TMI Blog2013 (4) TMI 754X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by the assessee returning the same income, but claiming credit for TDS of ₹ 3,72,793/-. Notice under section 143(2) was issued to the assessee on 11-9-2008 to proceed with scrutiny assessment. After the issue of the said notice, there was a survey carried out at the business premises of the assessee under section 133A of the Act on 26-2-2009. On the basis of the details collected in the course of survey and other details available in the accounts and records of the case, the Assessing Officer issued a detailed questionnaire to the assessee seeking clarifications on various points. After going through the replies filed by the assessee against the questionnaire and also after considering the explanations offered by the assessee in respect of other queries made by the Assessing Officer, he zeroed down the area of his enquiry to the amounts collected by the assessee-company towards its share capital, in the previous year relevant to the assessment year under appeal. The Assessing Officer found that the assesseecompany has issued shares to different parties in the relevant previous year. The shares issued by the assessee-company were of the face value of ₹ 10/- per sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies and later on sold the gold again to the assessee-company and thereafter the proceedings were paid over to the assessee-company for acquiring the shares. The Assessing Officer explained that this sort of cycling and recycling of funds do not carry any conviction and that the initial statements provided by the assesseecompany and Shri Shahul Hameed were diametrically opposite and contradictory. He observed that all the subsequent explanations offered by Shri Shahul Hameed and the assesseecompany were only damage control exercises to save the face of the assessee and to save out of the adverse inference arising out of the initial statements made by them, which were contradictory. In the case of Smt. Savithri also, the Assessing Officer found that the assessee-company had initially paid the money to Smt.Savithri on the ground that the moneys were due to her on account of her late husband and immediately thereafter the moneys were collected by the assessee-company and allotted shares to her. In the case of Shri Prakash Chand Jain also, the moneys were collected by the assessee-company against allotment of shares without explaining the reason as to why Shri Prakash Chand Jain had acq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of Income-tax(Appeals) deleting these additions and, therefore, the second appeal before us. 10. While making the assessment, the Assessing Officer has also made another addition of ₹ 10,45,913/-. According to the assessee the said amount was spent towards the expenditure incurred in presenting compliments and the other gift articles to customers. The Assessing Officer disallowed the claim on the ground that the assessee had not produced any evidence to support the purchase of those materials and incurring of the said expenditure. Accordingly, the said amount of ₹ 10,45,913/- was disallowed and added to the income of the assessee. 11. In first appeal, the Commissioner of Incometax( Appeals) held that the assessee has not produced any evidence to support the incurring of such expenditure and, therefore, the Assessing Officer was justified in making the addition of ₹ 10,45,913/-. He confirmed the said addition. 12. The assessee is aggrieved by the above finding of the Commissioner of Income-tax(Appeals) and therefore filed the second appeal before the Tribunal. 13. As already stated, the Revenue is aggrieved by the order of the Commissioner of Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Shahul Hameed has not proved the source available in his hands to make the first purchase of gold from the assessee-company. These aspects have not been considered by the Commissioner of Income-tax(Appeals); (vii) that in the case of Smt. Savithri also, the explanations offered by the assessee are so unbelievable that the Commissioner of Incometax( Appeals) ought to have not accepted such arguments to undo the addition made by the Assessing Officer; (viii) that the Commissioner of Income-tax(Appeals) ought to have considered the judgment of the Hon ble Supreme Court in the case of CIT vs. Ashwini Lease Finance Pvt. Ltd., 309 ITR 320, wherein the court has held that cognizance of circular on trading in shares entered for evading tax should be taken into account by courts; and (ix) that the Commissioner of Income-tax(Appeals) ought to have considered the distinction between public issue and private placement of shares, as held by the Hon ble Delhi High Court in the case of CIT vs. Divine Leasing Finance Ltd., 299 ITR 268. 14. In the light of the above detailed grounds, Shri Suneel Verma, the learned Commissioner of Income-tax appearing for the Revenue, argue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT vs. Deepak Iron and Steel Rolling Mills, 336 ITR 307 (P H). 2. Malik Bros.(P) Ltd. vs. CIT, 212 CTR (Del) 469. 3. Avinash Gupta vs CIT, 164 Taxman 170 (P H). 4. Technical Glass Industries vs. CIT, 281 ITR 61 (All.). 5. Silk Museum vs. CIT, 257 ITR 22(Guj.) 6. R.Kanakammal vs. CIT, 244 ITR 152(Mad.). 7. CIT vs. G.Anandarajan, 228 ITR 664(Ker.) 8. Amal Kumar Chakraborthy vs. CIT, 207 ITR 376(Cal.), etc. 17. Shri U.M.Khalilullah, the learned chartered accountant, appeared for the assessee and argued the case. He submitted that the parties disputed by the Assessing Officer had in fact invested in the share capital of the assessee-company for valid reasons. The assessee-company was contemplating expansion of its business by opening branches in different places. This proposition was made known to a few persons, who showed keen interest to invest in the company. The assesseecompany had spent crores of rupees in the past on advertisement and other promotional activities and has built up a very good name in the field of jewellery business. This big name built up by spending huge amounts of money and lot of efforts made in the past, is an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the gold made by Shri Shahul Hameed from the assessee-company is properly accounted and vouched. The amounts were paid by cheques. The cheques were cleared through banks. Later on, the gold was sold back to the assessee-company. This is also accounted. The payment was again through bank. The very same amount was invested by Shri Shahul Hameed in the share capital and share premium accounts of the assessee-company. The payments relating to the subscription of shares have already been made through cheques. He himself appeared before the Assessing Officer. Whatever is possible, has been done by the assessee and in such circumstances there is absolutely no reason to hold that the amount of ₹ 5,75,00,000/- invested by Shri Shahul Hameed in the share capital and share premium account of the assessee-company has not been proved. 21. In the case of Smt. Savithri, the learned chartered accountant explained that she is the wife of late M.S.Kandasamy, who was the founder chairman of the assessee-company. There was some amount due to him at the time of retirement. On his death, the amount was agreed to be paid to his wife Smt.Savithri by all the legal heirs. An amount of ₹ 1,41, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheques, demand drafts and bank transfers, is one of the ingredients to prove the genuineness of the payment. But, at the same time we have to be cautious to the fact that such transactions made through banks do not conclusively prove that those transactions have been entered in the same way explained by an assessee. The fact that a payment has been made by cheque or draft by itself does not conclusively prove that the person making such payment had enough resources in his hands to make such payment. It is always possible to transact through banking channels and still manipulate the original character of the amount as to whom it belonged and how it was earned. Therefore, we cannot decide this appeal only on the ground that the payments objected in this case have been effected through banking channels. 27. Next we have to examine whether the explanations offered by the assessee on the question of the parties investing in the share capital of the assessee-company are acceptable as plausible explanations. The managing director of the assesseecompany and his wife together held 98.50% of the share capital of the assessee-company. In other words, the managing director of the assessee- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nied any such sale of jewellery and gold made by his company to the assesseecompany. The statement of the assessee-company was instantly denied by Shri Shahul Hameed. Later on, when he appeared before the Assessing Officer in response to the summons, he changed his earlier stand and fine-tuned his statement to help out the assessee-company. Subsequently, he has stated before the Assessing Officer that he has sold such jewellery and gold to the assessee-company. When the Assessing Officer asked for the resources available in his hands to purchase the old jewellery and gold, he furnished the details of money received from certain parties like M/s.Arihant Foundations and Housing Ltd. and M/s. Ultramarine Property Developers Pvt. Ltd. According to the details furnished by Shri Shahul Hameed, the amounts were received during the period from 18-7-2007 to 1-10-2007, whereas according to him the jewellery and gold were purchased during the period 18-11-2006 to 20-2-2007. This itself clearly shows that according to Shri Shahul Hameed the amounts were collected by him much after the purchase of jewellery and gold. According to him the purchases were made from the assessee as well as from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-company has allotted shares to Smt.Savithri also at a premium of ₹ 1,490/- against the face value of ₹ 10/- per share. Here also the flow of fund is very circular. It first goes from the books of the assessee-company, and then it comes back to the assessee-company through the medium of Smt. Savithri. We are of the view that Smt. Savithri might be a convenient name lender in the whole exercise carried out by the assessee-company. It is also to be seen that she did not appear before the Assessing Officer. 32. In the cases of Shri Prakash Chand Jain and M/s.Heritage Creations Pvt. Ltd., they did not appear before the Assessing Officer. Enquiries were made through the Income-tax Office at Delhi. They reported that these parties are not much resourceful so as to invest in the share capital of the assesseecompany. Except the address provided in the paper, there was nothing available before the Assessing Officer to verify the genuineness of the investments made by the so called parties. It is stated that Shri Prakash Chand Jain is a big business-man in Dubai. Ofcourse the money came through his bank account. But there is no other communication from him. 33. In the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee-company has discharged its onus of proving the genuineness of the amounts received by the assessee-company in the previous year by way of share capital money and share premium money. 36. We find that the Assessing Officer has rightly held that the amounts brought in by the assessee-company into its share capital and share premium accounts are unexplained and they are to be treated as the income of the assessee-company. Therefore, we confirm the additions of ₹ 5.75 crores; ₹ 1,41,60,000/-; ₹ 5 crores and ₹ 9,80,00,000/-. The order of the Commissioner of Income-tax(Appeals) on this point is reversed and the order of the Assessing Officer is restored. 37. The Revenue is successful in its appeal filed before us. 38. Next we will consider the appeal filed by the assessee. The only ground raised by the assessee in this appeal is that the lower authorities have erred in disallowing the expenditure incurred by the assessee on gifts and compliments, which amounted to ₹ 10,45,913/-. 39. It is the case of the assessee that on a turnover of ₹ 150 crores, the expenditure incurred by the assessee on gifts and compliments amounting to ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
