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Before: SHRI N.K. SAINI & SMT. BEENA PILLAI
ORDER
PER BEENA PILLAI, JUDICIAL MEMBER:
The present appeal has been filed by the assessee against the order of the ld. CIT(A)-Faridabad vide his order dated 16/12/2014 for A.Y. 2010-11 on the following grounds: 1. “That reassessment proceedings initiated u/s 148 are void ab-initio since the Assessing Officer failed to verify the veracity of the information before recording the so called reasons as held by the Delhi High Court in various cases. Mere receipt of information from (Inv) wing does not confer power on Assessing Officer to initiate proceedings u/s Assessing Officer. The CIT(A) grossly erred in law in ignoring the binding decisions of the high court relied upon by the appellant while upholding the validity of such proceedings.
2. That reassessment proceedings initiated u/s 148 are void ab-initio since the reasons recorded are vague without reference to any material on record. There is no nexus or live link between the information/material and the formation of belief that there is escapement of income for the year under consideration and thus contrary to the settled legal position. The CIT(A) grossly erred in law in ignoring the binding decisions of the high court relied upon by the appellant while upholding the validity of such proceedings.
3. The CIT(A) erroneously decided the above legal issue on the basis of the information which was not available with the Assessing Officer on the date when the reasons were recorded.
4. That without prejudice to the above, the burden u/s 68 stood discharged by the assessee in view of enormous evidence filed before the Assessing Officer in the assessment proceedings and the judicial decisions. In fact, the onus shifted to the Assessing Officer to prove that share application money received was by way of accommodation entry as alleged by the Assessing Officer in the reasons recorded u/s 148.
The CIT(A) was not justified in presuming incorrect fact that shares were not allotted to the share applicant till date. Thus, the decision of CIT(A) is vitiated on account of such assumption.
Mere mentioning of allegations in the assessment order does not and cannot not establish the veracity of the allegation. Further, nothing has been confronted to the assessee in the course of assessment proceedings and, therefore, contents of the report cannot be considered as evidence in view of the decisions of the apex court and, therefore, no addition could be legally made on the basis of mere allegations. In the absence of cogent evidence, the addition could not be legally made.
The appellant craves to add or amend the grounds of appeal if required.”
The brief facts of the case as recorded by the authorities below are as under: The assessee filed its return of income on 12/10/2010 declaring a loss of Rs. 98,563/-. The ld. Assessing Officer processed the return u/s 143(1) of the Act. He received certain information regarding accommodation entries provided by Shri Surendra Kumar Jain Group to various beneficiary companies from the office of DIT. The relevant extract pertaining to the assessee herein, as established by the search/survey/investigation conducted by the investigation wing, Delhi containing the details of amounts received by the assessee is as under: Cheque From To Bank Chequ Cheque Amount Name of Annexu Page Book/R Compan Company e/ Book/R (Rs.) The re No. No. TGS y / RTGS/ TGS Middle Date Name Person PO No. Date Man/media Name tor 04.07.0 Victory Aksar Axis RTGS 04.07.0 10,00,000 Sukesh A-21 Back 9 Softwar Wire 9 /- Gupta Page e Products 33 P. Ltd. P. Ltd. 2.1. The ld. Assessing Officer accordingly initiated reassessment proceedings u/s 148 of the Act. He recorded the reasons recorded in respect of escapement of income in the hands of the assessee, during the previous year relevant to the assessment year under consideration. The assessee accordingly filed the return declaring loss of Rs. 98,563/- as was declared in the original return filed u/s 139(1) of the Act in response to the notice issued u/s 148. The ld. Assessing Officer in pursuance thereof issued notice u/s 143(2) and 143(1) dated 19/09/2013 to the assessee.
2.2. The assessee submitted that it had received share application money of Rs. 10 lakhs from the applicants being M/s Victory Software Pvt. Ltd. who had applied for 10,000 equity shares of Rs. 10/- each at a premium of Rs. 90/- each. The ld. Assessing Officer refused the genuineness of the transaction and rejected the explanation given by the assessee. The ld. Assessing Officer in specific reference to M/s Victory Software P. Ltd. held that the said company belongs to Surendra Kumar Group and is in the business of a professional entry provider. It is also observed that the assessee vide his letter dated 27/12/2013 had submitted all the details regarding allotment of shares to the applicant M/s Victory Software P. Ltd. The ld. Assessing Officer made addition of Rs. 10 lakhs as undisclosed income u/s 68 of the Act.
Aggrieved by the order of the ld. Assessing Officer the assessee preferred an appeal to the ld. CIT(A). 3.3. Before the ld. CIT(A) the assessee submitted various details regarding the share application money received from the parties being Gunpati Fincap Services Pvt. Ltd. and Victory Software Pvt. Ltd. amounting to Rs. 15 lakhs and 10 lakhs respectively. The assessee submitted that all the relevant documents relating to the parties, which could prove the genuineness and creditworthiness.
3.4. The ld. CIT(A) rejected the submissions made by the assessee and upheld the orders of the ld. Assessing Officer.
Aggrieved by the order of the ld. CIT(A) the assessee is in appeal before us. 4.1. We have perused the records and have gone through the judgments relied upon by the parties herein. The assessee is engaged in manufacturing of hand sewing needles, aluminum/plastic knitting needles and other iron needles, having its plant and machinery at its leading brand name “Titony”. The assessee has issued 25,000 equity shares during the financial year 2009-10 to the following shareholders: 1. M/s Ganpati Fincap Services Ltd. - 15,000 shares 2. M/s Victory Software P. Ltd. - 10,000 shares 4.2. Out of the above shares allotted other than directors and its spouse, kids, the two companies had applied for, to issue, subscribe and allot the shares at a premium of Rs. 90/- each. The assessee had also submitted before the authorities below that there is no entry in the name of Mr. Surendra Kumar Jain in the books of account maintained by the assessee for the year under consideration. 4.3. We have perused the reasons recorded by the ld. Assessing Officer which is placed at page 3 of the paper book filed before us. “There is an information with the Assessing Officer received from the DIT(Inv.)-II, New Delhi that assessee has obtained accommodation entry for Rs. 10,00,000/- during the financial year 2009-10 relevant to A.Y. 2010- 11, from Shri Surendra Kumar Jain group cases, who is entry provider.
2. In view of above, I have reason to believe that income chargeable to tax amounting to Rs. 10,00,000/- and any other income which subsequently comes to notice has escaped assessment for A.Y. 2010-11 within the meaning of section 147 of the Income Tax Act. Accordingly, a notice u/s 148 is being issued for the A.Y. 2010-11.”
4.4. A perusal of the reasons recorded shows that the reassessment proceedings have been initiated on the belief that the assessee has obtained accommodation entry of Rs. 10 lakh from Shri Surendra Kumar Jain Group of cases, who is an entry operator. The ld. AR contended before us that the ld. Assessing Officer has not provided the copy of the information received from the DIT(Investigation Wing) which was the basis of the addition. The ld. AR submitted that the information received by the ld. Assessing Officer cannot be said to be reliable. The ld. AR submitted that the assessee had placed on record all the documents relating to the incorporation details of the share applicants and the confirmations sought from them regarding the same. The ld. AR vehemently argued that the share application money has been made by the application through banking channels and, therefore, cannot be doubted for.
4.5. On the contrary, the ld. DR submitted that the receipt of cash by Surendra Jain Group for the purposes of accommodation entry, was found at the time of search which has been performed through a mediator Shri Sukesh Gupta, who has received cash from the beneficiary, and routed back this cash into dummy accounts belonging to the accommodation entry provider M/s Surendra Kumar Jain Group, who has then finally transferred the requisite amount vide RTGS to the assessee. The ld. DR also submitted that the ld. Assessing Officer had issued summons u/s 131 for verifying the veracity of the claim of the assessee and the summons was received back from the postal authorities with the remarks “Refused”. The ld. DR further submitted that Investigating Officer was deputed to check the address of the claimed applicants in order to verify the identity of applicant and genuineness of transaction as claimed by the assessee. On personal verification and local enquiries made by the ITI it was reported by him that “no such company is operating/existing at the given address in the name of M/s Victory Software P. Ltd.” Neither anybody on the given address knew about the existence of this applicant company nor had any knowledge as to where do they have their offices.
4.6. The ld. DR submitted that the assessee has not discharged its onus of establishing the genuineness of the transaction so claimed as share application money from M/s Victory Software Pvt. Ltd.
We have heard the arguments by both the parties. It is observed that the assessee has not obtained any share application money from the alleged Shri S.K. Jain Group. The ld. Assessing Officer, however, has alleged that the company by the name Victory Software Pvt. Ltd. is one of the group companies of Shri S.K. Jain and it is pertinent to note that the ld. Assessing Officer has not brought out materials on record to establish the same. It is further observed that the assessee has received the share application money from its applicant being Victory Software P. Ltd. by proper banking channels. The assessee has further submitted all the details regarding the applicants including PAN numbers, board resolution, copy of the bank statements, incorporation certificates, memorandum and articles of association and the acknowledgement of IT returns filed by the applicants. 4.7. The ld. Assessing Officer had issued summons to the company by the name Victory Software P. Ltd. which was received back from the postal authorities with remark “Refused”. This does not mean that there was nobody who was present at the said address and further it cannot be inferred that the company is merely existing on papers. 4.8. The assessee placed its reliance on the judgment of the jurisdictional High Court in the case of Signature Hotels P. Ltd. vs. ITO reported in (2012) 20 taxman.com 797 (Del.). The Hon’ble High Court has observed that as there is no reference to any document or statement except the annexure which has been quoted by the Assessing Officer a prima facie nexus or link cannot be made to have been established which shows that income has escaped assessment. The Hon’ble High Court held that from the reasons recorded by the Assessing Officer it does not appear that the Assessing Officer has applied his mind to the information and has independently arrived at a belief on the basis of material which he had before him that the income had escaped assessment.
4.9. In the facts of the present case, the assessee had furnished the names and all the relevant details of the companies, with which it had entered into transaction, and that the Assessing Officer was made aware of the situation. We observe from the records placed before us that the Assessing Officer has not disputed the bank accounts and the payments that were made to the assessee by the applicant companies. Nowhere in the assessment order the ld. Assessing Officer has brought into existence any material to show that the company Victory Software P. Ltd. is a non-existing and a fictitious entity. It is, therefore, incorrect to arrive at a conclusion that the money received by the assessee by way of share application from Victory Software is bogus. Merely because the name of one Shri Sukesh Gupta appears as a mediator in the annexure, it cannot be concluded that Sukesh Gupta had facilitated so called bogus transaction between the assessee and M/s Victory Software P. Ltd. The ld. Assessing Officer has not issued any summons u/s 131 of the Act, to Sukesh Gupta to ascertain whether he was involved in the so called bogus transaction.
From the above discussion, we arrive at a conclusion that the ld. Assessing Officer could not establish that the share application money received by the assessee from M/s Victory Software P. Ltd. are bogus. We also hold that the assessee has discharged its burden u/s 68 as it had filed the enormous details in respect of M/s Victory Software P. Ltd. before the ld. Assessing Officer for him to investigate upon in detail. The ld. Assessing Officer has failed to establish that the details filed by the assessee are wrong. He has also failed to produce sufficient material on record to prove that the receipt of money by the assessee from M/s Victory Software P. Ltd. is accommodation entries from the entry operator S.K. Jain Group. In the above circumstances, we allow grounds filed by the assessee and held that reopening by the ld. Assessing Officer was met valid.
In the result, the appeal filed by the assessee stands allowed. The order is pronounced in the open court on 11.12.2015