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Income Tax Appellate Tribunal, DELHI BENCH ‘E’ : NEW DELHI
Before: SHRI L.P. SAHU & SHRI KULDIP SINGH
PER KULDIP SINGH, JUDICIAL MEMBER :
The Appellant, M/s. M.S. Capital & Management Services Ltd. (hereinafter referred to as ‘the assessee’) by filing the present appeal sought to set aside the impugned order dated 05.01.2011 passed by the Commissioner of Income-tax (Appeals)-VIII, New Delhi qua the assessment year 2002-03 on the grounds inter alia that :-
“1. On the facts and circumstances of the case and in law the CIT (A) was wrong and unjustified in confirming the addition of Rs.28 lacs received from M/s Finorg Chemicals Ltd. on account of explained sale of shares.
2. On the facts and circumstances of the case and in law the CIT (A) was wrong and unjustified in confirming the addition of Rs.1,07,000/- being an opening balance in the account of Kishan Chand Ferro Steels Ltd.
3. On the facts and circumstances of the case and in law the CIT (A) was wrong and unjustified in confirming the disallowance of expenses of Rs.2,34,560/- on ad hoc basis ignoring the submissions made by the assessee.”
Briefly stated the facts necessary for adjudication of this case are : during the scrutiny proceedings qua return of income filed by the assessee for Assessment Year 2002-03, certain issues came to the notice of Assessing Officer which he has examined in the light of material collected during survey proceedings under section 133A of the Income-tax Act, 1961 (for short ‘the Act’) at the premises of Shri Sanjay Rastogi, Director of the assessee company.
AO noticed from the report received from ADIT (Inv.), Unit 7, New Delhi that Sanjay Rastogi and his associates are engaged in providing the accommodation entries in connivance with companies/concerns floated by them and assessee company is one of the beneficiaries of such hawala business. Sanjay Rastogi admitted in his statement recorded on 20.04.2003 that all these transactions are bogus as the entry seeking company received Cheques in the name of companies of Sanjay Rastogi and thereafter money was either taken out from the bank account in cash or routed through other companies for eventual withdrawal of cash. When the explanation of the assessee was called it has moved application u/s 144A of the Act. Assessee failed to file the confirmation/copy of account in case of Jyoti Global Pvt. Ltd. for Rs.5,00,000/-, M/s. Sahil Stock Broking Ltd. for Rs.18,00,000/- and M/s. Sethi Estate Pvt. Ltd. for Rs.5,00,000/- and consequently made addition of Rs.28,00,000/-.
Assessee has claimed personal expenses to the tune of Rs.6,27,720/- and due to non-producing of books of account with supporting vouchers, the AO disallowed the expenses to the extent of 30% i.e. Rs.3,34,560/-. The confirmation in case of Kishan Chand Ferro Steel Pvt. Ltd. filed by the assessee to explain Rs.1,07,000/- has been rejected by the AO for want of date and incomplete PAN and thereby made an addition of Rs.1,07,000/-.
AO assessed the taxable income of the assessee company at Rs.91,67,138/-.
Assessee carried the matter before the ld. CIT (A) by way of filing the appeal who has partly allowed the appeal. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
By moving a separate application, assessee company sought to raise additional grounds on the ground that the same go to the root of the case which are as under :- “1. That in the fact and circumstances of the case and in law the Ld. CIT (A) was unjustified in not considering the direction of the Hon’ble ITAT, Delhi in case of Sanjay Rastogi elated 12.1 1.2008, whereby the Hon'ble Tribunal has given a finding that the turnover for which the assessee (Sanjay Rastogi) is assessed, the same amount of commission shall not be assessed in the hands of any of the company (which includes M.S. Capital & Management Service Ltd. ) floated, by the assessee. 2. That in the fact and circumstances of the case and in law the Ld. CIT (A) was unjustified in not accepting the explanation about the nature and source of the sum found credited in the books of the assessee, even when the Hon'ble Tribunal had given a finding in case of Sanjay Rastogi (Supra) that the entries made in the case of the assessee company were bogus accommodation entries, the commission income from which is to be taxed in case of Sanjay Rastogi.”
Keeping in view the fact that the additional grounds sought to be raised by the assessee company, though not raised before the ld. CIT (A), are necessary for complete adjudication of the controversy at hand, the application for additional grounds is hereby allowed.
GROUND NO.1 AND ADDITIONAL GROUNDS NO.1 & 2 : 8. AO made an addition of Rs.28,00,000/- stated to have been received from M/s. Finorg Chemicals Ltd., which is one of the bogus companies being run for merely operating the entries/ transactions and were not in actual business. Sanjay Rastogi, Director of the assessee company categorically admitted in his statement recorded during survey proceedings conducted u/s 133A by the Investigation Wing of the Income-tax Department on 04.03.2003 that, “he was engaged in providing accommodation entries in various outside entities through the 8 companies floated by him for this purpose having registered office at Vakil Chamber, A-115, Shakarpur.”
Assessee company is one of the aforesaid 8 bogus companies being run by Sanjay Rastogi and total accommodation entries provided by the assessee company for AY 2002-03 under consideration came to be Rs.19,66,23,061/- as is evident from para 2 of the order passed by the coordinate Bench of the Tribunal in a bunch of appeals bearing 1388, 1389, 1390 & 1391/Del/07 for AYs 1999-00, 2000-01 2001-02, 2002-03 & 2003- 04 (Order dated 12.11.2008). Undisputedly assessee company found to be engaged in providing bogus accommodation entries as has been discussed in order DATED 12.11.2008 (supra) passed in Sanjay Rastogi vs. ACIT, Circle 37 (1), New Delhi.
The ld. AR for the assessee contended that when the income derived by the assessee company as commission income to the tune of Rs.19,66,23,061/- during AY 2002-03 has been taxed in the hands of Sanjay Rastogi, Director of the assessee company, the said income cannot be taxed twice and Sanjay Rastogi has already paid penalty on the said amount.
Undisputedly, the case of Sanjay Rastogi went up to the Tribunal which has been decided vide order dated 12.11.2008 (supra). The coordinate Bench in para 8 of the order discussed the issue at length by returning the finding that, “as a matter of principle, the commission income has to be taxed in one hand.”
When undisputedly the entire commission income earned by assessee company to the tune of Rs.19,66,23,061/- pertaining to M/s. Finorg Chemicals Ltd. has already been taxed in the hands of Sanjay Rastogi, we are of the considered view that the same cannot be taxed twice now by claiming the same from assessee company.
The contention of the ld. DR for the revenue that company is a juristic person and has to be taxed independent of its Director is not tenable in the face of admitted fact that the assessee company is a bogus company merely floated to provide accommodation entries and income in question has already been taxed in the hands of Mr. Sanjay Rastogi and this fact has already been admitted and considered by the revenue while taxing Sanjay Rastogi qua AY 1999-00 to 2003-04. Sanjay Rastogi has even paid the penalty imposed upon him on the basis of his assessed income qua M/s.
Ld. AR for the assessee further contended that the amount of Rs.28,00,000/- received by the assessee company from M/s. Finorg Chemicals Ltd. is not in the nature of unexplained cash credit u/s 68 of the Act as it has received the amount on account of sale consideration received from M/s. Finorg Chemicals Ltd. for the sale of shares of M/s. Sahil Stock Broking Ltd. for Rs.18,00,000/-, for sale of shares of M/s. Jyoti Global Pvt. Ltd. for Rs.5,00,000/- and for sale of shares of M/s. Sethi Estate Pvt. Ltd. for Rs.5,00,000/- during FY 2001-02 relevant for AY 2002-03.
Assessee filed confirmation of accounts of M/s. Finorg Chemicals Ltd. containing GIR number, assessment details, Form No.2, now available at page 100 and 101 of the paper book. Moreover, in order dated 19.12.2006 passed in case of Sanjay Rastogi for AY 2002-03 by ld. CIT (A), available at page 8 to 21 of the paper book, it is categorically mentioned by ld. CIT (A) that there is no material to establish the link between Sanjay Rastogi and Finorg Chemicals Ltd. So, we are also of the considered view that the addition of Rs.28,00,000/- is not sustainable.
14. So, we are of the considered view that amount of Rs.28,00,000/- received by the assessee company from M/s. Finorg Chemicals Ltd. on account of sale of shares has already been taxed in its hands and as such, this addition is not sustainable, hence we delete the addition of Rs.28,00,000/-.
GROUND NO.2 15. AO made an addition of Rs.1,07,000/- on the ground that incomplete confirmation bearing incomplete date and PAN from M/s. Kishan Chand Ferro Steel Pvt. Ltd. has been furnished. Even no cogent evidence has been produced during first appellate proceedings before the ld. CIT (A) by the assessee. So, we hereby confirm the addition of Rs.1,07,000/- made by the AO and affirmed by the ld. CIT (A). So, ground no.2 is determined against the assessee.
GROUND NO.3 16. AO from the scrutiny of profit & loss account noticed that the personal expenses of Rs.6,27,720/- and administrative expenses of Rs.4,87,488/- has been claimed by the assessee, out of which AO disallowed 30% of the total expenditure on the ground that the assessee company has failed to submit necessary evidence. Thereafter, addition of Rs.3,34,560/- has also been confirmed by the ld. CIT (A). However, even during the arguments before us, no cogent material to support the expenditure claimed by the assessee company has been brought on record. So, we find no ground to interfere into the findings returned by the AO as well as by the ld. CIT (A) in making ad hoc disallowance of Rs.3,34,560/- on account of certain expenses. So, we hereby determine ground no.3 against the assessee.
In view of our findings on the above grounds, we hereby partly allow the present appeal. Order pronounced in open court on this 3rd day of November, 2016.