TMI Blog2021 (4) TMI 220X X X X Extracts X X X X X X X X Extracts X X X X ..... hiness of the investor companies and also the genuineness of the transaction. Nowhere these evidences or documents have been rebutted by Assessing Officer or any specific material has been brought on record to allay the veracity of these documents. In so far as the Assessing Officer s allegation that the assessee was non cooperative, already it has been explained by the assessee before the ld. CIT (A) as well as before us that, in the first notice u/s. 142(1) issued on 15.10.2013 seeking preliminary details, the assessee had filed their requisite details, which were, income tax return, balance-sheet, computation and details of Directors of shareholders. Thereafter, 2nd notice was issued almost after 15 months from the date of first notice, wherein 63 points were listed, which too was complied with by the assessee on 16.02.2015. It was for the first time that at the fag end of the limitation of passing of the order that the Assessing Officer issued summons u/s.131 on 20.03.2015 to produce the Directors of the subscriber companies on 24.3.2015 and said summons was served on the late evening of 21st March, 2015 which was a Saturday and in response assessee has replied on 24.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion entry in this year. Statement of Shri Jagdish Prasad Purohit dated 21.01.2015, wherein he has admitted that he is controlling few companies which were engaged in providing accommodation entry - The reliance placed by the Assessing Officer in his statement to draw the adverse inference is not correct, because Assessing Officer has just jumped to the conclusion that, since these companies are controlled by Shri Jagidsh Prasad Purohit, therefore, it has to be sham transaction or bogus. At least there should have been some reference that the assessee company was one of the beneficiaries of the accommodation transaction or was figuring in the list of the companies through which he has been provided accommodation entries. Without any such material information from his statement or investigation report qua the assessee, all the reference made by the Assessing Officer has no legs to stand so as to warrant any adverse inference while examining the credit entries in the case of the assessee company. Assessing Officer has also referred the investigation of bank transaction with various parties at the time of repayment of OFCD holders and came to the conclusion that the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. 3. For the sake of convenience, the appeal in the case of M/s. Arizona Global Services Pvt. Ltd. in ITA No.1429/Del/2016 is being taken up and as admitted by both the parties, the findings given therein will apply mutatis mutandis in other appeal also. The facts in brief are that, M/s. Arizona Global Services Pvt. Ltd. the appellant has its registered office at Flat No. 211, 2nd floor, Hemkunt Chambers, 89, Nehru Place, New Delhi-110019. It was originally known as M/s Digivive Content Services Pvt. Ltd. and subsequently its name was officially changed. In the year of its incorporation, i.e., during 2010-11, it was in existence for about 1 months. During this period, no business was conducted and there was not much income or receipts. As per the Memorandum of Association, the assessee company was to carry on the business of Service Providers, operators, agents, renters, hirers and distributors of cable Television Network, in the line of telecom and communication and to act as business consultants, give advice, to engage in dissemination of information in all aspects of business organization and industry. In the year under consideration, the proposed business was still to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4TH FLOOR, MIRZA GHALIB STREET KOLKATA, WEST BENGAL-700016. 1,50,00,000 5 RUPAK TRADING PVT. LTD AABCR2787D 62, RADHA BAZAR STREET, 3 RD FLOOR ROOM NO 29, CALCUTTA, WEST BENGAL-700001. 7,50,00,000 6 SCAN INFRASTRUCTURE LTD AACCB3214C P-27, PRINCEP STREET, 3 RD FLOOR, KOLKATA, WEST BENGAL-700072 1,50,00,000 7 SWARNAPUSHPA VANIYA PVT. LTD AAJCS0597G MAA PAHARI ESTATES PVT LTD, 4 SYNAGOGUE ST,KOLKATA, WEST BENGAL- 700001. 3,50,00,000 8 UNISYS SOFTWARES AND HOLDING INDUSTRIES LTD AABCC1191Q 75C PARK STREET, BASEMENT, KOLKATA, WEST BENGAL- 700016 3,00,00,000 9 WALTARE INVESTMENT PVT LTD AAACW2314A ROOM NO 29, 3 RD FLOOR, 63 RADHA BAZAR STREET CHINA BAZAR KOLKATA, BENGAL-700001 3,70,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor was deputed to serve the summons and to conduct certain inquiry and submit his report. In case of KOA Investments Ltd., he observed that notices could not be served because address given is of a small Halwai shop. Regarding M/s. Shail Investments Pvt. Ltd., the notice was served on the given address, however, the Income Tax Inspector has mentioned that there was no name plate/signboard of the company and only an office boy and guard was present. Later on, on inquiry, it was found that it was an office of Mr. Tarun Goyal who was an established Entry Operator . Further, some of the investors were from Kolkata and information was received from the Income Tax Department that the only activities carried out by these parties was to provide accommodation entries. He required the assessee to produce the Directors of all the parties who have invested in OFCDs and all the Directors should bring documentary evidences regarding their identity and appointment as Director, complete books of accounts, copy of company s returns and individual return of income from Assessment Year 2011-12 to 2013-14, bank statements for Financial Years 2010-11 to 2012-13, cheque booklets and minutes of mee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Purohit was one of the many dummy Directors in his numerous Companies including M/s. Scan Infrastructures Ltd. (the Company which has paid ₹ 1,50,00,000/- for OFCD subscription to the Assessee company). It was stated that Sh. Anil Kumar Purohit was a dummy Director in at least 49 Companies of his group. Sh. J. P. Purohit categorically admitted that all the companies were involved in providing accommodation entries only and did nothing else. The cash received from the Entry Seeker / Beneficiary was deposited in account of one Company and routed through multiple Companies within the group for layering of the funds and ultimately the funds were parked in the bank accounts of the Entry Seeker' / Beneficiary. In Unisys Software Holding Industries Limited (the Company which has paid ₹ 3,00,00,000/- for OFCD subscription to the assessee Company) Sh. J. P. Purohit himself is a Director. Further, you yourself have failed to produce the Directors of the Companies whose addresses are at Kolkata. Not even in a single case you have been able to cause their production. 7. Due opportunity was given to you, vide Summons u/s. 131 dated 20/03/15, to produce all the Parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer are that; firstly, these companies do not have any appreciable liquidity or surplus funds of their own. Their bank statement shows pattern of accommodation entries, etc; secondly, in so far as the assessee s contention that the amount received as OFCD subscription has already been rebutted/refunded in the later year. He has rejected the same after observing and holding as under: Even though it was claimed that the amounts had been refunded back, yet, it was never explained as to whether the source of funds was from the same Companies to which the funds had been given or whether the source was from some other third parties. It cannot be entirely ruled out that another set of fresh entries were taken for making arrangement of funds to pay back the OFCD subscription amounts. Here, another very important point which commands a great degree of importance is that the terms and conditions governing the issue of OFCDs were very much adverse to the subscribers. The agreement in this regard was seen to be totally lopsided and completely in favour of the Assessee Company. The terms and conditions on which these OFCD subscriptions were made by the subscribing Parties con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Ltd. and further these have flowed into the bank account of M/s Dhartrima Urja Pvt. Ltd. from which they have further flowed into the bank account of M/s Magnifico Minerals Pvt. Ltd. All these Companies have one common address which is 75, Khirki Village, New Delhi. In fact, at this address, after local enquiries it was found that many number of Companies were functioning from this address (75, Khirki Village). Names of some of the other Companies are M/s World Windows Impex Pvt. Ltd., M/s Alstrong International, M/s Aspum Trading, M/s Alubond Enterprises, M/s World Windows Ujala, M/s Mangalam Apartments Pvt. Ltd. etc. Therefore, in the end result, the funds have remained in the chain / loop of the entry operator group itself. These are so many reasons to hold that it makes no difference if the amounts P-*- been returned back. The assessee has taken the plea that the money was returned back and hence the net effect is zero and hence no income can be added is not tenable at all. AR of the Assessee vide letter dated 26/03/15 vide para no. 4 submitted thus - As far as assessee is concerned, we may vouchsafe that the transaction undertaken with them by the assessee company were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered satisfactory and adequate. In support, he relied upon the judgment of Hon ble Delhi High Court in the case of CIT vs. M/s. Focus Exports Pvt. Ltd. in ITA No.218/2001; (2) Nova Promoters and Finlease Pvt. Ltd. (3) CIT vs. NR Portfolio Pvt. Ltd. 206 (2014) DLT 97 , and other decisions. After discussing all those judgments, he finally made the addition after observing and holding as under: 10. The terms and conditions governing the issue of OFCDs were very much adverse to the subscribers. The agreement in this regard was seen to be totally lopsided. The terms and conditions, in brief, were as described below (a). Conversion : The OFCDs would be redeemable after 10 years at par if the conversion option is not exercised. (b) Usage of Funds; The amount received would be at exclusive disposal of the Company and may be utlilized by the Company for any purpose in the manner deemed fit. The OFCD Holder shall have not right to claim or question anything in this regard. Under normal circumstances nobody would agree to such adverse conditions prescribed for investing. The Assessee Company never explained even during assessment proceedings as to how the OFCD holders w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he relevant period to establish the availability of funds with the said parties. (vi) Confirmatory certificates of receiving back the loan amount as obtained from each party, after redemption of the OFCDs. (vi) Copy of relevant portion of our bank account statement, highlighting therein the relevant transaction of repayment to the respective parties after redemption of the OFCDs (vii) Copy of the ledger accounts of the investors, as in the books of account of the appellant assessee showing the refund of loans. The Assessing Officer has relied upon the investigation report wherein there was reference of statement of Shri Tarun Goyal which was recorded in the year 2008 and the satement of Shri Jagdish Prasad Purohit u/s.132(4) on 21.01.2015. In so far as the statement of Shri Tarun Goyal is concerned, the assessee submitted that the same were recorded around seven years back which cannot have any evidentiary value for the transaction under taken for Assessment Year 2012-13. Assessing Officer has made additions without making inquiry on his own in this regard and simply relying upon the inquiries conducted by the Investigation Wing way back in the year 2008, when the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above referred information to the assessee and how the inquiry was conducted on sample basis only in case of two companies. Thereafter various judgments have been relied upon and rebutting each and every finding and observation of the Assessing Officer which has been dealt and incorporated in detail in the impugned appellate order. 9. Another important fact which was pointed out that, in fact the time provided by the Assessing Officer was too short because the inference which Assessing Officer has tried to draw was confronted only in the last few days, and therefore, the assessee filed a petition of admission of additional evidence under Rule 46A which has been incorporated in the appellate order as under: a) Balance confirmation from the OFCD holders confirming the repayment of amount made to them and showing nil balance after making payment to them. b) Copy of bank account statement of the appellant company showing the repayment of the amounts made to the respective OFCD holders. c) Copy of bank account statements of all the companies, which invested in OFCDs floated by the appellant company showing receipt back of the respective amounts in their bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t doing any significant business on their own and onus of proving creditworthiness has not been complied. Further, it is submitted that your kindself has asked for carrying out necessary verification of the documents filed by the assessee at the appellate stage and to submit the report thereon. 2. In this regard, it is further submitted that the assessee has submitted before your kindself confirmations from different parties, copy of its bank account and also those of the parties concerned and evidence relating to their being Income -tax assesses. In order to cross-verify the same, notice u/s 133(6) of the I.T. Act, 1961 were issued to all the parties concerned asking them to confirm the position as also to comment us to whether the document submitted by the assessee are genuinely supplied by them to the assessee or not. The replies from all the parties have since been received and they have confirmed that they had undertaken the transactions, in question, and had also supplied the confirmatory documents to the assessee, on request for the same. It is further stated by the parties that the balance towards the assessee is Nil as on date. 3. Irrespective of the above pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties in such a short time. Based on these facts and circumstances and in the interest of substantial justice, he admitted the additional evidences. He further observed in response to the query raised by the Assessing Officer that the assessee company had submitted various documents/evidences like complete names and address, PAN, number of OFCD subscriber and amount of loan outstanding as on 31.03.2012, proof of their being regular income tax assessee, viz. copy of return of income, copy of bank statement, confirmation certificates of the investors, copy of ledger account, balance sheet, auditor s report etc. In order to prove the genuineness of the transaction the assessee has also filed the evidences at the appellate stage which were as under: a) Balance confirmation from the OFCD holders confirming the repayment of amount made to them and showing nil balance after making payment to them. b) Copy of bank account statement of the appellant company showing the repayment of the amounts made to the respective OFCD holders. c) Copy of bank account statements of all the companies, which invested in OFCDs floated by the appellant company showing receipt back of the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant company submitted the copy of bank statement, income tax return, PAN and audited financial statements of the applicant company in support of its claim. The investor company has got share capital of ₹ 6,09,00,000/- and reserve surplus to the extent of ₹ 53,85,36,219/- in its balance sheet. The appellant company has also submitted the copy of bank statement of the applicant company with HDFC Bank, Stephen House, Kolkata wherein the amount refunded by the appellant company has been credited in the account of the applicant company on 28.08.2014. The investor company has also submitted copy of Income Tax Return wherein total revenue of ₹ 28,000/- has been shown and has declared loss of ₹ 78,519/-. During the course of remand proceedings, Assessing Officer issued notice u/s 133(6) of the I.T. Act to the said investor company. The said investor company filed its reply in response to the notice u/s 133(6) and confirmed the transactions with the appellant company. The said company also filed copy of appellant s account from its books of accounts from 01.04.2011 to 31.03.2015 along with its copy of bank statement whereby the amount given to the appellant company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -from M/s Ritesh Construction Pvt. Ltd. The appellant company submitted the copy of bank statement, income tax return, PAN and audited financial statements of the applicant company in support of its claim. The investor company has got share capital of ₹ 50,72,500/- and reserve surplus to the extent of ₹ 7,05,13,867/- in its balance sheet. The appellant company has also submitted the copy of bank statement of the applicant company with Induslnd Bank, Burra Bazar, Kolkata wherein the amount refunded by the appellant company has been credited in the account of the applicant company on 26.06.2013. The investor company has also submitted copy of Income Tax Return wherein total revenue of ₹ 40,05,274/- has been shown and has declared income of ₹ 8,593/-. During the course of remand proceedings, Assessing Officer issued notice u/s. 133(6) of the I.T. Act to the said investor company. The said investor company filed its reply in response to the notice u/s 133(6) and confirmed the transactions with the appellant company. The said company also filed copy of appellant s account from its books of accounts from 01.04.2011 to 31.03.2012 and 01.04.2013 to 31.03.2014 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant company and subsequent refund of the same to the investor company. All these facts establish the identity, creditworthiness and genuineness of the transactions made with the investor company. SCAN INFRASTRUCTURE LTD The appellant company has received 0% OFCDs of ₹ 1,50,00,000/- from M/s Scan Infrastructure Pvt. Ltd. The appellant company submitted the copy of bank statement, income tax return, PAN and audited financial statements of the applicant company in support of its claim. The investor company has got share capital of ₹ 20,28,99,900/- and reserve surplus to the extent of ₹ 30,37,87,015/- in its balance sheet. The appellant company has also submitted the copy of bank statement of the applicant company with Kotak Mahindra Bank, Dalhousie, Kolkata wherein the amount refunded by the appellant company has been credited in the account of the applicant company on 25.06.2013. The investor company has also submitted copy of Income Tax Return wherein total revenue of ₹ 87,62,650/- has been shown and has declared loss of ₹ 7,20,518/-. During the course of remand proceedings, Assessing Officer issued notice u/s 133(6) of the I.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with its balance sheet for A.Y. 2012-13 and the confirmation of the amount paid as 0% OFCDs to the appellant company. All these facts establish the identity, creditworthiness and genuineness of the transactions made with the investor company. UNISYS SOFTWARES AND HOLDING INDUSTRIES LTD. The appellant company has received 0% OFCDs of ₹ 3,00,00,000/- from M/s Unisys Softwares and Holding Industries Ltd. The appellant company submitted the copy of bank statement, income tax return, PAN and audited financial statements of the applicant company in support of its claim. The investor company has got share capital of ₹ 23,00,02,000/- and reserve surplus to the extent of ₹ 34,08,84,000/- in its balance sheet. The appellant company has also submitted the copy of bank statement of the applicant company with Kotak Mahindra Bank, Dalhousie Road, Kolkata wherein the amount refunded by the appellant company has been credited in the account of the applicant company on 22.01.2014. The investor company has also submitted copy of Income Tax Return wherein total revenue of ₹ 201,70,44,000/- has been shown and has declared income of ₹ 1,01,28,680/-. During t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with the investor company. WALTARE INVESTMENT PVT. LTD. The appellant company has received 0% OFCDs of ₹ 3,70,00,000/- from M/s Waltare Investment Pvt. Ltd. The appellant company submitted the copy of bank statement, income tax return, PAN and audited financial statements of the applicant company in support of its claim. The investor company has got share capital of ₹ 2,48,66,700/- and reserve surplus to the extent of ₹ 47,20,46,908/- in its balance sheet. The appellant company has also submitted the copy of bank statement of the applicant company with United Bank of India wherein the amount refunded by the appellant company has been credited in the account of the applicant company on 11.06.2014 of ₹ 2,70,00,000/- and on 12.06.2014 of ₹ 1,00,00,000/-. The investor company has also submitted copy of Income Tax Return wherein total revenue of ₹ 8,78,485/- has been shown and has declared income of ₹ 39,430/-. During the course of remand proceedings, Assessing Officer issued notice u/s 133(6) of the I.T. Act to the said investor company. The said investor company filed its reply in response to the notice u/s 133(6) and confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the appellant company as 0% OFCD of ₹ 6,75,00,000/- and refund of the same is reflected. The investor company has also filed its copy of the return of income filed with Income Tax Department along with its balance sheet for A.Y. 2011-12 and 2012- 13 and the confirmation of the amount paid as 0% OFCDs to the appellant company and subsequent refund of the same to the investor company. All these facts establish the identity, creditworthiness and genuineness of the transactions made with the investor company. GLOBAL INFRATECH FINANCE LTD. (FORMERLY ASIANLAK CAPITAL AND FINANCE LTD.) The appellant company has received 0% OFCDs of ₹ 8,00,00,000/- from M/s Global Infratech Finance Ltd. (Formerly Asianlak Capital and Finance Ltd. ). The appellant company submitted the copy of bank statement, income tax return, PAN and audited financial statements of the applicant company in support of its claim. The investor company has got share capital of ₹ 14,00,53,000/- and reserve surplus to the extent of ₹ 5,36,14,137/- in its balance sheet. The appellant company has also submitted the copy of bank statement of the applicant company with HDFC Bank, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any. The said investor company filed its reply in response to the notice u/s 133(6) and confirmed the transactions with the appellant company. The said company also filed copy of appellant's account from its books of accounts from 01.04.2011 to 31.03.2012 its copy of bank statement whereby the amount given to the appellant company as 0% OFCD of ₹ 1,00,00,000/- is reflected. The investor company has also filed its copy of the return of income filed with Income Tax Department along with its balance sheet for A.Y. 2010-11, 2011-12 and 2012-13 and the confirmation of the amount paid as 0% OFCDs to the appellant company. All these facts establish the identity, creditworthiness and genuineness of the transactions made with the investor company. EVERSIGHT TRADECOMM PVT. LTD. The appellant company has received 0% OFCDs of ₹ 6,00,00,000/- from M/s Eversight Tradecomm Private Limited. The appellant company submitted the copy of bank statement, income tax return, PAN and audited financial statements of the applicant company in support of its claim. The investor company has got share capital of ₹ 4,04,41,500/- and reserve surplus to the extent of Rs.(-)1,51, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o submitted copy of Income Tax Return wherein total revenue of ₹ 2,00,000/- has been shown and has declared loss of ₹ 2,68,617/-. During the course of remand proceedings, Assessing Officer issued notice u/s 133(6) of the I.T. Act to the said investor company. The said investor company filed its reply in response to the notice u/s 133(6) and confirmed the transactions with the appellant company. The said company also filed the confirmation with respect to investment in OFCDs outstanding as on 01.04.2014 and its refund in F.Y. 2014-15 and its copy of bank statement whereby the amount given to the appellant company as 0% OFCD of ₹ 4,50,00,000/- and refund of the same is reflected. The investor company has also filed its copy of the return of income filed with Income Tax Department for A.Y. 2012-13 to 2015-16 and the confirmation of the amount paid as 0% OFCDs to the appellant company and subsequent refund of the same to the investor company. All these facts establish the identity, creditworthiness and genuineness of the transactions made with the investor company. SHAIL INVESTMENT PVT. LTD The appellant company has received 0% OFCDs of ₹ 90,25,00,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice u/s 133(6) of the I.T. Act to the said investor company. The said investor company filed its reply in response to the notice u/s 133(6) and confirmed the transactions with the appellant company. The said company also filed copy of appellant's account from its books of accounts from 01.04.2011 to 31.03.2012 and its copy of bank statement whereby the amount given to the appellant company as 0% OFCD of ₹ 90,25,00,000/- and refund of the same is reflected. The investor company has also filed its copy of the return of income filed with Income Tax Department for A.Y. 2012-13 along with the confirmation of the amount paid as 0% OFCDs to the appellant company. All these facts establish the identity, creditworthiness and genuineness of the transactions made with the investor company. ARIZONA VENTURES PVT. LTD. (FORMERLY PIGIVIVE VENTURE PVT. LTD). The appellant company has received OFCD subscription of ₹ 2,75,00,000/- from M/s Arizona Ventures Pvt. Ltd.(formerly known as Digivive Venture Pvt. Ltd.). The appellant company submitted the copy of bank statement, income tax return, PAN and audited financial statements of the applicant company in support of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit (Share application money) - Assessment years 2007-08 to 2009-10 - Whether mere fact that some of investors have a common address is a valid basis to doubt their identity or genuineness - Held, no - Whether fact that shares of assessee were subsequently sold at a reduced price is germane to question of genuineness of investment in share capital of assessee - Held, no - Assessee was part of SVP Group of companies which were engaged in business of construction and sale of residential and commercial complexes - During search at SVP Group of companies, said companies were found to have received share capital from several companies - According to revenue, said companies were charging 'on- money on sale of flats, shops, etc., which was not accounted for in their regular books of account and was routed back into group companies in form of share application money unsecure loans, etc through conduit channels - On that basis, addition under section 68 was made in case of assessee-company in respect of share application money received by it - Whether allegation of revenue that assessee being a developer was charging on money in cash would not apply to assessee inasmuch as it was in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Multimedia Ltd., M/s. Prime Capital Market Ltd. and M/s Unisys Software and Holding Industries Pvt. Ltd. A.Y. 2012-13 wherein no adverse view with regard to 0% OFCD given to the appellant company has been taken by the AO in the case of above mentioned three investor company. This shows that the AO was fully satisfied with the transaction of 0% OFCD with the appellant company. It is also seen that in the statement made during the search, Shri Purohit has named certain concerns to which he has provided accommodation entries against commission. However, he has not named the appellant company as to have obtained any accommodation entry from the company wherein Sh. Jagdish Prasad Purohit is Director. In these cases, the money has been received by way of account payee cheques and same has been refunded back to the said companies by way of account payee cheques and have been credited in their respective bank accounts. Copies of such bank accounts have been filed by the respective companies before AO as well as before me during the course of remand proceedings. The financial statement of the three companies wherein Sh. J.P. Purohit is Director have been analyzed here-in-above and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first of all drew our attention to the various observations and findings of the Assessing Officer as has been incorporated in the assessment order as well as in his show cause notice and the manner in which Assessing Officer has given his rebuttal on each and every explanation given by the assessee. He has summarized the observations of the Assessing Officer in both the cases as under: AO could not ascertain the exact nature of business run by the assessee. With no business background, the assessee could collect huge amount as OFCD from number of companies. Questionnaire issued on 15/10/2013 which got responded by 16/02/2015 (after a gap of 16 months). AO recorded the delay tactics of the assessee in the assessment order (refer para 4.1) AO issued another questionnaire dated 20/11/2014 (Arizona Ventures) dated 05/01/2015 (Arizona Global) which got responded partly on 16/02/2015. Hansraj Jain, director of company was asked to be produced by the AO on 05/01/2015. However, no compliance was made in this regard till 30/03/2015.(refer 2.1 In the case of Arizona Global Services Pvt. Ltd.- Notice under section 131 of the act was issued to M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Purohit and Mr. Tarun Goyal. The AO noted that repayment of unaccounted income cannot exonerate the assessee from liability to be taxed on that unaccounted income (refer para 7.2) 15. Thereafter, he relied upon various judgments which were elaborated by him in the following manner: 3. At the outset, it may be relevant to take note of Hon'ble SC decision in the case of NRA Iron Steel Pvt. Ltd. (13 taxmann.com 48) (Diary No(S). 41307/2019] In CA No.2463/2019). 4. Hon'ble Supreme court (supra) commented at para 14 of the order that The practice of conversion of unaccounted money through the cloak of Share Capital/Premium must be subjected to careful scrutiny. This would be particularly so in the case of private placement of shares, where a higher onus is required to be placed on the Assessee since the information is within the personal knowledge of the Assessee. The Assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the Assessee. 5. Further, Hon'ble SC (supra) held that the onus of the assessee does not st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... places no duty upon him to point to the source from which the money was received by the assessee. In this regard, the court relied upon decision of the Apex Court in the case of A. Govindarajulu Mudaliar v CIT, (1958) 34 ITR 807. 8. In the case of NDR Promoters Private Limited (ITA 49/2018), following judicial principles and factual positions have been followed while deciding the matter;- Principle of human probabilities- In the normal course of conduct, no one will make investment of such huge amounts without being concerned about the return and safety of such investment Failure to produce directors- The court laid emphasis on the aspect of failure on the part of the assessee to produce directors despite of filing their confirmations. Financial strength of the assessee company- The court noticed that the respondent- assessee did not have any business income in the relevant year(s) and had not incurred any expenditure in the relevant year. Certificate of incorporation, PAN number etc. are relevant for purchase of identification, but have their limitation when there is evidence and material to show that the subscriber was a paper company and not a genuine inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther except for one sister concern Arizona Ventures Private Limited making investment with Arizona Global Services Private Ltd. whether the transaction is entered into through written documentation to protect investment? Answer;- No such documentation is there to protect investment. On the other hand, the AO observed certain adversarial terms and conditions of OFCD (Optionally Fully Convertible Debentures) which included redemption after 10 years at par in case conversion option is not exercised and no right to claim or question anything with regard to the usage of funds. whether the investor was an angel investor? Answer; No what is the quantum of money invested? Answer: Ranging from ₹ 50 lakhs per entity to ₹ 21.25 crore per entity-in case of Arizona Ventures (Overall investment-₹ 53.55 Crore) and ranging from ₹ 1 crore per entity to ₹ 90.25 crore per entity-in case of Arizona Global Services (Overall Investmcnt-₹ 151.95 Crore). how the party believed the credit-worthiness of the recipient? Answer; Being private placement, the investor would invest with an intent to gain. However, the assessee did not specify as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e note of decision of Hon'ble Delhi High Court in the case of Bikram Singh (ITA 55/2017) on the issue of accommodation entry in the form of unsecured loans wherein it is observed that ...This device of loan entries continues to plague the legitimate economy of our country. As seen from the facts narrated above, the transactions herein clearly do not inspire confidence as being genuine and are shrouded in mystery, as to why the so-called creditors would lend such huge unsecured, interest free loans - that too without any agreement... 13. In view of the above facts of the case and jurisprudence on the issue of cash credits, there is no doubt that the facts of the present case do not inspire confidence as being genuine and are clouded with doubt. It is prayed that the order of the AO may be upheld. Submissions on behalf of the Assessee 16. Before us, ld. counsel for the assessee, Mr. Rakesh Joshi submitted that to prove the identity and creditworthiness of the subscribers as well as genuineness of the transaction the assessee had filed following evidences before the Assessing Officer;- ( i) Complete names and addresses of the subscribers, number of 0% OFCD subscri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /03/2015, which was served to watchman on late evening of 21/03/2015 i.e. Saturday. So effectively the notice was received by the assessee on 23/03/2015 and replied on 24/03/2015. Final showcause notice dated 25/03/2015 was issued which was replied on 27/03/2015. So there is no non-cooperation from the assessee s side. Similarly, the allegation of nonattendance and adopting delaying tactics etc. has no substance. Had there been any delaying tactics or intentional skipping of hearing on the assessee s part, the AO must have initiated penalty proceedings u/s 271(1)(b) of the I.T. Act, 1961 and should have completed the assessment u/s 144 of the Act rather than section 143(3) of the I.T. Act, 1961. Not only there is no penalty notice issued u/s 271(1)(b) in our case, there is no adverse comment against the assessee on the order sheet of the assessment proceedings with regard to any lapses. 2 Page 6 Para 4.2 AO stated that vide notice dated 05/01/2015 point no. 63, assessee was asked to produce Directors of the company, but not produced. The contention of the AO is wrong. In this notice vide point No. 62 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11005. When the assessee is proving an address by the inspector visits at some other address, it is not the fault of assessee. Therefore, no cognizance can be taken of such report. The inspector s enquiry at Delhi proves nothing conclusively. Moreover, the inspector s report, as such, was never confronted to the assessee . Hence, it cannot legally be used against the assessee. AO also discussed that Sail Investment Co is having address of Tarun Goyal who was an entry operator as per 2008 investigation report. We submit that notice sent by AO on the given address was duly served upon the party, however reply not received due to lack of time. However, in remand proceeding all parties including this party duly submitted all the desired details to the AO. Further AO has not done any investigation ion the case except relying upon investigation wing report of 2008. As for different statements of Shri Tarun Goyal, CA recorded around 7 years back, it is humbly stated that these statements have practically zero evidentiary value as on date, so far as the impugned issue is concerned. What Sh. Tarun Goyal, CA was doing in the distant past has nothing to do with the transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... providing accommodation entries. Name of these two companies are not appearing in such list given by Shri Jagdish Purohit, Copy of statement is enclosed herewith for Your Honour s Kind perusal. Further in question No. 25 it was specifically asked that Mr Jagdish Purohit is also controlling few other companies, which includes these two companies, and M/s Varah Infra Ltd. Raised capital through these companies also, whether this transaction is also an accommodation transaction. In reply to this question Mr Purohit categorically stated that these companies have subscribed to capital of other companies out of their own capital which was raised through public issue/ private placement merger with other companies through High Court order. Copy of his statement as provided by AO alongwith assessment order is enclosed herewith. The AO failed to consider this vital information in this statement and directly jumped to the conclusion that all companies controlled by Mr. Purohit and a sham transaction. Mr. Purohit nowhere stated in his statement that the assessee companies is one of the beneficiaries of the accommodation transactions. 18. Ld. Counsel further pointed out that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny figures nowhere. As per Ld. AO, since Sh. Tarun Goyal, CA and Sh. J.P Purohit of Kolkata are tainted persons in the eyes of the Income Tax Department, it is confirmed that any company, with which their name is associated in one way or the other, must be indulging in giving accommodation entries . Ld. Counsel pointed out that this view is not reasonable and not sufficient enough to hold the assessee guilty of taking accommodation entries. Further, it is worth noting that neither of the above-said two persons has directly accused the assessee company as beneficiary of any accommodation entry. Further, Ld. AO has simply enclosed photocopies of the statements of Sh. Tarun Goyal, CA and Sh. J.P Purohit with the assessment order only. These statements, as such were never confronted to the assessee except for referring them in his letter dated 25.03.2015 marked Last Final Opportunity . Legally speaking, he should have supplied copies of these statements to the assessee and sought its comments. He cannot legally rely upon any adverse material in his possession without confronting the same to the assessee. 21. Ld. Counsel relied upon the case of CIT-1, Jaipur V. A.L. Lalpuria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed so that the same may also be filed. (ii) In the cited case, Hon ble Court noted that the assessee did not furnish complete details and particulars and virtually absconded during the course of reassessment proceedings, resulting in a best judgment assessment. As against this, the appellant does not remember ever skipping any hearing on any date. The proceedings were regularly attended. Even the adjournments were mostly given by the AO on his own accord asking for complete details in one go, refusing to accept the details from the assessee in piecemeal. Consequently, assessment in the case of the appellant company was completed u/s 143(3) of the I.T. Act, 1961. iii. In the cited case, the assessee failed to file requisite details and evidence with regard to the cash credits received in the form of share applications. Hon ble Court pointed out that the AO had called for exhaustive details but the assessee did not file details of amounts received on account of share premium along with the details of share capital, and the address and PAN Numbers were not provided for all parties. Some other details were filed consisting of some short notes and a list without PAN num ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut any basis and support. 25. Further, in the appellate stage when Ld CIT (A) Appeal called for remand report, AO has not given any opportunity to the assessee to produce parties. He send notice U/s 133(6) to all the parties and all such parties duly responded to the AO and filed desired details. Thereafter no investigation done by the AO and submitted his report to the Ld CIT (A). This clearly proves that the AO was satisfied with the details submitted before him by the assessee as well as by the respective parties. It is worthwhile to note that out of various parties one of the subscriber is Arizona Ventures Pvt. Ltd. Who is also assessed by the same AO and similar additions were made by the AO in this company and it is also one of the respondent before the Hon ble bench. This shows that in other cases the AO has not applied his mind at all. 26. Ld CIT(A) after considering facts of the case and remand report received from the AO, verified credentials of each and every subscriber and held that the assessee company has explained identity, genuineness and creditworthiness of each and every party. Further, Ld CIT (A) based on assessment records also gone through statement of Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt that If relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with the copy of the share holders register, share application forms, share transfer register etc., it would constitute acceptable proof or acceptable explanation by the assessee In the case of the appellant, a number of documents, as enumerated in the earlier paragraphs were furnished to AO, which constitute acceptable proof. - [2008] 307 ITR 0334( Delhi) CIT v. Value Capital Services P. Ltd. In this case, Hon ble Delhi High Court, relying on the decisions in the case of CIT v. Stellar Investment Ltd. (1991) 192 ITR 0287 (Delhi) and CIT v. Sophia Finance Ltd.[1994] 205 ITR 0098 (Del) held that: It is quite obvious that it is very difficult for the assessee to show the credit worthiness of strangers. If the Revenue has any doubt with regard to their ability to make the investment, their returns may be reopened by the Department. In any case, what is clinching is the additional burden on the Revenue. It must show that even if the applicant does not have the means to make the investment, the investment made by the applicant actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eport of the Investigation Wing and conducted no meaningful enquiry at his level. So, there was no case for making the addition. - CIT v. Steller Investment Ltd. [2001] 251 ITR 263/115 Taxman 99(SC) In this case, Hon ble Supreme Court affirmed the view of Delhi High Court in the case of CIT v. Steller Investment Ltd. [1991] 192 ITR 287/59 Taxman 568, that reads as under: It is evident that even if it be assumed that the subscribers to the increased share capital were not genuine, nevertheless, under no circumstances, can the amount of share capital be regarded as undisclosed income of the assessee. It may be that there are some bogus shareholders in whose names shares had been issued and the money may have been provided by some other persons. If the assessment of the persons who are alleged to have really advanced the money is sought to be reopened, that would have made some sense but we fail to understand as to how this amount of increased share capital can be assessed in the hands of the company itself. The above-cited case relates to cash credit on account of subscription to shares whereas the assessee s case is that ````````````of loan by way of subscrip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce and the documents were not found false. On perusal of the impugned order of the CIT(Appeals), we are convinced that on doubts and suspicion, the AO has treated short term capital gain . as unexplained credit .. On the basis of doubts and suspicion, the cash credits cannot be held as unexplained. Similarly, in the case of MOD Creations Pvt. Ltd. v. ITO( Delhi High Court) , it was held that The assessee had discharged its initial onus placed on it. In the event the Revenue still had a doubt with regard to the genuineness of the transactions in issue or as regards the creditworthiness of the creditors, it would have had to discharge the onus which had shifted on to it. A bald assertion by the Assessing Officer that the credits were a circular route adopted by the assessee to plough back its own undisclosed income into its accounts, could be of no avail . The Revenue was required to prove this allegation. An allegation by itself which is based on assumption will not pass muster in law. The Revenue would be required to bridge the gap between the suspicions and proof in order to bring home this allegation. Reliance is also placed on the following case laws: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entative of the company. In the case of two parties, i.e., M/s. Shail Investments Pvt. Ltd. and M/s. KOA Investments notices sent to the Directors were not complied with and when Income Tax Inspector was deputed to serve the summons and the same could not be served because at the given address nobody was found or no board was there on the address. The above two companies, i.e., M/s. Shail Investment and M/s. KOA Investment Ltd. where the company controlled and operated by Shri Tarun Goyal, who is an established entry operator which was found during the course of search and seizure operation u/s.132 way back on 15.09.2008. Similarly, the two companies, namely, M/s. Scan Infrastructure Ltd. and M/s. Unisys Software and Holding Industries Ltd. which are Kolkata based company was managed and controlled by Shri Jagdish Prasad Purohit who was also found to be entry operator in the search conducted on him on 21.01.2015 wherein he has admitted that he is controlling few companies which are engaged in providing accommodation entries. He has also referred to finding of the Investigation Wing of Kolkata regarding Mr. Jagdish Prasad Purohit who has also enclosed the statement of Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary details, the assessee had filed their requisite details, which were, income tax return, balance-sheet, computation and details of Directors of shareholders. Thereafter, 2nd notice was issued on 15.01.2015 which was almost after 15 months from the date of first notice, wherein 63 points were listed, which too was complied with by the assessee on 16.02.2015. It was for the first time that at the fag end of the limitation of passing of the order that the Assessing Officer issued summons u/s.131 on 20.03.2015 to produce the Directors of the subscriber companies on 24.3.2015 and said summons was served on the late evening of 21st March, 2015 which was a Saturday and in response assessee has replied on 24.03.2015 that time allowed was too short. The Assessing Officer immediately thereafter issued a final show cause notice on 25.03.2015 which again was responded on 27.03.2015. Under these admitted facts, which have been duly noted by the ld. CIT (A) which is also evident from the records, there cannot be any allegation of non cooperation by the assessee or failure to produce the Directors. If the Assessing Officer was really desired to examine the Directors, then he would have g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been noted by the ld. CIT (A) and has dealt with same while deleting the addition in the case of each and every subscriber/investor company. Hence, non production of Directors on the facts and circumstances of the case cannot be adversely viewed and cannot be the sole reason for sustaining the addition. 36. Coming to the Assessing Officer s observation regarding statement of Shri Tarun Goyal and the investigation carried out in his case in the year 2008. First of all, different statements of Shri Tarun Goyal which has been referred to by the Assessing Officer is more than seven year back and then without there being any specific information given by him regarding assessee that it was one of the beneficiaries, then such a statement practically holds no evidentiary value and what he did in the distant past has nothing to do with the transaction entered by the assessee company in the Assessment Year 2012-13. There is no iota of reference by the Assessing Officer, whether Shri Tarun Goyal named any of the parties with whom assessee had undertaken a transaction in his statement and how the same is related to him except the common address even in the report of the Investigation Win ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies through which he has been provided accommodation entries. Without any such material information from his statement or investigation report qua the assessee, all the reference made by the Assessing Officer has no legs to stand so as to warrant any adverse inference while examining the credit entries in the case of the assessee company. 38. The Assessing Officer has also referred the investigation of bank transaction with various parties at the time of repayment of OFCD holders and came to the conclusion that the amount of repayment finally vested with the subscribers. If the fund obtained through OFCD have been refunded back which is an admitted fact and did not remain in the possession of the assessee company and then how the refunded amount has been utilised by the subscriber companies is none of burden of the assessee, unless these parties have confirmed otherwise and from where the funds have originated. How the assessee can be held to beneficiary of accommodation entry until and unless there is some information or statement or material that for the period the assessee had taken OFCDs was through unaccounted money which was introduced in the books and later on it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) which is based on facts and material on record, the remand report of the Assessing Officer and proper rebuttal of the Assessing Officer s observation and the finding and accordingly the same is confirmed. 41. In so far as the judgments relied upon by the ld. CITDR, specifically in the case of NRA Iron Steel Pvt. Ltd., the Hon ble Apex Court had opined that in case of private placement of shares, where a higher onus is required to be placed on its and legal obligation of the assessee to prove the receipt of share capital to the satisfaction of the Assessing Officer. The onus cannot be discharged merely by filing of primary evidence. Here in this case as stated above not only the primary evidence but also in the inquiries carried out by the Assessing Officer qua the investor specifically in the remand proceedings wherein they have duly confirmed the transaction with the documentary evidences along with their balance sheet and income tax records from where they have been duly shown and proved that they have subscribed to the OFCDs with their source disclosed in their balance sheet duly supported by their bank statement. Though these companies may have a meager income but if t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
