2013 (6) TMI 429 - AT - Income Tax

Providing accommodation entries - CIT(A) deleted the addition - Held that - As per AO the assessee received Rs.26 lacs as bogus entries in the garb of sale proceeds of share. On the other hand, the CIT (A) allowed the appeal of the assessee with an observation that all impugned transactions are reflected in the audited accounts of the assessee, all the amounts related to impugned transactions were received through cheques and no suspicious features are noticed. The CIT (A) has also held that the AO has not raised any doubt against the said purchase and sale of shares in the earlier years. The CIT (A) concluded the assessee company has brought on record overwhelming evidence to prove the genuineness of the transactions and the AO wrongly disbelieved the transactions by erroneously observing that the genuineness of the impugned transactions was not proved without controverting the facts brought on record by the assessee showing genuineness of the transactions. Thus in view of the above, unable to see any infirmity, ambiguity or any other valid reason to interfere with the impugned order. Thus respectfully relying on ITO Vs. M/s Diplomate leasing and Finance Pvt. Ltd. 2013 (6) TMI 349 - ITAT DELHI if sale consideration was bogus then the AO ought to have given reduction in the sale proceeds reflected in the books of accounts before making any addition in this regard. Against revenue. Reopening of assessment - Held that - Since the appeal of the Revenue has been dismissed by the earlier part of this order and cross objection of the assessee are only supportive to the impugned order, therefore, no reason to interfere with the findings of the CIT (A) upholding the action of the AO for initiation of proceedings u/s 147 and 148 against the assessee. Accordingly, cross objection of the assessee being devoid of merits is also dismissed. Cross objection of the assessee are dismissed.

Summary

Issues Involved:
1. Deletion of addition of Rs. 26,00,000/- deemed as income under Section 68 of the Income Tax Act.
2. Deletion of addition of Rs. 2,60,000/- as commission for obtaining entries and whitening undisclosed income.
3. Genuineness of the receipt of Rs. 26,00,000/- as sale proceeds of shares.
4. Validity of the initiation of proceedings under Section 147 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Deletion of Addition of Rs. 26,00,000/- Deemed as Income under Section 68:
The Revenue contested the deletion of Rs. 26,00,000/- added as unexplained income under Section 68. The Assessing Officer (AO) had received information that the companies from which the assessee received the amount were involved in providing accommodation entries. The AO added the amount to the total income, treating it as unexplained, due to the failure of the assessee to produce bank statements and representatives of the concerned companies. However, the Commissioner of Income Tax (Appeals) [CIT (A)] found that the transactions were reflected in the audited accounts, and the amounts were received through cheques. The CIT (A) concluded that the assessee provided sufficient evidence, including sale bills, bank statements, and confirmations from the concerned parties, proving the genuineness of the transactions. The Tribunal upheld the CIT (A)'s findings, noting that the AO's suspicion was not supported by concrete evidence.

2. Deletion of Addition of Rs. 2,60,000/- as Commission:
The AO had added Rs. 2,60,000/- on account of alleged commission paid for obtaining accommodation entries. This addition was based on the presumption that the assessee must have paid a commission at the rate of 1% for the entries. The CIT (A) deleted this addition, stating that it was based on pure presumptions without any cogent material or evidence. The Tribunal agreed with the CIT (A), noting that since the main addition of Rs. 26,00,000/- was deleted, there was no basis for the commission addition.

3. Genuineness of the Receipt of Rs. 26,00,000/- as Sale Proceeds of Shares:
The AO doubted the genuineness of the receipt of Rs. 26,00,000/- as sale proceeds of shares, labeling the transactions as bogus. The assessee argued that the transactions were genuine and supported by documentary evidence, including sale bills, bank statements, and confirmations from the purchasing companies. The CIT (A) examined the evidence and found no suspicious features in the transactions. The Tribunal upheld the CIT (A)'s findings, noting that the AO failed to provide concrete evidence to disprove the genuineness of the transactions.

4. Validity of the Initiation of Proceedings under Section 147:
The assessee filed a cross-objection challenging the initiation of proceedings under Section 147. The CIT (A) had upheld the AO's action for initiating proceedings under Section 147. During the arguments, the assessee's representative conceded that the cross-objection was only to support the impugned order and did not make further submissions. The Tribunal found no reason to interfere with the CIT (A)'s findings and dismissed the cross-objection.

Conclusion:
The Tribunal dismissed both the Revenue's appeal and the assessee's cross-objection. The Tribunal upheld the CIT (A)'s order deleting the additions of Rs. 26,00,000/- and Rs. 2,60,000/-, finding that the transactions were genuine and supported by sufficient evidence. The Tribunal also upheld the validity of the initiation of proceedings under Section 147. The order was pronounced in open court on 7th June 2013.