M/s. T&G Quality Management Cons. Ltd., New Delhi V. ACIT, New Delhi

ITA 3221/DEL/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6231 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 10-03-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 21-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHRIY R SONBHADRA
• Keywords: Accommodation entries
• Section: 143(3); 153A; 132

Judgement Text

\IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI KULDIP SINGH: JUDICIAL MEMBER ITA NOS. 3221, 3222 & 3223/DEL/2012 & 1071/DEL/201 3 ASSTT. YR: 2005-06, 2006-07, 2007-08 & 2009-10 T&G QUALITY MANAGEMENT CONS. LTD., VS. ACIT CENTRAL CIRCLE-9, H-108, IIND FLOOR, NEW ASIATIC BLDG., NEW DELHI. CONNAUGHT PLACE, NEW DELHI. PAN: AACCB 1121 C ( APPELLANT ) (RESPONDENT) REVENUE BY : SHRI V. RAJAKUMAR ADV. ASSESSEE BY : SHRIY.R. SONBHADRA SR. DR DATE OF HEARING : 10/03/2016. DATE OF ORDER : 30/03/2016. O R D E R PER BENCH: THESE ARE ASSESSEES APPEALS AGAINST SEPARATE ORD ERS OF LD. CIT(A), RELATING TO A.Y. 2005-06, 2006-07, 2007-08 AND 2009 -10. SINCE COMMON ISSUES ARE INVOLVED FOR ADJUDICATION, ALL THESE APP EALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORD ER. FOR THE SAKE OF CONVENIENCE, WE REFER THE FACTS AS OBTAINING IN ASS ESSMENT YEAR 2005-06 (ITA NO. 3221/DEL/2012). GROUNDS OF APPEAL RAISED ARE AS UNDER: THAT ON THE FACTS AND IN THE CIRCUMSTANCES AND IN THE LAW THE AUTHORITIES BELOW ERRED IN 2 1. DETERMINING TAXABLE INCOME OFRS.3,88,810/- AS AG AINST THE RETURNED INCOME OF RS.8,683/- ; 2. PASSING ORDER U/S 143(3) R.W.S. 153A OF THE INC OME TAX ACT, 1961 RELYING ON THE ESTIMATES AND NOT ON THE B ASIS 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 OFRS.1,0 1,638/- AND RS.2,78,492/- BASED FIGURE APPEARING IN BALANCE SHEET DESPITE THE FACT THAT SUCH BOOKS OF ACCOUNT WERE NE VER RELIED UPON; 2. BRIEF FACTS OF THE CASE ARE THAT A SEARCH & SEIZ URE 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. SIMILAR ACTION U/S 132 OF IT ACT, 1961 WAS CONDUCTED IN THE CASE OF VARIOUS COMPANIES OWNED OR CONTROLLED BY H IM AND ALSO IN THE CASE OF DIFFERENT INDIVIDUALS CONNECTED WITH THE SAID CO MPANIES. THE ASSESSEES CASE WAS ONE OF SUCH CASES, WHICH WERE COVERED UN DER SEARCH & SEIZURE ACTION. THE AO WHILE GIVING THE BACK GROUND OF THE CASE HAS POINTED OUT THAT THE INVESTIGATION WING GATHERED THAT SHRI S.K.GUPTA , A CHARTERED ACCOUNT BY PROFESSION, WAS RUNNING VARIOUS COMPANIES FROM A PREMISES OF 'TRUMP AND GATES' SITUATED AT H-108, 2ND FLOOR, NEW ASIATI C BUILDING. CONNAUGHT 3 PLACE, NEW DELHI AND ALSO FROM THE PREMISES OF HIS FIRM, NAMELY, M/S GUPTA & RAKESH ASSOCIATES, AT 231, GULMOHAR ENCLAVE, NEW DELHI. 3. THE AO HAS GIVEN A LIST OF 33 COMPANIES, WHICH HAD OSTENSIBLY BEEN CREATED FOR PROVIDING A VARIETY OF SERVICES RANGING FROM CONSULTANCY TO ADVERTISING TO SOFTWARE DEVELOPMENT. ACCORDINGLY, B ILLS/ INVOICES HAD BEEN ISSUED IN THE NAMES OF THESE COMPANIES, BUT IN FACT NO ACTUAL SERVICES HAD BEEN RENDERED BY THEM TO THE BENEFICIARIES. HE HAS FURTHER POINTED OUT THAT DURING THE COURSE OF SEARCH IT WAS FOUND THAT SHRI S.K. GUPTA DID NOT HAVE THE NECESSARY INFRASTRUCTURE OR THE REQUISITE MANPO WER TO PROVIDE THE ACTUAL SERVICES AND THUS IT BECAME EVIDENT THAT THE COMPAN IES CONTROLLED BY HIM WERE MERELY ENGAGED IN THE BUSINESS OF ISSUING ACCO MMODATION BILLS TO OTHER ENTITIES. HE HAS FURTHER OBSERVED THAT AT THE OTHER PREMISES OF SHRI S.K. GUPTA AT 231, GULMOHAR ENCLAVE, HUGE NUMBER OF SUC H ACCOMMODATION INVOICES/ BILLS ISSUED BY THE VARIOUS COMPANIES WER E FOUND AND SEIZED DURING THE COURSE OF SEARCH. APART FROM THESE INVOICES/ BI LLS, THERE WAS NO OTHER EVIDENCE WHICH WAS FOUND FROM ANY OF THE PREMISES W HICH COULD SUGGEST THAT ACTUAL SERVICES WERE BEING RENDERED BY ANY OF THE COMPANIES, CONTROLLED BY SHRI S.K. GUPTA. THUS, HE POINTED OUT THAT THE A SSESSEE WAS ONE OF THE CONCERNS, WHICH WERE ENGAGED IN PROVIDING THE ACCOM MODATION ENTRIES. THE AO AFTER REFERRING TO THE SUBMISSIONS RECORDED DURI NG SEARCH AND ALSO THE 4 EVIDENCES FOUND IN COURSE OF SEARCH, INTER ALIA, CO NCLUDED AT PAGE 17 OF HIS ORDER AS UNDER: THE ASSESSEE HAS IN FACT INDULGED IN ACCOMMODATION ENTRIES BUSINESS AND HAS NOT DONE ANY GENUINE BUSINESS. SO THE INCOME OF THE ASSESSEE FROM THE ACCOMMODATION ENTRY BUSIN ESS. IS COMPUTED @ 2% NET RATE ON SALE TURNOVER AND INVESTM ENT TURNOVER IN VIEW OF THE OF THE ASSESSEE' S STATEMEN T COUPLED WITH PREVALENT MARKET CONDITION FOR SUCH ENTRIES. NO FUR THER EXPENSES ARE TO BE ALLOWED AS THIS IS THE NET RATE. 4. HE, ACCORDINGLY, MADE FOLLOWING ADDITIONS: (A) ON THE ACCOMMODATION SALE BILLS/ TURNOVER @ 2% OF RS. 50,81,880/- RS. 1,01,6 38/- (B) ON A/C OF BOGUS FRESH INVESTMENT ENTRIES @ 2% OF RS. 1,39,24,600/- RS. 2,78,4 92/- TOTAL INCOME RS. 3,88,813/- 5. LD. CIT(A) DISMISSED THE ASSESSEES APPEAL, INTE R ALIA, OBSERVING IN PARAS 2.3.4 AND 2.3.5 AS UNDER: 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 HAS ESTIMATED AND APPLIED A NET RATE OF 2% AND THEREFORE THERE WAS NO REASON TO ALLOW ANY EXPENSES OUT OF IT . THIS CONTENTION IS A LSO, THEREFORE, REJECTED. 2.3.5 TAKING INTO CONSIDERATION THE TOTALITY OF FAC TS 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 5 RS.3,80,130/- IS JUSTIFIED AND IS, THEREFORE, CONFI RMED. SINCE THE AO HAS GIVEN A CATEGORICAL FINDING THAT THE APPELLA NT HAD ONLY INDULGED IN ACCOMMODATION ENTRIES BUSINESS AND HAD RIOT DONE ANY GENUINE. BUSINESS AND REJECTED THE BOOK RESULTS ON THAT GROUND , THE NET PROFIT SHOWN IN THE RETURN HAS LOS T ITS RELEVANCE AND SHOULD NOT BE GIVEN ANY CREDENCE. THE AO IS, T HEREFORE, DIRECTED TO RECOMPUTE THE TOTAL INCOME ACCORDINGLY. THIS DISPOSES OFF ALL THE GROUNDS OF APPEAL TAKEN BY THE APPELLANT AGAINST THE IMPUGNED ASSESSMENT ORDER. 6. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSES SEE FILED BEFORE US COPIES OF TRIBUNALS ORDER IN THE CASE OF FIVE SUCH COMPANIES OUT OF 33 COMPANIES LISTED AT PAGE 2 OF ASSESSMENT ORDER AND POINTED OUT THAT THE MATTER HAS BEEN RESTORED TO THE FILE OF AO BY TRIBU NAL FOR EXAMINING THE ASPECT OF ALLOWANCE OF EXPENDITURE ON THE BASIS OF COGENT MATERIALS TO BE SUBMITTED BY THE ASSESSEE. 7. LD. DR RELIED ON THE ORDERS OF LOWER REVENUE AUT HORITIES. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORD OF THE CASE. WE FIND THAT ALL TH E FIVE ORDERS FILED BY ASSESSEE ARE IN RESPECT OF VARIOUS COMPANIES REFERR ED TO AT PAGE 2 OF THE ASSESSMENT ORDER. THE ASSESSEE IS ALSO ONE OF THE C OMPANIES REFERRED TO IN THE LIST OF COMPANIES AT PAGE 2 OF THE ASSESSMENT O RDER. THEREFORE, THE DECISION RENDERED IN THE CASE OF THE FIVE COMPANIES APPLIES MUTATIS MUTANDIS TO ASSESSEES CASE ALSO. WE FIND THAT THE ITAT DELH I BENCH A VIDE ORDER 6 DATED 14.2.2014 RENDERED IN ITA NOS. 3213 TO 3214 & 3856/DEL/2012 AND 1080/DEL/2013 IN THE CASE OF KONICHIVA BUILDERS PV T. LTD. VS. ACIT HAS OBSERVED AS UNDER: 11. IN THIS CASE THE ASSESSEE COMPANY'S DIRECTOR HAS AGREED THAT THE COMMISSION WAS TO THE TUNE OF 1.50/0 TO 2% . HENCE; ESTIMATION OF COMMISSION INCOME @ 2% CANNOT BE DISP UTED. HOWEVER, AT THE SAME TIME IT HAS ALSO BEEN SUBMITTE D IN THE SAME STATEMENT THAT THE ASSESSEE HAS TO INCUR THE E XPENDITURE ON ACCOUNT OF SALARY, RENT BANK CHARGES, CONVEYERS, TELEPHONE, WATER AND ELECTRICITY. HOWEVER, IT IS ALSO SETTLED THAT MERE SUBMISSION THAT EXPENDITURE HAS BEEN INCURRED CANNO T LEAD TO ALLOWANCE OF EXPENDITURE. ASSESSEE HAS TO PROVE WIT H COGENT MATERIAL THAT THE EXPENDITURE HAS BEEN INCURRED TO EARN THE INCOME. IN THESE CIRCUMSTANCES WE REMIT THE ISSUE T O THE FILE OF THE AD. THE ASSESSING OFFICER SHALL EXAMINE THE ASP ECT OF ALLOWANCE OF EXPENDITURE ON THE BASIS OF COGENT MAT ERIALS TO BE SUBMITTED BY THE ASSESSEE. 12. ANOTHER ADDITION MADE IN THIS REGARD IS @2% O N ACCOMMODATION FRESH INVESTMENTS. A.Y. ACCOMMODATION FRESH, INVESTMENT ENTRIES INC OME @2% 2004:.05 2,73,48,000 5,46,960 2005-06 2,63,50,000 5,27,000 2006-07 89,78,880 1,79,518 2007-:08 4,38,40,283 8,76,805 13. WE .HAVE HEARD BOTH- THE - COUNSEL AND PERUSED THE RECORDS. LD. COUNSEL OF THE ASSESSEE' SUBMITTED' THAT ESTIMA TE OF INCOME CAN BE MADE ONLY WITH REFERENCE TO THE INITIAL AND FRESH INVESTMENT MADE BY THE ASSESSEE. THE ROTATION OF TH E AMOUNT OF INVESTMENT CAN:NQ'T BE TAKEN FOR COMPUTATION OF THE : INCOME. LD. DR ON THE' OTHER HAND RELIED UPON HIS WRITTEN S UBMISSION, 7 14. WE HAVE CAREFULLY CONSIDERED THE SUBMISSION. W E FIND THAT IN THIS CASE IT HAS BEEN ESTABLISHED: THAT THE ASSE SSEE IS INDULGED IN BOGUS ACCOMMODATION ENTRY BUSINESS AND NO ACTUAL SALE AND PURCHASE ACTIVITY HAS BEEN DONE. TH E BOOKS HAS ALSO BEEN REJECTED AND IT HAS BEEN NOTED THAT PROPE R BOOKS ARE NOT MAINTAINED. IN SUCH CIRCUMSTANCES, A REASONABLE ESTIMATES @2% OF INVESTMENT HAS BEEN MADE BY THE AD, WHICH CA NNOT BE 'FAULTED WITH. HOWEVER, IN THIS REGARD ASSESSEE'S C OUNSEL SUBMISSION IS ALSO NOT WORTHY THAT ESTIMATE OF INCO ME FOR INVESTMENT HAS TO BE MADE ON THE BASIS OF INITIAL AND FRESH INVESTMENT MADE BY THE ASSESSEE. THOUGH WE NOTE THA T AO HAS WRITTEN THAT ADDITION WAS MADE ON THE BASIS 'ACCOMM ODATION FRESH INVESTMENT'; THE METHOD OF COMPUTATION OF THE AMOUNT OF INVESTMENT IS NOT ON RECORD. FOR ASSESSMENT YEAR 20 04-05 INVESTMENT HAS BEEN TAKEN AS FIGURE OF INVESTMENT I N SHARES AND SECURITIES REFLECTED IN SCHEDULE 3 TO THE BALANCE S HEET FOR OTHER YEAR HOW THE AMOUNT HAS BEEN ARRIVED IT IS NO T DISCERNIBLE. LD. COUNSEL OF THE ASSESSEE AND THE LD . DR COULD NOT THROW PROPER LIGHT ON THIS ASPECT. IN THESE CIR CUMSTANCES, WE REMIT THIS ISSUE TO THE FILE OF THE AO. THE AO S HALL EXAMINE THE ISSUE AFRESH. HE SHALL ARRIVE AT THE FIGURE OF INVESTMENT DONE BY THE ASSESSEE ON A COGENT BASIS AND THEN THE , ESTIMATE OF INCOME CAN BE MADE. 9. THIS DECISION HAS BEEN FOLLOWED IN THE CASES OF OTHER FOUR COMPANIES BY THE TRIBUNAL. WE, THEREFORE, FOLLOWING THE DECIS ION OF COORDINATE BENCH IN THE CASE OF KONICHIVA BUILDERS PVT. LTD. (SUPRA) & OTHERS, RESTORE THE MATTER TO THE FILE OF AO FOR DE NOVO ASSESSMENT IN TERMS OF OBSERVATIONS REPRODUCED EARLIER FOR EXAMINING THE ISSUE OF ALLOW ABILITY OF EXPENDITURE. 10. IDENTICAL GROUNDS HAVE BEEN TAKEN IN AY 2006-07 & 2007-08. FACTS OF THE CASE IN THESE ASSESSMENT YEARS REMAINING THE SA ME, FOR THE VERY SAME 8 REASONS AS IN AY 2005-06, HERE IN ALSO WE RESTORE T HE MATTER TO THE FILE OF AO FOR DE NOVO ASSESSMENT. APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. 11. AS FAR AS ASSTT. YEAR 2009-10 (ITA NO. 1071/DEL /2013) IS CONCERNED, IN THIS YEAR THE ASSESSEE HAD FILED RETURN OF INCOM E DECLARING NIL INCOME AS AGAINST WHICH ASSESSMENT HAD BEEN MADE AT RS. 29,93 ,520/- BY MAKING FOLLOWING ADDITIONS: UNEXPLAINED CASH DEPOSITS RS. 7,07,000 EXPENSES NOT SUPPORTED BY EVIDENCE(S) RS. 2,12,021 UNEXPLAINED ADVANCES RS. 18,81,497 PROFIT ON SALE OF SHARES RS. 1,90,000 SHARE APPLICATION MONEY RS. 3,000 12. LD. CIT(A) CONFIRMED THE ACTION OF AO. BEING AG GRIEVED THE ASSESSEE IS IN APPEAL BEFORE US AND HAS TAKEN FOLLOWING GROU NDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, ID. CIT (A)-XXXII WAS INCORRECT AND UNJUSTIFIE D IN ACCEPTING THE ASSESSMENT OF ASSESSEE AT INCOME OF R S. 29, 93,520/- AS AGAINST RETURNED INCOME OF RS. NIL. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE ID. CIT (A)-XXXII WAS INCORRECT AND UNJUST IFIED TO ACCEPT THE APPROACH OF ASSESSING THE ASSESSEE WHICH IS AGAINST THE PRINCIPAL OF 'CONSISTENCY' 3. ANY OTHER GROUND WHICH ASSESSEE WILL RAISE AT TH E TIME OF FILLING PAPER BOOK WITH THE OFFICE OF CIT (A) 13. HAVING HEARD BOTH THE PARTIES, WE FIND THAT IN PARA 6 LD. CIT(A) HAS OBSERVED AS UNDER: 9 THE REPEATED FAILURE TO AVAIL THE OPPORTUNITY OF B EING HEARD IS A POINTER TOWARDS THE FACT THAT THE APPELLANT IS NO T INTERESTED IN PURSUING THE APPEAL. UNDER THE CIRCUMSTANCES, I HAV E NO OTHER OPTION EXCEPT TO DECIDE THE APPEAL ON THE BASIS OF THE MATERIAL ON RECORD. THE APPELLANT HAS NEITHER MADE ANY SUBMI SSION NOR HAS SUBSTANTIATED THE GROUNDS OF APPEAL. NOTHING IS AVAILABLE ON RECORD TO SUPPORT THE SAID GROUNDS OF APPEAL. TH E ONLY MATERIAL AVAILABLE ON RECORD IS THE IMPUGNED ASSESS MENT ORDER AND HENCE, I HAVE TO DECIDE THE APPEAL ON THE BASIS OF THE SAME. 14. BEFORE LD. CIT(A) NO PROPER EXPLANATION WAS FUR NISHED BY ASSESSEE. UNDER SUCH CIRCUMSTANCES WE RESTORE THE MATTER TO T HE FILE OF AO, AS HAS BEEN DONE IN RESPECT OF OTHER THREE APPEALS, FOR DE NOVO ASSESSMENT, SO THAT CONSISTENT VIEW MAY BE TAKEN IN ALL THE ASSESSMENT YEARS UNDER CONSIDERATION. 15. IN THE RESULT, ALL THE APPEALS PREFERRED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCEMENT IN OPEN COURT ON 30/03/2016. SD/- SD/- (KULDIP SINGH) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30/03/2016. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI.