ACIT, New Delhi V. M/s. Vee Kay General Industries, New Delhi

ITA 3328/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2368 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 07-12-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 24-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANSHU KHURANA
• Keywords: Accommodation entries; Bogus loan; TDS
• Section: 143(3); 143(2); 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : I NEW DELHI BEFORE SHRI G.E VEERABHARAPPA , VICE PRESIDENT AND SHRI RAJPAL YADAV, JUDICIAL MEMEBR I.T.A NO. 3328/DEL./09 ASSESSMENT YEARS - 2003-2004 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 35(1) NEW DELHI. VS. M/S. VEE KAY GENERAL INDUSTRIES, B-46, JHILMIL INDUSTRIAL AREA, G.T. ROAD, SHAHDARA, DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : MS. ANSHU KHURANA, DR RESPONDENT BY : SHRI SANJEEV JAIN ORDER PER RAJPAL YADAV, JM: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDE R OF LD. CIT(A) DATED 31 ST MARCH, 2009 PASSED FOR ASSTT. YEAR 2003-04. THE SOL ITARY GROUND OF APPEAL IS THAT LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF R S. 1.60 CRORES ADDED BY THE AO WITH THE AID OF SECTION 68 OF THE INCOME TAX ACT 19 61. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY HAS FILED ITS RETURN OF INCOME ON 28.11.2003 DECLARING A TOTAL LOSS OF R S. 2,02,35,960/-. A NOTICE U/S 143(2) WAS ISSUED AND AN ASSTT. U/S 143(3) WAS COMP LETED ON 26 TH APRIL, 2005 AT A ITA NO. 3328/DEL/09 ASSTT.YEAR 2003-04 2 LOSS OF RS.2,03,09,960/-. IT EMERGES OUT FROM THE R ECORD THAT AO HAD RECEIVED AN INFORMATION FROM THE DIT INVESTIGATION NEW DELHI TO THE EFFECT THAT STATEMENT OF SHRI CHETAN PRAKASH, SHRI VINOD GARG AND SHRI MAHESH GA RG WERE RECORDED ON 3 RD NOVEMBER, 2003, 9 TH SEPTEMBER, 2003 AND 22 ND SEPTEMBER 2003 RESPECTIVELY. THEY HAVE DISCLOSED THAT THEY WERE IN THE BUSINESS OF PR OVIDING ACCOMMODATION ENTRIES. THE AO FORMED AN OPINION THAT ASSESSEE HAD TAKEN LO ANS FROM SOME OF THE COMPANIES MANAGED BY THESE PERSONS, THUS THOSE UNSE CURED LOANS ARE JUST ACCOMMODATION ENTRIES. HE ISSUED A SHOW CAUSE NOTIC E U/S 148 OF THE INCOME TAX ACT WHICH WAS SERVED UPON THE ASSESSEE ON 14 TH JULY, 2007 AND REOPENED THE ASSTT. ON RECEIPT OF NOTICE ASSESSEE HAD FILED OBJECTION A ND ASKED FOR THE REASONS RECORDED FOR REOPENING OF THE ASTTT. THE ASSESSEE HAS ALSO F ILED A LETTER SUBMITTING THEREIN THAT THE RETURN OF INCOME FILED ORIGINALLY ON 28.11.2003 MAY KINDLY BE TREATED AS RETURN OF INCOME FILED BY THE ASSESSEE IN RESPONSE TO THE NOT ICE U/S 148 OF THE INCOME TAX ACT. LD. AO HAS SUPPLIED THE COPIES OF THE REASONS RECORDED FOR REOPENING OF THE ASSTT. THE ASSESSEE HAS FILED OBJECTION OF SAID REA SONS AND THOSE OBJECTIONS WERE DISPOSED OFF THROUGH THE LETTER DATED 10.11.2008 WH ICH WAS DULY RECEIVED BY THE ASSESSEE. ACCORDING TO THE LD. AO DURING THE F.Y. 2 002-03 ASSESSEE HAS TAKEN UNSECURED LOAN OF RS. 1.60 CRORE FROM 16 PARTIES ON DIFFERENT DATES. HE EXTRACTED THE DETAILS OF SUCH PARTIES ON PAGE 2 OF THE ASSTT. ORD ER. THE AO THEREAFTER MADE A DETAILED DISCUSSION AS TO HOW THE REOPENING OF THE ASSTT. IS JUSTIFIED. HE IS OF THE OPINION THAT AO HAS TO FORM A PRIME FACIE BELIEF EX HIBITING THE ESCARPMENT OF INCOME FOR REOPENING OF AN ASSTT. ACCORDING TO HIM THE INF ORMATION SUPPLIED BY THE DIT IS SUFFICIENT TO FORM SUCH OPINION. THEREAFTER HE MADE A REFERENCE OF LARGE NUMBER OF DECISIONS NAMELY BRIJ MOHAN AGARWAL VS. ACIT 268 IT R 400, PRAFUL CHINILAL PATEL VS. ACIT 236 ITR 832 (GUJARAT) AND OTHERS. THE AO T HEREAFTER DISCUSSED THE CONCEPT ITA NO. 3328/DEL/09 ASSTT.YEAR 2003-04 3 OF ACCOMMODATION ENTRY AND WHAT MODUS OPERENDI IS B EING ADOPTED BY SUCH ENTRY OPERATORS. HE HAS REFERRED SMALL PIECES OF THE STAT EMENT OF SHRI CHETAN PRAKASH, SHRI MAHESH GARG AND SHRI VINOD GARD RECORDED BY AD IT ON 3 RD OCTOBER, 2003, 22 ND SEPTEMBER, 2003 AND 9 TH SEPTEMBER, 2003. THE AO HAS FURTHER OBSERVED THAT THE COMPANIES FROM WHOM THE ASSESSEE HAS TAKEN THE LOAN S HAVE RETURNED A VERY MEAGRE INCOME WHICH INDICATE THAT THEY ARE NOT CRED ITWORTHY. 3. THE ASSESSEE HAS CONTENDED BEFORE THE AO THAT IT HAS TAKEN A LOAN OF RS. 20,87,08,403/- EXCEPT A SUM OF RS. 3,10,79,982/-.AL L OTHER LOANS WERE DULY PAID UP BY THE ASSESSEE DURING THE YEAR AND ACCOUNTS HAVE B EEN SQUARED UP DURING THE YEAR ITSELF. THE LOANS WERE TAKEN THROUGH ACCOUNT PAYEE CHEQUES. THESE ARE INTEREST BEARING LOANS TDS WAS DEDUCTED ON THE AMOUNT OF INT EREST. THE LOANS WERE REPAID THROUGH ACCOUNT PAYEE CHEQUE. THE AO HAS VERIFIED T HESE ASPECTS IN THE ORIGINAL ASSTT. PROCEEDINGS AND DID NOT RAISED ANY DOUBT. TH E LOAN OF RS. 1.60 CRORES ALLEGED TO BE TREATED AS BOGUS LOAN FROM DIFFERENT ENTITIES WERE ALSO REPAID BY THE ASSESSEE DURING THE YEAR. THE COMPANIES ARE INCOME TAX ASSES SEE. THE AO HIMSELF ACCEPTED THIS FACT. THE TRANSACTION IS THROUGH BANKING CHANN EL NOT DISPUTED BY THE AO. THE DOUBT IS RAISED ONLY FOR THIS RS. 1.60 CRORE WHEREA S ALL OTHERS HAVE BEEN ACCEPTED. THE ASSESSEE FURTHER DEMANDED COPIES OF THE STATEME NT OF THESE THREE PERSONS RECORDED BY DIT INVESTIGATION. THE COPIES OF THE ST ATEMENT WERE PROVIDED TO THE ASSESSEE ON 10.11.2008. THE ASSESSEE POINTED THAT T HAT NONE OF THESE PERSONS HAVE DISCLOSED THAT THEY HAVE PROVIDED ACCOMMODATIO N ENTRIES TO THE ASSESSEE. THERE IS NO WHISPER ABOUT THE NAME OF ASSESSEE IN T HEIR STATEMENT. THE ASSESSEE FURTHER SUBMITTED THAT IT BE PROVIDED AN OPPORTUNIT Y TO CROSS EXAMINE OF THESE PERSONS IF THEY HAVE DEPOSED ANYTHING AGAINST IT. T HE AO DID NOT PROVIDE THE ITA NO. 3328/DEL/09 ASSTT.YEAR 2003-04 4 OPPORTUNITY TO CROSS EXAMINE RATHER HE OBSERVED THA T IT WOULD BE MERELY IMPOSSIBLE TO EXPECT THE ENTRY OPERATOR TO NAME ALL THE PARTIE S WHICH HAVE TAKEN ACCOMMODATION ENTRIES FROM THE GROUP. ON APPEAL ASSESSEE HAS AGAIN REITERATED ALL THIS CO NTENTIONS AND CONTENDED THAT THERE IS NO EVIDENCE WITH THE AO IN SUPPORT OF ITS CONCLUSION THAT ASSESSEE HAS TAKEN ACCOMMODATION ENTRIES. IT REITERATED THAT LOANS WER E TAKEN THROUGH ACCOUNT PAYEE CHEQUE. THESE WERE RETURNED THROUGH ACCOUNT PAYEE C HEQUE . TDS WAS DEDUCTED ON INTEREST PAID TO THE CREDITORS. THE CONFIRMATION WAS FILED FROM THE CREDITOR. THEIR PERMANENT ACCOUNT NUMBERS HAVE ALSO BEEN DISCLOSED. LD. CIT (A) HAS MADE A DETAILED DISCUSSION ON THE EVIDENCE SUBMITTED BY TH E ASSESSEE AND TAKEN NOTE OF ITS ARGUMENTS FROM PAGES NUMBER 25 UPTO 62 OF THE IMPUG NED ORDER. THE LD. CIT(A) HAS SUMMARIZED THE REASONS FOR DELETING THE ADDITIO N AT PAGE 55. THOSE REASONS READ AS UNDER :- NO ADVERSE INFERENCE COULD BE DRAWN AGAINST THE AS SESSEE FIRM ON THE BASIS OF THESE STATEMENTS SINCE NONE OF THESE PERSONS HAD NAMED THE ASSESSEE FIRM AS HAVING OBTAINED ANY ALLEGED BOGUS ACCOMMODA TION ENTRY FROM THEM. IT WAS SUBMITTED THAT THE NAME OF THE ASSESSEE FIRM DID NOT APPEAR IN ANY OF THE STATEMENTS PROVIDED BY THE ASSESSING OFFICER. IT WAS FURTHER POINTED OUT THAT THE AUTHORISED OFFI CER RECORDING THESE STATEMENTS HAD RAISED SPECIFIC QUESTION TO THESE PE RSONS REGARDING THE PROVISION OF ACCOMMODATION ENTRIES TO VARIOUS PERSO NS LIKE MS. MAYAWATI, HER RELATIVES AND OTHER PERSONS, BUT THERE WAS NO QUEST ION REGARDING ANY ACCOMMODATION ENTRY TO THE ASSESSEE FIRM AND, THERE FORE, THERE WAS NO MENTION OF ANY ALLEGED ACCOMMODATION ENTRY TOT EH A SSESSEE IN THESE STATEMENTS. THE ASSESSEE HAD NOT BEEN NAMED AS A BENEFICIARY OF ANY ALLEGED BOGUS ACCOMMODATION ENTRY IN ANY OF THESE STATEMENT. THE ASSESSEE HAD NOT BEEN NAMED AS A BENEFICIARY OF ANY ALLEGED BOGUS ACCOMMODATION ENTRY IN ANY OF THESE STATEMENTS. ITA NO. 3328/DEL/09 ASSTT.YEAR 2003-04 5 THE ASSESSEE HAD PROVED THE SOURCE OF LOANS AND HAD DISCHARGED THE BURDEN OF SHOWING THE IDENTITY, THE CREDIT WORTHINESS AND GENUINENESS OF THESE LOAN TRANSACTIONS. THE ASSESSEE HAD DULY FILED ALL DOCUMENTARY EVIDENC ES TO SHOW THAT THE LOANS HAD BEEN RECEIVED ANY ACCOUNT PAYEE CHEQUES DRAWN O N BANK ACCOUNTS OF THESE PARTIES AND THESE LOANS STOOD REPAID BY THE A SSESSEE BY ACCOUNT PAYEE CHEQUES DRAWN ON BANK ACCOUNTS OF THESE PARTIES AND THESE LOANS STOOD REPAID BY THE ASSESSEE BY ACCOUNT PAYEE CHEQUES DUR ING THE INSTANT YEAR ITSELF AFTER DUE DEDUCTION OF TDS ON INTEREST PAID TO THEM. THE COPIES OF STATEMENTS PROVIDED ARE TOO GENERAL A ND, THEREFORE, NO ADDITION COULD BE MADE ON THE BASIS OF THESE STATEMENTS. THE ASSESSEE FURTHER REITERATED ITS SUBMISSIONS MAD E VIDE ITS LETTER DATED 3.11.2008 WHEREIN AN OPPORTUNITY OF CROSS-EXAMINING THESE PARTIES WAS REQUESTED FOR BY THE ASSESSEE. THE ASSESSEE FURTHER SUBMITTED THE COPIES OF BANK C ERTIFICATE OBTAINED FROM ITS OWN BANKER PROVING THAT ALL THE LOANS STOOD REP AID TO THESE PARTIES THROUGH ACCOUNT PAYEE CHEQUES. IT WAS, THUS, SUBMITTED THAT THE ASSESSEE HAD DULY DISCHARGED THE ONUS THAT LAY UPON IT. 5. WITH THE ASSISTANCE OF LD. REPRESENTATIVE WE HAV E GONE THROUGH THE RECORD CAREFULLY. FROM THE PERUSAL OF THE RECORD WE FIND T HAT ASSESSEE HAS TAKEN UNSECURED LOANS OF RS. 20,87,08,403/- DURING THE YEAR. IT HAS REPAID THE TOTAL AMOUNT EXCEPT A SUM OF RS. 3,10,79,982/-. THE AMOUNT OF LOAN WHICH IS DOUBTED BY THE AO IS OF RS. 1.60 CRORE. THIS LOAN IS ALSO SHOWN TO HAVE BEEN PA ID AND THE ACCOUNTS OF THE PARTIES HAVE BEEN SQUARED UP. THE INCOME DECLARED BY THE AS SESSEE IS A LOSS OF RS. 2,02,35,960/-. THE ULTIMATE ASSESSED INCOME IS ALSO A NEGATIVE FIGURE I.E, LOSS OF RS. 43,09,760/-. THE ONLY EVIDENCE POSSESSED BY THE AO FOR DOUBTING THE UNSECURED LOANS OF RS. 1.60 CRORES IS THE INFORMATION SUPPLIE D BY THE DITA. THE AO IS HARPING UPON THE STATEMENT OF THREE PERSONS NAMELY SHRI CHE TAN PRAKASH, SHRI VINOD GARG, AND SHRI MAHESH GARG RECORDED BY THE DIT INVESTIGAT ION. THE ASSESSEE HAS DEMONSTRATED THAT THESE PERSONS HAD NOWHERE MENTION ED THE NAME OF ASSESSEE ITA NO. 3328/DEL/09 ASSTT.YEAR 2003-04 6 AND DISCLOSED THAT BOGUS ENTRIES WERE PROVIDED TO T HE ASSESSEE ALSO. IN SUCH CIRCUMSTANCES WE ARE OF THE OPINION THAT THE INFORM ATION POSSESSED BY THE AO CAN BE A STARTING POINT OF THE INVESTIGATION FOR DOUBTI NG THE LOAN TRANSACTION OF THE ASSESSEE. WHEN ASSESSEE HAS POINTED OUT TO THE AO T HAT THESE PERSONS HAVE NOWHERE MENTIONED THE NAME OF ASSESSEE IN THEIR STA TEMENT. LD. AO HAS OBSERVED THAT IT CANNOT BE EXPECTED FROM ENTRY OPERATOR TO R EMEMBER THE NAME OF AL THE PARTIES WHO HAVE TAKEN ACCOMMODATION ENTRIES FROM T HEY GROUP. IF THAT BE THE CASE THEN HOW TRANSACTION OF THE ASSESSEE CAN BE BRANDE D AS NON GENUINE. THE ASSESSEE HAS PRIME FACIE DISCHARGED ITS ONUS BY DEM ONSTRATING THAT LOANS WERE TAKEN THROUGH ACCOUNT PAYEE CHEQUE THIS WAS REPAID THROUGH ACCOUNT PAYEE CHEQUE. TDS WAS DEDUCTED ON INTEREST . COMPANIES AR E DOING THEIR BUSINESS AS APPEARING FROM THE WEBSITE OF REGISTRAR OF COMPANIE S. THEIR IDENTITY IS NOT IN DISPUTE THEY HAVE GIVEN CONFIRMATION IN SUPPORT OF THE LOAN S. AS AGAINST THIS THE EVIDENCE POSSESSED BY THE AO IS SOME DISCLOSURE MADE BY THRE E PERSONS ALLEGED TO BE MANAGING THOSE COMPANIES, BEFORE THE DIT. INSPITE O F ASSESSEE S REQUEST OPPORTUNITY TO CROSS EXAMINE WAS NOT GIVEN. THE AO COULD HAVE CALLED THESES PERSONS AND COULD HAVE ASKED THEM TO PROVIDE THE D ETAILS EXHIBITING THE ACCOMMODATION ENTRIES GIVEN TO THE ASSESSEE BUT HE DID NOT CARRY OUT THIS EXERCISE RATHER HE PROCEEDED ON THE INFERENCE FLOWING FROM THOSE STATEMENT AND FORMED AN OPINION FOR UNIFORM APPLICATION EXHIBITING AS TO HO W ENTRY OPERATORS GIVE EFFECT TO THEIR WORK. ON THE OTHER HAND LD. CIT(A) HAS REAPPRECIATE D THE CONTROVERSY IN RIGHT PERSPECTIVE AND DELETED THE ADDITION. ON DUE CONSID ERATION ON THE ORDER OF LD. CIT(A) WE DO NOT FIND ANY REASON TO INTERFERE IN IT . BEFORE PARTING WITH THIS ORDER WE WOULD LIKE TO MAKE AN OBSERVATION THAT ASSESSEE HAS CHALLENGED REOPENING OF ASSTT. BEFORE THE LD. CIT(A). LD. CIT(A) HAS HELD THAT REO PENING IS BAD IN LAW BECAUSE ITA NO. 3328/DEL/09 ASSTT.YEAR 2003-04 7 THERE WAS NO EVIDENCE WITH AO TO FORM A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. THIS FINDING OF THE LD. CIT(A) AVAILABL E IN PARAGRAPH NO. 5.6 AND 5.7 HAS NOT BEEN CHALLENGED BY THE REVENUE. THE REVENUE HAS NOT TAKEN ANY GROUND OF APPEAL CHALLENGING THIS FINDING OF THE LD. CIT(A). THUS THIS IS ONE MORE REASON TO REJECT THE APPEAL OF REVENUE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.12.2009. (G.E. VEERABHADRAPA) [RAJPAL YADAV) VICE PRESIDENT JUDICIAL MEMBER VEENA DATED : COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY R EGISTRAR, ITAT