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Income Tax Appellate Tribunal, DELHI BENCH ‘D’ NEW DELHI
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘D’ NEW DELHI
BEFORE SH.N.K.SAINI, ACCOUNTANT MEMBER AND SH.K.N.CHARY, JUDICIAL MEMBER
ITA No. 3422/Del/2014 (ASSESSMENT YEAR: 2008-09) Viagra Trading Co. Pvt. Ltd., vs DCIT, 308, Arunachal Bldg., 19, Central Barakhamba Road, New Delhi-110001. Circle-III, PAN-AABCV9360N New Delhi. (Appellant) (Respondent) Appellant by Sh. R.S.Singhvi & Sh. Satyajit Goyal, CA Respondent by Sh. Sampurnanand, Sr.DR Date of Hearing 28.09.2017 Date of Pronouncement .11.2017 ORDER PER K.N.CHARY, JUDICIAL MEMBER Aggrieved by the order dated 29.01.2014 in Appeal No.380/10-11/352 passing by the Commissioner of Income Tax (Appeal) [in short “CIT(A)”]-XXXIII, New Delhi for 2008-09 Assessment Year, the assessee filed this appeal.
Briefly stated facts are that the assessee is a company and one of the group concerns of Sh. S.K.Gupta Group. For 2008-09 AY, they have filed return of income on 18.09.2008 declaring total income of Rs.8,104/-. There was a survey operation on 20.11.2007 in Sh. S.K. Gupta Group of cases. During the survey and assessment proceedings one Sh. S.K.Gupta admitted that he had been providing accommodation entries to various persons through a large number of concerns effectively controlled by him. From perusal of the ledger accounts maintained in
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one of the laptops impounded under the survey, it was noticed that a large amount
of cash was deposited and cheque are issued on various parties on the same day or
within a few days. In view of the admission of Sh. S.K.Gupta that he has been
providing accommodation entries through various conduct companies, and on the
application filed before the Income Tax Settlement Commission (in short “ITSC”),
the ITSC directed computation of the total undisclosed income in relation to
various conduct companies controlled by Sh. S.K.Gupta, in the hands of Sh.
S.K.Gupta only. AO initiated action in the case of all 34 companies including the
assessee and passed orders in all the cases making additions. In case on hand,
the AO made an addition of Rs.1,44,23,220/- as against the returned income of
Rs.8,104/-. When nine out of such 34 conduit companies carried the matter in
appeal which reached the level of Income Tax Appellate Tribunal, a Bench of the
Tribunal by way of order dated 21.01.2015 in a batch of cases in ITA
No.3477/Del/2013 passed an order holding that since credit entries in the case of
conduit companies have been considered in the hands of Sh. S.K.Gupta, no
separate addition u/s 68 of the Act required to be made in the hands of conduct
companies which were merely used for providing accommodation entries. The
assessee preferred appeal to the Ld. CIT(A), and the Ld. CIT(A) by way of the
impugned order did not agree with the assessee and dismissed the appeal stating
that the assessee is not entitled to any relief because,-
“Deposit from inter-company has already been taxed u/s 68 of I.T.Act, 1961 in para 5.2 of the order. 2. Amount received from beneficiary has already been adjudicated by him in para 4.3 of the order treating them non genuineness the transactions. 3. Books of accounts of the appellant do not reflect genuine transaction therefore source of cash deposit remained unexplained, and
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The claim of HDFC Bank was remanded to the assessing officer, where he has given the finding that the appellant could not prove its stand that HDFC Bank A/c does not belong to it.
Hence, challenging the findings of the Ld. CIT(A), assessee preferred this appeal.
It is the submission of the Ld.AR that even according to the assessment
order, the assessee is one of the group concerns of Sh. S.K.Gupta group, survey
was conducted in the Sh. S.K.Gupta Group of cases on 20.11.2007, during that
time and also during the assessment proceedings, Sh. S.K.Gupta admitted that he
had been providing accommodation entries to various persons including the
assessee. It is also not in dispute that pursuant to the application of Sh. S.K.Gupta
before the Income Tax Settlement Commission (in short “ITSC”), ITSC was pleased
to direct computation of this income in the case of Sh. S.K.Gupta. It is further
submitted that out of 34 companies in respect of which the AO made addition u/s
68 of the Act, nine companies were granted relief by a Co-ordinate Bench of this
Tribunal in the above batch of cases and page No.7 of the order of the Tribunal
reads the names of all the 34 companies wherein vide Entry No.31, the assessee is
also to be found. According to the Ld. AR in view of the finding of the Tribunal - to
the effect that since credit entries in the case of conduit companies has been
considered in the hands of Sh.S.K.Gupta by the order of Income tax Settlement
Commission, no separate addition u/s 68 is required to me made in the hands of
conduit companies which were merely used for providing accommodation entries -
the assessee is also entitled to the relief of deletion of the addition. He submitted a
copy of the order dated 28.01.2015 in ITA No.3477/Del/2013.
Ld. DR heavily relied upon the authorities below.
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We have gone through the record. It is an admitted fact that the assessee is
also one of the group concerns of Sh. S.K.Gupta and on the application of the Sh.
S.K.Gupta before the ITSC, ITSC was pleased to direct the computation of the
entire undisclosed income relating to various conduct companies controlled by Sh.
S.K.Gupta shall be in the hands of Sh. S.K.Gupta. This fact is recorded by a Co-
ordinate Bench of this Tribunal in the order dated 28.01.2015. Relevant portion of
the order dated 28.01.2015 of the Co-ordinate Bench in the case of Nine
companies in M/s Omni Farms Pvt. Ltd. is as follows:-
“We have carefully considered the arguments of both the sides and perused relevant material placed before us. The facts in the case of all the companies are similar. Therefore, they are being taken up together for adjudication. For the sake of brevity, we shall discuss the facts in the case of M/s Omni Farms Pvt. Ltd. instead of all the nine companies.
In the case of M/s Omni Farms Pvt.Ltd., the Assessing Officer, at paragraph 2, has recorded the following finding:-
“2. A survey operation was conducted in the S K Gupta group of cases on 20/11/2007 at 308, Arunachal Building, 19, Barakhamba Road, New Delhi – 110001 and 1007-1008, Arunachal Building, 19, Barakhamba Road, New Delhi – 110001. The assessee company is one of the group concerns of S K Gupta Group. During the course of survey proceedings and assessment proceedings, Sh.S K Gupta admitted that he had been providing accommodation entries to various persons through a large no. of concerns effectively controlled by him. Further, it was seen that Sh. S.K. Gupta operates a number of accounts in the same bank/branch or in different branches in the names of companies/firms/proprietary concerns and individuals. For the operation of these bank accounts, persons who are filing income tax returns are roped in. Like any other business it does require man power according to the scale of operations. Except for two or three persons who are required regularly to visit banks and do other work like collection of cash etc. most of the other persons involved are on part time basis. The part time employees are called as and when required to sign documents, cheque books etc. Sh. S.K. Gupta has also roped in his own relatives for operation of various bank accounts and for filing the income tax returns. It was seen that Sh. S.K. Gupta was controlling more than 35 companies from a small office premises without sufficient infrastructure or employees to carry out meaningful business activity in so many companies.
Further, from the perusal of ledger accounts maintained in one of the laptops impounded during survey, it is noticed that a large amount of
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cash is deposited and cheques are issued on the same day/within few days to various parties from the accounts of the company controlled by him. As per enquiries carried out by the Investigation wing the assessee was found to have been using the bank accounts opened in different banks to route the entries through two to four accounts to vie the color of genuineness to these transactions.”
Thus, the Assessing Officer himself has recorded the finding that the assessee company is one of the group concerns of S.K. Gupta group and Shri S.K. Gupta admitted that he had been providing accommodation entries to various persons through a large number of concerns effectively controlled by him. The Settlement Commission also has recorded the similar finding that Shri S.K. Gupta was providing entries to various beneficiaries by using various firms/companies. Admittedly, the companies under appeal before us are the part of companies which were utilized by Shri S.K. Gupta for providing accommodation entries. In paragraph 26, the Settlement Commission has recorded the finding “It is further observed that the paper books give complete details as to how and when cash was received from the mediators, the cash was deposited in the bank accounts of intermediatories and cheques were issued to the beneficiaries of almost the same amounts”. Thus, after examining the facts, the Settlement Commission has recorded the finding that the cash deposited in the bank account of the intermediary companies was the cash received from mediators on behalf of the beneficiaries who wanted to avail the accommodation entries. It is further observed by the Settlement Commission “It is further noted that there are overwhelming evidence in the impounded material as enclosed by the applicant in the paper book which show that the applicant is only entry provider and he had issued cheques after receiving cash from mediators and deposited the same in the bank account controlled by him”. Thereafter, the Settlement Commission noted “Further, the report of the A.O. that the beneficiaries disclosed Rs.106.33 crores against the cheques received by them from the applicant, further strengthen applicant’s case that he was only entry provider and cash deposited in the bank accounts for issuing cheques are not his money but moneys of the beneficiaries to whom cheques were issued”. Thus, the Settlement Commission has recorded the clear cut finding that Shri S.K. Gupta was only entry provider and for the purpose of providing entries, he utilized the various group companies which included the companies under appeal before us. He used to receive the cash from the beneficiaries who wanted to avail the accommodation entries and after depositing the same in the bank account of various companies, he issued the cheques to the beneficiaries. In view of this finding, the cash deposited in the bank account of various companies which were the conduit companies cannot be said to be unexplained cash credit because the source of cash is from the beneficiary who wanted to avail the accommodation entry and to whom cheques for accommodation entries were issued almost of the similar amount. The order of the Settlement Commission has become final because the Revenue has not challenged the order of the Settlement Commission before the Hon'ble Jurisdictional High Court.
That Hon'ble Jurisdictional High Court has considered the binding nature of the decision of the Settlement Commission in the case of Omaxe Ltd. & Anr. (supra) and held as under:-
“Orders of Settlement Commission are final and conclusive as to matters stated therein. The “matters” necessarily could comprehend disputed questions, items or heads of income, disallowance, etc. or
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variants of it, but always with reference to a particular assessment year. In this case, the Settlement Commission was seized of asst. yr. 2006-07. Whilst exercising its authority over the application, the Commission concededly exercised the vast plenitude of its power or jurisdiction. The petitioner had made a disclosure in its application – as it was duty-bound to. What is in controversy today is that the subsequent event of search and seizure operation conducted in the premises of M and the contention of the Revenue – have thrown light on material that had been suppressed from the Commission. If such is the case, it would be only logical that the Commission itself should be approached for a declaration that its order of 17th March, 2008 is a nullity. Allowing any other authority, even by way of a notice under s. 153C, would be to permit multiple jurisdictions which can result in chaos. After all non-disclosure or suppression of information in respect of what is required to be revealed to the concerned authorities is akin to fraud and if it has a material bearing on the outcome of the assessment, it would most certainly be misrepresentation.”
Thus, Hon'ble Jurisdictional High Court has held that the order of the Settlement Commission is final and conclusive as to the matter stated therein for the assessment year decided by the Settlement Commission. Admittedly, the order of the Settlement Commission in the case of Shri S.K. Gupta is for AY 2008-09 and all the appeals under consideration before us are for AY 2008-09. The CIT(A) denied to follow the order of the Settlement Commission remarking that all the relevant facts might not have been produced before the Settlement Commission. However, learned CIT(A) has not pointed out any specific facts which were not placed before the Settlement Commission. On the other hand, reading of the order of the Settlement Commission shows that all the relevant material including the seized material were duly considered by the Settlement Commission. Moreover, Hon'ble Jurisdictional High Court has held that even if some material has been suppressed from the Settlement Commission, the only course available to the Revenue is to approach the Settlement Commission for declaring its order as nullity. In the case under appeal before us, the order of the Settlement Commission is of 2010. It has not been pointed out by the Revenue that it has approached the Settlement Commission for declaring its order as nullity. Therefore, respectfully following the decision of Hon'ble Jurisdictional High Court, in our opinion, the order of the Settlement Commission is binding on the Income Tax Department and all the logical consequences of the said order are to be given effect to.
We also find that the Additional CIT has issued direction under Section 144A in this regard. The Assessing Officer had asked for the specific direction of the Additional CIT in respect of the group companies which has been mentioned by the Additional CIT in paragraph 2 of his order under Section 144A. After considering all the facts, the Additional Commissioner held “it would be in the best interest of revenue to tax these transactions in the hands of beneficiaries and also Sh. S.K. Gupta, individual without making any additions on this account in the hands of conduit entities”. We may point out that the direction of the Additional CIT is for various years running from AY 2004-05 to 2007-08. However, the ratio of the said direction would continue to be applicable for AY 2008-09 also because the facts remain the same. The Additional CIT has discussed in detail that when the Revenue is taking action in the hands of the beneficiaries, if the addition is made in the case of conduit entities, it will dilute the case of the Department against the beneficiaries.
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The order of the Additional CIT under Section 144A is binding on the Assessing Officer which is evident from Section 144A which reads as under:-
“144A. A Joint Commissioner may, on his own motion or on a reference being made to him by the Assessing Officer or on the application of an assessee, call for and examine the record of any proceeding in which an assessment is pending and, if he considers that, having regard to the nature of the case or the amount involved or for any other reason, it is necessary or expedient so to do, he may issue such directions as he thinks fit for the guidance of the Assessing Officer to enable him to complete the assessment and such directions shall be binding on the Assessing Officer :
Provided that no directions which are prejudicial to the assessee shall be issued before an opportunity is given to the assessee to be heard.
Explanation. – For the purposes of this section no direction as to the lines on which an investigation connected with the assessment should be made, shall be deemed to be a direction prejudicial to the assessee.” (emphasis by underlining supplied by us)
Thus, there is an order of the Settlement Commission as well as the Additional Commissioner of Income Tax under Section 144A holding that Shri S.K. Gupta was providing accommodation entries, he used various companies as conduit for providing the accommodation entries, cash was received through mediators from the persons who wanted to avail the accommodation entries, such cash was deposited in the bank account of the conduit companies and thereafter, cheque of the similar amount was being issued to the beneficiaries (i.e. the person who wanted to avail the accommodation entry) within a day or so. The Assessing Officer himself in the assessment order has accepted these facts. Considering the totality of these facts and the logical consequences of the order of the Settlement Commission as well as of Additional CIT under Section 144A, we have no hesitation to hold that the addition under Section 68 cannot be made in the case of the conduit companies. Therefore, we delete the addition made under Section 68 in the case of all the nine companies, which are admittedly conduit companies of Shri S.K. Gupta.”
It is, therefore, clear that the assessee is one of the 34 conduit companies,
09 out of whom approached the Tribunal in ITA No.3477/Del/2013 and batch of
cases wherein the Tribunal noticed that pursuant to the computation of
undisclosed income by the ITSC in relation to various conduit companies
controlled by Sh.S.K.Gupta, in the hands of Sh. S.K.Gupta himself and held that
since credit entries in the case of conduit companies has been considered in the
hands of Sh.S.K.Gupta by the order of Income Tax Settlement Commission, no
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separate addition u/s 68 is required to me made in the hands of conduit
companies which were merely used for providing accommodation entries. Since
the contents of the assessment order, appellate order and grounds raised before
and considered by the Tribunal in the case of M/s Beriwal Investment Chit Fund
Pvt. Ltd. in ITA No.3481/Del/2013 are similar to the case of the assessee, while
respectfully following the decision of the Co-ordinate Bench of this Tribunal, we
hold that the addition u/s 68 of the Act cannot be made in the case of conduit
companies including the assessee as such while allowing this appeal, we direct the
AO to delete the addition made u/s 68 of the Act.
In the result, the appeal of the assessee is allowed.
The order is pronounced in the open court on 09th November, 2017.
Sd/- Sd/- (N.K.SAINI) (K.N.CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER *Amit Kumar* Date:- 09.11.2017 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI