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Income Tax Appellate Tribunal, ‘GUWAHATI’ BENCH, KOLKATA
Before: Shri Rajpal Yadav, Vice-(KZ) & Dr. Manish Borad
Per Rajpal Yadav, Vice-President (KZ):- The Revenue is in appeal before the Tribunal against the order of ld. Commissioner of Income Tax (Appeals), Jorhat dated 31.08.2018 passed for Assessment Year 2010-11.
The Revenue has taken four grounds of appeal. However, its grievance revolves around two-folds, namely- (a) The ld. CIT(Appeals) has erred in deleting the addition of Rs.9,21,30,650/- solely on the ground that
ITA No. 305/GAU/2018 (A.Y. 2010-2011) M/s. Toor Finance Company Limited
no addition was made with regard to the issue for which assessment was reopened.
(b) The ld. CIT(Appeals) failed to appreciate the scope of Explanation 3 to Section 147, whether the ld. Assessing Officer cannot make any addition on any other ground unless some addition is made on the ground of which reassessment had been initiated.
In other two grounds, the ld. CIT(Appeals) has deleted the additions on merit also and the Revenue is challenging the finding of the ld. CIT(Appeals).
Brief facts of the case are that the assessee has filed its return of income on 27.12.2010 declaring total income at Rs.57,652/-. This return was processed under section 143(1). The ld. Assessing Officer thereafter issued a notice under section 148 and reopened the assessment. The reasons for reopening are being reproduced in the assessment order itself and they are available on the paper book at page no. 24. In order to appreciate the controversy involved in an appropriate manner, we deem it proper to take note of this reasons:- “The assessee-company M/s. Toor Finance Company Ltd. was incorporated on 24.04.1978. During the period under consideration, the following are directors of the company:- (1) Mr. Vishnu Kumar Agarwal (2) Mr. Bal Kishan Singhania
The assessee-company has filed, its return of income on 27.12.2010 for the declaring income of Rs. 57,652/-. The return was processed u/s. 143(1) of the Act on 24.05.2011. Later on, information was received from ITO(lnv.), Unit - 1, Kolkata wherein it was mentioned that :'r assessee company is a beneficiary of Rs. 18,00,000/- which was routed through various concerns. Thereafter, the information was examined in view of the facts and information declared in the return of income. The return of income was downloaded from e filing portal. Other statutory forms were also downloaded from ROC portal.
ITA No. 305/GAU/2018 (A.Y. 2010-2011) M/s. Toor Finance Company Limited
In this case, vide letter F. No. ITO(lnv.)/ U-l/Kol./FIU/STR No. 1000014024/2016-17/4046 dated 08.03.2017, information in respect of M/s Toor Finance Company Ltd. was received from the ITO (Inv.), Unit-1, Kolkata mentioning therein that in the course of investigation of the STR no. 1000014024 it has been found that there are deposits of cash in number of bank accounts followed by transfer of funds to other accounts. After routing through several bank accounts of various concerns, ultimately the funds were transferred to the actual beneficiary companies. The intermediary concerns were used as a shell companies. Later on, the beneficiary companies alongwith the shell companies changed hands. It has also been found during investigation that the source of cash deposited in the accounts of layer-1 intermediary concern have not been established and it was also found that no actual business is being carried out by the intermediary concerns.
I have carefully examined the above referred information as well as have gone through the return of income filed for the A.Y. 2010-11 and other statutory returns filed with ROC. Following trail' of cash deposits and subsequent transfers to various accounts/concerns have been found:-
Layer Date Particulars Bank Name Account No. Amount Layer 1 24.07.2009 A.K. Traders ICICI 627605500133 1,00,000 Layer 1 01.08.2009 A.K. Traders ICICI Bank 627605500133 6,00,000 Layer 1 01.08.2009 A.K. Traders ICICI Bank 627605500133 7,00,000
Layer 2 24.07.2009 PO Issued DCB Bank 1,00,000 Layer 2 01.08.2009 Kusum Bank of 0902020000066 36,80,000 Supplier Baroda
Layer 3 03.08.2009 Heritage Bank of AACCH1520R 36,00,000 Commotrade Baroda Pvt. Ltd.
Layer 4 03.08.2009 Lokenath Bank of 09020200000678 18,00,000 Financial Baroda Management Pvt. Ltd. (AABCL5519P) Layer 4 03.08.2009 Lokenath Bank of 09020200000678 18,00,000 Financial Baroda Management Pvt. Ltd. (AABCL5519P)
BENEFICIARY 03.08.2009 Toor Finance 18,00,000 Company Ltd.
After going through all the details and information available on record, following conclusion has been drawn: 1. That M/s. Toor Finance Company Ltd is beneficiary of cash deposited in shell concerns and routing of the same through different accounts of various shell concerns.
ITA No. 305/GAU/2018 (A.Y. 2010-2011) M/s. Toor Finance Company Limited 2. During the investigation of the STR, various incriminating documents and information were gathered which establishes the above satisfaction.
In view of the above, I have reason to believe that amount of Rs.18,00,000/- which is chargeable to tax has escaped assessment for the year under consideration. The same needs to be brought under the ambit of taxation and action u/s 147/148 of the I.T. Act is being initiated. Moreover, as the case pertains to a period within 6 years but beyond 4 years from the end of the relevant assessment year, necessary sanction from the Pr. CIT-9, New Delhi in view of amended provision of section 151 of the I.T. Act is being obtained separately. Sd/- (RAJEEV KUMAR) Income Tax Officer, War4d-25(3), New Delhi”.
The ld. Assessing Officer thereafter passed the assessment order under section 147 read with section 143(3) on 11.12.2017. The ld. Assessing Officer did not make addition of Rs.18,00,000/- to the income of the assessee. To buttress this aspect, we take note of the computation of income made at the end of the assessment order, which reads as under:- “14. With the above remarks, the total income of the assessee- company is computed as under:- Total income assessed u/s Rs.57,650/- 143(3) Add.:Additions made u/s 68 Rs.8,94,55,000/- as per discussion made in para 12.1 above Add.: Additions made u/s Rs.26,83,650/- 69C as per discussion made in para 13.1 above Total Rs.9,21,96,300/-
Assessed u/s 143(3)/147 of Income Tax Act, 1961 at total income of Rs.9,21,96,300/-. Issue demand notice and challan after giving credit for prepaid taxes, if any. Charge interest u/s 234A, 234B, 234C and 234D of the Act according to law. Penalty proceedings u/s 271(1)(c0 have been initiated separately by issue of notice u/s 274.
Sd/- (B.V. GERANGAL) Income Tax Officer, Ward-25(3), New Delhi”.
ITA No. 305/GAU/2018 (A.Y. 2010-2011) M/s. Toor Finance Company Limited
We find that the ld. Assessing Officer has made two additions, namely Rs.8,94,55,000/- as unexplained credits with the aid of section 68 and Rs.26,83,650/- being commission paid by the assessee for arranging this bogus accommodation entry of unexplained credit amounting to Rs.8,94,55,000/-. He calculated the commission at the rate of 3% and in this way determined the taxable income of the assessee at Rs.9,21,96,300/-.
Before the ld. 1st Appellate Authority, the assessee raised two folds submissions. In its first-fold of contention, it was contended that unless addition was made on an issue for which assessment was reopened, the ld. Assessing Officer cannot make addition of any other income found escaped during the reassessment proceedings. For buttressing its contention, it relied upon – (i) the judgment of the Hon’ble Bombay High Court in the case of CIT –vs.- Jet Airways (I) Limited (2011) 331 ITR 236;
(ii) Ranbaxy Laboratories Limited –vs.- CIT (2011) 336 ITR 136 (Delhi High Court);
(iii) CIT –vs.- Mohmed Junded Dadani 355 ITR page 172 (Gujarat High Court).
The ld. 1st Appellate Authority has accepted this contention of the assessee raised by way of additional ground of appeal and deleted the additions. Though the ld. CIT(Appeals) has devoted roughly 30 pages on this proposition but hardly any discussion is discernable. It has just reproduced the proposition laid down in large number of decisions.
That apart from the first fold of submission, the ld. CIT(Appeals) has deleted the additions on merit also and the deletion of those additions on merit are being agitated in Grounds No. 3 & 4 by the Revenue before the Tribunal.
ITA No. 305/GAU/2018 (A.Y. 2010-2011) M/s. Toor Finance Company Limited
Before us, ld. Counsel for the assessee submitted that the first-fold of grievance raised by the Revenue deserves to be rejected because this aspect has not only been expounded by the Hon’ble Bombay High Court but Hon’ble Calcutta High Court also. He placed on record the judgment of the Hon’ble Calcutta High Court in the case of CIT –vs.-Infinity Infotech Parks Limited (ITA No.60 of 2014). According to him, in this judgment, Hon’ble High Court took cognizance of the judgment of the Hon’ble Bombay High Court in the case of Jet Airways (I) Limited as well as of the Hon’ble Delhi High Court of Ranbaxy Laboratories Limited. Thus according to the ld. Counsel for the assessee, all the Hon’ble High Courts are unanimous in their approach.
On the other hand, ld. D.R. relied upon the order of the ld. Assessing Officer.
On due consideration of the above facts and circumstances, we find that assessment order reopened on the ground that assessee has taken accommodation entries of Rs.18,00,000/-. As to how the assessee has taken this entry of Rs.18,00,000/- has been explained in the reasons extracted supra. The ld. Assessing Officer has highlighted the details of different concerns for demonstrating the fact as to how the assessee has taken the entries. A perusal of these details would indicate that concern entry provider was A.K. Traders and in Layer 2 it is Kusum Suppliers. Thereafter Heritage Commotrade Pvt. Limited, Lokenath Financial Management Pvt. Limited and beneficiary was assessee. Thus according to the ld. Assessing Officer, there were four layers of transactions for identify the ultimate beneficiary of the assessee. We have perused these details alongwith the details of the alleged cash credit added by the ld. Assessing Officer. The amount of Rs.8,94,55,000/- has been worked out by the ld. Assessing Officer on the basis of discussion made in paragraph 12 of the assessment order and we deem it appropriate to take note of this paragraph also, which reads as under:-
ITA No. 305/GAU/2018 (A.Y. 2010-2011) M/s. Toor Finance Company Limited
“12. In the light of all above facts and circumstances of the case and the settled legal position, the sum of money received by the assessee company during the year, shown as share application money from the aforesaid companies namely: Sl. No. Name of the Company Amount 1. M/s. Myra Apparels Pvt. Rs.1,11,00,000 Ltd. 2. M/s. Saksham Rs.84,00,000/- Buildhome Pvt. Ltd. 3. M/s. Surbhi Rs.1,77,00,000/- Infraprojects Pvt. Ltd. 4. M/s. Vemuri Finvest Rs.43,00,000/-0 Pvt. Ltd. 5. M/s. True Allinace Rs.28,45,000/- Managemenet Services Pvt. Ltd. 6. M/s. Zenith Vincom Pvt. Rs.1,20,00,000/- Ltd. 7. M/s. Subhlabh Tradevin Rs.16,00,000/- Pvt. Ltd. 8. M/s. P.L. Finlease Pvt. Rs.8,60,000/- Ltd. 9. M/s. Skylark Suppliers Rs.10,00,000/- Pvt. Ltd. 10. M/s. Samriti Builders Rs.25,00,000/- And Developers Pvt. Ltd. 11. M/s. Sunshine Rs.38,00,000/- Infraprojects Pvt. Ltd. 12. M/s. Aarohi Infocom Rs.25,00,000/- Pvt. Ltd. 13. M/s. Madhur Buildcon Rs.1,10,50,000/- Pvt. Ltd. 14. M/s. Mukesh Commecial Rs.21,00,000/- Pvt. Ltd. 15. M/s. Natraj Buildhome Rs.40,00,000/- Pvt. Ltd. 16. M/s. Unique Barter Pvt. Rs.12,00,000/- Ltd. 17. M/s. Skyweb India Pvt. Rs.25,00,000/- Ltd.
Aggregating to Rs.8,94,55,000/- is hereby added to the income of the assessee u/s 68 of the Income Tax Act, 1961.
12.1. After having perused and considered the facts and circumstances of the case, I am satisfied that the assessee
ITA No. 305/GAU/2018 (A.Y. 2010-2011) M/s. Toor Finance Company Limited
has concealed its income by furnishing inaccurate particulars of its income in respect of aforesaid sum of Rs.8,94,55,000/- and thereby provisions of section 271(1)(c) of the Act are attracted in this case and therefore, penalty proceedings u/s 271(1)(c) are being initiated separately. (Addition of Rs.8,94,55,000/-“.
The name of four accommodation providers, which has been discussed in the reasons for reopening is not discernable in this list of seventeen entities. Therefore, these concerns have not been demonstrated by the ld. Assessing Officer as connected in any manner to the four bogus concerns from whom the assessee alleged to have taken accommodation entries of Rs.18,00,000/- and the assessment of the assessee was reopened for verifying that aspect. Thus the addition made by the ld. Assessing Officer is totally unconnected with the issue for which assessment was reopened.
The second question posed to us, is whether the ld. Assessing Officer can make addition of any other item which was detected during the reassessment proceedings as escaped income. Section 147 has a direct bearing on this aspect, we take note of the relevant part of this section:- “Income escaping assessment Section 147: “If the Assessing has reasoned to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provision of section 148 to 153, assess or re-assess such income and ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT....................”.
This expression “and ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT” and which comes to his notice subsequently has fallen for consideration before various Hon’ble High Courts, namely Hon’ble Bombay High Court- Jet Airways (I) Limited;
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Hon’ble Delhi High Court- Ranbaxi Laboratories Limited, Hon’ble Gujarat High Court – Mohmed Junded Dadani and Hon’ble Calcutta High Court in the case of M/s. Infinity Infotech Parks Limited. All the Hon’ble High Courts are unanimous in their approach to propound that expression “and also” employed in section 147 cannot be read as being in the alternative. It means that if no addition is being made on an item for which assessment was reopened, then Assessing Officer cannot add any other item. In other words, he ought to have reopened the assessment again for the purpose of adding those escaped item because that creates an independent circumstance for proceeding against an assessee. There might be various aspects of limitation etc. would come to the rescue of assessee. Thus following the Hon’ble High Courts decisions, we are of the view that the ld. CIT(Appeals) has rightly deleted the addition.
Since we have concurred with the ld. CIT(Appeals) that these amounts cannot be considered for making an addition to the income of the assessee on the ground that no addition was made for the item for which assessment was reopened, therefore, we do not deem it necessary to indulge in academic exercise, whether addition of Rs.8,94,55,000/- and commission expenditure of Rs.26,83,650/- can be added or not on merit? We are of the view that first there should be a jurisdiction with the ld. Assessing Officer to entertain this aspect only, thereafter it is to be decided on genuineness etc. With the above observation, we do not find any merit in this appeal of the Revenue. It is dismissed.
In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on 20/09/2022.
Sd/- Sd/- (Manish Borad) (Rajpal Yadav) Accountant Member Vice-President (KZ) Kolkata, the 20th day of September, 2022
Copies to : (1) Deputy Commissioner of Income Tax, Circle-Jorhat, 9
ITA No. 305/GAU/2018 (A.Y. 2010-2011) M/s. Toor Finance Company Limited
Office of the Jt. Commissioner of Income Tax, Range-Jorhat, CA M.K. Bardoloi Building, Tarajan, Near Tarajan Pool, Tarajan, Jorhat, Assam-785001
(2) M/s. Toor Finance Company Limited, Khatan Bhawan, Seuni Ali, A.T. Road, jorhat-785001, Assam
(3) Commissioner of Income Tax (Appeals), Jorhat (4) Commissioner of Income Tax, Jorhat, (5) The Departmental Representative (6) Guard File