AKIK MARKETING INDIA PVT LTD,NEW DELHI vs. ITO WARD - 2(1), NEW DELHI

Because the action for initiation of re-assessment proceedings is unreasonable since while recording reasons, there is non-application of mind much less independent application of mind and merely relying upon investigation report by AO, further reasons recorded are vague, lacking tangible material/ reasonable cause and justification.

Because the action is being challenged on facts and law for making addition u/s 68 amounting Rs. 3,78,68000/- on the basis of Hon'ble supreme court in the case of PCIT vs NRA Iron & Steel P Ltd. (2019) 103 taxmann.com 48 whereas per assessee the facts of said case law is distinguishable and additionally in the alternative the quantum thereof too is being disputed.

Because the action is being challenged since the addition of Rs 3,78,68000/- has been made without having provided the cross examination of the person on whose statement or information the proceedings under section 147 were initiated which is in violation of the settled principle of law.

Because the action is being challenged since the addition of Rs 3,78,68,000/- has been made without making proper investigation from the other party whereby assessee has discharged the onus by providing relevant documents 7. Because the action for addition u/s 68 amounting Rs.1,14,00,000/- (out of total addition of Rs. 3,78,68,000/-) is being challenged on facts and law while all parameters for the provision of law required by assessee fulfilled as revealed in findings from acquiescence by silence.

Because the action for addition u/s 68 amounting Rs 15,00,000/- (out of total addition of Rs. 3,78,68,000/-) is being challenged on facts and law as the said amount is a duplicate entry wrongly taken by AO relating to Luster Finlease & Invest P Ltd.

Because the action is being challenged on facts and law for making addition on account of commission paid amounting Rs.7,57,360/- at the rate of 2% of Rs.3,78,68000/- PRAYER For any consequential relief and/or legal claim arising out of this appeal and for any addition, deletion, amendment and modification in the grounds of appeal before the disposal of the same in the interest of substantial justice to the assessee.”

As with regard to ground no. 4, Ld. AR has submitted that Section 151 of the Act clearly stipulates that the Pr.CIT, who is the competent authority to authorize the reassessment notice made available at PB 1 Pg. 16, has to apply his mind and form an opinion. The mere appending of the expression ‘I am satisfied’ says nothing. It is not as if the Pr. CIT has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. In assessee’s case, the exercise appears to have been ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer. Ld. AR relied judgement in Gorika Investment & Export (P) Ltd. Vs ITO (2018) 53 CCH 0168 (Delhi), Hon’ble ITAT, Delhi bench ‘D’ in the case of Virat Credit & Holdings (P) Ltd. in vide order dt. 09.02.2018 (PB 2 Pg. 31-43), Sanjay Kumar vs. ACIT in W.P. (C) No. 999/2022 dated 27.02.2023 (High Court of Delhi) and CIT vs. S. Goyanka Lime & Chemical Ltd. (2016) 237 Taxman 278 (SC)

As with regard to ground no. 6 to 9, touching merits of the case covered under these grounds, it was submitted by Ld. AR that Assessee has received amount in 3 ways and there was one duplicate entry. Ld. AR pointed that Assessee company had received back the loan given in AY2009-10 Rs.1,12,00,000/-. There is alleged accommodation entries provided by Pradeep Kumar Jindal for Rs. 1,37,68,000/- to various companies through Bank A/c in the name of Akik Education Centre (P) Ltd. (Old Name). There is duplicate entry wrongly taken by AO relating to Luster Finlease & Invest P Ltd. for Rs. 15,00,000 and Assessee company received amount as Loan which were repaid/transferred to share capital in succeeding years for Rs. 1,14,00,000/-. Total of same is Rs.3,78,68,000/-.

Ld. AR has provided an explanatory chart of the aforesaid which is being reproduced below for convenience;

Ld. DR has however relied the orders of Ld. Tax authorities below. It was submitted that reasons are well founded. Ld. DR submitted that Ld. AO has mentioned at time of recording of reasons that books were examined and reproduction of every aspect is not necessary. He relied the judgement of Hon’ble Delhi High Court in Experion Developers Pvt. Ltd. Vs. ACIT WP(C) 11302/2019 order dated 13/02/2020 to contend that DIT report has to considered tangible material to form opinion of escapement.

As we appreciate the material before us and the submissions it comes of that in the reasons recorded for reopening the case made available at pages 18- 19 of the paper book, the Ld. AO has relied the information received from the investigation Wing, where cases of the “beneficiaries” who had received accommodation entries from Pradeep Kumar Jindal (entry operator), were to be reopened. Ld. AO observes in the reason for invoking that assessee is one of the “beneficiary companies” which has received entries from the companies and its associates run and controlled by Pradeep Kumar Jindal. Ld. AO has mentioned in the reasons for the reopening:

The learned AO then observe that; “In view of above facts, the assessee company has received amounts of Rs.5,61,85,006/-as accommodation entries in the form of share application money and other forms from Pradeep Kumar Jindal group of companies. But, on examined the return of income filed for the AY 2010-11 by the assessee company, the assessee company has shown to receive unsecured loan from others of Rs. 1,14,00,000/- during the year. After examined the information available on record and return of income filed for AY 2010-11, I have reasons to believe that the income amounting to Rs. 1,14,00,000/- for the AY 2010-11 has escaped assessment and provisions of section 147/148 of the IT Act 1961 are clearly attracted. It is a fit case for initiating proceedings u/s 147/148 of the IT Act 1961 and for issue of notice u/s 148 of the IT Act 1961.”

Now when these observations of the assessing officer in the reasons for reopening are considered it appears that the assessing officer had merely relied the information of the investigation being without actually concluding specifically as to what was the nature of alleged accommodation entry proceeded to reopen the case.

Then assessing officer in the assessment order observes that this investigation Wing report to the extent of Rs. 5,61,85,006/- when verified from the bank statement of the assessee company reflected that assessee received Rs. 3,70,68,000/- only. In this reconciliation the assessing officer found that the investigation Wing report was incorrect in regard to 3 entries which were not credited in the account of assessee, 5 entries were duplicate and there was an entry shown to be received in investigation Wing report from M/s IKA Processors and Distributors Pvt. Ltd. but same was not received from this company in the bank account. Ld. AR has also established that even after reconciliation Ld. AO has added one duplicate entry of Rs. 15,00,000/- from M/s Luster Finlease and Investment Pvt. Ltd..

In fact as appraised to us by Ld. AR, on basis of Investigation Wing report, made available at page no 7-21 of PB, that in the Investigation Wing report a list of 62 companies of Pradeep Kumar Jindal is mentioned and the assessee company is shown to be one of the front and non-descript company of Pradeep Kumar Jindal, with directors name mentioned as Amish Agarwal and Chhavi Agarwal, who are mentioned as new directors in case of transferred company or otherwise dummy directors of Pradeep Kumar Jindal. If that was the case then assessee company is not beneficiary but conduit of Pradeep Kumar Jindal. Ld. AR has also appraised of the a fact, page 1-6 of PB, that in case of Amish Agarwal, Assessee company’s director for the assessment year 2011-12, addition was made treating him as beneficiary of commission of entries provided by Pradeep Kumar Jindal.

This shows that at the stage of recording reasons assessing officer had not shown any indulgence of his own. It appears that the assessing officer had blindfolded himself to rely the investigation Wing report and made the same foundation of recording the reasons for the reopening. The manner in which the 4559/Del/2019 reasons have been recorded make it appear that the assessing officer without actually applying his mind to the information made available by the investigation Wing proceeded to open the cases of all beneficiaries of alleged entries from Pradeep Kumar Jindal group of companies by recording reasons in same template/format and included assessee also as a beneficiary while assessee was a company of Pradeep Kumar Jindal and assessee is providing accommodation entries to the beneficiaries.

The judgement which Ld. DR has relied in the case of Experion Developers Pvt. Ltd. (supra), is distinguishable on fact. In that case the Investigation wing report was with regard to sources of a investing/ parent company located in Singapore were found to be not sufficient to make huge investment and that parent company was found to be conduit. However, here in case in hand the issue was of accommodation entries from numerous companies of one operator and for that assessing officer, while recording reasons the ld. AO should have justified that he has traveled the distance between ‘reasons to suspect’ and ‘Reasons to believe’. Which he failed and Ld. CIT(A) has erroneously sustained the reasons to believe, by very general discussion holding that reason are based on specific information. The information as narrated in the reasons may have been specific qua Pradeep Kumar Jindal, but not as against the assessee.

Consequently, appeal of assessee is allowed and impugned assessment order is quashed. Order pronounced in the open court on 11th January, 2024.