AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (4) TMI 1278
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.... the Investigating Officer that M/s. Globe Pharma was issuing bogus accommodation bills to various concerns and the assessee in question alongwith its sister company was one of the beneficiaries of the accommodation bills. A search operation was conducted on 09.09.2010 in the business premises of the assessee and its sister concerns. The operation also covered the residence of the directors. Consequent to the search, the total additional income disclosed by the Directors of the assessee companies was at Rs. 25.35 crores which was namely 24 crores in the hands of the present assessee and Rs. 1.35 crores in the hands of Aquatic Formulations Pvt. Ltd. 3.1. The offer of the undisclosed income covered assessment years 2004-05 to assessment year 2010-11. The offer covered the accommodation bills taken by the assessee from M/s. Globe Pharma and others and it can be better understood by the following chart. Name F.Y 04-05 FY 05-06 FY 06-07 FY 07-08 FY 08-09 FY 09-10 FY.10-11 Total Globe Pharma 10031783 13116698 17614166 24380594 18901698 26576407 105000 110726346 Premier Trading Nil Nil 21911140 17836 35041386 421760 Nil 57392122 S.S. Pharmachem Nil Nil N....
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....n respect of introduction of share capital/ premium or share application money received in your company please furnish subscribers details along with following further details: a)Copies of minutes of the board meeting held and recorded for raising these funds, b)Supporting bank statements, c) Details of any dividend paid by the company from the date of investment to till date. d)Details of the past performance of the company and its present earnings justifying the amount of premium which had been charged and supported by the copies of annual reports, e) Details of any comparable instances of the companies in this line of business commanding or having charged such a premium on their share value during the year under consideration. f) Whether you have relied an advice of any financial consultant or institution in justifying the share premium amount fixed. If so furnish names and addresses of the persons and a copy of any report availed from them in this regard and any fees etc paid to them. g) Details of the net worth as disclosed by the balance sheet, the potential earnings as disclosed by earnings per share or protestations of future prospects Justifying the premium p....
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.... issued and served on the assessee for the following points: "In connection with the assessments in your case for the assessment years 2005-06 o 2011-12 you are required to furnish following information. 1. Allotment of shares: It is claimed by you that during the financial years 2005-06 to 2009-10, relevant to AY's, 2006-07 to 2010-11 you have claimed receipt of share investment from various parties as per the Annexures enclosed. The brief details or the share investment claimed to have been received by you are as under: F.Y. No. of Shares Value of each share (Rs.) Amount of share investment received (Rs.) 2004-05 1,99,946 10 19,99,460/- 2005-06 4,90,000 10 49,00,000/- 2006-07 27,90,000 10 2,79,00,000/- 2007-08 20,00,000 10 2,00,00,000/- 2008-09 20,00,000 10 2,00,00,000/- 2009-10 16,80,000 10 1,68,00,000/- Total 9,15,99,460/- In this regard you were asked several times by way of noticesissued u/s. 142(1) to prove the genuineness of allocation of shares and receipts of share investments in to the company. You were requested to prove the genuineness of these transactions by producing the parties who have claimed to have i....
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....133(6) and obtain whatever further information that you may require from these shareholders. 4*In any case since we have already discharged the primary onus of proving the Identity of shareholders, genuineness of the transactions and capacity or the shareholders. It is submitted that as far as share capital is concerned the onus of the Assessee is only to prove the identity of the share holders which is more than sufficiently discharged. 5. On the facts of the case we submit that the position of the Share applicants are as under:- a) All the share applicants are existing assessees. b) Some of the shareholders are companies which are registered with the Registrar of Companies. c) The share applicants have filed their respective confirmations and are genuine existing persons. d) The investments have been made by them by account payee cheques. e) The assessee company is not accountable for the share applicants depositing money in their accounts before investing by cheques. f) The assessee company has no means to produce the shareholders physically. 6. We have the Assessee Company has prima facie established the genuineness of the Share application money received by i....
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....e". In that case, the Tribunal held that even though the explanation about the nature and source of purchases money was not satisfactory but in the facts and circumstances of the case, it is not possible for that aseeseee to earn the amount invested in the properties. It held that, by no stretch of imagination, could the assessee be credited for having earned this income, in the course of assessment year not was she in a position to earn it for a decade or more. The case was of a Muslim lady who is aged about 20 years in the case on hand, the assessee company was in the process of setting-up of a project and has not commenced production during the year and there was no possibility of the assessee company earning any such income during the course of this assessment year. The receipt in question being receipt of share premium, is a capital receipt and cannot be brouqht to tax. As already held, the addition is not warranted under section 68 of the Act. Hence, we uphold the order of the first appellate authority and dismiss this ground raised by the assessee" 10. The explanation and the detailed submissions made by the assessee did not find any favour from the AO. The AO proceeded by ....
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.... found at the time of search which clearly show that the shares were supposed to be bought back by the family members of the group at a discounted price. iii) There are evidences of assessee getting cash back on account of bogus accommodation bills relating to purchases reintroduced in the form of share capital. 14. These observations made by the AO for making the additions u/s. 68 of the Act have been confirmed by the Ld. CIT(A). To justify these additions, the Ld. Departmental Representative has relied upon the decision of the Hon'ble Delhi High Court in the case of Empire Builtech Pvt. Ltd. 366 ITR 110 and CIT Vs Nipun Builders & Developers Pvt. Ltd. 350 ITR 407. 15. Per contra, strong reliance was placed by the Ld. Counsel on the decision of the Hon'ble Delhi High Court in the case of Orbital Communication (P) Ltd. 327 ITR 560, Hon'ble Supreme Court in the case of Orissa Corpn. Pvt. Ltd. 159 ITR 78, Tribunal Delhi Bench in the case of Srajan Buildtech Pvt. Ltd. in ITA No. 4748/Del/2009 and Delhi Bench in the case of M/s. Jansampark Advertising & Marketing Pvt. Ltd. In ITA No. 4839/Del/2009. 16. In the case of Orissa Corpn. Pvt. Ltd (supra), the Hon'ble Supreme Court has he....
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....everal details and documents from the assessee which were duly submitted by the assessee in the form of confirmation from the distributors of the share application money and the assessee also submitted details of PAN No. and addresses of the corporate office. In addition to that the counsel for the assessee also submitted that all transactions were routed through banking channels and the share application money was paid through cheque and assessee submitted bank statements and other supporting evidence before the authorities below. The counsel supported the impugned order and submitted that this appeal of the revenue is devoid of merits in view of judgment of Hon'ble Jurisdictional High Court in the case of Commissioner of Income Tax vs Fair Finvest Ltd. in ITA No. 232/2012 dated 22.11.2012 and another recent judgment in the case of Commissioner of Income Tax vs Gangeshwari Metal Pvt. Ltd. in ITA 597/2012 delivered on 21.01.2013. On careful consideration of the above submissions of both the parties and ratio of the judgment cited before us in the light of facts and circumstances of the case, at the outset, we observe that DR has not disputed the point that the assessee company ha....
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....on of Section 68. 7. Having regard to the entirety of facts and circumstances, the Court is satisfied that the finding of the Tribunal in this case accords with the ratio of the decision of the Supreme Court in Lovely Exports (supra). 8. The decision in this case is based on the peculiar facts which attract the ratio of Lovely Exports (supra). Where the assessee adduces evidence in support of the share application monies, it is open to the assessing officer to examine it and reject it on tenable grounds. In case he wishes to rely on the report of the investigation authorities, some meaningful enquiry ought to be conducted by him to establish a link between the assessee and the alleged hawala operators; such a link was shown to be present in the case of Nova Promoters & Finlease (P) Ltd. (supra) relied upon by the revenue. We are therefore not to be understood to convey that in all cases of share capital added under section 68, the ratio of Lovely Exports (supra) is attracted, irrespective of the facts, evidence and material." Further in the case of Gangeshwari Metal Pvt. Ltd.(supra), the Hon'ble Jurisdictional High Court of Delhi considered the ratio of the judgment of Hon'bl....
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....- a smokescreen - conceived and executed with the connivance or involvement of the assessee excludes the applicability of the ratio. In our understanding, the ratio is attracted to a case where it is a simple question of whether the assessee has discharged the burden placed upon him under sec.68 to prove and establish the identity and creditworthiness of the share applicant and the genuineness of the transaction. In such a case, the Assessing Officer cannot sit back with folded hands till the assessee exhausts all the evidence or material in his possession and then come forward to merely reject the same, without carrying out any verification or enquiry into the material placed before him. The case before us does not fall under this category and it would be a travesty of truth and justice to express a view to the contrary. (underlining added) As can be seen from the above extract, two types of cases have been indicated. One in which the assessing officer carries out the exercise which is required in law and the other in which the assessing officer 'sits back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to mere....
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....be made under section 68 of the Act. Consequently, the question is answered in the negative. The decision of the Tribunal is correct in law." In the case of Gangeshwari Metal Pvt. Ltd. (supra), their Lordships held that two types of cases have been indicated, one in which the Assessing Officer carries out exercise which is required in law and the other in which the Assessing Officer sits back with folded hands till the assessee exhausts all the material in its possession and then the Assessing Officer comes forward to merely reject the same on presumption. From the above citation and peculiar facts and circumstances of the case, we observe that the ratio of the judgment of Hon'ble Apex Court in Nova Promoters and Finlease (P) Ltd. (supra) falls in the former category where the Assessing Officer carries out the necessary exercise which is required as per law and other statutory provisions and that is why Hon'ble Apex Court decided the case in favour of the revenue. However, the facts of the present case are clearly distinguishable and fall in the second category where the Assessing Officer sits back with folded hands till the assessee exhausts all its exercise by submitting requ....
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....de in cheque duly reflected in the bank statements and we find that no adverse inferences have been drawn in this respect nor we find that any verification from the bank have been made by the AO for making the impugned addition. The entire addition have been made only on the basis of admission of the Director during the course of search proceedings. However, we find that the admission was made on 9.9.2010 and retracted by the Director on the very next day i.e. 10.9.2010. Further, the addition is based on the surmises that assessee was taking bogus purchase bills and the cash was reintroduced in the form of share capital. However, there is no demonstrative evidence brought on record which could justify the additions made by the AO. 21. Considering the entire factual matrix, in the light of the judicial decisions discussed elsewhere and in the light of the evidences produced by the assessee, we set aside the order of the Ld. CIT(A) and direct the AO to delete the additions made u/s. 68 of the Act for all the assessment years under this appeal. 22. Now let us consider the additions made on account of bogus purchases through accommodation bills. Initially survey was conducted at the ....
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....anything which could suggest that the purchases are bogus as there is no adverse inferences in so far as sales are concerned. Without purchases there cannot be any sales. Considering all these facts in totality, we do not find any merit in respect of the additions made on account of alleged bogus purchases which are based merely on the statements backed by no cogent/demonstrative material evidences on record. We, therefore, set aside the findings of the Ld. CIT(A) and direct the AO to delete the additions made on account of bogus purchases/accommodation bills from all the assessment years under this appeal. 25. Proceeding further, the next addition relates to the alleged 2% commission on account of getting accommodation bills for which the Ld. CIT(A) has given part relief to the assessee. Since we have categorically held that the additions on account of bogus purchases cannot be sustained on the facts of the present case and accordingly we have deleted the same, there remains no reason why the addition on account of alleged 2% commission should be sustained. We, therefore direct the AO to delete the addition made on account of alleged 2% commission in entirety for all the years un....