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TMI Blog2019 (2) TMI 655X X X X Extracts X X X X X X X X Extracts X X X X ..... into a public limited company. It carries on the business of managing and operating coal mines in West Bengal, Jharkhand and Maharashtra which are for captive use. Henceforth, this organization will be described as EMTA. The Income Tax department in or about 2009 became suspicious of this company and of the people involved with it. The main cause of this impression was an apparently exaggerated expenditure shown by the appellant in its accounts. According to the Respondent Revenue, this expenditure was spiked up by a cleverly planned business operation. The sole intention was to evade income tax. The assessment years taken into account by the respondent Revenue were 2007-2008, 2008-2009 and 2009-2010. In August, 2013 survey proceedings und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that no transactions actually took place. (supra 9 & 12) (vi) All the given addresses of these shell companies, their directors and the alleged suppliers are of premises either owned or rented by the Jains. (supra 8 & 9) (vii) The money trail or the modus operandi for withdrawal of money paid by the applicant proves that the expenditure booked through the said four companies is bogus. (supra 5, 7, 9 & 12) (viii) Thus, it would be seen that the Jains have created an elaborate facade of these four shell companies." These four shell companies had 53 alleged sub suppliers and service providers. They were purported to be paid by cheque by the shell companies. The most intriguing discovery by the Income Tax Department was that thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s prayed for by the appellant. In the report the said Commissioner of Income Tax, Central circle - 3(1), Kolkata opined that the application for settlement was not genuine and was made to avoid penalty and prosecution. The appellant filed a reply to the said report. The Assessment Years before the commission were 2011-2012, 2012-2013 and 2013-2014. The hearing was concluded on 24th April, 2014. The respondent filed an additional report on 21st May, 2014 before the Commission. The Revenue was shell shocked by the order of the Commission pronounced on 10th June, 2014. The Commission added Rs. 15 crores for the Assessment Year 2011-2012, Rs. 15 crores for the Assessment Year 2012-2013 and Rs. 6 crores for the Assessment Year 2013-2014 increa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g direct expenses and depreciation so as to arrive at gross profit. The Commission made an addition of Rs. 15 crore for the assessment year 2011-12, Rs. 15 crore for the assessment year 2012-13 and Rs. 6 crore for the assessment year 2013-14, to the income of the appellant. The Revenue was aggrieved by the allegedly arbitrary addition, without any reasons of Rs. 15 crore to the income declared by the assessee for each of the year 2011-12 and 2012-13 and Rs. 6 crore for the year 2013-14. According to them all the alleged companies were shell companies with no real existence. There was no evidence of any supply made or service rendered by any of these companies. Neither there was any evidence of supply or service from the other sub contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 272 crores which were termed "bogus" by the revenue. He said the gross profit percentage should be taken as the bench mark. This was done by the Settlement Commission by adding Rs. 36 crores. Adding the entire unexplained expenses of Rs. 272.15 crores paid by the shell companies would produce an absurd result. If the order of the Settlement Commission arrived at, is not arbitrary or perverse but plausible the court will not interfere with it. (See the Division Bench judgment of the Delhi High Court in Commissioner of Income-Tax Vs. Gopal Gupta reported in (2014) 364 ITR 446 (Delhi). The second argument was that the ratio of expenses to gross receipts as adjudged by the Settlement Commission is in accordance with the usual ratio for these f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its duty to give an account for the rest of the money. It was also the duty of the Settlement Commission to ensure that the assessee did furnish proper accounts. In default adverse inference was drawn against them. The Commission was entitled to pass a best judgment order but doing so on the basis of gross receipts and expenses ratio or profit is not at all the wholly acceptable procedure. Some further enquiry was required. Equally the arbitrary was the method of addition of Rs. 36 crore to the expenses of the assessee. On what basis the Settlement Commission got this figure? Most probably it was using the figure to bring the receipt expenses or profit/expenses ratio of the assessee within the acceptable range. In the case of Ajmera Hous ..... X X X X Extracts X X X X X X X X Extracts X X X X
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