SILICON JEWEL INDUSTRIES PVT. LTD.,AHMEDABAD V. THE ITO, WARD-4(1)(1), AHMEDABAD

ITA 422/AHD/2019

AI Insights

The case involves Silicon Jewel Industries Pvt. Ltd., which appealed against the orders of the Commissioner of Income Tax (Appeals)-8, Ahmedabad, concerning the assessment years 2009-10 and 2010-11. The appeals were related to the additions made under Section 68 of the Income Tax Act, which were confirmed by the CIT(A). The additions pertained to share capital and premium received, which were treated as unexplained cash credits. The Tribunal noted that the Assessing Officer had reopened the assessments based on information that the company had received accommodation entries in the form of share capital against cash receipts. The Tribunal decided to restore the matter to the Assessing Officer for a fresh assessment, allowing the assessee to present additional evidence.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 396277 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Other Referred Cases: Palco Recycle Exchange Ltd. vs. ITO
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TRUPTI PATEL
• Assessee Lawyers: TUSHAR HEMANI; .; PARIMALSINH B. PARMAR; ARS; RS.; US.C R.W.S; RS.; US.C R.W.S; A SUM OF RS.; RS.
• Keywords: Set aside; Additional evidence; Unexplained cash credit; Principle of natural justice; Accommodation entries; Bogus Share capital; Bogus loan; Bogus
• Section: 147; 271(1)(c); 68; 131

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER & SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER I.T.A. Nos.421 & 422 /Ahd/2019 (Assessment Years: 2009-10 & 2010-11) Silicon Jewel Industries Pvt. Ltd., C/o. Shree Laxmi Saw Mill Compound, Nr. Mangalam Cinema, Odhav, Ahmedabad-382415 Vs. Income Tax Officer, Ward-4(1)(1), Ahmedabad [PAN No.AALCS9603H] (Appellant) .. (Respondent) I.T.A. Nos.586 & 617/Ahd/2019 (Assessment Years: 2009-10 & 2010-11) Silicon Jewel Industries Pvt. Ltd., C/o. Shree Laxmi Saw Mill Compound, Nr. Mangalam Cinema, Odhav, Ahmedabad-382415 Vs. Income Tax Officer, Ward-4(1)(1), Ahmedabad Commissioner of Income Tax (Appeals)-8, Ahmedabad [PAN No.AALCS9603H] (Appellant) .. (Respondent) Appellant by : Shri Tushar Hemani, Sr. Adv. & Shri Parimalsinh B. Parmar, ARs. Respondent by: Smt. Trupti Patel, Sr. DR Date of Hearing 08.05.2025 Date of Pronouncement 26.05.2025 O R D E R PER SIDDHARTHA NAUTIYAL, JM: These appeals have been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)-8, (in short “Ld. CIT(A)”), Ahmedabad vide orders dated 21.01.2019 & 19.02.2019 for A.Ys. 2009-10 and 2010-11. ITA No. 421 & 422/Ahd/ 2019 are related to additions confirmed by Ld. CIT(A), with respect to quantum additions whereas ITA Nos. 586 & 617/Ahd/2019 relate to appeals against the levy of penalty confirmed by Ld. CIT(A) with respect to the additions ITA Nos. 421&422/Ahd/2019 & 586&617/Ahd/2019 Silicon Jewel Industries Pvt. Ltd. vs. ITO Asst.Years –2009-10 & 2010-11 - 2– made in quantum proceedings. Since the facts and issues for consideration are common to both the assessment years under consideration before us, all the appeals are being taken up together. 2. The Assessee has taken the following grounds of appeal:- ITA No. 421/Ahd/2019 “1. The learned CIT(A) has erred both in law and on the facts of the case in confirming the action of AO of reopening the assessment u/s 147 of the Act. On the facts and circumstances of the case, learned CIT(A) ought to have held that the action of reopening is without jurisdiction and not permissible either in law or on facts. 2. The learned CIT(A) has erred in law and on facts in confirming the action of AO of making an addition of share capital and premium of Rs.1,89,00,000/- u/s.68 of the Act. 3. The learned CIT(A) has erred both in law and on the facts of the case in confirming the addition despite the fact that the AO did not give the appellant an opportunity to cross-examine the person whose statements were used against it which is a violation of the principles of natural justice. 4. The learned CIT(A) has erred both in law and on the facts of the case in not appreciating that once identity is proved, addition of share capital and premium as unexplained u/s.68 of the Act is not sustainable. 5. The learned CIT(A) has erred both in law and on the facts of the case in not appreciating that proviso to s.68 of the Act was inserted w.e.f. 01.04.2013 and hence, for AY 2009-10, assessee is not required to prove source of source of share capital. 6. The learned CIT(A) has erred both in law and on the facts of the case in enhancing the assessed income of the appellant by Rs.2,83,500/-u/s.69C r.w.s. 115BBEof the Act on the basis of investor's statement that appellant had paid commission of 1.5% for alleged accommodation entries. 7. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 8. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld. AO in levying interest u/s.234A/B/C of the Act. ITA Nos. 421&422/Ahd/2019 & 586&617/Ahd/2019 Silicon Jewel Industries Pvt. Ltd. vs. ITO Asst.Years –2009-10 & 2010-11 - 3– 9. The learned CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in initiating penalty u/s.271(1)(c) of the Act. 10. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.” ITA No. 422/Ahd/2019 “1. The learned CIT(A) has erred both in law and on the facts of the case in confirming the action of AO of reopening the assessment u/s 147 of the Act. On the facts and circumstances of the case, learned CIT(A) ought to have held that the action of reopening is without jurisdiction and not permissible either in law or on facts. 2. The learned CIT(A) has erred in law and on facts in confirming the action of AO of making an addition of share capital and premium of Rs.57,00,0007-u/s.68 of the Act. 3. The learned CIT(A) has erred both in law and on the facts of the case in confirming the addition despite the fact that the AO did not give the appellant an opportunity to cross-examine the person whose statements were used against it which is a violation of the principles of natural justice. 4. The learned CIT(A) has erred both in law and on the facts of the case in not appreciating that once identity is proved, addition of share capital and premium as unexplained u/s.68 of the Act is not sustainable. 5. The learned CIT(A) has erred both in law and on the facts of the case in not appreciating that proviso to s.68 of the Act was inserted w.e.f. 01.04.2013 and hence, for AY 2010-11, assessee is not required to prove source of source of share capital. 6. The learned CIT(A) has erred both in law and on the facts of the case in enhancing the assessed income of the appellant by Rs.85,5007-u/s.69Cr.w.s. 115BBEof the Act on the basis of investor's statement that appellant had paid commission of 1.5% for alleged accommodation entries. 7. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 8. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld. AO in levying interest u/s.234A/B/C of the Act. 9. The learned CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in initiating penalty u/s.271(1)(c) of the Act. ITA Nos. 421&422/Ahd/2019 & 586&617/Ahd/2019 Silicon Jewel Industries Pvt. Ltd. vs. ITO Asst.Years –2009-10 & 2010-11 - 4– 10. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.” ITA No. 586/Ahd/2019 “1. The learned CIT(A) has erred in law and on facts in initiating and levying penalty under section 271(1)(c) of the Act without recording mandatory satisfaction as contemplated under the Act at the time of passing the quantum order. 2. The learned CIT(A) has erred both in law and on the facts of the case in levying the penalty of Rs.96,362/- levied u/s 271(1)(c) of the Act. 3. In any case, the impugned penalty order is barred by limitation and thus without jurisdiction and illegal. 4. In any case, quantification of the penalty is erroneous and excessive 5. The learned CIT(A) has passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 6. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.” ITA No. 617/Ahd/2019 “1. The learned CIT(A) has erred in law and on facts in initiating and levying penalty under section 271(1)(c) of the Act without recording mandatory satisfaction as contemplated under the Act at the time of passing the quantum order. 2. The learned CIT(A) has erred both in law and on the facts of the case in levying the penalty of Rs.29,061/- levied u/s 271(1)(c) of the Act. 3. In any case, the impugned penalty order is barred by limitation and thus without jurisdiction and illegal. 4. In any case, quantification of the penalty is erroneous and excessive. 5. The learned CIT(A) has passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. ITA Nos. 421&422/Ahd/2019 & 586&617/Ahd/2019 Silicon Jewel Industries Pvt. Ltd. vs. ITO Asst.Years –2009-10 & 2010-11 - 5– 6. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.” 3. We shall first deal with the common order passed by Ld. CIT(A) with respect to quantum additions for A.Y. 2009-10 and 2010-11. 4. The brief facts of the case are that the assessee had issued shares at a face value of Rs. 10 with premium of Rs. 90 to one M/s. Bhoomidev Credit Corporation Ltd. (BCCL) and for the same the assessee received a sum of Rs. 1,89,00,000/- and a sum of Rs. 57,00,000/- for A.Ys. 2009-10 and 2010-11 as share capital money. Subsequently, in the inquiries made by the Directorate of Income Tax (Investigation Wing), Ahmedabad, it was observed that Shri Prakash Baghrecha, Director of BCCL, in his statement recorded under Section 131 of the Act stated that BCCL and Group Companies have given accommodation entries in the form of loan / share capital against cash receipts. On receipt of such information, the Assessing Officer reopened the assessment of both the years by invoking the provisions of Section 147 of the Act and treated the sum of Rs. 1,89,00,000/- and Rs. 57,00,000/- as unexplained cash credit under Section 68 of the Act, for A.Ys. 2009-10 and 2010-11 respectively. 5. The assessee filed appeal before Ld. CIT(A), who observed that Shri Prakash Baghrecha, Director of BCCL in his statement under Section 131 of the Act, while explaining the entries in the bank accounts has categorically stated that BCCL and Group Companies have been providing accommodation entries in lieu of cash, in the garb of share / share premium through various concerns. Ld. CIT(A) observed that the statement of Shri Baghrecha has not been challenged by the assessee and nor the assessee has asked for any cross-examination, either before the Assessing Officer or in the appellate proceedings before Ld. CIT(A). Ld. ITA Nos. 421&422/Ahd/2019 & 586&617/Ahd/2019 Silicon Jewel Industries Pvt. Ltd. vs. ITO Asst.Years –2009-10 & 2010-11 - 6– CIT(A) observed that the statement given by the creditor itself has explained the entire modus operandi and the same is a direct evidence on this issue. During the course of appellate proceedings before Ld. CIT(A), the assessee contended that they have filed evidences in the form of Affidavit, copies of accounts, copy of returns of income and also copy of return filed before ROC etc. to establish the genuineness of transaction, however, the same have not been appreciated by the Assessing Officer. However, Ld. CIT(A) was of the view that looking into the facts of the instant case, furnishing of PAN, ITR, bank statement and confirmations may not be sufficient to prove the genuineness of the transaction and creditworthiness of the subscribers to shares issued. The money may have been received by the assessee through banking channel, but still the transaction may not be genuine. The genuineness of the transaction and creditworthiness would depend on the facts of each case. CIT(A) noted that in the instant case, the Director of the company subscribing to the share capital of the assessee has himself admitted that BCCL and Group Concerns were engaged in the business of giving accommodation entries in lieu of cash. Accordingly, Ld. CIT(A) was of the considered view that cash credits in the form of subscription to the share capital including share premium amounting to Rs. 1,89,00,000/- and Rs. 57,00,000/- in A.Ys. 2009-10 and 2010-11 respectively was correctly held by the Assessing Officer to be accommodation entries. Further, Ld. CIT(A) also enhanced the income of the assessee by a sum of Rs. 2,83,500/- and Rs. 85,500/- for A.Ys. 2009-10 and 2010-11 respectively, being 1.5% of undisclosed commission paid for obtaining the bogus accommodation entries of Rs. 1.89 crores and Rs. 57,00,000/- by the assessee. Further, the levy of penalty under Section 271(1)(c) of the Act was also confirmed by Ld. CIT(A) for both the years under consideration. ITA Nos. 421&422/Ahd/2019 & 586&617/Ahd/2019 Silicon Jewel Industries Pvt. Ltd. vs. ITO Asst.Years –2009-10 & 2010-11 - 7– 6. Before us, at the outset the Counsel for the assessee submitted that he shall not pressing for grounds relating to challenge to the Assessing Officer’s jurisdiction in initiating re-assessment proceedings under Section 147 of the Act. Accordingly, in light of the Counsel’s submission before us that the assessee shall not be pressing for grounds relating to challenge to issuance / initiation of proceedings under Section 147 of the Act, all grounds relating to challenge to re-assessment proceedings under Section 147 of the Act, are hereby dismissed as “not pressed”. 7. With respect to quantum proceedings, the Counsel for the assesee submitted that the assessee had submitted substantial information before the Revenue Authorities, which had not been appreciated by the Tax Authorities. The assessee had submitted PAN card, Acknowledgement of ITR and STI, Audited Financial Statements, Certificate of Incorporation, Certificate of Commencement, Memorandum of Association, Articles of Association, Bank Statement, Affidavit of Prakash Bagrecha dated 27.12.2016 and also copy of confirmation, which are adequate to shift the onus of proof, however, the Assessing Officer has not appreciated the evidence furnished before him. Further, the Counsel for the assessee submitted that Shri Prakash Bagrecha in his statement had stated that he had provided accommodation of Rs. 75,00,000/- to a third party namely M/s. Kutch Ginning and Spinning Pvt. Ltd. and received cash in lieu thereof from such entity. However, the Counsel for the assessee submitted that in the case of Kutch Ginning & Spinning Pvt. Ltd., Ld. CIT(A) vide order dated 20.05.2016 had deleted the additions on account of bogus share capital, by appreciating the evidences placed on record by that assessee. Further, the Counsel for the assessee also drew our attention to order passed by ITAT Ahmedabad in the case of Palco Recycle Exchange Ltd. vs. ITO in ITA No. 481/Ahd/2019 for A.Y. 2010-11 vide order ITA Nos. 421&422/Ahd/2019 & 586&617/Ahd/2019 Silicon Jewel Industries Pvt. Ltd. vs. ITO Asst.Years –2009-10 & 2010-11 - 8– dated 04.03.2022, wherein on identical set of facts (where share capital was received from M/s. BCCL by this entity), the matter was restored to the file of Assessing Officer for de-novo consideration. Accordingly, the Counsel for the assessee submitted that in light of the above judicial precedents, and in view of the fact that the Tax Authorities had not appreciated the evidences from a correct perspective, the matter may be restored to the file of Assessing Officer, with liberty to assessee to place on record any documentary evidences in support of genuineness of the transaction. 8. In response, Ld. D.R., in the interest of justice, did not object to the matter being restored to the file of the Assessing Officer, for de-novo consideration. 9. We would like to reproduce the relevant extract of the decision of Palco Recycle Exchange Ltd. vs. ITO (supra), wherein on similar set of facts, the matter was restored to the file of Assessing Officer for de-novo consideration, for ready reference: “3. Brief facts of the case is that assessee-company is engaged in trading of ferrous and non-ferrous metal scrap. For the assessment year 2009-10, assessee filed its return of income on 27.8.2010 declaring total income of Rs.35,41,830/- and the same was processed under section 143(1) on 16.8.2011. Thereafter, the case of the assessee was reopened under section 147 of the Income Tax Act, 1961 (\"the Act\" for short) on the basis of information received from ADIT (Inv.,) Rajkot that company named “M/s.Bhoomidev Credit Corporation Ltd., Ahmedabad (“BCCL”) has indulged in providing accommodation entries of various kinds such as bogus loans & advances, bogus share capital etc. Copy of statement of Shri Prakash Bagrecha, (“Shri Prakash” for short) Director of BCCL recorded on 13.12.2011 wherein he has admitted having engaged in providing accommodation entries by providing cheque in lieu of cash and vice versa. Shri Prakash has also admitted of receiving commission at 1.5% of the transaction for providing such entries. Cash receipt from one client was set off with cheque of another client so that nowhere in the book of accounts of BCCL cash component was reflected. It is also found that BCCL has providing accommodation entry of Rs.45.00 lakhs as investment in the assessee- company. In response to the notice under section148, the assessee filed its return of income and replied to further notices that the assessee subscribed for 4,50,000 equity shares of Rs.10/- each towards the share capital of the company on 5.10.2009. Copy of such allotment was given to the AO. BCCL continued to hold shares in its name, and ITA Nos. 421&422/Ahd/2019 & 586&617/Ahd/2019 Silicon Jewel Industries Pvt. Ltd. vs. ITO Asst.Years –2009-10 & 2010-11 - 9– copy of a list of shareholders of the company as on 31.3.2007 filed with the annual return with ROC was also furnished to the AO, and that, the investment has been duly reflected in the balance sheet of the BCCL. Further, the assessee pointed out that on going through the statement of Shri Prakash, he has confirmed that BCCL company was involved in the business of investment and finance and nowhere he has stated all the transactions in the companies were allegedly business entries. It was further clarified that assessee came to know that Shri Prakash in his statement dated 9.12.2016 has very specifically stated that his previous statement dated 13.12.2011 was given without verification of its books of accounts. He further produced his bank statements and accounts to establish that the remaining transactions were genuine transactions of finance and investment business. Similar disallowance made in the case of Kutch Ginning & Spinning P.Ltd. which was also figured out in the statement dated 13.12.2011 has been deleted by the ld.CIT(A)-2, Rajkot for want of evidence on the ground that the sole basis of addition by the AO was the statement which was without any corroborating evidence. Thus, the assessee sought for an opportunity to cross- examine the above named Shri Prakash whose new statement was being relied upon by the department in making such disallowance. However, the AO held that the assessee is coming up with a new statement of Shri Prakash after a long period cannot be entertained. Therefore, the AO made addition to the total income of the assessee and determined tax accordingly. 9. We have given our thoughtful consideration and perused the material available on record and additional evidences filed for the first time before the Tribunal. As can be seen from the assessment order, the assessee pleaded before the AO during the re- assessment proceedings vide its reply dated 25.11.2017 about the statement of Shri Prakash and the appellate orders passed by the ld.CIT(A) in the cases of Kutch Ginning & Spinning Pvt.Ltd. However, the same were not given due weightage by the AO. The ld.CIT(A) in his conclusion has also held that statement of Shri Prakash could not be taken on record, as he was not a Director of the company thereafter. As far as CIT(A)’s orders in other cases are concerned, the same cannot be taken on record, as they are not binding on him, more so when, assessee was unable to produce copies of such orders before him during the appellate stage. 10. As per Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 the Tribunal can entertain additional evidence in the event of the income tax authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them or not specified by them, the Tribunal for reasons to be record may allow such document to be produced or evidence to be adduced. Further, as per Rule 30, such evidence may be produced either before the Tribunal or before such income tax authority, the Tribunal may direct the income-tax authorities to go through and pass a speaking order after giving reasonable opportunity to the assessee. As it can be seen from the assessment order and CIT(A)’s order, proper opportunity was not given to the assessee to adduce these statements or evidence, which are no doubt belongs to third parties which could not be produced by the assessee during the proceedings before the lower authorities. Therefore, we are of the considered opinion that additional evidences filed by the assessee under Rule 29 are to be accepted, and on that basis a de novo assessment order is to be framed by the AO after providing reasonable opportunity to the assessee. Accordingly, we set aside the matter back to the file of the AO with a direction to pass a fresh assessment order after examining additional evidences referred to by the assessee in the application, and after giving reasonable opportunity of the hearing to the assessee in accordance with law. Assessee is also given liberty to file any other documents to support its case during the set aside proceedings. Needless to say, the assessee shall ITA Nos. 421&422/Ahd/2019 & 586&617/Ahd/2019 Silicon Jewel Industries Pvt. Ltd. vs. ITO Asst.Years –2009-10 & 2010-11 - 10– cooperate with the AO in the de novo assessment proceedings. With this observation, we dispose of the appeal, and treat the same as allowed for statistical purpose.” 10. Looking into the submissions made by the Counsel for the assessee, and in the light of the decision of Hon’ble ITAT Ahmedabad the case of Palco Recycle Exchange Ltd. (supra), wherein on similar set of facts the matter was restored to the file of Assessing Officer for de-novo consideration, we hereby restore the matter for A.Ys. 2009-10 and 2010- 11 to the file of Assessing Officer for de-novo consideration, in the interest of justice. Further, since quantum proceedings have been restored to the file of Assessing Officer, both the appeals of the assessee relating to levy of penalty are also restored to the file of Assessing Officer. 11. In the result, all appeals filed by the assessee are allowed for statistical purposes. This Order pronounced in Open Court on 26/05/2025 Sd/- Sd/- (MAKARAND V. MAHADEOKAR) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 26/05/2025 TANMAY, Sr. PS TRUE COPY आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / Concerned CIT 4. आयकर आयुƅ(अपील) / The CIT(A)- 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 23.05.2025 2. Date on which the typed draft is placed before the Dictating Member 23.05.2025 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S 26.05.2025 5. Date on which the fair order is placed before the Dictating Member for pronouncement .05.2025 6. Date on which the fair order comes back to the Sr.P.S./P.S 26.05.2025 7. Date on which the file goes to the Bench Clerk 26.05.2025 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Dispatch of the Order…………………………………… "