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| The Tax Publishers2022 TaxPub(DT) 4076 (Mum-Trib) INCOME TAX ACT, 1961
Section 68
Huge unsecured loans obtained by Dunlop Limited and Falcon Tyres Ltd. were assigned to the companies like assessee. In case of Dunlop and Falcon Tyres Limited along with Mr. Pavan Kumar Ruia, Suneel Bhansali, S. Ravi, Damodar Dani and Mohanlal Chauhan were found to be involved in violation of Securities and Exchange Board of India regulations along with the assessee and several other companies wherein the assignment of loan was used for preferential issue of shares in the above two companies. The whole transactions were orchestrated by Dunlop and Falcon to violate the provisions of minimum public shareholding criteria in those companies under SEBI Laws. Therefore, amounts credited in books of account of assessee lacked genuineness. In view of above facts, addition of under section 68 was justified.
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Income from undisclosed sources - Addition under section 68 - Assignment of loans to assessee for violating SEBI regulation -
AO noticed that in case of Manali properties and finance private limited, Falcon Tyres Ltd. had assigned loan to assessee which was interest free loan of Rs. 21 crores without any mortgage or security pledged by the assessee with Manali Properties and Finance Private Limited. Assessee was also not a related party. The return of Manali Properties and Finance Private Limited showed current loss of Rs. 81 lakhs and meager share capital of Rs. 4.13 crores. Manali Properties and Finance Ltd. was found to be a Calcutta-based party and does not have any business but carrying on share financing activity and merely an entry provider for these kind of unsecured loans. AO also found that assessee has signed a tripartite agreement on non Judicil stamp paper of Rs 100 which did not have any registration mark or even not notarized before any competent authority. Similarly, Dunlop India Ltd. had assigned a loan of Stephen Financial Services Private Limited to the assessee, being interest free in nature, without any mortgage or security amounting to Rs. 50 crores. It has also the similar modus operandi as compared to Manali Properties and Finance Private Limited. Stephen Financial Services had shown a current loss of Rs. 777 and having a share capital along with reserve and surplus of Rs 190 crores which forms of security premium of Rs. 188 crores. Accordingly, AO made an addition under section 68 with respect to the above transactions. Held: Huge unsecured loans obtained by Dunlop Limited and Falcon Tyres Ltd. were assigned to the companies like assessee. In case of Dunlop and Falcon Tyres Limited along with Mr. Pavan Kumar Ruia, Suneel Bhansali, S. Ravi, Damodar Dani and Mohanlal Chauhan were found to be involved in violation of Securities and Exchange Board of India regulations along with the assessee and several other companies wherein the assignment of loan was used for preferential issue of shares in the above two companies. The whole transactions were orchestrated by Dunlop and Falcon to violate the provisions of minimum public shareholding criteria in those companies under SEBI Laws. Assessee was used as a conduit company along with other companies to do the same. Ruia and Bhansali were part of the Board of Directors of Dunlop and Falcon. The complete history of transaction was also mentioned in the order of SEBI dated 24-3-2021. Over and above this, finding of CIT(A) also noted in paragraph number 7.5 that Enforcement Director was also found money-laundering traces in the books of Falcon and Dunlop. Both these above companies were controlled by Mr. Pawan Kumar Ruia. Therefore, amounts credited in books of account of assessee lacked genuineness. In view of above facts, addition of under section 68 was justified.
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