ACIT, CENTRAL CIRCLE-26, DELHI vs. ZED ENTERPRISES P LTD., DELHI

The assessee is a Private Limited company and is engaged in the business of trading. The assessee filed return of income on 28.09.2012 declaring a total income of Rs.1,06,230/-. Thereafter, a search and seizure operation was carried out on the business & residential premises of Anand Jain and Naresh Jain group of cases on 17.12.2015. The case of the assessee company is covered under 153C of the Act, 1961 and satisfaction note were recorded by the AO of searched person on 20.03.2018 and by the AO of the assessee company on 22.03.2018.

The AO has made protective addition of entire credit entries in bank account of Rs.2,85,37,640/- treating as unexplained entries in the hands of the assessee company and also made substantive addition of Rs. 71,344/- on account of unaccounted commission income.The Assessing Officer vide show cause notice dated 10.12.2018, on basis of material seized/ impounded during search alleged that assessee company is only paper/shell company and providing accommodation entries in lieu of cash and required to explain deposits of Rs. 2,85,37,640/- in bank accounts of assessee company.

At the end ,the AO made the protective addition of entire credit entries in bank account of Rs.2,85,37,640/- treating as unexplained entries in the hands of the assessee company and

Aggrieved, the assessee filed appeal before the ld. CIT(A) who deleted the commission charged by the AO.

Aggrieved, the Revenue filed appeal before the Tribunal.

Before us, the ld. DR argued that the action of the ld. CIT(A) deleting the commission wrong on the facts as the assessee company has proved to have given accommodation entries to various people and entities.

On the other hand, the ld. AR argued that it is a fact that accommodation entries have been given by Sh. Anand Jain and Sh. Naresh Jain brothers who have floated various concern including the assessee company through which the entries have been routed through. The commission earned by these two brothers already stands adjudicated determining the total commission earned on the entries given through various entities. Hence, no separate commission can be taxed in the hands of the assessee as the commission already stands taxed in the hands of the entry operators in individual capacity.

Heard the arguments of both the parties and perused the material available on record.

We have examined the ratio of the ld. CIT(A). The ld. CIT(A) held that the AO in the assessment order has claimed to 5 to 212/Del/2022 CO Nos. 181 to 185/Del/2022 M/s Zed Enterprises(P) Ltd. have identified the names of beneficiaries and already disseminated the information to the assessing officers of the beneficiaries and hence the credits received by the appellant cannot be treated as unexplained credit in its hands since, the said transactions are mere arrangement of funds/routing of unaccounted income of the beneficiaries to whom the said funds were transferred through the bank of the appellant company in lieu of commission. The ld. CIT(A) has also made note of the beneficiaries of the entries given by the assessee company. For the sake of ready reference, a few entries and the beneficiaries are reproduced below:

From the above, the ld. CIT(A) held that the assessee company has received funds from various concerns as mentioned above and thereafter amounts were transferred to the above mentioned companies/concerns immediately, thus the appellant company is not beneficiary company. The ld. CIT(A) also obtained the remand report from the AO and held that the AO has verified the fund flow statement depicting the source of funds and utilization of the same for payments to beneficiaries submitted by the assessee. The ld. CIT(A) held that it was found which established that the Sh. Anand Jain and Sh. Naresh Kumar Jain were operating bank accounts in the names of various concerns/companies through which accommodation entries were being provided and the appellant company was one of such shell concerns. Further the beneficiaries of such accommodation entries were also identified and information to their respective AOs was also disseminated as mentioned in the assessment order as well as the remand report.

Having observed so, the ld. CIT(A) held that as far as charging of commission is concerned in the case of the assessee, it has been held by the AO in the assessment order

Since, the commission already stands taxed in the hands of the entry operators in their individual capacity, no separate commission can be charged in the hands of the pass through/ companies floated by the entry operators. As the assessee is found to be one of such pass-through entity, we decline to interfere with the order of the ld. CIT(A) in deleting the commission charged.

Cross Objections are not pressed.

In the result, the appeals of the Revenue as well as the Cross Objections of the assessee are dismissed. Order Pronounced in the Open Court on 09/01/2024.