ITO, New Delhi V. M/s. Bhagwan Krishan Investment & Trading (P) Ltd., Delhi

ITA 2585/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0345 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-02-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 31-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B KISHORE
• Assessee Lawyers: R C RAI
• Keywords: Opportunity of being heard; Accommodation entries; Tax effect

Judgement Text

I.T.A. NO.2585 & 2586 /DEL/10 1/5 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A NEW DELHI) BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.2585 & 2586/DEL/2010 ASSESSMENT YEAR : 2005-06 & 2006-07 ITO, M/S BHAGWAN KRISHAN WARD-2 (4), INVESTMENT & TRADING (P) LTD., NEW DELHI. 509-USHA KIRAN BLDG., V. AZADPUR, DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AACCB AACCB AACCB AACCB- -- -2095 2095 2095 2095- -- -F FF F APPELLANT BY : SHRI B. KISHORE, SR. DR. RESPONDENT BY : SHRI R.C.RAI, C.A. ORDER PER A.K. GARODIA, AM: BOTH THESE APPEALS ARE FILED BY THE REVENUE WHICH AR E DIRECTED AGAINST A COMMON ORDER OF LD CIT(A) V, NEW DELHI D ATED 11.2.2010 FOR ASSESSMENT YEAR 2005-06 & 2006-07. IN FACT, THIS COMMON ORDER OF LD CIT(A) IS FOR THREE ASSESSMENT YEARS I.E. 2004-05, 2005-0 6 & 2006-07 BUT NONE OF THE PARTIES WERE AWARE ABOUT THE FACTUAL POSITION WITH REGARD TO ASSESSMENT YEAR 2004-05 AS TO WHETHER ONLY AP PEAL WAS FILED BY THE REVENUE FOR THAT ASSESSMENT YEAR AND IF FI LED, WHAT IS THE STATUS OF THAT. BE THAT AS IT MAY, BECAUSE IT MAY BE T HAT NO APPEAL MIGHT HAVE BEEN FILED BY THE REVENUE IN THAT YEAR B ECAUSE OF LOW TAX EFFECT SINCE WE FIND THAT AS HAS BEEN NOTED BY THE LD CIT(A) ON PAGE NO.1 OF THIS COMMON ORDER, THE INCOME ASSESSED IN THAT Y EAR WAS ONLY . I.T.A. NO.2585 & 2586/DEL/10 2/5 `.2,12,392/-. WE, THEREFORE, PROCEED TO DECIDE THE SE TWO APPEALS OF THE REVENUE. THE GROUND RAISED BY THE REVENUE IS IDEN TICAL EXCEPT THE DIFFERENCE IN AMOUNT AND HENCE, WE REPRODUCE THE GR OUND RAISED BY THE REVENUE IN I.T.A. NO.2585/DEL/2010 WHICH IS AS UN DER:- IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DECISI ON OF THE LD CIT(A) DELETING THE ADDITION OF `.9,65,395/- ON ACCOUNT OF COMMISSION @ 1% IS NOT ACCEPTABLE AS THE CIT(A) HAS NOT APPRECIATED FACTS OF THE CASE THAT SHRI PRADEEP JIND AL HAS ADMITTED DURING STATEMENT ON OATH THAT HE WAS DOING T HE BUSINESS OF SALE AND PURCHASE OF SHARE THROUGH VARIOUS COMPANIES IN WHICH HE WAS A DIRECTOR AND ALSO ADMITTED THAT THE ASSESSEE COMPANY IN QUESTION WAS CONTROLLED BY HIM THROUG H HIS KNOWS PERSONS WHO WERE SOWN AS DIRECTORS AND ALSO ADMITTE D THAT THESE COMPANIES WERE BEING USED HIM FOR PROVIDING ACCOMMODATION ENTRIES TO VARIOUS COMPANIES. 2. LD DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS IT WAS SUBMITTED BY THE LD AR OF THE ASSESSEE THAT THE ASSESSEE WAS NOT PROVIDED THE COPY OF ADVERSE MATERIAL/STATEMENT GATHE RED AT THE BACK OF THE ASSESSEE AND USED IN ASSESSMENT PROCEEDINGS AGAINST TH E ASSESSEE. IT IS ALSO POINTED OUT BY HIM THAT THIS ISSUE HAS B EEN RAISED BY THE ASSESSEE BEFORE THE LD CIT(A) AS PER GROUND NO.3 RAISED BEFORE HIM BUT THE SAME WAS NOT DECIDED BY THE LD CIT(A) AND FOR THIS REASON ALSO, THE ADDITIONS MADE BY THE ASSESSING OFFICER ARE NO T JUSTIFIED IN BOTH THE YEARS. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE TH ROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IT HAS B EEN NOTED BY THE ASSESSING OFFICER IN PARA NO.2 OF THE ASSESSMENT ORDER THA T SHRI PRADEEP JINDAL HAS GIVEN A STATEMENT ON OATH THAT HE WAS DOING THE . I.T.A. NO.2585 & 2586/DEL/10 3/5 BUSINESS OF SALE AND PURCHASE OF SHARES THROUGH VARIOUS COM PANIES IN WHICH HE WAS A DIRECTOR. IT IS ALSO NOTED BY THE ASSESSING OFFICER THAT IT IS ALSO STATED BY SHRI PRADEEP JINDAL THAT THESE TRANSAC TIONS OF SHARES WERE IN FACT BOGUS. THESE FACTS ARE NOTED BY THE ASSESSIN G OFFICER IN PARA NO.2 OF THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2005 -06 AND THE SAME IS REPRODUCED BELOW:- SHRI PRADEEP JINDAL HAD GIVEN A STATEMENT ON OATH T HAT HE WAS DOING THE BUSINESS OF SALE AND PURCHASE OF SHARES THROUGH VARIOUS COMPANIES IN WHICH HE WAS A DIRECTOR. THESE TRANSACTIONS OF SHARES WERE IN FACT BOGUS AND HE WAS GIVI NG ACCOMMODATION ENTRIES TO VARIOUS COMPANIES THROUGH THE SE SHARE TRANSACTIONS. DURING THE ASSESSMENT PROCEEDINGS IN TH E CASE OF BEACON SALES PVT. LTD. IN WHICH SHRI PRPADEEP JINDAL WAS DIRECTOR GAVE A STATEMENT THAT THE ASSESSEE COMPANY I.E . M/S BHAGWAN KRISHAN INVESTMENT AND TRADING CO. PVT. LTD. WAS CONTROLLED BY HIM THROUGH HIS KNOWN PERSONS WHO WERE SH OWN AS DIRECTORS. HE ALSO ADMITTED THAT THESE COMPANIES WERE B EING USED BY HIM FOR PROVIDING ACCOMMODATION ENTRIES TO VA RIOUS COMPANIES. 4. WE HAVE GONE THROUGH THE ENTIRE ASSESSMENT ORDER AND WE FIND THAT NOWHERE, IT IS OBSERVED BY THE ASSESSING OFFICER TH AT THE ADVERSE MATERIAL HAD BEEN CONFRONTED TO THE ASSESSEE OR COPY HA S BEEN PROVIDED TO THE ASSESSEE OF THE STATEMENT OF SHRI PRADE EP JINDAL. A SPECIFIC GROUND WAS RAISED BY THE ASSESSEE BEFORE LD CIT( A) AS PER GROUND NO.3 WHICH IS AS UNDER:- NOT PROVIDING ADVERSE MATERIAL/STATEMENTS GATHERED AT THE BACK OF THE ASSESSEE AND USED IN ASSESSMENT PROCEEDING AGAINST THE ASSESSEE. . I.T.A. NO.2585 & 2586/DEL/10 4/5 5. IN SPITE OF THIS, LD CIT(A) HAS DECIDED THIS ISSUE O N MERIT BY FOLLOWING THE JUDGMENT OF HON'BLE APEX COURT RENDER ED IN THE CASE OF LOVELY EXPORTS PVT. LTD. AS REPORTED IN 216 CTR 195 ( SC). WE FAIL TO UNDERSTAND AS TO HOW THIS JUDGMENT OF HON'BLE APEX COU RT CAN BE APPLIED IN THE PRESENT CASE WHEN THE ALLEGATION IS TH IS THAT THE SHARE TRANSACTIONS ARE NOT GENUINE AND ARE MERE ACCOMMODATI ON ENTRIES AND THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER ONL Y TO THE EXTENT OF 1% OF THE AMOUNT OF SUCH TRANSACTION BY HOLDING TH AT THIS MUCH IS THE COMMISSION INCOME OF THE ASSESSEE COMPANY FROM THESE ACCOMMODATION ENTRIES. FIRST OF ALL, THIS ASPECT HAS TO BE DECIDED AS TO WHETHER THESE ARE ACCOMMODATION ENTRIES OR NOT AND IF IT IS FOUND THAT THESE ARE NOT ACCOMMODATION ENTRIES THEN ONLY WITH RE GARD TO RECEIPT OF SHARE APPLICATION MONEY BY THE ASSESSEE COMPANY, THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF LOVELY EX PORTS PVT. LTD. (SUPRA) MAY BE APPLICABLE IF THE ASSESSEE FULFILLS THE BA SIC REQUIREMENTS I.E. ESTABLISHING THE IDENTITY OF THE SHAR E APPLICANTS ETC. BUT BEFORE THAT, IT HAS TO BE DECIDED FIRST AS TO WHET HER THE ENTRIES IN QUESTIONS ARE ACCOMMODATION ENTRIES OR NOT. SINCE THI S ASPECT WAS NOT DECIDED BY THE LD CIT(A), HIS ORDER CANNOT BE SUSTAIN ED BUT AT THE SAME TIME, WE ALSO CANNOT DECIDE THE MATTER AND THE I SSUE HAS TO GO BACK TO THE FILE OF THE ASSESSING OFFICER FOR A FRESH DE CISION AFTER FURNISHING THE COPY OF ADVERSE MATERIAL/STATEMENT GATH ERED BY THE ASSESSING OFFICER BEHIND THE BACK OF THE ASSESSEE AND USED I N ASSESSMENT PROCEEDINGS AGAINST THE ASSESSEE. WE, THEREFORE, SET ASIDE THE ORDER OF LD CIT(A) IN BOTH THE YEARS AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR A FRESH DECISION. THE ASSESSING OFFICER HAS TO PROVIDE COPY OF ADVERSE MATERIAL/STATEM ENT GATHERED AT THE BACK OF THE ASSESSEE ON WHICH HE WANTS TO RELY UPON AND USE AGAINST THE ASSESSEE. THE ASSESSEE HAS TO BE PROVIDED WITH AN OPPORTUNITY TO REBUT SUCH ADVERSE MATERIAL/STATEMENT A ND THEREAFTER, THE ASSESSMENT HAS TO BE FRAMED AFRESH AFTER PROVIDING A DEQUATE . I.T.A. NO.2585 & 2586/DEL/10 5/5 OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY IN BOTH THE YEARS. 6. IN THE RESULT, THE APPEALS FILED BY THE REVENUE AR E ALLOWED FOR STATISTICAL PURPOSES. 7. ORDER PRONOUNCED IN THE OPEN COURT ON THE DAY OF 11TH FEBRUARY, 2011. SD/- SD/- (R.P. TOLANI) (A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 11.2.2011. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI).