TaxTMI 
TaxTMI 
2016 (5) TMI 55
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....received by the appellant-company as share application money/share capital/share premium as alleged unexplained cash credit under section 68 of the Income-tax Act, 1961. (3) That he was further not justified to uphold the addition of Rs. 8,41,500 made by the learned Assessing Officer under section 69C as alleged payment of commission on the alleged accommodation entries. 2. We have heard the learned representatives of both parties, perused the findings of the authorities below and considered material available on record. 3. Briefly the facts of the case are that original assessment in this case was completed under section 143(3) of the Act on December 30, 2011, at loss of Rs. 64,92,340 against returned loss of Rs. 1,50,37,116 by making additions on account of low gross profit, under valuation of closing stock, the disallowance of depreciation, disallowance of interest and disallowance of expenses, etc. (paper book 1). Subsequently, information was received from the Investigation Wing of the Income-tax Department at Delhi that the assessee-company had received accommodation entries as share application money/share capital/share premium during the year under considerat....
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....the following details : (Rs.) 1. M/s. Campari Fiscal Services (P) Ltd. 62,00,000 2. M/s. Taurus Iron and Steel Co. (P) Ltd. 1,05,00,000 3. M/s. Tejasvi Investments (P) Ltd. 27,00,000 4. M/s. Thar Steel (P) Ltd. 55,00,000 5. Shri Bhuwan Goyal 12,00,000 6. Smt. Anita Rani 3,00,000 7. Shri Arun Goyal 4,00,000 8. M/s. Kaveri Shilp Kala Ltd. 35,00,000 9. M/s. Rajasthan Plantation Co. Ltd. 50,00,000 10. M/s. Shalini Holdings 1,25,00,000 11. Shri Shiv Goyal 5,00,000 12. M/s. Jindal Proteins 2,62,00,000 13. Miscellaneous (share application) 11,75,000 7,61,75,000 Out of these, the following companies belong to the group controlled by Shri Tarun Goyal : (Rs.) 1. M/s. Campari Fiscal Services (P) Ltd. 62,00,000 2. M/s. Taurus Iron and Steel Co. (P) Ltd. 1,05,00,000 3. M/s. Tejasvi Investments (P) Ltd. 27,00,000 4. M/s. Thar Steel (P) Ltd. 55,00,000 Total 2,49,00,000 The detailed facts relating to these, as coming out from the report of the In....
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....by misleading her. She has categorically denied her association with any of the companies. (vi) All the pass books, cheque books, permanent account number cards of these companies were in the possession of Sh. Tarun Goyal. All the bank account opening forms appear to be filled-in in the handwriting of Sh. Tarun Goyal. (vii) All the books of account of all these companies have been retrieved from the computers/laptop of Sh. Tarun Goyal. (viii) Sh. Tarun Goyal gave letters for release of bank account of the companies which had been put under restraint after search. No such appli cation was from the so-called directors of these companies. Even the various proceedings in respect of these companies before the Assessing Officers or the appellate authorities were also attended by Sh. Tarun Goyal only. (ix) Sh. Tarun Goyal could not produce the directors of various companies before the Income-tax authorities. (x) Even the auditors of various companies admitted that they had no knowledge about the directors of the companies and the audits were done by them at the instructions of Sh. Tarun Goyal. Sh. Rakesh Sharma, who signed the audit reports of ....
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....he assessee-company. These are liable to be treated as income of the assessee-company under section 68 of the Income-tax Act, 1961. It would be worthwhile to note that the above facts are similar to the case of CIT v. Nova Promoters and Finlease (P) Ltd. reported at [2012] 342 ITR 169 (Delhi). The observation of the hon'ble High Court are reproduced as below (page 191) : "30. The findings of the Tribunal cannot be upheld as they are based on irrelevant material or have been entered by ignoring the relevant material. The finding that the share application monies have come through account payee cheques is, at best neutral. The question required a thorough examination and not a superficial examination. If anything, in the light of the material gathered by the Investigation Wing about the modus operandi followed by the entry providers, the statements of Mukesh Gupta and Rajan Jassal the plea that the money was sent through banking channels, loses all force. The Tribunal ought to have seen that the modus operandi involves receipt by the entry providers of equivalent amount of cash from the asses see. The facts that the companies which subscribed to the shares were borne on ....
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....icability of the ratio. In our understanding, the ratio is attracted to a case where it is a simple question of whether the assessee has dis charged the burden placed upon him under section 68 to prove and establish the identity and creditworthiness of the share applicant and the genuineness of the transaction. In such a case, the Assessing Officer cannot sit back with folded hands till the assessee exhausts all the evidence or material in his possession and then come forward to merely reject the same, without carrying out any verification or enquiry into the material placed before him. The case before us does not fall under this category and it would be a travesty of truth and justice to express a view to the contrary." After going into the factual matrix of the case as above, the hon'ble High Court has held as below (page 199) : "43. In the case before us, not only did the material before the Assessing Officer show the link between the entry providers and the assessee-company, but the Assessing Officer had also provided the statements of Mukesh Gupta and Rajan Jassal to the assessee in compliance with the rules of natural justice. Out of the 22 companies who....
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....capement of the income. There is no tangible/affirmative/direct evidence to the effect that income of the assessee-company has escaped assessment. The fact of the matter is that a sum of Rs. 3.74 crores were received from various companies allegedly belonging to the above persons which stood duly recorded in the books of account as an amount received from the said entities. The date of filing of the original return in the case of the assessee is September 27, 2009 for the assessment year under appeal. The date of search under section 132 of the Act at the residence/premises of Shri Tarun Goyal is dated September 15, 2008 and the date of search at the premises of Shri Surinder Kumar Jain and Virender Jain is dated September 14, 2010. The original assessment in the case of the assessee under section 143(3) for the assessment year under appeal was completed on December 30, 2011. The perusal of the original assessment record will make it clear that matter relating to increase in share capital was duly dealt with, investigated and enquired into by the Assessing Officer. Moreover, the facts of the results of search conducted at the premises of Shri Tarun Goyal and Shri Surinder Kumar Jai....
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.... dated December 13, 2011, and dated November 2, 2011, as well as issued notice under section 142 calling for the information regarding receipt of share application money in respect of the above parties under reference. He has submitted that the Assessing Officer asked the assessee to prove the identity, creditworthiness and genuineness of the transaction in the matter and also directed to file evidence regarding the same. He has submitted that the assessee has submitted various replies before the Assessing Officer, copy of the reply dated December 26, 2011, and December 28, 2011, are placed on record in which the assessee explained the identity of the shareholders, their creditworthiness and genuineness of the transaction. It was also explained that these companies have confirmed giving share application money to the assessee in their replies directly submitted to the Assessing Officer. The transactions were conducted through banking channel. The assessee relied upon various decisions in support of the contention of receipt of genuine share application money including the judgment of the hon'ble Supreme Court in the case of CIT v. Lovely Exports Pvt. Ltd. [2008] 216 CTR (SC) 19....
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....verything was alright". Therefore, the objections of the assessee were rejected. Learned counsel for the assessee, therefore, submitted that the order of the Assessing Officer itself shows that the Assessing Officer at the original assessment stage examined the entire matter in issue with regard to issue of the share capital and amount received by the assessee from various companies including the five companies in reference. Therefore, on mere change of opinion, the Assessing Officer should not reopen the assessment. He has also filed copy of the statement of Shri Tarun Goyal on the day of search dated September 15, 2008 and next date September 16, 2008, copy of which is filed at paper book pages 36 to 51 and submitted that Shri Tarun Goyal has not named the assessee-company of giving any accommodation entry. Learned counsel for the assessee relied upon the decision of the Delhi High Court in the case of Swarovski India Pvt. Ltd. v. Deputy CIT [2016] 6 ITR (OL) 4 (Delhi) dated September 29, 2015, in Writ Petition No. 1772 of 2014 in which in paragraph 16, hon'ble Delhi High Court held as under (page 12) : "16. In the present case, this is exactly what has happened as q....
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....eopening of the assessment is justified along with additions on merit. He has submitted that the assessee has not discharged initial onus, therefore, addition is justified and relied upon the decisions of the Delhi High Court in the cases of CIT v. Nova Promoters and Finlease (P) Ltd. [2012] 342 ITR 369 (Delhi) and CIT v. Navodaya Castles P. Ltd. [2014] 367 ITR 306 (Delhi). The learned Departmental representative placed on record letter dated April 6, 8, 2009, issued by the ADIT (Investigation) Unit-IV, New Delhi, to the Commissioner of Income-tax-I Ludhiana with list of beneficiaries of accommodation entries provided by Shri Tarun Goyal. 13. After considering the rival submissions, we do not find any justification to sustain the impugned orders regarding re-opening of the assessment under section 147/148 of the Act. The hon'ble Full Bench of the Delhi High Court in the case of CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 (Delhi) [FB] by following Circular No. 549 of the Central Board of Direct Taxes ([1990] 182 ITR (St.) 1 ) held that on mere change of opinion of the Assessing Officer cannot be a ground for reassessment and that amendment of section 147 with effect from....
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....reassessment is sought to be made after four years the power conferred by section 147 of the Income-tax Act, 1961, does not provide a fresh opportunity to the Assessing Officer to correct an incorrect assessment made earlier unless the mistake in the assess ment so made is the result of a failure of the assessee to fully and truly disclose all materials facts necessary for assessment. There is a difference between a wrong claim made by an assessee after disclosing all the true and material facts and a wrong claim made by the asses see by withholding the material facts fully and truly. It is only in the latter case that the Assessing Officer would be entitled to proceed under section 147. Held, allowing the petition, that the Assessing Officer had not recorded the failure on the part of the petitioner to fully and truly disclose all material facts necessary for the assessment year 1997-98. What was recorded was that the petitioner had wrongly claimed certain deductions which he was not entitled to. The reassessment proceedings initiated in the year 2004 were not valid. 14. The hon'ble Delhi High Court also in the case of Swarovski India P. Ltd. (supra) did not approv....
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.... The reassessment proceedings were not valid and were liable to be quashed." 16. It is not in dispute that the assessee has received share application money from many companies/parties which are recorded in the reasons for reopening of the assessment in a sum of Rs. 7.61 crores (approximately). However, the Assessing Officer in the reasons for reopening of the assessment has considered four parties, i.e., M/s. Campari Fiscal Services Pvt. Ltd., M/s. Taurus Iron and Steel Co. P. Ltd., M/s. Tejasvi Investments (P) Ltd. and M/s. Thar Steel Pvt. Co. for considering investment in a sum of Rs. 2.49 crores. However, at the time of passing of the assessment order, the Assessing Officer made addition of Rs. 3.74 crores under section 68 of the Income-tax Act by including M/s. Shalini Holdings for making investment in the assessee-company in a sum of Rs. 1.25 crores. Learned counsel for the assessee has placed on record copies of the enquiry letters issued by the Assessing Officer at the original assessment stage in which the Assessing Officer called for the details of additions in share capital money by giving their names and complete addresses of the persons along with evidences on their....
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....e filed return on September 27, 2009. 17. It may also be noted here that original return of income was filed on September 27, 2009 and the search under section 132 of the Act was conducted in the case of Shri Tarun Goyal on September 15, 2008. The assessment in the case of the assessee was completed on December 30, 2011, therefore, the information regarding accommodation entry provided by Shri Tarun Goyal was well within the knowledge of the Income-tax Department but this fact was not taken into consideration against the assessee because the Assessing Officer accepted the genuineness of the share application money in the case of the assessee. It may also be noted here that copies of the statements of Shri Tarun Goyal recorded on the date of search on September 15, 2008, and September 16, 2008, are filed on record in which Shri Tarun Goyal has not made any specific statement against the assessee-company for providing accommodation entry to the assessee-company. Even the Assessing Officer has not examined the information received from Investigation Wing before recording the reasons for reopening of the assessment. Therefore, there was nothing on record to justify reopening of the ....
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....sessee for reopening of the assessment. The Assessing Officer was having no specific evidence or material against the assessee for reopening of the assessment. No fresh material has been brought on record to justify reopening of the assessment, therefore, the Assessing Officer has not validly assumed jurisdiction under section 148 of the Income-tax Act for reopening of the assessment in the matter. The decisions relied upon by the learned Departmental representative are not applicable to the facts and circumstances of the case. We, accordingly, set aside the reopening of the assessment and quash the impugned orders under section 147/148 of the Income-tax Act. 19. In view of the above, there is no need to consider the issue of additions on merit in detail, however, the evidences on record, as noted above and the share applicant companies in their reply confirmed giving share application money to the assessee before the Assessing Officer clearly show that the initial burden on the assessee has been discharged to prove the identity of the share applicant companies, their creditworthiness and genuineness of the transaction in the matter. The identical issue was considered by this Be....
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....irmatory letter in favour of the assessee certifying that M/s. Glacis Investment Ltd. has invested Rs. 3,70,00,000 for allotment of 7,40,000 equity shares in assessment year under appeal. The Republic of Mauritius also certified that global business licence under Financial Services Act have been granted to M/s. Glacis Investment Ltd. The balance-sheet of the shareholder company M/s. Glacis Investment Ltd. is also filed on record which is admitted as additional evidence which proved that the principal activity of this company is that of investment holding and was having the sufficient funds/assets to make investment in the assessee-company and that the investment made in the assessee- company have been certified in the balance-sheet. The bank statement of the assessee is also filed on record which support the contention of the assessee that Rs. 3,70,00,000 have been invested by shareholder company in the assessee-company through transfer entries, i.e., banking channels. The decisions relied upon by learned counsel for the assessee clearly support the contention of the assessee that the assessee has proved the creditworthiness of the shareholder company and genuineness of the transac....
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.... account books even if it is credited as receipt of share application money. The mere fact that the (assessee) company chooses to show the receipt of the money as capital does not preclude the Income-tax Officer from going into the question whether this is actually so. Where, therefore, an assessee-company represents that it had issued shares on the receipt of share application money then the amount so received would be credited in the books of account of the company. The Income-tax Officer would be entitled, and it would indeed be his duty, to enquire whether the alleged shareholders do in fact exist or not. If the shareholders exist then, possibly, no further enquiry need be made. But if the Income-tax Officer finds that the alleged share holders do not exist then, in effect, it would mean that there is no valid issuance of share capital. Shares cannot be issued in the name of non-existing persons. The use of the words 'may be charged' in section 68 clearly indicates that the Income-tax Officer would then have the jurisdiction, if the facts so warrant, to treat such a credit to be the income of the assessee. If the shareholders are identified and it is e....
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....cess, fully discharged the onus that lay upon it for proving the identity of the subscribers and the genuine ness of the transactions. On that basis, it deleted the addition made by the authorities below. On appeal to the High Court : Held, dismissing the appeal, that in the absence of any perversity in the view taken by the Tribunal or anything to establish conclusively that the finding regarding the genuineness of the subscribers and the transactions suffered from any irrationality, no substantial question of law arose from the order of the Tribunal. The deletion of the amount was justified". Gauhati High Court in the case of CIT v. Down Town Hospital Pvt. Ltd. [2004] 267 ITR 439 (Gauhati), held "that regarding amounts received as share application moneys, the Tribunal had given clear finding after appreciation of the materials on record that the assessee had filed the details regarding the source of funds of shares and their Income-tax file numbers before the Assessing Officer. According to the Tribunal the assessee had also submitted before the Assessing Officer the confirmation from the creditors where full addresses, Income-tax file number, etc., were given.....
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....een invested by a particular person, be he a partner or an individual, then the responsibility of the assessee is over. Whether that person is an Income-tax payer or not and where he had brought this money from, is not the responsibility of the firm. The moment the firm gives a satisfactory explanation and produces the person who has deposited the amount, then the burden of the firm is discharged and in that case that credit entry cannot be treated to be the income of the firm or the purposes of Income-tax". The Income-tax Appellate Tribunal, Indore Bench in the case of ACIT v. Vindhya Soya Ltd., I. T. A. No. 227/IND/2004, held "in the instant case, the Commissioner of Income-tax (Appeals) in annexure of his order has mentioned details of the shareholder, their addresses, holding of agricultural land, permanent account number of some of the shareholders, amount of deposit, their occupation and evidence filed in form of confirmation letter, copy of acknowledgment receipt of some of the shareholders filing return of income, evidence of agricultural holding, etc. We have also noted that the assessee- company has furnished complete details of all the shareholders. The....
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...., the assessee. The Assessing Officer failed to show that the amounts, which had come to the hands of the creditors from the hands of the sub-creditors, had actually been received by the sub-creditors from the assessee. Therefore, the Assessing Officer could not have treated the said amounts as income derived by the assessee from undisclosed sources". The hon'ble Rajasthan High Court in the case of CIT v. First Point Finance Ltd. [2006] 286 ITR 477 (Raj), held (headnote) "that it was not denied that all the shareholders/share applicants were genuinely existing persons. It was also not denied that each of them was an Income-tax assessee and copies of the return of their income were also placed before the Assessing Officer. There was no presumption that the assessee was the benami owner of the Investment made by the existing persons. The Tribunal was justified in deleting the addition". The hon'ble Delhi High Court in the recent decision in the case of CIT v. Illac Investment P. Ltd. [2006] 287 ITR 135 (Delhi), held (page 136) "the respondent-assessee had for the assessment year 1989-90 disclosed in its return sum of Rs. 4,75,000 received as share applicatio....
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....e mentioned. It is also admitted fact that the said non-resident Indian company is a registered company and which fact is also proved by the certificate of incorporation of M/s. Alliance Industries Ltd. which is also certified by the Notary Public and is countersigned by the Governor and Commander in Chief of the city of Gibraltar. These certificates are supported by later on by Faria and Associates Chartered Accountants. The identity of the foreign investor M/s. Alliance Industries Ltd. is therefore established beyond doubt. The Assessing Officer also did not dispute the identity and existence of the share holder M/s. Alliance Industries Ltd. The Assessing Officer also did not dispute transfer of money by M/s. Alliance Industries Ltd. to the assessee for the purchase of shares of the assessee-company and the amount invested in the assessee-company on account of share capital/share premium. The assessee from the certificate of the Government of India has established that M/s. Alliance Industries Ltd. invested the money in the business of the assessee after obtain ing the permission of the Government of India. The forms filed with the Reserve Bank of India would also indicate that t....
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....at the Income-tax authority cannot ask the assessee to prove source of the source. All the issue of the shares to M/s. Alliance Industries Ltd. have already been reported by the assessee to the Registrar of Companies. As per submission of learned counsel for the assessee though the Directorate of Enforcement Government of India conducted certain inquiries against the assessee under the provisions of Foreign Exchange Management Act but no further inquiry has been made into the matter. It would also prove that the money in question flow from M/s. Alliance Industries Ltd. therefore the Assessing Officer was not justified in drawing adverse inference against the assessee. The Assessing Officer has not brought any evidence on record that the share application money received by assessee from M/ s. Alliance Industries Ltd. belong to the assessee or that it was the assessee's own money which it had received in the shape of dollars from the non-resident Indian company. It is therefore not in the nature of income of the assessee because the money received was on account of share capital/share premium. The learned Commissioner of Income-tax (Appeals) has given categorical finding in the i....
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....has failed to point out that the circumstances for treating the gain in the transactions for the assessment year 1972-73 as a capital gain were different from those in the assessment years 1962-63 and 1963- 64 and, as such, the finding has to be consistent. The Tribunal has, therefore, not committed any error. In this respect, we would like to set out hereinbelow an excerpt from the decision of the Orissa High Court in CIT v. Belpahar Refractories Ltd. [1981] 128 ITR 610 (Orissa) at pages 613-614". The hon'ble Punjab and Haryana High Court in the case of CIT v. Vikas Chemi Gum India [2005] 276 ITR 32 (P&H) held (headnote) "that since the appellant did not challenge the order passed by the Tribunal in relation to the assessment year 1986-87 by which it confirmed the order of the Commissioner (Appeals) deleting the addition made by the Assessing Officer on account of value of 'bardana' used for storing 'churi and korma', it could not challenge a similar order passed in relation to the assessment year 1988-89". The hon'ble Supreme Court in the case of Berger Paints India Ltd. v. CIT [2004] 266 ITR 99 (SC) held "High Court-decision in the case ....
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....ent in the assessee-company in the earlier years which is not disputed by the Assessing Officer therefore the contentions of the learned Departmental representative have no merits and are rejected. The reliance of the learned Departmental representative on the order of the Income-tax Appellate Tribunal, Delhi Bench in the case of A-One Housing Complex Ltd. (supra) is misplaced because ultimately in this case it was held 'whether onus of assessee in the case of share capital by public issue is lighter one and therefore such onus would stand discharged if identity of share appli cant is established-held-Yes'. This case is not applicable in favour of the Revenue because the amount is not received from close relative or friend. 12.1 On going through the above documentary evidences on records and the judicial pronouncements referred to above, it is clear neither the Assessing Officer nor the learned Departmental representative appearing for the Revenue have disputed the documentary evidences filed by the assessee before the authorities below. The only point agitated by the Assessing Officer was creditworthiness of M/s. Alliance Industries Ltd. which is also satisfactori....
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....resentative. We may also note that the hon'ble Supreme Court in the case of CIT v. P. Mohanakala [2007] 291 ITR 278 (SC), as relied upon by the learned Departmental representative has considered the fact in which the Assessing Officer held that the gift though apparent were not real and accordingly treated all the amounts of the gift as income of the assessee under section 68 of the Income-tax Act. The assessee did not contend that even if their explanation was not satisfactory, the amount were not of the nature of income. The learned Commissioner of Income-tax (Appeals) confirmed the order and the Tribunal through majority view confirmed the orders of the authorities below. On an appeal, the High Court reappreciated the evidence and substituted its own finding and came to the conclusion that the reasons assigned by the Tribunal were in the realm of surmises, conjecture and suspicion. The hon'ble Supreme Court on such facts "held, reversing the decision of the High Court, that the findings of the Assessing Officer, the Commissioner (Appeals) and the Tribunal were based on the material on record and not on any conjectures and surmises. That the money came by way of bank cheq....