M.S. Capital & Management Services Ltd., New Delhi V. ITO, New Delhi

ITA 1358/DEL/2011

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6720 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 06-10-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 16-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR SENIOR
• Keywords: Unexplained cash credit; Accommodation entries
• Section: 133A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI L.P. SAHU, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.1358/DEL./2011 (ASSESSMENT YEAR : 2002-03) M/S. M.S. CAPITAL & MANAGEMENT SERVICES LTD., VS. I TO, WARD 6 (1), 108, DUA BUSINESS CENTRE, NEW DELHI. DA 4, VIKAS MARG, SHAKARPUR, DELHI 110 092. (PAN : AAACM6544L) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ARVIND KUMAR, ADVOCATE REVENUE BY : SHRI RAJESH KUMAR, SENIOR DR DATE OF HEARING : 06.10.2016 DATE OF ORDER : 03.11.2016 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, M/S. M.S. CAPITAL & MANAGEMENT SERVI CES LTD. (HEREINAFTER REFERRED TO AS THE ASSESSEE) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 05.01.2011 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)- VIII, NEW DELHI QUA THE ASSESSMENT YEAR 2002-03 ON THE GROUND S INTER ALIA THAT :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT (A) WAS WRONG AND UNJUSTIFIED IN CONFIRMING THE ADDITION OF RS.28 LACS RECEIVED ITA NO.1358/DEL./2011 2 FROM M/S FINORG CHEMICALS LTD. ON ACCOUNT OF EXPLAINED SALE OF SHARES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE CIT (A) WAS WRONG AND UNJUSTIFIED IN CONFIRMING THE ADDITION OF RS.1,07,000/- BEING AN OPENING BALANCE IN THE ACCOUNT OF KISHAN CHAND FERRO STEELS LTD. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE CIT (A) WAS WRONG AND UNJUSTIFIED IN CONFIRMING THE DISALLOWANCE OF EXPENSES OF RS.2,34,560/- ON AD HOC BASIS IGNORING THE SUBMISSIONS MADE BY THE ASSESSEE. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THIS CASE ARE : DURING THE SCRUTINY PROCEEDINGS QUA RETURN OF INCOME FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2002-03, CERTAIN I SSUES CAME TO THE NOTICE OF ASSESSING OFFICER WHICH HE HAS EXAMIN ED IN THE LIGHT OF MATERIAL COLLECTED DURING SURVEY PROCEEDINGS UND ER SECTION 133A OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE AC T) AT THE PREMISES OF SHRI SANJAY RASTOGI, DIRECTOR OF THE AS SESSEE COMPANY. AO NOTICED FROM THE REPORT RECEIVED FROM ADIT (INV. ), UNIT 7, NEW DELHI THAT SANJAY RASTOGI AND HIS ASSOCIATES AR E ENGAGED IN PROVIDING THE ACCOMMODATION ENTRIES IN CONNIVANCE W ITH COMPANIES/CONCERNS FLOATED BY THEM AND ASSESSEE COM PANY IS ONE OF THE BENEFICIARIES OF SUCH HAWALA BUSINESS. SANJ AY RASTOGI ADMITTED IN HIS STATEMENT RECORDED ON 20.04.2003 TH AT ALL THESE TRANSACTIONS ARE BOGUS AS THE ENTRY SEEKING COMPANY RECEIVED ITA NO.1358/DEL./2011 3 CHEQUES IN THE NAME OF COMPANIES OF SANJAY RASTOGI AND THEREAFTER MONEY WAS EITHER TAKEN OUT FROM THE BANK ACCOUNT IN CASH OR ROUTED THROUGH OTHER COMPANIES FOR EVENTUAL WITHDRAWAL OF CASH. WHEN THE EXPLANATION OF THE ASSESSEE WAS CAL LED IT HAS MOVED APPLICATION U/S 144A OF THE ACT. ASSESSEE FA ILED TO FILE THE CONFIRMATION/COPY OF ACCOUNT IN CASE OF JYOTI GLOBA L PVT. LTD. FOR RS.5,00,000/-, M/S. SAHIL STOCK BROKING LTD. FOR RS .18,00,000/- AND M/S. SETHI ESTATE PVT. LTD. FOR RS.5,00,000/- A ND CONSEQUENTLY MADE ADDITION OF RS.28,00,000/-. 3. ASSESSEE HAS CLAIMED PERSONAL EXPENSES TO THE TU NE OF RS.6,27,720/- AND DUE TO NON-PRODUCING OF BOOKS OF ACCOUNT WITH SUPPORTING VOUCHERS, THE AO DISALLOWED THE EXPENSES TO THE EXTENT OF 30% I.E. RS.3,34,560/-. THE CONFIRMATION IN CAS E OF KISHAN CHAND FERRO STEEL PVT. LTD. FILED BY THE ASSESSEE T O EXPLAIN RS.1,07,000/- HAS BEEN REJECTED BY THE AO FOR WANT OF DATE AND INCOMPLETE PAN AND THEREBY MADE AN ADDITION OF RS.1 ,07,000/-. AO ASSESSED THE TAXABLE INCOME OF THE ASSESSEE COMP ANY AT RS.91,67,138/-. 4. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY WAY OF FILING THE APPEAL WHO HAS PARTLY ALLOWED THE APPEAL . FEELING AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIB UNAL BY WAY OF FILING THE PRESENT APPEAL. ITA NO.1358/DEL./2011 4 5. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. BY MOVING A SEPARATE APPLICATION, ASSESSEE COMPA NY SOUGHT TO RAISE ADDITIONAL GROUNDS ON THE GROUND THAT THE SAME GO TO THE ROOT OF THE CASE WHICH ARE AS UNDER :- 1. THAT IN THE FACT AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) WAS UNJUSTIFIED IN NOT CONSIDERING THE DIRECTION OF THE HONBLE ITAT, DELHI IN CASE OF SANJAY RASTOGI ELATED 12.1 1.2008, WHEREBY THE HON'BLE TRIBUNAL HAS GIVEN A FINDING THAT THE TURNOVER FOR WHICH THE ASSESSEE (SANJAY RASTOGI) IS ASSESSED, THE SAME AMOUNT OF COMMISSION SHALL NOT BE ASSESSED IN THE HANDS OF ANY OF THE COMPANY (WHICH INCLUDES M.S. CAPITAL & MANAGEMENT SERVICE LTD. ) FLOATED, BY THE ASSESSEE. 2. THAT IN THE FACT AND CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT (A) WAS UNJUSTIFIED IN NOT ACCEPTING THE EXPLANATION ABOUT THE NATURE AND SOURCE OF THE SUM FOUND CREDITED IN THE BOOKS OF THE ASSESSEE, EVEN WHEN THE HON'BLE TRIBUNAL HAD GIVEN A FINDING IN CASE OF SANJAY RASTOGI (SUPRA) THAT THE ENTRIES MADE IN THE CASE OF THE ASSESSEE COMPANY WERE BOGUS ACCOMMODATION ENTRIES, THE COMMISSION INCOME FROM WHICH IS TO BE TAXED IN CASE OF SANJAY RASTOGI. 7. KEEPING IN VIEW THE FACT THAT THE ADDITIONAL GRO UNDS SOUGHT TO BE RAISED BY THE ASSESSEE COMPANY, THOUGH NOT RA ISED BEFORE THE LD. CIT (A), ARE NECESSARY FOR COMPLETE ADJUDICATIO N OF THE ITA NO.1358/DEL./2011 5 CONTROVERSY AT HAND, THE APPLICATION FOR ADDITIONAL GROUNDS IS HEREBY ALLOWED. GROUND NO.1 AND ADDITIONAL GROUNDS NO.1 & 2 : 8. AO MADE AN ADDITION OF RS.28,00,000/- STATED TO HAVE BEEN RECEIVED FROM M/S. FINORG CHEMICALS LTD., WHICH IS ONE OF THE BOGUS COMPANIES BEING RUN FOR MERELY OPERATING THE ENTRIES/ TRANSACTIONS AND WERE NOT IN ACTUAL BUSINESS. SANJ AY RASTOGI, DIRECTOR OF THE ASSESSEE COMPANY CATEGORICALLY ADMI TTED IN HIS STATEMENT RECORDED DURING SURVEY PROCEEDINGS CONDUC TED U/S 133A BY THE INVESTIGATION WING OF THE INCOME-TAX DEPARTM ENT ON 04.03.2003 THAT, HE WAS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES IN VARIOUS OUTSIDE ENTITIES THROUGH THE 8 COMPANIES FLOATED BY HIM FOR THIS PURPOSE HAVING REGISTERED OFFICE AT VAKIL CHAMBER, A-115, SHAKARPUR. 9. ASSESSEE COMPANY IS ONE OF THE AFORESAID 8 BOGUS COMPANIES BEING RUN BY SANJAY RASTOGI AND TOTAL ACCOMMODATION ENTRIES PROVIDED BY THE ASSESSEE COMPANY FOR AY 2002-03 UND ER CONSIDERATION CAME TO BE RS.19,66,23,061/- AS IS EV IDENT FROM PARA 2 OF THE ORDER PASSED BY THE COORDINATE BENCH OF TH E TRIBUNAL IN A BUNCH OF APPEALS BEARING ITA NOS.1387, 1388, 1389, 1390 & 1391/DEL/07 FOR AYS 1999-00, 2000-01 2001-02, 2002- 03 & 2003- ITA NO.1358/DEL./2011 6 04 (ORDER DATED 12.11.2008). UNDISPUTEDLY ASSESSEE COMPANY FOUND TO BE ENGAGED IN PROVIDING BOGUS ACCOMMODATIO N ENTRIES AS HAS BEEN DISCUSSED IN ORDER DATED 12.11.2008 (SUPR A) PASSED IN SANJAY RASTOGI VS. ACIT, CIRCLE 37 (1), NEW DELHI. 10. THE LD. AR FOR THE ASSESSEE CONTENDED THAT WHEN THE INCOME DERIVED BY THE ASSESSEE COMPANY AS COMMISSION INCOM E TO THE TUNE OF RS.19,66,23,061/- DURING AY 2002-03 HAS BEEN TAX ED IN THE HANDS OF SANJAY RASTOGI, DIRECTOR OF THE ASSESSEE C OMPANY, THE SAID INCOME CANNOT BE TAXED TWICE AND SANJAY RASTOG I HAS ALREADY PAID PENALTY ON THE SAID AMOUNT. 11. UNDISPUTEDLY, THE CASE OF SANJAY RASTOGI WENT U P TO THE TRIBUNAL WHICH HAS BEEN DECIDED VIDE ORDER DATED 12 .11.2008 (SUPRA). THE COORDINATE BENCH IN PARA 8 OF THE ORD ER DISCUSSED THE ISSUE AT LENGTH BY RETURNING THE FINDING THAT, AS A MATTER OF PRINCIPLE, THE COMMISSION INCOME HAS TO BE TAXED IN ONE HAND. WHEN UNDISPUTEDLY THE ENTIRE COMMISSION INCOME EARN ED BY ASSESSEE COMPANY TO THE TUNE OF RS.19,66,23,061/- P ERTAINING TO M/S. FINORG CHEMICALS LTD. HAS ALREADY BEEN TAXED I N THE HANDS OF SANJAY RASTOGI, WE ARE OF THE CONSIDERED VIEW THAT THE SAME CANNOT BE TAXED TWICE NOW BY CLAIMING THE SAME FROM ASSESS EE COMPANY. 12. THE CONTENTION OF THE LD. DR FOR THE REVENUE TH AT COMPANY IS A JURISTIC PERSON AND HAS TO BE TAXED INDEPENDENT O F ITS DIRECTOR IS ITA NO.1358/DEL./2011 7 NOT TENABLE IN THE FACE OF ADMITTED FACT THAT THE A SSESSEE COMPANY IS A BOGUS COMPANY MERELY FLOATED TO PROVIDE ACCOMMODA TION ENTRIES AND INCOME IN QUESTION HAS ALREADY BEEN TAXED IN TH E HANDS OF MR. SANJAY RASTOGI AND THIS FACT HAS ALREADY BEEN ADMIT TED AND CONSIDERED BY THE REVENUE WHILE TAXING SANJAY RASTO GI QUA AY 1999-00 TO 2003-04. SANJAY RASTOGI HAS EVEN PAID T HE PENALTY IMPOSED UPON HIM ON THE BASIS OF HIS ASSESSED INCOM E QUA M/S. FINORG CHEMICALS LTD.. 13. LD. AR FOR THE ASSESSEE FURTHER CONTENDED THAT THE AMOUNT OF RS.28,00,000/- RECEIVED BY THE ASSESSEE COMPANY FRO M M/S. FINORG CHEMICALS LTD. IS NOT IN THE NATURE OF UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT AS IT HAS RECEIVED THE AMOUNT ON ACCO UNT OF SALE CONSIDERATION RECEIVED FROM M/S. FINORG CHEMICALS L TD. FOR THE SALE OF SHARES OF M/S. SAHIL STOCK BROKING LTD. FOR RS.18,00,000/-, FOR SALE OF SHARES OF M/S. JYOTI GLOBAL PVT. LTD. F OR RS.5,00,000/- AND FOR SALE OF SHARES OF M/S. SETHI ESTATE PVT. LT D. FOR RS.5,00,000/- DURING FY 2001-02 RELEVANT FOR AY 200 2-03. ASSESSEE FILED CONFIRMATION OF ACCOUNTS OF M/S. FIN ORG CHEMICALS LTD. CONTAINING GIR NUMBER, ASSESSMENT DETAILS, FOR M NO.2, NOW AVAILABLE AT PAGE 100 AND 101 OF THE PAPER BOOK. M OREOVER, IN ORDER DATED 19.12.2006 PASSED IN CASE OF SANJAY RAS TOGI FOR AY 2002-03 BY LD. CIT (A), AVAILABLE AT PAGE 8 TO 21 O F THE PAPER ITA NO.1358/DEL./2011 8 BOOK, IT IS CATEGORICALLY MENTIONED BY LD. CIT (A) THAT THERE IS NO MATERIAL TO ESTABLISH THE LINK BETWEEN SANJAY RASTO GI AND FINORG CHEMICALS LTD. SO, WE ARE ALSO OF THE CONSIDERED V IEW THAT THE ADDITION OF RS.28,00,000/- IS NOT SUSTAINABLE. 14. SO, WE ARE OF THE CONSIDERED VIEW THAT AMOUNT O F RS.28,00,000/- RECEIVED BY THE ASSESSEE COMPANY FRO M M/S. FINORG CHEMICALS LTD. ON ACCOUNT OF SALE OF SHARES HAS ALR EADY BEEN TAXED IN ITS HANDS AND AS SUCH, THIS ADDITION IS NOT SUST AINABLE, HENCE WE DELETE THE ADDITION OF RS.28,00,000/-. GROUND NO.2 15. AO MADE AN ADDITION OF RS.1,07,000/- ON THE GRO UND THAT INCOMPLETE CONFIRMATION BEARING INCOMPLETE DATE AND PAN FROM M/S. KISHAN CHAND FERRO STEEL PVT. LTD. HAS BEEN FU RNISHED. EVEN NO COGENT EVIDENCE HAS BEEN PRODUCED DURING FIRST A PPELLATE PROCEEDINGS BEFORE THE LD. CIT (A) BY THE ASSESSEE. SO, WE HEREBY CONFIRM THE ADDITION OF RS.1,07,000/- MADE BY THE A O AND AFFIRMED BY THE LD. CIT (A). SO, GROUND NO.2 IS DE TERMINED AGAINST THE ASSESSEE. GROUND NO.3 16. AO FROM THE SCRUTINY OF PROFIT & LOSS ACCOUNT N OTICED THAT THE PERSONAL EXPENSES OF RS.6,27,720/- AND ADMINIST RATIVE EXPENSES ITA NO.1358/DEL./2011 9 OF RS.4,87,488/- HAS BEEN CLAIMED BY THE ASSESSEE, OUT OF WHICH AO DISALLOWED 30% OF THE TOTAL EXPENDITURE ON THE G ROUND THAT THE ASSESSEE COMPANY HAS FAILED TO SUBMIT NECESSARY EVI DENCE. THEREAFTER, ADDITION OF RS.3,34,560/- HAS ALSO BEEN CONFIRMED BY THE LD. CIT (A). HOWEVER, EVEN DURING THE ARGUMENT S BEFORE US, NO COGENT MATERIAL TO SUPPORT THE EXPENDITURE CLAIMED BY THE ASSESSEE COMPANY HAS BEEN BROUGHT ON RECORD. SO, WE FIND NO GROUND TO INTERFERE INTO THE FINDINGS RETURNED BY THE AO AS W ELL AS BY THE LD. CIT (A) IN MAKING AD HOC DISALLOWANCE OF RS.3,34,56 0/- ON ACCOUNT OF CERTAIN EXPENSES. SO, WE HEREBY DETERMI NE GROUND NO.3 AGAINST THE ASSESSEE. 14. IN VIEW OF OUR FINDINGS ON THE ABOVE GROUNDS, W E HEREBY PARTLY ALLOW THE PRESENT APPEAL. ORDER PRONOUNCED IN OPEN COURT ON THIS 3 RD DAY OF NOVEMBER, 2016. SD/- SD/- (L.P. SAHU) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 3 RD DAY OF NOVEMBER, 2016/TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A)-VIII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.