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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 ..... before the Settlement Commission for acquisition of any other asset. We entirely agree with order of the ITAT passed in stay petition wherein the ITAT held 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 double taxation, once the source of income and secondly the application of income . 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. Expenditure being commission for acquiring the accommodation entries in the form of share capital - HELD THAT:- Both the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 ₹ 6,50,000/- 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.1158/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 ₹ 13,31,50,000 made u/s 68 of the Act on account of receipt of share capital. 2. That on facts and circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed 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 ₹ 31 Cr. in F.Y 2012-13 and ₹ 15.91 Cr. in F.Y 2014-15. 2. In revised return filed on 30.08.2016 assessee increased an amount of ₹ 2.6 Cr. in A.Y 2013-14 and ₹ 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 Subh Shree Investment Management P. Ltd. and M/s Neelkanth Vincom P. Ltd.(pages 4 to 19 of AO) which showed that the entire investment was on account of accommodation entries. 4. As stated in para 4.9 of AO , statement of directors Sh. Navin Aggarwal and Sh. Manoj Aggarwal were recorded in which they stated that Sh. Shek ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zure 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 ITR 496 (Delhi)/[2016] 290 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surrendered amount being not bona fide and it was also not borne out in any contentions raised 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 consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assesee's taxable income under 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 Pv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 addressees 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 sec. 68, 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. 11. 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 providers 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s routed through the share capital. In fact, the income was earned in the flagship company viz., M/s Surya Food and Agro Limited which had the turnover of more than ₹ 500 crores a year. Therefore, the said company filed the petition before the Settlement Commission by disclosing its additional income. That in the appellant companies, it is only the application of that income. That these facts have been duly considered and accepted by the ITAT while granting stay to the appellant companies in its order dated 1st March, 2019. He further stated that in the assessment order, the Assessing Officer himself has mentioned at several places that it is the undisclosed income of the group which is invested in the form of bogus share capital. However, at the end, while making the addition, he took a different stand than what is stated in the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf has considered the Priya Gold group as one group and the assessee company being part of the same group. He relied upon the statement of Shri Shekhar Agarwal who is Director in the associated group companies. It was pointed out by the learned counsel that Shri Shekhar Agarwal is the Director in M/s Surya Food and Agro Limited i.e., the flagship company. In the statement, Shri Shekhar Agarwal accepted the fact that the group has routed its unaccounted income in the form of share capital in its companies M/s Surya Processed Food Pvt.Ltd. and M/s Surya Agrotech Infrastructure Limited. 9. The Assessing Officer has again relied upon the above statement of Shri Shekhar Agarwal. Paragraph 4.11 of the order of the assessment order reads as under :- 4.11 The statement on oath dated 16.12.14 of Shri Shekhar Agrawal, who was handling all the investment related issues of the Priyagold group of companies, was also recorded at the residence and the 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 g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Satnaliwala. Accordingly Sh. Sudhir Satnaliwala introduced these unaccounted funds into the books of our main companies namely M/s Surya Processed Food Pvt.Ltd. M/s Surya Processed Food Pvt.Ltd. in the form of share capital/share premium through a layer of Kolkata based companies. However I am not aware about the exact modus operandi followed by Sh. Sudhir Satnaliwala to arrange these transactions. 11.1 From the above, it is evident that Shri Shekhar Agarwal repeatedly mentioned that it is the unaccounted income of the group which is routed through the share capital in M/s Surya Processed Food Pvt.Ltd. and M/s Surya Agrotech Infrastructure Limited i.e., the companies in appeal before us. 11.2 The above statement of Shri Shekhar Agarwal has been relied upon by the Assessing Officer time and again. At page 31 of the assessment order, after considering the statement of Shri Shekhar Agarwal, the Assessing Officer concluded as below :- The above admission of Shri Shekhar Agarwal established beyond doubt that Priyagold group had unaccounted funds which were introduced into main companies of the group by routing of these funds through la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the order of the Settlement Commission in the case of M/s Surya Food and Agro Limited, which is the flagship company of the assessee group. The copy of the application before the Settlement Commission along with the annexures are produced in the paper book from page 36 onwards. The application is signed by Shri Shekhar Agarwal, Director of the said company. At page 4 of the application, the assessee has given the names of the group companies which read as under :- S.No. Name of the company 1. M/s Surya Food Agro Ltd. 2. M/s Surya Agrotech Infrastructure Ltd. 3. M/s Surya Processed Food Pvt.Ltd. 4. M/s Surya Fresh Foods Ltd. 5. M/s Surya Shopping Arcade Pvt.Ltd. 6. M/s Surya Biscuit Industries (Proprietorship concern) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amount Assessment Year 1. Surya Processed Food (P) Ltd. 31,00,50,000 2013-14 2. Surya Agrotech Infrastructure Ltd. 2,60,00,000 2013-14 3. Surya Agrotech Infrastructure Ltd. 13,31,50,000 2014-15 Total 46,92,00,000 Entries were introduced in the above companies by allotting shares to the bogus shareholders as per list placed in Annexure C . It is submitted that the entire bogus share capital was obtained by ploughing back money earned in hedging transactions in cash kept outside books. 14. Below is a table showing the turn over and the gross profit earned by the applicant as per books:- A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,36,88,88,049 83,00,88,729 58,31,74,857 24,69,13,872 2011-12 4,73,68,11,191 89,99,94,126 87,91,34,327 2,08,59,799 2012-13 5,41,17,27,672 1,02,82,28,258 96,71,90,982 6,10,57,276 2013-14 6,39,80,48,593 1,21,56,29,233 1,11,61,57,254 9,94,71,979 2014-15 6,77,30,78,789 1,28,68,84,970 1,26,35,04,456 2,33,80,514 2015-16 7,18,85,42,615 1,36,58,23,097 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iculars No. of Shares Per share value Amount Assessment Years 1 M/s Surya Vanijya Pvt.Ltd. 26,00,000 10 260,00,000 2013-14 2 M/s Garima Commerce Pvt.Ltd. 3,60,000 10 36,00,000 2014-15 3 M/s Surya Vanijya Pvt.Ltd. 126,30,000 10 1263,00,000 2014-15 4 M/s Lokenath Investment Consultants Pvt.Ltd. 3,25,000 10 32,50,000 2014-15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23,380,514 23,380,514 17,70,21,574 2015-16 501,459,130 1,225,042 6,76,76,042 56,91,35,172 Total 1,079,070,554 491,273,399 55,77,24,399 1,63,67,94,953 18. Thus, as against the income of ₹ 49.12 crores disclosed before the Settlement Commission, the additional income finally settled was ₹ 55.77 crores. With regard to application of income in the form of share capital in M/s Surya Processed Food Pvt.Ltd. and M/s Surya Agrotech Infrastructure Ltd., the Settlement Commission declined to give any finding with the following order :- 8.5.3 Another issue in this case is that the applicant is claiming that its Additional income has been invested in two other group compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me to the tune of ₹ 49.12 crores before the Settlement Commission, which the Settlement Commission has enhanced to ₹ 55.77 crores. The order of the Settlement Commission is accepted by both the parties and thus has become final. Before the Settlement Commission, the assessee has repeatedly stated, which we have already mentioned above while reproducing the relevant portion of the application before the Settlement Commission, that the undisclosed income which is being offered before the Settlement Commission has been applied by way of introduction in the shape of share capital to group entities viz., M/s Surya Processed Food Pvt.Ltd. and M/s Surya Agrotech Infrastructure Limited. In paragraph 15 of the application before the Settlement Commission, M/s Surya Food Agro Limited has made it clear that there is no other undisclosed asset found or application of funds by the group . This statement made before the Settlement Commission has neither been found to be incorrect nor before us it has been shown that M/s Surya Food and Agro Limited has applied the undisclosed income offered before the Settlement Commission for acquisition of any other asset. In view of the above, w ..... 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