TaxTMI 
TaxTMI 
2024 (7) TMI 1736
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....this case, notice u/s 148 of the Income Tax Act, 1961 has been issued to the assessee on 31.03.2021 against which the assessee filed ITR and filed replies to the notices issued u/s 142(1) of the Act. As per the reasons provided to the assessee on 17.12.2021, the Income Tax department has received information that the assessee had transactions with M/s Grand Realcon Pvt. Ltd. whose Director has given statement on oath accepting that M/s Grand Realcon Pvt. Ltd. is a paper company and no real business is being conducted by the company. On 04.02.2022, objections were filed by the assessee to the reasons recorded and requested the AO to provide copy of statement of Directors which was relied upon for opening of the case u/s 147 of the Act on 16.03.2022. The copy of the statement was provided to the assessee and the assessment proceedings continued culminating into conclusion of assessment proceedings on 29.03.2022 making addition u/s 68 of the amounts received from M/s Grand Realcon Pvt. Ltd. 4. Aggrieved, the assessee filed appeal before the ld. CIT(A) who deleted the addition made by the AO on the grounds that the assessee could provide identity, creditworthiness and genuineness of....
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....es for introducing their unaccounted cash into their books of accounts without paying the due taxes." b. Sometimes there are a number of intermediaries who work for the operator. These intermediaries introduce the beneficiaries to the operator or in many cases these intermediaries become sub agents of the operator and deal with the beneficiaries on their own. b.1 The operator is a person who manages the overall scheme of the scam. He is in control of numerous paper/bogus companies which are utilized for routing of cash. The beneficiaries desiring bogus accommodation entries approach the operator. c. Entry operator: An entry operator is the person who is in the business of giving accommodation entries in lieu of cash/cheque of equal amount after charging certain percentage of commission in cash. In short, they are individuals who control a large number of paper/ shell companies which are used for routing cash for the transactions. They work for commission to be paid by the beneficiaries. d. Jamakharchi companies : A paper or Jamakharchi company is a company which have usually following characteristics: - 1. These companies have no actual ....
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....6 relevant to AY 2016-17 to Sun Infraestate Private Limited. Despite, the company is having meagre income and meagre capital Rs. 1,00,000/-, it has advanced such huge amount to the assessee. (iii) On verification of assessee's submission, it is seen that the assessee company has claimed that it has received an advance of Rs. 31.80 Crores from M/s Grand Realcon Pvt. Ltd. for identification and purchase of suitable land for M/s Grand Realcon Private Limited. However, No evidence of any correspondence in this regard has been placed on record. Further, it is mentioned here that no land transaction, land development activities has been reflected in the books of M/s Grand Realcon Private Limited during any previous years. Further, no activities of land dealing has been made by M/s Sun Infra with any other party during any previous year. The sale & purchase during the year is Nil in its ITR for AY 2016-17. Thus, the claim that the advance of Rs. 31.80 Crore has been received by the assessee company towards land transactions holds no ground. Also, on perusal of the ITR for AY 2016-17 of the Sun Infraestate Private Limited, it is seen that, the company has no sale or p....
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....cause notice alongwith draft assessment order to the assessee on 22.03.2022 and the assessee replied on 25.03.2022. The assessee has submitted various points' alongwith number case laws. On perusal of the case Laws, it is found that the facts of the instant case is different from the case laws relied by the assessee. Hence, same is not acceptable. The reply of the assessee is summarized as under -: 10. Before concluding the appellant seeks to summarize following fundamental aspects of the advance received in the course of business by the assessee company during the financial year 2015-16 relevant to assessment year 2016-17: a) That assessee company is engaged in the business of real estate and in the course of business assessee company received advance of Rs.31,80,00,000/- from M/s Grand Realcon (P) Ltd. for the purpose of identification and procurement of suitable land for the purpose of development of project. b) That genuineness of the transaction can be seen from the confirmation, audited financial statement and bank statement; c) That advances were received through banking channel and the M/s Grand Realcon Pvt. Ltd. has confirme....
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....therefore do not have creditworthiness to advance the amount. Cannot be used as a guise and an indirect attempt to carry out investigation of source which is altogether impermissible in law. k) That money received originated from the coffers of the appellant and on this ground alone addition is not tenable. (l) The statement of Shri Pradeep Dey was recorded on 30.03.2015 and behind the back of assessee. In this regard, it is to state that the statement of Shri Pradeep dey was recorded on oath and he stated the modus operandi of companies including Grand Realcon Private Limited. These companies were providing accommodation entries. The assessee has also requested for opportunity of cross examination of director. In this regard it is stated that "the right of cross examination is not an absolute right. (Nath International Sales vs. UOI, AIR 1992 (Del) 295). The Hon'ble Supreme Court has also held that the right of hearing does not necessarily include right of cross examination. The right of cross examination must depend upon the circumstances of each case and also on the statute concerned (State of J&K vs. Bakshi Gulam Mohammad AIR 196....
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....VP of company attended the V.C. The points of assessee were listened carefully and perused. 9. Section 68 For the purpose of easy understanding of the provision, let us divide the section into 7 parts as under: 1. A sum is credited into the books of the assessee 2. Maintained for the previous year 3. Assessee does not give any explanation about the source of the sum 4. Assessee does not give any explanation about the nature of the sum 5. The answer by the Assessee does not satisfy the Income Tax Officer 6. The sum credited is chargeable to income tax 7. If the above conditions are satisfied, sum is credited to the income of the assessee in the previous year The word "Sum" used here in the section is very exhaustive in nature. The sum credited into the account shall be of any from and nature. It applied to all the credits by whatever the name being called. This was laid down in the case of G.R. Siri Ram v. CIT [1975] 98 ITR 337 (P&H). The ultimate aim of the Court was to keep the intent of the legislature alive. The word "Books" is defined under the Section 2 (12) of the Income Tax Act, 1961. T....
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.... High Court that the burden of proof is not dependent upon the fact of a credit entry in the name of the assessee or in the name of a third party. In either case, the burden lies upon the assessee to explain the credit entry, though the onus might shift to the Income-tax Officer under certain circumstances. Otherwise a clever assessee can always throw the burden of proof on the income-tax authorities by making a credit entry in the name of a third party either real or pseudonymous. The same High Court in the case of M.M. A.K. Mohindeen Tham by and Co. vs. CIT [1959] 36 ITR 481, relying on the said decision came to the conclusion that there is no distinction between the entries in the names of the partners and those in the names of the third parties, and the nature of the entry is not distinguishable. In the absence of a satisfactory explanation, it is open to the Department to infer that these monies also belong to the assessee and represent suppressed income. The Hon'ble Delhi ITAT in the case of A-One Housing Complex Ltd. Vs ITO (2008) 110 ITD 361 (Del) has illustrated different scenarios by way of examples to show cause the quantum of burden to be discharged by the ....
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....t the appellant's claim about the amount being her winning from races is not genuine." Thus, the Court has laid down a test to analyze the genuineness of the entry through the logical analysis. The Human Probability Test could be applied when the Assessee makes the Officer to believe his/her story as a valid event. The false claims of the Assessee cannot sustain before the test of Human Probabilities. The Human Probability test is also applied in the following cases: 1. A. Rajendran & Ors. vs. ACIT (2006) 204 CTR (Mad) 9 2. Hacienda Farms (P) LTD. vs. CIT (2011) 239 CTR (Del) 212 3. Major Metals Ltd. vs. UOI AND ORS (2012) 251 CTR (Bom.) 385 4. Pradip Kumar Loyalka vs. ITO (1997) 59 TTJ (Pat) (TM) 655 5. ACIT vs. Sampat Raj Ranka (2001) 73 TTJ (Jd) 642 Satisfaction of the Assessing Officer: Section 68 of the Income Tax Act demands that assessee has to provide an explanation to any sum credited in the accounts of the assessee and the said explanation should satisfy the Assessing Officer of the sum credited in the books. In the case of A. Govindarajulu Mudaliar vs. CIT [1958] 34 ITR 807, it ....
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....income of the assessee. ............ . .........The fact that the cash credits are introduced in the accounts of Mr. Trivedi, it cannot be inferred that the said cash belonged to the assessee. The assessee was not under any obligation to prove the cash credits in the accounts of Mr. Trivedi. In the present case, the assessee has proved that he was in possession of the diamond jewellery which was duly declared and certified under VDIS, 1997. The assessee has proved the identity of the person to whom the said diamond jewellery was sold, his credit worthiness and has accounted for the sale proceeds received from the sale of the diamond jewellery." the treatment of share capital amount under Section 68 of the Act has been amended by Finance Act, 2012, w.e.f. 01.04.2013 to insert the following: "Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- a) t....
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....n to Sun Infraestate Private Limited, of Rs.31,80,00,000/- is not proved. (ii) Hence, addition of Rs. 31,80,00,000/- u/s 68 of the Act is made to the income of the assessee as unexplained cash credit into books of account." 9. The Assessing Officer finally based on the financials of the lender company, statement of Sh. Pradip Dey, explaining the bogus transactions cycle and accommodation entry operations, invoking the provisions of Section 68 of the Income Tax Act, 1961, brought the amounts of the advances received from M/s Grand Realcon Pvt. Ltd. 10. Aggrieved, the assessee filed appeal before the ld. CIT(A) who deleted the addition. 11. While deleting the addition, the ld. CIT(A) held that the appellant has duly discharged its onus and the AO has failed to conduct specific enquiries and to come out with findings that the transactions are sham in nature. For the sake of ready reference, the entire decision of the ld. CIT(A) is reproduced in toto: "5.1 I have gone through the Assessment Order and submissions of the appellant. The learned AO has invoked section 68 and added sum of Rs. 31.8 crores on account of unexplained cash credit. The appellant had rec....
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....ronouncements- "A] In CIT v. Daulat Ram Rawat Mull, the Supreme Court held that the fact that the depositor had not been able to give a satisfactory explanation regarding the source of deposit would not be decisive even of the matters as to whether the depositor was or was not the owner of the amount, that a person could still be held to be the owner of a sum of money even though the explanation furnished by him regarding the source of that money was found to be incorrect, and that from the simple fact that the explanation regarding the source of the money had been found to be false, it would be a remote and farfetched conclusion to hold that the money belonged to the alsessee. B] In A. Govindarajulu Mudaliar v. CIT the Court came to the conclusion that: There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipt is of an assessable nature. C] In Kale Khan Mohammad Hanif v. Commissioner of Income-tax the Supreme Court, in answering the question Whether the....
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....lcon Pvt. Ltd. for the period from 06.11.2010 to 09.12.2011 and the statement was recorded on 30.03.2015 before the year under consideration whereas the monies received by the assessee were on 15.03.2016. Sh. Pradeep Dey was not a Director nor in any way associated with the company either of the recording of the statement or at the time of receipt of advance by the assessee company. Thus, the reliance placed by the Assessing Officer on the statement of Sh. Pradeep Dey is misconceived. Further, the statements recorded in the absence of the assessee which has been utilized for the purpose of assessment but the assessee was not provided any opportunity of cross examining of Sh. Pradeep Dey. The non- compliance to the notices issued u/s 133(6) cannot be considered as the sole criteria to make addition in the case of the assessee. The Assessing Officer should bring this fact to the notice of the assessee and direct /provide an opportunity to the assessee to produce the parties. No field enquiries have been conducted by the Assessing Officer as per the record before us. The allegation that meager income of the lender party cannot be a ground to reject the genuineness and creditworthiness....