TaxTMI 
TaxTMI 
2019 (9) TMI 1180
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....ng, Ahmedabad at several premises of M/s Nishant Construction Private Ltd. Upon going through the survey report dated 27.07.2012 sent to the concerned office and upon analysing the impounded documents certain facts claimed to have been emerged before the revenue authorities for which ultimately additions on following 3 counts were made: A. Addition on account of alleged bogus premium to the tune of Rs. 4 crores u/s 68 of the Act. B. Rs. 18,05,87,658/- on account of on money payment/ unaccounted investment in purchase of land of the appellant's project Ratnakar IV and C. on money receipts to the tune of Rs. 17,85,79,435/- The addition, however, was confirmed by the First Appellate Authority, hence the assessee is before us. 3. At the time of hearing of the instant appeal, the Learned Sr. Counsel appearing for the assessee submitted before us that he does not want to proceed with the Ground No.1 being the maintainability of the proceeding. Hence, the first ground preferred by the assessee is dismissed as not pressed. 4. We now propose to deal with the grounds relating to the addition made on each count. Ground No.2:Addition on account of alleged....
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....ent i.e. December 2008. Thus the amount of Rs. 1,65,50,000/- has been said to be brought to the books of assessee company being Nishant Construction Private Ltd. as observed by the Learned Assessing Officer. The entire pattern of transaction by rotation of money actually owned by Shri Uprendra C. Shah is nothing but a clever trick adopted by the assessee to introduce unaccounted income in the group company and individuals in a disguised manner and ultimately the assessment was finalised inter alia by making addition of Rs. 4 crore under Section 68 of the Act on account of unexplained credits which was further confirmed by the First Appellate Authority. Hence the instant appeal before us. 7. During the appellate proceeding the assessee submitted the following before the Learned First Appellate Authority: "5.1 On this issue the appellant during the course of appellate proceedings submitted as under:- "(i) ADDITION ON ACCOUNT OF ALLEGED BOGUS PREMIUM Rs. 4,00.00,000/- The Ld. A.O. has erred in law and on facts in making huge addition of Rs. 400,00,000/- on account of alleged bogus share premium ignoring the fact that there was absolutely no evidence of su....
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....14 (page 8 to 11 as enclosed with Appeal Memo). The ld AO has miserably failed to appreciate the true position and also failed to consider the supporting documentary evidences in the form of share applications, Board resolution allotting shares in the year 200809, allotment of shares as well as Form No 2 filed with ROC, Share transfer Forms, Resolution sanctioning transfer of Shares from both the companies etc (Attached with letter dated 11.12.2014 ). It is therefore abundantly clear that as far as the appellant company is concerned, the addition is made merely on the basis of assumption, presumption and suspicion on the basis of alleged uncross verified statement of Mr. Bharat Shah of Ankush Finstock Ltd. It is also clear from the analysis of the transactions noted by AO in para 4 of his order that the transactions of share purchases were pertaining to year 2008 and were all genuine transactions between the various persons. Merely because the shares earlier allotted (which were accepted as genuine transactions) were transferred by the share holders during later years, it cannot be presumed that the amount received by those shareholders through proper ban....
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....tion of the A.O. as well as the case law relied upon by the appellant. It is observed that the A.O has made an addition of Rs. 4 crore on account of unexplained credits as per sec.68 of the Act. It is observed from para4.1.18 of the order of assessment that the A.O has also made protective addition of Rs. 4 crores in the hands of Shri Upendra C. Shah and Smt. Nilam U. Shah. The addition in the hands of the appellant has been made on substantive basis. The A.O at para-4.1 to 4.1.18 has dealt with the issue of share application money received by the appellant. The A.O has observed that the appellant had allotted 1,60,000 shares at the rate of Rs. 250 per share (Rs. 10 + premium of Rs. 240/-) to the directors/related individuals of the directors namely Nilam U. Shah, wife of Shri Upendra Shah, Shri Upendra Shah, M.D of the appellant company and Shri Nishant U. Shah, son of Shri Upendra Shah. 160000 shares of the appellant were allotted by theappellant on 31/3/2009. Later on Smt. Nilam U. Shah purchased the shares so allotted to Shri Upendra C. Shah and Shri Nishant U. Shah. In F.Y.2009-10,Smt. Nilam U. Shah sold 160000 shares at the rate of Rs. 250/- per shares to Ankush fins....
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....r account of the appellant for making share application money. All three of them have diverted funds from their loan account to make investments in the share of the appellant. The A.O has mentioned at para-4.1.6 how the funds came to these three individuals for making investments in the shares of the appellant company. The details of funds received by these three individuals are mentioned at para-4.1.6 to 4.1.14. It can be seen from these details that through various persons the money was being introduced into the accounts of these three individuals and routed for making investments by means of share application money of the appellant company. 160000 shares of the appellant company were thus concentrated in the hands of Nilam U. Shah and finally with the help of entry operator namely Bharat M. Shah the money was introduced through purchase of shares of the appellant company at a premium. Therefore, as the funds of Rs. 4 crore in cash given by Shri Upendra Shah to Shri Bharat Shah finally came back in the form of share application money to the appellant company, although Ankush Finstock Pvt. Ltd. (company of Shri Bharat Shah) had purchased the shares of the appellant company from Ni....
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.... the surrounding circumstances to find the reality of the recitals made in those documents." Hon'ble Supreme Court in the case of A. Govindarajulu Mudaliyar 34 ITR 807 has held that whether receipt is to be treated as income or not, must depend very largely on the facts and circumstances of each case. In the instant case the statement of entry providers i.e. Bharat M. Shah explaining their modus operandi to help the appellant as well as Shri Upendra C. Shah, Smt. Nilam U. Shah and Nishant U. Shah to convert their unaccounted money into the accounted money by means of layering and laundering offers sufficient material on the basis of which the A.O can be said to have been fulfilled its duty. The statements of Shri Bharat M. Shah, refers to the practice of receiving cash and issuance of cheques in a systematic manner for subscription to share capital for a consideration i.e. the commission. The investigation wing has already recorded statement of such share applicant subscribing the shares of the appellant. This constitutes materials upon which one could reasonably come to the conclusion that the cash belonged to the appellant company and was introduced in the form of share capit....
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....not have its own profitmaking apparatus and was not involved in any genuine business activity.The front company was merely involved in rotation of money which was coming through the bank accounts but this does not reflect its creditworthiness or even genuineness of the transactions. As mentioned by Shri Bharat M. Shah, he did not have possession of the shares allotted to Ankush Finstock and had given the blank signed share transfer forms to the appellant and Shri Upendra C. Shah. It would be worth mentioning that Hon'ble Delhi High Court in the case of N.R. Portfolio Pvt. Ltd. 206 (2014) DLT 97 (Del) has held that mere production of incorporation details, PAN, the fact that 3rd person or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts protect a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive Companies, no doubt, are artificial or juristic persons but they are soulless and dependent upon the individuals behind them who run and manage the sail companies, it is the persons behind the company to take ....
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....cument and cogent evidence of such undisclosed income of the appellant. Such addition has been made on as assumption basis and on the basis of the statement of the director of Ankush Finstock Ltd who was not been allowed to be cross-examined by the assessee in spite of repeated request made to that effect. Apart from that the Learned Senior Counsel also argued on this particular point that though the assessee furnished all the details and explanation with regard to such share transaction to Ankush by and under its letter dated 11.12.2014 along with all the documentary evidences including the share applications, the same have been totally ignored by the authorities below while making addition which is nothing, but the colourable exercise of power, as also submitted by the learned AR. In this respect he has relied upon the said letter dated 11.12.2014 being Exhibit-A as appearing at page 45 of the paper book before us. More so the Learned Senior Counsel explained as regards transaction of share transferred between the shareholders and Ankush Finstock Ltd. has not been rebutted by the Learned Assessing Officer which was otherwise established from the records furnished to him. 10. I....
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....ders, creditworthiness of the creditors/shareholders and genuineness of the transaction have to be decided not only superficially but in-depth having regard to the materials available on record. He further proclaims that transfer of funds through banking channels, share registration form, certificate of incorporation, PAN become irrelevant so far as the issue of identity is concerned when there is pre-dominant evidence and material to show that the subscriber company was only a paper company and not a genuine investor. He further relied upon the statement made by the director of the Ankush Finstock Ltd that he did not have possession of the shares allotted to his company and had given the blank signed shares transfer forms to the appellant and Shri Upendra C. Shah. According to the Ld DR though the funds have been received by the assessee from Ankush Finstock Ltd through banking channels, they do not reflect the actual, genuine business activity of the said company; being a paper company the entire transaction is ingenuine and thus he relied upon the conclusion made by the authorities below to this extent that the appellant has introduced the share capital of Rs. 4 crore in the for....
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....d 10.07.2009 passed by the Board of Directors of the said Ankush Finstock Ltd in order to show that the said Ankush Finstock Ltd has not made any direct investment in the shares of the assessee company but has purchased shares worth Rs. 4 crores from Mrs Nilam U Shah. However, with utter surprise we find though those were placed before the authorities below the same were not taken into consideration either by the Ld AO or by the First Appellate Authority for the reason best known to them. Thus, the authority hasadmittedly acted in a closed and biased mind only on the basis of the statement of Bharat C shah recorded on oath under section 133of the Act and addition made thereon. The defense of the assessee has not been taken into consideration in its proper perspective either by way of examining the document placed before it as made known to the authorities by and under the representation dated 11.12.2014 or by affording opportunity to cross examine the said Bharat C Shah. It is a settled principle of law that assessment order in which addition is made on the basis of any such statement is a "nullity" as also held by Apex Court in the case of Andaman Timber Mart v. Commissioner of Ce....
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....older companies pleading that they were not shareholders now and seven years had passed since the transactions took place. We do not hesitate to conclude that such an attempt by the authorities below in relying upon a judgment passed by the Hon'ble Apex Court on a different set of facts is nothing but misleading in order to make addition against the assessee by hook or crook by the revenue.In this regard we further would like to rely upon the order passed by the Hon'bleJurisdictional High Court in the matter of PCIT-vs-Chartered Speed Private Ltd in Tax Appeal No. 126 of 2015 and Tax Appeal No. 127 of 2015. While dealing with this particular aspect of the matter the Hon'ble High Court observed as follows: "In the appeal before the Commissioner (Appeals), the order of the AO was confirmed. In the further appeal before the Tribunal, at paras 17 and 18, it was observed thus - "17. We find that in the instant case, the addition is made u/s. 68 of the Act on the ground of unexplained cash credit. As per the provisions of section 68, the initial onus lies upon the assessee to prove the nature and source of amount credited in his books of account. We find that this initi....
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.... discharge the onus which was upon it u/s. 68 of the Act. In the above circumstances, in our considered view, the addition was made solely based on the inadmissible and unreliable material and therefore addition so made cannot be sustained. We, therefore, delete the addition of Rs. 2,00,00,000/- made in the case of M/s Charted Motors Pvt. Ltd. as well as addition of Rs. 70,00,000/- made in the case of M/s. Chartered Speed Private Limited." Under the circumstances, the present Tax Appeals before this Court. 4. Mr.Bhatt, learned counsel appearing for the Revenue contended that three aspects were required to be proved. One was the identity of the person concerned from whom the source of money is disclosed. The another was the creditworthiness of the person concerned and the third was the genuineness of the transaction. He submitted that in the present case, the Tribunal has committed error in not considering that the creditworthiness as well as genuineness of the transaction were not proved and therefore, irrespective of the fact that the persons who had given statements were not made available for cross-examination, the Tribunal has committed error in accepting the ....
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.... these circumstances, if the Tribunal hasfound that the explanation under section 68 of the Act was acceptable in absence of nondischarge of the burden upon the Revenue, such a finding of fact would not call for interference when the appeal before this Court is limited to the substantial questions of law. The decision upon which the reliance has been placed by Mr.Bhatt in Tax Appeal No.800/12 (supra) is of no help to the Revenue because the facts and circumstances of the present case cannot be equated with the facts of the said caseconsidered by this Court. It is hardly required to be stated that whether the explanation is sufficient or not would essentially depend upon the facts and circumstances of each case. But the principle remains that once the initial burden is discharged by the assessee, it would be for the Revenue to show that the transaction was bogus leading to conclusion for discarding of the explanation. In the present case, as observed by us hereinabove, the burden was not discharged and therefore the Tribunal has held in favour of the assessee. We do not find that any substantial question of law would arise for consideration in the present appeals, as canvassed. ....
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....er passed by the Learned CIT(A) as impugned before us. Those clearly show that this particular aspect was further pointed out to the CIT(A). Thus,in the event we accede to such prayer made by the revenue, at this stage, it will be nothing but adding premium to the inaction/overaction made by the authorities below particularly when we do not find any such receipt of the appellant during the year under consideration as added under section 68 of the Act, neither we encourage multiple innings to revenue authorities as the ratio laid down in the judgement passed by the Hon'ble Jurisdictional High Court in the case of Rajesh Babubhai Damania-vs CIT, reported in 122 Taxman 614(Guj) which was subsequently followed by the Hon'ble ITAT Bench, at Delhi in the case of COIM India private Ltd versus ACIT reported in 96 taxman.com 511. It is relevant to mention that the judgement relied upon by the Ld. DR has no manner of application to the instant case since the basic fact is completely different from that of the judgement relied upon before us.Particularly in the said judgment the assessee failed to produce a shareapplications before the Assessing Officer which is admittedly different from t....
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....the assessee subsequently retracted from his statement by filing an affidavit on 25.05 2011 which was made known to the authorities being the Assistant Director of Income Tax, Aykar Bhawana, Ahmedabad, by and under an intimation dated 20.06.2011 as it appears at page 118 of the paper book before us. Admittedly the authorities below while coming to the conclusion that the assessee had paid Rs. 18,05,87,658/- by cash relied upon that particular document which has been narrated by the Learned Assessing Officer in the following manner: "4.2.1. During the course of survey proceedings at the premises of Nishant Construction Pvt. Ltd. at 801-802, Regency Plaza, Satellite Road, Ahmedabad a loose paper inventoried as page no.160 of Annexure A-2 was found and impounded. There are certain rough notings on this page. A figure (Rs. 23,30,87,658/-)is written at the top of this page with remarks 'total'. Below that, in the second line a figure of Rs. 14,26,00,000/- is written with remarks 'cash paid'. A figure of Rs. 9,04,87,658/- is written as the balance figure in the third line. A figureof Rs. 5,25,00,000/- is written at the four line. Further, a figure of Rs. 3,79,....
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....articularly was recovered from one Virendra N Thakkar, an employee of the assessee company who happens to be the liaison officer for the company for last 23 years. However, according to the authorities below the said Shri Thakkar deals with the matters related to land. We have also gone through the deed of conveyance dated 03.02.2010 available at page 175 to 193 of the paper book filed before us by the assessee where the total consideration of the said sale proceed was of Rs. 5,25,00,000 as reflected at page 185 of the said paper book. The case of the assessee is this that the said loose paper as aforesaid is a "dumb document" having no title, date or details which can lead to the conclusion that it was pertaining to the appellant and related to the alleged payment made by the appellant to DasharathbhaiPunjabhai, MahentabhaiDashrathbhai and RajendrabhaiDashrathbhai for purchase of land for the residential project of Ratnakar VI of the assessee company. It is only pure guess, without any supporting evidence to rebut the explanation of the appellant and given without any independent enquiry from the vendors regarding any such alleged cash payment being made to them as the submissi....
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....e concluded that it is that amount which is reflected in the sale deed. Further that the other figures of various amounts mentioned in the said loose paper either paid or to be paid in cash has rightly been considered by the authorities below. It was further contended that in the event the aforesaid argument is not accepted by us the matter be set aside to the file of the authorities below to cross examine the Vendors of the land. Thus, it appears that the moot point to be considered by us is as to whether the revenue can rely upon the piece of paper in question as part and parcel of the transaction pertaining to the land which has been alleged to be a dumb document by the assessee in the present facts and circumstances of the case and as to whether the statement given by Upendra C Shah at all been taken into consideration while making addition of the amount of Rs. 18,05,87,658/- as payment of cash towards the purchase of land under section 69C of the Act. 18. Firstly, we would like to deal with that piece of paper seized and impounded from the employee of the assessee company namely Shri Virendra N Thakkar at premises No. 801, 802, Regency Plaza, Satellite Road, Ahmedabad....
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....d we have considered the judgement relied upon by the Learned AR passed in the matter of V. C.Shukla, reported in 1998(3) SCC 410 wherein, it was held that the loose sheet cannot be said to be the book or entries therein is not an admissible evidence. In the case before us the such loose paper was found from one of the employees of the assessee company namely Mr. Virender N. Thakkar. Shri Thakkar did not depose that this particular loose paper belongs to the appellant company or it relates to the payment made for land in cash by the appellant company. Relying on the figure mentioned in that particular loose paper and assuming that relates to the payment made by the appellant in cash towards land dealing is ultimately is of no value if the very basis of such conclusion is not having any true force in the eye of law. We have further considered the judgement passed in the matter of CIT, Delhi-VI-vs-Girish Choudhary, reported in (2007) 163 Taxmann 608 (Delhi) where in similar circumstances a document containing entry '48' was seized from the premises of the company in which the assessee was a Director. As assessee failed to explain the said entry, the Assessing Officer treated Rs. 48 L....
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....C. Shah recorded during the survey on 20.05.2011 accepting discrepancy in the books and disclosing Rs. 15 crore but the affidavit dated 25.05.2011 shown by the assessee with a specific statement that such statement so recorded during survey was under pressure and coercion has not been taken into consideration in its proper perspective. The judgment passed by the Hon'ble Madras High Court in the matter of CIT-vs-S. Kadarkhan, reported in 352 ITR 480 holding that statement during survey has no evidentiary value has been upheld by the Hon'ble Apex Court. The ratio has also been followed by the Jurisdictional High Court in the case of CIT-vs-Sardaben K. Modi, reported in 217 Taxman 89. In the said judgment the Hon'ble Court was pleased to refer the CBDT Circular dated 10.03.2003 whereby and whereunder the Board has instructed that no attempt should be made to obtain confessional statement of disclosure and evidence should be collected. We further find from the submissions made by the revenue that they have prayed for setting aside the issue to the learned AOfor re examination of the matter which, according to us is not permissible at this stage. If the prayer is granted by us, then ....