TaxTMI 
TaxTMI 
2026 (8) TMI 347
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.... 28.01.2020 (PAO) passed by the Initiating Officer, BPU, Mumbai under Section 24 (4)(a)(i) of PBPTA, whereby shares of M/s Responsive Industries Ltd. held by M/s Rajput Plastics & Polymers Pvt. Ltd. (RPPL) were attached. 2. Ld. Counsel for the Appellants submitted that the Appellant Shri Om Prakash Agarwal is one of the promoters of M/s Responsive Industries Ltd. (RIL). While he was undergoing treatment for advanced stage cancer, in USA, the Show Cause Notice (SCN) and the PAO had been issued on the basis of the information gathered during survey under Section 133 A of the Income Tax Act, 1961 at the premises of the RPPL. For the reasons that the Directors of RPPL S/Shri Ashok Jha and Ajay Pratap Singh were persons of limited means and the RPPL earned small amount of profit the Initiating Officer (IO) drew an inference that the RPPL was a fictitious Company. This logic was extended by the IO to conclude that the shares of RIL held by RPPL were being held on the instructions of and for the benefit of the alleged Beneficial Owner namely Shri Om Prakash Agarwal. On 28.01.2020 the IO passed a PAO under Section 24 (4)(a)(i) of the PBPTA. Ld. Counsel argued that the amount of Rs. 2,41....
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.... judicial overreach on the part of the Respondent so as to illegally/erroneously to direct the NSDL as well as CDSL to freeze the demat account of the Appellant which consist of 21,52,197 of equity shares of RIL. Ld. Counsel argued that even the SCN had been issued only for 10,42,935 shares. The Appellant is hampered in conducting its normal business activity for 11,09,262 shares of RIL. He therefore prayed for the appropriate direction to NSDL and CDSL to release excess shares numbering 11,09,262 shares of RIL. He therefore prayed for allowing the Appeals and the Application. 5. Ld. Counsel for the Respondent submitted that RPPL was incorporated on 26.07.2017 and in the Financial Year 2017 -18 it did not have financial profile which can corroborate the fact that it could acquire 10,42,935 shares of RIL on the basis of its own resources. Even its Directors did not have profiles which could reflect capacity on their part to acquire the said number of shares of RIL. Shri Ashok Jha had never filed ITR and Shri Ajay Pratap Singh filed ITRs with minimal income. Even though RPPL had somewhat large turn over its income was meagre as well as employee expenses were just Rs. 15,000/-. Ld.....
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.... contain the name of Gouri Shankar Investments Pvt Ltd in the list. Further, receipt of the said funds from Gouri Shankar Investments Pvt Ltd has not been disclosed by RPPPL in its ITR/Tax Audit Report as a loan creditor either. Moreover, this company (Gouri Shankar Investments Pvt Ltd) is a group company of Kamal Kumar Jalan Securities and Priyasha Meven Finance Ltd, which are the brokers of the Responsive Group as well. The bank account has been used by RIL/Axiom Cordages Ltd (both part of the RIL promoter group, of which Shri Om Prakash Agarwal is the promoter) as a conduit for moving funds between themselves and the broker group entities (i.e., Kamal Kumar Jalan Securities, Priyasha Meven Finance Ltd and Gouri Shankar Investments Pvt Ltd), thereby firmly establishing the link between RPPPL and the promoter group of RIL. Part of the Rs 9 crores of Gouri Shankar has been repaid by RPPPL using funds received by RPPPL from RIL/Axiom Cordages Ltd. Letters were written to Kamal Kumar Jalan Securities, Priyasha Meven Finance as well as Gouri Shankar Investments Pvt Ltd enquiring about these transactions. However, no reply has been received. In view of the above discussion, the truth i....
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....he consideration for these shares were provided by Shri Om Prakash Agarwal. However, the Respondent has contended that, in view of the financial profile and the existential status of RPPL the funds to acquire the said shares were provided by Shri Om Prakash Agarwal. 8. It is on record RPPL was incorporated on 26.07.2017 with Shri Ajay Pratap Singh and Shri Ashok Jha as Directors. The two Directors held 50% of the shares of RPPL which had paid up capital of Rs. 1,00,000/-. It is an admitted fact that RPPL received funds from M/s Gouri Shankar Investments Pvt. Ltd. to buy the said shares of RIL. Part of the said funds were returned to M/s Gouri Shankar Investments Pvt. Ltd. by RPPL from the funds amounting to Rs. 2,41,50,000/- received from M/s Axiom Cordages Ltd. and Rs. 1,00,81,448/- received from RIL. The Appellants have argued that the RPPL was a supplier of raw material to RIL and Rs. 1,00,81,448/- was part payment towards such supply. In so far as Rs. 2,41,50,000/- is concerned the arguments of the Appellants and that Axiom Cordages Ltd. was given Rs. 12,93,62,494/- as advance for supply of raw material made by them to RPPL and the said amount was returned to RPPL as to repa....
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....PPPL has purchased 10,42,935 shares of RIL from the stock exchange and for this purchase of the benami property, it has used funds provided ultimately by RIL and the promoter group of RIL, i.e., from Axiom Cordages Ltd. The RPPPL is a company that is being held and run in the name of Shri Ajay Pratap Singh and Shri Ashok Jha, who are both closely linked to the promoter of RIL- Shri Om Prakash Agarwal. Shri Ashok Jha is a person of no-means and a non-filer and is employed as driver of Shri Om Prakash Agarwal for more than 20 years and the other Director Shri Ajay Pratap Singh is close to Shri Om Prakash Agarwal, as evidenced by the fact that the latter has introduced the former for membership to The Bombay Presidency Radio Club Limited. Even Ashok Jha has stated in his statement on oath that Shri Ajay Pratap Singh, the other director/shareholder is also an employee of Shri Om Prakash Agarwal. The directors of RPPPL are no way connected with the claimed business activities of RPPPL. While Ashok Jha never attends to any of the work as stated by Shri Ajay Pratap Singh, even the latter has no idea about even basic things pertaining to the business. This shows that these directors/ share....
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....ugned Order cannot be doubted. 10. The Appellants have also cited the Judgments and have raised the issue that it is for the IO to establish the intend behind the transaction and to demonstrate that Shri Om Prakash Agarwal had in fact provided the funds to RPPL. We note from the judgments cited from them that the Hon'ble Supreme Court has observed in the matter relating to Binapani Paul vs Pratima Ghosh & Ors on 27 April, 2007 AIR 2008 SUPREME COURT 543 the following: "Burden of proof as regards the benami nature of transaction was also on the respondent. This aspect of the matter has been considered by this Court in Valliammal (D) By LRS. v. Subramaniam and Others [(2004) 7 SCC 233] wherein a Division Bench of this Court held: "13. This Court in a number of judgments has held that it is well established that burden of proving that a particular sale is benami lies on the person who alleges the transaction to be a benami. The essence of a benami transaction is the intention of the party or parties concerned and often, such intention is shrouded in a thick veil which cannot be easily pierced through. But such difficulties do not relieve the person asserting the t....
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....Agarwal provided the consideration to RPPL for acquisition of the impugned shares is inescapable. Shri Om Prakash Agarwal did so through an arrangement with closely connected Companies, even though he may not have had at that point in time direct controlling interests in these closely connected Companies. The Judgment (supra) itself acknowledges that 'such intention is shrouded in a thick veil which cannot be easily pierced through.' However, the very fact that there is evidence on record as to question the economic viability and existence of RPPL, the indications that the said Company was merely used as Benamidar by Shri Om Prakash Agarwal are so obvious. It therefore follows that the intention to engage in benami transaction, even though shrouded in a thick veil, is revealed as to avoid purchase of the impugned shares from the market directly by Shri Om Prakash Agarwal yet achieve the said intention by indirect purchase of the said shares by a Company which is under his control through two persons, one of whom was his driver and the other person closely known to him, who would not question his authority. We therefore conclude that the acquisition of 10,42,935 shares of RIL was a ....