DY. COMMISSIONER OF INCOME TAX CENTRAL-1(4), KOLKATA, AAYAKAR BHAWAN , POORVA vs. ONTRUST SUPPLIERS PVT LTD, KOLKATA

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ITSSA 111/KOL/2023Status: DisposedITAT Kolkata18 February 2025AY 2019-2050 pages

In favour of the Revenue: the Revenue's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the CIT(A) had erred in deleting the additions made by the AO under Section 68 of the Income-tax Act, 1961. The Tribunal found that while the assessee claimed the amounts were advances for land sale and submitted various documents, including agreements and TDPL's financial statements, these did not sufficiently establish the identity, creditworthiness, and genuineness of the transactions. The AO's findings that TDPL was not found at its registered address, its directors were untraceable, and it appeared to be a paper concern with no substantial business activity or fixed assets were not adequately rebutted by the assessee. The Tribunal noted that the statement recorded under Section 132(4) regarding dummy directors and accommodation entries raised serious doubts about TDPL's genuineness. The mere filing of bank statements and audited accounts of TDPL, without further corroboration or explanation for the source of funds and the nature of its business activities, was insufficient to discharge the burden of proof under Section 68. Therefore, the additions made by the AO were upheld. The appeals were allowed.

What were the facts?

The Revenue (DCIT) has filed two appeals against the orders of the CIT(A) for Assessment Years (AY) 2015-16 and 2019-20. These appeals arise from assessment orders passed under Section 153C of the Income-tax Act, 1961. The core of the dispute involves additions made by the Assessing Officer (AO) under Section 68 of the Act, amounting to Rs. 32,00,000 for AY 2015-16 and Rs. 1,83,00,000 for AY 2019-20. These additions were based on transactions with M/s. Tower Distributors Pvt. Ltd. (TDPL). The AO initiated proceedings under Section 153C after a search on the Jalan Group of Companies, where a ledger account of TDPL in the assessee's books was found. The AO found TDPL to be a paper concern, with its directors untraceable and no evidence of genuine business activity or creditworthiness. The assessee, Ontrust Suppliers Pvt. Ltd., claimed the amounts were advances for land sale.

What were the issues?

1. Whether, on the facts and circumstances, the CIT(A) erred in not appreciating the addition made under Section 68 of the Income-tax Act, 1961, amounting to Rs. 32,00,000 (AY 2015-16) and Rs. 1,83,00,000 (AY 2019-20), as the identity, creditworthiness, and genuineness of the transactions with M/s. Tower Distributors Pvt. Ltd. (TDPL) were not proved. 2. Whether, on the facts and circumstances, the CIT(A) erred in not accepting the Tally data documents relating to transactions with TDPL and the ledger copy found in the assessee's office as incriminating documents. Assessee's Contentions: - The assessee is part of the Jalan Group, engaged in real estate. It entered into an agreement with TDPL on 03.03.2015 to sell land for Rs. 910.8 lakhs. Copies of sale agreements and details of money receipt and utilization were submitted. The funds were utilized for loan repayments and land development charges. - TDPL was incorporated in 1995, is assessed to tax, and had a substantial net worth as of 31.03.2015 and 31.03.2020. TDPL had submitted its Certificate of Incorporation, MOA/AOA, audited accounts, IT returns, bank statements, confirmation of accounts, and replies to notices under Section 133(6). - The non-availability of TDPL at its registered address was due to its office premises being geotagged with another location. Revenue's Contentions: - The AO opined that TDPL was a paper/jama-kharchi concern as it was not found at its registered address and its directors were untraceable. - A statement under Section 132(4) indicated that a dummy director was appointed for TDPL, and the entry operator floated companies for accommodation entries. - TDPL's audited accounts showed huge capital invested in non-current assets, with no fixed assets and minimal salary paid, indicating a lack of genuine business activity or creditworthiness for such large transactions.

Which sections of the Income-tax Act were involved?

Section 68,Section 153C,Section 132(1),Section 143(2),Section 142(1),Section 133(6),Section 132(4)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA BENCHES “A”, KOLKATA

Before: SHRI RAJPAL YADAV & DR.MANISH BORAD

For Appellant: Shri Miraj D. Shah, AR
For Respondent: Shri Subhendu Datta, CIT-DR
Hearing: 20.11.2024Pronounced: 18.02.2025

PER DR. MANISH BORAD, ACCOUNTANT MEMBER :

The captioned two appeals pertaining to Assessment Years 2015-16 and 2019-20 at the instance of Revenue are directed against the separate orders both dated 22.03.2023 passed by CIT(A), Kolkata-20 u/s.250 of the Income-tax Act, 1961 (in short ‘the Act’) which in turn are arising out of respective Assessment orders dated 25.03.2022 passed u/s.153C of the Act.

2.

Since the issue raised by Revenue for the years under appeal is common, we proceed to dispose of these appeals by way of this consolidated order for the sake of convenience.

3.

At the outset, we find that the appeals are time barred by 67 days before the Tribunal. The Revenue has filed the condonation petition enumerating the reasons which led to delay in presenting the appeal. We are satisfied with the reasons so stated and therefore condone the said delay of 67 days and proceed for adjudication of appeal.

4.

The Grounds of appeal raised by the Revenue for A.Y. 2015-16 and 2019-20 read as under :

Grounds of appeal for A.Y. 2015-16 :

“1. Whether on the facts and circumstances of the case and on materials available, Ld. CIT(A) was erroneous in not appreciating the addition made u/s.68 of the IT Act Rs.320,00,000/- as the identity of the creditors creditworthiness and genuineness of the transaction was not proved. 2. whether on the facts and circumstances of the case and on documents the Ld. CIT(A) has erred in not accepting the Tally data documents relating to transactions with M/s. Tower Distributors Pvt. Ltd., and ledger copy found in assessee office as being incriminating documents.”

Grounds of appeal for A.Y. 2019-20 :

“1. Whether on the facts and circumstances of the case and on materials available, Ld. CIT(A) was erroneous in not appreciating the addition made u/s.68 of the IT Act Rs.1,83,00,000/- as the identity of the creditors creditworthiness and genuineness of the transaction was not proved. 2. whether on the facts and circumstances of the case and on documents the Ld. CIT(A) has erred in not accepting the Tally data documents relating to transactions with M/s. Tower Distributors Pvt. Ltd., and ledger copy found in assessee office as being incriminating documents.”

5.

We take the lead appeal of the Revenue for the A.Y. 2015-16 first. Facts in brief are that a search was conducted u/s.132(1) of the Act on 07.12.2020 at Jalan Group of Companies. During the course of search, a ledger account of M/s. Tower Distributors Pvt. Ltd. (in short ‘TDPL’) appearing in the books of account of assessee for the period 01.04.2011 to 01.12.2020 was found. Since this document did not pertain to the assessee who was searched u/s.132 of the Act, ld. Assessing Officer of the searched person recorded proper satisfaction and the same was handed over to the ld. Assessing Officer of the assessee in question, i.e. Ontrust Suppliers Pvt. Ltd. and further the ld. Assessing Officer other than the searched person, i.e. the assessee recorded the satisfaction and initiated the proceedings by issuance of notice u/s.153C of the Act. In the said document, i.e., the ledger account, there were some transactions of the amount received by the assessee from TDPL at Rs.3.20 crore for A.Y. 2015-16 and Rs.1.83 crore for A.Y. 2019-10. Valid notices u/s.143(2)/142(1) of the Act were issued and served upon the assessee. During the course of assessment proceedings, it was stated by the assessee that alleged sum was received from TDPL on account of advance for sale of land. An Inspector was deputed to verify the physical address of M/s. Tower Distributors Pvt. Ltd., however, the party is not found at its registered address. Ld. AO therefore opined that the said party was only a paper/jama-kharchi concern. On confrontation, Shri Ajay Mohan Jalan in his statement u/s.132(4) of the Act explained that the money was received from M/s. Tower Distributors Pvt. Ltd. on account of advance for ‘sale of land’. Ld. AO has further mentioned that one entry operator Mr. Dinesh Kumar Dhandhania had accepted in his statement recorded previously that Mr.

Rampal Agarwal was appointed as dummy director of M/s. Tower Distributors Pvt. Ltd. and that Mr. Dinesh Kumar Dhandhania had floated a number of companies to provide accommodation entries. Ld. AO has further mentioned that the funds received from M/s. Tower Distributors Pvt. Ltd. were invested in purchasing different plots of land on different dates. In the course of 153C proceedings, ld. AO has examined the identity and creditworthiness of TDPL and genuineness of the transactions. Ld. AO has mentioned that mere filing of bank statements by itself may not be sufficient to prove the creditworthiness without any explanation for the deposits in the accounts and their source. Since the Directors of the lender company were not traceable at their registered address and the assessee company also did not produce the directors, ld. AO was unable examine the genuineness of the business activities of the lenders and to ascertain whether they were financially sound to lend substantial amounts. In response to notice u/s.133(6) of the Act served on M/s. Tower Distributors Pvt. Ltd., the said company furnished their reply along with copy of audited accounts, Balance-sheet and other documents. After examining those documents, ld. AO has mentioned that the aforesaid concern have raised huge capital which was invested in other non-current assets in the form of investment in equity shares, unsecured loans etc. It was further observed that aforesaid company didn’t have any fixed assets and salary paid to employees was only Rs.20,000/- for F.Y. 2014-15. Eventually, the AO relying on certain decisions made addition of Rs.3.20 crore and at Rs.1.83 crore u/s.68 of the Act for A.Y. 2015-16 and A.Y.

2019-20 respectively holding that cash creditor was not carrying out any business activity and the existence of the company was only on paper, which had no creditworthiness to carry out of such valued transactions.

6.

Aggrieved assessee preferred appeals before the ld.CIT(A) against the impugned additions for A.Y. 2015-16 and A.Y.2019-20 by making the following submissions :

“It is owner of various land parcels in Howrah. Assessee company is a part of Jalan Group which is engaged in real estate project, land development and industrial plotting for past few decades. Assessee company had entered into an agreement with M/s. Tower Distributors Pvt. Ltd. to sell 830 decimals of land located in Mouza-Hijlok and Tenpur Abasan, Howrah. This agreement was signed on 03.03.2015. Total consideration for the sale of land was Rs.910.8 lakhs. Copies of agreement signed on 03.03.2015, 01.02.2019, 01.02.2020 and 01.02.2021 have been submitted along with the reply. Appellant has also submitted details of date- wise money receipt from M/s. Tower Distributors Pvt. Ltd., along with the utilization of this money. Initial funds received from March, 2015 to 5th February, 2019 have been utilized for loan re- payments. Further, funds received from 16th February, 2019 to 24th July, 2019 has been utilized as mutation charges, conversion charges and compensation for land development. Appellant further submits that M/s. Tower Distributors Pvt. Ltd. was incorporated on 28.03.1995 and it is assessed to tax. The said company has a net worth of Rs.22,71,40,672/- as on 31.03.2015 and net worth of Rs.23,06,42,012/- as on 31.03.2020. The said company had last raised share capital in the financial year 2004-05. Since then, it has not raised any fresh capital.

6.

1 Assessee further submitted that in response to notice u/s.133(6), M/s. Tower Distributors Pvt. Ltd. had responded and also submitted the following documents, however, the AO brushed aside all the submissions and made addition u/s.68 of the Act :

1.

Certificate of Incorporation

2.

Memorandum and Article of Association

3.

Audited Accounts for year ended 31.03.2015, 31.03.2019 and 31.03.2020

4.

Income tax return for year ended 31.03.2015, 31.03.2019 and 31.03.2020

5.

Bank statement reflecting the transactions

6.

Source of funds of creditor

7.

Confirmation of Accounts for the transactions

8.

Agreement for sale

9.

Reply to notice u/s.133(6) of the Income-tax Act, 1961

10.

Reply of assessee in respect of show cause notice dated 15.03.2022 issued by the AO to the assessee

6.

2 With regard to non-availability of M/s. Tower Distributors Pvt. Ltd. at their registered address, assessee company submitted that office premises of the said party has been geotagged with the

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