TaxTMI 
TaxTMI 
TaxTMI 
2017 (6) TMI 1284
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.... during the Asst. Year 2010-11. The assessee credited Rs. 1,90,00,000/- in total in its books against the above receipts. The assessee claimed that the detail of receipts are as under :- Table-1 Particulars of Receipts of Share Capital/Investment during Asst. Year 2010-11 Date of Application : 05-06-2009 Date of Allotement : 22-06-2009 SI No. Name & Address of the Share Holder No. of Share Capital Amount of Share Capital (Face Value : @ 10/-) Amount of Share Premium (Value : @ 990/-) Total Amount (Total Value : @ 1,000/-) 1 Double Plus Softwre Pvt. Ltd. 10159, Padam Singh Road, Karol Bagh, New Delhi - 110 007.PAN: AABCD3206F 650000 65,00,000 64,35,00,000 65,00,00,000 2 Sayaji Marketing Pvt. Ltd 5, Russel Street, 1st Floor, Kol.-71. PAN : AAGCS0147M 650000 65,00,000 64,35,00,000 65,00,00,000 3 Stephens Financial Services Pvt. Ltd. Vasundhara, 6th Floor, 2/7, Sarat Bose Road, Kolkata- 700 020. PAN : AAGCS2740G. 600000 60,00,000 59,40,00,000 60,00,00,000 19000000 19,00,00,000 188,10,00,000 190,00,00,000 Para 1.2.2. The assessee has shown subsequent investment against this huge receipt. There is nothing extraordinary that the receipt ....
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....order he held as follows:- Para 1.5 Modus operandi of the transaction: - From the above discussion it is clear that the four companies including the assessee company are circulating the above mentioned four cheques among themselves by endorsement only one after another until it returns to the issuer. The modus operandi of the assessee company & other three companies is to raise fictitious funds through book entry. The assessee & other three companies raised their capital to the tune of Rs. 190,00,00,000/- each through this fictitious book entry. Para 1.6 Conclusion: - The above facts & circumstances leads to a reasonable conclusion that the above arrangement were made by the assessee with other three companies. The idea of counterbalancing the capital raise by way of investment of similar nature does not sound novel or worth mentioning. The unique feature of the overall transactions lies in a different field and smacks of meticulous planning in order to throw dirt in the eyes of all and sundry. On a careful analysis of the data made threadbare in the discussion above, it is crystal clear that the labyrinth woven by the assessee company in convenience with the other three co....
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....In view of the above, the entire sum of Rs. 190,00,00,000/- is added to the total income of the assessee for the Asst. Year 2010-11 as unexplained Cash Credit. The assessee furnished inaccurate particulars in this regard and by this way understand its income. Hence, Penalty proceeding u/s 271(1)(c) is applicable in this issue and accordingly initiated. Accordingly, total income of the assessee for the Asst. Year 2010-11 is assessed & calculated as under:- Total Returned Income : Rs. NIL Total Loss as per return : -668 Add: (i) Unexplained Cash Credit, as in Para 1.6 : 190,00,00,000.00 ----------------------------------- Total Assessed Income = Rs. 189,99,99,332.00 Rs.189,99,99,330.00 ----------------------------------- Tax on assessed income Rs. 189,99,99,330/-, as above : Rs.56,99,99,799.00 For Tax Computation, see separate sheet enclosed herewith. -------------------------------------------------------------------- : ----------------------- Total Payable by the assessee 87,83,01,290/- ----------------....
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....t. He contended that the assessee received a cheque and after crediting the same in its books of account, endorsed it to a third party. The mode of utilisation of the credit, as per the ld. CIT, DR, is not relevant in the facts and circumstances of the case and what is to be seen is whether the three ingredients i.e. the identity, creditworthiness and genuineness of the credit transactions have been proved by the assessee. He took this Bench through the order of the ld. A.O. and submitted that circular transactions have been undertaken by the assessee at huge premium, without any justification. He pointed out to the cash balance available in the bank account of these companies on various dates, which are at table 5 of the assessment order and submitted that, against a balance of Rs. 11,288/-, a cheque of Rs. 65 Crores was issued on 05/06/2009. Similar cheques were issue on different dates by other entities for crores of rupees though their bank balances were only a few thousand rupees. Hence he submits that the assesse has not proved the creditworthiness of the credit. He vehemently contended that there is no justification, whatsoever, for the premium charged and that this is a cas....
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....ed on the order of the ld. CIT(A) and argued that the same may be upheld as this is a case where no real income has accrued to the assessee. 9. Rival contentions heard. On a careful consideration of the facts and circumstances of the case, a perusal of the papers on record as well as of the order of the Authorities below and case laws cited, we hold as follows:- 9.1. Section 68 of the Act, reads as follows: "68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year (emphasis our) 9.2. In this case admittedly, the assessee has received cheques as consideration for allotment of share capital at a premium. 9.3. The assessee credited these cheques in its books of account. The manner in which the credit has been used subsequently is not relevant for the application of Section 68 of the Act. The contention of the assessee was that "crossed & CO" cheques were received and sub....
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....re cheques have been issued. Thus, on facts this case law does not apply. 9.4.3. In the case of Jatia Investment Co. (supra), the facts were that entries were made in the books of account so as to comply with the directions of RBI given to NBFC‟s. These directions were in the public domain. The RBI had directed the three companies belonging to Jatia Group to maintain a particular ratio of loans to share capital and reserves. This required discharge of loans and through a transparent arrangement these three companies sold shares held by them in various other companies of Jatia Group and the consideration received through book entries were utilized for repayment of loans borrowed from a proprietary concerns of one of the partners. Under such circumstances, the Hon‟ble Jurisdictional High Court held that there is no real cash entry on the credit side of the cash book. The Hon‟ble High Court found fault with the Tribunal for refusing to take notice of the directions of the RBI. In the case on hand, the transactions undertaken by the assessee are not for complying with any of any authority, much less to comply with any law. When the assessee had received the cheque an....
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....al transactions. He submits that when the A.O. gives a categorical finding that these are fictitious book entries, then logically no additions should be made. In our view, this argument has to be dismissed for the reason that credit entry has been made in the books of account consequent to receipt of cheques against which share capital has been allotted by the assesse company which, by the admission of the assessee, are legally valid transaction. The requirements of the Negotiable Instruments Act and the Companies Act are fulfilled in this case. Shares have been legally allotted. Amounts have been validly received by cheque. There is no violation of law. Thus, it cannot be said that these are fictitious or sham entries and no cognigence should be taken of theses entries. These are not unreal transactions as held by the A.O. These transactions are valid in law. 13.1. Hence, the credit recorded in the books of accounts of the assessee is not a fictitious credit and has legal sanction. In view of the discussions these arguments of the ld. Counsel for the assessee is dismissed as devoid of merit. 14. We find that the transactions undertaken by these groups of companies are scandalous....
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....f the transaction and the creditworthiness of the creditors has not been demonstrated by the assessee. The AO in his order at page 7 has clearly recorded that the assessee company has no financial base or business and the money received by it was withdrawn the very same day or the next day. More important he has recorded that the assessee has not given any, let alone satisfactory explanation for the high premium charged on the shares. When shares are allotted within a span of less than one month, the reason for charging high premium in the case of VPC Financial Services P Ltd. , Killa Financial Services Pvt. Ltd., Highyield Securities Pvt. Ltd. , Mehul Finvest Pvt. Ltd. and Synergy Finlease P. Ltd. and reason for not charging premium in the case of M/s. Timely Fincap Pvt. Ltd. and Graph Financial Services Pvt. Ltd. is not at all explained. The explanation given that the Ld. Counsel for the assessee that charging of premium is the sole discretion of the company and that price is a contract entered between two parties and cannot be questioned by the revenue is devoid of merit. The AO cannot be expected to wear blinkers and accept bald explanations of the assessee. There should be som....
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....idity of those grounds that appealed to the learned judges. It is true that the apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self- serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents." In CIT vs. Daulat Ram Rawatmull [1973] 87 ITR 349, the Supreme Court dealt with the question as to when the findings of facts recorded by the Tribunal can be interfered with in a reference made under section 66 ....
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....e position thus is that even where a reference of a question of law is made to the High Court under Section 66 of the Indian Income Tax Act, 1922 or Section 256 of the Income Tax Act, 1961 over which the High Court exercises advisory jurisdiction, and not appellate jurisdiction, where normally the findings of fact recorded by the Tribunal are binding on the High Court, it has been held by the Supreme Court that the findings are not binding on the High Court if they are perverse or if the findings are such that no person acting judicially and properly instructed as to the relevant law could have come to the determination under appeal. The position in an appeal under Section 260A of the Act is "a fortiori" as the judgment of the Supreme Court in the case of Bharat Dimond Bourse, (supra) would show. We shall demonstrate in the following paragraphs as to how both the CIT (Appeals) and the Tribunal have failed to appreciate the evidence in the proper perspective and on the lines indicated by the Hegde J. in the case of Durga Prasad More (supra). The present case is also not one, as we shall show presently, where the conclusion of the Tribunal is a reasonable conclusion which should not ....
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....h includes share premium @ Rs. 40/- per share amounting to Rs. 41 ,88,000/-. It is not a case of the respondent assessee that they had a proven good past track record justifying a hefty premium, four times the face value. What was placed on record were certain papers which showed that the respondent assessee had taken care to ensure legal compliances. The said evidence is primarily documentary evidence. But, what the tribunal has noticed but not given due credence to are the surrounding circumstances which include a huge premium i.e. four times of the face value of the shares, credit entries in the bank accounts before transfer of money to the assessee, failure of the companies to file details of the inventories and the fact that the assessee company had not charged any premium earlier. Identity, creditworthiness of the shareholders and genuineness of the transaction in all cases is not established by only showing that the transaction was through banking channels or account payee instrument. It would be incorrect to state that the onus to prove genuineness of the transaction and creditworthiness of the creditor stands discharged in all cases if payment is made through banking cha....
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....dicially noticed. Judicial notice, in such matters, takes the place of proof and is of equal force. In fact, as a means of establishing notorious and widely known facts it is superior to formal means of proof..... " 13. It is important, to segregate cases of bonafide or genuine investments by third persons in a private limited company, from cases where receipt of share application money is only a facade for conversion of unaccounted for money or money laundering. The said question cannot be decided without taking notice of the surrounding facts and circumstances, by merely relying upon paper work which at best in some cases would be a neutral factor. The paper work though important may not be always conclusive or determinative of the final outcome or finding whether the transaction was genuine. When and under what circumstances onus is discharged, as held in NR. Portfolio (P.) Ltd. (supra), cannot be put in a strait jacket universal formula. It will depend upon several relevant factors. Cumulative effect has to be ascertained and understood before forming any objective opinion whether or not onus has been discharged by the assessee. Of course suspicion or doubts may not be suffic....