Jagriti Traders Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 3966/DEL/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97022 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 26-06-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 25-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAURAV DUDEJA
• Assessee Lawyers: K R MANJANI
• Keywords: Opportunity of being heard; Principle of natural justice; Accommodation entries
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI H.S. SIDHU: JUDICIAL MEMBER ITA NO. 3966/DEL/2010 ASSTT. YR: 2006-07 JAGRATI TRADERS PVT. LTD., VS. INCOME-TAX OFFICE R, A-231, 2 ND FLOOR, DERAWAL NAGAR, WARD 4(1), NEW DELHI. DELHI. PAN: AAACJ 0442 N ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI K.R. MANJANI ADV. RESPONDENT BY : SHRI GAURAV DUDEJA SR. DR DATE OF HEARING : 26/06/2015. DATE OF ORDER : 19/08/2015. O R D E R PER S.V. MEHROTRA, A.M.. : THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST THE CIT(A)-VII, NEW DELHIS ORDER DATED 6-5-2010 IN APPEAL NO. 161/08- 09, RELATING TO ASSTT. YEAR 2006- 07. FOLLOWING GROUNDS ARE RAISED: 1. THAT ON THE FACTS AND ON THE CIRCUMSTANCES OF T HE CASE , THE LEARNED CIT(APPEALS) HAS NOT CONSIDERED THE FAC TS OF THE CASE AND LEGAL JUDGMENTS OF JURISDICTIONAL COURTS, ITAT AND SUPREME COURT AND OTHER DIFFERENT COURTS OF LAW AS CITED IN THE APPEAL WHILE DECIDING THE MATTER OF ADDITION OF INC OME ON ESTIMATION/GUESS WORK BASIS MERELY ON SURMISES AND CONJECTURES. 2 2. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE THE LEARNED CIT(A.) HAS ERRED IN LAW AND ON FACTS BY UP HOLDING THE FINDING OF THE AO REGARDING THE NATURE OF BUSINESS OF THE ASSESSEE WITHOUT ANY COGENT EVIDENCES. 3. THAT LEARNED CIT(A) HAS ERRED ON THE FACT AND ON LAW AND IN CIRCUMSTANCES OF THE CASE WHEREIN HE HAS NOT CON SIDERED THE SUBMISSIONS OF THE ASSESSEE FILED DURING THE COURSE OF PROCEEDINGS . 4. THAT THE LEARNED CIT(A) HAS ERRED ON THE FACTS A ND ON LAW WHEREIN UPHOLDING THE CLAIM OF THE AO WITHOUT GOING INTO THE FACT THAT THE) ORDER OF AO HAD BEEN PASSED WITHOUT CONFRONTING ANY MATERIAL TO THE ASSESSEE WHICH ITSELF IS AGAIN ST THE PRINCIPLE OF NATURAL JUSTICE. 5. THAT THE CIT(A) ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE WHEREIN WITHOUT ANY SUBSTANCE IN HIS LOGIC FOR ESTIMATING THE INCOME 'OF THE ASSESSEE HE PROCEEDED TO ESTIMAT E MERELY ON CONJECTURE AND SURMISES. 6. THAT THE CIT(A) ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE WHEREIN HE DID NOT FIND OR IDENTIFIED ANY SING LE TRANSACTION EFFECTIVELY CARRIED OUT BY THE ASSESSEE AND WITHOUT PROVING THE SAME TO BE AS SHAM TRANSACTION WHEREIN THE AO AND C IT(A) HARBORED A SUPERNATURAL BELIEF THAT IN TRANSFERRING THE FUNDS ON ACCOUNT OF SALE AND PURCHASE THE ASSESSEE MUST BE E ARNING SOME SORT OF COMMISSION INCOME WHICH IS ILLEGAL AND BASE LESS MERELY ON PRESUMPTION. 7. THAT THE APPELLANT CRAVES THE INDULGENCE OF THIS HONBLE APPELLANT AUTHORITY TO AMEND ANY/ALL GROUNDS OF APP EAL EITHER BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. 2. BRIEF FACTS OF THE CASES ARE THAT IN THE RELEVAN T ASSESSMENT YEAR THE ASSESSEE COMPANY AS ENGAGED IN THE PURCHASE AND SAL E OF SHARES (TRADING) AS WELL AS INVESTMENT IN SHARES BESIDES FINANCE AND AD VANCES. THE ASSESSEE HAD FILED ITS RETURN OF INCOME, DECLARING LOSS OF RS. 1 007/-. THE AO NOTICED THAT THE ASSESSEE COMPANY HAD DEALT IN THE FOLLOWING SHA RES: I. BVANZO PAPERS, 3 II. EXPLORE COMPUTERS; III. BOLT SYNTHETICS; IV. DATTA FINANCE & TRADING; V. DEPLOMAT INTERNATIONAL VI. ELENT STEELS VII. MAKESR AGENCIES VIII. ZIG ZAG EXPORTS IX. S.S.A. CREDITS, X. ROSE ALLOYS, XI. COMMITMENT FINANCIAL SERVICES ETC. 2.1. HE OBSERVED THAT NONE OF THESE ALLEGED COMPANI ES HAD MENTIONED THE WORDS LTD. OR PVT. LTD.. HE OBSERVED THAT ALL T HESE WERE, IN ANY CASE, UNLISTED COMPANIES AND, THEREFORE, NO PERSON WOULD INVEST IN ORDINARY COURSE AND DEAL WITH THESE COMPANIES. HE FURTHER NOTED THA T IN ALL THE CASES THE PURCHASES AS WELL AS SALES HAD BEEN MADE @ 10/- PE R SHARE. BEING DOUBTFUL ABOUT THE CREDENCE OF PURCHASE AND SALES, HE ISSUED NOTICES U/S 133(6) TO THE FOLLOWING CONCERNS WITH WHICH THE ASSESSEE CLAIMED TO HAVE BUSINESS TRANSACTIONS: (I) M/S JOY COMMERCIAL PVT. LTD. (II) M/S GLORY COMMERCIAL PVT. LTD. (III) M/S A.K. KUMAR & COMPANY (IV) M/S JUMBO CONSULTANTS PVT. LTD. (V) M/S THUNDER EXPORTS PVT. LTD. (VI) M/S GUARD COMMERCIAL PVT. LTD. 2.2. THE AO HAS NOTED THAT NO RESPONSE WAS RECEIVED FROM M/S JOY COMMERCIAL PVT. LTD. AND /S GLORY COMMERCIAL PVT. L TD. AND IN CASE OF OTHER FOUR, THE NOTICES ISSUED U/S 133(6) RETURNED UNSERV ED. AFTER CONSIDERING ALL THESE ASPECTS, THE AO CONCLUDED THAT ASSESSEE WAS A N ENTRY OPERATOR, INTER ALIA, OBSERVING AS UNDER: 4 THE ACTUAL POSITION IS THAT THE ASSESSEE M/S JAGRA TI TRADERS PVT. LTD. IS A PART OF THE VIKAS HOLDING PVT. LTD. GROUP BEING RUN BY AJAY KUMAR AND PRADEEP KUMAR AND THESE TWO PERSONS ARE RUNNING MORE THAN 30 BANK ACCOUNTS OF VARIOUS CONCE RNS INCLUDING THE ASSESSEE COMPANY. THE ENTIRE GROUP HA S BEEN SUBJECT OF CERTAIN INQUIRIES AND INVESTIGATION BY T HE INVESTIGATION WING WHEREIN IT HAS BEEN FOUND THAT T HEY ARE NOT CARRYING ON ANY ACTUAL BUSINESS. THEY HAVE BEEN FOU ND TO BE ENGAGED IN THE ACTIVITY OF PROVIDING ACCOMMODATION ENTRIES. THE PERSON/ PARTY WHO PROVIDES SUCH ENTRY IS KNOWN AS ENTRY OPERATOR AND THE PERSON/ PARTY TAKING SUCH ENTRY IS CALLED BENEFICIARY. EARNING THROUGH COMMISSION. HE, ACCORDINGLY, MADE ADDITION OF RS. 5,33,370/-, INTER ALIA, OBSERVING AS UNDER: THE TOTAL CREDITS IN THE BANK ACCOUNTS OF THE ASSE SSEE COMPANY (AS PER THE BANK BOOK FOR BANK OF INDIA ACCOUNT MAI NTAINED BY THE ASSESSEE) LESS THE OPENING BALANCE FOR THE RELE VANT PERIOD WORKS OUT TO RS. 2,13,34,810/- (2,16,70,532- 3,35,7 22). TAKING THE AVERAGE OF THE COMMISSION RATES AS 2.5%, A SUM OF RS. 5,33,370/- (I.E. 2.5% OF RS. 2,13,34,810/-) IS ALSO ADDED TO THE INCOME OF THE ASSESSEE AS THE COMMISSION PAID TO TH E ENTRY OPERATORS. THE TOTAL COMMISSION INCOME OF THE ASSES SEE FROM THIS ACTIVITY OF GIVING ADJUSTMENT ENTRIES THUS W ORKS OUT TO RS. 5,33,370/-. 2.3. ACCORDINGLY, THE TOTAL INCOME WAS DETERMINED A T RS. 5,32,363/-. 2.4. BEFORE LD. CIT(A), THE ASSESSEE HAD FILED FOLL OWING DOCUMENTS: I) DETAIL OF SALE OF SHARES TO VARIOUS PARTIES DURING THE YEAR UNDER CONSIDERATION. II) COPY OF THE STATEMENT FOR THE YEAR UNDER CONSIDERAT ION RELATING TO THE BANK ACCOUNT OF THE APPELLANT WITH BANK OF INDI A, ANSARI ROAD, DELHI; AND 5 III) CONFIRMATION OF ACCOUNTS FROM THE PARTIES TO WHOM T HE SHARES HAVE BEEN CLAIMED TO HAVE BEEN SOLD DURING THE YEAR UNDE R CONSIDERATION. 2.5. THE AO SUBMITTED ITS REMAND REPORT, WHICH HAS BEEN REPRODUCED IN PARA 5.1 OF THE CIT(A)S ORDER. THE SAID REMAND REP ORT WAS PROVIDE TO ASSESSEE. THE ASSESSEES REJOINDER HAS BEEN REPRODU CED IN PARA 5.2 OF CIT(A)S ORDER. 2.6. AFTER CONSIDERING THE REPLY, THE LD. CIT(A) DE TERMINED THE COMMISSION/ BROKERAGE @ 1.5% ON THE TOTAL BANK ENTR IES OF RS. 2,13,34,810/-, WHICH CAME TO RS. 3,20,022/-. 3. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT(A) HAS NOT CONSIDERED THE DETAILED REPLY FILED BY THE ASSESSEE . HE PRAYED THAT THE MATTER MAY BE RESTORED BACK TO THE FILE OF AO FOR DE NOVO CONSIDERATION. 4. LD. DR RELIED ON THE ORDER OF CIT(A). 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE OBSERVATIONS MADE BY THE AO IN THE REMAND REPORT WERE REPLIED BY ASSESSEE. HOWEVER, TH EY HAVE NOT BEEN CONSIDERED BY LD. CIT(A). WE HAVE EXAMINED THE CASE OF M/S JOY COMMERCIAL PVT. LTD. (SUPRA), WHEREIN AO IN THE REM AND REPORT, INTER ALIA, OBSERVED THAT, A PERUSAL OF THE DETAILS FILED REVE ALED THAT THE BANK STATEMENT FOR ONLY A PART OF THE YEAR WAS FILED AND NOT THE S TATEMENT FOR THE FULL YEAR AS SPECIFICALLY ASKED FOR IN THE SUMMONS ISSUED. 5.1. IN THE REPLY FILED BY ASSESSEE, THE ASSESSEE H AS CATEGORICALLY STATED THAT, AO NEVER REQUISITE THE PARTIES TO WHOM HE SU MMONED TO SUBMIT THE COPIES OF THE BANK STATEMENT FOR FULL YEAR. HE HAD MERELY ASKED THE PARTIES TO 6 SHOW HIM THE BANK STATEMENT FOR FINANCIAL YEAR 2005 -06, WHICH HAD BEEN DULY PERUSED BY HIM DURING THE COURSE OF ATTENDANCE OF THE SUMMONED PARTIES WHEREIN HE ASKED FROM THE PARTY THE RELEVAN T PART OF THE COPY OF THE BANK STATEMENT WHEREIN TRANSACTION HAD TAKEN PLACE WITH THE ASSESSEE. HE ALSO PERUSED THE BOOKS OF ACCOUNT AND BILLS AND VO UCHERS WHICH HAD BEEN PRODUCED BEFORE HIM, BUT THE AO HAD OBSERVED CONTRA RY TO THE SAME. THESE SUBMISSIONS, CONTRADICTING THE STAND OF AO, H AVE NOT BEEN CONSIDERED BY LD. CIT(A). 5.2. SIMILAR IS THE POSITION IN REGARD TO OTHER PAR TIES WHICH WE DO NOT PROPOSE TO GO INTO DETAIL. CONSIDERING THE CONTRADI CTIONS IN THE FINDING REGARDING PRODUCTION OF EVIDENCE BEFORE AO, WE CONS IDER IT IN THE INTEREST OF JUSTICE THAT THE ORDER PASSED BY LD. CIT(A) BE SET ASIDE AND THE MATTER BE RESTORED TO THE FILE OF AO FOR DE NOVO CONSIDERATI ON AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. WE DIRECT ACCORDINGLY. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN OPEN COURT ON 19/08/2015.. SD/- SD/- (H.S. SIDHU) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 19/08/2015. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. 7 - + DATE INITIAL 1. DRAFT DICTATED ON - 07.2015 PS 2. DRAFT PLACED BEFORE AUTHOR .07.2015 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.