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Before: Shri H.S. Sidhu & Shri L.P. Sahu
ORDER Per L.P. Sahu, A.M.: This is an appeal filed by the assessee against the order dated 13th June 2013 passed by the CIT(A)-XI, New Delhi for the assessment year 2005-06 on the following grounds :
1. That on the facts and circumstance of the case and in law, the Commissioner of Income-tax (Appeals)-Xi, New Delhi [briefly “the CIT(A)”] has erred in upholding the reopening of assessment under section 147 of the Income tax Act, 1961 (briefly “the Act”).
2. That on the facts and circumstances of the case and in law, the CIT(A) has erred in not appreciating that that there was no application of mind to the alleged information received from Investigation Wing that the assessee was amongst the beneficiaries of the bogus accommodation entries. There was no tangible material to reopen the assessment.
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3. That on the facts and circumstances of the case an in law, the CIT(A) has erred in not appreciating that the proviso to section 147 of the Act was applicable inasmuch as notice u/s 148 of the Act has been issued after the expiry of four years from the end of assessment year and that there was no failure on the part of the assessee to disclose fully and truly material facts necessary for the assessment.
4. That on the facts and circumstances of the case and in law, the CIT(A) has erred in upholding the assessment at total income of Rs. 1,04,36,156/-, as against returned loss of Rs. 13,844/-. The Appellant denies its liability to be assessed at income of Rs. 1,04,36,156/-.
5. That on the facts and circumstances of the case and in law, the CIT(A) has erred in confirming the addition of Rs. 1,04,50,000/- under Section 68 of the Act, as bogus accommodation entry.”
Briefly stated, the facts of the present case are that the assessee filed its return of income declaring loss of Rs.13,844/-. The AO received information from Additional DIT (Inv.), Unit-IV, New Delhi that one Mr. Tarun Goyal has floated about 90 companies for the purpose of providing accommodation entries to various beneficiaries without making actual business transactions.
Since the name of the assessee figured in the list of beneficiaries, the AO reopened the assessment by issuing notice under Section 148 on 28.03.2012.
In response, the assessee stated that the return filed originally be treated as the return filed in compliance to notice u/s. 148. On examination of balance sheet, the Assessing Officer observed that during the year the assessee company had received share application money amounting to Rs.1,04,50,000/- from 15 parties as detailed in the assessment order. During
ITA No. 5114/Del./2014 3 the course of hearing, the AO asked the assessee to submit the details about the share capital received by it. The assessee filed the details and explanation from time to time. Being not satisfied with the reply of the assessee, the AO made addition of 1,04,50,000/- received by the assessee during the year from 15 shareholders under section 68 of the IT Act. The assessee carried the matter before the ld. CIT(A) and challenged the reassessment order both on legal aspect and merits of the addition. The CIT(A) by order dated 13th March 2014 upheld the reopening of assessment and also confirmed the addition made by the AO. The assessee aggrieved by the above order of the CIT(A) is in appeal before the Tribunal.
It was contended by the learned AR that the addition made by the AO is unjustified. In this regard, the learned AR invited our attention to the Paper Book comprising of 103 pages regarding the documents on record with the AO. It was contended that assessee has filed the original return on 29th October, 2005. The said return was accompanied with audited Balance Sheet and Profit and loss account. The case was taken up for scrutiny by issue of notice under Section 143(2). The learned AO issued a detailed questionnaire on 30th August 2006 as per the notice issued under Section 142(1) placed at PB. Pg. 15-16 where the AO asked the assessee to furnish the details of the share application money amounting to AR. 1,04,50,000/-. The AO has asked
ITA No. 5114/Del./2014 4 specifically 8 documents which included name and address, income tax return, bank account, details of share issue and distinctive number, shareholder register, mode of payment and bank account of the company. The assessee duly complied the requirement of the AO and the AO being satisfied passed the assessment order dated 30th March 2007. On this basis it was contended that all the documents relating to share capital were part of the assessment record and therefore, the addition made in re-assessment made on the same issue which stood properly considered in original assessment proceedings, is not justified without considering the documentary evidences which were already on assessment records.
It was further contended by the learned AR that the assessee during the course of reassessment proceeding has attended the proceedings and has filed necessary details. It was further contended that the learned AO has made independent enquiries from each of the shareholder during the reassessment proceedings as is evident from the page 3 of the order of Assessing Officer.
The replies have been received from each of the shareholder along with the copy of the bank statement showing the relevant entry. This fact has been duly stated by the Assessing Officer. The Assessing Officer was wrong in drawing adverse inference having obtained confirmation directly from each of the shareholder as is evident from the assessment order, merely on the basis
ITA No. 5114/Del./2014 5 that from the bank statement, the source of funds could not be ascertained. In this regard it was pointed out that in case the AO was not satisfied with the reply received directly from the shareholders he could have sought clarification further. As per provisions of law, the assessee company is required only to prove the source of the funds and not the source of source of funds. Each of the shareholder having acknowledged to have contributed to the share capital of the company the onus of the assessee company stood discharged.
As regards the allegation of the AO regarding accommodation entries from Mr. Tarun Goyal, on the basis of which the assessment was opened, it was contended by the learned AR that the AO after mentioning casually in the first page of the order about accommodation entries has nowhere discussed and pointed out the allegation against the assessee. In this regard, attention was invited to the assessment order to demonstrate that there is no discussion about the documents and the contents thereof; and that there is no mention of any statement. It was further contended that the learned AO was not correct in relying upon the judgment of M/s Nova Promoters and Finlease, M/s Neelkanth Ispat Udyog. The learned AR invited attention to para 35 and 38 of the Judgment in the case of Nova Promoters and Finlease where the court has categorically held that AO is not justified to reject the explanation
ITA No. 5114/Del./2014 6 and evidences of the assessee without carrying out any investigation or enquiry into the material placed before him. The present case squarely falls in the exception provided in the Nova Promoter’s case. It was submitted that the assessee has placed all the documents. The assessment order clearly demonstrate that the AO has not even bothered to look at the original record of assessment proceedings under Section 143(3) where the assessee has submitted each and every details including Bank account of each of the shareholders. It was further submitted that the ld. CIT(A) has confirmed the additions made by the AO relying upon the judgment in the case of M/s Nova Promoters and Finlease Pvt. Ltd. and M/s Neelkanth Ispat Udyog Pvt. Ltd. which are not applicable to the facts of the present case, but in fact support the case of the assessee. The ld. CIT(A) has ignored the fact that it is a case where assessee has led all the evidences as is evident from the record and the Assessing Officer having made enquiry independently from each of the shareholder, nothing adverse has come against the assessee. The learned AR placed reliance on the following judgments in support of its contention :
(i). CIT v. Laxman Industrial Resources Pvt. Ltd. in dated 14.03.2017. (ii). CIT v. Best Infrastructure India Pvt. Ltd. [2017] 392 ITR 82, where also the allegation was of accommodation entry from Tarun Goyal. (iii). CIT v. Rakam Money Matters Pvt. Ltd. in ITA No. 778 of 2015 of 2015 dated 13.10.2015. (iv). CIT v. Fair Finvest Ltd. [2013] 357 ITR 146
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(v). CIT v. Vrindavan Farms (P) Ltd. in 72, 85/D/2015, vide order dated 12.08.2015 (vi). ITO v. Softline Creations (P.) Ltd. in ITA No. 744/Del/2012 dated 10.02.2015 which has been further upheld by the High Court in ITA No. 504/2016 dated 31.08.2016. (vii). DCIT v. AVS Investment Pvt. Ltd. in ITA No. 5302/Del/2016 dated 03.01.2017
The ld. DR, on the other hand, submitted that in this case the AO was not satisfied with the explanation and the documents submitted by the assessee, he was well within his rights to make the above addition. It was contended that assessee has received accommodation entries from Mr. Tarun Goyal as alleged by the AO for reopening of the assessment, the onus was upon assessee to rebut the same. As regards the contention of the learned AR that assessee has submitted all the documents in respect of each of the shareholder and the AO has also made independent enquiry where he has received reply from each of the shareholders, it was submitted that though these facts are on record as is evident from the assessment order, considering the allegation of accommodation entries, it will be appropriate that the matter be set aside to the file of Assessing Officer for carrying out detailed enquiry.
We have considered the rival submissions and also perused the entire material available on record including the orders passed by the authorities below. It is notable that the AO has made an addition of Rs. 1,04,50,000/- on account of the share capital received by the assessee company during the ITA No. 5114/Del./2014 8 year by resorting to the provisions of section 147 of the IT Act. It is the case of the AO that these entries are accommodation entries. Further we note that the original assessment in this case was made under Section 143(3) vide order dated 30th March 2007. During the original assessment, the AO has raised the issue of the share capital received by the assessee by issuing of notice under Section 142(1) dated 30th August 2006, placed at page 15 of the paper book.
The relevant query made by the Assessing Officer on this issue was as under:
“5. Please furnish the details of the introduction of the share application money amounting to Rs. 1,04,50,000/- during the year as shown in the Balance Sheet in the following manner: (a) Name and Address of the subscribers (b) Income tax particulars of the subscribers (c) Copy of the bank account of the subscribers as obtained from the bank (d) Details of the shares issued to the subscribers with their distinctive numbers. (e) Produce the copy of the shareholders register. (f) Mode of payment towards the contribution of share application money. (g) Copy of the bank account of the company receiving the contribution.” “6. Names/Addresses/Amounts of all Loans given, advances recoverable, Share application money, Sundrey Creditos/Advnces from Customers and sundry debtors. Pleas also furnish asstt. Particulars of those above Rs.50,000/- along with their confirmation. The assessee has complied with the above requirement of the AO and the then AO being satisfied with the documents filed by the assessee company, did not draw any adverse inference as is evident from the assessment order dated 30th March 2007. The Assessing Officer during the original assessment proceedings had thrashed out the issue of share application money received
ITA No. 5114/Del./2014 9 by the assessee and was satisfied with the requisite details/documents and explanations of the assessee. The series of these facts shows that the requisite documents pertaining to impugned share application money were already available on assessment records even at the stage of original assessment proceeding.
It is worthwhile to mention here that this case, however, is not a case of change of opinion for the simple reason that post passing of original assessment order, the AO received new material in the shape of intimation regarding accommodation entries being provided by one Mr. Tarun Goyal; that the Assessing Officer accordingly reopened the assessment and asked the assessee again to substantiate the share capital; that the assessee submitted the documents; that AO thereafter made independent enquiry by issuing notice from each of the shareholders to furnish confirmation and bank statement etc.; that the AO received replies from all the 15 parties as is stated by the AO himself in the assessment order confirming the transactions. We, however, find that the AO still disbelieved the assessee’s explanation and made the addition. This addition has been made on the ground that assessee could furnish confirmation and bank statement only with regard to few parties and that the parties to whom notices were issued should have submitted complete bank statement. We are of the view that in the above
ITA No. 5114/Del./2014 10 facts, the AO was not justified in making the addition. As is evident from the record, the assessee was called upon to submit details in respect of each of the shareholders during the original assessment proceedings and the assessee has complied the same and no adverse inference was drawn against the assessee.
The learned AO in the reassessment proceedings has ignored the documents already on record in respect of each of the shareholders. As regards the adverse inference on the issue that shareholders have not submitted complete bank statement for the year, we are of the view that each of the shareholder having received the notice and having confirmed the transactions with the assessee company, the requirement of Section 68 stands discharged. In case, AO still had doubt, he had to make further enquiry and bring material to discredit the document and the explanation on record. Merely by raising doubt, the AO was not justified to ignore the evidences already on record. For ignoring the documents on record, the AO need to carry out an enquiry and such enquiry should bring adverse facts on record to discredit the documents and the explanation of the assessee. Ongoing through the entire assessment order, we find that nothing adverse has been brought on record by the AO so as to discredit the explanation and evidences of the assessee already on record.
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It is also significant to note that the AO while reopening the assessment on the basis of intimation regarding alleged accommodation entries, has made no further discussion or any reference to material or statement, whatsoever, in the reassessment order. There is no discussion in the re-assessment order as to what was the material in possession of the Assessing Officer and how it was related to the assessee to disbelieve the share application money claimed by the assessee. It is no doubt true that the AO might be justified in reopening the assessment on receipt of information but during the course of reassessment proceedings he has to appraise such material, confront the same to the assessee and carry out necessary enquiry to substantiate the additions made, which is lacking in the present case. During the course of the hearing, a query was posed to the learned DR to point out that except for reference of Mr. Tarun Goyal for reopening of assessment and that there is no allegation or any material referred by the AO in respect of accommodation entries while making the addition. The learned DR, however, could not point out any enquiry conducted by the AO in this regard.
A perusal of the orders of authorities below we further find that the ld. Authorities below have relied upon the judgment of Delhi High Court in the case of Nova Promoters and Finlease Pvt. Ltd. and NeelkanthIspat Udyog Pvt. Ltd. In this context, the ld. AR has rightly pointed out that the ratio laid down
ITA No. 5114/Del./2014 12 in the said judgment, in fact, will support the case of the assessee. In the said case, an adverse view was taken against the assessee and in favour of the Revenue and the case laws cited by the assessee company were distinguished on the reasoning that the AO in that case has discredited and impeached the particulars furnished by the assessee and has also established the link between self-confessed accommodation entry providers and the involvement of the assessee was established by valid material brought on record by the AO.
In this regard, it may be relevant to point out that the court in this case has specifically observed as under :
“The ratio of a decision is to be understood and appreciated in the background of the facts of that case. So understood, it will be seen that where the complete particulars of the share applicant such as their names and addresses, income tax file numbers, their creditworthiness, share application form and shareholders register, share transfer register, etc. are furnished to the Assessing Officer and the Assessing Officer has not conducted any enquiry into the same or has no material in the possession to show that those particulars are false and cannot be acted upon, then no addition can be made in the hands of the company under Section 68 and the remedy open to the Revenue is to go after the share applicants in accordance with law.” The above observations of the Hon’ble Jurisdictional Delhi High Court are applicable in the present case. In the present case as stated hereinabove, in the enquiry conducted by the AO, nothing adverse has come so as to discredit the evidences and explanations filed by the assessee. In fact, in the replies received, all the share applicants confirmed the transactions. It is not a case
ITA No. 5114/Del./2014 13 where shareholders were not available or the notices issued have come back.
It is a case where each of the shareholder has confirmed the fact that it has subscribed to the share capital of the assessee company. All these shareholders are being assessed to tax. The learned AR has further referred to a number of judgments in support of its contention. However, we need not refer to all these judgments in view of our findings given hereinabove on factual aspects of the present case. . From the above facts, we are of the considered view that the assessee has discharged its onus. Nothing adverse has come in the enquiry carried out by the AO and the CIT(A) was, therefore, not justified in ignoring the evidences already on record and the fact that nothing adverse has come to discredit the documents filed by the assessee and to sustain the impugned addition.
In view of what has been discussed above, we find substantial merit in the appeal of the assessee. Therefore, the impugned order deserves to be set aside and the appeal of the assessee has to be allowed.