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

ITA 3067/DEL/2012

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1255 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-06-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 18-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIDHI SRIVASTAVA
• Assessee Lawyers: K SAMPATH ADV SH V RAJAKUMAR
• Keywords: Corroborative evidences; Accommodation entries
• Section: 143(3); 153A; 13; 145; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SH. BHAVNESH SAINI, JUDICIAL MEMBER & DR. B. R. R. KUMAR, ACCOUNTANT MEMBER ITA NOS. 3067 & 3068/DEL./2012 ASSTT. YEARS: 2005-06 & 2006-07 M/S CENTENARY SOFTWARE PVT. LTD. H-108, 2 ND FLOOR, NEW ASIATICE BLDG., CONNAUGHT PLACE, NEW DELHI. VS ACIT CENTRAL CIRCLE-9, NEW DELHI. (APPELLANT) (RESPONDENT) PAN NO. AACCC0793M ASSESSEE BY : SH. K. SAMPATH, ADV. SH. V. RAJA KUMAR, ADV. REVENUE BY : MS. NIDHI SRIVASTAVA, CIT DR ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEALS HAVE BEEN FILED BY THE ASSESSE E AGAINST THE ORDERS OF THE LD. CIT(APPEALS)-XXXII, N EW DELHI DATED 02.03.2012 PERTAINING TO ASSESSMENT YEARS 200 5-06 & 2006-07 RESPECTIVELY. 2. FOLLOWING COMMON GROUNDS HAVE BEEN RAISED BY THE ASSESSED FOR AY 2005-06 & 2006-07 EXCEPT THE DIFFER ENCE IN THE AMOUNTS. DATE OF HEARING 05.12.2019 DATE OF PRONOUNCEMENT 16 .12.2019 ITA NOS. 3067 & 3068/DEL/2012 CENTENARY SOFTWARE P VT. LTD. 2 THE ON THE FACTS AND IN THE CIRCUMSTANCES AND IN T HE LAW THE AUTHORITIES BELOW ERRED IN : 1. DETERMINING TAXABLE INCOME OF RS. 48,20,710/- AS AGAINST THE RETURNED INCOME OF RS. 23,58,210/-; 2. PASSING ORDER U/S 143(3) R.W.S. 153A OF THE INCOME TAX ACT, 1961 RELYING ON THE ESTIMATES AND NOT ON THE BASIS OF SEIZED MATERIAL; 3. IN APPLYING PROVISIONS OF SECTION 145(3) OF THE ACT EVEN THOUGH BOOKS OF ACCOUNT WERE NEVER PRODUCED BEFORE THE AUTHORITY AND NO MATERIAL DEFECTS WERE POINTED OUT THEREIN; 4. IN ESTIMATING UNDISCLOSED INCOME OF SUM OF RS. 39,02,701/- AND RS. 4,94,799/- BASED FIGURE APPEARING IN BALANCE SHEET DESPITE THE FACT THAT SUCH BOOKS OF ACCOUNT WERE NEVER RELIED UPON; 3. AT THE OUTSET, LD. AR INVITING OUR ATTENTION TO THE ASSESSMENT ORDER UNDER CONSIDERATION SUBMITTED THAT THE ASSESSEE WHO IS FOUND MENTIONED AT SL. NO.-11 IN TH E LIST OF COMPANIES WHERE KONICHIVA BUILDERS LTD. IS FOUND ME NTIONED IN SL. NO.-1. IT WAS SUBMITTED THAT THE TRIBUNAL IN KO NICHIVA BUILDERS LTD. RESTORED THE ISSUE OF ALLOWANCE OF EX PENDITURE INCURRED TO THE AO. IT WAS SUBMITTED THAT IN BOTH T HESE SET OF CASES ADDITIONS HAD BEEN MADE ON IDENTICAL FACTS AN D THE ARGUMENTS REMAIN THE SAME IN RESPONSE TO Q.NO.2 EXT RACTED IN THAT ORDER BY THE TRIBUNAL WHICH HAS BEEN EXTRACTED BY THE AO IN THE PRESENT PROCEEDINGS ALSO. ITA NOS. 3067 & 3068/DEL/2012 CENTENARY SOFTWARE P VT. LTD. 3 4. THE LD. CIT DR CONSIDERING THE ORDER OF THE TRIB UNAL IN KONICHIVA BUILDERS LTD. HAD NO OBJECTION IF IDENTIC AL DIRECTION IS GIVEN HEREIN. 5. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERU SED THE MATERIAL AVAILABLE ON RECORD. 6. WE FIND THAT THE TRIBUNAL HAS RESTORED THE MATTE R BACK TO THE FILE OF THE ASSESSING OFFICER TO DETERMINE THE ISSUE OF ALLOWABILITY OF THE EXPENSES INCURRED OUT OF THE ES TIMATED INCOME OF 2% AGAINST THE CLAIM OF THE ASSESSED WHIC H IS 0.25% TO 0.5%. 7. FOR THE SAKE OF READY REFERENCE THE RELEVANT POR TION OF THE ORDER OF THE ITAT IN ITA NO. 3046/DEL/2012 IN THE C ASE OF THE ASSESSEE IS REPRODUCED HEREUNDER: THE FACTS OF THE CASE AS EMANATING FROM THE ASSESSMENT ORDER DATED 29.12.2008 IN 2001-02 ASSESSMENT YEAR 3 I.T.A .NO.- 3046-3049/DEL/2012 & 3069/DEL/2012 PASSED U/S 143(3) R.W.S 153A OF THE A CT IT IS SEEN ARE IDENTICAL IN ALL THE REMAINING YEARS EXCEPT FOR THE DIFFERENCE IN AMOUNTS. ACCORDINGLY THE FACT S FROM THE ORDER OF 2001-02 ASSESSMENT YEAR ARE BEING EXTRACTED FOR READY-REFERENCE:- A SEARCH & SEIZURE ACTION WAS CONDUCTED ON 12-12-2006 AT BUSINESS AND RESIDENTIAL PREMISES OF SHRI. S.K.GUPTA ALONG WITH VARIOUS CONCERNS IN WHICH HE AND HIS FAMILY MEMBERS WERE INTERESTED. SIMILARLY ACTION U/S 132 OF IT ACT , ITA NOS. 3067 & 3068/DEL/2012 CENTENARY SOFTWARE P VT. LTD. 4 1961 WAS CONDUCTED IN THE CASE OF VARIOUS COMPANIES OWNED OR CONTROLLED BY HIM AND ALSO IN THE CASE OF DIFFERENT INDIVIDUALS CONNECTED WITH THE SAID COMPA NIES. THIS IS ONE OF SUCH CASES COVERED UNDER SEARCH & SEIZURE ACTION. CONSEQUENT TO SEARCH ACTION THE CAS E WAS CENTRALIZED WITH THIS OFFICE AND AS SUCH NOTICE U/S 153A OF IT ACT 1961 WAS ISSUED TO THE ASSESSEE ON 2 5- 2-2008. 1.1.BACKGROUND OF THE CASE . WHILE CONDUCTI NG DISCREET INQUIRIES, THE INVESTIGATION WING GATHERED THAT SHRI S.K.GUPTA A CHARTERED ACCOUNT BY PROFESSION, I S RUNNING VARIOUS COMPANIES FROM A PREMISES OF 'TRUMP AND GATES' SITUATED AT H-108, 2 FLOOR, NEW ASIATIC BUILDING. CONNAUGHT PLACE, NEW DELHI AND ALSO FROM THE PREMISES OF HIS FIRM NAMELY M/S GUPTA & RAKESH ASSOCIATES AT 231, GULMOHAR ENCLAVE, NEW DELHI. IN THE COURSE OF THE SEARCH OPERATION, IT WAS REPORTED BY THE INVESTIGATION WING THAT A LARGE NUMBER 0 R COMPANIE S WERE BEING OPERATED AND CONTROLLED BY SHRI S. K GUP TA FROM HIS MAIN OFFICE PREMISES AT H-108, CONNAUGHT PLACE. THE LIST OF THESE COMPANIES IS AS UNDER:- 1. KONICHIVA BUILDERS LTD . 2. B.T.TECHNET LTD. 3. SWEN TELEVISION LTD. 4. T & G QUALITY MANAGEMENT CONSULTANTS LTD. 5. HITECH COMPUTECH PVT. LTD. 6. CENTENARY SOFTWARE PVT. LTD 7. TRUMP AND GATES 8. T & G QUALITY SERVRCES 9. GTM KONICHIVA BUILDERS 10. GU PTA RAKESH ASSOCIATES 11. ERA ADVERTISING AND MARKETING COY PVT LTD 12. PG TRAVELS HINDUSTAN COM 13. SHARK COMMUNICATION PVT LTD 14. SPG FINVEST PVT LTD. 15. ITA NOS. 3067 & 3068/DEL/2012 CENTENARY SOFTWARE P VT. LTD. 5 KRISHNA INFORMEDIA 16. BOLNI EXIM INDIA LTD 17. BHA RTI PROPERTIES PVT LTD 18. MARKETING INSURANCE BROKERS PVT LTD 19. CAM SOFT (LNDIA) PVT LTD 20. OURS TRADING P VT. LTD 21.PAWAR ESTATES PVT LTD 22. RAJDHANI LEASING L TD 23.DMC VAULTS LTD 24. SIGMA FARMS LTD 25. NORTH IND IA SECURITIES PVT LTD 26. HAMARA SAMAY TV NEWS NETWORK PVT LTD 4 I.T.A .NO.- 3046-3049/DEL/2012 & 3069/DEL/2012 27.CEL CEL TECHNOLOGIES LTD 28. CHIP SET SOLUTIONS PVT LTD 29. TRUMP & GATES 30. SERVEL TECHNOLOGY SYSTEM PVT. LTD. 31. PG TRAVELS HINDUSTA N COM PVT LTD 32. J.A. FINANCIAL & MARKETING CONSULTA NTS PVT. LTD. 33. SAKSHAM INFOCOM PVT LTD 6.1. CONSIDER ING THE FOLLOWING FACTS WHICH HAVE BEEN SUMMED UP IN TH E IMPUGNED ORDER THE AO IN THE YEAR UNDER CONSIDERATI ON MADE AN ADDITION OF RS.47,151/-. THE RELEVANT EXTRA CT IS REPRODUCED FORM THE IMPUGNED ORDER:- 2.1.1. THE AO HAS GIVEN VARIOUS FINDINGS ABOUT THESE COMPANIES INCLUDING THE APPELLANT COMPANY BASED ON THE REPORT S FROM THE INVESTIGATION WING AND HIS OWN PROCEEDINGS DURING THE IMPUGNED ASSESSMENT, WHICH CAN BE SUMMARISED AS UNDER: (I). THESE COMPANIES WERE CREATED OSTENSIBLY FOR PROVIDING A VARIETY OF SERVI CES RANGING FROM CONSULTANCY OF ADVERTISING TO SOFTWARE DEVELOPMENT, VARIOUS PROFESSIONAL SERVICES, ANNUAL MAINTENANCE SERVICES, UPGRADATION SERVICES, CUSTOME R CARE, RETAINERSHIP, SPONSORSHIP ETC. AND ACCORDINGL Y BILLS/INVOICES HAVE BEEN ISSUED IN THE NAMES OF THE SE COMPANIES INCLUDING THE APPELLANT BUT IN FACT NO SU CH ITA NOS. 3067 & 3068/DEL/2012 CENTENARY SOFTWARE P VT. LTD. 6 ACTUAL SERVICES HAVE BEEN RENDERED BY THEM TO THE RESPECTIVE BENEFICIARIES. (II). SHRI. S.K. GUPTA DI D NOT POSSESS THE NECESSARY INFRASTRUCTURE OR THE REQUIRE D MAN POWER TO RENDER SUCH VARIETY OF SERVICES THROUG H THESE COMPANIES. (III). THESE COMPANIES WERE MERELY ISSUING ACCOMMODATION BILLS FOR VARIOUS EXPENDITURE TO VARIOUS ENTITIES FOR THE SAKE OF TAX EVASION. SUCH BIILS AND INVOICES WERE FOUND AND SEIZED FROM THE PREMISE S COVERED U/S 132 OF THE ACT. (IV). NO OTHER EVIDENCE WAS FOUND DURING SEARCH INDICATING ANY SUCH ACTUAL SERV ICES RENDERED BY THE APPELLANT OR OTHER COMPANIES AS CLAIMED. (V). SHRI S.K. GUPTA IN VARIOUS STATEMENTS RECORDED ON DIFFERENT DATES BETWEEN DECEMBER, 2006 TO DECEMBER, 2008 BOTH BEFORE THE OFFICERS OF INVESTIGATION WING AND IN POST SEARCH INQUIRIES AND BEFORE THE ASSESSING OFFICER, ADMITTED IN DETAIL HI S MODUS OPERANDI OF PROVIDING ACCOMMODATION BILLS THROUGH THE APPELLANT COMPANY AND OTHER COMPANIES I N LIEU OF CHEQUES RECEIVED AND CASH RETURNED TO THE BENEFICIARIES. (VI). EVIDENCE OF DUPLICATE SET OF B OOKS OF ACCOUNTS, HAND WRITTEN CASH BOOKS AND LEDGER ACCOUN TS, VARIOUS CHEQUE BOOKS AND BLANK CHEQUES SIGNED BY VARIOUS AUTHORIZED SIGNATORIES/DIRECTORS OF THE APPELLANT COMPANY AND OTHER COMPANIES WERE FOUND AN D SEIZED FROM SHRI. S.K. GUPTA'S PREMISES. SOME OF TH ESE DIRECTORS/AUTHORIZED SIGNATORIES WERE FOUND TO BE EMPLOYEES, RELATIVES OR FRIENDS OF SH. S.K.GUPTA. ( VII) THE ASSESSING OFFICER HAS GIVEN ELABORATE AND ADEQU ATE ITA NOS. 3067 & 3068/DEL/2012 CENTENARY SOFTWARE P VT. LTD. 7 OPPORTUNITIES TO THE APPELLANT COMPANY TO EXPLAIN T HEIR MATTER DURING THE ASSESSMENT PROCEEDINGS AND TO COUNTER THE FINDINGS OF THE ASSESSING OFFICER. 5 I. T.A .NO.- 3046-3049/DEL/2012 & 3069/DEL/2012 (VIII) THE ASSESSING OFFICER HIMSELF HAS REPEATEDLY RECORDED STATEMENTS OF SHRI S.K.GUPTA AND HAS CONFRONTED HIM IN DETAIL ABOUT THE FINDINGS. 6.2. ON THE BASIS OF TH E ABOVE FACTS THE AO ARRIVED AT THE FOLLOWING CONCLUS IONS. THESE ARE EXTRACTED FROM THE ASSESSMENT ORDER:- 4. INFERENCES:- I. IT IS PROVED BEYOND DOUBT ON THE B ASIS OF DOCUMENTARY EVIDENCES, CONFESSIONAL STATEMENT OF SHRI. S.K.GUPTA, THE MAIN PERSON CONTROLLING THE ST ATE OF AFFAIRS OF THE ASSESSEE. HUSBAND OF SMT. SAROJ GUPTA, DIRECTOR OF THE ASSESSEE COMPANY AND RESULTS OF THE ASSESSMENT THAT ASSESSEE IS ENGAGED IN THE ACCOMMODATION ENTRY BUSINESS AND NOT DOING ANY GENUINE SALE & PURCHASE AS CLAIMED IN THE FINAL ACC OUNT STATEMENTS ANNEXED WITH RETURN OF INCOME. II. SINCE ASSESSEE HAS FAILED TO PRODUCE ANY REGULAR BOOKS OF ACCOUNT, SALE & PURCHASE AND EXPENSES VOUCHERS THE BOOK RESULTS SHOWN BY THE ASSESSEE ARE LIABLE TO BE REJECTED BY TAKING RECOURSE TO PROVISIONS OR SECTIO N 145 (3) OF IT ACT 1961. III. THE ASSESSEE HAS NOT BEEN SUCCESSFUL IN ESTABLISHING THAT ANY GENUINE BUSINES S ACTIVITY WAS BEING CARRIED OUT OTHER THAN THE ACCOMMODATION ENTRY BUSINESS. NO PHYSICAL EVIDENCE OF SUPPORTING INFRASTRUCTURE WAS FOUND BY THE INVESTIGATION WING AT THE TIME OF SEARCH NOR THE SA ME ITA NOS. 3067 & 3068/DEL/2012 CENTENARY SOFTWARE P VT. LTD. 8 HAS BEEN ADDUCED BEFORE THE UNDERSIGNED. IV. THE ASSESSEE HAS NOT PRODUCED ANY CONFIRMATIONS FROM TH E DEBTORS AND CREDITORS TO WHOM BILLS HAVE BEEN ISSUE D AND BILLS HAVE BEEN PROCURED. V. THE ASSESSEE FAILE D TO PROVIDE DOCUMENTARY EVIDENCES IN THE FORM OF RENT DEEDS/RECEIPTS AND OTHER EXPENSES VOUCHERS AND BILL S, WHICH COULD ESTABLISH THE GENUINE CREDENTIALS OF TH E ASSESSEE AS A GENUINE SOFTWARE DESIGN & DEVELOPMENT AND OTHER IT RELATED SERVICES PROVIDER TO THE GENUI NE CUSTOMERS. EVEN THE BIG CORPORATES LIKE RELIANCE INDUSTRIES LTD, NIIT, HCL GROUP, FIITJEE. MOTHERSON S SUMI INNOVATIVE & DESIGN LTD, ASL INSURANCE BROKERS PVT LTD, ACCORD INSURANCE, ALLIANZE SECURITIES. LIN K ENGINEER LTD, PASHUPATI FABRICS ETC, WHO THEMSELVES ARE HAVING THEIR OWN INFRASTRUCTURES FOR IT RELATED REQUIREMENTS, HAVE APPROACHED THE ASSESSEE AS WELL AS ITS OTHER RELATED GROUP COMPANIES FOR GETTING ACCOMMODATION .BILLS. BUT SURPRISINGLY NONE OF THEM HAD ANY CORROBORATIVE EVIDENCE OTHER THAN THE SATE BILLS OR IN SOME CASES A GENERAL AGREEMENT, WITHOUT ANY SUPPORTING EVIDENCES OF SOFTWARE DEVELOPMENT. EVEN ASSESSEE HAD NO SUPPORTING DOCUMENTS OF PURCHASE OR OUTSOURCING, WHERE FROM IT COULD ISSUE SALE BILLS T O THESE CORPORATES OR OTHER DESIROUS COMPANIES/CONCER NS. (I) THE ASSESSEE HAS FAILED TO CORRELATE ITS SURREN DER INCOME IN DIFFERENT ASSESSMENT YEARS, WITH THE ACTU AL DEFICIENCIES OF THE BUSINESS RELEVANT TO ACCOMMODAT ION ENTRY BUSINESS ON ACCOUNT OF PROVIDING ACCOMMODATIO N ITA NOS. 3067 & 3068/DEL/2012 CENTENARY SOFTWARE P VT. LTD. 9 SALE BILLS, EXPENSES BILLS IN THE FORM OF JOB WORK CHARGES, ADVERTISEMENT CHARGES. WEB DESIGNING CHARGES-AND PROVIDING INVESTMENT ENTRIES. (II) THE ASSESSEE HAS INTACT INDULGED IN ACCOMMODATION ENTER IES BUSINESS AND HAS NOT DONE ANY GENUINE BUSINESS. SO THE INCOME OF THE ASSESSEE FROM THE ACCOMMODATION ENTRY BUSINESS IS COMPUTED @ 2% NET RATE ON SALE TURNOVER AND INVESTMENT TURNOVER IN VIEW OF THE ASSESSEE'S STATEMENT COUPLED WITH 6 I.T.A .NO.- 304 6- 3049/DEL/2012 & 3069/DEL/2012 PREVALENT MARKET CONDITION FOR SUCH ENTRIES. NO FURTHER EXPENSES ARE TO BE ALLOWED, AS THIS IS THE NET RATE. 5. WITH THESE REMARKS, THE TOTAL INCOME IS COMPUTED AS UNDER: WIT H THESE REMARKS INCOME OF THE ASSESSEE IS COMPUTED AS UNDER: (I) TOTAL INCOME AS PER 153 A RETURN RS.19,0 60/- ADD:- INCOME EARNED FROM ACCOMMODATION ENTRY BUSINESS (A) ON THE ACCOMMODATION SALE BILLS/TURNOV ER @ 2% OF RS.23,57,555/- RS.47,151/- RS.66,211/- 6.3. IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY THE CIT(A) HELD AS UNDER:- 2.3.5.TAKING INTO CONSIDERA TION THE TOTALITY OF FACTS 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 TUNE OF RS.47,151/- IS JUSTIFIED AND IS, THEREFORE, CONFIRM ED. SINCE THE AO HAS GIVEN A CATEGORICAL FINDING THAT T HE APPELLANT HAD ONLY INDULGED IN ACCOMMODATION ENTRIE S BUSINESS AND HAD NOT DONE ANY GENUINE BUSINESS AND ITA NOS. 3067 & 3068/DEL/2012 CENTENARY SOFTWARE P VT. LTD. 10 REJECTED THE BOOKS RESULTS ON THAT GROUND, THE NET PROFIT SHOWN IN THE RETURN HAS LOST ITS RELEVANCE A ND SHOULD NOT BE GIVEN ANY CREDENCE. THE AO IS, THEREF ORE, DIRECTED TO RECOMPUTED THE TOTAL INCOME ACCORDINGLY . THIS DISPOSES OFF ALL THE GROUNDS OF APPEAL TAKEN B Y THE APPELLANT AGAINST THE IMPUGNED ASSESSMENT ORDER. 7 . AGGRIEVED BY THIS THE ASSESSEE IN APPEAL BEFORE US HAS RAISED THE FOLLOWING GROUNDS:- 1. DETERMINING TAXA BLE INCOME OF RS.47,151/- AS AGAINST THE RETURNED INCOM E OF RS.19,060/-; 2. PASSING ORDER U/S 143(3) R.W.S 1 53A OF THE INCOME TAX ACT, 1961 RELYING ON THE ESTIMATE S AND NOT ON THE BASIS OF SEIZED MATERIAL; 3. IN APPL YING PROVISIONS OF SECTION 145(3) OF THE ACT EVEN THOUGH BOOKS OF ACCOUNT WERE NEVER PRODUCED BEFORE THE AUTHORITY AND NO MATERIAL DEFECTS WERE POINTED OUT THEREIN; 4. IN ESTIMATING UNDISCLOSED INCOME OF SUM OF RS.47,151/- BASED FIGURE APPEARING IN BALANCE SHEET DESPITE THE FACT THAT SUCH BOOKS OF ACCOUNT WERE NE VER RELIED UPON; 5. ERROR IN MAKING ASSESSMENT WITHOUT UNDERSTANDING THE FACTS OF THE CASE. 8. AS BROUGHT OUT EARLIER THE LD. AR AT THE TIME OF HEARING HAS CHOSE N TO CONFINE HIS ARGUMENTS TO THE LIMITED PLEA THAT THE EXPENDITURE INCURRED BY THE ASSESSEE FOR EARNING TH E INCOME BY WAY OF PROVIDING ACCOMMODATION ENTRIES MA Y BE ALLOWED FOR WHICH PURPOSES THE ISSUE MAY BE RESTORED TO THE AO. A PERUSAL IN THE DECISION IN KONICHIVA BUILDERS LTD. SHOWS THAT FACTS HAVE BEEN APPRECIATED IN THE FOLLOWING MANNER:- 7 I.T.A .NO.- ITA NOS. 3067 & 3068/DEL/2012 CENTENARY SOFTWARE P VT. LTD. 11 3046-3049/DEL/2012 & 3069/DEL/2012 4. THE ASSESSEE IN THIS CASE BELONGS TO A GROUP OF ABOUT 33 CASES O F VARIOUS COMPANIES OPERATED AND CONTROLLED BY ONE SH . S K GUPTA CHARTERED ACCOUNTANT BY PROFESSION, FROM HIS OFFICE PREMISES OFTRUMP AND GATES SITUATED AT H-1 08, 2ND FLOOR, NEW ASIATIC BUILDING, CONNAUGHT PLACE, N EW DELHI AND ALSO FROM THE PREMISES OF HIS FIRM NAMELY M/S GUPTA & RAKESH ASSOCIATES AT 231, GULMOHAR ENCLAVE, NEW DELHI, WHICH WERE BOTH COVERED DURING SEARCH AN D SEIZURE OPERATION U/S. 132 OF THE ACT BY THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT. IN THE VARIOUS STATEMENTS OF SH. SK GUPTA RECORDED ON VARIOUS DATES BOTH BEFORE THE OFFICERS OF THE INVESTIGATION WING AND IN POST SEARCH ENQUIRIES BEF ORE THE AO, HE ADMITTED IN DETAIL, HIS MODUS OPERANDI O F PROVIDING ACCOMMODATION BILLS THROUGH THE ASSESSEE COMPANY AND ANOTHER COMPANIES IN LIEU OF CHEQUE RECEIVED AND CASH RETURN TO THE BENEFICIARIES. THER E WAS ALSO SEIZURE OF DUPLICATE SET OF BOOKS OF ACCOU NTS, CHEQUES SIGNED BY VARIOUS AUTHORISED SIGNATORIES / DIRECTORS OF THE ASSESSEE COMPANY AND OTHER COMPANI ES (WHICH WERE FOUND TO BE EMPLOYEES, RELATIVES OR FRI ENDS OF SH. SK GUPTA) FROM SHRI S.K. GUPTAS PREMISES. F ROM THE ABOVE, AO OBSERVED THAT IT BECAME ABUNDANTLY CL EAR THAT THE ASSESSEE COMPANY, IN FACT, INDULGED IN ACCOMMODATION ENTRIES BUSINESS AND DID NOT DO ANY GENUINE BUSINESS. ALL THE SALE AND PURCHASES ETC. BOOKED IN THESE COMPANIES WERE FOUND TO BE BOGUS. ITA NOS. 3067 & 3068/DEL/2012 CENTENARY SOFTWARE P VT. LTD. 12 PROPER BOOKS OF ACCOUNTS WERE NOT FOUND TO HAVE BEE N MAINTAINED. IN THESE CIRCUMSTANCES, THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE REJECTED AND ADDITION S WERE MADE ON ESTIMATE BASIS, THE SAME WERE AFFIRMED BY THE LD. CIT(A) IN APPEAL. 8.1. THE ISSUE PERTAI NING TO BOOKS OF ACCOUNTS ETC. WAS CONSIDERED BY THE COORDINATE BENCH IN THE FOLLOWING MANNER:- 6. THE FIRST ISSUE PERTAINS TO REJECTION OF BOOKS OF ACCOU NTS. LD. COUNSEL OF THE ASSESSEE IN THIS REGARD SUBMITTE D THAT HE IS NOT VEHEMENTLY PRESSING THIS ISSUE. WE F IND THAT IN THE SEARCH AND ON THE BASIS OF MATERIAL RECOVERED AND STATEMENTS OBTAINED IT HAS BEEN DULY ESTABLISHED THAT ASSESSEE WAS INDULGING IN BOGUS ACCOMMODATION ENTRIES. NO ACTUAL SALE AND PURCHASE WAS DONE BY THE ASSESSEE. PROPER BOOKS OF ACCOUNTS WERE NOT MAINTAINED. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDERS OF THE AUTHORITIES BELOW IN WHICH THE BOOKS OF ACCOUNTS HAVE BEEN REJECTED. 8.2. IT IS SEEN THAT CONSIDERING THE STATEMENT RECO RDED OF SH. S.K.GUPTA WHICH FACTS HAVE BEEN SUMMED IN TH E FOLLOWING PARAS 8 & 9 IN THE ORDER OF THE COORDINAT E BENCH WHICH ARE IDENTICAL TO THE FACTS IN THE PRESE NT PROCEEDINGS ALSO. IT IS SEEN THAT IT IS THIS STATEM ENT WHICH FORMS THE BASIS OF THE ADDITION BY WAY OF A ESTIMATE OF INCOME AT THE 2%. IT IS FURTHER SEEN TH AT CONSIDERING THE ARGUMENTS ADVANCED ON BEHALF OF THE ASSESSEE WHICH ARE FOUND RECORDED IN THE FOLLOWING PARA 10. THE ISSUE HAS BEEN REMITTED TO THE AO IN PARA 1 1 ITA NOS. 3067 & 3068/DEL/2012 CENTENARY SOFTWARE P VT. LTD. 13 BY WAY OF SPEAKING 8 I.T.A .NO.- 3046-3049/DEL/2012 & 3069/DEL/2012 DIRECTION. THESE SPECIFIC PARAS ARE EXTRACTED FROM THE ORDER OF THE CO-ORDINATE BENCH RELIED UPON BY THE ASSESSEE:- 8. HEARD BOTH THE PARTIES. ON THIS ISSUE, WE FIND THAT IT IS ESTABLIS HED THAT ASSESSEE WAS ENGAGED IN THE BUSINESS OF PROVIDING BOGUS ACCOMMODATION ENTRY. HENCE, THE INCOME IN THI S REGARD HAS TO BE ESTIMATED. IN THIS REGARD, THE ADD ITION HAS BEEN MADE BY THE AO ON THE BASIS OF STATEMENTS GIVEN BY THE DIRECTOR, S.K. GUPTA. IN THIS REGARD, IT IS RELEVANT TO QUOTE THE PRECISE QUESTION AND ANSWERS THEREOF GIVEN BY SH. SK GUPTA:- Q.(2) PLEASE STATE CATEGORICALLY THE PERCENTAGE COMMISSION CHARGED BY YOU FOR PROVIDING ACCOMMODATION SALE BILLS, ACCOMMODATION PURCHASE / EXPENSES BILLS AND INVESTMENT AND LOAN ENTRIES THROUGH YOUR VARIOUS GR OUP COMPANIES. ANS. THE AVERAGE COMMISSION EARNED BY VARIOUS GROUP COMPANIES IN PROVIDING DIFFERENT TYPE OF ACCOMMODATION ENTRIES WAS TO THE TUNE OF 1.5% TO 2.0% OUT OF WHICH I HAVE TO INCUR OUR NORMAL EXPENS E ON A/C OF SALARY, RENT, BANK CHARGES, CONVEYERS, TELEPHONE, WATER AND ELECTRICITY. 9. ON THE BASIS OF STATEMENTS AS WELL AS PREVALENT MARKET CONDITION, T HE AO HAS ESTIMATED THE INCOME @ 2% WITHOUT ALLOWING ANY AMOUNT FOR THE EXPENDITURE. LD. CIT(A) HAS AFFIRMED THE SAID. 10. IN THIS REGARD LD. COUNSEL O F THE ASSESSEE HAS PLEADED FOR ALLOWANCE OF EXPENDITURE INCURRED TO EARN THE INCOME. WE FIND THAT WHEN ADDI TION ITA NOS. 3067 & 3068/DEL/2012 CENTENARY SOFTWARE P VT. LTD. 14 IS BEING MADE ON THE BASIS OF STATEMENT, THE STATEM ENT HAS TO BE RELIED IN FULL . REVENUE CANNOT CHOOSE TO RELY ON ONE PART OF THE STATEMENT AND IGNORE THE REST OF THE STATEMENT IN THE ABSENCE OF ANY COGENT MATERIAL. TH IS IS SUPPORTED BY THE COMMON LAW MAXIM OF APPROBATE AND REPROBATE. 11. IN THIS CASE THE ASSESSEE COMPAN YS DIRECTOR HAS AGREED THAT THE COMMISSION WAS TO THE TUNE OF 1.5% TO 2%. HENCE, ESTIMATION OF COMMISSION INCOME @ 2% CANNOT BE DISPUTED. HOWEVER, AT THE SAME TIME IT HAS ALSO BEEN SUBMITTED IN THE SAME STATEMENT THAT THE ASSESSEE HAS TO INCUR THE EXPENDITURE ON ACCOUNT OF SALARY, RENT BANK CHARGES , CONVEYERS, TELEPHONE, WATER AND ELECTRICITY. HOWEVE R, IT IS ALSO SETTLED THAT MERE SUBMISSION THAT EXPENDITU RE HAS BEEN INCURRED CANNOT LEAD TO ALLOWANCE OF EXPENDITURE. ASSESSEE HAS TO PROVE WITH COGENT MATERIAL THAT THE EXPENDITURE HAS BEEN INCURRED TO EARN THE INCOME. IN THESE CIRCUMSTANCES WE REMIT THE ISS UE TO THE FILE OF THE AO. THE ASSESSING OFFICER SHALL EXAMINE THE ASPECT OF ALLOWANCE OF EXPENDITURE ON T HE BASIS OF COGENT MATERIALS TO BE SUBMITTED BY THE ASSESSEE. 9. IN THE AFORE-MENTIONED PECULIAR FACTS AND CIRCUMSTANCES ADDRESSING THE LIMITED PLEA OF THE ASSESSEE IN THE LIGHT OF THE ARGUMENTS ADVANCED BY THE PARTIES BEFORE US WHEREIN LD. AR HAS PLACED RELIANC E UPON THE ORDER OF THE DIVISION BENCH IN THE CASE OF KONICHIVA BUILDERS LTD. AND THE LD. CIT DR THOUGH N OT OPPOSING IT HAS INVITED OUR ATTENTION TO THE ORDER OF THE ITA NOS. 3067 & 3068/DEL/2012 CENTENARY SOFTWARE P VT. LTD. 15 SMC BENCH IN THE CASE OF 9 I.T.A .NO.- 3046- 3049/DEL/2012 & 3069/DEL/2012 CENTENARY SOFTWARE PVT. LTD. WE FIND ON CONSIDERING THE ORDER IN CENTE NARY SOFTWARE PVT. LTD. RELIED UPON BY THE REVENUE THAT THE LD. AR BEFORE THE SMC BENCH HAD NOT RAISED ANY PLEA IN REGARD TO ALLOWANCE OF EXPENDITURE AND HAD INSTEAD CANVASSED BEFORE THE SMC BENCH THAT AS PER JUDICIAL PRECEDENT THE ACCEPTED INCOME SHOULD BE BETWEEN 0.25% TO 0.50%. THIS ARGUMENT IT IS SEEN WAS NOT ACCEPTED. THE CLAIM FOR ALLOWABILITY OF ESTIMATING THE EXPENSES IT IS SEEN WAS NOT CANVASSED BEFORE THE SM C BENCH. ACCORDINGLY THE SAID ORDER IN THE CIRCUMSTAN CES HAD NO OCCASION TO CONSIDER THE PLEA. IN THE FACTS BEFORE US, LD. AR HAS DRAWN SPECIFIC ATTENTION TO QUESTION NO.-2 WHICH HAS BEEN EXTRACTED IN THE CASE OF KONICHIVA BUILDERS LTD. ALSO IN PARA 8 OF THEIR ORD ER WHICH IS ALSO CONSIDERED AT PAGE 18 OF THE ASSESSME NT ORDER IN THE YEAR UNDER CONSIDERATION. IN VIEW OF T HE ABOVE THERE BEING NO CHANGE IN FACTS AND CIRCUMSTAN CES OF THESE CASES RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN KONICHIVA BUILDERS LTD. THE ISSUE OF ALLOWABILITY OF EXPENSES IN SIMILAR LINES IS RESTOR ED TO THE AO HEREIN ALSO REQUIRING THE ASSESSEE TO PROVE ITS CLAIM WITH COGENT MATERIAL THE LIMITED PLEA OF THE ASSESSEE IS ACCEPTED. ITA NOS. 3067 & 3068/DEL/2012 CENTENARY SOFTWARE P VT. LTD. 16 8. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16/12/2019 SD/- SD/- (BHAVNESH SAINI) (DR. B. R. R. KUMAR) JUDICIAL MEMBER ACCOUN TANT MEMBER DATED: 16.12.2019 *KAVITA ARORA, SR. PS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR