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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’, NEW DELHI
Before: SHRI N. K. SAINI
ORDER This is an appeal by the assessee against the order dated 01.02.2017 of ld. CIT (A)-XXXIII, New Delhi.
2. Following grounds have been raised by the assessee in this appeal:
1. That the order of the Ld. CIT (A) dated 29.01.2014 is bad in law and on facts. 2(a). That on the facts and in the circumstances of the case the Ld. CIT (A) is not justified in confirming the addition of Rs.15,01,200/- made u/s 68 of the Income-tax Act, 1961 representing deposits in appellant's bank accounts received from various intermediaries operated by Shri S.K. Gupta to provide accommodation entries to various beneficiaries against cash received from them.
Anila Industries Ltd. 2(b). That the appellant company being one of 32 conduit companies operated by Shri S.K. Gupta to provide bogus capital to the beneficiaries against cash received from them, the addition made by the Ld. AO and sustained by Ld. CIT (A) is unjustified and uncalled for, as the laptop impounded during the survey u/s 133A conducted on 20.11.2007 at the business premises of Shri S.K. Gupta contained complete details of intermediaries, beneficiaries, cash received and cheque issued etc. which are presumed to be correct u/s 292C of the I.T. Act. 2(c). That the ld. CIT (A) has erred in law by failing to appreciate the fact that the complete list of beneficiaries found in the seized records and available with the Department were filed during the course of assessment proceedings. The ld. CIT (A) has wrongly observed that the list of beneficiaries did not exist. 2(d). That the ld. CIT (A) has ignored the judgment of the jurisdictional High Court and the Tribunals squarely on the issue even though the same were cited and form part of the written statements reproduced by the ld. CIT (A) in the assessment order. 2(e) That the ld. CIT (A) has erred in ignoring the settled legal principle that the same amount cannot be taxed doubly unless the loss or profit and the nature of the same changes. In the case of the appellant the amount received by it has been taxed and the same amount has admittedly been taxed in the hands of the beneficiaries who were the actual real owners of the said sum. 2(f). That the Id. CIT (A) has erred in law and on facts in making the addition on conjectures and surmises and for reasons unwarranted in law. The ld. CIT (A) has stated the Anila Industries Ltd. addition should be made in the hands of the appellant company so that the beneficiaries should not be able to state that the money does not belong to them. 2(g). That the Id. CIT (A) has erred in ignoring the fact that income can be taxed only if the Act so provides and the taxability of income cannot be determined on the basis of the subjective feeling and the attitude of the appellate authority.
3. That the Ld. CIT (A) has further erred in not accepting the findings given in the order u/s 245(4) dated 22.6.2012 passed by Hon'ble Settlement Commission in the case of Shri S.K. Gupta as well as directions of the Addl. CIT u/s 144A dated 23.11.2011 for A. Y. 2004-05 directing the Ld. AO not to make addition in the hands of conduit companies including appellant company.
4. That the CIT (A) has erred in issuing enhancement notice u/s 251 (2) and directing the AO to enhance income without appreciating the appellant's reply dated 31.01.2014 filed in response to the enhancement notice and also ignoring the fact that the same tantamount to double addition of the same amount.
5. That the CIT (A) has erred in not allowing relief on the following issues raised as additional ground having effect of income being taxed twice: a) Rs. 15,00,000/- twice added in the hands of the appellant as well as in the hands of the various other conduit companies from whom the amounts were received through account payee cheques details which are given in paper book.
Anila Industries Ltd. b) Cash deposited into bank account out of the cash available with the company 6. That the appellant craves leave to add, alter, amend, substitute, delete and modify any or all the grounds of appeal
, which are without prejudice to one another, before or at the time of hearing of the appeal.”
3. From the aforesaid grounds, it is gathered that the grievance of the assessee relates to the sustenance of addition of Rs.15,01,200/- made by the AO under section 68 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’).
Facts of the case in brief are that the AO issued notice u/s 142 (1) of the Act on 23.02.2009 asking the assessee to file its return of income for the Assessment Year 2008-09 as the assessee had not filed its return of income. In response, the assessee filed the return of income on 09.03.2009 declaring total income at nil. During the course of assessment proceedings, AO noticed that the assessee is maintaining bank account with Syndicate Bank, Barakhamba Road, New Delhi wherein a sum of Rs.15,01,200/- was deposited. The AO asked the assessee to explain the source of deposits in its bank account including by cash / cheque / transfer etc. indicating the name and address of the depositor/creditor and also to prove the creditworthiness of Anila Industries Ltd. the creditors and the genuineness of the transactions u/s 68 of the Act. In response, the assessee furnished copy of its bank account from its books of accounts. The AO observed that the assessee did not provide the complete name and PAN or address whatsoever of the persons from whom it had received various amounts in cash / otherwise during the FY 2007-08. He also observed that the burden was on the assessee to prove the source of receipt in respect of credit entries in his books of account and where nature of source of receipt could not be satisfactorily explained by the assessee, it was open to the Revenue to hold that it was income of the assessee. The reliance was placed on the following cases: � Roshan Di Hatti vs. CIT – (1977) 107 ITR 938 � Kale Khan Mohammad Hanif vs. CIT – (1963) 50 ITR 1 � Sumati Dayal vs. CIT – (1995) 80 Taxman 89 / 214 ITR 801 � CIT vs. R.S. Rathore – (1995) 212 ITR 309 � Addl. CIT vs. Bahri Bros. Pvt. Ltd. – (1985) 154 ITR 244; and � Nemi Chand Kothari vs. CIT – 136 Taxman 213 (Gauwahati). He also observed that various persons / concerns of S.K. Gupta Group had been arranged alphabetically and all the unexplained deposits in the bank accounts of the first Anila Industries Ltd. concern after giving credit of inter-bank transfers and returned cheques are being added in its hands and the assessee had not received any amount from any of the persons / concerns mentioned in the said list. AO, however, treated the amount of Rs.15,01,200/- as deemed income of the assessee u/s 68 of the Act and added the same to the income of the assessee. The AO, although pointed out that a prorata amount of Rs.4,68,162/- already taxed in the hands of S.K. Gupta was deducted from the total unexplained deposits of Rs.15,01,200/- in the various bank accounts of the assessee but he assessed the said amount in the hands of the assessee on protected basis.
5. Being aggrieved, the assessee carried the matter to the ld. CIT (A) and submitted as under: “A survey U/s 133A of the Act was conducted by the Investigation Wing of the Department on one Sh. S.K.Gupta on 20.11.2007. During the course of survey, a computer (Laptop) was seized wherein complete details of transactions undertaken by Sh. S.K. Gupta and other from August, 2003 to November, 2007 were found recorded in the cash book, ledger and other accounts appearing therein. The transactions contained in the Laptop gave complete account of the accommodation entries that had been provided by Sh. S. K. Gupta and others to the beneficiaries by using the assessee company and 32 other Anila Industries Ltd. companies and two individuals as conduits. The list of the said companies and individuals is given as under:- S. No. Name of Companies 1. AGM Holding Ltd. 2. Advantage Software Pvt. Ltd. 3. Anila Industries Ltd. 4. Anjali Gupta 5. Belief Chits Pvt. Ltd.
6. Beriwal Investments & Chits funds 7. Central Gum & Chemicals Industries 8. Champ Finvest Pvt. Ltd. 9. Chander Prabhu Financial Services Ltd. 10. Cubic Commercial Resources 11. Dhamaka Trading & Constructions 12. Falcon Freight (P) Ltd. 13. Galaxy Mines & Stones Pvt. Ltd 14. Giriasho Company Pvt. Ltd. 15. IDS Investment Pvt. Ltd. 16. KSA Chits (P) Ltd. 17. Mitsu Securities Management (P) Ltd. 18. Namrata Marketing Pvt. Ltd. 19. New Star Information Systems (I) Ltd. 20. Omni Farms Pvt. Ltd. 21. Optimum Credits Ltd. 22. Passion Chits Co. Pvt. Ltd. 23. Rapid Packaging Ltd. 24. S.J. Securities Pvt. Ltd. 25. S.K. Gupta 26. Safe N Sure Hygiene Products Pvt. Ltd. 27. Shikhar Fincap Pvt. Ltd. 28. Sino Credits & Leasing Ltd. 29. V.A. Foods Pvt. Ltd.
Anila Industries Ltd.
Vasudeva Farms Pvt. Ltd.
Viagra Trading Co. Pvt. Ltd.
Vijay Conductors (I) Ltd.
Visrut Marketing Pvt. Ltd.
Zenith Estates Ltd.
Your goods self will appreciate that the Laptop was found during the course of search and its contents therefore have to be taken to be a true and correct representation of the affairs of Sh. S.K. Gupta and the assessee companies in as much as the same have been made a part of the survey report in the case of the concerns and Sh. S.K. Gupta. It is trite that Laptop and its contents found during the course of survey constitute documents which have a high evidentiary value in the eyes of law. The Laptop is a document which can be regarded as a core document containing a graphic account of the accommodation as a core document containing a graphic account of the accommodation entries provided by Sh. S.K. Gupta and even the commission earned by him in respect of the same. The modus operandi of proving accommodation entries detailed graphically in the seized Laptop is briefly given as under:- (a) There are accounts of various intermediaries whose names have been mentioned in the Laptop. In the accounts of the intermediaries, the beneficiaries from whom cash had been arranged by intermediaries, has been given. Hence, the name of the beneficiaries, dates and amounts given by them is mentioned in the accounts of the intermediaries.
Anila Industries Ltd. (b) The cash received from the beneficiaries appearing in the accounts of the intermediates as above, has been deposited in the cash book appearing in the seized Laptop. (c) From the cash book, the money has been deposited in the various bank accounts of individual / proprietorships. The account of each of the individual / proprietorship features in the Laptop. From the accounts of the individuals /proprietorship, the money is transferred by cheques to the account of the assessee company, which is one of the 32 companies whose assessment is being done by ACIT, central Range -22, New Delhi. (d) From the assessee companies, cheque are issued to the beneficiaries whose name appears in the Laptop. It is further stated that Sh. S.K. Gupta, in any case, has given complete list of beneficiaries to whom all the accommodation entries have been given. (e) It is reiterated that the entire modus operandi mentioned above appears vividly in the Laptop seized during the course of survey on 20.11.2007. (f) It is further submitted that the companies are at best conduits for giving accommodation entries to the beneficiaries and the same conduits have been used by Sh. S.K. Gupta in the process of carrying out his business.
Anila Industries Ltd.
It is further submitted that the deposits in the bank account of the assessee companies were on account of the following five reasons:- (i) Deposits received by cheques from individuals/ proprietors in whose account cash was deposited. (ii) Cheques received from beneficiaries to whom cheques had been issued earlier against cash received from them. (iii) Transfer of cheques from one company to the other out of the 32 companies, (iv) The cheques received against interest / consultancy charges etc. which have already been shown in the profit & Loss Account. (v) Cash deposited out of cash in hand available with the assessee company, All the aforesaid types of deposits in the bank and their source etc, feature in the seized Laptop where every entry referred to above has been recorded and its movement from one account to other is also reflected therein.
4. It is, therefore, prayed that the assessee company is merely a conduit for providing entries to the beneficiaries against cash given by them. The cash is deposited in the various bank accounts. And as already submitted. Cheques are issued through these assessee companies to the ultimate beneficiaries. Hence, it is respectfully prayed that Anila Industries Ltd. no income other than that disclosed in the Profit & Loss Account / return of income incures to the assessee company. All the deposits in the bank account which stands fully explained.
Kind attention is invited to the judgment of the Hon'ble Delhi High Court in the case of Manoj Aggarwal wherein only commission income in respect of accommodation entries provided by the assessee has been held to be taxable.
We also place on record the decision of the Mumbai Tribunal dated 28.03.2008 in the case of Gold Star Finvest P. Ltd. V. ITO, Mumbai in wherein the Hon'ble Tribunal has deleted the deposits appearing in the bank account of the company and taxed the companies only in respect of the commission earned @ 0.15%. The Mumbai Tribunal has followed various other decisions across the country before passing this order.
It is respectfully submitted that the assessee - company was scrutinized U/s 143(3) read with section 147 of the Act in respect on the A.Y. 2004- 05 by Asstt. Commissioner of Income-Tax, Central, Range - 22, New Delhi. The facts in respect of said assessment year were identical to the facts for A.Y. 2008-09. The assessee filed various details and evidence to establish the fact that it was merely a conduit for providing accommodation entries to the beneficiaries who had deposited the cash in the account of Sh. S.K. Gupta and a number of Anila Industries Ltd. individuals. The Assessing Officer made a reference to the Additional CIT, Central, Range - 5, New Delhi U/s 144A of the Act and furnished our submissions and details filed during the course of assessment proceedings to him. The Additional CIT, Central Range-5, New Delhi, after considering the submissions and the material on record opined that the said company being merely a pass-through/ conduit, no income on account of deposits in the bank account can be attributed to it. He, therefore, directed the Assessing Officer not to make any addition in the hands of the company and on the basis of the said direction, the Assessing Officer passed a detailed order discussing the facts of the case and the submission made by the assessee and, thereafter, the directions of the Additional CIT, Central Range -5, New Delhi. It is respectfully submitted that the facts of the case for A.Y. 2007-08 are identical to the facts for A. Y, 2004-05 which has been assessed at nil income pursuant to the direction of Ld. Additional CIT, Central, Range -5, New Delhi. In view of the aforesaid, it is submitted that since the Department has itself in the subsequent assessment, held that no income can be attributed to the company, it is prayed that the returned income of the assessee for A. Y. 2007-08 may be accepted on similar lines. It is further submitted that the learned AO, while passing the assessment order, made certain additions aggregating to INR 1501200.00 as unexplained income which represented all the Anila Industries Ltd. credits in the bank accounts maintained by the appellant during the subject year. The learned AO contended that the appellant had not been able to establish the identity, genuineness and creditworthiness of the parties from whom the credit has been made. However, the appellant had disputed the entire addition in an appeal filed before your office. Out of the said amount of Rs. 1501200.00. The amount received back from beneficiaries / debtors which represent opening balance and featured in the laptop sized by the department, the details are as under.” Amount received from beneficiaries 1500000.00 Cheque dishonored 500.00
6. The assessee further submitted before the ld. CIT(A) as under: “13. Additional Evidence to be placed on record: In view of the aforesaid circumstances, it is prayed that the following additional evidence, may kindly be admitted: (i) Order of the Ld. AO for A.Y. 2004-05. (ii) Notice issued U/s 148 of the Act to the Assessee. (iii) Notice issued U/s 148 of the Act to Sh. S.K. Gupta. (iv) Amount received back from Debtors / beneficiaries featuring in the laptop seized from Sh. S.K. Gupta. a. Particular of amount received.
Anila Industries Ltd. b. Copies of ledger, cash book etc extracted from laptop of Sh. S.K. Gupta. c. Confirmation from parties. (v) Intercompany transfer (within the 33 companies) a. Particular of amount. b. Confirmation of companies. (vi) Loans given during the year and received back- not forming part of the laptop seized. a. Particular of the amount. b. Confirmation from the companies to whom loan given. (vii) The Cheques Dishonored There are cheques of Rs. 500.00 deposited in the bank accounts of the company, which later on has been received back as "dishonored" for one reason or the other. The learned AO has added the same to the returned income of the appellant. However, as the learned AO had taxed the entire credits as appearing in the bank accounts of the appellant and added the same to the returned income of the appellant, the same had an effect of the income being taxed twice. (x) Cash deposited in the bank account The appellant company had deposited the cash, into his bank account out of cash available with the company. However, as the learned AO had Anila Industries Ltd. taxed the entire credits as appearing the bank accounts of the appellant and added the same to the returned income of the appellant, the same had an effect of the income being taxed twice. Ld. AR has made written submission for the applicability of Rule 46A as under.
Legal Position - Rule 46A of the Income Tax Rules 1962 As per the said rule, the appellant is entitled to produce additional evidence i.e. other than produced before the AO in following cases: • The AO has refused to admit which ought to have been admitted. • The appellant was prevented by sufficient cause from producing evidence, which he was called upon to produce by the AO. • The appellant .was prevented by sufficient cause from producing the evidence before the AO, which is relevant to the grounds in appeal; • The AO has made order without giving sufficient opportunity to the appellant to adduce evidence relevant to any grounds in appeal.
Applicability of Exceptions listed in Rule 46A of facts of the instant case: The Appellant wishes to bring to your kind attention the fact that were numerous changes in the Assessing Officer and the actual proceedings commended only at the fag end of the year i.e. in the month of November 2010. It was the first time in November, when the Appellant received a Anila Industries Ltd. questionnaire from the Assessing Officer, seeking confirmation in respect of all credits appearing in the bank account. This was a monumental task which was going to require a lot of time and efforts of the appellant. The appellant in turn was completely dependent on two accountants who were assisting him in maintaining the accounts and other related financial matters. It may be pertinent to mention that the appellant was having great difficulty with the accountants who had already resigned from the company at that time and had agreed to stayon for a month or so after great persistence. Under these constraints i.e. paucity of time along with inadequate help form the accountants, the appellant found it extremely difficult to comply with the monumental task assigned by the learned AO. Hence the appellant was prevented by the sufficient cause from making the submissions on queries raised by the Assessing Officer. Thus, the case of the appellant clearly falls under clauses (b) of Rule 46A(1) of the Rules. It is further submitted that it is incumbent upon the Assessing Officer to issue a show cause notice before making such large additions to the income of the appellant. Your honour will appreciate that the entire credits in the bank account has been added as if, the company was only bringing into account its undisclosed income and doing nothing else. In the absence of show cause notice, the appellant could not foresee the addition that the Assessing Officer was likely to make. It is the cardinal principal of natural justice that a person must be put to notice before any addition to income is made in hands. The principles of audi alteram Anila Industries Ltd. partem have been given a go bye by the learned Assessing Officer. Non- furnishing of show cause notice clearly shows that inadequate opportunity was afforded to the appellant by the Assessing Officer and clause (d) Rule 46A(1) has been invoked.”
7. The reliance was placed on the following case laws: � Babu Lal Jain 176 ITR 411 (M.P.) � Dhakeswari Cotton Mills Ltd. Vs CIT 26 ITR 775 (WB) � J.T. (India) Exports Vs Union of India 177 CTR 108 (Del.) � Sona Builders Vs Union of India & Others 251 ITR 197 (SC) 8. The ld. CIT(A) forwarded the additional evidences furnished by the assessee to the AO who vide his remand report dated 07.12.2012 requested not to admit the additional evidences. The comment of the AO has been incorporated by the ld. CIT(A) in para 4.2.2 of the impugned order, for the cost of repetition, the same are not reproduced herein.
The assessee in its rejoinder dated 29.01.2014 submitted to the ld. CIT(A) as under: “that additions on identical facts were made by the assessing officer in the case of 11 companies which are in appeal before your honour.
Anila Industries Ltd. (i) At the very inception, it is submitted that after filing of our application for additional evidence under Rule 46A on 18.4.2012, the order of the Hon'ble Settlement Commission in the case of Shri S. K. Gupta was received in respect of the impugned assessment year. The said order has been accepted by the department inasmuch as no appeal has been filed against it and therefore the facts and the legal position adjudicated in the said order by a superior judicial authority is binding. It has been held that the cash belonged to beneficiaries whose names features in the laptop of Shri S. K. .Gupta seized during the course of survey by the department on 20.11.2007. Cheques from the proprietorship accounts used be issued in favor of these intermediary companies one of which is SINO CREDITS AND LEASING LTD. and the said company in turn would either issue cheques to the beneficiaries or issue cheques to other intermediaries companies which would in turn issue cheques to the beneficiaries. Hence, as per order of the Hon'ble Settlement Commission all 32 intermediaries companies were mere conduits for providing accommodation entries to the beneficiaries and the amounts were to be taxed in the hands of the beneficiaries. List of beneficiaries was given by Shri S. K. Gupta to the Hon'ble Settlement Commission and those beneficiaries to the best of our knowledge have already been assessed to tax. Hence, according to the Hon'ble Settlement Commission all the cheques issued by these intermediaries company to the beneficiaries can be said to be belonging to the beneficiaries and therefore Shri S. K. Gupta was to be taxed only in respect of the commission on the Anila Industries Ltd. accommodation entries which was computed by the Hon'ble Settlement Commission at Rs.1,22,93,025/-. (ii) Hence the irrefutable conclusion is that the monies received by the intermediary companies does not belong to them; cannot be taxed under Section 68 and the said money has to be assessed to tax in the hands of beneficiaries. The submissions made by Shri S. K. Gupta before the Settlement Commission explaining the modus operandi are enclosed herewith as Annexure-2. The order of the Hon'ble Settlement Commission at page 6 clearly states that the said 32 companies have been used as intermediaries/conduit and the money received by them does not belong to them. (iii) Your honour this order of the Hon'ble Settlement Commission constitutes contemporary evidence and a binding precedent and the same is available with the assessing officer. We fail to understand why the assessing officer has not considered the decision of the Hon'ble Settlement Commission in respect of the said assessment year i.e. 2008-09 and has given his remand report without adverting to the same. (iv) It is, therefore, submitted that the remand report given by the assessing officer is incorrect and needs to be reconsidered and redone after considering and following the order of the Hon'ble Settlement Commission in respect of the said assessment year. Your honour, the finding of the Hon'ble Settlement Commission on facts is final and cannot be challenged before any court of law. All the findings contained therein clearly state that Anila Industries Ltd. the 32 companies are intermediaries and no deposit received by it belongs to it. Hence, we implore by your honour to refer the matter back to the Assessing Officer for reconsideration after following the findings of fact and law of the Hon'ble Settlement Commission. 2. (i) Another serious deficiency that we find is the non consideration of the fact that under Section 144A of the Act, the Ld. Addl. Commissioner of Income Tax. Range V, had held these 32 companies to be conduits for providing entries to the beneficiaries. In respect of assessment year 2004- 05, on the instructions of the Ld. Addl. Commissioner of Income Tax the then assessing officer had not made any addition on account of deposits in the bank accounts of these intermediaries companies by holding that the same were merely pass through / conduits and therefore Sec. 68 is not applicable. The assessing officer has studiously kept quite on this issue although the same was raised in our application under Section 46A dated 6.3.2012. The assessing officer was enjoined in law to comment as to how and why the same decision taken by the Addl. Commissioner of Income tax under Section 144A does not apply to the facts of the case for assessment year 2008-09. According to us, the facts are identical and therefore the same decision taken under Section 144A has to be taken for this year as well. (ii) Your honour the assessing officer cannot be permitted to take different stand for different assessment years on the same issue. The facts and the legal position is the same as that was for the Anila Industries Ltd. assessment year 2004-05. Only the amounts are different. Hence, we request you to direct the assessing officer to consider whether the facts of the case before your honour are the same as were for assessment year 2008-09 and whether the same directions under Sec. 144A would apply to the assesses company as well.
Amount Received from Beneficiary The assessing officer has also made addition on account of amount received from Beneficiary,. It is very difficult and is not a general practice in any of the trade to collect proof of source of funds, and bank statements at the time of trade of business. This is also a bona-fide mistake apparent from the records. Please do consider the above facts while framing the Assessing Order. (Amounting to Rs. 1500000/-) 2. Additions on account of cheque dishonored The cheque dishonored were of the sum of Rs. 500/, whereas the assessing office has not given any credit. The remaining amount of Rs 500 to be deleted which is a bona-fide mistake apparently from the record. The details are enclosed. Please do consider the above facts while framing the Assessing Order. (Amounting to Rs. 500/-) 3. Statement of cash flow Sir, we are enclosing herewith a chart showing movements of funds, which clearly shows that the Anila Industries Ltd. funds received in Anila Industries. Ltd has already been taxed either in the hands of the company or otherwise. So it should not be added thrice. Please do consider the above facts while framing the Assessing Order. (Amounting to Rs. 15,00,000/-) 4. Addition on protective basis The additions made on account of protective basis, is likely to be deleted as the case of S.K Gupta for the A.Y 2008-2009 has already been settled by order of Honorable Settlement commission Dated 22.06.2012. The taxes due has already been paid. Please do consider the above facts while framing the Assessing Order. (Amounting to Rs.468162/-) 10. The ld. CIT(A) after considering the submissions of the assessee and the remand report of the AO admitted the additional evidences by observing in para 4.2.4 of the impugned order as under: “4.2.4 I have considered the nature of additional evidence & perused the assessment order. As during the assessment proceeding, specific opportunity was not granted, these evidences are admitted u/r 46A. The merit of these evidences has already been examined by the assessing officer. The same would be considered while giving findings.”
Anila Industries Ltd.
11. The ld. CIT(A) confirmed the addition made by the AO by observing in para 4.3.1 of the impugned order which read as under: “4.3.1 The main arguments of Ld. AR is that the appellant company is only a conduit amongst 32 companies operated by Sh. S.K. Gupta to provide bogus capital to the beneficiaries by taking cash from the beneficiaries. Ld, AR relied on the direction u/s 144A issued by Additional CIT, Central Range-5, New Delhi for A.Y. 2004-05 where he has directed the Assessing officer not to make any addition in respect - of these conduit companies and he has directed the Assessing Officer to make addition in the hands of Sh. S.K. Gupta for entire cash received and in the hands of beneficiaries from whom alleged cash has been received. The direction of the additional commission of income tax, Central Range V, New Delhi has been compiled by the Assessing Officer for the said assessment year. I have examined the merits of the direction u/s 144A issued by Addl. CIT, Central Range-V, New Delhi dt. 23.11.2011. Additional CIT, Central Range- V, New Delhi has nowhere in his findings has stated that the names of the beneficiary are contained in the seized material. He has given an instance of the mediator who has brought cash to Sh. S.K. Gupta for conversion from cash to cheque. Therefore, the claim of Ld. AR that the detail of beneficiaries was contained in the seized material does not appear to be truth. In absence of mention of the beneficiaries who has brought cash in impounded document, source of cash cannot be Anila Industries Ltd. explained on the basis of impounded materials. Further, nowhere, the beneficiaries have owned up the cash. Addl. CIT, Central Range-5, New Delhi in his direction has stated that since Sh. S.K. Gupta has not been able to produce the mediators/beneficiaries, therefore, the cash is not owned by these mediators and beneficiaries, therefore, the entire cash should be assessed in the hands of Sh. S.K. Gupta and the beneficiaries and no addition should be made in the hands of conduit companies. Addl. CIT. has opined in his report that by making addition in the hands of the conduit companies will jeopardize the case of revenue to tax the same in the hands of Sh. S.K. Gupta and beneficiaries. I do not agree with this view. In fact, it may be mentioned that if in the hands of these conduit companies, no addition u/s 68 is made, then the entire balance sheet of these company gets approval of the Assessing Officer that the credits are genuine. Therefore, I apprehend, such step will help the beneficiary companies who have taken entries to get away from taxation net as only these conduit companies have provided cheque to the beneficiary companies. So, creditors in the hand of these beneficiary companies are these so called conduit companies only. Therefore, the giving clean cheat to these so called conduit companies will create evidence that the credits in the books of accounts of the beneficiaries are explained. Probably, the Additional commissioner of Income Tax, while issuing direction u/s 144A has missed this aspect. In fact nowhere, Addl.CIT has given the -findings that the credits in the books of accounts of the conduit company are explained Addl.CIT has in fact strengthened the view that the Anila Industries Ltd. cash credits in the hands of these companies are bogus. The Ld. AR himself accepts that these are conduit companies. Therefore, admittedly the credits in the books of accounts, of the appellant company are fictitious. Then, the appellant should have recasted its books of accounts and submitted alongwith the return of income. It is surprising to note that the survey action in the case of Sh. S.K. Gupta took place on 20.11.2007 when the book of account of the appellant company was not even closed for relevant financial year 2007-08. Knowing very well that survey action u/s 133A of I.T. Act, has taken place, the modus operandi of bogus credit has come to the notice of Income Tax Department, the appellant has chooses to stick to its fabricated books of accounts and closed the books of account and filed its return of Income for A.Y. 2008-09 much after the survey action. In fact, it is surprising that as additional evidence, Ld. AR has given confirmation from the beneficiaries for money received for such beneficiaries to explain the source of credit in the books of accounts. Therefore, the appellant company at one hand is pretending that it is a conch.., therefore, even though there are credits in its books of account, section 68 does not apply and on other hand, it is trying to prove entries contained in the books of accounts. These stands in my view are contradictory to each other. Second main argument of Ld. AR in support of proving itself as conduit, the Ld. AR is relying on the order of the Settlement Commission. I have perused the order of Hon'ble Settlement Anila Industries Ltd. Commission. The Hon'ble Settlement Commission has quantified the income of Sh. S.K. Gupta as some percentage of total turnovers. Of course, in its order, Hon'ble commission has mentioned that various companies including appellant company is used as conduit for routing the entries. However, before settlement commission, entire facts that the appellant company is maintaining its books of account on the basis of such entries might not be available. Hon'ble settlement commission has not given any comments for credit in the books of accounts of the appellant company which is not changed after admission that it is a conduit company. Therefore, in no way, the order of settlement commission support the in applicability of section 68 in appellant's 'case, as the order of Hon'ble Settlement Commission has only qualified same commission income in the hands of Sh. S.K. Gupta. Now coming to modus operandi, the cash are deposited -in various bank accounts called proprietary concerns. These proprietary bank accounts are in the name of various other persons, having separate PAN etc & sometimes filing return of income also. Their affidavit that they are benamidars of Sh. S.K. Gupta does not prove the case that they are benamidars, as PAN of these persons have not been surrendered neither their return of Income have been revised. Additional evidence filed by the Ld. AR during the appellate proceeding does not help the appellant.
Anila Industries Ltd. In additional evidence, Ld. AR has sought reworking of credit U/s 68 on these counts:- (i) Inter transaction amongst 32 conduit companies should be excluded. The assessing officer has verified the figure. However, in my view, no relief can be given for addition U/s 68 of I.T. Act, for inter company transfer. I will be dealing this issue in next paragraph of the order. (ii) Ld. AR has claimed that some of the amount has been received from its debtors. Once the debtors itself is bogus, then how the amount received from such bogus debtor can be treated as genuine. No benefit can be given for quantifying addition U/s 68 on the basis. (iii) The next claim of Ld.AR is on account of dishonored cheque. This relief if any will be discussed in subsequent paragraph of additional ground of appeal. (iv) Last claim of Ld.AR is the source of some of the deposit in bank accounts is cash available from cash book. The assessing officer has doubted the authenticity of such cash book. Therefore, the appellant is not entitled to get the relief on this score also. In view of the above, addition of entire deposit in its bank account is liable to be sustained U/s 68 of I.T. Act, as the source, of these cash credits are not genuine, credit worthiness of the creditors are not only doubtful but proven to be uncredit worthy.
Anila Industries Ltd. Taking entire facts & circumstances of the case, 1 hereby confirm the entire addition of Rs.15,01,200/- except the relief on account of additional ground of appeal
. This ground of appeal is therefore dismissed.”
12. Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee had not received any loan during the year under consideration. A reference was made to page no. 7 of the assessee’s paper book which is the copy of the balance sheet as on 31.03.2008. On the basis of aforesaid document, it was stated that the unsecured loan during the year under consideration and the earlier year were at Nil. It was further submitted that the opening balance in the account of M/s USG Buildwell Pvt. Ltd. was coming from 01.04.2006 and the amount was received back on 27.09.2007. A reference was also made to page no. 18 of the assessee’s paper book. It was stated that the AO himself admitted in para 3.7 of the assessment order that the assessee did not received any amount from the persons/concerns of. S.K. Gupta Group as the name of the assessee company was not mentioned in their list. It was emphasized that the assessee did not raise any fresh loans during the year under consideration or had deposits or sundry creditors or any fresh share application Anila Industries Ltd. money which could have been received during the year under consideration. Therefore, the addition made by the AO and sustained by the ld. CIT(A) was not justified. Particularly when, nothing was brought on record that the assessee has raised fresh loans of Rs.15,00,000/- during the year under consideration or the said amount was raised from the group concerns of Sh. S.K. Gupta.
In his rival submissions the ld. DR supported the orders of the authorities below.
I have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it appears that the AO made the addition of Rs.15,01,200/- by presuming that the assessee had received accommodation entries from the concern of Sh. S.K. Gupta. On the contrary, the contention of the assessee is that no fresh loan was received during the year under consideration neither there were fresh creditors or depositors. The said contention of the assessee appears to be correct which is evident from the copy of balance sheet for the year ending on 31.03.2008 placed at page no. 3 of the assessee’s paper book in which it is clearly mentioned that there was no loan in the year under consideration or the Anila Industries Ltd. earlier year. In the instant case, it is also noticed that the assessee had given advances to M/s USG Buildwell Pvt. Ltd. and an advance of Rs.15,00,000/- was brought forward since 01.04.2006 which is evident from page no. 7 of the assessee’s paper book. The said amount was received back vide Cheque No. 072705002 on 27.09.2007 which is evident from page no. 18 of the assessee’s paper book which is the copy of bank account maintained with Syndicate Bank, Barakhamba Road, New Delhi. I, therefore, considering the totality of the facts, am of the considered view that the amount received by the assessee from M/s USG Buildwell Pvt. Ltd. was not an accommodation entry rather it was the receipt against the old balance outstanding in the name of said company. Therefore, the addition made by the AO and sustained by the ld. CIT(A) was not justified.
As regards to the remaining amount of Rs.1,200/- is concerned, it is noticed from the copy of bank account placed at page no. 18 that an amount of Rs.199.75 represented brought forward balance as on 01.04.2007, Rs.500/- debited on 19.04.2007 was reversed on the same date and the another amount of Rs.500/- was cash deposited. Therefore, the addition of Rs.1,200/- made by the AO was also not justified. Accordingly, the same is Anila Industries Ltd. deleted. In view of the aforesaid discussion, the addition of Rs.15,01,200/- (Rs.15,00,000/- + Rs.1,200/-) made by the AO and sustained by the ld. CIT(A) is deleted.
In the result, the appeal of the assessee is allowed. (Order Pronounced in the Open Court on 26/04/2017)