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TMI Blog2023 (5) TMI 1100X X X X Extracts X X X X X X X X Extracts X X X X ..... s erred in not appreciating the reliance was placed on the charge sheet filed by the Enforcement Directorate regards to bogus purchases made by the assessee from various parties without supply of actual goods. 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT (A), has erred in deleting the disallowance of commission as alleged to bogus." 03. Assessee is a company engaged in the business of trading, manufacturing, import and export of diamonds. It filed its return of income on 31/11/2012 declaring a total income of Rs. 378,440,970/-. Assessment under section 143 (3) of the act was made on 30/3/2016 determining total income of the assessee at Rs. 397,039,090. 04. Subsequently information was received From Investigation Directorate surat on 19/3/2019 that assessee company has made bogus payment of Rs. 10.32 crores to M/s R A Distributors private limited and M/S Ram Shyam exports private limited which are paper companies without having any business activities. These companies are engaged in providing accommodation entries or sending bogus foreign remittances to entities based in Hong Kong and UAE in guise of bogus import purchases. Further information wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction with level four entities and subsequently the money was transferred to Ram Shyam exports private limited. Thus, it was noted by the learned assessing officer that after the level of four - six layers, Ram Shyam exports private limited ultimately has received the money. Thereafter the learned AO asked the assessee to produce the Ledger account, the invoices and bank statement of all the intermediary companies up to level VI and 1 to 1 mapping of corresponding purchases and sales. Assessee submitted the same. However, the learned that assessing officer did not believe the explanation and noted that that assessee has transacted with entities at level four and six as in the fund trail by the investigation wing Surat. The funds have moved out to entities based in Hong Kong and UAE in the form of remittance received by these entities in the guise of payment for import of diamonds. The customs authorities have found that the bills of entries of bogus and there was no such import made by 12 companies which included Ram Shyam exports private limited. Therefore, the learned assessing officer held that Rs. 6.26 crores of purchases made by the assessee through intermediary compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bit notes and also the bank statement to show the payment. The learned AO issued notices under section 133 (6) of the act to the various parties calling for information. In response to that notice one party submitted reply, however other three parties did not respond. Accordingly, the learned AO disallowed the payment of commission of Rs. 8,315,201/- to all the 4 parties. 011. Accordingly the assessment order under section 143 (3) read with section 147 of the act was passed on 30/12/2019 making the addition of Rs. 116,624,231 with respect to the purchase transaction and disallowance of commission expenditure of Rs. 8,315,211, determining the total income of the assessee at Rs. 521,978,532/-. 012. Assessee aggrieved with assessment order preferred appeal before the learned CIT - A, who passed a consolidated order on 1/8/2022 four assessment year 2012 - 13, 2014 - 15, 2017 - 18, 2018 - 19 and 2019 - 20. Though the issue in other assessment year from the impugned assessment year i.e. 2012 - 13. Assessee challenged the reopening of the assessment, the learned CIT - A dismissed this ground of appeal. Against the addition of Rs. 116,624,231 on account of bogus purchases, he held that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter, since register, stock register, Ledger, daybook, bankbook et cetera and no defect or irregularity was found. He further held that as there is no finding of the assessing officer about the sales made by the appellant against the purchases the addition cannot be made. With respect to RA Distributors private limited, the learned CIT further held that with respect to the purchases the assessee has submitted the invoices, bank statement, sales and purchase register, account confirmation of the transactions, which have been entered into before eight years. According to him, the assessee has discharged his onus of proving the genuineness of the purchases. The goods purchased from this entity were also sold and quantity Delhi thereof is given in the tax audit report which is not been rejected by the learned assessing officer. Alternatively, he held that even if the purchases of Rs. 11.66 crores is found to be doubtful there is no scope for any addition in the instant case following the decision of honourable Bombay High Court Muhammad Haji Adam & co (ITA 1004 of 2016) wherein it has been held that the purchases cannot be rejected without disturbing the sales in case of a trader and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing officer is deletion of disallowance of bogus purchases and commission. The learned departmental representative referred to the assessment order with respect to the addition of bogus purchases it was submitted that assessee has failed to produce the party and therefore the addition is made with respect to RA distributors private limited. She further referred to the statement submitted by the assessee showing 1 -to 1 mapping and stated that the purchases are shown in carrats but not in quantity. Therefore, the statement does not have any validity. It was further stated that assessee could not show any proof of delivery. It was further stated that purchase invoices does not have any direction. It was further the claim that there is no identification of the material purchased are sold. Accordingly, the argument of mapping of purchases with the sale is incorrect. It was further claimed that the learned and CIT - A has merely accepted the submission of the assessee and did not carry out any information from the assessee with respect to correlation of purchases with sales. It was further stated that when diamonds are traded there are no document shown with respect to insurance, ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the penny stock companies but same does not apply in the case of the assessee. It was stated that the decision of the honourable Gujarat High Court relied upon by the learned departmental representative is distinguishable on the fact and in that decision there was nothing to suggest that the recipient of such commission payment has rendered any services to the assessee and the onus was on the assessee claiming such deduction to establish that such payments were made for services rendered. It was submitted that it is not only the order of the Benami transaction act but also the order in case of the parties were rendered the services in whose hands the commission income has already been taxed was relied upon by the learned CIT - A. When the income is taxed in the hands of the parties who have rendered the services to the assessee and those parties were also assessed by the same assessing officer, the revenue now cannot contest that the income though offered in the hands of the recipient of the commission as commission income which they have earned on rendition of the services, but the same assessing officer when assessing the case of the assessee who paid the commission says that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfatta as mentioned in the bill of entry. On receipt of the confirmation of bogus import, the Enforcement Directorate conducted investigation and filed a charge sheet against some persons on 18.07.2014 related with Afroz Mohamed Hasanfatta. On verification in the case of 12 companies related with Afroz Mohamed Hasanfatta, it appears that the account of the foreign based entities, wherein funds were funded in guise of import payment from Indian based entities. These companies are proved to be bogus and have disguised fund transferred in form of bogus purchases or bogus loan transactions. The identification of source of fund received by the said 12 entities are mentioned in the interim report forwarded by this office. 1. The fund trail was undertaken from the starting point of the bank account of above 12 parties and traced back to the source of deposits entities. The activity for tracing the potential source resulted in analysis from Level 2 to Level 9 which were mentioned in the report forwarded along with its annexure to the jurisdictional AO. Segregation of fund received in the bank account of above mentioned 12 entities/parties was according to beneficiary name/depositor name. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A/c of M/s. M.B. Offshore Distributors Pvt. Ltd.) which was subsequently transferred to M/s. Ram Shyam Exports Pvt. Ltd, as described in Para 3 & Para 4 of this letter. 1. M/s. Asian Star Company Ltd. had transactions with Level 6 entities namely M/s. Riddhi Exim Pvt. Ltd. Subsequently, M/s. Riddhi Exim Pvt. Ltd has transferred funds to the above-mentioned company Le. M/s Ram Shyam Exports Pvt. Ltd. On perusal of the report furnished by the agency involved in the analysis of the fund trail, it is found that the transaction between M/s. Asian Star Company Ltd. & M/s. Riddhi Exim Pvt. Ltd. had taken place on 29.02.2012 and M/s. Asian Star Company Ltd. transferred the amount mentioned above in the table to the A/c. No. 910020011100833 (this is the A/c of Riddhi Edm Pvt. Ltd.) which was subsequently transferred to M/s. Ram 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue to be decided here is whether M/s Nayan Exim Pvt Ltd, M/s M B Offshore Distributors Pvt Ltd and M/s Riddhi Exim Pvt Ltd. can be termed as bogus entities whose names appear at the 4 or 6 layer only on the basis of said transactions (related to the appellant of Rs. 2.49 crore, Rs. 2.19 Crore and Rs. 1.58 Crore) flowing downwards, crossing 4 or 6 more layers and ultimately landing to the accounts of M/s. Ram Shyam Exports Pvt. Ltd., a company connected with Afroz Mohamed Hasanfatta? This issue is further analysed in the light of evidences on record, surrounding circumstances and the judicial precedence. 7.7 Upon further analysis I find that, neither M/s Nayan Exim Pvt Ltd, M/s MB Offshore Distributors Pvt Ltd and M/s Riddhi Exim Pvt Ltd. can be considered as bogus entities providing 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 appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in the opinion of the AO goods were actually received from these entities. In such circumstances, there is no reason to consider these concerns as non-genuine, paper entity or bogus. 7.7.3 No Connection established. If the purchases treated as bogus, from these entities are further examined, I find that while M/s. Nayan Exim Pvt. Ltd. is a level 4 entity, M/s M B Offshore Distributors Pvt Ltd and M/s Riddhi Exim Pvt Ltd. are level 6 entities. Initial trigger entity (Level 1 entity) was M/s. 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 automat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed by the auditors. The A.O. has also not rejected the sales of the appellant. 7.7.3.4 I find merit in the above arguments of the appellant. The A.O. has not doubted the sales made by the appellant against the purchases (which are disallowed in the assessment order) but at the same time, disallowed the payments made for such purchases. The AO's action is solely based on the information received from Investigation Wing. Surat. As stated above, the Information does not reveal 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.O. cannot be justified. 7.9 Considering the totality of facts and circumstances of the issue involved and evidences on record, in my considered view, the addition of Rs. 11,66,24,231/- (Rs. 6,27,31,343/- from M/s Nayan Exim Private Limited, M/s M.B. Offshore Distributors Private Limited, & M/s Riddhi Exim Private Limited and Rs.5,38,92,888/- from M/s R.A. Distributors Private Limited.) deserved to be deleted. 8.0 Alternatively even if, it is considered that the 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 amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to delete the addition of Rs. 11,66,24,231/ made on account of abovesaid purchases made from M/s Nayan Exim Private Limited, M/s M.B. Offshore Distributors Private 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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gross profit earned by the assessee on total purchases of Rs. 11.66 crores; assessee has earned gross profit of Rs. 85.21 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered that the purchases from these parties is genuine when part of purchases from the same parties is not disputed, 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d M/s Nishant Impex Pvt. Ltd. the information received from investigation are seems to be correct that the above 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 the light of observations of the AO in the following paragraphs. 10.4.1 In the assessment order, the AO has given an observation that no evidence is submitted during the assessment proceedings to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 appellant, during the year under consideration, are accepted under the same head of income, by the same AO. Total commission income shown and accepted for these concerns during AY 2012-13 as tabulated as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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-alia, by making retrospective application of the provisions of the prohibition of The Benami Property Transactions Act, 1988 are illegal, bad in law and void ab-initio, was considered in detail. I find that various courts have taken different stand and done varying interpretation in this legal issue and the subject is now sub judice before the Hon'ble Apex Court. The decision of Single Judge of Hon'ble Rajasthan High Court is under challenge before the Hon'ble Division Bench of Rajasthan High Court and there are two interim orders passed by the Hon'ble Divisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluding 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 facts and circumstances of the case, In this case the Initiating Officer defends this argument on the grounds that the purchase consideration was paid by the beneficial owner, the benamidars are being centrally controlled and monitor by the beneficial owner who has received benefits from the benamidar entities and the shareholders and directors of the said entities ale dummy name lenders. It must be noted that the nexus must be clearly visible in a case where the section 2(9)(A) is invoked. In the case in hand the Beneficiary owner and the eight benamidars are defined and are ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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 Shree Vipul Shah. Further, the only alleged link of Optionally Debentures issued for the loans taken by DI -D4 have since matured without the conversion clause being ever invoked, The Initiating Officer has also not been able to show any instance of or demonstrate the control being exercised by the alleged beneficial owner as Debenture holder over the operations or any part of the company at any point in time. It is also pertinent to submit here that the option to convert the debentures has already expired and the debentures are being processed for repayment by the entities wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 the PBPT Act. The issuance of a Show Cause Notice u/s 240) is sine qua non for passing of the order o/s 24(4)(b), such requirement has been inserted in law in order to make the procedure fair and give the person whose property is being attached an opportunity to place on record evidence to show that his property is legitimate, untainted and not liable to be attached under the provisions of the PBPT Act, In this case, in respect of these properties, i.e., bank accounts, the Initiating Officer has not recorded reasons to believe or issued mandatory SCN to the alleged benamidars or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 from ignorance of section 63 of the PBPT Act, I do not agree with the Initiating Officer and hold that the section 63 speaks about the protection of validity of orders, notice etc. in case of mistakes, errors or omissions in a notice/ order, but section does not any protection from the lapse in any procedure laid down under statute. 8.11. The defendants further contents that the approval for the orders u/s 24(3) and 24(4)(a)(i). and 24(b)(i) as given by the Approving Authority is mechanical and perfunctory. The defendants argue that it has been held in various judgments that the san ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 defendants or part of public domain, need not be submitted again and if any document is specifically required, the defendants were always at liberty to seek for the same, Considering this explanation, the contention is rejected. 8.14 The further contention of the defendants is that the Initiating Officer erroneously placed reliance on oral statements as recorded under a different proceedings and under a different law which are not admissible as evidence under a different statute. The submission is about the statements recorded under section 131 of the Income Tax Act which is being lar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 passed and referred for adjudication. It is observed that the Order and the Reference in hand are not presented in accordance with the basic principles of law. The description of the properties in question shown by the Initiating Officer in the statutory notices/orders issued under various sections and the reference in hand are either incorrect, incomplete or illogical. The property and the description thereof are vital in any proceedings under the PBPT Act as the centre of action is the property. In the present case the property details including demat and bank accounts given in the Reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 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 appending comparative evidences, without which the proceedings will fail by its own fate. 13. Again, it is the allegation that the copy of Show Cause Notice dated 25/1/2019 was sent to the alleged beneficial owner on 15/4/2019 only, it is the legal obligation on the part of the Initiating Officer under section 24(2) that a copy of the SCN is to be sent to the beneficial owner also. In the present case, the Show Cause Notice does not make an allegation that Shri. Vipul Shah is the beneficial owner. Further, the SCN, though framed under section 2(9)A) also, is silent as to who exactly is the ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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, the entire shareholding in Asian Star Company Ltd was transferred to the partnership firms. Thereafter the shares as well as resultant dividend were appearing the books of the Partnership Firms. Benamidar - DI is now receiving share of profit from Benamidar -5 and paying interest on the OCD These affairs are not disputed and there is an assessment order U/s143(3) read with section 153C in respect of DI accepting these affairs as such and not finding any irregularity. The share acquired by Benamidar1 is in the name of Benamidarl only (As Benamidar 5 is a firm who cannot hold share) and these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 address, same contact number or of an employee of the ASCL total dependence on business provided by ASCL, changing shareholding in benamidar 1 to 4 between retiring employees and new employees without commensurate pay off, optionally convertible debenture subscribed in each benamidar by family members, loans being given to group concerns are not material far as basic limb of Section 2(9) (A) is concerned i.e., what are the evidences of beneficial owner providing the consideration to benamidar 1 to 4 for acquisition of shares (of ASCL)? All so called benami companies are existing since long as an in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 photocopies of the email are available at page number 54 - 56 of the paper book. Therefore the finding of the learned assessing officer that out of four parties only three parties have responded. There is no credence in the finding of the learned assessing officer that the directors have confessed under section 132 (4) of the act with respect to the above commission expenditure because this statement was made in the year 2010 and is not related to the assessment year. Further the 153A assessment made their was not resulting into the addition of this commission expenditure. It is also to be recorded that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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