Tervin Estates Pvt. Ltd., New Delhi V. ACIT, Central Circle- 29, New Delhi

ITA 8252/DEL/2018

AI Insights

The case involves M/s. Tervin Estates P. Ltd., which appealed against the order of CIT(A)-30 New Delhi for the Assessment Year 2010-11. The primary contention was regarding the reassessment and subsequent additions made under Section 68 of the Income Tax Act, which pertained to unexplained credit entries and share application money. The Tribunal considered previous similar cases and the High Court's decision, which supported a limited addition based on a reasonable rate of commission for accommodation entries. The Tribunal's decision was influenced by the need to maintain consistency with judicial precedents and fair play in tax assessments.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 122020 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: G
• Next Hearing Date: 15-10-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 26-12-2018
• Other Referred Cases: Vertex Drugs Pvt. Limited vs DCIT- Central ITA No. 6496/Del/2015, DCIT vs. M/s. Bhawani Portfolio Pvt. Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H.K CHOUDHRY; JUDGMENT DATED
• Keywords: Unexplained cash credit; Unexplained expenditure; Question of law; Accommodation entries
• Section: 147; 68; 148; 260A; 251; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G: NEW DELHI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA No.8252/Del/2018 Assessment Year: 2010-11 M/s. Tervin Estates P. Ltd., 711/92, Deepali, Nehru Place, New Delhi 110019 PAN AABCV 5553 H vs. The ACIT, Central Circle 29, New Delhi (Appellant) (Respondent) For Assessee : Shri Ved Jain, Adv. Shri Aman Garg, Adv. For Revenue: Shri H.K Choudhry, CIT(DR) Date of Final Hearing : 04.07.2023 & 16.10.2023 Date of Pronouncement : 19.10.2023 ORDER PER CHANDRA MOHAN GARG, J.M. This appeal has been filed against the order of CIT(A)-30 New Delhi dated 29.11.2018 for AY 2010-11. 2. The grounds of assessee are as follows:- 1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eye of law and on facts. 2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO despite the fact that there is no proper service of notice under section 148 of the Act. 3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO despite the fact that a copy of reasons recorded for reopening of the assessment proceedings were not provided to the assessee. 4. On the facts and circumstances of the case, the learned CIT(A) has erred both on ITA No.8252/Del/2018 2 facts and in law in confirming the action of the AO despite the fact that the reopening by the AO and consequent reassessment without complying with the statutory conditions prescribed under Section 147 read with Section 148 of the Act is bad in law. 5. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO despite the fact that the reasons recorded for reopening the assessment does not meet the requirements lof Section 147 of the Act. 6. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the additions rejecting the contention of the assessee that the reopening has been made on the basis of reasons which are vague and have been recorded without application of mind on the part of the A.O. 7. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the order passed by the A rejecting the contention of the assessee that the reopening is bad in law as the same has been made on the basis of material collected at the back of the assessee without giving assessee an opportunity to rebut the same in violation of provisions of section 142(3) of the Act. 8. On the facts and circumstances of the case, the learned CIT(A) has erred in confirming the initiation of proceedings under section 148 of the Act as the same has been reopened on the basis of reasons without there being any whisper that the income has escaped due to the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, as the same has been reopened after a period of four years from the end of relevant assessment year. 9. On the facts and circumstances of the case, the learned CIT(A) has erred in rejecting the contention of the assessee that the notice issued under Section 148 is barred by limitation as the same has been issued after a period of four years from the end of relevant assessment year. 10. (i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in enhancing the income assessed by the AO. (i) That the enhancement order passed by the learned CIT(A) is without following the statutory provisions of the Act. (ii) That the learned CIT(A) has erred, both on facts and in law, in going beyond the scope of his power of enhancement under section 251 of the Income Tax Act. 11. (i) On the facts and circumstances of the case the learned CIT(A) has erred both on facts and in law in sustaining the addition of an amount of Rs. 13,54,50,000/-made by AO on account of share application money received under Section 68 of the Act. (ii) That the said addition has been confirmed rejecting the detailed explanation and evidences brought on record by the assessee to prove the identity and creditworthiness of the shareholders as well as the genuineness of the transaction. 12. (i) On the facts and circumstances of the case the learned CIT(A) has erred both on ITA No.8252/Del/2018 3 facts and in law in sustaining the addition of an amount of Rs. 14, 15,51,000/-on account of deposits in the bank account of the assessee. (ii) That the above addition has been confirmed despite the assessee has submitted the details of the deposits and those deposits have been dulyaccounted for in the books of accounts of the assessee. 13.On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in enhancing the income by Rs. 1,38,50,050/- made by the AO as unexplained expenditure on account of commission income @2% arbitrarily on the above alleged amount of Rs. 27,70,01,000/- 14. (i) On the facts and circumstances of the case, the learned CIT(A) has erred in confirming the action of the Ld. AO merely relying on the report of the investigation wing and without application of his own mind. (ii) That the addition is confirmed despite the fact that the same is made material collected at the back of the assessee without giving it an opportunity to rebut the same. 15. On the facts and circumstances of the case, the learned CIT(A) has erred in confirming the addition despite the fact that the AO has failed to bring any direct material against the assessee on record. 3. The ld. counsel pressing into service ground no. 13 of assessee on merits submitted that learned CIT(A) has erred both on facts and in law in enhancing the income by Rs. 1,38,50,050/- made by the AO as unexplained expenditure on account of commission income @2% arbitrarily on the above alleged amount of Rs.27,70,01,000/-. He further pointed out that accordingly, Assessing Officer and CIT(A) have gone wrong in considering the double of the above amount i.e., Rs 27,70,01,000/-. The above figures of share capital and security premium are verifiable from the balance sheet PB Pg 2-12, relevant page 6 and 8. It is also relevant to mention that assessing officer had made the addition of Rs.27,70,01,000/-. However, the above addition included share capital and security premium of Rs. 13,54,50,000/- and rest amount related to normal business transaction of sale of stock. 4. He further submitted that the case of assessee for immediately preceding AY 2009-10 was also having same set of allegation by the Department and under identical facts and circumstances additions were made and upheld by the ld. CIT(A). In the preceding year the allegation was that the assessee company belongs to Tarun Goyal group of companies and has reached before this Hon'ble Tribunal in Vertex Drugs Pvt. ITA No.8252/Del/2018 4 Limited vs DCIT- Central ITA No. 6496/Del/2015 wherein Hon'ble Tribunal vide common order in 86 companies dated. 18.1.2019 (PB Page no. 359- 371- assessee name ( Vertex Drugs Pvt. Limited -now Tervin Estate P Ltd) at item no 63 on pg 362) held that all these companies are engaged in the business of providing accommodation entries and restricted the addition to only commission it would have been earned by providing such accommodation entry to the extent of 0.50% or 0.50 paise as the reasonable rate of profit/commission in such clandestine activities. 5. Further drawing our attention towards assessee paper book pages 372 to 374 the ld. counsel submitted that against the said common order of the Tribunal in 86 companies dated 18.01.2019 the Department filed appeal in the case of one company and Hon’ble jurisdictional High Court of Delhi dismissed appeal of the Revenue ITA No. 158 of 2020 by rendering judgment on 12.07.2021 in the case of DCIT vs. M/s. Bhawani Portfolio Pvt. Ltd. upholding the conclusion drawn by the assessee wherein it was held that all said 86 companies were engaged in the business of providing accommodation entries and the addition to only commission amount, it would have been earned by providing such accommodation entry to the extent of 0.5% as reasonable rate of profit/commission was found to be sustainable. The ld. counsel thus, submitted that the issue is squarely covered by the order of Tribunal dated 18.01.2019 (supra) in the assessee’s own case for immediately preceding AY 2009-10 whereby assessee company was held to be an intermediary and only addition sustained was of commission at the rate of 0.50% of the accommodation entry which in the present assessment year will be Rs 0.50% of Rs 13,54,50,000. All other additions including the enhancement made by CIT(A) need to be deleted. 6. Replying to the above, the ld. CIT(DR) supported the action of the Assessing Officer in making addition and First Appellate Order passed by the ld. CIT(A) and submitted that the ld. Authorities below rightly made and upheld addition u/s 68 of the Act on account of unexplained credit found in the accounts of assessee therefore no interference is required. Accordingly, he submitted that ground of assessee on merits may kindly be dismissed. ITA No.8252/Del/2018 5 7. However, the ld. CIT(DR) did not controvert a factual position emerged from the records and also evident from the Schedule ‘A’ & ‘B’ at page 8 of paper book that the during the year the actual amount of share capital was 1,35,450/- and share premium was 13,53,14,550/- thus, the total amount of alleged entries comes to Rs.13,54,50,000/- and the Assessing Officer has taken amount as Rs. 27,70,01,000/- by adding a sum of Rs. 14,15,51,500/- an amount received by the appellant in its bank accounts. Thus there was double addition made by the Assessing Officer. The total amount of share capital and share premium is Rs. 13,54,50,000/- which assessee company has further provided accommodation entries. It is also pertinent to note that the ld. CIT(DR) also did not controvert a factual position of preceeding AY 2009-10, which was undisputedly similar and quite identical to the present AY 2010-11 on the same issue, emerging from the orders of Tribunal dated 18.01.2019 (supra) in assessee’s own cases for immediately preceding AY 2009-10 wherein the Tribunal decided 86 appeals including appeal of assessee and concluded that in the cases of business of providing accommodation entry the addition should be restricted to reasonable rate of profit/commission to 0.50% of total volume. It is also pertinent to note that the Department in the case of one assessee out of 86 companies i.e. M/s. Bhawani Portfolio Pvt. Ltd. carried the matter before Hon’ble High Court of Delhi and the Hon’ble High Court dismissed appeal of the Department by judgment dated 12.07.2021 upholding the conclusion of the Tribunal in the order dated 18.01.2019 (supra) wherein reasonable rate of profit/commission out of alleged entries was ordered to be calculated to the extent of 0.50% of total volume of entries. 8. For the sake of completeness of this order, we find it appropriate to reproduce the relevant operative para of Tribunal order dated 18.01.2019 (supra) wherein the addition was restricted to 0.50% of total volume of entries by observing as follows:- 16. To put an end to the litigation and in the interest of justice and fair play, in our considered opinion, 0.50 paise or 0.50% should be taken as the reasonable rate of profit commission in such clandestine activities. We, accordingly, direct the Assessing Officers to adopt 0.50% or 0.50 paise and compute the profit accordingly. ITA No.8252/Del/2018 6 17. We are of the opinion that there cannot be any profit element in intra-group transactions. We, therefore, direct the Assessing Officers to consider the transactions with outside parties only and then compute the profit. 18. Thus, the common ground in the case of the appellants is partly allowed. 9. The above findings returned by the Tribunal in the appeals of 86 companies including present assessee were confirmed and upheld by Hon’ble jurisdictional High Court of Delhi dismissing the Departmental appeal in the case of M/s. Bhawani Portfolio Pvt. Ltd. judgment dated 12.07.2021(supra) with following observations and findings as follows:- 7. Having perused the paper book, this Court finds that the Tribunal in the impugned orders has upheld the appellant's contention that the respondent used to provide accommodation entries upon charging commission. However, the Tribunal has held that just because some loose sheets had been found stating that percentage of commission was 1.69% to 2.5% in some transactions, it cannot be presumed that for all transactions the respondent had earned a similar rate of commission. 8. Further relying upon past decisions by a number of Coordinate Benches of the Tribunal adopting a commission rate ranging from 0.15% to 0.50%, in similar matters, the Tribunal passed the impugned order. 9. This Court is of the view that none of the aforesaid findings are so perverse that they warrant an interference in appeal jurisdiction under Section 260A of the Income Tax Act, 1961. This Court is also of the view that the Tribunal, being the last fact finding authority, was entitled to guess work and arrive at a ballpark rate of commission. Consequently, no substantial question of law arises in the present appeals. Accordingly, the appeals along with pending applications are dismissed. 10. Thus, we reach to a logical conclusion that undisputedly, the facts and circumstances in the present assessment year are identical to the facts in the preceding year 2009-10. On careful consideration of rival submissions, order of the Tribunal in assessee’s own appeal for immediately preceding AY 2009-10 (supra) and judgment of Hon’ble High Court of Delhi upholding the order of the Tribunal (supra), having identical and similar facts and circumstances with the present case on the similar issue, we are inclined to hold that the issue is squarely covered by the said order of Tribunal and judgment of Hon’ble jurisdictional High Court of Delhi. Therefore, respectfully following the said propositions recorded in assessee’s own appeal for AY 2009-10 the Assessing Officer is directed to restrict the addition to 0.50% by calculating the profit/commission ITA No.8252/Del/2018 7 income on alleged entries of Rs. 13,54,50,000/- only. Accordingly, ground no. 13 of assessee is partly allowed. 11. Since, in the earlier part of this order, we have partly allowed ground of assessee on merits in the manner as concluded above therefore we don’t deem it proper to adjudicate other grounds of the assessee. 12. In the result, the appeal of the assessee is partly allowed in the manner as indicated above. Order pronounced in the open court on 19.10.2023. Sd/- Sd/- (DR. B.R.R. KUMAR) (CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 19 th October, 2023. NV/- Copy forwarded to : 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR // By Order // Asstt. Registrar, ITAT, New Delhi