ACIT, CHENNAI V. K.I. (International) Ltd., CHENNAI

ITA 897/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6317 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 12-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: T VASUDEVAN
• Keywords: Bogus purchase; Search and seizure; Accommodation entries; Retraction
• Section: 143(3); 153A; 133(6); 68; 132

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER I . T.A. NO S . 897 & 898 /MDS/201 7 ASSESSMENT YEAR S : 20 07 - 08 & 20 08 - 09 THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1 (1), CHENNAI 600 034 . VS. M/S. K.I. (INTERNATIONAL) LTD., NO. 664/400, T.H. ROAD, TONDIARPET, CHENNAI 60 0 081. [PAN: A A CC K6 186E ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : MS. S. VIJAYAPRABHA , J CIT / RESPONDENT BY : SHRI T. VASUDEVAN, ADVOCATE / DATE OF HEARING : 17 . 0 8 .201 7 / DATE OF P RONOUNCEMENT : 24 . 0 8 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : BOTH THE APPEAL S OF THE DEPARTMENT , PERTAINING TO THE SAME ASSESSEE, ARE DIRECTED AGAINST THE COMMON ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPE ALS) 18 , CHENNAI DATED 0 9 .0 1 .201 7 REL E VANT TO THE ASSESSMENT YEAR S 20 07 - 08 AND 20 08 - 09 , WHEREBY THE DEPARTMENT HAS CHALLENGED THE ONLY COMMO N GROUND IN BOTH THE APPEALS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE UNDER SECTION 68 OF THE INC OME TAX ACT, 1961 [ ACT IN SHORT] BY REJECTING THE ASSESSMENT MADE UNDER SECTION 153A/153C OF THE ACT . I.T.A. NO S . 897 - 898 /M/ 1 7 2 2 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN IRON & STEEL PRODUCTS AND MINERALS. ORIGIN AL ASSESSMENTS FOR BOTH THE ABOVE ASSESSMENT YEARS WERE COMPLETED ACCEPTING THE RETURNED INCOME. A SEARCH AND SEIZURE OPERATIONS UNDER SECTION 132 OF THE ACT AT THE BUSINESS PREMISES OF THE ASSESSEE COMPANY S GROUP WAS CONDUCTED ON 18.12.2012. SUBSEQUENTLY , NOTICES UNDER SECTION 153C OF THE ACT WERE ISSUED ON 06.02.2015 AND THE ASSESSMENTS WERE COMPLETED UNDER SECTION 143(3) R.W.S. 153A & 153C OF THE ACT ON 31.03.2015 BY MAKING ADDITION UNDER SECTION 68 OF THE ACT. 3. AGGRIEVED, THE ASSESSEE IS IN APPEAL FOR BOTH THE ASSESSMENT YEARS BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND BY OBSERVING THAT NO INCRIMINATING MATERIALS WERE FOUND DURING THE COURSE OF SEARCH PROCEEDINGS AND POST SEARCH PROCEEDINGS, THE LD. CIT(A) DELETED THE ADDITION MADE UNDER SECTION 68 OF THE ACT FOR BOTH THE ASSESSMENT YEARS. 4. ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL FOR BOTH THE ASSESSMENT YEARS. WITH REGARD TO ASSUMPTION OF JURISDICTION, THE LD. DR HAS SUBMITTED THAT SERVI CE OF NOTICE UNDER SECTION 153A OF THE ACT FOLLOWED BY THE SEARCH CONDUCTED UNDER SECTION 132 OF THE ACT, THE ASSESSING OFFICER HAS VALIDLY ASSUMED JURISDICTION TO COMPLETE THE ASSESSMENT UNDER SECTION 143(3) R.W.S. 153A & 153C OF THE ACT . MOREOVER, THE A SSESSING OFFICER HAS BROUGHT ON RECORD THE DOCUMENTARY EVIDENCES I.T.A. NO S . 897 - 898 /M/ 1 7 3 SHOWING THAT THE ALLEGED SHARE HOLDERS WERE ONLY PAPER COMPANIES WHOSE CREDIT WORTHINESS AND THE GENUINENESS OF THE TRANSACTIONS WERE NOT ESTABLISHED. THEREFORE, THE LD. CIT(A) HAS SIMPLY ACC EPTED THE SUBMISSIONS OF THE ASSESSEE THAT THERE WAS NO INCRIMINATING MATERIALS FOUND DURING THE COURSE OF SEARCH AND SEIZURE, THEREBY, DELETED THE ADDITION MADE UNDER SECTION 68 OF THE ACT WITHOUT DECIDING THE ISSUE ON MERITS. THUS, THE LD. DR HAS PLEADED THAT THE ORDER OF THE LD. CIT(A) SHOULD BE SET ASIDE AND DIRECTED TO ADJUDICATE THE ISSUE ON MERITS FOR BOTH THE ASSESSMENT YEARS. 5. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 6. WE HAVE HE ARD BOTH THE SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ORIGINAL ASSESSMENTS FOR BOTH THE ABOVE ASSESSMENT YEARS WERE COMPLETED ACCEPTING THE RETURNED INCOME. A SEARCH AND SEIZURE OPERATIONS UNDER SECTION 132 OF THE ACT AT THE BUSINESS PREMISES OF THE ASSESSEE COMPANY S GROUP WAS CONDUCTED ON 18.12.2012. SUBSEQUENTLY, NOTICES UNDER SECTION 153C OF THE ACT WERE ISSUED ON 06.02.2015 . FURTHER INFORMATION FROM THE INVESTIGATION WING OF THE INCOME TAX D EPARTMENT, MUMBAI HAS BEEN RECEIVED STATING THAT SHRI PRAVEEN JAIN, ONE OF THE LEADING ENTRY PROVIDERS OPERATING IN MUMBAI, INDULGED IN PROVIDING ACCOMMODATION ENTRIES LIKE I.T.A. NO S . 897 - 898 /M/ 1 7 4 BOGUS PURCHASES, SALES, UNSECURED LOANS, SHARE CAPITAL, ETC. A SEARCH AND SEIZURE O PERATION WAS ALSO CARRIED OUT IN THE CASE OF SHRI PRAVEEN KUMAR JAIN GROUP ON 01.10.2013. DURING THE SEARCH, FOLLOWING FACTS HAVE BEEN REVEALED: (I) SHRI PRAVIN JAIN HIMSELF IS A DIRECTOR IN FEW CONCERNS ONLY. HOWEVER, THROUGH VARIOUS DUMMY DIRECTORS/PROP RIETORS, HE CONTROLS, OPERATES AND MANAGES A LARGE NUMBER OF CONCERNS. (II) ALL SUCH CONCERNS ARE NOT CARRYING OUT ANY GENUINE BUSINESS. THEY DO NOT HAVE ANY PHYSICAL STOCK OF GOODS, WHICH THEY CLAIMED TO BE DEALING IN. (III) ALL SUCH CONCERNS HAVE EMPLO YED PERSONS EXCEPT THE FEW COMMON ACCOUNTANTS, WHO MANAGE ACCOUNTS AND BANKING TRANSACTIONS OF ALL SUCH CONCERNS. (IV) ALL SUCH CONCERNS ARE INDULGED IN THE ACTIVITY OF PROVIDING ACCOMMODATION ENTRIES ONLY. FURTHER, IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE COMPANY HAS TAKEN MONEY IN GARB OF SHARE CAPITAL FROM VARIOUS COMPANIES , AS DETAILED IN THE ASSESSMENT ORDER AT PARA 6.1, WHICH WERE DIRECTLY OR INDIRECTLY CONTROLLED BY SHRI PRAVIN JAIN. DURING THE SEARCH OPERATION , IN HIS STATEMENT RECORDED ON OATH UNDER SECTION 132(4) OF THE ACT, SHRI PRAVIN JAIN HAS ADMITTED THAT HE HAS INDULGED IN PROVIDING I.T.A. NO S . 897 - 898 /M/ 1 7 5 ACCOMMODATION ENTRIES AND ALSO EXPLAINED THE COMPLETE MODUS OPERANDI OF PROVIDING SUCH ENTRIES. THE DETAILED ADMISSION OF S HRI PRAVIN JAIN MADE IN HIS STATEMENT WAS REPRODUCED IN THE ASSESSMENT ORDER UNDER PARA 6.5. SUBSEQUENTLY, SHRI PRAVIN JAIN AND HIS ASSOCIATES RETRACTED THE STATEMENT MADE UNDER SECTION 132(4) OF THE ACT, WHICH WERE NOT FOUND ACCEPTABLE BY THE ASSESSING OF FICER AND HIS OBSERVATIONS ARE REPRODUCED AS UNDER: WHEN ALL THE AFFIDAVITS ARE READ TOGETHER, SEVERAL CONTRADICTIONS EMERGE, WHICH GO TO ESTABLISH THAT IT IS A PLANNED MOVE MADE BY THE ASSESSEE TO THWART THE PROCESS OF INVESTIGATION IN THE CASE OF BENEFIC IARIES OF HIS ACCOMMODATION ENTRIES: A) ALL THE STAMP PAPERS WHICH HAVE BEEN USED TO FILE THE AFFIDAVITS ARE BROUGHT FROM THE SAME VENDOR AND ON A SPECIFIC DATE I.E., 25.04.2014. B) ALL AFFIDAVITS HAVE BEEN NOTARIZED BY ONE COMMON NOTORY I.E., SHRI N.R. G UPTA BEARING REGISTRATION NO. 724. C) ALL THE PERSONS FILING AFFIDAVITS HAVE BEEN IDENTIFIED BY ONE COMMON ADVOCATE SHRI NARAYANKUMAR P. RANA. D) ALL THE AFFIDAVITS HAVE BEEN SIGNED ON ONE COMMON DATE I.E., 15.05.2014. E) THE WORDING OF ALL THE AFFIDAVIT S IS ALMOST SAME TO THE EXTENT THAT THERE ARE VARIOUS FACTUAL INACCURACIES, AS THE SPECIFIC PARTICULARS OF EACH CASE HAVE NOT BEEN TAKEN INTO CONSIDERATION WHILE COPYING AND PASTING THE CONTENTS OF PRAVEEN KUMAR JAIN IN THE AFFIDAVITS OF HIS ASSOCIATES. AL L SUCH ASSOCIATES BEING WORKING UNDER HIS CONTROL AND DIRECTIONS HAVE SIGNED THESE STATEMENTS WITHOUT EVEN PROPERLY CORRELATING THE CONTENTS WITH THE FACTS OF THEIR OWN CASES. . . I.T.A. NO S . 897 - 898 /M/ 1 7 6 THE POINT WISE REPLY OF THE ASSERTIONS MADE BY PRAVEEN KUMAR JAIN AND TH E COMMON READINGS OF ALL THE AFFIDAVITS FILED, CLEARLY GO TO ESTABLISH THAT IT IS AN AFTERTHOUGHT GIVEN BY PRAVEEN KUMAR JAIN, WHEN THE INFORMATION PERTAINING TO THE BENEFICIARIES FOR AY 2007 - 08 WAS DISSEMINATED TO THE FIELD THAT SUCH AFFIDAVITS HAVE BEEN FILED. THE FIN DIN GS OF THE SEARCH HAVE ALREADY ESTABLISHED THAT ALL SUCH ASSOCIATES WHO HAVE NOW FILED THEIR AFFIDAVITS ALONG WITH PRAVEEN KUMAR JAIN ARE HIS DUMMY ASSOCIATES WHO WORK ON HIS INSTRUCTION. THE AFFIDAVITS SO FILED AT THIS STAGE ARE BASELESS A ND RETRACTION MADE BY THE ASSESSEE AND HIS ASSOCIATES IS NOTHING BUT A DESPERATE ATTEMPT TO PROTECT THE INTERESTS OF THE VARIOUS CLIENTS/BENEFICIARIES OF THE ACCOMMODATION ENTRIES. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH DETAILS OF ALLOTMENT OF SHARES, PRESENT HOLDING OF THE SHARES, AND THE BENEFIT IF ANY EXTENDED BY THE ASSESSEE TO THE ABOVE SHARES HOLDERS TOWARDS THEIR INVESTMENTS. HOWEVER, THE ASSESSEE COULD NOT FILE ANY DETAILS BEFORE THE ASSESSING OFFICER. IN VIEW OF THE ABOVE, THE ASSESS ING OFFICER HAS OBSERVED THAT NO PRUDENT BUSINESSMEN WILL INVEST SUCH HUGE MONEY WITHOUT ANY BENEFIT. THE VARIOUS COMPANIES MENTIONED IN PARA 6.1 OF THE ASSESSMENT ORDER HAS INVESTED AND THEY STILL HOLDING THE SHARES OF THE COMPANY WITHOUT ANY BENEFIT FOR 8 YEARS. THE COMPANIES DO NOT SEEMS TO BE SO CASH RICH. THE CREDITWORTHINESS OF THE COMPANIES HAS NOT BEEN PROVED. THE ACTION OF INVESTING WITHOUT ANY BENEFIT WAS ALSO NOT LIKE A PRUDENT BUSINESS ENTITY, THEREFORE, THE ASSESSING OFFICER HAS HELD THAT THE I NVESTMENT MADE BY THE METHODOLOGY AND ACTS DONE IN SUCH CASES OF CAPITAL FORMATION IS IN THE NATURE OF TAX EVASION BY MONEY LAUNDERING. THUS, HE HELD THAT IT WAS THE MONEY OF ASSESSEE ONLY FROM I.T.A. NO S . 897 - 898 /M/ 1 7 7 UNDISCLOSED SOURCES WHICH WAS PLOUGHED BACK IN THE BUSINESS OF THE ASSESSEE. WITH THE ABOVE OBSERVATIONS AND BY REFERRING TO VARIOUS DECISIONS, THE UNPROVED RECEIPT OF SHARE APPLICATION MONEY WAS BROUGHT TO TAX. ON APPEAL, BY ACCEPTING THE STATEMENT OF THE ASSESSEE THAT NO INCRIMINATING MATERIAL HAS BEEN FOUND LEADIN G TO ASSESSMENT UNDER SECTION 143(3) R.W.S. 153A & 153C OF THE ACT, AND BY FOLLOWING VARIOUS DECISIONS , THE LD. CIT(A) HAS DELETED THE ADDITION MADE UNDER SECTION 68 OF THE ACT FOR BOTH THE ASSESSMENT YEARS. 6.2 IN THIS CASE, ADMITTEDLY, A SEARCH AND SE IZURE OPERATION WAS CONDUCTED ON 18.12.2012. FURTHER, A SEARCH AND SEIZURE ACTION WAS ALSO CARRIED IN THE CASE OF SHRI P RAVEN KUMAR J AIN GROUP ON 01.10.2013, WHO WAS STATED TO BE ONE OF THE LEADING ENTRY PROVIDERS OPERATING IN MUMBAI, INDULGING IN PROVIDIN G ACCOMMODATION ENTRIES LIKE BOGUS PURCHASES, SALES, UNSECURED LOANS, SHARE CAPITAL, ETC. IN HIS STATEMENT RECORDED ON OATH UNDER SECTION 132(4) OF THE ACT, SHRI PRAVEEN KUMAR JAIN HAS ADMITTED THAT HE WAS INDULGED IN PROVIDING ACCOMMODATION ENTRIES AND AL SO EXPLAINED THE COMPLETE MODUS OPERANDI OF PROVIDING SUCH ENTRIES. BEFORE THE LD. CIT(A), THE ASSESSEE HAS SUBMITTED THAT CONSEQUENTIAL FINDINGS IN THE CASE OF THE SHRI PRAVEEN KUMAR JAIN WAS NO WAY RELATED TO THE CASE OF THE ASSESSEE AND THE ASSESSEE HAS NO TRANSACTION WHATSOEVER WITH THE SAID SHRI PRAVEEN JAIN. IF SO, WHAT PREVENTED THE ASSESSEE TO FURNISH THE DETAILS OF ALLOTMENT OF I.T.A. NO S . 897 - 898 /M/ 1 7 8 SHARES, PRESENT HOLDING OF THE SHARES AND THE BENEFIT, IF ANY, EXTENDED BY THE ASSESSEE TO THE ABOVE SHARES HOLDERS TOWARD S THEIR INVESTMENT, BEFORE THE ASSESSING OFFICER, WHEN THE SAME WERE SPECIFICALLY CALLED FOR. UPON NOTICE UNDER SECTION 133(6) OF THE ACT ISSUED TO THE EIGHT COMPANIES, ON THE BASIS OF REPLIES, RECORDS AVAILABLE AND DATA AVAILABLE IN PUBLIC DOMAIN, THE ASS ESSING OFFICER HAS OBSERVED THAT ALL THE COMPANIES INVOLVED ARE BASICALLY INVESTMENT COMPANIES EXISTING ONLY IN PAPER AND HAVE NO ACTIVITY AS SUCH AND PRACTICALLY HAVE NO FIXED ASSET. ALL THE COMPANIES HAVE FILED THEIR RETURNS SHOWING MEAGRE INCOME AND THE REFORE, THE CREDITWORTHINESS OF THE COMPANIES HAS NOT BEEN PROVED. FURTHER, MOST OF THE COMPANIES CLAIMED TO HAVE RECEIVED SHARE APPLICATION MONEY AT A HUGE PREMIUM TO ITS FACE VALUE. IN OTHERS THE SOURCES OF FUNDS HAVE BEEN SHOWN AS SALE OF BOGUS INVESTME NTS OF UNQUOTED EQUITY SHARES. AS PER WEBSITE INFORMATION, THE DIRECTORS OF ABOVE NAMED COMPANIES ARE ALSO DIRECTORS IN OTHER COMPANIES. AVERAGE NUMBER OF COMPANIES IS 13 [130 COMPANIES/10 PERSONS]. FURTHER, THE APPARENT STRENGTH OF DOCUMENTARY PROOF OF RE TURNS OF INCOME FILED WITH ROC, INCOME TAX DEPARTMENT AND OPENING OF BOGUS BANK ACCOUNTS FROM BOGUS ADDRESSES AND SUBSEQUENT TRANSACTIONS THROUGH BANKING CHANNELS ARE EMBOLDENED THE ENTRY OPERATORS AND THE BENEFICIARY ENTITIES TO EMBARK UPON SUCH A COMPLEX , FRAUDULENT AND FICTITIOUS PROCESS INVOLVING A HUGE NUMBER OF COMPANIES AND OTHER ENTITIES. I.T.A. NO S . 897 - 898 /M/ 1 7 9 6.3 WITH REGARD TO RETRACTION BY SHRI PRAVEEN JAIN AND HIS ASSOCIATES ON THE STATEMENT RECORDED ON OATH UNDER SECTION 132(4) OF THE ACT, THE SUBSEQUENT OBSERVATI ONS MADE BY THE ASSESSING OFFICER AND REPRODUCED HEREINABOVE, CLEARLY INDICATES THAT THE SAID RETRACTION IS NOTHING BUT AN AFTERTHOUGHT AND MORE SO, THE ENTIRE PROCESS IS FICTITIOUS AND FRAUDULENT PROCESS FOR EVADING TAXATION. I T MAY BE NOTED THAT THE HON' BLE G AUHATI HIGH COURT IN THE CASE OF GREENVIEW RESTAURANT VS. ACIT 263 ITR 169 HAS EXPRESSED DISAPPROVAL ON RETRACTION OF A STATEMENT AFTER A CONSIDERABLE TIME LAG. IN THE CASE ON HAND, THE RETRACTION HAS BEEN MADE AFTER 7 - 8 MONTHS BY WAY OF MOSTLY COMMON AFFIDAVITS CONTAINING VARIOUS FACTUAL INACCURACIES FURNISHED BY THE ASSOCIATES WORKING UNDER THE CONTROL OF SHRI PRAVEEN KUMAR JAIN AND THE STATEMENTS HAVE BEEN SIGNED BY THEM WITHOUT CORRELATING THE CONTENTS WITH THE FACTS OF THEIR OWN CASES. 6.4 MOREOV ER, S INCE THE ASSESSEE COULD NOT PROVED THE GENUINENESS, CREDITWORTHINESS AND IDENTITY OF THE COMPANIES, AS THESE COMPANIES MIGHT HAVE BEEN EXISTING ON PAPERS OR IN REAL SENSE AT THE TIME OF REGISTRATION, BUT WERE SPECIFICALLY FOUND TO BE NON - EXISTENCE, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER HAS VALIDLY MADE THE ASSESSMENT UNDER SECTION 143(3) R.W.S. 153A & 153C OF THE ACT FOR BOTH THE ASSESSMENT YEARS. THUS, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT HIM TO ADJUDICATE I.T.A. NO S . 897 - 898 /M/ 1 7 10 THE GROUNDS RAISED BY THE ASSESSEE ON MERITS IN ACCORDANCE WITH LAW AFTER ALLOWING SUFFICIENT OPPORTUNITIES OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY , THE GROUND RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, BOTH THE APPEALS FILED BY THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 24 TH AUGUST , 201 7 AT CHENNAI. SD/ - SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 24 . 0 8 .201 7 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.