JKS IMPEX PVT. LTD. ,DELHI V. ACIT, CENTRAL CIRCLE-26, DELHI

CO 28/DEL/2023

AI Insights

The case involves multiple appeals and cross-objections related to the assessment orders passed under sections 153C and 144 of the Income Tax Act, 1961, concerning various assessment years. The primary contention revolves around the additions made under section 68 of the Act, which were deemed to be protective assessments concerning accommodation entries. The assessee argued that they were merely conduit companies and not the owners of the entries, a position supported by the CIT(A) but contested by the Revenue. Additionally, issues arose regarding the legal standing of the companies to appeal, given their struck-off status at the time of the assessments, which was later revived by the NCLT.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 37123 (ITAT-DELHI)
• Appeal Type: Cross Objection
• Pronouncement Date: 09-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Other Referred Cases: CIT vs Pramod Sharma, Omni Firms (P). Ltd. vs DCIT(HQ), Central Circle- 111, New Delhi, M/s Dwarka Portfolio Pvt.Ltd. vs ACIT & Others
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHILPI JAIN
• Assessee Lawyers: DAYAINDER SINGH SIDHU
• Keywords: Set aside; Accommodation entries; Source of fund; Bogus
• Section: 68; 13; 153C

Judgement Text

"ITA Nos. 196/Del/2022 & Others Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “C” BENCH: NEW DELHI BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI SUDHIR PAREEK, JUDICIAL MEMBER Sl. No ITA/CO No(s) Asst. Year(s) Appeal(s) by Appellant vs. Respondent Appellant Respondent 1. ITA No.196/Del/2022 2012-13 ACIT Central Circle –26 New Delhi Karda Traders (P.) Ltd. B-163, 1st Floor Amar Colony, Lajpat Nagar Delhi – 110024 PAN:AADCJ7802Q 2. ITA No.197/Del/2022 2015-16 -do- -do- 3. ITA No.198/Del/2022 2013-14 -do- -do- 4. ITA No.199/Del/2022 2016-17 -do- -do- 5. ITA No.200/Del/2022 2014-15 -do- -do- 6. Co.No.21/Del/2023 [ In ITA No.196/Del/ 2022] 2012-13 Karda Traders (P.) Ltd. B-163, 1st Floor Amar Colony, Lajpat Nagar Delhi – 110024 PAN:AADCJ7802Q ACIT Central Circle –26 New Delhi 7. Co.No.22/Del/2023 [ In ITA No.198/Del/ 2022] 2013-14 -do- -do- 8. Co.No.23/Del/2023 [ In ITA No.200/Del/ 2022] 2014-15 -do- -do- 9. Co.No.24/Del/2023 [In ITA No.197/Del/ 2022] 2015-16 -do- -do- 10. Co.No.25/Del/2023 [ In ITA No.199/Del/ 2022] 2016-17 -do- -do- 11. ITA No.2407/Del/2024 2012-13 DCIT New Delhi Kushaagra Exports Pvt.Ltd. C-20, Basement, Dayanand Colony Lajpat Nagar New Delhi-110020 PAN-AADCK6309E 12. ITA No.2408/Del/2024 2013-14 -do- -do- 13. ITA No.2409/Del/2024 2014-15 -do- -do- 14. ITA No.2410/Del/2024 2015-16 -do- -do- 15. ITA No.2411/Del/2024 2016-17 -do- -do- 16. ITA No.2412/Del/2024 2017-18 -do- -do- 17 ITA No.201/Del/2022 2012-13 ACIT Central Circle-26 New Delhi M/s JKS Impex Pvt.Ltd. 412, M.G.House Community Centre Wazirpur Industrial Area New Delhi PAN-AABCJ6878R 18. ITA No.217/Del/2022 2013-14 -do- -do- ITA Nos. 196/Del/2022 & Others Page | 2 Appellant by Shri Dayainder Singh Sidhu, CIT DR Respondent by Ms. Shilpi Jain, CA Date of Hearing 09.01.2025 Date of Pronouncement 09.01.2025 ORDER PER PRADIP KUMAR KEDIA, AM : The captioned appeals arise from the respective orders of the Ld. Commissioner of Income Tax (Appeals)-29, New Delhi [Ld.CIT(A)] in respective assessment orders passed by the Assessing Officer [AO] tabulated hereunder: Sr. Nos. ITA Nos. CIT(A) Order dated Assessment Order dated Remarks 1-2 ITA No.196/Del/2022 & Co.No.21/Del/2023 23.11.2021 26.12.2018 Assessment Order under section 153C/144 of the Income Tax Act, 1961. 3-4 ITA No.197/Del/2022 & Co.No.24/Del/2023 23.11.2021 -do- -do- 5-6 ITA No.198/Del/2022 & Co.No.22/Del/2023 24.11.2021 -do- -do- 7-8 ITA No.199/Del/2022 & Co.No.25/Del/2023 -do- -do- -do- 9-10 ITA No.200/Del/2022 & Co.No.23/Del/2023 23.11.2021 -do- -do- 11 ITA No.2407/Del/2024 28.02.2024 19.12.2018 Assessment Order under section 153A/143(3) of the Income Tax Act, 1961. 12 ITA No.2408/Del/2024 -do- -do- Assessment Order under section 153C r.w.s 153A/143(3) of the Income Tax Act, 1961. 13 ITA No.2409/Del/2024 -do- -do- -do- 19. ITA No.218/Del/2022 2014-15 -do- -do- 20. C.O.No.26/Del/2023 [In ITA No.201/Del/ 2022] 2012-13 M/s JKS Impex Pvt.Ltd. 412, M.G.House Community Centre Wazirpur Industrial Area, New Delhi PAN-AABCJ6878R ACIT Central Circle-26 New Delhi 21. C.O.No.27/Del/2023 [In ITA No.217/Del/ 2022] 2013-14 -do- -do- 22. C.O.No.28/Del/2023 [In ITA No.218/Del/ 2022] 2014-15 -do- -do- ITA Nos. 196/Del/2022 & Others Page | 3 14 ITA No.2410/Del/2024 -do- -do- -do- 15 ITA No.2411/Del/2024 -do- -do- -do- 16 ITA No.2412/Del/2024 -do- -do- -do- 17-18 ITA No.201/Del/2022 &C.O.No.26/Del/2023 25.11.2021 26.12.2018 Assessment Order under section 153C/144 of the Income Tax Act, 1961. 19-20 ITA No.217/Del/2022 &C.O.No.27/Del/2023 -do- -do- -do- 21-22 ITA No.218/Del/2022 & C.O.No.28/Del/2023 -do- -do- -do- 2. The issues being common, interlinked and arising from the various group concerns covering different assessees for various AYs. All these appeals by the Revenue and cross-objection appeals by the assessee have been heard together and accordingly adjudicated by a common order. 3. When the matter was called for hearing for the group companies, the Ld. Counsel for the assessee pointed out that the two fold additions were made by the AO: (1) Additions under s. 68 of the Act but however, on protective basis. While holding so, the AO observed that the assessee company is found to be merely on conduit company used to route accommodation entries through bank account of the assessee company. The assessee companies have merely acted as pass through entities and were not owner of entries so routed through its bank account. The Ld.CIT(A) has thus rightly reversed the additions made under s. 68 of the Act. (2) The AO also estimated commission income for providing the accommodation entries which were subjected to protective assessment under s. 68 of the Act. 3.1. The Ld. Counsel for the assessee submitted that this is the scenario in all the captioned appeals. 3.2. The Ld. Counsel for the assessee also pointed out in the same vain that the name of the company namely M/s. Karda Traders Pvt.Ltd. was struck off from the records of Ministry of Corporate Affairs (“MCA”)/Registrar of Companies (“RoC”) by ITA Nos. 196/Del/2022 & Others Page | 4 order dated 03.04.2017 and therefore, the assessment orders framed in the case of the struck off companies is invalid. Joining the issue, Ld.CIT DR for the Revenue pointed out that by the order of National Company Law Tribunal (“NCLT”) order dated 03.04.2019 the name of the company has been revived on records of MCA/RoC. The names of the assessee company were struck off due to certain non-compliance of legal formalities by the assessee company. The AO is thus entitled to frame assessment on the return filed by the existing company. 4. The Ld.CIT DR for the Revenue pointed out that Ld.CIT(A) has mis-directed himself in law in granting relief and deleting the additions made on protective basis under s. 68 of the Act without verifying the finality of additions in the hands of so-called beneficiaries of the entry receipts on substantive basis. The Ld.CIT(A has also reversed the commission income on the ground that the commission income has accrued to Shri Anand Kumar Jain & Shri Naresh Kumar Jain who were the persons behind managing and controlling various said concerns and nothing has been earned by the company itself. The Ld.CIT(A) has ignored the basic fact that entries have been routed through the assessee companies which were distinct legal entities and thus income earned by way of commission, if any, can be taxed only in the hands of company and it is trite that income assessed on wrong hands will not prevent the Revenue from assessing the right person. 5. On being inquired by the Bench that when the assessee company was struck off from the Registrar of Companies at the relevant time on whose behest appeals were filed before the Ld.CIT(A) and similarly cross-appeal/C.Os filed before the ITAT how the compliance of s.140 of the Act was made for verification of the captioned appeals. The Ld. Counsel for the assessee submitted that the former Director of the respective companies have signed the appeal memo in the absence of any alternative. 6. It is observed that aggrieved by the protective assessment carried out by the AO in all the captioned appeals relating to additions under s. 68 of the Act towards accommodation entries, the assessee preferred appeals before the ITA Nos. 196/Del/2022 & Others Page | 5 Ld.CIT(A). The Ld.CIT(A) took note of the bank statement of the assessee company and noted that the assessee has received loans from large number of entities which in turn has been immediately given to other entities i.e. beneficiaries of such entries. The Ld.CIT(A) thus observed that the amounts were transferred to other companies immediately which is nothing but part of Modus Operandi of the accommodation entry provider to introduce unaccounted funds of the beneficiaries in their respective accounts. The Ld.CIT(A) accordingly called for the Remand Report. In the Remand Report, the AO verified the fund flow statement depicting the source of funds and utilization of the same for payment to beneficiaries. The Ld.CIT(A) thus observed that based on the Remand Report, it is evident that the AO has identified that the money deposited in the bank accounts belongs to other parties and the assessee company was merely on name lender and for which commission was charged by Shri Anand Kumar Jain & Shri Naresh Kumar Jain who are stated to be managing and controlling these entities. The Ld.CIT(A) thus observed that it is settled position of law that the ownership of the funds is a pre-condition for making additions of the credits and therefore, unless the AO makes the actual finding that the assessee itself was the owner of the money, the additions of the credits cannot be made. 7. As observed by the Ld. CIT(A), there is no factual finding of the AO in the Remand Report that the assessee is the owner of the entire deposits. The Ld.CIT(A) thus observed that the question of money belonging to the assessee does not arise and therefore, the additions made by the AO on protective basis is not justified. Likewise, commission presumably earned on such entries cannot be sustained on the ground that the commission income has been assessed in the hands of entry providers controlling these companies namely, Shri Anand Kumar Jain & Shri Naresh Kumar Jain. The Ld. Counsel for the assessee adverted to the decisions rendered by the Co-ordinate Bench to buttress her contention on the correctness of the first appellate order on the subject matter of the dispute raised on behalf of the Revenue. 8. In the context, the Ld. Counsel for the assessee has referred to the decisions rendered by the Hon’ble Calcutta High Court in the case of CIT vs Pramod Sharma ITA Nos. 196/Del/2022 & Others Page | 6 [2024] 468 ITR 258 (Cal.) for the proposition that the additions under s. 68 of the Act by the AO is not permissible where the assessee company is found to be accommodation entry provider. 9. The Ld. Counsel for the assessee has also referred to the decision of Co- ordinate Bench of the Tribunal in Omni Firms (P). Ltd. vs DCIT(HQ), Central Circle- 111, New Delhi [2017] 85 taxmann.com 241 (Del.) that the Ld.CIT(A) has rightly granted relief and reversed the additions made by the AO where the assessee was found to be a mere entry provider and a conduit. The Ld. Counsel for the assessee thereafter had adverted to the cross-objection and pointed out that the addition has been struck off from the Registry under the Companies Act and thus stood disallowing by virtue of an order dated 03.04.2017 issued by the Ministry of Corporate Affairs. On being asked, the assessee however could not furnish whether when was the return of income filed and whether any return of income was filed under s. 153C proceedings. On being further asked, the Ld. Counsel for the assessee could not inform the Bench about the date on which the AO was informed by the assessee towards struck off. The Ld. Counsel for the assessee submitted that the proceedings under s. 153C giving rise to the present appeal was passed ex-parte. 10. Ld. CIT DR for the Revenue in the counter submitted that the company has been revived by obtaining order dated 03.04.2019 by the National Company Law Tribunal (“NCLT”). 11. We have heard carefully the rival submissions in the group of bunch of appeals. As it emerges from the record the additions have been made under s. 68 by the AO in the assessment order passed under s. 153C on protective basis on the premise that the respondent-companies herein above are conduit companies and merely a entry providers. The Ld.CIT(A) has granted relief to the assessee on the premise that the additions under s. 68 in the hands of the respondent company are not sustainable on the ground that in the absence of ownership of the entries giving rise to the additions, the additions cannot be countenanced. Likewise commission income held to be chargeable in the hands of the assessee company by the AO is also not sustainable since the commission income has ITA Nos. 196/Del/2022 & Others Page | 7 already been assessed in the hands of Shri Anand Kumar Jain & Shri Naresh Kumar Jain who are stated to be controlling the respondent companies. 12. On perusal of first appellate order and the assessment order, it clearly emerges that additions in question arises from entries which have landed up in the bank account in the respective respondent assessee. This being so, the onus is always on the assessee to discharge the burden placed under s. 68 of the Act. While returning the finding by the Ld.CIT(A) that the ownership of the entries do not belong to the assessee, it was incumbent upon the Ld.CIT(A) to satisfy himself that the ultimate so-called beneficiaries have been assessed on substantive basis and the tax has been realized on such bogus entries. The Ld.CIT(A) has dealt with the issue without consideration of this vital fact. The onus lays on the assessee companies to establish that entries routed through the bank account of such companies are not owned by them. The corporate veil cannot be lifted cursorily. The onus has not been discharged by the assessee at all. In the absence of any finding on the taxability of entries in the hands of beneficiaries, we are not in a position to either sustain the action of the Ld.CIT(A) or dislodge the action of the Ld.CIT(A). It will thus equitable to restore the appeal to the file of the Ld.CIT(A) for adjudication afresh in accordance with law. It shall be open to the assessee to place arguments and adduce evidences as may be considered expedient to defend the stand of the assessee on the subject matter of dispute. 13. Apart from the merits, the restoration of the appeal before the Ld.CIT(A) is also desired owing to the fact emerging that the company was struck off from the records of the RoC by order dated 03.04.2017. Therefore, the authority of the assessee before the Ld.CIT(A) to file appeal on behalf of the non-existent company calls for examination to ascertain the maintainability of the appeals before the Ld.CIT(A). Coupled with this, it has also been brought to our knowledge that the NCLT vide its order dated 03.04.2019 has restored the assessee company in the case of M/s. Karda Traders Pvt.Ltd. and some other companies. 13.1. The assessee by its cross-objections has also raised the maintainability of assessment order in the light of the fact that company was not existing at the time of passing of the order and therefore, the assessment order passed on a non- ITA Nos. 196/Del/2022 & Others Page | 8 existent company is bad in law. This aspect also calls for examination having regard to the relevant facts such as status of the company at the time of issuance of notice for assessment and the applicable law expounded in M/s. Dwarka Portfolio Pvt.Ltd. vs ACIT & Others in ITA No.2563/Del/2017 & Others (Assessment Year 2014-15) order dated 27.05.2022 and other judgements. 13.2. The assessee has also challenged the assessment order on the ground that the additions made are not relatable to any incriminating documents per se and therefore the proceedings under s. 153C is not maintainable. Complete facts are not made available by the assessee before the Tribunal to satisfy itself on the correctness of the arguments 14. As noted, it is seen that the cross-objection has been filed by the assessee on behalf of the former Director which is in departure of the provision of s.140 of the Act. Thus multiple issues arises on legal points as well as justification of additions on merits. These aspects require nuanced consideration. Therefore, in the totality of circumstances, we consider it expedient to restore all these captioned appeals of the Revenue as well as objections raised by way of cross- objections to the file of Ld.CIT(A). The Ld.CIT(A) shall determine various issues reflected in the Revenue’s appeal as well as in the cross-objections in accordance with law after giving reasonable opportunity to the assessee. The respective first appellate orders are thus set aside and restored for fresh adjudication in accordance with law by the Ld.CIT(A). 15. In the result, all captioned Revenue’s appeals as well as cross-objections of the assessee are allowed for statistical purposes. Order dictated and pronounced in the open Court on 09.01.2025. Sd/- Sd/- (SUDHIR PAREEK) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER *Amit Kumar, Sr.P.S* ITA Nos. 196/Del/2022 & Others Page | 9 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "