Futurestic International Pvt. Ltd. vs Assessing Officer

“1 That on the facts and in the circumstances of the case and in law, the learned CIT(A) has grossly erred in upholding the reopening of assessment under Section 147, which is bad in law, arbitrary, and void ab initio, as the same is based solely on unverified third-party statements without any independent enquiry or tangible material..

2.

That the entire reassessment is illegal and void, as it was initiated solely on the basis of statements from third parties such as Mr. Yashpal Gupta and others, without confronting the assessee or affording any opportunity for cross-examination, thereby violating the principles of Natural Justice.

3.

That the Ld. CIT(A) has erred in confirming the addition of ₹1,00,00,000 under Section 68 on account of share capital, without properly appreciating and examining the complete evidentiary documents filed by the assessee, including PAN, bank statements, share application forms, board resolutions, and affidavits from directors of the applicant companies.

4.

That the Ld. Authorities below failed to consider that the entire amount of ₹1,00,00,000 was received through proper banking channels from companies having valid PAN, ROC registration, and confirmations, thereby establishing the identity, creditworthiness, and genuineness of the transactions, as required under law.

5.

That the observation of the Ld. AO and CIT(A) that PAN and ROC registrations are not enough to establish the genuineness of the transaction is erroneous and against settled judicial principles, especially when other supporting documents, such as share application forms and board resolutions, were duly furnished.

6.

That the Ld. Authorities below have made the addition merely on presumptions and assumptions, without conducting any independent investigation or verification, and solely relying on general findings of third-party surveys not directly related to the assessee.

7.

That the CIT(A) erred in not considering the offer made by the assessee to produce the directors of the investor companies via video conferencing or in person, and such refusal to allow cross-examination or direct verification has rendered the assessment arbitrary and unsustainable.

8.

That reliance placed by the lower authorities on the statements of third parties, namely Mr. Yashpal Gupta, Rani Sharma, and others, without furnishing their statements to the assessee or offering a right to rebut and cross-examine, violates the Hon’ble Supreme Court’s principle in Andaman Timber Industries vs. CCE (2015) 62 taxmann.com 3 (SC) and Hon'ble ITAT Delhi's ruling in Amitabh Bansal vs ITO (ITA 7802/DEL/2018).

9.

That the Ld. Authorities have not appreciated that the assessee furnished affidavits from directors of share applicant companies affirming the genuineness of the transactions, which were neither refuted nor proved false by the department through any inquiry or examination.

10.

That the reassessment proceedings are based on "borrowed satisfaction" and the information from the Insight portal was not corroborated by any independent examination of assessee's books or affairs, which is against the ratio laid down by the Hon’ble Delhi ITAT in M/s VSR Enterprises vs ITO (ITA No. 1855/Del/2016).

11.

That the Ld. CIT(A) failed to discharge quasi-judicial obligations by dismissing the appeal without proper application of mind and legal appreciation of facts and evidences placed on record.

12.

That both the assessment and appellate orders are perverse, passed without due consideration of facts, devoid of application of mind, and deserve to be quashed.

13.

That the appellant craves leave to add, amend, alter or withdraw any of the grounds of appeal before or at the time of hearing.”

“ 1. Reopening under section 147 is bad in law as the reasons recorded were based on borrowed satisfaction from Investigation Wing’s report without independent application of mind by the AO.

2.

Notice under section 148 was issued without due process, making it vague and ambiguous, and without providing copy of reasons or opportunity to rebut at the time of reopening.

3.

No opportunity was granted for cross-examination of Shri Yashpal Gupta and others whose statements formed the basis of the addition.

4.

Addition of ₹77,00,000 under section 68 is arbitrary, mechanical and unsustainable. It was made merely on the basis of third-party statements and presumptions, without rebutting the documentary evidences filed by the assessee proving identity, creditworthiness and genuineness of the loan/share capital.

5.

Appellant furnished all supporting evidences, including: Confirmations, Audited Financials, Bank statements, Affidavits of Directors, MCA master data and Share allotment records (Form PAS-3, Board Resolution). These were summarily disregarded by the AO and CIT(A) without proper verification or adjudication.

6.

No enquiry was conducted under section 133(6) or summons under section 131 to the share applicant companies or their directors, despite appellant’s readiness to produce them.

7.

Onus u/s 68 was discharged by furnishing all three requisites: identity, creditworthiness and genuineness, shifting the burden on the Revenue, which was not discharged.

8.

The CIT(A) erroneously upheld the AO’s finding by ignoring that these were in fact share application monies converted into equity in subsequent year (supported by Form PAS-3 and share allotment data).

9.

Violation of settled judicial precedents including: CIT vs. Lovely Exports Pvt. Ltd. (216 CTR 195 – SC), PCIT vs. NRA Iron & Steel Pvt. Ltd. (412 ITR 161 – SC), Amitabh Bansal vs. ITO (ITA 7802/Del/2018) and Nova Promoters & Finlease Pvt. Ltd. (342 ITR 169).

10.

The assessment order is arbitrary and based on surmises and conjecture, in violation of principles of natural justice, fair play, and proper assessment procedure under law.

11.

The assessee craves leave to add/ delete/ amend any or all grounds to appeal during the course of personal hearing.”

“5.6

I have gone through the grounds of appeal, statement of facts, assessment order and the submissions of the appellant. The appellant had received credit entries of Rs.1,00,00,000 on different dates in its bank account.

5.7

In the appellate proceedings, the burden of proof lies on the appellant to prove that facts and findings of the AO are incorrect. Rather than alleging that the observations of the Assessing officer, the appellant should have filed the details in support of its claim that the cash deposited are nothing but the share application money received from 3 parties. The appellant ought to have furnished the share application submitted, confirmation, details of the shares allotted, etc. Mere routing of a transaction through banking channel does not make it an explained genuine business transaction. The primary requirements, which should be satisfied in such cases is, identification and creditworthiness of creditors along with genuineness of the transaction. These three requirements have to be tested not superficially but in depth having regard to the human probabilities and normal course of human conduct.

5.8

company is certainly not sufficient when surrounding and attending facts predicate a cover up. These facts indicate and reflect proper paperwork or documentation but genuineness, creditworthiness, identity is deeper and obtrusive. The word 'identity' as defined, it was meant the condition or fact of a person or thing being that specified unique person or thing. PAN numbers are allotted on the basis of applications without actual verification of the identity or ascertaining active nature of business activity. PAN is number which is allotted and helps the revenue keep track of the transaction. PAN number is relevant but cannot be blindly and without considering surrounding circumstances treated sufficient to discharge the onus, even when payment is through bank account.

5.9

It is to be noted that the assessee in the instant case is the ultimate beneficiary and unaccounted money routed through a maze of entities is for the benefit of the assessee. Therefore, the cash credit is to be taxed appropriately in the hands of the assessee. In a recent decision the hon'ble Indore Bench of ITAT, in the case of Agrawal Coal Corpn P Ltd. Vs. Asst. CIT 63 DTR 20, while dealing with a similar situation held that 'merely because the companies were registered with ROC, were filing Return of Income having PAN/Bank accounts, share application forms were submitted, but the same did not establish their identity as these companies might have been existing on papers or in real sense at the tie of registration but were specifically found to be non-existent. Further, assessee even failed to produce the director or employees of these share applicants and, thus, addition under sec. 68 made in the hands of assessee was sustainable.

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5.13

In the instant case, no further details except very primary documents have been submitted by the appellant. Mr. Yashpal Gupta himself accepted in his statement that the companies M/s. Supremo Marketing P Ltd. M/s. First Hi Fin Ltd. and M/s. Ahy Foods have been created by him for providing accommodation entries i.e., taking cash from parties and giving them RTGS entries in the form of bogus loans and advances. Further, the appellant had not submitted any new information or documents. Under the circumstances and in view of the above, I have no reason to interfere with the decision of the Assessing officer. Therefore, the addition of Rs.1,00,00,000 u/s 68 is hereby upheld. Ground Nos. 3 and 4 are dismissed.”