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Income Tax Appellate Tribunal, DELHI BENCH ‘A’: NEW DELHI
(Assessment Year: 2020-21) DCIT, Central Circle 3, vs. BGCC Infraprojects Pvt. Ltd., Delhi. A – 7/2, Shivaji Apartments, Sector 14, Rohini, Delhi – 110 085. (PAN : AAHCB0910A) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Gautam Jain, Advocate REVENUE BY : Ms. Amisha S. Gupt, CIT DR Date of Hearing : 22.10.2024 Date of Order : 20.12.2024 ORDER
PER S.RIFAUR RAHMAN,AM:
This appeal is filed by the Revenue against the order of ld. Commissioner of Income Tax (Appeals)-23, New Delhi (hereinafter referred to as “ld. CIT(A)”) dated 29.07.2023 for the Assessment year 2020-21.
Brief facts of the case are, original return u/s 139 of the Income Tax Act, 1961 (in Short ‘the Act’) was e-filed by the assessee on 15.02.2021 vide acknowledgement no.264818271150221 declaring total income at loss of Rs.2,29,19,942/- for the financial year 2019-20 relevant to assessment 2020-21. A search and seizure proceedings u/s 132 of the Act was conducted in the case of assessee and others on 11.02.2021. A notice u/s 153A of the Act dated 19.11.2021 has been issued and duly served to the assessee for furnishing the return of income. In response to the notice u/s 153A, the assessee filed return of income on 4.12.2021 declaring total income at loss of Rs.2,29,19,942/-. Thereafter, the case was assessed at an income of Rs.2,57,50,000/- after making addition of Rs.2,50,00,000/- which represents sums received as business advance from M/s Bell Indus Fibercom (P) Ltd. and erroneously held as unexplained cash credit u/s 68 of the Act and further addition of Rs.7,50,000/- was made representing commission paid for receiving accommodation entries and, held as unexplained expenditure u/s 69C of the Act.
Aggrieved, the assessee filed an appeal before the ld. CIT(A). After considering the submissions made by the assessee, the ld. CIT(A) deleted the aforesaid addition made in the assessment order dated 11.04.2022 u/s 153A of the Act.
Aggrieved, the Revenue is in appeal before us and has raised the following grounds of appeal:- “1 That the ld. CIT(A) has erred on facts and in law in deleting the disallowance of Rs.2,50,00,000/- made by the Assessing Officer u/s 68 of the Income Tax Act’ 1961
2. The ld. CIT(A) has erred on facts and in law in deleting the disallowance of Rs.7,50,000/- made by the Assessing Officer u/s 68 of the Income Tax Act, 1961.”
5. At the time of hearing, ld. DR for the Revenue brought to our notice relevant facts of the case from the assessment order and heavily relied on the order of the Assessing Officer. He prayed that the order of the Ld. CIT(A) may be set aside.
6. On the other hand, ld.AR of the assessee reiterated the submissions made before the Ld. CIT(A). The ld. AR further contended that the addition made of Rs.2,50,00,000/- u/s 68 of the Act representing sums received by the assessee company as business advance from M/s Bell Indus Fibercom (P) Ltd. and erroneously held as unexplained cash credit u/s 68 of the Act is not in accordance with law on the following contentions: a) That complete details of M/s Bell Indus Fibercom (P) Ltd. and sum received as business advance from M/s Bell Indus Fibercom (P) Ltd. b) That transaction was through banking channel only; c) That pages 117-121 of Annexure A-1 in the shape of memorandum of understanding dated 15.6.2019 between appellant company and M/s Bell Indus Fibercom (P) Ltd. was seized from 201-206, 2nd Floor, VSSM Plot No. 18, Sector-3, Rohini, New Delhi-110 085 as a result of search u/s 132(1) of the Act and in such circumstances in absence of any contrary evidence no adverse inference can be drawn against the appellant. This is in view of section 292C of the Act; d) That no evidence against the appellant that the appellant had paid cash; e) That evidence on record in respect of the sums received as business advance from M/s Bell Indus Fibercom (P) Ltd. which remains unrebutted is tabulated hereunder:
Sr. Name of Party Amount No. (Rs.) i) M/s. Bell Indus Fibrecom (P) Ltd. 2,50,00,000 Address: H. No.-3/12, S/F, Asaf Ali Road, New Delhi -110002 PAN No. AAACB2764K Bank: The Lakshmi Vilas Bank Ltd. Account No. 0609360000004749 Branch: E-1/5, Sector-7, Rohini, New Delhi Date of Incorporation:12.3.1996 Date of filing of return of income: 31.2.2020 Auditor of the Company: DPA & Co. Chartered Accountants 61-A, Master Block, Shakarpur, Delhi – 110 092 Date of payment Sr. Date Amount Bank statement of Bank statement of No. (Rs.) lender appellant company (pages of Paper (pages of Paper Book) Book) i) 28.6.2019 55,00,000 119 121 ii) 28.6.2019 40,00,000 119 121 iii) 28.6.2019 50,00,000 119 122 iv) 28.6.2019 17,00,000 119 122 v) 28.6.2019 63,00,000 120 122 vi) 1.7.2019 25,00,000 120 122 Total 2,50,00,000 Net Worth of M/s. Bell Indus Fibrecom Private Limited Particular As on As on 31.03.2020 31.03.2019 Shareholder’s Funds Share capital 1,95,21,050 1,95,21,050 Reserves & Surplus 37,02,18,934 36,79,34,564 Share Application Money --- --- Unsecured loans --- --- Total 38,97,39,984 38,74,55,614 Application of Funds Investment(A) 2,30,00,000 --- Long Term Loans and advances (B) 36,58,07,204 38,81,06,920 Long term assets (Others than 7,76,078 10,15,653 investment) (B) Currents Assets and Liabilities Other Current Assets 32,46,242 34,21,745 Less: Current Liabilities & Provisions 30,89,540 50,88,704 Net Current Assets(C) 1,56,702 (16,66,959) Total (A+B+C) 38,97,39,984 38,74,55,614 Evidence (pages of Paper Book) i) Copy of memorandum of understanding dated 15.6.2019 between M/s Bell Indus Fibrecom (P) Ltd. (113-117) marked as page 107-111 of Annexure A-1 seized from 201-206, 2nd Floor, VSSM, Plot No. 18, Sector-3, Rohini, New Delhi – 110 085 ii) Copy of confirmation of account to M/s Bell Indus Fibercom (P) Ltd. for the financial year 1.4.2019 to 31.3.2020 (118) iii) Copy of bank statement of The Lakshmi Villas Bank Ltd. of M/s Bell Indus Fibrecom (P) Ltd. (119-120) iv) Copy of PAN Card AAACB2764K of M/s Bell Indus Fibrecom (P) Ltd.(123) v) Copy of ledger account of M/s. Bell Indus Fibrecom (P). Ltd. in the books of appellant company (124, 176). vi) Copy of certificate of Incorporation alongwith memorandum of association and articles of association of M/s. Bell Indus Fibrecom (P) Ltd (125-147) vii) Copy of acknowledgement of return of income alongwith computation of income and audited financial statement for the financial year 2019-20 relevant to assessment year 2020-21 in the case of M/s. Bell Indus FibrecomPvt. Ltd (148-175). viii) Copy of statement of Sh. Raju Malik, Director of lender company i.e. M/s. Bell Indus Fibrecom (P) Ltd. was recorded on 23.3.2022 u/s 131 of the Act (181-183) wherein it has been stated that the company had invested amount through own funds and completely denied the receipt of any cash in lieu of any transactions with the appellant company. ix) Copy of statement of Sh. Joginder Pal Gupta recorded on 21.3.2022 u/s 131 of the Act (177-180) APPELLANT COMPANY i) Copy of acknowledgement of return of income alongwith computation of income and audited financial statement of appellant company for the financial year 2009-10 relevant to assessment year 2020-21 (1-63). ii) Copy of bank statement of Union of India of appellant company (121-122) 7. The ld. AR also contended that they have provided each and every detail before the Revenue Authorities based on which the remission has been given by the ld. CIT(A).
Considered the rival contentions and perused the material on record. We are of the considered view that assessee has placed on record the evidences in the shape of addresses, PAN Nos and networth of M/s Bell Indus Fibercom (P) Ltd.. confirmation of account, bank statement of M/s Bell Indus Fibercom (P) Ltd., ledger account of M/s Bell Indus Fibercom (P) Ltd. in the books of assessee company, certificate of incorporation, Fibercom (P) Ltd., acknowledgement of return of income and audited financial statement, bank statement of assessee company. A tabular chart of M/s Bell Indus Fibercom (P) Ltd. containing name, address, PAN No. income tax jurisdiction of Assessing Officer, particulars of income declared alongwith date of filing of return of income and date of amount received through banking channels is as under:
Address Details of income Particulars of income Date of amount Amount (Rs.) tax jurisdiction of declared alongwith received assessing officer date of filing of return through with PAN No. of of income banking channels H.No. 3/12, S/F/ DLC-CC-045-22 29,64,990 28.6.2019 55,00,000 Asaf Ali Road, 31.12.2020 New Delhi – 110 002 28.6.2019 40,00,000 28.6.2019 50,00,000 28.6.2019 17,00,000 29.6.2019 63,00,000 1.7.2019 25,00,000 2,50,00,000
The Assessing Officer did not doubt the genuineness of the aforesaid documentary evidences which clearly prove that entity is existing and registered with Registrar of Companies as well as assessed to income tax.
The fact that the genuineness of the transaction is also evident from the confirmation, ledger account in the books of account of the assessee company, bank statements, audited financial statements establishing the genuineness of the transactions. The AO has made addition u/s 68 in respect of the receipt of money treated as business advance by the “It is amply clear from the above discussion that in this case, the assessee had not discharged its initial onus u/s 68 of the Act, with regard to credit which was claimed as alleged loan from above referred to paper company whereas it is proved beyond doubt from investigation that the alleged loan were actually accommodation entries from paper companies controlled by entry operators and assessee was one of the several beneficiaries. In view of these facts, it is held that such receipts remained unexplained credit in the books of accounts of the assessee in the form of alleged loan is deemed to be income of the assessee u/s 68 of the Act and amount was wrongly disclosed as loan from paper companies engaged in business of providing entries. For aforestated reasons, Rs. 2,50,00,000/- is deemed to be the income of the assessee for the year under consideration u/s 68 of the Act. Further, the assessee has paid commission/charges to receive such accommodation entries from entry providers. Generally for taking accommodation entry commission/charges @ 3 to 5 % has been charged by the entry operator. During the year under consideration the assessee has received a total entry amounting to Rs. 2,50,00,000/- and paid commission/charges @ 3%, the amount paid by the assessee comes to Rs. 7,50,000/-. The same is added to the income of the assessee u/s 68 of the Act as unexplained cash credits.
It is also noted that M/s Bell Indus Fibercom (P) Ltd. is also examined independently by the ld. CIT(A) as stated in para 26 at pages 12-18 of order.
In this background, we have examined the order of the ld. CIT(A). The ld. CIT(A) deleted the addition by holding as under: “21 I have considered the facts of the issue and submissions of the appellant. The issue involved relates to addition made out of business advance of Rs. 2,50,00,000/- from M/s Bell Indus Fibrecom (P) Ltd. 22 The appellant has placed on record following evidences on record in respect of aforesaid business advance: i) Addresses, PAN Nos and networth of M/s Bell Indus Fibercom (P) Ltd.. ii) Confirmation of account, iii) Bank statement of M/s Bell Indus Fibercom (P) Ltd. iv) Ledger account of M/s Bell Indus Fibercom (P) Ltd. in the books of assessee company, v) Certificate of incorporation, vi) Memorandum of association and articles of association of M/s Bell Indus Fibercom (P) Ltd., vi) Acknowledgement of return of income and audited financial statement, vii) Bank statement of assessee company. ……. 27 In the aforesaid circumstances, the initial burden of the appellant as to identity, creditworthiness of the M.s Bell Indus Fibercom (P) Ltd. and genuineness of the transaction stands duly established. Once statement of Sh. Raju Malik, Director of M/s Bell Indus Fibercom (P) Ltd. has been recorded on 223.03.2022 u/s 131 of the Act thus in absence of any further adverse material brought on record by the AO, the addition is not in accordance with law. Sh. Raju Malik, Director M/s Bell Indus Fibercom (P) Ltd. Has not only confirmed the transactions but also provided the source of the said transaction inn as much as the sums were remitted out of their bank accounts and duly recorded in its books of accounts.
After the appellant having discharged his onus of furnishing the details regarding the transaction, it was incumbent upon the Assessing Officer to prove that either the identity is not established or the creditor does not have the creditworthiness or the or the transaction is not a genuine transaction. Apparently in this case, there nothing on record to establish that the transaction was not a genuine transaction or the creditor did not have the creditworthiness to pay to the appellant.
The assessment in this case was made pursuant search and the Assessing Officer as well as the investing officer had all the powers to fully examined the transaction and bring on record the 68 of the Act.
The creditor is a company and filling his returned with the ROC as well as Income-tax. Therefore, its identity is well established. The director of the company was summoned and his statement recorded. From the fact that the Director of the creditor company appeared before the Assessing Officer and deposed before the Assessing Officer establishes that the person behind the company was not a person of no means. It also indicates that the director was in the knowhow of the affairs of the company and was not a dummy director. These facts established beyond doubt the identity of the creditor. Even otherwise, it is not the case of the Assessing Officer that the director of the company is dummy director and the identity of creditor is not established.
From the annual account of the creditor, it has been reproduced above, it is seen that the creditor company had disclosed to total receipt of Rs.3,93,67,517/- and Rs.4,08,44,685/- for the F.Y 2018-19 respectively. The creditor company has disclosed a net profit of Rs. 17,94,872/- and Rs.28,67,622/- for the F.Y 2018-19 and 2019-20 respectively. Shell companies by its nature of activities do not disclose such high receipts and income. From further analysis of the balance sheet, it is seen that the creditor has disclosed reserve and surplus of Rs. 36,79,34,564/- and Rs. 37,02,18,938/- for the F.Y 2018-19 and 2019-20 respectively. On the basis of balance sheet and profit and loss account of the creditor company, it is held that the creditor had creditworthiness to give advance of Rs. 2.50Crores to the appellant.
Further, there was a MoU between the appellant and the creditor regarding advance. The contents of such MOU has not been proved to be wrong or incorrect in any manner.
It is not the case of the Assessing Officer that the appellant has given cash/unaccounted money to the creditor for taking loan. it is also not the case of the assessing Officer that the creditor had any bogus entries in his accounts. The fundamental premise on which the Assessing officer rests his case is that there were credits in the accounts of the creditor from suspicious sources. However, such a suspicion has not been taken to the logical end by examining the transaction in detail. Presumption and suspicion may be the starting point for making investigation but not the end of investigation.
It is therefore held that the creditor had the creditworthiness of giving advance.
The third limb is regarding genuineness of the transaction. Firstly, it is not the case of Assessing Officer that the transaction is not a genuine transaction. Additionally, there was MoU between the parties to the transaction; the transaction was through banking channel; the transaction is reflected in the books of appellant as well as the creditor; the director of the creditor under statement under oath has confirmed the transaction; there is no evidence or argument to establish that the statement of the director was incorrect; there was any round tripping of funds; and there was any cash deposit in any account t and the same cash travelled back to the appellant. Therefore, it is held that the transaction was a genuine transaction of business advance. 36 Also Hon’ble Deli High Court in the case MOD Creations (P) Ltd. v. ITO reported in 354 ITR 182 has held as under: …. 37 The Hon’ble Delhi High Court in the case of CIT v. Diamond Products Ltd. reported in 177 Taxman 131 has held as under: …. 38 Further Hon’ble Delhi High Court in its decision in Income Tax Appeal No. 1324/2008 dated 23.12.2011 in the case of CIT v. Kamdhenu Steel and Alloys Ltd. reported in 361 ITR 220 becomes applicable. In the said case, Their Lordships after examining all the precedents held that the initial burden is upon the assessee to explain the nature and source of the share application money received by the assessee. It was held that in order to discharge this burden, the assessee is required to prove: a) The identity of shareholder; b) The genuineness of transaction; and c) The creditworthiness of shareholders 39 The Hon’ble Court further held as under: …… 40 Further it was specifically observed in respect of of 2009 in the said judgment as under: ….. 41 The Hon’ble Delhi High Court in its decision in Income Tax Appeal No. 386/2022 dated 10.10.2022 the case of Pr. CIT v. Satkar Infrastructure (P) Ltd. has stated as under: …. 42 Also the Hon’ble Delhi High Court in its decision in Income Tax Appeal No. 335/2012 dated 11.1.2017 the case of Pr. CIT v. N.C. Cables Ltd. reported in [2017] 391 ITR 11. The Hon’ble Court has stated as under: ….. 43 Further, the Hon’ble Delhi High Court in its decision in Income Tax Appeal No. 377/2016 dated 21.11.2016 in the case of Pr. CIT v. Goodview Trading (P) Ltd. has held as under: ….. 44 Further Hon’ble Delhi High Court in the case of CIT v. Kinetic Capital Finance Ltd. reported in 354 ITR 296 has held as under: …. 45 The Hon’ble Calcutta High Court in the case of IT v. Dataware (P) Ld. in GA No. 2856/2011 (Cal) dated 21.9.2011 has held as under: …… 46 In view of the facts discussed above and judicial pronouncements, the impugned addition is liable to be deleted. 47 Consequently, the addition u/s 68 of the Act of Rs. 2,50,00,000/- is deleted. Grounds 11, 12, 13 and 14 are allowed.”
Having regard to the above, the ld. CIT(A) in his order has rightly deleted the addition made in this regard. The order of CIT(A) in this regard is upheld and Ground No.1 of the appeal of the revenue is dismissed.
13. Ground 2 raised by the revenue relate to disallowance of Rs.7,50,000/- u/s 68 of the Act. The learned CIT(A) deleted the disallowance by holding as under “48 The Ground No. 15 to 15.2 of Grounds of Appeal is regard that addition made of Rs. 7,50,000/- representing alleged commission paid for received aforesaid alleged accommodation entries and held as unexplained cash credit u/s 68 read with section 115BBE of the Act.
49. I have considered the facts of the issue and submissions of the appellant. During the course of appellate proceedings, the appellant argued that addition made by the learned Assessing Officer is not tenable as it is unsupported by any material and, in view of the judgement of Apex Court in the case of Maharaja BipinsinghDeo v. State of Orissa reported in 76. ITR 690. It was thus prayed that, the addition made may kindly be deleted.
50. The facts of the case and reply of the appellant is considered. In the decision in respect of Ground no. 11, 12, 13 and 14, the addition is Rs. 2,50,00,000/- is deleted, therefore, the addition of Rs. 7,50,000/- is also deleted. Ground 15 to 15.2 are allowed.”
14. Having regard to the above, the CIT(A) in his order has rightly deleted the addition made in this regard. The order of ld. CIT(A) in this regard is upheld and ground no.2 of the appeal of the Revenue is dismissed.