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Income Tax Appellate Tribunal, DELHI BENCH: ‘E’, NEW DELHI
Before: SHRI BHAVNESH SAINI & SHRI O.P. KANT
ORDER PER O.P. KANT, AM:
This appeal has been preferred by the Revenue against the order dated 12/02/2015 passed by the Ld. Commissioner of Income-tax (Appeals)-5, New Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2003-04, raising following grounds:
1. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.23,02,268/- made by AO as unexplained advance to M/s. Aakriti International Inc.
2. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.15,00,000/- made by the AO as unexplained investment in shares.
3. That on the facts and circumstances of the case and in law, the ld. CIT(A) has erred in restricting the total addition of Rs.4,23,52,500/- made by the AO u/s 68 of the Act to @ 1% of Rs.4,23,52,500/-.
That the order of the Ld. CIT(A) is erroneous and is not tenable of facts and in law. 5. That the grounds of appeal
are without prejudice to each other.
6. That the appellant craves leave to add, alter, amend or forego any ground(s) of appeal raised above at the time of hearing.
At the outset, we may like to mention that notices through registered post for hearing of the appeal were issued to the assessee on 28/02/2018; 08/05/2018; 08/08/2018; 14/11/2018; 26/03/2019; 07/05/2019; 09/07/2019; 21/10/2019 and 20/11/2019. The notice was also served by affixture through the inspector of the Department on 29/11/2019. Despite notifying the date of hearing several times, neither anyone appeared on behalf of the assessee nor any request for adjournment was filed. In the facts and circumstances, we were of the opinion that the assessee was not interested in prosecuting the appeal, and accordingly we heard the appeal ex-parte qua the assessee, after hearing arguments of the Departmental Representative.
Briefly stated facts of the case are that the assessee filed return of income on 27th February, 2004, declaring total income of Rs.9,890/-. The return was found to be filed after the due date of filing of the return of income as provided under Section 139(1) of the Income-tax Act, 1961 (in short ‘the Act’). The return was processed under section 143(1) of the Act on 28/03/2004. Subsequently, on the basis of information received from another Income Tax Officer, the case of the assessee was reopened by way of issue of notice under section 148 of the Act on 01/04/2005, which was served at the last known address by way of registered post. The assessee did not respond to the notice. The subsequent notices were issued under section 143(2) and 142(1) of the Act were also remained non-complied. The Assessing Officer in the assessment order has given details of the notices sent along with the remark of non-compliance. In view of non-compliance, the Assessing Officer made addition for unexplained cash deposited in bank, unexplained advances to Akariti International Inc. and unexplained investment in shares and assessed the total income at Rs.4,61,64,660/-, observing as under: “From the above facts of the case, it is noted that the assessee is avoiding compliance of statutory notices, therefore penalty proceedings u/s 271(1)(b) are separately initiated in this case. In this case, information regarding loan advanced by the assessee was received from Add!. CIT, Range-20, New Delhi. In the letter of the Addl. CIT, Range-20, New Delhi, it is mentioned that on 6.1.2004 a survey operation u/s 133A was conducted in the case of M/s Aakriti International Inc, 4/5, Double Story, Vijay Nagar, Delhi and during the course of survey operation it was found that during the FY 2002-03 M/s Kuldeep Textiles (P) Ltd. has advanced a loan of Rs. 2302268/- to M/s Aakriti International Inc. From the verification of the assessment record of the assessee, it is found that no such advance given by the assessee to M/s Aakriti International Inc is shown in the balance sheet of the assessee. As per balance sheet, the total amount of loan and advances as on 31.3.2003 is shown of Rs.3550000/- only No further detail of the persons to whom this loan was advanced is given by the assessee. In absence of any supporting evidence, it is concluded that the above amount of advance of Rs 2302268/- is not included in the total amount of Rs.3550000/- declared in the balance sheet. In absence of any authentic evidence, it is considered that this amount of Rs.2302268/- was given by the assessee to M/s Aakriti international Inc out of its undisclosed source of income. Therefore, this amount of Rs. 2302268/- is added back in the taxable income of the assessee under the head assessee’s income earned form undisclosed sources of income. From the above facts of the case, it has been established that the assessee has concealed the accurate particulars of its taxable income, therefore penalty proceedings u/s 271(1) (c) are separately initiated in this case. In this case, an information was also received from the Investigation Unit- 5, New Delhi. The Investigation Wing forwarded a list of persons involved in the activities of accommodation entries to different charges to take proper action against the persons who provided accommodation entries and also against the person who received these accommodation entries. The name of the assessee is also included in the list of entry providers.
During the course of assessment proceedings on the basis of information available on record, copies of bank a/s statement of the assessee were collected from State Bank of Bikaner & Jaipur, New Rohtak Road, New Delhi a/c no. 24624 and State Bank of Patiala, Darya Ganj, New Delhi a/c no. 50108. In account no. 50108 held with State Bank of Patiala, Darya Ganj, New Delhi a huge cash amount was deposited by the assessee regularly and thereafter cheques were issued from this account. The total of cash amount deposited in the above account comes at Rs.27493000/-. Similarly, a cash amounting to Rs. 14859500/- was also deposited in account no. 24624 held with State Bank of Bikaner and Jaipur, New Rohtak Road, New Delhi. Thus, the total of above cash amount deposited in both the accounts comes at Rs.42352500/-. In this case, no one has attended to the assessment proceedings explain the source of above cash amount credited in these bank accounts, therefore in absence of any supporting evidence, it is considered that the cash deposited in these accounts belongs to the assessee and it is the income of the assessee earned during the year from its undisclosed sources of income which is not declared in its return of income therefore this amount of Rs. 42352500/- is added back in the taxable income of the assessee u/s 68 of the IT Act, 1961.
Thus, an addition of Rs. 42352500/- is made in the taxable income of the assessee.
In addition to the above, an information was also received from the DCIT, Circle 15(1), New Delhi that during the course of assessment proceedings of M/s Rim.zim Valley Products (P) Ltd. (AY 2003-04) it was found that M/s Kuldeep Textiles (P) Ltd. has made an investment of Rs. 1500000/- in the share application money of the above named company. It reveals from the balance sheet of the assessee that the assessee has shown total investment in shares of Rs.3000000/- only. No further details of the companies in which investment was made by the assessee is placed on the record. In absence of any supporting evidence, it is considered that the assessee has made an investment of Rs. 1500000/- out of the books of accounts in the share application money of M/s Rimzim Valley Products (P) Ltd. during the FY 2002-03 relevant to the assessment year under reference. This amount of Rs. 1500000/- is added back in the taxable income of the assessee as an unexplained investment made by the assessee company.
From the above facts of the case, it has been established that the assessee has concealed the accurate particulars of its taxable income, therefore penalty proceedings u/s 271(1)(c) are separately initiated in this case.
In this case assessee has not filed its audit report before the specified date in prescribed form duly signed and verified by an auditor as required u/s 44AS of the IT Act, therefore penalty proceedings u/s 271B are separately initiated in this case for the above default of the assessee company.
With the above remarks, the total income of the assessee is computed as under: - Income from business or profession Taxable income as per return filed and processed u/s 143(1) Rs.9890/- Addition/disallowances 1. Unexplained cash 4,23,52,500/- deposited in bank accounts u/s 68 (as discussed above) 2. Unexplained advance 23,02,268/- to Aakriti International Inc. (as discussed above) 3. Unexplained 15,00,000/- Rs.4,61,64,658/- investment in shares (as discussed above) Total taxable income Rs.4,61,64,660/-
4. Before the Ld. CIT(A), no compliance was made by the assessee except relying on the other case of M/s. Tarun Goel (ITA No.4636 & 4637/Del/2001 for assessment year 2003-04 and 2004-05) wherein the Tribunal restored the matter back for deciding the peak credit for addition. The Ld. CIT(A) has reproduced the direction of the Tribunal in said case and thereafter, keeping in view the statement of Sh. Mahesh Garg (the person who operated the assessee-company for providing entries) and the Director, Sh. Anil Sharma, he estimated 1% of the turnover as commission income.
The Ld. Departmental Representative submitted that the Ld. CIT(A) has estimated 1% income of the transactions, without any evidence on record to substantiate that all the transactions were carried out by the assessee against commission income. She submitted that in the case of Tarun Goyal (supra), the Tribunal laid the burden of proof to demonstrate the chain of transaction, the layering indulged by him, and to prove each credit in the books of each assessee. According to her, the ld. CIT(A) is not justified in estimating income from commission without any documentary evidence on record.
We have heard submission of the Ld. DR and perused the relevant material on record. The case of the assessee was reopened by the Assessing Officer on the basis of information received from the Investigation Wing of the Income-tax Department. During the assessment, many opportunities were provided to the assessee, however, the assessee failed to explain the credit entries in its books of accounts (Rs.4,23,52,500/-) in addition to the advances to Akiriti International (Rs.23,02,268) and investment in shares (Rs. 15,00,000/-). Before the Ld. CIT(A) also, the assessee failed to explain the deposits in bank except relying on the decision in the case of Tarun Goel (supra). The finding of the Ld. CIT(A) is reproduced as under: “The A/R of the appellant wanted that his income be assessed on commission basis only i.e. the appellant was receiving cash and giving cheque after getting his commission @ .5% as admitted by sh. Mahesh Garg. The ITAT Order in for assessment year 2003-04 and 2004-05 in the case of M/s. Tarun Goel Vs. ACIT reviewed by me. The Para 21,22,23 and 24 of the ITAT are produced for ready reference. “21. The contention that the totality of the circumstances have to be considered by arriving at the assessable income and that when the finding is that the assessee has indulged in circular and multiple transaction, by layering, what can be taxed is the peak credit and that too at the first point is acceptable and should be the manner of determining the correct income. If each of the layer is brought our tax, then it would be case of levy of income tax, multiple no. of times, on the same amount. Such levy of double or multiple taxes is against law and it would be the right method of arriving at the correct amount of income. If income is taxed in the hands of Mr. Tarun Goyal, the taxed amount, when transferred to another company should be treated as explained credit. The multiple transfer of this amount should also be treated as explained. But the burden of proof lies on the assessee.
Admittedly certain assessment of Sh. Tarun Goyal, the kin pin are at various stages and have not reached the Tribunal. Under these circumstances, it would not be possible to have in over all view of the matter and eliminate chain /multiple transaction, for arriving at the correct assessable amount. Thus we have no other alternative but to set aside all these appeals to the file of the AO for fresh adjudication in accordance with law.
The AO shall after examining the evidence submitted by the assessee, consider all the cases together and;
a) Restrict the addition u/s 68 to only the peak unexplained credit in each case, after elimination circular transaction. b) To eliminate taxation of the same amount multiple times, due to the chain transaction which resulted due to layering indulged by the assessee. c) Consider the material on record and the precedence available on the issue and determine the percentage of commission, which the assessee would have earned and bring the same to tax.
Before parting we make it clear that the burden of proof lay on the assessee. It is for the assessee to demonstrate the chain of transaction, the layering indulged by him, the calculation of peak unexplained credit etc. and to prove each credit in the books of each assessee. In the result all these appeal are set aside to the file of the AO for each adjudication in accordance with law. ”
The ITAT had set aside the issue to the A.O. for fresh adjudication in accordance with the law. Since the appellant is dormant company and A/R is not coming forward to explain his transaction with books of account I have no other alternative but to take one percentage! 1%) as commission income of the appellant company and tax it accordingly. The A.O. is directed to get the bank account of the appellant from investigation wing or from the banks and send the list of cheques given by the appellant to the AOs of different companies and pass on the information to the A.O.’s of these companies for reopening the cases for reassessment u/s 148 of Income Tax Act if its permitted by law. A statement dated 20.10.2003 was taken by Addl.DIT from Sh. Anil Kumar Sharma, S/o Mohinder Kumar Sharma, R/o Near Dharam Bhawan, opposite Parbat Singh House, Brij Ghat, Gaziabad (27 years) on oath. The director was maintaining bank account No.3650 at State Bank of Patiala, Daryaganj, which was with Addl. DIT(Inv.) in 2003. The Director was under the control of Sh. Mahesh Garg who was another entry operator, whose statement is also by A/R Sh. Mahesh Kaushik, CA. Mahesh Garg was taking blank paper signature from Sh. Anil Sharma, Director of this appellant company. The Director of this company Sh. Anil Sharma had never purchased any shares nor received any gifts from any other company. Thus, it is clear that Sh. Mahesh Garg (Entry Provider) was that doing this paper business of receiving cash and giving cheques from purchase of shares, shared application money, loan, advance gift, to convert black money to white money in the form of Bogus Entry Provider. The Addl. DIT(Inv.) Unit-I, Jhandewalan, Delhi had taken a statement on 22.09.2003 from Sh. Mahesh Gupta, about his involvement as Entry Provider to different assessees in and around Delhi. Sh. Mahesh Garg had admitted his income from commission @ 0.5% and after getting some expenses, his net income was 0.4% of the amount of cheque/DD issued. Thus, the appellant company Director Sh. Anil Kumar Sharma admits he was helping Sh. Mahesh Garg in giving Bogus Cash Credits/Entry Provider activities. Considering the overall circumstances, and business of appellant company. I estimate net income of the company @ 1% of Rs.4,23,52,500/- (which includes share application money of Rs.15,00,000/- and loans and advances of Rs.23,02,268/- = Rs.4,23,525/- for this A.Y. 2003-04.”
6.1 Though, the Ld. CIT(A) has relied on the statement of persons before the Investigation Wing but the assessee has not produced any evidences before the ld. CIT(A) or before the Assessing Officer to corroborate those statements that the assessee company was engaged in providing only accommodation entries. The assessee-company has not provided any affidavits from the beneficiary companies to support its claim of being engaged in providing accommodation entries. The primary onus under section 68 of the Act is on the assessee to discharge and explain the nature and source of the entries in books of account. In our opinion, estimating the income at the rate of 1% presuming that the assessee was engaged in providing only accommodation entries against commission by the Ld. CIT(A) is not justified. We feel it appropriate to restore this issue to the ld. CIT(A) for deciding afresh after verification of documentary evidence, if any, which shall be produced by the assessee to substantiate its claim that it has rotated money of the beneficiaries and provided accommodation entries to the beneficiaries against certain commission only. The assessee should produce those beneficiaries before the Assessing Officer in support of its claim of having engaged only in providing accommodation entries to the beneficiaries. It is needless to mention that both the parties, i.e., the assessee and Assessing Officer shall be provided adequate opportunity of being heard. The grounds of the appeal of the Revenue are, accordingly, allowed for statistical purposes.
In the result, the appeal of the Revenue is allowed for statistical purposes. Order is pronounced in the open court on 21st January, 2020.