The Ahmedabad Bench of Income Tax Appellate Tribunal(ITAT)set aside the Commissioner of Income Tax(Appeals)[CIT(A)]’s order deleting an addition of Rs. 6.70 crores made by the Assessing Officer (AO) for unexplained share capital and premium.
The Revenue-appellant stated that its main issue with the CIT(A)’s order was the removal of an addition made by the AO. This addition of Rs. 6.70 crores, including a share premium of Rs. 990 per share, was treated as accommodation entries.
Become a PF & ESIC expert with our comprehensive course – Enroll Now
The amount, received as share capital by Blueray Trading Pvt. Ltd, the respondent-company, came from three entities: Prabhav Industries Ltd (Rs. 3.20 crores), Shri Ganesh Spinners Ltd (Rs. 3 crores), and Juliet Merchants Private Ltd (Rs. 50 lakhs).
The AO treated the share capital and premium as bogus accommodation entries based on evidence that the entities were fake companies controlled by Shri Shirish Chandrakant Shah. A search and survey revealed that he used dummy companies to provide such entries. Shri Shah, along with his associates, who acted as directors in these companies, and intermediaries linking beneficiaries to the entry provider, admitted to these activities during the investigation.
Become a PF & ESIC expert with our comprehensive course – Enroll Now
The CIT(A) deleted the Rs. 6.70 crore addition made by the AO, stating that the evidence and statements used were insufficient and that the assessee had proven the genuineness of the transactions. The Revenue appealed, claiming the companies involved were shell entities controlled by Shri Shirish Chandrakant Shah and that the CIT(A) ignored key evidence supporting the AO’s’s findings. The Revenue requested that the original addition be reinstated.
The tribunal heard both parties and reviewed the orders of the AO and the CIT(A). It found that the CIT(A) had removed the addition of Rs. 6.70 crores related to share capital and premium without fully understanding the AO’s case, which treated it as a bogus accommodation entry.
Become a PF & ESIC expert with our comprehensive course – Enroll Now
The AO relied on evidence from a search on Shri Shirish C. Shah, including statements from him and his associates admitting to providing accommodation entries. The CIT(A), however, dismissed each piece of evidence without looking at the bigger picture.
The appellate tribunal observed that the AO had strong evidence, such as bank accounts, cheque books, and statements from directors, all showing that the companies involved were used for accommodation entries. The CIT(A) wrongly ignored this evidence.It also noted that the CIT(A) dismissed the statements of Shri Shirish C. Shah and his associates, which the AO had used alongside other evidence. The CIT(A) claimed these statements were not valuable, but the Tribunal disagreed, as the case was based on more than just these statements.
Become a PF & ESIC expert with our comprehensive course – Enroll Now
The two member bench comprising T.R.Senthil Kumar(Judicial Member) and Annapurna Gupta(Accountant Member) concluded that the CIT(A) had made an error by ignoring key evidence. It sent the case back to the CIT(A) to reconsider all the evidence together before making a decision.
In short, the appeal filed by the Revenue was allowed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
