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 Shri Dinesh Kumar Mathur, F-10/4, Vasant Vihar, New Delhi Vs. The Income Tax Officer, Old Ward-24(4), New Delhi.
 M/s. Ancon Chemplast P. Ltd., Khasra No.66-7, Village-Alipur, Main G.T. Road, Near Retreat, New Delhi Vs. The Income Tax Officer, Ward 2 (4), C.R. Building, New Delhi.
 M/s. Building Design Partnership Ltd., 201, South Ex Plaza, 1/389, Masjid Moth, South Ext. Part-II, New Delhi Vs. DCIT, CPC, Bengaluru
 DCIT, Exemption Circle, Ghaziabad Vs. Aligarh Development Authority (ADA), Ramghat Road, Aligarh UP
 Dunnhumby IT Services India Pvt. Ltd. 4th Floor, Paras Twin Tower, Tower-B Golf Course Road, Sector-54 Gurgaon vs. DCIT Circle-10(1) New Delhi
 DCIT vs. Ozone India Ltd (ITAT Ahmedabad)
 Teleperformance Global Services Private Limited vs. ACIT (Bombay High Court)
 Tata Communications Ltd vs. UOI (Bombay High Court)
 P. K. Cotton Mills Pvt. Ltd. C/o. RRA Tax India, D-28, South Extension, Part-1, New Delhi Vs. Pr. CIT Meerut, Uttar Pradesh
 Heera Singh Bhola A-30, Sham Nagar New Delhi Vs. DCIT Central Circle-8 New Delhi
 Vineet Malhotra C/o M/s RRA Tax India, D-28, South Extension, Part-1 New Delhi Vs. ACIT Circle-61 (1) New Delhi
 Shailaja B-44, Vishrantika Apartments, Plot No. 5-A, Sector-3, Dwarka, New Delhi Vs. ITO Ward-69(5) Block-D, Pratyakash Kar Bhawan, Civic Centre, JLN Marg, New Delhi

M/s. Ancon Chemplast P. Ltd., Khasra No.66-7, Village-Alipur, Main G.T. Road, Near Retreat, New Delhi Vs. The Income Tax Officer, Ward 2 (4), C.R. Building, New Delhi.
May, 03rd 2021

IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES “A” : DELHI

BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND

SHRI O.P. KANT, ACCOUNTANT MEMBER

ITA.No.3562/Del./2019
Assessment Year 2010-2011

M/s. Ancon Chemplast P. The Income Tax Officer,
Ltd., Khasra No.66-7, Ward – 2 (4),
Village-Alipur, Main G.T. [vs. C.R. Building,
Road, Near Retreat, New Delhi.
New Delhi – 110 036. PIN – 110 002.
PAN AAECA7400M
(Respondent)
(Appellant)

For Assessee : Shri R.S. Singhvi, Advocate

Shri Satyajeet Goel, Advocate

For Revenue : Shri Satpal Gulati, CIT-D.R.

Date of Hearing : 24.03.2021
Date of Pronouncement : 30.04.2021

ORDER
PER BHAVNESH SAINI, J.M.

This appeal by Assessee has been directed
against the Order of the Ld. CIT(A)-1, New Delhi, Dated
18.03.2019, for the A.Y. 2010-2011, challenging the
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ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

reopening of the assessment under section 147/148 of the

I.T. Act, 1961, addition of Rs.45 lakhs under section 68 of

the I.T. Act, 1961 being share capital received from M/s.

Prraneta Industries Ltd., and addition of Rs.90,000/- under

section 69C of the I.T. Act, 1961 on account of commission.

2. We have heard the Learned Representative of

both the parties and perused the material available on

record.

3. Briefly the facts of the case are that information

in this case was received that search and seizure operation

was conducted at various premises of Shri Shirish C. Shah

who happened to be main persons engaged in providing

bogus accommodation entries like long term capital gains,

share capital, share premium and loan etc. Shri Shirish C.

Shah directly and indirectly controlled more than 200

companies which include some of the public limited

companies also. It was seen from the impounded material

that assessee company has received Rs.45 lakhs in three

transactions Dated 18.06.2009 from M/s. Prraneta
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ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

Industries Ltd., through Shri Shirish C. Shah Group.
Perusal of the information revealed that M/s. Prraneta
Industries Ltd., Now known as Aadhar Venture India Ltd.,
[Investor Company] is one of the conduit company which is
controlled and managed by Shri Shirish C. Shah for the
purpose of providing accommodation entries. The statement
of Shri Omprakash Khandelwal, Promoter of the Company
was recorded where he admitted to provide accommodation
entries of the Investor Companies after charging
Commission @ 1.8%. The A.O. noticed that in assessment
year under appeal the assessee has received Rs.45 lakhs as
share capital/share premium from the Investor Companies,
therefore, reasons recorded for reopening of the assessment
under section 147/148 of the I.T. Act, 1961. The assessee
filed letter before A.O. submitting therein that return of
income filed originally may be treated as return filed in
response to notice under section 148 of the I.T. Act, 1961.
The A.O. separately disposed of the objections of the
assessee. The A.O. issued statutory notices seeking
explanation of assessee with regard to the amount received
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ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

of Rs.45 lakhs from Investor Company. The assessee

attended the proceedings before A.O. and submitted as

under :

 “That Prraneta Industries Ltd. (now known as Aadhaar
India Ltd) is a public Limited Company and presently
listed in Bombay Stock Exchange hence identity of
shareholder is established.

 That during the F.Y. 2009-10 Prraneta Industries Ltd
has declared income of Rs. 173.55-lacs hence amount
received as share-capital is out of tax paid money.

 That shares are issued at fair market value of the
company not at huge share premium. Equity shares
having face value of Rs.10/- were issued at Rs.50/-
which is fair market value as per the audited financial
statements of the company.

 That Shri Shirish C. Shah neither Director nor
shareholder of Praneta Industries Ltd.”

3.1. The A.O. however did not accept the contention

of assessee and found that during the course of search and
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ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

survey operation statements of Shri Shirish C. Shah, Shri
Kumar Raichand Madan, Shri Chandrank Padmasni
Kamani, Shri Rajan Kachaliya were recorded who have
explained the modus operandi as to how to provide
accommodation entries. The A.O. considering the modus
operandi of these persons did not accept the explanation of
assessee to have received genuine share capital. Therefore,
explanation of assessee that return of income of Investor
Company of Rs.173.55 lakhs and presently listed in
Bombay Stock Exchange [ “BSE”] is no ground to accept the
explanation of assessee. The A.O. accordingly issued show
cause notice to the assessee seeking explanation of assessee
and in the show cause notice reproduced relevant para of
statement of Shri Om Prakash Khandewal, Promoter
Director of the Investor Company and sought explanation of
assessee. The A.O. ultimately did not accept the explanation
of assessee because assessee failed to produce the Director
of the Investor Company for examination. Therefore, made
addition of Rs.45 lakhs under section 68 of the I.T. Act and
also made addition of Rs.90,000/- on account of
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ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

Commission. The assessee challenged the reopening of the

assessment as well as addition on merits before the Ld.

CIT(A), however, the appeal of assessee has been dismissed.

4. Learned Counsel for the Assessee reiterated the

submissions made before the authorities below and referred

to PB-2 which is reasons recorded for reopening of the

assessment and submitted that reasons are borrowed

satisfaction and that A.O. did not apply his mind to the

information received from Investigation Wing, therefore,

reopening of the assessment is invalid and bad in Law. He

has referred to objections filed by assessee to the reopening

of the assessment Dated 27.06.2017 [PB-4] in which the

assessee has requested the A.O. to provide copy of

statement of Shri Shirish C. Shah and Shri Om Prakash

Khandelwal, copy of the assessment order of Investor

Company, copy of the Bank account of Investor Company

and whether action have been taken under section 148 in

case of other parties also. Learned Counsel for the Assessee

also referred to PB-9 which is the Order of the A.O. Dated

17.07.2017 dismissing the objections filed by assessee
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ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

against reopening of the assessment in which the A.O. has
specifically mentioned that the above documents sought by
assessee cannot be supplied to the assessee because the
same are confidential in nature. Learned Counsel for the
Assessee, therefore, submitted that since all the relevant
documents were not supplied to the assessee, therefore,
objections of the assessee were not decided properly and
right of assessee have been curtailed in filing proper
objections before A.O. He has referred to PB-20 in which the
assessee filed another objection before A.O. Dated
09.08.2017 against the re-assessment proceedings in which
it is clearly clarified that assessee filed copy of ITR of
Investor Company along with its audited balance-sheet and
Director’s Report, Certificate of Incorporation and proof of
trading of shares at BSE. He has referred to PB-49 to 85
which are the documents filed before A.O. in respect of the
fact that assessee received genuine share capital/premium
which are copy of the confirmation, of ITR, copy of Board
Resolution, copy of share application along with Share
Application Form, copy of Master Data, Certificate of
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ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

Incorporation and evidence in respect of listing of shares at
BSE of Investor Company along with their ITR and balance-
sheet of the Investor. Learned Counsel for the Assessee
submitted that letter of Shri Omprakash Khandelwal,
Director of the Investor Company retracted from his
statement, therefore, there is no case for reopening of the
assessment against the assessee.

4.1. He has submitted that ITAT, Indore Bench in the

group case of ACIT, Central Circle-18, New Delhi vs., M/s.

Bharat Securities (P) Ltd., New Delhi & Others and ACIT,

Central Circle-18, New Delhi vs., Chain House International

(P.) Ltd., New Delhi decided the group appeals in

Departmental appeals in ITA.No.598/Del./2017 etc., vide

Order Dated 27.12.2017 in which the Ld. CIT(A) vide Order

Dated 07.11.2016 deleted the additions on merits in respect

of the same Investor Company M/s. Prraneta Industries

Ltd., based on the same information received in search in

the cases of Shri Shirish C. Shah etc., and Departmental

appeals have been dismissed. Copy of the Order is placed on

record. He has submitted that the Ld. CIT(A) accepted the
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ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

identity of the same Investor, its creditworthiness and
genuineness of the transaction in the matter and the ITAT,
Indore Bench dismissed the Departmental appeals. He has
submitted that the Order of the Indore Bench of ITAT have
been confirmed by the Hon’ble Madhya Pradesh High Court
by dismissing the Departmental appeal. In the case of PCIT
vs., Chain House International Pvt. Ltd., 98 taxmann.com
47 (MP) in which it was held that “once genuineness,
creditworthiness and identity of the Investors are
established, no addition could be made as cash credit on
ground that shares were issued at excessive premium.” He
has submitted that the Judgment of the Hon’ble Madhya
Pradesh High Court have been confirmed by the Hon’ble
Supreme Court by dismissing the SLP of the Department in
the matter of PCIT vs., Bharat Securities (P.) Ltd., reported
in [2020] 113 taxmann.com 32 (SC). Learned Counsel for
the Assessee submitted that the ITAT, Delhi C-Bench in the
case of INS Finance & Investment P. Ltd., New Delhi vs.,
ITO, Ward-12(3), New Delhi in ITA.No.9266/Del./2019 for
the A.Y. 2010-2011 considered the identical issue of
10

ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

reopening of the assessment and addition on merit in
respect of the same Investor Company M/s. Prraneta
Industries Ltd., based on the statement of same persons
Shri Shirish C. Shah and Shri Omprakash Khandelwal vide
Order Dated 26.10.2020 addition on merit have been
deleted. Learned Counsel for the Assessee also relied upon
the Order of ITAT, Delhi A-bench, Delhi in the case of ASN
Polymers Pvt. Ltd., New Delhi vs., ITO, Ward-1(1), New Delhi
in ITA.No.2489/Del./2019 for the A.Y. 2010-2011 in which
the Tribunal has quashed the reopening of the assessment
vide Order Dated 30.12.2020 on the same facts of taking
share capital/premium from M/s. Prraneta Industries Ltd.,
based on the same statement of Shri Shirish C. Shah and
Shri Omprakash Khandelwal. He has, therefore, submitted
that the issue of the assessee is covered by these decisions
on identical facts. He has submitted that since statements
of Shri Shirish C. Shah and Shri Omprakash Khandelwal
have not been provided to the assessee and was not
subjected to cross-examination on behalf of the assessee,
therefore, their statements cannot be read in evidence
11

ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

against the assessee. The A.O. has not brought any material

on record to rebut the documentary evidences filed by

assessee, therefore, reopening of the assessment as well as

addition on merit is wholly unjustified.

5. On the other hand, Ld. D.R. relied upon the

Orders of the authorities below and submitted that at the

time of initiation of re-assessment proceedings, the A.O.

should have prima facie some material to form a belief and

at that stage the sufficiency or correctness of the material is

not required and relied upon Judgments of Hon’ble

Supreme Court in the cases of Central Provinces Manganese

Ore Co. Ltd., vs., ITO, Nagpur [1991] 191 ITR 662 (SC), Shri

Krishna Pvt. Ltd., etc., vs., ITO, Calcutta & Others 221 ITR

538 (SC), Raymond Woolen Mills Ltd., [1999] 236 ITR 34

(SC) and ACIT vs., Rajesh Jhaveri Stock Brokers Pvt. Ltd.,

[2007] 291 ITR 500 (SC). He has also relied upon the

Judgment of Hon’ble Delhi High Court in the case of AGR

Investments Ltd., vs., Addl. CIT & Another [2011] 333 ITR

146 (Del.). He has, therefore, submitted that reopening of

the assessment is justified in the matter. The Ld. D.R. as
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ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

regards merits of the addition submitted that Investigation
Wing carried-out search action in the case of Shri Shirish C.
Shah and found him to be engaged in providing
accommodation entries. The A.O. noted that he is the
person controlling Investor Company and that Shri
Omprakash Khandelwal, Promoter of the Investor Company
also made a statement. Therefore, addition was correctly
made against the assessee. The A.O. rejected the
explanation of assessee because of the findings given by the
Investigation Wing. The Ld. D.R. submitted that the
statement of Shri Omprakash Khandelwal was confronted to
the assessee by referring to part statement in the show
cause notice Dated 30.08.2017 and that assessee did not
produce Director of the Investor Company, therefore,
addition is rightly made by the authorities below. The Ld.
D.R. relied upon Judgment of Hon’ble Supreme Court in the
case of NRA Iron & Steel Pvt. Ltd., 13 taxmann.com 48 (SC)
in which meager income declared by Investor was
considered against the assessee because assessee failed to
explain the creditworthiness of the Investor Company. He
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ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

has also relied upon Judgments of Hon’ble Delhi High Court

in the cases of CIT vs., NR Portfolio Private Limited [2014]

42 taxmann.com 338 (Del.), Nova Promoters & Finlease Pvt.

Ltd., ITA.No.342 of 2011and NDR Promoters Private Limited

ITA.No.49 of 2018. The Ld. D.R, therefore, submitted that

authority below rightly confirmed the addition.

5.1. The Ld. D.R. also filed copy of the Order of SEBI

Dated 04.09.2017 in the matter of M/s. Kavit Industries

Limited in which name of the Investor Company is referred.

6. We have considered the rival submissions and

perused the material on record. It is not in dispute that

assessee filed confirmation of Investor, its Board resolution,

Copy of Share Application along with Form, Copy of Master

Data of the Investor Company and its Certificate of

Incorporation along with evidence in respect of listing of

shares at BSE along with ITR and balance-sheet of the

Investor Company. The assessee explained before A.O. that

the Investor Company is a Public Limited Company and

presently listed in BSE. This fact is not doubted by the A.O.
14

ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

The assessee also submitted before A.O. that the Investor
Company has declared income of Rs.173.55 lakhs and
hence amount received as share capital would prove the
creditworthiness of the Investor. Copy of the
acknowledgment of ITR of the Investor Company for the
assessment year under appeal is filed at page-64 of the PB
which supports the explanation of assessee that the
Investor Company has declared income of Rs.1,73,55,274/-.
The balance-sheet of the Investor Company also support
such fact and PB-71 shows the Investor Company has share
capital of Rs.22.57 crores and reserve and surplus of
Rs.18.84 crores. Thus, the Investor Company has sufficient
funds and income that it had capacity to make investment
in assessee-company. The Investor Company is assessed to
tax and listed Company and Public Limited Company,
therefore, its identity is not in dispute. The assessee has
also proved creditworthiness of the Investor Company and
that entire transaction has taken place through banking
channel, therefore, genuineness of the transaction in the
matter is also not in dispute. The assessee also explained
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ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

before A.O. that Shri Shirish C. Shah is neither Director nor
shareholder of the Investor Company. The A.O. has not
brought any evidence on record to dispute the above
explanation of assessee. The A.O. doubted the explanation
of assessee because the search conducted in the case of
Shri Shirish C. Shah and some material found during the
course of search in his case. The statement of Shri Shirish
C. Shah, Shri Omprakash Khandelwal of Investor Company
were recorded during the course of search. The assessee has
asked to supply copy of their statements for the purpose of
rebutting their statements, but, such statements were not
supplied by the A.O. stating that they are confidential in
nature. Since these statements were recorded at the back of
the assessee and have not been supplied to the assessee for
filing an objection or to seek for cross-examination of their
statements, therefore, such statements cannot be read in
evidence against the assessee. We rely upon the Judgments
of Hon’ble Supreme Court in the case of Kishanchand
Chellaram 125 ITR 713 (SC) and Andaman Timber
Industries 281 CTR 214 SC). This was the sole basis for the
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ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

authorities below to doubt the explanation of assessee,
however, the material found during the course of search in
the case of above persons have not been confronted to the
assessee and their statements were also not supplied to the
assessee, therefore, same cannot be the basis to reject the
explanation of assessee. The Ld. D.R. referred to the notice
issued by the A.O. Dated 30.08.2017 to say that statement
of Shri Omprakash Khandelwal was confronted to the
assessee. This fact is not correct because the A.O. in his
notices has only referred to part of the statement in the
notice, but, it is a fact that A.O. never supplied the
statements of above two persons recorded during the course
of search in their cases to the assessee. Therefore, no
statement or material is confronted to assessee for the
purpose of raising any objection by assessee or to dispute
correctness of their statements and that no cross-
examination have been allowed which right of the assessee
has been curtailed by the A.O. The A.O. cannot refuse to
supply their statements and material to the assessee by
considering them confidential in nature. The moment A.O.
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ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

says that their statements and other material are

confidential in nature would mean that A.O. has nothing to

confront these material to the assessee for the purpose of

assessee’s defence. Therefore, such material shall have to be

excluded from consideration.

6.1. We may also note that ITAT Delhi C-Bench, Delhi

in the case of INS Finance & Investment P. Ltd., New Delhi

vs., ITO, Ward-12(3), New Delhi in ITA.No.9266/Del./2019

for the A.Y. 2010-2011 vide Order Dated 26.10.2020

considered identical issue on identical facts on account of

share capital/premium received from M/s. Prraneta

Industries Ltd., through Shri Shirish C. Shah based on his

statement and statement of Shri Omprakash Khandelwal,

confirmed the Orders of the authorities below as regards

reopening of the assessment, however, the Tribunal has

deleted the entire addition on merits. The Order of the

Tribunal in paras 16 to 37 is reproduced as under :

“16. Now coming to the issue of addition of

Rs.2,50,00,000/- added u/s. 68 being share capital
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ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

received during the year from M/s. Prraneta Industries
Ltd. (now known as M/s. Aadhaar Ventures India Ltd.),
ld. counsel submitted that M/s. Prraneta Industries Ltd.
(now known as M/s. Aadhaar Ventures India Ltd.) is a
listed company on Bombay Stock Exchange and as such
the identity of the party is not in dispute. It was further
argued that there is no adverse material on record in
support of allegation of accommodation entry and the
assessing officer has considered the addition merely on
the basis of so called statement of Director of
Shareholder Company Sh. Om Prakash Khandelwal is
unreliable as later on he has retracted from his above
statement. It was vehemently submitted that assessing
officer, despite repeated requests, did not provide the
copy of information/material from investigation or
statement of the parties on the basis of which adverse
inference was drawn. The assessing officer even failed
to provide opportunity of cross examination in case he
wanted to rely on any such statement.
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ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

17. He further submitted that the entire premise

of the Assessing Officer is for disbelieving the entire

share application money of Rs.2,50,00,000/- is based

on statement of Shri Omprakash Khandelwal. However,

now the statement was later on retracted and had also

come up for consideration before the Co-ordinate Bench

of the Tribunal in the case of ACIT vs. M/s. Bharat

Securities Pvt. Ltd. and this judgment had come up for

consideration in the appeal before the Madhya Pradesh

High Court in the case of PCIT vs. Chain House

International Pvt. Ltd. [IT Appeal Nos. 110 to 115

of 2018 dated 7th Aug 2018] wherein the credential

of the share holder company M/s. Prraneta Industries

Ltd. (now known as M/s. Aadhaar Ventures India Ltd.)

were found to be genuine by three consecutive

authorities right from CIT(A), ITAT and Hon’ble High

Court. The main thrust of Ld. AR’s argument was that

since the very same company has already been

scrutinized and examined in great depth by Hon’ble

High Court, there remains no doubt over the veracity of
20

ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

share capital of Rs. 2.50 crores received by the
appellant company. Our attention was also drawn to
observation in High Court’s order regarding retraction of
statement by Sh.Om Prakash Khandelwal before CIT(A).
It was further submitted that order of Hon’ble High
Court was confirmed by Supreme Court as SLP of
revenue was dismissed.

18. The Ld. AR also took us to the audited

Balance Sheet and Profit & Loss a/c of the shareholder

company placed in PB pg 81-91 to establish the

creditworthiness in the hands of investor. Reference

was also made to judgments of High Courts and

coordinate benches in support of the proposition that

once the identity, genuineness and creditworthiness of

the investor is proved, the provisions of section 68 does

not apply.

19. In response to above, the Ld. DR made

elaborate submissions and supported the finding

recorded by assessing officer and CIT (A). It was argued
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ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

that Investor Company does not possess
creditworthiness to make investment of Rs. 2.50 crores
in Assessee Company. It was also submitted that
shares of the company has been issued at premium
which is unjustified and creates doubt over the
genuineness of the transaction. Further, the Ld. CIT DR
also countered that there is no requirement for affording
opportunity of cross examination of person whose
statements are being relied upon since same is
secondary material and as such there is no
contravention of principles of natural justice. Reference
was made decision of Supreme Court in the case of NRA
Iron & Steel P. Ltd. 412 ITR 161 (SC) and other revenue
favoring decisions of High Courts and ITAT. However,
the Ld. DR fairly conceded that issue of share capital
relating to very same company was considered by ITAT
and MP High Court.

20. We have considered the rival submissions

and perused the material available on record. The issue

in hand for our consideration is applicability of
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ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

provisions of section 68 to share capital received by the
appellant company from M/s. Prraneta Industries Ltd.
(now known as M/s. Aadhaar Ventures India Ltd.).
Before discussing the facts of the case, it is relevant to
understand the pre-requisites of section 68 and under
what circumstances the provisions is triggered. As per
the plain language of section 68, the appellant is
obligated to establish the identity, creditworthiness of
the party and genuineness of the transaction so as to
avoid the rigors of the deeming provision. By ‘identity’ it
means that the person/entity must have actual
existence which is legally recognized. The word
‘creditworthiness’ in simple terms means the resources
to pay money (investment in the present case) i.e. the
person/entity should have necessary funds to pay. Now
it is not necessary that those funds must be own funds
or out of earnings but same could also be in the nature
of borrowings. The sum and substance is that there
should be explainable means in the hands of the
investor. The last ingredient is ‘genuineness’ which
23

ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

apparently means that entire transaction must be real

and there should not be any element of collusiveness or

sham. Once these pre-requisites of section 68 are

satisfied, the can be no case of any addition in the

hands of the assessee.

21. When we examine the facts of the present

case on the touchstone of pre-requisite of section 68, we

find that M/s. Prraneta Industries Ltd. is a listed

company and as such there can hardly be any dispute

with regard to identity of the party which is subject to

stringent of scrutiny by another statutory body SEBI

during the listing process. Moreover, the appellant has

placed on record the ITR acknowledgment, Certificate of

Incorporation issued by MCA, Bank statement and

Audited Financial Statements of the party in support of

identity which has remained undisputed by both the

lower authorities. With regard to creditworthiness, on

going through the financial statement of M/s. Prraneta

Industries Ltd. we find that the investor company is

having sufficient earnings and reserves to justify
24

ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

investment of Rs. 2.50 crores. The party is showing
healthy profit before tax of Rs. 1,72,12,447/- and has
reserves of over Rs. 18 crores in the balance sheet. Let
us now come to third and the most important element
which is genuineness of transaction. We note that the
assessing officer has primarily relied upon the
statement of Sh. Omprakash Khandelwal in reaching
the conclusion that M/s. Prraneta Industries Ltd. (now
known as M/s. Aadhaar Ventures India Ltd.) is an
accommodation entry provider. We also note that
assessment order is absolutely silent about any enquiry
carried out by the assessing officer with respect to M/s.
Prraneta Industries Ltd. and no attempt has been made
to independently verify and bring on record material to
establish the alleged collusiveness or any connivance
between appellant and investor, if any.

22. The entire edifice of the Assessing Officer is

the reliance placed by him on the statement of Shri Om

Prakash Khandelwal which though assessee has

claimed was not provided to the assessee nor any
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Chemplast Pvt. Ltd., Delhi.

opportunity of cross-examination was offered and the
statement of Shri Shirish Shah for which assessee has
objected that same has been recorded without
opportunity of cross-examination. In so far as Shri
Shirish Shah is concerned, he is neither the Director nor
the shareholder in the investor company and it is not
even in the case of the Assessing Officer that Shri
Shirish Shah or Om Prakash Khandelwal has
specifically taken the name the assessee. The main
charge of the Department is that Shri Om Prakash
Khandelwal through his company, M/s. Prrenata
Industries has been providing accommodation entries to
various persons. This precise issue and allegations had
come up for consideration before the coordinate bench of
the Tribunal in the case of Bharat Securities Pvt.
Ltd., Chain House International and Rohtak Chain
Co. Pvt. Ltd. in ITA no. 598, 599, 584, 595 and
597/Del/2017 order dated 27.12.2017. The relevant
facts and the observation of the Tribunal in that case for
the sake of better appreciation for our case also are
26 ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.
reproduced hereunder:

“3. During the course of assessment proceedings,
the AO noticed that the assessee has received
share application money and share premium
amounting to Rs. 30 Crores in A. Y. 2012-13 and
Rs. 25 Crores during for assessment year 2013-
14. The details of share application money
received during the year under consideration are
as under :

SN Name F. Y. 2012-13 F. Y. 2013-14
Amount in Rs. Amount in Rs.

1 M/s. Prraneta Industries Pvt. Ltd. ( 15,75,00,000 25,00,00,000

Later named as M/s. Aadhaar

Venture India Ltd. PAN NO

2 M/s. Dhanus Technologies Ltd. 9,75,00,000

PAN: AABCD3429L
3 M/s. Emporis Projects Ltd. PAN 3,00,00,000

NO AABCN0273G

4 M/s. L. N. Polyesters Ltd. ( Later 75,00,000

named as M/s. L N Industries

India Ltd.)

5 PMA/Ns.NShOriAGAaAnCeCs4h1S0p2iBnners Ltd. ( 75,00,000

Later named as M/s. Yantra

Natural Resources Ltd.) PAN NO

AACCS4221Q

Total 30,00,00,000 25,00,00,000
27

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Chemplast Pvt. Ltd., Delhi.

6. The Directors and the four investor companies

(except L. N. Industries Ltd) Complied with the requirement

with Copy of Balance Sheets, Copy of ITR Ledger Account

etc. Investor companies confirmed the investment made by

them in the share capital of assessee-company.

Page-13

11. The Assessing Officer issued show cause notice
dated 02.02.2016 wherein it was alleged that assessee
company received accommodation entries of Rs. 55 Crores
from five listed companies. This allegation was based on
the statements of Shri Shirish Chandrakant Shah (SCS),
Shri Chandan Kumar Singh (CKS), Shri Kumar Raichand
Madan (RKM), Shri Omprakash Anandilal Khandelwal
(OAK) and affidavits of Shri Jils Raichand Madan, Smt.
Jyoti Munver, and Shri D. U. Munver and on other material
found in the search of SCS and Aadhaar Ventures India
Ltd. Statement of SCS and his employee CKS, being third
parties were recorded during the course of search on SCS.
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Page-17

14. It is also notice that during the proceedings on
12.02.2016, the assessing Officer directed the assessee
company to produce the Directors of the investor
companies and consequently on 19.02.2016, the assessee
company produced Shri Somabhai Sunderbhai Meena (SS
Meena), director of major investor company namely
Aadhaar Ventures India Ltd. Who contributed Rs. 40.75
Crores out of total investment of Rs. 55 crores, before the
Assessing Officer. He was examined and his statement
was recorded. He produced the books of accounts of the
company. He confirmed the investment made by his
company in the share capital of the assessee company.
The books of accounts produced by him were examined by
assessing Officer. The books of accounts contained such
investment made in the share capital of the assessee
company. The books of accounts also explained the source
of investment.

17. The CIT (A) recorded the statements of the persons
who appeared before her. For the sake of completeness in
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our findings we find it necessary to briefly note the facts
emerged from the said statement as follows.

18. The alleged SCS appeared during first appellate
proceeding and his statement was recorded by the CIT (A)
wherein he stated the he was not engaged in providing
any accommodation entries and on the contrary he was in
the business of providing consultancy services and the
data hub services to various companies. He was also
engaged in purchase and sale of shares. He also stated
that he did not know Bharat Securities (P) Ltd. or its CA.
He disowned his earlier statement and stated that the
same was recorded under fear. An opportunity to cross
examine was granted to the assessee company which
was availed by the assessee company.

Page-25

21. Shri Omprakash Anandilal Khandelwal, the then
director of Aadhaar Ventures India Ltd. appeared before
CIT (A) and his statement was recorded wherein he stated
that his company was not engaged in any business of
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providing any accommodation entries. He also stated that
SCS was not controlling the business of his company. He
was only a financial consultant. He further submitted that
it was not correct that SCS was appointing dummy
directors for his company. Regarding investment in Bharat
Securities (P) Ltd. he categorically stated that prior to
investing the fund in Bharat Securities (P) Ltd. necessary
enquiries were made and two directors of the company
namely Shri Jils Raichand Madan and Shri. Subramanya
Kusnur visited Delhi and discussed the matter of
investment with the directors of Bharat Securities (P) Ltd.
namely Shri Naresh Kumar. He also stated that the due
diligence report was also obtained from a company
secretary at their own. Bharat Securities also provide
share valuation report. He also stated that Board of
Directors after considering the entire scenario decided to
invest in equity shares of Bharat Securities (P) Ltd. He
also stated that MOU was executed prior to investment.
He also stated that there was no question of providing any
accommodation entries to Bharat Securities. He further
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stated that his earlier statement was recorded under fear
and pressure. An opportunity to cross examine was
granted to the assessee company which was availed by
the assessee company.

26. After recording the statements of the said
witnesses, the CIT(A) forward copies of all statements to
the AO for his comments. The AO had perused such
statements in extensor and sent his comments on each
and every question and answer recorded in respect of
each and every statement. The AO did not raise any
objection on the contents of these statements. He almost
accepted all the factual position. He also agreed with the
nature of the business of investor companies. The AO
almost accepted the contents of the statements. However,
he opined that there was mismatch between the two
statements, such statements may not be relied upon and
also statements should not be accepted at this stage. But
finally the AO requested the CIT(A) that the appeal may be
decided on merits of the case by ignoring the said
statements.
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27. The Ld. CIT(A) after recording the statements,
calling the comments and report from the Assessing
Officer on the statements and submission of the assessee
and also taking on record the submissions of the assessee
company, filed during first appellate proceeding, the
CIT(A) perused the entire assessment proceedings,
examined the material on record and facts of the case had
recorded her finding on various issues involved in appeal.
Such findings are recorded on pages 274 to 316 of the
CIT(A) order.

28. The Ld. CIT(A) observed the AO has treated the
amount of Rs. 55 crores as taxable u/s. 68 on the basis of
statements of certain persons recorded earlier to the date
of search on the appellant company. But since these
statements were recorded behind the back of the AO and
no opportunity of cross examination was provided despite
specific and repeated requests, CIT(A) had decided to
summon such persons and record their statements and
provide an opportunity of cross examination to the
appellant company as per law, rule and procedure. The
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question, therefore, arose as to which of the two
statements i.e. one recorded earlier and the other recorded
by the CIT(A) herself deserves reliance. After considering
the entire scenario of the case the CIT(A) found that the
earlier statements did not merit acceptance for the
reasons such as earlier statements were recorded behind
the back of the assessee and also behind the back of the
AO. No opportunity of cross examination was allowed
despite specific and repeated requests. Even the
opportunity of cross examination once sought to be
provided was immediately snatched. The earlier
statements were recorded much before the search on the
appellant company. Bharat Securities was not in the
picture and was not an issue during these statement. In
such statements non had named Bharat Securities. We
also observe that the Ld. CIT(A) held that the statements
recorded by her are more authentic in all respect. Direct
questions regarding investment in Bharat Securities were
put up and replied. Books of accounts were produced and
examined. Investment found recorded. Audited Balance
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Sheets also demonstrate the investment in share capital of
Bharat Securities Pvt. Ltd. Source of the source has also
been explained and found to be correct. In these
circumstances, CIT(A) found herself in agreement with the
statements recorded by herself. It was held that detailed
statements were recorded and all the five investor
companies have admitted the investment. CIT(A) finally
held that investment made by five listed companies in the
share capital of the appellant company was genuine and
there was no question of providing and taking any
accommodation entries by the assesse company.

29. After considering the statement of Sh. Somabhai
Sunderbhai Meena, Director of major investor company
namely M/s. Aadhaar Ventures India Ltd. which was
recorded by the AO during assessment proceedings, the
Ld. CIT(A) arrived to the following findings.

“The appellant company had produced one director
of Aadhaar Ventures namely Sh. Somabhai
Sunderbhai Meena before the AO during
assessment proceedings. He confirmed that his
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company had invested a sum of Rs. 40.75 crores
in the share capital of the appellant company in FY
2011-12 and 2012-13. He produced the books of
accounts of the company and was thoroughly
examined by the AO. This investment was found
recorded in the books of accounts as verified by
the AO. He explained the source of investments
with reference to the books of accounts. Such
source was then examined by the AO and the AO
also obtained copies of the necessary ledger
accounts with reference to the source of
investments. He explained that his company was
never engaged in providing accommodation entire
and on the contrary was carrying on real business
where the turnover runs into approx. 171 crores
and 133 crores in FY 2011-12 and 2012-13
respectively. He also produced the bank accounts
of his company with reference to the share capital
invested in Bharat Securities. The AO also required
him to send certain documents. Consequently copy
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Chemplast Pvt. Ltd., Delhi.

of resolution, shareholding pattern, copy of share
certificate, copy of MOU, copy of arbitration award,
copy of due diligence report, copy of share
valuation report and legal notice were sent by his
company vide letter dtd. 18.03.2016. The AO never
disagreed with the contents of the statements of
Somabhai. His only objection was that Somabhai
was not a director of the company at the time of
making investment in Bharat Securities. Now two
other directors of the same company namely Sh.
Jils Raichand Madan and Sh. Omprakash
Anandilal Khandelwal appeared before me and
their statements were recorded. Both of them were
directors of Aadhaar Ventures at the time of
making the investment in Bharat Securities. Their
tatements have already been discussed in the
earlier paras and to avoid any repetition I simply
want to reiterate that the present statements given
by both the directors of Aadhaar Ventures before
me are totally confirmatory and corroborative to
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the earlier statement of Somabhai Sunderbhai
Meena recorded by the AO during the assessment
proceedings”.

32. The AO had stated at various places in the
assessment order that the share capital has been received
from paper companies. CIT(A) examined the issue and
held as under:

“I find that the position in the present case is
otherwise. All the five companies have produced
the books of accounts. There is an audit reports.
All the investors have appeared personally. The
books of accounts were examined thoroughly and I
find that such books of accounts contain
purchases and sales transactions, payments and
receipts by banking channels, incurring of various
expenses such as payments of rent, electricity
excise duty, sales tax, bank interest, staff salaries
etc. The himself examined the director of major
shareholder Aadhaar Ventures namely Somabhai
Sunderbhai Meena and also examined the books
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of accounts produced by him during the course of
assessment. It is very pertinent to note here that
even the AO could not find discrepancies with the
books of accounts or the documents produced or
the fact of investment and source thereof. The AO
had never disagreed with the various evidences
and documents submitted before him by the
director of the investor company. In the presence of
enormous evidences it is very difficult to hold that
these companies are paper companies.

43. From the order of the Ld. CIT(A) it is also apparent
that on the conclusion that the entry providing companies
failed to prove the genuineness of their source of the
investment made in Bharat Securities Pvt. Ltd. including
the amount of premium after considering the submissions
of both the sides and relevant documentary evidence the
CIT(A) held as under:

“All the listed companies have given the required
evidences to prove the source of their investments
in Bharat Securities Pvt.Ltd. One of the major
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investing companies appeared before the AO with
the books of accounts and demonstrated the
source of the share capital. Similar is the position
with regard to other companies whose directors
appeared before me and produced the books of
accounts except Dhanus showing the source of the
investment. Dhanus was under liquidation. Its
director had produced the confirmation admitting
the investment and also containing the source
thereof. The balance sheets of all the companies
are audited. The auditors have given a clean
report. Looking to the entire scenario of the case I
am satisfied with the source of the investment of
all the five listed companies and hold that the
source is fully explained and hence the conclusion
is rejected.

85. We find that in the case of M/s. Aadhaar
Ventures India Ltd. (formerly known as Parraneta
Industries Ltd. ) the said investor company has made
investment in share application money of Rs. 15.75 crores
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Chemplast Pvt. Ltd., Delhi.

in A.Y. 2012-13. The copy of bank accounts of the
subscriber company has also been furnished ( PB-839 to
846) which reflected the payments by RTGS towards
share capital evidencing sufficient availability of funds on
the date of investment. There is no cash deposits before
issue of RTGS and none of the entries are found to have
been made out of the assessee’s own account in this bank
statement. Therefore genuineness of transaction is not to
be doubted. The share of the assesse company was duly
allotted to the investor company, which creates legal right
of the investor. Unless proven otherwise with some
documentary evidence, it cannot be alleged that all the
apparent is not real who alleges to be so. It cannot be
alleged merely on the basis of apprehensions and on third
party statement, without allowing cross examination and
bringing any concrete material on record to show that the
money invested is assessee’s money.

86. All the notices issued by the Revenue Authorities,
i.e. investigation Wing, Assessing Officer and CIT(A) to this
company were served and duly complied by the said
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Chemplast Pvt. Ltd., Delhi.

company. We find that said company is a listed company
and duly complying with all the statutory requirement of
SEBI and Stock Exchange. The assessee has filed copy of
share application and confirmation submitted of the said
company ( PB- 333-334 ), copy of ITR acknowledgement (
PB-460-461/Volume-2) for A.Y. 2012-13 and 2013-14,
copy of balance sheet reflecting the investment made in
the share capital the assessee BSPL ( PB-345-355), bank
statement ( PB-336-343& 839-846), copy of ledger account
of the assesse in the books of investor company ( PB-344)
and reply dtd. 14.07.2014 in response to summons dtd.
25.06.2014 issued by ADIT (Inv.)-Delhi furnished by said
company ( PB 754 to 831). Reply dtd. 06.08.2014 field by
the Sh. Jai Rai Cahnd Madan, in his personal capacity as
a director in response to the letter dtd. 30.07.2014 issued
by the ADIT (Inv.) Delhi under section 131(1 A) PB 32,
Assessment order page No. 129). Reply filed dtd.
06.08.2014 by Smt. Jyoti Dhiresh Munver, director in her
personal capacity as a director in response to the letter
dtd. 30.07.2014 as issued by the ADIT (Inv.), Delhi, letter
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Chemplast Pvt. Ltd., Delhi.

dtd. 19.11.2015 issued by the AO duly served on investor
company ( page No. 33 & 34 of CIT(A) order and reply dtd.
26.11.2015 filed by investor company ( PB-834-883), reply
dtd. 12.02.2016 filed by Investor company duly
confirming investment made by it in the share of the
assessee company along with relevant documents ( page
No. 144 & 171 of assessment order) in support of the
claim that identity and credit worthiness of investor and
genuineness of transaction of said investor/share
applicant is duly established. It was further submitted
that opportunity of cross examination was grained to the
assesse for examination in the case of Sh. Shirish
Chandrakant Shah and Sh. Sawan Kumar Jajoo for which
the assesse reached Mumbai at the time as given and the
Venue, but since prior to the date of cross examination
opportunity scheduled, ( reference page No. 134,135,170
and 171 of assessment order) the same was withdrawn
by ADIT (Inv.)-Delhi and therefore, the opportunity did not
actually materialise (PB-884-894). Thereafter opportunity
for cross examination was demanded by the assessee in
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time and again before the AO but the same was never
provided by the AO. In support of this claim the learned
counsel for the assesse referred page No. 133 ( Para-2),
page No. 134 ( Para-3) page No. 135 ( Para-4) Page No.
145 ( Para-ii, iv & vi) of the assessment order.

87. Thus, we find that the AO and Investigation Wing
has not given any change to cross examination all the
parties which even though demanded by the assessee
company and said opportunity was denied to the
assessee even the assessee has reached at Mumbai on
given date. The AO is required to allow the opportunity of
cross examination, in view of the decision of Hon’ble
Supreme Court in the case of Andaman Timber Industries
Vs. Commissioner of Central Excise (2015) 13 STD 805
(SC).

88. We further observed that the Ld.CIT(A) having
convinced with this serious injustice rightly decide to
summon the witness on whose statements the AO had
placed reliance without giving the opportunity of cross
examination to the assessee. All the witness appeared
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before the CIT(A) and they were examined by her and
their statements were recorded and opportunity of cross
examination was given to the appellate company. From
careful perusal of such statement and logical analyses of
thereof we are convinced that there statements were
found to be strongly supporting the explanation and stand
of the assessee company against the made by the AO u/s.
68 of Act. We also find that the Ld. CIT(A) send these
statement and other relevant evidence for examination,
verification and comments of the AO providing due
opportunity to him. However, AO and not made any
adverse comment on these statements except contending
that the same cannot be considered in favour of the
assesse. We are unable to see any valid reason to
disbeliever or discard statement recorded by the Ld.
CIT(A) and thus we hold that the first appellate authority
was right in considering he same in right prospective and
hence we are unable to see any valid reason to interfere
with the findings of Ld. CIT(A) as noted above.

89. We find that Sh. Somabhai Sunderbhai Meena, the
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present director of Aadhaar Ventures India Ltd., the
investor company appeared on 19.02.2016 before the AO
with books of accounts and his detailed statement was
recorded under section 131 of the Act, wherein he has
duly confirmed the investment made in the shares capital
in the assesse company. The copy of his statement is
placed at paper book page No. 230 to 243. We further find
that in response to summons under section 131 of the Act,
issued by the CIT(A) invoking his power under section
250(4) of the Act, Sh. Jils Raichand Madan, along with
books of accounts duly appeared before the CIT(A) and
duly confirmed the investment made in the shares of the
assesse company, in his statement recorded by the Ld.
CIT(A). Refer paper book page No. 244 to 256 and page
No. 132 to 142 of order of CIT(A). Similarly, Sh.
Omprakash Anandilal Khandelwal, the then director of
the company, appeared before the CIT(A) and duly the
investment in his statement recorded before the Ld. CIT(A)
(refer page No. 151 to 158 of the order of CIT(A) and paper
book page No. 257 to 266)
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90. Further, in response to summons u/s. 131 of the
Act issued by the CIT(A) by invoking power u/s. 250(4) of
the Act, Sh. Chandrakant Shah, a third party, duly
appeared before the CIT(A) and denied in any invoking of
accommodation activities. (Paper book page No. 296 to
302 and page No. 217 to 223 of the order of CIT(A)).
Similarly, Sh. Sawan Kumar Jajoo, being third party, who
already as per the Revenue worked as broker, has also
appeared before the CIT(A) and had explained that he
does not know the name of the assesse company and
name, chart and other figures in the statement was
provided and written by the Authorized Officer himself,
refer to question No. 15 to 19 (Page No. 207 to 208 of the
order of CIT(A)).

91. Sh. Chandan Kumar Singh, a third party was
duly appeared before the CIT(A) and he had denied of any
accommodation entries provided, in his statement
recorded by the CIT(A), his denial in invoking in any
accommodation activities are placed at paper book page
No. 303 to 311 and also reflected at page No. 229 to 234
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Chemplast Pvt. Ltd., Delhi.

of the order of Ld. CIT(A). Thereafter, the statement of both
the directors and third parties recorded by the CIT(A) were
provided to the AO for his comments ( second para last
four line of page No. 130 of CIT(A) order and the AO
submitted his comments and comments on the statement
of directors and third parties were filed by the CIT(A) (
refer paper book page No. 313 to 322, page No. 144-146, (
OAK) 161-162 (SCS) 224-213, (CKS) and 224-225 (Jajoo)
of the order of CIT(A). However, no adverse comments
appears to have been made by the AO on these
statements except merely saying that statement cannot be
recorded at this stage.

92. In our considered opinion as per sub section (4) of
section 250 of the Act, the Ld. CIT(A) before disposing any
appeal may make such further any enquire as he thinks
fit, or he may direct the AO to make such enquiry and to
report the result of the same thus according to this
provisions the CIT(A) is empowered to make any further
enquiry and in the present case the Ld. CIT(A) conducted
the proceeding with the ambit of the said provisions.
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Therefore, in our opinion, the Ld. CIT(A) has duly
discharged her obligation by conducting examination of
the key person involved by way recording statement and
examination of books of accounts. These evidence brought
on record proved and established the identity and credit-
worthiness of share applicant and investor and
genuineness of transaction of above said five investor
companies. Whereas the AO has not brought on record
anything contrary and made addition by merely holding
that the said subscriber as non- genuine on the basis of
inquiry conducted in the case of third party who has not
whispered any word against the assesse company.
Therefore, no addition on account of share application
money can be made particularly when shares are allotted
and transaction are through banking channel and
concerned party relied to summon issued by investigation
wing and also by the AO conforming the investment made
in the BSPL.

93. We further find that the Ld. CIT(A), during the
course of first appellate proceeding in exercising powers
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mandated in the section 250(4) of the Act has rightly
decided to summons all the ten person out of which except
two namely Smt. Jyoti Dhiresh Munver and Sh. Manish
Mirg, have attended before her and their statements were
recorded by the CIT(A) personally. The appellant has been
given opportunity to cross examination and he appellant
availed the cross examination . All the statements were
send to the AO for his comments. The Ld. AR of the
assessee on 17.10.2016 filed reply submissions and
explanation on the said remand report of the AO on behalf
of the assessee BSPL. The submissions dated 17.10.2016

of the assessee were reproduced by the CIT(A) verbatim
at page No. 130 to 263 of her appellate order. Accordingly,
identify credit worthiness and genuineness of transaction
has been duly proved and established. Therefore, the
addition of Rs. 15.75 crore in A.Y. 2012-13 and Rs. 25
crores in A.Y. 2013-14 made in respect of this subscriber
and alleged assumed payment of commission of 1.50 for
A.Y. 2012-13 and Rs. 1.25 crore for the assessment year
2013-14 as deleted by the CIT(A) are rightly deleted by
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the Ld. CIT(A) thus, we uphold the same.

In the present case, the AO has not brought any evidence
on record that the amounts of share application money
received from Aadhar Ventures India Ltd., Dhanus
Technologies Ltd., M/s. Emporis Projects Ltd., L.N.
Polyester Ltd. and M/s. Yantra Natural Resources Ltd. are
merely accommodation entries. As mentioned earlier, the
AO has acted merely on the basis of information received
from the Investigation Wing. Therefore, the ratio laid down
by Hon’ble Madhya Pradesh High Court in CIT Vs. Peoples
General Hospital Ltd. (2013) 356 ITR 65 )MP), (2013) 216
Taxman 320(MP)/(2013) 35 Taxmann.com 444 (Madhya
Pradesh) is squarely gives shelter to the assessee,
wherein it was held that where the assessee establishes
the identity of share applicant, burden of proving
creditworthiness was not on assessee.

122. In the light of above discussion, we held that the
AO was not justified in making addition of Rs. 30 crores
by treating the share application money received by the
assessee as unexplained cash credit u/s. 68 of the Act.
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Chemplast Pvt. Ltd., Delhi.

Therefore, we are in agreement with the findings of Ld.
CIT(A) in deleting the same, as there was no case for
making such addition either on protective basis or on
substantive basis. Since, we have held that the assessee
company has genuinely received share application money,
therefore, question of payment of any commission does
not arise and therefore, we find no infirmity in the order of
CIT(A) accordingly, her findings are upheld. Accordingly,
all the grounds of appeal of Revenue are dismissed.”

23. This order of the Tribunal was challenged by the

Department before the Madhya Pradesh High Court in the

case of Chain House International (supra) wherein the

Hon’ble High Court had analyzed and dealt with the

statement of Shri Omprakash Khandelwal and genuineness

of M/s. Prrenata Industries in detail. It has been also pointed

out by the ld. counsel that SLP filed by the Revenue against

the said order of the Hon’ble High Court stands dismissed.

The relevant observation and the finding of Their Lordships

are reproduced hereunder:
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Chemplast Pvt. Ltd., Delhi.

16. Shri Omprakash Anandilal Khandelwal, the then
Director of Aaadhaar Ventures (I) Ltd appeared before
appellate authority (A) and his statement was recorded
wherein he stated that his company was not engaged in
any business of providing any accommodation entries.
He also stated that Shrish Chandrakant Shah was not
controlling the business of his company. He was only a
financial consultant. He stated that his company was
engaged in the business of textiles, finance and
investment. He produced the books of account for the
Assessment Years 2012-13 and 2013-14 consisting of
cash book, ledger, journal, bank book etc. The
investment made in the appellant company was found
recorded and source of such investment was also
explained. He stated that audited balance sheet of the
company for both the years reflecting the investment
made in shares of BSPL. These books of account were
examined by CIT (A). He also stated that prior to making
the investment a due diligence enquiry from a company
secretary regarding BSPL was also made. He also
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stated that a share valuation report of shares of BSPL
was provided to them. He also stated that his company
subscribed 105000 shares @ of Rs.1500/- per share in
the Assessment Year 2012-13. He further stated that
his company subscribed to 80,00,000 shares @
Rs.125/- per share in the Assessment Year 2013-14 for
the purpose of acquiring controlling stake in BSPL and
thereby acquire control of its subsidiary company Chain
House International (P) Ltd. he also stated that he knew
BSPL and its Directors. He had visited their residence
and also visited business premises of its sister
concerns. He stated that Shrish Chandrakant Shah was
their financial consultant and he did not know Shri
Sawan Kumar Jajoo. His company had made genuine
investment in BSPL. He also denied to have received or
collected any cash from anybody in exchange of RTGS
made to BSPL for subscribing share capital. He further
stated that the earlier affidavit was filed under fear and
pressure.
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20. After considering the entire factual scenario

of the case, the appellate authority found that the earlier

statements did not merit acceptance for the reasons

such as earlier statements were recorded behind the

back of the assessee and also behind the back of the

AO. No opportunity of cross examination was allowed

despite specific and repeated requests. The earlier

statements were recorded much before the search on

the appellant company. BSPL was not in the picture and

was not an issue during these statements. In such

statements none had named BSPL and held that the

statement recorded by the CIT (Appeals) are more

authentic in all respect and held as under :—

"I examined this issue in detail and found that
there is no evidence to prove, firstly generation of
unaccounted cash and transfer of such cash to
others for obtaining accommodation entries. In
have also found that during the course of search at
the appellant company and also on its associate
companies and residence of the directors when
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Chemplast Pvt. Ltd., Delhi.

every corner of the house was searched, not a
single paper, evidence or record was unearthed by
the search team which support the allegation of
generation of any unaccounted cash and transfer
of such cash for the purpose of obtaining
accommodation entries. In the absence of any
evidence of such cash transfer, the AO was
unjustified in holding that the appellant company
had routed back its own unaccounted cash. In this
connection it would be also relevant to state that
during the process of examining these investor
companies I have found that there is no transfer of
cash from the appellant company to these investor
companies or to anybody else for this purpose. I
hold that there is no generation of cash outside the
books of account and also there is no transfer of
any such cash by te appellant company to anyone
else and, therefore, I old that there is no
accommodation entry and the share capital
received is genuine."
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21. The appellate authority (A) held that the

assessee company was not connected with the money

trial and the assessee company was only concern with

the source of share capital which stands proved. The

appellate authority also examined the issue of share

capital and held as under :—

"I find that the position in the present case is
otherwise. All the five companies have produced
the books of account. There is an audit reports. All
the investors have appeared personally. The books
of account were examined thoroughly and I find
that such books of accounts contain purchases
and sales transactions, payments and receipts by
banking channels, incurring of various expenses
such as payments of rent, electricity excise duty,
sales tax, bank interest, staff salaries etc. He
himself examined the director of major shareholder
Aaadhaar Ventures namely Somabhai Sunderbahi
Meena and also examined the books of account
produced by him during the course of assessment.
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It is very pertinent to note here that even the AO
could not find discrepancies with the books of
accounts or the documents produced or the fact of
investment and source thereof. The AO had never
disagreed with the various evidences and
documents submitted before him by the director of
the investor company."

23. After considering the statement of Shri Somabhai
Sunderbhai Meena, Director of major investor company
namely M/s. Aadhar Ventures India Ltd. which was
recorded by the AO during assessment proceedings, the
CIT(A) arrived to the following findings :—

"The appellant company had purchased one
director of Aaadhaar Ventures namely Shri
Somabhai Sunderbhai Meena before the AO during
assessment proceedings. He confirmed that his
company had invested a sum of Rs.40.75 crores in
the share capital of the appellant company in Fys.
2011-12 and 2012-13. he produced the books of
account of the company and was thoroughly
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examined by the AO. This investment was found
recorded in the books of account as verified by the
AO. He explained the source of investments with
reference to the books of account. Such source was
then examined by the AO also obtained copies of
the necessary ledger accounts with reference to
the source of investments. He explained that his
company was never engaged in providing
accommodation entire and on the contrary was
carrying on real business where the turnover runs
into approx. 171 crores and 133 crores in Fys.
2011-12 and 2012-13 respectively. He also
produced the bank accounts of his company with
reference to the share capital invested in Bharat
Securities. The AO also required him to send
certain documents. Consequently copy of
resolution, shareholding pattern, copy of share
certificate, copy of MOU, copy of arbitration award,
copy of due diligence report, copy of share
valuation report and legal notice were sent by his
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company vide letter dated 18.3.2016. The AO
never disagreed with the contents of objection was
that Somabhai was not a director of the company
at the time of making investment in Bharat
Securities. Now two other directors of the same
company namely Shri Jils Raichand Madan and
Shri Omprakash Anandilal Khandelwal appeared
before me and their statements were recorded.
Both of them were directors of Aaadhaar Ventures
at the time of making the investment in Bharat
Secuirties. Their statements have already been
discussed in the earlier para and to avoidany
repetition I simply want to reiterate that the
present statements given by both the directors of
Aaadhaar Ventures before me are totally
confirmatory and corroborative to the earlier
statement of Somanbhai Sunderbahai Meena
Recorded by the AO during the assessment
proceedings."
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27. In respect of the allegation against the five listed
companies for providing accommodation entries, the
appellate authority has held as under :—

"The basis of such conclusion is the statement of
SCS and some others as recorded in the search of
others and also on the back of the appellant
company. The appellant had argued that such
statements are outside the jurisdiction of the
assessment u/s 153A since they were recorded
not in connection with the search on the appellant
company. No cross examination was done. It is
pertinent to note here that the appellant was very
keen to cross examine the persons. This keenness
is proved by the fact that on 18.09.2014 when the
opportunity of cross examination of SCS and Jajoo
was offered to the appellant, the director Naresh
Kumar reached at the designated placed at
Mumbai on time to cross examine the witnesses.
However, the department has withdrawn such
opportunity. This opportunity was never provided
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to the appellant despite repeated requests during
assessment proceedings. I hold that reliance on
statements without cross examination is against
the settled principle of natural justice. Even
otherwise SCS and others have appeared before
me and admitted that SCS was not managing and
controlling these companies for the purpose of
providing accommodation entries. All the
companies are engaged in the real business
having substantial turnover, paying rent, salaries,
electricity bill etc. One of the companies is also
paying excise duty and sales tax. Some of the
companies have taken secured loans from banks.
As I understand the reference to key associates
could be the employee of SCS namely Chandan
Kumar Singh. In the statement recorded by me he
has denied all such allegations. He has admitted
that SCS was not involved in any business of
providing accommodation entries and nor he has
ever seen SEC Controlling these five companies.
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Hence I do not agree with the conclusion arrived at
by the AO."

51. The learned ITAT after due examination of the
order of CIT (Appeals) and the documents on record
insofar as identity creditworthiness, genuineness of
transaction of M/s. Aaadhaar ventures (I) Ltd, M/s.
Dhanush Technologies Ltd, M/s. Emporis Projects Ltd
and M/s. L.N. Industries Ltd (formarly known as L.N.
Polyster Ltd) came to the conclusion that the assessee
company having receipt share application money
through bank channel and furnished complete details of
bank statements, copy of accounts and complied with
notices issued and the directors of the subscriber
company also appeared with books of accounts before
the appellate authority and confirmed the investment
made by them with the assessee company, therefore,
the identity and creditworthiness of investor and
genuineness of transaction of the share applicant has
been proved in the light of the ratio laid down by the
M.P. High Court, Delhi High Court and the Hon'ble
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Supreme Court and were of the opinion that the onus
cast upon the assessee as provided under Section 68 of
the Act has been duly discharged by the assessee the
identity of the share subscriber, creditworthiness and
genuineness of the transaction is not to be doubted. The
learned ITAT considered the case of the each company
in great detail in paras 85 to 110 of the impugned order
and recorded its finding. The aforesaid finding of fact
recorded by the ITAT are based on the material
available on record which is a finding based on
appreciation of evidence on record.

52. Issuing the share at a premium was a

commercial decision. It is the prerogative of the Board of

Directors of a company to decide the premium amount

and it is the wisdom of shareholder whether they want

to subscribe the shares at such a premium or not. This

was a mutual decision between both the companies. In

day to day market, unless and until, the rates is fixed

by any Govt. Authority or unless there is any restriction

on the amount of share premium under any law, the
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price of the shares is decided on the mutual

understanding of the parties concerned.

53. Once the genuineness, creditworthiness and

identity are established, the revenue should not

justifiably claim to put itself in the armchair of a

businessman or in the position of the Board of Directors

and assume the role of ascertaining how much is a

reasonable premium having regard to the circumstances

of the case.

54. There is no dispute about the receipt of funds

through banking channel nor there is any dispute about

the identity, creditworthiness and genuineness of the

investors and, therefore, the same has been established

beyond any doubt and there should not have been any

question or dispute about premium paid by the investors

therefore, unless there is a limitation put by the law on

the amount of premium, the transaction should not be

questioned merely because the assessing authority

thinks that the investor could have managed by paying

a lesser amount as Share Premium as a prudent
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businessman. The test of prudence by substituting its

own view in place of the businessman's has not been

approved by the Supreme Court in the decisions of CIT

v. Walchand & Co. (P.) Ltd. [1967] 65 ITR 381 and J.K.

Woollen Mfg. v. CIT [1969] 72 ITR 612 (SC).

55. The question of share premium has been

considered by the Delhi High Court in the case of CIT v.

Anshika Consultants (P.) Ltd.[2015] 62 taxmann.com

192 wherein it was held thus :—

"The onus cast upon the assessee under Section
68 of the Act to satisfy the department about the
true identity of an investor, its creditworthiness
and genuineness of a transaction was explained
by the Supreme Court in CIT v. Lovely Exports (P)
Ltd., [2008] 216 CTR 195,. Whilst, the AO acted
legitimately in enquiring into the matter, the
inferences drawn by him were not justified at all in
the circumstances of the case. Whether the
assessee company charged a higher premium or
not, should not have been the subject matter of the
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enquiry in the first instance. Instead, the issue
was whether the amount invested by the share
applicants were from legitimate sources. The
objective of Section 68 is to avoid inclusion of
amount which are suspect. Therefore, the
emphasis on genuineness of all the three aspects,
identity, creditworthiness and the transaction.
What is disquieting in the present case is when the
assessment was completed on 31.12.2007, the
investigation report which was specifically called
from the concerned department in Kolkata was
available but not discussed by the AO. Had he
cared to do so, the identity of the investors, the
genuineness of the transaction and the
creditworthiness of the share applicants would
have been apparent. Even otherwise, the share
applicants' particulars were available with the AO
in the form of balance sheets income tax returns,
PAN details etc. While arriving at the conclusion
that he did, the AO did not consider it worthwhile
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to make any further enquiry but based his order
on the high nature of the premium and certain
features which appeared to be suspect, to
determine that the amount had been routed from
the assessee's account to the share applicants'
account. As held concurrently by the CIT (Appeals)
and the ITAT, these conclusions were clearly
baseless and false. This Court is constrained to
observe that the AO utterly failed to comply with
his duty considers all the materials on record,
ignoring specifically the most crucial documents."

56-57. It is well settled that if the creditworthiness

of the investor company and genuineness of the

transaction is proved no addition under Section 68 could

be made and no substantial question of law arises.

25. The aforesaid judgment of Hon’ble High Court

clearly clinches the issue in so far as reliance placed on the

statement of Shri Omprakash Khandelwal which has been

the sole foundation of the Assessing Officer and same stands

negated and does not have any evidentiary value because
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the same was retracted subsequently which fact has been
analyzed by the Hon’ble Tribunal and also by the Hon’ble
High Court. The Hon’ble High Court also noted that source of
investment in the hands M/s. Prraneta Industries Ltd. (now
known as M/s. Aadhaar Ventures India Ltd.) is explained
and the company was not engaged in the business of
providing accommodation entries. In fact, Sh. Omprakash
Khandelwal himself, in that case, has categorically affirmed
the genuineness of the affairs of M/s. Prraneta Industries
Ltd. It is relevant to mention that in the said case, the alleged
nexus of Shirish C Shah with Investor Company was also
examined and it was found that Shrish C Shah was not even
controlling the said concern. After examining the entire gamut
of facts in the light of decision of Hon’ble MP High Court,
there remains no shred of doubt in our mind that M/s.
Prraneta Industries Ltd. is a genuine concern and veracity
and authenticity of share capital received by the appellant
from the said investor cannot be questioned.

25. Further, the issue of share premium as raised by

Ld. DR also gets dispelled by above the decision of Hon’ble
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High Court wherein it has been held that issuance of share at
premium is prerogative of the board and wisdom of the
investor. Moreover, in absence of any prohibition with regard
to share premium in the Income tax Act, 1961 as relevant for
the year under reference i.e. AY 2010-11, no adverse
inference is warranted. In any case, the assessing officer
having not disputed the value of shares or premium, we fail
to see any merit in the contention of Ld DR particularly when
the identity, creditworthiness and genuineness of transaction
stood established.

26. The decision of Hon’ble Supreme Court in the case

of PCIT v. NRA Iron and Steel P. Ltd. 412 ITR 161 (SC) as

relied upon by ld. DR and other revenue favouring decisions

are clearly distinguishable on facts and not applicable. In

fact, in the case of NRA Iron and Steel (Supra), the assessing

officer conducted detailed enquiry and identity of the parties

was under serious doubt. However, nothing of that sort has

done in this case.
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27. Thus in the light of finding recorded in aforesaid

para and respectfully following the decision of Hon’ble MP

High Court, we are of concerned view that appellant has

discharged the onus u/s 68 to prove the identity,

genuineness and creditworthiness of investor company M/s.

Prraneta Industries Ltd. (now known as M/s. Aadhaar

Ventures India Ltd.). Accordingly, the assessing officer is

directed to delete the addition u/s 68. Ground No. 4 is

allowed.

28. The Ground No. 3 and 5 are taken together as they

deal with addition of aggregate share capital of

Rs.5,12,40,000/- u/s 68 of the Act. It is a case of

reassessment proceedings u/s 147 where reopening was

made in respect of share capital of Rs.2.50 crores received

from M/s. Prraneta Industries Ltd. However, during the

course of reassessment proceedings, the assessing officer

noted that appellant has also raised share capital from other

parties and accordingly enquiry was initiated in respect of

share of capital of Rs.5,12,40,000/- received from 18 investor

companies. The assessing officer being not satisfied with
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genuineness of share capital from the said parties,

considered the addition u/s 68 of the Act.

29. At the threshold, since we have deleted the

addition of Rs. 2.50 crores which was the sole basis of notice

u/s 148, there remains no valid ground for any addition of

Rs.5,12,40,000 in view of the fact that foundational base of

reassessment proceedings gets vitiated. The legal position to

this effect is well supported by the decision of Hon’ble Delhi

High Court in the case of Ranbaxy Laboratories Ltd. v.

CIT[2011] 336 ITR 136 (Del) and Bombay High Court in

the case of Jet Airways [2011] 331 ITR 236 (Bom). It was

held by Hon’ble Jurisdictional High Court that Explanation 3

to section 147 will not applicable if no addition is made in

respect of issue which was subject matter of notice u/s 148.

30. In the present case, the reasons were recorded

only with respect to issue of share of capital of Rs. 2.50

crores from M/s. Prraneta Industries Ltd. (now known as

M/s. Aadhaar Ventures India Ltd.) and same having been

deleted by us, the remaining addition of Rs. 5,12,40,000/-
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has no legs to stands and is hereby ordered to be deleted.

31. However, for sake of completeness and keeping in

mind the gravity of issue, we feel appropriate to decide the

legality of additions made over and above the reasons

recorded in the light of scope of proceedings u/s 147 of the

Act. As mentioned earlier, the provisions of section 147 are

potent and its application is restricted to deserving cases

having satisfied the defined criteria i.e. existence tangible

material evidencing escapement of income and application of

mind. Further, the act has inbuilt checks and balances to

ensure proper exercise of power u/s 147 which included prior

approval of superior authority.

32. It is the argument of the Ld. AR appearing for the

appellant assessee that once the assessing officer records

reason and obtains approval for issue of notice u/s 148, the

scope of proceedings u/s 147 gets laid down and it is not

open to assessing officer to make roving and fishing enquiry

and arbitrarily enhance the scope of reassessment

proceedings as per whims and fancies. It was further
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contended that Explanation 3 to section 147 does not provide

unfettered power to assessing officer to go beyond the

reasons and same has to be read in conjunction with

principle provision of section 147, 148 and 151. The upshot of

argument of Ld. AR is that for making any further enquiry or

addition, the following conditions must be satisfied:

i. There must be some tangible material coming to the
notice of assessing officer during the course of assessment
which shows escapement of income in respect of some
other item (other than one referred in the reasons).

ii. The assessing officer must record reasons for including
such other item in the scope of ongoing reassessment
proceedings u/s 147

iii. Fresh approval must be obtained u/s 151 and
notice u/s 148 must also be issued.

33. In support of above proposition, the ld. AR has

relied upon the decision of Hon’ble Delhi High Court in the

case of Ranbaxy Laboratories Ltd. v. CIT[2011] 336 ITR

136 (Del) and coordinate bench in the case of Sh. Devki
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Chemplast Pvt. Ltd., Delhi.

Nandan Bindal v. ITO (ITA No. 4271/D/19 dated
18/12/2019). The finding of coordinate bench is reproduced
hereunder :

35. It may also be noted here that the A.O. in the
reasons recorded for reopening of the assessment has
merely recorded that Rs.15 lacs accommodation entry
taken by the assessee has escaped assessment.
However, at the re-assessment stage, A.O. made further
addition of Rs.52.91 crores on account of deposits in the
bank account of the assessee. No reasons have been
mentioned as to why such addition have been made and
what was the purpose in making the addition. The entire
deposit in the Bank account of the assessee could never
be unexplained. Even the Investigating Agency have not
made any allegation against the assessee if that amount
was an accommodation entry taken by the assessee? The
Ld. D.R. admitted that no notice have been issued by the
A.O. while proposing to make this addition of Rs.52.91
crores. The issue is, therefore, covered in favour of the
assessee against the Department by Judgment of Hon’ble
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Delhi High Court in the case of Ranbaxy Laboratories
Limited vs., CIT [2011] 336 ITR 136 (Del.) in which in para
18 it was held as under :

“We are in complete agreement with the reasoning of
the Division Bench of the Bombay High Court in the
case of CIT vs., Jet Airways (I) Limited [2011] 331
ITR 236 (Bom.). We may also note that the heading
of section 147 is "income escaping assessment" and
that of section 148 "issue of notice where income
escaped assessment". Sections 148 is
supplementary and complimentary to section 147.
Sub-section (2) of section 148 mandates reasons for
issuance of notice by the Assessing Officer and sub-
section (1) thereof mandates service of notice to the
assessee before the Assessing Officer proceeds to
assess, reassess or re-compute the escaped income.
Section 147 mandates recording of reasons to
believe by the Assessing Officer that the income
chargeable to tax has escaped assessment. All
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these conditions are required to be fulfilled to assess
or reassess the escaped income chargeable to tax.
As per Explanation 3 if during the course of these
proceedings the Assessing Officer comes to
conclusion that some items have escaped
assessment, then notwithstanding that those items
were not included in the reasons to believe as
recorded for initiation of the proceedings and the
notice, he would be competent to make assessment
of those items. However, the Legislature could not be
presumed to have intended to give blanket powers
to the Assessing Officer that on assuming
jurisdiction under section 147 regarding assessment
or reassessment of the escaped income, he would
keep on making roving inquiry and thereby
including different items of income not connected or
related with the reasons to believe, on the basis of
which he assumed jurisdiction. For every new issue
coming before the Assessing Officer during the
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course of proceedings of assessment or
reassessment of escaped income, and which he
intends to take into account, he would be required to
issue a fresh notice under section 148.”

36. Similar view is taken by the ITAT, Mumbai G
Bench in the case of Juliet Industries Ltd., Mumbai vs.,
ITO 6(3)(3), Mumbai (supra). Considering the totality of the
facts and circumstances, we are of the view that A.O. has
recorded non-existing, incorrect and wrong facts in the
reasons recorded for reopening of the assessment. The
A.O. did not applied his mind to the report of Investigation
Wing. The A.O. merely believed report of Investigation
Wing without making further scrutiny at the assessment.
The A.O. merely reproduced report of Investigation Wing
without making further scrutiny of the same. The A.O.
merely reproduced report of Investigation Wing and crux of
statement of Shri Kishori Sharan Goel for reopening of the
assessment in the matter. Therefore, it was merely a
borrowed satisfaction without application of mind. We,
therefore, held that initiation of re-assessment
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proceedings in the instant case is illegal, bad in law and
is liable to be quashed. In this view of the matter, we set
aside the orders of the authorities below and quash the
reopening of assessment under section 147/ 148 of the
Income Tax Act, 1961. Resultantly, all additions stand
deleted. In view of the above, there is no need to
adjudicate the issues on merit which are left with
academic discussion only.

34. We have given careful thought to the argument of

the Ld. Counsel and find ourselves in agreement with same.

The intention of legislature behind enacting provisions of

section 147 is not to create a parallel assessment proceeding

akin to regular assessment framed u/s 143(3) of the Act. The

purpose of section 147 is to catch in the tax net income

escaping assessment based on tangible material. The

requirement of tangible material and approval u/s 151 is to

keep check on arbitrary exercise of power u/s 147 which

necessarily means that assessing officer cannot convert

reassessment proceedings into regular scrutiny proceedings

at his/her sweet will. It goes without saying that Explanation
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cannot defeat the intention and purpose of a section and as

such the application of Explanation 3 will have to be in

accordance with checks and balances which are applicable

at the time of issuance of notice u/s 148.

35. In the present case, in respect of share capital of

Rs.5,12,40,000/- received from 18 parties, the assessing

officer initiated fresh enquiry during the course of

reassessment proceedings on the basis of books of account of

the appellant. There is no dispute that very same material

was in existence when assessing officer recorded reasons

and it is neither the case of the assessing officer that there

was any failure or omission on part of the appellant in

disclosing any information nor any case of fresh information

coming to the notice of the assessing officer. The original

action u/s 148 was on the basis of some information which

was has already been affirmed by us. However, in respect of

other items, the assessing officer himself made random

enquiry which is absolute misuse of power in the context of

scope of section 147 as well as settled legal principle.
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Chemplast Pvt. Ltd., Delhi.

36. It is further noted that there is no iota of material

or information with regard to share capital of

Rs.5,12,40,000/- received from 18 parties. In fact the

assessing officer gathered the information after calling for

bank statement from the bank as evident from para 10 of the

assessment order. It is classic case of roving enquiry where

the assessing officer is exceeding its jurisdiction in total

disregard to scheme and intent of section 147 of the act. Such

action of the assessing officer not only renders the purpose of

approval u/s 151 otiose but also strikes at the root of section

147 of the Act. Accordingly, we are of the view that assessing

officer was not justified in expanding the scope of

reassessment proceedings u/s 147 without following the due

course and as such the addition of Rs.5,12,40,000/- is in the

teeth of provisions of section 147 of the Act and liable to

deleted. As a result, Ground No. 3 and 5 are allowed.

37. In the result, the appeal of the assessee is partly

allowed.”
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ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

6.2. In the aforesaid Order, the Tribunal has

considered the identical issue of receipt of share capital/

premium from M/s. Prraneta Industries Ltd., (Investor

Company) and examined the issue in detail. The Tribunal

has also considered the Order of the Indore Bench in the

case of M/s. Bharat Securities (P) Ltd., in which

Departmental Appeal have been dismissed and the Order of

the Tribunal has been confirmed by Hon’ble Madhya

Pradesh High Court and ultimately the Hon’ble Supreme

Court dismissed the SLP of the Revenue. Therefore, the

issue being identical could not justify the confirmation of

the additions on merits. We also note that ITAT Indore

Bench in the case of M/s. Bharat Securities (P) Ltd., etc.,

has also considered an identical issue in respect of the same

Investor Company for providing share capital/premium to

various parties based on the statements of Shri Omprakash

Khandelwal and Shri Shirish C. Shah and dismissed

Departmental appeal confirming the Order of the Ld. CIT(A)

in deleting the additions on merits. The Order of the Indore

Bench of ITAT has been confirmed by the Hon’ble Madhya
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Chemplast Pvt. Ltd., Delhi.

Pradesh High Court and ultimately, the SLP of the
Department have been dismissed confirming the Order of
the Hon’ble Madhya Pradesh High Court. Since the identical
issue have been examined by various Benches of the
Tribunal on identical facts and addition on merit have been
deleted which is also confirmed by the Hon’ble Madhya
Pradesh High Court and by the Hon’ble Supreme Court,
therefore, in our view the issue is covered in favour of the
assessee by the aforesaid decisions. We may also note that
apart from the above findings of the different Benches of the
Tribunal, it is an undisputed fact that assessee produced
documentary evidences before the A.O. to establish that
assessee has received genuine share capital/premium from
the Investor Company. The documentary evidences have not
been doubted by the authorities below. The Investor
Company has declared income of Rs.173.55 Lacs in
assessment year under appeal and has sufficient funds to
make investment in assessee-company. It is a Public
Limited Company and listed with BSE. Therefore, the
assessee-company has been able to prove the identity of the
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ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

Investor, its creditworthiness and genuineness of the
transaction in the matter. Therefore, there were no
justification for the authorities below to make or confirm the
addition against the assessee under section 68 of the I.T.
Act, 1961. The Ld. D.R. relied upon Judgment of Hon’ble
Supreme Court in the case of NRA Iron & Steel Pvt. Ltd.,
(supra) which is also considered by the ITAT, Delhi Bench in
the case of INS Finance & Investment P. Ltd., (supra) and
this decision is also distinguishable on facts because the
Investor Company has declared income of Rs.173.55 Lacs in
the return of income for the assessment year under appeal,
therefore, Investor Company would not have meager income
in assessment year under appeal. The other decisions relied
upon by the Ld. D.R. are distinguishable on facts as
mentioned above. The Ld. D.R. also referred the Order of the
SEBI Dated 04.09.2017 in the case of M/s. Kavit Industries
Limited, in which name of the Investor Company mentioned,
but, there is no reference to the case of assessee-company
for receiving any accommodation entry from the Investor
Company. Rather the issue of receipt of share capital/
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ITA.No.3562/Del./2019 M/s. Ancon
Chemplast Pvt. Ltd., Delhi.

premium have been examined in detail by the Indore Bench
of the Tribunal as well as Hon’ble Delhi Bench of the
Tribunal and the addition on merits have been deleted in
respect of the same Investor Company and ultimately the
decisions of the Indore Bench have been confirmed by the
Hon’ble Madhya Pradesh High Court as well as by the
Hon’ble Supreme Court. Therefore, the Order of the SEBI in
the case of third party would not be relevant for the purpose
of decision in the case of assessee.

6.3. The Hon’ble Delhi High Court in the case of

Divine Leasing & Finance Ltd., 299 ITR 268 (Del.) held that

“no adverse inference to be drawn if the shareholders failed

to respond to the notice issued by the A.O.” It may be noted

here that in the case of M/s. Bharat Securities (P) Ltd., the

Indore Bench of the Tribunal has considered the fact that

the Director of the Investor Company and others were

examined in which they have confirmed the transaction with

the assessees in that case. Therefore, merely because the

same Directors did not appear in the case of assessee would

not be a ground to have an adverse inference against the
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Chemplast Pvt. Ltd., Delhi.

assessee. Considering the totality of the facts and
circumstances of the case in the light of above decisions, we
do not find any justification to sustain the addition of Rs.45
lakhs under section 68 of the I.T. Act, 1961 and addition of
Rs.90,000/- under section 69C of the I.T. Act, 1961. In view
of the above, we set aside the Orders of the authorities
below and delete addition of Rs.45,90,000/-.

6.4. Learned Counsel for the Assessee heavily relied

upon Order of ITAT, Delhi Bench in the case of INS Finance

& Investment P. ltd., (supra). In this case, the Tribunal has

confirmed the validity of notice under section 148 of the I.T.

Act, 1961 on the identical facts. Therefore, in the light of

this decision, the Order of the Tribunal in the case of ASN

Polymers Pvt. Ltd., cannot be considered favourable in

favour of the assessee. We, therefore, following the Order of

the Tribunal in the case of INS Finance & Investment P. ltd.,

(supra) confirm the reopening of the assessment in the

matter. This ground of appeal of Assessee is dismissed.

6.5. In the result, appeal of Assessee partly allowed.
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Chemplast Pvt. Ltd., Delhi.

Order pronounced in the open Court.

Sd/- Sd/-
(O.P. KANT) (BHAVNESH SAINI)
ACCOUNTANT MEMBER JUDICIAL MEMBER

Delhi, Dated 30th April, 2021

VBP/-

Copy to

1. The appellant
2. The respondent
3. CIT(A) concerned
4. CIT concerned
5. D.R. ITAT ‘A’ Bench, Delhi
6. Guard File.

// BY Order //

Assistant Registrar : ITAT Delhi Benches :
Delhi.

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