TaxTMI 
TaxTMI 
2020 (2) TMI 106
X X X X Extracts X X X X
X X X X Extracts X X X X
....nces of the case, Ld. CIT (A) has erred in holding as under while passing the impugned order. • That AO has not acted mechanically before framing the reasons to believe. • Ld. AO has not acted under the borrowed belief or under directions. • That the reasons recorded by AO are based upon the specific information. • That AO has applied his mind to the information received independently. • AO has validly assumed jurisdiction u/s 148. • That no back material like seized material authenticated copy, investigation wing report details vis a vis assessee, and statements etc. if any recorded by investigation wing, was lawfully confronted to assessee thus invalidating entire reopening; • That none of the assessee submission is appreciated while adjudicating the appeal; • That only action could have been taken u/s 153C of the Act and not u/s 147/148 of the Act; • That none of evidence filed by assessee is overruled in accordance with law. 3. On the facts and circumstances of the case, Ld. CIT(A) has erred in confirming the action of Ld. AO in making addition of Rs. 74....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t Company. The following persons are directors of the company:- i. Sh. Krishan Mohan Sharan ii. Sh. Anil Mohan Sharan iii. Sh. Dushyant Singh The return of income was furnished by the assessee for A.Y. 2010- 11 on 08/10/2010 by declaring income of Rs. 10,85,664/-. Return was processed u/s 143(1) on 29.08.2011 at income of Rs. 10,85,664/-. As per system, the case is found to be not selected for scrutiny u/s 143(3) of the Income Tax Act, 1961 for A.Y. 2010-11. This is the first year of Filing ITR of the assessee company because the assessee was incorporated during the previous year 2009-10 relevant to A.Y. 2010-11. 2. In this case, very vital and credible information relating to evasion of income taxes has been received-from the following source:- 2.1 The main source of new information in this case is a search u/s 132 of the Income Tax Act, 1961 which was carried out at the residence of Shri Pradeep Kumar Jindal, who happened to be main person engaged in providing bogus entries of share capital, Share Premium and unsecured loans to a large number of beneficiaries. The companies of Shri Pradeep Kumar Jindal have no creditworthiness....
X X X X Extracts X X X X
X X X X Extracts X X X X
....usion:- That Shri Pradeep Kumar Jindal was engaged in the lousiness of providing entries of bogus share capital/share premium/loan or Advances. The modus operandi of Sh. Pradeep Kumar Jindal was to provide cheques/RTGS of the dummy controlled by him in lieu of cash and commission @ 2.5%. The following persons are found to be directors in the companies controlled by Sh. Pradeep Kumar Jindal from which the assessee company has received amount of Rs. 74,00,000/- in form of share capital/share premium/unsecured loan or others: S. No. Name of the paper companies Directors as per MCA record 1. Lustre Finlease & Investment Pvt Ltd Sh. Subodh Kumar Khandelwal Ms. Seema Khandelwal 2. Hajima Resorts Ltd Sh. Laxman Singh Satyapal, Ms. Meera Miohra Sh. Vijay Shankar Mishra 3. Pawansut Holdings Ltd Sh. Pawan Kumar Poddar Sh, Laxman Singh Satyapal Ms. Seema Khandelwal Sh. Pradeep Kumar Jindal Sh. Rahul 4. Ganga Debt Recovery Agency Pvt Ltd Sh. Subodh Kumar Khandelwal Ms. Seema Khandelwal 5. Jacaranda - Capital Ltd(Archit Finescrip ltd) Sh. Ajay Kumar Jindal Sh. Laxman Singh Satyapal Ms. Meera Mis'ira Ms. Seema K....
X X X X Extracts X X X X
X X X X Extracts X X X X
....andelwal in his statement stated that his educational qualification is 7th pass; that he is in business of manufacturing plastic plates of electric meter and earns Rs. 20,000- 25,000 p.m. from this business; that earlier he used to look after maintenance of office and house of Sh. Pradeep Kumar Jindal during year 2004 to 2011; that he knows Sh. Pradeep Kumar Jindal since childhood; that Shri Pradeep Kumar Jindal has made him sign certain documents, nature of which he is not aware as he is not much educated; that he had signed some blank cheque books of Union Bank of India, State Bank of India and Vijaya Bank in the office of Sh. Pradeep Kumar Jindal; that he does not know Sh. Sajjan Kumar Jain; that Sh. Pradeep Kumar Jindal may have given 88, Baldev Park, Parwana Road, Delhi as registered address of certain companies; that Shri Pradeep Kumar Jindal had made him Director in many companies without his knowledge and therefore he resigned; that he does not know as to how his residential address has been used as the registered address of various companies; that all such companies belong to Sh. Pradeep Kumar Jindal; that many letters of such companies were received at their address which....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ieces of evidence were found which established beyond doubt that Sh. Pradeep Kumar Jindal has earned /charged commission in cash on accommodation entries at higher rates compared to rates admitted by him. Sh. Pradeep Kumar Jindal explained the working of commission in his statement and admitted that he had charged commission @ 2.50% on accommodation entries. 3.5 A careful scrutiny of information received from the ADIT (Investigation; unit- 2(1), New Delhi and subsequent analysis of report of ADIT (Investigation) unit-2(l), New Delhi lead to an irresistible conclusion that the assessee had received bogus share capital/Securities Premium/unsecured loan of Rs. 74,00,000/- from company engaged in business of providing entries of bogus share capital/Security Premium. Accordingly, an amount of Rs. 74,00,000/- represent unexplained credit u/s 68 of the Act in books of a/c of the assessee. 3.6 A careful examination/analysis of the report received from Investigation Wing, New Delhi, data of transactions and verification of ITR lead to an irresistible conclusion that the assessee company has taken accommodation entry at least upto the amount of Rs. 74,00,000/- in the form o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment order is incorporated herein below as it is quite vital and goes to the very root of the issue involved:- "Question2. In your earlier statement dated L8.11.2015 recorded u/s 132(4) you have admitted that you have been running a large number of front companies and providing bogus accommodation entries inform of share premium. Please provide the details of all the bank accounts of your various companies including the bank account number and the bank and branch name and address? Answer. I am not able to provide these details at present due to shortage of manpower and myself being unaware about its availability in the office. I would be providing them shortly. However, I am able to recall that we are having functional bank accounts of our front companies in Andhra Bank, Kundli branch Sonipat, Haryana. I submit that my front companies are not having bank account in any other bank at Present. Question 3. In your statement dated 18.11.2015, you had told in reply to question no. 12 that you don't have any explanation at that juncture about sms messages received in your i-phone from CA Santosh Gupta. In the said messages dated 2nd, 4th, 5th and 6th October 20....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to Tech Ltd. that she has not even heard about any company where she has been shown as director. Do you want to say anything in this context? Answer. I have already submitted in my earlier statement dated 18.11.2015, the entire modus operandi of my front companies. I accept that Smt. Seema Khandelwal is a director only for namesake. I have misused her name and particular to float/run my front companies. She is not much educated and therefore I have misused her particulars. Question 10. Do you know Sh. Subodh Kumar Khandelwal? Answer. Yes, I know Sh. Subodh Kumar Khandelwal. He is husband of Smt. Seema Khandelwal who has been discussed in replied to earlier questions. He has worked at my residence and office during 2004 to 2011 and used to look after maintenance work. Sometimes, I have visited their residence 88 Baldev Park, Parwana Road, Delhi. I have used their residential address as registered address of some of my front companies. Besides, he has been made namesake director of various front companies run by me for purpose of providing accommodation entries. Question 11. I am showing the statement dated 18.11.2015 of Sh. Subodh Kumar Khandelwal....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Jindal Rio H-l/IA, Model Town-111, New Delhi. I have provided my I.D. driving license No.0819920119611 issued by Delhi Transport Authority, Delhi. Question2. In your earlier statement dated 18,11.2015 recorded u/s 132(4) you have admitted that you have been running a large number of front companies and providing bogus accommodation entries in form of share premium. Please provide the details of all the bank accounts of your various companies including the bank account number and the bank and branch name and address. Answer. I am not able to provide these details. However, I am able to recall that we are having functional bank accounts of our front companies in Andhra Bank, Kundli branch, Sonipat, Haryana. I submit that my front companies are not having bank account in any other bank at present. I will provide the required details by 11.01.2016. Question 3. In your statement dated 18.11.2015, you had told in reply to question no. 12 that you don't have any explanation at that juncture about sms messages received in your i-phone from CA Santosh Gupta. In the said messages dated 2nd, 4th, 5th and 6th October 2015 there was reference in respect of Rs. 6....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cash. Question 9. Do you have any Non-Banking Finance Company registered in RBI? if so, the details thereof. Answer. Yes, I have no banking finance companies registered with RBI. The 2 companies namely M/s. Pawansut Holdings Limited and M/s Focus Industrial Resources Limited are registered with RBI as NBFC. However the application for registration as NBFC is pending with RBI in case of third company namely M/s Delta Leasing & Finance Co. Limited. Question 10. What is the modus operandi of arrangement of funds from the clients seeking the accommodation entries and providing such sentries to them? Answer. I have understood the above question and I reconfirm that I have a large number of front companies and the directors in all the above companies are just for namesake. Many directors of my front companies are not even aware that they are directors in my front companies. The companies are not doing business of finance and investment and in reality these company are into business of providing entries only (without any real transaction of finance and investment). L would like state that most of the above cash and subsequent transactions have been used for the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ceived for providing accommodation entries? How do you utilize the commission? Answer. The commission received by us in lieu of providing accommodation entry is not accounted for and utilized as such in form of cash only in day to day expenses related to household, vehicle and maintenance and family trips and telephone expenses etc. Question 14. In which bank account, do you deposit the cash received from clients seeking accommodation entries for providing such entries? Is there any other method of getting funds through cash or otherwise in lieu of providing accommodation entries? Answer. The cash received from clients seeking accommodation entry is deposited in various accounts held with Vaish Cooperative Commercial Bank Ltd., Nai Sarak, Delhi and then routed as mentioned in the modus-operandi stated by me in reply to question no. 10. The fund received for providing of accommodation entry is in the form of cash only. Question 15. Do you associate with any other entry provider for providing accommodation entries? Who are they? Answer. No, I do not associate with any other entry provider for providing accommodation entry. Questio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Question 24. You are being shown your statement recorded on 18.11.2015 and 01.12.2015 under section 132(4) of the Income Tax Act, 1961 during the search proceedings at your residence and this premise respectively. Please confirm that it has been shown to you. Answer. I confirm that I have been shown the above said statements dated 18.11.2015 and 01.12.2015. Question 25. Do you want to say anything in respect of the above statements of yours dated 18.11.2015 and 01.12.2015? Answer yes I want to say that my statements dated 18.11.2015 and 01.L2.2015 recorded u/s 132(4) of the I.T. Act during the search proceedings at my residence and office premise respectively was tendered by me voluntarily and is true to the best of my knowledge and belief. I stand by and affirm to my early statements and once again admit voluntarily my modus operandi of running front companies and providing bogus accommodation entries of share premium to the beneficiaries including Indo Auto Tech Ltd., Sarvo technologies Ltd. (earlier known as sarvottam Pumps Ltd) and Admach Auto Industries Pvt. Ltd. Besides, I would also want to admit here that in some cases, we receive back some....
X X X X Extracts X X X X
X X X X Extracts X X X X
....emises of Shri Pradeep Kumar Jindal, he has categorically admitted that he has provided accommodation entries of various natures in lieu of cash through companies and during the course of post search investigation and evidences revealed that he was charging commission in cash on accommodation entries at a higher rates compared to rates admitted by him and also explained the working of commission in his statement that he had charged commission @ 2.5% on accommodation entries. The assessee at a much later stage of assessment proceedings filed a letter dated 13.11.2017 which was received in the office of the Assessing Officer on 20.11.2017 raising objection against the 'reason recorded' for issuance of notice u/s.148. Ld. Assessing Officer disposed of the assessee's objection vide detailed order dated 23.11.2017 and also noted that assessee has not submitted any genuine proof in support of his claim. After detailed reasoning and relying upon various judgments, Assessing Officer has rejected the assessee's objection. During the course of the assessment proceedings, the Assessing Officer asked the assessee to furnish details, and after analyzing the details and the information submitted....
X X X X Extracts X X X X
X X X X Extracts X X X X
....estionnaire, he came to the conclusion that assessee has taken accommodation entry in the form of share capital/share premium of Rs. 74 lac. The relevant observation of Assessing Officer in this regard reads as under: "A careful examination/ analysis of report received from Investigation Wing, New Delhi, statements of various person recorded on oath during investigation, non compliance of notice 133(6) and summons u/s 131 by the investor as share capital and share premium, data of transactions and verification of ITR lead to an conclusion that assessee company has taken accommodation entry in form of Share Capital /Share Premium Rs. 74,00,000/- which is covered under the violation of criteria of identity, creditworthiness and genuineness of the transaction as prescribed u/s. 68 of the Income Tax Act, 1961." 7. After detailed discussion, Assessing Officer has made the addition of Rs. 74 lacs u/s.68 and further made addition of Rs. 1,85,000/- on account of commission paid @ 2.5% in cash. 8. The Ld. CIT (A) has confirmed the additions made by the Assessing Officer after referring to the various observations of the Assessing Officer and explanation and submissions made b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... various documents; secondly, their creditworthiness were shown from the income tax records and genuineness of the transaction was proved from the fact that the entire share capital/share premium has been received through banking channels. Further, without cross-examination of the Shri Pradeep Kumar Jindal and providing the entire material, the assessee's evidences cannot be discarded. The assessee is only required to prove the prima facie nature and source of the credit which here in this case assessee has duly discharged by providing all the documents before the Assessing Officer. Lastly, as an alternative submission, he submitted that assessee can produce the parties and will explain the source the deposits as during the assessment proceedings whatever documentary evidences which was required to be filed to discharge the primary onus was duly filed and if there is any explanation to be given with regard to source of money from the investee company, assessee will try to obtain, Thus, matter cn be restored back to the Assessing Officer. 11. On the other hand, ld. CIT-DR submitted that it is an undisputed fact that during the course of search and seizure action in the case of Sh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of recording of the reasons. The information and the material sent by the ADIT (Inv.) itself contained the entire statement which has been analyzed by the Assessing Officer independently before recording the reasons. Thus, it cannot be held that Assessing Officer did not have any material before recording the reasons or there is no independent application of mind or it is based on purely borrowed satisfaction. Thus, not only the proceedings u/s. 147 is valid but also there is a clinching evidences and information that entire share application money and share premium received by the assessee was bogus. 13. On merits, Ld. CIT-DR submitted that, though assessee might have filed some of the documents but in the wake of such credible information and material that these companies were mere dummy companies used for given accommodation entries and the person who was running and managing these companies had himself admitted that he had provided accommodation entry after receiving the cash and commission, then it is sufficient to hold that the share application money and premium received is non-genuine. If assessee has taken a share capital and share premium from genuine companies then as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessment and Assessing Officer should have prima facie reason to believe based on such information or material coming on record that there is an escapement of income. At the time of recording the reasons Assessing Officer does not have to establish the entire facts of escapement of income. Here, in this case, from the bare perusal of the 'reasons recorded' as incorporated above, it can be seen that, firstly, there was certain incredible information which was unearthed during the course of search and seizure action u/s.132 at the premise of Shri Pradeep Kumar Jindal who was an established entry provider and was found to be providing bogus share capital/share premium to large number of beneficiary in lieu of cash. He was also found to be laundering money through his dummy companies with dummy directors and all these companies were managed and controlled by him only to provide accommodation entries of more than 100 crores. Secondly, in so far as assessee is concerned, there was a specific information and material which was unearthed that Shri Pradeep Kumar Jindal through his six dummy companies have made investment in the form of share capital and huge share premium with the assessee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ired and this can be examined or inquired upon at the stage of assessment proceedings. Here, in this case, the material and information coming on record clearly shows that it had a direct and live link nexus with the share premium/ share capital received by the assessee and was prima facie in the nature of accommodation entry which needed to be scrutinized and examined. Here it is not a case where reasons have not been recorded in good faith or is merely pretence to make rowing and fishing inquiry, albeit the reasons recorded speaks volumes about the shady transactions entered by the assessee and the entry provider. Thus, in our opinion, the reasons recorded are not only valid but also clothe the Assessing Officer with the jurisdiction to reopen the assessment u/s.147. 14. In so far as allegation of the ld. counsel that Assessing Officer has received the information and material subsequent to the recording of reasons, therefore, such reason is based on borrowed satisfaction. We are not persuaded by such a contention, because, even though the information was received from the Investigation Wing but such information contained the entire material including the statement on oath of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion 153A/153C would have been applicable. Thus, such a ground raised by the assessee is also dismissed. 16. Another contention raised by the ld. counsel is that the material information was not confronted to the assessee despite several requests and no opportunity was given for cross-examination. Here in this case in the reasons recorded itself Assessing Officer has confronted the material and the statement and also the copy of the statement was duly provided. Thereafter, the Assessing Officer has not merely relied or gone by the statements and material given by the Investigation wing, but in fact Assessing Officer has made his endeavor to conduct independent inquiries by sending notices u/s.133(6) and issuing summons u/s.131 to the Directors of the investee companies and also to the directors of the assessee company. When none of such summons or notices was responded, then assessee itself was called upon by the Assessing Officer to produce those persons, because it is the assessee who has received the share application money from them. Since there was failure on the part of the assessee to produce the directors and the information as required by the Assessing Officer, then it c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....companies to explain the credits and to corroborate the documents submitted by the assessee. Hon'ble Delhi High Court in the case of Novadaya Pvt. Ltd. (supra) has held that if there were corresponding deposit in the bank account before the issuance of share capital/share premium cheques, then mere filing of PAN, etc. were not sufficient, because these are the nature of deposits and source of deposits which needs to be explained. In the cases where investigation wing has found that any assessee has received bogus accommodation entry which has been found to be factually correct from the records gathered, then all the more onus shifts very heavily upon the assessee to prove that the transaction is genuine and the money which has been received by it has come through genuine sources and this can only be established when the investee company when the directors/principal Officers of the investee company produced before the Assessing Officer and they can explain the nature of transaction undertaken with the assessee. All these judgments relied upon by the ld. CIT-DR of Hon'ble Jurisdictional High Court clearly clinches the issue in favour of the Revenue. The permeating principle is laid d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee has miserably failed to discharge its onus at the assessment stage:- "9.1 Neither directors/representative of investor companies were appeared for hearing u/s 131 for recording of statement on oath nor the assessee company could produce them. As such case is completed on the basis of material and details furnished by the CA/AR of the assessee company available on record. The assessee company was given all opportunity to prove its claim. In the back drop of above facts applicability of provisions of section 68 is examined. It has been judicially established that the primary onus is on the assessee to prove the identity, creditworthiness and genuineness of transactions in respect of cash credits in its books of accounts. Law states that it is for the alleged to come out clean. The assessee company made no serious efforts to come out clean on the allegation so raised. Explanation offered by the assessee is found unsatisfactory, the provision of section 68 are attracted and discussed above in detail in para 6. 9.2 The sum of Rs. 74, 00,000/- has been found credited in the books of account of the assessee. It is most important to note that the assessee enjoying....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Thus, keeping in view of the totality of the facts, above discussion the amount of Rs. 74,00,000/- (Rupee Seventy four Lakh) is added back to the income of the assessee company for A.Y 2010-11, u/s. 68 of the Income Tax Act, 1961. (Addition Rs. 74, 00,000/-) 9.4 It is also a well known fact that these entry providers do charge certain percentage of commission from the beneficiaries. There are so many similar cases of entry providers in the department wherein a percentage of 2-3% was held to be paid by the beneficiaries to the entry providers. Therefore, the following the same pattern, in this case also it is held that a commission at the rate of 2.5% has been paid by the assessee to the above mentioned entry providers. Hence, a further addition of Rs. 1,85,000/- being 2.5% of Rs. 74, 00,000/- is made to the income of the assessee for A.Y 2010-11 as added u/s 69C of the income tax act, 1961 as expenditure incurred on such transactions. (Addition Rs. 1,85,000/- 19. Before us, Ld. Counsel had submitted that what was required to prove was the nature and source of credit which assessee has tried to establish by all the documentary evidences and assessee was not ....