TaxTMI 
TaxTMI 
TaxTMI 
2017 (7) TMI 1319
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....n of income on 31.10.2005 declaring a loss of Rs. 7,11,546/-, which was processed under section 143(1) of the Act on 24.1.2006. The AO received a letter from ADIT (INV) bearing ADIT(Inv)/U-VII(1)/A.Dalmia/2011-12 dated 28.12.2011 and ADIT(Inv)-VII(1)(2), Mumbai regarding the investigation in the case of Arun Dalmiya and Harshad Dalmiya and their dummy concerns accompanying therewith report of CBI/ACB and secret note prepared by Joint Director, CBI along with the extract of scrutiny report prepared by the Chartered Accountant on the basis of seized books of account and documents. It was pointed out in the CBI and ACB report that the investigation into the affairs of Arun Dalmiya and Harshad Dalmiya with reference to Shri M.S. Bali ExPost Master General, Maharashtra and Goa that they have formed 20 dummy concerns which were engaged into providing bogus transactions and accommodation entries. It was also reported that the assessee has entered into transactions with Radiovani Holding Pvt Ltd worth 21.02 crores for which no contracts/ details were found. Further the Joint Director of CBI stated that Arun Dalmiya and Harshad Dalmiya were Directors of M/s Watermark Financial Consultants L....
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.... were returned unserved and the assessee could not furnish the details and their whereabouts. The ld.AR of the assessee stated that all the records of the funds have been seized by the CBI during the raids at their premises and it was not possible for the assessee to file the details as called for by the AO. The AO found from the perusal of the bank statement that the assessee has entered into several transactions of funds transfers in the group concerns and the assessee which were also reported by the CBI. The AO also observed that the assessee has made sales and purchase running in the several crores of rupees without having necessary infrastructure and the technical staff required for development of software and finally came to the conclusion that the assessee was engaged in providing hawala entries. In order to assess the income of the assessee he calculated peak credit on the basis of deposits and withdrawals in the bank statements which has been tabulated at pages 11 and 12 of the assessment order. The AO observed that the assessee has raised huge unsecured loans for which no confirmations were produced and finally added a sum of Rs. 10,00,503/- being peak credit on 25.10.200....
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....Balance sheet Sources of funds Schedule Amount in Rs. 1.Shareholder‟s funds a.share capital A 5,00,000 b.Reserves and surplus B (6,35,084) (1,35,084) 2.Unsecured loans C 46,62,57,785 Total 46,61,22,701 Application of funds 1. Investments D 15,00,00,000 2. Current assets, loans & advances E a. Inventory 13,65,21,000 b.Sundry debtors 16,23,08,128 c. Cash & bank balances 34,144 d. Loans & advances 53,77,80,733 83,66,44,005 Less: current liabilities and provisions F (52,05,21,304) 31,61,22,701 Total 46,61,22,701 P&L Account Income: Schedule Amount in Rs. Sales 106,64,15,000 Miscellaneous income A 3003 Closing stock of computers/software B 13,65,21,000 Total 120,29,39,003 Expenditure: Cost of Purchases 120,31,05,000 Administrative Expenses G 3,95,302 Selling and distribution exp H 1,48,920 Financial exp I 1,327 Preliminary expenses written off --- Total 120,36,50,549 Profitl....
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....a Steel Company. It has been alleged that this transaction was only on paper; actual supply of IT software, having not taken place. * Similar allegations have been levelled against the appellant's group concern Basent Marketing Pvt. Ltd of giving IT software accommodation bills of Rs. 26.10 crores toa company GSS America InfotechLtd of Hyderabad. Again, this transaction isstated to be only on paper; actual supply of IT software, having not taken place. It is stated in the same report that Basant Marketing Pvt. Ltd has given an aggregate amount of accommodation entries of Rs. 129.76 crores to various companies. * Similar allegation has been made in respect of IT software accommodation bills given to M/s HFCL of Rs. 194 crores (the name of the company giving the accommodation bills has not been specified). It is also alleged in the report of Supdt of Police, CBI, ACB that Shri Arun Dalmia and his son Shri Harsh Dalmia through their concern Basant Marketing Pvt. Ltd and Satya Securities Ltd. acquired 5.55% shareholding in Granules India Ltd without following the norms of Securities a Exchange Board of India Act, 1992 in connivance with the promoters of the Said concern (Gran....
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....oncerns. Neither did the CBI/the Chartered Accountant confronted these allegations regarding accommodation entries to the appellant (Shri Arun Dalmia or Shri Harsh Dalmi or any other official of the company), nor their explanation was called. (iii) Thus, both the reports of the CBI are based on a unilateral scrutiny of documents of the appellant group and conclusions have been drawn, ignoring the fact thatthe regular books of account of the appellant *are supported by necessary bills/vouchers/other documents. The statutory audit as per the Companies Act, 1956 and tax audit as per section 44AB of the Income Tax Act, 1961 have also been carried out, where-in nofault was found with the appellant's books of account and the transactions entered therein. (iv) It may be noted that no third party has independently confirmed the allegation of being a beneficiary of accommodation bills or of money-laundering. (v) The Income Tax Investigation Wing also did not carry out any further enquiries and simply forwarded the reports of the CBI to the AO. (vi) On his part, the AO issued notices under section 133(6) to 4 parties namely 1) Stads Ltd, 2) Pashupati Fabric Ltd, 3) Radiovani ....
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....So far as the AD's allegation regarding mode of delivery of goods is concerned, the appellant has submitted a letter dated 28/03/2014, explaining the same. (ix) Yet another allegation against the appellant group is that it has floated 20 dummy companies through whom accommodation entries are managed. However, it is only an observation of the Chartered Accountant of the CBI and no holistic enquiries in this regard have been conducted either by the CBI or by the I. T. Department Investigation Wing or by the AD. The AD has purely assumed the said observation of the CBI and the Investigation Wing to be true and has drawn his conclusions accordingly. It must be noted that unless this fact is proved through field enquiries, such a finding could not have been given. The socalled 20 dummy companies are largely private limited companies of the appellant. Regular returns of income in respect of these companies are being filed and these are being accepted by the Department either uls 143(1) or assessed u/s 143(3) of the Act. The books of account of these companies are being maintained regularly and are registered corporate entities and are complying with the company law, R.O.C. and oth....
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.... this sales made, the purchases of software are Rs. 120,31,05,000/- and complete details of the same including the copies of the invoices have been furnished. The appellant has also furnished copies of confirmations of accounts from various parties including Stads Limited, Ahmedabad. The purchases and sales have mostly been made from/to HFCL, Stads Limited, Hindustan Engineering & Industries Ltd and Basant Marketing Pvt. Ltd during the year. The AO has no-where established that purchases and sales effected by the appellant were bogus. In the background of above facts, which are discussed above, it is evident that the transactions of the appellant cannot be doubted simply on the basis of a scrutiny report of a Chartered Accountant engaged by the CBI, who also did not carry out any enquiries to establish that the transactions for purchases and sales were bogus. His conclusions were evidently based on assumptions and surmises. The Investigation Wing of the Income Tax Department has also not carried out any enquiries to prove that the sales and purchases of the appellant were bogus/ sham. As already stated, therefore, this is a case where both the sellers and the purchasers of the good....
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.... in the former class of cases that it would be necessary, when a dispute arises as to whether the person named in the deed is the real transferee or B, to enquire into the question as to who paid the consideration for the transfer, X or B. But in the latter class of cases, when the question is whether the transfer is genuine or sham, the point for decision would be, not who paid the consideration but whether any consideration was paid. Therefore, there will be force in the contention of the appellant that a finding as to who furnished the capital for the intermediaries was requisite before they could be held to be benamidars, if the Tribunal had held them to be benamidars in the former sense but not in the latter. We must, therefore, examine what it is that the Tribunal has actually found. Now, the Tribunal has not held that any of the transactions with which the assessment proceedings are concerned are benami. Indeed, the word "benami" does not find a place anywhere in its order. It is only in the question which the appellant framed for reference to the Court in its application under section 66(1) that it has chosen for the first time to introduce the word "benamidar". That apart,....
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....contention of Dr. V. Gauri Shanker on behalf of the revenue is that the settlor had specifically made these three trusts for the benefit of his son, Arvind, the assessee, and has declared unequivocally that the settlement is for the benefit of the assessee, and on the assessee's marriage, also for the benefit of his wife and children. It is urged that the High Court has erred in failing to collect the real intention of the settlor from the entire document and has erroneously confined itself to paragraph 7 of the deed. According to the learned counsel, what the High Court should have done was to ascertain the state of affairs existing on the relevant valuation date. It should not have been influenced by what could possibly happen in the indefinite future on the happening of certain contingencies. The submission is that on the valuation dates there was only one beneficiary, the assessee, his share was determined and known, and it extended to the entire interest in the trust properties. It is urged that in the case of a discretionary trust the interest of the beneficiary extends not only to the actual share paid to him but to his right to be considered as a potential recipient of ....
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....that the fact that a beneficiary may change on the happening of certain contingencies will not make the share of the beneficiary undetermined or unknown, and reliance has been placed on Padmavati Jaykrishna Trust v. CWT [1966] 61 ITR 66 (Guj.), CWT v. Trustees of Mrs. Hansabai Tribhuwandas Trust [1968] 69 ITR 527 (Bom.), CWT v. Trustees of H.E.H. Nizam's Family (Remainder Wealth) Trust [1977] 108 ITR 555 (SC) and CWT v. Trustees of H.E.H. the Nizam's Sahebzadi Anwar Begum Trust [1981] 129 ITR 796 (AP). These cases can be of no assistance to us, for, unlike the facts in each of those cases, the instant case is one where beyond the specified minimum the assessee was not entitled to anything more. There must be a right, present or contingent, before it can be said that an assessee has an interest, and I am supported in this by what was said by the House of Lords in Gartside v. IRC LR [1968] AC 553 where it was also observed that a mere right to be considered for distribution of the income or of the corpus of the trust fund cannot be regarded as an 'interest' since it was not capable of valuation. Dr. Gauri Shanker relies on Leedale (Inspector of Taxes) v. Lewis [1982] ....
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....would like to pay that price to buy civilization. But the question which many ordinary taxpayers very often in a country of shortages with ostentious consumption and deprivation for the large masses ask, is does he with taxes buy civilization or does he facilitate the wastes and ostentiousness of the few. Unless wastes and ostentiousness in the Government's spendings are avoided or eschewed, no amount of moral sermons would change people's attitude to tax avoidance. 4. In any event, however, where the true effect on the construction of the deeds is clear, as in this case, the appeal to discourage tax avoidance is not a relevant consideration. But since it was made it has to be noted and rejected. With these observations I agree. 14.16 The above is a very important judgement, which leads us to conclude that if a business transaction is simple and unambiguous, the same has to be accepted as such, unless established to be false. In the case of the appellant, the falsity of the transactions has not at all been established and all the documents furnished by the appellant indicate that such transactions of sale and purchase of software had actually taken place. Even in the ....
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....ot affected the freedom of citizen to act in a manner according to his requirements, his wishes in the manner of doing any trade, activity or planning his affairs with circumspection, within the framework of law, unless the same fall in the category of colourable device which may properly be called a device or a dubious method or a subterfuge clothed with apparent dignity. 14.18 In the face of above discussion therefore, it is evident that unless it is established that the transactions carried out by the appellant were false, bogus or sham and were supported by colourable device, there cannot be any assumption against the appellant to that effect. There are innumerable other decisions, which also support this view [Muthuram Agarwal Vs. State of UP, 87 AIR 109 (SC); Azadi Bachao Andolan, 263 ITR 703 (SC); CIT Vs. Raman, 67 ITR 11 (SC); M. V. Valliappan, 170 ITR 238 (Mad), to name a few]. Hence, it cannot be held that the appellant has provided accommodation entries to third parties and the sales and purchases reflected in its accounts are bogus. 14.19 The appellant has a disclosed bank account, through which all the transactions have been carried out. The bank account is a par....
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....ome accordingly. Finally the ld.DR prayed before the Bench to restore the order of AO by setting aside the order of the ld.CIT(A). 10. On the other hand, the ld.AR strongly objected to the arguments of the ld.DR and submitted that the assessee furnished all the details qua the sales and purchases made with the various parties and also furnished confirmations from the most of the debtors and creditors and also filed copy of ledger accounts whereas the AO has failed to carry out further inquiry even ignoring the confirmations without assigning any reason. The ld. AR of the assessee also argued that the facts of non-service of notice u/s 133(6) to M/s Stads Ltd and Pashupati Fabric Ltd have not been informed to the assessee and used against the assessee thereby causing huge miscarriage of justice. While justifying the non service , the ld. AR also submitted that out of these three companies on whom the notices u/s 133(6) were not served , one M/s Stads Ltd was struck-off from the register of companies by the Registrar of Companies whereas the second company M/s Pashupati Fabric Ltd was under liquidation before commencement of re-assessment proceedings and most importantly , there wa....
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....te concerns were subject to same rate of income tax. The ld. AR also submitted before the Bench that AO‟s conclusion that the associate concerns of the assessee were dummy concerns was erroneous as it was based upon the report of the CBI and not resulted from his own investigation. It was also stated that the FAA required the AO to give remand report after examination of the additional evidence as filed by the assessee in the appellate proceedings and the CIT(A) has also recorded the finding that the AO has not examined these additional evidences while preparing the remand report. The ld.AR stated that a sum of Rs. 6,28,300/- was found by the CBI at the time of search on the assessee and group concerns which indicated that the assessee was not engaged in the business of providing accommodation entries and so much so that no incriminating documents were found during the course of search by CBI. Lastly the ld. AR submitted that the addition of Rs. 10,00,523/- on the basis of peak credit was calculated on the basis of entries made in the bank statements which were already accounted for and disclosed in the books of accounts maintained by the assessee and therefore additions were....
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....uments could not be produced because the records were in the custody of CBI. We find that the FAA has comprehensively considered various facts and contention of the assessee and came to the conclusion that the addition of Rs. 10,00,523/- were made on the basis of peak credit which was wrong as the assessee has fully disclosed all the transactions in its books of account. Similarly the ld.CIT(A) also deleted the addition made of Rs. 53,32,075/- at the rate of 0.5% of the total sales on the ground that the assessee has fully disclosed the sales and purchases in its books of account and whatever profit or loss earned on these transactions were duly calculated and filed before the AO in the return of income. Under these circumstances, we are inclined to agree with the conclusion drawn by the ld.CIT(A) . Accordingly , the appeal of the revenue department is dismissed. I.T.A.No.4400 to 4403/Mum/2014(AYs:2006-07 to 2009-10) 12. Grounds of appeal no.1 and 2 raised by the revenue in all these appeals are same as has been in assessment year 2005-06 which has been dismissed as not pressed. Accordingly, grounds of appeal no.1 and 2 are dismissed in these appeals as well. 13. Grounds of....
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....ics Ltd. Instead the amount of Rs. 35,00,000/- was received by the appellant from Pasupati Fabrics Ltd as advance for supply of software and the three payments received by the appellant aggregating to Rs. 35,00,000/- are reflected in the bank account of the appellant. It is stated by the appellant that the software has been sold to Pasupati Fabrics Ltd later on 08/05/2006. As already stated, the appellant has filed a confirmation of account in this regard from the said party. So far as the creditworthiness of the said party is concerned, it is seen that Pasupati Fabrics Ltd has a paid up capital of Rs. 91 ,21 ,77,200/-. The appellant has filed necessary documents in this regard in paper book. In view of this therefore, even the addition of Rs. 35,00,000/- u/s 68 is not justified". 18. We have heard both the parties and perused the relevant material placed before us. We find that the assessee has received advance of Rs. 35 lakhs against the sale of software from Pashupati Fabric Ltd which was wrongly taken by the AO as unsecured loans. The ld. CIT(A) has recorded the findings of facts that the said amount was received as advance against the supply of software which was sold and su....