LENIENT CONSULTANTS P.LTD,DELHI vs. DCIT, CENTRAL CIRCLE-2, NOIDA

O R D E R PER ASTHA CHANDRA, JM The appeal filed by the assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals), Kanpur-4 (“CIT(A)”) dated 18.05.2022 pertaining to the Assessment Year (“AY”) 2014-15.

2. That on the facts and in the circumstances of the case and in law, the Ld CIT-A vide impugned, order dated 18.05:2022 has grossly erred in not accepting the legal and jurisdictional plea/ground that there is lack of mandatory VALID approval u/s 153D as per undisputed facts of the case due to which impugned extremely “HIGH PITCHED” assessment is void ab initio.

3. That on the facts and in the circumstances of the case and in law, the Ld CIT-A vide impugned order dated 18.05.2022 has grossly erred in not deleting the unlawful and arbitrary additions/disallowances made in impugned extremely "high pitched” assessment order which were patently made without any “application of mind” and in total/complete violation of principles of natural justice that is without valid/requisite mandatory SCN/ “SHOW CAUSE NOTICE as per CBDT instruction no. 20/2015 dated 29.12.2015 (which is firmly established when main addition u/s 68 of Rs 87,77,45,000 is tested on elementary terra-firma of sec. 68) 4. That on the facts and in the circumstances of the case and in law, the Ld CIT-A vide impugned order dated 18.05.2022 has grossly erred in not accepting the appellant case that all the additions/disallowances made in impugned HIGH PITCHED asst, order defies all sense of rationality and are made in most arbitrary and capricious manner.”

3. Briefly stated, the facts are that the assessee company is a NBFC and one of the group concerns of Samtel Group. It is a search case. Search under section 132(1) of the Income Tax Act, 1961 (the “Act”) was carried out on 18.01.2018 in the case of Samtel Group including the assesee. Consequently, a notice under section 153A of the Act dated 04.09.2019 was issued and duly served upon the assessee. Again notice under section 142(1) of the Act with detailed questionnaire was issued on 21.10.2019. In response, the assessee e-filed return on 25.11.2019 declaring total income at Rs. Nil (original return was filed on 30.09.2014 declaring loss of Rs. 50,06,746/-). During assessment proceedings, reply through ITBA portal/manually was submitted. The Ld. Assessing Officer (“AO”) examined/verified the details/submissions filed by the assessee and placed them on record. The Ld. AO completed assessment on total income of Rs. 88,24,67,020/- on 29.12.2019 under section 153A r.w.s 144 of the Act including therein the following additions/disallowances:- i) Addition of Rs. 87,77,45,000/- on account of unaccounted share capital with concluding observations and findings in paras 6.6 and 6.7 of his order as under:- 2

“6.6 Through the various notices and summons as enclosed here and above the assessee company is required to explain the following important information:- (a) The modus operandi through which it has received the share premium. (b) The bank account statement in which such premium were received. (c) KYC of that bank account in which share premium was received. (d) Duly authorised letter from the bank authority through which the assessee is requested to change the authorised signatory of the bank account, if the account was not opened in A.Y.2014-15, (e) Minutes of the meeting of the AGM wherein authorised capital of the company was increased. (f) Loan agreement between the assessee company and other companies through whom loan and advances were given or amount was invested along with the bank account, statement throng i which the money was transferred or invested. But the assessee did not complied. 6.7 Perusal of the above shows that the back dating and forgery has been done by the auditor of the assessee company for A.Y. 2014-15. Sh. Shailendra Kumar who is currently the director of the company has admitted on oat u/s 131(1A) of the I.T. Act, 1961 20.01.2018 that he is an entry provider. All the forms which were required to submit before the MCA after increasing the authorized capital, were submitted very late in December and January when the director of Samtel Croup were, finally resigned from the directorship whereas the date of ACM was shown prior to 31.03.2014, although no copy of the ACM were submitted during assessment proceedings the annual return which was shown as assigned in 3rd September 2014 has also filed on MCA on 16.02.2015 even the 1TR of the company for A.Y. 2014-15 has been revised on 23.02.2015. It shows that the accounts were managed by the new administration of the company and back dating has been done to show that funds were received m A Y. 2014 15 itself. The assessee is not able to produce any evidence like bank accounts statements, filing of the required forms on MCA to increase in share capital which can actually prove that share capital of the assessee company was increased before 31.03.2014 legitimately. From all the discussion mentioned here in above it can be summarized that assessee company is an accommodation entry providing company (as accepted by Sh. Shailendra Kumar who is the director of the company right now) which is failed to prove the identity, creditworthiness and genuineness of the transactions related to share premium of Rs. 86,01,90,100/- along with the share capital of Rs. 1,75,54.900/- shown in the revised return as on 31.03.2014. As there are evidences for forgery and back dating and assessee is failed to produce any documentary evidences related to third parties (neutral one like bank or MCA or Income Tax Reports) through which it can be prove that funds were actually received in A.Y 2014-15 itself. Through back dating the assessee company and its auditor Sh. Naveen Mittal had tried to create a situation wherein they could prove that authorised capital and share premium was increased on or before 31.03.2014. Therefore, Rs. 87,77,45.000/- is being treated as unexplained share capital of the assessee for A.Y. 2014-15 on protective basis (in A.Y. 2015-16 on substantive basis as the entries took place in A.Y. 2015-16 only) since the assessee is not able to prove. the source and source of the source therefore, Rs. 87,77,45,000/- is being added u/s 68 of the 1.T..Act 1961 as unexplained share capital and section 115BBE will be applied accordingly. Penalty u/s 271(l)(c) is being initiated for the concealment of the income.” ii) Disallowance of Rs. 27,22,021/- with observations and findings contained in para 7.1 of his order as under:-

“7 1 Vide show cause notice dated 20.12.2019 the assessee company was requested to explain the debit entries in P & L account for A.Y. 2014-15. The scanned copy of the show cause is as under.- GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX DCIT/ACIT CEN CIR-II, NOIDA TO LENIENT CONSULTANTS PRIVATE LIMITED. HOUSE NO. 149, GROUND FLOOR, BLOCK H J J COLONY MANGOLPURI NEW DELHI NORTH WEST DELHI 11083, DELHI INDIA PAN: AY: Notice No.: Dated: Hearing Date and Time: AAACL0143Q 2014-15 ITBA/AST/F/153A(SCN)/201 20/12/2019 23/12/2019 12:37PM 9-20/1022785501(1) SHOW CAUSE NOTICE You are also required to explain the following:- 1. Nature of Bad debts claimed and documentary evidence in support of efforts which were made to realise the same 2. If nature of expenses claimed in profit and loss account you are requested to justify your expenses with documentary evidences.

ABHINAV PRAKASH DCIT/ACIT CEN CIR-II, Noida

But assessee did not complied, therefore Rs. 27,22,021/- (including the bad debts of Rs. 24,65,493/-) which has been debited for AY 2014-15 is hereby disallowed. Penalty proceedings u/s 271(1)(c) is being initiated.” iii) Addition of Rs. 20,00,000/- under section 68 of the Act with the observations and findings in para 7.2 of his order as under:-

7.2 Further, loan of Rs. 20,00,000/- received from M/s. Ambar Infra Reality Pvt. Ltd. is being added u/s 68 of the I.T. Act, 1961 as the assessee has not provide any documentary evidences to prove the genuineness, identity and creditworthiness of the transaction. Section 115BBE will be applied accordingly. Penalty u/s 271(1)(C) of the I.T. Act, 1961 is being initiated as the assessee has concealed his income from AY 2014-15.

“The appellant herein, M/s Lenient Consultants Private Limited, duly incorporated on 31-05-1988 a NBFC Company, duly registered with RBI, having ongoing business, endeavor ed successfully in pas couple of years in securing good clients and investors as well. A notice under section 153A was issued on 30-09-2019 by the Ld DCIT, Central Circle-II, Noida consequential to a search and seizure operation u/s 132(1) of income Tax Act, 1961, carried out in the case of M/s Samtel Group on 18-01-2018, covering various residential and business premises of concerned directors and group companies. However; nothing incriminating was found and seized, except some ROC documents, already available on MCA Site in public domain, accessible to all, including MO A/AOA, RBI Certificate, Common Seal, PAN Card etc., cannot by any stretch of imagination be termed as incriminating material. Entire order impugned has no mention about any incriminating material seized or found relevant or utilized in making the gigantic additions. Primary basis of drawing egregious inference of entry operator against assessee herein is untested and unverified statements of Mr. Shailerider Kumar and others (recorded between 20- 01-2018 to 27-02-2018) u/s 131(1A) etc., which are not valid and lawful incriminating material in eyes of law so as to be considered while framing assessment u/s 153A of the Act as same are recorded during post search proceedings. Material Seized does not qualify as good enough incriminating material in eyes of law to disturb unabated/completed assessments u/s 153A of the Act and additions made is clear case of sidestepping and overreaching view beyond jurisdiction under section 153A restricted proceedings. Additions so 5 made are based on mere assumptions, surmises, divergent visions, contradictory contentions without due application of mind in as much as Ld Assessing Officer could not make out that no additions can be made u/s 68 when shares have been issued in lieu of consideration other than cash/bank including share premium thereof and no sum was found credited in the books of appellant company. Further to above, Ld AO by taking contradictory view if that assessee company is found to be used for providing accommodation entries resorted in making additions under section 68 on amount received in hands of assessee company is contradictory and conflicting position and further made it worse in violation to settled proposition that a company being an artificial judicial person cannot earn commission by Itself, thereby added commission thereon in the hands of appellant company which is not sustainable. A massive demand has been raised by Imposing section 115BBE wrongly including Interest U/S 234B and 234C thereon, without appreciating the fact of the case and without appreciating and reckoning about the applicability of provision Section 68, Section 115BBE and Sections 234B and 234C of IT Act. Short/insufficient opportunities afforded and chaotic process initiated with intent to clothe cleans into muddled including without considering the facts and documents made available on record, with regard to the explanation sought and representations made instead resorted assessing income on the basis of baseless, unsubstantiated reasoning, is rebutted and strongly contended.”