ITO, JAIPUR vs. LAND MARK DILSAY 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 Hkkxpan] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, AM vk;dj vihy la-@ITA No. 178/JP/2015 fu/kZkj.k o"kZ@Assessment Year : 2006-07 cuke Income Tax Officer, M/s Land Mark Dealers (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.: AAACL 2002 N vihykFkhZ@Appellant izR;FkhZ@Respondent izR;k{ksi.k@C.O. No. 18/JP/2015 (Arising out of vk;dj vihy la-@ITA No. 177/JP/2015) fu/kZkj.k o"kZ@Assessment Year 2006-07 cuke M/s Land Mark Dealers (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.: AAACL 2002 N 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 : 06/06/2018 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 08/06/2018 vkns'k@ ORDER PER: BHAGCHAND, A.M. The appeal by revenue and cross objection by assessee arise from the order dated 30/12/2014 of Ld. CIT (A)-I, Jaipur pertaining to the A.Y. 2006-07.

ITA 178/JP/2015 & C.O. 18/JP/2015_ 2 ITO Vs M/s Land Mark Dealers (P) Ltd. 2. The assessee filed its return of income on 30/11/2006 declaring Nil

income with ITO, Ward 6(1), Jaipur. Alongwith the return, the assessee

filed financial statements including the details of the share capital. The

return was processed U/s 143(1) of the Income Tax Act, 1961 (in short the

Act). Notice U/s 148 of the Act was issued on 29/03/2012 by the ITO, Ward

4(3), New Delhi on the basis of information received from O/o CIT(C)-II,

New Delhi. During the year, the assessee has raised share capital of Rs.

1,10,00,000/- from various parties. The Assessing Officer has considered

the share capital of Rs. 1,09,00,000/- received from fourteen (14)

companies as unexplained and made the addition.

carried the matter before the ld. CIT(A), who after considering the facts

and submissions of the case, deleted the addition by holding as under:

“3.3.2 I have duly considered A/O’s contention and appellant’s submission, perused the materials on record, factual matrix of the case and also applicable legal position. The case was re-opened on 30/03/2012 on the basis of information received from Investigation Wing Delhi, with regard to share application money received by the assessee. Assessee has filed its objection for re-opening of assessment on 20.02.2013 but AO was unconvinced with that and rejected the same. During the reassessment proceeding, assessee provided all prima facie details such as Name with complete address, PAN, confirmation, bank statement, share application from & allotment etc.

ITA 178/JP/2015 & C.O. 18/JP/2015_ 3 ITO Vs M/s Land Mark Dealers (P) Ltd. Assessee vide letter dated 25.03.2013 has requested AO to provide an opportunity to cross-examine Sh. Aseem Gupta and other directors of these beneficiary companies. However, the same was not offered by the AO. In view of these facts, the reference to the statements made by some of the persons related with the said investing companies is of no effect/use because such statements could not have been utilized against the assessee-company without providing an opportunity of cross-examination, which was not afforded by the AO in this case. It is also found that the AO could not bring out any material to disapprove the genuineness of confirmations along with other prima facie details filed by the assessee. Therefore, the decision given by the Hon'ble Supreme Court, in the case of CIT v. Lovely Exports (P.) Ltd. [2008] 216 CTR 195, will apply here and addition made by the AO is uncalled for.

3.3.2.1 Burden of proof is not static. Once the assessee has provided relevant evidences then the burden shifts on the AO to disapprove their genuineness with new facts. However on the basis of documentary evidences such as (i) PANs of all fourteen (14) concerns who have subscribed to the share capital (ii) Bank statements (iii) cheque details (iv) confirmations received from share holders (v) Copy of ROC return filed and (vi) Share allotment details, it can be concluded that assessee had been able to prove its case and that AO could not shift the burden back on to the assessee without producing any tangible material to doubt the veracity of documents furnished by the assessee. Therefore, assessee has been able to discharge its burden to establish their identity, creditworthiness and genuineness as regards the transactions concerning the allotment of shares. From ROC return, it is also seen that once share allotment is done, whole process of share capital subscription starting from share capital application received from aforementioned fourteen (14) concerns, has reached its finality. Even in view of these documentary factual evidences, AO was not able to prove his contention that assessee’s own money was ploughed back in form of share capital

ITA 178/JP/2015 & C.O. 18/JP/2015_ 4 ITO Vs M/s Land Mark Dealers (P) Ltd. received from these fourteen (14) concerns whose references were found in the search & seizure report of SK Jain group. The immediate source in the bank account of the shareholders is through transfer, not by cash. Apart from these facts, assessee has also relied upon ratio of following decisions which are directly in its favour: Ambreshwar Grih Nirman Samiti 84 ITD 139 Starptex India P Ltd 84 ITD 320 T.S Venketation 74 ITD 298 Amarjit Singh Bakshi (HUF) 263 ITR 75 SMC Share Broker Ltd 159 Taxman 306 Jafferali K Rattonsey 53 SOT 220 Nipuan Auto P Ltd 89 DTR 342 Kamdhenu Steel & Alloys Ltd and others 68 DTR 38 Dolphine Marbles (P) Ltd 57 DTR 58 Dadhimati Syntex P Ltd 259/Jodh/2013 Dt 31/7/13. Hon’ble ITAT Jodhpur Bench Bharti Syntex Ltd 52 DTR 73 ( Hon’ble ITAT Jaipur Bench)

3.3.2.2 Further, I also find that the established legal position on the subject under consideration as adopted in a large number of case laws is as follows:-

(i) As held in the case of R.B. Mittal v. CIT 246 ITR 283 (AP) in an enquiry u/s 68 of the Act, the rule of audi alteram parterm has to be observed and the assessee must be given a fair and reasonable hearing to discharge the burden cast on him u/s 68 of the Act.

(ii) Jurisdictional ITAT Bench Jaipur in case of Bharti Syntex Ltd 52 DTR 73 has held inter alia as under:

“ ……………..Held that certificate of incorporation of investor companies was placed on record. It means that they were registered companies under the Companies Act. PANs of all the three parties had been given and surprisingly no enquiry had been made by the Department from its own department whether the PANs allotted to these parties were correct or not or these companies were assessed to tax or not. The assessee-company had filed copy of its balance sheet also showing the shares of the assessee-company in their books of account on said assets. Year-wise these shares had been

ITA 178/JP/2015 & C.O. 18/JP/2015_ 5 ITO Vs M/s Land Mark Dealers (P) Ltd. shown in their balance sheet and they had stated that they were regularly assessed to tax. Copy of confirmation along with affidavit and share certificates issued were also placed on record. Therefore, by merely saying that these parties were not traceable and treating the share application money as unexplained money under section 68 was not correct. The assessee had filed necessary details for the purpose of proving that it had received actual share application money and the shares had been allotted. Shares had been allotted to the respective companies. The assessee- company was showing the shareholders in its balance sheet and these companies were also showing the assets in their balance sheet in the shape of shares in the assessee-company. All these companies were assessed to tax and, therefore, the addition sustained by the Commissioner (Appeals) was not justified…………….’’(Stress supplied)

Further, ITAT Jodhpur Bench in case of Dadhimati Syntex P Ltd 259/Jodh/2013 Dated 31/7/13 has also endorsed this view.

(iii) It is also settled law that it is mandatory for the AO to confront the assessee with any material collected by the AO at the back of the assessee, and in case of statement of third party recorded at the back of the assessee, opportunity of cross examination has to be offered to the assessee, failing which the said material/statement etc. will be rendered on unreliable and additions made on the basis of such material/statement etc. shall be rendered illegal. It is fact that AO did not provide any opportunity to cross- examine any of the persons namely, Sh. S K Jain or Sh. V K Jain or Sh. Assem Kumar Gupta or Sh. Rajesh Agrawal whose statements have referred/relied in the assessment order. Reference in this regard can be made to the decisions in the case of R.B. Shreeram Durga Prasad 176 ITR 169 (SC), 125 ITR 713 (SC), Jindal Vegetable (order of Hon'ble Delhi High Court in ITA no. 428 of 2007, 174 Taxmann 440 (Raj.) and Laxman Bhai Patel (order of Hon'ble Gujarat High Court dated 22/07/2008 in ITR no. 41/1997).

Admittedly, these statements were not recorded by the AO but were recorded by the Investigation Wing Delhi at the back of the assessee. AO

ITA 178/JP/2015 & C.O. 18/JP/2015_ 6 ITO Vs M/s Land Mark Dealers (P) Ltd. has even not referred to the relevant portion of such statement so as to establish the collusive arrangement the assessee company had with these persons.

(iv) Further, in the case of N.P. Garodia (order dated13/01/2009 of Hon'ble P & H High Court in ITA no. 808 of 2008) and in the case of Brij Pal Sharma (order dated 17.02.2009 in ITA no. 685 of 2008 of Hon'ble P & H High Court) it was held that where the assessee provides identity and details pertaining to the lenders/creditors but is unable to produce them and requests the AO to issue summons u/s 131 of the Act for their attendance, it is the duty of the AO to issue such summons, failing which the addition would get deleted. It is also held in CIT v. Orissa Corporation Pvt. Ltd. 158 ITR 78 (SC) and Anis Ahmed 297 ITR 441 (SC) that mere non- production of the lender/shareholder cannot be a ground for making addition u/s 68 of the Act.

(v) Similarly as held in the case of CIT v. Metachem Industries (2000) 245 ITR 160 (MP) where a credit is shown to have come from a person other than the assessee, there is no further responsibility of the assessee to show that it has come from accounted source of the lender, as long as the fact that he had made the advance and was capable of making the advance are established. It was held by the Hon'ble Madras High Court in Hastimal (S) v. CIT (1963) 49 ITR 273 that after a lapse of decade, the assessee should not be placed upon the rack and called upon to explain not merely the origin and source of a capital contribution, but also the origin of origin and source of the source.

(vi) Further, I find that the Hon’ble Apex Court in CIT v Lovely Exports (P) Ltd. (2008) 216 CTR 195 has held that the even if the share application money received by the appellant company is from alleged bogus shareholder, whose identity is produced by the appellant company, the revenue can always proceed against such shareholders and if necessary reopen their

ITA 178/JP/2015 & C.O. 18/JP/2015_ 7 ITO Vs M/s Land Mark Dealers (P) Ltd. individual assessment. Similar decision is also taken in the case of CIT v. Steller Investment Ltd. (1991) 192 ITR 287 (Del.), (2000) 251 ITR 287 (SC), CIT v. Sophia Finance Ltd. 205 ITR 98 (Del.)(FB), CIT v. Divine Leasing & Finance Ltd. (SLP no. CC 375/2008 arising out of ITA no. 53/2005 of the High Court of Delhi), CIT (Kolkata) v. M/s Shipra Retailers (P) Ltd. SLP no. CC 451/2008 arising out of ITA no. 576/2004 of the High Court of Calcutta), CIT v. Pondy Metal & Rolling Mills (P) Ltd. (SLP no. CC 12860/2007 arising out of ITA no. 788/2006 of the High Court of Delhi) and CIT v. General Exports Ltd. (SLP no. 21349/2007 arising out of ITA No. 880/2006 of the High Court of Delhi). Following the aforesaid decision of the Apex Court in CIT v. Lovely Exports (P) Ltd. (supra), the Hon'ble Bombay High Court in the recent judgment in the case of CIT v Creative World Telifilms Ltd. (order dated 12.10.2009 in ITA(L) no. 2182 of 2009) has held inter alia as under:

"The question sought to be raised in the appeal was also raised before the Tribunal and the Tribunal was pleased to follow the judgment of the Apex Court in the case of CIT vs. Lovely Exports (P) Ltd. reported in (2008) 216 CTR 195 (SC) wherein the Apex Court observed that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the assessing officer, then the department can always proceed against them and if necessary reopen their individual assessments. In the case in hand, it is not disputed that the assessee has given the details of name and address of the shareholders, their PANIGIR number and had also given the cheque number, name of the bank. It was expected on the part of the assessing officer to make proper investigation and reach the shareholders. The assessing officer did nothing except issuing summons which was ultimately returned back with an endorsement 'not tenable'. In our considered view, the assessing officer ought to have found out their details through PAN Card, Bank Account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the assessing officer. In the above circumstances, the view taken by the Tribunal cannot be faulted. No substantial question of law is involved in the appeal. In the result, the appeal is dismissed in liminni with no order as to costs. ”

ITA 178/JP/2015 & C.O. 18/JP/2015_ 8 ITO Vs M/s Land Mark Dealers (P) Ltd. Similar decision has also been taken by the Hon'ble Chhattisgath High Court in ACIT v Venkateshwar Ispat Pvt. Ltd. (2009) 319 ITR 393.

(vii) Further, the Hon'ble Delhi High Court relying on the judgment of the Apex Court in Lovely Exports Pvt. Ltd. (supra) has dismissed the department’s appeals in limine vide its recent orders in the case of CIT v. Dwarkadhish Investment Pvt. Ltd. and Dwarkdhish Capital Pvt. Ltd (ITA nos. 911/2010 and 913/2010 order dated 02/08/2010, CIT Vs. Green Tech Tower Builders Pvt. Ltd. (ITA no. 1113/2010 order dated 12.08.2010) and CIT v. Ultratech Finance & Investment Ltd. (ITA no. 1122/2010 order dated 12.08.2010). In the case of Dwarkadhish Investment Pvt. Ltd. and Dwarakdhish Capital Pvt. Ltd. (supra) the Hon'ble Delhi High Court vide its common order dated 02.08.2010 has inter alia observed as under:

"7. Consequently, the doctrine of merger would apply and the judgment of the Supreme Court in Lovely Exports (P) Ltd. (supra) would cover the field with regard to interpretation of Section 68 of Act, 1961.

………………………………..

ITA 178/JP/2015 & C.O. 18/JP/2015_ 9 ITO Vs M/s Land Mark Dealers (P) Ltd. as the Division Bench judgment of this Court in the case of the respondent- assessee itself.

(viii) In the case of CIT vs. Fair Finvest Ltd. ITA no. 232/2012 dated 22-11- 2012, Hon’ble Delhi High Court has held as under:-

“6. This Court has considered the submissions of the parties. In this case the discussion by the CIT(Appeals) would reveal that the assessee has filed documents including certified copies issued by the Registrar of Companies in relation to the share application, affidavits of the Directors, Form 2 filed with the ROC by such applicants confirmations by the applicant for company’s shares, certificates by auditors etc. Unfortunately, the assessing officer chose to base himself merely on the general inference to be drawn from the reading of the investigation report and the statement of Mr. Mahesh Garg. To elevate the inference which can be drawn on the basis of reading of such material into judicial conclusions would be improper, more so when the assessee produced material. The least that the assessing officer ought to have done was to enquire into the matter by, if necessary, invoking his powers under Section 131 summoning the share applicants or directors. No effort was made in that regard. In the absence of any such finding that the material disclosed was untrustworthy or lacked credibility the assessing officer merely concluded on the basis of enquiry report, which collected certain facts and the

ITA 178/JP/2015 & C.O. 18/JP/2015_ 10 ITO Vs M/s Land Mark Dealers (P) Ltd. statements of Mr. Mahesh Garg that the income sought to be added fell within the description of Section 68.

(ix) Recently, in the case of ITO Ward (2) New Delhi Vs. M/s Rakam Money Matters P Ltd ITA no. 2821/Del/2011 dated 16/10/2014, the Hon’ble ITAT Bench Delhi has deleted the entire addition made on account of share application money by the assessee u/s 68 of the Act, relevant extract of which are reproduced as under:-

“……………………………………………………………………………………………………………………. 16. In the present case, as noted above, the AO has not been able to bring on record any valid material or evidence to discredit the evidences and the explanation given by the assessee company. The only evidence which has been referred by the AO is statement of third parties recorded by the Investigation Wing. Admittedly these statements were not recorded by the AO but were recorded by the Investigation Wing at the back of the assessee. The AO has not even referred to the relevant portion of such statement so as to establish the collusive arrangement the assessee company had with these persons.

ITA 178/JP/2015 & C.O. 18/JP/2015_ 11 ITO Vs M/s Land Mark Dealers (P) Ltd. “3.3.2.3 Further, in view of the decisions of the Jurisdictional High Court in Barkha Synthetics Ltd. Vs Asstt. CIT (2005) 197 XTR (Raj) 432 & CIT Vs AKJ Granites P Ltd. 301 ITR 298, where the share applications are received from different places accompanies 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 the facts and circumstances as discussed and also ratio of the above decision in favour of the appellant as discussed in above paras, the addition of Rs. 1,09,00,000/- made U/s 68 of the Act cannot be justified, hence deleted. Assessee gets a relief of Rs. 1,09,00,000/-.”

grounds of appeal:

On the facts and in the circumstances of the cases and in law the ld. CIT(Appeal)-I, Jaipur has erred in:-

“1. “Whether on the facts and in the circumstances of the case and in law the ld.CIT(A) has erred in deleting the addition of Rs. 1,09,00,000/- made u/s 68 on account of unexplained cash credits in the form of share capital issued by the assessee.”

ITA 178/JP/2015 & C.O. 18/JP/2015_ 12 ITO Vs M/s Land Mark Dealers (P) Ltd. confronted with the evidences collected and ignoring the fact that necessary evidences and details in the form of statements records during the course of search operation as well as copies of bank accounts and related documents were provided to the assessee.”

the addition of Rs. 1,09,00,000/- lacs made by the Assessing Officer U/s 68

of the Act as unexplained cash credit in the form of share capital issued by

the assessee. The ld. CIT(A) has allowed the appeal of the assessee by

holding that the assessee has discharged its onus by establishing the

identity, creditworthiness and genuineness with regard to the transactions

for allotment of shares.

raised in the appeal, the ld DR has relied on the orders of the Assessing

Officer and submitted that the assessee has not discharged the onus. The

ld. CIT(A) is not justified in deleting the addition. She submitted that the

Assessing Officer has issued inquiry letters U/s 133(6) of the Act to the

addresses provided by the assessee. No response was received in respect

of ten companies who has invested in the shares. Shri Aseem Kumar Gupta,

C.A. has confessed in his statement dated 24/11/2011 and 25/11/2011 that

ITA 178/JP/2015 & C.O. 18/JP/2015_ 13 ITO Vs M/s Land Mark Dealers (P) Ltd. he was engaged in providing accommodation entries through number of

entities controlled/managed by him. The explanation given by the assessee

was not satisfactory and it lacks creditworthiness and genuineness. Hence

the addition made u/s 68 of the Act made by the Assessing Officer may be

confirmed and the order of ld. CIT(A) may be quashed.

submitted as under:

S.No Name, address and PAN of Amount Reasons for making addition the Company invested (Rs.)

- In response to summons, balance 1. M/s SAM Portfolio Pvt. Ltd. 5,00,000 WP-501,3rd Floor, Shiv sheet filed but it did not furnish Market, Wazirpur, Ashok Schedule-5 of the Balance Sheet Vihar, Delhi-110052 which shows investment of New Address: 2-G, MIG Rs.93,60,900/- to verify whether it DDA Flats, Gulab Bagh, has invested in share capital of the

ITA 178/JP/2015 & C.O. 18/JP/2015_ 14 ITO Vs M/s Land Mark Dealers (P) Ltd. Delhi-110007 assessee or not. - Sh. Aseem Kumar Gupta in his PAN: AAHCS6810N statement has stated that he was engaged in providing accommodation entries through this company. - Assessee has not produced the director. - Annexure 3 of the Balance Sheet 2. M/s KMC Portfolio Pvt. Ltd. 5,00,000 RZH-266, Raj Nagar, Part-II, shows investment in share Palam, New Delhi-110045 application money in different New Address: 2-G, MIG companies but the name of the assessee does not appear. DDA Flats, Gulab Bagh, - Sh. Aseem Kumar Gupta in his Delhi-110007 statement has stated that he was PAN: AACCP5345A engaged in providing accommodation entries through this company. - Assessee has not produced the director. - In response to summons balance 3. M/s Ravnet Solutions Pvt. 10,00,000 Ltd. sheet filed but it did not furnish DA-4, Vikas Marg, Schedule-5 of the Balance Sheet Shakarpur, Delhi-110092 which shows investment of New Address: 305, Agarwal Rs.2,11,76,030/- to verify whether it Arcade, Plot No.6, Sector- has invested in share capital of the 12, Dwarka, Delhi-110075 assessee or not - Sh. Aseem Kumar Gupta in his PAN: AAEER6878G statement has stated that he was engaged in providing accommodation entries through this company. - Assessee has not produced the director. - Company has shown its inability in 4. M/s S.G. Portfolio Pvt. Ltd. 20,00,000 WP-501, IIIrd Floor, Shiv furnishing the requisite information and requested to grant two months Market, Ashok Vihar, New time which is not possible as the Delhi-110052 assessee was only required to furnish New Address: House the routine information. No.191. IInd Floor, Naya - Sh. Aseem Kumar Gupta in his Bans, Delhi-110006 statement has stated that he was PAN: AAHCS6809H engaged in providing accommodation entries through this company. - Assessee has not produced the director. 5. M/s Geefcee Finance Ltd. 10,00,000 Geefcee House, No response was given by these 13/34, W.E.A. IVth Floor, companies. The assessee failed to Main Arya Samaj Road, prove the identity of the share capital Karol Bagh, New Delhi- subscribers due to non furnishing of 11005 latest confirmation with correct PAN: AAACG1103H address and it is hard to believe that 6. M/s Newage Exim Pvt. Ltd. 10,00,000 genuine companies would disappear and their investments will go waste. H-003, Saraswati Appt., 97 I.P. Extn., Patparganj, Delhi- 110092

ITA 178/JP/2015 & C.O. 18/JP/2015_ 15 ITO Vs M/s Land Mark Dealers (P) Ltd. PAN: AAEFN3888R 7. M/s Telstar Editing & Studio 5,00,000 Pvt. Ltd. 228A, Pocket A, Mayur Vihar-II, Delhi-110091 PAN:AAACT8962B 8. M/s Chhoti Leasing & 10,00,000 Finance Pvt. Ltd. D-11, Nanda Devi Tower, 2nd Floor, Central Market, Prashant Vihar, New Delhi- 85 PAN: AABCC8851H 9. M/s B.T. Technet Pvt. Ltd. 10,00,000 16B/9, Bolni Chambers, D.B Gupta Road, Dev Nagar, New Delhi-110005 PAN:AABCB9573F 10. M/s Priti Merchantile Pvt. 5,00,000 Ltd. 15/76, Old Rajinder Nagar, IInd Floor, New Delhi-110060 PAN: AADCP1611J 11. M/s Time Computech 5,00,000 Services 2727/102, Ist Floor, Challan Street, Daryaganj, New Delhi-11002 PAN: AAACT2715L 12. M/s Jovial Suppliers Pvt. 4,00,000 Ltd. 208, Mukand House, Comm. Complex, Azadpur, Delhi-110033 PAN: AAACJ3250A

ITA 178/JP/2015 & C.O. 18/JP/2015_ 16 ITO Vs M/s Land Mark Dealers (P) Ltd. Submission:- 1. The AO has treated the share capital amount received from SAM Portfolio Pvt. Ltd. as unexplained for the reason that the company has not furnished Schedule- 5 of the Balance Sheet which shows the details of investments. Only because Schedule-5 to the Balance Sheet is not furnished by the company, the investment made by it in the share capital of the assessee cannot be considered as unexplained. This company has made investment in the share capital of the assessee through J&K Bank. From this bank account (PB 40) investment of Rs.5,00,000/- made by it is fully verifiable. Even Aseem Gupta in his statement while providing the list of entities providing the accommodation entries has not stated that J&K Bank of SAM portfolio Pvt. Ltd. has been used by him for providing the accommodation entries. Further inspite of the specific request made by the assessee vide letter dated 18.03.2013 (PB 37), the AO has not utilised his power under the Act to enforce the attendance of the director. The assessee was also not provided an opportunity to cross examine Sh. Aseem Kumar Gupta who is alleged to have stated to provide accommodation entry inspite of the specific request of the assessee vide letter dated 05.03.2013 and 25.03.2013 (PB 34-36). It may be noted that in respect of this company assessee has filed the share application form, confirmation and the bank statement (PB 38-40). Thus, assessee has discharged his primary burden of proving the identity of the share applicant, genuineness of the transaction and creditworthiness of the creditor. Thus, the share capital money received from this company is fully explained and the addition made by the AO is rightly deleted by the CIT(A).

ITA 178/JP/2015 & C.O. 18/JP/2015_ 17 ITO Vs M/s Land Mark Dealers (P) Ltd. and confirmation (PB 41-42). The AO in spite of the request of the assessee has not issued summon to the director of this company for his personal presence and no opportunity to cross examine Sh. Aseem Kumar Gupta was given. Thus, the addition of Rs.5 lacs made by AO is rightly deleted by the CIT(A).

ITA 178/JP/2015 & C.O. 18/JP/2015_ 18 ITO Vs M/s Land Mark Dealers (P) Ltd. 5. In respect of parties mentioned at S. No. 5 to 14 it is to submit that assessee has given the latest address available with him. This is proved from the fact that the summons issued to them is not returned back unserved. If these parties did not turn up then necessary actions should have been taken against these companies and for that reason no adverse view can be taken in case of the assessee. The assessee had furnished complete details to the AO regarding the transactions in question, which include confirmation, share application form, copy of bank account and their permanent account numbers (PB 51-78). These companies are not referred as providing accommodation entries in the notice issued u/s 148. These companies (except M/s Chhoti Leasing & Finance Pvt. Ltd.) are also not covered in the list given by Sh. Aseem Gupta in his statement as being used for providing accommodation entries (PB 21-30). Further as per his statement the bank account no. 252 of Corporation Bank of M/s Chhoti Leasing & Finance Pvt. Ltd. was used for providing accommodation entries whereas assessee has received the amount from bank a/c no. 5043 on 08.09.2005 as evident from his bank statement placed at PB 62.Thus, this account is a different account than the account used by Aseem Gupta for providing accommodation entries. In these circumstances, assessee has discharged his primary burden of proving the identity of the share applicant, genuineness of the transaction and creditworthiness of the creditor. Thus, the share capital money received from these ten parties aggregating to Rs.69 lacs is fully explained and the addition made by the AO is rightly deleted by the CIT(A).

ITA 178/JP/2015 & C.O. 18/JP/2015_ 19 ITO Vs M/s Land Mark Dealers (P) Ltd. 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. Therefore, addition of Rs. 1,09,00,000/- made by the AO is rightly deleted by the Ld. CIT(A).

CIT Vs. Vacmet Packaging (India) Pvt. Ltd. 367 ITR 0217 (All.) (HC) decision dated 11.02.2014 Facts of the case A survey u/s 133A was carried out and it was alleged by the revenue that a Chartered Accountant by the name of Aseem Kumar Gupta was involved in providing accommodation entries to various beneficiaries under the guise of share application money. Summons was issued to Aseem Kumar Gupta and he was confronted with the notings contained in a black diary which had been impounded during the course of survey. AO in the assessment u/s 153A, made an addition of an amount which was received by assessee as share application money from M/s KMC Portfolio Pvt. Ltd. on the ground that amount was only a movement of money belonging to the assessee through various channels in a colourable manner. CIT(A) deleted the addition by holding that AO had erred in relying upon the contents of the black diary, as it consisted of entries which related to AY 2005-06 and not to current AY 2007-08. Further, during the course of assessment proceedings, the AO had issued notice u/s 133(6) inter alia to M/s KMC Portfolio Pvt. Ltd. as well as to another company in response whereto both the companies had confirmed investments made by them and filed share receipt confirmation, bank statements of the relevant period, acknowledgments of the income tax returns and balance sheet. Tribunal while sustaining the view of the CIT(A) observed that assessee had filed documentary evidence to prove genuineness of share application money consisting of (i) share application forms; (ii) copies of bank accounts of share applicants; (iii) copies of income tax returns of share allottees; (iv) balance sheets; and (v) copies of share allotment certificates and of Board's resolution of the share applicants. Identity of applicants was established by production of copies of PAN cards and registration certificate with the Registrar of Companies. Financial capacity was also proved by filing of copies of the bank accounts from where the share application money was transferred through banking channels to the assessee. The genuineness of the transaction had been established by filing of the documents and in view of the confirmation by both the companies of the respective transaction. On this basis, the Tribunal held that the assessee had discharged the onus placed upon him by sec. 68. Findings of the case

ITA 178/JP/2015 & C.O. 18/JP/2015_ 20 ITO Vs M/s Land Mark Dealers (P) Ltd. The assessee undoubtedly had to discharge the onus of establishing the identity and credit worthiness of the applicant companies and the genuineness of the transaction. In this regard, both the CIT(A) and the Tribunal had noted that the assessee had established all the three aspects by producing, during the course of the assessment, necessary documentary material such as the share application forms, copies of bank accounts, income tax returns and balance sheets. The view which was taken by the CIT(A) and which was sustained by the Tribunal would thus have to be regarded as being, at least, a possible view to take in the circumstances of the case.

It may be noted that in assessee’s case also, the addition is made 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.

ACIT Vs. VIP Growth Fund Pvt. Ltd. 46 CCH 0231 (Del.) (Trib.) decision dated 04.03.2016

Facts of the case

In this case, the assessee filed its return of income declaring certain income. Scrutiny assessment u/s 143(3) was made on 28.02.2006. In the course of the said proceedings, the details of share application money/share capital were furnished. The AO received information from the Investigation Wing of the Department, that the companies / persons which contributed towards share application money / share capital were involved in providing accommodation entries. In view of the specific information, the AO initiated action u/s 148 and completed the assessment disbelieving a part of share application money/share capital of Rs. 40,00,000/-.

Findings of the case

The Hon’ble ITAT affirmed the findings of the Ld. CIT(A) who deleted the addition by holding that nothing adverse was found in the details of share application money/share capital furnished by the assessee in the course of assessment proceedings. The AO has not verified the details furnished by the assessee and I.T. records of the shareholders/investing companies. The assessee has discharged its burden of providing basic details which were required for verification to fulfill the conditions viz. identity of the creditor, credit worthiness of the creditor and genuineness of transaction. The assessee has provided necessary details including the ward/circle where the share applicants/ investing companies were assessed to income tax and discharged the onus cast on it. All the amounts were received, through banking channels by way of cheques issued in favour of the appellant company towards share application money. The shares were allotted as per the documents furnished before ROC. The assessee has produced possible/best evidence to support its claim. The AO has simply acted on the information received from the Investigation Wing without verifying the details furnished by the assessee company and also not placing before the assessee the information and findings of the Investigation Wing violating the principles of natural justice. If there is any

ITA 178/JP/2015 & C.O. 18/JP/2015_ 21 ITO Vs M/s Land Mark Dealers (P) Ltd. discrepancy in the books of accounts maintained by the investing companies, there is a case for reopening of the assessment of the respective shareholders/investing companies. The assessee cannot be penalized for the mistakes/faults committed by the share holders. The AO has not found any discrepancy in the books of account and bank accounts maintained by the assessee.

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

AO made addition u/s 68 on account of amount received for share capital, its premium and amount paid as commission for arranging it on basis of statement made by third parties who were related to purchasing companies stating that these companies were engaged in providing accommodation entries in lieu of commission. It was held that the said third party statement was made behind back of assessee and no opportunity of being heard or cross-examining third parties was provided to assessee. Further, AO could not bring any material to disapprove genuineness of confirmation and affidavits filed by assessee. All transactions were through account payee cheques. All these companies had PAN numbers, were regularly assessed to tax, were registered under Companies Act and Form No.2 for allotment was also filed. Therefore, appellate authorities have rightly deleted the addition.

ITO Vs. Rakam Money Matters P. Ltd. (2014) 41 CCH 0155 (Del.) (Trib.) decision dated 16.10.2014

In this case, return of income was submitted declaring certain income. The case was reopened u/s 148 of the IT Act, 1961 on the basis of information received from the investigation wing that assessee has received accommodation entries by way of share application money from certain companies. The AO required the assessee to prove the genuineness of the share application money received by it. In response to same, the assessee filed details in the form of share application form, PAN, affidavit of the directors of shareholder companies, confirmation, bank statement etc. The AO, however, held that as assessee has not produced the director of the companies from whom the share application money has been received, it has failed to discharge its onus to prove the genuineness of the share application and accordingly made addition u/s 68 of the IT Act, 1961. The Ld. CIT(A) observed that assessee company has filed all the necessary details which include copies of share application form, copies of bank statements, copies of income tax returns, copies of PAN cards, balance sheet, copy of Certificate of Incorporation and Memorandum of Articles of Association of the companies, that the status of these companies is ‘active’ on the ROC Website and that the opportunity of cross examination was not provided to the appellant in respect of the allegation of the Investigation Wing. Thus, on the basis of the above facts and by relying upon the various judgments, the Ld. CIT(A) held that assessee has discharged its onus and accordingly deleted the addition. The Hon’ble ITAT held as under:-

ITA 178/JP/2015 & C.O. 18/JP/2015_ 22 ITO Vs M/s Land Mark Dealers (P) Ltd. 13. We have heard both the parties. The only issue here is the addition of Rs.60 lacs made by the Assessing Officer as unexplained credit on account of the share application money. On going through the facts of the case, we notice that assessee has filed the relevant details which it could have filed in support of its contention of having received the share application money from each of these shareholder companies.

Jadau Jewellers & Manufacturing (P) Ltd. Vs. ACIT 45 CCH 0442 (Jpr.) (Trib.) decision dated 14.12.2015

Assessee was engaged in business of trading and manufacturing of jewellery—Search and seizure operation was carried by department u/s 132 and survey u/s 133A was made on Members of ’X’ of which Assessee was one of Members—AO issued notice

ITA 178/JP/2015 & C.O. 18/JP/2015_ 23 ITO Vs M/s Land Mark Dealers (P) Ltd. u/s 153A and Assessee was asked to file true and correct return of income as prescribed under r 12 of the Income Tax Rules, 1962—In return of income filed in response to notice u/s 153A no disclosed income pertaining to relevant year was declared by Assessee—AO observed that during year under consideration, assessee showed total turnover of Rs. 2.05 crores on which assessee returned a net loss of Rs. 13,29,220—AO observed that assessee had obtained share capital and share application money from various companies—AO held that amount received from stated companies in form of share capital was only accommodation entries and genuineness of Share capital received by assessee company could not be accepted—AO passed Order u/s 153 and made addition of Rs. 60,00,000 on account of alleged unexplained share capital received by assessee company from following persons—CIT(A) upheld addition made by AO— Held, AO could issue notice u/s 143(2)—In assessee’s case, search was conducted on 06/5/2010 and AO issued notice on 16/09/2011 u/s 153A read with s 143(2)—During course of search, no incriminating documents were found therefore, no notice could be issued u/s 153A read with s 143(3) because no proceeding was pending before AO which abated for issue of notice on date of initiation of search—Thus, on technical ground, order passed u/s 153A read with s 143(3) was held void ab initio—Further Assessee before AO had produced copy of share application, confirmation of cash creditors, copy of PAN, copy of Board resolution, copy of Director’s report, auditor’s report, copy of balance sheet, copy of P&L account, copy of bank account to prove the identity, genuineness and creditworthiness of cash creditors—AO made addition on basis of investigation conducted by ITO, but AO did not clarify what inquiry had been conducted and what evidences collected which had gone against assessee—Also although Notice u/s 131 was issued by ITO, Investigation were served in case of X and Y but compliance could not be made on given date because concerned officer was on leave—Copy of inquiry had not been provided by AO to assessee and Investigation Officer had not deputed Inspector to enquire whereabouts of company—Thus Order of CIT(A) was reversed—Assessee’s Appeal allowed on technical ground as well as on merit.

Ganga Projects (P) Ltd. and B.S. Traders (P.) Ltd. in ITA No. 175 & 176/JP/15 and 179/JP/15 and CO No. 15 & 16/JP/15 and 19/JP/15 order dated 22.06.2016

Hon’ble ITAT, Jaipur Bench in the similar facts of the case involving the same companies have deleted the addition (referred above).

Anchal Fintrade Pvt. Ltd. Vs. ITO in ITA No. 131/JP/16 for A.Y. 05-06

In this case also, where addition of Rs. 5 lacs was made on the basis of the information received from investigation wing, New Delhi that assessee was one of the beneficiary of the accommodation entry provided by S.K. Jain Group, the Hon’ble ITAT after elaborate discussion on Page 12-17 of the order after considering the decision of jurisdictional High Court in case of CIT Vs. Supertech Diamond Tolls Pvt. Ltd. 229 Taxman 460 and the

ITA 178/JP/2015 & C.O. 18/JP/2015_ 24 ITO Vs M/s Land Mark Dealers (P) Ltd. decision of Allahabad High Court in case of CIT Vs. Vacmet Packaging India Pvt. Ltd. 367 ITR 217 deleted the addition confirmed by CIT(A).

In view of above, the Ld. CIT(A) has rightly deleted the addition and thus the grounds of the department be dismissed.

The ld. AR has also relied on the recent decision of the Hon’ble ITAT, Jaipur

Bench in the case of ITO Vs M/s Alok Fintrade (P) Ltd. in ITA No.

180/JP/2015 order dated 14/5/2018 and in the case of M/s Choice

Buildstate Pvt. Ltd. Vs ITO in ITA No. 431/JP/2016 order dated 28/3/2018.

material available on the record. The Assessing Officer has treated the

share capital received from M/s SAM Portfolio Pvt.Ltd. as unexplained for

the reason that the company has not furnished Schedule-5 of the balance

sheet, which shows the details of investments. Only because Schedule-5 to

the balance sheet is not furnished by the company, the investment made

by it in the share capital of the assessee cannot be considered as

unexplained. This company has made investment in the share capital of the

assessee through J&K Bank. From this bank account, investment of Rs.

5,00,000/- made by it is fully verifiable. Even Aseem Gupta in his statement

while providing the list of entities providing the accommodation entries has

not stated that J&K Bank of SAM portfolio Pvt. Ltd. has been used by him

for providing the accommodation entries. Further in spite of the specific

request made by the assessee, the AO has not utilised his power under the

ITA 178/JP/2015 & C.O. 18/JP/2015_ 25 ITO Vs M/s Land Mark Dealers (P) Ltd. Act to enforce the attendance of the Director of the company. The assessee

was also not provided an opportunity to cross examine Sh. Aseem Kumar

Gupta who is alleged to have stated to provide accommodation entry. The

assessee has filed the share application form, confirmation and the bank

statement with regard to this company. Thus, assessee has discharged his

primary burden of proving the identity of the share applicant, genuineness

of the transaction and creditworthiness of the creditor. Thus, the share

capital money received from this company is fully explained. Similarly in

case of M/s KMC Portfolio Pvt. Ltd. the AO treated the share capital amount

as unexplained because in Annexure-3 of the Balance Sheet furnished by

the company which shows the details of the investments made in share

application money in different companies, the name of the assessee does

not appear. However, the AO has not made any further enquiry from the

company more particularly when the investment is verifiable from its bank

account. The assessee has filed the share application form and confirmation

regarding this company. The AO in spite of the request of the assessee has

not issued summon to the Director of this company for his personal

presence. The share capital amount received by assessee from M/s Ravnet

Solutions Pvt. Ltd. was treated as unexplained by the AO because the

company has not furnished Schedule-5 of the Balance Sheet which shows

the details of investments. Only because Schedule-5 to the Balance Sheet is

ITA 178/JP/2015 & C.O. 18/JP/2015_ 26 ITO Vs M/s Land Mark Dealers (P) Ltd. not furnished by the company, the investment made by it in the share

capital of the assessee cannot be considered as unexplained particularly

when such investment is verifiable from its bank account. The assessee has

filed confirmation and share application form. In spite of the request of the

assessee to the AO to issue summon to the director of this company for his

personal attendance, the same was not issued. In case of M/s S.G. Portfolio

Pvt. Ltd., the assessee had furnished the confirmation, share application

form and copy of bank account. From the statement of Sh.Aseem Kumar

Gupta, it has been verified that the bank a/c no. 5982, 247, 03, 4996 of

Corporation Bank and bank a/c no. 10400, 563 of J&K Bank was used by

him for providing accommodation entries whereas assessee has received

the amount from bank a/c no. 0241 of J&K Bank as evident from the bank

statement placed at page No.50 of the paper book. In these circumstances,

assessee has discharged his primary burden of proving the identity of the

share applicant, genuineness of the transaction and creditworthiness of the

creditor.In respect of ten companies mentioned at S.No. 5 to 14 of the

chart mentioned in earlier paragraphs, it has been stated that the assessee

has given the latest address available with him. This is proved from the fact

that the summons issued to them is not returned back unserved. The

assessee had furnished complete details to the AO regarding the

transactions in question, which include confirmation, share application

ITA 178/JP/2015 & C.O. 18/JP/2015_ 27 ITO Vs M/s Land Mark Dealers (P) Ltd. form, copy of bank account and their permanent account number. These

companies (except M/s Chhoti Leasing & Finance Pvt. Ltd.) are also not

covered in the list given by Sh. Aseem Gupta in his statement as being

used for providing accommodation entries. As per the statement of Shri

Aseem Gupta, the bank account no. 252 of Corporation Bank of M/s Chhoti

Leasing & Finance Pvt. Ltd. was used for providing accommodation entries

whereas assessee has received the amount from bank a/c no. 5043 on

08.09.2005 as evident from his bank statement placed at page No. 62 of

the paper book. By filing number of identity of these share applicants and

the assessee has specifically requested the Assessing Officer to enforce the

attendance of Director of these companies. The assessee has prima facie

discharged the onus on it. Further the statement of Shri Aseem Kumar

Gupta was not provided to the assessee and no opportunity to cross

examine was also given in spite of the specific request of the assessee.

Thus, not providing the opportunity to cross examine, there is a violation of

principles of nature justice. The Hon'ble Supreme Court in the case of

Andaman Timber Industries Vs. CCE (supra) has clearly 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. The Hon’ble Allahabad High Court in the case

of CIT Vs. Vacmet Packaging (India) Pvt. Ltd. (supra) has held as under:

ITA 178/JP/2015 & C.O. 18/JP/2015_ 28 ITO Vs M/s Land Mark Dealers (P) Ltd. “The assessee undoubtedly had to discharge the onus of establishing the identity and credit worthiness of the applicant companies and the genuineness of the transaction. In this regard, both the CIT(A) and the Tribunal had noted that the assessee had established all the three aspects by producing, during the course of the assessment, necessary documentary material such as the share application forms, copies of bank accounts, income tax returns and balance sheets. The view which was taken by the CIT(A) and which was sustained by the Tribunal would thus have to be regarded as being, at least, a possible view to take in the circumstances of the case.”

Similarly in the case of ACIT Vs. VIP Growth Fund Pvt. Ltd. (supra), the

ITAT, Delhi Bench has held as under:

Facts of the case

In this case, the assessee filed its return of income declaring certain income. Scrutiny assessment u/s 143(3) was made on 28.02.2006. In the course of the said proceedings, the details of share application money/share capital were furnished. The AO received information from the Investigation Wing of the Department, that the companies / persons which contributed towards share application money / share capital were involved in providing accommodation entries. In view of the specific information, the AO initiated action u/s 148 and completed the assessment disbelieving a part of share application money/share capital of Rs. 40,00,000/-.

Findings of the case

The Hon’ble ITAT affirmed the findings of the Ld. CIT(A) who deleted the addition by holding that nothing adverse was found in the details of share application money/share capital furnished by the assessee in the course of assessment proceedings. The AO has not verified the details furnished by the assessee and I.T. records of the shareholders/investing companies. The assessee has discharged its burden of providing basic details which were required for verification to fulfill the conditions viz. identity of the creditor, credit worthiness of the creditor and genuineness of transaction. The assessee has provided necessary details including the ward/circle where the share applicants/ investing companies were assessed to income tax and discharged the onus cast on it. All the amounts were received, through banking channels by way of cheques issued in favour of the appellant company towards share application money. The shares were allotted as per the documents furnished before ROC. The assessee has produced possible/best evidence to support its claim. The AO has simply acted on the information received from the Investigation Wing without verifying the details furnished by the assessee company and also not placing before the assessee the information and findings of the Investigation Wing violating the principles of natural justice. If there is any discrepancy in the books of accounts maintained by the investing companies, there is a

ITA 178/JP/2015 & C.O. 18/JP/2015_ 29 ITO Vs M/s Land Mark Dealers (P) Ltd. case for reopening of the assessment of the respective shareholders/investing companies. The assessee cannot be penalized for the mistakes/faults committed by the share holders. The AO has not found any discrepancy in the books of account and bank accounts maintained by the assessee.

The Hon’ble Rajasthan High Court in the case of CIT Vs. Supertech

Diamond Tools Pvt. Ltd. (supra) has held as under:

“AO made addition u/s 68 on account of amount received for share capital, its premium and amount paid as commission for arranging it on basis of statement made by third parties who were related to purchasing companies stating that these companies were engaged in providing accommodation entries in lieu of commission. It was held that the said third party statement was made behind back of assessee and no opportunity of being heard or cross-examining third parties was provided to assessee. Further, AO could not bring any material to disapprove genuineness of confirmation and affidavits filed by assessee. All transactions were through account payee cheques. All these companies had PAN numbers, were regularly assessed to tax, were registered under Companies Act and Form No.2 for allotment was also filed. Therefore, appellate authorities have rightly deleted the addition.

The ITAT, Delhi Bench in the case of ITO Vs. Rakam Money Matters P. Ltd.

(supra) has held as under:

“In this case, return of income was submitted declaring certain income. The case was reopened u/s 148 of the IT Act, 1961 on the basis of information received from the investigation wing that assessee has received accommodation entries by way of share application money from certain companies. The AO required the assessee to prove the genuineness of the share application money received by it. In response to same, the assessee filed details in the form of share application form, PAN, affidavit of the directors of shareholder companies, confirmation, bank statement etc. The AO, however, held that as assessee has not produced the director of the companies from whom the share application money has been received, it has failed to discharge its onus to prove the genuineness of the share application and accordingly made addition u/s 68 of the IT Act, 1961. The Ld. CIT(A) observed that assessee company has filed all the necessary details which include copies of share application form, copies of bank statements, copies of income tax returns, copies of PAN cards, balance sheet, copy of Certificate of Incorporation and Memorandum of Articles of Association of the companies, that the status of these companies is ‘active’ on the ROC Website and that the opportunity of cross examination was not provided to the appellant in respect of the allegation of the Investigation Wing. Thus, on the basis of the above facts and by relying upon the various judgments, the Ld. CIT(A) held that assessee has discharged its onus and accordingly deleted the addition. The Hon’ble ITAT held as under:- 13. We have heard both the parties. The only issue here is the addition of Rs.60 lacs made by the Assessing Officer as unexplained credit on account of the share application

ITA 178/JP/2015 & C.O. 18/JP/2015_ 30 ITO Vs M/s Land Mark Dealers (P) Ltd. money. On going through the facts of the case, we notice that assessee has filed the relevant details which it could have filed in support of its contention of having received the share application money from each of these shareholder companies.

The Coordinate Bench of ITAT, Jaipur Bench in the case of Jadau Jewellers

& manufacturing (P) Ltd. Vs. ACIT (supra) has held as under:

“Assessee was engaged in business of trading and manufacturing of jewellery—Search and seizure operation was carried by department u/s 132 and survey u/s 133A was made on Members of ’X’ of which Assessee was one of Members—AO issued notice u/s 153A and Assessee was asked to file true and correct return of income as prescribed under r 12 of the Income Tax Rules, 1962—In return of income filed in response to notice u/s 153A no disclosed income pertaining to relevant year was declared by Assessee—AO observed that during year under consideration, assessee showed total turnover of Rs. 2.05 crores on which assessee returned a net loss of Rs. 13,29,220—AO observed that assessee had obtained share capital and share application money from

ITA 178/JP/2015 & C.O. 18/JP/2015_ 31 ITO Vs M/s Land Mark Dealers (P) Ltd. various companies—AO held that amount received from stated companies in form of share capital was only accommodation entries and genuineness of Share capital received by assessee company could not be accepted—AO passed Order u/s 153 and made addition of Rs. 60,00,000 on account of alleged unexplained share capital received by assessee company from following persons—CIT(A) upheld addition made by AO— Held, AO could issue notice u/s 143(2)—In assessee’s case, search was conducted on 06/5/2010 and AO issued notice on 16/09/2011 u/s 153A read with s 143(2)—During course of search, no incriminating documents were found therefore, no notice could be issued u/s 153A read with s 143(3) because no proceeding was pending before AO which abated for issue of notice on date of initiation of search—Thus, on technical ground, order passed u/s 153A read with s 143(3) was held void ab initio—Further Assessee before AO had produced copy of share application, confirmation of cash creditors, copy of PAN, copy of Board resolution, copy of Director’s report, auditor’s report, copy of balance sheet, copy of P&L account, copy of bank account to prove the identity, genuineness and creditworthiness of cash creditors—AO made addition on basis of investigation conducted by ITO, but AO did not clarify what inquiry had been conducted and what evidences collected which had gone against assessee—Also although Notice u/s 131 was issued by ITO, Investigation were served in case of X and Y but compliance could not be made on given date because concerned officer was on leave—Copy of inquiry had not been provided by AO to assessee and Investigation Officer had not deputed Inspector to enquire whereabouts of company—Thus Order of CIT(A) was reversed—Assessee’s Appeal allowed on technical ground as well as on merit.”

Similar view has also been affirmed by the ITAT, Jaipur Bench in its order

dated 22/06/2016 in the case of Ganga Projects (P) Ltd. and B.S. Traders

(P) Ltd. (supra) and Anchal Fintrade Pvt. Ltd. Vs ITO (supra). The

Coordinate Bench of ITAT, Jaipur in the case of ITO Vs. M/s Alok Fintrae

(P) Ltd. vide order dated 14/05/2018 has decided as under:

ITA 178/JP/2015 & C.O. 18/JP/2015_ 32 ITO Vs M/s Land Mark Dealers (P) Ltd. 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 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

ITA 178/JP/2015 & C.O. 18/JP/2015_ 33 ITO Vs M/s Land Mark Dealers (P) Ltd. 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 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 178/JP/2015 & C.O. 18/JP/2015_ 34 ITO Vs M/s Land Mark Dealers (P) Ltd. 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 178/JP/2015 & C.O. 18/JP/2015_ 35 ITO Vs M/s Land Mark Dealers (P) Ltd. “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.”

The ITAT, Jaipur Bench in the case of M/s Choice Buildstate Pvt. Ltd. Vs.

ITO in ITA No. 431/JP/2016 order dated 28/03/2018 has held as under”

“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,

ITA 178/JP/2015 & C.O. 18/JP/2015_ 36 ITO Vs M/s Land Mark Dealers (P) Ltd. 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 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

ITA 178/JP/2015 & C.O. 18/JP/2015_ 37 ITO Vs M/s Land Mark Dealers (P) Ltd. jurisdiction under section 147 in the instant case. In the result, ground no. 1 of the assessee's appeal is hereby dismissed.

ITA 178/JP/2015 & C.O. 18/JP/2015_ 38 ITO Vs M/s Land Mark Dealers (P) Ltd. 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 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.

Therefore, considering the totality of the facts and circumstances of the

case, we dismiss the appeal of the revenue.

ITA 178/JP/2015 & C.O. 18/JP/2015_ 39 ITO Vs M/s Land Mark Dealers (P) Ltd. 9. Since we have dismissed the appeal of the revenue on merit,

therefore, the C.O. filed by the assessee becomes academic and the same

is hereby dismissed.

assessee are dismissed.

Order pronounced in the open court on 08/06/2018. Sd/- Sd/- ¼fot; iky jko½ ¼Hkkxpan½ (VIJAY PAL RAO) (BHAGCHAND) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 08th June, 2018 *Ranjan आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- The ITO, Ward-2(2), Jaipur. 1. izR;FkhZ@ The Respondent- M/s Land Mark Dealers (P) Ltd., Jaipur. 2. vk;dj vk;qDr@ CIT 3. vk;dj vk;qDr¼vihy½@The CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 178/JP/2015 & C.O. 18/JP/2015) 6.

vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत