CLAQYX SECURITIES P.LTD,NEW DELHI vs. ITO, WARD-6(2), NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI M. BALAGANESHAssessment Year: 2012-13
PER SATBEER SINGH GODARA, JM
This assessee’s appeal for assessment year 2012-13, arises against the Commissioner of Income Tax (Appeals)-2 [in short, the “CIT(A)”], New Delhi’s order dated 14.12.2018 passed in case no.
10382/17-18, involving proceedings under section 144/147 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’).
Assessee by None
Department by Sh. Surender Pal, CIT(DR)
Date of hearing
07.04.2025
Date of pronouncement
07.04.2025
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Case called twice. None appears at the assessee’s behest. The assessee had last appeared on 1st November, 2023; and; thereafter, the case has already been listed on seven occasions. We thus proceed ex-parte against the assessee.
This assessee’s appeal raises the following substantive grounds:
“1. On the facts and in the circumstances of the case as well as in law the Ld. Commissioner of Income Tax (Appeals) grossly erred in holding that the re-opening of the assessment is valid in law, which is otherwise bad in law without juri iction and ab initio void.
On the facts and in the circumstances of the case as well as in law the Ld. Commissioner of Income Tax (Appeals) grossly erred in holding that the transaction of share capital of 4,01,03,000/-and share premium of 4,96,03,72,000/- and confirming the addition of 500,03,75,000/- U/s 68 of the Income Tax Act, 1961. 3. On the facts and in the circumstances of the case as well as in law the Ld. Commissioner of Income Tax (Appeals) grossly erred in upholding the action of Ld. Assessing Officer completing the Assessment and ex-parte U/s 144 of the Income Tax Act, 1961, without providing proper and adequate opportunity of being
These action of Hon'ble Commissioner of Income Tax (Appeals) -2, New
Delhi., and Ld. Assessing officer being Arbitrary, unjust, Illegal and invalid in law are liable to quashed and it is prayed to Your Honor that they please be quashed and/or any other relief just deem fit and proper please be directed.”
Learned CIT(DR) invites our attention to the fact that not only the Assessing Officer had framed his assessment ex-parte against the assessee on 28th December, 2017 but also it failed to discharge the onus of proving the genuineness/correctness of the impugned unexplained cash credits before the learned CIT(A) as under: 3 | P a g e
“7. Decision:- I have carefully gone through all the facts, findings of the AO, grounds of appeal and submissions.
Ground no. 1 & 7:- These grounds are general in nature, hence, do not require any specific adjudication.
Ground no. 2: This ground is against reopening of case u/s 147 of the Act. It is clear from assessment order that the assessee company did not file return of income for the A.Y. 2012-13 during which the amount of Rs. 500,03,75,000/- was received as Share Premium and Share Capital. The AO noticed it during assessment of subsequent year. As is clear from para 3.1 of the Remand report, this fact was submitted by the A.R of the assessee company during the course of assessment proceedings for the A.Y. 2013-14. Thereafter, the notice u/s 148 was issued after necessary administrative approval. The reasons for reopening were also communicated to the appellant. After receiving the notice u/s 148 by post and e-mail, the return was filed by the appellant. There was no objection raised against reopening of the case. As per the ratio of the case GKN Driveshafts (India) Ltd Vs ITO, 259 ITR 19 (SC), the assessee can object against reopening of the case before assessment and the AO has to dispose of the objection before completion of assessment. In the present case, no such action was taken by "the applicant. Therefore, raising objection against reopening at the appellate stage does not appear tenable. This ground is dismissed.
Ground no. 3:- This ground is directed against addition of share application money of Rs. 4,01,03,000/- and share premium of Rs. 4,96,03,72,000/- and making total addition of Rs. 500,03,75,000/- u/s 68 of the Income Tax Act, 1961. The facts and findings of the case are given below:
i. The appellant had received Rs. 500,03,75,000/- during the year as share application money and share premium from four parties but had not filed any return of income.
4 | P a g e ii. The share applicant companies are running in loss. Their operating expenses booked were very nominal in hundreds and thousands.
Financial condition vis-a-vis share investment in the appellant companies is shown in the table below:
iii. These companies running in loss have made huge investments in appellant which is also running in loss but making huge investment in some other companies. They had made investments in crores i.e.
Rs. 500,03,75,000/-. Both the appellant and the share applicant companies have shown similar operating pattern thereby making the behaviour very suspicious.
iv. There are no employees in the companies. They have common address.
v. During assessment, AO issued notice u/s 133(6) to three share applicants viz. Hibiscus holdings, Hologram holding & Preen
Securities. Nobody attended or filed any reply.
vi. During remand proceeding, the AO has examined thoroughly and very clearly each and every detail that was adduced as additional evidence. The four share applicant companies were given adequate opportunity to prove their identity, genuineness and capacity. The Principal Officers of all the share applicants were summoned. One Sh.
Bharat Bhushan, appeared as Director of three companies but could not prove even his identity of being the Director of these companies which was basic and fundamental before proving the identity of the company. He did not even have an I-card.
vii. The Director was not aware of the auditors of the company and had no understanding of purpose of huge investment made in a loss making company nor did he know the name of the other Director of his own companies.
viii. The address given to ROC is different from that submitted during remand proceedings. The Director failed to adduce any documentary evidence that the companies operated from the address given.
ix. The corporate address of these companies at Gurugram did not exist as verified during inspection conducted by the AO. The Director was confronted by the AO on the non-existence of corporate address.
But he had no idea. He had also not visited the place. He was not aware since when the corporate address existed.
x. The Director stated that the registered address of Paharganj, New
Delhi, was a rented office. But the P&L a/c showed no payment of rent. When confronted, the Director had no reply.
5 | P a g e xi. The AO noticed several credit entries are made on a single day in the bank accounts of all these companies and then channeled to other companies. He confronted the Director and asked to explain the debit
& credit entries in bank accounts to confirm the genuineness of transactions. But he had no reply.
xii. He did not have idea of the functioning of the three companies. He only said that he was appointed as Director of the three companies from March 18 and reported to Sh. S.K. Jain (who was involved in accommodation entry operators case).
xiii. The AO summoned on 11.09.2018 the fourth share applicant company viz. S.K.P.J. Investment and Finance Private Limited at the two given addresses. The summon issued at one address returned unserved. There was no compliance from the share applicant company.
xiv. The AO summoned the appellant company's Director who could not prove his identity. He neither had an I-card nor did he know the name of other Directors of his company. He had no answer on the critical issues of financial transactions made by the company.
1 Burden of proof: From the rejoinder on the remand report, it is very clear that it has not addressed any point raised by the AO regarding the dummy Directors of the share applicant and companies having no identity or no idea of the functioning of the companies and their working addresses. It has no reply to the finding of the AO It has not responded to the allegation of the AO about the address mentioned at the letterhead of the parties namely M/s Hibiscus Holdings Private Limited, M/s Hologram Holdings (P) Limited and M/s Preen Securities Private Limited being the same addresses which pertain to the companies operated by the S.K. Jain Group involved in entry operators case. No reply has been put forth to controvert the findings of the AO. The silence of the appellant on these burning issues is deafening.
2 After receiving fresh evidence in the form of bank statements, confirmations etc., the burden was on the AO to verify the details. The AO, after conducting all necessary verification and spot inquiry during remand proceedings, gave his findings in a clear and unambiguous manner about sham transactions and pre-planned share investments. The AO discharged his burden and shifted the onus on the appellant. But it is evident that the appellant has miserably failed to discharge the burden of proof after the remand proceeding. 6 | P a g e
3 On the other hand, it has raised baseless allegation like the statement on oath elicited by force and pressure. It is also requesting CIT(A) to further remand the case to AO for providing more time and explanation before the AO. It has miserably failed to explain severe anomalies noted about the so called dummy companies and its own behaviour at every stage viz. during assessment, during remand proceedings and even during appellate proceedings.
4 The remand report is a speaking report how these companies are operating as dummy companies and even their so-called Director does not have identity and does not know about their address or business. It is based on facts and inquiry and speaks volumes on the shady behaviour of the creditor as well as recipient companies. The conclusion of the AO that the companies are dummy, the transaction through bank is sham and the only purpose of their existence is to rotate the capital without doing any business, is concrete and based on detailed inquiry of all the parties involved and after giving adequate opportunity.
5 In a similar case of CIT vs. Nova Promoters & Finlease (P) Ltd. [2012] 18 taxmann.com 217 (Delhi), important observations have been made by Delhi High Court as to the burden of proof and shifting of onus in the cases of cash credit under Section 68 of the Act. While confirming the additions made by the AO, important observations are quoted below:
"19. In the present appeal, the evidence and material on record, properly considered in the light of the surrounding circumstances and without attaching weight to neutral circumstances or circumstances of no relevance, point to only one conclusion, namely, that the monies introduced by the assessee as share subscriptions from 15 companies were its own unaccounted monies..
It is not in dispute in the present case that the assessment was reopened on the basis of information received from the investigation wing of the department about the existence of accommodation entry providers and their "modus operandi" in which the assessee was also found to be involved...
It seems to us that in finding fault with the Assessing Officer for not accepting the above affidavits, both the CIT (Appeals) as well as the Tribunal have committed a serious error in appreciating the evidence. The affidavits were presented before the Assessing Officer in the course of the assessment proceedings on 4th December, 2007. In the appeal filed before the CIT (Appeals) he called for a remand report from the Assessing Officer. In doing so, he directed the Assessing Officer to examine the contents of the affidavits and verify 7 | P a g e the genuineness of the averments made therein. The Assessing Officer submitted a remand report dated 30 th April, 2009. In this report he stated that despite repeated opportunities the deponents of the affidavits were not produced before him for examination. It may be noted at this juncture that the assessee filed affidavits not only from Mukesh Gupta and Rajesh Jassal but also from several other persons who were in charge of some of the companies which had subscribed to the shares of the assessee company. Their names are Raj Kumar, Pramod Kumar, Harish Kumar etc. In the remand report, the Assessing Officer stated that as per the directions of the CIT(Appeals), summons were issued to all the deponents of the affidavits on 24th April, 2009 but they remained uncomplied with and none of the persons attended before him. When the remand report was given to the assessee for rejoinder, it is rather surprising to note that the assessee had nothing to say as to why the deponents of the affidavits, which were all in its favour, could not present themselves before the Assessing Officer for being examined on the affidavits. On the other hand, the assessee raised a legal plea that if the Assessing Officer is unable to verify the contents and correctness of the affidavits filed on oath, the same shall be treated as accepted by the department.
...... In the present case, there is enough material on record to negate the claim of genuineness of the transactions and in the light of over-whelming material, the plea that the Assessing Officer should not have rejected the affidavits without cross-examination of the deponents has no force. The said exercise has resulted in complete miscarriage of justice...
The Tribunal also erred in law in holding that the Assessing Officer ought to have proved that the monies emanated from the coffers of the assessee-company and came back as share capital. Section 68permits the Assessing Officer to add the credit appearing in the books of account of the assessee if the latter offers no explanation regarding the nature and source of the credit or the explanation offered is not satisfactory. It places no duty upon him to point to the source from which the money was received by the assessee."
6 In the instant case also, the Assessing Officer is in possession of material from S.K. Jain Group cases that discredits and impeaches the particulars furnished by the assessee and also establishes the link between self-confessed entry providers whose business is to help assessees bring into their books of account their unaccounted monies through the medium of share subscription, his onus stands discharged and his action is right. 8 | P a g e
7 Further investigation show that the share subscriptions were collected as part of a pre-meditated plan a smokescreen conceived and executed with the connivance or involvement of the assessee, the involvement of the assessee in such modus operandi is clearly indicated by valid material obtained by the Assessing Officer as a result of investigations carried out into the activities of such dummy share applicants or entry providers. He has made a clear case of sham transaction by paper companies busy only in rotating the capital through entry operators of group concerns.
8 The theory of preponderance of human probability as pronounced by the Hon. Apex Court in the cases of CIT v. Durga Prasad More [1971] 82 ITR 540 and Sumati Dayal v. CIT [1995] 80 Taxman 89/214 ITR 801 (SC), is very relevant. Similar to these cases, in this case also, the source of credit is a mere paper entity solely engaged in the activity of sham transactions and the presumption on the basis of human probability has been made by the assessing officers to fortify the findings.
On the basis of the findings given above, the addition made u/s 68 in the hands of the appellant company is confirmed. There being no substance in this ground, the same is dismissed.”
Suffice to say, there is no material in the case file or any cogent evidence submitted at the assessee’s behest which could rebut both the learned lower authorities’ respective findings making section 68 unexplained cash credits herein. We thus see no reason to accept all its substantive grounds challenging the addition on merits as well qua the legal issue on validity of the reopening, as the case may be. Rejected accordingly. 5. This assessee’s appeal is dismissed. Order pronounced in the open court on 7th April, 2025 9 | P a g e (M. BALAGANESH) (SATBEER SINGH GODARA) ACCOUNTANT MEMBER
JUDICIAL MEMBER
Dated: 7th April, 2025. RK/-