AURA GOLD PVT. LTD.,,DELHI vs. ITO, WARD-3(4), DELHI

Brief Details of the assessee The assessee company M/s. Aura Gold Private Limited was incorporated on 01-1 11-2010. The business of the assessee is manufacturing, trading, export, import of all kinds of gold, silver, platinum, diamond, jewellery and ornaments to cut, saw, clean, polish, sort drill etc. The company filed its Return of income for A.Y. 2012-13 on 22-09-2012 declaring income Rs.18,81,584/- The return was processed u/s 143(1) of I.T. Act. The case was picked up for scrutiny, and assessment u/s 143(3) was made at the returned income. Sh. Nitin Gupta, Neetu Gupta, Deepak Gupta and Hema Gupta were Directors of the Company during the A.Y. 2012-13.

Information Investigation Wing, New Delhi. 2.1. The DDIT (Inv.) Unit-6(1), New Delhi vide letter F.No. DDIT(Inv)Unit-6(1)/ A.O/2018-19/700 dated 22-03-2019 forwarded therewith information in the case of M/s. Aura Gold Private Limited. Information was received that the saving account held in the name of M/s PAM Jewellers Pvt. Ltd. having account NO. 629205031115 in ICICI bank received large value cash transaction in this account. During the period 28.9.2011 to 20.1.2012, total cash credit in the account is 13 Cr. and total debit is 13 Cr. which is transferred to linked account No. 000705030999, 113805500015 and 629205030804. Multiple cash deposit were done on same day followed by immediate transfer leaving the minimum balance in the account. The customer purchases gold from importers and sell to jewellery manufacturer. There is no cash transaction after 20.1.2012 and account closed on 23.03.2012. High value of cash transaction in the account in short period and usage of account for parking of funds lead to suspicion. Summons were issued to the PAM jewelers Pvt. Ltd., for explaining the source of credit and nature and purpose of debit in respect of bank account no. 629205031115, list of all bank accounts, to explain the business relationship and transaction undertaken with M/s Atma Ram Amarnath, M/s Radhamohan Purshotam Das Jewellers Pvt. Ltd. and M/s Aura Gold Pvt. Ltd. during the stipulated period alongwith the documentary evidences etc. AR of the assessee furnished ITR and books of accounts and submitted that company was in process of compiling the details and will be filing the relevant details at the earliest. No details were filed after that. Summons were also issued to the various other parties, including M/s Aura Gold Pvt. Ltd., having bank account no 13805500015, which was linked to the bank account of M/s PAM Jewellers Pvt. Ltd. M/s Aura Gold Pvt. Ltd. did not file any reply to the summons. Thus, physical enquiry was conducted by the inspector on 12.03.2019 at the premised of the M/s Aura Gold Pvt. Ltd. During the course of enquiry no physical stock of goods was found. Summons were also issued to the accountant of the company, to file details, but no details were filed by the assessee company. Thus in the absence of any explanation from the assessee company, the transaction entered into by it with PAM jewelers Pvt. Ltd. remained unverified. Also the details of company were perused from MCA site and it was found that the company had issued 3,00,000 shares to Kolkata based company at security premium during FY 2011-12. It was observed that the creditworthiness of Kolkata based entities which appear in the list of allotees for M/s Aura Gold Pvt. Ltd. need to be determined. Thus in the light of the above, it is held as below: (i) Transaction entered into between PAM jewelers Pvt. Ltd. and M/s Aura Gold Pvt. Ltd. has remained unexplained. (ii) The creditworthiness of the allotees of share in the case of M/s Aura Gold Pvt. Ltd. need to be verified. The information has forwarded to this office for necessary remedial action u/s 147 of Income Tax Act, 1961.

Analysis of Information Received 3.1. I have perused the information received from the Investigation Unit. The following facts emerged in from the inquiries:- (i) The transactions entered into between M/s Pam Jewellers Pvt. Ltd. and M/s Aura Gold Pvt. Ltd. during AY 2012-13 remain unexplained (ii) The creditworthiness of the allotees of share at Share Premium in the case of M/s Aura Gold Pvt. Ltd. is unexplained.

Enquiries made by the AO pursuant to information received from Investigation Wing 4.1 Analysis of ITR:- 4.1.1 The return of income of Assessee Company has been downloaded from the ITD system and the same was examined in the light of information received from Investigation Unit. On examination of return of income of the assessee company for A.Y. 2012-13, the following facts have been observed with regard to the financial condition of assessee company:- Sl. Particular A.Y. 2011-12 A.Y. 2012-13 No. 1 Authorized Share 10,00,000/- Rs.10,00,000/- Capital 2 Issued Subscribed 1,00,000/- Rs.4,00,000/- and Paid Up Capital 3 Share Application NIL NIL Money 4 Share Premium 2,97,50,000 4.1.2 From the above it is evident that the assessee company has enhanced share capital/ share premium during AY 2012- 13.

Summary of Findings 5.1 I have carefully perused and analyzed the facts of the case as detailed above and the following facts emerge from the same: (i) M/s Aura Gold Pvt. Ltd. had enhanced its share premium and Share capital during AY 2012-13 by Rs. ii) The case of M/s Aura Gold Pvt. Ltd. has been assessed u/s 143(3) under complete scrutiny. The issue of share premium has already been examined during the assessment u/s 143(3) of the Income Tax Act, 1961 and no adverse view was taken by the then Assessing Officer. Now the investigation unit has informed that since the summons were not complied by the M/s Aura Gold Pvt. Ltd., the issue of shares at premium to Kolkata based companies need to be examined again to check the creditworthiness of the allotees. (iii) Since the transaction of M/s Pam Jewellers Pvt. Ltd. with M/s Aura Gold Pvt. Ltd. remain unverified. The issued needed to be examined. From the analysis of the bank statement of Aura Gold Pvt. Ltd., it has been ascertained that the amount of Rs.1,30,00,000/- has been received from M/s PAM Jewellers Pvt. Ltd. during AY 2012-13 (v) Since the information was not available at the time of assessment u/s 143(3) of the Income Tax Act, 1961, and this information has been received recently. Hence, both the issues need to be re-examined.

Basis of Reasons to Believe The above facts clearly establish that the assessee company had received unexplained income of more than Rs.1,30,00,000/- during AY 2012-13. Keeping in view all the above, I have reason to believe that an amount of more than Rs. 1,30,00,000/- has escaped assessment in case of M/s. Aura Gold Pvt. Ltd. for the A.Y. 2012-13 within the meaning of Section 147/148 of Income Tax Act, 1961.

Ground no.1 of the appeal is challenging the above reopening of the assessment and the reasons recorded and stating that on the same facts there was a change of opinion by the AO as no new material facts or any tangible fact brought on record by the AO while reopening the assessment. The same has been carefully perused. However, on perusal of the reasons, it is seen that physical enquiry was done by the Inspector at the premises of the assessee and it was found that there was no physical stock of jewellery available at the show-room of the assessee even though the assessee claims to be in the jewellery business. Prior to that it is also noted in the reasons recorded that the Investigation Wing had issued summons to both the assessee as well as M/s Pam Jewellers Pvt. Ltd., wherein, the assessee did not file any reply to the summons and M/s Pam Jewellers Pvt. Ltd. did not file the balance details of the summon issued to the said party. Further, the AO had not mechanically adopted the information for recording the reasons for reopening of the assessment 4 to 5.1, the AO upon downloading the return of the assessee from ITD system, verified the information and gave his own finding for reopening of the assessment on the ground that the Investigation Wing had informed that summons were not complied by the assessee and the transactions of the assessee with M/s PAM Jeweller remained unverified and since, the above information forwarded by the DDIT, Investigation Wing were not available at the time of original assessment u/s 143(3) of the Act and since this information has been recently received and therefore needs to be re-examined. Accordingly, the AO re-opened the assessment on the ground that the assessee had failed to disclose fully and truly all material facts necessary for its assessment for the relevant assessment year and the income of Rs.1,30,00,000/- had escaped assessment for AY 2012-13. Thus, it is seen that that since the assessee did not comply during the enquiry being made by the Investigation Wing on both the issues and also the fact that on physical verification conducted by the Inspector on 12.03.2019 at the premises of the assessee, no physical stock of goods was found and summons issued to the Accountant of the company to file necessary document were again not were filed by the assessee company. Further, it was also informed that the details of the company from which share application money of Rs.3,00,00,000/- was received were perused from MCA site and it was found that 3,00,000 shares issued to Kolkata based company at a security premium was received and the creditworthiness of the Kolkata entities which appear in the list of allottees from M/s Aura Gold Private Limited need to be determined. Therefore, in this case, new fact as discussed above came out to the notice of the AO through the DDIT, Investigation Wing, which was not available at the time of original assessment. In view of these facts, the contention of the assessee that there was no tangible and new material for reopening of the assessment and the reopening of the assessment on the same facts is change of opinion is not correct and the case laws relied upon by the assessee do not support the ground of appeal and the submission made in this regard. Therefore, contention of the assessee that jurisdiction u/s 147 has been wrongly assumed by the AO is not correct and the ground no.1 of the appeal in this regard is dismissed.

The ld. CIT-DR supported the orders of the authorities below.

We have heard both the parties and perused the materials available on record. In the reasons recorded, the information relating to the share allocation is only with respect to the details of the said eleven companies from the MCA website and stating that the creditworthiness of the said party needs to be examined. Therefore, in order to examine the creditworthiness of the said eleven parties, the AO issued notice u/s 133(6) of the Act to the eleven parties, which is noted above and not complied with by the any of the eleven parties. It was further noted by the AO that all the notices sent through speed post were received back in the office and therefore claim of the assessee remained unverified in the independent investigation. Accordingly, the AO in the remand report Rs.3,00,00,000/- remained unexplained and added u/s 68 of the Act in the reassessment order dated 19.12.2019. Further, on perusal of the bank statement of the share subscribers placed in the paper book at page no.171,181,194, 213, 231, 249, 265, 281, 298 and 314 of all the eleven respective parties, it is seen that source of the shares subscribers is immediate credit of equivalent amount of cheque receipt by the said eleven companies on the date on which the said eleven companies paid the amount for their respective share-subscriptions, the details of which are not on record. Thus, the source of immediate credit of share-subscription is not out of the intrinsic income/capacity of the share applicant companies and, therefore, the source of credit in the respective share applicant companies is not prima facie established. The details of which are not on record. As noted above, all the eleven parties did not respond to the notice u/s 133(6) of the Act and also all the notice sent through speed post came back to the office of the AO. Therefore, in given facts of the case, the identity, creditworthiness and genuineness of the transaction were not established by the assessee in the reassessment proceedings, which is an independent proceeding, as there was an information by the Investigation Wing hinting that the creditworthiness of the shares subscription by the Kolkata based parties needs to be verified. Further, it is also noted by the Ld. CIT(A) in the order u/s 154/250 dated 15.07.2024 that even during the assessment proceedings, the assessee did not comply with to the letter dated 19.12.2023 (as noted by the AO in para no.4.3 of his remand report dated 29.02.2024). Thus, it is seen that the assessee did not AO during the re-assessment proceedings and as noted earlier did not comply during the remand proceedings as discussed above. However, as noted by the AO in the remand report, the details regarding identity, creditworthiness and genuineness of the transactions were submitted by eleven subscribers during the original assessment proceedings, which is on record and the same needs to be further enquired by the Assessing Officer. Therefore, in the given facts of the case, the addition of Rs.3,00,00,000/- made by the AO and confirmed by the Ld. CIT(A) cannot be sustained. However, in view of the fact that the assessee did not comply during the re-assessment proceedings as discussed in the assessment order and also that none of the eleven parties complied to the notices u/s 133(6) issued by the AO during the re- assessment proceedings during independent verification, the assessee cannot be allowed relief as claimed in ground of no.3 of the appeal. As held by the Hon’ble Delhi High Court in the case of CIT vs Jansampark Advertising & Market Ltd. [2015] 375 ITR 373 (Del.), almost on similar facts, (in the cited case the Hon’ble Court noted that it was the allegation of the Revenue that account statement revealed a uniform pattern of cash deposits of equal amounts in the respective accounts preceding the transactions in question, wherein, the said company had received share capital amounting to Rs.71 lakhs from twelve parties as similar to the case of the present assessee, wherein, there is a pattern that entire share capital including premium was received by the assessee on 16.05.2011 and the source of the said money in the hands of the share applicants was credit of identical amount in the respective bank account of the eleven share applicants, which shows that there was no intrinsic capacity Tribunal to ascertain the full fact before a decision can be taken in the matter. Therefore, to ascertain the full facts in this case about the identity, creditworthiness and the genuineness of the share applicant, the assessment order of the AO on this issue is set-aside to his file to pass an order afresh after making necessary enquiries as required in this case and after giving reasonable opportunity of being heard to the assessee. The assessee is also directed to appear before the AO and make necessary compliance before the Assessing Officer during the set-aside assessment proceedings. Accordingly, ground no.4 is allowed for statistical purposes.

Ground no.5 of the appeal is against the addition of Rs.1,30,00,000/- made by the AO u/s 68 of the Act and subsequently confirmed by the ld. CIT(A).

The ld. AR submitted that the assessee is a reputed company and it had made sales to M/s Pam Jewellers Pvt. Ltd. through which the payments of Rs.1,30,00,000/- was received through cheque. In this regard, the assessee submitted that the company Pam Jewellers Pvt. Ltd. had complied to the notices u/s 133(6) of the Act issued by the AO and submitted the details of the said transaction. However, the AO in his remand report did not agree with the above facts and submitted the following findings in para 4.5.3 of the remand report which is reproduced as under:-

We have considered the rival submissions and perused the materials available on record. It is seen from the above table in the remand report of the AO that in bank account no.629205031115 of M/s Pam Jewellers Pvt. Ltd., at ICICI Bank there are entries of cash deposits and thereafter transfer to respective parties as mentioned therein in which a sum of Rs.1,30,00,000/- in cash was deposited in the bank account of the M/s Pam Jewellers Pvt. Ltd. on 11.10.2011 and the same was transferred through cheque by M/s PAM Jewellers Pvt. Ltd. to the assessee on same date i.e. on 11.10.2011. Further, the assessee in its reply has not given any explanation regarding the finding of the AO as stated below the above table stating that the ratio of cash deposits after 13.10.2011 i.e. after date of transfer of Rs.1,30,00,000/- to the assessee had reduced drastically and even after 25.11.2011, there was no cash deposits till March, 2012 and further there was no cash sales by M/s Pam Jewellers Pvt. Ltd. after 25.11.2011 or prior to 28.09.2011 when the said bank account was opened. The assessee has only explained by way of reply dated 03.02.2024 of M/s Pam Jewellers Pvt. Ltd. to the Assessing Officer about the reasons for closure of the bank account on 28.03.2012 (which was opened on 28.09.2011) that the account was opened on the assurance given by the bank manager of the ICICI Bank for good services but was closed since the services were not provided to the bank to their satisfaction and the bank charged huge transaction charges and this was the reason for closing the bank account. However, even if the above explanation of the assessee is acceptable though it is also a fact that M/s Pam Jewellers Pvt. Ltd. would be aware about the bank charges while opening the bank account but the fact remains that neither the assessee nor M/s Pam Jewellers Pvt. Ltd. explained the facts regarding the ratio of deposit of cash after 13.10.2011 getting reduced drastically, which will be an important factor to rebut the finding of the Assessing Officer that the said account was used for accommodation entry for the benefit of the assessee. Further, the assessee did not offer any comment on the finding of the Investigation Wing by way of Inspector’s report dated 12.03.2019 that on physical verification of the assessee’s premises no physical stock of goods were found even though the assessee claims to be in jewellery business. However, it is stated by the assessee that Inspector report dated 12.03.2019, wherein, it was stated that on physical verification no physical stock of goods were found at the assessee’s premises was not provided to the assessee either during the re-assessment proceedings or during the remand proceedings, which is also a vital piece of information in this case. We, therefore, in view of the failure of the AO in not sharing above Inspector’s report and to allow one more opportunity to the assessee to offer the explanation regarding facts stated by the AO regarding above cash deposits in the bank account, we set-aside the order of the AO and restore this issue to his file to pass afresh order after giving reasonable opportunity of being heard to the assessee. It is further directed that the AO will forward the copy of Inspector’s report dated

In the result, the appeal of the assessee is partly allowed for statistical purposes.