Quartz Commercial Pvt. Ltd., Delhi V. ITO, Ward-20(3), New Delhi

ITA 4699/DEL/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0002 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 26-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Assessee Lawyers: PRAVEEN KUMAR MANAGER
• Keywords: Accommodation entries; Sham transactions
• Section: 271(1)(c); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBE R ITA NO. 4699/DEL/2018 ASSESSMENT YEAR: 2007-08 M/S QUARTZ COMMERCIAL PVT. LTD., FLAT NO. 10, C-1/2, MODEL TOWN, DELHI. PAN NO. AAACQ0081E VS ITO WARD 20(3) NEW DELHI. APPELLANT RESPONDENT ASSESSEE BY SHRI PRAVEEN KUMAR, MANAGER REVENUE BY SHRI S.L. ANURAGI, SR. DR ORDER THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST T HE ORDER OF LD. CIT(APPEALS)-7, NEW DELHI DATED 18.05.2018 F OR AY 2007-08, CHALLENGING THE LEVY OF PENALTY U/S 271(1)(C) OF TH E INCOME TAX ACT, 1961. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT ASSESSMEN T IN THIS CASE WAS ORIGINALLY COMPLETED U/S 143(3) OF THE ACT ON 3 0.12.2009. IN THIS ORDER, THE ASSESSEE COMPANY WAS HELD AS AN ENT RY OPERATOR A SUM OF RS. 7,87,000/- BEING 0.5% OF THE TOTAL ENTRI ES OPERATED DURING THE YEAR AT RS. 15.70 CRORES WAS ASSESSED AS ITS INCOME. THE ORDER WAS CONFIRMED BY THE CIT(A). THE ASSESSE E PREFERRED APPEAL BEFORE THE ITAT WHICH VIDE ORDER DATED 01.03 .2013 REMITTED THE MATTER TO THE FILE OF AO WITH A DIRECTION THAT BOOKS OF ACCOUNTS DATE OF HEARING 04.12.2018 DATE OF PRONOUNCEMENT 11.12.2018 2 ITA NO. 4699/DEL /2010 AY 2007-08 M/S QUARTZ COMMERCIAL PVT. LTD. BE EXAMINED AND GIVE A FINDING THEREON. THE AO ISS UED VARIOUS NOTICES BUT ASSESSEE WAS RELUCTANT TO ATTEND INITIA LLY BUT JOINED THE ASSESSMENT PROCEEDINGS AT THE FAG END OF THE PROCEE DINGS. THE BOOKS OF ACCOUNTS WERE PRODUCED AND EXAMINED. THE ASSESSEE DID NOT HAVE ANY OPERATIONAL INCOME AND THE EXPENSES DE BITED AS ROC FEE AND AUDIT FEE AND CLAIMED THESE AS A LOSS IN TH E RETURN. A PERUSAL OF THE BANK ACCOUNT MAINTAINED WITH KARNATA KA BANK LTD. REVEALED THAT AFTER 01.04.2006 THERE WAS ENTRY OF R ECEIPTS OF SHARE APPLICATION MONEY ON 21.03.2007 WHICH WAS IMMEDIATE LY TRANSFERRED TO ANOTHER COMPANY AS SHARE APPLICATION MONEY. OTHER ENTRIES OF RS. 12 CRORES ARE RECEIPT FROM THR EE COMPANIES NAMELY: M/S PLATINUM AGENCIES PVT. LTD., M/S REDIUM CONSULTANCY SERVICES PVT. LTD. AND M/S LAURELS PROP ERTIES PVT. LTD. ON THE SAME DATE THERE WERE TRANSFERS TO THRE E COMPANIES AS SHARE APPLICATION MONEY I.E. M/S REDIUM CONSULTANCY SERVICES PVT. LTD., M/S PLATINIM AGENCIES PVT. LTD., M/S LAU RELS PROPERTIES PVT. LTD. IN FACT THERE IS INCREASE IN SHARE CAPIT AL OF RS. 39,25,000/- BESIDES SHARE PREMIUM OF RS. 15,30,75,0 00/-. ALL WERE CONSIDERED AS THE SHAM TRANSACTIONS AS DISCUSS ED IN THE ORIGINAL ASSESSMENT ORDER AS THE ASSESSEE IS ENGAGE D IN PROVIDING ACCOMMODATION ENTRIES TO VARIOUS COMPANIES OF ITS G ROUP COMPANIES OR CLIENTS. THE AO NOTED THAT THE COMMIS SION CHARGED IS BETWEEN 0.5% TO 2% TO BE MOST CONSERVATIVE ONLY 0.5% OF THE TOTAL ENTRIES OPERATED BY THE ASSESSEE DURING THE Y EAR WAS TREATED AS INCOME OF ASSESSEE DURING THE YEAR WHICH WORKED OUT TO RS. 7,85,000/-. FROM THE PERUSAL OF THE BOOKS OF ACCOU NTS, AO NOTED 3 ITA NO. 4699/DEL /2010 AY 2007-08 M/S QUARTZ COMMERCIAL PVT. LTD. THAT THERE IS A SALE OF SHARE OF RS. 4 LAKHS WHICH ALSO IS A SHAM TRANSACTION AND 0.5% OF THE SAME WORKED OUT TO RS. 2,000/-. THE AO, ACCORDINGLY, MADE ADDITION OF RS. 7,87,000/-. THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE ACCORDING LY INITIATED. THE AO IN THE PENALTY ORDER NOTED THAT THE LD. CIT( A) AS WELL AS ITAT HAVE DISMISSED THE APPEAL OF ASSESSEE. THE AO , THEREFORE, NOTED THAT ASSESSEE HAS FURNISHED INACCURATE PARTIC ULARS OF INCOME AND, AS SUCH, LIABLE FOR PENALTY U/S 271(1)( C) OF THE ACT ON THIS ADDITION. THE AO, ACCORDINGLY, LEVIED THE PE NALTY U/S 271(1)(C) OF THE ACT. THE ASSESSEE PREFERRED APPEA L BEFORE THE LD. CIT(A). THE ASSESSEE FILED WRITTEN SUBMISSION BEFO RE LD.CIT(A) AND IN WHICH IT WAS SUBMITTED THAT ADDITION IS MADE ON MERE ESTIMATION, THEREFORE, PENALTY IS NOT LEVIABLE. TH E LD. CIT(A), HOWEVER, CONFIRM THE LEVY OF PENALTY AND DISMISS TH E APPEAL OF ASSESSEE. 3. I HAVE HEARD THE MANAGER OF THE ASSESSEE COMPANY AND LD. SR. DR. IT IS ARGUED ON BEHALF OF THE ASSESSEE THA T ADDITION IS MADE PURELY ON ESTIMATE, THEREFORE, IT IS NOT A CAS E OF FURNISHING INACCURATE PARTICULARS OF INCOME. THE ASSESSEE REL IED UPON THE FOLLOWING DECISIONS: 1. ORDER OF ITAT DELHI F BENCH IN THE CASE OF PRAGAT I FOODS PVT. LTD. VS. ITO (ITA NO. 914/DEL/2010 DATED 06.05 .2010); 2. JUDGMENT OF DELHI HIGH COURT IN THE CASE OF CIT VS. AERO TRADERS PVT. LTD. (ITA NO. 1097/DEL/2009 DATED 25.0 1.2010 4 ITA NO. 4699/DEL /2010 AY 2007-08 M/S QUARTZ COMMERCIAL PVT. LTD. 3. ORDER OF ITAT DELHI F BENCH IN THE CASE OF PRASHA NT AGGARWAL VS. ACIT AND OTHERS DATED 14.11.2017. 4. ON THE OTHER HAND, LD. DR RELIED UPON ORDERS OF THE AUTHORITIES BELOW. 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL AVAILABLE ON RECORD. THE AO NOTED AFTER E XAMINATION OF THE BOOKS OF ACCOUNTS THAT THERE ARE ENTRIES OF REC EIPT OF SHARE APPLICATION MONEY WHICH WAS IMMEDIATELY TRANSFERRED TO ANOTHER COMPANY AS SHARE APPLICATION MONEY. THE AO, THEREF ORE, FORMED AN OPINION THAT ENTRIES HAVE BEEN TRANSFERRED SUBJE CT TO CHARGING COMMISSION. THE AO ESTIMATED THE COMMISSION INCOME AND MADE THE ADDITION OF RS. 7,87,000/-. THE AO NOTED THAT COMMISSION IS CHARGED IN SUCH CIRCUMSTANCES BETWEEN 0.5% TO 2% AN D ONLY ON CONSERVATIVE SIDE, AO APPLIED 0.5% FOR ASSESSING TH E COMMISSION INCOME. THUS, THE AO IN THE ASSESSMENT ORDER AS WE LL AS IN THE PENALTY ORDER COULD NOT MAKE OUT A CASE AS TO HOW I NACCURATE PARTICULARS HAVE BEEN FURNISHED BY THE ASSESSEE. T HE ADDITION SEEMS TO HAVE BEEN MADE PURELY ON ESTIMATE BASIS. NO FACTS HAVE BEEN GIVEN IN THE ORDERS OF THE AUTHORITIES BELOW A S TO HOW THE ESTIMATES HAVE BEEN MADE. THE AO MERELY PRESUMED T HAT ON RECEIVING SHARE APPLICATION MONEY ENTERY AND TRANSF ERRING SUCH ENTRY, ASSESSEE WOULD HAVE RECEIVED THE COMMISSION INCOME FOR ROTATING THOSE ENTRIES. THE QUANTUM AND PENALTY PR OCEEDINGS ARE INDEPENDENT TO EACH OTHER. THE AO HAS NOT BEEN ABL E TO MAKE OUT A CASE AS TO HOW ASSESSEE FURNISHED INACCURATE PART ICULARS WHILE 5 ITA NO. 4699/DEL /2010 AY 2007-08 M/S QUARTZ COMMERCIAL PVT. LTD. ESTIMATING THE COMMISSION INCOME ON PRESUMPTIONS. THE DECISIONS RELIED UPON BY LD. COUNSEL FOR ASSESSEE C LEARLY APPLY TO THE FACT THAT ON ESTIMATE BASIS IN SUCH CIRCUMSTANC ES PENALTY NEED NOT TO BE LEVIED. 6. I, ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTH ORITIES BELOW AND CANCEL THE PENALTY. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED: 11.12.2018 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI 6 ITA NO. 4699/DEL /2010 AY 2007-08 M/S QUARTZ COMMERCIAL PVT. LTD. DATE OF DICTATION 06.12.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 11/12 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 11/12 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 11/12 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 11/12 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 11/1 2 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER