RAPTI PREMISES PRIVATE LIMITED, MUMBAI V. ITO, WARD 11(1)(1), MUMBAI

ITA 303/MUM/2024

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 5382 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 11-06-2024
• Assessment Year: 2010-2011
• Appeal Filed On: 22-01-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus Share capital; Search and seizure; Accommodation entries; Bogus
• Section: 147; 131; 68; 132; 142(1); 133(6); 143(1); 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “D”, MUMBAI BEFORE SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No.303/MUM/2024 Assessment Year: 2010-11 M/s. Rapti Premises Private Limited, 1009, Shefield Tower, 2 nd Cross Lane, Lokhandwala, Andheri (West), Mumbai - 400053 PAN: AAECR1590B Vs. ITO, Ward 11(1)(1), Aayakar Bhavan, M.K. Road, Mumbai - 400020 (Appellant) (Respondent) Present for: Assessee by : Shri Vishnu Agarwal, CA Revenue by : Smt Mahita Nair, Sr. D.R. Date of Hearing : 12.06.2024 Date of Pronouncement : 31.07.2024 O R D E R Per : Narender Kumar Choudhry, Judicial Member: This appeal has been preferred by the Assessee against the order dated 21.11.2023, impugned herein, passed by the National Faceless Appeal Center (NFAC)/ Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) under section 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2010-11. 2. In the instant case, the Assessee had declared its income at ‘Rs. Nil’ by filing its return of income on 07.06.2011, which was processed under section 143(1) of the Act. Subsequently, on the basis of the information received from the DGIT (Inv.), Mumbai to the effect that search and seizure action was carried out by the Investigation Wing of ITA No.303/MUM/2024 M/s. Rapti Premises Private Limited 2 the Department in the case of Praveen Kumar Jain and his group concern and during the course of search/survey action it was revealed that these group concerns were mainly providing accommodation entries through various concerns operated and managed by Praveen Kumar Jain Group and indulged into fraudulent transactions of issuing accommodation/hawala entries which purportedly show the transactions of bogus share capital / share premium / purchase / sale /unsecured loan. The assessee is also beneficiary of accommodation entries like bogus share capital/share premium/ purchases/sale/ unsecured loan from the following parties managed by Mr. Praveen Kumar Jain during the financial year 2009-10: Sl no Name of the concern PAN Amount (Rs) 1 Alka Diamond Ind. Ltd AAACA5236D 1500000 2 Olive Overseas P Ltd (Realgold Trading co P Ltd) AACCR4512K 1500000 3 Triangular Infocom Ltd (Lexus Infotect Ltd) AAACL4646G 6000000 4 Yash - V Jewels Ltd AAACY1119P 1500000 2.1 The AO on the basis of the aforesaid information, recorded the reasons for reopening of the case under section 147 of the Act and consequently reopened the case by issuing a notice dated 20.03.2017 U/s 148 of the Act, in response to which the Assessee by filing a letter dated 29.03.2017 in “tapal” on dated 07.04.2017 claimed that the original return filed on 07.06.2017 may be treated as return filed in response to the notice under section 148 of the Act. On the request of the Assessee, the AO vide letter dated 09.05.2017 provided the reasons for reopening. The Assessee vide letter dated 13.06.2017 filed objections against the reopening of the case and mainly claimed that share capital subscribed by the shareholders have already been disclosed in the return of income filed by the Assessee on 07.06.2011 ITA No.303/MUM/2024 M/s. Rapti Premises Private Limited 3 and the amount of alleged accommodation entries as alleged in the letter dated 09.05.2017 is Rs.1,05,00,000/- share capital subscribed by four parties named in the letter is infact is only Rs.60 lakhs. 2.2 The AO though considered the aforesaid claim/objections raised by the Assessee, however, rejected the same and proceeded with the assessment proceedings and by issuing the statutory notices show caused the Assessee to substantiate the claim qua share application money. In order to prove the genuineness of the share application money transaction, the Assessee vide letters dated 01.08.2017, 18.08.2017 & 11.09.2017 filed it's reply and following documents as mentioned by the AO in the assessment order itself: (1) share application money requested by the respective persons to the Assessee (2) Present members of the above mentioned companies as per MC to one site (3) Copies of acknowledgement of return of income filed by above mentioned companies (4) All transactions are through Bank (5) Share application forms (6) Board resolution 2.3 The AO also asked the Assessee to produce the persons/companies being shareholders; however, the Assessee expressed its inability to produce the said parties on the ground that these persons are no more shareholders of the Assessee Company. Consequently the AO asked the Assessee to produce the transfer deeds vide notice dated 04.12.2017 under section 142(1) of the Act. The Assessee though filed the share transfer deed vide letter dated 07.12.2017, however, the same was treated as defective by the AO on the ground that the same does not contain consideration, name, ITA No.303/MUM/2024 M/s. Rapti Premises Private Limited 4 signature of the witnesses, occupation, address and father's name of the transferee and the same also did not contain the portion, wherein the Assessee company was required to file the details and share transfer stamps were also fixed hereon. The Assessee, on being asked for the aforesaid defect, replied that original transfer deeds duly executed are not traceable and therefore the Assessee will submit the same in due course. The AO found the submission of the Assessee as unacceptable on the ground that there cannot be two sets of transfer deeds; further share transfer deed shows that the shares were transferred by the purported investor to Mr. Praful Dave who happened to be main promoter of the company on 28.09.2009. It is clear evidence how the unaccounted income was routed through share capital. 2.4 In order to verify, the AO also summoned the purported investors under section 131 of the Act, however the purported investors did not attend the assessment proceedings. Therefore, the AO also issued fresh notices under section 133(6) of the Act to the Assessee and to the investors. All the investors though submitted their replies along with PAN card, ledger account, bank statement and copy of the acknowledgement of return of the income filed for A.Y. 2010-11, however did not reply the points mentioned in the notice. Thereafter the AO again issued a show cause notice dated 08.12.2017, in response to which the Assessee filed its submissions dated 12.12.2017 which are summarized as under: (1) The impugned parties responded to the notice under section 133(6) of the Act which proves that the parties are genuine. (2) It is the prerogative of the parties to reply to the notices under section 133(6) of the Act. (3) The Assessee already proved the genuineness of the transactions along with creditworthiness of these parties. ITA No.303/MUM/2024 M/s. Rapti Premises Private Limited 5 (4) Amendment to section 56(vii)(b) of the Act was introduced w.e.f. 01.04.2013. 2.5 The Assessee also relied the decisions in the case of Gagandeep Infrastructure P. Ltd. 394 ITR 680, Apeak Infotech 397 ITR 148 and Orchid Industries P. Ltd. 397 ITR 136 (Bombay High Court). 2.6 The AO though considered the aforesaid submissions of the Assessee but found not acceptable for the following reasons: “Though the provisions of section 56(vii)(b) of the Act are not applicable to the case, however opined that the present issue revolves around unexplained cash credit under section 68 of the Act. Mere fact that the Assessee had taken the amount by checks from the companies is not sufficient to establish the genuineness of the transaction of share capital with the companies as the real activities of the companies were providing bogus accommodation entries like share capital as bogus at huge premium. Mere fact that these persons are assessed to tax does not clear the fact to prove the genuineness of the transaction. Considering the fact that these companies were engaged in providing accommodation entries which casts more responsibilities on the Assessee to establish transactions as genuine. Therefore the Assessee was required to establish the genuineness of the transaction beyond doubt. Mere submission of bank statement of such companies, balance sheet etc. does not prove the genuineness of the transaction. The onus was on the Assessee to establish the genuineness of the transactions by producing the directors of such companies with their books of accounts, minutes, books etc..................Had the investment been genuine there would not be no difficulty in producing such persons for examination and all. ................................................In this particular case the real transaction was revealed during the course of search in the case of Shri Praveen Kumar Jain. Though the facts related to search under section 132 of the Act in the case of Shri Praveen Kumar Jain had been mentioned in the assessment order but none of the statements of Shri Praveen Kumar Jain had been relied upon. The conclusion had been drawn based on independent enquiries. Therefore the question of cross examination of Sri Praveen Kumar Jain by the Assessee does not arise. 2.7 The AO on the aforesaid as well as inter-alia other reasons ultimately treated the amount of Rs.60 lakhs as un-explained cash credit under section 68 of the Act and added the same in the income of the Assessee. 3. The Assessee, being aggrieved, challenged the aforesaid addition as well as reopening of the case before the Ld. Commissioner, who not ITA No.303/MUM/2024 M/s. Rapti Premises Private Limited 6 only affirmed the reopening of the case but also the addition under challenge. 4. The Assessee being aggrieved is in appeal before us. 5. Heard both the parties and perused the material available on record. Admittedly the case of the Assessee was the re-opened on the basis of information received from the DGIT(Inv.), Mumbai, who conducted search and seizure action in the case of Shri Praveen Kumar Jain and group concern, wherein it was revealed that these group concerns were merely providing accommodation entries through various concerns operated and managed by Shri Praveen Kumar Jain group and indulged into over-turned transactions of issuing bogus accommodation/hawala entries, which purportedly show the transactions of bogus share capital / share premium / purchases / sales / unsecured loans. The Assessee is a beneficiary of accommodation entries like bogus share capital/share premium / purchases/ sales/ unsecured loans from the following parties managed by Sri Praveen Kumar Jain during the Financial Year 2009 – 10. Sl no Name of the concern PAN Amount (Rs) 1 Alka Diamond Ind. Ltd AAACA5236D 1500000 2 Olive Overseas P Ltd (Realgold Trading co P Ltd) AACCR4512K 1500000 3 Triangular Infocom Ltd (Lexus Infotect Ltd) AAACL4646G 6000000 4 Yash - V Jewels Ltd AAACY1119P 1500000 5.1 Admittedly the AO though analysed the information on record and affirmed his opinion “that the above entries are entry providers of bogus share capital/share premium / purchases/ sales/ unsecured loans to the Assessee and are not genuine and the fact that entries provided for an amount aggregating to Rs.1,05,00,000/- has resulted suppression of the income of the Assessee for the A.Y. 2010-11” however, it is a fact that before reopening of the case under section 147 of the ITA No.303/MUM/2024 M/s. Rapti Premises Private Limited 7 Act and issuing the notice under section 148 of the Act, the AO made no exercise to find out the veracity of the case. It appears from the assessment order that in order to substantiate its share application/capital money amounting to Rs.60 lakhs from the aforesaid parties provided to the AO, the present address of the above mentioned companies as per MC21 site, copy of acknowledgement, return of income filed by aforesaid companies, details of the transaction routed through bank, share application forms, board resolution. The Assessee by producing the documents tried to demonstrate that it had taken the amounts by cheque from the said companies and the aforesaid persons are assessed to tax. It is also admitted fact that the impugned parties have also responded to the notices under section 133(6) of the Act and in order to prove their genuineness submitted their respective replies along with PAN card, ledger account, bank statement and copy of acknowledgement for return of income filed for the A.Y. 2010-11 and therefore it goes to show that the Assessee primarily was able to discharge its primary owners casted upon it under section 68 of the Act. However, the AO still doubted the transaction qua share application money mainly on the reasons that the Assessee failed to produce the directors of the aforesaid companies and also failed to produce the originals of the share applications, share transfer deeds and also failed to reply as were directed to be replied in the notice under section 133(6) of the Act. 5.2 It is also admitted fact that though the case of the Assessee was reopened mainly on the reasons that Shri Praveen Kumar Jain and his group concerns were involved in providing accommodation entries through fraudulent transactions of issuing accommodation/hawala entries, however the AO, in para No.9.17 of the assessment order, has clearly noted “that though the facts related to search u/s 132 of the Income Tax Act 1961 in the case of Shri Pravin Kumar Jain had been mentioned in the assessment order, ITA No.303/MUM/2024 M/s. Rapti Premises Private Limited 8 but none of the statement of Shri Pravin Kumar Jain had been relied upon. The conclusion had been drawn based on independent enquiries. Therefore the question of cross examination of Shri Pravin Kumar Jain by the Assessee does not arise.” We do not find any logic for not relying on the statement which is foundation for reopening of the case. The alleged parties’ statement certainly would be relevant for adjudication of the issue, if the reopening is based on the substantive allegations against any particular person /parties. Therefore it was incumbent upon the AO to refer the statement of Shri Praveen Kumar Jain to substantiate the addition which the AO failed to do so. 5.3 Even otherwise, we observe that the case of the Assessee was reopened on the allegations that the amount aggregating to Rs.1,05,00,000/- from the aforesaid parties in total, was non-genuine share application money and the accommodation entries. Whereas, the Assessee in order to demonstrate the genuineness of the share application money in reply to the notices clearly submitted before the AO that the amount of alleged accommodation entries as stated in the reasons recorded for reopening is Rs.1,05,00,000/- whereas the actual share capital subscribed from the four parties named in the reasons for reopening is only Rs.60 lakhs. In effect the AO ultimately made the addition of Rs.60 lakhs only, which also substantiates the case of the Assessee as genuine. 5.4 Even otherwise, we observe that the Assessee in the objections also raised the issue that share capitals subscribed by the shareholders have already been disclosed in the return of income filed by the Assessee on 07.06. 2011, which goes to show that no new material was available to substantiate the allegations levelled/made for reopening the case under section 147 of the Act and before issuing the notice under section 148 of the Act. Therefore, on this ground as well the impugned addition is un-sustainable. ITA No.303/MUM/2024 M/s. Rapti Premises Private Limited 9 Considering the aforesaid facts and circumstances and analyzations in totality, the addition in hand is un-sustainable; hence the same is deleted. 6. In the result, the appeal filed by the Assessee is allowed. Order pronounced in the open court on 31.07.2024. Sd/- Sd/- (GIRISH AGRAWAL) (NARENDER KUMAR CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER * Kishore, Sr. P.S. Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The DR Concerned Bench //True Copy// By Order Dy/Asstt. Registrar, ITAT, Mumbai.