Sahakar Global Ltd. Vs DCIT (ITAT Mumbai)
Issue- Addition of Rs. 3,50,00,000/- as unexplained cash credit u/s. 68 in respect of amount received during the year as share capital and premium from M/s. Vanguard Jewels Ltd, Ansh Merchandise Pvt Ltd., Alka Diamond Industries Ltd & Talent Infoway Pvt Ltd.
Held: Additions have primarily been made on the basis of statement of Shri Pravin Kumar Jain and in view of the allegations that there was buy back of shares in subsequent years. However, we have deleted the additions by observing that the opportunity to cross-examine Shri Pravin Kumar Jain was never provided to the assessee. Nor the copies of statements were furnished / confronted to the assessee. Resultantly, the additions would be unsustainable in the eyes of law as per settled legal position. Further, all the stated entities have duly furnished replies along with sufficient documentary evidences. They have confirmed that there is no buy back of shares. These entities are not listed as entities to whom the cash is stated to have been paid by the assessee in exchange of accommodation entries. Therefore, the allegations of lower authorities would have no legs to stand. Similar ratio is applicable to this category of investors, facts being pari-materia the same. Therefore, the addition as sustained by Ld. CIT(A) stand deleted.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1.1 The assessee is in appeal for Assessment Years (AY) 2009-10 to 2012-13 whereas the revenue is in appeal for AYs 2010-11 to 2012-13. However the facts as well as issues in all the years are more or less similar and it is admitted position that adjudication in any one year shall substantially apply to other years also. Therefore, the appeals were heard together and are now being disposed-off by way of this common order for the sake of convenience & brevity. Taking facts from AY 2011-12 as the lead year, we proceed to adjudicate the same in the succeeding paragraphs. The order under challenge has been passed by learned Commissioner of Income Tax (Appeals)-52, Mumbai [CIT(A)] on 05/06/2017.
1.2 The ground raised by the assessee read as under: –
1. On the facts and in the circumstances of the case, the Ld Commissioner of Income Tax (Appeals) – 52, Mumbai (“herein after referred to as the CIT (A)) has erred in confirming the addition of Rs. 3,50,00,000/- as unexplained cash credit u/s. 68 in respect of amount received during the year as share capital and premium from M/s. Vanguard Jewels Ltd, Ansh Merchandise Pvt Ltd., Alka Diamond Industries Ltd & Talent Infoway Pvt Ltd.
2. The appellant company being aggrieved, prays that the addition of Rs.3,50,00,000/- on account of unexplained cash credit u/s. 68 being unwarranted, illegal, bad in law be deleted.
3. On the facts and in the circumstances of the case, the Learned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs.3,50,000/- out of Rs.3,50,00,000/- as unexplained cash credit u/s. 68 on mere estimation basis that some commission must have been paid for securing accommodation entry.
4. The appellant company being aggrieved, prays that the addition of Rs.3,50,000/- on account of unexplained cash credit u/s. 68 being unwarranted, illegal, bad in law be deleted.
1.3 The ground raised by the revenue read as under: –
i. On the facts and in the circumstances of the case and in law, the CIT(A), while upholding the addition of Rs.3.5 Crore on account of share capital and share premium, has erred in deleting the remaining addition on account of share capital and premium of Rs.13,00,00,000/- received during the year and added as unexplained credit u/s 68 of the l.T.Act, 1961.
ii. On the facts and in the circumstances of the case and in law, the CIT(A) has erred in deleting the addition of share capital premium of Rs.3,46,50,000/- (out of total addition of Rs.3,50,00,000/-) by confirming only 1% of the above amount despite the fact that cash of Rs.3.5 Cr. generated by the assessee was not taken on the receipt side while preparing the P&L A/c.
As evident, the sole subject-matter of cross-appeal is certain addition made u/s 68 since partial relief has been granted by Ld. CIT(A) to the assessee in the impugned order.
2. We have carefully heard the rival submissions as urged before us. We have also gone through material on record including documents placed in the paper-book and written submissions filed during the course of hearing. The judicial precedents as cited during hearing have duly been deliberated upon. The assessee being resident corporate assessee is stated to be engaged in the business of toll collection under government contracts. The key person of the assessee group is stated to be its Chairman & Managing Director (CMD) Shri Kishore P. Agrawal. Our adjudication to the subject matter of appeal would be in subsequent paragraphs.
3. Assessment Proceedings and findings of Ld. AO
3.1 An assessment has been framed against the assessee for the year under consideration u/s 143(3) r.w.s. 153A on 28/03/2016 in view of the fact that the assessee group was subjected to search action u/s 132 on 27/02/2014. The search action stem from pre-search enquiries conducted by the department wherein it was alleged that the assessee
group obtained share capital and share premium from shell companies who had certain common features viz. common directors / common addresses, low turnover, meager income, low opening and closing bank balances, no genuine business etc.
3.2 During search action on one of such group being controlled by Shri Praveen Kumar Jain on 01/10/2013, an admission was made therein that the group was providing accommodation entries against commission in various forms to other companies. In assessee‟s case, it was alleged that the assessee also introduced share capital and share premium in its books of accounts in various years through accommodation entries as provided by Shri Praveen Kumar Jain and his associated group companies.
3.3 Similar search was carried out in the case of another entry provider namely Shri Mukesh Chokshi on 27/02/2014 wherein similar admission of indulgence in accommodation entries against commission were made.
3.4 It was alleged by Ld.AO that during the year under consideration, the assessee introduced share capital and share premium of Rs.20 Crores in its books of accounts through accommodation entries from the tainted group‟s 21 entities as detailed below: –
