AVANCE TECHNOLOGIES LTD, MUMBAI V. DCIT CENTRAL CIR 2(2), MUMBAI

ITA 3556/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9185 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 24-05-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJEEV HARIT
• Keywords: Business income; Income from undisclosed sources; Accommodation entries; Capital receipt
• Section: 271(1)(c); 143(3); 13; 153C; 68; 2

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL , A BENCH MUMBAI BEFORE : SHRI MAHAVIR SINGH, VICE PRESIDENT & SHRI M.BALAGANESH, A CCOUNTANT M EMBER ITA NO. 3556/ MUM/ 20 19 ( ASSESSMENT YEAR : 20 08 - 09 ) & ITA NO. 3640/ MUM/ 2019 TO 3645/MUM/2019 ( ASS ESSMENT YEAR : 2009 - 10 TO 2014 - 15 ) M/S. AVANCE TECHNOLOGIES LIMITED OFFICE NO.7, 5 TH FLOOR, BLOCK - A, AIDUN BUILDING 1 ST DHOBI TALAO LANE MUMBAI, MAHARASHTRA - 400 002 VS. DCIT, CENTRAL CIRCLE - 2(2), 8 TH FLOOR, PRATISHTHA BHAWAN M.K.ROAD, MUMBAI PAN/GIR N O. AAECA5763B (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI NEERAJ MANGLA REVENUE BY SHRI RAJEEV HARIT DATE OF HEARING 30 / 06/ 202 1 DATE OF PRONOUNCEMENT 05/08 /202 1 / O R D E R PER M. BALAGANESH (A.M) : THESE APPEAL S IN ITA NO S . 3556/MUM/2019, 3640/MUM/2019 TO 3645/MUM/2019 FOR A.Y. 2008 - 09 TO 2014 - 15 ARISE OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 48, MUMBAI IN APPEAL NO S . CIT(A) - 48/IT - 119,120,121,122,123,124 & 125/DCIT - CC 2(2)/2016 - 17 DATED 29/03/2019 (LD. CIT(A) IN SHORT) AGAINST THE ORDER OF ASSESSMENT ITA NO . 3556/MUM/2019 AND OTHER APPEALS M/S. AVANCE TECHNOLOGIES LTD., 2 PASSED U/S.143(3) R.W.S. 153C OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) DATED 21/03/2016 BY THE LD. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(2), MUMBAI (HEREINAFTER REFERRED T O AS LD. AO). THE IDENTICAL ISSUES OF GROUNDS ARE INVOLVED IN ALL THESE APPEALS AND HENCE, THEY ARE TAKEN UP TOGETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. WITH THE CONSENT OF BOTH THE PARTIES, THE APPEAL FOR THE AY 2013 - 1 4 IN ITA NO.3644/MUM/2019 IS TAKEN AS A LEAD CASE AND THE DECISION RENDERED THEREON WOULD APPLY WITH EQUAL FORCE FOR OTHER ASSESSMENT YEARS ALSO IN VIEW OF IDENTICAL FACTS EXCEPT WITH VARIANCE IN FIGURES. ITA NO.3644/MUM/2019 (A.Y.2013 - 14) 3. AT THE OUTS ET, THE LD. AR SUBMITTED THAT HE WOULD BE PRESSING ONLY GROUND NOS. 5 & 6 RAISED FOR A.YRS.2008 - 09 TO 2014 - 15. APART FROM THIS, THE LD. AR STATED THAT HE WOULD BE PRESSING THE GROUND NO. 8 RAISED FOR A.Y.2013 - 14. T HE LD. AR ALSO STATED THAT GROUND NO.7 RAI SED BY THE ASSESSEE FOR A.Y. S 2012 - 13, 2013 - 14 AND 2014 - 15 IS ONLY SEEKING RECTIFICATION OF THE FIGURE WRONGLY ADOPTED BY THE LD. AO FOR THE PURPOSE OF COMPUTING ADDITION TOWARDS COMMISSION INCOME. ALL OTHER GROUNDS RAISED BY THE ASSESSEE IN THE RESPECTIVE ASSESSMENT YEARS WERE STATED TO BE NOT PRESSED BY THE LD. AR, WHICH IS RECKONED AS STATEMENT MADE FROM BAR AND ACCORDINGLY, ALL OTHER GROUNDS ARE DISMISSED AS NOT PRESSED FOR THE RESPECTIVE ASSESSMENT YEARS. 3.1. THE GROUND NOS. 5 - 6 RAISED BY THE ASSESSE E ARE AS UNDER: - ITA NO . 3556/MUM/2019 AND OTHER APPEALS M/S. AVANCE TECHNOLOGIES LTD., 3 5. THAT THE LD. C1T(A) GROSSLY ERRED IN FACTS OF THE CASE IN NOT ALLOWING SET - OFF OF INCOME DECLARED IN THE BOOKS OF ACCOUNT AGAINST THE ASSESSABLE COMMISSION INCOME ON INCORRECT PRESUMPTION THAT THE ASSESSEE COMPANY HAD DECLARED LOSSES IN ITS BOOKS OF ACCOUNT. 6. THAT THE LD. CIT(A) GROSSLY ERRED IN FACTS OF THE CASE IN NOT ALLOWING TELESCOPING OF INCOME DECLARED IN BOOKS OF ACCOUNT DESPITE HOLDING THAT THE ASSESSEE COMPANY WAS NOT UNDERTAKING ANY BUSINESS ACTIVITIES AND HOLDING THAT TH E ASSESSEE HAD NOT DISCHARGED ITS ONUS OF PROVING THE FACT THAT THE INCOME DECLARED IN ITS BOOKS OF ACCOUNT IS WHOLLY AND EXCLUSIVELY OUT OF COMMISSION INCOME. 3.2. THE ISSUE IN DISPUTE IS WHETHER THE ASSESSEE IS ENTITLED FOR BENEFIT OF TELESCOPING THE C OMMISSION INCOME WITH THE INCOME DECLARED IN THE RETURN. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT A SEARCH U/S.132 OF THE ACT WAS CARRIED OUT AT THE VARIOUS PREMISES OF SHRI SHIRISH C SHAH. DURING THE COURSE OF SEARCH, VARIOUS DOCUMENTS BELONGING TO ASSESSEE COMPANY WERE ALSO SEIZED FROM COMPUTER OF SHRI SHIRISH C SHAH INDICATING TRANSACTIONS WITH ASSESSEE COMPANY. ACCORDINGLY, PROCEEDINGS U/S.153C OF THE ACT WERE INITIATED IN THE HANDS OF THE ASSESSEE COMPANY. 4.1. THE LD. AO OBSERVED IN HIS ASSESSMENT ORDER THAT ASSESSEE HAD DEPLOYED ITS FUNDS IN THE FORM OF SHARE CAPITAL WITH HUGE SHARE PREMIUM WITH VARIOUS COMPANIES BY PROVIDING BOGUS ACCOMMODATION ENTRIES WITH THE HELP OF SHRI SHIRISH C SHAH TO VA RIOUS PARTIES AND HAD EARNED COMMISSION INCOME. THE DIRECTOR OF THE ASSESSEE COMPANY IN HIS STATEMENT HAD ADMITTED THAT IT HAD EARNED 0.30% COMMISSION FROM THE ENTRIES. THE LD. AO HOWEVER, OBSERVED THAT THE COMMISSION IN SAID TRADE RANGES FROM 0.5% TO 4%. THE LD. AO CONSIDERING THE FACT THAT COMMISSION IS SHARED BY NUMBER OF BROKERS IN BETWEEN PROCEEDED TO ADD NET COMMISSION IN THE HANDS OF THE ASSESSEE @1% AND ADDED A SUM OF ITA NO . 3556/MUM/2019 AND OTHER APPEALS M/S. AVANCE TECHNOLOGIES LTD., 4 RS. 1,89,41,785/ - FOR A.Y.2013 - 14 AND COMPLETED THE ASSESSMENT, BY APPLYING 1% ON NEW INVESTMENT MADE DURING THE YEAR AND TOTAL SALES SHOWN DURING THE YEAR. SIMILAR ADDITIONS WERE MADE FOR OTHER ASSESSMENT YEARS ALSO BY THE LD. AO. 4.2. WE FIND THAT THE LD. AO HAD ASSESSED THE INCOME U/S.143(1) R.W.S. 153C OF THE ACT FOR THE VARIOUS ASSESSMENT YEARS WHICH CAN BE SUMMARISED BY WAY OF FOLLOWING TABLE: - A.Y. DATE OF FILING OF ORIGINAL RETURN OF INCOME ORIGINAL RETURNED INCOME ASSESSE E D INCOME U/S. 143(3) DATE OF FILING OF RETURN OF INCOME IN RESPONSE TO NOTICE U/S. 153C RETURNED I NCOME IN RESPONSE TO NOTICE U/S. 153C ASSESSED INCOME U/S. 143{3) R.W.S. 153C 2008 - 09 28.09.2008 10135 579270 31.10.14 10135 9756750 2009 - 10 29.09.2009 2166824 2166820 31.10.14 2166824 9970020 2010 - 11 14.10.2010 3966149 31.10.14 39 66149 14071720 2011 - 12 30.09.2011 2290527 31.10.14 2290527 36350060 2012 - 13 28.09.2012 - 7393754 31.10.14 - 7393754 14585110 2013 - 14 28.09.2013 - 2533450 31.10.14 - 2533450 295448340 2014 - 15 30.09.2014 NIL AFTER SET OF BROUGHT F ORWARD LOSS AND SHORT TERM CAPITAL LESS OF EARLIER ASSESSMENT YEARS 15868400 4.3. FROM THE ABOVE TABLE , IT COULD BE SEEN THAT THE LD. AO WHILE COMPUTING THE ASSESSED INCOME HAD TAKEN THE INCOME RETURNED BY THE ASSESSEE AS WELL AS LOSS RETURNED BY THE A SSESSEE , AS THE CASE MAY BE. IN OTHER WORDS, FOR A.Y.2012 - 13 AND 2013 - 14, ASSESSEE HAD DECLARED LOSS AS PER THE RETURN OF INCOME , WHICH HAS BEEN DULY SET OFF BY THE LD. AO WHILE COMPUTING THE COMMISSION INCOME ON AN ESTIMATED BASIS. ITA NO . 3556/MUM/2019 AND OTHER APPEALS M/S. AVANCE TECHNOLOGIES LTD., 5 4.4. WE FIND THAT ASS ESSEE HAD PLEADED BEFORE THE LD. CIT(A) BY CONCEDING AND ACCEPTING THAT IT EARNED COMMISSION INCOME ON BOGUS ENTRIES BUT FURTHER PLEADED THAT THE SAID COMMISSION INCOME SHOULD HAVE BEEN RESTRICTED ONLY TO TRANSACTIONS WITH OUTSIDE COMPANIES AND NOT TO TRAN SACTIONS WITH GROUP COMPANIES CONTROLLED BY SHRI SHIRISH C SHAH. THIS WAS ON THE LOGIC THAT NO ONE CAN EARN PROFIT FROM ONE SELF. THE LD. CIT(A) DULY APPRECIATED THIS CONTENTION OF THE ASSESSEE AND GAVE A CATEGORICAL FINDING THAT THE INTERNAL MOVEMENTS OF FUNDS WITHIN THE COMPANIES CONTROLLED BY SHRI SHIRISH C SHAH / SHRI DEWANG MASTER WOULD BE FOR WINDOW DRESSING OR LAYERING OF MOVEMENT OF FUNDS AND WOULD NOT YIELD COMMISSION INCOME. ACCORDINGLY, HE HELD THAT THE COMPUTATION OF COMMISSION INCOME SHOULD BE RESTRICTED ONLY TO INVESTMENTS AND SALES TO OUTSIDE COMPANIES / PARTIES. HE ALSO OBSERVED THAT ASSESSEE HAS GIVEN DETAILS OF AMOUNTS OF INVESTMENTS AND SALES TO OUTSIDE COMPANIES IN HIS WRITTEN SUBMISSIONS WHICH WAS DIRECTED TO BE VERIFIED BY THE LD. AO AN D COMPUTE COMMISSION INCOME ACCORDINGLY. THE LD. CIT(A) HOWEVER, UPHELD THE RATE OF COMMISSION AT 1% AS ADOPTED BY THE LD. AO. 4.5. WITH REGARD TO YET ANOTHER PLEA MADE BY THE ASSESSEE SEEKING FOR BENEFIT OF TELESCOPING, THE INCOME DECLARED BY THE ASSESS EE IN THE RETURN, THE LD. CIT(A) REJECTED THE PLEA OF THE ASSESSEE ON THE GROUND THAT INCOME RECOGNISED IN THE BOOKS IS IN THE FORM OF OTHER INCOME AND CANNOT AUTOMATICALLY BE ALLOWED BENEFIT OF TELESCOPING THE COMMISSION INCOM E WITHOUT ASSESSEE HAVING EST ABLISHED THAT THE INCOME IN THE BOOKS IS EXCLUSIVELY AND WHOLLY OUT OF THE COMMISSION INCOME AS COMPUTED BY THE LD. AO. THE LD. CIT(A) OBSERVED THAT THERE IS NO BUSINESS ACTIVITY IN REALITY AND PROFIT AND LOSS STATEMENT OF EACH OF THE ASSESSMENT YEAR IS SH AM AND IS ONLY A WINDOW DRESSING. THEREFORE, HAVING ADMITTED BOGUS NATURE OF ITA NO . 3556/MUM/2019 AND OTHER APPEALS M/S. AVANCE TECHNOLOGIES LTD., 6 ACCOUNTS, ASSESSEE CANNOT TAKE ADVANTAGE OF ANY INCOME DECLARED IN SUCH ACCOUNTS. 4.6. AGGRIEVED BY THE REJECTION OF BENEFIT OF TELESCOPING, THE ASSESSEE IS IN APPEAL BEFORE US V IDE GROUND NOS. 5 & 6. WE FIND THAT THERE IS ABSOLUTELY NO DISPUTE THAT THE TRANSACTIONS REFLECTED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS ARE SHAM AND BOGUS AND CORRESPONDINGLY, THE BOOK RESULTS REFLECTED THEREON WOULD ALSO BECOME SHAM AND BOGUS. IN OTHE R WORDS, THERE IS ABSOLUTELY NO DISPUTE THAT ASSESSEE IS ONLY AN ACCOMMODATION ENTRY PROVIDER AND THAT ALL THE ENTRIES REFLECTED IN THE BOOKS ARE MERELY ACCOMMODATION ENTRIES AND NOT REAL TRANSACTIONS OF THE ASSES SEE. THAT IS WHY WE FIND THE LD. AO HAD REJ ECTED THE BOOK RESULTS AND HAD RESORTED TO DETERMINING THE INCOME OF THE ASSESSEE ON AN ESTIMATED BASIS BY ESTIMATING COMMISSION @1%. HENCE, THE INCOME RETURNED BY THE ASSESSEE CANNOT BE BROUGHT TO TAX. SIMILARLY, THE LOSS RETURNED BY THE ASSESSEE CANNOT B E ALLOWED TO BE SET OFF WITH ESTIMATED COMMISSION INCOME. WE FIND THAT ASSESSEE IS SEEKING TELESCOPING BENEFIT OF COMMISSION INCOME WITH THE INCOME RETURNED BY THE ASSESSEE BECAUSE, THE LD. AO HAD STARTED THE COMPUTATION OF INCOME FROM THE FIGURE OF INCOM E / LOSS AS PER THE RETURN OF INCOME. 4.7. WE FIND THAT ASSESSEE IS INDEED ENTITLED FOR THE BENEFIT OF TELESCOPING FOR THOSE ASSESSMENT YEARS WHERE THE POSITIVE INCOME HAS BEEN DECLARED BY IT IN THE RETURN OF INCOME. HOWEVER, FOR THE A.YRS. 2012 - 13 AND 2013 - 14, ASSESSEE HAS DECLARED LOSS AS PER THE RETURN OF INCOME WHICH HAS ALREADY BEEN SET OFF OF THE LD. AO WITH THE ESTIMATED COMMISSION INCOME DETERMINED BY HIM WHILE COMPLETING THE ASSESSMENT. THIS ACTION OF THE LD. AO WAS ALSO UPHELD BY THE LD. CIT(A ) EXCEPT FOR TINKERING OF ESTIMATION OF COMMISSION INCOME. ITA NO . 3556/MUM/2019 AND OTHER APPEALS M/S. AVANCE TECHNOLOGIES LTD., 7 4.8. AGAINST THE SAID ORDER OF THE LD. CIT(A), THE REVENUE IS NOT IN APPEAL BEFORE US. SINCE, THIS TRIBUNAL DOES NOT HAVE POWER OF ENHANCEMENT OF INCOME, WE ARE NOT INCLINED TO DISTURB THE WRONG S ET OFF OF LOSS AS PER THE RETURN OF INCOME (ALREADY GRANTED BY THE LD. AO IN THE ASSESSMENT) WITH THE ESTIMATED COMMISSION INCOME FOR A.YRS. 2012 - 13 AND 2013 - 14. WE FIND WITH REGARD TO THE ISSUE OF TELESCOPING OF POSITIVE INCOME AS PER THE RETURN WITH THE ESTIMATED COMMISSION INCOME, THE ISSUE IS ALREADY COVERED IN FAVOUR OF THE ASSESSEE IN THE FOLLOWING CASES: - ITA NO. AY ASSESSEE DATE OF THE ORDER 3646/MUM/2019 2008 - 09 M/S. EMPOWER INDIA LIMITED 18/12/2020 3647/MUM/2019 2009 - 10 M/S. EMPOWER INDIA LIMIT ED 18/12/2020 3648/MUM/2019 2010 - 11 M/S. EMPOWER INDIA LIMITED 18/12/2020 3649/MUM/2019 2012 - 13 M/S. EMPOWER INDIA LIMITED 18/12/2020 3650/MUM/2019 2013 - 14 M/S. EMPOWER INDIA LIMITED 18/12/2020 3651/MUM/2019 2014 - 15 M/S. EMPOWER INDIA LIMITED 18/12/202 0 4.9. IN VIEW OF THE AFORESAID OBSERVATIONS AND RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THIS TRIBUNAL, WE HOLD THAT (A) IN THE A.Y.2008 - 09 TO 2011 - 12, ONLY ESTIMATED COMMISSION @1% ON INVESTMENTS AND SALES TO OUTSIDE COMPANIES / PARTIES SHOULD BE CONSIDERED AND THE SAME SHOULD BE TELESCOPED WITH THE INCOME RETURNED BY THE ASSESSEE FOR THE RESPECTIVE ASSESSMENT YEARS. (B) IN THE A.Y RS .2012 - 13, 2013 - 14 & 2014 - 15 ONLY ESTIMATED COMMISSION @1% AND INVESTMENTS AND SALES TO OUTSIDE COMPANIES / PARTIE S SHOULD BE CONSIDERED WITHOUT DISTURBING THE SET OFF OF ITA NO . 3556/MUM/2019 AND OTHER APPEALS M/S. AVANCE TECHNOLOGIES LTD., 8 RETURN ED LOSS ALREADY GIVEN BY THE LD. AO IN HIS ASSESSMENT ORDER AS THIS TRIBUNAL DOES NOT HAVE POWER OF ENHANCEMENT. THE GROUND NOS. 5 & 6 ARE DISPOSED OF IN THE ABOVE MENTIONED TERMS. 5. THE GROU ND NO. 7 RAISED BY THE ASSESSEE FOR A.YRS. 2012 - 13, 2013 - 14 AND 2014 - 15 WITH REGARD TO ADDITION OF INCOME @1% ON THE VALUE OF INCREASE IN INVESTMENTS ARE NOW TAKEN UP FOR ADJUDICATION. WE FIND THAT LD. AO HAD CONSIDERED THE AMOUNT OF INCREASE IN INVESTMENT AND COMPUTED COMMISSION INCOME THEREON AS UNDER: - A.Y. AMOUNT WRONGLY TAKEN BY AO IN ORDER COMMISSION 2012 - 13 63,97,82,000 63,97,820 2013 - 14 61,44,33,569 61,44,335 2014 - 15 13,69,92,820 13,69,928 5.1. THE ASSESSEE PLEADED BEFORE THE LD. CIT(A) BY WA Y OF WRITTEN SUBMISSION THAT THE LD. AO HAD ERRONEOUSLY CONSIDERED THE FIGURE OF AMOUNT OF INCREASE IN INVESTMENT. THE SAME WAS NOT APPRECIATED BY THE LD. CIT(A). THE ASSESSEE FILED THE FOLLOWING CHART BEFORE US. A.Y. 2012 - 13 AMT. (AS ON 31/03/2012 ) AMT. (AS ON 31/03/2011) DIFFERENCE NON - CURRENT INVESTMENTS 1,05,38,99,577/ - 2,12,28,69,023/ - ( - )1,06,89,69,446/ - CURRENT INVESTMENTS 63,97,82,000/ - 63,97,82,000 / - 1,69,36,81,577/ - 2,12,28,69,023 / - ( - ) 42,91, 87,446/ - ITA NO . 3556/MUM/2019 AND OTHER APPEALS M/S. AVANCE TECHNOLOGIES LTD., 9 A.Y. 2 013 - 14 AMT. (AS ON 31/03/2013) AMT. (AS ON 31/03/2012) DIFFERENCE NON - CURRENT INVESTMENTS 1,66,83,33,146 / - 1,05,38,99,577 / - 61,44,33,569 / - CURRENT INVESTMENTS 15,22,20,820 / - 63,97,82,000 / - ( - )48,75,61,180 / - 1,82,05,53,966/ - 1,69,36,81,55 7 / - 12,68,72,389/ - A.Y. 2014 - 15 AMT (AS ON 31/03/2014) AMT. (AS ON 31/03/2013) D IFFERE N CE NON - CURRENT INVESTMENTS 1,76,36,75,577 / - 1,66,83,33,146/ - 9,53,42,431 / - CURRENT INVESTMENTS 3,03,90,012/ - 15,22,20,820/ - ( - )12,18,30,808/ - 1,79,40,65,589 / - 1,82,05,53,966/ - ( - ) 2,64,88,377 / - 5.2. WE HOLD THAT IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE DEEM IT FIT AND APPROPRIATE THAT THE AFORESAID CHART ON INVESTMENTS FILED BY THE ASSESSEE REQUIRES TO BE RE - VISITED BY THE LD. AO AND WE DEEM IT FIT TO REMAND THIS ISSUE TO THE FILE OF THE LD. AO FOR DENOVO ADJUDICATION ON THIS ASPECT OF THE ISSUE IN ACCORDANCE WITH LAW. ACCORDINGLY, GROUND NO.7 RAISED BY THE ASSESSEE FOR A.YRS.2012 - 13, 2013 - 14 AND 2014 - 15 IS ALLOWED FOR STATISTICAL PURPOSES. 6. THE GROUND NO.8 RAISED BY THE ASSESSEE FOR A.Y.2013 - 14 IN ITA NO.3644/MUM/2019 IS CHALLENGING THE ADDITION OF RS.27,90,40,000/ - ON ACCOUNT OF FORFEITURE OF SHARE APPLICATION MONEY. 6.1. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIA LS AVAILABLE ON RECORD. WE FIND THAT THE LD. AO HAD OBSERVED THAT ASSESSEE ITA NO . 3556/MUM/2019 AND OTHER APPEALS M/S. AVANCE TECHNOLOGIES LTD., 10 DURING THE YEAR HAD FORFEITED A SUM OF RS.27,90,40,000/ - BEING THE SHARE APPLICATION MONEY RECEIVED FROM SHAREHOLDER WHO DID NOT PAY THE BALANCE AMOUNT OF PARTLY PAID SHARE WARRANTS . THE LD. AO SOUGHT TO TREAT THE SAME AS INCOME OF THE ASSESSEE AND ACCORDINGLY, ISSUED SHOW - CAUSE NOTICE TO THE ASSESSEE. THE ASSESSEE SUBMITTED VIDE ITS LETTER DATED 29/02/2016 THAT THE AMOUNT FORFEITED TOWARDS SHARE APPLICATION MONEY WOULD ONLY REPRESEN T CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE COMPANY AND THE SAME CANNOT BE TAXED IN THE HANDS OF THE COMPANY. THE LD. AO HOWEVER, OBSERVED AS UNDER: - IT IS NOT JUST SIMPLE A CASE OF FORFEITURE. IT IS METHOD ADOPTED TO BRING UNACCOUNTED MONEY IN THE BO OKS OF ACCOUNTS SO THAT FURTHER ACCOMMODATION ENTRIES CAN BE PROVIDED THROUGH THE ASSESSEE. NO DOUBT THE AMOUNT WAS BROUGHT IN THROUGH SHRI SHIRISH C SHAH BUT THE ULTIMATELY THE MONEY SO RECEIVED HAS BEEN ENJOYED BY THE ASSESSEE ONLY IN PROVIDING FURTHER A CCOMMODATION ENTRIES TO VARIOUS PARTIES THEREFORE THE AMOUNT OF RS 27,90,40,000/ - IS ADDED TO ITS TOTAL INCOME. PENALTY PROCEEDINGS U/S 271(1)(C) HAS BEEN INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 6.2. WHEN THE ASSESSEE CONTESTED THIS AD DITION BEFORE THE LD. CIT(A) ON THE GROUND THAT ASSESSEE IS ONLY ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES AND THAT THE FORFEITURE OF SHARE APPLICATION MONEY CANNOT BE TAXED AS INCOME IN THE HANDS OF THE ASSESSEE COMPANY , T HE LD. CIT(A) DI D NOT APPRECIATE THE CONTENTIONS OF THE ASSESSEE AND UPHELD THE ACTION OF THE LD. AO. 6.3. THE LD . AR STATED THAT ASSESSEE HAD RECEIVED A SUM OF RS.27,90,40,000/ - FROM ITS SHAREHOLDER BY WAY OF ISSUANCE OF 128000000 EQUITY WARRANTS OF RS.8.70 EACH PARTLY PAID RS.2.18 PER CONVERTIBLE EQUITY WARRANT. THIS SUM WAS FORFEITED BY THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDERATION. THE LD. AR POINTED OUT THAT T HE ASSESSEE HAD STATED IN HIS AUDITED FINANCIAL STATEMENTS THAT IT HAD FORFEITED RS.27,90,40,000/ - ITA NO . 3556/MUM/2019 AND OTHER APPEALS M/S. AVANCE TECHNOLOGIES LTD., 11 IN COMP LIANCE WITH SEBI GUIDELINES OF ICDR 2009 WHERE AN AMOUNT OF 25% AS RECEIVED IN TERMS OF APPLICATION MONEY SHOULD BE FORFEITED AND THAT AS PER THE TERMS AND CONDITIONS OF ISSUE OF CONVERTIBLE EQUITY WARRANTS (CEW), THE SAID AMOUNT SHOULD BE TRANSFER RED TO RESERVES AND SURPLUS. THE LD. AR SUBMITTED THAT CASE OF THE LOWER AUTHORITIES IS THAT THE FORFEITURE OF SHARE APPLICATION MONEY IS ONLY THE METHOD ADOPTED BY THE ASSESSEE TO BRING UNACCOUNTED MONEY IN ITS BOOKS OF ACCOUNTS IN ORDER TO PROVIDE MORE A CCOMMODATION ENTRIES TO OTHER BENEFICIARIES. THE LD. AO ALSO HAD STATED THAT THIS AMOUNT WAS ORIGINALLY BROUGHT IN BY SHRI SHIRISH C SHAH AND SINCE THE MONEY SO BROUGHT IN HAD BEEN ENJOYED BY THE ASSESSEE COMPANY ITSELF, THE SAME IS TO BE TREATED AS INCOME IN THE HANDS OF THE ASSESSEE. THE LD. AR ARGUED THAT THE REVENUE HAD NOT EVEN BOTHERED TO MENTION THE SECTION UNDER WHICH THE ADDITION IS SAID TO BE MADE IN THE HANDS OF THE ASSESSEE COMPANY. THE LD. AR ARGUED THAT THE FORFEITURE OF SHARE APPLICATION MONE Y IS ONLY ENTRY MADE IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND THE SAME WOULD NOT AUTOMATICALLY BECOME INCOME IN THE HANDS OF THE ASSESSEE COMPANY. THE LD. AR PLACED RELIANCE ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PCIT V S. ALAG SECURITIES PVT. LTD., REPORTED IN 425 ITR 658. 6.4. THE LD. DR BEFORE US VEHEMENTLY ARGUED THAT THE ENTRY IN THE BOOKS OF ACCOUNTS REPRESENTING FORFEITURE OF SHARE APPLICATION MONEY WOULD ONLY CONSTITUTE CASH CREDIT LIABLE FOR TAXATION U/S. 68 OF T HE ACT WHEN THE NATURE AND SOURCE OF CREDIT IS NOT PROVED IN THE HANDS OF THE ASSESSEE. 6.5. WE FIND THAT THE LD. AO HAD COMPLETELY IGNORED ALL THE SUBMISSIONS MADE BY THE ASSESSEE IN THIS REGARD. NO FINDING HAS BEEN GIVEN BY THE LD. AO WITH REGARD TO TH E FACT OF RECEIPT OF MONIES BY ISSUANCE OF CONVERTIBLE EQUITY WARRANTS; ITS TREATMENT GIVEN BY ASSESSEE IN TH E BOOKS; PREVAILING ITA NO . 3556/MUM/2019 AND OTHER APPEALS M/S. AVANCE TECHNOLOGIES LTD., 12 LAW ON THE IMPUGNED ISSUE; WHETHER THE SAME WAS DONE IN ACCORDANCE WITH SEBI GUIDELINES AS POINTED OUT BY THE ASSESSEE IN ITS A NNUAL REPORT ETC. WE FIND THAT THE LD. AO DIRECTLY CONCLUDES THE ISSUE THAT THE AMOUNT FORFEITED REPRESENTS UNACCOUNTED INCOME OF THE ASSESSEE. WE FIND THAT THE LD. AO HAD ALSO NOT BROUGHT ON RECORD, UNDER WHAT PROVISIONS OF THE ACT, THE AMOUNT FORFEITED B ECOMES INCOME OF THE ASSESSEE. HENCE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE DEEM IT FIT AND APPROPRIATE, TO REMAND THIS ISSUE TO THE FILE OF LD. AO FOR DENOVO ADJUDICATION IN ACCORDANCE WITH LAW. SINCE, THE ENTIRE ISSUE IS SENT BACK TO THE FILE OF T HE LD. AO FOR DENOVO ADJUDICATION IN ACCORDANCE WITH LAW, THE RELIANCE PLACED ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ALAG SECURITIES REPORTED IN 425 ITR 658 WOULD BE PREMATURE AT THIS STAGE. THE ASSESSEE IS AT LIBERTY TO QU OTE THE SAID DECISION BEFORE THE LD. AO WHILE ADJUDICATING THIS ISSUE IN THE DENOVO PROCEEDINGS. THE LD. AO IS HEREBY DIRECTED TO DETERMINE ITS APPLICABILITY TO THE FACTS OF THE CASE. 7. IN THE RESULT, APPEALS OF THE ASSESSEE FOR ALL THE YEARS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 05 / 08 /202 1 BY WAY OF PROPER MENTIONING IN THE NOTICE BOARD. SD/ - ( MAHAVIR SINGH ) SD/ - (M.BALAGANESH) VICE PRESIDENT ACCOUNTANT MEMBER MUM BAI ; DATED 05 / 08 / 2021 KARUNA , SR.PS ITA NO . 3556/MUM/2019 AND OTHER APPEALS M/S. AVANCE TECHNOLOGIES LTD., 13 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//