M/S G.J. HOLDING PVT. LTD.,LUDHIANA vs. ACIT, CC-2, LUDHIANA

Both the above appeals were heard together so they are being disposed off by this consolidated order for the sake of brevity and convenience.

Firstly we shall deal with the appeal of the Assessee in for the A.Y. 2008-09.

This is an appeal filed by the Assessee before this Tribunal under section 253 of the Income Tax Act, 1961. The assessee is aggrieved by the order No. 10055/IT/CIT(A)-5/(195)/Ldh//2016-17 dt. 24/02/2023 passed by the Ld. CIT(A) under section 250(6) of the Act, which is hereinafter referred to as the “impugned order”. The relevant assessment year is 2008-09 and corresponding previous year is from 01/04/2007 to 31/03/2008. Factual Matrix 5. The assessee is a company registered under the Companies Act, 1956/ 2013 and its shares are listed.

The assessee company filed return of income for A.Y. 2008-09 on 27/09/2008 declaring income at Rs. 1,98,76,840/-.

The assessee company is engaged in the business of manufacturing of automotives components.

A notice under section 148 was issued to the assessee company on 13/03/2015 for reopening of the case. It was served on 16/03/2015. A notice under section 143(2) was also issued on 28/09/2015 which was served on 30/09/2015, in response to which assessee requested vide letter dt. 18/12/2015 to provide the reasons for reopening under section 148 which were duly supplied.

In response a letter was filed on 15/04/2015, stating that the return of income originally filed on 27/09/2008 may kindly be treated as a return filed in response to the notice under section 148. A copy of the reasons for reopening the case was furnished to the Assessee company (supra).

A search operation under section 132 of the Act was conducted on the group of the assessee company on 03/12/2014.

One of the allegation against the group was that the group is engaged in the layering and placement of unaccounted money in the form of share capital and share premium by using paper entities specifically floated for this purposes.

The reasons recorded are as under for purpose of reopening the assessment: i) A search operation u/s 132 of I.T. Act, 1961 was conducted on G.S Group including its promoters/ directors on 03.12.2014. One of the allegation against the group was that - this group is engaged in layering and placement of unaccounted money in the form of share capital and share premium by using paper entities specifically floated for this purpose. The group company i.e. M/s G.S Auto International Ltd was found to be receiving investments from paper companies having doubtful creditworthiness and genuineness, thereby giving indication that these investments are nothing but its unaccounted incomes which are then placed, layered and re-introduced in the group companies as share capital and share application money. ii) The details of investments received by M/s G.S Auto International Ltd (as per MCA data, ITD data and post search submissions) in F.Y.2007- 08 are as under: (Figures in Lacs) S.N Names F.Y. 2007-08 o. 1. G.J Holdings Pvt. Ltd. A-22 Tagore Market, Kirti Nagar 69.38 New Delhi 2. M.R. Italian Chains Ltd., 3160 34 FF Saraswati Marg, 23.50 Beadon Pura, Karol Bagh Delhi (Formerly Goldline Enterprise Ltd.) 3. Sharda Ispat Rollers Pvt. Ltd., 1304 Padma Tower-1, 20.40 Rajendra Place New Delhi-110008 4. Disha Commercial Pvt. Ltd. 1304 Padma Tower-1, 19.90 Rajendra Place New Delhi-110008 5. Securocorp Securities (I) Pvt. Ltd, Shop no. 37 Shankar 6.00 Market, Connaught Circus New Delhi-110001 6. Rajpal Singh 0.75 7. Gurcharan Singh 0.75 8. Satish Monga 7.00 Total 147.68 iii) During the later years also, the company M/s G.S Auto International Ltd has received approximately Rs.14 Crores from the same or similar companies and other individuals, as share capital and share application money. During the pre- search enquiries (both through ITD database as well as discrete enquiries), it was found that the investor companies do not exists at their addresses or the addresses are of a single premise i.e. 1304 Padma Tower-1, Rajendra Place Delhi (office of a Chartered Accountant). The ITD database also showed that the investor companies are filing returns with meager incomes. iv) Furthermore survey u/s 133A was conducted at the registered addresses of some of the investor companies at 1304, Padma Tower-1 Rajendra Place, New Delhi on 03.12.2014. At the above mentioned address Sh. Satish Monga, CA is running a firm M/s Satish Monga & Associates. v) Further summons were issued to directors of various paper companies at various addresses during post search enquiries, to ascertain the creditworthiness, identity of the investor companies and genuineness of the transactions. From the replies received/ not received, it is evident that directors of the layer-III and layer- II companies have tried to evade the verification of identity and creditworthiness of their respective companies as well as genuineness of the transactions with respect to investment in GS Group companies in different financial years. In some cases no reply has been received, while in some cases repeated adjournments were sought and finally no one appeared even after giving last opportunity. None of the investor companies filed any documents proving their creditworthiness and genuineness of the transactions. A total of six different companies having different directors and having different addresses in Delhi, appointed one single authorized representative i.e. Sh. Shanti Bhushan Aggarwal, FCA located at Ludhiana. These facts strongly indicate a common control point of all these related paper concerns designed for giving accommodation entries. Proceedings before AO

That from the examination of Balance Sheet of the assessee company for A.Y.2008-09 it is noted that the assessee company has received share application money amounting to Rs.8,50,500/- and warrant allotment money amounting to Rs.1,39,18,800/-. Accordingly, the AR of assessee company was asked to justify the receipt of share application and warrant allotment money and show cause as to why the same may not be added as assessee company's own unaccounted money u/s 68 of Income Tax Act, 1961. Further, the AR was also required to submit the relevant bank statements of investor company from whom money has been received in the form of share application & warrant allotment money, their ITR's, PAN and jurisdiction where these are assessed to justify the credit worthiness and genuineness of these investors/ companies. The AR was also required to submit complete set of balance sheets of lenders showing the amount of corresponding investment in their balance sheets alongwith the supporting schedule/ annexure of investments to justify the investments made by them order sheet entry dated 08.03.2016.

That at the first instance the AR of assessee company raised objections to the issuance of notice u/s 148 of the I.T Act which were disposed off through speaking order dtd.26.02.2016. Regarding objections raised, it is hereby stated that all conditions which are required to be satisfied for invoking the provisions of section 147 of the Act have been satisfied before issuing notice u/s 148 and therefore, notice issued u/s 148 is strictly in accordance with the provisions of law.

That further in response to the queries raised, the AR of the assessee company filed certain submissions vide letter dt. 18/03/2016 the relevant extracts of which are as under:

"During the year under assessment, an amount of Rs. 1,39,18,880/- was received from all the investors to whom the above said warrants were issued and allotted, Rs. 26,50,000/- was received in financial year 2008-2009 and the balance amount of Rs.2,94,31,200/- was received in next the financial year ended 31st March, 2010 i.e Assessment year 2010-2011. After the sub-division of the face value of the equity shares of the company from Rs. 10/- per equity shares to Rs.5/- per equity shares on dated 20th August, 2008 and after the receipt of all the amount from all the warrants holders, all the above said 2300000 (twenty three lacs) convertible warrants were converted into 4600000 (forty six lacs) equity shares of the face value of Rs.5/- each at a premium of Rs.5/- per equity shares on dated 01 July, 2009. A copy of the listing approval for the above said 4600000 (forty six lacs) equity shares from the Bombay Stock Exchange Limited and all the copies of resolutions are also attached herewith. The above said equity shares were allotted in physical as well as in demat form. A copy of the share certificate issued to the respective shareholders are enclosed herewith. A copy of the Central Depository Services (India) Limited (CDSL) & National Securities Depository Limited (NSDL) confirming the allotment of equity shares in demat forms are also enclosed herewith. A copy of Form-02 filed with the ROC, with respect to the allotment of above said equity shares is also enclosed herewith. Further regarding the identity, creditworthiness and genuineness of the transactions, it is submitted that the identity of the companies from whom such share capital/warrant allotment money was received, all the relevant documents which includes PAN, confirmations and Memorandum and Articles of Association along with Certificate of Incorporation of all the companies have already been submitted. As far as the genuineness of the transactions is concerned, it is submitted that all the amounts, which were received on account of share capital / warrant allotment money /share premium, were received through normal banking channel and through account payee cheques/RTGS. No part of the share capital/warrant allotment money /share premium was received otherwise than cheques/RTGS. For these purposes, bank statements of the companies from whom share capital /warrant allotment money /share premium received have also been submitted. As regards credit worthiness of the parties, it is submitted that balance sheets along with ITR of the companies from whom such warrant allotment money /share/ capital/premium received have also been submitted. It is further submitted that it is not disputed that the Income Tax Authorities are required to satisfy themselves about the identity of the persons, genuineness of the transactions and the credit worthiness. In the instant case the said onus enjoined upon the Assessee Company stands not just adequately but completely and comprehensively discharged in as much as the identity of the investors stands proved by the fact that all the investors are limited companies incorporated by due process of law as laid out in the Companies Act, 1956 and whose existence is verified from the records of the concerned