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TMI Blog2021 (2) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... ave actually not been presented for payment or whether any real payments were ever made . The statement is factually wrong as the bank statement of the assessee maintained at HDFC Bank clearly shows the amounts received and paid with regard to M/s Arha Buildcon Pvt. Ltd. Hence, in view of the facts are unable to agree with the contentions of the ld. CIT (A). The addition on this account is directed to be deleted. Addition on account of other parties - addition mainly based on the statement of Shri Mahesh Garg - We find that the assessee has not been given opportunity to rebut even the statement of Shri Mahesh Garg by the Assessing Officer. The Assessing Officer has not issued any summons or made any enquiries with regard to any of the parties to prove that the amounts have been in fact rooted through these entities. We have gone through the case laws submitted in judgments relied upon by the revenue. While a valiant attempt have been made by the ld. CIT DR, there has not been any tangible facts to treat these amounts u/s 68 especially when there is no premium involved, the parties have not been inquired into revenue, addition has been made solely on the basis of Shri Mahesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. Hence, the addition made by the AO cannot be sustained. The appeal of the revenue on this ground is dismissed. - Decided in favour of assessee. - ITA No. 3797, 3577/Del/2010 And SA No. 186/Del/2020 - - - Dated:- 4-2-2021 - Sh. Amit Shukla And Dr. B. R. R. Kumar, JJ. Appellant : Sh. S. Krishnan, Adv. Respondent : Ms. Sunita Singh, CIT DR ORDER Dr. B. R. R. Kumar, J. The present appeals have been filed by the assessee and the revenue against the order of ld. CIT(A)-I, New Delhi dated 28.05.2010. 2. In ITA No. 3797/Del/2010, following grounds have been raised by the revenue: 1. The order of the Ld. CIT(Appeals) is not correct in law and facts. 2. In the facts and circumstances of the case, ld. CIT (A) has erred in law and on facts deleting addition of ₹ 2 Crores towards unexplained share application money under section 68 of Income Tax Act 1961 whereas the assessee failed to substantiate genuineness and creditworthiness of the share capital subscription. 3. In the facts and circumstances of the case, Learned CIT(A) has erred in law and on facts deleting addition of 2 Crores towards unexplained share application mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... K who arranged the funds from the different parties at ₹ 3.30 Crores and out of it an amount of ₹ 2,20,50,000/- was refunded/adjusted to same of the parties which was duly reflected in the books of accounts as per the copy of confirmation in the form of Indemnity Bond dated 10.11.2006 executed between the said company by the appellant which is part of the seized documents Annexure A 17 Page 46-52 with the department. Therefore, the action the Commissioner of Income Tax (Appeals) is arbitrary, unjustified and against the provisions of law. 3. The Ld. Commissioner of Income Tax (Appeals) has erred in law and facts in not appreciating the various judgments of the ITAT, High Court and that of Hon ble Supreme Court in the case of Lovely Exports relied upon by the appellant which squarely applies to the facts of the case and therefore, the action of the Commissioner of Income Tax (Appeals) is arbitrary, unjustified and against the provisions of law. 4. The Ld. Commissioner of Income Tax (Appeals) has erred in law and facts in confirming the transaction for investment towards the share application money of ₹ 400,000/- by Shri Rakesh Kumar in the appellant co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the course of search. The appellant further submitted that the money was arranged from M/s Arha Buildcon Pvt. Ltd., who is a regular assessee with the Department. 7. The AO referred to the statement of one Shri Mahesh Garg who had invested share application money with the appellant and who confirmed that these companies were not carrying out any genuine business. He further noticed that another company i.e. Hillridge Investment who is stated to have invested money with the appellant, was controlled by entry operators Virender Jain and S.K. Jain. The Assessing Officer, therefore, concluded that this company is also engaged in taking accommodation entries. 8. The AO also referred to the Indemnity Bond entered into between M/s Arha Bui ldcon and GTM Builders Promoters Ltd on 10.11.2006 marked as Annexure A-17 pages 46 to 52 which showed advance of ₹ 3.75 crores to appellant for 60 flats in the GTM Forest and Hills at Dehradun. The Bond further states that GTM, looking to the increased value of properties, has agreed to repurchase the flats from Arha at an additional cost of ₹ 2.97 crores as well as ₹ 1 crore as interest on the principle. As per the bon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Finanace (p) Ltd 900000 Unique Diagnostic Ltd A/c 500000 Zafar Iqbal Ansari 2400000 Zigma Telecom (p) Ltd A/c 1500000 Grand Total 53450000 11. Out of the above amount, the ld. CIT (A) has deleted the amounts received from Shailja Finance Ltd. of ₹ 1,00,00,000/- Pathik Merchandise (p) Ltd. of ₹ 1,00,00,000/- as the assessee and the parties could provide documents relating to identity, genuineness and creditworthiness of the amounts received along with confirmations, address, cheque number and PAN. 12. Aggrieved with the order of the ld. CIT (A), the revenue filed appeal against deletion of ₹ 2 Cr. and the assessee filed appeal against the confirmations of the remaining amounts of ₹ 3,45,50,000/-. 13. Before us during the arguments, the ld. AR submitted that the Assessing Officer mainly relied upon the statement recorded during the search operation and any addition has to be based on the seized material. In that aspect, no seized material relevant to the addition has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee for that previous year. The burden of proof is heavily cast on the assessee. First of all, he must furnish an explanation as otherwise the cash credit will be treated as his income. Secondly, the explanation offered must be to the satisfaction of the Assessing Officer. It is by now well-settled that what all is required from the assessee by way of explanation is, (i) that he must establish the identity of the payer; (ii) that he must prove the creditworthiness of the payer, and (iii) that he must prove the genuineness of the transaction. In the case of Lovely Exports (P) Ltd [216 CTR 195 SC] it was held that, if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of assessee company. The Hon'ble Jurisdictional High Court in I.T.A. No. 665/2009 in the case of CIT Vs Gourdin Herbals India Ltd. order dated 17th Sep. 2009 fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transaction is on the assessee as the facts are within the assessees knowledge. Mere production of incorporation details, PAN Nos. or the fact that third persons filed return in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. (vi) In the case of MAF ACADEMY P. LTD. [361 ITR 02858 (Delhi)] it was held that, mere production of incorporation details, PAN Nos. or returns may not be sufficient when surrounding and attending facts predicate cover up. In present case, it was strange that Assessee in year 2001 felt need of obtaining affidavits from persons investing in shares to certify genuineness when there was no inquiry. Such fact raised suspicion on genuineness of transaction. Further shares were purchased at large premium and then sold at substantial loss in short span of time. Also assessee failed to produce persons who had invested in shares and show that these people were completely unrelated to Assessee and as such, all entries were merely accommodation entries Thus, Assessee had not discharged onus satisfactorily and additions made by AO were sustained Orders of CIT (Appeals) and ITAT in deleting addition un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that burden imposed upon it u/s 68 had been discharged, particularly when investors not only did not submit any confirmation, but had concededly reported far less income than the amounts invested. (x) In the case of ONASSIS AXLES PRIVATE LIMITED [364 ITR 53 (Delhi)] it was held that, Held, bank statement of three companies filed in remand report before CIT(A) shows that accounts did not disclose large volume of transactions. Cash deposits were made into accounts of companies on same day or on proximate days. Pay orders given to apply to shares were issued from a far off bank branch in NOIDA. These facts, together with share applicants lack of resources and inadequate share capital, as well as authorized and subscribed share capital of assessee i.e. ₹ 50 lakh being the authorized capital, and paid up capital being ₹ 70 lakh, as against it reserves being over ₹ 2 crores, for reason of the premium received, showed that share money transaction was dubious. Amount received by assessee falls within mischief of Section 68 as unexplained amounts. Tribunal was justified in holding that amount received by assessee was bogus share capital. Assessee s appeal dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal. (xvii) In the case of Nova Promoters Finlease (P) Ltd (342 ITR 169 Del) it was held that Assessing Officer after issuance of summons not being satisfied by the explanations provided held that that assessee was unable to prove the genuineness of the transactions with the companies and that it also proved that the assessee company had introduced its own monies through nonexisting companies using the banking channel in the shape of share application monies There is no explanation as to why the deponents could not be produced and did not appear in response to the summons - the modus operandi involves receipt by the entry providers of equivalent amount of cash from the assessee Section 68 places no duty upon Assessing Officer to point to the source from which the money was received by the assessee. Order of Tribunal set aside - Question of law answered in favour of department--Yes. (xviii) In the case of AZEEM INVESTMENT PVT LTD (252 CTR 0217 Del) it was held that Reassessment proceedings were initiated in the case of the assessee after information was received from Director of Investigation regarding bogus/accommodation entries allegedly provided by different com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oney coming from assessee's coffers - For making addition under section 68, it is not incumbent upon AO to establish that money had come from assessee's coffers. (xxi) In the case of NEELKANTH ISPAT UDHYOG PVT LTD (81 DTR 0214) it was held that, In cases where the explanation offered by the assessee about the nature and source of the sums found credited in the books is not satisfactory there is, prima facie, evidence against the assessee, viz., the receipt of money. The burden is on the assessee to rebut the same, and, if he fails to rebut it, it can be held against the assessee that it was a receipt of an income nature---Yes. (xxii) In the case of Frostair P. Ltd [92 DTR 393 (Del)] it was held that, Share application money, Genuineness of the transaction, Revenue received information alleging that assessee had accepted share capital from companies engaged in providing bogus entries in the form of loan and share application money to interested parties. Accordingly, the AO called for information u/s 142 (1)Assessee filed a list of 18 shareholders and felt that the nature of the assess company and its business was not such as to attract a huge premium. After taking into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... settled in the case of Lovely Exports (supra). In CIT V/s. Navodaya Castles (P) Ltd. 109 DTR (Delhi HC) 109 (184) Certificate of Incorporation, PAN etc are relevant for the purpose of identification, but have their limitation when there is evidence and material to show that the subscriber was a paper company and not a genuine investor., Matter is remanded for reconsideration. In the case of Navodaya Castle [56 taxmann.com 18 (SC)], this it was held- Whether Special Leave Petition filed against impugned order was to be dismissed - Held, yes. [IV] Ground Nos. 2, 3 and 4 of Department Appeal ITA No. 3797/Del/2010 - The facts brought out in the assessment order for AY 2006-07 and in view of the discussion of all the case laws cited above, it is very clear that the AO has correctly made the addition u/s 68 of the Income Tax Act and the addition should be upheld. In the present case, the AO has conducted necessary investigations to arrive at the conclusion that the genuineness of the transactions have not been proved and neither have the same been explained. The Revenue relies upon all the facts as discussed by the AO in the assessment order for AY 2006-07. Hence, on the merits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee has not been given any opportunity to the assessee regarding the discrete enquiries conduced and its outcome. The said lender has been existence for 10 years and assessed to tax. While making the addition, the Assessing Officer mentions that the assessee was not above to provide any details of cheques that was issued by the assessee and how many of these cheques have actually not been presented for payment or whether any real payments were ever made . The statement is factually wrong as the bank statement of the assessee maintained at HDFC Bank A/c No. 1322000007148, Palam, New Delhi clearly shows the amounts received and paid with regard to M/s Arha Buildcon Pvt. Ltd. Hence, in view of the facts are unable to agree with the contentions of the ld. CIT (A). The addition on this account is directed to be deleted. Addition on account of other parties: 19. The addition has been mainly made mainly based on the statement of Shri Mahesh Garg. 20. We have gone through the statement and also the ledger account and the bank accounts of the various parties from whom the amounts have been received. In the case of the Bic Consultants Pvt. Ltd. while the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Shri Mahesh Garg only. In the case of MAF Academy Pvt. Ltd., the shares were purchased at a large premium and then sold at substantial loss in short span of time. The assessee failed to produce the parties and the parties were completely unrelated to the assessee whereas in the instant case the amounts have been received and repaid to various parties even before the date of search and in some case after the search and in other cases against the allotment of flats. There was no premium involved in this case except that it is a finance arrangement to complete the process of construction of flats. In the case, no shares have allotted, the amounts have been taken are refunded and the agreements have been made to buy back the flats. In the case of Global Securities Finance Pvt. Ltd., the assessee had no proven track record justifying hefty premium of four times the face value whereas here in the instant case the flats have been sold @ ₹ 1100 per sq. ft. The judgment in the case of Onassis Exiles Pvt. Ltd. there were cash deposit whereas in the instant case no such cash deposit could be brought out by the revenue. We have perused all the other cases relied upon by the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se papers and did not give any further explanation. In addition to the above, some documents relating to cooperative societies were also found from the residence of Shri Tushar Kumar Bhaqwanti Cooperative Group Housing Society, Plot No. 83, Sector 56, Gurgaon (GTM Ananda) 60. This society was formed in 1998 and has been ful ly completed. The initial membership of the society was 40 members but was subsequently increased to 48 members. During the course of search at the residence of Shri Mohit Vohra various documents were found which related with the Bhagwanti cooperative group housing society. 61. Shri Mohit Vohra was asked about these papers during the course of search at his residence. He was asked Q.1 I am showing you annexure A 1 1 to 10, which is seized from your residence during the course of search. Please go through each page of this annexure thoroughly and carefully, please tell what they are about? Ans. I have gone through each and every page of this annexure, but I find myself unable to explain them and they are not related to my duty, but I was asked to hand over these papers to Mr. Kansal, who resides at sector 56, Gurgaon by Shri Tushar K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This is only prospective list of the names of the flat owners along with the flat nos. for contacts etc. There is no transaction pertaining to me. 62. The reply provided is clearly an afterthought as there is a clear contradiction in the reply provided by Shri Mohit Vohra. Further when he was asked A-3/1-48 Copies of letters relating to payment of instalments by members who have booked flats in Haryana CGHS Ltd, original receipts issued by Bhagwanti CGHS for payments made by members. Please explain the same. Whether you have shown these transactions in your books of accounts. He replied I was an authorized loan coordinator of Loan Pandit and Trendsetters Finance Company vide their letter dated 10.01.2006 I was a mediator between the mentioned companies and various clients for different housing projects. The clients in various housing projects would approach me for arranging financial assistance or I used to contact them so that I could arrange housing loans for them and they could pay the outstanding amount for their flats. The papers of various parties/members of housing societies etc. were lying with me for this purpose or for arranging supplies as state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t No. 1. Sh. Rajesh Chabbra 502 Bhagwanti CGH Ltd. 2. Mrs. Alka Gupta 505 Bhagwanti CGH Ltd. 3. Mrs. Ruchi Aggarwal 606 Bhagwanti CGH Ltd. 4 Mr. S. Rajan. 701 Bhagwanti CGH Ltd. 5. Group Cpt. Modi Lai Bhandari Ltd. 801 Bhagwanti CGH 6. Wg. Cdr. Suni l Chaudhery 203 Bhagwanti CGH Ltd. 7. Sh. Jati in Bakshi 804 Bhagwanti CGH Ltd. 8. Sh. Raman Deep Sharma 803 Bhagwanti CGH Ltd. 9. Sh. Manoj Dhar 305 Bhagwanti CGH Ltd. 10. Dr. Meena Gupta 706 Bhagwanti CGH Ltd. 11. Sh. Amit Gupta 301 Bhagwanti CGH Ltd. 12. Sh. P.S.Manikantan 204 Bhagwanti CGH Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he society i.e. Plot No. 83 Sec. 56 Gurgaon. These papers pertain to Sh. Rajesh Chhabra. Sh. Rajesh Chhabra has stated that (1) Ration Cards at page no. 26, does not pertains to him. (2) Signature at page no. 27 has not been done by him. (3) Address written at page no. 28 in blue ink on page 28 has not been written by him and does not pertains to him. Please clarify the above facts? Ans: In this connection I clarify that all the papers relating to formation of members of the society i.e. application for membership, affidavits, ration cards and other documents were received by us from M/s GTM builders and the promoters, Dwarka which were sent by hand by Sh. Tushar Kumar to the society. I do not know anything about ration card, affidavit and address written on the application form for membership. The authenticity of these documents is known to Sh. Tushar Kumar of GTM Builders and Promoters Dwarka. Q 15. Please state about the agreement between the society and M/s GTM builders and Promoters? Ans. The society was desirous to make the members of the society but the society was not getting the sufficient members. We contacted with the contractor of the society to provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is correct. Q. 2. On the basis of the above can it be concluded that the control of the society was with GTM/Tushar Kumar? Ans. The technical legal control is with the society only however GTM/Tushar Kumar was controlling the society by the way of introducing most of the members, keeping their records and giving advertisement in the name of society. 69. During the course of assessment proceedings Shri Tushar Kumar was asked During the course of survey on Bhagwanti Cooperative Group Housing Society, the statement of Shri Vidyasagar Vishnoi was recorded who is the Honorary Manager in the society. In the course of his statement Shri Vishnoi has stated that 31 of the 48 members in the society were introduced by Shri Tushar Kumar/GTM whose names are also given by him. This was done on the condition that the value of each flat would be decided at a higher rate i.e. ₹ 21 lakhs instead of ₹ 17 lakhs which was the cost of the flat. The difference amount of ₹ 4 lakhs was to be shared by Shri Tushar Kumar/GTM and contractors. He further stated that all the documents relating to the members introduced by GTM were received directly from the company and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries made in my absence/back. The material being cited has not been seized from us and we have nothing to do with the same. Still, if the department has any doubts relating to our bonafides, we have requested the Department to call the persons in person and confront them to us and allow us opportunity of cross-examine them. We again reiterate and confirm to your good self that no payment in cash or through cheque has ever been received by the assessee from society or any client/customers of the Society. We were earlier working as a Property Dealer/agent/broker in various places like Dwarka, Gurgaon etc. and the income earned is shown in the respective case of each assessee. You are therefore requested to consider and accept my submissions in the interest of justice. 71. The same question was also asked in case of GTM Builders and the assessee has replied that the reply may be treated as same as in case of Sh. Tushar Kumar. 72. Papers were also seized from the residence of Shri Tushar Kumar relating to Bhagwanti Cooperative Group Housing Society. Annexure A-4 of Party A-3 has page no. 14. It is on the letterhead of Bhagwanti Cooperative Group Housing Society and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... members and kept for the records of the society. 77. The reply is wrong as the papers were not found during the course of survey but were found at the residence of Shri Tushar Kumar and no explanation whatsoever has been given what these papers were doing at his residence. When question was put about the letter as Papers have been seized from the premises of Sh. Tushar Kumar during the course of search at his premises annexurised as Party A-2, Annexure A-4 page no. 13 and 14. Page 13 is about escalation of cost and 14 is on the letter head of Bhagwanti Cooperative Group Housing Society also written GTM Ananda signed by its President, Sh. Ashok Kumar and Vice President, Sh. R.K. Huda. Please explain the same. The assessee replied that It is clarified that letter was issued by the society to its members informing the cost of flat. However insertion of the words GTM Ananda (Stylish Comfort Homes) on the top of it, was not in the knowledge of the society. Further in his replies dated 24.11.2008 A.R. of the Bhagwanti Cooperative Group Housing Society acknowledged that members were introduced by Shri Tushar Kumar. Interestingly a newspaper article had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... society was managed and controlled by the GTM Group and the main contact person was Shri Tushar Kumar. It is also evident that for each of the 48 flats, GTM/Tushar Kumar received a sum of ₹ 4 lakhs which amounts to a total payment of ₹ 1,92,00,000/- which was raised by the active connivance of GTM Builders and the members of the society. This clearly represents the undisclosed income of the group. An addition of ₹ 1,92,00,000/- on this account is being made protectively in the hands of Bhagwanti Cooperative Group Housing Society and Shri Tushar Kumar and substantively in the hands of M/s GTM Builders in the year 2006-07 as final instalment for payment was made in the year 2005 which is clear from the statement of Shri Ashok Kumar President of M/s Bhagwanti Cooperative Group Housing Society. Members were introduced in various years but it is presumed that only while paying the final instalment the cash amount would have been paid to Shri Tushar Kumar. Hence the addition of ₹ 1,92,00,000/- is being made in the year 2006-07. 25. The ld. CIT (A) deleted the addition on the grounds that there is no evidence to show that any money has passed from the societ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar Kumar. Hence the addition of ₹ 1,92,00,000/- is being made in the year 2006-07. 31. From the record, we find that Shri Tushar Kumar might have played some role but the society confirmed that initially each flat was estimated in the year 2003 at ₹ 17 lacs and ₹ 21 lacs for category A and category A1 type of flats. It was also confirmed by the society that since there was a rise in the price of steels, cement and bricks, the cost escalation was worked out to be ₹ 44,800/- which was duly approved by the members of the society in the AGM. The society cannot be said a benami concern of Shri Tushar Kumar/GTM since it is a separate legal entity and is a registered society under the Haryana cooperative society Act. The scope of its activities, objectives is governed by its Memorandum and Articles of the association and nothing else. The society takes its decisions through its governing body which are given such powers through General Body. It is also to be noted that all the legal , financial documents relating to the society, the minutes of its meetings, its members, its accounts etc. are kept with the society and no one else. The mere fact that some of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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