TaxTMI 
TaxTMI 
TaxTMI 
2019 (9) TMI 1180
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....ant 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 bogus premium to the tune of Rs. 4 crore. 5. The brief facts leading to ....
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.... 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 such undisclosed income of the appellant nor any concern of the appellant with regard to the share transa....
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....er 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 banking channels was to be added in the hands of the appellant company which has no role to play in those transactions It be so held now and addition of Rs. 4,00,....
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....t 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 finstock Pvt. Ltd. During the post search enquiries, enquiries were also made with regard to the investment made by Ankush Finstock in the shares of Nishant Construction Pvt. Ltd./appellant by way of purchas....
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....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 Nilam U. Shah. During the appellate proceedings the appellant has reiterated the submission made before the A.O. It further submitted that the A.O has failed to appreciate the supporting documentary evidence in....
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....end 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 capital by means of purchasing the shares of the appellant from Smt. Nilam U. Shah. Hon'ble High Court of Delhi in the case of Nova Promters and Finlease Pvt. Ltd. has held that "we are afraid that we cannot apply the ratio to a case such as the ....
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....enuineness 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 the decisions, control and manage them." On 16/1/2015 Hon'ble Supreme Court has dismissed the SLP in the case of by Navodaya Castle Pvt. Ltd. vs CIT 230 Taxman.com 268. The SLP was filed by Navodaya Castle Pvt. Ltd. against the ruling of Hon'bl....
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....see 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. It was further argued that it is clear from the analysis of the transaction noted by the Learned AO in paragraph 4 of his order that the transaction of share purchases were pertaining to the year 2008 and were all genuine transactions between the various pe....
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....els, 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 form of share application money through the entry provider and hence addition has been rightly made. The Learned DR relied upon the judgement passed by the Coordinate Bench in the case of Ayaana Comtrade (P) Ltd -versus- Income Tax Officer, Ward-(1(1)(4), Ahmedab....
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.... 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 Central Excise, Kolkata [2015]62 taxmann.com 3 (C) where the Apex Court has observed that : " According to us, not allowing the assesses to cross examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the im....
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....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 initial onus was discharged in the instant case by the assessee by furnishing documents like MOA, AOA, share application & board resolution, Certificate of Incorporation, Certificate of Commencement, acknowledgements of ITRs, audited accounts etc. of concerned companies. Thereafter, in our view, t....
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.... 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 explanation as sufficient and thereby deleting the amount as income of the assessee concerned. He also relied upon the decision of this Court in the case of Umesh Krishnani Vs. ITO in Tax Appeal No.800/12 decided on 15.12.2013 and he contended that as the preliminary burden was not discharged by the assessee, the Tribunal has not considered the sa....
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....t 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. 8. Hence, the appeals are meritless and therefore, dismissed." Thus, it appears that in that case the assessee has to prove the nature and source of the amount credited in his books of accounts. It appears from the aforesaid judgement that when the assessee has admittedly discharged its initial burden it would be for the revenue to show that the transaction was bogus ....
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....uring 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 the case before us. Thus, the entire action of the authorities below speaks total non-application of mind, lack of inquiry and colourable exercise of power, excessive highhandedness as also close mindedness resulting into addition merely on the basis of the statement made by the director of Ankush Finstock Ltd which was neither allowed to be cross examined; such addition, thereforeis....
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....d 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. 3,79,87,658/ is written at the fifth line with remarks 'cash'. To understand and interpret this paper properly it is necessary, to have a look at pages 112 to 128 ofAnnexure A-impounded from the premises of Nishant Construction Pvt. Ltd. at 801-802 Regency Plaza, Satellite Road, Ahmedabad. Page no. 112 to 128 ofAnnexure A-is the deed of registration for purchase of land by Nishant Construction ....
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....essee 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 submission made by the Learned Senior Counsel appearing for the assessee before us. The Learned Counsel further argued that the consideration amount was not disputed by the Registrar at the time of registration of the Deed of Conveyance, hence the formation of the opinion without making enquiry is nothing but absolutely on surmise and conjectures and thus the addition on that basis is liable to be deleted. The Learn....
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....e 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 during survey proceeding. Admittedly, the said document as is having no title or date or broad details to draw an inference that it was particularly relating to payment made by the appellant to DasharathbhaiPunjabhai, MahendtabhaiDashrathbhai and RajendrabhaiDashrathbhai for purchase of land for the residential project of Ratnakar VI of the assessee company. In this regard, we find that no independent enquiry has b....
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....s 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 Lakh as assessee's undisclosed income and made addition.The Hon'bleCourt held that since there was no material on record to show as to on what basis the Assessing Officer has reached at the conclusion that figure "48" was to be read as 48 lakhs and thus document recovered was a "dumb document", addition therefore was unjustified and upheld the order passed by the Learned Tribunal in deleting such addition. In another mat....
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....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 this will be nothing but a premium on the inaction made by the authorities below on this aspect when they failed to avail the chances to do so at the relevant time. Both the Learned AO or by the Learned CIT(A) failed to do it. Opportunity of cross verification from the vendors, in our considered view should not be given in the hands of the Revenue once again which will be opening a further avenue for multiple innings which has ....