The Income Tax Appellate Tribunal (ITAT), Delhi Bench while deleting the addition ruled that no adverse inference to be drawn if shareholders failed to respond to the notice issued by the AO.
The assessee, M/s. Ancon Chemplast P. Ltd. has challenged the reopening of the assessment under section 147 or 148 of the Income Tax Act, 1961, addition of Rs.45 lakhs under section 68 of the Income Tax Act, 1961 being share capital received from M/s. Prraneta Industries Ltd., and addition of Rs.90,000/- under section 69C of the Income Tax Act, 1961 on account of commission.
The search and seizure operation was conducted at various premises of Shirish C. Shah who happened to be the main person engaged in providing bogus accommodation entries like long term capital gains, share capital, share premium and loan etc. 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 the assessee company has received Rs.45 lakhs in three transactions from M/s. Prraneta 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 companies which is controlled and managed by Shri Shirish C. Shah for the purpose of providing accommodation entries.
The statement of Omprakash Khandelwal, Promoter of the Company was recorded where he admitted to providing accommodation entries of the Investor Companies after charging Commission at the rate of 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.
The assessee filed a letter before AO submitting therein that return of income filed originally may be treated as return filed in response to notice under section 148. The AO separately disposed of the objections of the assessee. The AO issued statutory notices seeking an explanation of the assessee with regard to the amount received of Rs.45 lakhs from the Investor Company.
The coram of O.P.Kant and Bhavnesh Saini held that merely because the same Directors did not appear in the case of the assessee would not be a ground to have an adverse inference against the assessee.
The Tribunal while set aside the Orders of the authorities below and deleted the addition of Rs.45,90,000 held that there is no justification to sustain the addition of Rs.45 lakhs under section 68 and addition of Rs.90,000/- under section 69C.
However, the ITAT in light of this decision, the Order of the Tribunal in the case of ASN Polymers Pvt. Ltd. confirmed the reopening of the assessment in the matter.
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