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Facts
The assessee received share capital/premium of Rs. 25,00,000/- from M/s. Blue Bell Finance Ltd. This amount was alleged to be part of a money laundering scheme operated by Jain Brothers. The AO made an addition under Section 68 of the Income Tax Act. An addition of Rs. 45,000/- was also made for alleged commission expenses.
Held
The Tribunal held that the assessee had discharged its onus to prove the genuineness, identity, and creditworthiness of the investor. The assessment order for M/s. Blue Bell Finance Ltd. for the same assessment year accepted its income, thereby establishing its identity. No incriminating material directly linked the assessee to paying unaccounted cash for accommodation entries. The addition under Section 68 was deleted, and the addition for commission expenses was also found unsustainable.
Key Issues
Whether the addition under Section 68 for share capital/premium is justified when the assessee provides documentary evidence and the investor's identity is established? Whether the addition for commission expenses is sustainable without corroborating evidence?
Sections Cited
68, 148, 69C, 194A, 143(2)
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Income Tax Appellate Tribunal, DELHI BENCH “SMC”, DELHI
(A.Y.2011-12) Agroha Fincap Ltd., C-51, Mahendru Enclave, G.T. Karnal Road, ...... अपीलाथ�/Appellant New Delhi 110033 PAN: AAACA-8075-G बनाम Vs. Income Tax Officer, Ward-1(4), ..... �ितवादी/Respondent R.No. 398B, CR Building, New Delhi 110002 अपीलाथ� �ारा/Appellant by : Shri Suraj Gupta, Advocate �ितवादी�ारा/Respondent by : Shri Manoj Kumar, SR.DR सुनवाई क� ितिथ/ Date of hearing : 22/05/2025 घोषणा क� ितिथ/ Date of pronouncement : : 19/08/2025 आदेश/ORDER
PER VIKAS AWASTHY, JM:
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-I, New Delhi [in short ‘the CIT(A)’] dated 20.08.2019, for Assessment Year 2011-12.
Shri Suraj Gupta, appearing on behalf of the assessee at the outset submitted that he is not pressing legal ground raised in ground no. 2 of appeal. Thus, the primary issue for adjudication in appeal by the assessee is addition of Rs.25,00,000/- u/s. 68 of the Income Tax Act,1961(hereinafter referred to as ‘the Act’) on account of share capital/share premium received from M/s. Blue Bell Finance Ltd.
(AY 2011-12) 2.1. Narrating facts of the case, the ld. Counsel for the assessee submitted that a search and seizure operation was carried out in the case of Jain Brothers (Shri Virender Jain & Shri Surender Kumar Jain) and there group concerns on 14.09.2010. On the basis of material found and seized in search it is alleged that the assessee is one of the beneficiaries of share capital premium/loan from one the concerns/entities operated by Jain Brothers. Hence, assessment for AY 2011- 12 in the case of assessee was reopened. Notice u/s. 148 of the Act was issued to the assessee on 30.03.2018. In response to the said notice, the assessee filed return of income on 31.03.2018 declaring income of Rs.38,100/-. During the period relevant to assessment year under appeal, the assessee had received Rs.25,00,000/- as share application money/share premium from M/s. Blue Bell Finance Ltd. The said company had subscribed for 25,000 equity shares with face value of Rs.10/- and share premium of Rs.90/-. During assessment proceeding, the assessee in order to prove genuineness of the transactions and identity and creditworthiness of the subscriber to the share, vide letter dated 04.12.2018 furnished confirmation, bank statement, copy of ITR and audit financials of M/s. Blue Bell Finance Ltd. The ld. Counsel referring to Balance Sheet of M/s. Blue Bell Finance Ltd. as on 31.03.2011 pointed that the name of the assessee is reflected in Schedule 3 of Investments by the said company. He further referred to Indian Overseas Bank, bank statement for the period of 01.04.2010 to 30.09.2010 at page no. 12 of the paper book to show the amount of Rs.25,00,000/- is received by the assessee. He also referred to the bank statement of M/s. Blue Bell Finance Ltd. at page no 13 of the paper book to show that on 18.06.2010 Rs.25,00,000/- was transferred from the account of M/s. Blue Bell Finance Ltd. to the assessee. He further referred to the assessment order dated 28.03.2013 for AY 2011-12 in the case of M/s. Blue Bell Finance Ltd. where the income returned by the said (AY 2011-12) company was accepted by the AO without any addition. The ld. Counsel asserted that with the aforesaid documents, the assessee was able to discharge its onus qua genuineness of the transaction and creditworthiness of the investor company i.e. M/s. Blue Bell Finance Ltd. He further referred to the confirmation filed by the M/s. Blue Bell Finance Ltd. at page no 14 of the paper book. In so far as incriminating material referred to at page no. 52 and 53 of the paper book, he submitted that no adverse inference can be drawn from the said incriminating material as it nowhere mentions that these transactions are bogus. 2.2. In respect of ground no. 4 of appeal relating to addition of Rs.45,000/- as unexplained expenditure u/s. 69C of the Act, the ld. Counsel submits that the said addition is consequential. The AO has assumed without there being any material available on record that the assessee has paid commission of Rs.1.8% on sum of accommodation entry provided by S.K Jain Group of Companies. There is no material whatsoever to show that the assessee has paid any such commission for obtaining alleged accommodation entries.
Per contra, Shri Manoj Kumar representing the department vehemently defended the impugned order and prayed for dismissing appeal of the assessee. The ld. DR submitted that in operation carried out on Jain Brothers and their group concerns, certain incriminating documents were found and seized. The AO has summarized the modus operands of Jain Brothers according to which unaccounted cash was received from the beneficiaries and the same was deposited in bank accounts of various entities operated by Jain Brother. After multiple layering of transactions the same amount was invested by dummy companies of Jain Brothers in the company from whom cash was received. For providing this money laundering services, commission at the rate of 1.8% was (AY 2011-12) charged on the value of money laundered. The assessee is one of the beneficiaries of Jain Brothers and its group concerns. The dummy entities of Jain Brothers do not carry out any actual business except for providing accommodations entries. He submitted that in seized document-Annexure A-10 comprehensives details of cheque no, bank, entry providing company, name of beneficiary, date, etc. are given. The name of assessee appears in the said list.
Both sides heard, orders of the authorities below examined. The ld. Counsel for the assesse has stated at Bar that he is not pressing ground of appeal
no.
2. In light of aforesaid statement ground no. 2 of appeal is dismissed.
5. In ground no. 3 of appeal, the assessee has assailed addition made u/s. 68 of the Act. Addition of Rs.25,00,000/- has been made in the hands of the assessee u/s. 68 of the Act on the premise that the assessee has received share application money/premium from M/s. Blue Bell Finance Ltd. one of the company allegedly operated by Jain Brothers for money laundering. The assessee in order to discharge its onus in proving genuineness of the transaction, identity and creditworthiness of the investor has furnished various documents including confirmations, bank statements, ITR’s, financial statements etc. of M/s. Blue Bell Finance Ltd. A perusal of Balance Sheet as on 31.03.2011 of M/s. Blue Bell Finance Ltd. shows that name of the assessee is duly reflected in the Schedule of Investment of the said company and against the name of the assessee Rs.25,00,000/- has been recorded. Further, the assessee has also drawn our attention to the bank statements of M/s. Blue Bell Finance Ltd. and the assessee, indicating that the amount Rs.25,00,000/- has been transferred through banking channel. The assessee has further placed on record assessment order in the case of M/s. Blue Bell Finance Ltd. for AY 2011-12 passed u/s. 143(2) of the Act. The AO (AY 2011-12) in the case of M/s. Blue Bell Finance Ltd. has accepted the income returned by the assessee after search and seizure operation. The income of said company was assessed at loss of Rs.15,967/-. Once the Revenue has accepted return of M/s. Blue Bell Finance Ltd., the identity of the investor is established. The AO in the case of M/s. Blue Bell Finance Ltd. has accepted its books, hence, the Balance Sheet on which the assessee placed reliance has been held to be free from any defects and deficiencies. The assessee has drawn our attention to the alleged incriminating material found and seized during the course of search on Jain Group where the name of assessee is mentioned (at page 52 & 53 of paper book). A perusal of the said incriminating material shows that an amount of Rs.25,00,000/- has been reflected against the name of the assessee. Beyond that nothing transcends from the said incriminating material. The AO has explained modus operandi of Jain Brothers in providing accommodation entries, but the said observations of the AO is general and not specific to the assesee. There is no reference to any documentary evidence corroborating that the assessee has paid unaccounted cash to Jain Brothers and in return has got the benefit of accommodation entries in the form of share capital/premium. It is well settled principle that suspicion, howsoever strong, cannot partake the character of evidence. [Re. Dhakeswari Cotton Mills Ltd. vs. CIT 26 ITR 775 (SC)] Hence, no addition can be made on suspicion and conjectures alone. Considering documents available on record, I find no reason to sustain the addition u/s. 68 of the Act. Therefore, addition of Rs.25,00,000/- is directed to be deleted. The ground no. 3 of appeal is thus, allowed.
6. In ground no. 4 of appeal, the assessee has assailed addition of Rs.45,000/- as unexplained expenditure u/s.69C of the Act for alleged commission expenses.
(AY 2011-12) The said addition has been made merely on conjectures and surmises. No material has been brought on record by the Revenue to substantiate that the assessee has paid commission at the rate of 1.8% of the amount for which the assessee has allegedly taken accommodation entry. Since, ground no. 3 has been decided in favour of the assessee and addition of Rs.25,00,000/- on account of alleged accommodation entry has been deleted, therefore, no addition on account of alleged commission expenses on obtaining accommodation entries is sustainable. Thus, ground no. 4 of appeal is allowed.
In ground no. 5 of appeal, the assessee has alleged that the AO has not given credit of TDS deducted u/s. 194A of the Act. The AO is directed to re- examine the issue and grant benefit of TDS deducted u/s. 194A of the Act which is allegedly reflected in Form 26AS. Thus, ground no. 5 of appeal is allowed for statistical purpose.