Agroha Capital Services Ltd, Delhi V. ITO, War4d-1(4), New Delhi

ITA 1143/DEL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0794 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 16-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Keywords: Unexplained investment; Unexplained expenditure; Income from undisclosed sources; Document seized; Opportunity of being heard; Accommodation entries; Documents seized; Reassessment proceedings; Borrowed satisfaction
• Section: 69C; 143(1); 147; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : SMC : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.1143/DEL/2018 ASSESSMENT YEAR: 2009-10 AGROHA CAPITAL SERVICES LTD., C/O RAJ KUMAR & ASSOCIATES, CAS, L-7A (LGF), SOUTH EXTENSION, PART-2, NEW DELHI. PAN: AAACA9515B VS. ITO, WARD-1(4), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJ KUMAR, CA REVENUE BY : SHRI S.L. ANURAGI, SR.DR DATE OF HEARING : 19.02.2019 DATE OF PRONOUNCEMENT : 27.03.2019 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 11 TH JANUARY 2018 OF THE CIT(A)-1, NEW DELHI FOR ASSESSMENT YEAR 2009-10. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A PRIVATE LIMITED COMPANY INCORPORATED ON 23 RD OCTOBER 1996 UNDER THE COMPANIES ACT, 1956. IT FIL ED ITS RETURN OF INCOME ON 21 ST SEPTEMBER 2009 DECLARING AN INCOME OF RS.2420/-. T HE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, ON T HE BASIS OF INFORMATION RECEIVED FROM THE OFFICE OF THE DIRECTOR OF INCOME-TAX, INVE STIGATION-II, JHANDEWALAN EXTENSION, NEW DELHI, VIDE LETTER DATED 12 TH MARCH 2013, THAT DURING THE COURSE OF ITA NO.1143/DEL/2018 2 SEARCH OPERATION CARRIED OUT IN THE CASE OF SHRI SU RENDRA KUMAR JAIN GROUP OF CASES WHO WERE INVOLVED IN PROVIDING ACCOMMODATION ENTRIE S, IT WAS FOUND THAT THE ASSESSEE COMPANY ALSO FIGURES IN THE LIST AS ONE OF THE BENE FICIARIES. ACCORDINGLY, THE CASE OF THE ASSESSEE WAS REOPENED BY RECORDING REASONS UNDE R SECTION 147 AND BY ISSUE OF NOTICE UNDER SECTION 148. THE ASSESSEE FILED THE RE TURN IN RESPONSE TO THE NOTICE U/S 148 ON 29 TH MARCH 2016 AND ALSO REQUESTED FOR COPY OF THE REAS ONS RECORDED AS WELL AS APPROVAL U/S 151 OF THE ACT. THE COPY OF THE REASO NS RECORDED WAS SUPPLIED TO THE ASSESSEE ON 29.06.2016. THE ASSESSEE FILED OBJECTI ONS TO SUCH REOPENING VIDE LETTER DATED 11 TH AUGUST 2016 WHICH WAS DULY DISPOSED OFF BY THE ASS ESSING OFFICER BY PASSING A SPEAKING ORDER. SUBSEQUENTLY THE ASSESSIN G OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE H AS RECEIVED AN AMOUNT OF RS.10 LAKHS FROM VIRGIN CAPITAL SERVICES LIMITED ON 18.11 .2008 THROUGH RTGS FROM AXIS BANK. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN THE IDENTITY AND CREDITWORTHINESS OF THE INVESTOR AND THE GENUINENESS OF THE TRANSACTION . REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE AND OBSERVING THAT THE ASSESS EE FAILED TO SUBSTANTIATE WITH EVIDENCE TO HIS SATISFACTION, REGARDING THE IDENTIT Y AND CREDITWORTHINESS OF THE INVESTOR AND GENUINENESS OF THE TRANSACTION, THE ASSESSING O FFICER MADE AN ADDITION OF RS.10 LAKHS U/S 68 OF THE ACT. WHILE DOING SO, THE ASSESS ING OFFICER HAD ALSO SUMMARISED THE CREDIBLE EVIDENCES IN THE INSTANT CASE WHICH AR E AS UNDER:- THE ASSESSEE RECEIVED FUND FROM THE COMPANIES WHIC H DO NOT HAVE ANY INDEPENDENT EXISTENCE BUT WERE PAPER COMPANIES BEIN G OPERATED, CONTROLLED AND USED BY S.K. JAIN, HIS BROTHER AND C LOSE BUSINESS ASSOCIATES FOR PROVIDING ACCOMMODATION ENTRIES, (REFER PARAGRA PH 8/ PARA 12 OF THE SHOWCAUSE NOTICE) ITA NO.1143/DEL/2018 3 THE INVESTOR COMPANIES WERE THE PART OF GROUP OF P APER COMPANIES USED AND OPERATED BY S.K. JAIN GROUP FOR PROVIDING ACCOM MODATION ENTRIES IN LIEU OF CASH PAYMENT, (REFER PARAGRAPH 8/ PARA 12 O F THE SHOWCAUSE NOTICE) THESE INVESTOR COMPANIES DID NOT HAVE ANY KNOWN BU SINESS ACTIVITIES AND IDENTIFIED BUSINESS OFFICES. DURING THE COURSE OF S EARCH AND SURVEY NO BOOKS OF ACCOUNTS, DOCUMENT SUGGESTING ANY GENUINE BUSINESS TRANSACTION BY THESE INVESTOR COMPANIES WERE FOUND, (REFER PARA GRAPH 8/ PARA 13-14 OF THE SHOW CAUSE NOTICE) DURING THE COURSE OF SEARCH INCRIMINATING D OCUMENTS WERE SEIZED FROM THE PREMISES CONTROLLED BY S.K. JAIN GROUP, SCRUTINY OF WHICH WHEREIN THE DETAILS OF ENTRIES TAKEN BY THE ASSESSEE COMPANY HA S BEEN MENTIONED INCLUDING THE NAME OF THE INTERMEDIARY (REFER PARAG RAPH 5/ANNEXURE A) DURING THE COURSE OF SEARCH INCRIMINATING BOOKS OF ACCOUNTS AND DOCUMENT WERE SEIZED FROM THE PREMISES CONTROLLED B Y S.K. JAIN GROUP SCRUTINY OF WHICH REVEALED THAT BENEFICIARIES INCLU DING THE ASSESSEE COMPANY MADE PAYMENTS IN CASH IN LIEU OF RECEIVING FUND THROUGH CHEQUE FOR SHARE CAPITAL/SHARE APPLICATION. (REFER PARAGRA PH 5/ANNEXURE B) IT IS EVIDENT FROM THE TRANSACTION RECORDED IN THE SEIZED DOCUMENTS THAT S.K. JAIN WAS CHARGING COMMISSION @ 1.75% FOR PROVI DING ACCOMMODATION ENTRIES IN LIEU OF CASH PAYMENT.(REFE R PARAGRAPH 6.11, 6.12 & 6.13) THESE COMPANIES DID NOT HAVE IDENTIFIABLE OFFICE, BUSINESS ACTIVITY, BOOKS, ETC. IT WAS NOTICED DURING SEARCH & SEIZURE AND SURVEY OPERATION THAT THESE COMPANIES WERE NOT LOCATED AT DISCLOSED ADDRESSES, (REFER PARAGRAPH 8/ PARA 13-14 OF THE SHOW CAUSE NOTICE) THE BANK ACCOUNTS OF THE GROUP OF INVESTOR COMPANI ES WERE OPERATED AND CONTROLLED BY S.K. JAIN GROUP. CHEQUE BOOK, PASS BO OK AND BANK ACCOUNTS OF THESE WEB OF INVESTOR COMPANIES WERE FOUND IN TH E CONTROL AND CUSTODY OF S.K. JAIN GROUP AND CONTACT NUMBER OF THESE COMP ANIES TO THE BANK WAS DISCLOSED AS MOBILE NUMBER OF S.K. JAIN AND HIS ASSOCIATES. IT IS CLEAR FROM THE PERUSAL OF ASSESSMENT ORDER T HAT THE FINDING OF INVESTIGATION WING HAVE BEEN CONFIRMED BY ASSESSMEN T UNIT THAT JAIN BROTHERS ARE ENGAGED IN THE BUSINESS OF PROVIDING A CCOMMODATION ENTRIES ITA NO.1143/DEL/2018 4 IN VIEW OF COMMISSION. THIS FINDING HAS ALSO BEEN U PHELD BY CIT(A) & ITAT. 3. THE ASSESSING OFFICER FURTHER MADE AN ADDITION O F RS 18,000/- BEING EXPENDITURE INCURRED FOR ARRANGING THE ACCOMMODATIO N ENTRY AS UNEXPLAINED INVESTMENT OF THE ASSESSEE. 4. BEFORE CIT(A), THE ASSESSEE CHALLENGED THE VALID ITY OF THE REASSESSMENT PROCEEDINGS AS WELL AS THE ADDITION ON MERIT. HOWEV ER, THE LD. CIT(A) DECIDED BOTH THE ISSUES AGAINST THE ASSESSEE. SO FAR AS THE INIT IATION OF REASSESSMENT PROCEEDINGS ARE CONCERNED HE HELD THAT THE ASSESSING OFFICER HAS AP PLIED HIS MIND WHILE RECORDING REASONS WHICH ARE BASED UPON SPECIFIC INFORMATION B ASED ON THE INVESTIGATION CONDUCTED BY THE DEPARTMENT AND ARE BASED ON CREDIB LE INFORMATION ABOUT THE BOGUS ENTRIES. SIMILARLY, HE HAS ALSO TAKEN THE APPROVAL OF THE HIGHER AUTHORITIES AS REQUIRED U/S 151 OF THE ACT BEFORE ISSUING NOTICE U/S 148 OF THE ACT. THE ASSESSING OFFICER HAS NEITHER ACTED UNDER THE BORROWED BELIEF OR UNDER TH E DIRECTIONS OF THE INVESTIGATION WING. HE ACCORDINGLY DISMISSED THE LEGAL GROUND CHA LLENGING THE VALIDITY OF THE REOPENING OF THE ASSESSMENT. SO FAR AS THE MERIT OF THE CASE IS CONCERNED HE ALSO UPHELD THE SAME ON THE GROUND THAT THE ASSESSEE HAS TRIED TO CREATE A PAPER TRAIL TO CAMOUFLAGE THE ENTIRE TRANSACTION TO INTRODUCE THE UNACCOUNTED INCOME BY WAY OF SHARE CAPITAL IN THE HANDS OF THE ASSESSEE COMPANY. MERE PRODUCTION OF DOCUMENTARY EVIDENCE BY WAY OF CONFIRMATION, BANK STATEMENT, C OPY OF ACKNOWLEDGEMENT OF RETURN FILED TO EXPLAIN THE SOURCE OF THE IMPUGNED CREDIT IS NOT THE BASIS FOR ACCEPTING CREDITWORTHINESS OF THE INVESTORS AND THE GENUINENE SS OF THE TRANSACTION. THE ITA NO.1143/DEL/2018 5 ASSESSING OFFICER IN THE INSTANT CASE HAS FULLY DIS CHARGED THE ONUS CAST ON HER AND THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS CAST UPON IT IN ORDER TO EXPLAIN THE SHARE APPLICATION MONEY/SHARE PREMIUM INTRODUCED DURING T HE YEAR. SO FAR AS THE ARGUMENT OF THE ASSESSEE THAT NO OPPORTUNITY OF CROSS EXAMIN ATION OF SHRI S.K. JAIN ON THE BASIS OF WHOSE STATEMENT ADDITION HAS BEEN MADE BY THE AO IS CONCERNED, HE OBSERVED THAT THE AO HAS MADE THE ADDITION ON THE STRENGTH OF ENQ UIRIES CONDUCTED AND BY MAKING INDEPENDENT ANALYSIS OF THE DOCUMENTS TO ARRIVE AT THE CONCLUSION THAT THE ASSESSEE HAS FAILED TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS IN RESPECT OF CREDITS OF RS.10 LACS. STATEMENT OF SHRI S.K. JAIN AND SEVERAL MATERIAL FOUND IN THE COURSE OF SURVEY HAS BEEN USED BY THE ASSESSING OFFICER AS CO RROBORATIVE MATERIALS TO STRENGTHEN HIS FINDINGS. SINCE THE ASSESSING OFFICER HAS NOT E NTIRELY RELIED UPON THE STATEMENT OF SHRI S.K. JAIN TO DRAW HER INFERENCE, THE ASSESSING OFFICER WAS UNDER NO OBLIGATION TO ALLOW CROSS EXAMINATION OF SHRI S.K. JAIN. THE LD.C IT(A) ACCORDINGLY UPHELD THE ACTION OF THE ASSESSING OFFICER IN MAKING AN ADDIT ION OF RS.10 LAKH U/S 68 AND HE ALSO SUSTAINED THE ADDITION OF RS.18,000/- AS EXPEN DITURE INCURRED FOR ARRANGING ACCOMMODATION ENTRY AS UNEXPLAINED INVESTMENT. 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL RAISING THE FOLLOWING GROUNDS:- 1. THAT UNDER THE FACTS AND CIRCUMSTANCES, INITIAT ION OF PROCEEDINGS U/S 147, 148 ARE MECHANICAL, WITHOUT APPLICATION OF MIND, IL LEGAL, WITHOUT JURISDICTION, UNWARRANTED AND UN - SUSTAINABLE IN LAW AS WELL AS ON MERITS AND ALSO FOR THE OBJECTIONS TAKEN AGAINST THE REOPENING, WHICH ALSO STANDS UNJUSTIFIABLY REJECTED WITHOUT COGENT REASONS. ITA NO.1143/DEL/2018 6 2. THAT THE APPROVAL OF HIGHER AUTHORITIES U/S. 151 BE ING MECHANICAL AND WITHOUT APPLICATION OF MIND, HENCE, INVALID IN LAW SO MUCH SO AS TO NOT CAPABLE OF PROVIDING VALID JURISDICTION FOR INITIATING PROC EEDINGS U/S. 147. 3. THAT UNDER THE FACTS AND CIRCUMSTANCES, ADDITION O F RS. 10 LACS U/S. 68 FOR ALLEGED ACCOMMODATION ENTRY TAKEN FROM VIRGIN C APITAL SERVICES (P) LTD. IS ILLEGAL, UNJUSTIFIED AND UNSUSTAINABLE IN LAW AS WE LL AS ON MERITS 4. THAT IN THE ABSENCE OF PROVIDING CROSS EXAMINATION OF RELEVANT PERSONS AS SPECIFICALLY REQUESTED AND ALSO IN THE ABSENCE O F CONFRONTING WITH ALL ALLEGED ADVERSE MATERIAL, NO COGNISE THEREOF CAN BE TAKEN F OR TAKING AN ADVERSE VIEW. 5. THAT UNDER THE FACTS AND CIRCUMSTANCES, THE ADDITI ON OF RS. 18,000/- U/S. 69C FOR ALLEGED UNEXPLAINED EXPENDITURE CALCULATED @1.8% OF RS. 10 LACS IS UNSUSTAINABLE IN LAW AS WELL AS ON MERITS. 6. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. THE FIRST OBJECTION OF THE ASS ESSEE IS REGARDING INITIATION OF REASSESSMENT PROCEEDINGS ON THE GROUND THAT THE SAM E HAS BEEN INITIATED BY THE ASSESSING OFFICER IN A MECHANICAL MANNER ON BORROWE D SATISFACTION AND WITHOUT INDEPENDENT APPLICATION OF MIND. THE LD. COUNSEL HA S ALSO RELIED ON A SERIES OF DECISIONS TO THE PROPOSITION THAT THE INITIATION IS PURELY ON THE BASIS OF REPORT RECEIVED FROM THE INVESTIGATION WING AND HE HAS NOT CONDUCTE D ANY ENQUIRY EVEN TO KNOW AND UNDERSTAND THAT THE INFORMATION AS PER THE INVESTIG ATION REPORT IS PRIMA FACIE CORRECT. SINCE THE PROCEEDINGS ACCORDING TO THE LD. COUNSEL WERE INITIATED MECHANICALLY AND ON BORROWED SATISFACTION AND WITHOUT APPLICATION OF MI ND THE SAME IS NOT IN ACCORDANCE WITH LAW. I HAVE GONE THROUGH THE REASONS RECORDED BY THE ASSESSING OFFICER AND FIND THE AO HAS ANALYSED THE INFORMATION RECEIVED FROM T HE INVESTIGATION WING, EXAMINED THE SEIZED DOCUMENTS WHICH CONTAIN COMPREHENSIVE DE TAILS COMPRISING INTER ALIA THE BENEFICIARIES NAME, AMOUNT OF ENTRY TAKEN, NAME OF ACCOUNT HOLDER OF ENTRY GIVING ITA NO.1143/DEL/2018 7 ACCOUNT, BANK DETAILS OF THE ACCOUNT FROM WHICH ENT RIES ARE GIVEN, THE DATE OF ENTRIES, ETC. THE ASSESSING OFFICER, THEREAFTER HAS CONDUCT ED INDEPENDENT ENQUIRY PURSUANT TO THE INFORMATION RECEIVED FROM THE INVESTIGATION WIN G. THEREAFTER, HE HAD RECORDED THE REASONS. THEREFORE, THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSING OFFICER HAS INITIATED REASSESSMENT PROCEEDINGS MECH ANICALLY ON BORROWED SATISFACTION AND WITHOUT INDEPENDENT APPLICATION OF MIND IS INCO RRECT. THE VARIOUS DECISIONS RELIED ON BY THE LD. COUNSEL IN THE SYNOPSIS ARE NOT AT AL L APPLICABLE TO THE FACTS OF THE PRESENT CASE. THEREFORE THE GROUND OF APPEAL NUMBER 1 BY TH E ASSESSEE IS DISMISSED. SO FAR AS GROUND OF APPEAL NUMBER 2 IS CONCERNED, IT IS THE A RGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE PRINCIPAL CIT HAS APPROVED IN A M ECHANICAL MANNER AND WITHOUT APPLICATION OF MIND. ACCORDING TO HIM THE APPROVAL GIVEN IN A MECHANICAL MANNER WITHOUT APPLICATION OF MIND IS NOT VALID FOR INITIA TING REASSESSMENT PROCEEDINGS. VARIOUS DECISIONS WERE ALSO RELIED ON BY THE LD. CO UNSEL TO THIS PROPOSITION. HOWEVER, A PERUSAL OF THE APPROVAL GIVEN BY THE ADDL. CIT AN D THE PRINCIPAL CIT SHOWS THAT THEY WERE CONVINCED/SATISFIED THAT IT IS A FIT CASE FOR REOPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE ACT BY ISSUE OF NOTICE UNDER SEC TION 148. IT IS NOT A CASE OF GIVING APPROVAL IN A MECHANICAL MANNER AND WITHOUT APPLICA TION OF MIND, THEREFORE, THE GROUND OF APPEAL NO. 2 BY THE ASSESSEE IS ALSO DISM ISSED. 7. SO FAR AS GROUND NOS. 3 TO 5 ARE CONCERNED, THE SAM E RELATES TO ADDITION OF RS.10 LAKHS U/S 68 OF THE ACT FOR THE ACCOMMODATION ENTRY TAKEN FROM VIRGIN CAPITAL SERVICES LIMITED AND ADDITION OF RS.18,000/- U/S 69 C AS UNEXPLAINED EXPENDITURE FOR ITA NO.1143/DEL/2018 8 OBTAINING THE ACCOMMODATION ENTRY. I HAVE CONSIDERE D THE ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. IT IS AN ADMITTED FACT THAT THE ASSESSING OFFICER MADE THE ADDITION OF RS.10 LAKHS U/S 68 OF THE ACT ON THE GROUND THAT HE WAS NOT SATISFIED WITH THE IDENTITY AND CREDIT WORTHINE SS OF THE INVESTOR AND THE GENUINENESS OF THE TRANSACTION. IT IS THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE IDENTITY STANDS PROVED BY THE ASSESSMENT ORDER OF T HE COMPANY, BANK ACCOUNT AND THE CONFIRMATION. THE CREDIT WORTHINESS IS PROVED SINC E THE PAYMENT HAS BEEN MADE THROUGH BANK ACCOUNT OUT OF SUFFICIENT BALANCE AND GENUINENESS IS PROVED SINCE THE TRANSACTION IS THROUGH BANKING ACCOUNT. SUBSEQUENT TO HEARING OF THE APPEAL, THE DECISION OF THE HON'BLE SUPREME COURT CAME IN THE C ASE OF PR. CIT (CENTRAL)(1) VS. NRA IRON & STEEL PRIVATE LTD. VIDE CIVIL APPEAL NO. 29855/18, ORDER DATED 5 TH MARCH 2019, WHERE IDENTICAL ISSUE HAS BEEN DECIDED. THERE FORE, CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND IN THE INTEREST OF JUSTICE, I DEEM IT PROPER TO RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE WITH EVIDENCE TO HIS SATIS FACTION REGARDING THE IDENTITY AND CREDITWORTHINESS OF THE INVESTOR AND THE GENUINENES S OF THE TRANSACTION. THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AS PER FACT AND LAW, AFTER GIVING THE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. HE SHOULD ALSO KEEP IN MIND THE DECISION OF THE HON'BLE SUPREME COURT CITED (SUPRA). I HOLD AND DIRECT ACCO RDINGLY. THE GROUND OF APPEAL NOS. 3 TO 5 BY THE ASSESSEE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1143/DEL/2018 9 8. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 2 7.03.2019. SD/- ( R.K. PANDA) ACCOUNTANT MEMFBE R DATED: 27 TH MARCH, 2019 DK COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI