M/s. Centenary Software Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 3034/DEL/2012

• Counselvise Citation: 303420114 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 18-07-2013
• Assessment Year: 2001-2002
• Appeal Filed On: 15-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUKHVEER CHOUDHARY
• Keywords: Accommodation entries; Condonation of delay
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC NEW DELHI BEFORE SHRI R.P. TOLANI : JUDICIAL MEMBER ITA NOS. 3034, 3035, 3036 & 3037/DEL/2012 A.YRS: 2001-02, 2002-03, 2003-04 & 2004-05 M/S CENTENARY SOFTWARE PVT. LTD. VS. ACIT CENTRA L CIRCLE-9, H-108, IIND FLOOR, NEW ASIATIC BUILDING, NEW DELHI . CONNAUGHT PLACE, NEW DELHI-110001. PAN: AACCC 0793 M ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI K. SAMPATH ADV. RESPONDENT BY : SHRI SUKHVEER CHOUDHARY SR. DR O R D E R THIS IS A GROUP OF FOUR APPEALS, FILED BY THE ASSES SEE AGAINST SEPARATE ORDERS OF CIT(A) RELATING TO A.Y. 2001-02, 2002-03, 2003-04 & 2004-05. ALL THE APPEALS ARE HEARD TOGETHER AND DISPOSED OF BY A CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. ADMITTEDLY, THESE APPEALS WERE FILED ON 15-6-201 2 AS AGAINST LAST DATE OF FILING THE APPEAL BEING 10-5-2012. ASSESSEE HAS FILED APPLICATION FOR CONDONATION OF DELAY CONTENDING THAT FATHER OF CON CERNED DIRECTOR SHRI S.K. GUPTA WAS CRITICALLY ILL AND EXPIRED ON 22-4-2012. IN THESE CIRCUMSTANCES, THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FROM FILING THE APPEALS. 3. LD. DR IS HEARD. 2 4. I HAVE HEARD RIVAL CONTENTIONS. IN MY CONSIDERED OPINION, IN THE ABOVE FACTS AND CIRCUMSTANCES THE ASSESSEES PLEA FOR DEL AY IN FILING THE APPEALS DESERVES TO BE ACCEPTED. ACCORDINGLY, THE DELAY IN FILING THE APPEALS IS CONDONED. 5. FOLLOWING COMMON GROUNDS ARE RAISED: THE CIT(A) ERRED IN CONFIRMING THE ORDER OF ASSESSI NG OFFICER PASSED U/S 143(3) ESTIMATING THE UNDISCLOSED INCOME WITHOU T THERE BEING ANY MATERIAL AS AGAINST THE RETURNED INCOME AS UNDER: ASSTT. YR. RETURNED ASSESSED INCOME INCOME 2001-02 RS. 6,233/- RS. 44,569/- 2002-03 RS.12,368/- RS. 23,727/- 2003-04 RS. 2,438/- RS. 46,020/- 2004-05 RS.18,669/- RS. 58,956/- 6. BRIEF FACTS ARE: ON 12-12-2006, SEARCH AND SEIZU RE OPERATIONS WERE CARRIED OUT AT BUSINESS AND RESIDENTIAL PREMISES O F ONE SHRI S.K. GUPTA ALONG WITH VARIOUS CONCERNS OPERATED BY HIM AND HIS FAMILY MEMBERS. FROM THE ASSESSMENT ORDER IT EMERGES THAT INVESTIGATION WING OF INCOME-TAX DEPARTMENT GATHERED THE INFORMATION THAT ONE SHRI S .K. GUPTA, CHARTERED ACCOUNTANT BY PROFESSION, WAS RUNNING VARIOUS DUBI OUS COMPANIES AND OTHER ENTITIES FROM THE PREMISES OF TRUMP AND GATES, SI TUATED AT H-108, 2 ND FLOOR, NEW ASIATIC BUILDING, CONNAUGHT PLACE, NEW D ELHI AND ALSO FROM HIS 3 C.A. FIRM M/S GUPTA & RAKESH ASSOCIATES AT 231, GUL MOHAR ENCLAVE, NEW DELHI. AS MANY AS 33 SUCH DUBIOUS COMPANIES WHICH A RE LIST4ED IN ASSESSING OFFICERS ORDER WERE ALLEGED TO BE OPERATED BY SHR I S.K. GUPTA, WHICH WERE UTILIZED FOR ISSUING ACCOMMODATION ENTRIES TO OTHER PERSONS. 6.1. THE ASSESSEE FILED RETURNS OF INCOME U/S 153A CONSEQUENT TO SEARCH, ACCEPTING THE UNDISCLOSED INCOME AS MENTIONED IN TH E ABOVE RETURNED FIGURES ALONG WITH THE AUDITED ACCOUNTS. 6.2. DURING THE COURSE OF SEARCH PROCEEDINGS, SHRI S.K. GUPTA HAD ADMITTED IN HIS OWN STATEMENT THAT DUMMY BILLS WERE ISSUED BY VARIOUS DUBIOUS ENTITIES OR CONCERNS TO OTHERS FOR A CONSID ERATION. ASSESSING OFFICER ASKED THE DOCUMENTARY EVIDENCE IN RESPECT OF SOFTWA RE DEVELOPMENT AS WELL AS DETAILS OF PERSONS WHO STUDIED THE CITES ON RESP ECTIVE DATES AS CLAIMED IN THE AUDIT STATEMENT. NO SUCH DOCUMENTARY EVIDENCE W AS PRODUCED. 6.3. THE ASSESSING OFFICER MADE DETAILED OBSERVATIO NS AND IN ESSENCE HELD AS UNDER: (I) THE ASSESSEE FAILED TO PROVIDE ANY DOCUMENTARY EVID ENCE IN RESPECT OF ITS ACCOUNTS, RECEIPTS AND EXPENSES. (II) THE ASSESSEE HAD THUS FAILED TO SUBSTANTIATE ITS RE TURN AND UNDISCLOSED INCOME MENTIONED THEREIN. (III) THERE WERE VARIOUS DISCREPANCIES RELEVANT TO ACCOMM ODATION ENTRIES BUSINESS IN RESPECT OF ENTRIES PROVIDED AND THE EXPENSES 4 CLAIMED. THE ASSESSEES BUSINESS WAS TREATED AS SH AM AND UNDISCLOSED INCOME WAS COMPUTED @ 2% NET INCOME ON DUMMY SALE AND TURN OVER AND INVESTMENT RELYING ON ASSESS EES STATEMENT, PREVALENT MARKET CONDITION AND THE INCONSISTENCIES IN THE BOOKS OF ACCOUNT. 6.4. ACCORDING TO ASSESSING OFFICER, THE ASSESSEE ESTIMATED HIS INCOME @ 0.5% ON THE ACCOMMODATION TURN OVER 2% WAS THE REAS ONABLE ESTIMATE OF INCOME FROM ACCOMMODATION TURNOVER, WHICH THE ASSES SEE HAS EARNED FROM INDULGING IN THESE ACCOMMODATION ENTRIES. ACCORDING LY, THE ADDITIONS WERE MADE. 6.5. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL BEF ORE THE CIT(A), WHERE WRITTEN SUBMISSIONS WERE FILED, SAME WERE FORWARDE D TO ASSESSING OFFICER FOR HIS COMMENTS. THE REPORT SUBMITTED BY ASSESSING OFFICER WAS SUPPLIED TO THE ASSESSEE AND HIS REJOINDER WAS SOUGHT. CIT(A), HOWEVER, UPHELD THE ORDER OF ASSESSING OFFICER AND DISMISSED THE ASSESS EES APPEALS BY FOLLOWING OBSERVATIONS: CIT(A)S OBSERVATIONS FOR A.Y. 2001-0 2 ARE REPRODUCED, WHICH ARE COMMON IN ALL THE YEARS, EXCEPT THE ESTIM ATED INCOME FIGURES: 2.3.3. THE APPELLANT, IN HIS REJOINDER, HAS ALSO R AISED THE ISSUE OF NON-ALLOWANCE OF CREDIT OF INCOME SURRENDE RED IN VARIOUS HANDS INCLUDING IN THE HANDS OF THE APPELLA NT COMPANY BY SHRI S.K. GUPTA. IN THIS REGARD, THE AO HAS OBSE RVED THAT THE APPELLANT HAD FAILED TO CORRELATE ITS SURRENDERED I NCOME, IN DIFFERENT A.YRS WITH THE ACTUAL FIGURES OF THE BUSI NESS. THIS OBSERVATION OF THE AO HAS NOT BEEN CONTROVERTED BY THE 5 APPELLANT WITH SUBSTANTIATING EVIDENCES. FURTHERMOR E, I HAVE PERUSED THE STATEMENTS AS EXTRACTED BY THE AO IN T HE ASSESSMENT ORDER. NO SURRENDER WAS MADE IN THE HAND S OF THE APPELLANT COMPANY FOR THE ASSESSMENT YEAR UNDER CON SIDERATION IN THIS APPEAL. THEREFORE, THE ABOVE CONTENTION IS MISPLACED AND IS THEREFORE REJECTED AS SUCH. 2.3.4. THE OTHER CONTENTION OF THE APPELLANT IS THA T NO EXPENSES HAVE BEEN ALLOWED OUT OF THE ADDITIONS MADE ON ACCO UNT OF COMMISSION EARNED FOR PROVIDING ACCOMMODATION ENTRI ES WHICH IS NOT JUSTIFIED. SUFFICE IT TO SAY THAT THE AO HA S ESTIMATED AND APPLIED A NET RATE OF 2% AND THEREFORE THERE WAS NO REASON TO ALLOW ANY EXPENSES OUT OF IT. THIS CONTENTION IS AL SO, THEREFORE, REJECTED. 2.3.5. TAKING INTO CONSIDERATION THE TOTALITY OF FA CTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED HEREINABOVE, IT IS HELD THAT THE ADDITION MADE BY THE AO ON ACCOUNT OF NET INCOME EARNED FROM ACCOMMODATION ENTRY BUSINESS TO THE TUN E OF RS. 44,569/- IS JUSTIFIED AND IS, THEREFORE, CONFIRMED. SINCE THE AO HAS GIVEN A CATEGORICAL FINDING THAT THE APPELLANT HAD ONLY INDULGED IN ACCOMMODATION ENTRIES BUSINESS AND HAD NOT DONE ANY GENUINE BUSINESS AND REJECTED THE BOOK RESULTS ON THAT GROUND, THE NET PROFIT SHOWN IN THE RETURN HAS LOST ITS RELEVANCE AND SHOULD NOT BE GIVEN ANY CREDENCE. THE AO IS, TH EREFORE, DIRECTED O RECOMPUTED THE TOTAL INCOME ACCORDINGLY. THIS DISPOSES OFF ALL THE GROUNDS OF APPEAL TAKEN BY THE APPELLANT AGAINST THE IMPUGNED ASSESSMENT ORDER. AGGRIEVED ASSESSEE IS BEFORE ITAT. 7. LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE I NCOME OF THE ASSESSEE HAS BEEN ESTIMATED @ 2% OF THE TURN OVER WHEREAS IN HIS STATEMENT SHRI S.K. GUPTA HAD CONTENDED THAT THE PREVALENT INCOME ON ACCOMMODATION ENTRY TRANSACTIONS WAS BETWEEN 0.25% TO 0.5%. THIS STATEMENT WAS ON OATH 6 AND WITHOUT GIVING ANY MATERIAL THE ASSESSING OFFIC ER HAS ESTIMATED THE SAME @ 2%. BESIDES, WHILE FRAMING THE ASSESSMENT THE ASS ESSING OFFICER HAS MADE THE ADDITION ON THE SAME TURN OVER QUA WHICH THE AS SESSEE HAS OFFERED INCOME ALREADY IN THE P&L A/C. THUS, TO THIS EXTEN T THERE IS DOUBLE ADDITION. 8. LD. DR, ON THE OTHER HAND, VEHEMENTLY CONTENDS T HAT THERE IS NO MERIT IN THE APPEALS OF THE ASSESSEE INASMUCH AS: (I) IN THE P&L A/C FILED ALONG WITH THE RETURN, THE ASS ESSEE HAS SHOWN THE INCOME CLAIMING IT TO BE A REGULAR BUSINESS WHE REAS THE FACT REMAINS THAT ASSESSEE WAS NOT ENGAGED IN ANY ACTUAL BUSINESS AT ALL, THEREFORE, THE RETURNED INCOME CONSTITUTES THE ASSE SSEES OWN OFFER ON THE BASIS OF ITS METHOD. (II) ON THE BASIS OF EVIDENCE, STATEMENT AND OTHER RECOR D, ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE ASSESSEE WA S ENGAGED IN ACCOMMODATION ENTRIES AND FROM THE VERIFIABLE TURN OVER FIGURE AN ESTIMATE OF 2% HAS BEEN MADE, WHICH IS A FAIRE ESTI MATE, AS NO ARBITRARINESS HAS BEEN DEMONSTRATED. (III) THE ASSESSEES ACCOUNT REMAINED ENGAGED IN NEPHARIO US ACTIVITIES OF PROVIDING ACCOMMODATION ENTRIES ON ONE HAND AND CLAIMS TO BE ASSESSED AT HIS DESIRED RATE OF PROFIT ON THE OTHER HAND. (IV) NEITHER BEFORE THE ASSESSING OFFICER NOR BEFORE TH E CIT(A) NOR BEFORE THE ITAT, THE ASSESSEE HAS FILED ANY EVIDENC E TO SUBSTANTIATE ITS INCOME. (V) WHEN THE INCOME IS ESTIMATED BY ASSESSING OFFICER I N THE ABSENCE OF ASSESSEES SUBSTANTIATION, THE SAME SHOULD GENE RALLY BE NOT INTERFERED WITH, UNLESS THE ASSESSEE DEMONSTRATES A RBITRARINESS IN 7 ARRIVING AT THE ESTIMATE. IN THIS CASE THE ASSESSIN G OFFICER HAS ARRIVED AT FAIR AND REASONABLE METHOD AND ESTIMATE BY ADOPTING 2% PROFIT ON THE ACCOMMODATION ENTRIES OPERATED BY THE ASSESSEE. ASSESSING OFFICER AND CIT(A) HAVE GIVEN DETAILED RE ASONS IN SUPPORT OF THEIR OBSERVATIONS, FINDINGS AND CONCLUS IONS. THE SAME ARE RELIED ON. 9. I HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. AS THE FACTS EMERGE, THE ASSESSEE HAS FILED HIS RETURNS OF INCOME U/S 153A ON THE BASIS OF AUDITED STATEMENTS WHICH ARE F OUND TO BE BOGUS AND UNRELIABLE. THEREFORE, THE INCOME OFFERED BY THE AS SESSEE IN SUCH RETURNS BECOMES ASSESSEES OWN OFFER. APROPOS ASSESSEES BU SINESS, IT HAS NOT BEEN DISPUTED THAT THE ASSESSEE WAS ACTUALLY ENGAGED IN PROVIDING ACCOMMODATION ENTRIES AND NOT IN REAL BUSINESS TRANSACTIONS. THE FINDINGS OF ASSESSING OFFICER AND CIT(A) THAT ASSESSEE COULD NOT SUBSTANT IATE HIS CLAIM ABOUT ACCOMMODATION ENTRIES AND ASSESSMENT OF PROFIT @ 0.5%. ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE THE RATE OF INCOME FROM A CCOMMODATION ENTRIES EXCEPT MAKING A GENERAL ASSERTION THAT THE PROFIT C HARGED ON ACCOMMODATION ENTRIES TRANSACTIONS IS GENERALLY 0.5%. 9.1. THE PROVIDING OF ACCOMMODATION ENTRIES AMOUNTS TO RUNNING A PARALLEL ECONOMY AND IS A SORT OF MONEY LAUNDERING, WHICH IS AGAINST PUBLIC POLICY. THEREFORE, ASSESSEE IN ANY CASE CANNOT GET ANY DEDUCTION FOR ANY 8 ESTIMATED EXPENSES IN THIS BEHALF. SINCE ASSESSEE C OULD NOT SUBSTANTIATE THE RATE OF PROVIDING ACCOMMODATION ENTRIES, THE ASSESS ING OFFICER IS WELL WITHIN HIS RIGHTS TO ESTIMATE THE INCOME OF THE ASSESSEE. THIS ESTIMATE IN ORDINARY CIRCUMSTANCES CANNOT BE INTERFERED WITH UNLESS THE ASSESSEE MAKES OUT A CASE OF ARBITRARINESS AND UNREASONABLE ESTIMATE, WHICH H AS NOT BEEN ESTABLISHED. IN MY CONSIDERED VIEW, THE ESTIMATE AS ARRIVED AT B Y ASSESSING OFFICER @ 2% AND CONFIRMED BY CIT(A) IS REASONABLE AND CANNOT BE CALLED ARBITRARY. THEREFORE, THE SAME IS UPHELD. 9.2. SINCE THE ASSESSEE OFFERED HIS INCOME IN RETUR N AND THEREAFTER ASSESSING OFFICER MADE HIS ESTIMATE, BASED ON ACCOM MODATION TRANSACTION, IT CANNOT BE ASSUMED THAT THIS AMOUNTS TO DOUBLE ADDIT ION OF INCOME. 10. IN THE RESULT, ALL THE APPEALS FILED BY THE ASS ESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 30-08-2013. SD/- ( R.P. TOLANI ) JUDICIAL MEMBER DATED: 30 TH AUGUST 2013. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR 9