhs was received namely (i) share application form (ii) copy of Board Resolution (iii) Copy of Bank Statements reflecting payment through cheque (iv) Audited Statement of Accounts and Acknowledgement of ITR (v) Copy of certificate of Incorporation and Certificate of Commencement of Business (vi) Copy of PAN Card. Where the assessee furnishes the documentation and necessary explanation, the AO should examine whether the documents so submitted and explanation so offered establishes the three ingredients i.e. identity of the investor company, creditworthiness of investor company and genuineness of the transaction. Whether explanation of the assessee is reliable or acceptable? If yes, no further action is required and the sum so credited may not be charged to income tax. If the explanation so offered by the assessee is not acceptable or reliable, the AO should give a detailed reasoning in the assessment order for not accepting the same. The order passed by the AO should be speaking one bringing on record all the facts, explanation furnished by the assessee in respect of nature and source of the credit in its books of accounts and reasons for not accepting the explanation of the assessee. In the instant case, we

ITA 180/JP/2015 & C.O. 20/JP/2015_ 18 ITO Vs Alok Fintrade P Ltd. find that the AO has not taken any efforts to examine these documents so submitted by the assessee company during the course of assessment proceedings and has simply gone by his prima facie view formed at the time of assumption of jurisdiction u/s 147 and such a prima facie view without further examination/investigation cannot be a basis for forming a final view of making the addition in the hands of the assessee company. It is a case where the AO was in receipt of material information from the Investigation Wing, Mumbai that the assessee company has received accommodation entries in form of share application/investment from seven companies who are not doing genuine business activities as divulged during the course of search and seizure operations in case of Praveen Jain group. In these situations, the Courts have held that the Assessing Officer cannot sit back with folded hands and then come forward to merely reject the explanation so made, without carrying out any verification or enquiry into the material placed before him by the assessee. If the Assessing Officer harbours any doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the Company. We therefore agree with the contentions of the Id AR that in absence of any falsity which have been found in the documents so submitted by the assessee company to prove the identity, creditworthiness and genuineness of the share transaction, these documents cannot be summarily rejected as has been done by the AO in the instant case. Further, we find that there is no action taken by the AO in terms of calling information from these companies under section 133(6) and/or issuing summons to directors of these companies under section 131 of the Act. Further, where the AO relies upon the statement of third parties (Praveen Jain

ITA 180/JP/2015 & C.O. 20/JP/2015_ 19 ITO Vs Alok Fintrade P Ltd. and others)recorded u/s 132(4), without getting into controversy whether the said statement was retracted subsequently, the fact remains that the assessee deserves an opportunity to cross examine such persons as held by the Hon'ble Supreme Court in case of Andaman Timber Industries (supra). During the course of assessment proceedings, the assessee company has made specific request to the AO to allow cross examination of these persons which has however not being provided to the assessee company. In light of above discussions, we don't find any basis for making addition under section 68 of the Act. In the result, ground no.2 taken by the assessee company is allowed.”

ITA 180/JP/2015 & C.O. 20/JP/2015_ 20 ITO Vs Alok Fintrade P Ltd. the time of assumption of jurisdiction u/s 147 and such a prima facie view without further examination/investigation cannot be a basis for forming a final view for making the addition in the hands of the assessee company. Further, we note that in respect of three companies from whom Rs 20 lacs has been received as share capital, the addition has been made by the AO without even asking the assessee to submit the desired information during the reassessment proceedings which cannot be accepted at first place. It is thus a case where the AO was in receipt of material information from the Investigation Wing, Delhi that the assessee company has received accommodation entries in form of share application/investment from two companies as divulged during the course of search and seizure operations in case of S K Jain group. In these situations, the Courts have held that the Assessing Officer cannot sit back with folded hands and then come forward to merely reject the explanation so made, without carrying out any verification or enquiry into the material placed before him by the assessee. If the Assessing Officer harbours any doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the Company. We are therefore of the view that there is no infirmity in the findings of the ld CIT(A) that in absence of any falsity which have been found in the documents so submitted by the assessee company to prove the identity, creditworthiness and genuineness of the share transaction and any satisfaction to that effect recorded by the AO, these documents cannot be summarily rejected as has been done by the AO in the instant case. Further, we find that there is no action taken by the AO in terms of calling information from these companies under section 133(6) and/or issuing summons to directors of these companies under section 131 of the Act.

ITA 180/JP/2015 & C.O. 20/JP/2015_ 21 ITO Vs Alok Fintrade P Ltd. same to the assessee and allow the latter to file its objections and rebuttal. The additions made, merely relying on these information and documentation, without confronting the assessee cannot be accepted. Besides furnishing the reasons for reopening the assessment to the assessee company, there is nothing on record that such information/documentation was confronted to the assessee. Further, the AO has relied upon the statement of third parties namely, shri S.K. Jain, shri V.K. Jain, shri Assem Kumar Gupta and shri Rajesh Agarwal, the assessee again deserves an opportunity to cross examine such persons as held by the Hon'ble Supreme Court in case of Andaman Timber Industries (supra).

“So far as question No. 1 is concerned, it is stated by learned counsel for the appellant that the issue embedded in the said question has already been decided by this court and governed by the ratio laid down in Shree Barkha Synthetics Ltd. v. Asst. CIT [2005] 197 CTR 432 ; [2006] 283 ITR 377. It has been pointed out that share applications are made by a number of persons, may be in their own names or benami, but the fact that share applications received from different places accompanied by share application money, no presumption can be drawn that the same belongs to the assessee and cannot be assessed in his hands as his undisclosed income unless some nexus is established that the share application money for augmenting the investment in business has flowed from the assessee's own money. In coming to this conclusion, the court relied on CTT v. Stellar Investment Ltd. [1991] 192 ITR 287 (Delhi) which has since been affirmed by the Supreme Court in CIT v. Steller Investment Ltd. [2001] 251 ITR 263 . In view thereof, this question need not be decided again.”

ITA 180/JP/2015 & C.O. 20/JP/2015_ 22 ITO Vs Alok Fintrade P Ltd. 24. In the instant case, no such nexus has been established by the Revenue and the suspicion however strong cannot be basis for making the addition. Therefore, no presumption can be drawn without establishing the necessary nexus that share application money received is assessee’s own undisclosed money.

In the result, the appeal of the Revenue and the cross objection of the assessee are both dismissed.

Order pronounced in the open Court on 14/05/2018.

Sd/- Sd/- ¼fot; iky jko½ ¼foØe flag ;kno½ (Vijay Pal Rao) (Vikram Singh Yadav) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member

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