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Income Tax Appellate Tribunal, JAIPUR BENCHES, JAIPUR
Before: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA. No. 431/JP/2016
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh fot; ikWy 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. 431/JP/2016 fu/kZkj.k o"kZ@Assessment Years : 2007-08 M/s Choice Buildestate cuke Income Tax Officer, Private Limited, Vs. Ward-5(2) 144, Adarsh Nagar, Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AACCC9805G vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA. No. 432/JP/2016 fu/kZkj.k o"kZ@Assessment Years : 2007-08 M/s Choice Colonizers Private Ltd., cuke Income Tax Officer, 144, Adarsh Nagar, Ward-5(2) Vs. Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AACCC9805G vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri S. L. Poddar & Shri Isha Kanungo (Adv.) jktLo dh vksj ls@ Revenue by: Shri Ran Singh (Addl. CIT) lquokbZ dh rkjh[k@ Date of Hearing : 19/02/2018 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 28/03/2018 vkns'k@ ORDER PER: VIKRAM SINGH YADAV, A.M.
These are two appeals filed by the respective assessees against the order of ld. CIT(A)-2, Jaipur of even date i.e, 24.02.2016 for Assessment Year 2007-08. Both these appeals were heard together and are disposed off by this consolidated order. In ITA No. 431/JP/2016 for AY 2007-2008, the grounds of appeal taken by the assessee are as under:
2 ITA No. 431 & 432/JP/2016 M/s Choice Buildestate Pvt. Ltd., Jaipur vs. ITO, Jaipur “1. The order passed by the Learned Assessing Officer as well as Learned CIT(A) u/s 143(3)/147 of the Income Tax Act, 1961 is void-ab-initio and deserves to be quashed. 2. Under the facts and circumstances of the case, the Learned CIT(A) has erred in confirming the addition of Rs. 35,00,000/- u/s 68 on account of share application money.”
Briefly stated, the facts of the case are that assessee filed its return of income declaring loss of Rs 2,247 which was processed u/s 143(1), thereafter notice under section 148 was issued and assessment u/s 147 read with 143(3) of the Act was completed wherein the AO made an addition of Rs. 35,00,000/- u/s 68 in respect of share application money received by the assessee company during the year under consideration. 3. In respect of ground No. 1, the assessee has challenged the action of the Assessing officer u/s 147 of the Act. It was submitted by the ld. AR that there was no independent application of mind by the ld. Assessing Officer who was guided exclusively in taking action u/s 148 on the basis of the report received from DDIT (Inv.), Mumbai. It was submitted by the ld. AR that in the reasons so recorded by the AO, it is no where clear as to how the assessee was found beneficiary of so called accommodation entries. Further, the ld. AO has not caused any enquiry before having reason to form a belief that income has escaped in the hands of the assessee company. It was further submitted by the ld. AR that in the statement recorded u/s 139(2) of Shri Praveen Kumar Jain and others, including a copy of report received from DDIT (Inv.) Unit-III(2), Mumbai, nowhere indicate the name of the assessee or of the transactions of share application money relating to the assessee. It
3 ITA No. 431 & 432/JP/2016 M/s Choice Buildestate Pvt. Ltd., Jaipur vs. ITO, Jaipur was submitted that action u/s 148 could not be taken unless there was specific information with respect to the case of the assessee. It was further submitted that long before the report DDIT (Inv.) Unit-III (2), Mumbai, Shri Praveen Kumar Jain had furnished an affidavit dated 15.05.2014 retracting his statement given during the course of search. It was submitted that pursuant to retraction of statement recorded u/s 132(4), there is nothing material which is left in the hands of the Revenue for taking action against the assessee company u/s 148 of the Act. It was further submitted by the ld. AR that the ld. CIT (A) has not considered the retraction affidavit on the ground that retraction has come almost a year after the recording of the statement. In this regard, it was submitted by the ld. AR that it is not the length of time or the delay in filing retraction that matter, what is material is the contents of the retraction statement. It was further submitted that in the report of the investigation wing, Mumbai, there is no mention of any incriminating document pertaining to the transaction of the assessee which was found in the search in the case of Shri Praveen Kumar Jain. It was submitted that the entire action of the Assessing Officer is based on guess work, suspicion and conjecture and the Assessing Officer was not in possession of any document indicating that assessee had paid cash in lieu of having share application money. Accordingly, it was submitted that the Assessing Officer was not justified in resorting to action u/s 148 of the Act. Further, ld. AR has placed reliance on the decision of Hon’ble Delhi High Court in case of Signature Hotels (P) Ltd. vs. ITO (2011) 338 ITR 51 (Delhi).
In respect of ground No. 2, the assessee company has challenged the addition of Rs. 35,00,000/- received towards the share application
4 ITA No. 431 & 432/JP/2016 M/s Choice Buildestate Pvt. Ltd., Jaipur vs. ITO, Jaipur money u/s 68 of the Act. In this regard, ld. AR vehemently argued the matter and his contentions as also stated in the written submissions are as under:
“1. Details of shares application money:-
Complete particulars of persons from whom share application moony was received are as under:-
Sr. Name & PA Nos of Share Documents furnished regarding No address N shares application genuineness . money 1 Vanguard AA 50000 500000 (i) Share Application money Form Jewels Ltd. AC (ii) Copy of Board resolution G-3, Silver V3 (iii) Copy of PAN Card Anklet Yari 48 (iv) Copy of Bank statement Road, 0A (v) Acknowledgement of ITR Versova, (vi) Copy of certificate of incorporation Andheri (W), (vii) Audited statement of accounts Mumbai 2. Yash – V- AA 50000 500000 (i) Share application money Form Jewels Ltd. AC (ii) Copy of Board resolution A-43, Happy Y1 (iii) Copy of PAN Card Home 11 (iv) Copy of Bank statement Apartment 9P (v) Acknowledgement of ITR Saibaba (vi) Copy of certificate of incorporation Nagar, (vii) Audited statement of accounts Borivali (W), Mumbai- 400092 3. Akla AA 50000 500000 (i) Share application money Form
5 ITA No. 431 & 432/JP/2016 M/s Choice Buildestate Pvt. Ltd., Jaipur vs. ITO, Jaipur Diamond CA (ii) Copy of Board resolution Industries 52 (iii) Copy of PAN Card Ltd 233, 36 (iv) Copy of Bank statement Panchratna, D (v) Acknowledgement of ITR Opera House, (vi) Copy of certificate of incorporation Mumbai- (vii) Audited statement of accounts 400004 4. Kush AA 50000 500000 (i) Share application money Form Hindustan CC (ii) Copy of Board resolution Entertain Ltd K3 (iii) Copy of PAN Card CS-2, Silver 59 (iv) Copy of Bank statement Anklet Yari 7M (v) Acknowledgement of ITR Road, (vi) Copy of certificate of incorporation Versova, (vii) Audited statement of accounts Andheri (W), Mumbai 5. Nakshtra AA 50000 500000 (i) Share application money Form Business Pvt. BC (ii) Copy of Board resolution Ltd. (Hema H4 (iii) Copy of PAN Card Trading Pvt 27 (iv) Copy of Bank statement Ltd.) 303-B, 9G (v) Acknowledgement of ITR Minal Park, (vi) Copy of certificate of incorporation CS Road, (vii) Audited statement of accounts Dahisar (E), Mumbai- 400068
6 ITA No. 431 & 432/JP/2016 M/s Choice Buildestate Pvt. Ltd., Jaipur vs. ITO, Jaipur 6. Javda India AA 50000 500000 (i) Share application money Form Impex Ltd. AC (ii) Copy of Board resolution 626, A7 (iii) Copy of PAN Card Panchratna, 06 (iv) Copy of Bank statement M.P. Road, 5L (v) Acknowledgement of ITR Opera House, (vi) Copy of certificate of incorporation Mumbai- (vii) Audited statement of accounts 400004
Lexus AA (i) Share application money Form 7 Infotech Ltd AC (ii) Copy of Board resolution CS-1, Silver L46 (iii) Copy of PAN Card Anklet Yari 46 (iv) Copy of Bank statement Road, G (v) Acknowledgement of ITR Versova, (vi) Copy of certificate of incorporation (vii) Audited statement of accounts Andheri (W), Mumbai
The supporting documents are available at paper book page no. 34 to 208.
The perusal of the aforesaid chart reveals that the assessee did his best to convince the Learned Assessing Officer/ the Learned CIT(A) regarding the genuineness of the share application money by furnishing various documents such as Share Application money form, Copy of board resolution, Copy of PAN Card, Copy of Bank statement, Acknowledgment of lTR, Copy of certificate of incorporation and Audited statement of accounts.. It is submitted that all the ingredients which make a transaction genuine are available in the case of the assessee. The same are repeated here under:
7 ITA No. 431 & 432/JP/2016 M/s Choice Buildestate Pvt. Ltd., Jaipur vs. ITO, Jaipur (1) Copies of share application money which have complete address of the company. Copy of certificate of incorporation of company has also been furnished. These details establish the genuineness of the company. (2) In all the cases share application money has been received through banking channels. (3) Copies of PAN cards have been furnished establishing the identity of share applicants. (4) Copies of bank accounts have been furnished which establish that the transaction through banking channel and hence genuine. (5) Copies of audited accounts have been furnished. It is submitted that the Learned Assessing Officer has accepted the identity of all the share applicants. The Learned Assessing Officer/Learned CIT(A) have not accepted the share application money only on the ground that a report was received from the Investigation Wing Mumbai reporting that the share applicant companies were paper companies and the assessee had received accommodation entries. In this regard the action of the Learned Assessing Officer as well as of the ld. CIT(A) is assailed as under:- 2. Nothing adverse in the report of investigation wing:- It is further submitted that the Learned Assessing Officer under letter dated 26.12.2014 furnished to the assessee a copy of statement recorded u/s 132(4) of Shri Praveen Jain and others including a copy of report received by him from DDIT (Inv) Unit-III(2), Mumbai. It is noticed that during the course of search conducted in the case of Shri
8 ITA No. 431 & 432/JP/2016 M/s Choice Buildestate Pvt. Ltd., Jaipur vs. ITO, Jaipur Praveen Kumar Jain on 01.10.2013 statements were recorded of the following persons: (i) Shri Praveen Kumar Jain (ii) Shri Uttam C. Hinger (Brother-in-law of Shri Praveen Kumar Jain) (iii) Shri Dinesh Kumar Choudhary (Director of Ansh Merchandise Pvt. Ltd. (iv) Shri Chandra Shekar Goyal (Broker) (v) Shri Nilesh Parmar Prop. Mohit International (Statement recorded on 02.01.2A13 - pre search) It is submitted that perusal of the extracts of the statement so furnished to the assessee by the Learned Assessing officer nowhere indicate the name of the assessee or of the transactions of share application money relating to the assessee. It is submitted that in these statements there is nothing except wild generalizations/allegations that Shri Praveen Kumar Jain was indulging in providing accommodation entries by way of managing and operating several companies. It is submitted that the assessee has got no transaction of share application money with Shri Praveen Kumar Jain. In the report of the Investigation wing it has not been mentioned in which company Shri Praveen Kumar Jain is director. It is also not the case of the Learned Assessing Officer that the companies who have paid share applications money to the assessee are having Shri Praveen Kumar Jain as Director. Therefore it is totally of no avail that Shri Praveen Kumar Jain was an entry provider. It is also not in the knowledge of the assessee that Shri Praveen Kumar Jain was operating the companies who have paid share application money. Wild allegations against Shri Praveen Kumar Jain have no effect so far as the assessee is concerned.
9 ITA No. 431 & 432/JP/2016 M/s Choice Buildestate Pvt. Ltd., Jaipur vs. ITO, Jaipur It is further submitted that although the revenue is harping in the report that the company is have no real business and are dummy. These companies are alleged to have provided accommodation entries to the assessee. But it is not on record whether any action has been taken against the companies for being dummy by the serious frauds Investigation Wing in the Ministry of Corporate Affairs. Unless it is brought on record and proved up to the hilt, the assessee cannot be punished in any way and the share applicant companies cannot be held to be dummy companies. No company can be called a dummy company simply on the basis of a statement or of two of the ex-employees who always have an exe to grind. Therefore it is submitted that in the report of the investigation wing there is nothing untowards in respect of assessee's transactions. Therefore the same deserve to be accepted. The share application money cannot be rejected on the basis of wild generalization. 3. No action on the basis of retraction by Shri Praveen Kumar Jain - It is submitted that the report of the Investigation Wing, Mumbai is based mainly on the statement of Shri Praveen Kumar Jain. It is on the basis of this statement that the DDIT recommended action in the case of the assessee. In this regard it is submitted that long before the report of the DDIT Shri Praveen Kumar Jain furnished an affidavit dated 15.05.2014 retracting his statement given during the course of search. However there is no mention of this retraction in the report of the DDIT. The main part of the retraction is that Shri Praveen Kumar Jain has stated that during the course of search which lasted from 01.10.2013 to 09.10.2013, his statement was recorded under duress. At that stage of
10 ITA No. 431 & 432/JP/2016 M/s Choice Buildestate Pvt. Ltd., Jaipur vs. ITO, Jaipur time, he was ready to state anything to get rid of the search operation. (Para 11 of the affidavit). In the affidavit he has reiterated again and again his retraction of the statement recorded u/s 132(4). In view of this retraction nothing material was left in the hands of the revenue for suggesting action in the hands of the assessee. In view of the contents of the affidavit of Shri Praveen Kumar Jain, the Learned Assessing Officer was not left with any case for treating the share applicant companies as dummies and share application money as bogus. The Learned CIT(A) has not considered the retraction affidavit on the ground that the retraction has come almost a year after. It is submitted that the search in the case of Shri Praveen Kumar Jain took place on 01.10.2013 and the affidavit of retraction has been filed on 15.05.2014. It is hardly seven months. Further it is not the length of time or the delay in filing retraction that matters, what is material is the contents of the retraction. The Learned CIT(A) was therefore not justified in upholding the action of the Learned Assessing Officer in making additions. 4. No documents found relating to assessee in search in the case of Praveen Kumar Jain:- It is further submitted that in the report of the Investigation Wing Mumbai, there is no mention of any incriminating document pertaining to the transaction of the assessee which was found in the search in the case of Shri Praveen Kumar Jain. The entire action of the Learned Assessing Officer is based on guess work, suspicion and conjecture. The Learned Assessing Officer was not in possession of any document indicating that assessee had paid cash in lieu of having share application money. In the absence of this the Learned Assessing Officer
11 ITA No. 431 & 432/JP/2016 M/s Choice Buildestate Pvt. Ltd., Jaipur vs. ITO, Jaipur was not justified in rejecting the share application money. Further he has erred in making addition on the basis of statement disregarding documentary evidences furnished by the assessee establishing the genuineness of share application money. It is submitted that the report of the investigation wing has not mentioned whether any letter or correspondence of the assessee with Shri Praveen Kumar Jain was found. Even no rough paper was found indicating that assessee has taken accommodation entries. The report is based purely on assumption and presumption. The Learned Assessing Officer was precluded in making addition simply on the ground of wild allegation that Shri Praveen Kumar Jain was operating these companies and providing accommodation entries. There is no documentary evidence supporting this finding. On the other hand the assessee had furnished a number of documentary evidences which establish the genuineness of the existence of the companies, genuineness of the share application money being routed banking channels. The companies are having PAN. In view of this the Learned Assessing Officer was not justified to disregard all the documentary evidence and treat the share application money as bogus. The Learned Assessing officer was not justified in taking action on the basis of statements and disbelieving the documentary evidences. The Learned CIT(A) also erred in confirming the additions. 5. Principle of natural justice violated by not allowing cross examination- It is submitted that the entire addition in the case has been made by the Learned Assessing officer following the report of the Investigation wing Mumbai. The Learned CIT(A) has also confirmed the addition on
12 ITA No. 431 & 432/JP/2016 M/s Choice Buildestate Pvt. Ltd., Jaipur vs. ITO, Jaipur the basis of this report. As discussed in the forgoing paras, the report does not consists of any documentary evidence which may lead to establish or infer that the share application money received by the assessee was nothing but accommodation entries except statement of the following persons recorded before and during the search: (i) Shri Praveen Kumar Jain (ii) Shri Uttam c. Hinger (Brother-in-law of Shri Praveen Kumar Jain) (iii) Shri Dinesh Kumar choudhary (Director of Ansh Merchadise Pvt. Ltd. (iv) Shri Chandra Shekar Goyat (Broker) (v) Shri Nilesh Parmar prop. Mohit International (statement recorded on 02.01.2A13 - pre search) The assessee during the course of assessment proceedings had requested the Learned Assessing Officer that assessee should be allowed opportunity for cross examining each and every person whose statement was being relied by the revenue. But this has not been done. Not a single person was allowed cross examination by the assessee. It is established position of law that third party statement or evidence which has remained untested by cross examination is not good evidence. ln view of this the assessment so completed and additions so made are bad in law. Copies of letters submitted before the Learned Assessing officer are available on paper book page no.209 to 219.
The Apex court has observed that not allowing cross examination is a serious flaw and makes the order nullity. Andman Timber Ind. Vs. Commission of Central Excise (2015) 281 CTR 211 (SC). “not allowing the assessee to cross examine the witness by the adjudicating authority though the statements of those witnesses were made the basis of the
13 ITA No. 431 & 432/JP/2016 M/s Choice Buildestate Pvt. Ltd., Jaipur vs. ITO, Jaipur impugned order, is a serious flaw which makes the order nullity in as much as it amounted to violation of principle of natural justice because of which the assessee was adversely affected.
The assessee further places reliance on the following decisions:
Smilax Pharmaceuticals Ltd - ITA No. 208/JP/2014 dated 24.04.2016. Shalimar Buildcon Pvt. Ltd. vs. Income Tax Officer (ITAT Jaipur) (2015) 45 DTR 185 Bharti Syntex Ltd. vs. Deputy Commissioner of Income Tax ITA No. 172 & 173/JP/2010 (2011) 137 TTJ (Jb)82: (2011) 52 DTR 73 CIT vs. Bhaval Synthetics (2013) 84 DTR 449 (Raj.) CIT vs. Supertech Diamond Tools Pvt. Ltd. (2015) 229 Taxman 62 (Rajasthan High Court) Shri Barakha Synthetics Ltd. vs. ACIT (2006) 155 Taxman 239 (Raj.) CIT vs. Diving Leasing and Finance Ltd. 299 ITR 268 (SC) CIT vs. Steller Investment Ltd. (2001) 251 ITR 263 (SC) CIT vs. Lovely Export (P) Ltd. (2008) 216 CTR (SC) 195 It is submitted that the Learned CIT(A) has quoted certain decision of the Hon'ble Delhi High court in support of his order. It is submitted that the Judicial Disciple requires that the Learned CIT(A) should have followed the decisions of the Territorial High Court of Rajasthan and of the Hon'ble ITAT Bench Jaipur which were quoted before him. This was not done nor the Learned CIT(A) controverted any of the decisions quoted before him. It is settled position of law that if there are two opinions on the same issue then one favourable to the assessee has to
14 ITA No. 431 & 432/JP/2016 M/s Choice Buildestate Pvt. Ltd., Jaipur vs. ITO, Jaipur be followed as held in CIT vs. Vegetable Products (SC) 88 ITR 192 and CIT Strawboard Manufacturing Ltd. (sc) 177 ITR 431. 7. In view of the aforesaid facts, it is submitted that the Learned Assessing officer and the Learned CIT(A) have acted by placing uncalled for and blind reliance on the report of the Investigation Wing Mumbai disregarding the documentary evidences furnished by the assessee. They have also not been able to controvert a number of decisions on the issue both of the Apex court as well as of the Territorial High court of Rajasthan. It is prayed that the additions made by the Learned Assessing officer and so confirmed by the Learned CIT(A) deserves to be deleted.” 8. Per contra, the ld DR has vehemently argued the matter and relied upon the order of the lower authorities. He also referred to the relevant findings of the ld CIT(A) and submitted that the AO while assuming jurisdiction under section 147 has applied his mind and has not acted on borrowed satisfaction because once information was received by the Assessing Officer from investigation Wing, Mumbai on the basis of search and survey operations conducted by them in the case of an entry operator , the AO thereafter examined all the relevant and necessary facts and circumstances and there is an nexus between the material and formation of belief by the AO that the income has escaped taxation within the meaning of section 147 of the Act. Further, he relied upon the decision of the Hon’ble Delhi High Court in case of Rajat Export lmport lndia (P) Ltd 18 taxmann.com 311 (Delhi). On merits, he submitted that the assessee company has discharged the primary onus placed on it in terms of identity, creditworthiness and genuineness of the transaction and submitted that in a case where
15 ITA No. 431 & 432/JP/2016 M/s Choice Buildestate Pvt. Ltd., Jaipur vs. ITO, Jaipur credible information is available regarding the company being only paper company and not a genuine investor and the same having been disclosed to the assessee, his onus of proving the genuineness of these amounts was more than just furnishing the basic details which could not established the identity, the genuineness of the transaction or creditworthiness of these companies. Since no further evidences whatsoever were produced, the Assessing Officer was justified in holding these amounts as unexplained. The ld DR further referred to the decision of the Hon’ble Delhi High Court in case of N.R. Portfolio (P) (Ltd) , CIT vs. Navodaya Castles Pvt. Ltd. (50 taxmann.com 110 Delhi) and Nova Promoters and Finlease (P) LTD 342 ITR 169 (Del) and submitted that the ld CIT(A) was right in upholding the addition under section 68 of the I.T. Act 1961, with regard to share application money received by the appellant of an amount of Rs. 35,00,000/-. 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 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,
16 ITA No. 431 & 432/JP/2016 M/s Choice Buildestate Pvt. Ltd., Jaipur vs. ITO, Jaipur 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 be examined for the purposes of determining the
17 ITA No. 431 & 432/JP/2016 M/s Choice Buildestate Pvt. Ltd., Jaipur vs. ITO, Jaipur 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 ld 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 ld 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.
Now, coming to the merits of addition of Rs 35 lacs made by the AO under section 68 of the Act. On careful examination of material available on record, we find that it is a case where the AO has relied blindly on information supplied by the Investigation Wing Mumbai without carrying out any further examination of documents submitted 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
18 ITA No. 431 & 432/JP/2016 M/s Choice Buildestate Pvt. Ltd., Jaipur vs. ITO, Jaipur 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 lncorporation 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 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
19 ITA No. 431 & 432/JP/2016 M/s Choice Buildestate Pvt. Ltd., Jaipur vs. ITO, Jaipur 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 ld 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 and others) recorded u/s 132(4), without getting into controversy whether the said
20 ITA No. 431 & 432/JP/2016 M/s Choice Buildestate Pvt. Ltd., Jaipur vs. ITO, Jaipur 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.
In the result, the appeal of the assessee is partly allowed.
In ITA. No. 432/JP/2016 for AY 2007-08, the assessee company has taken the following grounds of appeal:
“ 1. The order passed by the Learned Assessing Officer as well as Learned CIT(A) u/s 143(3) u/s 143(3)/147 of the Income Tax Act, 1961 is void-ab-initio and deserves to be quashed. 2. Under the facts and circumstances of the case, the Learned CIT(A) has erred in confirming the addition of Rs. 30,00,000/- u/s 68 on account of share application money.”
Admittedly, the facts and circumstances in this case are similar to that of ITA No. 431/JP/16. Our findings and directions contained in ITA No. 431/JP/16 shall apply mutatis mutandis to this matter as well. The appeal of the assessee is thus partly allowed.
In the result, the appeals of the respective assessees are partly allowed.
21 ITA No. 431 & 432/JP/2016 M/s Choice Buildestate Pvt. Ltd., Jaipur vs. ITO, Jaipur Order pronounced in the open Court on 28/03/2018. Sd/- Sd/- ¼fot; ikWy jko½ ¼foØe flag ;kno½ (Vijay Pal Rao) (Vikram Singh Yadav) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 28/03/2018. *Ganesh Kr. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- M/s Choice Buildestate Private Limited, Jaipur 2. izR;FkhZ@ The Respondent- ITO, Ward-5(2), Jaipur 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. xkMZ QkbZy@ Guard File { ITA No. 431 & 432/JP/2016} 6. vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत