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TMI Blog2019 (5) TMI 1600X X X X Extracts X X X X X X X X Extracts X X X X ..... f the appeal of the AO is allowed with above direction. Addition u/s 14A - there being no dividend income earned by the assessee during the year - HELD THAT:- As found that assessee has not earned any exempt income during the year and therefore there is no question of making any disallowance u/s 14 A of the income tax act. Therefore we find no infirmity in the order of the learned CIT A in deleting disallowance. Accordingly ground of the appeal of the AO is dismissed. - ITA No. 2117/Del/2016 - - - Dated:- 28-5-2019 - Shri Amit Shukla, Judicial Member And Shri Prashant Maharishi, Accountant Member For the Assessee : Shri R. C Rai, CA For the Revenue : Shri K. Hauthang, Sr. DR ORDER PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by The Income Tax Officer, Ward 24 (2), New Delhi (the learned AO) against the order of the ld Commissioner Of Income Tax (Appeal) 28, New Delhi [ The Ld CIT(A)] dated 29.02.2016 for the Assessment Year 2010-11. 2. The AO has raised the following grounds of appeal:- 1. The Ld. CIT (A) has erred in not appreciating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e investigation wing showed the modus operandi of the entry operators. Further to investigate the matter, the learned assessing officer called the detail from the bank account of the companies from where funds were initially infused in the share capital or share premium in the companies. It was found that most of these companies are opened accounts in the month of March 2000 in same branch of Axis bank and has started by introduction of funds from its group controlled company and then rotated same among themselves till it reached ultimate beneficiaries. Based on these enquiries conducted by the assessing officer himself, coupled with the report received from the investigation wing, he held that it was proved that these companies are nothing but the facilitator in the chain of companies controlled and operated by Mr. Surendra Kumar Jain and others in providing accommodation entry to the beneficiary company. The learned AO further noted that the amount received is further advanced by the assessee to other group companies which stands in the middle of the chain of the companies, which starts from the introduction of cash in the accounts and ending with the issue of cheque to the benef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the entry operator used to take commission of 0.75% 3% for providing entries. Accordingly the entries rooted through this company has been ignored and held to be part of entry process. However deemed commission on down 0.75% for every entry debit and credit entries has been calculated and added in the hands of the appellant company. Even if it is established that the appellant company is a dummy/paper company created and managed by entry operators Shri SK Jain, then also addition on account of earning of commission has to be made in the hands of the entry operator who control and manage the dummy companies and not in the hand of various companies through whom the entries have been routed by the entry provider. Taking all the facts into consideration the addition of INR 1.20/by the AO under the head undeclared commission on earned is deleted. 5. The ld AO aggrieved with the finding of the learned CIT A has preferred this appeal. The ground number 1 and 2 of the appeal are specifically with reference to the deletion of the addition of 1,20,00,000 on account of undeclared commission income. 6. The learned departmental representative vehement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s grossly erred in noting that the learned assessing officer has stated that commission of 0.75% to 3% is charged by the accommodation entry providers. He stated that the learned assessing officer has stated 1.75% to 3% is charged as commission by the accommodation entry providers and only 0.75% is charged to tax in the hands of the assessee company. Therefore it is submitted that the learned CIT A has wrongly taken the figures from the assessment order and deleted the addition. With respect to the taxability of the commission income in the hands of the operations Shri SK Jain, the learned DR submitted that as assessee is an intermediary in the whole chain of the provision of the accommodation entries to the beneficiaries, part of the addition is required to be made in the hands of the assessee company as transactions have been routed through this company. In view of this, he submitted that the order of the learned CIT A is incorrect and the order of the learned assessing officer is required to be restored. 7. The learned authorised representative vehemently supported the order of the learned CIT A and submitted that assessee has submitted all th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii. It is also highly improbable that in such a company like assessee, 3 unknown companies will make an investment of INR 850,000,000, further, such a small company as an assessee, will make an investment in other 3 companies of Rs . 85,00,00,000. Further there is no income to the investor from these companies and neither the assessee has made any return to investor in the assessee company. iii. The learned assessing officer made an enquiry from the bank statement of these companies who made investment of INR 850,000,000 and found that all these 3 companies are having their bank account in the same branch of the axis bank. The amount of debit and credit entries in those bank statements are also routed through and to the other dummy and paper companies controlled by Sri SK Jain and others. iv. All 3 investors who have made investment in the assessee company opened their bank account between 3/3/2010 10/3/2010 with the same branch and makes investment of INR 850,000,000 in the assessee company which is a private limited company engaged in service sector as it is engaged in business of financial services by three different, stated to be unknown com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the assessee company for rotation of such a huge fund have used only one bank branch of Axis bank. x. The finding of the learned CIT A that all these companies have been assessed u/s 143 (3) of The Income Tax Act and no addition has been made in the hands of these companies u/s 68 of the income tax act and therefore he reached at a conclusion that these transactions have been accepted by the learned AO of the respective companies as genuine. The above findings results to be rejected for the simple reason that when the income does not belong to these companies there cannot be any addition in the hands of these accommodation entry providers or one of the entities in the chain of accommodation entry providers. Such additions are required to be made only in the hands of the real beneficiaries. Furthermore, the learned CIT A has reached at the conclusion without having any facts on the record that as income tax department has accepted these entries as genuine. Contrary to that, investigation wing and the learned assessing officer has made the detailed enquiries with respect to the bank account of the investor or in the investor and has shown that the whole transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on entries have already been offered by him as income in his hands. If the assessee shows that same have been already taxed in the hands of Sri SK Jain, then commission with respect to the above accommodation entries will not be added in the hands of the assessee as it will amount to double addition. If the assessee fails to show that commission income has been offered by Sri SK Jain on these accommodation entries as income in his hands , then the assessing officer is directed to retain the addition of INR 12,000,000 in the hands of the assessee company. Accordingly ground number 1 and 2 of the appeal of the AO is allowed with above direction. 10. With respect to the ground number 3 of the appeal of the learned AO with respect to the deletion of the addition under section 14A of the income tax act of INR 73283/ despite there being no dividend income earned by the assessee during the year, the learned CIT DR supported the order of the learned assessing officer where the learned authorised representative supported the order of the learned CIT A. 11. We have carefully considered the rival contention and found that assessee has not earned any exempt inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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