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Income Tax Appellate Tribunal, DELHI BENCH ‘I-2+SMC’, NEW DELHI
Before: Ms. Suchitra KambleDr. B. R. R. Kumar
Per Dr. B.R.R. Kumar, Accountant Member:
The present appeal has been filed by the assessee against the order of ld. CIT (A)-I, New Delhi dated 07.12.2017.
Following grounds have been raised by the assessee:
1. That having regards to the facts and circumstances of the case, Ld. CIT(A) has grossly erred in law and on facts in confirming the additions of Rs.14,00,000 /- as unexplained cash credit u/s 68 of the Income Tax Act, 1961 during the year by recording incorrect facts and making irrelevant observations. Therefore, the additions made as such may be liable to be deleted.
2. That having regards to the facts and circumstances of the case, Ld. CIT(A) has grossly erred in law and on facts in confirming the additions of Rs.25,200/- by deeming commission as Adarsh Food Products Pvt. Ltd. unexplained cash credit u/s 68 of the Income Tax Act, 1961 during the year by recording incorrect facts and making irrelevant observations. Therefore, the additions made as such may be liable to be deleted.
That having regards to the facts and circumstances of the case, Ld. CIT(A) has grossly erred in law and on facts, in confirming the orders framed by the Ld. AO u/s. 143(3)/ 147 in spite of the fact that the Ld. AO passed orders without considering the fact that detail found by DIT (Inv. ) was not belonging to the appellant. Without considering the bank statement of appellant and of share applicant. Therefore, the assessment completed as such may be held ab-initio invalid.
4. That having regards to the facts and circumstances of the case, Ld. CIT-(A) has grossly erred in law and on facts, in confirming the orders framed by the Ld. AO u/s. 143(3)/ 147 and that too without considering the material on record; therefore, the additions made as such per Ground of Appeals No. 3 may be liable to be deleted.
5. That having regards to the facts and circumstances of the case, Ld. CIT-(A) has grossly erred in law and on facts, in confirming the orders framed by the Ld. AO u/s. 143(3)/ 147 and that too without giving opportunity of being heard, therefore, the additions made as such as per Grounds of Appeals No. 3 may be liable to be deleted.
6. That having regards to the facts and circumstances of the case, Ld. CIT-(A) has grossly erred in law and on facts, in confirming the orders framed .by the Ld. AO u/s. 143(3)/ 147 and that too without providing the material to appellant collected on the back of him, therefore, the additions made as such as per Grounds of Appeals No. 3 may be liable to be deleted.
7. That having regards to the facts and circumstances of the case, Ld. CIT (A) has grossly erred in law and on facts, in confirming the order
Adarsh Food Products Pvt. Ltd. framed by the Ld. AO u/s. 143(3)/ 147 and that too without providing the opportunity of cross- examination of the parties who were examined by the learned AO on the back of it; therefore, the additions made as such as per Grounds of Appeals No. 3 may be liable to be deleted.
8. That having regards to the facts and circumstances of the case, Ld. CIT-(A) has grossly erred in law and on facts, in confirming the action of the Ld. AO despite the fact that he invoked his re- assessment jurisdiction by invoking section 147 simply on the basis of information and without having any “Reasons to believe” or application of mind that the income has escaped assessment, therefore, the orders passed on the basis of sue notice may be liable to be quashed.
9. That having regards to the facts and circumstances of the case, Ld. CIT(A) has grossly erred in law and on facts, in confirming the action of the Ld. AO despite the fact that he invoked section 147 without first having disposed off the case under section 143(1)/ 143(3) etc. as the same fact could not find a mention in the assessment orders. Therefore, reason to believe based on purely guesswork only. Therefore, the orders passed on the basis of such a defective notice may be liable to be quashed.
10. That having regards to the facts and circumstances of the case, Ld. CIT-(A) has grossly erred in law and on facts, in confirming the action of the Ld. AO despite the fact that he invoked section 147 without first having statutory requirement of section 151(2) regarding the satisfaction of the Hon’ble Joint Commissioner of Income Tax, as the same is absent in the file having no comment and seal of the Hon’ble Joint Commissioner of Income Tax. As such, the orders passed in the absence of these statutory requirements may be liable to be quashed.”
Adarsh Food Products Pvt. Ltd. 3. Broadly, the issues are two. 1. Reopening u/s 148 2. Addition u/s 68
The assessee company was incorporated on 07.06.1983. The company filed its Return of Income for A.Y. 2009- 10 on 29 09.2009 declaring income at Rs.3,94,360/-. Thereafter the return was processed u/s 143(1) under the regular proceedings of the I.T. Act. No assessment u/s 143(3) was made in this case hitherto.
Information received from Investigation Wing as per the Assessment Order: The DIT (Investigation)-II, New Delhi vide letter F.No. DIT(Inv)-II/U/s148/2012-13/195 dated 12.03.2013 intimated that Sh. Surinder Kumar Jain had been providing accommodation entries through a large number of dummy companies floated by him or his associates. The Investigation Wing has compiled a report & date of the beneficiaries of such entries. The name of the assessee company- i.e. M/s. Adarsh Food Products Pvt. Ltd. figures in the list of beneficiaries of Share Capital Premium / Loan. The information is based on search & seizure operation conducted in the case of Jain Brothers (Sh. Virendra Jain and Sh. Surinder Kumar Jain) their group concerns on 14/09/2010. The material found and seized (Annexure A-1 to A-163) from the residence of Jain Brothers includes several diaries and registers and it contains incriminating information maintained in the form of daily cash books wherein detailed day to day receipt and payments in cash /RTGS and cheques from /to different persons /firm
Adarsh Food Products Pvt. Ltd. /companies have been recorded for the past six years till the date of search.
Analysis of Information Received by the AO On perusal of the information received from the Investigation Wing, the following facts emerged in the course of search and post search inquiries:
(i) These dummy entities are not carrying out any actual business activities, other than the activity of providing accommodation entries in the garb of some ostensible business transactions.
(ii) The entries in the bank accounts through which the amounts are routed, do not have any underlying or actual business transaction.
The seized documents were examined and they contained comprehensive details comprising, inter alia the Beneficiary's Name, amount of entry taken, Name of Account Holder of Entry giving Account, Bank details of the accounts from which entries are given, the dates of the entries etc. The specific analysis of following documents seized in respect of the assessee company indicated transactions which are as under:
(I) Pago 43 of Annexure A-25 are seized during the search operation gives comprehensive details of cheque No., Bank, Entry Providing Companies, name to one of the beneficiary i.e. M/s Adarsh Food Products Pvt. Ltd., jurisdiction of which lies with this ward.
As per information received, the entry of assesses found in the seized documents of Jain brothers corroborates with the Adarsh Food Products Pvt. Ltd. Banking channel and during the year the following entries have been taken by the assessee from the entry operators: Cheque From To Name Cheque Amount Name Annexure Page Book company company/ of the /RTGS/ PO (Rs.) of the No. No. Date name person issuing No./Cheque Middle name Bank Date Man/ Mediato 21/3/09 Mani Adarsh AXIS Ch. No. 3,00,000 Satish A-25 43 Mala Food 191226 Garg Delhi Products dated Pro Pvt. Pvt. Ltd. 21/3/09 Ltd. 21/3/09 Virgin Adarsh AXIS Ch. No. 4,00,000 Satish A-25 43 Capital Food 012111 Garg Services Products dated Pvt. Ltd. Pvt. Ltd. 21/3/09 Independent Enquiries Conducted pursuant to information received from Investigation Wing
Analysis of ITR by the AO:
The return of income of Assesses Company has been downloaded from the ITD system and the same was examined in the light of information received from Investigation Wing. On comparative examination of return of income of the S. No. Particulars A.Y. 2008-09 A.Y. 2009-10 Increase (+)/ Decrease (-) Assessed company for Authorized Rs.70,00,000 Rs.2,00,00,000 Rs.1,30,00,000 A.Y. 2008-09 & 2009- Share (+) 10, the following Capital has been observed with regard to the share capital and share premium of the assesses company :
1. 1.
2. Issued Rs.57,79,700 Rs.1,56,79,700 Rs.99,00,000 Subscribed (+) and Paid up capital From the above, it is evident that the assessee company has increased its share capital/share premium by total amount of Rs.90,00,000/-. Thus the information received
Adarsh Food Products Pvt. Ltd. from the Investigation Wing was corroborated by the particulars shown by the assessee company in its return of income.
Reasons for formation of belief recorded by the AO:
The information was carefully perused and analyzed in light of the facts of the case as detailed above and the following facts emerged from the same: (i) Particulars of all investing companies are found recorded in the diary maintained in the regular course at the premises under control of Sh. S.K. Jain. (ii) The pass books/cheque books of all the investing companies who have made investments in the assessee company have been found at the premises of Sh. S.K. Jain and Sh. Virendra Jain when these persons are not directors/shareholders of these companies. (iii) Perusal of various seized documents, as discussed at para 3.2 clearly shows that the name of the assessee company i.e. M/s Adarsh Food Products Pvt. Ltd., appears on this document has taken accommodation entry from S.K. Jain group companies. (iv) The assessee has declared in its return of income that it has increased its share capital total amounting to Rs.2,00,00,000/- which confirms the information received from Investigation Wing. It can be fairly concluded from the above facts that the assessee company has given its own fund to Sh. S.K. Jain to introduce it in the form of share capital through the companies being controlled by Sh. S.K. Jain Group.
Income chargeable to tax escaping assessment as mentioned by the AO: 11. The above facts clearly establish that the assesses company M/s Adarsh Food Products Pvt. Ltd. has taken accommodation entries in the form of share capital as well as share premium from the entry providing companies being controlled by S.K. Jain group. As per information available on record i.e. ITR filed for A.Y. 2009-10, the full and true disclosure with regard to the above transactions have not been made by the assesses company as the fact that the Share Capital and Share Premium is being introduced through these dummy companies is nowhere disclosed by the assesses company. In view of explanation 2 to clause (b) of proviso of section 147 of the Income Tax Act, 1961, where a return of income has been furnished by the assesses but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income where income chargeable to tax has escaped assessment…. Keeping in view all the above, there was reason to believe that income had escaped assessment in case of M/s. Adarsh Food Products Pvt. Ltd. for the A.Y. 2009-10 within the meaning of Section 147/148 of income Tax Act. 1961.
On receipt of the information and reply of the assessee, the Assessing Officer, from page no. 5 (para 6.1) to page no. 20 (para 7.3) referred to the modus operandi of the entry operation by the Sh. S.K. Jain and Sh. V.K. Jain and orders of the ld. CIT (A) and ITAT in the case of entry operators. At para no. 7.4, the AO held as under:
Adarsh Food Products Pvt. Ltd. “The assessee has submitted that no such amounts have been received by it. A perusal of the extract of diary reveals that the following accommodation entries have been provided by M/s Manimala Delhi Pro Pvt. Ltd. and M/s Virgin Capital Services Pvt. Ltd. to the assessee and M/s Jindal Dal Mills Pvt. Ltd. both having Sh. Anil Kumar Jindal as common Director.
Date Name of Beneficiary Amount Company Company 21.03.2009 M/s Manimala M/s Adarsh Food 3,00,000 Delhi Pro Pvt. Products Pvt. Ltd. Ltd. 21.03.2009 M/s Manimala M/s Jindal Dal Mills 4,00,000 Delhi Pro Pvt. Pvt. Ltd. Ltd. 21.03.2009 M/s Virgin M/s Adarsh Food 4,00,000 Capital Services Products Pvt. Ltd. Pvt. Ltd. 21.03.2009 M/s Virgin M/s Jindal Dal Mills 3,00,000 Capital Services Pvt. Ltd. Pvt. Ltd.
The AO from page no. 22 to page no. 35 (para 9 to 14) quoted various case laws. At page no. 36 (para 15), the AO concluded the proceedings making an addition of Rs.14,00,000/-, the relevant portion of the assessment order is as under: “15.1 It is a settled position of law that a conspiracy is hatched and executed in darkness. To overcome these issues, law states that it is for the alleged to come out clean. The assessee company made no serious efforts to come clean on the allegation so raised. In the civil law, a mere preponderance of probability is enough to fix the responsibility. Section 68 is enacted in these terms only. It is clearly indicated from the wordings of the section that where the assessee offers no explanation or the explanation offered by the assessee is unsatisfactory, the provisions of section 68 are attracted.
Adarsh Food Products Pvt. Ltd. 15.2 To sum up, a sum of Rs.14,00,000/- has been found credited in the books of account of the assessee. The immediate source of this amount has been found to be accommodation entry provider companies out of the entities controlled by Jain brothers are discussed above.”
The ld. CIT (A) confirmed the addition.
We have heard the arguments of the ld. DR and perused the material on record.
The detailed examination of the record, the following resultant undisputed facts have been arrived at. 1. The diaries of Jain Brothers reflect that the assessee has received Rs.3,00,000/- from Manimala Delhi Pro Pvt. Ltd. and Rs.4,00,000/- from Virgin Capital Services Pvt. Ltd. 2. The analysis of the ITR by the AO reflected increase of share capital by Rs.99,00,000/-. 3. As per the reasons, the AO believed that the share capital received by the assessee confirms to the fact of receipt of information from the Investigation Wing regarding the entry taken. 4. Thus, the belief of the AO was that the share capital of Rs.99,00,000/- received by the assessee is bogus and only an entry from the entry operator. 5. From the submissions of the assessee, the share capital received by the assessee is as under: a. Sushil Kumar Jindal HUF – Rs.42,00,000/- b. Anil Kumar Jindal HUF - Rs.37,00,000/- c. Anil Kumar Jindal - Rs.14,00,000/- d. Bhaibhav Jindal - Rs.4,00,000/- e. Ekta Jindal - Rs.2,00,000/-
Adarsh Food Products Pvt. Ltd. 17. Thus, we find that the reasons recorded by the AO that the assessee company received share capital from the entry operator proved to be incorrect based on the facts. Attributing the entry of Rs.7,00,000/- to the share capital of the company by the AO to the increased share capital of Rs.99,00,000/- found to be incorrect based on the details of the share capital received by the company from the five entities above.
Further, we find that the information available with the Assessing Officer pertains to receipt of Rs.7,00,000/- from two entities namely, Manimala and Virgin Capital whereas the AO made addition of Rs.14,00,000/- u/s 68 of the Act. As per the information mentioned at para 7.4 an amount of Rs.7,00,000/- has been received by another entity namely, M/s Jindal Dal Mills Pvt. Ltd. Sh. Anil Kumar Jindal is the common Director in the assessee company as well as Jindal Dal Mills Pvt. Ltd. No reasons given by the AO as to why the addition of Rs.14,00,000/- has been made in the case of the assessee. The AO has not mentioned whether this Rs.14,00,000/- is on account of share capital or loans or expenses. No details of these entries have been given. The AO has failed to examine whether the amount of Rs.14,00,000/- credited in the books of the assessee or not, if so under what head. The AO has made addition of Rs.7,00,000/- received by M/s Jindal Dal Mills Pvt. Ltd. in the hands of the assessee company. The addition has to be rightly made in the hands of M/s Jindal Dal Mills Pvt. Ltd. instead of the assessee company. It was also not proved that the assessee company whose name figured in the diary entries and shares of an equivalent amounts have been allotted to the common Directors, Sh. Anil Kumar Jindal. As per the record
Adarsh Food Products Pvt. Ltd. and the bank statement, Sh. Anil Kumar Jindal has received Rs.14,00,000/- from M/s Jindal Dal Mills Pvt. Ltd. and purchased the shares of the assessee company. In that case, the genuineness of the receipt of amount by Sh. Anil Kumar Jindal from M/s Jindal Dal Mills Pvt. Ltd. needs to be enquired and in case found to be bogus or in genuine, the addition should have been made in the hands of Sh. Anil Kumar Jindal, which was totally overlooked by the Assessing Officer.
The ld. CIT (A)’s observation that “the assessee has failed to prove identity, creditworthiness and genuineness of the transaction in respect of the share application money. It is also relevant to mention here that in view of the facts of the case as discussed above, even the identity of the share applicants has not been proved and established”. cannot be said to be factually correct when all the share applicants namely, Sushil Kumar Jindal HUF, Anil Kumar Jindal HUF, Anil Kumar Jindal, Bhaibhav Jindal and Ekta Jindal belong to the same family and assessed to tax and whose identity and existence is never in dispute.
Hence, keeping in view, the reasons recorded which have been proved incorrect, the addition has been made without specifying as to the nature of the amounts and also without examining the credits in the books of the assessee, we hereby allow the appeal of the assessee on grounds of Section 148 and Section 68 of the IT Act.
In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 06/05/2020.