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Income Tax Appellate Tribunal, DELHI BENCH “E”: NEW DELHI
Before: Shri G.S. Pannu, Hon’ble & Shri Anubhav Sharma
O R D E R PER ANUBHAV SHARMA, J. M.: 1. The appeal has been preferred by the revenue against the order dated 02.06.2017 of Ld Commissioner of Income Tax (Appeals)-23, New Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in appeal No. 406, 395, 401 & 380/16-17 arising out of an appeal before it against the order dated 30.12.2016 passed u/s 153/143(3) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the ld. Assessing Officer, Assistant Commissioner of Income Tax, Central Circle-2, New Delhi (hereinafter referred as the Ld. AO).
The facts in brief are that a search and seizure operation was carried out u/s 132 of the Income Tax Act, 1961 on 10.03.2015 on Appu Ghar Group of cases. The case of the Assessee was also covered u/s 132 of the Act. Notice u/s 143(2) of the Act was issued on 14.10.2016. Notice u/s 142(1) along with detailed questionnaire was issued on 14.10.2016. Appu Ghar group and its promoters were found to have floated various front companies in which there were no business activities. In such companies, the employees or ex-employees of the group were said to have been made directors. Allegedly through these companies, the group had routed its unaccounted income by way of investments/ infusion of funds by various accommodation entry providing companies based in Delhi, Kolkata and Mumbai. During the course of investigations, the survey operations were carried out on five Mumbai based companies namely M/s Abhilasha Money Operations Pvt. Ltd., M/s Elpee Corporate Services Pvt. Ltd. (now known as M/s Choice Office Solutions Pvt. Ltd.), M/s Irishman Steels Pvt. Ltd., M/s Signora Finance Pvt. Ltd. and M/s Panama Overseas pvt, Ltd. As per case of Revenue, the directors of these companies had stated in their statements under oath that it was Mr. Latlf Khan who was instrumental in financial transactions that were undertaken by these companies with various companies of Appu Ghar group. The director of M/s Safal Resorts Pvt. Ltd. also affirmed on oath that it was only Mr. Latif Khan who was responsible for the financial transactions between his company and different Appu Ghar group companies. Although, Mr. Latif Khan was not found to be a director in any of these companies himself, the registered office of one of the Mumbai based investor company namely M/s Safal Resorts Pvt. Ltd., emerged out to be the residence of Mr. Latif Khan. As per Revenue,in his statement recorded on 02/07/2015, Mr. Latif Khan whose full name was Mr. Latif Umed Ali Khan confirmed that his residence had been used as registered office of the M/s Safal Resorts Pvt. Ltd. In essence, Revenue alleges that it was Mr. Latlf Khan who was the Individual holding control and management over the financial transactions done by these six Mumbai based companies with Appu ghar group companies.
2.1 As per the Revene, the statement of Mr. Latif Khan was recorded and based upon it, it was concluded by the ld AO that he was conduit who facilitate Apu Ghar for routing their own funds through six Mumbai based companies who acted as conduit. Further, notice u/s 133 (6) and summons u/s 131 of the Act were issued to the investor company requiring them to furnish the necessary details/ information. However, they did not respond and considering the same the ld AO concluded that companies are paper companies which routed unaccounted cash generated by Appu Ghar group of companies into books of the Assessee in the form of share application money. Therefore, during the course of assessment proceedings questionnaire u/s 142(1) of the Act dated 23.09.2016 was issued to the assessee requiring it to file the details of investments received. In response to the same as per the submission dated 09.12.2016 the assessee company had submitted the list of investment received in the form of unsecured loan as well as share application money in the year under consideration. The details of such Investments received through the Mumbai based paper companies is as under:
S. No. Name of Investor Company/ Entity Amount (In ) 1 Abhilasha Money Operations Pvt Limited 1,85,00,000 Elpee Corporate Services Pvt ltd (now 3,20,00,000 2 known as Choice Office Solutions Pvt. Ltd.) 3 Irishman Steels Pvt Limited 1,90,00,000 4 Panama Overseas Pvt limited 1,65,00,000 5 Safal Resorts Pvt limited 3,45,00,000 6 Signora Finance Pvt ltd 1,80,00,000 TOTAL 13,85,00,00
0 Further, during the course of assessment proceedings the assessee vide show cause notice u/s 142(1) of the Act dated 14.12.2016 was issued as to why the unaccounted funds/accommodation entries received in the form of 'unsecured loan (infact share application money) should not be added to its total income.
Consequently, the response of the Assessee was taken on record. However, the same was not found satisfactory and amount of Rs. 13,85,00,000/- was held unexplained cash credit and added u/s 68 of the Act. However, in appeal the ld CIT(A) set aside the addition vide common order in regard to Assessee company and three other companies on the basis primarily that the Assessee was not given opportunity for cross examination of Mr. Latif Khan and that the ld AO had made factually incorrect observation that no confirmations were received from the investor companies.
Therefore, the revenue is in appeal raising following grounds of appeal:-
“1. The order of the ld CIT(A) is not correct in law and on facts.
2. On the facts & circumstances of the case, the ld CIT(A) has erred in deleting the addition of Rs. 13,85,00,000/- made by the AO on account of unexplained cash credit u/s 68 of the Income Tax Act, 1961.
3. On the facts & circumstances of the case, the ld CIT(A) has erred in deleting the addition of Rs. 13,85,000/- made by the AO on account of unexplained commission expenses.” 5. Heard and perused the record.
None appeared on behalf of the Assessee when the case was called for hearing on 26.05.2022 and the notice also received unserved. It is also on record that on 07.03.2022 none had appeared for the Assessee. Prior to that on 19.08.2020, 10.02.2021, 15.04.2021, 06.09.2021, 28.10.2021 adjournments were requested on behalf of the Assessee. It appears that the Assessee is not interested to prosecute the appeal therefore, argument of the ld DR were heard ex parte.
The ld DR submitted that the ld AO had given very insightful discussion after comprehensive enquiry however, in a very sketchy order the ld CIT(A) has set aside the additions.
It can be observed that the ld CIT(A) in its findings in para No. 4.3.2.3 while concluding observations mentions that “since the investments were made by these five companies, obviously the statements of Shri Latif Khan cannot be considered, under the facts and circumstances brought out herein above, as being conclusive piece of evidence to hold the investments of these companies as in genuine. In fact, on perusal of the assessment order. I do not find any evidence as having been mentioned and considered by the AO which could hold the investment of these investor companies as ingenuine.”
This observation itself is self contrary as to when there was no evidence coming up from the statement of Mr. Latif Khan then denial of right to cross examine cannot be considered to be fatal to hold the additions unsustainable.
Then it can be observed that the ld CIT(A) in para 4.3.3.2 and 4.3.3.3 observed that the observations of ld AO “that no reply from investor companies were received” was factually incorrect and the ld CIT(A) has taken into consideration the evidence submitted by the ld AR of the Assessee about confirmation being submitted to the ld AO. As a matter of fact in para 4.1 of its order the ld AO observed that the Assessee filed its reply dated 26.12.2016 and mentioned that they have requested the share holders to comply with the notices issued and that the share holders have informed that the necessary compliance is being made as per directions of the ld AO in the notice. The bench is of considered opinion that in the absence of calling of remand report from the ld AO, observations as have been made by the ld CIT(A) cannot be sustained.
In the light of the aforesaid issue with regard to genuineness of the alleged unexplained cash credit is restored to the file of the ld CIT(A) to be decide afresh after taking remand report with regard to the fact mentioned in para No. 4.3.3.2 from the ld AO. An opportunity of hearing afresh be also given to the Assessee in that regard.
Consequently, the appeal of the revenue is allowed for statistical purposes.