SD POLYFILMS PVT LTD,NEW DELHI vs. ITO WARD - 22(1), NEW DELHI

O R D E R PER AMIT SHUKLA, JM:-

The aforesaid appeal has been filed by the assessee against the impugned order dated 22.02.2019, passed by Commissioner of Income Tax (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 etc. if any recorded by investigation wing, was lawfully confronted to assessee thus invalidating entire reopening; • That none of the assessee submission is appreciated while adjudicating the appeal; • That only action could have been taken u/s 153C of the Act and not u/s 147/148 of the Act; • That none of evidence filed by assessee is overruled in accordance with law.

3. On the facts and circumstances of the case, Ld. CIT(A) has erred in confirming the action of Ld. AO in making addition of Rs.74,00,000/- u/s 68 on account of share capital received and that too without going into merits of the case and without considering the submissions/evidences filed by the assessee. 4. On the facts and circumstances of the case, Ld. CIT (A) has erred in passing the impugned order without providing the adequate opportunity of hearing. 5. On the facts and circumstances of the case, Ld. CIT(A) has erred in confirming the action of Ld. AO in making addition of Rs.185000/- on account of alleged commission expenses. 6. On the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in passing the impugned order as the same have been passed in violation of principles of natural justice as Ld. CIT(A) has rejected the request for adjournment petition dated 12-02-2019 filed by the assessee wherein it has been specifically mentioned that some vital information is pending for which RTI petition was to be filed.”

2. The facts in brief are that assessee-company was incorporated on 11.09.2009 and return of income for the Assessment Year 2010-11 was filed on 08.10.2010 declaring income of Rs.10,85,664/-. Such return was duly processed u/s. 143(1) vide intimation dated 29.08.2011. Later on, the Assessing Officer has reopened the assessment u/s.147 vide issuance of notice u/s.148 which was served upon on 30.03.2017 by speed post and also by e-mail. In response to the said notice, assessee vide letter dated 20.07.2017 stated that original return filed on 08.10.2010 may be considered as return filed in response to the notice u/s.148 and also requested to provide the copy of ‘reasons recorded’ for reopening the assessment. The copy of reasons was duly provided to the assessee vide order-sheet entry dated 08.08.2017. Here in this case, the Assessing Officer has sought to reopen the case on the basis of information received from ADIT (Inv.) Unit-2(1), New Delhi that the assessee had taken accommodation entry of share capital and premium amounting to Rs.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 Non- government 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 Rs. 10,85,664/-. Return was processed u/s 143(1) on 29.08.2011 at income of Rs. 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.

2.3 As per the information received from the office of Assistant Director of Income Tax-(Investigation)- unit-2(l), New Delhi that Shri Pradeep Kumar Jindal’s following dummy companies made investments through share capital/share premium/unsecured loan with the assessee company as follows:-

S.N Beneficiaries Date Amount (Rs.) Name of Entry o Provider i) 23/09/2009 Rs. 15,00,000 / M/s S D Lustre Finlease & Polyfilms Pvt Ltd Investment Pvt Ltd ii) 01/10/2009 Rs. M/s S D Hajima Resorts Ltd 14,00,000/- Polyfilms Pvt Ltd iii) 09/10/2009 M/s S D Pawansut Holdings Polyfilms Pvt Ltd Ltd Rs.15,00,000/- iv) 10/03/2010 Rs.10,00,000/- M/s S D Ganga Debt Polyfilms Pvt Ltd Recovery Agency Pvt Ltd v) 11/03/2010 Rs.10,00,000/- M/s S D Jacaranda Capital Polyfilms Pvt Ltd Ltd (Ar chit Finescrip ltd) Vi) 11/03/2010 Rs.10,00,000/- M/s S D Sawera Housing & Polyfilms Pvt Ltd Construction Pvt Ltd. Total Rs.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 conclusion:- That Shri Pradeep Kumar Jindal was engaged in the lousiness of providing entries of bogus share capital/share premium/loan or Advances. The modus operandi of Sh. Pradeep Kumar Jindal was to provide cheques/RTGS of the dummy controlled by him in lieu of cash and commission @ 2.5%.

The following persons are found to be directors in the companies controlled by Sh. Pradeep Kumar Jindal from which the assessee company has received amount of Rs. 74,00,000/- in form of share capital/share premium/unsecured loan or others:

S.No. Name of the paper Directors as per MCA record companies Lustre Finlease & Sh. Subodh Kumar Khandelwal Ms.

In the statement recorded on oath Sh. Pradeep Kumar Jindal has himself accepted that one director Meera Mishra had been working as receptionist in his company and she was made director only for the namesake. Further Sh. Pradeep Kumar Jindal has also stated that another director Smt. Seema Khandelwal was also known to him and he has used her residential address as registered address of some of the paper companies formed by him.

Furthermore, it is pertinent to mention that Smt. Seema Khandelwal has stated in her statement her educational qualification is 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 Rs. 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; that she is signing the papers related to Sh. Pradeep Kumar Jindal even after leaving the job on basis of good faith; that she is not aware of the business and registered premises of such companies in which she is Director; that her work as Director was only limited to signing the papers related to companies of Sh. Pradeep Kumar Jindal.

Sh. Subhodh Kumar Khandelwal in his statement stated that his educational qualification is 7th pass; that he is in business of manufacturing plastic plates of electric meter and earns Rs. 20,000- 25,000 p.m. from this business; that earlier he used to look after maintenance of office and house of Sh. Pradeep Kumar Jindal during year 2004 to 2011; that he knows Sh. Pradeep Kumar Jindal since childhood; that Shri Pradeep Kumar Jindal has made him sign certain documents, nature of which he is not aware as he is not much educated; that he had signed some blank cheque books of Union Bank of India, State Bank of India and Vijaya Bank in the office of Sh. Pradeep Kumar Jindal; that he does not know Sh. Sajjan Kumar Jain; that Sh. Pradeep Kumar Jindal may have given 88, Baldev Park, Parwana Road, Delhi as registered address of certain companies; that Shri Pradeep Kumar Jindal had made him Director in many companies without his knowledge and therefore he resigned; that he does not know as to how his residential address has been used as the registered address of various companies; that all such companies belong to Sh. Pradeep Kumar Jindal; that many letters of such companies were received at their address which were lateron collected by Sh. Pradeep Kumar Jindal and that he has been made Director in various companies by wrong means. The statement recorded on oath of Sh. Pradeep Kumar Jindal & other dummy directors indicates the facts that all of the dummy electors were acting on the direction of Sh. Pradeep Kumar Jindal and they were not aware of any actual affairs of the companies in which they were made dummy directors by Sh. Pradeep Kumar Jindal.

3.2 The return of income of the assessee company has been filed on 08/ 10/2010 for the A.Y 2010-11 declaring income of Rs. 10,85,664/- . Thereafter the return was processed under section 143(1) of the Income Tax Act, 1961 on 18/04/2011 at nil income. The case was not selected for the AY. 2010-11. On perusaj of return for the year under consideration it is seen that the following information was declared by the assessee:- a. Share capital(Issued, subscribed and paid up):- Rs. 12,20,000, b.Securities premium Rs. 1,00,80,000/- c. Unsecured loans(other than Bank) Rs. 1,41,36,800/- d. Purchase Rs. 1,83,29,764/- e. Sale Rs. 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 Rs. 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. Sawera Housing & Construction Pvt. Ltd. which were controlled by Shri Pradeep Kumar Jindal. 3.4 During the course of search proceedings on 18.11.2015 at his residence premises, Sh. Pradeep Kumar Jindal admitted that he has provided accommodation entries of various natures in lieu of cash through his front companies. During the course of post search investigations, pieces of evidence were found which established beyond doubt that Sh. Pradeep Kumar Jindal has earned /charged commission in cash on accommodation entries at higher rates compared to rates admitted by him. Sh. Pradeep Kumar Jindal explained the working of commission in his statement and admitted that he had charged commission @ 2.50% on accommodation entries. 3.5 A careful scrutiny of information received from the ADIT (Investigation; unit- 2(1), New Delhi and subsequent analysis of report of ADIT (Investigation) unit-2(l), New Delhi lead to an irresistible conclusion that the assessee had received bogus share capital/Securities Premium/unsecured loan of Rs. 74,00,000/- from company engaged in business of providing entries of bogus share capital/Security Premium. Accordingly, an amount of Rs. 74,00,000/- represent unexplained credit u/s 68 of the Act in books of a/c of the assessee. 3.6 A careful examination/analysis of the report received from Investigation Wing, New Delhi, data of transactions and verification of ITR lead to an irresistible conclusion that the assessee company has taken accommodation entry at least upto the amount of Rs.74,00,000/- in the form of Share Capital/ Security Premium/ Unsecured Loan which is covered under the violation of criteria of identity, creditworthiness, and genuineness of the transactions as prescribed u/s 68 of Income Tax Act, 1961. 4 Income Chargeable to tax escaping assessment 4.1 Considering the above referred credible information, enquiries and analysis subsequent to the .information, I have reason to believe that an amount at least of Rs. 74,00,000/- & commission @ 2.5% amounting to 1,85,000/- (Total Rs. 75,85,000/-) has escaped assessment in case the of M/s S D Polyfilms Pvt Ltd for the A.Y 2010-11 within the meaning of Section 147/148 of Income-tax Act, 1961. 4.2 Since more than 4 years of the relevant years have passed and the information received from the investigation wing that transactions are in 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

Answer. I am not able to explain the contents of the messages at present. I would explain that shortly. Question 4. Do you know Smt Meera Mishra? Answer. Yes, I know Smt. Meera Mishra. She has worked as receptionist at 104 Mukund House, Azadpur from 1994 to 2006. She has been director of various front companies run by me for purpose of providing accommodation entries. Question 5.1 am showing the statement dated 18.11.2015 of Smt. Meera Mishra R/o K-31/6, Model Town -III, Delhi recorded u/s 132(4) of the I.T.Act 1961. Please confirm that you have been shown the same. Answer. Yes, I confirm that I have been shown the statement. Question6. 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 the I.T.Act 1961. Please confirm that you have been shown the same.

Answer. Yes, I confirm that I have been shown the statement. Question 9. Smt. Seema Khandelwal in her above statement has stated that she is not director or authorized signatory in any company, that she has no knowledge about any share transaction held with M/s Indo Auto Tech Ltd. that she has not even heard about any company where she has been shown 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. I accept that Smt. Seema Khandelwal is a director only for namesake. I have misused her name and particular to float/run my front companies. She is not much educated and therefore I have misused her particulars. Question 10. Do you know Sh. Subodh Kumar Khandelwal? Answer. Yes, I know Sh. Subodh Kumar Khandelwal. He is husband of Smt. Seema Khandelwal who has been discussed in replied to earlier questions. He has worked at my residence and office during 2004 to 2011 and used to look after maintenance work. 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, he has been made namesake director of various front companies run by me for purpose of providing accommodation entries. Question 11. I am showing the statement dated 18.11.2015 of Sh. Subodh Kumar Khandelwal recorded u/s 132(4) of the I.T. Act 1961. Please confirm that you have been shown the same. Answer. Yes I confirm that I have been shown the statement. Question 12. Sh. Subodh Kumar Khandelwal in his above statement has stated that he is not director or authorized signatory in any company, that he had signed some blank cheque books in your office, that he is not aware about any company registered at his residential premises, that he has no knowledge about any share transaction held with M/s Indo Auto Tech Ltd. and M/s Sarvottam Pumps Ltd., that he is not aware about cash and subsequent bank transactions in the bank account of different companies registered at his premises and where he is director, that he does not know all companies where he has been shown 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. 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 speak anything other than truth. I have been made aware of the fact that if I tender any false or untrue fact or statement then I can be prosecuted under provisions of the Income Tax Act, 1961 and Indian Penal Code. Question 1. Please introduce yourself. Answer. I am Sh. Pradeep Kumar Jindal S/o Late Sh. D.C. Jindal Rio H-l/IA, Model Town-111, New Delhi. I have provided my I.D. driving license No.0819920119611 issued by Delhi Transport Authority, Delhi. Question2. In your earlier statement dated 18,11.2015 recorded u/s 132(4) you have admitted that you have been running a large number of front companies and providing bogus accommodation entries in form of share premium. Please provide the details of all the bank accounts of your various companies including the bank account number and the bank and branch name and address. Answer. I am not able to provide these details. However, I am able to recall that we are having functional bank accounts of our front companies in Andhra Bank, Kundli branch, Sonipat, Haryana. I submit that my front companies are not having bank account in any other bank at present. I will provide the required details by 11.01.2016. Question 3. In your statement dated 18.11.2015, you had told in reply to question no. 12 that you don't have any explanation at that juncture about sms messages received in your i-phone from CA Santosh Gupta. In the said messages dated 2nd, 4th, 5th and 6th October 2015 there was reference in respect of Rs. 6 Crore and Rs. 15 Crore NBFC documents. Please explain the contents of the same sms messages. Answer. I am not able to explain the contents of the messages. At present, I will provide the required details by 11.01.2016. If I failed to reply on the said date the same may be treated as unexplained. Question 4. How did you contact the entities and persons and offered them to provide accommodation entries? Answer. It is the beneficiaries who contact me on my phone {9810049333, 9310049333) after they come to know that I provide accommodation entry in form of bogus share premium /unsecured loan in lieu of cash. Normally I do notcontact the persons seeking accommodation entries. I am quite well known in this field for last 15 years. Therefore, people know me very well and contact me for entries of share premium, long term capital gain, share forfeiture, unsecured 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 provide funds to you in lieu of entries? Answer. Such accommodation entry seeking persons and entities provide funds in lieu of entries through their own persons / employees. Such persons and entities tell us telephonically about the person or vehicle who is coming to provide us the cash. Question 9. Do you have any Non-Banking Finance Company registered in RBI? if so, the details thereof. Answer. Yes, I have no banking finance companies registered with RBI. The 2 companies namely M/s. Pawansut Holdings Limited and M/s Focus Industrial Resources Limited are registered with RBI as NBFC. However the application for registration as NBFC is pending with RBI in case of third company namely M/s Delta Leasing & Finance Co. Limited. Question 10. What is the modus operandi of arrangement of funds from the clients seeking the accommodation entries and providing such sentries to them? Answer. I have understood the above question and I reconfirm that I have a large number of front companies and the directors in all the above companies are just for namesake. Many directors of my front companies are not even aware that they are directors in my front companies. The companies are not doing business of finance and investment and in reality these company are into business of providing entries only (without any real transaction of finance and investment). L would like state that most of the above cash and subsequent transactions have been used for the purpose of providing accommodation entries namely bogus share application money, share premium, share forfeiture, unsecured loans, bogus purchases, bogus sales and bogus advances against properties to a large number of clients from time to time. I would like to narrate once again the modus operandi of providing entries against receipt of cash as under: Stage-I- The persons of such entries seeking persons or entities hand over/giving cash to me or my representative at pre-decided locations mainly offices. Stage-II The above collected cash used to be deposited in one of the bank A/c in Vaish Cooperative Commercial Bank, Nai Sarak, Delhi as table in the question by me or Laxman Singh Satyapal or Uttam Kumar Srivastava (who are my employees) or some other employee. Stage-III- On the same day, for the purpose of layering of entries, we use to transfer the deposits from one particular A/c (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 your commission on such accommodation entries? Whether it is in cash or cheque or otherwise? Answer. The commission so received on such accommodation entries is always in form of cash only. Question 13. How do you account for commission received for providing accommodation entries? How do you utilize the commission? Answer. The commission received by us in lieu of providing accommodation entry is not accounted for and utilized as such in form of cash only in day to day expenses related to household, vehicle and maintenance and family trips and telephone expenses etc.

Question 14. In which bank account, do you deposit the cash received from clients seeking accommodation entries for providing such entries? Is there any other method of getting funds through cash or otherwise in lieu of providing accommodation entries?

Answer. The cash received from clients seeking accommodation entry is deposited in various accounts held with Vaish Co- operative Commercial Bank Ltd., Nai Sarak, Delhi and then routed as mentioned in the modus-operandi stated by me in reply to question no.

10. The fund received for providing of accommodation entry is in the form of cash only. Question 15. Do you associate with any other entry provider for providing accommodation entries? Who are they? Answer. No, I do not associate with any other entry provider for providing accommodation entry. Question 16. Are you aware that your activity of providing of accommodation entries by way of share application money, share, premium and share forfeiture is illegal and in violation of Companies Act, 1.956 and Companies Act 2013? Answer. Yes, I am aware of that my activity of providing of accommodation entries by way of share application money or share premium or share forfeiture is illegal and in violation of Companies Act, 1956 and Companies Act 2013. Question 17. Are you aware that your activity of providing accommodation entries is illegal and in violation of section 420, 467, 468, 471 and 120-8 of IRC? Answer. Yes, I am aware that my activity of providing accommodation entries is illegal and in violation of section 420, 467,468, 471 and 120-8 of IPC. Question 18. Are you aware that your 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? 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, share forfeiture? Answer. Yes, I have filed the statutory reports in ROC, SEBI and RBI with respect to entries of accommodation entries of share premium, share application money, share forfeiture. Question 24. You are being shown your statement recorded on 18.11.2015 and 01.12.2015 under section 132(4) of the Income Tax Act, 1961 during the search proceedings at your residence and this premise respectively. Please confirm that it has been shown to you. Answer. I confirm that I have been shown the above said statements dated 18.11.2015 and 01.12.2015. Question 25. Do you want to say anything in respect of the above statements of yours dated 18.11.2015 and 01.12.2015? Answer yes I want to say that my statements dated 18.11.2015 and 01.L2.2015 recorded u/s 132(4) of the I.T.Act during the search proceedings at my residence and office premise respectively was tendered by me voluntarily and is true to the best of my knowledge and belief. I stand by and affirm to my early statements and once again admit voluntarily my modus operandi of running front companies and providing bogus accommodation entries of share premium to the beneficiaries including Indo Auto Tech Ltd., Sarvo technologies Ltd. (earlier known as sarvottam Pumps Ltd) and Admach Auto Industries Pvt. Ltd. Besides, I would also want to admit here that in some cases, we receive back some entry of bogus unsecured loan advanced through our front companies to the beneficiaries. As the entry has been received back and therefore we have to pay such beneficiaries almost equivalent amount in cash after deducting our commission .In this case we would receive cash from Shri Sajan Kumar Jain group of companies namely M/s Indo Autotech Ltd., M/s Sarvo Technologies Ltd' and M/s Admach Auto Industries India Private Ltd managed and controlled by Sh. Sajan Kumar Jain, Sh. Anand Kumar Jain and Sh. Manoj Tantia and this cash will be utilized in making cash payment to the earlier set of beneficiaries and Shri Sajan Kumar Jain group of companies would be provided accommodation entry of exorbitant share premium as discussed above.”

a. Share Capital (issued, subscribed and paid up Rs.12,20,000/- b. Securities Premium Rs.1,00,80,000/- c. Unsecured loans (other than Bank) Rs.1,41,36,800/- d. Purchase Rs.1,83,29,764/- e. Sale Rs.1,49,46,517/-

Ld. Assessing Officer disposed of the assessee’s objection vide detailed order dated 23.11.2017 and also noted that assessee has not submitted any genuine proof in support of his claim. After detailed reasoning and relying upon various judgments, Assessing Officer has rejected the assessee’s objection. During the course of the assessment proceedings, the Assessing Officer asked the assessee to furnish details, and after analyzing the details and the information submitted by the assessee, he noted that none of the investor companies had any sound financial strength and even return of income was very meager and looking to their dismal financial background, he concluded that they not could have invested in shares of assessee company which has so less revenue at a huge premium without any scope of dividend income. Further, these companies had consistently very low profit and in some cases, bank statements of bank account were not submitted by the assessee. In some of the case where bank statement was submitted he found that when the amount of investment in shares were debited from the bank there was corresponding large amount which was credited on the same date or day before either by way of cheque/ RTGS etc. the source of which itself was dicey. The pattern of credit and debit entries was analyzed by him and found that the investor companies had no sufficient source which can prove the creditworthiness of the transaction.

“A careful examination/ analysis of report received from Investigation Wing, New Delhi, statements of various person recorded on oath during investigation, non compliance of notice 133(6) and summons u/s 131 by the investor as share capital and share premium, data of transactions and verification of ITR lead to an conclusion that assessee company has taken accommodation entry in form of Share Capital /Share Premium Rs.74,00,000/- which is covered under the violation of criteria of identity, creditworthiness and genuineness of the transaction as prescribed u/s. 68 of the Income Tax Act, 1961.”

7. After detailed discussion, Assessing Officer has made the addition of Rs.74 lacs u/s.68 and further made addition of Rs. 1,85,000/- on account of commission paid @ 2.5% in cash.

been found to be unsatisfactory by the AO. Accordingly, the addition made by the AO with regard to unexplained credit of Rs. 74,00,000/- is upheld. The AO has also brought to tax commission payment of Rs. 1,85,000/- to arrange for the impugned accommodation entry which is also part of elaborate modus operandi for obtaining accommodation entries. In view thereof, addition of Rs. 1,85,000/- is in order and is confirmed. These grounds of appeal are ruled against the appellant.”

13. On merits, Ld. CIT-DR submitted that, though assessee might have filed some of the documents but in the wake of such credible information and material that these companies were mere dummy companies used for given accommodation entries and the person who was running and managing these companies had himself admitted that he had provided accommodation entry after receiving the cash and commission, then it is sufficient to hold that the share application money and premium received is non-genuine. If assessee has taken a share capital and share premium from genuine companies then assessee should have discharged its onus by producing the directors of these companies. Here in this case Assessing Officer has made his inquiries and despite various summons issued u/s.131 and several notices sent u/s. 133(6), none of these companies responded and even the director of the assessee company has not responded. All these factors go to show that the documents submitted by the assessee are mere paper trails and nothing else. Apart from that Assessing Officer and Ld. CIT (A) have categorically mentioned that these companies did not have creditworthiness. Looking to the financial health and the nature of entries appearing in some of the bank statements, it can be easily deduced that it was nothing but accommodation entry. Once all these material and short coming were pointed out by the Department to the assessee, then onus was upon the assessee to prove the contrary. Merely a transaction has been done through banking channel, that does not 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

16. Another contention raised by the ld. counsel is that the material information was not confronted to the assessee despite several requests and no opportunity was given for cross-examination. Here in this case in the reasons recorded itself Assessing Officer has confronted the material and the statement and also the copy of the statement was duly provided. Thereafter, the Assessing Officer has not merely relied or gone by the statements and material given by the Investigation wing, but in fact Assessing Officer has made his endeavor to conduct independent inquiries by sending notices u/s.133(6) and issuing summons u/s.131 to the Directors of the investee companies and also to the directors of the assessee company. When none of such summons or notices was responded, then assessee itself was called upon by the Assessing Officer to produce those persons, because it is the assessee who has received the share application money from them. Since there was failure on the part of the assessee to produce the directors and the information as required by the Assessing Officer, then it cannot be held that merely because Assessing Officer has not provided cross examination, the entire assessment gets invalid or addition is unsustainable. Assessing Officer has not made the addition blindly relying upon the statements but it was assessee who has failed to discharge its onus.

17. Here it is not a case that there is any lack of inquiry by the Assessing Officer or he is merely gone by the information received from the Investigation Wing, in fact, at all the stages Assessing Officer kept on asking the assessee to provide the requisite details and to produce the directors of the investee companies and the director of the assessee company, because it is assessee’s claim that it has received share capital/share premium from these companies. If a company is making such a huge investment, then assessee should have at least made endeavor to produce such parties before the Assessing Officer when they were not responding to the notices and summons issued by the Assessing Officer. Not only there was non- attendance 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 where they have received the money for making the investment. If they have failed to respond to the notices issued by the Assessing Officer then assessee should have produce the Principal Officer/Directors of these companies to explain the credits and to corroborate the documents submitted by the assessee.

Hon’ble Delhi High Court in the case of Novadaya Pvt. Ltd. (supra) has held that if there were corresponding deposit in the bank account before the issuance of share capital/share premium cheques, then mere filing of PAN, etc. were not sufficient, because these are the nature of deposits and source of deposits which needs to be explained. In the cases where investigation wing has found that any assessee has received bogus accommodation entry which has been found to be factually correct from the records gathered, then all the more onus shifts very heavily upon the assessee to prove that the transaction is genuine and the money which has been received by it has come through genuine sources and this can only be established when the investee company when the directors/principal Officers of the investee company produced before the Assessing Officer and they can explain the nature of transaction undertaken with the assessee. All these judgments relied upon by the ld. CIT-DR of Hon’ble Jurisdictional High Court clearly clinches the issue in favour of the Revenue. The permeating principle is laid down in these judgments are that mere furnishing of bank statement and documents does not fulfill the requirement 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.

any associated financial burden, the same manner as it is its own tax paid money after utilizing the services of the said entry operators. The immediate source of this amount has been found to be accommodation entry provider companies out of entities controlled by Sh. Pradeep Kumar Jindal as discussed above in para 3 reason to believe and modus operandi. The source of money is not explainable by the entry operators. These facts clearly show that transactions are not genuine. 9.3 In view of the above facts and circumstances, details/material available on record in the case and correlated information with the financials of the return of income filed and report of information from Investigation wing, ADIT (Investigation) Unit 2(1), New Delhi, statements recorded on oath by the investigation Wing and aforesaid discussion held I am satisfied that the total amount of Rs.74,00,000/- (Rupee Seventy four Lakh ) allegedly received from entities 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 application form or other documents emanated from the assessee or its counterpart in such act. But the source and nature of transactions need to be proved beyond doubts. The assessee has miserably failed to do so. Thus, keeping in view of the totality of the facts, above discussion the amount of Rs.74,00,000/- (Rupee Seventy four Lakh ) is added back to the income of the assessee company for A.Y 2010-11, u/s. 68 of the Income Tax Act, 1961. (Addition Rs. 74, 00,000/-) 9.4 It is also a well known fact that these entry providers do charge certain percentage of commission from the beneficiaries. There are so many similar cases of entry providers in the department wherein a percentage of 2-3% was held to be paid by the beneficiaries to the entry providers. Therefore, the following the same pattern, in this case also it is held that a commission at the rate of 2.5% has been paid by the assessee to the above mentioned entry providers. Hence, a further addition of Rs. 1,85,000/- being 2.5% of Rs.74, 00,000/- is made to the income of the assessee for A.Y 2010-11 as added u/s 69C of the income tax act, 1961 as expenditure incurred on such transactions. (Addition Rs. 1,85,000/-