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2015 (12) TMI 518 - ITAT PANAJI

2015 (12) TMI 518 - ITAT PANAJI - TMI - Addition u/s 68 - addition on account of share application money received by the assessee Held that:- In the instant case the addition is made u/s 68 of the Act on the ground of unexplained cash credit. As per the provisions of sec. 68, the initial onus lies upon the assessee to prove the nature and the source of amount credited in his books of accounts. We find that this initial onus was discharged in the instance case by the assessee by furnishing the do .....

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charge its burden on the basis of statements recorded by it of the persons mentioned above.

We find that the assessee requested for cross-examination of the makers of the statements. But strangely, the Assessing Officer did not take any step to allow effective opportunity to the assessee to cross-examine the makers of the statements. The Assessing Officer did not pursue the matter further. Thus, we find that the assessee was not allowed any opportunity to cross-examine the persons who .....

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as been brought on record by the Revenue to show that why still the amount in question should be treated as income of the assessee when the assessee furnished all the documents which were available with it to discharge the onus which was upon it u/s 68 of the Act. In the above circumstances, in our considered view, the addition was made solely based upon the inadmissible and unreliable material - Decided in favour of assessee. - ITA Nos. 327/PNJ/2015 - Dated:- 20-10-2015 - N. S. Saini, AM And Ge .....

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investor companies. 3. The Assessing Officer while making the addition of ₹ 3.80 crores on account of share application money received by the assessee observed as under:- "The assessee company is engaged in the business of Transportation of Iron ore: Assessee filed the original return of income on 27/09/2010 for A.Y. 2010-11 declaring total income as NIL. Later, during the assessment proceedings of AY 2011-12, it was seen that the assessee has received share application money to the .....

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sked about the share holding pattern and assessee submitted the following details: Sl.No Name of the Company Address No. of Equity Shares Amount of investment Date of Allotment 1 SONY FINANCIAL SERVICES LIMITED 1/4233, Ansari Road 2nd Floor darya Ganj, New 40,000 40,00,000 09.01.2010 2 AKI ORGANICS PRIVATE LIMITED 449, RPS Flats, Mansarover Park, Shahdara Delhi - 110032, Delhi, India 40,000 40,00,000 09.01.2010 3 CONTINENTAL FISCALMANAGEMENT LTD 36, GANESH CHANDRA AVENUE, CABIN NO-4B, KOLKATA - .....

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D 33, C.R. AVENUE, 9TH Floor, Kolkata - 700012 35,000 35,00,000 09.01.2010 9 PARIDHI FINVEST PRIVATE LIMITED 8 LAKE TOWN, BLOCK-B, Kolkata 700089 60,000 60,00,000 09.01.2010 10 OMEGA VENTURES PRIVATE LIMITED 1 B BLACK BURN LANE, 4TH FLOOR, P S BOW BAZAR, Kolkata -700012 35,000 35,00,000 09.01.2010 A Commission u/s 131(1)(d) was issued to The Deputy Director of Income Tax (Investigation), Aayakar Bhawan Annexe, P-13, Chowringhee Square, Kolkata-0700069 and The Assistant Director of Income Tax (In .....

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LIMITED 5. J P ENGINEERING CORPN PVT LTD 6. RAMESWAR RETAILERS PRIVATE LIMITED 7. PARIDHI FINVEST PRIVATE LIMITED 8. OMEGA VENTURES PRIVATE LIMITED The Office of the Deputy Director of Income Tax (Investigation), Calcutta replied vide letter dated 22/01/2014 saying that "In spite of the best efforts, none of the concerns could be located at the given address and thus the credit worthiness of the companies could not be verified. The Inspector report is attached for your ready reference.&quo .....

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to the Deputy Director of Income Tax (Inv), New Delhi was issued in the matter of share holding companies based out of New Delhi which are: 1. SONY FINANCIAL SERVICES LIMITED 2. AKI ORGANICS PRIVATE LIMITED The Office of the Deputy Director of Income Tax (Investigation), New Delhi replied vide letter dated 10.03.2014, saying that "The principal officers of M/s Sony financial services limited and AKI organics private limited were summoned for furnishing the following details. However, neithe .....

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ng here. Enquiries from neighborhoods about the existence of the above mentioned company was done. But no one could reply in positive about this company. The aforesaid premise is a residential premise." On M/s Sony financial services limited, Deputy Director of Income Tax (Investigation), New Delhi replied saying that "Summons in the name of the principal officer, M/s Sony financial services liMited was- served at GL-5, Ansal Bhawan, Delhi-110001 personally by the inspector of this uni .....

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Please provide on which date the application of these companies for share allocation was received, with receipt. 6. On which bank account (your account) was the share money received by you and date on which transaction happened with bank statement. - 7. From which bank account (account of the allottee) was the share money received by you. Later vide letter 14/02/2014, the assessee was again asked to submit Any communication with those companies How the companies came to know about the share iss .....

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already in the possession of this office and verified on commission. This assessing officer has the following objective reasons to believe that income chargeable to tax has escaped assessment for assessment year 2010-11 since: The assessee did not produce those parties Assessee could not give the contact details other than addresses of those parties Companies were found to be non-existent in those addresses as verified by DDIT(Inv), Kolkata and DDIT(Inv), New Delhi No communication with the part .....

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at income chargeable to tax has escaped assessment for the AY. 2010-11. The assessee company not having assessed for A.Y. 2010-11, it is hereby decided to reopen the case u/s 14g for assessment for A.Y. 2010-11..." 3. Subsequently a notice u/s 148 was sent to the assessee on 14.03.2014. Assessee replied to this notice vide letter dated 05.04.2014, saying that the original return of income declaring income as NIL be considered as filed in response to the above notice. In the same letter date .....

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oath of Shri. Deepak Patwari recorded u/s 131 of the IT Act, 1961 on 27.02.2013 provides the modus of operandi: "1. Please identify yourself and confirm that oath has been administered to you and consequence for giving false statement on oath under the Indian Penal Code has been explained to you. Ans: I am Deepak Patwari, s/o late Madhusudan Patwari, aged about 42 years, residing at Space Town, block-2, flat no.1-E, VIP road, Kolakta-52. I confirm that the oath has been administered and the .....

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R Avenue,. Kolkata, at 211/1/ Sarat Chatterjee Road, at 27 Braboufne Road, Kolkata, at A3A Narsingh Avenue, 4th floor, at 12 Bharpara Road, 4th floor, Howrah, at 65B Guru Garden Road, at 171/12 Ray Bahadur Road, at 13 Khudiram Bose Road and at 8 lake town, Block B, Nikita tower, Kolkata. The list of companies and their addresses are as follows: 1. At 29A Weston Street, 3rd floor, Room No. C-2, Kolkata-700012 M/s J P Engg Corp Pvt. Ltd ...(10 more companies) 2. At 113 Blackburn Lane, 4th floor, K .....

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.(1 company) 9. at 12 Bharpara Road, 4th floor, Howrah ...(1 company) 10. at 65B Guru Garden Road ...(1 company) 11. 13 Khudiram Bose Road, Saranji, Mall Enclave, Kolkata ....(1 company) 12. at 171/12 Ray Bahadur Road ...(1 company) These above companies are fully managed and operated by me and Dilip Agarwal by placing various directors in _ place. I along with Dilip Agarwal are the brain behind these companies and its operations. Q6. Please explain the nature of transactions entered amongst com .....

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r statement on oath of Shri. Deepak Patwari recorded u/s 131 of the IT Act, 1961 on 05.06.2013. is given below: "...Q4. During the course of your statement recorded on 27.02.2013 u/s 131 of the IT Act, 1961, you have admitted the cash was received from the Rashmi Group for the said accommodation entries. Please explain where was the cash deposited and also produce the cash trails in respect of all the accommodation entry arranged and managed by you. Ans: The cash received Rashmi Group was d .....

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ed into share capital and share premium in. the hands of Rashmi gfoup. The same modus operandi is followed in respect of all other transactions also..." 6. The other statements passed on by Deputy Director of Income tax, Kolkata were of the directors of these investor companies. The director of M/s Continental Fiscal Management Pvt. Ltd and M/s Centak Distributors Pvt. Ltd, Shri. Santosh Kumar Gupta said as below: "..I, Santosh Kumar Gupta resident of 27/1. T.N. Mukherjee Road, Hooghly .....

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Pvt. Ltd, M/s Rameswar Retails Pvt. Ltd, Shri. Baikunth Nath Pandey said as below: "...I, Baikunth Nath Pandey resident of 66, Salkia School Road, 5th Floor, Block-B, Kolkata - 711106 was then the Director in the following companies during the F.Y :- 2009-10 1. M/s. Afsons (India) Pvt Ltd 2. M/s. J P Engineering Corpn Pvt. Ltd. was just a dummy director in those companies which were operated and managed by Mr. Deepak Patwari. I am just a paid employee of Mr. Deepak Patwari and for signing c .....

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y which was operated and managed by Mr. Deepak Patwari. I was just a paid employee of Mr. Deepak Patwari and for signing cheque and balance Sheet I used to get a monthly remuneration of ₹ 2000/- to ₹ 3000/-. The details of the company and their activities can only be provided by Mr. Deepak Patwari..." 9. As can be seen, the companies and directors of the companies who have invested in the Share application of the assessee company are accommodation entry providers. The statements .....

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ation entry companies said that they are just employees drawing monthly salaries of ₹ 2000/- to ₹ 3000/-. They also said that they are just there for signing cheques and balance sheets. 10. Just to reiterate, the companies which provided share investment in Assessee Company are: Sl.No. Investor Company Place (Directors) Share application signed 1 M/s. Sony Financial Services Ltd Delhi Yogesh Gupta Sandeep Gupta 2 M/s. AKI Organics Pvt. Ltd Delhi Yogesh Gupta Sandeep Gupta 3 M/s. Cont .....

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which invested in Assessee Company are operated by Shri. Deepak Patwari, an accommodation entry provider by making. shell companies whose directors are his lowly paid employees. 11. It was also seen from the statements of these companies that they get money from various bank accounts and were transferred to assessee account within the same day. The profit and loss account and Balance sheet figures of these companies look as below: Sl.No. Investor Company Returned income P&L (for AY 2010-11) .....

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tributors Pvt. Ltd Rs.22,671 (for Ay 2009-10) Income side (total)= ₹ 1,46,99,662 Sources of funds side (total)= ₹ 43,73,34,298 5 M/s Kanupriya Commercial Pvt. Rs.62,183 (for AY 2009-10) Income side (total) = Rs.12,35,283 Sources of funds side (total) = ₹ 11,53,29,727 6 M/s Orpat Commercial Pvt. Ltd Rs.4,241 (for AY 2009-10) Income side (total) = ₹ 17,99,500 Sources of funds side (total) = ₹ 8,84,54,276 7 M/s J P Engg Corp Pvt. Ltd Rs.54,819 (for AY 2009-10) Income s .....

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of funds side (total) =Rs.8,38,85,178 As can be seen above, the returned income is negligible in all these companies. The balance sheet of all these companies are big corroborating the fact that the directors of these companies, who are lowly paid employees (Rs 3000-4000 per month), and who are not credit worthy to this extent of crores, are just a front for providing accommodation entry in the form of share application money. 12. Assessee Company was again asked about the share application mone .....

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. We have no direct communication with the parties. 4. The Share issue was not a public issue and hence there was no public communication inviting public to invest in our company. Our company is a private limited company and cannot offer its shares to the public either through prospectus or statement in lieu of prospectus. Since we are private limited company any advertisement inviting the public to invest is prohibited by law. I am submitting separately all the documents list in the said letter .....

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ssee is' still not able to give any latest confirmation letter from the investor companies. 13. Assessee Company was again given an opportunity to explain by summoning the Assessee Company's director, Shri Yuri Alemao u/s 131 of the Income Tax Act, 1961 and recording his statement. He was also confronted of the latest facts passed from Deputy Director ofIncome Tax (Investigation), Kolkata during the statement. The statement is given below: "...Statement recorded u/s 131 of the Incom .....

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ng Pvt. Ltd, residing House No. 150, Casa Alemao, Chadwadddo, Varca, Salcate, Goa. My contact numbers are 09552188899 and 0832 2744461. 2. Pl. submit any proof in respect of your identity and residential address Ans: I am submitting herewith photocopy of my election card bearing # SL10280065: 3. What is your educational qualification? Ans: I am a Commercial Pilot. I did my Diploma in Aviation in Australia. 4. Are you aware about the consequences of giving false statement under oath? Ans:. Yes, I .....

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is another director of the company. Our company is into Transportation of ore through barges. Our clients are M/s Sesa Goa. and M/s Sesa Resources. The company owns 2 urges. PAN of the Company is AAFCP2941R. 7. Till which A.Y the company has filed the return of income? Ans:The Company has filed the return of income till A.Y 2014-15. 8. When was the Company incorporated? Ans:The company was incorporated in 19/12/2009. 9. For the Asst. Year 2010-11, i.e., year ending 31/03/2010, the Balance Sheet .....

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Organics Pvt. Ltd ₹ 40,00,000 c) Continental Fiscal.Management Pvt. Ltd Rs.30,00,000 d) M/s Centak Distributors Pvt. Ltd Rs.50,00,000 e) M/s Kanupriya Commercial Pvt. Ltd ₹ 40,00,000 f) M/s Orpat Commercial Pvt. Ltd Rs.25,00,000 g) M/s J P Engg Corp Pvt. Ltd Rs.25,00,000 h) M/s Rameswar Retails Pvt. Ltd Rs.35,00,000 i) M/s Paridhi Finvest Pvt. Ltd Rs.60,00,000 j) M/s Omega Ventures Pvt. Ltd Rs.35,00,000 10. Who are the Directors of the above companies? Ans: As per the submissions, t .....

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M s. J P Engg Corp Pvt. Ltd Kolkata Baikunth Nath Pandey 8 M/s. Rameswar Retails Pvt. Ltd Kolkata Baikunth Nath Pandey 9 M s. Paridhi Finvest Pvt. Ltd Kolkata Amit Agarwal 10 M/s. Omega Ventures Pvt. Ltd Kolkata Ashok Kumar Singh 11. Pls explain where these companies are located? Ans: Some companies are located in Delhi and some are in Calcutta as per our submission. Without referring to the list and the addresses of the companies, I am unable to explain the locations of these companies. 12. Do .....

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r bank statement - HDFC, Margao Account No.00372320001690, - the investment from the aboVe companies came during December 2009 to January 2010. 15.How did you come to know that the above companies are ready to invest in your company? Ans: I, being the director of the Company, discussed with Mr. Rajendra Prasad Singla, a family friend of ours that we would like to have some investors for the- company. He agreed that hewould get the investors. This way the above companies have invested in our comp .....

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ave the other director or any employee of the company has contacted these investor companies? Ans: Apart from Shri. Rajendra Prasad Singla, no one from our company is in contact with these investor companies or director. 21 If you are asked to produce these directors or companies, will you be able to do that? Ans: No. I will not be able to produce any of these directors. As I have already submitted, these share application money has come thru' proper banking channels. 22. You are hereby show .....

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or signing cheque and balance Sheet I got a monthly remuneration of ₹ 2,000/- to ₹ 3,000/-. The details of the company and their activities can only be provided by Mr. Deepak Patwari. Do you have anything to say? Ans: No. I do not have anything to say. I do not know the person also. 23. In the statement shown to you right now, the director of the company has stated that he is just a dummy director in M/s Continental Fiscal Management Ltd and gets paid a monthly remuneration of around .....

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Corporation Pvt. Ltd. in front of DDIT, (Inv), Unit-II(3), Kolkata, saying as below: I, Baikunth Nath Pandey resident of 66, Salkia School Road, 5th Floor, block - B, Kolkata - 711106 as then the Director in the following companies during the F.Y. 2009- 10. 1. M/s. Afsons (India) Pvt. Ltd 2. M/s. J.P. Engineering Corpn. Pvt. Ltd. was just a dummy director in those companies which were operated and managed by Mr. Deepak Patwari. I was just a paid employee of Mr. Deepak Patwari and for signing che .....

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thly remuneration of around ₹ 2000 to ₹ 3000 for signing cheque and Balance sheet. He is a paid employee of Mr. Deepak Patwari who is managing the company M/s JP Engineering Corporation Pvt. Ltd. Do you confirm? Ans: Yes. I have read the statement of Shri. Baikunth Nath Pandey, the director of M/s JP Engineering Corporation Pvt. Ltd. and I have gone thru the contents of the statement. I do not know the person also. 26. You are hereby shown a statement (Annexure-C) of Shri. Amit Agarw .....

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₹ 2,000/- to ₹ 3,000/-. The details of the company and their activities can only be provided by Mr.Deepak Patwari. Do you have anything to say? Ans: No. I do not have anything to say. I do not know the person also. 27. In the statement shown to you right now, Shri. Amit Agarwal has stated that he is just a dummy director in M/s Abex Infocom Pvt. Ltd. and gets paid a monthly remuneration of around ₹ 2000 to ₹ 3000 for signing cheque and Balance sheet. He is a paid employee .....

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e Road, at 27 Barbourne Road, Kolkata, at 43A Narsingh Avenue, at 4th floor, 12 Bharpara Road,. at 4th floor, Howrah, at 65B Guru Garden Road, at 171/ 12 Ray Bahadur Road, at 12 Khudiram Bose Road and 8 lake town, Block B Nikita tower, Kolkata. The list of companies and their addresses are as follows: M/ s. J P Engg Corp Pvt. Ltd M/ s .Centak Distributors Pvt. Ltd M/ s .Paridhi Finvest Pvt. Ltd M/ s .Kanupriya Commercial Pvt. Ltd M/ s . Continental Fiscal Management Pvt. Ltd These above companie .....

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s: Yes. Ihave read the statement and I do not have anything to say. I do not know anything about the content of the statement. 29. You are hereby shown a sworn statement (Annexure-E)of Shri. Deepak Patwari at The Aayakar Bhawan, Kolkata on 05.06.2013 saying that some companies he is operating are as below: M/s. J P Engg Corp Pvt.Ltd M/s. Centak Distributors Pvt. Ltd M/s. Paridhi Finvest Pvt.Ltd M/s. Kanupriya Commercial Pvt. Ltd M/s. Continental Fiscal Management Pvt. Ltd Do you confirm that you .....

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ve anything to say. I do not know anything about the content of the statement. 31. In the above statement of 05.06.2013, Shri. Deepak Patwari said that "...the cash received from Rashmi Group was deposited in the various accounts of other entry operators such as … I am submitting you the details of cash trails in respect of some of the transactions to collaborate my statement. However, due to paucity of time I could not furnish cash trails in respect of all the transactions. The said .....

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er transactions also..." Have you read the statement and do you have anything to say? Ans: Yes. I have read the statement and I do not have anything to say. We have received the share application premium amount through proper banking channels. 32. So the above investor companies were managed by Shri. Deepak Patwari through his employees and provided accommodation entry by injecting cash in various bank accounts and then the amounts were withdrawn through cheques. Do you still say that your .....

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requesting to produce Shri. Rajendraprasad Singla, through whom the assessee claimed to have arranged the investment from other companies. The assessee submitted a reply on 16/03/2015 as under: "...We are in receipt of your letter dated 13/ 03/2015 asking us to produce Mr. Rajendraprasad Singla on 16/ 03/2015. We regret to inform you that Shri. Rajendraprasad Singla expired on 26/03/2013. He was residing at Margao and his detailed address is as under: H. No. 235/ 1, KarleVilla, Pulwado, Be .....

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was first identified, assessee had said about the share application money vide letter dated 05.12.2013, as below: "...The promoters of Paradise Inland Shipping Pvt. Ltd. belong to. a business family of considerable repute. The goodwill and credibility is acknowledged in the business circles. The investor companies had directly approached us during the mining boom in Goa. They wished to participate in the mining growth and as such were eager to invest in our Company. The investors have then .....

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eard and, Assessee did not know any of the directors of these companies. Assessee said he will not be able to produce these directors. Assessee never talked communicated with these companies either thru' email or telephone or post. Assessee says one Shri. Rajendra Prasad Singla, who is a family friend, got these investors but the assessee company doesn't have any business dealings with Shri. Singla too. The present claim is not verifiable since the supposed middleman, Shri. Singla has ex .....

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given by Shri. Deepak Patwari, the operator of investor companies who gave in statement that he is an accommodation entry operator who receives cash from customers and route it thru different bank accounts and at last route it to customer companies back as share application money etc. Assessee doesn't have any explanation about the statements given by the directors of the investor companies who said that they are just lowly paid employees signing on cheques and drafts' on behalf of Shri. .....

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s were given No explanation was offered how the companies came to know about the share issue. The latest explanation of communication via a family friend is given after 1 year of asking multiple times how the investor companies came to know about this and the claim is not verifiable since the supposed middleman has expired. No newspaper advertisement, etc. which publicized the share issue was given The Original receipt of application of these companies for share allocation was not given Even aft .....

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that he is an accommodation entry operator who receives cash from customers who route it thru different bank accounts and at last route it to customer companies back as share application money and gets a commission of ₹ 25 paise for every 100 Rupees. Assessee was also given a multitude of opportunities to explain the transaction. 17. Hence the explanation for sum found credited in the books of the assessee company found as not satisfactory. The sum credited is added under Section 68 which .....

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ed in Section 68 by the Finance Act, 2012, w.e.f. 1-4-2013. "Provided that where the assessee is a company, (not being a company in which the public are substantially interested) and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless - (a)the person, being a resident in whose name such credit is recorded in the books o .....

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e AO to CIT(A) and submitted as under vide written submission dated 29/4/2015 "Your appellant is a Private Limited Company carrying on the business of transportation of iron-ore by means of barges since 19th December 2009. A notice u/s 148 dated 14.03.2014 was issued requiring your appellant to file the return of income. In response to the said notice a letter dated 05.04.2014 was submitted stating therein the original return of income filed on 27.09.2010 may please be treated as filed in. .....

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any. The notice u/s 143(2) dated 09.07.2014 was issued asking your appellant to appear on 22.07.2014 which was complied. A summons u/s 131 dated 02.03.2015 was issued asking your appellant's director Shri. Yuri Alemao to appear in person on Friday 6th of March 2015 which was a public holiday (Holi). Shri. Yuri Alemao was informed over the telephone on 9th of March 2015 calling him to appear before the Assessing Officer on that day itself. A statement of Shri Yuri Alemao was recorded on that .....

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tsche Bank,K C Marg, New Delhi 15/12/2009 40,000 2 AKI organics Private Limited. 40,00,000 RTGS The Bank of Rajasthan Ltd, Karol. Bagh, Nev 12.12.2009 40,000 3 Continental Distributors Private Limited 30,00,000 000270 HDFC Bank, Stephen House, Kolkata 07.01.2010 30,000.00 4 Centak Distribut ors Private Limited 50,00,000.00 000258 HDFC Bank, Stephen House, Kolkata 01.01.2010 50,000.00 5 Kanupriya Commercial Private Limited 40,00,000. 691478 HDFC Bank, GC Avenue, Kolkata 10.12.2009 40,000.00 6 Orp .....

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nk, GC Avenue, Kolkata 21.12.2009 35,000.00 No notice u/s 143(2) or 142(1) was issued after 22nd July 2014 and till the order u/s 143(3) r.w 147 was passed on by the AO on 25.03.2015. On 9th March 2015 your appellant's CA Senior Chartered Accountant Shri R. K. Pikale was not allowed to argue the matter before the learned ACIT. Hence no assessment proceedings as such have taken place, no clarification was sought and no assessment proceedings have taken place between 22nd July 2014 and 25th Ma .....

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bout the documents submitted by your appellant On 9th March 2015. The learned AO also does not say that the companies who subscribed in to the share capital of your appellant company are non-existent or bogus or they have not invested any funds in the shares of your appellant's company. Under the Income Tax Act, the directors, share holders and the company have a separate status. A private company cannot seek share capital from public by advertising in the newspaper. None of the statements r .....

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itself the AO rejected it, drew adverse conclusions against your appellant and issued the assessment order without giving adequate opportunity to clarify or rebut some vague questions raised by him, thus acting beyond the scope of the provisions of the Act and law. Your appellant vide letter dated 16.03.2015 had reminded the learned AO to provide the copies of statements of some persons allegedly recorded at Kolkata and being referred to by him. We also requested the learned AO to arrange for th .....

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e law. However, in no case the amount of share money received can be regarded as undisclosed income under Section 68 of the assessee company. The assessing officer has issued a notice u/s 148 dated 14.03.2014 only to verify the genuineness of the investor which is not permissible under the Income Tax Act, 1961. Hence notice issued u/s 148 itself is bad in law. In pursuance of a notice issued to verify genuineness of investments made by some investors he has inexplicably proceeded on to treat it .....

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age documents which are unflinching records of the companies. The list of documents submitted on 09.03.2015 are as follows: 1. Sony Financial Services Ltd. - CIN U74899DL1995PLC068362-Date of Registration 09/05/1995 a) Memorandum of Association and Article of Association b) Certificate of Incorporation c) Certificate of Commencement of Business d) Acknowledgement of the Return of Income AY 08-09 e) Affidavit of the Director confirming the investment f) Application for allotment of shares g) Phot .....

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IN U74899DL1992PTCO51265 - Date of Registration 08/12/1992 a) Memorandum of Association and Article of Association b) Certificate of Incorporation c) Acknowledgement of the Return of Income AY 08-09 d) Affidavit of the Director confirming the investment e) Application for allotment of shares f) Photocopy of the share certificate g) Audited account and Directors report thereon including Balance- sheet, Profit and Loss Account and schedules for the year ended 31.03.2009 h) Audited account and Dire .....

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d) Acknowledgement of the Return of Income AY 09-10 e) Affidavit of the Director confirming the investment f) Application for allotment of shares g) Photocopy of the share certificate Audited account and Directors report thereon including Balance sheet, Profit and Loss Account and schedules for the year ended 31.03.2010 h) The Bank statement highlighting receipt of the amount by way of Cheque. i) Banks certificate certifying the receipt of the amount through Banking channels. 4. Centak Distribu .....

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The Bank statement highlighting receipt of the amount by way of Cheque. i) Banks certificate certifying the receipt of the amount through Banking channels. 5. Kanupriya Commercial Private Ltd. - CIN U51909WB2004PTC100 225 - Date. of Registration 20/ 10/2004 a) Memorandum of Association and Article of Association b) Certificate of Incorporation c) Acknowledgement of the Return of income 09-10 d) Affidavit of the Director confirming the investment e) Application for allotment of shares f) Photocop .....

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rporation c) Acknowledgement of the Return of Income 09-10 d) Affidavit of the Director confirming the investment e) Application for allotment of shares f) Photocopy of the share certificate g) Audited account and Directors report thereon including Balance sheet, Profit and Loss Account and schedules for the year ended 31.03.2010 h) The Bank statement highlighting -receipt of the amount by way of RTGS. i) Banks certificate certifying the receipt of the amount through Banking channels. 7. J P Eng .....

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e Bank statement highlighting receipt of the amount by. way of cheque. - i) Banks certificate certifying the receipt of the amount through Banking channels. 8. Rameswar Retailers Pvt. Ltd. - CIN U51909WB2003PTC097065 -Date of Registration 01/10/2003 a) Memorandum of Association and Article of Association b) Certificate of Incorporation c) Acknowledgement of the Return of Income 09-10 d) Affidavit of the Director confirming the investment e) Application for allotment of shares f) Photocopy of the .....

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) Acknowledgement of the Return of Income 09-10 d) Affidavit of the Director confirming the investment e) Application for allotment of shares f) Photocopy of the share certificate g) Audited account and Directors report thereon including Balance sheet, Profit and Loss Account and schedules for the year ended 31.03.2010 h) The Bank statement highlighting receipt of the amount by way of Cheque. i) Banks certificate certifying the receipt of the amount through Banking channels. 10. Omega Ventures P .....

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ent highlighting receipt of the amount by way of Cheque. i) Banks certificate certifying the receipt of the amount through banking channels. 4. The assessment order is passed based on the statement alleged to have been recorded at Kolkata and Delhi. Your appellant has not been given an opportunity to verify that the statement recorded is a voluntary statement or recorded under a threat or duress or with an evil design to protect the investors in those companies or their directors. 5. The assessm .....

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's CA was not allowed hence this statement is malicious. 8. All the investments in shares are received through banking channels and appearing as investment in the respective company balance sheets. 9. The shares are allotted at par and no premium is received on allotment. 10. The share capital received was immediately deployed for construction of barge for iron-ore transportation. It is therefore prayed that for all the reasons stated above the appeal may kindly be allowed. 11. All the trans .....

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lant further submits as under: 1. The Company was incorporated on 19th December 2009 and the Company did not commence any business during the previous year relevant to A.Y 2010-11 (period from 19.12.2009 to 31.03.2010). The business commenced only from July 2010 by putting into voyage newly constructed barge for transportation of iron ore. A.Y 2010-11 first assessment year of the company without any business. On the date of receipt of share capital your appellant company was not carrying on the .....

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under the control of investment companies. 3. The shares allotted to investment companies were at par, without any premium. The alleged statement of the learned AO that the shares are allotted at premium is incorrect. 4. The investment companies are carrying on the business of investments and trading activities besides alleged accommodation entries. There was a mining boom in Goa from 2005 till it was closed in September 2012 after the Supreme Court ban. Many investors all over the world investe .....

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nst the other five companies namely: i. Orpat Commercial Pvt Ltd ii. Rameswar Retail Pvt Ltd iii. Omega Ventures Pvt Ltd. iv. Sony Financial Services Ltd. v. AKI Organics Pvt Ltd 4. The Commissioner of Income Tax (Appeals), after considering the submission of the assessee deleted the addition and held as under: 5. "I have gone through the assessment order and the submission of the appellant. In this case, the appellant company was incorporated on 19th December 2009 i.e. during financial yea .....

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for A. Yr. 2010-11, relevant to F. Yr. 2009-10 at Rs. NIL. 6. During the course of assessment proceedings u/s.143(3) r.w.s.147, the A.O. asked for details of these investor companies and the same was furnished by the appellant. The A.O. issued a commission u/s.131(1)(d) to the DDIT (Investigation), Kolkata and requested him to verify credentials of these companies. Similar request was made to Asst. D.I.T., (Investigation), Delhi also. The A.O. received a report that none of the investor compani .....

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odation entries, admitted that he was in the business of providing accommodation entries in terms of capital and share premium. Equipped with this information, the A.O. asked the appellant to prove genuineness of its transactions. In response, the appellant stated that though they did not know the investor companies directly, but a family friend and reputed industrialist of Goa Shri. Rajendra Prasad Singla helped the appellant to get investment from these companies. The A.O. recorded the stateme .....

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there email or telephone or post. iii) Assessee says one Shri. Rajendra Prasad Singla, who is a family friend, got these investors but the assessee company does not have any business dealings with Shri. Singla too. iv) The claim of the appellant is not verifiable since the supposed middleman Shri. Singla has expired. v) The assessee did not have the acknowledgement of original application receipts either by post or some other communication. vi) No advertisement or communication was done via medi .....

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ompanies who said that they are just lowly paid employees signing on cheques and drafts on behalf of Shri. Deepak Patwari. On the basis of the above, the A.O. concluded that source of investment was not satisfactorily explained by the appellant company and consequently, he added entire share application money amount of ₹ 3.80 Crores as unexplained cash credit u/s.68 as income of the appellant company. On the other hand, the appellant, during the course of appellate proceedings raised follo .....

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ellant placed reliance on the decision of Hon'ble Supreme Court in the case of CIT, Salem Vs Kadar Khan, 352 ITR 481. (SC). Dated 29.09.2012. ii) No Notice u/s.143(2) or 142(1) was issued after 22.07.2014 and till the order was passed on 25.03.2015. On 9th march, 2015, appellant's counsel, Shri. R. K. Pikale was not allowed to argue the matter by the A.O. iii) After 22nd July 2014, no hearing took place, no clarification wassought for and the assessment was finalized with pre-conceived m .....

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, and the same was used to draw adverse conclusion in the case of the appellant. Inspite of specific request made vide letter dated 16.03.2015, for allowing cross-examination, the A.O. did not give the opportunity to cross examine, violating the principles of Natural Justice. ix) The A.O. issued a notice u/s.148 to verify the genuineness of investor, which is not permissible under: the provisions of the Act. In the reasons recorded, the A.O. does not mention of any income escaping assessment. Ap .....

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endra Prasad Singla. All the investors are companies, details of which are available on the site of Registrar of companies. Entire share capital has come through banking channels, through account payee cheques. Since these investors were initial investors, inspite of mining boom in Goa, no premium was charged and shares were issued, subscribed and allotted at par. The learned counsel further stated that valid share certificates were issued and all the relevant documents were submitted before the .....

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have been routed back to the company in the form of share capital on premium. What becomes clear from the order of the A.O. and investigation carried out by the Investigation wing that the source of funds in case of investor company is doubtful and that they are in the business of providing accommodation entries, but this does not prove that the appellant company also availed of accommodation entries and it routed its own un accounted income, back to itself in the form of share capital. If at a .....

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sessment and not for making verifications. Thus, in view of the totality of facts and circumstances, the A.O., in my opinion, was not justified in making an addition of ₹ 3.80 crores u/s.68 of the Act. The A.O. is directed to delete the addition of ₹ 3.80 crores accordingly:" 5. We have heard rival submissions and perused the orders of the lower authorities and the material available on record. 6. In the instance case assessee claimed to have received the following amounts from .....

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GA VENTURES PRIVATE LIMITED 35,00,000 The Assessing Officerhas not accepted the above as genuine transactions and added the entire amount as income of the assessee company. The main reason for addition in respect of share application money received from M/s. J.P. Engineering Corporation Pvt. Ltd ₹ 25.00 lacs, M/s Centak Distributors Pvt. Ltd ₹ 50.00 lacs, Paridhi Finvest Pvt Ltd ₹ 60.00 lacs, Kanupriya Commercial Pvt. Ltd ₹ 40.00 lacs and the Continental Fiscal Pvt. Ltd & .....

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ledgement vi. Affidavit of Directors confirming the investment. vii. Audited accounts and director report viii. Bank certificate certifying the receipt through banking channel 7. In view of this overwhelming evidences and the material furnished by the assessee, the transaction in question cannot be held as not genuine. The identity of share application cannot be doubted. 8. The statement made by the persons in question were self-serving statements and same cannot be taken as evidence against the .....

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share application of ₹ 3.80 crore to the income of the assessee u/s 68 of the Act. 9. On appeal the Commissioner of Income Tax (Appeals), deleted the addition by observing as under: "I have gone through the assessment order and the submission of the appellant. In this case, the appellant company was incorporated on 19th December 2009 i.e. during financial year 2009-10 relevant to A.Yr. 2010-11. After incorporation, the appellant company received share capital totaling to ₹ 3.8 .....

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he A.O. asked for details of these investor companies and the same was furnished by the appellant. The A.O. issued a commission u/s.131(1)(d) to the DDIT (Investigation), Kolkata and requested him to verify credentials of these companies. Similar request was made to Asst. D.I.T., (Investigation), Delhi also. The A.O. received a report that none of the investor companies could be located at the given addresses. In view of such adverse report, the A.O. reopened the case of the appellant u/s.147 of .....

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uipped with this information, the A.O. asked the appellant to prove genuineness of its transactions. In response, the appellant stated that though they did not know the investor companies directly, but a family friend and reputed industrialist of Goa Shri. Rajendra Prasad Singla helped the appellant to get investment from these companies. The A.O. recorded the statement of Shri. Yuri Alemao and he reiterated the same thing. He admitted that he did not know Directors of these companies. The A.O. .....

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stors but the assessee company does not have any business dealings with Shri. Singla too. xiii) The claim of the appellant is not verifiable since the supposedmiddleman Shri Singla has expired. xiv) The assessee did not have the acknowledgement of original application receipts either by post or some other communication. xv) No advertisement or communication was done via media to let investors know about the share issue. xvi) Assessee did not have any explanation about the statement given by Shri .....

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On the basis of the above, the Assessing Officer concluded that source of investment was not satisfactorily explained by the assessee-company and consequently, he added the entire share application money of ₹ 3.80 Crores as unexplained cash credit u/s.68 to the income of the assessee company. On the other hand, the appellant, during the course of appellate proceedings raised following points in its support. i) During the course of reassessment proceedings, summonS u/s.131 wasissued to Shr .....

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R 481. (SC). Dated 29.09.2012. ii) No Notice u/s.143(2) or 142(1) was issued after 22.07.2014 and till the order was passed on 25.03.2015. On 9th march, 2015, appellant's counsel, Shri. R. K. Pikale was not allowed to argue the matter by the A.O. iii) After 22nd July 2014, no hearing took place, no clarification wassought for and the assessment was finalized with pre-conceived mind. iv) The appellant submitted voluminous documents on 9th march 2015, but the A.O. has not even made a mention o .....

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de letter dated 16.03.2015, for allowing cross-examination, the A.O. did not give the opportunity to cross examine, violating the principles of Natural Justice. viii) The A.O. issued a notice u/s.148 to verify the genuineness of investor, which is not permissible under: the provisions of the Act. In the reasons recorded, the A.O. does not mention of any income escaping assessment. Apart from raising above technical grounds, the learned counsel of the appellant argued on facts as under: The appel .....

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companies. Entire share capital has come through banking channels, through account payee cheques. Since these investors were initial investors, inspite of mining boom in Goa, no premium was charged and shares were issued, subscribed and allotted at par. The learned counsel further stated that valid share certificates were issued and all the relevant documents were submitted before the A.O., which he chose to ignore, while framing assessment order. Therefore, the appellant has proved the identity .....

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premium. What becomes clear from the order of the A.O. and investigation carried out by the Investigation wing that the source of funds in case of investor company is doubtful and that they are in the business of providing accommodation entries, but this does not prove that the appellant company also availed of accommodation entries and it routed its own un accounted income, back to itself in the form of share capital. If at all the funds invested in the appellant company are unaccounted the add .....

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my opinion, was not justified in making an addition of ₹ 3.80 crores u/s.68 of the Act. The A.O. is directed to delete the addition of ₹ 3.80 crores accordingly:" 10. Before us the Departmental Representative supported the order of the Assessing Officer and submitted that in view of the statements of the persons recoded by the department the addition made was fully justified. 11. On the other hand, the Authorized Representative of the assessee submitted that the receipt of share .....

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lso proved by the assessee. In these circumstances, the initial onus which was upon the assessee u/s 68 of the Act to explain the nature and source of credit was duly discharged by the assessee. Thereafter, the Assessing Officerignored all these evidences by solely relying upon the statements which were inadmissible in law. He explained that these statements were recorded at the back of the assessee. These statements were self-serving statements made by those persons. The assessee requested for .....

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ve facts submitted that the additions made is unsustainable under the law and placed reliance on the decision of the Hon. Gujarat High Court in the case of Pr. Commissioner of Income Tax vs. Chartered Speed Pvt. Ltd.[2015(3) TMI 809 - GUJARAT HIGH COURT] wherein it was held as under:- "5. As recorded by the Tribunal, the Tribunal found that the initial burden was discharged by the assessee. In our view, once the Tribunal upon the appreciation of the material found and recorded the finding o .....

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und that the statement of those persons cannot be read against the assessee. 6. The attempt made to contend that the burden is upon the assessee to prove the identity of the person, creditworthiness of the person and the genuineness of the transaction are to be examined in context to the existence of the person concerned, the factum of actual money in possession of the person and having paid to the assessee and the mode of payment. Thereafter, if the person concerned is in existence and has actu .....

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the statement of the persons, but unfortunately, they were not made available for cross-examination and therefore, the statements could be used as an evidence against the assessee. No other evidence was available with the Revenue. 7. Under these circumstances, if the Tribunal has found that the explanation under section 68 of the Act was acceptable in absence of non-discharge of the burden upon the Revenue, such a finding of fact would not call for interference when the appeal before this Court .....

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he initial burden is discharged by the assessee, it would be for the Revenue to show that the transaction was bogus leading to conclusion for discarding of the explanation. In the present case, as observed by us hereinabove, the burden was not discharged and therefore the Tribunal has held in favour of the assessee. We do not find that any substantial question of law would arise for consideration in the present appeals, as canvassed. 8. Hence, the appeals are meritless and therefore, dismissed.& .....

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14. We find that in the instant case the addition is made u/s 68 of the Act on the ground of unexplained cash credit. As per the provisions of sec. 68, the initial onus lies upon the assessee to prove the nature and the source of amount credited in his books of accounts. We find that this initial onus was discharged in the instance case by the assessee by furnishing the documents like memorandum of association, article of association, share application, certificate of incorporation, acknowledge .....

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