Decent Industries P. Ltd., Bhopal V. ITO-1(2), Bhopal

ITA 356/Ind/2023

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 5441 (ITAT-INDORE)
• Duration Of Justice: 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: Indore
• Next Hearing Date: 03-06-2024
• Assessment Year: misc
• Appeal Filed On: 19-09-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FORASSESSEEHASFILEDAWRITTENSYNOPSISANDADVANCEDTHE; FORREVENUEHASSUFFICIENTSTRENGTHINCONTENDINGTHATTHEAOHASNOT; FORASSESSEECOULDNOTSUBSTANTIATEAS; FORASSESSEEMADEFOLLOWINGCONTENTIONSTOASSAIL; FORREVENUESTRONGLYSUPPORTEDTHEORDERSOFLOWER; FORASSESSEEHASTHOUGHRELIEDUPONSTATEMENTSOFSHRI
• Assessee Lawyers: SHILPA GUPTA; SHRIN.K.GUPTA
• Keywords: Bogus

Judgement Text

Page 1 of 44 आयकरअपीलीयअिधकरण,इंदौरɊायपीठ,इंदौर INTHEINCOMETAXAPPELLATETRIBUNAL INDOREBENCH,INDORE BEFORESHRIVIJAYPALRAO,JUDICIALMEMBER AND SHRIB.M.BIYANI,ACCOUNTANTMEMBER (Virtualhearing) ITANo.356/Ind/2023 AssessmentYear:2012-13 M/sDecentIndustries PrivateLtd, 5 th floor, CorporatePark, DBCityAreaHills, Opp.M.P.NagarZoneI, Bhopal बनाम / Vs. ITO-1(2), Bhopal (Assessee/Appellant)(Revenue/Respondent) PAN:AAECA6271G AssesseebyMs.ShilpaGupta&ShriN.K.Gupta RevenuebyShriV.K.Singh,CIT-DR DateofHearing04.06.2024 DateofPronouncement20.08.2024 आदेश / ORDER PerB.M.Biyani,A.M.: Feelingaggrievedbyappeal-orderdated25.08.2023passedbylearned CommissionerofIncome-Tax(Appeals)-NFAC,Delhi[“CIT(A)”]whichinturn arisesoutofassessment-orderdated30.12.2019passedbylearnedITO-1(2), Bhopal[“AO”]u/s147/143(3)ofIncome-taxAct,1961[“theAct”]for Assessment-Year[“AY”]2012-13,theassesseehasfiledthisappeal. M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page2of44 2.Thebackgroundfactsleadingtopresentappealaresuchthatthe assessee-company,earlierknownas‘M/sBhaskarDenimLtd.’and subsequentlychangedto‘M/sDecentIndustriesPvt.Ltd.’asmentionedin thetitle,filedoriginalreturnofAY2012-13on30.09.2012declaringatotal incomeofRs.80,100/-whichwasdulyassessed.Subsequently,theAO receivedinformationfromInvestigationWing,KolkataofIncome-tax Department[“InvestigationWing”]thattheassesseehadallottedpreference shareshavingfacevalueofRs.10/-pershareatanissuepriceofRs. 1,000/-(inclusiveofpremiumofRs.990/-pershare)totwo‘Kolkata-based shellcompanies’namedM/sAjaySoftwarePvt.Ltd.[“A”]andM/sJayHind FinancialAdvisorsLtd.[“J”]on31.03.2012andreceivedproceedsofRs. 66,91,70,000/-infinancialyear2011-12relevanttoAY2012-13under consideration.Thedetailsofsharesallottedareasunder: S.No.Nameoftheallotee andPAN No.of shares allotted Nominal amountper share(Rs.) Premium amountper share(Rs.) Totalamount including premium(Rs.) 1M/sAjaySoftwareP. Ltd (AAGCA4914J) 2,21,07010/-990/-22,10,70,000/ - 2M/sJaiHind FinancialAdvisorsP Ltd (AABCJ9501B) 4,48,10010/-990/-44,81,00,000/ - Total66,91,70,000/ - ThereportofInvestigationWingwasbasedonasurveyactionu/s133A carriedoutinthecaseofone‘ShriAnandSharma,Kolkata’(entryoperator) on02.07.2013pursuanttowhichthestatementsofShriAnandSharma wererecordedon02.07.2013/06.02.2014.TheAOobservedthatShriAnand M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page3of44 Sharmawasengagedinprovidingaccommodationentriesintheformof sharecapital,etc.byachannelofcompaniesoperated/controlledbyhim. TheAOalsoobservedthatthecompanies“A”and“J”receivedamountsfrom other‘Kolkata-basedshellcompanies’operated/controlledbyShriAnand Sharmaandthoseamountswerethereaftertransferredtoassesseefor subscriptiontocapital.Itwasfurtherobservedthatmanyofthecompanies operated/controlledbyShriAnandSharmawerestruckoffbyMinistryof CorporateAffairs(MCA).Fromthis,itwasinferredthatthemoneysprovided toassesseeonaccountofsubscriptiontoshare-capitalwasbasically introductionofassessee’sown‘undisclosedmoney’.TheAOfurther observedthatthetransactionsofaforesaidshare-capitalwerenotverifiable fromITRofassessee.Accordingly,theAOformedareasontobelievethat theincomeofRs.66,91,70,000/-chargeabletotaxhadescapedassessment. Therefore,proceedingsu/s147wereundertakenagainstassesseethrough noticedated30.03.2019u/s148.Inresponsetonotice,theassesseere-filed ITRon22.04.2019repeatingtheoriginalincomeofRs.80,100/-.Thereafter, theAOissuednoticesu/s143(2)/142(1)fromtimetotimewhichwereduly compliedbyassessee.Finally,theAOcompletedassessmentvideorder dated30.12.2019u/s147/143(3)assessingtotalincomeatRs. 66,93,07,996/-aftermakingtwoadditions,viz.(i)additionofRs. 66,91,70,000/-onaccountofunexplainedsharecapitalu/s68and(ii) additionofRs.57,896/-onaccountofdisallowanceofexpensesu/s14A. Aggrieved,theassesseecarriedmatterinfirst-appealandmadedetailed M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page4of44 submissionsbutdidnotgetanysuccess.Stillaggrieved,theassesseehas comeinnextappealbeforeus. 3.Thegroundsraisedbyassesseeareasunder: “1.There-openingoftheassessmentu/s148isbadinlawandhencethe assessmentmaypleasebeannulled. 2.TheLd.CIT(A)NFAChaserredinupholdingtheadditionofRs.66,91,70,000/- u/s68beingthesharepremiumreceived. 3.ItwasprovedbeforetheLd.CIT(A)NFACandtheLd.AOthatthetransaction isgenuineandtheamountshavebeenreceivedthroughthebankingchannel. TheadditioncannotbemademerelyonthebasisoftheADI’sreportinthe caseofsomeothercompaniesandnotinthecaseofsubscriberofshares. 4.Theassesseehasprovedthatthesubscribercompanieshadasubstantial capitalandreserves.Theadditionshavebeenmadeonsurmisesand conjecturesanddeservestobedeleted. 5.TheadditionofRs.66,91,70,000/-maypleasebedeleted. 6.TheLd.CIT(A)NFAChaserredinupholdingtheadditionofRs.57,896/-made u/s14A.Theadditionmaypleasebedeleted.” GroundNo.1: 4.Thisisalegalgroundinwhichtheassesseehaschallengedthere- openingofassessmentu/s148andprayedforannullingtheassessment madebyAO. 5.Ld.ARforassesseehasfiledaWritten-Synopsisandadvancedthe samesubmissionasmentionedthereinbeforeusduringhearing.Thethrust ofLd.ARissuchthattheAOhasmerelyadoptedthereportsharedby InvestigationWingandinitiatedre-assessmentproceedingagainstassessee withoutapplicationofhisownmind.RelyinguponMeenakshiOverseas(P) Ltd.395ITR677(Delhi),ShodimanInvestmentPvt.Ltd.422ITR337 M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page5of44 (Bombay),NuPowerRenewables(P)Ltd.104taxmann.com307 (Bombay),SingnatureHotels(P)Ltd.338ITR51(Delhi)andFair InvestmentLtd.357ITR146(Delhi),Ld.ARprayedthatthere-openingin suchamannerisinvalidliabletoannulled. 6.Percontra,Ld.DRsubmittedthattheAOreceivedinformationfrom InvestigationWingthattheassesseewasbeneficiaryofshareapplication moneyofRs.66,91,70,000/-receivedfromcompaniesnamed“A”and“J”. Thus,theAOhadacreditableinformationfromInvestigationWing.He submittedthattheAOcannotcreateinformationonhisown,hewillalways receiveinformationfromsomeagencymaybeanoutsideagencyorinternal InvestigationWingofdepartment.Hesubmittedthattheinformation receivedfromInvestigationWingisareliancesourcefortheAO.Further,the applicationofAO’smindisclearlyvisiblefromthereasonsrecordedasalso thevehementmentionsbyAOinpreliminaryParas1and2ofassessment- orderwhereintheAOhasnarratedhisanalysisoftheinformationreceived. Further,theAOhasfolloweddueprocedureoflawtore-openassessee’s caseandtheassesseehasnowhereraisedanyobjectionduringassessment- proceedingorfirstappellateproceeding.Therefore,thereisnoillegalityin AO’sactioninundertakingproceedingsu/s147. 7.Wehaveconsideredrivalcontentionsofbothsidesandperusedthe ordersoflower-authoritiesaswellasthematerialheldonrecordtowhich ourattentionhasbeendrawn.Afteracarefulconsideration,wefindthatthe Ld.DRforrevenuehassufficientstrengthincontendingthattheAOhasnot M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page6of44 onlyreceivedcredibleinformationfromInvestigationWingbutalsoapplied hisownmindtotheinformationwhichisdiscerniblefromreasonsrecorded asalsoprefacedinPara1and2ofassessment-order.Itisanaccepted judicialviewthatatthetimeofformationofbelief,theAOisonlyrequiredto lookintotheexistenceofavalidreasonandapplyareasonablemindin ordertoformaprimafaciebeliefofescapementofincome.Inpresentcase, theseparametersaresatisfied.Ld.ARforassesseecouldnotsubstantiateas tohowinpresentcaseitcanbesaidthattheAOhasnotappliedhismind totheinformationsharedbyInvestigationWing.Asamatteroffact,wemay alsomentionthattheassesseehasnotraisedanyobjectionagainstAO’s actionduringentireassessment-proceedingorevenduringfirst-appeal proceedingbeforeCIT(A).Therefore,inthefactsofcase,wedonotfindany meritinassessee’sground.ThedecisionscitedbyLd.ARarenotapplicable toassessee’sfacts.Consequently,theassessee’sgroundisrejected. GroundNo.2to5: 8.Inthesegrounds,theassesseehaschallengedtheadditionofRs. 66,91,70,000/-madebyAOandupheldbyCIT(A)onaccountof unexplainedsharecapitalu/s68. 9.Duringassessment-proceeding,whentheAOshow-causedassesseeto explainthejustificationofissuanceofshareshavingfacevalueofRs.10/- atapremiumofRs.990/-,theassesseefiledreplydated24.12.2019which isre-producedbyAOinPara3.1-3.2ofassessment-orderasunder: M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page7of44 “3.1Theassesseevideanothernoticedated29.11.2019hasbeenaskedto explainthejustificationofsaidsecuritypremiumcollectedonissueof preferencesharestoabovetwocompaniesandalsotojustifythevaluationof shareswithfacevalueofRs.10/-eachatpremium@Rs.990/-.Noreplywas receivedandthereforeashowcausenoticeundersection144wasissuedto submitthereply.Theassesseesubmittedthereplyvideletterdated 24.12.2019whichisplacedonrecord.Theassesseerepliedasunder:- "(i)Thecompanyhasenhanceditscapitalbaseandissuepreference shareofRs.10/-eachatapremiumofRs.990/-pershare. (ii)Regardingjustificationofsaidsecuritypremiumcollectedonissueof preferenceshares,wewouldliketosubmitthatcompanyhasissued suchsharesonthesamepremiumcompanyhascollectedjustyear beforethepreviousyearandthatwasthebasisofcollectingpremium thisyear. (iii)Itisworthymentionthatcompanyhasissuedtoabovesaidcapital tothesameparties(M/sAjaySoftwarePLtdandM/sJaiHind FinancialServicesPLtd)duringtheyearunderconsiderationtowhom issuedintheyearbeforethepreviousyearunderconsideration. (iv)Yourgoodselfmayverifythesamefromtheauditedfinancial statementoftheCompanyattachedherewithwherethesecurity premiumonissueofsharesatRs.990/-pershareinjustyearbefore thepreviousyearbythecompanyasperAnnexure1. (v)Further,wewouldliketosubmitthatboththecompaniesassessed totaxandlatestassessmentorderisenclosedforyourreadyreference andkindperusal.” 3.2Abovereplyoftheassesseeiscarefullyexamined.Itisnoticedthatthe assesseehasattachedfollowingdocumentswithitswrittensubmissiondated 24.12.2019filedthroughe-proceedings:- (i)NoticeofAGMdated29.09.2012alongwithcopyofDirector'sreport, Auditors'report,FinancialStatementsfortheFY2011-12withnotesto financialstatementfortheyearended31.03.2012. (ii)Copyofassessmentordersundersection143(3)incaseofM/sJai HindFinancialAdvisorsPLtdandM/sAjaySoftwarePLtdfortheAY 2017-18passedbyrespectiveAssessingOfficersofKolkata. Itisthusevidentthattheauditedfinancialstatementofthecompanyfor immediateprecedingFYisnotfoundenclosed.” M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page8of44 However,theAOrejectedassessee’ssubmissionvidePara3.3to8of assessment-order,treatedthereceiptofRs.66,91,70,000/-byassesseeas unexplainedandmadeaddition. 10.Duringfirst-appeal,theCIT(A)approvedAO’sactionbyfollowingorder: “5.DECISION: Ihavegonethroughanddulyconsideredthesubmissionmadebythe appellant,assessmentorderoftheAOandotherfactsofthecaseavailableon therecord. 5.1.GroundNo.1pertainstotheissueofadditionofRs.66,91,70,000/-on accountofsharepremiumu/s68oftheActandthesameisadjudicatedas under:- 5.2.Inthiscase,duringtheyearunderconsideration,itisevidentthatthe appellanthasreceivedanamountofRs.66,91,70,000/-assharepremium. Theappellantwasrequiredtosubstantiatetheamountreceivedinhisbooks ofaccountbywayoffurnishingthedetailsofsuchpersons,genuinenessof transaction,creditworthinessofpersonetc.Theappellantestablishedthe identityofinvestorsandgenuinenessoftransactions.However,the appellantfailedtoestablishcreditworthinessofinvestors. 5.3.Asperinformationavailable,M/sBhaskarDenimLtd,d,nowrenamed asM/sDecentIndustriesPvtLtd.allottedpreferencesharesatpremiumto twoKolkatabasedshellcompanieson31.03.2012amountingtoRs. 66,91,70,000/-,SharesvalueofRs.10/-eachwereissuedatpremiumofRs. 990/-totwocompaniesviz.M/sAjaySoftwarePLtdandM/sJaiHind FinancialAdvisorsP.Ltd.Inthisregard,InvestigationDirectorateofthe Department,Kolkatahadexaminedthecasesofentryprovidersandfound thattheassesseecompanyhadallottedpreferencesharestoM/sAjay SoftwarePLtdandM/sJaiHindFinancialAdvisorsPLtdatapremiumofRs. 990/-pershare. Frombankaccountsofabovetwocompaniesitisalsoobservedthatduring theFY2011-12,thesecompanieshavereceivedamountfromvariousKolkata basedshellcompaniesandsuchamountswereimmediatelytransferredtothe assesseecompany.Inthesebankaccounts,moneywasreceivedfromKolkata basedshellcompanieswhicharecontrolledbyvariousentryoperators.Itis alsonoticedthatmanyofthesecompanieshavebeenstruckoffbytheMCA. Thisclearlyshowsthatmoneyprovidedbysuchcompaniestoabovetwo companiesonaccountofpurchaseofsharewasactuallyroutingof undisclosedincomeoftheassesseecompanywhichisthebeneficiary M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page9of44 company.Thus,itisevidentthattheundisclosedincomeoftheassessee companywasroutedthroughvariousshellcompaniestoM/sAjaySoftwareP LtdandM/sJaiHindFinancialAdvisorsPLtdintheguiseofsaleof investmentsandthenfinallytransferredtotheassesseecompanyinthegarb ofsharepremium. Duringtheappellateproceedings,thenoticeswereissuedtothetwoinvestor companiestoprovetheircreditworthiness.However,boththecompaniesfailed toprovetheircreditworthinesswithsupportingdocumentaryevidences. 5.4.ItisalsoundisputedfactthatanamountofRs.66,91,70,000/-was creditedinappellant’sbookofaccountonaccountofreceivingofshare premium.ThereforeprovisionofSection68oftheActclearlyattractsinthis case.Forthesakeofreference,Section68ofIncomeTaxActisre-produced below:- “Cashcredits. 68.Whereanysumisfoundcreditedinthebooksofanassesseemaintained foranypreviousyearandtheassesseeoffersnoexplanationaboutthenature andsourceintheopinionoftheAssessingOfficersatisfactory,thesumso creditedmaybechargedtoincome-taxastheyear:thereofortheexplanation offeredbyhimisnot,Officer,satisfactory,thesumsocreditedmayincomeof theassesseeofthatpreviousyear. Providedthatwherethesumsocreditedconsistsofloanorborrowingorany suchamount,bywhatevernamecalled,anyexplanationofferedbysuch assesseeshallbedeemedtobenotsatisfactory,unless,- (a)thepersoninwhosenamesuchcreditisrecordedinthebooksofsuch assesseealsooffersanexplanationaboutthenatureandsourceofsuchsum socredited;and (b)suchexplanationintheopinionoftheAssessingOfficeraforesaidhasbeen foundtobesatisfactory: Providedfurtherthatwheretheassesseeisacompany(notbeinga companyinwhichthepublicaresubstantiallyinterested),andthesumso creditedconsistsofshareapplicationmoney,sharecapital,sharepremiumor anysuchamountbywhatevernamecalled,anyexplanationofferedbysuch assessee-companyshallbedeemedtobenotsatisfactory,unless- (a)theperson,beingaresidentinwhosenamesuchcreditisrecordedinthe booksofsuchcompanyalsooffersanexplanationaboutthenatureandsource ofsuchsumsocredited;and (b)suchexplanationintheopinionoftheAssessingOfficeraforesaidhasbeen foundsatisfactory: Providedalsothatnothingcontainedinthefirstprovisoorsecondproviso shallapplyiftheperson,inwhosenamethesumreferredtothereinis recorded,isaventurecapitalfundoraventurecapitalcompanyasreferredto inclause(23FB)ofsection10.” M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page10of44 5.5.Thereareseveraljudicialprecedentswhichholdthatinitialonusison theappellanttoestablishbycogentevidencethegenuinenessofthe transaction,andcredit-worthinessoftheshareholdersunderSectioncited below:-. (a)Hon.DelhiHighCourtinthecaseofCITvs.OasisHospitalitiesPvt.Ltd. 333ITR119(Delhi)(2011)heldthat:- “Theinitialonusisupontheassesseetoestablishthreethingsnecessaryto obviatethemischiefofSection60.Thoseare:(i)identityoftheinvestors;(ii) theircreditworthiness/investments;and(iii)genuinenessofthetransaction. Onlywhenthesethreeingredientsareestablishedprimafacie,thedepartment isrequiredtoundertakefurtherexercise”. Ithasbeenheldthatmerelyprovingtheidentityoftheinvestorsdoesnot dischargetheonusoftheassessee,ifthecapacityorcredit-worthinesshasnot beenestablished. (b)Hon’bleSupremeCourtinthecaseofCITVsP.Mohankala(2007)161 Taxman169/291ITR278heldthat:- “Abarereadingofsection68oftheIncome-taxAct,1961,suggeststhat(i) therehastobecreditofamountsinthebooksmaintainedbytheassessee,(ii) suchcredithastobeasumofmoneyduringthepreviousyear;and(iii)either (a)theassesseeoffersnoexplanationaboutthenatureandsourceofsuch creditsfoundinthebooksor(b)theexplanationofferedbytheassessee,inthe opinionoftheAssessingOfficer,isnotsatisfactory.Itisonlythenthatthesum socreditedmaybechargedtoIncome-taxastheincomeoftheassesseeofthat previousyear.Theexpression“theassesseeoffersnoexplanation”meansthe assesseeoffersnoproper,reasonableandacceptableexplanationasregards thesumfoundcreditedinthebooksmaintainedbytheassessee.Theburden isontheassesseetotakethepleathat,eveniftheexplanationisnot acceptable,thematerialandattendingcircumstancesavailableonrecorddo notjustifythesumfoundcreditedinthebooksbeingtreatedasareceiptof incomenature”. (c)Hon’bleSupremeCourtinthecasesofKaleKhanMohammadHanifvCIT [1963]50ITR1(SC),RoshanDiHattivCIT[1977]107ITR(SC)heldthat:- “theonusofprovingthesourceofasumofmoneyfoundtohavebeenreceived byanassessee,isonhim.Wherethenatureandsourcethereofcannotbe explainedsatisfactorily,itisopentotherevenuetoholdthatitistheincomeof theassesseeandnofurtherburdenisontherevenuetoshowthattheincome isfromanyparticularsource”. 5.6.IthasbeenrecentlyheldbytheHon’bleSupremeCourtinthecaseof PCITVs.NRAIron&SteelPvt.Ltd.whereintheadditioninrespectofidentical issuehasbeenconfirmedbyApexCourtandheldthattheonustoestablish creditworthinessoftheinvestorscompaniesisontheappellant.Theappellant isunderlegalobligationtoprovethereceiptofsharecapital/premiumtothe satisfactionoftheAOandmerefilingtoprimaryevidenceisnotsufficient. 5.7.InviewofabovejudicialprecedentslaidbytheHon’bleHighCourtand SupremeCourt,itisevidentthat“theinitialonusisupontheassesseeto M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page11of44 establishthreethingsnecessarytoobviatethemischiefofSection68.Those are:(i)identityoftheinvestors;(ii)theircreditworthiness/investments;and(ii) genuinenessofthetransaction”.Inthiscase,itisevidentfromassessment- orderthattheappellanthasnotfurnishedsatisfactorydocumentaryevidences regardingnatureandsourceofcreditentriesofRs.66,91,70,000/-receivedby wayofsharepremium.Further,itisapparentthattheappellantduringthe assessmentaswellasintheappellateproceedingsfailedtofurnish documentaryevidences/properexplanationinsupportofhiscontention.Soin viewofaforesaidfacts,Iamnotinapositiontotakeadivergentviewfromthe findingoftheAO.Hence,theactiontakenbytheAOappearstobeinorder. Accordingly,IupholdtheadditionmadeofRs.66,91,70,000/-onaccountof unexplainedcashcreditsbywayofsharepremium.Accordingly,GroundNo.1 isdismissed.” 11.Beforeus,Ld.ARforassesseemadefollowingcontentionstoassail theordersoflower-authorities: (i)TheAOhasmadeadditionsolelyonthebasisofstatementofShri AnandSharma.Theassesseehasreceivedmoneysfrom“A”and“J” anddoesnotknowwhois‘AnandSharma’.TheAOhasnomaterialor basisexceptthestatementsof‘AnandSharma’,toshowthatthe assesseehasreceivedaccommodationentriesintheformofshare capital. (ii)Eveninhisstatements,ShriAnandSharmahasnowheredisclosed thenameofassessee.TheAOhasnotedawrongfindinginPara4(ii) ofassessment-orderthatShriAnandSharmastatedthathehasgiven bogus/accommodationshareapplicationmoneytoassesseei.e. BhaskarDenimLimited(renamedasDecentIndustriesPvt.Ltd.). Further,nowhereinstatements,ShriAnandSharmahasdisclosed thenamesof“A”or“J”ascompaniesoperated/controlledbyhimfor providingaccommodationentries.Thus,fromthestatementswhich M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page12of44 aretheonlybasisformakingadditioninassessee’shands,itcannot befoundthatanyaccommodationby“A”and“J”wasprovidedto assessee. (iii)TheAOhasmadeadditionwithoutmakinganyenquiryor investigationfrom“A”and“J”todiscoverthetruthandauthenticityof transactions.Infact,inPara4(iii)ofassessment-order,theAOhas himselfnotedthatbeforeInvestigationWing,“A”and“J”statedin theirwritten-submissionsthattheyliquidatedtheiroldinvestments heldinearlieryearsandtheproceedswasutilisedformaking investmentinassessee-company.Thus,thereisaclear-cut explanationby“A”and“J”madetoauthoritiesinfavourofassessee duringindependentexamination. (iv)That,allthreeingredientsofsection68oftheAct,viz.identityof“A”& “J”,genuinenessoftransactionsandcreditworthinessof“A”&“J”, havebeendulyestablishedbyfurnishingalargenumberofstatutory andnon-statutorydocuments.InPara5.2ofappeal-order,theCIT(A) hasalreadyacceptedthesatisfactionoffirsttwoingredientsi.e.the identityof“A”&“J”andgenuinenessoftransactions.Althoughthe CIT(A)hasexpresseddoubtaboutthirdingredientofcreditworthiness butthedocumentsbroughtbyassesseeonrecordareenough evidencestoestablishcreditworthinessalso.Nodefectorinfirmityhas beenfoundbylower-authoritiesinanyofthedocumentaryevidences. Ld.ARhasnarratedthedetailsofdocumentsfiledinPara2.8to2.19 M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page13of44 ofWritten-SynopsisgivingreferencesofPagenumbersofPaper-Book wheretherespectivedocumentsareplacedasunder: Documentstoestablishidentity: a)Namesandaddressesof“A”and“J”(PageNo.73ofPaper-Book). b)AuditedfinancialstatementsandIncome-taxreturnsof“A”and“J”for AY2012-13underconsideration(PageNo.139to171/295to327 ofPaper-Book). c)Latestassessment-ordersof“A”and“J”forAY2017-18.Theseare scrutinyassessment-orderspassedu/s143(3)byITO-Ward-9(1)/9(3), Kolkata.(PageNo.58to63ofPaper-Book). Documentstoestablishgenuineness: d)Form2(ReturnofAllotment)alongwithBoardResolutionfiledwith theMinistryofCorporateAffairsandacknowledgementthereof(Page no.69to74/115ofPaper-Book). e)Theassesseehasreceivedmoneysthroughbankingchannel.Bank StatementofassesseeandCopyofBankBookasextractedfrom booksofaccountofassessee(Pageno.75to83ofPaper-Book). f)Ledgeraccountof“A”and“J”inthebooksofassessee(Pageno.112 to114ofPaper-Book). Documentstoestablishcreditworthiness: g)Bankstatementsof“A”and“J”showingdebitandcreditentriesforAY 2012-13underconsideration(Pageno.116to138ofPaper-Book). h)AuditedfinancialstatementsandIncome-taxreturnsof“A”and“J”for AY2012-13underconsideration(PageNo.139to171/295to327 ofPaper-Book).TheBalance-Sheetsof“A”and“J”ason31.03.2012 showshareholders’fundstothetuneofRs.46,94,46,306/-andRs. 58,39,49,987/-respectivelywithcorrespondingfiguresofRs. 46,94,42,355/-andRs.58,39,24,450/-ason31.03.2011.Both companieshavecurrentliabilities,tangibleassets,investmentsand currentassets. i)Latestassessment-ordersof“A”and“J”forAY2017-18.Theseare scrutinyassessment-orderspassedu/s143(3)byITO-Ward-9(1)/9(3), Kolkata.(PageNo.58to63ofPaper-Book). (v)That,thecompanies“A”and“J”havebeenassessedbyIncome-tax Departmentandcopiesoftheirlatestscrutinyassessment-ordersof M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page14of44 AY2017-18passedu/s143(3)byITO-Ward-9(1)/9(3),Kolkataareon recordasmentionedinabovelistofdocuments.Ld.ARsubmitted thatthedepartmenthasscrutinizedboth“A”and“J”andfoundthose companiesandthefinancialfiguresofthosecompaniesasgenuine. Further,thecopiesofauditedfinancialstatementsandincome-tax returnsofthosecompaniesforAY2012-13underconsiderationare alsofiledinPaper-BookatPage139to171/295to327.Thus,once thecompanies“A”and“J”arefoundhavingsufficientsharecapital, etc.andtheinvestmentsmadebytheminassessee-companyareduly recordedintheirauditedaccountsandwell-informedtodepartment alsointhereturnsfiled,theAOisgrosslywrongindoubtingthesame. (vi)Oncetheassesseehasdischargedprimaryonusbyadducingample evidenceasnotedabove,theburdenshiftsuponAO.Relianceinthis regardisplacedonOrissaCorporation(P)Ltd.159ITR78(SC), RohiniBuilders127Taxman523(Gujrat),LovelyExports(P)Ltd. 216ITR195,OasisHospitalities(P)Ltd.333ITR119(Delhi)and FairFinvestLtd.357ITR146(Delhi). (vii)Theassessee-companyhasissuedidenticalsharesatidentical premiuminprecedingAY2011-12.Thispointwascategorically submittedtoAOinPointNo.(ii)oftheletterdated24.12.2019re- producedinPara3.1ofassessment-order.Ld.ARdrewustoPage251 ofPaper-BookwheretheauditedBalance-Sheetofassesseefiledto M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page15of44 departmentforprecedingAY2011-12isplaced.InSchedule-1,there is“issuedandpaid-upcapital”ofRs.38,30,800/-from3,83,080 preferencesharesofRs.10/-eachandinSchedule-2,thereisa securitypremiumofRs.37,92,49,200/-ason31.03.2011.The correspondingfiguresason31.03.2010were0(zero).Thus,the assesseeissued3,83,080preferencesharesofRs.10/-eachata premiumofRs.990/-pershare(Rs.37,92,49,200÷3,83,080).Ld.AR submittedthatthepremiumofRs.990/-receivedbyassesseein precedingAYhasbeenacceptedbydepartmentwithoutanyobjection. Therefore,theAOiswronginraisingobjectionincurrentyear. Withoutprejudice,Ld.ARsubmittedthatneithertheassesseeis obligatedtoexplainfairvalueforsection68northeAOhasauthority toquestionfairvalueforinvokingsection68.Inthisregard,Ld.AR relieduponChiripalPolyFilmsLtd.104taxmann.com172 (MumbaiITAT).Ld.ARalsocontendedthatitwasamutualdecision betweenassesseeand“A”&“J”toreceive/paypremium,howtheAO isconcernedwiththeirmutualdecision?Ld.ARreliedupondecision ofHon’bleJurisdictionalHighCourtinChainHouseInternational (P)Ltd.98taxmann.com47(MP)holdingthus: “52.Issuingtheshareatapremiumwasacommercialdecision.Itisthe prerogativeoftheBoardofDirectorsofacompanytodecidethepremium amountanditisthewisdomofshareholderwhethertheywanttosubscribe thesharesatsuchapremiumornot.Thiswasamutualdecisionbetween boththecompanies.Indaytodaymarket,unlessanduntil,theratesisfixed byanyGovt.Authorityorunlessthereisanyrestrictionontheamountof sharepremiumunderanylaw,thepriceofthesharesisdecidedonthe mutualunderstandingofthepartiesconcerned. M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page16of44 53.Oncethegenuineness,creditworthinessandidentityareestablished,the revenueshouldnotjustifiablyclaimtoputitselfinthearmchairofa businessmanorinthepositionoftheBoardofDirectorsandassumetherole ofascertaininghowmuchisareasonablepremiumhavingregardtothe circumstancesofthecase. 54.Thereisnodisputeaboutthereceiptoffundsthroughbankingchannelnor thereisanydisputeabouttheidentity,creditworthinessandgenuinenessof theinvestorsand,therefore,thesamehasbeenestablishedbeyondanydoubt andthereshouldnothavebeenanyquestionordisputeaboutpremiumpaid bytheinvestorstherefore,unlessthereisalimitationputbythelawonthe amountofpremium,thetransactionshouldnotbequestionedmerelybecause theassessingauthoritythinksthattheinvestorcouldhavemanagedby payingalesseramountasSharePremiumasaprudentbusinessman.The testofprudencebysubstitutingitsownviewinplaceofthebusinessman's hasnotbeenapprovedbytheSupremeCourtinthedecisionsofCITV/s. Walchand&Co.Pr.Ltd.[(1967)65ITR381]andJ.K.WoollenManufacturers V/s.CIT[(1969)72ITR612].” 12.Havingsubmittedthus,Ld.ARalsopointedoutalegallacunainthe actionoflower-authorities.Itissubmittedthattheassesseehasreceived subscriptionfrom“A”&“J”throughbankingchannelwhichwereduly recordedinbooksof“A”&“J”.Thecompanies“A”&“J”are‘source’for assesseeandtheassesseehasfiledampleevidencestoprovetheidentity, genuinenessandcreditworthinessasrequiredbysection68qua“A”&“J”i.e. the‘source’.Thereafter,thereremainsnofurtherburdenuponassesseein termsofsection68.TheCIT(A)has,however,relieduponProvisotosection 68toupholdtheadditionmadebyAO.Thesaidprovisoprescribesthus: “Providedthatwheretheassesseeisacompany(notbeingacompanyinwhichthe publicaresubstantiallyinterested),andthesumsocreditedconsistsofshare applicationmoney,sharecapital,sharepremiumoranysuchamountbywhatever namecalled,anyexplanationofferedbysuchassessee-companyshallbedeemedto benotsatisfactory,unless- (a)theperson,beingaresidentinwhosenamesuchcreditisrecordedinthebooksof suchcompanyalsooffersanexplanationaboutthenatureandsourceofsuchsum socredited;and M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page17of44 (b)suchexplanationintheopinionoftheAssessingOfficeraforesaidhasbeenfound satisfactory:” ThisProvisohasitselfcomeinstatutefromAY2013-14andthereforenot applicabletoAY2012-13underconsideration.Beforeintroductionofthis Proviso,whichisthecaseofassessee,therewasnorequirementtoprove “sourceofsource”.ItisfurtherheldbyHon’bleCourts,M/sGagandeep InfrastructurePvt.Ltd.394ITR680(Bom)toquoteonesuchdecision, thatthenewprovisoisprospectiveandnotretrospectiveinapplication. Whenitisso,thelower-authoritiesarelegallywronginmaking/upholding additionontheallegationswithrespecttothe“sourceofsource”i.e.the source/companiesfromwhich“A”&“J”receivedmoneysformaking investmentinassessee.Therefore,theactionoflower-authoritiesisbased onanon-existentlawandclearlyillegal. 13.Percontra,Ld.DRforrevenuestronglysupportedtheordersoflower- authorities.Forthisfirstly,hedrewusthroughvariousparasof assessment-ordertoshowthattheAOhasmadecompleteanalysisbefore makingadditionasunder: (i)InPara4,theAOhasnotedthatasurveyu/s133Awasconductedby InvestigationWingon02.07.2013uponShriAnandSharmaand subsequentlystatementsofShriAnandSharmawerealsorecorded u/s131on06.01.2014.Itemergedfromtheconfessionsand admissionsofShriAnandSharmainswornstatementsthatheisan accommodationprovider.InreplytoQ.No.6and8,ShriAnand M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page18of44 SharmaadmittedthathewasinvolvedinformationofJama-Kharchi companiesandprovidingaccommodationtoothersforcommission. TheAOhasalsonotedthatthecompanies“A”and“J”informedto InvestigationWingthattheyliquidatedtheiroldinvestmentsandthe saleproceedwasutilizedforpurchasingsharesofassesseebutthis explanationisnottrueinviewofstatementsofShriAnandSharma. TheAOhasextractedthekeyfiguresoffinancialstatementsof“A” and“J”andfoundthatthosecompaniesdonothaveanynetworthor realassets;therearenofixedassetsorverylittlefixedassetsare ownedbycompanies;theturnoverisverynegligible;thereisnooffice building,shop,etc.,norenthasbeenpaid;thecompaniesdonothave significantincome,majorsourceofincomeisnotfromoperationsof businessbutfrominterest,commission,etc.;thereforethecompanies donotrealeconomicexistenceandtheyexitonlyonpapers. (ii)Inpara5,theAOhasextractedthedetailsofinvestmentsmadeby“A” and“J”inothercompaniesandobservedthatallthosecompanies wereshellcompaniescontrolledbyShriAnandSharma.TheAOhas alsore-producedthestatementsofShriAnandSharma. (iii)Inpara6,theAOhasobservedthatthebankstatementsof“A”and “J”reflectthattheyreceivedfundsfromothercompaniesjustbefore transfertoassessee.Thus,entiremodusoperandiwasadoptedto pumpundisclosedincomeoftheassessee.TheAOalsoobservedthat theassesseehasclaimedtohavecollectedidenticalsharepremiumin M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page19of44 precedingyearbutsuchfactcannotbeabasistodischargethe burdentoprovegenuinenessoftransactionsincurrentyear.Further, theassesseehasfailedtofurnishthedetailedbasisforshare premiumofRs.990/-collected. (iv)InPara6.1,theAOhasmadefollowingobservationsquathe assessment-ordersof“A”and“J”filedbyassesseeforAY2017-18: “6.1Insupportofitscontentiontheassesseehasalsoenclosedthecopiesof assessmentordersundersection143(3)fortheAY2017-18inrespectofM/s AjaySoftwarePLtdandM/sJaiHindFinancialAdvisorsP.Ltd.passedby therespectiveAOsofKolkata.ItisnoticedthatM/sAjaySoftwarePLtde- fileditsreturnofincomefortheAY2017-18declaringnilincome,after adjustingbroughtforwardlossofRs.1927/-undersection143(3).TheAO computedtheincomeofRs.1927/-.Theassessmentproceedingswere completedonlimitedissues.Similarly,theassessmentproceedingsincaseof M/sJaiHindFinancialAdvisorsPLtdwerecompletedontotalincomeofRs. 48,035/-asagainstthereturnedIncomeofRs.6035/-fortheAY2017-18. ThiscasewasalsoselectedonlimitedIssuesincludinglowincomein comparisontohighloan/advance/investment.Thus,theaboveassessment ordersdonotjustifythesharepremiumofRs.990/-perarereceivedduring theFY2011-12relevanttoAY2012-13.FromtheAssessmentordersitisalso noticedthatthereisnoregularbusinessactivitybythesepapercompanies.” Further,theAOobservedthattheassesseehadissuedsharesofRs. 10/-eachatapremiumofRs.990/-withoutjustifyingsuchhigh premium. (v)Thereafter,inPara7,theAOhastakenintoaccountthedecisionsof Hon’bleApexCourtinDurgaPrasadMore214ITR801,Sumati Dayal80Taxmann89,McDowellVs.CTOandHon’bleDelhiHigh CourtinNRPortfolio201442Taxmann.com339andfinally,vide Para8,madeaddition. M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page20of44 14.TheLd.DRreliedheavilyuponPCITVs.BSTInfra(2024)161 Taxmann.com668(Calcutta),PCITVs.SwatiBajaj(2022)139 taxmann.com352(Calcutta)andBalGopalMerchants(P)Ltd.Vs.PCIT (2024)162Taxmann.com465(Calcutta). 15.Inrejoinder,Ld.ARre-iteratedthattheassesseeisneitherconcerned norhadanyknowledgeofeitherAnandSharmaorothercompaniesin which“A”and“J”madeinvestments.Theassesseehasreceivedmoneys from“A”and“J”andbothofthesecompaniesareverymuchactiveasper MCArecordsandalsoregularlyassessedbyIncome-taxDepartmentitself. Thecompanies“A”and“J”soldtheirinvestmentsandinvestedsale-proceed inassessee.Hesubmittedthattheauditedaccountsof“A”and“J”arealso availableonrecordandonceitisfoundthatthosecompaniesliquidated theirinvestmentsandmadeinvestmentinassessee-companythrough bankingchannel,thereisadirectsourceformakinginvestmentinassessee. Thetheoryoflessincomeornoincomeorlessfixedassetsisnotrelevant. HesubmittedthattheAOhasmadeadditiononthebasisofmeresurmises andconjectureswithouthavinganyiotaoftangiblematerialtoestablish thatthetransactionsarenotgenuine. 16.Wehaveconsideredrivalcontentionsofbothsidesandperusedthe ordersoflower-authoritiesaswellasthematerialheldonrecordtowhich ourattentionhasbeendrawn.TheissueinvolvedhereistheadditionofRs. 66,91,70,000/-madebyAOu/s68inrespectofshareapplicationmoney receivedbytheassesseefrom“A”and“J”.Afteracarefulconsideration,we M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page21of44 findcertainvitalpoints.ThefirstandforemostpointisthattheAOhas madeadditiononthebasisofstatementrecordedinthesurveyproceeding carriedoutbyInvestigationWingonShriAnandSharmaon02.07.2013. ShriAnandSharmahasclearlyadmittedinstatementsthatheisengagedin providingaccommodationbywayofshareapplicationmoney,loans,etc., hencetherecannotbeanydisputetothatextent.ButtheAOhasre- producedstatementsofShriAnandSharmaonPage12-15ofassessment- order.AperusalofstatementsclearlyshowsthatShriAnandSharmahas nowherestatedthatanyaccommodationwasprovidedtoassessee.Further, ShriAnandSharmahasnowherestatedthatthecompanies“A”&“J”from whomtheassesseereceivedshareapplicationmoneywerethecompanies controlled/operatedbyhim.Therefore,theadditionmadebyAOisonthe basisofmereassumptionofaccommodationprovidedbyShriAnand Sharmatoassessee.Secondly,theAOhashimselfnotedanimportantfact inPara4(iii)ofassessment-orderthatwhenInvestigationWingasked“A”& “J”aboutsourcesoftheirinvestmentsinassessee,theystatedintheir writtensubmissionsthattheyhaveliquidatedtheiroldinvestmentsheldin earlieryearsandtheproceedsofsalehavebeenutilizedforpurchasing sharesofassessee.ThisfindingnotedbyAOhimselfinassessment-order clearlyshowsthat“A”and“J”haveadmittednotonlytheinvestmentmade inassesseebutalsothesourceutilizedbythemformakinginvestment. Thirdly,theassesseehasadducedsufficientevidencesasenumeratedin foregoingparatoshowthatallthreeingredientsofsection68viz.identity, M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page22of44 genuinenessandcreditworthinessaredulyproved.Ld.CIT(A)hasalready acceptedinhisorderthatthefirsttwoingredientsofidentityand genuinenessareproved.Sofarasthethirdingredientofcreditworthinessis concerned,theassesseehasfiledauditedBalance-Sheets,Income-tax ReturnsandBankStatementsof“A”&“J”.TheBalance-Sheetsshows sufficientshareholders’fundsavailable.Thecompanies“A”&“J”soldtheir investmentsheldinothercompaniesandfromsale-proceeds,invested moneysinassessee.Thebankstatementsof“A”&“J”areheldonrecord whichshowssufficientbalancesavailablethereinformakinginvestmentsin assessee.Theassesseehasalsofiledevenlatestscrutinyassessment-orders ofAY2017-18of“A”and“J”whicharere-producedbelowforanimmediate reference: M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page23of44 M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page24of44 M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page25of44 M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page26of44 M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page27of44 NodefecthasbeenfoundbyAOinanyofthedocumentsadducedby assessee.Thus,afterseeingallthesedocumentsfiledbyassessee,therecan hardlybeanydisputequathecreditworthinessalso.Fourthly,theAOisnot havinganydocumentaryorcorroborativeevidencetoshowthattheassessee hasreceivedaccommodationentrybywayofshareapplicationmoney. Fifthly,theassesseehasalsoissuedidenticalsharesatidenticalpriceofRs. 1,000/-pershare(inclusiveofpremiumofRs.990/-pershare)in immediateprecedingAY2011-12whichthedepartmenthasaccepted. Sixthly,thereisastronglegalpointraisedbyassessee/Ld.ARthatthe assesseehasestablishedallthreeingredientswithrespecttothe“source”, namely“A”&“J”,fromwhichtheimpugnedshareapplicationmoneywas receivedbyassessee.TheCIT(A)andAOhave,however,attemptedtorequire theassesseetosatisfytherequirementofProvisotosection68i.e.toexplain ‘sourceofsource’althoughthesaidProvisoitselfwasnotthereinsection68 atthattime.Undisputably,theProvisocameintobeingfromAY2013-14 andtheCourtshavealsoheldagainstretrospectiveapplicationofProviso, thereforeitwasnotapplicabletoAY2012-13underconsideration.Whenit isso,thereisastrongmeritinassessee’ssubmissionthattheaddition made/upheldbyAO/CIT(A)onthestrengthofProvisotosection68isvery muchillegal.Ld.DRforassesseehasthoughrelieduponstatementsofShri AnandSharmaandtheobservationsmadebyAOinvariousparasof assessment-order(asnarratedbyusinforegoingparasofthisorder)but, however,couldnotcontrovertthesevitalpointsasnotedbyus. M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page28of44 17.Atthisstage,wegainfullyreferthedecisionofITAT,Jaipur‘B’ BenchinTheITO,Ward-4(2),JaipurVs.M/sSkywaysIndustrialEstate Company(P)Ltd.,ITANo.691/JP/2017,dated21.02.2020(orderis authoredbyJudicialMemberformingpartofthisBench)inoneidenticalcase wheretheAOmadeanadditionofRs.3,98,00,000/-intheverysameAY 2012-13inthehandsofanassesseenamed“M/sSkywaysIndustrialEstate Company(P)Ltd.”u/s68onaccountofunexplainedsharecapitalreceived fromM/s.AbhishekAdvisoryPvt.Ltd.byreferringtosamesurveyaction carriedoutbyInvestigationWingon‘ShriAnandSharma’on02.07.2013. Thebasicfacts,aswouldbeseenfromparasofITAT’sorderre-produced below,aresimilartopresentassessee: “ThisappealbytheRevenueisdirectedagainsttheorderofld.CIT(A),Ajmerdated 27-06-2017fortheAssessmentYear2012-13.TheRevenuehasraisedthefollowing ground:- ''Whetherinthefactsandcircumstancesofthecaseandinlawtheld.CIT(A)is rightindeletingtheadditionofRs.3,98,00,000/-madeu/s68oftheI.T.Act, 1961withoutappreciatingthefactthattheassesseehasintroducedcash amountingtoRs.3,98,00,000/-intheformofsharecapitalthoroughthe racketofentryprovideroperatinginKolkata,informationofwhichwas providedbytheInvestigationWing,Kolkata.'' 2.1Theassesseeisacompanyandengagedinthebusinessofrealestateand developers.Duringtheyearunderconsideration,theassesseereceivedsharecapital ofRs.3,98,00,000/-fromM/s.AbhishekAdvisoryPvt.Ltd.TheAOquestionedthe genuinenessofthereceiptofthesaidamountonaccountofsharecapitalata premiumofRs.790/-pershareofRs.10/-each.TheAOproposedtomakethe additionu/s68oftheActonthebasisthatsearchandsurveyactionwascarried outinthecaseofoneShriAnandSharma,Kolkataon02-07-2013wherebyvarious incriminatingdocumentswereseizedandimpounded.Thesaidsearchactionrevealed andprovedthatShriAnandSharmathroughawebofcompaniesrunandoperatedby himisengagedinprovidingaccommodationentriesofvariousnatureslikebogus unsecuredloans,bogusshareapplicationandbogussalesetc.TheAOreferredtothe statementofShriAnandSharmarecordedbytheInvestigationWing,Kolkata,inthe searchandseizureactioncarriedouton02-07-2013andobservedthatShriAnand Sharmainhisstatementadmittedtohaveengagedinprovidingtheaccommodation entriesforcommission.TheAOcametotheconclusionthatM/s.AbhishekAdvisory Pvt.Ltd.isoneofthecompaniesownedandcontrolledbyShriAnandSharmaforthe purposeofprovidingaccommodationentries.BasedonthestatementofShriAnand M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page29of44 SharmarecordedbytheInvestigationWing,Kolkata,theAOmadetheadditionofthe saidamountofRs.3.98croresandtreatedthesameasunexplainedcashcredit.The assesseechallengedtheactionoftheAObeforetheld.CIT(A)andsubmittedthatit hadproducedallthedetailsbeforetheAOtoprovebeyonddoubttheidentityofM/s. AbhishekAdvisoryPvt.Ltd.,creditworthinessofthesaidcompanyandgenuineness ofthetransactions.TheassesseereferredtothedocumentsproducedbeforetheAO whichincludedPANCardofM/s.AbhishekAdvisoryPvt.Ltd.,copyofCompany's MasterDatageneratedfromMCAWebsiteshowingthestatusofthecompanyas active,copyofIncomeTaxReturnsfortheAssessmentYears2009-10to2013-14as wellastheassessmentorderpassedu/s143(3)inthecaseofM/s.Abhishek AdvisoryPvt.Ltd.byITO,Ward-1(1),KolkatafortheAssessmentYear2008-09.Thus theassesseeexplainedthatwhilepassingthescrutinyassessmentforthe AssessmentYear2008-09,theAOexaminedthesourceoffundsbeingsharecapital receivedbyM/s.AbhishekAdvisoryPvt.Ltd.fromitsshareholdersandfoundtobe genuine.Oncethesaidcompanywashavingthesufficientfundsandreceivedthe fundsonaccountofsharecapitalthentheinvestmentsmadebythesaidcompanyin thesharesoftheassesseecannotbedoubted.Theassesseehasmadeelaborate submissionsbeforetheld.CIT(A)andalsoreferredtovariousdecisionsaswellas documentaryevidencesproducedbeforetheAO.Theld.CIT(A)aftergoingthroughthe recordandmaterialnotedthatShriAnandSharma,inhisstatementhasnotdisclosed thenameofM/s.AbhishekAdvisoryPvt.Ltd.asacompanyorconcerncontrolledby himforprovidingaccommodationentries.Theld.CIT(A)directedtheAOtofurnish certaininformationwhichincludesthecopiesofstatementofShriAnandSharmaand otherseizedmaterialsaswellassourceoflistofthecompaniesasreferredbytheAO intheassessmentorderbeingtheconcernscontrolledandmanagerbyShriAnand Sharma.SincetheAOdidnotrespondtothesequeriesraisedbytheld.CIT(A), therefore,theld.CIT(A)proceededtodecidetheappealonthebasisofrecord availablebeforehim.Thustheld.CIT(A)hasdeletedtheadditionmadebytheAOon thegroundthattheAOhasnotreferredtoanyseizedmaterialsoranyother materialswhichcouldprovethattheassesseehasreceivedtheaccommodation entriesintheformofshareapplicationmoney.Aggrievedbytheimpugnedorderofthe ld.CIT(A),theRevenuefiledthepresentappeal. 2.2Beforeus,theld.DRhassubmittedthattheassesseeissuedthesharesofRs. 10/-eachatapremiumofRs.790/-persharewithoutjustifyingthevalueofits sharestocarrysuchahighpremium.Theld.DRhasfurthersubmittedthatthe assesseewasdulyconfrontedwiththesearchandseizureactioninthecaseofM/s. AbhishekAdvisoryPvt.Ltd.,bytheDCIT(Inv.)andalsoshownthestatementofShri AnandSharmainwhichallthestatementswerenarratedbytheInvestigationWing. Thustheassesseewasgiventheopportunitybyissuingshowcausenoticeastowhy sharecapitalofRs.3.98croresintroducedduringtheyearunderconsiderationfrom thesaidcompanymaynotbetreatedasnon-genuineasthesameisonlydiversionof profittoevadethetaxliability.Theld.DRhasreferredtothestatementofShriAnand Sharmaandsubmittedthathehasexplainedthemodusoperandiofcreatingthe papercompanyforthepurposeofprovidingaccommodationentries.Theld.DRthus contendedthatM/s.AbhishekAdvisoryPvt.Ltd.wasalsocontrolledandmanagedby ShriAnandSharmaashisbrother,thedirectorofthesaidcompany.Theld.DR submittedthatthelistofcompaniesasreproducedbytheAOintheassessmentorder istakenbytheInvestigationWing,KolkatafromthesystemofShriAnandSharma, maintainedinTally.Therefore,thisclearlyshowsthatM/s.AbhishekAdvisoryPvt. Ltd.isoneofthecompaniesmanagedandcontrolledbyShriAnandSharma otherwisehowthenameofthesaidcompanyisthepartofthelistmaintainedbyhim inhiscomputer.Theld.DRfurthercontendedthateventhefinancialstatementof thesecompanieswerealsopartofhissystemwhichshowsthathewasmanaging andcontrollingallthesecompaniesforprovidingaccommodationentries.Theld.DR M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page30of44 hasreferredtothefinancialstatementoftheinvestorcompaniesandsubmittedthat thereisnorealestatebusinesscarriedoutbythesecompaniesexceptreceivingthe moneyintheshapeofsharecapitalandinvestingthesameasprovidingthe accommodationentriesinthegarbofinvestmentinsharesorloansprovidedto variouspersons.Theld.DRhasfurtherreferredtotheassessmentorderand submittedthattheAOinordertoverifythegenuinenessofthetransactionsissued noticesu/s133(6)oftheActtoM/s.AbhishekAdvisoryPvt.Ltd.butthesaidletter wasreceivedbackunservedwiththeremarksthat''nosuchcompanyonthis address.''TheAOthenissuedacommissiontoDDIT(Inv.),Kolkatawiththerequestto conductanenquiryandgiveanenquiryreportontheissue.TheDDIT(Inv.),Kolkata thensentareportdated25/26-03-2015whichshowsthattheinformationwas soughttobegatheredfromShriAnandSharmabyrecordinghisstatementfor confirmationofthefactofprovidingaccommodationentries.However,despite summonu/s131(1)oftheActtoShriAnandSharmaattheaddressavailablewith thisoffice,hedidnotturnup.TheAOaftertakingthesestepsaskedtheassesseeto producethedirectoroftheinvestorcompanyforexamination.Theassesseefailedto producethedirectortheinvestorcompany.Thusalltheseexercisesandinvestigations conductedbytheDepartmentaswellasbytheAOduringtheassessmentproceeding clearlyestablishthattheassesseehasfailedtoprovetheidentity,creditworthiness andgenuinenessofthetransactionsasrequiredu/s68oftheI.T.Act,1961.Theld. DRhasalsoreferredvariousdocumentswhichhavebeenfiledfirsttimebeforethe Tribunalasadditionalevidenceandsubmittedthatthesedocumentsarenothingbut thereturnsfiledbyM/s.AbhishekAdvisoryPvt.Ltd.withR.O.C.whichdisclosesthe factsrelevanttotheissue.Theld.DRsubmittedthatthesaidcompanyisnowowned bythreegroupcompaniesoftheassesseenamely(1)M/s.SkywayColonizersPvt.Ltd. (2)SkywayIspatPvt.Ltdand(3)SkywayTownshipPvt.Ltd.Therefore,thiscompany isoneofthegroupcompaniesoftheassesseeandtheassesseewasrequiredto furnishalltherequisitedetailstoprovethegenuinenessofthetransactions.Theld. DRfurthercontendedthatthesharesofM/s.AbhishekAdvisoryPvt.Ltd.were purchasedbythegroupconcernsfromtheassesseeatlessthanRs.2/-pershare whereastheassesseeissuedthesharesathugepremiumofRs.790/-pershare.The ld.DRhassubmittedthattheld.CIT(A)hasnotappreciatedthefactsaswellasthe materialsbroughtonrecordbytheAOwhichestablishesthattheassesseehasfailed todischargeitsonusu/s68oftheAct.Theld.CIT(A)hasgivenhisfindingsbased onthesubmissionsoftheassesseeignoringthefactthattheAOissuednoticesu/s 133(6)oftheActwhichwerereceivedbackunservedandfurthertheAOalsoissued acommissionforconductinganenquirybytheDDIT(Inv.),Kolkata.Theld.DRfurther submittedthattheinvestorcompanyisnothavinganyincomebutonlyameager amountofRs.2,68,625/-wasdeclaredasRevenuefortheAssessmentYear2012-13 thattoounderthehead''IncomefromotherSources'',substantiatetheviewoftheAO thatcreditworthinessofthesaidcompanyisnotproved.Theld.DRthusreliedonthe orderoftheAOaswellasfollowingcaselaws. 1.Pr.CITvsNRAIron&Steel(P)Ltd.(2019)103Taxmann.com48(SC). 2.ITOvsAPJConstructionPvt.Ltd(ITANo.722/Del/2015forthe AssessmentYear2005-06dated31-12-2019-DelhiTrib) 3.PremCastings(P)Ltd.vsCIT(2017)88Taxmann.com189(All) 2.3Ontheotherhand,theld.ARoftheassesseesubmittedthattheassessee producedalltherelevantdocumentaryevidencestoprovetheidentityand creditworthinessoftheinvestorcompanyaswellasthegenuinenessofthe transactions.HehasreferredtotheassessmentorderpassedbytheAOforthe AssessmentYear2008-09dated06-01-2010andsubmittedthattheAOhasverified M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page31of44 thesharecapitalreceivedbythesaidcompanyandacceptedthesame.Further,the saidcompanyhasbeenregularlyfilingthereturnofincomeandalsoshownasactive aspercompanyMasterDataofROC.Theld.ARoftheassesseehasalsofiledthe assessmentorderdated6-12-2019fortheAssessmentYear2017-18andsubmitted thattheAOhaspassedthescrutinyassessmentorderinthecaseofInvestor Company.Theld.ARoftheassesseefurthersubmittedthatnoticesissuedu/s 143(2)and142(1)oftheActweredulyservedupontheInvestorCompany. Therefore,theidentityandexistenceofthesaidcompanycannotbedisturbed.Asper recordofROC,thesaidcompanyhasbeenregularlyfilingthereturnwhichshows existenceofthesaidcompanyaswellasgenuinenessofthecompany.Theld.ARof theassesseecontendedthatoncetheAOhasexaminedthesourceoffundsinthe handsoftheInvestorCompanythentheinvestmentmadeinthesharesofthe assesseecompanyfromthesaidamountavailablewithM/s.AbhishekAdvisoryPvt. Ltd.cannotbedoubted.Thetheoryofnoincomeorverylessincomecannotbeapplied whenthesaidcompanywasenoughfundstoreceiveassharecapitalaswellas reservedfundsandtheinvestmentshownfromthesaidfundsandnottheincome fromoperation.OncethefundsinthehandsoftheInvestorCompanyarenotin disputeandtransactionisthroughbankingchannelthencreditworthinessand genuinenessofthetransactionisalsoproved.Theld.ARoftheassesseereliedonthe orderoftheld.CIT(A)andsubmittedthattheld.CIT(A)hasspecificallyaskedtheAO toclarifycertainfactsandalsofurnishtherequisiteinformationincludingthe statementofShriAnandSharmabutdespiterepeateddirectionsoftheld.CIT(A),the AOdidnotfurnishtherequisiteinformation.Further,theAOhasreliedonthe statementofShriAnandSharmawithoutanycorroborativeevidencetoshowthatthe assesseehasreceivedaccommodationentries.Theld.ARoftheassesseethus contendedthatevenfromthestatementofShriAnandSharma,itcannotbeconcluded thattheinvestorcompanyM/s.AbhishekAdvisoryPvt.Ltd.wasmanagedand controlledbyhimandusedforprovidingaccommodationentries.Oncethiscompany isevennotownedbyShriAnandSharmaoranyofhisassociatesorrelativesatthe relevantpointoftimewhentheshareapplicationmoneywasreceivedbytheassessee thenthequestionofprovidingtheaccommodationentriesbyShriAnandSharmadoes notarise.Theld.ARoftheassesseevehementlyopposedtheadditionalevidence proposedtobefiledbytheld.DRandsubmittedthatitisbeyondthescopeof proceedingsbeforethisTribunal.Theld.DRcannotgobeyondtheassessmentrecord aswellastheassessmentorderbuthecansupporttheorderoftheAObasedonthe recordavailableintheassessmentorder.Insupportofhiscontentions,theld.ARof theassesseereliedonfollowingdecisions. 1.Mahindra&MahindraLtdvsDCIT,(2009)122TTJ0577/22DTR0362 2.KWLProExportsvsACIT110ITD059 Theld.ARoftheassesseefurthercontendedthatthenoticesissuedbytheAOu/s 133(6)oftheActtoM/s.AbhishekAdvisoryPvt.Ltd.maybeatoldaddressandnot atthecurrentaddress.Theld.ARoftheassesseereferredtotheannualreturnfiledby thesaidcompanyandsubmittedthatthecorrectaddressisavailableonrecordbut theAOmighthaveissuedthenoticesatwrongaddress.Insupportofhiscontentions, theld.ARoftheassesseereliedontheorderdated01-07-2019oftheCoordinate BenchofthisTribunalinthecaseofM/s.IzzyMetalsPvt.Ltd.vsITO (ITANo.75/JP/2018fortheAssessmentYear2012-13).Theld.ARoftheassessee thussupportedthefindingsoftheld.CIT(A)andsubmittedthattheadditionmadeby theAOisbasedonsurmisesandconjecturesandwithouthavinganytangible materialtoshowthatthetransactionisnotgenuine. M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page32of44 2.4Wehaveconsideredtherivalsubmissionsaswellastherelevant materialsavailableonrecord.TheAOhasproceededtomakethe additionu/s68oftheActinrespectofshareapplicationmoneyreceivedby theassesseefromM/s.AbhishekAdvisoryPvt.Ltd.byreferringtothesearch andsurveyactioncarriedoutbytheDGIT(Inv.)Kolkata,inpara3.1as under:- ''3(1).AsearchandsurveyactionwascarriedoutinthecaseofShri AnandSharma,Kolkata(entryprovider)andhisGroupbythe DGIT(Inv.),Kolkataon02-07-2013whenvariousincriminating documentswereseizedandimpounded.Thesearchactionresulted intocollectionofevidencesandotherfindingswhichconclusively provedthatShriAnandSharmathroughawebofconcernsrunand operatedbyhim,isengagedinprovidingaccommodationentriesof variousnaturelikebogusunsecuredloans,bogusshareapplication andbogussalesetc.'' ItisclearthattheAOhasproceededonthebasisofthestatementofShriAnand SharmarecordedbyInvestigationWing,Kolkataduringsearchandsurveyaction carriedouton02-07-2013.Thereisnodisputethatinhisstatementrecordedbythe InvestigationWing,Kolkata,ShriAnandSharmahasadmittedthatheisengagedin providingtheaccommodationentriesinrespectofshareapplicationmoney,unsecure loansetc.However,intheentirestatementShriAnandSharmahasnotstatedthat M/s.AbhishekAdvisoryPvt.Ltd.isoneoftheconcerns/companiescontrolledor managedbyhiminprovidingsuchaccommodationentries. Evenotherwisewhenthestatementwasrecordedon02-07-2013,M/s.Abhishek AdvisoryPvt.Ltd.wasnotacompanyeitherownedorcontrolledbyShriAnand Sharmadirectlyorindirectly.Thisfactismanifestfromtherecordsasproducedby theld.DRasadditionalevidencethat100%shareholdingofthesaidcompanyM/s. AbhishekAdvisoryPvt.Ltd.wasacquiredbythefollowinggroupconcernsofthe assesseecompany. (1)M/s.SkywayColonizersPvt.Ltd. (2)SkywayIspatPvt.Ltdand (3)SkywayTownshipPvt.Ltd. Thisfactisalsorevealedfromtheannualreturnfiledbythesaidcompanyinthe officeofROCfortheyear2009-10ason30-09-2009.Thuswhenthecompanywas alreadyownedbythreegroupconcernsoftheassesseecompanythenthestatement ofShriAnandSharmaadmittinghisinvolvementinprovidingtheaccommodation entriesisnotrelevantinthecaseofinvestorcompanyM/s.AbhishekAdvisoryPvt. Ltd.TheentirebasisoftheadditionmadebytheAOisturnedouttobecontrarytothe actualfacts.Oncetheinvestorcompanyisawhollyownedcompanyofthegroup concernsoftheassesseeitselfthenthereisnoreasontohaveroleofShriAnand Sharmainmakingtheinvestmentbythiscompanyinthesharesoftheassessee company.TheverybasisoftheAOthattransactionisbogusbeingtheaccommodation entriesprovidedbyShriAnandSharmathroughhisconcern,hasnolegstostand upon.Therefore,theproceedingsconductedbytheAOontheassumptionof accommodationentriesprovidedbyShriAnandSharmastandsvitiatedbythefact thattheinvestorcompanywasneitherownednorcontrollednormanagedeither directlyorindirectlybyShriAnandSharmaasonthedateoftransactionof investmentinsharesoronthedateofsearchon.02-07-2013.Therefore,thecaseof theDepartmentissolelybasedonsurmisesthatthiscompanyisoneoftheconcerns M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page33of44 managedandcontrolledbyShriAnandSharmaandhisinvolvementinprovidingthe accommodationentriesisonlytheassumptionofincorrectfacts.Evenotherwise,the assesseeinordertodischargeitsonusu/s68oftheActhasproducedthePAN, IncomeTaxReturnandtheassessmentorderpassedbytheAOu/s143(3)oftheAct fortheAssessmentYear2008-09dated6-01-2010.Forreadyreference,wereproduce theassessmentorderpassedbyITO,Ward-1(1),Kolkata: ''Theassesseecompanyfileditse-returnfortheassessmentyear 2008-09on30.09.2008declaringoftotalincomeofRs.Nil.Thereturnwas dulyprocessedu/s143(1)on12.08.2009.Thecasewasselectedfor compulsoryscrutinybyissuingnoticeu/s148.Accordingly,noticesu/s 143(2)&143(1)alongwithquestionnairewereissuedandserveduponthe assessee. Inresponsetotheaforesaidnotices,SriSanjoyKr.Fogla,theA/Rof theassesseecompanybeingdulyauthorisedbytheassesseecompany, appearedforhearingfromtimetotime.TheA/Rduringthecourseofhearing, explainedthereturn,filedsomerelevantdocumentsinsupportofitsreturn andhasalsoproduceditsbooksofaccountsforexamination.Thecasewas discussedandheard. Inthiscase,theassesseecompanywasincorporatedon01.10.2007 andason31.03.2008,ithadpaidupcapitalamountingtoRs.56,97,500/- andsharepremiumreserveamountingtoRs.10,03,33,500/-.Duringthe courseofhearing,inquireswereconductedwithvariousshareholdersofthe assesseecompanybyissuingnoticesu/s133(6). Duringtheyearunderconsideration,theassesseehadnotcarriedout anybusinessexceptinvestmentontheotherhand,ithasincurredexpenses amountingtoRs.11,725/-.Therefore,theexpensessoclaimedarenotallowed fordeductionastheassesseehasnotcarriedoutanybusinessduringthe relevantpreviousyear. Subjecttotheabovediscussion,thetotalincomeoftheassessee companyiscomputedasunder: Totalincome(loss)-asperreturn(-)Rs.11,725/- Add:Entireexpensesdisallowed-asdiscussedabove.Rs.11,725/- AssessedtotalincomeNil TaxonaboveNil AssessedU/s143(3)oftheIncomeTaxAct,1961,issuedcompanyoforder anddemandnoticetotheassesseecompany. Sd/- (MingurDorjee) ITO,Ward-1(1),Kolkata'' TheAOhasstatedthatduringthecourseofhearing,theld.ARofthesaidcompany explainedthereturnfiled,relevantdocumentsinsupportofthereturnandalso producedthebooksofaccountforexamination.TheAOalsorecordedthedateof incorporationaswellasthesharecapitalandpremiumreceivedbythesaidcompany tothetuneofRs.10,63,3,500/-.TheAOalsoconductedtheenquiryfromvarious shareholdersbyissuingnoticesu/s133(6)oftheActtoverifythetransactionsof sharecapitalandsharepremiumreceivedbythesaidcompany.Onlyafter M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page34of44 satisfactionfromtheenquiry,theAOacceptedthesame.Thuseveninfirstyearofits incorporation,thesaidcompanyreceivedthesharecapitalandsharepremiumtothe tuneofRs.10,63,3,500/-andthesaidamountwasalsointhebooksofsaidcompany andevenatthetimeofinvestingthisamountofRs.3.98croresinthesharesof assesseecompany.Thetransactionofpaymentsoftheshareapplicationmoneyis throughbankingchannel.Wefurthernotethatthesaidcompanyatthetimeof investmentisfullyownedbythegroupconcernsasstatedaboveandthedirectorsof thesaidcompanieswerealsoShriRonakRoyalGuptaandSmt.RajniGuptawhoare alsotheshareholdersanddirectorsofthegroupconcernsaswellasoneofthe directorsisalsothedirectoroftheassesseecompany. Therefore,thesaidcompanywasneitherownednorcontrolledbyShriAnandSharma. AsregardsthenoticesissuedbytheAOu/s133(6)oftheAct,thereisnodispute thatearliertheaddressofthesaidcompanywasdifferentfromthecurrentaddress asitisapparentfromrecordsaswellasassessmentorderfortheAssessmentYear 2008-09andothersubsequentrecordsavailablewithROC.Therefore,thepossibility ofsendingthenoticesbytheAOattheoldaddresscannotberuledout.Oncethereis achangeofaddressthenassesseecannotbeblamedfornon-deliveryofthenotice.As regardstheCommissionissuedbytheAO,itwasonlyforconductinganenquiryfrom ShriAnandSharmaandnotfromtheinvestorcompany.TheDDIT(Inv.),Kolkatahas clearlysubmittedthereportwithoutconductinganyenquirybygivingthereasonsthat despitesummonissuedtoShriAnandSharma,hedidnotturnup.Therefore,thiswas anemptyandfutileexercise.OnceShriAnandSharmawasnotcontrollingor managingtheinvestorcompanyeitherdirectlyorindirectlyattherelevanttimethen theso-calledenquirywouldnothaveresultedanypositiveoutcome.Further,wenote thattheAOhasnotsuppliedanydocumentaryorincriminatingevidencestothe assessee.EventhestatementofShriAnandSharmawasnotsuppliedtotheassessee butitisstatedintheassessmentorderthattheassesseewasapprisedthefactsof thecaseinbriefinrespectofsearchofShriAnandSharma.Therelevantpartofthe assessmentorderinpara4(iii)isasunder:- ''4(iii).Itisimportanttomentionherethattheassesseewasapprisedthefacts ofthecaseinbrieflyinrespectofsearchactionofShriAnandSharmabyDGIT (Inv),KolkattaandalsoshownthestatementofShriAnandSharmainwhich alltheevidenceswerenarratedbytheInvestigationWingandwasaskedto givetheircommentsandalsoaskedtoshowcausedastowhytheshare capitalofRs.3,98,00,000/-introducedduringtheF.Y.2011-12fromthegroup aforesaidcompaniesmaynotbetreatedasnon-genuineasthesameisonly diversionofprofitstoevadethetaxliabilities.'' ThisclearlyshowsthattheAOwasnothavinganydocumentaryevidenceor corroborativeevidencewhichcannotbeconsideredasincriminatingmaterialtoshow thattheassesseehasreceivedtheaccommodationentriesintheshapeofshare capital/shareapplicationmoney/premium.Eventheld.CIT(A)hasspecificallyasked theAOtoproducethecopyofstatementofShriAnandSharmaaswellasotherseized materials.ItappearsthatsincetheAOwasnothavinganyevidenceinhispossession, therefore,hedidnotrespondtothesaidrequestoftheld.CIT(A).Theld.CIT(A)has discussedallthesefactsinpara5.3to5.11andhasgivenhisfindingsinpara5.12 whicharereproducedasunder:- ''5.3Ihavegonethroughtheassessmentorder,statementoffacts,groundsof appealandwrittensubmissioncarefully.Itisseenfrompara3.1ofthe assessmentorderthatasearchandsurveyactionwascarriedoutinthecase ofShriAnandSharmaandhisgroupbytheDDITInvestigationKolkataon 02.07.2013.AccordingtoAO,thesearchactionresultedintocollectionof M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page35of44 evidencesandotherfindingwhichconclusivelyprovedthatShriAnand Sharma,throughawebofconcernsrunandoperatedbyhim,wasengagedin providingaccommodationentriesofvariousnaturelikebogusunsecuredloans, bogusshareapplicationandbogussharesetc.ButtheAOhasnotdiscussed theevidencesandotherfindings"whichconclusivelyprovedthatShriAnand Sharmathroughawebofconcernsrunandoperatedbyhimwasengagedin providingaccommodationentries".Againatpara4.5,theAOhasmentioned thatvariousincriminatingdocuments/materialwasseizedduringthecourse ofsearchandaccordingtoAO,duringthepostsearchinvestigationand perusalofseizeddocuments,itwasobservedthatShriAnandSharmawas engagedinbusinessofprovidingaccommodationentriesbyproviding cheques/POIDDinlieuofcashtoalargenumberofbeneficiarycompanies throughvariouspaperanddummycompanyoperatedandcontrolledbyhim. However,theAOhasnotbroughtonrecordanyevidencetoshowthatthe appellantcompanyhaspaidcashforobtainingtheaccommodationentryinthe formofshareapplicationmoneyfromM/sAbhishekAdvisoryPvt.Limited. Frompageno.4to10oftheassessmentorder,theAOhasquotedthe statementofShriAnandKumarSharmarecordedduringthecourseofsearch. Inreplytoquestionno.7and8,ShriAnandSharmahasstatedasunder: "Q.7Pleasestatethenameofthecompaniesinwhichyouandyour familymembersareassociatedwith? Ans.IamaDirectorinQualityJewelBox&DisplayPvt.Ltdapartfrom thatIamalsoadirectorinmyothercompanies.MywifeSmt.Sobha SharmaisalsoanotherDirectorinQualityJewelBox&DisplayPvt.Ltd. apartfromthatIamalsoadirectorinmanyothercompanies.The detailsfortheabovewillbefurnishedsubsequently. Q.8Pleasestatethenameofthecompaniesmanaged/controlledby youandalsostatewhoarethedirectorsinthesecompanies?be submittedlateron. Ans.Asfarasmyknowledgeisconcerned,around500companies approximatelyarebeingcontrolledbyme,thebooksofaccountsof thosecompaniesaremaintainedinthecomputerinthisoffice.Iwill alsoprovideseparatelistofalltheothercompaniescontrolledbyme...." However,fromtheassessmentorder,itisnotclearwhetherShriAnand Shamahadsubmittedanylistofcompaniescontrolledbyhim. 5.4AstheAOhasatpage11oftheassessmentorderhaspastedcopyofa screenshotwhereinlistofcompaniesisgivenandinthatlistnameofM/s AbhishekAdvisoryPvt.Ltd.isappearing,therefore,theAOvideletterdated 11.05.2017wasrequestedtofurnishfollowinginformation: "1.YouarerequestedtofurnishcopyofthestatementofShriAnand Sharmaandotherseized/impoundedmaterialonwhichtheAOhas relieduponformakingtheadditionofRs.3,99,00,000/-u/s68in respectoftheshareapplicationmoneyandsharepremiumreceivedby theappellantfromM/sAbhishekAdvisoryPvt.Limited. 2.AtPageNo.11oftheassessmentorder,ascannedcopyof"listof companies"hasbeenpasted.Youarerequestedtoclarifywhetherthe M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page36of44 listispartofthestatementofShriAnandSharmabecauseatPageNo. 10,theAOhasmentionedatpara4.(vii)"inviewoftheabove statementdated02.07.2013,asperreplyofQuestionNo.8ofShri AnandSharma,itwasacceptedbyhimthatheiscontrollingaround 500companiesandM/sAbhishekAdvisoryPvt.Ltd.isoneofthem. WeareproducinglistofcompanyoperatedbyShriAnandSharma whichwasmaintaininginaaccountingsoftwareisasunder".Ifthe scannedcopyofthelistpastedatPageNo.11isnotthepartofthe statementofShriAnandSharmathenwhatisthesourceofthislist." AsnoresponsewasreceivedfromtheAOtherefore,againreminderwere issuedon29.05.2017. Alongwithhisletterdated30.05.2017,theITO,Ward-4(2),Jaipurhasonly enclosedstatementdated02.07.2013ofShriAnandKumarSharmarecorded duringthecourseofsurveyoperationu/s133Aandcopyofthescreenshot pastedatpage12oftheassessmentorder.However,theAOhasnotclarified whetherthelistofcompaniespastedatpage12oftheassessmentorderwas partofthestatementofShriAnandSharmaandifthelistofcompanieswas notpartofthestatementofShriAnandShamathenwhatisthesourceofthat list. 5.5Atpage11,theAOreferringtothecopyofthescreenshotpastedat2, pageno.11hasmentionedthat"aspertheabovelistitisverymuchclearthat M/sAbhishekAdvisoryPvt.Ltd.fromwhomtheassesseehadtakenshare applicationmoney,whicharecontrolledbyShriAnandSharmaandto accommodationentryhasbeenprovided".Asalready/discussedabove, neitherintheassessmentordernorduringthecourseofappellateproceedings, theAOhasgiventhesourceofthescreenpastedatpage11oftheassessment order. 5.6Atpara4(viii),theAOhasstated"Inviewofabove,allthebooksofaccount andalltherelevantpaperofthesepersonsactonlyastheirstooges.Allthe booksofaccountandalltherelevantpaperofthesecompanieswerefoundat thebusinesspremises.ThisclearlyshowsthatthesecompaniesarerunbySh. AnandSharmaandhecontrolledallthesecompaniesthroughdummy directors/principalofficersofthesecompanies.Thiscouldbeestablishedbya carefulexaminationofseizedmaterial,includingthecomputerharddiscs,PAN driveandtallydata,whichcontainthebooksofaccountofthesecompanies. Duringthecourseofsearchdailycashbooks,balancesheetandchequebooks werefoundwhereindetailsofcashreceivedfromdifferentcompanies/persons throughvariousmiddlemen/agentsinlieuofaccommodationentriesprovided tothemondifferentdateshavebeenrecorded".However,theAOhasnot discussedanyseizeddocumentinwhichthecashreceivedfromtheassessee companyforobtainingtheaccommodationentryfromM/sAbhishekAdvisory Pvt.Ltd.wasfoundrecorded. 5.7Atpara5.1,theAOreferstheinvestigationcarriedoutbytheInvestigation Wing,Kolkataaswellasthedocumentsandpapersseizedduringthecourse ofsearchbuthehasnotdiscussedanythingaboutthedocumentsandpapers seizedduringthecourseofsearchinthecaseofShriAnandSharmaand investigationcarriedoutbytheInvestigationWing,Kolkata.Againatpara5.(ii), theAOhasstated"onexaminationofthematerialsprovidedbythe investigationWing,ithasbeennoticedthatassesseehadreceived accommodationentryfromtheabovementionedfictitiouscompanyfloatedby M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page37of44 ShriAnandSharma".ButtheAOhasnotdiscussedwhatwasthematerial providedbytheInvestigationWingandexaminedbyhim. 5.8Asthenoticeissuedu/s133(6)toM/sAbhishekAdvisoryPvt.Ltd., Kolkatawasreturnedunserved,thereforetheAOissuedcommissionu/s 131(1)(d)toDDITInvestigation,officeoftheDGITInvestigationKolkata. AccordingtoAO,thecommissionwasissuedtorecordthestatementofShri AnandSharmaforconfirmationofthefactofprovidingaccommodationentries asaforementionedsoastoensurethattheassesseecompanycannottake shelterbeforetheappellateauthority.TheDDIThasreportedthat summonsu/s131wassenttoShriAnandSharmaatthethreeaddresses availablewithhisoffice,howeverShriAnandSharmadidnotturnup. Therefore,theDDITrequestedtheAO"todotheneedfulwhateverdeemedfitin theinterestofrevenue".Thus,itisclearthattheAOinspiteofhavingissued commissionu/s131(1)(d),couldnotgetthestatementofShriAnandSharma recorded,confirmingthathehadprovidedanyaccommodationentrytothe appellantcompanythroughM/sAbhishekAdvisoryPvt.Limited. 5.9Atpara5(iv),theAOhasmentionedthat"alltheevidencesavailableon recordclearlyestablishthattheassesseecompanyisoneofthebeneficiaries whoobtainedaccommodationentryintheformofshareapplicationmoney fromthedummycompaniesfloatedbyShriAnandSharma".However,hehas notdiscussedwhataretheevidencesavailableonrecordwhichaccordingto AOclearlyestablishesthattheassesseecompanyisoneofthebeneficiary whoobtainedaccommodationentryintheformofshareapplicationmoney fromthedummycompanyfloatedbyShriAnandSharma. 5.10Duringthecourseofassessmentproceedings,theappellantvideitsletter dated21.01.2015(atpara6)hadrequestedtheAOtosupplyanyadverse materialandallowtheopportunityofcrossexamination.Para6ofletterdated 21.01.2015oftheappellantisreproducedhereunderforreadyreference: "Itisalsosubmittedthatthereisnomaterialtosuggestthattheshare capitalcontributedtothecompanyisnotgenuine.Nomaterialhas beenprovidedwhichindicatesthatthesaidcompanyoritsdirector hadstatedanythingaboutthecompany.Ifthereisanysuchadverse materialthesamemaykindlybesuppliedtotheassessee,andfurther theopportunityofcrossexaminationmaykindlybeallowed.The generalstatementscannotbeusedagainsttheassesseeunlessthe sameisgivenforthespecificcompanyoftheassesseeandforthe investmentinsharesbeingmade.Itiswellsettledlawthatnoadverse materialcanbeusedagainsttheassesseeunlessthesameisbeing suppliedtotheassesseeandopportunityisbeingprovidedtocross examinethesame.Yourkindattentionisinvitedtowardsthefollowing decisionsinthisregard." However,theAOdidnotprovideanyopportunitytotheappellantto crossexaminethepersononwhosestatementhehasrelieduponfor makingtheadditionu/s68. 5.11Theappellanthasfurnishedfollowingdocumentaryevidencestoprove identityandcreditworthinessoftheshareapplicantandgenuinenessofthe transaction: M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page38of44 1.Confirmatoryletteroftheshareapplicant. 2.CopyoftheacknowledgementoftheITR4and5(A.Y.2013-14). 3.CopyofBalanceSheetandP&Laccountdated31.03.2016. 4.Bankstatementoftheshareapplicantwhereinthepaymentsmade totheappellanttowardshareapplicationmoneyareappearing.There isnocashdepositimmediatelybeforeoraftertheissueofchequesto theappellantcompany. 5.CopyofROCdocument(FormNo.20B,FormNo.23AC,FormNo. 23ACA,FormNo.66,FormNo.23B)andAnnualReturnfortherelevant period(FY2011-12)and(F.Y.2015-16). 6.Copyofassessmentorderdated06.01.2010ofM/sAbhishek AdvisoryPvt.Ltd.fortheA.Y.2008-09passedu/s143(3)r.w.s.148.In theassessmentorder,theAOhasmentionedthatM/sAbhishek AdvisoryPvt.Ltd.wasincorporatedon01.10.2007andason 31.03.2008,ithadpaidupcapitalofRs.55,97,500/-andshare premiumreserveofRs.10,63,33,500/-.TheAOdidconduct enquiriesu/s133(6)withvariousshareholdersoftheassessee company. 5.12.Thus,fromtheabovediscussion,itisclearthattheappellanthas furnishedallthedocumentaryevidencestoproveidentityandcreditworthiness ofM/sAbhishekAdvisoryPvt.Ltd.andgenuinenessofthetransactions. WhereastheAOhasmadetheadditionwithoutbringingonrecordany evidencetoshowthattheappellanthadpaidcashforobtaining accommodationentryintheformofshareapplicationmoney,fromM/s AbhishekAdvisoryPvt.Limited.TheAOhasnotdiscussedanyevidencewhich provesthatM/sAbhishekAdvisoryPvt.Ltd.wasthecompanycontrolledand managedbyShriAnandSharma.Thesourceofthe"listofcompanies"pasted atpage11oftheassessmentorderhasnotbeenclarifiedbytheAO.TheAO hasnotdiscussedanyseizedmaterialortheinvestigationcarriedoutby InvestigationWingKolkatawhichprovesthattheappellantcompanyreceived accommodationentryintheformofshareapplicationmoneyfromM/s AbhishekAdvisoryPvt.Ltd.bymakingcashpaymenttoShriAnandSharmaor hisagent/middleman.ThoughtheAOhasrelieduponthestatementofShri AnandSharmabutinspiteofhavingbeenrequestedspecificallybythe appellant,theAOdidnotprovideanyopportunitytotheappellanttocross examineShriAnandSharma.Inviewoftheabovediscussion,Iamofthe consideredopinionthattheappellanthasfurnishedeachdocumentary evidencetoproveidentityandcreditworthinessoftheshareapplicantand genuinenessofthetransactions.Whereas,theAOhasfailedtobringonrecord anyevidencetoshowthattheappellanthadreceivedaccommodationentryin theformofshareapplicationmoneyfromM/sAbhishekAdvisoryPvt.Ltd.by payingcashfromundisclosedsourcesofincomeeithertoShriAnandSharma ortoanyofhisagent/middleman.Therefore,inviewofthevariousdecisions relieduponbytheappellant,specificallythedecisionofSupremeCourtinthe caseofAndamanTimberIndustriesvsCCE(orderdated02.09.2015)and decisionofITATJaipurBenchinthecaseofJadauJewellers&Manufacturers Pvt.Ltd.vsACIT(175TTJ(JP)344),additionofRs.3,98,00,000/-madebythe AOu/s68isherebydeleted.'' Whentheassesseehasproducedalltherelevantdocumentsasnarratedbytheld. CIT(A)inpara5.11abovethenonuscastedu/s68oftheActhasbeenduly dischargedbytheassessee.Oncetheassesseehasdischargedhisprimaryonusthen M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page39of44 burdenisshiftedontheAOtobringonrecordthecontrarymaterialorfactsto disproveevidenceproducedbytheassessee.TheAOexceptnarratingthemodus operandiasdisclosedbyShriAnandSharma,hasnotreferredtoanydocumentary evidenceorothermaterialtosupporthisviewandfindings.Therefore,thefindingsof theAOaremerelyanassumptionandbasedonconjectureandsurmisesandnot onanytangiblematerial.AsregardsthedecisionofHon'bleSupremeCourtinthe caseofPr.CITvsNRAIron&Steel(P)Ltd(supra)reliedonbytheld.DR,theHon'ble SupremeCourthasspecificallymentionedthefactsofthesaidcaseinpara9as under:- ''9ThejudgmentcitedholdthattheAssessingOfficeroughttoconductan independentenquirytoverifythegenuinenessofthecreditentries. Inthepresentcase,theAssessingOfficermadeanindependentanddetailed enquiry,includingsurveyofthesocalledinvestorcompaniesfromMumbai, KolkataandGuwahatitoverifythecreditworthinessoftheparties,thesource offundsinvestedandthegenuinenessofthetransactions.Thefieldreports revealedthattheshareholderswereeithernon-existentorlacked creditworthiness.'' ItisclearinthesaidcasethattheAOmadeanindependentanddetailedenquiry includingsurveyofso-calledinvestorcompanyfromMumbai,KolkataandGauhatito verifythecreditworthinessoftheparties,sourceoffundsandgenuinenessofthe transactions.Thefieldreportsrevealthatshareholderswereeithernon-existentor lackofcreditworthiness.Onthecontrary,inthecaseinhand,theinvestorcompanyis verymuchinexistenceandsubjectedtoscrutinyassessment.Evenforthe AssessmentYear2017-1,thesaidcompanyhasundergonescrutinyassessment. Therefore,theexistenceofthecompanyisnotindisputeasitisestablishedfromthe record.Secondly,theHon'bleSupremeCourtinthecaseofPr.CITvsNRAIron& Steel(P)Ltd(supra)inpara13observedthatlowerauthoritieshaveignoredthe detailedenquiryconductedbytheAOaswellasthefindingsoftheAOasunder:- Para13....TheCourt/Authoritiesbelowdidnotevenadverttothefield enquiryconductedbytheAOwhichrevealedthatinseveralcasestheInvestor Companieswerefoundtobenon-existentandtheonustoestablishthe identityoftheinvestorcompanies,wasnotdischargedbytheassessee.'' Inthecaseinhand,theAOhasnotbroughtanymaterialonrecordasaresultofany enquiry.ThecommissionissuedtotheDIT(Inv),Kolkatahasnotyieldedanyresult. ThusexceptontherelianceofthestatementofShriAnandSharma,theAOwasnot havingeitheranydocumentinhispossessionoranyotherfactsdetectedasan outcomeofenquiry.ThesaidstatementofShriAnandSharmahasnotmadeany allegationregardingtransactionofinvestmentmadebyM/s.AbhishekAdvisoryPvt. Ltd.Therefore,thedocumentaryevidenceproducedbytheassesseecannotbeignored orrejected.Hence,inviewoftheabovefactsandcircumstancesofthecase,wedonot findanyerrororillegalityintheorderoftheld.CIT(A).ThustheappealoftheRevenue isdismissed.” 18.TheabovedecisionofITAThasalreadybeenupheldbyHon’ble RajasthanHighCourtinPr.CommissionerofIncometax,JaipurVs. M/sSkywaysIndustrialEstateCompany(P)Ltd.DBIncome-taxAppeal M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page40of44 No.82/2020Judgementdated14.02.2022.Were-producebelowthe Judgementinentiretyasunder: “ThisappealisfiledbytherevenuetochallengethejudgmentoftheIncomeTax AppellateTribunal.Followingquestionispresentedforourconsideration:- (i)WhetheronthefactsandcircumstancesofthecaseandinlawtheITAT wascorrectindismissingappealofthedepartmentontheissueofthe additionofRs.3,98,00,000/-madeu/s68oftheITAct,1961without appreciatingthefactthattheassesseehasintroduceditsunaccountedcash amountingtoRs.3,98,00,000/-intheformofsharecapitalthroughtheracket ofentryprovideroperatinginKolkata,informationofwhichwasprovidedby theInvestigationWing,Kolkata." Thedocumentsonrecordwouldsuggestthatfortheassessmentyear2012-13the assessingofficerhadmadeadditionofasumofRs.3.98croresinthehandsofthe assesseeintermsofSection68oftheIncomeTaxAct,1961('theAct'forshort). Accordingtotheassessingofficer,thisrelatedtobogusaccommodationentriesby wayofshareapplicationmoney.Theassesseecarriedthematterinappeal.TheCIT (Appeals)allowedtheappealanddeletedtheadditions,uponwhichtherevenue preferredfurtherappealbeforetheTribunal.Tribunalbyimpugnedjudgment dismissedtherevenue'sappealmakingfollowingobservations:- "2.4Wehaveconsideredtherivalsubmissionsaswellastherelevant materialsavailableonrecord.TheAOhasproceededtomaketheadditionu/s 68oftheActinrespectofshareapplicationmoneyreceivedITO,Ward-4(2), JaipurvsM/s.SkywaysIndustrialEstateCompanyPvt.Ltd.,Jaipurbythe assesseefromM/s.AbhishekAdvisoryPvt.Ltd.byreferringtothesearchand surveyactioncarriedoutbytheDGIT(Inv.)Kolkata,inpara3.1asunder:- ''3(1).AsearchandsurveyactionwascarriedoutinthecaseofShriAnand Sharma,Kolkata(entryprovider)andhisGroupbytheDGIT(Inv.),Kolkataon 02-07-2013whenvariousincriminatingdocumentswereseizedand impounded.Thesearchactionresultedintocollectionofevidencesandother findingswhichconclusivelyprovedthatShriAnandSharmathroughawebof concernsrunandoperatedbyhim,isengagedinprovidingaccommodation entriesofvariousnaturelikebogusunsecuredloans,bogusshareapplication andbogussalesetc.''ItisclearthattheAOhasproceededonthebasisofthe statementofShriAnandSharmarecordedbyInvestigationWing,Kolkata duringsearchandsurveyactioncarriedouton02-07-2013.Thereisno disputethatinhisstatementrecordedbytheInvestigationWing,Kolkata,Shri AnandSharmahasadmittedthatheisengagedinprovidingthe accommodationentriesinrespectofshareapplicationmoney,unsecureloans etc.However,intheentirestatementShriAnandSharmahasnotstatedthat M/s.AbhishekAdvisoryPvt.Ltd.isoneoftheconcerns/companiescontrolled ormanagedbyhiminprovidingsuchaccommodationentries. ItcanthusbeseenthatCIT(Appeals)andTribunalhaveconcurrentlyfound noevidenceofintroductionofassessee'sownmoneythroughbogusshare applicationentries.Theprimerelianceoftherevenueonthestatementmade byoneShriAnandSharmawhichwasrecordedbytheInvestigationWing, M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page41of44 Kolkatadidnotincriminatetheassesseecompany.Asrecordedbythe TribunalthesaidShriAnandSharmahasnowherestatedthatM/sAbhishek AdvisoryPvt.Ltd.isoneoftheconcernedcompaniescontrolledormanaged byhiminprovidingaccommodationentries. Theentirequestionisthusbasedonappreciationoftheevidence. Noquestionoflawarises. IncomeTaxappealisdismissed.” 19.Thus,thedecisionofITATissquarelyapplicabletoassessee.Further, theHon’bleRajasthanHighCourthasdismisseddepartmentalappeal againstITAT’sordertakingcognizanceofonesingleimportantfactorthat theprimerelianceoftherevenueonthestatementmadebyShriAnand SharmawhichwasrecordedbytheInvestigationWing,Kolkatadidnot incriminatetheassessee-companyandthatShriAnandSharmahas nowherestatedthattheinvestorcompany(M/sAbhishekAdvisoryPvt.Ltd. inthatcasesimilarto“A”and“J”inpresentappeal)wasoneofthe companiescontrolledormanagedbyhiminprovidingaccommodation entries.Thefactualpositionofassessee’scaseisexactlysame.Therefore, theassesseeissquarelycoveredbydecisionofITAT/Hon’bleRajasthanHigh Court. 20.Inviewofabovediscussionsandforthereasonsmentionedtherein, weareoftheconsideredviewthattheadditionmadebyAOandupheldby CIT(A)isnottenable.Therefore,wedeletetheimpugnedaddition.These groundsofassesseearethusallowed. GroundNo.6: M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page42of44 21.Inthisground,theassesseehaschallengedtheadditionofRs. 57,896/-madebyAOandupheldbyCIT(A)onaccountofdisallowanceof expensesu/s14A. 22.TheAOhasmadedisallowancebypassingfollowingorder: “9.Itisnoticedthattheassesseehasmadeinvestmentinshares.Inthe P&Laccount,theassesseehasshowndividendincomeofRs.99,65,424/-. TheassesseehasalsoclaimedlegalandprofessionalexpensesofRs. 2,89,934/-.Therefore,20%oftheexpensesofRs.2,89,934/-i.e.Rs.57,896/- isbeingdisallowedundersection14AoftheActandaddedtothetotalincome oftheassessee.” 23.Duringfirst-appeal,theCIT(A)uphelddisallowancebypassing followingorder: “5.8GroundNo.2pertainstotheissueofdisallowanceofdeductionu/s 14AoftheActonaccountofdisallowanceofexpensesofRs.57,896/-claimed toearnexemptdividendincome.Thisgroundwasnotpressedbythe appellantandhenceinabsenceofanysubmission/explanation,theactionof theAOisupheld.Accordingly,GroundNo.2isdismissed.” 24.Duringhearingbeforeus,Ld.ARsubmittedthattheCIT(A)hasmade anincorrectnotingthatthegroundwasnotpressedbyassesseeandthere wasabsenceofanysubmission/explanation.Ld.ARdrewustoPage25-28 ofPaper-BookandsuccessfullydemonstratedthatvidePara3.1to3.18of letterdated10.12.2021filedtoCIT(A),theassesseemadeadetailed submissionquathisissue.Onperusal,wefindmeritinthissubmissionof assessee. 25.Sofarasthemeritofdisallowanceisconcerned,theAOhasmade adhocdisallowanceof20%oflegalandprofessionalexpenses.Thereareat leasttwoseriousfallaciesinAO’sactionduetowhichthedisallowance M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page43of44 madebyAOisnottenable.Firstly,theadhocdisallowanceasmadebyAOis notrecognizedbytheprovisionofsection14AorRule8DofIncome-taxAct/ Income-taxRules.Therefore,thedisallowanceiswithoutlegalauthority. Secondly,theAOhasmadeadhocdisallowance@20%oflegaland professionalexpensesevenwithoutlookingintothedetailsofexpenses.In pursuanceoflibertygrantedbybench,Ld.ARfileddetailsoflegalexpenses subsequentlyon07.06.2024withacopyserveduponrevenue/respondent. Thedetailsarescannedandre-producedbelow: M/sDecentIndustriesPvt.Ltd ITANo.356/Ind/2023–AY2012-13 Page44of44 Thesedetailsshowthattheassesseehasincurredlegalexpensesforfilingof appealsorpaymentstoROC.Theseexpenses,asrightlycontendedbyLd. AR,cannotbesaidtohavebeenincurredforthepurposeofearning exempteddividend.Thus,weareoftheconsideredviewthatthe disallowancemadebyAOisneithersustainableinlawnoronfacts. Accordingly,thesameisherebydeleted.Thisgroundisallowed. 26.Resultantly,thisappealispartlyallowed. Orderpronouncedinopencourton20.08.2024 Sd/-Sd/- (VIJAYPALRAO)(B.M.BIYANI) JUDICIALMEMBERACCOUNTANTMEMBER Indore िदनांक/Dated:20.8.2024 Dev/Sr.PS Copiesto:(1)Theappellant (2)Therespondent (3)CIT (4)CIT(A) (5)DepartmentalRepresentative (6)GuardFile Byorder UECOPY AssistantRegistrar IncomeTaxAppellateTribunal IndoreBench,Indore