ITO, New Delhi V. M/s. Fussy Financial Services Pvt. Ltd., New Delhi

ITA 4227/DEL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3038 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 31-05-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 01-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Accommodation entries
• Section: 143(3); 133(6); 131; 68; 6

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH 'B', NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER I.T.A. NO. 4227/DEL/2014 A.Y. 2005-06 INCOME TAX OFFICER, VS. M/S FUSSY FINANCIAL WARD-11(3), NEW DELHI SERVICES PVT. LTD. ROOM NO. 374A, C.R. BLDG., 1117/12, 3 RD FLOOR, NEW DELHI NAIWALA, KAROL BAGH, NEW DELHI 110 005 (PAN: AAACF0157G) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. ANIL KUMAR SHARMA, SR. DR ASSESSEE BY : SH. KAPIL GOEL, ADV. ORDER PER H.S. SIDHU, JM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XIII, NEW DELH I DATED 23.05.2014 PERTAINING TO ASSESSMENT YEAR 2005-06 ON THE FOLLOW ING GROUNDS:- 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS. 3,17,67,951/- MADE ON ACCOUNT OF UNEXPLAINED CREDIT S U/S. 68 OF THE I.T. ACT. 2 2. THE APPELLANT CRAVES LEAVE FOR ADD, ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARIN G OF THIS APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE HAD FILED ITS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR 2005-06 ON 29.10.2005 DECLARING INCOME OF RS. 3,557/-. THE RETURN WAS PRO CESSED U/S. 143(1) OF THE I.T. ACT, 1961. SUBSEQUENTLY, THE NOTICE U/S. 143(2) OF THE ACT WAS ISSUED TO THE ASSESSEE. IN RESPONSE TO THE NOTICE, THE A.R. OF THE ASSESSEE ATTENDED THE PROCEEDINGS FROM TIME TO TIME AND FILE D THE DETAILS. IN THIS CASE DURING THE YEAR THE SHARE CAPITAL OF THE ASSES SEE COMPANY HAS INCREASED BY RS. 1,01,90,000/- AND RESERVE AND SURP LUS HAS INCREASED BY RS. 1,98,64,000/- WHICH SHOWS THAT SHARES WERE A LLOTTED ON PREMIUM. OTHER LIABILITIES ALSO INCREASED BY RS. 6,31,020/-. THE ASSESSEE HAS ALSO INVESTED MOST OF THE AMOUNTS IN OTHER COMPANIES BY WAY OF LOANS OR SHARE PURCHASE. AS PER PROFIT AND LOSS ACCOUNT THE ASSESSEE HAS SHOWN AN INCOME OF RS. 85,873/- ONLY FROM OTHER SOURCES. AO OBSERVED THAT THE SHARE CAPITAL RAISED BY THE ASSESSEE COMPANY REQUIR ED VERIFICATION HENCE NOTICES U/S. 133(6) WERE SENT TO ALL THE PARTIES. C ONFIRMATIONS FROM ALL THE PARTIES WAS ALSO RECEIVED. HOWEVER, FROM THE CONFIR MATIONS RECEIVED, IT WAS NOTED THAT ALL THE CONFIRMATIONS WERE RECEIVE D FROM KAROL BAGH POST OFFICE WHEREAS SOME OF THE PARTIES WERE FROM DELHI GATE AREA. THEREAFTER AO OBSERVED THAT THE ASSESSEE COMPANY HAS RECEIVE D / PROVIDED ENTRIES TO OTHER PAPER COMPANIES SO AS TO PASS ON THE MONE Y TO THE ULTIMATE BENEFICIARIES AND THE TRANSACTION IS ALSO NOT GENUI NE, IDENTITY IS NOT 3 PROVED AS NONE OF THE DIRECTORS HAVE BEEN PRODUCED OR APPEARED IN RESPONSE TO THE SUMMONS ISSUED AND ALSO AS PER THE REPORT OF THE INSPECTOR IN THIS REGARD. HOWEVER, CREDITWORTHINESS ALSO REMAINS DISPUTED. AO FURTHER OBSERVED THAT IN FACT THE ASSE SSEE HAS NOT DONE ANY REAL BUSINESS AND HAS CIRCULATED THE MONEY WITHIN T HE GROUP TO ULTIMATE BENEFICIARIES. AS THE DEPARTMENT IS ALSO LOOKING AF TER THE CASES OF BENEFICIARIES AND THE AMOUNTS CHANNELIZED THROUGH THIS GROUP WOULD BE TAXED IN THE HANDS OF BENEFICIARIES, THE AMOUNT OF TOTAL CREDITS OF RS. 3,17,67,951/- MADE IN ITS BANK ACCOUNT WITH KOT AK MAHINDRA BANK, KG MARG, NEW DELHI, DURING THE YEAR WAS ADDED TO TH E INCOME OF THE ASSESSEE ON PROTECTIVE BASIS AND ACCORDINGLY THE AO COMPLETED THE ASSESSMENT AT RS. 3,27,37,450/- U/S. 143(3) OF THE I.T. ACT, 1961 VIDE ORDER DATED 27.12.2007. AGGRIEVED BY THE ASSESSMENT ORDER DATED 27.12.2007, THE ASSESSEE APPEALED BEFORE THE LD. CI T(A), WHO VIDE HIS IMPUGNED ORDER DATED 23.05.2014 HAS DELETED THE ADD ITION AND PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 3. AGGRIEVED WITH THE IMPUGNED ORDER OF THE LD. CI T(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. LD. DR RELIED UPON THE ORDER OF THE AO AND REIT ERATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL. 5. ON THE CONTRARY, LD. A.R. OF THE ASSESSEE RELIE D UPON THE ORDER OF THE LD. CIT(A). 4 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS, ESPECIALLY THE ORDER OF THE LD. CIT(A). WE FIND THA T LD. FIRST APPELLATE AUTHORITY HAS ELABORATELY DISCUSSED AND ADJUDICATED THE ISSUE IN DISPUTE VIDE PARA NO. 2.1 AT PAGE NO. 5 TO 11. THE RELEVAN T FINDINGS OF THE LD. CIT(A) ARE REPRODUCED AS UNDER:- 2.1 I HAVE CAREFULLY PERUSED THE FACTS OF THE CASE AND THE DETAILED SUBMISSIONS MADE BY THE COUNSEL OF THE APPELLANT. THE FACTS DENOTED IN THE ASSESSMENT ORDER REVEAL THAT THE ASSESSING OFFICER MADE THE ADDITION OF RS. 3,17,678,951/- ON PROTECTIVE BASIS U/S. 68 OF THE ACT. THE ASSESSING OFFICER ACCEPTED THE FACT THAT THE APPELLANT IS ACTING AS THE ENTRY OPERATOR. THE CASE WAS REMANDED BACK TO THE ASSESSING OFFICER FOR HIS SPECIFIC COMMENTS ON THE QUANTUM OF SHARE APPLICATION MONEY RECEIVED BY THE COMPANY. THE ASSESSING OFFICER VIDE REMAND REPORT DATED 16.8.2012 REPORTED THAT TOTAL CREDITS OF RS. 3,17,67,952/- CAME INTO THE BANK ACCOUNTS OF THE COUNTRY. THE STATEMENT OF SH. PN JHA, DIRECTOR OF THE COMPANY WAS RECORDED U/S. 131 OF THE ACT BY THE 5 ASSESSING OFFICER ON 11 TH OF JUNE, 2004. THE STATEMENT IS REPRODUCED AS UNDER:- .. SH. PN JHA IN HIS ANSWER TO THE VARIOUS QUESTIONS CATEGORICALLY EXPLAINED THAT THE COMPANY IS DOING THE BUSINESS OF INVESTMENT AND FINANCE. IN ANSWER TO Q.NO. 8 HE EXPLAINED THAT THE BANK ACCOUNTS OF THE COMPANY HAVE BEEN USED FOR PROVIDING THE ACCOMMODATION ENTRIES. THE COMPANY HAS EARNED THE GROSS COMMISSION INCOME RANGING FROM 0.5% TO 1% AND AFTER ADJUSTING THE VARIOUS EXPENSES THE NET INCOME RANGES BETWEEN 0.25% TO 0.5%. HE CATEGORICALLY EXPLAINED THAT THE VARIOUS ENTRIES HAVE BEEN ROTATED THROUGH THEIR BANK ACCOUNTS AND ENTRIES TO THE FOLLOWING HAVE BEEN GIVEN DURING THE YEAR AS APPEARING IN THE BOOKS OF ACCOUNTS AS ON 31.3.2005. INVESTMENTS AS AT 31 . 03 . 2005 AS AT 31 . 03.2004 6 ESTEEM S E CUR IT I ES & L EAS IN G L TD . 500000 . 00 500000 . 00 PR O SAFE I NV ES T ME N T PV T . L T D . 7 372 0 0 0 . 00 12 4 2 000 . 00 PRO S HA RE INVE STM E N T & FIN . PVT . LT D 2 334000 . 00 1 4 8 4000 . 00 SAR FIN A N CE & INV ES TMENT P L T D 7 50000 . 00 7 50000 . 00 VS CA P ITA L SERVICE S P L TD. 570000 . 00 57 0000 . 00 NISHT I KA I NVESTMENT & F IN . P VT L T D . 800000 . 00 8 00000 . 00 RO S MI K F INLEASE L TD 150000 . 00 1 50000.00 CHINTAN SE C URITI E S &FI N . L T D . 650000 . 00 . 650000 . 00 . ABO INV ES TMENT PVT . L TD . 1 960000 . 00 560000 . 00 F L N WI Z C A P I T AL S ER VICE S PV T . L T D 4850000 . 00 4 50000 . 00 G & G PH ARM A ( I) LTD 4 50000 . 00 45 0000 . 00 M EE N AK S H I OV E R SEAS PVT . LT D 11 00000.00 1 100000 . 00 ZA R S TR A DIN G PVT . LTD . 4 00000 . 00 400000 . 00 I N V ES TW E LL SEC U R IT IES PVT . LTD . 500000 . 00 500000 . 00 AF R O S H ASTER M ERC ~ AN T S P V T . LT D . 9 1 0000 . 00 - - A GGREGATE F INA N CE & I N V E . P LTD . 5665000 . 00 ~ - - I F G E NIU S POLYM E R S PV T . LTD . 3500000 . 00 - - H ARERA M R ES T A UR E N T S PV T . L T D . 1100000 . 00 -- MEG H NA T OWE RS P VT . LTD. 1 050000 . 0 0 -- RAJAT CHIT S PVT . LTD . 7 0000 0 . 00 -- SUBH A M E L EC TRI CA L S PVT . LTD 1150 000 . 00 - - SW AS T I K P ROPBU IL R L P VT . L TD . 5 0 0 00 0 .00 -- O T HE RS 13440000 . 00 10301150 . 0 0 50401000 .0 0 19907150.00 THE ANALYSIS OF THE INVESTMENT ACCOUNT REVEAL THAT THE COMPANY HAS MADE INVESTMENT OF RS. 5,04,01,000/ . THE STATEMENT GIVEN BY SH. PN JHA ASSUMES IMPORTANC E WHEREIN HE CATEGORICALLY ADMITTED THAT THE COMPANY WAS DOING THE BUSINESS OF INVESTMENT AND FINANCE AN D DURING THE YEAR THE BANK ACCOUNTS OF THE COMPANY HA VE BEEN USED TO PROVIDE THE ACCOMMODATION ENTRIES. TH E 7 ADDITION OF RS. 3,17,67,951/- MADE BY THE ASSESSING OFFICER ON PROTECTIVE BASIS THEREFORE, DESERVES TO BE DELETED. 7. ON GOING THROUGH THE AFORESAID FINDINGS OF THE LD. CIT(A), WE FIND THAT THE ASSESSING OFFICER MADE THE ADDITION OF RS. 3,17,678,951/- ON PROTECTIVE BASIS U/S. 68 OF THE ACT. THE ASSESSING OFFICER ACCEPTED THE FACT THAT THE ASSESSEE IS ACTING AS THE ENTRY OPERATOR. THE CASE WAS REMANDED BACK TO THE ASSESSING OFFICER FOR HIS SPECIFIC COMM ENTS ON THE QUANTUM OF SHARE APPLICATION MONEY RECEIVED BY THE COMPANY. T HE ASSESSING OFFICER VIDE HIS REMAND REPORT DATED 16.8.2012 REPORTED TH AT TOTAL CREDITS OF RS. 3,17,67,952/- CAME INTO THE BANK ACCOUNTS OF TH E COUNTRY. THE STATEMENT OF SH. PN JHA, DIRECTOR OF THE COMPANY WA S RECORDED U/S. 131 OF THE ACT BY THE ASSESSING OFFICER ON 11 TH OF JUNE, 2004. THE STATEMENT OF SH. PN JHA IS MENTIONED AT IMPUGNED ORDER PAGE N O. 6 TO 9 WRITTEN IN HINDI LANGUAGE, WHICH IS NOT REPRODUCED HEREUNDER. HOWEVER, SH. PN JHA IN HIS ANSWER TO THE VARIOUS QUESTIONS CATEGO RICALLY EXPLAINED THAT THE COMPANY IS DOING THE BUSINESS OF INVESTMENT AN D FINANCE. IN ANSWER TO Q.NO. 8 HE EXPLAINED THAT THE BANK ACCOUNTS OF T HE COMPANY HAVE BEEN USED FOR PROVIDING THE ACCOMMODATION ENTRIES. THE COMPANY HAS EARNED THE GROSS COMMISSION INCOME RANGING FROM 0.5 % TO 1% AND AFTER ADJUSTING THE VARIOUS EXPENSES THE NET INCOME RANGE S BETWEEN 0.25% TO 0.5%. WE FURTHER FIND THAT THE VARIOUS ENTRIES HA VE BEEN ROUTED THROUGH THEIR BANK ACCOUNTS AND ENTRIES TO THE FOLLOWING HA VE BEEN GIVEN DURING THE YEAR AS APPEARING IN THE BOOKS OF ACCOUNTS AS O N 31.3.2005. 8 INVESTMENTS AS AT 31 . 03 . 2005 AS AT 31 . 03.2004 ESTEEM S E CUR IT I ES & L EAS IN G L TD . 500000 . 00 500000 . 00 PR O SAFE I NV ES T ME N T PV T . L T D . 7 372 0 0 0 . 00 12 4 2 000 . 00 PRO S HA RE INVE STM E N T & FIN . PVT . LT D 2 334000 . 00 1 4 8 4000 . 00 SAR FIN A N CE & INV ES TMENT P L T D 7 50000 . 00 7 50000 . 00 VS CA P ITA L SERVICE S P L TD. 570000 . 00 57 0000 . 00 NISHT I KA I NVESTMENT & F IN . P VT L T D . 800000 . 00 8 00000 . 00 RO S MI K F INLEASE L TD 150000 . 00 1 50000.00 CHINTAN SE C URITI E S &FI N . L T D . 650000 . 00 . 650000 . 00 . ABO INV ES TMENT PVT . L TD . 1 960000 . 00 560000 . 00 F L N WI Z C A P I T AL S ER VICE S PV T . L T D 4850000 . 00 4 50000 . 00 G & G PH ARM A ( I) LTD 4 50000 . 00 45 0000 . 00 M EE N AK S H I OV E R SEAS PVT . LT D 11 00000.00 1 100000 . 00 ZA R S TR A DIN G PVT . LTD . 4 00000 . 00 400000 . 00 I N V ES TW E LL SEC U R IT IES PVT . LTD . 500000 . 00 500000 . 00 AF R O S H ASTER M ERC ~ AN T S P V T . LT D . 9 1 0000 . 00 - - A GGREGATE F INA N CE & I N V E . P LTD . 5665000 . 00 ~ - - I F G E NIU S POLYM E R S PV T . LTD . 3500000 . 00 - - H ARERA M R ES T A UR E N T S PV T . L T D . 1100000 . 00 -- MEG H NA T OWE RS P VT . LTD. 1 050000 . 0 0 -- RAJAT CHIT S PVT . LTD . 7 0000 0 . 00 -- SUBH A M E L EC TRI CA L S PVT . LTD 1150 000 . 00 - - SW AS T I K P ROPBU IL R L P VT . L TD . 5 0 0 00 0 .00 -- O T HE RS 13440000 . 00 10301150 . 0 0 50401000 .0 0 19907150.00 7.1 WE FURTHER NOTE THAT THE ANALYSIS OF THE INVEST MENT ACCOUNT REVEAL THAT THE COMPANY HAS MADE INVESTMENT OF RS. 5,04,01 ,000/. THE STATEMENT GIVEN BY SH. PN JHA ASSUMES IMPORTANCE WH EREIN HE CATEGORICALLY ADMITTED THAT THE COMPANY WAS DOING T HE BUSINESS OF INVESTMENT AND FINANCE AND DURING THE YEAR THE BANK ACCOUNTS OF THE COMPANY HAVE BEEN USED TO PROVIDE THE ACCOMMODATION ENTRIES. THE ADDITION OF RS. 3,17,67,951/- MADE BY THE ASSESSING OFFICER ON PROTECTIVE BASIS, WHICH IS NOT SUSTAINABLE IN THE EYES OF LAW, BECAUSE IN THIS CASE THE AO HIMSELF STATED IN THE ASSESSMENT ORDER THAT THE DEPARTMENT IS 9 LOOKING AFTER THE CASES OF BENEFICIARIES AND THE AM OUNTS CHANNELIZED THROUGH THIS GROUP WOULD BE TAXED IN THE HANDS OF T HE BENEFICIARIES, THE AMOUNT OF TOTAL CREDITS OF RS. 3,17,67,951/- MADE I N ITS BANK ACCOUNT WITH KOTAK MAHINDRA BANK, KG MARG, NEW DELHI, DURI NG THE YEAR IS ADDED TO THE INCOME OF THE ASSESSEE ON PROTECTIVE BASIS. IN THIS CASE WE FIND THAT AO HAS NOT MADE ANY SUBSTANTIVE ASSESSMENT. TH ERE MAY BE SUBSTANTIVE ASSESSMENT WITHOUT ANY PROTECTIVE ASSES SMENT, BUT THERE CANNOT BE ANY PROTECTIVE ASSESSMENT WITHOUT THERE B EING A SUBSTANTIVE ASSESSMENT. 7.2 KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE OF THE CONSIDERED VIEW THAT LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION IN DISPUTE, WHICH DOES NOT NEED ANY INTERF ERENCE ON OUR PART, HENCE, WE UPHOLD THE ACTION OF THE LD. CIT(A) ON TH E ISSUE IN DISPUTE AND REJECT THE GROUND RAISED BY THE REVENUE. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED ON 05/06/2017. SD/- SD/- (O.P. KANT) (H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 05/06/2017 'SRBHATNAGAR' COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES