A two-judge bench of the Delhi High Court has upheld an income tax addition made under Section 68 of the Income Tax Act wherein the assessee- Company was found receiving bogus share premium from seven fake Companies formed by a Chartered Accountant.
The respondent-assessee received money in the form of share capital/share premium from seven Companies.
While completing the assessment, the Assessing Officer observed that these seven companies were “creation‟ of and de facto operated by one Tarun Goyal, Chartered Accountant, who had set up about 90 companies/firms including the aforesaid 5 companies for providing accommodation entries.
After the search, it was revealed that the registered office of 90 companies was located at their former office in New Delhi. It was also revealed that these companies were not carrying on any genuine business activities. Directors of these companies were employees of Tarun Goyal, who were working as peons, receptionists etc. Entries in the books were bogus. Modus operandi in such cases is well known, money is circulated by first depositing cash in the bank account of one such company, and thereupon it is transferred/circulated within the group companies before the cheque is issued to the beneficiary.
The Officer concluded that the true nature of the transactions was to convert illegitimate money by providing bogus or accommodation entries.
The division bench comprising Justices Sanjiv Khanna and Anup Jairam Bhambhani observed that the respondent-assessee had failed to produce Directors of the companies, though they had filed confirmations, and therefore, were in touch with the respondent-assessee. The respondent-assessee had also failed to produce the details and particulars with regard to the issue of shares, notices etc. to the shareholders of AGM/EGM etc
“In view of the aforesaid factual position, we have no hesitation in holding that the transactions in question were clearly sham and make-believe with excellent paperwork to camouflage their bogus nature. Accordingly, the order passed by the Tribunal is clearly superficial and adopts a perfunctory approach and ignores evidence and material referred to in the assessment order. The reasoning given is contrary to human probabilities, for, in the normal course of conduct, no one will make an investment of such huge amounts without being concerned about the return and safety of such investment,” the bench said.
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