M/S INNOVATORS FACADE SYSTEMS LIMITED,THANE vs. CIT (A), PUNE-11

Against the aforesaid reasons assessee has raised the objection before the ld. AO vide letter dated 08/11/2016 which has been disposed of by the ld. AO. During the course of assessment proceedings ld. AO noted that assessee has received share application alongwith share premium from following six entities. Sr. Name of the No. of Share Total Shar Share No shareholder equity capital capital e Premium . Pre miu m Shares Face Amount Value 1. Blazer 120000 10 1200000 10 1200000 Venture Pvt. Ltd.

Capetown 50000 10 500000 10 500000 Mercantile Company Pvt. Ltd.

Fairment 120000 10 1200000 10 1200000 Venture Pvt. Ltd.

According to the AO, since assessee has failed to produce the parties and these are companies controlled by Pravin Jain group and therefore, as per the information received from Investigation Wing, it is in the nature of accommodation entry. Hence, the entire amount of Rs.99,00,000. Ld. CIT (A) too has confirmed the said addition for the same reasoning.

Before us, ld. Counsel has challenged the validity of reopening and the reasons recorded on the ground that, firstly, it is based on borrowed satisfaction; and secondly, there is no application of mind by the ld. AO because in the reasons recorded, ld. AO has mentioned that assessee has received accommodation entry of Rs. 20,00,000/- however, no such amount of Rs.20,00,000/- has been received albeit assessee has received share application money of Rs.99,00,000/- from 6 different parties. He also pointed out that at page 36-37 of the CIT (A) order there is a mention of list of various companies owned and controlled by Shri Pravin Jain which are running into 52 companies and in the list of those companies of Shri Pravin Jain, none of the six companies from whom assessee has received share application money belong to Shri Pravin Jain group. Thus, the entire basis for reopening for the second time is Innovators Façade Systems Ltd on wrong assumption of facts and therefore, on this ground alone reopening should be quashed.

On the other hand, ld. DR submitted that it is an undisputed fact that assessee received share application money and could not prove the genuineness and creditworthiness of the parties and once it is a fact that assessee had received credit entries, the reopening is valid. Thus, he strongly relied upon the order of the ld. CIT(A) confirming the reopening.

We have heard both the parties and also perused the relevant finding given in the impugned orders. As noted above, here in this case original assessment order was passed u/s. 143(3) on 23/02/2011 and then again re-assessment order was passed u/s. 143(3) / 147 on 03/12/2013, whereby addition was made on some alleged bogus purchases. The quantum appeal against this addition had attained finality from the stage of the Tribunal wherein the addition on account of bogus purchases was limited to application of net profit rate. Now again reopening has been done on the basis of certain information received from DCIT-Central Circle, Surat in the case of Shri Pravin Jain group that this group provides entries of bogus sales. From the perusal of the reasons recorded it is seen that reopening is based on documents found in the search and seizure action dated 01/10/2013 in the Pravin Jain group wherein information has been received that assessee i.e., Innovators Façade Systems Ltd., is one of the beneficiary who has got accommodation entry for A.Y.2009-10 amounting to Rs.20,00,000/- and therefore, ld. AO Innovators Façade Systems Ltd has the reason to believe that amount of Rs.20,00,000/- has escaped assessment within the meaning of Section 147 due to failure on the part of the assessee of disclosed fully and truly all material facts necessary for its assessment for A.Y.2009-10. Thereafter, ld. AO de-hors the information sated in the reasons recorded, that there was an accommodation entry of Rs. 20,00,000/-, has ultimately gone by the entries in the books of accounts wherein assessee had shown share application monies from 6 different companies who had no connection with the Pravin Jain Group. There was no such entry of Rs. 20,00,000/- in the books. Nowhere in the reasons it has been mentioned that what was the nature of accommodation entry of Rs.20,00,000/-, that is, it is in the form of loan, share application money or bogus sales, etc. and which of the companies / entities of Shri Pravin Jain group has provided the accommodation entry to the assessee. There has to be specific material coming on record and correlation with the entries in the book. Here in this case there is no accommodation entry of Rs.20,00,000/- credited in the books of the assessee, which fact is also borne out from the assessment order. The share application money has come from six entities and without any material information on record as to how these companies were Benami concerns of Shri Pravin Jain or group and how these companies are related to Shri Pravin Jain, can there be any reason to believe as contemplated in section 147. Without this information, how can AO entertain reason to believe that income chargeable to tax has escaped assessment in the form of share application money, because it is in the nature of Innovators Façade Systems Ltd accommodation entry. There is absolutely no co-relation between the reasons recorded and the facts and material on record, because in the books assessee had shown share application money from these companies for sums aggregating to Rs.99,00,000/- where as in the reasons there is a vague mention of Rs.20,00,000/- which has been alleged to be on account of accommodation entry. There has to be some live link nexus with the information and income escaping assessment. If the information was for Rs.20,00,000/- then what was the nature of this information and the accommodation entry and from which of the company there is no whisper. This shows that there is a complete lack of application of mind by the ld. AO especially when reopening is being done for the second time.

As pointed out by the ld. Counsel for the assessee that ld. CIT (A) in his impugned order at pages 36-38 has extracted the statement of Shri Pravin Jain, wherein in Question No.63, he has given the list of companies in which he was a Director and has given the list of 13 such companies and also the list of 39 companies where although he was not formally associated but was managed and controlled by him, For the sake of ready reference, relevant question and the list of companies are as under:- Q.63 Please give the complete list of all the companies in which either you or your close associates/family members are directors along with the complete list of companies under your control Sir, I am a director in the following companies Innovators Façade Systems Ltd 1. Anchal Properties Pvt Ltd 2. Easy Mercantile Pvt Ltd 3. Nakshatra Business Pvt Ltd 4 Olive Overseas Pvt Ltd 5. Picadily Overseas Pvt Ltd 6. PIM Trading (1) Pvt Ltd 7. Raghunandab Reyons Ltd 8. Riddhi Siddhi Multitude Pvt Ltd 9. Sanjivani Enviro Protection Ltd 10. SBI Training India Pvt Ltd 11 Sumith Commercial Pvt Ltd 12 Spine Infotech Pvt Ltd 13. Angel Softlang Pvt Ltd With the following companies and other entities, I am not formally associated but, these are managed and controlled by me

Aalla Diamond Industries Limited 2. Ansh Merchandise Pvt Ltd 3. Atharv Business Pvt Ltd 4. Bhagyashree Gems Pvt Ltd 5 Casper Enterprise Pvt Ltd 6. Duke Business Pvt Ltd 7. Flak Trading Co Pvt Ltd 8. Jahanavi Gems Pvt Ltd 9. Javde India Impex Ltd 10 Josh Trading Pvt Ltd 11. Kush Hindustan Entertainment Ltd 12. Pragati Gems Pvt Ltd 13. Spurti Computech Pvt Ltd 14. Tanika Commodities Pvt Ltd 15 Trangular Infocom Pvt Ltd 16. Vanguard Jewels Ltd 17. Viraj Mercantile Pvt Ltd 18. Yaswh V Jewels Ltd 19. Anan Diamonds Innovators Façade Systems Ltd 20. Arihant Corporation 21. Ganesh Trading Co 22. Jasoda Exports 23. Kailash International 24. KLI Diamond 25. Kunal Gems 26 Kush Intemational 27. Mahalxmi Corporation 28. Mahalxmi Trading Co 29. Minal Corporation 30. Mohit International 31. Natasha Enterprises 32. Paras Gems 33. Pratik Impex 34. RS Enterprises 35. Raj Export 36. Ryan International 37. Seven Star Gems 38. Suraj Gems 39. Taj Impex

From the perusal of the aforesaid list of companies and the companies from whom assessee had received share application money, it can be seen that nowhere these companies have been mentioned by Shri Pravin Jain that any of the 6 entities were managed and controlled by him. Thus, the very premise of the ld. AO while recording the reasons is based on wrong assumption of facts. It is a very well settled law that ld. AO has acquired jurisdiction based on valid reasons and material and information referred to in the reasons recorded should have live link nexus with the income escaping assessment. If there is no such material and information relevant to the assessee, then ld. AO Innovators Façade Systems Ltd cannot reopen the case based on incorrect assumption of facts recorded and the reasons recorded. Thus, the reasons recorded by the ld. AO do not clothe the him with the jurisdiction to reopen the assessment u/s 147 for the second time and accordingly, the reason recorded as well as the notice issued u/s.148 is invalid and accordingly, same is quashed. Thus, the entire re-assessment order is quashed.

In the result, appeal of the assessee is allowed on jurisdictional issue.