Yagya Techno Solutions Pvt. Ltd., Karnal V. ACIT, Haryana

ITA 4955/DEL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2983 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 30-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 19-09-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BEDOBANI
• Keywords: Accommodation entries
• Section: 68; 148; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : SMC : NEW DELHI BEFORE SHRI R.S. SYAL, VICE-PRESIDENT ITA NO.4955/DEL/2016 ASSESSMENT YEAR : 2010-11 YAGYA TECHNO SOLUTIONS PVT LTD., 25, 2 ND FLOOR, NEHRU PLACE, KARNAL. PAN : AAACY3078R VS. ACIT, CIRCLE KARNAL, HARYANA. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJIV SACHDEVA, CA RESPONDENT BY: MS BEDOBANI, DR DATE OF HEARING : 30.05.2017 DATE OF PRONOUNCEMENT: 31.05.2017 ORDER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER PASSED BY THE CIT(A) ON 08.07.2016 IN RELATION TO THE ASSESSMENT YEAR 2010-11. 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE CONFIRMATION OF ADDITION OF RS.25 LAC MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT. ITA NO.4955/DEL/2016 2 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED ITS RETURN DECLARING AN INCOME OF RS.11,09,260/- WHICH WAS PRO CESSED U/S 143(1). ON THE BASIS OF INFORMATION RECEIVED FROM THE DIRECTOR OF INCOME-TAX (INV.), THE ASSESSING OFFICER ISSUED NOTICE U/S 148 ON THE PREMISE THAT THE ASSESSEE OBTAINED ACCOMMODATION ENTRIES TOTALING RS.25 LAC I N THE FORM OF BOGUS SHARE CAPITAL/PREMIUM/LOAN FROM SHRI SURENDER KUMAR JAIN GROUP (ENTRY OPERATOR) WHERE SEARCH/SURVEY ACTION WAS TAKEN U/S 132/133A. THE ASSESSEE WAS CALLED UPON TO SHOW CAUSE AS TO WHY RS .25 LAC BE NOT ADDED TO ITS INCOME U/S 68 OF THE ACT. THE ASSESSEE SUBMITT ED DETAILS OF THE FIVE COMPANIES WHO HAD INVESTED RS.5 LAC EACH IN ITS SHA RE WITH FACE VALUE OF RS.10/- AT A PREMIUM OF RS.90/-. NOT CONVINCED WITH THE PAPER TRAIL FURNISHED BY THE ASSESSEE INCLUDING THE DATES OF IN CORPORATION OF THESE COMPANIES, THEIR BALANCE SHEET, AND BANKING CHANNEL ETC., THE ASSESSING OFFICER MADE ADDITION U/S 68 OF THE ACT. THE LD. C IT(A) SUSTAINED THE ADDITION. THE ASSESSEE IS AGGRIEVED AGAINST THE ADD ITION OF RS.25 LAC MADE U/S 68 OF THE ACT. 4. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD. IT IS NOTICED THAT THE ASSESSEE CLAIMED TO HAVE RECEIVED RS.100/- ITA NO.4955/DEL/2016 3 PER SHARE AGAINST THE FACE VALUE OF RS.10/- FROM TH E FOLLOWING FIVE COMPANIES:- I) EURO-ASIA MERCANTILE PVT. LTD. II) MEGA TOP PROMOTERS PVT. LTD., III) SHALINI HOLDING LTD., IV) APPORVA LEASING FINANCE INVESTMENT PVT. LTD. V) AD-FIN CAPITAL SERVICES INDIA PVT. LTD. 5. SHRI SURENDER KUMAR JAIN GROUP (ENTRY OPERATOR), WHO WAS SUBJECTED TO SEARCH/SURVEY ADMITTED TO HAVE ISSUED ACCOMMODAT ION ENTRIES TO VARIOUS BENEFICIARIES INCLUDING THE ASSESSEE. THE ASSESSEE , ON THE OTHER HAND, CLAIMED GENUINENESS OF THE TRANSACTIONS ON THE BASI S OF DOCUMENTS INCLUDING THE IDENTITY OF THE COMPANIES, THEIR PERM ANENT ACCOUNT NUMBERS AND DATES OF INCORPORATIONS ETC. 6. SECTION 68 PROVIDES THAT WHERE ANY SUM IS FOU ND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFI CER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO TAX AS INCOME OF THE ASSESSEE OF THAT YEAR. IT ITA NO.4955/DEL/2016 4 IS A SETTLED LEGAL POSITION THAT THE BURDEN U/S 68 CAN BE DISCHARGED BY NOT ONLY PROVING THE IDENTITY AND CAPACITY OF THE CREDI TOR BUT ALSO THE GENUINENESS OF THE TRANSACTION. ALL THE THREE INGR EDIENTS, NAMELY, IDENTITY, CAPACITY AND GENUINENESS MUST BE CUMULATIVELY SATIS FIED SO AS TO BRING A CASE OUT OF THE AMBIT OF SECTION 68. THE FILING OF DOCUMENTS EVIDENCING THE EXISTENCE OF CREDITOR AND RECEIPT OF MONEY THROUGH BANKING CHANNEL, ETC., NO DOUBT, PROVE THE IDENTITY OF THE CREDITOR, BUT, FURNISHING OF SUCH DETAILS DOES NOT CONCLUSIVELY PROVE THAT ALL THE INGREDIENT S OF SECTION 68 HAVE BEEN ESTABLISHED. ONE OF THE MOST IMPORTANT FEATURES IS TO PROVE THE GENUINENESS OF TRANSACTION. IF THE GENUINENESS OF A TRANSACTIO N IS NOT PROVED, NOTWITHSTANDING THE FACT THAT THE ASSESSEE PROVED T HE IDENTITY AND CAPACITY OF THE CREDITOR, THE ATTRACTIBILITY OF SECTION 68 C ANNOT BE OVERRULED. 7. THE HONBLE DELHI HIGH COURT IN CIT VS. YOUTH CONSTRUCTION PVT. LTD. (2013) 357 ITR 197 (DEL) HAS HELD THAT THE SOLE FACT THAT SHARE APPLICANTS HAD ESTABLISHED THEIR IDENTITY BY FILING CONFIRMATION LETTERS AND COPIES OF THEIR INCOME-TAX RETURNS IS NOT SUFFICIENT FOR THE PURPOSE OF DISCHARGING CREDIT WO RTHINESS OF SHARE APPLICANTS AND GENUINENESS OF TRANSACTIONS. SIMILAR VIEW ITA NO.4955/DEL/2016 5 HAS BEEN TAKEN BY THE HON'BLE JURISDICTIONAL HIGH C OURT IN CIT VS. ULTRA MODERN EXPORTS PVT. LTD. (2013) 40 TAXMAN N.COM 458 (DEL). IN THIS CASE ALSO, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE RECEIVED SHARE APPLICATION MONEY FROM NINE APPLICANTS. UPON ENQUIRY, FIVE OUT OF NINE NOTICES ISSUED TO SH ARE APPLICANTS U/S 133 (6) WERE RETURNED UNSERVED. FURTHER MATERIA L INDICATED THAT APPLICANTS HAD VERY MEAGER INCOME. THE ASSESS ING OFFICER INVOKED SECTION 68 AND MADE ADDITION. THE TRIBUNAL , RELYING ON DOCUMENTARY EVIDENCE SUCH AS PAN, PARTICULARS OF AD DRESSES, ACCOUNTS AND BANK STATEMENTS OF SHARE APPLICANTS, E TC., CAME TO HOLD THAT CREDIT WORTHINESS OF SHARE APPLICANTS WAS PROVED AND RESULTANTLY, THE ADDITION WAS DELETED. SETTING ASI DE THE TRIBUNAL ORDER, THE HON'BLE HIGH COURT HELD THAT THE TRIBUNA L FELL INTO ERROR IN HOLDING THAT THE ASSESSING OFFICER COULD N OT HAVE ADDED BACK THE AMOUNT U/S 68 OF THE ACT. SIMILAR VIEW HA S BEEN TAKEN BY THE HON'BLE DELHI HIGH COURT IN ONASSIS AXLES (P) LTD. VS. (2014) 44 TAXMANN.COM 408 (DEL) . IN CIT VS. N R PORTFOLIO PVT. LTD. (2013) 263 CTR 456 (DEL) , THE ASSESSEE RECEIVED SHARE APPLICATION MONEY FOR WHICH ADDITION WAS MADE U/S 6 8. THE ITA NO.4955/DEL/2016 6 ADDITION WAS DELETED ON THE GROUND OF DOCUMENTARY E VIDENCE. SETTING ASIDE THE TRIBUNAL ORDER, THE HON'BLE HIGH COURT RESTORED THE ADDITION. A DETAILED DISCUSSION HAS BEEN MADE IN THIS JUDGMENT LAYING DOWN THE DUTY OF THE ASSESSEE IN ES TABLISHING THE GENUINENESS OF TRANSACTION. IT HAS BEEN SPECIFICALL Y LAID DOWN THAT MERE FURNISHING THE NAME, ADDRESS, PAN AND ENTRIES IN THE REGISTRAR OF COMPANIES, ETC., DO NOT LEAD TO THE DI SCHARGE OF ONUS U/S 68. THE HON'BLE DELHI HIGH COURT IN CIT VS. JANSAMPARK ADVERTISING AND MARKETING PVT. LTD. (2015) 375 ITR 373 (DEL) DID NOT AGREE WITH THE ROUTING OF TRANSACTION THROU GH BANKING CHANNEL AS NECESSARILY PROVING THE CREDIT WORTHINES S OF THE PARTIES OR THE GENUINENESS OF THE TRANSACTIONS. TH IS JUDGMENT CLEARLY PROVES THAT THE VERY FACT THAT THE TRANSACT IONS ARE ROUTED THROUGH BANKING CHANNEL WOULD NOT PER SE LEND GENUINENESS TO THE TRANSACTION. IT HAS BEEN FURTHER LAID DOWN IN THIS CASE THAT IF THE ASSESSING OFFICER HAS NOT CONDUCTED PROPER ENQU IRY, THE ADDITION CANNOT BE DELETED SIMPLY ON THE GROUND THA T THE ASSESSING OFFICER FAILED TO CONDUCT ENQUIRY. IN SU CH CIRCUMSTANCES, A DUTY HAS BEEN CAST UPON THE APPELL ATE AUTHORITIES ITA NO.4955/DEL/2016 7 TO CONSIDER THE EVIDENCE AS TO WHETHER THE ADDITION WAS RIGHTLY CALLED FOR OR NOT. THE HON'BLE JURISDICTIONAL HIGH COURT IN A RECENT DECISION IN PARAMOUNT INTERCONTINENTAL PVT. LTD. VS . ITO (2017) 392 ITR 505 (DEL) DEALT WITH ALMOST SIMILAR FACTS IN WHICH ALL DETAILS SUCH AS PRICES, CONFIRMATION LETTERS, PAN AND BANK DETAILS, ETC. WE RE PRODUCED, BUT, THE ADDITION MADE ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT THAT THE ASSESSEE WAS A BENE FICIARY OF ACCOMMODATION ENTRIES RECEIVED FROM CERTAIN ENTRY O PERATORS WAS UPHELD. 8. COMING BACK TO THE FACTS OF THE INSTANT CASE , I FIND THAT THE LD. CIT(A) HAS RIGHTLY APPRECIATED THE FACTUAL MATRIX OF ALL T HE FIVE COMPANIES IN THE FOLLOWING TERMS. I) EURO-ASIA MERCANTILE PVT. LTD . AS PER THE COPY OF THE INCOME TAX RETURN FILED, TH E TOTAL INCOME HAS BEEN SHOWN AT RS. 33,869/- FOR A.Y. 2008-09. THOUGH , THE DOCUMENTS RELATING TO THE IDENTITY OF THE COMPANY HAS BEEN ES TABLISHED THERE IS ONLY INCOME OF RS.3,28,250/- ON ACCOUNT OF PROFIT ON SAL E OF INVESTMENT. ON THE OTHER HAND, ASSETS HAVE BEEN SHOWN AT RS.481,120,67 5/-. THE NATURE OF ITA NO.4955/DEL/2016 8 BUSINESS ACTIVITY OF THE COMPANY APPEARS TO BE VAGU E AND ACCOUNTS OF THE PARTY GIVES THE IMPRESSION OF IT, BEING A SHELL COM PANY. II) MEGA TOP PROMOTERS PVT. LTD . ON GOING THROUGH THE INCOME TAX RETURN FOR A.Y. 20 08-09, THE TOTAL INCOME HAS BEEN SHOWN AT RS.18,015/-. IN THIS CAS E ALSO, THE ONLY INCOME SHOWN IN THE PROFIT AND LOSS ACCOUNT IS INTEREST ON LOAN AND PROFIT ON SALE OF INVESTMENT. THE ASSETS SHOWN IN THE BALANCE SHEET A S ON 31.03.2008 AMOUNT TO RS. 164,107,423/-. IN THIS CASE ALSO THE NATURE OF BUSINESS ACTIVITY APPEARS TO BE VAGUE AND THE FINANCIAL DOCU MENTS INDICATE THIS COMPANY ALSO IS NOT HAVING GENUINE BUSINESS ACTIVIT Y. III) SHALINI HOLDING LTD . ON GOING THROUGH THE INCOME TAX RETURN FOR A.Y. 20 08-09, THE INCOME HAS BEEN DECLARED AT RS. 1,21,716/-. THE ONL Y SOURCE OF INCOME ARE INTEREST INCOME AND PROFIT ON SALE OF INVESTMENT. T HE VALUE OF ASSETS AS ON 31.03.2008 IS RS. 1,248,730,000/-. CLEARLY THE VALU E OF THE ASSETS IS HUGELY DISPROPORTIONATE TO THE RETURN INCOME OF THE COMPAN Y, WHICH CLEARLY ITA NO.4955/DEL/2016 9 INDICATES THAT THE COMPANY IS ONLY FUNCTIONING FOR PURPOSES OF PROVIDED ENTRIES. IV) APPORVA LEASING FINANCE INVESTMENT PVT. LTD. ON GOING THROUGH THE INCOME TAX RETURN FOR A.Y. 20 08-09, THE TOTAL INCOME HAS BEEN RETURNED AT NIL. AS PER THE PROFIT AND LOSS ACCOUNT, THE INCOME SHOWN IS FROM 'INCOME FROM OPERATION' AMOUNT ING TO RS. 1,32,150/-. THE LOSS FOR THE YEAR HAS BEEN SHOWN AT RS. 2,23,666/-. THE VALUE IN THE BALANCE SHEET HAS BEEN SHOWN AT RS.148 ,625,000/-. THESE FINANCIAL STATISTICS CLEARLY INDICATE THAT THE BAL ANCE SHEET AND INVESTMENTS OF THE COMPANY WERE CREATED NOT FOR DOING ANY GENU INE BUSINESS BUT ONLY FOR ACTING AS SHELL COMPANIES AND PROVIDING ENTRIES . V) AD-FIN CAPITAL SERVICES INDIA PVT. LTD . WITH REGARD TO AD-FIN CAPITAL INDIA PVT. LTD, IN C OMPLETE DETAILS REGARDING ITR, BALANCE SHEET AND PROFIT AND LOSS AC COUNT WAS PROVIDED BY THE AR OF THE APPELLANT WHICH CLEARLY DID NOT ESTAB LISH THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS. ITA NO.4955/DEL/2016 10 9. IT CAN BE SEEN THAT THE ABOVE FIVE COMPANIES ARE CLAIMING TO HAVE INVESTED A SUM OF RS.5 LAC EACH IN THE ASSESSEE COM PANY, BUT, THE FACTS ABOUT THEIR TOTAL INCOME VIS--VIS THE VALUE OF ASS ETS, DO NOT PROVE THE GENUINENESS OF TRANSACTION. IT IS FURTHER RELEVANT TO NOTE THAT THE ASSESSEE IS CLAIMING TO HAVE ISSUED ITS SHARE WITH FACE VALUE O F RS.10/- AT A PREMIUM OF RS.90/-. IT IS BEYOND MY COMPREHENSION AS TO WHY A PERSON WILL PURCHASE THE SHARES OF THE ASSESSEE COMPANY AT SUCH A HUGE P REMIUM, MORE SO, WHEN THERE IS NO PAYMENT OF ANY DIVIDEND, ETC. NO PRUDE NT INVESTOR WILL PARK HIS FUNDS AT SUCH A HIGH PREMIUM WITHOUT THE EXPECTED R ETURN COMMENSURATE WITH THE INVESTMENT. WHEN ALL THE FACTS AND CIRCUM STANCES ARE SEEN IN ENTIRETY, IT BECOMES EVIDENT THAT THE ASSERTION OF SHRI SURENDER KUMAR JAIN GROUP (ENTRY OPERATOR) ABOUT PROVIDING ACCOMMODATIO N ENTRIES TO THE ASSESSEE WAS CORRECT AS THE ASSESSEE COULD NOT PROV E THE GENUINENESS OF TRANSACTIONS. 10. IN VIEW OF THE FOREGOING REASONS, I AM SATISFIE D THAT THE LD. CIT(A) WAS JUSTIFIED IN SUSTAINING THE ADDITION. ITA NO.4955/DEL/2016 11 11. IN THE RESULT, THE APPEAL IS DISMISSED. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 3 1 ST MAY, 2017. SD/- (R.S. SYAL) VICE-P RESIDENT DATED: 31 ST MAY, 2017. DK COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR DY. REGISTRAR, ITAT, NEW DELHI