Ashtech Industries Pvt. Ltd. Vs DCIT (ITAT Delhi)
Conclusion: Addition under section 68 on mere reason of non-production of directors in the person of shareholder companies was not justified and AO had not brought any cogent material on records in assessment order to demolish the copious evidences furnished by assessee.
Held: In the instant case, AO made addition under section 68 on account of accommodation entries. It was found that assessee had filed all evidences like share application form, board resolution confirming investment made, confirmation of share capital raised, share certificate, income tax particulars of share holders, bank statement of share holders and form 2 for allotment of shares along with their audited final a/c in support of share capital recd.. Further, no where any shareholder company was found to be fictitious or non existing rather all share holder companies were duly found to be existing as summons had been served on them. No cogent material was brought on records in assessment order to demolish the copious evidences furnished by assessee. AO nowhere made any independent enquiry from concerned and competent AO of share holder companies etc. AO only on basis of investigation wing report (unconfronted to assessee) acting purely on borrowed satisfaction without any independent application of mind. Addition made u/s 68 for mere reason of non production of directors in person of share holder companies could not be a justified ground to draw adverse inference u/s 68.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal is filed by assessee against the Order dated 08.3.2018 passed by the Ld. CIT(A), New Delhi relating to Assessment Year 2009-10 on the following grounds:-
1. The initiation of proceedings u/s 148 is without jurisdiction.
2. The initiation of action u/s 148 is bad in law, being based on bald allegations equating the same with tangible material.
3. The initiation of action u/s 147 on the basis of search material found during search of third party i.e. Jain brothers, is contrary to law in view of non-obstante clause in S. 153A/153C, specifically prohibiting action u/s. 147, inter alia.
4. Even otherwise, the initiation of proceedings u/s 148 and the consequent assessment u/s 147 is contrary to law in the absence of any incriminating material to form reason to believe, as per the report of Investigation Wing & AO relied on, which only directs the AO to examine the details and after this examination only to determine whether there could be any justification for initiation of action u/s 147. Thus, the issue of notice u/s. 148 and the consequent assessment u/s 147 is without the authority of law and do not provide jurisdiction to the AO to make re- ssessment u/s 147.
5. That the assessment u/s 147 is unlawful, arbitrary and without jurisdiction on account of lack of application of mind and lack of approval u/s.151 from competent authority.
6. That the assessment u/s 147 is contrary to law laid down by the Hon’ble Supreme Court in GKN Driveshaft case, without following the procedure laid down by the Hon’ble Supreme Court.
7. That the assessment is bad in law being made without following the principles of equity and justice and denying the assessee of proper opportunity to defend, without supplying the copies of material relied on and cross examination of the witnesses whose statements have been relied upon to initiate action and complete assessment.
8. That the Id. AO has erred on facts and in law in making the addition of Rs. 1,85,00,000/- on account of alleged accommodation entry, merely following the investigation report, ignoring the voluminous evidence to the contrary brought on record by the assessee. The addition is made on the basis of conjectures and surmises.
9. That the Id. CIT(A) has erred in law and on facts in confirming the order of Id. AO both on legal grounds and on merits.
10. That the Id. CIT(A) has erred in law in treating the vague and general information of investigation wing and of the AO of the searched party M/s Jain Brothers as sacrosanct without examination with reference to the seized material and the facts of the assessee’s case.
11. That the Id CIT(A) has erred in importing approval of the higher authorities u/s 151 on assumptions without existence of the actual correspondence regarding approval and without confronting the assessee with the same..
12. The appellant craves leave and sanction of the Hon’ble ITAT to file additional evidence, if so required for proper prosecution of the case, based on facts and circumstances, which has not been or could not be adduced or filed before lower authorities either because proper and sufficient opportunity was not provided or because it was not solicited or its need was not appreciated.
13. The appellant craves leave to and permission of the Hon’ble ITAT to add to or alter any of the grounds of appeal at any time up to the final decision of the appeal.
14. The assessment may please be set aside as null and void and addition of Rs. 1,85,00,000/- be deleted or such other relief as your Honors may deem fit under the circumstances of the case, be allowed.
2. The assessee has also filed the following additional ground under Rule 11 of the ITAT Rules.
“That impugned assessment order passed by the AO u/s. 147/143(3) of the Act is invalid and void abnitio for want of valid notice u/s. 143(2) as per law as evident from fact that when return in response to notice u/s. 148 was admittedly filed on 27.4.2016 notice u/s. 143(2) is issued on very same day that is 27.4.2016 which shows non application of mind in issuing notice u/s. 143(2) and thereafter in framing the assessment and accordingly all proceedings are nullity.”
3. The brief facts of the case are that assessee filed its return of income on 29.9.2009 declaring an income of Rs. 3,39,85,750/-. The assessment u/s. 143(3)/147 of the Income Tax Act, 1961 (in short “Act) was made on 24.11.2016 at a total income of Rs. 5,24,85,750/-. In the assessment order, AO added Rs. 1,85,00,000/- on account of accommodation entries u/s. 68 of the I.T. Act. Aggrieved with the addition, the assessee appealed before the Ld. CIT(A), who vide its impugned order dated 8.3.2016 dismissed the appeal of the assessee. Now against the impugned order, assessee is in appeal before us.
4. Ld. Counsel for the assessee has submitted that the additional ground in identical facts has been accepted and assessment u/s. 143(3) of the Act was passed without proper issue and service of notice u/s. 143(2) of the Act, which was later quashed by the ITAT and the Hon’ble High Court in the following cases:-
i) Hon’ble Delhi ITAT in case of Micron Enterprises Pvt. Ltd. Vs. ITO in I.T.A .No. 901/DEL/2016 (A.Y .2006-07) order dated 14/05/2018
ii) Hon’ble Delhi ITAT in Harsh Bhatia case ITA Nos. 1262/& 1263/DEL/2017 [A.Ys. 2008-09 & 2009-10] order dated 17.10.2017.
iii) Hon’ble Delhi High Court in the case of Director of Income Tax Vs. Society for Worldwide Inter Bank Financial, Telecommunications in ITA No. 441/2010, reported at 323 ITR 249
iv) Delhi High Court decision in the case of Silver Line reported at 383 ITR 455.
5. On the merits of the case, Ld. Counsel for the assessee stated that the addition made u/s 68 of the Act is for mere reason of non production of directors in person of share holder companies same cannot be a justified ground to draw adverse inference u/s 68 of the Act where those share holders are found to be existing and identified in detail as summons have been duly served on them. Mere non production of share holder companies director is argued to be no valid reason for making addition u/s 68 of the Act dehors voluminous evidences filed which has not been objectively and lawfully controverted in manner known to law, in view of following coordinate benches decisions, where similar argument in identical circumstances of additions based on S.K.Jain group search has been deleted u/s 68 of the Act.
