MINAL SYSTEMS PVT. LTD., NEW DELHI V. DCIT, CIRCLE- 16(1), NEW DELHI

ITA 3855/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3016 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 14-06-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Tangible material; Accommodation entries; Onus to prove; Sham transactions; Reason to believe; Reassessment proceedings
• Section: 143(3); 142(1); 43; 13; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI G.S. PANNU, VICE PRESIDENT & SHRI AMIT SHUKLA, JUDICIAL MEMBER I.T.A. NO.3855/DEL/2017 ASSESSMENT YEAR 2010-11 MINAL SYSTEMS PVT. LTD., D-5/4, OKHLA INDUSTRIAL AREA, PHASE-II, NEW DELHI. V. DCIT, CIRCLE-16(1), NEW DELHI. TAN/PAN: AACCT3905C (APPELLANT) (RESPONDENT) APPELLANT BY: NONE RESPONDENT BY: MS. RAKHI VIMAL, SR.D.R.. DATE OF HEARING: 02 01 2020 DATE OF PRONOUNCEMENT: 28 02 2020 O R D E R PER AMIT SHUKLA, J.M.: THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE IMPUGNED ORDER DATED 08.03.2017 PASSED BY COMMISSIONER OF INCOME TAX (APPEALS)-XXXIII, NEW DE LHI FOR THE QUANTUM OF ASSESSMENT PASSED U/S.143(3) FOR THE ASSESSMENT YEAR 2010-11. IN VARIOUS GROUNDS OF APPE AL, THE ASSESSEE HAS CHALLENGED THE VALIDITY OF REOPENING U /S.147 AND ADDITION OF RS.30 LACS MADE U/S.68. THE NOTICE OF H EARING WAS SENT TO THE ASSESSEE THROUGH RPAD AND DESPITE SERVI CE OF NOTICE NONE APPEARED ON BEHALF OF THE ASSESSEE. ACC ORDINGLY, THE APPEAL OF THE ASSESSEE IS DECIDED EX-PARTE QUA THE ASSESSEE AFTER CONSIDERING THE RELEVANT MATERIAL PL ACED ON RECORD. I.T.A. NO.3855/DEL/2017 2 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE HAS FIL ED RETURN OF INCOME OF RS. 56,17,217/- ON 03.02.2011. LATER ON, INFORMATION WAS RECEIVED FROM THE INVESTIGATION WIN G BASED ON INVESTIGATION AND INQUIRY CARRIED OUT IN THE CAS E OF ENTRY PROVIDER, SHRI S.K. JAIN THAT ASSESSEE IS ALSO ONE OF THE BENEFICIARIES OF ACCOMMODATION ENTRIES AGGREGATING TO RS.30 LAC IN THE IMPUGNED ASSESSMENT YEAR THROUGH THREE E NTITIES VIDE FOLLOWING CHEQUES AS INCORPORATED IN THE ASSES SMENT ORDER. THREE ENTITIES VIDE CHEQUES NO. 310950 & 310953 DA TED 15.09.2009 FROM M/S VICTORY SOFTWARE P. LTD. RS.20, 00,000/- , M/S. CHEQUE NO. 3 10555 DATED 18.09.09 FROM M/S. ZE NITH AUTOMOTIVE P. LTD. RS.5,00,000/- AND CHEQUE NO 3108 43 DATED 21.10.2009 FROM M/S HUMTUM MARKETING PVT. LTD. RS.5 ,00,000/- , MANAGED AND CONTROLLED BY SHRI SURENDRA KUMAR JAI N AND HIS BROTHER SHRI VIRENDRA KUMAR JAIN. BASED ON THIS INFORMATION FOLLOWING REASONS WERE RECORDED:- M/S. MINAL SYSTEMS (P) LTD. (PREVIOUSLY TULIP SYSTE MS P. LTD.) IS ASSESSED TO TAX WITH CIRCLE-16(1), NEW DELHI. ENQUI RIES OF INVESTIGATION WING, DELHI OF THE DEPARTMENT HAVE UN EARTHED HUGE ACCOMMODATION ENTRY RACKET BEING OPERATED BY ACCOMMODATION ENTRY OPERATOR SHRI SURENDER KUMAR JA IN BY WAY OF MORE THAN 100 COMPANIES/FIRMS ETC. THE INVES TIGATION WING HAS COMPLIED A REPORT & DATA OF THE BENEFICIAR IES OF SUCH ENTRIES. THE NAME OF THE ASSESSEE FIGURES IN THE LI ST OF BENEFICIARIES OF SHARE CAPITAL PREMIUM/LOAN ETC. I HAVE GONE THROUGH THE REPORT AND DATA SENT BY THE INVESTIGATION WING. THE REPORT CLEARLY INDICATES THAT ACCOMMODATI ON ENTRIES I.T.A. NO.3855/DEL/2017 3 HAVE BEEN TAKEN TO PLOUGH BACK UNCOUNTED BLACK MONE Y FOR THE PURPOSE OF BUSINESS OR FOR PERSONAL NEEDS SUCH AS P URCHASE OF ASSETS ETC., IN THE FORM SHARE APPLICATION MONEY LO ANS ETC. AND EVEN DESCRIBES THE MODUS OPERANDI OF THIS SCAM. THE INVESTIGATION WINGS LIST OF BENEFICIARIES (OF SUCH ACCOMMODATION ENTRIES) GIVES COMPREHENSIVE DETAILS OF BENEFICIARIES NAME, ENTITY FROM WHERE ENTRY RECEIVE D BANK, CHEQUE/RTGS, DATE AND EVEN THE MIDDLEMAN THROUGH WH OM SUCH ENTRY IS RECEIVED. THIS LIST CONTAINS THE NAME OF M/S. TULIP SYSTEMS ( P) LTD., WHICH HAS TAKEN SUCH ACCOMMODATION ENTRY/ENTRIES OF RS.30 ,00,000/- 3. IN RESPONSE TO THE NOTICE U/S.148, THE ASSESSEE SUBMITTED THAT THE RETURN OF INCOME FILED ON 03.02. 2011 SHOULD BE TREATED AS RETURN FILED IN RESPONSE TO NO TICE U/S.148. ACCORDINGLY, THE ASSESSING OFFICER SUPPLIE D THE COPY OF REASON RECORDED. LD. ASSESSING OFFICER IN THE CO URSE OF PROCEEDINGS HAS ISSUED SHOW CAUSE NOTICE TO FURNISH VARIOUS DOCUMENTS, IN RESPONSE TO WHICH, ASSESSEE HAS FILED COPY OF ITR, COPY OF BANK ACCOUNT, COPY OF AUDITED BALANCE SHEET, ETC. OF THE CREDITORS. AS PER THE ASSESSING OFFICER ALL THE REQUISITE DETAILS AND INFORMATION WHICH WAS SPECIFICALLY SOUG HT FOR HAS NOT BEEN FURNISHED AND NO CONCRETE EVIDENCE OR JUST IFICATION HAS BEEN FILED TO PROVE THE IDENTITY, CREDITWORTHIN ESS AND GENUINENESS OF THE TRANSACTION. LD. ASSESSING OFFIC ER THEN ISSUED SUMMONS TO ALL THE THREE CREDITORS AT THE AD DRESS GIVEN BY THE ASSESSEE FOR THE PERSONAL DEPOSITION. HOWEVER, NONE APPEARED ON BEHALF OF THE SAID ENTITIES NOR AN Y WRITTEN I.T.A. NO.3855/DEL/2017 4 SUBMISSIONS WERE FILED. AGAIN SUMMONS U/S.131 WERE ISSUED TO M/S. VICTORY SOFTWARE PVT. LTD. AND M/S. HUM TUM MARKETING PVT. LTD. WHICH HOWEVER RECEIVED BACK UNS ERVED. THE ASSESSEE WAS FURTHER GIVEN FURTHER OPPORTUNITY TO PRODUCE THE DIRECTOR/PRINCIPAL OFFICER OF THE THREE ENTITIES. HOWEVER, THE ASSESSEE SHOWED ITS INABILITY TO PRODU CE ANY OF THE PERSONS. AFTER DETAILED DISCUSSION AND REPORT O F THE INVESTIGATION WING AND BASED ON HIS OWN INQUIRY, TH E LD. ASSESSING OFFICER HAS MADE THE ADDITION OF RS.30 LA CS. 4. THE LD. CIT (A) ON THE ISSUE OF VALIDITY OF REOP ENING HAS GIVEN VERY DETAILED FINDINGS WHICH ARE AS UNDER: 11. THE FIRST CONTENTION OF THE APPELLANT IS THAT THE REASON TO BELIEVE IS BASED ON SURMISES AND CONJECTURES. I DIS AGREE WITH THE CONTENTION. THE BASIS OF THE REASON WAS FINDINGS OF THE INVESTIGATION WING WHICH ARE DULY RECORDED IN THE ASSESSMENT ORDE R AND THE REASONS WERE DULY COMMUNICATED TO THE APPELLANT ON 26.06.14. THE REASONS HAVE BEEN REPRODUCED IN PARA 5 ABOVE. AFTER CAREFULLY CONSIDERING THE REASONS, I HOLD THAT THE REASON TO BELIEVE HAS BEEN FORMED AFTER CAREFUL CONSIDERATION AND SOUND ANALYS IS OF HIGHLY INCRIMINATING AND SELF- EXPLANATORY MATERIAL IN POS SESSION OF THE ASSESSING OFFICER. 11.1 THE SECOND CONTENTION IS THAT THE A.O. DID NOT APPLY MIND. IN THIS ERA OF EFFORTLESS CUT- COPY-PASTE, TO DECISIVE LY DISCERN FROM READING A FEW PARAGRAPHS WHETHER MIND WAS APPLIED OR NOT MA Y REQUIRE A PERCEPTION WELL BEYOND THE COGNITIVE POWERS AND ANA LYTICAL SKILLS OF A JUDICIAL MIND. THE APPELLANTS CONTENTION THAT ASSE SSING OFFICER BORROWED THE BELIEF WITHOUT APPLYING INDEPENDENT JU DICIAL MIND ALSO GIVES RISE TO THE QUESTION AS TO HOW MUCH MIND IS T HE ASSESSING OFFICER EXPECTED TO APPLY BEFORE ISSUING A NOTICE U /S 148 WHEN CERTAIN I.T.A. NO.3855/DEL/2017 5 AUTHENTICATED, CATEGORICAL AND SPECIFIC INFORMATION OBTAINED THROUGH A LEGAL PROCESS OF SEARCH EMANATES FROM THE DULY SEIZ ED DOCUMENTS AND IS LAWFULLY COMMUNICATED TO THE ASSESSING OFFICER T HROUGH ESTABLISHED CHANNELS? 11.1.1 THIS INFORMATION IS COLLECTED AND ANALYZED BY OFFIC ERS OF THE INVESTIGATION WING OF INCOME TAX DEPARTMENT WHO FAL L WITHIN THE DEFINITION OF ASSESSING OFFICER WITHIN THE SCOPE AND MEANING OF SECTION 2 (7A). THESE OFFICERS DERIVE THE POWER TO EXERCISE OR PERFORM THE POWERS AND FUNCTIONS CONFERRED ON OR ASSIGNED T O THE ASSESSING OFFICER BY VIRTUE OF SUBSECTION (4) OF SECTION 120. I AM OF THE OPINION THAT AFTER GOING THROUGH THE SPECIFIC AND AUTHENTIC INFORMATION (REPRODUCED IN PARA 5 ABOVE), RECEIVED FROM SUCH AU THORITIES, A BELIEF IS BOUND TO GET FORMED IN ANY REASONABLE MIND ABOUT INCOME HAVING ESCAPED ASSESSMENT. 11.1.2 FURTHER, IN MY VIEW THE RECORDING OF REASONS FOR TH E PURPOSE OF TAKING NECESSARY ADMINISTRATIVE APPROVAL FROM TH E HIGHER AUTHORITIES IN RESPECT OF THE INFORMATION RECEIVED AS ABOVE INVOLVES ADEQUATE APPLICATION OF MIND NOT ONLY OF THE ASSESS ING OFFICER BUT ALSO OF THE HIGHER AUTHORITIES. THIS PROCESS OF ADMINIST RATIVE APPROVAL AND RECORDING OF THE REASONS CANNOT BE COMPLETED WITHOU T DUE APPLICATION OF MIND. THE SAME PROCESS ALSO RESULTS IN FORMATION OF A BELIEF IN THE MIND OF THE ASSESSING OFFICER AS WELL AS THE HIGHER AUTHORITY. 11.2 ON THE BASIS OF ABOVE DISCUSSION, I FIND THAT THE REASSESSMENT PROCEEDINGS WERE INITIATED AFTER ADEQUATE APPLICATI ON OF MIND. IN FACT, AFTER RECEIPT OF THE ABOVE STATED INFORMATION FORM THE INVESTIGATION WING, THE A.O. WAS DUTY-BOUND TO DO SO. REGARDING THE THIRD CONTENTION OF THE APPELLANT THAT THE ASSESSING OFFI CER DID NOT HAVE THE JURISDICTION BECAUSE THE NAME OF THE COMPANY HAD CH ANGED, IT IS PERTINENT THAT THE JURISDICTION OF THE ASSESSING OF FICER EMERGES FROM ASSIGNMENT OF PAN TO DIFFERENT AUTHORITIES THROUGH A COMPUTERIZED PROCESS. UNLESS PAN IS MIGRATED FROM ONE ASSESSING OFFICER TO ANOTHER, THE JURISDICTION DOES NOT CHANGE. I.T.A. NO.3855/DEL/2017 6 11.2.1 IN THE INSTANT CASE, SINCE LONG THE ASSESSIN G OFFICER WHO ISSUED THE NOTICE U/S 148 HAD JURISDICTION OVER THE ASSESSEE. FURTHER, EVEN THOUGH THE NAME OF THE COMPANY WAS CH ANGED WITH EFFECT FROM 16.12.09, THERE IS NO MENTION IN THE AS SESSMENT ORDER THAT THE APPELLANT SUBMITTED THE INCIDENCE OF CHANG E OF NAME AND/OR MADE A REQUEST FOR TRANSFERRING THE CASE TO ANOTHER JURISDICTION EITHER BEFORE THE ASSESSING OFFICER OR BEFORE ANY OTHER AUTHORITY BEFORE THE REASSESSMENT PROCEEDINGS. 11.3 DURING THE APPELLATE PROCEEDINGS THE APPELLANT DID BRING TO THE ATTENTION OF THE ASSESSING OFFICER VIDE LETTER DATE D 26.12.14 (I.E. 10 MONTHS AFTER THE ISSUE OF NOTICE U/S 147 AND ABOUT 3 MONTHS BEFORE THE PASSING OF THE ASSESSMENT ORDER) THE INFORMATIO N REGARDING CHANGE OF NAME. THE INFORMATION WAS COMMUNICATED TO THE ASSESSING OFFICER JUST BEFORE THE CONCLUSION OF THE ASSESSMEN T PROCEEDINGS. IT IS IMPERATIVE THAT NON COMMUNICATION OF CHANGE OF NAME TO THE ASSESSING OFFICER FOR 7 LONG YEARS AND RACKING UP T HE ISSUE JUST BEFORE THE CONCLUSION OF THE ASSESSMENT PROCEEDINGS WERE D UE TO SELF SERVING DESIGN OF THE APPELLANT. IT IS ALSO POSSIBLE THAT F OR EARLIER ASSESSMENT YEARS ALSO THE ASSESSMENT WAS COMPLETED BY THE SAME ASSESSING OFFICER TO WHICH ANY OBJECTION RAISED BY THE APPELL ANT IS NOT VISIBLE ANYWHERE. 11.3.1 THE ASSESSING OFFICER HAS PASSED THE ORDER I N THE NAME OF M/S MINAL SYSTEMS (PREVIOUSLY KNOWN AS TULIP SYSTE MS PVT. LTD.) WHICH IS THE CORRECT WAY TO DO IT BY TAKING INTO A/ C THE LATE INFORMATION ABOUT NAME CHANGE. 11.4 THE APPELLANT HAS ALSO CONTENDED THAT SINCE TH E A.O. HAS NOT DISPOSED OF THE OBJECTIONS RAISED BY THE ASSESSEE A GAINST THE REASONS RECORDED BEFORE PASSING OF THE ORDER U/S 147, THE R EASSESSMENT IS NULL AND VOID. 11.4.1 THE APPELLANT HAS CLAIMED THAT IT HAD RAISED OBJECTIONS TO REOPENING VIDE LETTERS DATED 23.01.15 & 5.12.14. 11.4.2 THE LETTER DATED 23.01.15 READS AS UNDER:- I.T.A. NO.3855/DEL/2017 7 1. THIS IS IN CONTINUATION OF MY EARLIER SUBMISSIO N MADE ON 05/12/2014 IN THIS MATTER. AS REQUESTED IN EARLIER SUBMISSION, I AGAIN MAKE MY REQUEST TO SUPPLY US COPY OF ALL THE DOCUMENTS RELIED UPON BY THE AO FOR MAKING AN OPINION THAT INCOME HA S ESCAPED ASSESSMENT. 2. THE ABOVE CLEARLY SHOWS THAT LD A.O . HAS MERELY ACTED ON THE REPORT OF INVESTIGATION WING AN D HAS NOT APPLIED HIS MIND. BEFORE ISSUING ANY NOTICE U/S 148 THE A.O MUST HAVE REASONS TO BELIEVE THAT ANY INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT. REASON TO BELIEVE CAN'T BE A REASON TO SUSPECT MERELY. MERE SURMISE OR SUSPICION CAN'T BE GROUND TO REOPEN ASSESSMENT. THERE MUST BE DIRECT NEXUS BETWEEN THE MATERIAL COM ING TO THE NOTICE OF A.O AND FORMATION OF THE BELIEF THAT THERE HAS B EEN ESCAPEMENT OF INCOME OF THE ASSESSEE FROM ASSESSMENT IN A PARTICU LAR YEAR. SINCE THE DOCUMENTS RELIED UPON IN THE REASON FOR REOPENI NG OF ASSESSMENT HAS NOT BEEN CONFRONTED WITH THE ASSESSEE, THE ACTI ON OF A.O FOR REOPENING OF ASSESSMENT IS ILLEGAL AND AGAINST THE FACTS OF THE CASE AND SHOULD BE DROPPED. 3. THE LD. HIGH COURT OF DELHI IN A VERY RECENT JU DGMENT OF VOLVOLINE CUMMINE LTD. (CIT VS VOLVOLINE CUMMINE LT D) ITA 319/2014 DATED 21/11/2014 MADE THE FOLLOWING OBSERV ATION: 4. IT WAS THE RESPONSIBILITY OF THE REVENUE TO BRI NG ON RECORD DOCUMENTS AND MATERIAL TO SHOW AND ESTABLISH THAT T HE 'PROVISIONS' RELATED TO UNASCERTAINED LIABILITY AND THE ASSESSIN G OFFICER WHILE FORMING HIS OPINION AND RECORDING 'REASONS TO BELIE VE' WAS IN KNOWLEDGE OF OR AWARE OF 'FORMATION OR MATERIAL TO SHOW THAT WHAT WAS SHOWN UNDER THE HEAD 'PROVISIONS' WAS NOT CERTA IN AND ACCRUED LIABILITY. IN THE ABSENCE OF ANY MATERIAL OR INFOR MATION REASONS TO BELIEVE OF HAS TO BE HELD NOT RELEVANT AND MEET TH E REST OF SATISFACTION', REQUESTED TO SUSTAIN THE REOPENING U SE OF HEADING OR WORD PROVISION ON THE BALANCE SHEET IT IS APPARENT BECOME THE MATERIAL OF OR INFORMATION TO REOPEN. THE WORD / EX PRESSION 'PROVISION' BY ITSELF AND ALONE WITHOUT OTHER INFORMATION/MATER IAL, WOULD NOT I.T.A. NO.3855/DEL/2017 8 REFLECT AND INDICATE UNASCERTAINED LIABILITY. THUS, THE ASSUMPTION DRAWN BY THE ASSESSING OFFICER IN THE REASONS TO B ELIEVE' IS FARFETCHED, VAGUE, AND A MERE PRETENSE. IT IS ALSO EXTRANEOUS AND IRRELEVANT TO THE ISSUE AND FORMATION OF BELIEF THA T 'UNASCERTAINED LIABILITY' HAD BEEN CLAIMED AND ALLOWED AS EXPENDIT URE.' 5. IN THE PRESENT CASE ALSO A.O HAS MERELY ACTED O N THE REPORT RECEIVED FROM INVESTIGATION WING AND HAS NOT INVEST IGATED FURTHER BEFORE REOPENING THE ASSESSMENT. THIS IS EVIDENT FR OM THE FACT THAT THE DOCUMENTARY EVIDENCE SUPPORTING THE CONTENTION OF A .O. THAT THERE ARE ACCOMMODATION ENTRIES TAKEN BY ASSESSEE HAS NEVER B EEN SUPPLIED AND CONFRONTED WITH ASSESSEE. MORE SO WE ARE ENCLOS ING HEREWITH COPY OF ITR, COMPUTATION SHEET AND CONFIRMATION OF THOSE ENTITIES WHO HAVE GIVEN THIS MONEY AS UNSECURED LOAN TO THE ASSE SSEE. AS THE ASSESSEE HAS DISCHARGED IT'S ONUS TO PROVE THE IDEN TITY AND CREDIT WORTHINESS OF THE LENDERS, THE A.O. IS WITH IN HIS POWER TO INVESTIGATE THE LENDERS UNDER INCOME TAX ACT. THIS CLEARLY SHOW S THAT 'REASONS TO BELIEVE' HAS BEEN FORMED IN A VERY MECHANICAL AND C ASUAL MANNER AND RIGHTLY POINTED OUT AS ABOVE BY LD. DELHI HIGH COURT: THAT THERE IS A DIFFERENCE BETWEEN REASON TO BELIEVE AND REASON T O SUSPECT. FURTHER ALSO WE HAVE SOUGHT COPY OF STATEMENT AND OTHER DOC UMENTS WHERE THE NAME OF ASSESSEE HAS BEEN SPECIFICALLY STATED F OR THE ALLEGED TRANSACTIONS. 6. FURTHER TO THIS HON'BLE SUPREME COURT HAS LAID DOWN PROCEDURE IN GKN DRIVESHAFTS (INDIA) LTD V/S. ITO (2003) 259 ITR 19 (SC) FOR REASSESSMENTS. AS PER THE SAID JUDGMENT, THE ASSESS EE HEREBY OBJECTS TO THE ISSUANCE OF NOTICE U/S 148 FOR ASSES SMENT YEAR 2010-11 ON THE GROUNDS THAT THE REOPENING PROCEEDINGS ARE J UST BASED ON THE CONJUNCTURES, SURMISES AND IMAGINATION OF A.O. AND IS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE AND ALSO THIS CASE WAS NOT IN THE JURISDICTION OF THE A.O. AT THE TIME OF REOPENING O F ASSESSMENT. YOU ARE REQUESTED TO PASS A SPEAKING ORDER AND DISPOSE OF T HE OBJECTIONS GIVING REFERENCE OF JUDGMENT OF HON'BLE SUPREME COU RT IN GKN I.T.A. NO.3855/DEL/2017 9 DRIVESHAFTS (INDIA) LTD VS ITO (2003) 259ITR19(SC). 7. THE PERUSAL OF ABOVE SHOW THAT ASSESSEE HAS FILED THE DOCUMENTS NE CESSARY TO PROVE THE IDENTITY OF LENDERS, AND HENCE THE PROPOSED ADD ITION OF RS. 30,00,000/- AS MENTIONED IN SHOW CAUSE NOTICE MAY N OT TO BE MADE. 11.4.3 THE LETTER DATED 5.12.14 REFERRED ABOVE REA DS AS UNDER:- THIS IS IN RESPONSE TO NOTICE U/S 143(2), 142(1) A ND COPY OF REASONS FOR REOPENING OF ASSESSMENT U/S 148 SUPPLIE D TO US. THE PERUSAL OF YOUR LETTER DATED 06/01/2014 WHERE Y OU INTEND TO SEEK SANCTION FOR ISSUE OF NOTICE U/S 148 OF THE AC T, IT IS MOST RESPECTFULLY SUBMITTED THAT YOU ARE REQUESTED TO SU PPLY THE COPIES OF DOCUMENTS /STATEMENT WHICH YOU INTEND TO USE AGAINS T THE ASSESSES FOR FINALIZING ASSESSMENT AFTER ISSUANCE OF NOTICE U/S 148 OF THE ACT. FURTHER YOU ARE REQUESTED TO SUMMON THE ALLEGED COM PANY THROUGH THEIR DIRECTOR BY ALL MODE OF SERVICES FOR THE ALLE GED ENTRIES. IN THE MEANTIME YOU ARE REQUESTED TO ADJOURN THE CA SE FOR PROVIDING THE COPIES OF ENTIRE MATTER AS DISCUSSED ABOVE. 11.4.4 FROM A PERUSAL OF THE CONTENTS OF THE LETTE RS IT BECOMES CLEAR THAT THE LETTER DATED 05.12.14 IS PRIMARILY AN ADJO URNMENT APPLICATION WHICH ALSO MAKES A REQUEST FOR SUPPLYING THE COPIES OF DOCUMENTS AND STATEMENTS ETC. 11.4.5 SIMILARLY, THE LETTER DATED 27.01.15 IS MAI NLY A REPEAT REQUEST FOR SUPPLY OF THE DOCUMENTS. 11.4.6 I HAVE ALSO NOTED THAT IN THE LAST PARA OF THE LETTER DATED 23.01.15 THERE IS A REQUEST TO NOT MAKE THE PROPOSE D ADDITION OF RS. 30 LAKHS. THE OBSERVATIONS AND ADVICES CONTAINE D IN PARA 2 OF LETTER DATED 23.1.15 AND VIDE PARA 2 AND 4 OF LETTER DATED 5.12.14 ARE NOT THE FOCUS OF THE LETTERS AND ARE AT BEST ROUTINE RH ETORIC IN NATURE. I HAVE ALSO NOTED THAT THESE LETTERS WERE WRITTEN AFT ER 11 MONTHS OF ISSUE OF NOTICE U/S 147 AND MERELY 2 MONTHS BEFORE THE COMPLETION OF THE REASSESSMENT PROCEEDINGS. 11.4.7 THE MOTIVE FOR INCLUDING THESE SUBMISSIONS IN A LETTER PRIMARILY REQUESTING FOR SUPPLY OF COPIES OF DOCUME NTS COULD BE TO I.T.A. NO.3855/DEL/2017 10 DIVERT THE FOCUS OF THE ASSESSING OFFICER AWAY FROM THE SUBSTANTIAL ISSUE. IN FACT THE CONTENTION RAISED VIDE PARA 2 AN D 4 OF THE LETTER DATED 23.01.15 THAT THE ACTION OF THE A.O. IN REOPE NING THE ASSESSMENT IS BAD IN LAW BECAUSE THE REASONS FOR RE OPENING HAVE NOT BEEN CONFRONTED WITH THE ASSESSEE, IS AT BEST A WRO NG DESCRIPTION OF THE CIRCUMSTANCES. IN FACT, ON 26.06.14, THAT IS 5 MONTHS BEFORE THE SAID LETTER, THE COPY OF THE REASONS RECORDED WAS D ULY SUPPLIED BY THE ASSESSING OFFICER TO THE APPELLANT. CLEARLY, FOR 5 MONTHS AFTER SEEING THE REASONS THE APPELLANT RAISED NO OBJECTION TO RE OPENING OF THE ASSESSMENT PROCEEDINGS. IN FACT, IN THE ASSESSMENT ORDER AS WELL AS IN THE SUBMISSIONS OF THE APPELLANT, I HAVE NOT BEE N ABLE TO FIND ANY OBJECTION TO THE REASSESSMENT PROCEEDINGS RAISED BY THE APPELLANT AT THE ASSESSMENT STAGE. 11.4.8 IT IS FURTHER NOTED THAT ON THE SAME DATE VIZ 23.01.15 THE APPELLANT TILED THE COPIES OF ITR, COPIES OF BANK ACCOUNTS OF LENDERS, COPIES OF THE BALANCE SHEET & PROFIT AND LOSS A/C ETC. BEFORE THE A.O. CLEARLY, THE CONDUCT OF THE AP PELLANT IN COMPLYING WITH THE REASSESSMENT PROCEEDINGS AND ASKING FOR SU PPLY OF PHOTO COPIES ETC. DEMONSTRATED APPELLANTS ACCEPTANCE OF T HE REASSESSMENT PROCEEDINGS. 11.4.9 BASED ON THE ABOVE OBSERVATIONS I FIND NO L EGAL INFIRMITY IN THE REASSESSMENT PROCEEDINGS AND CONSEQUENTLY, I HA VE NOT AN IOTA OF DOUBT THAT BOTH THE ISSUE OF THE NOTICE AS WELL AS THE ASSESSMENT ORDER ARE GOOD IN LAW. 5. ON THE ISSUE OF MERITS, AFTER CONSIDERING THE EN TIRE FACTS AND MATERIAL PLACED ON RECORD BY THE ASSESSEE AS WE LL AS ON BEHALF OF THE ASSESSING OFFICER, LD. CIT(A) HAS DRA WN VARIOUS INFERENCE BASED ON THE FACTS AND MATERIAL, WHICH AR E AS UNDER:- I.T.A. NO.3855/DEL/2017 11 (A) THE DETAILS OF THE TRANSACTIONS OF THE APPELLA NT WITH THE THREE COMPANIES WERE RETRIEVED/CAME TO KNOWLEDGE OF THE DEPARTMENT IN THE COURSE OF SEARCH ON A THIRD PARTY . (B) THE SAID THIRD PARTY ADMITTED ON OATH THAT IT E ARNS ITS LIVELIHOOD BY SUPPLYING ACCOMMODATION ENTRIES FOR W HICH CASH IS COLLECTED FROM THE POTENTIAL BENEFICIARIES, DEPO SITED IN DIFFERENT BANK ACCOUNTS BELONGING TO DIFFERENT PVT. LTD. COMPANIES. THESE COMPANIES ARE REGISTERED BY THE EN TRY OPERATOR. THE OPERATOR ALSO MAINTAINS THE NECESSARY STATUTORY DOCUMENTATION IN RESPECT OF THESE COMPANIES AND HAS A DE- FACTO CONTROL OVER THE BANK ACCOUNTS OF THESE COMPA NIES. (C) THE APPELLANT HAD A CLEARLY DISCERNIBLE MOTIVE FOR INDULGING IN A SHAM TRANSACTIONS BY WHICH ITS UNACC OUNTED MONEY FINDS A WAY IN ITS BOOKS OF ACCOUNTS AND BECO MES LEGITIMATE WITHOUT PAYING DUE TAXES AND ONLY BY PAY ING JUST A FRACTION OF THE DUE TAXES AS COMMISSION TO THE ENTR Y OPERATOR. (D) AS DISCUSSED IN PARA 11.4.9 ABOVE, THE RE ASSE SSMENT PROCEEDINGS SUFFER WITH NO LEGAL INFIRMITY. (E) THE APPELLANT FURNISHED COPIES OF PAN, CERTIFI CATES OF REGISTRATION, FINAL AUDITED ACCOUNTS, COPY OF THE B ANK ACCOUNT AND CONFIRMATIONS FROM THE CREDITORS BEFORE THE ASS ESSING OFFICER. (F) EXAMINATION OF BANK ACCOUNT OF THESE CREDITOR COMPANIES REVEALED A PATTERN OF INSTANT CREDIT AND DEBITS OF ONLY THE RELEVANT AMOUNTS/ CASH DEPOSITS OF EQUIVAL ENT AMOUNTS JUST BEFORE THE ISSUE OF THE CHEQUE BY THE CREDITOR COMPANY. (G) THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNTS OF THESE COMPANIES REVEAL THAT EFFECTIVELY THERE IS NO BUSIN ESS CARRIED I.T.A. NO.3855/DEL/2017 12 OUT BY THE COMPANY AND THE COMPANIES ARE USED ONLY FOR THE PURPOSE OF PROVIDING ACCOMMODATION ENTRIES. (H) SUMMONS SERVED TO THE CREDITOR COMPANIES EITHE R RETURNED UNSERVED OR WERE NOT COMPLIED WITH. THE UN SERVED SUMMONS RAISE A DOUBT ABOUT THE VERY EXISTENCE OF T HE CONCERNED COMPANY AND THE UNCOMPLIED SUMMONS SHIFT THE ONUS OF PROVING THE GENUINENESS & CREDIT WORTHINESS OF THE TRANSACTION ON TO THE ASSESSEE. (I) THE APPELLANT REFUSED TO PRODUCE THE CREDITORS BEFORE THE A.O. EXPRESSING ITS INABILITY TO DO SO THUS IN EFFECT ABSOLVING ITSELF FROM THE ONUS CAST UPON IT UNDER SECTION 68. (J) NO COLLATERAL SECURITY/ GUARANTEE WAS FURNISHED FOR OBTAINING THE ABOVE LOAN. (K) THE LOAN HAS NEITHER BEEN RETURNED TILL DATE NO R IS ANY INTEREST EVER PAID ON IT FOR LAST 7 YEARS THEREBY I MPLYING THAT THE MOTIVE OF THE CREDITOR COMPANIES WAS NOT EARNING OF INTEREST ON INVESTMENT. (1) THE ASSESSING OFFICER DID NOT PROVIDE AN OPPORT UNITY TO THE APPELLANT TO CROSS EXAMINE EITHER SHRI SURENDER KUM AR JAIN OR SHRI VIRENDER KUMAR JAIN (BOTH ENTRY OPERATORS) OR SHRI RAJESH AGGARWAL WHOSE STATEMENT WAS RECORDED DURING THE SE ARCH PROCEEDINGS OR SHRI GOYAL SAHAB WHO WAS THE MIDDLEM EN BETWEEN ENTRY PROVIDER AND THE APPELLANT. (M) THE INVESTIGATION WING ONLY RECORDED THAT CASH WAS DEPOSITED IN THE BANK ACCOUNTS MENTIONED ABOVE. NEI THER, THE ASSESSING OFFICER NOR THE INVESTIGATION WING HAS ES TABLISHED THAT THE CASH DEPOSITED IN THOSE BANK ACCOUNTS EMER GED FROM THE COFFERS OF THE APPELLANT. I.T.A. NO.3855/DEL/2017 13 (N) FOR THIS YEAR REGULAR ASSESSMENT U/S. 143(3) WA S NOT DONE BEFORE. 13.9 EXCEPT ITEMS (E), (1) AND (M) OF PARA 13.8, AL L OTHER FACTS LEAD TO THE INEVITABLE OUTCOME THAT THE ABOVE TRANS ACTIONS CANNOT ESCAPE THE PROVISIONS OF SECTION 68. 6. THEREAFTER, FOLLOWING THE RATIO AND THE DECIS ION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MAF ACADEMY (2014) 42 TAXMANN.COM 377 , LD. CIT(A) HELD THAT ALL THE FACTS LEAD TO INEVITABLE CONCLUSION THAT TH E TRANSACTIONS ARE NOT GENUINE AND ADDITION HAS RIGHT LY BEEN MADE U/S.68, BECAUSE ALL THE DOCUMENTS LOSE CREDIBI LITY IN THE LIGHT OF THE FACT THAT THE ENTITY WHICH HAS GIV EN THE LOAN WAS RUN BY ENTRY PROVIDER WHO HIMSELF ADMITTED THAT HE HAS PROVIDED THE ACCOMMODATION ENTRY; SECONDLY, EXACT A MOUNT OF CASH WAS FOUND TO BE DEPOSITED IN THE BANK ACCOUNTS OF THESE COMPANIES JUST BEFORE THE ADVANCING OF THE ALLEGED LOANS TO THE ASSESSEE COMPANY AND THEY HAVE DUMMY DIRECTORS, EXISTING AT PAPER JUST TO PROVIDE ACCOMMODATION ENTR Y AND THEIR CREDITWORTHINESS ITSELF WAS IN DOUBT. ACCORDI NGLY, HE HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICE R. 6. AFTER HEARING THE LD. DR AND ON PERUSAL OF THE I MPUGNED ORDER, WE FIND THAT HERE IN THIS CASE BASED ON SPEC IFIC INFORMATION AND MATERIAL FOUND DURING THE COURSE OF INVESTIGATION IN THE CASE OF SHRI S.K. JAIN, THE AS SESSEE WAS FOUND TO BE BENEFICIARY OF ACCOMMODATION ENTRY AND THERE WAS SPECIFIC MENTION OF CHEQUE AND DETAILS AND THE ENTITY PROVIDING THE ENTRY ALONG WITH DATE, WHICH ALSO I.T.A. NO.3855/DEL/2017 14 COMMENSURATE WITH THE ENTRIES IN THE ASSESSEES BOO KS OF ACCOUNT. SUCH AN INFORMATION AND MATERIAL PRIMA FACIE GOES TO SHOW THAT THE TRANSACTION ENTERED BY THE ASSESSE E WAS NOT GENUINE AND THUS, CONSTITUTE TANGIBLE MATERIAL FOR FORMING REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX ESC APE ASSESSMENT. THE REASONING AS INCORPORATED BY THE LD . CIT(A) IS NOT ONLY BASED ON CORRECT FACTS BUT ALSO HAD COR RECT APPRECIATION OF LAW AND WE DO NOT FIND ANY REASON T O DEVIATE FROM SUCH A CONCLUSION AND ABSENCE OF ANY REBUTTAL FROM THE SIDE OF THE ASSESSEE. ACCORDINGLY, THE VALIDITY OF REOPENING IS UPHELD. 7. IN SO FAR AS ISSUE ON MERITS IS CONCERNED, APART FROM FACT THAT THE DETAILS OF THE TRANSACTION OF THE ASSESSEE WERE UNEARTHED DURING THE INVESTIGATION CARRIED OUT IN T HE CASE OF SHRI S.K. JAIN WHO ADMITTED THAT HE WAS AN ENTRY PR OVIDER BUT ASSESSEE WAS FOUND TO BE BENEFICIARY IN THE INQ UIRY CONDUCTED IN THE CASE OF MR. S.K. JAIN. NOT ONLY TH AT, ASSESSING OFFICER HAS ASKED FOR FURTHER DETAILS FRO M THE ASSESSEE WHICH COULD NOT BE PROVIDED AS NOTED BY TH E ASSESSING OFFICER. THEREAFTER, THE ASSESSING OFFICE R HAS CONDUCTED HIS INQUIRY AND ISSUED SUMMONS AND NOTICE S TO THE THREE ENTITIES. HOWEVER, NONE OF THE PARTIES RE SPONDED ON THE NOTICES SENT CAME BACK UNSERVED. WHEN ASSESSEE WAS CONFRONTED WITH THIS FACT AND WAS ASKED TO PRODUCE THE DIRECTOR/PRINCIPAL OFFICER OF THE COMPANY WHO HAVE GIVEN LOAN, THE ASSESSEE COULD NOT COMPLY WITH SUCH A REQ UISITION BY THE ASSESSING OFFICER. THUS, GENUINENESS OF THE I.T.A. NO.3855/DEL/2017 15 TRANSACTION AND THE CREDITWORTHINESS COULD NOT BE ESTABLISHED. ANOTHER IMPORTANT FACT AS NOTED BY THE LD. CIT(A) IS THAT, BEFORE ISSUING THE CHEQUES IN THE FORM OF LOAN TO THE ASSESSEE, EXACT AMOUNT OF CASH WAS FOUND TO BE DEPO SITED IN THE BANK ACCOUNT OF THESE COMPANIES AND THESE COMPA NIES WERE MANAGED AND CONTROLLED BY SHRI S.K. JAIN THROU GH DUMMY DIRECTORS WHICH FACT HAS EMERGED FROM THE INQ UIRY MADE BY THE INVESTIGATION WING. IN SUCH A SITUATION , THE ONUS LIES HEAVILY UPON THE ASSESSEE TO REBUT AND ALLAY T HE DOUBTS, WHICH ASSESSEE HAS FAILED TO DO SO. THEREFORE, THE BURDEN CAST UPON THE ASSESSEE TO PROVE THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION COULD NOT BE PROVED. IN ABSENCE OF ANY CONTRARY MATERIAL, WE DO NOT FIND AN Y REASON TO DEVIATE FROM THE FINDING RECORDED BY THE LD. CIT (A) AND SAME IS CONFIRMED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUARY, 2020. [G.S. PANNU] [AMIT SHUKLA] VICE PRESIDENT JUDICIAL MEMBER DATED: FEBRUARY, 2020 PKK: