ITO 1(1)(1), MUMBAI vs. ART HOUSING P. LTD, MUMBAI

The grounds of appeal read as under: i. "Whether, on the facts and circumstances of the case and in law, the CIT(A) was justified in directing the deletion of the sum brought to tax by the (A.Y.2009-10) ITO vs. M/s. Art Housing Pvt. Ltd. AO as unexplained income under Section 68 of the Income Tax Act, 1961 in respect of moneys credited in the books as share application money Rs.45,00,000?"

ii. "Whether, on the facts and circumstances of the case and in law, the CIT(A) was justified in holding that the assessee proved identity, credit- worthiness and genuineness of moneys credited in the books as share application money of Rs 45,00,000, just by submitting name, address and other details of the share applicants disregarding all the evidences gathered by the revenue establishing that the share capital introduced were through benami concerns operated by Shri Pravin Kumar Jain, which evidences not only remained uncontroverted but even the onus shifted back on assessee in such circumstances were not discharged in the facts of this case? iii. "Whether, on the facts and circumstances of the case and in law, the CIT(A) was justified in allowing the appeal of the assessee by relying on the decision of Apex court in the case of CIT vs Lovely Exports Pvt Ltd 216 CTR 195(SC) without appreciating that the facts in the instant case were different than those in the case relied upon, as in the instant case, the AO did not sit idle but made investigations with the share holders before making an adverse inference and hence the case law relied upon is not applicable in this case?"

The genesis of this case lies is search and survey action was carried out in the case of Shri Praveen Kumar Jain and his group on 01.10.2013. The search action resulted into collection of evidences and other findings which proved that the said person through a web of concerns run and operated by him was engaged in providing accommodation entries of various natures. The Assessing Officer received information from Investigation Wing that the assessee was in receipt of accommodation entry in the form of bogus share application money from the concerns operated by the said Shri Praveen Kumar Jain. The Assessing Officer further noted that during the year consideration, the assessee company is engaged in business of Brokerage. It is seen that from the balance sheet of the assessee that in the year, the (A.Y.2009-10) ITO vs. M/s. Art Housing Pvt. Ltd. assessee has shown authorized share capital of Rs.50,00,000/- and issued subscribed and paid up share capital at Rs.46,00,000/-. Out of this, Rs.45,00,000/- consists of share application money.

Upon the Assessing Officer’s enquiry, the assessee submitted the name, PAN number and details of the companies which had invested in the share capital along with share application forms and bank statement of five applicants, copy of acknowledgement, audited profit and loss account and balance sheet of nine share applicants. However, the Assessing Officer noted that all the documents are the Xerox copies of the relevant papers not authenticated by the authorized person or Principal Officer of the company. In the questioner, the assessee has been specifically asked to submit the ledger confirmation of the applicants but the same was not filed by the assessee company and, hence, the Assessing Officer was of the opinion that it is clear that the assessee company has failed to fulfill the onus on it completely, and that bank statements of only five companies out of nine companies were filed.

The assessing officer in the assessment order noted that in this case information was received from the DGIT Investigation Wing, Mumbai that the assessee company has taken accommodation entries of share application money from benami concerns operated by one Shri Pravin Kumar Jain. The information so received contained transaction of share application money of Rs.45,00,000/- in the name of nine of the companies of Shri Pravin Kumar Jain, viz. Anchal Properties Pvt. Ltd., New Planet

During the search at various premises, which were shown by the assessee group to be the place of operation and registered office addresses as per the Income Tax records, the official website of the Ministry of Corporate Affairs and bank documents, it was found that the entities operated by Shri Pravin Kumar Jain were non-existing at these addresses and no genuine business was being carried out at any of these premises.

The Assessing Officer thereafter referred to the statements and admissions of the related persons. Further, the Assessing Officer observed that during the search action as well as the pre search enquiries, it was found that the all the registered addresses of the concerns of Shri Praveen Kumar Jain were non-functional and nowhere the books of accounts of any of the suspected concerns were found.

Thereafter elaborately referring to the findings in the case of the said Shri Pravin Kumar Jain. The Assessing Officer held as under:

Thereafter, the assessing officer referred to several decisions as under:

The assessing officer concluded as under:

I have heard both the counsel and perused the records. I find that in this case the assessee has received share application money from nine concerns which were operated by Shri Praveen Kumar Jain and his group. The modus operandi of Shri Praveen Kumar Jain and his group has been elaborately brought out in the assessment order. Shri Praveen Kumar Jain has clearly admitted that his group concerns which included the concerns from which the assessee has received share application money were indulging in providing bogus accommodation entry. It has further been noted that these concerns operated by Shri Praveen Kumar Jain were not doing any proper business but were engaged in providing accommodation entries. In the investigation done, it has been found that the addresses given are non-existent. In these circumstances, the assessing officer has made it clear case that the assessee has obtained bogus share capital entry from non-existent concerns which are in existence only on paper and are being operated by Shri Praveen Kumar Jain and his group to provide bogus accommodation entries of which the assessee has been recipient of Rs.45 lakh as share capital.

The assessee in its response has only mentioned that the assessee has given the name and address and PAN numbers of the investing companies and, hence, it has discharged the onus. In none of the responses, the assessee submitted that these companies are actually in existence at the addresses mentioned. That these companies

The reliance by the ld. Commissioner of Income Tax (Appeals) on the order of Hon’ble Apex Court decision in the case of CIT vs. Lovely Exports Pvt. Ltd. 216 CTR 195 (SC) is totally misplaced. In the said case before the Hon’ble Apex Court there was no clear establishment that the share applicant companies are bogus being operated by Shri Praveen Kumar Jain and his group to provide bogus accommodation entries. Similarly is the position of the case laws referred by the learned counsel of the assessee. In none of the case there was clear establishment that the assessee has received bogus accommodation entry. And the assessee has miserably failed to dislodge the finding of the Revenue that these companies are only operated by Shri Praveen Kumar Jain to provide bogus accommodation entries. As held by the Hon’ble Apex Court in the case of Sumati Dayal vs. CIT [1995] 214 ITR 801 (SC) and CIT vs.

In these circumstances, in light of the overwhelming evidence that assessee has obtained bogus accommodation entries from entities operated by Shri Praveen Kumar Jain and his group, the mere production of Xeroxed copies of documents cannot support the case of the assessee. Accordingly, I set aside the order of the ld. Commissioner of Income Tax (Appeals) and decide the issue in favour of Revenue.

In the result, this appeal filed by the Revenue stands allowed.