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Income Tax Appellate Tribunal, ‘F‘ BENCH
Before: SHRI AMIT SHUKLA & SHRI GAGAN GOYAL
आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the Revenue against the order dated 06/10/2022 passed by NFAC, Delhi for the quantum of assessment passed u/s. 143(3) r.w.s. 147 for the A.Y.2012-13.
M/s. Janitor Infrastructure Pvt. Ltd. 2. In the grounds of appeal
Revenue has raised the following grounds:- 1. "Whether on the facts and in the circumstances of the case in law, Ld. CIT(A) erred in holding that re- assessment proceedings were ab initio void and cannot be sustained in law of eye as there was no failure on the part of the assessee or any new material or information was in the possession of AO without appreciating that explanation 1 of Section 147 makes clear that production before the assessing officer of books of account or other evidences from which material evidence could with due diligence have been discovered by the assessing officer will not necessarily amount to disclosure." 2."Whether on the facts and in the circumstances of the case in law, Ld. CIT (A) was right in treating the proceedings u/s 148 being based on change of opinion or having no failure on the part of the assessee to disclose material facts even when proviso to Section 147 was not applicable and Explanation 1 of Section 147 was applicable." 3."Whether on the facts and in the circumstances of the case in law, Ld. CIT (A) was right to delete the addition of Rs. 36 crore without appreciating the facts that the assessee could not prove the creditworthiness of the investor ie. Delight Resorts Pvt. Ltd. and genuineness of the transaction" 4."Whether on the facts and in the circumstances of the case in law, Ld. CIT (A) was right to delete the addition of Rs. 36 crore stating that additions made in the case of the Delight Resort Pvt. Ltd. were deleted by the Ld. CIT(A)-3, Delhi without appreciating the facts that the case is pending before the Hon'ble High Court of Delhi."
5. The Ld. CIT (A)'s order is contrary in law and on facts and deserves to be set aside.
6. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the AO restored. The appellant craves leave to amend or alter any ground or add a new ground that may be necessary at the time of hearing.
M/s. Janitor Infrastructure Pvt. Ltd.
The facts in brief are that Assessee Company is engaged in the business of construction and builders. It has filed the return of income for A.Y.2012-13 on 28/09/2012 declaring total income of Rs.4,29,088. Later on assessee’s case was selected for scrutiny through CASS and accordingly, assessment order u/s. 143(3) was passed vide order dated 19/03/2015 accepting the return of income. Thereafter, the assessee’s case was reopened u/s.137 by issuance of notice u/s.148 dated 31/03/2019. The reopening has been done on the basis of information received from ADIT, Investigation, Unit 2(1), Delhi that assessee in respect of amount of Rs.36 crores taken in form of share capital from the concern, M/s. Delight Resorts Pvt. Ltd., is not genuine. The reasons recorded for reopening were as under:-
“The assessee filed its return of Income on 28-09-2012 declaring total income at R$4,29,088/. The return was processed u/s. 143(1) of the Act, accepting the return of income. Subsequently assessment proceeding u/s 143(3) of the Income-tax Act was completed on 19/03/2015 accepting the returned income. During the year under consideration assessee engaged in business of Real estate 2 An information was received from the Investigation Wing, Asstt. DIT(Inv), Unit 2(1), Delhi vide letter bearing No.F.No. ADIV(Inv)/Unit2(1)/2018-19/594 dated 25-03-2019, During the course of inquiry in the case of Delight Resorts Private Limited, its bank account with Axis Bank bearing No.912020015498014 were verified. On scrutiny a trend of High Value transfer credits followed by immediate transfers favouring various accounts on the same day was observed. Out of the many transactions, the transactions with respect to the assessee company amounted to Rs.36,00,00,000/- towards Share capital. The details of income as received by Delight Resorts Pvt Ltd is as under:
M/s. Janitor Infrastructure Pvt. Ltd. A.Y. Turnover GTI (RS) Total Assessed (RS) Income Income (Rs) (Rs) 2012-13 3,79,547 0 0 76,57,89,941 2013-14 49,34,514 43,995 44,000 --- 2014-15 72,77,544 47,080 47,080 37,70,47,084 The genuineness of the transactions and creditworthiness of Delight Resorts Pvt. Ltd remained questionable and therefore there is reason to believe that Delight Resorts Pvt. Ltd. is a conduit and real beneficiary is the assessee company.
4. From the analyses of the details in the assessment record of AY-2012-13, and the information received from investigation wing and enquiry made during the course of assessment proceeding gives reason to believe that assessee is a beneficiary of accommodation entry from Delight Resorts Pvt Ltd the entity involved providing bogus entry.
In this case the assessee has filed its return of income for Assessment Year 2012-13, on declaring total income at Rs.4,29,088/ and regular assessment u/s 143(3) was made on 19/03/2015 Since, 4 years from the end of the relevant year has expired in this case, the requirements to initiate proceeding u/s 147 of the Act are reason to believe that income for the year under consideration has escaped assessment because of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the assessment year under consideration. It is pertinent to mention here that reasons to believe that income has escaped assessment for the year under consideration has been recorded supra. I have carefully considered the assessment records containing the submissions made by the assessee in response to various notices issued during the assessment proceedings and have noted that the assessee has not fully and truly disclosed the material facts necessary for his assessment for the year under M/s. Janitor Infrastructure Pvt. Ltd. consideration. The dubious antecedents of the entities/concerns/persons associated in transactions with the assessee company and its key personnel have now been unearthed by the Investigation wing with corroborative evidences. Thus, in view of the changed scenario of events it is evident that the assessee had not truly and fully disclosed material facts necessary for his assessment for the year under consideration thereby necessitating reopening u/s 147 of the Act.
It is true that the assessee has filed a copy of annual report and audited P&L A/c and balance sheet along with return of income where various information/material were disclosed. However, the requisite full and true disclosure of all material facts necessary for assessment has not been made as noted above. It is pertinent to mention here that even though the assessee has produced Annual report Audited P&L A/c and Balance sheet or other evidence as mentioned above, the requisite material facts as noted above in the reasons for reopening were embedded in such a manner that material evidence could not be discovered by the AO and could have been discovered with due diligence, accordingly attracting provisions of Explanation 1 of section 147 of the Act.
It is evident from the above discussion that in this case, the issues under consideration were never examined by the AO during the course of regular assessment, as such information was not privy to the assessing office at the time of assessment nor has the assessee suo-moto declared such relevant details/information. It is important to highlight here that material facts relevant for the assessment on the issue(s) under consideration were not filed during the course of assessment proceeding and the same may be embedded in Annual report, Audited P&L A/c Balance sheet and Books of account in such a manner that it would require due diligence by the AO to extract these information For afore-stated reasons, it is not a case of change of opinion in the Assessing officer. 8 In this case more than four years have lapsed from the end of assessment year under consideration. Hence necessary M/s. Janitor Infrastructure Pvt. Ltd. sanction to issue notice u/s 148 has been obtained separately from Principal Commissioner of Income Tax as per the provisions of section 151 of the Act.
In view of all the above, these entries represents the unexplained/unaccounted of the assessee for the AY 2012-13. Therefore, I have the reason to belief that income chargeable to tax amounting to Rs.36,00,00,000/-has escape assessment within the meaning of Section 147 of the Income-tax Act, 1961. This is a fit case for issue of notice u/s. 148 of the income-tax Act, 1961.
4. Thereafter, the ld. Assessing Officer purely decided on the report of investigation as stated beyond reasons recorded has made the addition of Rs.36 Crores u/s.68. His relevant observations read as under:-
3.7.1. The submissions made by the assessee have been carefully considered. the contention of the assessee is not acceptable because of the following reasons: (a) It is true that the assessee furnished PAN number, assessment details, bank details and ledger confirmation of Delight Resorts Private Limited. However, as observed by Hon'ble Delhi High Court in the case of CIT- II vs. MAF Academy Pvt. Ltd (2014) 42 taxmann.com 377 (Delhi), mere production of incorporation details, PAN number or income tax returns may not be sufficient when surrounding and attending facts predicates a cover up. The production of incorporation details, PAN numbers or income tax details may indicate towards completion of paper work or documentation but genuineness, creditworthiness and identity of investment and the Investor are deeper and abstrusive than mere completion of paper work or documentation. (b) During the course of investigation made by the investigation 10 (2)wing. Delhi, in the case of Delight Resorts Private Limited, its bank account No.912020015498014 was verified. On scrutiny a trend of high value transfer credits following by M/s. Janitor Infrastructure Pvt. Ltd. immediate transfers favouring various accounts on the same day were observed. Out of these transactions, the transaction with respect to the assessee company amounted to Rs.36.00 crores towards share capital. (c) Income profile of the company Delight Resorts Pvt. Ltd. is as under:- A.Y. Turnover Gross Total Total Income Income 2012-13 3,79,547 0 0 2013-14 49,34,514 43,995 44,000 2014-15 72,77,544 47,080 47,080 From the above table, it can be clearly seen that the turnover of the company during the A.Y.2012-13 is meager Rs 3,79,547/- How a company with meager turnover as less as Rs.3,79,547/- made transactions of crores of rupees from its bank account is never explained by the assessee with any conclusive proof. It is pertinent to mention here that the above details are provided to the assessee by way of reasons recorded for reopening the assessment. Instead of providing proof to establish the creditworthiness of Delight Resorts Pvt. Ltd., the assessee relied upon the income tax returns, confirmations and copy of bank statements containing these transactions. This only indicates the completion of mere paper work but not any conclusive proof to establish the creditworthiness of Delight Resorts Pvt. Ltd. and genuineness of transaction.
From the above discussion, it is clear that the assessee failed in its onus to establish the creditworthiness of the investor and the genuineness of the transaction. Hence, an amount of Rs.36.00 Crores received by the assessee from Delight Resorts Pvt. Ltd. is treated as unexplained cash credits under the provisions of section 68 of the Income tax Act and added to the total income of the assessee for the AY.2012-13.
M/s. Janitor Infrastructure Pvt. Ltd. 5. Before the ld. CIT (A) assessee had filed detailed explanations and the reasons which has been dealt in the appellate order. The ld. CIT (A) had deleted the said addition after observing as under:-
5.1.6 Last but not the least that the appellant company submitted that the creditor shareholder viz. Delight Resorts Pvt. Ltd.(PAN: AACCD3031D) was also assessed by its A.O. Le. Ward 7(1), New Delhi for A.Y. 2012-13 only and a scrutiny Assessment Order u/s 143(3) was passed on 30.03.2015 in which share premium and share capital received by it during the year as well as advances Rs. 10 cr received of approx. Rs. 68.50cr. besides 50% disallowance of some expenses claimed towards employees' benefit schemes etc. were added and no enquiry etc was made as regards to credit given by that company Le. Delight Resort Pvt. Ltd. to appellant company. Further, In the first appeal itself by Appeal Order dated 01.06.20117 for AY 2012-13 by the then appellate commissioner Le. CIT(A)-3, Delhi all the additions were directed to be deleted and the relief was given to that company le. Delight Resort Pvt. Ltd. Both the said Assessment and Appeal Order were uploaded on ITBA by the appellant in these appeal proceedings also and were downloaded by this office. 5.1.7 In the light of such facts, I am afraid, there is no such occasion to confirm action of Ld. A.O. in making the impugned addition of Rs.36,00,00,000 and relief has to be given to the appellant company as it is entitled for the same. The amount of addition being as a result of misappreciation of facts of the case and of law that too without any basis cannot be confirmed and is directed to be deleted. Therefore, Ground no.1 &3 are allowed.
6. Before us, ld. Counsel submitted that share application money has come through sister concern and not from any outside parties or through any entry operator by way of any kind of accommodation entry. Here, in this case, assessee had M/s. Janitor Infrastructure Pvt. Ltd. received a sum of Rs.36 Crores share capital including share premium from M/s. Delight Resorts Pvt. Ltd which has been duly repaid back during the relevant assessment year itself. The assessee had filed all the documents including confirmation, copy of income tax returns, bank statements and annual accounts of the creditor which have not been rebutted or found faulted with by the ld. AO. The assessee has discharged onus of proving the deposit which has been discussed in details in the submissions made before the ld. CIT (A). The ld. Counsel further submitted that in the case of Delight Resorts Pvt. Ltd., assessment has been passed u/s.143(3) on 30/03/2015 was made as noted by the ld. CIT(A), wherein this issue has been examined at length. Apart from that, he also pointed out that ITAT Delhi Bench in the case of M/s. Delight Resorts Pvt. Ltd. for the same assessment years alongwith other bunch of similar appeals of the same group had decided this issue in favour of the assessee wherein the entire source of loan or share capital received by the said company has been accepted.
7. On the other hand, ld. DR submitted that the ld. CIT(A) has not analysed the documents and evidences as well as the observations and the finding of the ld. CIT(A). Thus, he strongly relied upon the order of the ld. AO.
After considering the relevant finding given in the impugned order as well as various materials referred to before us, we find that the only reason for addition made by the ld. AO is based on M/s. Janitor Infrastructure Pvt. Ltd. information on the investigation as noted in the reasons recorded. Secondly, the total income shown by M/s. Delight Resorts Pvt. Ltd. was very meager and even the turnover was very less in A.Y.2012-13; and lastly, all the details which were filed by the assessee are merely a paper work. No independent enquiry has been carried out by the ld. AO apart from relying on the said information. In any case, assessee has filed the various documents as mentioned above, which has not even commented upon or rebutted by AO. But one important fact is that, in the case of M/s. Delight Resorts Pvt. Ltd, i.e,. creditor shareholder, already assessment u/s.143(3) was passed wherein this issue had come up for consideration which was deleted by the ld. CIT(A). Later on this issue had come before the Tribunal wherein, the Tribunal in deciding the bunch of cases of same group concerns had noted that all the funds of the entire group concerns were routed through one company, M/s. Bhushan Energy Ltd., who had given loans and advances through maze of group companies in the earlier years which have been from books and duly reflected therein, who in turn have been given further to other companies or subscribe to share capital within the same group company and finally the same very amount have been reinvested in the Bhushan Energy Ltd. The Tribunal has even examined on the fund flow chart to explain the source of the funds from bank statements which also included the funds received from M/s. Delight Resorts Pvt. Ltd. to the assessee company; and again back to the same creditor which in turn to the other group companies had gone back to M/s. Bhushan M/s. Janitor Infrastructure Pvt. Ltd. Energy Ltd. All these entries were verified from the bank statements. The relevant observations and the findings of the Tribunal reads as under:- “60. Thus, what is to be examined is whether, the onus to prove the identity and creditworthiness of the creditors and genuineness of the transaction stands established or not, firstly, with regard to the documentary evidences filed to substantiate the explanation; and secondly, whether Assessing Officer has brought anything on record to rebut the explanation and evidences filed by the assessee or here is any prior information that all the transaction is colourable.
61. The ld. CIT-DR relying upon the order of the Assessing Officer had contended that the assessees herein has availed accommodation entries wherein they have introduced the unaccounted/undisclosed fund into their books of account in the garb of share capital and or loan and advances. However, there is not an iota of material by way of any inquiry or information from Investigation Wing that, firstly, above named assessee companies have been found to be beneficiary of accommodation entry in any search or survey in the case of entry operator, and secondly, any inquiry has been made in the case of the assessee companies wherein it has been found that these companies have taken any accommodation entry by rotating their unaccounted money or income. Though there is a rotation/movement of money from one company to another through web of group companies of Bhushan Energy Ltd. and the entities owned by common shareholder, which is a subsidiary flagship Company, Bhushan Steel Ltd. now. merged with Tata Steels Ltd. The fund have flown from Bhushan Energy Ltd. through maze, of group companies whereby the funds which has been accounted in the books of Bhushan Energy Ltd. have been routed through group companies and finally have been rerouted back into the books of the Bhushan Energy Ltd. M/s. Janitor Infrastructure Pvt. Ltd. The entire chain and link involves actual movement of accounted fund of BEL in the form of share capital and or loan advances into the assessee- company herein and subsequent reintroduction of such funds into regular account of BEL to augment its capital base.
However, independent of that, we will first examine as to whether at the threshold, the assessees were able to discharge their primary onus cast upon them for discharging their burden of proving the nature and source of credit, ie, identity and creditworthiness of the leader/subscriber companies and genuineness of the transaction. As discussed above the primary documents by the lender/subscriber companies have been filed which included confirmation, their bank statement, their income return, balance sheet and profit and loss account, most importantly, ssco orders passed in Lender/ Subscriber Companies for the same assessment years, that is, A.Y. 2012- 13 & 2013-14 passed u/s.143(3)/147 and catena of other details. All these details have neither been controverted nor have been rebutted by the Assessing Officer. By and large identities cannot be disputed. What has been disputed is the creditworthiness and this is because, they do not have much revenue from operations and were showing marginal income. However, nowhere the Assessing Officer has disputed the funds available in their balances sheets, duly accounted for and the source from such funds have come. All the Subscribers/ Lenders are corporate entities having separate legal identity who are regularly assessed to tax and complying with all statutory requirements. One very important fact here in this case are that in all the cases Subscribers/ Lenders Companies for the relevant assessment year scrutiny assessments have been done u/s 143(3) or the cases have been reopened u/s.147 and thereafter assessments have been completed wherein in some cases exactly on the same amount additions have been made. Thus, in many instances there are double additions on the same M/s. Janitor Infrastructure Pvt. Ltd. amount. Ergo in view of these facts and evidences, the identity of the investors' stands established.
In so far as genuineness of the transaction is concerned, the funds have been received through banking channels and bank statement of all the investors/lenders company have been filed which prove conclusively that the assessee companies had received the funds from the said investors, who in turn have received money from the same group companies; and they have not only corroborated this fact in their confirmation along with copies of income tax return but also from their audited balance sheets filed alongwith their Income Tax Returns.
Again, in so far as the creditworthiness is concerned, these companies have made investments through banking channels duly reflected in the bank statement and have also filed balance sheets and detailed explanation thereafter showing their availability of funds for making the investments. The case of the Department before us has been that these companies had very meager income however the Revenue from the operations did not justify such an investment. First of all, what is required to be seen is whether the lender/investor companies had sufficient funds available with them in the books/ balance sheets and it is not necessary that loan or advances or shares are subscribed, should be out of taxable income only. Either it could be from borrowed funds or from the investments standing in their balance sheet. If the Assessing Officer doubted the source of the fund of the investor companies, then Assessing Officer was required to at least conduct prima facie inquiry from these investors to rebut the assessee's explanation about the source of the funds in the hands of the investor companies. Hon'ble Delhi High Court in the case of CIT vs. Vrindavan Farms (P) Ltd., 72, 84/2015, vide judgment and order dated 12.08.2015, wherein one of the ground raised by the revenue was that creditworthiness is not proved, because lender companies had shown low income in their Income Tax Return.
M/s. Janitor Infrastructure Pvt. Ltd. The Court found that the entire details of share applicants were made available to the Assessing Officer, including PAN, confirmations, bank statements, their balance sheets and profit & loss accounts and certificates of incorporation, etc. Assessing Officer had not undertaken any inquiry or investigation of the veracity of above documents. Hence Tribunal has rightly held that without doubting the document, the Assessing Officer cannot make the addition only on presumption that low return of income is sufficient to doubt the creditworthiness of the share holders. The Assessee by producing the above documents has discharged its initial onus of showing the genuineness and creditworthiness of the share holders. Same ratio will apply here also. Further, even for the sake of repetition, one very peculiar fact as incorporated above is that, in most of the cases of the investor company's assessments have been made u/s.143(3) or u/s 147, wherein either their source of fund have been accepted or certain additions have been made based on scrutiny examination. It is not a case where there is any cogent finding in those cases that it is unaccounted money of the assessee companies which has been routed through them or it is their unaccounted money which has been invested in the assessee company. In absence of any such finding or material, no adverse inference can be drawn in the case of the assessee companies. Thus, the identity and the creditworthiness of the investor/subscriber company stands fully established and so also the genuineness of the transaction.
Now coming to the arguments raised on behalf of the Revenue that in some of the case notices u/s 133(6) has not been served or responded and directors of the lender companies were not produced. First of all, it was only in few cases that notice were not responded to and in majority of cases they were duly responded. But be that as may be, where notices have not been served not responded to, then also in the present cases their identity cannot be disputed, because in all the cases assessments have been done under scrutiny proceedings u/ss.
M/s. Janitor Infrastructure Pvt. Ltd. 143(3) or 147, and in most of the cases appeals are also pending. Hence this factor, itself will not vitiate the case of the assessees. Similarly, even if directors were not produced, then there is no legal obligation on the assessee to produced the directors as held in many cases as relied upon by the Ld. Counsel in foregoing para 27. Apart from that, once assessments have been made on substantive basis in each and every case, then mere non production of directors loses its significance when all the statutory records and sources of funds have been duly explained, on which no adverse material has been brought to rebut the same by the Assessing Officer. Thus, in our opinion this factor on the facts of the present case is not so detrimental.
One key contention and fact which has been harped upon by the ld. counsel and also discussed by us at several places herein in the foregoing paragraphs is that, all the funds have been routed through Bhushan Energy Ltd. by way of advances and loans given to the maze of its group companies who have invested or given loan within the same group companies which again has been reinvested in the Bhushan Energy Ltd. Ld. counsel before us has demonstrated by filing fund flow statement in the case of all the companies along with their bank statement and balance sheets. In so far as bank statement and balance sheets are concerned they have already been filed before the Assessing Officer and ld. CIT (A) and this specific plea was also raised before the Ld. CIT (A)s, except for the fact that now before us, he has tried to demonstrate the flow of money from Bhushan Energy Ltd, to the group companies and that all these funds have come from the accounted funds duly recorded in the books of the Bhushan Energy Ltd. and the books of the lender companies. Since the fund flow chart to explain the source of the funds and rotation of funds amongst the group companies is one of the vital factors which impinge upon the case of the assessee companies, therefore, these are made part of this order and are annexure to this order running into 38 M/s. Janitor Infrastructure Pvt. Ltd. pages, which contains the addition made by the Assessing Officer from the figures given in the balance sheet; and flow of funds from one company to other. All the entries are verifiable from the bank statements placed before us.
In support of the fund flow statements, balance sheets and the bank statement of all these companies have been filed separately before us and has been demonstrated with one to one correlation of the entries therein. The theory of fund flow statement was also raised before the ld. CIT (A) for which remand report was also called for which has been dealt and incorporated in the appellate order by the ld. CIT (A) also especially in the case of M/s. Jawahar Credit and Holding Pvt. Ltd. vs. ITO, Ward-13(3), New Delhi for Assessment Year 2012- 13 in ITA No.5398/Del/2019. Thus, it is not a new plea which has been raised by the assessee counsel before us for the first time, albeit now it has been presented in detail manner in case of each and every assessee company which is evident from the annexures hereto of this order. Therefore, these fund flow statements duly supported by bank statement of other lender companies which are already part of record, even if it is reckoned as additional evidence, bat they do not require Revenue-examination by the Assessing Co which has been pleaded by the ld. CIT DR before us.
Thus, it is quite evident that in various chains of links and the flow of the funds, nowhere there are any unaccounted funds of any of the lender companies or if any of the assessee companies which can be said to have been introduced either by the assessee company or by the lender company. The source of the source has been proved at all levels, right from origin of the funds to the final destination stands substantiated and neither there is unaccounted money nor there is any outside entry operator to route the unaccounted funds for making such investments. Although looking to the peculiarity of the facts and circumstances of the case where these companies can be M/s. Janitor Infrastructure Pvt. Ltd. reckoned as conduit entities for rotation of money, but nowhere can it be said that any of the entities have routed their own unaccounted money. This is the precise reason that in most of the cases Ld. CIT Appeals have deleted the addition; and in 3 cases, he has held that they must have received some commission for such rotation of funds, albeit such observation may not have legal and factual legs to stand.
Thus, in view of our discussion and finding of fact, we do not find any reason or justification for sustaining such an addition of share capital or share premium under the deeming provision of Section 68. We are in tandem with the arguments raised by the ld. counsel and the explanation given by him in view of supporting documents as dealt and incorporated above and are accepted. In the result additions as made by the Assessing Officer on this score are directed to be deleted.