DOLPHIN MANAGEMENT ADVISERS PVT LTD., MUMBAI V. ITO 14(1)(4), MUMBAI

ITA 529/MUM/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 4233 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 21-01-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRAVIN SALUNKHE
• Keywords: Unexplained cash credit; Bogus Share capital; Charitable institution; Accommodation entries; Onus to prove; Reason to believe; Reassessment proceedings
• Section: 147; 68; 148; 143(3); 133(6)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL “SMC” Bench, Mumbai Shri Shamim Yahya (AM) I.T.A. No. 529/Mum/2020 (A.Y. 2007-08) Dolphin Management Advisers Pvt. Ltd. 502,Prabhu Prerna Vallabh Baug Lane Ghatkopar East Mumbai-400 077. PAN : AACCD2432J Vs. ITO-14(1)(4) Room No. 203 2 nd Floor Aayakar Bhavan M.K. Road Mumbai-400020. (Appellant) (Respondent) Assessee by None Department by Shri Pravin Salunkhe Date of Hearing 30.03.2022 Date of Pronouncement 20.04.2022 O R D E R This appeal by the assessee is directed against the order of learned CIT(A) dated 3.12.2019 pertains to A.Y. 2007-08. 2. Grounds of appeal read as under :- As regards validity of reopening of assessment proceedings u/s 147 of Income Tax Act, 1961 ('the Act'): 1. The Learned Commissioner (Appeals) erred in upholding the action of the Assessing Officer ('AO') in reopening the assessment of the appellant u/s 147 of the Act. 2. The learned Commissioner (Appeals) failed to appreciate the fact that the reassessment proceedings are not according to the laws, rules and regulations. The AO has relied on the alleged information claimed to have been received from DGIT (Investigation) without making any inquiry on his own and therefore the entire reassessment proceedings were bad in law. As regards addition of Rs 13,00,000 received as Share application as cash credit u/s 68: 3. The learned Commissioner (Appeals) erred in confirming the addition made by the AO amounting to Rs. 13,00,000 as unexplained cash credit u/s 68 in lieu of amount received as share application money. Dolphin Management Advisers Pvt. Ltd. 2 4. The learned Commissioner (Appeals) and AO failed to follow the principles of natural justice by not granting an opportunity to cross examine/confront the person on whose confession/statement or possession of material/evidence, they presumed that the share transaction is a bogus/ sham transaction. The basic principles of natural justice have not been followed. Relief Sought Your appellant prays that the order of the learned Commissioner (Appeals) be modified by - i. The reassessment proceedings initiated u/s 147 of Act be held as invalid in law. ii. Alternatively, addition of Rs.13,00,0000 in relation to Share application money as unexplained Cash Credit u/s 68 be deleted.” 3. Brief facts are that the assessee is a Private Limited Company and engaged in the business of financing activities. The assessee filed return of income for AY 2007-08 on 27.10.2007 declaring total income at Rs.5,41,580/-. Subsequently, on the basis of the information received from the Investigation Wing that the assessee is allegedly one of the beneficiaries of having accommodation entries in the form of Share Application Money amounting to Rs.13,00,000/- from a bogus concern operated by Shri Praveen Kumar Jain and group concerns namely M/s Real Gold Trading Company Pvt Ltd (New name M/s Olive Overseas Pvt Ltd), the case was re-opened on approval from higher authorities. The Assessing Officer made the impugned addition on the basis of following reasoning :- 7.5 In view of the above mentioned facts and the findings of the search it is clearly evident that the assessee has taken accommodation entries from the concerns run and operated by Praveen Kumar Jain. 8. In the instant case the assessee h«* taken Share application money from M/s. Olive Overseas Pvt. Ltd. formerly known as Real Gold Trading Co, Pvt. Ltd. to the tune of Rs.13.00,000/-. The alleged Company is stated to be run controlled under the supervision of Shri Pravin Jain and during the course of search proceedings also Mr. Pravin Jain ahs admitted in its statement that the concern is not conducting any business activity but is a concern created for providing entries and it is merely a paper concern controlled by the dummy directors viz. Niiesh Parmar and Ramesh Javda However, the statements of the said directors have also been recorded at the time of search Dolphin Management Advisers Pvt. Ltd. 3 proceedings and they have also admitted that they are acting under the directions and supervision of Shri Pravin Jain. 8.1 In view of the reasons recorded as referred above, notice u/s 133(6) of the I.T. Act, were issued to M/s Real Gold Trading P Ltd in order to verify the identity, creditworthiness, genuineness, source and nature of the transactions. However, the notice could not be served to the address provided by the assessee. A show-cause notice did. 18.3,2015 was issued to the assessee as per the following. 1. As the onus is on you to substantiate your claim of the transaction, you are required to produce the Authorised person from M/s Realgold Trading Company Pvt Ltd for confirmation of the transaction made' with your company. Please note that, in absence of the identity and confirmation from the said entity the genuineness of transaction cannot be substantiated. 2. Further, you are required to submit the present position of share holding of the said entity with your company. If the said entity is not holding the allotted shares of your company, then when the said entity has surrendered it holding. Please give details of this transaction 3. Under these circumstances and following the principle of natural justice, you are hereby given an opportunity to not only establishing the identity of the parties from whom such share Application money received but also to establish the genuineness of the same. 8.2 In response to the same the assessee facilitated to obtain the reply from the said party and filed on 25 03 2015. However the assessee failed to produce the party for verification , The assessee also failed to produce the details with regard to present position of holding of said shares and replied that its computer data in corrupted and the assessee is not in a position to produce the same. The modus operands of providing bogus share application money is explained by Pravin Jam in his statement (relevant extract reproduced above) the circle of transaction is completed when the company- buy back the shares as per the fair market value and the amount gets refunded back Hence in this case the assessee has not disclosed such details even after requiring the assessee to reply as per the Show cause notice. 8.3 In view of above discussion, assessee has clearly failed to prove the identity, creditworthiness of the lender and genuineness, nature & source of the transactions. As it has been established that the assessee company has taken accommodation entries through Praveen Kumar Jain Group the sum of Rs. 13,00,000/- shown by the assessee as share capital and share premium received from M/s. Olive Overseas P Ltd. (Realgold Trading Co P. Ltd.) introduced during the year is company u/s. 88 of the IT Act. Dolphin Management Advisers Pvt. Ltd. 4 4. Against the above order assessee appealed before learned CIT(A) challenging the reopening as well as merits of the case. Learned CIT(A) upheld the reopening by observing as under :- As could be seen from record, the A.O. has recorded reasons for reopening and has satisfied himself that there is a reason to believe that income has escaped assessment Sec 147 says that the A.O has to have reason to believe that any income chargeable to tax has escaped assessment Reason to believe can be on the basis of information which comes to his possession or knowledge This information is more than enough for any reasonable person to form a reason to believe that income has escaped assessment The very fact that reasons are recorded and notice u/s. 148 is issued goes to show that the A O has applied his mind and satisfied himself about the reopening the case The reasons recorded are not vague and scanty but precise and concrete. The Act envisages that the A O should only have to reason to believe to reopen a case. He need not establish beyond doubt that there is escapement before issuing the notice. This can be done at the time of assessment but not at the time of issue of notice Reliance is placed on. i) Rohilkhand Education Charitable Trust Vs CCIT Others 365 ITR 233 (AII.). It was held by Hon'ble High Court that AO should have relevant and credible material with him to form requisite reason to believe that income of assessee has escaped assessment. Material available on record has rational connection and relevant bearing on such formation of belief for issuing valid notices for re-assessment. Sufficiency or correctness of material was not to be considered at this stage ii) Sun Pharmaceutical Industries Ltd Vs DC.T 353 IT'R 474 (Guj) where the Hon'ble High Court held the formation by belief that the A.O is essentially within his subjective satisfaction at the stage of issue of notice, only question is whether there was relevant material on which reasonable person could have formed requisite belief iii) ACIT Vs Rajesh Jhaveri Stock Brokers Pvt Ltd Hon'ble Apex Court held that Sec 147 authorises and permits the A.O to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. So long as the ingredients of Sec 147 are fulfilled, A.O. is free to initiate proceedings u/s 147 and failure to take steps u/s 143(3) will not render the A.O. powerless to initiate reassessment proceedings even when intimation u/s had been issued. In this case, the A.O. has ample reason to believe that income has escaped assessment and had rightly issued the notice u/s 148 to the appellant after recording reasons for reopening. The A.O. is well acted within jurisdiction and acted in accordance with the provisions of the I.T. Act. This ground of appeal is accordingly dismissed.’’ 5. On merit also he confirmed the Assessing Officer’s order. Dolphin Management Advisers Pvt. Ltd. 5 6. Against this order assessee is in appeal before the ITAT. I have heard learned Departmental Representative. It is noted that despite several notice in the past none appeared on behalf of the assessee. 7. Upon hearing learned Departmental Representative and perusing records I find that learned CIT(A) is correct in upholding the reopening. The Assessing Officer was in possession of tangible material which had live link with the prima facie belief that income has escaped assessment in as much as assessee was obtaining bogus accommodation entry. 8. As regards merits of the case Assessing Officer has issued notice which had remained uncompliance with. The assessee’s plea of the assessee having no onus to prove the creditworthiness of the party is not sustainable on the touchstone of Hon'ble Bombay High Court Goa Bench decision in CIT Vs. Sadiq Sheikh (TAX APPEAL NO. 18 OF 2014) vide order dated 14.10.2020. 9. In the result, appeal by the assessee is dismissed. Order pronounced in the open court on 20.04.2022. Sd/- (SHAMIM YAHYA) ACCOUNTANT MEMBER Mumbai; Dated : 20/04/2022 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard File. BY ORDER, //True Copy// (Assistant Registrar) PS ITAT, Mumbai