Fortune Seefin (P) Ltd, v. ITO Ward 11 (3),

ITA 4991/DEL/2007 | 2001-2002
Pronouncement Date: 29-01-2010 | Result: Allowed

Appeal Details

RSA Number 499120114 RSA 2007
Assessee PAN AAACF3170H
Bench Delhi
Appeal Number ITA 4991/DEL/2007
Duration Of Justice 2 year(s) 1 month(s) 9 day(s)
Appellant Fortune Seefin (P) Ltd,
Respondent ITO Ward 11 (3),
Appeal Type Income Tax Appeal
Pronouncement Date 29-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 29-01-2010
Date Of Final Hearing 19-08-2009
Next Hearing Date 19-08-2009
Assessment Year 2001-2002
Appeal Filed On 20-12-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C: NEW DELHI SHRI G.E. VEERABHADRAPPA HONBLE VICE PRESIDENT AND BEFORE SHRI C.L. SETHI JUDICIAL MEMBER & ITA NOS. 2172/DEL/2006 & 4991/DEL/2007 ASSESSMENT YEAR: 2001-02 M/S. FORTUNE SECFIN PVT. LTD. C/O M/S. GUPTA RANJAN K. & CO. 208 LAXMI DEEP TOWER LAXMI NAGAR DISTRICT CENTRE DELHI. VS. ASSTT. COMMISSIONER OF INCOME TAX (OSD) WARD 11 (3) NEW DELHI. (APPELLANT) (RESPONDENT) PAN: AAACF 3170 H APPELLANT BY : SHRI ASHWANI TA NEJA AR RESPONDENT BY : SHRI R.K. RAINA SR. DR O R D E R PER: C.L. SETHI JUDICIAL MEMBER THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST TWO SEPARATE ORDERS DATED 03/20.03.06 AND 29.09.2007 PA SSED BY THE LD. CIT (A) IN THE MATTER OF AN ASSESSMENT MADE U/S. 143(3) /147 OF THE INCOME TAX ACT 1961 AND IN THE MATTER OF A PENALTY LEVIE D U/S. 271(1)(C) OF THE ACT RESPECTIVELY FOR THE A.Y. 2001-02. 2. IN THE APPEAL ARISING FROM THE ASSESSMENT ORDER THE ASSESSEE HAS DISPUTED THE ADDITION OF RS. 94 00 000/- MADE BY TH E A.O. AND FURTHER CONFIRMED BY THE CIT(A) ON ACCOUNT OF SHARE CAPITA L RECEIVED BY THE ASSESSEE COMPANY DURING THE RELEVANT YEAR. 3. IN THIS CASE ORIGINAL RETURN DECLARING NIL INCO ME WAS FILED ON 25.02.2002 BY THE ASSESSEE. THE RETURN WAS ACCOMPA NIED WITH AUDITED 2172/DEL/2006 & 4991/DEL/2007 2 BALANCE SHEET AND PROFIT & LOSS ACCOUNT. THE RETUR N WAS PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY THE A.O. INITIATE D PROCEEDINGS U/S. 147 OF THE ACT AFTER RECEIVING AN INFORMATION THAT ONE SHRI SANJAY RASTOGI WHO IS A CHARTERED ACCOUNTANT ALONGWITH HIS ASSOCIA TES WAS PROVIDING ACCOMMODATION ENTRIES TO VARIOUS COMPANIES. DURING THE INVESTIGATION CONDUCTED BY THE DEPARTMENT IT WAS REVEALED THAT S HRI SANJAY RASTOGI HIS FATHER SHRI M S RASTOGI AND ONE OF HIS ASSOCIAT E SHRI ASHWANI UPPAL ALONGWITH HIS EMPLOYEES WERE ENGAGED IN PROVIDING B OGUS ENTRIES AND FOR THAT PURPOSE THEY CREATED NUMBER OF CONCERNS TH ROUGH WHICH BOGUS OR ACCOMMODATION ENTRIES WERE PROVIDED TO OTHER COMPAN IES OR FIRMS OR INDIVIDUAL ETC. IT WAS ALSO FOUND THAT THE ADDRESS ES OF MOST OF THE CONCERNS THROUGH WHICH ACCOMMODATION ENTRIES WERE P ROVIDED WAS THE SAME AS TO THE OFFICE ADDRESS OF SHRI SANJAY RASTO GI. IT WAS ALSO FOUND THAT IN ALL THE CONCERNS SHRI SANJAY RASTOGI AND/O R HIS ASSOCIATES WERE DIRECTORS AND SHRI SANJAY RASTOGI WAS HAVING CONTR OLLING POWER OVER ALL OTHER CONCERNS. AMONGST VARIOUS CONCERNS ONE CONC ERN VIZ. M/S. FRENZY PRODUCTS PVT. LTD. WAS ALSO PROVIDING BOGUS ENTRIES TO VARIOUS PERSONS. FROM THE INFORMATION RECEIVED FROM INVEST IGATION WING IT WAS REVEALED THAT THE ASSESSEE M/S. FORTUNE SECFIN PVT . LTD. HAD ENGAGED INTO BOGUS TRANSACTION OF RS. 21 00 000/- THROUGH M /S. HALLMARK DRUGS AND CHEMICALS PVT. LTD. IT HAD ALSO ENGAGED INTO B OGUS TRANSACTION OF RS. 20 00 000/- FROM KUSH LEASING PVT. LTD. TRANSACTIO N OF RS 8 00 000/- WITH M/S. MEHRAN EXPORTS (PVT.) LTD. RS. 15 00 000 /- FROM M/S. M.S 2172/DEL/2006 & 4991/DEL/2007 3 LEASING PVT. LTD. AND RS. 10 00 000/- WITH M/S. VI K MEDITRONICS (P) LTD. AND RS. 10 00 000/- WITH NIMANTRAN LEASING LT D. THE AGGREGATE AMOUNT OF BOGUS TRANSACTION UNDERTAKEN BY THE PRESE NT ASSESSEE WAS REPORTED TO BE OF RS. 84 00 000/-. ON THE BASIS OF AFORESAID INFORMATIONS THE AO INITIATED PROCEEDINGS U/S. 147 OF THE ACT AF TER RECORDING THE REASONS AND ENTERTAINING A BELIEF THAT HE HAD REASO N TO BELIEVE THAT AN AMOUNT OF RS. 84 00 000/- HAD ESCAPED ASSESSMENT AS THE ASSESSEE HAD UNDERSTATED ITS RETURNED INCOME BY AN AMOUNT OF RS. 84 00 000/- FOR THE A.Y. 2001-02. 4. IN THE ASSESSMENT THE A.O. MADE THE ADDITION OF RS. 94 00 000/- ON ACCOUNT OF SHARE CAPITAL RECEIVED FROM FOLLOWING CO NCERNS: - HALL MARK DRUGS & CHEMICAL P LTD. 21 00 000 KUSH LEASING (P) LTD. 20 00 000 MEHRAN EXPORTS (P) LTD. 8 00 000 M.S. LEASING PVT. LTD. 15 00 000 VIK MEDITRONICS (P) LTD. 10 00 000 NIMANTRAN LEASING LTD. 10 00 000 M.S. CAPITAL & MANAGEMENT SERVICES LTD. 10 00 000 TOTAL 94 00 000 5. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSEE WAS ASKED TO EXPLAIN THE TRANSACTION MADE IN THE BANK ACCOUNT NO . 61048 OF SBBJ. THE ASSESSEE FILED IT REPLY ON 04.03.2004 BEFORE TH E AO GIVING THE EXPLANATION ABOUT THE TRANSACTION IN THE AFORESAID BANK ACCOUNT MADE DURING THE PERIOD FROM 03.04.2000 TO 14.02.2001. 6. IN ORDER TO VERIFY THE CREDITWORTHINESS AND IDEN TITY OF SHARE INVESTORS OF AN AMOUNT OF RS. 94 00 000/- THE A.O. ISSUED SUMMONS TO 2172/DEL/2006 & 4991/DEL/2007 4 THEM AT THE ADDRESS GIVEN IN THE CONFIRMATION LETTE RS FILED BY THE ASSESSEE. HOWEVER THESE SUMMONSES COULD NOT BE SERVED UPON S OME OF THE INVESTORS AS NO SUCH COMPANY FOUND EXISTING AT THE ADDRESS GIVEN BY THE ASSESSEE AS PER THE REPORT OF THE INSPECTOR. 7. IN THE MEAN TIME SHRI SANJAY RASTOGI IN THE CAS E OF M/S. FRENZY PRODUCTS (P) LTD. WAS EXAMINED ON OATH BY THE A.O. ON 07.03.2005. IN THE STATEMENT SHRI SANJAY RASTOGI ADMITTED THAT HE WAS CONTROLLING INTEREST IN M/S. M.S. LEASING PVT. LTD M/S. M.S. C APITAL MANAGEMENT SERVICES PVT. LTD. M/S. KUSH LEASING PVT. LTD. AN D M/S. MEHRAN EXPORTS PVT. LTD. AND ALSO ADMITTED THAT THESE COMPANIES P ROVIDED BOGUS ENTRIES IN THE NATURE OF SHARE APPLICATION MONEY PAID TO TH E ASSESSEE COMPANY. HE ALSO STATED THAT M/S. NIMANTRAN LEASING LTD. HA LLMARK DRUGS AND CHEMICALS PVT. LTD. AND VIK MEDITRONICS (P) LTD. WE RE ALSO INVOLVED IN GIVING BOGUS ENTRIES. HE ALSO CONFIRMED THE FACTS THAT WERE STATED EARLIER BY ONE SHRI OM PRAKASH SHRI SANTOSH PRASAD AND BY HIM DURING THE SURVEY CONDUCTED AT HIS OFFICE ON 17.04.2003 AND 24 .04.2003. IN THE STATEMENT OF THE AFORESAID PERSONS THEY STATED THA T SHRI SANJAY RASTOGI WITH THE HELP OF HIS EMPLOYEES RELATIVES AND OTHER CHARTERED ACCOUNTANTS SPECIALLY SHRI ASHWANI UPPAL AND HIS EMPLOYEES HAD PROVIDED ACCOMMODATION ENTRIES TO OTHER PERSON IN LIEU OF MO NETARY BENEFITS AND FOR THIS PURPOSE HE CREATED NUMBER OF COMPANIES. T HE AO CONDUCTED EXTENSIVE ENQUIRIES INCLUDING TAKING STATEMENT OF A LL THE PERSONS INVOLVED IN THE TRANSACTIONS. THE AO CONCLUDED HIS FINDINGS AS UNDER:- 2172/DEL/2006 & 4991/DEL/2007 5 9. IN THE LIGHT OF ABOVE ADMISSIONS MADE BY SHRI RANJAM KUMAR BEFORE THE UNDERSIGNED FOLLOWING FACTS EMERGES:- A) THIS COMPANY WAS CREATED FOR THE BENEFIT OF SH. BIKRAM DAS GUPTA AND HIS COMPANIES B) THE PURPOSE FOR WHICH THE ASSESSEE COMPANY WAS CREATED WAS TO TRANSFER THE SHARES OF GLOBSYN TECHNOLOGIES LTD. HELD BY BDG GLOBAL PVT. LTD. BECAUSE GLOBSYN TECHNOLOGIES LTD. WAS GOING FOR PUBLIC ISSUE AND SHARES HELD BY BDG GLOBAL PVT. LTD. GLOBSYN TECHNOLOGIES LTD. WOULD HAVE GONE IN LOCK IN PERIOD AND THE LIQUIDITY OF COMPANY WOULD HAVE BEEN AFFECTED BECAUSE SUCH SHARES CAN NEITHER BE SOLD NOR TRANSFERRED DURING THE LOCK IN PERIOD. THEREFORE NEEDS AROSE FOR CREATING A COMPANY WHICH IN THE EYE OF LAW WOULD BE UNRELATED AND INDEPENDENT COMPANY WHEREIN BIKRAM DAS GUPTA AND HIS COMPANIES HAD NOT DIRECT STAKE OR INVESTMENT OR INVOLVEMENT. C) SHRI RANJAN KUMAR WAS A CLOSE CONFIDENT OF SHRI BIKRAM DAS GUPTA. BEING HIS CHARTERED ACCOUNTANT HE WAS ALREADY DOING PROFESSION WORK FOR BDG GLOBAL PVT. LTD. ROMIT LEASING & FINANCE LTD AND VARIOUS OTHER COMPANIES AND HIS PERSONAL AND FAMILY INCOME TAX MATTERS. HE WAS APPOINTED AUTHORIZED REPRESENTATIVE OF M/S. GLOBSYN TECHNOLOGIES LTD. GLOBSYN WEBEL LTD. AND BDG GLOBAL PVT. LTD. THEREFORE HIS SERVICES WERE TAKEN FOR CREATING THE ASSESSEE COMPANY. D) THE FUNDS FOR PURCHASING SHARES OF M/S. GLOBSYN TECHNOLOGIES LTD. FROM M/S. BDG GLOBAL PVT. LTD WAS ARRANGED BY INTRODUCING PROFITS ON SALE OF SHARES IN THE ASSESSMENT YEAR 2000-01 AND FROM FRESH SHARE CAPITAL INTRODUCED DURING THE PERIOD UNDER CONSIDERATION. FOR THIS BOGUS ENTRIES FOR SHARE APPLICATION MONEY WERE TAKEN FROM THE AFOREMENTIONED SEVEN COMPANIES OF SHRI SANJAY RASTOGI. HERE IT 2172/DEL/2006 & 4991/DEL/2007 6 IS IMPORTANT TO NOTE THAT THE SHARES OF THE COMPANY WERE PLANNED TO REMAIN WITH THE ASSESSEE COMPANY ITSELF BECAUSE THE SAME SHARES WERE TO BE BUYED BACK FROM THE INVESTORS AT THE RATE OF RS. 10 EACH FOR WHICH PAYMENT HAVE ALREADY BEEN MADE FROM THE SAVINGS BANK ACCOUNT OF SHRI RANJAN KUMAR AFTER TRANSFERRING THE FUND FROM THE BANK ACCOUNT OF THE ASSESSEE COMPANY IN THE FOLLOWING MANNER:- DATE PARTICULAR CHEQUE NO. AMOUNT PAID TO 7/11/2000 CLG 805195 100000 M.S. CAPITAL & MANAGEMENT SERVICES LTD. 7/11/2000 CLG 825199 150000 M.S. LEASING PVT. LTD. 7/11/2000 CLG 825197 100000 NIMANTRAN LEASING LTD. 7/11/2000 CLG 825193 210000 KUSH LEASING (P) LTD. 7/11/2000 CLG 825196 200000 HALL MARK DRUGS & CHEMICAL P LTD. 8/11/2000 CLG 825194 80000 MEHRAN EXPORTS (P) LTD. 30/12/2000 CLG 825198 100000 VIK MEDITRONICS (P) LTD. 10. SINCE DURING THE PERIOD UNDER CONSIDERATION SOURCE OF FRESH CAPITAL IS TO BE VER IFIED THE QUESTION OF PROFITS EARNED BY THE COMPANY IN A. Y. 2000-01 IS NOT EXAMINED AT THE MOMENT. 11. IT IS CLEAR FROM THE FOREGOING DISCUSSIONS THAT THE DIRECTOR OF THE ASSESSEE COMPANY SMT. ANJU GUPTA IS NOT THE CONVERSANT WITH THE FINANCIAL DEAL INGS ENTERED INTO BY THE COMPANY AND SHE HAS ADMITTED TH AT ALL THESE ASPECTS WERE LOOKED AFTER BY HER HUSBAND WHO IS THE AUTHORIZED SIGNATORY AND AUTHORIZED REPRESENTATIVE OF THE ASSESSEE COMPANY. EVEN SH. RANJAN KUMAR GUPTA DOES NOT KNOW ANYTHING ABOUT THE INVESTORS WHO HAS INVESTED 94 LACS IN THE COMPANY A ND AS PER HIS VERSION ALL THESE CHEQUES FOR INVESTMENT S 2172/DEL/2006 & 4991/DEL/2007 7 SHARE APPLICATIONS FORMS AND THE CONFIRMATIONS WERE GIVEN TO HIM BY SH. ASHWANI UPPAL ON THE DIRECTIONS OF SHRI BIKRAM DAS GUPTA. HERE IT IS IMPORTANT TO NOT E THAT THE ASSESSEE COMPANY IS A PRIVATE LIMITED COMP ANY AND AS PER USAGE CUSTOMS AND PRACTICE PREVALENT IN INDIA INVESTMENTS ARE USUALLY MADE IN SUCH COMPANI ES BY CLOSELY RELATED PERSONS E.G. FRIENDS AND RELATIV ES OF THE DIRECTORS AND SHAREHOLDERS. HOWEVER NEITHER S H. RANJAN KUMAR GUPTA NOR THE DIRECTOR IS IN KNOWLEDGE OF DIRECTORS AND SHAREHOLDERS OF THE INVESTOR COMPANIES. ON THE OTHER HAND THE PAYMENTS AGAINST CHEQUES RECEIVED FROM THE INVESTORS LEND IN THE ACCOUNTS OF THE CONCERNS CREATED BY SH. ASHWANI UPP AL WHO HAS UNDER OATH STATED THAT HE HAS DRAWN CASH FR OM THE SAID CONCERNS AND GIVEN IT TO SH. RANJAN KUMAR. HERE IT IS ALSO IMPORTANT TO NOTE THAT SHRI SANJAY RASTOGI HAS HIMSELF ADMITTED THAT BOGUS SHARE APPLICATION MONEY HAD BEEN GIVEN BY THE COMPANIES CREATED BY HIM TO THE ASSESSEE COMPANY. ALL THESE FACTS LEAD TO ONLY CONCLUSION THAT BOGUS SHARE APPLICATIO N MONEY AMOUNTING TO RS. 94 LAKHS WAS INTRODUCED IN T HE ASSESSEE COMPANY. 12. THE CONCLUSION THAT THE BOGUS SHARE APPLICATION MONEY WAS INTRODUCED IN THIS CASE IS AL SO CONFIRMED FROM THE FACT THAT THE SHARE OF THE COMPA NY WAS ALLOTTED AT THE PREMIUM OF RS. 90/- EACH FOR A SHARE OF RS. 10/- EACH. SUCH A HIGH PREMIUM FOR A UNKNOW N PRIVATE COMPANY OF A VERY SMALL CAPITAL BASE IS NOT A PRUDENT BUSINESS FOR GENUINE COMPANY. STILL SEVEN INVESTOR COMPANIES PREFERRED TO PURCHASE SHARES OF SUCH A COMPANY FOR ON SUCH A HIGH PREMIUM. IT IS A LSO INTERESTING TO NOTE THAT THESE INVESTOR COMPANIES W ERE READY TO SALE THE SAME SHARES OF RS. 10/- ONLY WITH IN FEW MONTHS OF INVESTMENTS FOR WHICH THEY ACCEPTED CHEQU ES FROM SHRI RANJAN KUMAR. IT IS CLEAR THAT THIS STEP WAS TAKEN FOR RETAINING THE SHARES IN THE COMPANY ITSEL F. 13. THUS FROM THE ENQUIRIES MADE IN THIS MATTER AND ADMISSION MADE BY SH. ASHWANI UPPAL SHRI SANJAY RASTOGI AND SHRI RANJAN KUMAR IT IS CONCLUDED THAT A SUM OF RS. 94 LAC WAS INTRODUCED I N THE ASSESSEE COMPANY FROM UNDISCLOSED SOURCES. FOR INTRODUCING THIS UNACCOUNTED MONEY ASSISTANCE OF S HRI SANJAY RASTOGI AND SHRI ASHWANI UPPAL AND SHRI RANJAN KUMAR WAS TAKEN. THE SEVEN COMPANIES OF SHR I SANJAY RASTOGI GROUP ISSUED CHEQUES IN LIEU OF CASH IN 2172/DEL/2006 & 4991/DEL/2007 8 FAVOUR OF ASSESSEE COMPANY WHO TRANSFERRED THE MON EY SO PRODUCED TO M/S. BDG GLOBAL PVT. LTD UNDER THE GARB OF PAYMENT FOR PURCHASE OF SHARES OF M/S. GLOB SYN TECHNOLOGIES LTD. THIS PAYMENT WAS MADE EITHER DIRECTLY TO M/S. BIKRAM DAS GUPTA TO HIM OR TO OTH ER COMPANIES AND CONCERNS I.E. TO D.K. ELECTRICALS AND GLOBSYN WEBEL LTD. OR ROMIT LEASING AND FINANCE PVT . LTD. AND ALSO FOR EXPENSES OF TAX PAYMENT OF SH. BI KRAM DAS GUPTA. THE MONEY SO TRANSFERRED TO M/S. BDG GLOBAL PVT. LTD AND GLOBSYN WEBEL LTD. WAS THEN TRANSFERRED TO M/S. D K ELECTRICALS AND ULTIMATELY CASH WAS WITHDRAWN FROM THE SAID ACCOUNT. THUS THE MONE Y INTRODUCED FROM UNEXPLAINED SOURCES WAS ULTIMATELY GONE TO THE PERSONS TO WHOM IT BELONGED. THIS CONF IRMS THAT BOGUS SHARE APPLICATIONS MONEY IN LIEU OF CASH WAS RECEIVED BY THE ASSESSEE COMPANY FROM INVESTORS AND WHOLE TRANSACTION WAS NOTHING BUT A SHAM TRANSACTIO N. 14. THEREFORE IT IS HELD THAT THE ASSESSEE COMPANY HAS FAILED TO DISCHARGE ITS ONUS OF PROVING THE IDENTITY AND CREDITWORTHINESS OF PERSONS WHO HAVE INVESTED RS. 94 LAC IN THE COMPANY. THE SAME IS AD DED BACK UNDER THE PROVISIONS OF SECTION 68 AS UNEXPLAI NED CREDITS IN THE BOOKS OF ACCOUNTS. PENALTY PROCEEDI NGS U/S. 271(1)(C) IS INITIATED FOR CONCEALING PARTICUL ARS OF INCOME. 8. BEING AGGRIEVED THE ASSESSEE PREFERRED AN APPEA L BEFORE THE CIT(A). 9. DURING THE COURSE OF APPELLATE PROCEEDINGS IT WA S SUBMITTED BY THE ASSESSEE THAT NEITHER THE REASONS RECORDED FOR INIT IATING U/S. 147 OF THE ACT NOR THE STATEMENT OF SHRI SANJAY RASTOGI OR CROSS E XAMINATION WERE PROVIDED TO THE ASSESSEE. THE CIT(A) THEREFORE D IRECTED THE AO TO GIVE THE COPIES OF THE STATEMENT OF SHRI SANJAY RASTOGI AND ALSO MAKE HIM AVAILABLE FOR CROSS EXAMINATION BY THE ASSESSEE COM PANY AND AFTER DOING SO AND MAKING FURTHER VERIFICATION TO SUBMIT FURTHE R REMAND REPORT ON THE 2172/DEL/2006 & 4991/DEL/2007 9 ISSUE. THE AO FORWARDED THE REMAND REPORT VIDE LET TER DATED 03.10.2005 AND 25.10.2005 CONTENTS OF WHICH HAVE BEEN SUMMARI ZED IN PARA 2.5 OF THE CIT(A)S ORDER. 10. THE CIT(A) THEN SUMMARIZED THE SUBMISSIONS OF T HE ASSESSEE GIVEN IN REPLY TO THE REMAND REPORT IN PARA 2.5 OF HIS ORDER. 11. AFTER CONSIDERING THE PROVISIONS OF SECTION 147 148 AND 68 OF THE ACT AND AFTER CONSIDERING THE VARIOUS FACTS INCLUD ING THE STATEMENT OF SHRI RANJAN KUMAR GUPTA SHRI SANJAY RASTOGI AND OT HER PERSONS THE CIT(A) DECIDED THE ISSUE BY OBSERVING AND HOLDING A S UNDER:- FROM THE STATEMENTS NOTED ABOVE OF SHRI SANJAY RASTOGI DATED 1.3.2005 IN THE CASE OF M/S. FRENZY P RODUCTS PVT. LTD. U/S. 131 IT IS CLEAR THAT M.S. LEASING PV T. LTD. KUSH LEASING PVT. LTD. M.S. CAPITAL MANAGEMENT AND MEHRAM EXPORT PVT. LTD. ARE HIS FOUR COMPANIES WHIC H WERE USED AS A CONDUIT TO GIVE AND TAKE EXCESS FUND S AVAILABLE IN THE BANK ACCOUNT. IT HAS BEEN CLEARLY MENTIONED BY SHRI SANJAY RASTOGI IN RESPONSE TO Q. NO. 7 THAT FORTUNE SECFIN (P) LTD HAS TAKEN BOGUS ENTRIES FROM M/S. CAPITAL SERVICES LTD. MEHRAM EXPORT PVT. LTD. KUSH LEASING PVT. LTD. AND M.S. LEASING PVT. LTD. THE STATEMENT GIVEN BY SHRI SANJAY RASTOGI IS CORROBORA TED FROM THE STATEMENT GIVEN BY SHRI RANJAN KUMAR GUPTA HIMSELF DATED 21.03.2005 U/S. 131 OF THE I.T. ACT. INITIALLY IN THE STATEMENT DATED 17.03.2005 IT WAS STATED BY SHRI RANJAN KUMAR GUPTA THAT HE WAS TOLD ONE SH. ASHWAN I UPPAL WILL HANDOVER THE CHEQUES ALONG WITH SHARE APPLICATION FORMS AND CONFIRMATIONS FOR INVESTMENT FROM THE SEVEN CONCERNS UNDER CONSIDERATIONS I.E. M/S. C APITAL MANAGEMENT SERVICES LTD. M.S. LEASING PVT. LTD. M /S. KUSH LEASING PVT. LTD. M/S. MEHRAM EXPORT PVT. LTD . M/S. NIMANTRAN LEASING LTD. M/S. HALLMARK DRUGS AN D CHEMICALS PVT. LTD. AND MEDIATRONICS PVT. LTD. BUT ON 21.3.2005 IT WAS ADMITTED BY SHRI RANJAN KUMAR GUPT A AS HE WAS CLOSE CONFIDENT OF SHRI BIKRAM DAS GUPTA BEI NG HIS CHARTERED ACCOUNTANT FOR HIM AND HIS GROUP COMPANIE S HE WAS MADE THE AUTHORIZED SIGNATORY TO THE BANK IN THE 2172/DEL/2006 & 4991/DEL/2007 10 CASE OF M/S. FORTUNE SECFIN (P) LTD. AND THE NAME O F SHRI ASHWANI UPPAL WAS SUGGESTED BY HIM TO SH. BIKRAM DA S GUPTA AS HE AND BIKRAM DAS GUPTA WAS IN THE KNOWLED GE THAT SH. ASHWANI UPPAL AND SH. SANJAY RASTOGI ARE D OING THE WORK OF PROVIDING ENTRIES TO THE NEEDY PERSONS. SH. RANJAN KUMAR GUPTA HAS ALSO ADMITTED IN THE STATEME NT DATED17.3.2005 IN RESPONSE TO Q. NO. 6 THAT SHARES ISSUED IN THE NAME OF SEVEN COMPANIES UNDER CONSIDERATION FOR RS. 94 LACS BY THE APPELLANT COMPANY WAS PURCHASED BACK BY THE APPELLANT COMPANY FROM THE SEVEN INVESTEE COMPANIES FOR RS. 9 LACS ONLY. THIS CLEARLY SHOWS THAT THERE IS NO CONTRADICTION AND ANY DOUBT REGARDING T HE SO CALLED TRANSACTION OF INVESTMENT NOT BEING GENUINE MADE BY THE SEVEN INVESTEE COMPANIES IN THE APPELLANT CO MPANY. THE SAME IS BEING ACCEPTED BY SH. RANJAN KUMAR GUPT A ALSO WHO IS MANAGING THE APPELLANT COMPANY WHICH IS NOT DISPUTED. UNDER THE SITUATION THE ONLY QUESTION WHICH REMAINS TO BE ANSWERED IN WHOSE HAND THIS SUM OF RS 94 LACS CREDITED IN THE ACCOUNTS OF THE APPELLANT COMP ANY SHOULD BE ASSESSED. AS PER THE PROVISIONS OF THE ACT THE PRIMARY ONU S IS ON THE APPELLANT TO PROVE THE IDENTITY GENUINEN ESS AND CREDITWORTHINESS OF THE CREDITS APPEARING IN THE BO OKS OF ACCOUNT. THE WIFE OF SHRI RANJAN KUMAR GUPTA SMT. ANJU GUPTA HAS STATED ON OATH U/S. 131 OF THE ACT THAT S HE DOES NOT KNOW ANYTHING ABOUT THE COMPANY AND THE COMPANY IS MANAGED BY HER HUSBAND SHRI RANJAN KUMAR GUPTA WHO IS A CA AND SHE USED TO PUT SIGNATURE ON THE PAPER AS DIRECTED BY HIM. MERE FURNISHING OF THE PARTICULARS OR PAYMENT BY ACCOUNT PAYEE CHEQUE IS NOT SACROSANCT N OR CAN IT MAKE A NON GENUINE TRANSACTION AS GENUINE. T HERE IS NO DOUBT THE CREDITS APPEARING IN THE NAME OF ABOVE SEVEN INVESTEE COMPANIES ARE NOT GENUINE. THE ONUS IS ON THE APPELLANT COMPANY TO PROVE THE GENUINENESS OF THE C REDITS APPEARING IN ITS BOOKS OF ACCOUNTS. SHRI RANJAN KU MAR GUPTA HAS SUBMITTED THAT THE FUNDS HAVE BEEN ARRANG ED BY SHRI B.D. GUPTA FOR WHOSE BENEFIT THE APPELLANT COM PANY WAS CREATED. SHRI RANJAN KUMAR GUPTA HAS NOT PRODUC ED SHRI B.D. GUPTA TO SUPPORT HIS SUBMISSION THAT THE FUNDS WERE INTRODUCED BY SHRI B.D. GUPTA. ON THE CONTRAR Y THE STATEMENT OF SHRI ASHWANI UPPAL IS THERE WHO HAS CONFIRMED THAT WHEN THE CHEQUES WERE ISSUED BY M/S. FORTUNE SECFIN (P) LTD. REACHED M/S. D.K. ELECTRICA LS INN THE VARIOUS NAMES THE CASH WAS WITHDRAWN AND PERSON ALLY 2172/DEL/2006 & 4991/DEL/2007 11 DELIVERED TO SH. RANJAN KUMAR GUPTA AT HIS OFFICE B Y HIM. THOUGH SH. RANJAN KUMAR GUPTA HAS STATED THAT THE STATEMENT GIVEN BY SH. ASHWANI UPPAL IS INCORRECT A ND HE HAS NOT HANDED ANY MONEY TO HIM BUT HE HAS NOT CROS S EXAMINED SH. ASHWANI KUMAR UPPAL ON THIS STATEMENT OF HIS WHICH HAS BEEN RECORDED U/S. 131 OF THE I.T. AC T. AS SHRI ASHWANI KUMAR UPPAL HAS NOT BEEN EXAMINED BY S HRI RANJAN KUMAR GUPTA THE STATEMENT GIVEN BY SH. ASHWA NI KUMAR UPPAL IS TAKEN TO BE THE CORRECT STATEMENT GI VEN U/S. 131 OF THE ACT. FROM THIS IT IS CLEAR THAT THE MONEY HAS BEEN RECEIVED BACK BY SHRI RANJAN KUMAR GUPTA AND H IS THE PERSON WHO IS RESPONSIBLE FOR THE APPELLANT COM PANY AND HAVE RECEIVED THE MONEY ON BEHALF OF THE APPELL ANT COMPANY. THEREFORE UNDER THE SITUATION AS THE APP ELLANT COMPANY HAS NOT BEEN ABLE TO PROVE THAT THE MONEY H AS BEEN INTRODUCED BY SOME OTHER PERSON AS THE CREDITS ARE APPEARING IN THE BOOKS OF THE APPELLANT COMPANY AND WHICH HAS NOT BEEN PROVED TO BE GENUINE BY THE APPE LLANT COMPANY THE AO HAS RIGHTLY ADDED THE SAME TO THE INCOME OF THE APPELLANT U/S. 68 OF THE I.T. ACT. T HE ACTION THE AO IS CONFIRMED. 12. BEING AGGRIEVED THE ASSESSEE IS IN APPEAL BEFO RE US 13. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT EVEN ASSUMING BUT NOT ADMITTING THE FINDINGS GIVEN BY THE AO AND BY THE CIT(A) AS TO THE MODEST OPERANDI UNDER WHICH THE SHARE CAPITAL H AS BEEN CREDITED IN THE ACCOUNT OF THE ASSESSEE COMPANY IT IS CLEAR TH AT THE UNDISCLOSED MONEY HAS COME FROM THE COFFERS OF SHRI BIKRAM DAS GUPTA FOR WHOSE BENEFIT THE PRESENT COMPANY WAS CREATED AND THE SHA RE CAPITAL WAS INTRODUCED IN THE BOOKS OF ACCOUNTS. AS PER THE ST ATEMENT OF SHRI RANJAN KUMAR GUPTA AND OTHERWISE IN THE LIGHT OF THE STAT EMENT OF SHRI ASHWANI UPPAL THE CASH MONEY WAS WITHDRAWN AND PERSONALLY DELIVERED TO SHRI RANJAN KUMAR GUPTA BY SHRI ASHWANI UPPAL. HE THER EFORE SUBMITTED THAT THE MONEY INTRODUCED IN THE FORM OF SHARE CAPI TAL IN THE ACCOUNTS OF 2172/DEL/2006 & 4991/DEL/2007 12 THE ASSESSEE COMPANY HAS NOT COME FROM COFFERS OF T HE ASSESSEE COMPANY BUT HAS BEEN INTRODUCED EITHER BY SHRI RANJAN KUMAR GUPTA OR BY SHRI BIKRAM DAS GUPTA AND THE UNDISCLOSED INVESTMENT CAN THUS BE ASSESSED IN THE HANDS OF SHRI RANJAN KUMAR GUPTA OR SHRI BIK RAM DAS GUPTA AND CERTAINLY NOT IN THE HANDS OF THE ASSESSEE COMPANY. 14. THE LD. DR ON THE OTHER HAND SUPPORTED THE OR DERS OF THE AUTHORITIES BELOW. 15. BEFORE CONSIDERING OTHER ASPECTS OF THE PRESENT CASE WE FIND IT APPROPRIATE TO CONSIDER ONE CORE ISSUE WHETHER INVE STMENTS IN THE SHARE CAPITAL HAS ACTUALLY EMANATED FROM THE COFFERS OF T HE ASSESSEE COMPANY OR FROM THE COFFERS OF SHRI RANJAN KUMAR GUPTA OR SHRI BIKRAM DAS GUPTA OR ANY OTHER PERSON/S. ON THE PROPOSITION THAT SHA RE CAPITAL RECEIVED BY A COMPANY CAN BE CONSIDERED IN THE HANDS OF THE PERSO NS WHOSE COFFERS THE MONEY HAS EMANATED FROM A REFERENCE MAY BE MADE TO THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. VA LUE CAPITAL SERVICES PVT. LTD. (2008) 307 ITR 334 (DELHI) WHERE THE HON BLE HIGH COURT HAS HELD THAT IN ORDER TO TREAT THE SHARE CAPITAL MONEY AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY IT IS THE BURDEN OF THE R EVENUE TO SHOW THAT THE INVESTMENT MADE BY SHARE APPLICANT HAS ACTUALLY EMA NATED FROM COFFERS OF THE ASSESSEE COMPANY AND IF THE REVENUE HAS NO T DISCHARGED THIS BURDEN THE SHARE CAPITAL MONEY CANNOT BE TREATED A S UNDISCLOSED INCOME OF THE COMPANY EVEN IF THE SHARE APPLICANT DOES NOT HAVE THE MEANS TO MAKE THE INVESTMENT. SIMILARLY THE HONBLE SUPREM E COURT IN THE CASE 2172/DEL/2006 & 4991/DEL/2007 13 OF CIT VS. LOVELY EXPORTS PVT. LTD. (2008) 216 CTR 195 (SC) HAS ALSO OBSERVED THAT IF THE SHARE APPLICATION MONEY IS REC EIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHARE HOLDERS WHOSE NAM ES ARE GIVEN TO THE AO THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. THEREFORE WE HAVE TO CONSIDER WHOSE COFFERS THE INVESTMENT IN THE SHARE CAPITAL I S ACTUALLY EMANATED FROM. IN THIS RESPECT THE STATEMENT OF SHRI RANJA N KUMAR GUPTA AND SHRI ASHWANI UPPAL HAS BEEN CONSIDERED AND LOOKED INTO B Y THE CIT(A). AT ONE STAGE THE CIT(A) HAS STATED THAT AS SHRI ASHWA NI KUMAR UPPAL HAS NOT BEEN CROSS-EXAMINED BY SHRI RANJAN KUMAR GUPTA THE STATEMENT GIVEN BY SHRI ASHWANI KUMAR UPPAL IS TAKEN TO BE CO RRECT STATEMENT GIVEN U/S. 131 OF THE ACT AND FROM THIS IT IS CLEA R THAT THE MONEY HAS BEEN RECEIVED BACK BY SHRI RANJAN KUMAR GUPTA AND HE IS THE PERSON WHO IS RESPONSIBLE FOR THE ASSESSEE COMPANY AND HAVE RECEI VED MONEY ON BEHALF OF THE ASSESSEE. BUT THE CIT(A) HAS NOT BEEN ABLE TO POINT OUT ANY MATERIAL ON RECORD TO SHOW AND ESTABLISH THAT SHRI RANJAN KUMAR GUPTA WAS ACTUALLY ACTING FOR AND ON BEHALF OF THE ASSESS EE COMPANY AND HAD RECEIVED MONEY FOR AND ON BEHALF OF THE ASSESSEE CO MPANY AND THIS ASPECT OF THE MATTER HAS NOT BEEN PUT TO SHRI RANJA N KUMAR GUPTA OR TO THE ASSESSEE TO HAVE THEIR SAY NOR ANY EXERCISE OF GIVING AN OPPORTUNITY TO SHRI RANJAN KUMAR GUPTA TO CROSS EXAMINE SHRI AS HWANI KUMAR UPPAL HAS BEEN MADE BY THE CIT(A) BEFORE GIVING ANY ADVERSE FINDING AGAINST SHRI RANJAN KUMAR GUPTA THAT MONEY WERE REC EIVED BACK BY SHRI 2172/DEL/2006 & 4991/DEL/2007 14 RANJAN KUMAR GUPTA FOR AND ON BEHALF OF THE ASSESSE E COMPANY. IN THE LIGHT OF THIS CONTRADICTORY STATEMENT OF SHRI RANJA N KUMAR GUPTA VIZ-A`- VIZ SHRI ASHWANI KUMAR UPPAL AND IN THE LIGHT OF T HE ROLE PLAYED BY SHRI BIKRAM DAS GUPTA WE ARE OF THE CONSIDERED VIEW THA T MATTER TO ASCERTAIN WHOSE COFFERS THE INVESTMENTS HAS ACTUALLY EMANATED FROM NEED FURTHER AND EXTENSIVE ENQUIRY AFTER EXAMINING EACH OF SHRI RANJAN KUMAR GUPTA SHRI ASHWANI UPPAL AND SHRI BIKRAM DAS GUPTA OR ANY OTHER PERSONS AND AFTER GIVING OPPORTUNITY TO EACH TO CROSS EXAMINE E ACH-OTHER IN RESPECT OF ANY MATERIAL OR STATEMENT MADE AGAINST ANY OF THEM AND THEN TO DECIDE THE MATTER AS TO THE SOURCE OF THE INVESTMENTS MADE IN THE ASSESSEE COMPANY TOWARDS SHARE CAPITAL AND FIND THE SOURCE F ROM WHICH THE MONEY HAS ACTUALLY BEEN EMANATED FROM. IF IN THE LIGHT O F THE ENQUIRY ALREADY MADE BY THE AO AND IN THE LIGHT OF FURTHER ENQUIRY TO BE MADE BY THE AO IN THE COURSE OF FRESH ASSESSMENT PROCEEDINGS BEING REMANDED BY US TO THE AO IT TRANSFERS THAT INVESTMENT HAS NOT BEEN E MANATED FROM THE COFFERS OF THE ASSESSEE COMPANY THE ADDITION OF SH ARE CAPITAL MONEY CANNOT BE MADE IN THE ASSESSEES HANDS BUT SHALL B E MADE IN THE HANDS OF THE CONCERNED PERSONS WHOSE COFFERS THE INVESTMENT S WERE EMANATED FROM. THE AO SHALL EXAMINE THE MATTER AFRESH AND S HALL ASCERTAIN THE SOURCE OF MONEY INTRODUCED AS SHARE CAPITAL IN THE PRESENT ASSESSEE COMPANY AND TO TAKE APPROPRIATE ACTION AS PER LAW I N THE HANDS OF THAT PERSON WHOSE COFFERS MONEY HAS BEEN EMANATED FROM FOR THE PURPOSE OF INTRODUCING THE SAME AS SHARE CAPITAL IN THE ACCOUN TS OF THE ASSESSEE 2172/DEL/2006 & 4991/DEL/2007 15 COMPANY. THE AO SHALL BE FREE TO INITIATE ACTION OF ASSESSMENT IN THE HANDS OF A PERSON WHO HAS ACTUALLY INVESTED THE MON EY TOWARDS SHARE CAPITAL IN THE PRESENT ASSESSEE COMPANY IN THE LIG HT OF OUR DIRECTIONS WITHIN THE MEANING OF SECTION 150 OF THE ACT AFTER GIVEN HIM AN OPPORTUNITY TO HAVE HIS SAY IN THIS REGARD. THE AO SHALL PROVIDE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE AS WELL AS TO THE OTHER PERSONS TO HAVE THEIR SAY AND TO DECIDE THE M ATTER AS PER LAW AND IN THE LIGHT OF THE FACTS TO BE BROUGHT ON RECORD BY T HE AO. WE ORDER ACCORDINGLY. 16. SINCE THE MATTER HAS BEEN RESTORED BACK TO THE FILE OF THE AO FOR HIS FRESH ADJUDICATION THE OTHER ISSUES ABOUT THE VALI DITY OF THE ASSESSMENT BEING REOPENED U/S. 147 OF THE ACT SHALL ALSO BE CO NSIDERED BY THE AO AFRESH AFTER PROVIDING REASONABLE OPPORTUNITY OF BE ING HEARD TO THE ASSESSEE. ITA NO. 4991/DEL/2007 17. NOW WE COME TO THE APPEAL PERTAINING TO THE PE NALTY LEVIED U/S. 271(1)(C) OF THE ACT IN RESPECT OF THE ADDITION OF RS. 94 00 000/- MADE BY THE AO ON ACCOUNT OF SHARE CAPITAL INTRODUCED IN TH E ACCOUNT OF THE ASSESSEE COMPANY. 18. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GO NE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 19. SINCE THE VERY ADDITION OF RS. 94 00 000/- IN R ESPECT OF WHICH THE PENALTY HAS BEEN LEVIED U/S. 271(1)(C) OF THE ACT HAS BEEN SET ASIDE TO THE 2172/DEL/2006 & 4991/DEL/2007 16 FILE OF THE AO FOR HIS FRESH ADJUDICATION THE BASI S ON WHICH PENALTY HAS BEEN IMPOSED DOES NOT SURVIVE AT THIS STAGE. WE T HEREFORE SET ASIDE THE PENALTY ORDER PASSED BY THE AO AS WELL AS THE ORDER OF THE CIT(A) CONFIRMING THE PENALTY WITH AN OBSERVATION THAT AO MAY INITIATE FRESH PENALTY PROCEEDINGS U/S. 271(1)(C) IN THE COURSE OF THE FRESH ASSESSMENT PROCEEDINGS TO BE MADE BY HIM IN PURSUANCE TO OUR O RDER REMANDING THE ASSESSMENT BACK TO HIS FILE FOR DENOVO ASSESSMENT IF HE THINKS FIT AND PROPER AS PER LAW. WE ORDER ACCORDINGLY. 20. IN THE RESULT THESE TWO APPEALS FILED BY THE A SSESSEE ARE TREATED TO BE ALLOWED FOR STATISTICAL PURPOSE IN THE MANNER AS INDICATED ABOVE. 21. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N . DECEMBER 2009. (G.E. VEERABHADRAPPA) VICE-PRESIDENT (C.L. SETHI) JUDICIAL MEMBER DATED: . DECEMBER 2009. *NITASHA COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT NEW DELHI. BY ORDER DEPUTY REGISTRAR