TMI Blog2015 (9) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... i admitted by Shri Kripa Shankar Sharma in his statement recorded on 12.04.2005 that cash was received from the entry receiver parties and cheques were issued through various companies opened by Shri Bal Chand Purohit Group. He categorically admitted on 21.09.2004 that he received ₹ 6,00,000/- in cash from M/s. Soni Hospital and on 22.09.2004 two entries of ₹ 3,00,000/- each were given to M/s. Soni Hospital which were routed through M/s. Artline Finvest Pvt. Ltd. and M/s. Arpan Agro Pvt. Ltd. Similar other details were also found in seized material. The companies were managed by Shri Kripa Shankar Sharma for providing accommodation entries and he was getting commission by providing accommodation entries. It is further found fact that Shri Sunil Verma, a peon, has been shown as Director in number of companies who had also admitted on 26.04.2005 that these companies did not have any business but providing entries by receiving cash from the beneficiaries and after depositing in the bank account of these companies, cheques are issued to the beneficiaries. Some of the companies’ addresses were found on vacant plots. This group not only providing accommodation entries to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT (Appeals) has erred in 1) deleting the addition of ₹ 99,00,000/- made by the AO on account of unexplained share application money without appreciating the facts of the case. 2. Brief facts of the case are that the assessee is running a hospital and files its return of loss of ₹ 2,82,73,070/- on 31.10.2005. The case was scrutinized under section 143(3) of the IT Act. The AO observed that during the course of investigation being conducted by the Investigation Wing, Jaipur in the cases of providing accommodation entries, being run by M/s. B.C. Purohit Co. (searched on 12.04.2005) it was noticed that some entries from the bogus entities being run by these racketeers had gone to Soni Hospital Ltd., Jaipur. In order to verify these entries and confront this party about the non-genuineness of these entries a limited purpose survey was conducted u/s 133A by the Investigation Wing at the office premises of its hospital located at Sector-5, Vidhyadhar Nagar, Jaipur on 03.05.2005 with the authorization issued by the Addl. Director of Income-tax (Inv.), Jaipur. 2.1. The AO further observed that during the course of survey operation when the books of accounts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s : These are the parties who have taken the accommodation entries and have introduced their unaccounted money in their books of accounts using this racket run by the entry operators. They are the persons who have been finally benefited by this racket. The bogus Individuals : These are the individuals whose income t4ax files and bank accounts have been created/operated by the entry operators and whose names have been used for providing the accommodation entries. These persons are either non existing or are persons of no means. The Bogus Companies/Firms : Certain private limited companies which have been floated by this group to provide the accommodation entries. In these companies the share capital is built up in the name of the large number of Bogus individuals whose income tax files are being maintained by the entry operators. The returns of income of these companies are being filed as finance and investment companies. One or two partnership firms have also been used for this purpose. The Middlemen : These are the persons who act as contact persons between the Entry Operators and the Beneficiaries. They are chartered accountants, tax advocates or finance brokers o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pan Agro (P) Ltd., 49, Patel Nagar, Ajmer Road, Jaipur. ₹ 3,00,000/- 4. Art Line Finvest (P) Ltd., M-15, New Market, Khasa Kothi Circle, Jaipur. ₹ 3,00,000/- 5. Bachpan Credit Capital (P) Ltd., M-15, New Market, Khasa Kothi Circle, Jaipur. ₹ 3,50,000/- 6. Bengal Fintrade Co. (P) Ltd., 48, Patel Nagar, Ajmer Road, Jaipur. ₹ 2,00,000/- 7. Bequeen Textiles (P) Ltd., 17A, Sujan Vihar, Nandpuri, Japur. ₹ 5,00,000/- 8. Bhavika Credit Capital (P) Ltd., M-15, New Market, Khasa Kothi Circle, Jaipur. ₹ 5,00,000/- 9. Ganpati Film Producers (P) Ltd. G-103, Kamal Apartment, Bani Park, Jaipur. ₹ 5,00,000/- 10. Great Eastern Movies (P) Ltd., 48, Patel Nagar, Ajmer Road, Jaipur. ₹ 3,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d also not filed confirmations or copies of their bank statements and also not produced them for examination of the persons. Regarding production of the said parties, the assessee stated that request has been made to them and they have assured to attend before the AO. But nobody attended in this regard before the AO. The statement of Shri Kripa Shankar Sharma recorded during the search and the entries in register of Annexure-A3 found from the residence of Shri Bal Chand Purohit situated at G-1/103, Kamal Apartment, Bani Park, Jaipur clearly indicate that the assessee had obtained only accommodation entries and not any genuine share application money. The relevant excerpts of the statement dated 12.04.2005 had been reproduced by the AO on pages 6 7 are as under :- ^^c;ku Jh d ik kadj kekZ fnukad 12-04-2005 iz u 27 Jh iou iqjksfgr tks fd ch-lh iqjksfgr ,.M dEiuh ds ekfyd Jh ckypUn th iqjksfgr dk iksrk gS ds ;gkWa ls vkt ryk kh ds nkSjku th 1 103] dey vikVZesUV cuhikdZ t;iqj ls tCr jftLVj ftls Ann-A/3 ekdZ fd;k x;k gS ist la- 18]19]20 dh QksVks izfr eSa vkidks fn[kk jgk gwWa ftlds izR;sd ist ds Top Vksi ij KS fy[kk gqvk gSa ftls ;g izekf.kr gksrk gS fd bu pkjks istks ij tks V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jh ckypUn iqjksfgr dh dEifu;ka }kjk Entries nsus dk fooj.k gSaA tks mu ikfVZ;ksa dks nh xbZA i B 18 ,oa 19 ij NKMK dh dqN Entries Reverse gksus dk fooj.k Hkh fy[kk x;k gSA^^ The statement of Shri Kripa Shankar Sharma recorded on 12.04.2005 was shown to Shri Bimal Rai Soni during the course of survey on 03.05.2005. During the course of search on 12.04.2005 Shri Kripa Shankar Sharma had admitted that he is Director of M/s. K.K. Petrochem (P) Ltd., M/s. Bequeen Textiles Pvt. Ltd., M/s. Kotputli Investment (P) Ltd., M/s. Anupriya Transformers (P) Ltd., M/s. Padam Bearing India Ltd. and M/s. Sushila Capfin (P) Ltd. He clearly admitted that he is engaged in providing the accommodation entries on a large scale in different names. After search, he had also filed returns of his companies, namely, M/s. Sushila Capfin (P) Ltd., M/s. Bequeen Textiles (P) Ltd. and M/s. K.K. Petrochem (P) Ltd. etc. and shown only commission income in the returns of these companies from providing accommodation entries only. The assessments have also been completed in these cases. 2.7. Similarly Shri Sunil Verma who is a peon in the Office of M/s. B.C. Purohit Co. has been shown as Director in M/s. An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Padam Bearing Pvt. Ltd., M/s. K.K. Petrochem Pvt. Ltd. and M/s. Bequeen Textiles Pvt. Ltd. 2.9. On the basis of the above observation, the AO concluded that it has been clearly established that the companies and individuals in whose names the assessee had shown share application money of ₹ 79,00,000/- were engaged in providing accommodation entries only and the assessee had also obtained accommodation entries and had not received any genuine share application money and had thus introduced its own undisclosed income in the account books, which was added to the income of the assessee. It is further found by the AO that the assessee had raised share application money from various parties which included following concerns :- 1. Shashi sales Marketing Pvt. Ltd. RZ-41A, Mohan Nagar, Pankh Road, New Delhi. ₹ 5,00,000/- 2. Lexus Infotech Limited 9, Roxana Building, M. I. Road, Church Gate, Mumbai. ₹ 10,00,000/- 3. Labh Tronics Pvt. Ltd. RZ-41A, Mohan Nagar, Pankh Road, New Delhi. ₹ 5, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicants were limited companies registered under the Companies Act, and the amount was received through banking channels and the companies were existing income tax assessees, their existence was beyond any doubt. It was held by Honourable Delhi Tribunal in the case of Sky High Properties Pvt. Ltd. Vs. ITO (258 ITR AT 098) that there is a difference between an ordinary cash credit and credit by way of share capital. While in the case of ordinary loans, the onus is on the assessee to prove not only the identity of the creditors but also the genuineness and the capacity of the persons to lend, with reference to share capital for which shares have been issued, the onus on the company is very much limited in the light of the law under the Companies Act. In the case of limited companies, the jurisdiction of the Assessing Officer would be limited only to see whether the identity of the shareholders is established. In the instant case out of five shareholders four shareholders were companies incorporated under the Companies Act. They were regularly assessed to tax. They were regularly filing their statements with the Registrar of Companies. All the four companies had huge share capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ify the inference that it is for the company to satisfy the Assessing Officer, that the sources of the shareholders are also established. Once genuineness of share application is manifest from the facts, the remedy for the Revenue, if it entertains any further doubt, is only enquiry with the shareholders. It is unfortunate that additions are being made for share capital contributions routinely and what is more, appeals are filed against the orders of the first appellate authority which are eminently found to be fair as it happened in CIT vs. Victor Electrodes Ltd. (329 ITR 271). 3.2. The issue of providing accommodation entry in the garb of share capital came up for consideration before the Hon ble Delhi High Court in the case of CIT vs. Oasis Hospitalities Pvt. Ltd. (2010 TIOL-69 HC Del). The observations of the Hon ble Delhi High Court has been reproduced by the ld. CIT (A) at pages 10, 11 12 of his order. 3.3. As regards addition of ₹ 20,00,000/- made on account of subscription from three corporate entities, the assessee filed certain additional evidences before the ld. CIT (A). The notice issued by the AO in the case of M/s. Labh Tronics Overseas Pvt. Ltd. and M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions are bogus. The company has accepted the share application money through entries of operators who provided the fund in the guise of share application money. It is evident from the investigation made by the Department as well as notice issued by the AO for production of these parties that it can easily be concluded that money received through share application money by the assessee is undisclosed income of the assessee. He further argued that Hon ble Supreme Court decision in the case of M/s. Lovely Export (supra) is longer law of the land as various High Court including Hon ble Delhi High Court in the case of CIT vs. Empire Builtech P. Ltd., 366 ITR 110 wherein the Supreme Court decision in case of M/s. Lovely Exports (supra) has been considered in respect of notice under section 133(6) issued to 11 investors. The investors had not submitted any confirmation and reporting for less income than amount invested. The assessee had not discharge its burden, the addition u/s 68 held justified. 4.1. He further argued that Hon ble Gujarat High Court in case of Blessing Construction vs. ITO, (2013) 214 Taxman 645 (Guj.) had confirmed the addition u/s 68 which was challenged before Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was purported to have been made for share application money received from 19 corporate entities and 3 individuals treating them as bogus. The ld. A/R argued that this issue is covered by the Hon ble Supreme Court decision in the case of CIT vs. Steller Investment Ltd., 251 ITR 263 and CIT vs. Lovely Exports Pvt. Ltd., 216 CTR 195). He further relied on Hon ble Jurisdictional High Court decision in the case of Shree Barkha Synthetics Ltd. vs. ACIT, 283 ITR 377 wherein Hon ble Supreme Court decision in case of CIT vs. Steller Investment Ltd. (supra) had been followed by the Hon ble High Court. The ITAT, Jaipur Bench in the case of Modi Air Product (P) Ltd. vs. ACIT, 31 Tax World 41) has also followed the decision of Hon ble Supreme Court in the case of CIT vs. Steller Investment Ltd. (supra). He further relied on the decision of Hon ble Delhi High Court in the case of CIT vs. Gangour Investment Ltd. dated 30.1.2009, wherein similar additions on account of share capital was disallowed by the AO under section 68 but Hon ble Delhi High Court has allowed the appeal on the ground that assesee has filed subscription forms to prove the identity and addresses of the applicant, PAN. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipur during the course of search revealed that there was an entry of cheque and cash received from various parties. There are number of companies on page 20 of this Annexure-A3 and on page 21 there were details of entries provided with amount. The name of the assessee company also figured on these pages and the modus operandi admitted by Shri Kripa Shankar Sharma in his statement recorded on 12.04.2005 that cash was received from the entry receiver parties and cheques were issued through various companies opened by Shri Bal Chand Purohit Group. He categorically admitted on 21.09.2004 that he received ₹ 6,00,000/- in cash from M/s. Soni Hospital and on 22.09.2004 two entries of ₹ 3,00,000/- each were given to M/s. Soni Hospital which were routed through M/s. Artline Finvest Pvt. Ltd. and M/s. Arpan Agro Pvt. Ltd. Similar other details were also found in seized material. The companies were managed by Shri Kripa Shankar Sharma for providing accommodation entries and he was getting commission by providing accommodation entries. It is further found fact that Shri Sunil Verma, a peon, has been shown as Director in number of companies who had also admitted on 26.04.2005 that t ..... 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