INS Finance & Investment P Ltd., New Delhi V. ITO WARD - 12(3), New Delhi

ITA 9266/DEL/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2873 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 02-12-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M BARANWAL
• Keywords: Reopening of assessment; Unexplained cash credit; Bogus Share capital; Share purchase agreement; Principle of natural justice; Opportunity of cross examination; Question of law; Tangible material; Valuation report; Accommodation entries; Retraction; Sham transactions; Reason to believe; Reassessment proceedings; Borrowed satisfaction; Set aside; Liquidation
• Section: 143(3); 142(1); 153A; 143(1); 250; 201; 274; 207; 208; 192; 64; 43; 48; 9(1); 9(1); 9(1); 72; 13; 22; 32; 147; 131; 148; 132; 28; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & DR. B.R.R. KUMAR, ACCOUNTANT MEMBER I.T.A. NO.9266/DEL/2019 ASSESSMENT YEAR 2010-11 INS FINANCE & INVESTMENT P. LTD., A-2/452, SECTOR-8, ROHINI NEW DELHI. V. ITO, WARD-12(3), NEW DELHI. TAN/PAN: AABCI4418E (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI R.S. SINGHVI, CA RESPONDENT BY: SHRI M. BARANWAL, SR.D.R. DATE OF HEARING: 03 09 2020 DATE OF PRONOUNCEMENT: 26 10 2020 O R D E R PER AMIT SHUKLA, J.M.: THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE IMPUGNED ORDER DATED 29.12.2017, PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-XLIV, NEW DELH I FOR THE QUANTUM OF ASSESSMENT PASSED U/S.147/143(3) FOR THE ASSESSMENT YEAR 2010-11. IN THE GROUNDS OF APPEAL T HE ASSESSEE HAS RAISED FOLLOWING GROUNDS: 1(I). THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN DISMISSING THE APPEAL W ITHOUT PROPER OPPORTUNITY OR APPRECIATION OF THE WRITTEN SUBMISSI ONS PLACED ON RECORD. I.T.A. NO.9266 /DEL/2019 2 (II) THAT THE IMPUGNED ORDER HAVING BEEN PASSED BY CIT(A) WITHOUT ANY HEARING AND MERELY ON THE BASIS OF SUBM ISSIONS MADE BEFORE ERSTWHILE CIT(A), THE IMPUGNED ORDER IS ILLEGAL AND CONTRARY TO PRINCIPLE OF NATURAL JUSTICE. (III) THAT THE ORDER PASSED BY CIT(A) IS IN CONTRAV ENTION OF PROVISION OF SECTION 250(1) AND 250(2)(A) OF THE AC T. 2(I). THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE VALIDITY OF NOTICE U/S 148 OF THE INCOME TAX ACT, 1961 EVEN THOUGH THE NOT ICE U/S 148 WAS ISSUED WITHOUT RECORDING PROPER REASONS TO BELI EVE IN TERMS OF PROVISIONS OF SECTION 147 OF THE ACT. (II) THAT IN THE ABSENCE OF ANY EVIDENCE OR MATERIA L IN RESPECT OF ANY INCOME ESCAPING ASSESSMENT, THERE IS NO GROUND OR BASIS FOR ASSUMING JURISDICTION U/S 148 OF THE INCOME TAX ACT , 1961 (III) THAT THE REASONS HAVING BEEN RECORDED WITHOUT APPLICATION OF MIND AND TANGIBLE MATERIAL, THE SAME ARE IMPROPER, INVALID AND FAILS TO CONFER VALID JURISDI CTION U/S 147 OF THE ACT. (IV) THAT EVEN OTHERWISE, THE NOTICE U/S 148 HAVING BEEN ISSUED WITHOUT PROPER APPROVAL IN TERMS OF PROVISIO NS OF SECTION 151 OF THE ACT, THE SAME IS ILLEGAL AND WITHOUT JUR ISDICTION. (V) THAT IN ANY CASE, REASONS BEING MERELY ON THE B ASIS OF INFORMATION FROM INVESTIGATION WING AND IN ABSENCE OF ANY INDEPENDENT TANGIBLE MATERIAL TO ESTABLISH THE CASE OF ESCAPEMENT OF INCOME, THE REASONS RECORDED ARE UNCO RROBORATED, UNSUBSTANTIATED AND BASED ON ERRONEOUS PRESUMPTION. (VI) THAT IN ABSENCE OF PROPER DISPOSAL OF OBJECTIO NS TO NOTICE U/S 148, THE CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE RE- I.T.A. NO.9266 /DEL/2019 3 ASSESSMENT PROCEEDINGS U/S 147 OF THE ACT. 3(I). THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE ADDITION OF RS. 5,12,40,000/- U/S 68 ON THE ALLEGED GROUND OF BOGUS SHARE CAPITAL EVEN THOUGH THE SAME IS NEITHER PART OF REA SONS NOR IN RESPECT OF WHICH ANY EVIDENCE OR MATERIAL IS ON REC ORD IN SUPPORT OF ALLEGATION OF ANY UNDISCLOSED INCOME. (II) THAT THE REASONS HAVING BEEN RECORDED ONLY IN RESPECT OF ISSUE OF SHARE CAPITAL TO THE EXTENT OF RS. 2,50,00,000/- RECEIVED FROM M/S. PRANNETA INDUSTRIES LTD., THE REMAINING ADDITI ONS ARE WHOLLY WITHOUT JURISDICTION AND AGAINST THE SPIRIT OF PROVISIONS OF SECTION 147 OF THE ACT PARTICULARLY WHEN THERE IS N O ADVERSE INFORMATION OR MATERIAL ON RECORD. (III) THAT THE SCOPE OF REASSESSMENT PROCEEDINGS U/ S 147 IS DEFINED WITH REFERENCE TO REASONS RECORDED AND IN A BSENCE OF ANY FRESH NOTICE U/S 148 OR APPROVAL U/S 151 IN RES PECT OF OTHER ISSUES, THE ASSESSING OFFICER WAS BEREAVED FROM MAK ING ROVING ENQUIRY OR INVESTIGATION IN RESPECT OF ISSUES FALLI NG OUTSIDE THE REASONS. (IV) THAT ASSESSING OFFICER HAVING EXCEEDED HIS JUR ISDICTION U/S 147 AND THERE BEING NO CASE OF ANY TANGIBLE MAT ERIAL, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE IMPU GNED ADDITION U/S 68 OF THE ACT AS SAME IS ILLEGAL, UNWARRANTED A ND NOT SUSTAINABLE UNDER THE LAW. 4(I). THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING ADDITION OF RS. 2,50,00,000/- U/S 68 IN RESPECT OF SHARE CAPITAL IS SUED TO M/S. PRANNETA INDUSTRIES LTD., A LISTED COMPANY, EVEN TH OUGH SAME IS I.T.A. NO.9266 /DEL/2019 4 DULY SUPPORTED FROM DOCUMENTARY EVIDENCES. (II) THAT THE ASSESSING OFFICER HAVING NOT DISPUTED THE GENUINENESS OF THE DOCUMENTARY EVIDENCES FURNISHED IN SUPPORT OF SHARE CAPITAL RECEIVED FROM SAID PARTY, THE IMPU GNED ADDITION U/S 68 IS ON MECHANICAL AND ARBITRARY BASIS AND AGA INST THE SETTLED LEGAL PRINCIPLE. (III) THAT EVEN OTHERWISE, THE ASSESSING OFFICER HA VING FAILED TO PROVIDE COPY OF STATEMENT OF SH. SHIRISH C SHAH AND OPPORTUNITY OF CROSS EXAMINATION, THE IMPUGNED ADDI TION ARE CONTRARY TO PRINCIPLE OF NATURE JUSTICE AND NOT SUS TAINABLE UNDER THE LAW. 5. THAT THE ENTIRE SHARE CAPITAL BEING FULLY SUPPOR TED FROM DOCUMENTARY EVIDENCES, THE IMPUGNED ORDER CONFIRMIN G THE ADDITION U/S 68 TO THE EXTENT OF RS. 7,62,40,000/- IS ILLEGAL, ARBITRARY AND WITHOUT PROPER OPPORTUNITY. 6. THAT THE ORDERS OF LOWER AUTHORITIES ARE NOT JUS TIFIED ON FACTS AND ARE BAD IN LAW. 7. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND, A LTER OR FORGO ANY OR ALL OF THE GROUNDS AS MAY BE NECESSARY AND I N THE INTEREST OF JUSTICE. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A PR IVATE LIMITED COMPANY AND IS MAINLY ENGAGED IN ACTIVITIES OF NBFC. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-1 1 WAS FILED ON 18.09.2010 DECLARING INCOME OF RS.1,66,200 /- WHICH WAS DULY PROCESSED U/S. 143(1) VIDE INTIMATION DATE D 20.01.2012 AND THUS INCOME OF THE ASSESSEE STOOD AS SESSED. LATER ON, ON THE BASIS OF INFORMATION RECEIVED FROM DCIT, CC- I.T.A. NO.9266 /DEL/2019 5 2(2), MUMBAI CONTAINING ALLEGATION OF ASSESSEE BEIN G A BENEFICIARY OF ACCOMMODATION ENTRY OF RS. 2.50 CROR ES PROVIDED BY M/S. PRRANETA INDUSTRIES LTD. (NOW KNOW N AS M/S. AADHAAR VENTURES INDIA LTD.), THE ASSESSEES C ASE WAS SOUGHT TO BE REOPENED. THE CONTENTS OF THE INFORMAT ION FROM DCIT MUMBAI HAVE BEEN BROUGHT OUT IN THE REASONS ON THE BASIS OF WHICH THE ASSESSING OFFICER FORMED THE OPI NION THAT SHARE CAPITAL RECEIVED BY THE ASSESSEE COMPANY FROM M/S. PRRANETA INDUSTRIES LTD. IS IN THE NATURE OF ACCOMM ODATION ENTRY RESULTING IN INCOME ESCAPING ASSESSMENT TO TH E EXTENT OF RS. 2.50 CRORES. THE REASONS RECORDED BY THE ASS ESSING OFFICER HAVE BEEN INCORPORATED IN THE ASSESSMENT OR DER, WHICH FOR THE SAKE OF READY REFERENCE ARE REPRODUCE D HEREUNDER: RECORDING OF REASONS FOR RE-OPENING THE CASE OF M/ S INS FINANCE & INVESTMENT PVT . LTD. A.Y. 2010-11, PAN: AABCI4418E 1. BACKGROUND THE ASSESSEE COMPANY M/S INS FINANCE & INVESTMENT P VT. LTD. WAS INCORPORATED ON 22/11/2005. THE BUSINESS OF THE ASSESSES IS FINANCE AND INVESTMENT. THE DIRECTORS OF THE ASSESS EE COMPANY ARE MS. MEGHA GOEL, SH, NARESH GOEL AND SH. RAJ KDINAR GAEL. THE COMPANY FRIED ITS RETURN OF INCOME FOR A.Y.2010-11 ON 18/09/2010 DECLARING INCOME OF RS. 1,66,200/-. THEREAFTER THE RETURN WAS PROCESSED U/S 143(1) OF IT. ACT THE CASE WAS NOT PI CKED UP FOR SCRUTINY , SO ASSESSMENT U/S 143(3) WAS NOT MADE. 2. INFORMATION RECEIVED FROM DCIT.CC 2(2 ) MUMBAI I.T.A. NO.9266 /DEL/2019 6 2.1. THE DOT, CO-2(2), MUMBAI VIDE LETTER F. NO. MU M/ DCIT CC 2(2)/INTIMATION/ 2016-17/ DATED 26/04/2016 INTIMATE D THAT M/S INS FINANCE & INVESTMENT PVT. LTD. (PAN : AABCI4418E) H AS TAKEN ACCOMMODATION ENTRY AMOUNTING TO RS.2,50,00,000/-IN FINANCIAL YEAR 2009- 10 RELEVANT TO ASSESSMENT YEAR 2010-11 FROM T HE ENTITY CONTROLLED AND OPERATED BY SH. SIRISH C SHAH ENTRY PROVIDER, M ENTIONED BELOW. 2.2 THE DCIT CC-2 (2), MUMBAI FURTHER REPORTED THAT A SEARCH OPERATION WAS CONDUCTED AT THE VARIOUS PREMISES OF SH. SHIRISH C SHAH WHO WAS ENGAGED IN PROVIDING ACCOMMODATION ENT RY IN THE SHAPE OF LOAN, SHARE CAPITAL/ PREMIUM/ LONG TERM CA PITAL GAIN , SH. SHIRISH C SHAH DIRECTLY CONTROLLED MORE THAN 200 CO MPANIES AND M/S AADHAAR VENTURES INDIA LTD. IS ALSO ONE OF THE COMPANIES CONTROLLED BY HIM. IT IS SEEN FROM THE IMPOUNDED MATERIAL THAT ASSESSES MENTIONED IN PARA-2 ABOVE HAS ACQUIRED ACCOMMODATIO N ENTRY FROM M/S AADHAAR VENTURES INDIA LTD. THE ASSESSMENT OF S H. SHIRISH C SHAH AS WELL AS ASSESSMENT OF THE ENTRY PROVIDER CO MPANIES HAVE BEEN COMPLETED WHERE-IN DETAILS FACTS AND MODUS OPE RANDI OF THE ENTITIES HAVE BEEN MENTIONED. IN THE ASSESSMENT ORD ER IT WAS HELD THAT IMPUGNED COMPANIES WERE ENGAGED IN PROVIDING A CCOMMODATION ENTRIES TO VARIOUS BENEFICIARIES. PERUSAL OF ASSESS MENT ORDER OF SH. SHIRISH C SHAH TANTAMOUNT THAT M/S AADHAAR VENTURES INDIA LTD. (P) LTD WAS A DUMMY COMPANY AND PROVIDED ACCOMMODATION ENTRY TO VARIOUS BENEFICIARIES INCLUDING THE ASSESSEE COMPAN Y. 2.3 A DATA FURNISHED BY THE DCIT CC-2(2) MUMBAI DEM ONSTRATES THAT THE ABOVE NAMED COMPANY IS A MEAGRE NET PROFIT DERI VING ENTITY WHICH CLEARLY INDICATES THAT IT DOES NOT HAVE CREDITWORTH INESS TO INVEST IN M/S IMS FINANCE & INVESTMENT PVT. LTD. DURING THE A SSESSMENT PROCEEDINGS, M/S AADHAAR VENTURES INDIA LTD. PVT. L TD. HAS FAILED TO SR NO NAME OF THE ENTRY PROVIDER NAME OF THE BENEFICIARY COMPANY F.Y A.Y AMOUNT (RS.) 01 M/S PRANETA INDUSTRIES LTD. (NOW KNOWN AS M/S AADHAAR VENTURES INDIA LTD.) M/S INS FINANCE & INVESTMENT PVT. LTD, 2009-10 20 10-11 2,50,00,000 I.T.A. NO.9266 /DEL/2019 7 PROVE CREDITWORTHINESS OF THE INVESTMENT IN THE ASS ESS COMPANY 3. ANALYSIS OF INFORMATION RECEIVED 3.1. I HAVE PERUSED THE INFORMATION RECEIVED FROM T HE DOT, CC-2(2), MUMBAI. THE FOLLOWING FACTS EMERGED FROM, THE REPOR T, AS. PROVIDED BY THE*. DOT, CC-2 (2), MUMBAI:- (I) M/S INS FINANCE & INVESTMENT PVT. LTD. HAS TAKE N ACCOMMODATION ENTRY FROM M/S AADHAAR VENTURES INDIA LTD. AMOUNTIN G TO RS.2,50,00,000/- IN THE A. Y 2010-11. IT IS DIFFICU LT TO ASCERTAIN HOW A NEWLY INCORPORATED COMPANY HAS RAISED SUCH AMOUNT P ARTICULARLY FROM NON DESCRIPT AND PAPER COMPANY. (II) M/S AADHAAR VENTURES INDIA LTD. IN ITS ASSESSM ENT PROCEEDINGS ADMITTED THAT ACCOMMODATION ENTRY WAS GIVEN TO VARI OUS BENEFICIARIES INCLUDING THE ASSESSEE COMPANY, (III) SH. SHIRISH C SHAH, THE MAIN OPERATOR AND CON TROLLER OF M/S AADHAAR VENTURES INDIA LTD. (P) LTD. ADMITTED IN IT S OWN ASSESSMENT PROCEEDINGS THAT HE WAS ACCOMMODATION ENTRY PROVIDE R AND GAVE ACCOMMODATION ENTRY TO VARIOUS PERSONS IN LIEU OF C ASH RECEIVED. 4. INDEPENDENT ENQUIRIES CONDUCTED PURSUANT TO INF ORMATION RECEIVED FROM DCIT. CC-212H MUMBAI: 4.1 THE RETURN OF INCOME OF ASSESSEE COMPANY HAS BE EN DOWNLOADED FROM THE ITD SYSTEM AND THE SAME WAS EXAMINED IN TH E LIGHT OF INFORMATION RECEIVED FROM DCIT ,CC 2(2) MUMBAI. DUR ING THE YEAR UNDER CONSIDERATION, THE COMPANY HAS SHOWN SECURITY PREMIUM MORE THAN RS.2.5 CRORE WHICH STRENGTHEN THE BELIEF THAT THE COMPANY HAS RECEIVED ACCOMMODATION ENTRY OF RS.2.5 CRORE OR MOR E IN THE GUISE OF SHARE PREMIUM/ SHARE APPLICATION MONEY. 4.1.2 FROM THE ABOVE IT IS EVIDENT THAT THE ASSESSE E COMPANY HAS RAISED ITS SHARE APPLICATION MONEY/ INCLUDING SHARE PREMIUM AMOUNTING TO RS.2,50,00,000/- . THE BALANCE SHEET O F M/S INS FINANCE 8S INVESTMENT PVT. LTD, FOR THE A. Y. 2010- 11 WAS ALSO PERUSED AND IT WAS FOUND THAT THIS COMPANY INVESTED RS.2,50,00,000/- OR MORE AND HAS EARNED INCOME OF R S. 1,66,200/- THE ITR-6 OF THE COMPANY IS ALSO SHOWING, CASH IN H AND IS CF RS.5,93,123/- AND BALANCE WITH BANKS IS OF RS. 14,8 62/-. 5. REASONS FOR FORMATION OF BELIEF I.T.A. NO.9266 /DEL/2019 8 5.1 IN THE LIGHT OF ABOVE DISCUSSION, IT IS APPAREN T THAT THE COMPANY HAS RAISED SHARE APPLICATION MONEY AMOUNTING TO RS. 2,50,00,000/- IN THE A. Y 2010-11. IT IS DIFFICULT TO ASCERTAIN HOW A NEWLY INCORPORATED COMPANY HAS RAISED SUCH HUGE SHARE APPLICATION MONE Y PARTICULARLY FROM NON-DESCRIPT AND PAPER COMPANIES. SINCE, THE ASSESSEE COMPANY IS A BENEFICIARY OF THE ACCOMMODATION ENTRIES AS PER DETAILS GIVEN ABOVE AND AS PER INFOR MATION, I HAVE REASON TO BELIEVE THAT THE INCOME OF RS/2,50,00,000 /- HAS ESCAPED ASSESSMENT AS DEFINED BY SECTION 147 OF THE ACTFORA .Y 2010-11. THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THIS YEAR BY THE REASONS OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. THEREFORE IT IS A FIT CAS E FOR THE ISSUANCE OF NOTICE U/S 148 OF THE ACT FOR A. Y. 2010-11. 3. IN RESPONSE, THE ASSESSEE HAS FILED A LETTER DAT ED 25.04.2017 STATING THAT EARLIER RETURN FILED U/S.13 9(1) SHOULD BE TREATED AS RETURN FILED IN COMPLIANCE TO A NOTIC E U/S.148 DATED 30.03.207. LATER ON, DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, THE ASSESSING OFFICER ON THE PERUSAL O F BALANCE SHEET OBSERVED THAT DURING THE YEAR ASSESSEE HAD IS SUED 7,62,700 SHARES AND HAD RECEIVED RS.7,62,40,000/- A S SHARE CAPITAL/PREMIUM DURING THE YEAR UNDER CONSIDERATION . THE ASSESSEE HAD FILED ITS OBJECTION FOR REOPENING OF A SSESSMENT VIDE ORDER DATED 22.09.2017, WHICH HAS BEEN DISPOSE D OFF BY THE ASSESSING OFFICER VIDE ORDER DATED 04.10.2017. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER HAS INITIATED FRESH INQUIRY WITH RESPECT TO SHARE CAPIT AL RECEIVED FROM OTHER PARTIES, WHICH WAS NOT PART OF THE REASO NS RECORDED AND OBSERVED THAT ASSESSEE HAD RECEIVED SH ARE CAPITAL FROM 18 OTHER COMPANIES ALSO. THE DETAILS O F WHICH HAVE BEEN GIVEN IN THE ASSESSMENT ORDER INCLUDING T HAT OF I.T.A. NO.9266 /DEL/2019 9 M/S. PRRANETA INDUSTRIES LTD. (NOW KNOWN AS M/S. AA DHAAR VENTURES INDIA LTD.) FOR SUMS OF RS.2,50,00,000/- F OR WHICH INFORMATION WAS RECEIVED BY THE ASSESSING OFFICER. THE DETAILS OF THESE COMPANIES ARE AS UNDER: . SI. NO NAMES ADDRESS OF SUBSCRIBER DETAILS OF SHARES PURCHASE TOTAL AMOUNT OF INVESTMENT (RS) NO. OF SHARES FACE VALUE (RS) PREMIU M (RS) 1 MRIGIYA ELECTRONIC INDUSTRIES PVT. BID,, 27A, MATCALF STREEET, 3 RD FLOOR, KOLKATA, (WB) 25000 10 90 25,00,000/- 2 MARUBHUMI FINANCE & DEVELOPERS :PVT. LTD. ROOM NO.205, 2 ND FLOOR, 10A HOSPITAL STREET, .KOLKATA 70072 (WB) 25000 10 90 25,00,000/- 3 MAKESWORTH PROJECT & DEVELOPERS (F) LTD. 156A, 3 RD FLOOR, LANIN SARANI, KOIKATA (WB) 48400 10 90 48,40,000/- 4 : LINK POINT INFRASTRUCTURE (P) LTD. 10A HOSPITAL STREET, KOLKATA 70072 (WB) 39000 10 90 39,00,000/- . 5 ABHILASHA EXPORT (P) LTD. 3, SAKELAT PLACE, KOLKATA (WB) 25000 10 90 25,00,000/- 6 CHANDIMATA MANAGEMENT (P) LTD. 27A, MATCALF STREEET, 3 ! FLOOR, KOLKATA, (WB) 55000 10 90 55,00,000/- : 7 CIMMCO VINMAY (P) LTD. 16 MUNSHI SADRUDDIN LANE, 1 ST FLOOR, KOLKATA (WB) 40000 10 90 40,00,000/- 8 MEHANDIPURA TRADE LINK PVT. LTD., 85, NETAJI SUBHASH ROAD, KOLKATA 50000 10 90 50,00,000/ - 9 JAINEX SECURITIES PVT. LTD., 7 LYONCE RANDE, ROLKATA- 700001 20000 10 90 20 , 00 , 000 / 10 CRITCARE MARKETING PVT. LTD. ISA, RAMAKANT BOSE STREET, KOLKATA-70001 45000 10 90 45,00,000/ 11 S.R. JUTE TRADERS PVT. LTD. 23/1, MAHARISHI DEVINDRA ROAD, KOLKATA-700007 10000 10 90 10 , 00 , 000 / - 12 MABAVIR FIHCON I[P) LTD. 10, CLIVE ROW, 7* FLOOR, ROOM NO. 710, KOLKATA 35000 10 90 35,00,000/ - ; 13 NITIN HIRE PURCHASE (P) LTD. HOUSE NO.2698, MOHALA DHIRANAKODAR DT JALANDHER, KOLKATA 25000 10 90 25,00,000/ - .1 I.T.A. NO.9266 /DEL/2019 10 : 14 FLY HIGH EXPORTS (P) LTD. 4, B.B.D BAGH EAST, STEPHEN HOUSE KOLKATA -700001 25000 10 90 25,00,000/ - 15 . PMB HOLDINGS (P) LTD. 19, SYNAGOGUE STREET, CITY CENTRE 2 FLOOR, KOLKATA 10000 10 90 10 , 00 , 000 / - 16 DEVRAAJ MERCANTILE (P) LTD. 18, RAMAKANT BOSE STREET, KOLKATA -700003 20000 10 90 20 , 00 , 000 / - PRRANETA INDUSTRIES LTD. S 574 - 77 4 TH FLOOR, BELGAUM SQUARE, RING ROAD, SURAT, GUJRAT 250000 10 90 2 00,000 M/S BALAJI FINEAP .'PVT - . LTD., ISA, U - 158, 24 FLOOR, VATS COMPLEX, VIKAS MARG, SHAKARPUR DELHI. 5000 10 90 5,00,000 M/S ANIKAISH PROJECT PVT. LTD., 14, U/158, FLOOR, VATS COMPLEX, VIKAS MARG, SHAKARPUR, DELHI. 10000 10 90 10 , 00,000 7,62,40,000/ - 4. THE ASSESSING OFFICER NOTED THAT, A SEARCH U/S.1 32 WAS CONDUCTED AND THE PREMISES OF ONE, SHRI SHIRISH SHA H AND ALSO A SEQUENTIAL SEARCH WAS CARRIED OUT AT THE RES IDENCE OF SHRI OM PRAKASH KHANDELWAL, DIRECTOR OF M/S. PRRANE TA INDUSTRIES LTD. DURING THE COURSE OF SEARCH, SHRI O M PRAKASH KHANDELWAL HAD EXPLAINED THE ACTIVITIES OF M/S. PRR ANETA INDUSTRIES LTD. AND THE RELEVANT QUESTIONS AND ANSW ERS HAVE BEEN REPRODUCED IN THE IMPUGNED ASSESSMENT ORDER FR OM PAGES 11 TO 19 OF THE ASSESSMENT ORDER. IN THE STAT EMENT SHRI OM PRAKASH KHANDELWAL HAD EXPLAINED THE SOURCE OF I NCOME WHEN COMPANY WAS INCORPORATED, I.E., IN THE YEAR 19 99 AND ALSO MENTIONED THAT THE EVENTS OF THE COMPANY HAS B EEN MANAGED BY SHRI SHIRISH SHAH AND WHEN IT WAS REQUIR ED TO JUSTIFY ITS SHARE CAPITAL AND VARIOUS SHARE APPLICAT ION MONEY RECEIVED BY THE DETAILS OF THE INVESTOR AND ALSO TH E ASSESSEE COMPANY WAS ENGAGED IN PROVIDING ACCOMMODATION ENTR IES I.T.A. NO.9266 /DEL/2019 11 ETC. THE RELEVANT QUESTION AND ANSWER ARE REPRODUCE D HEREUNDER: Q.2 PLEASE GIVE DETAILS OF YOUR SOURCE OF INCOME, IF ANY, ANS. I HAD PROMOTED A COMPANY BY THE NAME OF M/S PR RANETA INDUSTRIES LIMITED IN 1993 THEN KNOWN AS M/S. AADHA R VENTURES INDIA LIMITED, I RECEIVED SALARY FROM THIS COMPANY AS MANAGING DIRECTOR OF THIS COMPANY ON 10.01.2013. IN ADDITION TO SALARY RECEIVED FROM THIS COMPANY I ALSO EARNED COMMISSION INCOME AND INCOME FROM INVESTMENT IN SHARES. ALL THE INCOME EA RNED BY ME IS DULY REFLECTED IN THE RETURNS OF INCOME FILED BY ME . I HAVE FILED THE RETURN OF INCOME TILL A.Y. 2011-12 AND AM IN PROCES S TO FILE THE RETURN FOR A.Y. 2012-13 AND 2013-14. Q.3 .PLEASE PROVIDE THE COMPLETE DETAILS OF THE OFF ICE PREMISES, FACTORIES, GODOWNS, BRANCH OFFICES AND OTHER PLACE OF BUSINESS FROM WHERE THE ACTIVITIES OF M/S PRRANETA INDUSTRIES LIM ITED ARE CARRIED OUT AND WHERE THE BOOKS OF ACCOUNTS OF THIS COMPANY ALONG WITH THE PRIMARY DOCUMENTS IRICLUDING BILLS AND VOUCHERS ARE MAINTAINED. ANS. SIR, THERE IS. ONLY ONE OFFICE OF M/S PRRANETA INDUSTRIES LIMITED AND THE SAME IS SITUATED AT 323, GOLDEN POINT, RING ROAD, NEAR BSNL BHAVAN, SURAT. THERE IS NO OTHER BRANCH OFFICE , FACTORY, GODOUM SITE OFFICE OR ANY OTHER BUSINESS PREMISES O F THE COMPANY, THIS IS THE OFFICE OF THE COMPANY SINCE LAST ONE AN D HALF YEAN EARLIER THE ONLY OFFICE OF THE COMPANY WAS AT 574/ 75, BELG IUM SQUARE, RING ROAD, SURAT SINCE INCEPTION OF THE COMPANY I.E . YEAR 1993. THE BOOKS OF ACCOUNTS SINCE INCEPTION TILL 2008-09 WERE MAINTAINED AT THIS OFFICE ONLY. HOWEVER, SINCE THE AFFAIRS OF THE COMPANY ARE BEING MANAGED BY SHIRISH CHCMDRAKANT SHAH THE BOOKS OF AC COUNTS ARE MAINTAINED BY SHRI DEVANG DINESH CHANDRA MASTER AN ASSOCIATE OF SHIRISHBHDI AT THIS OFFICE SITUATED, AT NAWDB BUILD ING, FORT, MUMBAI. REGARDING BILLS OF PURCHASE AND SALE I WOULD LIKE T O STATE THAT THERE IS NO ACTIVITY IN THE COMPANY NOR THE COMPANY IS DO ING ANY BUSINESS, HOWEVER WHATEVER PURCHASES AND SALES FOR TURNOVER AND ENTRY HAVE BEEN MADE ITS BILLS ARE MAINTAINED BY SH IRISHBHAI AND SHRI DEWANG MASTER. SOME OF THE BILLS WERE SENT BY SHIRISHBHAI FOR INCOME TAX ASSESSMENT PURPOSES FROM MUMBAI AND THE SAME WERE SEIZED BY THE DEPARTMENT DURING THE COURSE OF SEARC H CONDUCTED AT I.T.A. NO.9266 /DEL/2019 12 THE REGISTERED OFFICE OF THE COMPANY ON 09.04.2013. Q.4 PLEASE PROVIDE DETAILS OF THE PROMOTERS OF M/S PRRANETA INDUSTRIES LIMITED AND WHO MANAGES AND CONTROLS THE AFFAIRS OF THE COMPANY INCLUDING THE DAY TO DAY BUSINESS ACTIVITIE S LIKE PURCHASES, SALES, INVESTMENTS, FINANCIAL TRANSACTIO NS LIKE LOANS ADVANCES RECEIVED AND PAID AND OTHER REVENUE GENERA TING ACTIVITIES. ANS. SIR, 1 ALONG WITH MY WIFE SMT. RAJSHREE KHANDE LWAL, MY BROTHER SHRI VIJAY NARAYAN SHARMA (JOSHIJ AND FEW O THER PEOPLE PROMOTED, THIS COMPANY IN 1993 AND SHARE CAPITAL OF RS. 1 LACS. THE COMPANY WAS LISTED AT BSE IN 1996 AND TRUE SHARE CA PITAL WAS RAISED TO RS, 8,15,21,000/-. HOWEVER, THE ENTIRE IN CEPTION TIL 2008, THEREAFTER, THE ENTIRE AFFAIRES OF THE COMPANY ARE MANAGED BY SHIRISH CHANDRAKANT SHAH, Q.5 ON PERUSAL OF THE ANNUAL ACCOUNTS FOR F.Y. 2008 -09 TO 2011-12 OF M/S PRRANETA INDUSTRIES LIMITED FILED WITH ROC A ND CERTIFIED AND SIGNED BY YOU AS MANAGING DIRECTOR OF THE COMPANY T HERE HAS BEEN SIGNIFICANT RECEIPT OF FUNDS IN FORM OF SHARE CAPIT AL, SHARE APPLICATION MONEY, SECURITIES PREMIUM. THE DETAILS OF THE SAME ARE AS UNDER: PARTICULARS F.Y. 2008-09 F.Y, 2009-10 F.Y, 2010-11 F.Y. 2011-12 SHARE CAPITAL 81,521,000 225 ,721,000 225,721,000 225,721,000 MONEY 544,885, RECEIVED AGAINST SHARE WARRANTS SECURITIES 180,250,004 180,250,004 180,250,004 PREMIUM RESERVE SHARE 1,201,080,000 2,508,42 APPLICATION MONEY PENDING ALLOTMENT IN THIS REGARD YOU ARE REQUESTED TO PROVIDE THE DET AILS OF THE INVESTORS, PRODUCE THE SHARE APPLICATION FORMS AND ALSO PRODUCE THE BOARD RESOLUTIONS ED FOR INVITING INVESTMENT THROUG H PROVATE PLACEMENT ALSO PROVIDE DETAILS AS THESE FUNDS WERE USED. - THE ENTIRE WORK OF RAISING THE SHARE CAPITAL OF T HE COMPANY WAS DONE CKANDRAKANT SHAH. HE ALONG WITH DEVANG DINESH CHANDRA MASTER -RIVATE PLACEMENT OF SHARES OF M/S PRRANETA INDUSTRIES I.T.A. NO.9266 /DEL/2019 13 LIMITED, I VESTORS, NOR THE COMPANY IS IN POSSESSI ON OF SHARE APPLICATION *HESE INVESTORS. AS PER MY KNOWLEDGE NO BOARD RESOLUTION NY OF THE PROMOTERS OF THE COMPANY IN TH IS REGARD. THIS SHIRISH CHANDRAKANT SHAH SO AS TO PROVIDE ONE TIME SHARE CAPITAL, UNSECURED LOANS AND LTCG, THE PURPOSE FOR WHICH HE TOOK CONTROL AND MANAGEMENT OF MY COMPANY. WITH REGARD TO THE UT ILIZATION OF THE FUNDS ALSO I AM NOT AWARE AS THESE FUNDS WERE R ECEIVED IN THE BANK ACCOUNTS OPERATED AND CONTROLLED BY SHIRISH BH AI AT MUMBAI AND PAID TO VARIOUS PARTIES FROM THOSE BANK ACCOUNT S. HOWEVER, I CAN SURETY SAY THAT THESE FUNDS WERE OT USED FOR AN Y OF THE BUSINESS ACTIVITIES OF THE COMPANY LIKE PURCHASE, S ATE, INVESTMENTS ETC. THE RECEIPT AND PAYMENT OF FUNDS BOTH ARE NOT GENUINE TRANSACTIONS, BUT, PART OF THE ACCOMMODATION ENTRY BUSINESS OF SHIRISHBHAI OPERATED THROUGH MY COMPANY M/S PRRANET A INDUSTRIES LIMITED. I WOULD LIKE TO CLARIFY THAT SHIRISHBHAI D ID NOT PAY ME THE COMMISSION EARNED BY HIM FROM ENTRY BUSINESS, AS AG REED BY HIM WHEN THE' CONTROL AND MANAGEMENT OF THE COMPANY WAS HANDED OVER TO HIM, THUS, I WITHDREW MYSELF FROM THE ENTRY BUSINESS OF THE COMPANY, 1 HAM BEEN REQUESTING SHIRISHBHAI SINCE PA ST 2-3 YEARS FOR FILING REVISED FORM NO. 32 WITH ROC AND WITHDRA WING ME FROM THE POST OF MANAGING DIRECTOR OF THE COMPANY IN JAN 2013. Q-6 PLEASE COMPANY DETAILS OF THE BUSINESS ACTIVITI ES OF M/S. PRRANETA INDUSTRIES LIMITED SINCE INCEPTION. ARTS. THE COMPANY HAS BEEN ENGAGED IN PROVIDING ACC OMMODATION ENTRIES OF PURCHASE, SALE, LOANS, ADVANCES AND ONE TIME ENTRY OF SHARE CAPITAL INTRODUCTION TO THE CLIENTS. 1 MANAGE D THE ENTIRE BUSINESS TILL YEAR 2008. IN YEAR 2006, I RECEIVED T HE PROPOSAL FROM SHIRISH CHANDRAKANT SHAH OF MUMBAI WHOM I KNEW THRO UGH SOME COMMON FRIENDS. HE INFORMED ME THAT HE IS IN THE BU SINESS OF PROVIDING ACCOMMODATION ENTRIES OF BOGUS LTCQ TO VA RIOUS CLIENTS ON RECEIPT OF COMMISSION. SHIRISHBHAI PROPOSED THAT HE IS INTERESTED IN USING M/S PRRANETA INDUSTRIES LIMITED FOR PROVID ING ACCOMMODATION ENTRIES OF LTCG AND FOR THIS HE TOLD ME THAT THE COMMISSION RECEIVED FROM PROVIDING THE ACCOMMODATIO N ENTRIES WILL BE SHARED EQUALLY BETWEEN ME AND HIM FOR THIS SHIRI SHBHAI REQUESTED ME TO TRANSFER THE SHARES OF M/S PRRANETA INDUSTRIES LIMITED UNDER MY CONTROL TO THE PERSONS AND COMPANI ES SPECIFIED BY HIM. I AGREED TO THE PROPOSAL AND THE SHARES OF M/S PRRANETA I.T.A. NO.9266 /DEL/2019 14 INDUSTRIES LIMITED UNDER MY CONTROL WERE TRANSFERRE D TO THE PERSONS SPECIFIED BY SHIRISHBHAI PARTLY THROUGH OFF MARKET SALE AND PARTLY THROUGH SYNCHRONIZED TRADING AT BSE. Q.7 IN REPLY TO QUESTION NO. 6 YOU HAVE STATED THAT YOU MANAGED THE BUSINESS OF THE COMPANY TILL 2008. PLEASEE EXPLAIN WHEN YOU GAVE CONTROL OF THE COMPANY TO SHIRISH CHANDRAKANT SHAH IN YEAR 2006, HOW WERE YOU AND TO WHAT EXTENT CONTROLLING THE ACT IVITIES OF M/S. PRRANETA INDUSTRIES LIMITED. ANS. SIR, IN THE YEAR 2006 THE CONTROL OVER THE SHA RES AND ITS TRADING SO AS TO FIVE ACCOMMODATION ENTRIES OF LTCG WAS HAN DED OVER TO SHIRISH CHANDRAKANT SHAH, HOWEVER, THE OTHER ACCOMMODATION ENTRIES BEING PROVIDED BY THE COMPANY INCLUDING THE ONE TIME ENTRIES WERE BEING ENTIRELY MANAGED BY ME FROM SURA T. IN YEAR 2008-09, SHIRISHBHAI TOLD ME THAT HE WILL ISSUE SHA RES THROUGH PRIVATE PLACEMENT TO VARIOUS INVESTORS FOR PROVIDIN G ACCOMMODATION ENTRIES OF SHARE CAPITAL AND FOR THIS PURPOSE HE OP ENED A HANK ACCOUNTS IN THE NAME OF M/S PRRANETA INDUSTRIES LIM ITED AT MUMBAI AND ON HIS REQUEST JEW DUMMY DIRECTORS AS SPECIFIED BY HIM WERE APPOINTED BY THE COMPANY. THE DUMMY DIRECTORS APPOI NTED BY SHIRISHBHAI ARE JULLS RAICHAND MADAN, MRS. JYOTI MU NVER, MR. RIF AN THAKORE, MR. MONISH THAKKAR. THE AUTHORITY TO OPERA TE THESE ACCOUNTS WAS VESTED WITH SOME OF THESE DIRECTORS AN D. SHRI RADHE SHY AM SHARRNA, DIRECTOR OF THE COMPANY AT THAT TIM E AND MY EMPLOYEE. THEREAFTER, THE FUNDS RECEIVED IN THE COM PANY WERE USED BY SHIRISHBHAI TO PROVIDE ONE TIME ENTRIES. HOWEVER , AFTER 2008-09 THE ENTIRE AFFAIRS OF M/S PRRANETA INDUSTRIES LIMIT ED WERE BEING MANAGED AND CONTROLLED BY SHIRISHBHAI. ON PERUSAL O F THE BANK ACCOUNTS OF M/ PRRANETA INDUSTRIES LIMITED AT SURA T HELD WITH THE KARUR VYSYA BANK LIMITED, PARLE POINT, AND OPERATED BY ME, IT WOULD BE CLEAR THAT NO SIGNIFICANT DEPOSITS OR WITH DRAWALS ARE MADE IN THESE BANKS ACCOUNTS RELATING TO THE BUSINESS AC TIVITIES OF THIS COMPANY. SIMILARLY, THE BANK ACCOUNTS OPERATED AND MAINTAINED BY SHIRISHBHAI AT MUMBAI WILL BE HAVING ALL THE DEPOSI TS AND WITHDRAWALS RELATING TO THE ENTRY BUSINESS OF PRRAN ETA INDUSTRIES LIMITED INCLUDING TURNOVER ENTRIES, Q.8 IN REPLY TO QUESTION ABOVE YOU HAVE STATED THAT SINCE INCEPTION M/S PRRANETA INDUSTRIES LIMITED WAS ENGAGED IN PROV IDING I.T.A. NO.9266 /DEL/2019 15 ACCOMMODA TION ENTRIES OF VARIOUS TYPES. PLEASE EXP LAIN THE MODUS OPERANDI OF PROVIDING ACCOMMODATION ENTRIES. ANS. SIR, THE ENTRY BUSINESS IN M/S PRRANETA INDUST RIES LIMITED STARTED MAINLY AFTER THE RECEIPT OF FUNDS RAISED TH ROUGH IPO IN THE YEAR 1996. THROUGH IPO FUNDS AGGREGATING TO 8,15,21 ,000/~ WERE MANAGED TO BE RAISED. THE FUNDS RAISED THROUGH IPO WERE USED TO GIVE ENTRIES OF SHARE CAPITAL, UNSECURED LOANS, ADV ANCES OR INTER CORPORATE DEPOSITS WAS PROVIDED USED TO GIVE CHEQUE S TO SQUARE OFF THE ACCOUNT IN THEIR BOOKS. THESE CHEQUES WERE USED TO PROVIDE ACCOMMODATION ENTRIES TO OTHER PARTIES WHOSE ACCOUN TS WERE SQUARED OFF ON RECEIPT OF CHEQUES. ONE TIME ENTRIES OF SHARE CAPITAL WAS ALSO PROVIDED TO CLIENTS. IN THIS TYPE OF ENTRIES TWO TYPES OF MODUS OPERANDI WERE EM PLOYED. FIRSTLY, SHARE CAPITAL OF THE CLIENT COMPANY WAS SUBSCRIBED FROM WHOM CASH AND COMMISSION WERE RECEIVED. ALONG WITH THE SHARE APPLICATION FROM SHARE TRANSFER FORMS WERE HANDED OVER TO THE C LIENTS AND FINALLY THE SHARES WERE TRANSFERRED TO THE PERSONS DESIGNATED BY THE CLIENT AT NORMAL PRICES. SECONDLY, SHARE APPLICATIO NS WERE MADE IN THE CLIENT COMPANIES AND FIRST CALL PAYMENTS WERE M ADE AS PER THE UNDERSTANDING WITH THE CLIENT AND THE CASH RECEIVED FROM THEM. THEREAFTER, THE CLIENT COMPANY USED TO CALL FOR THE ARREAR CALLS AMOUNT AND GAVE A NOTICE THAT FAILING, THE PAYMENT OF THE REMAINING CALL AMOUNT THE SHARE APPLICATION MONEY WOULD BE FO RFEITED. AS .PER THE UNDERSTANDING THE ARREAR CALLS WERE NOT PAID AN D THE SHARE APPLICATION MONEY WAS FORFEITED BY THE CLIENT COMPA NY. IN THIS WAY THE CASH RECEIVED FROM THE CLIENT WAS INTRODUCED BA CK IN THEIR COMPANY AS SHARE FORFEITURE AMOUNT WITHOUT ANY OBLI GATION TO. PAY BACK. Q.9 PLEASE PROVIDE DETAILS OF COMMISSION CHARGED BY YOU FOR PROVIDING ACCOMMODATION ENTRIES TO VARIOUS CLIENTS AND WHETHER SUCH COMMISSION INCOME WAS OFFERED TO TAX, IF YES, PLEASE EXPLAIN HOW. ANS. SIR, AFTER DEDUCTING THE EXPENSES COMMISSION @ 1.8% PER ANNUM WAS CHARGED FOR PROVIDING ACCOMMODATION ENTRI ES OF UNSECURED LOANS, INTER-CORPORATE DEPOSITS AND LOANS AND ADVANCES. FOR PROVIDING ONE-TIME ACCOMMODATION ENTRIES OF SHA RE CAPITAL INTRODUCTION COMMISSION @2% WAS CHARGED. THIS INCOM E WAS NOT I.T.A. NO.9266 /DEL/2019 16 REFLECTED IN THE BOOKS OF ACCOUNTS. HOWEVER, IN CER TAIN CASES BOGUS INTEREST PAYMENTS RECEIVED FROM CLIENTS AGAINST LOA N ENTRIES WAS REFLECTED IN THE BOOKS OF AMOUNTS, 7'HIS INTEREST W AS RECEIVED FROM THE CLIENTS SO AS TO GIVE LEGITIMATE COLOUR TO THE ACCOMMODATION ENTRY OF LOANS AND ADVANCESHOWEVER, THE INTEREST RECEIVED THROUGH CHEQUES WAS PAID IN CASH TO THE CLIENTS AND WAS NOT ACTUAL INCOME OF THE COMPANY, BUT, HOWEVER, THE SAME WAS REFLECTE D IN THE BOOKS OF M/S PRRANETA INDUSTRIES LIMITED. Q.10) PLEASE PROVIDE THE YEAR WISE DETAILS OF THE P ERSONS TO WHOM ACCOMMODATION ENTRIES OF LOAN, ADVANCES, INTER CORP ORATE DEPOSITS, INVESTMENTS THAT HAVE BEEN PROVIDED BY YOU THROUGH M/S PRRANETA INDUSTRIES LIMITED. ANS. SIR, ALL THE LOAN, ADVANCES INTER CORPORATE DE POSITS, INVESTMENT ENTRIES APPEARING IN THE BOOKS OF ACCOUNTS OF M/S P RRANETA. INDUSTRIES LIMITED. ARE ACCOMMODATION ENTRIES AS TH ERE HAS NOT BEEN ANY BUSINESS ACTIVITY I THE COMPANY SINCE ITS INCEPTION, AS ALREADY STATED BY ME ABOVE. THUS, ON PERUSAL OF THE BOOKS OF M/S PRRANETA INDUSTRIES LIMITED. YOU CAN IDENTIFY THE C LIENTS TO WHOM ACCOMMODATION ENTRIES HAVE BEEN PROVIDED. Q. 11 PLEASE ALSO EXPLAIN THE TYPES OF BOGUS ACCOMM ODATION ENTRIES PROVIDED BY SHIRISH CHANDRAKANT SHAH USING THE BANK ACCOUNTS AND THE BOOKS OF ACCOUNTS OF M/S PRRANETA INDUSTRIE S LIMITED. ANS. SIR, SHIRISHBHAI WAS MAINLY ENGAGED IN PROVIDI NG BOGUS LTCG ENTRIES TO HIS CLIENTS USING THE SHARES OF M/S PRRA NETA INDUSTRIES LIMITED. AND THE NUMBER OF COMPANIES MANAGED BY HIM . THE COMPLETE MODUS OPERANDI FOLLOWED BY HIM IS NOT KNOW N TO ME. HOWEVER, AS PER MY KNOWLEDGE AND UNDERSTANDING BETW EEN US AND DISCUSSED HE USED TO CONVERT CASH RECEIVED FROM THE CLIENTS INTO LTCG USING HIS EXPERTISE IN DEALING IN SHARES AND S ECURITIES THROUGH SYNCHRONIZED TRADING. HE ALSO USED THE BANK ACCOUNT S OF M/S PRRANETA INDUSTRIES LIMITED. TO PROVIDE ONE TIME EN TRIES. Q. 12 AS PER THE FINAL ACCOUNTS OF M/S PRRANETA INDUSTRIES L IMITED. SIGNED AND CERTIFIED BY YOU AS MANAGING DIRECTOR FOR THE F INANCIAL YEARS 2008-09 TO 2011-12 AND FILLED WITH ROC IT IS SEEN T HAT M/S PRRANETA INDUSTRIES LIMITED. MAS TURNOVER, INCOME AND EXPENS ES AS UNDER: PARTICULARS F.Y. 2008-09 F.Y. 20 09-10 F.Y. 2010-11 2011-12 TOTAL TURNOVER 653.55,080 5366,72,892 2,655,541,196 1,727,09 7,811 I.T.A. NO.9266 /DEL/2019 17 INCOME FROM STAES OF SHARES 34,82,730 74, 37,557 INCOME FROM SALE OF FABRIC AND CLOTHS 606,52,510 1865,98,568 INCOME FROM ROAD AND INFRASTRUCTURE PROJECTS EXPENSES FOR PURCHASE OF RAW MATERIAL 1846,99,643 2,633 ,445,588 1,259,326,252 EXPENSESFOR ROAD CONSTRUCTION 3317,53,4,887 377,43,243 4497,88,601 PLEASE COMMENT REGARDING THE GENUINENESS OF THE. TU RNOVER OF THE COMPANY AND THE EXPENSES RECORDED IN THE BOOKS OF A CCOUNTS OF THE COMPANY, AS RECORDED ABOVE. ALSO PRODUCE EVIDENCE W ITH REGARD TO RECEIPT AND DELIVERY OF THE GOODS I.E, FABRICS AND CLOTH PURCHASED AND SOLD BY THE COMPANY. ANS. SIR, AS ALREADY STATED, BY ME IN MY STATEMENT, ABOVE, M/S PRRANETA INDUSTRIES LIMITED. SINCE ITS INCEPTION IS ENGAGED IN THE ACTIVITY OF PROVIDING ACCOMMODATION ENTRIES TO VARI OUS CLIENTS OF SHARE CAPITAL, UNSECURED LOANS, INTER CORPORATE DEP OSITS ETC., MOREOVER, IT IS LISTED COMPANY, THUS, TO KEEP THE C OMPANY ALIVE TURNOVER ENTRIES WERE GIVEN AND RECEIVED FROM VARIO US PARTIES. THOUGH, MOST OF THE TURNOVER AS RECORDED BY YOU IN THE QUESTION, ABOVE, IS BOGUS AND A MERE BOOK ENTRY, IN SOME CASE S BOGUS ENTRIES OF PURCHASE AND EXPENSES MIGHT HAVE BEEN PROVIDED T O CERTAIN PARTIES. MORE DETAILS IN THIS REGARD CAN ONLY BE PR OVIDED BY SHIRISH BHAI FOR THE PERIOD AFTER 2008-09. HOWEVER, BEING T HE MANAGING DIRECTOR OF THE COMPANY LEAN SURELY SAY THAT THERE IS NO REAL BUSINESS ACTIVITY IN THE COMPANY AND THE ENTIRE TUR NOVER AND EXPENSES CREDITED AND DEBITED TO THE P/L ACCOUNT EX CEPT FOR FEW DAY TO DAY MAINTENANCE AND SALARY EXPENSES ARE BOGU S. AS NO REAL GOODS WERE PURCHASED AND SOLD EVIDENCES WITH REGARD TO THE DELIVERY AND RECEIPT OF GOODS CANNOT BE PRODUCED BY ME. I WOULD LIKE TO CLARIFY THAT ANNUAL ACCOUNTS FILED WITH ROC FOR F.Y. 2011-12 HAVE NOT BEEN SIGNED BY ME AND MY SIGNATURES ON THE ANNUAL RETURN HAVE BEEN FORGED. Q.13 I AM SHOWING YOU THE STATEMENT OF SHIRISH CHANDRAKANT SHAH RECORDED UNDER SECTION 132 (4) OF THE ACT, DURING THE COURSE SEARCH ON 13.04.2013. IN REPLY TO QUESTION NO. 8, HE HAS STATED THAT HE IS MANAGING AND CONTROLLING T HE AFFAIRS OF VARIOUS LISTED COMPANIES INCLUDING M/S PRRANETA IND USTRIES LIMITED, 1,875,562,713 1,260,202,839 4587,97,947 I.T.A. NO.9266 /DEL/2019 18 {KNOW AADHAR VENTURES INDIA LIMITED). FURTHER, IN R EPLY TO QUESTION NO. 9 HE HAS STATED THAT HE HAS USED THE NETWORK OF VARIOUS COMPANIES MANAGED AND CONTROLLED BY MM FOR PROVIDIN G ONE TIME AND BOGUS LTCG ENTRIES ON RECEIPT OF CASH FROM THE CLIENTS. HOWEVER, HE HAS CLARIFIED THAT IN CASE OF LISTED CO MPANIES HE IS INVOLVED ONLY TO THE EXTENT OF PROVIDING ACCOMMODAT ION ENTRIES AND WHATEVER, BOGUS BILLS OF PURCHASE AND SALE HAVE BEE N ISSUED BY THE LISTED COMPANIES (INCLUDING Y OUR COMPANY) HAVE BEE N ISSUED BY THE PROMOTERS AND HE HAS NO ROLE TO PLAY IN THE 'ISSUE OF SUCH BOGUS BILLS. HOWEVER, YOU HAVE STATED THAT THE BOGUS TURNOVER EN TRIES OF PURCHASES AND SALE OF M/S PRRANETA INDUSTRIES LIMIT ED. ARE BEING MANAGED AND CONTROLLED BY SHIRISH CHANDRAKANT SHAH, WHEREAS HE HAS CATEGORICALLY DENIED TO HAVE ISSUED BOGUS PURCH ASE AND SALE ENTRIES. INFACT AS PER HIS STATEMENT REFERRED ABOVE THE BOGUS BILLS HAVE BEEN ISSUED BY THE PROMOTERS AND IN YOUR STATE MENT ABOVE YOU HAVE CLEARLY STATED THAT ON BEHALF OF THE PROMOTERS ENTIRE AFFAIRS OF THE COMPANY ARE BEING MANAGED AND CONTROLLED BY YOU . IN THIS REGARD YOU ARE REQUESTED TO GO THROUGH THE STATEMENT OF SHIRISH CHANDRAKANT SHAH AND OFFER YOUR COMMENTS- ARTS. SIR, I HAVE GONE THROUGH THE STATEMENT OF SHI RISH CHANDRAKANT SHAH AND I AM NOT IN AGREEMENT WITH THE STATEMENT W HEREIN HE HAS STATED THAT THE BOGUS BILLS OF PURCHASE AND SALES O F GOODS BY THE LISTED COMPANIES ARE BEING ISSUED THE PROMOTERS AS FAR AS MY COMPANY M/S PRRANETA INDUSTRIES LIMITED, IS CONCERN ED. I HOWEVER, AGREE WITH OTHER PARTS OF HIS STATEMENT WHEREIN HE HAS STATED THAT HE HAS USED THE LISTED COMPANIES MANAGED AND CONTRO LLED BY HIM INCLUDING MY COMPANY M/S PRRANETA INDUSTRIES LIMITE D, TO PROVIDE VARIOUS TYPES OF ACCOMMODATION ENTRIES Q.15 I AM SHOWING YOU LOOSE PAPER FILE INVENTORIESD AS ANNEXURE BS-2 (PAGES 1 TO 135), THIS FILE CONTAINS CERTAIN A GREEMENTS ENTERED INTO BY MY COMPANY M/S PRRANETA INDUSTRIES LIMITED, WITH PACL INDIA. LIMITED FOR EXECUTION OF LAND DEVELOPMENT WO RK IN TAMILNADU, THIS FILE ALSO CONTAINS THE AGREEMENTS ENTERED INTO BY M/S PRRANETA INDUSTRIES LIMITED, WITH SOME COMPANIES IN KILKATA WHEREIN THE WORK CONTRACTED BY M/ S PACL INDIA LIMITED HAS BEEN SUB- CONTRACTED TO THESE COMPANIES BASED IN KOLKATA. THI S FILE ALSO CONTAINS THE INVOICES RAISED BY M/S PRRANETA INDUST RIES LIMITED, ON I.T.A. NO.9266 /DEL/2019 19 PACL INDIA LIMITED AND BY SUB-CONTRACTORS ON M/S PR RANETA INDUSTRIES LIMITED. THESE FILES WERE BROUGHT BY ME AND SHRI RADHE SHYAM SHARMA, MY EMPLOYEE FROM SHIRISH BHAIS RESID ENCE AT MEGHDOOT, MARIN LINES MUMBAI. HE ASKED US TO KEEP T HE FILED AT THE REGISTERED OFFICE OF TH COMPANY IN CASE SOME ENQUIR Y IS CONDUCTED BY INCOME TAX OR ANY OF THE DEPARTMENT. IN REPLY TO VARIOUS QUESTIONS IN THIS STATEMENT YOU HAVE STATED THAT M/S STA INDUSTRIES LIMITED, DOES NOT HAVE ANY REAL BUSINESS ACTIVITIES, BUT, IS ONLY ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES. PLEASE EXPLAIN AS TO HOW SUC H BIG CONTRACTS OF LAND DEVELOPMENT WERE AWARDED TO YOUR COMPANY. A LSO EXPLAIN AS TO HOW THESE CONTRACTS WERE EXECUTED AND THE KEY PERSONS RESPONSIBLE FOR EXECUTION OF THIS CONTRACT. ANS. SIR, IT IS TRUE THAT M/S PRRANETA INDUSTRIES L IMITED, DOES NOT HAVE ANY BUSINESS ACTIVITIES OTHER THAN PROVIDING A CCOMMODATION ENTRIES. THE CONTRACT WITH M/S PACL INDIA LIMITED I S ALSO NOT A GENUINE CONTRACT. IT MIGHT BE A TURNOVER ENTRY OR B OGUS BILLING ENTRY DONE BY SHIRISH CHANDRAKANT SHAH. AS MANAGING DIREC TOR OF THE COMPANY I CAN SURELY SAY THAT MY COMPANY M/S PRRANE TA INDUSTRIES LIMITED, DID NOT EXECUTE ANY LAND DEVELO PMENT CONTRACT IN TAMIL NADU OR ANY OTHER PART OF THE COUNTRY TILL DA TE. Q.17 PLEASE PRODUCE THE CONTRACT AG NTS, INVOICE RA ISE DBY M/S PRRANETA INDUSTRIES LIMITED, AND EVIDENCES INCLUDIN G BILLS VOUCHERS OF THE EXPENSES INCURRED WIH REGARD TO THE ROAD AND INFRASTRUCTURE PROJECTS EXECUTED BY M/S PRRANETA INDUSTRIES LIMITE D, IN WHICH CONTEXT AND INCOME OF RS. 45.88 CRORES HAS BEEN SHO WN IN THE AUDITED ACCOUNTS FOR F.Y. 2011-12. AM. SIR, I DO NOT HAVE ANY IDEA WITH REGARD, TO ANY ROAD DEVELOPMENT PROJECTS EXECUTED BY M/S PRRANETA INDUS TRIES LIMITED, TILL DATE. AS ALREADY STATED IN MY STATEMENT THAT M /S PRRANETA INDUSTRIES LIMITED, IS NOT ENGAGED IN ANY BUSINESS ACTIVITY, THUS THERE IS NO QUESTION OF EXECUTING ANY ROAD DEVELOPM ENT PROJECT. NO BILLS OR INVOICES WITH REGARD TO THESE CONTRACTS HA VE BEEN RAISED FROM THE OFFICE OF M/S PRRANETA INDUSTRIES LIMITED, NEITHER ANY BILLS NOR OTHER DETAILS, CONTRACTS HAVE BEEN RECEIVED FRO M SHIRISHBHAI PERTAINING TO ROAD DEVELOPMENT PROJECTS. Q.18 YOU ARE GIVEN AN OPPORTUNITY TO GO THROUGH THE STATEMENT GIVEN I.T.A. NO.9266 /DEL/2019 20 BY YOU AND CONFIRM AS TO WHETHER THE SAME HAS BEEN RECORDED AS STATED BY YOU. IN CASE YOU WANT TO MAKE ANY CLARIFI CATIONS, CORRECTIONS OR A NOTIFICATION TO WHAT HAS BEEN RECO RDED, YOU CAN STATE THE SAME. ANS. SIR, I HAVE GONE THROUGH THE ENTIRE STATEMENT AND I CONFIRM THAT WHAT HAS BEEN STATED BY ME HAS BEEN RECORDED AS STA TED BY ME. I DO NOT WANT TO MODIFY OR CORRECT AND THE FACTS STAT ED BY ME AND RECORDED IN THIS STATEMENT ABOVE. HOWEVER, I WOULD LIKE TO STATE THAT IT WAS OPERATING A SMALL ACCOMMODATION ENTRY BUSINE SS USING MY COMPANY M/S PRRANETA INDUSTRIES LIMITED, SINCE INCE PTION TILL 2008- 09. HOWEVER, AFTER THE CONTROL TO THE EXTENT OF THE ENTRIES RECORDED IN THE BANK ACCOUNTS MAINTAINED BY THE COMPANY AT SURA T AND WHATEVER BOGUS ACCOMMODATION ENTRIES, BOGUS BILLS H AVE BEEN ISSUED BY THE COMPANY WHICH ARE REFLECTED IN THE BANK ACCOUNTS MAINTAINED AT MUMBAI HAVE BEEN EFFECTED ONLY BY SHI RISH BHAI AND I HAVE NO ROLE TO PLAY I THOSE ACCOMMODATION ENTRIE S AND NEITHER I GOT ANY SIGNIFICANT INCOME REGARDING THOSE ENTRIES. I AGAIN CONFIRM THAT SINCE INCEPTION NO GENUINE BUSINESS TRANSACTIO NS HAVE BEEN MADE BY M/S PRMNETA INDUSTRIES LIMITED AND THE COMP ANY HAS BEEN INVOLVED IN PROVIDING ACCOMMODATION ENTRIES. 5. FROM THE ABOVE STATEMENT, THE ASSESSING OFFIC ER STATED THAT THE MANAGING DIRECTOR OF M/S. PRRANETA INDUSTR IES LTD., SHRI OM PRAKASH KHANDELWAL HAS ADMITTED IN HIS STAT EMENT RECORDED U/S.132 THAT THE COMPANY WAS INVOLVED IN P ROVIDING ACCOMMODATION ENTRIES AND WAS NOT DOING ANY OTHER B USINESS AND ALL THE ENTRIES APPEARING IN THE BOOKS ARE BOGU S. HE FURTHER OBSERVED THAT THE SAME STATEMENTS WERE REPR ODUCED IN THE ASSESSMENT ORDER OF M/S. PRRANETA AS WELL AS SHRI SHIRISH SHAH. THEREAFTER, HE OBSERVED CERTAIN INQUI RIES DONE BY THE INVESTIGATION WING, KOLKATA WITH REGARD TO S HARE CAPITAL RECEIVED FROM KOLKATA BASED COMPANIES AND A LSO THE INFORMATION AND INQUIRIES DONE BY THE INVESTIGATION WING, I.T.A. NO.9266 /DEL/2019 21 KOLKATA AND FROM THERE HE OBSERVED THAT THE INVESTO R COMPANIES HAS FOUND TO BE BOGUS. BEFORE THE ASSESSI NG OFFICER THE ASSESSEE HAS FILED THE VARIOUS MATERIAL S AND DOCUMENTS WHICH ACCORDING TO ASSESSING OFFICER WERE NOT SUBSTANTIATED. THE ASSESSEE HAD RAISED THE SPECIFIC OBJECTION THAT IN THE RE-ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER CANNOT MADE ADDITION ON THE ISSUES WHICH ARE MENTIO NED IN THE REASONS RECORDED. HOWEVER, THE LD. ASSESSING OF FICER REJECTED THE ASSESSEES CONTENTION AFTER REFERRING TO EXPLANATION 3 TO SECTION 147. THEREAFTER, ASSESSING OFFICER ELABORATED JUDICIAL PRINCIPLES WITH REGARD TO BURDE N OF PROOF U/S.68 AS LAID DOWN BY VARIOUS COURTS WHICH HAS BEE N ELABORATED BY HIM FROM PAGES 31 TO 44. FINALLY, HE HAS MADE THE ADDITION OF RS.7,62,40,000/- AFTER OBSERVING AN D HOLDING AS UNDER: 28. THE REPLY FURNISHED BY THE ASSESSEE HAS BEEN CONSIDERED BUT THE SAME IS TENABLE. THE AR HAS AGAI N RAISED THE BASELESS GROUND THAT COMPLETE STATEMENTS AND OTHER DOCUMENTS WERE NOT PROVIDED TO HIM, THOUGH AL L RELEVANT PAPERS WERE HANDED OVER TO EARLIER AR OF T HE COMPANY. MOREOVER, THE CD CONTAINING VARIOUS STATEM ENTS AND- COPY OF INSPECTOR REPORT WAS FORWARDED ALONG W ITH THE FINAL SHOW CAUSE NOTICE. ON THE OTHER HAND, THE AR STILL AT THE TIME OF FRAMING ASSESSMENT ORDER DID NOT PROVID ED THE INFORMATION THAT WERE CALLED VIDE THIS OFFICE NOTIC E ISSUED U/S 142(1) DATED 13/09/2017. MOREOVER THE SUMMONS S O ISSUED ALSO REMAINED UNCOMPLIED WITH. I.T.A. NO.9266 /DEL/2019 22 29. THE ASSESSEE HAS TRIED HARD TO PROVE THAT HE IS AGGRIEVED AND ACTION IS BEING TAKEN AGAINST HIM FOR NOTHING. WHEREAS THE FACT IS THAT THE ASSESSEE COMPANY HAS ARRANGED BOGUS FUNDS WITHOUT PAYING ANY TAX TO THE EXCHEQUER. THE FACTS OF THE CASE AND THE CIRCUMSTAN TIAL EVIDENCES ARE AGAINST THE ASSESEEE. THE INFORMATION RECEIVED FROM DIE ADIT(INV.) KOLKATA IS BASED ON FA CTS AND THE REPORT HAS BEEN SENT BY HIM AFTER KEEPING IN VI EW ALL THE FACTS AND CIRCUMSTANCES. THE INVESTIGATION REPORT T HUS PROVED THE DOUBTS HARBOURING ON BOGUS INVESTMENT AS TRUE AND THE ASSESSEE COMPANY HAS SHOWN INVESTMENTS ITS OWN. MONEY FROM BOGUS SHELL COMPANIES BY MAKING SHAM TRANSACTIONS. DURING THE YEAR, THE COMPANY HAS OBTA INED INVESTMENT IN ITS SHARE CAPITAL INCLUDING PREMIUM T O THE TUNE OF RS.7,62,40,000/- WHICH HAS BEEN PROVED AS B OGUS AFTER INVESTIGATION AND IS DISALLOWED AND ADDED BAC K TO THE INCOME OF THE ASSESSEE AS PER THE PROVISIONS OF SEC TION 68 OF THE I.T.ACT. THE ASSESSEE COMPANY IS MISERABLY FAIL ED TO PROVE THE GENUINENESS, IDENTITY AND CREDITWORTHINES S OF THE INVESTOR COMPANIES/ENTITIES. PENALTY U/S 271(L)(C) FOR CONCEALMENT OF THE PARTICULARS OF ITS INCOME HAVE B EEN INITIATED SEPARATELY. [ADDITION RS.7,62,40,000/-] 6. LD. CIT (A) HAS CONFIRMED THE ASSESSMENT ORDER A ND THE FINDINGS OF THE ASSESSING OFFICER IN ALL THE ASPECT S AND REJECTED ALL THE CONTENTIONS RAISED BY THE ASSESSEE IN RELATION TO VALIDITY OF REOPENING AND ADDITION ON MERITS. I.T.A. NO.9266 /DEL/2019 23 7. THE GROUND NO. 1 OF THE APPEAL RELATES TO LACK O F PROPER OPPORTUNITY BY FIRST APPELLATE AUTHORITY. IT HAS BE EN CONTENDED BY SH. R.S. SINGHVI, AR THAT CIT (A) HAS NOT AFFORDED PROPER OPPORTUNITY OF HEARING WHILE DECIDI NG THE APPEAL AND THE APPEAL HAS BEEN DECIDED ON THE BASIS OF WRITTEN SUBMISSIONS FILED BEFORE ERSTWHILE CIT (A). 8. ON PERUSAL OF IMPUGNED ORDER OF CIT (A), IT IS N OTED THAT DETAILED SUBMISSIONS FILED BY THE APPELLANT HAS BEE N REPRODUCED THEREIN AND HAS BEEN DEALT WITH BY THE C IT (A) WHILE DECIDING THE APPEAL. NO SPECIFIC INSTANCE HAS BEEN BROUGHT TO OUR NOTICE TO SHOW THAT OPPORTUNITY TO F ILE NECESSARY SUBMISSIONS OR DOCUMENTS WAS NOT GIVEN. I N THESE CIRCUMSTANCES, WE DONT FIND ANY MERIT IN THIS GROU ND OF THE APPEAL AND SAME IS DISMISSED. 9. ON THE ISSUE OF ASSUMPTION OF JURISDICTION U/S.14 7/148, LD. COUNSEL FOR THE ASSESSEE MADE ELABORATE SUBMISS IONS ON THIS ISSUE AND ALSO FILED PAPER BOOK OF DOCUMENTS C ONTAINING COPY OF REASONS, OBJECTIONS FILED AND ORDER DISPOSI NG OBJECTIONS. IT WAS VEHEMENTLY ARGUED THAT ASSESSING OFFICER HAS ASSUMED JURISDICTION U/S 148 MERELY ON THE BASI S OF INFORMATION FROM DCIT CC-2(2) MUMBAI WITHOUT INDEPE NDENT APPLICATION OF MIND. IT WAS FURTHER SUBMITTED M/S. PRRANETA INDUSTRIES LTD. (NOW KNOWN AS M/S. AADHAAR VENTURES INDIA LTD.) IS A LISTED COMPANY ON BOMBAY STOCK EXCHANGE AND THE SHARE CAPITAL RECEIVED FROM THE SAID COMPANY IS AUT HENTIC AND GENUINE. THE LD. AR ARGUED THAT REASONS HAVE BEEN R ECORDED I.T.A. NO.9266 /DEL/2019 24 ON THE BASIS OF BORROWED SATISFACTION AND WITHOUT P ROPER APPLICATION OF MIND AND HARPED UPON THE FACT THAT C OPY OF INFORMATION FROM DCIT MUMBAI AND STATEMENTS OF SHIR ISH C SHAH WAS NOT CONFRONTED TO ASSESSEE AND AS SUCH THE SAME CANNOT BE RELIED FOR RECORDING REASONS FOR REOPENIN G OF THE ASSESSMENT U/S 147 OF THE ACT. 10. THE LD. AR DREW OUR ATTENTION TO ORDER DISPOSIN G OBJECTION PLACED AT PAPER BOOK PG 33-42 WHEREIN THE ASSESSING OFFICER RELIED ON STATEMENT OF SH. OMPRAK ASH KHANDELWAL WHO WAS ALSO THE DIRECTOR OF M/S. PRRANE TA INDUSTRIES LTD. (NOW KNOWN AS M/S. AADHAAR VENTURES INDIA LTD.) IN RESPECT OF WHOM THERE WAS NO REFERENCE IN THE REASONS RECORDED EARLIER. IN THESE CIRCUMSTANCES, IT IS SEL F EVIDENT THAT THE ASSESSING OFFICER ATTEMPTED TO IMPROVE UPON THE REASONS RECORDED FOR ISSUE OF NOTICE U/S 148 OF THE ACT. TH E LD. AR ALSO PRESSED THE ISSUE OF IMPROPER DISPOSAL OF OBJEC TIONS TO NOTICE U/S 148 AND ARGUED THAT MECHANICAL DISPOSAL OF OBJECTIONS AND INTRODUCTION OF FRESH FACTS WHICH WE RE NOT THERE IN THE REASONS RENDERS SUCH DISPOSAL OF OBJEC TION AS ILLEGAL. RELIANCE WAS MADE TO VARIOUS JUDICIAL PRECE DENTS AS REFERRED IN THE SYNOPSIS. 11. THE LD. CIT-DR ON THE OTHER HAND SUPPORTED TH E ORDERS OF LOWER AUTHORITIES AND SUBMITTED THAT CIT( A) HAS RIGHTLY UPHELD THAT NOTICE U/S 148 AS SAME IS BASED ON CREDIBLE INFORMATION RECEIVED FROM INVESTIGATION WI NG. THE LD. DR ALSO FILED SYNOPSIS CONTAINING SUBMISSIONS AND C ASE LAW I.T.A. NO.9266 /DEL/2019 25 CITATIONS ON THE ISSUE OF REOPENING U/S 148 OF THE ACT. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ON TH E ISSUE OF VALIDITY OF REOPENING U/S.147 AND THE MATERIAL R EFERRED TO BEFORE US AT THE TIME OF HEARING. THE MAIN THRUST O F THE LD. COUNSEL QUA THE VALIDITY OF REASONS RECORDED BY ACQ UIRING JURISDICTION U/S.147 AND IN SUPPORT VARIOUS CASE LAW S HAVE BEEN CITED IN THE SYNOPSIS FILED BY HIM. IT IS A WE LL SETTLED LAW THAT THE REASONS RECORDED MUST BE BASED ON TANGIBLE MATERIAL HAVE LIVE LINK NEXUS WITH INCOME ESCAPING ASSESSMEN T AND THE REASON TO BELIEVE MUST GO TO SHOW PROPER APPLIC ATION OF MIND BY THE ASSESSING OFFICER ONLY TO ESTABLISH PRIMA FACIE CASE OF ESCAPEMENT OF INCOME. AT THE TIME OF RECORD ING THE REASONS, ASSESSING OFFICER DOES NOT HAVE TO ESTABLI SH THE ESCAPEMENT OF INCOME. THE PRE-CONDITION OF TANGIBLE MATERIAL AND APPLICATION OF MIND IS IN PLACE SO AS TO PREVEN T MISUSE AND ARBITRARY USE OF POWER WHICH WILL OTHERWISE LEA D TO CHAOS AND NEVER ENDING TAX LITIGATION FOR THE ASSESSES. H OWEVER, REQUIREMENT OF EXISTENCE OF TANGIBLE MATERIAL AND A PPLICATION OF MIND SHOULD NOT BE STRETCHED TOO FAR WHICH WOULD OTHERWISE HANDICAP THE ASSESSING OFFICER IN EXERCIS ING THE POWER VESTED BY THE STATUTE IN DESERVING CASES. AT THIS JUNCTURE, WE FEEL APPROPRIATE TO REFER THE DECISION OF APEX COURT IN THE CASE RAYMOND WOOLLEN MILLS LTD. V. ITO [1999] 236 ITR 34(SC) WHICH ACTS AS A GUIDING PRINCIPLE FO R ADJUDGING THE VALIDITY OF REOPENING U/S 147 OF THE ACT AND BEEN REITERATED BY APEX COURT IN THE CASE OF ACIT V . RAJESH JHAVERI STOCK BROKERS P. LTD. 291 ITR 500 (SC). I.T.A. NO.9266 /DEL/2019 26 13. WE HAVE TO SEE, WHETHER THERE WAS PRIMA FACIE S OME MATERIAL ON THE BASIS OF WHICH THE DEPARTMENT COULD REOPEN THE CASE. THE SUFFICIENCY OR CORRECTNESS OF THE MAT ERIAL IS NOT A THING TO BE CONSIDERED AT THIS STAGE. ON THESE FA CTS WE ARE UNABLE TO STRIKE DOWN THE REOPENING OF THE CASE. AT THIS STAGE, IT IS RELEVANT TO TAKE NOTE OF THE FACT THAT ASSESS EE HAS NOT DISPUTED THE FACT OF RECEIPT OF SHARE CAPITAL FROM M/S. PRRANETA INDUSTRIES LTD. (NOW KNOWN AS M/S. AADHAAR VENTURES INDIA LTD.) AND THE ASSESSING OFFICER WAS IN POSSESSION OF CERTAIN CREDIBLE INFORMATION RELATING TO THIS VERY PARTY. ON CAREFUL PERUSAL OF REASONS, IT EMERGES TH AT ASSESSING OFFICER RECEIVED DETAILED INFORMATION FRO M DCIT CIRCLE 2(2), MUMBAI AS PER WHICH SEARCH ACTION WAS UNDERTAKEN ON SHRISH C SHAH AND IT WAS FOUND THAT T HE SAID PERSON ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMO DATION ENTRIES. THE REASONS ALSO MAKE REFERENCE TO IMPOUND ED MATERIAL WHEREIN THE NAME OF ASSESSEE HAS BEEN MENT IONED AS BENEFICIARY. IN ADDITION TO ABOVE, THE ASSESSING OF FICER ALSO EXAMINED THE RETURN OF THE APPELLANT COMPANY TO COR ROBORATE THE INFORMATION FROM INVESTIGATION WING AND ONLY TH EREAFTER THE REASONS WERE RECORDED. FURTHER, THE FACT THAT M /S. PRRANETA INDUSTRIES LTD. (NOW KNOWN AS M/S. AADHAAR VENTURES INDIA LTD.) IS A LISTED COMPANY HAS NO REL EVANCE AS BEING LISTED ON A STOCK EXCHANGE IS NOT A CERTIFICA TE OF SAINTHOOD AND EVEN THE LISTED COMPANIES HAVE BEEN F OUND TO BE ENGAGED IN UNHOLY PRACTICES. 14. THE ARGUMENT OF LD. COUNSEL FOR THE APPELLANT T HAT I.T.A. NO.9266 /DEL/2019 27 REASONS ARE BASED ON BORROWED SATISFACTION IS DEVOI D OF ANY MERITS AS THE ASSESSING OFFICER HAS RECORDED THE RE ASONS ONLY AFTER ANALYSING THE INFORMATION FROM INVESTIGATION WING AND MATCHING THE SAME WITH RETURN OF INCOME FILED BY TH E APPELLANT. EVEN THOUGH WE AGREE THAT ASSESSING OFFI CER SHOULD HAVE ALSO CARRIED OUT PRELIMINARY ENQUIRY VIS--VIS M/S. PRRANETA INDUSTRIES LTD. (NOW KNOWN AS M/S. AADHAAR VENTURES INDIA LTD.) SO AS TO VERIFY THE ALLEGATION S OF ACCOMMODATION ENTRY, HOWEVER, IN OUR VIEW, NON CARR YING OF OUT SUCH EXERCISE WILL HAVE LITTLE EFFECT ON VALIDI TY OF NOTICE U/ 147 WHICH IS BASED ON SPECIFIC INFORMATION FROM INV ESTIGATION WING. IN VIEW OF ABOVE, WE FIND THAT THE REASONS RE CORDED FOR ISSUE NOTICE U/S 148 SATISFIES THE JURISDICTIONAL RE QUIREMENT OF SECTION 147 OF THE ACT AND AS SUCH THE VALIDITY OF NOTICE U/S 147 IS UPHELD. 15. IT IS ALSO THE CONTENTION OF LD. AR THAT ASSESS ING OFFICER HAS NOT PROPERLY DISPOSED OFF THE OBJECTIONS TO NOT ICE U/S 148 OF THE ACT. ON EXAMINATION OF ORDER DISPOSING OBJEC TIONS, IT IS EVIDENT THAT ASSESSING OFFICER HAS PARA-WISE DEALT WITH THE OBJECTIONS OF THE APPELLANT. WE DO NOT FEEL THE NEE D TO DELVE INTO THE ISSUE OF SUFFICIENCY OF REASONING GIVEN BY THE ASSESSING OFFICER WHILE REJECTING THE OBJECTIONS AS THE SAME IS OF ACADEMIC NATURE SINCE WE HAVE ALREADY UPHELD THE VALIDITY OF NOTICE U/S 148 OF THE ACT. ACCORDINGLY, THE GROU ND NO.2 IS DISMISSED. 16. NOW COMING TO THE ISSUE OF ADDITION OF RS.2, 50,00,000/- I.T.A. NO.9266 /DEL/2019 28 ADDED U/S. 68 BEING SHARE CAPITAL RECEIVED DURING T HE YEAR FROM M/S. PRRANETA INDUSTRIES LTD. (NOW KNOWN AS M/ S. AADHAAR VENTURES INDIA LTD.), LD. COUNSEL SUBMITTED THAT M/S. PRRANETA INDUSTRIES LTD. (NOW KNOWN AS M/S. AADHAAR VENTURES INDIA LTD.) IS A LISTED COMPANY ON BOMBAY STOCK EXCHANGE AND AS SUCH THE IDENTITY OF THE PARTY IS N OT IN DISPUTE. IT WAS FURTHER ARGUED THAT THERE IS NO ADV ERSE MATERIAL ON RECORD IN SUPPORT OF ALLEGATION OF ACCO MMODATION ENTRY AND THE ASSESSING OFFICER HAS CONSIDERED THE ADDITION MERELY ON THE BASIS OF SO CALLED STATEMENT OF DIREC TOR OF SHAREHOLDER COMPANY SH. OM PRAKASH KHANDELWAL IS UNRELIABLE AS LATER ON HE HAS RETRACTED FROM HIS AB OVE STATEMENT. IT WAS VEHEMENTLY SUBMITTED THAT ASSESSI NG OFFICER, DESPITE REPEATED REQUESTS, DID NOT PROVIDE THE COPY OF INFORMATION/MATERIAL FROM INVESTIGATION OR STATEMEN T OF THE PARTIES ON THE BASIS OF WHICH ADVERSE INFERENCE WAS DRAWN. THE ASSESSING OFFICER EVEN FAILED TO PROVIDE OPPORT UNITY OF CROSS EXAMINATION IN CASE HE WANTED TO RELY ON ANY SUCH STATEMENT. 17. HE FURTHER SUBMITTED THAT THE ENTIRE PREMISE OF THE ASSESSING OFFICER IS FOR DISBELIEVING THE ENTIRE SH ARE APPLICATION MONEY OF RS. 2,50,00,000/- IS BASED ON STATEMENT OF SHRI OMPRAKASH KHANDELWAL. HOWEVER, NOW THE STAT EMENT WAS LATER ON RETRACTED AND HAD ALSO COME UP FOR CON SIDERATION BEFORE THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. M/S. BHARAT SECURITIES PVT. LTD . AND THIS JUDGMENT HAD COME UP FOR CONSIDERATION IN THE APPEAL BEFORE I.T.A. NO.9266 /DEL/2019 29 THE MADHYA PRADESH HIGH COURT IN THE CASE OF PCIT VS. CHAIN HOUSE INTERNATIONAL PVT. LTD. [IT APPEAL NOS. 110 TO 115 OF 2018 DATED 7TH AUG 2018] WHEREIN THE CREDENTIAL OF THE SHARE HOLDER COMPANY M/S. PRRANETA INDUSTRIES L TD. (NOW KNOWN AS M/S. AADHAAR VENTURES INDIA LTD.) WERE FOU ND TO BE GENUINE BY THREE CONSECUTIVE AUTHORITIES RIGHT FROM CIT(A), ITAT AND HONBLE HIGH COURT. THE MAIN THRUST OF LD. ARS ARGUMENT WAS THAT SINCE THE VERY SAME COMPANY HAS A LREADY BEEN SCRUTINIZED AND EXAMINED IN GREAT DEPTH BY HON BLE HIGH COURT, THERE REMAINS NO DOUBT OVER THE VERACIT Y OF SHARE CAPITAL OF RS. 2.50 CRORES RECEIVED BY THE APPELLAN T COMPANY. OUR ATTENTION WAS ALSO DRAWN TO OBSERVATION IN HIGH COURTS ORDER REGARDING RETRACTION OF STATEMENT BY SH.OM PR AKASH KHANDELWAL BEFORE CIT(A). IT WAS FURTHER SUBMITTED THAT ORDER OF HONBLE HIGH COURT WAS CONFIRMED BY SUPREME COUR T AS SLP OF REVENUE WAS DISMISSED. 18. THE LD. AR ALSO TOOK US TO THE AUDITED BALANCE SHEET AND PROFIT & LOSS A/C OF THE SHAREHOLDER COMPANY PL ACED IN PB PG 81-91 TO ESTABLISH THE CREDITWORTHINESS IN TH E HANDS OF INVESTOR. REFERENCE WAS ALSO MADE TO JUDGMENTS OF HI GH COURTS AND COORDINATE BENCHES IN SUPPORT OF THE PRO POSITION THAT ONCE THE IDENTITY, GENUINENESS AND CREDITWORTH INESS OF THE INVESTOR IS PROVED, THE PROVISIONS OF SECTION 6 8 DOES NOT APPLY. 19. IN RESPONSE TO ABOVE, THE LD. DR MADE ELABORATE SUBMISSIONS AND SUPPORTED THE FINDING RECORDED BY A SSESSING I.T.A. NO.9266 /DEL/2019 30 OFFICER AND CIT (A). IT WAS ARGUED THAT INVESTOR CO MPANY DOES NOT POSSESS CREDITWORTHINESS TO MAKE INVESTMENT OF RS. 2.50 CRORES IN ASSESSEE COMPANY. IT WAS ALSO SUBMITTED T HAT SHARES OF THE COMPANY HAS BEEN ISSUED AT PREMIUM WH ICH IS UNJUSTIFIED AND CREATES DOUBT OVER THE GENUINENESS O F THE TRANSACTION. FURTHER, THE LD. CIT DR ALSO COUNTERED THAT THERE IS NO REQUIREMENT FOR AFFORDING OPPORTUNITY O F CROSS EXAMINATION OF PERSON WHOSE STATEMENTS ARE BEING RE LIED UPON SINCE SAME IS SECONDARY MATERIAL AND AS SUCH T HERE IS NO CONTRAVENTION OF PRINCIPLES OF NATURAL JUSTICE. R EFERENCE WAS MADE DECISION OF SUPREME COURT IN THE CASE OF N RA IRON & STEEL P. LTD. 412 ITR 161 (SC) AND OTHER REVENUE FAVORING DECISIONS OF HIGH COURTS AND ITAT. HOWEVER, THE LD. DR FAIRLY CONCEDED THAT ISSUE OF SHARE CAPITAL RELATING TO VE RY SAME COMPANY WAS CONSIDERED BY ITAT AND MP HIGH COURT. 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. THE ISSUE IN HAND FOR OUR CONSIDERATION IS APPLICABILITY OF PROVISIONS OF SEC TION 68 TO SHARE CAPITAL RECEIVED BY THE APPELLANT COMPANY FRO M M/S. PRRANETA INDUSTRIES LTD. (NOW KNOWN AS M/S. AADHAAR VENTURES INDIA LTD.). BEFORE DISCUSSING THE FACTS O F THE CASE, IT IS RELEVANT TO UNDERSTAND THE PRE-REQUISITES OF SEC TION 68 AND UNDER WHAT CIRCUMSTANCES THE PROVISIONS IS TRIGGERE D. AS PER THE PLAIN LANGUAGE OF SECTION 68, THE APPELLANT IS OBLIGATED TO ESTABLISH THE IDENTITY, CREDITWORTHINESS OF THE PAR TY AND GENUINENESS OF THE TRANSACTION SO AS TO AVOID THE R IGOURS OF THE DEEMING PROVISION. BY IDENTITY IT MEANS THAT THE I.T.A. NO.9266 /DEL/2019 31 PERSON/ENTITY MUST HAVE ACTUAL EXISTENCE WHICH IS L EGALLY RECOGNIZED. THE WORD CREDITWORTHINESS IN SIMPLE T ERMS MEANS THE RESOURCES TO PAY MONEY (INVESTMENT IN THE PRESENT CASE) I.E. THE PERSON/ENTITY SHOULD HAVE NECESSARY FUNDS TO PAY. NOW IT IS NOT NECESSARY THAT THOSE FUNDS MUST BE OWN FUNDS OR OUT OF EARNINGS BUT SAME COULD ALSO BE IN THE NATURE OF BORROWINGS. THE SUM AND SUBSTANCE IS THAT THERE SHOULD BE EXPLAINABLE MEANS IN THE HANDS OF THE INVESTOR. THE LAST INGREDIENT IS GENUINENESS WHICH APPARENTLY MEANS THAT ENTIRE TRANSACTION MUST BE REAL AND THERE SHOULD NO T BE ANY ELEMENT OF COLLUSIVENESS OR SHAM. ONCE THESE PRE-RE QUISITES OF SECTION 68 ARE SATISFIED, THE CAN BE NO CASE OF ANY ADDITION IN THE HANDS OF THE ASSESSEE. 21. WHEN WE EXAMINE THE FACTS OF THE PRESENT CASE O N THE TOUCHSTONE OF PRE-REQUISITE OF SECTION 68, WE FIND THAT M/S. PRRANETA INDUSTRIES LTD. IS A LISTED COMPANY AND AS SUCH THERE CAN HARDLY BE ANY DISPUTE WITH REGARD TO IDEN TITY OF THE PARTY WHICH IS SUBJECT TO STRINGENT OF SCRUTINY BY ANOTHER STATUTORY BODY SEBI DURING THE LISTING PROCESS. MOR EOVER, THE APPELLANT HAS PLACED ON RECORD THE ITR ACKNOWLEDGME NT, CERTIFICATE OF INCORPORATION ISSUED BY MCA, BANK ST ATEMENT AND AUDITED FINANCIAL STATEMENTS OF THE PARTY IN SU PPORT OF IDENTITY WHICH HAS REMAINED UNDISPUTED BY BOTH THE LOWER AUTHORITIES. WITH REGARD TO CREDITWORTHINESS, ON GO ING THROUGH THE FINANCIAL STATEMENT OF M/S. PRRANETA INDUSTRIES LTD. WE FIND THAT THE INVESTOR COMPANY IS HAVING SUFFICIENT EARNINGS AND RESERVES TO JUSTIFY INVESTMENT OF RS. 2.50 CRORE S. THE I.T.A. NO.9266 /DEL/2019 32 PARTY IS SHOWING HEALTHY PROFIT BEFORE TAX OF RS. 1 ,72,12,447/- AND HAS RESERVES OF OVER RS. 18 CRORES IN THE BALAN CE SHEET. LET US NOW COME TO THIRD AND THE MOST IMPORTANT ELE MENT WHICH IS GENUINENESS OF TRANSACTION. WE NOTE THAT T HE ASSESSING OFFICER HAS PRIMARILY RELIED UPON THE STA TEMENT OF SH. OMPRAKASH KHANDELWAL IN REACHING THE CONCLUSION THAT M/S. PRRANETA INDUSTRIES LTD. (NOW KNOWN AS M/S. AA DHAAR VENTURES INDIA LTD.) IS AN ACCOMMODATION ENTRY PROV IDER. WE ALSO NOTE THAT ASSESSMENT ORDER IS ABSOLUTELY SILEN T ABOUT ANY ENQUIRY CARRIED OUT BY THE ASSESSING OFFICER WITH R ESPECT TO M/S. PRRANETA INDUSTRIES LTD. AND NO ATTEMPT HAS BE EN MADE TO INDEPENDENTLY VERIFY AND BRING ON RECORD MATERIA L TO ESTABLISH THE ALLEGED COLLUSIVENESS OR ANY CONNIVAN CE BETWEEN APPELLANT AND INVESTOR, IF ANY. 22. THE ENTIRE EDIFICE OF THE ASSESSING OFFICER IS THE RELIANCE PLACED BY HIM ON THE STATEMENT OF SHRI OM PRAKASH KHANDELWAL WHICH THOUGH ASSESSEE HAS CLAIMED WAS NO T PROVIDED TO THE ASSESSEE NOR ANY OPPORTUNITY OF CRO SS- EXAMINATION WAS OFFERED AND THE STATEMENT OF SHRI S HIRISH SHAH FOR WHICH ASSESSEE HAS OBJECTED THAT SAME HAS BEEN RECORDED WITHOUT OPPORTUNITY OF CROSS-EXAMINATION. IN SO FAR AS SHRI SHIRISH SHAH IS CONCERNE, HE IS NEITHER THE DIRECTOR NOR THE SHAREHOLDER IN THE INVESTOR COMPANY AND IT IS NOT EVEN IN THE CASE OF THE ASSESSING OFFICER THAT SHRI SHIRISH SHAH OR OM PRAKASH KHANDELWAL HAS SPECIFICALLY TAKE N THE NAME THE ASSESSEE. THE MAIN CHARGE OF THE DEPARTMEN T IS THAT SHRI OM PRAKASH KHANDELWAL THROUGH HIS COMPANY , I.T.A. NO.9266 /DEL/2019 33 M/S. PRRENATA INDUSTRIES HAS BEEN PROVIDING ACCOMMO DATION ENTRIES TO VARIOS PERSONS. THIS PRECISE ISSUE AND A LLEGATIONS HAD COME UP FOR CONSIDERATION BEFORE THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF BHARAT SECURITIES PVT. LTD., CHAIN HOUSE INTERNATIONAL AND ROHTAK CHAIN CO. PVT. LTD. IN ITA NO. 598, 599, 584, 595 AND 597/DEL/2017 ORDE R DATED 27.12.2017. THE RELEVANT FACTS AND THE OBSERVATION OF THE TRIBUNAL IN THAT CASE FOR THE SAKE OF BETTER AP PRECIATION FOR OUR CASE ALSO ARE REPRODUCED HEREUNDER: 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E AO NOTICED THAT THE ASSESSEE HAS RECEIVED SHARE APPLICATION MO NEY AND SHARE PREMIUM AMOUNTING TO RS. 30 CRORES IN A. Y. 2 012-13 AND RS. 25 CRORES DURING FOR ASSESSMENT YEAR 2013-14. T HE DETAILS OF SHARE APPLICATION MONEY RECEIVED DURING THE YEAR UNDER CONSIDERATION ARE AS UNDER: SN NAME F. Y. 2012-13 AMOUNT IN RS. F. Y. 2013-14 AMOUNT IN RS. 1 M/S. PRRANETA INDUSTRIES PVT. LTD. ( LATER NAMED AS M/S. AADHAAR VENTURE INDIA LTD. PAN NO AABCP4155F 15,75,00,000 25,00,00,000 2 M/S. DHANUS TECHNOLOGIES LTD. PAN: AABCD3429L 9,75,00,000 3 M/S. EMPORIS PROJECTS LTD. PAN NO AABCN0273G 3,00,00,000 I.T.A. NO.9266 /DEL/2019 34 4 M/S. L. N. POLYESTERS LTD. ( LATER NAMED AS M/S. L N INDUSTRIES INDIA LTD.) PAN NO AAACC4102B 75,00,000 5 M/S. SHRI GANESH SPINNERS LTD. ( LATER NAMED AS M/S. YANTRA NATURAL RESOURCES LTD.) PAN NO AACCS4221Q 75,00,000 TOTAL 30,00,00,000 25,00,00,000 6. THE DIRECTORS AND THE FOUR INVESTOR COMPANIES (E XCEPT L. N. INDUSTRIES LTD) COMPLIED WITH THE REQUIREMENT WITH COPY OF BALANCE SHEETS, COPY OF ITR LEDGER ACCOUNT ETC. INV ESTOR COMPANIES CONFIRMED THE INVESTMENT MADE BY THEM IN THE SHARE CAPITAL OF ASSESSEE-COMPANY. PAGE-13 11. THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE DATED 02.02.2016 WHEREIN IT WAS ALLEGED THAT ASSESSEE COM PANY RECEIVED ACCOMMODATION ENTRIES OF RS. 55 CRORES FRO M FIVE LISTED COMPANIES. THIS ALLEGATION WAS BASED ON THE STATEME NTS OF SHRI SHIRISH CHANDRAKANT SHAH (SCS), SHRI CHANDAN KUMAR SINGH (CKS), SHRI KUMAR RAICHAND MADAN (RKM), SHRI OMPRAK ASH ANANDILAL KHANDELWAL (OAK) AND AFFIDAVITS OF SHRI J ILS RAICHAND MADAN, SMT. JYOTI MUNVER, AND SHRI D. U. MUNVER AND ON OTHER MATERIAL FOUND IN THE SEARCH OF SCS AND AADHAAR VEN TURES INDIA LTD. STATEMENT OF SCS AND HIS EMPLOYEE CKS, BEING T HIRD PARTIES WERE RECORDED DURING THE COURSE OF SEARCH ON SCS. I.T.A. NO.9266 /DEL/2019 35 PAGE-17 14. IT IS ALSO NOTICE THAT DURING THE PROCEEDINGS O N 12.02.2016, THE ASSESSING OFFICER DIRECTED THE ASSESSEE COMPANY TO PRODUCE THE DIRECTORS OF THE INVESTOR COMPANIES AND CONSEQU ENTLY ON 19.02.2016, THE ASSESSEE COMPANY PRODUCED SHRI SOMA BHAI SUNDERBHAI MEENA (SS MEENA), DIRECTOR OF MAJOR INVE STOR COMPANY NAMELY AADHAAR VENTURES INDIA LTD. WHO CONT RIBUTED RS. 40.75 CRORES OUT OF TOTAL INVESTMENT OF RS. 55 CRORES, BEFORE THE ASSESSING OFFICER. HE WAS EXAMINED AND HIS STAT EMENT WAS RECORDED. HE PRODUCED THE BOOKS OF ACCOUNTS OF THE COMPANY. HE CONFIRMED THE INVESTMENT MADE BY HIS COMPANY IN THE SHARE CAPITAL OF THE ASSESSEE COMPANY. THE BOOKS OF ACCOU NTS PRODUCED BY HIM WERE EXAMINED BY ASSESSING OFFICER. THE BOOKS OF ACCOUNTS CONTAINED SUCH INVESTMENT MADE IN THE S HARE CAPITAL OF THE ASSESSEE COMPANY. THE BOOKS OF ACCOUNTS ALSO EXPLAINED THE SOURCE OF INVESTMENT. 17. THE CIT (A) RECORDED THE STATEMENTS OF THE PER SONS WHO APPEARED BEFORE HER. FOR THE SAKE OF COMPLETENESS I N OUR FINDINGS WE FIND IT NECESSARY TO BRIEFLY NOTE THE F ACTS EMERGED FROM THE SAID STATEMENT AS FOLLOWS. 18. THE ALLEGED SCS APPEARED DURING FIRST APPELLAT E PROCEEDING AND HIS STATEMENT WAS RECORDED BY THE CI T (A) WHEREIN HE STATED THE HE WAS NOT ENGAGED IN PROVIDI NG ANY ACCOMMODATION ENTRIES AND ON THE CONTRARY HE WAS IN THE BUSINESS OF PROVIDING CONSULTANCY SERVICES AND THE DATA HUB SERVICES TO VARIOUS COMPANIES. HE WAS ALSO ENGAGED IN PURCHASE AND SALE OF SHARES. HE ALSO STATED THAT HE DID NOT KNOW BHARAT SECURITIES (P) LTD. OR ITS CA. HE DISOWNED HIS EARL IER STATEMENT AND STATED THAT THE SAME WAS RECORDED UNDER FEAR. A N I.T.A. NO.9266 /DEL/2019 36 OPPORTUNITY TO CROSS EXAMINE WAS GRANTED TO THE ASS ESSEE COMPANY WHICH WAS AVAILED BY THE ASSESSEE COMPANY. PAGE-25 21. SHRI OMPRAKASH ANANDILAL KHANDELWAL, THE THEN D IRECTOR OF AADHAAR VENTURES INDIA LTD. APPEARED BEFORE CIT (A) AND HIS STATEMENT WAS RECORDED WHEREIN HE STATED THAT HIS C OMPANY WAS NOT ENGAGED IN ANY BUSINESS OF PROVIDING ANY ACCOMMODATION ENTRIES. HE ALSO STATED THAT SCS WAS NOT CONTROLLING THE BUSINESS OF HIS COMPANY. HE WAS ONL Y A FINANCIAL CONSULTANT. HE FURTHER SUBMITTED THAT IT WAS NOT CO RRECT THAT SCS WAS APPOINTING DUMMY DIRECTORS FOR HIS COMPANY. REG ARDING INVESTMENT IN BHARAT SECURITIES (P) LTD. HE CATEGOR ICALLY STATED THAT PRIOR TO INVESTING THE FUND IN BHARAT SECURITI ES (P) LTD. NECESSARY ENQUIRIES WERE MADE AND TWO DIRECTORS OF THE COMPANY NAMELY SHRI JILS RAICHAND MADAN AND SHRI. SUBRAMANYA KUSNUR VISITED DELHI AND DISCUSSED THE M ATTER OF INVESTMENT WITH THE DIRECTORS OF BHARAT SECURITIES (P) LTD. NAMELY SHRI NARESH KUMAR. HE ALSO STATED THAT THE DUE DILI GENCE REPORT WAS ALSO OBTAINED FROM A COMPANY SECRETARY AT THEIR OWN. BHARAT SECURITIES ALSO PROVIDE SHARE VALUATION REPO RT. HE ALSO STATED THAT BOARD OF DIRECTORS AFTER CONSIDERING TH E ENTIRE SCENARIO DECIDED TO INVEST IN EQUITY SHARES OF BHAR AT SECURITIES (P) LTD. HE ALSO STATED THAT MOU WAS EXECUTED PRIOR TO INVESTMENT. HE ALSO STATED THAT THERE WAS NO QUESTI ON OF PROVIDING ANY ACCOMMODATION ENTRIES TO BHARAT SECUR ITIES. HE FURTHER STATED THAT HIS EARLIER STATEMENT WAS RECOR DED UNDER FEAR AND PRESSURE. AN OPPORTUNITY TO CROSS EXAMINE WAS G RANTED TO THE ASSESSEE COMPANY WHICH WAS AVAILED BY THE ASSES SEE COMPANY. I.T.A. NO.9266 /DEL/2019 37 26. AFTER RECORDING THE STATEMENTS OF THE SAID WIT NESSES, THE CIT(A) FORWARD COPIES OF ALL STATEMENTS TO THE AO FOR HIS COMMENTS. THE AO HAD PERUSED SUCH STATEMENTS IN EXT ENSOR AND SENT HIS COMMENTS ON EACH AND EVERY QUESTION AND AN SWER RECORDED IN RESPECT OF EACH AND EVERY STATEMENT. TH E AO DID NOT RAISE ANY OBJECTION ON THE CONTENTS OF THESE STATEM ENTS. HE ALMOST ACCEPTED ALL THE FACTUAL POSITION. HE ALSO A GREED WITH THE NATURE OF THE BUSINESS OF INVESTOR COMPANIES. THE A O ALMOST ACCEPTED THE CONTENTS OF THE STATEMENTS. HOWEVER, H E OPINED THAT THERE WAS MISMATCH BETWEEN THE TWO STATEMENTS, SUCH STATEMENTS MAY NOT BE RELIED UPON AND ALSO STATEMEN TS SHOULD NOT BE ACCEPTED AT THIS STAGE. BUT FINALLY THE AO R EQUESTED THE CIT(A) THAT THE APPEAL MAY BE DECIDED ON MERITS OF THE CASE BY IGNORING THE SAID STATEMENTS. 27. THE LD. CIT(A) AFTER RECORDING THE STATEMENTS, CALLING THE COMMENTS AND REPORT FROM THE ASSESSING OFFICER ON T HE STATEMENTS AND SUBMISSION OF THE ASSESSEE AND ALSO TAKING ON RECORD THE SUBMISSIONS OF THE ASSESSEE COMPANY, FIL ED DURING FIRST APPELLATE PROCEEDING, THE CIT(A) PERUSED THE ENTIRE ASSESSMENT PROCEEDINGS, EXAMINED THE MATERIAL ON RE CORD AND FACTS OF THE CASE HAD RECORDED HER FINDING ON VARIO US ISSUES INVOLVED IN APPEAL. SUCH FINDINGS ARE RECORDED ON P AGES 274 TO 316 OF THE CIT(A) ORDER. 28. THE LD. CIT(A) OBSERVED THE AO HAS TREATED THE AMOUNT OF RS. 55 CRORES AS TAXABLE U/S. 68 ON THE BASIS OF STATEMENTS OF CERTAIN PERSONS RECORDED EARLIER TO THE DATE OF SEA RCH ON THE APPELLANT COMPANY. BUT SINCE THESE STATEMENTS WERE RECORDED BEHIND THE BACK OF THE AO AND NO OPPORTUNITY OF CRO SS EXAMINATION WAS PROVIDED DESPITE SPECIFIC AND REPEA TED I.T.A. NO.9266 /DEL/2019 38 REQUESTS, CIT(A) HAD DECIDED TO SUMMON SUCH PERSONS AND RECORD THEIR STATEMENTS AND PROVIDE AN OPPORTUNITY OF CROSS EXAMINATION TO THE APPELLANT COMPANY AS PER LAW, RU LE AND PROCEDURE. THE QUESTION, THEREFORE, AROSE AS TO WHI CH OF THE TWO STATEMENTS I.E. ONE RECORDED EARLIER AND THE OTHER RECORDED BY THE CIT(A) HERSELF DESERVES RELIANCE. AFTER CONSIDE RING THE ENTIRE SCENARIO OF THE CASE THE CIT(A) FOUND THAT THE EARL IER STATEMENTS DID NOT MERIT ACCEPTANCE FOR THE REASONS SUCH AS EA RLIER STATEMENTS WERE RECORDED BEHIND THE BACK OF THE ASS ESSEE AND ALSO BEHIND THE BACK OF THE AO. NO OPPORTUNITY OF C ROSS EXAMINATION WAS ALLOWED DESPITE SPECIFIC AND REPEAT ED REQUESTS. EVEN THE OPPORTUNITY OF CROSS EXAMINATION ONCE SOUGHT TO BE PROVIDED WAS IMMEDIATELY SNATCHED. THE EARLIE R STATEMENTS WERE RECORDED MUCH BEFORE THE SEARCH ON THE APPELLANT COMPANY. BHARAT SECURITIES WAS NOT IN THE PICTURE AND WAS NOT AN ISSUE DURING THESE STATEMENT. IN SUCH ST ATEMENTS NON HAD NAMED BHARAT SECURITIES. WE ALSO OBSERVE TH AT THE LD. CIT(A) HELD THAT THE STATEMENTS RECORDED BY HER ARE MORE AUTHENTIC IN ALL RESPECT. DIRECT QUESTIONS REGARDIN G INVESTMENT IN BHARAT SECURITIES WERE PUT UP AND REPLIED. BOOKS OF ACCOUNTS WERE PRODUCED AND EXAMINED. INVESTMENT FOUND RECORD ED. AUDITED BALANCE SHEETS ALSO DEMONSTRATE THE INVESTM ENT IN SHARE CAPITAL OF BHARAT SECURITIES PVT. LTD. SOURCE OF THE SOURCE HAS ALSO BEEN EXPLAINED AND FOUND TO BE CORRECT. IN THESE CIRCUMSTANCES, CIT(A) FOUND HERSELF IN AGREEMENT WI TH THE STATEMENTS RECORDED BY HERSELF. IT WAS HELD THAT DE TAILED STATEMENTS WERE RECORDED AND ALL THE FIVE INVESTOR COMPANIES HAVE ADMITTED THE INVESTMENT. CIT(A) FINALLY HELD T HAT INVESTMENT MADE BY FIVE LISTED COMPANIES IN THE SHARE CAPITAL OF THE APPELLANT COMPANY WAS GENUINE AND THERE WAS NO QUES TION OF I.T.A. NO.9266 /DEL/2019 39 PROVIDING AND TAKING ANY ACCOMMODATION ENTRIES BY T HE ASSESSE COMPANY. 29. AFTER CONSIDERING THE STATEMENT OF SH. SOMABHAI SUNDERBHAI MEENA, DIRECTOR OF MAJOR INVESTOR COMPAN Y NAMELY M/S. AADHAAR VENTURES INDIA LTD. WHICH WAS RECORDED BY THE AO DURING ASSESSMENT PROCEEDINGS, THE LD. CIT(A) AR RIVED TO THE FOLLOWING FINDINGS. THE APPELLANT COMPANY HAD PRODUCED ONE DIRECTOR OF AADHAAR VENTURES NAMELY SH. SOMABHAI SUNDERBHAI MEENA BEFOR E THE AO DURING ASSESSMENT PROCEEDINGS. HE CONFIRMED THAT HIS COMPANY HAD INVESTED A SUM OF RS. 40.75 CRORES IN T HE SHARE CAPITAL OF THE APPELLANT COMPANY IN FY 2011-12 AND 2012-13. HE PRODUCED THE BOOKS OF ACCOUNTS OF THE COMPANY AN D WAS THOROUGHLY EXAMINED BY THE AO. THIS INVESTMENT WAS FOUND RECORDED IN THE BOOKS OF ACCOUNTS AS VERIFIED BY TH E AO. HE EXPLAINED THE SOURCE OF INVESTMENTS WITH REFERENCE TO THE BOOKS OF ACCOUNTS. SUCH SOURCE WAS THEN EXAMINED BY THE A O AND THE AO ALSO OBTAINED COPIES OF THE NECESSARY LEDGER ACC OUNTS WITH REFERENCE TO THE SOURCE OF INVESTMENTS. HE EXPLAINE D THAT HIS COMPANY WAS NEVER ENGAGED IN PROVIDING ACCOMMODATIO N ENTIRE AND ON THE CONTRARY WAS CARRYING ON REAL BUS INESS WHERE THE TURNOVER RUNS INTO APPROX. 171 CRORES AND 133 C RORES IN FY 2011-12 AND 2012-13 RESPECTIVELY. HE ALSO PRODUCED THE BANK ACCOUNTS OF HIS COMPANY WITH REFERENCE TO THE SHARE CAPITAL INVESTED IN BHARAT SECURITIES. THE AO ALSO REQUIRED HIM TO SEND CERTAIN DOCUMENTS. CONSEQUENTLY COPY OF RESOLUTION, SHAREHOLDING PATTERN, COPY OF SHARE CERTIFICATE, CO PY OF MOU, COPY OF ARBITRATION AWARD, COPY OF DUE DILIGENCE RE PORT, COPY OF SHARE VALUATION REPORT AND LEGAL NOTICE WERE SENT B Y HIS I.T.A. NO.9266 /DEL/2019 40 COMPANY VIDE LETTER DTD. 18.03.2016. THE AO NEVER D ISAGREED WITH THE CONTENTS OF THE STATEMENTS OF SOMABHAI. HI S ONLY OBJECTION WAS THAT SOMABHAI WAS NOT A DIRECTOR OF T HE COMPANY AT THE TIME OF MAKING INVESTMENT IN BHARAT SECURITI ES. NOW TWO OTHER DIRECTORS OF THE SAME COMPANY NAMELY SH. JILS RAICHAND MADAN AND SH. OMPRAKASH ANANDILAL KHANDELWAL APPEAR ED BEFORE ME AND THEIR STATEMENTS WERE RECORDED. BOTH OF THEM WERE DIRECTORS OF AADHAAR VENTURES AT THE TIME OF M AKING THE INVESTMENT IN BHARAT SECURITIES. THEIR TATEMENTS HA VE ALREADY BEEN DISCUSSED IN THE EARLIER PARAS AND TO AVOID AN Y REPETITION I SIMPLY WANT TO REITERATE THAT THE PRESENT STATEMENT S GIVEN BY BOTH THE DIRECTORS OF AADHAAR VENTURES BEFORE ME AR E TOTALLY CONFIRMATORY AND CORROBORATIVE TO THE EARLIER STATE MENT OF SOMABHAI SUNDERBHAI MEENA RECORDED BY THE AO DURING THE ASSESSMENT PROCEEDINGS. 32. THE AO HAD STATED AT VARIOUS PLACES IN THE ASSE SSMENT ORDER THAT THE SHARE CAPITAL HAS BEEN RECEIVED FROM PAPER COMPANIES. CIT(A) EXAMINED THE ISSUE AND HELD AS UNDER: I FIND THAT THE POSITION IN THE PRESENT CASE IS OT HERWISE. ALL THE FIVE COMPANIES HAVE PRODUCED THE BOOKS OF ACCOUNTS. THERE IS AN AUDIT REPORTS. ALL THE INVESTORS HAVE APPEARED P ERSONALLY. THE BOOKS OF ACCOUNTS WERE EXAMINED THOROUGHLY AND I FIND THAT SUCH BOOKS OF ACCOUNTS CONTAIN PURCHASES AND S ALES TRANSACTIONS, PAYMENTS AND RECEIPTS BY BANKING CHAN NELS, INCURRING OF VARIOUS EXPENSES SUCH AS PAYMENTS OF R ENT, ELECTRICITY EXCISE DUTY, SALES TAX, BANK INTEREST, STAFF SALARIES ETC. THE HIMSELF EXAMINED THE DIRECTOR OF MAJOR SHA REHOLDER AADHAAR VENTURES NAMELY SOMABHAI SUNDERBHAI MEENA A ND ALSO EXAMINED THE BOOKS OF ACCOUNTS PRODUCED BY HIM DURING I.T.A. NO.9266 /DEL/2019 41 THE COURSE OF ASSESSMENT. IT IS VERY PERTINENT TO N OTE HERE THAT EVEN THE AO COULD NOT FIND DISCREPANCIES WITH THE B OOKS OF ACCOUNTS OR THE DOCUMENTS PRODUCED OR THE FACT OF I NVESTMENT AND SOURCE THEREOF. THE AO HAD NEVER DISAGREED WITH THE VARIOUS EVIDENCES AND DOCUMENTS SUBMITTED BEFORE HI M BY THE DIRECTOR OF THE INVESTOR COMPANY. IN THE PRESENCE O F ENORMOUS EVIDENCES IT IS VERY DIFFICULT TO HOLD THAT THESE C OMPANIES ARE PAPER COMPANIES. 43. FROM THE ORDER OF THE LD. CIT(A) IT IS ALSO APP ARENT THAT ON THE CONCLUSION THAT THE ENTRY PROVIDING COMPANIES F AILED TO PROVE THE GENUINENESS OF THEIR SOURCE OF THE INVESTMENT M ADE IN BHARAT SECURITIES PVT. LTD. INCLUDING THE AMOUNT OF PREMIUM AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE SIDES AND R ELEVANT DOCUMENTARY EVIDENCE THE CIT(A) HELD AS UNDER: ALL THE LISTED COMPANIES HAVE GIVEN THE REQUIRED E VIDENCES TO PROVE THE SOURCE OF THEIR INVESTMENTS IN BHARAT SEC URITIES PVT.LTD. ONE OF THE MAJOR INVESTING COMPANIES APPEA RED BEFORE THE AO WITH THE BOOKS OF ACCOUNTS AND DEMONSTRATED THE SOURCE OF THE SHARE CAPITAL. SIMILAR IS THE POSITION WITH REGARD TO OTHER COMPANIES WHOSE DIRECTORS APPEARED BEFORE ME AND PR ODUCED THE BOOKS OF ACCOUNTS EXCEPT DHANUS SHOWING THE SOU RCE OF THE INVESTMENT. DHANUS WAS UNDER LIQUIDATION. ITS DIREC TOR HAD PRODUCED THE CONFIRMATION ADMITTING THE INVESTMENT AND ALSO CONTAINING THE SOURCE THEREOF. THE BALANCE SHEETS O F ALL THE COMPANIES ARE AUDITED. THE AUDITORS HAVE GIVEN A CL EAN REPORT. LOOKING TO THE ENTIRE SCENARIO OF THE CASE I AM SAT ISFIED WITH THE SOURCE OF THE INVESTMENT OF ALL THE FIVE LISTED COM PANIES AND HOLD THAT THE SOURCE IS FULLY EXPLAINED AND HENCE T HE CONCLUSION IS REJECTED. I.T.A. NO.9266 /DEL/2019 42 85. WE FIND THAT IN THE CASE OF M/S. AADHAAR VENTU RES INDIA LTD. (FORMERLY KNOWN AS PARRANETA INDUSTRIES LTD. ) THE SAID INVESTOR COMPANY HAS MADE INVESTMENT IN SHARE APPLICATION MONEY OF RS. 15.75 CRORES IN A.Y. 2012-13. THE COPY OF BANK ACCOUNTS OF THE SUBSCRIBER COMPANY HAS ALSO BEEN FU RNISHED ( PB-839 TO 846) WHICH REFLECTED THE PAYMENTS BY RTGS TOWARDS SHARE CAPITAL EVIDENCING SUFFICIENT AVAILABILITY OF FUNDS ON THE DATE OF INVESTMENT. THERE IS NO CASH DEPOSITS BEFOR E ISSUE OF RTGS AND NONE OF THE ENTRIES ARE FOUND TO HAVE BEEN MADE OUT OF THE ASSESSEES OWN ACCOUNT IN THIS BANK STATEMEN T. THEREFORE GENUINENESS OF TRANSACTION IS NOT TO BE DOUBTED. TH E SHARE OF THE ASSESSE COMPANY WAS DULY ALLOTTED TO THE INVESTOR C OMPANY, WHICH CREATES LEGAL RIGHT OF THE INVESTOR. UNLESS P ROVEN OTHERWISE WITH SOME DOCUMENTARY EVIDENCE, IT CANNOT BE ALLEGE D THAT ALL THE APPARENT IS NOT REAL WHO ALLEGES TO BE SO. IT C ANNOT BE ALLEGED MERELY ON THE BASIS OF APPREHENSIONS AND ON THIRD P ARTY STATEMENT, WITHOUT ALLOWING CROSS EXAMINATION AND B RINGING ANY CONCRETE MATERIAL ON RECORD TO SHOW THAT THE MONEY INVESTED IS ASSESSEES MONEY. 86. ALL THE NOTICES ISSUED BY THE REVENUE AUTHORIT IES, I.E. INVESTIGATION WING, ASSESSING OFFICER AND CIT(A) TO THIS COMPANY WERE SERVED AND DULY COMPLIED BY THE SAID COMPANY. WE FIND THAT SAID COMPANY IS A LISTED COMPANY AND DULY COMP LYING WITH ALL THE STATUTORY REQUIREMENT OF SEBI AND STOCK EXC HANGE. THE ASSESSEE HAS FILED COPY OF SHARE APPLICATION AND CO NFIRMATION SUBMITTED OF THE SAID COMPANY ( PB- 333-334 ), COPY OF ITR ACKNOWLEDGEMENT ( PB-460-461/VOLUME-2) FOR A.Y. 201 2-13 AND 2013-14, COPY OF BALANCE SHEET REFLECTING THE INVES TMENT MADE IN THE SHARE CAPITAL THE ASSESSEE BSPL ( PB-345-355), BANK I.T.A. NO.9266 /DEL/2019 43 STATEMENT ( PB-336-343& 839-846), COPY OF LEDGER AC COUNT OF THE ASSESSE IN THE BOOKS OF INVESTOR COMPANY ( PB-344) AND REPLY DTD. 14.07.2014 IN RESPONSE TO SUMMONS DTD. 25.06.2 014 ISSUED BY ADIT (INV.)-DELHI FURNISHED BY SAID COMPA NY ( PB 754 TO 831). REPLY DTD. 06.08.2014 FIELD BY THE SH. JAI RAI CAHND MADAN, IN HIS PERSONAL CAPACITY AS A DIRECTOR IN RE SPONSE TO THE LETTER DTD. 30.07.2014 ISSUED BY THE ADIT (INV.) DE LHI UNDER SECTION 131(1 A) PB 32, ASSESSMENT ORDER PAGE NO. 1 29). REPLY FILED DTD. 06.08.2014 BY SMT. JYOTI DHIRESH MUNVER, DIRECTOR IN HER PERSONAL CAPACITY AS A DIRECTOR IN RESPONSE TO THE LETTER DTD. 30.07.2014 AS ISSUED BY THE ADIT (INV.), DELHI, LET TER DTD. 19.11.2015 ISSUED BY THE AO DULY SERVED ON INVESTOR COMPANY ( PAGE NO. 33 & 34 OF CIT(A) ORDER AND REPLY DTD. 26. 11.2015 FILED BY INVESTOR COMPANY ( PB-834-883), REPLY DTD. 12.02 .2016 FILED BY INVESTOR COMPANY DULY CONFIRMING INVESTMENT MADE BY IT IN THE SHARE OF THE ASSESSEE COMPANY ALONG WITH RELEVA NT DOCUMENTS ( PAGE NO. 144 & 171 OF ASSESSMENT ORDER) IN SUPPORT OF THE CLAIM THAT IDENTITY AND CREDIT WORTHINESS OF INVESTOR AND GENUINENESS OF TRANSACTION OF SAID INVESTOR/SHARE A PPLICANT IS DULY ESTABLISHED. IT WAS FURTHER SUBMITTED THAT OPP ORTUNITY OF CROSS EXAMINATION WAS GRAINED TO THE ASSESSE FOR EX AMINATION IN THE CASE OF SH. SHIRISH CHANDRAKANT SHAH AND SH. SA WAN KUMAR JAJOO FOR WHICH THE ASSESSE REACHED MUMBAI AT THE TIME AS GIVEN AND THE VENUE, BUT SINCE PRIOR TO THE DATE OF CROSS EXAMINATION OPPORTUNITY SCHEDULED, ( REFERENCE PAGE NO. 134,135,170 AND 171 OF ASSESSMENT ORDER) THE SAME W AS WITHDRAWN BY ADIT (INV.)-DELHI AND THEREFORE, THE O PPORTUNITY DID NOT ACTUALLY MATERIALISE (PB-884-894). THEREAFT ER OPPORTUNITY FOR CROSS EXAMINATION WAS DEMANDED BY THE ASSESSEE IN TIME AND AGAIN BEFORE THE AO BUT THE SAME WAS NEVER PROV IDED BY I.T.A. NO.9266 /DEL/2019 44 THE AO. IN SUPPORT OF THIS CLAIM THE LEARNED COUNSE L FOR THE ASSESSE REFERRED PAGE NO. 133 ( PARA-2), PAGE NO. 1 34 ( PARA-3) PAGE NO. 135 ( PARA-4) PAGE NO. 145 ( PARA-II, IV & VI) OF THE ASSESSMENT ORDER. 87. THUS, WE FIND THAT THE AO AND INVESTIGATION WI NG HAS NOT GIVEN ANY CHANGE TO CROSS EXAMINATION ALL THE P ARTIES WHICH EVEN THOUGH DEMANDED BY THE ASSESSEE COMPANY AND SA ID OPPORTUNITY WAS DENIED TO THE ASSESSEE EVEN THE ASS ESSEE HAS REACHED AT MUMBAI ON GIVEN DATE. THE AO IS REQUIRED TO ALLOW THE OPPORTUNITY OF CROSS EXAMINATION, IN VIEW OF TH E DECISION OF HONBLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES VS. COMMISSIONER OF CENTRAL EXCISE (2015 ) 13 STD 805 (SC). 88. WE FURTHER OBSERVED THAT THE LD.CIT(A) HAVING CONVINCED WITH THIS SERIOUS INJUSTICE RIGHTLY DECIDE TO SUMMO N THE WITNESS ON WHOSE STATEMENTS THE AO HAD PLACED RELIANCE WITH OUT GIVING THE OPPORTUNITY OF CROSS EXAMINATION TO THE ASSESSE E. ALL THE WITNESS APPEARED BEFORE THE CIT(A) AND THEY WERE EX AMINED BY HER AND THEIR STATEMENTS WERE RECORDED AND OPPORTUN ITY OF CROSS EXAMINATION WAS GIVEN TO THE APPELLATE COMPANY. FRO M CAREFUL PERUSAL OF SUCH STATEMENT AND LOGICAL ANALYSES OF T HEREOF WE ARE CONVINCED THAT THERE STATEMENTS WERE FOUND TO BE ST RONGLY SUPPORTING THE EXPLANATION AND STAND OF THE ASSESSE E COMPANY AGAINST THE MADE BY THE AO U/S. 68 OF ACT. WE ALSO FIND THAT THE LD. CIT(A) SEND THESE STATEMENT AND OTHER RELEVANT EVIDENCE FOR EXAMINATION, VERIFICATION AND COMMENTS OF THE AO PR OVIDING DUE OPPORTUNITY TO HIM. HOWEVER, AO AND NOT MADE ANY AD VERSE COMMENT ON THESE STATEMENTS EXCEPT CONTENDING THAT THE SAME CANNOT BE CONSIDERED IN FAVOUR OF THE ASSESSE. WE A RE UNABLE TO I.T.A. NO.9266 /DEL/2019 45 SEE ANY VALID REASON TO DISBELIEVER OR DISCARD STAT EMENT RECORDED BY THE LD. CIT(A) AND THUS WE HOLD THAT TH E FIRST APPELLATE AUTHORITY WAS RIGHT IN CONSIDERING HE SAM E IN RIGHT PROSPECTIVE AND HENCE WE ARE UNABLE TO SEE ANY VALI D REASON TO INTERFERE WITH THE FINDINGS OF LD. CIT(A) AS NOTED ABOVE. 89. WE FIND THAT SH. SOMABHAI SUNDERBHAI MEENA, THE PRESENT DIRECTOR OF AADHAAR VENTURES INDIA LTD., TH E INVESTOR COMPANY APPEARED ON 19.02.2016 BEFORE THE AO WITH B OOKS OF ACCOUNTS AND HIS DETAILED STATEMENT WAS RECORDED UN DER SECTION 131 OF THE ACT, WHEREIN HE HAS DULY CONFIRMED THE I NVESTMENT MADE IN THE SHARES CAPITAL IN THE ASSESSE COMPANY. THE COPY OF HIS STATEMENT IS PLACED AT PAPER BOOK PAGE NO. 230 TO 243. WE FURTHER FIND THAT IN RESPONSE TO SUMMONS UNDER SECT ION 131 OF THE ACT, ISSUED BY THE CIT(A) INVOKING HIS POWER UN DER SECTION 250(4) OF THE ACT, SH. JILS RAICHAND MADAN, ALONG W ITH BOOKS OF ACCOUNTS DULY APPEARED BEFORE THE CIT(A) AND DULY C ONFIRMED THE INVESTMENT MADE IN THE SHARES OF THE ASSESSE CO MPANY, IN HIS STATEMENT RECORDED BY THE LD. CIT(A). REFER PAP ER BOOK PAGE NO. 244 TO 256 AND PAGE NO. 132 TO 142 OF ORDER OF CIT(A). SIMILARLY, SH. OMPRAKASH ANANDILAL KHANDELWAL, THE THEN DIRECTOR OF THE COMPANY, APPEARED BEFORE THE CIT(A) AND DULY THE INVESTMENT IN HIS STATEMENT RECORDED BEFORE THE LD. CIT(A) (REFER PAGE NO. 151 TO 158 OF THE ORDER OF CIT(A) AND PAPE R BOOK PAGE NO. 257 TO 266) 90. FURTHER, IN RESPONSE TO SUMMONS U/S. 131 OF TH E ACT ISSUED BY THE CIT(A) BY INVOKING POWER U/S. 250(4) OF THE ACT, SH. CHANDRAKANT SHAH, A THIRD PARTY, DULY APPEARED BEFORE THE CIT(A) AND DENIED IN ANY INVOKING OF ACCOMMODATION ACTIVITIES. (PAPER BOOK PAGE NO. 296 TO 302 AND PAGE NO. 217 TO 223 OF THE I.T.A. NO.9266 /DEL/2019 46 ORDER OF CIT(A)). SIMILARLY, SH. SAWAN KUMAR JAJOO, BEING THIRD PARTY, WHO ALREADY AS PER THE REVENUE WORKED AS BRO KER, HAS ALSO APPEARED BEFORE THE CIT(A) AND HAD EXPLAINED T HAT HE DOES NOT KNOW THE NAME OF THE ASSESSE COMPANY AND NAME, CHART AND OTHER FIGURES IN THE STATEMENT WAS PROVIDED AND WRITTEN BY THE AUTHORIZED OFFICER HIMSELF, REFER TO QUESTION N O. 15 TO 19 (PAGE NO. 207 TO 208 OF THE ORDER OF CIT(A)). 91. SH. CHANDAN KUMAR SINGH, A THIRD PARTY WAS DUL Y APPEARED BEFORE THE CIT(A) AND HE HAD DENIED OF ANY ACCOMMODATION ENTRIES PROVIDED, IN HIS STATEMENT RE CORDED BY THE CIT(A), HIS DENIAL IN INVOKING IN ANY ACCOMMODA TION ACTIVITIES ARE PLACED AT PAPER BOOK PAGE NO. 303 TO 311 AND AL SO REFLECTED AT PAGE NO. 229 TO 234 OF THE ORDER OF LD. CIT(A). THEREAFTER, THE STATEMENT OF BOTH THE DIRECTORS AND THIRD PARTIES R ECORDED BY THE CIT(A) WERE PROVIDED TO THE AO FOR HIS COMMENTS ( S ECOND PARA LAST FOUR LINE OF PAGE NO. 130 OF CIT(A) ORDER AND THE AO SUBMITTED HIS COMMENTS AND COMMENTS ON THE STATEMEN T OF DIRECTORS AND THIRD PARTIES WERE FILED BY THE CIT(A ) ( REFER PAPER BOOK PAGE NO. 313 TO 322, PAGE NO. 144-146, ( OAK) 161-162 (SCS) 224-213, (CKS) AND 224-225 (JAJOO) OF THE ORD ER OF CIT(A). HOWEVER, NO ADVERSE COMMENTS APPEARS TO HAVE BEEN M ADE BY THE AO ON THESE STATEMENTS EXCEPT MERELY SAYING THA T STATEMENT CANNOT BE RECORDED AT THIS STAGE. 92. IN OUR CONSIDERED OPINION AS PER SUB SECTION ( 4) OF SECTION 250 OF THE ACT, THE LD. CIT(A) BEFORE DISPO SING ANY APPEAL MAY MAKE SUCH FURTHER ANY ENQUIRE AS HE THIN KS FIT, OR HE MAY DIRECT THE AO TO MAKE SUCH ENQUIRY AND TO REPOR T THE RESULT OF THE SAME THUS ACCORDING TO THIS PROVISIONS THE C IT(A) IS EMPOWERED TO MAKE ANY FURTHER ENQUIRY AND IN THE PR ESENT CASE I.T.A. NO.9266 /DEL/2019 47 THE LD. CIT(A) CONDUCTED THE PROCEEDING WITH THE AM BIT OF THE SAID PROVISIONS. THEREFORE, IN OUR OPINION, THE LD. CIT(A) HAS DULY DISCHARGED HER OBLIGATION BY CONDUCTING EXAMINATION OF THE KEY PERSON INVOLVED BY WAY RECORDING STATEMENT AND EXAM INATION OF BOOKS OF ACCOUNTS. THESE EVIDENCE BROUGHT ON RECORD PROVED AND ESTABLISHED THE IDENTITY AND CREDIT-WORTHINESS OF S HARE APPLICANT AND INVESTOR AND GENUINENESS OF TRANSACTION OF ABOV E SAID FIVE INVESTOR COMPANIES. WHEREAS THE AO HAS NOT BROUGHT ON RECORD ANYTHING CONTRARY AND MADE ADDITION BY MERELY HOLDI NG THAT THE SAID SUBSCRIBER AS NON- GENUINE ON THE BASIS OF INQ UIRY CONDUCTED IN THE CASE OF THIRD PARTY WHO HAS NOT WH ISPERED ANY WORD AGAINST THE ASSESSE COMPANY. THEREFORE, NO ADD ITION ON ACCOUNT OF SHARE APPLICATION MONEY CAN BE MADE PART ICULARLY WHEN SHARES ARE ALLOTTED AND TRANSACTION ARE THROUG H BANKING CHANNEL AND CONCERNED PARTY RELIED TO SUMMON ISSUED BY INVESTIGATION WING AND ALSO BY THE AO CONFORMING TH E INVESTMENT MADE IN THE BSPL. 93. WE FURTHER FIND THAT THE LD. CIT(A), DURING THE COURSE OF FIRST APPELLATE PROCEEDING IN EXERCISING POWERS MAN DATED IN THE SECTION 250(4) OF THE ACT HAS RIGHTLY DECIDED TO SU MMONS ALL THE TEN PERSON OUT OF WHICH EXCEPT TWO NAMELY SMT. JYOT I DHIRESH MUNVER AND SH. MANISH MIRG, HAVE ATTENDED BEFORE HE R AND THEIR STATEMENTS WERE RECORDED BY THE CIT(A) PERSONALLY. THE APPELLANT HAS BEEN GIVEN OPPORTUNITY TO CROSS EXAMI NATION AND HE APPELLANT AVAILED THE CROSS EXAMINATION . ALL TH E STATEMENTS WERE SEND TO THE AO FOR HIS COMMENTS. THE LD. AR OF THE ASSESSEE ON 17.10.2016 FILED REPLY SUBMISSIONS AND EXPLANATION ON THE SAID REMAND REPORT OF THE AO ON BEHALF OF TH E ASSESSEE BSPL. THE SUBMISSIONS DATED 17.10.2016 OF THE ASSES SEE WERE I.T.A. NO.9266 /DEL/2019 48 REPRODUCED BY THE CIT(A) VERBATIM AT PAGE NO. 130 T O 263 OF HER APPELLATE ORDER. ACCORDINGLY, IDENTIFY CREDIT WORTH INESS AND GENUINENESS OF TRANSACTION HAS BEEN DULY PROVED AND ESTABLISHED. THEREFORE, THE ADDITION OF RS. 15.75 C RORE IN A.Y. 2012-13 AND RS. 25 CRORES IN A.Y. 2013-14 MADE IN R ESPECT OF THIS SUBSCRIBER AND ALLEGED ASSUMED PAYMENT OF COMM ISSION OF 1.50 FOR A.Y. 2012-13 AND RS. 1.25 CRORE FOR THE AS SESSMENT YEAR 2013-14 AS DELETED BY THE CIT(A) ARE RIGHTLY D ELETED BY THE LD. CIT(A) THUS, WE UPHOLD THE SAME. IN THE PRESENT CASE, THE AO HAS NOT BROUGHT ANY EVI DENCE ON RECORD THAT THE AMOUNTS OF SHARE APPLICATION MONEY RECEIVED FROM AADHAR VENTURES INDIA LTD., DHANUS TECHNOLOGIE S LTD., M/S. EMPORIS PROJECTS LTD., L.N. POLYESTER LTD. AND M/S. YANTRA NATURAL RESOURCES LTD. ARE MERELY ACCOMMODATION ENT RIES. AS MENTIONED EARLIER, THE AO HAS ACTED MERELY ON THE B ASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING. T HEREFORE, THE RATIO LAID DOWN BY HONBLE MADHYA PRADESH HIGH COUR T IN CIT VS. PEOPLES GENERAL HOSPITAL LTD. (2013) 356 ITR 65 )MP), (2013) 216 TAXMAN 320(MP)/(2013) 35 TAXMANN.COM 444 (MADHY A PRADESH) IS SQUARELY GIVES SHELTER TO THE ASSESSEE, WHEREIN IT WAS HELD THAT WHERE THE ASSESSEE ESTABLISHES THE ID ENTITY OF SHARE APPLICANT, BURDEN OF PROVING CREDITWORTHINESS WAS NOT ON ASSESSEE. 122. IN THE LIGHT OF ABOVE DISCUSSION, WE HELD THAT THE AO WAS NOT JUSTIFIED IN MAKING ADDITION OF RS. 30 CRORES B Y TREATING THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. THEREFO RE, WE ARE IN AGREEMENT WITH THE FINDINGS OF LD. CIT(A) IN DELETI NG THE SAME, AS THERE WAS NO CASE FOR MAKING SUCH ADDITION EITHE R ON I.T.A. NO.9266 /DEL/2019 49 PROTECTIVE BASIS OR ON SUBSTANTIVE BASIS. SINCE, WE HAVE HELD THAT THE ASSESSEE COMPANY HAS GENUINELY RECEIVED SH ARE APPLICATION MONEY, THEREFORE, QUESTION OF PAYMENT O F ANY COMMISSION DOES NOT ARISE AND THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) ACCORDINGLY, HER FINDINGS ARE U PHELD. ACCORDINGLY, ALL THE GROUNDS OF APPEAL OF REVENUE A RE DISMISSED. 23. THIS ORDER OF THE TRIBUNAL WAS CHALLENGED BY TH E DEPARTMENT BEFORE THE MADHYA PRADESH HIGH COURT IN THE CASE OF CHAIN HOUSE INTERNATIONAL (SUPRA ) WHEREIN THE HONBLE HIGH COURT HAD ANALYZED AND DEALT WITH THE STATEMENT OF SHRI OMPRAKASH KHANDELWAL AND GENUINEN ESS OF M/S. PRRENATA INDUSTRIES IN DETAIL. IT HAS BEEN ALS O POINTED OUT BY THE LD. COUNSEL THAT SLP FILED BY THE REVENU E AGAINST THE SAID ORDER OF THE HONBLE HIGH COURT STANDS DIS MISSED. THE RELEVANT OBSERVATION AND THE FINDING OF THEIR L ORDSHIPS ARE REPRODUCED HEREUNDER: 16. SHRI OMPRAKASH ANANDILAL KHANDELWAL, THE THEN D IRECTOR OF AAADHAAR VENTURES (I) LTD APPEARED BEFORE APPELLATE AUTHORITY (A) AND HIS STATEMENT WAS RECORDED WHEREIN HE STATE D THAT HIS COMPANY WAS NOT ENGAGED IN ANY BUSINESS OF PROVIDIN G ANY ACCOMMODATION ENTRIES. HE ALSO STATED THAT SHRISH C HANDRAKANT SHAH WAS NOT CONTROLLING THE BUSINESS OF HIS COMPAN Y. HE WAS ONLY A FINANCIAL CONSULTANT. HE STATED THAT HIS COM PANY WAS ENGAGED IN THE BUSINESS OF TEXTILES, FINANCE AND IN VESTMENT. HE PRODUCED THE BOOKS OF ACCOUNT FOR THE ASSESSMENT YE ARS 2012- 13 AND 2013-14 CONSISTING OF CASH BOOK, LEDGER, JOU RNAL, BANK BOOK ETC. THE INVESTMENT MADE IN THE APPELLANT COMP ANY WAS I.T.A. NO.9266 /DEL/2019 50 FOUND RECORDED AND SOURCE OF SUCH INVESTMENT WAS AL SO EXPLAINED. HE STATED THAT AUDITED BALANCE SHEET OF THE COMPANY FOR BOTH THE YEARS REFLECTING THE INVESTMENT MADE I N SHARES OF BSPL. THESE BOOKS OF ACCOUNT WERE EXAMINED BY CIT ( A). HE ALSO STATED THAT PRIOR TO MAKING THE INVESTMENT A DUE DI LIGENCE ENQUIRY FROM A COMPANY SECRETARY REGARDING BSPL WAS ALSO MADE. HE ALSO STATED THAT A SHARE VALUATION REPORT OF SHARES OF BSPL WAS PROVIDED TO THEM. HE ALSO STATED THAT HIS COMPANY SUBSCRIBED 105000 SHARES @ OF RS.1500/- PER SHARE I N THE ASSESSMENT YEAR 2012-13. HE FURTHER STATED THAT HIS COMPANY SUBSCRIBED TO 80,00,000 SHARES @ RS.125/- PER SHARE IN THE ASSESSMENT YEAR 2013-14 FOR THE PURPOSE OF ACQUIRIN G CONTROLLING STAKE IN BSPL AND THEREBY ACQUIRE CONTR OL OF ITS SUBSIDIARY COMPANY CHAIN HOUSE INTERNATIONAL (P) LT D. HE ALSO STATED THAT HE KNEW BSPL AND ITS DIRECTORS. HE HAD VISITED THEIR RESIDENCE AND ALSO VISITED BUSINESS PREMISES OF ITS SISTER CONCERNS. HE STATED THAT SHRISH CHANDRAKANT SHAH WA S THEIR FINANCIAL CONSULTANT AND HE DID NOT KNOW SHRI SAWAN KUMAR JAJOO. HIS COMPANY HAD MADE GENUINE INVESTMENT IN B SPL. HE ALSO DENIED TO HAVE RECEIVED OR COLLECTED ANY CASH FROM ANYBODY IN EXCHANGE OF RTGS MADE TO BSPL FOR SUBSCRIBING SH ARE CAPITAL. HE FURTHER STATED THAT THE EARLIER AFFIDAVIT WAS FI LED UNDER FEAR AND PRESSURE. 20. AFTER CONSIDERING THE ENTIRE FACTUAL SCENARIO O F THE CASE, THE APPELLATE AUTHORITY FOUND THAT THE EARLIER STATEMEN TS DID NOT MERIT ACCEPTANCE FOR THE REASONS SUCH AS EARLIER ST ATEMENTS WERE RECORDED BEHIND THE BACK OF THE ASSESSEE AND ALSO B EHIND THE BACK OF THE AO. NO OPPORTUNITY OF CROSS EXAMINATION WAS ALLOWED DESPITE SPECIFIC AND REPEATED REQUESTS. THE EARLIER I.T.A. NO.9266 /DEL/2019 51 STATEMENTS WERE RECORDED MUCH BEFORE THE SEARCH ON THE APPELLANT COMPANY. BSPL WAS NOT IN THE PICTURE AND WAS NOT AN ISSUE DURING THESE STATEMENTS. IN SUCH STATEMENTS N ONE HAD NAMED BSPL AND HELD THAT THE STATEMENT RECORDED BY THE CIT (APPEALS) ARE MORE AUTHENTIC IN ALL RESPECT AND HEL D AS UNDER : 'I EXAMINED THIS ISSUE IN DETAIL AND FOUND THAT THE RE IS NO EVIDENCE TO PROVE, FIRSTLY GENERATION OF UNACCOUNTE D CASH AND TRANSFER OF SUCH CASH TO OTHERS FOR OBTAINING ACCOM MODATION ENTRIES. IN HAVE ALSO FOUND THAT DURING THE COURSE OF SEARCH AT THE APPELLANT COMPANY AND ALSO ON ITS ASSOCIATE COM PANIES AND RESIDENCE OF THE DIRECTORS WHEN EVERY CORNER OF THE HOUSE WAS SEARCHED, NOT A SINGLE PAPER, EVIDENCE OR RECORD WA S UNEARTHED BY THE SEARCH TEAM WHICH SUPPORT THE ALLEGATION OF GENERATION OF ANY UNACCOUNTED CASH AND TRANSFER OF SUCH CASH FOR THE PURPOSE OF OBTAINING ACCOMMODATION ENTRIES. IN THE ABSENCE OF ANY EVIDENCE OF SUCH CASH TRANSFER, THE AO WAS UNJUSTIF IED IN HOLDING THAT THE APPELLANT COMPANY HAD ROUTED BACK ITS OWN UNACCOUNTED CASH. IN THIS CONNECTION IT WOULD BE AL SO RELEVANT TO STATE THAT DURING THE PROCESS OF EXAMINING THESE IN VESTOR COMPANIES I HAVE FOUND THAT THERE IS NO TRANSFER OF CASH FROM THE APPELLANT COMPANY TO THESE INVESTOR COMPANIES OR TO ANYBODY ELSE FOR THIS PURPOSE. I HOLD THAT THERE IS NO GENE RATION OF CASH OUTSIDE THE BOOKS OF ACCOUNT AND ALSO THERE IS NO T RANSFER OF ANY SUCH CASH BY TE APPELLANT COMPANY TO ANYONE ELSE AN D, THEREFORE, I OLD THAT THERE IS NO ACCOMMODATION ENT RY AND THE SHARE CAPITAL RECEIVED IS GENUINE.' 21. THE APPELLATE AUTHORITY (A) HELD THAT THE ASSES SEE COMPANY WAS NOT CONNECTED WITH THE MONEY TRIAL AND THE ASSE SSEE COMPANY WAS ONLY CONCERN WITH THE SOURCE OF SHARE C APITAL I.T.A. NO.9266 /DEL/2019 52 WHICH STANDS PROVED. THE APPELLATE AUTHORITY ALSO E XAMINED THE ISSUE OF SHARE CAPITAL AND HELD AS UNDER : 'I FIND THAT THE POSITION IN THE PRSENT CASE IS OTH ERWISE. ALL THE FIVE COMPANIES HAVE PRODUCED THE BOOKS OF ACCOUNT. THERE IS AN AUDIT REPORTS. ALL THE INVESTORS HAVE APPEARED PERS ONALLY. THE BOOKS OF ACCOUNT WERE EXAMINED THOROUGHLY AND I FIN D THAT SUCH BOOKS OF ACCOUNTS CONTAIN PURCHASES AND SALES TRANS ACTIONS, PAYMENTS AND RECEIPTS BY BANKING CHANNELS, INCURRIN G OF VARIOUS EXPENSES SUCH AS PAYMENTS OF RENT, ELECTRICITY EXCI SE DUTY, SALES TAX, BANK INTEREST, STAFF SALARIES ETC. HE HIMSELF EXAMINED THE DIRECTOR OF MAJOR SHAREHOLDER AAADHAAR VENTURES NAM ELY SOMABHAI SUNDERBAHI MEENA AND ALSO EXAMINED THE BOO KS OF ACCOUNT PRODUCED BY HIM DURING THE COURSE OF ASSESS MENT. IT IS VERY PERTINENT TO NOTE HERE THAT EVEN THE AO COULD NOT FIND DISCREPANCIES WITH THE BOOKS OF ACCOUNTS OR THE DOC UMENTS PRODUCED OR THE FACT OF INVESTMENT AND SOURCE THERE OF. THE AO HAD NEVER DISAGREED WITH THE VARIOUS EVIDENCES AND DOCUMENTS SUBMITTED BEFORE HIM BY THE DIRECTOR OF THE INVESTO R COMPANY.' 23. AFTER CONSIDERING THE STATEMENT OF SHRI SOMABHA I SUNDERBHAI MEENA, DIRECTOR OF MAJOR INVESTOR COMPAN Y NAMELY M/S. AADHAR VENTURES INDIA LTD. WHICH WAS RECORDED BY THE AO DURING ASSESSMENT PROCEEDINGS, THE CIT(A) ARRIVED T O THE FOLLOWING FINDINGS : 'THE APPELLANT COMPANY HAD PURCHASED ONE DIRECTOR OF AAADHAAR VENTURES NAMELY SHRI SOMABHAI SUNDERBHAI M EENA BEFORE THE AO DURING ASSESSMENT PROCEEDINGS. HE CON FIRMED THAT HIS COMPANY HAD INVESTED A SUM OF RS.40.75 CRORES I N THE SHARE CAPITAL OF THE APPELLANT COMPANY IN FYS. 2011-12 AN D 2012-13. HE PRODUCED THE BOOKS OF ACCOUNT OF THE COMPANY AND WAS I.T.A. NO.9266 /DEL/2019 53 THOROUGHLY EXAMINED BY THE AO. THIS INVESTMENT WAS FOUND RECORDED IN THE BOOKS OF ACCOUNT AS VERIFIED BY THE AO. HE EXPLAINED THE SOURCE OF INVESTMENTS WITH REFERENCE TO THE BOOKS OF ACCOUNT. SUCH SOURCE WAS THEN EXAMINED BY THE AO ALSO OBTAINED COPIES OF THE NECESSARY LEDGER ACCOUNTS WI TH REFERENCE TO THE SOURCE OF INVESTMENTS. HE EXPLAINED THAT HIS COMPANY WAS NEVER ENGAGED IN PROVIDING ACCOMMODATION ENTIRE AND ON THE CONTRARY WAS CARRYING ON REAL BUSINESS WHERE THE TU RNOVER RUNS INTO APPROX171 CRORES AND 133 CRORES IN FYS. 2011-1 2 AND 2012- 13 RESPECTIVELY. HE ALSO PRODUCED THE BANK ACCOUNTS OF HIS COMPANY WITH REFERENCE TO THE SHARE CAPITAL INVESTE D IN BHARAT SECURITIES. THE AO ALSO REQUIRED HIM TO SEND CERTAI N DOCUMENTS. CONSEQUENTLY COPY OF RESOLUTION, SHAREHOLDING PATTE RN, COPY OF SHARE CERTIFICATE, COPY OF MOU, COPY OF ARBITRATION AWARD, COPY OF DUE DILIGENCE REPORT, COPY OF SHARE VALUATION REPOR T AND LEGAL NOTICE WERE SENT BY HIS COMPANY VIDE LETTER DATED 1 8.3.2016. THE AO NEVER DISAGREED WITH THE CONTENTS OF OBJECTI ON WAS THAT SOMABHAI WAS NOT A DIRECTOR OF THE COMPANY AT THE T IME OF MAKING INVESTMENT IN BHARAT SECURITIES. NOW TWO OTH ER DIRECTORS OF THE SAME COMPANY NAMELY SHRI JILS RAICHAND MADAN AND SHRI OMPRAKASH ANANDILAL KHANDELWAL APPEARED BEFORE ME A ND THEIR STATEMENTS WERE RECORDED. BOTH OF THEM WERE D IRECTORS OF AAADHAAR VENTURES AT THE TIME OF MAKING THE INVESTM ENT IN BHARAT SECUIRTIES. THEIR STATEMENTS HAVE ALREADY BE EN DISCUSSED IN THE EARLIER PARA AND TO AVOIDANY REPET ITION I SIMPLY WANT TO REITERATE THAT THE PRESENT STATEMENTS GIVEN BY BOTH THE DIRECTORS OF AAADHAAR VENTURES BEFORE ME ARE TOTALL Y CONFIRMATORY AND CORROBORATIVE TO THE EARLIER STATE MENT OF SOMANBHAI SUNDERBAHAI MEENA RECORDED BY THE AO DURI NG THE ASSESSMENT PROCEEDINGS.' I.T.A. NO.9266 /DEL/2019 54 27. IN RESPECT OF THE ALLEGATION AGAINST THE FIVE L ISTED COMPANIES FOR PROVIDING ACCOMMODATION ENTRIES, THE APPELLATE AUTHORITY HAS HELD AS UNDER : 'THE BASIS OF SUCH CONCLUSION IS THE STATEMENT OF SCS AND SOME OTHERS AS RECORDED IN THE SEARCH OF OTHERS AND ALSO ON THE BACK OF THE APPELLANT COMPANY. THE APPELLANT HAD AR GUED THAT SUCH STATEMENTS ARE OUTSIDE THE JURISDICTION OF THE ASSESSMENT U/S 153A SINCE THEY WERE RECORDED NOT IN CONNECTION WITH THE SEARCH ON THE APPELLANT COMPANY. NO CROSS EXAMINATI ON WAS DONE. IT IS PERTINENT TO NOTE HERE THAT THE APPELLA NT WAS VERY KEEN TO CROSS EXAMINE THE PERSONS. THIS KEENNESS IS PROVED BY THE FACT THAT ON 18.09.2014 WHEN THE OPPORTUNITY OF CROSS EXAMINATION OF SCS AND JAJOO WAS OFFERED TO THE APP ELLANT, THE DIRECTOR NARESH KUMAR REACHED AT THE DESIGNATED PLA CED AT MUMBAI ON TIME TO CROSS EXAMINE THE WITNESSES. HOWE VER, THE DEPARTMENT HAS WITHDRAWN SUCH OPPORTUNITY. THIS OPP ORTUNITY WAS NEVER PROVIDED TO THE APPELLANT DESPITE REPEATE D REQUESTS DURING ASSESSMENT PROCEEDINGS. I HOLD THAT RELIANCE ON STATEMENTS WITHOUT CROSS EXAMINATION IS AGAINST THE SETTLED PRINCIPLE OF NATURAL JUSTICE. EVEN OTHERWISE SCS AN D OTHERS HAVE APPEARED BEFORE ME AND ADMITTED THAT SCS WAS NOT MA NAGING AND CONTROLLING THESE COMPANIES FOR THE PURPOSE OF PROVIDING ACCOMMODATION ENTRIES. ALL THE COMPANIES ARE ENGAGE D IN THE REAL BUSINESS HAVING SUBSTANTIAL TURNOVER, PAYING R ENT, SALARIES, ELECTRICITY BILL ETC. ONE OF THE COMPANIES IS ALSO PAYING EXCISE DUTY AND SALES TAX. SOME OF THE COMPANIES HAVE TAKE N SECURED LOANS FROM BANKS. AS I UNDERSTAND THE REFERENCE TO KEY ASSOCIATES COULD BE THE EMPLOYEE OF SCS NAMELY CHAN DAN I.T.A. NO.9266 /DEL/2019 55 KUMAR SINGH. IN THE STATEMENT RECORDED BY ME HE HAS DENIED ALL SUCH ALLEGATIONS. HE HAS ADMITTED THAT SCS WAS NOT INVOLVED IN ANY BUSINESS OF PROVIDING ACCOMMODATION ENTRIES AND NOR HE HAS EVER SEEN SEC CONTROLLING THESE FIVE COMPANIES. HENCE I DO NOT AGREE WITH THE CONCLUSION ARRIVED AT BY THE AO. ' 51. THE LEARNED ITAT AFTER DUE EXAMINATION OF THE O RDER OF CIT (APPEALS) AND THE DOCUMENTS ON RECORD INSOFAR AS ID ENTITY CREDITWORTHINESS, GENUINENESS OF TRANSACTION OF M/S . AAADHAAR VENTURES (I) LTD, M/S. DHANUSH TECHNOLOGIES LTD, M/ S. EMPORIS PROJECTS LTD AND M/S. L.N. INDUSTRIES LTD (FORMARLY KNOWN AS L.N. POLYSTER LTD) CAME TO THE CONCLUSION THAT THE ASSESSEE COMPANY HAVING RECEIPT SHARE APPLICATION MONEY THRO UGH BANK CHANNEL AND FURNISHED COMPLETE DETAILS OF BANK STAT EMENTS, COPY OF ACCOUNTS AND COMPLIED WITH NOTICES ISSUED A ND THE DIRECTORS OF THE SUBSCRIBER COMPANY ALSO APPEARED W ITH BOOKS OF ACCOUNTS BEFORE THE APPELLATE AUTHORITY AND CONFIRM ED THE INVESTMENT MADE BY THEM WITH THE ASSESSEE COMPANY, THEREFORE, THE IDENTITY AND CREDITWORTHINESS OF INVESTOR AND G ENUINENESS OF TRANSACTION OF THE SHARE APPLICANT HAS BEEN PROVED IN THE LIGHT OF THE RATIO LAID DOWN BY THE M.P. HIGH COURT, DELHI H IGH COURT AND THE HON'BLE SUPREME COURT AND WERE OF THE OPINION T HAT THE ONUS CAST UPON THE ASSESSEE AS PROVIDED UNDER SECTION 68 OF THE ACT HAS BEEN DULY DISCHARGED BY THE ASSESSEE THE IDENTI TY OF THE SHARE SUBSCRIBER, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION IS NOT TO BE DOUBTED. THE LEARNED ITAT CONSIDERED THE CASE OF THE EACH COMPANY IN GREAT DETAIL IN PAR AS 85 TO 110 OF THE IMPUGNED ORDER AND RECORDED ITS FINDING. THE AFORESAID FINDING OF FACT RECORDED BY THE ITAT ARE BASED ON T HE MATERIAL AVAILABLE ON RECORD WHICH IS A FINDING BASED ON APP RECIATION OF I.T.A. NO.9266 /DEL/2019 56 EVIDENCE ON RECORD. 52. ISSUING THE SHARE AT A PREMIUM WAS A COMMERCIAL DECISION. IT IS THE PREROGATIVE OF THE BOARD OF DIRECTORS OF A COMPANY TO DECIDE THE PREMIUM AMOUNT AND IT IS THE WISDOM OF S HAREHOLDER WHETHER THEY WANT TO SUBSCRIBE THE SHARES AT SUCH A PREMIUM OR NOT. THIS WAS A MUTUAL DECISION BETWEEN BOTH THE CO MPANIES. IN DAY TO DAY MARKET, UNLESS AND UNTIL, THE RATES IS F IXED BY ANY GOVT. AUTHORITY OR UNLESS THERE IS ANY RESTRICTION ON THE AMOUNT OF SHARE PREMIUM UNDER ANY LAW, THE PRICE OF THE SH ARES IS DECIDED ON THE MUTUAL UNDERSTANDING OF THE PARTIES CONCERNED. 53. ONCE THE GENUINENESS, CREDITWORTHINESS AND IDEN TITY ARE ESTABLISHED, THE REVENUE SHOULD NOT JUSTIFIABLY CLA IM TO PUT ITSELF IN THE ARMCHAIR OF A BUSINESSMAN OR IN THE POSITION OF THE BOARD OF DIRECTORS AND ASSUME THE ROLE OF ASCERTAINING HO W MUCH IS A REASONABLE PREMIUM HAVING REGARD TO THE CIRCUMSTANC ES OF THE CASE. 54. THERE IS NO DISPUTE ABOUT THE RECEIPT OF FUNDS THROUGH BANKING CHANNEL NOR THERE IS ANY DISPUTE ABOUT THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE INVESTORS A ND, THEREFORE, THE SAME HAS BEEN ESTABLISHED BEYOND ANY DOUBT AND THERE SHOULD NOT HAVE BEEN ANY QUESTION OR DISPUTE ABOUT PREMIUM PAID BY THE INVESTORS THEREFORE, UNLESS THE RE IS A LIMITATION PUT BY THE LAW ON THE AMOUNT OF PREMIUM, THE TRANSACTION SHOULD NOT BE QUESTIONED MERELY BECAUSE THE ASSESSING AUTHORITY THINKS THAT THE INVESTOR COULD HAVE MANAGED BY PAYING A LESSER AMOUNT AS SHARE PREMIUM AS A PRU DENT BUSINESSMAN. THE TEST OF PRUDENCE BY SUBSTITUTING I TS OWN VIEW IN PLACE OF THE BUSINESSMAN'S HAS NOT BEEN APPROVED BY THE SUPREME COURT IN THE DECISIONS OF CIT V. WALCHAND & CO. (P.) LTD. I.T.A. NO.9266 /DEL/2019 57 [1967] 65 ITR 381 AND J.K. WOOLLEN MFG. V. CIT [196 9] 72 ITR 612 (SC). 55. THE QUESTION OF SHARE PREMIUM HAS BEEN CONSIDER ED BY THE DELHI HIGH COURT IN THE CASE OF CIT V. ANSHIKA CONS ULTANTS (P.) LTD.[2015] 62 TAXMANN.COM 192 WHEREIN IT WAS HELD T HUS : 'THE ONUS CAST UPON THE ASSESSEE UNDER SECTION 68 O F THE ACT TO SATISFY THE DEPARTMENT ABOUT THE TRUE IDENTITY OF A N INVESTOR, ITS CREDITWORTHINESS AND GENUINENESS OF A TRANSACTION W AS EXPLAINED BY THE SUPREME COURT IN CIT V. LOVELY EXP ORTS (P) LTD., [2008] 216 CTR 195,. WHILST, THE AO ACTED LEGITIMAT ELY IN ENQUIRING INTO THE MATTER, THE INFERENCES DRAWN BY HIM WERE NOT JUSTIFIED AT ALL IN THE CIRCUMSTANCES OF THE CASE. WHETHER THE ASSESSEE COMPANY CHARGED A HIGHER PREMIUM OR NOT, S HOULD NOT HAVE BEEN THE SUBJECT MATTER OF THE ENQUIRY IN THE FIRST INSTANCE. INSTEAD, THE ISSUE WAS WHETHER THE AMOUNT INVESTED BY THE SHARE APPLICANTS WERE FROM LEGITIMATE SOURCES. THE OBJECTIVE OF SECTION 68 IS TO AVOID INCLUSION OF AMOUNT WHICH AR E SUSPECT. THEREFORE, THE EMPHASIS ON GENUINENESS OF ALL THE T HREE ASPECTS, IDENTITY, CREDITWORTHINESS AND THE TRANSACTION. WHA T IS DISQUIETING IN THE PRESENT CASE IS WHEN THE ASSESSM ENT WAS COMPLETED ON 31.12.2007, THE INVESTIGATION REPORT W HICH WAS SPECIFICALLY CALLED FROM THE CONCERNED DEPARTMENT I N KOLKATA WAS AVAILABLE BUT NOT DISCUSSED BY THE AO. HAD HE C ARED TO DO SO, THE IDENTITY OF THE INVESTORS, THE GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF THE SHARE A PPLICANTS WOULD HAVE BEEN APPARENT. EVEN OTHERWISE, THE SHARE APPLICANTS' PARTICULARS WERE AVAILABLE WITH THE AO IN THE FORM OF BALANCE SHEETS INCOME TAX RETURNS, PAN DETAILS ETC. WHILE ARRIVING AT THE CONCLUSION THAT HE DID, THE AO DID NOT CONSIDER IT I.T.A. NO.9266 /DEL/2019 58 WORTHWHILE TO MAKE ANY FURTHER ENQUIRY BUT BASED HI S ORDER ON THE HIGH NATURE OF THE PREMIUM AND CERTAIN FEATURES WHICH APPEARED TO BE SUSPECT, TO DETERMINE THAT THE AMOUN T HAD BEEN ROUTED FROM THE ASSESSEE'S ACCOUNT TO THE SHARE APP LICANTS' ACCOUNT. AS HELD CONCURRENTLY BY THE CIT (APPEALS) AND THE ITAT, THESE CONCLUSIONS WERE CLEARLY BASELESS AND FALSE. THIS COURT IS CONSTRAINED TO OBSERVE THAT THE AO UTTERLY FAILED T O COMPLY WITH HIS DUTY CONSIDERS ALL THE MATERIALS ON RECORD, IGN ORING SPECIFICALLY THE MOST CRUCIAL DOCUMENTS.' 56-57. IT IS WELL SETTLED THAT IF THE CREDITWORTHIN ESS OF THE INVESTOR COMPANY AND GENUINENESS OF THE TRANSACTION IS PROVED NO ADDITION UNDER SECTION 68 COULD BE MADE AND NO S UBSTANTIAL QUESTION OF LAW ARISES. 25. THE AFORESAID JUDGMENT OF HONBLE HIGH COURT CLE ARLY CLINCHES THE ISSUE IN SO FAR AS RELIANCE PLACED ON THE STATEMENT OF SHRI OMPRAKASH KHANDELWAL WHICH HAS BE EN THE SOLE FOUNDATION OF THE ASSESSING OFFICER AND SAME S TANDS NEGATED AND DOES NOT HAVE ANY EVIDENTIARY VALUE BEC AUSE THE SAME WAS RETRACTED SUBSEQUENTLY WHICH FACT HAS BEEN ANALYZED BY THE HONBLE TRIBUNAL AND ALSO BY THE HO NBLE HIGH COURT. THE HONBLE HIGH COURT ALSO NOTED THAT SOURCE OF INVESTMENT IN THE HANDS M/S. PRRANETA INDUSTRIES LT D. (NOW KNOWN AS M/S. AADHAAR VENTURES INDIA LTD.) IS EXPLA INED AND THE COMPANY WAS NOT ENGAGED IN THE BUSINESS OF PROV IDING ACCOMMODATION ENTRIES. IN FACT, SH. OMPRAKASH KHAND ELWAL HIMSELF, IN THAT CASE, HAS CATEGORICALLY AFFIRMED T HE GENUINENESS OF THE AFFAIRS OF M/S. PRRANETA INDUSTR IES LTD. IT IS RELEVANT TO MENTION THAT IN THE SAID CASE, THE A LLEGED NEXUS I.T.A. NO.9266 /DEL/2019 59 OF SHIRISH C SHAH WITH INVESTOR COMPANY WAS ALSO EX AMINED AND IT WAS FOUND THAT SHRISH C SHAH WAS NOT EVEN CO NTROLLING THE SAID CONCERN. AFTER EXAMINING THE ENTIRE GAMUT OF FACTS IN THE LIGHT OF DECISION OF HONBLE MP HIGH COURT, THE RE REMAINS NO SHRED OF DOUBT IN OUR MIND THAT M/S. PRRANETA IN DUSTRIES LTD. IS A GENUINE CONCERN AND VERACITY AND AUTHENTI CITY OF SHARE CAPITAL RECEIVED BY THE APPELLANT FROM THE SA ID INVESTOR CANNOT BE QUESTIONED. 25. FURTHER, THE ISSUE OF SHARE PREMIUM AS RAISED B Y LD. DR ALSO GETS DISPELLED BY ABOVE THE DECISION OF HONBL E HIGH COURT WHEREIN IT HAS BEEN HELD THAT ISSUANCE OF SHA RE AT PREMIUM IS PREROGATIVE OF THE BOARD AND WISDOM OF T HE INVESTOR. MOREOVER, IN ABSENCE OF ANY PROHIBITION W ITH REGARD TO SHARE PREMIUM IN THE INCOME TAX ACT, 1961 AS REL EVANT FOR THE YEAR UNDER REFERENCE I.E. AY 2010-11, NO ADVERS E INFERENCE IS WARRANTED. IN ANY CASE, THE ASSESSING OFFICER HAVING NOT DISPUTED THE VALUE OF SHARES OR PREMIUM, WE FAIL TO SEE ANY MERIT IN THE CONTENTION OF LD DR PARTICULAR LY WHEN THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF T RANSACTION STOOD ESTABLISHED. 26. THE DECISION OF HONBLE SUPREME COURT IN THE CA SE OF PCIT V. NRA IRON AND STEEL P. LTD. 412 ITR 161 (SC) AS RELIED UPON BY LD. DR AND OTHER REVENUE FAVOURING DECISION S ARE CLEARLY DISTINGUISHABLE ON FACTS AND NOT APPLICABLE . IN FACT, IN THE CASE OF NRA IRON AND STEEL (SUPRA), THE ASSESSI NG OFFICER CONDUCTED DETAILED ENQUIRY AND IDENTITY OF THE PART IES WAS I.T.A. NO.9266 /DEL/2019 60 UNDER SERIOUS DOUBT. HOWEVER, NOTHING OF THAT SORT HAS DONE IN THIS CASE. 27. THUS IN THE LIGHT OF FINDING RECORDED IN AFORES AID PARA AND RESPECTFULLY FOLLOWING THE DECISION OF HONBLE MP HIGH COURT, WE ARE OF CONCERNED VIEW THAT APPELLANT HAS DISCHARGED THE ONUS U/S 68 TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF INVESTOR COMPANY M/S. PRRANETA INDUSTRIES LTD. (NOW KNOWN AS M/S. AADHAAR VENTURES INDIA LTD.). ACCORDINGLY, THE ASSESSING OFFICER IS DIRECT ED TO DELETE THE ADDITION U/S 68. GROUND NO. 4 IS ALLOWED. 28. THE GROUND NO. 3 AND 5 ARE TAKEN TOGETHER AS TH EY DEAL WITH ADDITION OF AGGREGATE SHARE CAPITAL OF RS. 5,1 2,40,000/- U/S 68 OF THE ACT. IT IS A CASE OF REASSESSMENT PRO CEEDINGS U/S 147 WHERE REOPENING WAS MADE IN RESPECT OF SHAR E CAPITAL OF RS. 2.50 CRORES RECEIVED FROM M/S. PRRANETA INDU STRIES LTD. HOWEVER, DURING THE COURSE OF REASSESSMENT PROCEEDI NGS, THE ASSESSING OFFICER NOTED THAT APPELLANT HAS ALSO RAI SED SHARE CAPITAL FROM OTHER PARTIES AND ACCORDINGLY ENQUIRY WAS INITIATED IN RESPECT OF SHARE OF CAPITAL OF RS.5,12 ,40,000/- RECEIVED FROM 18 INVESTOR COMPANIES. THE ASSESSING OFFICER BEING NOT SATISFIED WITH GENUINENESS OF SHARE CAPIT AL FROM THE SAID PARTIES, CONSIDERED THE ADDITION U/S 68 OF THE ACT. 29. AT THE THRESHOLD, SINCE WE HAVE DELETED THE ADD ITION OF RS. 2.50 CRORES WHICH WAS THE SOLE BASIS OF NOTICE U/S 148, THERE REMAINS NO VALID GROUND FOR ANY ADDITION OF R S. 5,12,40,000 IN VIEW OF THE FACT THAT FOUNDATIONAL B ASE OF I.T.A. NO.9266 /DEL/2019 61 REASSESSMENT PROCEEDINGS GETS VITIATED. THE LEGAL P OSITION TO THIS EFFECT IS WELL SUPPORTED BY THE DECISION OF HO NBLE DELHI HIGH COURT IN THE CASE OF RANBAXY LABORATORIES LTD. V. CIT[2011] 336 ITR 136 (DEL) AND BOMBAY HIGH COURT IN THE CASE OF JET AIRWAYS [2011] 331 ITR 236 (BOM). IT WAS HELD BY HONBLE JURISDICTIONAL HIGH COURT THAT EXPLANATION 3 TO SECTION 147 WILL NOT APPLICABLE IF NO ADDITION I S MADE IN RESPECT OF ISSUE WHICH WAS SUBJECT MATTER OF NOTICE U/S 148. 30. IN THE PRESENT CASE, THE REASONS WERE RECORDED ONLY WITH RESPECT TO ISSUE OF SHARE OF CAPITAL OF RS. 2.50 CR ORES FROM M/S. PRRANETA INDUSTRIES LTD. (NOW KNOWN AS M/S. AA DHAAR VENTURES INDIA LTD.) AND SAME HAVING BEEN DELETED B Y US, THE REMAINING ADDITION OF RS. 5,12,40,000/- HAS NO LEGS TO STANDS AND IS HEREBY ORDERED TO BE DELETED. 31. HOWEVER, FOR SAKE OF COMPLETENESS AND KEEPING I N MIND THE GRAVITY OF ISSUE, WE FEEL APPROPRIATE TO DECIDE THE LEGALITY OF ADDITIONS MADE OVER AND ABOVE THE REASONS RECORD ED IN THE LIGHT OF SCOPE OF PROCEEDINGS U/S 147 OF THE ACT. A S MENTIONED EARLIER, THE PROVISIONS OF SECTION 147 ARE POTENT A ND ITS APPLICATION IS RESTRICTED TO DESERVING CASES HAVING SATISFIED THE DEFINED CRITERIA I.E. EXISTENCE TANGIBLE MATERI AL EVIDENCING ESCAPEMENT OF INCOME AND APPLICATION OF MIND. FURTH ER, THE ACT HAS INBUILT CHECKS AND BALANCES TO ENSURE PROPE R EXERCISE OF POWER U/S 147 WHICH INCLUDED PRIOR APPROVAL OF S UPERIOR AUTHORITY. 32. IT IS THE ARGUMENT OF THE LD. AR APPEARING FOR THE I.T.A. NO.9266 /DEL/2019 62 APPELLANT ASSESSEE THAT ONCE THE ASSESSING OFFICER RECORDS REASON AND OBTAINS APPROVAL FOR ISSUE OF NOTICE U/S 148, THE SCOPE OF PROCEEDINGS U/S 147 GETS LAID DOWN AND IT IS NOT OPEN TO ASSESSING OFFICER TO MAKE ROVING AND FISHIN G ENQUIRY AND ARBITRARILY ENHANCE THE SCOPE OF REASSESSMENT PROCEEDINGS AS PER WHIMS AND FANCIES. IT WAS FURTHE R CONTENDED THAT EXPLANATION 3 TO SECTION 147 DOES NOT PROVIDE UNFETTERED POWER TO ASSESSING OFFICER TO GO BEYOND THE REASONS AND SAME HAS TO BE READ IN CONJUNCTION WITH PRINCIP LE PROVISION OF SECTION 147, 148 AND 151. THE UPSHOT O F ARGUMENT OF LD. AR IS THAT FOR MAKING ANY FURTHER E NQUIRY OR ADDITION, THE FOLLOWING CONDITIONS MUST BE SATISFIE D: I. THERE MUST BE SOME TANGIBLE MATERIAL COMING TO T HE NOTICE OF ASSESSING OFFICER DURING THE COURSE OF AS SESSMENT WHICH SHOWS ESCAPEMENT OF INCOME IN RESPECT OF SOME OTHER ITEM (OTHER THAN ONE REFERRED IN THE REASONS) . II. THE ASSESSING OFFICER MUST RECORD REASONS FOR I NCLUDING SUCH OTHER ITEM IN THE SCOPE OF ONGOING REASSESSMEN T PROCEEDINGS U/S 147 III. FRESH APPROVAL MUST BE OBTAINED U/S 151 AND NOTICE U/S 148 MUST ALSO BE ISSUED. 33. IN SUPPORT OF ABOVE PROPOSITION, THE LD. AR HA S RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN TH E CASE OF RANBAXY LABORATORIES LTD. V. CIT[2011] 336 ITR 136 (DEL) AND COORDINATE BENCH IN THE CASE OF SH. DEVKI NANDAN I.T.A. NO.9266 /DEL/2019 63 BINDAL V. ITO (ITA NO. 4271/D/19 DATED 18/12/2019). THE FINDING OF COORDINATE BENCH IS REPRODUCED HEREUNDER : 35. IT MAY ALSO BE NOTED HERE THAT THE A.O. IN THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT HAS MERELY RECORDED THAT RS.15 LACS ACCOMMODATION ENTRY TAKEN BY THE ASSESSEE HAS ESCAPED ASSESSMENT. HOWEVER, AT THE RE - ASSESSMENT STAGE, A.O. MADE FURTHER ADDITION OF RS. 52.91 CRORES ON ACCOUNT OF DEPOSITS IN THE BANK ACCOUNT O F THE ASSESSEE. NO REASONS HAVE BEEN MENTIONED AS TO WHY SUCH ADDITION HAVE BEEN MADE AND WHAT WAS THE PURPOSE IN MAKING THE ADDITION. THE ENTIRE DEPOSIT IN THE BANK ACCOUNT OF THE ASSESSEE COULD NEVER BE UNEXPLAINED. EVEN TH E INVESTIGATING AGENCY HAVE NOT MADE ANY ALLEGATION A GAINST THE ASSESSEE IF THAT AMOUNT WAS AN ACCOMMODATION EN TRY TAKEN BY THE ASSESSEE? THE LD. D.R. ADMITTED THAT NO NOTICE HAVE BEEN ISSUED BY THE A.O. WHILE PROPOSING TO MAKE THIS ADDITION OF RS.52.91 CRORES. THE ISSUE IS , THEREFORE, COVERED IN FAVOUR OF THE ASSESSEE AGAINS T THE DEPARTMENT BY JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF RANBAXY LABORATORIES LIMITED VS., CIT [2011 ] 336 ITR 136 (DEL.) IN WHICH IN PARA 18 IT WAS HELD AS U NDER : WE ARE IN COMPLETE AGREEMENT WITH THE REASONING OF THE DIVISION BENCH OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS., JET AIRWAYS (I) LIMITED [2011] 331 ITR 236 (BO M.). WE MAY ALSO NOTE THAT THE HEADING OF SECTION 147 IS 'I NCOME ESCAPING ASSESSMENT' AND THAT OF SECTION 148 'ISSUE OF I.T.A. NO.9266 /DEL/2019 64 NOTICE WHERE INCOME ESCAPED ASSESSMENT'. SECTIONS 1 48 IS SUPPLEMENTARY AND COMPLIMENTARY TO SECTION 147. SUB - SECTION (2) OF SECTION 148 MANDATES REASONS FOR ISS UANCE OF NOTICE BY THE ASSESSING OFFICER AND SUB-SECTION (1) THEREOF MANDATES SERVICE OF NOTICE TO THE ASSESSEE BEFORE T HE ASSESSING OFFICER PROCEEDS TO ASSESS, REASSESS OR R E- COMPUTE THE ESCAPED INCOME. SECTION 147 MANDATES RECORDING OF REASONS TO BELIEVE BY THE ASSESSING OF FICER THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT . ALL THESE CONDITIONS ARE REQUIRED TO BE FULFILLED TO AS SESS OR REASSESS THE ESCAPED INCOME CHARGEABLE TO TAX. AS P ER EXPLANATION 3 IF DURING THE COURSE OF THESE PROCEED INGS THE ASSESSING OFFICER COMES TO CONCLUSION THAT SOME ITE MS HAVE ESCAPED ASSESSMENT, THEN NOTWITHSTANDING THAT THOSE ITEMS WERE NOT INCLUDED IN THE REASONS TO BELIEVE AS RECO RDED FOR INITIATION OF THE PROCEEDINGS AND THE NOTICE, HE WO ULD BE COMPETENT TO MAKE ASSESSMENT OF THOSE ITEMS. HOWEVE R, THE LEGISLATURE COULD NOT BE PRESUMED TO HAVE INTENDED TO GIVE BLANKET POWERS TO THE ASSESSING OFFICER THAT ON ASS UMING JURISDICTION UNDER SECTION 147 REGARDING ASSESSMENT OR REASSESSMENT OF THE ESCAPED INCOME, HE WOULD KEEP O N MAKING ROVING INQUIRY AND THEREBY INCLUDING DIFFERE NT ITEMS OF INCOME NOT CONNECTED OR RELATED WITH THE REASONS TO BELIEVE, ON THE BASIS OF WHICH HE ASSUMED JURISDICT ION. FOR EVERY NEW ISSUE COMING BEFORE THE ASSESSING OFFICER DURING THE COURSE OF PROCEEDINGS OF ASSESSMENT OR REASSESS MENT OF ESCAPED INCOME, AND WHICH HE INTENDS TO TAKE INTO A CCOUNT, I.T.A. NO.9266 /DEL/2019 65 HE WOULD BE REQUIRED TO ISSUE A FRESH NOTICE UNDER SECTION 148. 36. SIMILAR VIEW IS TAKEN BY THE ITAT, MUMBAI G BEN CH IN THE CASE OF JULIET INDUSTRIES LTD., MUMBAI VS., ITO 6(3)(3), MUMBAI (SUPRA). CONSIDERING THE TOTALITY OF THE FAC TS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT A.O. HAS REC ORDED NON-EXISTING, INCORRECT AND WRONG FACTS IN THE REAS ONS RECORDED FOR REOPENING OF THE ASSESSMENT. THE A.O. DID NOT APPLIED HIS MIND TO THE REPORT OF INVESTIGATION WIN G. THE A.O. MERELY BELIEVED REPORT OF INVESTIGATION WING W ITHOUT MAKING FURTHER SCRUTINY AT THE ASSESSMENT. THE A.O. MERELY REPRODUCED REPORT OF INVESTIGATION WING WITHOUT MAK ING FURTHER SCRUTINY OF THE SAME. THE A.O. MERELY REPRO DUCED REPORT OF INVESTIGATION WING AND CRUX OF STATEMENT OF SHRI KISHORI SHARAN GOEL FOR REOPENING OF THE ASSESSMENT IN THE MATTER. THEREFORE, IT WAS MERELY A BORROWED SATISFA CTION WITHOUT APPLICATION OF MIND. WE, THEREFORE, HELD TH AT INITIATION OF RE-ASSESSMENT PROCEEDINGS IN THE INST ANT CASE IS ILLEGAL, BAD IN LAW AND IS LIABLE TO BE QUASHED. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE ORDERS OF THE AUTHO RITIES BELOW AND QUASH THE REOPENING OF ASSESSMENT UNDER SECTION 147/ 148 OF THE INCOME TAX ACT, 1961. RESUL TANTLY, ALL ADDITIONS STAND DELETED. IN VIEW OF THE ABOVE, THERE IS NO NEED TO ADJUDICATE THE ISSUES ON MERIT WHICH ARE LE FT WITH ACADEMIC DISCUSSION ONLY. 34. WE HAVE GIVEN CAREFUL THOUGHT TO THE ARGUMENT O F THE LD. COUNSEL AND FIND OURSELVES IN AGREEMENT WITH SAME. THE I.T.A. NO.9266 /DEL/2019 66 INTENTION OF LEGISLATURE BEHIND ENACTING PROVISIONS OF SECTION 147 IS NOT TO CREATE A PARALLEL ASSESSMENT PROCEEDI NG AKIN TO REGULAR ASSESSMENT FRAMED U/S 143(3) OF THE ACT. TH E PURPOSE OF SECTION 147 IS TO CATCH IN THE TAX NET INCOME ES CAPING ASSESSMENT BASED ON TANGIBLE MATERIAL. THE REQUIREM ENT OF TANGIBLE MATERIAL AND APPROVAL U/S 151 IS TO KEEP C HECK ON ARBITRARY EXERCISE OF POWER U/S 147 WHICH NECESSARI LY MEANS THAT ASSESSING OFFICER CANNOT CONVERT REASSESSMENT PROCEEDINGS INTO REGULAR SCRUTINY PROCEEDINGS AT HI S/HER SWEET WILL. IT GOES WITHOUT SAYING THAT EXPLANATION CANNOT DEFEAT THE INTENTION AND PURPOSE OF A SECTION AND A S SUCH THE APPLICATION OF EXPLANATION 3 WILL HAVE TO BE IN ACC ORDANCE WITH CHECKS AND BALANCES WHICH ARE APPLICABLE AT TH E TIME OF ISSUANCE OF NOTICE U/S 148. 35. IN THE PRESENT CASE, IN RESPECT OF SHARE CAPITA L OF RS. 5,12,40,000/- RECEIVED FROM 18 PARTIES, THE ASSESSI NG OFFICER INITIATED FRESH ENQUIRY DURING THE COURSE OF REASSE SSMENT PROCEEDINGS ON THE BASIS OF BOOKS OF ACCOUNT OF THE APPELLANT. THERE IS NO DISPUTE THAT VERY SAME MATERIAL WAS IN EXISTENCE WHEN ASSESSING OFFICER RECORDED REASONS AND IT IS N EITHER THE CASE OF THE ASSESSING OFFICER THAT THERE WAS ANY FA ILURE OR OMISSION ON PART OF THE APPELLANT IN DISCLOSING ANY INFORMATION NOR ANY CASE OF FRESH INFORMATION COMIN G TO THE NOTICE OF THE ASSESSING OFFICER. THE ORIGINAL ACTIO N U/S 148 WAS ON THE BASIS OF SOME INFORMATION WHICH WAS HAS ALREADY BEEN AFFIRMED BY US. HOWEVER, IN RESPECT OF OTHER I TEMS, THE ASSESSING OFFICER HIMSELF MADE RANDOM ENQUIRY WHICH IS I.T.A. NO.9266 /DEL/2019 67 ABSOLUTE MISUSE OF POWER IN THE CONTEXT OF SCOPE OF SECTION 147 AS WELL AS SETTLED LEGAL PRINCIPLE. 36. IT IS FURTHER NOTED THAT THERE IS NO IOTA OF MA TERIAL OR INFORMATION WITH REGARD TO SHARE CAPITAL OF RS. 5,1 2,40,000/- RECEIVED FROM 18 PARTIES. IN FACT THE ASSESSING OFF ICER GATHERED THE INFORMATION AFTER CALLING FOR BANK STATEMENT FR OM THE BANK AS EVIDENT FROM PARA 10 OF THE ASSESSMENT ORDE R. IT IS CLASSIC CASE OF ROVING ENQUIRY WHERE THE ASSESSING OFFICER IS EXCEEDING ITS JURISDICTION IN TOTAL DISREGARD TO SCH EME AND INTENT OF SECTION 147 OF THE ACT. SUCH ACTION OF TH E ASSESSING OFFICER NOT ONLY RENDERS THE PURPOSE OF APPROVAL U/ S 151 OTIOSE BUT ALSO STRIKES AT THE ROOT OF SECTION 147 OF THE ACT. ACCORDINGLY, WE ARE OF THE VIEW THAT ASSESSING OFFI CER WAS NOT JUSTIFIED IN EXPANDING THE SCOPE OF REASSESSMENT PRO CEEDINGS U/S 147 WITHOUT FOLLOWING THE DUE COURSE AND AS SUC H THE ADDITION OF RS. 5,12,40,000/- IS IN THE TEETH OF PR OVISIONS OF SECTION 147 OF THE ACT AND LIABLE TO DELETED. AS A RESULT, GROUND NO. 3 AND 5 ARE ALLOWED. 37. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH OCTOBER, 2020. SD/- SD/- [B.R.R. KUMAR] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 26 TH OCTOBER, 2020 PKK: