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Facts
The assessee filed an appeal against the order of the CIT(A) for assessment year 2012-13. The appeal was filed with a delay of 4 days due to technical glitches, which was condoned by the bench. The assessee had taken accommodation entries as share application money and share premium from three companies.
Held
The Assessing Officer (AO) confirmed the addition of Rs. 25 lakhs made by the Assessing Officer, holding that the assessee failed to discharge the primary onus of proving the identity, creditworthiness, and genuineness of the transactions with the investor companies, which were found to be non-existent and controlled by a single individual.
Key Issues
Whether the assessee discharged the onus of proving the genuineness of the transactions for share application money and share premium received from the investor companies.
Sections Cited
68
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC’’ JAIPUR
Before: Hon’ble SHRI SANDEEP GOSAINvk;dj vihy la-@ITA No. 582/JP/2023
ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 14-07-2023, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2012-13 raising the ground of appeal in Form No. 36.
2 DANISH REALMART PVT LTD. VS ITO, WARD 7(2), JAIPUR 2.1 None appeared on behalf of the assessee when the case was called out for hearing. Hence, in this situation, the Bench decided to dispose off the appeal of the assessee based on the material available on record. 2.2 At the outset of the hearing of the appeal, the Bench noticed that there is delay of 04 days in filing the appeal of the assessee for which Assessee-Director has filed an application dated 13-10-2023 for condonation of delay alongwith affidavit to condone the delay. The narration as made by the asssessee in his application is as under:- ‘’That the appeal order of ld. CIT(A), Jaipur -2 has been received on 14-07-2023 and while filing the appeal online on 13-09-2023 due to some technical glitch it could not be filed online. Ultimately it got filed on 16-09-2023. It is very humbly submitted that due to technical glitch it could not be filed on due date otherwise appeal would have been filed before the prescribed time limit.’’ 2.3 On the other hand, the ld. DR objected to such delay made by the assessee in filing the appeal. 2.4 The Bench has heard the ld. DR and perused the condonation application of the assessee wherein it is felt that there is a merit in the submission of the assessee and thus in view of the condonation application of the assessee, the delay in filing the appeal by the assessee is condoned.
3 DANISH REALMART PVT LTD. VS ITO, WARD 7(2), JAIPUR 3.1 Further, the Bench noticed that the solitary issue of the assessee is regarding confirming the addition of Rs.25.00 lacs by the ld.CIT(A) wherein the ld. CIT(A) has dismissed the appeal of the assessee by observing as under:- ‘’6. Decision 6.1 I have gone through the assessment orde3r and submissions made by the appellant. The basic contention of the assessing officer in this case is that the AO received information from the office of Director General of Income Tax, Japur vide letter dated 3-07-2014 in which it was informed that the appellant had taken accommodation entries as share application money and share premium from the following three companies which were managed and controlled by Shri Praveen Kumar Jain group from Mumbai.
M/s Gupteshwar Finance and investment Private Limited Rs.5,00,000 2. M/s printage offset Private Limited Rs. 10,00,000 3. Arro Exim Private Limited Rs. 10,00,000 6.2 The amount received from these three companies was totalling to Rs.25 lakhs by the appellant. All these three companies were managed and controlled by Shri Praveen Kumar Jain, through his relatives, agents, accountants, etc. Mr Praveen Kumar Jain was subjected to search under Section 132 of the Act. During the course of search, it was found that Mr Praveen Kumar Jain was not doing any actual business but was engaged in providing accommodation entries to the businessmen including the appellant. The companies controlled and managed by Mr Praveen Kumar Jain were only on paper, and had no place of business and did not have any fixed assets to carry on the business. The activity carried on by these companies was to give the loans to various companies by receiving cash and commission in return. This was confessed by Mr Praveen Kumar Jain during the course of search before the Investigation Wing, Mumbai 6.3 The appellant in its submission merely stated that the parties are genuine and that are identifiable having PAN and address. And the 4 DANISH REALMART PVT LTD. VS ITO, WARD 7(2), JAIPUR share application money was received through banking channels. However, the appellant has not been able to give any other information beyond these facts 6.4 During investigation, it was found that none of the investor companies which had invested amounts ranging between Rs. 5 Lacs and Rs. 10 Lacs as share capital in the appellant Company during the impugned A.Y. could justify making investment at such a high premium of Rs. 90 for each share, when the face value of the shares was only Rs.
All of the investor companies were found to be non- existent. Almost none of the companies produced the bank statements to establish the source of funds for making such investment in the shares, even though they were declaring a very meager income in their returns. None of the investor-companies appeared before the A . underline O.. The AO held that the Assessee had failed to discharge the onus by cogent evidence either of the credit worthiness of the so- called investor-companies, or genuineness of the transactions. Ruling by Hon'ble Supreme Court on the issue in the case PCIT v/s NRA Iron & Steel d.( SLP (Civil) No.29855 of 2018- Date of Judgement/Order 05/03/2019) held that whether the respondent assessee had discharged the primary onus to establish the genuineness of the transaction required under sec68 of the said Act. After making reference to number of judicial precedents the apex court placed some principles where sums of money are credited as share capital/premium which are as follows: The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and credit- worthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. The Assessing Officer is duty bound to investigate the credit-worthiness of the creditor/subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name-lenders. If the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the transaction would not be established. In such a case, the assessee would not have discharged the primary onus contemplated by Sec 68 of the Act. The practice of conversion of un-accounted money through the cloak of Share Capital/Premium must be subjected to careful scrutiny. This would be particularly so in the case of private 5 DANISH REALMART PVT LTD. VS ITO, WARD 7(2), JAIPUR placement of shares, where a higher onus is required to be placed on the assessee since the information is within the personal knowledge of the assessee. The Assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the assessee. Thus, the Hon'ble Supreme Court finally concluded that the company by filing all primary evidence, it could not be said that onus on assessee to establish credit worthiness of investor companies stood discharged u/s 68 of the Income Tax Act, 1961. 6.5 In view of the above Supreme Court decision in the case of PCIT vis NRA Iron and Steel Company Private Limited, I am of the opinion that the appellant has not discharged the onus of proving the credit worthiness of the companies which had invested in share application money and share premium with the appellant company. All the three companies were managed and controlled by Mr. Praveen Kumer-Jein who has been proved to be an entry provider as per the report of DGIT investigation Mumbai. In view of all these facts, it is proved beyond doubt that the appellant took the help of Mr Praveen Kumar Jain to get investment in his company by paying cash and commission. Therefore, the addition made by the AO of Rs.25 lakhs under section 68 of the act is sustained. Ground number 1 to 3 are dismissed. 6.6 Ground No.4 relates to charging of interest u/s 234A and 2348 of the Act. Since charging of interest u/s 234A, 2348 & 234C is consequential in nature, and hence no adjudication is required in the present appeal. 6.7 Ground No.5 is general in nature and needs no adjudication, 7. In the result, the appeal is treated to have been dismissed for statistical purpose.’’ 3.2 At the time of hearing of the appeal, the Bench noted that the assessee has filed the paper book containing pages 1 to 177 and basically the assessee has filed the written submission produced before the ld CIT(A) containing pages 1 and 2 6 DANISH REALMART PVT LTD. VS ITO, WARD 7(2), JAIPUR meaning thereby the assessee wished to reiterate the same written submissions as made before the ld. CIT(A) and nothing more. 3.3 On the other hand, the ld. DR supported the order of the ld. CIT(A) and filed following case laws vide her letter dated 12-12-2023 countering the written submissions of the assessee. (i) Pr. CIT vs Swati Bajaj, 446 ITR 56 (Cal.) (ii) Suman Poddar vs ITO (2029) 112 Taxman. Com 330 (SC) (iii) Jawari Lal Lunia vs Union of India (2022) 138 Taxmann.com 406 (Raj) (iv) ITO vs Smt. Shakuntala Agarwal (ITA No. 213/JPR/2023 dated 23- 08-2023 – ITAT Jaipur Bench) (v) Hemil Subhashbhai Shah vs DCITm Ward 5(3)(1), Ahemdabad (ITA No. 1121/Ahd/2028 & 961/Ahd/2019 dated 12-06-2023 (vi) Rahul Gupta vs ACIT (2023) 151 Taxmann.com 367 (Raipur Trib) (vii) Nishant Vilaskumar Parekh vs ITO, Ward 1(3), [2021] 129 taxmann.com 119 (Guj)
3.4 The Bench heard the ld. DR and also perused the documents advanced by the assessee. The Bench noticed after considering the submissions of the respective parties and noticed that the assessee has reiterated the same submissions as made before the ld. CIT(A) and nothing substantiated to controvert the findings of the ld. CIT(A). Hence, in such a situation, the Bench has no other alternative except to concur with the findings of the ld CIT(A). Hence, the appeal of the assessee is dismissed.