TaxTMI 
TaxTMI 
2021 (2) TMI 597
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..... 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 income from sale of flats in residential societies as evidenced from seized docu....
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....isions 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 received marked as Annexure A-127, page 4. He also referred to pages 75 and 76 of Annexure A-14 which showed details of....
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....gister 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 Fincap (P) Ltd. 800000 Nishant Finvest (p) Ltd. 900000 Particular Manage Finance (p) Ltd. 900000 Pathik Merchandise (p) Ltd. 10000000 Rakesh Kumar 400000 Rightway Network Pvt.....
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....s 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 Income-Tax Act, 1961 provides that, where any sum is found credited in the books of assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the ....
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....pplicable 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 unverifiable, or there are further doubts in pursuit of such details, onus shifts back to assessee to explain same---Yes. (v) Also in the case of N.R. Portfolio Pvt Ltd [96 DTR 0281 (Del)] it was held that, the onus to prove the identity, creditworthiness and genuineness of the transaction is on the asses....
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....t 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 or details before it is held that onus is discharged. Thus, matter remitted to tribunal for entire issue to be dealt afresh. (ix) In the case of Empire Builtech Pvt Ltd [366 ITR 110 (Delhi)] it was held that, merely because assessee had disclosed the identity of the investors, it cannot be said that burden imposed upon it u/s ....
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....ompany 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 winnings from races is not genuine. (xvi) In the case of Power Drugs Ltd. (245 CTR 623 P & H) it was held that, Assessee-company having failed to establish the identity and creditworthiness of the alleged share applicants and the genuineness of the share application money shown by it, addition under s.68 was rightly upheld by the Tribunal. (xvii) In the case of Nova Promoter....
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....wo 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. There is no perversity in the findings of the Settlement Commission. Reappreciation of finding of facts not warranted in exercise of judicial review. Order of the Settlement Commission upheld. (xx) In the case of INDEPENDENT MEDIA PVT. LTD. (25 taxmann.com 276 (Delhi)) it was held that, For addition u/s 68, AO need not establish money coming from assessee's coffers - For making addition under sect....
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....ars 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 those details filed and thereafter arrive at a conclusion in connection with the genuineness of share capital/premium. However, the recent judgements of different high courts in this regard are quite different particularly considering the facts of each case. Moreover, recent judgement in the case of Navodaya Castle (supra) has distinguished the position of law settled in the case of Lovely Exports (supra). In CIT V/s. Navodaya Castles (P) Ltd.....
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....ment 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 agreement. The Indemnity Bond, the amounts received and paid against the bookings cannot be suspected in the absence of any other contrary finding by the revenue. From the record, we also find that M/s Arha Buildcon Pvt. Ltd. has not complied to the summons issued by the Investigation Wing. Regarding the discrete enquiries conducted by the Assessing Officer at the premises, we observe that the assessee has not been given any opportunity to the assessee regarding the discrete enquiries conduced and its outcome. The said lende....
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..... 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 fact rooted through these entities. We have gone through the case laws submitted in judgments relied upon by the revenue. 22. In the case NR Portfolio, the Assessing Officer has issued summons verified the parties and made the addition whereas in this case we find that the Assessing Officer has merely relied on the statement of Shri Mahesh Garg only. In the case of MAF Academy Pvt. Ltd., the shares were purchased at a large premium and then sold at substantial loss in short span of time. The assessee failed to produce the pa....
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....ating 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 of the flagship company. In his statement recorded during the search as well as during post search proceedings, Shri Mohit Vohra stated that these papers were handed over to him by Mr. Tushar Kumar for further handing over to same to one Mr. Kansal at Sector 56, Gurgaon. He expressed his ignorance about the nature of these papers and did not give any further explanation. In addition to the above, some documents relating to cooperative societies were also found from the residence of Shri Tushar Kumar Bhaqwanti Cooperative Group Housing Soc....
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....moters 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. Please explain the same. Whether you have shown these transactions in your books of accounts. He replied I earlier used to provide geysers, electrical fixtures and other items in various societies/housing schemes on contract basis. I also used to assist in getting loans as I was having experience of arranging finance having worked with a finance company. This is only prospective list of the names of the flat owners along with the flat nos. for contacts etc. There is no transaction pertaining to me. 62. The reply provided is clearly an afterthought as there is a clear contradiction in the reply provided by Shri Mohit Vohra. ....
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....ri 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 whole 48 members were initially the members of the society? Ans. Only one member is at present the member of the society who was initially member of the society. All 47 members are the new members. Q.8 Please state the names of the members introduced Ans. Following members have been introduced by M/s GTM or Shri Tushar Kumar:- Name Flat No. 1. Sh. Rajesh Chabbra 502 Bhagwanti CGH Ltd. 2. Mrs. Alka Gupta 505 Bhagwanti CGH Ltd. 3. Mrs. Ruchi Aggarwal 606 Bhagwanti CGH Ltd. 4 Mr. S. Rajan. 701 Bhagwanti CGH Ltd. 5. Group Cpt. Modi Lai Bhandari Ltd. 801 Bhagwanti CGH 6. Wg. Cdr. Suni l Chaudhery 203 Bhagwanti CGH Ltd. 7. Sh. Jati in Bakshi 804 Bhagwanti CGH Ltd. 8. Sh. Rama....
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.... 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 state about the agreement between the society and M/s GTM builders and Promoters? Ans. The society was desirous to make the members of the society but the society was not getting the sufficient members. We contacted with the contractor of the society to provide the members to the society. Without membership the society was under the risk of failure. The contractor suggested us the name of GTM builders and promoters on the conditions that the value of the Flats will be decided at higher rate i.e. 21 Lacs instead of 17 Lacs which was the actual cost of the flat i.e. 17 lacs. 66. Statement of Sh. Rajesh Chabra owner of flat no. 502 recorded on date of survey at the premises of the society. Q 2. Please state how you came to know about Bhagwanti CGH Ltd.? Ans. I saw the advertisement in the newspaper of the society for sale of flats in the society. The advertisement was given by GTM Group. Q.3. Please state after seeing the advertisement in the news....
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....names are also given by him. This was done on the condition that the value of each flat would be decided at a higher rate i.e. Rs. 21 lakhs instead of Rs. 17 lakhs which was the cost of the flat. The difference amount of Rs. 4 lakhs was to be shared by Shri Tushar Kumar/GTM and contractors. He further stated that all the documents relating to the members introduced by GTM were received directly from the company and were sent directly by Shri Tushar Kumar. The cheques for the payments for purchase of the flats were also sent by GTM. The statements of two of the members/occupants of the society were also recorded during the course of survey. Shri Ramesh Wadhawan, owner of Flat 604 stated that on making enquiries at the construction site of the society in 2004 they were told to contact Shri Tushar Kumar. After making contact with him they booked the flat and gave cheques to him. Subsequently all further cheques were sent to him and the last instalment was paid in 2005. The other member/owner Shri Rajesh Chabra in his statement stated that he had seen the advertisement for sale of flats in the society which had been given by the GTM group and accordingly he contacted Shri Tushar Kumar ....
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....me question was also asked in case of GTM Builders and the assessee has replied that the reply may be treated as same as in case of Sh. Tushar Kumar. 72. Papers were also seized from the residence of Shri Tushar Kumar relating to Bhagwanti Cooperative Group Housing Society. Annexure A-4 of Party A-3 has page no. 14. It is on the letterhead of Bhagwanti Cooperative Group Housing Society and in the middle it is written GTM ANANDA (STYLISH COMFORT HOMES). The letter is about escalation of cost and is signed by Sri Ashok Kumar (President) and Sri R.K. Huda (Vice President). 73. When Sri Tushar Kumar was questioned about these papers he replied The position is same as in the case in Item 46. Shri Ashok Kumar was an acquaintance who had perhaps come to seek advice on the proposed transaction and left a copy of his letter at our premises. It has no concern with me. 74. Page 13 is paper seized from the residence of Shri Tushar Kumar and is about escalation of cost at Bhagwanti cooperative group housing society signed by Ruchi Aggarwal. When Shri Tushar Kumar was asked about it he replied that: The seized paper is self speaking and has no concern with me. It pertains to Mr....
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....t. However insertion of the words "GTM Ananda (Stylish Comfort Homes) on the top of it, was not in the knowledge of the society. Further in his replies dated 24.11.2008 A.R. of the Bhagwanti Cooperative Group Housing Society acknowledged that members were introduced by Shri Tushar Kumar. Interestingly a newspaper article had appeared in the Indian Express on 11.08.2006 titled "How green is the valley". The article states that "For those who travel on the Gurgaon-Faridabad road, Valley View Estate must be a familiar sight. The project spread over 22 acres consists of 14 towers housing separate societies. One of the towers, GTM's Tower 11, is being promoted by Sri Balaji & Company which has an ISO 9001:2000 certification. They also have td their credit smaller projects in Gurgaon Ananda and Garima of around 40- 50 flats each. 79. When Shri Tushar Kumar was confronted with this article during his statement on 13.03.2006 he was asked Q. 7. I am showing you a printout of a newspaper article of Indian Express dated 1-1.08.2006 which says that GTM projects also include Ananda and Garima in Gurgaon. What do you have to say? Ans. The facts are incorrect. GTM has nothing to do....
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.... 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." 25. The ld. CIT (A) deleted the addition on the grounds that there is no evidence to show that any money has passed from the society to the assessee towards the sale of flats. 26. Before us, the revenue relied on the exhaustive order of the Assessing Officer and the ld. AR supported the order of the ld. CIT (A). 27. Heard the arguments of both the parties and perused the material available on record. 28. We find that the Assessing Officer has made addition on the following premises: 1. Documents pertaining to the society have been found with Shri Mohit Vohra and Shri Tushar Kumar, Directors of the company. 2. Held that the assessee has a role in management of the group houses societies. 3. Held that the assessee group and its associates have controlled over the Cooperative Societies. 4. The application for membership and other documents are being sent to the society Manager by the Directors of the assessee company. 5. The assessee received Rs. 4 lacs against each flat 6. Some of the members have been introduced by S....