TaxTMI 
TaxTMI 
2019 (3) TMI 2102
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....n brief are that the assessee is engaged in the business of trading and investments and filed its return income on 26.02.2011 declaring an income of Rs. 389/- under the normal provision of the Act which was processed under section 143(1) of the Act. Thereafter, the case of the assessee was reopened under section 147 of the Act by issuing notice under section 148 dated 19.08.2013 that income to the tune of Rs. 2,15,77,500/- has escaped assessment in A.Y. 2010-11 as assessee has provided accommodation entries in the books of accounts by purchasing shares of Purti Power and Sugar Ltd.( hereinafter referred to as PPSL) at higher rate at Rs. 4,25,77,500/- and selling the same at lower rate at Rs. 2,10,00,000/- on the direction of Shri Shyam Aggarwal and thus the difference of Rs. 2,15,77,500/- was received outside the books of accounts. The said reopening was done by the AO after the detailed reasons recorded are as under: "2. The notice u/s 148 of the IT Act was issued on 19.08.2013. The reason recorded for reopening of assessment is as under: "In this case information has been received from the Addl. CIT(Inv.) Unit-III(2), Kolkata, vide letter No. ADIT(lnv.)/U-III(2)....
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.... summons u/s 131 of IT. Act, the A.R. of the assessee furnished source of fund of purchase of shares and statement of loss in PPSL shares. The assessee company has purchased 30,50,000 shares of M/s PPSL for Rs. 4,25,77,500/- @ Rs. 6.35 per share and another 22,00,000 shares @ 10.55 per share and sold these shares on Since the reasons for wide variation in rate of purchase and sale of PPSL shares were not explained properly, a survey u/s 133A was conducted on 26/02/2013. During the course of survey it was found that one Shri C. S. Sarda, a practicing CA is the person who has the knowledge of all matters related to the assessee company and he controls the actual affairs of the assessee company. Statement of Shri C. S. Sarda, C.A., was recorded in the absence of directors. In his statement, Shri C. S. Sarda, CA., admitted to have received cash of Rs. 2,15,77,500/-. In his statement he also stated that the transactions have taken place on the instruction and direction of Shri Shyam Agarwal, one of the directors of M/s Tanishka Mercantile Pvt. Ltd. (now known as Rishi Realcon Pvt. Ltd.) It is also stated that cash of Rs. 2,15,77,500/- was received from Shri Shyam Agarwal equivalent to c....
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....a also filed retraction that I have not received any cash from Shri Shyam Aggarwal. The assessee also submitted that notice issued under section 133(6) to all 5 parties were confirmed stating that transactions were genuine and recorded in the books of accounts. The assessee submitted before the AO that purchase and sale of shares is a business and independent decision and therefore loss can not be disallowed on the statement of third party when no cross examination was provided to the assessee. Finally, the AO came to the conclusion that assessee company has provided accommodation entries in the books of accounts by purchasing shares of PPSL at higher rate of Rs. 4,25,77,500/- and selling the same at lower rate at Rs. 2,10,00,000/- on the advice of Shri C. S. Sarda key person of the assessee company and thus, concluded that the differential amount of Rs. 2,15,77,500/- was received outside the books of accounts and added the same to the income of the assessee under section 68 of the Act. 5. In the appellate proceedings, the Ld. CIT(A) deleted the addition after taking into consideration the submissions and contentions of the assessee by holding that all the transactions of sales ....
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....as the appellant had not made any effort to discharge its onus, thus submissions of Ld. AR is hereby rejected and entire short term capital gain/loss disclosed by the appellant are held as non genuine transactions. 7.2. Further, Addl. Commissioner of Income Tax (Inv.), Kolkata and DDIT, Nagpur had carried on the detailed investigations in Purti Group of companies and provided the finding that various companies has been floated to book the bogus losses and to provide accommodation entries to various shell companies of Purti Group. The appellant company had been declared as one of the layer-4 companies indulged in bogus transactions and providing the accommodation transactions. It is observed that AO had allowed sufficient opportunity to the appellant and has issued the show cause notice to the appellant; however, the appellant except filing the confirmation of account and I.T acknowledgement receipts of the parties had not furnished other evidences to prove the genuineness of share transactions. The balance sheet of the appellant discloses the share capital of Rs 15 lacs and there is no turnover disclosed by the appellant in impugned year and in earlier year. The appellant ....
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....sactions of Mehta Group through Mr. C. S. Sarda. 7.4. Mr C. S. Sarda vide letter dated 20/02/2015 submitted before AO on 26/02/2015 filed an affidavit on retracting his earlier statement recorded during Survey u/s 133A of I.T. Act, 1961. Mr. C. S. Sarda, in retraction affidavit, declared that he had not received any cash and had not received any commission for providing any accommodation entries and his earlier statement recorded during survey was given under mental stress, coercion and in confused state of mind and he pleaded not to use his earlier statement against the appellant. The AO rejected the retraction of Mr C. S. Sardafor the reason that Mr C. S. Sarda is a practicing Chartered Accountant and was fully aware of the consequence of his false statement and his statement was recorded in his sound state of mind. Finally, A.O at para-12 and 21 of the assessment order, held that the appellant, is a paper company formed for routing the accommodation transactions. It is also observed that the statement of Mr. C. S. Sarda was recorded during survey u/s, 133A on 26/03/2013 and his retraction had been filed on 26/02/2015 which is after expiry of 23 months. Thus, affidavit f....
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....recorded u/s. 133A and he admitted of having provided accommodation entries on providing non genuine profit/loss on purchase and sale of shares to the appellant. The retraction statement of Mr C. S. Sarda made after substantial lapse of time of 23 months and without corroboration is rejected. (f) The balance sheet of the appellant discloses the share capital of Rs. 15 lacs and there is no turnover disclosed by the appellant in impugned year and in earlier year. The books of accounts of the appellant are not reliable and are rejected since the books of accounts discloses the bogus purchase and sale of unlisted shares of private limited companies; (g) No concrete evidence had been brought on record to justify the genuineness of purchase and sale of shares. In view of the above finding, I hold that the appellant company is involved in providing accommodation entries being layer-4 company and such fact had also been established held by the investigating authorities and thus the entire transactions of purchase and sale of shares of the unlisted companies and Short term Capital gain/loss are held as non-genuine. 7.7. The Ld. AR alternatively argued tha....
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....detailed investigations conducted by the Investigation wing had established that the appellant company as one of the Iayer-4 companies out of the various companies indulged in accommodation transactions mainly for Purti Group of companies. The bank statements of the appellant reveals several cheque receipts and cheque payments made to square-up the non-genuine share transactions. The Ld. AR hod argued that in such types of accommodation transactions, the profit margin is very low ranging from 0.10% to 0.35% and on this proposition relied on Judicial decisions of the Hon'ble ITATs. (i) In the case of Gold Star Finvest (P.) Ltd vs. ITO [(33 Taxmann.com 129 (Mumbai)] Hon'ble Mumbai ITAT decided that :- "In such a case, the theory of the Assessing Officer to treat the entire deposit as unexplained cash credits, cannot be accepted in the light of assessment orders in the case of beneficiaries and also in the light of the fact that assessee is only concerned with the commission earned on providing accommodation entries. Since the assessee itself has declared the commission on turnover of 0.15 per cent which is more than the percentage considered to be reasonable....
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....ling Rs. 4,82,95,000/-. Thus the addition is restricted at Rs. 9,65,900/- (2% of Rs. 4,82,95,000/-). Accordingly, the addition is sustained to the tune of Rs. 9,65,900/- (Rs. 2,15,77,500/- Rs. 9,65,900/-) and delete the balance addition of Rs. 2,06,11,600/- is directed to be deleted." - 6. The ld CIT(A), however, directed the AO to add 2% of the gross transactions amount of Rs. 4,82,95,000/- arrived at by adding together Rs. 2,10,00,000/- and Rs. 2,72,15,000/- thereby directing the addition to be made at Rs. 9,65,900/-. The Ld. CIT(A) observed that all these transactions were non-genuine and hawala entries and only income on the said transaction is to be brought to tax and thus estimated the income on the gross value of transactions. 7. The Ld. A.R. vehemently submitted before us that Ld. CIT(A) has passed a very reasoned order after holding that all these transactions were non genuine and that only income of such gross value of transactions were to be assessed to tax and not the differential amount as done by the AO. The Ld. A.R. relied heavily on the order of Ld. CIT(A) to this extent, however, he prayed before the Bench that on such hawala transactions the only commission ....