TaxTMI 
TaxTMI 
2018 (7) TMI 2375
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....riting of share applicants looks alike in most of the occasions. (b) Letters were issued to the share applicants seeking the following details: i. Mode of payment, details of allotment of shares by Cauvery Iron & Steels (India) Ltd., ii. Income tax particulars of A.Y. 2009-10 iii. Ledger extracts of Cauvery Iron & Steels in the books of share applicants. (c) Letters were issued to 22 share applicants and the response is as under: (i) Confirmed the investment - 5 cases. They are : 1. Glozon Alloys & Castings Pvt. Ltd., New Delhi 2. Mahak Textile Pvt. Ltd., New Delhi 3. Afflatus Software Pvt. Ltd., New Delhi 4. Sperm Tracom Pvt. Ltd., Kolkata 5. Jamuna Machine Tools & Manufacturing Company P. Ltd., Hyderabad. (ii) Letters returned with the remarks unknown / not known - 7 cases. They are: 1. Dost International Ltd. 1510/11, Shiv Ashram, SP Mukharji Marg, Delhi-6. 2. Rishikesh Properties Pvt. Ltd. 18/19, Eriappan St., Sowkarpet, Chennai. 3. Rupe Promoters Pvt. Ltd., 18/19, Eriappan St., Sowkarpet, Chennai. 4. Rupa Merchants Pvt. Ltd. 302, 3rd f....
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....or in the appellant company. Here also it was found that the money had not come in the account of Jamuna Machine Tools & Manufacturing Company P. Ltd. directly from the investors and it was routed through series of accounts. (i) Since the investors were not produced for examination, the enquiries were conducted by Income-tax Investigation officials located at Mumbai, Kolkata, New Delhi and Chennai. All of them have reported that the companies do not exist at the given address and reported that these are only paper companies. (j) That with reference to investment made by sister concern M/s. Jamuna Machine Tools & Manufacturing Company P. Ltd. vital details of share applicants and the reasons for fixing the premium at Rs.4,990/- were not submitted. (k) That Mr. Ashok Kumar Gupta, Managing Director of the company admitted that the share application money was received through an agent - Mr. K.C. Malu, CA, who is currently not in India, but his address, contact number and PAN No. were not given. Mr. Ashok Kumar Gupta clearly admitted that he did not know any of the investor companies and their directors. He further admitted that the process of raising funds in....
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....liance is placed on the following decisions: (i) CIT Vs. Lovely Exports (P) Ltd (2009) [319 ITR 0005] (SC) (ii) CIT Vs. Oasis Hospitalities (P) Ltd. (2011) [333 ITR 011] (Del) (iii) CIT Vs. STL Extrusion (P) Ltd. (2011) [333 ITR 269] (Madhya Pradesh) (iv) Aquatech International Ltd. Vs. ITO (2008) [119 TTJ 0140] (Delhi - Trib) (v) Asst.CIT Vs. Venkateshwar Ispat (P) Ltd. (2010) (II) ITCL 0355 (Chattisgarh - HC) (vi) Hindustan Inks & Resins Ltd Vs. Dy.CIT (2011) [60 DTR 0018 (Guj.HC) 4. Ld. CIT(A) vide para 5 of the order has considered that none of the investors are existing at the addresses given, issuance of PAN (Permanent Account Number) does not prove the physical existence of a person unlike that of a Passport, almost all companies do not have any activity at all and majority of the companies have shown NIL income or nominal income and further enquiries conducted with assessee's bank account indicated that the amounts are routed through several accounts. Relying on the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Titan Securities Ltd., (2013) [84 CCH 184] / [357 ITR 184] (Delhi) and the decision of....
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.... at Kolkata have not been confronted to assessee and so the principles laid down by the Hon'ble Supreme Court in the case of CIT Vs. Sunita Dhadda in SLP (Civil) Diary No. 9432/2018 will apply and the presumption u/s. 292C against assessee is not available. 6.1. It was further submitted that all the companies have submitted their confirmation letters, copies of income tax returns and financial statements so as to prove the investment made in assessee-company and the investor companies also got their books audited and are regularly filed returns of income. Ld. Counsel further submitted that none of these companies have been deleted from the list of the companies recently, which proves that they are genuine companies. It was further submitted that assessee-company has received an amount of Rs. 39,97,00,000/ towards share capital, whereas AO made an addition of Rs. 39,17,06,000/-, thereby accepting part of the share capital and share premium received. It further shows that AO has not examined the issue properly. With reference to the share premium received, Ld. Counsel relied on the Co-ordinate Bench decision in the case of M/s. Hariom Concast & Steel Pvt. Ltd., Vs. ITO in ITA ....
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....urther submitted that as per the investigation report received, it was found that the companies actually involved in providing accommodation entries based in Kolkata and other places. Further summons were issued and a statement was recorded on 30-12-2011 informing about the investigation conducted by the department. Ld. DR further stated that the Managing Director has taken a 'U' turn with regard to mode of procurement of funds from the investors and stated that one Mr. K.C. Mali, CA had arranged the funds rather than in his own. Since assessee-company failed to furnish the requisite details in order to prove the identity of the alleged investor to establish their creditworthiness and the genuineness of the transactions, AO invoked the provisions of Section 68 and taxed the entire amount of increase in share capital and share premium account as income of assessee. Ld. DR relied on the judicial principles laid down by the Hon'ble Apex Court in the case of Sumati Dayal Vs. CIT [80 taxman 89] (SC) and CIT Vs. Sophia Finance Ltd., [205 ITR 98] (Delhi). 7.1. Ld. DR further submitted that the surrounding circumstances considered by the AO are : i. Receipt of share premium....
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.... i. CIT Vs. Durga Prasad More [82 ITR 540] (SC) ii. Sumati Dayal Vs. CIT [80 Taxman 89] (SC) iii. N. Tarika Property Invest (P) Ltd., Vs. CIT [51 taxmann.com 387] (SC) iv. CIT Vs. Sophia Finance Ltd., [205 ITR 98] (Delhi) v. CIT Vs. Nova Promoters & Finlease (P) Ltd., [18 taxmann.com 217] (Delhi) vi. CIT Vs. Titan Securities Ltd., [32 taxmann.com 306] (Delhi) vii. CIT Vs. N.R. Portfolio (P) Ltd., [42 taxmann.com 339](Dehi) viii. Co-ordinate Bench decision of ITAT in the case of M/s. Royal Rich Developers Pvt. Vs. DCIT - ITA Nos. 1835 & 1836/Mum/2014. 8. In reply, Ld. Counsel for assessee submitted that the share capital cannot be enquired in the hands of assesseecompany once the shares were allotted and confirmations were furnished by assessee. Further non-declaration of dividend cannot be a reason for computing the transaction as declaration of dividend will depend on the incomes earned by the company. It was submitted that none of the companies have either sold the shares or transferred the shares and they are still holding the share capital in assessee-company. 9. We have considered the rival contentions....
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.... be paper companies. In view of the above facts and circumstances, the identity and creditworthiness of the shareholders could not be examined at this end. The modus operandi adopted by this company is simple - they do not do any business and involved in providing accommodation entries. This is the trend in Kolkata. Such paper companies are managed and operated by some entry operators through dummy Directors in lieu of small amount of commission. The assessee willing to make the accommodation entry has to give cash to receive a cheque along with a small amount of commission. The above report along with Annexure-I is submitted for your kind perusal and necessary action at your end. Yours faithfully, XXXXXXXXX 9.3. As can be seen from the above report, a reference from the CIT, Hyderabad to the Investigation Unit was dated 22-12-2011 and the report from DDIT was dated 26-12-2011. It is not understandable what enquiries have been caused in the four days i.e., from the date of letter of CIT and the reply by the DDIT, leave alone the detailed enquiries caused by the above unit. The modus operandi adopted is explained in the letter, but there is no ....
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....ealed that they are assessed with ITO, Ward- XV(4), Delhi was also not explained. 9.5. Another aspect stated in Assessment order and also by the Ld. CIT(A) is about so called enquiry with Axis Bank, Secunderabad which it seems 'revealed layering of transaction so as to frustrate the enquiry by the department'. None of the details have been placed on record. If the AO has made such enquiries with Axis Bank, Secunderabad so as to state that the investments are layered through many such companies, no such enquiry report or details have been placed on record. It is to be noted that the appeal has been filed as early as 2014 and cases have been heard over a period of four years but still the Revenue never thought it fit to file the necessary enquiry report on record, so that this can be confronted to assessee. In fact, it was one of the contentions of assessee that enquires caused behind the back of assessee have not been confronted to assessee at all and so the same cannot be relied upon. 9.6. Analysing the paper book placed on record, it reveals that the enquiry by DIT, Investigation, Chennai confirms that two companies are assessed at Delhi. There is no evidence of modus operan....
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.... Investment amount (Rs) 1 Rupa Merchants Pvt. Ltd. 50,00,000 2 Rishikesh Properties Pvt. Ltd. 25,00,000 3 Mahak Textiles Pvt. Ltd. 1,40,00,000 4 Pearl Handcrafts Pvt. Ltd. 50,00,000 5 Kuber Handicrafts Pvt. Ltd. 50,00,000 6 Julania Finance Pvt. Ltd. 1,25,00,000 7 Glozon Alloys & Casting Pvt. Ltd. 1,60,00,00 8 Dost International Ltd. 50,00,000 9 Cee Aar Decors Pvt. Ltd. 25,00,000 10 ANG Finvest Pvt. Ltd. 50,00,000 11 Afflatus Software Pvt. Ltd. 1,00,00,000 Total 8,25,00,000 11.1. Out of these, M/s. Glozon Alloys & Casting Pvt. Ltd., Mahak Textiles Pvt. Ltd., and Afflatus Software Pvt. Ltd., have confirmed to the AO directly about their investment when enquired u/s. 133(6). In addition, the investigation report of DIT, Chennai indicates that Rupa Promoters Pvt. Ltd., and Rishikesh Properties Pvt. Ltd., were also assessed in Delhi. Thus these five companies cannot be considered as bogus. No investigation was conducted at New Delhi and there is no evidence against assessee worth mentioning as far as the investment by the Delhi companies are concerned. Since assessee ha....
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.... these companies have been deleted from the list of companies and are holding the investments in assessee's company as such and as the share capital has been allotted, we cannot uphold the revenue contention that these companies are bogus. As already stated above, no evidence of the so-called modus operandi has been placed on record. Additions cannot be made on presumptions and assumptions. There should be some evidence to support the contentions raised. Since the Revenue has not placed anything on record worth considering to hold that these companies are bogus, just because AO mentions the so called modus operandi which in turn was followed by the CIT(A) in the order, the same cannot be accepted, unless the flow of funds have been confronted to assessee or at least brought to the notice of ITAT being a final fact finding authority. In the absence of any evidence to the contrary, the contentions of assessee cannot be rejected. In our opinion, the Revenue has failed to establish that it is assessee's money which has been routed through various companies. 13. It may not be out of place to mention that Revenue has placed some statements recorded from one person supposed to have bee....