TaxTMI 
TaxTMI 
2020 (2) TMI 106
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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. 74,00,000/- u/s 68 on account of share capital received and that too without going into merits of the case and without considering the submissions/evid....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ished 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 to invest such huge amounts in share capital/ Share Premium or to issue loans and advances. 2.2 As per the material impounded from the entry provider Shri Pradeep Kumar Jindal, it was seen that the companies control....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 Khandelwal 6. Sawera Housing & Construction Pvt Ltd. Ms. Archit Jindal Sh. Pradeep Kumar Jindal 3.1 I have perused and analyzed the statement recorded on oath u/s 131 of Sh. Pradeep Kumar Jindal and other directors of the dummy companies. In the statement recorded on oath Sh. Pradeep Kumar Jindal has himself accept....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 were lateron collected by Sh. Pradeep Kumar Jindal and that he has been made Director in various companies by wrong means. The statement recorded on oath of Sh. Pradeep Kumar Jindal & other dummy directors indicates the facts that all of the dummy electors were acting on the direction of Sh. Pradeep Kumar Jindal and they were not aware of any actual affairs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m 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 of Share Capital/ Security Premium/ Unsecured Loan which is covered under the violation of criteria of identity, creditworthiness, and genuineness of the transactions as prescribed u/s 68 of Income Tax Act, 1961. 4 Income Chargeable to tax escaping assessment 4.1 Considering the above referred credible information, enquiries and analysis subsequent to the .information, I have reason to believe that an amount at least ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ank 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 2015 there was reference in respect of Rs. 6 crore and Rs. 15 crore NBFC documents. Please explain the contents of the same sms messages. Answer. I am not able to explain the contents of the messages at present. I would explain that shortly. Question 4. Do you know Smt Meera Mishra? Answer. Yes, I know Smt. Meera Mishra. She has worked as receptionist at 104 Mukund House, Azadpur from 1994 to 2006. She has been director of various front companies run by me for pu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r. 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 recorded u/s 132(4) of the I.T. Act 1961. Please confirm that you have been shown the same. Answer. Yes I confirm that I have been shown the statement. Question 12. Sh. Subodh Kumar Khandelwal in his above statement has stated that he is not director or authorized signatory in any company, that he had signed some blank cheque books in your office, that he is not aware about any company registered at his residential premises, that he has no knowledge about any share transaction held with M/s Indo Auto Tech Ltd. and M/s Sarvottam Pumps Ltd., that he is not aw....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 Crore and Rs. 15 Crore NBFC documents. Please explain the contents of the same sms messages. Answer. I am not able to explain the contents of the messages. At present, I will provide the required details by 11.01.2016. If I failed to reply on the said date the same may be treated as unexplained. Question 4. How did you contact the entities and persons and offered them to provide accommodation entries? Answer. It is the beneficiaries who contact me on my phone {9810049333, 9310049333) after they come to know that I provide accommodation entry in form of bogus share premium /unsecured loan in lieu of cash. No....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 purpose of providing accommodation entries namely bogus share application money, share premium, share forfeiture, unsecured loans, bogus purchases, bogus sales and bogus advances against properties to a large number of clients from time to time. I would like to narrate once again the modus operandi of providing entries against receipt of cash as under: Stage-I- The persons of such entries seeking persons or entities hand over/giving cash to me or my representative at pre-decided locations mainly offices. Stage-II The above collected cash used to be deposited in one of the bank A/c in Vaish Cooperative Commercial Bank, Nai Sarak, Delhi as table in the question by me or Laxman Singh Sat....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., 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. Question 16. Are you aware that your activity of providing of accommodation entries by way of share application money, share, premium and share forfeiture is illegal and in violation of Companies Act, 1.956 and Companies Act 2013? Answer. Yes, I am aware of that my activity of providing of accommodation entries by way of share application money or share premium or share forfeiture is illegal and in violation of Companies Act, 1956 and Companies Act 2013. Question 17. Are you aware that your activity of providing accommodation entries is illegal and in violation of section 420, 467, 468, 471 and 120-8 of IRC? Answer. Yes, I am aware that my activity of providing accommodation entries is illegal and in violation of section 420, 467,468, 471 and 120-8 of IPC. Question 18. Are you....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s 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 entry of bogus unsecured loan advanced through our front companies to the beneficiaries. As the entry has been received back and therefore we have to pay such beneficiaries almost equivalent amount in cash after deducting our commission .In this case we would receive cash from Shri Sajan Kumar Jain group of companies namely M/s Indo Autotech Ltd., M/s Sarvo Technologies Ltd' and M/s Admach Auto Industries India Private Ltd managed and controlled by Sh. Sajan Kumar Jain, Sh. Anand Kumar Jain and Sh. Manoj Tantia and this cash will be utilized in making cash payment to the earlier set of beneficiaries and Shri Sajan Kumar Jain group of companies would be provided accommodation entry of exorbitant share premium as discussed above." 4. From the statements and the material coming on record, the ld. Assessing Officer came to the conclusion that Shri Pradeep....
X X X X Extracts X X X X
X X X X Extracts X X X X
....laim. 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 by the assessee, he noted that none of the investor companies had any sound financial strength and even return of income was very meager and looking to their dismal financial background, he concluded that they not could have invested in shares of assessee company which has so less revenue at a huge premium without any scope of dividend income. Further, these companies had consistently very low profit and in some cases, bank statements of bank account were not submitted by the assessee. In some of the case where bank statement was submitted he found that when the amount of investment in shares were debited from the bank there was corresponding large amount which was credited on the same date or day before either by way of cheque/ RTGS etc. the source of which itself was dicey. The pattern of credit and debit entries was analyzed by him and found that the investor companies had no sufficient s....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 by the assessee and finally reached to the following conclusion:- "5.10. In view of the facts of the case and the judicial pronouncements referred above, it is apparent that the appellant has taken accommodation entry of Rs. 74,00,000/- from M/s. Lustre Finlease and Investment and others. Neither genuineness of transaction nor the creditworthiness of the subscribing company, the onus of which rested on the appellant has been discharged. The explanation offered regarding the amounts credited in the books of accounts of the appellant has correctly been found to be unsatisfactory by the AO. Accordingly, the addition made by the AO with regard to unexplained credit of Rs. 74,00,000/- is upheld. The AO has also brought to tax commission payment of Rs. 1,85,000/- to arrange for the impugned accommodation entry which is also part of elaborate modus operandi for obtaining accommodation entries. In view thereof,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rce 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 Shri Pradeep Kumar Jindal, various material and evidences were found that he was not only an entry provider but also had number of dummy companies through which he was giving accommodation entries to various persons and seized documents show that he has also given share capital/share premium to the assessee company. From the bare perusal of the 'reasons recorded', it can be seen that not only there was very vital and credible material and information received from the Investigation Wing qua the assessee, but also, Assessing Officer on the basis of such material and information and after analyzing the return of income of the assessee has independently applied his mind before recording the reasons, which is evident from his analysis and reasons to believe arrived at from paragraph 3.1 onwards of the reasons recorded. All throughout the reasons it can be seen that the Assessing Officer has not only independently applied....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 assessee should have discharged its onus by producing the directors of these companies. Here in this case Assessing Officer has made his inquiries and despite various summons issued u/s.131 and several notices sent u/s. 133(6), none of these companies responded and even the director of the assessee company has not responded. All these factors go to show that the documents submitted by the assessee are mere paper trails and nothing else. Apart from that Assessing Officer and Ld. CIT (A) have categorically mentioned that these companies did not have creditworthiness. Looking to the financial health and the nature of entries appearing in some of the bank statements, it can be easily deduced that it was nothing but accommodation entry. Once all these material and short coming were pointed out by the Department to the assessee, then onus was upon the assessee to prove the contrary. Merely a transaction has been done through b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ned, 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 company for sums aggregating to Rs. 74 lacs. Based on this information, the Assessing Officer analysed the return of income of the assessee and also the information received from ADIT investigation Wing about the modus operandi of Shri Pradeep Kumar Jindal. After analysis Assessing Officer categorically observed that the Investigation Wing had found that the directors of the investee companies controlled and managed by Shri Pradeep Kumar Jindal were dummy directors and this information was based on the statement recorded on oath of these persons. The analyses of these statements recorded on oath have been dealt by the Assessing Officer in paragraph 3.1 of the 'reasons recorded' as incorporated above. All these directors have categorically admitted that they were acting on behest of Shri Pradeep Kumar Jindal and were asked to sign certain documents, the nature of which, they were not aware of nor they were aware of any activity of the companies. Thereafter, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 the entry providers and the dummy directors of these companies which has been carefully analyzed by the Assessing Officer to reach prima facie reason to believe. The information which has been sought by the Assessing Officer later on for providing the entire data and the statement does not mean that Assessing Officer has not perused the material or statement at the time of recording the reasons, otherwise how could the Assessing Officer could have analysed the statement in his reasons recorded. In fact the analysis of statement in the reasons recorded matches precisely with the statement which has been incorporated in the assessment order which has been stated to have been received later on. Thus, such a contention raised by the ld. counsel cannot be accepted to hold that the reasons recorded are invalid or there is no independent application of mind or is based on borrowed satisfaction. Accordingly, we uphold the validity of reopening u/s.147. 15. One of the con....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t 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 cannot be held that merely because Assessing Officer has not provided cross examination, the entire assessment gets invalid or addition is unsustainable. Assessing Officer has not made the addition blindly relying upon the statements but it was assessee who has failed to discharge its onus. 17. Here it is not a case that there is any lack of inquiry by the Assessing Officer or he is merely gone by the information received from the Investigation Wing, in fact, at all the stages Assessing Officer kept on asking the assessee to provide the requisite details and to produce the directors of the investee companies and the director of the assessee company, because it is assessee's claim that it has received share capital/share premium from these companies. If a company is making such a huge investment, then assessee should have at least made endeavor to produce such parties before the Assessing Officer when they were not responding to the notices and summons issued by the As....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 down in these judgments are that mere furnishing of bank statement and documents does not fulfill the requirement of Section 68 because it is essential that business activities of the share subscribers and the financial health needs to be established. Assistance of Principal Officer of the subscribing companies is required and who was/should be present before the Assessing Officer to explain the said position. Otherwise also it is not a case that Assessing Officer has not made any inquiry or where he has issued notices u/s. 133(6) and all the subscribing company have duly responded and submitted and the documents relating to the transaction and confirming the same through evidences. In that case, onus shifts upon the Assessing Officer to prove that these are not correct. Here in this case it is just an opposite, as none of the notices and summons have been complied with, therefore, all the documents submitted by the assessee does not discharge the onus specifically in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cted 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 the benefit of the said money without any associated financial burden, the same manner as it is its own tax paid money after utilizing the services of the said entry operators. The immediate source of this amount has been found to be accommodation entry provider companies out of entities controlled by Sh. Pradeep Kumar Jindal as discussed above in para 3 reason to believe and modus operandi. The source of money is not explainable by the entry operators. These facts clearly show that transactions are not genuine. 9.3 In view of the above facts and circumstances, details/material available on record in the case and correlated information with the financials of the return of income filed and report of information from Investigation wing, ADIT (Investigation) Unit 2(1), New Delhi, statements recorded on oath by the investigation Wing and aforesaid discussion held I am satisfied that the total amount of Rs. 74,00,000/- (Rupee Seventy four Lakh ) allegedly received from entities mention....