Flagship Housing Development Pvt. Ltd. Vs ACIT (ITAT Mumbai)
ITAT Mumbai held that non-response to notice u/s. 133(6) of the Income Tax Act by some parties that does not prove that the entire transactions are bogus especially when all other documents to prove the identity and creditworthiness of the parties have been submitted
Facts- During the year under consideration, assessee had issued 8,90,000 optionally convertible non-cumulative preference shares at Rs.10/- at a premium of Rs.90/- to 15 parties which included 14 companies. Matter was reopened mainly that, out of 15 parties, 8 of the companies to whom shares were issued were controlled / managed by Shri Praveen Kumar Jain, who was engaged in providing accommodation entries. Thus, the reason to belief was entertained that amount of Rs.2 Crores from such parties were subscribed optionally convertible non-cumulative preference shares had escaped assessment.
AO in order to verify the genuineness of these parties had issued notice u/s. 133(6), however, notices from seven parties returned back and out of which three parties related to Shri Praveenn Kumar Jain. Thereafter, AO based on the information and that the parties have not responded to the notice u/s. 133(6) had added the sum of Rs.2 Crores from the preference shares allotted to companies belonging to Shri Praveen Kumar Jain u/s. 68. Apart from that he has also added further sum of Rs. 2,25,00,000/- received from other companies. Thus, total addition made u/s.68 was Rs.4,75,00,000/-.
CIT(A) held that in so far as share premium is concerned, same is not taxable in view of the judgment of the Hon’ble High Court in the case of Vodafone India Services Pvt. Ltd reported in [2014] 368 ITR 1 (Bombay) and held that the premium received is a capital receipt which is not taxable as income.
Conclusion- Even though some of the parties may not have responded to notice u/s. 133(6) that does not prove that the entire transactions are bogus especially when all other documents to prove the identity and creditworthiness of the parties have been submitted and same has not been examined or enquired by the AO.
Held that the identity and creditworthiness has been established and genuineness of the transaction cannot be doubted, simply based on information from Praveen Jain Group unless something specific material has been found.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The aforesaid appeal has been filed by the Revenue against order dated 17/03/2017 passed by CIT (A)-10, Mumbai for the quantum of assessment passed u/s.143(3) r.w.s. 147 for the A.Y.2007-08.
2. In the grounds of appeal, the Revenue has raised following grounds:-
1. “On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in deleting the addition of Rs.475 lacs u/s.68 of the Income Tax Act on a / c of unexplained cash credit in the form of share capital with premium.”
2. “On the facts and circumstances of the case and in law, the Ld. CIT (A) failed to appreciate the fact that the assessee failed to produce any subscriber for examination by the AO.
3. “On the facts and circumstances of the case and in law, the Ld. CIT (A) failed to appreciate the fact that Shri Pravin Kumar Jain was indulged in issuing bogus accommodation entries in different forms including share capital.”
4. “On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in deleting the addition u / s . 68 on account of non-genuine share capital and premium received through the entities engaged in providing accommodation entries on commission basis on the basis of documentary evidence such as PAN, IT return, confirmation, Bank Statement etc without considering the facts that subscriber was a paper company and not a genuine investor.”
5. “On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in deleting the addition u/s 68 on account of non-genuine share capital with premium received through the entities engaged in providing accommodation entries on the basis of documentary evidence such as PAN, IT return, confirmation, Bank Statement etc without considering the ratio of the decision of Supreme Court in the case of Sumati Dayal and Modowell relied upon by the AO in the assessment order.
6. “On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in accounting the plea of the assessee that repayment to subscribers of preferential shares justify the genuineness of credit entries from these entities when the main person of these entities namely Shri Pravin Jain had categorically admitted that these entities were involved in providing accommodation entries..”
For these and other grounds that may be urged at the time of hearing, the decision of the CIT(A) may be set aside and that of the AO be restored.”
3. The brief facts of the case are that Assessee Company is engaged in the business of trading and it had filed its return of income on 31/03/2009 declaring total income at Rs. Nil. During the year under consideration assessee had issued 8,90,000 optionally convertible non-cumulative preference shares at Rs.10/- at a premium of Rs.90/- to 15 parties which included 14 companies. These shares were subsequently redeemed by all the parties in A.Y.2009-10, i.e., after two years after the issue. The said return was duly processed and was accepted u/s. 143(1).
4. Later on assessee’s case was reopened u/s.147 and notice u/s.148 was issued on 28/03/2014 on the basis of following reasons recorded as incorporated in the assessment order:-
“2. Information available on record shown that during the course of search and seizure proceedings in the case of Shri Praveen Kumar Jain group, evidences collected and statements recorded of various persons including that of Shri Praveen Kumar Jain have lead to detection of accommodation entries of approximately 8897 crore.
A list of beneficiaries has been complied who have taken accommodation entries in the nature companies have been given the accommodation entries of bogus share capital from various entry providers including the concerns managed and controlled by Shri Praveen Kumar Jain. In the case of the assessee company, it has been reported that it has taken accommodation entries in the form of Investment/share application money from various parties. A list of such parties has been furnished vide above referred letter. The relevant details are reproduced hereunder:
