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Income Tax Appellate Tribunal, DELHI BENCH : SMC : NEW DELHI
Before: SHRI R.S. SYAL, VICE-
per share against the face value of Rs.10/- from the following five companies:- i) Euro-Asia Mercantile Pvt. Ltd. ii) Mega Top Promoters Pvt. Ltd., iii) Shalini Holding Ltd., iv) Apporva Leasing Finance Investment Pvt. Ltd. v) Ad-fin Capital Services India Pvt. Ltd.
Shri Surender Kumar Jain group (entry operator), who was subjected to search/survey admitted to have issued accommodation entries to various beneficiaries including the assessee. The assessee, on the other hand, claimed genuineness of the transactions on the basis of documents including the identity of the companies, their permanent account numbers and dates of incorporations etc.
Section 68 provides that where any sum is found credited in the books of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to tax as income of the assessee of that year. It is a settled legal position that the burden u/s 68 can be discharged by not only proving the identity and capacity of the creditor but also the genuineness of the transaction. All the three ingredients, namely, identity, capacity and genuineness must be cumulatively satisfied so as to bring a case out of the ambit of section 68. The filing of documents evidencing the existence of creditor and receipt of money through banking channel, etc., no doubt, prove the identity of the creditor, but, furnishing of such details does not conclusively prove that all the ingredients of section 68 have been established. One of the most important features is to prove the genuineness of transaction. If the genuineness of a transaction is not proved, notwithstanding the fact that the assessee proved the identity and capacity of the creditor, the attractibility of section 68 cannot be overruled.
The Hon’ble Delhi High Court in CIT vs. Youth Construction Pvt. Ltd. (2013) 357 ITR 197 (Del) has held that the sole fact that share applicants had established their identity by filing confirmation letters and copies of their income-tax returns is not sufficient for the purpose of discharging credit worthiness of share applicants and genuineness of transactions. Similar view has been taken by the Hon'ble jurisdictional High Court in CIT vs. Ultra Modern Exports Pvt. Ltd. (2013) 40 taxmann.com 458 (Del). In this case also, the Assessing Officer noticed that the assessee received share application money from nine applicants.
Upon enquiry, five out of nine notices issued to share applicants u/s 133 (6) were returned unserved. Further material indicated that applicants had very meager income. The Assessing Officer invoked section 68 and made addition. The Tribunal, relying on documentary evidence such as PAN, particulars of addresses, accounts and bank statements of share applicants, etc., came to hold that credit worthiness of share applicants was proved and resultantly, the addition was deleted. Setting aside the Tribunal order, the Hon'ble High Court held that the Tribunal fell into error in holding that the Assessing Officer could not have added back the amount u/s 68 of the Act. Similar view has been taken by the Hon'ble Delhi High Court in Onassis Axles (P) Ltd. vs. (2014) 44 taxmann.com 408 (Del). In CIT vs. N R Portfolio Pvt. Ltd. (2013) 263 CTR 456 (Del), the assessee received share application money for which addition was made u/s 68. The addition was deleted on the ground of documentary evidence.
Setting aside the Tribunal order, the Hon'ble High Court restored the addition. A detailed discussion has been made in this judgment laying down the duty of the assessee in establishing the genuineness of transaction. It has been specifically laid down that mere furnishing the name, address, PAN and entries in the Registrar of Companies, etc., do not lead to the discharge of onus u/s 68. The Hon'ble Delhi High court in CIT vs. Jansampark Advertising and Marketing Pvt. Ltd. (2015) 375 ITR 373 (Del) did not agree with the routing of transaction through banking channel as necessarily proving the credit worthiness of the parties or the genuineness of the transactions. This judgment clearly proves that the very fact that the transactions are routed through banking channel would not per se lend genuineness to the transaction. It has been further laid down in this case that if the Assessing Officer has not conducted proper enquiry, the addition cannot be deleted simply on the ground that the Assessing Officer failed to conduct enquiry. In such circumstances, a duty has been cast upon the appellate authorities to consider the evidence as to whether the addition was rightly called for or not. The Hon'ble jurisdictional High Court in a recent decision in Paramount Intercontinental Pvt. Ltd. vs. ITO (2017) 392 ITR 505 (Del) dealt with almost similar facts in which all details such as prices, confirmation letters, PAN and bank details, etc. were produced, but, the addition made on the basis of information received from the Investigation Wing of the Department that the assessee was a beneficiary of accommodation entries received from certain entry operators was upheld.
Coming back to the facts of the instant case, I find that the ld. CIT(A) has rightly appreciated the factual matrix of all the five companies in the following terms. i) Euro-Asia Mercantile Pvt. Ltd.
As per the copy of the Income Tax return filed, the total income has been shown at Rs. 33,869/- for A.Y. 2008-09. Though, the documents relating to the identity of the company has been established there is only income of Rs.3,28,250/- on account of profit on sale of investment. On the other hand, assets have been shown at Rs.481,120,675/-. The nature of business activity of the company appears to be vague and accounts of the party gives the impression of it, being a shell company.
On going through the Income Tax Return for A.Y. 2008-09, the total income has been shown at Rs.18,015/-. In this case also, the only income shown in the profit and loss account is interest on loan and profit on sale of investment. The assets shown in the Balance Sheet as on 31.03.2008 amount to Rs. 164,107,423/-. In this case also the nature of business activity appears to be vague and the financial documents indicate this company also is not having genuine business activity.
On going through the Income Tax Return for A.Y. 2008-09, the income has been declared at Rs. 1,21,716/-. The only source of income are interest income and profit on sale of investment. The value of assets as on 31.03.2008 is Rs. 1,248,730,000/-. Clearly the value of the assets is hugely disproportionate to the return income of the company, which clearly indicates that the company is only functioning for purposes of provided
On going through the Income Tax Return for A.Y. 2008-09, the total income has been returned at NIL. As per the profit and loss account, the income shown is from "Income from operation" amounting to Rs. 1,32,150/-. The loss for the year has been shown at Rs. 2,23,666/-. The value in the Balance Sheet has been shown at Rs.148,625,000/-. These financial statistics clearly indicate that the Balance Sheet and investments of the company were created not for doing any genuine business but only for acting as shell companies and providing entries. v) Ad-fin Capital Services India Pvt. Ltd.
With regard to Ad-fin Capital India Pvt. Ltd, in complete details regarding ITR, Balance Sheet and profit and loss account was provided by the AR of the appellant which clearly did not establish the creditworthiness and genuineness of the transactions.
It can be seen that the above five companies are claiming to have invested a sum of Rs.5 lac each in the assessee company, but, the facts about their total income vis-à-vis the value of assets, do not prove the genuineness of transaction. It is further relevant to note that the assessee is claiming to have issued its share with face value of Rs.10/- at a premium of Rs.90/-. It is beyond my comprehension as to why a person will purchase the shares of the assessee company at such a huge premium, more so, when there is no payment of any dividend, etc. No prudent investor will park his funds at such a high premium without the expected return commensurate with the investment. When all the facts and circumstances are seen in entirety, it becomes evident that the assertion of Shri Surender Kumar Jain group (entry operator) about providing accommodation entries to the assessee was correct as the assessee could not prove the genuineness of transactions.
In view of the foregoing reasons, I am satisfied that the ld. CIT(A) was justified in sustaining the addition.
In the result, the appeal is dismissed.