ACIT, CC-26, NEW DELHI V. NINE CORPORATE INCEPTIONS (P) LTD. (FORMALLY KNOWN AS M/S.SKM CREATION PVT. LTD.), DELHI

ITA 227/DEL/2022

AI Insights

The case involves multiple appeals by the Revenue against the orders of the CIT(A) which had deleted the additions made under section 68 and the commission income in the hands of M/s Nine Corporate Inception Pvt Ltd for various assessment years. The Revenue contended that the assessee failed to produce concrete evidence to support its claims, while the assessee argued that it acted merely as a conduit for the funds and did not earn any commission. The tribunal examined the role of the assessee as a conduit company and the legal implications of such a status under the Income-tax Act, 1961, referencing several judicial precedents that supported the CIT(A)'s decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 37355 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2015-2016
• Other Referred Cases: ACIT, Central Circle-26, New Delhi Vs Zed Enterprises (P) Ltd, The DCIT, Central Circle-26, New Delhi Vs Shivij Garments (P) Ltd, The ACIT, Central Circle-26, New Delhi Vs Zen Tradex (P) Ltd, The DCIT, Central Circle-26, New Delhi Vs Third Generation Traders (P) Ltd, The DCIT, Central Circle-26, New Delhi Vs Shivangi Garments (P) Ltd, The ACIT, Central Circle-26, New Delhi Vs Round Square Exim (P) Ltd
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BALJEET KAUR
• Assessee Lawyers: SHILPI JAIN
• Keywords: Additional evidence; Unexplained cash credit; Income from undisclosed sources; Accommodation entries; Source of fund
• Section: 153A; 139(1); 68; 208; 153C

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘E’ BENCH, NEW DELHI BEFORE MS. MADHUMITA ROY, JUDICIAL MEMBER AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 189/DEL/2022 [A.Y. 2014-15] ITA No. 190/DEL/2022 [A.Y. 2013-14] ITA No. 191/DEL/2022 [A.Y. 2016-17] ITA No. 227/DEL/2022 [A.Y. 2015-16] The A.C.I.T. Vs. M/s Nine Corporate Inception Pvt Ltd Central Circle – 26 [Formerly known as SKM Creation New Delhi Pvt Ltd], 1555/13, Ground Floor S.F. Mukherjee Marg, New Delhi PAN – AAICS 2335 P CO No.177/DEL/2022 (A/o ITA No. 190/DEL/2022 [A.Y. 2013-14]) CO No.178/DEL/2022 (A/o ITA No. 189/DEL/2022 [A.Y. 2014-15]) CO No.179/DEL/2022 (A/o ITA No. 227/DEL/2022 [A.Y. 2015-16]) CO No.180/DEL/2022 (A/o ITA No. 191/DEL/2022 [A.Y. 2016-17]) M/s Nine Corporate Inception Pvt Ltd Vs. The A.C.I.T. [Formerly known as SKM Creation Central Circle – 26 Pvt Ltd], 1555/13, Ground Floor New Delhi S.F. Mukherjee Marg, New Delhi PAN – AAICS 2335 P (Applicant) (Respondent) Assessee By : Ms. Shilpi Jain, CA Department By : Ms. Baljeet Kaur, CIT-DR 2 Date of Hearing : 15.01.2025 Date of Pronouncement : 22.01.2025 ORDER PER BENCH:- The above captioned four separate appeals by the Revenue are preferred against four separate orders of the ld. CIT(A) – 29, New Delhi dated 24.11.2021 for A.Y 2013-14, 2014-15, 2015-16 and 2016-17 respectively. The assessee has filed cross objections for A.Ys A.Y 2014- 15, 2013-14, 2016-17 and 2015-16 respectively. 2. Since the underlying facts are common in the cross objections of the assessee and Revenue and pertain to same assessee, they were heard together and are disposed of by this common order for the sake of convenience and brevity. 3. Representatives of both the sides were heard at length. Case records carefully perused. Relevant documentary evidence brought on record duly considered in light of Rule 18(6) of the ITAT Rules. Relevant judicial decisions considered wherever necessary. 3 4. At the very outset, the ld. counsel for the assessee submitted that it did not want to press the cross objections filed for A.Ys A.Y 2014-15, 2013-14, 2016-17 and 2015-16. The same are, accordingly, dismissed as not pressed. ITA No. 227/DEL/2022 [A.Y 2015-16] 4. The appeals of the Revenue for all the four appeals are identical. We however, take up the Revenue’s appeal for A.Y 2015-16 first, the adjudication of which shall be applicable for the other three appeals. The grounds raised in AY 2015-16 read as under: “1. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.6,93,50,000/- made on account of undisclosed sources u/s 68 for unexplained entries in bank account ignoring the fact that assessee has failed to produce any concrete and any additional evidences in support of its contention. 2. That on the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs.1,73,375/- made on account of unaccounted commission, ignoring the fact that the assessee has failed to disclose the commission earned from providing accommodation entry. 3. That the order of the CIT (A) is perverse, erroneous and is not tenable on facts and in law 4. That the grounds of appeal are without prejudice to each other.” 4 5. Briefly stated, the facts of the case are that the assessee is a resident Private Limited company. The assessee filed a return of income for the A.Y. 2015-16 u/s 139(1) of the Income-tax Act, 1961 [the Act, for short] on 15.09.2015 declaring an income of Rs. 3,08,640/-. 6. A search action was conducted at the residential as well as business addresses related to Sh. Anand Kumar Jain and Sh. Naresh Kumar Jain and those of their employee Kaushal Kumar on 17.12.2015 . In the course of search, it was found that Sh. Anand Kumar Jain and Sh. Naresh Kumar Jain were entry provider and were managing various companies, including the assessee, from different Residential and Business Premises through dummy directors for the purposes of providing accommodation entries. In the course of search, on the basis of seized materials, it was established that the assessee was a conduit company belonging to the entry operator Sh. Anand Jain and Sh. Naresh Jain who were managing and controlling various shell concerns for providing accommodation entries in lieu of commission. 7. The Assessing Officer passes an order u/s 153C r.w.s. 153A of the Act considering the assessee company as a conduit company and made 5 the addition of entire credit entries of Kotak Mahindra Bank totaling to Rs. 6,93,50,000/- and treating it as unexplained entries u/s 68 of the Act on protective basis. The AO also made substantive addition of Rs. 1,73,375/- on account of unaccounted commission, earned in the process of providing accommodation entries, in the hands of the assessee company. 8. Aggrieved, the assessee went in appeal before the ld. CIT(A) who deleted the protective addition of Rs 6.93 crore as well as the commission income of Rs. 1,73,375/-. 9. Aggrieved by the above action of the ld. CIT(A), the Revenue is in appeal before us. 8. The ld. DR submitted that during search operations on the entry operators, it was found that Shri Anand Jain was giving accommodation entry to various persons through its shell companies. The Assessing Officer has also added commission in the hands of the assessee on account of accommodation entries provided and that such commission income has been finally added in the hands of the entry operator Shri Anand Jain and another. 6 9. The ld DR submitted that the Assessing Officer has made additions in the case of the instant assessee u/s 68 of the Act as protective assessments and substantive additions are to be made in the hands of the real beneficiaries. It is also the say of the ld. DR that the ultimate beneficiaries are yet to be found, hence the protective addition made in the hands of the assessee may be continued. 10. Per contra, the ld. counsel for the assessee submitted that in the case of other conduit companies of same entry operator, ITAT has deleted the protective assessments as the assessee has only been considered as conduit shell company. The ld. counsel for the assessee relied on the following decisions: (i) ACIT, Central Circle-26, New Delhi Vs Zed Enterprises (P) Ltd dated 09.01.2024 for A.Y. 2012-13 to 2016-17 (ITA NOS. 208 TO 212/DEL/2022) (ii) The DCIT, Central Circle-26, New Delhi Vs Shivij Garments (P) Ltd dated 06.02.2024 for A.Y. 2012-13 to 2016-17 (ITA NOS. 208 TO 212/DEL/2022) (iii) The ACIT, Central Circle-26, New Delhi Vs Zen Tradex (P) Ltd dated 13.09.2024 for A.Y. 2012-13 to 2014-15 and 2017-18 (ITA NOS. 371 TO 374/DEL/2022) (iv) The DCIT, Central Circle-26, New Delhi Vs Third Generation Traders (P) Ltd dated 20.09.2024 for A.Y. 2012-13 to 2017-18 (ITA NOS. 2413 ΤΟ 2418/DEL/2024) 7 (v) ITAT Order passed in the case of The DCIT, Central Circle-26, New Delhi Vs Shivangi Garments (P) Ltd dated 16.10.2024 for Α.Υ. 2013- 14 to 2015-16 (ITA NOS. 2186 TO 2188/DEL/2024) (vi) ITAT Order passed in the case of The ACIT, Central Circle-26, New Delhi Vs Round Square Exim (P) Ltd dated 08.01 for A.Y. 2012-13 to 2015-16 (ITA NOS. 8834 TO 8837/DEL/2019) 11. We have heard the rival submissions and have perused the relevant material on record. We find that the assessee is a conduit company being run by the entry operator Anand Jain and Naresh Jain and others. The assessee bank account has been used as conduit to transfer funds to various other conduit companies of the entry operator for the use of ultimate end beneficiaries. We also note that the AO has made protective assessment in the hands of the assessee of the entire credit entries in its bank account. The AO mentions in his assessment order that information to the assessing officer of the beneficiaries have already been disseminated by the Investigation Wing for appropriate action. The AO himself is informing the AOs of the concerned beneficiaries for appropriate action in their respective cases. We find that the ld. CIT(A), referring to several decisions of jurisdictional High Court and Tribunals in his appellate order, has held as under: “9.1 In the above judicial pronouncements, it has been categorically held by various courts including Honorable Jurisdictional High Court 8 that where the assessee is found to be engaged in the activity of accommodation entries on commission basis to various beneficiaries and there is по finding/observation of the AO alleging the assessee to be actual owner of the money/credits/deposits in its bank account and beneficiaries being identified there cannot be any addition of credit/funds deposited in the bank account in the hands of the assessee being the entry operator/conduit concern under section 68 of the Act treating it as unexplained cash credit. 9.2 Further it is noted that the addition of credits is made on protective basis in the hands of the appellant based on the finding that the appellant company acted as conduit and information to the real/actual beneficiaries/actual owners of the money/funds in the bank account of the assessee has already been disseminated to their respective assessing officer to take appropriate action as per law in their cases. In this regard, it is relevant to note here that protective assessment is a kind of assessment whereby the assessing officer, not knowing the true ownership of the asset/income therefrom, assesses the incomes in the hands of more than one person. However, in the present case of the appellant it is evident from the observations of the AO in the assessment order and the facts on record that the appellant being a conduit/shell company was not the real owner of the credits in its bank account and the real beneficiaries/owners of the money have already been identified by the department in this regard. Accordingly, when the beneficiaries were identified, there cannot be any protective addition of credits in the hands of the appellant since there being no doubt in the mind of the AO with respect to the belongingness/actual ownership of funds 9 being credited in the bank account of the appellant being shell/conduit concern. In this regard reliance is being placed on the decision of Hon'ble ITAT Delhi, in the case of SHRI SURESH NANDA VERSUS ACIT, CENTRAL CIRCLE-13, NEW DELHI, [2014] 31 ITR (Trib) 620 (ITAT [Del]) dated 11.04.2014.”…….. 9.3 In the above decision it was held by the Honorable Tribunal that when there is clear finding on record that the capital did not belong to the assessee and belonged to some other person whose existence is not in doubt then there cannot be a question of addition on protective basis in the hands of the assessee. In the present case of the appellant, there are clear observations of the AO in the assessment order that the credits in the bank account of the appellant belongs to the some other persons who have been identified and department has already taken steps to appropriate actions in the cases of those persons. Accordingly, the appellant cannot be charged with protective addition of credits/deposits in its hands. 9.4 The addition in such cases can at best be that of commission earned on such accommodation entries. But as far as charging of commission is concerned in the case of the appellant, it has been held by the AO in the assessment order that Sh. Anand Jain and Sh. Naresh Jain were entry operators who were managing and controlling various shell concerns including the appellant for providing accommodation entries in lieu of commission. Accordingly, taking that logic there is no question of charging of commission income in the hands of the appellant company, since nothing has been earned by the company in this regard being the shell concern. (Income Tax Therefore, I am of the view that no further addition can be made in 10 the hands of the appellant company under the facts as discussed above. Under these circumstances, the protective addition made by the AO of Rs. 6,61,50,000/- is directed to be deleted. The appellant gets relief on these grounds of appeal. 10. Ground No. 12: The appellant has challenged the addition made by the AO of Rs.1,65,375/-. The AO in the assessment order has made an addition on account of commission income of Rs. 1,65,375/-@ 0.25% on the total credits of Rs. 6,61,50,000/- received from various parties. 10.1 As discussed in para 9.4 above, Sh. Anand Jain and Sh. Naresh Jain were entry operators who were managing and controlling various shell concerns including the appellant for providing accommodation entries in lieu of commission. Thus, taking that logic there is no question of charging of commission income in the hands of the appellant company, since nothing has been earned by the company in this regard. I am of the view that no addition on account of commission is warranted in the hands of appellant company under the facts as discussed above. Therefore, the addition made on account of commission of Rs. 1,65,375/-is directed to be deleted. The appellant gets relief on this ground of appeal. 11. In the result, the appeal of the appellant is partly allowed’ . 12. The CIT(A) has found that the assessee is not the real owner of funds and the funds in the bank of the assessee is for the use of ultimate beneficiaries and it acted only as a conduit. In such circumstances, we find that the protective additions have no leg to 11 stand. Such decision of the CIT(A), on identical issues with similar facts, has been upheld by several decision of the Tribunal as relied upon by the ld AR as above. The co-ordinate bench in the case of Shivangi Garments [supra], has held as under: “5. Considered the rival submissions and material placed on record. We observed that the protective additions are made in the hands of the assessee in all the three assessment years under consideration. Ld. AR for the assessee brought to our notice decision of coordinate Bench in the case of Anand Kumar Jain (supra) who controls the assessee company, which is one of the companies, which was utilised to provide accommodation entries. The assessee company being a conduit company, addition was made on protective basis by the Assessing Officer by observing that the assessee has acted as conduit company for providing accommodation entries to the beneficiaries. Appropriate action in the case of beneficiary is to be taken by the concerned Assessing Officer. Since the addition was made on protective basis and the addition was made substantive basis in the hands of beneficiaries, we observed that ld. CIT (A) has deleted the same. It is a fact on record that assessee has acted only as a conduit entity therefore, we do not see any reason to disturb the findings of ld. CIT (A) in this regard. Accordingly, the ground raised by the Revenue is dismissed. 6. With regard to commission income which was made on substantive basis in the hands of the assessee, however it is brought to our notice that Anand Kumar Jain who is the provider of accommodation entries, who is the main person, has established these dummy and conduit 12 entities and he has earned the commission income and the same was offered to tax and also confirmed by the coordinate Bench in the case of Anand Kumar Jain (supra) which is 5 ITA Nos.2186 to 2188/Del/2024 placed on record, therefore, the same income cannot be subject to tax twice. Therefore, even on the issue of commission, we are not inclined to disturb the findings of the ld. CIT (A). Accordingly, this ground of appeal is also dismissed.” 13. In the case of Zen Tradex [supra], the co-ordinate bench has held as under: 7. We have heard both the parties at length. We find merit in the submission of the Ld. AR. The Tribunal, in the case of Zed Enterprises (P) Ltd., ITA No. 208 to 212/Del/2022 for AY 2012- 13 to 2016-17, has held as under: “12. We have examined the ratio of the ld. CIT(A). The ld. CIT(A) held that the AO in the assessment order has claimed to have identified the names of beneficiaries and already disseminated the information to the assessing officers of the beneficiaries and hence the credits received by the appellant cannot be treated as unexplained credit in its hands since, the said transactions are mere arrangement of funds/routing of unaccounted income o f the beneficiaries to whom the said funds were transferred through the bank of the appellant company in lieu of commission. The ld. CIT(A) has also made note of the beneficiaries of the entries given by the assessee company. For the sake of ready reference, a few entries and the beneficiaries are reproduced below: …… …… 13 13. From the above, the ld. CIT(A) held that the assessee company has received funds from various concerns as mentioned above and thereafter amounts were transferred to the above- mentioned companies/concerns immediately, thus the appellant company is not beneficiary company. The ld. CIT(A) also obtained the remand report from the AO and held that the AO has verified the fund flow statement depicting the source of funds and utilization of the same for payments to beneficiaries submitted by the assessee. The ld. CIT(A) held that it was found which established that the Sh. Anand Jain and Sh. Naresh Kumar Jain were operating bank accounts in the names of various concerns/companies through which accommodation entries were being provided and the appellant company was one of such shell concerns. Further the beneficiaries of such accommodation entries were also identified and information to their respective AOs was also disseminated as mentioned in the assessment order as well as the remand report. 14. Having observed so, the ld. CIT(A) held that as far as charging of commission is concerned in the case of the assessee , it has been held by the AO in the assessment order that Sh. Anand Jain and Sh. Naresh Jain were entry operators who were managing and controlling various shell concerns including the appellant for providing accommodation entries in lieu of commission and taking that logic there is no question of charging of commission income in the hands of the appellant company arises, 14 since nothing has been earned by the company, being the shell concern. 15. Since, the commission already stands taxed in the hands of the entry operators in their individual capacity, no separate commission can be charged in the hands of the pass through/ companies floated by the entry operators. As the assessee is found to be one of such pass-through entity, we decline to interfere with the order of the ld. CIT(A) in deleting the commission charged.” 8. We are of the considered view that the case of the assessee for all AYs is squarely covered by the decision in the Tribunal in the case of Zed Enterprises (P) Ltd., ITA No. 208 to 212/Del/2022 for AY 2012-13 to 2016-17. We are therefore, in agreement with the above extracted observations/ findings in para-7 as the facts of the present case are squarely covered by this case. In view of the decision & following the reasoning in the case of Zed Enterprises (P) Ltd. (supra) and considering the facts and circumstances of the instant case, all four appeals of the Revenue deserve no consideration and are accordingly dismissed.” 14. After careful perusal of the orders of the authorities below and the judicial pronouncements relied upon by the representatives of the assessee as well as the order of the ld. CIT(A), we find no reason to interfere with the findings of the ld. CIT(A). It is the finding of the AO as well as the CIT(A) that the assessee is not the owner of the 15 credits/deposits in its bank account and that the assessee acts only as a conduit for transferring the said funds to the ultimate real/actual beneficiaries. Respectfully following the decision in the cases of Zed Enterprises (P) Ltd ; Shivij Garments (P) Ltd ; Zen Tradex (P) Ltd (supra), M/s Round Square Exim Pvt Ltd (supra), we hold that the protective addition made in the instant case deserves to be deleted. Likewise, the addition on account of commission income is also deleted as the same has been considered in the hands of the main entry operators Sh Anand Jain and Naresh Jain. Accordingly, the ground no 1 and 2 are dismissed. 15. The facts of the instant case in the impugned year is pari materia to the facts of the cases for AY 2016-17; AY 2014-15 and AY 2013-14 except for the difference in the amounts. The decision of the impugned assessment year applies mutatis mutandis for the other appeals of the Revenue as above in relation to the protective additions u/s 68 and the substantive addition on account of commission. Accordingly, all the four appeals of the Revenue stand dismissed. 16. To sum up, in the result, all the four appeals of the Revenue i.e., ITA 189/Del/2022; ITA 190/Del/2022; ITA 191/Del/2022 and ITA 16 227/Del/2022 as well as all the four cross objections i.e, CO 177/Del/2022; CO 178/Del/2022; CO 179/Del/2022 and CO 180/Del/2022 of the assessee stand dismissed. The order is pronounced in the open court on 22.01.2025. Sd/- Sd/- [MADHUMITA ROY] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 22nd JANUARY, 2025. VL/ Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi Sr. No. Particulars Dates 1. Date of dictation of Tribunal order 2. Date on which the typed draft Tribunal Order is placed before the Dictation Member 3. Date on which the typed draft Tribunal order is placed before the other Member 4. Date on which the approved draft Tribunal order comes to the Sr. PS/PS 5. Date on which the fair Tribunal order is placed before the Dictating Member for pronouncement 6. Date on which the signed order comes back to the Sr.PS/PS 7. Date on which the final Tribunal order is uploaded by the Sr.PS/PS on official website 8. Date on which the file goes to the Bench Clerk alongwith Tribunal order 9. Date on which the file goes to the Supervisor (Judicial) 10. The date on which the file goes to the Assistant Registrar for endorsement of the order 11. Date of Despatch of the order "