DCIT, Circle - 1(1), Panaji V. M/s Kagal Iron and Steel Ltd, Panaji

ITA 84/PAN/2020

AI Insights

The case involves an appeal by the Revenue against the order of the CIT(A) which had deleted the addition made by the Assessing Officer on account of share application money received by the respondent-assessee, Kagal Iron and Steel Ltd. The Assessing Officer had initially made an addition of Rs.1,90,00,000, treating it as unexplained money, based on information from a search operation linked to accommodation entry providers in Delhi. The CIT(A) had deleted this addition, accepting the respondent's evidence as sufficient to prove the genuineness of the transactions. However, the Tribunal, upon reviewing the material, concluded that the CIT(A) had erred in not requiring further proof of the genuineness and creditworthiness of the transactions, leading to the restoration of the original assessment order.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 136962 (ITAT-PANAJI)
• Duration Of Justice: 2 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 08-12-2020
• Other Referred Cases: PCIT vs. Chartered Speed Pvt. Ltd. [2015] (3) TMI 809 (Gujarat)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Accommodation entries; Set aside
• Section: 68; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI – VIRTUAL COURT BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER आयकर अपील सं. / ITA No.84/PAN/2020 िनधाᭅरण वषᭅ / Assessment Year : 2010-11 DCIT, Circle-1(1), Panaji Vs. M/s. Kagal Iron and Steel Ltd., 505A, Dempo Trade Centre, 11 EDC Complex, Patto Plaza, Panaji, Goa- 403001. PAN : AACCK6075G Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the Revenue directed against the order of ld. Commissioner of Income Tax (Appeals)-2, Panaji, Goa [‘the CIT(A)’] dated 22.09.2020 for the assessment year 2010-11. 2. The Revenue raised the following grounds of appeal :- “1. The order of the Ld. CIT(A) is opposed to law and facts of the case. 2. That the Ld. CIT(A) failed to appreciate that the Assessing Officer was made additions based on the information received from Revenue by : Shri N. Shrikanth Assessee by : None Date of hearing : 16.08.2023 Date of pronouncement : 25.08.2023 ITA No.84/PAN/2020 2 DDIT(Inv.)-II, New Delhi which was gathered after exercising search action u/s.132 in the residential and business premises of the alleged person Shri Surendra Kumar Jain and Shri Virendra Kumar Jain. 3. That the Ld. CIT(A) failed to appreciate that based on the incremental material found during search action and further enquiry after search, the above cited allegation of accommodation entries was established. 4. That the Ld. CIT(A) failed to appreciate that the submission made by the assessee (such as share application form, board resolution of the company, share receipt letter and confirmation, etc.) as proof for genuine transfer of money cannot be acceptable as the same was document for transfer of fund and these were not revealing the actual motive of receipt i.e. accommodation entries. 5. For these and other grounds that may be adduced at the time of the hearing, the order of the CIT(A) may be set aside and the order of the Assessing officer restored.” 3. Briefly, the facts of the case are as under : The respondent-assessee is a company stated to have been engaged in the business of trading of M.S. Scrap, TMT Bars and Allied Products of Steel. The Return of Income for the assessment year 2010-11 was filed on 25.03.2011 declaring Rs.Nil income. There was no regular assessment was made against the said return of income. Subsequently, on receipt of the information from the DDIT (Investigation)-II, New Delhi that the respondent-assessee was a beneficiary of accommodation entries from the entities promoted and controlled by Shri Surendra Kumar Jain and Shri Virendra Kumar Jain of Delhi, the Assessing Officer issued a notice u/s 148 of the Income Tax Act, 1961 (‘the Act’) on 30.03.2013, ITA No.84/PAN/2020 3 which was served upon the respondent-assessee on the same date. Against the said return of income, the assessment was completed by the Asst. Commissioner of Income Tax, Circle-1(1), Panaji (‘the Assessing Officer’) vide order dated 14.03.2014 passed u/s 143(3) r.w.s. 147 of the Act at a total income of Rs.1,90,00,000/-. While doing so, the Assessing Officer made addition on account of share application money received from the entities promoted and controlled by Shri Surendra Kumar Jain and Shri Virendra Kumar Jain of Delhi treating as unexplained money of the respondent- assessee of Rs.1,90,00,000/-. The Assessing Officer also discussed the modus of operandi adopted by the respondent-assessee for receipt of share application money. 4. Being aggrieved by the order of assessment, an appeal was filed before the ld. CIT(A) contending that the Assessing Officer ought not to have made addition of Rs.1,90,00,000/-, inasmuch as, the respondent-assessee had issued capital equity shares of Rs.1,90,00,000/- and the amount had been received through the cheques. The respondent-assessee had discharged the initial onus of proving the identity, creditworthiness and genuineness of the transactions by filling following things :- ITA No.84/PAN/2020 4 a. Share application letter. b. Copies of bank statement of the appellant to prove the monies received by cheque. c. Allotment letters. d. Copies of Form 2 filed with Registrar of Companies. e. Copies of the annual report and Income Tax return filed acknowledgement of the referred company. 5. The ld. CIT(A) considering the submissions made before him held that the initial onus of proving the genuineness and creditworthiness of the transactions on respondent-assessee was discharged, the Assessing Officer had not brought any material on record to discharge the veracity of the evidence filed by the respondent-assessee placing reliance on the decision of the Hon’ble Gujarat High Court in the case of PCIT vs. Chartered Speed Pvt. Ltd. [2015] (3) TMI 809 (Gujarat) deleted the addition. 6. Being aggrieved by the decision of the ld. CIT(A), the Revenue is in appeal before us in the present appeal. 7. When the appeal was called on, none appeared on behalf of the respondent-assessee despite due service of notice of hearing. 8. On the other hand, ld. Sr. DR submits that the findings of the ld. CIT(A) holding that the respondent-assessee had discharged the initial onus of proving the genuineness, creditworthiness and ITA No.84/PAN/2020 5 identity of the share application money, is perverse, as the findings of the ld. CIT(A) were not born out of any material on record. He further submits that the respondent-assessee had failed to rebut the allegation of the Assessing Officer that share application money received is nothing but an unexplained income of the respondent- assessee routed through dummy entities floated by Shri Surendra Kumar Jain and Shri Virendra Kumar Jain of Delhi, who are known to be accommodation entries providers in the consideration of charging fees. 9. We heard the ld. Sr. DR and perused the material on record. The issue in the present appeal relates to the addition u/s 68 of Rs.1,90,00,000/-. The Assessing Officer based on the information received from DDIT (Investigation)-II, New Delhi that the appellant is a beneficiary of the accommodation entries provided by Shri Surendra Kumar Jain and Shri Virendra Kumar Jain of Delhi through dummy entries promoted and controlled by the said persons, made addition on account of share application money of Rs.1,90,00,000/- received from the entities mentioned in the assessment order. The Assessing Officer also discussed the modus of operandi adopted by Shri Surendra Kumar Jain and Shri Virendra ITA No.84/PAN/2020 6 Kumar Jain of Delhi in providing these accommodation entries to the various people. Admittedly, the respondent-assessee is beneficiary of these accommodation entries. From mere perusal of the assessment order, it could reveal that the respondent-assessee had not discharged the initial onus of proving the identity, genuineness and creditworthiness of the share application money. However, the ld. CIT(A) considering the share application form, board resolution of the company, share receipt letter and confirmation, copy of bank statement of the respondent-assessee etc, had concluded that the respondent-assessee had discharged the initial onus lying upon it. The evidence considered by the ld. CIT(A) does not establish the genuineness and creditworthiness of the share application money. Thus, the ld. CIT(A) had failed to enquire into the creditworthiness and genuineness of the transactions and there is no evidence brought on record establishing the genuineness and creditworthiness of the share application money. Thus, the order passed by the ld. CIT(A) is perfunctory and not based on any material on record. Thus, the doctrine of fraud can be squarely invoked to the facts of the present case. Since, we held that the doctrine of fraud is applicable to the facts of the present ITA No.84/PAN/2020 7 case, even the principles of natural justice have no application, therefore, we reverse the order of the ld. CIT(A) and the assessment order is restored. Thus, the grounds of appeal filed by the Revenue stand allowed. 10. In the result, the appeal filed by the Revenue stands allowed. Order pronounced on this 25 th day of August, 2023. Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 25 th August, 2023. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-2, Panaji, Goa. 4. The Pr. CIT, Panaji, Goa. 5. DR, ITAT, Panaji. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.