The DCIT, Circle-1(1), Ahmedabad V. M/s. Aavas Infrastructure & Gruh Finance Ltd., Ahmedabad

ITA 303/AHD/2019

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 8010 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 27-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MEHUL K. PATEL
• Keywords: Bogus Share capital; Unexplained expenditure; Depreciation; Loose papers; Principle of natural justice; Question of law; Accommodation entries; Capital Gains
• Section: 68; 132; 143(3); 73; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD [CONDUCTED THROUGH VIRTUAL AT AHMEDABAD] BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER& Ms. MADHUMITA ROY, JUDICIAL MEMBER I .T .A . N o . 3 0 2/ A h d /2 0 19 ( A s s e s s me nt Y ea r : 20 1 2- 13 ) D C I T , C e ntr al C ir cle - 1 ( 1 ) , A h m e d a ba d V s . M / s. A da r sh C ap it a l F in s t oc k Ltd . 30 1, C it y Pr i d e C o m pl e x , N r . N al a n da H ote l, M i tha k h a l i S i x R oa ds , El li sb ri d ge , N a vr a n g pu ra , A h m eda ba d [ P A N N o . A A B C A 9 3 4 4 B ] (Appellant) .. (Respondent) I .T .A . N o . 3 0 3/ A h d /2 0 19 ( A s s e s s me nt Y ea r : 20 1 2- 13 ) D C I T C e ntr al C ir cle - 1 ( 1 ) , A h m e d a ba d V s . M / s. A a va s I n f r a s t r uc t ur e & G r u h Fi na nc e Lt d. 2 3 53 , K al up ur K ot N i R a ng , O p p . N e w Fr ui t Ma r ke t, K a l up u r , A h me da b a d [ P A N N o . A A B C A 6 3 73 J ] (Appellant) .. (Respondent) Revenue by : Shri Alok Kumar, Sr. DR Assessee by : Shri Mehul K. Patel, AR D a t e of H ea r i ng 02.09.2021 D a t e of P r o no u n ce me nt 23.11.2021 O R D E R PER Ms. MADHUMITA ROY - JM: Both the appeals filed by the Revenue are directed against the orders both dated 17.12.2018 passed by the Ld. CIT(A)-11, Ahmedabad arising out of the orders both dated 31.03.2015 passed by the Ld. DCIT, ITA No.302/Ahd/2019 & ITA No.303/Ahd/2019 DCIT vs. M/s. Adarsh Capital Finstock Ltd. & Aavas Infrastructure & Gruh Finance Ltd. Asst.Year –2012-13 - 2 - Central Circle-1(1), Ahmedabad under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred as to “the Act”) for the Assessment Year (A.Y.) 2012-13 whereby and whereunder the addition made by the Ld. AO on account of share capital and share premium has been deleted. ITA No. 302/Ahd/2019(A.Y. 2012-13):- 2. The appellant company is engaged in the business of financing and share trading. It also carries out investment activities in shares and securities. The company registered with RBI as NBFC filed its return of income on 29.09.2012 declaring total loss at Rs. (-) 7,89,937/-. The appellant company has issued 3,05,000 shares having face value of Rs. 10/- each at premium of Rs. 52/- per share to three parties namely Sanguine Media Ltd., Specialty Papers Ltd. and Yantra Natural Resources Ltd. (Ganesh Spinners Ltd.), 1,05,000 shares to each and received Rs. 30,05,000/- towards share capital and Rs. 1,58,60,000/- towards share premium aggregating to Rs. 1,89,10,000/-. In response to the notice regarding the details of increase in share capital, the assessee furnished complete documents in support of share capital and share premium received during the year alongwith a detailed submission dated 29.01.2015 followed by another written submission dated 23.03.2015 objecting the show-cause issued directing the assessee to explain as to why the addition under Section 68 of the Act should not be made in its hands. However, the assessment was completed upon assessing income at Rs. 1,89,10,000/- which was added to the total income of the assessee under Section 68 of the Act being share capital/premium received ITA No.302/Ahd/2019 & ITA No.303/Ahd/2019 DCIT vs. M/s. Adarsh Capital Finstock Ltd. & Aavas Infrastructure & Gruh Finance Ltd. Asst.Year –2012-13 - 3 - from the above mentioned three companies as unexplained on the alleged ground that the said companies are paper/shell companies and share capital and share premium so received during the year is in the nature of accommodation entries. The income has been assessed without giving the effect/set off of current year business loss/unabsorbed depreciation as shown in the return of income. The addition was subsequently deleted by the Ld. CIT(A). Hence, the instant appeal before us. 3. We have heard the respective parties and perused the relevant materials available on record. 4. The fact culled out from the order of the Ld. AO is this that a search under Section 132 of the Act was conducted in the case of one Amrapali Group of Ahmedabad on 26.10.2012 and subsequent days. In connection with the said group survey was conducted at the premises of the assessee at Ahmedabad on 30.01.2013. Consequently a search and survey action was carried out at the residence and offices of one Shri Chandrakant Shah and at the residence of his key employees and associates on 09.04.2012 and thereafter. A “N. Navkar Sheet” was found and seized by the Revenue during the course of search proceeding carried out in the case of Shri Chandrakant Shah. It was further found that Shri Shah was engaged in providing accommodation entries of share capital, share premium, share application money, unsecured loans, long term capital gains, short term capital gains wherein cash was received by him from various clients against which he provides accommodation entries. Further that, he has created an infrastructure of 212 companies which are used for layering of funds and ITA No.302/Ahd/2019 & ITA No.303/Ahd/2019 DCIT vs. M/s. Adarsh Capital Finstock Ltd. & Aavas Infrastructure & Gruh Finance Ltd. Asst.Year –2012-13 - 4 - purchase and sale of shares as claimed to have been found from such N. Navkar Sheet. Relying upon the seized document and the statement of various directors of different companies as mentioned above finally the Ld. AO came to a conclusion that all the companies from whom the assessee had received share capital with premium are paper companies having no business activities, controlled and managed by Shri Shah and used by him for providing accommodation entries. The fact that payments were received through cheques and banking channel and the party filed confirmation failed to satisfy the AO’s doubt in regard to the creditworthiness and genuineness of the transaction. Thus, the share capital with premium of Rs. 1,89,10,000/- received in the books of accounts of the assessee from three companies namely Sanguine Media Ltd., Specialty Paper Ltd. and Yantra Natural Resources Ltd. (Ganesh Spinners Ltd.) was treated as unexplained within the meaning of Section 68 of the Act and added the total income of the assessee. 5. We find that on the basis of the detail of evidences found during the course of search Revenue has claimed establishing the following facts:- (i) Details of 220 bank accounts and more than 300 Blank and signed cheque books, bank statements, bank deposits- withdrawal and RTGS slips were found. These pertain to 210 companies including 16 listed companies managed and controlled by him and used for providing accommodation entries by Shrirish Chandrakant Shah. (ii) Directors of the companies have been found to be dummy and for namesake. Statements of persons who are Directors in large number of ITA No.302/Ahd/2019 & ITA No.303/Ahd/2019 DCIT vs. M/s. Adarsh Capital Finstock Ltd. & Aavas Infrastructure & Gruh Finance Ltd. Asst.Year –2012-13 - 5 - companies, have been recorded wherein they have admitted that they are mere name lenders. Notarized declarations have also been filed by a number of Directors wherein they have stated that they are only name lenders and do not know about the activities of the companies in which they are Directors. (iii) PAN Cards, seals of the companies, original stamp, records of statutory compliance as well as user Id and password of e-banking etc. of all these companies have been found and taken record of during the search and survey proceedings. (iv) Regular accounts as well as accounts w.r.t to accommodation entry maintained and found at premises of SCS (v) Companies do not having any offices (in fact the registered shown are professional arrangement with persons for receipt of correspondence) 6. The further case of Revenue is this that the records providing accommodation entries are maintained by Shri Shah in cash sheets as well as in various account maintained in the name of intermediaries who have introduced clients to Shri Shah; the statement of Shri Shah and his employees established that the main intermediary through whom clients of Ahmedabad availed accommodation entries from Shri Shah is Shri Rajesh Jhaveri as claimed to have been found from the seized material mainly the N. Navkar Sheet. It was further found that OT entry of share capital of 1,89,10,000/- have also been provided by Shri Shah to the assessee ITA No.302/Ahd/2019 & ITA No.303/Ahd/2019 DCIT vs. M/s. Adarsh Capital Finstock Ltd. & Aavas Infrastructure & Gruh Finance Ltd. Asst.Year –2012-13 - 6 - company. These onetime entries have also been found to be mainly paid against receipt of cash by Shri Shah from the Said Rajesh Jhaveri. Further that the directors of those companies from whom the assessee have received credits are dummy directors and name lenders as directed by an employee of Shri Shah as per the declaration and/or affidavit filed by those directors. 7. On the basis of the statement of Shri Shah recorded under Section 131 of the Act on 13.01.2014 and in view of the admissions and declaration of the directors as aforesaid the assessee was directed to discharge the onus as per provision of Section 68 of the Act to prove the creditworthiness of the parties, genuineness of the transaction in which the assessee has received credits to the tune of Rs. 12,29,45,000/-. 8. The assessee claimed to have discharged the primary onus cast on it under Section 68 of the Act by submitting the confirmations, copy of account, PAN of the parties who have invested in the assessee company through banking channels. However, the Revenue was of the view that the assessee failed to discharge the onus with regard to funds received in its accounts for the following reasons as it appears from the order passed by the Ld. AO: The funds received in the assessee company as share capital/premium have been paid by Shri Chandrakant Shah’s (SCS) companies against receipt of cash/other credits that has been recorded in the seized evidence in the name of Rajesh Jhaveri. ITA No.302/Ahd/2019 & ITA No.303/Ahd/2019 DCIT vs. M/s. Adarsh Capital Finstock Ltd. & Aavas Infrastructure & Gruh Finance Ltd. Asst.Year –2012-13 - 7 - The SCS companies from which funds have been received by the assessee do not have any business activities, have dummy directors and are operated and managed by SCS, as detailed at Annexure-1. Therefore, the creditworthiness of the companies from whom the share capital has been received, is not proved. Further, SCS has accepted that the funds paid in these companies are one time accommodation entries paid against receipt of cash or squaring off transactions and the same is also corroborated with the evidence seized/impounded during the course of search and survey action in case of SCS. 9. However, it appears from the records that during the course of assessment proceeding the assessee submitted the following evidences/materials in support of share capital/premium received during the year which fact has not been denied by the Ld. AO: (i) Statement showing number of shares allotted to each of the company and the price at which the shares have been allotted. (ii) Letter of all 3 companies for share application and the payment made by them in the bank account of the appellant company through RTGS. (iii) Resolution passed by the Board of Directors of the respective companies authorizing investment in shares of the appellant company. (iv) Confirmation of all the 3 companies. ITA No.302/Ahd/2019 & ITA No.303/Ahd/2019 DCIT vs. M/s. Adarsh Capital Finstock Ltd. & Aavas Infrastructure & Gruh Finance Ltd. Asst.Year –2012-13 - 8 - (v) Copy of PAN card of all the companies. (vi) Necessary forms filed with ROC for allotment of shares to the respective companies. (vii) Copy of Ack. of ITR filed, Bank statements reflecting payment to the appellant company towards share capital/premium and audited accounts of Sanguine Media Ltd., Specialty Papers Ltd., and Yantra Natural Resources Ltd. [Ganesh Spinners Ltd] showing the investments made in the share capital/share premium of the appellant company. 10. We, in fact, find substances in the case made out by the assessee as also submitted by the Ld. AR that Ld. AO has not disproved/discredited the above documents placed on record, neither proceeded to carry out any enquiry thereon. 11. Upon perusal of the records of the matter and the order passed by the authorities below we find inter alia the following factors as required to be considered in its proper perspective in order to adjudicate upon the issue before us. As per the details filed by the appellant company the status of all the three companies in question as on the date is “ACTIVE” as per the records of the Ministry of Corporate Affairs. Therefore, the investor companies cannot be held to be as paper/shell companies as observed by the Ld. AO. Another important factor, as it reveals from the records, that the N Navkar Sheet as seized during the search does not bare any entry and/or noting in the columns of “Paid” or “Received” against the transactions of the assessee company alleged to has been found and noted in the said sheet ITA No.302/Ahd/2019 & ITA No.303/Ahd/2019 DCIT vs. M/s. Adarsh Capital Finstock Ltd. & Aavas Infrastructure & Gruh Finance Ltd. Asst.Year –2012-13 - 9 - on 28.03.2012. This particular fact was also brought to the notice of the Ld. AO while filing written notes of submission by the assessee which we find has not been taken care of in its proper perspective. The initial/primary burden cast upon the assessee under Section 68 of the Act as regards the identity of the shareholder has been meted out by the assessee by submitting PAN Card, registered address of the respective companies, company master data from the website of MCA and details downloaded from the website of BSE. The document being the bank statement, confirmation and audited accounts of the respective company showing investment in share/capital premium of the appellant company proves the genuineness of the transaction as claimed by the assessee seems to be correct as we find from the records. The audited accounts of the respective company showing substantial net worth affirm creditworthiness of those companies. Furthermore, the three companies are listed companies fact of which cannot be brushed aside. 12. We find that on this aspect the appellant before us relied upon the judgment passed by the Hon’ble Madhya Pradesh High Court in the case of PCIT (1), Indore vs. Chain House International (P.) Ltd. reported in, 98 taxmann.com 47 wherein it has been held that “Once genuineness, creditworthiness and identity of investors are established, no addition could be made as cash credit on the ground that shares were issued at excess premium”. The similar identical issue was examined with respect to 5 companies said to be managed and controlled by SCS out of which there is one company as in the instant case before us has also received share capital ITA No.302/Ahd/2019 & ITA No.303/Ahd/2019 DCIT vs. M/s. Adarsh Capital Finstock Ltd. & Aavas Infrastructure & Gruh Finance Ltd. Asst.Year –2012-13 - 10 - and share premium namely Yantra Natural Resources Ltd. The Ld. CIT(A) has also considered the judgment as it appears from the order impugned before us. While deciding the issue in favour of the assessee the Hon’ble Court was pleased to observe as follows: “Principal Commissioner of Income-tax (1) Indore v. Chain House International (P.) Ltd. [20181 98 taxmann.com 47 (Madhya Pradesh) Facts - During the course of search, it had been allegedly revealed that the assessee had received an unsecured loan of Rs. 30 crores from company 'BSPL' who shown to have got a bogus share application money and premium of Rs. 55 crores from 5 entry providing companies viz. Aadhaar Ventures (Rs.40.75 crores), Emporis Project (Rs.3 crores), Dhanus Technologies (Rs. S.75 crores), L.W. Polyester (Rs.0.75 crores) and Yantra Natural Resources (Rs.0.75 crores) during the Financial Years 2011-12 and 2012-13 in the form of accommodation entries and the some share capital with exorbitant premium from the said 5 companies against payment of unaccounted cash which was inter-alia routed back as share capital and share premium during financial years 2011-12 & 2012-13. Further, it was allegedly found that BSPL had transferred the said receipts of Rs. 55 Crores of bogus share capital and premium to the main Group companies i.e., Rs.30 Crores during the financial year 2011-12 as unsecured loan which was transferred to the assessee company and again Rs. 8 Crores during the financial year 2012-13 as unsecured loan were transferred to the assessee-company and further during financial year 2012-13 and Rs. 17 Crores was transferred as unsecured loan to company RCCPL During the investigation, it was allegedly found that commission at the rate of 5 per cent had been charged by the aforesaid 5 entry providers companies for providing accommodation entries, therefore, commission of Rs. 1.50 Crores (5 per cent of Rs. 30 Crores) for the financial year 2011-12 and Rs. 1.25 Crores (5 per cent of Rs. 25 Crores) for financial year 2012-13 was added to the total income on the assessee company for infusion of accommodation entries as unexplained expenditure. Held - The Tribunal after due examination of the order of Commissioner (A) and the documents on record insofar as identity creditworthiness, genuineness of transaction of Aadhaar ventures, Dhanush Technologies, Emporis Projects and L.N. Industries (formerly known as L.N. Polyster) came to the conclusion that the assessee company having received share application money through bank channel and furnished complete details of bank statements, copy of accounts and complied with notices issued and the directors of the subscriber company also appeared with books of account before the appellate authority and confirmed the investment made by them with the assessee company, therefore, the identity and creditworthiness of investor and genuineness of transaction of the share applicant has been proved in the light of the ratio laid down by the M.P. High Court, Delhi High Court and the Supreme Court and were of the opinion that the onus cast upon the assessee as provided under section 68 has been duly discharged by the assessee the Identity of the share ITA No.302/Ahd/2019 & ITA No.303/Ahd/2019 DCIT vs. M/s. Adarsh Capital Finstock Ltd. & Aavas Infrastructure & Gruh Finance Ltd. Asst.Year –2012-13 - 11 - subscriber, creditworthiness and genuineness of the transaction is not to be doubted. The Tribunal considered the case of the each company in great detail and recorded its finding. The aforesaid findings of fact recorded by the Tribunal are based on the material available on record which is a finding based on appreciation of evidence on record. 14. The statement of Shrish Chandrakant Shah (SCS) was recorded by the appellate authority wherein he stated that he was not engaged in providing any accommodation entries and on the contrary he was in the business of providing consultancy services and data hub services to various companies. He was also engaged in purchase and sale of shares. He disowned his earlier statement and stated that the same was recorded under fear. 19. Shri Dhiresh Uttamchand Munver, Driector of M/s. Emporis Project Ltd. and M/s. Yantra Natural Resources Ltd. stated that he knew BSPL and its directors since 7-8 years. He also knows other business entities of Naresh Kumar namely Rohtak Chain and Chain House. He also confirmed the investment made in BSPL by both of his companies. He also produced book of accounts of both the companies. The investment made was found duly recorded in the books of accounts which were examined by the CIT(A). He also provided bank accounts of his companies and categorically explained the source of investments. He also denied that his companies were managed by Shrish Chandrakant Shah (SCS). SCS was simply a consultant. He further stated that his company was not engaged in any accommodation entry business. 20. After considering the entire factual scenario of the case, the appellate authority found that the earlier statements did not merit acceptance for the reasons such as earlier statements were recorded behind the back of the assessee and also behind the back of the AO. No opportunity of cross examination was allowed despite specific and repeated requests. The earlier statements were recorded much before the search on the appellant company. BSPL was not in the picture and was not an issue during these statements. In such statements none had named BSPL and heid that the statement recorded by the CIT (Appeals) are more authentic in all respect and held as under :- "I examined this issue in detail and found that there is no evidence to prove, firstly generation of unaccounted cash and transfer of such cash to others for obtaining accommodation entries. I have also found that during the course of search at the appellant company and also on its associate companies and residence of the directors when every corner of the house was searched, not a single paper, evidence or record was unearthed by the search team which support the allegation of generation of any unaccounted cash and transfer of such cash for the purpose of obtaining accommodation entries. In the absence of any evidence of such cash transfer, the AO was unjustified in holding that the appellant company had routed back its own unaccounted cash. In this connection it would be also relevant to state that during the process of examining these investor companies I have found that there is no transfer of cash from the appellant company to these investor companies ITA No.302/Ahd/2019 & ITA No.303/Ahd/2019 DCIT vs. M/s. Adarsh Capital Finstock Ltd. & Aavas Infrastructure & Gruh Finance Ltd. Asst.Year –2012-13 - 12 - or to anybody else for this purpose. I hold that there is no generation of cash outside the books of account and also there is no transfer of any such cash by the appellant company to anyone else and, therefore, I hold that there is no accommodation entry and the share capital received is genuine." 25. The appellate authority had considered all the issues raised before her and had recorded her findings separately, on the conclusion of the assessing officer that the assesses had received bogus share capital and premium of Rs.55.00 Crores as held as under :— "The appellant company had filed enormous evidences in support of the identity, creditworthiness and genuineness of the transaction during the assessment proceedings. I have examined all such evidences. All the five listed companies have been examined by me. Statements recorded. They have admitted to have invested in the share capital. They produced their books of accounts wherein the transactions of investment in the appellant company were found recorded. They have explained the source of investment. The entire amount of share capital has been received through banking channel. All the five companies have their definite addresses. Notices and summons have been served and complied with. No involvement of cash has been found anywhere. Even after conducting extensive enquires from various bank accounts of the source of the investor companies up to 6-7 levels no cash deposit was found in any of the bank account of different parties. All the five companies are assessed to tax and have been allotted permanent account numbers. All of these are listed in Bombay Stock Exchange. All the five companies have produced the audited balance sheets and such Balance Sheets have declared investment made by them in the appellant company...,,...,," "In view of the above facts and circumstances, I hold that the share capital has been genuinely received and genuinely reinvested. I am also satisfied with identity, creditworthiness of the investors, and genuineness of the transactions. Therefore, f am satisfied that the condition u/s 68 stands satisfied. Hence the conclusion of the AO is rejected." 26. On the allegation of the assessing officer regarding appointment of dummy directors, the appellate authority held the following:— "The appellant company had argued without prejudice to the merits of the conclusion, that any statement recorded in the search of others without providing opportunity of cross examination cannot be used in the assessment of the appellant company while making the assessment. In any case for that matter, I have myself recorded the statement of the persons who all have deviated from there earlier statements which were stated to be recorded under fear and misrepresentation. During examination the books of account were also produced by the concerned directors. They satisfactorily explained and replied all the queries raised by me regarding the business activities of their respective companies, explained the investment made in the appellant company and also explained the source thereof. They were found to be fully acquainted with the directors of the investee company. ITA No.302/Ahd/2019 & ITA No.303/Ahd/2019 DCIT vs. M/s. Adarsh Capital Finstock Ltd. & Aavas Infrastructure & Gruh Finance Ltd. Asst.Year –2012-13 - 13 - They also explained about the business premises and activities of the associates companies of the appellant. They fully explained the purpose of making the investment in the appellant company. Under this background I have no hesitation in holding that none of these persons were acting as dummy directors. Hence this conclusion of the AO is rejected." 27. In respect of the allegation against the five listed companies for providing accommodation entries, the appellate authority has held as under : - "The basis of such conclusion is the statement of SCS and some others as recorded in the search of others and also on the back of the appellant company. The appellant had argued that such statements are outside the jurisdiction of the assessment u/s 153A since they were recorded not in connection with the search on the appellant company. No cross examination was done. It is pertinent to note here that the appellant was very keen to cross examine the persons. This opportunity was never provided to the appellant despite repeated requests during assessment proceedings. I hold that reliance on statements without cross examination is against the settled principle of natural justice. Even otherwise SCS and others have appeared before me and admitted that SCS was not managing /controlling these companies for the purpose of providing accommodation entries. All the companies are engaged in the real business having substantial turnover, paying rent, salaries, electricity bill etc. One of the companies is also paying excise duty and sales tax. Some of the companies have taken secured loans from banks. As I understand the reference to key associates could be the employee of SCS namely Chandan Kumar Singh. In the statement recorded by me he has denied all such allegations. He has admitted that SCS was not involved in any business of providing accommodation entries and nor he has ever seen SCS controlling these five companies. Hence I do not agree with the conclusion arrived at by the AO." 30. On the basis of statements of Shrish Chandrakant Shah (SCS), in respect of the allegation that Shrish Chandrakant Shah (SCS) was utilizing companies to provide accommodation entries to BSPL the appellate authority has held as under :— "I have recorded the statement of SCS who had denied use of such companies for the purposes of providing accommodation entries. He had also explained the availability of books of account and other materials of different companies in his office premises. He has stated that he was providing data hub services and financial consultancy services to different companies. He has also given the reasons for earlier statement. I am unable to rely on the statement recorded earlier. I cannot reject the statement recorded by me mainly for three reasons such as earlier SCS never stated or referred the name of Bharat Securities (P) Ltd. and secondly Bharat Securities was not in picture at all during those statements and finally SCS denied for providing any accommodation entries to Bharat Securities. I disagree with the conclusion drawn by the AO and, therefore, reject the same." ITA No.302/Ahd/2019 & ITA No.303/Ahd/2019 DCIT vs. M/s. Adarsh Capital Finstock Ltd. & Aavas Infrastructure & Gruh Finance Ltd. Asst.Year –2012-13 - 14 - 31. On the allegation of the assessing officer that from the bank trail it is established that the funds were layered mainly through the companies controlled by SCS, after considering the facts of the case and rival submissions the CIT (A) held as under :— 'The AO has not found either the source or the source of the source as vague or untrue The AO has not examined these companies from where RTGS has arisen. The amount of RTGS had come on surface in the books of account somewhere else and these entities have not been proved bogus or non-existent. But in any case it is settled law that the appellant have to prove the source of investment received. It is not supposed to go beyond that and explain further in this matter. Additionally SCS in his statement has denied for being involved in any entry providing business. In view thereof, the conclusion drawn by the AO is devoid of any merit and hence rejected.' 52. Issuing the share at a premium was a commercial decision. It is the prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of shareholder whether they want to subscribe the shares at such a premium or not. This was a mutual decision between both the companies. In day to day market, unless and until, the rates is fixed by any Govt. Authority or unless there is any restriction on the amount of share premium under any law, the price of the shares is decided on the mutual understanding of the parties concerned. 53. Once the genuineness, creditworthiness and identity of investors are established, the revenue should not justifiably claim to put itself in the armchair of a businessman or in the position of the Board of Directors and assume the role of ascertaining how much is a reasonable premium having regard to the circumstances of the case. 54. There is no dispute about the receipt of funds through banking channel nor there is any dispute about the identity, creditworthiness and genuineness of the investors and, therefore, the same has been established beyond any doubt and there should not have been any question or dispute about premium paid by the investors; therefore, unless there is a limitation put by the low on the amount of premium, the transaction should not be questioned merely because the assessing authority thinks that the investor could have managed by paying a lesser amount as Share Premium as a prudent businessman. The test of prudence by substituting its own view in place of the businessman's has not been approved by the Supreme Court. 56. It is well settled that if the creditworthiness of the investor company and genuineness of the transaction is proved no addition under section 68 could be made and no substantial question of law arises. 62. The question raised by the revenue in regard to issuing the share at 3 premium is purely a question of fact. It is a prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of shareholder whether they want to subscribe to shares at such a premium or not and, moreover, the section 68 does not envisages any law on share premium it only requirement is to identity of the investors, the genuineness of the transaction and the creditworthiness of the share applicants which has been discharged by the respondent authority and the same has ITA No.302/Ahd/2019 & ITA No.303/Ahd/2019 DCIT vs. M/s. Adarsh Capital Finstock Ltd. & Aavas Infrastructure & Gruh Finance Ltd. Asst.Year –2012-13 - 15 - been accepted by the appellate authorities; thus, the same cannot be reconsidered in these appeals as it is a pure question of fact.” 13. Further that though it was requested by the assessee for providing cross-examination of Shri Shirish Chandrakant Shah and Shri Rajesh Jhaveri statement of whom were relied upon while drawing adverse inference on the case of the assessee such request has not been acceded to as it reveals from the order passed by the Ld. AO. It was though opined by the Ld. AO that the issue involved has not been decided merely on the basis of statement given by SCS and others but is decided mainly on the basis of various evidences found during the course of search on SCS. On the other hand, we find that the said AO admitted that SCS in his statements have elaborated the entries recorded in evidences found and seized which also corroborates with the evidences found and entries recorded in the books of accounts of the assessee. This particular finding establishes the evidences in itself could have been relied upon in the absence of any explanation or clarification given by the author of the seized material i.e. SCS. This is sufficient for granting cross-examination of SCS since it is his version about the noting in the seized documents which has relied upon by the Ld. AO while drawing adverse inferences against the assessee. Thus, the reasons for refusal of granting opportunity to cross-examination as assigned by the Ld. AO is contrary to his own finding. This is a glaring instance of violation of the principle of natural justice by the Ld. AO. On this aspect we have considered the judgment passed by the Hon’ble Supreme Court in the case of Andaman Timber Industries vs. CCE, reported in (2015) 62 taxmann.com 3 (SC) wherein it has been held that “not allowing the assessee to cross examine the persons whose statements are relied upon is a ITA No.302/Ahd/2019 & ITA No.303/Ahd/2019 DCIT vs. M/s. Adarsh Capital Finstock Ltd. & Aavas Infrastructure & Gruh Finance Ltd. Asst.Year –2012-13 - 16 - serious flaw which makes the order a nullity in as much as it amounted to violation of principles of natural justice because of which the assessee was adversely affected.” In that view of the matter refusing the grant of cross- examination of SCS and others in spite of specific request made by the assessee is bad in law and the resultant effect thereon by way of making addition is wholly unjustified. 14. We finally find the following observation was made by the Ld. CIT(A) while allowing the appeal in favour of the assessee while deleting the addition made by the Ld. AO: “After considering the facts and findings of above case, it is evident that SCS and other persons connected with SCS and whose statements/affidavits, the AO has referred to and Relied upon in the case of appellant company have denied to have engaged/Involved in providing accommodation entries and have retracted from their earlier statements/affidavits and have categorically confirmed that the companies in which they are directors have been carrying out genuine business and investment activities. The aforesaid decision has also dealt with each of the observations made by the AO in the assessment order of the appellant company. Hence, in my considered opinion, facts of the appellant company's case and facts of the above decision are identical and therefore respectfully following the above decision of Hon'ble High Court of Madhya Pradesh, I hold that the addition on account of share capital/premium received by the appellant company while considering the same as in the nature of accommodation entries received from the companies alleged to be managed and controlled by SCS is not justified. I have also perused and considered the following decisions of various courts relied upon by the appellant company wherein the addition made by lower authorities for share capital and share premium u/s. 68 of the Act considering the same as in the nature of accommodation entries have been deleted. Since in the appellant company's case also, the addition has been made considering the share capital/premium as accommodation entries, the same is not sustainable on facts and in law. ITO v. Iraisaa Hotels (P.) Ltd.[2018] 97 taxmann.com 623 (Mumbai - Trib.) ACIT v. Shyam Indus Power Solutions (P.) Ltd. [2018] 90 taxmann.com 424 (Delhi - Trib.) ACIT v. Swiftsol (I) (P.) Ltd [2018] 95 taxmann.com 286 (Nagpur - Trib.) Pavitra Realcon (P.) Ltd. v. ACIT [2017] 87 taxmann.com 142 (Delhi - Trib.) Jadau Jewellers & Manufacturers (P) Ltd. v. ACIT [2017] 83 taxmann.com 249 (Jaipur-T) ITO vs. M/s Land Mark Dealers (P) Ltd. - ITA No. 178/JP/2015. ITA No.302/Ahd/2019 & ITA No.303/Ahd/2019 DCIT vs. M/s. Adarsh Capital Finstock Ltd. & Aavas Infrastructure & Gruh Finance Ltd. Asst.Year –2012-13 - 17 - ITO vs. M/s Alok Fintrade (P) Ltd, - ITA No. 1SO/JP/2015. M/s. Komal Agrotech P. Ltd. vs. ITO - ITA.No.437/Hyd/2016 In view of the above facts and circumstances discussed above and respectfully following the ratio laid down in the decisions relied upon by the appellant company, I am of the considered opinion that the appellant company has sufficiently and reasonably discharged its primary onus u/s. 68 of the Act and the AO was not justified in resting his case on the loose papers and documents found and seized from the premises of a third party viz. SCS which even otherwise do not contain any noting of exchange of cash for which allegation of accommodation entries has been made in the assessment order as elaborately discussed hereinabove apart from the fact that the investor companies cannot be treated as paper/shell companies based on facts and figures of their financials as discussed hereinabove. The AO is also not justified in relying upon the Statements of SCS and others in absence of granting an opportunity of cross examination of such persons to the appellant company. Thus, considering my findings and observations discussed at length, the addition of Rs.1,89,10,000/- made by the AO is thus deleted. This ground of appeal is allowed. 15. It is also placed on record by the appellant that in the case of identical issues arising out of the same search proceeding in the case of Shri Shirish Chandrakant Shah on the same set of facts the ITAT Mumbai Benches upheld the order passed by the Ld. CIT(A) in deleting the addition made under Section 68 of the Act. While doing so the Hon’ble Bench was pleased to observe as follows: “5. Upon careful consideration of factual matrix as enumerated in preceding paragraphs, particularly documentary evidences submitted by assessee to prove the identity, creditworthiness and genuineness of transactions and appraised by us in preceding para 4.3, it is quite evident that the assessee had discharged the initial onus of proving the fulfilment of primary ingredients of Sec.68. The onus, thus, shifted on Ld. AO to rebut the assessee's stand as well as documentary evidences by bringing on record cogent material to dislodge the same However, except for relying on a third-party statement, which was never confronted to the assessee, there is no other material to support the conclusion that the said transactions were unexplained cash credit. No opportunity of cross-examination was ever provided to the assessee and in fact, no further investigations were done by Ld. AO to support his conclusion. Therefore, additions could not be sustained in the eyes of law. 6. As rightly noted by Ld. CIT(A), in terms of the decision of Hon'ble Bombay High Court in CIT V/s Gagandeep Infrastructure P. Ltd. (ITA No. 1613 of 2014 dated 20/03/2016), proviso to Sec.68 requiring assessee to prove the source of ITA No.302/Ahd/2019 & ITA No.303/Ahd/2019 DCIT vs. M/s. Adarsh Capital Finstock Ltd. & Aavas Infrastructure & Gruh Finance Ltd. Asst.Year –2012-13 - 18 - source was applicable only from AY 2013-14 onwards only and therefore, the assessee could not be obligated to prove the source of source for AY 2010-11. We concur with the reliance of Ld. CIT(A) on this binding judicial precedent for the said proposition. 7. Proceeding further, we find that the assessee was saddled with similar additions in AY 2012-13 but the same were deleted by Ld. CIT(A). Upon further appeal to Tribunal, the appellate order was set aside and Ld.AO was directed to reframe the assessment. Upon perusal M/s. Amirashmi Finstock Private Limited Assessment Years :2010-11 & 2011-12 of cited order of the Tribunal, we that the assessee, in that year, had received similar share premium from certain entities which allegedly being managed and controlled by Shri Shirish Chandrakant Shah. Relying on the statement of Shri Shirish Chandrakant Shah, the same were added as assessee's income u/s 68, in smilar manner. The Ld. CIT(A) deleted the same by observing that the assessee had established the identity, creditworthiness and genuineness of share application money. Upon further appeal to Tribunal, the matter was restored back to Ld. AO for fresh assessment after examining the aforesaid parties and allowing the assessee an opportunity to cross-examine the same. Pursuant to the said directions, an assessment was framed u/s 143(3) r.w.s. 254 on 30/12/2019. During the course of fresh assessment proceedings, the assessee had filed an affidavit dated 20/12/2019 of Shri Shirish Chandrakant Shah in support of the transactions. In the said affidavit, Shri Shah, inter-alia, denied having provided any accommodation entries to the assessee. The assessee had relied upon favourable decision of Hon'ble High Court of Madhya Pradesh in the case of Pr.CIT V/s Chain House International Ltd. (408 ITR 561). The special leave petition (SLP) filed by the department against the same was dismissed by Hon'ble Supreme Court vide SLP No. 1992/2109 dated 18/02/2019. After due consideration of assessee's submissions, Ld. AO chose not to make any additions in the hands of the assessee. Similar are the facts in this year since there is allegation by Ld. AO that the three entities were being managed as well as controlled by Shri Shirish Chandrakant Shah whereas the said party, in the sworn M/s. Amirashmi Finstock Private Limited Assessment Years:2010-11 & 2011-12 affidavit, has already denied having advanced any accommodation entry to the assessee. 8. In the above background we are of the considered opinion that the additions made Ld. AO u/s 68 could not be sustained in the eyes of law and hence, rightly deleted by Ld. CIT(A). The .impugned order would not require any interference on our part. Resultantly, the revenue's appeal stands dismissed. The assessee's cross- objections which are merely supportive in nature, would not require any specific adjudication and hence, dismissed. ITA No. 4559/Mum/2017& CO No. 306/Mum/2018, AY2011-12 9. As stated earlier, facts are pari-materia the same in this year. The assessee has been saddled with similar additions, being share premium received from certain entities allegedly being controlled by Shri Shirish Chandrakant Shah. The assessment has been framed on similar lines. The Ld. CIT(A) deleted the same, inter-alia, by ITA No.302/Ahd/2019 & ITA No.303/Ahd/2019 DCIT vs. M/s. Adarsh Capital Finstock Ltd. & Aavas Infrastructure & Gruh Finance Ltd. Asst.Year –2012-13 - 19 - observing that Id. AO did not establish any connection of Shri Shirish Chandrakant Shah with the listed entities and the additions were merely on the basis of third-party statement. As against this, the assessee had established the identity, creditworthiness and genuineness of the share application by furnishing complete details and documentary evidences which is also evident from similar documents placed before us in the paper-book for this year. Aggrieved, the revenue in in further appeal before us. The assessee has filed similar cross-objections which is merely supportive of impugned order. 10. Since the facts are pari-matena the same, our adjudication for AY 2010-11 shall mutatis-mutandis apply to this year also. The impugned M/s. Amirashmi Finstock Private Limited Assessment Years: 2010-11 & 2011-12 order would not require any interreference on our part. The revenue's appeal as well as assessee's cross- objections stands dismissed. Conclusion 11. The revenue's appeals as well as assessee's cross-objections stands dismissed.” 16. We have already discussed that the appellant company has sufficiently and reasonably discharged its primary onus under Section 68 of the Act by producing all relevant required documents as asked for by the Revenue. It also appears that the Ld. AO completely relied upon the loose papers and documents found and seized from the premises of third party i.e. SCS which even do not contain any noting of receiving or paying cash which could at all lead to the allegation of accommodation entries by the Ld. AO. Finally considering factors inter alia the status of all three companies in question as active as per the Ministry of Corporate Affairs ought not to have been treated as paper/sale companies. All the above facts and flaws have been carefully considered by the Ld. First Appellate Authority in its proper perspective. Thus, considering above factors as discussed by us and further taking into consideration the judgments passed by the Hon’ble Madhya Pradesh High Court and ITAT Mumbai Benches on the identical search proceeding we find no ambiguity in the order passed by the First Appellate Authority in deleting the addition made by the Ld. AO ITA No.302/Ahd/2019 & ITA No.303/Ahd/2019 DCIT vs. M/s. Adarsh Capital Finstock Ltd. & Aavas Infrastructure & Gruh Finance Ltd. Asst.Year –2012-13 - 20 - so as to warrant interference. Hence, the appeal preferred by Revenue is found to be devoid of any merit and, thus, dismissed. ITA No. 303/Ahd/2019 (A.Y. 2012-13):- 17. The identical issue involved in the case has already been dealt with by us in ITA No.302/Ahd/2019 for A.Y. 2012-13 and in the absence of any changed circumstances the same shall apply mutatis mutandis. Hence, the appeal preferred by the Revenue is dismissed. 18. In the combined results, both appeals preferred by the Revenue are dismissed. This Order pronounced in Open Court on 23/11/2021 Sd/- Sd/- (PRADIP KUMAR KEDIA) (Ms. MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER (True Copy) Ahmedabad; Dated 23/11/2021 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad