ITO, New Delhi V. M/s. Softline Creations (P) Ltd., New Delhi

ITA 744/DEL/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6864 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 21-12-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 14-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRAPALL Y DAS
• Keywords: Principle of natural justice; Opportunity of cross examination; Question of law; Accommodation entries; Onus to prove
• Section: 133(6); 147; 131; 68; 148

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G : NEW DELHI BEFORE SHRI N.K.SAINI, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO , JUDICIAL MEMBER ITA NO. 744 /DEL/ 2012 (ASSESSMENT YEAR: 2003 - 04 ) ITO, WARD - 9(1), ROOM NO.190, C.R.BUILDING, NEW DELHI VS. M/S. SOFTLINE CREATIONS (P) LTD., 38, RANI JHANSHI ROAD, JHANDEWALLAN, NEW DELHI PAN:AAECS6591B ( ASSESSEE ) (RESPONDENT) APPELLANT BY : SMT. AMRAPALL Y DAS, CIT DR RESPONDENT BY : SH. VED JAIN, CA SH. ASHISH GOEL, CA SH. ASHISH CHADHA, CA DATE OF HEARING 21.12.2015 DATE OF PRONOUNCEMENT . 12 .2015 O R D E R PER VIJAY PAL RAO, JM THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER DATED 30.08.2011 OF LD. CIT(A) - X II , NEW DELHI FOR THE ASSESSMENT YEAR 2003 - 04 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - 1. THE LD CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN QUASHING THE PROCEEDINGS INITIATED U/S 147 OF THE ACT. 2. THE LD CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS.78,00,000/ - MADE BY THE OA U/S 68 OF THE ACT. 2. THE ASSESSEE FILED ITS RETURN OF INCOME ON 2 8 .11.2003 DECLARED TOTAL INCOME OF RS.1850/ - . SUBSEQUENTLY, THE AO PROPOSED TO REOPEN THE ASSESSMENT ON THE BASIS OF THE INFORMATION RECEIVED FROM INVESTIGATION WING OF THE DEPARTMENT THAT THE ASSESSEE COMPANY RECEIVED AN AMOUNT OF RS.73 LACS DURING THE P REVIOUS ASSESSMENT YEARS 2002 - 03 IN THE FORM OF CHEQUES/ DD AS ACCOMMODATIO N ENTRIES FROM VARIOUS PERSONS/ CONCERNS. ACCORDINGLY, THE AO REOPENED THE ASSESSMENT BY ISSUING A NOTICE U/S 148 ON 29.03.2010. BY RECORDING THE REASONS AS UNDER: - PAGE NO. 2 I T IS OBSERVED FROM THE DETAILS PROVIDED BY THE INVESTI GATION WING THAT M/S SOFT LIME CREATIONS PVT LTD, HAD RECEIVED THE AMOUNT OF RS. 73,00,000 / - DURING FY 2002 - 03; RELEVANT TO THE AY 2003 - 04 FROM THE CONCERNS SHOWN, HEREUNDER, WHICH WERE FOUND BY THE INVESTIGATION WIN G TO BE THE COMPANIES WHICH WERE NON GENUINE ENTITIES AND WERE GIVING ONLY ACCOMMODATION ENTRIES. THE COMPAN I ES FROM WHICH ENTRIES WERE RECEIVED BELONG TO MAHESH GARG GROUP. THIS GROUP HAS OPERATED ACCOUNTS IN VARIOUS BANKS ARID BRANCHES . THE ABOVE ENTRIES HAVE BEEN RECEIVED FROM THE STATE BANK OF PATIALA, DARYA GANJ, NEW DELHI AND STATE BANK, OF B I KANER & JAIPUR, NEW ROHTAK ROAD, NEW DELHI. S. NO. AMOUNT (RS. CHEQUE NO. DATE CONCERN FROM WHICH RECEIVED 1 1000000 3 - DEC - 02 RAHUL FINL E ASE P. LTD. 2 400000 17 - DEC - 02 SEKHAWATI FINANCE P. LTD. 3 500000 23 - DEC - 02 GARG FINVEST P. LTD 4 6 00000 24 - DEC - 02 SHREE GUPTESHWAR MKT. P.LTD. 5 700000 27 - D E C - 02 TOUCHWOOD AGENCIES P. LTD. 6. 800000 L - J AN - 03 RIGHT CHOICE CONST. P. LTD. 7. 1000000 12 - DE C - 02 NISHANT FINVEST 8. 400000 2 - 3AN - 03 DIVISION TRADING PVT LTD 9. 1000000 3 - DEC - 02 PERFORMANCE TRADING & INVESTMENT 10. 900000 17 - DEC - 02 TE CNNO COM ASSOCATES P LTD TOT AL 73,00,000 THE COMPANIES FROM WHICH ENTRIES WERE RECEIVED BELONG TO MAHESH G ARG GROUP. THE STATEMENT OF SHRI MAHESH GARG WAS RECORDED ON 22 - 09 - 2003 BY THE INVESTIGATION WING IN WHICH HE HAS ADMITTED THAT I TOLD YOU THAT I OPEN THIS FIRM/COMPANY FOR PROVIDING ENTRY'. IT IS FURTHER NOTED HERE THAT MAHESH GARG HAD OPENED ABOUT 70 BANK ACCOUNTS IN THE NAME OF VARIOUS COMPANIES/FIRMS AND INDIVIDUALS. IN THE ANSWER TO THE QUESTION REGARDING BUSINESS ACTIVITY OF THESE COMPANIES, HE HAS REPLIED THAT THESE COMPANIES DID NOT CARRY OUT ANY ACTIVITY IN REALITY. IN THESE COMPANIES CASH USED TO BE DEPOSITED AND THEN THE CHEQUE, DDS OR LOCAL DAY ORDER WERE ISSUED. HE FURTHER REPLIED IN THE NEXT QUESTION THAT OTHER DIRECTORS IN THESE COMPA NIES USED TO SIGN THE BLANK CHEQUE BOOK ONLY. HE FURTHER ADMITTED THAT I MADE SOME PEOPLE AS DIRECTORS TO SO MANY COMPANIES, THEY ARE DIRECTORS FOR NAMESAKE, THEY USED TO PUT THE SIGNATURE ON THE BLANK CHEQUE BOOK' HE ADMITTED THAT HE WAS ONLY A MATRICULA TE AND USED TO ISSUE CHEQUES IN LIEU OF CHEQUES TO VARIOUS PARTIES AFTER CHARGING 0.5% COMMISSION. IN V IEW OF THE ABOVE L HAVE REASONS TO BELIEV E THAT A SUM OF RS. 73,00,000/ - REPRESENTS INCOME OF M/S SOFT LINE CREATIONS PVT LTD, FOR THE AY 2003 - 04 WHICH HA S ESCAPED ASSESSMENT WITHIN THE MEANING OF PROVISIONS OF SECTION 147 OF THE I.T ACT 1961, THEREFORE A NOTICE U/S 148 OF THE INCOME TAX ACT 1961 IS R EQUIRED TO BE ISSUED TO THE ASSESSES COMPANY (M/S SOFT LI NE PAGE NO. 3 CREATIONS. PVT LTD) TO ASSESS THE INCOME ESCAPED ASSESSMENT AS STATED, HEREINABOVE. 3. THE ASSESSEE SUBMITTED BEFORE THE AO , THAT IT HAS NOT RECEIVED THE NOTICE U/S 148 AND MADE A REQUEST VIDE LETTER DATED 08.11.2010. IN RESPONSE TO THE NOTICE THE AO SUPPLIED THE COPIES OF THE STATEMENT OF MAHESH GARG DATED 10.09.2003, 22.09.2003 ALONG WITH DECLARATION AS WELL AS THE COPIES OF THE NOTICE I SSUED U/S 148 ALONG WITH THE REASONS RECORDED BY THE AO FOR REOPENING OF THE ASSESSMENT. THE AO WHILE PASSING THE REASSESSMENT ORDER DATED 31 ST DECEMBER 2010 MADE AN ADDITION OF RS.78 , 39 , 000/ - ON ACCOUNT OF ACCOMMODATION ENTRIES BEING UNEXPLAINED CASH CRED IT U/S 68 TO THE TU N E OF RS.78,00 ,00 0/ - ALONG WITH COMMISSION AT THE RATE OF 0.5% AMOUNTING TO RS.39 , 000/ - . THE ASSESSE E CHALLENGED THE ACTION OF THE AO BEFORE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) AND ALSO CHALLENGED THE VALIDITY OF REOPENING. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ALLOWED THE APPEAL OF THE ASSESSEE BY HOLDING THAT THE REOPENING IS NOT VALID AS WELL AS DELETED THE ADDITION MADE BY THE AO IN RESPECT OF THE ACCOMMODATION ENTRIES . 4. AGGRIEVED BY THE IMPUGNED ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) THE REVENUE H AS PREFERRED THIS APPEAL. 5. FIRST I WILL TAKE UP THE ISSUE ON MERITS REGARDING THE ADDITION OF RS.78 LACS MADE BY THE AO. THE LD DR HAS SUBMITTED THAT THE A SSESSEE HAS RECEIVED AN AMOUNT OF RS.78 LACS FROM 11 PERSONS/ ENTITY WHICH ARE ONLY PAPER ENTITIES/ COMPANIES BELONGING TO SHRI MAHESH GARG. THESE ENTITIES HAVE NO CREDITWORTHINESS WHATSOEVER COUPLED WITH NO EVIDENCE TO CARRY OUT ANY GENUINE BUSINESS TRANS ACTION. THEY DO NOT CARRY ANY REAL BUSINESS AND ARE SIMPLY ENGAGED IN PROVIDING ACCOMMODATION ENTRIES. THESE FACTS WERE DULY ACKNOWLEDGED AND ACCEPTED BY SHRI MAHESH GARG IN HIS STATEMENT DATED 2 2.09. 2003 MADE BEFORE THE INVESTIGATION WING . THE LD DR HAS SUBMITTED THAT THE AO GRANTED A NUMBER OF OPPORTUNITIES TO THE ASSESSEE TO GET THE SIGNATURE OF THE DIRECTORS OF THESE ENTITIES CERTIFIED BY THE BRANCH MANAGER OF THE BANK WHERE DIRECTORS HAVE THEIR OWN PERSON AL AS WELL AS COMPANY ACCOUNTS. THUS, THE ASSESSEE FAILED TO ESTABLISH THE AUTHENTICITY OF THE SIGNATURE ON THE AFFIDAVIT FILED BY THE ASSESSEE IN SUPPORT OF THE CLAIM OF GENUINENESS OF THE TRANSACTION S . THE TRANSACTION S IN THIS CASE ARE RECEIPT S IN THE NATURE OF SHARE INVESTMENT ON PRIV ATE PLACEMENT WHICH HAS TO BE PROVED BY STRINGENT TEST AS THE PAGE NO. 4 REASON BEING A PUBLIC ISSUE CANNOT MADE BY A PRIVATE LIMITED COMPANY . IN CASE OF SHARE CAPITAL RECE IVED THROUGH PRIVATE PLACEMENT I S NORMAL LY TO KNOWN PERSONS/ COMPANIES. THEREFORE ONCE THE ALLE GED SHARE HOLDERS HA VE ADMITTED THE TRANSACTION BEING ACCOMMODATI ON ENTRIES IN THE STATEMENT RECORDED U/S 131 , T HE ONUS IS SHIFTED ON THE ASSESSEE TO PROVE THAT THE TRANSACTION IS GENUINE. DESPITE ENOUGH OPPORTUNIT IES GRANTED BY THE AO TO THE ASSESSEE , THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE TRANSACTION AND GENUINENESS OF THE SIGNATURE OF THE DIRECTOR S OF THESE ENTITIES IN THE AFFIDAVIT FILED BY THE ASSESSEE. THE LD D R RELIED UPON THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF NAVODAY A CASTE PVT. LTD. VS. CIT 230 TAXMAN 268 (SC) , AND SUBMITTED THAT THE HONBLE SUPREME COURT HAS CONFIRMED THE JUDGMENT OF HONBLE HIGH COURT BY HOLDING THAT CERTIFICATE OF INCORPORATION , PAN, ETC WERE NOT SUFFICIENT FOR THE PURPOSE OF IDENTIFICATION OF SU BSCRIBER COMPANY WHEN THERE WAS MATERIAL TO SHOW THAT THE SUBSCRIBER IS A PAPER COMPANY AND NO T A GENUINE INVEST OR . SHE HAS RELIED UPON THE ORDE R OF THE AO. 6. O N THE OTHER HAND THE LD AR OF THE ASSESSEE SUBMITTED THAT THE AO HAS NOT M ADE ANY ENQUIRY TO ASCERTAIN WEA THER ALLEGED TRANSACTION ENTERED BY THE ASSESSEE ARE GENUINE OR NOT . DURING THE COURSE OF ASSESSMENT PROCEEDING S THE ASSESSEE DULY DISCHARGE THE ONUS CAST ON IT BY SUBMITTING VARIOUS DOCUMENTARY EVIDENCE WHICH PROVE D THE IDE NTITY, CREDITWORTH INESS OF THE CREDITORS AND GENUINENESS OF THE TRANSACTION S . HOWEVER , THE AO RELIED UPO N THE STATEMENT OF SHRI MAHESH GARG WHICH WAS RECORDED BY THE DIT(INVESTIGATION) AND DID NOT EXAMINE THE SAID PERSON HIMSELF. EVEN THE AO HAS NOT GIVEN THE ASSESSEE AN OP PORTUNITY TO CROSS EXAMINE THE SAID PARTY DESPITE THE FACT THAT SPECIFIC REQUEST IN THIS REGARD WAS MADE BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THUS THE LD AR HAS SUBMITTED THIS IS WELL SETTLED LAW THAT A N Y ADVERSE INFERENCE ON THE BA SIS OF MATERIAL COLLECTED ON THE BACK OF THE ASSESSEE WITHOUT AFFORDING AN OPPORTUNITY TO CROSS EXAMINE IS NOT VALID AND SUCH INVALID EVIDENCE CANNOT BE THE BASIS FOR MAKING ANY ADDITION. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES VS. CCE DATED 22 ND SEPTEMBER 2015 IN CIVIL APPEAL NO.4288/2006. HE HAS ALSO RELIED UPON THE FOLLOWI NG JUDGEMENT : - 1. PRAKASH CHAND NAHATA VS.UNION OF INDIA 163 CTR 310 (SC) PAGE NO. 5 2. KISHAN CHAND CHELLARAM VS. CIT 125 ITR 713 (SC), 3. CIT VS. SMC SHARE BROKERS LTD. 288 ITR 345 (DEL) 4. ALOK AGGARWAL VS. DCIT (2000) 67 TTJ 109 (DEL) 7 . ALTERNATIVELY THE LD AR HAS SUBMITTED THE ALLEGED BOGUS SHARE HOLDERS ARE ALL INCORPORATED AND ACTIVE COMPANIES AS PER RECORD OF THE ROC AND THE MASTER DAT A DETAIL ALONG WITH PAN WAS ALSO SUBMITTED BEFORE THE AO BY THE ASSESSEE. ALL THESE ENTITIES ARE HAVING THEIR BANK ACCOU NT, PAYMENT WERE MADE BY THEM TO THE ASSESSEE COMPANY TH R OUGH BANKING CHANNELS, THEREFORE , ENTITIES OF SHARE HOLDERS STAND DULLY ACCEPTED EVEN BY THE DIT(INVESTIGATION) AT WHOSE INFORMATION THE AO HAS INITIATED THE REOPENING PROCEEDINGS. THE ASSESSEE PRODU CED ALL THE RELEV ANT DOCUMENTS TO ESTABLISH THE IDE NTITY OF THE SUBSCRIBER AND ALSO ALL TRANSACTIONS ARE THROUGH BANK ING CHANNELS. THE AO HAS NOT CONTROVERTED THE DOCUMENTS PRODUCED BY THE ASSESSEE IN SUPPORT OF THE CLAIM AS WELL AS THE TRANSACTIONS TOOK PLACE THROUGH BANKING CHANNEL. THEREFORE CREDITWORTHINESS OF THE PARTIES WAS ALSO ESTABLISHED BY THE ASSESSEE WHICH WAS NOT DISAPPROVED BY THE AO. THE ASSESSEE DISCHARGE D ITS PRIMARY ONUS TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THE SUBSCRIBER AS WELL AS GENUINENESS OF THE TRANSACTION S . DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE FILED COPIES OF CONFIRMATION, BANK STATEMENT , COPY OF ITR, COPY O F FINANCIAL STATEMENT OF THE PARTIES, COPY OF BOARDS RESOLUTION, SHARE APPLICATION F O RM, AFFIDAVIT OF THE DIRECTORS OF THE SUBSCRIBERS COMPANIES, COPIES OF SHARE TRANSFER REGISTER AND ALSO RECORD FROM ROC IN RESPECT OF ALL SHARE APPLICANTS. HOWEVER THE AO HAS NOT POINT OUT ANY DEFECT OR ANY ERROR IN THE SAID EVIDENCE FILED BY THE ASSESSEE. THE AO RAISED ONLY OBJECTION WI TH THE SIGNATURE S OF SHRI TRILOK CHAND BANSAL , BHARAT BHUSAN BANSAL AND AJAY MITTAL, NARENDER KUMAR GUPTA, ANIL KUMAR SHARMA AND VI NOD GAR G ON THEIR AFFIDAVIT S FILED BY THE ASSESSEE DO NOT MATCH WITH THEIR SIGNATURE ON STATEMENT RECORDED BY THE INVESTIGATING WING. THE LD AR HAS POINTED OUT THAT THE ASSESSEE VIDE ITS LETTER DATED 27.12.2010 EXPLAIN THAT THE SIGNATURE ARE IDENTICAL AND THERE CAN BE SOME DIFFERENCE IN THE SIGNATURE AFTER A GAP OF 7 YEARS. WHEN THE ASSESSEE FILED ALL THE RELEVANT MATERIAL/ EVIDENCE IT WAS THE DUTY OF THE AO TO MAKE PROPER ENQUIRY , WHICH HAS NOT BEEN DONE IN THE CASE OF THE ASSESSEE. T HE AO DID NOT CHOOS E TO SUMMON OR ISSUE NOTICE TO THE PARTIES FOR EXAMINATION AND VERIFICATION OF THE GENUINENESS OF THE SIGNATURE WHICH WAS DOUBTED BY THE AO. THE LD AR HAS RELIED UPON THE JUDGMENT OF THE HONBLE PAGE NO. 6 JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S. RAKAM M ONEY MATTERS PVT. DATED 13.10.2015 IN ITA NO.778/2015 AND SUBMITTED THAT THE HONBLE HIGH COURT WHILE CONFIRMING THE FINDING OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) AND TRIBUNAL HAS OBSERVED THAT THE AO FAILED TO COM E UP WITH THE MATERIAL TO DI SAPPROVE WHAT HAS BEEN PRODUCED BY THE ASSESSEE. THE LD AR HAS FURTHER CONTENDED THAT THE ASSESSEE EXPRESSED ITS INABILITY TO PRODUCE THE DIRECTOR OF THE SHARE APPLICANTS COMPANY AND IF THE AO WANTED TO EXAMINE THE DIRECTORS IT WAS UP THE AO TO SUMMON THES E PARTIES. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. VICTOR ELECTR ODES 329 ITR 271 AND SUBMITTED THAT THE HONBLE HIGH COURT HAS OBSERVED THAT THERE IS NO LEGAL OBLIGATION ON THE ASSESSEE TO PRODUCE SOME DIRECTORS AND OTHER REPRESENTATIVE OF THE APPLICANTS COMPANY BEFORE THE AO . A SIMILAR VIEW HAS BEEN TAKEN BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS. GS CONTROL, ITA NO.1560/ DEL/ 2010 VIDE ORDER DATED 13.0 3.2015. THUS, THE LD AR HAS SUBMITTED THAT THE AO HAS MADE THE ADDITION MERELY ON THE BASIS OF STATEMENTS OF SHI MAHESH GARG RECORDED BY THE INVESTIGATION WING WITHOUT CONDUCTING ANY ENQUIRY OR EXAMINATION AND EVEN WITHOUT GIVING ANY OPPORTUNITY TO THE AS SESSEE TO CROSS EXAMINE. THE LD AR HAS RELIED UPON THE FOLLOWING JUDGMENT: 1. GEE CEE CYCLE BALLS PVT. LTD. VS ITO, ITA NO.867/DEL/2013 DATED 30.10.2015 2. CIT VS. FAIR INVEST LTD. 357 ITR 146 3. CIT VS. GOEL SONGS GOLDEN ESTATE PVT. LTD., ITA NO.212/2012 DATED 11.04.2012 4. CIT VS. GANGESHWARI METAL PVT. LTD. 361 ITR 10 (DEL) 5. CIT VS. VRINDAVAN FARMS (P) LTD. ITA NO.71,72,85/DEL/2015 DATED 12.08.2015 8 . THUS THE LD AR HAS ARGUED THAT IN THE CASE OF THE ASSESSEE THE EVIDENCE AND MATERIAL ADDUCED HAS BEEN THROWN BY THE AO WITHOUT ANY ENQUIRY. THERE IS NO MATERIAL ON THE BASIS ON WHICH THE AO CAN HOLD THE ASSESSEE IN THE COLLUSIVE ARRANGEMENT , THEREFORE THE ADDITION MADE BY THE AO W AS RIGHTLY DELETED BY THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS). 9 . WE HAVE CONSIDERED THE RIVAL SUBMISSION AS WELL AS RELEVANT MATERIAL ON RECORD . AO HAS REOPENED THE ASSESSMENT OF THE ASSESSEE ON THE BASIS OF THE INFORMATION RECEIVED FROM THE INV ESTIGATION WING WHEREIN IT WAS POINTED OUT THAT PAGE NO. 7 THE ASSESSEE HAS RECEIVED ACCOMMODATION ENTRIES OF RS.78 LAC FROM VARIOUS PERSONS/ ENTITIES WHICH ARE MENTIONED IN THE REASON S RECORDED AND REPRODUCED IN THE FOREGOING PARAS . IN THIS CONNECTION THE INVESTIGAT ION WING RECORDED THE STATEMENT OF SHRI MAHESH GARG WHO WAS CONSIDERED AS THE MAIN PERSON AND ALL THESE ENTITIES WERE BELONGING TO THE SAID PERSON. IT IS PERTINENT TO NOTE THAT IN THE ENTIRE ASSESSMENT ORDE R THE AO HAS REPEATEDLY REPRODUCED THE REPORT RECEIVED FROM THE INVESTIGATION WING ALLEGING THAT THE ABOVE ENTITIES HAVE NO CRE DITWORTHINESS WHATSOEVER AND NO GENUINE BUSINESS TRANSACTION WERE CARRIED BY THESE ENTITIES. THEREFORE, THE AO HAS FRAMED THE ASSESSMENT ON THE BASIS THAT THESE ENTITIES DO NO T CARRY ANY REAL BUSINESS AND ARE SIMPLY ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES AS INDICATED BY THE INVESTIGATION WING IN ITS REPORT. THE ASSESSEE HAS PRODUCED CONFIRMATION S , BANK STATEMENT, COPY OF ITRS, COPIES OF FINANCIAL STATEMENT O F THE PARTIES, COPIES OF BOARD S RESOLUTION, SHARE APPLICATIONS FORM, AFFIDAVIT OF THE DIRECTORS OF THE SUBSCRIBER COMPANIES, COPIES OF SHARE TRANSFER DEED AND ALSO INFORMATION FROM THE ROC IN RESPECT OF THESE SHARE APPLICANTS. THE AO RAISED OBJECTIONS ABO UT THE GENUINENESS OF THE SIGNATURE ON THE AFFIDAVIT S OF THE DIRECTORS OF THESE COMPANIES AND ASKED THE ASSESSEE TO PRODUCE THESE DIRECTORS FOR EXAMINATION. THE ASSESSEE EXPRESSED ITS INABILITY TO PRODUCE THESE DIRECTORS AND REQUEST ED THE AO TO SUMMON THES E PARTIES BY ISSUING THE NOTICE U/S 133(6) OR SEEK THE INFORMATION BY ISSUING NOTICE U/S 131 OF THE ACT. THE ASSESSEE HAS ALSO DEMANDED THE CROSS EXAMINATION OF SHRI MAHESH GARG WHOSE STATEMENT WAS RELIED UPON BY THE AO AGAINST THE ASSESSEE. THE AO INSTEAD OF TAKING ANY STEP TO VERIFY THE GENUINENESS OF THE S IGNATURE ON THE AFFIDAVIT S H AS KEPT ON ASKING THE ASSESSEE TO PRODUCE THESE PARTIES AND REFERRING THAT THE A SSESSEE COULD HAVE DONE THE SIGNATURES OF THE DIRECTORS CERTIFIED BY THE BRANCH MANAGER OF TH E BANK. THUS IT IS MANIFEST FROM THE ASSESSMENT ORDER AND THE PROCEEDINGS THAT THE AO INSTEAD OF TAKING ANY STEP U/S 133(6)/ 131 OF THE ACT WAS ASKING THE ASSESSEE TO PRODUCE THE PARTIES OR GETTING THE SIGNATURE ON THE AFFIDAVIT S CERTIFIED THROUGH BANKS. THE ENTIRE ASSESSMENT HAS BEEN FRAMED BY THE AO WITHOUT CONDUCTING ANY ENQUIRY FROM RELEVANT PARTIES OR INDEPENDENT SOURCE OR EVIDENCE BUT HAS MERELY RELIED UPON THE STATEMENT OF MR. MAHESH GARG RECORDED BY INVESTIGATION WING OF T HE DEPARTMENT AS WELL AS INFORMATION RECEIVED FROM INVESTIGATION WING. THUS IT IS APPARENT FROM THE ASSESSMENT ORDER THAT THE AO HAS NOT CONDUCTED ANY INDEPENDENT AND SEPARATE PAGE NO. 8 ENQUIRY IN THIS CASE OF THE ASSESSEE. E VEN THE STATEMENT RECORDED BY THE IN VESTI GATION WING HAS NOT BEEN GOT CONFIRMED OR CORROBORATED BY THE PERSON DURING THE ASSESSMENT PROCEEDINGS. THE AO OUGHT TO HAVE CONDUCTED A SEPARATE AND INDEPENDENT ENQUIRY AND ANY INFORMATION RECEIVED FROM THE INVESTIGATION WING IS REQUIRED TO BE CORROBORATE D AND REASSERTED /REAFFIRMED DURING THE ASSESSMENT P ROCEEDINGS BY EXAMINING THE CONCERNED PERSONS WHO CAN AFFIRM THE STATEMENT ALREADY RECORDED BY OTHER AUTHORITY OF THE DEPARTMENT. THERE IS NO DISPUTE THAT THE STATEMENT WHICH WAS RELIED UPON BY THE AO WAS NOT RECORDED BY THE AO IN THE ASSESSMENT PROCEEDING BUT IT WAS PRE - EXISTING STATEMENT RECORDED BY THE INVESTIGATING WING AND THE SAME CANNOT BE A SOLE BASIS OF ASSESSMENT WITHOUT CONDUCTING A PROPER ENQUIRY AND EXAMINATION DURING THE ASSES SMENT PROCEEDING ITSELF. FURTHER DESPITE THE SPECIFIC DEMAND OF THE ASSESSEE FOR CROSS EXAMINATION OF SHRI MAHESH GARG, THE LD. AO HAS NOT GIVEN ANY HEED TO THE REQUEST OF THE ASSESSEE FOR AFFORDING ANY OPPORTUNITY OF CROSS EXAMINATION AND USE D THE STATEMENT OF SHRI MAHES H GARG AGAINST THE ASSESSEE WHICH IS NOT PERMISSIBLE UNDER THE LAW. AS IT IS A CASE OF CLEAR VIOLATION OF THE RULE OF PRINCIPAL OF NATURAL JUSTICE AND STATEMENT WHICH IS RECORDED AT THE BACK OF THE ASSESSEE CANNOT BE USE D AGAINST THE ASSESSEE WITHOUT GIVIN G ANY OPPORTUNITY OF CROSS EXAMINATION. THUS THE ADDITION ON ACCOUNT OF ACCOMMODATION ENTRIES OF RS.78 LAC MADE BY THE AO SOLELY ON THE BASIS OF THE STATEMENT OF SHRI MAHESH GARG WHICH ARE RECORDED IN THE ABSENCE OF THE ASSESSEE BY THE INVESTIGATION WING , IS NOT PERMITTED WITHOUT THE EXAMINATION OF THE SAID WITNESS DURING THE ASSESSMENT PROCEEDING AND AFTER GIVING AN OPPORTUNITY OF CROSS EXAMINE TO THE ASSESSEE. EVEN OTHERWISE THE AO HAS NOT CONDUCTED ANY ENQUIRY WHATSOEVER EITHER IN SUPPORT OF THE INFORMAT ION RECEIVED FROM THE INVESTIGATION WING OR TO DISAPPROVE THE EVIDENCE PRODUCED BY THE ASSESSEE. THE AO COULD HAVE VERIFIED THE SIGNATURE OF THE DIRECTORS OF THESE ENTITIES FROM THE BANK BY ISSUING THE NECESSARY SUMMONS/NIOTICES INSTEAD OF I NSISTING THE AS SESSEE TO FURNISH THE BANK CERTIFICATE. THEREFORE IT IS A CASE OF COMPLETE LACK OF ENQUIRY ON THE PART OF THE AO WHICH OUGHT TO HAVE BEEN CONDUCTED WHILE FRAMING THE ASSESSMENT. IN THE CASE OF CIT VS. RAKA M MONEY PVT. LTD. (SUPRA) THE HONBLE JURISDICTIONAL HIGH COURT BY DEALING WITH AN IDENTICAL QUESTION AS OBSERVED IN PARA 13 AS UNDER: - 13. IT IS NOT IN DISPUTE THAT EXTENSIVE MATERIAL WAS PRODUCED BY THE ASSESSEE IN THE PRESENT CASE IS TO PROVE THE IDENTI TY, GENUINENESS AND CREDITWORTHINESS OF THE COMPANIES WHO HAD SUBSCRIBED TO ITS SHARES. AMONG PAGE NO. 9 THE MATERIAL PRODUCED WERE THE INCOME TAX RETURNS AND THE PAN CARD DETAILS OF THE EIGHT COMPANIES. EVEN IF THE DIRECTORS OF THESE COMPANIES DID NOT RESPOND TO THE SUMMONS ISSUED BY THE AO, IT WAS NOT IMPOSSIBLE FOR THE AO TO MAKE PROPER ENQUIRIES TO ASCERTAIN THE GENUINENESS OF THESE ENTITIES AND SATISFY HIMSELF OF THEIR CREDITWORTHINESS. AS POINTED OUT BY THE CIT(A), THE AO FAILED TO MAKE ANY EFFORT IN THAT DIRECT OR. HE DID NOT TAKE TO THE LOGICAL AND THE HALF - HEARTED ATTEMPT AT GETTING THE DIRECTORS TO APPEAR BEFORE HIM. HE DID NOT EVEN SEEK THE ASSISTANCE OF THE AOS OF THE CONCERNED COMPANIES WHOSE ITRS AND PAN CARD COPIES HAD BEEN PRODUCED. 10 . THUS IT IS CLEAR THAT EVEN IN THE CASE THE DIRECTORS OF THE COMPANIES DID NOT RESPOND TO THE SUMMONS ISSUED BY THE AO THE HONBLE HIGH COURT HAS AGREED WITH THE VIEW OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) THAT AO FAILED TO MAKE ANY EFFORT IN T HAT DIRECTION AND TO TAKE THE MATTER TO LOGICAL END. IN THE CASE OF CIT VS. VICTORS ELECTRICALS LIMITED (SUPRA) THE HONBLE JURISDICTIONAL HIGH COURT AN IDENTICAL ISSUE HAS HELD IN PARA 9 AS UNDER: - 9. THERE WAS NO LEGAL OBLIGATION ON THE ASSESSEE TO PRO DUCE SOME DIRECTOR OR OTHER REPRESENTATIVE OF THE APPLICANT - COMPANIES BEFORE THE ASSESSING OFFICER. THEREFORE, FAILURE OF THE ASSESSEE TO PRODUCE THEM COULD NOT, BY ITSELF, HAVE JUSTIFIED THE ADDITIONS MADE BY THE ASSESSING OFFICER, WHEN THE ASSESSEE HAD F URNISHED DOCUMENTS, ON THE BASIS OF WHICH, THE ASSESSING OFFICER, IF HE SO WANTED, COULD HAVE SUMMONED THEM FOR VERIFICATION. NO ATTEMPT WAS MADE BY THE ASSESSING OFFICER TO SUMMON THE DIRECTORS OF THE APPLICANT - COMPANIES. THE ADDRESSES OF THESE COMPANIES MUST BE AVAILABLE ON THE SHARE APPLICATIONS, MEMORANDUM AND ARTICLES OF ASSOCIATION AND THEIR INCOME - TAX RETURNS. IF THE ASSESSING OFFICER HAD ANY DOUBT ABOUT IDENTITY OF THE SHARE APPLICANTS, HE COULD HAVE SUMMONED THE DIRECTORS OF THE APPLICANT - COMPANIES . NO SUCH ATTEMPT WAS, HOWEVER, MADE BY HIM. THEREFORE, THE COMMISSIONER OF INCOME - TAX (APPEALS) AND THE INCOME - TAX APPELLATE TRIBUNAL, IN OUR VIEW, WERE JUSTIFIED IN HOLDING THAT THE IDENTITY OF THE SHARE APPLICANTS AND THE GENUINENESS OF THE TRANSACTIONS HAD BEEN ESTABLISHED BY THE ASSESSEE. FOR THE REASONS GIVEN IN THE PRECEDING PARAGRAPHS, NO SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR CONSIDERATION. 11 . I T WAS FOUND BY THE HONBLE JURISDICTIONAL HIGH COURT THAT THERE IS NO LEGAL OBLIGATION ON THE ASSESSEE TO PRODUCE SOME DIRECTORS AND OTHER REPRESENTATIVE OF THE APPLICANT COMPANY BEFORE THE AO. THE COORDINATE BENCH OF THIS TRIBUNAL DCIT VS. GS CONTROL PVT. LTD. (SUPRA) WHILE DEALING WITH AN IDENTICAL ISSUE HAS HELD IN PARA 14 AS UNDER: - 14. WE HA VE CONSIDERED THE RIVAL SUBMISSION AND PERUSED THE ENTIRE MATERIAL AVAILABLE ON RECORD. THE AO HAD MADE ADDITION OF RS. 80 LACS OUT OF THE TOTAL SHARE APPLICATION MONEY AMOUNTING TO RS. 2,40,00,000/ - . THUS, REST OF THE AMOUNT HAD BEEN ACCEPTED BY AO. FROM THE ASSESSMENT ORDER IT IS EVIDENT THAT AO HAS MERELY RELIED ON GENERAL INFORMATION REGARDING THE IMPUGNED 4 PAGE NO. 10 COMPANIES IN RESPECT OF WHICH ADDITION WAS MADE AS THEY WERE KNOWN ENTRY PROVIDERS. THE AO HAS POINTED OUT THAT DETAILS WERE PROVIDED BY THESE COMP ANIES BUT SINCE THE DIRECTORS OF THESE COMPANIES WERE NOT PRODUCED, HE MADE THE ADDITION. NO INQUIRIES WERE CONDUCTED BY AO TO FIND OUT THE GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE COMPANIES WHO HAD APPLIED FOR THE SHARE APPLICATION MONE Y IN THE ASSESSEE COMPANY. WE FIND CONSIDERABLE MERIT IN THE ARGUMENT OF LD. COUNSEL FOR THE ASSESSEE THAT MERELY BECAUSE THE DIRECTORS WERE NOT PRODUCED THE ADDITION COULD NOT BE MADE IN VIEW OF THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF VICT OR ELECTRODES LTD. (SUPRA) AND ALSO IN THE CASE OF NOVA PROMOTERS (SUPRA) ALSO HONBLE DELHI HIGH COURT HAD CLEARLY DISTINGUISHED BETWEEN THE CASES WHERE AO HAD CARRIED OUT DETAILED INQUIRY AND THEN ARRIVED AT A FINDING REGARDING ACCOMMODATION ENTRIES AND THOSE CASES WHERE AO DID NOT CARRY OUT ANY INQUIRY AND MERELY MADE ADDITION ON GENERAL BASIS. THE INQUIRY FOR ARRIVING AT A PROPER CONCLUSION IS A SINE QUA NON AND THAT CANNOT BE DISPENSED WITH BY MAKING GENERAL OBSERVATIONS. WE FIND THAT THE DECISION IN T HE CASE OF GOEL SONS GOLDEN ESTATE P. LTD. IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE, WHEREIN IN PARAS 2 & 3 IT HAS BEEN OBSERVED AS UNDER: 2. LEARNED COUNSEL FOR THE APPELLANT SUBMITS THAT THE ORDER PASSED BY THE TRIBUNAL IS PERVERSE AND IN FACT ONE S.H. MALLICK HAD GIVEN A STATEMENT, WHICH IS RE - PRODUCED IN THE ASSESSMENT ORDER SAYING THAT HE HAD PROVIDED ACCOMMODATION ENTRIES AND THE SAID STATEMENT CONCLUSIVELY PROVES THAT SHARE MONEY OF 30,00,000/ - ALLEGEDLY RECEIVED BY THE RESPONDENT - ASS ESSEE FROM 5 COMPANIES ARE SHAM AND BOGUS TRANSACTIONS . 3. WE HAVE EXAMINED THE SAID CONTENTION AND FIND THAT THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS FILED CONFIRMATION LETTERS FROM THE COMPANIES, THEIR PAN NUMBER, COPY OF BANK STATEM ENTS, AFFIDAVITS AND BALANCE SHEET. THEREAFTER THE ASSESSING OFFICER HAD ASKED THE ASSESSEE TO PRODUCE THE SAID DIRECTORS/ PARTIES. ASSESSEE EXPRESSED ITS INABILITY TO PRODUCE THEM. THE ASSESSING OFFICER DID NOT CONSEQUENT THERETO CONDUCT ANY INQUIRY AND C LOSED THE PROCEEDINGS. THIS IS A CASE WHERE THE ASSESSING OFFICER HAS FAILED TO CONDUCT NECESSARY INQUIRY, VERIFICATION AND DEAL WITH THE MATTER IN DEPTH SPECIALLY AFTER THE AFFIDAVIT/ CONFIRMATION ALONG WITH THE BANK STATEMENTS ETC. WERE FILED. IN CASE TH E ASSESSING OFFICER HAD CONDUCTED THE SAID ENQUIRIES AND INVESTIGATION PROBABLY THE CHALLENGE MADE BY THE REVENUE WOULD BE JUSTIFIED. IN THE ABSENCE OF THESE INQUIRIES AND NON VERIFICATION OF THE DETAILS AT THE TIME OF ASSESSMENT PROCEEDINGS, THE FACTUAL F INDINGS RECORDED BY THE ASSESSING OFFICER WERE INCOMPLETE AND SPARSE. THE IMPUGNED ORDER PASSED CANNOT BE TREATED AND REGARDED AS PERVERSE. THE APPEAL IS DISMISSED AS NO SUBSTANTIAL QUESTION OF LAW ARISES. 12 . THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. FAIR FINVEST LTD. (SUPRA) HAS TAKEN A SIMILAR VIEW WHILE DEALING WITH AN IDENTICAL ISSUE IN PARA 6 AND 7 AS UNDER: - PAGE NO. 11 6. THIS COURT HAS CONSIDERED THE SUBMISSIONS OF THE PARTIES. IN THIS CASE THE DISCUSSION BY THE CIT (APPEALS) WOULD REVEAL THAT THE ASSESSEE HAS FILED DOCUMENTS INCLUDING CERTIFIED COPIES ISSUED BY THE REGISTRAR OF COMPANIES IN RELATION TO THE SHARE APPLICATION, AFFIDAVITS OF THE DIRECTORS, FORM 2 FILED WITH THE ROC BY SUCH APPLICANTS CONFIRMATIONS BY THE APPLICANT FOR COMPAN Y'S SHARES, CERTIFICATES BY AUDITORS ETC. UNFORTUNATELY, THE ASSESSING OFFICER CHOSE TO BASE HIMSELF MERELY ON THE GENERAL INFERENCE TO BE DRAWN FROM THE READING OF THE INVESTIGATION REPORT AND THE STATEMENT OF MR. MAHESH GARG. TO ELEVATE THE INFERENCE WHI CH CAN BE DRAWN ON THE BASIS OF READING OF SUCH MATERIAL INTO JUDICIAL CONCLUSIONS WOULD BE IMPROPER, MORE SO WHEN THE ASSESSEE PRODUCED MATERIAL. THE LEAST THAT THE ASSESSING OFFICER OUGHT TO HAVE DONE WAS TO ENQUIRE INTO THE MATTER BY, IF NECESSARY, INVO KING HIS POWERS UNDER SECTION 131 SUMMONING THE SHARE APPLICANTS OR DIRECTORS. NO EFFORT WAS MADE IN THAT REGARD. IN THE ABSENCE OF ANY SUCH FINDING THAT THE MATERIAL DISCLOSED WAS UNTRUSTWORTHY OR LACKED CREDIBILITY THE ASSESSING OFFICER MERELY CONCLUDED ON THE BASIS OF ENQUIRY REPORT, WHICH COLLECTED CERTAIN FACTS AND THE STATEMENTS OF MR. MAHESH GARG THAT THE INCOME SOUGHT TO BE ADDED FELL WITHIN THE DESCRIPTION OF SECTION 68. 7. HAVING REGARD TO THE ENTIRETY OF FACTS AND CIRCUMSTANCES, THE COURT IS SATI SFIED THAT THE FINDING OF THE TRIBUNAL IN THIS CASE ACCORDS WITH THE RATIO OF THE DECISION OF THE SUPREME COURT IN LOVELY EXPORTS (P.) LTD. (SUPRA). 13 . IN THE CASE IN HAND IT WAS NOT MERE TRANSFER OF MONEY BY THESE SHARE APPLICANTS TO THE ASSESSEE BUT T HE ASSESSEE HAS PRODUCED ON RECORD THE BOARD S RESOLUTION , SHARE APPLICANTS FORM, COPY OF SHARE TRANSFER DEEDS AND INFORMATION FROM ROC IN RESPECT OF SHARE APPLICANTS. IT ESTABLISHED THE EXISTENCE OF REAL TRANSACTION OF TRANSFER OF SHARES AND THEREFORE IT REBUTS THE CASE OF THE REVENUE OF ALLEGED ACCOMMODATION ENTRIES. ONCE THE ASSESSEE HAS ESTABLISHED THE EXISTENCE OF THE TRANSACTION OF TRANSFER OF SHARES AGAINST THE RECEIVED OF SHARE APPLICATION MONEY THEN THE BURDEN IS SHIFTED ON THE AO TO CONDUCT THE NE CESSARY ENQUIRY AND INVESTIGATION TO DISAPPROVE THE EVIDENCE PRODUCED ON RECORD BY THE ASSESSEE. THE AO DID NOT CHOOSE TO CONDUCT ANY ENQUIRY OR INVESTIGATION DURING THE ASSESSMENT PROCEEDING BUT RELIED UPON THE STATEMENT OF SHI MAHESH GARG AND REPORT OF T HE INVESTIGATION WING, THEREFORE THE ADDITION MADE BY THE AO MEREL Y ON THE BASIS OF A STATEMENT RECORDED BY THE INVESTIGATION WING WITHOUT ANY CORROBORATIVE EVIDENCE AND EXAMINATION AND CROSS EXAMINATION OF THE ASSESSEE , IS NOT SUSTAINABLE. THEREFORE IN VI EW OF THE FACTS AND CIRCUMSTANCES AS WELL AS THE DECISION DISC USSED ABOVE WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) IN DELETING THE ADDITION IN QUESTION. THE DECISION RELIED UPON BY THE LD DR WI LL NOT HELD THE CASE OF THE REVENUE AS THE EVIDENCE ADDUCED BY THE ASSESSEE HAS BEEN THROWN OUT WITHOUT ANY ENQUIRY BY THE AO. PAGE NO. 12 14 . THE REVENUE HAS ALSO CHALLENGED THE FINDING OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ON THE ISSUE OF VALIDITY OF R EOPENING. IN VIEW OF OUR FINDING ON THE MERITS OF THE CASE THE ISSUE OF VALIDITY OF REOPENING BECOME S ACADEMIC IN NATURE AND THEREFORE WE DO NOT PROPOSE TO ADJUDICATE THE SAME. 15 . IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.02 .201 6 . - SD/ - - S D/ - ( N.K.SAINI ) ( VIJAY PAL RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 10 / 02 / 2015 A K KEOT COPY FORWARDED TO 1 . APPLICANT 2 . RESPONDENT 3 . CIT 4 . CIT (A) 5 . DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI