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Income Tax Appellate Tribunal, DELHI BENCH “SMC”, NEW DELHI
Before: SHRI H.S. SIDHU
the impugned order dated 15/12/2014 passed by the Ld. Commissioner of Income Tax (Appeals)-8, New Delhi on the following grounds:-
The Ld. CIT(A) has erred in law and on the facts in deleting of Rs. 45,00,000/- made by the AO u/s. 68 of the Income Tax Act, 1961.
2. The Ld. CIT(A) has erred in law and on facts in deleting
addition of Rs. 90,000/- made by the AO on account of commission on the gross amount of accommodation entry provided paid from undisclosed sources.
3. The appellant craves to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.
The facts in brief are that in this case, the assessment was reopened on the basis of the information received from DIT(Inv.), New Delhi to the effect that the assessee had obtained accommodation entry amounting to Rs. 30 lacs from the concerns floated by Sh. Surender Kumar Jain. Accordingly, notice u/s. 148 of the I.T. Act, 1961 dated 28.3.2012 was issued, after recording the reasons and after obtaining the approval. In response thereto, the A.R. of the assessee attended and filed the details from time to time. Thereafter, the AO observed that in the case of Surender Kumar Jain Group, the Investigation Wing of the Income Tax Department, New Delhi, has, during action u/s. 132 of the I.T. Act and thorough post search inquiries have established that the concerns floated by Surender Kumar Jain Group have provided accommodation entries to various beneficiaries, the name of the assessee company appears in the list of beneficiaries received from the Investigation Wing. The DIT(Inv.) during the course of investigation in the case of Surender Kumar Jain Group, found that the group have operated multiple accounts in various branches to plough back unaccounted black money for the purpose of business or for personal needs such as purchases of assets etc. in the form o gifts, share application money loans etc. during the course of investigation by the DIT(Inv.) It was discovered that the assessee who have unaccounted money and want to introduce the same in the books of accounts without paying tax approach another person (entry operator) and hand over cash (plus commission) and take Cheque/DDs/Pos. The cash is deposited by the entry operator in a bank account either in his own name or in the name of relative/friends or other person hired by him, for the purpose of opening bank account. The entry operator thereafter issues Cheque/DD/PO in the name of beneficiary from the same account (in which the cash is deposited) or another account in which funds are transferred through clearing in two or more stages. The beneficiary in turn deposits these instruments in his bank accounts and the money comes to his regular books of account in the form of gift, share application money, loan etc. through banking channels and the transactions looks genuine. As mentioned above, in this case the relevant assessment was made on the basis of information received from Investigation Wing of Income Tax Department, New Delhi that the assessee has been the beneficiary of accommodation entries provided by Surender Kumar Jain Group of concerns. As per the reasons recorded, the assessee has taken the accommodation entries amounting to Rs. 30 lacs from the concerns floated /controlled by Surender Kumar Jain group. The above cited entry is reflected in the accounts as share application money. During the course of reassessment proceedings, it was seen that the assessee has obtained total share application money amounting to 30 lacs from the company M/S Steller Investment Ltd and Rs. 15 lacs from Sh. Vijendra Thapliyal. Vide reply dated 16.1.2013, the AR of the assessee company had filed confirmation of M/S Steller Investment Ltd with copy of lTR, affidavit sworn by Sh. Virender Kumar Jain and copy of bank statement. AO observed that it is noteworthy that Sh.
Virender Kumar Jain is very closely associated with Sh. Surender Kumar Jain. AO vide his letter dated 6th Feb. 2013 has specifically requested the assessee to establish identity of the parties, genuineness of transaction and creditworthiness. Vide note sheet dated 18.2.2013, the AR of the assessee company was requested to produce the share applicants for personal deposition on 22.3.2013.
However, no compliance was made on 22.2.2013. The share applicants were not produced for personal deposition. On 4.3.2013, notice u/s 131 were issued to the principal officer of M/S Steller Investment Ltd and to Sh. Thapliyal for personal deposition along with the bank statement of the bank account for the entire financial year. In response to the said notices, Sh. thapliyal sent a confirmation by post enclosing there with a photocopy of bank statement from 1.2.2005 to 9.3.2005. No response was received from M/S Steller Investment Ltd. The letter was properly addressed and prepaid and not received back unserved . Therefore , as per the provisions of section 27 of General Clauses Act, 1897, it is presumed that the notice u/s 131 of the Act was served upon M/s Steller Investment Ltd. On 18.3.2013, the AR of the assessee company attended at his own and filed response to notice u/s 131 ,one copy of confirmation and bank statement received earlier by post from Sh. Thapliyal. From the details filed, genuineness of transaction and credit worthiness of the parties could not be established. The AR of the assessee company has filed confirmations from both the share applicants. On the other hand, when the AO asks the AR to produce the parties for personal deposition, the AR does not produce the parties. Even in response to the notice u/s 131 of the Act issued for personal deposition, the share applicants do not appear before the AO with the requisite documents neither the assessee produces them before the AO. On perusal copy of bank statement of Sh. Thapliyal, it is seen that there is hardly any balance in his bank account before and after giving share application money. Immediately Before, contributing share application money, there are of Rs. 15,50,000/-. And, the company M/S Steller Investment Ltd. is a established entry provider floated by Sh.
Surrender Kumar / Virender Jain group as established by DIT(Inv.) in action u/s. 132 and post search inquiries. AO further observed that as per the provisions of 68 of Income Tax Act, onus is on the assessee to explain the credits appearing in its books of accounts to the satisfaction of the AO. Mere filing of paper details does not satisfy the conditions laid down under 68 of Income Tax Act. In the case of CIT vs. Nova Promoters and Finlease Pvt. Ltd. reported in 252 CTR 187 Hon'ble High Court of Delhi has held that Statements of M and R explaining their modus operandi afford sufficient material on the basis of which the AO can be said to have discharge such duty. These constitute materials upon which one could reasonably come to the conclusion that the monies emanated from the coffers of the assessee company It In the case of CIT Delhi-V versus NR Portfolio Pvt. Ltd. in of 2012 vide in its order dated 21.12.2012 has also held that - "if the assessee has access to the share applicants. PAN, particulars or bank account statement, surely its relationship is closer than arms length. Its request to such concerns to participate in income tax proceedings. would view from a pragmatic perspective, be quite strong that apart, the concept of shifting onus does not mean that once certain facts are provided.
The assessee duty is over. AO on verification or during proceedings, the AO cannot contact the share applicants or that the information becomes unverifiable or there are further doubts in the pursuit such details, the onus shift back to the assessee. At this stage, it if falters, the consequence may well be addition u/s 68 ..... ".
2.1 In view of the above, AO added Rs. 45,00,000/- in the hands of the assessee and treated the same as unexplained cash credit u/s.68 of the I.T. Act, 1961. AO further added Rs. 90,000/- being 1% to 2% commission on the gross amount of entry provided and completed the assessment at Rs. 45,78,950/- u/s. 143(3) of the I.T.
Act, 1961.
Aggrieved with the assessment order, assessee preferred an appeal before the Ld. CIT(A), who vide his impugned order dated 15.12.2014 has deleted both the additions and allowed the appeal of the assessee.
4. Now the Revenue is aggrieved against the impugned order and filed the present appeal before the Tribunal.
At the time of hearing Ld. Sr. DR relied upon the order of the AO and reiterated the contentions raised by the Revenue in the grounds and requested that Appeal of the Revenue may be allowed.
On the contrary, Ld. Counsel of the Assessee has relied upon the order of the Ld. CIT(A) and stated that Ld. CIT(A) has passed a well reasoned order which needs to be upheld and accordingly, the appeal of the Revenue may be dismissed.
I have heard both the parties and perused the records, especially the impugned order passed by the Ld. CIT(A). I find that Ld. CIT(A) has elaborately adjudicated the issue raised in grounds no. 1 & 2 in dispute vide para no. 3 to 4 from pages 8 to 10 of the impugned order as under:-
“3. I have considered the assessment order, written submission filed by the A.R. of the appellant and also perused the case record. I agree with the Ld. AR of the appellant that Ld. AO mechanically believe the report furnished by the DIT(Inv.). Ld. AO has not made any enquiries. Even during the assessment proceedings, the confirmation and affidavit was filed by Shri Virender Kumar Jain on behalf of M/s Steller Investment Ltd. but no enquiry was made. The Ld. AO requested for production of the parties, however, they were not produced before the AO by the appellant. In compliance to notices issued u/s 131 to both the persons by the Ld. AO, details have been furnished. Ld. AO has given the finding that Shri Virender Kumar Jain is closely associated to Sh. Surender Kumar Jain.
However, no such report is available on record and assessing officer has also not narrated how they are closely associated. M/s Steller Investment Ltd. is connected to Sh. Surender Kumar Jain who is said to be hawala operator is also not clear from the assessment order. In view of these facts, I find that Ld. AO has wrongly disbelieve share application money received from M/s Steller Investment Ltd. Regarding the share application money amounting to Rs.15 lacs received from Sh. Vijendra Thapliyal and Ld. AO noticed that there was a balance of Rs.15,50,OOO/- before issuing the cheque for share application money. However, he has added this amount on the ground that before issuing the cheque appellant has received some money in the bank account. Without investigating who has given the money before issuing the cheque for share application, Ld. AO has disbelieved the transaction. There is no allegation against Shri Vijendra Thapliyal for providing the accommodation entry to the appellant, but Ld. A.O. has added this amount alongwith 2% commission for paying commission to get entries. The action of the Ld.AO clearly indicates that he has treated both the transactions similar without assigning any reason. During the year the appellant has not received any income because business was not carried on by the appellant. Ld. AO has wrongly treated the share application money as income of the appellant. If any amount is to be added it should be added in the hand of directors because only they can take the entry by giving the cash from their pockets. Respectfully following the decision of the Hon'ble Supreme Court in the case of CIT v. Bharat Engineering Construction Co. 83 ITR 187. The Hon'ble Lordships had accepted the findings of the Hon'ble High Court and Tribunal that the cash credit entries cannot be treated as income of the appellant as undisclosed income because company has not yet started any business activity. The addition made by the Assessing Officer is hereby deleted. Grounds of appeal taken by the appellant are allowed.
(ii) Since no addition on account of share application money is confirmed, 2% commission amounting to Rs.90,OOO/- is also deleted because there is no evidence that appellant has taken entry for share application money. This addition is also deleted and the ground of the appeal is allowed.
In the result, appeal is allowed.”
7.1 After going through the findings of the Ld. CIT(A), as aforesaid, I find that in this case the AO has not made any enquiries. Even during the assessment proceedings, the confirmation and affidavit was filed by Shri Virender Kumar Jain on behalf of M/s Steller Investment Ltd. but no enquiry was made. The AO requested for production of the parties, however, they were not produced before the AO by the assessee. In further find that in compliance to notices issued u/s 131 of the I.T. Act to both the persons by the AO, details have been furnished. The AO has given the finding that Shri Virender Kumar Jain is closely associated to Sh.
Surender Kumar Jain. However, no such report is available on record and Assessing Officer has also not narrated how they are closely associated. M/s Steller Investment Ltd. is connected to Sh.
Surender Kumar Jain who is said to be hawala operator is also not clear from the assessment order. In view of these facts, I find that AO has wrongly disbelieve share application money received from M/s Steller Investment Ltd. Regarding the share application money amounting to Rs.15 lacs received from Sh. Vijendra Thapliyal and AO noticed that there was a balance of Rs.15,50,OOO/- before issuing the cheque for share application money. However, he has added this amount on the ground that before issuing the cheque appellant has received some money in the bank account. Without investigating who has given the money before issuing the cheque for share application, AO has disbelieved the transaction. There is no allegation against Shri Vijendra Thapliyal for providing the accommodation entry to the assessee, but Ld. A.O. has added this amount alongwith 2% commission for paying commission to get entries. The action of the AO clearly indicates that he has treated both the transactions similar without assigning any reason. During the year the assessee has not received any income because business was not carried on by the appellant. The AO has wrongly treated the share application money as income of the assessee. If any amount is to be added it should be added in the hand of Directors because only they can take the entry by giving the cash from their pockets. I further find that Ld. CIT(A) by respectfully following the decision of the Hon'ble Supreme Court in the case of CIT v. Bharat Engineering Construction Co. 83 ITR 187 wherein the Hon'ble Lordships had accepted the findings of the Hon'ble High Court and Tribunal that the cash credit entries cannot be treated as income of the assessee as undisclosed income because company has not yet started any business activity. Hence, the addition made by the Assessing Officer was rightly deleted by the Ld. CIT(A) which does not need any interference on my part, hence, I uphold the same and dismiss the ground no.1 raised by the Revenue.
7.2 With regard to ground no. 2 is concerned, since addition on account of share application money was deleted, as aforesaid, the 2% commission amounting to Rs.90,OOO/- was also rightly deleted, due to the fact that there is no evidence that assessee has taken entry for share application money. Hence, this addition made by the Assessing Officer was rightly deleted by the Ld. CIT(A) which does not need any interference on my part, hence, I uphold the same and dismiss the ground no.2 raised by the Revenue.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the Open Court on 02/02/2017.