SHIVALIK KINEMA PVT. LTD., Jaipur V. DCIT, Jaipur

ITA 400/JPR/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6182 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 18-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SEEMA MEENA
• Keywords: Gift; Search and seizure; Principle of natural justice; Reasonable cause; Difference of opinion; Corroborative evidences; Accommodation entries; Assessment record; Reason to believe; Change of opinion; Borrowed satisfaction
• Section: 143(3); 133A; 133(6); 147; 131; 68; 148; 132; 2

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKWY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA. NO. 400/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2010-11 M/S SHIVALIK KINEMA PVT. LTD., E-822, ROAD NO. 14, VKI, JAIPUR CUKE VS. DCIT, CIRCLE-04 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAACS6572L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPO NDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS @ REVENUE BY : SMT. SEEMA MEENA (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 09/04/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 24/04/2018 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A)-2, JAIPUR DATED 26.02.2016 FOR ASSESSMEN T YEAR 2010-11 WHEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND S OF APPEAL:- 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE VALIDITY OF THE ORDER PASSED BY THE AO U/S 147 OF THE I.T. ACT, 1961. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING AN ADDITION OF RS. 30 LAKHS U/S 68 BY TREATING THE SHARE CAPITAL MONEY RECEIVED FROM THE FOLLOWING PARTIES AS UNEXPL AINED:- ITA NO. 400/JP/2016 M/S SHIVALIK KINEMA PVT. LTD., JAIPUR VS. DCIT, JA IPUR 2 S. NO. NAME OF THE COMPANY AMOUNT 1. M/S ZENITH AUTOMOTIVE PVT. LTD. RS. 10 LACS 2. M/S ASHISH CAP. SERVICES PVT. LTD. RS. 10 LACS 3. ULTIMATE IT SOLUTION RS. 10 LACS TOTAL RS. 30 LACS 3. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE LUMP SUM DISALLOWANCE OF RS. 31,171/-, BEING 25 % OF VARIOUS EXPENSES OF RS. 1,24,682/-. 2. THE FACTS OF THE CASE ARE THAT ASSESSEE HAS FILE D ITS RETURN OF INCOME U/S 139(1) ON 26.09.2010 DECLARING NIL INCOM E. THEREAFTER, THE AO ISSUED NOTICED U/S 148 DATED 28.03.2013 AFTER RE CORDING THE REASONS AND SEEKING THE NECESSARY APPROVAL FROM THE CIT JAI PUR. THE COPY OF THE REASONS SO RECORDED WERE MADE AVAILABLE TO THE ASSESSEE AND THE OBJECTIONS SO RECEIVED BY THE ASSESSEE WERE DISPOSE D OFF BY AN ORDER DATED 14.03.2014. THEREAFTER, AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, AN ADDITION AT RS. 30,00,000/- WAS MADE U /S 68 OF THE ACT. FURTHER, CERTAIN EXPENSES AMOUNTING TO RS. 62,341/- WERE ALSO DISALLOWED. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE ACTION OF THE AO IN INITIATING THE PROCEEDINGS U/S 147 AND HAS ALSO CONFIRMED THE ADDI TION MADE U/S 68 OF THE ACT. HOWEVER, REGARDING DISALLOWANCE OF EXPE NSES, CERTAIN RELIEF WAS PROVIDED TO THE ASSESSEE COMPANY. NOW, THE ASSE SSEE IS IN APPEAL BEFORE US. ITA NO. 400/JP/2016 M/S SHIVALIK KINEMA PVT. LTD., JAIPUR VS. DCIT, JA IPUR 3 4. IN GROUND NO. 1, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN UPHOLDING THE VALIDITY OF THE ORDER P ASSED BY THE AO U/S 147 OF THE ACT. IT WAS SUBMITTED BY THE LD AR THAT THE PRIMARY CONDITION FOR INITIATING ACTION U/S 147 IS THAT THE AO MUST H AVE REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSES SMENT. THIS SATISFACTION SHOULD NOT BE VAGUE BUT MUST BE SPECIF IC. IN THE PRESENT CASE, THE REASONS SIMPLY STATES THAT THE ASSESSEE I S A BENEFICIARY OF THE ACCOMMODATION ENTRY PROVIDED BY SH. S.K JAIN GROUP AS PER THE INFORMATION RECEIVED FROM INVESTIGATION WING, DELHI . NEITHER THE NAME/ADDRESS OF THE PERSONS FROM WHOM THE ALLEGED E NTRY IS RECEIVED IS MENTIONED NOR THE QUANTUM OF SAME WAS MENTIONED IN THE REASONS RECORDED. THIS SHOWS THAT THE AO SIMPLY ON THE BASI S OF THE INFORMATION RECEIVED FROM THE INVESTIGATION WING, DELHI RECORDE D THE REASONS WITHOUT REFERENCE TO THE RETURN AND THE FINANCIAL S TATEMENTS. HE HAS SIMPLY RELIED ON THE INFORMATION RECEIVED FROM THE INVESTIGATION WING, DELHI WITHOUT APPLYING HIS OWN MIND TO INFORMATION RECEIVED TO ARRIVE AT THE BELIEF THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. THE AO HAS FURTHER MENTIONED THAT THE TRANSACTION IS NOT R EFLECTED IN THE RETURN OF INCOME FILED. IF THIS IS SO, THEN THERE IS NO QU ESTION OF INCOME ESCAPING ASSESSMENT. HENCE, THE REOPENING OF ASSESS MENT IS NOT JUSTIFIED AS THE SAME IS REOPENED ONLY AT THE INSTA NCE OF INVESTIGATION WING, DELHI. 5. IT WAS FURTHER SUBMITTED THAT THE AO HAS RELIED ON VARIOUS DECISIONS. IN THOSE DECISIONS, IT WAS HELD THAT WH ERE THE AO HAS NOT APPLIED HIS MIND TO THE RETURN FILED, THERE CANNOT BE A CHANGE OF OPINION. HOWEVER, IN THE PRESENT CASE, THE ISSUE IS NOT ABOUT CHANGE OF OPINION RATHER THE ISSUE IS THAT THE AO HAS NOT IND EPENDENTLY RECORDED ITA NO. 400/JP/2016 M/S SHIVALIK KINEMA PVT. LTD., JAIPUR VS. DCIT, JA IPUR 4 HIS OWN SATISFACTION BUT HAS SIMPLY ACTED ON THE VA GUE INFORMATION RECEIVED FROM THE INVESTIGATION WING, DELHI WITHOUT RELATING IT WITH THE RETURN FILED BY THE ASSESSEE. 6. IT WAS FURTHER SUBMITTED THAT THE LD. CIT(A) HA S INCORRECTLY HELD THAT AO HAS BROUGHT OUT ALL THE RELEVANT AND NECESS ARY FACTS AND CIRCUMSTANCES TO SHOW THAT THE SHARE APPLICATION MO NEY OF RS.30 LACS RECEIVED BY THE APPELLANT FROM THE NUMBER OF COMPAN IES IS NOT GENUINE AND IS IN THE NATURE OF ACCOMMODATION ENTRIES IN AS MUCH AS THE SAME IS NOT COMING OUT FROM THE REASONS RECORDED. THE SU BSEQUENT INFORMATION WOULD NOT VALIDATE THE VAGUE REASONS RE CORDED AT THE TIME OF REOPENING OF THE ASSESSMENT. THE VALIDITY OF THE REOPENING IS TO BE SEEN WITH REFERENCE TO WHAT IS MENTIONED IN THE REA SONS RECORDED AND NOT THE SUBSEQUENT INFORMATION WHICH THE AO HAS GAT HERED OR THE INFORMATION WHICH IS NOT A PART OF REASONS RECORDED . THEREFORE, THE CASES RELIED BY CIT(A) ARE NOT APPLICABLE TO THE FA CTS OF THE PRESENT CASE. 7. IN SUPPORT OF HIS CONTENTIONS, THE LD. AR PLACED RELIANCE ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF HI NDUSTAN LEVER LTD. VS. R.B. WADKAR (2004) 268 ITR 332 (BOM) WHERE IT W AS HELD THAT IT IS NEEDLESS TO MENTION THAT THE REASONS ARE REQUIRED T O BE READ AS THEY WERE RECORDED BY THE AO. NO SUBSTITUTION OR DELETIO N IS PERMISSIBLE. NO ADDITIONS CAN BE MADE TO THOSE REASONS. NO INFERENC E CAN BE ALLOWED TO BE DRAWN BASED ON REASONS NOT RECORDED. IT IS FOR T HE AO TO DISCLOSE AND OPEN HIS MIND THROUGH REASONS RECORDED BY HIM. HE HAS TO SPEAK THROUGH HIS REASONS. IT IS FOR THE AO TO REACH TO T HE CONCLUSION AS TO WHETHER THERE WAS FAILURE ON THE PART OF THE ASSESS EE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSE SSMENT FOR THE ITA NO. 400/JP/2016 M/S SHIVALIK KINEMA PVT. LTD., JAIPUR VS. DCIT, JA IPUR 5 CONCERNED ASSESSMENT YEAR. IT IS FOR THE AO TO FORM HIS OPINION. IT IS FOR HIM TO PUT HIS OPINION ON RECORD IN BLACK AND WHITE . THE REASONS RECORDED SHOULD BE CLEAR AND UNAMBIGUOUS AND SHOULD NOT SUFFER FROM ANY VAGUENESS. THE REASONS RECORDED MUST DISCLOSE H IS MIND. REASONS ARE THE MANIFESTATION OF MIND OF THE AO. THE REASON S RECORDED SHOULD BE SELF-EXPLANATORY AND SHOULD NOT KEEP THE ASSESSE E GUESSING FOR THE REASONS. REASONS PROVIDE LINK BETWEEN CONCLUSION AN D EVIDENCE. THE REASONS RECORDED MUST BE BASED ON EVIDENCE. THE AO, IN THE EVENT OF CHALLENGE TO THE REASONS, MUST BE ABLE TO JUSTIFY T HE SAME BASED ON MATERIAL AVAILABLE ON RECORD. HE MUST DISCLOSE IN T HE REASONS AS TO WHICH FACT OR MATERIAL WAS NOT DISCLOSED BY THE ASS ESSEE FULLY AND TRULY NECESSARY FOR ASSESSMENT OF THAT ASSESSMENT YEAR, S O AS TO ESTABLISH VITAL LINK BETWEEN THE REASONS AND EVIDENCE. THAT V ITAL LINK IS THE SAFEGUARD AGAINST ARBITRARY REOPENING OF THE CONCLU DED ASSESSMENT. THE REASONS RECORDED BY THE AO CANNOT BE SUPPLEMENTED B Y FILING AFFIDAVIT OR MAKING ORAL SUBMISSION, OTHERWISE, THE REASONS W HICH WERE LACKING IN MATERIAL PARTICULARS WOULD GET SUPPLEMENTED, BY THE TIME THE MATTER REACHES TO THE COURT, ON THE STRENGTH OF AFFIDAVIT OR ORAL SUBMISSIONS ADVANCED. 8. THE LD. AR FURTHER PLACED RELIANCE ON THE DECISI ON OF HONBLE BOMBAY HIGH COURT IN CASE OF NIVI TRADING LTD. VS. UOI & ORS. (2015) 375 ITR 308 (BOM.) (HC) WHEREIN IT WAS HELD THAT I F MORE DETAILS WERE SOUGHT OR SOME VERIFICATION WAS PROPOSED THAT COULD NOT BE A SUBSTITUTE FOR REASONS WHICH LED AO TO BELIEVE THAT AN INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. REVENUE DOES NOT STATE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. ALL THAT REVENUE DESIRES IS VERIFICATION OF CERTAIN DETAILS PERTAINING TO GIFT. THAT IS NOT FOUNDED ON ITA NO. 400/JP/2016 M/S SHIVALIK KINEMA PVT. LTD., JAIPUR VS. DCIT, JA IPUR 6 BELIEF THAT ANY INCOME WHICH IS CHARGEABLE TO TAX H AS ESCAPED ASSESSMENT AND HENCE, SUCH VERIFICATION IS NECESSAR Y. THAT BELIEF IS NOT RECORDED WHICH ALONE WOULD ENABLE AO TO PROCEED. TH US, REASONS MUST BE FOUNDED ON SATISFACTION OF THE ASSESSING OFFICER THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. REASONS O UGHT TO BE RECORDED ON THE DATE OF THE ISSUANCE OF THE NOTICE AND WHICH MUST DISCLOSE THE REQUISITE SATISFACTION. REASONS AS REC ORDED CANNOT BE SUBSTITUTED OR SUPPLEMENTED BY FILING AN AFFIDAVIT IN COURT. THUS, ADDITIONAL REASONS CANNOT BE SUPPLIED ON AFFIDAVIT. IMPUGNED NOTICE U/S 148(1) QUASHED AND SET ASIDE. 9. PER CONTRA, THE LD. DR HAS VEHEMENTLY ARGUED THE MATTER AND RELIED UPON THE ORDER OF THE LOWER AUTHORITIES. SHE ALSO REFERRED TO THE RELEVANT FINDING OF THE LD. CIT(A) AND SUBMITTED TH AT THE AO WHILE ASSUMING THE JURISDICTION U/S 147 HAS APPLIED HIS M IND AND HAS NOT ACTED ON BORROWED SATISFACTION. ONCE INFORMATION WA S RECEIVED BY THE ASSESSING OFFICER FROM INVESTIGATION WING, DELHI ON THE BASIS OF SEARCH AND SURVEY OPERATION CONDUCTED IN CASE OF S.K. JAIN GROUP OF CASES, THE AO THEREAFTER EXAMINED ALL THE RELEVANT AND NECESSA RY FACTS AND CIRCUMSTANCES OF THE CASE AND THERE IS A DEFINITE N EXUS BETWEEN THE MATERIAL AND FORMATION OF BELIEF BY THE AO THAT INC OME HAS ESCAPED TAXATION WITHIN THE MEANING OF SECTION 147 OF THE A CT. FURTHER, THE LD DR RELIED UPON THE DECISION OF HONBLE DELHI HIGH C OURT IN CASE OF RAJAT EXPORT IMPORT (P.) LTD. 18 TAXMANN.COM 311 (DEL.). IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAS BROUGHT OUT ALL THE RELEVANT AND NECESSARY FACTS AND CIRCUMSTANCES TO SHOW THAT SHAR E APPLICATION MONEY OF RS. 30,00,000/- RECEIVED FROM THE NUMBER O F COMPANIES WAS NOT GENUINE AND IS IN THE NATURE OF ACCOMMODATION E NTRIES. IT WAS ITA NO. 400/JP/2016 M/S SHIVALIK KINEMA PVT. LTD., JAIPUR VS. DCIT, JA IPUR 7 FURTHER SUBMITTED THAT MERELY BECAUSE THE INFORMATI ON WAS RECEIVED FROM THE INVESTIGATION WING, DELHI WOULD NOT VITIAT E THIS SATISFACTION ARRIVED THAT BY THE ASSESSING OFFICER. REGARDING WH ETHER AN INFERENCE CAN BE DRAWN THAT THE ASSESSEE HAS OBTAINED ACCOMMO DATION ENTRIES WITH RESPECT TO SHARE CAPITAL RECEIVED DURING THE Y EAR, THE LD. DR DRAWN OUR REFERENCE TO THE FINDINGS OF THE LD. CIT(A) WHE REIN IT WAS HELD THAT I HAVE PERUSED THE COPIES OF THE SEIZED DOCUMENT, ASSESSMENT ORDER AND CONTENTION OF THE APPELLANT AND FIND THAT ASSES SING OFFICER HAS DRAWN THE CORRECT INFERENCE REGARDING INCOME CHARGE ABLE TO TAX HAVING ESCAPED ASSESSMENT ON THE BASIS OF INFORMATION WHIC H WAS IN HIS POSSESSION. 10. IN ORDER TO APPRECIATE THE RIVAL CONTENTIONS S O RAISED BY BOTH THE PARTIES, IT WOULD BE RELEVANT TO REFER TO THE REAS ONS WHICH HAVE BEEN RECORDED BY THE AO BEFORE ISSUANCE OF NOTICE U/S 14 8 AND THE CONTENTS THEREOF READS AS UNDER:- IT HAS COME TO NOTICE FROM THE INFORMATION RECEIVE D FROM DIT(INV-II), NEW DELHI THAT THE ASSESSEE IS A BENEFICIARY OF ACC OMMODATION ENTRY PROVIDED BY SH. SURENDRA KUMAR JAIN GROUP DURING TH AT FINANCIAL YEAR I.E. 2009-10 RELATING TO AY 2010-11 BUT THE TRANSAC TION IS NOT REFLECTED IN THE RETURN OF INCOME FILED. IN VIEW OF ABOVE, I HAVE REASONS TO BELIEVE THAT IN COME HAS ESCAPED 147 OF THE ASSESSMENT FOR THE AY 2010-11 WITHIN THE MEANING OF PROVISIONS OF SECTION 147 OF THE I.T ACT, 1961, THE REFORE A NOTICE U/S 148 OF THE I.T ACT, 1961 IS REQUIRED TO BE ISSUED A ND SERVED UPON THE ASSESSEE TO RE-ASSESS THE INCOME ESCAPED AS STATED ABOVE FOR THE AY 2010-11. ITA NO. 400/JP/2016 M/S SHIVALIK KINEMA PVT. LTD., JAIPUR VS. DCIT, JA IPUR 8 11. ON PERUSAL OF THE REASONS RECORDED BEFORE ISSU ANCE OF NOTICE UNDER SECTION 148, IT TALKS ABOUT CERTAIN INFORMATI ON RECEIVED FROM DIT(INV-II), NEW DELHI THAT THE ASSESSEE IS A BENEF ICIARY OF CERTAIN ACCOMMODATION ENTRY PROVIDED BY SH. SURENDRA KUMAR JAIN GROUP DURING THAT FINANCIAL YEAR I.E. 2009-10 RELATING TO AY 2010-11. THE REASONS SO RECORDED ALSO TALKS ABOUT THE FACT THAT THE SAID TRANSACTION OF ACCOMMODATION ENTRY IS NOT REFLECTED IN THE RETU RN OF INCOME FILED. IN VIEW OF THE SAME, IT WAS HELD BY THE AO THAT HE HAS REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT WITHIN T HE MEANING OF SECTION 147 OF THE ACT. DURING THE COURSE OF HEARI NG, THE LD DR REFERRED TO THE ASSESSMENT RECORDS AND SUBMITTED THAT THE AO HAD THE NECESSARY INFORMATION AND MATERIAL PRIOR TO THE ISSUANCE OF N OTICE U/S 148 THAT THE ASSESSEE IS ONE OF THE BENEFICIARIES OF THE ACCOMMO DATION ENTRIES PROVIDED BY SHRI SURENDRA KUMAR JAIN GROUP AND HAS OBTAINED ACCOMMODATION ENTRY TO THE TUNE OF RS 30 LACS AND O N THE BASIS OF SAID INFORMATION, HE HAS REASONS TO BELIEVE THAT THE INC OME HAS ESCAPED ASSESSMENT. IT WAS ACCORDINGLY SUBMITTED BY THE LD DR THAT THE BELIEF FORMED BY THE AO IS AFTER DUE EXAMINATION OF THE MA TERIAL ON RECORD THAT THE INCOME OF THE ASSESSEE CHARGEABLE TO TAX D URING THE IMPUNGED ASSESSMENT YEAR HAS ESCAPED ASSESSMENT THEREFORE, I T CANNOT BE SAID TO BE ARBITRARY OR IRRATIONAL. IN OUR VIEW, THE FORMA TION OF BELIEF BY THE AO THAT THE INCOME HAS ESCAPED ASSESSMENT IS THUS CLEA RLY BASED ON CERTAIN SPECIFIC INFORMATION RECEIVED FROM DIT(INV- II), NEW DELHI AND THEREFORE, IT CANNOT BE SAID THAT THERE EXISTS NO R ATIONAL AND INTELLIGIBLE NEXUS BETWEEN THE REASONS AND THE BELIEF. AT THE SA ME TIME, THE QUESTION THAT ARISES FOR CONSIDERATION IS WHETHER T HE SATISFACTION SO ITA NO. 400/JP/2016 M/S SHIVALIK KINEMA PVT. LTD., JAIPUR VS. DCIT, JA IPUR 9 RECORDED BY THE AO THAT THE INCOME HAS ESCAPED ASSE SSMENT HAS TO EMERGE IN CLEAR, UNAMBIGUOUS, AND SELF-EXPLANATORY TERMS AND DISCERNABLE FROM THE REASONS SO RECORDED ITSELF OR THE SAME CAN BE EXPLAINED AND SUPPLEMENTED SUBSEQUENTLY WHERE SO CH ALLENGED BY THE ASSESSEE. IN THE INSTANT CASE, WE FIND THAT THERE IS NO MENTION OF NATURE OF THE ACCOMMODATION ENTRY WHETHER IN FORM O F SHARE CAPITAL, LOANS AND ADVANCES OR ANY OTHER TRANSACTION. THERE IS NO MENTION OF THE NAME OF THE ENTITIES FROM WHOM THE ASSESSEE HAS OBTAINED THE SO CALLED ACCOMMODATION ENTRY. AND, A MORE GLARING FA CT THAT WE FOUND IS THAT THERE IS NO MENTION OF QUANTUM OF SUCH ACCOMMO DATION ENTRY OR ENTRIES WHICH THE ASSESSEE HAS OBTAINED AND WHICH, AS PER THE AO, IS THE INCOME OF THE ASSESSEE WHICH HAS ESCAPED ASSESS MENT. IT WAS SUBMITTED BY THE LD DR THAT EVEN THOUGH IN THE REAS ONS, THE QUANTUM OF ACCOMMODATION ENTRY HAS NOT BEEN EXPLICITLY STAT ED, AT THE SAME TIME, WHILE DISPOSING OFF THE ASSESSEES OBJECTIONS TO THE REASONS SO RECORDED, THE QUANTUM OF ACCOMMODATION ENTRY WAS MA DE KNOWN TO IT. IN THIS REGARD, WE REFER TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN CASE OF HINDUSTAN LEVER LTD (SUPRA) WHICH THOUGH RENDERED IN THE CONTEXT OF PROVISO TO SECTION 147 W HERE THE ASSESSMENT WAS INITIALLY COMPLETED U/S 143(3) AND FAILURE ON P ART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR THE ASSESSMENT, IN OUR VIEW, THE LEGAL PROPOSITION LAID DOWN THEREI N IN SO FAR AS IT RELATES TO CLEAR AND UNAMBIGUOUS RECORDING OF REASONS BEFOR E THE ISSUANCE OF NOTICE U/S 148 IS EQUALLY APPLICABLE IN THE INSTANT CASE AND THE SAME READS AS UNDER: 20. THE REASONS RECORDED BY THE ASSESSING OFFICER NOWH ERE STATE THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DI SCLOSE FULLY AND TRULY ITA NO. 400/JP/2016 M/S SHIVALIK KINEMA PVT. LTD., JAIPUR VS. DCIT, JA IPUR 10 ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT OF THAT ASSESSMENT YEAR. IT IS NEEDLESS TO MENTION THAT THE REASONS ARE REQU IRED TO BE READ AS THEY WERE RECORDED BY THE ASSESSING OFFICER. NO SUB STITUTION OR DELETION IS PERMISSIBLE. NO ADDITIONS CAN BE MADE TO THOSE REASONS. NO INFERENCE CAN BE ALLOWED TO BE DRAWN BASED ON REASO NS NOT RECORDED. IT IS FOR THE ASSESSING OFFICER TO DISCLO SE AND OPEN HIS MIND THROUGH REASONS RECORDED BY HIM. HE HAS TO SPE AK THROUGH HIS REASONS. IT IS FOR THE ASSESSING OFFICER TO REACH TO THE CONCLUSION AS TO WHETHER THERE WAS FAILURE ON THE P ART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR HIS ASSESSMENT FOR THE CONCERNED ASSESSMENT YEAR. IT IS FOR THE AS SESSING OFFICER TO FORM HIS OPINION. IT IS FOR HIM TO PUT HIS OPINION ON RECORD IN BLACK AND WHITE. THE REASONS RECORDED SHOULD BE CLEAR AND UNAMBIGUOU S AND SHOULD NOT SUFFER FROM ANY VAGUENESS. THE REASO NS RECORDED MUST DISCLOSE HIS MIND. REASONS ARE THE MANIFESTATION OF MIND OF THE ASSESSING OFFICER. THE REASONS RECORDED SHOULD BE SELF-EXPLANATORY AND SHOULD NOT KEEP THE ASSESSEE GUESSING FOR THE REASONS. REASONS PROVIDE LINK BETWEEN CONCLUSION AND EVIDENCE. THE REASONS RECORDED MUST BE BASED ON EVIDENCE. THE ASSESSING OFFICER, IN THE EV ENT OF CHALLENGE TO THE REASONS, MUST BE ABLE TO JUSTIFY THE SAME BASED ON MATERIAL AVAILABLE ON RECORD. HE MUST DISCLOSE IN THE REASON S AS TO WHICH FACT OR MATERIAL WAS NOT DISCLOSED BY THE ASSESSEE FULLY AN D TRULY NECESSARY FOR ASSESSMENT OF THAT ASSESSMENT YEAR, SO AS TO ESTABL ISH VITAL LINK BETWEEN THE REASONS AND EVIDENCE. THAT VITAL LINK I S THE SAFEGUARD AGAINST ARBITRARY REOPENING OF THE CONCLUDED ASSESS MENT. THE REASONS RECORDED BY THE ASSESSING OFFICER CANNOT BE SUPPLEM ENTED BY FILING AFFIDAVIT OR MAKING ORAL SUBMISSION, OTHERWISE, THE REASONS WHICH WERE ITA NO. 400/JP/2016 M/S SHIVALIK KINEMA PVT. LTD., JAIPUR VS. DCIT, JA IPUR 11 LACKING IN THE MATERIAL PARTICULARS WOULD GET SUPPL EMENTED, BY THE TIME THE MATTER REACHES TO THE COURT, ON THE STRENGTH OF AFFIDAVIT OR ORAL SUBMISSIONS ADVANCED. 12. IN LIGHT OF ABOVE DISCUSSIONS AND RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT REFERRED SUPRA, WE ARE OF THE VIEW THAT EVEN THOUGH THE AO WAS IN RECEIPT OF SPECIFIC INFORMATION THAT THE ASSESSEE WAS BENEFICIARY OF ACCOMMODATION ENTRY, THE FACT REMAINS THAT THE INFORMATION SO RECEIVED FROM THE I NVESTIGATION WING WAS NOT SUPPLIED TO THE ASSESSEE ALONG WITH THE REA SONS RECORDED BEFORE THE ISSUANCE OF NOTICE U/S 148 OF THE ACT AN D EVEN THE REASONS SO RECORDED ARE EXTREMELY SCANTY AND VAGUE AND THER E IS NO MENTION OF NATURE AND QUANTUM OF ACCOMMODATION ENTRIES WHICH H AS ESCAPED ASSESSMENT. WE ALSO WONDER AS TO HOW THE LD CIT HA S ACCORDED HIS APPROVAL ON SUCH SCANTY REASONING BY THE AO. MEREL Y BY STATING THAT CERTAIN INFORMATION HAS BEEN RECEIVED FROM THE INVE STIGATION WING THAT THE ASSESSEE IS BENEFICIARY OF CERTAIN ACCOMMODATIO N ENTRY IS NOT SUFFICIENT ENOUGH FOR THE AO IN ASSUMING JURISDICTI ON UNDER SECTION 147 IN THE INSTANT CASE AND THE ORDER SO PASSED BY THE AO IS HEREBY QUASHED AND SET-ASIDE. IN THE RESULT, GROUND NO. 1 OF THE ASSESSEES APPEAL IS HEREBY ALLOWED. 13. NOW, COMING TO THE MERITS OF THE CASE, BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT DURING THE YEAR, ASSESSEE RECEIVE D SHARE CAPITAL/SHARE APPLICATION MONEY OF RS.30 LACS FROM THREE PARTIES. IN COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE VIDE LETTER DATED 10.12.2013 FILED THE CONFIRMATION, SHARE APPLICATION FORM & BANK STATEME NT OF THESE PARTIES. FURTHER, VIDE LETTER DATED 13.01.2014, ASSESSEE FIL ED THE AUDITED ITA NO. 400/JP/2016 M/S SHIVALIK KINEMA PVT. LTD., JAIPUR VS. DCIT, JA IPUR 12 FINANCIAL STATEMENTS OF THESE PARTIES AND FORM NO. 2 BEING RETURN OF ALLOTMENT FILED WITH ROC. 14. THE AO OBSERVED THAT ON THE BASIS OF INFORMATIO N RECEIVED FROM INVESTIGATION WING, NEW DELHI IT WAS FOUND THAT THE ASSESSEE WAS ONE OF THE BENEFICIARIES OF ACCOMMODATION ENTRY PROVIDE D BY SHRI SURESH KUMAR JAIN GROUP. NUMBER OF COMPANIES WERE RUNNING FROM THE RESIDENTIAL AS WELL AS BUSINESS ADDRESS OF SH. S.K JAIN AND HIS BROTHER SH. V.K. JAIN. THESE COMPANIES WERE FOUND TO BE RUN AND CONTROLLED BY THESE TWO PERSONS THROUGH DUMMY DIRECTORS. SURVEY W AS CARRIED OUT BY THE INVESTIGATION WING AT THE GIVEN ADDRESSES OF TH ESE DUMMY COMPANIES AND AT MANY PLACES NO PROPER OFFICES WERE FOUND FUNCTIONING. FROM A SINGLE ADDRESS, A NUMBER OF COM PANIES WERE SHOWN TO HAVE BEEN REGISTERED AND THESE ADDRESSES WERE MO STLY THE RESIDENTIAL ADDRESS OF DIRECTORS OF DIFFERENT DUMMY COMPANIES/ PROPRIETORS OF VARIOUS FIRMS. SURVEY U/S 133A WAS C ONDUCTED BY THE DEPARTMENT IN DELHI AT THE OFFICE PREMISES OF ONE S H. ASSEM KUMAR GUPTA. IN HIS STATEMENT, HE HAS CLEARLY STATED THAT HE WAS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES AS PER THE REQUISIT ION OF THE BENEFICIARIES AND THE WORK OF ACCOMMODATION ENTRY I S BROUGHT TO HIM BY SH. S.K. JAIN. A SEARCH OPERATION WAS CARRIED OUT U /S 132 BY THE INVESTIGATION WING IN NEW DELHI ON 18.01.2011 AT TH E RESIDENTIAL AND BUSINESS PREMISES OF SH. RAJESH AGGARWAL. IN HIS ST ATEMENT, HE STATED THAT HE WAS IN CONSTANT TOUCH WITH SH. S.K JAIN AND SH. V.K JAIN AND HE KNEW THAT THEY ARE KNOWN ACCOMMODATION ENTRY OPERAT OR WHO PROVIDES CHEQUES AGAINST PAYMENT OF CASH AFTER DEDUCTING SPE CIFIC PREMIUM FROM THE PARTIES. THE AO, THEREAFTER, ISSUED LETTERS U/S 133(6) FOR CALLING INFORMATION FROM ALL THESE PARTIES. HOWEVER, NO SUC H INFORMATION WAS ITA NO. 400/JP/2016 M/S SHIVALIK KINEMA PVT. LTD., JAIPUR VS. DCIT, JA IPUR 13 RECEIVED. THE AO THEN REQUIRED THE ASSESSEE TO PROD UCE SH. G.L. GUPTA, THE MIDDLEMAN AND SH. GHANSHYAM AGARWAL, THE DIRECT OR OF ASSESSEE COMPANY. THE ASSESSEES AR VIDE LETTER DT.28.02.201 4 AND 08.02.2014 SUBMITTED THAT NONE OF THE DIRECTOR OF THE ASSESSEE COMPANY IS IN TOUCH WITH OR AWARE ABOUT SH. G.L. GUPTA AND THUS HE CANN OT BE PRODUCED. FURTHER, SH. GHANSHYAM AGARWAL HAS UNDERGONE A SURG ERY ON 06.01.2014 AT FORTIS HOSPITAL AND HE IS STILL NOT W ELL AND FEELING PROBLEM IN MOVING OUTSIDE THE HOUSE AND THUS HE IS UNABLE T O ATTEND THE HEARING. THE AO, HOWEVER, OBSERVED THAT SH. G.L. GU PTA WAS NOT ONLY A MEDIATOR OF THE ASSESSEE COMPANY FOR PROVIDING ACCO MMODATION ENTRIES BUT HE WAS ALSO A RELATIVE OF THE DIRECTORS OF THE COMPANY. IT IS NOT KNOWN AS TO HOW A PERSON CAN DENY TO BE IN TOUCH WI TH HIS RELATIVES EVEN. SO FAR AS PERSONAL EXAMINATION OF SH. GHANSHY AM AGARWAL IS CONCERNED AGREED HE WAS ILL BUT THERE WERE OTHER DI RECTORS AS WELL WHO COULD HAVE BEEN PRODUCED BUT OF NO AVAIL. ON THE SA ME DATE I.E. 28.02.2014, IT WAS GATHERED THAT SH. GHANSHYAM AGAR WAL WAS ATTENDING ALL HIS ROUTINE WORK HIMSELF. THUS, IT IS PROVED BEYOND DOUBT THAT THE ASSESSEE WAS KNOWINGLY OR INTENTIONALLY AV OIDING THE PERSONAL PRESENCE OF ANY OF THE DIRECTORS AND RELATIVE SH. G .L. GUPTA FOR THE REASON THAT HAS ANY DIRECTOR BEEN TO THE DEPARTMENT , THE MODUS OPERANDI FOR TAKING ACCOMMODATION ENTRIES WOULD BE STAMPED CONFIRMED THEREBY LEADING TO PAYMENT OF LEGITIMATE TAX ALONG WITH INTEREST AND PENALTIES. ACCORDINGLY, THE AO MADE AD DITION OF RS.30 LACS U/S 68 OF THE IT ACT, 1961. 15. THE LD. CIT(A) CONFIRMED THE ADDITION SO MADE B Y THE AO. THE LD CIT(A) HELD THAT PERUSAL OF THE BANK STATEMENT O F THE COMPANIES REVEALS FREQUENT MONEY BEING RECEIVED ON TRANSFER F ROM ONE OF THE ITA NO. 400/JP/2016 M/S SHIVALIK KINEMA PVT. LTD., JAIPUR VS. DCIT, JA IPUR 14 COMPANY NAMED BY THE ENTRY OPERATOR AS HIS OWN AND A PAPER COMPANY AND THE SAME BEING ISSUED TO OTHER COMPANY THAT IS THE ONES RECEIVING THE ACCOMMODATION ENTRY. INSPITE OF THE ADEQUATE OP PORTUNITY NEITHER THE DIRECTORS NOR THE MIDDLEMAN WHO WAS ALSO A RELA TIVE APPEARED BEFORE THE AO. THE COMPANY WHO HAVE ALLEGEDLY APPLI ED FOR SHARE INVESTMENTS ARE NOT CARRYING ON ANY BUSINESS ACTIVI TY AND THE ONLY ACTIVITY IS PROVIDING ENTRIES. THE BANK ACCOUNT SHO WS INFLOW AND OUTFLOW AMOUNTS BY RECEIVING THROUGH COMPANY WHICH BELONGS TO THE ALLEGED ENTRY OPERATOR. THEY ARE INVESTING HUGE AMOUNTS IN A COMPANY ABOUT WHICH THEY DO NOT KNOW AND FROM WHERE NO DIVIDEND O R INTEREST IS BEING RECEIVED. IT IS SURPRISING THAT INVESTMENTS ARE BEI NG MADE BUT NO BENEFIT ON THESE INVESTMENTS SEEMS TO ACCRUE TO THE SE INVESTING COMPANIES. FURTHER IN PRIVATELY HELD LIMITED COMPAN IES, SHARES ARE ISSUED TO KNOWN PERSONS AND USUALLY BY PRIVATE PLAC EMENT OR REQUEST BUT IN THESE CASES THESE ARE COMPLETELY UNRELATED P ARTIES AND EVEN THOUGH HUGE INVESTMENTS ARE MADE BUT THE ASSESSEE I S NOT AWARE OF THEIR CORRECT ADDRESS AVAILABLE TO PRODUCE THE DIRE CTORS TO TESTIFY REGARDING THEIR OWN INVESTMENTS. THEREFORE, THE AO WAS JUSTIFIED IN HOLDING THESE AMOUNTS AS UNEXPLAINED. HE FURTHER RE LIED ON THE DECISION OF DELHI HIGH COURT IN CASE OF N.R. PORTFOLIO P. LT D. AND CIT VS. NAVODAYA CASTELS PVT. LTD. 16. DURING THE COURSE OF HEARING, THE LD. AR SUBMI TTED THAT FROM THE FACTS STATED ABOVE, THE MAIN REASON FOR THE ADDITIO N IS THAT THE INVESTMENT MADE BY THE ABOVE THREE COMPANIES IN THE SHARES OF THE ASSESSEE COMPANY, ARE PAPER COMPANIES WHICH BELONG TO SH. S.K. JAIN GROUP OF COMPANIES. HOWEVER, THE LOWER AUTHORITIES HAVE NEITHER PROVIDED NOR CONFRONTED THE ASSESSEE OF ANY MATERIA L IN SUPPORT OF THEIR ITA NO. 400/JP/2016 M/S SHIVALIK KINEMA PVT. LTD., JAIPUR VS. DCIT, JA IPUR 15 ASSUMPTION EVEN WHEN THE ASSESSEE SPECIFICALLY REQU ESTED THE AO VIDE LETTER DT. 10.12.2013 TO PROVIDE THE COPY OF STATEM ENT OF ALL THE PERSONS OF SH. S.K. JAIN GROUP AND THE INVESTIGATION REPORT AND OTHER DOCUMENTS SUGGESTING THAT THIS GROUP WAS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES. FURTHER, THE AO HAS NOT PROVIDED ANY OPPOR TUNITY TO THE ASSESSEE TO CROSS EXAMINE ANY OF THE PERSONS NAMELY SH. S.K JAIN OR SH. V.K. JAIN OR SH. ASSEM KUMAR GUPTA OR SH. RAJES H AGGARWAL WHOSE STATEMENTS HAS BEEN REFERRED/RELIED IN THE ASSESSME NT ORDER. IN FACT THE AO WITHOUT PROVIDING ANY OPPORTUNITY TO THE ASSESSE E TO REBUT THE SO CALLED INFORMATION AVAILABLE WITH THE DEPARTMENT OR PROVIDING ANY OPPORTUNITY TO CROSS EXAMINE THESE PERSONS HAS MADE THE ADDITION WHICH IS AGAINST THE PRINCIPLE OF NATURAL JUSTICE A ND ILLEGAL & BAD IN LAW AS HELD BY SUPREME COURT DECISION DATED 02.09.2015 IN CASE OF ANDAMAN TIMBER INDUSTRIES VS. CCE 127 DTR 0241 WHEREIN IT WAS HELD THAT DENIAL OF OPPORTUNITY TO THE ASSESSEE TO CROSS -EXAMINE THE WITNESSES WHOSE STATEMENTS WERE MADE THE SOLE BASIS OF THE ASSESSMENT IS A SERIOUS FLAW RENDERING THE ORDER A NULLITY IN AS MUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL J USTICE. EVEN FROM THE ASSESSMENT ORDER, IT IS NOT DISCERNIBLE THAT ANY OF THESE PERSONS HAD STATED THAT INVESTMENT MADE BY THESE COMPANIES IN T HE SHARE CAPITAL OF THE ASSESSEE IS BOGUS/ ACCOMMODATION ENTRIES. 17. IT WAS FURTHER SUBMITTED BY THE LD AR THAT ANO THER REASON GIVEN BY THE AO IS THAT INFORMATION U/S 133(6) WAS CALLED FROM THE ABOVE COMPANIES BUT NO INFORMATION WAS RECEIVED. IN THIS REGARD, IT WAS SUBMITTED THAT IT IS NOT THE CASE OF THE AO THAT TH E ENQUIRY LETTER ISSUED BY HIM WAS NOT SERVED ON THEM. IF THEY HAVE NOT RES PONDED, AO SHOULD HAVE TAKEN NECESSARY ACTION AGAINST THEM. THE LD. C IT(A) HAS WRONGLY ITA NO. 400/JP/2016 M/S SHIVALIK KINEMA PVT. LTD., JAIPUR VS. DCIT, JA IPUR 16 HELD THAT ASSESSEE WAS ASKED TO PRODUCE THE DIRECTO R/PERSONS MANAGING THESE COMPANIES WHEN THERE IS NO SUCH REQUIREMENT F ROM THE AO. IN ANY CASE, ONCE THE ASSESSEE HAS ESTABLISHED THE IDE NTITY OF THESE COMPANIES, ADDITION CANNOT BE MADE IN THE HANDS OF THE ASSESSEE AS HELD BY SUPREME COURT IN CASE OF CIT VS. LOVELY EXP ORTS PVT. LTD. (2008) 216 CTR 195. 18. IT WAS FURTHER SUBMITTED THAT IN RESPECT OF TH E ABOVE THREE COMPANIES, THE ASSESSEE HAS FURNISHED THE FOLLOWING DOCUMENTS TO ESTABLISH THE IDENTITY, GENUINENESS OF THE TRANSACT ION AND THE CREDITWORTHINESS OF THESE ENTITIES: NAME, ADDRESS AND PAN NO. SHARES APPLIED/ ALLOTTED SHARE CAPITAL EVIDENCES PRODUCED BEFORE THE AO M/S ZENITH AUTOMOTIVE P. LTD. 106, PALCO HOUSE, T- 10, MAIN PATEL ROAD, PATEL NAGAR, NEW DELHI-110008 PAN NO.: AAACZ0283B 20,000 RS.10,00,000/- COPY OF SHARE APPLICATION MONEY, CONFIRMATION, BANK STATEMENT, BALANCE SHEET, ROC RETURN. M/S AASHEESH CAP. 20,000 RS.10,00,000/- COPY OF SHARE ITA NO. 400/JP/2016 M/S SHIVALIK KINEMA PVT. LTD., JAIPUR VS. DCIT, JA IPUR 17 SERVICES P. LTD. ROYAL PALACE, G-55, LAXMIMARG, VIKAS NAGAR, NEW DELHI- 110092 PAN NO.: AAACA6633N APPLICATION MONEY, CONFIRMATION, BANK STATEMENT, BALANCE SHEET, RO C RETURN. M/S ULTIMATE IT SOLUTION U-23, ARVIND NAGAR, GHONDA, DELHI-53 PAN NO.: AAACU9005G 20,000 RS.10,00,000/- COPY OF SHARE APPLICATION MONEY, CONFIRMATION, BANK STATEMENT, BALANCE SHEET, ROC RETURN. FROM THE ABOVE TABLE IT CAN BE NOTED THAT THE ABOVE COMPANIES ARE ASSESSED TO TAX, THEIR PAN NO. IS PROVIDED, THE TRA NSACTION IS THROUGH BANKING CHANNEL AND THE SHARES HAS BEEN ALLOTTED TO THEM AS IS EVIDENT FROM FORM 2 RETURN OF ALLOTMENT FILED WITH ROC. F ROM THE BALANCE SHEET OF THESE COMPANIES, THEIR CREDITWORTHINESS AN D GENUINENESS OF THE TRANSACTION CAN BE PERCEIVED IN AS MUCH AS THEY HAVE SUBSTANTIAL SHAREHOLDERS FUNDS AND THE NAME OF THE ASSESSEE COM PANY IS APPEARING IN THE DETAIL OF INVESTMENT MADE BY THEM. THUS, THE ASSESSEE HAS DISCHARGED THE ONUS WHICH LAY UPON IT U/S 68. THEREFORE, SOLELY ON THE BASIS OF THE INFORMATION RECEIVED FROM INVESTIGATIO N WING, DELHI, THE ITA NO. 400/JP/2016 M/S SHIVALIK KINEMA PVT. LTD., JAIPUR VS. DCIT, JA IPUR 18 SHARE CAPITAL RECEIVED BY THE ASSESSEE FROM THESE C OMPANIES CANNOT BE PRESUMED TO BE ACCOMMODATION ENTRIES. 19. THE AO OBSERVED THAT DIRECTOR OF THE ASSESSEE C OMPANY, SH. GHANSHYAM AGARWAL WAS NOT PRODUCED. IN THIS CONNECT ION, IT WAS SUBMITTED THAT THE DIRECTOR HAD UNDERGONE A SURGERY ON 6/01/2014 AT ESCORTS HOSPITAL AND THE DOCTOR ADVISED HIM TO TAKE REST AND NOT TO TAKE ANY STRESS. THEREFORE, THERE WAS A REASONABLE CAUSE FOR NOT PRODUCING HIM. FURTHER FINDING OF THE AO THAT SH. GHANSHYAM A GARWAL WAS ATTENDING ALL HIS ROUTINE WORK OR OTHER DIRECTORS C OULD HAVE ATTENDED THE OFFICE OR THAT SH. G.L. GUPTA IS RELATIVE OF THE DI RECTOR OF THE ASSESSEE COMPANY IS WITHOUT BASIS MORE PARTICULARLY WHEN IT WAS SPECIFICALLY MENTIONED TO THE AO THAT THE DIRECTORS ARE NOT AWAR E OF G.L. GUPTA. FURTHER, WHEN ASSESSEE HAS FILED ALL THE EVIDENCES TO PROVE THE GENUINENESS OF THE SHARE CAPITAL, NO ADVERSE INFERE NCE IS CALLED FOR SIMPLY BECAUSE THE OTHER DIRECTOR OF THE ASSESSEE C OMPANY IS NOT PRODUCED WHEN THEIR PRESENCE WAS NOT REQUIRED BY TH E AO. 20. IN SUPPORT, RELIANCE WAS PLACED ON FOLLOWING C ASES:- CIT VS. VACMET PACKAGING (INDIA) PVT. LTD. 367 ITR 0217 (ALL.) (HC) ACIT VS. VIP GROWTH FUND PVT. LTD. 46 CCH 0231 (DEL .) (TRIB.) CIT VS. SUPERTECH DIAMOND TOOLS PVT. LTD. 229 TAXMA N 62 (RAJ.) ITO VS.RAKAM MONEY MATTERS P. LTD. (2014) 41 CCH 01 55 (DEL.) (TRIB.) JADAU JEWELLERS & MANUFACTURING (P) LTD. VS. ACIT 4 5 CCH 0442 (JPR.) (TRIB.) DECISION DT. 14.12.2015 ITA NO. 400/JP/2016 M/S SHIVALIK KINEMA PVT. LTD., JAIPUR VS. DCIT, JA IPUR 19 GANGA PROJECTS (P) LTD. AND B.S. TRADERS (P.) LTD. IN ITA NO. 175 & 176/JP/15 AND 179/JP/15 AND CO NO. 15 & 16/JP/15 AN D 19/JP/15 ORDER DATED 22.06.2016 ANCHAL FINTRADE PVT. LTD. VS. ITO IN ITA NO. 131/JP /16 FOR A.Y. 05- 06. M/S CHOICE BUILDSTATE PRIVATE LIMITED VS ITO IN ITA NO. 431/JP/2016 DATED 28.03.2018 21. IN CASE OF M/S CHOICE BUILDESTATE PRIVATE LIMI TED VS ITO (SUPRA), WE HAVE RECENTLY EXAMINED AN IDENTICAL MATTER AND W E FIND THAT OUR FINDINGS THEREIN APPLIES EQUALLY IN THE INSTANT CAS E. THE RELEVANT FINDINGS ARE REPRODUCED AS UNDER: 10. NOW, COMING TO THE MERITS OF ADDITION OF RS 35 LACS MADE BY THE AO UNDER SECTION 68 OF THE ACT. ON CAREFUL EXAMINAT ION OF MATERIAL AVAILABLE ON RECORD, WE FIND THAT IT IS A CASE WHER E THE AO HAS RELIED BLINDLY ON INFORMATION SUPPLIED BY THE INVESTIGATIO N WING MUMBAI WITHOUT CARRYING OUT ANY FURTHER EXAMINATION OF DOC UMENTS SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND IND EPENDENT INVESTIGATION OF THESE INVESTOR COMPANIES. AS WE H AVE NOTED ABOVE, THE INFORMATION SO RECEIVED FROM THE INVESTIGATION WING, MUMBAI AND AFTER DUE EXAMINATION THEREOF, THE AO HAS FORMED A PRIMA FACIE VIEW AND A REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT AND HAS THUS ASSUMED JURISDICTION U/S 147 OF THE ACT. AT THE SAME TIME, SUCH A PRIMA FACIE VIEW HAS TO BE FINALIZED AND A F IRM VIEW HAS TO BE TAKEN ON BASIS OF EXAMINATION OF DOCUMENTS SO BROUG HT ON RECORD AND FURTHER INVESTIGATION TO BE CARRIED OUT BEFORE ANY TAX LIABILITY IS FASTENED ON THE ASSESSEE. IN THE INSTANT CASE, WE FIND THAT THE ASSESSEE ITA NO. 400/JP/2016 M/S SHIVALIK KINEMA PVT. LTD., JAIPUR VS. DCIT, JA IPUR 20 COMPANY HAS SUBMITTED DETAIL DOCUMENTATION IN REGAR D TO THESE COMPANIES FROM WHOM A TOTAL AMOUNT OF RS.35 LAKHS W AS RECEIVED NAMELY (I) SHARE APPLICATION FORM (II) COPY OF BOAR D RESOLUTION (III) COPY OF BANK STATEMENTS REFLECTING PAYMENT THROUGH CHEQU E (IV) AUDITED STATEMENT OF ACCOUNTS AND ACKNOWLEDGEMENT OF ITR (V ) COPY OF CERTIFICATE OF LNCORPORATION AND CERTIFICATE OF COM MENCEMENT OF BUSINESS (VI) COPY OF PAN CARD. WHERE THE ASSESSEE FURNISHES THE DOCUMENTATION AND NECESSARY EXPLANATION, THE AO SHO ULD EXAMINE WHETHER THE DOCUMENTS SO SUBMITTED AND EXPLANATION SO OFFERED ESTABLISHES THE THREE INGREDIENTS I.E. IDENTITY OF THE INVESTOR COMPANY, CREDITWORTHINESS OF INVESTOR COMPANY AND GENUINENES S OF THE TRANSACTION. WHETHER EXPLANATION OF THE ASSESSEE IS RELIABLE OR ACCEPTABLE? IF YES, NO FURTHER ACTION IS REQUIRED A ND THE SUM SO CREDITED MAY NOT BE CHARGED TO INCOME TAX. IF THE EXPLANATIO N SO OFFERED BY THE ASSESSEE IS NOT ACCEPTABLE OR RELIABLE, THE AO SHOU LD GIVE A DETAILED REASONING IN THE ASSESSMENT ORDER FOR NOT ACCEPTING THE SAME. THE ORDER PASSED BY THE AO SHOULD BE SPEAKING ONE BRING ING ON RECORD ALL THE FACTS, EXPLANATION FURNISHED BY THE ASSESSEE IN RESPECT OF NATURE AND SOURCE OF THE CREDIT IN ITS BOOKS OF ACCOUNTS A ND REASONS FOR NOT ACCEPTING THE EXPLANATION OF THE ASSESSEE. IN THE I NSTANT CASE, W E FIND THAT THE AO HAS NOT TAKEN ANY EFFORTS TO EXAMINE TH ESE DOCUMENTS SO SUBMITTED BY THE ASSESSEE COMPANY DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND HAS SIMPLY GONE BY HIS PRIMA FACIE VIEW FORMED AT THE TIME OF ASSUMPTION OF JURISDICTION U/S 147 AND SUCH A PRIMA FACIE VIEW WITHOUT FURTHER EXAMINATION/INVESTIGATION CANNOT BE A BASIS FOR FORMING A FINAL VIEW OF MAKING THE ADDITION IN THE HANDS OF THE ASSESSEE COMPANY. IT IS A CASE WHERE THE AO WAS IN RECEIPT O F MATERIAL INFORMATION FROM THE INVESTIGATION WING, MUMBAI THA T THE ASSESSEE ITA NO. 400/JP/2016 M/S SHIVALIK KINEMA PVT. LTD., JAIPUR VS. DCIT, JA IPUR 21 COMPANY HAS RECEIVED ACCOMMODATION ENTRIES IN FORM OF SHARE APPLICATION/INVESTMENT FROM SEVEN COMPANIES WHO ARE NOT DOING GENUINE BUSINESS ACTIVITIES AS DIVULGED DURING THE COURSE OF SEARCH AND SEIZURE OPERATIONS IN CASE OF PRAVEEN JAIN GROUP. I N THESE SITUATIONS, THE COURTS HAVE HELD THAT THE ASSESSING OFFICER CAN NOT SIT BACK WITH FOLDED HANDS AND THEN COME FORWARD TO MERELY REJECT THE EXPLANATION SO MADE, WITHOUT CARRYING OUT ANY VERIFICATION OR E NQUIRY INTO THE MATERIAL PLACED BEFORE HIM BY THE ASSESSEE. IF THE ASSESSING OFFICER HARBOURS ANY DOUBTS OF THE LEGITIMACY OF ANY SUBSCR IPTION HE IS EMPOWERED, NAY DUTY-BOUND, TO CARRY OUT THOROUGH IN VESTIGATIONS. BUT IF THE ASSESSING OFFICER FAILS TO UNEARTH ANY WRONG OR ILLEGAL DEALINGS, HE CANNOT OBDURATELY ADHERE TO HIS SUSPICIONS AND TREA T THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANY. W E THEREFORE AGREE WITH THE CONTENTIONS OF THE LD AR THAT IN ABSENCE O F ANY FALSITY WHICH HAVE BEEN FOUND IN THE DOCUMENTS SO SUBMITTED BY TH E ASSESSEE COMPANY TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE SHARE TRANSACTION, THESE DOCUMENTS CANNOT BE SUMMAR ILY REJECTED AS HAS BEEN DONE BY THE AO IN THE INSTANT CASE. FURTHE R, WE FIND THAT THERE IS NO ACTION TAKEN BY THE AO IN TERMS OF CALLING IN FORMATION FROM THESE COMPANIES UNDER SECTION 133(6) AND/OR ISSUING SUMMO NS TO DIRECTORS OF THESE COMPANIES UNDER SECTION 131 OF THE ACT. FURT HER, WHERE THE AO RELIES UPON THE STATEMENT OF THIRD PARTIES (PRAVEEN JAIN AND OTHERS) RECORDED U/S 132(4), WITHOUT GETTING INTO CONTROVER SY WHETHER THE SAID STATEMENT WAS RETRACTED SUBSEQUENTLY, THE FACT REMA INS THAT THE ASSESSEE DESERVES AN OPPORTUNITY TO CROSS EXAMINE S UCH PERSONS AS HELD BY THE HONBLE SUPREME COURT IN CASE OF ANDAMA N TIMBER INDUSTRIES (SUPRA). DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE COMPANY HAS MADE SPECIFIC REQUEST TO THE A O TO ALLOW CROSS ITA NO. 400/JP/2016 M/S SHIVALIK KINEMA PVT. LTD., JAIPUR VS. DCIT, JA IPUR 22 EXAMINATION OF THESE PERSONS WHICH HAS HOWEVER NOT BEING PROVIDED TO THE ASSESSEE COMPANY. IN LIGHT OF ABOVE DISCUSSION S, WE DONT FIND ANY BASIS FOR MAKING ADDITION UNDER SECTION 68 OF THE A CT. IN THE RESULT, GROUND NO.2 TAKEN BY THE ASSESSEE COMPANY IS ALLOWE D. 22. IN THE INSTANT CASE, WE FIND THAT THE ASSESSEE HAS REQUESTED THE AO VIDE LETTER DT. 10.12.2013 TO PROVIDE THE COPY O F STATEMENT OF ALL THE PERSONS OF SH. S.K. JAIN GROUP AND THE INVESTIGATIO N REPORT AND OTHER DOCUMENTS SUGGESTING THAT THIS GROUP WAS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES, HOWEVER, THERE IS NOTHING ON RECORD THAT THE SAME HAVE BEEN PROVIDED TO THE ASSESSEE. BEING REA SSESSMENT PROCEEDINGS, WHERE THE AO IS CEASED OF CERTAIN INFO RMATION AND DOCUMENTS, IT IS INCUMBENT UPON HIM TO CONFRONT THE SAME TO THE ASSESSEE AND ALLOW THE LATTER TO FILE ITS OBJECTION S AND REBUTTAL. THE ADDITIONS MADE, MERELY RELYING ON THESE INFORMATION AND DOCUMENTATION, WITHOUT CONFRONTING THE ASSESSEE CAN NOT BE ACCEPTED. FURTHER, WHERE THE AO RELIES UPON THE STATEMENT OF THIRD PARTIES, THE FACT REMAINS THAT THE ASSESSEE DESERVES AN OPPORTUN ITY TO CROSS EXAMINE SUCH PERSONS AS HELD BY THE HONBLE SUPREME COURT IN CASE OF ANDAMAN TIMBER INDUSTRIES (SUPRA). 23. FURTHER, WE FIND THAT IN THE INSTANT CASE, THE ASSESSEE COMPANY HAS FILED COPIES OF THE SHARE APPLICATION FORM, RET URN OF ALLOTMENT FILED WITH ROC, COPIES OF THE BANK STATEMENTS, COPIES OF THE FINANCIAL STATEMENTS AND CONFIRMATIONS OF THESE PARTIES. WE ALSO FIND THAT THE AO HAS ISSUED LETTERS U/S 133(6) TO THESE PARTIES A ND HAS ALSO CALLED FOR PERSONAL APPEARANCE OF SH G.L GUPTA AND ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY. IT IS ALSO A FACT THAT THERE NOT ICES HAVE NOT ITA NO. 400/JP/2016 M/S SHIVALIK KINEMA PVT. LTD., JAIPUR VS. DCIT, JA IPUR 23 RETURNED BACK UNDELIVERED AND AT THE SAME TIME, THE RE HAS BEEN NO COMPLIANCE. IT IS THEREFORE A CASE WHICH IS SHADE DIFFERENT THAN THE ONE WE DECIDED SUPRA. AT THE SAME TIME, THE FACT REMAIN S THAT INSPITE OF NON-COMPLIANCE OF THESE NOTICES AND NON-APPEARANCE WHICH CANNOT BE A SOLE BASIS FOR DISALLOWANCE, THE AO HAS TO GIVE A SPECIFIC FINDING AND RECORD HIS SATISFACTION REGARDING NON-ACCEPTANCE OF DOCUMENTS SO SUBMITTED BY THE ASSESSEE. WE ARE THEREFORE OF THE VIEW THAT THAT IN ABSENCE OF ANY FALSITY WHICH HAVE BEEN FOUND IN THE DOCUMENTS SO SUBMITTED BY THE ASSESSEE COMPANY TO PROVE THE IDEN TITY, CREDITWORTHINESS AND GENUINENESS OF THE SHARE TRANS ACTION AND ANY SATISFACTION TO THAT EFFECT RECORDED BY THE AO, THE SE DOCUMENTS CANNOT BE SUMMARILY REJECTED AS HAS BEEN DONE BY THE AO IN THE INSTANT CASE. 24. IN LIGHT OF ABOVE DISCUSSIONS AND IN THE ENTIRE TY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE DONT FIND ANY BASIS FOR MAKING THE ADDITION UNDER SECTION 68 OF THE ACT. IN THE RESUL T, GROUND NO.2 TAKEN BY THE ASSESSEE COMPANY IS ALLOWED. 25. IN GROUND NO. 3, THE ASSESSEE HAS CHALLENGED TH E SUSTENANCE OF DISALLOWANCE OF RS. 31,171/- IN RESPECT OF VARIOUS EXPENSES CLAIMED BY IT. IN THIS REGARD, THE LD. AR SUBMITTED THAT DURIN G THE COURSE OF PROCEEDINGS, THE ASSESSEE FILED THE COMPLETE DETAIL S OF THESE EXPENSES AND ALSO PRODUCED THE SUPPORTING EVIDENCES. IT WAS FURTHER SUBMITTED THAT LOWER AUTHORITIES HAVE NOT POINTED OUT ANY SPE CIFIC INSTANCES OF EXPENSES WHICH ARE NOT PROPERLY VOUCHED OR ARE NOT GENUINE. IT WAS SUBMITTED THAT THE AO ONLY ON SURMISES MADE A LUMP SUM DISALLOWANCE OF 50% OF THESE EXPENSES AND THE LD. CIT(A) WITHOUT ANY BASIS RESTRICTED IT TO 25%. IT WAS SUBMITTED THAT THESE A RE REGULAR BUSINESS ITA NO. 400/JP/2016 M/S SHIVALIK KINEMA PVT. LTD., JAIPUR VS. DCIT, JA IPUR 24 EXPENDITURE WHICH ARE REQUIRED TO BE INCURRED EVEN IF NO BUSINESS IS CARRIED OUT DURING THE YEAR. IN SUPPORT, RELIANCE W AS PLACED ON THE FOLLOWING CASES:- ACIT VS. GANPATI ENTERPRISES LTD. (2013) 142 ITD 11 8 (DELHI)(TRIB.) CIT VS. ORACLE INDIA (P) LTD. 199 TAXMAN 181 (DEL) (HC) (MAG.) SEASONS CATERING SERVICES (P) LTD. VS. DCIT 43 DTR 397 (DEL) (TRIB) 26. WE FIND THAT IT IS A CASE OF ADHOC DISALLOWANC E OF EXPENSES WHICH IS NOT PERMISSIBLE IN THE EYE OF LAW. NO FINDING H AS BEEN GIVEN BY THE LOWER AUTHORITIES THAT THESE ARE BOGUS EXPENDITURE OR THE EXPENDITURE HAS NOT BEEN INCURRED FOR THE PURPOSES OF THE BUSIN ESS. IT IS NOT THE CASE OF THE REVENUE THAT THE BUSINESS OF THE ASSESS EE HAS NOT BEEN SET UP. IN LIGHT OF THE SAME, THE DISALLOWANCE SO CONF IRMED BY THE LD CIT(A) IS HEREBY DELETED. THE GROUND TAKEN BY THE ASSESSEE IS THUS ALLOWED. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/04/2018. SD/- SD/- FOT; IKWY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 24/04/2018 * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: ITA NO. 400/JP/2016 M/S SHIVALIK KINEMA PVT. LTD., JAIPUR VS. DCIT, JA IPUR 25 1. VIHYKFKHZ@ THE APPELLANT- M/S SHIVALIK KINEMA PVT. LTD., JAIPU R 2. IZR;FKHZ@ THE RESPONDENT- DCIT, CIRCLE-04, JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE { ITA NO. 400/JP/2016} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR