M/s Sadguru Finman Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 771/DEL/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4725 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2003-2004
• Appeal Filed On: 12-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NIDHI SRIVASTAVA
• Keywords: Unexplained cash credit; Search and seizure; Peak credit; Accommodation entries; Set aside
• Section: 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT & SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 771/DEL/2016 ASSESSMENT YEAR: 2003-04 SADGURU FINMAN PVT. LTD. 13/34, 4 TH FLOOR, WEA, KAROL BAGH, NEW DELHI. PAN NO. AABCS4800J VS DCIT CENTRAL CIRCLE 29, NEW DELHI. APPELLANT RESPONDENT ASSESSEE BY SHRI V.P. GUPTA, ADV. REVENUE BY MS. NIDHI SRIVASTAVA, CIT DR ORDER PER SHRI BHAVNESH SAINI, J.M. THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST T HE ORDER OF LD. CIT (APPEALS)-30, NEW DELHI DATED 27.11.2015 FOR AY 2003- 04. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE OPERATION U/S 132 OF THE INCOME TAX ACT WAS CARRIED OUT AT THE DATE OF HEARING 08.05.2019 DATE OF PRONOUNCEMENT 20.05.2019 2 ITA NO . 771/DEL/2016 BUSINESS PREMISES AT 13/34, WEA, 4 TH FLOOR, ARYA SAMAJ ROAD, KAROL BAGH, NEW DELHI OF TARUN GOYAL GROUP ON 15. 09.2008. DURING THE SEARCH AND SEIZURE OPERATION AT BUSINESS PREMISES OF SHRI TARUN GOYAL, CERTAIN DOCUMENTS BELONGING TO TH E ASSESSEE COMPANY WERE FOUND AND SEIZED. PURSUANT TO THIS, A SSESSMENT PROCEEDINGS WERE INITIATED BY ISSUE OF NOTICE U/S 1 53C OF THE ACT AND ASSESSMENT WAS COMPLETED ON 20.12.2010 U/S 153C OF THE ACT AT AN INCOME OF RS. 4,31,270/- BY MAKING AN ADD ITION OF RS. 4,81,500/- ON ACCOUNT OF UNEXPLAINED COMMISSION AND CASH CREDITS. THE AO NOTED MODUS OPERANDI OF SHRI TARUN GOYAL WHO HAS FLOATED A NUMBER OF PRIVATE LIMITED COMPANIES A ND FIRMS FOR PROVIDING ACCOMMODATION ENTRIES. THE DIRECTORS OF THESE COMPANIES WERE HIS EMPLOYEES, WHO WORKED IN HIS OFF ICE AS PEONS, CLERKS, RECEPTIONIST, ETC. ALL THE DOCUMENTS INCLU DING BLANK CHEQUES WERE GOT SIGNED FROM THESE EMPLOYEES ON THE DIRECTION OF SHRI TARUN GOYAL. SHRI TARUN GOYAL IN HIS STATEMEN T RECORDED DURING THE COURSE OF SEARCH ADMITTED TO HAVE PROVID ED ACCOMMODATION ENTRIES TO VARIOUS PARTIES. THE AO N OTED THE FACT IN DETAIL IN THE ASSESSMENT ORDER. THE AO HELD THA T THE ASSESSEE HAS CHARGED COMMISSION AT DIFFERENT RATES. FOR THE PURPOSE OF CALCULATING COMMISSION INCOME OF THE ASSESSEE, THE RATE OF COMMISSION WAS TAKEN AT 2.25% ON THE BASIS OF THE S EIZED MATERIAL. THE AO CONSIDERED THE ACCOUNT OF ASSESSE E AND BALANCE SHEET AS ON 31.03.2003 AND OBSERVED THAT ASSESSEE C OMPANY HAD MADE INVESTMENT IN UNQUOTED SHARES OF DIFFERENT COM PANIES. THE AMOUNT OF INVESTMENT WAS RS. 14,00,000/- IN THE YEA R UNDER 3 ITA NO . 771/DEL/2016 CONSIDERATION. THE AO HELD THAT INVESTMENT SHOWN O UTSIDE GROUP COMPANIES WERE ACCOMMODATION ENTRIES AND ADDED INCO ME OF RS. 31,500/- BY APPLYING RATE OF COMMISSION @ 2.25%. T HE CIT(A) VIDE ORDER DATED 01.06.2012 CONFIRMED THE ADDITIONS MADE BY THE AO. THE ITAT VIDE ITS CONSOLIDATED ORDER DATED 18. 10.2013 FOR ASSESSMENT YEARS 2003-04 TO 2008-09 IN ITA NOS. 462 9 TO 4634/DEL/2012 HAS SET ASIDE THE ASSESSMENT ORDER PA SSED U/S 153C OF THE ACT AND RESTORED BACK THE MATTER TO THE FILE OF AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW. THE TRI BUNAL DIRECTED THAT ASSESSMENT ORDER FOR EACH COMPANY HAS TO BE PA SSED SEPARATELY. THE CREDIT APPEARING IN THE BOOKS OF E ACH ASSESSEE HAS TO BE EXPLAINED BY THAT ASSESSEE. THE IDENTITY , CREDITWORTHINESS AND GENUINENESS OF THE CREDITOR HA VE TO BE PROVED BY THAT PARTICULAR ASSESSEE AND IF THE SAME IS NOT PROVED, ADDITION MAY BE MADE U/S 68 OF THE ACT. THE AO WAS FURTHER DIRECTED THAT HE SHALL AFTER EXAMINATION OF EVIDENC E SUBMITTED BY THE ASSESSEE, CONSIDER ALL THE CASES TOGETHER AND R ESTRICT THE ADDITION U/S 68 OF THE ACT TO ONLY PEAK UNEXPLAINED CREDIT IN EACH CASE AFTER ELIMINATING CIRCULAR TRANSACTION. THE T AXATION OF SAME AMOUNT MULTIPLE TIMES DUE TO CHAIN OF TRANSACTIONS INVOLVED LAYERING ARE TO BE ELIMINATED. FOR DETERMINING THE PERCENTAGE OF COMMISSION, THE MATERIAL ON RECORD AND PRECEDENCE A VAILABLE IS TO BE CONSIDERED. 3. THE AO IN VIEW OF THE DIRECTIONS OF THE TRIBUNAL TAKEN UP THE MATTER AFRESH AND NOTED THAT TRIBUNAL HAS PUT THE B URDEN OF PROOF ON THE ASSESSEE. THE ASSESSEE WAS ASKED TO SUBMIT DETAILS AND 4 ITA NO . 771/DEL/2016 SOURCE OF BANK DEPOSITS AND TO SUBSTANTIATE THE TRA NSACTIONS. THE AO NOTED THAT ASSESSEE WAS ASKED TO FURNISH FUND FL OW CHART RELATING TO ACCOMMODATION ENTRY OPERATION AND TO DE MONSTRATE THE UNBROKEN CHAIN OF TRANSACTIONS RELATING TO ACCOMMOD ATION ENTRIES. THE ASSESSEE SUBMITTED THE TRANSACTION DETAILS IN B ANK ACCOUNT ONLY IN RESPECT OF COMPANIES WHICH ARE UNDER ASSESS MENT IN THIS CHARGE. THE DETAILS IN RESPECT OF INTERVENING ASSE SSMENT YEARS WHICH WERE NOT UNDER ASSESSMENT, WERE NOT FILED. N O DETAILS OF FUND FLOW IN THE ACCOUNTS OF THE OTHER GROUP COMPAN IES WERE FILED. THUS, THE ASSESSEE WAS UNABLE TO DEMONSTRATE THE UN BROKEN CHAIN OF TRANSACTIONS RIGHT FROM THE RECEIPTS OF CA SH, SUBSEQUENT LAYERING OF FUNDS IN THE GROUP COMPANIES AND THE TR ANSFER OF MONEY TO ULTIMATE BENEFICIARIES. THE ASSESSEE ALSO FAILED TO IDENTIFY THE ACCOUNTS IN WHICH FIRST TRANSACTION IN THE SERIES OF TRANSACTIONS WAS MADE. THE ASSESSEE ALSO FAILED TO IDENTIFY THE ACCOUNTS THROUGH WHICH THE FIRST TIME DEPOSITS WERE ROUTED SUBSEQUENTLY BEFORE FINALLY ISSUING ACCOMMODATION E NTRIES. THUS, THE ASSESSEE FAILED TO EXPLAIN ANYTHING BEFORE AO. THE AO, THEREFORE, NOTED THAT ASSESSEE FAILED TO PROVIDE AN Y DETAILS ON ABOVE ISSUES. THEREFORE, DIRECTIONS OF THE ITAT WI TH REGARD TO PEAK CREDIT WOULD NOT BE APPLICABLE TO ASSESSEE. THE AO CONSIDERING THE INVESTMENT OF ASSESSEE FOR A SUM OF RS. 14 LAKH S DIRECTED TO APPLY COMMISSION @ 2% ON ACCOMMODATION ENTRY PROVID ED BY THE ASSESSEE AND MADE ADDITION OF RS. 28,000/-. THE AO ALSO CONSIDERED THE ISSUE OF CASH CREDIT AND NOTED THAT ASSESSEE FAILED TO EXPLAIN UNEXPLAINED CASH DEPOSITS IN THE BANK AC COUNTS. THE 5 ITA NO . 771/DEL/2016 TRIBUNAL DIRECTED TO RESTRICT THE ADDITION ONLY TO PEAK UNEXPLAINED CREDIT BUT ASSESSEE FAILED TO PROVIDE ANY DETAILS A S PER DIRECTIONS OF THE TRIBUNAL. THEREFORE, THE AO FEELING NO ALTERNA TIVE BUT TO MAKE ADDITION OF RS. 4,50,000/- AGAINST THE ASSESSEE. T HE LD.CIT(A) DISMISSED THE APPEAL OF ASSESSEE. 4. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES AND PERUSED THE MATERIAL ON RECORD. 5. ON GROUND NOS. 1 TO 4 ASSESSEE CHALLENGED THE OR DERS OF THE AUTHORITIES BELOW IN COMPUTING THE COMMISSION INCOM E BY APPLYING PROFIT RATE OF 2% FOR COMMISSION INCOME. LD. COUNSEL FOR ASSESSEE SUBMITTED THAT ITAT DELHI B BENCH IN GRO UP APPEALS (86 APPEALS) VIDE ORDER DATED 23.01.2019 DECIDED THE SI MILAR ISSUE IN WHICH FIVE APPEALS OF THE ASSESSEE HAVE ALSO BEEN D ECIDED FOR AY 2004-05 TO AY 2008-09 AND THE TRIBUNAL DIRECTED TO APPLY PROFIT RATE OF 0.50% TO COMPUTE THE REASONABLE COMMISSION IN THE MATTER. COPY OF THE ORDER IS FILED ON RECORD. LD. DR DID NOT DISPUTE THE SAME. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW SINCE IN THE CASE OF THE ASSESSEE IN SUBSEQUENT YEARS AS REF ERRED TO ABOVE AND IN THE CASE OF GROUP ASSESSEES THE TRIBUNAL HAS CONSIDERED 0.50% AS REASONABLE RATE OF PROFIT/COMMISSION AND D IRECTED THE AO TO ADOPT THE SAME FIGURE FOR COMPUTING THE PROFI T ON ACCOUNT OF COMMISSION, WE FOLLOWING THE SAME ORDER SET ASIDE T HE ORDERS OF THE AUTHORITIES BELOW AND DIRECT THE AO TO ADOPT PR OFIT RATE OF 0.50% INSTEAD OF 2% FOR ESTIMATING THE COMMISSION I NCOME 6 ITA NO . 771/DEL/2016 ACCORDINGLY. THESE GROUNDS OF APPEAL OF THE ASSESS EE ARE ALLOWED PARTLY. 6. ON GROUND NOS. 5 TO 10, ASSESSEE CHALLENGED THE ADDITION OF RS. 4,50,000/- ON ACCOUNT OF UNEXPLAINED DEPOSIT IN THE BANK ACCOUNT OF ASSESSEE. LD. COUNSEL FOR ASSESSEE SUBM ITTED THAT SINCE GROUP WAS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES AND CASH RECEIVED AND DEPOSITED IN BANK ACCOUNT WAS PAR T OF THE BUSINESS OF ASSESSEE, THEREFORE, NO SEPARATE ADDITI ON CAN BE MADE. IN ALTERNATE CONTENTION, HE HAS SUBMITTED THAT SINC E THE AO HAS DETERMINED COMMISSION INCOME ON ALL DEPOSIT ENTRIES , THEREFORE, ON THIS ADDITION ALSO COMMISSION INCOME MAY BE ESTI MATED AND SUGGESTED THAT PEAK ADDITION COULD BE MADE ONLY FOR RS. 2,00,000/-. ON THE OTHER HAND, LD. DR SUBMITTED TH AT ASSESSEE FAILED TO COMPLY WITH DIRECTIONS OF THE TRIBUNAL EA RLIER, THEREFORE, NO INTERFERENCE IS CALLED FOR IN THE MATTER. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSION AND DO N OT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDERS OF THE A UTHORITIES BELOW. THE ITAT IN FIRST ROUND OF PROCEEDINGS DIRECTED THA T CREDIT APPEARING IN THE BOOKS OF EACH ASSESSEE HAS TO BE E XPLAINED BY THAT ASSESSEE. THE ASSESSEE SHALL HAVE TO PROVE TH E IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION . IN CASE SAME IS NOT PROVED, ADDITION MAY BE MADE U/S 68 OF THE ACT. IT WAS ALSO DIRECTED THAT THE AO AFTER EXAMINING THE E VIDENCE SUBMITTED BY ASSESSEE CONSIDER THE ISSUE AND RESTRI CT THE ADDITION U/S 68 OF THE ACT TO ONLY PEAK UNEXPLAINED CREDIT I N EACH CASE 7 ITA NO . 771/DEL/2016 AFTER ELIMINATING CIRCULAR TRANSACTION. THE DIRECT IONS OF THE ITAT ARE VERY SPECIFIC AND BURDEN WAS UPON THE ASSESSEE TO PROVE ITS CASE AS PER THE DIRECTIONS OF THE ITAT. HOWEVER, A SSESSEE FAILED TO EXPLAIN ANYTHING BEFORE THE AUTHORITIES BELOW. THE ASSESSEE WAS NOT ABLE TO EXPLAIN ANY OF THE BANK ENTRIES CONTAIN ED IN THE BANK ACCOUNT OF THE ASSESSEE. THE ASSESSEE THUS, FAILED TO PROVE ITS CASE BEFORE THE AO. THE CONDITIONS OF SECTION 68 H AVE NOT BEEN MET BY THE ASSESSEE. EVEN FOR MAKING ADDITION ON A CCOUNT OF PEAK CREDIT THE ASSESSEE DID NOT COMPLY WITH THE DIRECTI ONS OF THE TRIBUNAL. THEREFORE, THERE IS NO QUESTION OF MAKIN G ADDITION ON ACCOUNT OF COMMISSION AS AGAINST ADDITION MADE U/S 68 OF THE ACT. IT IS WELL SETTLED LAW THAT IN SET ASIDE PROC EEDINGS, AUTHORITIES BELOW ARE BOUND TO DECIDE THE ISSUE IN THE LIGHT OF DECISION OF THE APPELLATE AUTHORITY. NO NEW ISSUE CAN BE CONSIDERE D IN SET ASIDE PROCEEDINGS. IN OUR VIEW, THE AUTHORITIES BELOW HA VE RIGHTLY FOLLOWED THE DIRECTIONS OF THE ITAT ISSUED IN FIRST ROUND OF PROCEEDINGS. ASSESSEE CANNOT TAKE A NEW PLEA TO CH ALLENGE THE ADDITION U/S 68 OF THE ACT WHEN THE FIRST ORDER OF THE TRIBUNAL HAS REACHED FINALITY. SINCE THERE IS A CASH CREDIT APP EARING IN THE BOOKS/BANK ACCOUNT OF THE ASSESSEE, THEREFORE, BURD EN WAS UPON THE ASSESSEE TO EXPLAIN THE SAME TO THE SATISFACTIO N OF THE AO AS PER DIRECTIONS OF THE TRIBUNAL. EVEN BEFORE US LD. COUNSEL FOR ASSESSEE WAS NOT ABLE TO DEMONSTRATE AS TO HOW THE PEAK ADDITION COULD BE MADE IN THE CASE OF THE ASSESSEE. WE, THE REFORE, DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDERS OF THE AUTHORITIES 8 ITA NO . 771/DEL/2016 BELOW. ADDITION OF RS. 4,50,000/- IS CONFIRMED. T HESE GROUNDS ARE, THEREFORE, DISMISSED. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (G.D. AGRAWAL) (BHAV NESH SAINI) VICE PRESIDENT JU DICIAL MEMBER DATED: 20/05/2019 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 08.05.19 20.05.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 09.05.19 20.05.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P S/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 20.05.2019 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 20.05.2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT 20.05.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 20.0 5.2019 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER 9 ITA NO . 771/DEL/2016