GLOBUS HOUSING,BHOPAL vs. ASSESSMENT UNIT, NFAC, DELHI

M/s Jay Ganga Exim Pvt Ltd is one of the companies which is controlled by Shri Sharad Darak and found as a shell company indulged in the malpractice of providing accommodation entries.

2.4 That according to the list of beneficiaries provided it was found that the assessee had received accommodation entry during the financial year 2013-14 amounting to Rs.87,00,000/- from M/s Jay Ganga Exim P.Ltd (earlier known as Jay Jyoti India P. Ltd) . Thus unaccounted money of the assessee was rotated in the form of acclammodation entry through M/s Jay Ganga Exim P.Ltd which is controlled by Shri Sharad Darak.

2.5 That after recording reasons for the reopening and after obtaining the prior approval from the competent authority, the case of the assessee was reopened u/s 147 of the Act.

Page 4 of 15 Accordingly, notice u/s 148 of the Act was issued to the assessee on 08.05.2020 and served through ITBA on the e-mail of the assessee.

2.6 That subsequently notice u/s 142(1) of the Act was issued on 13.01.2022. That during the course of reassessment, the assessee had submitted details as were called for.

2.7 That the objection was filed by the assessee and same was disposed off on 14.03.2022 as “it is noticed that assessee firm M/s. Global Housing has received accommodation entry of Rs.87,20,000/- from M/s. Jay Jyoti India Pvt. Ltd. The assessee in its objection has raised that date stamping has not been made by the AO. However, it is brought to the notice of the assessee that notice u/s. 148 of the Income Tax Act was issued through system (Income Tax Business Application) which required "recording of reason for escapement of Income" as prior step and due time and date stamping in made on the third party server which cannot be changed. The procedure u/s. 151 of the Act is also followed in the instant case. The assessee has received as accommodation entry of Rs.87,20,000/- in its books of Page 5 of 15 accounts from M/s. Jay Jyoti India Pvt. Ltd. which was a paper concern floated by the Shri Sharad Darak. The reason for escapement of Income mentioned name of main person i.e. Shri Shrad Darak, who is the main person behind this entire façade, hence assessee firm objections that AO has not applied mind while reopening the assessment is not factually correct. The reason for reopening in para 4 under (enquiries made by the AO as sequel to information collected/received and finding of the AO) has the finding that Shri Sharad Darak's Controlled entity has provided bogus loan to assessee during the year under assessment. In view of above fact, the region for reopening of assessment as recorded following the procedure and law as prescribed the fact and circumstances of the assessee's case are different from the case law cited. In view of the above discussion the objection raised by assessee is disposed off”.

2.8 That the Ld. A.O in para 4 to 6 (page 2 to 9 of the A.O order) has explained the modus operandi.

2.9 That the Ld. A.O in para 7 of the aforesaid order has noted following:-

“7. During the course of assessment proceedings, it is noticed that assessee has also taken accommodation entries from the above company JAYGANGA EXIM INDIA PVT LTD. During the financial year 2012-13, sale of shares of the above company has been shown on which short term capital gain of Rs.1,23,10,312/- has been shown. This gain has been neutralized by the b/f losses and no taxes paid has been paid. Assessee has submitted ledgers and details on 19.03.2022. The assessee has failed to substantiate the genuineness of alleged share transactions in respect of STCG. In view of above discussions, the landmark decision of the Hon'ble Supreme Court in the case of McDowell and Company Limited, 154 ITR 148 are squarely applicable in this case wherein it has been held that tax planning may be legitimate provided it is within the framework of the law and any colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by dubious methods. It is relevant to mention here that in the case of Smt. Harjit Kaur Vs. ACIT, the Hon'ble Punjab & Haryana High Court in of 2013 upheld the decision of the Hon'ble ITAT Chandigarh holding that the department cannot bake or accept 'make believe transactions' as held by the Hon'ble ITAT Chandigarh Bench. The Tribunal in that case relied upon the decision of the Hon'ble Supreme Court in the case of Durga Parsad More, 82 ITR 540 and McDowell & Company Ltd., 154 ITR 148 also. The Hon'ble ITAT, Chandigarh held that it is essential on the part of the revenue authority, to look into the real nature of the transaction and what happens in the real word and contextualize the same to such transactions in the real market situation. The following observations of the Hon'ble ITAT are worth mentioning here:- "It is essential on the part of revenue authority, to look into the real nature of transaction and what happens in the real word and contextualize the same to such transaction in the real market situation. It is pertinent to state here, the judicial wisdom of Hon'ble Supreme Court in CIT vs. Arvinds Raju (TN) 120 ITR 46 (SC) wherein it was held that "one day in our welfare state geared to social justice, this clever concept of avoidance as against evasion may have to be exposed. In the present case, there is an obvious and plain transaction of tax evasion which has been clothed with the smoke screen of subterfuges, by the assessee appellants". The Relevant observations and findings of Hon'ble Supreme Court, in the matter of discharge of onus of proof and the relevance of surrounding circumstances of the case are that though an appellant's statement must be considered real until it was shown that there were reasons to believe that the apparent was not the real, in a case where the party relied on self-serving recitals, the Page 7 of 15 taxing authorities were entitled to look into the surrounding circumstances to find out the reality of such recitals. In view of the facts of the case, the decision of the Supreme Court in the case of CIT Vs. Durga Parsad More is applicable that the Income Tax Authorities are entitled to look into surrounding circumstances to find out the reality. The decision of the Supreme Court in the case of Sumati Dyal Vs. CIT 214 ITR 801 is also relevant where it has been held that matter has to be considered in the light of human probability. Merely because the payments were made by cheques and received by cheque does not render the transaction genuine. Given the circumstances, it is quite apparent that the paper documents filed by the appellant are sham and the paper evidence has been created although these are not genuine because once, during the course of investigation by the Investigation Wing of the Department at Kolkata and the investigation by the SEBI/BSE, the transactions in shares have been proved to be not genuine, then how the funds received from such source can be genuine in the hands of the assessee. The genuine funds could come from a genuine source only and the funds received from a non-genuine source cannot be genuine. Further, according to Section 68, the primary burden is on the assessee to satisfactorily explain the credit entries in the accounts of the previous year. If the explanation given by the assessee is not satisfactory or the source offered by the assessee is not genuine, the amount is to be taken as the income of the assessee. The explanation regarding the nature and source of credit should be satisfactory in the opinion of the assessing authority and Section 68 sets up a presumption against the assessee whenever unexplained credits are found in the accounts of the assessee. The initial burden is on the assessee to refute the presumption raised and the burden shifts only when the assessee establishes the authenticity of the transactions. Section 68 applies equally to money received by the assessee shown as sale of shares and the burden is on the assessee to prove the nature and source thereof to the satisfaction of the Assessing Officer regarding the three ingredients ie. proof regarding identity of the purchaser, the creditworthiness to purchase the shares and the genuineness of the transaction as a whole. The burden of proving the source of a cash credit is on the assessee and the Assessing Officer is not required to prove the source. Mere furnishing of particulars is not enough, mere payment by account payee by cheque is not sacrosanct as held in Hindustan Tea Trading Co. Ltd. vs CIT 2003 [263 ITR 289, 297 (Cal)]. Where there is unexplained credit, it is open to the Assessing Officer to hold that it is income of the assessee and no further burden lies on the Assessing Officer to show that the income is from any particular

Page 8 of 15 source as held in CIT vs. Devi Prasad Viswanath Prasad 1969 72 ITR 194 (SC). In the present case the genuineness of the transaction has not been established because on investigation, the existence of the company M/s. Presha Metallurgical Ltd. has not been established and it was revealed that the company was not carrying out any business activities and nobody knew about the existence of the company at the given address. From the facts, it is clear that the assessee has infact re-introduced its unaccounted income in the shape of Long Term Capital Gain by routing it through paper companies who have no real business or activities and are created on papers for such type of sham transactions. The persons operating such paper companies complete the paper formalities but no real business/ activities are carried out by these companies. The bank accounts are opened and operated only to launder money and provide accommodation entries. It is an accepted principle of jurisprudence that in certain exceptional cases the court is entitled to lift the veil of corporate entity and to pay regard to the economic realities behind the legal facade. The court has power to disregard the corporate entity if it used for tax evasion or to circumvent tax obligation or to perpetrate s held in Juggilal Kamlapat v. CIT, (1969) 73 ITR 702 (SC); Union of India v. Playworld Electronics Pvt. Ltd. (1990) 184 ITR 308, 317 (SC): CIT v. Sri Meenakshi Mills Ltd., (1967)63 ITR 609, 616 (SC) etc. Further the legislature can forge a sledge- hammer capable of cracking open the corporate shell, and it can, if it chooses, demand that the courts ignore all the conceptions and principles which are at the root of company law [Bank Voor Handel enScheepvart N.V. v. Slatford, (1953) 1QB 248). The facts and circumstances of the case, as mentioned above, clearly suggest that the revenue cannot take or accept such 'make believe transaction', as presented by the appellants. Truth or genuineness of such transactions must prevail over the smoke screen, created by way of premeditated series of steps taken by the appellants, with a view to imparting a colour of genuineness and character of real receipt as sale of shares. Needless to say that one has to look at the whole transactions and a series of steps taken to accomplish such share transactions, in an integrated manner, with a view to ascertaining the true nature and character of the money received. The assessee has not been able to identify the purchaser of the shares (sold by the assessee) and their creditworthiness to substantiate the genuineness of the transactions. The plea that the sale proceeds have come through account payee cheques loses all force in the light of the material gathered by the Investigation Wing about the modus operandi followed by the operators”.

Page 9 of 15 2.10 That the Ld. A.O in view of the above observations (supra) keeping in mind the legal position with reference to the “credits loan entry” shown by the assessee as income from other sources and added Rs.87,20,000/- u/s 68 of the Act. The Ld. A.O also disallowed further the interest of Rs.3,53,160/- credited to the account of Jay Ganga Exim on 31.03.2014 as disallowed as being non genuine expenditure and added it to the total income of the assessee (supra).

2.11 That it is recorded in the aforesaid assessment order that the final show cause notice along with draft assessment order was sent to the assessee on 28.03.2022 and the assessee responded (Para 9 of A.O order). The assessee was given video conferencing for 30.03.2022 at 18.35 hours however the assessee did not attend.

2.12 That the aforesaid assessment order is hereinafter referred to as the “impugned assessment order”.

2.13 That the assessee being aggrieved by the “impugned assessment order” prefers first appeal u/s 246A of the Act before Ld. CIT(A) who by the “impugned order” has dismissed the appeal of the assessee on grounds/reasons stated therein.

Page 10 of 15 2.14 That the assessee being aggrieved by the “impugned order” has preferred the instant second appeal before this Tribunal and has raised following grounds of appeal in Form No.36 against the “impugned order” which are as under:-

“1.On the facts and circumstances of the case and in law the Id. A.O, erred in issuing notice u/s 148 as the reasons recorded are undated, erroneous and factually incorrect and there is no direct nexus or live link between the reasons recorded and the formation of belief that there has been escapement of any income and therefore reasons as recorded by Id. A.O. cannot be made any basis for reopening thus, notice u/s 148 in this case is illegal, void and without jurisdiction and accordingly the assessment order passed on the foundation of such notice is liable to be quashed which is prayed to be quashed and held as unwarranted, illegal and bad in law.

2.On the facts and circumstances of the case and in law the Id. A. O, erred in assuming jurisdiction under Section 147 of the Act as there were no reasons to believe that appellant's any income has escaped assessment, inasmuch as Id. A.O. has not himself formed any belief as to the escapement of income which is must for assuming lawful jurisdiction under section 147 of the Act, but he has merely acted upon the report of the investigation Wing that too has not been confronted/provided to the appellant despite several written requests. Accordingly, the Appellant prays that the order be held as invalid, bad in law and as such, directed to be quashed.

3.On the facts and circumstances of the case and in law the Id. A.O. earned in not providing the alleged report of the Investigation Wing based on which the case has been reopened thus, impugned assessment order has been passed in gross violation of the principles of natural justice and therefore, the assessment be held to be invalid bad in law and directed to be quashed.

4. On the facts and circumstances of the case and in law the impugned assessment order as framed by the Id. A.O. deserves only to be quashed as same has been passed without addressing/disposing off the objections raised by the appellant on the reasons recorded by the Id. A.O. for reopening its case.

Page 11 of 15 5.On the facts and circumstances of the case and in the law the Id. A.O. erred in making addition of Rs. 87,20,000 u/s 68 mentioning them as explained money, to the appellant's income treating it as income from other sources contrary to the fact that this amount represents interest bearing unsecured loan taken by the appellant during the subject previous year and without appreciating evidences filed before him for proving the identity of the loan creditor, its creditworthiness and genuineness of the transactions. Accordingly, the Appellant prays that the said addition be deleted. 6.On the facts and circumstances of the case and in law the Id. A.O. erred in disallowing interest paid/credited on above loan amounting to Rs.3,53,160 after deducting/paying TDS from this amount, alleging it being non-genuine expenditure. Accordingly, the Appellant prays that the said addition be deleted.

(i) Sanjay Shukla vs ACIT, Central-2 Page 12 of 15 (ii) ITO 2(1) vs. Hi Link City Homes P.Ltd ITA No.2/Ind/2021 (iii) ACIT Central-1 vs. Akash Shukla ITA No.43/Ind/2022 (iv) Sanjeev Kumar Agrawal vs. ACIT Central-2 ITA No.899/ Ind/2024

It was pleaded that by applying above orders and decisions of ITAT, Indore Benches this tribunal should too set aside the impugned order and allow the appeal. The Ld. AR also submitted that legal grounds need not be adjudged and adjudicated by this tribunal. Per contra Ld. DR stated that revenue places reliances on the impugned assessment order and impugned order but he maintained studded silence on the issue that matter is covered one indeed as pleaded by the Ld. AR.

4.1 We now have to decide the legality, validity and the proprietery of the “impugned order” basis records of the case and rival contentions canvassed before us.

4.2 We have carefully perused the records of the case.

4.3 We basis records of the case and so also after hearing and upon examining the contentions are of the considered opinion that credit loan entry shown by the assessee of Rs.87,20,000/-

Page 13 of 15 cannot be added u/s 68 of the Act and so also interest of Rs.3,53,160/- credited to the account of Jay Jyoti India Pvt. Ltd renamed as Jay Ganga Exim India Pvt. Ltd which was allowed as being non genuine expenditure added to the total income. Hence addition aggregating to Rs.90,73,160/- is deleted which was added to the Return of Income. We refer to the following cases:-

Sanjay Shukla V/s ACIT Central Circle-2, Indore. ITA (i) No.333&49/Ind/2020 order dated 15.03.2022

M/s Hi Link City Homes Pvt. Ltd V/s ITO 21), Indore. (ii) order dated 19.09.2022.

ACIT, Central-2, Indore V/s Shri Sanjay Shukla. ITA (iii) No.333/Ind/2020 order dated 15.03.2022.

ACIT, Central-1, Indore V/s Shri Krishna Devcon Ltd. (iv) to 10/Ind/2022, IT(SS)A No.11&3/Ind/2022, C.O. No.03/Ind/2022 order dated 21.08.2023.

Joint CIT (OSD)-CC-7(4) V/s M/s. Shalimar Housing & (v) Finance Ltd. order dated 01.06.2021.

ACIT,3(1), Indore V/s Shri Pramod Kumar Sethi. ITA (vi) No.382 & 383/Ind/2014 order dated 06.11.2018.

Wherein this Tribunal has held that M/s Jay-Jyoti (India)

Pvt. Ltd is not a paper company nor a shell company. Hence we too respectfully following above decisions (supra) concur with the view of Ld. AR that the issue in appeal is covered one.

Page 14 of 15 Consequently we set aside the “impugned order” and allow the appeal of the assessee.

5.2 In result, appeal of the assessee is allowed.

Order pronounced in open court on 10.10.2025.