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2018 (1) TMI 316
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.... of other appeals in ITA No. 2484/Del/2017 and 2485/Del/2017 for Assessment Year 2012-13. 2. Now, therefore, we take up the ITA No. 2491/Del/2017 in case of Globus Projects Pvt. Ltd. 3. The assessee has raised the following grounds of appeal in ITA No. 2491/Del/2017 for Assessment Year 2012-13: "(A) That on the facts & circumstances of the case and the statement of Mr. Sanjay Singhal, CMD of M/s Bhushan Power and Steel Ltd. the learned CIT u/s 263 erred in: i) Holding that the A.O. has failed to thoroughly examine/ investigate the identity/ genuineness/ creditworthiness/ of the parties from whom the alleged share application money/ share capital have been received Inspite of the A.O. conducting detailed enquiries and servicing notices on all shareholders, companies u/s 131 and 133(6) of the Income Tax Act & due compliances by them including recording of Directors statement on oath. ii) Holding that the capital contributed by M/s KDK Food Grains Pvt. Ltd., M/s Leisure Buildcon Pvt. Ltd. and M/s Manomay Foods & Beverages Pvt. Ltd. in the Assessee Company was not genuine as it was out of funds advanced by the M/s Bhushan Power and Steel Ltd to them. ....
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..../s KDK Food Grains Pvt. Ltd., Shop No. 17, Plot No. 13E, Gali No. 20, Guru Nanak Complex, Madhu Vihar, Delhi - 110092. (Rs, 3,36,00,000/-) (iii) M/s Manomay Food & Bev. Pvt. Ltd., Shop No. 17, Plot No. 13E, Gali No. 20, Guru Complex, Madhu Vihar, Delhi -110092 (Rs. 1,71,00,000/-) During the course of assessment proceedings assessee was required to give the source of the share capital the company, please also furnish detail of any changes in the share capital of the compare, the year . In response to the assessee has submitted its reply vide letter dated 12.03.2014 the assessee company has allotted 2,46,000 fresh shares. To prove the identity, genuineness of the transactions and creditworthiness of each of the above said share holders, following documents are enclosed herewith for verification and record. a) Share application form b) Board resolution for investment in the assessee company in case the share holder is a company. d) Copy of extract of hoard meeting of the. assessee company in which allotment of shares has been made. d) Copy of allotment letter. e) Copy of confirmation of accounts. f) Bank statement....
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....g any meaningful business activities and are existing only on papers. Summons were issued to the companies and their directors on 02.09.2014. No. Name of the company to which summons issued Name of the Directors to which summons issued Remarks 1 M/s KDK Food Grains Pvt Ltd. Sh. Ajay Kumar, E-635/B, Pratap Vihar, Ghaziabad Sh. Mahindra Saxena, E-648, Sec-10, Pratap vihar, Vijay Nagar, Ghaziabad No compliance made till date 2 M/s Leizure Buildcon Pvt Ltd. Sh. Surabh Jain and Sh. Ramji, 27 KHokari Village, Sunlight colony. New Delhi No compliance made till date 3 M/s Manomay Foods & Beverages Pvt Ltd. Sh. Ajay kumar, E-635/B, Pratap Bihar, Ghaziabad Sh. Mahindra Saxena, E-648, Sector-to, No compliance made till date 4 M/s SPB Propcon Pvt. Ltd. Pratap Vihar, Vfioy Nagar, GhaziabadSh. Surabh join and Sh. Ramji, 27 Kitokari Village, Sunlight colony, New Delhi No compliance made till date 5 M/s Strap Creation Pvt Ltd Sh. Jai Narayan, 106 Dua Business Center, Main Vikas Marg, Shakarpur, Delhi, Sh. Anil*Kumar, A-62, Laxmi Nagar, Delhi No compliance made till date 6 M/s Syns Construction Pvt Ltd. Sh.....
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....he paper book ) "The Honourable Commissioner of Income Tax - Central, Gurgaon. Haryana. Respected Sir, Re:- Reply to Show Cause Notice u/s 263 of Income Tax Act 1961 M/s. Globus Project Private Limited. Assessment Year 2012-13 The above referred assessee is in receipt of show cause notice u/s 263 of Income Tax Act, 1961 for the above-mentioned assessment year. In this regard we respectfully submit as under: Statement of Facts 1. The Assessee is Private Limited Company engaged in the business of Construction and development of Residential and Commercial Complexes. 2. A search and seizure operation under section 132 of the Act was carried out on Bestech Group of cases on 4th July, 2012, wherein some papers relating to assessee company were also seized. 3. During the year under assessment the assessee company has received share application money/share capital from the following companies : S. No. Name of Shareholder Amount Received 1 KDK Food Grains Pvt. Ltd. 3,36,00,000 2 Leisure Buildcon Pvt. Ltd. 2,31,00,000 3. Manomay Food & Beverages Pvt. Ltd. 1,71,00,000 4. The....
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.... Explanation 1.-For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) ................ (b) "record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Commissioner or Commissioner; (c) ............ Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the asses....
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....which the CIT does not agree. It cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law. (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power U/s 263 is not permitted to substitute his estimate of income in place of the income estimated by the AO. (vii) The AO exercises quasi-judicial power vested in him and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not feel satisfied with the conclusion. (viii) The CIT, before exercising his jurisdiction under s. 263 must have material on record to arrive at a satisfaction. (ix) if the AO- has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on being satisfied with the explanation of the assessee. the decision of the AO cannot be held to be erroneous simply because in his order....
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....for your honor‟s kind perusal and records. From the above facts, it is evident that the assessing officer had made adequate / requisite inquiries / verification to satisfy herself about genuineness of transactions and framed assessment order, only, after being fully satisfied and after taking the approval from her range head. Therefore, order passed by assessing officer cannot be deemed to be erroneous as per Explanation 2 to Section 263 of the Act. Thus, the case of the assessee mjay not be covered under the provisions of Section 263 of the Act. Statement recorded u/s 131 and submission received u/s 133(6) forming part of "Record‟ Sir, all the above Replies filed by shareholder companies u/s 133(6) of the Act and Statements of directors of shareholder companies recorded on oath in response to notice u/s 131 of the Act, are forming part of "records‟ as defined in explanation 1(b) of Section 263 of the Act. These records may have skipped your examination / may have not been made available to your goodself while judging the assessment order of the Assessing Officer and framing an opinion that identity, creditworthiness of share applicants and genui....
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.... genuine. The Show Cause Notice also states that he admitted for disallowance of interest on these advances given. It is worth mentioning here that he never admitted to the disallowance of the whole advances but agreed to disallowance of interest attributable to these advances only. Thus, in his statement, Mr. Sanjay Singhal, CMD of BPSL has never admitted that advances paid to share applicant companies are bogus. Rather, he confirmed the payment of advance to share holder companies, out of which share capital has been paid to the assessee company during the year under consideration. In other words, he has rather confirmed the sources of funds out of which share capital has been paid to assessee company. Thus, no addition u/s 68 of the Act may be made in the case of the assessee company. 2. That the allegation that these share applicant companies does not have any meaningful business and exist only on papers are just presumptions and there is no basis to allege so. It is evident from the assessment records that the addresses of all the investor companies were genuine where all the summons/ notices/ correspondences have been served/ delivered and complied ....
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..../ share application money, whatever addition which the learned AO may think fit, should have been made only in the hands of share applicant companies and not the receiver of the money (assessee company) as per the principles laid down by Hon‟ble Supreme Court in the case of CIT vs. LOVELY EXPORTS PVT.LTD {(2008) 216 CTR 195) wherein it was held that - "If the share application money is received by the assessee company even from alleged bogus shareholders, whose names are given to AO, then the Department is free to proceed to re-open their individual assessments in accordance with law. But it cannot be regarded as undisclosed income of the assessee company". Hon‟ble Delhi High Court in CIT VS. STELLER INVESTMENTS LT 1991) 192 ITR 287) that "Even if it be assumed that the subscribers to the increased share capital were not genuine, under no circumstances, can the amount of such capital be regarded as undisclosed income of the assessee company if certain shareholders were bogus and money was provided by some other persons, reopening of assessment of such persons would be sensible". Hon‟ble High court of Delhi has held in CIT VS. DOLPHIN CANPACK ITD ....
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....t companies before the learned assessing officer. The appellant was not required to prove the source of the source as has been held by the Supreme Court in the case of CIT vs Daulat Ram Rawat Mull (87 ITR 349)(SC). Hon‟ble High Court of Delhi in the case of CIT vs Value Capital Services Ltd. (307 ITR 334) have held that the additional burden lay on the revenue to show that even if the applicant does not have means to make the investment in shares, the investment has emanated from the coffers of the assessee. In case, this additional burden is not discharged, the investment cannot be treated as undisclosed income of the assessee. To Sum up, Sir, on this issue the law is very clear that once, assessee prima facie discharges its obligation by furnishing of requisite documents coupled with t. \a i.ev.co of parties, thereafter the onus shifts to the Department and the assessing officer is duty bound to investigate the same and addition, if any, could be made in the hands of applicant companies. In the present case, the assessee company has duly discharged onus cast on it to prove identity of shareholders, creditworthiness of the -shareholder and genuinen....
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....ause notice, Mr. Sanjay Singhal, CMD of BPSL has accepted the fact that BPSL has given the amounts mentioned in the notice to Share Applicants Companies and these are still outstanding in the books as advance. In other words, he accepted and confirmed the fact that payments made by BPSL to share applicant companies (the companies who has paid share application money to assessee company) are genuine. It is also evident from the fact that all these advances have been duly repaid back by these share applicant companies to BPSL in subsequent period. The confirmation of account from Bhusan Power & Steels Ltd. reflecting such repayment is submitted herewith for your kind verification and records. It is worth mentioning here that Mr. Singhal never admitted to the disallowance of the whole advances but agreed to disallowance of interest claimed by BPSL which is attributable to these advances. He rather confirmed that advance has been paid by BPSL to share holder companies. After repayment, his statement got further substantiated that all these advances, were genuine business advances. It is further submitted that Manomay Foods & Beverages Pvt. Ltd. which has paid share ap....
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....unt from Bhusan Power & Steel Ltd. reflecting such repayment from Manomay Foods & Beverages Pvt. Ltd. is submitted herewith for your kind verification and records. Thus, Sir, In the present case, the assessee company has duly discharged onus cast on it to prove identity of shareholders, creditworthiness of the shareholder and1* genuineness of transaction by providing requisite proofs / documents. The Learned Assessing officer has also independently verified the Identity, Creditworthiness of share applicant and genuineness of transactions by independently calling the directors of the companies u/s 131 and/or calling information U/s 133(6) of Income Tax Act. Further, the sources of funds out of which share capital has been paid to assessee company has also been confirmed by Mr. Singhal, CMD of BPSL in his statement before Investigation Wing. Moreover, all the share applicant companies have repaid back the advances to BPSL in subsequent period. Thus, no addition u/s 68 of the Act may be made in the case of the assessee company. In case the your goodself is still not satisfied about the genuineness of transaction, appropriate action may have been taken against the sha....
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.....Y. Amount given as capital advances 1 M/s KDK Food Grains Pvt. Ltd., F-20/B, 2^nd floor, Gali No. 29, Gurudwara Rd., MadhyVihar, New Delhi 2011-12 12,50,00,000/- 2 M/s Leisure Buildcon Pvt. Ltd., 27 Kilokari Village Opposite, Thaper Business Center, New Delhi 2011-12 12,50,00,000/- 3 M/s Maonmay food & Bev. Pvt. Ltd., F-20/B, 2^nd floor, Gali No. 29, Gurudwara Rd., MadhyVihar, New Delhi 2011 - 12 9,00,00,000/- 4 M/s SPB Propcon Pvt Ltd., 27 Kilokari Village Opposite, Thaper Business Center, New Delhi 2011-12 13,00,00,000/- 5 M/s Strap Creation Pvt Ltd., 106 Dua Business Center, Main Vikas Marg, Shakarpur, Delhi 2011-12 10,00,00,000/- 6 M/s Syns Construction Pvt Ltd., A-69, Laxmi Nagar, Delhi 11,00,00,000/- Sh. Sanjay Singhal stated that Rs. 68 crores were given to the above companies by BPSL as advances. In this case also, BPSL has made payments tojgaper companies namely M/s KDK Food Grains Pvt. Ltd., M/s LeizureBuildcon Pvt. Fid/, M/s Manomay Foods & Beverages Pvt. Ltd., M/s SPB Propcon Pvt. Ltd., M/s Strap Creation Pvt. Ltd., M/s Syns Construction Pvt. Ltd. for s....
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.... in the entities ofBesiech Group in form of bogus share capital/premium. Thus, prima facie from the discussed modus operand'i, it appears that cash paid by Beslech group for taking bogus share capital/premium accommodation entries through paper entries has been given equal amount to BPSL group. However issue may be investigated further before finalizing the assessment proceedings." 3. A show cause notice was issued vide this office letter dated 08.11.2016 giving an opportunity to show cause why assessment order dated 13.06.2014 be not revised. The same is reproduced as under: (i) On perusal of the balance-sheet and record of the assessee for year under assessment, it was observed that assessee company have received share application money/share capital to the extent of Rs. 7,38,00,000/- from the three companies named as under:- (a) M/s Leisure Buildcon Pvt. Ltd., C-17, Guru Nanakpura, Opp. Scope Tower, Laxmi Nagar, New Delhi (Rs. 2,31,00,000/-) b) M/s KDK Food Grains Pvt. Ltd., Shop No. 17, Plot No. 13E, Gali No. 20, Guru Nanak Complex, MadhuVihar, Delhi - 110092. (Rs. 3,36,00,000/-) c) M/s Manomay Food & Bev. Pvt. Ltd., Shop No. 17,....
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....nd floor, Gali No. 29, Gurudwara Rd., MadhyVihar, New 2011-12 9,00,00,000/- 4 Mi/s SPB Propcon Pvt Ltd., 27 Kilokari Village Opposite, Thaper 2011-12 13,00,00,000/- 5 M/s Strap Creation Pvt Ltd., 106 Dua Business Center, Main Vikas Marg, 2011-12 10,00,00,000/- 6 M/s Syns Construction Pvt Ltd., A-69, Laxmi Nagar, Delhi 11,00,00,000/- Sh. Sanjay Singhal stated that Rs. 68 crores were given to the above companies by BPSL as advances. In this case also, BPSL has made payments to paper companies namely M/s KDK Food Grains Pvt. Ltd., M/s Leizure Buildcon Pvt. Ltd., M/s Manomay Foods & Beverages Pvt. Ltd., M/s SPB Propcon Pvt. Ltd., M/s Strap Creation Pvt. Ltd., M/s Syns Construction Pvt. Ltd. for siphoning off funds in the grab of making bogus purchases or for buying capital goods. From the analysis of 1TR and ROC data of the above mentioned companies, it is found that these companies are not doing any meaningful business activities and are existing only on papers. Summons were issued to the companies and their directors on 02.09.2014. S. No. Name of the company to which summons issued Name of the Directors to wh....
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....roceedings, the issue of creditworthiness and genuineness of the transactions of the investor companies from whom the assessee company has received share capital has not been thoroughly examined/ investigated which is also evident from the report dated 17.04.2015 of DDIT(Inv.)-I, Faridabad. Merely filing confirmations/PAN Nos. etc. does not prove the genuineness & creditworthiness of the investors. (v) . The order of the Assessing Officer in therefore erroneous & prejudicial to the interests of revenue. 4. Opportunities were given to the assessee from time to time. The assessee‟s main arguments have been that: (a) The assessee had discharged his onus by producing all evidences. (b) Sh. Sanjay Singhal CMD of BPSL never admitted to the disallowance of the whole advances but agreed to disallowance of interest claimed by BPSL which is attributable to these advances. (c) Advances by the share applicant companies who had received advances from BSPL have been repaid to BSPL. 5. The facts of the case have been considered: (a) The facts in respect of share application money/share capital are as under: Sr. No. Name of....
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....o thoroughly examine/investigate the identity/genuineness/creditworthiness of the following three parties from whom share capital has been received * M/s KDK Food Grains (P) Ltd. Rs. 3,36,00,000/- * M/s Leisure Buildcon (P) Ltd. Rs. 2,31,00,000/- * M/s Maonmay Food & Bev. (P) Ltd. Rs. 1,7100.000/- The invocation of sec.263 is unsustainable for various mutually exclusive reasons One * During asstt., the A.O. deeply examined the receipt of share capital from above three companies * The A.O. called for the all relevant information from assessee, from parties u/s.133 (6) and also recorded statement of directors of all the 03 companies u/s. 131. * The exercise undertaken by the A.O. at asstt. stage is evident from following evidences which was furnished by the assessee as well as by the parties u/s. 133 (6) as well as statement recorded u/s. 131. KDK Food Grains (P) Ltd. Rs. 3,36,00,000/- * Query reg. share holdings vide para-22 of questionnaire dt.05.02.14 (3) Notice u/s.133 (6) dt.25.05.14 to KDK (8) * Reply to A.O. by assessee vide para-4 (giving details of documents furnished by the assessee to....
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....ure (63) * Notice u/s. 131 to Sh. Saurav Jain, Director of Leisure (85) * Copy of statement of director of Leisure (120-123) (specially ans. to Q. Nos.4, 6, 7, 9, 10, 11, 14) * All the above documents confirms the transactions. * Information furnished u/s. 133 (6) further confirms the transactions. * Statement of directors of all the 03 companies reconfirm these transactions. * The A.O. after verifying the documents/statement could not point out even a single discrepancy, hence accepted the receipt. * Thus, in this case, the A.O. carried out all the maximum possible inquiries/investigations for receipt of the share capital and noting more could had been done. * Sec.263 (1), expln. 2, clause (a) provides for an order to be erroneous and prejudicial to the interest of revenue when the order has been passed without making inquiries or verification which should have been made, however in this case, all maximum possible inquiries and verification has been carried out. * It is neither a case of lack of inquiry and even not a case of inadequate inquiry. * It is interesting to note that in the impugne....
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....04.15 in the case of another assessee namely Bhushan Power & Steel Ltd. (Bhushan) (CIT Pg.1-4) * The asstt. order u/s. 153A stood completed on 13.06.14 * The report of DDIT was not in existence on the date of completion of asstt. on 13.06.14 * Under these facts it cannot be said that the A.O. failed to take into consideration the DDIT report dated 17.04.2015 and contents thereof. * Hence section 263 cannot be invoked on the basis of material/ DDIT report which was not in existence at the time of completion of original asstt. Three * Even otherwise, there is nothing adverse in DDIT report dt.17.04.15 so as to invoke sec.263, rather the said report supports the case of assessee * The DDIT report dt.17.04.15 in the case of Bhushan (3rd party) is abstracted in asstt. order (CIT Pg.1-4) * As per conclusion of DDIT report, Bhushan made payments to these 3 companies (and other companies also) which are paper entities, and these companies, introduced the said amount as bogus share capital (CIT - Top Para Pg.4) * However these observation/finding are totally incorrect as per the facts mentioned in the report on....
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....sed during proceedings u/s.263. * Hence the directions of denovo asstt. are beyond jurisdiction. AUTHORITIES * CIT VS. CONTIMETERS ELECTRICALS (P) LTD. (2009) 22 DTR (DEL.) 158 * Revision on issue not mentioned in show cause notice is not permissible. * PR. CIT V. KRISHAK BHARATI COOPE. LTD. 395 ITR 572 (Del.) * Revision scope of provisions natural justice order covering issues not mentioned in show cause notice not permissible. Six * The findings in sec.263 order are self contradictory * The CIT, has given a finding that it is a case of bogus share capital wherein cash has been paid against receipt of share capital (CIT Pg.8, Para - e) * Thus the directions of the CIT to re-examine the issue by A.O., in substance cannot be independently examined and adjudicated with independent view by the A.O. in view of clear otherwise findings of the CIT as given in Para - e. * Under the facts, when the CIT set aside the matter for re-examination, he should not give the findings as given in Para - e, which needs to be ex¬punched, in case the order u/s.263 is not quashed. * Seven The order unde....
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....any from Bhushan Power and Steel Ltd. She therefore submitted that it is clear cut case of "no enquiry‟ made by the ld AO. She further relied on the following decisions of various courts as under:- a. Malabar Industrial Co. ltd Vs. CIT Supreme Court (109 Taxman 66 b. Rajmandir Estates (P) Ltd Vs. PCIT Kolkata High Court 70 Taxmann.com, 124 c. Rankandir Estates (P) Ltd Vs. PCIT, Supreme Court 2017 77 Taxmann.com 285 d. South India Steel Rolling Mills Vs. CIT 224 ITR 654 10. The ld Authorised Representative in rejoinder submitted that report of the DDI was not before the ld Assessing Officer at the time of passing order, therefore, it cannot be said that the ld Assessing Officer has failed to consider the same and therefore, the order passed by him is erroneous. It was further stated that the page NO. 69 referred to by the ld DR is the bank statement which itself demonstrates that funds have been received by the depositor from Bhushan Steel Ltd therefore, even in the case of the shareholder, assessee has proved the source of source of the funds deposited. He therefore, submitted that the order passed by the ld Assessing Officer is neither ....
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....They also submitted the copies of their bank statements from which the payment for share application was made. Consequent to that the ld Assessing Officer issued summons to the Directors of those companies u/s 131 of the Act and their statements were recorded. In specific reference to the question raised to the Director of the depositor companies, they confirmed the fact of making investment in the assessee company and also explained the nature of the business of the investor companies as well as source of the funds of making investments. He specifically submitted that source of the investment in the assessee company is receipt of inter-corporate deposit by the shareholder companies from M/s. Bhushan Steel and Power Ltd. He further explained how the premium has been decided. He further stated that as the assessee is carrying on the development of a project of residential complex, IT park at Punjab therefore, such investment are made. He further stated that investments are made on long term basis in the company. With respect to the report of the inspector that these companies were not available at the addresses given, he stated that the address visited by the inspector is incorrect ....
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....e assessment to the Assessing Officer to be made de novo. According to us the Commissioner had no jurisdiction to set aside the order of the assessment merely to conduct another purposeless and fruitless enquiry to reach the same result which was arrived earlier. If any further fresh enquiry is held it will be an empty formality as by going through the motion of making a further enquiry and reaching the same conclusion, no useful purpose would be achieved. Though, it is not expected of the Commissioner to record his final conclusion in his order but he must at least indicate as to how the order of the ld AO is erroneous and prejudicial to the interest of revenue. Same is missing in the impugned order. It is also an established fact that every mistake or error committed by the AO cannot be subject to revision, but it is only when such type of mistake makes the order "prejudicial‟, then only the CIT can assume the power of the revision. Further, the power of revisions is not meant to exercise for the purpose of directing the officer to hold another investigation when the order of the officer was not found to be erroneous. In the present case the ld CIT has failed to show that w....
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....which the Hon'ble Supreme Court has also dismissed the special leave petition vide 77 Taxmann.com 285. In that particular case the order u/s 263 was passed by the ld CIT was sustained for the reason that out of 39 share applicants 15 procured the funds by selling their own shares and the rest of the applicants did not disclose the nature of receipt at their end though the source of fund was identified. It was not known in that case as on what account the money was received. In the present case it has been established by the share holders that money has been received from M/s. Bhushan Steel and Power ltd as inter corporate deposits. This fact has been confirmed by the director of the investor company as well as the director of Bhushan Steel, and further supported by the bank statements. It is also established that these inter corporate deposits have been repaid. Further in case of Rajmandir Estate the form of share application money were found blank, however, in the present case it has not been stated that any such other incriminating documents is relied upon by the ld CIT. in the present case no relationship was also established as stated in para No. 23(d) of that decision. Fur....