TMI Blog2023 (5) TMI 1100X X X X Extracts X X X X X X X X Extracts X X X X ..... d from the profit and loss account, sales is higher than the purchases in rupees terms, therefore, the addition would be only required to be made to the extent of lower gross profit on alleged bogus purchases then the regular gross profit. It is not the case of the AO that amount invested in acquiring the bogus purchases should also be considered as an addition, because the only addition is disallowance of bogus purchases, no further addition is warranted. Disallowance of commission expenditure - HELD THAT:- As commission has been paid on export of diamond stating the details of exports made by the assessee, respective commission and details of service tax collected thereon. The assessee has also produced the details of other commission expenditure incurred by the assessee at page number 65 onwards, which are also identical. There is no reason to differentiate between the nature of services rendered by the commission expenditure accepted by the assessee as genuine and the details of alleged bogus commission expenditure. We do not find any infirmity in the order of the learned CIT A in deleting the disallowance of commission expenditure. Therefore, ground number 3 of the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was found that assessee has debited expenses in the form of commission from four different parties. The enquiries were conducted and found that all the 4 companies have the same address and there are not available on the addresses mentioned in the income tax return and no business activity is being carried out from those premises. The statement of directors and shareholders were recorded who denied having any knowledge of business activities of these companies. The total commission expenditure incurred by the assessee company is amounting to ₹ 16,630,422/ . 05. Based on the above information, notice under section 148 of the income tax act was issued on 28/3/2019 after recording the reasons and obtaining approval from The Principal Commissioner of Income Tax central 1, Mumbai. Accordingly, the reasons were recorded that (i) assessee has made non genuine payment of ₹ 10.32 crores and (ii) bogus commission payment of ₹ 16,630,422/ during the year under consideration and has not disclosed these fact in its return of income or during the assessment proceedings completed under section 143 (3) of the act and therefore the learned assessing officer has reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibutors private limited assessee has purchased diamonds of ₹ 53,892,888. Assessee explained that this is in actual delivery of goods, which were subsequently sold on export. The assessee submitted the Ledger account, purchase invoices, bank statement, corresponding sale invoices and 1 to 1 mapping of goods purchased from this company and subsequently exported. The learned assessing officer was also shown that the transactions are in the ordinary course of business at arm's-length price with actual delivery of goods. Therefore, same are genuine. The learned AO issued later on 30/10/2019 to RA Distributors private limited under section 133 (6) of the act asking for certain information, the latter returned back with remark of postal authorities of left . This was informed to the assessee's and assessee was directed to produce the party. Assessee on 16/12/2019 stated that the transaction with that party to place eight years back after that there is no transaction with the assessee and assessee is now not in touch with that party. Therefore, assessee is not in a position to give the reasons why the notice is un served. The learned AO rejected the contention of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f show Distributors private limited and with the exempt private limited whether they can be termed as bogus entities whose name A. The fourth or sixth layer only based on said transaction flowing down, crossing 4 - 6 layers or more layers and ultimately lending to the account of Ram Shyam exports private limited company. He found that neither of these companies can be said to be bogus entities providing accommodation entry and not the payment to these three persons/companies will resume the colour of non-genuineness only based on information of investigating wing Surat. He found that assessee has submitted the evidences in the form of Ledger accounts, purchase invoices, bank statements as well as 1 to 1 mapping of corresponding purchases and sales. The AO has acknowledged these evidences but has not rejected them. He further found that Nayan Exim private limited has sold Rs. 5.29 crores, out of which only 2.49 crores doubted by the AO, MD of show Distributors private limited has sold goods worth ₹ 6.97 crores out of which the AO has touched only Rs. 2.19 crores whereas in writ the exempt private limited assessee has purchased 7.40 crores out of which only ₹ 1.58 crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e gross profit on purchases at the same rate of other genuine purchases could have only have been made. After that, he found that the gross profit of 6.81% from the above said purchases and the gross profit of the assessee from the audited books of account is 6.73% and the gross profit related to bogus purchases exceeds the gross profit from genuine purchases there is no scope of making further addition. Accordingly, the addition was deleted. 013. With respect to the commission expenditure disallowed of ₹ 8,315,211, the learned CIT A though notices under section 133 (6) of the act were issued to the four parties but only one party furnish the reply and no information was received from the other three parties, but the assessee has submitted the debit notes, details of tax deducted at source, bank statements and financial statements along with the income tax return of those parties. With respect to the statement of the directors, he held that the statement was recorded under section 132 of the act in earlier research in case of the appellant in the year 2010 and assessment was completed under section 153A of the act wherein all the transaction of the appellant which above- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n details and therefore it is merely a general statement, which does not show any core relation between purchases and sales. With respect to the decision of the honourable Bombay High Court it was submitted that that decision does not help the case of the assessee. Further, the gross profit rate taken by the learned CIT A is also not correct, as there is no basis for taking gross profit rate of unaccounted purchases. 015. With respect to the commission expenditure, it was submitted that learned assessing officer has clearly doubted the rendition of services by the parties to whom the commission have been paid. The order of the benefit and does not show how the services have been rendered. The particulars of the services are mentioned are very general and therefore the learned and CIT A has deleted the addition without proper verification. She further relied on the decision of honourable Gujarat High Court in case of Gujarat insecticides 40 Taxman 166. She further relied on the decision of honourable Calcutta High Court in case of CIT versus Swati Bajaj 446 ITR 56 and specifically referred to paragraph number 65 to 69. 016. The learned authorized representative referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he services is not acceptable. 017. On the query by the bench, the assessee submitted the details of the process of the purchases as well as the gross profit working of the assessee. It was submitted that the gross profit margin of the trading segment of the bogus purchases was computed by the learned CIT A at 6.81% whereas the cross profit margin of the other genuine purchase transaction and its corresponding sale is 5.55% assessee submitted the carrot wise quantitative details of the alleged bogus purchases and the other purchases not disputed. He further showed the invoices of the other parties which are accepted by the learned assessing officer and the invoices of the alleged bogus parties where the description is similar, therefore, he submitted that it is not the practice to mention the number of diamonds involved in the purchases but it is only sold in carrats. 018. It was also the claim of the learned authorized representative that in case of the parties, which are alleged to be bogus, the learned assessing Officer has accepted the purchases from the same parties partly. Accordingly his claim was that it is not the only one reason by which the learned CIT A is del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned in the report, transaction mentioned at Level 1 are foreign outward remittances made by the 12 companies/entities related with Afroz Mohamed Hasanfatta from their bank accounts. The transactions mentioned at Level 2 are funds received by these 12 entities from various Indian Entities. Transactions mentioned at Level 3 are fund received by the entities mentioned at Level 2. Similar downwards transactions are mentioned in subsequent level. 3. So far as transactions related with M/s. Asian Star Company. Ltd. is concerned, the following amount is shown to have been received by a company out of the 12 entities as mentioned in the report: Number as mentioned in the report Name of the Entity Name of the Beneficiary Party Date of Transaction Amount (Rs.) 54 M/s Asian Star Company Ltd. M/s Ram Shyam Exports Pvt. Ltd. 29.02.2012 2.49 Cr 54 M/s Asian Star Company M/s Ram Shyam Exports Pvt. Ltd. 29.02.2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shyam Exports Pvt. Ltd, as described in Para 3 Para 4 of this letter. 7.3 Thus the genesis of information was the bogus foreign outward remittances made by the 12 companies/entities related to Afroz Mohamed Hasanfatta from their bank accounts. These 12 companies have been termed, as Level 1 entities. On further verification, it was found that the appellant, M/s. Asian Star Company. Ltd. had transactions with (i) Level 4 entities Le., M/s. Nayan Exim Pvt. Ltd. on 29.02.2012 for an amount of Rs. 2.49 Cr. It is further mentioned in the order that subsequently, M/s. Nayan Exim Pvt. Ltd., had transferred funds to M/s Ram Shyam Exports Pvt. Ltd. through different layers. (ii) Level 6 entity Le., M/s M.B. Offshore Distributors Pvt. Ltd. on 29.02.2012 for an amount of Rs. 2.19 Cr. It is also mentioned in the order that subsequently, M/s. M.B. Offshore Distributors Pvt. Ltd. has transferred funds to M/s Ram Shyam Exports Pvt. Ltd. through different layers. (iii) Another Level 6 entity i.e., M/s. Riddhi Exim Pvt. Ltd. on 29.02.2012 for an amount of Rs. 1.58 Cr. It is also mentioned in the order that subsequently, M/s. Riddhi Exim Pvt. Ltd has transferred funds to M/s R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing accommodation entries nor the said payments made by the appellant of Rs. 2.49 crore, Rs. 2.19 Crore and Rs. 1.58 Crore to these three concerns will assume the colour of non-genuineness solely on the basis of information of Investigation Wing, Surat. The reasons are as under- 7.7.1 Evidences submitted being disregarded. The evidences that the appellant submitted during the assessment as well as appellate proceedings are- 1. Ledger accounts of the transactions with the purchase parties 2. Purchase invoices 3. Bank Statements of the appellant highlighting the payment to M/s Nayan Exim Pvt Ltd, M/s M B Offshore Distributors Pvt Ltd and M/s Riddhi Exim Pvt Ltd. And 4. One to one mapping of corresponding purchases and sales. 7.7.1.1 Although the AO has acknowledged receipt of these evidences, he has not commented on the merit of these as seen from para 5.7 of the order. He has neither highlighted lacuna in these evidences nor rejected it. His complete silence on the documentary evidence while accepting only the information received from Investigation Wing, Surat is one sided will not give credence to his conclusion. 7.7.2 A no. of Transactions - The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ram Shyam Exports Pvt. Ltd., which was investigated by the Custom Authorities. As per the information received, the Custom Authorities found that the bills of entries were bogus and there was no such import made by the companies related with Afroz Mohamed Hasanfatta. M/s. Ram Shyam Exports Pvt. Ltd. was one of such companies. The AO has stated that on receipt of the information of bogus import, the Enforcement Directorate (ED) conducted investigation and filed a charge sheet against some persons on 18.07.2014 related with Afroz Mohamed Hasanfatta. 7.7.3.1 If that is the case, whether all the entities which form the trail, from level 2 onwards to level 6, 7 or to the nth no. will automatically become bogus or non-genuine without bringing further material on record. In my considered view, it is the duty of the AO to establish that all the entities in the trail are working in a syndicate manner, in harmony, in promotion of the nefarious activities on Afroz Mohamad Hasanfatta. Moreover, it is also the duty of the AO to provide such evidences, which establish that the three entities are working in a co-ordinated fashion, of issuing bogus bills, in tandem with the entities of Afroz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direct connection of these three parties with the concerns controlled by Mohammed Afroze Hassan Fatta and as to how the payments made by the appellant have turned into hawala transaction. On the other hand, the appellant has submitted overwhelming evidences which have not been contradicted by the AO. 7.7.8 Reg. M/s R.A. Distributors Pvt Ltd- With respect to M/S RA. Distributors Pvt Ltd., although facts are identical as that of the 3 parties mentioned above, the AO had issued notice u/s 133(6) of the Act, dated 30.10.2019, which was returned unserved by the postal authorities. In this regard, the appellant submitted before the AO that the transactions of purchase of stock with the said concern were only during the year under consideration, i.e., almost 8 years ago and after that there has been no transaction with the said party. As per the reply of the AO, there could be various reasons for which the notice could be unserved, such as change of address, closure of business, financial losses, Government litigation, Death/ insolvency/ Unsound mind of key management and so on. Before the AO, the appellant submitted various documentary evidences to support genuineness of the transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchases of Rs. 11,66,24,231/-, as identified by the AO, are doubtful, still there is no scope for any addition in the instant case as per the ratio laid down by Hon'ble Bombay High Court in case of PCIT vs. M/s Mohommad Haji Adam Co. [ITA NO. 1004 OF 2016 (Bombay High Court)! wherein it is held that: 8. In the present case, as noted above, the assessee was a trader of fabrics. The A. O. found three entities who were indulging in bogus billing activities. A. O. found that the purchases made by the assessee from these entities were bogus. This being a finding of fact, we have proceeded on such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be added by way of assessee's additional income or the assessee is correct in contending that such logic cannot be applied The finding of the CIT(A) and the Tribunal would suggest that the department had not disputed the assessee's sales. There was no discrepancy between the purchases shown by- the assessee and the sales declared. That being the position, the Tribunal was correct in coming to the conclusion that the purchases cannot be rejected witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Limited, M/s Riddhi Exim Private Limited and M/s R.A. Distributors Private Limited. Thus, ground of appeal no. 3 is Allowed. 021. The learned CIT A has categorically noted that assessee has submitted the evidences with respect to the Ledger accounts of the transactions with purchase parties, purchase invoices and bank statements of the appellant showing the payment made to the parties. Assessee has also shown the mapping of corresponding purchases and sales. The argument of the learned DR is that one-to-one mapping shown by the assessee is not correct for the reason that in the purchase bills of these parties there is no narration with respect to the quantity i.e. number of diamonds as well as the colour et cetera. To support the same, the learned authorized representative has submitted the other beans of the other parties, which have been accepted by the learned assessing officer as genuine purchases. On perusal of those bills, also there is no mention of number of diamonds as well as the colour of the diamonds. Therefore, it cannot be said that in the purchase bills the assessee should have mentioned this details as that is not the trade practice and that is also not t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 lakhs, which is 6.81%. Gross profit as per the regular books of account is 6.73%. Thus, no infirmity can be found in the finding of the learned CIT A whereas assessee has shown higher gross profit from alleged bogus purchases compared to its regular transaction. The honourable Bombay High Court in 103 taxmann.com 459 has dealt with identical issue in case of Mohammad Haji Adam co [ Supra] as under:- 8. In the present case, as noted above, the assessee was a trader of fabrics. The A.O. found three entities who were indulging in bogus billing activities. A.O. found that the purchases made by the assessee from these entities were bogus. This being a finding of fact, we have proceeded on such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be added by way of assessee's additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT (A) and the Tribunal would suggest that the department had not disputed the assessee's sales. There was no discrepancy between the purchases shown by the assessee and the sales declared. That being the position, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, even otherwise, even if it is held that the purchases from these parties are bogus, then also, the proper course would be to determine the profit arising from the purchases by looking at corresponding sales and what amount of gross profit is earned on alleged bogus purchases. If the alleged bogus purchases show gross profit higher than the regular gross profit shown by the assessee, no further addition is required to be made in the hands of the assessee. The logic behind this is that sale is already accounted for on the credit side of the profit and loss account. If the purchases are to be removed, the corresponding sale is also required to be removed from the profit and loss account, sales is higher than the purchases in rupees terms, therefore, the addition would be only required to be made to the extent of lower gross profit on alleged bogus purchases then the regular gross profit. This also takes the care of the argument that no proof of delivery of goods purchased are shown by the assessee, similarly, the sales are also bogus. It is not the case of the AO that amount invested in acquiring the bogus purchases should also be considered as an addition, because the only additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove companies are only the paper/shell companies and do not having any business activity is being carried out. Since the assessee fails to prove genuineness of the transactions, the commission expenses made to the following parties is need to be disallowed. Sr No. Name of Company A.Y. 2012-13 (Amt.) 1. Flora Impex Pvt. Ltd. 20,54,691/- 2. Nishant Impex Pvt Ltd. 5,99,225/- 3. Rahil Impex Pvt. Ltd. 24,70,750/- 4. Shloka Traders Pvt. Ltd. 31,90,545/- 83,15,211/- In the instant Case, the total undisclosed commission which is required to be added is 83,15,211/- 10.4 During the appellate proceeding, the Ld. AR has submitted various documentary evidences forming part of the paper book. It is also certified that these evidences and facts were also brought to the knowledge of the AO during the assessment proceedings. These evidences has been examined in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidences, one cannot simply reject it or ignore it. Any documentary evidence submitted during assessment proceedings has got some evidentiary value which needs to be commented upon by the AO. 10.4.4 In para 6.3 of the assessment order, the A.O. has made a reference to statements under oath recorded by directors regarding commission paid. In this regard, Ld. AR submitted that earlier a search action u/s 132 of the Act was carried out in the case of the appellant in the year 2010 and assessment was completed u/s 153A of the Act wherein all the transactions of the appellant with above mentioned four companies were held to be genuine. 10.4.5 It is further observed that all the four concerns Le, M/s Flora Impex, M/s Nishant Impex, M/s Rahil Impex and M/s Shloka Traders are also assessed by the same AO, whose scrutiny assessment u/s 143(3) rws 147 were simultaneously passed in the month of December, 2019. Appeals have been filed in these cases too with the undersigned. On verification of the scrutiny assessment orders of these four concerns, it is observed that while commission expenses paid by these concerns were disallowed, commission income received by these concerns from the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference u/s 24(5) of the PBPT Act was made to the Adjudicating Authority for adjudication of alleged benami property u/s 26 of the PBPT Act. The Ld. Adjudicating Authority (AA) under the Prohibition of Benami Properties Act, 1988, passed order u/s 26(3) of the PEPT Act, dated 11.10.2021 vide Order Number 24/AA/MUM/PBIT/2021-22, wherein it is held that there is no evidence against the alleged Benami concerns. The relevant portion of the said order of AA is reproduced as under. Discussions and Findings 8. I have carefully gone through the submissions, both written and oral, from both the sides including the facts recorded in the SCN, orders under section 24(3), 24 (4), reference u/s replies by the defendants and the rejoinders by the Initiating Officer, the documents in the RUDs etc. On perusal of these documents and submissions and after considering the output of the lengthy discussion held during the hearing with the advocates of both the sides, following observations are made out. 8.1. The contention of the defending parties that the action taken by the Initiating Officer by issuing show cause notice u/s 24(1) and subsequent passing of orders u/s 24(3), 24(4), inter-al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use notice u/s 24(1) and orders passed by it u/s 24(3), 24(4) and the reference made u/s 24(5) are all barred by Limitation as order was passed on the 918! day the date of SCN this regard, the Initiating Officer has placed reliance. On the Provisions of the Section 9 of the General Clauses Act 1897 and agree with him. The said provision says that in any Central Act or Regulation made after the commencement of this Act, it shall be sufficient for the purpose of excluding the first in series of days or any other period of time to use the word 'from and for the purpose of including the last series of days or any other period of time, to use the word 'to Thus the first day is the date of notice which should be excluded and the days should be counted starting from the next day, Thus this allegation is not maintainable. 8.3. Another contention of the defendants is that the Initiating Officer failed to establish any nexus in the transaction for purchase of the subject properly as benami when examined on the touchstone of the crucial test of a benami transaction. In this connection, I must say that the nexus and the extent thereof may vary from case to case depending on the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where and how did the consideration flow from the alleged sole beneficial Owner for all) of the investments made by the DI-D8 over the years starting 1995 to 2098. The best case as per the Initiating Officer is that the answering defendant lent funds of Rs. 1 crore each to two of the 'defendant companies in the year 2009. There is clear mismatch in the amounts invested and funded and timing of the investment. There cannot be any nexus between funds received in 2009 and used for investments made in 1995 to 2008. He has not even examined the flow of funds breach of the times the DI-D8 invested in the shares they held in it's DEMAT account. Therefore, the Initiating Officer has failed to prove with any cogent evidence that the subject properties had been acquired and the consideration amounts ever paid by the alleged beneficial owner. Again there is allegation that funds of family members of the alleged beneficial owner and the group company ASCL have been used by the benami companies, but no effort has been taken to include these family members and the ASCL as beneficial owners as each individual and the companies are separate legal entities and they cannot be clubbed with S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion has reason to believe that any person is a benamidar in respect of a property he may, after recording reasons in writing, issue a notice to the person to show cause why the property should not treated as benami property. In the scheme of the Act, the SCN is issued after recording the reasons and the SCN in the instant case do contain details of reason framed by the Initiating Officer. Further it has been communicated to the Defendants albeit not separately. But in essence the Initiating Officer has fulfilled the basic obligation. It could have been better worded or could have been communicated separately but in my opinion Such deficiency would not make this proceeding invalid. The fact is that the Initiating Officer has fulfilled the mandatory requirement of reason to believe in the form of SCN in respect of the properties covered by the said notice which is already on record and the sufficiency of the reasons cannot be examined by this authority under statute. 8.7. I do find merit in the submission of the defendant that the order passed u/s dated 25.04.2019, has been passed illegally without issuing any SCN u/s 24(1) and it is clearly in contravention of the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd how the property, being the centre of action, is covered under the Act, The Initiating Officer initially covered the properties under section 2(9)(A), 2(9)(C) and later while passing order under section 24(4) he himself restricted to section 2(9) (A) and, In my opinion, the initiating Officer should not be vague and confused while initiating and concluding a proceeding under the Act. In the instant case, as the existence and applicability of section .2(9) (A) is already alleged by the Initiating Officer, then further sections cannot hold good for the same set of properties. 8.10. The defendants content that the Initiating Officer passed erroneous and illegal attachment orders, u/s 24(3) and 24(4) as he did not comply with the statut01Y and compulsory procedure for attachment of subject properties as prescribed in the PBPT Act and Rules having regard to Rule 5 of the PBPT Rules, 2016 which states that for the purpose of sub-section (3) of section 24, the Initiating Officer shall provisionally attach any property in the manner provided in the Second Schedule of Income-tax Act, 1961. The defence of the Initiating Officer is that this type of hyper technicalities are resulting fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BSE and MCA. In this connection, the initiating Officer has not been able to penal Action by the Bombay Stock Exchange 01 Ministry Affairs in case of Violations if any. 8.13. The averment of the defendants that the Initiating Officer bas taken reliance of documents which have neither been provided to the Answering Defendant nor have been appended in the relied upon documents which are fatal and incurable legal lapses on his part and violation of principle of natural justice refers to the non-inclusion of the documents like reasons recorded by the. Initiating Officer for issuance of SCN u/s. 24(1); detailed note submitted to the Approving Authority for the approval of order u/s 24(4): Income Tax Return and other forms filed by the companies which are arrayed as party to the reference; shareholding disclosure of the company M/S Asian Star Company Limited 26 AS details of the companies arrayed as party to the reference; details downloaded and analysed from Ministry of Corporate Affairs; Details downloaded and analysed from Income-Tax Department etc. In view of the reply of the Initiating Officer that these documents are either incorporated in the SCN, order or available with the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sought to have ordered provisional attachment of the accounts, not the continence of provisional attachment which was in fact not existing. Further, mere mentioning of bank account numbers Without mentioning the balance is a total non-application of mind and it is an order without eyen identifying the property. On these grounds itself the entire order in respect of these properties is vitiated in the eyes of law and the attachment ordered therein are not maintainable for total non-application of mind and jeopardizing the statutory provisions. Therefore, these items stand released without any further examination 011 merit. It is apparent from the order U/S 24(3) and 24(4) that proceeding u/s 24(1) had its root in the survey operation undertaken in 2019 when it was gathered. that DI-D4 companies were holding the shares of Asian Star Company Ltd and that these 4 companies' entire business are based on the orders tor receipts from the Asian Star company Ltd. Thus, it was suspected that these four companies and their downstream firms were created only to park the funds of the alleged beneficial owner. Accordingly the proceedings were initiated and the impugned order was pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as complete and legal unless and until each share or lot is identified and found attributable to the alleged beneficial owner having regard to the source of acquisition along with the element of immediate or future benefit to the said beneficial owner, The statement of the Initiating Officer in the order in question that firm the balance sheet of the 4 companies, it was found that the promoters and their family members of M/S Asian Star Company Ltd have -issued debentures to the companies is not understood generally companies issue debentures to the public individuals for raising fund from them, but an action of Certain individuals issuing debentures of companies is strange end appears to be a result of application of mind on the part of the Initiating Officer. 12. Another fact in the present case is that the reasons to initiate the proceedings are mainly based on the statements of many persons recorded under section 131 of the Income Tax Act, But during the proceedings under PBPTA all of them have retracted the earlier statements. Under such situation, the rebuttal and reinstating the alleged facts in the earlier statements is the responsibility of the Initiating Officer appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions and activities of the company is there on record. 14. The audited Balance Sheets of D-1 from the year 1995 to 2017-18 was perused and it is apparent that in initial years loan/ borrowing from Aslan Star group companies were the actual and only source of the investment. made in Asian Star Company Limited, In financial year 2000, loan/ borrowing from group company was substituted by loan from shareholder, family member of the Beneficial Owner of Rs. 2.58 crore which was the main source for share investment of Rs. 3.07 crore. By financial year 2002, the mix of Surplus in Profit and Loss Account in General Reserve of Rs, 77 Lac and loan of Rs. 4.5 crore was the source of total investment of IRS. 5.18 crore, In financial year 2008-09, Benamidar-1 has declared Total Income at Rs. 21 lacs, General Reserve of Rs, 2.21 crore, unsecured loan crore and the investment' in Asian Star Company Ltd of Rs. 5.57 crore, Thus character and find available in these called benami companies was always changing arid there was one-to-one or direct nexus of any contribution by the beneficial owner eyen in the form of loan to the investment made in ASCL In the next financial Year. Le.. 2009-10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be treated as payment by the beneficial owner as these individuals or company are separate entities/individuals and cannot be legally clubbed with Shri. Vipul Shah. The various debentures issued to Shri. Vipul Shah and other have not been converted into shares and closing and the repayment of debentures are said to be in process, which the Initiating Officer is unable to contradict. Since these debentures are not converted into shares it shows that the benefit of more in the companies is unlikely. Further having regard to the period of issuance of debentures and period of acquisition of shares, it cannot be held that the funds raised out of these debentures have been utilised to acquire these shares. 15. To sum up the findings, it is apparent that the Initiating Officer has made his case of beneficial owner providing the consideration to DI to D8 on the basis of close proximity of all these entities with Asian Star Company Ltd, of which Shri. Vipul Shah and his family members are promoter all the red flags raised by the Initiating Officer point towards the close proximity and inter dependence of these entities. But all of these red flags like benamidar I-4 having same addr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income from undisclosed sources. This has not happened. The assessment order is in the hence of the recipient of commission are also passed Simon tenuously with the assessment order in the case of the assessee. On consideration of the statement prepared by the learned CIT A in paragraph number 10.4.5 we find that in case of Nishant impacts private limited the commission income shown in the audited account and accepted in the respective assessment order of that company is Rs. nil whereas the commission paid by the assessee to that party is ₹ 5.99 lakhs. However, it is not the case that the sum has not been shown by that assessee in its profit and loss account, where the appropriate tax deduction at source is made by the assessee. The claim of the assessee recorded at paragraph number 82 at page number 60 of the order clearly shows that all these parties have intimated to email response to the notice issued under section 133 (6) of the act. In their communication, those parties have submitted the Ledger confirmation reflecting the details of the transaction with the appellant as well as the debit not of the working of the commission along with their return of income. The pho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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