M/S. UGS FINANCE PVT. LTD.,NEW DELHI vs. DCIT, NEW DELHI

Assessment Year: 2004-05 UGS Finance Pvt. Ltd., Vs DCIT, 401, 4th Floor, 3198/15, Central Circle-9, Arihant Plaza, New Delhi. Gali No.1, Sangtrashan, Paharganj, New Delhi – 110 055. PAN: AAACU1658B (Appellant) (Respondent) Assessee by : None Revenue by : Ms Harpreet Kaur Hansra, Sr. DR Date of Hearing : 02.04.2025 Date of Pronouncement : 09.04.2025 ORDER

PER ANNAPURNA GUPTA, AM:

by the assessee read as under:- “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 penalty order dated on 01.03.2013 passed by Ld. Assessing Officer is valid in law.

2. 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 penalty amounting to Rs.95,10,463/- U/s 271(1)(c) 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 alleging that the appellant concealed its income and filed inaccurate particulars of Income.

4. As is evident from the grounds above, the solitary issue involved in the present appeal is levy of penalty u/s 271(1)(c) of the Act for concealment of income/ furnishing of inaccurate particulars of such income. The orders of the authorities below reveal that the penalty was levied on account of addition made to the income of the assessee in quantum proceedings of share capital and premium received by the assessee during the year amounting in all to Rs.2,65,10,000/-. The quantum of penalty levied on the same amounts to Rs.95,10,463/-. The ld. CIT(A)’s order reveals that the addition made by the AO in quantum proceedings was confirmed by the ld.CIT(A) after conducting a detailed inquiry on the facts relating to the share capital received by the assessee. During the year, the impugned share capital of Rs.2.65 crore was received from seven different companies. The CIT(A) notes that the case of the assessee was reopened u/s 148 of the Act on the basis of the information received from the CEIB that the assessee was recipient of bogus share capital from seven different companies. The shares were issued at a premium of Rs.90/- with a face value of Rs.10/-. During the assessment proceedings, the assessee could not discharge the onus to prove the identity, credit worthiness and the genuineness of the said transactions and the AO accordingly treated the entire amount of share capital as unexplained cash credit u/s 68 of the Act on account of bogus share capital and added the same to the income of the assessee. In the first appellate proceedings the ld.CIT(A) noted that the assessee had failed to produce Bank statements of the applicants, Books of accounts maintained by it and also the parties and its own director before the AO .Before the ld.CIT(A) copy of Bank statement of the share applicants was submitted who sought a report from the AO twice: once to seek information about the bank accounts of the share applicants who had given money to the assessee company and noting from the report of the AO that in all the bank accounts of the seven share applicants money had come from one single bank account, the CIT(A) had sought further inquiry on this single bank account which had given money to all the seven share applicants. Further inquiry by the AO reported in his second report revealed that in this bank account there was cash deposit which was routed to the seven share applicants who immediately on the next day had transferred the money as share application money to the assessee company. The bank accounts of the share applicants was noted to have nominal amount with there being a credit entry the same day or a day before cheque was issued to the assessee company.. Noting all these facts, the 4 ld.CIT(A) confirmed the addition of bogus share capital made in the hands of the assessee of Rs.2.65 crores.

5. Noting the outcome of the quantum proceedings, the ld.CIT(A) , in penalty appellate proceedings gave several opportunities to the assessee to file its response as to why the penalty levied by the AO be not confirmed, in response to which, no material submission was noted to be filed by the assessee except for the fact that all possible evidence to substantiate the claim of share capital and premium had been submitted by the assessee. The ld.CIT(A) noting the findings of the first appellate authority in quantum proceedings to the effect that:  the assessee company had failed to discharge the onus to prove the genuineness of the share capital contributed by seven companies  as also the fact that the assessee deliberately evaded the compliance by not even producing its own directors and not producing books of accounts, bills, vouchers, etc. and even the present addresses of the directors of the assessee company and their income-tax returns and  based on the information revealed in the two reports sought from the AO during the appellate proceedings revealing that money was routed from one source to all the seven share applicants who had in turn transferred the money to the assessee, with cash being found deposited in the bank account of the original source, the ld.CIT(A) held that the assessee had failed to answer the charge of concealment of income by the above modus operandi brought out in the order of the ld.CIT(A) and, accordingly, confirmed the penalty levied on the assessee. His findings in this regard are reproduced as at para 8.16 to 8.22 of his order and para 8.25 of his order as under:- “8.16 The Appellant has claimed that the Penalty Proceedings have not been validly initiated. However, perusal of the entire facts of the case show that the penalty has been validly initiated. It has also been claimed that the Assessee had furnished all the possible evidences to substantiate its claim for receipt of Share Capital and Share Premium, which were not accepted by the Learned Assessing Officer and that mere disallowance of a claim or changing the head does not attract Penalty. However, perusal of the facts show that such claims are baseless and the Assessee could not substantiate its claim for receipt of Share Capital and Share Premium and that the instant case is a case where deliberate concealment of income was made. 8.17 In the present case, the Assessee Company not only failed to discharge the onus to prove that the claimed Share Capital (including Share Premium) amounting to Rs. 2,65,10,000/- was contributed by the 7 claimed Companies, but it is also noticed that the Assessee deliberately evaded compliance by not even producing its own Directors and not producing its own Books of Account, Bills & Vouchers etc. The extent of non compliance by the Assessee Company is seen from the fact that even the present addresses of the Directors of the Assessee Company and their Income Tax Returns were not filed despite specific request of the Assessing Officer. 8.18 The enquiries made during the Appellate Proceedings in the Quantum case (Appeal No. 196/09-10, before Ld. CIT(Appeals)-XXI, New Delhi), particularly the two Remand Reports submitted by the Assessing Officer during the Quantum Appellate Proceedings have further fortified the additions of Rs. 2,65,10,000/- made and bringing on record, additional evidences against the Appellant, have firmly established the deliberate concealment of income by the Appellant. 8.19 The Learned CIT(Appeals)-XXI called for Remand Report from Assessing Officer who submitted the same vide her letter dated 17.01.11 (the First Remand Report). The Ld. CIT(Appeals), in Para 5.1 of his Order dated 28.04.11 has reproduced the relevant Paras of the Remand Report submitted by the Ld. Assessing Officer, which have been reproduced above in Para 8.4 of this Order. A portion of the First Remand Report from the Assessing Officer which demonstrates the concealment of income is as under: "While examining the bank statements of the respective shareholders as well as assessee company bank account it is observed that in most of the time amount deposited in the shareholders accounts was transfer from one account number i.e. 861796 and subsequently transferred to the account of the assessee's company. It is also observed from the assessee's bank account that there is debit as well credit entries were made from the same account number i.e. 861796. Thus, the finding given by the CEIB that these companies are engaged in bringing in bogus share capital and exist on paper only. The black money is routed through these companies. It is pertinent to mention here that there is nominal amount lies in the account of shareholders. There is credit entry on the same day or one day prior in the account of shareholder of the same amount before issuing the cheque to the assessee company. As discussed in the foregoing para's and as observed by the CEIB, I have concluded that these companies are in existence only on papers and engaged in providing the accommodation entries to different companies." 8.20 The Learned CIT (Appeals)-XXI, in the Appellate proceeding in the Quantum Case, required the Assessing Officer to conduct enquiry u/s 250(4) of the Income Tax, 1961 with regard to the Ownership of Account No. 861796 and the source of money in this Bank Account. The Learned Assessing Officer submitted her reply in detail vide Remand Report dated 28.03.11 (the Second Remand Report), which is reproduced in Para 6 of the Appellate Order dated 28.04.11, and relevant extracts from which are reproduced above in Para 8.6 of this Order. A portion of the Second Remand Report (submitted during Quantum Appellate Proceedings) from the Assessing Officer, which demonstrates the concealment of income is as under: "On perusal of the bank account opening form it is observed that the director of M/s. S. G. Fincap Private Ltd has declared that the account no. 861796 as the Primary Account referred in the terms and condition and the owner of the account us the group Owner. As per declaration made by the Director of shareholders companies at the time of opening the bank account in the bank, they have declared that one more account be opened-with ABN Amro Bank New Delhi for accounting purpose of their international transactions But as per bank statement there is no international transactions were made. As per the declaration the group companies contains the following names:- i) M/s Lovely Securities Pvt. Ltd. ii) M/s. Avail Financial Services Pvt. Ltd. iii) M/s. VPC Financial Services Pvt ltd iv) M/s. Lehra Investment Pvt Ltd v) M/s. Mehul Investment Pvt Ltd. vi) M/s. Smartest Corporate Services Pvt. Ltd etc. On perusal of the statement of account of M s Group Companies i.e. M/s. S.G Fincap Private Ltd. I have observed that the amount initially transferred to the company who has subsequently remitted the money for allotment of shares of my assessee company. This fact has already been explained to your good-self in my earlier remand report dated 7th January, 2011 Now in support of my submission I am submitting the photocopy of account opening form and also forwarding the few sheets as annexure 'A' to 'D' drawn from the group company bank account showing that the amount transferred to the shore holders bank account and subsequently transferred to the assessee s bank account for allotment of shares. Thus the finding given by the CEIB that these companies are engaged in bringing in bogus share capital and exist on papers only. The black money routed through these companies. It is pertinent to mention here that shareholders companies' accounts were opening for the short period, This facts can also verified with the annexure attached to this report as mentioned above. As discussed in the foregoing para's and as observed by the CEIB I have concluded that these companies are in existence only on papers and engaged in providing the accommodation entries to different companies." 8.21 Another portion of the Second Remand Report (submitted during Quantum Appellate Proceedings) from the Assessing Officer, which demonstrates the concealment of income is as under: "In response to the further information called under section 133(6) of the IT Act, 1961 the Manager ABN Amro Bank had provided the copy of bank account no. 521679 (861796) in the name of M/s. S. G. Fincap (P) Ltd along with copy of bank account opening form in the shape of hard copy as well as in CD form. On perusal of the bank account it is observed that a sum of Rs.31,14,74,510/- was deposited in the shape of cash as well as cheques/DD's in this company's account as per annexure 'A'. Out of that a sum of Rs. 36,54,398/- was deposited on different dates in the shape of cash as per annexure 'B' and subsequently transferred to the bank account No. 737096 (879024) maintained in the name of M/s Smartest Corporate Services (P) Ltd as per annexure С ассount no, 758804 (867660) maintained in the name of M/s. Sarang Securities Ltd. as per annexure D, account no. 748947 (884321) maintained in the name of M/s Lovely Scan dies (P) Ltd as per annexure 'E' account no. 754289 (876607) maintained in the name of M/s. Mehul Finvest (P) Ltd as per annexure 'F' account no. 758797 (884461) maintained in the name of M/s. Avail Financial Services (P) Ltd as per annexure 'G', account no. 607637 (916239) maintained in the name of M/s World Link Telecom (P) Ltd as per annexure 'H'. All the above companies were maintaining double accounts. Cash were deposited in the parallel account and subsequently transferred to another account by way of cheque to show that there is no cash transaction in the account and from that account made the requisite investment. From the above it is clear that the money were routed from one account another account of the group companies. It is pertinent to mention here that the amounts were deposited in the bank account of shareholders account on the same day or one day prior to the date of issue of the cheque to the assessee company for allotment of shares. This facts can also verified with the annexure attached to this report as mentioned above," 8.22 The Appellant in its Written Submissions dated 25.01.16 has failed to answer the charge of deliberate concealment of income by the above modus operandi brought out in the order dated 28.04.11 in Appeal No. 196/09-10, of Sh.V.K. Tiwari, the Learned Commissioner of Income Tax (Appeals)- XXI, New Delhi on the basis of the two Remand Reports submitted by the Learned Assessing Officer in the Quantum Appellate Proceedings. The order of the Learned CIT (Appeals)-XXI has exposed the claims of the Appellant Company as false. ………………… 8.25 Thus looking into the entire facts and circumstances and also the relevant judicial decisions, it is clear that Penalty is imposable upon the Appellant. Though die Appellant has claimed that Confirmations have been given by all the claimed Share Investors, but enquiries (particularly during the Remand Proceedings before the Learned Assessing Officer in the Quantum Appellate Proceedings) have revealed the false and bogus claims regarding receipt of Share Investment. The enquiries have shown that the claimed Share Investors were in existence only on paper and that unaccounted cash had been routed through a particular Dank Account to facilitate accommodation entries to the Appellant and the claim of receipt of actual Share Investment was false. It is my considered opinion that the Appellant has concealed the particulars of its income in respect of the undisclosed income of Rs. 2,65,10,000/- which was introduced in the Books of Accounts in the garb of Share Capital and Share Premium and hence Penalty u/s 271 (1) ( c) is imposable. Accordingly, the Penalty imposed upon the Assessee Company for AY 04 05 by the Learned Assessing Officer vide order u/s 271 (1) (c ) dated 01.03.13 (a) 100% of the tax sought to be evaded, amounting to Rs. 95.10,463/- is hereby confirmed.”

6. Before us, the only additional facts brought to our notice was that the ITAT had confirmed the addition in quantum proceedings vide its order in dated 24.05.2023. Copy of the order was noted to be on record.