TaxTMI 
TaxTMI 
2021 (4) TMI 220
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....es Pvt. Ltd. Similar ground has been raised for deleting the addition of Rs. 53,55,00,000/- made u/s.68 of the Act. 3. For the sake of convenience, the appeal in the case of M/s. Arizona Global Services Pvt. Ltd. in ITA No.1429/Del/2016 is being taken up and as admitted by both the parties, the findings given therein will apply mutatis mutandis in other appeal also. The facts in brief are that, M/s. Arizona Global Services Pvt. Ltd. the appellant has its registered office at Flat No. 211, 2nd floor, Hemkunt Chambers, 89, Nehru Place, New Delhi-110019. It was originally known as M/s Digivive Content Services Pvt. Ltd. and subsequently its name was officially changed. In the year of its incorporation, i.e., during 2010-11, it was in existence for about 1½ months. During this period, no business was conducted and there was not much income or receipts. As per the Memorandum of Association, the assessee company was to carry on the business of Service Providers, operators, agents, renters, hirers and distributors of cable Television Network, in the line of telecom and communication and to act as business consultants, give advice, to engage in dissemination of information in all a....
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....000 7 SWARNAPUSHPA VANIYA PVT. LTD AAJCS0597G MAA PAHARI ESTATES PVT LTD, 4 SYNAGOGUE ST,KOLKATA, WEST BENGAL- 700001. 3,50,00,000 8 UNISYS SOFTWARES AND HOLDING INDUSTRIES LTD AABCC1191Q 75C PARK STREET, BASEMENT, KOLKATA, WEST BENGAL- 700016 3,00,00,000 9 WALTARE INVESTMENT PVT LTD AAACW2314A ROOM NO 29, 3RD FLOOR, 63 RADHA BAZAR STREET CHINA BAZAR KOLKATA, BENGAL-700001 3,70,00,000 10 KOA INVESTMENT LTD AACCK8539K 5/5761, 1ST FLOORL, GALI NO- 2, DEV NAGAR KAROL BAGH DELHI-5 6,75,00,000 11 GLOBAL INFRATECH & FINANCE LTD (FORMELY ASIANLAK CAPITAL AND FIANANCE LTD) AABCA4255H T2-3RD FLOOR SINDUR, PANTHEON PLAZA 346, PANTHEON ROAD, EGMORE, CHENNAI, TAMILNADU-600008 8,00,00,000 12 COMET HODLING LTD AABCAC0351 J ROOM NO BA, HASTINGS CHAMBER, 7CKIRAN SANKAR ROY ROAD, HIGH COURT, KOLKATA WEST BENGAL- 700001 1,00,00,000 13 EVERSIGHT TRADECOMM PVT LTD AAACE7667 E 7TH FLOOR ROOM NO 11 & 12, SHANTINIKETAN, 8 CAMAL STREET, KOLKATA, WEST BENGAL-70001 7 6,00,00,000 14 AGGRESSIVE EXPORTS INDUSTRIES PVT. LTD AAACA5741 P 11/6 B 2ND FLOOR, SHANTI CHAMBER, PUSA ROAD, NEW DELHI-110005. 4,50,00,000 15 SHAIL INVESTMENTS PVT LTD ....
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....notice to the assessee to comply with all the contents he has asked for. One of the important thing which was mentioned in his show cause notice was the fact of search and seizure operation u/s.132 conducted at the office premises of Shri Tarun Goyal by the Investigation Wing way back on 15.09.2008, during the course of which, it was found and established that Shri Tarun Goyal was engaged in the business of providing accommodation entries in lieu of cash to a large number of beneficiaries through numerous dummy companies floated and controlled by him. He has also explained the modus operandi of bogus companies as discussed in the report that how they were not carrying out any genuine activity. He also referred to the statement on oath of the employees of Shri Tarun Goyal recorded on 15.09.2008 wherein they have stated that they were signing various documents related to many companies at his behest. The statements of auditors of Shri Tarun Goyal were also recorded who have confirmed that they had no knowledge about the Directors of the companies and all the audits were done at the instructions of Shri Tarun Goyal. From these backgrounds, he made his observation in the show cause no....
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....ts made by these Parties is not genuine, you are not in a position to furnish requisite evidence and it is your own unaccounted cash which has been taken back through cheques from the 'Entry Operator' Group. 8. In the light of above, after enquiries conducted on random basis in 4 cases, the source of the funds, genuineness of the transactions and also the creditworthiness of the Parties concerned is not proved in your books / accounts. 9. It has already held that you that you deliberately delayed submission of information with a view to prevent complete investigations in all the cases / Parties from whom you received the amounts claimed by you to be OFCD subscription. 10. To sum up you have failed to establish your claims and the explanation with regard to the amounts credited in your accounts is seen to be false and not satisfactory. Therefore, provisions of Section 68 of the Act clearly apply in your case. Therefore, please show cause why the entire amount of Rs. 151,95,00,000/- should not be added u/s.68 of the Income Tax Act 1961." 6. Further in the cases where OFCD subscribers were based in Kolkata, Assessing Officer observed that department has gathered inquiry on sa....
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....pany for any purpose in the manner deemed fit. The OFCD Holder shall have not right to claim or question anything in this regard. In this regard it is important to keep in mind that even the Hon'ble Delhi High Court has held, in numerous decisions, one of them being Nova Promoters (2012) 342 ITR 169 (Del.) and another being C.IT vs. Focus Exports Pvt. Ltd. in ITA 12. On Page 9 of ITA 218/2012 it has been stated that what is apparent be considered real until it can be shown that there are reasons to believe : the apparent is not real. Proof is required and the assessing authorities are rejected to put blinkers while looking at documents before them. The terms editions were seen to be very un-favourable to the OFCD subscribers. This was one very important aspect which required explanation and the explanation could have been provided by only the Directors of the investor Companies. The assessee blocked all roads in this direction by failing to produce the said Directors. It is also amusing to note that the AR of the Assessee says that it has thing to do with either Sh. J. P. Purohit or Sh. Tarun Goel when in fact the truth is that Sh. Tarun Goel and Sh. J. P. Purohit are thems....
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....ion entry. Therefore, there is no justification for revoking the provisions of section 68 of the Act on the part of Ld. AO." This reasoning given by AR of the Assessee is faulty. If unexplained and unaccounted sums are found credited in the books of accounts and the same are utilised for some purpose and then the account is squared up, the act of squaring up the account has no impact on the taxability/assessment of such unexplained and unaccounted sums as income. The only point to be seen is unaccounted income has been detected in the accounts and that income is clearly assessable to tax. Repayment of the same would not give a clean chit to the Assessee bi what has been detected is unaccounted income which has been earns which has been taken into accounts in a different form so as to avoid tax. Further, if that unaccounted income has been repaid through same channels would not mean anything significant. Repayment of unaccounted income exonerate the Assessee from liability to be taxed on that unaccounted income." * Thirdly, he has taken the adverse inference of non producing of Directors and has rejected the assessee's contention that the time allowed for producing the Directors w....
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....nuine. In view of above discussions it is held that the amounts received in the bank accounts of the Assessee Company and claimed to be of capital nature (claimed as OFCD subscriptions) are not of the nature that these are claimed to be. The implausible terms of agreement regarding the OFCDs- 0% interest rate, redeemable at par after 10 years, etc coupled with the following: * findings of the Department regarding Mr. Tarun Goyal and the cases at Kolkata, selected on random basis * failure of the AR to produce the Directors of the assessee Company for personal deposition * failure of the AR to produce the Directors of the Companies that had been claimed to have given the OFCDs * failure of the assessee to prove the identity, genuineness and creditworthiness in respect of the OFCDs received proves beyond doubt that the Assessee Company has, through use of colourable device, brought in its books, its own unaccounted money from 'Entry Operators,' in the garb of OFCDs and hence these receipts are hit by provisions of Section 68 of the Act. The explanation provided about the nature of these sums is not found to be satisfactory. Therefore, this sum is liable to be adde....
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....n the year 2011-12. Shri Tarun Goyal has also admitted that there are various companies from which genuine business was carried out. * Regarding the statement of Shri Jagdish Prasad Purohit, it was pointed out that he has never said that any accommodation entry was provided to the appellant company and the only name mentioned of the beneficiary of the accommodation entry was M/s. Varaha Infra Ltd. and nowhere the name of the appellant company appeared. * All 16 subscribers who had subscribed for OFCDs have now been redeemed and the subscriber had accordingly been rebutted their loans and there is nothing due to them as on date and the account stands fully settled nowhere there is an iota of evidence that repayment has come part to the assessee company in some hidden way even Assessing Officer who has tried to examine the trail of money could not found that the amount of repayment does not finally listed with the subscribers. * Simply based on inquiry of four cases on sample basis Assessing Officer has applied his finding of sixteen cases including in the name of M/s. Arison Ventures Pvt. Ltd. a subsidiary concern of the assessee-company. * Another important fact which was....
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....fficer had filed his remand report which reads as under:- "1. Kindly refer to your letter F.No. CIT(A)-I/2015-16/275 dated 13.10.2015 on the above subject. The point wise report is as under: As far as the admission of additional evidence, it may be noted that Rule 46A of the Income Tax Rules, 1962 prescribes certain conditions subject to the fulfillment of which additional evidence can be permitted which are given as under:- (a) Where the Assessing Officer has refused to admit evidence which ought to have been admitted; or (b) Where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer; or (c) Where the appellant was prevented by sufficient cause from producing before the Assessing Officer by evidence which is relevant to any ground of appeal; or (d) Where the Assessing Officer has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. The plea of the assessee for acceptance of additional evidence was that they could not filed copy of Bank statement of all the companies, which invested in OFCDs floated ....
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.... a halwai shop was found existing in place of the office of the said party. Similarly, the other party namely M/s. Shail investments Pvt. Ltd was found to be sharing address 13/34, WEA, 4th floor, Main Arya Samaj Road, Karol Bagh, New Delhi with the CA Sh. Tarun Goyal, who is a known entry operator. Similarly, enquiries were got conducted in the cases of three parties at Kolkata namely M/s Warner Multimedia Ltd., M/s Prime Capital Market Ltd and M/s Unisya Software & Holding Industries Ltd. These enquiries revealed that these parties belonged to an entry operator group of Purohit family. Sh. J.P. Purohit of the said group admitted in a statement recorded that he was giving accommodation entries. In view of above and also observing the pattern of Return of Income and copy of balance sheet filed by the parties' credit worthiness remains doubtful. Further it is also submitted that section 68 of the I. T. Act speaks about "Where any sum is found credited in the books.." and is immaterial that the funds have been returned back in future. 4. Considering the above report, the case may kindly be decided by your good self on merits and assessment order may be uphold." 11. Ld. CIT (A) a....
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....y has received 0% OFCDs of Rs. 5,30,00,000/- from M/s Bharat Vision Infra Ltd. The appellant company submitted the copy of bank statement, income tax return, PAN and audited financial statements of the applicant company in support of its claim. The investor company has got share capital of Rs. 4,99,00,000/- and reserve & surplus to the extent of Rs. 44,44,00,207/- in its balance sheet. The appellant company has also submitted the copy of bank statement of the applicant company with HDFC Bank, Stephen House, Kolkata wherein the amount refunded by the appellant company has been credited in the account of the applicant company on 27.08.20147 The investor company has also submitted copy of Income Tax Return wherein total revenue of Rs. 5,34,312/- has been shown and has declared loss of Rs. 31,743/-. During the course of remand proceedings, Assessing Officer issued notice u/s 133(6) of the I.T. Act to the said investor company. The said investor company filed its reply in response to the notice u/s 133(6) and confirmed the transactions with the appellant company. The said company also sent its copy of bank statement whereby the amount given to the appellant company as 0% OFCD of Rs. 5,3....
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....tor company. OM VINCOM PVT. LTD. The appellant company has received 0% OFCD subscription of Rs. 1,50,00,000/- from M/s. Om Vincom Pvt. Ltd. The appellant company submitted the copy of bank statement, income tax return, PAN and audited financial statements of the applicant company in support of its claim. The investor company has got share capital of Rs. 76,12,500/- and reserve & surplus to the extent of Rs. 12,89,05,543/- in its balance sheet. The appellant company has also submitted the copy of bank statement of the applicant company with Induslnd Bank, Kolkata wherein the amount refunded by the appellant company has been credited in the account of the applicant company on 26.06.2013. The investor company has also submitted copy of Income Tax Return wherein total revenue of Rs. 88,46,032/- has been shown and has declared income of Rs. 8,215/-. During the course of remand proceedings, Assessing Officer issued notice u/s 133(6) of the I.T. Act to the said investor company. The said investor company filed its reply in response to the notice u/s 133(6) and confirmed the transactions with the appellant company. The said company also filed copy of appellant's account from its book....
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....ith the investor company. RUPAK TRADING PVT. LTD The appellant company has received 0% OFCDs of Rs. 7,50,00,000/- from M/s Rupak Trading Private Limited (now known as Iskcon Infra Engineering Pvt. Ltd.). The appellant company submitted the copy of bank statement, income tax return, PAN and audited financial statements of the applicant company in support of its claim. The investor company has got share capital of Rs. 1,70,27,000/- and reserve & surplus to the extent of Rs. 14,93,11,552/- in its balance sheet. The appellant company has also submitted the copy of bank statement of the applicant company with United Bank of India, Netaji Subhash Road, Kolkata wherein the amount refunded by the appellant company has been credited in the account of the applicant company on 22.01.2014 Rs. 4,00,00,000/- and on 27.06.2014 Rs. 3,50,00,000/-, The investor company has also submitted copy of Income Tax Return wherein total revenue of Rs. 47,87,22,950/- has been shown and has declared loss of Rs. 4,47,771/-. During the course of remand proceedings, Assessing Officer issued notice u/s 133(6) of the I.T. Act to the said investor company. The said investor company filed its reply in response to ....
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.... the amount paid as 0% OFCDs to the appellant company and subsequent refund of the same to the investor company. All these facts establish the identity, creditworthiness and genuineness of the transactions made with the investor company. SWARNAPUSHPA VANIYA PVT. LTD The appellant company has received 0% OFCDs of Rs. 3,50,00,000/- from M/s Swarnapushpa Vaniya Pvt. Ltd. The appellant company submitted the copy of bank statement, income tax return, PAN and audited financial statements of the applicant company in support of its claim. The investor company has got share capital of Rs. 1,49,56,170/- and reserve & surplus to the extent of Rs. 25,92,70,155/- in its balance sheet. The appellant company has also submitted the copy of bank statement of the applicant company with State Bank of Bikaner and Jaipur, Kolkata wherein the amount refunded by the appellant company has been credited in the account of the applicant company on 27.06.2014. The investor company has also submitted copy of Income Tax Return wherein total revenue of Rs. 14,60,13,069/- has been shown and has declared income of Rs. 32,769/-. During the course of remand proceedings, Assessing Officer issued notice u/s 133(6)....
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....the confirmation of the amount paid as 0% OFCDs to the appellant company and subsequent refund of the same to the investor company. In its reply dated 28.10.2015 received by the AO on 09.11.2015, the Director of the said investor company, Shri Jagdish Prasad Purohit has stated that his statement was recorded u/s 132(1) during the course of search on 21.01.2015 at his residence and survey was also carried out in the case of M/s Warner Multimedia Ltd., M/s Prime Capital Market Ltd. and M/s Unisys Software and Holding Industries Pvt. Ltd. He has further stated that during the course of search he was forced to sign on a pre-drafted statement in place of his own replies. He has also mentioned that DDIT took out a list of companies and he was forced to accept that all these companies mentioned in this list were belonging to him. Sh. Jagdish Prasad Purohit has also written that he had already retracted the said statement by swearing an affidavit on 30.01.2015. Copy of the said affidavit is also enclosed along with the reply filed in response to notice u/s 133(6). Sh. Jagdish Prasad Purohit has confirmed the transaction with the appellant company and has mentioned that these transactions h....
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....vestor company. KOA INVESTMENT LTD. The appellant company has received 0% OFCDs of Rs. 6,75,00,000/- from M/s KOA Investment Ltd. The appellant company submitted the copy of bank statement, income tax return, PAN and audited financial statements of the applicant company in support of its claim. The investor company has got share capital of Rs. 1,04,44,200/- and reserve & surplus to the extent of Rs. 10,37,76,346/- in its balance sheet. The appellant company has also submitted the copy of bank statement of the applicant company with Axis Bank, Karol Bagh Branch, Delhi wherein the amount refunded by the appellant company has been credited in the account of the applicant company on 31.03.2013 of Rs. 1,00,00,000/-, on 30.03.2016 Rs. 1,00,00,000/-, on 30.05.2013 of Rs. 1,00,00,000/-, 02.08.2013 of Rs. 1,00,00,000/-, on 14.02.2014 of Rs. 1,00,00,000/-, on 04.06.2014 of Rs. 50,00,000/-, on 09.06.2014 of Rs. 50,00,000/-, on 30.06.2014 of Rs. 50,00,000/- and on 01.07.2014 of Rs. 25,00,000/-. The investor company has also submitted copy of Income Tax Return wherein total revenue of Rs. 91,506/- has been shown and has declared income of Rs. 9,387/-. During the course of remand proceedings....
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.... 0% OFCD of Rs. 8,00,00,000/- and refund of the same is reflected. The investor company has also filed its copy of the return of income filed with Income Tax Department for the A.Y. 2012-13 to 2015-16 along with its balance sheet for the A.Y. 2013-14 and 2015-16 and the confirmation of the amount paid as 0% OFCDs to the appellant company and subsequent refund of the same to the investor company. All these facts establish the identity, creditworthiness and genuineness of the transactions made with the investor company. COMET HOLDING LTD. The appellant company has received OFCD subscription of Rs. 1,00,00,000/- from M/s Comet Holding Ltd. The appellant company submitted the copy of bank statement, income tax return, PAN and audited financial statements of the applicant company in support of its claim. The investor company has got share capital of Rs. 99,92,000/- and reserve & surplus to the extent of Rs. 4,52,75,529/- in its balance sheet. The appellant company has also submitted the copy of bank statement of the applicant company with HDFC Bank, Stephen House, Kolkata wherein the amount refunded by the appellant company has been credited in the account of the applicant company o....
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....the appellant company. The said company also confirmed the transactions in OFCDs undertaken with the appellant company and filed its copy of bank statement whereby the amount refunded by the appellant company of Rs. 6,00,00,000/- is reflected. The investor company has also filed its copy of the return of income filed with Income Tax Department along with its balance sheet for A.Y. 2010-11, 2011-12 and 2012-13 and the confirmation of the amount paid as 0% OFCDs to the appellant company and subsequent refund of the same to the investor company. All these facts establish the identity, creditworthiness and genuineness of the transactions made with the investor company. AGGRESSIVE EXPORTS INDUSTRIES PVT. LTD The appellant company has received 0% OFCDs of Rs. 4,50,00,000/- from Aggressive Exports Industries Pvt. Ltd. The appellant company submitted the copy of bank statement, income tax return, PAN and audited financial statements of the applicant company in support of its claim. The investor company has got share capital of Rs. 5,00,100/- and reserve & surplus to the extent of Rs.(-) 4,42,19,421/- in its balance sheet. The appellant company has also submitted the copy of bank stat....
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.... Rs. 5,00,00,000/-, on 30.01.2013 of Rs. 4,00,00,000/-, on 14.03.2013 of Rs. 2,50,00,000/-, on 22.03.2013 of Rs. 5,00,00,000/-, on 30.03.2013 of Rs. 5,00,00,000/-, on 23.03.2013 of Rs. 5,00,00,000/-, on 03.04.2013 of Rs. 2,00,00,000/-, on 30.05.2013 of Rs. 3,00,00,000/-, on 26.06.2013 of Rs. 3,00,00,000/-, on 17.07.2013 of Rs. 2,25,00,000/-, on 18.07.2013 of Rs. 2,00,00,000/-, on 29.07.2013 of Rs. 1,00,00,000/-, on 08.08.2013 of Rs. 1,00,00,000/-, 21.11.2013 of Rs. 3,00,00,000/-, on 04.06.2014 of Rs. 1,00,00,000/-, on 05.06.2014 of Rs. 1,00,00,000/-, on 10.06.2014 of Rs. 1,00,00,000/-, on 15.07.2014 of Rs. 1,00,00,000/-, on 28.08.2014 of Rs. 1,00,00,000/-, on 17.09.2014 of Rs. 50,00,000/-, on 18.09.2014 of Rs. 50,00,000/-, on 22.09.2014 of Rs. 1,00,00,000/-, on 07.11.2014 of Rs. 1,00,00,000/-, on 10.11.2014 of Rs. 25,00,000/-, on 12.11.2014 of Rs. 1,00,00,000/-, on 20.11.2014 of Rs. 50,00,000/-, on 21.11.2014 of Rs. 50,00,000/-, on 24.11.2014 of Rs. 50,00,000/-, on 25.11.2014of Rs. 50,00,000/- and on 25.11.2014 of Rs. 25,00,000/-. The investor company has also submitted copy of Income Tax Return wherein total revenue of Rs. 65,31,90,369/- has been shown and has declared in course o....
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.... that the companies sharing address with him at Delhi must be under his control and that it might have given an accommodation entry during the relevant period to the appellant company as the said person was found to be involved in the business of giving accommodation entries in the search conducted by the Department on him. By all means it is a farfetched conception. The money received from the investor companies have been received through banking channels and refunded back to them and same have been credited in their respective bank accounts. Copy of such bank accounts has been filed by the respective investors before the AO as well as before me during the course of remand proceedings. These evidences establish the identity, creditworthiness and genuineness of the transactions. The AR of the appellant has also relied upon Delhi High Court judgment in the case of CIT Vs. Five Vision Promoters (P) Ltd. 65 Taxman .com 71 (Delhi) wherein the Court has held that "whether mere fact that some of investors have a common address is a valid basis to doubt their identity or genuineness - held NO" the ratio of this judgment has given hereunder: - "Section 68 of the Income-tax Act, 1961 - Ca....
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....ed 28.10.2015 received by the AO on 09.11.2015, the Director of the said investor company, Shri Jagdish Prasad Purohit has stated that his statement was recorded u/s 132(1) during the course of search on 21.01.2015 at his residence and survey was also carried out in the case of M/s Warner Multimedia Ltd., M/s Prime Capital Market Ltd. and M/s Unisys Software and Holding Industries Pvt. Ltd. He has further stated that during the course of search he was forced to sign on a pre-drafted statement in place of his own replies. He has also mentioned that DDIT took out a list of companies and he was forced to accept that all these companies mentioned in this list were belonging to him. Sh. Jagdish Prasad Purohit has also written that he had already retracted the said statement by swearing an affidavit on 30.01.2015. Copy of the affidavit is also enclosed along with the reply filed in response to notice u/s 133(6). Sh. Jagdish Prasad Purohit has confirmed the transaction with the appellant company and has mentioned that these transactions have been taken place through banking channels. He has also filed copy of the Assessment order passed by the Assessing Officer in the case of M/s. Warner ....
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....from whom funds have been received by those investor companies are duly assessed to tax. It is seen that name of the appellant company is appearing in the balance sheet of the above named companies as investee company. In view of the documents filed by the above named investor companies before AO and by the AR of the appellant at the time of assessment proceedings and in the remand proceedings and copy thereof filed before me, the identity, source, creditworthiness of the investor companies and genuineness of the transactions have been established. I find that the AO has not been able to bring on record any evidence to negate the genuineness of the transaction done by the appellant and the applicant of 0% OFCD. Therefore, the addition cannot be sustained only on suspicion and surmises. Considering the fact that the identity, genuineness and creditworthiness of all the applicants of 0% OFCD is duly established, the addition made by the AO cannot be upheld and hence the AO is directed to delete the addition of Rs. 151,95,00,000/- made on account of 0% OFCD subscription u/s. 68 of the I.T. Act. Submission of CIT DR 14. Before us, the ld. CIT-DR, Mr. Gulati first of all drew our at....
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....of the AO order. 2.2 In the case of Arizona Ventures Pvt. Ltd. * As regards Kolkata based companies (Warner Multimedia Ltd., Prime Capital Market Ltd, Unisys Software & Holding Industries Limited), the AO observed based on information from Income Tax Department investigation at Kolkata that the aforesaid companies were managed by Mr. J.P.Purohit, accommodation entry provider. Search and seizure action had taken place in the case of J P Purohit on 21/01/2015. The AO took note of the fact that M. J P Purohit was director of the aforesaid companies. Statement of J P Purohit is part of the AO order. * The AO recorded that the investigation wing findings were duly communicated to the assessee (refer para 6) * At para 7, the AO rebutted the plea of the assessee as to a) how statement recorded in 2008 can be relied upon b) the amounts received as OFCD subscriptions have already been repaid/refunded in later years (refer para 7.2) o c) time for producing the directors was short (refer para 7.3) * The AO observed that how the assessee company could get funds from the investor companies if it was ignorant of Mr. Purohit and Mr. Tarun Goyal. * The AO noted that repayment of unac....
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....st their wishes and that such transactions including the transactions of giving cheques to the assessce company (Nova Promoters and Finlease Pvt. Ltd.) were absolutely genuine and bonafide transactions wherein no cash had been received from assessee company in exchange of cheuqes issued to them. It has been stated in the affidavits that the cheques were issued to the assesscc company for share application money for allotment of shares and subsequently shares were also issued * Para 25-Affidavit can be rejected if there is enough material on record to negate the claim of genuineness of the transactions. * Para 30-Material was gathered by the investigation wing and made available to the Assessing Officer, who in turn had made it available to the assessee. Nothing has been said by the Tribunal about the said material. Thus, the Tribunal, with respect, seems to have ignored relevant material. * Para 31- The Tribunal also erred in law in holding that the Assessing Officer ought to have proved that the monies emanated from the coffers of the assessee-company and came back as share capital. ...It places no duty upon him to point to the source from which the money was received by the....
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....019 (AY 2005-06) where the ITAT listed out set of questions based on various decisions including PCIT vs. NRA Iron and Steel (P) Ltd and NR Portfolio Private Limited and held that * "....Unless and until satisfactory answers are obtained to these questions, it would be difficult to reach a positive conclusion as to the identity and creditworthiness of the share applicants and the genuineness of the transaction. Merely because the assessee was successful in completing the paperwork very meticulously or bringing into existence certain documents, the statutory obligation of the authorities does not get absolved merely because the assessee produced certain documents. It is incumbent on the authorities to verify the genuineness of such documents also in the light of the attending circumstances. 11. The questions as listed out by Hon'ble ITAT are discussed as under with reference to the case in hand:- * whether the two parties are related or known to each other, or mode by which parties approached each other? Answer:- Investor and recipient entities are not known to each other except for one sister concern Arizona Ventures Private Limited making investment with Arizona Glob....
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....ors of the investing companies. The AO also made enquiry on sample basis in case of two Delhi based entities and found to be nonexistent. As regards Kolkata based companies, the same were found to be pari of companies managed by entry provider. * whether the assessee discharged their legal obligation to prove the receipt of share capital/premi m to the satisfaction of the AO? Answer;- The AO was not satisfied as the directors of the investing companies were neither produced at the assessment stage nor at the appellate stage. The entry operators did state t he modus operandii which was retracted after a long gap. * whether the assessee discharged the onus to establish the credit worthiness of the investor companies? Answer;- Except for filing ITR, the assessee did not establish credit worthiness of the investor companies. * did the assesscc do anything more than mere mention of the income tax file number of an investor to discharge the onus under Section 68 of the Act? Answer;- No 12. It may also be relevant to take note of decision of Hon'ble Delhi High Court in the case of Bikram Singh (ITA 55/2017) on the issue of accommodation entry in the form of unsecured l....
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....e 3 Para 4 & 4.1 AO stated that there was no co-operation from the assessee during the assessment proceeding in submitting details in compliance to notices issued U/s 142(1) and not produced directors of the assessee company as desired we submit that first Notice U/s 142(1) was issued on 15/10/2013 seeking preliminary details i.e. Income tax return (ITR), Balance sheet, details of directors and shareholders etc. In response to this notice basic details i.e. ITR, Balance sheet & Computation filed on 24/10/2013, which also covers other details like directors, shareholder etc. in the return. Thereafter second notice was issued on 05/01/2015, almost after 15 months asking for various details 63 numbers, in the specific format. These details were filed on 16/02/2015. Thereafter the AO issued summon U/s 131 dated 20/03/2015 to produce directors of the subscribing companies on 24/03/2015, which was served to watchman on late evening of 21/03/2015 i.e. Saturday. So effectively the notice was received by the assessee on 23/03/2015 and replied on 24/03/2015. Final showcause notice dated 25/03/2015 was issued which was replied on 27/03/2015. So there is no non-cooperation from the assessee....
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.... assessee requested for sometime as it was not possible to produce parties within such a short notice. 4 Page 8 -10. AO discussed inspector report on these pages and alleged that one of the party address is of Tarun Goyal office address. On page 9, AO stated that in case of KOA Investment Ltd. The inspector visited the address 5/5791, 1st Floor, Gali No. 2, Dev Nagar, Karol bagh, New Delhi and found that it was a small Halwai shop. In this regard we submit that the assessee has submitted address of the party, copy of which available on page 317 and the address read as 5/5761, 1st Floor, Gali No. 2, Dev nagar, Karol bagh, New Delhi- 11005. When the assessee is proving an address by the inspector visits at some other address, it is not the fault of assessee. Therefore, no cognizance can be taken of such report. The inspector's enquiry at Delhi proves nothing conclusively. Moreover, the inspector's report, as such, was never confronted to the assessee. Hence, it cannot legally be used against the assessee. AO also discussed that Sail Investment Co is having address of Tarun Goyal who was an entry operator as per 2008 investigation report. We submit that notice sent by AO on the ....
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....modation entry providing. 5 Page 12 Para 6 AO discussed about two Kolkata party i.e. San Infrastructure Ltd and Unisys Software & Holding Ind. Ltd. and stated that these companies pertains to Jagdish Purohit who is also an entry operator. Ld AO relied upon the statement of Jagdish Purohit dated 21/01/2015 wherein he has admitted that he is controlling few companies which are engaged in providing accommodation entries. In this regard we submit that in reply to Q No. 23, he provided list of companies who are engaged in the business of providing accommodation entries. Name of these two companies are not appearing in such list given by Shri Jagdish Purohit, Copy of statement is enclosed herewith for Your Honour's Kind perusal. Further in question No. 25 it was specifically asked that Mr Jagdish Purohit is also controlling few other companies, which includes these two companies, and M/s Varah Infra Ltd. Raised capital through these companies also, whether this transaction is also an accommodation transaction. In reply to this question Mr Purohit categorically stated that these companies have subscribed to capital of other companies out of their own capital which was raised through p....
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....d assessee to produce its directors before 20/03/2015. 20. The AO has also relied on the statement of Shri Jagdish Prashad Purohit recorded by the Search & Seizure party of the Income Tax Department on 21.01.2015. On perusal of this statement, it may be observed that Sh. Jagdish Prashad has never said that any accommodation entries were provided to the appellant company. In the statement, only name mentioned of the beneficiary of accommodation entries is M/s Varaha Infra Ltd. The name of the appellant company figures nowhere. As per Ld. AO, since Sh. Tarun Goyal, CA and Sh. J.P Purohit of Kolkata are tainted persons in the eyes of the Income Tax Department, it is confirmed that any company, with which their name is associated in one way or the other, must be indulging in giving 'accommodation entries'. Ld. Counsel pointed out that this view is not reasonable and not sufficient enough to hold the assessee guilty of taking accommodation entries. Further, it is worth noting that neither of the above-said two persons has directly accused the assessee company as beneficiary of any accommodation entry. Further, Ld. AO has simply enclosed photocopies of the statements of Sh. Tarun Goya....
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....ailed herein below: (i) In the cited case, the assessee did not cooperate with the AO and filed utterly incomplete details and consequently, the assessment in the said case was completed ex-parte u/s 144 of the I.T. Act. Hon'ble Court noted that "the assessee filed some details but they were not exhaustive/complete." As against this, in the case of the appellant, full details were filed. Moreover, the AO was requested in writing to kindly point out if any specific detail remains to be filed so that the same may also be filed. (ii) In the cited case, Hon'ble Court noted that "the assessee did not furnish complete details and particulars and virtually "absconded" during the course of reassessment proceedings, resulting in a best judgment assessment." As against this, the appellant does not remember ever skipping any hearing on any date. The proceedings were regularly attended. Even the adjournments were mostly given by the AO on his own accord asking for complete details in one go, refusing to accept the details from the assessee in piecemeal. Consequently, assessment in the case of the appellant company was completed u/s 143(3) of the I.T. Act, 1961. iii. In the cited case, t....
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.... there is no such adversity in these terms. The debentures are fully convertible to shares and if any party not willing to convert it they can take their principal amount. Where is the question of any adversity in this term. Further regarding use of funds also if the assessee company do not put such condition each and every debenture holder will disturb day to day functioning of the company. It is not their job to run the business. Therefore, the allegation of AO is without any basis and support. 25. Further, in the appellate stage when Ld CIT (A) Appeal called for remand report, AO has not given any opportunity to the assessee to produce parties. He send notice U/s 133(6) to all the parties and all such parties duly responded to the AO and filed desired details. Thereafter no investigation done by the AO and submitted his report to the Ld CIT (A). This clearly proves that the AO was satisfied with the details submitted before him by the assessee as well as by the respective parties. It is worthwhile to note that out of various parties one of the subscriber is Arizona Ventures Pvt. Ltd. Who is also assessed by the same AO and similar additions were made by the AO in this company a....
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.... 49 taxmann.com 13 (Delhi) CIT v. Nipun Auto (P) Ltd. Hon'ble Delhi High Court averred in this case that "Where identity of share applicants had been established and their bank accounts, IT returns and balance sheet in addition to confirmation letters were produced, addition under section 68 was to be deleted." - CIT Vs. Divine Leasing and Finance Ltd. [2008] 299 ITR 0268(Delhi) It was held by Hon'ble Delhi High Court that "If relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with the copy of the share holders' register, share application forms, share transfer register etc., it would constitute acceptable proof or acceptable explanation by the assessee" In the case of the appellant, a number of documents, as enumerated in the earlier paragraphs were furnished to AO, which constitute acceptable proof. - [2008] 307 ITR 0334( Delhi) CIT v. Value Capital Services P. Ltd. In this case, Hon'ble Delhi High Court, relying on the decisions in the case of CIT v. Stellar Investment Ltd. (1991) 192 ITR 0287 (Delhi) and CIT v. Sophia Finance Ltd.[1994] 205 ITR 0098 (Del) held that: "It is quite obvious that it is very di....
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....at "In our opinion, the AO has simply acted on the information received from the Investigation Wing without verifying the details furnished by the assessee. The assessee has also produced best possible evidence to support its claim. Consequently, the addition made by the AO cannot be sustained." In the case of the appellant as well, Ld. AO has simply acted on the report of the Investigation Wing and conducted no meaningful enquiry at his level. So, there was no case for making the addition. - CIT v. Steller Investment Ltd. [2001] 251 ITR 263/115 Taxman 99(SC) In this case, Hon'ble Supreme Court affirmed the view of Delhi High Court in the case of CIT v. Steller Investment Ltd. [1991] 192 ITR 287/59 Taxman 568, that reads as under: "It is evident that even if it be assumed that the subscribers to the increased share capital were not genuine, nevertheless, under no circumstances, can the amount of share capital be regarded as undisclosed income of the assessee. It may be that there are some bogus shareholders in whose names shares had been issued and the money may have been provided by some other persons. If the assessment of the persons who are alleged to have really advance....
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....nk and the assessee had explained the source of income, additions u/s 68 could not be made." In the case of CIT v. Jitendra Dolepatbhai Shah (2014) 41 taxmann.com 523 (Gujarat), Hon'ble High Court averred that "The source of credit has been explained by the assessee with documentary evidence and the documents were not found false. On perusal of the impugned order of the CIT(Appeals), we are convinced that on doubts and suspicion, the AO has treated short term capital gain .......... as unexplained credit........... On the basis of doubts and suspicion, the cash credits cannot be held as unexplained." Similarly, in the case of MOD Creations Pvt. Ltd. v. ITO( Delhi High Court), it was held that "The assessee had discharged its initial onus placed on it. In the event the Revenue still had a doubt with regard to the genuineness of the transactions in issue or as regards the creditworthiness of the creditors, it would have had to discharge the onus which had shifted on to it. A bald assertion by the Assessing Officer that the credits were a circular route adopted by the assessee to plough back its own undisclosed income into its accounts, could be of no avail. The Revenue was requ....
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....ore him. * The assessee has been non cooperative throughout the assessment proceedings and despite asking the assessee to produce the Directors of the investor company the assessee was unable to produce any of the Directors or authorized representative of the company. * In the case of two parties, i.e., M/s. Shail Investments Pvt. Ltd. and M/s. KOA Investments notices sent to the Directors were not complied with and when Income Tax Inspector was deputed to serve the summons and the same could not be served because at the given address nobody was found or no board was there on the address. * The above two companies, i.e., M/s. Shail Investment and M/s. KOA Investment Ltd. where the company controlled and operated by Shri Tarun Goyal, who is an established entry operator which was found during the course of search and seizure operation u/s.132 way back on 15.09.2008. Similarly, the two companies, namely, M/s. Scan Infrastructure Ltd. and M/s. Unisys Software and Holding Industries Ltd. which are Kolkata based company was managed and controlled by Shri Jagdish Prasad Purohit who was also found to be entry operator in the search conducted on him on 21.01.2015 wherein he has admit....
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....ng Officer's allegation that the assessee was non cooperative, already it has been explained by the assessee before the ld. CIT (A) as well as before us that, in the first notice u/s. 142(1) issued on 15.10.2013 seeking preliminary details, the assessee had filed their requisite details, which were, income tax return, balance-sheet, computation and details of Directors of shareholders. Thereafter, 2nd notice was issued on 15.01.2015 which was almost after 15 months from the date of first notice, wherein 63 points were listed, which too was complied with by the assessee on 16.02.2015. It was for the first time that at the fag end of the limitation of passing of the order that the Assessing Officer issued summons u/s.131 on 20.03.2015 to produce the Directors of the subscriber companies on 24.3.2015 and said summons was served on the late evening of 21st March, 2015 which was a Saturday and in response assessee has replied on 24.03.2015 that time allowed was too short. The Assessing Officer immediately thereafter issued a final show cause notice on 25.03.2015 which again was responded on 27.03.2015. Under these admitted facts, which have been duly noted by the ld. CIT (A) which is a....
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....ecessary details and confirmation along with documentary evidences substantiating the case of the assessee. In such remand report also no adverse inference has been drawn which fact has already been noted by the ld. CIT (A) and has dealt with same while deleting the addition in the case of each and every subscriber/investor company. Hence, non production of Directors on the facts and circumstances of the case cannot be adversely viewed and cannot be the sole reason for sustaining the addition. 36. Coming to the Assessing Officer's observation regarding statement of Shri Tarun Goyal and the investigation carried out in his case in the year 2008. First of all, different statements of Shri Tarun Goyal which has been referred to by the Assessing Officer is more than seven year back and then without there being any specific information given by him regarding assessee that it was one of the beneficiaries, then such a statement practically holds no evidentiary value and what he did in the distant past has nothing to do with the transaction entered by the assessee company in the Assessment Year 2012-13. There is no iota of reference by the Assessing Officer, whether Shri Tarun Goyal name....
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....saction or bogus. At least there should have been some reference that the assessee company was one of the beneficiaries of the accommodation transaction or was figuring in the list of the companies through which he has been provided accommodation entries. Without any such material information from his statement or investigation report qua the assessee, all the reference made by the Assessing Officer has no legs to stand so as to warrant any adverse inference while examining the credit entries in the case of the assessee company. 38. The Assessing Officer has also referred the investigation of bank transaction with various parties at the time of repayment of OFCD holders and came to the conclusion that the amount of repayment finally vested with the subscribers. If the fund obtained through OFCD have been refunded back which is an admitted fact and did not remain in the possession of the assessee company and then how the refunded amount has been utilised by the subscriber companies is none of burden of the assessee, unless these parties have confirmed otherwise and from where the funds have originated. How the assessee can be held to beneficiary of accommodation entry until and unl....
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....orated in the foregoing paragraphs. After considering the entire gamut of fact and material available on record, we do not find any reason to tinker with the findings of the ld. CIT (A) which is based on facts and material on record, the remand report of the Assessing Officer and proper rebuttal of the Assessing Officer's observation and the finding and accordingly the same is confirmed. 41. In so far as the judgments relied upon by the ld. CITDR, specifically in the case of NRA Iron & Steel Pvt. Ltd., the Hon'ble Apex Court had opined that in case of private placement of shares, where a higher onus is required to be placed on its and legal obligation of the assessee to prove the receipt of share capital to the satisfaction of the Assessing Officer. The onus cannot be discharged merely by filing of primary evidence. Here in this case as stated above not only the primary evidence but also in the inquiries carried out by the Assessing Officer qua the investor specifically in the remand proceedings wherein they have duly confirmed the transaction with the documentary evidences along with their balance sheet and income tax records from where they have been duly shown and proved that t....