ZODIAC DEVELOPERS (INDIA) PVT. LTD., MUMBAI V. ITO - 11 (3)(4), MUMBAI

ITA 1407/MUM/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 4743 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 04-03-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Bogus Share capital; Tangible material; Accommodation entries; Reason to believe
• Section: 147; 68; 148; 132; 142(1); 133(6); 143(2); 191

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL “G” Bench, Mumbai Shri Shamim Yahya (AM) & Shri Amarjit Singh (JM) I.T.A. No. 1407/Mum/2020 (A.Y. 2010-11) M/s. Zodiac Developers (India) Pvt. Ltd. 404, Dev Plaza 68, S.V. Road, Andheri West Mumbai-400 058. PAN : AAACZ4112H Vs. ITO-11(3)(4) Room No. 429 4 th Floor Aayakar Bhavan M.K. Road Mumbai-400 020. (Appellant) (Respondent) Assessee by Shri S.C. Tiwari Department by Shri Hoshang B. Irani Date of Hearing 20.01.2022 Date of Pronouncement 11.04.2022 O R D E R Per Shamim Yahya (AM) : This appeal by the assessee is directed against the order of learned CIT(A) dated 28.1.2020 pertains to A.Y. 2010-11. 2. The grounds of appeal read a under :- 1. That on the facts and in the circumstances of the case of the appellant and in law learned CIT(Appeals) has erred in upholding the validity of re- opening of assessment u/s. 147 of the Act. 2. That on the facts and in the circumstances of the case of the appellant and in law learned CIT(Appeals) has erred in upholding the addition of Rs. 3,10,00,000/- made by the Assessing Officer. 3. Without prejudice to the generality of grounds of appeal no. 1 & 2 above, on the facts and in the circumstances of the case of the appellant and in law learned CIT(Appeals) has erred in not appreciating that the addition of Rs. 3,10,00,000/- made by the Assessing Officer is on inexistent facts. 4. Without prejudice to the generality of grounds of appeal no. 1 & 2 above, on the facts and in the circumstances of the case of the appellant and in law, learned CIT( Appeals) has erred in not appreciating that the addition of Rs. 3,10,00,000/- has been made by the Assessing Officer without bringing on the appellant's assessment records any material in support of the facts alleged by him. M/s. Zodiac Developers (India) Pvt. Ltd. 2 5. Without prejudice to the generality of grounds of appeal no. 1 & 2 above, on the facts and in the circumstances of the case of the appellant and in law learned CIT(Appeals) has erred in not appreciating that the addition of Rs. 3,10,00,000/- made by the Assessing Officer merely based on some communication received by him without verifying the correctness of the same and without confronting the appellant with any material in relation thereto. 6. Without prejudice to the generality of grounds of appeal no. 1 & 2 above, on the facts and in the circumstances of the case of the appellant and in law learned CIT(Appeals) has erred in holding that the appellant failed to support its explanation by any documentary evidence such as bank account statement, financial statements and confirmation of entities to prove that no such funds was given to the appellant. 7. Without prejudice to the generality of grounds of appeal no. 1 & 2 above, on the facts and in the circumstances of the case of the appellant and in law learned CIT(Appeals) has erred in holding that the appellant failed to produce such parties before the Assessing Officer. 8. That the order of learned CIT (Appeals) being contrary to the facts of the case, evidence and material on record and law applicable thereto should be set aside, amended or modified in accordance with the grounds of appeal deduced above. 9. Each of the ground of appeal enumerated above are independent of and without prejudice to one another. 10. That the appellant craves leave to reserve to herself the right to add to, alter or amend any of the aforesaid grounds of appeal at or before the time of hearing and to produce such further evidence, documents and papers in support of its claim as may be necessary. 3. Brief facts of the case are that the Assessing Officer has noted that in this case information received from Inv. Wing of IT Deptt., Mumbai that during search action by Ahmedabad Directorate in Mumbai at the residence and office of Shri Shirish C Shah on 09.04.2013. It was found that Shri Shirish C. Shah was engaged in providing accommodation entries of share capital, share premium, share application money etc. M/s. Zodiac Developers is one of the beneficiaries who have taken accommodation entries from following entities by way of bogus share application/share premium: Sr. No. Name of bogus concern F.Y. Amount of transaction 1 Empower Industries India Ltd. 2009-10 11000000 M/s. Zodiac Developers (India) Pvt. Ltd. 3 4. It is seen that the assessee has entered into bogus transactions in form of receipt of share premium/share application money and above parties have only issued accommodation entries to the tune of Rs. 3,10,00,000/-. The case was re-opened to reassess the income and notice u/s.148 dated 09.03.2015 was issued. Reasons for reopening were provided to assessee on 11.5.2016 vide letter dated 11/05/2016. Assessee filed objection vide letter dated 25.05.2015 which was rejected vide letter dated 29.07.2015. Further notices u/s 143(2) and 142(1) of the I T Act dated 08.09.2015 were issued. In this case, the Assessing Officer had reason to believe that income has escaped assessment and accordingly, the assessment has been reopened by issue of notice u/s. 148 dated 09/03/2015 served upon the assessee on 11.03.2015. Thereafter notices u/s 143(2)/142(1) dated 08.09.2015 were issued and served on the assessee. 5. The assessee responded as under : 3. In response to the notice, the assessee filed letter dated 21.09.2015 therein stated that "the following transaction were recorded in books of account during the said assessment year 1. The shareholder of the company gave cheques of Rs.1,00,000/- for their contribution to share capital. The same was credited to share capital account and debited to bank account as cheques in hand. 2. One director of the company incurred preliminary expenses (ROC Charges) of Rs. 1,18,300/- on behalf of company. The same was debited to preliminary expenses account and credited to director account as a loan. 3. One professional person (Company Secretary) gave a bill of Rs. 10.000/- for his professional charge for the formation of work of the company. The same was debited to preliminary expenses account and credited to professional account as sundry creditors. Since no transaction were done (except above mentioned three transaction), most of the details desired by you either nil or not applicable. Further we are enclosing the copy of the return of income, balance sheet and profit & Loss account for the A.Y.2010-11." 6. However, the Assessing Officer was not satisfied. He held as under : During course of scrutiny proceedings, details regarding transactions were called from Cosmos bank. Correspondence was done with DIT (Inv.)-2, M/s. Zodiac Developers (India) Pvt. Ltd. 4 Mumbai. Reply dated 11.03.2015 was received from ADIT(Inv) Unit5(2) wherein it was stated that further correspondence in the matter should be sought with office of the DDIT(Inv), Unit-1(3), Ahmedabad. Further telephonic conversation with DCIT Cent Cir-1(1) was done to provide further details of transactions. They suggested to enquire about bogus concern parties i.e. that Empower Industries India Ltd and Shri Ganesh Spinners Ltd. who has provided accommodation entries to the assessee company. Simultaneously notice u/s 133(6) was issued to Empower Industries Pvt. Ltd. In the absence of any details like PAN and address etc no notice u/s. 133(6) issued to Shree Ganesh Spinners Ltd. The ledger of Empower Industries India Limited reflect two entries of Rs. 60,00,000/- (dated 26.03.2010) and 50,00,000 (dated 29,03.2010) on the debit side, It means that some transaction have been entered into. Further on perusal of bank statement (Yes Bank) of Empower Industries India Limited, it is seen that there has been a said transaction via RTGS. 4.1 Further show cause dated 08.03.2016 was issued to the assessee to explain nature of these transactions and date of hearing was fixed on request of the assessee on 17.03.2016. Assessee has failed to furnish any details regarding transactions and he did not appear on the date fixed for hearing. One more opportunity is given to assessee vide show cause notice dated 21.03.2016, in which it is mentioned that the explanation of the assessee should reach on or before 28/03/2016 failing which it will be presumed that assessee has no explanation to offer and accordingly amount of Rs. 3,10,00,000/- will be added in the total income. 7. Upon assessee’s appeal as regards challenge to reopening learned CIT(A) held as under :- “7.1.2 Upon careful perusal of the assessment order and material on record, I find that the AO was in receipt of tangible material from reliable source, viz., the Investigation Wing of the Income Tax Department, Mumbai that during search action by Ahmedabad Directorate in Mumbai at the residence and office of Shri Shirish C Shah on9.4.2013, it was found that Shri Shirish C. Shah was engaged in providing accommodation entries of share capital, share premium, share application money etc. and the appellant company is one of the beneficiaries who has taken accommodation entries from two entities, M/s. Empower Industries India Ltd. and M/s. Shri Ganesh Spinners Ltd. by way of bogus share application/share premium money amounting to Rs.3,10,00,000/-. The fact of providing accommodation entry towards loan has been unearthed by the Investigation Wing during the course of search action at the residence and office of Shri Shirish C Shah on 09.04.2013. Therefore there was sufficient reason to believe that income chargeable to tax to that extent has escaped assessment within the meaning of Section 147 of the Income Tax Act. The information so received by the Assessing Officer has live link with reason to believe that income has escaped assessment. At the time of issue of notice u/s. 148, there has to be prima facie belief based on some tangible and material information about escapement of income and there is no necessity to prove the guilt. In this regard, reference is made to M/s. Zodiac Developers (India) Pvt. Ltd. 5 the decision of the Hon'ble Apex Court in the case of CIT(A) vs. Rajesh Jhaveri Stock Brokers P. Ltd, 291 ITR 500 wherein it is held as under: "Section 147 authorizes and permits the Assessing Officer to assess or reassess income chargeable to lax if he has reason to believe that income for any assessment year has escaped assessment The word "reason" in the phrase "reason to believe" would mean cause or justification. If the AO has cause or justification to know or suppose (hat income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the AO should have finally ascertained the fact by legal statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Ltd, vs. ITO(1991) 191 ITR 662, for initiation of action under section 147(a) (as the provision stood at the relevant time fulfillment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is "reason to believe", but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief whether the materials would conclusively prove, the escapement is nut the concern at that stage. This is so because the formation of belief by the AO is within the realm of subjective satisfaction as held in ITO vs. Selected Dalurband Coal Co. (P.) Ltd. (1996) 217 ITR 597 (Supreme Court): Raymond Woollen Mills Ltd. vs. ITO (1999) 236 ITR 34 (Supreme Court)." 7.1.3 On careful perusal of the assessment order, besides fulfillment of the condition of tangible material available with the Assessing Officer the case of the appellant to form a belief regarding escapement of income chargeable to tax, it is observed that after recording the reasons, the appellant's case for the impugned assessment year was reopened by issuing notice u/s.148 of the Income Tax Act which was served on the ' assessee. The reasons recorded for reopening of the assessment was duly provided to the assessee on 11.05.2015 vide letter dated 11.05.2015 upon request made by the assessee. The objection raised by the appellant vide letter dated 25.05.2015 was rejected vide letter dated 29.07.2015 by passing speaking order. Further, notice u/s. 143(2) and 142(1) along with questionnaire were issued and served on the assessee. The assessee filed written submission response to the aforesaid notices. In the given facts and circumstances, I find no infirmity in the Assessing Officer reopening the assessment of the impugned assessment year of the appellant. The procedural maxim laid down in the Act and by judicial precedents in particular by the Hon'ble Supreme Court in the case of M/s. GKN Driveshafts (India) Ltd. vs. Income-tax Officer [2002] 125 Taxman 963 (SC) has been scrupulously followed by the Assessing Officer in reopening the assessment of impugned assessment year. In view of the foregoing facts and settled position of law, the grounds raised by the appellant are untenable. Accordingly, the grounds of appeal No. 1 & 2 are dismissed.” M/s. Zodiac Developers (India) Pvt. Ltd. 6 8. On merits learned CIT(A) held as under :- 7.2.4 On perusal of the above documents, it is observed that that the appellant company was incorporated on 22.03.2010. The bank account statement of Cosmos Cooperative Bank Ltd. is for the period of 20.04.2010 to 10.07.2010. The above bank statement does not obviously reflect the transactions executed on 29.03.2010. It is also noticed that the reference year and the date in the certificate issued by the Cosmos Cooperative Bank Ltd. Andheri (West) Branch, Mumbai is overwritten, hence the authenticity of the document is doubtful. The balance sheet for the period 01.04.2009 to 31.03.2010 shows bank account balance on the asset side at Rs. 1,00,000/-. While share capital is also shown at Rs. l,00,000/-. This indicates that the appellant has bank account during the F.Y. 2009-10 relevant to A.Y. 2010- 11 under consideration. However, appellant has not submitted bank account statement for the period 01.04.2009 to 31.03.2010 and the Ld.AR of the appellant has chosen to produce and submit the bank account statement of Cosmos Cooperative Bank Ltd. only for the period from 20.04.2010 to 10.07.2010. It is pertinent to point out here that in the course of search action u/s.132 in the case of Shri Shirish C. Shah on 09.04.2013, it was found that the appellant company has taken accommodation entries from two entities, M/s. Empower Industries India Ltd. and M/s. Shri Ganesh Spinners Ltd. by way of bogus share application/share premium money amounting to Rs.3,10,00,000/- and this fact is confirmed by the Ledger Account collected by the Assessing Officer u/s. 133(6) from one of the parties, M/s. Empower Industries India Ltd. who applied for the shares of the appellant company. The crux of the matter is that the appellant has not disclosed these facts neither in the return filed nor during the assessment proceedings despite the fact that the Assessing Officer has issued show cause notice on two instances wherein the appellant was communicated that in the absence of any explanation and cogent proof to contradict the findings of the Investigation Wing and material on the record of the Assessing Officer, the sum of Rs.3,10,00,000/- will be added as unexplained cash credit u/s.68 of the Income Tax Act, 1961. In the appellate proceeding also no tangible material has been produced to controvert the findings of the Assessing Officer. 7.2.5 In this regard, I find it appropriate to refer to the ratio held by the Hon'ble Bombay High Court in the case of Arunkumar J. Muchhala vs. The Commissioner of IncomeTax-8, in its order dated 24 August, 2017. The Hon'ble Court held as, “When even after giving opportunities, The Appellant had failed to produce relevant documents and explain the nature and source of the amount received by him as narrated above; the order of the Assessment officer and the appellate authorities in respect of those amounts is justified." 7.2.6 I find the appellant has failed to support its explanation by any documentary evidence such as bank account statements, financial statements and confirmation of the aforesaid entities to prove that no such funds was given to the appellant. The said parties were not produced before the AO during the assessment proceedings for deposition and verification despite the fact that the appellant was made aware of the tangible materials received by the AO unearthed in the course of search action u/s. 132 and M/s. Zodiac Developers (India) Pvt. Ltd. 7 those collected in the assessment proceedings. In the said facts and circumstances, the addition made u/s. 68 is sustained. In doing so, I take support of the decision held by the Hon'ble Bombay High Court in the cited above. I hereby confirmed the addition made by the Assessing Officer. The grounds of appeal are accordingly dismissed.’’ 9. Against the above order assessee is in appeal before us. 10. We have heard both the parties and perused the records. Learned Counsel of the assessee submitted that the assessee did not enter into the said transaction and claimed that there is no record as such. 11. Learned Departmental Representative submitted that assessee failed to provide the details. Further he submitted that the assessee deliberately did not provide complete bank statement. He referred to the Assessing Officer’s observation submitted as under : “2. In this connection, it is submitted that on perusal of para 4 of the assessment order and the case records, it is seen that the Assessing Officer had correctly mentioned the facts in para 4 of the assessment order. It is observed that the AO had made enquiries with M/s. Empower Industries India Ltd. by issue of notice u/s. 133(6) of the Act. In response, the said party had submitted ledger confirmation supported by bank statement. From the same, it is seen that the amounts of Rs.60 lakhs and 50 lakhs on 26.03.2010 and 29.03.2010 respectively were transferred to the assessee by way of debit entry of RTGS. Certified copies of reply of M/s. Empower Industries India Ltd. along with ledger confirmation and bank account highlighting the relevant entries are enclosed herewith for kind perusal. 3. During the course of the appellate proceedings, enquiries were made with various banks wherein the accounts have been maintained by the assessee during the year. Accordingly, the bank statements of the assessee from Cosmos Bank and HDFC Bank have been obtained. From the same, it is seen that the said amounts have been credited in the accounts of the assessee. Therefore, it is clear that the assessee has received the amounts totalling to Rs.1,10,00,000/- from M/s. Empower Industries India Ltd. and Rs.2 cores from M/s. Shri Ganesh Spinners Ltd during the financial year relevant to the assessment year under consideration. Copy of the certified copies of the bank statements highlighting the relevant entries are enclosed herewith for kind perusal. 4. From the above, it is clear that the assessee has received the sum of Rs.3.10 crores from two accommodation entry providers during the year. Therefore, the denial of the assessee that it had not received the said sum is of no us in view of the evidences submitted as above.” M/s. Zodiac Developers (India) Pvt. Ltd. 8 12. Upon careful consideration as regards the validity of reopening of the case we find that learned CIT(A) has elaborately and reasonably dealt with the issue. We fully agree with learned CIT(A) that the Assessing Officer was in receipt of tangible material from the reliable source of Investigation Wing of the Income Tax Department. Information so received had live link with the reason to believe that income has escaped assessment. The reliance by learned CIT(A) appears on the decision of Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd. (91 ITR 500) is fully applicable. Hence, we do not find any infirmity in the order of learned CIT(A). 13. As regards the merits of the case we note that consequent upon information that the assessee has engaged in obtaining bogus accommodation entry the tune of Rs. 3.10 crore, assessee has except for denial not provided any cogent material to respond to the query raised in this regard. Assessee has not submitted the relevant details called for. The assessing officer has noted that assessee has wanted time to provide the necessary details but had failed to do so despite repeated notices. The learned CIT(A) has also given the finding that assessee’s denial that the transaction was not entered cannot be accepted as assessee has failed to submit full bank account and submitted only part of Bank account. We find learned CIT(A) is correct in holding that when the assessee has been found to be engaged in bogus accommodation entry by investigation wing and assessee simply denies the same without submitting complete details of bank statement assessee's plea has no legs to stand. In this view of the matter we do not find any infirmity in the orders of authorities below. 14. In the result appeal by the assessee stands dismissed. Order pronounced in the open court on 11.04.2022. Sd/- Sd/- (AMARJIT SINGH) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated : 11/04/2022 M/s. Zodiac Developers (India) Pvt. Ltd. 9 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