IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES `CAMP AT MEERUT'
BEFORE SHRI N. S. SAINI, ACCOUNTANT MEMBER AND
SHRI KULDIP SINGH, JUDICIAL MEMBER
ITA No.4819/DEL/2018
Assessment Year 2010-11
DCIT, Circle-2, Vs Reeta Singhal,
Meerut. A-312, Prahlad Vatika,
Khair Nagar, Meerut.
PAN : ABTPS 0061P
(Appellant) (Respondent)
Appellant by : Shri Yogesh Sharma, Sr.D.R.
Respondent by : S/Shri Raj Kumar & Shri
Sumit Goyal, CA
/ Date of Hearing : 09/01/2019
/Date of Pronouncement: 17/01/2019
ORDER
PER N.S. SAINI, A. M.
This is an appeal filed by the Revenue against the order
of learned CIT(A), Meerut dated 06.04.2018 for the Assessment
Year 2010-11. The sole issue involved in this appeal is that the
learned CIT(A) has erred in deleting the addition of
Rs.69,00,000/- made by the Assessing Officer on account of
unexplained cash credit in the guise of sale of shares.
2. The brief facts of the case are that the Assessing Officer
observed that information was received from Assistant
Director of Income Tax (Investigation), New Delhi that search
ITA No.4819/Del/2018 2
and seizure/survey operation was carried out upon the entry
providers, Shri Pradeep Kumar Jindal, Shri Sajan Kumar Jain,
Shri Prem Arora Group and Shri Pawan Arya and his family
members. During the course of investigation, it was found that
the said persons were entry provider and was providing
accommodation entries in the form of bogus share premium,
exempt Long Term Capital Gain and advance against property
etc from front and non-descript companies and Smt. Reeta
Singhal is one of the beneficiary who has received
accommodation entry amounting to Rs.69 lac.
3. The AR of the assessee has filed written submission and
stated that Smt. Reeta Singhal has sold share of Shri Ganga
Paper Mills Pvt. Ltd. for a consideration of Rs.50 lac which is
received through RTGS and balance amount of Rs.19 lac was
returned back. It was submitted that shares of Shri Ganga
Paper Mills Pvt. ltd. were acquired by the assessee during the
Assessment Year 2009-10 and these shares were sold to M/s.
Mayank Medilab Pvt. Ltd. in the Assessment Year 2010-11.
There was no profit and gains in this transaction. The
ITA No.4819/Del/2018 3
Assessing Officer observed that submission of the assessee
was examined and found devoid of merit and not convincing.
During the course of hearing, the AR of the assessee was
specifically asked why M/s. Mayank Medilab Pvt. Ltd. has paid
Rs.19 lac in excess of sale consideration without receipt of
shares of this value. He was not able to give satisfactory reply.
Further the assessee has not filed any document to
substantiate her claim regarding holding of shares of various
companies by her and inflow/outflow of shares in her capital
account. Therefore, he held that the amount declared on
account of sale of shares by the assessee amounting to Rs.69
lac is hereby treated as unexplained cash credit and added to
the income of the assessee.
4. On appeal, the Ld. CIT(A) deleted the addition by
observing that the assessee received Rs.69 lac through RTGS
from M/s. Mayank Medilab Pvt. Ltd. as under:
"Rs. 25,00,000/- through RTGS on 13006.2009 from M/s. Mayank Medilab (P) Ltd.
Rs. 25,00,000/- -do-
Rs. 19,00,000/- -do-
Rs. 69,00,000/-
ITA No.4819/Del/2018 4
4.1 He further observed that Rs.50 lac vide two RTGS of
Rs.25 lac each received on 30.06.2009 was towards sale
consideration of 5 lac shares of M/s. Shri Ganga Paper Mills
Pvt. Ltd. of face value of Rs.10/- each, sold at par @ Rs.10/-.
Thus, total sale consideration has been received at Rs.50 lac.
The assessee acquired the shares prior to the Assessment Year
2010-11, i.e., partly in Assessment Year 2006-07 and partly
in Assessment Year 2009-10 as under:
A.Y. 2006-07
Date of No. of shares Face value Per share Total
purchase purchased per share purchase purchase
cost cost at par
03.02.2006 92070 10/- 9.86 908000
03.02.2006 5000 10/- 10/_ 50000
03.02.2006 200 10/- 10/- 2000
Total 97270 960000
A.Y. 2009-10
Date of No. of shares Face value Per share Total
purchase purchased per share purchase purchase
cost cost at par
22.11.2008 1473005 10/- 10/- 14730050
4.2 The opening number of shares as on 01.04.2009 were
15,17,275 out of which in Assessment Year 2010-11 assessee
sold total 15,27,000 as Rs.10/- per share to M/s. Mayank
ITA No.4819/Del/2018 5
Medilab (P) Ltd., the shares sold were only 5 lac and balance
10,27,000 shares were sold to other parties. All the shares
were sold at the same value of Rs.10/- per share. The details
are as under:
Date No. of shares Sale value Total sale Sold to
sold per share value
13.06.2009 260000 10/- 2600000 Others
13.06.2009 767000 10/- 7670000 Others
12.06.2009 500000 10/- 5000000 M/s.
Mayank
Medilab
Total 1527000 15270000
4.3 He further observed that the Assessing Officer has not
doubted genuineness of sale of 10,27,000 shares to parties
other than M/s. Mayank Medilab (P) Ltd. and added only sale
consideration of Rs.50 lac received on sale of 5 lac shares to
M/s. Mayank Medilab (P) Ltd. This was done only on the
ground that information was received from Investigation Wing
that Shri Pradeep Kumar Jindal, Shri Prem Arora Group, Shri
Sajjan Kumar Jain and Shri Pawan Arya and his family
members were found to have indulged in the activity of
providing accommodation entry and assessee was one of the
beneficiaries for receipt of Rs.69 lac from the said group of
ITA No.4819/Del/2018 6
persons. He observed that the information received was that
these parties were involved in providing bogus
accopmmodation entry and bogus exempt Long Term Capital
Gain in the hands of the assessee. It is not in dispute that
there is no case of Long Term Capital Gain. Rs. 50 lac out of
Rs.69 lac was received as sale consideration of 5 lac shares of
M/s. Shri Ganga Paper Mill (P) Ltd. which were held since past
by the assessee, i.e., partly from Assessment Year 2006-07
and partly from Assessment Year 2009-10. The holding of
shares has never been doubted by the Assessing Officer. He
observed that in this year 10,27,000 number of shares of the
same company and practically at the same point of time and
at the same value were sold to the parties other then M/s.
Mayank Medilab (P) Ltd. and the Assessing Officer has not
doubted the said sale transactions. The assessee has filed
copy of sale invoice issued by the assessee to M/s. Mayank
Medilab (P) Ltd. showing sale of 5 lac shares. The copy of
ledger account of M/s. Mayank Medilab (P) Ltd. in the books of
assessee, the bank statement of the assessee, the balance
ITA No.4819/Del/2018 7
sheet and the details of share holdings of the assessee as on
31.03.2009 and the balance sheet and the holdings of shares
as on 31.03.2010 in the books of assessee which all
documents has been placed on record clearly proves the
contention of the assessee.
4.4 Ld. CIT(A) further observed that assessee was having the
capital of Rs.50,00,000/- in the shape of 5 lac number of
shares of M/s Shri Ganga Paper Mills (P) ltd., partly from A.Y.
2006-07 and partly from A.Y.2009-10, and the same holding
has never being doubted which was being liquidated in this
year at the face value itself brought in Rs.50,00,000/- from
the purchaser of those shares being M/s Mayank Medilab (P)
Ltd., and the same has been given vide two RTGS of
Rs.25,00,000/- each, stood credited in the ICICI bank of the
assessee on 13.06.09. He further observed that when the sale
consideration of balance 10,27,000 number of shares of the
same company, at the same point of time, at the same value,
stands accepted by the A.O, he found no reason for not
accepting the sale of 5,00,000 similar shares to M/s Mayank
ITA No.4819/Del/2018 8
Medilab (P) ltd. at the same point of time. He observed that he
also did not find any specific cogent evidence on record in
support of the contention of the A.O. that this sale transaction
of shares for Rs.50,00,000/- is not the genuine transaction. In
respect of Rs.19,00,000/- received in excess from M/s Mayank
Medilab (P) Ltd., which amount was received through RTGS on
13.06.09, he found justification in the explanation of the
assessee that under some confusion of sale of more shares,
the said Rs.19,00,000/- were also given by M/s Mayank
Medilab (P) Ltd. to the assessee. However, the said amount
was returned back immediately by the assessee on the 2nd
day i.e. on 15.06.09, therefore, no benefit was received on
account of receipt of said sum of Rs.19,00,000/-. He further
observed that under these facts when the money stood
returned on the 2nd day, totally unutilized and without taking
any benefit of any nature out of the said receipt, such receipts
cannot be understood or taken as receipt of accommodation in
nature. In case of any accommodation entry, the recipients
will surely enjoy the benefits of the said receipt, which is not a
ITA No.4819/Del/2018 9
case here. Regarding the observation of report from the Inv.
Wing, he observed that he found substance in the contention
of the assessee that when specifically requested, the cross
examination of the person was to be required, since the
statements of such persons have been relied upon and acted
upon by the A.O., specially when these statements were
recorded at the back of the assessee and that too, not by the
A.O. but by the Inv. Wing. Ld. CIT(A) has observed that he has
seen that in the assessment order, the A.O. has specifically
rejected the request of cross-examination of the assessee on
the ground that it was only a secondary and subordinate
material, therefore, the cross-examination was not necessary.
Ld. CIT(A) observed that he did not agree with the findings of
the A.O. for rejection of prayer of the assessee asking for
cross-examination. In the entire assessment order, he found
that only substantive material against the assessee relating to
this amount was the report of Investigation Wing which was
based on the statements of 3rd parties, recorded behind the
back of the assessee and which have been used adversely. In
ITA No.4819/Del/2018 10
that case, as per the settled law, in case, the assessee,
demands for cross-examination, it is necessary for the A.O. to
facilitate for the cross-examination in the absence of which,
such alleged adverse material cannot be used. This legal
preposition stands laid down by Hon'ble Supreme in the case
of M/s. Andaman Timber Industries, 281 CTR 241 (SC). The
Hon'ble Supreme Court has held as that "Denial of
opportunity to the assessee to cross-examine the witnesses
whose statements were made the sole basis of the assessment
is a serious flaw rendering the order a nullity inasmuch as it
amounted to violation of principles of natural justice".
4.5 Ld. CIT(A) also observed that he found substance in the
contention of the assessee that in the assessment order it is
nowhere mentioned that the transaction under consideration
has been specifically stated by the said persons as in the
nature of accommodation entry. He observed that in the
absence of cross-examination, no cognizance of such
information and statements collected behind the back of the
assessee can be used against the assessee. He observed that
ITA No.4819/Del/2018 11
he examined the facts of the case on its merits, it is not a case
where any capital or accommodation entry of Rs.50,00,000/-
has been received by the assessee since the said sum
represents the sale consideration of shares of same value
which already existed in records and had been coming from
earlier years. Similarly Rs.19,00,000/- received on 13.06.09
were returned on 15.06.09 thereby no benefit and has been
derived from this receipt also. Hence he held that there is no
justification for holding the receipt of Rs.69,00,000/- as
unexplained cash credit and accordingly deleted the same.
Learned Department Representative relied upon the order of
the Assessing Officer. The AR of the assessee supported the
order of the Ld. CIT(A).
5. We have heard the rival submissions and also perused
the material available on record. In the instant case, the
undisputed facts are that the Assessing Officer received
information from Investigation Wing, New Delhi that search
and seizure operation was carried out on Shri Pradeep Kumar
Jindal, Shri Sajan Kumar Jain, Shri Prem Arora and Shri
ITA No.4819/Del/2018 12
Pawan Arya and his family members who were entry providers.
They provided accommodation entries by way of bogus share
premium, exempt Long Term Capital Gain and advance
against property etc from non-descript companies and the
assessee, Smt. Reeta Singhal was one of the beneficiary who
has received accommodation entry amounting to Rs.69 lac. On
a show cause notice, it was explained by the assessee that it
received Rs.50 lac towards sale consideration of shares of Shri
Ganga Paper Mills Pvt. Ltd. for Assessment Year 2010-11. The
said shares were acquired by the assessee in the Assessment
Years 2006-07 and 2009-10 and were already appearing in the
balance sheet of the assessee. It was also explained that the
said purchaser M/s. Mayank Medilab Pvt. Ltd. under a
mistake that it was acquiring further shares from the assessee
paid Rs.19 lac on 13.06.2009 and the same was returned back
by the assessee on 15.06.2005 and that assessee did not
derive benefit of Rs.19 lac as an accommodation entry.
Further, the assessee submitted that nowhere it has been
stated in the information received from Investigation Wing that
ITA No.4819/Del/2018 13
they had provided accommodation entry to the assessee, Smt.
Reeta Singhal. Further, he requested the Assessing Officer to
provide cross-examination of the maker of the statement. The
Assessing Officer denied the same and added Rs.69 lac to the
income of the assessee as unexplained cash credit u/s.68 of
the Act.
6. On appeal, Ld. CIT(A) deleted the addition mainly on the
ground that the sum of Rs.50 lac received by the assessee was
towards sale consideration of shares of M/s. Shri Ganga Paper
Mills Pvt. Ltd. at face value on which the assessee had not
earned any capital gain. The shares already existed in the
balance sheet of the assessee in the Assessment Years 2006-
07 and 2009-10. Further, the assessee was not allowed cross-
examination of the maker of the statement that the assessee
received accommodation entry of Rs.69 lac in the guise of sale
consideration of shares, and therefore, the statement of the
persons cannot be used against the assessee for making
addition u/s.68 of the Act and relied upon the decision of
Hon'ble Supreme Court in the case of M/s. Andaman Timber
ITA No.4819/Del/2018 14
Industries (supra). No material has been brought on record by
the Department to show that the above findings of the ld.
CIT(A) are not correct. Even otherwise, no specific error in the
order of the ld. CIT(A) could be pointed out by the learned
Department Representative. Hence, we find no good reason to
interfere with the order of the ld. CIT(A) which is hereby
confirmed and the grounds of appeal of the Revenue is
dismissed.
7. In the result, the appeal of the Revenue is dismissed.
Order pronounced in the Court on this day, the 17/01/2019.
Sd/- Sd/-
(KULDIP SINGH) (N. S. SAINI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 17/01/2019
Prabhat Kumar Kesarwani, Sr.P.S.
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