ROUND SQUARE EXIM PVT. LTD.,NEW DELHI V. ACIT, CENTRAL CIRCLE-26, NEW DELHI

CO 88/DEL/2022

AI Insights

The case involves appeals by the Revenue against the decision of the CIT(A) which deleted the protective additions made by the Assessing Officer on the grounds of unexplained cash credits and commission income. The assessee, M/s Round Square Exim Pvt. Ltd., was implicated following a search and seizure operation under section 132 of the Income Tax Act, 1961, at the premises of associates of Jain Brothers, who were alleged to be managing various shell companies. The CIT(A) found that the real beneficiaries had been identified and substantive additions were made at their hands, thus no further additions were warranted at the hands of the assessee. The Tribunal agreed with the CIT(A)'s decision, referencing similar cases and the modus operandi of accommodation entry providers.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 298910 (ITAT-DELHI)
• Appeal Type: Cross Objection
• Pronouncement Date: 08-01-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: SHILPI JAIN
• Keywords: Additional evidence; Unexplained cash credit; Search and seizure; Accommodation entries
• Section: 143(3); 132; 68; 13; 153C

Judgement Text

"आयकर अपीलीय अिधकरण, \u000eद\u0010ली पीठ ‘एफ’, \u0014यायपीठ, \u000eद\u0010ली \u0016ी िवकास अव\bथी, याियक सद\bय एवं एवं एवं एवं \u0016ी मीठा लाल मीना, लेखा सद य, क े सम IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES ‘F’ DELHI BEFORE, SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND DR. MITHA LAL MEENA, ACCOUNTANT MEMBER आयकर अपील सं आयकर अपील सं आयकर अपील सं आयकर अपील सं. / . / . / . / ITA Nos.8834 TO 8837/DEL/2019 िनधा\"रण वष\" िनधा\"रण वष\" िनधा\"रण वष\" िनधा\"रण वष\" / / / /Assessment Years: 2012-13 to 2015-16 Asst. Commissioner of Income Tax, Central Circle- 26, Room No.323, E-2, ARA Centre, Jhandewalan Extn., New Delhi-110055 Vs. M/s Round Square Exim Pvt. Ltd. B-163, Block-B, Amar Colony Lajpat Nagar-IV, New Delhi (राज व / / / /Revenue) (िनधा\"%रती / / / /Assessee) P.A. NUMBER : AAECR5167Q Cross Objection Nos.87 To 90/Del/2022 (Arising out of आयकर आयकर आयकर आयकर अपील सं अपील सं अपील सं अपील सं. / . / . / . / ITA Nos.8834 TO 8837/DEL/2019) िनधा\"रण वष\" िनधा\"रण वष\" िनधा\"रण वष\" िनधा\"रण वष\" / / / /Assessment Years: 2012-13 to 2015-16 M/s Round Square Exim Pvt. Ltd. B-163, Block-B, Amar Colony Lajpat Nagar-IV, New Delhi Vs. Asst. Commissioner of Income Tax, Central Circle- 26, Room No.323, E-2, ARA Centre, Jhandewalan Extn., New Delhi-110055 (िनधा\"%रती / / / /Assessee) (राज व / / / /Revenue) P.A. NUMBER : AAECR5167Q (िनधा\"%रती क' ओर से/Assessee by Ms. Shilpi Jain, CA राज व क' ओर से / Revenue by: Ms. Suman Malik CIT-DR सुनवाई क' तार+ख / / / / Date of Hearing : 06.01.2025 घोषणा क' तार+ख / Date of Pronouncement : 08.01.2025 2 ITA Nos.8834 to 8837/Del/2019 CO. Nos.87 To 90/Del/2022 ORDER PER DR. MITHA LAL MEENA, AM, The captioned appeals by the Revenue and Cross Objections (in short ‘the COs’) by the appellant assessee are filed against the separate orders even dated 22.08.20149 of the learned Commissioner of Income Tax (Appeals)-29, New Delhi (hereinafter referred to as ‘the ld. CIT(A)), in respect of the Assessment Years 2012-13, 2013-14, 2014-15 and 2015-16 respectively. 2. Considering the common grounds of appeal and facts arising in the captioned appeals of the Revenue and Cross Objections of the assessee, we decided to hear all these appeals and cross objections together and are being adjudicated by a common order for the sake of brevity. 3. Grounds taken by the Revenue in appeal for Assessment year 2012- 13 and Cross Objections of the assessee for Assessment year 2012-13 are considered as lead year and are thus, reproduced hereunder:- ITA No.8834/Del/2019 1. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in law and on facts in deleting the protective addition of Rs 14,18,37,753/- made by the AO on account of unexplained cash credits, without considering the fact that the assessee has failed to discharged the onus to satisfy the conditions laid on u/s 68 of the I.T. Act 1961 with regard to the nature and source of credit entries in respect of share capital/premium/unsecured loans and other credits in bank. 3 ITA Nos.8834 to 8837/Del/2019 CO. Nos.87 To 90/Del/2022 2. On the facts and in the circumstances of the case the La.CIT(A) has erred in law and on facts in deleting the substantive addition of Rs. 3,54,594 /- made by the AO without considering the fact that the assessee that assessee being a conduit concern, would have earned commission income for the transactions. Cross objection No.87/Del/2022 “1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eye of law and on facts. 2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the order passed by the learned Assessing Officer (AO) under Section 143(3) read with section 153C is without jurisdiction. 3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the proceedings initiated under Section 153C and the assessment framed under Section 153C is bad and liable to be quashed in the absence of any satisfaction being recorded by the AO of the searched person that the incriminating material belonging to the assessee was found during the course of the search. 4. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the additions made under Section 153C are bad in law in the absence of any incriminating material belonging to the assessee being found during the course of the search. 4 ITA Nos.8834 to 8837/Del/2019 CO. Nos.87 To 90/Del/2022 5. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in ignoring the contention of the assessee that the assessment order was passed alleging that the assessee did not file reply to the show cause notice even though the same was duly filed before passing of order. 6. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in ignoring the contention of the assessee that the assessment order was passed alleging that the assessee did not produce director of the assessee company but no such opportunity was provided to the assessee company. 7. i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the explanations and evidences brought on record by the assessee to prove the identity and creditworthiness of the lenders and genuineness of the transactions. (ii) That the abovesaid addition has been confirmed ignoring the fact that the addition has been made by the AO without pointing out any defect in the evidences filed by the assessee. 8. On the facts and circumstances of the case, the learned CIT (A) has erred both on facts and in law in holding that the assessee is involved in providing and taking accommodation entries in the form of share application money or unsecured loans.” 4. Briefly the facts are, the assessee is a resident corporate entity and stated to be engaged in the business of trading in shares and other investments. As observed by the Assessing Officer, a search and seizure operation under section 132 of the Act was carried out on 17.12.2015 at 5 ITA Nos.8834 to 8837/Del/2019 CO. Nos.87 To 90/Del/2022 the residential premises of Sh. Kaushal Kumar, employee of Sh. Anand Kumar Jain and Sh. Naresh Kumar Jain (Jain Brothers), H. No. 151, Pocket-13, Sector-20, Rohini, Delhi. In course of search and seizure operation, certain documents and hard disks were seized. In the said seized material, a ledger mentioning the name of the assessee, was found. Based on such information, the Assessing Officer of the searched persons recorded a satisfaction note in terms of section 153C of the Act implicating the assessee. After receiving the satisfaction note from the Assessing Officer of the searched persons, the Assessing Officer of the assessee has initiated proceedings under section 153C read with section 153A/143(3) of the Income-tax Act, 1961 (in short ‘the Act’). In course of the assessment proceeding, the Assessing Officer verified the seized materials and was of the view that Jain Brothers were controlling/managing various shell/paper-companies through which they provide accommodation entries to large number of beneficiaries. He observed that the assessee is one of such companies. Alleging that various credit entries appearing in the books are merely in the nature of accommodation entries without any valid source, the Assessing Officer treated them as unexplained cash credit at the hands of the assessee by invoking section 68 of the Act and added them back to the income of the assessee. Further, he observed that while providing such accommodation entries to various beneficiaries, the assessee must have received commission. Accordingly, he estimated the unaccounted commission income by applying rate of 0.25% to the total credit entries. However, he held that the additions have to be made on protective basis at the hands 6 ITA Nos.8834 to 8837/Del/2019 CO. Nos.87 To 90/Del/2022 of the assessee. Whereas, they have to be made on substantive basis at the hands of the beneficiaries. In like manner, the AO has made additions in all the assessment years under dispute. 5. Being aggrieved with the additions made, the assessee preferred appeals before the CIT(A) where the assessee furnished various documentary evidences by way of additional evidences, which were forwarded to the Assessing Officer for verification. After verifying the additional evidences, the Assessing Officer furnished a remand report. After examining all the facts and materials on record, the submissions of the assessee and the remand report, the Ld. CIT(A) found that the Assessing Officer himself, while making protective additions at the hands of the assessee, has stated that information of the beneficiaries has already been disseminated by Investigation Wing to the respective AO’s for appropriate actions by the AO’s of the beneficiaries. 5.1 Thus, the CIT(A) held that when the beneficiaries have been identified and the undisclosed income have to be added at their hands on substantive basis, the additions made on protective basis at the hands of the assessee cannot be sustained. He further held that since the commission income has been added on substantive basis at the hands of Jain Brothers, the main entry provider, the same cannot be added at the hands of the assessee. While coming to such conclusion, CIT(A) relied upon the decisions taken in case of other similar companies in Peri Materia. 7 ITA Nos.8834 to 8837/Del/2019 CO. Nos.87 To 90/Del/2022 6. The learned Departmental Representative heavily relied upon the observations of the Assessing Officer. 7. The learned counsel appearing for the assessee submitted that while deciding Revenue’s appeal in respect of other similar companies, the Coordinate Benches have upheld the decision of Ld. CIT(A). In this context, she placed on record the following decisions of the Tribunal: 1. DCIT vs Third Generation Traders Pvt. Ltd., ITA Nos.2413 to 2418/Del/2024, order dated 20.09.2024. 2. ACIT Vs. M/s. ZED Enterprises (P) Ltd., ITA No.208 to 2012/Del/2022, order dated 09.01.2024. 3. DCIT Vs. M/s. Shivji Garments Pvt. Ltd., ITA No. 9639 to 9642/Del/2019, order dated 06.02.2024 8. Further, she submitted, that in respect of some of the beneficiaries also substantive addition made by the Assessing Officer, has been confirmed by the Tribunal. She submitted, even substantive addition of commission income made at the hands of the Jain Brothers, has been confirmed by the Tribunal. 9. We have heard the rival submissions, perused the material available on record, impugned order and case law cited before us. In the present case, while deleting the addition, the Ld. CIT(A) has observed as under:- “6.4. From the above transactions, it is noticed that the appellant company has received funds from various concerns and transferred the same to the above mentioned 8 ITA Nos.8834 to 8837/Del/2019 CO. Nos.87 To 90/Del/2022 companies/concerns immediately thereafter, and accordingly, appellant company is not beneficiary company. The above arrangement of funds is nothing but part of modus operandi of the accommodation entry provider to introduce the unaccounted funds of the beneficiaries in their respective bank accounts. Further, the AO also in the assessment order has observed that the appellant company was a conduit company operated by Sh. Naresh Jain and Anand Jain to provide accommodation entries to various beneficiaries and said beneficiaries have already been identified. Accordingly, when the beneficiaries are identified, the addition in such cases can at best be that of commission earned on such accommodation entries. The commission income earned on providing accommodation entries through the appellant company have already been assessed by the AO in the hands of Sh. Anand Jain and Naresh Jain which has been confirmed by me in their respective appeals. Therefore, I am of the view that no further addition can be made in the hands of appellant company under the facts as discussed above. Under these circumstances, the protective addition made by the AO of Rs. 14,18,37,75/- is directed to be deleted. 7. In ground nos. 12, the appellant has challenged the addition made by the AO of Rs.3,54,594/-. The AO in the assessment order has made an addition on account of commission income of Rs. 3,54,594/- on account of commission income @0.25% of the total credits of Rs.14,18,37,753/- received from various parties. 7.1. In this regard, it has already been held in para 6.4. of this order that the addition on account of commission income has already been made in the hands of Anand Kumar Jain and Naresh Kumar Jain as these two persons were operating appellant company as conduit for providing accommodation entries. Having held that these two persons were operating these companies including the appellant, l am of the view that no further addition on account of commission is warranted in the hands of appellant company under the facts as discussed above. Therefore, the addition made on account of commission of Rs.3,54,594/- is directed to be deleted.” 10. As could be seen from the aforesaid observations of the Ld. CIT(A), since, the real beneficiaries, who have availed the accommodation entries were identified, the substantive additions have been made at their hands. That being the case, protective additions made at the hands of the assessee cannot survive. 9 ITA Nos.8834 to 8837/Del/2019 CO. Nos.87 To 90/Del/2022 11. While considering identical issue on similar facts, the companies, allegedly managed and controlled by Jain Brothers, the Coordinate Bench in the cases of DCIT Vs. M/s. Shivji Garments Pvt. Ltd. (supra) and ACIT Vs. M/s. Zed Enterprises (P) Ltd. (supra) has upheld the decision of the Ld. CIT(A) in deleting the addition. 12. In the present cases, the facts are being identical, we do not find any infirmity in the decision of Ld. CIT(A), in deleting the additions. Accordingly, revenue grounds are dismissed. 13. Since, the Department’s appeals are dismissed, the assessee has not pressed the Cross objections, hence, the COs stands rejected as infructuous. 14. The facts and issues raised in the Revenue’s appeal and Cross Objections of the assessee in the Assessment Years 2013-14, 2014-15, and 2015-16 are exactly identical to the facts and issues raised in the Assessment Year 2012-13. Therefore, our finding given in respect of Assessment year 2012-13 shall be applicable to the Assessment years 2013-14, 2014-15 and 2015-16 in pari material, decided accordingly. 15. In the result, four appeals of the Revenue and four Cross Objections of the assessee are dismissed. Order pronounced in the open court on 8th January, 2025. Sd/- Sd/- [VIKAS AWASTHY] [DR. MITHA LAL MEENA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 08.01.2025. f{x~{tÜ f{x~{tÜ f{x~{tÜ f{x~{tÜ 10 ITA Nos.8834 to 8837/Del/2019 CO. Nos.87 To 90/Del/2022 आदेश क' /ितिल0प अ1े0षत आदेश क' /ितिल0प अ1े0षत आदेश क' /ितिल0प अ1े0षत आदेश क' /ितिल0प अ1े0षत/Copy of the Order forwarded to : 1. अपीलाथ3 / The Appellant 2. /4यथ3 / The Respondent. 3. आयकर आयु5(अपील) / The CIT(A)- 4. आयकर आयु5 / CIT 5. 0वभागीय /ितिनिध, आयकर अपीलीय अिधकरण, \u000eद\u0010ली / DR, ITAT, Delhi, 6. गाड\" फाईल / Guard file. आदेशानुसार आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, उप उप उप उप/ / / /सहा सहा सहा सहायक पंजीकार यक पंजीकार यक पंजीकार यक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, , , , \u000eद\u0010ली \u000eद\u0010ली \u000eद\u0010ली \u000eद\u0010ली / ITAT, DELHI "