ITO, Kota V. S.S. POLY CHEMICALS PVT. LTD., Kota

ITA 947/JPR/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6235 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 02-11-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SEEMA MEENA
• Assessee Lawyers: P C PARWAL CA DHK
• Keywords: Unexplained cash credit; Bogus Share capital; Depreciation; Document seized; Accommodation entries; Commercial expediency; Documents seized
• Section: 131; 68; 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,O JH HKKXPUN] YS[KK LNL; LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, AM VK;DJ VIHY LA-@ ITA NO. 947/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR: 2007-08 THE ITO WARD- 1(1) KOTA CUKE VS. M/S. S.S. POLY CHEMICALS (P) LTD E-218, ROAD NO. IPIA KOTA, 610A, TALWANDI, KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AADCS 4229 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT C.O. NO.01/JP/2017 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 947/JP/2016 ) FU/KZKJ.K O'K Z@ ASSESSMENT YEAR: 2007-08 M/S. S.S. POLY CHEMICALS (P) LTD E-218, ROAD NO. IPIA KOTA, 610A, TALWANDI, KOTA CUKE VS. THE ITO WARD- 1(1) KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AADCS 4229 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY:SMT. SEEMA MEENA, JCIT - DR FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI P.C. PARWAL, CA LQUOKBZ DH RKJH[K@ DATE OF HEARING : 22/03/2018 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 11 /04/2018 VKNS'K@ ORDER PER BHAGCHAND, AM THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A) , KOTA DATED 5-08-2016 FOR THE ASSESSMENT YEAR 2007 -08 WHILE THE ITA NO.947/JP/2016 ITO, WARD- 1( 1), KOTA VS M/S. S.S. CHEMICALS PVT LTD., KOTA 2 ASSESSEE HAS FILED THE C.O., RAISING GROUNDS OF APP EAL BY THE REVENUE AND THE ASSESSEE AS UNDER:- ITA NO. NO.947/JP/2016 REVENUE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN:- 1. DELETING THE ADDITION OF RS. 48 LACS MADE U/S 68 OF THE I.T. ACT, 1961 ON ACCOUNT OF BOGUS SHARE CAPITAL RAISED. 2. DELETING ADDITION OF RS. 1.44 LACS MADE ON ACCOU NT OF COMMISSION PAID OUT OF UNDISCLOSED INCOME. C.O. NO. 01/JP/2017 ASSESSEE 1. THE LD. CIT(A) HAS ERRED ON FACTS AND I LAW IN C ONFIRMING THE DISALLOWANCE OF RS. 45,904/-OUT OF INTEREST PAID ON LOAN TAKEN FROM THE DIRECTORS BY HOLDING THAT ASSESSEE HAS NEITHER BEEN ABLE TO PROVE THE NECESSARY BEHIND PAYMENT OF HIGHER INTEREST TO DIRE CTORS NOR ANY COMMERCIAL EXPEDIENCY HAS BEEN BROUGHT OUT. HE HAS FURTHER ERRED IN CONFIRMING THIS DISALLOWANCE IGNORING THAT THE DISA LLOWANCE MADE IS NOT IN THE NATURE OF INCOME ESCAPING THE ASSESSMENT . 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE @ 20% OUT OF FOLLOWING EXPENSES. PARTICULAR S EXPENSES CLAIMED (IN RS.) EXPENSES DISALLOWED (IN RS.) CAR/MOTORCYCLE EXPENSES 99,039/- (INCLUDING DEPRECIATION OF RS. 39,787/- 19,908/- TELEPHONE & MOBILE EXPENSES 43,662/- 12,694/- TRAVELLING EXPENSES 34,256/- 6,851/- HE HAS FURTHER ERRED IN CONFIRMING THIS DISALLOWANC E IGNORING THAT THE DISALLOWANCE MADE IS NOT IN THE NATURE OF INCOME ESCAPING THE ASSESSMENT ITA NO.947/JP/2016 ITO, WARD- 1( 1), KOTA VS M/S. S.S. CHEMICALS PVT LTD., KOTA 3 2.1 FIRST OF ALL, WE TAKE UP THE GROUNDS OF APPEAL OF THE REVENUE FOR ADJUDICATION. 3.1 IN GROUND NO. 1, THE REVENUE IS AGGRIEVED THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 48 LACS MADE U/S 68 OF THE ACT ON ACCOUNT OF BOGUS SHARE CAPITAL RAISED BY THE ASSESS EE. BRIEF FACTS OF THE CASE ARE THAT THE AO DURING THE COURSE OF ASSESSMEN T PROCEEDING NOTED THAT THE RETURN FOR A.Y. 2007-08 WAS FILED BY THE A SSESSEE ON 29-11-2007 DECLARING INCOME OF RS. 1,37,230/-. THE AO SUBSEQUE NTLY NOTICED THAT THE ASSESSEE HAD INDULGED IN TAKING ACCOMMODATION ENTR IES FROM A RACKET OPERATING IN DELHI. THE AO FURTHER NOTED THAT AS PE R THE MATERIAL GATHERED BY THE DEPARTMENT DURING THE COURSE OF SEARCH CONDU CTED IN THE CASE OF SHRI SURENDRA KUMAR JAIN GROUP BY THE INVESTIGATION WING, NEW DELHI, THE ASSESSEE COMPANY HAD TAKEN ACCOMMODATION ENTRY OF RS. 48.00 LACS FROM THE SAID RACKET IN DELHI THROUGH M/S. PARISUDH FINANCE COMPANY (P) LTD. AND M/S. VOGUE LEASING AND FINANCE PVT LTD. DU MMY COMPANIES OF THE RACKET OF ENTRY PROVIDERS IN DELHI. THE AO FURT HER OBSERVED THAT AFTER RECORDING THE REASONS TO THE BELIEF OF THE AO THE I NCOME OF THE AMOUNTING TO RS. 48.00 LACS HAD ESCAPED ASSESSMENT. THUS AFTE R APPROVAL OF THE JCIT, RANGE-1, JAIPUR ON 22-03-2013, THE CASE OF TH E ASSESSEE WAS ITA NO.947/JP/2016 ITO, WARD- 1( 1), KOTA VS M/S. S.S. CHEMICALS PVT LTD., KOTA 4 REOPENED U/S 148 OF THE I.T. ACT, 1961. ACCORDINGLY , THE NOTICE U/S 148 OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE ON 22-03-2013. THE AO IN THIS CASE NOTED THAT THE ASSESSEE WAS ONE OF THE BENEFICIARIES OF THE ACCOMMODATION ENTRY PROVIDED BY M/S. PARISUDH FINAN CE COMPANY (P) LTD AND M/S. VOGUE LEASING AND FINANCE (P) LTD, DUM MY COMPANIES OPERATED BY SHRI SURENDRA KUMAR JAIN AND & OTHERS W HO OPERATED RACKET OF ACCEPTING CASH FROM THE BENEFICIARIES AND AFTER INTRODUCING CASH THROUGH VARIOUS BANKS ACCOUNTS IN THE NAMES OF VARI OUS PROPRIETARY CONCERNS, ISSUED CHEQUES FROM ONE OF THEIR INTERMED IARY COMPANY AFTER ROUTING THE FUNDS THROUGH SEVERAL INTERMEDIARIES. T HE AO FURTHER NOTED THAT DURING SEARCH OPERATIONS THE EVIDENCES FOUND O N RECORD ESTABLISHED THAT SHRI SURENDRA KUMAR JAIN & OTHERS WERE ENTRY P ROVIDERS AND NUMBER OF COMPANIES WERE RUNNING FROM THE RESIDENTIAL AS W ELL AS BUSINESS ADDRESSED RELATED TO SHRI SURENDRA KUMAR JAIN & OTH ERS. ALL THE BOOKS OF ACCOUNTS AND OTHER RELEVANT PAPERS OF THE FIRMS/ CO MPANIES WERE FOUND THE RESIDENCE OF THESE PERSONS. THE AO FURTHER NOTE D THAT ALL THESE COMPANIES WERE RUN AND CONTROLLED BY SHRI SURENDRA KUMAR JAIN AND SHRI VIRENDRA KUMAR JAIN. THE SEIZED MATERIAL INCLUDED B ANK UNSIGNED AS WELL AS BLANK SIGHNED CHEQUE BOOKS, ACKNOWLEDGEMENT OF F ILING OF RETURN OF ITA NO.947/JP/2016 ITO, WARD- 1( 1), KOTA VS M/S. S.S. CHEMICALS PVT LTD., KOTA 5 THESE COMPANIES, USER OF IDS AND PASSWORD OF ALL CO MPANIES FOR E-FILING THEIR RETURNS, BANK ACCOUNT OPENING AND CLOSING LE TTERS, AUTHORIZATION LETTERS FOR ATTENDING THE ASSESSMENT PROCEEDING, BO OKS OF ACCOUNT IN TALLY FORMAT AS WELL AS IN THE FORMAT REQUIRED FOR FILING A RETURN, PROOF OF THE USE OF MOBILE NOS. OF SHRI SURENDERA KUMAR JAIN AND SHRI VIRENDERA KUMAR JAIN IN BANK OPENING FORMS HAVING OPTION OF MOBILE BANKING. ACCORDING TO THE AO, ALL THESE COMPANIES ARE TOOLS IN THEIR BUSINESS OF PROVIDING ACCOMMODATION ENTRIES. THE AO DURING THE COURSE OF RE- ASSESSMENT PROCEEDING NOTED THAT THE COMPANY HAD IS SUED 3000 SHARES OF RS. 100/- EACH AMOUNTING TO RS. 3.00 LACS AT PREMIU M OF RS. 21 LACS TO M/S. PARISUDH FINANCE COMPANY PVT LTD. AND 3000 SHA RES OF RS. 100/- EACH AMOUNTING TO RS. 3.00 LACS AT PREMIUM OF RS. 2 1 LACS TO M/S. VOGUE LEASING & FINANCE PVT LTD. TOTALING TO RS. 48,00,00 0/- (I.E. 6,00,000 + 42,00,000/-) WHICH WERE HELD AS BOGUS COMPANIES AND WERE INDULGED IN BUSINESS OF PROVIDING ACCOMMODATION ENTRIES TO VARI OUS BENEFICIARIES COMPANIES/ ENTITIES/ PERSONS THROUCH CHEQUQES IN LI EU OF CASH. FROM THE DOCUMENT FOUND DURING THE COURSE OF SEARCH/ SURVEY ACTION 132/133A OF THE ACT, IT WAS ADMITTED THAT THESE COMPANIES WERE MAINTAINED DATEWISE CHEQUE BOOKS WHICH WERE MANAGED BY SHRI S.K. JAIN A ND HIS BROTHER OVER ITA NO.947/JP/2016 ITO, WARD- 1( 1), KOTA VS M/S. S.S. CHEMICALS PVT LTD., KOTA 6 A LONG PERIOD OF TIME I.E AROUND 6 YEARS. IN THESE CHEQUE BOOKS AND CASH BOOKS DETAILS OF CHEQUES PROVIDED TO THE BENEFICIAR Y COMPANIES AND RECEIPT OF CASH BOOKS WERE RECORDED BY SHRI SURENDR A KUMAR JAIN. THESE SAID BOGUS TRANSACTIONS ARE CLEARLY REFLECTED / VER IFIABLE FROM THE FOLLOWING PAGES. S.N. EXHIBIT NO. PAGE NO. ITEM NARRATION CLEARANCE DT. REMARKS 1. A-66 P-13, CHEQUE BOOK PARISUDH P LTD TO SS POLICY PVT LTD. CH. NO. 079962 DT 11-2-2007 RS. 24,00,000/- CHEQUE OF RS. 24 LACS WAS CLEARED IN A/C OF ASSESSEE ON 8-3-2007 I.E. VERY NEXT DAYOF CASH MENTIONED TO BE CASH RECEIVED IN THE CASH BOOK OF S.K. JAIN NAME OF RISHI SINGHAL WAS MENTIONED. 2. A-70 P-6 CASH BOOK CASH RECEIVED FROM RISHI SINGHAL OF RS.24 LACS ON 7-3-2007 3. A-65 P-48 CHEQUE BOOK VOGUE PVT.LTD TO SS POLY PVT. LTD CH. NO. 080213 DT 27- 07-07 & 080214 DT 11.2.07 CHEQUE OF RS. 24 LACS WAS CLEARED IN A/C OF ASSESSEE ON 27-2-2007 I.E. VERY SAME DAY OF CASH MENTIONED TO BE RECEIVED IN THE CASH BOOK OF S.K. JAIN NAME OF RISHI SINGHAL WAS MENTIONED 3. A-78 P-22 CASH BOOK CASH RECEIVED FROM RISHI SINGHAL OF RS.24 LACS ON 27-2-2007 FROM THESE SEIZED DOCUMENTS, THE AO OBSERVED THAT T HE ASSESSEE COMPANY HAD RECEIVED PAYMENT OF 3000 SHARES ALLOTT ED TO M/S. PARUISHUDH FIANCE COMPANY AND VOGUE LEASING AND FIN ANCE PVT LTD ITA NO.947/JP/2016 ITO, WARD- 1( 1), KOTA VS M/S. S.S. CHEMICALS PVT LTD., KOTA 7 (DUMMY COMPANIES) IN CONSIDERATION OF RS. 24 LACS E ACH THROUGH CHEQUE NO. 080213 DATED 26-02-2007 AND THROUGH CHEQUE NO. 079962 DATED 27- 02-2007 AND THEREAFTER IT HAD RECEIVED BACK IN CASH RS. 24 LACS FROM DUMMY COMPANIES RESPECTIVELY THROUGH SHRI RISHI SIN GHAL AS PER COPY OF SEIZED DOCUMENTS WHICH ARE IN THE HANDWRITING OF SH RI SURENDRA KUMAR JAIN. THIS FACT WAS CORROBORATED BY OBTAINING THE C ONFIRMATIONS FOR SHARE TRANSACTIONS FROM THE ASSESSEE. IT IS NOTED THAT TH E CASH RECEIVED FROM BENEFICIARY IS INTRODUCED IN THE BANK ACCOUNT OF PE RSONS/FIRMS / COMPANIES FLOATED BY THE RACKET AND CHEQUE/DD/POS I N THE NAME OF BENEFICIARY WAS ISSUED EITHER FROM THE SAME ACCOUNT OR THROUGH OTHER ACCOUNTS IN WHICH THE FUNDS WERE TRANSFERRED BY CLE ARING IN TWO OR MORE STAGES. IN ORDER TO FIND OUT THE ORIGINATING BANK ACCOUNT AND THE MODE OF DEPOSIT THEREIN, AN ATTEMPT WAS MADE TO OBTAIN THE BANK ACCOUNTS OF THE SO CALLED COMPANIES FROM WHERE FUNDS WERE TRANSFERR ED TO THE ACCOUNT OF M/S. PARISHUDH FINANCE COMPANY AND M/S. VOGUE LEASI NG AND FINANCE (P) LTD, JUST PRIOR TO ISSUE OF CHEQUE/ PAY ORDERS TO THE ASSESSEE. THE AO NOTED THAT THE SHARE APPLICANT COMPANY IN THIS CASE I.E. M/S. PARISHUDH FINANCE COMPANY AND M/S. VOGUE LEASING AND FINANCE (P) LTD HAD PROVIDED ENTRIES TO MORE THAN 100 BENEFICIARIES DUR ING THE F.Y. 2006-07 ITA NO.947/JP/2016 ITO, WARD- 1( 1), KOTA VS M/S. S.S. CHEMICALS PVT LTD., KOTA 8 SPREADING ALL OVER THE COUNTRY. FOR VERIFICATION OF THE SAID COMPANIES, SUMMON NOTICES U/S 131 OF THE I.T. ACT, 1961 WERE I SSUED 21-03-2014 BY THE DEPARTMENT FOR WHICH THE INSPECTOR WAS DEPUT ED TO SERVE THE NOTICES TO THE COMPANIES THROUGH ITS DIRECTORS. HOW EVER, THE INSPECTOR FAILED TO SERVE THE NOTICE AS ON THE MENTIONED ADDR ESS THE COMPANIES OF THE ASSESSEE COMPANY WERE ESTABLISHED AND THE COMP ANIES WERE NOT SITUATED AT THE GIVEN ADDRESS WHICH CLEARLY ESTABLI SHED THAT THESE COMPANIES WERE FLOATED FOR PROVIDING ACCOMMODATION ENTRIES BY SHRI SURENDRA KUMAR JAIN AND OTHERS. THE AO NOTED THAT I T HAD NO RESOURCES, MANPOWER, INFRASTRUCTURE ETC. TO CARRY OUT REGULAR BUSINESS ACTIVITIES. THE STATEMENT OF SHRI SACHIN JHA WHO IS SON OF THE DIRE CTOR OF THE ASSESSEE COMPANY WERE RECORDED ON 28-03-2014 WHEREIN HE HAS STATED VIDE REPLY OF QUESTION 4,5 & 6. THE SAME ARE REPRODUCED AT PAR A 5 OF THE ASSESSMENT ORDER. THE AO NOTED THAT THE ASSESSEE COMPANY HAD I SSUED 6000 SHARES ON 7-03-2007 AT PREMIUM OF RS. 700/- EACH SHARE WHI LE IT HAD ISSUED 500 SHARES TO THE SON OF DIRECTORS WITHIN ALMOST ONE YE AR PERIOD ON 22-04- 2008 FROM THE SHARES ISSUED AT PREMIUM OF RS. 700/- EACH SHARE ON 7/9- 03-2007 AT PAR WITHOUT PREMIUM. FURTHER 6000 SHARES WHICH WERE ISSUED BY ASSESSEE COMPANY TO M/S. PARISHUDH FINANCE COMPA NY AND M/S. ITA NO.947/JP/2016 ITO, WARD- 1( 1), KOTA VS M/S. S.S. CHEMICALS PVT LTD., KOTA 9 VOGUE LEASING AND FINANCE (P) LTD. ULTIMATELY ACQUI RED BACK BY SHRI SACHIN JHA SON OF DIRECTORS DURING F.Y. 2011-12 WIT HOUT ANY PREMIUM. THE AO FURTHER NOTED THAT THE ASSESSEE COMPANY COUL D NOT PRODUCE ANY DOCUMENTARY EVIDENCE THAT HOW THIS UNLISTED COMPANY ALLOTTED SHARES TO ABOVE SAID DUMMY COMPANIES AT PREMIUM OF RS. 700/- EACH SHARE. IT IS ALSO PERTINENT TO NOTE THAT THESE 6000 SHARES ALLOT TED TO M/S. PARISHUDH FINANCE COMPANY AND M/S. VOGUE LEASING AND FINANCE (P) LTD. WERE BOUGHT BACK BY THE SON OF THE DIRECTOR NAMELY SHRI SACHIN JHA (WHO ALSO BECOME DIRECTOR DURING F.Y. 2012-12) AT FACE VALUE WITHOUT PAYING ANY PREMIUM. THE AO NOTED THAT IT IS BEYOND THE UNDERST ANDING THAT WHY ANY PERSON/COMPANY HAD BORNE LOSS OF RS. 42 LACS BY PUR CHASING THE SAME ON PREMIUM OF RS. 700/- EACH AND THEREAFTER SOLD THE S AME WITHOUT PREMIUM TO THE FAMILY MEMBERS OF DIRECTORS OF SAID IMPUGNED ASSESSEE COMPANY. THE AO FURTHER NOTED THAT THIS WAS ONLY AN EFFORT O F ASSESSEE TO CONVERT ITS UNDISCLOSED INCOME INTO ENHANCED CAPITAL IN THE FORM OF SALE OF SHARES AT PREMIUM OF RS. 42 LACS TO SUCH DUMMY COMPANIES W HICH ACCORDING TO THE AO SHOWED THAT THE ASSESSEE HAD DELIBERATELY TR IED TO EVADE THE PAYMENT OF DUE TAXES. THE AO LOOKING INTO THE ABOVE FACTS AND ITA NO.947/JP/2016 ITO, WARD- 1( 1), KOTA VS M/S. S.S. CHEMICALS PVT LTD., KOTA 10 CIRCUMSTANCES OF THE CASE MADE THE ADDITION OF RS. 48 LACS BY OBSERVING AS UNDER:- 3.11 AFTER CONSIDERING THE ENTIRETY OF THE FACT S AND CIRCUMSTANCES OF THE CASE, IT HAS BEEN ESTABLISHED THAT THE ASSES SEE COMPANY HAD INTRODUCED ITS UNACCOUNTED CASH AMOUNTING TO RS. 48,00,000/- I N THE FORM OF SHARE CAPITAL THROUGH THE RACKET OF ENTRY PROVIDERS OPERATED IN D ELHI. THEREFORE, THE AMOUNT OF RS. 48,00,000/-, THE SOURCE OF WHICH COULD NOT B E SATISFACTORILY EXPLAINED BY THE ASSESSEE, IS BEING TREATED AS THE UNEXPLAINED C ASH U/S 68 OF THE I.T. ACT, 1961 AND ACCORDINGLY ADDED TO THE TOTAL INCOME OF T HE ASSESSEE. 3.2 THE ASSESSEE'S CARRIED THE MATTER BEFORE THE LD . CIT(A) WHO HAD DELETED THE ADDITION OF RS. 48 LACS MADE BY THE AO BY OBSERVING AS UNDER:- BASED ON THE BACKGROUND FACTS AVAILABLE AND THE LE GAL AS DISCUSSED ABOVE, IT IS SEEN THAT THE INVESTOR CO MPANIES WEER HAVING CREDITWORTHINESS TO PAY SHARE PREMIUM A S ON 31-03-2007. FURTHER, NAME OF SHRI S.K. JAIN IS NOT APPEARING IN THE LIST OF DIRECTORS OF M/S. PARISHUDH FINANCE COMPANY AND M/S. VOGUE LEASING AND FINANCE (P) LTD. WHO WER E THE LENDERS OF THE APPELLANT ASSESSEE SO AS TO ESTABLIS H A DIRECT NEXUS AS PER THE ALLEGATION IN THE INVESTIGATION DI RECTORATE REPORT. FURTHER IN THE ASSESSMENT FRAMED U/S 153C I N THE CASE OF M/S. PARISHUDH FINANCE COMPANY AND M/S. VOG UE LEASING AND FINANCE (P) LTD. BY THE INCOME TAX DEPA RTMENT PURSUANT TO SEARCH OF THE AO HAS NOT GIVEN ANY ADVE RSE INFERENCE AND ASSESSED THE SAME AT RETURNED INCOME WHICH STRENGTHENS THE CLAIM OF THE ASSESSEE REGARDING GEN UINENESS OF THE TRANSACTION. SINCE THE ADDITION HAS BEEN MADE U/S 68, IT MAY BE NOTED THAT THE INITIAL BURDEN OF PROVING THE GENUIN ENESS OF THE TRANSACTION LIES UPON THE ASSESSEE ALONGWITH TH E IDENTITY OF LENDER/INVESTOR AND HIS CREDITWORTHINESS. HAVING DONE SO, ITA NO.947/JP/2016 ITO, WARD- 1( 1), KOTA VS M/S. S.S. CHEMICALS PVT LTD., KOTA 11 THE ASSESSEE IN THE INSTANT CASE HAS DISCHARGED THE ONUS CAST UPON IT. BEYOND THIS, FOR THE CHARGE OF UNEXPLAINED CASH CREDIT TO STICK, THE ONUS LIES UPON THE AO TO DISPR OVE THE CLAIM OF THE ASSESSEE BY ESTABLISHING THAT THE EVID ENCES FILED BY THE ASSESSEE WAS FALSE AND BY BRINGING NEW MATER IAL ON RECORD AND FAILURE TO DO SO WOULD VITIATE THE ADDIT ION MADE ON THIS COUNT. IN THE LIGHT OF THE ABOVE DISCUSSION, IT CAN BE CONCLUDED THAT AS REGARS THE SHARE CAPITAL SUBSCRIB ED BY M/S. PARISHUDH FINANCE COMPANY AND M/S. VOGUE LEASING AN D FINANCE (P) LTD. SINCE THE AO DID NOT BRING ANY IND EPENDENT FINDINGS ON RECORD TO DISPROVE THE ASSESSEE'S DOCUM ENTS SUBMITTED TO SUPPORT INTRODUCTION OF CAPITAL FROM T HE ABOVE ENTITY, THE ADDITION OF RS. 48,00,000/- MADE REGARD ING PREMIUM ON SHARE CAPITAL INTRODUCED THESE TWO ENTIT IES CANNOT BE SUSTAINED AS IT IS BASED UPON SUPERFICIAL FINDINGS AND IGNORANCE OF BASIC REQUIREMENTS OF LAW AND NATU RAL JUSTICE MAKING THE ADDITION DEVOID OF MERITS ESPECI ALLY IN THE ABSENCE OF PROPER ENQUIRIES AND INDEPENDENT FINDING S BY THE AO TO CONTROVERT THE EVIDENCES FURNISHED BY THE ASS ESSEE TO PROVE THE GENUINENESS OF THE CAPITAL INTRODUCED AS DISCUSSED ABOVE. THE ADDITION OF RS. 48,00,000/-IS ACCORDINGLY NOT JUSTIFIED AND IS DIRECTED TO BE DELETED. 3.3 DURING THE COURSE OF HEARING, THE LD. DR SUPPOR TED THE ORDER OF THE AO. 3.4 ON THE OTHER HAND, THE LD.AR OF THE ASSESSEE PR AYED THAT THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE AO AND THUS THE GROUND OF THE DEPARTMENT BE DISMISSED. THE LD.AR OF THE ASSESSEE HAS ITA NO.947/JP/2016 ITO, WARD- 1( 1), KOTA VS M/S. S.S. CHEMICALS PVT LTD., KOTA 12 FILED THE WRITTEN SUBMISSION AND RELIED UPON THE CA SE LAWS WHICH HAVE BEEN TAKEN INTO CONSIDERATION. 3.5 AFTER HEARING BOTH THE SIDES AND CONSIDERING TH E RELEVANT MATERIAL AVAILABLE ON RECORD AND FACTUAL ASPECTS AND LEGAL P ROPOSITION DECIDED BY VARIOUS COURTS WITH REGARD TO SUCH ISSUE, WE HOLD T HAT SHRI SURENDRA KUMAR JAIN AND VARIOUS ENTITIES FLOATED TO PROVIDE ACCOMMODATION ENTRIES AND ASSESSEE IS ONE OF THE BENEFICIARIES OF SUCH EN TRY PROVIDERS THROUGH THESE COMPANIES FROM WHOM ASSESSEE HAS SHOWN THE RE CEIPT OF SHARE APPLICATION MONEY. THE MODUS OPERANDI IS THAT THESE SHARES ARE ISSUED AT A HIGH PREMIUM AND THEREAFTER THESE SHARES ARE ACQU IRED BACK BY ANY OF THE GROUP PERSONS AT NOMINAL PRICE. THE SHARES WERE ISSUED AT A PREMIUM OF 700/- EACH AND AFTER SOMETIME SHOWN AS ACQUIRED BACK BY SOME OF THE DIRECTOR OF COMPANY AT FACE VALUE OF SHARES. THIS M ODUS OPERANDI IS ALSO ESTABLISHED BY THE SEIZED MATERIAL. THE DIARY MAINT AINED BY THE ENTRY PROVIDER SHOWS THAT CASH WAS GIVEN TO THE ENTRY PRO VIDERS THROUGH SHRI RISHI SINGHAL. THE CHEQUE HAS BEEN ISSUED IN LIEU O F CASH WHICH HAS BEEN CREDITED IN THE BOOKS OF ASSESSEE. THE SEIZED MATER IAL ALSO ESTABLISHES THAT THE CHEQUE TOWARDS SHARE CAPITAL WERE ALSO OBTAINED THROUGH SHRI RISHI SINGHAL. THUS THE MODUS OPERANDI OF ISSUING CHEQUES AFTER RECEIVING THE ITA NO.947/JP/2016 ITO, WARD- 1( 1), KOTA VS M/S. S.S. CHEMICALS PVT LTD., KOTA 13 CASH IS FULLY ESTABLISHED IN THIS CASE. IN THIS VIE W OF THE MATTER, WE DO NOT CONCUR WITH THE VIEWS OF THE LD. CIT(A) ON THE ISSU E IN QUESTION. WE REVERSE THE FINDINGS OF THE LD. CIT(A) AND CONFIRM THE FINDINGS OF AO. THUS GROUND NO. 1 OF THE REVENUE IS ALLOWED. 4.1 IN GROUND NO. 2, THE REVENUE IS AGGRIEVED THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1.44 LACS MAD E ON ACCOUNT OF COMMISSION PAID OUT OF UNDISCLOSED INCOME. BRIEF FA CTS OF THE CASE ARE THAT DURING THE COURSE OF POST SEARCH ENQUIRIES IT IS ESTABLISHED THAT SHRI S.K. JAIN AND SHRI VIRENDRA JAIN WERE ESTABLISHED I N THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES BY ISSUING CHEQUES IN LIEU OF CASH THROUGH SEVERAL PAPERS COMPANIES CONTROLLED BY THEM BY CHARGING A CERTAIN AMOUNT OF COMMISSION. THE AO NOTED FROM THE FACTS AVAILABLE ON RECORD THAT THE ASSESSEE COMPANY HAD OBTAINED ENTRY OF RS. 48,00,000/- ON WHICH THE ASSESSEE MIGHT HAVE PAID COMMISSION @ 3% AMOUNTING TO RS. 1,44,000/-. THE AO NOTED THAT THIS COMMISSION A MOUNT WAS MET BY THE ASSESSEE FROM ITS UNDISCLOSED SOURCES. THEREFOR E, THE AO ADDED THIS AMOUNT OF RS. 1,44,000/- U/S 68 OF THE I.T. ACT, 19 61 TO THE TOTAL INCOME OF THE ASSESSEE COMPANY. ITA NO.947/JP/2016 ITO, WARD- 1( 1), KOTA VS M/S. S.S. CHEMICALS PVT LTD., KOTA 14 4.2 IN FIRST APPEAL, THE LD. CIT(A) HAS DELETED THE ADDITION OF RS. 1,44,000/- BY OBSERVING AS UNDER:- I HAVE GONE THROUGH ASSESSEE'S SUBMISSIONS AND AOS FINDINGS. IN VIEW OF THE FINDINGS IN GROUND NO . 2 TO 6 ABOVE, THE ADDITION OF RS. 1,44,000/- WAS MADE ON A CCOUNT OF COMMISSION WHICH WAS PRESUMED TO HAVE BEEN PAID BY THE ASSESSEE FOR OBTAINING ACCOMMODATION ENTRY IN DISPU TE, SINCE THE ASSESSING OFFICER WAS NOT ABLE TO BRING ANYTHIN G ON RECORD THAT IT WAS THE ASSESSEE'S OWN MONEY AND USE D THE WORDS LIKE MIGHT HAVE PAID WHICH ITSELF SHOWS T HAT THE ADDITION IS BASED ON PRESUMPTION AND ALSO SINCE I H AVE HELD THE SHARE CAPITAL TO BE EXPLAINED, CONSEQUENTLY, TH E A.O.S ADDITION ON ACCOUNT OF COMMISSION PAYMENT FOR SUCH TRANSACTION TO THE PURCHASER COMPANIES AT A RATE OF 3.00% AMOUNTING TO RS. 1,44,000/- ALSO CANNOT SUSTAIN AND THE SAME IS DIRECTED TO BE DELETED. 4.3 DURING THE COURSE OF HEARING, THE LD. DR SUPPOR TED THE ORDER OF THE AO AND PRAYED THAT THE LD. CIT(A) HAS ERRED IN DELE TING THE ADDITION OF RS. 1.44 LACS MADE ON ACCOUNT OF COMMISSION PAID OU T OF UNDISCLOSED INCOME. 4.4 ON THE OTHER HAND, THE LD.AR OF THE ASSESSEE SU PPORTED THE ORDER OF THE LD. CIT(A). IN SUPPORT OF IT, THE LD.AR OF THE ASSESSEE FILED THE WRITTEN SUBMISSION WHICH HAS BEEN TAKEN INTO CONSIDERATION. 4.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THIS CASE, THE AO OBSERVED THAT THE ASSESSEE ITA NO.947/JP/2016 ITO, WARD- 1( 1), KOTA VS M/S. S.S. CHEMICALS PVT LTD., KOTA 15 COMPANY HAD OBTAINED ACCOMMODATION ENTRY OF RS. 48 LACS AND THE ASSESSEE MIGHT HAVE PAID COMMISSION @ 3% AMOUNTING TO RS. 1,44,000/-. THIS COMMISSION AMOUNT HAS BEEN PAID FROM UNDISCLOS ED SOURCES AND THUS THE AO MADE THE ADDITION OF RS. 1,44,000/- U/S 68 OF THE ACT. IN FIRST APPEAL, THE LD. CIT(A) HAS DELETED THE ADDITION OF RS. 1.44,000/- MADE BY THE AO. FROM THE AVAILABLE RECORDS, IT APPEARS THAT THE ASSESSEE COMPANY HAD OBTAINED ACCOMMODATION ENTRY OF RS. 48.00 LACS AND SUCH ACCOMMODATION ENTRY ARE PROVIDED ON PAYMENT OF COMM ISSION. HENCE, WE HOLD THAT THE AO IS JUSTIFIED IN HOLDING THAT ASSESSEE HAD PAID 3% COMMISSION OF RS. 1,44,000/- ON THE ACCOMMODATION E NTRY OF RS. 48.00 LACS. THUS GROUND NO. 2 OF THE REVENUE IS ALLOWED. 5.1 IN GROUND NO. 1 OF THE C.O., THE ASSESSEE IS AG GRIEVED THAT THE LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE OF RS. 45,904 /- OUT OF INTEREST PAID ON LOAN TAKEN FROM THE DIRECTORS. BRIEF FACTS OF THE CASE THAT THE ASSESSEE HAD CLAIMED INTEREST PAYMENT @ 15% AMOUNTI NG TO RS. 1,14,760/- TO ITS DIRECTORS WHILE IT HAD MAINTAINED DEPOSITS WITH HFDC BANK OF RS. 30,14,981/- AND DEPOSITS WITH BANK OF I NDIA OF RS.15 LACS @ 9% PER ANNUM INTEREST. THE AO NOTED THAT THE ASSESS EE COMPANY HAD SUFFICIENT FUNDS TO RUN BUSINESS SMOOTHLY BUT TO SU PPRESS ITS INCOME FOR ITA NO.947/JP/2016 ITO, WARD- 1( 1), KOTA VS M/S. S.S. CHEMICALS PVT LTD., KOTA 16 THE INTENTION NOT TO PAY THE DUE TAXES, IT HAD TO C LAIM THAT SOME MONEY WAS BORROWED BY THE DIRECTORS AND PAID INTEREST TO THEM. THE AO FURTHER NOTED THAT IF THE CONTENTION OF ASSESSEE SEEMED TO BE JUSTIFIED THERE WAS NO REQUIREMENT TO BORROW THE MONEY FROM THE DIRECTO RS. THE ASSESSEE COMPANY SHOULD HAVE TAKEN PAYMENT OF IMMATURE FDR A ND IT COULD SAVE THE PAYMENT OF INTEREST @ 6%. THE AO THUS DISALLOWE D THE DIFFERENCE OF INTEREST RATE OF 6% ON LOANS TAKEN FROM THE DIRECTO RS WHICH COMES TO RS. 45,904/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 5.2 IN FIRST APPEAL, THE LD. CIT(A) HAS CONFIRMED T HE ACTION OF THE AO BY OBSERVING AS UNDER:- I HAVE GONE THROUGH THE ASSESSEE'S SUBMISSION AND AOS FINDINGS. SINCE THE ASSESSEE HAS NOT BEEN ABLE TO PROVE EITHER THE NECESSITY OR THE LOGIC BEHIND THE HIGHER EFFECTIVE PAYMENT OF INTEREST TO DIRECTORS NOR ANY COMMERCIAL EXPEDIENCY HAS BEEN BROUGHT OUT, THE ACTION OF THE AO APPEARS JUSTIFIED AND NO INTERFERENCE IS REQUIRED I N THE SAME. THE DISALLOWANCE OF RS. 45,904/- IS CONFIRMED. 5.3 DURING THE COURSE OF HEARING, THE LD.AR OF THE ASSESSEE PRAYED FOR DELETION OF ADDITION OF RS. 45,904/- FOR WHICH THE LD.AR OF THE ASSESSEE FILED THE WRITTEN SUBMISSION. 5.4 ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORD ER OF THE LOWER AUTHORITIES. ITA NO.947/JP/2016 ITO, WARD- 1( 1), KOTA VS M/S. S.S. CHEMICALS PVT LTD., KOTA 17 5.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOTED THAT THE LD.AR OF THE ASSESSEE COULD NOT CONTROVERT THE FINDINGS OF THE LOWER AUTHORITIES AS TO THE DISALLOWANCE OF INTEREST AMOUNT OF RS. 45,904/- PAID TO THE DIRECTO RS BY THE ASSESSEE. IN THIS VIEW OF THE MATTER, WE CONCUR WITH THE FINDING S OF THE LD. CIT(A). THUS GROUND NO. 1 OF THE C.O. OF THE ASSESSEE IS DI SMISSED. 6.1 IN GROUND NO. 2 OF THE C.O., THE ASSESSEE IS AG GRIEVED IN CONFIRMING THE DISALLOWANCE @ 20% OUT OF THE FOLLOW ING EXPENSES BY THE LD. CIT(A). PARTICULAR S EXPENSES CLAIMED (IN RS.) EXPENSES DISALLOWED (IN RS.) CAR/MOTORCYCLE EXPENSES 99,039/- (INCLUDING DEPRECIATION OF RS. 39,787/- 19,908/- TELEPHONE & MOBILE EXPENSES 43,662/- 12,694/- TRAVELLING EXPENSES 34,256/- 6,851/- 6.2 THE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) ON THE ABOVE EXPENSES ARE AS UNDER:- 6. DISALLOWANCE OUT OF CAR/MOTOR CYCLE EXPENSES: THE ASSESSEE COMPANY HAS CLAIMED EXPENSES ON ACCOUNT OF CAR/MOTORCYCLE AT RS. 99,039/- (PETROL & DIESEL EXPENSE RS. 34,256 +INSURANCE RS. 12,231AND DEPRECIATION RS. 39,787/-, RS. 12,485/- U NDER THE HEAD REPAIR & MAINTENANCE EXPENSES WHICH WERE PAID TO CH AMBAL MOTORS ITA NO.947/JP/2016 ITO, WARD- 1( 1), KOTA VS M/S. S.S. CHEMICALS PVT LTD., KOTA 18 PVT. LTD ON ACCOUNT OF SERVICING AND REPAIRING OF S AFARI CAR ON 7-07- 2007 AND RS. 190/-ON ACCOUNT OF WHEEL BALANCING EXP ENSES PAID TO M/S. TYRE SHOPPE ON 08-06-2006) HAVE ALSO BEEN CLAI MED UNDER THIS HEAD. DURING THE PERIOD UNDER CONSIDERATION, THE ASSESSEE COMPANY HAS MAINTAINED A SAFAR CAR AND A MOTORCYCLE. THE DI RECTORS OF THE COMPANY HAVE NOT MAINTAINED ANOTHER CARS/MOTORCYCLE S FOR THEIR PERSONAL USE AS WELL AS USE OF THEIR FAMILY MEMBERS . THE DIRECTORS AND THEIR FAMILY MEMBERS HAVE UTILIZED THESE VEHICLES F OR THEIR PERSONAL AFFAIRS ALSO. LOG BOOK HAS ALSO NOT BEEN MAINTAINED . HENCE, CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE AN ADHOC DISALLOWANCE @ 20% OUT OF THESE EXPENSES IS MADE I. E. RS. 19,808/- AND ADDED TO TOTAL INCOME OF ASSESSEE COMPANY TREAT ING PERSONAL EXPENDITURE OF THE DIRECTORS WITH REGARD TO THESE V EHICLES. I HAVE GONE THROUGH ASSESSEE'S SUBMISSIONS AND AO F INDINGS. PERSONAL USE OF CAR/MOTORCYCLE CANNOT BE RULED OUT. HOWEVER, THE DISALLOWANCE HAS TO BE REASONABLE. CONSIDERING THE FACTS OF THE CASE, IN MY OPINION THE DISALLOWANCE OF 20% OF THE VEHICLE EXPENSES IS CONSIDERED REASONABLE. THEREFORE, THE DISALLOWANCE OF RS. 19,808/- IS UPHELD. THIS GROUND OF APPEAL IS THEREFORE, DISMISS ED. 7. DISALLOWANCE OUT OF TELEPHONE AND MOBILE EXPENSE S:- THE COMPANY HAS CLAIMED TELEPHONE & MOBILE EXPENSES RS. 43,662/- IN THE P&L ACCOUNT WHICH ARE INCLUDING MOBILE EXPEN SES INCURRED BY THE DIRECTORS. THE COMPANY HAS MAINTAINED LAND PHON ES AT ITS BUSINESS PREMISES AS WELL AS RESIDENTIAL PREMISES OF THE DIR ECTORS. FURTHER THE DIRECTORS WERE NOT HAVING SEPARATE MOBILES FOR THEI R PERSONAL USE DURING THE YEAR UNDER CONSIDERATION. PERSONAL USE O F THESE LANDS PHONES AND MOBILE PHONE HAS NOT BEEN DENIED BY THE DIRECTO RS. CONSIDERING ALL THE FACTS OF THE CASE, A SUM OF RS. 20% OF THES E EXPENSES I.E.RS 12,694/- ARE DISALLOWED AND ADDED TO TOTAL INCOME O F THE ASSESSEE. I HAVE GONE THROUGH THE ASSESSEE'S SUBMISSIONS AND AO FINDINGS. PERSONAL USE OF TELEPHONE / MOBILE CANNOT BE RULED OUT. HOWEVER, THE DISALLOWANCE HAS TO BE REASONABLE. CON SIDERING THE FACTS OF THE CASE, IN MY OPINION THE DISALLOWANCE IS CONS IDERED REASONABLE. THEREFORE, THE DISALLOWANCE OF RS. 12,964/- IS UPHE LD. THIS GROUND OF APPEAL IS THEREFORE, DISMISSED. ITA NO.947/JP/2016 ITO, WARD- 1( 1), KOTA VS M/S. S.S. CHEMICALS PVT LTD., KOTA 19 8. DISALLOWANCE OF TRAVELLING EXPENSES :- ASSESSEE HAS DEBITED TRAVELLING EXPENSES OF RS. 34, 256/- UNDER THIS HEAD. ON PERUSAL OF DETAILS FILED BY THE ASSESSEE, IT WAS NOTICED THAT ENTIRE EXPENSES HAVE BEEN INCURRED BY SHRI SATENDRA SINGH. ENTIRE EXPENDITURE HAS BEEN INCURRE D IN CASH AND PROPER VOUCHERS HAVE NOT MAINTAINED. IN LACK OF GENUINENESS/ BUSINESS EXPEDIENCY AN ADHOC DISALLOWA NCE OF 20% I.E. RS. 6,851/- IS MADE AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. I HAVE GONE THROUGH ASSESSEE'S SUBMISSION AND AOS FINDINGS. CONSIDERING THE FACTS OF THE CASE, ON ACC OUNT OF LACK OF GENUINENESS/ BUSINESS EXPEDIENCY IN TRAVELLING A ND CONVEYANCE EXPENSES, DISALLOWANCE CANNOT BE CONSIDE RED UNREASONABLE. CONSIDERING THE FACTS OF THE CASE, IN MY OPINION A DISALLOWANCE OF RS. 6,851/- OUT OF THE TRAVELLING A ND CONVEYANCE EXPENSES IS CONSIDERED REASONABLE AND IS UPHELD. THIS GROUND OF APPEAL IS THEREFORE, DISMISSED. 6.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOT IMPERATIVE TO REPEAT THE DISALLOWANCES CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF CAR/MOTOR CYCLE EXPENSES, TELEPHONE & MOBILE EXPENSES AND TRAVELLING EXPENSES . WE FIND THAT THE LD. CIT(A) TAKING INTO CONSIDERATION ALL THE FACTS AND CIRCUMSTANCES OF THE CASE CONFIRMED THE ABOVE DISALLOWANCES AND WE CONCU R WITH HIS FINDINGS. THUS THE GROUND NO. 2 OF THE C.O. OF THE ASSESSEE I S DISMISSED. ITA NO.947/JP/2016 ITO, WARD- 1( 1), KOTA VS M/S. S.S. CHEMICALS PVT LTD., KOTA 20 7.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS AL LOWED AND THE C.O. OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 -04-2018 . SD/- SD/- FOT; IKY JKO HKKXPUN (VIJAY PAL RAO) ( BHAGCHAND) U;KF;D LNL; / JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 11 /04/ 2018 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ITO, WARD- 1(1), KOTA 2. IZR;FKHZ@ THE RESPONDENT- M/S. S.S. POLY CHEMICALS PVT. LTD. KOTA 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.947 /JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR