Assistant Commissioner of Income tax, Pune V. M/s. D.S. Kulkarni & Co., Pune

ITA 1304/PUN/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4181 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-02-2020
• Assessment Year: 2009-2010
• Appeal Filed On: 22-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ALOK MALVIYA
• Keywords: Income from undisclosed sources; Opportunity of cross examination; Accommodation entries; Onus to prove
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI PARTHA SARATHI CHAUDHURY , JM . / I TA NO. 1304 /PUN/20 17 / ASSESSMENT YEAR : 2009 - 10 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 3, PUNE. ....... / APPELLANT / V/S. M/S. D.S. KULKARNI & COMPANY, DSK HOUSE, 1187/60, J M ROAD, SHIVAJINAGAR, PUNE - 411 016 PAN: AAEFD2122L / RESPONDENT A SSESSEE BY : NONE REVENUE BY : SHRI ALOK MALVIYA / DATE OF HEARING : 27 .0 2 .2020 / DATE OF PRONOUNCEMENT : 27 .02 .2020 / ORDER PER PARTHA SARATHI CHAUDHU RY, JM : THIS APPEAL PREFERRED BY THE REVENUE EMANATES FROM THE ORDER OF THE LD. CIT(APPEALS) - 3, PUNE DATED 20.02.2017 FOR THE ASSESSMENT YEAR 2009 - 10 AS PER THE FOLLOWING GROUNDS OF APPEAL ON RECORD: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING THE ALLEGED BOGUS UNSECURED LOAN TAKEN BY THE ASSESSEE 2 ITA NO. 1304 /PUN/20 17 A.Y. 2009 - 10 WITHOUT APPRECIATING THE FACTS THAT NO GENUINE BUSINESS ACTIVITY IS BEING CARRIED OUT BY THE LOAN LENDER COMPANIES. THE SO CALLED DIRECTORS OF THESE COMPANIES ARE ONLY DUMMY DIRECTORS, THE RELATED CONCERNS ARE INDULGING IN PROVIDING ACCOMMODATION ENTRIES I N THE FORM OF BOGUS UNSECURED LOAN, SHARE APPLICATION MONEY/SHARE PREMIUM AND NO INTEREST HAS BEEN PAID ON SUCH LOAN RAISING THE QUESTION AS TO WHY SUCH UNKNOWN PARTIES WOULD EXTENT FUNDS TO THE ASSESSEE WITHOUT CHARGING EVEN INTEREST. 2. ON THE FACTS AN D CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING THE ALLEGED BOGUS UNSECURED LOAN TAKEN BY THE ASSESSEE WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE SAID LOANS, WHEN THE ONUS IS ON THE ASSESSEE AS PER THE SECTION 68 OF THE INCOME TAX ACT TO PROVE THE SAME. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING THE ALLEGED BOGUS UNSECURED LOAN TAKEN BY THE ASSESSEE WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE FAILED TO DISCHARGE THE PRIMARY ONUS ON IT TO PROVE THE IDENTITY, CREDITWORTHINESS & GENUINENESS OF THE MONEY INTRODUCED IN THE BOOKS OF ACCOUNTS. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN NOT ALLOWING TO TREAT THE 2% OF COMMISS ION PAID FOR PROVIDING THE ACCOMMODATION ENTRIES AS THE INCOME OF THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT THE ACCOMMODATION ENTRY OPERATORS CHARGE COMMISSION FOR PROVIDING SUCH ENTRIES AND SAME IS NOT RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSE E. 5. THE APPELLANT PRAYS TO BE ALLOWED TO ADD, AMEND, MODIFY, RECTIFY, DELETE OR RAISE ANY GROUNDS OF APPEAL DURING THE COURSE OF APPELLATE PROCEEDINGS. 2 . THE BRIEF FACTS IN THIS CASE ARE THAT THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF PROMOTER & BUILDER. THE ASSESSEE FIRM FILED RETURN OF INCOME FOR A.Y. 2009 - 10 ON 30.09.2009 DECLARING TOTAL INCOME OF RS.3,31,28,820/ - . THE CASE WAS SELECTED FOR SCRUTI NY AND ASSESSMENT WAS COMPLETED U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) ON 31.12.2010 AT A TOTAL INCOME OF RS.86,48,820/ - . SUBSEQUENTLY, THE ASSESSING OFFICER RECEIVED INFORMATION FROM THE INVESTIGATION WING, MUMBAI OF ASSESSEE BEING A BENEFICIARY OF ACCOMMODATION ENTRY OF UNSECURED LOAN ALLEGED TO BE TAKEN FROM M/S. ATHARVA BUSINESS PVT. LTD. WHICH WAS ADMITTED TO BE AN ENTRY OPERATOR CONTROLLED AND RUN BY SHRI PRAVEEN JAIN DURING THE COURSE OF SEARCH ACTION U/S.132 OF THE ACT. THE CASE WAS, THEREFORE, REOPENED AND ASSESSMENT U/S.143(3) R.W.S.147 WAS COMPLETED ON 23.03.2016 DETERMINING 3 ITA NO. 1304 /PUN/20 17 A.Y. 2009 - 10 THE TOTAL INCOME AT RS.3,31,28,820/ - . THE ASSESSING OFFICER MADE ADDITION OF RS.2,40,00,000/ - TREATING THE UNSECURED LOANS AS UNDISCLOSE D INCOME OF THE ASSESSEE AND 2% ON THE ABOVE AMOUNT I.E. RS.4,80,000/ - WAS ADDED AS UNDISCLOSED INCOME ON ACCOUNT OF COMMISSION PAID FOR ARRANGING THE ACCOMMODATION ENTRIES. 3. AT THE TIME OF HEARING, NEITHER THE ASSESSEE NOR HIS AUTHORIZED REPRESENTATIVE WAS PRESENT TO REPRESENT THEIR CASE ON MERITS. THE RECORDS WERE CHECKED AND IT WAS FOUND THAT NOTICE OF HEARING HAS BEEN DULY ISSUED AND SERVED ON THE ASSESSEE. IN SPITE OF THE FACTS, THE ASSESSEE IS ABSENT ON THIS DATE OF HEARING & CONSIDERING THE FACTS AND CIRCUMSTANCES, WE PROCEED TO HEAR THE APPEAL ON MERITS AFTER HEARING THE LD. DR ON RECORD. 4. THE LD. DR FOR THE REVENUE SUBMITTED THAT NO GENUINE BUSINESS ACTIVITY IS BEING CARRIED OUT BY THE LOAN LENDER COMPANIES. THE SO CALLED DIRECTORS OF THESE COMPANIES ARE ONLY DUMMY DIRECTORS, THE RELATED CONCERNS ARE INDULGING IN PROVIDING ACCOMMODATION ENTRIES IN THE FORM OF BOGUS UNSECURED LOAN, SHARE APPLICATION MONEY/SHARE PREMIUM AND NO INTEREST HAS BEEN PAID ON SUCH LOAN. THE LD. DR FURTHER SUBMITTED THAT THE ASSESSEE FAILED TO DISCHARGE HIS ONUS TO PROVE THE IDENTITY, CREDITWORTHINESS & GENUINENESS OF THE MONEY INTRODUCED IN THE BOOKS OF ACCO UNTS. ACCOMMODATION ENTRY OPERATOR CHARGE COMMISSION FOR PROVIDING SUCH ENTRIES ARE NOT RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. 5. WE HAVE PERUSED THE CASE RECORD AND HEARD THE SUBMISSIONS OF THE LD. DR. WE HAVE ALSO CONSIDERED THE FACTS AND CI RCUMSTANCES IN THIS CASE. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEES NAME WAS APPEARING IN THE LIST 4 ITA NO. 1304 /PUN/20 17 A.Y. 2009 - 10 OF BENEFICIARIES WHO HAD TAKEN ACCOMMODATION ENTRIES FROM THE ENTITIES OPERATED AND CONTROLLED BY SHRI PRAVEEN KUMAR JAIN. IN PARA 8 OF THE ORDER, T HE ASSESSEE SUBMITTED FOLLOWING LOAN DETAILS: THE ASSESSING OFFICER, IN VIEW OF THE ABOVE, CONCLUDED THAT IT WAS CLEAR, THE ASSESSEE HAD CLAIMED TO HAVE RECEIVED LOAN OF RS.2,40,00,000/ - FROM THE SAID ENTITIES. HOWEVER, THE LD. AR OF THE ASSESSEE SUBMITTED BANK ACCOUNT STATEMENTS, LEDGER ACCOUNT OF THE PARTY AND AFFIDAVIT STAT ING THAT LOAN ONLY TO THE EXTENT OF RS.40,00,000/ - WAS TAKEN AND THERE WAS NO OTHER TRANSACTION FROM THE SAID ENTITY IN THE RELEVANT YEAR OR IN LATER YEARS EXCEPT REPAYMENT OF THE SAME IN ASSESSMENT YEAR 2010 - 11. IN PARA 10 OF THE ORDER OF ASSESSING OFFICE R , THE LD. AR OF THE ASSESSEE WAS ASKED TO PROVE GENUINENESS, CREDITWORTHINESS AND IDENTITY OF THE ALLEGED LENDERS BY PRODUCING THE DIRECTOR/DIRECTORS OF THE SAID ENTITIES. THE ASSESSEE SUBMITTED THAT THE LOANS WERE ARRANGED DIRECTLY AND NO INTEREST WAS PA ID ON SUCH LOANS. FURTHER, THE ASSESSEE ARGUED THAT THE TRANSACTIONS WERE THROUGH BANKING CHANNELS AND THE SAID LOANS WERE REPAID BY THE ASSESSEE IN THE NEXT YEAR AND HENCE, CANNOT SR. NO. NAME OPENING BALANCE ADDITION DURING THE YEAR INTEREST PROVIDED IN BOOKS REPAYMENT DURING THE YEAR CLOSING BALANCE 1 OSWAL TRADING (I) PVT. LTD. 50,00,000 50,00,000 2 FASTSTONE TRADING CO. PVT. LTD. 40,00,000 40,00,000 3 JKP TRADING (I) PVT. LTD. 40,00,000 40,00,000 4 EASY MERCANTILE PVT. LTD. 40,00,000 40,00,000 5 HEMA TRADING CO. PVT. LTD. 70,00,000 70,00,000 TOTAL 2,40,00,000 2,40,00,000 5 ITA NO. 1304 /PUN/20 17 A.Y. 2009 - 10 BE CONSIDERED AS BOGUS. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HA RPED ON THE FACT THAT ALL THESE TRANSACTIONS WERE DONE THROUGH BANKING CHANNELS AND THAT LOANS WERE ARRANGED DIRECTLY BUT AT NO POINT OF TIME, THE ASSESSEE WAS ABLE TO DISCHARGE ITS ONUS REGARDING PROVING OF GENUINENESS, CREDITWORTHINESS AND IDENTITY OF TH ESE ALLEGED LENDERS. IT IS ABSOLUTELY NOT CLEAR WHETHER AT ALL THESE ENTITIES EXISTS OR NOT SO TO HAVE PROVIDING THESE LOANS TO THE ASSESSEE. EVEN, WHETHER THESE ENTITIES WERE IN A CAPACITY TO PROVIDE THESE SORTS OF LOANS, NOTHING WAS PROVED BEFORE THE ASS ESSING OFFICER. IN VIEW THEREOF, THE ASSESSING OFFICER WAS OF THE OPINION THAT EVIDENCES GATHERED CLEARLY ESTABLISHED THE FACT THAT THE ABOVE ENTRIES WERE ACCOMMODATION ENTRIES AND REPRESENT ASSESSEES UNACCOUNTED INCOME. THUS, THE AMOUNT OF RS.2,40,00,00 0/ - INTRODUCED BY WAY OF UNSECURED LOANS WAS TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE FOR ASSESSMENT YEAR 2009 - 10 AND ADDED BACK. 5.1 FURTHER, WE FIND THAT THE LD. CIT(APPEALS) IN HIS ORDER HAS NOT INDIVIDUALLY AND SPECIFICALLY DEALT WITH EACH OF THE LOANS DETAILS AS IN THE AFORESAID TABLE. THE LD. CIT(APPEALS) SHOULD HAVE ADJUDICATED CLEARLY ON EACH OF THESE LOANS DETAILS AND DECIDED T HE ISSUE AS PER LAW. THE ASSESSING OFFICER HAS GATHERED ENOUGH EVIDENCES REGARDING THE BENEFITS TAKEN FROM ACCOMMODATION ENTRIES PROVIDER NAMELY, SHRI PRAVEEN KUMAR JAIN AND VIS - - VIS VARIOUS LOANS TAKEN. THESE DO NOT FIND ANY ADJUDICATION IN THE ORDER OF THE LD. CIT(APPEALS) WHICH SHOULD HAVE DONE. THE LD. CIT(APPEALS) HAS GRANTED RELIEF TO THE ASSESSEE SOLELY ON THE GROUND THAT THE ASSESSING OFFICER SHOULD HAVE PROVIDED AN OPPORTUNITY OF CROSS EXAMINATION TO THE ASSESSEE BEFOR E MAKING ADDITIONS AS ON RECORD, BUT ON MERITS, THE ENTIRE LOANS TAKEN FROM VARIOUS ENTITIES AND ITS CONNIVANCE WITH THE ACCOMMODATION ENTRIES PROVIDER 6 ITA NO. 1304 /PUN/20 17 A.Y. 2009 - 10 KINGPIN REMAINED UN - ADJUDICATED BY THE LD. CIT(APPEALS) . THAT ALSO AS A MATTER OF FACT, THE GENUINENESS, CREDITWORTHINESS AND IDENTITY OF THESE PERSONS FROM WHOM LOANS WERE RECEIVED BY THE ASSESSEE , WERE NOT AT ALL PROVED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AND THESE FACTS IS ONLY BEING DEALT BY THE LD. CIT(APPEALS) STATING THAT THE TRANSACTIONS WER E THROUGH BANKING CHANNELS BUT ON EXAMINATION, THE GENUINENESS OF THE TRANSACTIONS IS NOT COMING OUT FROM THE ADJUDICATION MADE BY THE LD. CIT(APPEALS). THAT FURTHER, WHETHER THESE PEOPLE WERE CAPABLE FOR PROVIDING SUCH LOANS TO THE ASSESSEE WAS ALSO NOT C LEAR. THESE FACTS HAVE TO BE ANALYZED AND SPEAKING ORDER SHOULD BE PASSED BY THE LD. CIT(APPEALS). THESE FACTS ON RECORD ARE ALTOGETHER LEFT TO BE ADJUDICATED BY THE LD. CIT(APPEALS) AND THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ORDER OF THE LD. C IT(APPEALS) IS CRYPTIC ONE AND PASSED IN A SUMMARY MANNER. THEREFORE, IN THE INTEREST OF JUSTICE, THE ENTIRE MATTER SHOULD BE RESTORED TO THE FILE OF THE LD. CIT(APPEALS) FOR PROPER ADJUDICATION AS PER LAW AFTER COMPLYING WITH THE PRINCIPLES OF NATURAL JUS TICE. WE ORDER ACCORDINGLY. THUS, GROUNDS RAISED BY THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRO NOUNCED ON 27 TH DAY OF FEBRUARY , 20 20 . SD/ - SD/ - D. KARUNAKARA RAO PARTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER / PUNE; / DATED : 27 TH FEBRUARY , 2020. SB 7 ITA NO. 1304 /PUN/20 17 A.Y. 2009 - 10 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS) - 3, PUNE 4. THE PR. CIT - 2, PUNE. 5 . , , , / DR, ITAT, A BENCH, PUNE. 6 . / GUARD FILE. // TRUE COPY // / BY ORDER, / PRIVATE SECRETARY , / ITAT, PUNE . 8 ITA NO. 1304 /PUN/20 17 A.Y. 2009 - 10 DATE 1 DRAFT DICTATED ON 27 .02 .2020 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 27 . 0 2 .20 20 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER