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TMI Blog2018 (3) TMI 661X X X X Extracts X X X X X X X X Extracts X X X X ..... have been made in the hands of the recipient of purported accommodation entries. 2. The ld CIT(A) has erred in law and facts in not appreciating the fact there was nothing on record to establish that the substantive additions had remained uncontested and the issue had reached finality in the cases wherein the substantive additions had been made. 3. The ld CIT(A) has erred in law and on facts in deleting the addition of Rs. 254930/- made on account of commission !1% of above addition on the ground that addition made by the Assessing Officer was on assumption basis." 4. The Revenue has raised the following grounds of appeal in ITA No. 1813/Del/2013 for the Assessment Year 2001-02: "1. The ld CIT(A) has erred in law and on facts in restricting the addition at Rs. 741059/- as against the original addition made by the assessing officer at Rs. 20325753/- merely observing that the assessee company had nothing to do with the said account and it was misused by one of its Directors namely Sh. Pradeep Jindal. 2. The ld CIT(A) has erred in law and facts in not appreciating the fact there was nothing on record to absolve the assessee of its responsibility with respect to the said b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " 9. In response to the notice under section 148 of the income tax act the director of the assessee company submitted vide letter dated 24/4/2007 that the return filed originally on 30/11/2000 be treated as return filed in compliance to notice under section 148 of the act. Subsequently the copies of the reasons recorded for reopening of assessment under section 148 for the assessment was also provided vide order sheet entry dated 8/8/2007. Subsequently the assessee was also provided the copy of the bank statement of bank account of the assessee company with state bank of India Shakti Nagar and copy of the statement of Sh. Pradeep Jindal, who was at that time director of the assessee company. 10. During the course of reassessment proceedings the assessee was asked to explain the large amount of deposit in the bank account, which was not reflected in the books of accounts of the assessee company. The assessee was further provided the copy of the bank account No. 43145 with state bank of India Shakti Nagar/Delhi for explanation. The Ld. assessing officer asked the assessee to explain all debit and credit entries appearing in the above state bank account. In response to this the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cross-examination. He further held that the assessee company cannot be absolved of the affairs and transactions entered into in its own bank account and in control and supervision of its own director. However, the Ld. assessing officer has made the addition of Rs. 2,54,93,000/- in the hands of the assessee on protective basis for the reason that on perusal of the entries reflected in the bank account reveals that there is an immediate debit of amount equivalent to the amount of credit in this account. From these facts, it was noted by the Ld. assessing officer that the pattern of the transactions reflected in the bank account shows that the bank account existing in the name of the assessee company was being used for providing accommodation entries. The Ld. AO further held that the assessing officers of the alleged beneficiaries stood also informed about the transactions in those cases. The commission income at the rate of 1% of the accommodation entry was added on substantive basis in the hands of the assessee of rupees 254930/-. 12. Assessee, aggrieved with the order of the Ld. assessing officer, preferred an appeal before the Ld. CIT (A) who vide order dated 31/1/2013 deleted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he addition of Rs. 24553000/- on protective basis in the hands of the assessee and deletion of addition of Rs. 254930/- on account of commission at the rate of 1% of accommodation entries on the ground that addition made by the assessing officer was on presumption basis. 15. The assessee has raised an additional ground of appeal before us as under:- "That the impugned assessments framed is bad in law and on facts, inasmuch as, the initiation of proceedings under section 147 of the act and further completion of assessment under section 143 (3)/147 of the act was without satisfying the statutory precondition is envisaged in the aforesaid section and was without jurisdiction and was liable to be quashed as such." 16. The Ld. authorized representative submitted that the above ground is purely legal in nature and requires no further investigation of the fact. Therefore, in view of decision of the Hon'ble Supreme Court in case of National Thermal Power Company Ltd versus CIT 229 ITR 383 as well as M/s Jute Corporation Of India Ltd versus CIT 187 ITR 688 the above additional ground may be admitted and adjudicated. 17. The Ld. departmental representative vehemently objected to the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d which has been used by the assessee for giving accommodation entries to the various parties, reopening is validly initiated. Further, the ld Assessing Officer has also verified that where the assessee is filing return of income. In this circumstances and facts all the decisions relied upon by the ld AR do not support the case of assessee. He further submitted that in the case of Minakshi Overseas the issue was that the accommodation entry was taken by the assessee however, in the present case of the assessee the company itself is an entry operator, which has been confirmed by the Director of the company itself. With respect to the decision of Sabh Infrastructure the statement of third party was taken who has stated he operates certain companies who have given accommodation entry to that assessee. However, in the present case the Director himself has confessed then there is no reason that reopening can be held to be invalid. Even in the present case, assessee himself has confirmed at all the stages that account of the assessee was used for providing accommodation entries. Hence, in this case there is no reason to say that the reasons recorded by the Assessing Officer are invalid. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d High Court in 128 ITR 58 when asked to produce the details of account opening form from the bankers that when the assessee is not producing material the tribunal is not bound to collect material to decide the claim. He further referred to the decision of Hon'ble Delhi High Court in case of PC Puri Vs. CIT 151 ITR 584 and specifically referred to page No. 604 of that order to support his contention. He further referred to the third member decision of the coordinate bench in case of Raj Kumar Jain Vs. ACIT 50 ITD 1 to further support his claim. In the end, he submitted that the appeal of the revenue deserves to be dismissed and appeal of the assessee needs to be allowed. 24. We have carefully considered the rival contentions and perused the orders of the lower authorities. The first issue that requires to be decided by us on the additional ground raised by the assessee against reopening of the assessment. In the present case the ld Assessing Officer has reopened the case of the assessee by issue of notice u/s 148 of the Income Tax Act. Basis of the reopening was the enquiry made by the Director of Investigation on various persons who were indulged in providing accommodation en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Hon'ble Delhi High Court in PCIT Vs. Minakshi Overseas Pvt. Ltd 395 ITR 677 to submit that reopening is not valid. We have carefully perused the decision of the Hon'ble Delhi High Court and compared the facts of the same with the facts before us and found that in the present case the ld Assessing Officer has not merely reproduced the report of the investigation wing but has also linked with bank account of the assessee, return of the assessee and statement of the director of the assessee company. In view of this reliance on the above decision is misplaced for the reason that in that particular case reopening was held to be invalid because the ld AO has merely reproduced the Investigation Wing's Report in the reasons record without establishing link between tangible material and formation of belief. Further, the reliance placed on the decision of the Hon'ble Delhi High Court in case of Sabh Infrastructure Ltd Vs. ACIT is also misplaced for the reason that in that particular case the ld Assessing Officer did not mention that what facts have been assessee failed to disclose. Further, in that particular case the reason for reopening contain the name of very ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct the addition is made in the hands of the assessee of the full amount of accommodation entry given from their bank account of Rs. 25493000/- was added into the hands of the assessee on protective basis. The AO held that this amount is required to be assessed substantially in the hands of respective beneficiaries. Further, commission @1% on the above accommodation entry was also added. For subsequent years the ld AO has made addition on the substantive basis in the hands of the assessee. 27. For AY 2000-01, The ld CIT(A) after obtaining the remand report of the assessee held that out of sum of Rs. 25493000/- the ld Assessing Officer has submitted that in case of the five parties out of the several beneficiaries the addition have been substantially made amounting to Rs. 9632760/- in the hands of the five parties as mentioned in para No. 3.1 of the order of the ld CIT(A). The ld AO did not mention anything whether in case of two parties the addition is made or not on substantive basis. However, the ld CIT(A) as per the letter of the appellant dated 16.02.2010 mentioned in para No. 3.2 of the order that in case of the other two parties the substantial addition of Rs. 60 lacs and Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther the company is in anyway responsible for these transactions is yet to be proved with evidence. In view of the above, the AO's addition of transactions subsequent to 27.09.2000 is not justifiable as the evidence clearly indicates that Shri Pradeep Jindal had resigned on 27.09.2000. The company if at all can be held responsible it is for transactions upto 27.09.2000 only when Shri Pradeep Jindal was the director of the company. I have verified the bank pass book with SBI, Shakti Nagar branch and it is a typical accommodation entry case pass book with immediate debit of amount equivalent to the amount of credit in the account as mentioned by the AO in the assessment order for A. Y. 2000-01. The real beneficiaries in this case are the recipients of accommodation entries and the actual addition should be in their names only. It is not clear from the assessment records whether any addition was made in the hands of the four beneficiaries mentioned, above though their AOs their AOs have been intimated about these transactions. Further, it is also not clear whether any addition have been made in the hands of Shri Pradeep Jindal, the director of the company till 27.09.2000 who was the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n introduced in the bank account of the state bank of India in cash on substantive basis. Consequently, the addition of Rs. 40,000 because of commission income was also made. On appeal before the Ld. CIT appeal, he deleted the addition of the commission of Rs. 40,000/-, however, with respect to the addition of Rs. 40 Lacs, he upheld the addition to the extent of Rs. 36 Lacs holding that that as the bank account is stated in the name of the assessee company the appellant cannot claim total ignorance about the deposits in those accounts. He further rejected the contention of the assessee that the appellant cannot state that the next director was operating the amount and no one in the company was aware of this facts. However he collected the amount of Rs. 40 Lacs to Rs. 36.40 Lacs and confirmed the addition of Rs. 36 Lacs in the hands of the assessee on substantive basis. Therefore assessee is in appeal before us. 35. We have carefully considered the rival contentions and also per used the orders of the lower authorities for all the 3 years in a wholistic manner. Apparently the facts that emerge are that one Sh. Pradeep general along with other directors of the assessee company were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are the beneficiaries of the total transaction. Therefore for the assessment year 2000-01 the addition was partly confirmed in the hands of the assessee by the Ld. CIT(A). Subsequently for assessment year 2001-02 the Ld. CIT(A) held that as Sh. Pradeep Jindal was the director of the company up to certain date and therefore the company is responsible only up to that date to the peak balance in the bank account and confirmed the addition and consequently deleted the balance addition. Further for assessment year 2002-03 the Ld. CIT(A) confirmed the whole addition as assessee was having the bank account and the money was deposited in its bank account. In all the three cases, the Ld. CIT(A) has deleted the addition of commission income. Neither the assessing officer conducted any inquiry with respect to who were the beneficiaries of this whole transaction, nor the appellate authorities of the income tax Department while deleting the addition even attempted to find out the true nature of the transactions and go behind the real beneficiaries. At this moment it is also necessary to see what kind of investigation the investigation wing of the income tax Department has done. The investigatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided with the accommodation entries the confirmation of the transaction on the letterhead of these companies which are also forged were provided mentioning the permanent account number and bank account of the assessee company. Not all these transactions are recorded in the books of accounts of the respective companies. In the confirmation, no accounts were provided for. These are the modus operandi of these accommodation entry providers and after carrying on business for sometime the companies were sold by transferring the shares in the name of some other persons. It is apparent that even after sale of these companies the bank account in the name of those companies were kept by the entry operators in control with them and from the same account the accommodation entries are provided. The income tax Department was always provided with complete information about these loans or share capital stating the name, address, permanent account number and confirmation of the lender on the letterhead of these companies. Income tax return copies Page | 21 were also provided to give the color of entries from recorded transaction in the books of entry provider. But the entries are never recorded in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bringing any material on record enhanced the household expenditure in case of assessee and made the addition. In the present case when assessee says that the bank account does not belong to the company the higher onus lies on the assessee to show that assessee has not opened any bank account. This can be proved only by obtaining the copy of account opening form and complete details submitted to the banker. The assessee does not want to make any effort to bring that material on record. In fact assessee also does not deny that Mr. Pradeep Jindal was the director of the company. It is also not mentioned by the assessee that how assessee had entered into the commercial dealing with that gentleman by purchasing the shares of the company as well as taking over the company owned by the gentleman therefore it is apparent that assessee/directors know Mr Pradeep Jindal Further, even if the version of the assessee company is believed since 2007 to 2018 the assessee has not taken any steps against Mr. Pradeep Jindal or the bank. Such inactiveness on the part of the assessee also speaks loud. Further, regarding the issue of summons u/s 131 to Mr. Pradeep Jindal as well as his cross examination ..... X X X X Extracts X X X X X X X X Extracts X X X X
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