SUBURBAN BUILDERS PRIVATE LIMITED,MUMBAI V. ITO-8(2)(4), MUMBAI

ITA 1135/MUM/2024

AI Insights

The appeal by Suburban Builders Pvt. Ltd. challenges the reopening of its assessment for A.Y. 2007-08 and the subsequent addition of Rs. 50,00,000 as unexplained cash credit under section 68 of the Income Tax Act, 1961. The reopening was based on information from the DGIT (Inv.), Mumbai, regarding alleged bogus share application money received from companies linked to Shri Pravin Kumar Jain, known for providing accommodation entries. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) upheld the reopening and the addition, citing the Assessee's failure to substantiate the genuineness of the transactions and the creditworthiness of the investors. The Tribunal, after hearing the parties and reviewing the material, decided to remand the case for a fresh decision, emphasizing the need for a thorough examination of the documents and proper adjudication of the issues involved.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 33692 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Other Referred Cases: Sumati Dayal vs. CIT, CIT vs. Durga Prasad More, NDR Promoters (P) Ltd vs. Pr. Commissioner of Income Tax, PCIT (Central-1) Vs NRA Iron and Steel (P) Ltd., JJ developments (P) Ltd vs Commissioner of Income Tax, Kolkata
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONIKA H. PANDE; LD.
• Assessee Lawyers: SANJAY KAPADIA; LD
• Keywords: Unexplained cash credit; Search and seizure; Accommodation entries; Bogus Share capital; Bogus
• Section: 148; 143(3); 250; 271(1)(c); 68

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “B”, MUMBAI BEFORE SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER AND MS. RENU JAUHRI, ACCOUNTANT MEMBER ITA No.1135/M/2024 Assessment Year: 2007-08 Suburban builders Pvt. Ltd. Flat No.101, Sealine CHS Ltd. 16, Union Park, Pali Hill Road No.4 Khar (West) Maharastra 400052 PAN: AAACS7578N Vs. ITO 8(2)(4) Aayakar Bhavan, Maharishi Karve Road, Mumbai Maharashtra - 400020 (Appellant) (Respondent) Present for: Assessee by : Shri Sanjay Kapadia, Ld. A.R. Revenue by : Ms. Monika H. Pande, Ld. Sr. DR Date of Hearing : 19.12.2024 Date of Pronouncement : 22.01.2025 O R D E R Per : Narender Kumar Choudhry, Judicial Member: This appeal has been preferred by the Assessee against the order dated 08.02.2024, impugned herein, passed by the National Faceless Appeal Center (NFAC)/ Ld. Commissioner of Income Tax (Appeals) (in short ‘Ld. Commissioner’) under section 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2007-08. ITA No.1135/M/2024 Suburban Builders Pvt. Ltd. 2 2. In the instant case, the Assessee had declared its total income at loss of Rs.3,10,723/- by filling return of income on 28.10.2007, which resulted into passing the assessment order dated 11.12.2009 u/s 143(3) of the Act, whereby the total income of the assessee was assessed at Rs.1,51,200/-. 2.1 Subsequently the information was received from the DGIT (Inv.) Mumbai, which read as under: \" That a search seizure action was carried in the case of Shri Pravin Kumar Jain Group on 01.10.2013 which is engaged in the business of providing accommodation entries. One of the beneficiaries of such accommodation entry by way of bogus investments / share application is the assessee company M/s.Suburban Builders Pvt. Ltd. M/s.Superbond Panels India Pvt. Ltd. has taken accommodation entries of Rs.50,00,000/- in the nature of bogus investment / share application money from the entities namely M/s. Yash-V jewels Ltd, M/s.Banguard Jewels Pvt. Ltd., M/s.Kush Hindustan Entertainment Ltd, M/s. Duke Business Pvt. Ltd. M/s.Ansh Mercantile Pvt. Ltd and M/s.Nakshratra Business Pvt. Ltd during the A.Y.2007-08. Further, Mr. Pravin Kumar Jain admitted to being involved in providing bogus accommodation entries in form of loan / share application / share premium/investments through the web of concerns managed/owned/controlled by him directly or indirectly. In view of the above facts, it is clear that the accommodation entry amounting to Rs.50,00,000/- introduced during the current financial year 2006-07 in the books of accounts of the assessee. 2.2 On the basis of above information, assessment proceedings for A.Y.2007-08 were reopened in assessee's case by recording the reasons for reopening and issuing notice dated 24-03-2014 u/s 148 of the Act. The assessee in response to notice u/s 148 of the Act, vide letter dated 16.07.2014 filed its objections against the reopening proceedings, which were disposed of vide order dated 09.09.2014 passed by the AO. The AO thereafter on perusing information received from the department DGIT (Inv.) observed that the assessee has taken accommodation entries of Rs.50,00,000/- from Shri Pravin Kumar Jain, who is operating bogus investment companies namely M/s. Yash-V Jewels Ltd., M/s Banguard Jewels Pvt. Ltd., M/s Kush Hindustan Entertainment Ltd., M/s Duke ITA No.1135/M/2024 Suburban Builders Pvt. Ltd. 3 Business Pvt. Ltd., M/s Ansh Mercantile Pvt. Ltd. and M/s. Nakshratra Business Pvt. Ltd. and said amount has been treated as unexplained money by the Investigation Department. Therefore, in order to verify the genuineness of transactions, the AO asked the Assessee to explain “as to why the impugned transactions should not be treated as non-genuine and added to the total income of the assessee as unexplained cash credit”. The assessee was also asked to furnish the details of share allotments to these parties. 2.3 The Assessee before the AO, in response to the show cause has submitted that the share capital is genuine and had been received through banking channels and the shares were allotted to the concerned parties and those parties reflected in the list of share holders etc. 2.4 Though, the AO considered the said reply/claim of the assessee however, observed that the Assessee had failed to substantiate its share application money with the supporting documentary evidences, such as whether shares were allotted, creditworthiness of the applicants, details and basis for share premium, etc. to substantiate the share capital. The AO further observed that mere stating that the payments were received through banking channels, does not itself evident that the share capitals are genuine, unless those are really genuine and are supported with documentary evidences. The AO also relied on various judgment including in the cases of Sumati Dayal vs. CIT (1995) 214 ITR 801 & CIT vs. Durga Prasad More 82 ITR 540 (SC) and held that it is settled proposition that the onus is upon the assessee to prove the genuineness of the share capital, when the transaction is claimed as genuine by the assessee. However, in this case this onus has not been discharged by the assessee. The assessee company has failed to establish identity, creditworthiness of the parties and genuineness of the transaction i.e. accommodation entry of Rs.50,00,000/- received from various companies, as discussed above. The AO ultimately treated the amount of Rs.50,00,000/- as bogus share capital shown from the above said alleged bogus companies and added ITA No.1135/M/2024 Suburban Builders Pvt. Ltd. 4 the same to the total income of the assessee company as unexplained cash credit, as per the provisions of section 68 of the Act, by observing as holding as under: “5.10 If the propositions as held in the above decisions are applied, it can be concluded that the assessee had not established its case. The evidences which have not been produced are weighing heavily as against the evidences furnished by the assessee which are also not free from doubts for genuineness. In view of the above, the alleged accommodation entries shown from hawala parties have to be treated as unexplained in nature. 5.11 Further, vide letter dated 13.03.2015 Assessee has contended that Shri Pravin Jain is only director in Hema Trading Pvt. Ltd and not in rest of the companies from whom bogus share capital was received. The contention of the assessee is not acceptable. Assessee has not furnished any documentary evidence in this regard by way of letter from Shri Pravin Jain or the companies from whom bogus share capital was received denying the charge of giving accommodation entry to the assessee company. The burden is on the assessee to prove its contention. Assessee further contended that Shri Pravin Jain retracted from his statement given regarding bogus share capital. However, no material was made available by the assessee in this regard. The assessee should have produced Shri Pravin Jain in person for cross verification of the facts or filed an affidavit stating that he has retracted from earlier statements given by him specifically with respect to the assessee company, that the money advanced is not an accommodation entry. Assessee has failed to do so. The act of the assessee that merely arguing the facts without documentary evidences is not tenable. It is nothing but an afterthought by the assessee with an intention to avoid tax on the taxable income. Therefore, the objections/contentions raised by the assessee is not acceptable. In this connection, it is pertinent to mention the provisions of section 68 of the Act and various judicial pronouncements which establishes that it is a well settled law that the onus of proving source of a sum of money found to have been received by an assessee is on him. Reliance is placed on the decisions of Hon'ble Apex Court delivered in the cases of: (i) Roshan Di Hatti vs CIT [1977] 107 ITR 938 (SC) and (ii) Kale Khan Mohd. Hanif vs. CIT (1963) 50 ITR 1 (SC) Thus, it is held that Assessee company has failed to discharge the onus of proving the identity, genuineness and credit worthiness of the creditor, with respect to the credit of Rs.50,00,000/- received from M/s.Yash-V Jewels Ltd. M/s.Banguard Jewels Pvt. Ltd., M/s.Kush Hindustan Entertainment Ltd, M/s. Duke Business Pvt. Ltd, M/s.Ansh ITA No.1135/M/2024 Suburban Builders Pvt. Ltd. 5 Mercantile Pvt. Ltd and M/s. Nakshratra Business Pvt. Ltd etc., as per the provisions of section 68 of the 1.T.Act. 5.12 From the discussion above, it is clear that the transaction between the assessee company and the above-mentioned parties is a sham transaction and these transactions are not genuine. Hence, it is held that the assessee company has failed to establish creditworthiness, identity and genuineness of the transaction i.e. accommodation entry of Rs.50,00,000/- received from various companies, as discussed above. In light of the discussions in the above paras, the amount of Rs.50,00,000/- i.e. bogus share capital shown from the above said bogus companies is added, to the total income of the assessee company as unexplained cash credit, as per the provisions of section 68 of the Act. Penalty proceedings u/s 271(1)(c) of the Act are initiated for concealing the particulars of income by furnishing inaccurate particulars of income.” 3. The assessee being aggrieved challenged the reopening of the case u/s 147 of the Act and the addition on merit as well, by filling first appeal before the Ld. Commissioner, who not only affirmed the reopening the case u/s 147 of the Act but also the said addition of Rs.50,00,000/- on merit, by observing and holding as under: “The assessment order and the submissions have been carefully considered. It must be mentioned here that it is a fact there was a search and seizure operation conducted by the Investigation Wing of Mumbai Unit on 01/10/2013 relating to Shri. Pravin Kumar Jain and its group of concerns wherein, it was revealed that the searched party had been giving accommodation entries by way of bogus investments/share applications/share capital. It was found that the appellant assessee is one of the beneficiaries of such accommodation entries to the tune of Rs.50,00,000/- introduced in its books of accounts during the F.Y.2006- 07. After recording satisfaction and obtaining the approval as required the Assessing officer has reopened the assessment by issue of notice u/s 148. It may not be out of place to mention here that the objections filed by the appellant had been rebutted and approval copies were also made available. Coming to the issue of the share application money, the AO has given reasonable opportunities and has examined the receipt of accommodation entries in its books of accounts. Taking into consideration the details furnished by the appellant and non- submissions and substantiations of transaction of accommodation with supporting documentary evidences, the AO has rightly came to the conclusion that the creditworthiness of the applicants have not been proved beyond doubt of the satisfaction of the Assessing Officer. The ITA No.1135/M/2024 Suburban Builders Pvt. Ltd. 6 case laws relied upon the Assessing Officer is directly on the issue and very much applicable in the instant case. It is necessary to mention here the decision given by the Hon'ble Supreme Court in the case of NDR Promoters (P) Ltd vs. Pr. Commissioner of Income Tax reported in 266 Taxmann 93 wherein the Hon'ble Court has held that the AO has made the additions to assessee's income u/s 68 in respect of amount received as Share Capital from several companies who were engaged in providing accommodation entries through paper companies were justified. The Hon'ble Supreme Court in the case of PCIT (Central-1) Vs NRA Iron and Steel (P) Ltd. reported in 412 ITR 161 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 company stood discharged. Therefore, the AO was justified in passing assessment order making addition u/s 68 for the share premium /share capital received by the assessee company. It is also necessary to mention here the decision given by the Hon’ble Supreme Court in the case of JJ developments (P) Ltd vs Commissioner of Income Tax, Kolkata reported in 259 Taxmann 414 wherein the Hon'ble Court has held that the addition u/s 68 in respect of Share Capital introduced on the ground that the documents pertaining to share application produced by the assessee did not demonstrate the such alleges applicants had invested in assessee's share capital. Hence the addition made by the AO was confirmed. In the light of the above discussion and relying on the case laws, in the given factual matrix, I am of the considered opinion that the AO was justified in bringing to tax, the unproved bogus share capital to the tune of Rs.50,00,000/-. Therefore, the ground Nos.4, 5 and 6 raised are dismissed. Ground No. 7: The Ld. A.O. ought to have appreciated that appellant company disclosed all the details and materials truly and no income is concealed and the Assessment order U/s. 143(3) was passed. The Ld. A.O. did not find any lacuna in the Assessment order U/s. 143(3). This ground raised is carefully examined and found that consequent to the search conducted in Shri. Pravin Kumar Jain group of concerns on 01/10/2013 wherein the appellant was one of the beneficiaries of accommodation entries, the assessment was reopened. On the other hand, the assessment u/s 143(3) was concluded on 11/12/2009, when there was no such material available at that point of time. ITA No.1135/M/2024 Suburban Builders Pvt. Ltd. 7 Therefore, based on the fresh material made available to the AO, the assessment was reopened. Under the circumstances, there is no merit in the ground raised. Hence, the ground raised is dismissed. Ground No. 8: The Ld. A.O. failed to appreciate that the appellant company substantiated the details with the documentary evidences as extracted from the website of Ministry of corporate affairs, Government of India. In this assessment order, the Ld. A.O. could not rebut any of the facts and documentary evidences submitted by the appellant company. The ground raised is carefully examined and the detailed reasons and findings given by the AO at Para-5.2 of Page-2 and Para-5.3 of Page-3, I am of the considered opinion that the appellant did not prove the creditworthiness of the applicants in whose names the accommodation entries by way of bogus investments/share capital/share application money was alleged to have been received. The appellant assessee failed to substantiate with supporting documentary evidence to the satisfaction of the AO. In view of these facts, I am of the considered opinion that the AO was right in bringing to tax the bogus accommodation entries to the tune of Rs.50 Lakhs in the re-assessment proceedings concluded on 30/03/2015. Accordingly, the ground raised is dismissed.” 4. The Assessee being aggrieved is in appeal before this Court and has submitted that it has placed all the relevant substantive documents before both the authorities below, which is clear from the certificate filed along with paper book filed on 17th September 2024 before the tribunal, while serving advance copy of the Ld. DR. However, both the authorities below have not considered such documents while deciding the issues involved. The Ld. AR further submitted that even otherwise the Tribunal in various cases including in Bestline Properties Pvt. Ltd. Vs. ITO (ITANo.350/Mum/2023) and DCIT Vs M/s. D.N.H. Spinners Pvt. Ltd. in ITANo.6315 & 6316/Mum/2017) has also considered the same parties as involved in this case and the share application money except variation in amount and have not doubted the transactions carried out by other Assessees with the aforesaid companies. In the instant case, the authorities below have relied on the involvement of Shri Pravin Kumar Jain, whereas it is a fact that assessment year involved in this case pertains to A.Y.2007-08 when the share application money was accounted for and Mr. Pravin Kumar Jain has taken over the ITA No.1135/M/2024 Suburban Builders Pvt. Ltd. 8 charge of the said companies only in 2010 and therefore on the aforesaid aspects, the addition is un-sustainable. 5. On the contrary, the Ld. DR has specifically argued that from the orders passed by the authorities below, it is nowhere appears that the Assessee has filed such documents as claimed to have been filed before the Authorities below and therefore, both authorities below have correctly passed the respective orders and thus no interference is warranted specifically in the impugned order, which is under challenge before the tribunal. 6. We have heard the parties and perused the material available on record. Admittedly, the case of the Assessee was reopened on the basis of the investigation carried out by DGIT(Inv.) Mumbai, wherein allegations have been leveled against the Assessee qua alleged bogus share application money of Rs.50,00,000/- having been received from the companies, which were/are operated/ruled by Mr. Pravin Kumar Jain. We have perused the orders passed by the authorities below, more or less one fact again and again appearing, as both authorities below have categorically mentioned in the respective orders that the Assessee has failed to file substantive documents to discharge its onus cast u/s 68 of the Act qua identity, creditworthiness of the parties who invested share application money and genuineness of the transactions. Though, from the orders of authorities below it appears that the transactions qua share application money have been carried out through banking channels and shares were also allotted. However, as observed by the AO specifically that no substantive documents have been filed by the Assessee and therefore in order to verify the claim of the Assessee qua filling of the relevant documents before the authorities below, we on the day of hearing on 07-11-2024 directed the AO specifically to verify “whether the Assessee has filed such documents as filed before us in paper book along with certificate” and on verifying to submit the report on or before 19th ITA No.1135/M/2024 Suburban Builders Pvt. Ltd. 9 December 2024 i.e. , however, no such report was filed and the Ld. DR had sought for further time, however we had shown our inclination not to prolong the case further and therefore heard the case finally. 6.1 Considering the aforesaid peculiar facts and circumstances of the case in totality, as the issues admittedly remained to be examined viz-a- viz the relevant documents, which are essential for proper and just decision of the issues involved and therefore, for the just and proper decision of the case and in the interest of substantial justice, we are inclined to remand the instant case to the file of the Ld. Commissioner for decision afresh, suffice to say by affording reasonable opportunity of being heard to the assessee. We clarify that the Ld. Commissioner would be at liberty to verify as to whether the Assessee has filed the relevant documents before the AO and before erstwhile commissioner or not and on finding answer “no”, the Ld. Commissioner before deciding the appeal, will afford an opportunity to the Assessee to substantiate the claim for filling of such documents and on non-substantiating such claim by the Assessee, the Ld. Commissioner would be at liberty to take appropriate action in accordance with law. 6.2 The Ld. Commissioner shall also make endeavor to decide the case within six months from the date of receipt of this order. 6.3 The Assessee would be at liberty to raise all contentions and issues whether legal or on merit, as raised before us. The Assessee is also directed to co-operate with appellate proceedings and will not make any attempt to delay the appellate proceedings and to file again the relevant documents before the Ld. Commissioner, as filed before us and any other documents, if any would be required for proper adjudication of the issues involved. 7. Thus, the case is accordingly remanded to the file of Ld. Commissioner, in the aforesaid terms. ITA No.1135/M/2024 Suburban Builders Pvt. Ltd. 10 8. In the result, the appeal filed by the Assessee stands allowed for statistical purposes. Order pronounced in the open court on 22.01.2025. Sd/- Sd/- (RENU JAUHRI) (NARENDER KUMAR CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER * Patel, Sr. P.S. Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The DR Concerned Bench //True Copy// By Order Dy/Asstt. Registrar, ITAT, Mumbai. "