AI Insights
The case involves appeals by M/s. Safe Infracon Pvt Ltd against the orders of the CIT(A), Jaipur-4, for the assessment years 2010-11 and 2011-12. The primary issues revolved around the reopening of assessments under section 147/148 of the Income Tax Act, 1961, and the subsequent additions made on account of unexplained cash credits and expenses. The Assessing Officer had initially made additions based on the premise that the transactions involved were bogus accommodation entries. The CIT(A) upheld these additions, leading to the appeals before the Tribunal. The Tribunal noted the lack of adequate opportunity for the assessee to present its case and the need for a thorough examination of the evidences provided, leading to the decision to restore the matter to the CIT(A).
Appeal Details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 668920 (ITAT-JAIPUR)
Assessee PAN
Bench
Appeal Number
CRN Number
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
23-06-2025
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
B
Assessment Year
2010-2011
Judgement Text
" vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBkSM+ deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No.1334 & 1335/JPR/2024 fu/kZkj.k o\"kZ@Assessment Years : 2010-11 & 2011-12 M/s.Safe Infracon Pvt Ltd. 92, Everest Vihar, Kings Road, Ajmer Road, Jaipur 302 019 (Raj) cuke Vs. Income Tax Officer, Ward -6(2), Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAMCS 6346 J vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Dilip Shivpuri, Advocate and Shri Utkarsh Shara, Advocate jktLo dh vksj ls@ Revenue by : Shri Anoop Singh, Addl. CIT-DR lquokbZ dh rkjh[k@ Date of Hearing : 26/03/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement : 23/06/2025 vkns'k@ ORDER PER: DR. S. SEETHALAKSHMI, J.M. Both these appeals have been filed by the assessee against two different orders of the ld. CIT(A), Jaipur-4 dated 11-09-2024 for the assessment years 2010-11 and 2011-12 raising therein following grounds of appeal. ITA No.1334/JPR/2024 – A.Y. 2010-11 ‘’1. That the Ld. CIT(A) has erred in both facts and in law in passing the impugned Appellate Order dated 11.09.2024 2 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR 2. That the Ld. CIT(A) has erred on facts and in law in holding that the assessee did not respond to notices of hearing and did not file any details/written submissions 3. That the Ld. CIT(A) has erred on facts and in law in upholding the issue of notice u/s 147, and reopening of the assessment without appreciating the fact that: a)the information received was general and had no link with the assessee in question, b) there was no verification or enquiry to verify the reasons given for reopening of the assessment, c) Shri Praveen Kumar Jain has already owned up all the entries related to him and paid tax thereon, The reopening of the assessment was bad in law for these and other reasons, 4. The Ld. CIT(A) has erred on facts and in law in upholding the addition of Rs. 1,10,00,000/-on account of unexplained credit entries, and dismissing the appeal on this issue 5. The Ld. CIT(A) has grossly erred on facts and in law in upholding the addition of Rs. 55000/-on account of unexplained expenses under section 6C of the IT. Act, thus dismissing the appeal on this issue. 6. The ld. CIT(A) has erred on facts and in law in upholding the charging of interest w/s 245B of Rs. 34,80,153/- by the ITO, thus dismissing the Appeal on this issue.’’ ITA No.1335/JPR/2024 – A.Y. 2011-12 ‘’1. That the Ld. CIT(A) has erred in both facts and in law in passing the impugned Appellate Order dated 11.09.2024, 2. That the Ld. CIT(A) has erred on facts and in law in holding that the assessee did not respond to notices of hearing and did not file any details written submissions, 3 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR 3. That the Ld. CIT(A) has erred on facts and in law in upholding the issue of notice u/s 147, and reopening of the assessment without appreciating the fact that a) the information received was general and had no link with the assessee in question, b) there was no verification or enquiry to verify the reasons given for reopening of the assessment: c) Shri Praveen Kamar Jain has already owned up all the entries related to him and paid tax thereon, The reopening of the assessment was bad in law for these and other reasons, 4. The Ld. CTT(A) has erred on facts and in law in upholding the addition of Rs. 39,50,000/-on account of unexplained credit entries, and dismissing the appeal on this issue, 5. The Ld. CIT(A) has grossly erred on facts and in law in upholding the addition of Rs. 19,750/-on account of unexplained expenses under section 69C of the IT. Act, thus dismissing the appeal on this issue, 6. The Ld. CIT(A) has erred on facts and in law in upholding the 6 charging of interest u/s 245B of Rs. 11,40,831/- by the ITO, thus dismissing the Appeal on this issue.’’ 2.1 First of all, we take up the appeal of the assesee relating to Assessment year 2010-11 in ITA No. 1334/JPR/2024 for adjudication. 3.1 The brief facts as observed in the assessment order are that information available on record, it was gathered that the assessee had taken accommodation entry in the nature of bogus share application money/bogus unsecured loan/bogus 4 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR sale and purchase. Therefore, proceedings u/s 147 was initiated after prior approval from Pr.CIT-2, Jaipur. Notice u/s 148 of the Act was issued on 03-03-2017. In response to the notice, the assessee filed its return of income for the A.Y. 2010-11 declaring total loss at Rs.45,532/-. Notice u/s 143(2) of the Act was issued to the assessee. Finally, the AO completed the assessment vide order dated 15-12-2017 at a total income of Rs.1,10,09,470/- holding following observation as under:- ‘’E. In view of abovementioned discussion it is clearly established that transaction made by the assessee with M/s. Olive Overseas Pvt. Ltd. not genuine one and is only bogus accommodation entry which was obtained in lieu of cash. During the year under consideration, the assessee has shown loan of Rs.30,00,000/- and share capital & share premium of Rs.80,00,000/- from the concern M/s. Olive Overseas P. Ltd. , the same are added to the total income of the assessee as unexplained cash credits within the meaning of provisions of Section 68 of I.T. Act, 1961. The assessee has furnished inaccurate particulars of income and concealed the facts. Therefore, penalty u/s 271(1)© is separately initiated. F. Further Shri Praveen Kumar Jain admitted that he charged @ 0.55% for arranging of accommodation entries. Therefore, the assesee has paid Rs.55,000/- (0.50%) of Rs.1,10,00,000/-) out of books which is unexplained expenses. Thus Rs.55,000/- is added back to the total income of the assessee u/s 69C. The assessee has furnished inaccurate particulars of income and concealed the facts. Therefore, penalty u/s 271(1)© is separately initiated.’’ 5 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR 3.2 In first appeal, the ld.CIT(A) has passed an ex-parte order by dismissing the appeal of the assessee observing that no further response/ submission had been received from the assessee even after considerable time had elapsed. 3.2.1 It is pertinent to mention that as regards the issue of reopening of the assessment u/s 147, the Ld. CIT(A) has confirmed the action of the AO by observing as under:- ‘’(x) In the present case, it is to be noted that the AO had material before him for formation of reasonable belief of escapement which had live nexus with the material in his possession for assuming the valid jurisdiction for reopening u/s 147. In view of the above discussion ground Number 2 of appeal is hereby dismissed.’’ 3.2.2 As regards the issue of addition of Rs.1,10,00,000/- on account of unexplained cash credit and addition of Rs.55,000/- on account of unexplained expenses u/s 69 of the Act, the ld. CIT(A) has dismissed both the grounds by observing as under:- Page 47-48 …As there are several strong evidence is with the learned AO including the statements of the directors of the company itself from whom the loan was received by the appellant company and the fact that these companies were found to be non-existent at the given addresses and not having any genuine business and 6 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR were only doing bogus entries in the books of accounts and that the loans were given to the appellant without any security and the appellant has not justified the same with any correspondence and valuation reports and agreements etc. the onus is on the appellant to prove that the evidences with the learned AO on wrong and for the onus is on the appellant to prove the identity, genuineness and creditworthiness in terms of section 68. The turnover, profitability etc. of lending/investing company Olive Overseas Pvt Ltd is extremely low and bank statements show that funds are coming and going. In the present case the appellant has merely produced the documents regarding the form of the transaction i.e. that the transaction was through banking channel and is recorded in the books of accounts of the loan given company and books of the appellant. These are only initial documents and do not prove the identity, genuineness and creditworthiness in terms of substance and reality. Appellant has not produced any evidence to prove the evidences with the learned AO as wrong. The appellant has also not produced the directors and shareholders of the company before the learned AO for examination or cross examination by the Id. AO from which the loans and share capital including huge share premium were received by the appellant company. The addition in the assessment order on account of commission is consequential in nature and the same has been from the statements made by various parties and as per the general business modus operandi of the accommodation entries. The appellant has miserably failed in discharging the onus cast on it in view of the above facts and circumstances and the explanation of the appellant is only primitive and does not at all prove the three ingredients of section 68. Accordingly the addition made by the learned AO in the assessment order is hereby upheld and these grounds (3 and 4) of appeal of the appellant are hereby dismissed’’ 7 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR 3.2.3 As regards the issue of charging of interest of Rs.34,80,153/- u/s 234B of the Act, the ld.CIT(A) has disposed off this ground by stating that charging of interest is mandatory and consequential in nature and the AO is directed to give effect of the same on the income determined vide this appellate order. 3.3 During the course of hearing, the ld.AR of the assessee submitted that an opportunity to cross examine Shri Praveen Jain should have been provided to the assessee since his statement had been relied upon by the AO. He further submitted that M/s. Olive Overseas P. Ltd. had applied for equity shares in the company and the company had allotted 80,000 equity shares of Rs.10/- each @ premium of Rs.90/- to the aforesaid company. All the payments were received through banking channel whose details are as under:- S.N. Date Amount 1. 26-06-2009 10,00,000/- 2. 26-06-2009 20,00,000/- 3. 26-06-2009 15,00,000/- 4. 10-07-2009 5,00,000/- 5. 01-08-2009 30,00,000/- Total 80,00,000/- The ld. AR of the assessee further submitted that besides the above amount of Rs.80,00, 000/-, the assessee company had taken a loan of Rs.30,00,000/- from the same company and thus the total amount came to the tune of Rs.1,10,00,000/-. He 8 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR further submitted following details / evidence in support of his claim before the AO. 1. Copies of application of share capital 2. Relevant record of Registrar of Companies 3. Copy of account of assessee appearing in the books of said parties. 4. Copy of bank statement of said parties 5. ITR copies, balance sheet and audited books of accounts for A.Y. 2010-11 of the said parties and share application request letter. 6. Master Data available with the Registrar of Companies related to the companies from whom loans had been taken during the year wherein the parties had confirmed the registered office, address of the company, nature of business, registration number of the company with Registrar of Companies, CIN and PAN. They also affirmed the fact of filing of return of income and loans granted to the assessee The ld.AR further submitted that the AO did not believe the documents and supporting evidence placed on record by the assesee and the AO relied upon the report of the Mumbai Investigation Wing of the Income Tax Department. He further submitted that on perusal of bank statements of the parties it can be seen 9 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR that both the companies had sufficient bank balance to advance the loans and thus the identity, genuineness of the transactions and creditworthiness of the parties have been proved beyond doubt by the assessee and no material had been put on record to show that it was assessee’s unaccounted money that had been utilized to turn it into unaccounted money and thus the assessee cannot be held accountable for the source of the source. Conclusively, the ld. AR of the assessee submitted that ld. CIT(A) was not justified in confirming the action of the AO and the addition so confirmed needs to be deleted. It is also pertinent to mention that the ld. AR of the assessee has advanced the following written submission to counter the orders of the lower authorities. ‘’WRITTEN SUBMISSIONS 3.4 This is an appeal against the order of the Ld. CIT(A), Jaipur-04 dated 11.09.2024 for A.Y. 2010-11. A copy of the impugned order is enclosed as Annexure A. The brief facts of the case are that ITO, Ward 6(2) ,Jaipur received information that the assessee had obtained accommodation entries from a company known as M/s Olive Overseas P. Ltd. (Realgold Trading Co. P. Ltd.) of Rs. 1,10,00,000/-. According to the information received from the Investigation Wing of the Income-Tax Department at Mumbai, these concerns were part of the Praveen Jain Group, Mumbai, which indulged in providing accommodation entries in lieu of cash obtained from beneficiaries and not doing any genuine business activities as divulged during search and survey operations carried out on the premises of Shri Praveen Jain. 10 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR On the basis of this information, the Assessing Officer issued a notice u/s 147/148 of the Income-Tax Act on 03.03.2017 after obtaining the approval of the PCIT-II, Jaipur. In response to the said notice, the assessee filed its return of income showing a loss of (-) Rs.45,532/-. In response to the show-cause notice u/s 143(2) of the Act, the assessee made the following submissions on 30.11.2017: “1.That an opportunity to cross-examine Shri Praveen Jain should be given to the assessee since his statement has been relied upon by the AO; 2.That M/s Olive Overseas P. Ltd. Had applied for equity shares in the company and the company had allotted 80,000/- equity shares of Rs. 10/- each @premium of Rs. 90/- to the aforesaid company. 3.All the payment was received through banking channel as per details given below: S.No. Date Amount(in Rs.) 1 26.06.2009 10,00,000/- 2. 26.06.2009 20,00,000/- 3. 26.06.2009 15,00,000/- 4. 10.07.2009 5,00,000/- 5. 01.08.2009 30,00,000/- Total 80,00,000/- In addition thereto, the assessee company had also taken a loan of Rs. 30,00,000/- from the same company. Hence, the total amount involved was Rs. 1,10,00,000/-. 4. The assesee company submitted the following further evidence in support of their claim that, as far as they are concerned, the transaction was genuine: i)Copies of Application of Share Capital; ii)Relevant Records of Registrar of Companies; iii)Copy of account of assessee appearing in the books of said parties; iv)Copy of bank statements of the said parties; v)ITR Copies , balance-sheets and Audited books of account for A.Y. 2010-11 of the said parties, and Share Application request letter. vi)Master Data available with the Registrar of Companies related to the companies from whom loans have been taken during the year wherein the parties have affirmed the registered office address of the company, nature of business, registration number of the company with Registrar 11 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR of Companies, CIN and PAN. They also affirmed the fact of filing of Return of Income and loans granted to the assessee. 16. on a perusal of the bank statements of the parties, it is seen that both the companies have sufficient balances to advance the loans. With the above documents , the identity , genuiness of the transaction and creditworthiness of the parties has been proved by the assessee by filing the necessary documents. It is further submitted that important aspect which has to be noted here is that the loans were borrowed by the assessee in F.Y. 2009-10 whereas the search and survey action on Praveen Jain and his associate companies was subsequent 01.10.2013.” The Assessing Officer did not believe the documents and supporting evidence placed on record by the assessee, and relied on the report of the Mumbai Investigation Wing of the Income-Tax Department, referring to the following: i)report of the Mumbai Investigation Wing which stated that one Shri Praveen Jain had floated a number of bogus companies whose only business was to provide accommodation entries to other companies. One such company was M/s Olive Overseas Pvt. Ltd. Which had invested in the equity of the assessee company, and had also given it loan; ii)statements of the following persons recorded as a result of the search and survey operations: a. Shri Manish Jain, Director, Atharva Business Pvt. Ltd.and M/s Ansh Mercantile Pvt. Ltd. Who stated in his statement dated 21.10.2013 that both these companies were controlled and managed by his cousin Shri Pravin Jain, he was a Director only in namesake. These companies are not involved in any genuine business activity. b. Shri Nilesh Parmar , Prop. Of M/s Mohit International .who stated that he managed the accounts of about 30 odd concerns of the Praveen Jain Group. He stated that Shri Praveen Jain was a Director in only 4-5 of these concerns , in other his employees and outsiders were Directors.He admitted that he was managing the accounts of M/s Olive Overseas Pvt. Ltd. c. Shri Uttam C. Hinger, brother-in-law of Shri Praveen Jain and a Director in some of the shell companies. He stated, inter alia, that only Shri Pravin Jain may explain the exact nature of the business activities of these concerns. Since he is only a director on paper and accountant to Shri Jain, he admitted that none of the concerns with which he was associated was genuine. d. Shri Chandra Sekhar Goyal , a broker, who admitted that Shri Pravin jain was providing accommodation entries for commission, bogus purchases, bogus expenditure, bogus unsecured loans etc. e. Shri Dinesh Chaudhary, a broker, also confirmed the facts as stated above. According to the report of the Mumbai Investigation Wing, the statement of Shri Pravin Jain was recorded on oath on 01.10.2023 and he admitted that he was providing accommodation entries and also explained the complete modus operandi of providing such entries. 12 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR The Assessing Officer relied on this report to come to the conclusion that the amount of Rs. 1,10,00,000/- received by the assessee company was actually the money of the assessee company. While passing the assessment order on he made the following additions: 1. On account of bogus share application money 80,00,000/- 2. On account of bogus loan 30,00,000/- 3. On account of commission paid to Shri Pravin Jain @ 0.5% of the amount 55,000/- ____________ Total 1,10,55,000/- A copy of the reply filed by the A/R of the assessee is annexed herewith and marked as Annexure B. A copy of the assessment order dated 15.12.2017 is enclosed herewith and marked as Annexure C. Aggrieved of the order of the Assessing Officer, the assessee preferred an appeal to the CIT(A)-04, Jaipur. Order of CIT(A)-04, Jaipur: The CIT(A) -04 , in his order, upheld the order of the Assessing Officer, and confirmed the additions made by the Assessing Officer. He specifically relied on the following decisions of the Mumbai Tribunal: i)1402-1407/Mum/2023 ,Olive Overseas Pvt. Ltd. The operative part of the said decision is: “8. In the present appeals, it is undisputed that the substantive addition has been made in the hands of Mr. Praveen Kumar Jain and similar additions , on a protective basis, is made in the hands of the assessee. Since the substantive addition has already been upheld by the coordinate Bench in the case of Praveen Kumar Jain (supra) , therefore, similar addition made on protective basis in the hands of the assessee becomes unsustainable and, therefore, is directed to be deleted in all the assessment years under consideration before us. We further direct the Assessing Officer that in case the addition made in the hands of Mr. Praveen Kumar Jain is deleted in further appellate proceedings, then the addition made in the hands of the assessee be revived. With the above limited directions, the impugned additions made in all the assessment years under consideration before us are directed to be deleted.” 13 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR ii)ITA NO. 7191/Mum/2018 and Etc.-Praveen Kumar Jain V/s DCIT, A.Y. 2008-09 to 2014-15 ; Submissions : Ground No. 1 &2: Ground no. 1 is general. Ground no. 2 deals with the contention of the CIT(A) that the assessee did not respond to the notices of hearing and did not file any details/written submissions. This contention of the CIT(A) is erroneous since he himself says in para 4.1 of his order that the assessee has reiterated the submissions during the appellate proceedings. Then, from page 4 to page 15, para 4.1 of the Appellate Order, he reproduces the submissions of the assessee. Ground No. 3 Ground no. 3 states that reopening of the assessment under section 147/148 of the I.T. Act is bad since the information received was general and had no link with the assessee in question. Moreover, the AO did not conduct any enquiry at his end. Further, Shri Praveen Jain had owned up the entries and paid tax thereon. The first part of this Ground of Appeal is that reopening of the assessment under section 147/148 was bad in law since the Assessing Officer did not undertake any independent verification of the information received by him from the Mumbai Investigation Wing. From a perusal of the Assessment order it appears that the facts mentioned in the assessment order forming reasons for reopening of the assessment are all taken ad verbatim from the report received from Mumbai. The AO has not independently verified any of the statements of various persons recorded during search, nor has he verified the identity, creditworthiness or genuineness of the impugned transactions . In the absence of any independent verification , accepting the information received from the Investigating Wing is not enough to form a reason to believe that income chargeable to tax has escaped assessment. It is borrowed satisfaction. Secondly, there is nothing on record to directly link the assessee to Shri Praveen Kumar Jain . Shri Jain or others whose statements have been referred to, have not mentioned the name of the assessee or specifically said that the transactions carried out by the assessee are sham or bogus, especially in the light of the evidence placed on record by it. Further, Shri Praveen Jain retracted his statement relied upon by the AO, which fact has been deliberately suppressed by him. The retraction is genuine, hence needs to be given full weightage.The AO has not brought on record any evidence to nullify the retraction. The second part of the Ground of Appeal is that neither a copy of the statement of Shri Praveen Kumar Jain was supplied nor was he produced for cross-examination by the assessee, despite 14 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR specific request. Attention is drawn to para 17 of the Assessment Order wherein the assessee requested the following: “..it is requested you to give an opportunity to the assessee in the presence of the third party who is the author of the statements/document and also to cross-examine the author of such statements/document and elicit such necessary facts from him as to how these entries came to be made by him connecting the assessee in such statements/documents .” The Assessing Officer , however, did not pay any heed to this request of the assessee and he did not produce Shri Praveen Kumar Jain for cross-examination before the assessee. Hence, there is a clearcut violation of the principles of natural justice which renders the whole assessment proceedings, including the notice u/s 147/148 of the Act , unsustainable in law and liable to be quashed. In this regard, on all the issues raised above, reliance is placed on the following case laws: 1.Principal Commissioner of Income-Tax-5 v. Shodiman Investments (P.) Ltd. [2018] 93 taxmann.com 153 (Bombay): Where Assessing Officer had issued a reassessment notice on basis of intimation from DDIT(Inv.) about a particular entity entering into suspicious transactions, this was clearly in breach of settled proposition in law that re-opening notice has to be issued by Assessing Officer on his own satisfaction and not on borrowed satisfaction.” 2.CIT V. Orissa Corporation P. Ltd. [1986] 159 ITR 78 (SC): “Once the primary onus of establishing the genuineness of the transaction is done by the assessee by furnishing details like name, address, PAN confirmation, copy of tax return etc. it was the duty of the AO to verify the genuineness of these transactions by strictly enforcing the provisions of section 131 of the Act if at all the those creditors were required to be produced before him.” 3.Principal Commissioner of Income-Tax v. N.S Software (Firm) [2018] 403 ITR 259 (Delhi): “the assessing officer had not explained the steps taken by him to determine that seized material belonged to the assessee…” 4.Principal Commissioner of income-Tax v. More Overseas [2018] 97 taxmann.com 657 (Calcutta): 15 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR “Both the Commissioner and the Tribunal , however, found that no re-assessment proceedings could be initiated merely because of action taken by the Customs Department…..In our judgment, the reasoning of the Tribunal in the decision which we upheld is also almost identical to that in the present case, in relation to the order appealed against….. Under these circumstances, following our decision delivered in ITA No. 353 of 2016, we dismiss the appeal.” 5.Harikishan Sunderlal Virmani v. Dy. CIT [2017] 394 ITR 146 (Gujarat): “On the basis of information from another agency there cannot be any reassessment proceedings. However, after considering the information/material received from other source, the Assessing Officer is required to consider the material on record in case of the assessee and thereafter is required to form an independent opinion on the basis of material on record that the income has escaped assessment. Without forming such opinion , solely and mechanically relying upon information received from other source, there cannot be any reassessment for verification…. Held that from the reasons recorded, it appeared that the impugned reopening proceedings were on borrowed satisfaction, no independent opinion was formed……Under these circumstances, the assumption of jurisdiction to reopen assessment beyond the period of 4 years in exercise of powers under section 147 was bad in law.” 6.CIT V. Odeon Builders (P.) Ltd. [2019] 110 taxmann.com64 (SC) Wherein it was held that the information received from a third party was not subjected to any further scrutiny and that the assessee was not allowed opportunity to cross-examine the person whose statement was relied on. Thus the addition was rightly deleted by the lower Appellate Authorities, which order was confirmed by the High Court.” 7.Smt. Jyoti D. Shah, ITA No. 1843/M/2012 decided by Mumbai ITAT: “Shri Mukesh Choksi had issued a general statement, and, therefore, a general statement given by Shri Mukesh Choksi cannot be applied to each and every case. The additions made were deleted as there was no direct evidence against the assessee. Neither the statement of Mukesh Choksi was provided to the assessee nor opportunity for cross-examination of Mukesh Choksi was provided. 20. It is further submitted that various Courts have held and reiterated the principles where an assessee is not granted an opportunity of cross-examination of the person whose statement has been relied upon during the course of assessment, which could have held the assessee to rebut the statements, the addition made basis the statement is not correct as there is violation of 16 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR principles of natural justice. This principle has been settled time and again by the Higher Courts.” Now , we are placing on record two cases decided by the Income-Tax Appellate Tribunals which are specifically related to the case of Praveen Kumar Jain, as is the present case in appeal. 7.M/s Kamal Agrotech Pvt. Ltd. Vs. ITO Ward 2(1) , ITA No. 37/HD/2016: “ A plain reading of the assessment order demonstrates that the AO merely went by the Investigation done by the office of D.G. I(Investigation), Mumbai. No enquiries or investigation was carried out . No evidence to controvert the claim of the assessee was brought on record by the A.O. Even statement of Mr. Praveen Kumar was not supplied . …..The addition is made merely on surmises and conjectures.” In view of the above discussion, the Tribunal held that the addition made under section 68 of the Act is bad in law.” 8.M/s Choice Buildestate Pvt. Ltd. V. Income-Tax Officer, Ward 5(2), Jaipur. Page 18 of the said order passed by the jurisdictional co-ordinate bench of the ITAT states as under: “The order passed by the AO should be speaking one bringing on record all the facts, explanation furnished by the assessee in respect of nature and source of the credit in its books of account and reasons for not accepting the explanation of the assessee . In the instant case, we find that the AO has not taken any efforts to examine these documents so submitted by the assessee company during the course of assessment proceedings and has simply gone by his prima facie view formed at the time of assumption of jurisdiction u/s 147 and such a prima facie view without further examination/investigation cannot be a basis for forming a final view of making the addition in the hands of the assessee company. It is a case where the AO was in receipt of material information from the Investigation Wing, Mumbai that the assessee company has received accommodation entries in form of share application/investment from seven companies who are not doing genuine business activities as divulged during the course of search and seizure operations in case of Praveen Jain group.In these situations, the Courts have held that the Assessing Officer cannot sit back with folded hands and then come forward to merely reject the explanation so made, without carrying out any verification or enquiry into the material placed before him by the assessee……… We, therefore, agree with the contentions of the ld A/R that in absence of any falsity which have been found in the documents so submitted by the assessee company to prove the identity, creditworthiness and genuineness of share transaction , those documents cannot be summarily rejected as has been done by the AO in the instant case……the fact remains that the assessee 17 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR deserves an opportunity to cross-examine such persons as held by the Hon’ble Supreme Court in case of Andaman Timber Industries (supra)….In the light of above discussions, we don’t find any basis for making addition under section 68 of the Act.” In this case, reopening of assessment by issue of notice u/s 147/148 of the Act based on the statements and facts related to the Praveen Jain Group, has been quashed. It is settled law that one bench of the ITAT,Jaipur has to follow a decision of another bench of the ITAT, Jaipur as stated by the Hon’ble Supreme Court in the case of Shah Faisal v. UOI(AIR 2020 Supreme Court 3601). It is, therefore, requested that the Ld. ITAT may follow the decision of this very ITAT in the case of M/s Choice Buildestate Pvt. Ltd.v. ITO. On the issue of cross-examination, we rely on the decision of the following judicial pronouncements: 9.Aayubkhan Noorkhan Pathan v. State of Maharashtra & Ors., Civil Appeal No. 7728 of 2012, order dated 08.11.2012 “46.In view of the above discussion and considering the seriousness of the allegations, as the Scrutiny Committee has already conducted an inquiry in relation to this matter, and the only grievance of the appellant is that there has been non-compliance with the principles of natural justice…we direct that before the submission of any report by the Scrutiny Committee , his application for calling witnesses for corss-examination must be disposed off, and the appellant must be given a fair opportunity to cross-examine the witnesses…In case, the Scrutiny Committee has already taken a decision the same being violative of the principles of natural justice, would stand vitiated.” 10. New India Assurance Company Ltd. V. Nusli Neville Wadia & Anr., AIR 2008 SC 876: “If some facts are to be proved by the landlord, indisputably the occupant should get an opportunity to cross-examine. The witness who intends to prove the said fact has the right to cross-examine the witness . This may not be provided in the statute , but it being a part of the principle of natural justice, should be held to be indefeasible right. In view of the above, we are of the considered opinion that the right of cross-examination is an integral part of the principles of natural justice.” 11.M/s Andaman Timber Industries v. Commissioner of Central Excise, Kolkata-II, Civil Appeal No. 4228 of 2005: “As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination……Therefore, it was not for the adjudicating authority to 18 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above…. We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal.” In view of the facts as mentioned above, and the position of law as expounded in the various judicial pronouncements cited above, the order passed by the ld. CIT(A) -04, Jaipur needs to be set-aside and the order passed by the Assessing Officer needs to be quashed . Ground No. 4&5: Ground no. 4 &5 deals with the addition of Rs. 1,10,00,000/- and of Rs. 55,000/- made by the Assessing Officer on account of the investment in equity shares and the commission paid thereon to M/s Olive Overseas Pvt. Ltd.. As already stated above, and in the written reply filed both before the CIT(A) and the Assessing Officer, the assessee had stated that the money received both on account of investment in equity shares (Rs. 80,00,000/-) and as loan (Rs. 30,00,000/-) was received through banking channels. In support of the genuineness of the transaction, the assessee had supplied, during the course of assessment proceedings, the following documents to support his claim: i)Copies of Application for share capital; ii)Registrar of Companies records; iii)Copy of account of assessee appearing in the books of the said parties; iv)Copy of bank statements of said parties; v)ITR copies and audited books of account for A.Y. 2010-11 of the said parties; vi) Master Data available on Registrar of Companies , related to the companies from whom loans have been taken during the year wherein the parties have affirmed the registered office address of the company, nature of business, registration number of the company with the Registrar of Companies, CIN and PAN. They also have affirmed about the filing of Return of Income and loans granted to the assessee. On a perusal of the bank statements of the parties, it is seen that both the companies have sufficient bank balance to advance the loans. With the above documents, the identity , genuineness of transaction and creditworthiness of the parties has been proved beyond doubt by the assessee. We would like to add here that ,as far as the assessee is concerned, he has received money from M/s Olive Overseas P. Ltd., Its creditworthiness, identity of the creditor and genuineness of transaction is proved by the assessee. No material has been put on record to show that it was the assessee’s unaccounted money that has been utilised to turn it into accounted money. The assesee cannot be held accountable for the source of the source. 19 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR The department, if it feels that cash has been introduced at any level, then it has to be taxed at that level, in those hands. The assessee cannot be held liable for the alleged unaccounted cash of a third person. We also want to add that a perusal of the order of the AO and the CIT(A) shows that all the amount involved has already been taxed in the hands of Shri Praveen Kumar Jain on a substantive basis. Then, the same money cannot be taxed in another hand. For all these reasons, the additions made by the Assessing Officer and confirmed by the CIT(A) in the hands of the assessee are not justified, unsustainable The additions made by the Assessing Officer and confirmed by the CIT(A) are not justified, they need to be deleted.’’ 3.5 On the other hand, the ld. DR supported the order of the lower authorities. He further submitted that the asseessee has not filed any confirmation of loan and thereby the identity, genuineness and creditworthiness is not confirmed. To support his contention, the ld. DR filed following detailed written submission in connection with both appeals. ‘’Subject: Written Submission along with case laws in the case of Safe Infracon Pvt. Ltd, Jaipur, PAN- AAMCS6346J, (ITA No. 1334/JPR/2024 & ITA No. 1335/JPR/2024) for the A.Y. 2011-12– reg – Ref: Kindly refer to this office Letter No. 1590 dated 26.03.2025 on the subject cited above. 1. In this regard, as desired by the Hon’ble Bench, the gist of case laws submitted on 26-03-2025 alongwith rebuttal of case laws filed by the the assessee is submitted herewith:- A. The Gist of case laws for reopening of the assessment u/s 147/148 relied by the department are as under: The Reasons for Reopening of the assessment 1. [1999] 236 ITR 34 (SC) SUPREME COURT OF INDIA Raymond Woollen Mills Ltd. v. Income-tax Officer The Hon’ble SC held that in determining whether commencement of reassessment was valid, it has only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of material is not a thing to be decided at this stage. 20 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR 2. [2023] 148 taxmann.com 446 (Delhi) HIGH COURT OF DELHI Saif II Mauritius Company Ltd. v. Assistant Commissioner of Income-tax Since no scrutiny assessment had taken place in instant case and there was prima facie material based on which reopening notice was issued within four years, sufficiency or correctness of material would not be considered at stage of issue of notice under section 148. 3. [1999] 103 TAXMAN 562 (PAT.) HIGH COURT OF PATNA P.K. Haldar & Co. v. Commissioner of Income-tax It is held that in writ petition arising out of notice under section 148, Court is not supposed to go into sufficiency or otherwise or correctness of materials leading to notice, but merely to see whether there is any material before Assessing Officer on basis of which he came to form reasonable belief that income had escaped assessment. 4. [2002] 123 Taxman 756 (Calcutta) HIGH COURT OF CALCUTTA Ispat Industries Ltd. v. Deputy Commissioner of Income-tax It is held that Court will only find out whether there was any prima facie material to reopen case and sufficiency or correctness cannot be gone into by Court. 5. [2023] 153 taxmann.com 25 (Gujarat) HIGH COURT OF GUJARAT Akshat Pramodkumar Chaudhary v. Deputy Commissioner of Income-tax Where Assessing Officer had received information from Investigation wing that assessee received accommodation entry in penny scrip, which was bogus in nature and addition was required to be made to total income of assessee and on basis of said material before it, he was satisfied to harbour reasons to believe that there was escapement of income and on such basis, he had exercised his powers under section 148, no fault could be found in such reassessment proceedings. 6. [2022] 139 taxmann.com 198 (Gujarat) HIGH COURT OF GUJARAT Amar Jewellers Ltd. v.Assistant Commissioner of Income-tax Where pursuant to survey under section 133A conducted by Investigating Wing on BAS, he admitted on oath that he was engaged in business of providing accommodation entries to beneficiaries in lieu of commission and had named applicant as one of recipients of accommodation entries and Assessing Officer after examining facts formed belief that income chargeable to tax had escaped assessment, proceedings of reassessment initiated in cases of applicant were justified. 7. [2018] 94 taxmann.com 393 (Gujarat) HIGH COURT OF GUJARAT Amit Polyprints (P.) Ltd.v.Deputy Commissioner of Income-tax Where reassessment proceedings were initiated on basis of information received from Investigation wing that assessee had received certain amount from shell companies working as an accommodation entry provider, reassessment could not be held unjustified. 8. [2018] 91 taxmann.com 119 (Gujarat) HIGH COURT OF GUJARAT Aradhna Estate (P.) Ltd.v.Deputy Commissioner of Income-tax, Circle-1(1) Where reassessment proceedings were initiated on basis of information received from Investigation wing that assessee had received certain amount from shell companies working as an accommodation entry provider, merely because these transactions were scrutinised by Assessing Officer during original assessment, reassessment could not be held unjustified. 9. [2023] 152 taxmann.com 573 (SC) SUPREME COURT OF INDIA Ajay Gupta v. Income-tax Officer SLP dismissed against order of High Court that where a reopening notice was issued on ground that assessee was beneficiary of accommodation entry in form of long-term capital gain (LTCG) on sale of shares which was claimed as exempt under section 10(38), since said transactions of sale and purchase 21 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR of shares were admitted by assessee and it had not brought on record anything to suggest that reassessment proceedings were being undertaken in arbitrary manner, impugned reopening notice was justified. 10. [2019] 101 taxmann.com 231 (Madhya Pradesh) HIGH COURT OF MADHYA PRADESH Etiam Emedia Ltd.v. Income-tax Officer-2(2) Where Assessing Officer had specific information from DIT (Investigation) that assessee company was merely a dummy concern of a person who allegedly used dummy companies for routing his unaccounted money and, further, assessee also had certain amount of bogus share application, it could be said that there was material on basis of which notice under section 148 could be issued. 11. [2020] 115 taxmann.com 338 (Delhi) HIGH COURT OF DELHI Experion Developers (P.) Ltd. v.Assistant Commissioner of Income-tax Where reassessment notice was issued on basis of information received from DIT (Investigation) that a parent company of assessee at Singapore had made an investment of huge amount in assessee company but said investing company did not appear to be carrying out any regular business activities and was floated to act as a conduit to funnel funds into Indian companies, impugned notice was justified. 12. [2018] 91 taxmann.com 181 (Gujarat) HIGH COURT OF GUJARAT Jayant Security & Finance Ltd.v.Assistant Commissioner of Income-tax, officer Circle 1(1) Initiation of reassessment proceedings on basis of information received from Investigation wing that assessee had received certain amount as a loan from a company, working as entry operator and earning bogus funds to provide advances to various person, was justified. 13. [2012] 18 taxmann.com 83 (Delhi) IN THE ITAT DELHI BENCH Ms. Rainee Singh v.Income-tax Officer Validity of reassessment where AO had received information from investigation wing regarding a bogus claim of long-term capital gains. 14. [1995] 83 TAXMAN 194 (MAD.)HIGH COURT OF MADRAS Panchugurumurthy v. Commissioner of Income-tax The Hon’ble High Court held that on going through the materials on record, produced by the department, it was clear that sufficient reasons had been recorded by the competent authority and the statutory approval had been obtained from the appropriate authority. Consequently, the general and vague allegation of mala fides and want of sufficient basis for the proposed action under section 148 had no basis in law. Further, as held earlier, the action initiated under section 148 could not be said to be prima facie illegal to warrant the interference of the Court. 15. [2016] 72 taxmann.com 302 (Gujarat) HIGH COURT OF GUJARAT Peass Industrial Engineers (P.) Ltd. v. Deputy Commissioner of Income-tax Where Assessing Officer had reopened assessee's assessment for assessment year 2012-13 for reasons that information was received from Competent Authority, Kolkata that one 'K' was very known entry operator and instant assessee was also a beneficiary of 'K' to extent of Rs. 183 lakhs pertaining to assessment year 2012-13, reasons were sufficient enough to reopen assessment. 16. [2020] 114 taxmann.com 718 (Gujarat) HIGH COURT OF GUJARAT Purnima Komalkant Sharma v. Deputy Commissioner of Income- Where evidence found during search in case of third party was sufficient to form belief that LTCG shown by assessee was in nature of accommodation entries and income to that extent had 22 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR tax, Circle 1 escaped assessment, issue of notice under section 148 was justified. 17. [2022] 139 taxmann.com 409 (Gujarat) HIGH COURT OF GUJARAT Pushpa Uttamchand Mehta v. Income-tax Officer Where Assessing Officer had information in form of accounts/documents received from Investigation wing that 'U' was a company run, managed and operated by entry providers and it was a penny stock and assessee had entered into transaction with 'U' to claim bogus capital gains, it could not be said that Assessing Officer, on absolutely vague or unspecific information initiated proceedings of reassessment without taking pains to form his own belief in respect of such materials. 18. [2023] 153 taxmann.com 282 (Kolkata - Trib.) IN THE ITAT KOLKATA BENCH 'A' Tarasafe International (P.) Ltd. v.Deputy Commissioner of Income-tax Where Assessing Officer found that assessee was beneficiary of bogus donation and was able to lay its hand on a large number of material and had recorded statements of founder and director of said institution as well as other persons, who have deposed during survey and post-survey inquiries regarding bogus loan given by assessee to said institution, sufficient material was available with Assessing Officer for forming an opinion that income had escaped assessment. Re-assessment is based not on borrowed satisfaction 19. [2021] 128 taxmann.com 229 (Gujarat) HIGH COURT OF GUJARAT Bhanuben Mansukhlal Khimashia v.Income Tax Officer Ward 3(1) Where AO issued reopening notice on ground that an information was received from DIT (Investigation) that shares sold by assessee were of penny stock, thus, income on sale of said shares could not be allowed as exempt under section 10(38), since such information was specific and AO made independent enquiries and applied his mind and upon due satisfaction to such information finally formed a belief that income had escaped assessment, impugned reopening notice was justified. 20. [2021] 129 taxmann.com 48 (Gujarat) HIGH COURT OF GUJARAT Kaushaliya Sampatlal Dudani v.Income-tax Officer, Ward 1(3) Where AO issued reopening notice against assessee on ground that an information was received from AIMS module that shares sold by assessee were of penny stock, since such information was specific with regard to transactions of penny stock entered into by assessee and AO made independent enquiries and applied his mind to information and upon due satisfaction formed a belief that income had escaped assessment, impugned reopening notice was justified. 21. [2021] 129 taxmann.com 119 (Gujarat) HIGH COURT OF GUJARAT Nishant Vilaskumar Parekh v.Income-tax Officer, Ward 1(3) Where AO issued a reopening notice against assessee on ground that an information was received from AIMS module that shares sold by assessee were of penny stock, since such information with regard to transactions of penny stock entered into by assessee was specific and AO had made independent enquiry and applied his mind to said information and upon due satisfaction, formed an opinion that LTCG on sale of penny stock shares had escaped assessment, impugned reopening notice was justified. 22. [2022] 138 taxmann.com 50 (Gujarat) HIGH Where assessee sold shares and claimed exemption under section 23 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR COURT OF GUJARAT Nishant Vilaskumar Parekh v.Income-tax Officer 10(38) and Assessing Officer issued a reopening notice on ground that an information was received from AIMS module that shares sold by assessee were of penny stock, since said information was specific with regard to transactions of penny stock entered into by assessee and Assessing Officer made independent enquiries and applied his mind to information and upon due satisfaction and materials gathered during enquiries, finally formed a belief that income had escaped assessment, impugned reopening notice issued against assessee was justified. 23. [2021] 131 taxmann.com 42 (Gujarat) HIGH COURT OF GUJARAT Sameer Gulabchand Shah HUF v. Income-tax Officer, Ward 1(3) Where AO issued a reopening notice on ground that an information was received that shares sold by assessee were of penny stock, thus, income on sale of said shares could not be allowed as exempt under section 10(38), since such information was specific and AO made independent inquiries and applied his mind and upon due satisfaction to such information finally formed a belief that income had escaped assessment, impugned reopening notice was justified 24. [2021] 127 taxmann.com 679 (Gujarat) HIGH COURT OF GUJARAT Silverdale Inn (P.) Ltd. v. Income Tax Officer Where Assessing Officer issued reopening notice against assessee on ground that an information was received from NMS (Non filler monitoring system) that assessee had received cash deposits of certain amount in a bank account but had not disclosed same in its return, since assessee had failed to submit supporting evidences and source of income with regard to said cash deposits, impugned reopening notice issued against assessee was justified. 25. [2021] 129 taxmann.com 68 (Gujarat) HIGH COURT OF GUJARAT Vilas Vrajlal Parekh HUF v.Income-tax Officer, Ward(1)3 Where AO issued reopening notice on ground that an information was received from AIMS module that shares sold by assessee were of penny stock, since information was specific with regard to transactions of penny stock entered into by assessee and AO made independent enquiries and applied his mind to such information and upon due satisfaction formed a belief that income had escaped assessment, impugned reopening notice was justified. 26. [2021] 133 taxmann.com 397 (Gujarat) HIGH COURT OF GUJARAT Zaveri & Company (P.) Ltd.v.Deputy Commissioner of Income- tax Where Assessing Officer issued a reopening notice on ground that an information was received from Deputy Director (Investigation) that assessee company had entered into transactions of trading in penny stocks of two companies which were used for providing accommodation entries in respect of bogus LTCG and contrived losses, impugned reopening notice issued on basis of such specific information outlining systematic evasion of tax by assessee and fresh material in hands of Assessing Officer was justified. 27. [1980] 4 Taxman 83 (Delhi) HIGH COURT OF DELHI Commissioner of Income-tax v. H.P. Sharma S. RANGANATHAN AND D.R. KHANNA, JJ The court held that action under section 147 is permissible even if Assessing Officer gathered his reasons to believe from very same record as had been subject-matter of completed assessment proceedings. It was further held that principle that a mere change 24 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR 28. [2006] 151 Taxman 41 (Delhi) HIGH COURT OF DELHI Consolidated Photo & Finvest Ltd. v. Assistant Commissioner of Income-tax of opinion cannot be a basis for reopening completed assessments would have no application where order of assessment does not address itself to aspect which is basis for reopening of assessment. 29. [2009] 315 ITR 84 (Bombay) HIGH COURT OF BOMBAY Yuvraj v. Union of India 30. [2011] 197 Taxman 415 (Delhi) HIGH COURT OF DELHI Honda Siel Power Products Ltd. v. Deputy Commissioner of Income-tax. The court held that merely because material lies embedded in material or evidence, which Assessing Officer could have uncovered but did not uncover, is not a good ground to deny or strike down a notice for reassessment. 31. [2012] 21taxmann.com 438(Delhi) HIGH COURT OF DELHI Money Growth Investment & Consultants (P.) Ltd. v. Income- tax Officer Section 147, read with section 68, of the Income-tax Act, 1961 - Income escaping assessment - Non-disclosure of primary facts - Assessment year 2004-05 - Assessing Officer sought to reopen assessment of assessee company on basis of statement given by one 'M' before investigation wing admitting that he was carrying on business of providing accommodation entries for commission through bogus companies in which he was a director. Since assessee-company had received share capital from three companies run by 'M' for providing accommodation entries, reasons were germane to prima facie belief reached by Assessing Officer that income chargeable to tax had escaped assessment by reason of failure of assessee to furnish full and true particulars at time of original assessment 32. [2014] 41 taxmann.com 21(Delhi) HIGH COURT OF DELHI OPG Metals & Finsec Ltd. v. Commissioner of Income-tax Section 69B, read with section 147, of the Income-tax Act, 1961 - Undisclosed investment [Reassessment] - Assessment year 2003- 04 - When six companies, merged with assessee-company, their accounts were consolidated and return was filed - Investigation Wing recorded that one of amalgamated companies had procured shares and sold them to an entry operator and, assessee was a beneficiary of accommodation entries - Accordingly, reassessment was completed making additions to assessee's income - Thereafter, a comprehensive investigation was carried for exposing money laundering - It was found that transactions between assessee and entry operator were not disclosed during first reassessment proceeding. Since information regarding all transactions were not subject matter of earlier reassessment proceedings and details provided fresh material for Assessing Officer to initiate second reassessment proceedings, second reassessment could not be said to be based upon mere change of opinion. Moreover, requirement of full and true disclosure was not satisfied as assessee had not specifically pointed out at time of first reassessment that there were other transactions between amalgamated companies and entry operator. 25 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR 33. [2021] 128 taxmann.com 369(Jaipur-Trib.) IN THE ITAT JAIPUR BENCH ‘A’ Smt. Uma Mandal v. Income Tax Officer, Ward 5(4), Jaipur Section 68 of the Income-tax Act, 1961 - Cash credit (Bank deposits) - Assessment Year 2010-11 - An information was received that during year assessee had deposited certain amount in cash in her bank account but no return of income was filed by assessee - Therefore, Assessing Officer issued a reopening notice against assessee. He further passed an assessment order under section 143(3) read with section 147 treating entire deposits in her account as turnover belonging to assessee and assuming net profit thereupon at rate of 5 per cent. Assessee contended that bank account was misused for purposes of accomodation entries for which she had also received commission and she was just a housewife and wife of a labourer who never carried on any business, thus, by no stretch of mind her misused bank account receipts could be reckoned as her turnover. It was noted that credit was in bank account of assessee and it was onus of assessee to prove correct nature of credits. She had not given any evidence to prove that this was not her turnover. Affidavit filed by her was not supported by any evidence and was self-serving. So far as net profit rate of 5 per cent was concerned, same was reasonable Section 68, read with section 148, of the Income-tax Act, 1961 - Cash credit (Reassessment) - Assessment Year 2010-11 - An information was received that during year assessee had deposited certain amount in cash in her bank account but no return of income was filed by assessee. Therefore, a reopening notice under section 148 was issued against assessee. Assessing Officer further passed an assessment order under section 143(3) read with section 147 treating entire deposits in her account as turnover belonging to assessee and assuming net profit thereupon at rate of 5 per cent. Assessee contended that impugned reopening notice issued against it without following due process of law was unjustified. It was noted that Assessing Officer reopened assessment proceedings after recording due reasons and due satisfaction after following due process. Such information available before Assessing Officer was relevant and afforded a live link or nexus to formation of prima facie belief that income chargeable to tax had escaped assessment in hands of assessee. 26 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR 34. [1997] 90 taxmann.com 553(SC) SUPREME COURT OF INDIA Associated Stone Industries (Kotah) Ltd. v. Commissioner of Income-tax Section 147(a) of the Income-tax Act, 1961 [corresponding to section 34(1)(a) of the Indian Income-tax Act, 1922] - Reassessment - Non-disclosure of primary facts - Assessment years 1950-51 to 1954-55. Assessee, lessee of stone quarry, claimed that royalty and excess royalty paid in lieu of tax in terms of lease agreement to State was allowable as deduction. During pendency of suit for declaration that assessee was not liable to pay tax in which injunction was granted against levy of tax, ITO allowed excess royalty paid as deduction. Subsequently invoking section 34(1)(a) he disallowed the deduction. Section 147(b) of the Income-tax Act, 1961 [corresponding to section 34(1)(b) of the Indian Income-tax Act, 1922] - Reassessment - Information - Assessment years 1954-55 to 1956. Section 37(1) of the Income-tax Act, 1961 - Assessee was lessee of stone quarry - In terms of lease granted by ruler of erstwhile State of Kotah assessee had to make certain excess payment of royalty in lieu of income-tax. Assessee's application to Commissioner to exempt tax liability was rejected. In suit for declaration, civil court held portion of excess royalty paid to State Government was relatable and available to Union Government towards income-tax. High Court held that assessee having not paid any amount as tax to Union Government no deduction could be allowed. B. The Gist of case laws for addition u/s 68 relied by the department on the aforesaid grounds are as under: 1. In State Bank of Patiala v. S.K. Sharma AIR 1996 SC 1669, the Hon'ble Supreme Court pointed out that violation of any and every procedural provision cannot be said to automatically vitiate the domestic enquiry held against the delinquent employee or the order passed by the disciplinary authority except in cases falling under no notice, no opportunity and no hearing categories. Further it was held that if no prejudice is established to have resulted from such violation of procedural provisions no interference is called for, against the ultimate orders. The test laid down was whether the person has received a fair hearing considering all things as the ultimate test is always the test of prejudice or the test of fair hearing as. Further the Hon'ble Supreme Court pointed out a distinction between a case of no opportunity and a case of no adequate opportunity and while examining the latter case, it was held that the violation has to be examined from the stand point of prejudice, in other words the Court or the tribunal has to see whether in the totality of the circumstances, the 27 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR delinquent officer/employee did or did not have a fair hearing and the orders to be made shall depend upon the answers to the said query. Further it was held that there may be a situation where interest of the state or public interest may call for curtailing of rule of audi alteram partem and in such a situation the Court may have to balance public/state interest with the requirements of natural justice and arrive at an appropriate decision. 2. In M J James civil appeal no 8223 of 20089 SC dated 16.11.2021, after referring to a catena of decisions, the Hon'ble Supreme Court pointed out that natural justice is a flexible tool in the hands of the judiciary to reach out in fit cases to remedy injustice. The breach of the audi alteram partem rule cannot by itself, without more lead to the conclusion that prejudice is thereby caused. Where procedural and/or substantive provisions of law embodied the principles of natural justice, their infraction per-se does not lead to invalidity of the order passed. The prejudice must be caused to the litigant, except in the case of a mandatory provision of law which is conceived not only in individual interest but also in public interest. Further by referring to the decision in State of Uttar Pradesh v. Sudhir Kumar Singh [2020] SCC Online SC 847, it was held that the \"prejudice\" exception must be more than a mere apprehension or even a reasonable suspicion of a litigant, it should exist as a matter of fact or to be cast upon a definite inference of likelihood of prejudice flowing from the non-observance of natural justice. 3. In In Kishanlal Agarwalla v. Collector of Land Customs AIR 1967 Cal 80, the Hon'ble Division Bench of Calcutta High Court pointed out that no natural justice requires that there should be a kind of formal cross examination as it is a procedural justice, governed by the rules and regulations. Further it was held that so long as the party charged has a fair and reasonable opportunity would receive, comment and criticize the evidence, statements or records on which the charges is being against him, the demand and tests of natural justice are satisfied. 4. In State of J & K v. Bakshi Ghulam Mohammad AIR 1967 SC 122, the Hon'ble Supreme Court held that the right of hearing cannot include the right of cross examination and the right must depend upon the circumstances of each case and must also depend on the statute under which the allegations are being enquired into. 5. In [2022] 139 taxmann.com 352 (Calcutta) HIGH COURT OF CALCUTTA Principal Commissioner of Income-tax v. Swati Bajaj, after analyzing the SIT Report on black money and the report of Investigation Directorate, the Court held that it is seen that there is a discussion about the \"modus operandi\" adopted and the SIT opines that there is an urgent need for having an effective, preventive and punitive 28 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR action in such matters to prevent recurrence of such instances. This is a relevant aspect to be borne in mind. Thus, the report submitted by the investigation department cannot be thrown out on the grounds urged on behalf of the assessees. The assesses have not been shown to be prejudiced on account of non- furnishing of the investigation report or non-production of the persons for cross examination as the assessee has not specifically indicated as to how he was prejudiced, coupled with the fact as admitted by the revenue, the statements do not indict the assessee. The Hon’ble Court noted that the assessees have miserably failed to prove the test of prejudice or that the test of fair hearing has not been satisfied in their individual cases. The Hon’ble Court also noted that the assessee were conscious of the fact that they have not been named in the report, therefore made a vague and bold statement that the non-furnishing of report would vitiate the proceedings. Therefore, merely by mentioning that statements have not been furnished can in no manner advance the case of the assessee. If the report was available in the public domain as has been downloaded and produced before us by the learned standing counsel for the revenue, nothing prevented the assesses who are ably defended by Chartered Accountants and Advocates to download such reports and examine the same and thereafter put up their defence. Therefore, the based on such general statements of violation of principles of natural justice the assessees have not made out any case. 6. In [2022] 135 taxmann.com 252 (SC) SUPREME COURT OF INDIA T. Takano v. Securities and Exchange Board of India, the SEBI took a stand that the investigation report under Regulation 9 of the SEBI regulations could also include sensitive information about the business affairs of various entities and persons concerned and if disclosed it would affect their privacy and the competitive position of other entities. While considering the correctness of the submissions made on behalf of the SEBI, the Hon'ble Supreme Court held that if the disclosure of the report would affect third party rights the onus then shifts to the appellant to prove that the information is necessary to defend the case appropriately. 7. In the case of Rameshwar Lal Mali vs CIT 256 ITR 536 (Raj.), The Hon'ble High Court of Rajasthan held \"there is no provision for permitting the cross examination of the persons whose statements were recorded during the survey” 8. In the case of Mahendra N. Chatterjee v. Collector of Central Excise, The Hon'ble High Court of Calcutta held \"right to cross examination is not necessarily part of reasonable opportunity\" 29 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR 9. The Hon’ble ITAT Mumbai Bench in the case of Soman Citi v. JCIT in ITA No. 2960/Mum/2016held that the right of cross-examination is not absolute. No prejudice is caused to the assessee by non granting of cross examination if the assessee has not discharged the primary onus. The fact that purchase bills are produced and payment is made through banking' channels is not sufficient if the other evidence is lacking. 10. In CIT Vs Metal Products of India (1984) 150 ITR 714 (P&H), it was held that the AO may gather information in any manner he likes, behind the back of the assessee and utilize the same against the assessee, even if it does not, in all respects the requirements of the Indian Evidence Act. What is necessary is that he should have material upon which to base the assessment; “material” as distinguished from evidence, which includes direct and circumstantial evidence. (para 7.9.2 of the Assessment Order) 11. The Tribunal in the case of Ram Niwas Gupta, Dehradun v. DCIT, Dehradun on 6th February, 2019 in ITA No. 4881 to 4883/Del/2016 (Assessment Years: 2010-11, 2012-13 and 2013-14), after considering various decisions of the Hon'ble Supreme Court, including the decision in the case Andaman Timbers Industries vs. Commissioner of Central Excise, Kolkata-II reported in MANU/SC/1250/2015: 2015 (324) E.L.T. 641 (SC), 2017 (50) S.T.R. 93 (SC), 2016 (15) SCC 785 has held as under: In our opinion right to cross-examine the witness who made adverse report is not an invariable attribute of the requirement of the dictum, \"audi alteram partem\". The principles of natural justice do not require formal cross-examination. Formal cross- examination is a part of procedural justice. It is governed by the rules of evidence, and is the creation of Court, It is a part of legal and statutory justice therefore it cannot be laid down as a general proposition of law that the revenue cannot rely on any evidence which has not been subjected to cross-examination. 12. [2022] 136 taxmann.com 333 (SC) SUPREME COURT OF INDIA Securities and Exchange Board of India v. Mega Corporation Ltd: The Hon’ble Court held that: 35.As per the principles laid down in the above referred case, there is a right of disclosure of the relevant material. However, such a right is not absolute…. 37.We are also of the opinion that, there was no necessity for the Tribunal to lay down as an inviolable principle that there is a right of cross examination in all cases. In fact, the conclusion of the Tribunal based on evidence on record did not require such a finding. 30 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR 13. The Hon’ble Delhi ITAT bench held in the case of Sh Satish Kishore Vs ITO and Naval Kishore Vs ITO (2019-TIOL-1760-ITAT-Del in ITA No. 1704- 1705/Del/2019): 6.12 As far as contention of the learned counsel that no opportunity of cross- examination of the statement of share brokers relied upon by the Assessing Officer is concerned, we find that the authorities have not merely relied on the statement of the relevant brokers, but also has taken into account other, circumstantial evidences and the assessee was asked to justify the genuineness of the transactions, which the assessee has failed. In our opinion, the ratio in the case of M/s Andman Timber Industries (2015] 281 CTR 241 (SC) is not applicable over the facts of the instant case. 14. ITA No. 220/2019 CM No. 10774/2019 UDIT KALRA Vs INCOME TAX OFFICER: In this case, the main thrust of the assessee's argument is that he was denied the right to cross-examine the two individuals whose statements led to the inquiry and ultimate disallowance of the LTCG claim in the returns. The A.O., CIT(A) and the ITAT have all consistently rendered adverse findings. What is intriguing is that the company M/s Kappac Pharma Ltd. had meagre resources with consistent reported losses. The astronomical growth of the value of company’s shares naturally excited the suspicions of the Revenue. The company was even directed to be delisted from the stock exchange. Since, the findings are entirely of fact, no substantial question of law arises in the present appeal. (B). PREPONDERANCE OF HUMAN PROBABILITIES VS DIRECT EVIDENCE VS CIRCUMSTANTIAL EVIDENCE AND ONUS: 1. [2016] 66 taxmann.com 288 (SC) SUPREME COURT OF INDIA Securities and Exchange Board of India v. Kishore R. Ajmera: The question of law which arose for consideration before the Hon'ble Supreme Court was as to what is the degree of proof required to hold brokers/sub-brokers liable for fraudulent/manipulative practices under the SEBI Regulations and for violating the code of conduct of the SEBI (Stocks brokers and Sub-brokers) Regulations. It was pointed out that it is the judicial duty to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are founded and to reach what would appear to the Court to be a reasonable conclusion therefrom. The test would always be that what inferential process that a reasonable/prudent man would adopt to arrive at a conclusion. The judgement pointed towards the prior meeting of minds in case of screen based trade transactions of scrips also. It was argued that on a screen- based trading the identity of the second party to be a client or the broker is not known to the first party/client or broker. This argument was rejected as being 31 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR irrelevant. It was pointed out that the screen-based identity system keeps the identity of the parties anonymous and it will be too naïve to rests the final conclusions on said basis which overlooks a meeting of minds elsewhere. Further it was held that direct proof of such meeting of mind elsewhere would rarely be forth coming and therefore the test is one of the preponderance of probabilities so far as the adjudication of a civil liability arising out of violation of the Act or to the Regulations. Further it was held that the conclusion has to be gathered from various circumstances like that volume of trade effected; the period of persistence in trading in particular scrips; the particulars of the buy and sell orders, namely, the volume thereof; the proximity of time between the two and such other relevant factors. Thus, the legal principle which can be culled out from the above decision is that to prove the allegations, against the assessee, can be inferred by a logical process of reasoning from the totality of the attending facts and circumstances surrounding the allegations/charges made and levelled and when direct evidence is not available, it is the duty of the Court to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are founded so as to reach a reasonable conclusion and the test would be what inferential process that a reasonable/prudent man would apply to arrive at a conclusion. Further proximity and time and prior meeting of minds is also a very important factor especially when the income tax department has been able to point out that there has been a unnatural rise in the price of the scrips of very little known companies. Furthermore, in all the cases, there were minimum of two brokers who have been involved in the transaction. It would be very difficult to gather direct proof of the meeting of minds of those brokers or sub-brokers or middlemen or entry operators and therefore, the test to be applied is the test of preponderance of probabilities to ascertain as to whether there has been violation of the provisions of the Income-tax Act. In such a circumstance, the conclusion has to be gathered from various circumstances like the volume from trade, period of persistence in trading in the particular scrips, particulars of buy and sell orders and the volume thereof and proximity of time between the two which are relevant factors. Therefore, in our considered view the methodology adopted by the department cannot be faulted. 2. [2022] 139 taxmann.com 352 (Calcutta) HIGH COURT OF CALCUTTA Principal Commissioner of Income-tax v. Swati Bajaj: It is very rare and difficult to get direct information or evidence with regard to the prior meeting of minds of the persons involved in the manipulative activities of price rigging and insider trading. We can draw a parallel in cases of adulteration of food stuff, more than often action 32 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR is initiated under the relevant Act after the adulteration takes place, the users of adulterated products get affected etc. Therefore, a holistic approach is required to be made and the test of preponderance of probabilities have to be applied and while doing so, we cannot loose sight of the fact that the shares of very little known companies with in-significant business had a steep rise in the share prices within the period of little over a year. The Income-tax department was not privy to such peculiar trading activities as they appear to have been done through the various stock exchanges and it is only when the assessees made claim for a LTCG/STCL, the investigation commenced. As pointed out the investigation did not commence from the assessee but had commenced from the companies and the persons who were involved in the trading of the shares of these companies which are all classified as penny stocks companies. 3. [1985] 22 Taxman 11 (SC) SUPREME COURT OF INDIA McDowell & Co. Ltd. v. Commercial tax Officer: It was held that the colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay taxes honestly without resorting to subterfuges. 4. [2022] 139 taxmann.com 352 (Calcutta) HIGH COURT OF CALCUTTA Principal Commissioner of Income-tax v. Swati Baja:j It was argued that unless there are foundational facts, circumstantial evidence cannot be relied on. This argument does not merit acceptance as wealth of information and facts were on record which is the outcome of the investigation on the companies, stock brokers, entry operators etc. Based on those foundational facts the department has adopted the concept of \"working backward\" leading to the assessees. While at that relevant stage the sounding circumstances, the normal human conduct of a prudent investor, the probabilities that may spill over, were all taken into consideration to negative the claim for exception made by the assessee. Therefore, the department was fully justified in taking note of the prevailing circumstances to decide against the assessees. 5. In [1971] 82 ITR 540 (SC) SUPREME COURT OF INDIA Commissioner of Income- tax v. Durga Prasad More, the Hon'ble Supreme Court pointed out that on the question of onus that law does not prescribe any quantitative test to find out whether the onus in a particular case has been discharged or not and it depends on the facts and circumstances of each case. It was further held that in some cases, the onus may be heavy whereas in others, it may be nominal. In the said 33 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR case the assessee was receiving some income which he stated that it is not his income but that of his wife. On facts, it was found that the assessee's wife is supposed to have had Rs. 2 lakhs neither deposited in bank, nor advanced to others but safely kept in a safe. The assessee was unable to show from what source she built up the amount and Rs. 2 lakhs before the year 1940 which was a big sum during the relevant time. The Tribunal disbelieved the story of the assessee and held it to prima facie be a fantastic story, a story that does not accord with human probabilities. It was further held that the Courts and Tribunals have to judge the evidence before it by applying the test of human probabilities, human minds may differ as to the reliability of a piece of evidence but in that sphere, the decision of the final fact finding authority is made conclusive by law. 6. In [1995] 80 Taxman 89 (SC) SUPREME COURT OF INDIA Sumati Dayal v. Commissioner of Income-tax, the appeals were filed by the assessee against the order passed by the Income-tax Settlement Commission. On the aspect of burden of proof, it was pointed out that in all cases in which a receipt is sought to be taxed as income, the burden lies on the department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within exemption provided by the Act, lies upon the assessee. With regard to the effect of Section 68 of the Act, it was held that where any sum is found credited in the books of the assessee in previous year, the sum may be charged to Income-tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. It was further held that in such a case, the prima facie evidence against the assessee namely, the receipt of money and if he fails to rebut, the said evidence being unrebuted, can be used against him by holding that it was a receipt of an income nature. The Hon'ble Supreme Court proceeds to discuss the facts of the case where the dispute was whether the winnings of the assessee therein were from horse races. Pointing out as to how this matter has to be examined, it was held that the matter has to be considered in the light of human probabilities and by applying the said test it was held that the assessee's claim therein about the amount being her winnings from horse races was not genuine. (Enclosed: SIMILARITY NOTE WITH P C MAHNOT) 7. In [2007] 161 Taxman 169 (SC) SUPREME COURT OF INDIA Commissioner of Income-tax v. P. Mohanakala, the questions of law which were framed for consideration are more or less identical as the substantial questions of law raised before use with regard to the burden of proof cast on the assessee under section 68 of the Act. It was held that the expression \"the assessee offers no explanation\" 34 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR means where the assessee offers no proper, reasonable and acceptable explanation as regard the sums found credited in the books maintained by the assessee. Further it was pointed out that in cases where the explanation offered by the assessee about the nature and source of sums found credited in the books is not satisfactory shows, prima facie evidence against the assessee namely, the receipt of money, the burden is on the assessee to rebut the sum and if he fails to rebut, it can be held against the assessee that it was a receipt of an income nature. Further, it was held that in the absence of satisfactory explanation of the assessee, the Income-tax Officer may assume that cash credit entries in the books represented income from undisclosed sources. In the said case also the Court took note of the fact that the Assessing Officer considered various surrounding circumstances before rejecting the explanation offered by the assessee which finding was approved by the Hon'ble Supreme Court as it was based on the material available on record and not on any conjectures and surmises. 8. In [1977] 107 ITR 938 (SC) SUPREME COURT OF INDIA Roshan Di Hatti v. Commissioner of Income-tax, it was held that the onus of proving the source of money found to have been received by an assessee is on him, if he disputes, it is not liable to tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation and in the absence of such proof the revenue is entitled to treat it as taxable income. Further, it was held that where the nature of and source of a receipt whether it be of money or of the property, cannot be satisfactorily explained by the assessee, it is open to the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that the income is from any particular source. 9. In [1963] 50 ITR 1 (SC) SUPREME COURT OF INDIA Kale Khan Mohammad Hanif v. Commissioner of Income-tax, one of the questions referred was whether the burden of proof, source of cash credit is on the assessee. It was held that the answer to question must be in the affirmative and that is how it was answered by the High Court therein. It was held that the onus of proving the source of the sum of money found to have been received by the assessee is on him, if he disputes liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provision of the Act. 10. In Smt. Tharakumari v. ITO 2019 SCC Online Mad. 9523, the appeal by the assessee was questioning the correctness of the finding as to whether LTCG claimed by the assessee, which was brought to tax by the Assessing Officer as unexplained income under section 68 of the Act was justified. The said case also arose out of a 35 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR penny stock where the assessee had purchased shares in M/s. Luminaries Technologies Ltd. The Division Bench of the Madras High Court took note of the findings recorded by the Tribunal which also referred to the report of the DITI, Kolkata and held that the nature of transactions of sale of shares of a shell company was rightly held to be sham transactions and the same are to be taxed as undisclosed income under section 68 of the Act. 11. In [2013] 29 taxmann.com 291 (Delhi) HIGH COURT OF DELHI Commissioner of Income-tax, Delhi-V N.R. Portfolio (P.) Ltd, the substantial question of law framed for consideration was whether the Tribunal was right in deleting the additions under section 68 of the Act and whether the decision of the Tribunal is perverse. While answering the said question, it was pointed out that the Assessing Officer is both an investor and an adjudicator. The Assessing Officer can also refer to incriminating material or evidence available with him and call upon the assessee to file their response and a general and universal procedure or method to be adopted by the Assessing Officer while verification of facts cannot be laid down. Further, the manner and mode of conducting assessment proceedings has to be left to the discretion of the Assessing Officer and the same should be just, fair and should not cause any harassment to the assessee. Further, it was held that the provisions of the Evidence Act are not applicable but the Assessing Officer being a quasi-judicial authority, must take care and caution to ensure that the decision is reasonable and satisfies the balance of equity, fairness of justice and the principle of preponderance of probabilities apply. The assessee argued that the revenue must have evidence to show circulation of money from the assessee to the third party which contention was rejected by the Court holding it to be fallacious. 12. In A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 802 (SC), the Hon'ble Supreme Court observed that it is not the duty of the revenue to adduce evidence to show from what source income was derived and why it should be treated as concealed income and the assessee must prove satisfactorily the source and the nature of cash received during the accounting year and it is not necessary for the revenue to locate the exact source. Further, it was observed that the Court was conscious of the doctrine of \"source of source\" or \"origin of origin\" and pointed out as follows. 13. In CIT v. Nova Promoters Finlease (P.) Ltd. [2012] 18 taxmann.com 217/206 Taxman 207/342 ITR 169 (Delhi) wherein it was held that in view of the link between the entry providers and incriminating evidence, mere filing of PAN, acknowledgement of IT Returns of the entry providers, bank account statements 36 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR etc. where not sufficient to discharge the onus under section 68 of the Act. Further it was held that credit worthiness cannot be proved by mere issue of a cheque or by furnishing a copy of the bank account and circumstances might require that there may be some evidence of positive nature to show that the said subscribers had made a genuine, investment as well as angel investor after due diligence or for personal reasons and the findings or a conclusion must be practicable, pragmatic and might in a given case take into account that the assessee might find it difficult to unequigibly established credit worthiness of the shareholders. 14. In [2020] 119 taxmann.com 470 (Delhi) HIGH COURT OF DELHI Sanjay Kaul v. Principal Commissioner of Income Tax, Delhi-8, New Delhi it was held that where the assessee had only invested in high risk stocks of obscure companies with no business activities or assets, which were identified as the penny stocks, the assessing officer had correctly concluded that the assessee entered into a pre- arranged sham transaction so as to convert unaccounted money into accounted money in guise of capital loss and therefore, the alleged Short Term Capital Loss (STCL) was rightly disallowed. 15. In [2018] 89 taxmann.com 196 (Bombay) HIGH COURT OF BOMBAY Sanjay Bimalchand Jain v. Principal Commissioner of Income-tax-1, Nagpur, the assessee had purchased shares from the penny stocks companies for a lower amount and within a year, sold such shares at higher amount and the assessee had not tendered cogent evidence to explain as to why the shares in unknown company had jumped to such a higher amount in no time and also failed to provide details of persons, who purchased the said shares and the transaction was held to be an attempt to hedge the undisclosed income as LTCG. 16. In CIT v. Oasis Hospitality (P.) Ltd. [2011] 9 taxmann.com 179/148 Taxman 247/333 ITR 119 (Delhi) it was held that the initial onus is upon the assessee to establish three things necessary to obviate the mischief of section 68 and those are: (i) identity of the investors; (ii) their credit worthiness/investments and (iii) genuineness of the transactions and only when these three ingredients are established prima facie, the department is required to undertake further exercise. The Court after noting the legal position had examined the facts of the case, the modus operandi and allowed the appeal filed by the revenue. 17. In [2019] 109 taxmann.com 53 (SC) SUPREME COURT OF INDIA NDR Promoters (P.) Ltd.v. Principal Commissioner of Income-tax, objection was raised by the assessee with regard to the non-production of directors for cross examination etc. and the Court noted the facts in particular that the assessee did not have any 37 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR business income in the year ending March 31st, 2007 and had a marginal income from other sources in the year ending 31st March 2008 and did not incur any expenditure in the year ending 31st March, 2007 and the shares of face value of Rs. 10/- each were issued at a premium of Rs. 40/-, the total Rs. 50/-. Thus, taking note of the factual position, the Court held that the transaction in question were clearly sham and make believe with an excellent paper work to camouflage their bogus nature. 18. In [2019] 112 taxmann.com 330 (SC) SUPREME COURT OF INDIA Suman Poddar v. Income Tax Officer, the Hon'ble Delhi High Court in the case of Suman Poddar (supra), observed that shares of Cressanda Solutions Ltd. have been identified by the Bombay Stock Exchange as penny stock used for obtaining bogus Long Term Capital Gain and no evidence of actual sale except contract notes issued by the share broker were produced by the assessee. The Hon'ble High Court accordingly dismissed the appeal of the assessee as no substantial question of law involved. Thus, Tribunal has in depth analyzed balance sheets and profit and loss accounts of Cressanda Solutions Ltd. Which shows that astronomical increase in share price of said company which led to returns of 491 % for Appellant, was completely unjustified. Pertinently, EPS of said company was Rs. 0.01/- as in March 2016, it was Rs. 0.01/- as in March 2015 and -0.48/- as in March 2014. Similarly other financial parameters of said company cannot justify price in excess of Rs. 500/- at which Appellant claims to have sold said shares to obtain Long Term Capital Gains. It is not explained as to why anyone would purchase said shares at such high price. Tribunal goes on to observe in impugned order as follows: With such financials an affairs of business, purchase of share of face value Rs. 10/- at rate of Rs. 491/- by any person and assessee's contention that such transaction is genuine and credible and arguing to accept such contention would only make decision of judicial authorities fallacy. Evidences put forth by Revenue regarding entry operation fairly leads to conclusion that assessee is one of beneficiaries of accommodation entry receipts in form of long term capital gains assessee has failed to prove that share transactions are genuine and http://itatonlin.org could not furnish evidences regarding sale of shares except copies of ITA 841/2019 Page 7 of 10 contract notes, cheques received against overwhelming evidences collected by Revenue regarding operation of entire affairs of assessee. This cannot be case of intelligent 38 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR investment or simple and straight case of tax planning to gain benefit of long term capital gains earnings @ 491% over period of 5 months is beyond human probability and defies business logic of any business enterprises dealing with share transactions net worth of company is not known to assesses. Even brokers who coordinated transactions were also unknown to assessee. All these facts give credence to unreliability of entire transaction of shares giving rise to such capital gains ratio laid down by Hon'ble Supreme Court in case of Sumati Dayal v. CIT case. Though assessee has received amounts by way of account payee cheques, transactions cannot be treated as genuine in presence of overwhelming evidences put forward by Revenue fact that in spite of earning such steep profits assessee never ventured to involve himself in any other transaction which broker cannot be mere coincidence of lack of interest. Reliance is place on judgment in case of Nipun Builders and Developers Pvt. Ltd. (supra) where it was held that it is duty of Tribunal to scratch surface and probe documentary evidence in depth, in light of conduct of assessee and other surrounding circumstances in order to see whether assessee is liable to provisions of section 68 or not in case of NR Portfolio, obtrusive. Similarly bank statements provided by assessee to prove genuineness of transaction cannot be considered in view of judgment of Hon'ble Court in case of Pratham Telecom India Pvt. Ltd. Wherein it was stated that bank statement is not sufficient enough to discharge burden. Regarding failure to accord opportunity of cross examination, we rely on judgment of Prem Castings Pvt. Ltd. Similarly tribunal in case of Udit Kalra ITA No. 6717/Del/2017 for assessment year 2014-15 has categorically held that when there was specific confirmation with Revenue that assessee has indulged in ITA 841/2019 page 8 of 10 non-genuine and bogus capital gains obtained from transactions of purchase and sale of shares, it can be good reason to treat transactions as bogus difference of case of Udit Kalra attempted by Ld. AR does not add any credence to justify transactions. Investigation Wing has also conducted enquires which proved that assessee is also one of beneficiaries of transactions and entries provided, Even BSE listed this company as being used for generating bogus LTCG. On facts of case and judicial pronouncements will give rise to only conclusion that entire activities of assessee is colourable device to obtain bogus capital gains. Hon'ble High Court of Delhi in case of Udit Kalra ITA No. 220/2009 held that company had meagre resources and astronomical growth of value of company's shares only excited suspicion of Revenue and hence, treated receipts of sale of shares to be bogus. Hon'ble High Court has also dealt with arguments of assessee that he was denied right of cross examination of individuals whose statements led to enquiry. Ld. AR arguments that no question of law has been framed in case of Udit Kalra also does not make any tangible difference to decision of this Case, 39 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR Since additions have been confirmed based on enquiries by Revenue, taking into consideration ratio laid down by various High Courts and Hon'ble Supreme Court, our decision is equally applicable to receipts obtained from all three entities. Further, reliance is also placed on orders of various Courts and Tribunals listed below. MK Rajeshwari v. ITO in ITA No. 17231 Bang/2018, order dated 12-10-2018. Abhimanyu Soin v. Sanjay Bimalchand Jain v. ITO 89 taxmann.com 196. Dinesh Kumar Khandelwal, HUF v. ITO in ITA No. 58 & 591 Nag/2015, order dated 24-8-2016. Ratnakar M Pujari v. ITO in IT no. 995/Mum/2012, order dated 3-8-2016. ITA 841/2019 page 9 of 10 Disha N. Lalwani v. ITO in ITA No. 6389/Mum/2012, order dated 22-3-2017. ITO v. Shamin M. Bharwani MANU/IU/0493/2015: [2016] 69 taxmann.com 65. Usha Chandresh Shah v. ITO in ITA No. 6858/Mum/2011, order dated 26-9-2014, CIT v. Smt. Jasvinder Kaur MANU/GH/0241/2013: 357 ITR 638 19. In [2020] 114 taxmann.com 186/181 ITD 146 (Delhi - Trib.) UDIT KALRA v ITO, a similar case of investment in 4000 shares in a penny stock company which share prices increased astronomically within a period of approximately 19 months when the price of acquisition was Rs. 12/- per share, on the date of sale it was Rs. 720/-. The High Court of Delhi affirmed the order passed by the Tribunal and dismissed the appeal filed by the assessee. 20. the Hon'ble Supreme Court in Chuharmal v. CIT [1986] 38 Taxman 190/172 ITR 250 has affirmed the principle of human probability. 21. Hemil Subhashbhai Shah vs DCIT, Ward-5(3)(1) Ahmedabad, ITA No.1121/Ahd/2018, [Asst.Year : 2014-15] AND ITA No.961/Ahd/2019, [Asst.Year : 2015-16], INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD dated 12.06.2023: The assessee has invested in the penny stock “KAPPAC PHARMA” and has come up with the same argument (as in the instant case) that the transaction was carried out through banking channel on a recognized stock exchange and the assessee was not provided the copy of investigation report and statements. The Hon’ble Bench sustained the addition made u/s 68 and 69C of the Act placing their reliance on the judgement of Swati Bajaj. 22. [2020] 122 taxmann.com 75 (Delhi - Trib.) IN THE ITAT DELHI BENCH 'E' Sanat Kumar v. Assistant Commissioner of Income Tax, Circle-36(1), New Delhi : It was held that the purchase and sale of shares of unknown company, CSL, having no profile, financial growth, risk factor etc. available with the assessee, whose shares were purchased at the rate of Rs. 10 per share by the assessee and sold at the rate of Rs. 476 to Rs. 503.90 per share, is merely a sham transaction credited to get the bogus profit at astronomical rate under the garb of LTCG in connivance with the 40 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR entry providers to make undisclosed income as disclosed one by evading the tax 23. [2019] 109 taxmann.com 174 (Delhi - Trib.) IN THE ITAT DELHI BENCH 'G' Sandeep Bhargava v. Assistant Commissioner of Income-tax, Circle-60(1), New Delhi : The Hon’ble Tribunal held that the contention of the assessee that the transaction leading to long-term capital gains are supported by documents such as sale and purchase invoices, bank statement etc., cannot be accepted in view of the facts and circumstances of the case brought on record by the Assessing Officer after proper examination of the material facts and taking into account corroborating evidences gathered by the Directorate of Income-tax (Investigation), Kolkata, involving a network of brokers and operators engaged in manipulation of market price of the shares of the shares of the HBC bioscience controlled and managed by such person with a purpose to provide accommodation entries in the form of long-term capital gains. The onus was on the assessee to prove the transaction leading to claim of long-term capital gain was a genuine transaction. The assessee failed to justify manifold increase in the prices of the share of 'HBC bioscience' despite weak financials of the company. Initial investment in the company of unknown credential and subsequent jump in the share prices of such a company, cannot be an accident or windfall but could be possible, because of manipulation in the share prices in a preplanned manner, as brought on record by the Assessing Officer. In view of the failure on the part of the assessee to discharge his burden of proof and explain nature and source of the transaction. The Tribunal accordingly, uphold the action of the Ld. CIT(A) on the issue in dispute and dismiss the grounds raised by the assessee on this issue. 24. [2023] 147 taxmann.com 21 (Indore - Trib.) IN THE ITAT INDORE BENCH Abhishek Gupta v. Income-tax Officer : The assessee has declared to have earned a whopping capital gain of Rs. 64,58,168/- on the basis of a meagre investment of Rs. 1,77,192/- and the relevant shares are claimed to have been purchased in cash and held in the pool account of broker for about 17 months. Thus, it was held that the assessee is not only declaring hefty gain but also claiming exemption u/s 10(38) in a period nearing 12 months, which is in consonance with the modus operandi observed by the Investigation Wing in the Investigation-Report. Had the assessee not claimed any exemption or other benefit, but declared the income as normal income or business income and paid legitimate tax at normal rate, perhaps there would not have been suspicion or question-mark on the income declared by the assessee but this is not so in the present case. 25. [2023] 149 taxmann.com 98 (Pune - Trib.) IN THE ITAT PUNE BENCH 'A' Dinesh 41 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR Kumar R. Tulsyan (HUF) v. Income-tax Officer: It was held that since the said company was a penny stock company and had financial and trading pattern of providing accommodation entry by alloting shares to beneficiaries through preferential allotment, splitting share, increasing market price through paper companies, action of assessee was nothing but pre-motivated and deliberate conduct done for converting his unaccounted money under guise of long-term share transaction without paying tax 26. [2022] 145 taxmann.com 315 (Kolkata - Trib.)IN THE ITAT KOLKATA BENCH 'A'Shyam Sunder Bajaj v.Income-tax Officer : It is another classical case of using a penny stock to convert black money into white as exempt LTCG. The Tribunal upheld the addition made u/s 68 and 69C placing eliance on Swati Bajaj case law. 27. [2023] 149 taxmann.com 104 (Ahmedabad - ITAT) IN THE ITAT AHMEDABAD BENCH 'SMC' Atmiben Alipitkumar Doshi v. Income-tax officer : It is a case of penny stock purchased @ Rs 20/- and sold @ Rs 675/- per share to claim exempt LTCG. Therefore, Assessing Officer made additions on account of such capital gains as unexplained income under section 68 thereby denying claim of exemption on same. The Hon’ble Tribunal noted that assessment order was not solely based on investigation but Assessing Officer had verified each aspect about increase in price of share. Further, purchase of share appeared bogus as scrip was purchased at price higher than market price and as an off-market transaction. It was held that merely submission of demat as well as transaction statements along with debit note and share certificate by assessee would not shun away aspect that assessee was very well aware about penny stock brokers and, hence, Assessing Officer was justified in denying exemption on LTCG and treating same as unexplained income under section 68 28. [2016] 69 taxmann.com 65 (Mumbai - Trib.) IN THE ITAT MUMBAI BENCH 'E'Income-tax Officer, 19(3)(4), Mumbai v. Shamim M. Bharwani : It was held that or a scrip to trade at nearly 50 times its' face value, only a few months after its issue, only implies, if not price manipulation, trail blazing performance and/or great business prospects (with of course proven management record, so as to be able to translate that into reality), while even as much as the company's business or industry or future program (all of which would be in public domain), is conspicuous by its absence, i.e., even years after the transaction/s. The company is, by all counts, a paper company, and its share transactions, managed. We, accordingly, reversing the findings of the first appellate authority, confirm the 42 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR assessment of the impugned sum u/s.68 of the Act. 29. [2019] 106 taxmann.com 65 (Delhi - Trib.) IN THE ITAT DELHI BENCH 'SMC' Pooja Ajmani v. Income-tax Officer, Ward 20(4), New Delhi: The Hon’ble Bench held that documents submitted as evidences to prove the genuineness of transaction are themselves found to serve as smokescreen to cover up the true nature of the transactions in the facts and circumstances of the case as it is revealed that purchase and sale of shares are arranged transactions to create bogus profit in the garb of tax exempt long-terra capital gain by well organised network of entry providers with the sole motive to sell such entries to enable the beneficiary to account for the undisclosed income for a consideration or commission. The share transactions leading to long-term capital gains by the assessee are sham transaction entered into for the purpose of evading tax. 30. [2015] 54 taxmann.com 10 (Punjab & Haryana) HIGH COURT OF PUNJAB & HARYANA Chandan Gupta v.Commissioner of Income-tax, Ludhiana: It was held that once the transaction of purchase and sale was found to be bogus then the sale proceeds had to be added as income of the assessee under Section 68 of the Act because the money received on the basis of bogus transaction had been credited by the assessee in the books of account which remained unexplained. 31. [2011] 12 taxmann.com 276 (Punjab & Haryana) HIGH COURT OF PUNJAB AND HARYANA Balbir Chand Maini v. Commissioner of Income-tax-III, Ludhiana: During assessment proceedings, Assessing Officer found that assessee had purchased certain shares of a company at rate between Rs. 2.50 and Rs. 3.40 per share in month of April, 1997 and part of those shares were sold through a broker at Rs. 55 per share. He came to opinion that value of said shares could not be as high as Rs. 55 per share. He recorded statement of broker who admitted to have purchased shares in question but failed to produce books of account and other relevant documents. The Assessing Officer held that transaction of sale of shares was an ingenuine transaction and made addition of alleged sale consideration to assessee's income as income from undisclosed sources. The addition was upheld by the Hon’ble Court. 32. [2013] 37 taxmann.com 286 (Gauhati) HIGH COURT OF GAUHATI Commissioner of Income-tax v. Smt. JasvinderKaur: Assessing Officer having noticed that capital gains shown by assessee on sale of shares were more than 57 times of purchase value in just 16 months of purchase. The Assessing Officer treated said income as income from undisclosed sources. The Tribunal allowed claim of assessee on ground that there was no material on record to show that what assessee had claimed as regards value of shares was factually incorrect. It was 43 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR held that the Tribunal wrongly placed burden of proving correctness of return of income, which assessee had filed, on revenue, whereas it was for assessee to show, by placing all materials including profits of two companies that, if not arithmetically, there was, at least, reasonable possibility of value of shares having risen as high as had been shown by assessee . 33. [1991] 56 TAXMAN 304 (CAL) HIGH COURT OF CALCUTTA Commissioner of Income-tax v. United Commercial & Industrial Co. (P.) Ltd.: It was held that it is necessary for assessee to prove prima facie identity of his creditors, capacity of such creditors to advance money and lastly genuineness of transactions. It was also held that mere production of confirmation letters before ITO would not prove that loans have been obtained from those loan creditors or that they have creditworthiness. 34. [2023] 151 taxmann.com 119 (Calcutta) HIGH COURT OF CALCUTTA Principal Commissioner of Income-tax v Smt. Usha Devi Modi: Where assessee claimed long term capital gain on sale of shares of a company as exempt under section 10(38), since in related cases it was found that assessee had not proved genuineness of claim, creditworthiness of companies in which it had invested and identity of persons with whom sale transactions were done, said LTCG was not exempt under section 10(38) and accordingly, revision invoked by Pr. Commissioner on ground that script sold by assessee was of penny stock was justified. Reliance was placed on Swati Bajaj judgement. 35. [2022] 143 taxmann.com 402 (Calcutta) HIGH COURT OF CALCUTTAPrincipal Commissioner of Income-tax v. Nand Kishore Agarwala: It was held that the assessee had stage managed transactions of sale of shares with object to plough back his unaccounted income in form of fictitious long-term capital gains (LTCG) and claim bogus exemption under section 10(38), such exemption denied by Assessing Officer by way of treating bogus LTCG in penny stock under purview of unexplained cash under section 68 was justified 36. [2018] 99 Bangalore - Trib.) IN THE ITAT BANGALORE BENCH 'SMC-C' Smt. M.K. Rajeshwari v. Income Tax Officer, Ward-3, Raichur: It was held that where the assessee claimed exemption under section 10(38) in respect of capital gain arising from sale of shares, in view of fact that financial worth of said company was meagre and, moreover, there was abnormal rise in price of shares, it could be concluded that assessee introduced her own unaccounted money in garb of long term capital gain and, thus, claim raised by her was to be rejectedtaxmann.com 339 ( 44 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR 37. [2019] 110 taxmann.com 307 (Delhi - Trib.) IN THE ITAT DELHI BENCH 'G' Satish Kishore v. Income Tax Officer, Ward-47(2), New Delhi : Assessing Officer held amount so received as unexplained cash credit under section 68 and made addition on ground that assessee failed to discharge burden of proof and explain nature and source of transaction and huge profit in all shares traded by assessee against human probability. It was found that assessee failed to justify manifold increase in prices of shares despite weak financials of companies. Further, investigation carried out by Department had brought facts on record that share prices had been manipulated artificially, purchased by a set of accommodation entry provider companies controlled by cartel of brokers, entry operator, etc. Moreover, fact that prices of all shares purchased by assessee went up, that too without any corresponding profit or prospects of company, and not even in single case price of share came down, was against human probabilities and impugned year was an isolated year of such profits with no such profits made in earlier or subsequent years,. It was held that assessee failed to prove genuineness of transaction and long-term capital gain on sale of shares by assessee was an arranged affair to convert its own unaccounted money and thus, exemption claimed under section 10(38) on sale of shares had rightly been disallowed 38. [2011] 43 SOT 544 (Delhi) IN THE ITAT DELHI BENCH 'B' Hersh W. Chadha v. Deputy Director of Income-tax, Circle-1(1), International Taxation: The Hon’ble Court held that the admissibility of documents, evidence or material differs greatly in income tax proceedings and criminal proceedings respectively. In criminal proceedings, the charge is to be proved by the State against the accused, establishing it beyond doub, whereas as per the settled proposition of law, the income tax liability is ascertained on the basis of the material available on record, the surrounding circumstances, human conduct and preponderance of probabilities. 39. [2003] 128 Taxman 621 (Delhi) HIGH COURT OF DELHI Sajan Dass& Sons v. Commissioner of Income-tax: Onus u/s 68 of the Act is on the assessee to prove identity, genuineness and creditworthiness. 40. [1979] 2 Taxman 197 (SC) SUPREME COURT OF INDIA Indian & Eastern Newspaper Society v. Commissioner of Income-tax: The Hon’ble Court has held the proceedings for the assessment before the assessing officer as quasi-judicial in character. 41. In Mahindra & Mahindra Ltd v Union of India AIR 1979 SC 798, it was held that though the AO has the same powers as are vested in a court for the limited purposes mentioned in section 131, the proceedings before him are not strictly 45 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR judicial proceedings, though they are deemed to be so for limited purposes 42. The Hon’ble Delhi High Court in CIT(Addl) vs Jay Engineering Works Ltd (1978) 113 ITR 389 (Del) held that the Assessing Officer has no doubt, to hear evidence, but such evidence may consist of material which would be wholly inadmissible in a court of law. 43. In Gadgil (SS) vs Lal & Co (1964) 53 ITR 231 (SC), Hon’ble Supreme Court held that the position of AO cannot be equated to that of a Judge of a Court deciding a “lis” between his a citizen and the state. He is not bound to lead evidence on his own account with a view to rebutting the evidence of the assessee. 44. In Usha Chandresh Shah Vs ITO (ITA NO 6858/ Mum/ 2021), the Hon’ble Bench upheld the findings of the AO who concluded that the assessee has adopted the methodology of acquiring the LTCG in order to convert her black money into white and by applying the principles of human probabilities added the share sale receipts as other source income of the assessee from unexplained cash credits u/s 68. 45. In the case of Mangilal Jain Vs ITO 315 ITR 105, the Hon’ble High Court of Madras has held that when the assessee has failed to prove the genuineness of credit, mere proof of identity of creditor or that transaction was by cheques, is not sufficient. Addition u/s 68 was justified. 46. In the case of Precision Finance P Ltd 208 ITR 465, the Hon’ble High Court of Calcutta has held that when the assessee has failed to prove the genuineness of credit, mere proof of identity of creditor or that transaction was by cheques, is not sufficient. Addition u/s 68 was justified. 47. In the case of Principal Commissioner of Income-tax (Central)-1 v. NRA Iron & Steel (P.) Ltd. [2019] 103 taxmann.com 48 (SC), it was held by the Hon’ble Supreme Court that the assessee is under a legal obligation to prove receipt of share capital/premium to satisfaction of Assessing Officer, failure of which, would justify addition of said amount to income of assessee. The assessee company in its return of income for relevant year showed that money aggregating to Rs. 17.60 crores had been received through share capital/premium. The Assessing Officer added back Rs. 17.60 crores to total income of assessee on ground that the assessee had failed to discharge onus by cogent evidence either of creditworthiness of so-called investor-companies, or genuineness of transaction. On appeal, Commissioner (Appeals), deleted addition on ground that assessee having filed confirmations from investor companies to show that entire amount had been paid through normal banking 46 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR channels, and hence discharged initial onus under section 68 for establishing credibility and identity of shareholders. The Tribunal as well as High Court confirmed order passed by Commissioner(Appeals). However, it was found that Authorities below did not even advert to field enquiry conducted by Assessing Officer which revealed that in several cases investor companies were found to be non-existent, and onus to establish identity of investor companies, was not discharged by assessee. The entire transaction seemed bogus, and lacked credibility. It was held that merely because assessee company had filed all primary evidence, it could not be said that onus on assessee to establish creditworthiness of investor companies stood discharged and the Assessing Officer was justified in passing assessment order making additions under section 68 for share capital/premium received by assessee company. 48. [2018] 90 taxmann.com 147 (SC) SUPREME COURT OF INDIA Securities & Exchange Board of India v. Rakhi Trading (P.) Ltd: In this case it was held that in the absence of direct proof of meeting of minds elsewhere in synchronized transactions, the test should be one of preponderance of probabilities as far as adjudication of civil liability arising out of the violation of the Act or the provision of the Regulations is concerned. 46.Considering the reversal transactions, quantity, price and time and sale, parties being persistent in number of such trade transactions with huge price variations, it will be too naïve to hold that the transactions are through screen-based trading and hence anonymous. Such conclusion would be overlooking the prior meeting of minds involving synchronization of buy and sell order and not negotiated deals as per the board's circular. The impugned transactions are manipulative/deceptive device to create a desired loss and/or profit. Such synchronized trading is violative of transparent norms of trading in securities. If the findings of SAT are to be sustained, it would have serious repercussions undermining the integrity of the market and the impugned order of SAT is liable to be set aside. On the above additional reasoning also, I agree with the conclusion allowing the appeal preferred by SEBI against the traders. I also agree with the conclusion dismissing the appeal preferred by the SEBI against the brokers. 49. [1980] 4 Taxman 525 (Delhi) HIGH COURT OF DELHI Yadu hari Dalmia v. Commissioner of Income-tax: It was held that there can be no difference between a case with direct proof of expenditure and a case where circumstances justify an inference that there must have been excess expenditure and the same can only be estimated for want of direct evidence. 50. [2020] 122 taxmann.com 180 (Madras) HIGH COURT OF MADRAS 47 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR Commissioner of Income Tax, Chennai v. Mrs. Manish D. Jain (HUF),Chennai: The Assessing Officer after verification found that transaction of purchase of shares by assessee was a sham transaction and that assessee could not discharge onus cast upon her to prove genuineness of transaction by producing documentary evidence and accordingly refused to entertain claim made by assessee under section 10(38) towards sale proceeds. The appeal against same was dismissed by Commissioner (Appeals). The action of the Tribunal, without finding an error in approach of Assessing Officer or Commissioner (Appeals) and without interfering with such finding, to remand the matter to Assessing Officer for a fresh consideration of claim made by assessee under section 10(38) – was not found to be justified. 51. [2013] 30 taxmann.com 292 (Delhi) HIGH COURT OF DELHI Commissioner of Income-tax v. Nipun Builders & Developers (P.) Ltd: It was held that it is the duty of the Tribunal to scratch the surface and probe the documentary evidence in depth, in the light of the conduct of assessee and other surrounding circumstances in order to see whether the assessee is liable to the provisions of section 68 or not. 52. [1982] 134 ITR 119 (RAJ.)HIGH COURT OF RAJASTHAN Vimal Chandra Golecha v. Income-tax Officer: Natural Justice which is said to have been violated is not so rigid and inflexible a concept as to insist invariably that thus person concerned must be shown the original documents which are required to be explained by him. It is well settled that the requirements of natural justice depend on the circumstances of the case, the nature of the enquiry, the statute under which the Tribunal is acting and the subject matter to be dealt with. 53. [2018] 95 taxmann.com 327 (SC) SUPREME COURT OF INDIA Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Company: It was held by the Hon’ble Apex Court that where there is an ambiguity on interpretation of tax exemption provisions/Notifications, as to its applicability with respect to entitlement of assessee or rate of tax to be applied, such exemption notification should be interpreted strictly, and burden of proving applicability would be on assessee to show that his case comes within parameters of exemption clause or exemption notification. Further, it was held that when there is ambiguity in exemption notification which is subject to strict interpretation, benefit of such ambiguity cannot be claimed by subject/assessee and it must be interpreted in favour of revenue/State. 48 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR 54. High Court of Judicature at Madras dated 15.09.2021 Tax Case Appeal No.451 of 2021 The Pr. Commissioner of Income Tax, Chennai vs. Prabha Jain: In the instant case, the bogus LTCG was disallowed by the Assessing Officer and confirmed by the CIT(A) after examining the modus operandi of the assessee and held that the shares were purchased through off market and not through Stock Exchange and that the selling rates were artificially hiked later on. The above findings have not been set aside by the Tribunal and there is no reason for the Tribunal to remand the matter to the Assessing Officer for a fresh consideration. 55. 2019-TIOL-686-ITAT-DEL IN THE INCOME TAX APPELLATE TRIBUNAL BENCH ‘SMC’ NEW DELHI ITA No. 3809/Del/2018 Assessment Year: 2015-16 ANIP RASTOGI Vs INCOME TAX OFFICER ITA No. 3810/DEL/2018 Assessment Year: 2015-16 ANJU RASTOGI Vs INCOME TAX OFFICER: 7.The independent findings of the AO, which are corroborated by the information given by the Investigation Wing, the assessee has failed to substantiate the genuineness of alleged share transactions in respect of long term capital gain u/s. 10(38). The decision of the Supreme Court in the case of McDowell and Company Limited is applicable. In that case it was held that tax planning may be legitimate provided it is within the framework of the law and any colorable devices cannot be part of tax planning. Thus, following such decision and the fact that the assessee has failed to substantiate his claim before the lower Revenue authorities as well as before this Bench, the appeal of the assessee is dismissed. 56. 2018-TIOL-733-ITAT-CHD IN THE INCOME TAX APPELLATE TRIBUNAL BENCH 'A' CHANDIGARH ITA No.951/Chd/2016 Assessment Year: 2011-12 SHRI ABHIMANYU SOIN Vs ASSTT COMMISSIONER OF INCOME TAX CIRCLE- VII , LUDHIANA: : The Hon’ble Bench held that unnatural LTCG @ 3072% over a period of 1.5 years from scrip of the unlisted company whose even net worth is not known to the assessee, without expert advice is beyond the business logics and is valid reason to make addition for undisclosed income. Further, it was held that when assessee fails to prove through evidences that purchase and sale transactions of shares are genuine, claim of exempted LTCG can be disallowed and addition for undisclosed income can be made. Furthe, the Hon’ble Bench adjudicated that when facts indicates that whole process of trading in shares is depicted just to avoid tax liability, the addition for undisclosed income should be upheld. 57. 2013-TIOL-128-ITAT-MUM IN THE INCOME TAX APPELLATE 49 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR TRIBUNALBENCH 'A' MUMBAI ITA No.7024/Mum/2010Assessment Year: 2004-05 SHRI ARVIND M KARIYAA Vs ASSTT COMMISSIONER OF INCOME TAXCENTRAL CIRCLE-12: In this case, Bogus LTCG u/s 10 (38) of the Act was denied by the AO and was upheld by the Hon’ble Tribunal based on the principle of preponderance of human probabilities. 58. [1973] 87 ITR 370 (SC) SUPREME COURT OF INDIA Commissioner of Income- tax v. S.P. Jain: The Hon’ble Supreme Court has adjudicated the matter of share transactions on the basis of circumstantial evidences “ The above enumerated circumstances are telle-tale. The only reasonable inference that can be drawn from those circumstances is that the Rana was a mere name-lender. The conclusion reached by the Income tax Officer and the Appellate Assistant Commissioner that the Rana was a mere name lender is a reasonable conclusion. Neither the Tribunal nor the High Court has given any good reasons for rejecting those conclusions.” 59. [2019] 109 taxmann.com 53 (SC) SUPREME COURT OF INDIA NDR Promoters (P.) Ltd. v. Principal Commissioner of Income-tax: In this case, during AY 2008-09, assessee-company received money in form of share capital from five companies. Assessing Officer received an information that share capital money received by assessee was bogus as aforesaid five companies from whom it received premium were operated by one, 'TG', Chartered Accountant who had set up about 90 companies for providing accommodation entries. Accordingly, he made an additions under section 68 in respect of impugned share application money received by assessee. It was noted that assessee had failed to produce directors of shareholder companies, though directors had filed confirmations and, therefore, were in touch with assessee. Further, it was found that directors of all these five companies were either employees of 'TG' or close relatives. All five shareholder companies were located at a common address. During search on premises of 'TG', it was found that all passbooks, cheque books, PAN cards etc. belonging to said companies were in possession of 'TG'. High Court by impugned order held that, on facts, impugned additions made under section 68 in respect of share application money was justified. Further apex court dismissed Special Leave Petition filed against impugned order. 50 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR 60. [1928] 3 ITC 48 (ALL.) HIGH COURT OF ALLAHABAD Bhagat Halwai: In this case assessing Officer rejected oral evidence produced by assessee and his witness in support of his return. He formed an opinion from his own inspection at assessee’s shop and accordingly determined of sum payable by assessee. The Hon’ble HC held that no question of law arose out of order of Assessing Officer. 61. 2019-TIOL-496-ITAT-PUNE IN THE INCOME TAX APPELLATE TRIBUNAL BENCH 'B' PUNE ITA Nos.1648 & 1649/Pun/15 Assessment Years: 2005-06 & 2006-07 RAJKUMAR B AGARWAL Vs DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1(2), PUNE ITA Nos.1650 & 1651/Pun/15 Assessment Years: 2004-05 & 2006- 07 BHARAT R AGARWAL Vs DEPUTY COMMISSIONER OF INCOME TAX ITA No.1652/Pun/15 Assessment Year: 2006-07 AMEETA R AGARWAL Vs DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1(2), PUNE: In this case the Hon’ble ITAT held that on the basis of contract notes alone and without furnishing materials of paper-trail with respect to earning of STCG, it is not correct to delete the addition made for warrant of genuniness. 62. 2019-TIOL-1973-ITAT-MAD IN THE INCOME TAX APPELLATE TRIBUNAL BENCH 'B' CHENNAI ITA No. 746/CHNY/2019 Assessment Year: 2012-13 SHRI ASHOK BATUKLAL MAKWANA Vs INCOME TAX OFFICER ITA No. 747/CHNY/2019 Assessment Year: 2015-16 SHRI ASHOK BATUKLAL MAKWANA Vs INCOME TAX OFFICER: In this case the Hon’ble ITAT held that when assessee completely fails to prove the genuineness of the transactions entered into by them, which are alleged as sham transactions by the Revenue based on investigation wing report, the same is rightly treated as unexplained credit u/s 68 by the Revenue authorities. 63. IN THE INCOME TAX APPELLATE TRIBUNAL BENCH 'D' MUMBAI ITA No.6398/Mum/2012 Assessment Year: 2003-04 DISHA N LALWANI Vs INCOME TAX OFFICER: In this case the Hon’ble ITAT held that addition u/s 68 was justified when it being an admitted position that one person was engaged in providing bogus accommodation entries such as LTCG, wherein, the assessee was one of the beneficiaries. 51 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR 64. 2016-TIOL-1746-ITAT-MUM IN THE INCOME TAX APPELLATE TRIBUNAL BENCH 'D' MUMBAI ITA No.995/Mum/2012 Assessment Year: 2006-07 RATNAKAR M PUJARI Vs INCOME TAX OFFICER: In this case it is held that a transaction of 'off market purchase of share' for which payments were made in cash and the brokers had issued pre dated contract notes, is liable to be treated as bogus transaction, and hence such cash receipts are liable to be treated as 'unexplained cash receipts'. 65. [2021] 128 taxmann.com 224 (Madras) HIGH COURT OF MADRAS Commissioner of Income Tax, Chennai v. Mrs. Pinky Devi: In this case, assessee company claimed exemption under section 10(38) in respect of long-term capital gains arising out of sale of shares. Assessing Officer disallowed claim on ground that company in which assessee invested was a penny stock company. Tribunal remanded back matter to Assessing Officer for reconsideration. Since the Assessing Officer already having examined matter in great depth while framing assessment order, Tribunal, without finding an error in approach of Assessing Officer could not have remanded back matter to Assessing Officer for fresh consideration, the Hon’ble court held in favour of revenue. 66. [2023] 155 taxmann.com 630 (Kolkata - Trib.) IN THE ITAT KOLKATA BENCH 'B' Saroj Baid v. Income-tax Officer: In this case, Assessee, claimed exemption under section 10(38) for long-term capital gain from sale of equity shares of NCL Research and Financial Services Limited. Assessing Officer called for details of financial statements of said company. These financial statements indicated poor results that were not commensurate with steep increase in price of equity shares. Company's name also appeared in list of 84 penny stock companies listed with Bombay Stock Exchange, which were found to be managed by unscrupulous brokers, entry operators, and money launderers involved in providing bogus accommodation entries of long-term capital gain and short-term capital loss. Based on these findings, Assessing Officer treated claim of long-term capital gain as bogus and not eligible for exemption under section 10(38) and made addition under section 68. Since income under section 10(38) in respect of long-term capital gain arising from sale of equity shares from listed companies, were found to be penny stock companies and long-term capital gain so claimed found to be bogus in nature, lower authorities were justified in treating assessee's claim of long-term capital gain claim as bogus, and making additions, the Hon’ble court held in favour of revenue. 52 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR 67. [2013] 40 taxmann.com 525 (Delhi) HIGH COURT OF DELHI Commissioner of Income-tax v. N Tarika Properties Investment (P.) Ltd,: The Hon’ble Delhi High Court held that where there is incriminating evidence related to entry providers, mere filing of PAN number acknowledgement of IT Return, bank account statement are not sufficient to discharge the onus cast on the assessee. 68. [2018] 90 taxmann.com 386 (Gujarat) HIGH COURT OF GUJARAT Pavankumar M. Sanghvi v. Income-tax officer: It is held that where assessee had received loan from two companies, in view of fact that on date assessee was given loan were credit entries of almost similar amounts and balance after these transactions was a small amount and moreover assessee failed to produce these lenders for verification, impugned amount was rightly brought to tax under section 68. SLP filed against this decision by the assessee was dismissed by the Hon’ble Supreme court. 69. [2017] 85 taxmann.com 104 (Delhi) HIGH COURT OF DELHI Principal Commissioner of Income-tax-7 v. Bikram Singh: It is held that where AO made addition to assessee’s income under section 68 in respect of loan taken from various parties, sine assessee failed to prove that any of those creditors had financial strength to lend such huge sums of money to assessee, that too without any collateral security, without interest and without a loan agreement, impugned addition deserved to be confirmed. C. The case laws relied upon by the CIT (Appeals) in his order are as under: S.No. Case Laws Page No. 1 1402-1407/Mum./2023 Olive Overseas Pvt. Ltd. vs DDIT (Inv.) 28 2. ITA No. 7191/Mum./2018 and etc. in Praveen Kumar Jain Vs DCIT 31 3. ITA No. 5414/Del/2018 Surana Enterprises vs ITO 34 4. ITA No. 5415 & 5416/Del/2018 Surana Jewellers vs ITO 34 5. ITA No. 1049/Del/2018 SIL Gold, New Delhi vs ITO 53(4) New Delhi 37 6. [2024] 161 taxmann.com 668 (Calcutta) [23-04-2024] Principal Commissioner of Income-tax vs. BST Infratech Ltd. 37 7. [2021] 128 taxmann.com 295 (Kolkata – Trib.) Sweet Sales P. Ltd vs. Income Tax Officer, Ward 13(4), Kolkata 45 8. [2021] 130 taxmann.com 341 (Mumbai – Trib.) Deputy Commissioner of Income-tax vs. Leena Power Tech Engineers P. Ltd. 45 53 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR D. Distinguishing Note for Case Laws relied by the assessee: 1402-1407/Mum./2023 in Olive Overseas Pvt. Ltd. and Praveen Kumar Jain:- In the case of Olive Overseas Pvt. Ltd. and Praveen Kumar Jain, the Hon’ble ITAT Mumbai has adjudicated that Praveen Kumar Jain was an entry provider and he used a web of more than 50 fictitious concerns including Olive Overseas Pvt. Ltd. to provide accommodation entries of share capital premium, unsecured loans to various beneficiaries in lieu of commission. Further, Olive Overseas Pvt. Ltd. has been adjudicated as a fictitious concern managed by Praveen Kumar Jain for providing accommodation entries only. These case laws have direct bearing on the case of assessee as he has allegedly received share premiums and unsecured loans from Olive Overseas Pvt. Ltd. The case laws cited by the assessee are distinguishable as they do not take into account these two case laws - 1402-1407/Mum./2023 in Olive Overseas Pvt. Ltd. and Praveen Kumar Jain.’’ 3.6 We have heard both the parties and perused the materials available on record. In this case, it is noted that the AO while passing the assessment order made the following additions in the hands of the assessee. 1. On account of bogus share application money Rs.80,00,000/- 2. On account of bogus loan Rs.30,00,000/- 3. On account of commission paid to Shri Pravin Jain @ 0.5% of the amount Rs. 55,000/- Total Rs.1,10,55,000/- In first appeal, the ld. CIT(A) has passed ex-parte order by dismissing the appeal of the assessee and thus confirmed the action of the AO. It is noted from the records the assessee has not furnished any information / evidences to rebut the 54 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR findings of the AO before the ld. CIT(A) who had provided various opportunities to substantiate the issue in question. It is observed by the ld. CIT(A) that in the present case the assessee had merely produced the documents regarding the form of the transaction i.e. that the transaction was through banking channel and is recorded in the books of accounts of the loan given company and the books of the assessee company. The ld. CIT(A) noted that these are initial documents and do not prove the identity, genuineness and creditworthiness in terms of substance and reality. Even during the course of hearing, the ld. AR was asked to confirm whether any confirmation was filed for the transactions. He on that issue stated that assessee had not filed any confirmation to that effect. It is noted by the ld. CIT(A) that the assessee has not produced the directors and shareholders of the company before the AO for examination or cross examination by the AO from which the loans and share capital including huge share premium were received by the assessee company alongwith loan. However, the ld. AR of the assessee submitted that the assessee company has filed all the documents before the AO concerning the issue in question (supra) except confirmation and the assessee had received the money from M/s. Olive Overseas P Ltd. Its creditworthiness, identity of the creditor and genuineness of the transaction is proved and no material has been put 55 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR on record to show that it was the assessee’s unaccounted money that has been utilized to turn into accounted money. From the entire conspectus of the case, the Bench feels that since there was no proper opportunity to assessee before the ld. CIT(A), therefore in the interest of equity and justice the lis between the parties has to be decided on merits so that nobody’s rights could be scuttled down without providing opportunity of being heard to the assessee. Hence, the matter is restored to the file of the ld. CIT(A) to decide it afresh by providing one more opportunity of hearing. The assessee is directed to advance all the documents before the ld. CIT(A) to settle the dispute in question. However, the assessee will not seek any adjournment on frivolous ground and remain cooperative during the course of proceedings. Thus the appeal of the assessee is allowed for statistical purposes. 4.1 As regards the appeal of the assessee in ITA No.1335/JPR/2024 for the assessment year 2011-12, the Bench noted that the issues as raised by the assessee in ITA No.1334/JPR/20224 for the assessment year 2010-11 are similar and the ld. CIT(A) has passed ex-parte order in spite of providing various opportunities but the assessee failed to advance any submission to counter the assessment order. Hence, he dismissed the appeal of the assessee relating to assessment year 2011-12. 56 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR 4.2 During the course of hearing, the ld. AR of the assessee has filed following written submission to counter the order of the lower authorities. ‘’WRITTEN SUBMISSIONS This is an appeal against the order of the Ld. CIT(A), Jaipur-04 dated 11.09.2024 for A.Y. 2011- 12. A copy of the impugned order is enclosed as Annexure A. The brief facts of the case are that ITO, Ward 6(2) ,Jaipur received information that the assessee had obtained unsecured loans from the following concerns of the Praveen Kumar Jain group: 1.M/s Olive Overseas P. Ltd. Rs. 18,00,000.00 2.M/s Aashritha Trading Company P. Ltd. Rs. 11,50,000.00 3.M/s Triangular Infracom Ltd. Rs. 10,00,000.00 ________________ Total 39,50,000.00 According to the information received from the Investigation Wing of the Income-Tax Department at Mumbai, these concerns were part of the Praveen Jain Group, Mumbai, which indulged in providing accommodation entries in lieu of cash obtained from beneficiaries and not doing any genuine business activities as divulged during search and survey operations carried out on the premises of Shri Praveen Jain. On the basis of this information, the Assessing Officer issued a notice u/s 147/148 of the Income-Tax Act on 27.03.2018 after obtaining the approval of the PCIT-II, Jaipur. In response to the said notice, the assessee filed its return of income on 28.04.2018 returning an income Rs. 0. In response to the show-cause notice u/s 143(2) of the Act, the assessee made the following submissions on 30.11.2018: “With reference to above, I request you to please find enclosed acknowledgment of return filed u/s 148 for A.Y. 2011-12. It is requested you to please provide reasons recorded under section 148 of the Income-Tax Act. Further ,we are submitting following documents: 1. Complete address and mobile no.of M/s Safe Infracon P.Ltd. situated at 92, Everest Vihar, Kings Road, Ajmer Road, Jaipur PAN-AAMCS6346J Mobile No. 7726940398; 2. Copy of balance-sheet of:- a. Aasthrita Trading Co. P. Ltd. Along with confirmation. b. Olive Overseas P. Ltd. Along with confirmation. c. Triangular Infracom Ltd. Along confirmation. 57 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR The Assessing Officer did not believe the documents and supporting evidence placed on record by the assessee, and relied on the report of the Mumbai Investigation Wing of the Income-Tax Department, referring to the following: i)report of the Mumbai Investigation Wing which stated that one Shri Praveen Jain had floated a number of bogus companies whose only business was to provide accommodation entries to other companies. One such company was M/s Olive Overseas Pvt. Ltd. Which had invested in the equity of the assessee company, and had also given it loan; ii)statements of the following persons recorded as a result of the search and survey operations: a. Shri Manish Jain, Director, Atharva Business Pvt. Ltd.and M/s Ansh Mercantile Pvt. Ltd. Who stated in his statement dated 21.10.2013 that both these companies were controlled and managed by his cousin Shri Pravin Jain, he was a Director only in namesake. These companies are not involved in any genuine business activity. b. Shri Nilesh Parmar , Prop. Of M/s Mohit International .who stated that he managed the accounts of about 30 odd concerns of the Praveen Jain Group. He stated that Shri Praveen Jain was a Director in only 4-5 of these concerns , in other his employees and outsiders were Directors. He admitted that he was managing the accounts of M/s Olive Overseas Pvt. Ltd. c. Shri Uttam C. Hinger, brother-in-law of Shri Praveen Jain and a Director in some of the shell companies. He stated, inter alia, that only Shri Pravin Jain may explain the exact nature of the business activities of these concerns. Since he is only a director on paper and accountant to Shri Jain, he admitted that none of the concerns with which he was associated was genuine. d. Shri Chandra Sekhar Goyal , a broker, who admitted that Shri Pravin jain was providing accommodation entries e. for commission, bogus purchases, bogus expenditure, bogus unsecured loans etc. f) Shri Dinesh Chaudhary, a broker, also confirmed the facts as stated above. According to the report of the Mumbai Investigation Wing, the statement of Shri Pravin Jain was recorded on oath on 01.10.2023 and he admitted that he was providing accommodation entries and also explained the complete modus operandi of providing such entries. The Assessing Officer writes in the assessment order that: “it is clearly established that transaction made by the assessee with M/s Olive Overseas P. Ltd., M/s Aashritha Trading Co. Ltd. And M/s Triangular Infracom P. Ltd… are not genuine one and are only bogus accommodation entries which were obtained in lieu of cash. During the year under consideration, the assessee has shown unsecured loans of Rs. 39,50,000/- from the above concerns of Shri Praveen Kumar Jain and the same are added to the total income of the assessee as unexplained cash credits within the meaning of provisions of section 68 of the IT Act, 1961….. 58 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR F. Further, Sh. Praveen Kumar Jain admitted that he charged @0.50% for arranging of accommodation entries. Therefore, the assessee has paid Rs. 19.750/- (0.50% of Rs. 39,50,000/-) out of books which is unexplained expenses. Thus Rs. 19,750/- is added back to the total income of the assessee under section 69C…… Revised income of the assessee is computed as under: Total income declared by the assessee Rs. 0 Add: Addition u/s 68 as discussed above Rs. 39,50,000/- Add: Addition u/s 69C Rs. 19,750/- ______________ Total 39,69,75 A copy of the assessment order dated 15.12.2017 is enclosed herewith and marked as Annexure B. Aggrieved of the order of the Assessing Officer, the assessee preferred an appeal to the CIT(A)- 04, Jaipur. Order of CIT(A)-04, Jaipur: The CIT(A) -04 , in his order, upheld the order of the Assessing Officer, and confirmed the additions made by the Assessing Officer. He specifically relied on the following decisions of the Mumbai Tribunal: i)1402-1407/Mum/2023 ,Olive Overseas Pvt. Ltd. The operative part of the said decision is: “8. In the present appeals, it is undisputed that the substantive addition has been made in the hands of Mr. Praveen Kumar Jain and similar additions , on a protective basis, is made in the hands of the assessee. Since the substantive addition has already been upheld by the coordinate Bench in the case of Praveen Kumar Jain (supra) , therefore, similar addition made on protective basis in the hands of the assessee becomes unsustainable and, therefore, is directed to be deleted in all the assessment years under consideration before us. We further direct the Assessing Officer that in case the addition made in the hands of Mr. Praveen Kumar Jain is 59 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR deleted in further appellate proceedings, then the addition made in the hands of the assessee be revived. With the above limited directions, the impugned additions made in all the assessment years under consideration before us are directed to be deleted.” ii)ITA NO. 7191/Mum/2018 and Etc.-Praveen Kumar Jain V/s DCIT, A.Y. 2008-09 to 2014-15 ; Submissions : Ground No. 1 &2: Ground no. 1 is general. Ground no. 2 deals with the contention of the CIT(A) that the assessee did not respond to the notices of hearing and did not file any details/written submissions. This contention of the CIT(A) is erroneous since he himself says in para 4.1 of his order that the assessee has reiterated the submissions during the appellate proceedings. Then, from page 4 to page 15, para 4.1 of the Appellate Order, he reproduces the submissions of the assessee. Ground No. 3 Ground no. 3 states that reopening of the assessment under section 147/148 of the I.T. Act is bad since the information received was general and had no link with the assessee in question. Moreover, the AO did not conduct any enquiry at his end. Further, Shri Praveen Jain had owned up the entries and paid tax thereon. The first part of this Ground of Appeal is that reopening of the assessment under section 147/148 was bad in law since the Assessing Officer did not undertake any independent verification of the information received by him from the Mumbai Investigation Wing. From a perusal of the Assessment order it appears that the facts mentioned in the assessment order forming reasons for reopening of the assessment are all taken ad verbatim from the report received from Mumbai. The AO has not independently verified any of the statements of various persons recorded during search, nor has he verified the identity, creditworthiness or genuineness of the impugned transactions . In the absence of any independent verification , accepting the information received from the Investigating Wing is not enough to form a reason to believe that income chargeable to tax has escaped assessment. It is borrowed satisfaction. Secondly, there is nothing on record to directly link the assessee to Shri Praveen Kumar Jain . Shri Jain or others whose statements have been referred to, have not mentioned the name of the assessee or specifically said that the transactions carried out by the assessee are sham or bogus, especially in the light of the evidence placed on record by it. 60 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR Further, Shri Praveen Jain retracted his statement relied upon by the AO, which fact has been deliberately suppressed by him. The retraction is genuine, hence needs to be given full weightage.The AO has not brought on record any evidence to nullify the retraction. The second part of the Ground of Appeal is that neither a copy of the statement of Shri Praveen Kumar Jain was supplied nor was he produced for cross-examination by the assessee, despite specific request. Attention is drawn to para 17 of the Assessment Order wherein the assessee requested the following: “..it is requested you to give an opportunity to the assessee in the presence of the third party who is the author of the statements/document and also to cross-examine the author of such statements/document and elicit such necessary facts from him as to how these entries came to be made by him connecting the assessee in such statements/documents .” The Assessing Officer , however, did not pay any heed to this request of the assessee and he did not produce Shri Praveen Kumar Jain for cross-examination before the assessee. Hence, there is a clearcut violation of the principles of natural justice which renders the whole assessment proceedings, including the notice u/s 147/148 of the Act , unsustainable in law and liable to be quashed. In this regard, on all the issues raised above, reliance is placed on the following case laws: 1.Principal Commissioner of Income-Tax-5 v. Shodiman Investments (P.) Ltd. [2018] 93 taxmann.com 153 (Bombay): Where Assessing Officer had issued a reassessment notice on basis of intimation from DDIT(Inv.) about a particular entity entering into suspicious transactions, this was clearly in breach of settled proposition in law that re-opening notice has to be issued by Assessing Officer on his own satisfaction and not on borrowed satisfaction.” 2.CIT V. Orissa Corporation P. Ltd. [1986] 159 ITR 78 (SC): “Once the primary onus of establishing the genuineness of the transaction is done by the assessee by furnishing details like name, address, PAN confirmation, copy of tax return etc. it was the duty of the AO to verify the genuineness of these transactions by strictly enforcing the provisions of section 131 of the Act if at all the those creditors were required to be produced before him.” 3.Principal Commissioner of Income-Tax v. N.S Software (Firm) [2018] 403 ITR 259 (Delhi): 61 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR “the assessing officer had not explained the steps taken by him to determine that seized material belonged to the assessee…” 4.Principal Commissioner of income-Tax v. More Overseas [2018] 97 taxmann.com 657 (Calcutta): “Both the Commissioner and the Tribunal , however, found that no re-assessment proceedings could be initiated merely because of action taken by the Customs Department…..In our judgment, the reasoning of the Tribunal in the decision which we upheld is also almost identical to that in the present case, in relation to the order appealed against….. Under these circumstances, following our decision delivered in ITA No. 353 of 2016, we dismiss the appeal.” 5.Harikishan Sunderlal Virmani v. Dy. CIT [2017] 394 ITR 146 (Gujarat): “On the basis of information from another agency there cannot be any reassessment proceedings. However, after considering the information/material received from other source, the Assessing Officer is required to consider the material on record in case of the assessee and thereafter is required to form an independent opinion on the basis of material on record that the income has escaped assessment. Without forming such opinion , solely and mechanically relying upon information received from other source, there cannot be any reassessment for verification…. Held that from the reasons recorded, it appeared that the impugned reopening proceedings were on borrowed satisfaction, no independent opinion was formed……Under these circumstances, the assumption of jurisdiction to reopen assessment beyond the period of 4 years in exercise of powers under section 147 was bad in law.” 6.CIT V. Odeon Builders (P.) Ltd. [2019] 110 taxmann.com64 (SC) Wherein it was held that the information received from a third party was not subjected to any further scrutiny and that the assessee was not allowed opportunity to cross-examine the person whose statement was relied on. Thus the addition was rightly deleted by the lower Appellate Authorities, which order was confirmed by the High Court.” 7.Smt. Jyoti D. Shah, ITA No. 1843/M/2012 decided by Mumbai ITAT: “Shri Mukesh Choksi had issued a general statement, and, therefore, a general statement given by Shri Mukesh Choksi cannot be applied to each and every case. The additions made were 62 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR deleted as there was no direct evidence against the assessee. Neither the statement of Mukesh Choksi was provided to the assessee nor opportunity for cross-examination of Mukesh Choksi was provided. 20. It is further submitted that various Courts have held and reiterated the principles where an assessee is not granted an opportunity of cross-examination of the person whose statement has been relied upon during the course of assessment, which could have held the assessee to rebut the statements, the addition made basis the statement is not correct as there is violation of principles of natural justice. This principle has been settled time and again by the Higher Courts.” Now , we are placing on record two cases decided by the Income-Tax Appellate Tribunals which are specifically related to the case of Praveen Kumar Jain, as is the present case in appeal. 7.M/s Kamal Agrotech Pvt. Ltd. Vs. ITO Ward 2(1) , ITA No. 37/HD/2016: “ A plain reading of the assessment order demonstrates that the AO merely went by the Investigation done by the office of D.G. I(Investigation), Mumbai. No enquiries or investigation was carried out . No evidence to controvert the claim of the assessee was brought on record by the A.O. Even statement of Mr. Praveen Kumar was not supplied . …..The addition is made merely on surmises and conjectures.” In view of the above discussion, the Tribunal held that the addition made under section 68 of the Act is bad in law.” 8.M/s Choice Buildestate Pvt. Ltd. V. Income-Tax Officer, Ward 5(2), Jaipur. Page 18 of the said order passed by the jurisdictional co-ordinate bench of the ITAT states as under: “The order passed by the AO should be speaking one bringing on record all the facts, explanation furnished by the assessee in respect of nature and source of the credit in its books of account and reasons for not accepting the explanation of the assessee . In the instant case, we find that the AO has not taken any efforts to examine these documents so submitted by the assessee company during the course of assessment proceedings and has simply gone by his prima facie view formed at the time of assumption of jurisdiction u/s 147 and such a prima facie view without further examination/investigation cannot be a basis for forming a final view of making the addition in the hands of the assessee company. It is a case where the AO was in receipt of material information from the Investigation Wing, Mumbai that the assessee company has received accommodation entries in form of share application/investment from seven companies who are not doing genuine business activities as divulged during the course 63 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR of search and seizure operations in case of Praveen Jain group.In these situations, the Courts have held that the Assessing Officer cannot sit back with folded hands and then come forward to merely reject the explanation so made, without carrying out any verification or enquiry into the material placed before him by the assessee……… We, therefore, agree with the contentions of the ld A/R that in absence of any falsity which have been found in the documents so submitted by the assessee company to prove the identity, creditworthiness and genuineness of share transaction , those documents cannot be summarily rejected as has been done by the AO in the instant case……the fact remains that the assessee deserves an opportunity to cross-examine such persons as held by the Hon’ble Supreme Court in case of Andaman Timber Industries (supra)….In the light of above discussions, we don’t find any basis for making addition under section 68 of the Act.” In this case, reopening of assessment by issue of notice u/s 147/148 of the Act based on the statements and facts related to the Praveen Jain Group, has been quashed. It is settled law that one bench of the ITAT,Jaipur has to follow a decision of another bench of the ITAT, Jaipur as stated by the Hon’ble Supreme Court in the case of Shah Faisal v. UOI(AIR 2020 Supreme Court 3601). It is, therefore, requested that the Ld. ITAT may follow the decision of this very ITAT in the case of M/s Choice Buildestate Pvt. Ltd.v. ITO. On the issue of cross-examination, we rely on the decision of the following judicial pronouncements: 9.Aayubkhan Noorkhan Pathan v. State of Maharashtra & Ors., Civil Appeal No. 7728 of 2012, order dated 08.11.2012 “46.In view of the above discussion and considering the seriousness of the allegations, as the Scrutiny Committee has already conducted an inquiry in relation to this matter, and the only grievance of the appellant is that there has been non-compliance with the principles of natural justice…we direct that before the submission of any report by the Scrutiny Committee , his application for calling witnesses for corss-examination must be disposed off, and the appellant must be given a fair opportunity to cross-examine the witnesses…In case, the Scrutiny Committee has already taken a decision the same being violative of the principles of natural justice, would stand vitiated.” 10. New India Assurance Company Ltd. V. Nusli Neville Wadia & Anr., AIR 2008 SC 876: “If some facts are to be proved by the landlord, indisputably the occupant should get an opportunity to cross-examine. The witness who intends to prove the said fact has the right to cross-examine the witness . This may not be provided in the statute , but it being a part of the principle of natural justice, should be held to be indefeasible right. In view of the above, we are of the considered opinion that the right of cross-examination is an integral part of the principles of natural justice.” 64 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR 11.M/s Andaman Timber Industries v. Commissioner of Central Excise, Kolkata-II, Civil Appeal No. 4228 of 2005 “As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination……Therefore, it was not for the adjudicating authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above…. We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal.” In view of the facts as mentioned above, and the position of law as expounded in the various judicial pronouncements cited above, the order passed by the ld. CIT(A) -04, Jaipur needs to be set-aside and the order passed by the Assessing officer needs to be quashed . Ground No. 4&5: Ground no. 4 &5 deals with the addition of Rs. 1,10,00,000/- and of Rs. 55,000/- made by the Assessing Officer on account of the investment in equity shares and the commission paid thereon to M/s Olive Overseas Pvt. Ltd.. As already stated above, and in the written reply filed both before the CIT(A) and the Assessing Officer, the assessee had stated that the money received both on account of investment in equity shares (Rs. 80,00,000/-) and as loan (Rs. 30,00,000/-) was received through banking channels. In support of the genuineness of the transaction, the assessee had supplied, during the course of assessment proceedings, the following documents to support his claim: i)Copies of Application for share capital; ii)Registrar of Companies records; iii)Copy of account of assessee appearing in the books of the said parties; iv)Copy of bank statements of said parties; v)ITR copies and audited books of account for A.Y. 2010-11 of the said parties; vi) Master Data available on Registrar of Companies , related to the companies from whom loans have been taken during the year wherein the parties have affirmed the registered office address of the company, nature of business, registration number of the company with the Registrar of Companies, CIN and PAN. They also have affirmed about the filing of Return of Income and loans granted to the assessee. On a perusal of the bank statements of the parties, it is seen that both the companies have sufficient bank balance to advance the loans. With the above documents, the identity , 65 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR genuineness of transaction and creditworthiness of the parties has been proved beyond doubt by the assessee. We would like to add here that ,as far as the assessee is concerned, he has received money from M/s Olive Overseas P. Ltd., M/s Aashritha Trading Co. Ltd. And M/s Triangular Infracom P. Ltd. Their creditworthiness, identity and genuineness of transaction is proved by the assessee. No material has been put on record to show that it was the assessee’s unaccounted. The assesee cannot be held accountable for the source of the source. The department, if it feels that cash has been introduced at any level, then it has to be taxed at that level, in those hands. The assessee cannot be held liable for the alleged unaccounted cash of a third person. We also want to add that a perusal of the order of the AO and the CIT(A) shows that all the amount involved has already been taxed in the hands of Shri Praveen Kumar Jain on a substantive basis. Then, the same money cannot be taxed in another hand. For all these reasons, the additions made by the Assessing Officer and confirmed by the CIT(A) in the hands of the assessee are not justified, unsustainable in law and need to be deleted.’’ 4.3 On the other hand, the ld. DR supported the order of the lower authorities and submitted the written submission (supra). 4.4 We have heard both the parties and perused the materials available on record. It is pertinent to mention that the issue as raised by the assessee in ITA No. 1335/JPR/2024 for the assessment year 2011-12 are similar to appeal of the assessee in ITA No. 1134/JP/2024 for the assessment year 2010-11 wherein the appeal of the assessee has been restored to the file of the ld. CIT(A) for afresh adjudication. Hence, the decision so taken by the Bench in appeal No 1134/JPR/2024 shall apply mutatis mutandis in appeal No. 1135/JPR/2024. Thus the appeal of the assessee is allowed for statistical purposes. 66 ITA NO.1334 & 1335/JPR/ 2024 SAFE INFRACON PVT LTD VS ITO, WARD 6(2), JAIPUR 5.0 In the result, both the appeals of the assessee are allowed for statistical purposes. Order pronounced in the open court on 23/06/2025. Sd/- Sd/- ¼ jkBkSM+ deys'k t;UrHkkbZ ½ ¼MkWa-,l-lhrky{eh½ (RATHOD KAMLESH JAYANTBHAI) (Dr. S. Seethalakshmi) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 23 /06/2025 *Mishra vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1vihykFkhZ@The Appellant- Safe Infracon Pvt Ltd, Jaipur 2izR;FkhZ@ The Respondent- ITO, Ward-6(2), Jaipur. 3vk;dj vk;qDr@ CIT 4. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur. 5. xkMZ QkbZy@ Guard File { ITA No. 1334 & 1335/JPR/2024} vkns'kkuqlkj@ By order lgk;d iathdkj@Asst. Registrar "
Other Referred Cases
Olive Overseas Pvt. Ltd. vs DDIT (Inv.), Praveen Kumar Jain Vs DCIT, Surana Enterprises vs ITO, Smt. Jyoti D. Shah vs ITO, Andaman Timber Industries vs Commissioner of Central Excise, Kolkata-II
Laws Referred To
Income Tax Act, 1961
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