AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (10) TMI 974
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....s and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition u/s.68 of the IT Act without appreciating the fact that the assessee, even during the appellate proceeding could not establish the genuineness of claimed transaction and creditworthiness of the lenders?." 2. "Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was justified in deleting the addition u/s.68 of the IT Act without appreciating the fact that the basic tenets for satisfying genuineness of cash credits, being identity, creditworthiness of the lenders and genuineness of the transaction are cumulative and not isolated i.e. all three need to be satisfied?" 3. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition u/s.68 of the Act solely on the basis of AO's report that the source of the source of the credit had been establish ignoring the fact that the very basics of genuineness of the transaction itself and creditworthiness of the lenders were never established?" 4. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addi....
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....branch of Central Bank of India with New Marine Lines, Mumbai. The AO observed that assessee did not file its bank statements for the entire previous year relevant to impugned assessment year and has merely filed bank statement for relevant period wherein receipt of aforesaid cheque was reflected. The AO asked assessee to explain complete details of receipt of aforesaid loan with complete details and sources of loan. The assessee filed ledger account of Central Bank of India as appearing in its books of accounts which reflected that the said amount of Rs. 8,00,000/- was received from Nabela Finvest Private Limited. The assessee claimed that said amount was received from Nabela Finvest P. Ltd., but further details such as detail of cheque number was not given. The assessee did not file any further evidences such as account copy or confirmation letter from Nabela Finvest Private Ltd.. The AO also observed that ledger account copy of the bank was not signed by any competent person. The AO doubted genuineness of the ledger copy filed by the assessee. 3.4 The AO observed that the assessee has declared share speculation profit of Rs. 79,340/- as gross income and net income declared w....
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.... 79,340/- as gross income and net income declared was only Rs. 8875/-. It was held by the AO that sources of amount of Rs. 39.90 lakhs were not proved through proper and satisfactory evidences. The AO also observed that the assessee has also not explained reasons as to why Rotuda Capital & Finance Pvt. Ltd. routed the funds through the bank account of the assessee to reach to the account of M/s. Murliwala Realtors P. Ltd.. The AO also observed that the assessee has not declared any income out of these transactions. The AO observed that assessee is appeared to be helping money laundering by routing unaccounted funds of some persons through several layers of bank accounts to make detection by investigation authorities difficult. The AO treated the said amount of Rs. 39,90,000/- as an unexplained credit u/s 68 of the 1961 Act as no satisfactory explanation for debit and credit entries in the bank account is given by the assessee which stood added by the AO to the returned income and assessed as income of the assessee, vide assessment order dated 11.03.2013 passed by the AO u/s 143(3) of the 1961 Act. 3.6 The AO further observed that similarly in Central Bank of India, New Marines Br....
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....in bank accounts for issuance of cheques and giving back cash after deducting service charges or commissions for the above services. It was observed by AO that said Mr. Jagdish Purohit has given a statement on 15.10.2008 before learned ADIT (Inv.) to that effect . The said Mr. Jagdish Purohit in his statement recorded before ld. ADIT (Inv.) has admitted that he had received cash back against the pay orders given for accommodation entries for which he earned commission income for providing accommodation entries. The AO observed that aforesaid Mr. Jagdish Purohit retracted his statement after 39 months which was not believed by AO of the assessee while framing assessment of the assessee for AY 2007-08 and also for framing assessment order in the case of M/s Poonam Investments and Financial Consultants Private Limited which was one of the connected case in the group. The AO relied upon the decision of Hon‟ble Supreme Court in the case of Sumati Dayal v. CIT (1995) 214 ITR 801(SC). The AO held that assessee could not be a genuine investor or a genuine person providing financial services and he is only name lender for commission purpose for some other persons. It was observed by....
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....eleted. The contentions of the appellant have been considered carefully. During the course of appellate proceedings the appellant had submitted certain additional evidences, as discussed above, and the same were forwarded to the Ld. AO for his verifications, with a request to submit the remand report. In pursuance of same, as detailed above, the Ld. AO has submitted the remand report vide his letter dated 15.05.2016 and has explained that "it is to humbly submit the assessee has submitted the source of share application money and also source of source is explained, which has been found in order" From the remand report submitted by the Ld. AO it is evident that in view of addition evidences submitted and verification made by him, the Ld. AO has found that not only the source, but source of source of investment made in impugned share application have been found to be order. In view of the said report of the AO, the addition of Rs. 3,13,90,000/- made on account of investment in share application money is DELETED. Accordingly, the Ground Nos. 2 and 3 raised in appeal are ALLOWED. 4.2 Further additions of Rs. 15,69,500/- as were made by the AO on protective basis with respect to commi....
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....at no notices u/s. 133(6) nor summons u/s. 131 were issued by the AO or learned CIT(A) to these parties. It was further submitted by learned DR that additions of Rs. 15.69 lacs made by the AO were protective in nature and were towards commission income earned by assessee on providing the services of providing bogus accommodation entries . The Ld. AR on the other hand relied upon the appellate order passed by Ld. CIT(A) wherein all these additions stood deleted by learned CIT(A). The Ld. Counsel for the assessee drew our attention at the outset to the order giving effect passed by the AO to give effect to the appellate order passed by Ld. CIT(A), dated 27.06.2016 wherein total income after giving effect to appellate order passed by Ld. CIT(A) order was computed to be Rs. 8,800/- by the AO, which also happened to be returned income. The said order passed by the AO is placed in file . It was submitted that remand report dated 15.02.2016 was submitted by AO on directions of learned CIT(A) with respect to additional evidences filed by the assessee before learned CIT(A). The said Remand Report is placed in file . On being asked by the Bench after observing the audited financial statement....
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....ed financial statements filed by the assessee also nowhere mentions/reveals that assessee is holding any licence/approvals granted by RBI to carry on business of Finance, Investments, Financial Services etc.. The assessee company has advanced share application money of Rs. 3,13,90,000/- to following two entities namely, as under:- M/s. Emerald Electronics P Ltd. Rs. 2,66,00,000 M/s. Murliwala Realtors P Ltd. Rs. 47,90,000 The AO has invoked provisions of Section 68 of the 1961 Act to make additions to the income of the assessee as the assessee could not prove genuineness of the sources for making aforesaid payments towards share applications money advanced by the assessee during the year under consideration. The learned CIT(A) on the other hand granted relief to the assessee based on additional evidences filed by the assessee during the course of appellate proceedings before learned CIT(A) by invoking Rule 46A of the 1962 Rules. The Remand Report was called by learned CIT(A) from the AO who objected to admission of these additional evidences which were mainly confirmations from the parties from whom the money was raised for making payments for share application money and the....
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....t the identity and capacity/creditworthiness of the creditors along with the genuineness of the transaction to the satisfaction of the AO. All the constituents are required to be cumulatively satisfied. If one or more of them is absent, then the AO can make the additions u/s 68 of the Act as an income. There are companies which are widely held companies in which public are substantially interested which comes out with an initial public offers wherein shares are listed on stock exchanges and widely traded, wherein members of public make subscriptions in pursuance to the Prospectus issued by the company . Issue of shares in these cases to general public in India as well abroad are approved, regulated and monitored by various authorities who are engaged in regulating and managing securities market such as Securities and Exchange Board of India(SEBI), Stock Exchanges, Government of India etc. . These members of public who make subscription are widely scattered all over the country or even outside India as any person entitle to apply as per the conditions prescribed in the prospectus can place an application subscribing to the shares of the company by depositing duly filled in applicati....
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....sessee u/s 68 of the Act as an unexplained credit in the hands of the assessee company raising the share capital because the AO is both an investigator and adjudicator. In our considered view, merely submission of the name and address of the creditor, income tax returns, Balance Sheet/statement of affairs of the creditor and bank statement of the creditor is not sufficient as the AO is to be satisfied as to their identity and creditworthiness as well as to the genuineness of the transaction entered into. Before, we proceed further, it is important at this stage itself to analyse the audited financial statements of the assessee company for the relevant previous year 2009-10. We have carefully perused the audited financial statement of the assessee for the previous year ended 31.03.2010 and we have observed that assessee has shown meagre revenue from operations vide income from share speculation to the tune of Rs. 79,340/- on a total balance sheet size of Rs. 14.53 crores. The net income offered for taxation is meagre amount of Rs. 8,880/-. The assessee has granted huge loans and advances to the tune of Rs. 15.11 crores(including advances towards share application money to severa....
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....ies and wages (Preceding Year-Rs. 52,000/-) to run a business of size of more than Rs. 23 crores which again defy all cannons of commercial expediency . The assessee has incurred other expenses of meagre amount of Rs. 18,465/- during the entire year under consideration. The gross revenue from operations are meagre Rs. 79,340/- which was share speculation profit earned during the year under consideration. In the preceding year, gross income from operations were meagre amount of Rs. 1,47,750/- which was again share speculation profit . Thus, there is a huge inconsistency between revenue streams and the size of its Balance Sheet wherein the assessee is claiming itself to be an NBFC, which is against the spirit of doctrine of commercial expediency in conducting normal business affairs. It is incomprehensible and unacceptable against the doctrine of commercial expediency that an NBFC which is formed for undertaking Finance business would grant all loans free of interest. If the expenses incurred by assessee during the year under consideration were compared with size of its sundry creditors, another inconsistency emerges which is against commercial expediency is the reporting of huge....
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....with an intent to defraud Revenue casting a serious shadow of doubt on the genuineness of these transactions. These financial parameters clearly defy all commercial logics and expediencies despite the established and accepted doctrine that Revenue cannot govern the manner in which business men shall organise its business affairs as it could not sit in the arm chair of the businessmen but at the same time it is also established principles in taxing statute that this leeway cannot be extended to such an extent that business men organises its affairs in a manner to defraud Revenue which will entitle Revenue to lift corporate veil and see who all are behind the smoke screen of corporate veil to defraud Revenue. Under the presence of these extra-ordinary circumstances being present in assessee‟s audited financial statement vis-a-vis normal business conduct governed by commercial expediency, onus is now very heavy on assessee to bring on record cogent evidences and material to substantiate that its transactions are genuine and are not merely smoke screen or camouflaged with an intent to defraud Revenue. We have also observed that in all these cases wherein the assessee made investm....
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....eated again. The AO in its remand report has stated that sources of share application money as well sources of sources stood explained which has been followed by learned CIT(A) in giving relief to the assessee, but the important ingredient of Section 68 of the 1961 Act as to genuineness of these transactions unfortunately has not been looked into by learned CIT(A). There are three ingredients of Section 68 of the 1961 Act which are to be cumulatively fulfilled namely establishing identity of the creditor, creditworthiness of the creditor and genuineness of the entire transaction . The order passed by learned CIT(A) is cryptic and cannot be sustained in the eyes of law as it could not explain as to how these transactions undertaken by the assessee are genuine transactions and are under the realm of commercial expediency. We have already held that the assessee‟s affairs as reflected in its audited financial statements clearly points to assessee being an accommodation entry provider, as detailed by us in this order. We have also observed that one of the Directors of the assessee company namely Mr Jagdish Purohit has admitted before ADIT(Inv) that he is engaged in providing bogus....