M/S AERENS PROJECTS & INFRASTRUCTURE PVT. LTD.,,GURGAON vs. ACIT, NEW DELHI

For the sake of convenience, these were heard together and are being disposed of by this common order.

First we take up A.Y. 2006-07. Facts of the case, in brief, are that a search and seizure operation u/s 132/133A of the Income- tax Act, 1961 were conducted on 17th August, 2011 in the case of the assessee along with other cases of the Aerens group at various residential and business premises. In response to notices u/s 153A, the assessee filed its return of income declaring total income at Rs.8,64,811/-. During the course of search, it was found that the company has shown receipt of Rs.4.85 crores as share capital and share premium in F.Y. 2005-06 relevant for the impugned assessment year. The AO asked the assessee to prove the genuineness of the transaction and credit worthiness of the parties. Rejecting the various explanations given by the assessee, the AO made addition of Rs.4.85 crores to the total income of the assessee and determined the total income at Rs.4,93,64,811/-. In appeal, the ld.CIT(A) upheld the action of the AO.

The appellant craves the leave to add, substitute, modify, delete or amend all or any ground of appeal either before or at the time of hearing.”

The ld. Counsel for the assessee, at the outset, submitted although complete details were filed before the lower authorities, however, they have not considered the same properly and have made the addition. Further, despite request by the assessee, no opportunity to cross-examine the persons who have admitted to have received cash amounts from time to time from the assessee for providing accommodation entries in the form of share capital and share premium to the assessee were provided. Further, proper representation was not made before the CIT(A) for which the addition was sustained. He accordingly submitted that in the interest of justice the matter should be restored to the file of the AO for giving one final opportunity to the assessee to substantiate its case. to 4996/Del/2016 ITA No.8231/Del/2018

The ld. DR, on the other hand, strongly supported the order of the CIT(A) and submitted that the share capital and share premium were received from known entry providers and despite opportunities granted by the Revenue authorities, the assessee failed to discharge the onus cast on it. Therefore, the addition made by the AO and sustained by the CIT(A) should be upheld. Referring to the following decisions, the ld. DR submitted that the order of the CIT(A) being in accordance with law, should be upheld:-

We have considered the rival arguments made by both the sides, perused the orders of the authorities below and the paper book filed on behalf of the assessee. We have also considered the various decisions relied on by both the parties. We find the AO, in the instant case, made addition of Rs. 4.85 crores being the share capital and share premium received from 34 companies wherein the share of Rs.10/- was issued at a premium of Rs.190/- and the assessee failed to discharge the onus cast on it by proving the ingredients of section 68 of the Act. We find the to 4996/Del/2016 ITA No.8231/Del/2018 ld.CIT(A) upheld the action of the AO. It is the submission of the ld. Counsel for the assessee that the assessee has filed various documents to substantiate the identity and credit worthiness of the share applicants and genuineness of the transactions. It is to be noted here that the decision of the Hon’ble Supreme Court in the case of PCIT vs. NRA Iron & Steel (supra) and the decision of the Hon’ble Delhi High Court in the case of NDR Promoters Pvt. Ltd. (supra) were pronounced subsequent to the orders passed by the lower authorities. Neither the assessee nor the Revenue had the benefit of these two decisions wherein the issue of share capital at high premium to bogus companies have been elaborately discussed. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the AO with a direction to give one final opportunity to the assessees to substantiate its case by producing the directors of the investor companies for recording of their statements and produce evidence to the satisfaction of the AO regarding the identity and credit worthiness of the investor companies and the genuineness of the transaction. The AO shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee are allowed for statistical purposes. , 4995 & 4996/Del/2016 (A.Ys 2008-09, 2010-11 & 2011-12)

We take up as the lead case. to 4996/Del/2016 ITA No.8231/Del/2018

The grounds raised by the assessee are as under:-

Facts of the case, in brief, are that the assessee in response to notice u/s 153A filed its return of income declaring loss of Rs.35,94,413/- and claiming the loss to be carried forward at Rs.38,13,260/-. During the course of assessment proceedings, the AO noted that the assessee has received bogus advances against properties from Calcutta based paper companies during the year. He noted that during the course of search proceedings and subsequent to the search, enquiries were made and it was noticed that various companies of Aerens group have been found to have taken accommodation entries in the form of share capital from several bogus companies which are bogus/paper/briefcase/non-existent companies and no actual business is carried out by them. These companies are just used as a medium to utilize the unaccounted money of the assessee and after circulating through many channels, the same is brought back to the books in the form of share capital. He further noted that on the basis of such enquiries addition to the tune of Rs.104 crores on account of bogus share capital and premium were made in Assessment Year 2008-09, 2010-11 and 2011-12. He noted that the assessee company has received advance against properties from Calcutta based companies as under:- S. Name of assessee Name of Investing Company F.Y. Amount (Rs.) No. company 1. M/s Aerens Project & M/s Lokpriya Trade & Agency 2007-08 18,75,00,000 Infrastructure Pvt. Pvt. Ltd. Ltd. 2. - do- M/s Rejoice Vyapaar Pvt. Ltd. 2009-10 9,80,00,000 3. -do- M/s Kusum Vanijya Pvt. Ltd. 2010-11 2,00,00,000 4. -do- M/s Everest Vinimay Pvt. Ltd. 2007-08 7,19,50,000 Total 49,97,47,500 8 to 4996/Del/2016 ITA No.8231/Del/2018

He referred to the statement of Mr. Deepak Patwari, Mr. Amit Kumar Dhandhaniya and Mr. Jai Dev Dukaniya who are the entry operators of the companies from whom the assessee has received advance and issued show cause notice to the assessee to explain as to why the bogus advance received should not be added to the total income of the assessee. The request of the assessee to cross- examine the persons whose statements were recorded and utilized against the assessee was rejected by the AO on the ground that all these companies were investors of the assessee company and the persons concerned are directly related to the assessee company and instead of requesting the Department for cross- examination, the assessee could have produced the directors of the above mentioned bogus companies in its support which it has failed to do. Rejecting the various explanations given by the assessee, the AO made addition of Rs.25,94,50,000/- to the total income of the assessee for A.Y.2008-09. Similarly, for A.Y. 2010-11, the AO made addition of Rs.9,80,00,000/- and for A.Y. 2011- 12, he made an addition of Rs.2 crore. In appeal, the ld.CIT(A) upheld the action of the AO.

Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal.

The ld. Counsel for the assessee, at the outset, submitted that despite the request of the assessee, cross examination of the persons whose statements were recorded and which is the basis for making the addition, was never allowed. 9 to 4996/Del/2016 ITA No.8231/Del/2018 Further, there was no proper representation before the CIT(A) for which the matter should be restored to the file of the AO or the CIT(A) as the Bench deems proper. He submitted that during the course of assessment proceedings, the assessee has filed various details to substantiate the genuineness of the advance received from the parties and their credit worthiness. However, all these details were ignored by the lower authorities. He accordingly requested that in the interest of justice the matter may be restored to the file of the CIT(A) or the AO.

The ld. DR, on the other hand, strongly supported the order of the AO and the CIT(A) and submitted that delay tactics adopted by the assessee has been mentioned by the AO in the body of the assessment order. He submitted that all these companies who have given advances to the assessee company were clearly proved as bogus/non-existent/briefcase/paper companies and the directors are close persons of the assessee company and, therefore, instead of producing them to support its case the assessee is arguing before the AO to provide it an opportunity to cross-examine them. He, however, submitted that he has no objection if the matter is restored to the file of the AO with some specific direction.

We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We find the AO, in the instant case, made addition of Rs.25,94,50,000/- for A.Y. 2008-09, Rs.9,80,00,000/- for A.Y. 2010-11 and Rs.2 crore for A.Y. to 4996/Del/2016 ITA No.8231/Del/2018 2011-12 on the ground that the assessee was unable to substantiate with evidence to his satisfaction regarding the identity and credit worthiness of the companies who have given advance against property and the genuineness of the transaction. We find the ld.CIT(A) has upheld the action of the AO for all the three years. It is the submission of the ld. Counsel for the assessee that despite the request made by the assessee to cross-examine the persons whose statements were recorded and which is the basis for making the addition, the same was not granted. Further, there was no proper representation before the CIT(A) for which he also could not appreciate the facts properly and, therefore, the assessee should be given an opportunity to substantiate its case. We find some merit in the above arguments of the ld. Counsel for the assessee that there was no proper representation before the CIT(A). A perusal of pages 18 to 25 of the impugned order reveals that the ld. CIT(A) has discussed about the non-appearance of the assessee before him and referred to various case laws to the effect that where an assessee does not appear the appeal should be dismissed. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issues to the file of the AO with a direction to give one final opportunity to the assessees to substantiate its case to the satisfaction of the AO by producing the directors of the above companies who have given advances to the assessee for purchase of properties and substantiate their identity and credit worthiness. The AO shall decide the issue as per fact and law after giving due opportunity of being heard to to 4996/Del/2016 ITA No.8231/Del/2018 the assessee. We hold and direct accordingly. The grounds of appeal raised by the assessee in 4995 & 4996/Del/2016 are accordingly allowed for statistical purposes.

The grounds raised by the assessee are as under:-

The facts of the case, in brief, are that the assessee filed its return of income on 30th September, 2015 declaring nil income, after adjusting brought forward losses of Rs.35,849/-. During the course of assessment proceedings, the AO noticed from the P&L Account of the assessee that the assessee has claimed an amount of Rs.44,41,958/- as interest on unsecured loans. On being asked by the AO to furnish the details, i.e., the purpose for which interest was paid with details to 4996/Del/2016 ITA No.8231/Del/2018 of persons to whom paid, etc., there was no proper compliance from the side of the assessee. The assessee did not furnish any supporting evidence for its claim, i.e., details of utilization of loan and how the loans were utilized for the purpose of business. Since the assessee could not furnish requisite documents to the satisfaction of the AO, the AO made an addition of Rs.44,41,958/- to the total income of the assessee. In appeal, the ld.CIT(A) upheld the action of the AO since despite service of notice no one appeared before him. While doing so, he relied on the decision of the Hon’ble Supreme Court in the case of B.N. Bhattacharjee & Anr, 118 ITR 461 and he has not decided the appeal on merit.

Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal.

We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We find the ld.CIT(A) while dismissing the appeal filed by the assessee, has not decided the issue on merit. As per the provisions of section 250(4) and 250(6), the ld.CIT(A) is supposed to make further enquiry as he thinks fit or direct the AO to make further enquiry. While disposing of the appeal, he shall pass the order in writing and shall state the points for determination, the decision thereon and the reason for the decision. Even though the assessee has not appeared before him, the ld.CIT(A) cannot dismiss the appeal for want of prosecution and he is to 4996/Del/2016 ITA No.8231/Del/2018 supposed to pass a speaking order on merit. Since, in the instant case, the ld.CIT(A) has failed to follow the law, therefore, we deem it proper to restore this issue to the file of the CIT(A) with a direction to pass a speaking order on this issue after giving an opportunity to the assessee to substantiate its case. The assessee is also hereby directed to appear before the CIT(A) and cooperate in completion of the hearing without seeking adjournment under any pretext, failing which the ld.CIT(A) is at liberty to pass appropriate order as per law. We hold and direct accordingly. The grounds of appeal raised by the assessee are accordingly allowed for statistical purposes.