1. This appeal filed by the assessee is directed against the order dated 05.11.2018 of the Commissioner of Income Tax (Appeals)-4,New Delhi relating to Assessment Year 2014-15.
2. Brief facts of the case as culled out from the material on record are as under :-
3. The assessee is a company who electronically filed its return of income for A.Y. 2014-15 on 26.03.2016 declaring loss at Rs. NIL. The case of the assessee was selected for scrutiny and thereafter assessment was framed u/s. 143(3) vide order dated 30.12.2016, and the total income was determined at Rs. 86,80,71,000/-.
4. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who vide order dated 05.11.2018 in Appeal No.805/16-17/CIT(A)-4, dismissed the appeal of the assessee.
5. Aggrieved by the order of CIT(A), assessee is now in appeal and has raised the following grounds:-
1. Under the facts and circumstances of the case, the assessment order passed by the ld. Assessing Authority u/s 143(3) of the Act and upheld by Id. First Appellate Authority is arbitrary, injudicious, invalid & bad at law.
2. Under the facts and circumstances of the case, Id. Assessing Authority and Id. First Appellate Authority has grossly erred in making addition of ' 85,10,50,000/- u/s 68 of the Act when no cash credit has been received by the assessee which is grossly injudicious, unwarranted, against the facts of the case & bad at law.
Tax Effect relating to above mentioned ground of appeal is ' 28,92,71,895/-.
3. Under the facts and circumstances of the case, Id. Assessing Authority and Id. First Appellate Authority has grossly erred in making addition of ' 85,10,50,000/- u/s 68 of the Act which is highly injudicious, unwarranted, against the facts of the case and bad at law as no cash credit either in the year under consideration or in any of the earlier years had ever been received by the assessee & the same were issued against the investment received by the assessee which do not tantamount to cash credit for the purpose of section 68 of the Act.
4. Under the facts and circumstances of the case, reference to Section 197(c) of the Finance Act, 2016 made by the Id. Assessing Authority and Id. First Appellate Authority is grossly misplaced and bad at law as the said section has no application in the case under consideration.
5. Under the facts and circumstances of the case, Id. Assessing Authority and Id. First Appellate Authority has grossly erred in alleging that the assessee has failed to establish the identity & creditworthiness of the shareholders and genuineness of the transaction of allotment of shares.
6. Under the facts and circumstances of the case, Id. Assessing Authority and Id. First Appellate Authority has grossly erred in alleging that credits on account of share capital & premium received by the assessee during F.Y. 2007-08 as credits of the year under consideration i.e. F.Y. 2013-14 which is highly injudicious, unwarranted, against the facts of the case, based on surmise and conjectures and bad at law.
7. Under the facts and circumstances of the case, Id. Assessing Authority and Id. First Appellate Authority has grossly erred in alleging that the assessee has not submitted any document to establish that the share capital & premium was received by it during F.Y. 2007-08 as the assessee had duly submitted all the necessary evidences pertaining to the same.
8. Under the facts and circumstances of the case, Id. Assessing Authority and Id. First Appellate Authority has grossly erred in making addition of ' 1,70,21000/- u/s 69C of the Act alleging that the assessee has paid 2% commission on the amount of share capital & premium of 85,10,50,000/- which is highly arbitrary, injudicious, unwarranted, based on surmise and conjectures, and bad at law.
Tax Effect relating to above mentioned ground of appeal is ' 57,85,438/-.
9. The appellant prays for leave to add, amend, alter or withdraw any grounds of appeal.
6. The case file reveals that the appeal was filed by the assessee on 24.01.2019 but in the past on the dates fixed for hearing there was no appearance from the side of assessee nor any adjournment application was filed. The case file further reveals that the notices sent in the past to the assessee intimating about the date of hearing was returned undelivered by the postal authorities with the reason “no such person at the address”. Preferring an appeal does not mean mere formally filing it but also taking all the steps to effectively pursue the appeal. When the appeal is filed before the Tribunal by the assessee himself against the orders of the lower authorities, it is expected that the assessee may put forth some documentary evidences in support of his contention so as to unable the appellate authorities to decide the appeal as it is the duty of the assessee to lead evidence in support of its claim and for the adjudicating authority to decide upon the sustainability of the claim on the basis of the evidence lead by the parties before it. The fact that the assessee has not appeared before the Tribunal despite various opportunities granted to the assessee shows that assessee is not serious in perusing the appeal filed by it. The assessee has not placed on record any change of address if any, to which the notice of the hearing could be served to it. In the absence of any co-operation from the side of the assessee we don’t find any reason to keep that matter pending before us. In circumstances we have no other option but to dispose of the appeal after considering the material available on record and after hearing the Ld. DR.
7. AO on perusing the Balance Sheet of the assessee noticed that it had shown share capital of Rs. 19,91,000/- and share premium of Rs. 84,90,59,000/- but had not provided any details of share holders despite various notices issued to the assessee. AO has also noted that the major share holder of the company i.e. M/s. Tenstar Marketing Pvt. Ltd., who was having 99.95% shares in the assessee was issued notice u/s. 133(6) for verification of the investments made. It is noted by the AO that the notice was not responded by the assessee and further the summons issued to the Directors of the assessee company were also not responded. AO after considering the material available on record at page 11 of the order under para 3 has noted that the company has been operating without bank account which according to him showed that it was formed only for providing accommodation entries. He has further noted that no source of original allotment was given and no return of income was filed by the assessee though the shares were stated to have been allotted during A.Y. 2008-09. He has further noted that the shares were allotted at a premium of Rs. 4,490/- for each share and no justification has been given by the assessee for such a huge premium. AO has also given a finding under para 4 of the order that the perusal of the Balance Sheet of M/s. Tenstar Marketing Pvt. Ltd., reveals that it had shown investment of Rs. 9,95,000/- whereas the assessee company had shown share capital with premium recorded in its Balance Sheet at Rs. 85,10,50,000/- and further the Directors of the assessee and M/s. Tenstar Marketing Pvt. Ltd., are common. AO has further noted that assessee had failed to provide the bank statement for the year 2007-08 to 2014-15 to prove that the money was actually received in those years and assessee also failed to produced the Directors of the company as well as the share subscriber companies. He has further noted that assessee has failed to establish that the money in the form of share capital and share premium were received in F.Y. 2007-08 as claimed by the assessee. He therefore concluded that assessee has not discharged his primary onus to prove that the sum credited in the books of accounts were related to F.Y. 2007-08. He therefore concluded that the amount of Rs. 85,10,50,000/- recorded by the assessee in its Balance Sheet has failed to pass the test of identity, creditworthiness and genuineness of the transaction. He accordingly made the addition of Rs. 85,10,50,000/- u/s. 68 of the Act. AO thereafter held that assessee would have a paid commission at 2% on the amount of accommodation entry of Rs. 85,10,50,000/- which works out to Rs.1,70,21,000/- and he made the addition of the aforesaid sum u/s. 69C of the Act.
8. Aggrieved by the order of AO, assessee carried the matter before CIT(A), who dismissed the appeal of the assessee. While dismissing the appeal, CIT(A) considered the submissions made by the assessee and which are reproduced in his order. CIT(A) thereafter upheld the order of AO by observing as under:-
6.1.10 It is to be noted that the appellant claims as per the documents placed on record, that the sum was credited in the books in the financial year 2007-08. The appellant in its grounds of appeal (no. 7) took a ground that all the financials, necessary ROC forms, Form 2 of allotment of shares etc. were placed before the AO. However, to my utter surprise, though a paper book comprising of 287 pages was filed before me, all such claimed documents pertaining to Financial Year 2007-08 were missing.
6.1.11 Instead, before me, the appellant filed a list of share subscribers in the year FY 2007-08 and the agreements entered by the company with them. I have perused the agreements and all of them are similarly worded and are of the same date. Further, none of the documents is registered and are not even on the stamp paper. Only court fees is pasted on the same. From the bare perusal of these agreements and the way they are drafted and presented, it becomes evident that the same are not genuine and are only self-serving documents. (These agreements are placed from page 1 to page 22 of the Paper book). As per the agreements, all such share subscribers have been allotted shares of Rs.10/-each at premium of Rs.4490/- in lieu of shares of certain unlisted companies valued at a very high rate and thus there is no payment in cash involved.
6.1.12 Further, these documents have not been corroborated with confirmation from these primary shareholders. The identity and creditworthiness of such primary share holders have not been divulged. Even the financials, board resolutions, Form 2 filed with ROC, etc. are also not on record.
6.1.13 It is also to be noted that there is no basis of the valuation also for which, the said transaction in shares has been made. Arbitrary values have been assigned without any reasoning and basis defying commercial prudence. Premium of Rs.4490/- has been paid by persons/companies of unproven financials credentials to the appellant company which has admittedly been doing no business, whatsoever. These primary shareholders have paid consideration in the form of highly valued shares of some unknown companies, whose financial credentials are further unproven.
6.1.14 Tax authorities must see substance over form. In substance, if all the documents, facts and circumstances are considered, the genuineness of the transaction cannot be accepted.
6.1.15 Furthermore, the submission of the appellant company that the transaction took place in the FY 2007-08 and not in the captioned financial year is not acceptable because of further following reasons:
1. No FORM -2 filed with ROC for allotment of shares in the claimed financial year 2007-08 is filed on record, which provides for detail of allotment of shares for other than cash.
2. No balance sheet or financials of all those companies to whom shares of the appellant company were allotted, is filed on record for FY 2007-08 to substantiate the investment in their books of accounts in the FY 2007-08. No details of persons who have been stated to have made investment in F.Y. 2007-08 by way of share capital has been filed.
3. No financials of the company for the FY 2007-08 were filed on record and no Annual compliance forms filed with ROC for such period were filed on record.
4. No income tax return for FY 2007-08 to FY 2012-13 is filed by the appellant company.
5. Interestingly financials for the FY 2008-09 to FY 2012-13 were filed before the ROC only in the Financial year 2016-17, after filing of the first income tax return by the company for the FY 2013-14 on 26.03.2016. From the details filed, it is established that no form and returns were filed by the company during the earlier financial years but Form 20B (Annual Return) & Form 23AC & ACA (Annual accounts) were filed for the first time in October, 2016 and January/ February, 2017.
6. Further, the appellant contented that the shares have been transferred by the shareholders of the company in the FY 2008-09 to another company named M/s Tenstar Marketing Pvt. Ltd. I have perused the financials of M/s Tenstar Marketing filed on record for the financial year 2008-09 and was surprised to note that the entire shareholding comprising of Rs.85,10,50,000/- was purchased by M/s Tenstar Marketing Put. Ltd. for a mere amount of Rs. Rs.9,95,000/-. The appellant placed photocopies of share transfer forms also on record, which cannot be accepted as no confirmation has been filed from either of the parties.
Such paperwork without supporting attending factors doesn't prove that real transaction pertains to FY 2007-08. Such documentation in the facts and circumstances of the case, appears to be a cover up attempt to mask the transactions as pertaining to FY 2007-08 as genuineness of transaction of Rs.85,10,50,000/- in FY 2007-08 has not been established in the absence of identity, source of fund and creditworthiness of primary/earlier investors. It is worthwhile to mention that the appellant company and M/s Tenstar Technologies Pvt. Ltd. have common directors.
6.1.16 Thus, in view of the above, the submission of the appellant company that the sum was not credited in the current captioned year but in FY 2007-08 is not acceptable, in the absence of any independent, direct evidence for the Financial year 2007-08 filed on record. No documentary evidence, which can stand on its own evidentiary value and on which the control of the appellant company is not possible, has been filed on record. All the documents which are placed on record, and the manner in which they are prepared and the circumstances and timing of filing of the same before ROC suggest that the same are self serving, not genuine and hence does not have any evidentiary value.
6.1.17 Therefore, this submission of the appellant company is also rejected and it is considered that the sum is credited in the financial year 2013-14 as per the reasons cited above and also in the assessment order.
6.1.18 Thus, in view of the aforesaid findings, the contentions raised by the appellant company against the order of the AO are dismissed.
6.1.19 The case laws relied upon by the AO in the factual matrix of this case are very relevant. The appellant has failed to produce any reliable and independent evidence to account for its claim of receiving share money in FY 2007-08. What has been produced is merely self serving and self generated documents created under a pre-mediated plan as a smoke-screen-conceived and executed to introduce unaccounted money.
6.1.20 None of the so called primary share-holders and original subscribers (Directors) were produced before the AO. The appellant failed to establish the genuineness of the transactions. Enquiry conducted through Inspector revealed that such primary shareholders do not exist at the given address.
6.1.21 It has been stated that primary share holders transferred the shares to M/s Tenstar Marketing Pvt. Ltd. during FY 2008-09 but the assessee failed to provide the details of IT, Bank account, PAN, Address, Balance Sheet of these primary share holders.
6.1.22 As on 31/03/2014, M/s Tenstar Marketing Pvt. Ltd. was having 99.95% share holding in the appellant company. Enquiry conducted by the AO through Inspector revealed that neither anybody nor any office establishment was found at the given address. Similarly, the inspector deputed to serve the summons to the primary share holders found that all these companies were not working at the address provided by the assessee. Summons issued to the Directors of the assessee company remained un-complied with. The assessee failed to produce the director of the assessee company or directors of primary or current share holders. If these have been genuine transactions reported to have taken place in earlier years, the assessee company could have easily produced Directors of share subscribing companies. Further, Directors of M/s Tenstar Marketing Pvt. Ltd., the company which has 99.95% share holding and common directors in the appellant company could have come along with all the financial documents and could have clarified the timing issue as well as about their intention to make investment in the equity shares of the appellant company because every investor wants to earn income from investment in the form of dividend as well as expects appreciation in the valuation of shares with the growth of business. The genuineness of the transactions is not proved at all because the appellant has failed to produce its Directors as well as the Directors of the primary share subscribing companies or Directors of M/s Tenstar Marketing Pvt. Ltd.
9. CIT(A) thereafter placing reliance relied on the decisions cited in his order observed as under:-
6.1.25 I agree with the AO that this is a case of accommodation entry. The onus to prove the three factum i.e. identity, creditworthiness and genuineness is on the assessee as the facts are within the assessee's knowledge. Mere production of copies of agreement with a number of persons without giving their PAN, source of income, IT details, bank statement is totally insufficient to prove the identity, creditworthiness and genuineness of transactions. Further, facts like non-maintenance of bank accounts, reliance only on self serving documents, Inability to produce the primary share allottees and present directors & share holders, filing of forms and returns of earlier many years with ROC in FY 2015-16 give me conviction to uphold the findings of AQ. All the surrounding and attending facts as also pointed out in the order of the AO predicate a cover up.
6.1.26 The appellant has relied on the decision of Hon'ble High Court of Madras in the case of M/s VR Global Energy Pvt. Ltd. [Tax Case (Appeal) No. 246 of 2017], wherein, it has been held that provision of Section 68 of the Act cannot be applied in the case of book adjustments.
6.1.27 I have considered the facts of the case of the decision relied upon by the appellant. In the instant case the transaction of Rs.85,10,50,000/- in F.Y. 2007-08 is of issue of shares for consideration other than 'cash'. The transaction of 'issue of shares for consideration other than cash' cannot be equated with 'adjustment by way of book entry'. "Adjustment by way of book entry" can only be in the case where there is already some liability/asset/entry in books of account's which is to be adjusted. However, in the instant case that was not the case. There was no entry subsisting in the books of account's which was adjusted. This was a fresh issue of equity shares for consideration other than cash, and was not issued against any of liability in the books of accounts. Thus the reliance of the appellant on the case is not applicable to the facts of instant case.
6.1.28 Thus, in view of the total factual matrix and the documents placed on record I agree with the assessment order of the AO. Thus, the addition made by the AO amounting to Rs.85,10,50,000/- under Section 68 is confirmed. The grounds of appeal are dismissed.
10. With respect to the addition made u/s. 69C of the Act, CIT(A) upheld the order of AO by observing as under:-
6.2.2 I have considered the facts of the case and the documents placed on record. As discussed above, documents/paper work is merely a cover up and therefore, there is no reason to interfere with the AO's reasonable action and estimation in adding a sum of Rs. 1,70,21,000/- u/s 69C on account of commission paid to obtain accommodation entry of Rs.85,10,50,000/- as the appellant has failed to rebut the finding of the Assessing Officer that in the given facts and circumstances of the case the receipt of share money was not genuine transactions but was only accommodation entry. Accordingly, addition of Rs. 1,70,21,000/- is also confirmed. The ground of appeal is dismissed.
11. Aggrieved by the order of CIT(A), assessee is now before us.
12. Before us, Ld. DR took us through the findings of lower authorities and supported the order of lower authorities.
13. We have heard the Ld. DR, and perused the material on record. The issue in the present appeal of the assessee is with respect to addition u/s. 68 & 69C of the Act. We find that CIT(A) by well reasoned and detailed order and after considering the submissions of the assessee and for the reasons which have been reproduced hereinabove dismissed the appeal of the assessee. Before us assessee has not placed any material on record to point out any fallacy in the findings of AO and CIT(A). In such a situation we find no reason to interfere with the order of CIT(A) and thus the grounds of assessee are dismissed.
14. In the result, appeal of the assessee is dismissed.
