INCOME TAX OFFICER- 6(2), LUCKNOW vs. M/S. STATUS VYAPAAR PVT. LTD., LUCKNOW

Assessment Year: 2012-13 Income Tax Officer-6(2) v. M/s. Status Vyapaar Pvt 27/2, Raja Ram Mohan Rai Ltd Marg, P. K. Complex, 3rd Floor, 24, Eldico Greens, Gomti Lucknow-226001. Nagar, Lucknow-226010. PAN:ARVPM1497R अपीलाथी/(Appellant) प्रत्यथी/(Respondent) अपीलाथी कक और से/Appellant by: Shri Raghunath Mishra, Adv प्रत्यथी कक और से /Respondent by: Shri R. K. Agarwal, CIT(DR) O R D E R PER ANADEE NATH MISSHRA, AM.: This appeal, by the Revenue, is directed against the order of the Learned Commissioner of Income-tax (Appeals)-2, Lucknow dated 24.09.2020, pertaining to the assessment year 2012-13. The Revenue has raised the following grounds of appeal: -

1. Whether on the facts of circumstances of the case and in law. Ld. CIT(A)-2, Lucknow erred in restricting the addition of Rs.6,34,00,000/- made by the AO on account of unexplained credit u/s 68 of the Act to Commission Income calculated at 1% without appreciating that the assessee had failed to furnish satisfactory explanation with regard to identify of the parties, source and genuineness of the transaction

2. The appellant craves leave to add or amend any one or more of the grounds of appeal as and when need to doing so arises with the prior permission of the Court.”

2. In this case, assessment order dated 29.12.2019 was passed by the Assessing Officer whereby the assessee’s total income was assessed at Rs.6,34,42,150/-. Thereafter, during the assessment proceedings, the Assessing Officer noted that there were total credit entries of Rs.9.84 crores and matching debit Page 2 of 14 entries of Rs.9.84 crores. The Assessing Officer The Assessing Officer held that Rs.3.50 crores out of the total credit entries appearing in the bank statement was explained and added the balance amount of Rs.6.34 crores to the income of the assessee. The assessee filed an appeal in the office of the Ld. CIT(A). Vide impugned appellate order dated 24.09.2020, the ld. CIT(A) observed that the Assessing Officer, on one hand gave a categorical finding that the assessee was an entry provider entity and out of the total amount of Rs.9.84 crores, the Assessing Officer did not take any adverse view regarding an amount of Rs.3.50 crores given to a beneficiary entries provided by the assessee; and on the other hand, the Assessing Officer added the remaining amount of Rs.6.34 crores without making any verification in respect of other beneficiaries. The Ld. CIT(A) observed that holding the assessee to be the beneficiaries of Rs.6.34 crores was not justified, without giving finding on how the entry provider became the beneficiaries. She gave direction u/s 150 of the Act to the Assessing Officer to make enquiry about remaining beneficiaries to the tune of Rs.6.34 crores. She held as under: - “4……..In view of the above I find that, the AO on one side has given a categorical finding that appellant is entry provider entity and out of total benefits extended of Rs. 9,84,00,000/- to different persons has allowed the credit in the tune of Rs. 3,50,00,000/- being loan/advance given to Shri Mahesh Chandra Agarwal Group (beneficiary) and rest amount of Rs. 6,34,00,000/- without verifying about other beneficiaries has been added in income of appellant as beneficiary. AO has failed to enquire about beneficiaries of Rs. 6,34,00,000/- though the detail of such persons are available in bank account and name and address as well as detail of Directors of beneficiaries companies are available on MCA site. This exercise of enquiry was neither done during assessment proceedings nor in remand proceedings by AO. The addition of Rs.6,34,00,000/- in the hands of appellant as beneficiary is against the peculiar facts of the case and finding of AO itself in assessment order as well as in remand report. AO has not reported about his enquiry on rest of beneficiaries company, the detail of which is already available and submitted by appellant during appellate proceedings also, therefore, holding appellant as beneficiaries of Rs. 6,34,00,000/- is not justified without giving finding how entry provider became beneficiary of such amount. Considering the nature of transactions carried out by appellant rate of commission on these camouflage transactions to be estimated @ 1% of transactions routed to beneficiaries from bank account of applicant. The Page 3 of 14 AO is being directed u/s 150 to make enquiry about remaining beneficiaries to the tune of Rs.6,34,00,000/- and take necessary action as per the Act.

5. The assessee company being an accommodation entry provider must be well aware of all the beneficiary of Rs. 9.84 crore. But it disclosed only the name of Mahesh Chandra Agarwal Group which was beneficiary of Rs. 3.50 crore. Therefore, it was found that assessee company to elusive regarding Rs. 6.34 crore (9.84 - 3.50). Therefore, addition of Rs. 6.34 crore was made to total income of the assessee which is lawful.

6. The assessee company has submitted the only addition could have been made on commission income of fees charge towards providing such entries which may vary between 0.2% to 1% of amount of transaction”. This ground of the assessee company is not acceptable at this stage in the light of the facts of the case. As it is evident that the assessee company was not incorporated with any business motive or earning profit, it was only created for routing the unaccounted funds ofdifferent persons (as entry provider).” A copy of the report was provided to the appellant for its comments The appellant has also submitted the comments which were duly considered.

Page 4 of 14 A perusal of assessment order and the remand report of the AO and submissions made by the appellant shows that the appellant is a Kolkata based investment company which was incorporated on 04.10.2007 with shri Deepak Kumar and Shri Sanjay Kumar Tibrewal as promoters Thereafter Mr. Sameer Kumar Agarwal & Mr. Mahesh Chandra Agarwal were appointed as a Non-Executive Director (s) on the Board of the Company w.e.f. 02/04/2012 and Mr. Deepak Kumar &Mr. Sanjay Kumar Tibrewal resigns from the Board on 30.04.2012 and 30.05.2013 respectively and thus company was transferred during F.Y. 2012-13 (AY 2013-14) in the hands of Mr. Mahesh Chandra Agarwal Group. A search & seizure took place on Mahesh Chandra Agarwal Group on 30.08.2016 and the appellant company was also under investigation to unearth disclosed income of such group. Further, Mahesh Chandra Agarwal Group being beneficiaries of Rs. 4,90,00,000/- earned undisclosed income through such company (appellant)surrendered before Hon'ble ITSC and said application is accepted and matter is at final stage in the assessment year 2012-13, the management of the company was not with the Mahesh Chandra Agarwal group. However, in relevant year only loan were given amounting Rs. 3,50,00,000/from appellant to Mahesh Chandra Agarwal group. Since, Mahesh Chandra Agarwal Group was beneficiary of Rs. 3,50,00,000/-, therefore, said amount was surrendered in relevant year. These facts were verified by AO after obtaining relevant information from DCIT, Central Circle-2, Income tax office, Lucknow and mentioned in assessment order. The AO made the addition of bank credits (maintained at Dhanlaxmi Bank Limited (DCB), Ideal Plaza, Kolkata Account no 015406700003321) amounting Rs. 6,34,00, 000/after reducing Rs. 350, 00,000/- from whole bank credits of Rs. 9,84,00,000/- A perusal of the bank statement of the appellant shows that there are matching amount of debit and credit entries of Rs. 9.84 crores out which the Mahesh Chandra Agarwal group has surrendered Rs. 4.88 crores before the STSC and the matter is at the final stages as per the appellant. Furthermore, the net worth of the appellant is Rs. 4.91 crores and it is apparent from the bank statement that the same amount has been rotated twice to generate the entry provided by it. The appellant has provided a detailed analysis of the bank statement which is reproduced as under: - Summary of Bank transactions F.Y. 2011-12 Dhanlaxmi Bank Ltd 3321 A Opening Balance 21,000.00 From the above table it is evident that investments/loan were Rs.4,91,00,000/- as on 31.03.2011 as well as on 31.03.2012 being reshuffled twice during the year. Out of which Shri Mahesh Chandra Agarwal group surrendered before Hon‘ble ITSC, Delhi amounting Rs. 3,50,00,000/- in A.Y. 2012-13 and Rs. 1,38,00,000/- in A.Y. 2013-14 aggregating Rs. 4,88,00,000/, the extent of loan/advances received by the Shri Mahesh Chandra Agan, group as beneficiary. It is also relevant to mention that networth of company (capital, Reserve and Surplus) was Rs. 4,91,20,224/ as on 31.03.2012 and same ultimately surrendered by the beneficiaries i.e. Shri Mahesh Chandra Agarwal, group. It is also relevant to mention that AO after due verification of the fay of the case and cross verification of nature of transactions from DCIT, Circle-2, Lucknow has categorically given his following finding in last paras page 3 of assessment order: “The total entries appearing in the account no.015406700003321 wig Dhanlaxmi Bank at Rs.9,84,00,000/ - of the assessee company The any amount has been. debited during the year be. 9;84,00,000/-It is established that all the debit and credit entries are accommodation entries provided by the assessee company.” Therefore, in review of above said finding based on evidences AO has himself observed assessee is accommodation entry provider. Hence, when it is proved by AO that assessee is a conduit company or accommodation entry provided addition of whole credit transactions cannot be made u/s 68. The only addition could have been made on commission income of fees charge toward providing such entries which may vary between 0.2% to 1% of amount transactions. Reliance is placed on following: Principal Commissioner of Income-tax-14 v. Alag Securities (P.) Ltd. (2020 117 taxmann.com 292 (Bombay) Section 68 of the Income-tax Act, 1961 – Cash credits (Accommodation entries) - Assessment year 2003-04 - Assessee was engage, providing accommodation entries to its customers - It received cash amount customers/beneficiaries and issued them cheques of Page 6 of 14 slightly lower amount after charging its commission - In course of assessment, Assessing Officer brought entire amount of cash received from customers to tax in assessee's hands - Tribunal, however, held that only amount of commission received by assessee from its customers was liable to be added to assessee's taxable income - Whether, on facts, since cash amount deposited by customers/beneficiaries had been accounted for in assessment orders of those beneficiaries, question of adding such cash credits to income of assessee did not arise particularly when assessee was only concerned with commission earned on providing accommodation entries to its customers - Held, yes -Whether, therefore, impugned order passed by Tribunal did not require any interference - Held, yes [Para 20] [In favour of assessee] Omni Farms (P.) Ltd. v. Deputy Commissioner of Income Tax (HQ), Central vs Gircle-111, New Delhi*{2017] 85 taxmann. com 214 (Delhi - Trib): Section 68 of the Income: Act, 196 - Cash credit (Burden of proof) - Assessment year 2008-09 - Where 'SK', an accommodation entries provider, utilized various companies, including assessee, in view of finding of Settlement Commission in case of 'SK' that cash deposited in bank account of assessee which was one of conduit companies could not be said to be unexplained credit because source of cash was from beneficiary who wanted to avail accommodation entry, no addition of such cash credit to be made in hands of assessee It is pertinent to note here that the findings of the Assessing Officer makes it clear that no efforts has been made by the AO to verify information / documents submitted during assessment as well as appellate proceedings as regard to verify details of person with whom transactions entered been outlay of funds aggregating Rs. 6.34 crore. In the submission it was categorically mentioned that name of the companies alongwith respective amount being fund outlay aggregating Rs. 6,34,00,000/-, the AO not even bother to verify these companies. On MCA site detail of these companies are very much liable and freely assessable, which carries name of the company, paid up capital, date of incorporation, registered office, status (active), details? Directors. The AO has not even verify single company or conduct any enduring on subject matter. The AO has made addition u/s 68 of the Act. A perusal of the Sat, shows that if any cash as credit entry is found to be related to the assessee and he offers no explanation or the explanation offered by him is not to t, satisfaction of the AO, then the same can be Taxed as unexplained income. Thus, it is clear that the primary onus to substantiate the identity creditworthiness and genuineness of the transaction is cost upon the assessee once the same is discharged, the onus shifts upon the AO to prove otherwise and if the same is not satisfactory to his opinion he can charge it to tax. However, such satisfaction must not be illusory or imaginative by must have been derived from relevant facts and factors, ai" 25 ca the basis proper enquiry of all material before him but also to which he has command The enquiry envisaged under section 69 is an enquiry which is reasonable and just the amount of cash credits could not be included in the total income d the assessee because the Assessing Officer had not made proper enquiry. In this regard the following judgements are directional. Pr. CIT v. Adamine Constructions (P.) Ltd. [2018] 99 taxmann.com 4) where it was held that relevant enquiry based upon materials furnished by assessee had not been made - High Court also found that assessee had discharged onus initially cast upon it by providing basic details which were not suitably enquired into by Assessing Officer. Accordingly, High Court upheld order passed by Tribunal Further, the said decision was confirmed by Apex Court and SLP filed against said decision of High Court was dismissed………...”

Page 7 of 14 4. The present appeal has been filed by Revenue against the aforesaid impugned appellate order dated 24.09.2020 of the Ld. CIT(A). During the course of appellate proceedings in Income Tax Appellate Tribunal, a paper book in two parts was submitted from the assessee’s side, containing the following particulars paper book is in two parts: - (4.1) The written submissions of the assessee contained in the aforesaid paper book are reproduced below, for the sake of ready reference: - “That in said case Assessing Officer recorded the reason while issuing the notice u/s 148 in tune of Rs. 1,05,00000/- being Appellant received accommodation entry from Shiv Bhumi Trade Links Pvt. Ltd. However, while passing the assessment order dated 29.12.2019 made addition of Rs. 6,34,00,000/- u/s 68 out of credit transaction of Rs. 9,84,00,000/- after reducing Rs. 3,50,00,000/- being surrendered by Sh. Mahesh Chandra Agarwal/Sh. Mahesh Chandra Agarwal/Rishita Group before Hon’ble ITSC.

Page 8 of 14 That reason recorded while issuing the notice u/s 148 for relevant year has provided (page 2 & 3 of Order of CIT(A)) mentioned that “these shell companies are controlled and managed by known entry operators of Kolkata i.e. Akash Agrawal and Praveen Agarwal. In fact, the subject entity under inquiry i.e. M/s Safeco Projects Pvt. Ltd. is also a shell company controlled and managed by Akash Agarwal. Some of credits are alit from Shell Company like M/s Megacity Infrabuilders Pvt. Ltd. which is also controlled and managed by Akash Agarwal. The statement of the aforesaid entry operators were recorded u/s 131 of the LT. Act, 1961 on oath on various occasions by the Investigation Wing, Kolkata wherein he admitted that his main source of income was from commission for providing accommodation entries thorough “lama- kharchi companies”. From the relevant materials on record, it reveals, M/s Status Vyapaar Pvt. Ltd. (PANAAMCS1343P) being one of the real beneficiaries has received accommodation entries amounting to Rs. 10,500,000/- by above mentioned entity M/s SHIVBHUMI TRADELIK PVT LTD in the form of bogus share capital/share premium, unsecured loans etc. Therefore, I have reason to believe that unaccounted cash/income of assessee amounting to Rs. 10,500,000/was routed through bogus accommodation entry and has escaped assessment within the of meaning of section 147 of the Income Tax Act, 1961 for the A.Y. 2012-13.” and also mentioned at page 2 & 3 of the order of Ld. CIT(A) dated 24.09.2020. Further, during the first appellate proceedings AO vide letter dated 14.09.2020 (Page-6 Order of the CIT(A)) submitted his report and commented as under: “During the relevant financial year 2011-12 amounts of Rs. 9.84 crore found credited in the bank account of the assessee. Assessee was required to explain the credit entries. The assessee submitted that amount of Rs. 3.50 crore was related to Mahesh Chandra Agarwal Group which was routed through assessee company and the same amount has been surrendered before Hon'ble ITSC (Income Tax Settlement Commission) by Mahesh Chandra Agarwal Group. Further Mahesh Chandra Agarwal Group taken over management of this company in April 2012. Necessary enquiry was made to verify the contention of the assessee from the Dy. Commissioner of Income Tax, Central Circle-2, Lucknow. The same was found tenable. But assessee remained elusive regarding the credit entries of Rs. 6.34 crore. It neither replied about the actual beneficiary nor submitted the source thereof. In the absence of concrete submission on the part of the assessee, the same was added u/s 68 of the income Tax Act which is correct and lawful.

5. The assessee company being an accommodation entry provider must be well aware of all the beneficiary of Rs.9.84 crore. But it disclosed only the name of Mahesh Chandra Agarwal Group which was beneficiary of Rs.3.50 crore. Therefore, it was found that assessee company is elusive regarding Rs.6.34 crore (9.84 -3.50). Therefore, addition of Rs. 6.34 crore was made to total income of the assessee which is lawful.

(4.1.1) At the time of hearing before us, the Ld. Departmental Representative for the Revenue submitted that the credits for the aforesaid amount of Rs.6.34 crores appeared in the assessee’s bank account and debits of matching amount also appeared within a short time. He submitted that the aforesaid transactions were also recorded in the assesse’s books of accounts but the assessee failed to give satisfactory explanation regarding credits amounting to Rs.6.34 crores. In view of this, the Ld. Departmental Representative submitted, the aforesaid addition of Rs.6.34 crore should be sustained.

(4.2) The Ld. Counsel for the assessee placed reliance on the aforesaid paper books (referred to in foregoing paragraph no.4 of this order) and the aforesaid written submissions (referred to in foregoing paragraph no.4.1 of this order). He further submitted that in the facts and circumstances of the present case, the direction of the Ld. CIT(A) to estimate the assessee’s income @ 1% of transactions routed to the beneficiaries from the assessee’s bank account was just and fair.

(5) We have heard the representatives of both sides. We have perused the materials available on record. It is not in dispute that the aforesaid amount of Rs.6.34 crore credited in the assessee’s bank account was also debited from the bank account within a short period of time. Under these facts and circumstances, a prima facie inference would be that aforesaid amount was not meant for the assessee’s own purposes and was Page 12 of 14 not assessee’s own income; rather that the assessee was using his bank account to provide accommodation entries to the beneficiaries. This has been the consistent claim of the assessee during the assessment proceedings and during the appellate proceedings. The Assessing Officer accepted this explanation in respect of an amount of Rs.3.50 crores, after making necessary verification. However, the Assessing Officer failed to make verification regarding the remaining amount of Rs.6.34 crores and went ahead to make the aforesaid addition. The Ld. CIT(A) has directed the Assessing Officer to estimate the assessee’s income @ 1% transactions routed to the beneficiaries from the assessee’s bank account. The Ld. CIT(A) gave further direction u/s 150 of the Act to make enquiry about the remaining beneficiaries to the tune of Rs.6.34 crores and to take necessary action as per the Income Tax Act. The relevant provisions of Section 150 of the Act are reproduced as under: - “150. Provision for cases where assessment is in pursuance of an order on appeal, etc. (1)Notwithstanding anything contained in section 149, the notice under section 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision [or by a Court in any proceeding under any other law] [ Inserted by Act 4 of 1988, Section 56 (w.e.f. 1.4.1989)…………]” (6) Thus, in effect, the direction of the Ld. CIT(A) was to initiate proceedings u/s 148 read with section 147 of the Act in respect of beneficiaries of the aforesaid amount of Rs.6.34 crores routed through the bank account of the assessee. The direction of the Ld. CIT(A) is found to be just and fair and in accordance with law having regard to the specific facts and circumstances of the present case. No material has been brought for our consideration from the side of Revenue to claim that the estimation of assessee’s income @ 1% of transactions routed to the beneficiaries from the bank account of the assessee, is on the Page 13 of 14 lower side or below the income that realistically might be attributable to the assessee in respect of the transactions routed to the beneficiaries from the assessee’s bank account. The Ld.CIT(A) has arrived at her conclusion after detailed discussion of the issue at hand, which is already reproduced in the foregoing paragraph no.3 of this order. In foregoing paragraph (5) of this order, we have observed that in the facts and circumstances that the amount was prima facie inference that the amount routed through the bank account of the assessee was not meant for the assessee’s non purposes and was not assessee’s own accommodation entries to the beneficiaries. Otherwise, the amount credited in the bank account may not have been debited within a short time. There is nothing on record to show that the aforesaid prima facie inference is factually incorrect. Further, the assessee’s written submissions (already reproduced in foregoing paragraph no.4.1 of this order), have also been given due consideration by us. In view of the foregoing discussion, we find no reason to interfere with the impugned order of the Ld. CIT(A). Accordingly, the ground of the appeal is dismissed. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on 12/08/2025.