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TMI Blog2017 (10) TMI 1212X X X X Extracts X X X X X X X X Extracts X X X X ..... aterials with mineral like lime stone etc. Assessee filed return of income declaring income of Rs. 20,05,940/-assessed u/s. 143 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). The Assessing Officer assessed income of the assessee at Rs. 5,81,13,480/- and made addition of Rs. 1.5 Crore on account of share premium received from six companies as well as other additions made u/s. 40(a)(ia) of the Act. The contents/ the discussion given in para 5 and 6.2 of the assessment order are relevant. 4. In the First Appellate Proceedings, the CIT(A) confirmed the above said addition of Rs. 1.5 Crore. However, he deleted the other additions made by the Assessing Officer invoking the provisions of Section 40(a)(ia) of the Act. Aggrieved with the order of confirming addition of Rs. 1.5 Crore, the assessee is in appeal before the Tribunal. On the other hand, aggrieved with the deletion of addition made u/s. 40(a)(ia) of the Act, the Revenue is in appeal before the Tribunal. Therefore, these present cross appeals are filed for adjudication of the issues raised in the appeals. 5. In connection with the assessee's appeal, Ld. Counsel of the assessee submitted that the CIT(A) erro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjournment and the hearing was again refixed on 25/02/2013. On 25th Feb CA, K. K Kabra submitted the information in tapal and attended with manager of the assessee company Mr. Rohit Chandak. The A.R of the assessee reiterated the contention that the said companies have made investment out of reserves, etc. The A.R also filed the working of share price, which comes to Rs. 133/- per share and accordingly held that the shares offered @ Rs. 100/- are not excessive as compared with the fair market value as calculated by the A.R of the assessee at Rs. 133/- per share. I have considered the entire facts. Though the said share capital is shown to be received from above mentioned six companies, which are assessed to income tax, but it appears that the said companies are created for name lending purpose. The said investment is appeared to be made by the said companies out of similar investment shown to be received by the said companies. In view of above mentioned facts the amount of Rs. 1,50,00,000/- shown to be raised by the assessee from the said six companies is treated as income of the assessee from undisclosed sources. Penalty proceedings u/s.271 (1) (c) of the Income Tax Act, 1961 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of the opinion that the said companies constitutes the ones with the accommodation entries only and therefore, they are not genuine companies. Accordingly, he confirmed the addition made by the Assessing Officer as per the discussion given in para 6.5 of assessment order and the same is reproduced as under:- "6.5 I have also examined the so-called joint venture agreement entered between the appellant and the six investors. The said terms and conditions of the agreement are such that the joint venture would not take place. For instance, the six investors had to obtain the environment clearance from the Mantralaya/Govt. Of Maharastra Within no time, it was declared that the said six companies had failed to fulfill the terms and conditions of the agreement. Therefore, these six companies had no option, but to accept the offer made by the appellant. The offer was that the appellant company was to buy back the shares at the face value. The six companies had to forgo/forfeit the premium/investment. The joint venture agreement itself is sham agreement meant to be discarded as soon as its purpose is served. The terms and conditions of the said agreement are such that the onus of obtai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h these companies do not consider as genuine business transactions. 11. Further, Ld. DR submitted that there was search and seizure action conducted on M/s. Eshan Minerals Pvt. Ltd. on 12.09.2013 which resulted in seizure of pre-signed blank application form for allotment of equity shares, pre-signed blank sales bills, pre-signed blank receipts, pre-signed blank transfer forms and pre-signed blank declaration etc. It is inference of the Ld. DR that these six companies are involved in providing bogus accommodation entries under the garb of investing in share capital. Shri Jagdish Purohit is the key person in orchestrating these transactions involving dummy directors and Shri Pradeep Gupta. Mentioning about Shri Jagdish Purohit, Ld. DR submitted that he is an entry operator who operated and managed a number of companies for the purpose of providing accommodation entries. The facts of Shri Jagdish Purohit to the extent of convincing that these six companies under consideration are mere paper companies, Ld. DR referred to the statement recorded on oath in certain seizure action u/s. 131 of the Act in the case of Pride Group of Pune, M/s. Benco Finance of Mumbai and M/s. Spectrum Vintr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panies" as alleged by the Ld. D.R for the revenue. Further, we examined the requirement of remanding the issues to the file of Assessing Officer. In our view, the enquiries undertaken by the Assessing Officer in the first round do not indicate that the Assessing Officer successfully examined if all the Directors of all these six companies along with all the Directors of assessee Company are financially interfaced. The financial activities of six companies were not deeply probed by the Assessing Officer. Assessing Officer merely spoken about meager income of the six companies. Assessee's submissions relates to the floating of joint venture was not thoroughly examined. Assessing Officer never examined the details of the violations if any in clearing the new business venture. The fact relating to inflow of funds amounting to Rs. 1.5 Crore proposed involving the said companies were not examined by Assessing Officer. Therefore, we are of the view that Assessing Officer failed to bring out the facts for deciding if the said six companies constitutes "Shell Companies". Assessing Officer is directed to gather relevant facts and examine the persons involved in these transactions involving t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is proper and not Rs. 9,00,000/-. Accordingly, CIT(A) restricted the addition of Rs. 90,000/-and granted relief of Rs. 8,10,000/-. After hearing both the parties, we find that the same is reasonable and it does not recall any interference. Accordingly, relevant ground of Revenue is dismissed. 18. Coming to the other addition of Rs. 4,02,07,541/-, assessee submitted that he purchased raw material from M/s. Shreeya Industries and M/s. Viana Lime Industries. Assessee made all these payments and made the TDS in respect of the payments of job processing charges. However, no TDS was done on the payments for raw materials purchased. Assessing Officer invoked the provisions of Section 40(a)(ia) in respect of these payments for purchase. 19. Before CIT(A), the assessee submitted that the payments for raw material charges do not involve the deduction of TDS. Therefore, the applicability u/s.40(a)(ia) does not arise to these payments. These payments do not constitute any interest/commission for attracting the TDS provisions. Accordingly, the provision of section 40(a)(ia) and Section 194C are not applicable in this regard. Considering the said submission of the assessee, the CIT(A) granted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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