APNA FOODS P. LTD,MUMBAI vs. ITO 5(1)(1), MUMBAI

ITO 5(1) M/s Apna Foods Pvt. Ltd. 8 Arab Bunglow, 12th Mumbai बिधम/ Pin- Khetwadi Lane, Near Vs. Balwas Hotel Mumbai-400004 स्थायीलेखासं./जीआइआरसं./ PAN No. AAICS1219G (अपीलाथी/Appellant) (प्रत्यथी / Respondent) : अपीलाथीकीओरसे/ Appellant by : Ms. Retuja Pawar, AR प्रत्यथीकीओरसे/Respondentby : Shri V. Justin, DR सुनवाईकीतारीख/ : 27/07/2018 Date of Hearing घोषणाकीतारीख / 03/08/2018 : Date of Pronouncement आदेश / O R D E R

Per Sandeep Gosain, Judicial Member:

M/s Apna Foods Pvt. Ltd. 1. The Learned CIT(A) erred on facts and in law in confirming addition of Rs. 20,00,000/- u/s. 68 on account of share application money. Alternatively the addition is highly excessive along with being arbitrary.

2. The Learned CIT(A) erred in law and on facts in not giving proper opportunity to explain the case.

3. The Learned CIT(A) erred in upholding the AO order which is purely based on presumption without any conclusive finding.

4. The Learned CIT(A) erred in not passing order on merit of case.

5. The Learned CIT(A) erred in not considering various legal and judicialpronouncements including Mumbai ITAT decision in the case of M/s Superline Constructions Private Ltd (ITA No. 3644/Mum/2014).

6. The Learned CIT(A) erred in not following Article 227 of The Constitution Of India 1949, which states the High Courts, Tribunals have superintendence over all courts and tribunals throughout its territories which means the decision of high court, Tribunals order is binding on all lower authority within its territories which, inter alia, includes Income Tax Officers, CIT(A) etc.

M/s Apna Foods Pvt. Ltd. 7. The Learned CIT(A) erred in law and on facts in passing order which is arbitrary, without any legal and sustainable basis and on imagination and therefore without any valid base, hence need to be deleted.

8. The appellant craves to insert new grounds, and to add, amend, alter, insert, delete any of the above grounds of appeal either in full or in part on or before the final hearing of the appeal.

2. At the very outset, Ld. AR appearing on behalf of the assessee drawn our attention to letter dated 14thFeb 2018 filed by the assessee for seeking admission of additional ground, which is reproduced below:-

1. The learned CIT(A) erred in law in confirming addition despite the appellant was not provided an opportunity to cross examine Mr. Mukesh Choksi on basis of whose statement the reopening of assessment was done and disallowance of Rs.20,00,000/- was sustained.

M/s Apna Foods Pvt. Ltd. 3. The learned CIT(A) erred in fact and/or in law in not relying on the submission of appellant. 4. The learned CIT(A) erred in fact and/or in law in confirming addition u/s. 68 though none of the conditions of the said sections are satisfied.

Vide above application, assessee seeks admission of additional ground on the basis of reasons mentioned in the application.

M/s Apna Foods Pvt. Ltd.

Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties, dismissedthe appeal of the assessee. Now before us, the assessee has preferred the present appeal.

4.2 I have carefully considered the facts and submissions of the learned AR. I have also perused the decisions relied on by him. After careful examination, I hold that the addition made by the AO is in order. Firstly, Mr Chokshi in his various statementshas categorically and unequivocally admitted that through his created companies mentioned in earlier

M/s Apna Foods Pvt. Ltd. paragraphs, he has helped the appellant companyby giving accommodation entries in the name of those three companies as if they have invested in the share application money of the appellant company. Secondly, the statement given before the search party during the course of search proceedings under section 132 of the Act, was reiterated by him in his subsequent statements recorded at various stages gives further strength to the collusion removing the smokescreen of doubt. Thirdly, as seen from the records Mr Chokshi has not retracted any of his statements at any stage. This further strengthens the factum of accommodation entries provided by him as true ones. Fourthly, as seen from the assessment order the AC was not desperate to make any additions whatever way he likes. He has made investigation and discreetly made this addition under section 68 in the names of those three parties is evidenced by the fact that in the case of another investment in the appellant company in similar shares from Unicom Skytech Ltd to the extent of Rs. 88 lakhs was not added as he found the same as a genuine investment Fifthly, it is pertinent to mention here the contention of the learned AR that he has submitted all the details before the AC like filing of Form -2 and annual return with ROC, assessment details of the said three companies, PAN details, applying for and M/s Apna Foods Pvt. Ltd. allotment of shares, et cetera will not absolve the appellant from involving itself in the bogus transactions for the simple reason that the person who is doing an unethical practice can easily fabricate all the required documentary evidence to meet the feature contingency of investigation. Therefore, simply because all the documents were filed before the AC will not be sufficient to explain the credits when the karta/creator of such bogus transactions himself admitted at various stages that he has helped the appellant company in providing accommodation entries in the form of investment in its share capital.

After having gone through the facts of the present case, judgment cited by both the parties as well as orders passed by revenue authorities, we find that the sole ground raised by the assessee is against challenging the order of Ld. CIT(A) in sustaining the addition of Rs. 20,00,000/- made by AO on account of share application money. From the records, we notice that assessee company engaged in the business of setting up of fast food outlets during the year under consideration. The return of income for the year under consideration was filed thereby declaring loss. Since, there was no scrutiny in the beginning.

M/s Apna Foods Pvt. Ltd. Later on, the AO has received the information from DDIT(Inv.)- II, Mumbai that search and seizure action u/s 132 of the Act had taken place in the case of Mr. Mukesh Chokshi and group by the DDIT(lnv.), Mumbai and it was found that during the year under consideration the assessee company had taken accommodation entries in the form of investment in shares at premium from fictitious companies created by Mr Chokshi. The said Mr Chokshi had given categorical statements explaining the modus operandi of giving accommodation entries u/s 132(4) of I.T. Act. Subsequently, on the said information, the assessment in the present case was reopened and additions were made by the AO. From the records, we notice that Shri Mukesh Choksi had indulged in giving accommodation entry through its bogus companies Alliance Intermediaries & Networks Pvt. Ltd., Talent Infoway Ltd. and Gold Star Finvest Pvt. Ltd. by way of accommodation entries togenerate share application money, and the assessee company, Apna Foods Pvt. Ltd. is the beneficiary of company floated by Shri Mukesh Chokshi. We have also noticed that during the course of assessment proceedings it was found that the assessee company had received M/s Apna Foods Pvt. Ltd. an amount of Rs. 20,00,000/- towards issue of shares from the group companies of Shri Mukesh Chokshi concerns, which isreproduced as under:- S.No. Name of the Amount No. Date of company(MukeshChoksi invested such of certificate Equity shares 1 M/s. Alliance 8100,000/- 4000 10/11/2005 Intermeiateries &Network Pvt. Ltd. 2 M/s. Goldstar 7,00,000/- 3500 10/11/2005 FinvestPvt. Ltd. 3 M/s. Talent Infoway 5,00,000/- 2500 09/11/2005 Ltd. We have also considered all the judgements referred by both the parties and after careful examination of the same, we find that Shri Mukesh Choksi in his statement hadcategorically and unequivocally admitted that through his created companies, he had helped the assessee company by giving accommodation entries in the name of those three companies as if they had invested in the share application money of the assessee company. It is important to mention here that the statement given by Mr. Mukesh Chokshi recorded u/s 132(4) of the I.T. Act during the course of search proceedings before the competent authority M/s Apna Foods Pvt. Ltd. (public servant) was reiterated by him in his subsequent statements recorded at various stages. Therefore, the said statement had not retracted any of his statements at any stage. Even from the records, we further notice that AO had madeinvestigation and discreetly made additions of Rs. 20 lakhs u/s 68 of the I.T. Act in the name of those three parties and in the case of another investment in the assessee company in similar shares from Unicom Skytech Ltd to the extent of Rs. 88 lakhs was not added as the same was found to be genuine. We further notice the submission of of Ld. AR that he had submitted all the details before the AO, bank statement, annual return with ROC, assessment details, PAN details, allotment of shares, etc, but all those documents did not absolve the assessee from involving itself in the bogus transactions for the reason that the person who is doing an unethical practice can easily fabricate all the required documentary evidence to meet the feature contingency of investigation. In this respect, our attention was drawn towards the judgment of Hon’ble Supreme Court in the case of Navodaya Castle Pvt. Ltd Vrs. CIT (2015) 56 taxmann.com 18(SC), wherein it was held as under:-

M/s Apna Foods Pvt. Ltd. Section 68 of the I.T. Act 1961 – Cash credits (Share application money) – Assessment year 2002-03 – High Court by impugned order held that certificate of incorporation, PAN, etc., were not sufficient for purpose of identification of subscriber company when there was material to show that subscriber was a paper company and not a genuine investor – Whether Special Leave Petition filed against impugned order was to be dismissed.

Now as far as the question of not allowing an opportunity of cross examination to the assessee is concerned, we are of the considered view that in the present case, the Income Tax authorities have not recorded any statement of the alleged suppliers or had not received any affidavit of the alleged hawala dealers, but on the contrary, the Sales Tax Department which is one of the organ of the government, had carried out necessary investigations and had received affidavit of the alleged hawala dealers thereby denying the sales of materials to the assessee. The Sales Tax Department had issued required /necessary show cause notice to all the beneficiary including the assessee and in majority of cases VAT had also been collected from the M/s Apna Foods Pvt. Ltd. beneficiaries including the assessee. Therefore, in these circumstances, the assessee cannot be allowed to raise the point that assessee has not been confronted with these evidences by the Sales Tax Department. This objection raised by the assessee was also dealt with by Ld. CIT(A) by relying upon the judgment of I- Hon'ble Punjab & Haryana High Court in the case of Smt. Kusum LataThukral (327 ITR 424). The operative portion of Ld. CIT(A) is contained in para no. 5.2, which is reproduced below:- In the present case, the appellant company has not produced the quantitative details, consumption records, details of transport expenses and stock register showing movement of goods and it has miserably failed to bring on record any evidence to prove that these alleged purchases were genuine. The delivery challans furnished by the appellant do not bear any truck no. [fill to understand as to how said decisions can be applied to the facts of the present case. Further the appellant company has alleged that it was not allowed to cross examine the said suppliers alleged to be hawala dealers and therefore it violated Principles of natural justice. It must be appreciated here that it was not the Income Tax Department which M/s Apna Foods Pvt. Ltd. had recorded the statements of the alleged suppliers or had in its possession affidavits of the alleged hawala dealers. The appellant cannot deny that it had not been confronted with these evidences as the Sales Tax Department had issued show cause notices to all the beneficiaries including the appellant company and inmajority of cases, VA 7" had also been collected from the beneficiaries including appellant. In the case of Smt. KusumLataThukral (327 JTR 424) the Honourable Punjab & Haryana High Court had an occasion to deal with the same issue. in the cited case, the learned authorised representative of the assessee had sought annulment of the order on the ground that the assessee was not allowed to cross examine the donors. The Honourable High Court disagreed with this preposition. Whatever material the Assessing Officer had gathered was put to the assessee to comment. Therefore, the statements of the donors who had denied to have made any gift, had not been utilized against the assessee without affording the opportunity of the assessee. The assessee had not discharged the initial onus to produce the necessary evidence to support the genuineness of the transactions. The donors in theirstatements had denied to have given any gifts to Sint. KusumLataThukral, theassessee. They had denied even the acquaintance with the assessee. They M/s Apna Foods Pvt. Ltd. had also denied to have made the deposit of cash in their accounts and issue of drafts for the purpose of gifts. When the donors had denied to have given any gifts it had to be logically concluded that it was the assessee 's own money, which was routed through the mode of alleged gifts through the accounts of thepersons, who were not aware about the deposit of money in their accounts and purchase of bank. drafts in favour of the assessee. It was held by the Hon’ble Punjab & Haryana High court that the question whether denial of opportunity of cross-examination resulted in violation of natural justice depended upon the facts of each case. The object of cross-examination was to test the veracity of the version given in examination-in chief It was held that even if cross- examination was allowed and the donors who had disowned the making of gifts, were confronted and shown to be factually wrong, the same would have made no difference, as there was no natural love and affection and in its absence, the gifts were not genuine. The appeal of the assessee was accordingly dismissed. Reverting back to the present case, it would have made no difference even if the appellant company had been allowed an opportunity to cross-examine the alleged suppliers as they had categorically admitted to be involved in giving only accommodation entries. 11 is M/s Apna Foods Pvt. Ltd. an argument just for the sake of the argument. Mere denial by the appellant is not sufficient to rebut the direct as well as circumstantial evidence which is in the possession of the department.

The Ld. AR has also challenged the order of Ld. CIT(A) in not following Article 227 of the Constitution of India. After considering the submission, we find that Article 227 conferes on every High Court, the power of superintendence over all courts and Tribunals throughout the territories in relation to which it exercises jurisdiction. However, there is no dispute with regard to the above legal position. Apart from referring Article 227, Ld. AR submitted that Ld. CIT(A) has not followed the judgment of the jurisdictional courts. Even before, Ld. AR could not place any judgment of jurisdictional High Courts containing identical facts. The pari-materia contained in all cases are different. Therefore, facts of each and every case has to be considered and appreciated in those set of circumstances. Moreover, no new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). Therefore, there are no M/s Apna Foods Pvt. Ltd. reasons for us to interfere into or deviate from the findings recorded by the Ld. CIT (A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. Resultantly, these grounds raised by the assessee stands dismissed.