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TMI Blog2019 (5) TMI 687X X X X Extracts X X X X X X X X Extracts X X X X ..... - 08, New Delhi ('the Ld. Assessing Officer') in upholding the addition of Rs. 31,00,50,001 made u/s 68 of the Act on account of receipt of share capital. 2. That on facts and circumstances of the case and in law, the Ld.CIT(A), has erred in upholding the order of the Ld. Assessing Officer in upholding the addition of Rs. 77,51,250/- made u/s 37 of the Act on account of alleged expenditure for commission incurred by the applicant company for channelizing the above share capital/share premium." ITA No.1157/Del/2019 :- "1. That on facts and circumstances of the case and in law, the Commissioner of Income Tax (Appeals)-XXIV, New Delhi ['the Ld.CIT(A)'], has erred in upholding the order of the Assistant Commissioner of Income Tax, Central Circle- 08, New Delhi ('the Ld. Assessing Officer') in upholding the addition of Rs. 2,60,00,000/- made u/s 68 of the Act on account of receipt of share capital. 2. That on facts and circumstances of the case and in law, the Ld.CIT(A), has erred in upholding the order of the Ld. Assessing Officer in upholding the addition of Rs. 6,50,000/- made u/s 37 of the Act on account of alleged expenditure for commission incurred by the applicant company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich as against the income disclosed at Rs. 49.12 crores, the income settled was Rs. 55.77 crores. The assessee as well as Revenue both has accepted the order of the Settlement Commission and which has become final. In view of the above, no further addition for unexplained share capital in the hands of above two assessees is called for otherwise it would be double taxation of the same income. 4. Learned CIT-DR argued at length. He also furnished written submission, which is being reproduced below :- "In the above case, it is humbly submitted as follows: 1. In statement on oath recorded u/s 132(4) on 17.12.2014, Sh. Shekhar Agarwal surrendered undisclosed income of Rs. 31 Cr. in F.Y 2012-13 and Rs. 15.91 Cr. in F.Y 2014-15. 2. In revised return filed on 30.08.2016 assessee increased an amount of Rs. 2.6 Cr. in A.Y 2013-14 and Rs. 28.40 Cr. in A.Y 2014-15 on account of share application money. However, no taxes were paid thereon. In statement on oath recorded u/s 131(1) on 25.10.2016, Sh. Manoj Aggarwal, Director of assessee company, stated that all taxes will be paid by 30.09.2016 but were not paid. 3. Detailed investigation was made with regard to investment made in M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court's order where it was held that since assessee himself had stated in sworn statement during search and seizure about his undisclosed income, tax was to be levied on basis of admission without scrutinizing documents. B Kishore Kumar Vs CIT (52 taxmann.com 449) Madras High Court confirmed (Copy Enclosed) 2. Bhagirath Aggarwal Vs CIT (31 taxmann.com 274, 215 Taxman 229, 351 ITR 143) (Copy Enclosed) where Hon'ble Delhi High Court held that an addition in assessee's income relying on statements recorded during search operations cannot be deleted without proving statements to be incorrect. 3. CIT Vs M. S. Aggarwal [2018] 93 taxmann.com 247 (Delhi) (Copy Enclosed) where Hon'ble Delhi High Court held that where in course of block assessment proceedings, AO made addition to assessee's undisclosed income in respect of gift, in view of fact that assessee did not even know donor personally and, moreover, he himself in presence of his Chartered Accountant had made a statement under sec. 132(4) admitting that said gift was bogus, impugned addition was to be confirmed. 4. Smt Dayawanti Vs CIT [2016] 75 taxmann.com 308 (Delhi)/[2017] 245 Taxman 293 (Delhi)/[2017] 390 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before lower authorities, additions so made after adjusting expenditure were justified (SURVEY CASE). 8. PCIT Vs Avinash Kumar Setia [2017] 81 taxmann.com 476 (Delhi) where Hon'ble Delhi High Court held that Where assessee surrendered certain income by way of declaration and withdraw same after two years without any satisfactory explanation, it could not be treated as bona fide and, hence, addition would sustain. 9. ACIT Vs Hukum Chand Jain [2010] 191 Taxman 319 (Chhattisgarh) when assessee did not retract his statement immediately after search and seizure was over and in return also no explanation was offered for surrender of undisclosed income at time of search and seizure operations under section 132(4), it could be said that assessee had failed to discharge onus of proving that confession made by him under section 132(4) was as a result of intimidation, duress and coercion or that same was made as a result of mistaken belief of law or facts. In the above case, it is humbly submitted that the following decisions may kindly be considered with regard to addition made u/s 68 of I.T.Act: 1. PCIT Vs NRA Iron & Steel (P.) Ltd. [2019] 103 taxmann.com 48 (SC) (Copy Enclosed) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 68 It was held as follows: "53. In contrast to the above judgments, in the present case, the Assessee is a private limited company and in the factual matrix, we have held that the Assessee has not been able to discharge the initial onus and has not been able to establish the identity, creditworthiness of the share applicants and the genuineness of the transaction. Though, in our considered opinion, none of the above judgments, referred to by the Assessee respondent, are applicable in the facts of the present case and in view of the findings recorded by us hereinabove. 54. In view of the above, we are of the view that the Assessee has not discharged the onus satisfactorily and the additions made by the Assessing Officer were justified and sustainable." 6. CIT Vs Navodaya Castle Pvt Ltd [2014] 367 ITR 306 (Del) (Copy Enclosed) where Hon'ble Delhi High Court accepted that since the assessee was unable to produce the directors and the principal officers of the six shareholder companies and also that as per the information and details collected by the Assessing Officer from the concerned bank, the Assessing Officer had observed that there were genuine concerns about ide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8, was to be confirmed. 10 PCIT Vs Bikram Singh [2017] 85 taxmann.com 104 (Delhi)/[2017] 250 Taxman 273 (Delhi)/[2017] 399 ITR 407 (Delhi) (Copy Enclosed) where Hon'ble Delhi High Court held that even if a transaction of loan is made through cheque, it cannot be presumed to be genuine in the absence of any agreement, security and interest payment. Mere submission of PAN Card of creditor does not establish the authenticity of a huge loan transaction particularly when the ITR does not inspire such confidence. Mere submission of ID proof and the fact that the loan transactions were through the banking channel, does not establish the genuineness of transactions. Loan entries are generally masked to pump in black money into banking channels and such practices continue to plague Indian economy. 8. Pratham Telecom India Pvt Ltd Vs DCIT (2018-TIOL-1983-HCMUM- IT) (Copy Enclosed) where Hon'ble Bombay High Court held that mere production of PAN numbers & bank statements is sufficient enough to discharge the burden on taxpayer to escape the realms of Section 68. 9. J J Development Pvt Ltd Vs CIT (2018-TIOL-395-SC-IT) (Copy Enclosed) where Hon'ble Supreme Court held that when the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be added to its taxable income under section 68. It Was held as follows: "41. In the case before us, not only did the 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 provided the socalled "share subscription monies" to the assessee. There was thus specific involvement of the assessee-company in the modus operandi followed by Mukesh Gupta and Rajan Jassal. Thus, on crucial factual aspects the present case stands on a completely different footing from the case of Oasis Hospitalities (P.) Ltd. (supra). 42. In the light of the above discussion, we are unable to uphold the order of the Tribunal confirming the deletion of the addition of Rs. 1,18,50,000 made under section 68 of the Act as well as the consequential addition of Rs. 2,96,250. We accordingly answer the substantial questions of law in the negative and in favour of the department. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e whole body of the assessment order. He stated that when the income has been taxed, its application cannot be taxed again otherwise it would amount to double taxation of income. 6. We have carefully considered the arguments of both the sides and perused the material placed before us. The limited question before us is whether the credit in the form of share capital in the companies under appeal before us can be considered to be application of undisclosed income of M/s Surya Food and Agro Limited who have declared such income before the Settlement Commission. Let us first see the stand of the Revenue i.e., the Assessing Officer. At the time of hearing before us, both the parties have agreed that the facts in all the above three appeals are identical and in fact, the assessment orders are also more or less identically worded. They have referred to only one assessment order i.e., assessment order in the case of M/s Surya Processed Food Pvt.Ltd. for assessment year 2013-14. Therefore, we will also refer herein below the said assessment order. 7. In paragraph 1 of the order, the Assessing Officer has mentioned as under :- "Search and seizure proceedings under section 132 of the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement substantiates the fact that all the financial and investment related decisions were taken by Shri Shekhar Agarwal and he is the key person handling investments and fund requirement in main companies of the group. Further questioning of Shri Shekhar Agarwal on the issue of accommodation entries taken by the Priyagold Group took place at the head office of the Priyagold Group." 9.1 Thus, the Assessing Officer himself has recorded the finding that Shri Shekhar Agarwal was handling all the investment related issues of Priya Gold group of companies. It is further noted that he is the key person handling investments and funds requirements in the main companies of the group. 10. In paragraph 4.13, again the Assessing Officer has mentioned "His statement reflects the fact that though Shri Shekhar Agarwal inter-alia looked after the decisions related to finance and general policy including decisions regarding assessment of funds requirement by the group companies, he was unable to furnish any reply to the questions regarding creditworthiness of investor companies, details of meetings with investor companies, due diligence followed in issuance of shares by the group, date of allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds which were introduced into main companies of the group by routing of these funds through layers of bogus (jama kharchi) accommodation providing companies. This submission was reconfirmed by Mr. Shekhar Agarwal in his statement recorded during post-search proceedings on 29.01.15." 11.3 Thus, the Assessing Officer himself has concluded that Priya Gold group had undisclosed funds which were introduced into main companies of the group by routing of these funds through layers of bogus accommodation entries. 12. Again at page 38, the Assessing Officer, in paragraph 4.24, recorded the following finding :- "All the above statements further establish the fact that all these companies based in Kolkata purportedly investing in Priyagold Group are nothing but paper companies and all the investments from them in Priyagold group concerns in the form of share capital/share premium are nothing but accommodation entries, which have been obtained by Priyagold group in its books by routing its own unaccounted money." 13. In paragraph 4.26, the Assessing Officer concluded as under :- "It is proved beyond any iota of doubt that this investment of over Rs. 46.91 crores in the form of share cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paragraph 4 Annexure-A of the application, there is full and true statement of facts and the manner in which the income has been derived. The relevant portion thereof is reproduced below:- "IV. FULL & TRUE STATEMENT OF FACTS AND MANNER IN WHICH INCOME HAS BEEN DERIVED. 1. The applicant company is in the trade of manufacturing and sale of biscuits. 2. The applicant company is managed by Agarwal family called Agarwal Group for short. The head-man of family is Sh. Ballabh Prasad Agarwala. The business operations and executive functions of business of the applicant company are conducted by his youngest son Sh. Shekhar Agarwal. 3. .................. 4. .................. 5. .................. 6. .................. 7. .................. 8. .................. 9. .................. 10. .................. 11. .................. 12. The applicant introduced a part of the profit made in the hedging transaction kept outside books, in the books of the group concerns in the form of entries taken as Share capital in the group concerns. Thus the profit made outside books by the applicant was utilized by it for making investments in the share capital of other group concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een that the additional income mentioned above covers the investment made by the applicant company in the shares of:- a) Surya Processed Food Pvt.Ltd. b) Surya Agrotech Infrastructure Ltd. 15. It would be seen that the additional income offered by the applicant earned from the hedging of raw material covers the undisclosed assets/application of funds found during the course of search and there is no other undisclosed asset found or application of funds by the group over and above the income offered. Thus the income offered by the applicant is full and true." 16. In Annexure-3 of the application, M/s Surya Food & Agro Limited has given the complete details of bogus share capital introduced in the group companies. The same read as under :- Surya Food & Agro Ltd. List of bogus capital introduced by the applicant in group companies Company name : Surya Processed Food Private Limited Details of bogus shareholders S.No. Particulars No. of Shares Per share value Amount Assessment Years 1 M/s Subhshree Investment Management Pvt.Ltd. 42,22,973 37 1562,50,000 2013-14 2 M/s Surya Vincom Pvt.Ltd. 41,56,757 37 1538,00,000 2013-14 Total 83,79,730 & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to the application of additional income disclosed before the Settlement Commission. We find that the ITAT in assessee's own case, while considering the stay petitions by these two companies which are under appeal before us, in its order in Stay Application No.205 to 207/Del/2019, vide order dated 1st March, 2019, gave the following finding :- "We have carefully considered the rival contentions and perused the orders of the lower authorities as well as the order of the settlement commission dated 8/6/2018. It is apparent that the disclosure has been made by the company who has earned the undisclosed income and routed in books through the petitioner companies as unaccounted share capital. The application of the income is taxed in the hands of the petitioner companies apparently it seems and sources of income is taxed in the hands of Surya Food and Agro Ltd. Therefore prima facie the case of the assessee shows that there is a double addition, once the source of income and secondly the application of income. Therefore according to us the balance of convenience lies in favour of the assessee." 20. Learned DR has contended that the conclusion drawn by the ITAT in the order of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income is taxed in the hands of the petitioner companies apparently it seems and sources of income is taxed in the hands of Surya Food and Agro Ltd. Therefore prima facie the case of the assessee shows that there is double taxation, once the source of income and secondly the application of income". We entirely agree with the above finding of the ITAT in the order passed in the stay petition filed by M/s Surya Processed Food Pvt.Ltd. and M/s Surya Agrotech Infrastructure Ltd. In view of the above, since the income has already been taxed in the hands of M/s Surya Food and Agro Limited, the application of the said income in the form of share capital in M/s Surya Processed Food Pvt.Ltd. and M/s Surya Agrotech Infrastructure Ltd. i.e., the appellants before us, cannot be taxed again. Accordingly, we delete the addition for unexplained share capital and allow ground No.1 in all the appeals. 21. With regard to ground No.2, both the parties admitted that this ground would be consequential to the decision in ground No.1. The Assessing Officer, apart from the addition on share capital, has also made further addition of alleged expenditure being commission for acquiring the accommodation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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