TaxTMI 
TaxTMI 
2021 (2) TMI 597
X X X X Extracts X X X X
X X X X Extracts X X X X
....e application money even though unexplained investment of Rs. 7.43 Crores was admitted under Section 132(4) of the Income Tax Act, 1961 during search on this account. 4. In the facts and circumstances of the case, Learned CIT(A) has erred in law and on facts deleting addition of Rs. 2 Crores towards unexplained share application money under section 68 of Income Tax Act 1961 whereas the investment was made by entry operators and bogus parties as investigated during search and Assessment proceedings. 5. In the facts and circumstances of the case, Learned CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,92,00,000/- towards unexplained income from sale of flats in residential societies as evidenced from seized documents while holding that there was no proof of passing of money to the assessee while ignoring the fact that process of passing of unexplained money is corroborated by seized documents and as such handing over of undisclosed transactions is not reduced to documentation. 6. In the facts and circumstances of the case, Learned CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,92,00,000/- towards unexplained in....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... company ignoring the submissions of the appellant, which is arbitrary, unjustified and against the provisions of law. 5. Without prejudice to the above that the Ld. Commissioner of Income Tax (Appeals) has erred in law and facts in not appreciating that all the transaction of receipt of advances were through account payee cheques and most of the parties were company incorporated with the Registrar of the Companies and are existing. The action of the Ld. Commissioner of Income Tax (Appeals) is arbitrary, unjustified and against the provisions of law." ITA No. 3797/Del/2010 AY 2006-07 (Revenue) ITA No. 3577/Del/2010 AY 2006-07 (Assessee) Unexplained Share Application Money- u/s 68: 4. A search and seizure operation was carried out on the GTM group of companies controlled by Shri Gautam Kumar and his son Shri Tushar Kumar. 5. During the course of assessment proceedings, the Assessing Officer referred to the copy of share application money account of the company for the period 1.4.2005 to 31.3.2006 found during the course of search which showed share application money of Rs. 5,34,50,000/- in the names of various persons from whom share application money was rec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d back at the latest by February 2007. He further found that there were no share application forms or share application register which were found at the time of search. 9. For these reasons and various other reasons discussed in the assessment order and also for the reason that no confirmation could be filed by the appellant in respect of the share application money, the AO concluded that the share application money invested in GTM Builders and Promoters by the various companies are only entries and represent the undisclosed income of the group which has been sought to be entered into the books. 10. The details of amounts received from various parties is as below: Name Amount Arha Buildcon Limi ted 10200000 Arha Buildcon (p) Limi ted 1 600000 Bic Consultants (P) Ltd 700000 Chinpurni Credi t & Leasing (p) Ltd 1 500000 CVH Sea Life Ltd A/c 1700000 E-Dynamics Solution Pvt. Ltd. 500000 Enpol Pvt. Ltd. 1500000 Funtime Advertising (p) Ltd. 500000 Funtime Travel Pvt. Ltd. 500000 Ganga Inf in (P) Ltd. 800000 Garg Finvest (p) Ltd. 900000 Hiliridge Investment Ltd. A/c 500000 K.R F....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... cannot be treated as undisclosed income. He referred to page nos. 82 to 150 of the paper book. He has referred to the page nos. 152 & 153 of the paper book to prove that in total the assessee has received Rs. 4,00,50,000/- from total of 40 entities including the company alleged by the revenue department. He has argued taking into the issues regarding the genuineness of the amounts received and argued that the Assessing Officer has not rightly verified the facts in right perspective. 14. Against the arguments of the ld. AR, the departmental representative vehemently argued that the bonafides of M/s Arha Buildcon Pvt. Ltd. have not been proved, the entry operator has given a undisputable statement regarding the entries given to the assessee company hence there is no reason to disbelieve his statement. Coupled with the facts that no share application register has been found at the premises. The ld. DR argued that the discrete enquiries conducted by the Investigation Wing did not prove the existence of M/s Arha Buildcon Pvt. Ltd. 15. The ld. DR submitted the arguments succinctly in writing which has been reproduced in to: Ld. DR's submission- Section 68 of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....show that subscriber was a paper company and not a genuine investor - Whether Special Leave Petition filed against impugned order was to be dismissed - Held, yes. (ii) In the case of CIT v. Sophia Finance Ltd. 205 ITR 98 (Del.) (F.B.) it was held that, Provisions of s. 68 are applicable even to share application money and if on enquiry it is found that shareholders do not exist, sum credited may be treated as assessee's income. (iii) In the case of Titan Securities Ltd. [357 ITR 184 (del)] it was held that, Where Assessing Officer found that share applicants in case of assessee-company were established entry operators giving accommodation entries and, thus, he added amount paid by them to assessee's taxable income, Tribunal was not justified in deleting said addition without properly examining evidence brought on record by Assessing Officer (iv) In the case of N.R. PORTFOLIO PVT. LTD [87 DTR 0162 (Del)] it was held that Merely furnishing names, addresses and PAN particulars, or relying on entries in a Registrar of Companies website, if upon verification, or during proceedings, AO cannot contact share applicants, or that information becomes unverif....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ated. Assessee failed to establish creditworthiness of investors and also genuineness of transactionOrders of CIT(A) and ITAT were perverse in as much as they had failed to appreciate fabrication in bank statements of share applicants that had been filed by Assessee. (viii) In the case of Globus Securities & Finance Pvt Ltd [224 TAXMAN 237 (Delhi)] it was held that, Assessees Directors, who had purportedly made investment in shares were not related or known to them. Assessee had no proven good past track record justifying hefty premium, four times face value. Only certain papers showing that assessee had taken care to ensure legal compliances were placed on record. Tribunal had not given due credence to surrounding circumstances which included huge premium, credit entries in bank accounts before transfer of money to assessee, failure of companies to file details of inventories and fact that assessee company had not charged any premium earlier. Three factum in all cases was not established by only showing that transaction was through banking channels or account payee instrument. Surrounding and corroborative factual details were equally important and justify further proof o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(263 ITR 626 (Cal)) it was held that, since the assessee did not take any steps to obtain confirmatory letters from the subscribers of public issue quota who did not respond to the enquiry nor attempted to produce said subscribers or to disclose their income-tax file numbers subscriptions said to have been made by such subscribers to the shares of the assessee-company cannot be accepted as genuine; in the absence of any material except the income-tax file numbers, the identity of the subscribers to the promoters quota and their creditworthiness could not be established and the subscription made by them could not be accepted as genuine; however, matter is remanded to the Tribunal for deciding the same afresh. (xiv) In the case of Korlay Trading Co. Ltd (232 ITR 820 (Cal)) it was held that, merely filing of income-tax file number of creditor is not enough to prove the genuineness of cash credit unless the creditor is identified and his creditworthiness is established. Addition justified. (xv) In the case of Sumati Dayal (214 ITR 801 (SC)) it was held that, applying the test of human probabilities was right that the assessee's claim about the amount being her win....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y, reach and record correct and true finding, which depending upon the material may eventually even go in favour of the assessee. Assessees appeal dismissed. (xix) In the case of MAJOR METALS LTD (359 ITR 0450 (Bom)) it was held that Settlement commission addition under section 68 interference in exercise of writ jurisdiction Assessee an unlisted company was given huge loan of Rs. 6 crores by two companies. Later on these companies were allotted 30,000 shares each of face value 10 at huge premium of Rs. 990. Settlement Commission has considered all material on record including material which had a bearing on the creditworthiness and financial standing of the alleged subscribing companies to the share capital of the assessee. None of the companies was held to have a financial standing or creditworthiness which would justify making of such a large investment of Rs. 6 crores at a premium of Rs. 990 per share. Allotment of shares has taken place in pursuance of a private placement. View which has been taken by the Settlement Commission is consequently borne out on the basis of the material on record. Commission has not proceeded contrary to law or on the basis of no evidence. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t genuineness and creditworthiness is enough----No. (xxiv) In the case of ULTRA MODERN EXPORTS PVT. LTD [220 Taxman 165 (Delhi)] it was held that Information that assessee furnishes would have to be credible and at same time verifiable. Five share applicants could not be served as notices were returned unserved. Assessee's ability to secure documents such as income tax returns of share applicants as well as bank account particulars would itself give rise to a circumstance which AO in this case proceeded to draw inferences from Assessee commenced its business and immediately sought to infuse share capital at a premium ranging between Rs. 90-190 per share and was able to garner a colossal amount of Rs. 4.34 Crores. CIT (A) and ITAT erred in holding that AO could not have added back said amount u/s 68----Yes. [III] In conclusion, as can be seen from the above said judgements, it is clear that the initial onus is upon the assessee to prove the identity, genuineness and creditworthiness of the persons in whose name the credit entry is appearing by way of share capital/premium, loan or creditor etc. After that the Assessing Officer is duty bound to check the veracity of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 5. Seizure of Indemnity Bond entered between M/s Arha Buildcon and the assessee. 6. Seized material showing Arha - entry 7.5L 7. Seizure of post dated cheque signed by the Director of company against the loans M/s Arha Buildcon Pvt. Ltd. 18. The assessee has received amounts varying from Rs. 5 lacs to Rs. 67 lac from various periods from 07.12.2005 to 25.02.2006 and an amounts have been refunded from 27.04.2006 to 19.05.2006 of amounts varying from Rs. 5 lacs to 30 lacs. There has been an agreement between Arha Buildcon and the assessee regarding booking of 60 flats in the project GTM Forest at Dehradun. This shows that there have been direct finance arrangements between the M/s Arha Buildcon Pvt. Ltd. and the assessee. In the search & seizure operation, an Indemnity Bond has been seized wherein the Arha Buildcon has arranged Rs. 3.75 Crores for the assessee after calculation of cost of 60 flats each of 1650 sq. ft. @ Rs. 1100 per sq. ft. As per the agreement, Rs. 2 Crores is to be paid before 10.12.2006 and from the records it can be found that the assessee has already paid Rs. 67 lacs till 19.05.2006 which gives a credence to the reliability of the agree....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the amount received on 31.12.2005 from Ganga Infin Pvt. Ltd. and the Garg Finvest Pvt. Ltd. has been refunded on 28.09.2006 and by 10.10.2006. Simi lar is the case with other entities namely, Hill ridge Investment Ltd., the payment received in January has been refunded in September 2006. Similarly, in the case of Rakesh Kumar, the amount received of Rs. 4 lacs in January 2006 has been refunded on 28.04.2006. The same is in case of Sehdev Kandol, Rightway Network Pvt. Ltd. Thus, we find that except Sparrow Marketing Pvt. Ltd. of Rs. 5 lacs, SDLW Spinning Mills Pvt. Ltd. and Sri Nawas Leasing & Finance Pvt. Ltd. totalling to an amount of Rs. 21 lacs, the remaining amounts have been either refunded within the year, within two years or adjusted against the bookings. Under these circumstances, it cannot be said that the amounts have been accommodation entries solely based on the statement of Shri Mahesh Garg. 21. We find that the assessee has not been given opportunity to rebut even the statement of Shri Mahesh Garg by the Assessing Officer. The Assessing Officer has not issued any summons or made any enquiries with regard to any of the parties to prove that the amounts have been in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld provide documents relating to identity, genuineness and creditworthiness of the amounts received along with confirmations, address, cheque number and PAN. Hence, we decline to interfere with the order of the ld. CIT (A) on this issue. Unaccounted income from sale of flats in Cooperative Societies: ITA No. 3797/Del/2010 AY 2006-07 (Revenue) 24. The relevant part of the assessment order is as under: "53. In the course of the search operation, various incriminating documents were found and seized from the various premises relating to cooperative societies in Gurgaon and Dwarka. These included copies of application forms on the letterhead of the society requesting for membership, correspondence between the societies and the members regarding payment of instalments, copies of share certificate of members, correspondence by members with the office bearers of the society, copies of cheques paid by members to the society, copies of letters regarding disputes with the office bearers of the society, etc. In particular these documents were found and seized from the residence of Shri Mohit Vohra who is an employee of GTM group and recently has been made one of the directors o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sal at sector 56 Gurgaon. Therefore I am unable to throw light on papers of these annexures. Q.3. During the course of search various documents pertaining to 1. M/S Haryana Citizens cooperative Group Housing Society Ltd 2. M/S Bhagwanti cooperative group housing society 3. Shri Ganesh cooperative group housing society 4. Sukhmany sahib realtors and builders & developers limited were found. Please state how you and your concern employ are related to them? Ans. I do not know anything about these concerns and about the owners of our employer M/S GTM Builders & Promoters Pvt. Ltd and Sargam estate private limited only directors of them can tell. In the questionnaire when Shri Mohit Vohra was asked about them: A-5/ pages 36 to 46 and page 62 these are handwritten lose papers and relate to (geysers and other electrical fixtures to be fixed in flats of various projects. The names of the flat owners and the flat numbers are given alongside. On the top of the page the name of the society is given as "GTM Ananda, Bhagwanti Society, Plot 83, Sector 56 Gurgaon" or "GTM Garima, GH-1 Huda Society, Sector 56, Gurgaon....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Mohit Vohra and he is the proper person to answer the queries. We may, however, state that Shri Mohit Vohra is our employee and, besides working for us, he has been doing separate and independent side business/moonlighting with which we are not concerned. We are told by Shri Mohit Vohra that some of queries in the questionnaire under reply have already been replied by him in his case and we request that the reply already given by him should meet your requirement from us. We reiterate that we have nothing to do with the societies mentioned in the query and no transaction appears as such in our books of accounts. This reply may be taken into consideration for subsequent replies pertaining to Shri Mohit Vohra only for the sake of brevity. 64. In order to substantiate the involvement of the GTM group and its associates in the control over cooperative societies, a survey u/s 133A of the Act was conducted on M/S Bhagwanti Cooperative Group Housing Society on 21-03-2007. 65. During the course of survey a statement of Shri Vidyasaqar Vishnoi who was working in the society as an honorary Manager was recorded. He was asked Q.7 Please state how many members out of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....state when were the members provided by M/s GTM/Sh. Tushar Kumar? Ans: The members were provided by M/s GTM/ Sh. Tushar Kumar ..........w.e.f 11/03/2004. Q13: I am showing you the page no. 26, 27, & 28 of Annexure A impound a site office of the society i.e. Plot No. 83 Sec. 56 Gurgaon. These papers pertain to Sh. Rajesh Chhabra. Sh. Rajesh Chhabra has stated that (1) Ration Cards at page no. 26, does not pertains to him. (2) Signature at page no. 27 has not been done by him. (3) Address written at page no. 28 in blue ink on page 28 has not been written by him and does not pertains to him. Please clarify the above facts? Ans: In this connection I clarify that all the papers relating to formation of members of the society i.e. application for membership, affidavits, ration cards and other documents were received by us from M/s GTM builders and the promoters, Dwarka which were sent by hand by Sh. Tushar Kumar to the society. I do not know anything about ration card, affidavit and address written on the application form for membership. The authenticity of these documents is known to Sh. Tushar Kumar of GTM Builders and Promoters Dwarka. Q 15. Please ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on no. 8 he has stated that 31 members to the society were introduced by GTM/Tushar Kumar further vide answer to question no. 13 regarding certain papers pertaining to Sh. Rajesh Chhabra he said that these papers were received from GTM/Tushar Kumar. Kindly acknowledge the same? Ans. Yes it is correct. Q. 2. On the basis of the above can it be concluded that the control of the society was with GTM/Tushar Kumar? Ans. The technical legal control is with the society only however GTM/Tushar Kumar was controlling the society by the way of introducing most of the members, keeping their records and giving advertisement in the name of society. 69. During the course of assessment proceedings Shri Tushar Kumar was asked During the course of survey on Bhagwanti Cooperative Group Housing Society, the statement of Shri Vidyasagar Vishnoi was recorded who is the Honorary Manager in the society. In the course of his statement Shri Vishnoi has stated that 31 of the 48 members in the society were introduced by Shri Tushar Kumar/GTM whose names are also given by him. This was done on the condition that the value of each flat would be decided at a higher ra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s and having received any such amount as alleged. 70. No copy of the advertisement was provided to the department as has been given in the answer. Copies of all the statements were provided to the assessee. He fi led the reply on 19.12.2008 saying that All the statements are recorded and enquiries made in my absence/back. The material being cited has not been seized from us and we have nothing to do with the same. Still, if the department has any doubts relating to our bonafides, we have requested the Department to call the persons in person and confront them to us and allow us opportunity of cross-examine them. We again reiterate and confirm to your good self that no payment in cash or through cheque has ever been received by the assessee from society or any client/customers of the Society. We were earlier working as a Property Dealer/agent/broker in various places like Dwarka, Gurgaon etc. and the income earned is shown in the respective case of each assessee. You are therefore requested to consider and accept my submissions in the interest of justice. 71. The same question was also asked in case of GTM Builders and the assessee has replied tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the members. Since there was rise in the prices of steel, cement, Bricks and also other material over the period, the cost of escalation was worked out to be Rs. 44,300, which was duly approved by the members in the AGM of the society. The copy of the letters found during the survey belongs to the escalation cost duly accepted by the members and kept for the records of the society. 77. The reply is wrong as the papers were not found during the course of survey but were found at the residence of Shri Tushar Kumar and no explanation whatsoever has been given what these papers were doing at his residence. When question was put about the letter as Papers have been seized from the premises of Sh. Tushar Kumar during the course of search at his premises annexurised as Party A-2, Annexure A-4 page no. 13 and 14. Page 13 is about escalation of cost and 14 is on the letter head of Bhagwanti Cooperative Group Housing Society also written GTM Ananda signed by its President, Sh. Ashok Kumar and Vice President, Sh. R.K. Huda. Please explain the same. The assessee replied that It is clarified that letter was issued by the society to its members inform....
X X X X Extracts X X X X
X X X X Extracts X X X X
....M. 80. The reply of the A.R. of Bhagwanti Cooperative Society cannot be accepted. It is more than clear that GTM builders were controlling all the affairs of the society as they brought in members, they escalated the cost, and they gave the advertisement on behalf of the society and accepted the escalated cost as the profit. 81. From the above facts it is clear that the society was managed and controlled by the GTM Group and the main contact person was Shri Tushar Kumar. It is also evident that for each of the 48 flats, GTM/Tushar Kumar received a sum of Rs. 4 lakhs which amounts to a total payment of Rs. 1,92,00,000/- which was raised by the active connivance of GTM Builders and the members of the society. This clearly represents the undisclosed income of the group. An addition of Rs. 1,92,00,000/- on this account is being made protectively in the hands of Bhagwanti Cooperative Group Housing Society and Shri Tushar Kumar and substantively in the hands of M/s GTM Builders in the year 2006-07 as final instalment for payment was made in the year 2005 which is clear from the statement of Shri Ashok Kumar President of M/s Bhagwanti Cooperative Group Housing Society. M....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in the hands of M/s GTM Builders in the year 2006-07 as final instalment for payment was made in the year 2005 which is clear from the statement of Shri Ashok Kumar President of M/s Bhagwanti Cooperative Group Housing Society. Members were introduced in various years but it is presumed that only while paying the final instalment the cash amount would have been paid to Shri Tushar Kumar. Hence the addition of Rs. 1,92,00,000/- is being made in the year 2006-07. 31. From the record, we find that Shri Tushar Kumar might have played some role but the society confirmed that initially each flat was estimated in the year 2003 at Rs. 17 lacs and Rs. 21 lacs for category A and category A1 type of flats. It was also confirmed by the society that since there was a rise in the price of steels, cement and bricks, the cost escalation was worked out to be Rs. 44,800/- which was duly approved by the members of the society in the AGM. The society cannot be said a benami concern of Shri Tushar Kumar/GTM since it is a separate legal entity and is a registered society under the Haryana cooperative society Act. The scope of its activities, objectives is governed by its Memorandum and Articles of the....