M/S. HILLMAN PROPERTIES PVT. LTD.,NEW DELHI vs. ITO, NEW DELHI

Briefly the facts of the case are that information was gathered from DIT (Inv), New Delhi that the assessee company had received accommodation entries of 2 ITA.No.6530/Del./2014 M/s. Hillman Properties Pvt. Ltd., New Delhi. Rs.25,00,000/-. Since the amount was not reflected in the balance sheet filed by the assessee along with the original- return, action under section 147 of I.T. Act, 1961 was taken. Notice under section 148 of I.T. Act, 1961 was issued and served upon the assessee. The assessee filed letter stating that the return filed earlier under section 139(1) may be treated as return filed under section 148 of the I.T. Act. The A.O. issued statutory notices for completion of the assessment. Reasons for reopening of the assessment were also provided to assessee. The assessee filed written submission objecting the re-assessment proceedings which were disposed off separately by passing speaking order. The assessee stated that the A.O. has failed to give any details about the information and documents which have been relied upon by the A.O. at assessment stage. However, the A.O. noted that for initiation of action under section 148 have been conveyed to the assessee and hence, the allegation of the assessee are incorrect. The assessee was asked to produce the 3 ITA.No.6530/Del./2014 M/s. Hillman Properties Pvt. Ltd., New Delhi. principal officer of the following company from whom the accommodation entries were taken :-

As regards Ground No.1 regarding initiation of re-assessment proceedings, assessee submitted before the Ld. CIT(A) that the reasons recorded are only unsubstantiated allegations and, therefore, cannot be construed as reasons leading to the bonafide belief adequate for reopening of the assessment. The reasons recorded by the A.O. for reopening of the assessment was also submitted by assessee and the same are recorded in the impugned order as under :

The Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that it was only borrowed satisfaction based on information received from Investigation Wing and that A.O. has not applied his mind to the information received from Investigation Wing. The reopening of the assessment is invalid and bad in law. He has relied upon Judgment of Hon’ble Delhi High Court in the cases of Pr. CIT-4 vs., G & G Pharma India Ltd., 2015 (10) TMI 754 (Del.); Pr. CIT-6 vs., M/s. N.C. Cables Ltd., 2017 (1) TMI 1036 (Del.); Pr. CIT vs. Meenakshi Overseas Pvt. Ltd., 2017 (5) TMI 1428 (Del.) (HC) and Pr. CIT-5 vs., Jatin Investment Pvt. Ltd., 2017 (2) TMI 342 (Del.) (HC).

On the other hand, Ld. D.R. relied upon the Orders of the authorities below and submitted that assessee had not discharged the onus lay upon it to explain the issue. It was a private transaction and no details were submitted by assessee for verification of the 14 ITA.No.6530/Del./2014 M/s. Hillman Properties Pvt. Ltd., New Delhi. transaction. The A.O. received specific information from Investigation Wing that assessee has received accommodation entries which were credited in the accounts of assessee which were further received from the above parties and in their accounts cash have been found deposited. Therefore, reopening of the assessment is justified in the matter. The Ld. D.R. relied upon the following decisions.

We have considered the rival submissions. In this case the A.O. has received specific information from Investigation Wing that assessee has received accommodation entries from two parties, the details of the same are mentioned in the reasons which have not been disputed by the assessee as well. The report received from the DIT (Inv.) Wing further reveals that enquiries were initiated to probe into some Bank account which were used to issue cheques to entry seeker or beneficiary against cash paid by them to the entry operator. The A.O. has specifically recorded the fact in the assessment order that initially in different account of the Investors, the cash have been deposited from where the amount have been transferred to the another accounts of Investors and then transferred to assessee. These informations are specific to show that against the cash, entry have been provided to the assessee by entry providers. The assessee failed to produce any evidence before the authorities below. Therefore, it is a fit case of escapement of income on account of failure on the part of assessee to disclose fully and truly all material 17 ITA.No.6530/Del./2014 M/s. Hillman Properties Pvt. Ltd., New Delhi. facts. Therefore, reopening of the assessment is wholly justified in the matter. The objections of the assessee have been separately disposed of by the A.O. in which no infirmity have been pointed out by the assessee. At the stage of recording of the reasons for reopening of the assessment, all relevant facts leading to belief are justified. However, the sufficiency of those material is not necessary. Ultimately, on making further enquiry into the matter, it is specifically found that cash were deposited in the Bank accounts of entry providers from where the amounts in question have been transferred to the account of the assessee. Therefore, there is escapement of income chargeable to tax on account of assessee’s failure to furnish full and true particulars. Since in this case return was only processed under section 143(1), therefore, A.O. was justified in reopening of the assessment on bringing the material on record that there was an escapement of income from assessment in the matter. No infirmity have been pointed-out in the Orders of the authorities below for initiation of re-assessment proceedings in the matter.

On Ground Nos. 2 and 3, assessee challenged the addition of Rs.50 lakhs under section 68 of the I.T. Act, 1961.

The A.O. made addition of Rs.1,31,30,000/- under section 68 of the I.T. Act in respect of several entries provided by the entry providers which were not explained by the assessee, which were entered into the Bank account of the assessee.

The assessee submitted additional evidences before Ld. CIT(A) explaining various credits appearing in their Bank account with Bank of America, details of same are noted at page-19 of the impugned order. The Ld. CIT(A) noted from these details that documentary evidences submitted regarding the sale of shares of BLS Polymers 19 ITA.No.6530/Del./2014 M/s. Hillman Properties Pvt. Ltd., New Delhi. Ltd., to M/s. Suma Finance & Investment Ltd., Arun Finvest (P) Ltd. and Polo Leasing & Finance (P) Ltd. are letters issued in assessee’s ‘letter head’ to the Directors of the above 03 companies requesting them to accept share certificates and requesting them to issue acknowledgment of receiving share certificates to the assessee. The Ld. CIT(A) also noted that there is no PANs, Bank statements or Income-tax particulars of the above three accommodation providers, namely Suma Finance & Investment Ltd., Arun Finvest (P) Ltd. and Polo Leasing & Finance (P) Ltd. in the additional evidence submitted by the assessee. The computation statement of income of the assessee filed along with the additional evidence indicates that shares worth Rs.54,25,000/- were sold at the book value and the assessee had no capital gain from this transaction. Moreover, the additional evidence indicates that money received as accommodation entries were immediately transferred to assessee’s sister concern M/s Shiv Cable & Wire Industries on the same date, i.e., 17.3.2001 and, therefore, it appears that the assessee 20 ITA.No.6530/Del./2014 M/s. Hillman Properties Pvt. Ltd., New Delhi. being an investment company had only acted as conduit for transferring the accommodation entries to its sister concern. This explains the assessee’s reluctance to furnish proper evidence at appellate stage. The assessee also failed to produce any of the Directors of these 03 accommodation entry provider companies. The A.O. objected to the additional evidence in the remand report. The Ld. CIT(A) noted that during appellate proceedings Counsel for Assessee agreed to produce BLS Polymers Ltd., and M/s. Shiv Cable & Wire Industries for cross-examination. However, the assessee was not prepared to produce the 03 accommodation entry providers namely Suma Finance & Investment Ltd., Arun Finvest (P) Ltd. and Polo Leasing & Finance (P) Ltd., during appellate proceedings. The Ld. CIT(A) considering the material on record, deleted the addition of Rs.81,33,000/- leaving addition of Rs.50 lakhs which is under consideration in respect of the above 03 accommodation entry provider companies because the assessee did not produce adequate evidence even at the appellate proceedings. The assessee did not produce any of 21 ITA.No.6530/Del./2014 M/s. Hillman Properties Pvt. Ltd., New Delhi. the Directors of these 03 companies to verify the transaction and to further verify about cash deposited in their Bank accounts on the same day when entry was provided to the assessee. The Ld. CIT(A), therefore, noted that assessee refused to provide any PAN and other details of these accommodation entry provider companies and refused to prove genuineness of the sale of shares to the above 03 accommodation entry providers even during appellate proceedings. None of the Directors were produced for examination even at the remand proceedings despite A.O. issued summons to them to appear and get the transactions verified. Counsel for Assessee has shown inability to produce any of the Directors or responsible person of these 03 companies for production and examination before A.O. as well as before Ld. CIT(A). The Ld. CIT(A), therefore, noted that despite there was no additional evidences, assessee did not furnish adequate evidence in respect of these 03 parties and has failed to get the transactions verified. The Ld. CIT(A) relied upon decision of Hon’ble Delhi High Court in the case of M/s.

Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that assessee filed confirmations and amounts have been received through Banking channel, therefore, addition should not have been confirmed. He has further submitted that assessee has sold the shares at face value [PB-24] and referred to PB-20 on the proposition that assessee made a request to the A.O. to provide copies of the statements which were adverse in nature so that assessee could make proper reply on the same. Therefore, no addition could be made.

On the other hand, Ld. D.R. relied upon the Orders of the authorities below and submitted that these were private transactions and were not listed on any stock exchange. No adequate evidence were furnished. Assessee did not furnish PAN and Bank statements to substantiate genuine transaction. The assessee or other parties did not earn any income and have NIL income only. No business activity have been conducted by them. Therefore, preponderance of probability shows that these were bogus accommodation transactions. The Ld. D.R. relied upon the following decisions :

CIT vs., Nipun Builders & Developers (P.) Ltd., 350 ITR 407 (Del.) (HC).

We have considered the rival submissions. The finding of fact recorded by the authorities below have not 24 ITA.No.6530/Del./2014 M/s. Hillman Properties Pvt. Ltd., New Delhi. been disputed by the Learned Counsel for the Assessee. The A.O. has specifically given a finding of fact that the above accommodation entry provider companies have initially deposited cash in their Bank accounts and from where the funds were transferred to another Bank account through the Banking channel and then, a cheque have been given to the assessee. The cash have been deposited on the same day when transaction was conducted with the assessee. The assessee did not provide PAN of these 03 accommodation entry providers along with their Bank statements. The A.O. gathered information from the Banks on the basis of entries called under section 133(6) of the I.T. Act. The A.O. had specific information from DIT (Inv.) that assessee has received accommodation entries from 02 parties. However, later on, it was found that these are good in number and ultimately, addition was made on 03 accommodation entry providers. The Ld. CIT(A) in his findings has specifically noted that despite entertaining the additional evidences, assessee did not furnish any adequate/evidence while filing additional evidences in 25 ITA.No.6530/Del./2014 M/s. Hillman Properties Pvt. Ltd., New Delhi. respect of these 03 parties. The assessee failed to produce necessary details of these 03 accommodation entry providers and also shown inability to produce any of the Directors or responsible person of these 03 accommodation entry providers for examination before A.O. Therefore, in the absence of any adequate evidence and that assessee did not produce any of the responsible person or Directors of these 03 accommodation entry providers, the authorities below were justified in taking an adverse inference against these parties, particularly, when similar amount of cash was found deposited in their Bank accounts prior to giving cheque to the assessee. Therefore, even if some statements have been recorded by Investigation Wing and copies thereof have not been provided to assessee, but, there was sufficient material available on record to show that these were bogus transactions because assessee received accommodation entries from these 03 parties. Burden is upon assessee to prove the identity of the parties, their creditworthiness and genuineness of the transaction in the matter. It may also 26 ITA.No.6530/Del./2014 M/s. Hillman Properties Pvt. Ltd., New Delhi. be noted here that the above burden upon assessee have not been discharged by assessee by any adequate evidence. Further, the balance-sheet of the assessee company is filed which shows that assessee has NIL income, NIL expenditure and only carry forward losses have been shown. Return is filed at NIL income. No business activities have been carried out by the assessee. It is, therefore, difficult to believe that when assessee did nothing in assessment year under appeal as well as in preceding assessment year, how the assessee has been able to sell the shares to such parties who have made cash deposits in their Bank account before giving cheque to the assessee. Therefore, the circumstances clearly show that these were bogus entries received by the assessee in the name of sale of shares. How the investors would show faith in assessee when assessee has no worth at all ? The Ld. CIT(A) has also specifically found on record that the money received as accommodation entries were immediately transferred to assessee’s sister concern M/s. Shiv Cable & Wire Industries on the same day on 17.03.2001. It will 27 ITA.No.6530/Del./2014 M/s. Hillman Properties Pvt. Ltd., New Delhi. strengthen the finding of fact recorded by the authorities below that assessee had been acting as a conduit for transferring the accommodation entries to its sister concern. These facts clearly show that assessee has received its own cash money through the transactions carried out through various accommodation entry providers. Therefore, these were arranged affairs of the assessee company only to provide further accommodation entries to the sister concern. The decisions relied upon by the Ld. D.R. squarely apply to the facts and circumstances of the case. Merely showing that transactions were carried out through Banking channel in the facts and circumstances of the case is not sufficient to prove the genuineness of the transaction in the matter. The Hon’ble Supreme Court in the case of CIT, West Bengal-II vs., Durga Prasad More [1971] 82 ITR 540 [SC] and Smt. Sumati Dayal vs., CIT, Bangalore [1995] 214 ITR 801 [SC] have held that “Courts and Tribunals have to Judge the evidence before them by applying the test of human probability.” If the said test is applied in this matter, it is 28 ITA.No.6530/Del./2014 M/s. Hillman Properties Pvt. Ltd., New Delhi. clearly established that assessee failed to prove identity of the accommodation entry providers, their creditworthiness and genuine of the transaction in the matter. We, therefore, do not find any justification to interfere with the Orders of the authorities below in making the addition of Rs.50 lakhs. Both these grounds of appeals of the Assessee are dismissed. No other point is argued or pressed.

In the result, appeal of Assessee dismissed.