2024 (3) TMI 301 - AT - Income Tax

Addition u/s 68 - bogus LTCG - share capital and share premium were merely paper credit entries - receipt of accommodation entries in lieu of commission paid - HELD THAT - There is a concept of real income which has to be ascertained and taxed and not the hypothetical income which has never accrued to the assessee Except in these cases where statute expressly provides for taxing the income on deemed basis. This is further corroborated by the fact that the very first day during the course of recording statement u/s 132(4) of the Act Shri Bajrang Lal Agarwal have stated that he is engaged in providing accommodation entries in lieu of commission through the assessee meaning thereby that money did not belong to him as it is only pass through entity. The case of the assessee finds support from the decision of Coordinate Bench of Delhi in the case of ITO vs. M/s Angel Cement Pvt. Ltd 2021 (4) TMI 162 - ITAT DELHI Since Shri Bajrang Lal Aggarwal was providing accommodation entries to either intermediaries or the ultimate beneficiaries through paper companies including the assessee and the assessee is only a conduit for channelizing the unaccounted funds of beneficiary companies, therefore, in our opinion, the order passed by the Ld. CIT(A) appears to be incorrect and cannot be sustained. Accordingly we set aside the order of ld. CIT(A) and direct the AO to delete the addition. However the AO is directed to assess the commission income on accommodation entries @ 20 paisa on Rs. 27,63,46,000/- which comes to Rs. 6,90,865/-. Consequently the Appeal of the assessee is party allowed. Addition of payment made under MOU while computing the income of the assessee - HELD THAT - We find that undisputedly the assessee entered into MOU for transfer of land measuring 85.51 acres which belonged to Paul Brothers. Since the Paul brothers could not hand over the possession of the impugned land to the assessee due to on going legal disputes and therefore the assessee made payment only as advance on the date of signing of MOU on 31.03.2012. We note that Rs. 1,01,000/- was paid out of their personal sources and the same was covered in the disclosure of additional income made by them in the course of search proceedings. Therefore we are not in a position to concur with the findings of the Ld. CIT(A) on the upholding the assessment order on this issue. Consequently we set aside the order of Ld. CIT(A) on these cases and direct the AO to delete the addition. Unexplained cash credit - Deposits in bank account - HELD THAT - We note that the deposit of money in the bank account of the assessee has been advanced by these individuals out of their personal sources and have been admitted as additional income and offered to tax in their respective returns of income filed in various assessment years as is evident from table A B infra. We note that the said amount was assessed in various years in the hands of these individuals and therefore the action of Ld. CIT(A) in confirming this addition on account of unexplained cash credit cannot be sustained as the same stood offered to tax in their individual assessments and if confirmed, would result in taxing the same amount twice. Accordingly we set aside the order of Ld. CIT(A) and direct the AO to delete the said addition. Addition of expenses incurred in connection with the Renguni land - HELD THAT - No separate addition can be made in the hands of the assessee on account of expenses/investments as stated above particularly when the same is offered by the above individuals in their respective assessments. Accordingly we set aside the order of the Ld. CIT(A) and direct the AO to delete the addition. The Ground no. 2 is accordingly allowed. Addition u/s 69B - payment made as unexplained investments - HELD THAT - We observe that the said payment made by Sri Yogendra Kumar Agarwal to Sri Vivek Agarwal has been added on substantive basis in the hands of Sri Yogendra Kumar Agarwal in the assessment order framed u/s 153A. Therefore the impugned payment cannot be once again considered in the hands of the assessee company. In view of the above facts, we are inclined to set aside the order of Ld. CIT(A) on this issue and direct the AO to delete the addition. Consequently ground is allowed. Undisclosed investments u/s 69B - HELD THAT - As the authorities below have not brought on record any evidence substantiating the fact that the consideration was paid outside the books of accounts. In the instant case the consideration for which the impugned land was purchased was fully accounted for in the books as asset and the outstanding part of the sales consideration was shown as liabilities. In view of this fact, we are not in a position to sustain the order passed by the Ld. CIT(A) on this issue and consequently we set aside the order of Ld. CIT(A) and direct the AO to delete the addition. The ground is allowed. Unexplained investment/purchases of land - HELD THAT - The consideration payable to Sri Tarun Kanti Ghoshal was shown as outstanding and was duly shown in the liability side under the head current liabilities and therefore we are not in a position to approve the conclusion drawn by the authorities that the consideration was understated by the assessee whereas as a matter of fact there was no understatement of value of impugned land. Moreover the authorities below have not brought on record any evidence substantiating the fact that the consideration was paid outside the books of accounts. In the instant case the consideration for which the impugned land was purchased was fully accounted for in the books as asset and the outstanding part of the sales consideration was shown as liabilities. In view of this fact, we are not in a position to sustain the order passed by the Ld. CIT(A) on this issue and consequently we set aside the order of Ld. CIT(A) and direct the AO to delete the addition.

Summary

Issues Involved:
1. Addition of Share Capital and Share Premium under Section 68.
2. Addition of Credit Entries in Bank Account under Section 68.
3. Addition of Payment under Memorandum of Understanding (MOU).
4. Addition of Credit Entries for Stamp Duty Payment.
5. Addition of Unexplained Expenditure from Seized Documents.
6. Addition of Unexplained Investment for Purchase of Company.
7. Addition of Commission Paid to Vivek Agarwal.
8. Addition of Undisclosed Investment in Land.
9. Addition of Unexplained Expenses and Cash Deposits.
10. Deletion of Protective Additions in the Revenue's Appeal.

Summary:

1. Addition of Share Capital and Share Premium under Section 68:
The Tribunal addressed the addition of Rs. 27,63,46,000/- made under Section 68 for share capital and share premium. The assessee argued that the amounts were merely paper entries and the company was a conduit for providing accommodation entries. The Tribunal agreed with the assessee, noting that the company was a pass-through entity and only the commission income should be taxed. The addition was deleted, and the AO was directed to assess the commission income at 20 paisa per hundred rupees.

2. Addition of Credit Entries in Bank Account under Section 68:
For AY 2012-13, the Tribunal dealt with the addition of Rs. 1,57,81,000/- for credit entries in the bank account. The Tribunal found that the corresponding debits matched the credits and the assessee was a conduit. The addition was deleted, and the AO was directed to assess the commission income similarly.

3. Addition of Payment under Memorandum of Understanding (MOU):
The Tribunal addressed the addition of Rs. 1,01,000/- paid under an MOU for the purchase of land. It was found that this amount was covered in the additional income disclosed by the actual investors. The Tribunal directed the deletion of this addition.

4. Addition of Credit Entries for Stamp Duty Payment:
For AY 2013-14, the Tribunal examined the addition of Rs. 1,24,00,000/- for credit entries used for stamp duty payment. The Tribunal found that the funds were provided by individuals who disclosed this as additional income in their assessments. The addition was deleted.

5. Addition of Unexplained Expenditure from Seized Documents:
The Tribunal reviewed the addition of Rs. 1,81,45,000/- for expenses related to the Renguni land. It was found that these expenses were covered by the additional income disclosed by the investors. The Tribunal directed the deletion of this addition.

6. Addition of Unexplained Investment for Purchase of Company:
The Tribunal addressed the addition of Rs. 30,00,000/- for the purchase of the assessee company. It was found that the payment was made by the new owners and was covered in their additional income disclosures. The Tribunal directed the deletion of this addition.

7. Addition of Commission Paid to Vivek Agarwal:
The Tribunal examined the addition of Rs. 27,55,500/- for commission paid to Vivek Agarwal. It was found that this amount was covered in the additional income disclosed by the investors. The Tribunal directed the deletion of this addition.

8. Addition of Undisclosed Investment in Land:
The Tribunal reviewed the addition of Rs. 21,31,26,000/- for the purchase of land. It was found that the land was under dispute and the full consideration was not paid. The amount was accounted for in the books, and no evidence of payment outside the books was found. The Tribunal directed the deletion of this addition.

9. Addition of Unexplained Expenses and Cash Deposits:
For AY 2014-15, the Tribunal dealt with additions of Rs. 5,00,000/-, Rs. 2,29,800/-, Rs. 3,00,000/- for various payments. These amounts were covered by the additional income disclosed by the investors. The Tribunal directed the deletion of these additions.

10. Deletion of Protective Additions in the Revenue's Appeal:
The Tribunal addressed the revenue's appeal against the deletion of protective additions totaling Rs. 2,70,51,000/-. It was found that the substantive additions in the case of BCPL were deleted as the amounts were disclosed by the investors. The Tribunal dismissed the revenue's appeal.

Conclusion:
All the appeals of the assessee were allowed, and the revenue's appeal was dismissed. The Tribunal directed the deletion of various additions made under Sections 68, 69B, and 69C, as the amounts were found to be covered by the additional income disclosed by the actual investors.