ANKITA AGGARWAL,NEW DELHI vs. ITO WARD - 41(5), NEW DELHI

After disposing of the objections of the assessee, the Assessing Officer proceeded with the assessment. In course of assessment proceedings, the Assessing Officer made inquiries with regard to the investments made by the assessee in shares of M/s. Vidya Shankar Investments Pvt. Ltd. and M/s. Index Securities & Research Pvt. Ltd. He further inquired into the unsecured loans availed by the assessee from the aforesaid two entities. The Assessing Officer also called upon the assessee to explain the genuineness of investments in shares as well as loan transactions. In response to the queries raised by the Assessing 3 | P a g e Officer, the assessee furnished various documentary evidences to establish the genuineness of the investments made in shares as well as the unsecured loans availed during the year. The Assessing Officer, however, was not convinced with the submissions made by the assessee. Referring to the information contained in the communication received from DCIT, Central Circle, the Assessing Officer concluded that M/s. Vidya Shankar Investments Pvt. Ltd. and M/s. Index Securities & Research Pvt. Ltd. are two paper companies held/managed by entry operators, who have association with the people related to family of the assessee. He further observed that these two entities were used as a front to channelize unaccounted money. Basis the aforesaid reasoning, the Assessing Officer ultimately concluded that the investments in shares of M/s. Vidya Shankar Investments Pvt. Ltd. as well as the unsecured loans received from M/s. Vidya Shankar Investments Pvt. Ltd. and M/s. Index Securities & Research Ltd. are non-genuine, hence, have to be treated as unexplained investment under section 69B of the Act and unexplained cash credit under section 68 of the Act respectively.

Before us, learned counsel appearing for the assessee submitted that in course of assessment proceedings, the assessee had furnished cogent documentary evidences to prove the investments in the shares as well as the unsecured loans availed during the year. He submitted, not only the confirmations from the parties were filed, but various other documentary evidences, such as, Memorandum of Association of both the companies, copies of bank statements, copies of documents filed by the concerned companies before the Ministry of Corporate Affairs, etc. were filed before the Assessing Officer. However, he submitted, without properly verifying the documentary evidences, the Assessing Officer had made the additions merely relying upon the information received form DCIT, Central Circle.

He submitted, even the Assessing Officer did not have in his possession the so called seized documents referred to in the letters received from DCIT, Central Circle. He submitted, without 5 | P a g e having the requisite documents in his possession, the Assessing Officer has merely proceeded on the basis of communications received from the DCIT, Central Circle, to conclude that M/s.

He submitted, assessment in case of Vidya Shankar Investments Pvt. Ltd. for the very same assessment year was completed under section 143(3) read with section 153C of the Act, accepting the returned income without expressing any doubt with regard to the genuineness of the company. He submitted, even in case of Index Securities & Research Pvt. Ltd., though, assessment was completed under section 143(3) read with section 153C of the Act, making huge addition by treating it as accommodation entry provider, however, the additions were, ultimately, deleted by the first appellate authority and the decision of the first appellate authority was upheld by the Tribunal and Hon’ble Jurisdictional High Court. He submitted, the decision of the Assessing Officer in treating M/s. Vidya Shankar Investments Pvt. Ltd. and M/s.

Thus, he submitted, the allegation of the departmental authorities that M/s. Vidya Shankar Investments Pvt. Ltd. and M/s. Index Securities & Research Pvt. Ltd. are paper companies providing accommodation entries, is contrary to the materials on record, as, their genuineness stand established by virtue of orders passed not only by the Tribunal, but even by the Hon’ble Jurisdictional High Court. He submitted, none of the documentary evidences furnished by the assessee to prove the genuineness of the investments in shares and loan transactions, have been commented upon by the departmental authorities or anything adverse has been noted by them. Thus, he submitted, when the assessee has proved the genuineness of transactions through proper documentary evidences, the additions made are purely on conjectures and surmises have to be deleted.

Learned Departmental Representative strongly relied upon the observations of the Assessing Officer and learned first appellate authority. 7 | P a g e

We have considered rival submissions and perused the materials on record. We have also applied our mind to the decisions relied upon by learned counsel for the assessee. As discussed earlier, the assessee has contested the additions relating to investment in shares of a company, named, Vidya Shankar Investments Pvt. Ltd. as well as unsecured loans availed from the M/s. Vidya Shankar Investments Pvt. Ltd. and M/s.

In fact, in the assessment order, the Assessing Officer, except referring to the communications/letters from DCIT, Central Circle, has not discussed anything about the incriminating materials referred to in the said communications. It is quite clear from the observations of the Assessing Officer that he has treated M/s. Vidya Shankar Investments Pvt. Ltd. and M/s. Index Securities & Research Ltd. as paper companies/entities providing accommodation entries, mainly adopting the opinion expressed by DCIT, Central Circle in the communications sent to the Assessing Officer. Interestingly, though, the assessee had invested in shares of M/s. Vidya Shankar Investments Pvt. Ltd. and M/s. Index Securities & Research Pvt. Ltd., however, the Assessing Officer has accepted the investments made in M/s Index Securities & Research Pvt. Ltd.

Surprisingly, while deciding the issue, learned first appellate authority has completely mixed up the facts and has concluded that the investments in shares of Index Securities & Research Pvt. Ltd. are non-genuine. Whereas, the issue relating to investment of shares in M/s. Index Securities & Research Pvt. Ltd. is not at all a subject matter of dispute before the first appellate authority, as, 9 | P a g e the Assessing Officer has not made any addition with regard to such investment.

Be that as it may, the issue which requires consideration is, whether the investments made in the shares of M/s. Vidya Shankar Investments Pvt. Ltd. as well as unsecured loans from M/s. Vidya Shankar Investments Pvt. Ltd. and M/s. Index Securities & Research Pvt. Ltd., are genuine or not. The Assessing Officer has questioned the genuineness of the aforesaid transactions primarily on the ground that both the aforesaid entities are paper companies providing accommodation entries.

As could be seen from materials on record, for the very same assessment year, proceedings under section 153C of the Act were initiated against both the entities. In the assessment order passed under section 143(3) read with section 153C of the Act on 28.03.2013, a copy of which is placed at page 134 of the paper book, it is observed that the Assessing Officer, while completing the assessment, has accepted the income computed by the assessee in the return of income and no adverse inference has 10 | P a g e been drawn. Similarly, in case of M/s. Index Securities & Research Pvt. Ltd., though, in the assessment completed under section 143(3) read with section 153C of the Act vide order dated 28.03.2013, the Assessing Officer has made addition of more than Rs. 50 crores, however, learned first appellate authority, while deciding the appeal filed by the concerned entity, deleted the addition.

The Revenue being aggrieved with the decision of learned first appellate authority preferred an appeal before the Tribunal.

So, when all the shareholders appear before the AO and filed confirmations, bank statements, copy of ITRs for the AY 2007-08 to 2011-12, copy of PAN, name of directors, copy of audited accounts, etc. to establish the investment made by them in the assessee's company, their identity cannot be questioned on the basis of conjectures and surmises. In the absence of any adverse material on record that cash receipt/deposits were noticed in the bank accounts of these companies in question, the capacity of these investors cannot be questioned. Moreover, the assessee company has received the subscription of these shareholders through banking transactions.

The aforesaid decision of the Coordinate Bench has been confirmed by the Hon’ble Jurisdictional High Court. Thus, as could be seen from the facts discussed above, the genuineness of both the entities, viz., M/s. Vidya Shankar Investments Pvt. Ltd. and M/s. Index Securities & Research Pvt. Ltd. was tested not only before the departmental authorities, but before the Tribunal and Hon’ble Jurisdictional High Court as well. However, the allegation of the Assessing Officer regarding the genuineness of the aforesaid two entities could not be established. In fact, the Coordinate Bench, while deciding the appeal of Vidya Shankar Investments Pvt. Ltd. has given a categorical finding that the concerned entity was able to prove the genuineness of the share application money and share premium received from various persons.

Thus, viewed in the context of the observations of the Coordinate Bench and Hon’ble Jurisdiction High Court, as well as, the observations of learned first appellate authority, while deciding the appeals of the aforesaid two entities, it cannot be said that they are paper companies providing accommodation entries only.

It is a fact on record that in course of assessment proceedings, the assessee had furnished all documentary evidences, including confirmations from the concerned parties to prove the genuineness of the transactions relating to both the 14 | P a g e investments in shares and availing of unsecured loans. The Assessing Officer has not taken care to analyze and inquire into the evidences furnished by the assessee. No effort has been made by the Assessing Officer to disprove and discredit them. Without making any inquiry on his own or even establishing on record that evidences furnished by the assessee are not valid, the Assessing Officer could not have proceeded to treat the investments in shares and unsecured loans availed as non- genuine. It is prima facie evident, the Assessing Officer has treated the transactions between the assessee and M/s. Vidya Shankar Investments Pvt. Ltd. and M/s. Index Securities & Research Pvt. Ltd. as non-genuine, merely, relying upon the observations made by the DCIT, Central Circle in the communications sent to the Assessing Officer. No independent inquiry at all has been made by the Assessing Officer to verify the genuineness of the transactions. Thus, in our view, the additions made purely on conjecture and surmises cannot survive.

Before us, learned counsel appearing for the assessee submitted that jewellery of Rs.9,50,000/- belongs to the assessee 16 | P a g e and remaining jewellery belongs to other family members. He submitted, since the jewellery found is within the permissible limits prescribed by Central Board of Direct Taxes (CBDT), no addition should have been made.

Learned Departmental Representative submitted, since the assessee has not raised any specific ground before the first appellate authority challenging the addition, she cannot raise it now.

We have considered rival submissions and perused the materials on record. It is a fact that in course of search and seizure operation carried out in the residential premises, jewellery worth of Rs.78,77,328/- was alleged to have been found in the names of Smt. Rajni Aggarwal, Smt. Ankita Aggarwal and Smt.

So far as the contention of learned Departmental Representative that this ground cannot be entertained, as it was not raised before the first appellate authority, we are of the view that the assessee did raise the issue before learned first appellate authority in her submissions. Hence, the contention of learned Departmental Representative cannot be accepted. The Assessing Officer is directed to delete the addition.

In view of our decision on merits, as recorded above, we are not inclined to dwell upon the various legal issues raised in the main grounds as well as in additional grounds, as they are of academic interest.

In the result, appeal is allowed, as indicated above.