M/s. Geefcee Finance Ltd., New Delhi V. ACIT, New Delhi

ITA 2158/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74359 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 13-03-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 12-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S GILL
• Keywords: Unexplained cash credit; Opportunity of being heard; Peak credit; Accommodation entries; Onus to prove
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C : NEW DELHI) BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER ITA NOS.2157 TO 2159/DEL./2013 (ASSESSMENT YEARS : 2002-03, 2003-04 & 2004-05) M/S. GEEFCEE FINANCE LIMITED, VS. ACIT, CENTRAL C IRCLE 4, 13/34, W.E.A., KAROL BAGH, NEW DELHI. NEW DELHI 110 005. (PAN : AAACG1103H) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V.P. GUPTA, ADVOCATE REVENUE BY : SHRI R.S. GILL, CIT DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : ALL THESE THREE APPEALS FILED BY THE ASSESSEE EMANA TE AGAINST THE ORDER OF CIT (APPEALS)-XXXIII, NEW DELHI ALL DATED 29.01. 2013 FOR THE ASSESSMENT YEARS 2002-03, 2003-04 AND 2004-05. THE GROUNDS OF APPEAL ARE ALSO SAME IN ALL THE ASSESSMENT YEARS EXCEPT THE DIFFERENCE IN T HE FIGURE OF THE ADDITION. THE GROUNDS OF APPEAL IN ITA NO.2157/DEL/2013 ARE R EPRODUCED AS UNDER :- 1. THAT THE CIT(A) ERRED IN NOT CONSIDERING THE FA CTUAL AND LEGAL POSITION IN REGARD TO ADDITIONS MADE BY ASSESSING O FFICER AND PASSED THE ORDER UPHOLDING THE ADDITIONS CONTRARY TO THE F ACTS AND STAND OF THE DEPARTMENT AND ALSO THE ADMITTED POSITION THAT THE APPELLANT COMPANY WAS PART OF TARUN GOYAL GROUP WHICH HAS BEE N CARRYING ON THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES THR OUGH VARIOUS COMPANIES OF THE GROUP INCLUDING THE APPELLANT COMP ANY AND, ITA NO.2157 TO 2159/DEL./2013 2 THEREFORE, THE ENTRIES UNDER REFERENCE COULD NOT BE CONSIDERED INDEPENDENTLY AND IN THE NATURE UNDISCLOSED INCOME UNDER SECTION 68 OF THE INCOME TAX ACT. 2. THAT THE CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS.4,44,25,000/-REPRESENTING THE ENTRIES RECEIVED F ROM GROUP COMPANIES IN THE NATURE OF REDEEMABLE CUMULATIVE PR EFERENCE SHARES UNDER SECTION 68 OF THE ACT WITHOUT CORRECTLY APPRE CIATING THE FACTUAL AND LEGAL POSITION. 3. THAT THE CIT(A) ERRED IN UPHOLDING ADDITION OF RS.1,10,66,111/- (CORRECTLY RS.1,07,00,200/-) BEING THE CASH DEPOSITED IN THE BANK ACCOUNT OF APPELLANT COMPANY WITHOUT APPRECIATING AND CONSIDERING FACTUAL AND LEGAL POSI TION. HE ALSO FAILED TO DIRECT THE AO TO CORRECT THE FIGURE. 4. THAT THE CIT(A) ALSO ERRED IN NOT CONSIDERING AN D APPRECIATING THE FACTS AND ALSO THE STAND OF THE AO IN THE ORDER S PASSED FOR SUBSEQUENT YEARS IN THE CASE OF APPELLANT AND ALSO IN THE CASE OF OTHER GROUP COMPANIES WHICH HAD ALSO BEEN UPHELD BY CIT(A ) THAT ONLY THE COMMISSION INCOME IS CHARGEABLE TO TAX IN RESPE CT OF ENTRIES GIVEN OUTSIDE THE GROUP (IGNORING THE INTER GROUP T RANSACTIONS). 5. THAT THE CIT(A) ALSO ERRED IN NOT TAKING COGNIZA NCE OF THE CONTENTIONS OF THE APPELLANT THAT EVEN THE COMMISSI ON IS NOT CHARGEABLE TO TAX IN THE CASE OF THE APPELLANT AS M R. TARUN GOYAL HAD ALREADY OFFERED COMMISSION INCOME IN HIS RETURNED I NCOME FOR A.Y. 2009-10 IN RESPECT OF WHOLE OF THE BUSINESS OF ACCO MMODATION ENTRIES CARRIED BY HIM INCLUDING THE ACCOMMODATION ENTRY BU SINESS ROUTED THROUGH APPELLANT COMPANY IN THE YEAR UNDER APPEAL AND THE RATE OF COMMISSION SHOULD BE TAKEN ONLY AT RS.2.50 PER THOU SAND. 6. THAT THE CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS.14,00,000 ON ACCOUNT OF DISALLOWANCE OF BAD DEBT WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CAS E OF THE APPELLANT AND THE LEGAL PROVISIONS IN THIS REGARD. 7. THAT THE APPELLANT PRAYS THE LIBERTY OF HON'BLE TRIBUNAL FOR ADDITION / MODIFICATION OF ANY OF THE GROUNDS AT TH E TIME OF HEARING OF THE APPEAL. 2. IN THESE CASES, THE ASSESSMENTS WERE FINALIZED U /S 143(3) AGAINST WHICH THE ASSESSEE PREFERRED THE APPEAL BEFORE THE CIT (A PPEALS)-XV, NEW DELHI ITA NO.2157 TO 2159/DEL./2013 3 WHO CONFIRMED THE ADDITION. AGAINST THIS, ASSESSEE PREFERRED THE APPEAL IN ITAT AND ITAT SET ASIDE THE ORDERS OF THE ASSESSING OFFICER WITH THE FOLLOWING OBSERVATIONS :- THE ISSUES RAISED IN GROUND NOS.1 & 2 ARE FULLY DE LIBERATED UPON THE LEARNED COUNSEL FOR THE ASSESSEE AS WELL AS THE DEPARTMENTAL REPRESENTATIVE. CONSIDERING THE TOTALITY OF THE FA CTS AND CIRCUMSTANCES OF THE CASE AND KEEPING IN MIND THAT THE ISSUES RAISED IN THIS APPEAL ARE PROPERLY CONSIDERED AND ADJUDICA TED UPON BY THE A.O. AFTER CONSIDERING ALL THE DOCUMENTS, PAPERS, C ONTENTIONS AND SUBMISSIONS FURNISHED BY THE ASSESSEE, WE ARE OF TH E CONSIDERED VIEW THAT THE ISSUES RAISED IN THIS APPEAL ARE TO B E DECIDED AFRESH BY THE AO AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS UNDERSTANDING WAS SO ARRIVED AT AFT ER DELIBERATING UPON WITH THE LEARNED REPRESENTATIVES OF BOTH THE P ARTIES, WHO HAD AGREED TO THE SAME. BE IT MENTIONED HERE THAT THE ASSESSEE SHALL BE UNDER AN OBLIGATION TO PRODUCE AND FURNISH ALL THE EVIDENCES IN SUPPORT OF ITS CASE, BEFORE THE A.O., IN FAILURE OF WHICH THE A.O. SHALL BE ENTITLED TO DRAW AN INFERENCE AS PERMISSIB LE UNDER THE LAW AND TO DECIDE THE MATTER ON THE BASIS OF MATERIALS AVAILABLE ON RECORD. THE ASSESSEE SHALL ALSO CO-OPERATE WITH TH E A.O. IN MAKING FRESH ASSESSMENT AT THE EARLIEST AND WITHOUT TAKING ANY ADJOURNMENT WHEN THE MATTER IS FIXED FOR HEARING BY THE A.O. TH E LEARNED COUNSEL FOR THE ASSESSEE HAS GIVEN AN UNDERTAKING THAT THE ASSESSEE SHALL CO- OPERATE WITH THE A.O. IN FRESH ASSESSMENT PROCEEDIN GS AND SHALL SUBMIT ALL THE RELEVANT DETAILS AND PARTICULARS IN SUPPORT OF THE ASSESSEES CASE WITHOUT INDULGING IN ANY DILATORY T ACTICS. WE ORDER ACCORDINGLY. IN CONSEQUENCE TO THE ITAT ORDER, IN THE SECOND ROU ND, THE ASSESSMENTS WERE FINALIZED AGAINST WHICH THE ASSESSEE PREFERRED THE APPEAL AND THE CIT (A) DISMISSED THE APPEALS OF THE ASSESSEE. 3. NOW, AGAIN THE ASSESSEE IS IN APPEAL BEFORE US. 4. AT THE OUTSET OF THE HEARING, THE LD. AR SUBMITT ED THAT THE ASSESSEE IS A GROUP COMPANY OF SHRI TARUN GOYAL GROUP AND IN O THER GROUP COMPANIES, ITA NO.2157 TO 2159/DEL./2013 4 THE ITAT IN ITS ORDER DATED 18.10.2013 HAS SET ASID E THE ISSUES TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN ACC ORDANCE WITH LAW. HE ALSO PROVIDED A COPY OF THE ORDER OF ITAT, BENCH B, NE W DELHI IN ITA NO.4636-4637/DEL/2012 AND OTHERS DATED 18.10.2013. ON AN ENQUIRY FROM THE LD. DR, HE ALSO SUBMITTED THAT TO HAVE IN OVERA LL VIEW OF THE MATTER AND ELIMINATE CHAIN / MULTIPLE TRANSACTIONS, FOR ARRIVI NG AT THE CORRECT ASSESSABLE AMOUNT, THESE APPEALS MAY ALSO BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN ACCORDANCE WITH L AW. 5. AFTER HEARING BOTH THE SIDES, WE HOLD THAT IN TH E OTHER GROUP CASES, ITAT HAS SET ASIDE THE ISSUE TO THE FILE OF THE ASS ESSING OFFICER BY HOLDING AS UNDER :- 15. HE RELIED ON THE ASSESSMENT ORDER IN THE CASE OF MR. TARUN GOYAL FOR THE AY 2007-08 AND 2008-09 PASSED U/S 143 (3) OF THE ACT AND POINTED OUT THAT THE AO HAS ACCEPTED COMMISSION INCOME AT THE RATE OF DECLARED BY THE ASSESSEE AND PLEADED THAT T HE SAME SHOULD BE ACCEPTED IN EARLIER YEAR. 16. DR. SUDHA KUMARI, LD. CIT DR ON THE OTHER HAND VEHEMENTLY OPPOSED THE CONTENTIONS OF THE ASSESSEE. SHE SUBMIT TED THAT EACH ASSESSEE IS AN ARTIFICIAL JURISTIC PERSON IN LAW OR AN INDIVIDUAL AND THE REQUEST OF THE ASSESSEE TO FRAME A SINGLE ASSESSMEN T IN ALL THE CASES WOULD BE AGAINST LAW. SHE SUBMITTED THAT EACH ASSES SEE HAS TO NECESSARILY EXPLAIN EACH CREDITS IN THE BOOKS OF AC COUNT AND IN ABSENCE OF PROVING THE IDENTITY, GENUINENESS AND CR EDITWORTHINESS OF THE CREDITOR; THE CREDIT IN QUESTIONED HAS TO BE AD DED AS INCOME U/S 68 OF THE ACT, IN THE HANDS OF THE ASSESSEE IN WHOSE B OOKS THE ENTRY IS FOUND. SHE SUBMITTED THAT THE AO HAS CORRECTLY DONE SUCH AN EXERCISE AND MADE ADDITIONS AND THE LD. CIT (A) HAS RIGHTLY UPHELD THE SAME. SHE COUNTERED EACH AND EVERY CONTENTION OF THE ASSE SSEE. 17. ON COMMISSION INCOME SHE SUBMITTED THAT THE PER CENTAGE ADOPTED BY THE AO WAS REASONABLE AND BASED ON MATER IAL, AND THAT ITA NO.2157 TO 2159/DEL./2013 5 THE ASSESSMENT ORDER OF SHRI TARUN GOYAL FOR THE AS SESSMENT YEAR 2007-08 AND 2008-09, WHERE COMMISSION @ 0.25%, WAS NOT QUESTIONED OR INVESTIGATED UPON BY THE AO, CANNOT F ORM THE BASIS FOR CLAIMING RELIEF IN THE EARLIER ASSESSMENT YEARS. SH E SUBMITTED THAT THESE ASSESSMENT ORDERS DATED 30.3.2013 FOR THE AY 2007-08, 2008- 09 AND 2009-10 ARE NOT SPEAKING ORDER ON THIS ISSUE AND THAT THE ACIT CENTRAL CIRCLE, NOIDA, PASSED THESE ORDER WITH OUT APPLICATION OF MIND AND WITHOUT CONSIDERING THE MATERIAL ON REC ORD OR FINDINGS IN THE PREVIOUS ASSESSMENT YEARS AS CONFIRMED BY THE F IRST APPELLATE AUTHORITY. SHE CONTENDED THAT SUCH NEGLIGENT ACTS O F A AO CANNOT BE RELIED AS A PRECEDENT. THOUGH NOT LEAVING HER GROUN D, ON A QUERY FOR THE BENCH, SHE SUBMITTED THAT, IN CASE OF CIRCULAR TRANSACTION OR TRANSACTIONS WHERE LAYERING OF THE SAME AMOUNT IS M ADE MULTIPLE TIMES, THE TRANSACTION IS TO BE TAXED ONLY AT THE F IRST POINT AND THAT THE SUBSEQUENT TRANSFERS OF THE VERY SAME AMOUNT FROM O NE COMPANY TO ANOTHER BY WAY OF LAYERING, CANNOT BE TAXED AT EACH POINT AS IT WOULD AMOUNT TO MULTIPLE TAXATION OF THE SAME AMOUNT. 18. IN REPLY THE LD. COUNSEL FOR THE ASSESSEE POINT ED OUT THE ASSESSMENT IN THE CASE OF TARUN GOYAL FOR SOME OF T HE ASSESSMENT YEARS HAS NOT ATTAINED FINALITY AND THAT IT WOULD B E APPROPRIATE AND LEGALLY CORRECT TO PASS ASSESSMENT ORDERS IN ALL TH E GROUP CASES SIMULTANEOUSLY BY CONSIDERING THE TOTALITY OF THE F ACTS AND CIRCUMSTANCES AND BY BRING TO TAX ONLY THE PEAK AMO UNT OF CREDIT AND BY ELIMINATING CIRCULAR TRANSACTIONS. HE SUBMITTED THAT AS MR. TARUN GOYAL OFFERED THE ENTIRE INCOME TO TAX IN HIS HANDS , NO SEPARATE ADDITION IS CALLED FOR IN ANY OF THE OTHER COMPANIE S, AS THE CREDITS IN THOSE CASES STAND EXPLAINED. ON COMMISSION EARNED, ON ISSUE OF ACCOMMODATION ENTRIES, THE LD. COUNSEL REITERATED I N HIS CONTENTION. 19. RIVAL CONTENTION HEARD. ON A CAREFUL CONSIDERAT ION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND PERUSAL OF THE PA PERS ON RECORD IN THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE CASE LAWS CITED WE HOLD AS FOLLOWS. 20. THE UNDISPUTED FACT ACCEPTED BY THE ASSESSEE IS THAT MR. TARUN GOYAL WAS RUNNING A RACKET OF PROVIDING ACCOMMODATI ON ENTRIES BY FLOATING NUMEROUS COMPANIES. THE MODUS OPERANDI BRO UGHT OUT BY THE AO IN THE ASSESSMENT ORDER, IS NOT DISPUTED BY THE ASSESSEE. THE ONLY ISSUE BEFORE US IS THE QUANTIFICATION OF THE I NCOME IN THE HANDS OF MR. TARUN GOYAL AND EACH OF THE ENTITIES FORMED BY HIM. EACH COMPANY IS AN ASSESSEE AND AN ASSESSMENT ORDER HAS TO BE PASSED SEPARATELY IN EACH CASE. THE CREDITS APPEARING IN T HE BOOKS OF EACH ASSESSEE HAVE TO BE EXPLAINED BY THAT ASSESSEE. THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE CREDITOR HA S TO BE PROVED BY ITA NO.2157 TO 2159/DEL./2013 6 THAT PARTICULAR ASSESSEE AND IF THE SAME IS NOT PRO VED, ADDITION MAY BE MADE U/S 68. THE ARGUMENT OF THE LD. COUNSEL FOR TH E ASSESSEE THAT ALL THE ADDITIONS HAVE TO BE MADE ONLY IN THE HANDS OF MR. TARUN GOYAL IS NOT CORRECT AND HENCE CANNOT BE ACCEPTED. 21. THE CONTENTION THAT THE TOTALITY OF THE CIRCUMS TANCES HAVE TO BE CONSIDERED BY ARRIVING AT THE ASSESSABLE INCOME AND THAT WHEN THE FINDING IS THAT THE ASSESSEE HAS INDULGED IN CIRCUL AR AND MULTIPLE TRANSACTIONS, BY LAYERING, WHAT CAN BE TAXED IS THE PEAK CREDIT AND THAT TOO AT THE FIRST POINT IS ACCEPTABLE AND SHOULD BE THE MANNER OF DETERMINING THE CORRECT INCOME. IF EACH OF THE LAYE R IS BROUGHT OUT TAX, THEN IT WOULD BE CASE OF LEVY OF INCOME TAX, M ULTIPLE NO. OF TIMES, ON THE SAME AMOUNT. SUCH LEVY OF DOUBLE OR MULTIPLE TAXES IS AGAINST LAW AND IT WOULD NOT BE THE RIGHT METHOD OF ARRIVIN G AT THE CORRECT AMOUNT OF INCOME. IF INCOME IS TAXED IN THE HANDS O F MR. TARUN GOYAL, THE TAXED AMOUNT, WHEN TRANSFERRED TO ANOTHE R COMPANY SHOULD BE TREATED AS EXPLAINED CREDIT. THE MULTIPLE TRANSFER OF THIS AMOUNT SHOULD ALSO BE TREATED AS EXPLAINED. BUT THE BURDEN OF PROOF LIES ON THE ASSESSEE. 22. ADMITTEDLY CERTAIN ASSESSMENT OF SHRI TARUN GOY AL, THE KIN PIN ARE AT VARIOUS STAGES AND HAVE NOT REACHED THE TRIB UNAL. UNDER THESE CIRCUMSTANCES, IT WOULD NOT BE POSSIBLE TO HAVE IN OVER ALL VIEW OF THE MATTER AND ELIMINATE CHAIN / MULTIPLE TRANSACTION, FOR ARRIVING AT THE CORRECT ASSESSABLE AMOUNT. THUS WE HAVE NO OTHER AL TERNATIVE BUT TO SET ASIDE ALL THESE APPEALS TO THE FILE OF THE AO F OR FRESH ADJUDICATION IN ACCORDANCE WITH LAW. 23. THE AO SHALL AFTER EXAMINING THE EVIDENCE SUBMI TTED BY THE ASSESSEE, CONSIDER ALL THE CASES TOGETHER AND; A) RESTRICT THE ADDITION U/S 68 TO ONLY THE PEAK UN EXPLAINED CREDIT IN EACH CASE AFTER ELIMINATION CIRCULAR TRANSACTION. B) TO ELIMINATE TAXATION OF THE SAME AMOUNT MULTIPL E TIMES, DUE TO THE CHAIN TRANSACTIONS WHICH RESULTED DUE TO LAYERI NG INDULGED BY THE ASSESSEE. C) CONSIDERED THE MATERIAL ON RECORD AND THE PRECED ENCE AVAILABLE ON THE ISSUE AND DETERMINE THE PERCENTAGE OF COMMISSIO N, WHICH THE ASSESSEES WOULD HAVE EARNED AND BRING THE SAME TO T AX. 24. BEFORE PARTING WE MAKE IT CLEAR THAT THE BURDEN OF PROOF LAY ON THE ASSESSEE. IT IS FOR THE ASSESSEE TO DEMONSTRATE THE CHAIN OF TRANSACTION, THE LAYERING INDULGED BY HIM, THE CALC ULATION OF PEAK ITA NO.2157 TO 2159/DEL./2013 7 UNEXPLAINED CREDIT ETC. AND TO PROVE EACH CREDIT IN THE BOOKS OF EACH ASSESSEE. IN THE RESULT ALL THESE APPEALS ARE SET A SIDE TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW. IN VIEW OF THESE FACTS, WE HAVE NO ALTERNATE BUT TO SET ASIDE ALL THESE THREE APPEALS TO THE FILE OF THE ASSESSING OFFICER FOR FR ESH ADJUDICATION. WE ORDER ACCORDINGLY. 6. IN THE RESULT, ALL THE THREE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 13 TH DAY OF MARCH, 2014. SD/- SD/- (A.T. VARKEY) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 13 TH DAY OF MARCH, 2014 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXXIII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.