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TMI Blog2022 (1) TMI 476X X X X Extracts X X X X X X X X Extracts X X X X ..... h law. We, therefore, quash the re-assessment proceedings. Addition u/s 68 - assessee has filed the copies of the returns of income for A.Y. 2010-11 of all the applicants, copies of their audited balance-sheets as on 31.03.2010 containing the names of the assessees in the Schedule to the audited balance-sheets, confirmation of transactions by the share applicants, copies of their bank statements, copies of their assessment order for the impugned assessment year passed under sections 143(3) / 153A/153C of the I.T. Act, 1961 by their jurisdictional Assessing Officers etc. Further Shri Deepak Tyagi, Director of 06 Companies had appeared before the A.O. on 30.03.2014 in response to the summons issued by the A.O. under section 131 of the I.T. Act, 1961 and had confirmed to have made investments by his companies in the shares of the assessee-company in the statement recorded on oath. In view of the above and in view of the detailed reasoning given by the Ld. CIT(A) on this issue, we do not find any infirmity in his order in deleting the addition made by the A.O. under section 68. Addition u/s 69C - expenditure incurred for arranging the bogus accommodation entry - HELD THAT:- S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the A.O. made addition being other expenses on the ground that assessee could not furnish the bills and vouchers to the satisfaction of the A.O. and amount of ₹ 7,60,000/- was payable as on 31.03.2011, out of ₹ 11,05,000/-. We find the Ld. CIT(A) deleted 80% of the addition and sustained being 20% of such expenses, which, in our opinion, is just and proper under the facts and circumstances of the case. We, therefore, uphold the order of the Ld. CIT(A) on this issue and the ground of appeal is dismissed. - ITA No.5318/Del./2016 And ITA No.5278/Del./2016 And ITA.No.4704/Del./2014 - - - Dated:- 24-12-2021 - Shri R.K. Panda, Accountant Member And Shri Sanjay Garg, Judicial Member For the Revenue : Sh Gaurav Pundir, Sr. D.R. For the Assessee : Sh. Sudesh Garg, Advocate. ORDER PER R.K. PANDA, A.M. ITA.No.5318/Del/2016 filed by the Assessee and ITA.No.5278/Del./2016 filed by the Revenue are cross appeals and are directed against the order dated 29.07.2016 of the Ld. CIT(A)-6, New Delhi relating to A.Y. 2010-2011. ITA.No.4704/Del./2014 filed by the Revenue is directed against the order dated 19.06.2014 of the Ld. CIT(A)-8, New Delhi, relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee to produce books of account for his examination. 2.2. In the meantime, the A.O. received certain replies from the Companies in response to notice under section 133(6) of the I.T. Act, 1961. From the above, he noted that these replies were not sent by the Company concerned since all the replies were in similar pattern and mostly posted on the similar dates from one post office. Thereafter, the A.O. issued summons under section 131 to the Directors of the Companies from whom the alleged accommodation entries in the form of share capital and share premium were received for their personal deposition. However, there was no compliance to the same. In view of the above and considering the fact that information received from the Investigation Wing explains at length, the modus operandi of the entry operators, the A.O. applying the provisions and Section 68 of the I.T. Act, 1961, made addition of ₹ 17,32,00,000/- to the total income of the assessee. 2.3. Similarly, the A.O. made addition of ₹ 34,64,000/- under section 69C of the I.T. Act, 1961 being Commission paid @ 2% for arranging the accommodation entry of ₹ 17,32,00,000/-. 2.4. During the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f transaction by the applicants, copy of bank statements of the applicants, copy of assessment orders for the A.Y. 2010-11 passed under section 143(3) by the jurisdictional A.O. of the applicants etc. The relevant observation of the Ld. CIT(A) while deleting the addition of ₹ 17.32 crores made by the A.O. under section 68 of the I.T. Act, 1961 reads as under : 6.6.1. I have gone through the assessment order, assessment record, the observations of the A.O, the averments and the written submissions of the appellant as well as the facts and circumstances of the case and the position of law. 6.6.2. I have found that the appellant has furnished complete details of the transactions to the AO. The details filed by the appellant to the AO include the following documents pertaining to the transactions a) Copies of the returns of income for the AY 2010-11 of the applicants. b) Copies of the Audited Balance Sheets as at 31.3.2010 of the applicants containing the names of the appellant in the Schedule to the Audited Balance Sheets. c) Confirmations of transactions by the applicants. d) Copies of the Bank Statements of the applicants. e) Copies of the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estment Company Limited 11986.14 117 .97 2. Shalini Holdings Limited 12487.30 115 .92 3. Aasheesh Capital Services Pvt. Ltd 12336.50 100 .81 4. Sunny Cast Forge Ltd. 12550.57 100 .79 5. Finage Leasing Finance India Ltd 1456.29 100 6.86 6. Victory Software Pvt. Ltd. 1914.57 50 2.61 7. Mega Top Promoters Pvt. Ltd. 1641.42 50 3.04 8. Nandal Finance and Leasing Pvt. Ltd 11913.62 50 .41 9. Lunar Gold International Pvt. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there was no adverse material with him other than the information from the Investigation Wing (which was not sufficient in the face of the evidences furnished by the A.O. during assessment proceedings) and the addition has been made contrary to the facts and circumstances of the case and against the settled propositions of law and thus the addition of ₹ 17,32,00,000/- is hereby deleted. 6.6.9. My above view is fortified by the following decisions:- Where assesses had furnished income-tax returns, balance sheets, RoC particulars and bank account statements of shareholders, source of share application money had been satisfactorily explained. Section 68 .of the Income-tax Act, 1961 - Cash credits (Share application money) - Assessment year 2000-01 - Assesses received share application money during relevant assessment year - Assessing Officer held that assessee had not given satisfactory explanation and included entire amount under section 68 - On appeal, assessee furnished income-tax returns, balance sheets, ROC particulars and bank account statements of shareholders - Commissioner (Appeals) considering said materials held that share application money or source of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals) opined that identity and creditworthiness of lenders had duly been proved - Accordingly, addition made by Assessing Officer was deleted -Tribunal confirmed order of Commissioner (Appeals) - Whether on facts, impugned order passed by appellate authorities did not suffer from any infirmity and, thus, revenue's appeal was to be dismissed - Held, yes [Para 6] [In favour of assessee] In an identical case before high court of Gujarat in the matter related to CIT v .Apex Therm Packaging (P.) Ltd. 121)14] 42 taxmann.com 473 (Gujarat) it has been held that when full particulars, inclusive of confirmation with name, address and PAN Number, copy of income tax returns, balance sheet, profit and loss account and computation of total income in respect of all creditors/lenders were furnished and when it had been found that loans were furnished through cheques and loan account were duly reflected in balance sheet, Assessing Officer was not justified in making addition. High court of Rajasthan while deciding appeal of the revenue in the case of CIT, Ajmer v. H.S. Builders (P.) Ltd 12012] 26 taxnuinn.com 86 (Raj.) has observed as under Tribunal deleted addition on account of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property. None of the amounts represents investment in shares. Therefore, the action of the A.O. is contrary to the facts, for which, the Ld. CIT(A) deleted the addition. 6. So far as the addition of ₹ 1,92,000/- on account of disallowance of salary expenses is concerned, the Ld. CIT(A) deleted the same on the ground that A.O. made the addition without raising any query. Further being registered as NBFC Company with the RBI, the assessee has to comply with the legal requirements on this account. Therefore, disallowance of the entire salary is without any cogent reasons and unjustified, for which, he deleted the addition. 7. Aggrieved with such order of the Ld. CIT(A) giving relief to the assessee, the Revenue [ITA.No.5278/Del./2016 A.Y. 2010-11] is in appeal before the Tribunal by raising the following grounds : 1. Whether in facts and circumstances of the case, the Ld. CIT(A) is legally justified in deleting the addition of ₹ 17,32,00,000/- made u/s 68 of the I.T. Act in respect of unexplained credits introduced through hawala entry operators in the garb of share application money without giving reasons for its conclusion as well as ignoring the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings and also at appellate stage that it had actually received any services in lieu of payment of ₹ 1,92,000 ? 8. That the appellant craves leave to add, alter, amend or forgo any ground(s) of appeal either before or at the time of hearing of the appeal. 8. The assessee has filed Appeal [ITA.No.5318/Del./ 2016 A.Y. 2010-2011] challenging the order of the Ld. CIT(A) in upholding the validity of re-assessment proceedings and has raised the following grounds : 1. The Ld. CIT (Appeals) has erred on facts and in law in upholding the action of the AO in reopening the assessment in gross violation of substantive and procedural requirements of law for reopening of assessments. 2. The Ld. CIT (Appeals) has erred on facts and in law in upholding the action of the AO of reopening of assessment by summarily rejecting the contention of the appellant on facts and on law without even considering numerous case laws brought to her notice by the appellant. 3. The Ld. CIT (Appeals) has erred on facts and in law in upholding the mechanical action of the AO of reopening of the assessment solely on the basis of direction from the investigation wing with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC). 4. Sheonath Singh [1971] 82 ITR 147 (SC). 5. Lakhmali Mewaldas [1976] 103 ITR 437 (SC). 6. Kishanchand Chellaram vs., CIT [1980] 4 Taxman 29 (SC). 7. CIT vs., PV Kalyana Sundaram 164 Taxman 78 (SC). 8. CIT vs., Viniyas Finance Inv. Pvt. Ltd., 33 Taxman 86 (Del.) (HC).. 9. CIT vs., Living Media India Ltd., [2013] 35 taxmann.com 105 (Del.) (HC). 10. PCIT vs., NC Cables Ltd., 88 taxmann.com 649 (Del.) (HC). 11. United Electric Co. Pvt. Ltd., vs., CIT 125 Taxman 775 (Del.) (HC). 12. Sarthak Securities Co. (P) Ltd., [2010] 195 Taxman 262 (Del.) (HC). 13. Signature Hotels P. Ltd., [2012] 20 taxmann.com 797 (Del.) (HC). 14. SFIL Stock Broking Ltd., 325 ITR 285 (Del.) (HC). 15. Suren International Pvt. Ltd., vs., Commissioner of Income Tax [2013] 35 taxmann.com 398 (Del.) (HC).. 16. Pr. CIT vs., G And G Pharma India Ltd., [2017] 81 taxmann.com 109 (Del.) 17. Pr. CIT vs., Meenakshi Overseas (P) Ltd., 82 taxmann.com 300 (Del.), (HC). 18. Pr. CIT vs., RMG Polyvinyl (I) Ltd., [2017] 83 taxmann.com 348 (Del.) (HC). 19. Titanor Components Ltd., vs., ACIT [2012] 20 taxmann.com 805 (Bom.) (HC). 9.2. Referring to the following decisions he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mely Shri Deepak Tyagi had appeared before the A.O. on 30.03.2014 in response to the summons issued by the A.O. and his statement was recorded on oath wherein he had confirmed that the above companies have made investment in the shares of the assessee-company. However, the A.O. had conveniently ignored this fact. He submitted that the Ld. CIT(A) after considering the various submissions made before the A.O. and the assessment orders of the investor companies passed under sections 143(3)/ 153A/153C of the I.T. Act, 1961, has deleted the addition. He accordingly submitted that the order of the Ld. CIT(A) being in accordance with law so far as the quantum of deletion is concerned, should be upheld and the grounds raised by the Revenue on this issue should be dismissed. 11. The Ld. D.R. on the other hand heavily relied on the order of the Ld. CIT(A) so far as the validity of reassessment proceedings are concerned. So far as the order of the Ld. CIT(A) in deleting the addition is concerned, he submitted that assessee has introduced share application money and share premium through Hawala entry operators and certain self-serving documents/evidences were produced by the assessee of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -II New Delhi 12.2. Thus, a perusal of the communication received from the Investigation Wing and reasons recorded for reopening of the assessment shows that the A.O. has acted solely on the communication received from the Director of Income Tax (Inv.)-2, New Delhi regarding the alleged entry operator racket run by Shri S.K. Jain group. The satisfaction note nowhere indicates that the A.O. verified the facts on record with regard to the return of income filed by assessee on 15.10.2010, since there is no mention of the return filed by the assessee in the satisfaction note. Further, the A.O. has not even tried to ascertain how the alleged accommodation entries from the Investor Companies were reflected in the return. We find the A.O. has made no enquiries about the companies alleged to have provided accommodation entries to the assessee-company and ignored the very fact that those companies were assessed under sections 153A/153C in March, 2013 after the search in the case of alleged accommodation entry operators Shri Surendra Kumar Jain and Mr. Virendra Kumar Jain and in the assessments of these companies, return of income was accepted. No effort was made by the A.O. to find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Learned Counsel for the Assessee that had the A.O. applied his mind to the facts on record, he would have come to a different conclusion especially when all the investor companies are assessed to tax under sections 153C/153A of the I.T. Act, 1961 before recording reasons and their assessment is the out-come of the search at the premises of Shri S.K. Jain Group of companies. 12.5. It has been held in various decisions that assessment cannot be reopened without application of mind by the A.O. Hon ble Delhi High Court in the case of Signature Hotels Pvt. Ltd., (supra) has held that information given by the Director of Income Tax (Inv.) that amount received by the assessee from other company was nothing, but, accommodation entry and assessee was a beneficiary was not sufficient to reopen the assessment when A.O. did not apply his own mind to that information. The relevant Head Notes of the order of the Hon ble High Court reads as under : Section 147 of the Income-tax Act, 1961 - Income escaping assessment - General - Assessment year 2003-04 - Information given by Director of Income-tax (Investigation), that amount received by assessee from other company was nothing but ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer did not apply his own mind to the information and examine the basis and material of the information. The Assessing Officer accepted the plea on the basis of vague information in a mechanical manner. The Commissioner also acted on the same basis by mechanically giving his approval. Therefore, the proceedings under section 148 were to be quashed. .. 4. The aforesaid section is wide but it is not plenary. We have to consider and examine the crucial expression reason to believe used in the said section. The Assessing Officer must have reason to believe that an income chargeable to tax has escaped assessment. This is mandatory and the reasons to believe are required to be recorded in writing by the Assessing Officer. Sufficiency of reasons is not a matter, which is to be decided by the writ court, but existence of belief is the subject-matter of the scrutiny. A notice under section 148 can be quashed if the belief' is not bona fide, or one based on vague, irrelevant and non-specific information. The basis of the belief should be discernible from the material on record, which was available with the Assessing Officer, when he recorded the reason. There sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the I.T. Act, 1961. The Hon ble Delhi High Court in the case of SPL Siddharth Ltd., reported in [2012] 17 taxmann.com 138 (Del.) has held that if an authority is given expressly by affirmative words upon a defined condition, the expression of that condition excludes the doing of the Act authorised under other circumstances than those as defined. It is also established principle of law that if a particular authority has been designated to record his/her satisfaction on any particular issue, then it is that authority alone who should apply his/her independent mind to record his/her satisfaction and further mandatory condition is that the satisfaction recorded should be independent and not borrowed or dictated satisfaction . 12.9. The Hon ble Patna High court in the case of Shiv Naryan Jaiswal vs., ITO 176 ITR 352 (Patna) has held that where the A.O. does not himself exercise his jurisdiction under section 147, but, merely acts at the behest of any superior authority, it must be held that assumption of jurisdiction was bad for non-satisfaction of the condition precedent. 12.10. The Apex Court in the case of Anirudh Sinhji Karan Sinhji Jadeja v. State of Gujarat [1995] 5 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re dismissed. 14. So far as grounds of appeal number.5 is concerned, the same relates to the order of the Ld. CIT(A) in deleting the addition of ₹ 34,64,000/- under section 69C of the I.T. Act, 1961 made by the A.O. being expenditure incurred for arranging the bogus accommodation entry. 14.1. Since in the preceding paragraph we have already deleted the addition of ₹ 17,32,00,000/- by quashing the re-assessment proceedings as well as the addition on merit, the order of the A.O. on this issue cannot be sustained. Therefore, we uphold the order of the Ld. CIT(A) on this issue and the ground of appeal number.5 raised by the Revenue on this issue is dismissed. 15. So far as grounds of appeal number.6 of the Revenue is concerned, the same relates to the order of the Ld. CIT(A) in deleting the disallowance of ₹ 90,745/- made by the A.O. under section 14A read with Rule 8D of the I.T. Act, 1961. 15.1. After hearing both the sides, we find the Ld. CIT(A) had given a finding that the amount of ₹ 3,47,17,000/- invested by the assessee is towards advance against property and not towards shares. The Ld. D.R. also could not controvert the above factual finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Salaries. Also file details of Salaries paid during the year and explanation that why out of total salary of ₹ 25,40,000/-, ₹ 20,17,000/- was outstanding as on 31.03.2011, which reflects that there was no employer-employee relationship and the expenses were shown to reduce the tax liability. Also Produce the Original Salary Register, Attendance Register and details of ESIC and PF deducted and deposited in government account. 3. Person wise details of Audit Fees and Legal Professional Charges and evidence of TDS deducted thereon 4. Details of Other Expenses amounting to ₹ 11,05,000/- along with copy of bills. 5. Month wise and Party wise details of Sales and Justification how Sales were made without any purchases or opening stock. 6. Party wise details of Interest and Other Income along with details of TDS deducted by them and Also file Reconciliation of Income as per 26AS and Profit Loss Account. 7. Name Address (complete present) of the person / parties to whom Advances given for purchase of properties and Loan to others. 8. Please file copy of ITR of M/s Transactional Growth Fund Limited along with copy of Balance Sheet for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of securities. The A.O. asked the assessee to file month wise and party wise details of sales and justification as to how sales were made without any purchase or opening stock. Rejecting the various explanations given by the assessee and observing that no actual transaction were conducted by the assessee-company, but, to show certain income, entry was taken and shown as sale on securities, the A.O. made addition of ₹ 25,40,000/- being expenditure incurred towards salary expenses. Similarly, the A.O. made addition of ₹ 11,05,000/- being other expenses claimed by the assessee in absence of proper bills and vouchers. Thus, the A.O. determined the total income of the assessee at ₹ 10,04,44,930/-. 19. In appeal, the Ld. CIT(A) deleted all the additions made by the A.O. 19.1. So far as the amount of ₹ 9,37,50,244/- added by the A.O. under section 68 of the I.T. Act, 1961 is concerned, the Ld. CIT(A) deleted the same by observing as under : I have gone through the assessment order and the written submission of the appellant compiled in the shape of paper book. I have found that assessee has furnished complete details of the transaction to the AO. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw. 7. That the grounds of appeal are without prejudice to each other. 8. That the appellant craves leave to add, alter, amend or forgo any ground(s) of the appeal raised above at the time of the hearing. 21. Grounds of appeal numbers 1 and 2 by the Revenue relates to the order of the Ld. CIT(A) in deleting the addition of ₹ 9,37,50,244/- made by the A.O. 21.1. The Ld. D.R. heavily relied on the order of the A.O. 22. Learned Counsel for the Assessee on the other hand heavily relied on the order of the Ld. CIT(A). He submitted that the A.O. has made the addition of ₹ 9,37,50,244/- which is the amount received from M/s Transnational Growth Fund Ltd. [in short M/s Transnational ] which belonged to the alleged entry operator Shri Surender Kumar Jain. He submitted that the aforesaid sum was not a cash credit or capital received by the assessee from the aforesaid entity but in effect was the return of loans made by the assessee in the preceding year. The Learned Counsel for the Assessee drew the attention of the Bench to Page-6 of the assessment order where the A.O. has mentioned that the above amount was given in A.Y. 2010-11. 22.1. The Learned Couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Ld. CIT(A). We find the A.O. at page-6 of the last paragraph of the assessment order has observed as under : It is important to mention here that amount of ₹ 9,27,31,868/- was given by the assessee company to M/s Transnational Growth Fund Ltd for the Asst. Year 2010-11 during the period of 04.03.2010 to 31.03.2010 and the amount was returned back from 10.04.2010 and the major amount were received back till July, 2010 which is nothing but the own unaccounted money of the assessee company which was routed through M/s Transnational Growth Fund Ltd during the Asst. Year under consideration to give up the colourful shape of natural business transaction. If, the assessee company has so much requirement of money why the same was given to M/s Transnational Growth Fund Ltd for few days without any security taken from them. 23.1. A perusal of the above shows that the A.O. has totally misdirected himself in making the addition of ₹ 9,37,50,244/- which is not the cash credit or capital received by the assessee, but, is the return of the loans and advances given by the assessee in the preceding year. Further all relevant documents such as copy of income tax return, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , already been reproduced in the preceding paragraph wherein the Ld. CIT(A) has sustained an amount of ₹ 4,03,400/- being 10% of such unpaid amount and deleted the balance amount. Before deleting the addition the Ld. CIT(A) had directed the assessee to furnish the date wise payments which was filed before him. Further, he has given a finding that assessee is a registered NBFC Company with RBI and has to comply with all the legal requirements on this account over and above all the other non-NBFC companies. Further all the outstanding salaries were paid by the assessee during the month of April-May of subsequent financial year and the Ld. D.R. also could not controvert the factual findings given by the Ld. CIT(A) on this issue. In view of the detailed reasoning given by the Ld. CIT(A) on this issue while sustaining the addition of ₹ 4,03,400/- and deleting the balance amount out of the addition of ₹ 25,40,000/- made by the A.O, we do not find any infirmity in the order of the Ld. CIT(A). Accordingly the same is upheld and the grounds of appeal number.4 of the Revenue is dismissed. 26. Grounds of appeal number.5 relates to the order of the Ld. CIT(A) in deleting t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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