Calcutta HC confirms Income Tax Addition for Deposit of Unaccounted Cash in Shell Companies [Read Order]

While allowing an appeal filed by the income tax department, the Calcutta High Court has confirmed the addition in respect of the deposit of the unaccounted cash using nine shell companies.

The assessment against the assessee, M/S Arshia Global Tradecom Private Limited was reopened under Section 147 of the Income Tax Act on the ground that the department was in receipt of information that in the assessee’s current account since the year 2010 large value of non-cash transactions have occurred amounting to around Rs. 28,56,66,139/-. Based on the information, the department alleged that the assessee routed its own funds through paper/shell companies which also indicates bogus billings.

On appeal, the Tribunal deleted the addition. The Revenue approached the High Court for relief.

Justice T. S. Sivagnanam of Calcutta High Court observed that the genuineness of the transactions were not established by the assessee and the summons which were issued to those entities were also non complied with. These facts which were brought on record during the reassessment proceedings was reexamined by the CIT(A) who has also recorded its independent findings while upholding the order passed by the assessing officer.

Restoring the department’s order, the Court held that “the Commissioner of Income Tax (A) not only considered the findings of the assessing officer but also examined the remand report and held that it has been established by detailed enquiry that the fund transferred into the account of the assessee were mostly from entry operators based companies who are only giving accommodation entries and similarly funds have been transferred from the assessee to the operators based companies who are also engaged in the business of providing accommodation entries and bogus billings. The CIT(A) also noted that during the scrutiny proceedings and remand proceedings none other directors of the said company appeared before the assessing officer and the assessing officer rightly identified nine shell companies who are providing bogus purchase bills and accordingly held that the assessee has deposited its own unaccounted cash in the bank account and confirmed the findings of the assessing officer. Unfortunately, the tribunal failed to examine any of the factual details which have been brought out by the assessing officer as well as the Commissioner of Income Tax (A) but merely went on the basis as to what are the conditions to be fulfilled in order to reopen the assessment. As pointed out earlier, reasons given by the learned tribunal to distinguish the decision in Peass Industrial Engineers is not tenable.”

To Read the full text of the Order CLICK HERE

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