ACIT, NEW DELHI V. M/S. LINKWISE MARKETING PVT. LTD., KOLKATA

ITA 6659/DEL/2016

AI Insights

The case involves an appeal by the Revenue against the order of the CIT (A) which had deleted the additions made by the Assessing Officer on account of cash credits, unexplained share application money, and bogus expenses claimed by M/s. Linkwise Marketing Private Ltd. The additions were initially made following a search and seizure operation under section 132 of the Income-tax Act, 1961, which led to the discovery of various documents and transactions deemed suspicious by the AO. The CIT (A) found that the additions were not sustainable based on the merits of the case and previous rulings on similar issues involving other group companies. The Tribunal agreed with the CIT (A) and dismissed the Revenue's appeal, citing consistency with earlier judgments and the lack of new evidence to substantiate the AO's claims.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 47279 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Other Referred Cases: Mauria Udyog Ltd. vs. ITAT, Quality Synthetics Pvt. Ltd. vs. ITAT, Sri Narayan Rajkumar Merchants Ltd. vs. ITAT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BALJEET KAUR
• Assessee Lawyers: VED JAIN
• Keywords: Income from undisclosed sources; Principle of natural justice; Search and seizure; Bogus
• Section: 142(1); 143(2); 132; 153A; 68; 43; 13; 153C; 133A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’: NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER and SHRIS.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA No.6659/DEL/2016 (Assessment Year: 2013-14) ACIT, Central Circle 3, vs. M/s. Linkwise Marketing Private Ltd., New Delhi. Room No.107, Anand Jyoti Building, Netaji Subhas Road, Kolkata – 711 204 (West Bengal). (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Ved Jain, Advocate REVENUE BY : Ms. Baljeet Kaur, CIT DR Date of Hearing : 28.01.2025 Date of Order : 09.04.2025 O R D E R PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER : 1. The Revenue has filed appeal against the order of the Learned Commissioner of Income Tax (Appeals)-23, New Delhi [for short “ld. CIT(A)”] dated 26.10.2016 for the Assessment Year 2013-14 raising following grounds of appeal :- “1. The order of Ld. CIT (A) is not correct in law and on facts. 2. On the facts and circumstances of the case, the CIT(A) has erred in deleting the addition of Rs.3,00,00,000/- made by A0 on account of cash credit in the form of shares. 2 ITA No.6659/DEL/2016 3. On the facts and circumstances of the case, the CIT(A) has erred in deleting the addition of Rs.14,97, 50,000/- made by AO on account of unexplained share application money. 4. On the facts and circumstances of the case, the CIT(A) has erred in deleting the addition of Rs.2,00,000/- made by A0 on account of bogus expenses. 5. On the facts and circumstances of the case, the Ld. CIT (A) has erred in law in its decision that AO has not given sufficient opportunity to the assessee.” 2. Grounds No.1 & 5 are general in nature, hence do not require any adjudication. 3. With regard to ground no.2 regarding addition of Rs.3,00,00,000/- on account of cash credit in the form of shares, brief facts of the case are, search and seizure proceedings under section 132 of the Income-tax Act, 1961 (for short ‘the Act’) were conducted in the case of M/s. Mauria Udyog Ltd. and its group concerns and residential / factory premises of partners, directors and proprietors of the group on 07.08.2013. The warrants of authorization for search of various residential and business premises were issued on 06.08.2013 & 07.08.2013. During the course of search, documents, cash, jewellery etc. were found and seized. Thereafter, the case of the assessee was centralized with the AO, Central Circle 3, New Delhi vide order u/s 127 of the Act dated 13.07.2015 of CIT, Central 1, New Delhi. Thereafter, notice u/s 153C of the Act was issued on 17.09.2015 which returned unserved with remark “not known”. 3 ITA No.6659/DEL/2016 Again notice u/s 153C was issued on 19.01.2015 and in response, the assessee filed written submissions on 03.03.2016 requesting to treat the return filed with ITO-WD—7(1), Kolkata for AY 2013-14 declaring total income of Rs.4,01,603/- as return filed in response to notice u/s 153A of the Act. Notices u/s 143(2) and 142(1) of the Act along with questionnaire were issued and served on the assessee. In response, ld. AR of the assessee attended from time to time and filed written submissions in response to the queries raised. 4. During assessment year under consideration, the assessee has invested as share applciations money in the company, viz., M/s. Nexus Commosales Pvt. Ltd. (for short M/s. Nexus) of the quantity of 29,95,000 for an amount of Rs.2,99,50,000/-. These shares of M/s. Nexus were further sold by the assessee company to Kolkata based company, i.e., M/s. Eastwest Enclave Pvt. Ltd. in a very short span of time. In an attempt to establish the multi-layered transactions, bank statement of the above stated bogus Kolkata companies were called for. AO discussed the bank account details of the companies, nature of bank statements of the Kolkata companies and also recorded the statement of one Shri Arun Kumar Kahnani at pages 39 to 43 of assessment order. In view of the above inquiries, AO issued a show cause notice dated 21.03.2016 and served on the assessee asking as to why an amount of Rs.3,00,00,000/- 4 ITA No.6659/DEL/2016 that has been introduced as sale of shares to these parties may not be treated unaccounted income of the company and same be added and copies of statements of all the individuals whose statements were used as evidence were also provided with the show cause notice. In response to the notice, assessee filed its detailed reply. But the AO after considering the same did not find it satisfactory. He observed that assessee has nothing to produce and offer to substantiate the genuineness of the parties to whom shares have been claimed to be sold and the assessee has failed to discharge the primary onus of providing identity, capacity of making the investment and genuineness of the transactions. After relying on the decisions of Hon’ble Supreme Court and Hon’ble Delhi High Court, AO held that on the basis of enquiry made and discussed, it is very much clear that neither identity nor creditworthiness of this party proved and the transactions are also not genuine. He observed that the details of cash credit received in the books of account of the assessee from this party i.e. M/s. Eastwest Enclave Pvt. Ltd. is Rs.3,00,00,000/-. Accordingly, he held that Rs.3,00,00,000/- that has been introduced as sale of shares from these parties is being treated as unaccounted income of the assessee u/s 68 of the Act and same is added to the total income of the assessee. 5. Aggrieved assessee preferred an appeal before the ld. CIT (A) and ld. CIT (A) deleted the addition made by the AO by observing as under :- 5 ITA No.6659/DEL/2016 “4.4 Ground no.02 relates to the addition of Rs.3.00 crore on account of sale of shares held by the appellant in M/s Nexus Commosales Pvt. Ltd. (NCPL) to M/s SKP Commotrade Pvt. Ltd. (name changed to Manrup Comtrade Pvt. Ltd. – Manrup CPL) and M/s Siddeshwari Vyapaar Pvt Ltd. (SVPL). The facts of the matter are similar to that of the case of M/s Mauria Udyod Ltd. (MUL), M/s Quality Synthetics Pvt. Ltd. (QCPL) and M/s Sri Narayan Rajkumar Merchants Ltd. (SNRML) for AY 2013-14 and I have dealt the issue in detail in my order dt. 20.10.2016 in Appeal No.15/16-17 at paras 4.2.3 to 4.2.5 in the case of MUL for AY 2013-14. Similar documents have been filed in respect of the other two companies Manrup CPL & SVPL as well and the facts are similar in respect of these companies as well, in this case the facts related to the purchase and sale of shares of NCPL by the appellant company and corresponding payments made/received through banking channels are as under: Note: KTK: NCPL a/ no.2252000100101401 & LMPL a/c no.22520001 00101501 with Karnataka Bank Ltd., Faridabad; OBC- Oriental Bank of Commerce, Bhowanipore, Kolkata: Manrup CPL a/c no.02331131001471; SVPL- a/c no.02331 131001658. As mentioned above, the facts related to the addition are similar to that in the case of MUL, QSPL & SNRMPL for AY 2013-14 and for the detailed reasons in my order of MUL for AY 2013-14 (supra) and that of the other group companies, the addition made 6 ITA No.6659/DEL/2016 by the AO is not sustainable on merits as well. The addition made on this account is therefore deleted.” 6. Against this order, Revenue is in appeal before us. 7. Ld. DR of the Revenue relied upon the order of the AO. 8. At the time of hearing, ld. AR of the assessee submitted that during the year under consideration, the assessee had purchased the shares of M/s. Nexus Commosales Pvt. Ltd. for a sale consideration of Rs.2,99,50,000/- and further sold them to M/s. Eastwest Enclave Pvt. Ltd. For a consideration of Rs.3,00,00,000/-. He further submitted that as a result of such sale of shares, there was a short term capital gain to the assessee of Rs.50,000/- which was duly shown in the computation of income and this fact has neither been disputed by AO nor any adverse inference was drawn with regard to the disclosure of short term capital gain by the assessee. He further submitted that this issue is covered in favour of the assessee as is evident from para 4.4 of the CIT (A) order, reproduced above. He submitted that the facts of the case are similar to facts in the case of group companies, namely, Mauria Udyog Ltd., Quality Synthetics Private Limited, Sri Narayan Rajkumar Merchants Private Limited for same AY 2013-14 and, therefore, ld. CIT(A) has deleted such addition relying on his orders passed in the case of above three companies i.e. MUL, QSPL & SNRMPL for AY 2013-14. He further submitted that it 7 ITA No.6659/DEL/2016 is pertinent to note here that the Revenue had filed appeals in those cases which were dismissed by the ITAT. He submitted that ld. CIT (A) has relied upon the order passed in the case of Mauria Udyog Ltd. and the said order has been upheld by the ITAT in consolidated order dated 29.11.2018 in the case of M/s. Navneet Kumar Sureka, Mauria Udyog Ltd. & M/s. Narayan Rajkumar Merchants Ltd. and Hon’ble Delhi High Court order dated 23.07.2019 in the case of M/s. Mauria Udyog Ltd. 9. Considered the rival submissions and the material available on record. We find that the issue under consideration is squarely covered in favour of the assessee and ld. CIT (A) has rightly deleted the addition made by the AO. We do not find any infirmity in the order of the ld. CIT (A) and also the matter is squarely covered by the aforesaid decision of ITAT and Hon’ble Delhi High Court in the case of M/s. Mauria Udyog Ltd. Accordingly, ground no.2 of Revenue’s appeal is dismissed. 10. With regard to Ground No.3 regarding protective addition of Rs.14,97,50,000/- on account of unexplained share applciations money, the relevant facts are, during AY 2013-14, AO observed that authorized share capital of the assessee company was increased from Rs.1,00,000/- to Rs.15,00,00,000/-. AO observed the scanned copy of the documents annexed as page 89 of Annexure AA-3, Party P-4, seized on 23.08.2013, which was reproduced at page 2 of the assessment order. He observed 8 ITA No.6659/DEL/2016 that this document contained list of certain Kolkata based companies that are shareholders as on 05.08.2013 in the two Mauria group companies and exclusive list of companies that subscribed the shares of these companies are given at page 3 of the assessment order. In order to verify the creditworthiness of these Kolkata based companies, AO conducted a survey operation at their business premises/registered offices on 09.09.2013. AO recorded statements of Shri Raj Bahadur Singh and Shri Sushanta Kumar Datta. During survey operation on 09.09.2013, AO found that Shri Arun Kumar Kahanani was controlling the business affairs of all the companies and his statement was recorded which was given at page 5 & 6 of the assessment order. Further, statement of another accommodation entry provider, Shri Sujit Kumar Bose was also recorded and is placed at pages 6 & 7 of the assessment order. During assessment proceedings, various notices were issued to the assessee and in response, the assessee has submitted details of share application money received/share allotted/share premium etc. AO made the detailed enquiry of the submissions made by the assessee which is elaborated at pages 8 to 32 and found that it is very much clear that neither identity nor creditworthiness of these parties were proved and the transactions are also not genuine. Further, after going through all the detailed enquiries and statements recorded, in the interest of natural justice, AO issued a show 9 ITA No.6659/DEL/2016 cause notice dated 21.03.2016 and served on the assessee asking as to why an amount of Rs.14,97,50,000/- that has been introduced as share capital from these parties may not be treated unaccounted income of the assessee company and same be protectively added back u/s 68 of the Act. In response, assessee filed its reply. AO considered the reply of the assessee but did not find it satisfactory and held that money received from non-genuine Kolkata based companies in the form of shares issued to them is hereby added protectively in the hands of the assessee company and the respective amount are being added to the hands of the original shareholders and made an addition of Rs.14,97,50,000/- on protective basis. 11. Aggrieved assessee preferred an appeal before the ld. CIT (A). Ld. CIT (A) deleted the addition by holding as under :- “4.3 Ground no.01 relates to addition of Rs.14,97,50,000/- on account of shares of the appellant company originally subscribed by five companies M/s Nexus Commosales Pvt (NCPL), M/s Mauria Udyod. Ltd. (MUL), M/s Quality Synthetic Ltd. (QSPL), M/s Sri Narayan Rajkumar Merchants Ltd, (SNRML) and M/s Jotindra eel & Tubes Ltd. (JSTL), all Mauria group companies, and subsequently sold to the Kolkata based companies (mentioned at para-3.2 herein above) by the original allottees of the Mauria group. The addition has been made protectively in the hands of the appellant and substantively in the hands of these five companies. The additions in the hands of these five companies, appeals of which are simultaneously being considered by me, have been made not on account of purchase of shares of LMPL (as also that of the other sister concern, NCPL), which investments have been accepted by the AO in their respective hands, but on account of subsequent sale of the same shares by the respective five 10 ITA No.6659/DEL/2016 companies of Mauria group to third parties of Kolkata which sale transactions have been held to be bogus by the AO and added u/s 68 of the Act in the hands of MUL, QCPL, SNRML & NCPL and JSTL. I may mention that even the facts JSTL are similar to that of MUL and other companies of the Mauria group. In this case the AO has made the addition on protective basis considering the share capital/application of these five companies as ingenuine though the same have been accepted in their respective hands. T have considered the matter related to the purchase and sale of shares of the appellant company (as also that of the other sister concern, NCPE by these five companies in the respective orders of MUL, QCPL, SNRML & NCPL (the appeal of JSTL is pending as on date) dt. 20.10.2016, 21.10.2016, 21.10.2016 & 26.10.2016 in Appeal Nos. 15, 12, 16 & 14/16-17 all for AY 2013-14 wherein I have deleted the additions made on this account in their respective hands. Interestingly, there is no deposit of the amount of Rs.14.97.50,000/- in the accounts of the appellant company as having been received from M/s SKP Commotrade Pvt. Ltd. (SKPCPL), M/s Samrat Finvestor Pvt. Ltd. (SHPL), M/s Dewdrops Mercantiles Private Limited. (DMPL), M/s Pragya Commodities Private Limited (PCPL), M/s Sri Narayan Mercantile Private Limited., (SNMPL), M/s Seema Holdings Pvt. Ltd. (Seema HPL), M/s Sharma Hire Purchase Pvt. Ltd. (SHPL) and M/s Siddeshwari Vyapaar Pvt Ltd. (SVPL) who had in fact purchased the shares of the appellant company from the other five Mauria group companies and payments by these Kolkata based companies were made to these five Mauria group companies, MUL, QCPL, SNRML & NCPL and JSTL, and therefore there cannot be any presumption of \"cash credit\" in the accounts of the appellant in respect of these transactions. Therefore s.68 of the Act is not applicable in the case of the appellant. There is an apparent fallacy in finding of the AO on this account. Thus, the protective addition in the hands of the appellant company is not sustainable. The addition made protectively on this account is therefore deleted.” 12. Against this order, Revenue is in appeal before us. 13. Ld. DR of the Revenue relied upon the order of the AO. 11 ITA No.6659/DEL/2016 14. At the time of hearing, ld. AR of the assessee submitted that this issue here is protective addition made in the hands of the assessee and substantive addition made in the name of the 5 group companies each of which has subscribed the share capital of the assessee company. He submitted that the Substantive addition made in the hands of the group companies have been deleted on merits by the ITAT. He submitted that the ld. CIT(A) has passed detailed order on merit in the case of Mauria Udyog Limited (being Appeal No. 15/16-17 dated 20.10.2016) and this order has been followed in the other group companies. He further submitted that the Revenue has come in appeal against the order of the Mauria Udyog Ltd. in ITA No.6660/Del/2016 and other group companies and the ITAT has confirmed the order of the CIT(A) deleting the addition on merit in the case of Mauria Udyog Ltd. ITAT has followed this order in other group companies. He submitted that the Revenue has filed appeal against the order of the ITAT in the case of group company, namely, Mauria Udyog Limited before the Hon’ble Delhi High Court and Delhi High Court dismissed the appeal filed by the Revenue vide order dated 23.07.2019 (supra). Accordingly, he pleaded to uphold the order of the ld. CIT (A). 15. Considered the rival submissions and the material available on record. We find that the issue under consideration is squarely covered in favour 12 ITA No.6659/DEL/2016 of the assessee by the aforesaid decision of ITAT and Hon’ble Delhi High Court in the case of M/s. Mauria Udyog Ltd. (supra). Accordingly, we do not find any infirmity in the order of the ld. CIT (A) and the same is upheld. Accordingly, ground no.3 of Revenue’s appeal is dismissed. 16. With regard to Ground No.4 regarding addition of Rs.2,00,000/- on account of bogus expenses, relevant facts are, during assessment proceedings in the case of M/s. Trinity Shipping and Allied Services Pvt. Ltd., statement of Shri Solly Perumal was again recorded wherein he has endorsed his statement recorded by the investigation wing and the assessee was given an opportunity to cross examine but the assessee chosen not to avail this opportunity. AO observed that as per statement of Shri Solly, it is clear that no goods of any kind had been stored in SP godown and in CC godown Kandla. Accordingly, AO show caused the assessee company as to why the expenses claimed as rent payments made to above two companies may not be disallowed and also in absence of exact details with respect to turnover related to these two godowns, why 20% of indirect expenses related to agro business may not be disallowed and added to your income. In response, assessee filed its reply. AO considered the reply of the assessee but not found to be acceptable. Accordingly, he disallowed and added an amount of Rs.1 lac paid as rent to M/s. Trinity Shipping Allied Serviced Ltd. and further as the assessee 13 ITA No.6659/DEL/2016 has not provided the exact details with respect to turnover related to these two godowns, adhoc disallowance of Rs.1 lac is also made on account of bogus expenses related to bogus turnover related to these godowns. Accordingly, he made an addition of Rs.2,00,000/-. 17. Aggrieved assessee preferred an appeal before the ld. CIT (A) who deleted the addition by observing as under :- “4.5 Ground no. 03 relates to disallowances of expenses of Rs.2,00,000/- on account of payment to M/s Trinity Shipping & Allied Services Pvt. Ltd. The AO has, at para-6 of the assessment order, mentioned that trust receipts were found issued by M/s Trinity Shipping & Allied Services Pvt. Ltd. and therefore survey u/s 133A of the Act was conducted at the premises of M/s Trinity Shipping & Allied Services Pvt. Ltd. (TSASPL), Plot No. 46A, Sector-1A, Gandhidham whereby statement of Sh. Solly Perumal. Director of M/s Trinity Shipping & Allied Services Pvt. Ltd. was recorded who stated that they had no business with the appellant company and that the trust receipts shown to him are forged. The AO has reproduced Q.Nos. 10 to 12 of the statement of Sh. Perumal at para-6 of the assessment order. As per Q.No. 11 the alleged receipts of M/s Trinity Shipping & Allied Services Pvt. Ltd. shown to Sh. Perumal were three receipts one of M/s Linkwise Marketing Pvt. Ltd. dt. 09.03.2013 and two receipts dt. 09,03.2013 and 05.03.2013 of M/s Nexus Commosales Pvt. Ltd., group companies of the appellant company, The AO has, based on these facts concluded that the appellant company had not stored any kind of goods in the SP and CC godowns at Kandla of M/s Trinity Shipping & Allied Services Pvt. Ltd. and in spite of the reply of the assessee, quoted at para 6.3 of the assessment order, that no expenses have been incurred by the company which has been paid to M/s. Trinity Shipping & Allied Services Pvt. Ltd. for storage of goods from AY 2008-09 to 2014-15 except for those mentioned herein above, the AO made an “ad hoc disallowance of Rs.1.00 lakh” observing that “the disallowance is on account of bogus expense related to bogus turnover related these two godowns\" beside the payment of Rs.1.00 lakh by the appellant during the year as rent to TSASPL. 4.5.2 The appellant has submitted copy of the agreement dt. 20.12.2011 with TSASPL for warehousing. clearing/handling the goods traded by the appellant company at Kandla and Mundra, Gujarat and 14 ITA No.6659/DEL/2016 copy of the ledger and bank statement with Karnataka Bank mentioned above indicating payment of Rs.1.00 lakh by cheque no.357105 on 23.08.2013 to TSASPL. The AO has not brought on record any material evidence related to any such material which was transported to Kandla and which formed part or the total turnover of the appellant company, not to talk of lack of any evidence that any material was kept in those godowns or that payment of any nature or purpose Was made to M/s Trinity Shipping & Allied Services Pvt. Ltd. Under these facts and circumstances, the addition of Rs.1.00 lakh on account of payment of rent to TSASPL is not sustainable. The AO has also not brought on record any material for making further addition of Rs.1.00 lakh on ad hoc basis. The addition of Rs.2.00 lakh made is therefore deleted.” 18. Against this order, Revenue is in appeal before us. 19. Ld. DR of the Revenue relied upon the order of the Assessing Officer. 20. Ld. AR of the assessee submitted that the AO has made addition of Rs.2,00,000/- which comprises of disallowance of Rs.1,00,000/- paid as rent for warehouse and a further ad-hoc disallowance of Rs.1,00,000/-. He submitted that the ld. CIT(A) has deleted the same and held that the assessee has produced necessary evidences in support the expense of Rs.1,00,000/- towards warehouse rent and further the AO was not justified in making ad-hoc addition of Rs.1,00,000/-. As regards the warehouse rent, he submitted that it is an undisputed fact that assessee has paid Rs.1,00,000/- on 23.08.2013 via banking channels; copy of agreement dated 20.12.2011 entered into between the assessee and M/s. Trinity Shipping & Allied Services Pvt. Ltd. for warehousing, cleaning/handling the goods traded by the assessee at Kandla and Mundra, Gujarat has also been submitted before the AO; no defect has 15 ITA No.6659/DEL/2016 been pointed out in the copy of ledger account furnished by the assessee; and no adverse finding has been recorded with respect to the entry recorded in the bank statement. He further submitted that as regards the ad-hoc disallowance made by the AO, there was no basis whatsoever. Accordingly, he pleaded that the disallowance of warehouse rent of Rs.1,00,000/- and a further ad-hoc disallowance of Rs. 1,00,000/- made by the AO has rightly been deleted by the ld. CIT(A) which may be upheld. 21. Considered the rival submissions and material available on record. We find cogency in the submissions of the ld. AR of the assessee as well as ld. CIT (A) has rightly dealt with the issue under consideration. Accordingly, we do not find any infirmity in the order of the ld. CIT (A), which is upheld. Hence, ground no.4 is dismissed. 22. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on this 9th day of April, 2025. Sd/- sd/- (SATBEER SINGH GODARA) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 09.04.2025 TS 16 ITA No.6659/DEL/2016 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals). 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "