M/S. BHARTI PROPERTIES PVT. LTD.,NEW DELHI vs. ACIT, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES “A” New Delhi BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA No: 3070/Del/2012 Asstt. Year: 2005-06 ITA No: 3071/Del/2012 Asstt. Year: 2007-08 Bharti Properties Pvt. Ltd., vs ACIT, H-108, IInd Floor, Central Circle-9, New Asiatic Building, New Delhi. Connaught Place, New Delhi-110001 (PAN: AAACB9995L) (Appellant) (Respondent) Appellant by: Shri K. Sampath, Adv.Sh. Rajan Kumar,Adv. Respondent by: Shri Ravi Jain CIT DR Date of Hearing : 16.2.2016 Date of pronouncement :

O R D E R PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER These two appeals of the assessee against the separate orders of CIT(A)- XXXII, New Delhi pertaining to Assessment Years 2005-06 and 2006-07 are being decided by a common order for the sake of convenience as facts, circumstances and the submissions of the parties before the Bench remained identical in all these appeals. 2. Before these appeals are taken up for consideration it is seen that the Registry has pointed out a delay of 30 days in the filing of these two appeals. Addressing the delay the Ld. AR inviting attention to the condonation of delay petition in filing each of these appeals submitted that the impugned order had been 1

I.T.A. 3070 & 3071/D/12 Assessment Year 2005-06, 2007-08 received by the assessee when the father of Sh. S.K.Gupta who is the controlling person of the assessee was critically ill; confined to bed and finally passed away. On account of remaining pre-occupied with the above tragedy the appeals it was stated could not be filed on time. Inviting attention to the copy of the order dated 14.02.2014 in ITA Nos.-3213, 3214 & 3856/Del/2012 & 1080/Del/2013 in the case of Konichiva Builders Ltd. it was submitted that on identical facts delay of 43 days had been condoned by the Co-ordinate Bench. Relying on the same it was submitted that the delay may be condoned. The Ld. DR considering the order of the Tribunal and the petition of the assessee had no objection if the appeal is decided on merits by condoning the delay in each of the appeals. 3. Considering the facts on record and the submission of the parties we are of the view that the delay pointed out by the Registry deserves to be condoned. Respectfully following the order of the Co-ordinate Bench the delay in the appeals is condoned. 4. Ld. AR inviting attention to the assessment order under consideration submitted that the assessee who is found mentioned at Sl. No.-17 in the list of companies where Konichiva Builders Ltd. is found mentioned in Sl. No.-1. It was submitted that the Tribunal in Konichiva Builders Ltd. restored the issue of allowance of expenditure incurred to the AO. It was submitted that in both these set of cases additions had been made on identical facts and the arguments remain the same in response to Q.no.2 extracted in that order by the Tribunal which has been extracted by the AO in the present proceedings also. Accordingly it was his submission that similar prayer was made in these two appeals. 5. The Ld. CIT DR considering the order of the Tribunal in Konichiva Builders Ltd. had no objection if identical direction is given herein also. 6. Before we proceed to decide the limited plea of the assessee, we deem it appropriate to first refer to the facts on record. The facts of the case as emanating from the assessment order dated 30.12.2008 in Assessment Year 2005-06 passed u/s 143(3) r.w.s 153A of the Act it is seen are identical in all the remaining years 2

I.T.A. 3070 & 3071/D/12 Assessment Year 2005-06, 2007-08

except for the difference in amounts. Accordingly the facts from the order of Assessment Year 2005-06 are being extracted for ready-reference:- “A search & seizure action was conducted on 12-12-2006 at business and residential premises of Shri. S.K.Gupta alongwith various concerns in which he and his family members were interested. Similarly action u/s 132 of IT Act, 1961 was conducted in the case of various companies owned or controlled by him and also in the case of different individuals connected with the said companies. This is one of such cases covered under search & seizure action. Consequent to search action the case was centralized with this office and as such notice u/s 153A of IT Act 1961 was issued to the assessee on 25-2-2008. 1.1.Background of the case . While conducting discreet inquiries, the investigation wing gathered that Shri S.K.Gupta a Chartered Account by profession, is running various companies from a premises of "Trump and Gates" situated at H-108, 2 floor, New Asiatic Building. Connaught Place, New Delhi and also from the premises of his firm namely M/s Gupta & Rakesh Associates at 231, Gulmohar Enclave, New Delhi. In the course of the search operation, it was reported by the investigation wing that a large number of companies were being operated and controlled by Shri S. K Gupta from his main office premises at H-108, Connaught Place. The list of these Companies is as under:- 1. Konichiva Builders Ltd. 2. B.T.Technet Ltd. 3. Swen Television Ltd. 4. T & G Quality management consultants Ltd. 5. Hitech Computech Pvt. Ltd. 6. Centenary software pvt. Ltd 7. Trump and Gates 8. T & G Quality Servrces 9. GTM Konichiva Builders 10. Gupta Rakesh Associates 11. Era Advertising and Marketing Coy Pvt Ltd 12. PG Travels Hindustan Com 13. Shark Communication Pvt Ltd 14. Spg Finvest Pvt Ltd. 15. Krishna Informedia 16. Bolni Exim India Ltd 17. Bharti Properties Pvt Ltd 18. Marketing Insurance Brokers Pvt Ltd 19. Cam Soft (lndia) Pvt Ltd 20. Ours Trading Pvt. Ltd 21.Pawar Estates Pvt Ltd 22. Rajdhani Leasing Ltd 23.DMC Vaults Ltd 24. Sigma Farms Ltd 25. North India securities Pvt Ltd 26. Hamara Samay TV News Network Pvt Ltd 27.Cel Cel Technologies Ltd 3

I.T.A. 3070 & 3071/D/12 Assessment Year 2005-06, 2007-08 28. Chip Set Solutions Pvt Ltd 29. Trump & Gates 30. Servel Technology System Pvt. Ltd. 31. PG Travels Hindustan Com Pvt Ltd 32. J.A. Financial & Marketing Consultants Pvt. Ltd. 33. Saksham Infocom Pvt Ltd

6.1. Considering the following facts which have been summed up in the impugned order the AO in the year under consideration made an addition of Rs.1,97,938/-. The relevant extract is reproduced from the impugned order:- 2.1.1. “The AO has given various findings about these companies including the appellant company based on the reports from the Investigation Wing and his own proceedings during the impugned assessment, which can be summarised as under: (i). These companies were created ostensibly for providing a variety of services ranging from consultancy of advertising to Software Development, various professional services, annual maintenance services, upgradation services, customer care, retainership, sponsorship etc. and accordingly bills/invoices have been issued in the names of these companies including the appellant but in fact no such actual services have been rendered by them to the respective beneficiaries. (ii). Shri. S.K. Gupta did not possess the necessary infrastructure or the required man power to render such variety of services through these companies. (iii). These companies were merely issuing accommodation bills for various expenditure to various entities for the sake of tax evasion. Such biils and invoices were found and seized from the premises covered u/s 132 of the Act. (iv). No other evidence was found during search indicating any such actual services rendered by the appellant or other companies as claimed. (v). Shri S.K. Gupta in various statements recorded on different dates between December, 2006 to December, 2008 both before the officers of Investigation Wing and in post search inquiries and before the Assessing Officer, admitted in detail his modus operandi of providing accommodation bills through the appellant company and other companies in lieu of cheques received and cash returned to the beneficiaries. (vi). Evidence of duplicate set of books of accounts, hand written cash books and ledger accounts, various cheque books and blank cheques signed by various authorized signatories/Directors of the appellant company and other companies were found and seized from Shri. S.K. Gupta's premises. Some of these Directors/Authorized Signatories were found to be employees, relatives or friends of Sh. S.K.Gupta. (vii) The Assessing Officer has given elaborate and adequate opportunities to the appellant company to explain their matter during the assessment proceedings and to counter the findings of the Assessing Officer.

I.T.A. 3070 & 3071/D/12 Assessment Year 2005-06, 2007-08 (viii) The Assessing Officer himself has repeatedly recorded statements of Shri S.K.Gupta and has confronted him in detail about the findings.”

6.2. On the basis of the above facts the AO arrived at the following conclusions. These are extracted from the assessment order:- 4. “Inferences:- i. It is proved beyond doubt on the basis of documentary evidences, confessional statement of Shri. S.K.Gupta, the main person controlling the state of affairs of the assessee. Husband of Smt. Saroj Gupta, director of the assessee company and results of the assessment that assessee is engaged in the accommodation entry business and not doing any genuine sale & purchase as claimed in the final account statements annexed with return of income. ii. Since assessee has failed to produce any regular books of account, sale & purchase and expenses vouchers the book results shown by the assessee are liable to be rejected by taking recourse to provisions or section 145 (3) of IT Act 1961. iii. The assessee has not been successful in establishing that any genuine business activity was being carried out other than the accommodation entry business. No physical evidence of supporting infrastructure was found by the investigation wing at the time of search nor the same has been adduced before the undersigned. iv. The assessee has not produced any confirmations from the debtors and creditors to whom bills have been issued and bills have been procured. v. The assessee failed to provide documentary evidences in the form of rent deeds/receipts and other expenses vouchers and bills, which could establish the genuine credentials of the assessee as a genuine software design & development and other IT related services provider to the genuine customers. Even the big corporates like Reliance Industries Ltd, NIIT, HCL Group, FIITJEE. Mothersons Sumi Innovative & Design Ltd, ASL Insurance Brokers Pvt Ltd, Accord Insurance, Allianze Securities. Link Engineer Ltd, Pashupati Fabrics etc, who themselves are having their own infrastructures for IT related requirements, have approached the assessee as well as its other related group companies for getting accommodation .bills. But surprisingly none of them had any corroborative evidence other than the sate bills or in some cases a general agreement, without any supporting evidences of software development. Even assessee had no supporting documents of purchase or outsourcing, where from it could issue sale bills to these corporates or other desirous companies/concerns. (i) The assessee has failed to correlate its surrender income in different assessment years, with the actual deficiencies of the business relevant to accommodation entry business on account of providing accommodation sale bills, expenses bills in the form of job work charges, advertisement charges. web designing charges-and providing investment entries. 5

I.T.A. 3070 & 3071/D/12 Assessment Year 2005-06, 2007-08 (ii) The assessee has intact indulged in accommodation enteries business and has not done any genuine business. So the income of the assessee from the accommodation entry business is computed @ 2% net rate on sale turnover and investment turnover in view of the assessee's statement coupled with prevalent market condition for such entries. No further expenses are to be allowed, as this is the net rate. 5. With these remarks, the total income is computed as under: With these remarks income of the assessee is computed as under: (i) Total income as per 153 A return Rs. 3396/- Add:- Income earned from Accommodation entry Business (a) On the Accommodation Sale Bills/Turnover @ 2% of Rs.1501913/- Rs.30038/- (b) On account of bogus fresh investment entries @2% of Rs. 83,95,000/- Rs. 167900 Rs. 201334

6.3. In appeal before the First Appellate Authority the CIT(A) held as under:-

“2.3.5. Taking into consideration the totality of facts and circumstances of the case as discussed hereinabove, it is held that the addition made by the AO on account of net income earned from accommodation entry business to the tune of Rs.197938/- is justified and is, therefore, confirmed. Since the AO has given a categorical finding that the appellant had only indulged in accommodation entries business and had not done any genuine business and rejected the books results on that ground, the net profit shown in the return has lost its relevance and should not be given any credence. The AO is, therefore, directed to recomputed the total income accordingly. This disposes off all the grounds of appeal taken by the appellant against the impugned assessment order.”

“That on the facts and in the circumstances and in the law the authorities below erred in : 1. Determining taxable income of Rs.2,01,330/- as against the returned income of Rs. 3,396/-; 2. Passing order U/s 143(3) r.w.s 153A of The Income Tax Act, 1961 relying on the estimates and not on the basis of seized material; 3. In applying provisions of section 145(3) of the Act even though books of account were never produced before the authority and no material defects were pointed out therein ; 4. In estimating undisclosed income of sum of Rs.30,038 /- and Rs.1,67,900 /- based figure appearing in balance sheet despite the fact that such books of account were never relied upon .”

I.T.A. 3070 & 3071/D/12 Assessment Year 2005-06, 2007-08

8.1. The issue pertaining to books of accounts etc. was considered by the Co- ordinate Bench in the following manner:- 6. “The first issue pertains to rejection of books of accounts. Ld. Counsel of the assessee in this regard submitted that he is not vehemently pressing this issue. We find that in the search and on the basis of material recovered and statements obtained it has been duly established that assessee was indulging in bogus accommodation entries. No actual sale and purchase was done by the assessee. Proper books of accounts were not maintained. In these circumstances, we do not find any infirmity in the orders of the authorities below in which the books of accounts have been rejected.” 7

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8.2. It is seen that considering the statement recorded of Sh. S.K.Gupta which facts have been summed in the following paras 8 & 9 in the order of the Co- ordinate Bench which are identical to the facts in the present proceedings also. It is seen that it is this statement which forms the basis of the addition by way of a estimate of income at the 2%. It is further seen that considering the arguments advanced on behalf of the assessee which are found recorded in the following para 10. The issue has been remitted to the AO in para 11 by way of speaking direction. These specific paras are extracted from the order of the Co-ordinate Bench relied upon by the assessee:- 8. “Heard both the parties. On this issue, we find that it is established that assessee was engaged in the business of providing bogus accommodation entry. Hence, the income in this regard has to be estimated. In this regard, the addition has been made by the AO on the basis of statements given by the Director, S.K. Gupta. In this regard, it is relevant to quote the precise question and answers thereof given by Sh. SK Gupta:- “Q.(2) Please state categorically the percentage commission charged by you for providing accommodation sale bills, accommodation purchase / expenses bills and investment and loan entries through your various group companies. Ans. The average commission earned by various group companies in providing different type of accommodation entries was to the tune of 1.5% to 2.0% out of which I have to incur our normal expense on a/c of salary, rent, bank charges, conveyers, telephone, water and electricity.”

I.T.A. 3070 & 3071/D/12 Assessment Year 2005-06, 2007-08 salary, rent bank charges, conveyers, telephone, water and electricity. However, it is also settled that mere submission that expenditure has been incurred cannot lead to allowance of expenditure. Assessee has to prove with cogent material that the expenditure has been incurred to earn the income. In these circumstances we remit the issue to the file of the AO. The Assessing Officer shall examine the aspect of allowance of expenditure on the basis of cogent materials to be submitted by the assessee.

I.T.A. 3070 & 3071/D/12 Assessment Year 2005-06, 2007-08 12. In the result the appeals of the assessee are partly allowed for statistical purposes. Order pronounced in the open court on 16.05.2016.

Sd/- Sd/- (S.V. MEHROTRA) (SUDHANSHU SRIVASTAVA ) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: the 16th of May 2016 ‘GS’

Copy of the Order forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR 6. Guard File By order

Asstt. Registrar

I.T.A. 3070 & 3071/D/12 Assessment Year 2005-06, 2007-08