Quartz Commercial Pvt. Ltd., Delhi V. ITO, New Delhi

ITA 381/DEL/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2694 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 08-05-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 24-01-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BEDOBANI
• Assessee Lawyers: PRAVEEN KUMAR MANAGER
• Keywords: Unexplained cash credit
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC NEW DELHI BEFORE SHRI R.K.PANDA, ACCOUNTANT MEMBER ITA NO. 381/DEL/2017 ASSESSMENT YEAR: 2007-08 QUARTZ COMMERCIAL P.LTD. FLAT NO.10, C-1/2 MODEL TOWN DELHI 110 009 PAN: AAACQ 0081 E VS ITO, WARD 20(3) C.R.BLDG. IP ESTATE NEW DELHI 110 002 (APPELLANT) (RESPONDENT) APPELLANT BY SH. PRAVEEN KUMAR, MANAGER. RESPONDENT BY MS. BEDOBANI, SR.DR DATE OF HEARING 08.05.2017 DATE OF PRONOUNCEMENT 31.07.2017 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 07.11.2016 OF THE LD.CIT(A)-16, NEW DELHI RELATING TO ASSESSMENT YEAR (A.Y.) 2007-08. 2. ALTHOUGH, A NUMBER OF GROUNDS HAVE BEEN RAISED BY THE ASSESSEE IN THE GROUNDS OF APPEAL, THEY ALL RELATE TO THE ORDER OF THE LD.CIT(A) IN CONFIRMING THE ADDITION OF RS.7,85,000/- MADE BY THE ASSESSING OFFICER (A.O.) ON ACCOUNT OF COMMISSION FOR ARRANGING BOGUS SHARE CAPITAL. 3. THIS IS THE SECOND ROUND OF LITIGATION. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A COMPANY. IN THIS CASE ASSESSING O FFICER NOTED THAT ASSESSEE ITA NO. 381/DEL/2017 A.Y. 2007-08 QUARTZ COMMERCIAL P.LTD. 2 HAS ROUTED THE SHARE APPLICATION MONEY OF RS.15,70, 00,000/- WITHIN ASSESSEE'S GROUP COMPANIES ON THE SAME DAY. ASSESSEE HAD SHOWN TO HAVE RECEIVED SHARE APPLICATION MONEY ALONG WITH SHARE PREMIUM OF RS.19 0 ON EACH SHARE TOTALLING TO RS.4,00,00,000/- FROM M/S PLATINUM AGENCIES PVT . LTD., RS.4,00,00,000/- FROM M/S RADIUM CONSULTANCY SERVICES (P) LTD. AND RS.4,00,00,000/- FROM M/S LAURELS PROPERTIES (P) LTD. ON 28.3.2007 AND TH E SAME WAS SHOWN AS INVESTED AS SHARE APPLICATION MONEY IN M/S RADIUM C ONSULTANCY SERVICES (P) LTD; M/S PLATINUM AGENCIES (P) LTD. AND M/S LAURE LS PROPERTIES (P) LTD. ON THE SAME DAY AND THE SAME AMOUNT. A.O. FURTHER OB SERVED THAT ASSESSEE HAS SHOWN SHARE APPLICATION MONEY RECEIVED FROM M/S LAU REL P. LTD. AMOUNTING TO RS.3,70,00,000/- AND AGAIN THE SAME WAS SHOWN AS IN VESTED IN M/S RADIUM CONSULTANCY P.LTD. ON 21.3.2007 I.E. ON THE SAME DA Y AND THE SAME AMOUNT. THE ASSESSEE HAS SHOWN TO HAVE RECEIVED SHARE APPLI CATION MONEY FROM GROUP COMPANY AND SAME DAY SAME AMOUNT WAS AGAIN INVEST ED IN ASSESSEE'S GROUP COMPANY IN THE SHAPE OF SHARE APPLICATION MONEY. F URTHERMORE, ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS ALSO SHOWN SALE OF SHARES OF RS. 4,00,000/-, BUT THE SAME WAS NOT REFLECTED IN THE BANK . THE A SSESSING OFFICER OBSERVED THAT ASSESSEE COMPANY WAS PART OF A GROUP OF NEARLY 150 ENTITIES COMPRISING OF VARIOUS PRIVATE LIMITED COMPANIES AND PROPRIETORSHI P CONCERNS. A.O. OBSERVED THAT THE ENTRIES OF RS.15,70,00,000/- WERE ROTATED IN THE SHAPE OF SHARE APPLICATION MONEY. HE FURTHER OBSERVED THAT ASSESS EE COMPANY WAS RUNNING ITA NO. 381/DEL/2017 A.Y. 2007-08 QUARTZ COMMERCIAL P.LTD. 3 FROM A COMMON ADDRESS IN DARYA GANJ FROM WHERE MANY OTHER COMPANIES ARE ALSO BEING RUN. HE FURTHER OBSERVED THAT THE ADDRE SS IS BEING USED JUST AS A POST OFFICE TO RECEIVE THE CORRESPONDENCE. A.O. OB SERVED THAT THE ASSESSEE COMPANY WAS AN ENTRY OPERATOR WHICH WAS PROVIDING A CCOMMODATION ENTRIES ON COMMISSION BASIS. HE FURTHER OBSERVED THAT IN S UCH BUSINESS ASSESSEE, RECEIVED COMMISSION IN CASH WHICH WAS NOT REFLECTED IN THE BOOKS OF ACCOUNTS. HE OPINED THAT ASSESSEE COMPANY MUST HAVE CHARGED C OMMISSION OF 0.5% ON THE TOTAL TURNOVER DURING THE YEAR. THEREFORE, A.O . HELD THAT RS.7,87,000/- WAS TO BE ADDED TO THE ASSESSEES INCOME. 4. IN APPEAL THE LD. CIT(A) UPHELD THE DISALLOWANCE MADE BY THE A.O. ON FURTHER APPEAL BY THE ASSESSEE THE TRIBUNAL RESTORE D THE MATTER TO THE FILE OF THE A.O. WITH A DIRECTION TO EXAMINE ASSESSEES BOOKS O F ACCOUNTS AND GIVE A FINDING THEREOF BY OBSERVING AS UNDER. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. WE FIND THAT THE LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT ASSESSEE HAS MAINTAINED PROPER BOOKS OF ACCOUNTS, NO DISCREPANCY HAS BEEN FOUND BY THE ASSESSING OFFICER AND NO ADDITION HAS BEEN MADE EXCEPT FOR THIS ADDITION. LD. COUNSEL OF THE ASSESSEE FURTHER SUBMI TTED THAT THERE IS NO PROVISION FOR NOTIONAL INCOME IN THE INCOME TAX ACT . HE FURTHER SUBMITTED THAT THERE WAS NO EVIDENCE OF ASSESSEE BE ING INVOLVED IN ANY ACCOMMODATION ENTRY BUSINESS. HENCE, LD. COUNSEL OF THE ASSESSEE HAS ARGUED THAT THE ADDITION SHOULD BE DELETED. 7.1 ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTAT IVE SUBMITTED THAT THERE IS NO EVIDENCE THAT BOOKS OF ACCOUNTS WE RE ACCEPTED BY THE ITA NO. 381/DEL/2017 A.Y. 2007-08 QUARTZ COMMERCIAL P.LTD. 4 ASSESSING OFFICER. HE SUBMITTED THAT THE SHARES HAV E BEEN TRANSACTED OF THE FACE VALUE OF RS.10/- AT RS. 190/-. HE PLEADED THAT THE ORDER OF THE AUTHORITIES BELOW IN THIS CASE NEEDS TO BE ACCEPT ED. 7.2 WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AN D PERUSED THE RECORDS. WE FIND THAT IN THIS CASE A SHOW CAUSE NOT ICE WAS GIVEN TO THE ASSESSEE. WE FIND THAT THE ASSESSING OFFICER HAS ASKED THE ASSESSEE TO FURNISH THE REPLY WITH SUPPORTING DOCUMENTARY EVIDE NCE AND ALSO COMPLETE BOOKS OF ACCOUNTS ALONG WITH COMPLETE BI LLS, .VOUCHERS AND ALSO BANK STATEMENTS IN, SUPPORT OF THE ASSESSEE'S CLAIM. HOWEVER, THEREAFTER IN THE ASSESSMENT ORDER THERE IS NO MENT ION ABOUT THE AFORESAID REQUISITION MADE BY THE ASSESSING OFFICER . UNDER THE CIRCUMSTANCES WE FIND THAT IT REMAINS TO BE VERIFI ED' WHETHER THE ASSESSEE HAS MAINTAINED PROPER BOOKS OF ACCOUNTS OR NOT. HENCE, THE SUBMISSIONS OF THE ASSESSEE THAT THE ADDITIONS WERE NOT WARRANTED AS THE ASSESSEE HAS MAINTAINED PROPER BOOKS OF ACCOUNTS, N EEDS TO BE VERIFIED. IN OUR CONSIDERED OPINION, THE INTEREST OF JUSTICE WILL BE SERVED, IF THE MATTER IS REMITTED TO THE FILE OF THE ASSESSING OFF ICER. THE ASSESSING OFFICER IS DIRECTED TO EXAMINE THE ASSESSEE'S BOOKS OF ACCOUNTS AND GIVE A FINDING THEREON. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. 5. SUBSEQUENTLY THE A.O. ASKED THE ASSESSEE TO PROD UCE BOOKS OF ACCOUNTS WHICH WERE PRODUCED AND DULY EXAMINED BY THE A.O. THE A.O. NOTED THAT THE ASSESSEE DID NOT HAVE ANY OPERATIONAL INCOME AN D EXPENSES DEBITED AS ROC FEE, AUDIT FEE ETC. WHICH WERE CLAIMED AS LOS S. THE BANK ACCOUNTS MAINTAINED WITH KARNATAKA BANK LTD REVEALED THAT AF TER 1.4.2006 THERE WERE ITA NO. 381/DEL/2017 A.Y. 2007-08 QUARTZ COMMERCIAL P.LTD. 5 ENTRIES IN RESPECT OF SHARE APPLICATION MONEY ON 21 .3.2007 WHICH WAS IMMEDIATELY TRANSFERRED TO ANOTHER COMPANY AS SHARE APPLICATION MONEY. HE OBSERVED THAT THERE IS INCREASE IN SHARE CAPITAL OF RS.39,25,000/- BESIDES SHARE PREMIUM OF RS.15,30,75,000/- (BEING RS.390 PER SHAR E). TREATING THIS AS A SHAM TRANSACTION AS DISCUSSED IN THE ORIGINAL ASSESSMENT ORDER THE A.O. OBSERVED THAT THE ASSESSEE IS ENGAGED IN PROVIDING ACCOMMOD ATION ENTRIES TO VARIOUS GROUP COMPANIES. HE WAS OF THE OPINION THAT THE AS SESSEE IS CHARGING COMMISSION FOR ARRANGING SUCH BOGUS SHARE TRANSACTI ONS AND COMMISSION IS CHARGED BETWEEN 0.5% TO 2%. TO BE MOST CONSERVATI VE 0.5% OF THE TOTAL ENTRIES OPERATED BY THE ASSESSEE WAS TAKEN BY THE A .O. AS INCOME FOR THE YEAR. ACCORDINGLY, THE A.O. MADE AN ADDITION OF RS.7,85, 000/-. A.O. AS 6. IN APPEAL THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE A.O. BY OBSERVING AS UNDER : I HAVE CONSIDERED ALL FACTS AND CIRCUMSTANCES OF T HE CASE. AS HAS BEEN MENTIONED BY THE A.O. IN HIS ORDER DT. 13.2.2014, I T IS A FACT THAT THE HONBLE ITAT HAD SET ASIDE THE CASE TO THE FILE OF A.O. TO EXAMINE THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT. I A M TO GIVE A FINDING THEREON. IN HIS ORDER U/S 143(3)/254 DATED 13.2.20 14 THE A.O. HAS MENTIONED CATEGORICALLY THAT BOOKS WERE PRODUCED AN D WERE EXAMINED. IT IS FURTHER MENTIONED BY THE A.O. THAT THE PERUSA L OF THE BANK ACCOUNT WHICH IS ALSO PART OF THE BOOKS OF ACCOUNTS MAINTAI NED BY THE APPELLANT. IT IS NOTED THAT THE RECEIPT AND TRANSFER OF SHARE APPLICATION MONEY ON THE SAME DATE I.E. 21.3.2007. THE A.O. STATED THAT THE RE INCREASE IN SHARE ITA NO. 381/DEL/2017 A.Y. 2007-08 QUARTZ COMMERCIAL P.LTD. 6 CAPITAL OF RS.39,25,000/- AND SHARE PREMIUM OF RS.1 5,30,25,000/-. ALL THESE INFORMATION WAS GATHERED BY THE A.O. FROM THE EXAMINATION OF BOOKS OF ACCOUNTS OF THE APPELLANT WHICH INCLUDED B ANK ACCOUNTS. THEREAFTER THE A.O. HAS BROUGHT TO TAX ONLY 0.5% OF THE COMMISSION WHICH COMES TO RS.7,85,000/-. TO MY MIND, THE A.O. HAS GIVEN HIS FINDINGS ON THE BASIS OF EXAMINATION OF BOOKS OF AC COUNTS AND TO THAT EXTENT THE APPELLANT SHOULD NOT HAVE ANY GRIEVANCE. THE ACTION OF THE A.O. IS CONFIRMED. 7. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A) THE AS SESSEE IS IN APPEAL BEFORE US. 8. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRING T O THE COPIES OF THE ASSESSMENT ORDER IN CASE OF M/S LAURELS PROPERTIES (P) LTD. AND M/S RADIUM CONSULTANCY SERVICES (P) LTD. WHICH ARE PASSED U/S 143(3) SUBMITTED THAT HUGE SHARE PREMIUM WAS ALSO ACCEPTED IN THOSE CASES. 8.1. REFERRING TO THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. M/S DATAWARE PVT.LTD. JUDGEMENT DATED 21 ST SEPTEMBER, 2011, HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID T HE DECISION HAS UPHELD THE ORDER OF THE TRIBUNAL WHEREIN THE TRIBUNAL HAS ALL OWED THE APPEAL OF THE ASSESSEE BY DELETING THE ADDITION MADE BY THE A.O . UNDER SECTION 68 OF THE ACT ON ACCOUNT OF UNEXPLAINED CASH CREDIT BEING BOGUS S HARE CAPITAL. HE ACCORDINGLY SUBMITTED THAT THE ADDITION SUSTAINED B Y THE LD. CIT(A) SHOULD BE DELETED. ITA NO. 381/DEL/2017 A.Y. 2007-08 QUARTZ COMMERCIAL P.LTD. 7 9. THE LD.DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE LD. CIT(A). HE SUBMITTED THAT THE ASSESSEE IS AN ACCO MMODATION ENTRY PROVIDER. THE ASSESSEE DOES NOT HAVE ANY BUSINESS AND IT HAS RECEIVED SHARE APPLICATION WITH THE HUGE PREMIUM AND INVESTED THE SAME AGAI N IN SHARE APPLICATION MONEY. THIS IS NOTHING BUT THE WORK OF AN ENTRY PRO VIDER. THEREFORE, THE LD. CIT(A) WAS FULLY JUSTIFIED IN SUSTAINING THE ADDIT ION MADE BY THE A.O. 10. I HAVE CONSIDERED RIVAL ARGUMENTS MADE BY BOTH TH E SIDES, PERUSED THE ORDERS OF THE LD. CIT(A) AND THE A.O. AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. I HAVE ALSO CONSIDERED THE VARIOUS DECIS IONS CITED BEFORE ME. AS MENTIONED EARLIER THE ASSESSEE HAS NOT CARRIED ON ANY BUSINESS ACTIVITIES DURING THE YEAR AND HAS RECEIVED SHARE APPLICATION MONEY W ITH A HUGE PREMIUM WHICH HAS BEEN INVESTED AGAIN ON THE SAME DATE AS SHARE A PPLICATION MONEY IN VARIOUS COMPANIES. THIS OTHERWISE INDICATES THAT THE ASSES SEE IS DOING ONLY THE BUSINESS OF ENTRY OPERATIONS. THEREFORE, THE LD. CIT(A) IN MY OPINION IS FULLY JUSTIFIED IN BRINGING TO TAX THE COMMISSION WHICH IS PREVALEN T IN THIS TYPE OF BUSINESS. THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F SUMATI DAYAL VS. CIT REPORTED IN 214 ITR 801 AND CIT VS. DURGA PRASAD MO RE REPORTED IN 82 ITR 540 FULLY SUPPORTS THE CASE OF THE REVENUE. IN THIS VI EW OF THE MATTER AND IN VIEW OF THE DETAILED DISCUSSION BY THE CIT(A) ON THIS ISSUE , I DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) SUSTAINING THE ADDITIO N OF RS.7,85,000/- MADE BY ITA NO. 381/DEL/2017 A.Y. 2007-08 QUARTZ COMMERCIAL P.LTD. 8 THE A.O. ACCORDINGLY, I UPHOLD THE SAME. THE GROU NDS RAISED BY THE ASSESSEE ARE ACCORDINGLY DISMISSED. 11. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 31.07.2017. SD/- (RK P ANDA) ACCOUNTANT MEMBER * MANGA * MANGA * MANGA * MANGA/SUJEET /SUJEET /SUJEET /SUJEET COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. 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