M/S TEJASVI INVESTMENTS PVT. LTD.,NEW DELHI vs. DCIT, NEW DELHI

The relevant facts giving rise to these appeals are that search & seizure operations were carried out, under section 132 of the Act, on Tarun Goyal Group of cases on 15.09.2008. Mr. Tarun Goyal, a tax consultant, was indulged in providing accommodation entries through his group companies/firms. The Modus Operandi adopted by this Group for providing accommodation entries is worth to narrate here for proper appreciation of facts of these cases. Shri Tarun Goyal got registered/created more than 90 business entities; such as Private Ltd. Companies and Firms, for providing accommodation entries at his office premises at 13/34, W.E.A., Arya Samaj Road, Karol Bagh, New Delhi. The Directors of such companies were his employees, who worked in his office as peons, clerks, receptionist etc. All the documents including blank cheques were got signed from these employees. A number of bank accounts were opened in the names of these companies and his employees. For providing accommodation entries this Group used to and Ors. accept cash from the beneficiaries. The cash was deposited in bank account of any of the business concerns of this Group. Later, the said sums were transferred from one concern to another within the Group before returning/providing the said sums to the beneficiaries through banking channels. Transferring the money from one concern to another was to camouflage the true nature of money and to avoid investigations by the Tax Authorities. The accommodation entries were provided in the garb of Share capital, etc. Mr. Tarun Goyal admitted the above-mentioned facts during the course of initial assessment proceedings, under section 153A, 153C and 148 of the Act, of this Group cases.

The AO taxed the entire accommodation entries/unexplained credits in each assessee of this Group and also the commission income @ 2,00% thereon, as required, in the initial assessments completed under section 153A, 153C and 148 of the Act. In first round appeals, the Ld. CIT(A) upheld the findings of the AO. However, the Tribunal, in cases of Tarun Goyal & others belonging to Tarun Goyal Group of cases (94 appeals) in & 4637/Del/2012, etc., including the appellants/assessee’s cases decided these initial appeals vide consolidated order dated 18.10.2013 as under: “20. The undisputed fact accepted by the assessee is that Mr. Tarun Goyal was running a racket of providing accommodation entries by floating numerous companies. The modus operandi brought out by the AO in the assessment order, is not disputed by the assessee. The only issue before us is the quantification of the income in the hands of Mr. Tarun Goyal and each of the entities formed by him. and Ors. Each company is an assessee and an assessment order has to be passed separately in each case. The credits appearing in the books of each assessee have to be explained by that assessee. The Identity, creditworthiness and genuineness of the creditor has to be proved by that particular assessee and if the same is not proved, addition may be made u/s 68. The argument of the ld. counsel for the assessee that all the additions have to be made only in the hands of Mr. Tarun Goyal is not correct and hence cannot be accepted.

In pursuance of the above-mentioned Tribunal order, the Assessing Officer (hereinafter, the ‘AO’) completed assessments vide orders dated 17.02.2015 as detailed hereunder: S. Assessee AY Assessments Assessed No. completed u/s of the income Act 1. Vivek Plantation Pvt. Ltd. 2005-06 153C/153A/254 4,61,00,200/- Vivek Plantation Pvt. Ltd. 2006-07 153C/153A/254 1,94,37,884/- 2. Unique Capital Pvt. 2005-06 153C/153A/254 1,70,31,486/- Ltd. Unique Capital Pvt. 2006-07 153C/153A/254 91,08,458/- Ltd. 3. Tejasvi Investments 2008-09 153A/254 2,18,34,100/- (P) Ltd. Aggrieved with assessments in remitted matters, appellants/assessees filed appeals before the Ld. CIT(A), however, they did not succeed.

The Ld. Counsel submitted that two core issues in these appeals were (i) taxability of entire credits appearing in books of account/bank and Ors. account as unexplained credits and (ii) chargeability of commission income @ 2.00%. With respect to the first issue that whether the AO was justified in taxing the entire credits appearing in books of account/bank account as unexplained credits, the Ld. Counsel submitted that the AO erred in working out the peak credit. According to the Ld. Counsel, the peak of bank account(s) has to be assessed as per the directions of the Tribunal vide its order dated 18.10.2013; whereas the AO had taxed the entire credits appearing in books of account/bank account as unexplained credits in pursuance of the Tribunal order dated 18.10.2013. The Ld. Counsel, with the help of bank account transactions, submitted that the AO had erred in working out the peak credits and not allowing the set off of bank debits. His argument was for taxing the peak of bank credits as the black money received for accommodation entries were routed through the bank accounts only. Providing accommodation entries was the business of the appellants/assessees; hence the peak of bank accounts had to be taxed in pursuance of the Tribunal order dated 18.10.2013.

The Ld. Counsel further submitted that the commission income had to be taxed @ 0.50% in the hands of respective assessees of this group instead of @ 2.00% taxed by the AO. To buttress this argument, the Ld. Counsel placed reliance on the decision of the Hon’ble Delhi High Court in of the case of this Group; namely, Bhawani Portfolio Pvt. and Ors. Ltd. (ITA No. 158/2020& CM APPL. 7946/2020) and Tribunal order in the cases of Ordinary Financial Services Pvt. Ltd. (ITA No. 6719/Del/2016) wherein the rate of 0.50% of commission income.The Ld. Counsel drew our attention to para 9 of the Hon’ble High Court order in the case of M/s. Bhawani portfolio Pvt. Ltd. (supra), order dated 12th July, 2021. The finding of the Hon’ble High Court in para 9 is extracted as under:- “9. This court is of the view that none of the aforesaid findings are so perverse that they warrant an interference in appeal jurisdiction under Section 260A of the Income Tax Act, 1961. This Court is also of the view that the Tribunal, being the last fact-finding authority, was entitled to guess work and arrive at a ballpark rate of commission. Consequently, no substantial question of law arises in the present appeals. Accordingly, the appeals along with pending applications are dismissed.”

The Ld. Counsel, emphasizing the fact that Tejaswi Investment Pvt. Ltd. provided accommodation entries in the garb of investment/through booking of flats. So, it had to be assessed on commission income @ 0.50% only. Therefore, he prayed for deletion of Rs. 43,59,333/-; accommodation entries provided to M Tech Developers Pvt. Ltd.

The Ld. CIT-DR submitted that the Ld. Sr. Counsel had not appreciated the finding of the Tribunal order dated 18.10.2013.She drew our attention to para 24 of the order of the Ld. CIT(A) and para 11 of the assessment order. She contended that the Tribunal has not given and Ors. any categorical finding to tax the peak of bank credits. She was surprised on the arguments of the Ld. Counsel that how set off of accommodation entries of ‘X’ can be given to the ‘Y’. She contended that each accommodation entry was independent and it had to be assessed in case if the same was unexplained either in the hands of the appellants/assessees providing accommodation entries or in the hands of beneficiaries. Since the Tribunal had given a categorical finding to tax the same in the hands of the appellants/assessees providing accommodation entries if the same was not taxed in the hands of other business concerns of this Group. Therefore, the same had to be done accordingly. She, highlighting the relevant paras of the assessment orders and the Ld. CIT(A)’s orders, submitted that the appellants/assessees failed to work out the peak as per the Tribunal order dated 18.10.2013 and also failed to demonstrate, with corroboratory evidence, the outgoing debits/transfer out of credits appearing in books of accounts/bank accounts of various assessees; therefore, the actions of the AO and the Ld. CIT(A) was justified and prayed for dismissal of this ground. She placed reliance on the decision of the Hon’ble Delhi High Court in the case of D K Garg 300 CTR 510. For commission income and taxability of investment as mentioned above she placed reliance on orders of the AO and the Ld. CIT(A). Accordingly, she prayed for dismissal of all appeals. and Ors. In case of M/s. Tejasvi Investment P. Ltd., the Ld. CIT-DR 11. submitted that the M Tech Developers Pvt. Ltd. had never come forward to own the transaction that it took accommodation entry of Rs. 48,59,333/-. Further, the appellant/assessee had not brought any corroboratory evidence to substantiate its claim and contradict the finding of the Ld. CIT(A). Further, the Ld. CIT-DR drew our attention to the finding of the Tribunal in the case of the appellant/assessee wherein the Tribunal had not held the same as accommodation entries.

We have heard both the parties and have perused the material available on the record. We also perused the above referred case laws.

The dispute before us is limited only with the determination of quantum of peak credits appearing in books of accounts/bank accounts of various assessees. Undisputedly, the appellants/assessees were involved in providing accommodation entries to various beneficiaries. The appellants/assessees used to receive cash and thereafter they deposited the said sums in their bank account(s). To launder such black money, they used to transfer the said sums to their sister concerns for camouflaging. After siphoning of such money from one concern to another, the same were refunded back to the beneficiaries in the garb of some make shift transactions. As per para 23 of the Tribunal order dated 18.10.2013, the AO was directed to and Ors. (i)examine the evidence submitted by the assessees, (ii) consider all the cases together and (iii) restrict the addition under section 68 of the Act to only the peak unexplained credit in each case after elimination of circular transaction(s) within the sister concerns. The said direction of Tribunal order dated 18.10.2013 was not for taxing the bank credit. It was exclusively for restricting the addition under section 68 of the Act to only the peak unexplained credit after elimination of circular transaction(s), if any, within the Group concerns. In other words, the one and only one inference that emerged from the Tribunal order dated 18.10.2013 is that the entire credits appearing in the books of account/bank account(s) for providing accommodation entries to beneficiaries have to be assessed in the hands of the appellants/assessees if the same was not taxed elsewhere in the hands of other business concerns of this Group involved in providing accommodation entries to beneficiaries.

In view of the above, we find merit in the arguments of the Ld. CIT- DR. We are of the considered view that the Ld. Counsel’s argument that the peak of the bank credits has to be assesseed as per the direction of the Tribunal order dated 18.10.2013 is devoid of any merit on the simple reasoning that the bank credits are not assessable as unexplained credits under section 68 of the Act and each accommodation entry is independent and separate transaction. The Tribunal vide order dated and Ors. 18.10.2013 has directed the appellant/assessee to produce the evidence and demonstrate the chain of transactions before the AO during the course of remitted proceedings. Further, the Tribunal vide order dated 18.10.2013 has clarified that the burden of proof to produce the evidence and demonstrate the chain of transactions, layering indulged by him in the calculation of peak credits and to prove each credit in the books of each assessee is on the appellants/assessees. However, we have noticed that the appellants/assessees, during the second round of assessment proceedings, failed to follow the directions of the Tribunal vide order dated 18.10.2013. Therefore, the AO was constraint to assess the entire credits under section 68 of the Act.

In case of M/s. Tejasvi Investment P. Ltd., we find merit in the arguments of the Ld. CIT-DR. M Tech Developers Pvt. Ltd. had never come forward to own the transaction that it took accommodation entry of Rs.48,59,333/- from M/s. Tejasvi Investment P. Ltd. Further, we have taken note of the fact that the investment documents were seized from the possession of the appellant/assessee and it has to be explained by the appellant/assessee. The appellant/assessee failed to bring any material on the record to contradict the finding of the lower authorities. We therefore, do not find any fault in the finding of the Ld. CIT(A) on this score. Thus, the same is upheld accordingly.

In the result the appeals of the assessees are allowed partially as above.