TaxTMI 
TaxTMI 
2026 (10) TMI 516
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....al return of income on 04.02.2012 declaring total income of Rs. 1,08,584/-. A search and seizure operation u/s. 132 of the Act was conducted on 07.08.2014 in the case of M/s.OPG Power Generation Pvt. Ltd. and its group/associate concerns by the Investigation Wing, Chennai. Consequent to the search, the cases of the group companies were centralized for completion of assessments. During the course of search, statements were recorded from, inter alia, Shri A.K. Khemka and Shri S.K.Tibrewala. On the basis of such statements and the findings of the Investigation Wing, the Revenue was of the view that the assessee was one such company through which Shri Arvind Gupta, main promoter of the group, had routed his unaccounted money. The Assessee was taken over by Shri Arvind Gupta and his family members from the entry operator Shri A K Khemka during the FY 2009-10. The AO noticed that during the relevant previous year, the assessee had received an aggregate amount of Rs. 24,00,00,000/- towards share capital and share premium, comprising share capital of Rs. 2,40,00,000/- and share premium of Rs. 21,60,00,000/-. The investments were received from the following persons/entities: Name of Inve....
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.... raised by the assessee challenging the assumption of jurisdiction under section 147 of the Act. As regards the addition u/s. 68 of the Act, the Ld.CIT(A) examined the source and movement of the impugned share capital and share premium. The Ld.CIT(A) took note of the assessee's contention that, out of the total sum of Rs. 24 crores, an amount of Rs. 16 crores had been declared by Arvind Gupta (HUF) under the Income Declaration Scheme, 2016 ("IDS, 2016") as income utilized for obtaining accommodation entries through various companies of Shri A.K. Khemka and his associates for investment in the shares of the assessee-company. The Ld.CIT(A) further took note of the fact that the declaration under IDS, 2016 had been accepted by the Revenue and Form No.4 had been issued by the competent authority upon payment of the applicable tax, surcharge and penalty. The Ld.CIT(A), therefore, accepted the assessee's explanation regarding the source of investment to the extent of Rs. 16 crores. The Ld.CIT(A) also accepted the explanation in respect of the sum of Rs. 1 crore directly invested by Shri Arvind Gupta, holding that the said investment stood explained from his disclosed sources. The....
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....7 crores, however, the CIT(A) observed that though the funds had moved through banking channels, the assessee had not satisfactorily explained the circuitous routing of the funds through various Kolkata-based/group companies and the commercial rationale for such movement. According to the CIT(A), mere movement of money through banking channels would not establish the genuineness of the transaction when the alleged roundtripping of funds remained unexplained. On the aforesaid reasoning, the CIT(A) sustained the addition of Rs. 7 crores u/s. 68 of the Act and treated the same as a substantive addition in the hands of the assessee-company. The relevant findings of the CIT(A) in this regard are extracted hereunder - 8.3 With regard to the balance amount of Rs. 7 crores, it is the claim of the appellant that a sum of Rs. 4,00,00,000/- was given by M/s OPG Energy Pvt Ltd to M/s IKE Electric Pvt Ltd through banking channels and the said amount was advanced to various Kolkatta companies, which in turn made their way into M/s Swiss Park Vanijya Pvt Ltd. As regards balance of Rs. 3,00,00,000/-, it was explained that the appellant company had advanced money to M/s Spectra Solar Pvt L....
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.... of the entry operators and the entire chain through which the funds were routed rather than treating the IDS declaration as conclusive for the purposes of section 68 of the Act. The Ld.DR also contended that the relief granted in respect of Rs. 1 crore invested by Shri Arvind Gupta was also not warranted and that the assessee had failed to satisfactorily discharge the burden cast upon it with regard to the entire share capital and share premium of Rs. 24 crores. The Ld.DR, therefore, prayed that the order of the Ld.CIT(A) be reversed to the extent of the relief of Rs. 17 crores granted to the assessee and the addition made by the AO be restored. 8. The Ld.AR on the other hand supported the order of the Ld.CIT(A) with regard to the deletion of the addition to the extent of Rs. 17 crores. The Ld.AR submitted that Rs. 16 crores had specifically been disclosed under IDS, 2016 in the hands of Arvind Gupta (HUF), wherein Shri Arvind Gupta was the Karta, as cash income utilized for obtaining accommodation entries through the companies of Shri A.K. Khemka and his associates for investment in the assessee-company. The ld AR in this regard drew our attention to pages 19 to 35 of the pape....
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....pta (HUF) has since declared the very same amount under the IDS, 2016 as its own undisclosed cash income utilised for obtaining accommodation entries for investment in the assessee-company, and that this declaration has been accepted by the Department upon issuance of Form No.4 after payment of the applicable tax, surcharge and penalty. It is the argument of the Ld AR that it is not a case of the assessee claiming impunity towards another person's IDS filing to explain away a credit, but one where the Revenue's own search-based case identified Shri Arvind Gupta as the source of these very funds, and that said claim of ownership of the funds and payment of tax thereon is accepted by the revenue. 10. Therefore, the question before us is not whether the assessee company can claim any immunity for itself, but whether the true nature and source of the credit found in its own books, as required to be explained u/s. 68 of the Act, stands established by this sequence of events. There is no dispute that immunity under Section 183 of the Finance Act, 2016 operates only in favour of the declarant in respect of the declarant's own liability to further tax, penalty or prosecution....
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.... that the declaration made under the IDS, 2016 specifically covers the sum of Rs. 16 crores credited in the assessee's books, nor has it been shown that the said declaration was false, invalid or subsequently withdrawn. Therefore we are of the view that once the true source of the credit stands identified and independently brought to tax, taxing the very same sum again in the hands of the assessee-company would amount to double taxation of the same income. We accordingly hold that there is no infirmity in the decision of the Ld. CIT(A) in deleting the addition to the extent of Rs. 16 crores. As regards the sum of Rs. 1 crore invested directly by Shri Arvind Gupta, we notice that the Ld. CIT(A) has accepted the same after verification of the relevant documentary evidence establishing that Shri Arvind Gupta had sufficient disclosed sources of income to make the said investment. During the course of hearing the Revenue has not brought any material on record to show that he lacks the financial capacity to do so or that the money in fact emanated from the assessee-company. Accordingly, we see no reason to interfere with the decision of the CIT(A) to delete the addition of Rs. 1 cror....
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....ands of Shri Arvind Gupta. It is argued that in the absence of any independent material demonstrating that Rs. 7 crores represented the assessee-company's own undisclosed income, the Ld.CIT(A), was not justified in converting the protective addition into a substantive addition in the hands of the assessee. Therefore, it was thus contended that the addition of Rs. 7 crores rested essentially on suspicion arising from the manner in which the funds had moved and not upon any positive evidence establishing that the assessee had introduced its own unaccounted money. The Ld.AR accordingly prayed for deletion of the addition of Rs. 7 crores. 13. The Ld.DR submitted that the assessee had received an unusually large amount of share capital and share premium from entities identified during the investigation as accommodation-entry providers. The Ld DR further submitted that mere production of incorporation particulars, PAN, financial statements and bank statements would not by itself establish the genuineness of the transactions when the surrounding circumstances indicated a pre-arranged routing of funds through several entities. The Ld.DR further submitted that the Ld.CIT(A) had himse....
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....ectra Solar Pvt. Ltd., which routed it through Kolkata based companies, which in turn invested the same amount back into the assessee as share capital and share premium. We are of the view that this is not a case of third party funds moving through intermediary entities, but of the assessee's own money leaving its own account and returning to it in the guise of an external investment, and no explanation has been placed before us as to why the assessee advanced this sum to Spectra Solar in the first place or what purpose the round trip served. We notice that this aspect has not been specifically put to the assessee at any stage, and the assessee's submissions before us have treated the entire Rs. 7 crores as a single block without addressing this component separately. We are therefore of the view that this issue requires fresh examination at the level of the AO, and we accordingly restore the question of the sum of Rs. 3 crores to the file of the AO with a direction to examine the commercial rationale for the advance made by the assessee to Spectra Solar Pvt. Ltd. and its return to the assessee as share capital. 16. As regards the balance sum of Rs. 4 crores, which the as....
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..../s. 147 of the Act was invalid. The Ld.AR further contended that the objections filed by the assessee against the reopening were not disposed of by a separate speaking order as contemplated by the judgment of the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. v. ITO & Ors. (259 ITR 19). It was submitted that the AO merely incorporated his rejection of the objections in a subsequent notice dated 24.12.2018 issued u/s. 142(1) of the Act, which, according to the Ld.AR, did not satisfy the procedure mandated by the Hon'ble Supreme Court. The Ld.AR therefore prayed that the reassessment be quashed as being without valid jurisdiction. 18. Per contra, the Ld.DR strongly supported the assessment order insofar as the addition u/s. 68 of the Act was concerned and supported the order of the Ld.CIT(A) insofar as the validity of reopening was upheld. On the issue of reopening, the Ld.DR submitted that the AO was in possession of specific information emanating from the search and seizure proceedings conducted in the OPG group and the statements recorded from Shri A.K.Khemka and Shri S.K.Tibrewala. The Ld.DR further submitted that the material gathered by the Investigation Wing ....