TaxTMI 
TaxTMI 
2019 (7) TMI 875
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....O representing commission that was claimed to be paid thereon to the entry operator 2. Brief facts of the case shows that assessee is a company who filed its return of income for assessment year 2006 - 07 and 29/11/2006 declaring income of loss of INR 19801/- 3. A search and survey operation u/s 132 /133A of the income tax act, 1961 was conducted by the investigation wing of Department, Delhi on 19/4/2010 at the residential and business premises of Sri Surendra Jain and his brother Virendra Jain. Various incriminating documents were seized and impounded. During the post-search and survey operation, revenue impounded documents and enquiries conducted by the revenue, it was revealed that Sri SK Jain and Shri VK Jain are engaged in the business of providing accommodation entries by making payment in the form of various instruments through banking channel in lieu of cash to a large number of beneficiary companies through more than 100 paper and dummy companies, entities controlled by and operated by them through various persons by appointing them as directors/partner/proprietors et cetera apart from nominating them as authorised signatories for maintaining the bank accounts of th....
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....ce the principal officers of the alleged company who has given share application money and premium to the assessee. The learned authorised representative despite many opportunities did not produce any of the creditors or shareholders. In view of this, the learned assessing officer deputed the inspector to issue summons u/s 131 on the 4 companies personally and to other parties through registered post. The Inspector submitted a report that these companies do not exist at the addresses given by the assessee and the premises are locked. In case of the parties to whom the summonses were sent t through post, no reply was received. The learned assessing officer further examined the details furnished in response to notice u/s 133 (6) of the income tax act and found that these persons are not doing any business and the turnover is very nominal and on examination of the bank account it is found that these accounts have been used for rotating the transactions only. Further, once again the summonses were issued to the principal officers of those companies under section 131 of the income tax act on 26/3/2014. However, no reply was received from them. The assessee was also asked to produce the ....
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....ssued by the learned assessing officer to those shareholders were served on them and they filed their replies directly to the AO confirming the investment in the appellant company. He further held that several decision of the honourable Delhi High Court cited by the learned assessing officer does not apply in the case of the assessee. Accordingly, he deleted the addition of INR 7,000,000 under section 68 of the income tax act and consequent unexplained expenditure of INR 1 22500/- made because of commission was deleted. Therefore, the learned assessing officer aggrieved with the order of the learned CIT - capital has preferred an appeal before us raising the above grounds of appeal. 8. It is important to note that this appeal has been listed for hearing 5 times before the scheduled hearing on 12/06/2019. On all the occasion, none appeared on behalf of the assessee. The notices were also issued on many times through registered post and in the end through revenue. Therefore, it is apparent that assessee does not want to get himself represented in this case before the coordinate bench. 9. The learned departmental representative vehemently submitted that that it is a clear-cut....
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....om these companies, however, it was found to be a suspicious response from these companies. Therefore, the assessee was asked to produce the principal officers of these companies. The assessing officer issued summons u/s 131 of the income tax act through inspector who found that the premises of the some of the companies are locked. Summons issued under section 131 of the act through post was never replied. The AO analyzed the information received under section 133 (6) of the act from the shareholders, and found that these are merely the paper companies, does not have any substance, turnover, income. The bank statements of those companies received u/s 133 (6) of the act also did not inspire any confidence as according to AO they were merely transactions of accommodation entries only. In view of this, the addition was made u/s 68 of the income tax act. Apparently, in this case the assessee failed to discharge its onus u/s 68 of proving the identity, creditworthiness of the depositors, share applicants and the genuineness of the transactions. Therefore, the assessee has failed in his duty to discharged initial onus cast upon him. In spite of that, the learned assessing officer made....
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....t in case of accommodation entries all the documents produced by the assessee before the assessing officer and before him were bound to be there. AO disbelieved them and conducted the necessary enquiries. However, the learned CIT - A has believed them without rebutting the findings of the learned AO, that these companies do not exist and they do not have any business. Further, the learned CIT - A also failed to comprehend that response to notice u/s 133 (6) was received from the one post office, which is a regular feature in case of accommodation entry operators whenever the confirmations are asked for. There is no whisper in the order of the learned CIT - A respect to the bank account of these parties where the learned assessing officer has observed that these are only the accommodation entries rooted through these accounts. The learned CIT - A has also held that that the replies have been received from the various shareholders as it has been sent by them from the same office and around the same time is at best the suspicion of the assessing officer and he further went ahead and said that it is not the case of the AO that replies were sent by the appellant. The learned CIT - A ....
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...., 2012. The assessee submitted before A.O. that it has raised money aggregating to Rs. 17.60 crores through share capital/share premium during the assessment year under appeal from various parties which are Mumbai based companies, Kolkata based companies and Gauhati based companies. The details of which are noted at pages 2 and 3 of the assessment order. It was submitted that assessee has already filed copies of the confirmations, income tax return acknowledgments and bank accounts in respect of these companies, duly establishing the identity, genuineness and source of transaction regarding share capital and share premium. The entire share capital/ application money has been received by the assessee-company through normal banking channels by account payee cheques/demand drafts. Furthermore, the said confirmations also clearly reveal the source of funds, particulars of bank accounts through which payment have been received and income tax particulars which go to establish their identity and creditworthiness. It was therefore, submitted that there were no cause exists to make a recourse to the provisions of Section 68 of the I.T. Act, 1961. In the instant case, there is no material on....
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....ee on merit. Therefore, no detailed reasoning have been given because it was found that the issue is left with academic discussion only. 4. The assessee as regards the addition, on merit, reiterated the same submissions before Ld. CIT(A) and it was submitted that A.O. made the addition arbitrarily and unjustifiably. The assessee produced all the relevant documents before A.O. which have not been doubted. The assessee filed confirmations of all the share applicants, copy of their income tax returns, bank accounts and copy of annual accounts. Therefore, no adverse inference has been drawn against the assessee. The Ld. CIT(A) on going through the documents and material on record, deleted the entire addition of Rs. 17.60 crores and allowed the appeal of assessee. His findings in paras 3.3 to 3.5 of the impugned order are reproduced as under : "3.3. I have considered the rival claims. The fact that appellant filed the requisite documents before the AO is undisputed. Thus, the appellant had discharged its primary onus of establishing the identity of the share holders / applicant ire source of the money. The only reason for the revenue....
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....ts in assessee-company who were having sufficient net worth to make investment in assessee-company. Assessee filed I.T. returns, PAN, Bank Statements of investor Company to prove they are existing assessees of Department and are genuine parties. No efforts are made by A.O. for production of investors at assessment stage. Therefore, the assessee has been able to prove identity of the share applicants, their creditworthiness and genuineness of the transactions in the matter. The Ld. CIT(A), on examination of the material on record, further found that the only reason for the Revenue to goes for further verification was the report relating to survey conducted at the premises of the assessee- company which forms part of satisfaction recorded for reopening of the assessment proceedings. From the said report, Ld. CIT(A) found that the business premises of the assessee actually belong to M/s. Bhushan Steel Ltd., and several other Companies having their Registered Offices at the same address. This created a suspicion in the mind of the Revenue. The Ld. CIT(A) therefore, rightly noted that there is no law that more than one Company cannot have its Registered Office at one address. T....
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....ss of the creditors as well as the transactions had been prima facie disclosed which amounted to discharge of onus upon it. The ITAT rejected the revenue's objections. The Court notices that CIT(A) in this case quite correctly had examined the entirety of the facts and concluded, as follows : "3.3 I have considered the rival claims. The fact that appellant filed the requisite documents before the AO is undisputed. Thus, the appellant had discharged its primary onus of establishing the identity of the share holders /applicant ire source of the money. The only reason for revenue to cause further verification was the report relating to survey conducted at the premises of the appellant which forms part of the satisfaction recorded for reopening the assessment proceedings. From the said report it transpires that the business premises of the appellant actually belonged to M/s Bhushan Steel Ltd. and several other companies were having their registered offices in the same premises. This led to the suspicion that these companies were paper companies. During further verification of the identity of the shareholders in Mumbai, some summons were served but parties....
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....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 supplied) The use of the words "any sum found credited in the books" in Section 68 of the Act indicates that the section is widely worded, and includes investments made by the introduction of share capital or share premium. 8.2. As per settled law, the initial onus is on the Assessee to establish by cogent evidence the genuineness of the transaction, and credit-worthiness of the investors under Section 68 of the Act. The assessee is expected to establish to the satisfaction of the Assessing Officer, CIT v. Precision Finance Pvt. Ltd. (1994) 208 ITR 465 (Cal) 15 : * Proof of Identity of the creditors; * Capacity of creditors to advance money; and * Genuineness of transaction This Court in the land mark case of Kale Khan Mohammad Hanif v. CIT, [1963] 50 ITR 1 (SC), and, Roshan Di Hatti v. CIT, [1977] 107 ITR (SC), laid down that the onus of proving the source of a sum of money found to have been received by an asse....
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....y to link the assessee with the source when that link is missing, it is difficult to fasten the assessee with such a liability." 9. The Judgments cited hold that the Assessing Officer ought to conduct an independent enquiry to verify the genuineness of the credit entries. In the present case, the Assessing Officer made an independent and detailed enquiry, including survey of the so- called investor companies from Mumbai, Kolkata and Guwahati to verify the credit-worthiness of the parties, the source of funds invested, and the genuineness of the transactions. The field reports revealed that the share-holders were either non-existent, or lacked credit-worthiness. 10. On the issue of unexplained credit entries /share capital, we have examined the following judgments : i. In Sumati Dayal v. CIT, [1995] 214 ITR 801 (SC), this Court held that : "if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory, there is prima facie evidence against the assessee, vis., the receipt of money, and if he fails to rebut the same, the said evidence being unrebutted can be used....
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....editors and genuineness of the transaction. : "It cannot be said that a transaction, which takes place by way of cheque, is invariably sacrosanct. Once the assessee has proved the identity of his creditors, the genuineness of the transactions which he had with his creditors, and the creditworthiness of his creditors vis-a-vis the transactions which he had with the creditors, his burden stands discharged and the burden then shifts to the revenue to show that though covered by cheques, the amounts in question, actually belonged to, or was owned by the assessee himself" (emphasis supplied) vi. In a recent judgment the Delhi High Court, CIT v. N.R. Portfolio (P.) Ltd.[2014] 42 taxmann.com 339/222 Taxman 157 (Mag.) (Delhi) 21, held that the credit-worthiness or genuineness of a transaction regarding share application money depends on whether the two parties are related or known to each other, or mode by which parties approached each other, whether the transaction is entered into through written documentation to protect investment, whether the investor was an angel investor, the quantum of money invested, credit-worthiness of the recipient, object and purpose f....
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.... The genuineness of the transaction was found to be completely doubtful. ii. The enquiries revealed that the investor companies had filed returns for a negligible taxable income, which would show that the investors did not have the financial capacity to invest funds ranging between Rs. 90,00,000 to Rs. 95,00,000 in the Assessment Year 2009-10, for purchase of shares at such a high premium. For example: Neha Cassetes Pvt. Ltd. - Kolkatta had disclosed a taxable income of Rs. 9,744/- for A.Y. 2009-10, but had purchased Shares worth Rs, 90,00,000 in the Assessee Company. Similarly Warner Multimedia Ltd. - Kolkatta filed a NIL return, but had purchased Shares worth Rs. 95,00,000 in the Assessee Company - Respondent. Another example is of Ganga Builders Ltd. - Kolkatta which had filed a return for Rs. 5,850 but invested in shares to the tune of Rs. 90,00,000 in the Assessee Company - Respondent, etc. iii. There was no explanation whatsoever offered as to why the investor companies had applied for shares of the Assessee Company at a high premium of Rs. 190 per share, even though the face value of the share was Rs. 10/- per share. ....