Vijayshree Food Products P. Ltd. Vs ACIT (ITAT Delhi)
The reopening has been challenged by the assessee stating that initiation of proceedings u/s 147 of the income tax act is solely on the basis of the unverified, on rectified, unsubstantiated and unconfirmed statement of Mr Malu. It is further the claim of the assessee that the learned assessing officer has violated the principles of natural justice by not providing the opportunity for cross-examination of the persons whose statements have been relied upon by him in spite of specific request made by the appellant in the assessment proceedings as well as before the learned CIT – A. Admittedly in this case notice u/s 148 of the income tax act was issued on 31/3/2017. The reasons recorded in the first paragraph clearly refer to the search and seizure operation carried out on the coupe group of cases on 9/10/2014. During post search investigation summons were issued u/s 131 of the income tax act to comic sales private limited, which has provided the share capital to the assessee company. The summons returned unserved. Further enquiries were made issuing commission u/s 131 (1A) of the act and information was gathered from investigation wing that the share deposit company is not physically existing at the given address 125/1, cotton Street, Kolkata – 700007 whereas the correct address of this company was 16 A, Shakespeare Sarani, New B K Market, 5th Floor, Kolkatta 71. Thus, the learned assessing officer made the inquiries at the incorrect address. Furthermore, the learned assessing officer has heavily relied upon the statement of Mr. Vikas Agarwal residing at BC – 75, Akanskha apartment, 4th floor Calcutta 101 that was recorded on 9/1/2014. He is an alleged entry operator. He admitted this in answer to question number 6 of his statement. He named in answer to question number 7 – 12 companies, however, the name of the company who deposited share capital with the assessee was not appearing in the statement. Further, in none of the other statements recorded by the investigation wing Kolkata, the name of the company who deposited money with the assessee was appearing. During the course of appellate proceedings before the learned CIT – A, assessee submitted a remand report dated 25/10/2018, which is at page number 22 of 38 of the appellate order. In para number 5 the learned AO stated that the assessment order are based on the statement of Shri Moolchand Malu, post search investigation and investigation during assessment proceedings. The assessee specifically asked the AO to provide cross-examination or the information to show that the amount of share capital taken by the assessee from the above stated company is an accommodation entry. None of the statements of the investigation wing, though referred to many of the companies, however the name of this company from whom the assessee has taken share capital is appearing. In para number 8 of the remand report, the learned assessing officer has categorically stated that during the assessment proceedings commission u/s 131 (1) (D) of the income tax act, 1961 was issued to the Calcutta investigation wing. A list of 27 companies was sent for necessary enquiry. As per report of Calcutta wing, 9 companies are such companies, which are used for routing, and providing accommodation entry to the beneficiaries as per the statement of the directors/to persons of respective companies admitted during both during the previous enquiry survey/searches. For balance 18 companies, as per inspector report, no such companies existed at the addresses mentioned. The name of the company who deposited money with the assessee appears in the list of 18 companies where the inspector has gone to the incorrect address as held above. Further, at para number 10 of the remand report, request of the assessee for cross-examination is dealt with. The learned assessing officer and stated that in the commission report received from Calcutta office, statement of Mr VIkas Kumar AGarwal, Devesh Upadhyay, and Praveen Kumar was mentioned. However, in none of these entry operators’ statement the name of the company, which deposited money with the assessee, is mentioned. Further assessee asked the cross-examination of these persons who have mentioned the name of the above-deposited company. Statement recorded of all these persons are prior to date of search on Kuber Group. Thus, statements are recorded by the investigation wing prior to search, naturally before the reasons were recorded. Before the learned CIT – A, on the specific request of the assessee that AO has not granted an opportunity of the cross-examination of those persons, even the learned CIT – A directed the AO to grant cross- examination of those person however AO expressed his inability to do so. With respect to the identity, creditworthiness and genuineness of the transactions the assessee submitted return of income of the share applicant, it is audited balance sheet, confirmation of the transactions and bank statement of the share applicants. Therefore, the claim of assessee is that it has discharged initial onus cast upon it under section 68 of the income tax act. The learned AO merely on the basis of the statement of the entry operators, who did not name the share deposit as 1 of the companies operated by them, the inspector report saying that share deposit and did not exist by inquiring at the incorrect address and failure to give cross- examination of those entry operators, which are the only statement against the assessee, the addition made by the learned assessing officer cannot be sustained. Honourable Supreme Court in CIVIL APPEAL NO. 4228 OF 2006 M/S ANDAMAN TIMBER INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE,KOLKATA-II has held that when except the statement of the 3rd party is the only evidence available with the revenue authorities, addition cannot be made on that solitary evidence without granting the cross-examination of such 3rd party to the assessee when asked for. In the present case the assessee asked for cross-examination before the assessing officer and as well as before the learned CIT – A, the assessee did not give the cross-examination of those accommodation entry providers. Further, the copies of the statement given by the assessing officer during the course of remand proceedings, none of the statement of the entry provider implicated the company, which deposited the share capital with the assessee. In view of the above facts, the addition made by the learned assessing officer and sustained by the learned CIT – A cannot be upheld.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal filed by the assessee is directed against the order dated 28th December, 2018 of the CIT(A)-30, New Delhi, relating to Assessment Year 2014-15.
2. Facts of the case, in brief, are that the assessee is a company engaged in the business of manufacturing and export of tobacco products. It filed its return of income on 30th September, 2014 declaring the loss of Rs.18,78,467/-. The return was processed u/s 143(1) of the Act on 26th November, 2014 at the returned income. Subsequently, the AO reopened the assessment as per the provisions of section 147 of the Act by recording the following reasons:-
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3. In response to the notice u/s 148 of the Act, the assessee filed its return of income on 18th April, 2017 declaring the loss of Rs.18,78,467/-. During the course of assessment proceedings, the AO noted that the assessee company during the year under consideration has received share application money from the following companies:-
