Alfa Bhoj Limited vs Dy. Commissioner Of Income Tax ...

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*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+                  INCOME TAX APPEAL 27/2019

                                         Date of decision: 16th January, 2019

       ALFA BHOJ LIMITED                               ..... Appellant

                         Through: Mr. K. R. Manjani, Advocate.

                         versus

       DY. COMMISSIONER OF INCOME TAX CENTRAL CIRLE -13
                                                             ..... Respondent

Through: Mr. Ashok K. Manchanda, SSC.

CORAM:

HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE ANUP JAIRAM BHAMBHANI SANJIV KHANNA, J. (ORAL):

We have heard counsel for the appellant-assessee in this appeal under Section 260A of the Income Tax Act, 1961 ('Act' for short) which pertains to the Assessment Year 2002-03 and arises from the order of the Income Tax Appellate Tribunal (' Tribunal' for short) dated 31st August, 2018.

2. The appellant-assessee has challenged factual findings recorded by the Tribunal in affirming addition of Rs.5.27 crores on account of bogus share capital under Section 68 of the Income Tax Act, thereby affirming the order passed by the Assessing Officer and reversing the findings recorded by the Commissioner of Income Tax (Appeals).

3. The appellant-assessee was subjected to search and seizure operations under Section 132 of the Act on 10th November, 2004 and thereafter notice under Section 153A of the Act was issued. During the pendency of the said proceedings, the appellant-assessee also approached the Settlement Commission on disclosing the undisclosed income of Rs.17 lacs.

4. However, as the tax on the undisclosed income was not paid, settlement application was dismissed as not maintainable vide order dated 17th September, 2007.

5. The appellant-assessee does not dispute the issue on bogus share capital as per the details noticed by the assessing officer who held:-

"8. While scrutinizing the seized documents and register of share applications, the Assessing Officer noticed that the following persons applied for shares of the company on different dates:

Name and No. of Total Date of Date of Date of address of the shares amount application allotment payment Applicants applied for paid K.R. Fincap Pvt. 30,000 3,00,000 28.02.2002 28.02.2002 28.02.2002 Ltd. 63 Shankar Market, New Delhi Bampal 70,000 7,00,000 28.02.2002 28.02.2002 28.02.2002 Securities Pvt.

Ltd. 100, Cycle Market, Jhandewalan Exn. N. Delhi ITA No. 27/2019 Page 2 of 11 Punjab state 2,50,000 25,00,000 28.02.2002 28.02.2002 28.02.2002 Industrial, Udyog Bhawan, Chandigarh Royal Credit Pvt. 50,000 5,00,000 28.02.2002 28.02.2002 28.02.2002 Ltd. D-35A, First Floor, Rajouri Garden New Delhi Dinanath 50,000 5,00,000 28.02.2002 28.02.2002 28.02.2002 Luhaliwala Spinning Milss, A-261, Shastri Nagar, Delhi-

110052 Shatarchi Finance 2,00,000 20,00,000 28.02.2002 28.02.2002 28.02.2002 & Leasing. 196/1, Pck. D-12, Sector-7, Rohini, Delhi Shatarchi Finance 50,000 5,00,000 30.03.2002 30.03.2002 30.03.2002 & Leasing 196/1, 2,00,000Pck. D-

12, Sectior-7, Rohini, Delhi Rabik Exports 1,00,000 10,00,000 28.02.2002 28.02.2002 28.02.2002 Ltd. RZ-41A, Mohan Nagar, Panka Road, New Delhi Changla Steels 2,00,000 20,00,000 28.02.2002 28.02.2002 28.02.2002 Pvt. Ltd. 10-

3596, Regarpur Karol Bhag, New Delhi Bic Consultants 50,000 5,00,000 28.02.2002 28.02.2002 28.02.2002 ITA No. 27/2019 Page 3 of 11 Pvt. Ltd.

204,Delhi Chamber, Delhi Gate, New Delhi Sehgal Fluid 1,00,000 10,00,000 30.03.2002 30.03.2002 30.03.2002 Equipment RZ-

41A, Mohan Nagar Pankha Road, New Delhi FNS Consultancy 1,50,000 15,00,000 30.03.2002 30.03.2002 30.03.2002 Pvt. Ltd. A-66, Tagore Garden, New Delhi Rajesh Kumar 30,000 3,00,000 30.03.2002 30.03.2002 30.03.2002 Gupta 127, Mohalla Kanjimal Dasna Gate (Ghaziabad) Maestro 1,50,000 15,00,000 30.03.2002 30.03.2002 30.03.2002 Marketing Adversiting Pvt.

Ltd, A-4/181, Sec-17, Rohini Delhi-85 Harish Bhashin 1,50,000 15,00,000 10.12.2001 10.12.2001 10.12.2001 T-1, Rajori Garden, New Delhi Harish Bhashin 1,00,000 10,00,00 22.03.2002 22.03.2002 22.03.2002 T-1, Rajori Garden, New Delhi Jyoti Bhasin T-1, 1,00,000 10,00,00 10.12.2001 10.12.2001 10.12.2001 Rajori Garden, New Delhi ITA No. 27/2019 Page 4 of 11 Jyoti Bhasin T-1, 1,00,000 10,00,00 22.03.2002 22.03.2002 22.03.2002 Rajori Garden, New Delhi Jyoti Bhasin T-1, 20,000 2,00,000 30.03.2002 30.03.2002 30.03.2002 Rajori Garden, New Delhi Connoiseur 1,00,000 10,00,00 22.03.2002 22.03.2002 22.03.2002 Management Services Pvt. Ltd.

34, Engineers Enclave, Pitampura, New Delhi Connoiseur 1,00,000 10,00,00 28.02.2002 28.02.2002 28.02.2002 Management Services Pvt. Ltd.

34, Engineers Enclave, Pitampura, New Delhi Tanita Leasing 70,000 7,00,000 10.12.2001 10.12.2001 10.12.2001 Finance Ltd. A-

2/3, Lusa Tower 3rd floor, Azadpur New Delhi Tanita Leasing 1,30,000 13,00,000 28.02.2002 28.02.2002 28.02.2002 Finance Ltd. A-

2/3, Lusa Tower 3rd floor, Azadpur New Delhi Ethnic Creatio 1,00,000 10,00,000 10.12.2001 10.12.2001 10.12.2001 Pvt. Ltd. A-32, Tagore Garden Ex., New Delhi Ethnic Creatio 50,000 5,00,000 28.02.2002 28.02.2002 28.02.2002 Pvt. Ltd. A-32, ITA No. 27/2019 Page 5 of 11 Tagore Garden Ex., New Delhi SGC Publishing 1,50,000 15,00,00 10.12.2001 10.12.2001 10.12.2001 Pvt. Ltd. 50/15, Ashok Nagar, New Delhi-18 SGC Publishing 50,000 5,00,000 30.03.2002 30.03.2002 30.03.2002 Pvt. Ltd. 50/15, Ashok Nagar, New Delhi-18 Polo Leasing & 1.25.000 12,50,000 13.12.2001 13.12.2001 13.12.2001 Finance Ltd. A-

4/181, Rohini Sector-17, New Delhi Polo Leasing & 1,00,000 10,00,000 28.02.2002 28.02.2002 28.02.2002 Finance Ltd. A-

4/181, Rohini Sector-17, New Delhi M.v. Marketing 1,00,000 10,00,000 10.12.2001 10.12.2001 10.12.2001 Pvt. Ltd. A-32, Tagore Garden(Ext) New Delhi M.v. Marketing 20,000 2,00,000 28.02.2002 28.02.2002 28.02.2002 Pvt. Ltd. A-32, Tagore Garden(Ext) New Delhi Shree Niwas 60,000 6,00,000 10.12.2001 10.12.2001 10.12.2001 Leasing & Finance Ltd. A-

10,204 Sai Bhawan, Ranjeet Nagar, New ITA No. 27/2019 Page 6 of 11 Delhi Shree Niwas 50,000 5,00,000 28.02.2002 28.02.2002 28.02.2002 Leasing & Finance Ltd. A-

10,204 Sai Bhawan, Ranjeet Nagar, New Delhi Laxman Indus 30,000 3,00,000 10.12.2001 10.12.2001 10.12.2001 Resources Ltd.

101, 3rd Floor, A Commercial Chambers Satwant Singh 30,000 3,00,000 10.12.2001 10.12.2001 10.12.2001 Sodhi & Sons Pvt. Ltd. A-66 Tagore Garden New Delhi Satwant Singh 1,65,000 16,50,000 28.02.2002 28.02.2002 28.02.2002 Sodhi & Sons Pvt. Ltd. A-66 Tagore Garden New Delhi Geeface Finance 1,00,000 10,00,000 10.12.2001 10.12.2001 10.12.2001 Ltd. 3rd Floor, 13/34, WEA Karol Bagh, New Delhi Geeface Finance 1,30,000 13,00,000 28.02.2002 28.02.2002 28.02.2002 Ltd. 3rd Floor, 13/34, WEA Karol BAgh, New Delhi Rahul Finlease 55,000 5,50,000 28.02.2002 28.02.2002 28.02.2002 Pvt. Ltd. A-2/23, Shakti Nagar ITA No. 27/2019 Page 7 of 11 Extn., New Delhi Suma Finance & 20,000 2,00,000 28.02.2002 28.02.2002 28.02.2002 Investment 1366/21,Nalwala, Karol Bagh, New Delhi Performance 1,65,000 16,50,000 28.02.2002 28.02.2002 28.02.2002 Trading and Investment Pvt.

Ltd. A-261, Sashhtri Nagar, New Delhi Technocom 1,65,000 16,50,000 28.02.2002 28.02.2002 28.02.2002 Associates Pvt.

Ltd. 205, Delhi Chambers, Delhi Gate New Delhi Transpan 1,00,000 10,00,000 28.02.2002 28.02.2002 28.02.2002 Financial Services Ltd. E-

36, Jawahar Park, Laxmi Nagar, Delhi-92 Jasdeep 1,50,000 15,00,000 28.02.2002 28.02.2002 28.02.2002 Financers Pvt.

Ltd. 203, Mukund House Commercial Comples, Azadpur, New Delhi S.N. Electrical 50,000 15,00,000 28.02.2002 28.02.2002 28.02.2002 Pvt. Ltd. S-172, Co Cir. 29(4), New Delhi Titan Securities 2,00,000 20,00,000 28.02.2002 28.02.2002 28.02.2002 ITA No. 27/2019 Page 8 of 11 Ltd. A-2/3, Lusa Tower, Azadpur, New Delhi Tanuja Industries 75,000 7,50,000 28.02.2002 28.02.2002 28.02.2002 Credit A-2/3, Lusa Tower, 3rd Floor, Azadpur, Delhi Arun Finvest Pvt. 2,00,000 20,00,000 28.02.2002 28.02.2002 28.02.2002 Ltd. CA/16-D, Hari Nagar, New Delhi Fair N Saquare 2,00,000 20,00,000 28.02.2002 28.02.2002 28.02.2002 A-66, Tagore Garden Ex, New Delhi Surya Udyog 2,00,000 20,00,000 28.02.2002 28.02.2002 28.02.2002 4832/24, Ansari Road, Daryaganj, New Delhi Zed Leasing & 60,000 6,00,000 28.02.2002 28.02.2002 28.02.2002 Finance 4A, Pusa Road, New Delhi Zed Leasing & 30.03.2002 30.03.2002 30.03.2002 Finance 4A, Pusa Road, New Delhi 1,00,000 10,00,000

9. The Managing Director/partners of all such companies/firms were examined on oath and all of them accepted that they were name lenders on commission basis. The statements of all such directors/partners were confronted to the assessee company. However, the assessee company chose not to reply. Accordingly, share application money to the tune of Rs. 1.55 cores was treated ITA No. 27/2019 Page 9 of 11 as bogus. In respect of remaining share applicants, the assessee could not furnish any detail within the parameters of the provisions of section 68 of the Act.

10. The assessee, in one of its replies, explained that the share application money was received by it in tranches, which was rotated again and again and, therefore, only peak of such credits should be added as undisclosed income of the assessee. The assessee explained the modus operandi by admitting that, to avail the loan from IDBI Bank, it inflated cost of land/building. It also inflated cost of plant and machinery. The explanation of the assessee did not find favour with the Assessing Officers who was of the firm belief that the entire share capital is bogus and benefit of peak credit cannot be allowed on the peculiar facts of the case. The Assessing Officer, accordingly, made addition of Rs. 5.72 crores on account of bogus share capital u/s 68 of the Act.

6. The contention of the appellant-assessee is that the amount received was rotated. It was submitted that addition of bogus share capital should be restricted to Rs.1.55 cores.

7. We do not find any reasons and ground to accept the said submission as it is accepted that the bogus share capital received on different days amounted to Rs. 5.72crores. The amount paid was not returned and refunded. This being the position, we are not inclined to accept the contention of the appellant-assessee that there was rotation of money and only bogus share capital of Rs.1.55 crore should have been added as undisclosed credit under Section 68 of the Act.

8. At this stage, learned counsel for the appellant-assessee states that Rs.62 lacs was added as undisclosed cash credit for Assessment Years 1999- 2000 to 2002-03. It is stated that the appellant-assessee has filed an application under Section 254(2) of the Act before the Tribunal on the said aspect.

9. We would on the said aspect give liberty to the appellant-assessee to file an appeal after disposal and decision of the application under Section 254(2) of the Act. This would not bar the appellant from filing an appeal against the decision of the aforesaid miscellaneous applications.

10. Recording the aforesaid, we dismiss the present appeal on the first aspect. On the second aspect, the issue is left open to be decided if required and necessary. The appeal is dismissed without any order as to costs.

SANJIV KHANNA, J.

ANUP JAIRAM BHAMBHANI, J.

JANUARY 16, 2019 MR ITA No. 27/2019 Page 11 of 11