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Facts
For AY 2007-08, the AO made a protective addition of Rs. 8 lakhs under section 69 for unexplained investment in shares of Adarsh Engitech Projects Pvt. Ltd., which later became substantive. The assessee contended that he was merely an accommodation entry provider, facilitating the routing of funds from a director of Adarsh Engitech, Shri Shantilal Jain, for a commission. The AO and CIT(A) had confirmed this addition, stating the assessee failed to prove the genuineness of the transaction.
Held
The Tribunal observed that the amount was received from Adarsh Engitech Projects Pvt. Ltd., and the bank statement details provided by the assessee were not considered by the lower authorities. Citing a similar case where the appeal was allowed, the Tribunal concluded that the assessee's claim of being a mere accommodation entry provider was justified, and therefore, the addition made under section 69 could not be sustained. Consequently, both appeals were allowed.
Key Issues
Whether the addition under section 69 for unexplained investment is sustainable when the assessee claims to be an accommodation entry provider and the substantive addition in the primary beneficiary's case was deleted.
Sections Cited
Section 69, Section 271(1)(c), Section 143(3) r.w.s. 147
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Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH, AHMEDABAD
Before: Ms. Suchitra Kamble
आदेश/ORDER These two appeals are filed against the order dated 30- 07-2019 passed by CIT(A)-13, Ahmedabad for assessment year 2007-08
2. The grounds of appeal “1. The Ld. AO has erred in law by making an addition u/s 69 of Rs. 8.00 lacs in the hands of the assessee without identifying the facts of the case and real nature of transactions involved without appreciating the fact that the assessee is only an accommodation entry provider. The Ld. CIT A has erred in law by confirming the same.
1.
2. The Ld. AO has erred in law by initiating penalty u/s 271 1 (c) on the above addition without proving intention to conceal income.
& 1535/Ahd/2019 Rajesh Manilal Makwana, A.Y. 2007-08
3. Any other ground of appeal shall be submitted at the time of hearing.”
1. 1. “1. The Ld. AO has erred in law by making an addition u/s 69 of Rs. 8.00 lacs in the hands of the assessee without identifying the facts of the case and real nature of transactions involved without appreciating the fact that the assessee is only an accommodation entry provider. The Ld. CIT A has erred in law by confirming the same.
The Ld. AO has erred in law by initiating penalty u/s 2711(c) on the above addition without proving intention to conceal income.
Any other ground of appeal shall be submitted at the time of hearing.”
3. Firstly, we are taking assessment year 2007-08. The assessee filed return of income for assessment year 2007-08 on 07-04-2018 declaring taxable income at Rs. 1,42,030/-. The case was reopened and order u/s. 143(3) r.w.s. 147 was passed on 04-11-2011 determining total income of Rs. 9,42,032/- and addition of Rs. 8,00,000/- was made on protective basis being unexplained investment in purchase of shares of Adarsh Engitech Projects Pvt. Ltd. wherein the substantive addition was made in the case of the Adarsh Engitech Projects Pvt. Ltd.. The assessee preferred appeal before the CIT(A) against the said addition and initiating penalty proceedings u/s. 271(1)(c) of the Act. The CIT(A) vide order dated 28-11-2013 disposed off assessee’s appeal by dismissing grounds of the assessee and held that the addition was made by the Assessing Officer though on protective basis now after the CIT(A) order in case of Adarsh Engitech Projects Pvt. Ltd. is now substantive and & 1535/Ahd/2019 Rajesh Manilal Makwana, A.Y. 2007-08 fully justified. The addition made by the Assessing Officer were confirmed and upheld.
4. Aggrieved by the order of the CIT(A), the assessee preferred further appeal to the Tribunal Ahmedabad on the ground that the Assessing Officer made addition u/s. 69 of Rs. 8 lacs in the hands of assessee without identifying the fact of the case of the case and real nature of the transaction as well as against the initiating penalty u/s. 271(1)(c) of the Act. The Tribunal vide order dated 11-01- 2017 set aside the assessment back to the file of the Assessing Officer and directed to decide the same afresh after examining the finality of the additions in the hands of Shri Shantilal Jain in case of Adarsh Engitech Projects Pvt. Ltd. The Tribunal vide order dated 22-11-2013 dismissed the Revenue’s appeal against the order of the CIT(A), Udaipur 02-02-2010 deleting the addition of Rs. 2.50 crores. In view of the set aside proceedings, fresh notice was issued and the Assessing Officer observed that the assessee made investment for which the explanation offered by the assessee is not satisfactory and since the substantive addition in the hands of Adarsh Engitech Projects Pvt. Ltd. was deleted by the CIT(A) vide order dated 02-02-2010, the protective addition in the hands of assessee’s case became substantive. The assessee filed reply to the same and after taking cognizance of the said reply, the Assessing Officer held that the assessee did not furnish any evidence to support her contention that he provided any accommodation entries. Nowhere in return of income, the 3 & 1535/Ahd/2019 Rajesh Manilal Makwana, A.Y. 2007-08 details of commission were provided. On being asked to furnish the source of investment made by him in purchase of shares of Adarsh Engitech Projects Pvt. Ltd, the assessee has not furnished any details of investment. Thus, the assessee did not prove the genuineness and creditworthiness of the investment made in the share of Adardh Engitech Projects Pvt. Ltd. Thus, the Assessing Officer made addition of Rs. 8 lachs as unexplained investment u/s. 69 as substantive addition.
The assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
The ld. A.R. submitted that in case of Arvind M Makwana vs. ITO 394/Ahd/2020, the Tribunal vide order dated 24-02-2023 who is the other assessee who invested in Adarsh Engitech Projects Pvt. Ltd., the Tribunal has allowed the appeal filed by the said assessee. Therefore, the Hon’ble Gujarat high Court in case of present assessee has remanded back the matter to decide it on merit.
The ld. A.R. submitted that the assessee has only allowed the company to use his name as investor for a commission and the director of the company Ms. Shantilal Jain has given the cash the assessee to the company to deposit the same in the bank account and then purchase DD in favour of Adarsh Engitech Projects Pvt. Ltd. towards share application money as per the observation of the Assessing Officer. But the investment is unexplained at all. 4 & 1535/Ahd/2019 Rajesh Manilal Makwana, A.Y. 2007-08 In fact, the investigation report of the revenue proves that the money belonged to Adarsh Engitech Projects Pvt. Ltd. and was given by its director Mr. Shantilal Jain to the various accommodation provider to route in the company via banking channel. The ld. A.R. submitted that there was no investment and it was purely an accommodation entry as per the Investigation Wing Report. Since the substantive addition in the hands of Adarsh Engitech Projects Pvt. Ltd. was deleted, nowhere in the said order it was stated that the amount of Rs. 8 lacs was not given by Shantilal Jain. The ld. A.R submitted that the addition does not sustain.
The ld. D.R. relied upon the decision of the assessment order and the order of the CIT(A) categorically mentions that it is an unexplained investment and cannot be treated as accommodation entry and righty the Assessing Officer has made substantive addition in the hands of the assessee.
We have heard both the parties and perused all the relevant material available on record. Five persons including the assessee have invested Rs. 8 lacs and the aid amount was given to them by Shri Shantilal Jain and the contention of the A.R. before the Assessing Officer as well as before CIT(A) that the assessee has allowed the said amount to use his name as an investor for commission and the directors of the company, Shri Shantilal Jain had given cash to the assessee for depositing the same in his bank account and then to purchase a DD in favour of Adarsh Engitech Projects Pvt. Ltd. towards share application money was not 5 & 1535/Ahd/2019 Rajesh Manilal Makwana, A.Y. 2007-08 justified as the assessee is a merely accommodation entry provider and this fact cannot be otherwise proved by the Assessing Officer. In fact, the amount received from Adarsh Engitech Projects Pvt. Ltd. for which the details of bank statements were also filed before the Assessing Officer as well as CIT(A) was not taken into account either by the Assessing Officer as well as by the CIT(A). Thus, the observation made in case of Arvind M Makwana (supra) appears to be correct in the present assessee’s case as well. Therefore, the addition made in the hands of the assessee does not sustain. Thus, the appeal being is allowed.
As regards, ITA 1535/Ahd/2019, the facts of the case are identical, hence the same is allowed.
In the result, both the appeals are allowed.