JAJOO ENTERPRISES LTD, MUMBAI V. DCIT CEN CIR 4(3) CEN RG 4, MUMBAI

ITA 1142/MUM/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3584 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 17-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMANTHA NULLAMUDI
• Assessee Lawyers: NEHA PARANJAPE
• Keywords: Bogus Share capital; Search and seizure; Document seized; Opportunity of being heard; Principle of natural justice; Additional evidence; Accommodation entries; Onus to prove; Documents seized; Capital Gains
• Section: 143(3); 133(6); 143(2); 13; 68; 132

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI SHRI JUSTICE P.P. BHATT (PRESIDENT) & SHRI SHAMIM YAHYA (AM) I.T.A. NO. 1142/MUM/2017 (ASSESSMENT YEAR 2012-13 ) JAJOO ENTERPRISES LTD. SHOP NO. 3, BUILDING 3/C, JAI HIND ESTATE DR.A.M. ROAD BHULESHWAR KALBADEVI ROAD MUMBAI-400 002. PAN : AAACJ9939L VS . DCIT, CENTRAL CIRCLE 4(3) 19 TH FLOOR AIR INDIA BUILDING NARIMAN POINT MUMBAI-400 021. (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI K. GOPAL & MS. NEHA PARANJAPE DEPARTMENT BY SHRI SAMANTHA NULLAMUDI DATE OF HEARING 21.10.2020 DATE OF PRONOUNCEMENT 27.10.2020 O R D E R PER JUSTICE P.P. BHATT (PRESIDENT) :- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [IN SHORT LEAR NED CIT(A)] DATED 7.12.2016 AND PERTAINS TO A.Y. 2012-13. 2. THE GROUNDS OF APPEAL READS AS UNDER :- 1) THE LD. C.I.T. (APPEALS) ERRED IN CONFIRMING THE ADD ITION MADE BY LD. D.C.I.T. BY ON ACCOUNT OF SHARE APPLICATION MONEY ( SHARE CAPITAL) HOLDING THE SAME AS NON GENUINE. 2) THE LD. C.I.T. (APPEALS) ERRED IN CONFIRMING THE AC TION OF LD. D.C.I.T. OF TREATING THE SHARE APPLICATION MONEY (SHARE CAPITAL) AS BOGUS AND THEREBY ERRED IN MAKING ADDITION OF RS. 4,45,00,000/- . 3. THE ASSESSEE HAS SOUGHT TO RAISE ADDITIONAL GROU ND BY SUBMITTING AS UNDER :- JAJOO ENTERPRISES LTD. 2 1. THE APPELLANT IS MOVING THE PRESENT APPLICATION BE FORE THIS HON'BLE BENCH TO ADMIT THE ADDITIONAL GROUNDS OF APPEAL RAISED. THE APPELLANT SUBMITS THAT THOUGH THE ADDITIONAL GROUNDS OF APPEAL, THE APPELLAN T HAS RAISED THE ISSUE OF VIOLATION OF PRINCIPLES OF NATURAL JUSTICE WHICH G OES TO THE ROOT OF THE PROCEEDINGS. THE LD. A.O. INVOKED THE PROVISIONS OF SECTION 68 OF THE ACT TO TREAT THE SHARE APPLICATION MONEY RECEIVED BY THE APPE LLANT AS INCOME RELYING ON THE STATEMENTS OF SOME PERSONS. THE APPELL ANT HAS NEITHER BEEN PROVIDED WITH THE COPIES OF THE SAME NOR CROSS EXAMIN ATION OF THE PERSONS WHO HAD GIVEN THE STATEMENTS. THE APPELLANT SUBMITS THA T THIS ISSUE GOES TO THE ROOT OF THE PROCEEDINGS. HENCE, THE ADDITIONAL GROUN DS OF APPEAL MAY BE ADMITTED. 2. FOR THE ABOVEMENTIONED WELL-ESTABLISHED PROPOSITI ON OF THE LAW, THE APPELLANT STRONGLY RELIES UPON THE FOLLOWING JUDICIAL PRONOUNCEMENTS AND REQUESTS YOUR HONOUR TO ADMIT AND ADJUDICATE THE SAI D ADDITIONAL GROUND. SR. NO. NAME OF JUDICIAL PRONOUNCEMENTS HON'BLE JUDICIAL FORUM RELEVANT CITATION 1 JUTE CORPN. OF INDIA LTD. V/S COMMISSIONER OF INCOME-TAX SUPREME COURT 187ITR688 2 NATIONAL THERMAL POWER CO. LTD. V/S COMMISSIONER OF INCOME TAX SUPREME COURT 229ITR383 3 ANMEDABAD ELECTRICITY CO LTD V/S COMMISSIONER OF INCOME-TAX BOMBAY HIGH COURT 199ITR351 4. THE ADDITIONAL GROUND READ AS UNDER :- THE LD. A.O. IS UNJUSTIFIED IN TREATING THE SHARE AP PLICATION MONEY RECEIVED BY THE APPELLANT AMOUNTING TO RS.4,45,00,000/- AS UN EXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT RELYING ON THE STATEMENTS OF THIRD PARTIES WITHOUT PROVIDING THE APPELLANT AN OPPORTUNITY TO CROSS EXAMIN E THOSE PERSONS. THUS, THE ACTION OF THE LD. A.O. IN IS BREACH OF PR INCIPLES OF NATURAL JUSTICE. THUS, THE ASSESSMENT ORDER DATED 31.03.2015 PASSED U NDER SECTION 143(3) OF THE ACT IS BAD IN LAW AND VOID AB INITIO. HENCE, THE S AME MAY BE QUASHED. 5. THE ASSESSEE HAS ALSO MOVED A PETITION TO ADMIT ADDITIONAL EVIDENCE AS UNDER :- THE APPLICANT IS MOVING THIS APPLICATION UNDER RULE 29 OF THE INCOME TAX APPELLATE TRIBUNAL RULES, 1963 TO ADMIT THE ADDITIONAL EVIDENCE, COMPILED IN PAPER BOOK AT SERIAL NOS. 12 AND 13 AT PAGES 294 TO 2 99. THE APPLICANT REQUESTS YOUR HONOURS TO ADMIT THE SAME AFTER CONSIDE RING THE FOLLOWING FACTS:- 1. THE APPLICANT IS A PRIVATE LIMITED COMPANY, ENGAGED IN THE BUSINESS OF WHOLESALE TRADING IN SYNTHETIC CLOTH. THE APPLICANT F ILED ITS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR ON 27.09.201 2 DECLARING TOTAL INCOME AT RS.2,64,03,226/-. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, THE LD. A.O. DOUBTED THE GENUINENESS OF SHARE APPLICATION JAJOO ENTERPRISES LTD. 3 MONEY AMOUNTING TO RS.4,45,00,000/- RECEIVED FROM M/S . SPECIALITY PAPERS LIMITED IN THE ASSESSMENT YEARS 2011-12 AND 20 12-13 RELYING ON THE STATEMENT OF SHRI SHIRISH CHANDRAKANT SHAH RECORDED UNDER SECTION 132(4) OF THE ACT. THE LD. A.O. WHILE FINALIZING THE ASSESSMENT ORDER MADE THE ADDITION OF RS.4,45,00,00/- UNDER SECTION 68 OF THE ACT IN THE YEAR UNDER CONSIDERATION BY ALLEGING THAT THE APPLICANT HAS OBTAINED ACCOMMODATION ENTRY FROM M/S. SPECIALITY PAPERS LIMI TED WHICH IS CONTROLLED BY SHRI SHIRISH CHANDRAKANT SHAH. THE LD. A.O. WHILE COMING TO THIS CONCLUSION RELIED ON THE STATEMENT OF SHRI SHIR ISH CHANDRAKANT SHAH RECORDED UNDER SECTION 132(4) OF THE ACT, DATED 13.04.2013. IT IS PERTINENT TO NOTE THAT THE APPLICANT HAS NOTHING TO DO WI TH SHRI SHIRISH CHANDRAKANT SHAH. HE HAD NO ROLE TO PLAY IN THE SHARE SUBSCRIPTION RECEIVED FROM M/S. SPECIALITY PAPERS LIMITED. THE A PPLICANT BEING AGGRIEVED BY THE ASSESSMENT ORDER PREFERRED THE APPEA L BEFORE THE LD.CIT (A). ON APPEAL, THE LD. CIT (A) UPHOLD THE ACTION O F THE LD. A.O. 2. THE APPLICANT BEING AGGRIEVED BY THE APPEL LATE ORDER PREFERRED THE PRESENT APPEAL BEFORE HON'BLE APPELLATE TRIBUNAL. 3. THE APPLICANT STRONGLY OBJECTS TO THE ADDITI ON MADE BY THE LD. A.O. UNDER SECTION 68 OF THE ACT AND CONFIRMED BY LD. CIT(A). THE APPLICANT SUBMITS THAT THE AUTHORITIES BELOW ARE NOT JUST IFIED IN DOUBTING THE SHARE APPLICATION MONEY RECEIVED BY THE APPLICANT FROM M/S. SPECIALITY PAPERS LIMITED AMOUNTING TO RS.4,45,00,00 0/-. THE APPLICANT SUBMITS THAT IT HAS PROVIDED ALL THE DETAILS TO SUBSTANTI ATE THE GENUINENESS OF THE SHARE SUBSCRIPTION MADE BY M/S. S PECIALITY PAPERS LIMITED BY FURNISHING RELEVANT EVIDENCE WHICH ARE EN CLOSED IN THE PAPER BOOK BEFORE HON'BLE APPELLATE TRIBUNAL. THE APPLICA NT FURTHER, SUBMITS THAT THE LD. A.O. HAS ACTED ARBITRARY IN MAKING ADDITI ON IN THE HANDS OF THE APPLICANT MERELY RELYING ON THE STATEMENT OF A THIR D PARTY. 4. THE APPLICANT SUBMITS THAT SHRI SHIRISH CHAN DRAKANT SHAH HAS AFFIRMED AN AFFIDAVIT ON 14.12.2019 AT THE INSTANCE OF MR. KAMAL JAJOO, DIRECTOR OF THE APPLICANT COMPANY TO CLARIFY ALL THE FA CTS OF THE PRESENT CASE. SHRI SHIRISH C. SHAH HAS CLEARLY STATED IN HIS AFFIDAVIT THAT HIS STATEMENTS RECORDED DURING THE COURSE OF SEARCH ACTION CANNOT BE RELIED SINCE THE SAME ARE NOT TRUE AND GIVEN UNDER FEAR AND PRESSURE. THE APPLICANT SUBMITS THAT THIS AFFIDAVIT IS A VITAL EVIDENC E WHICH MAY BE RELEVANT TO DECIDE THE PRESENT ISSUE. THE APPLICANT WA NTS TO PLACE THIS AFFIDAVIT ON RECORD BEFORE THE HON'BLE APPELLATE TRIB UNAL BY WAY OF ADDITIONAL EVIDENCE. THUS, THE APPLICANT IS FURNISHIN G HEREWITH THE PETITION TO ADMIT THE ADDITIONAL EVIDENCES UNDER RULE 29 OF THE APPELLATE TRIBUNAL RULE, 1963 ALONG WITH THE AFFIDAVIT OF SHRI SHIRISH CHANDRAKANT SHAH, DATED 14.12.2019. THE APPLICANT SUBMITS THAT THIS AFFIDAVIT HAS GOT DIRECT BEARING ON THE PRESENT APPEAL FILED BEFORE THE HON'BLE TRIBUNAL. THE APPLICANT SUBMITS THAT THE HON'BLE BENCH HAS BEEN VEST ED WITH THE DISCRETION TO ADMIT THE ADDITIONAL EVIDENCE UNDER RULE 29 OF THE INCOME TAX APPELLATE TRIBUNAL RULES, 1963. JAJOO ENTERPRISES LTD. 4 5. THE APPLICANT PRAYS THAT YOUR HONOURS MAY BE PLEASED TO ADMIT THE ADDITIONAL EVIDENCES AS THE SAME SUBSTANTIATES THE LEGALITY OF THE CASE AND THIS EVIDENCE GO INTO THE ROOT OF THE ISSUES. IT IS THEREFORE, RESPECTFULLY SUBMITTED THAT THE AFORESAID ADDITIONAL EVIDENCES MAY K INDLY BE ADMITTED IN THE INTEREST OF JUSTICE. THE APPELLANT RELIES ON TH E RATIO LAID BY BOMBAY HIGH COURT SMT. PRABHAVATI SHAH VS. CIT 231 ITR 1 (BO M) AND PATNATRIBUNAL IN THE CASE OF ABHAY KUMAR 63 ITD 144 (PAT.)TM FOR ADMISSION OF ADDITIONAL EVIDENCE. 6. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A COMPANY STATED TO BE ENGAGED IN THE BUSINESS OF WHOLESALE TRADING OF CLOTH. IT IS ALSO GATHERED THAT THE ASSESSEE COMPANY GOT CONVERTED INTO A LIMI TED COMPANY FROM PRIVATE LIMITED COMPANY AS ON 31.01.2008. A SEARCH AND SEIZ URE ACTION U/S. 132 OF THE ACT WAS CONDUCTED BY THE AHMEDABAD INVESTIGATIO N WING IN THE CASE OF M/S. ROLTA INDIA LTD. AND ITS GROUP CASES COVERING BUSINESS AND RESIDENTIAL PREMISES OF THE ASSOCIATED PERSONS ON 29/04/2010. S IMULTANEOUSLY, PREMISES OF SHRI MUKESH CHANDAK AND SIRISH CHANDRAKANT SHAH WERE ALSO COVERED U/S. 132 OF THE ACT. DURING THE SEARCH PROCEEDINGS, IT W AS REVEALED THAT SHRI SIRISH CHANDRAKANT SHAH, THROUGH ITS VARIOUS ENTITIES/CONC ERNS HAS BEEN ENGAGED IN PROVIDING ACCOMMODATION ENTRIES. VARIOUS MATERIAL/D OCUMENTS VIZ., BLANK LETTER HEADS OF VARIOUS COMPANIES, SIGNED CHEQUES, BILLS ETC. WERE FOUND AND SEIZED FROM HIS PREMISES. SHRI S.C. SHAH WAS CONFRO NTED WITH THESE SEIZED DOCUMENTS AND HIS STATEMENT WAS RECORDED U/S. 132(4 ). IN THE STATEMENT RECORDED ON OATH, HE ACCEPTED THAT HE WAS ENGAGED I N PROVIDING ACCOMMODATION ENTRIES IN NATURE OF BOGUS SHARE CAPI TAL ETC. TO PROSPECTIVE CLIENTS AGAINST SOME COMMISSION. SUBSEQUENTLY INFOR MATION TO THIS EFFECT WAS FORWARDED BY THE ACIT, CENTRAL CIRCLE-1, MUMBAI VID E LETTER NO. ACCC-1/ 2013-14 DATED 16/08/2013 TO THE PRESENT AO , WHEREI N IT WAS INFORMED THAT DURING THE COURSE OF SEARCH, VARIOUS DOCUMENTS, LOO SE PAPERS, BOOKS OF ACCOUNT, ETC. BELONGING TO THE PRESENT ASSESSEE, NA MELY M/S. JAJOO ENTERPRISES LTD. WERE FOUND AND SEIZED. THE RELEVANT SEIZED MAT ERIAL AND A SATISFACTION NOTE WAS FORWARDED TO TAKE SUITABLE ACTION IN THE C ASE. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED ON 27/09 /2012 DECLARING TOTAL INCOME AT RS. 2,48,98,522/-. THE CASE WAS SELECTED FOR SCRUTINY AND JAJOO ENTERPRISES LTD. 5 ACCORDINGLY NOTICE U/S. 143(2) WAS ISSUED ON 14.10. 2013 AND DULY SERVED ON THE ASSESSEE. FURTHER NOTICES WERE ISSUED ON THE AS SESSEE CALLING FOR VARIOUS DETAILS. DURING THE COURSE OF SEARCH, APART FROM OT HER THINGS, IT WAS DETECTED THAT THE ASSESSEE COMPANY HAD TAKEN BOGUS SHARE APP LICATION MONEY TO THE TUNE OF RS.4,45,00,000/- FROM A COMPANY OF SIRISH C HANDRAKANT SHAH GROUP NAMELY SPECIALTY PAPERS LTD. THE AO ACCORDINGLY ASK ED THE ASSESSEE TO PROVE THE GENUINENESS OF SHARE APPLICATION MONEY. 7. BY PLACING RELIANCE UPON THE FINDINGS OF SEARCH AND SEIZURE WING THE ASSESSING OFFICER MADE FOLLOWING OBSERVATIONS :- DURING THE COURSE OF SEARCH THE EVIDENCE ESTABLISHI NG THAT HE IS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES TO THE CLIENTS ON RECE IPT OF CASH HAS BEEN FOUND AND SEIZED/IMPOUNDED. EVIDENCE WITH REGARD TO THE FACT THAT ALL THE 212 COMPANIES ARE MANAGED AND CONTROLLED BY HIM HAS ALS O BEEN FOUND. THE DETAILS OF THE EVIDENCE FOUND DURING THE COURSE OF SEARCH ES TABLISHING THE FACTS, WHICH IS NOTED BY DDIT(LNV.), UNIT-L(3), AHMEDABAD AS HERE UNDER:- I. DETAILS OF 220 BANK ACCOUNTS AND MORE THAN 300 BLANK AND SIGNED CHEQUE BOOKS WERE FOUND. THESE PERTAIN TO 212 COMPANIES INCL UDING 16 LISTED COMPANIES MANAGED AND CONTROLLED BY HIM AND USED FO R PROVIDED ACCOMMODATION ENTRIES BY SCS. II. DIRECTORS OF THE 212 COMPANIES HAVE BEEN FOUND TO BE DUMMY AND FOR NAMESAKE. STATEMENTS OF PERSONS WHO ARE DIRECTORS IN LARGE NUMBER OF COMPANIES HAVE BEEN RECORDED; WHEREIN THEY HAVE ADM ITTED THAT THEY WERE MERE NAME LENDERS. NOTARIZED DECLARATIONS HAVE ALSO B EEN FILED BY A NUMBER OF DIRECTORS WHEREIN THEY HAVE STATED THAT THEY ARE ONLY NA ME LENDERS AND DO NOT KNOW ABOUT THE ACTIVITIES OF THE COMPANIES IN WHICH TH EY ARE DIRECTORS. III. PAN CARD, SEALS OF THE COMPANIES, RECORDS OF STA TUTORY COMPLIANCE ETC OF ALL THESE COMPANIES HAVE BEEN FOUND AND TAKEN ON RECORD D URING THE SEARCH AND SURVEY PROCEEDINGS. IV. EVIDENCE OF SYNCHRONIZED TRADING TO ARTIFICIALLY RAISE SHARE PRICE OF THE LISTED COMPANIES MANAGED BY SCS HAS BEEN FOUND AND SEIZED. V. DETAILS OF RECEIPT OF CASH AGAINST WHICH CHEQUES FOR ACCOMMODATION ENTRIES WERE ISSUED TO THE RESPECTIVE BENEFICIARY PARTIES HAVE BEEN SEIZED. VI. THOUGH SCS IS FORMALLY NOT ASSOCIATED WITH ANY O F THE AFORESAID COMPANIES THE FACT REMAINS THAT SCS MANAGES AND CONTROLS THESE C OMPANIES AND HAS USED THE WEB OF CORPORATE STRUCTURE TO FACILITATE INTRODU CTION OF SHARE CAPITAL, UNSECURED LOANS, SYNCHRONIZED TRADING AND PROVIDING BOGUS LTCG. THIS FACT HAS BEEN ADMITTED UNDER OATH BY HIM AND MANY OF THE DUMMY DIRECTORS OF THESE COMPANIES. JAJOO ENTERPRISES LTD. 6 VII. THIS CLEARLY ESTABLISHES THAT THE ULTIMATE SOURC E OF FUNDS IN THE BANK ACCOUNTS OF THE COMPANIES MANAGED AND CONTROLLED BY HIM IS UNACCOUNTED CASH RECEIVED FROM THE CLIENTS THOUGH IT IS MADE TO AP PEAR THAT THE SAME HAS BEEN RECEIVED AS LOAN OR SHARE CAPITAL FROM OTHER COM PANIES. ON A PERUSAL OF THE SHAREHOLDING PATTERN OF THE ASSESS EE, IT IS OBSERVED THAT THE FOLLOWING ENTITIES/PERSONS ARE HAVING SHAREHOLDING MORE THAN 5% SHARES IN THE COMPANY:- S.NO. NAME OF THE SHAREHOLDER NO. OF SHARES HELD % OF HOLDING 1. KAMAL JAJOO 59,650 31.95 2. NITA JAJOO 40,300 21.59 3. KAMAL JAJOO HUF 34,492 18.47 4. SPECIALITY PAPERS LTD. 20,375 10.91 THE TOTAL AMOUNT INVOLVED AGAINST M/S SPECIALITY PAPERS LTD, IS CALCULATED AS FOLLOWS: TOTAL NO. OF SHARES : 20,375 (19,750+65) PARTLY PAID UP SHARES : 19,750 X 2000(RS. 25 FACE VALUE + RS.1975 SHARE PREMIUM = RS. 3,95,00,000 FULLY PAID UP SHARES : 625 X 8000(RS. 100 FACE VALUE + RS.7900 SHARE PREMIUM)= RS. 50,00,000 RS. 4,45,00,000 IT IS SEEN FROM THE DETAILS OF THE ANNUAL REPORT OF T HE SAID COMPANY FILED BY THE ASSESSEE VIDE SUBMISSION DATED 26.02.2015 THAT IN THE LIST OF SHAREHOLDERS HOLDING MORE THAN 5% OF EQUITY SHARES IN THE COMPANY AS AT 31.03.2012, THE FOLLOWING FOUR COMPANIES ARE HELD AND MANAGED BY SH RI SHIRISH CHANDRAKANT SHAH VIZ. :- I. DHANUS TECHNOLOGIES LTD II. CHANNEL GUIDE INDIA LTD. III. EMPOWER INDIA LTD. IV. ALLIED COMPUTER INTERNATIONAL ASIA LTD. SHRI SHIRISH CHANDRAKANT SHAH HAS ADMITTED IN HIS STA TEMENT RECORDED ON OATH THAT THESE LISTED COMPANIES ARE USED BY HIM ONLY FOR PROVIDING ACCOMMODATION ENTRIES OF SHARE CAPITAL/PREMIUM, SHARE APPLICATION, UNSECURED LOANS (ONE TIME) ETC. OUT OF THE 8 COMPANIES MENTIONED IN THE LIST OF SHAREHOLDERS HOLDING MORE THAN 5% OF EQUITY SHARES, 4 COMPANIES ARE NON GENUINE WITH NO BUSINESS ACTIVITY AS DISCUSSED ABOVE. M/S. SPECIALITY PAPERS LTD. HAS HELD 20,375 SHARES (19,750 PARTLY PAID + 625 FULL PAID) AS PER JAJOO ENTERPRISES LTD. 7 ASSESSEE'S BOOKS WITH A SHAREHOLDING OF 10.91%. UNDE R THIS BACKDROP OF THE ISSUE, THE ASSESSEE, BY VIRTUE OF NOTICE U/S.142(1) DATED 12.03.2015, WAS SHOW CAUSED AS TO WHY THE ENTIRE AMOUNT OF RS. 4,45,00,000/- [19,750 X 2000 (RS. RS. 1975 SHARE PREMIUM + RS. 25 FACE VALUE)] + [625 X 8000 (RS. 7900 SHARE PREMIUM + RS. 100 FACE VALUE)] SHOULD NOT BE CONSIDERED AS UNACCOUNTED AND UNEXPLAINED MONEY ROUTED BACK INTO THE ASSESSEE'S BUS INESS THROUGH NON- GENUINE AND ILLEGAL CHANNELS AND ADDED BACK TO THE TOTA L INCOME OF THE ASSESSEE. THE ASSESSEE WAS ALSO REQUIRED TO ASCERTAIN AND PROVE THE GENUINENESS OF THE TRANSACTIONS WITH THE AFORESAID PAR TIES. IN THIS REGARD, THE ASSESSEE WAS ASKED TO FURNISH THE FOLLOWING DETAILS:- A) CONFIRMED COPIES OF LEDGER ACCOUNT OF M/S SPE CIALITY PAPERS LTD. AS APPEARING IN YOUR BOOKS FOR THE PERIOD FROM 01.04.2 011 TO 31.03.2012. B) SUBMIT A COPY OF BANK STATEMENT REFLECTING TH E AFORESAID TRANSACTIONS. C) FURNISH THE PURPOSE FOR WHICH THE SAID TRAN SACTIONS WERE DONE. D) FURNISH A COPY OF ACKNOWLEDGEMENT OF RETURN OF INCOME FILED BY M/S SPECIALITY PAPERS LTD. FOR A.Y.2012-13 ALONG WITH B ALANCE SHEET, P&L ACCOUNT AND ALL THE RELEVANT SCHEDULES. E) CONFIRMED COPIES OF LEDGER ACCOUNT OF M/S JAJO O ENTERPRISES LTD. AS APPEARING IN THE BOOKS OF M/S SPECIALITY PAPERS LTD. FOR THE PERIOD FROM 01.04.2011 TO 31.03.2012. F) FURNISH THE COMPLETE ADDRESS OF M/S SPECIA LITY PAPERS LTD. ALONG WITH THE AFORESAID NOTICE U/S.142(1), THE ASSES SEE WAS ALSO MADE AVAILABLE COPIES OF STATEMENT OF SHRI SHIRISH CHANDRAKANT SHAH RECORDED ON OATH U/S.132(4) OF THE I.T.ACT, AS OBTAINED FROM THE INVES TIGATION WING, FOR CROSS- EXAMINATION. 8. THEREAFTER THE ASSESSING OFFICER NOTED THE FOLLO WING SUBMISSION OF THE ASSESSEE:- IN RESPONSE TO THE AFORESAID SHOW CAUSE, THE ASSESSE E, THROUGH ITS SUBMISSIONS FILED VIDE LETTER DATED 19.03.2015, HAS FILED FOLLOW ING DOCUMENTS: A) LEDGER ACCOUNT OF M/S SPECIALITY PAPERS LTD. IN ITS BOOKS FOR FY 2011-12. B) BANK STATEMENT REFLECTING THE TRANSACTIONS AND M/S SPE CIALITY PAPERS LTD. C) BANK STATEMENT OF M/S SPECIALITY PAPERS LTD. FROM TH EIR BANKER WHICH SHOWS PAYMENT ENTRY TRANSACTION. D) ITR OF M/S SPECIALITY PAPERS LTD. FOR AY 2011-12 & 2012-13. E) PAN CARD OF M/S SPECIALITY PAPERS LTD. F) BALANCE SHEET AND P&L ACCOUNT OF M/S SPECIALITY PAPER S LTD. FOR FY 2011- 12. G) SHARE APPLICATION FORM OF M/S SPECIALITY PAPERS LTD. H) RESOLUTION OF M/S SPECIALITY PAPERS LTD. FOR SHARE A PPLICATION IN ITS COMPANY. I) DECLARATION FROM M/S SPECIALITY PAPERS LTD. FOR SHA RE APPLICATION IN ITS COMPANY. THE ASSESSING OFFICER HAS FURTHER NOTED THAT IN SUPPO RT OF ITS CONTENTION, THE ASSESSES HAS MADE FOLLOWING WRITTEN SUBMISSIONS :- JAJOO ENTERPRISES LTD. 8 1. 'WE HAVE ISSUED 20375 SHARES TO-M/S SPECIALITY P APERS LTD. DETAILS OF WHICH IS GIVEN BELOW: 2. WE HAVE ISSUED 625 FULLY PAID SHARES TO M/S SP ECIALITY PAPERS LTD. IN AY 2011-12 @ 8000/- PER SHARE IN WHICH SHARE CAPITAL R S. 100/- PER SHARE AND SHARE PREMIUM RS. 7900/- PER SHARE. 3. WE HAVE ISSUED 19750 PARTLY PAID SHARES TO M/S S PECIALITY PAPERS LTD. IN AY 2012-13 @ 2000/- PER SHARE IN WHICH SHARE CAP ITA! RS. 25/- PER SHARE AND SHARE PREMIUM RS. 1975/-PER SHARE. 4. THE TOTAL COMES TO 20375 SHARES ALLOTTED TO M/S SPE CIALITY PAPERS LTD.. 5. THE COMPLETE ADDRESS OF M/S SPECIALITY PAPERS LTD. IS AS BELOW: 93, DADISHETH AGIARY LANE, OFF KALBADEVI ROAD, MUMBAI - 400002 IN THIS CONNECTION, WE WOULD INFORM YOU THAT WE DO NO T KNOW THE SHRI SHIRISH CHANDRAKANT SHAH. WE HAVE DONE THE GENUINE T RANSACTION WITH M/S SPECIALITY PAPERS LTD. WE HAVE RECEIVED AMOUNT FROM M/S SPECIALITY PAPERS LTD. IN OUR SHARE CAPITAL AND SHARE PREMIUM ACCOUNT. W E HAVE ALREADY SUBMITTED YOU THE PAPERS RELATED WITH M/S SPECIALITY P APERS LTD.. THUS WE VEHEMENTLY OBJECT TO YOUR PROPOSED ACTION TO TRE AT THIS AS BOGUS. WE HAVE GENUINELY RECEIVED SHARE APPLICATION THROUGH B ANKS AFTER VERIFYING THE IDENTITY CAPACITY AND GENUINENESS OF THE INVESTORS. TH US WE HAVE DISCHARGE OUR ONUS TO PROVE THE SAME...' 9. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED . HE PROCEEDED TO REFER TO THE FINDINGS OF THE INVESTIGATION WING AND STATEMEN T ON OATH OF SHRI S.C. SHAH. HE HELD THAT THE ABOVE SAID FINDINGS CORROBORATE TH AT ALL CONCERNS RUN CONTROLLED/OPERATED BY SHRI S.C. SHAH ARE ENGAGED I N THE ACTIVITY OF PROVIDING ACCOMMODATION ENTRIES ONLY. THAT FROM THE INFORMATI ON RECEIVED IT IS DERIVED THAT THE ASSESSEE HAS TAKEN ACCOMMODATION ENTRIES I N THE NATURE OF BOGUS SHARE CAPITAL TO THE TUNE OF RS. 4.45 CRORES FROM S HRI M/S.SPECIALITY PAPERS LTD. THEREAFTER THE ASSESSING OFFICER REFERRED TO THE PROVISIONS OF SECTION 68 OF THE ACT AND HON'BLE SUPREME COURT DECISION IN THE C ASE OF SUMATI DAYAL VS. CIT [(1995) SUPP.(2)SCC453] AND ACCORDINGLY HE ADDE D SHARE CAPITAL TO THE TUNE OF RS. 4.45 CRORES AS UNDISCLOSED INCOME OF TH E ASSESSEE. 10. UPON ASSESSEES APPEAL LEARNED CIT(A) REFERRED TO THE SUBMISSION OF THE ASSESSEE. THEREAFTER HE ALSO REFERRED TO THE FINDIN GS OF THE INVESTIGATION WING OF JAJOO ENTERPRISES LTD. 9 THE INCOME TAX DEPARTMENT AND THE STATEMENT OF SHRI S.C. SHAH. HE REFERRED EXTENSIVELY TO THE STATEMENT OF SHRI S.C. SHAH, WHE REIN HE MENTIONED THAT SOME OF THE COMPANIES INCLUDING M/S. SPECIALITY PAP ERS LTD. WERE ENGAGED IN PROVIDING BOGUS SHARE APPLICATION MONEY AND ALSO BO GUS UNSECURED LOANS, LONG TERM CAPITAL GAINS AGAINST CASH RECEIVED FROM THE CLIENTS. THEY WERE NOT DOING ANY BUSINESS. LEARNED CIT(A) FURTHER MENTION ED THAT THE ASSESSEE ARGUED THAT HE HAS RECEIVED SHARE APPLICATION MONEY THROUGH BANK AND HE IS NOT AWARE OF ANY SHIRISH CHANDRAKANT SHAH. LEARNED CIT(A) REJECTED THIS CONTENTION AND REFERRED THE HON'BLE SUPREME COURT D ECISION IN THE CASE OF KANCHWALA GEMS (122 TTJ 854) WHICH HELD THAT PAYMEN T THROUGH CHEQUE ALONE DOES NOT DETERMINED THE GENUINENESS OF THE T RANSACTION AND THE ASSESSEE HAS TO PROVE ITS GENUINENESS TO THE SATISF ACTION OF THE ASSESSING OFFICER. HE NOTED THAT THE ASSESSEE IS BEING ASSESS ED TO TAX AND HAS SHOWN SOME TURNOVER AND SOME INCOME/LOSS. HOWEVER IN VIEW OF THE SPECIFIC STATEMENT OF SHRI S.C. SHAH ENTIRE TURNOVER OF THIS COMPANY IS BOGUS AND INCOME/LOSS RETURNED BY THEM IS UNRELIABLE. THEREAF TER LEARNED CIT(A) NOTED THAT THE ASSESSING OFFICER HAS ISSUED NOTICE U/S. 1 33(6) TO THIS COMPANY WITH A VIEW TO EXAMINE THE TRANSACTION OF THE ASSESSEE COM PANY. THAT THE ASSESSEE NEVER RESPONDED TO THE NOTICE. THEREAFTER REFERRING TO SECTION 68 OF THE I.T. ACT AND HON'BLE SUPREME COURT DECISION IN THE CASE OF S UMATI DAYAL (SUPRA), LEARNED CIT(A) CONFIRMED THE ADDITION. 11. AGAINST THIS ORDER ASSESSEE IS IN APPEAL BEFORE US. 12. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEE SHRI K. GOPAL REFERRED TO T HE ADDITIONAL GROUND BEING RAISED. HE SUBMITTED THAT THE REVENUE HAS PRIMARILY RELIED UPON THE STATEMENT OF SHRI S.C. SHAH FROM THE INVESTIGATION WING OF TH E INCOME TAX DEPARTMENT. THAT THE ASSESSEE WAS NEVER GIVEN OPPORTUNITY TO CR OSS EXAMINE THE SAID SHRI S.C. SHAH. FURTHERMORE, HE SUBMITTED THAT THE ASSES SEE HAS OBTAINED AFFIDAVIT FROM SHRI S.C. SHAH IN SUPPORT THAT HE HAS NO DEALI NG WITH THE ASSESSEE COMPANY AND THAT HE IS NOT ENGAGED IN PROVIDING ACC OMMODATION ENTRY. JAJOO ENTERPRISES LTD. 10 LEARNED COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE HAS PROVIDED ALL THE NECESSARY EVIDENCES FOR THE GENUINENESS OF THE TRAN SACTIONS. HE FURTHER SUBMITTED THAT OUT OF RS. 4.45 CRORES ADDED AS BOGU S SHARE CAPITAL, RS. 50 LAKHS WAS RECEIVED IN THE EARLIER ASSESSMENT YEAR. HENCE, THE SAME CAN NEVER BE ADDED U/S. 68 IN THE PRESENT ASSESSMENT YEAR. 13. PER CONTRA, LEARNED DEPARTMENTAL REPRESENTATIVE MS. SAMANTHA NULLAMUDI SUBMITTED THAT ADDITION HAS BEEN MADE ON THE BASIS OF CLEAR AND COGENT FINDING OF THE INVESTIGATION WING OF THE INC OME TAX DEPARTMENT THAT SHRI S.C. SHAH OPERATES BOGUS COMPANY TO PROVIDE AC COMMODATION ENTRIES. THE SAID M/S. SPECIALITY PAPERS LTD. FROM WHOM ASSE SSEE HAS RECEIVED SHARE CAPITAL WAS ONE OF THEM WHICH HAVE PROVIDED BOGUS A CCOMMODATION ENTRIES TO THE ASSESSEE COMPANY. LEARNED DEPARTMENTAL REPRESEN TATIVE FURTHER SUBMITTED THAT AT ANY TIME DURING TIME OF PROCEEDIN G AUTHORITIES BELOW, THE ASSESSEE HAS NEVER ASKED FOR AN OPPORTUNITY TO CROS S EXAMINE THE SAID PERSON SHRI S.C. SHAH. SHE FURTHER SUBMITTED THAT THE ASSE SSEE HAS MANAGED TO OBTAIN AFFIDAVIT OF THE SAID PERSON NAMELY SHRI S.C . SHAH HENCE NO PURPOSE IS BEING SERVED BY ASKING FOR CROSS-EXAMINE. MOREOVER, LEARNED DEPARTMENTAL REPRESENTATIVE REITERATED THAT THE SAID INVESTOR CO MPANY HAS NO FUND OF ITS OWN TO UTILISE FOR SHARE CAPITAL AND SHARE PREMIUM. THAT IT ONLY HAS FUND IN THE SHAPE OF SHARE PREMIUM RECEIVED FROM OTHER CONC ERNS. THAT THIS SUPPORTS THE FINDING OF INVESTIGATION WING, THAT IT IS A PAR T OF SURREPTITIOUS ROUTING OF MONEY IN SHAPE OF SHARE CAPITAL AND SHARE PREMIUM. SHE PLACED RELIANCE UPON THE HON'BLE SUPREME COURT DECISION IN CIT VS. N.R. PORTFOLIO PVT. LTD. INCOME TAX APPEAL NO. 1019/2011 DATED 22ND NOVEMBER, 2013. 14. UPON CAREFUL CONSIDERATION WE FIND THAT THIS AD DITION FOR SHARE CAPITAL AND SHARE PREMIUM HAS BEEN DONE BY THE ASSESSING OF FICER UPON FINDING OF THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT THA T ASSESSEE WAS RECEIPT OF BOGUS ACCOMMODATION ENTRIES FROM SHRI S.C. SHAH GRO UP OF COMPANIES. THE ASSESSING OFFICER HAS ISSUED NOTICE U/S. 133(6) TO THE ASSESSEE COMPANY. THERE WAS NO RESPONSE FROM THE SAID COMPANY. HOWEVER, LEA RNED COUNSEL OF THE JAJOO ENTERPRISES LTD. 11 ASSESSEE SUBMITS BEFORE US THAT AT NO POINT OF TIME THE ASSESSEE WAS ASKED TO PRODUCE DIRECTORS OF THE INVESTOR COMPANY. THAT IF THE SAME WAS DONE THE ASSESSEE WOULD HAVE MADE NECESSARY ENDEAVOR TO BRIN G REPRESENTATIVE/DIRECTOR OF THE COMPANY BEFORE AUTHORITIES BELOW. WE FIND TH AT NOTICE BY THE AUTHORITIES BELOW ISSUED U/S. 133(6) HAS REMAINED UNRESPONDED. FURTHER THE ASSESSEE HAS SUBMITTED CERTAIN DOCUMENTS INCLUDING FINANCIAL STA TEMENT OF THE INVESTOR COMPANY, FOR WHICH THE AUTHORITIES BELOW HAVE OBSER VED THAT THESE ARE PART OF SURREPTITIOUS ROUTING OF MONEY AND INVESTOR COMPANY WAS NOT DOING PROPER BUSINESS. IN OUR CONSIDERED OPINION FOR ADDITION U/S. 68 AS U NDISCLOSED INCOME FOLLOWING THREE INGREDIENTS HAVE TO BE EXAMINED :- (I) GENUINENESS OF THE TRANSACTION (II) IDENTITY OF THE PAYER (III) CREDITWORTHINESS 15. IN THE PRESENT CASE WE NOTE THAT THE LOWER AUTH ORITIES HAVE NOTED THAT NOTICE U/S. 133(6) HAS NOT BE RESPONDED. LEARNED CO UNSEL OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE WAS NOT REQUIRED TO PRO DUCE THE DIRECTOR OF THE INVESTOR COMPANY. WE FURTHER NOTE THAT THE ISSUE OF ADDITIONAL EVIDENCE AND ADDITIONAL GROUND ARE NO MORE GERMANE TO THE ISSUE AT HAND AS THE ASSESSEE HAS HIMSELF PRODUCED AFFIDAVIT FROM SHRI S.C. SHAH FOR THE PROPOSITION THAT HE IS NOT PROVIDING ACCOMMODATION ENTRY. 16. NOW THE ISSUE REMAINS EXAMINATION OF THE IDENTI TY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. THE SAME IS NOT CLE AR FROM THE DOCUMENTS ON RECORD. THE SAME IS ALSO COGENTLY NOT BROUGHT OUT I N THE ORDERS OF THE AUTHORITIES BELOW. LEARNED COUNSEL OF THE ASSESSEE SUBMITS THAT IF THE ASSESSEE IS ASKED TO PRODUCE REPRESENTATIVE/DIRECTO R OF THE INVESTOR COMPANY THE SAME CAN BE ATTEMPTED. IN THE FACTS AND CIRCUMS TANCES OF THE CASE WE DEEM IT APPROPRIATE TO REMIT THIS ISSUE OF ADDITION U/S. 68 OF THE ACT TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHA LL ISSUE NECESSARY NOTICES TO THE ASSESSEE COMPANY AND SHALL MAKE THE NECESSARY E XAMINATION WITH RESPECT JAJOO ENTERPRISES LTD. 12 TO IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TH E TRANSACTION. HE SHALL PROPERLY EXAMINE THE DOCUMENTS AND FINANCIAL STATEM ENT BEING SUBMITTED BY THE ASSESSEE COMPANY AND PASS A SPEAKING ORDER 17. WITH THESE DIRECTIONS WE REMIT THIS ISSUE TO TH E FILE OF THE ASSESSING OFFICER. NEEDLESS TO ADD THE ASSESSEE SHOULD BE GRA NTED ADEQUATE OPPORTUNITY OF BEING HEARD THE ASSESSEE IS FREE TO SUBMIT THE N ECESSARY DOCUMENTS AS IT DEEMS APPROPRIATE. 18. IN THE RESULT, APPEAL FILED BY THE ASSESSEE STA NDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED UNDER RULE 34(4) OF THE ITAT RULE S ON 27.10.2020 BY PLACING THE RESULT ON NOTICE BOARD. SD/- SD/- (SHAMIM YAHYA) (P.P. BHATT) ACCOUNTANT MEMBER JUSTICE-PRESIDENT MUMBAI; DATED : 27/10/2020 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) PS ITAT, MUMBAI