TaxTMI 
TaxTMI 
2019 (10) TMI 347
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....losely held Private Limited Company. Assessee has filed it's income Tax Return on Dt.30/9/2010 declaring a total income of Rs. 2,29,830/-. The Company has Sh. Anil Singhal, Sh. Salek Chand Singhal, Ms. Sushma Singhal and Sh. Umesh Kumar Singhal as Directors. The assessee Company is engaged in the business of trading of Iron & Steels. 5. Balance sheet of the assessee firm stands it at Rs. 2,91,08,993.59/- as on 31.03.2010, wherein issued share capital has been shown at Rs. 4,00,000/- further, Share Application money has been shown at Rs. 85,00,000/- as on 31.03.2010. 6. During the course of assessment proceedings assessee was enquired vide questionnaire dated 03.08.2012 to furnish complete details of share application money shown at Rs. 85,00,000/-./It was asked to furnish name and complete addresses and PAN of the persons from whom the share application money was received along with copy of their bank statement, copy of Balance-sheet and confirmation of account in support of identity and creditworthiness of these persons and genuineness of transaction. In response to the query, the assessee could not furnish any convincing evidence to substantiate the genuineness of said tran....
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....roduced. 14 11.02.2013 To substantiate the share application money Also asked to produce Directors of assessee company and share applicant. 21.02.2013 Written submission 15 21.02.2013 To substantiate the share application money Also asked to produce Directors of assessee company and share applicant. 06.03.2013 Written submission 16 05.03.2013 To substantiate the share application money Also asked to produce Directors of assessee company and share applicant. Written submission 17 12.03.2013 To substantiate the share application money Also asked to produce Directors of assessee company and share applicant. Written submission 18 19.03.2013 To substantiate the share application money Also asked to produce Directors of assessee company and share applicant. Written submission 7. The assessee was requested to prove the identity of companies from whom share application money claimed to have been received and to produce Principal Officers of these companies so that genuineness of documents and physical existence of companies can be examined. It was asked to furnish name and complete addresses ....
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.... parties and officials of the revenue were deputed to get confirmation of the transaction shown by the assessee. However, the aforesaid parties were not found at their respective addresses provided by the assessee. It is reported by the officials that none of the companies found at the given addresses and notices issued u/s 133(6) were returned un-served. It is also reported that these companies have never been existent at the addresses provided by the assessee. The assessee has given new address in respect of two companies are as under: 1 Safari Tradex Private Limited, G-18, Garg Tower, Netaji Subhash Nagar, Pitampura, New Delhi 6,00,000/- 2 Focus Tradimpex Private Limited, YP-43 B, Pitampura, New Delhi 8,00,000/- 9. It is also found from local inquiry and persons/concerns found at the given addresses that these companies have never been in existence at respective addresses. Officials of revenue inquired from the owners of the buildings who have denied that they have ever given offices to the said named companies. The Assessing Officer vide letter dated 29.01.2013 sought from assessee about the status of each of the addresses as the address Room No.204, 21st C....
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.... Jewellers, Netaji Subhash Place, New Delhi 6,00,000/- 2 Focus Tradimpex Private Limited, 25/14A, No.14, Kunti Marg, 60 Feet Road, Vishwas Nagar, Shahdara, New Delhi 8,00,000/- 3 Kabir Enterprises Private Limited., A-85, First Floor, Office No.2, ST No.15, Madhu Vihar, New Delhi 10,00,000/- 12. Physical inquiries were made at the above addresses by the officials of revenue and found that these companies are not inexistence at the given address. At Safari Tradex Private Limited, S-561, Room No. 218, Bhagwati Business Centre, School Block, Shakarpur, New Delhi, a person named Sh. S.K. Srivastava is having office at this address, he has denied that such company was ever at this address. At South Ganesh Nagar, Mandawali New Delhi, the builder who is also owner of building stated that there is no such company since 1980. Similarly, the enquiries of other companies revealed the following: 1 Naman Lam Private Limited, Monitor Sprint Elevators Private Limited, Kabir Enterprises Private Limited, All at Room No.204 21st Century Business Centre, D-64, Shakarpur New Delhi Locked for many years, local inquiry reveal that such companies have never been at this ad....
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....y these companies. Partners of the firm have also not been produced. The Assessing Officer held that neither assessee could provide any address of all the companies from whom share application money has been received, so that summons u/s 131 can be issued nor has been able to produce principal officers of above companies. The enquiry conducted by the revenue revealed that address 204 21st Century business centre D-64, Shakarpure, New Delhi is found closed for many years. Care taker of the building has also confirmed that this was never let out to M/s Naman Lam Private Limited, Sprint Elevalors Private limited and Kabir Enterprises Private Limited. These companies were never in existence at the said address. The address of on M/s Kabir Enterprises was furnished that was also found wrong. It was submitted to the Assessing Officer that there was no need to keep such register. The assessee could not produce any document register to show that above shareholders companies have ever attended any meetings of shareholders. Further, no income or Dividend or any other benefits have been given on record to these alleged investor companies in lieu of substantial investment made by them. The ass....
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....at there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing au thorities were - not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents." 16. The ld. CIT (A) confirmed the order of the Assessing Officer relying on the judgment in the case of Empire Buildtech Pvt. Ltd. 366 ITR 110 and Nova Promoters and Finlease Pvt. Ltd. of Hon'ble Delhi High Court. 17. Before us, during the hearing, the ld. AR filed the minutes of the proceedings of extra ordinary general meeting of the ....
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....closed) where Hon'ble Allahabad High Court held that additions u/s 68 warrant being sustained where the identities & creditworthiness of investors in the assessee company are not established by the assessee & are also proved incorrect by the Department's Assessee Information System. In such circumstances, assessee cannot resist the additions on grounds that it did not have opportunity to cross-examine relevant witnesses. An assessee company cannot hide behind the shell of a corporate entity to feign ignorance regarding the identity of any person who invests in its share capital. Prem Castings (P.) Ltd. Vs CIT 2018-TIOL-274-SC-IT (Copy Enclosed) where Hon'ble Supreme Court held as follows: "We do not find any merit in this petition. The Special Leave Petition is accordingly dismissed." 5. CIT Vs MAF Academy (P.) Ltd (361 ITR 258) (Copy Enclosed) where Hon'ble Delhi High Court held that where assessee, a private limited company, sold its shares to unrelated parties at a huge premium and thereupon within short span of time those shares were purchased back even at a loss, share transactions in question were to be regarded as bogus and, t....
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....hat the matter requires an order of remit to the Tribunal for fresh adjudication keeping in view the aforesaid case law." Navodava Castle Pvt Ltd Vs CIT ([2015] 56 taxmann.com 18 (SC)/[2015] 230 Taxman 268 (SC)) (Copy Enclosed) SLP of assessee dismissed by Hon'ble Supreme Court 7. Konark Structural Engineering (P.) Ltd. Vs DCIT [2018] 96 taxmann.com 255 (SC) (Copy Enclosed) where assessee-company received certain amount as share capital from various shareholders, in view of fact that summons to shareholders under section 131 could not be served as addresses were not available, and, moreover, those shareholders were first time assessees and were not earning enough income to make deposits in question, addition made by Assessing Officer under section 68 was to be confirmed; SLP dismissed. Konark Structural Engineering (P.) Ltd. Vs DCIT [2018] 90 taxmann.com 56 (Bombay) (Copy Enclosed) where Hon'ble Bombay High Court held that where assessee-company received certain amount as share capital from various shareholders, in view of fact that summons served to shareholders under section 131 were unserved with remark that addressees were n....
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....rate that the assessee has discharged its onus to prove not only the identity of the share applicants, but also their creditworthiness and the genuineness of the transactions. No attempt was made by the Tribunal to scratch the surface and probe the documentary evidence in some depth, in the light of the conduct of the assessee and other surrounding circumstances in order to see whether the assessee has discharged its onus under Section 68. With respect, it appears to us that there has only been a mechanical reference to the case-law on the subject without any serious appraisal of the facts and circumstances of the case. We, therefore, answer the substantial question of law framed by us in the negative, in favour of the revenue and against the assessee. The appeal of the revenue is allowed with no order as to costs." 12. CIT Vs Nova Promoters & Finlease (P) Ltd (18 taxmann.com 217, 206 Taxman 207, 342 ITR 169, 252 CTR 187) (Copy Enclosed) where Hon'ble Delhi High Court held that amount received by assessee from accommodation entry providers in garb of share application money, was to be added to its taxable income under section 68. It Was held as follows: "41. In th....
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....e issuing cheques to the assessee, huge amounts were transferred in the accounts of said share applicants. This discussion itself would reveal that even though the share applicants could not be accessed through notices, the assessee was in a position to obtain documents from them. While there can be no doubt that in Lovely Exports (P.) Ltd. (supra), the Court indicated the rule of "shifting onus" i.e. the responsibility of the Revenue to prove that Section 68 could be invoked once the basic burden stood discharged by furnishing relevant and material particulars, at the same time, that judgment cannot be said to limit the inferences that can be logically and legitimately drawn by the Revenue in the natural course of assessment proceedings. The information that assessee furnishes would have to be credible and at the same time verifiable. In this case, 5 share applicants could not be served as the notices were returned unserved. In the backdrop of this circumstance, the assessee's ability to secure documents such as income tax returns of the share applicants as well as bank account particulars would itself give rise to a circumstance which the AO in this case proceeded to....
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.... (Delhi)/[2014] 222 Taxman 157 (Delhi)(MAG)/[2014] 264 CTR 258 (Delhi) (Copy Enclosed) where Hon'ble Delhi High Court held that if AO doubts the documents produced by assessee, the onus shifts on assessee to further substantiate the facts or produce the share applicant in proceeding. It was held as follows: "30. What we perceive and regard as correct position of law is that the court or tribunal should be convinced about the identity, creditworthiness and genuineness of the transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee's knowledge. Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate 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 are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind the company w....
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....shareholders." 19. Heard the arguments of both the parties and perused the material available on record. 20. We find that the assessee has miserably failed to give the basic details like the correct address of the applicant companies to the Assessing Officer. The addresses given initially and subsequently have been found to be bogus. The assessee has submitted documentation like ITR of the share applicant companies, the confirmations, the ROC record, P&L and balance sheet of the share applicant companies, copies of the application of the equity shares which cannot be primarily taken as sacrosanct when weighed against the concrete evidences collected and confronted by the revenue to the assessee before making the addition. The addresses have been proved wrong, the notices u/s 133(6) of the Act have come back unserved, correct address of the Directors was not provided. There has been change of Directors and a set of persons taken as Directors and different companies. Approximately, 15 concerns are floated or taken over by a set of persons having same addresses and common Directors/Proprietors as below: S. No. Name of companies Owner's/Director 1 Rachita Build....
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.... the way of following chart: Cash Rs. 9,00,000/- 12.11.2009 True way Network & Mkg Kotak Mahindra Bank 900000 13.11.2009 Visit India Voyges Pvt. Ltd. Kotak Mahindra Bank 1400000 13.11.2009 Singhal Sunrise Cash Rs. 2,00,000/- 12.11.2009 B R Gupta & Co Pvt. Ltd. Kotak Mahindra Bank 200000 13.11.2009 Cash 3,00,000 12.11.2009 Thakur Ji Sales Corporation Kotak Mahindra Bank 300000 13.11.2009 25 Lacs 28.10.2009 J K SALES CORPORATION ING Vysya Bank, 800000 29.10.2009 Sona Electrical Services Pvt. Ltd. ING Vysya Bank, 800000 29.10.2009 Naman Lam Pvt. Ltd. 800000 29.10.2009 Singhal Sunrise 4,00,000 30.11.2009 Ravi Sales Corporation South Indian Bank 09334172388 Cash 50,000 21.11.2009 Cash 50,000 30.11.2009 4,00,000 Naman Lam Pvt. Ltd. 500000 30.11.2009 Singhal Sunrise cash 9,00,000 28.10.2009 Harshit Textiles, 13508630000087 900000 cash 1,00,000 28.10.2009 Rachita Buildcon Pvt. Ltd. HDFC Bank 1000000 31.10.2009 Singhal Sunrise 1000000 30.10.2009 Ellora Buildtech Pvt. Ltd. Ltd. Syndicate Bank 1000000 30.10.2009 Anu....