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2015 (9) TMI 136 - ITAT JAIPUR

2015 (9) TMI 136 - ITAT JAIPUR - TMI - Unexplained share application money - accommodation entry in the garb of share capital - CIT(A) deleted the addition - Held that:- There was a search on M/s. B.C. Purohit & Co. on 12.04.2005 and detailed investigation was made by the Department on the basis of evidence collected. During the course of search, it was found that assessee was providing entries in form of gift, loans, share application money, share investment and long term capital gain in shares .....

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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/- ea .....

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s 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 assessee but other persons also. The AO issued notices under section 133(6) of the IT Act for verification but notices were received back with postal remarks “ no such party exists at the .....

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nder section 68 of the Act. The Hon’ble Gujarat High Court decision in the case of Blessing Construction (2013 (10) TMI 154 - GUJARAT HIGH COURT) which has been confirmed by Hon’ble Supreme Court in SLP vide [2015 (9) TMI 55 - SUPREME COURT OF INDIA] wherein the creditworthiness in case of cash creditor is to be proved by the assessee.

Recently Hon’ble Delhi High Court in case of CIT vs. T. S. Krishna Kumar & Co. Ltd., [2014 (9) TMI 703 - DELHI HIGH COURT] has held that under section .....

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n that in case of share capital, the creditworthiness along with genuineness of transaction, identity of person is also required to be proved by the assessee. Accordingly we reverse the order of ld. CIT (A). - Decided in favour of revenue. - ITA No. 588/JP/2011 - Dated:- 11-8-2015 - SHRI R.P. TOLANI AND SHRI T.R. MEENA, JJ. For The Revenue : Shri Dilip Sharma (JCIT) For The Assessee : Shri Akhilesh Kumar Jain (C.A.) ORDER PER SHRI T.R. MEENA, A.M. This is an appeal filed by the Revenue emanating .....

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,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 no .....

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s shown as received by this company from certain entities being operated by M/s. B.C. Purohit & Co. Group. The Managing Director of the assessee company Dr. Bimal Rai Soni was confronted with the findings of non-genuineness of these parties from whom loans were shown in the books of accounts of his company. However, Shri Bimal Rai Soni did not accept that the transactions relating to receipt of share application money etc. in his company from the entities controlled by B.C. Purohit Group are .....

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of rupees were being provided. For this purpose they had opened hundreds of back accounts all over the country. The entries were being provided to thousands of assessees spread all over the country. This racket was being used by the parties who were interested in introducing their unaccounted money in their books of accounts. 2.3. The A.O. described that the modus operandi adopted for running this racket was very simple. Cash was received from the party who wanted to take the accommodation entr .....

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olved in it as under :- The Entry Operator : These are the owners and employees of M/s. B.C. Purohit & Co. who have created a complex network of bank accounts and income tax files and are operating these to provide the accommodation entries of different types. The Beneficiaries : 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 .....

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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 or persons dealing in shares. Genera .....

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ntaining the income tax files of a large number of bogus individuals. For most of these individuals, the addresses of office, residence or other properties of the Purohit family at Jaipur have been used. The Permanent Account Numbers for these individuals have been obtained in Jaipur and their returns of income are being filed regularly and generally very low income around the minimum taxable income is shown, paying either NIL tax or very nominal amount. In the balance sheets of these persons ca .....

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up share capital of the Bogus Companies being operated by the Entry Operators. 2.5. The AO observed that the assessee had taken entries during the financial year 2004-05 relevant to the assessment year 2005-06 mostly from the bogus companies operated by the impugned entry operators. These entries are in the form of share application money which have been received from M/s. B.C. Purohit Group in the following names :- S.No. Name of the Company Cr. Amount 1. Anupriya Transformers (P) Ltd., 17A, Su .....

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,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/- 11. Jaytara Movies (P) Ltd., 48, Patel Nagar, Ajmer Road, Jaipur. ₹ 2,00,000/- 12. K.K. Petrochem (P) Ltd., A-94, .....

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4, Patel Nagar, Ajmer Road, Jaipur. ₹ 1,50,000/- 19. Om Prakash Agarwal, 3/757, Malviya Nagar, Jaipur. ₹ 1,50,000/- Total : ₹ 79,00,000/- The AO gave show cause notice on this issue and required the assessee to prove the genuineness of share application money of ₹ 79,00,000/- and also requested to produce the relevant parties for examination. Further it was also proposed to add on the basis of evidences collected during the course of search in case of B.C. Purohit Group. .....

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the amount contributed as share capital is also genuine. Before the AO, the assessee had not filed any evidence regarding genuineness of share application money and 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 .....

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h 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 ¼Vksi½ ij KS fy[kk gqvk gSa ftls ;g izekf.kr gksrk gS fd bu pkjks istks ij tks VªkUtsDlu fy[kh xbZ gS og vkids ek/;e ls dh xbZ gS d I;k crkb;s fd ;g VªkUtsDlu d;k gS rFkk bu i Bksa dh f .....

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kkZus dk fooj.k fy[kk x;k gSA tSls bu i Bksa esa ist 20 ij Rattangarh, Ganpati, Annushree, Bengal, Bhavika, Arpan, Agro, Art line fy[ksa gSaA ;g lkjh dEifu;k Jh ckypUn iqjksfgr ,oa muds ifjokj dh gS ftuds uke Øe k% Rattangarh Finlease Pvt. Ltd., Ganpati Film, Producers Pvt. Ltd. Anushree Finlease Pvt. Ltd., Arpan Agro Pvt. Ltd., Artline Finvest Pvt. Ltd. gSaA rFkk vU; i Bksa ij Hkh ;gh uke repeat gq, gSA buds vykok i B 21 ij Thar, Jaitara, Great dk ftØ gSa ;s Hkh Jh ckypUn iqjksfgr .....

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kfiax lsUVj] dksVk ftls buesa NKMK fy[kk gS] foØekfnR; dksyksukbtlZ izk-fy-t;iqj ftls foØekfnR; fy[kk gS ,oa vU; dks tSls Royal Shelter Pvt. Ltd. Jaipur dks Entries Jh ckypUn iqjksfgr dh mijksDr deifu;ksa ds Bank Account ls udn :i;k izkIr djds pSd dkV dj nh xbZ gS ftldk blds fooj.k gSA tSls 27-09-2004 dks 5]00]000@& lksuh gkfLiVy] t;iqj ls udn izkIr gq, rFkk 28-09-2004 dks 5]00]000@& :- dk pSd dkV dj mls Entry ns nh xbZ Jh ckypUn iqjksfgr dh dEiuh Bhavika Credit Capital Pvt .....

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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 .....

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Purohit & Co. has been shown as Director in M/s. Anupriya Transformers (P) Ltd., M/s. Bequeen Textiles (P) Ltd., M/s. Kotputli Investment Pvt. Ltd. and M/s. K.K. Petrochem Pvt. Ltd. and his statement recorded on 26.04.2005 he clearly admitted that these companies do not do any business, and cash is received from the beneficiaries and after depositing in the bank account of these companies cheques are issued to the beneficiaries. In respect of the bogus companies and bogus individuals whose .....

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rved that on account of enquiry by the Investigation Wing and statements of various persons recorded during the course of investigation in search operation, M/s. Ajay Fourwheels Pvt. Ltd. surrendered the accommodation entries from B.C. Purohit Group / Kripa Shankar Sharma as its undisclosed income in the names of the following companies/individuals (included in the list of ₹ 79,00,000/- as mentioned above. 1. M/s. Bequeen Textiles Pvt. Ltd. 2. M/s. Sushil Capfin Pvt. Ltd. 3. M/s. K.K. Petr .....

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ion entries in the names of M/s. Bhavika Credit Capital (P) Ltd. and M/s. Bachpan Credit Capital (P) Ltd. M/s. Unique Organics admitted to have taken accommodation entries in the name of M/s. Anupriya Transformers Pvt. Ltd., M/s. Padam Bearing India Pvt. Ltd. and M/s. K.K. Petrochem Pvt. Ltd. M/s. International Maharani Jewels Pvt. Ltd. admited to have taken accommodation entries in the names of M/s. Sushila Capfin Pvt. Ltd., M/s. Padam Bearing Pvt. Ltd., M/s. K.K. Petrochem Pvt. Ltd. and M/s. B .....

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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. ₹ 5,00,000/- Rs.20,00,000/- The AO asked to prov .....

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nces, the AO vide order sheet entry dated 23.11.2007 requested the assessee to produce the above said parties for examination. But the assessee vide order sheet entry dated 23.11.2007 had shown its inability to produce any of the said 3 parties. However, through its letter dated 26.12.2007 the assessee stated that the amount was received through banking channel and the companies are registered with ROC and the companies are genuine entities. Since the assessee was failed to satisfy the AO to pro .....

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t in the present case, the appellant had filed the subscription forms from each of the investors. The said subscription form contained complete details, which disclosed not only the identity of the subscribers, but also their complete address along with PAN. Therefore the appellant had been able to discharge its onus in respect of the veracity of the transactions. The AO has alleged that documentary evidences were not filed by the assessee company but in reality, all the primary documents and re .....

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onourable 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 .....

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of various companies was huge. The audited copy of the accounts were also on record. Looking to these documents, there could not be any dispute about their identity, credit-worthiness as well as genuineness of the transaction. It was held by Honourable Delhi Tribunal in the case of A-One Housing Complex Ltd. (299 ITR AT 327) that the onus on the assessee in the case of share capital by public issue was a lighter one and therefore such onus would stand discharged if the identity of the share appl .....

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hat either of the share applicants was a benami of the assessee. Therefore the reasons given by the Assessing Officer were to be rejected. 3.1. He relied on the order of ITAT Delhi in the case of Sky High Properties Pvt. Ltd. vs. ITO, 258 ITR AT 098. The onus is on the assessee to prove difference between an ordinary cash credit and credit by way of share capital. He placed reliance on the following decisions :- M/s. Sky High Properties Pvt. Ltd. vs. ITO 258 ITR AT 098 (ITAT Delhi) M/s. A-One Ho .....

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share application money, where the persons are identified, it is not reasonable to expect the AO to establish that the monies belonged to the company without making any enquiries against the shareholders, since there is no presumption that they are bogus shareholders. Normal rule of presumption under section 68 does not go so far as to justify 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 .....

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pital 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 .....

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company subsequently received information about the present address of both the companies which was A-4/181, Sector No. 17, Rohini, New Delhi 110 085. Accordingly to financial statements of both the companies for the year ended 31.03.2006, the said companies had enough creditworthiness to make investment in the share capital of the appellant company. The assessee submitted following additional evidences before the ld. CIT (A):- (1) Copy of the financial statements of both the companies for the y .....

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8 and the Profit & Loss Account for the year ending 31.03.2008 of M/s. Lexus Infotech Ltd. along with photocopy of acknowledgement of Return (now known as Traingular Infocom Ltd.) along with copy of PAN Card thereof. These additional evidences were forwarded to ACIT, Circle-5, Jaipur vide letter dated 04.02.2011 for examination. The remand report was due by 15.02.2011. However, till passing of the order by ld. CIT (A), the AO had not submitted the remand report. The ld. CIT (A) concluded tha .....

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ey 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 C .....

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se of Blessing Construction vs. ITO, (2013) 214 Taxman 645 (Guj.) had confirmed the addition u/s 68 which was challenged before Hon ble Supreme Court and the Hon ble Supreme Court has confirmed the order dated 13.09.2013 by rejecting SLP No. 29503 of 2013. The Hon ble Gujarat High Court held that there was sufficient evidence in case of all the depositors, their bank accounts contained meagre balance shortly before sizeable amount of ₹ 1,00,000/- and upward were given to the assessee throu .....

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e genuineness of the transaction, creditworthiness of creditor, identity of the creditor. The addition made by the AO under section 68 is justified. 4.3. The Hon ble Delhi High Court in case of CIT vs. Youth Construction Pvt. Ltd. (2013) 357 ITR 97 (Del.) has confirmed the share capital under section 68 on the ground of creditworthiness and genuineness has not been proved by the assessee, wherein Lovely Export (supra) decision had been followed by the Hon ble Delhi High Court. The ld. D/R furthe .....

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of the IT Act. It is further held by the Hon ble Supreme Court that PAN blindly cannot be accepted as a proof for identity of individuals as it is generally issued without ascertaining the active nature of business activities. Therefore, the ld. D/R requested to reverse the order of ld. CIT (A). 4.4. At the out set, the ld. A/R reiterated the arguments as made before ld. CIT (A). The AO had not made addition indicating any particular section of I. T. Act. The assessment revealed that the additi .....

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n 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 .....

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er section 68. The assessee had received share application money through banking channel which proved that applicant is existed and is a living person because an account was opened by the bank as per the Reserve Bank of India norms. It was further argued that Hon ble Jurisdictional High Court in the case of CIT vs. Supertech Diamond Tools Pvt. Ltd. (2015) 229 Taxman 62 (Raj.)(HC) wherein addition made under section 68 on the basis of Third Party statement made behind the back of the assessee and .....

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copies of share allotment certificates and of the Board s Resolution of the share applicants, and on that basis the Hon ble High Court held that variation of the transaction had been established by calling the documents and assessee has discharged its onus establishing the identity, creditworthiness and genuineness of the transaction. Therefore, he requested to uphold the order of ld. CIT (A). 5. We have heard rival contentions and perused the material on record. There was a search on M/s. B.C. .....

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ences. As per Annexure-A3 seized from residence of Shri Bal Chand Purohit situated at G-1/103, Kamal Apartments, Bani Park, Jaipur 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 s .....

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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 a .....

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