Hariyana Steel Centre (KDM) Private Limited, Secunderabad V. Dy. Commissioner of Income Tax, Circle-2(2), Hyderabad

ITA 1151/Hyd/2017

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 4644 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-A
• Assessment Year: 2011-2012
• Appeal Filed On: 05-07-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T. SUNIL GOUTAM
• Keywords: Accommodation entries; TDS
• Section: 68; 271(1)(c); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘A’ Bench, Hyderabad Before Shri Rama Kanta Panda, Accountant Member AND Shri Laliet Kumar, Judicial Member O R D E R Per Bench These two appeals are filed by the assessee, feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals)-9, Hyderabad, dated 28.03.2017 for the AY 2011-12 & 2012-13 respectively, on the following grounds 1. The learned First Appellate Authority is not justified in confirming the addition of Rs. 2,66,00,000 made u/s. 68 by the AO. 2. The learned First Appellate Authority failed to appreciate that in the facts and circumstances of the case the appellant discharged its duty of filing all evidences and hence the addition u/s. 68 is unwarranted. 3. The learned first Appellate Authority failed to appreciate the fact that the learned Assessing Officer did not accepted the claim of the appellant for Cross examinations. 2. The ld. AR has submitted that the AO had made the addition of Rs. 2.66 crores in the AY 2011-12 on account of the bogus entries taken by the assessee. Our attention was drawn to ITA Nos.1151 & 1152/Hyd/2017 Assessment Years: 2011-12 & 2012-13 Hariyana Steel Centre(KDM) Private Limited 6-4-454/3, Bholakpur Secunderabad-500080 PAN : AACCH0113J V s. DCIT,Circle-2(2) Signature towers Opp. Botanical Garden Kondapur Hyderabad- 500 084 (Appellant) (Respondent) Assessee by: Shri K.A.Sai Prasad, CA Revenue by : Shri T.Sunil Goutam, Sr.AR Date of hearing: 20.06.2022 Date of pronouncement: 22.06.2022 2 Hariyana Steel Centre (KDM) Pvt.Ltd. paragraph 9 to 13 of the assessment order, whereby the AO had held as under:- 9. The assessee argument is not tenable. The local enquiries conducted at Kolkata and bank statements of companies revealed that investments in M/s. Haryana Steel Centre(KDM) P.Ltd came through the Amrut Suppliers via from the above bogus companies which is as under:- Sr. No . Opening balance of Amrit Suppliers P Ltd.(A/c No. 06010200 0092269) Amrit Supplier s Pvt.Ltd. Hariyana Steel Centre(KD M)pvt.Ltd. 1 M/s. Pushpandant Infra pvt Ltd. A/C.No.90902 0036912742 Rs. 50,00,000/- Rs. 2296/- dt 21.4.10 Rs.50,0 0,000/d t 21/04/ 2020 Rs.50,00, 000/- dt 21/04/20 10 2 Joyprit Plastic Dealers p Ltd A/c No. 13003011 23105 dt 22/04/20 10 Rs.53,00,0 00/- A/c No.13003 01122931 dt 22/04/20 1 Rs. 23,00,000 0 Alishan Estates Pvt Ltd. A/c. No. 13003011231 50 dt 22/04/2010 Rs. 25,00,000 Rs. 2246/-, dt 21.04.201 0 Rs. 25 lakhs dt 22/04/ 2010 Rs. 25 Lakhs dt 22/04/20 10 3 Shyamala Devi A/c. No. 31022810 00000100 dt 10/04/20 10 Rs. 4,75,0000 /- Rs. 20,00,000 Dt. 19/04/20 10 Shri Biharji Trade A/c. No.31021150 00001115 dt23/04/201 0 Rs.25,00,000 /- Rs.2246/- , dt 23.4.10 Rs.25 lakhs Dt 23/04/ 2010 Rs.25 Lakhs Dt 26/04/20 10 4 Joyprit Plastics Dealers pvtLtd. Alishan Estates Pvt.ltd A/c. Venus Dealings PvtLtd. A/c Rs.20034 6, dt28.04.2 010 Rs.25 lakhs dt 28/4/2 010 Rs.25 lakhs dt 28./4/20 10 3 Hariyana Steel Centre (KDM) Pvt.Ltd. A/c.No.1300 301123105, dt 22/04/2010 Rs. 53 lakhs M/s. CRM Systems Pvt Ltd. A/c. No.1300301 122931 dt 22/04/2010 Rs..23 Lakhs No.13003 01123150 dt 22/4/201 0 Rs. 25 lakhs No.06010200 0084491 dt 28/04/2010 Rs. 23 Lakhs 5 Rishab Electro electrical A/c.No.06010 2000011282 dt 28/04/2010 Rs. 25 Lakhs Rs. 1.50 Lakhs (Cheque cleared from the accounts cheque No.123763- Rs.25 Lakhs Cheque No.123764- Rs.25 Lakhs Rs.346, dt28.4.20 10 Rs.25 lakhs dt28/4/ 2010 Rs.25 Lakhs dt 29/04/20 10 6 Jayaprit Plastic Dealers P Ltd. 1300301123 105 dt 22/04/2010 Rs. 53,00,000/- A/c. No.1300301 122931 Rs. 23,00,0000 Alishan Estates pvt Ltd. A/c No.13003 01123150 Rs.25 Lakhs Rishab Electro Metlex Goods Metlex Goods /c.No.060102 000030472 Rs.2350000/- Rs.246/- dt.28.04.2 010 Rs.25 Lakhs dt 29/04/ 2010 Rs.25 Lakhs dt 29/04/20 10 7 Pawanputra Distributors Pvt.Ltd. 06010200006 1861 Rs.828000/- Rs.26 lakhs Dt02/06/201 0 Rs.97755 4/-, dt 2.6.10 Rs.26 lakhs Dt 02/06/ 2010 Rs.26 lakhs Dt 03/06/20 10 8 M/s. pashupathi Marchendise pvt.Ltd.06010 2000092296 Dt24/06/201 0 Rs. 5 lakhs Rs.754 Rs.5 lakhs Dt 28/07/ 2010 Rs. 5 lakhs Dt 28/07/20 10 9 Sanjibani tie up Pvt Ltd. 06010200006 4406 Rs. 25 lakhs dt Rs.5,00,7 54/-dt 28.07.201 0 Rs.25 lakhs Dt 28/07/ 2010 Rs.25 laksh Dt 28/07/20 10 4 Hariyana Steel Centre (KDM) Pvt.Ltd. 28/07/2010 10 Saraiwala +mak Power Transformers p Ltd ACRR Refineries Rs. 25 lakhs Rs.146, dt4.5.10 Rs. 35 lakhs Dt 05/05/ 2010 Rs.35 lakhs Dt06/05/ 2010 10. Further, the enquires revealed MIs. Winners Commercial P Ltd and M/ s. Rishab Electro Electric P Ltd who are the investors in MIs. Amrut Suppliers P Ltd, do not existing in the addresses given as per their PAN numbers. 11. It is seen from the above table, MI s. Amrit Suppliers P Ltd. does not have enough sources to invest in the assessee company. It has very meagre amounts in the bank account before it receiving credits from the other companies. Subsequently, the same was transferred to the assessee company. In the case of Sagittaraious Builders & colonizers (2012-TIOL-19-HC-ALL-IT), the Allahabad High Court held that even if the identity of the investor is established, if there is not source and capacity for investment, addition u/s.68 is-warranted. The same position was confirmed by Ranchi High Court in the case of Mukesh Shaw (246 CTR 0082). In the case of P R Ganapathy (254CTTR 336), the Supreme Court also confirmed this position. 12. Further, from the above table the modus operandi and the involvement of assessee is clearly indicated the activities of such entry providers. The above table shows the amounts flown within one day or two days to the assessee from the entry providers. Further, as discussed above, Mis. Pushpadanth Infrastructure P Ltd, MI s. Alishan Estates P Ltd and MI s Joyprit Plastic Dealers P Ltd are among the dummy companies of Sri. Praveen Kumar Agarwal who is the entry provider, corroborates that the assessee involved and with the help of entry providers brought his money into the business. It is clear from the above, the assessee money which is rooted -through above stated bogus companies. In the case of Nova Promoters and Finlease P ltd (342 ITR 0169) the Delhi High Courty upheld the addition made on account of money received through entry providers. As per sec.68 . .... “Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offered no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the (Assessing) officer, satisfaction, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.” 13. In the light of the above, the amounts received by Hariyana Steel Centre (KDM) P Ltd., in the name of share capital from the My s. Amrit Suppliers P Ltd to the extent of Rs.2.66Cr treated as unexplained income of the assessee company vi] s.68 of the Income Tax Act, 1961. 5 Hariyana Steel Centre (KDM) Pvt.Ltd. 14. Subject to above discussion, the total income is computed as under: Income returned as per return of income Rs. 51,35,572 Add: share application money as discussed above Rs. 2,66,00,000 Assessed income Rs. 3,17,35,572 Rounded off to Rs. 3,17,35,570 Tax thereon Rs. 95,20,671 Add: Surcharge Rs. 7,14,050 Add: Education cess Rs. 3,07,042 Net tax payable Rs.1,05,41,763 Add: Interest u/s.234B Rs. 30,48,840 Gross demand Rs.1,35,90,603 Less: TDS Rs. 20,72,790 Payable Rs.1,15,17,813 Add: Refund issued Rs. 5,27,200 Payable Rs.1,20,45,013 Add: Interest u/s.234D Rs. 52,720 Net demand payable Rs.1,20,97,733 Rounded off to Rs.1,20,97,730 The demand notice and challan enclosed herewith. Penalty proceedings u/s. 271(1)(c) are initiated separately.” 3. Feeling aggrieved, the assessee preferred an appeal before the ld.CIT(A) and the ld.CIT(A) had also confirmed the order passed by the AO by giving the reasoning in paragraph 5 to 5.3.1 to the following effect. “5. I have considered the arguments of the assessee and have gone through the facts of the case. It is not disputed that the directors of the assessee are major share holders of Mis. ASPL and are controlling the activities of ASPL as directors On the basis of field enquiries conducted It is observed that ASPL does not exist at the given address. When these facts were brought to the notice of the assessee, no further efforts were made by assessee to prove the genuineness of Mis. ASPL. Instead the assessee kept on reiterating that M/s.ASPL is independently assessed and hence the sources and activities of ASPL have to be looked into in the hands of that company. Based on the statement given by Sri. Praveen 6 Hariyana Steel Centre (KDM) Pvt.Ltd. Agarwal and Sri. Pramod Ramdin Sharma it became clear that M/s. ASPL and the companies which transferred money to M/s ASPL are bogus companies floated by them for providing accommodation entries. When these facts were brought to the notice of the assessee, it did not contradict the findings with any cogent evidence it is found out that neither ASPL nor the other companies existed at the given addresses. There is no doubt that the assessee discharged its initial onus by providing the PAN, Income-tax details and bank account of ASPL However, based on the enquiries the department successfully demolished this make belief arrangement of the assessee and hence the onus again got shifted to the assessee to prove that the findings of the department are not correct. However, instead of providing further evidence to support its case, the assessee simply relied on the judicial pronouncements which are based on different facts. The assessee therefore, failed to discharge its onus of proving the existence and creditworthiness of Mis. ASPL. The assessee's reliance on the decision of Mis. Lovely Exports Pvt Ltd., is not well placed as in that case the company went in for public placement of shares and hence it would not know the whereabouts/ the creditworthiness of investors. The facts in the present case are entirely different as the assessee's directors are the directors of ASPL also and hence they know the affairs of ASPL very well. Therefore, the assessee is duty bound to prove the creditworthiness of M/s. ASPL and the sources of money which have flown into M/s. ASPL through various suitcase companies. The entire transaction raises strong suspicion when the fund flow as brought out by the Assessing Officer shows that the money has come through various layers only for the purpose of getting invested in the assessee company 5.1 As is well known the Kolkala based companies give accommodation entries of bogus bills / bogus share capital etc., through a maze of not physically existing paper companies. As it is proved by the Assessing Officer that Mis. ASPL and the companies which allegedly invested in ASPL are bogus, assessee is duty bound to prove to the contrary that the said company is genuine by producing cogent evidence that the company actually existed and has the financial muscle to invest an amount of more than Rs. 3 crores. However, the assessee failed to do so and chose to remain silent in response to the queries raised by the Assessing Officer. 5.2 Coming to the various decisions relied upon by the assessee, it is held that none of these decisions could be of any help to the assessee. The Hon'ble Kolkata High Court in a recent decision dated 13.05.2016 in case of Mis. Rajmandir Estates Pvt Ltd., GA No. 509/2016 with ITAT no. 113/2016 elaborately analysed the issue of bogus paper companies and money laundering. After taking into consideration, the decision of Hon'ble Supreme Court in case of Lovely Exports Pvt Ltd., and various other decisions on the issue of share capital introduction, withheld that the same needs to 7 Hariyana Steel Centre (KDM) Pvt.Ltd. be examined in detail especially in the light of the money laundering tactics adopted by various companies. Extensively quoting from the commentary on prevention of Money Laundering Act 2002 by Dr. M.C. Mehanathan the Hon'ble court held that the Income Tax authorities are duty bound to examine the aspect of money laundering in the share application money introduction. In the present case when the Assessing Officer sought to examine the directors of ASPL they did not make themselves available for such examination Further, they did not even contradict the evidence suggesting the bogus nature of the transaction placed before them by the Assessing Officer. In the light of above facts it becomes the bounden duty of the Assessing Officer to examine the sources of the source as was held by the Hon'ble Apex court in case of Sophia Finance Ltd., (205 ITR 98). In that case it was held by the Hon'ble Court that: “the Income-tax Officer may even be justified in trying to ascertain the source of the depositor assuming he is identified in order to determine whether the depositor is mere name lender or not. Be that as it may, it is clear that the Income Tax Officer has jurisdiction to make enquiries with regard to the nature and source of some credited in the books of account of an assessee and it would be immaterial as to whether the amount so credited is given the colour of a loan or a sum representing sale proceeds or even receipt of share application money. The use of the words any sum found credited indicates that section 68 is very widely worded and an ITO is not precluded from making an enquiry as to the true nature and source thereof even if the same is credited as receipt of share application money." 5.3 It was held by the Hon'ble Supreme Court in case of Sumati Dayal (214 ITR 801) that in view of section 68 any sum found credited may be charged to income tax if the explanation offered by the assessee about the nature and source thereof is in the opinion of the Assessing Officer not satisfactory. In such case there is, prima facie, evidence against the assessee viz. the receipt of money and if he fails to rebut the said evidence being un-rebutted can be used against him by holding that it was receipt of an income in nature. 5.3.1 Applying the said decision to the facts of the case on hand it can be concluded that the assessee failed to rebut the evidence produced by the Assessing Officer to show that the company is said to have invested are only paper companies and hence the onus of the assessee does not stand discharged. Therefore, the Assessing Officer is right in invoking the provisions of section 68. As held by the Hon'ble Supreme Court in the case of Durga Prasad More (82 ITR 540) the apparent may not always be real especially by applying the test of human probabilities. The taxing authorities are entitled to look into the surrounding circumstances to find out 8 Hariyana Steel Centre (KDM) Pvt.Ltd. the reality and the matter has to be considered applying the test of human probabilities. In the instant case, the Assessing Officer did examine the surrounding circumstances by getting field enquiries done and by proving that the companies said to have invested share capital in the assessee company are non existing bogus paper companies which do not have sources to invest the said amount. In light of \ the above investigations the share application money was doubted and the assessee was questioned. As the assessee was not able to give proper l explanation or prove the identity and the credit worthiness of the company which invested share application money, the Assessing Officer has correctly applied the provisions of section 68 and added back the amounts of share application money/ share capital as income of the assessee. Considering the facts and circumstances of the case I find no reasons to interpret otherwise or interfere with the decision of the Assessing Officer. Therefore, the addition made by the Assessing Officer of Rs. 2.66 crore and Rs.52,00,000/- in AY 2011-12 and 2012-13 respectively is confirmed.” 4. Feeling aggrieved, the assessee is in appeal before us, on the grounds mentioned hereinabove 5. At the outset, the ld. AR for the assessee had submitted that the issue before this Hon’ble Tribunal is squarely covered in favour of the revenue by virtue of the decision of the Hon’ble Supreme Court in the case of PCIT vs. NRA Iron & Steel Pvt.Ltd. 412 ITR 161. 6. Per contra, the ld. DR had submitted that the order passed by the lower authorities, we confirmed. 7. We have heard the rival contentions of both the parties and perused the material available on record. The issue of bogus share capital has already been adjudicated by the Hon’ble Supreme Court in the case of NRA Iron & Steel Pvt.Ltd. In the present case, the assessee failed to prove the genuineness, creditworthiness and identity of the share applicants from whom the assessee had received the bogus share capital. The above said facts have been elaborately demonstrated by the lower authority in the above said paragraph. We therefore have no reason to take 9 Hariyana Steel Centre (KDM) Pvt.Ltd. a contrary view than the view taken by the lower authorities. In light of the above and respectfully following the decision of Hon’ble Supreme Court cited (supra), we dismiss both the appeals. 8. In the result, both appeals filed by the assessee are dismissed. Order pronounced in the Open Court on 22 nd June, 2022. Sd/- Sd/- (RAMA KANTA PANDA) ACCOUNTANT MEMBER (LALIET KUMAR) JUDICIAL MEMBER Hyderabad, dated 22 nd June, 2022. Thirumalesh/sps Copy to: S.No Addresses 1 Hariyana Steel Centre(KDM) Private Limited 6-4-454/3, Bholakpur Secunderabad-500080 2 DCIT,Circle-2(2),Signature towers,Opp. Botanical Garden,Kondapur,Hyderabad- 500 084 3 CIT(A)-9, Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File By Order