JAYA GARG, INDORE V. ACIT NFAC, NEW DELHI

ITA 418/Ind/2023

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 7862 (ITAT-INDORE)
• Duration Of Justice: 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-04-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-04-2024
• Assessment Year: 2014-2015
• Appeal Filed On: 31-10-2023
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Unexplained cash credit; Accommodation entries
• Section: 147; 68; 148; 13

Judgement Text

Page 1 of 18 आयकर अपीलीय अिधकरण, इंदौर Ɋायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER ITA No. 418/Ind/2023 Assessment Year: 2014-15 Jaya Garg, C-4/5, Shivkripa Colony, Sajan Nagar Road, Indore बनाम/ Vs. ACIT-NFAC, New Delhi (Assessee/Appellant) (Revenue/Respondent) PAN: AGTPG 4247 L Assessee by Shri Pankaj Shah CA, Shri Soumya Bumb CA, Ms. Ayushi Garg CA & Ms. Anshika Goyal CA - ARs Revenue by Shri Ashish Porwal, Sr. DR Date of Hearing 09.04.2024 Date of Pronouncement 5.04.2024 आदेश / O R D E R Per B.M. Biyani, A.M.: Feeling aggrieved by appeal-order dated 30.09.2023 passed by learned Commissioner of Income-Tax (Appeals), NFCA, Delhi [“CIT(A)”], which in turn arises out of assessment-order dated 30.03.2022 passed by learned NFAC, Delhi [“AO”] u/s 147 read with section 144B the of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2014-15, the assessee has filed this appeal. Jaya Garg, Indore ITA No. 418/Ind/2023 – AY 2014-15 Page 2 of 18 2. The background facts leading to present appeal are such that the assessee-individual filed original return of income of AY 2014-15 on 12.12.2014 declaring a total income of Rs. 10,29,670/- which was duly assessed. Subsequently, based on an information received from DDIT(Inv), Unit-2(1), Kolkata, the AO recorded reason that the assessee had taken accommodation entries of Rs. 65,00,000/- during the relevant year from 3 lenders, viz. (i) M/s Jay Jyoti Pvt. Ltd. – Rs. 5,00,000/-, (ii) M/s Jayant Security and Finance Ltd. – Rs. 20,00,000/- and (iii) M/s Ziya Merchandise Pvt. Ltd. – Rs. 40,00,000/-, which had escaped assessment and re-opened assessment u/s 147 vide notice dated 26.03.2021 u/s 148. In response to notice, the assessee re-filed return on 25.11.2021 repeating the original income of Rs. 10,29,670/-. Thereafter, notices u/s 143(2)/142(1) were issued and served upon assessee to which the assessee filed replies. At assessee’s request, the AO also supplied reasons of re-opening to assessee. After examining reasons, the assessee filed objection against re-opening of assessment vide letter dated 17.03.2022. The AO disposed of assessee’s objection vide order dated 22.03.2022 wherein he turned down objection raised. Ultimately, the AO completed re-opened assessment vide order dated 30.03.2022 u/s 147 r.w.s. 144B of the Act after making an addition of Rs. 65,00,000/- on account of unexplained cash credit u/s 68. Aggrieved, the assessee carried matter in first appeal but could not get any success. Now, the assessee has come in next appeal before us assailing the orders of lower- authorities. Jaya Garg, Indore ITA No. 418/Ind/2023 – AY 2014-15 Page 3 of 18 3. The assessee/appellant has raised following grounds: “(1) The Ld. CIT(A) has erred in making confirmation of the addition made by LAO on account of unsecured loan taken of Rs. 65.00 lakh from M/s. Ziya Merchandise Private Limited of Rs. 40,00,000/-, M/s. Jayant Securities Private Ltd, of Rs. 20,00,000/- and M/s. Jay Jyoti India Pvt. Ltd. of Rs. 5,00,000/-. (2) The actual amount of loan was taken of Rs. 25,00,000/- from M/s. Ziya Merchandise Private Limited of Rs. 10,00,000/-, M/s. Jayant Securities Pvt. Limited of Rs. 10,00,000/- and M/s. Jay Jyoti India Private Limited of Rs. 5,00,000/-. (3) After repetitive request to LAO, no evidence for loan of Rs. 65.00 Lakh was given to me and addition of Rs. 65.00 Lakh was made in spite of the fact that it was only Rs. 25.00 lakhs. The same fact was brought into the knowledge of the Ld. CIT(A) who has even not bothered to consider my request that without any basis and no transaction, additional Rs. 40.00 lakhs of addition was confirmed. (4) The assessee has submitted all necessary documents to prove identity, creditworthiness of the lender and genuineness of transactions for loan taken of Rs. 25 lakhs, the LAO has erred in its addition treating it as unexplained cash credit u/s 68 of the act without considering the facts and circumstances of the case and the assessment needs to be deleted. (5) It was proved before the Ld. AO that the assessee has not taken loan of Rs. 65.00 lakhs factually it was only Rs. 25.00 lakhs. The addition made is bad in law and without application of mind. The addition upheld in the hands of the assessee is bad in law and hence be deleted. (6) The Ld. AO has made addition of Rs. 65.00 Lakhs however the loan taken is of Rs. 25.00 lakhs, to make the case assessable u/s 149 of the Income-tax Act, 1961, and cover under the limit of above Rs. 50 Lakhs as the time limit of 3 years has expired while issuing notice u/s 148 of the Act and hence the LAO has made addition of Rs. 65.00 Lakhs. Even the Ld. CIT(A) has not gone into the matter and confirmed the addition.” 4. Ld. AR for assessee pointed out that the Ground No. 6 is a legal ground challenging the re-opening of assessment and Ground No. 1 to 5 are on merits challenging the addition made/upheld by lower-authorities. Thereafter, the Ld. AR made mixed submissions covering all grounds. Jaya Garg, Indore ITA No. 418/Ind/2023 – AY 2014-15 Page 4 of 18 5. Ld. AR straightaway drew our attention to the reasons recorded by AO before issuing notice u/s 148, the said reasons read as under: “During the F.Y. 2013-14, it is noticed that the assessee in question has obtained accommodation entries from the aforesaid various bogus companies as per the chart given below. The company as mentioned below have been controlled and operated by Shri Sharad Darak, Indore. S.No. Name of the bogus companies in which alleged accommodation was getting into PAN Amount 01. M/s. Jay Jyoti India Pvt. Ltd. renamed as Jay Ganga Exim India Pvt. Ltd. AAACJ8822E 5,00,000/- 02. M/s. Jayant Security and Finance Limited AAACJ4848G 20,00,000/- 03. M/s. Ziya Merchandise P. Ltd. renamed as Zyka Merchandise Pvt Ltd. AAACZ3842Q 40,00,000/- During the F.Y. 2013-14, the assessee has received accommodation entries from the various companies like M/s. Jay Jyoti India Pvt. Ltd. renamed as Jay Ganga Exim India Pvt. Ltd. PAN - AAACJ8822E, M/s. Jayant Security and Finance Ltd. PAN - AAACJ4848G and M/s. Ziya Merchandise Pvt. Ltd. renamed as Zyka Merchandise Pvt.Ltd. - PAN AAACZ3842Q which are found to be bogus company whose one of the directors is Shri Sharad Darak, who is an Indore-based accommodation entry operator residing at H.No.9, Bhojnagar, Indore. He has formed several companies in which his family members and self are directors. Shri Sharad Darak is actual controller of this company. Some of these companies are registered as Non-Banking Financial Companies (NBFCs). However, these company is engaged purely in malpractice to provide accommodation entries to prospective beneficiaries and issue and return the money through cheques. NEFT, RTGS etc. For this facilitation, a commission at a pre-decided rate is charged to the beneficiary. The accommodation entry can be in the form of share capital, loans & advances or sale-purchase of goods and services. Where the entry is taken as share capital of loans and advances, the beneficiary shows it as liability in its balance sheet. However, in truth, such liability does not exist as equivalent cash is already given to the entry operator. In cases where the entry is of sale/purchase of goods and services, the beneficiaries receive bogus bills/invoices from the entry operator to inflate expenses and thereby deflating profit/taxable income. Some companies are also involved in providing accommodation entries of Long-Term Capital Gain or Short-Term Capital loss on sale of shares”. Jaya Garg, Indore ITA No. 418/Ind/2023 – AY 2014-15 Page 5 of 18 6. Ld. AR submitted that the AO has recorded wrong reason that the assessee had taken loans of Rs. 65,00,000/- whereas the assessee took loans only of Rs. 25,00,000/- from those 3 lenders. Ld. AR submitted the details of wrong amounts recorded by AO vis-à-vis the correct amounts actually taken by assessee as under: S.No. Name of the bogus companies in which alleged accommodation was getting into Wrong amount recorded by AO Correct amount actually taken by assessee 01. M/s. Jay Jyoti India Pvt. Ltd. renamed as Jay Ganga Exim India Pvt. Ltd. 5,00,000/- 5,00,000/- 02. M/s. Jayant Security and Finance Limited 20,00,000/- 10,00,000/- 03. M/s. Ziya Merchandise P. Ltd. renamed as Zyka Merchandise Pvt Ltd. 40,00,000/- 10,00,000/- Total 65,00,000/- 25,00,000/- Ld. AR also carried us to various pages of Paper-Book where copies of Ledger A/cs and Bank statements are filed to prove the above-detailed correct amounts taken by assessee. 7. Ld. AR submitted that the assessee informed this serious mistake in the reasons to AO at the initial stage itself and therefore filed an objection- letter dated 17.03.2022 to AO against the proceeding u/s 147 but the AO turned down assessee’s objection vide order dated 22.03.2022. The AO’s order turning down assessee’s objection reads as under: Jaya Garg, Indore ITA No. 418/Ind/2023 – AY 2014-15 Page 6 of 18 Jaya Garg, Indore ITA No. 418/Ind/2023 – AY 2014-15 Page 7 of 18 Jaya Garg, Indore ITA No. 418/Ind/2023 – AY 2014-15 Page 8 of 18 Jaya Garg, Indore ITA No. 418/Ind/2023 – AY 2014-15 Page 9 of 18 Jaya Garg, Indore ITA No. 418/Ind/2023 – AY 2014-15 Page 10 of 18 Jaya Garg, Indore ITA No. 418/Ind/2023 – AY 2014-15 Page 11 of 18 Jaya Garg, Indore ITA No. 418/Ind/2023 – AY 2014-15 Page 12 of 18 Jaya Garg, Indore ITA No. 418/Ind/2023 – AY 2014-15 Page 13 of 18 8. Referring to above order dated 22.03.2022 passed by AO, Ld. AR submitted that the AO has simply repeated the original version of his recorded reasons and that too with incorrect figures and thereby rejected assessee’s objection. This clearly shows that the AO has committed a serious mistake firstly in recording reasons and secondly in rejecting objection of assessee. Therefore, not only there is a mistake in the action undertaken u/s 147 on the basis of wrong reasons but also there is another mistake in rejecting assessee’s objection and continuing the proceeding u/s 147. Ld. AR submitted that the AO’s approach clearly shows that he just proceeded, acted and executed the information received from Investigation Wing and without application of his own mind. Ld. AR strongly contended that such an approach is clearly illegal, unsustainable and deserves to be quashed. 9. Then, Ld. AR drew us to the order of first-appeal passed by CIT(A) and submitted that although the CIT(A) has passed order running over as many 46 pages yet the operative part of his order is a very small para just confirming the AO’s action as under: “It needs to be stated that reopening has been done after concrete information received from DDIT(Inv), Unit-2(1), Kolkata who is competent investigative authority wherein they have found out that you are involved in the circle of accommodation entry. It is hereby clarified that office of investigation has sufficient material on record and on the basis of the said material and information received from the investigation Wing, proceedings u/s 147 has been initiated as per law and notice has been issued u/s 148 of the Income- tax Act, 1961, which has been duly served upon you. Jaya Garg, Indore ITA No. 418/Ind/2023 – AY 2014-15 Page 14 of 18 In view of the above, assessment proceedings were completed treating the transaction of the appellant as unsecured loan of Rs. 65,00,000/- which is taken by the appellant from the accommodation entry providers as unexplained cash credit u/s 68 and added to the returned income of the appellant, assessing the income at Rs. 75,29,670/-. 8.0 In result the action of AO is upheld and his action is justified as per provisions of income tax act.” 10. Then, Ld. AR submitted that before AO as well as CIT(A), the assessee also filed numerous documents to show that the loans taken by assessee from those 3 lenders were genuine. Those documents were in the shape of A/c confirmations, ITRs, Bank Statements and Audited financial statements of the lenders, etc. copies whereof are also placed at Page 8-69 of Paper- Book. However, neither the AO nor the CIT(A) has paid any attention to assessee’s documents in their respective orders. Ld. AR submitted that the documents submitted by assessee are sufficient enough to establish the ingredients of section 68, namely the identity and creditworthiness of the lenders and the genuineness of transactions. Ld. AR went on submitting that all 3 lenders have already been tested by ITAT, Indore Bench in a catena of decisions whereby the lenders have been held to be genuine. Ld. AR cited the decisions of Global Realcon Pvt. Ltd. Vs. ACIT IT(SS)A No. 170 to 174/Ind/2020 and ACIT Vs. Shri Krishan Devcon Ltd. IT(SS)A No. 8 to 10/Ind/2022 in this regard. Ld. AR further submitted a fact that out of 3 loans, the loans taken from first two parties, namely M/s Jay Jyoti India Pvt. Ltd. and M/s. Jayant Security and Finance Limited, have been repaid by assessee. Jaya Garg, Indore ITA No. 418/Ind/2023 – AY 2014-15 Page 15 of 18 11. With above submissions, Ld. AR made two-fold prayers, namely (i) the action taken by AO u/s 147 itself was invalid being based on wrong reasons and wrong disposal of assessee’s objection, hence the same must be quashed and (ii) in the alternative, the addition made by AO while passing assessment-order is not tenable on merit, hence the addition must be deleted. 12. Per contra, Ld. DR for revenue strongly defended the orders of lower- authorities. Ld. DR, however, agreed that the AO has not taken into account the mistake in the amounts of loans, whether Rs. 65 lakh or Rs. 25 lakh as pointed out by assessee, while disposing of objection. Ld. DR also agreed to Ld. AR’s submission that in certain decisions, the ITAT has held the lenders as genuine parties. But Ld. DR went on submitting that the financial transactions of every assessee are unique, even if made with the same lenders, and have to be looked aptly. 13. We have considered rival contentions of both sides and perused the orders of lower-authorities as well as the material held on record to which our attention has been drawn. Basically, the AO has conducted proceeding u/s 147 and made addition of Rs. 65,00,000/- on account of unexplained loans alleged to have been taken by assessee from 3 lenders. Now, the grievances raised by assessee are two folds, namely (i) the proceedings done by AO u/s 147 were not valid, and (ii) the addition made by AO is also not tenable on merit. So far as the first grievance is concerned, the assessee is harping on the point that although she has taken loans of Rs. 25,00,000/- Jaya Garg, Indore ITA No. 418/Ind/2023 – AY 2014-15 Page 16 of 18 only, the AO has wrongly recorded that she had taken loans of Rs. 65,00,000/-. Therefore, when the reasons are wrong, the entire assessment- proceeding is wrong. We do not agree with such a submission of assessee because at the time of recording reasons, the AO has considered an information received from DDIT(Inv), Unit-2(1), Kolkata informing that the assessee had taken loans of Rs. 65,00,000/-. Therefore, the reason recorded by AO has a basis or material. However, the assessee has a point that despite specific intimation by her in the objection-letter filed to AO informing correct loan amount of Rs. 25,00,000/- in place of Rs. 65,00,000/-, the AO has turned down assessee’s objection re-mentioning the incorrect amounts of loans at Rs. 65,00,000/-. On a careful reading of the order dated 22.03.2022 passed by AO turning down assessee’s objection, re-produced in earlier para, we find that the AO has not considered assessee’s categorical submission of correct loan amount of Rs. 25,00,000/-. Therefore, we agree that although the AO has disposed of assessee’s objection but without considering assessee’s submission with due care and hence there is an infirmity in the order passed by AO. Now, in such a situation, what would be the proper remedy at this stage? We believe that it would be most appropriate to remand this issue to AO for re-consideration of assessee’s objection. Needless to mention that the assessee shall be given opportunity to explain the facts and figures from relevant record. At this stage, we may also mention that in Ground No. 6, the assessee has also mentioned that the AO has made addition of Rs. 65.00 lakhs against actual amount of Rs. Jaya Garg, Indore ITA No. 418/Ind/2023 – AY 2014-15 Page 17 of 18 25.00 lakhs only to make the case assessable u/s 149 of the Income-tax Act, 1961 and cover under the limit of Rs. 50 Lakhs as the time limit of 3 years has expired while issuing notice u/s 148 of the Act. But, however, during hearing neither Ld. AR nor Ld. DR has made any submission on the point of time limit. We are not sure whether the assessee is serious about this time-limit part or not. However, since we are remanding this issue back to AO, the AO shall consider time-limit point also if raised or pressed by assessee. The second part of assessee’s grievance is such that additions were not sustainable even on merits but the lower-authorities have not discussed the contemporary documents filed by assessee to explain the ingredients of section 68 in their orders. When it is so, there is again a necessity to remand this case to AO for due consideration of the documents filed by assessee in the light of decisions of ITAT, Indore narrated by Ld. AR as mentioned in earlier part of this order. Thus, looking from all angles, we feel it most appropriate to remit this matter back to the file of AO for consideration afresh. Needless to mention that the AO shall make a proper adjudication after giving sufficient opportunity to assessee, in accordance with law and without being influenced by earlier order. Jaya Garg, Indore ITA No. 418/Ind/2023 – AY 2014-15 Page 18 of 18 14. Resultantly, this appeal is allowed for statistical purpose. Order pronounced in open court on 15.04.2024 Sd/- sd/- (VIJAY PAL RAO) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक /Dated : 15.04.2024 CPU/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore