INCOME TAX APPELLATE TRIBUNAL - AHMEDABAD
HARMONY YARNS PVT. LTD., SURAT VS ASSESSEE
Before Shri Rajpal Yadav, JM, & Shri Manish Borad, AM.
ITA No.1590/Ahd/2012
Asst. Year: 2005-06
Harmony Yarns Pvt. Ltd., Surat. 105, J. K. Tower, Ring Road,
Surat. PAN AAACH 5895F(Appellant)
Vs.
ITO, Wd 1(2), (Respondent)
Appellant by
Shri Mehul R. Shah, AR
Respondent
by
Shri Pradeepkumar Majmudar, Sr.DR
Date of hearing: 19/1/2016
Date of pronouncement: 01/04/2016
ORDER
PER Manish Borad, Accountant Member.
This appeal of the assessee is directed against the order of ld.
CIT(A) -I, Surat, dated 26.6.2012 in appeal No.CAS-1,208/2011-12 passed against
order u/s 143(3) r.w.s 147 of the IT Act, 1961 (in short the Act) for
assessment year 2005-06 framed on 29.8.2011 by ITO Wd -1(2), Surat. Assessee
has raised following grounds of appeal :-
1. On the facts and in circumstances of the case as well as law on
the subject, the learned Commissioner of Income-tax (Appeals) has erred in
confirming the action of the Assessing Officer in reopening assessment by
issuing notice u/s. 148 of the Act.
Asst. Year 2005-06
2. On the facts and in circumstance of the case as well as law on
the subject, the learned commissioner of Income-tax (Appeals) has erred in
confirming the action of the Assessing Officer in making addition of Rs.
26,00,000/- u/s 68 of the Act on account of share application and share premium
money.
3. It is therefore prayed that assessment framed u/s 143(3) r.w.s.
147 of the Act may kindly be quashed or alternatively the additions made by
assessing officer and confirmed by learned Commissioner of Income-tax (Appeals)
may please be deleted.
4. Appellant craves leave to add, alter or delete any ground(s)
either before or in the course of hearing of the appeal.
2. Briefly stated facts as culled out from the assessment records
are that assessee is a private limited company which filed its return of income
at Rs.NIL on 20.09.2005. The case was selected for scrutiny assessment and
order u/s 143(3) of the Act was framed on 28.12.2007 after making an addition
of Rs.1,58,771/- and after giving credit to carry forward losses income was
assessed at Rs.NIL. Thereafter notice u/s 148 of the Act was issued on
29/3/2011 and served upon the assessee on 31/03/2011 and in response to the
notice u/s 148 of the Act assessee vide its letter dated 27.4.2011 submitted
that the original return filed by the assessee company for Asst. Year 2005-06
may be treated as return filed in response of this notice. It was observed by
the Assessing Officer during reassessment proceedings that assessee has taken
share application money of Rs.26 lacs from following two persons :-
M/s Mihir Agency Pvt. Ltd.
Rs.11,00,000/-
M/s Buniyad Chemicals Pvt. Ltd. Rs.15,00,000/-
Total
Rs.26,00,000/-
Asst. Year 2005-06
Ld. Assessing Officer examined the share application money of
Rs.26, lacs received by the assessee company, in the light of documents seized
during the course of search and seizure u/s 132 in the case of M/s Mahasagar
Securities Private Limited wherein it was revealed that Mahasagar Securities
Pvt. Ltd. and its related group of 34 odd companies were engaged in fraudulent
billing activities and in the business of providing bogus speculation
profit/loss, short term/long term capital gain/loss, share application money,
commodities profit/loss on commodity trading [through MCX] for many years. In
the list of clients who had taken accommodation entries from these companies,
the name of the present assessee i.e. M/s Harmony Yarns Pvt. Ltd. had also
appeared. On the basis of statement on oath Shri Mukesh M. Choksi (the main
person behind that scam and also director of all these companies) was recorded
on 25.11.2009 wherein he revealed the complete modus operandi of his companies
and admitted that accommodation entries for share application money he used to
receive money in cash from the client and accommodation entry of that money had
been provided through banking channels. During the course of re-assessment
proceedings assessee submitted that statement given by a third party should not
be relied and placed reliance on the judgment of Hon. Supreme Court in the case
of CIT vs. Lovely Exports Pvt. Ltd. (2009) 319 ITR (St.) 5 wherein it was held
that if the names of the share applicants are furnished to the department then
the said amount cannot be regarded as income of the assessee company and
further submitted that re-assessment proceedings cannot be initiated on the
basis of Asst. Year 2005-06 statement of third party in a situation when all
necessary details and documents were duly verified during the course of regular
assessment proceedings u/s 143(3) of the Act and creditworthiness and
genuineness of the persons giving share application money was proved.
3. However, the submissions made by appellant were not enough to
convince ld. Assessing Officer who was of the view that as all the documents
produced in respect of M/s Mihir Agency Pvt. Ltd. and M/s Buniyad Chemicals
Pvt. Ltd. are under the signature of Shri Mukesh M. Choksi c/o M/s Mahasagar
Securities Private Limited, onus to prove nature and source of cash credit in
form of share application money is not discharged by the assessee
satisfactorily and he went ahead to make addition of Rs.26 lacs to the income
of assessee under the provisions of section 68 of the Act for unexplained
source of share application and share premium money.
4. Aggrieved, assessee went in appeal before ld. CIT(A) who
dismissed the appeal of assessee by observing as under :-
DECISION.
8.1 . During the course of appellant proceedings, the appellant
relied on the decision of Hon'ble Supreme Court in the case of Lovely Exports
(F) Ltd. Before proceeding further, it is necessary to discuss the interpretation
of the above judgement by the Hon'ble Mumbai High Court in the case of M/s
.Major Metals Limited reported in 19 taxman. Com 176 ( Bom ). The Hon'ble
Bombay High Court in judgment dated 22. 02. 2012 has analyzed the decision of
M/s Lovely Exports Pvt Ltd in detail and distinguished the same in the above
case of addition related to 'Share Capital. The relevant paras of the said
judgment (pages 23 to 28) are reproduced herein under:-
Asst. Year 2005-06
23. ............. .Now it is in this background that the
Settlement Commission has arrived at a considered finding of fact that the
transactions of the two companies were not genuine transactions; that the two
companies lacked a credit standing which would have enable them to pay large
amounts towards share premium of Rs 990/- on a face value of Rs 10/- per share
and that neither the past performance or the 'financials of the petitioner
itse1f~would-justify the payment of such a large premium. The Settlement
Commission has relied upon the law laid down by the Supreme Court in Sumati
DayaJ Vs CIT (1995) 214 ITR 801/ 80 Taxman 89 ( SC) in applying the test of
human probabilities. Section 68 of the Income Tax Act, provides that where any
sum is found credited in the books of an assessee maintained for any previous
year , and the assessee offers no explanation about the nature, and source
thereof or the explanation offered by him is not, in the opinion of the .
Assessing Officer , satisfactory, the sum so credited may be charged to income
tax as the income of the assessee of that previous year. The Supreme Court held
as follows :
" It is no doubt true that in all cases in which a receipt is
sought to be taxed as the burden lies on the Department to prove that it is
within the taxing provision and if a receipt is in the nature of income, the
burden of proving that it is not taxable income because it falls within
exemption provided by the Act lies upon the assessee. ( See Parimisetti
Seethararnamma ( 1965) 57UTR 532 at page 536) But, in view of Section 68 of the
Act, where any sum is found credited in the books of assessee for any previous
year, the same may be charged to income tax as the income of the assessee of
that previous year if me explanation offered by the assessee about .the nature
and source thereof, is in the opinion of the Assessing Officer, not
satisfactory. In such a case, there is, prima facie, evidence against the
assessee viz; the receipt of money, and if he fails to rebut it, the said
evidence being unrebutted , can be used against him by holding that it was a
receipt of an income nature. While considering the explanation of the assessee
the Department cannot, however, act unreasonably,
24. But, it has been urged on behalf of the petitioner that an
addition within .the meaning of Section 68 would not be justified in law in its
hands even if the share application money was received from bogus share
holders. Counsel appearing on behalf of the petitioner submitted that in the
present case the report submitted by the Commissioner U/s 245D(3) showed that
the two. companies were duly identified being income tax assessees whose PANs
were also furnished. Consequently, relying on the decision of the Delhi High
Court in the case of CIT Vs Lovely Exports (p) Ltd, ( 2008) 299ITR 268 ( 2007)
158 Taxman 440 (Delhi) and the order rendered by the Supreme Court in a Special
Leave Petition arising therefrom, it was urged that recourse to the provisions
of Section 68 was not in order. Now, in order to appreciate the submission it
would be .necessary to consider the Judgment of Delhi High Court in Lovely
Exports (P) Ltd ( supra). The Division Bench of the Delhi High Court dealt with
a batch of appeals relating to three assessees. In the case of Lovely Exports
(P) Ltd( supra), the Assessing Officer had proceeded to make an addition on
the, ground that the share applicants in question did not exist. The assessee
had furnished necessary details such as the PAN of the share applicants. The
share money had been received through banking channels. The AO made an addition
only on the ground that some of the summons which were issued to the applicants
were returned unserved, whereas in the case of others the summons though
served, had not been complied with Now, it is in this background that the
Division Bench of the Delhi High Court noted that the Assessing Officer 'did
not carry out any enquiry into the income tax record of the persons who had
furnished the details in order Asst. Year 2005-06 to ascertain the status of
the share applicants. Significantly, the judgment of the Delhi High Court makes
a distinction between a case where shares are allotted in the course of a large
scale subscription to the shares of a public company on the one hand and a case
of private placement on the other. In the case of allotment of shares of a
public company, the company may have no identity of the subscribers. This
distinction between a public issue of share capital and private placement has
been made out in the following observations of the Delhi High Court.
"15 There cannot be two opinions on the aspects that the
pernicious practice of conversion of unaccounted money through the masquerade
or channel of investment in the share capital of a company must be firmly
excoriated by the Revenue. Equally, where the preponderance of evidence indicates
absence of culpability and complexity (sic) of the assessee it should not be
harassed by the Revenue's insistence that it should prove the negative. In the
case of a public issue, the Company concerned cannot be expected to know every
details pertaining to the identity as well as financial worth of each of its
subscribers. The Company must, however, maintain and make available to the
Assessing Officer for his perusal, all the information contained in the
statutory share application documents. In the case of private placement the
legal regime would not be the same A delicate balance must be maintained while
waling the tightrope of Sections 68 and 69 of the Income Tax Act. The burden of
proof can seldom be discharged to the hilt by the assessee; if the A O harbours
doubts of the legitimacy of any subscription he is empowered, nay duty-bound,
to carry out thorough investigations. But if the AO fails to unearth any wrong
or illegal dealings, he cannot obdurately adhere to his suspicions and treat
the subscribed capital as the undisclosed income of the Company ( Emphasis
supplied).
25, Now, it is this decision of the Delhi Court against which a
Special Leave Petition before the Supreme Court came to be dismissed on 11
January 2008. In CIT Vs Lovely Exports (P) Ltd ( 2008) 6 DTR 308( SC) white
dismissing the Special Leave Petition the Supreme Court observed that if the
share application money was received by the assessee from allegedly bogus share
holders whose names were given to the AO, the department was free to proceed,
to re - open their individual assessments in accordance with law. On this
ground, the Supreme Court while dismissing the Special Leave Petition found no
infirmity in the judgment of the Delhi High Court, The principle which was
emphasized by the Delhi High Court i/i the case of Lovely Exports was followed
by another Division Bench in CIT Vs Value Capital Services (P) Ltd ( 2008) 307
ITR 334 (Delhi). In CIT Vs Oasis Hospitalities (P) Ltd(2011) 331 ITR 119.
_/_19S Taxman 247/9 Taxman.com 179 ( Delhi), a Division Bench of the Delhi High
Court observed that the initial burden must be upon the assesses to explain the
nature and source of the share application money received. In order to
discharge this burden, the assessee is required to prove (a) Identity of share
holder (b) Genuineness of transaction and (c) Credit worthiness of
shareholders. As far as the creditworthiness of the subscriber is concerned,
that can be proved by producing a bank statement of the subscriber showing that
it has sufficient balance in its account to enable it to subscribe to the share
capital. The Delhi High Court held that once the initial burden has been
discharged, the observations of the Supreme Court in the case of Lovely Exports
(p) Ltd ( supra ) would suggest that the Department is free to proceed Asst.
Year 2005-06 to reopen the individual assessments in the case of alleged bogus
shareholders in accordance with law and is not remediless.
This would be more so when the assessee is a public limited
company and has issued share capital to the public at large as in such cases
the company cannot be expected to know every detail pertaining to the identity
and financial worth of the subscriber. However, the initial burden on the
assessee would be some what heavy in case the assessee is a private Limited
Company where the shareholders are closely related because in such a case, the
assessee cannot feign ignorance about the status of the parties. The judgment
of a Division Bench of this Court in CIT Vs Creative World Telefilms Ltd (2011)
203 Taxman 36 ( Mag) 333 ITR 100/15 taxmann.com 183 (Bom) is along the same
lines.
26. In the present case, it needs to be emphasized that the
Settlement Commission has considered all the material on record including the
material which had a bearing on the credit worthiness and financial standing of
the alleged subscribing companies to the share capital of the petitioner. None
of the companies was held to have a financial standing or credit worthiness
which would justify making such a large investment of Rs. 6 crores at a premium
of Rs 990/- per share. The allotment of shares, it must be noted, has taken
place in pursuance of a private placement. The principles which have been
applied in relation particularly to the public subscription of shares of a
public limited company can obviously have no application to the facts of a case
such as the present. The view which has been taken by the Settlement Commission
is consequently, borne out on the basis of the material on record. This is not
a case where the Commission has proceeded contrary to law or on the basis of no
evidence. There is no per'ersity in the findings of Settlement Commission.
27. Before leaving this aspect of the matter, it would be
necessary to advert to two decisions of the Supreme Court, the first being in
C!T Vs P. Mohanakala (2007) 161Taxman 169 / 291 ITR 278 ( SC).
While considering the scope of section 68, the Supreme Court
observed as follows:-
"15. ..... When and in what circumstances Section 68 of the
Act would come into play?
That a bare reading of Section Q8 suggests that there has to be
credit of amounts in the books .maintained by an assesses; such credit has to
be of a sum during the previous year; and the assessee offer no explanation
abut the nature and source of such credit found in the books; or the
explanation offered by the assessees in the opinion of the AO is not
satisfactory. It is only (hen the sum so credited may be charged to income -
tax as the income of the assessee of that previous year. The expression ' the
assesses offer no explanation * means where the assessees offer no proper,
reasonable and acceptable explanation as regards the sums found credited in the
books maintained by the assessees. It Is true the opinion of the AO for not
accepting the explanation offered by the assessee as not satisfactory is
required, to be bases on proper appreciation of material and other attending
circumstances available on record. The opinion of the AO is required to be
formed objectively with reference to the material available on record.
Application of mind is the sine qua non for forming the
opinion...........................' Asst. Year 2005-06
The Supreme Court noted, following the earlier decision in CIT Vs
Orissa Corpn (p) Ltd : ( 1986) 159 ITR 78/25 Taxman 80 ( SO) that where the
conclusion, of the Tribunal was not reasonable or perverse or based on no
evidence, no question of law as such would arise for consideration. The Court
further observed thus:
'25, The doubtful nature of the transaction and the manner in
which the sums were found credited in the books of accounts maintained by the
assessee have been duly taken into consideration by the authorities below. The
transactions though apparent were held to be not real one. May be the money
came by way of bank cheques and paid through the process of banking transaction
but that itself is of no consequence. "
'28. In a more recent judgment of the Supreme Court in Vijay Kumar
Talwar Vs CIT (2011) 330 ITR 1/196 Taxman / 136(2010) 8 Taxman. Com 264 (SC),
the same principle was applied in the following observations :-
" 24 All the authorities below, in particular the 'Tribunal,
have observed in unison that the assessee did not produce any evidence to rebut
the presumption drawn against him under section 68 of the Act, by producing the
parties in. whose name the amounts in question bid- been credited by the
assessee in-his books of account. In the absence of any cogent evidence, a bald
explanation furnished by the assessee about the source of the credits in
question viz, realization from the debtors of the erstwhile firm, in the
opinion of the AO, was not satisfactory . It is well settled that in view of
section 68 of the Act, where any sum is found credited in the books of the
assessee for previous year, the same may be charged to income tax as the income
of the assessee of that previous year, if the explanation offered by the
assessee about the. nature and source thereof , is, in the opinion of the
assessing officer not satisfactory...............' 8.2 In this background we
may examine the judgement of Hon. Supreme Court in the case of M/s Lovely
Exports (P) Ltd. which is reproduced herein below "1 ....... Delay
condoned.
2. Can the amount of share money be regarded as undisclosed income
under section 68 of the IT Act,1961? We find no merit in this Special Leave
Petition for the simple reason that if the share application money is received
by the assessee company from alleged bogus shareholders, whose names are given
to the AO, then the Department is free to proceed to re - open their individual
assessments in accordance with law. Hence, we find no infirmity with the
impugned judgment.
3. Subject to the above, Special Leave Petition is dismissed...........................
...."
Asst. Year 2005-06 Since this decision was given in respect of the
decision of the Hon "ble Delhi Court against which, the SLP was filed, the
findings of the Honble Supreme Court are to be inferred in the background of
the facts of the said case. It is pertinent to mention here that in the case of
M/s Lovely Exports Pvt Ltd, the Assessing Officer had made an addition only on
the ground that some Summons 'were returned 'un-served' and some parties did
not comply with the Summons issued.'
Further, the Hobble Delhi High Court held that in this case , the
Assessing Officer did not carry out any further inquiries and therefore, the
onus did not shift back to the assessee.
8.3 During the course of appellate proceedings, vide order sheet
entry dt.7.2.2012 the appellant confirmed that the share application money was
by private placement and fresh confirmation from Shri. Mukesh M Choksi cannot
.be filed. The appellant was also asked to file the present statuses issued in
the name of those two companies i.e. whether the shares in the name of those
Companies or have been transferred to else. However, the said details were not
filed by the appellant.' 8.4 On the basis of facts of the case and in the
interpretation of decision in the case of M/s Lovely Exports by the Hon'ble
Murnbai High Court's (supra), i apparent .that the decision of M/s Lovely
Exports does not apply in the case as it was a case of private placement and
collusive transactions. cash was paid for taking accommodation entries.
Evidence of the same found in the form of lists maintained by the entry
provider. It is not a case where addition has been made only on the basis of
statement of entry provider. The lists found during the course of search were
maintained by the entry provider in the normal course of his business. The
appellant was informed of the evidence gathered but, it neither requested for
cross - examination of entry provider nor furnished his fresh confirmation.
The statement on oath of Shri Mukesh M. Choksi, Director of those
two companies was also recorded during the course of search operation. ......
8.5 As discussed supra, appellant did not give the ownership
details of those shares as on date. Subsequent movement of shares after
allotment til! - date, is c crucial evidence in this case which is in the
possession of the appellant, but it not to furnish the same.
8.6 The mere fact that both the companies have allotted by PAN and
have been registered with ROC does not help the case of the appellant, as it
case of collusive transaction. It is not a case where the assessee is being
asked to establish source of source of funds. It is a case where appellant has
cash for taking accommodation entries. The 'appellant is neither in a ;n to
furnish the Asst. Year 2005-06 confirmation of Shri Mukesh M Choksi as on date
nor the present contact addresses of these two-companies.
Since the decision of Hon *ble Supreme Court in the case of M/s
Lovely Export (P) Ltd. was in respect of earlier decision of Hon. Delhi High
Court it is worthwhile to reproduce the observations of the Hon. Delhi High
Court's recent judgment dt.15.02.2012. In the case of Nova Promoters &
Finlease (P) Ltd. reported in (2012) 206 taxman 207 (Delhi). The facts of the
case are similar to the facts in the case of the appellant. In that case also,
the issue involved was of an entry provider and evidence was gathered by the
investigation Wing. The relevant portion of the said judgment is reproduced
hereinunder :-
" 38. The ration of a decision is to be understood and
appreciated in the background of the facts of that case. So understood, it will
be seen that where the complete particulars of the share applicants such as
their names and addresses, income tax file numbers, their creditworthiness,
share application forms and share holders' register, share transfer register
etc. are furnished to the Assessing Officer and the assessing Officer has not
conducted any enquiry into the same or has no material in his possession to
show that those particulars are false and cannot be acted upon, then no
addition can be made in the hands of the company under sec. 68 and the remedy
open to the revenue is to go after the share applicants in accordance with law.
We are afraid that we cannot apply the ratio to a case, such as the present
one, where the Assessing Officer is in possession of material that discredits
and impeaches the particulars furnished by the assessee and also establishes
the link between self - confessed accommodation ' entry providers' whose
business it is to help assesses bring into their books of account 'their
unaccounted monies through the medium of share subscription, and the assessee.
The ratio is inapplicable to a case, again such .as the present one, where the
involvement of the assessee in such modus operand! Is clearly indicated by
valid material made available to the Assessing Officer as a result of
investigations carried out by the revenue authorities into the activities of
such 'entry providers'. The existence with the Assessing .Officer of material
showing that the share subscriptions were collected as part of a pre - mediated
part of a pre mediated plan- a smokescreen - conceived and executed with the
connivance or involvement of the assessee excludes the applicability of the
ratio. In our understanding, the ratio is attracted to a case where it is a
simple question of whether the assessee has discharged the burden placed upon
him under sec. 68 to prove and establish the identity and creditworthiness of
the share applicant and the genuineness of the transaction. In such a case, the
Assessing Officer cannot sit back with folded hands till the assessee exhausts
all the evidence or material in his possession and then come forward to merely
reject the same, without carrying out any verification or enquiry into the
material placed before him. The case before us does not" fall under this
category and it would be a travesty of truth and justice to express a view to
the contrary....,...............'
10. From a perusal of the judgement, it is apparent that this
judgement of Hon'ble Delhi High Court is squarely applies in the case of the
appellant. In view of the legal position discussed above, the appellant's
appeal deserves to be Asst. Year 2005-06 dismissed. Therefore, the addition
made by the Assessing Officer is confirmed and the appeal is dismissed.
11. In the result, appeal is DISMISSED.
5. Aggrieved, assessee is now in appeal before the Tribunal.
6. First we take up ground no.2 raised against the action of ld.
CIT(A) confirming the addition of Rs.26 lacs u/s 68 of the Act on account of
share application and share premium money received by the assessee.
7. At the outset ld. AR submitted that the issue raised in this
ground is squarely covered in favour of assessee by the decision of the
co-ordinate bench in the case of M/s Pankaj Enka Pvt. Ltd. vs. DCIT in ITA
No.816/Ahd/2013 for Asst. Year 2005-06 vide order dated 15.4.2015.
8. On the other hand ld. DR supported the orders of lower
authorities.
9. We have heard the rival contentions and perused the material on
record. The issue before us is in regard to action of ld. CIT(A) in confirming
the addition of Rs.26 lacs made u/s 68 of the Act for share application and
share premium money received by assessee during the year and addition was made
in the proceedings u/s 143(3) r.w.s.147 of the Act pursuant to notice u/s 148
of the Act. We observe that ld. AR has placed reliance on the decision of
co-ordinate bench Asst. Year 2005-06 in the case of M/s Pankaj Enka Pvt. Ltd.
vs. DCIT (supra). The facts in the appeal before us are identical to the facts
adjudicated in the case of M/s Pankaj Enka Pvt. Ltd. vs. DCIT (supra). In order
to examine the same we reproduce the notice u/s 148 of the Act raised in the
case of assessee at page 13 of the paper book.
Reasons recorded for reopening the assessment.
The return of income was filed on 20.09.2O05 declaring the income
of Rs. NIL/. Order u/s!43(3) of the Act was completed on 28.12.2007 making an
addition of Es.85,005/- en account of excess depreciation and Rs.73,766/- on
account of valuation of work in progress.
A search and seizure action u/s. 132 of the Income tax act *?.~ciz
conducted in the case of M/s. Mahasagar Securities Private limited by
Investigation wing of Income-tax department, Mumbai, on 25-11-2009. The search
was conducted on the basis of information received in an FIU alert from New
Delhi regarding suspicious transactions taking place in the bank accounts of
this company and its related companies. The directors of these companies were
one Mukesh M.Choksi and Jayesh K.Sampat. During the course of the search it was
revealed that the Mahasagar Securities private Limited and its related group of
34 odd companies (the prominent ones being Alliance Intermediaries &
Network Private Limited, M/s. Mihir Agencies Private limited, M/s. Goldstar
Finvest Private limited etc- all run by Mukesh Choksi) were engaged in.
fraudulent billing activities and in the business of providing Bogus
speculation profit/loss, short term/long term capital gain/loss, Share
application money, commodities profit/loss on commodity trading (Through MCXJ
and had been continuing this business for Many years.
In the list of clients who have taken accommodation entries from
these companies, the name of this assessee i.e Harmony Yarn pvt. Ltd.. is also
appearing. During the course the proceedings the statement of Shri Mukesh
Choksi, main person behind this scam, was also recorded on 25-11-2009.
In his statement recorded on oath he has admitted that these
transactions are bogus. Asst. Year 2005-06 From the details submitted by the
Investigation Wing it is seen that the assessee has obtained the shares
application money of Rs.11,00,000/- from Mihir Agency Pvt. Ltd. one of company
run by Mukesh Chokshi, during the financial year 2004-05 (A.Y.2005-06). In view
of this new fact, I have reason to believe that income chargeable to tax has
escaped assessment within the meaning of section 147 of the Act The approval of
the CIT-I, Surat is therefore sought for issue of notice under the provisions
of section 151(2) of the Act.
10. We further find that similar reasons were recorded in the
notice raised u/s 147 of the Act in the case of M/s Pankaj Enka Pvt. Ltd. which
is reproduced below :-
Reg: M/s. Pankaj Enka Pvt. Ltd., The return of income was filed on
17.10.2005 declaring the income of Rs 96,552/-The same is processed u/s. 143(1)
of the Act. On 20.03.2006. accepting the returned income. No order u/s 143(3)
passed in this case.
A search and seizure action u/s. 132 of the Income tax act was
conducted in the case of m/s. Mahasagar Securities Pvt. Ltd., by Dy. DIT
(Inv.)-Unit -(4), Mumbai, on 25.11.2009. The search was conducted on-the basis
of information received in an FIU alert from New Delhi regarding suspicious
transactions taking place in the bank accounts of this company and its related
companies. The directors of theses companies were one Mukesh M. Chokshi and Jayesh
K. Sampat. During the course of the search it was revealed that the Mahasagar
Securities Pvt. Ltd., and its related group of 34 odd companies ( the prominent
ones being Alliance Intermediates & Network Private Limited, M/s, Mihir
Agencies Private Limited, M/s. Gold star Finvest Private Limited etc. all run
by Mukesh Chokshi) were engaged in fraudulent billing activities and in the
business of providing Bogus speculation profit/loss, short term/long term
capital gain/loss, share application money, commodities profit/loss on
commodity trading (through MCX) and had been continuing this business for many
years.
Asst. Year 2005-06 In the list of clients who have taken
accommodation entries from these companies, the name of this assessee i.e.
Pankaj Enka Pvt. Ltd., is also appearing. During the course the search and
seizure proceedings the statement of Shri Mukesh Chokshi. main person behind
the scam, was also recorded on 25.011.2009. In his statement recorded on Oath
he has admitted that these transactions are bogus.
From the details submitted by the Investigation wing, Mumbai, it
is seen that the assessee has obtained entry of the share application money of
Rs. 11,00,000/- from Mihir Agency Pvt. Ltd., one of company run by Shri Mukesh
Chokshi, during the financial year 2004-05 (A.Y. 2005-06). In view of this new
fact, I have reason 10 believe that income chargeable to tax has escaped
assessment within the meaning oi section 147 of the Act.
In view of the above, income to the extent being more than Rs.1,00,000/-has
escaped assessment within the meaning of section 147 of the Act. Therefore,
Notice u/s 148 need to be issued.
The approval of the Addl. CIT Range-I, Surat is therefore, sought
for issue of notice under the provisions of section 151(2) of the Act.
11. From comparison of both the notices raised in the case of
assessee and M/s Pankaj Enka P. Ltd. we observe that the reasons recorded are
verbatim similar except the change of figure, name of assessee and date of
issue and some minor changes.
12. We further observe that assessee has submitted all details and
supporting documents to prove the identity, creditworthiness and genuineness of
both the parties M/s Mihir Agency Pvt. Ltd. And M/s Buniyad Chemicals Pvt. Ltd.
from whom share application and share premium money of Rs.11 lacs and Rs.15
lacs respectively were received by the assessee in the year under appeal. These
documents included registration certificates with Registrar of Companies, PAN
Asst. Year 2005-06 allotted by the Department, copies of income-tax returns of
both the companies, financial statement and relevant portion of bank statement
along with duly signed share application form in relation to both the parties
namely M/s Mihir Agency Pvt. Ltd. and M/s Buniyad Chemicals Pvt. Ltd. And
further no specific defects have been brought on record by the lower
authorities in respect of genuineness of the documents submitted by the
assessee in regard to identity, genuineness and creditworthiness of M/s Mihir
Agency Pvt. Ltd. and M/s Buniyad Chemicals Pvt. Ltd. We further find that
co-ordinate bench in the case of M/s Pankaj Enka P. Ltd. vs. DCIT in ITA
No.816/Ahd/2013 for Asst. Year 2005-06 has duly considered and decided similar
issue in favour of assessee, in regard to addition of Rs.85 lacs from 12
parties in regard to share application and share premium money, by observing as
under :-
6.13 Regarding addition of Rs. 85,00,000/- on account of share,
application money and share premium money, we find that assessee has received
Rs. 85,00,000/- towards share application money and share premium. List of the
said parties is as under:-
Sr. No. Name of the Party
Share Application Money
1, M/s Hiteshwari Marketing PvtA.td. Kolkata
5,00,000/-
2. M/s JMD Mercantile Pvt. Ltd.,
Kolkata
5,00,000/-
3. M/s Sunflower Vinimay Pvt. Ltd., Kolkata
5,00,000/-
4. M/s Sugam Commercial Pvt. Ltd., Kolkata
5,00,000/-
5. Edmond Commercial Pvt. Ltd.
5,00,000/-
6. M/s Bhagyalaxmi Mercantile Pvt. Ltd., Kolkata
5,00,000/-
7. M/s Komal Commercial Ltd., Mumbai
10,00,000/-
Asst. Year 2005-06
8. Dhawani Marketing Pvt. Ltd.
15,00,000/-
9. Emerald System Eng. Ltd.
5,00,000/-
10. M/s Larite Industries Ltd., Mumbai
15,00,000/-
11. M/s Sargossa Investment & Finance Pvt. Ltd., Mumbai
5,00,000/-
12. Study Sales Pvt. Ltd.
5,00,000/
Total 85,00,000/-
Assesses filed list of applicants of share application money vide
letter dated 22.02.2012. A notice u/s. 133(6) of the Act was issued on
12.03.2012 to all parties. Assessing officer observed that no reply is received
from parties at Sr. Nos. 5, 8, 9 85 12.
6.14 Further in assessment order, Assessing Officer observed that
assessee has not tiled any confirmation as well as original share application
form in respect of above 4 parties and therefore he made addition. In respect
of 8 parties, a notice dated 12.03.2012 u/s 133(6) of the Act was issued and
subsequently a reminder dated 03.04.2012 was issued. Assessing officer observed
that all the parties have given same K replies on the same day. A show cause
notice dated 23.04.2012 was issued to assessee and Assessing Officer requested
to supply details along with confirmation. Assessee asked for more time for
submission of details. However, Assessing Officer without providing sufficient
opportunity went on finalizing assessment order. In assessment order, he
concluded that assessee has not submitted details required and failed to
establish nature and source of credit. On this basis, he made addition of Rs.
85,00,000/- u/s 68 of the Act to the total income of assessee.
6.15 During remand proceedings, assessee was again requested to
produce original share application from its record in respect of 4 parties.
Assessee vide letter dated 09.08.2012 submitted copy of application for share
along with copy of acknowledgement of return, audited statement and copy of
relevant portion of bank statement together with their reply in response to
notice u/s. 133(6) in respect of 3 out of 4 parties. In case of Sturdy Sales
Pvt. Ltd., no such details have been given by assessee. On verification of copy
of share application form, Assessing Officer observed that share application
forms were not bearing date.
Asst. Year 2005-06 6.16 Further, during remand proceedings,
assessee again filed all details in regard to 8 parties who filed replies
before Assessing Officer in response to notice u/s. 133(6) of the Act. Assessee
filed acknowledgement of return of their income and audited financial statements
and copy of relevant portion of bank statements of the parties. Assessee also
produced original share application forms during the remand proceedings.
6.17 We find that all the transactions were duly supported by the
Share application form, acknowledgement of return of income, audited financial
statements 85 bank statements, Memorandum of Association (hereinafter referred
as "MOA") and Articles of Association (hereinafter referred as
"AOA") of the share applicant. All the share application monies have
been received through proper banking channel and there is no evidence that
assessee has paid any money in cash to the share applicant in consideration of
cheque received from share. No inquiry is made by the Assessing Gmcer once the
assessee has discharged his primary onus to prove the identity, genuineness and
creditworthiness of the share applicants. On perusal of the bank statements of
share applicant, it can be seen that no cash has been deposited by them before
issue of cheque to assessee towards share application money. None of the
parties are related to assessee company. The assessee has proved all the three
ingredients of proving a genuine cash credit by establishing identity
(limited/listed companies), genuineness (transactions through normal banking
channel) and creditworthiness (IT returns and balance sheet with huge share
capital). If the Assessing Officer doubts the source of the source of the
source, he was free to conduct inquiries in the case of persons from whom
assessee has received funds. However, on that count, addition cannot be made
u/s 68 in the hands of the assessee once the assessee discharges the onus on it
as per the requirement of section 68. The Honourable Supreme Court in case of
Lovely Exports (P) Ltd. [216 CTR 195] has held that "If share application
money is received by the assessee company from alleged bogus shareholders,
whose names are given to the Assessing Officer, then Department is free to
proceed to reopen their individual assessments in accordance with law, but it
cannot be regarded as undisclosed income of assessee company. Honourable Delhi
High Court in case of CIT v. Kamdhenu Steel & Alloys Ltd. (2012) 361
ITR 220 (Delhi) held that though initial burden is upon the assessee, once he
proves the identity of credit/share applications by either furnishing permanent
account numbers or copies of bank accounts and shows the genuineness of the
Asst. Year 2005-06 transaction by showing money in the banks is by account
payee cheques or by draft, etc., then the onus to would shift to the revenue.
After assessee furnished the required details to the revenue, onus shifted to
the revenue and revenue has not thereafter proved the transaction of the share
application as non-genuine. It has been further held in this judgement that
once adequate evidence/material is given, which would prima facie discharge the
burden of the assessee in proving the identity of shareholders, genuineness of
the transaction and creditworthiness of the shareholders, thereafter in case
such evidence is to be disregarded or it is proved that it has
"created" evidence, the revenue is supposed to make thorough probe
before it could nail the assessee and fasten the assessee with such a liability
u/s 68 of the Act. The assessing officer failed to carry his suspicion to
logical conclusion by further investigation and therefore addition u/s 68 was
not sustainable. The above judgment is squarely applicable to the facts of the
case of assessee. The Assessing Officer and CIT (A) has relied upon the
decision of Delhi High Court in the case of Nova Promoters Finlease Pvt. Ltd.
which has been distinguished and differed by the same Delhi High Court in the
case of CIT vs. Gangeshwari Metal (P.) Ltd. 30 taxmann.com 328 wherein it was
held that when an assessee brings various documentary evidences in support of
its claim that share application money is genuine, no addition can be made u/s
68 of Act. In the ratio of Nova Promoters Finlease Pvt. Ltd, two types of cases
have been indicated. One in which the assessing officer carries out the
exercise which is required in law and the other in which the assessing officer
'sits back with folded hands' till the assessee exhausts all the evidence or
material in his possession and then comes forward to merely reject the same on the
presumptions. The facts of Nova Promoters and Finlease (P) Ltd, fall in the
former category as the Assessing Officer had rejected the affidavits filed by
applicants on merits; further the AO had also initiated inquiries through
issuance of summons u/s 131 which returned _unserved, and that is why the Court
decided in favour of the revenue in said case. However, the facts of the
present case are clearly distinguishable and fall in the second category and
are more in line with facts of Lovely Exports (P) Ltd. (supra). In the remand
report, the Assessing Officer himself has stated that the assessee has
requested to issue summons u/s 131 but no further probe was made by the
Assessing Officer. Thus there was a clear lack of inquiry on the part of the
assessing officer once the assessee had furnished all the material which has
already been referred to above. Further in the case of Nova Promoters Finlease
Pvt. Ltd., the shareholders didn't confirm the transactions of share capital
and admitted before Additional Commissioner (Investigation) that they Asst.
Year 2005-06 were acting as accommodation entry providers and thereafter later
on they have filed the affidavit retracting their statement. The affidavits
were not notarized and the deponents of the affidavit didn't appear before
assessing officer for cross examination. So ratio of Nova Promoters Finlease
Pvt. Ltd. Does not support case of revenue. In view of above legal and factual
discussion on merit, the addition made by Assessing Officer of Rs.
1,06,00,000/- [Rs.21,00,000/- +Rs.85,00,000/-) on, account of share application
money under provision of Section 68 of Act is directed to be deleted.
7. In result, appeal filed by the assessee is allowed.
13. Respectfully following the decision of the co-ordinate bench
in the above referred case, we are of the view that the facts dealt in by the
co-ordinate bench in the case of M/s Pankaj Enka P. Ltd. vs. DCIT (supra) are
similar to the facts of the case of assessee, and therefore, in our opinion
that assessee has been able to explain the source of share application and
share premium money of Rs.26 lacs received from M/s Mihir Agency Pvt. Ltd. and
M/s Buniyad Chemicals Pvt. Ltd. accordingly the addition made u/s 68 of the Act
is deleted. This ground of assessee is allowed.
14. Now we take up ground nos.1 & 3 which have been raised
by the assessee against the action of ld. CIT(A) confirming the reopening of
assessment made by ld. Assessing Officer by issuing notice u/s 148 of the Act
and framing the assessment u/s 143(3) r.w.s. 147 of the Act.
Asst. Year 2005-06 14.1 From perusal of the order of ld. CIT(A) we
observe that in form no.35 filed by assessee at the time of filing of appeal
before ld. CIT(A) following three grounds have been raised:-
1. The learned Income Tax Officer has grossly erred in making
addition of Rs. 26, 00,000/- in the total income of the appellant company u/s
68 of the IT Act.
2. The action of the learned AO is not justified to consider the
share application money received by the company as bogus and unreliable just
based on the statement provided by a third party.
3 The appellant craves leave to change, amend, alter, add or
delete any of the grounds of appeal.
From going through the above grounds of appeal raised by the
assessee before ld. CIT(A), we find that assessee has not raised the ground
against the action of Assessing Officer for issuing notice u/s 148 of the Act
and further framing assessment u/s 143(3) r.w.s. 147. Normally grounds of
appeal which are raised before the Tribunal ought to have been raised before
ld. CIT(A) which in this case has not been so. However, looking to the facts of
the case discussed by us while adjudicating ground no.2 of this appeal, where
we have applied the decision of the co-ordinate bench in the case of M/s Pankaj
Enka Pvt. Ltd. vs. DCIT (supra), ground relating to issuing of notice u/s 148
and assessment framed u/s 143(3) r.w.s. 147 of the Act was decided in favour of
assessee and thereafter when Revenue went in appeal before the Hon.
Jurisdictional High Court in the case of Principal CIT vs. Pankaj Enka Pvt.
Ltd., the Tax Appeal No.967 of 2015 of Revenue was dismissed vide order dated
5.1.2016. We, therefore, are of the view that as the issue has been settled on
similar facts by Hon. Gujarat High Court then it will not be desirable to set
Asst. Year 2005-06 aside these ground nos.1 & 3 raised by the appellant
in this appeal to the file of ld. CIT(A) for adjudication and, therefore, we
deal with these grounds of appeal.
15. At the outset ld. AR referred and relied on the decision of
Hon. Jurisdictional High Court in the case of Principal CIT vs. Pankaj Enka
Pvt. Ltd. (supra) wherein Tax Appeal of the Revenue was dismissed for lack of
question of law and the order of the co-ordinate bench in the case of M/s
Pankaj Enka Pvt. Ltd. vs. DCIT was upheld.
15.1 On the other hand ld. DR could not controvert the submissions
of ld. AR.
16. On going through the decision of the Tribunal in the case of
M/s Pankaj Enka Pvt. Ltd. vs. DCIT we find that the co-ordinate bench has
decided the issue by observing as under :-
5. After going through rival submissions and material on record.
Assessee is engaged in business of high seas sales of imported goods, yearn,
plastic granules etc. On the point of reopening, we find that Return of Income
was filed by assessee on 17.10.2005 declaring total income at Rs.96,520/- for
A.Y. 2005-06. Return was accompanied with audited accounts as per audit report
in Form no. 3CB and 3CD as discussed above. In this case, no assessment was
made under scrutiny assessment and return was accepted u/s. 143(1) on
20.03.2006. Thereafter, Assessing Officer issued notice u/s. 148 on 01.07.2011
after recording reasons dated 23.06.2011 on the basis of details submitted by
Investigation Wing of Mumbai. The relevant extracts of reasons recorded are as
under:
Asst. Year 2005-06 "The return of income was filed on
17.10.2005 declaring total income of Rs. 96,552/-, The same is processed u/s
143(1) on 20.03.2006 accepting the returned income. No order u/s 143(3) passed
in this case.
A search and seizure action u/s. 132 of the Income tax act was
conducted in the case of M/s Mahasagar Securities Pvt. Ltd., by Dy. DIT
(Inv.)-Unit - (4), Mumbai, on 25.11.2009. The search was conducted on the basis
of information received in an FIU alert from New Delhi regarding suspicious
transactions taking place in the bank accounts of this company and its related
companies. The directors of these companies were one Mukesh M. Chokshi and
Jayesh K. Sampat. During the course of the search it was revealed that the
Mahasagar Securities Pvt. Ltd., and its related group of 34 odd companies (the
prominent ones being Alliance Intermediaries 85 Network Private Limited, M/s
Mihir Agencies Private Limited, M/s Gold Star Finest Private Limited etc. all
run by Mukesh Chokshi) were engaged in fraudulent billing activities and in the
business of providing Bogus speculation profit/loss, short term/long term
capital gain/loss, share application money, commodities profit/loss on
commodity trading (through MCX) and had been continuing this business for many
years.
In the list of clients who have taken accommodation entries from
these companies, the name of this assessee i.e. Pankaj Enka Pvt. Ltd., is also
appearing. During the course the search and seizure proceedings the statement
of Shri Mukesh Chokshi, main person behind the scam, was also recorded on
25.11.2009. In his statement recorded on Oath he has admitted that these
transactions are bogus.
From the details submitted by the Investigation wing, Mumbai, it
is seen that the assessee has obtained entry of the share application money of
Rs. 11,00,000/- from Mihir Agency Pvt. Ltd., one of company run by Shri Mukesh
Chokshi, during the financial year 2004-05 (A.Y. 2005-06). In the view of this
new fact, I have reason to believe that income chargeable to tax has escaped
assessment within the meaning of section 147 of the Act.
In view of the above, income to the extent being more than
Rs.1,00,000/- has escaped assessment within the meaning of section 147 of the
Act. Therefore, Notice u/s.148 need to be issued.
The approval of the Addl CIT Range-I, Surat is therefore, sought
for issue of notice under the provisions of section 151(2) of the Act"
Asst. Year 2005-06 5.1 The plain reading of reasons recorded by
assessee makes it clear that notice u/s. 148 was issued as per information
received from Investigation wing from Mumbai. The reasons recorded by Assessing
Officer only indicate that as per information of Investigation wing from
Mumbai, certain companies of Mukesh Chokshi group were operating and allegedly
providing accommodation entries and assessee has also received share
application money from such company.
Assessing Officer just made general observation about information
supplied by Investigation Wing and sought to reopen the assessment without
pointing out how information coming in his possession has nexus with escapement
of income. The primary condition of Section 148 of the Act is that Assessing
Officer must have reason to believe that income has escaped assessment and this
satisfaction should be of Assessing Officer himself and not a borrowed
satisfaction.
Therefore, notice so issued to assessee was illegal and bad in law
on fact of it.
5.2 As per the provisions of Section 147/148, it is clear that for
taking action u/s 147 of the Act, Assessing Officer must have reason to believe
that an income chargeable to tax has escaped assessment for any assessment
year. Therefore, Assessing Officer must satisfy himself regarding escapement of
income. He should not act mechanically or on information supplied by any other
person. In the present case, Assessing Officer acted on information supplied by
the Directorate of Income Tax (Inv.), Mumbai but he has not applied his
independent mind and reassessment proceedings were initiated only on the basis
of information received from above investigation wing Mumbai. Hon'ble Delhi
High Court in case of CIT v. Kamdhenu Steel & Alloys Ltd, (2012) 361
ITR 220 (Delhi) observed that where Assessing Officer acted mechanically on
information supplied by the Directorate of IT (Inv.) about the alleged
bogus/accommodation entries provided by certain individuals/companies, without
applying his own mind, he was not justified in invoking jurisdiction u/s. 147.
Hon'ble Apex Court in case of Calcutta Discount Co. Ltd. (1961) 41 ITR 191 (SC)
analysed Asst. Year 2005-06 the Phrase "reason to believe" and
observed that "It is for him to decide what inferences of facts can be
reasonably drawn and what legal inferences have ultimately to be drawn."
5.3 The case of assessee is squarely covered by the decision of
ITAT, Jodhpur Bench in case of M/s Surbhi Mmchem Pvt. Ltd. (ITA Nos. 102
& 103/Jodh/2014). In said case, case was reopened u/s. 148 on the basis
of same statement of Mukesh Choksi dated 25.11.2009, the director of Mahasagar
Group of companies and on this point it was held as under:
" the reason recorded by the Assessing Officer were merely on
the basis of information received from DDIT (Inv.) Udaipur and Mumbai,
therefore, from the so called reason, it was not at all discernable as to
whether the Assessing Officer had applied his mind to the information and
independently arrived at a belief that on the basis of the material which he
had before him the income had escaped assessment, therefore, the reassessment
u/s 147 of the Act was not valid and accordingly the same is quashed. Since we
have quashed the reassessment order, therefore, no findings are being given for
the grounds raised by the assessee on merit."
The reasons recorded in case of M/s. Surbhi Minchem Pvt. Ltd.
(supra) u/s. 148 are reproduced as under:
"In due course, the information have received from the DDIT
(Inv.-2), Udaipur alongwith report of the DDIT (Inv.), Unit-1 (4), Mumbai that
search & seizure action under section 132 of the Income Tax Act, 1961
was undertaken in the case of Mahasagar Group of Companies Mumbai on 25.11.2009
on the basis of information received in an FIU alert from New Delhi regarding
suspicious transactions taking place in the bank accounts of M/s Mahasagar
Securities Private Limited and its related companies. The directors of these
companies were one Mukesh Choksi and Jayesh K. Sampat. During the course of
search it was revealed that the Mahasagar Securities Private Limited and its
related group of 34 odd companies (the prominent ones being M/s. Alliance
Intermediateries & Network Private Limited, M/s Mihir Agencies Asst.
Year 2005-06 Private Limited, M/s. Goldstar Finvest Private Limited, etc. all
run by Mukesh Choksi) were engaged in fraudulent billing activities and in the
business of providing bogus speculation profit/toss, short term/long term
gain/loss, share application money, commodities profit/loss on commodity
trading (through MCX) and had been continuing this business from many
years"
In this background, we find that language used in above reasons
recorded is exactly same as in case of assessee and hence the case of assessee
is squarely covered by case of M/s Surbhi Minchem Pvt. Ltd. (supra). In fact
para no. 2 of reasons recorded in case of assessee and above para of reasons
recorded in case of Surbhi Minchem Pvt. Ltd. was exactly same. In the said
case, case was reopened u/s 148 by Assessing Officer merely on the basis of
information received from Investigation wing, Murnbai, and therefore, from
reason recorded, it was not at all discernable as to whether Assessing Officer
had applied his mind to the information and independently arrived at belief on
the basis of material which he had before him that if any income had escaped
assessment and therefore, assessment framed u/s. 143(3) r.w.s. 147 was
requested to be quashed. Nothing contrary was brought to our knowledge with
regards to decision taken in similar facts and circumstances in case of M/s.
Surbhi Minchem Pvt. Ltd. (supra) wherein reopening was quashed on the ground
reopening u/s. 148 of the Act by Assessing Officer was done merely on the basis
of information from Investigation Wing, Mumbai. Even in case before us, it
cannot be inferred that concern Assessing Officer has applied his mind
information and independently arrived at certain belief on the basis of
material before him that any income had escaped assessment. In view of above
legal discussion, assessment framed u/s. 143(3) r.w.s. 147 of Act is quashed.
17. Further on going through the decision of Hon. Jurisdictional
High Court in the case of Principal CIT vs. M/s Pankaj Enka Pvt. Ltd. we find
that Revenue went in appeal against the order of the Tribunal and their
Lordships have dismissed the Tax Appeal No.967 of 2015 Asst. Year 2005-06 of
Revenue as they were of the view that no question of law arose in the appeal,
by observing as under:-
2. Essentially three questions are raised. First is with respect
to reopening of assessment beyond a period of four years. The Tribunal recorded
that the Assessing Officer only on the base of information supplied by the
investigation wind at Mumbai that the assessee had received share application
money from one of the tainted companies, issued notice. The Tribunal was of the
opinion that the Assessing Officer himself did not satisfy about the
requirement and issued notice under section 148 of the Act without forming a
reason to believe that the income of the assessee had escaped - assessment. The
Tribunal regardlessly proceeded to examine the issue on merits and deleted the
addition of Rs.21 lacs and further deleted addition of Rs.85 lacs towards share
application money. Upon perusal of the judgement of the Tribunal with the
assistance of learned counsel for the Revenue, we are of the opinion that the
issues raised are fundamentally questions of facts. The Tribunal having perused
the facts on record come to the factual findings. No question of law arises.
Under the circumstances quite apart from the validity of reopening, in our
opinion, judgement does not require any further consideration. Tax Appeal is
therefore, dismissed.
18. Respectfully following the decision of Hon. Jurisdictional
High Court in the case of Principal CIT vs. Pankaj Enka Pvt. Ltd. (supra) and
the decision of the co-ordinate bench in the case of M/s Pankaj Enka Pvt. Ltd.
vs. DCIT (supra), we allow the grounds of assessee and quash the assessment
framed u/s 143(3) r.w.s. 147 of the Act.
Asst. Year 2005-06
19. Ground no.4 is general in nature, which needs no adjudication.
20. In the result, appeal of assessee is allowed.
Order pronounced in the open Court on 01/04/2016
Sd/-
Sd/-
(Rajpal
Yadav)
(Manish Borad)
Judicial
Member
Accountant Member
Dated 01/
04 /2016
Mahata/-
Copy of the
order forwarded to:
1. The
Appellant
2. The
Respondent
3. The CIT
concerned
4. The
CIT(A) concerned
5. The DR,
ITAT, Ahmedabad
6. Guard
File
BY ORDER
Asst. Registrar, ITAT, Ahmedabad
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