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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’, NEW DELHI
Before: Sh. N. K. Saini
ORDER This is an appeal by the assessee against the order dated 04.12.2017 of ld. CIT(A)-7, New Delhi. 2. Following grounds have been raised in this appeal: “1. The Ld. CIT(A) and A.O. is bad in law and against the facts of the case.
2. That the Ld. A.O. erred in invoking provisions of section 148.
3. That the Ld. CIT(A) erred in sustaining addition amounting Rs. 10,00,000/- made by the A.O. on account of unexplained cash credit u/s 68 of the Act.
4. That the Ld. CIT(A) erred in upheld the addition amounting Rs. 20,000/- made by the Ld. AO on adhoc basis on account of commission paid.
5. That the Id. AO has not provided any tangible evidence against respondent while making addition in his order Piyush Polymers Pvt. Ltd. other than Extracts of Investigation wing report as provided in reasons for reopening.
6. That the Ld, AO erred in not providing the opportunity of confronting the Information and documents received by him from Investigation Wing.
7. That the Ld. AO erred in not providing opportunity for cross examination which result in breach of natural justice.
8. That the Id. AO erred in initiating penalty u/s 271(1)(c).
9. That the Id. A.O. also erred in not following various judgments of jurisdictional High Court and ITAT.
10. Thai the appellant carves leave to add, alter, modify or delete any of the ground of appeal.”
3. From the above grounds, it would be clear that the grievance of the assessee relates to the sustenance of addition of Rs.10,20,000/- made by the AO on account of unexplained cash credit u/s 68 of the Income Tax Act, 1961 (hereinafter referred to as the Act).
Facts of the case in brief are that the assessee filed the return of income on 29.09.2009 showing an income of Rs.4,18,990/-. Later on, the case was reopened u/s 147/148 of the Act. The AO made the addition of Rs.10,00,000/- by observing as under: “The assessee has filed copy of share application form, copy of balance sheet of M/s Virggin Capital Services Pvt. Ltd only. However, no bank statement and confirmation has been filed. In the annexure of investment of the balance sheet of the applicant company name of assessee is also not appearing, As Piyush Polymers Pvt. Ltd. such the assessee has failed to discharge its onus as required u/s 68 of the Income Tax Act, 1961. Without having any creditworthiness (in absence of bank statement) the transaction cannot be justified u/s 68 of the Income Tax Act, 1961. Reference is hereby made to the provisions of Section 68 of the Act and their applicability. The assessee was further asked to produce the director of the alleged share applicant company which assessee failed to do so. In such circumstances, it is held that assessee is not able to prove identity and creditworthiness as assessee failed to file bank statement and even the TIR of share applicant company. Therefore the share application money of Rs.10,00,000/- is nothing but unexplained cash credit u/s 68 of the Income Tax Act, 1961.” (Addition of Rs.10,00,000/-) 5. He also made the addition of Rs.20,000/- on account of commission on the above said amount by observing as under: “Since, as discussed in the reason above, for getting the accommodation entry of the said amount of Rs. 10,00,000/- the assessee has taken the services of the above entry operator. For routing the money, the assessee has to pay commission to the entry operators. As per the prevalent rate known at the time which these entries are taken is @ 2%. This expenditure is also made out of the books of accounts. Therefore, the commission paid to the entry operators 2%, Rs.20,000/-i.e. (2% of Rs.10,00,000/-}, is also added to the income of the assessee.” (Addition of Rs.20,000/-) 6. Being aggrieved the assessee carried the matter to the ld. CIT(A) who sustained the addition by observing in paras 6.1 and 6.10 of the impugned order as under: “6.1. 1 have carefully considered the assessment order passed by the AO and the submissions furnished by the Ld, AR Reassessment proceedings were initiated, as the Piyush Polymers Pvt. Ltd. AO had received information from the DIT(Inv.) that the appellant was in receipt of accommodation entry Rs.10,00,000/- introduced as share capita! from M/s Virgin Capital Services (P) Ltd., a company managed and controlled by Shri S. K. Jain group The AO recorded exhaustive reasons bringing out clearly the modus operandi whereby Shri S K Jam and his associated concerns/companies were providing accommodation entries to interested persons and companies In terms of the reasons recorded, the appellant company had received an amount of Rs.10,00,000/- as share capital from M/s Virgin Capital Services (P) Ltd. The appellant had filed copy of share application form, copy of Balance sheet of M/s Virgin Capita! Services (P) Ltd. only However, no bank statement and confirmation had been filed. In the annexure of investment of the Balance sheet of the applicant company name of the appellant was also not appearing. The appellant was further asked to produce the director of the alleged share applicant company which me appellant failed to do so. In such circumstances, it was held that appellant is not able to prove identity and creditworthiness as the appellant failed to file bank statement and even the Director of the share applicant company. As the appellant company could not discharge the initial onus of creditworthiness of share holder, genuineness of transaction the AO relying on the findings of the Department in the assessments of the entry operators of Shri S. K. Jain held that the appellant has received Rs.10,00,000/- as share capital as accommodation entry and added the same to the total income of the appellant as unexplained investment He further added Rs.20,000/- being 2% of the unexplained credit of Rs.10,00,000/- as commission expenses incurred by the appellant to procure the accommodation entry. 6.10 Adverting to the facts in the appellant's case, it is obvious that only documentary evidence by way of confirmation, bank statement, copy of acknowledgement Piyush Polymers Pvt. Ltd. of return is filed to explain the source of the impugned credit. Despite, repeated opportunities, the Director of the company was not produced before the AO. Copy of bank accounts of the company also reveals simultaneous deposits and withdrawals leading credence to the modus operandi employed by such companies to provide accommodation entries. These facts only show that a paper trail is sought to be created to camouflage the entire transaction to introduce unaccounted income by way of share capital in the hands of the appellant company.”
Now the assessee is in appeal. The ld. Counsel for the assessee submitted that the assessee furnished all the requisite details before the AO as well as the ld. CIT(A) in the form of balance sheet of the investor, copy of share application form, bank statement and confirmation but the same had not been appreciated in right perspective either by the AO or by the ld. CIT(A). Therefore, the addition made by the AO and sustained by the ld. CIT(A) was not justified.
In her rival submissions, the ld. Sr. DR strongly supported the orders of the authorities below.
I have considered the submissions of both the parties and perused the material available on the record. In the present case, it is noticed that the ld. CIT(A) has again contradictory observation in paras 6.1 & 6.10 of the impugned order which have been reproduced in the former part of this order. In para 6.1, the ld. CIT(A) mentioned that the assessee filed the copy of share application form and balance sheet of M/s Virgin Capital Services (P) Ltd, however, no bank statement and confirmation had been Piyush Polymers Pvt. Ltd. filed while in para 6.10, the ld. CIT(A) mentioned that only documentary evidence by way of confirmation, bank statement copy of acknowledgment of return is filed to explain the source of the impugned credit. From the aforesaid facts, it is clear that the ld. CIT(A) has given a contradictory finding. I, therefore, deem it appropriate to remand this issue back to the file of the ld. CIT(A) to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee.
In the result, appeal of the assessee is allowed for statistical purposes. (Order Pronounced in the Open Court on 13/06/2018)