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Facts
The assessee, an NBFC, received information that it had obtained accommodation entries totaling Rs.97 lakhs from alleged paper entities (Sarveshrestha Traders Pvt Ltd and Silverlake Traders Pvt Ltd). The AO made an addition of Rs.97 lakhs to the assessee's income, which the CIT(A) subsequently deleted, finding no proof of accommodation entries.
Held
The Tribunal upheld the CIT(A)'s order, stating that the AO failed to establish how the assessee routed its own unaccounted money through the alleged paper entities. All transactions were through banking channels, and the AO did not bring anything on record to prove the accommodation entries or the assessee as a beneficiary of illicit transactions.
Key Issues
Whether the CIT(A) erred in deleting the addition of Rs.97 lakhs made by the AO on account of accommodation entries, when the AO failed to provide evidence of the assessee routing its own unaccounted money through the alleged paper entities.
Sections Cited
147, 148, 143(3)
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Income Tax Appellate Tribunal, “D” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR & SHRI PRADIP KUMAR CHOUBEY
(निर्धारण वर्ा / Assessment Year : 2010-2011) DCIT, Circle-5(1), Kolkata Vs M/s Puffco Distributors Pvt Ltd 5, Mangoe Lane, Suit No.306, 3rd Floor, Kolkata-700001 PAN No. :AABC 9974 E (अपीलधर्थी /Appellant) (प्रत्यर्थी / Respondent) .. निर्धाररती की ओर से /Assessee by : Shri Arvind Agrawal, Advocate रधजस्व की ओर से /Revenue by : Shri S.B.Chakraborthy, Sr. DR सुनवाई की तारीख / Date of Hearing : 25/08/2025 घोषणा की तारीख/Date of Pronouncement : 04/09/2025 आदेश / O R D E R
Per Pradip Kumar Choubey, JM :
The revenue has filed the instant appeal against the order dated 07.03.2025, passed by the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2010-2011.
The appeal of the revenue has been filed belatedly by 20 days. In this regard, the department has filed an application for condonation of delay stating therein sufficient reason for of delay. Considering the submissions made on behalf of the revenue and looking to the facts of the case, we condone the delay of 20 days in filing the present appeal and appeal of the revenue is admitted for hearing.
Brief facts of the case are that the assessee is a Non-Banking Finance Company (NBFC) incorporated on 08.02.1995. The assessee filed its return of income returning income at Rs.37,96,290/-. The AO was in receipt of information from the PDIT (Inv), Kolkata that the assessee received accommodation entries from Sarveshrestha Traders Pvt Ltd and Silverlake Traders Pvt Ltd and accordingly the AO initiated proceedings u/s 147 of the Act recording the reasons for reopening. A notice u/s.148 was also issued after obtaining prior approval of the competent authority. The assessee filed objection that has been disposed off and thereafter the AO had held that the assessee has received funds totaling to Rs.97 lakhs from unreliable sources which have been proved to be paper entities by our internal investigation". Upon considering the submissions of the assessee, the AO recorded the findings that that assessee could not disprove the above-mentioned facts and hence he made addition of Rs.97,00,000/- to the income of the assessee. The assessment order in the case was passed u/s 147/143(3) of the Act assessing income at Rs.1,34,96,290/-. Aggrieved with the assessment order of the AO, the assessee filed appeal before the ld. CIT(A), wherein the appeal of the assessee has been allowed and the ld.CIT(A) had directed to delete the addition of Rs.97 lakhs.
4. Being aggrieved and dissatisfied with the order of the ld. CIT(A), the revenue is in appeal before the Tribunal by taking following grounds :-
1. Whether on facts and circumstances of the case and in law, the Ld CIT(A) erred in fact in holding that the A.O. has not brought anything on record which shows hat the appellant routed its own unaccounted money when in the assessment order detailed facts were brought on record about the modus operandi and person/ entities facilitating such accommodated transaction.
2. Whether on facts and circumstances of the case and in law, the Ld CIT(A) erred in facts and in law in not appreciating the judicial principles laid down in the matter of Pr. CIT VS Swati Bajaj reported in [2022] 139 taxmann.com 352 (Cal) / 446 ITR (Cal) wherein the Hon'ble High Court at Calcutta laid down guidelines on the manner in which the allegation against the assessee has to be considered.
3. Whether on facts and circumstances of the case and in law, the Ld CIT(A) has failed to appreciate the judicial principles laid down in the matter of Sumati Dayal vs. CIT[1995]214ITR801(SC) and also in the matter of CIT Vs. Durga Prasad More 1973 CTR (SC) 500:[19714]82ITR540(SC).
It may be pleaded that although the tax effect in this case is below the prescribed monetary limit as per Circular No. 09/2024 dated 17.09.2024, yet appeal may be filed before the Hon'ble ITAT in view of the fact that the case falls under the exceptional clause 'h' given in paragraph 3.1 in CBDT's circular no.5 dated 15-03-2024.
5. That the appellant craves leave to add to and/or alter, amend, modify or rescind the grounds hereinabove before or at the time of hearing of this appeal.
On the other hand, ld.AR supported the order of the ld.CIT(A), thereby submitting that the ld.CIT(A) has not only discussed the issue in detail rather followed the judicial pronouncements thereafter allowed the appeal of the assessee and the impugned order does not require any interference. Ld.AR further submitted that, in fact, the assessee has received the sale proceeds of assets in form of investments and has not received the above amount towards share application money, share capital, share premium, loan, advance or any such amount by whatever name called. Enclosed find herewith the bank statement of the assessee with HDFC Bank for current account no. 00082560019048 for the period 01.10.09 to 31.10.09 where your honour would find that all the payments received from the above parties are through account payee cheques and bank statement of Sarveshrestha Traders Pvt Ltd. maintained with ICICI Bank for the period 01.10.09 to 31.10.09 where the payments made by them as mentioned above clearly goes to reveal that the payment made by them is out of receipt of Rs. 25,00,000/- from Merchan and Rs. 25,00,000/- from Swarn Ganga and Rs. 10,000/- from bank balance brought forward. Ld. AR further submitted the copy of ledger accounts of Sarveshrestha Traders Pvt Ltd., bank statement of the assessee which proves the case of the assessee.
Upon hearing the submission of the counsel of the respective parties, we peruse the impugned order and find that in response to the so- called notice the assessee submitted a detailed reply before the AO and as per the reply the following facts have been emerged :- The assesee had received Rs.50,10,000/- from M/s Sarveshrestha Traders Pvt. Ltd. which are sale proceeds of the following shares held by the assessee Name of company Investment value Sale Value ATO India Pvt. Ltd. 22,50,000/- 22,50,000/- Bhatia Coal Trading & Consignment 10,60,000/- 10,60,000/- Pvt. Ltd Sheth Impex Vivo Solutions Pvt. Ltd. 17,00,000/- 17,00,000/- The assessee had received Rs.47,00,000/- from Silverlake Traders Pvt. Ltd., which are sale proceeds of the following shares held by the assessee Name of company Investment Sale Value value Jinraj Estate Pvt. Ltd. 35,00,000/- 35,00,000/- Rashleela Enterprises Pvt. Ltd. 12,00,000/- 12,00,000/-
It is further pertinent to mention here that the bank statement of the Silverlake Traders Pvt. Ltd. with ICICI Bank for the period 01.10.09 to 31.10.09 where the payments made by them is reflected and it appears that payments made by them is out of receipt of Rs.25 lakhs from Merchan and Rs.22 lakhs from fund transfer. The said bank statement neither shows any receipt from the names mentioned in the show cause i.e. M/s Kuber Traders, M/s Mahabir Traders (Nagendra Singh), M/s Alankar Trading, Sneha International (Samson Rodrigues) and Sherawali Corporation nor any cash deposit and also includes only against both companies. In view of the above, we do not find anything to establish the nexus between the assessee and the so called unnamed paper companies. We have gone through the order passed by the ld.CIT(A) and it is relevant to reproduce the relevant operation of the ld.CIT(A) in para 4.1 onwards as under :-
4.1 On perusal of the submission of the appellant, I find that the appellant purchased the shares of (i) ATO India Pvt Ltd, (ii) Bhatia Coal Trading & Consignment Pvt Ltd, (iii) Sheth Impex Vivo solutions Pvt Ltd, (iv) Jinraj Estates Pvt Ltd and (v) Rashleela Enterprises Pvt Ltd in the F.Ys. 2006-07 and 2007-08 sold them to Sarveshrestha Traders Pvt and Silverlake Traders Pvt Ltd. In the F.Y. 2009-10 relevant to A.Y. 2010-11 i.e. the year under consideration. The investment in the shares is reflected in the accounts of the appellant. The details of purchase and sale of shares made by the appellant are as under –
Purchase of shares Sale of shares(all the receipts were received in HDFC Bank) Name of Name of Date of Cheque Amount Name of the Date of Cheque Amount the the Bank payment No. purchaser payment No. company ATO India IDBI Bank 10-01-2008 373049 750000 09-10-2009 533945 2500000 Pvt. Ltd. 10-01-2008 373050 750000 10-01-2008 373051 750000 Bhatia South 19-06-2007 848934 1000000 Sarveshrest Coal Indian ha Traders Trading & Bank Ltd. 12-10-2009 699276 2500000 Pvt. Ltd. Consignm 27-06-2007 848940 60000 ent Pvt. Ltd. Sheth IDBI Bank 18-12-2006 85167 900000 13-10-2009 533948 10000 Impex South 02-03-2007 848907 800000 Vivo Indian Solutions Bank Ltd. Pvt. Ltd. Jinraj South 24-04-2007 848927 1000000 Estates Indian Pvt.Ltd. Bank Ltd. IDBI Bank 29-05-2007 373015 1000000 09-10-2009 533947 2500000 Silverlake South 23-06-2007 848937 900000 Traders Pvt. Indian Ltd Bank ltd. 27-06-2007 848942 600000 12-10-2009 699206 2200000 Rashleela IDBI Bank 28-06-2006 85143 600000 Enterpris 12-03-2008 503182 600000 es Pvt. Ltd. TOTAL 9710000 TOTAL 9710000
All the payments for purchase of aforesaid shares and receipts against the sale of shares are routed through banking channel. There is no scope to treat the receipts against the aforesaid shares in the form of any accommodation entry. The AO ha not brought anything on record to show as to how the receipts of Rs.50.10,000/- from Sarveshrestha Traders Pvt Ltd and Rs.47,00,000/- Silverlake Traders Pvt Ltd we received by the appellant in the form of accommodation entries and the appellant was beneficiary of illicit transactions. The AO has not brought anything on record which shows that the appellant routed its own unaccounted money through Sarveshrestha Traders Pvt Ltd and Silverlake Traders Pvt Ltd in lieu of commission as alleged. In the assessment order, the AO's findings are that the appellant received