SHANKER TRADEX PVT. LTD.,DELHI vs. WARD 23(1), NEW DELHI

This appeal is filed by assessee against the order of COMMISSIONER OF INCOME TAX (Appeals) – 31, New Delhi dated 23rd of January 2019 for assessment year 2008 – 09 wherein appeal filed by the assessee against the order of The Income Tax Officer, Ward – 23 (1), New Delhi passed u/s 147 read with Section 144 of The Income Tax Act, 1961 on 28th of March 2016 making an addition of ₹ 2,036,000 u/s 68 of The Income Tax Act to the returned income of ₹ 30,770/- , was dismissed.

Brief facts of the case shows that assessee is a company which filed its return of income on 16/9/2008 for the assessment year 2008 – 09 declaring an income of ₹ 30,7 70/–. Thereafter the return was processed u/s 143 (1) of the act on 12/5/2009. Subsequently an information was received from the office of the Director Of Income Tax (Investigation) on 12th of March 2013 that assessee has obtained an accommodation entry through and entry operator of a sum of ₹ 20 lakhs. Therefore the learned assessing officer recorded reasons on 9 March 2015 as under and issued notice u/s 148 of the Act on 19 March 2015 after obtaining the approval from The Joint Commissioner of Income Tax, Range – 23, New Delhi. “1. Information/documents along with relevant details has been received from office of The Director Of Income Tax (Investigation) – II, New Delhi vide their letter F. NO DIT ( Inv) /II/u/s 148 /2012-13/196 dated 12 March 2013 and DDIT (INV) unit VI (2), New Delhi vide White their letter F No DDIT (INV)/ u-V(2)/information sharing, 2012 – 13/141 dated 12 March 2013 that the above assessee, M/s Shanker Tradex private limited has received and is a beneficiary of accommodation entries provided by entry operators Shri Surendre jain . The investigation wing of the Department had carried out such/survey operations against the entry operators Shri Surender Jain and his brothers Ravidner Jain. During the course of post such investigation it has been immediately established that Sri Surendra Kumar Jan is in the business of providing accommodation entries to various beneficiaries companies/entities/persons through cheques through a number of paper and dummy companies in lieu of cash. These dummy companies are totally managed and controlled by Sri Surendra Kumar Jan and his brothers Ravidenr Jain. During the course of search action, vast number of incriminating documents were found and seized. These documents include date -wise hand written cheque books and cashbooks maintained by Shri Sureidner Kumar Jain and his brother over a Long period of time around six years. In these cheque-books and cashbooks details of cheques provided to the beneficiary companies entity/ persons were recorded.

It is informed that from the verification of the documents seized, it clearly appears that the following accommodation entries from various paper companies of the Surender Kumar jain group was provided to the above assessee:- name of the company Amount 20,00,000 M/s Shankar Tradex Pvt Ltd Total 20 ,00,000

In view of the additional information documents received from the investigation wing, I have reason to believe that the assessee has wilfully and knowingly concealed its particulars of income to avoid tax and that income of ₹ 20 lakhs chargeable to tax has escaped assessment for assessment year 2008 – 09 within the meaning of Section 147 of the income tax act 1961. ( Ashok K Vishrant ) Income Tax Officer Ward 23(1) , New Delhi”

In response to the above notice, assessee submitted that its original return filed on 16 September 2008 may be treated as a return filed in response to notice u/s 148 of the act. Subsequently notices were issued u/s 143 (2) of the act which was served upon the assessee on 7/12/2015. The assessee did not file any objection before the learned assessing officer against the reopening of the assessment. Therefore, learned assessing officer assumed the jurisdiction and found that assessee has obtained an accommodation entry from two different companies on 5/1/2008 and 29/1/2000 date of ₹ 10 lakhs each respectively. Then the learned assessing officer discussed the modus operandi of the companies providing accommodation entries by the Jain brothers in paragraph number six of the order. Subsequently, in paragraph number [8] the learned assessing officer discussed show because notice giving the detailed information about the accommodation entries obtained. The learned assessing officer also noted the assessment proceedings in the case of accommodation entry provider and thereafter he discussed several judicial precedents as well as the surrounding circumstances and concluded that in view of the factual and legal metrics, along with human probability and surrounding circumstances and incriminating evidences on record, he made an addition of ₹ 20 lakhs u/s 68 of the income tax act. He further made an addition of ₹ 36,000 towards the commission paid for obtaining the above accommodation entry at the rate of 1.8% of the accommodation entry amount. Consequently the income was assessed at ₹ 2,066,770/–. Along with the assessment order the learned assessing officer attached for different annexures giving the details of the entry operator, various companies operated by the entry Page | 3 operator, details of accounting record in the form of cash book being part of seized material from entry operator.

Thereafter, assessee aggrieved with the order of the learned assessing officer, preferred an appeal before the learned CIT – A who dismissed the appeal of the assessee holding that it is clearly established that the appellant had obtained accommodation entry of the share capital from two different companies of ₹ 10 lakhs each amounting in all to ₹ 20 lakhs which was added by the learned assessing officer u/s 68 of the act along with the commission of ₹ 36,000. He thus confirms the action of the learned assessing officer.

Therefore, assessee aggrieved with the order of the learned CIT – A has preferred this appeal before us. The assessee adverting to ground number [2] & [3] of the appeal submitted that there is no application of mind by the learned assessing officer in recording reasons for reopening of the assessment and he merely relied upon the report of the investigation wing. He further submitted that the reasons recorded are vague, devoid of tangible material, reasonable cause and justification. It was submitted that that the learned assessing officer has failed to record the year for which the accommodation entry belongs to, the details of the companies providing accommodation entry or used for providing accommodation entry to the assessee, dates of such accommodation entries, the amount of accommodation entries from the respective companies, the nature of the amount received by the assessee and medium i.e. bank account etc. From which these accommodation entries were obtained. He therefore submitted that the reasons recorded by the learned assessing officer is devoid of the basic requirement which could not have lead him to “reason to believe ” and therefore same is without application of mind and deserves to be quashed.

The learned authorised representative despite asking by the bench did not argue on the merits of the case in ground number 4 – 7 of the appeal. Therefore ground numbers 1, 4 – 7 are dismissed.

The learned departmental representative vehemently supported the order of the learned assessing officer on the issue of reopening of the assessment. He submitted that the reasons have been properly recorded. It was further stated that those details as stated by the learned authorised representative does not appear in the reasons recorded by the learned assessing officer, however, same appears in abundant measure in the assessment order passed by the learned assessing officer. He therefore submitted that the reasons recorded are required to be seen with reference to the assessment order. He also referred to the assessment order stating that the learned assessing officer has given detailed reason containing in 44 pages of assessment order to show that how the accommodation entries have been obtained. He further stated that in the assessment order, the learned assessing officer has given the names Page | 4 of even the entry operator and intermediary who were instrumental in obtaining the above accommodation entries. He further submitted that at the time of reopening of the assessment only the simple reason to believe is to be seen. It is not necessary for the assessing officer to show that there is actual escapement of income. It has to be a prime facie belief of the learned assessing officer which cannot be questioned. He further submitted that the case of the assessee was not picked up for the scrutiny u/s 143 (3) of the act and therefore it cannot be tested on the same logic and reasoning which can be tested for the assessment already made by the learned assessing officer u/s 143 (3) of the act. He therefore stated that there is no infirmity in the reasons recorded by the learned assessing officer for reopening of the assessment.

On the merits of the case he submitted that the learned authorised representative has nothing to say and it is conclusively proved by the learned assessing officer and the learned and CIT – A that the accommodation entries of been obtained by the assessee from the entry operator. He therefore submitted that the appeal of the assessee deserves to be dismissed on all the counts.

We have carefully considered the rival contention and perused the orders of the lower authorities. Here, as per ground number 2 and 3 of the appeal the learned authorised representative has referred to the reasons recorded by the learned assessing officer and challenged the same stating that the learned assessing officer has failed to apply his mind to the information available and has recorded vague reasons. The reasons recorded by the learned assessing officer have already been reproduced in this order earlier. On perusal of the reason it is apparent that in the first paragraph the learned assessing officer has mentioned that details about the entry operators. In the second paragraph the learned assessing officer has noted that from the verification of the documents seized it is clearly appears to him that accommodation entries from various paper companies were obtained by the assessee. However in the table reproduced in paragraph number two there is no reference to the nature of the accommodation entry, the parties from whom accommodation entries have been provided/obtained by the assessee, the various dates of the accommodation entries, the amount involved with respect to each of the parties from whom accommodation entries have been obtained. Instead of that the learned assessing officer in paragraph number [2] has mentioned name of the assessee itself and against the name of the assessee mentioned sum of ₹ 20 lakhs. In paragraph number [3] of the reasons it was further stated by him that he has reason to believe that assessee has concealed its particulars of income willfully and knowingly and therefore the sum of ₹ 20 lakhs chargeable to tax has escaped assessment for assessment year 2008 – 09. However when we perused assessment order of the ld AO, it Page | 5