Turbinado Trading Limited (Formely Known as Surbhi Portfolio Management Limited), Ghaziabad V. ITO WARD - 24(4), New Delhi

ITA 893/DEL/2020

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5433 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 23-02-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Accommodation entries; Set aside
• Section: 147; 68; 148; 144; 250

Judgement Text

Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘H, NEW DELHI Before Dr. B. R. R. Kumar, Accountant Member Shri Anubhav Sharma, Judicial Member ITA No. 893/Del/2020 Asstt. Year : 2011-12 Turbinado Trading Ltd (formerly known as Surbhi Portfolio Management Ltd, C/o. BK Kapur & Company, CA, 17, Navyug Market, Ghaziabad Vs. ITO, Ward-24(4), New Delhi (APPELLANT) (RESPONDENT) PAN No. AAACB1245K Assessee by : None Revenue by : Shri M. Baranwal, Sr. DR Date of Hearing: 14.07.2022 Date of Pronouncement: 20.07.2022 ORDER Per Dr. B. R. R. Kumar, Accountant Member: 1. The present appeal has been filed by the Assessee against the order of the ld. CIT(A)-8, New Delhi dated 03.12.2019 for Assessment Year 2011-12. 2. The Assessee has raised the following grounds of appeal:- “1. That the learned Commissioner ( Appeals ) failed to consider that the proceedings initiated u/s 147 read with section 148 is abinitio, wrong, illegal and bad in law as no notice was ever served on the appellant thus there was no valid service of notice issued under section 148 of the Income Tax Act 1961. 2. That the learned Commissioner ( Appeals ) failed to consider that the assessment order framed under section 147 read with the section 144 is bad in law as the notice issued is without the jurisdiction and also not within the monetary limit prescribed for assuming jurisdiction by the Income Tax Officer. Page | 2 3. That the reasons recorded for reopening the case under section 148 are mechanical in nature without application of mind based on surmises guesswork and relying only upon the information received from DDIT Inv -1 Noida. 4. That the learned CIT (Appeals) was unjustified and incorrect in upholding the arbitrary and unwarranted additions of Rs.60,00,000/- made by the Assessing Officer u/s 68 of the Income Tax Act 1961 as taxable income of the appellant.” 3. During proceedings the ld CIT(A) , notices u/s 250 of the Act were issued at the addresses and email id given by appellant in appeal Form No.35, fixing hearing dates, as mentioned herein below:- S. No. Notice issue date Hearing date fixed Remarks 1 26.09.2019 11.10.2019 The notice was duly sent by e-mall through ITBA to [e-mail] on 26.09.2019 as provided in Form No. 35. None attended - no compliance was made, no submissions were filed. 2 14.10.2019 21.10.2019 The notice was duly sent by e-mail through ITBA to [e-mail] as well as bv speed post on 14.10.2019 as provided in Form No. 35. None attended - no compliance was made, no submissions were filed. 3 23.10.2019 06.11.2019 The notice was duly sent by e-mail through ITBA to dileeo.shrivastava@vaducorporation. comas well as bv speed post on 23.10.2019 as provided in Form No. 35. None attended - no compliance was made, no submissions were filed. 4 08.11.2019 25.11.2019 The notice was duly sent by e-mail through ITBA to dileeD.shrivastava@vaducorDoration. comas well as bv speed post on 08.11.2019 as provided in Form No. 35. None attended - no compliance was made, no submissions were filed. 4. As indicated by the appellant in form No. 35, the fixation notices were also sent by e-mail to following address which was provided by appellant company, in appeal Form No.35 by the ld CIT(A):- Page | 3 E-Mail: [e-mail] M/s Surbhi Portfolio Management Ltd. 134 B, Taimoor Nagar,New Delhi-110092 5. Since, nobody attended on behalf of the assessee the ld CIT(A) proceeded to decide the issue on merits of the case. 6. The appeal has been filed before the Tribunal on 24.02.2020 and notice appearing fixing the date of hearing has been issued and duly served through Speed Post on the assessee on the assessee at the address given in Form No. 36. Since nobody attended even before the Tribunal the matter is being adjudicated taking into consideration the entire facts available on record. 7. In this case the reassessment proceedings were initiated, based on the information received from the DDIT(Inv.)-I, Noida that the assessee was in receipt of accommodation entry Rs. 60,00,000/- introduced as share capital from a company managed and controlled by Shri Himanshu Verma, an entry operator. The AO recorded succinct reasons describing the modus operandi whereby Shri Himanshu Verma and his associated concerns/companies were providing accommodation entries to interested persons and companies. In terms of the reasons recorded, the appellant company had received an amount of Rs. 60,00,000/- as share capital through the intermediary of Shri Himanshu Verma. During the assessment proceedings initiated on 31.03.2008 the assessee has chosen not to file any reply or to make any compliance for the notices issued on 19.11.2018. The assessee had not filed confirmations from these parties. The assessee was required to produce the director of the alleged share applicant company which the assessee failed to do so. Owing to the failure of the assessee prove identity, genuineness and creditworthiness and also failure to file bank statement of the share applicant the AO relying on the findings of the Department in the Page | 4 assessments of the entry operators of Shri Himanshu Verma held that the assessee has received Rs.60,00,000/- as share capital as accommodation entry and added the same to the total income of the appellant as unexplained investment the assessment order passed u/s 144 read with Section 147 of the Act.. 8. We find that while confirming the order of the Assessmet the ld CIT(A) has relied on the order of the coordinate bench of ITAT Ahmedabad in the case of ACIT vs. Nakoda Fashions (P) Ltd, in ITA No. 1716/Ahd./2012 which after referring to judgements of the Hon'ble High Courts on similar facts wherein accommodation entries were received held as under: "18. Examining the facts in the light of above judgments and decisions we observe that assessee is a private limited company which is not open to public and, therefore, if it requires to increase its capital base or invite investment in the share capital along with premium which in this case is Rs.60/- over the face value of Rs.10/- then it has to approach within its friends and relatives for the investment. In the given case Rs. 70 lacs each has been given by the impugned 5 parties to the private limited company i.e. the assessee. Any prudent person who intends to invest in a company with a motive of gaining from the said investment, looking to the quantum of share capital and premium invested by these 5 parties which is of a substantial percentage of the total share capital of the company it is surprising to note that none of them was able to appear before the Assessing Authority nor the assessee was able to bring any of them in person to prove the genuineness of transaction and creditworthiness of the investor towards share capital and share premium given these impugned 5 parties. More so we find that out of the 5 parties three parties are within Ahmedabad and so is the assessee. It is not simple to believe that none of them could have been made to appear before the Assessing Officer to prove the transaction. This non-attendance of the equity share holders makes the situation little grimy which further gets suspicious when the financial statements are gone through. It has been uniform situation in all the 5 parties that transactions totaling in crores are routed through bank accounts, huge reserve and surplus is appearing in the balance sheet along equal amount of investment; but when the profits and loss account is looked into it seems complete dry as interest against investment running in crores the income shown is few thousand and so is the total turnover. Adding more to this in the statement given by one of the directors of Suraj Corporate Services Pvt. Ltd. it has been clearly accepted that Suraj Corporate Services Pvt. Ltd. is an accommodation entry provider and just a paper company. This modus operandi of accommodation entry provider cannot get itself covered under the shadow of PAN, income-tax return, Page | 5 audited financial statement and proof of transactions by account payee cheques. One has to go ahead to rethink why such company is incorporated. In normal course a business entity is incorporated to earn profits and capita! is contributed for doing the same but when the capital investment or reserve and surplus created is just used to invest in other companies without having any return and the gross turnover of the company is not having any direct connection with the voluminous bank transaction then such companies end up into a paper company. 19. From going through all the above judgments and decision, we find that along with evidences, surrounding circumstances, human probability and intentional acts are also to be taken note off while accepting the identity, creditworthiness and genuineness of the cash creditors which in this case is the share applicants, in the case before us we observe that assessee is trying to assert again and again upon the PAN, IT returns, bank statement and confirmations of the impugned 5 parties but has nowhere tried to clarify or disclose the fact which has embedded in the financial statement of these 5 parties which speaks in itself that they are paper companies. Further if it has been genuine transaction and assessee company is asked to produce the new share holders who have been allotted a substantial portion of equity shares, he would have easily called upon the investors. The investors could have come along with all the financial documents and could have clarified about his intention to make investment in the equity shares of the company because every investor wants to earn income from investment in the form of dividend as well as expects appreciation in the valuation of shares with the growth of business. If this has been the situation, then there would have been no doubt on the genuineness of the transactions. On the contrary in the instant case assessee completely fails to prove the same. 20. It is well settled that in order to discharge the onus the assessee must prove the following:- i. The identity of the cash creditor; ii. Capacity of the cash creditor to advance money towards capital. iii. Genuineness of the transaction. If the assessee has adduced evidences to establish the prima facie, the aforesaid onus shifts to the Department. However, mere furnishing of particulars or the mere fact of payment by account payee cheque or the mere submission of confirmation letter by the share applicant is by itself, not enough to shift the onus to the Department although these facts may, along with other facts be relevant in establishing the genuineness of the transaction. As held by Hon. Supreme Court in the case ofCIT vs. N. Tarika Properties Investment (2014) 51 taxmann.com 387(SC) that "PAN cannot be treated as sufficient disclosure of identity of the person. PANs are allowed on the basis of application without actual de facto clarification of identity or ascertainment of activities, nature of business activity and are Page | 6 just as to facilitate the Revenue to keep track of transactions and thus PAN cannot be blindly and without consideration of surrounding circumstances treated as sufficient disclosing the identity of individual". 21. We further observe that Hon. Delhi High Court in the case of CIT V Empire Builtech P Ltd 361 ITR 258 (Del), has held that when assessee does not produce evidence or tries to avoid the appearance before the Assessing authority it necessarily creates difficulties and prevents ascertainment of the truth and correct facts as the Assessing Officer is denied the advantage of the attendance or factual assertion by the assessee before him. If an assessee deliberately and intentionally fails to produce evidence before the Assessing Officer with the desire to prevent enquiry or investigation an adverse opinion should be drawn. The assessee had not discharged the initial onus to establish the identity, creditworthiness of the share applicants and the genuineness of the transactions. The additions made by the Assessing Officer were justified and sustainable. 22. We are, therefore, of the view that in the given facts and circumstances of the case and respectfully following the judgments of Hon. Supreme Court, High Court and the decision of Co-ordinate Bench as discussed above, we are of the confirmed view that assessee has been able to just prove the identity of the company but unable to prove the genuineness & creditworthiness of the impugned 5 parties. In the result, the sum of Rs.3.5 crores has rightly been treated as unexplained money u/s 68 of the Act by the Id. Assessing Officer. We set aside the order of Id. CIT(A) and restore that of the Assessing Officer. In the result ground no.(i) of Revenue is allowed." 9. We find that the ld CIT(A) has also relied on the judgment of Hon’ble Delhi High Court in the case of CIT Vs. Focus Exports Pvt. Ltd. (228 Taxman 88) while examining the provisions of section 68 has ruled that where the assessee failed to offer a reasonable and acceptable explanation regarding the source and nature of credit, the AO is entitled to draw inference that the receipt are that of an assessable nature. The High Court observed as under:- "9. A bare reading of Section 68 of the Act suggests that there has to be credit of amounts in the books maintained by an assessee; such credit has to be a sum during the previous year and if the assessee offers no explanation about the nature and source of such credit or the explanation offered is not satisfactory, then the sums so credited can be treated as income of the assessee for that previous year. The expression 'no explanation is offered' or 'the explanation offered is not satisfactory1 puts an onus on the assessee to offer a lucid, reasonable and acceptable explanation before the Assessing Officer and thereupon the Assessing Officer should form an opinion accepting or rejecting the explanation based Page | 7 upon appreciation of facts/materials and other attending circumstances. Section 68 of the Act was examined in A. Govindarajulu Mudaliar v. CIT, [1958134ITR 807 CSC) observing that there were ample authorities for the proposition that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during an accounting year, the Assessing Officer is entitled to draw inference that the receipts are of an assessable nature. Whether explanation should be accepted or not is not to be examined factually but having regard to test of human probabilities and normal course of conduct. Reference can be made to CIT v. Durga Prasad More [19711 82 ITR 540 (SCI. CIT v. Daulat Ram Rawatmull, [1973187 ITR 349 (SCI and other cases referred to in CIT v. Nova Promoters & Finlease (P.) Ltd. [20121342 ITR 169/206 Taxman 207/18 taxmann.com 217 (DelhiI In these cases, it has been observed that what is apparent must be considered real until it is shown that there are reasons to believe that the apparent is not real. Caution must be exercised on self-serving statements made in the documents as they are easy to make and rely upon in case an assessee wants to evade taxes. Proof is required and the assessing authorities should not put blinkers while looking at the documents before them. Surrounding circumstances are equally important.” 10. Further, we observe the ld CIT(A) relied on the judgment of the jurisdictional High Court of Delhi in the case of Nipun Builders & Developers (P) Ltd. (350 ITR 407) which ruled as under: " mere furnishing of the bank statements of share subscribers without any explanations for the deposits in the accounts may not meet the requirements of section 68. It may be necessary to know the business activities of the share subscribers in order to ascertain whether they are financially sound and are able to purchase shares for substantial amounts and if they have borrowed money for making the investment, whether they were capable of repaying them having regard to the nature of their business, volume of the business etc. it is for this purpose that it is necessary for the assessee, in appropriate cases, where the facts and surrounding circumstances justified, to seek the assistance of the principal officer of the subscribing companies and present them before the AO so that he will be in a position to explain in detail the source from which the thus shares were subscribed. A curious aspect of the matter which cannot be lost sight of is that the record reveals the assessee's ability to procure the share applicants bank statement. This speaks volume about its conduct and belies the arguments about its inability to ensure the presence of such company's Principal Officers." 11. Hence, keeping in view the facts and legal proposition applicable to the case we, hereby, reaffirm the order of the ld CIT(A). Page | 8 12. In the result the appeal of the Assessee dismissed. Order Pronounced in the Open Court on 20/07/2022. Sd/- Sd/- (Anubhav Sharma) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 20/07/2022 *Ajay Kumar Keot, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR