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TMI Blog2019 (2) TMI 2129X X X X Extracts X X X X X X X X Extracts X X X X ..... At the outset of hearing, both the parties fairly agreed that the grounds raised and the facts & issues involved in all these appeals are identical to those involved in ITA No. 6319/Del/2018 barring the difference in the amounts of the share capital and/ unsecured loans and therefore, the decision in ITA No. 6319/Del/2018 would equally be applicable in all the above group cases. Accordingly, all these appeals were heard together and are being disposed of by this consolidated order in order to avoid repetition of facts and for the sake of convenience and brevity. We, therefore, take up the appeal no.: ITA 6319/DEL/2018 first in the case of ACCIL Corporation Pvt. Ltd. for A.Y. 2012-13. The grounds raised in this appeal read as under : 1. "On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals)[CIT(A)] is bad both in the eye of law and on facts. 2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the order passed by the learned AO u/s 153A is bad and liable to be quashed as the same has been framed consequent to a search which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. 10. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition despite the fact that the addition made by the AO are on the basis of extraneous considerations grossly indulging into conjectures and surmises. 11. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition made by the AO despite the fact that the above addition was made on the basis of the material collected at the back of the assessee without giving it an opportunity to rebut the same. 12. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition despite the fact that the order was passed relying on the inspector's report which was never confronted to the assessee. 13. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition despite the fact that the AO has passed the order relying on the statement recorded without giving assessee proper opportunity to cross examine the same. 3. The brief facts attending to this appeal are that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments of the various employees recorded during the search, on the basis of which the Assessing Officer has drawn adverse inference against the assessee company. It was further contended that as per these statements, the employees, who happen to be directors of various group companies, have stated that they do not know anything about those companies but the fact remains that these are group/ associate companies and the money in these group/ associate companies is not that of the employees. It is not the case where the assessee company is contending that these companies are not group/associate companies and as such it is not in a position to explain the transactions entered into by these companies. The assessee company all along has contended that these are group/associate companies and the entire shareholding in these group companies belongs to the group/associate and no money has been subscribed by any of the employees or the directors whose statement has been used against the assessee. It was a structure of the group and the entire money and the share capital has been routed within the group/associate from one company to another company and as such it cannot be said that the share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the course of the hearing tried to justify complete trail of the money which has come to it as share capital from the group companies and tried to substantiate the same with the bank statements of each of the group companies. It was further contended that there is no adverse statement by anyone or so called entry operators that there is any exchange of cash in lieu of cheque. 4.3. It was next contended that the facts of the present case are entirely different and hence the various case laws referred and relied upon by the AO and the CIT(A) are not applicable as in those cases the share capital had come from outside sources. These persons were either not available and have even confessed of providing accommodation entries in lieu of cash which is not the case here. 4.4. The Ld. AR further submitted that in this case search has taken place on 10.12.2015. On this date, the assessment for the year under consideration stood completed and hence, has not abated. Since, the assessment has not abated no addition can be made in the absence of any incriminating material being found during the search. As per the assessment order, it is evident that no incriminating material was found d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Group were found during the course of search operation. (i). It was found that there are large number of companies, controlled and managed by the same management but have no apparent business and neither do they exist at their given registered addresses. Many of such companies have directors from the family of ACCIL promoters and employees of ACCIL group. (ii). It was also found that such companies were registered at the addresses of the Chartered Accountants of ACCIL group companies, the addresses of the employees of such companies, bogus addresses which do not really exist, as well as at the registered addresses of ACCIL group companies. (iii). Most of these addresses have been found nonexistent. A few addresses which could were located are one or two room rented accommodation and a security guard is deputed there to receive the DAK. No fixed assets, books of accounts, working employees of these shell companies were found. (iv). Share certificates of these companies were pot found at the registered office address given by them. (v). Large capital/share application money/premium/unsecured loans received in these companies . (vi). In many cases, the companies were foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any satisfactory reply. These points, inter alia, has been discussed in detail in the point number 8 of assessment orders passed by the undersigned. With regard to the point of incriminating evidence, the Ld. CIT(A) has also concurred with the points made by the AO by clearly bringing the following in his orders which is as below: In fact, the statements themselves constitute evidence, This evidence in the form of statements (detailing the wrong doing of the appellant), has come forth out of search action u/s 132 of the Act. The evidence as detailed by the AO is sufficient incriminating material. Evidence can be both documentary as well as oral. Section 3 of the Indian Evidence Act, 187 lays down that evidence means and includes all statements which the court permits or requires to be made before it by witnesses, in relation to maters of the fat under enquiry, and such statements are oral evidence. Documents, including electronic records, produced for the inspection of the courts, are called documentary evidence. I note that the individuals in questions (whose statements have been relied upon and reproduced by the AO in the assessment order), are Directors of the companies/ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identities & creditworthiness of investors in the assessee company are not established by the assessee & are also proved incorrect by the Department's Assessee Information System. In such circumstances, assessee cannot resist the additions on grounds that it did not have opportunity to cross-examine relevant witnesses. An assessee company cannot hide behind the shell of a corporate entity to feign ignorance regarding the identity of any person who invests in its share capital. Prem Casting (P.) Ltd. Vs. CIT 2018-TIOL-274-SC-IT (Copy Enclosed) Where Hon'ble Supreme Court held as follows: "We do not find any merit in this petition. The Special Leave Petition is accordingly dismissed." 3. CIT Vs. MAF Academy (P.) Ltd. (361 ITR 258) (Copy Enclosed) Where Hon'ble Delhi High Court held that where assessee, a private limited company, sold its shares to unrelated parties at a huge premium and thereupon within short span of time those shares were purchased back even at a loss, share transactions in question were to be regarded as bogus and, thus, amount received from said transactions was to be added to assessee's taxable income under section 68 It was held as follows: "53. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Enclosed) SLP of assessee dismissed by Hon'ble Supreme Court. 5. Konark Structural Engineering (P.) Ltd. Vs. DCIT[2018] 96 taxmann.com 255 (SC) (Copy Enclosed) Where assessee-company received certain amount as share capital from various shareholders, in view of fact that summons to shareholders under section 131 could not be served as addresses were not available, and, moreover, those shareholders were first time assessee and were not earning enough income to make deposits in question, addition made by Assessing Officer under section 68 was to be confirmed; SLP dismissed. Konark Structural Engineering (P.) Ltd. Vs. DCIT[2018] 90 taxmann.com 56 (Bombay) (Copy Enclosed) Where Hon'ble Bombay High Court held that where assessee-company received certain amount as share capital from various shareholders, in view of fact that summons served to shareholders under section 131 were unserved with remark that addresses were not available, and, moreover, those shareholders were first time assessees and were not earning enough income to make deposits in question, impugned addition made by AO under section 68 was to be confirmed. 6. Pratham Telecom India Pvt Ltd. Vs. DCIT (2018-TIOL-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts onus under Section 68. With respect, it appears to us that there has only been a mechanical reference to the case law on the subject without any serious appraisal of the facts and circumstances of the case. 13. We, therefore, answer the substantial question of law framed by us in the negative, in favour of the revenue and against the assessee. The appeal of the revenue is allowed with no order as to costs." 10. CIT Vs. Nova Promoters & Finlease (P) Ltd. (18 taxmann.com 217, 206 Taxman 207, 342 ITR 169, 252 CTR 187) (Copy Enclosed) Where Hon'ble Delhi High Court held that amount received by assessee from accommodation entry provides in garb of share application money, was to be added to its taxable income under section 68. It was held as follows:- "41. In the case before us, not only did not material before the Assessing Officer show the link between the entry providers and the assessee-company, but the Assessing Officer had also provided the statements of Mukesh Gupta and Rajan Jassal to the assessee in compliance with the rules of natural justice. Out of the 22 companies whose names figured in the information given by them to the investigation wing, 15 companies had pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be invoked once the basic burden stood discharged by furnishing relevant and material particulars, at the same time, that judgment cannot be said to limit the inference that can be logically and legitimately drawn by the Revenue in the natural course of assessment proceedings. The information that assessee furnishes would have to be credible and at the same time verifiable. In this case, 5 share applicants could not be served as the notices were returned unserved. In the backdrop of this circumstances, the assessee's ability to secure documents such as income tax returns of the share applicants as well as bank account particulars would itself give rise to a circumstances which the AO in this case proceeded to draw inferences from. Having regard to the totality of the facts, i.e., that the assessee commenced its business and immediately sought to infuse share capital at a premium ranging between Rs. 90-190 per share and was able to garner a colossal amount of Rs. 4.34 crores, this Court is of the opinion that the CIT(Appeals) and the ITAT fell into error in holding that AO could not have added back the said amount under Section 68. The question of law consequently is answered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... three factum is on the assessee as the facts are within the assessee's knowledge. Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a private limited company may not be sufficient when surrounding the attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive. Companies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind the company who take the decisions, controls and managed them." 14. CIT vs. Empire Buildtech(P.) Ltd. (366 ITR 110) (Copy Enclosed) Where Hon'ble Delhi High Court held that under section 68 it is not sufficient for assessee to merely disclose address and identities of shareholders; it has to show genuineness of such individuals or entities. 15. CIT Vs. Focus Exports (P.) Ltd. (51 taxmann.com 46 (Delhi)/[2015] 228 Taxman 88) (Copy Enclosed) Where Hon'ble Delhi High Court held that where in respect of share application money, assessee fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e share capital received by the assessee company is unaccounted income and the assessee has failed to discharge its onus under section 68 of the Act. The CIT(A) has confirmed the finding of the AO. As against this the contention of the assessee is that the share capital received by it is not the unaccounted income but is fully accounted money and routed through the group companies. It is the contention of the assessee company that it has led all the evidences to discharge its onus under section 68 of the Act. Thus, it is important to go through the details and examine the source of the money with the supporting evidence, which are placed by the assessee before us in the tabulated form, which is as under : ACCIL CORPORATION LTD. A.Y. 2012-13 Reconciliation of Shares Capital/Share Premium received during the year as on 31.03.2012 S. NO Particulars/Name of Entity No Of Shares Allotted Date of Allotment Total Amount Date of Receipt Amount Source Source Party name Date of Receipt Amount Party name Date of Receipt Amount Details of Addition during the year 2011- 12 as under :- &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Enterprises 20/06/2011 1,900,000 3,300,000 7 Maharaja Infratech Private Limited (Now Merged with Locus Infrastruct ure Private Limited) 392,000 31/12/2011 58,800,000 10/08/2010 44,000,00 0 Morgan Tradex Pvt Ltd 06/08/2010 20,000,000 ATJ Impex Private Limited 11/05/2010 10,000,000 Karan Overseas 05/08/2010 3,500,000 Balaji Investments 06/08/2010 3,300,000 Om Trading Company 06/08/2010 3,660,000 09/08/2010 23,850,000 Om Trading Company 09/08/2010 7,496,000 Shree Krishna Traders 7,154,000 Karan Overseas 7,900,000 Logas Impex Pvt Ltd 09/08/2010 50,000 10/08/2010 8,500,000 Shree Gopal Enterprises 10/08/2010 8,500,000 20/06/2011 6,300,000 Shree Gopal Enterprises 20/06/2011 3,100,000 20/06/2011 3,200,000 8 NityaInfrat ech Private Limited (Now Merged with VatsalInfra projects Private Limited) 621,800 31/12/2011 93,270,000 01/10/2010 3,000,000 Shree Gopal Enterprises 01/10/2010 8,450,000 02/11/2010 1,000,000 Olive Sales Pvt Ltd 02/11/2010 1,000,000 20/11/2010 2,000,000 Olive Sales Pvt Ltd 02/11/2010 2,000,000 23/12/2010 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Sales Pvt Ltd 09/03/2012 5,500,000 Asian Colour Coated Ispat Limited 07/03/2012 10,000,000 13/03/2012 13/03/2012 5,000,000 Havant Sales Pvt Ltd 13/03/2012 5,000,000 Parshavnath media Pvt Ltd 12/03/2012 5,000,000 11 Ujval Networks Private Limited (Now Merged with Rhone Associates Private Limited) 100,000 31/12/2011 15,000,000 07/02/2011 1,500,000 Bhawani Sales Corporation 03/02/2011 1,500,000 31/03/2012 09/03/2012 6,000,000 Chiba Electrotech Pvt Ltd 09/03/2012 6,500,000 Asian Colour Coated Ispat Limited 07/03/2012 11,500,000 13/03/2012 5,000,000 13/03/2012 5,000,000 Parshavnath media Pvt Ltd 12/03/2012 5,000,000 15/03/2012 2,500,000 14/03/2012 8,000,000 Deco Design Solutions LLC 14/03/2012 8,500,000 13 Viable Analytical Technology Private Limited (Now Merged with Locus Infrastructure Private Limited) 497,000 31/12/2011 74,550,000 10/08/2010 47,500,00 0 Jingle Consultancy Pvt Ltd 06/08/2010 3,800,000 Balaji Investments 05/08/2010 3,800,000 Morgan Tradex Pvt Ltd 3,700,000 Bhagirath Trading Company 05/08/2010 3,700,000 Coral Impex Pvt Ltd 20,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of Rs. 10,000/- is on account of the totaling error. These shares have been allotted to 16 companies as per the above chart. During the course of the hearing with the assistance of the Ld. AR & DR, we have tried to verify the trail of the transactions for all these 16 shareholder companies with the relevant documents in support thereof. After verification, the contention of the Ld. AR seems to be acceptable that the money have been routed within the group/associate companies. Each of the transaction may be verified. It is a case where one company has advanced money to another company which in turn has advanced money to another company and such another company has advanced money to the company where the money was originated. Thus, it is a circulation of the money within the various entities where complete trail right from origin till the end is available with the assessee. All these transactions are verifiable from the bank statements of the respective companies. Thus, the contention of the Ld. AR that the money received by it is not any unaccounted money seems to be justified. The Ld. DR also could not point out any error or flaw in the submission advanced by the Ld. AR explain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r past few days. Further, details could not be gathered as no authorized person of the company was available at this address. It is also important to point out that it is not the case of the assessee company that these companies are unknown and that they do not have any control over these companies. On the contrary, it has been the stand of the assessee company that these are group/associate companies and it has provided all the details about these companies also. 11. As regards the statements of various employees which have been relied upon by the Assessing Officer to draw adverse inference against the assessee, we are of the view that it has never been the stand of the assessee that these are not group/associate companies. In fact assessee has all along stated that these are transactions within the group/associate companies. We have also gone through the statement of each of these employees/directors. Ongoing through the same, we find that no one has alleged that the money which is deposited in the bank account of the company is unaccounted money or the source which is dubious. There is no allegation coming out in these statements that any transaction outside the books of accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s totally ignored the facts and in a mechanical way confirmed the order passed by the Assessing Officer. The assessee having submitted the details and explanation with evidences in support thereof, it was incumbent upon the Assessing Officer to verify the same before forming any adverse view against the assessee. Instead of examining the facts and the explanation, the AO has in an arbitrary manner made the addition. 14. The ld. AR before us, though has tried to explain the entire trail and the source of the share capital, and has argued for deletion of the addition, however, taking into consideration the entire facts, we are of the view that in the interest of justice it will be appropriate to restore the matter back to the file of Assessing Officer for carrying out proper verification at his end. Accordingly, we remit this issue to the Assessing Officer to verify the trail of the money received by the assessee by way of share capital with the direction to make the assessment order afresh on this issue after making proper verification regarding the trail of the money received by the assessee by way of speaking order in accordance with law. In case, the trail of money, as explained ..... X X X X Extracts X X X X X X X X Extracts X X X X
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