TaxTMI 
TaxTMI 
2019 (5) TMI 1600
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....see is a company which is stated to be in the business of financial services. It filed its return of income on 3/1/2011 declaring a loss of INR 73283/-. During the course of assessment proceedings it was found that assessee has received the share capital and share premium from 3 different companies amounting to INR 850,000,000/-. Further the assessee has invested this amount in unquoted shares of 3 different companies of Rs. 85,00,00,000. The learned assessing officer asked the investor companies in the assessee by issue of the notice u/s 133 (6) of the act. The reply was received from these 3 companies and the information was sent to the respective assessing officer of those companies. The learned assessing officer discovered during the process that all these companies belong to a group companies which were run and controlled by Sri surrender Kumar Jain for the purposes of giving accommodation entries. Further the learned assessing officer examined the bank statement filed by these investors and recorded his finding which, according to him, ultimately proved that these are the paper/dummy companies managed and controlled by Sri SK Jain and others. Therefore the learned assessing ....
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.... the expenses claimed, despite the fact that the assessee has not earned any dividend or exempt income. Consequently the assessment order u/s 143 (3) of the income tax act was passed on 28/3/2013 determining the returned income of the assessee at INR 12,000,000 as against the declared a gross loss of INR 7 3283/-. 4. Assessee being aggrieved with the order of the learned AO has preferred an appeal before the learned Commissioner Of Income Tax (Appeals) - 28, New Delhi. The learned CIT - A deleted the above addition of INR 12,000,000 vide para number 4.2 - 4.3 as under:- "4.2 However it is noted that the shareholders and investor company in which investment was made by the appellant all are assessed to tax and order in their cases has also been passed under section 143 (3) of the act. Further the share capital and share premium of the appellant are duly accepted as genuine in their respective assessment orders as mentioned above without any adverse finding. Moreover on perusal of the assessment order of M/s Akul Securities Private Limited 2010 - 11, it is evident that on the basis of search and seizure actions were carried out in the premises of the SK Jain group on 14/9/2010, pr....
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....e companies to the bankers and how money has been routed through this company. He further referred page no 2 of the assessment order to demonstrate that. He therefore submitted that as assessee is one of the entities which is in the chain of events of the provision of accommodation entry, learned assessing officer noted that the total commission is earned by @ 1.75% - 3% by accommodation entry provider and therefore only 0.75% of the commission has been charged. Coming to the order of the learned CIT - A, he submitted that the learned CIT appeal has grossly erred in stating that these companies are assessed to tax and there is no adverse inferences drawn in case of these companies. He submitted that as these companies are also accommodation entry provider, naturally there cannot be any addition in the hands of these companies u/s 68 or under section 69 of the income tax act, as these additions are required to be made only in the hands of the beneficiaries. The real income belongs to the beneficiaries and not to these entry operators and therefore the learned CIT - A has grossly erred in holding that the revenue has accepted the genuineness of the transaction of the investment and o....
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....n on 14/9/2010 returned income declared by the one of the investors has been accepted. Therefore he submitted that the transactions are genuine and the addition has rightly been deleted by the learned CIT - A. 8. We have carefully considered the rival contention and perused the orders of the lower authorities. Apparently in this case the learned assessing officer has made detailed enquiry coupled with the inquiries of the investigation wing and search and seizure carried out on Mr. Surendra Kumar Jain , then it was found that the amount of investment received by the assessee and amount of investment made by the assessee, both are in the form of accommodation entries and therefore the learned assessing officer has treated the part of the commission at the rate of 0.75% taxable in the hands of the assessee as it is part of the chain of the accommodation entry providers. The learned CIT - A has deleted the same giving the detailed reasons as we have already incorporated in our order above. We are not inclined to agree with the order of the learned CIT - A but to agree with the order of the learned assessing officer for the following reasons:- i. The assessee has a meager loss of I....
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....eceived funds through layering from one company and makes investment in the same company. vi. Looking to the investment made by the assessee company, it is apparent that all these investing companies have also account in the same branch of the axis bank. They are also used for giving an accommodation entry by debit and credit in their bank account to the group concern of SK Jain for onward beneficiaries. The learned AO noted that the debits and credits have gone to the other paper in dummy companies controlled by Sri SK Jain. vii. Further it is also interesting to note that the three companies in which the assessee has also made an investment all have opened their bank account in the same branch of axis bank within 2 days i.e. 4/3/2010 - 6/3/2010 and garnered INR 850,000,000. viii. The learned assessing officer on the enquiry also noted that the cash was deposited in one account and later on through chain of the companies and layered investments the money has gone to the assessee company and in turn is also routed from assessee company to other intermediaries and in the end to the beneficiaries. ix. In all these series of transactions entered into by the assessee of investm....
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....essee. In view of this, it is apparent that the learned CIT Appeal has erred in deleting the above addition. xii. The learned CIT - A has also erred in stating that as Sri SK Jain and others are the accommodation entry providers then addition on account of earning of commission has to be made in the hands of the entry operator who control and manage the dummy companies and not in the hands of the various companies from whom the entries have been routed by the entry provider. If the order of the learned CIT Appeal is taken to the logical conclusion that he should have ordered that identical amount should be added in the hands of Sri SK Jain, which has not been done by him. Further, the assessee is one of the entities which is a corporate entity, transaction have been routed to these entity, the corporate identity of this company has been used to give the colour of genuineness to the whole transaction, therefore it is imperative that the addition of the proportionate amount with respect to the commission earned is required to be taxed in the hands of the assessee company. 9. In view of the above findings we are of the opinion that the commission income with respect to the above ....