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Income Tax Appellate Tribunal, MUMBAI BENCHES “F”, MUMBAI
Before: Shri Rajesh Kumar & Shri Ram Lal Negi
O R D E R Per Rajesh Kumar, Accountant Member
The Revenue is in appeal against the order of the CIT(A) -9, Mumbai, dated 16.01.2017, for A.Y. 2007-09, which in turn arises out of the order of assessment passed u/s. 143(3) r.w.s. 147 of the Income Tax Act, 1961. The assessee is also before us with its cross-objections.
CO 45/Mum/2019 VHM Apparels P Ltd.
We shall first take up the appeal of the Revenue, wherein it has challenged the deletion of the addition of Rs. 2,10,00,000/- by the CIT(A) as made by the AO towards bogus share application money as unexplained cash credit u/s. 68 of the Act. The facts in brief are that the assessee filed its return of income on 28.10.2007 declaring total income at ‘Nil’, which was processed u/s. 143(1) on 26.03.2009.
Thereafter, the AO received information from DDIT (Inv)-III(2), Mumbai, that the assessee is beneficiary of hawala accommodation entries in the form of share application money, which came to the notice of the department during the Search & Seizure action on Shri Praveen Kumar Jain and its associate concern on 01.10.2013.
Accordingly, the AO, after recording the reasons, reopened the case of the assessee u/s. 147 of the Act by issuing notice, dated 26.03.2014, u/s. 148 of the Act. The assessee replied to the notice on 22.07.2014 to treat the original return as return in compliance with the notice u/.s. 148 of the Act. The AO, thereafter issued notice u/s. 143(2) and 142(1) dated 18.08.2014 calling upon the assessee to furnish details of share application money. The assessee responded to the notice issued by the AO vide letter dated 17.10.2013, objecting to the addition by way of share application money. The AO submitted that assessee has, in fact, allotted shares to various entities and furnished copies of bank statements, share application, Memorandum of Articles of Association of the investors as per the details below:
Sr No. Name of the hawala entry operator Amount 1 Alka Diamond Industries Ltd. 2000000 2 Javda India Impex Ltd. 2500000 3 Nakshtra Business P Ltd. (Hema Trading 3000000 Co. P Ltd.) 4 Kush Hindustan Entertainment Ltd. 2500000 5 Olive Overseas P Ltd 2500000
CO 45/Mum/2019 VHM Apparels P Ltd.
6 Lexuz Infotech Ltd. 2500000 7 Vanguard Jewels Ltd. 2500000 8 Yash V Jewels Ltd. 3500000 The AO on the basis of information furnished by the assessee in the form of PAN, Bank Statements, Balance Sheet etc., came to the conclusion that the assessee has obtained accommodation entries by way of share application money from eight parties mentioned at Sr. No. 1 to 8. The AO held that these concerns were operated by Shri Praveen Kumar Jain, who is an alleged hawala operator providing accommodation entries in the form of share application money, Long term capital gain and bogus unsecured loans, bogus sales etc., and, therefore, show cause notice was issued to the assessee. Finally the AO treated the share application money amounting to Rs 2,10,00,000/- received from the eight parties as non- genuine and added the same as unexplained cash credit u/s. 68 of the Act.
In the appellate proceedings, the learned CIT(A) allowed the appeal of the assessee by holding that the assessee has filed all necessary evidences in the form of copies of Certificate of incorporation, Memorandum and Articles of Association, Share Application forms, Board resolution of the subscriber companies, Income tax returns, affidavits of the share holders, etc., which prove the genuineness and creditworthiness of the subscriber companies. The learned CIT(A) further held that the AO has not bothered to carry out any investigations despite the assessee having filed all necessary documents of the investors.
The learned AR, at the outset, submitted before the Bench that the issue involved in the present case of share application money is squarely covered by in CO 45/Mum/2019 VHM Apparels P Ltd.
favour of the assessee by the decision of the Co-ordinate Bench in the case of Ambee Investment & Finance Pvt. Ltd. vs. Income Tax Officer in ITA Nos.
3899/Mum/2017 for A.Y. 2007-08 dated 08.02.2019. He further drew our attention to para no.3 of the said order and submitted that the investors in the said case viz.
Olive Overseas Pvt. Ltd., Nakshatra Buisness Pvt. Ltd., Javada India Impex Ltd. and Lexus Infotech Ltd. and Kush Hindustan Entertainment Ltd. are the same who have also invested in the assessee company. The learned AR further submitted that in the present case the assessee has filed all necessary evidences in the form of copies of Certificate of Incorporation, Memorandum and Articles of Association, Share application forms, Board Resolutions of subscriber companies making investments, acknowledgement of income tax returns of subscriber companies along with their sworn affidavits, bank account statements, PAN, share allotment forms etc., to prove the creditworthiness and genuineness of the investors However, the AO has not bothered to issue notice u/s. 133(6) and has merely relied on the statement of Shri Praveen Kumar Jain. The learned AR also submitted that Shri Praven Kumar Jain, whose statement was primarily made the basis for making the addition was neither the share holder nor the Director in the investor companies. Moreover, the statement by Shri Praveen Kumar Jain has been retracted and, thus, has no evidentiary value. The learned AR submitted that no cross examination of Shri Praveen Kumar Jain was allowed to the assessee despite being specifically requested. Finally, the AR submitted that the issue being covered in favour of the assessee the appeal filed by the Revenue may kindly be dismissed.
CO 45/Mum/2019 VHM Apparels P Ltd.
The learned DR, on the other hand, has relied on the grounds of appeal and the order of the AO. He primarily relied on the fact that Shri Praveen Kumar Jain is a hawala operation and along with his associate concern is in the business of providing accommodation entries and the assessee is apparently a beneficiary of these entries and therefore, prayed before the Bench that the order passed by the AO has to be restored. The learned DR relied on the decision of the Hon’ble Delhi High Court in the case of CIT vs. Jansampark Advertising & Marketing (P) Ltd. 56 taxmann.com 286 (Del).
We have heard both the parties and perused the material available on record.
In this case the assessee has received share application money from eight entities aggregating to Rs 2,10,00,000/-. The assessee has filed necessary evidences, as stated hereinabove, qua the said subscribers/investors. We further note that the AO has not carried out any further investigations or enquiries to find out whether these investors were genuine or not. The CIT(A) has noted specifically that the assessee has discharged the onus cast upon it by filing all necessary evidences to prove identity , creditworthiness of the investors and genuineness of the transactions. Moreover, the perusal of the financial data of the investors we observe that the investors had sufficient resources to invest in the assessee company and, therefore, we do not find any reason to interfere in the order of the CIT(A). The case of the assessee is also supported by the decision of the co- ordinate Bench in the case of Ambee Investment & Finance Pvt. Ltd. vs. Income Tax Officer (supra), wherein the five investors are common as has been stated in para no.3 of the said order. The operative part of the said order is reproduced below:
CO 45/Mum/2019 VHM Apparels P Ltd.
8. We have gone through the assessment order and the order of CIT(A) and noted that the AO noticed from the Bank Account submitted by the assessee that these are non-genuine transactions. The entire basis of the AO was on the investigation done by the office of DGIT Investigation, Mumbai. From the above assessment order, it is clear that the AO has not made any enquiry or investigation and no evidence to controvert the factual details submitted by the assessee was brought on record by the Assessing Officer. The statement of Shri Pravin Kumar was supplied and no cross-examination was provided. There nothing on record about the result of investigation having done by the DGIT (Investigation), Mumbai. The papers filed by the assessee clearly demonstrate that the identity, creditworthiness and genuineness of the transaction is proved. The assessee has prima facie discharged its onus and AO has not carried out any inquiry. In view of the above, we confirm the order of CIT(A) and this issue of Revenue’ s appeal is dismissed. The facts of the case of the assessee are identical to that as decided by the co- ordinate Bench. Therefore, respectfully following the said decision, we uphold the order of the CIT(A) and dismiss the appeal of the Revenue.
Since the appeal of the Revenue is dismissed, the cross-objection filed by the assessee challenging the re-opening is not being adjudicated and is being dismissed as such.
In the result, the appeal by the Revenue and the Cross-objection by the assessee is dismissed.
Order pronounced in the open court on this day of 09th September, 2019.