PRAGYA MULTITRADERS (P) LTD.(FROMERLY KNOWN AS KAILASH PORTFOLIO(P)LTD.),DELHI V. ACIT, CC-26, NEW DELHI

CO 203/DEL/2022

AI Insights

The case involves multiple appeals and cross-objections related to the assessment years 2014-15 to 2017-18, concerning the company Pragya Multitraders P.Ltd. The appeals arose from the consolidated order of the Commissioner of Income Tax (Appeals)-29, New Delhi, which was challenged by both the Revenue and the assessee. The primary issues revolved around additions made under section 68 of the Income Tax Act, 1961, which were initially assessed on a protective basis, and the substantive commission income estimated for providing accommodation entries. The CIT(A) had reversed the additions, leading to the Revenue's appeal. The Tribunal noted the lack of appearance by the assessee on multiple occasions and proceeded ex-parte, ultimately restoring the matter to the CIT(A) for a fresh decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314578 (ITAT-DELHI)
• Appeal Type: Cross Objection
• Pronouncement Date: 07-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2017-2018
• Other Referred Cases: ACIT vs Karda Traders (P.) Ltd. & Others
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL YADAV
• Keywords: Set aside; Accommodation entries; Source of fund; Bogus
• Section: 68

Judgement Text

"ITA Nos.204 to 207/Del/2022 & C.O.Nos.200 to 203/Del/2022 Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “F” BENCH: NEW DELHI BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI SUDHIR KUMAR, JUDICIAL MEMBER ITA Nos.204 to 207/Del/2022 [Assessment Years : 2014-15 to 2017-18] ACIT Central Circle-26 Delhi vs Pragya Multitraders P.Ltd. [Formerly known as Kailash Portfolio (P) Ltd], B-163 Block-B, Amar Colony Lajpat Nagar-IV, Delhi-110024 PAN-AAACK0670K APPELLANT RESPONDENT C.O.Nos.200 to 203/Del/2022 [In ITA Nos.204 to 207/Del/2022] [Assessment Years : 2014-15 to 2017-18] M/s. Pragya Multitraders P.Ltd. [Formerly known as Kailash Portfolio P Ltd], B-163 Block-B, Amar Colony Lajpat Nagar-IV, Delhi-110024 PAN-AAACK0670K vs ACIT Central Circle-26 New Delhi APPELLANT RESPONDENT Revenue by Shri Sunil Yadav, CIT DR Assessee by None Date of Hearing 11.03.2025 Date of Pronouncement 07.05.2025 ORDER PER PRADIP KUMAR KEDIA, AM : The captioned appeals filed by the Revenue arise from the consolidated order of the Commissioner of Income Tax (Appeals)-29, New Delhi [CIT(A)] passed under s. 250 of the Income Tax Act, 1961 [the Act] and Cross-objection appeals filed by the assessee, emanating from respective assessment orders passed by the Assessing Officer [AO] tabulated hereunder:- ITA Nos.204 to 207/Del/2022 & C.O.Nos.200 to 203/Del/2022 Page | 2 Sr. Nos. ITA/C.O Nos. CIT(A) Order dated Assessment Order dated Assessment order passed under section 1. 204/Del/2022 [AY 2014-15] 23.11.2021 19.12.2018 153C r.w.s. 153A/143(3) of the I.T.Act, 1961 2. C.O.No- 200/Del/2022 -do- -do- -do- 3. 205/Del/2022 [2015-16] 23.11.2021 19.12.2018 153C r.w.s. 153A/143(3) of the I.T.Act, 1961 4. C.O.No- 201/Del/2022 -do- -do- -do- 5. 206/Del/2022 [AY 2016-17] 23.11.2021 19.12.2018 153C r.w.s. 153A/143(3) of the I.T.Act, 1961 6. C.O.No- 202/Del/2022 -do- -do- -do- 7. 207/Del/2022 [AY 2017-18] 23.11.2021 19.12.2018 153C r.w.s. 153A/143(3) of the I.T.Act, 1961 8. C.O.No- 203/Del/2022 -do- -do- -do- 2. At the time of hearing, it was stated that the issues involved for AYs 2014-15 to 2017-18 are broadly common, interlinked and arising from the search action on the assessee company. Hence, all these appeals filed by the Revenue and cross-appeals filed by the assessee have been taken up together and accordingly adjudicated by this common order. 3. When the matter was called for hearing, none appeared on behalf of the assessee. It is seen from the record that the matter was listed for hearing on large number of occasions. However both sides had taken adjournments on different point of time which was liberally granted. The matter was yet again listed on 04.03.2025. At the written request of the assessee representative, the matter was however re-fixed for hearing on 10.03.2025. Again, the written request was for adjournment was filed. The matter was accordingly re-fixed for hearing on 11.03.2025. None attended on this date either. Thus having regard to the fact that the matter was first listed for hearing in the year 2023 and therefore, multiple opportunities have been given, we are constraint to assume that the assessee is not serious about his duties to assist the Bench. The captioned appeals are thus proceeded ex-parte. 4. As per the facts emerging from record and as submitted on behalf of the Revenue, two fold additions have been made by the AO:- ITA Nos.204 to 207/Del/2022 & C.O.Nos.200 to 203/Del/2022 Page | 3 (i) 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 a conduit company used to route accommodation entries through bank account of the assessee company. The assessee has merely acted as pass through entity and was not owner of the credit entries so routed through its banking account. Based on such premise, the CIT(A) reversed the additions made on protective basis under the shelter of s. 68 of the Act. (ii) The AO also estimated commission income on substantive basis for providing the accommodation entries which were subjected to protective assessment under s. 68 of the Act. 5. In this backdrop, the Ld.CIT DR for the Revenue pointed out that the 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 the additions in the hands of the so-called beneficiaries of the entry receipts on substantive basis. The CIT(A) has also reversed the commission income on the ground that the commission income has accrued to Shri Anand Kumar Jain and Shri Naresh Kumar Jain who were persons behind managing and controlling various concerns including the assessee company and nothing has been earned by the assessee company itself. The Ld.CIT(A) has ignored the basic fact that entries have been routed through the assessee company which is a distinct legal entity and thus the income earned by way of commission, if any, can be texted 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. 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 appeal before the CIT(A). The CIT(A) took note of the bank statement of the assessee company and noted that the company has received loans and credit entries from large number of entities, which in turn, has been given immediately to other entities i.e. beneficiaries of such entries. The CIT(A) thus observed that loan were transferred to other companies immediately which is nothing but part of modus operandi of the accommodation entry provider to introduce unaccounted funds ITA Nos.204 to 207/Del/2022 & C.O.Nos.200 to 203/Del/2022 Page | 4 of the beneficiaries in their respective accounts. The 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 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 belong to other parties and the assessee company was a mere name lender and for which commission was charged and earned by Shri Anand Kumar Jain and Shri Naresh Kumar Jain who were stated to be managing and controlling such entities. The 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. 6.1. 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 money/credits deposited in its bank accounts and beneficiaries being identified, there cannot be any addition of credit/funds deposited in the bank account in the hands of the assessee for the reason that such assessee is a entry provider/ conduit concern. The Ld.CIT(A) thus observed that question of money belonging to the assessee does not arise and therefore, the additions made by the AO on protective basis is not justified. 6.2. Likewise, commission presumably earned on such entries cannot be sustained on the ground that such commission income requires to be assessed in the hands of entry providers controlling these companies namely, Shri Anand Kumar Jain and Shri Naresh Kumar Jain. 7. The Co-ordinate Bench of the Tribunal in similar facts had an occasion to examine the issue. The Co-ordinate Bench of Tribunal observed that the onus lies on the assessee company to establish that the funds credited and routed through its bank account are not owned by it. The corporate veil cannot be lifted cursorily. The Co-ordinate Bench held that the onus has not been discharged at all. The relevant operative part of the decision of the Co- ordinate Bench in the case of ACIT vs Karda Traders (P.) Ltd. & Others in ITA ITA Nos.204 to 207/Del/2022 & C.O.Nos.200 to 203/Del/2022 Page | 5 Nos.196/Del/2022 & Others for the Assessment Years 2012-13 & Others order dated 09.01.2025 is reproduced hereunder for ready-reference:- 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 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 ITA Nos.204 to 207/Del/2022 & C.O.Nos.200 to 203/Del/2022 Page | 6 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-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.” 8. In consonance with the view expressed, we consider it equitable to restore the captioned appeals to the office of the CIT(A) for fresh adjudication in accordance with law. It is for the assessee to own up and take a stand as to how no rights or obligations arise to it from the entries credited in the books of accounts and received by it through banking channel. The onus is on the assessee which has been incorrectly shifted to AO by the CIT(A). Thus, it shall be open to the assessee to place arguments and adduce evidences as may be considered expedient to defend its stand on the subject matter of dispute. ITA Nos.204 to 207/Del/2022 & C.O.Nos.200 to 203/Del/2022 Page | 7 9. As per its captioned cross-objections, the assessee has sought to impugn the jurisdiction assumed under s. 153C of the Act. Complete facts are not available before the Tribunal to support the objections raised. The assessee has not demonstrated before the Tribunal as to how the jurisdiction assumed under s. 153C of the Act is plagued with any infirmity and consequent additions so made are unsustainable in any manner. We are thus not in a position to make comments at this stage. It shall be open to the assessee to raise such plea before the Ld.CIT(A) in accordance with law. The CIT(A) shall adjudicate the issue raised towards validity of additions made under s. 153C of the Act by passing a speaking order. 10. In the result, all captioned appeals of the Revenue as well Cross- objections of the assessee are allowed for statistical purposes. Order pronounced in the open Court on 07.05.2025. Sd/- Sd/- (SUDHIR KUMAR) JUDICIAL MEMBER *Amit Kumar, Sr.P.S* (PRADIP KUMAR KEDIA) ACCOUNTANT MEMBER Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "