TaxTMI 
TaxTMI 
2021 (4) TMI 220
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..../s.68; and in the case of M/s. Arizona Ventures 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 ....
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....LTD AACCB3214C P-27, PRINCEP STREET, 3^RD FLOOR, KOLKATA, WEST BENGAL-700072 1,50,00,000 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, 3^RD FLOOR, 63 RADHA BAZAR STREET CHINA BAZAR KOLKATA, BENGAL-700001 3,70,00,000 10 KOA INVESTMENT LTD AACCK8539K 5/5761, 1^ST 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 IND....
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....iance to this notice was made. The assessee never produced the Directors of the companies even those based at Delhi. Finally on 25.03.2015, he issued a show cause 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 ....
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.... received but you have failed to do so. Not even a single person concerned was produced before me by you. Therefore, this also is further additional reason which conclusively proves that the investments 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 entir....
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....ief, are as described below. (a) Conversion: The OFCDs would be redeemable after 10 years at par if the conversion option is not exercised. (b) Usage of Funds: The amount received would be at exclusive disposal of the Company and may be utlilized by the Company 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 assesse....
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....ompany were pure and simple business transactions and these were not any accommodation entries. Furthermore, entire loan amount obtained from the parties concerned through OFCDs has since been paid back through the banking channel. The fact of repayment negates the Department's allegation of accommodation 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 an....
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....ngs as to how the OFCD holders would benefit from subscribing to the OFCDs. There was no project to be undertaken by the assessee Company and there was no information on the projected profitability of the Company in future years. Therefore, there cannot be any valid reason to hold that the OFCD subscription was genuine and the investors were genuine. 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 ....
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....on his own in this regard and simply relying upon the inquiries conducted by the Investigation Wing way back in the year 2008, when the assessee company was not in existence. Another important thing which was pointed out that even in the statement of Shri Tarun Goyal he has not mentioned the name of any company from which assessee company has undertaken transaction was used by him for providing the entries and there is no whisper about the companies from whom assessee had transactions in 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 no....
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....s made to the respective OFCD holders. c) Copy of bank account statements of all the companies, which invested in OFCDs floated by the appellant company showing receipt back of the respective amounts in their bank accounts. d) Copies of acknowledgement portion of the Income Tax returns of the investing companies in proof of their being Income Tax assessees." 10. The additional evidences and assessee's explanation and submission were forwarded to the Assessing Officer to submit his remand report and to conduct the inquiries and verification. In response, the Assessing Officer 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 b....
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....undertaken the transactions, in question, and had also supplied the confirmatory documents to the assessee, on request for the same. It is further stated by the parties that the balance towards the assessee is 'Nil as on date. 3. Irrespective of the above position, I still support the findings of my predecessor as given in the assessment order. As stated in the assessment order, enquiries were got conducted on sample basis at Delhi in two cases namely M/s KOA Investments Ltd and M/s Shail Investments Pvt. Ltd. The inspector was sent with summons u/s 131 to the said parties. M/s. KOA Investments Ltd was not found by the inspector at the given address, where 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 t....
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.... b) Copy of bank account statement of the appellant company showing the repayment of the amounts made to the respective OFCD holders. c) Copy of bank account statements of all the companies, which invested in OFCDs floated by the appellant company showing receipt back of the respective amounts in their bank accounts. d) Copies of acknowledgement portion of the Income Tax returns of the investing companies in proof of their being Income Tax assessees." 12. Thereafter, he has discussed merits of additions in case of each and every party based on the evidences and the remand report of the Assessing Officer which are incorporated as under:- BHARAT VISION INFRA LIMITED The appellant company 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 app....
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.... and confirmed the transactions with the appellant company. The said company also filed copy of appellant's account from its books of accounts from 01.04.2011 to 31.03.2015 along with its copy of bank statement whereby the amount given to the appellant company as 0% OFCD of Rs. 5,20,00,000/- 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 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. 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 ba....
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.... 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 books of accounts from 01.04.2011 to 31.03.2012 and 01.04.2013 to 31.03.2014 and its copy of bank statement whereby the amount given to the appellant company as 0% OFCD of Rs. 1,50,00,000/- and the refund of the same 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. 2012-13, 2013-14 and 2014-15 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. 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 s....
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....in total revenue of Rs. 87,62,650/- has been shown and has declared loss of Rs. 7,20,518/-. 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 books of accounts from 01.04.2011 to 31.03.2015 and its copy of bank statement whereby the amount given to the appellant company as 0% OFCD of Rs. 1,50,00,000/- 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 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. SWARNAPUSHPA VANIYA PVT. LTD The appellant company has received 0% OFCDs of Rs. 3,50,00,000/- from M/s Swarnapushpa Vani....
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.... also submitted copy of Income Tax Return wherein total revenue of Rs. 201,70,44,000/- has been shown and has declared income of Rs. 1,01,28,680/-. 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 books of accounts from 01.04.2011 to 31.03.2015 and its copy of bank statement whereby the amount given to the appellant company as 0% OFCD of Rs. 3,00,00,000/- 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 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. 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....
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.....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 books of accounts from 01.04.2011 to 31.03.2012 and 01.04.2014 to 31.03.2015 and its copy of bank statement whereby the amount given to the appellant company as 0% OFCD of Rs. 3,70,00,000/- 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 along with its balance sheet for A.Y. 2014-15 and the confirmation of the amount paid as 0% OF'CDs 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. 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....
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....d the copy of bank statement of the applicant company with HDFC Bank, Egmore Branch, Chennai wherein the amount refunded by the appellant company has been credited in the account of the applicant company on 22.01.2014 of Rs. 8,00,00,000/-. The investor company has also submitted copy of Income Tax Return wherein total revenue of Rs. 1,91,00,416/- has been shown and has declared income of Rs. 11,38,614/-. 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 books of accounts from 01.04.2011 to 31.03.2012 and 01.04.2014 to 31.03.2015 and its copy of bank statement whereby the amount given to the appellant company as 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 p....
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....s to the extent of Rs.(-)1,51,82,990/- 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 26.06.2014 of Rs. 1,00,00,000/-, on 30.06.2014 of Rs. 1,00,00,000/-, on 02.07.2014 of Rs. 1,00,00,000/-, on 15.07.2014 of Rs. 1,00,00,000/-, on 18.07.2014 of Rs. 1,00,00,000/- and on 23.07.2014 of Rs. 1,00,00,000/-. The investor company has also submitted copy of Income Tax Return wherein total revenue of Rs. 38,95,60,109/- has been shown and has declared income of Rs. nil. 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 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 al....
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....Shail Investment 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. 1,22,71,030/- and reserve & surplus to the extent of Rs. 396,14,41,514/- in its balance sheet. The appellant company has also submitted the copy of bank statement of the applicant company with Axis Bank wherein the amount refunded by the appellant company has been credited in the account of the applicant company on 24.11.2012 of Rs. 2,50,00,000/-, on 19.12.2012 of Rs. 2,50,00,000/-, on 02.01.2013 of Rs. 2,50,00,000/-, on 03.01.2013 of Rs. 2,50,00,000/-, on 09.10.2013 of Rs. 5,00,00,000/- on 10.01.2013 of Rs. 5,00,00,000/- on 14.01.2013 Rs. 5,00,00,000/-, on 15.01.2013 of Rs. 2,50,00,000/-, on 15.01.2013 of Rs. 2,50,00,000/-, on 18.01.2013 of Rs. 2,50,00,000/-, on 18.01.2013 of Rs. 2,50,00,000/-, on 24.01.2013 of 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/-, ....
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....e copy of bank statement of the applicant company with HDFC Bank, Nehru Place, Delhi wherein the amount refunded by the appellant company has been credited in the account of the applicant company on 08.11.2014 of Rs. 2,25,00,000/- and 12.11.2014 of Rs. 50,00,000/-. The investor company has also submitted copy of Income Tax Return wherein total revenue of Rs. 3,24,701/- has been shown and has declared loss of Rs. 27,01,106/-. The above named company is assessed with the same AO and all facts are reflected in the balance sheet of the investor company. All these facts establish the identity, creditworthiness and genuineness of the transactions made with the investor company." 13. Regarding the reference of search and seizure conducted in the case of Shri Tarun Goyal and also Shri Jagdish Prasad Purohit, the same has been dealt by the ld. CIT (A) in the following manner: The AO has referred to the search & seizure operations conducted on one Sh. Tarun Goyal to hold 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 ....
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....ed, but that assessee had discharged primary onus of proving their creditworthiness and genuineness, addition made by Assessing Officer was to be deleted - Held, yes [Paras 38 to 43] [In favour of assessee] Further, the AO has referred to the statement of Sh. J.P. Purohit of Kolkata recorded by the Investigation Wing, Kolkata during search action on him, I have perused the statement of Sh. Purohit. He has acknowledged in his statement that he is in the business of giving accommodation entries apart from being in the profession of tax consultancy. However, subsequent to the search inquires were made by the AO of the appellant company by sending letter u/s 133(6) of the IT Act wherein he has sent reply to the AO along with the copy of the affidavit filed by him on 30.01.2015 and copy of the assessment orders passed by the respective AO 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. 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 searc....
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....ot brought any information on record which can prove otherwise that appellant has taken accommodation entry in lieu of the cash given by the appellant company. Simply on the basis of statement with reference to some other company it cannot be presumed that appellant has also taken accommodation entry from the said company. Further, the amount received from the said company as 0% OFCD has been refunded back in subsequent years and such amount has been credited in the account of the said applicant company. Therefore, the AO was not justified in drawing adverse inference with reference to OFCDs and treating the same as unexplained income of the appellant company u/s 68 of the I.T. Act. In view of the details filed above by the appellant before the AO as well as before me, the source of the funds invested in the OFCDs of the appellant company by the above named companies has been found to be explained. All the investor companies from whom OFCDs subscription has been received and the companies 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 ab....
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....t the given address and some other shop/office was being run from the given address. No compliance to summons, (refer para 5) * AO observed that at the given address of the office of Shail Investments, office of Mr. Tarun Goyal Accommodation entry provider was being run. Search & seizure action had already taken place at the premises of Tarun Goyal on 15/09/2008 in this regard. Statement of Tarun Goyal is part of the AO order. (Important to note-Delhi High Court decided the case of NDR Promoters after taking note of modus operandii of Mr. Tarun Goyal, entry provider) * As regards two Kolkata based companies (Scan infrastructure 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. 2.2 In the case of Arizona Ventures Pvt. Ltd. * As regards Kol....
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....with meagre income does not justify creditworthiness to invest huge sums of money. 6. Hon'ble SC (supra) observed that "If the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the transaction would not be established. In such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act." 7. In the case of Nova Promoters & Finlease Pvt. Ltd. (ITA No.342 of 2011) as decided by Hon'ble Delhi High court, the matter has been decided in favour of revenue despite the fact of retraction of statement of entry provider. It may relevant to take note of important observations in this decision. * Para 22-Both Rajesh Jassal and Mukesh Gupta, in identically worded affidavits proceed to state that in their earlier statements they have stated that the above companies issued cheques to various companies or entities and in turn received back cash from them and thus the transactions were not genuine and bonafide transactions, that the statements as above were got recorded from them under pressure and coercion and absolu....
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....re was evidence and material to show that the shareholder company was only a paper company having no source of income, but had made substantial and huge investments in the form of share application money. The three requirements (identification of the creditors/shareholder, creditworthiness of creditors/shareholder and genuineness of the transaction) have to be tested not superficially but in depth having regard to the human probabilities and normal course of human conduct. * The court took note of the fact that the tribunal failed to take into consideration the evidence and material as found during the course of search of Tarun Goyal regarding the fact of providing accommodation entries to beneficiaries. 9. It is relevant to take note of the facts in the case of Five Vision Promoters Private Limited (ITA 234/2015 -as decided by Hon'ble Delhi High court) where the court decided the case in favour of the assessee only on the ground that the director of the investor companies appeared before the AO and accepted the fact of investment by producing their books of accounts, (refer para 40 of the order). 10. It may be important to take note of decis....
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....intent to gain. However, the assessee did not specify as to how the investor was convinced about the return on such a huge investment. * what is the object and purpose of payment/investment? Answer; The assessee did not point out any details in this regard as it is in private knowledge of the assessee company. * whether the share applicant is in existence and an independent entity? Answer;- The share applicant is a shell company with no operational income. It is the group company floated by entry provider. * how the financial capacity of the share applicant to invest funds is proved?" Answer;- The assessee submitted ITR, bank account and PAN number. how the source of funds from which the high share premium was invested is dealt with by the assessee? Answer:- It is a case of OFCD (Optionally Fully Convertible Debentures) and the source of huge funds is layered one to route it through network of accommodation entry provider. why the investor companies had applied for shares of the Assessee Company at a high premium? Answer: It is a case of OFCD (Optionally Fully Convertible Debentures). ....
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....ness of the transaction the assessee had filed following evidences before the Assessing Officer;- (i) Complete names and addresses of the subscribers, number of 0% OFCD subscribed and the amount of loan outstanding as on 31.03.2012 of each party. (ii) Their Permanent Account Nos. (iii) Photocopies of the acknowledgement portion of their ITRs to establish that all parties were regularly assessed to Income Tax. (iv) Written confirmation certificates from the respective parties. (v) Copy of their bank accounts for the relevant period to establish the availability of funds with the said parties. (vi) Confirmatory certificates of receiving back the loan amount, as obtained from each party, after redemption of the OFCDs. (vii) Copy of relevant portion of our bank account statement, highlighting therein the relevant transaction of repayment to the respective parties after redemption of the OFCDs. (viii) Copy of the ledger accounts of the investors, as in the books of account of the appellant assessee showing the refund of loans. The copies of these documents was also shown and referred to as has been placed in the ....
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.... wrong. In this notice vide point No. 62 & 63, AO stated as under: - 62. Who was the individual who signed the cheque dated 26/06/2011 and 25/08/2011 for Rs. 10 crore and Rs. 5 crore respectively for giving donation to Bahujan Prerna Trust. 63. Can you produce before me in person, for examination on oath ( on the date and time to be decided as per mutual convenience) the individual mentioned in point no. 62 above. From the above points it is clear that the AO has not at all asked to produce directors in the above questionnaire. He simply asked whether it is possible. Now in summon dated 20/03/2015 which was effectively served on 23/03/2015, it was first time asked to produce directors on 24/03/2015. It is not possible for assessee to co-ordinate with the various parties and produce them before AO. The applicant has provided entire details of these parties in response to Jan 2015 notice, however AO has not taken any action from his end and at the last moment of passing order he asked for the same. Therefore, there is no default on the part of assessee to comply with the requirement. Further, it was averred by Delhi High Court in the case of CIT v. Victor Electrodes Lt....
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....amed this party in his statement and how the same is related to him except common address. Further AO relied upon report of investigation wing dated 31/03/2009 which is also part of assessment order as Annexure 'D' in this report it is clearly stated that the report relates to A Y 2004-05 to 2009- 10 for the beneficiaries listed therein. So this report no way connected with the assessee at all. Therefore, merely a common address can not be reason to doubt a transaction without any tangible material to prove otherwise. Moreover, in no statement, Sh. Tarun Goyal, CA has mentioned the name of any company as to be used by him for providing of entries, with which the appellant had transactions in subsequent period i.e. in 2011-12. Nonetheless, Sh. Tarun Goyal, CA, in his statement dated 15.09.2008 (recorded by Sh. Saroj Kumar Dubey, the then DDIT(Inv.), Unit-11, New Delhi) stated that some of the companies (with which he was associated) were doing genuine business.While replying to a question on various cheque books found from his office, he stated at page 4 of this statement that "I confirm that some of the bank accounts mentioned in the Annexure-2 belong to the companies and ....
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....s at the time of repayment of OFCD holders and after thorough investigation. Ld. AO has himself certified in the assessment order, after conducting due enquiry and examining the trail of money, that amount of repayment finally rested with the subscribers (to whom he refers as 'entry operator group'). He states at page 15 of the assessment order in its second para, in concluding lines "Therefore, in the end result, the funds have remained in the chain/loop of the entry operator group itself." The relevant question here arises- When the funds obtained through OFCDs did not remain in the possession of the appellant and have been paid to the parties from where these originated (and finally rest with them as per the finding of the AO), then how can the appellant be called 'a beneficiary of accommodation entry'. 19. Further regarding granting sufficient time to produce parties on page 17 of the AO order (underlined para) he stated as under: " Therefore, because the Directors of the assessee company themselves did not appear for personal deposition it can definitely be held that even if AR of the assessee company has been requested one year back to produce the directors of sub....
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....to be confronted by assessee and no documentary evidence was supplied to the assessee, could not be considered in making addition on account of alleged accommodation entries." He submitted that neither copies of statements nor any other adverse material were ever supplied to the assessee for its comments/explanation. These were only made enclosure/annexure of the assessment order to render support to the same. 22. Similarly, in case of CIT v. Ashwani Gupta(2010) 191 Taxman 51 (Delhi), wherein, it was held by Hon'ble Delhi High Court that "Once there is a violation of the principles of natural justice inasmuch as seized material is not provided to an assessee nor is cross-examination of the person, on whose statement the Assessing Officer relies upon, granted, then, such deficiencies would amount to a denial of opportunity and, consequently, would be fatal to the proceedings. Following approach adopted by us in SMC Share Brokers Ltd.'s case (supra), we see no reason to interfere with the impugned order. No substantial question of law arises for our consideration." 23. Thus, he submitted that on the basis of Investigation Wing's old report on Sh. Tarun Goyal, CA, the stateme....
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....e 16 parties, as detailed in para above, such as complete names & addresses and PAN Numbers of the subscribers, photocopy of acknowledgment portion of their respective ITRs, confirmation certificates/ledger account confirmations duly signed by the subscribers, photocopies of bank accounts/bank statements of the subscribers, evidence of refund back of the loan in the form of confirmation certificates/account confirmations and copies of bank accounts etc. Similarly, he cited other decisions also but ratio of these decisions also not applicable on facts of this case. So, the findings of the cited case cannot be applied to the instant case since the facts of the cited case are clearly distinguishable. 24. Finally, on page 28 para 10 Assessing Officer stated that terms of issue of OFCD were very much adverse to the subscriber. At the outset we submit that these are the issue of commercial understanding between two or more independent parties. Therefore, department can not interfere between these commercial transactions. In this regard reliance is placed on the decision of Hon'ble Delhi High Court in case of CIT Vs. B. Dalmia Cement Ltd. (245 ITR 377) (Delhi). Secondly, the term....
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....tatement. After considering all the facts and various judicial pronouncement, Ld CIT(A) deleted the entire addition. 27. He also relied upon the following judgments. -(2010) 194 Taxman 43 (Delhi)/(2011) 330 ITR 298 (Delhi) in the case of CIT Vs. Dwarkadhish P. Ltd. It was held by Hon'ble Delhi High Court that "In any matter, the onus of proof is not static one. Though in section 68 proceedings, the initial burden of proof lies on the assessee, yet once he proves the identity of the creditors/share applicants by either furnishing their PAN numbers or Income-tax assessment numbers and shows the genuineness of the transaction by showing money in his books of account either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the revenue. Just because creditors/share applicants could not be found at the address given, it would not give the revenue right to invoke section 68. One must not lose sight of the fact that it is revenue, which has all the powers and wherewithal to trace any person. Moreover, it is a settled law that the assessee need not to prove the source of source." (Para 8) - (2014) 52 taxman....
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....n so far as the present case is concerned and that has been noted by the Tribunal also Under the circumstances, we are of the view that the Tribunal has not committed any error in deleting the addition" - [2013] 30 taxmann.com 328 (Delhi) CIT v. Gangeshwari Metal (P) Ltd. It was held by Hon'ble Delhi High Court that "Where the assessee in support of transaction of receipt of share application money brought on record various documents such as names and addresses of share applicants, their confirmatory letters, copies of bank statements etc., said transaction was to be regarded as genuine and, consequently, no addition could be made in respect of same under section 68." - [2012] 19 taxmann.com 26 (Delhi) CIT-II v. Kamdhenu Steel & Alloys Ltd. Hon'ble Delhi High Court held in this case that "Once adequate evidence/material is given, which would prima facie discharge burden of the assessee in proving identity of shareholders, genuineness of transaction and creditworthiness of shareholder, thereafter in case such evidence is to be discarded or it is proved that it is 'created' evidence, revenue is supposed to make thorough investigation before it coul....
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....ce, the ratio of the above case is quite applicable to the instant case. -[2002] 256 ITR 795(SC) CIT v. Gujarat Heavy Chemicals Ltd. Hon'ble Supreme Court expressed its opinion in this case that in case where the share applicants were to be considered genuine, the right course for the Assessing Officer is to identify the real person to whom the money belongs and assess him to tax instead of assessing the company and as such there was no justification for assessing the company. - (2014) 43 taxmann.com 395 (Gujarat) CIT-1 V. Dharamdev Finance (P) Ltd. The following questions were held in favour of the assessee: Various additions were made to the assessee's income on account of cash credits- It was found that in respect of said credits, the assessee had filed PAN of creditors, their confirmations and their bank statements, which established their credit worthiness. Moreover, the transactions were made through banking channels. Whether any addition could not be made to assessee's income u/s 68- Held Yes (Para 5). Whether in the absence of any contrary material, any addition should not be made to the assessee's income- Held yes (Para....
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....aniAutomotives (P) Ltd. (ii) [2014] 44 taxmann.com 460 (Rajasthan) CIT, Central, Jaipur v. Supertech Diamond Tools (P) Ltd. (iii) [2015 58 taxmann.com 226 (Madras) CIT v. Mark Hospital (P) Ltd. (iv) [2014] 52 taxmann.com 23 (Delhi) CIT-XI v. Rama Krishna Jewellers. (v) [2015] 54 taxmann.com 75 (Allahabad) CIT, Central, Kanpur v. Anurag Agarwal (vi) [2014] 51 taxman.com 205 (Gujarat) CIT, Ahmedabad-IV v. Sachitel Communications (P) Ltd. (vii) CIT v. Lovely Exports (P) Ltd. [2008] 216 CTR (SC} 195 28. In the case of M/s. Arison Ventures Pvt. Ltd. in ITA No.1428/Del/2016, he submitted that though facts are exactly similar however out of total addition made by the Assessing Officer of Rs. 53,55,00,000/-, the amount of Rs. 26,75,00,000/- was received in the earlier years and OFCD was allotted in Assessment Year 2011-12, therefore amount of Rs. 26,75,00,000/- could not have been made in this year. 29. Further another important aspect in this case is that, there is no transaction with Sail Investment Pvt. Ltd. claimed by Assessing Officer as Tarun Goyal Company. Further, as far as companies of Jagdish Purohit are concern in this ....
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....Jagdish Prasad Purohit in the assessment order. • The repayment of OFCD does not exonerate the assessee from liability to be taxed on unaccounted income. 31. The assessee company was in existence for about only one and a half months during the relevant period and not much business was conducted, however, as per the memorandum of association the assessee company was formed to carry on the business as service provider/operators, agents, lenders, hirer and distributors of cable television network in the line of telecom and communication and also to act as business consultant. Admittedly the company had meager receipts from advisory services and some interest income. On the issue of receiving of OFCDs from various the Assessing Officer has required the assessee to furnish the relevant evidences and documents to establish the identity and creditworthiness of the investor companies and also the genuineness of the transaction. In response, the assessee had filed following evidences:- (i) Complete names and addresses of the subscribers, number of 0% OFCD subscribed and the amount of loan outstanding as on 31.03.2012 of each party. (ii) Their Permanent A....
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....desired to examine the Directors, then he would have given sufficient time to the assessee specifically when most of the Directors are based out station. Ld. DR before us has pointed out that in notice dated 05.01.2015 assessee was asked to produce the Directors however from the content of the said notice specifically vide points no.62 and 63, Assessing Officer had asked the following:- "62. Who was the individual who signed the cheque dated 26.06.2011 and 25.08.2011 for Rs. 10 crore and Rs. 5 crore respectively for giving donation to Bahujan Prerna Trust. 63. Can you produce before me in person, for examination on oath (on the date and time to be decided as per mutual convenience) the individual mentioned in point no.62 above." Though, he may have asked the assessee but the tenor of the question shows that he just wants to ascertain, whether it would be possible for the assessee to produce the person who has signed the cheque dated 26.06.2011 and 25.08.2011 for Rs. 10 crore and Rs. 5 crore respectively for giving donation to Bahujan Prerna Trust. It was for the first time that he insisted to produce the Directors on the summons dated 20.03.2015 served on 21.03....
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.... even in the report of the Investigation Wing dated 31.03.2009 annexed in his Assessment order. The report also relates to Assessment Years 2004-05 to 2009-10, wherein list of beneficiaries are contained and in such list, nowhere there is a mention and whisper about the assessee company. In his statement, Shri Tarun Goyal has mentioned the name of certain company who were providing accommodation entries in the earlier years. However, at the same time, in his another statement he has stated that some of his companies were doing the genuine business and it as a matter of record that all the statements were later on retracted wherein he has said that he was providing accommodation entries through of some of the companies and in majority companies he was doing genuine business. Under these circumstances, this factum of investigation report in the case of Shri Tarun Goyal which relates for much earlier years cannot be conclusive material to hold that either Shri Tarun Goyal was still continuing with his nefarious business of accommodation entry or assessee was beneficiary of any accommodation entry in this year. 37. Now coming to the statement of Shri Jagdish Prasad Purohit dated 21.....
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....s introduced in the books and later on it has repaid back which is also duly reflected in the books of account and has received a cash back from these entities. It is merely presumption drawn by the Assessing Officer based on certain facts and circumstances which were completely extraneous to the case of the assessee. 39. Further as stated above, if the assessee could not produce the Directors during the assessment proceedings in response to the summons issued by the Assessing Officer due to lack of time, then what prevented the Assessing Officer to ask the assessee to produce the Directors during the course of remand report when ample opportunity was given by the CIT (A) to him. The inquiry during the course of remand proceedings conducted by Assessing Officer in fact exonerates the assessee, because Assessing Officer has sent notices u/s.133(6) to each of the parties and in response to which the replies from all the parties have been received and they have confirmed that they had undertaken the transactions with the assessee company and they were also supplied confirmatory documents to the assessee and finally the balance towards the assessee was 'Nil' as on date this fact has....
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.... companies may have a meager income but if they have sufficient funds in the form of capital and surplus duly disclosed in the audited statement and also to the income tax department, then it cannot be held that they did not have any creditworthiness. In the case of NRA Iron & Steel Pvt. Ltd. the investigation/ inquiry is actually found that the creditors were dubious and lack creditworthiness. Similarly, in the case of Nova Promoters & Finlease Pvt. Ltd. (supra) there was a categorical statement of the entry providers that they have issued cheques and in turn received cash back from them which itself goes to prove that entire transactions were not genuine. In the case of NDR Promoters Pvt. Ltd. (supra) also, there was evidence and material to show that the shareholder company was only a paper company having no source of income. In that case inquiry and investigation was carried out by the Assessing Officer, wherein the evidences filed by the assessee had lost its credibility due to material brought on record and were found to be paper companies. Thus, on the facts and circumstances of the case which has been discussed in detail in the foregoing paragraph the principle and ra....