M/s. Bharti Properties Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 3070/DEL/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7618 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 16-02-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 18-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAVI JAIN
• Keywords: Rejection of books of accounts; Corroborative evidences; Accommodation entries; Condonation of delay
• Section: 143(3); 153A; 145; 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES A NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO: 3070/DEL/2012 ASSTT. YEAR: 2005-06 ITA NO: 3071/DEL/2012 ASSTT. YEAR: 2007-08 BHARTI PROPERTIES PVT. LTD., VS ACIT , H-108, IIND FLOOR, CENTRAL CIRCLE-9, NEW ASIATIC BUILDING, NEW DELHI. CONNAUGHT PLACE, NEW DELHI-110001 (PAN: AAACB9995L) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI K. SAMPATH, ADV.SH. RAJAN KUMAR,ADV. RESPONDENT BY: SHRI RAVI JAIN CIT D R DATE OF HEARING : 16.2.2016 DATE OF PRONOUNCEMENT : O R D E R PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER THESE TWO APPEALS OF THE ASSESSEE AGAINST THE SEPAR ATE ORDERS OF CIT(A)- XXXII, NEW DELHI PERTAINING TO ASSESSMENT YEARS 20 05-06 AND 2006-07 ARE BEING DECIDED BY A COMMON ORDER FOR THE SAKE OF CON VENIENCE AS FACTS, CIRCUMSTANCES AND THE SUBMISSIONS OF THE PARTIES BE FORE THE BENCH REMAINED IDENTICAL IN ALL THESE APPEALS. 2. BEFORE THESE APPEALS ARE TAKEN UP FOR CONSIDERAT ION IT IS SEEN THAT THE REGISTRY HAS POINTED OUT A DELAY OF 30 DAYS IN THE FILING OF THESE TWO APPEALS. ADDRESSING THE DELAY THE LD. AR INVITING ATTENTION TO THE CONDONATION OF DELAY PETITION IN FILING EACH OF THESE APPEALS SUBMITTED THAT THE IMPUGNED ORDER HAD BEEN I.T.A. 3070 & 3071/D/12 ASSESSMENT YEAR 2005-06, 2007-08 2 RECEIVED BY THE ASSESSEE WHEN THE FATHER OF SH. S.K .GUPTA WHO IS THE CONTROLLING PERSON OF THE ASSESSEE WAS CRITICALLY ILL; CONFINED TO BED AND FINALLY PASSED AWAY. ON ACCOUNT OF REMAINING PRE-OCCUPIED WITH THE ABOV E TRAGEDY THE APPEALS IT WAS STATED COULD NOT BE FILED ON TIME. INVITING ATTENT ION TO THE COPY OF THE ORDER DATED 14.02.2014 IN ITA NOS.-3213, 3214 & 3856/DEL/2012 & 1080/DEL/2013 IN THE CASE OF KONICHIVA BUILDERS LTD. IT WAS SUBMITTED T HAT ON IDENTICAL FACTS DELAY OF 43 DAYS HAD BEEN CONDONED BY THE CO-ORDINATE BENCH. RELYING ON THE SAME IT WAS SUBMITTED THAT THE DELAY MAY BE CONDONED. THE LD. DR CONSIDERING THE ORDER OF THE TRIBUNAL AND THE PETITION OF THE ASSESSEE HAD N O OBJECTION IF THE APPEAL IS DECIDED ON MERITS BY CONDONING THE DELAY IN EACH OF THE APPEALS. 3. CONSIDERING THE FACTS ON RECORD AND THE SUBMISSI ON OF THE PARTIES WE ARE OF THE VIEW THAT THE DELAY POINTED OUT BY THE REGISTRY DESERVES TO BE CONDONED. RESPECTFULLY FOLLOWING THE ORDER OF THE CO-ORDINATE BENCH THE DELAY IN THE APPEALS IS CONDONED. 4. LD. AR INVITING ATTENTION TO THE ASSESSMENT ORDE R UNDER CONSIDERATION SUBMITTED THAT THE ASSESSEE WHO IS FOUND MENTIONED AT SL. NO.-17 IN THE LIST OF COMPANIES WHERE KONICHIVA BUILDERS LTD. IS FOUND ME NTIONED IN SL. NO.-1. IT WAS SUBMITTED THAT THE TRIBUNAL IN KONICHIVA BUILDERS LTD. RESTORED THE ISSUE OF ALLOWANCE OF EXPENDITURE INCURRED TO THE AO. IT WA S SUBMITTED THAT IN BOTH THESE SET OF CASES ADDITIONS HAD BEEN MADE ON IDENTICAL F ACTS AND THE ARGUMENTS REMAIN THE SAME IN RESPONSE TO Q.NO.2 EXTRACTED IN THAT OR DER BY THE TRIBUNAL WHICH HAS BEEN EXTRACTED BY THE AO IN THE PRESENT PROCEEDINGS ALSO. ACCORDINGLY IT WAS HIS SUBMISSION THAT SIMILAR PRAYER WAS MADE IN THESE T WO APPEALS. 5. THE LD. CIT DR CONSIDERING THE ORDER OF THE TRIB UNAL IN KONICHIVA BUILDERS LTD. HAD NO OBJECTION IF IDENTICAL DIRECTION IS GI VEN HEREIN ALSO. 6. BEFORE WE PROCEED TO DECIDE THE LIMITED PLEA OF THE ASSESSEE, WE DEEM IT APPROPRIATE TO FIRST REFER TO THE FACTS ON RECORD. THE FACTS OF THE CASE AS EMANATING FROM THE ASSESSMENT ORDER DATED 30.12.2008 IN ASSES SMENT YEAR 2005-06 PASSED U/S 143(3) R.W.S 153A OF THE ACT IT IS SEEN ARE IDE NTICAL IN ALL THE REMAINING YEARS I.T.A. 3070 & 3071/D/12 ASSESSMENT YEAR 2005-06, 2007-08 3 EXCEPT FOR THE DIFFERENCE IN AMOUNTS. ACCORDINGLY THE FACTS FROM THE ORDER OF ASSESSMENT YEAR 2005-06 ARE BEING EXTRACTED FOR RE ADY-REFERENCE:- A SEARCH & SEIZURE ACTION WAS CONDUCTED ON 12-12-2 006 AT BUSINESS AND RESIDENTIAL PREMISES OF SHRI. S.K.GUPTA ALONGWITH V ARIOUS CONCERNS IN WHICH HE AND HIS FAMILY MEMBERS WERE INTERESTED. SIMILARL Y ACTION U/S 132 OF IT ACT, 1961 WAS CONDUCTED IN THE CASE OF VARIOUS COMPANIES OWNED OR CONTROLLED BY HIM AND ALSO IN THE CASE OF DIFFERENT INDIVIDUALS C ONNECTED WITH THE SAID COMPANIES. THIS IS ONE OF SUCH CASES COVERED UNDER SEARCH & SEIZURE ACTION. CONSEQUENT TO SEARCH ACTION THE CASE WAS CENTRALIZE D WITH THIS OFFICE AND AS SUCH NOTICE U/S 153A OF IT ACT 1961 WAS ISSUED TO T HE ASSESSEE ON 25-2-2008. 1.1.BACKGROUND OF THE CASE . WHILE CONDUCTING DISCREET INQUIRIES, THE INVESTIGAT ION WING GATHERED THAT SHRI S.K.GUPTA A CHARTERED ACCOUNT BY PROFESSI ON, IS RUNNING VARIOUS COMPANIES FROM A PREMISES OF 'TRUMP AND GATES' SIT UATED AT H-108, 2 FLOOR, NEW ASIATIC BUILDING. CONNAUGHT PLACE, NEW DELHI AN D 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 REPOR TED BY THE INVESTIGATION WING THAT A LARGE NUMBER OF COMPANIES WERE BEING OPERATED AND CONTROLLED BY SHRI S. K GUPTA 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. GUPTA 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. KRISHNA INFORMEDIA 16. BOLNI EXIM INDIA LTD 17. BHARTI PROPERTIES PVT LTD 18. MARKETING INSURANCE BROKERS PVT LTD 19. CAM SOFT (LNDIA) PVT LTD 20. OURS TRADING PVT. LTD 21.PAWAR ESTATES PVT LTD 22. RAJDHANI LEASING LTD 23.DMC VAULTS LTD 24. SIGMA FARMS LTD 25. NORTH INDIA SECURITIES PVT LTD 26. HAMARA SAMAY TV NEWS NETWORK PVT LTD 27.CEL CEL TECHNOLOGIES LTD I.T.A. 3070 & 3071/D/12 ASSESSMENT YEAR 2005-06, 2007-08 4 28. CHIP SET SOLUTIONS PVT LTD 29. TRUMP & GATES 30. SERVEL TECHNOLOGY SYSTEM PVT. LTD. 31. PG TRAVELS HINDUSTAN COM PVT LTD 32. J.A. FINANCIAL & MARKETING CONSULTANTS PVT. LTD . 33. SAKSHAM INFOCOM PVT LTD 6.1. CONSIDERING THE FOLLOWING FACTS WHICH HAVE BEE N SUMMED UP IN THE IMPUGNED ORDER THE AO IN THE YEAR UNDER CONSIDERATI ON MADE AN ADDITION OF RS.1,97,938/-. THE RELEVANT EXTRACT IS REPRODUCED FROM THE IMPUGNED ORDER:- 2.1.1. THE AO HAS GIVEN VARIOUS FINDINGS ABOUT THE SE COMPANIES INCLUDING THE APPELLANT COMPANY BASED ON THE REPORTS FROM THE INV ESTIGATION WING AND HIS OWN PROCEEDINGS DURING THE IMPUGNED ASSESSMENT, WHI CH CAN BE SUMMARISED AS UNDER: (I). THESE COMPANIES WERE CREATED OSTENSIBLY FOR P ROVIDING A VARIETY OF SERVICES RANGING FROM CONSULTANCY OF ADV ERTISING TO SOFTWARE DEVELOPMENT, VARIOUS PROFESSIONAL SERVICES, ANNUAL MAINTENANCE SERVICES, UPGRADATION SERVICES, CUSTOMER CARE, RETAINERSHIP, SPONSORSHIP ETC. AND ACCORDINGLY BILLS/INVOICES HAVE BEEN ISSUED IN THE NAMES OF THESE COMPANIES INCLUDING THE APPELLANT BUT IN FACT NO SUCH ACTUAL SERVICES HAVE BEEN RENDERED BY THEM TO THE RESPECTIVE BENEFICIARIES. (II). SHRI. S.K. GUPTA DID NOT POSSESS THE NECESSA RY INFRASTRUCTURE OR THE REQUIRED MAN POWER TO RENDER SUCH VARIETY OF SE RVICES THROUGH THESE COMPANIES. (III). THESE COMPANIES WERE MERELY ISSUING ACCOMMO DATION BILLS FOR VARIOUS EXPENDITURE TO VARIOUS ENTITIES FOR THE SAK E 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 IN DICATING ANY SUCH ACTUAL SERVICES RENDERED BY THE APPELLANT OR OTHER COMPANIES AS CLAIMED. (V). SHRI S.K. GUPTA IN VARIOUS STATEMENTS RECORDE D ON DIFFERENT DATES BETWEEN DECEMBER, 2006 TO DECEMBER, 2008 BOTH BEFORE THE OFFICERS OF INVESTIGATION WING AND IN POST SEARCH INQUIRIES AN D BEFORE THE ASSESSING OFFICER, ADMITTED IN DETAIL HIS MODUS OPERANDI OF P ROVIDING ACCOMMODATION BILLS THROUGH THE APPELLANT COMPANY AND OTHER COMPA NIES IN LIEU OF CHEQUES RECEIVED AND CASH RETURNED TO THE BENEFICIARIES. (VI). EVIDENCE OF DUPLICATE SET OF BOOKS OF ACCOUN TS, HAND WRITTEN CASH BOOKS AND LEDGER ACCOUNTS, VARIOUS CHEQUE BOOK S AND BLANK CHEQUES SIGNED BY VARIOUS AUTHORIZED SIGNATORIES/DIRECTORS OF THE APPELLANT COMPANY AND OTHER COMPANIES WERE FOUND AND SEIZED FROM SHRI . S.K. GUPTA'S PREMISES. SOME OF THESE DIRECTORS/AUTHORIZED SIGNATORIES WERE FOUND TO BE EMPLOYEES, RELATIVES OR FRIENDS OF SH. S.K.GUPTA. (VII) THE ASSESSING OFFICER HAS GIVEN ELABORATE AND ADEQUATE OPPORTUNITIES TO THE APPELLANT COMPANY TO EXPLAIN T HEIR MATTER DURING THE ASSESSMENT PROCEEDINGS AND TO COUNTER THE FINDINGS OF THE ASSESSING OFFICER. I.T.A. 3070 & 3071/D/12 ASSESSMENT YEAR 2005-06, 2007-08 5 (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 THE ABOVE FACTS THE AO ARRIVED AT THE FOLLOWING CONCLUSIONS. THESE ARE EXTRACTED FROM THE ASSESSMENT ORDER:- 4. INFERENCES:- I. IT IS PROVED BEYOND DOUBT ON THE BASIS OF DOCUME NTARY EVIDENCES, CONFESSIONAL STATEMENT OF SHRI. S.K.GUPTA, THE MAIN PERSON CONTROLLING THE STATE OF AFFAIRS OF THE ASSESSEE. HUSBAND OF SMT. S AROJ GUPTA, DIRECTOR OF THE ASSESSEE COMPANY AND RESULTS OF THE ASSESSMENT THAT ASSESSEE IS ENGAGED IN THE ACCOMMODATION ENTRY BUSINESS AND NOT DOING ANY GENU INE SALE & PURCHASE AS CLAIMED IN THE FINAL ACCOUNT STATEMENTS ANNEXED WIT H RETURN OF INCOME. II. SINCE ASSESSEE HAS FAILED TO PRODUCE ANY REGULA R BOOKS OF ACCOUNT, SALE & PURCHASE AND EXPENSES VOUCHERS THE BOOK RESULTS SHO WN BY THE ASSESSEE ARE LIABLE TO BE REJECTED BY TAKING RECOURSE TO PROVISI ONS OR SECTION 145 (3) OF IT ACT 1961. III. THE ASSESSEE HAS NOT BEEN SUCCESSFUL IN ESTABL ISHING THAT ANY GENUINE BUSINESS ACTIVITY WAS BEING CARRIED OUT OTHER THAN THE ACCOMMODATION ENTRY BUSINESS. NO PHYSICAL EVIDENCE OF SUPPORTING INFRAS TRUCTURE WAS FOUND BY THE INVESTIGATION WING AT THE TIME OF SEARCH NOR THE SA ME HAS BEEN ADDUCED BEFORE THE UNDERSIGNED. IV. THE ASSESSEE HAS NOT PRODUCED ANY CONFIRMATION S FROM THE DEBTORS AND CREDITORS TO WHOM BILLS HAVE BEEN ISSUED AND BILLS HAVE BEEN PROCURED. V. THE ASSESSEE FAILED TO PROVIDE DOCUMENTARY EVIDE NCES IN THE FORM OF RENT DEEDS/RECEIPTS AND OTHER EXPENSES VOUCHERS AND BILL S, WHICH COULD ESTABLISH THE GENUINE CREDENTIALS OF THE ASSESSEE AS A GENUIN E SOFTWARE DESIGN & DEVELOPMENT AND OTHER IT RELATED SERVICES PROVIDER TO THE GENUINE CUSTOMERS. EVEN THE BIG CORPORATES LIKE RELIANCE INDUSTRIES L TD, NIIT, HCL GROUP, FIITJEE. MOTHERSONS SUMI INNOVATIVE & DESIGN LTD, A SL INSURANCE BROKERS PVT LTD, ACCORD INSURANCE, ALLIANZE SECURITIES. LIN K ENGINEER LTD, PASHUPATI FABRICS ETC, WHO THEMSELVES ARE HAVING THEIR OWN IN FRASTRUCTURES FOR IT RELATED REQUIREMENTS, HAVE APPROACHED THE ASSESSEE AS WELL AS ITS OTHER RELATED GROUP COMPANIES FOR GETTING ACCOMMODATION .BILLS. BUT SUR PRISINGLY NONE OF THEM HAD ANY CORROBORATIVE EVIDENCE OTHER THAN THE SATE BILL S OR IN SOME CASES A GENERAL AGREEMENT, WITHOUT ANY SUPPORTING EVIDENCES OF SOFT WARE DEVELOPMENT. EVEN ASSESSEE HAD NO SUPPORTING DOCUMENTS OF PURCHASE OR OUTSOURCING, WHERE FROM IT COULD ISSUE SALE BILLS TO THESE CORPORATES OR OT HER DESIROUS COMPANIES/CONCERNS. (I) THE ASSESSEE HAS FAILED TO CORRELATE ITS SURRE NDER INCOME IN DIFFERENT ASSESSMENT YEARS, WITH THE ACTUAL DEFICIENCIES OF T HE BUSINESS RELEVANT TO ACCOMMODATION ENTRY BUSINESS ON ACCOUNT OF PROVIDIN G ACCOMMODATION SALE BILLS, EXPENSES BILLS IN THE FORM OF JOB WORK CHARG ES, ADVERTISEMENT CHARGES. WEB DESIGNING CHARGES-AND PROVIDING INVESTMENT ENTR IES. I.T.A. 3070 & 3071/D/12 ASSESSMENT YEAR 2005-06, 2007-08 6 (II) THE ASSESSEE HAS INTACT INDULGED IN ACCOM MODATION ENTERIES BUSINESS AND HAS NOT DONE ANY GENUINE BUSINESS. SO THE INCOM E OF THE ASSESSEE FROM THE ACCOMMODATION ENTRY BUSINESS IS COMPUTED @ 2% NET R ATE ON SALE TURNOVER AND INVESTMENT TURNOVER IN VIEW OF THE ASSESSEE'S S TATEMENT COUPLED WITH PREVALENT MARKET CONDITION FOR SUCH ENTRIES. NO FUR THER EXPENSES ARE TO BE ALLOWED, AS THIS IS THE NET RATE. 5. WITH THESE REMARKS, THE TOTAL INCOME IS COMPUTE D AS UNDER: WITH THESE REMARKS INCOME OF THE ASSESSEE IS COMPUT ED AS UNDER: (I) TOTAL INCOME AS PER 153 A RETURN RS. 3396/- ADD:- INCOME EARNED FROM ACCOMMODATION ENTRY BUSINE SS (A) ON THE ACCOMMODATION SALE BILLS/TURNOVER @ 2% OF RS.1501913/- RS.30038/- (B) ON ACCOUNT OF BOGUS FRESH INVESTMENT ENTRIES @2% OF RS. 83,95,000/- RS. 167900 RS. 201334 6.3. IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY THE CIT(A) HELD AS UNDER:- 2.3.5. TAKING INTO CONSIDERATION 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 ENT RY BUSINESS TO THE TUNE OF RS.197938/- IS JUSTIFIED AND IS, THEREFORE, CONF IRMED. SINCE THE AO HAS GIVEN A CATEGORICAL FINDING THAT THE APPELLANT HAD ONLY I NDULGED IN ACCOMMODATION ENTRIES BUSINESS AND HAD NOT DONE ANY GENUINE BUSIN ESS AND REJECTED THE BOOKS 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, T HEREFORE, DIRECTED TO RECOMPUTED THE TOTAL INCOME ACCORDINGLY. THIS DISP OSES OFF ALL THE GROUNDS OF APPEAL TAKEN BY THE APPELLANT AGAINST THE IMPUGNED ASSESSMENT ORDER. 7. AGGRIEVED BY THIS THE ASSESSEE IN APPEAL BEFORE US HAS RAISED THE FOLLOWING GROUNDS:- THAT ON THE FACTS AND IN THE CIRCUMSTANCES AND IN THE LAW THE AUTHORITIES BELOW ERRED IN : 1. DETERMINING TAXABLE INCOME OF RS.2,01,330/- AS AGA INST THE RETURNED INCOME OF RS. 3,396/-; 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 AC T EVEN THOUGH BOOKS OF ACCOUNT WERE NEVER PRODUCED BEFORE THE AUTHORITY AND NO MAT ERIAL DEFECTS WERE POINTED OUT THEREIN ; 4. IN ESTIMATING UNDISCLOSED INCOME OF SUM OF RS.30,0 38 /- AND RS.1,67,900 /- BASED FIGURE APPEARING IN BALANCE SHEET DESPITE THE FACT THAT SUCH BOOKS OF ACCOUNT WERE NEVER RELIED UPON . I.T.A. 3070 & 3071/D/12 ASSESSMENT YEAR 2005-06, 2007-08 7 8. AS BROUGHT OUT EARLIER THE LD. AR AT THE TIME OF HEARING HAS CHOSEN TO CONFINE HIS ARGUMENTS TO THE LIMITED PLEA THAT THE EXPENDITURE INCURRED BY THE ASSESSEE FOR EARNING THE INCOME BY WAY OF PROVIDING ACCOMMODATION ENTRIES MAY BE ALLOWED FOR WHICH PURPOSES THE ISSUE MAY BE REST ORED TO THE AO. A PERUSAL IN THE DECISION IN KONICHIVA BUILDERS LTD. SHOWS THAT FACTS HAVE BEEN APPRECIATED IN THE FOLLOWING MANNER:- 4. THE ASSESSEE IN THIS CASE BELONGS TO A GROUP OF ABOUT 33 CASES OF VARIOUS COMPANIES OPERATED AND CONTROLLED BY ONE SH. S K GU PTA CHARTERED ACCOUNTANT BY PROFESSION, FROM HIS OFFICE PREMISES OFTRUMP AND G ATES SITUATED AT H-108, 2ND FLOOR, NEW ASIATIC BUILDING, CONNAUGHT PLACE, NEW D ELHI 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 AND SE IZURE OPERATION U/S. 132 OF THE ACT BY THE INVESTIGATION WING OF THE INCOME TAX DEP ARTMENT. IN THE VARIOUS STATEMENTS OF SH. SK GUPTA RECORDED ON VARIOUS DATE S BOTH BEFORE THE OFFICERS OF THE INVESTIGATION WING AND IN POST SEARCH ENQUIRIES BEF ORE THE AO, HE ADMITTED IN DETAIL, HIS MODUS OPERANDI OF PROVIDING ACCOMMODATION BILLS THROUGH THE ASSESSEE COMPANY AND ANOTHER COMPANIES IN LIEU OF CHEQUE RECEIVED AN D CASH RETURN TO THE BENEFICIARIES. THERE WAS ALSO SEIZURE OF DUPLICATE SET OF BOOKS OF ACCOUNTS, CHEQUES SIGNED BY VARIOUS AUTHORISED SIGNATORIES / DIRECTOR S OF THE ASSESSEE COMPANY AND OTHER COMPANIES (WHICH WERE FOUND TO BE EMPLOYEES, RELATIVES OR FRIENDS OF SH. SK GUPTA) FROM SHRI S.K. GUPTAS PREMISES. FROM THE AB OVE, AO OBSERVED THAT IT BECAME ABUNDANTLY CLEAR THAT THE ASSESSEE COMPANY, IN FACT , INDULGED IN ACCOMMODATION ENTRIES BUSINESS AND DID NOT DO ANY GENUINE BUSINES S. ALL THE SALE AND PURCHASES ETC. BOOKED IN THESE COMPANIES WERE FOUND TO BE BOGUS. P ROPER BOOKS OF ACCOUNTS WERE NOT FOUND TO HAVE BEEN MAINTAINED. IN THESE CIRCUMS TANCES, THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE REJECTED AND ADDITIONS WERE MADE ON ESTIMATE BASIS, THE SAME WERE AFFIRMED BY THE LD. CIT(A) IN APPEAL. 8.1. THE ISSUE PERTAINING TO BOOKS OF ACCOUNTS ETC. WAS CONSIDERED BY THE CO- ORDINATE BENCH IN THE FOLLOWING MANNER:- 6. THE FIRST ISSUE PERTAINS TO REJECTION OF BOOKS OF ACCOUNTS. LD. COUNSEL OF THE ASSESSEE IN THIS REGARD SUBMITTED THAT HE IS NOT VE HEMENTLY PRESSING THIS ISSUE. WE FIND THAT IN THE SEARCH AND ON THE BASIS OF MATE RIAL RECOVERED AND STATEMENTS OBTAINED IT HAS BEEN DULY ESTABLISHED TH AT ASSESSEE WAS INDULGING IN BOGUS ACCOMMODATION ENTRIES. NO ACTUAL SALE AND PUR CHASE WAS DONE BY THE ASSESSEE. PROPER BOOKS OF ACCOUNTS WERE NOT MAINTAI NED. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDERS OF THE AUTHORITIES BELOW IN WHICH THE BOOKS OF ACCOUNTS HAVE BEEN REJE CTED. I.T.A. 3070 & 3071/D/12 ASSESSMENT YEAR 2005-06, 2007-08 8 8.2. IT IS SEEN THAT CONSIDERING THE STATEMENT RECO RDED OF SH. S.K.GUPTA WHICH FACTS HAVE BEEN SUMMED IN THE FOLLOWING PARAS 8 & 9 IN THE ORDER OF THE CO- ORDINATE BENCH WHICH ARE IDENTICAL TO THE FACTS IN THE PRESENT PROCEEDINGS ALSO. IT IS SEEN THAT IT IS THIS STATEMENT WHICH FORMS THE B ASIS OF THE ADDITION BY WAY OF A ESTIMATE OF INCOME AT THE 2%. IT IS FURTHER SEEN T HAT 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 11 BY WAY OF SPEAKING 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 ESTABLISHED THAT ASSESSEE WAS ENGAGED IN THE BUSINESS OF PROVIDING B OGUS ACCOMMODATION ENTRY. HENCE, THE INCOME IN THIS REGARD HAS TO BE E STIMATED. IN THIS REGARD, THE ADDITION HAS BEEN MADE BY THE AO ON THE BASIS OF ST ATEMENTS GIVEN BY THE DIRECTOR, S.K. GUPTA. IN THIS REGARD, IT IS RELEVAN T TO QUOTE THE PRECISE QUESTION AND ANSWERS THEREOF GIVEN BY SH. SK GUPTA:- Q.(2) PLEASE STATE CATEGORICALLY THE PERCENTAGE CO MMISSION CHARGED BY YOU FOR PROVIDING ACCOMMODATION SALE BILLS, ACCO MMODATION PURCHASE / EXPENSES BILLS AND INVESTMENT AND LOAN E NTRIES THROUGH YOUR VARIOUS GROUP COMPANIES. ANS. THE AVERAGE COMMISSION EARNED BY VARIOUS GROUP COMPANIES IN PROVIDING DIFFERENT TYPE OF ACCOMMODATION ENTRIES W AS TO THE TUNE OF 1.5% TO 2.0% OUT OF WHICH I HAVE TO INCUR OUR NORMA L EXPENSE ON A/C OF SALARY, RENT, BANK CHARGES, CONVEYERS, TELEPHONE, W ATER AND ELECTRICITY. 9. ON THE BASIS OF STATEMENTS AS WELL AS PREVALENT MARKET CONDITION, THE AO HAS ESTIMATED THE INCOME @ 2% WITHOUT ALLOWING ANY AMOU NT FOR THE EXPENDITURE. LD. CIT(A) HAS AFFIRMED THE SAID. 10. IN THIS REGARD LD. COUNSEL OF THE ASSESSEE HAS PLEADED FOR ALLOWANCE OF EXPENDITURE INCURRED TO EARN THE INCOME. WE FIND TH AT WHEN ADDITION IS BEING MADE ON THE BASIS OF STATEMENT, THE STATEMENT HAS TO BE RELIED IN FULL . REVENUE CANNOT CHOOSE TO RELY ON ONE PART OF THE STATEMENT AND IGN ORE THE REST OF THE STATEMENT IN THE ABSENCE OF ANY COGENT MATERIAL. THIS IS SUPPORT ED BY THE COMMON LAW MAXIM OF APPROBATE AND REPROBATE. 11. IN THIS CASE THE ASSESSEE COMPANYS DIRECTOR HA S 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 HA S ALSO BEEN SUBMITTED IN THE SAME STATEMENT THAT THE ASSESSEE HAS TO INCUR THE E XPENDITURE ON ACCOUNT OF I.T.A. 3070 & 3071/D/12 ASSESSMENT YEAR 2005-06, 2007-08 9 SALARY, RENT BANK CHARGES, CONVEYERS, TELEPHONE, WA TER AND ELECTRICITY. HOWEVER, 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. I N THESE CIRCUMSTANCES WE REMIT THE ISSUE TO THE FILE OF THE AO. THE ASSESSING OFFI CER SHALL EXAMINE THE ASPECT OF ALLOWANCE OF EXPENDITURE ON THE BASIS OF COGENT MAT ERIALS TO BE SUBMITTED BY THE ASSESSEE. 9. IN THE AFORE-MENTIONED PECULIAR FACTS AND CIRCUM STANCES ADDRESSING THE LIMITED PLEA OF THE ASSESSEE IN THE LIGHT OF THE A RGUMENTS ADVANCED BY THE PARTIES BEFORE US WHEREIN LD. AR HAS PLACED RELIANCE UPON THE ORDER OF THE DIVISION BENCH IN THE CASE OF KONICHIVA BUILDERS LTD. AND TH E LD. DR HAS NOT OPPOSED IT. IN THE FACTS BEFORE US, LD. AR HAS DRAWN SPECIFIC A TTENTION TO QUESTION NO.-2 WHICH HAS BEEN EXTRACTED IN THE CASE OF KONICHIVA B UILDERS LTD. ALSO IN PARA 8 OF THEIR ORDER WHICH IS ALSO CONSIDERED AT PAGE 15 OF THE ASSESSMENT ORDER IN THE YEAR UNDER CONSIDERATION. IN VIEW OF THE ABOVE THERE BE ING NO CHANGE IN FACTS AND CIRCUMSTANCES OF THESE CASES RESPECTFULLY FOLLOWIN G THE ORDER OF THE TRIBUNAL IN KONICHIVA BUILDERS LTD., THE ISSUE OF ALLOWABILITY OF EXPENSES IN SIMILAR LINES IS RESTORED TO THE AO HEREIN ALSO REQUIRING THE ASSESS EE TO PROVE ITS CLAIM WITH COGENT MATERIAL THE LIMITED PLEA OF THE ASSESSEE IS ACCEP TED. THE OTHER GROUNDS RAISED WERE NOT ARGUED AS SUCH THE SAME ARE DISMISSED FOLL OWING THE JUDICIAL PRECEDENT IN KONICHIVA BUILDERS LTD. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. 11. SINCE IN THE REMAINING APPEAL THERE IS NO CHANG E IN FACTS AND CIRCUMSTANCES AND THE ARGUMENTS OF THE PARTIES REMAIN THE SAME, THIS APPEAL ALSO WITH IDENTICAL DIRECTIONS FOLLOWING THE JUDICIAL PRECEDENT IS REST ORED TO THE AO. I.T.A. 3070 & 3071/D/12 ASSESSMENT YEAR 2005-06, 2007-08 10 12. IN THE RESULT THE APPEALS OF THE ASSESSEE ARE P ARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16.05.2016. SD/- SD/- (S.V. MEHROTRA) (SU DHANSHU SRIVASTAVA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: THE 16 TH OF MAY 2016 GS COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER ASSTT. REGISTRAR I.T.A. 3070 & 3071/D/12 ASSESSMENT YEAR 2005-06, 2007-08 11