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Income Tax Appellate Tribunal, “H” Bench, Mumbai
Before: Shri Shamim Yahya, AM & Shri Amarjit Singh, JM
This appeal by the assessee is directed against the order of learned Commissioner of Income Tax (Appeals)-17 dated 20.12.2018 and pertains to assessment year 2008-09.
The grounds of appeal
read as under:-
1. For that the Ld. C.I.T.(A)-17/Mumbai has erred in law as well as on facts of the case dismissing the appeal filed by the assesses and thereby not paying heed to the assessee’s grounds of appeal raised before his Honour against the impugned addition made by Assessing Officer of Rs. 36,41,68,000/- u/s. 68 of the I.T.Act, 1961 on the grounds which are not correct.
2. For that the Ld. C.I.T.(A)-17/Mumbai has erred in law as well as on facts of the case enhancing the addition with an amount of Rs. 74,32,000/- u/s: 68 of the I.T.Act, 1961 on grounds which are not correct.
3. For that the observations and contentions of the Ld. C.I.T,(A)-17/Mumbai while passing order u/s.250 of the I.T.Act, 1961 regarding arbitrary disallowances and additions as well enhancing the addition u/s.68 of the I.T.Act, 1961 by Rs. 74,32,000/- ignoring the assesse grounds of appeal on the grounds which are not correct.
Brief facts of the case are that the assessee company is engaged in the business of investment in shares & securities, providing loan & advance. Return of income in this case was filed on 26.09.2008 declaring total income Rs.9470/-. Subsequently, the case was reopened u/s 147 of the Act by issuance of notice u/s. 148 dated 30.03.2015 which was duly served on the assessee company. Subsequent to submission of return in response to notice u/s 148, the copy of reasons recorded for reopening u/s 147 was provided to the appellant company. The AO has quoted the reasons under para 5.1 to 5.2 of the Assessment order. Relevant portion is quoted below:-
5.1 The assessee company filed its return of Income for A. Y. 2008-09 declaring total Income of Rs. 9,470/-. The return was processed u/s 143(1) on 15.09.2009. No order u/s 143(3) of the Act is made in this case of the year under consideration.
From the perusal of the balance sheet filed it is observed that the assessee company has shown the share premium of Rs.36,41,68,000/- as on 31.03,2008 and corresponding P.Y. the share premium of Rs. 0 as on 31.03.2007. the Share premium amount received In A.Y. 2008-09 is Rs. 36,41,68,000/-.
As per the information received from Dy.DIT(lnv)-II, Jodhpur, Rajasthan during the course of Search & Seizure act/on u/s 132 of the I.T. Act, 1961 carried out in the case of varasha Infra Group of Jodhpur on 21.01.2015 the main allegation against the company was that it has rotated its unaccounted money in from of Share Premium through various Shri Jagdish Prasad Purohit accepted that he was an entry provider engaged in providing accommodation entries to willing companies in form of share capital share premium, bogus bills, unsecured loans etc in lieu of commission.
Shri Jagdish Prasad Purohit has provided a list of 246 companies which were controlled & managed by him for this purpose Kumaon Engineering Company Pvt Ltd. is one such company controlled by Shri Jagdish Prasad Purohit shown receipt of security premium amount of Rs.36,41,68,000/-in
5.2 In view of above, I have reason to believe that the income to Rs.36,41,68,000/- has escaped the assessment within the meaning of section I. T. Act, 1961. Hence, it is a fit case for initiation of proceedings u/s.147ofthe Act, 1961 by issuing notice u/s, 148 of the income Tax Act, 1961.
The objection on reassessment proceeding was filed, which was considered and rebutted vide a detailed speaking order. The rebuttal has also been reproducedunder para 6.2 and 6.3 of the Assessment Order in a nut shell, the assessment proceeding was reopened on the basis of information received from the Investigation wing Jodhpur, A search & seizer operation was conducted in case of Mr Jagdish Prasad Purohit, who is a tax practitioner and confessed during the search that he is providing accommodation entry through company, controlled and managed by him. These companies were incorporated with a view to provide accommodation entry to the interested parties for share capital, bogus bills, unsecured loan etc in lieu of commission. These companies were having all the character of a shell company.
The AO noted that the appellant company had also used 31 such companies controlled and operated by Mr. Purohit to launder own unaccounted money in the form of share capital and share premium. The A.O has given threadbare analysis of facts and circumstances of appellant case and peculiar facts associated with investor company which clearly establishes that these are shell company solely utilized for the purpose of laundering on unaccounted money.
The AO noted that there is no business in the assessees company for several years. He also noted that assessee was asked to submit various details and assessee filed some explanation, but AO found that cogent evidence pertaining to creditworthiness of the investors were not therein . In these circumstances, AO referring to several case laws drew adverse inference against the assessee and concluded as under:-
“In view of the discussion as above, the gist of the facts that emerge are recapitulated hereunder for the sake of ready reference and ease of understanding- i) The findings of the search action carried out in the case of jagdish Prasad Purohit u/s. 132 and the subsequent enquiries conducted in the case of various brokersand beneficiaries of accommodation entries, clearly established that all the concerns under the control, management and operation of Jagdish Prasad Purohit are involved in the activity of providing accommodation entries. Besides, they all are bogus concerns and not involved in any genuine business activity. ii) The capacity and credit worthiness of the share subscribers could not be established by the assessee. iii) Funds not utilized in assessee's business as mentioned in MOA Funds diverted for investment in shares. iv) The assesses failed to furnish valuation report and Justification for the premium charges vis a vis the intrinsic value of the shares. v) The actual user of the funds so raised is other companies. The fund raised by the assesses company did not remain in circulation of assessee's business and it has been merely routed through its books to the beneficial enjoyment of persons other than the assessee company.”
Upon assessee’s appeal, despite several opportunities by ld.CIT(A), none appeared before the ld.CIT(A). Ld.CIT(A) referred several case laws and upheld the orders of AO. He finally concluded as under:-
“In view of the above discussed facts, proposition of law it is held that the appellate company has introduced its own unaccounted money in the guise of share capital, share premium recorded in books of account. The Onus to establish genuineness of share capital or share premium becomes heaver in the background, the companies from whom such credit have been claimed, are already proved to be shell companies. The concerned entry provided i.e. Mr. Jagdish Prasad Purohit was examined u/s 132(4) during the case of search & seizure u/s 132 of the Act. The statement u/s 132(4) has got strong evidentiary value and its rebuttal requires concrete supporting proof. It is evident that neither during appellate proceeding nor during assessment proceeding the appellant company has been able to fulfill the onus cast upon, under the provisions of law. The AO -has added only Rs.36,41,68,000/- on account of share premium and nor Rs.7432,000/-. Which was received on account share capital as the appellate company has failed completely to satisfy the three ingredients of section 68 of the Act, i.e. identity of creditors genuineness of transactions and creditworthiness of investors then both the amount was to be added u/s 68 of the Act. As there has not been any compliance on behalf of appellate company, the notice enhancement for Rs.74,32,000/- receipt on account of share capital remains non complied. Thus, the addition of Rs.36,41,68,000/- added u/s 68 as unexplained cash credit on account of share premium is confirmed. The addition is also enhanced by Rs.74,32,000/- u/s 68 which was claimed as a share capital from 31 shell companies. Thus, final addition enhanced to.”
Against the above order, revenue is in appeal before us. Despite several notices, none appeared on behalf of the assessee. Hence, hearing the ld. DR and perusing the record, we are adjudicating the issue. We note that in this case, assessee has received abnormal share capital and share premium from companies, who did not have any business except for circuitatious routing of money. The facts revealed that the companies from whom the bogus accommodation entry in the form of share capital and share premium were received, where all controlled and operated by one Mr. Purohit a bogus entry operator. After analyzing the financials of the said company, AO has given a finding that they had no business except for routing bogus accommodation entry. Nothing has been produced before us to rebut the cogent finding of authorities below. In this view of the matter, the orders of the authorities below are reasonable and case law referred are germane. Hence, we do not find any infirmity in the order of ld.CIT(A). Hence, we uphold the order of authorities below.
In the result, appeal of the assessee stands dismissed.
Pronounced in the open court on 29 .03.2022