IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `SMC' NEW DELHI
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
ITA No. 5010/Del/2018
Assessment Year: 2013-14
Freak Buildcon Pvt. Ltd. vs ACIT
Sabharwal & Partners, Central Circle 28,
Advocates, Delhi High Court, New Delhi.
4819/24, Ansari Road,
Daryaganj, New Delhi.
PAN No. AABCF6031G
APPELLANT RESPONDENT
ITA No. 5011/Del/2018
Assessment Year: 2013-14
Shilpkar Buildtech Pvt. Ltd. vs ACIT
Sabharwal & Partners, Central Circle 28,
Advocates, Delhi High Court, New Delhi.
4819/24, Ansari Road,
Daryaganj, New Delhi.
PAN No. AAACZ4478L
APPELLANT RESPONDENT
ITA No. 5012/Del/2018
Assessment Year: 2013-14
Jarf Infra Development Pvt. vs ACIT
Ltd. Central Circle 28,
Sabharwal & Partners, New Delhi.
Advocates, Delhi High Court,
4819/24, Ansari Road,
Daryaganj, New Delhi.
PAN No. AAACZ4477F
APPELLANT RESPONDENT
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ITA Nos. 5010 to 5014/Del/2018
ITA No. 5013/Del/2018
Assessment Year: 2013-14
Strop Creation Pvt. Ltd. vs ACIT
Sabharwal & Partners, Central Circle 28,
Advocates, Delhi High Court, New Delhi.
4819/24, Ansari Road,
Daryaganj, New Delhi.
PAN No. AAPCS7752P
APPELLANT RESPONDENT
&
ITA No. 5014/Del/2018
Assessment Year: 2013-14
Rayan Garments Pvt. Ltd. vs ACIT
B-76, Gali No. 4/3, Central Circle 28,
Rama Garden, Karawal Nagar, New Delhi.
Delhi.
PAN No. AAECR8602A
APPELLANT RESPONDENT
Assessee by Shri V.K. Sabharwal, Advocate
Revenue by Ms. Ekta Vishnoi, Sr. DR
ORDER
The aforesaid assessees have filed the appeals against the
respective orders passed by the Ld. CIT(A) confirming the orders of
Assessing Officer relevant to AYs 2013-14.
2. Since facts involved in these appeals are same and identical,
hence, the appeals were heard together and for the sake of
convenience, all these appeals are being consolidated and
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ITA Nos. 5010 to 5014/Del/2018
disposed of by this common order. In all the appeals there are
similar grounds of appeal except the difference in figures.
Therefore, for the sake of reference and facility, facts in the case of
Freak Buildcon Pvt. Ltd. vs. ACIT in ITA No. 5010/Del/2018 (AY
2013-14) is being discussed and the grounds of appeal raised in
this appeal are reproduced as under: -
1. "That the assessment order passed u/s 143(3) of the
Income Tax Act, 1961 on 30.03.2016 and appellate order
passed on 30.05.2018 are perverse to the law and to the
facts of the case because of not following proper law and
procedure while completing the assessment and
adjudication of appeal filed by the appellant company.
2. That the Assessing Officer has grossly erred in law and to
the facts of the case in making lump-sum addition of Rs.
13,98,821/- being commission income in the hands of the
appellant @ 0.60% merely on the basis of his presumption
and guess work without the support of any material either
collected or ever placed upon records, which the CIT(A) has
further failed to appreciate while adjudicating the appeal
of the appellant on merits.
3. That the addition made of Rs. 13,98,821/- were only on
the basis of presumption and guess work of the Assessing
Officer because the provision of law contained u/s 145
has never been invoked besides this the Assessing Officer
has further failed to appreciate, that on the identical facts
the declared income have already been accepted as correct
in the preceding year and in the subsequent years also.
4. That the Assessing Officer and the Ld. CIT(A) has further
failed to appreciate that on the basis of total credits
appearing in the bank statement of the appellant
company, the accounts of the appellant company have
been audited and on the basis of which the Profit & Loss
Account and Balance Sheet have been prepared and filed
the ITR accordingly, which has not been viewed adversely,
as the same has already been accepted as correct.
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ITA Nos. 5010 to 5014/Del/2018
5. That the AO has further failed to appreciate while making
illegal and impugned additions of Rs. 13,98,821/- in the
declared income of the appellant being the commission
charged on lump sum basis @ 0.60% on the total amount
credited in the bank account of the appellant of Rs.
23,31,36,876/- without appreciating that the appellant
company is maintaining and possessing proper books of
account as required under the law wherein the entire
transactions have already been reflected/recorded, as
such no adverse inference if any, could be drawn only on
the imagination and guess work, which the CIT(A) has also
failed to appreciate.
6. That the Assessing Officer and ld. CIT(A) both have grossly
erred on facts of the case as even after accepting profits as
per books of account he presumed that the appellant
company is in the business of providing accommodation
entries without the support of any material either collected
or ever placed upon records.
7. That no proper and reasonable opportunity if any was
ever afforded by the Assessing Officer prior proceeded to
complete the assessment proceedings arbitrarily
capriciously and in a whimsical manner thereby making
illegal and impugned additions in the declared income of
the appellant.
8. That the further addition of Rs. 5,42,460/- made on the
basis of interest income appearing in the Form 26AS of the
appellant company is also perverse to the law and to the
facts of the case, because of not taking into consideration
the explanation given, evidence produced and placed upon
records under Rule 46A of the I.T. Rules by the Ld. CIT(A),
that the same is already forming part of the gross sale
proceeds received and disclosed in the ITR.
9. That the order passed by the Ld. CIT(A) on 30.05.2018
was further illegal, as the remand report received on dated
01.05.2017 on the back of the appellant company were
never confronted to the appellant for its rebuttal thereof,
the contents of which have been used while adjudicating
the appeal.
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ITA Nos. 5010 to 5014/Del/2018
10. That the appellant company assails their right to
amend, alter, change any grounds of appeal or take any
further ground at any time even during the course of
hearing of this instant appeal."
3. Original return of income declaring income of Rs. 1,95,600/-
was e-filed on 03.12.2014 which was processed u/s 143(1) of the
Income Tax Act, 1961 (hereinafter referred to as the `Act'). Since
the assessee has filed its return of income after the end of relevant
assessment year i.e. 31.03.2014, the Assessing Officer has also
initiated the penalty proceedings u/s 271F of the Act separately.
4. The case was taken up for scrutiny and notice u/s 143(2) of
the Act was issued on 01.09.2015 and served upon the assessee.
Notice u/s 142(1) along with questionnaire was issued on
03.12.2015. In response to the same, the Authorized
Representative of the assessee appeared and attended the
proceedings from time to time and filed details called for and the
case was discussed by the Assessing Officer with the AR of the
assessee.
5. The assessee company in its return of income filed for the
year under consideration has not specified its nature of business
or profession or activity. Further, as per the Income tax return
and Profit & Loss Account, the assessee company has shown
sales/gross receipts of business or profession against which it has
claimed certain expenses which are general and administrative in
nature. The Assessing Officer has mentioned that the assessee
has not claimed any expense in the nature which is relating to its
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ITA Nos. 5010 to 5014/Del/2018
business activities in general. Moreover, there is no opening
stock, closing stock, raw materials, stock in progress or work in
progress which in case of such company should exists, if it is
performing day to day activities. Furthermore, the assessee
company has shown purchases during the year in the ITR showing
gross sales/receipts against it but no service tax, VAT/Sales tax or
any other duty, tax or cess is reflected to have been paid by the
assessee company in its return of income.
6. The Assessing Officer also noticed that the bank statement of
the account of the assessee company in Axis Bank A/c No.
912020036005673 that the total credits and debits balances are
almost equal amount during the period 01.04.2012 to 31.03.2013
i.e. 23,31,36,876. It is further noticed by the Assessing Officer
that immediately after deposits or some funds are received
(credited in the bank account) there is a payment (debit in bank
account) of equivalent amount on the same day or immediately
preceding days. Transactions of large amount running into
several lakhs are passed through bank account of the assessee
company. What is the nature of these transactions or how they
are reflected in books of accounts is not known as neither the
books were produced for examination nor was there any reply to
the specific queries.
7. After examining the all documentary evidences produced by
the assessee. The AO is of the view that all the transactions of
assessee companies are sham and not as normal business
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ITA Nos. 5010 to 5014/Del/2018
transactions. The AO further held that the assessee company is
not doing any genuine business activities but merely acting as
conduit to pass the funds may be for some ulterior motive/part of
scheme of providing accommodation entries to some unscrupulous
persons companies. In view of the above, the income of the
assessee company is brought to tax as income from other sources
and the Assessing Officer also observed that most of the entry
operators are normally charging @ 60 paise to Rs. 1 per Rs. 100 as
commission for providing accommodation entries. In view of the
above facts, commission @ 0.60% on Rs. 23,31,36,876/-, being
total credits appearing in the bank account of the assessee which
comes to Rs. 13,98,821/-. The Assessing Officer added to the
income of the assessee. AO also initiation the penalty u/s
271(1)(c) of the Act in the case of the assessee and also held that
as per the 26AS data the assessee company has earned interest
amounting to Rs. 5,42,460/- from two parties on which TDS have
been deducted u/s 94A of the Act. Assessee has not shown the
interest income in its return though it has claimed the TDS
deducted on these payments in its return. Therefore, assessee has
deliberately concealed interest income earned by it during the year
amounting to Rs. 5,42,460/- and the AO has also added the same
to the income of the assessee and completed the assessment u/s
143(3) of the Income Tax Act, 1961 on 30.03.2016.
8. Assessee aggrieved by the assessment order dated
30.03.2016 passed by the Assessing Officer u/s 143(3) of the Act
filed an appeal before the Ld. First Appellate Authority who vide
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ITA Nos. 5010 to 5014/Del/2018
impugned order dated 30.05.2018 dismissed the appeal filed by
the assessee.
9. Assessee is aggrieved against the impugned order dated
30.05.2018 passed by the Ld. CIT(A)-31, New Delhi filed the
present appeal before the Tribunal.
10. At the time of hearing, Ld. Counsel for the assessee stated
that AO as well as the Ld. First Appellate Authority has passed the
impugned orders against the facts and law which deserves to be
cancelled. Ld. Counsel for the assessee reiterated the contention
raised by the assessee in the grounds of appeal. In the
alternative, Ld. Counsel for the assessee stated that exactly under
the similar facts and circumstances of the assessees case the ITAT
Delhi Bench (SMC), New Delhi has passed an order on 06.11.2018
and decided the seven appeals by estimating the average
commission @ 0.30% (30 paise to Rs. 1 per Rs. 100) on the credit
entries appearing in the bank accounts. He has also filed a copy
of the said order and requested that respectfully following this
order the appeal of the assessee may be partly allowed and the
same direction may be issued as has been issued in the aforesaid
case.
11. Ld. Sr. DR relied upon the orders passed by the Revenue
Authorities and stated that assessee has not filed a sufficient
evidence before the authorities below, therefore, the addition in
dispute has rightly been made by the Revenue Authorities and the
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ITA Nos. 5010 to 5014/Del/2018
same may be upheld. But on the alternative request of the
assessee she has not raised any serious objection.
12. I have heard the both parties and perused the relevant record
available with me especially. I have considered the alternative
request of the assessee after going through the order passed by
the ITAT Delhi Bench (SMC), New Delhi in ITA No. 2773/Del/2017
AY 2013-14 M/s Sorus Power Pvt. Ltd. vs. ACIT, Central Circle 28,
New Delhi and other six appeals. I am of the considered view that
facts and circumstances of the assessees case is almost similar to
the facts of the case relied upon by the Ld. Counsel for the
assessee passed by the ITAT Delhi Bench (SMC), New Delhi in the
case of M/s Sorus Power Pvt. Ltd. vs. ACIT, Central Circle 28, New
Delhi in ITA No. 2773/Del/2017 dated 06.11.2018. For the sake
of convenience the relevant paragraphs six and seven at pages 7 &
8 of the said order are reproduced as under:
"6. I have considered the rival submissions and gone
through the orders of lower authorities. I find that the sole
issue for adjudication is estimation of rate of commission
on the business of providing accommodation entry. In the
present case, as per the affidavit of the Director of the
assessee company, it is established beyond doubt that
assessee company is a paper company and not doing any
real business. Further, on perusal of impugned order and
assessment order, it is clear that assessee company is a
conduit company operated by Sh. Vivek Jain and is
engaged in providing accommodation entries to various
beneficiaries. In these circumstances, I am inclined to
approve the finding of Ld. CIT(A) and AO to the effect that
assessee company is an entry provider. However, the
next question to be answered is regarding estimation of
commission income taxable in the hands of assessee
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ITA Nos. 5010 to 5014/Del/2018
company which is engaged in the business of providing
accommodation entry. The Assessing Officer and Ld.
CIT(A) have applied 0.60% (60 paise to Rs. 1 per Rs. 100)
on total credit entries appearing in the bank account
whereas the Ld. AR is relying upon the assessment order
for AY 2012-13 and affidavit of the Director wherein, it has
been stated that appellant was charging 0.10% (10 paise
to Rs. 1 per Rs. 100). However, on specific query from the
Bench, neither of the sides could substantiate the basis for
arriving @ 0.60% or 0.10%. I am also aware of the fact
that in case of business of providing accommodation entry,
there cannot be a single rate of commission and same vary
from case to case and largely depends upon the quantum
of entry.
7. Keeping in view of the facts and circumstances of the
case, contention of both the parties and principle of equity
and fairness, I deem just and proper to estimate the
average commission @ 0.30% (30 paise to Rs. 1 per Rs.
100) on credit entries appearing in the bank account of the
assessee. It is further noted that AO has made double
addition to the extent that benefit of netting-off with
respect to income already offered by the assessee in the
return of income was not allowed. Accordingly, the AO is
hereby directed to re-compute the income after allowing
benefit of income already declared by the assessee in the
return."
13. After going through the aforesaid findings passed by the
Bench, I am of the considered view that facts and circumstances
of the present case are exactly similar. Therefore, respectfully
following the aforesaid order in the interest of justice, I am
directing the AO to estimate the average commission @ 0.30% (30
paise to Rs. 1 per Rs. 100) on credit entries appearing in the bank
account of the assessee.
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ITA Nos. 5010 to 5014/Del/2018
14. In the result, the appeal filed by the assessee is partly
allowed. Since in all the other four appeals there are similar facts
and circumstances and the findings given by the Revenue
authorities, therefore, my findings given above will apply modus
operandi in other four appeals also recall the nature of transaction
and documents are exactly same.
15. In the result, all the five appeals of different assessees are
partly allowed for statistical purposes.
Order pronounced in the open Court.
Sd/-
(H.S. SIDHU)
JUDICIAL MEMBER
Dated: 22/10/2019
*Kavita Arora
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
TRUE COPY
ASSISTANT REGISTRAR
ITAT NEW DELHI
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ITA Nos. 5010 to 5014/Del/2018
Date of dictation 16.10.2019/ 22.10.2019
Date on which the typed draft is placed before the dictating 16.10.2019/22.10.2019
Member
Date on which the typed draft is placed before the Other Member
Date on which the approved draft comes to the Sr. PS/PS 22.10.2019
Date on which the fair order is placed before the Dictating Member 22.10.2019
for pronouncement
Date on which the fair order comes back to the Sr. PS/PS 22.10.2019
Date on which the final order is uploaded on the website of ITAT 22.10.2019
Date on which the file goes to the Bench Clerk 22.10.2019
Date on which the file goes to the Head Clerk
The date on which the file goes to the Assistant Registrar for
signature on the order
Date of dispatch of the Order
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