P.N. Parashar, Judicial Member. - This appeal has been filed by the assessee against the order of the learned Commissioner of Income-tax (Appeals) dated 30-11-2006 for the assessment year 2003-04.

2. Shri Ajay Vohra and Sliri Gaurav Jain, Advocates appeared for the assessee whereas Mrs. Sadhna Shankar, learned CIT-DR represented the revenue.

3. Ground No. 1 taken in this appeal is general in nature and does not require any specific adjudication.

4. Ground No. 2(a) to (i) relates to the sustenance of addition of Rs. 9.22 crores made under section 68 of the Income-tax Act by the Assessing Officer.

5. The facts relating to this matter are as under :—

The assessee-company was carrying on the business of manufacturing and sale of sponge, iron, steel ingots and trading in steel. The assessee filed return declaring income of Rs. 4,51,60,553. The return filed on 28-11-2003 was processed under section 143(1) on 12-3-2004. Thereafter the case was selected for scrutiny and notices under section 143(2) were issued to the assessee in response to which the assessee filed details.

6. On examination of the material, the Assessing Officer found that the assessee had received share application money and share premium totaling Rs. 9.22 crores from Milli Marketing during the year under consideration.

7. A search and seizure operation had taken place in the case of Shri P.K. Ruia at his business premises and at his residence. It was alleged that Mr. P.K. Ruia has floated number of companies holding shares and were being used to provide entries to different beneficiaries after receiving cash from them. In the process, commission was charged for services rendered to them. It was also alleged that Mr. Ruia was providing fictitious loans or share application money and earned huge amount as commission without paying the rightful taxes.

8. The Assessing Officer examined the modus operandi vis-a-vis money laundering through dummy companies by Mr. Ruia by creating corporate veil. In paras 4 & 5 of the assessment order, the Assessing Officer has given a detailed description of the mode and manner in which Mr. P.K. Ruia was working and operating the companies. In para 5 he has also pointed out that during the course of search, certain material was found which contained details of sales and purchases of shares within the group companies after charging huge premium of Rs. 190 or Rs. 90 on the share having face value of Rs. 10 only. According to him, such sales and purchases were made just to increase the capital base of the company to be used when some prospective party approaches them for white money. It has been pointed out by him in para 4.9 of the assessment order that the capital base was shown to have been invested in quoted and unquoted shares of the group companies of stock of cloth, fabric, yarn, suiting and shiftings software etc. and by this method shares/stock were converted into money worth as and when required by showing sale within the group companies. As per the Assessing Officer, the modus operandi adopted was that when group companies was in need of providing accommodation, it will reach to the companies/concerns where cash has been deposited and this Katcha account of proprietary concerns and group companies would show the purchases to have been sold in the open market and plenty of cash was deposited in the accounts.

9. In para 5 the Assessing Officer has observed that in the bank account of Mr. Nayan Investors and Keshav Traders, deposits in cash and all the cash deposits have been invested towards acquisition of shares. These concerns were also proprietary concern of Mr. Ashok Sharma, a dummy person of Mr. P.K. Ruia. He has also noted that in other proprietary concern of Mr. Ashok Sharma huge amount running into more than 130 crores was found to be deposited in cash.

10. Coming to the case of the assessee, the Assessing Officer made detailed enquiries and examination on the issue relating to share application money and observed as follows :—

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