SURYA PROCESSED FOOD PVT. LTD.,NEW DELHI vs. ACIT, CENTRAL CIRCLE-8, NEW DELHI

PER G.D. AGRAWAL, PER G .D. AGRAWAL, VICE VICE PRESIDENT PRESIDENT :- PER G PER G .D. AGRAWAL, .D. AGRAWAL, VICE VICE PRESIDENT PRESIDENT

2. In all these appeals, common grounds have been raised. Therefore, they are all being taken up together for consideration. The grounds of appeal raised in the above appeals read as under :-

ITA No.1156/Del/2019 : : ITA No.1156/Del/2019 :

“1. That on facts and circumstances of the case and in law, the Commissioner of Income Tax (Appeals)-XXIV, New Delhi [‘the Ld.CIT(A)’] , has erred in upholding the order of the Assistant Commissioner of Income Tax, Central Circle- 08, New Delhi (‘the Ld. Assessing Officer’) in upholding the addition of Rs.31,00,50,001 made u/s 68 of the Act on account of receipt of share capital.

2. That on facts and circumstances of the case and in law, the Ld.CIT(A), has erred in upholding the order of the Ld. Assessing Officer in upholding the addition of Rs.77,51,250/- made u/s 37 of the Act on account of alleged expenditure for commission incurred by the applicant company for channelizing the above share capital/share premium.”

ITA No.115 : ITA No.115 ITA No.115 /Del/2019 : /Del/2019 :- /Del/2019 :

“1. That on facts and circumstances of the case and in law, the Commissioner of Income Tax (Appeals)-XXIV, New Delhi [‘the Ld.CIT(A)’], has erred in upholding the order of the Assistant Commissioner of Income Tax, Central Circle- 08, New Delhi (‘the Ld. Assessing Officer’) in upholding the addition of Rs.2,60,00,000/- made u/s 68 of the Act on account of receipt of share capital.

2. That on facts and circumstances of the case and in law, the Ld.CIT(A), has erred in upholding the order of the Ld. Assessing Officer in upholding the addition of Rs.6,50,000/- made u/s 37 of the Act on account of alleged expenditure for commission incurred by the applicant company for channelizing the above share capital/share premium.”

ITA No.1158/Del/2019 : /Del/2019 :- ITA No.1158 ITA No.1158 /Del/2019 : /Del/2019 :

“1. That on facts and circumstances of the case and in law, the Commissioner of Income Tax (Appeals)-XXIV, New Delhi [‘the Ld.CIT(A)’] , has erred in upholding the order of the Assistant Commissioner of Income Tax, Central Circle- 08, New Delhi (‘the Ld. Assessing Officer’) in upholding the addition of Rs.13,31,50,000 made u/s 68 of the Act on account of receipt of share capital.

2. That on facts and circumstances of the case and in law, the Ld.CIT(A), has erred in upholding the order of the Ld. Assessing Officer in upholding the addition of Rs.33,28,750/- made u/s 37 of the Act on account of alleged expenditure for commission incurred by the applicant company for channelizing the above share capital/share premium.”

3. At the time of hearing before us, it is stated by the learned counsel that both the above assessee companies are part of group companies of Priya Gold group. That search and seizure proceedings under Section 132 of the Income-tax Act, 1961 were conducted on 16th December, 2014 in the case of Priya Gold group and its group companies which included both the companies under appeal before us. During the course of search, statement of Shri Shekhar Agarwal, Director of M/s Surya Food & Agro Limited, which is the flagship company of the group, was recorded under Section 132(4). In the said statement, he accepted that the said group has earned unaccounted income which has been routed as bogus share capital during the financial year relevant to assessment year 2013-14 and 2014-15. He also admitted that the same income would be surrendered in the respective assessment years. The group has surrendered the entire undisclosed income of the group in its flagship company M/s Surya Food & Agro Limited by filing petition before the Settlement Commission. The additional income disclosed before the Settlement Commission was `49,12,73,399/-. In paragraph 12 & 13 of the application before the Settlement Commission, it was clearly mentioned that the profit made outside books by the applicant was utilized for making investment in the share capital of the group concerns. The assessee has also given the name of both the companies under appeal and the amount of share capital. That the Settlement Commission has admitted the above application and also passed the final order in which as against the income disclosed at `49.12 crores, the income settled was `55.77 crores. The assessee as well as Revenue both has accepted the order of the Settlement Commission and which has become final. In view of the above, no further addition for unexplained share capital in the hands of above two assessees is called for otherwise it would be double taxation of the same income.

4. Learned CIT-DR argued at length. He also furnished written submission, which is being reproduced below :-

“In the above case, it is humbly submitted as follows: 1. In statement on oath recorded u/s 132(4) on 17.12.2014, Sh. Shekhar Agarwal surrendered undisclosed income of Rs. 31 Cr. in F.Y 2012-13 and Rs. 15.91 Cr. in F.Y 2014-15.

2. In revised return filed on 30.08.2016 assessee increased an amount of Rs. 2.6 Cr. in A.Y 2013-14 and Rs. 28.40 Cr. in A.Y 2014-15 on account of share application money. However, no taxes were paid thereon. In statement on oath recorded u/s 131(1) on 25.10.2016, Sh. Manoj Aggarwal, Director of assessee company, stated that all taxes will be paid by 30.09.2016 but were not paid.

3. Detailed investigation was made with regard to investment made in M/s Subh Shree Investment Management P. Ltd. and M/s Neelkanth Vincom P. Ltd.(pages 4 to 19 of AO) which showed that the entire investment was on account of accommodation entries.

4. As stated in para 4.9 of AO , statement of directors Sh. Navin Aggarwal and Sh. Manoj Aggarwal were recorded in which they stated that Sh. Shekhar Agarwal was responsible for managing the finance and accounts of assessee group.

5. Statement of directors Ms. Beena Aggarwal, Chhavi Aggarwal and Nidhi Aggarwal were recorded in which they stated that they were dummy directors(pages 20 and 21 of AO).

6. As stated in para 4.12 of AO, various incriminating documents were seized from premises of the assessee.

7. As stated on page 30 of AO, Sh. Shekhar Agarwal admitted that unaccounted income earned through undisclosed sources was routed to the assessee company. No statutory register, minutes of meeting, share certificates and other documents were produced.

8. As stated in para 4.19 of AO, bank statements of investor companies reflected immediate introduction and withdrawal of funds.

9. As stated in page 37 of AO, summons were issued to Sh. Sudhir Satnaliwala but there was no compliance. Investigation Wing Kolkata examined Sh. Debashish Dutta who admitted providing accommodation entry to Priyagold group of companies.

10. 10 As stated in page 38 of AO, statement of dummy 10 10 directors Sh Bijay Kumar Aggarwal & Sh. Prakash Doshi was recorded in which they admitted that they were directors of entry operator Sh Debashish Dutta for earning commission. Sh Pankaj Agarwal also admitted that he was a dummy director.

11. 11 11 11 As stated in page 46 of AO, various incriminating documents pertaining to pre-planning were seized.

12. 12 12 12 Various ban inquiries were conducted as discussed on pages 47 to 54 of Assessing Officer.

13. 13 As stated in page 55 of AO, statement u/s 131(1) of 13 13 dummy directors Sh. Dinesh Kumar Pandey was recorded in which he admitted that companies in which he or his wife were directors are dummy companies.

14 14. 14 14 The assessee has failed to furnish justification for receiving such huge share premium.

It is humbly submitted that the following decisions may kindly be considered with regard to validity of statement recorded u/s 132(4) of I.T.Act:

1. B Kishore Kumar B Kishore Kumar B Kishore Kumar Vs CIT (62 taxmann.com 215, 234 B Kishore Kumar Vs CIT (62 taxmann.com 215, 234 Vs CIT (62 taxmann.com 215, 234 Vs CIT (62 taxmann.com 215, 234 Taxman 771) Taxman 771) (Copy Enclosed) Taxman 771) Taxman 771) (Copy Enclosed) (Copy Enclosed) (Copy Enclosed) where Hon’ble Supreme Court dismissed SLP against High Court's order where it was held that since assessee himself had stated in sworn statement during search and seizure about his undisclosed income, tax was to be levied on basis of admission without scrutinizing documents. B Kishore Kumar Vs CIT (52 taxmann.com 449) Madras High B Kishore Kumar Vs CIT (52 taxmann.com 449) Madras High B Kishore Kumar Vs CIT (52 taxmann.com 449) Madras High B Kishore Kumar Vs CIT (52 taxmann.com 449) Madras High Court confirmed (Copy Enclosed) Court confirmed (Copy Enclosed) Court confirmed (Copy Enclosed) Court confirmed (Copy Enclosed) 2. Bhagirath Aggarwal Vs CIT (31 taxmann.com 274, 215 Bhagirath Aggarwal Vs CIT (31 taxmann.com 274, 215 Bhagirath Aggarwal Vs CIT (31 taxmann.com 274, 215 Bhagirath Aggarwal Vs CIT (31 taxmann.com 274, 215 Taxman 229, 351 ITR 143) Taxman 229, 351 ITR 143) (Copy Enclosed) Taxman 229, 351 ITR 143) Taxman 229, 351 ITR 143) (Copy Enclosed) (Copy Enclosed) (Copy Enclosed) where Hon’ble Delhi High Court held that an addition in assessee's income relying on statements recorded during search operations cannot be deleted without proving statements to be incorrect.

admitting that said gift was bogus, impugned addition was to be confirmed.

5. M/s Pebble I M/s Pebble I M/s Pebble Investment and Finance Ltd Vs ITO (2017 M/s Pebble I nvestment and Finance Ltd Vs ITO (2017 nvestment and Finance Ltd Vs ITO (2017-TIOL nvestment and Finance Ltd Vs ITO (2017 TIOL TIOL- TIOL 238 238-SC 238 238 SC SC-IT) SC IT) IT) (Copy Enclosed) IT) (Copy Enclosed) (Copy Enclosed) (Copy Enclosed) where Hon’ble Supreme Court dismissed SLP challenging the judgment, whereby the High Court had held that statement made u/s 133A could be relied upon for purposes of assessment, in absence of any contrary evidence or explanation as to why such statement made was not credible. M/s Pebble Investment and Finance Ltd Vs ITO (2017 M/s Pebble Investment and Finance Ltd Vs ITO (2017-TIOL M/s Pebble Investment and Finance Ltd Vs ITO (2017 M/s Pebble Investment and Finance Ltd Vs ITO (2017 TIOL TIOL- TIOL 188 188-HC 188 188 HC HC-MUM HC MUM MUM-IT) Bombay High Court confirmed (Copy MUM IT) Bombay High Court confirmed (Copy IT) Bombay High Court confirmed (Copy IT) Bombay High Court confirmed (Copy Enclosed) Enclosed) Enclosed) Enclosed) 6. Greenview Greenview Greenview Restaurant Vs ACIT [2003] 133 Taxman 4 Greenview Restaurant Vs ACIT [2003] 133 Taxman 4 Restaurant Vs ACIT [2003] 133 Taxman 432 Restaurant Vs ACIT [2003] 133 Taxman 4 32 32 32 (Gauhati)/[2003] 263 ITR 169 (Gauhati)/[2003] 185 CTR 651 (Gauhati)/[2003] 263 ITR 169 (Gauhati)/[2003] 185 CTR 651 (Gauhati)/[2003] 263 ITR 169 (Gauhati)/[2003] 185 CTR 651 (Gauhati)/[2003] 263 ITR 169 (Gauhati)/[2003] 185 CTR 651 (Gauhati) (Copy Enclosed) (Gauhati) (Copy Enclosed) (Gauhati) (Copy Enclosed) (Gauhati) (Copy Enclosed) “From facts, it was clear that there was a delay on the part of the appellant and its partner in retracting the statements recorded. The attention of the Court had also not been drawn to any material on record to establish that any attempt was made on behalf of the appellant to prove the allegation of inducement, threat or coercion through the witnesses. Having examined the impugned orders rendered by the Tribunal with the reasonings in support of its finding against the complaint of threat, inducement or coercion, no good and sufficient reason was found to differ from it. In the facts and circumstances of the case, having regard to the materials on record, the appellant had failed to establish that the statements of its partner had been recorded in the course of the search by using coercion, threat or inducement. Hence, the contentions advanced by the appellant in that regard were dismissed and the conclusion of the Tribunal on that count was affirmed.” [Para 9]

7. Raj Hans Towers (P.) Ltd. Vs CIT (56 taxmann.com 67, 230 Raj Hans Towers (P.) Ltd. Vs CIT (56 taxmann.com 67, 230 Raj Hans Towers (P.) Ltd. Vs CIT (56 taxmann.com 67, 230 Raj Hans Towers (P.) Ltd. Vs CIT (56 taxmann.com 67, 230 Taxman 567, 373 ITR 9) (Copy Enclosed) Taxman 567, 373 ITR 9) (Copy Enclosed) Taxman 567, 373 ITR 9) (Copy Enclosed) Taxman 567, 373 ITR 9) (Copy Enclosed) where Hon’ble Delhi High Court held that where assessee had not offered any satisfactory explanation regarding surrendered amount being not bona fide and it was also not borne out in any contentions raised before lower authorities, additions so made after adjusting expenditure were justified (SURVEY CASE).

8. PCIT Vs Avinash Kumar Setia [2017] 81 taxmann.com 476 PCIT Vs Avinash Kumar Setia [2017] 81 taxmann.com 476 PCIT Vs Avinash Kumar Setia [2017] 81 taxmann.com 476 PCIT Vs Avinash Kumar Setia [2017] 81 taxmann.com 476 (De (Delhi) (De (De lhi) lhi) where Hon’ble Delhi High Court held that Where lhi) assessee surrendered certain income by way of declaration and withdraw same after two years without any satisfactory explanation, it could not be treated as bona fide and, hence, addition would sustain.

9. ACIT Vs Hukum Chand Jain ACIT Vs Hukum Chand Jain ACIT Vs Hukum Chand Jain [2010] 191 Taxman 319 ACIT Vs Hukum Chand Jain [2010] 191 Taxman 319 [2010] 191 Taxman 319 [2010] 191 Taxman 319 (Chhattisgarh) (Chhattisgarh) when assessee did not retract his statement (Chhattisgarh) (Chhattisgarh) immediately after search and seizure was over and in return also no explanation was offered for surrender of undisclosed income at time of search and seizure operations under section 132(4), it could be said that assessee had failed to discharge onus of proving that confession made by him under section 132(4) was as a result of intimidation, duress and coercion or that same was made as a result of mistaken belief of law or facts.

In the above case, it is humbly submitted that the following decisions may kindly be considered with regard to addition made u/s 68 of I.T.Act:

2. PCIT Vs NDR P PCIT Vs NDR P PCIT Vs NDR PROMOTERS PVT LTD (2019 PCIT Vs NDR P ROMOTERS PVT LTD (2019 ROMOTERS PVT LTD (2019-TIOL ROMOTERS PVT LTD (2019 TIOL TIOL-172 TIOL 172 172-HC 172 HC HC-DEL HC DEL DEL- DEL IT) IT) IT) IT) where Hon’ble Delhi High Court held that a case involving make-believe paper work to camouflage the bogus nature of the transactions is to be treated as unexplained credit u/s 68.

3. ITO Vs Synergy Finlease Pvt. Ltd ITO Vs Synergy Finlease Pvt. Ltd (ITA No.4778/Del/2013) (ITA No.4778/Del/2013) ITO Vs Synergy Finlease Pvt. Ltd ITO Vs Synergy Finlease Pvt. Ltd (ITA No.4778/Del/2013) (ITA No.4778/Del/2013) where Hon’ble ITAT Delhi held that where investor of share application money had nominal income and cheques had been received just before issue of cheques for share application money, creditworthiness was not proved and addition u/s 68 was sustained.

4. Prem Castings (P.) Ltd. Vs CIT Prem Castings (P.) Ltd. Vs CIT Prem Castings (P.) Ltd. Vs CIT [2017] 88 taxmann.com 189 Prem Castings (P.) Ltd. Vs CIT [2017] 88 taxmann.com 189 [2017] 88 taxmann.com 189 [2017] 88 taxmann.com 189 (Allahabad) (Allahabad) (Copy Enclosed) (Allahabad) (Allahabad) (Copy Enclosed) (Copy Enclosed) (Copy Enclosed) where Hon’ble Allahabad High Court held that additions u/s 68 warrant being sustained where the identities & creditworthiness of investors in the assessee company are not established by the assessee & are also proved incorrect by the Department's Assessee Information System. In such circumstances, assessee cannot resist the additions on grounds that it did not have opportunity to cross-examine relevant witnesses. An assessee company cannot hide behind the shell of a corporate entity to feign ignorance regarding the identity of any person who invests in its share capital.

Prem Castings (P.) Ltd. Vs CIT Prem Castings (P.) Ltd. Vs CIT 2018 Prem Castings (P.) Ltd. Vs CIT Prem Castings (P.) Ltd. Vs CIT 2018 2018-TIOL 2018 TIOL TIOL-274 TIOL 274 274-SC 274 SC SC-IT SC IT IT (Copy IT (Copy (Copy (Copy Enclosed) Enclosed) Enclosed) Enclosed) where Hon’ble Supreme Court held as follows: “We do not find any merit in this petition. The Special Leave Petition is accordingly dismissed.”

5. CIT Vs MAF Academy (P.) Ltd (361 ITR 258) (Copy Enclosed) CIT Vs MAF Academy (P.) Ltd (361 ITR 258) (Copy Enclosed) CIT Vs MAF Academy (P.) Ltd (361 ITR 258) (Copy Enclosed) CIT Vs MAF Academy (P.) Ltd (361 ITR 258) (Copy Enclosed) where Hon’ble Delhi High Court held that where assessee, a private limited company, sold its shares to unrelated parties at a huge premium and thereupon within short span of time those shares were purchased back even at a loss, share transactions in question were to be regarded as bogus and, thus, amount received from said transactions was to be added to assesee's taxable income under section 68 It was held as follows:

“53. 53.

54. Assessee has not discharged the onus satisfactorily and the additions made by the Assessing Officer were justified and sustainable.”

6. CIT Vs Navodaya Castle Pvt Ltd [2014] 367 ITR 306 (Del) CIT Vs Navodaya Castle Pvt Ltd [2014] 367 ITR 306 (Del) CIT Vs Navodaya Castle Pvt Ltd [2014] 367 ITR 306 (Del) CIT Vs Navodaya Castle Pvt Ltd [2014] 367 ITR 306 (Del) (Copy Enclosed) (Copy Enclosed) (Copy Enclosed) (Copy Enclosed) where Hon’ble Delhi High Court accepted that since the assessee was unable to produce the directors and the principal officers of the six shareholder companies and also that as per the information and details collected by the Assessing Officer from the concerned bank, the Assessing Officer had observed that there were genuine concerns about identity, creditworthiness of shareholders as well as genuineness of the transactions. “20. Now, when we go to the order of the Tribunal in the present case, we notice that the Tribunal has merely reproduced the order of the Commissioner of Income-tax (Appeals) and upheld the deletion of the addition. In fact, they substantially relied upon and quoted the decision of its co-ordinate Bench in the case of MAF Academy P. Ltd., a decision which has been overturned by the Delhi High Court, vide its judgment in CIT v. MAF Academy P. Ltd. [2014] 206 DLT 277 ; [2014] 361 ITR 258 (Delhi)). In the impugned order it is accepted that the assessee was unable to produce directors and principal officers of the six shareholder companies and also the fact that as per the information and details collected by the Assessing Officer from the concerned bank, the Assessing Officer has observed that there were genuine concerns about identity, creditworthiness of shareholders as well as genuineness of the transactions.

21. In view of the aforesaid discussion, we feel that the matter requires an order of remit to the Tribunal for fresh adjudication keeping in view the aforesaid case law.”

Navodaya Castle Pvt Ltd Vs CIT ([2015] 56 taxmann.com 18 Navodaya Castle Pvt Ltd Vs CIT ([2015] 56 taxmann.com 1 Navodaya Castle Pvt Ltd Vs CIT ([2015] 56 taxmann.com 1 Navodaya Castle Pvt Ltd Vs CIT ([2015] 56 taxmann.com 1 8 8 8 (SC)/[2015] 230 Taxman 268 (SC)) (Copy Enclosed) (SC)/[2015] 230 Taxman 268 (SC)) (Copy Enclosed) (SC)/[2015] 230 Taxman 268 (SC)) (Copy Enclosed) (SC)/[2015] 230 Taxman 268 (SC)) (Copy Enclosed) SLP of assessee dismissed by Hon’ble Supreme Court.

Konark Structural Engineering (P.) Ltd. Konark Structural Engineering (P.) Ltd. Vs DCIT Konark Structural Engineering (P.) Ltd. Konark Structural Engineering (P.) Ltd. Vs DCIT Vs DCIT [2018] 90 Vs DCIT [2018] 90 [2018] 90 [2018] 90 taxmann.com 56 (Bombay) taxmann.com 56 (Bombay) (Copy Enclosed) taxmann.com 56 (Bombay) taxmann.com 56 (Bombay) (Copy Enclosed) (Copy Enclosed) (Copy Enclosed) where Hon’ble Bombay High Court held that where assessee-company received certain amount as share capital from various shareholders, in view of fact that summons served to shareholders under section 131 were unserved with remark that addressees were not available, and, moreover, those shareholders were first time assessees and were not earning enough income to make deposits in question, impugned addition made by AO under sec. 68, was to be confirmed.

10 10 PCIT Vs Bikram Singh [2017] 85 taxmann.com 104 10 10 PCIT Vs Bikram Singh [2017] 85 taxmann.com 104 PCIT Vs Bikram Singh [2017] 85 taxmann.com 104 PCIT Vs Bikram Singh [2017] 85 taxmann.com 104 (Delhi)/[2017] 250 Taxman 273 (Delhi)/[2017] 399 ITR 407 (Delhi)/[2017] 250 Taxman 273 (Delhi)/[2017] 399 ITR 407 (Delhi)/[2017] 250 Taxman 273 (Delhi)/[2017] 399 ITR 407 (Delhi)/[2017] 250 Taxman 273 (Delhi)/[2017] 399 ITR 407 (D (Delhi) (Copy Enclosed) (D (D elhi) (Copy Enclosed) elhi) (Copy Enclosed) elhi) (Copy Enclosed) where Hon’ble Delhi High Court held that even if a transaction of loan is made through cheque, it cannot be presumed to be genuine in the absence of any agreement, security and interest payment. Mere submission of PAN Card of creditor does not establish the authenticity of a huge loan transaction particularly when the ITR does not inspire such confidence. Mere submission of ID proof and the fact that the loan transactions were through the banking channel, does not establish the genuineness of transactions. Loan entries are generally masked to pump in black money into banking channels and such practices continue to plague Indian economy.

10. CIT Vs Nipun Builders & Developers (P.) Ltd (30 CIT Vs Nipun Builders & Developers (P.) Ltd (30 CIT Vs Nipun Builders & Developers (P.) Ltd (30 CIT Vs Nipun Builders & Developers (P.) Ltd (30 taxmann.com 292, 214 Taxman 429, 350 ITR 407, 256 taxmann.com 292, 214 Taxman 429, 350 ITR 407, 256 taxmann.com 292, 214 Taxman 429, 350 ITR 407, 256 taxmann.com 292, 214 Taxman 429, 350 ITR 407, 256 CTR 34) CTR 34) (Copy Enclosed) CTR 34) CTR 34) (Copy Enclosed) (Copy Enclosed) (Copy Enclosed) where Hon’ble Delhi High Court held that where assessee failed to prove identity and capacity of subscriber companies to pay share application money, amount so received was liable to be taxed under section 68. It was held as follows:

“12. “12. A perusal of the order of the Tribunal shows that it has “12. “12. gone on the basis of the documents submitted by the assessee before the AO and has held that in the light of those documents, it can be said that the assessee has established the identity of the parties. It has further been observed that the report of the investigation wing cannot conclusively prove that the assessee's own monies were brought back in the form of share application money. As noted in the earlier paragraph, it is not the burden of the AO to prove that connection. There has been no examination by the Tribunal of the assessment proceedings in any detail in order to demonstrate that the assessee has discharged its onus to prove not only the identity of the share applicants, but also their creditworthiness and the genuineness of the transactions. No attempt was made by the Tribunal to scratch the surface and probe the documentary evidence in some depth, in the light of the conduct of the assessee and other surrounding circumstances in order to see whether the assessee has discharged its onus under Section 68. With respect, it appears to us that there has only been a mechanical reference to the case-law on the subject without any serious appraisal of the facts and circumstances of the case.

“41. “41. In the case before us, not only did the material before “41. “41. the Assessing Officer show the link between the entry providers and the assessee-company, but the Assessing Officer had also provided the statements of Mukesh Gupta and Rajan Jassal to the assessee in compliance with the rules of natural justice. Out of the 22 companies whose names figured in the information given by them to the investigation wing, 15 companies had provided the so- called "share subscription monies" to the assessee. There was thus specific involvement of the assessee-company in the modus operandi followed by Mukesh Gupta and Rajan Jassal. Thus, on crucial factual aspects the present case stands on a completely different footing from the case of Oasis Hospitalities (P.) Ltd. (supra).

where Hon’ble Delhi High Court held that if AO doubts the documents produced by assessee, the onus shifts on assessee to further substantiate the facts or produce the share applicant in proceeding. It was held as follows: “30. What we perceive and regard as correct position of law is that the court or tribunal should be convinced about the identity, creditworthiness and genuineness of the transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee's knowledge. Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive. Companies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind the company who take the decisions, controls and manage them.”

7. In paragraph 1 of the order, the Assessing Officer has mentioned as under :-

“Search and seizure proceedings under section 132 of the Income Tax Act, 1961, (hereinafter ‘the Act’) were conducted in the case of Priya Gold Group and its group concerns and residential/factory premises of partners, directors and proprietors of the group on 16.12.2014. The case of the assessee was also covered in operation u/s 132 of the Income Tax Act, 1961.”

8. Paragraph 2.2 of the order reads as under :-

“2.2 Sh. Shekhar Agarwal, one of the directors in the associated group companies, in his statement recorded on oath u/s 132(4) on 17.12.2014 has accepted that the undisclosed income on account of bogus share capital money will be surrendered in the A.Y. 2013-14 and 2014- 15, but the same has not been surrendered by the assessee company in its return u/s 153A of the Act. In reply to ques. no.25, Sh. Shekhar Agarwal stated that :

I accept the fact that our group has routed its unaccounted income earned through undisclosed sources amounting to `31 crore in F.Y. 2012-13 and `15.91 crore in F.Y. 2014-15 in its companies M/s Surya Processed Food Pvt.Ltd. and M/s Surya Agrotech Infrastructure Limited through Kolkata based companies namely and M/s Subhshree Investment Management Private Limited, M/s Surya Vincom Private Limited and M/s Surya Vanijya Private Limited, M/s Garima Commerce Private Limited, M/s Lokenath Investments Consultants Private Limited respectively by way of share capital/share premium.”

8.1 From the above, it is evident that the Assessing Officer himself has considered the Priya Gold group as one group and the assessee company being part of the same group. He relied upon the statement of Shri Shekhar Agarwal who is Director in the associated group companies. It was pointed out by the learned counsel that Shri Shekhar Agarwal is the Director in M/s Surya Food and Agro Limited i.e., the flagship company. In the statement, Shri Shekhar Agarwal accepted the fact that the group has routed its unaccounted income in the form of share capital in its companies M/s Surya Processed Food Pvt.Ltd. and M/s Surya Agrotech Infrastructure Limited.

9. The Assessing Officer has again relied upon the above statement of Shri Shekhar Agarwal. Paragraph 4.11 of the order of the assessment order reads as under :-

“4.11 The statement on oath dated 16.12.14 of Shri Shekhar Agrawal, who was handling all the investment related issues of the Priyagold group of companies, was also recorded at the residence and the statement substantiates the fact that all the financial and investment related decisions were taken by Shri Shekhar Agarwal and he is the key person handling investments and fund requirement in main companies of the group. Further questioning of Shri Shekhar Agarwal on the issue of accommodation entries taken by the Priyagold Group took place at the head office of the Priyagold Group.”

9.1 Thus, the Assessing Officer himself has recorded the finding that Shri Shekhar Agarwal was handling all the investment related issues of Priya Gold group of companies. It is further noted that he is the key person handling investments and funds requirements in the main companies of the group.

11. At page 30 of the assessment order, the Assessing Officer, while relying upon the statement of Shri Shekhar Agarwal, has reproduced his statement. Question No.26 and answer thereto read as under :-

“Q.26 Since you have accepted the fact that your group has routed its unaccounted income earned through undisclosed sources amounting to `31 crore in F.Y. 2012- 13 and `15.91 crore in F.Y. 2013-14 in its companies M/s Surya Processed Food Pvt.Ltd. and M/s Surya Agrotech

Infrastructure Limited through Kolkata based companies by way of share capital/share premium, please explain the modus operandi adopted by your group to route this unaccounted money.

Ans. I wish to state that our group had unaccounted funds available with it and wanted to introduce these funds into the books of accounts of our main companies. For this purpose I came in contact with Sh. Sudhir Satnaliwala, who assured the arrangement of bogus companies registered in Kolkata to introduce our unaccounted funds. The unaccounted funds were handed over in cash to one of the confidants of Sh. Sudhir Satnaliwala. Accordingly Sh. Sudhir Satnaliwala introduced these unaccounted funds into the books of our main companies namely M/s Surya Processed Food Pvt.Ltd. & M/s Surya Processed Food Pvt.Ltd. in the form of share capital/share premium through a layer of Kolkata based companies. However I am not aware about the exact modus operandi followed by Sh. Sudhir Satnaliwala to arrange these transactions.”

11.1 From the above, it is evident that Shri Shekhar Agarwal repeatedly mentioned that it is the unaccounted income of the group which is routed through the share capital in M/s Surya Processed Food Pvt.Ltd. and M/s Surya Agrotech Infrastructure Limited i.e., the companies in appeal before us.

11.2 The above statement of Shri Shekhar Agarwal has been relied upon by the Assessing Officer time and again. At page 31 of the assessment order, after considering the statement of Shri Shekhar Agarwal, the Assessing Officer concluded as below :-

“The above admission of Shri Shekhar Agarwal established beyond doubt that Priyagold group had unaccounted funds which were introduced into main companies of the group by routing of these funds through layers of bogus (jama kharchi) accommodation providing companies. This submission was reconfirmed by Mr. Shekhar Agarwal in his statement recorded during post-search proceedings on 29.01.15.”

11.3 Thus, the Assessing Officer himself has concluded that Priya Gold group had undisclosed funds which were introduced into main companies of the group by routing of these funds through layers of bogus accommodation entries.

12. Again at page 38, the Assessing Officer, in paragraph 4.24, recorded the following finding :-

“All the above statements further establish the fact that all these companies based in Kolkata purportedly investing in Priyagold Group are nothing but paper companies and all the investments from them in Priyagold group concerns in the form of share capital/share premium are nothing but accommodation entries, which have been obtained by Priyagold group in its books by routing its own unaccounted money.”

13. In paragraph 4.26, the Assessing Officer concluded as under :-

“It is proved beyond any iota of doubt that this investment of over Rs.46.91 crores in the form of share capital/premium in various companies of Priyagold Group is nothing but an accommodation entry which has been obtained by routing its own unaccounted money in its books and is liable to be added in the hands of assessee group companies u/s 68 of the I.T. Act, 1961.”

13.1 Thus, the Assessing Officer has concluded that the investment of `46.91 crores in the form of share capital/premium in various companies of Priyagold Group is nothing but an accommodation entry and it is liable to be added in the hands of the assessee group companies. As per Assessing Officer himself, the share capital is liable to be assessed in the hands of the assessee group companies. From the above observation of the assessment order, it is absolutely clear that the stand of the Revenue was that the Priya Gold group had undisclosed income which is routed in the form of share capital by obtaining accommodation entries from Kolkata based entry provider companies and the said share capital including premium is liable to be taxed in the hands of the assessee group companies.

S.No. Name of the company 1. M/s Surya Food & Agro Ltd.

2. M/s Surya Agrotech Infrastructure Ltd.

3. M/s Surya Processed Food Pvt.Ltd.

4. M/s Surya Fresh Foods Ltd.

5. M/s Surya Shopping Arcade Pvt.Ltd.

6. M/s Surya Biscuit Industries (Proprietorship concern) 7. M/s Surya Healthcare Industries (Prop. Concern) 8. M/s Garima Commerce Pvt.Ltd.

9. M/s Lokenath Investment Consultants Pvt.Ltd.

10. M/s Surya Vincom Pvt.Ltd. (formerly known as M/s Neelkanth Vincom Pvt.Ltd.) 11. M/s Subhshree Investment Management Pvt.Ltd.

12. M/s Surya Vanijya Pvt.Ltd.

(formerly known as M/s Labhdhan Mercantile Pvt.Ltd.)

15. From the above, it is evident that it includes both the companies under appeal before us. In paragraph 4 Annexure-A of the application, there is full and true statement of facts and the manner in which the income has been derived. The relevant portion thereof is reproduced below:-

“IV. FULL & TRUE STATEMENT OF FACTS AND MANNER IN WHICH INCOME HAS BEEN DERIVED.

1. The applicant company is in the trade of manufacturing and sale of biscuits.

13. The following are the amounts introduced in the shape of share capital of the group entities obtained from entry operators:-

S.No. Name of Entity in which entry Amount Assessment Year has obtained 1. Surya Processed Food (P) Ltd. 31,00,50,000 2013-14 2. Surya Agrotech Infrastructure 2,60,00,000 2013-14 Ltd. 3. Surya Agrotech Infrastructure 13,31,50,000 2014-15 Ltd. Total 46,92,00,000

Entries were introduced in the above companies by allotting shares to the bogus shareholders as per list placed in Annexure ‘C’. It is submitted that the entire bogus share capital was obtained by ploughing back money earned in hedging transactions in cash kept outside books.

14. Below is a table showing the turn over and the gross profit earned by the applicant as per books:-

Asstt. Year Turn Over Gross Profit G.P. Rate 2009-10 3,80,95,14,651 68,54,42,867 17.99 2010-11 4,36,88,88,049 58,31,74,857 13.35 2011-12 4,73,68,11,191 87,91,34,327 18.56 2012-13 5,41,17,27,672 96,71,90,982 17.92 2013-14 6,39,80,48,593 1,11,61,57,254 17.45 2014-15 6,77,30,78,789 1,26,35,04,456 18.65 2015-16 7,18,85,42,615 1,36,45,98,055 18.98

A reference to the above chart would show that there is a variation in the G.P. rate over the years. It shows the volatility in the trade because of the prices of raw material, which are end product of agricultural sector and thus their prices are fluctuating depending on the season and weather. The applicant in order to save itself from fluctuations hedged the prices of raw material to maintain a reasonable gross profit at 19%.

The additional income by taking the gross profit at 19% will be as follows:-

Asstt. Turnover (Rs.) G.P. @ 19% Gross profit as Additional Year Amount (Rs.) per books (Rs.) Income 2009-10 3,80,95,14,651 72,38,07,784 68,54,42,867 3,83,64,917 2010-11 4,36,88,88,049 83,00,88,729 58,31,74,857 24,69,13,872 2011-12 4,73,68,11,191 89,99,94,126 87,91,34,327 2,08,59,799 2012-13 5,41,17,27,672 1,02,82,28,258 96,71,90,982 6,10,57,276 2013-14 6,39,80,48,593 1,21,56,29,233 1,11,61,57,254 9,94,71,979 2014-15 6,77,30,78,789 1,28,68,84,970 1,26,35,04,456 2,33,80,514 2015-16 7,18,85,42,615 1,36,58,23,097 1,36,45,98,055 12,25,042 Total 49,12,73,399

From the above it is seen that the additional income mentioned above covers the investment made by the applicant company in the shares of:- a) Surya Processed Food Pvt.Ltd. b) Surya Agrotech Infrastructure Ltd.

Surya Food & Agro Ltd. List of bogus capital introduced by the applicant in group companies

Company name : Surya Processed Food Private Limited Details of bogus shareholders S.No. Particulars No. of Per Amount Assessment Shares share Years value 1 M/s Subhshree 42,22,973 37 1562,50,000 2013-14 Investment Management Pvt.Ltd. 2 M/s Surya Vincom 41,56,757 37 1538,00,000 2013-14 Pvt.Ltd. Total 83,79,730 3100,50,000

Company Name : Surya Agrotech Infrastructure Ltd. Details of Bogus Shareholders S.No. Particulars No. of Per Amount Assessment Shares share Years value 1 M/s Surya Vanijya 26,00,000 10 260,00,000 2013-14 Pvt.Ltd. 2 M/s Garima 3,60,000 10 36,00,000 2014-15 Commerce Pvt.Ltd. 3 M/s Surya Vanijya 126,30,000 10 1263,00,000 2014-15 Pvt.Ltd. 4 M/s Lokenath 3,25,000 10 32,50,000 2014-15 Investment Consultants Pvt.Ltd. Total 159,15,000 1591,50,000

Computation of Income u/s 245D(4) Name of Asstt. Total Income Income Income Total income the Year as per return disclosed settled u/s determined u/s applicant (in Rs.) u/s 245C(1) 245D(4) (in 245D(4) (in Rs.) Rs.) (in Rs.) 1 2 3 (1 + 3) 2009-10 69,711,904 38,364,917 38,364,917 10,80,76,821 2010-11 73,607,180 246,913,872 246,913,872 32,05,21,052 2011-12 86,738,060 20,859,799 20,859,799 10,75,97,859 M/s Surya 2012-13 78,470,380 61,057,276 61,057,276 13,95,27,656 Food & 2013-14 11,442,840 99,471,979 99,471,979 21,49,14,819 Agro Ltd. 2014-15 153,641,060 23,380,514 23,380,514 17,70,21,574 2015-16 501,459,130 1,225,042 6,76,76,042 56,91,35,172 Total 1,079,070,554 491,273,399 55,77,24,399 1,63,67,94,953

“8.5.3 Another issue in this case is that the applicant is claiming that its Additional income has been invested in two other group companies to the tune of Rs.46,92,00,000/-. However, those two companies are not before the commission and hence this issue cannot be adjudicated by us.”

“We have carefully considered the rival contentions and perused the orders of the lower authorities as well as the order of the settlement commission dated 8/6/2018. It is apparent that the disclosure has been made by the company who has earned the undisclosed income and routed in books through the petitioner companies as unaccounted share capital. The application of the income is taxed in the hands of the petitioner companies apparently it seems and sources of income is taxed in the hands of Surya Food and Agro Ltd. Therefore prima facie the case of the assessee shows that there is a double addition, once the source of income and secondly the application of income. Therefore according to us the balance of convenience lies in favour of the assessee.”