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TMI Blog2020 (2) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... irement of Section 68 because it is essential that business activities of the share subscribers and the financial health needs to be established. Assistance of Principal Officer of the subscribing companies is required and who was/should be present before the Assessing Officer to explain the said position. Otherwise also it is not a case that Assessing Officer has not made any inquiry or where he has issued notices u/s. 133(6) and all the subscribing company have duly responded and submitted and the documents relating to the transaction and confirming the same through evidences. In that case, onus shifts upon the Assessing Officer to prove that these are not correct. Here in this case it is just an opposite, as none of the notices and summons have been complied with, therefore, all the documents submitted by the assessee does not discharge the onus specifically in the light of the material information on record. On merits also, we are of the opinion that on the facts and circumstances of the case ingredients of Section 68 to establish the genuineness of the transaction were not met. Though assessee may have filed certain papers and documents, however, when there is a specific in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeals)-VIII, New Delhi for the quantum of assessment u/s 143(3)/147 for the Assessment Year 2010-11. In the grounds of appeal, the assessee besides merits has challenged the validity of reopening u/s. 147/143 (3). In the appeal memo, the assessee has raised following grounds: 1. On the facts and circumstances of the case, Ld. CIT(A) has erred in confirming the action of Ld. AO in assuming jurisdiction u/s 147 and passing the impugned reassessment order u/s 147/143(3), is arbitrary, unjustified, illegal and against the facts and circumstances of the case. 2. On the facts and circumstances of the case, Ld. CIT (A) has erred in holding as under while passing the impugned order. That AO has not acted mechanically before framing the reasons to believe. Ld. AO has not acted under the borrowed belief or under directions. That the reasons recorded by AO are based upon the specific information. That AO has applied his mind to the information received independently. AO has validly assumed jurisdiction u/s 148. That no back material like seized material authenticated copy, investigation wing report details vis a vis assessee, and statements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n received from ADIT (Inv.) Unit-2(1), New Delhi that the assessee had taken accommodation entry of share capital and premium amounting to ₹ 74 lacs from an entry provider. The detailed reason recorded by the Assessing Officer reads as under:- Reason for issue of Notice u/s 148 for reopening of assessment u/s 147 of I.T Act, 1961 for the A.Y. 2010-11 in the case of M/s S.D. Polyfilms Pvt. Ltd.(PAN; AANCS3743A) 1. Facts of the case:- The assessee-company was incorporated on 11.09.2009 as Nongovernment Company. The following persons are directors of the company:- i. Sh. Krishan Mohan Sharan ii. Sh. Anil Mohan Sharan iii. Sh. Dushyant Singh The return of income was furnished by the assessee for A.Y. 2010- 11 on 08/10/2010 by declaring income of ₹ 10,85,664/-. Return was processed u/s 143(1) on 29.08.2011 at income of ₹ 10,85,664/-. As per system, the case is found to be not selected for scrutiny u/s 143(3) of the Income Tax Act, 1961 for A.Y. 2010-11. This is the first year of Filing ITR of the assessee company because the assessee was incorporated during the previous year 2009-10 relevant to A.Y. 2010-11. 2. In this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01/10/2009 ₹ 14,00,000/- iii) M/s S D Polyfilms Pvt Ltd Pawansut Holdings Ltd 09/10/2009 ₹ 15,00,000/- iv) M/s S D Polyfilms Pvt Ltd Ganga Debt Recovery Agency Pvt Ltd 10/03/2010 ₹ 10,00,000/- v) M/s S D Polyfilms Pvt Ltd Jacaranda Capital Ltd (Ar chit Finescrip ltd) 11/03/2010 ₹ 10,00,000/- Vi) M/s S D Polyfilms Pvt Ltd Sawera Housing Construction Pvt Ltd. 11/03/2010 ₹ 10,00,000/- Total ₹ 74,00,000/ - 3. Reason for formation of belief: - I have carefully perused and considered the return of income of the assessee, information received from ADIT (Investigation) unit-2(l), New Delhi, and have reached the following conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 8th pass; that she is housewife; that she is not partner in any firm or related to any company; that Sh. Pradeep Kumar Jindal is known to her husband Sh. Subodh Kumar Khandelwal and Sh. Pradeep Kumar Jindal sometimes visits her house; that she has no business relation with Sh. Pradeep Kumar Jindal; that she does not know Sh. Laxman Singh Satyapal or Mrs. Meera Mishra or Sh. Sajan Kumar Jain; that she does not know anything about companies registered at her address; that she is not aware about share transaction/share premium by such companies and that she is not director and she does not know anything about 24 companies in which she is director against DIN 00007351. Similarly, Ms. Meera Mishra one of the directors in the paner companies formed by Sh. Pradeep Kumar Jindal in her statement stated that she had worked as receptionist at office of Sh. Pradeep Kumar Jindal since 1994 to 2006; that she is BA and she has no knowledge of English; that she was paid ₹ 5000/-per montKby Sh. Pradeep Kumar Jindal; that Sh. Pradeep Kumar Jindal has made her Director in certain companies; that she had no knowledge of the companies in which she is Director; that she is not aware of DIN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing information was declared by the assessee:- a. Share capital(Issued, subscribed and paid up):- ₹ 12,20,000, b. Securities premium ₹ 1,00,80,000/- c. Unsecured loans(other than Bank) ₹ 1,41,36,800/- d. Purchase ₹ 1,83,29,764/- e. Sale ₹ 1,49,46,517/- The above data shows that the transactions of purchase and sale do not commensurate with the amount of security premium and unsecured loan. Kurt her, the financial data was corroborated with the information received from ADIT (Investigation) Unit-2(1), New Delhi. Accordingly, it is found that the assessee has received share capital/security premium/unsecured loan from the entities controlled by Sh. Pradeep Kumar Jindal. 3.3 A perusal of documents as seized from the premises of Shri Pradeep Kumar Jindal and other annexures have revealed that bogus Share capital/Securities premium amounting to ₹ 74,00,000/- received by the assessee company from the entry providers i.e. M/s Lustre Finlease Investment Pvt Ltd, M/s Hajima Resorts Ltd, Pawansut Holdings Ltd, M/s Ganga Debt Recovery Agency Pvt Ltd., M/s. Jacaranda Capital Ltd. (Archit Finelease Ltd, M/s. Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the nature of accommodation entries, are non disclosure of material facts pertaining to such transactions which has not been disclosed by the assessee in the return of income or during the assessment proceedings of this relevant year. Thus, this specific condition for reopening is hereby fully filled in the instant case as assessee has failed to disclose such material facts on its own earlier. The case is squarely covered under provisions of section 147 of income- tax Act, 1961. 4.3 Moreover, as the case pertains to a period beyond four years from the end of relevant assessment years at the time of issue of notice, necessary sanction has to be obtained from Pr. Chief Commissioner of Income Tax or Pr. Commissioner of Income Tax or Commissioner of Income Tax, in view of the amended provision of section 151 w.e.f 01.06.2015. The necessary sanction in this regard is being obtained separately from Pr. Commissioner of Income Tax- 08, Delhi before the issue of notice u/s. 148 for reopening of assessment under section 147 in the case of assessee company. Yours faithfully (Suman Kumar Jha) Income Tax Officer, Ward-22(1), New Delhi 3. The Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Smt. Meera Mishra in her above statement has stated that she had not worked as director or held any shares in real terms in any company managed/controlled by you that she used to sign certain papers/documents in good faith even after 2006, that she has no DIN No., that she had not attended any meetings in the capacity as director. Do you want to say anything in this context? Answer. I have already submitted in my earlier statement dated 18.11.2015, the entire modus operandi of my front companies. 1 accept that Smt. Meera Mishra is a director only for namesake. I have misused her name and particular to float/run my front companies. Question 7. Do you know Smt. Seema Khandelwal? Answer. Yes, I know Smt. Seema Khandelwal. She is W/o Sh. Subodh Kumar Khandelwal. Sometimes, I have visited their residence 88, Baldev Park, Parwana Road, Delhi. I have used their residential address as registered address of some of my front companies. Besides, she has been made namesake director of various front companies run by me for purpose of providing accommodation entries. Question 8. I am showing the statement dated 18.11.2015 of Smt. Seema Khandelwal recorded u/s 132(4) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ady submitted in my earlier statement dated 18.11.2015, the entire modus operandi of my front companies. I accept that Sh. Subodh Kumar Khandelwal is a director only for namesake. I have misused his name and particular to float/run my front companies. He is not much educated and therefore I have misused his particulars. Statement on oath of Sh. Pradeep Kumar Jindal, s/o. Late Sh. D.C. Jindal, Age 57 years, R/o H-1/1A, Model Town-Ill, New Delhi and Managing Director, Focus Industrial Resources Ltd., 104 Mukund House, Commercial Complex, Azadpur, Delhi, Director in Pawansut Holding Ltd., 415' Usha Kiran Bluilding, Commercial Complex, Azadpur, Delhi recorded under section 132(4) of the Income Tax Act, 1961 during search proceedings on 06.01.2016 in the case of M/s Bhagwan Krishna Investments Trading co. (P) Ltd., 415, Usha Kiran Building, Commercial complex, Azadpur, Delhi.(Statement being recorded at office premise of M/s. Bhagwan Krishna Investments Trading co. (P) Ltd. and M/s Pawansut Holding Ltd.). I, Sh. Pradeep Kumar Jindal have been administered the oath by authorized officer Sh. Sandeep Rana, ADIT, Unit 2(1), New Delhi that I would speak truth and I would not sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ured loans etc. I charge 0.25% to 0.30% commission in lieu of providing the accommodation entry. Question 5. How did entities and persons contact you to procure accommodation entries from you? Answer. The entities and the persons contact me on my phone {9810049333, 9310049333} to procure accommodation entry from me through my front companies. However a few such entities and persons also contact me in my office 415, Usha Kiran Building, Azadpur, Delhi to procure such accommodation entries. Question 6. Where do you hold meetings with clients for providing accommodation entries? Answer. In a very few cases, I hold meetings with clients at my office. However in most of the cases, the deal of providing accommodation entry in lieu of cash is finalized on my phone itself (i.e., 9810049333, 9310049333). Question 7. What type of accommodation entries do you provide to the clients? Answer. I provide all types of accommodation entries namely bogus share application money, share premium, share forfeiture, unsecured loans, bogus purchases, bogus sales and bogus advances against properties. Question 8. How do accommodation entry seeking entities and persons pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintained with Vaish Bank, Nai Sarak, Delhi) to another bank A/c (also maintained same bank) through RTGS. This fact can be verified/is evident from relevant bank A/c statements. In all the bank A/c held with Vaish Bank credit entries are either through cash deposits or through transfer entries among Bank A/c Via RTGS. Stage-IV From our Bank A/c where the deposits were on account of RTGS transfer (from our separate Bank A/c with Vaish Bank other than involving cash deposits) on our instruction, funds used to be transferred to various bank A/c of various entry seeking entities and persons via RTGS transfer. We have received commissions at the rate of 0.25% for providing entries in this manner i.e. providing bank transfer entries in lieu of cash receipt. Question 11. Who are the intermediaries of such accommodation entries seeking entities? Whether they are advocates, Chartered Accountants, accountants, partners / proprietors /directors or in-house professionals of such entities? Answer. It depends on case to case as to who are the intermediaries. Thus such intermediaries are normally advocates or Chartered Accountants or accountants. Question 12. How do you charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of false statements and declarations relating to income filed in their returns of income and such offence is liable for prosecution under section 278 of Income Tax Act 1961? Answer. Yes, I am aware that my activity of providing accommodation entries is illegal and abets the filing of false returns of income by entities seeking accommodation entries by way of false statements and declarations relating to income filed in their returns of income and such offence is liable for prosecution under section 278 of Income Tax Act 1961. Question 19. Have you ever been investigated by Police I CBI I Enforcement Directorate (ED) /SEBI, in connection with the illegal activity of providing accommodation entries? If so, provide the details thereof. Answer. No, I have never been investigated by Police I CBI I Enforcement Directorate(ED) in connection with the illegal activity of providing accommodation entries, There were some queries from SEBI in respect of Focus industrial resources Ltd. The queries have been replied by us. Question 20. Have you filed statutory reports in ROC, SEBI and RBI in respect of accommodation entries of share premium, share application money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and modus operandi of Shri Pradeep Kumar Jindal was to provide cheque/ RTGS of the dummy companies controlled by him in lieu of cash and commission @ 25%. He also extracted the information declared by the assessee in its return of income. a. Share Capital (issued, subscribed and paid up ₹ 12,20,000/- b. Securities Premium ₹ 1,00,80,000/- c. Unsecured loans (other than Bank) ₹ 1,41,36,800/- d. Purchase ₹ 1,83,29,764/- e. Sale ₹ 1,49,46,517/- 5. He observed that financial data of the assessee was corroborated with the information received from the DIT (Inv.), Unit-2(1), New Delhi that assessee has received share capital / security premium loan from the entities controlled by Shri Pradeep Kumar Jindal. The documents seized from the premises of Shri Pradeep Kumar Jindal have revealed that bogus share capital/securities premium amounting to ₹ 74 lacs was received by the assessee company from the following entry provider companies. i.e. M/s. Lustre Finlease Investment R/t Ltd., M/s. Hajima Resorts Ltd., Pawansut Holdings Pvt. Ltd., M/s. Ganga Debt Recovery Agency Pvt. Ltd. M/s. Jacaranda Capital (Archit Finescrip Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out independent inquiry and issued notices u/s. 133(6) to all the concerned parties and also issued summons u/s.131 to the Directors of the assessee company and the entry provider companies. However, none of the notices or summons was responded by the directors of the assessee company or anyone and in case of three companies, the notices even returned back. The assessee s case before the Assessing Officer was that he has already furnished all the information regarding identity, creditworthiness and genuineness of all the investors and requested to confront and cross-examination of all the persons who had admitted to have involved in accommodation entry. The Assessing Officer again gave opportunity to the assessee to prove its claim and he sent notices u/s. 133(6) second time to all the concerned companies to confirm the transactions which were mostly returned undelivered or were not responded. Even various summonses issued u/s.131 to all the parties to record the statement were also not responded till finalization of assessment order. He has also mentioned the dates of notices issued and even the director of the assessee company who was summoned had also not responded too. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmed. These grounds of appeal are ruled against the appellant. 9. Before us, the ld. counsel for the assessee, Mr. Kapil Goel challenging the validity of the reasons recorded submitted that the Assessing Officer before recording the reasons did not had any material which is evident from the fact that he has received the information and material at a later stage from the Investigation Wing through letter dated 17.10.2017. This clearly goes to shows that the reasons recorded by the Assessing Officer are mainly based on borrowed satisfaction and none of the material was ever supplied to the assessee despite specific request. The assessee had also filed objection and also asked for the information and statements which was not supplied by the Assessing Officer. Thus, no live link nexus was established and there was no single piece of document before the Assessing Officer at the time of recording the reason. The so called tally data received from the Investigation Wing were received at a later stage that to be after the recording of the reasons. Thus, there was a clear cut violation of principle of natural justice. In support, he relied upon the judgment of Hon ble Delhi Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... every aspect to come to a prima facie believe that amount of ₹ 74 lacs received in the form of share capital/share premium was in the nature of bogus accommodation entry. Even the material gathered from the entry provider Shri Pradeep Kumar Jindal clearly pointed out that assessee was one such beneficiary who has taken share capital/share premium from the dummy companies controlled by the said entry provider. This material information is sufficient enough to clothe the Assessing Officer with the jurisdiction to reopen the case and any prudent person based on such material fact can entertain prima facie believe that income chargeable to tax had escaped assessment. 12. In so far as the contention raised by the ld. counsel that at the time of recording the reasons the Assessing Officer did not had material, is not correct because the information/ material which has been incorporated in the reasons record and thereafter independent analysis of the Assessing Officer on the statement recorded on oath of Shri Pradeep Kumar Jindal and other directors of the dummy companies shows that not only he had the statement but also all the relevant information. Later on, during the course o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make the transaction genuine especially when all the evidences at the face of it indicate that it was all a make believe arrangement for accommodation entry In support of his contentions, he strongly relied upon the following judgments. (i) NR Portfolio Pvt. Ltd., (2014) 42 Taxmann.com 339 (Del.) (ii) Navodaya Castle Pvt. Ltd., 226 taxmann 190 (iii) CIT vs. Focus Exports Pvt. Ltd., 228 taxmann 88 (iv) CIT v/s. Nova Promoters Finlease Pvt. Ltd., 342 ITR 169 (v) Nipun Builders Developers Pvt. Ltd., 350 ITR 407 (Del) (vi) CIT vs. MAF Academy Pvt. Ltd., 361 ITR 258 13. We have heard the rival submissions and also perused the relevant material and the findings given in the impugned orders including the validity of reopening u/s.147. On the jurisdictional issue, the main plank of assessee s objection is that the reasons recorded by the Assessing Officer do not clothe him to acquire jurisdiction as per law; firstly, for the reason that there is no independent application of mind by the Assessing Officer; and secondly, there was no such credible material before the Assessing Officer to entertain prima facie reason to believe that any income chargeable to tax escap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has also noted in paragraph 3.3 that he has carefully perused the documents seized from the premise of Shri Pradeep Kumar Jindal and other annexures which clearly reveals that an amount of ₹ 74 lac received by the assessee was in the form of bogus share capital/share premium which has come through various entry provider companies. He has noted that in the course of search, Shri Pradeep Kumar Jindal has admitted that he has provided accommodation entries of various natures in lieu of cash and assessee was also found to be one of such beneficiaries. The information and material along with the statements as analysed by the Assessing Officer clearly shows that there is not only independent application of mind by the Assessing Officer, but there is strong basis to form reason to believe. Even otherwise also based on these material and information any prudent person can form reason to believe that the transaction of share capital/share premium received by the assessee was prima facie bogus or was a shady transaction. At the time of recording the reason what is required to be seen is that, whether there is any credible information and tangible material on which Assessing Officer ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised in the grounds of appeal is that the action should have been taken u/s.153C of the Act and not u/s. 148, because the material information was received during the course of search carried out u/s. 132(1) in the case of Shri Pradeep Kumar Jain, therefore, the right course of action should have been u/s 153C. It is not a case here that any document or books of account relating to the assessee or any information contained therein, that is, information flowing from the documents or books of account pertaining to or relating to the assessee has been found from the premise of the searched person, albeit it was the seized material and documents belonging to the searched person recovered from the premise of the searched person which was maintained by him. It was his statement which revealed that he was providing accommodation entry and documents maintained by him showed that assessee was one of the beneficiaries which fact was found in investigation report. Thus, the only course of action under the law was to initiate the assessment or re-assessment u/s 147/148 based on material information unearthed from the case of the searched person. Had there been any documents or books of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer. Not only there was nonattendance from the side of the investee companies, but analysis of the financial credibility of these companies goes to show that they did not had any kind of creditworthiness to make such a huge investment in the assessee company. If the evidence produced by the assessee does not establish the genuineness or creditworthiness of the transaction, then the creditor or the investor has to explain the source or produce document to prove his creditworthiness. The Assessing Officer has categorically noted that uniformly in the case of all the six companies were not only showing the low profit but also had very meager income which shows that the profit making apparatus was not sufficient to make such investment. Nowhere assessee has brought on record that these companies have huge capital in the balance sheet to make investment because some of the bank statements analysed by the Assessing Officer goes to show that immediately before making the investment there are credit entries which remain unexplained. When any credible doubt has crept in regarding the nature of entries, then these companies alone could have explained or proved as to how and from wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht of the material information on record. 18. On merits also, we are of the opinion that on the facts and circumstances of the case ingredients of Section 68 to establish the genuineness of the transaction were not met. Though assessee may have filed certain papers and documents, however, when there is a specific information that the subscribing / investee companies have been found to be providing accommodation entries, and later on none of these investee companies responded to the inquiry made by the Assessing Officer, then onus shifts upon the assessee to rebut such finding and this can only be done when either in response to notices u/s.133(6) parties have responded to the Assessing Officer by furnishing all the details or assessee has produced the parties before the Assessing Officer to be examined. Here in this case the Assessing Officer has given an adverse finding regarding the creditworthiness and there profit making capacity which needs to established. The nature of deposit received by these companies before issuance of cheque has neither been explained nor has been proved either of the companies or by the assessee. The source of the money from where investment has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities mentioned in para 3 was never received as share capital/share premium. It was a camouflaged transaction to avail the benefit of favorable judicial pronouncement on share capital. The genuineness and creditworthiness of the persons/companies giving share application money to the assessee is not proved and assessee failed to discharge its onus of proving the genuineness and creditworthiness of the person/company who claimed to be the share holder of the assessee company. It is strongly pointed out that it is not case where subscribers to share capital are being verified in normal course of assessment. It is also not that the all the cases have been reopened where share were subscribed during the year. Only those cases are sought to be revisited where department had strong evidence that the parties contributing to the assessee are entry operators. One cannot be oblivious of the fact that the above mentioned organized syndicate of money laundering employed by the assessee to launder its unaccounted money as is evident from the above facts can be accepted only on the basis of collusive documents. In such scenario it would not be sufficient to only bring copy of ITR/ share applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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