MAJOR METALS LTD, NAVI MUMBAI V. ACIT CC 20, MUMBAI

ITA 6743/MUM/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3640 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 02-07-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 05-11-2012
• Court: TRIBUNAL
• Department Lawyers: SACHCHDANAND DUBE
• Assessee Lawyers: HARI S RAHEJA
• Keywords: Reopening of assessment; Bogus Share capital; Gift; Income from undisclosed sources; Search and seizure; Tangible material; Accommodation entries; Revised return; Reason to believe
• Section: 143(3); 153A; 147; 131; 68; 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE S/SHRI B.R. BASKARAN (AM) & PAWAN SINGH (JM) I.T.A. NO. 6742 /MUM/ 2012 (ASSESSMENT YEAR 2003 - 04 ) I.T.A. NO. 6743/MUM/2012 (ASSESSMENT YEAR 2004 - 05) M/S. MAJOR METALS LTD. 607, JK CHAMBERS SEC TOR 17 VASHI NAVI MUMBAI. VS. ACIT CC - 20 AAYAKAR BHAVAN M.K. ROAD CHURCHGATE MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) PAN NO. AABCM5595J ASSESSEE BY SHRI HARI S. RAHEJA DEPARTMENT BY SHRI SACHCHDANAND DUBE DATE OF HEARING 3 .2 . 201 6 DATE O F PRONOUNCEMENT 1 3 . 5 . 201 6 O R D E R PER B.R. BASKARAN, A M : - THE ASSESSEE HAS FILED THESE APPEALS CHALLENGING THE ORDERS PASSED BY LD CIT(A) FOR ASSESSMENT YEARS 2003 - 04 AND 2004 - 05 CONFIRMING THE ADDITION MADE U/S 68 OF THE ACT AND ALSO REJECTING T HE GROUND RELATING TO THE VALIDITY OF REOPENING OF ASSESSMENT. 2. THE ASSESSMENTS FOR THESE TWO YEARS WERE REOPENED BY THE AO BY ISSUING NOTICE U/S 148 OF THE ACT ON 30 - 03 - 2010. THE ORIGINAL ASSESSMENT WAS COMPLETED FOR ASSESSMENT YEAR 2003 - 04 U/S 143(1) OF THE ACT. FOR ASSESSMENT YEAR 2004 - 05, THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 31.7.2006. THUS, IT CAN BE SEEN THAT THE ASSESSMENTS HAVE BEEN REOPENED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND HENCE, FOR THE ASSESSMENT YEAR 2004 - 05, THE ASSESSING OFFICER IS ALSO REQUIRED TO SHOW THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR ASSESSMENT. MAJOR METALS LTD. 2 3. THE FACTS THAT LED TO RE OPENING OF THE ASSESSMENT OF THE TWO YEARS UNDER CONSIDERATION ARE DISCUSSED IN BRIEF. THE REVENUE CARRIED OUT SEARCH AND SEIZURE OPERATIONS IN THE HANS OF A PERSON NAMED SHRI GIRIRAJ VIJAYVARGIYA (HEREIN AFTER REFERRED TO AS G.V) ON 26.04.2007. IN T HE STATEMENT TAKEN FROM HIM U/S 132(4) OF THE ACT, HE ADMITTED THAT HE HAS GIVEN ACCOMMODATION ENTRIES IN THE FORM OF GIFTS, LOANS AND SHARE APPLICATION MONEY. THE MODUS OPERANDI WAS THAT HE USED TO ISSUE CHEQUE TO THE BENEFICIARIES BY GETTING CASH OF EQU IVALENT AMOUNT FROM THEM. HE SHALL DEPOSIT THE CASH INTO HIS BANK ACCOUNT AND THE CHEQUE SHALL BE ENCASHED BY THE BENEFICIARIES THERE AFTER. HE SUBMITTED THAT HE USED TO GET A COMMISSION OF 2 TO 3.5% FOR PROVIDING ACCOMMODATION ENTRIES AND ACCORDINGLY FI LED RETURN OF INCOME U/S 153A OF THE ACT BY DECLARING THE COMMISSION INCOME. HE ALSO SUBMITTED THAT HE HAD PROVIDED ACCOMMODATION ENTRIES TO THE TUNE OF RS.4.70 CRORES TO 45 PERSONS THROUGH 119 ENTRIES FROM THE FINANCIAL YEAR 1999 - 2000 TO 2005 - 06. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS CONDUCTED IN THE CASE OF SHRI G.V, A STATEMENT FROM THE DIRECTOR OF THE ASSESSEE COMPANY HEREIN, SHRI VIKAS BERLIA WAS RECORDED U/S 131 OF THE ACT, IT APPEARS THAT SHRI VIKAS BERLIA HAS STATED THAT THE ENTRIES WERE GENUINE ONE. WHEN THE STATEMENT GIVEN BY SHRI VIKAS BERLIA WAS CONFRONTED WITH SHRI G.V, HE STILL MAINTAINED THAT THEY WERE ACCOMMODATION ENTRIES. FROM THE DETAILS FURNISHED BY SHRI G. V, IT WAS SEEN THAT THE ASSESSEE HEREIN HAS RECEIVED SHARE APPLI CATION MONEY FROM THE GROUP OF SHRI G.V. AS UNDER: - S. NO. NAME OF PERSON AMOUNT FINANCIAL YEAR 1. SHRI GIRIRAJ VIJAYVARGIYA 2,00,00,000 2005 - 06 2. JETHMAL VIJAYVARGIYA 5,00,000 2004 - 05 3. SANTOSH VIJAYVARGIY A 5,00,000 2004 - 05 4. GIRIRAJ HUF 5,00,000 2004 - 05 5. REKHA VIJAYVARGIYA 5,00,000 2004 - 05 6. SURENDRA VIJAYVARGIYA 5,00,000 2004 - 05 7. PREMLATA VIJAYVARGIYA 5,00,000 2004 - 05 TOTAL 2,30,00,0 00 MAJOR METALS LTD. 3 ON THE BASIS OF STATEMENT GIVEN BY SHRI G.V, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE ASSESSEE COMPANY AND SHRI VIKAR BERLIA HAVE AVAILED THE ACCOMMODATION ENTRIES. FURTHER, THE AO ALSO TOOK THE VIEW THAT ALL THE SHARE APPLICATION MONEY REC EIVED BY THE ASSESSEE ARE ONLY ACCOMMODATION ENTRIES, I.E., THE ASSESSEE HAS INTRODUCED HIS OWN MONEY BY WAY OF SHARE APPLICATION MONEY. 5. DURING THE TWO YEARS UNDER CONSIDERATION, THE ASSESSEE HAD RECEIVED SHARE APPLICATION MONEY FROM SOME OTHER P ERSONS NOT CONNECTED WITH SHRI G.V. STILL THE ASSESSING OFFICER REOPENED THE ASSESSMENT OF BOTH THE YEARS UNDER CONSIDERATION BY ENTERTAINING THE BELIEF THAT THOSE SHARE APPLICATION MONEY ARE ALSO ACCOMMODATION ENTRIES. 6. THE CONTENTION OF THE ASSE SSEE IS THAT THE ASSESSMENTS OF BOTH THE YEARS UNDER CONSIDERATION WERE REOPENED ON THE BASIS OF STATEMENT GIVEN BY SHRI G.V. HE SUBMITTED THAT THE ASSESSEE HAS NOT RECEIVED ANY SHARE APPLICATION MONEY FROM SHRI G.V OR HIS GROUP DURING THE TWO YEARS UNDER CONSIDERATION . IN THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENTS ALSO, THE ASSESSING OFFICER HAS NOT REFERRED TO THE NAME OF SHRI G.V OR ANY OF THE PARTIES RELATED TO HIM. ACCORDINGLY HE SUBMITTED THAT THE ONLY INFORMATION AVAILABLE WITH THE AO WAS THE STATEMENT GIVEN BY SHRI G.V AND THE UNDISPUTED FACT REMAINS THAT THE ASSESSEE HAS NOT RECEIVED ANY MONEY FROM HIM DURING THE TWO YEARS UNDER CONSIDERATION. ACCORDINGLY HE SUBMITTED THAT THE ASSESSING OFFICER DOES NOT HAVE ANY MATERIAL TO BELIEVE THAT THE SHARE APPLICATION RECEIVED BY THE ASSESSEE DURING THE TWO YEARS UNDER CONSIDERATION ARE ACCOMMODATION ENTRIES. HE SUBMITTED THAT IT IS WELL ESTABLISHED PROPOSITION THAT THERE SHOULD BE A LIVE LINK BETWEEN THE MATERIALS AVAILABLE WITH THE AO AND THE R EASONS FORMED WITH REGARD TO THE ESCAPEMENT OF INCOME. SINCE THERE IS NO LIVE LINK BETWEEN THE STATEMENT OF SHRI G.V AND THE BELIEF ENTERTAINED BY THE AO IN RESPECT OF THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE, THE LD A.R CONTENDED THAT THE AO HAS REOPENED THE ASSESSMENTS OF THESE TWO YEARS ON THE BASIS OF SURMISES AND CONJECTURES. HE SUBMITTED THAT AN IDENTICAL LEGAL ISSUE WAS CONSIDERED BY THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF GLB FINVEST PVT . LTD VS. ACIT (ITA NO.1159 1161/MUM /2013 DATED 31.12.2014 MAJOR METALS LTD. 4 AND THE TRIBUNAL HAS HELD THE REOPENING MADE UNDER IDENTICAL SET OF FACTS IN THE ABOVE SAID CASE WAS NOT VALID AND ACCORDINGLY QUASHED THE ASSESSMENT ORDER. ACCORDINGLY HE CONTENDED THAT THE REOPENING OF ASSESSMENTS OF BOTH THE YEARS UNDER CONSIDERATION SHOULD BE QUASHED. 7. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE ASSESSEE HAD RECEIVED SHARE APPLICATION MONEY AND IT HAS ALSO ALLOTTED SHARES ON HIGH PREMIUM, WHICH COULD NOT BE JUSTIFIED WITH THE FINANCIAL RESULTS OF THE CO MPANY. THE SHARE APPLICATION MONEY HAS BEEN RECEIVED REGULARLY OVER THE YEARS. DURING THE COURSE OF SEARCH CONDUCTED IN THE HANDS OF SHRI G.V, THE METHODOLOGY ADOPTED BY PEOPLE WITH REGARD TO THE SHARE APPLICATION MONEY CAME TO LIGHT AND THE SAME LED THE ASSESSING OFFICER TO FORM THE BELIEF THAT THE INCOME OF THE ASSESSEE HAS ESCAPED THE ASSESSMENT. HE SUBMITTED THAT THE ASSESSING OFFICER IS NOT REQUIRED TO ESTABLISH THE FACT OF ESCAPEMENT OF INCOME AT THE TIME OF ISSUING NOTICE. IT IS ENOUGH IF HAS REASO NS TO BELIEVE ABOUT ESCAPEMENT OF INCOME. ACCORDINGLY HE SUBMITTED THAT THE REOPENING OF ASSESSMENTS OF THE TWO YEARS UNDER CONSIDERATION CANNOT BE FOUND FAULT WITH. 8. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. WE NOTICE THAT AN IDENTICAL LEGAL ISSUE URGED UNDER IDENTICAL SET OF FACTS WAS CONSIDERED BY THE CO - ORDINATE BENCH OF TRIBUNAL IN THE CASE OF GLB FINVEST PVT . LTD (SUPRA) AND THE TRIBUNAL HAS TAKEN THE VIEW THAT THE REOPENING OF ASSESSMENT IS BAD IN LAW. FOR THE SAKE OF CO NVENIENCE, WE EXTRACT BELOW THE OPERATIVE PORTION OF THE ORDER PASSED BY THE TRIBUNAL IN THE ABOVE CITED CASE: - 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT IN RESPECT OF T HESE THREE CASES ON THE REASON THAT THE SHARE APPLICATION RECEIVED BY THE ASSESSEE IS NOT A GENUINE TRANSACTION BUT IS ON ACCOUNT OF ACCOMMODATION ENTRIES RECEIVED BY PAYING THE CASH BEING UNACCOUNTED MONEY OF THE ASSESSEE. THE REASONS RECORDED BY THE ASSE SSING OFFICER AS REPRODUCED IN THE ASSESSMENT ORDER ARE AS UNDER: - ON THE 8TH OF SEPTEMBER 2010. THE REASONS AS RECORDED AND GIVEN TO THE ASSESSEE ARE AS UNDER: - SEARCH ACTION U/S 132 OF THE ACT TOOK PLACE IN THE CASE OF SHRI GIRIRAJVIJAYVARGIYA ON 26. 4.2007. SHRI GIRIRAJ VIJAYVARGIYA IS A MEMBER OF GROUP CALLED ANKUR GROUP. DURING THE COURSE OF SEARCH, IT WAS FOUND THAT SHRI GIRIRAJ VIJAYVARGIYAHAS GIVE MAJOR METALS LTD. 5 ACCOMMODATION ENTRIES IN THE FORM OF GIFTS, LOANS AND SHARE APPLICATION MONEY. IN THE SWORN STATEMEN T U/S 132(4), SHRI GIRIRAJ HAS ADMITTED THAT HE IS NOT HAVING ANY SOURCE OF GIFTS, LOANS OR SHARE APPLICATION MONEY AND THE BENEFICIARIES PAID HIM CASH FOR THE EQUIVALENT AMOUNT IN CHEQUE AND A COMMISSION OF 2 - 3.5%. SHRI. GIRIRAJ HAS DISCLOSED THE COMMISSI ON INCOME. IN THE RETURN FILED U/S 153A, SHRI GIRIRAJ HAS DISCLOSED THE COMMISSION INCOME. 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE CASE OF SHRI. GIRIRAJ, IT WAS FOUND THAT FROM F.Y. 1999 - 2000 TO 2005 - 06 HE HAD GIVEN ACCOMMODATION ENTRIES TO TALING TO RS. 4,70,65,000/ - TO 45 PERSONS VIDE 119 ENTRIES. DURING THE SEARCH ITSELF, SHRI GIRIRAJ HAS STATED THAT IN ALL THESE TRANSACTIONS THE ACTUAL AMOUNTS WERE PAID BY THE RECIPIENTS OF THESE ENTRIES IN CASH ALONG WITH 2 - 3.5% AS COMMISSION. IT IS ALSO FOUND THAT SHRI. GIRIRAJ IS NOT HAVING ANY MEANS OF GIFT/LOAN THESE AMOUNTS. DURING THE ASSESSMENT PROCEEDINGS, ALL THE RECIPIENTS OF THESE ENTRIES WERE SUMMONED U/S 131. BANK ACCOUNTS OF SHRI. GIRIRAJ AND HIS FAMILY MEMBERS WERE VERIFIED AND IT WAS FOUND THAT BEFORE MAKING THESE ENTRIES CASH WAS DEPOSITED IN THEIR ACCOUNTS. IT IS ALSO SEEN THAT OTHER THAN THESE DEPOSITS, THESE ACCOUNTS WERE HAVING ONLY NEGLIGIBLE AMOUNTS. 2.1. MOST OF THE PERSONS WHO APPEARED IN RESPONSE TO THE SUMMONS HAVE AGREED THAT THESE GIFTS/LOAN ENTRIES ARE BOGUS. IN VIEW OF THE SAME, 20' ASSESSEES WHO HAVE RECEIVED ENTRIES FOR RS. 1.06 CRORES IN 47 ENTRIES HAVE PAID ADDITIONAL TAXES/REVISED RETURNS FOR A. Y. 'S 2002 - 03 TO 2005 - 06. 2.2. TWO ASSESSEE'S WHO ARE COMPANIES HAVE PAID ADDITIONAL TAXES DISCLOSING AN AMOUNT OF RS.59 LAKHS WHICH THEY INTRODUCED AS BOGUS SHARE APPLICATION MONEY IN THE NAME OF SHRI. GIRIRAJ AND HIS FAMILY MEMBERS. 3. BERLIA PLASTOCHEM PVT. LTD IS A FAMILY CONCERN OF SHRI VIKAS BERLIA WHO IS THE MAIN PERSO N OF THE GROUP. THE DIRECTORS OF ASSESSEE COMPANY FOR THE YEAR UNDER CONSIDERATION IS SMT. POOJA BERLIA AND SMT. VARSHA BERLIA, SMT. POOJA BARLIA IS THE SISTER OF SHRI VIKAS BARLIA AND SMT. VARSA BARLIA WIFE OF SHRI VIKAS BERLIA. THE MAIN COMPANY OF THE GR OUP IS M/S MAJOR METALS LTD. IT IS SEEN THAT VARIOUS CONCERNS CONTROLLED BY SHRI VIKAS BERLIA HAVE INTRODUCED UNACCOUNTED MONEY IN THE FORM OF SHARES ALLOTTED TO SHRI. GIRIRAJ AND HIS FAMILY MEMBERS. DETAILS OF ACCOMMODATION ENTRY GIVEN BY SHRI. GIRIRAJ AN D HIS FAMILY MEMBERS IN THE FORM OF SHARE CAPITAL TO THE CONCERNS CONTROLLED BY SHRI. VIKAS BERLIA ARE AS UNDER: SL.NO. NAME OF PERSON TOTAL AMOUNT OF ENTRIES GIVEN FINANCIAL YEAR OF ENTRIES 1 SHRI GIRIRAJ VIJAYVARGIYA 2,00,00,000 2005 - 06 2 JETH MAL V IJAYVARGIYA 5,00,000 2004 - 05 3 SANTOSH VIJAYVARGIYA 5,00,000 2004 - 05 4 GIRIRAJ HUF 5,00,000 2004 - 05 5 REKHA VIJAYVARGIYA 5,00,000 2004 - 05 6 SURENDRA VIJAYVARGIYA 5,00,000 2004 - 05 7 PREMLATA VIJAYVARGIYA 5,00,000 2004 - 05 TOTAL 2,30,00,000 MAJOR METALS LTD. 6 M/S. S WEET MARKETING (I) PVT. LTD. SL.NO. NAME OF PERSON TOTAL AMOUNT OF ENTRIES GIVEN FINANCIAL YEAR OF ENTRIES 1. SMT. PREMLATA VIJAYVARGIYA 2,20,000 2003 - 04 TOTAL 2,20,000/ - M/S. BERLIN SECURITIES PVT.LTD. SL.NO. NAME OF PERSON TOTAL AMOUNT OF ENTR IES GIVEN FINANCIAL YEAR OF ENTRIES 1 SMT. PREMLATA VIJAYVARGIYA 4,00,000 2001 - 02 TOTAL 4,00,000/ - M/S. BERI FINVEST PVT. LTD. SL.NO. NAME OF PERSON TOTAL AMOUNT OF ENTRIES GIVEN FINANCIAL YEAR OF ENTRIES 1 SMT. SONAL VIJAYVARGIYA 2,20,000 200 3 - 04 TOTAL 2,20,000/ - DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE' CASE OF SHRI GIRIRAJ, STATEMENT OF SHRI VIKAS BERLIA, DIRECTOR OF M/S MAJOR METALS LTD WAS RECORDED U/S 131 OF THE ACT. THIS STATEMENT WAS CONFRONTED TO SHRI GIRIRAJ. SHRI GIRI RAJ IN HIS STATEMENT U/S. 131 HAS REITERATED THAT THE ABOVE TRANSACTION OF INTRODUCTION OF SHARE CAPITAL BY M/S MAJOR METALS LTD WAS NOT GENUINE AND IT WAS ONLY CHEQUE ISSUED BY HIM/HIS FAMILY MEMBERS (ON HIS BEHALF) IN LIEU OF CASH AND COMMISSION OF 2 - 3.5 %. THE STATEMENTS OF ABOVE FAMILY MEMBERS OF SHRI GIRIRAJ WERE ALSO RECORDED U/S 131 AND THEY HAVE STATED GIRIRAJ VIJAYAVARGIA HAS USED THEIR BANK ACCOUNTS FOR GIVING ENTRIES. THEY HAVE ALSO STATED THAT THEY HAVE SIGNED THE SHARE APPLICATION FORMS AND OTHE R PAPERS/DOCUMENTS TO THEM BY SHRI GIRIRAJ WITHOUT GOING THROUGH THE SAME IN VIEW OF THEIR RELATIONSHIP WITH AND GOOD FAITH AND TRUST ON SHRI. GIRIRAJ. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE CASE OF SHRI GIRIRAJ, STATEMENT OF SHRI VIKAS BERLIA WAS RECORDED U/S 131 AND DETAILED QUESTIONS WERE ASKED REGARDING INTRODUCTION OF SHARE CAPITAL BY M/S MAJOR METALS LTD AS IT IS THE MAIN CONCERN OF THE GROUP. FROM THE STATEMENT OF SHRI VIKAS BERLIA AND SHRI GIRIRAJ AND OTHER FACTS AND CIRCUMSTANCES OF THE CASE, IT WAS FOUND THAT MR VIKAS BERLIA WAS NOT ABLE TO GIVE ANY SATISFACTORY REASON AS TO WHY SHRI GIRIRAJ AND HIS FAMILY WOULD SUBSCRIBE TO THE SHARES OF HIS COMPANY. HE HAS NOT BEEN ABLE TO GIVE ANY SATISFACTORY ANSWER AS TO WHY ANYBODY WOULD BUY SHARE S OF A CLOSELY HELD A LIMITED COMPANY AT A PREMIUM OF RS. 990/ - ? IN THIS CASE THE COMPANY ISSUED SHARES HAVING FACE VALUE OF RS. 10/ - FOR RS. 1000/ . NO BASIS FOR VALUATION OF THE SHARES WAS GIVEN BY MR VIKAS BER L IA. NO PROOF OF DELIVERY OF SHARE CERTIFICAT ES TO SHRI GIRIRAJ OR HIS FAMILY MEMBERS HAS BEEN GIVEN. THE COMPANY NEVER DECLARED ANY DIVIDENDS OVER THE PAST SEVERAL YEARS. MAJOR METALS LTD. 7 THEN WHY WOULD ANY PRUDENT BUSINESSMAN WOULD INVEST IN ANY SUCH PRIVATE LIMITED COMPANY AND THAT TOO AT A HEFTY PREMIUM OF 100 TI MES THE FACE VALUE? ONE PROBABLE REASON A PERSON COULD INVEST IN A COMPANY FOR A HIGH PREMIUM IS WHEN HE HAS AN INTENTION TO JOIN THE BUSINESS AC TIVELY. BUT IN THE CASE OF SHRI GIRIRAJ HE NEVER ATTENDED ANY AGM ALSO! ALSO NO PROOF OF ANY INVITATION BEING S ENT TO HIM FOR ATTENDING THE AGM COULD BE PRODUCED BY MR VIKAS BERLIA. THE MINUTES OF THE BOARD MEETING AUTHORIZING THE ISSUE OF SHARES SHRI GIRIRAJ AND HIS FAMILY MEMBERS WAS NEVER PRODUCED IF THE TRANSACTIONS WERE GENUINE THEN MR VIKAS BERLIA WAS EXPECTE D TO CO - OPERATE WITH THE DEPARTMENT AND EXPLAIN THE QUERIES RAISED. ON THE CONTRARY, AFTER APPEARING ONCE, MR VIKAS BERLIA CHOSE NOT TO COMPLY WITH THE SUMMONS. IN HIS STATEMENT U/S 131 ON OATH, MR VIKAS BERLIA STATED THAT IN CONNECTION WITH THE INTRODUCTI ON OF THE SHARE CAPITAL, MR. GIRIRAJ WAS INTRODUCED TO HIM BY MR J.P. A GARWAL WHICH WAS DENIED BY SHRI GIRIRAJ IN HIS STATEMENT U/S 131. ALSO HE STATED THAT MR. GIRIRAJ WAS WELL KNOWN TO HIS LATE FATHER. THIS WAS AGAIN DENIED BY SHRI GIRIRAJ IN HIS STATEME NT U/S 1312. ALSO HE STATED THAT MR. GIRIRAJ WAS WELL KNOWN TO HIS LATE FATHER. THIS WAS AGAIN DENIED BY SHRI GIRIRAJ. 6. M/S MAJOR METALS LTD IS NOT A LISTED COMPANY AND NEVER DECLARED ANY DIVIDENDS. IT WAS SHOWING ONLY NOMINAL PROFIT IN ITS PROFIT AND LOSS ACCOUNT BUT THEY WERE INTRODUCING HUGE AMOUNTS AS SHARE APPLICATION MONEY WHICH THE CLAIM TO HAVE RECEIVED FOR ISSUING SHARES AT A SUBSTANTIAL PREMIUMS. THE FOLLOWING CHART SHOWS YEAR - WISE CAPITAL, PROFIT, AMOUNT INTRODUCED IN THE FORM OF SHARE APPLI CATION MONEY/SHARE PREMIUM, EARNING PER SHARE (EPS), AND PREMIUM FOR SHARES ALLOTTED DURING THE YEAR. F.Y. CAPITAL PROFIT AMOUNT INTRODUCED AS SHARE APPLICATION MONEY/PREMIUM EPS (EARNING PER SHARE) PREMI UM PER SHARE 2002 - 03 88,58,500 6,06,438 1,91,84,50 0 0.68 490 2003 - 04 90,96,500 16,74,566 6,62,000 1.84 490 2004 - 05 99,56,500 13,78,653 4,91,40,000 1.38 990 2005 - 06 99,56,500 25,12,765 2,44,00,000 2.52 990 2006 - 07 1,09,78,500 1,16,47,700 10,11,78,000 10.60 990 SHOWS THAT NO REAL INVESTOR WILL INVEST MONEY IN THIS NON - DIVIDEND PAYING NON LISTED COMPANY AT SUCH KA HIGH PREMIUM. 7. THE ABOVE FACTS CLEARLY ESTABLISH THAT THE SAID TRANSACTION IS ACTUALLY BOGUS. THE ACTION OF 20 PERSONS WHO PAID ADDITIONAL TAXES/FILED REVISED RETURNS ALSO SHOWED THAT ALL THESE ENTRIES ARE NOT REAL GIFTS/LOANS AND ONLY ACCOMMODATION ENTRIES OR BOGUS SHARE APPLICATION AMOUNTS. 8. THE ABOVE DISCUSSION CLEARLY EXPLAINS THE MODUS OPERANDI OF THE GROUP WHICH IS LARGELY CONTROLLED BY SHRI VIKAS BERLIA. THE GROUP COMPANIES ARE ' INVOLVED IN INTRODUCING THE UNACCOUNTED MONEY IN THE FORM OF BOGUS SHARE CAPITAL AT HUGE PREMIUMS. M/S GINNI FINVEST PVT. LTD IS ALSO A GROUP CONCERN OF VIKAS BERLIA AND IT IS SEEN THAT IT WAS SHOWING ONLY NOMINAL PROFITS IN ITS PROFIT MAJOR METALS LTD. 8 AND LOSS ACCOUNT B UT THEY WERE INTRODUCING HUGE AMOUNTS AS SHARE APPLICATION - MONEY WHICH THEY CLAIMED TO HAVE RECEIVED FOR ISSUING SHARES AT SUBSTANTIAL PREMIUMS. IT IS NOT A LISTED COMPANY AND HAS NEVER DECLARED ANY DIVIDENDS. ON THE BASIS OF THE ABOVE DISCUSSION, I HAVE REASON TO BELIEVE THAT M/S GINNI FINVEST PRIVATE LTD HAS ALSO INTRODUCED UNACCOUNTED MONEY IN ITS BOOKS IN THE FORM OF SHARE APPLICATION MONEY, SHARE CAPITAL AND SHARE PREMIUM DURING ASSESSMENT YEAR 2003 - 04. 9. FROM THE PERUSAL OF THE BALANCE SHEET OF M /S GINNI FINVEST PVT. LTD AS AT 31.03.2002 AND 31.03.2003 IT IS OBSERVED THAT THE PAID - UP CAPITAL FROM EQUITY SHARES HAS INCREASED FROM RS. 43,06,000/ - AS ON 31.03.2002 TO RS. 44,76,000/ - AS ON 31.03.2003. ALSO THE SHARE PREMIUM HAS INCREASED FROM &.1,80,60 ,000/ - AS ON 31.03.2002 TO RS. 1,97,60,000/ - AS ON 31.03.2003. FROM THE ABOVE DISCUSSION, THE MODUS OPERANDI OF THE ASSESSEE IS CLEAR. THE ASSESSEE HAS ADOPTED THE MODUS OPERANDI OF INTRODUCING THE UNACCOUNTED INCOME IN ITS BOOKS IN THE FORM OF BOGUS SHARE APPLICATION/SHARE CAPITAL. THEREFORE, I HAD REASONS TO BELIEVE THAT THE ASSESSEE'S PAID - UP CAPITAL AND SHARE CAPITAL IN FINANCIAL YEAR 2002 - 03 WAS ALSO BOGUS. IN VIEW OF THIS I HAVE REASON TO BELIEVE THAT INCOME OF RS. 18,70,000/ - BEING INCREASE IN SHARE CAPITAL AND SHARE PREMIUM DURING THE YEAR, HAS ESCAPED ASSESSMENT IN THE CASE OF M/S GINNI FINVEST PVT. LTD FOR A. Y. 2003 - 04 'AS PER THE PROVISIONS OF SECTION 147 OF THE ACT. ON VERIFICATION OF RECORDS FOR A. Y. 2003 - 04 IS SEEN THAT THE CASE WAS NOT SCRUT INIZED U/S 143(3) IN THAT YEAR. HENCE, NOTICE U/ 148 IS ISSUED AFTER OBTAINING PRIOR APPROVAL OF THE ADDL CIT(A), CENTRAL RANGE 4, MUMBAI 12. THESE REASONS ARE NOTHING BUT THE SUMMARY OF STATEMENT OF SHRI GIRIRAJ VIJAYVARGIYA DURING THE SEARCH AS WELL AS THE ASSESSMENT PROCEEDINGS OF SHRI GIRIRAJ. IT IS MANIFEST FROM THESE REASONS RECORDED BY THE ASSESSING OFFICER THAT FOUR CONCERNS ARE MENTIONED WHICH ARE CONTROLLED BY SHRI VIKAS BERLIA IN WHICH THE ALLEGATION OF GIVING ACCOMMODATION ENTRIES IN THE SHA PE OF SHARE APPLICATION MONEY WAS MADE BY SHRI GIRIRAJ IN HIS STATEMENT . IT IS PERTINENT TO NOTE THAT THESE THREE CONCERNS(ASSESSEE BEFORE US) ARE NOT PART OF THE BENEFICIARIES OF THE ACCOMMODATION ENTRIES AS PER THE ALLEGATION MADE IN THE STATEMENT OF SH RI GIRIRAJ. FURTHER EVEN THOSE FOUR CONCERNS WHO HAVE ALLEGEDLY RECEIVED THE ACCOMMODATION ENTRIES IN THE FORM OF SHARE APPLICATION MONEY ARE NOT THE SHARE APPLICANTS OF THESE ASSESSEES BEFORE US. THEREFORE, AS FAR AS, SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE THE SAME IS NEITHER CAME FROM SHRI GIRIRAJ OR FROM ANY RELATED PARTY OR PERSON OR EVEN FROM THE OTHER GROUP CONCERN OF SHRI VIKAS BERLIA. THE SHARE APPLICATION WERE RECEIVED BY THE ASSESSEE FROM FOLLOWING CONCERNS: - 1. M/S SHRESTH LEASING AN D FINANCE LTD. 2. WATSON SOFTWARE LTD. 3. UPBEAT TRADING PVT. LTD. 13. THERE IS NO ALLEGATION OF THE ASSESSING OFFICER THAT THE SHARE APPLICANTS OF THE ASSESSEE HAVE ANY CONNECTION WITH SHRI GIRIRAJ VIJAYVARGIYA OR WITH SHRI VIKAS BERLIA. ONCE THESE S HARE APPLICANT COMPANIES ARE UNRELATED/ INDEPENDENT PARTIES AND HAVE NO CONNECTION EITHER WITH SHRI GIRIRAJ OR WITH SHRI VIKAS BERLIA THEN THERE WAS NOTHING CAME TO THE POSSESSION OF THE ASSESSING OFFICER TO BELIEVE THAT THE SHARE APPLICATION MONEY MAJOR METALS LTD. 9 RECEIVE D BY THE ASSESSEE IS BOGUS TRANSACTION AND CONSEQUENTLY THE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. FROM THE REASONS RECORDED BY THE ASSESSING OFFICER, THERE IS NO INDICATION ABOUT THE RELATION BETWEEN THE SHARE APPLICATION MONEY AND THE BOGUS ACC OMMODATION ENTRIES GIVEN BY SHRI GIRIRAJ. THEREFORE, THE ASSESSMENTS WERE REOPENED BY THE AO MERELY ON THE BASIS OF ASSUMPTIONS WITHOUT HAVING ANY TANGIBLE MATERIAL OR INFORMATION ON THE BASIS OF WHICH IT COULD BE BELIEVED THAT TRANSACTION OF SHARE APPLICA TION MONEY WAS AS BOGUS TRANSACTION. IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. (SUPRA), THE HON'BLE SUPREME COURT WHILE CONFIRMING THE JUDGMENT OF FULL BENCH DECISION OF HONBLE DELHI HIGH COURT HAS HELD THAT THE REASON MUST HAVE A LINK WITH THE FORM ATION OF BELIEF AND THERE MUST BE A TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. SIMILARLY, IN THE CASE OF PRASHANT S. JOSHI (SUPRA), THE HON'BLE HIGH COURT HAS HELD IN PARA 20 AS UNDER: - 18. FOR ALL TH ESE REASONS, IT IS EVIDENT THAT THERE WAS ABSOLUTELY NO BASIS FOR THE FIRST RESPONDENT TO FORM A BELIEF THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF THE SUBSTANTIVE PROVISIONS OF SECTION 147. EXPLANATION (2) TO SECTION 147 CREATES A DEEMING FICTION OF CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. CLAUSE (B) DEALS WITH A SITUATION 'WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE ASSESSING OFF ICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN.' FOR THE PURPOSE OF CLAUSE (B) TO EXPLANATION (2), THE ASSESSING OFFICER MUST NOTICE THAT THE ASSESSEE HAS UNDERSTATED HIS INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN. THE TAKING OF SUCH NOTICE MUST BE CONSISTENT WITH THE PROVISIONS OF THE APPLICABLE LAW. THE ACT OF TAKING NOTICE CANNOT BE AT THE ARBITRARY WHIM OR CAPRICE OF THE ASSESSING OFFIC ER AND MUST BE BASED ON A REASONABLE FOUNDATION. THE SUFFICIENCY OF THE EVIDENCE OR MATERIAL IS NOT OPEN TO SCRUTINY BY THE COURT BUT THE EXISTENCE OF THE BELIEF IS THE SINE QUA NON FOR A VALID EXERCISE OF POWER. IN THE PRESENT CASE, HAVING REGARD TO THE L AW LAID DOWN BY THE SUPREME COURT IT WAS IMPOSSIBLE FOR ANY PRUDENT PERSON TO FORM A REASONABLE BELIEF THAT THE INCOME HAD ESCAPED ASSESSMENT. THE REASONS WHICH HAVE BEEN RECORDED COULD NEVER HAVE LED A PRUDENT PERSON TO FORM AN OPINION THAT INCOME HAD ESC APED ASSESSMENT WITHIN THE MEANING OF SECTION 147. IN THESE CIRCUMSTANCES, THE PETITION SHALL HAVE TO BE ALLOWED BY SETTING ASIDE THE NOTICE UNDER SECTION 148. 14. THUS IT IS CLEAR THAT THOUGH THE SUFFICIENCY OF EVIDENCE OR MATERIAL FOR FORMING THE BEL IEF IS NOT OPEN TO SCRUTINY BUT THE EXISTENCE OF BELIEF IS MUST FOR A VALID EXERCISE OF POWER. IF IT IS IMPOSSIBLE FOR ANY PRUDENT PERSON TO FORM A BELIEF ON THE BASIS OF MATERIAL OR EVIDENCE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND REA SON WHICH HAVE BEEN RECORDED WOULD NOT LEAD TO A PRUDENT PERSON TO FORM AN OPINION THAT THE INCOME HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 THEN THE ACTION OF THE ASSESSING OFFICER IN REOPENING THE ASSESSMENT U/S 147/148 IS CONTRARY TO THE POWERS PERMITTED UNDER THE SAID PROVISIONS OF ACT. IN THE CASE IN HAND, THE REASONS RECORDED BY THE ASSESSING OFFICER DO NOT INDICATE EVEN A REMOTE NEXUS BETWEEN THE APPLICATION MONEY RECEIVED BY THE ASSESSEE WITH THE ALLEGED ACCOMMODATION ENTRIES PROVIDED BY SHRI GIRIRAJ VIJAYVARGIYA OR THE ALLEGED BENEFICIARY OF THE ACCOMMODATION ENTRIES. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE MAJOR METALS LTD. 10 HOLD THAT THE REOPENING IN THESE CASES ARE NOT VALID AND CONSEQUENTLY THE SAME IS QUASHED 9. IN THE INS TANT CASES ALSO, THE REOPENING HAS BEEN DONE ON THE BASIS OF STATEMENT GIVEN BY SHRI G.V ONLY. THE REASONS RECORDED BY THE AO FOR REOPENING OF ASSESSMENTS ARE ALSO ALMOST IDENTICAL, I.E., IT REFERS TO THE SEARCH OPERATIONS CONDUCTED IN THE HANDS OF SHRI G .V, THE STATEMENT TAKEN FROM HIM U/S 132(4) OF THE ACT, STATEMENT TAKEN FROM THE DIRECTOR OF THE ASSESSEE COMPANY, THE REPLY GIVEN BY SHRI G.V TO THE AVERMENT MADE BY THE DIRECTOR, THE QUANTUM OF SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE COMPANY FRO M SHRI G.V GROUP AND AGGREGATE AMOUNTS RECEIVED AS SHARE APPLICATION MONEY, THE FINANCIAL POSITION OF THE ASSESSEE COMPANY. FINALLY, THE AO HAS CONCLUDED AS UNDER IN AY 2003 - 04: - FROM THE AB O V E DISCUSSION, THE MODUS OPERANDI OF THE ASSESSEE IS CLEAR. TH E ASSESSEE HAS ADOPTED THE MODUS OPERANDI OF INTRODUCING UNACCOUNTED INCOME IN ITS BOOKS, IN THE FORM OF BOGUS SHARE APPLICATION MONEY/SHARE CAPITAL. THEREFORE, I HAVE REASONS TO BELIEVE THAT THE INCREASE IN SHARE APPLICATION MONEY IN F.T 2002 - 03 IS BOGUS . IN AY 2004 - 05 ALSO, THE AO HAS ARRIVED AT THE CONCLUSION IN AN IDENTICAL MANNER. 10. DURING THE COURSE OF HEARING, THE LD A.R BROUGHT TO OUR ATTENTION TO THE DETAILS OF SHARE APPLICATION MONEY/SHARE CAPITAL RECEIVED BY THE ASSESSEE DURING THE FI NANCIAL YEARS RELEVANT TO THE ASSESSMENT YEARS 2003 - 04 AND 2004 - 05. A PERUSAL OF THE SAME SHOWS THAT THE ASSESSEE DID NOT RECEIVE THE FUNDS FROM THE GROUP OF SHRI G.V IN THESE TWO YEARS AND THEY HAVE BEEN RECEIVED FROM ALTOGETHER DIFFERENT PERSONS. IT IS PERTINENT TO NOTE THAT THE ASSESSING OFFICER DID NOT HAVE MATERIAL TO BELIEVE THAT THE AMOUNTS RECEIVED FROM THOSE PERSONS ARE ALSO ACCOMMODATION ENTRIES AND THUS BOGUS. 11. IT IS A WELL SETTLED PROPOSITION THAT THERE SHOULD BE A LIVE LINK BETWEEN T HE MATERIALS AND THE BELIEF FORMED BY THE AO. THERE SHOULD NOT BE ANY DISPUTE THAT THE STATEMENT GIVEN BY SHRI G.V ON THE ALLEGED ACCOMMODATION ENTRIES, CANNOT BE EXTENDED TO THE SHARE APPLICATION MONEY RECEIVED FROM OTHER PERSONS. MAJOR METALS LTD. 11 12. UNDER THESE S ET OF FACTS, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER DID NOT HAVE ANY MATERIAL TO FORM THE REASON OR BELIEF THAT THE INCOME HAS ESCAPED THE ASSESSMENT. WE AGREE WITH THE OPINION EXPRESSED BY THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF GLB F INVEST PVT LTD (SUPRA0 THAT THE REASONS RECORDED BY THE AO WOULD NOT LEAD A PRUDENT PERSON TO FORM AN OPINION THAT THE INCOME HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SEC. 147 OF THE ACT. ACCORDINGLY WE HOLD THAT THE REOPENING OF THE ASSESSMENTS OF TH E TWO YEARS UNDER CONSIDERATION ARE CONTRARY TO THE POWERS PERMITTED U/S 147 OF THE ACT, SINCE THE REASONS RECORDED BY THE AO DID NOT INDICATE EVEN A REMOTE NEXUS BETWEEN THE APPLICATION MONEY RECEIVED BY THE ASSESSEE DURING THESE TWO YEARS AND THE ALLEGED ACCOMMODATION ENTRIES PROVIDED BY SHRI G.V AND HIS GROUP. ACCORDINGLY WE SET ASIDE THE ORDERS PASSED BY THE LD CIT(A) ON THE LEGAL ISSUE AND HOLD THAT THE REOPENING OF ASSESSMENTS OF BOTH THE YEARS ARE NOT VALID AND CONSEQUENTLY THEY ARE QUASHED. 13. SINCE WE HAVE QUASHED THE ASSESSMENT ORDERS ON THE LEGAL ISSUE, THERE IS NO REQUIREMENT TO ADJUDICATE THE GROUNDS URGED ON MERITS OF THE ADDITION. 14. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER HAS BEEN PRONOU NCED I N THE OPEN COURT ON 13 .5 .2016 . SD/ - SD/ - (PAWAN SINGH ) (B.R.BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 13 / 5 /20 1 6 COPY OF THE OR DER 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// ( DY./ASSTT. REGISTRAR) ITAT, MUMBAI PS