TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 971
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.... the identity and creditworthiness of the share applicants as well as the genuineness of transactions during the assessment proceedings." 3. The brief facts of the case are that the assessee-company is engaged in the business of various trading activities. During the year under consideration, the assessee company has shown net loss of Rs. 5,76,478/- from business as against turnover of Rs. 74,33,691/-. The assessee had filed return of income on 06.10.2014 declaring total income at Rs. 85,710/-. The case was selected for scrutiny assessment under CASS. The Assessing Officer thereafter completed the assessment u/s 143(3) of the Act vide order dated 30.12.2016, determining the total income of the assessee at Rs. 48,53,60,710/-, making addition of Rs. 48,52,75,000/- u/s. 68 of the Act on account of share application money received from nine different parties during the year under consideration. The Ld. CIT(A) deleted the entire addition of Rs. 48,52,75,000/-. 3.1 During the year under consideration, the assessee issued 40000000 convertible equity warrants on preferential basis @15 (Rs. 10 face value and Rs. 5 premium) per warrant to be converted into equivalent number of equity share....
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....ed that the entire conduit companies were controlled by him. The Ld. CIT(A) held that the assessee-company acted as conduit and real income was earned in the hands of Shri Shirish C. Shah, the entry operator. 3.4 With regard to the assessee-company, now known as Evexia Lifecare Limited, formerly known as Kavit Industries Ltd, has received monies on account of convertible preferential shares from the following companies:- Sr. No. Name of the share applicants No. of shares applied during the year. Value of shares Receipt during the year. 1 Raghuvir International Pvt. Ltd. 9000000 13,50,00,000 13,56,00,000 2 Shree Sai baba Exim Pvt. Ltd. 7000000 10,50,00,000 7,55,75,000 3 SiIvercade Trading Pvt. Ltd. 4000000 6,00,00,000 6,48,00,000 4 Krystalklear Properties Pvt. Ltd. 3900000 5,85,00,000 3,52,00,000 5 Aprateem Trading Pvt. Ltd. 3600000 5,40,00,000 4,68,00,000 6 Ethan Construction Pvt. Ltd. 3300000 4,95,00,000 2,08,00,000 7 Saint Infrastructure Pvt. Ltd. 3200000 4,80,00,000 3,25,00,000 8 Gill Entertainment Pvt. Ltd. 3100000 4,65,00,000 2,70,00,000 9 Indivar Traders Pvt. Ltd. 2900000 4,35,00,000 4,70,00,000 40000000 60,....
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....08-09 and 2009-10 and for FYs 2010-11, 2011-12 & 2013-14 filed its return of income with a loss of (-)Rs.6200/-, (-) Rs. 12756 & (-) Rs. 45171 respectively. In a similar way, the company M/s. Aprateem Trading Pvt Ltd, AAKCA3649Q, which contributed Rs. 4,68,00,000/-, has not filed return of income for the AYs 2008-09 and 2009-10 and filed the return of income with a loss of Rs. (-)7425 and Rs. (-) 5784301/- for FYs 2011-12 and 2013-14 respectively. 4.2 The Ld. DR further submitted that M/s. Indivar Traders Pvt. Ltd., AACCI1585K, which invested Rs. 4.70 crores, did not file its return for FY 2008- 09 and, though returns were filed in later years, the reported income was minimal. M/s. Gill Entertainment Pvt. Ltd., AADCG6752B, which contributed Rs. 2.70 crores, did not file a return for FY 2013-14, and for other years reported either zero or negative profits. The case of M/s. Krystaiklear Properties Pvt. Ltd., PAN: AADCK1456A, which contributed Rs. 3.52 crores, but for all six years from FY 2008-09 to FY 2013-14, it declared either negative income or substantial losses, including Rs. (-)1.76 crores in FY 2012-13 and Rs. (-)4.21 crores in FY 2013-14. Likewise, M/s. Saint Infrastructure....
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....tion money. The Ld. AR argued that the assessee has furnished the following comprehensive evidence in support of the genuineness of the receipt of application money during assessment proceedings: * List of names of applicant companies along with number of warrants and amount who have subscribed to the Convertible Equity warrants on Preferential basis. * Share application Form. * Ledger Confirmation of the parties for such investment. * Bank Statement of applicant companies. * Demat statement of applicant companies * Duly sworn Affidavit confirming the investment in preferential issue of the assessee company along with particulars of number of warrants applied for and complete details of payment made with name of the bank as well as PAN and registered address of the applicant company. * ITR Ack. Along with computation of total income of the applicant companies. * Audited Balance sheet and profit & Loss A/c of all applicant companies * Copy of PAN Card * Certificate of Incorporation. * Form No. INC-22 filed with ROC in support of identity and address. * Source of funds of the appellant companies 5.1 It was also argued by the Ld. AR that the assessee-company c....
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....asis to doubt the genuineness and credit worthiness because in various investment companies also one can find that there are no fixed assets and investments are regularly made in other companies. The Ld. AR argued that duty is heavily casted on the Revenue in such type of cases where the burden of proving has been shifted by the assessee to the revenue by way of furnishing all requisite documents and evidences. It was also argued that it is on the revenue to further dig out some material information including the statements of persons at helm of affairs of such companies, when the Assessing Officer while confirming the addition has merely taken the information from published List and public domains but nowhere any further investigation was carried out even when necessary details were available with him. The Ld. AR relied upon the judgment of jurisdictional Tribunal (ITAT Ahmedabad) in case of Saanika Industries Private Limited vs ACIT (ITA No. 207/Ahd/2016) wherein on similar facts, the Tribunal confirmed the additions in respect of the shareholder who was particularly investigated by the Investigation Wing of the IT department and statement under section 131 of the IT Act was also....
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....he assessee company. Blank cheque books of various companies along with some cheques duly signed by directors of the companies were also seized during the course of search. 4. Documents evidencing transfer of funds from one company to other company and by other company to third company and so on were also seized. 5. During the course of search and from statements of Shri Shirish C Shah, it was revealed that he had been engaged in providing various sorts of accommodation entries to various parties through such entities which were directly or indirectly either associated or controlled by him. 6. Considering the fact that all the transactions were carried out at the instances of Shri. Shirish C Shah and the fact that directors of the assessee company were merely tool in the hands of Shri Shirish C Shah and Shri Shirish C Shah only knew all the affairs of company, the real income from these transactions is assessed in the hands of Under the circumstances, the total income of the assessee company is assessed as it is i.e. as per its return of income only i.e. Rs. NIL...." 5.6 The Ld. AR argued that the assessee cannot be taxed u/s 68 of the Act as all the ingredients relating to ....
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.... recipient of the monies on standalone basis as an entity, he has discharged all the requirements to prove the identity, genuineness and creditworthiness of the companies from which the amounts have been received. Alternatively, since the monies have been received and utilized by transfer them to different entities, the assessee be treated as not the final beneficiary but as a conduit. 6.2 We have given our thought as to whether the assessee is the final beneficiary of the accommodation entry operation or a conduit. To be a conduit, the assessee has to be a company floated, managed and operated by Shri Shirish C. Shah. We find that the assessee company is neither floated nor operated by Shri Shah who is the entry operator. The assessee is engaged in the business of manufacturing lubricants oil, hydraulic oil and meta-sulfite. The assessee has its registered office at Vadodara and is an independent entity doing business of lubricant oils. The Board of Directors are Mr. Jayesh Thakkar, Shri Chirag Thakkar, Ms. Kalyani Rajeshirke, Shri Yogesh Griglani, Ms. Kirti Joshi, Shri Salil Patel and Shri Kartik Mistry. The company is audited by one Shri Abhitesh Dubey who is based at Vadodara ....
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....s for the benefit of the assessee. The assessee is the ultimate beneficiary but the Ld. CIT(A) erroneously held the assessee to be a conduit company. 6.4. Further, we have given our careful consideration to the rival contentions, the voluminous documentary evidence placed on record, and the detailed factual matrix that emerges from the assessment proceedings, appellate findings, and the additional material furnished during the course of hearing. The second core issue is whether the assessee has satisfactorily discharged the statutory burden under section 68 of Act in respect of the sum of Rs. 48,52,75,000/- received during the year on account of preferential allotment of convertible equity warrants to nine companies, which the Revenue characterized as accommodation entries. 6.5 At the outset, we note that the assessee has placed on record a large set of documents typically relied upon in such cases-application forms for warrants, confirmations from investors, copies of their PAN cards, ITR acknowledgments, financial statements, demat accounts, ROC incorporation records, and replies under section 133(6). Having gone through these documents, financials, evidences collected, stateme....
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.... their boards recorded such decisions. What we see is a uniform pattern of mechanical documentation and immediate fund transfer, without any behavioral indication of independent investment intent. 6.8 Compounding the problem is the assessee's own handling of the funds. The entire amount received as share application money was not retained or applied in the assessee's business. Instead, it was immediately routed out as unsecured, interest-free advances to 34 entities, most of which are unconnected to the assessee's business. No loan agreements, repayment terms, or security instruments were produced. The parties to whom advances were given are themselves entities with low financial profiles, and several bear signs of being under the same group control as the investors. The timing of these disbursals, occurring almost immediately after receipt of share application money, evidences a pre-arranged flow of funds designed to layer and launder the actual source. 6.9 This fund trail clearly supports the Revenue's position that the entire structure was a facade, orchestrated to create the illusion of genuine capital infusion. The assessee's claim that it merely acted as a conduit is not su....
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....assessee, unless otherwise explained, therefore operates fully in this case. With regard to the case-laws relied on by the Ld. AR before us, we find that the decision in the case of Pr. CIT Vs. Vijay Conductors India Pvt Ltd (supra) is not applicable in the present facts of the case as the same are different to the present case. In case of Omni Farms (P.) Ltd., the assessee was also part of the same group entities but in the present case the assessee herein is saying that he is not part of the same group. It has been already proved and held by us that the assessee is not a conduit. The decision of the Ahmedabad Tribunal in the cases of KFC Industries Pvt Ltd (supra) & Chintan Niketan Bhandari (supra), the facts are distinguishable. In case of Anil Chhaganlal Jain (supra) and M/s. Greeksoft Institute of Financial Market Pvt. Ltd., the factual aspect is different than the present case. In respect of Alag Securities Pvt Ltd (supra), the assessee was also part of the said group of entities therein and thus is different from the present assessee's case. We are in agreement with the case-laws relied upon by the Ld. DR, i.e., * CIT Vs. Independent Media Pvt Ltd., 25 Taxman 276 * CIT ....