More Credit Securities (P) Ltd. Vs ITO (ITAT Delhi)
We find the Ld. CIT(A) while deleting the addition made by the A.O. under section 68 of the I.T. Act, 1961 has noted that 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 of Rs.17,32,00,000/-made by the A.O. under section 68 of the I.T. Act, 1961.
FULL TEXT OF THE ORDER OF ITAT DELHI
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 A.Y. 2011-2012. For the sake of convenience, all these appeals were heard together and are being disposed of by this common order.
ITA.No.5318/Del./2016 [Assessee]
And A.Y. 2010-11
ITA.No.5278/Del//2016 [Revenue]
2. Facts of the case, in brief, are that the assessee is a Company incorporated on 19.04.1993 and is engaged in the business of Finance being NBFC Registered Company. It filed its return of income on 15.10.2010 declaring total income of Rs.1,06,610/-. Subsequently, on the basis of information received from the Investigation Wing, the A.O. reopened the assessment as per the provisions of Section 147 of the I.T. Act, 1961 on the ground that assessee has taken accommodation entry of Rs.17,32,00,000/- from companies controlled by Shri S.K. Jain and Shri Virender Kumar Jain Group of Companies. The A.O. accordingly issued notice under section 148 of the I.T. Act, 1961 on 15.04.2013. The assessee-company vide letter dated 14.10.2013 stated that the return filed under section 139 on 15.10.2010 declaring taxable income of Rs.1,06,610/-may be treated as return in response to notice under section 148 of the I.T. Act, 1961.
2.1. During the course of assessment proceedings the A.O. called for information under section 133(6) from all the parties from whom the assessee-company has received accommodation entries in shape of share application money and share premium fixing the date for hearing on 07.03.2014. However, no reply was filed. He further noted that in the case of 03 companies namely Attractive Fin Lease Pvt. Ltd., Edoptica Developers (India) Ltd., and Twinkle Mercantile and Credit Pvt. Ltd., letters were returned unserved by the Postal Authorities with the remarks “no such company” in the case of Attractive Fin Lease Pvt. Ltd., and “left” in the case of other two companies. Subsequently, the assessee vide letter dated 06.05.2014 requested for reasons for reopening of the assessment which were provided to the assessee. Thereafter, the A.O. issued notice asking the assessee-company to submit the complete details, confirmation, nature of transaction, bank statements, I.T. particulars, bank statements of the persons/parties from whom share application money including share premium/unsecured loans were received during the year. He also asked the 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 Rs.17,32,00,000/- to the total income of the assessee.
2.3. Similarly, the A.O. made addition of Rs.34,64,000/- under section 69C of the I.T. Act, 1961 being Commission paid @ 2% for arranging the accommodation entry of Rs.17,32,00,000/-.
2.4. During the course of assessment proceedings, the A.O. noted that assessee-company had invested in shares amounting to Rs.3,47,17,000/- and has received dividend of Rs.71,188/-. However, the assessee has not made any disallowance under section 14A of the I.T. Act, 1961. The A.O, therefore, by invoking the provisions of Section 14A read with Rule 8D made disallowance of Rs.90,745/-.
2.5. The A.O. further noted that assessee-company has shown receipt of Rs.21,69,49,267/- from sale of securities. The assessee has claimed salary expenses of Rs.1,92,000/- which was shown as payable. He, held that there is no employer-employee relationship and the expenses were shown to reduce the tax liability. In absence of any satisfactory explanation given by the assessee, the A.O. made addition of the same to the total income of the assessee. Thus, the A.O. determined the total income of the assessee at Rs.17,70,53,360/-.
3. Before the Ld. CIT(A), the assessee apart from challenging the addition on merit, challenged the validity of the reopening of the assessment. However, the Ld. CIT(A) upheld the action of the A.O. in reopening of the assessment. While doing so, he noted that the Hon’ble Delhi High Court in the case of Ambica Steel Ltd., vs., DCIT 118 TTJ 116 (Del.) has held that reopening of the assessment on the basis of information received from the Investigation Wing is valid. Further the A.O. in the instant case has noted that the assessee-company was beneficiary of receiving Rs.17,32,00,000/-. This according to the Ld. CIT(A) was a sufficient reason to form the belief that income to the tune of Rs.17.32 crores had escaped assessment. Further A.O. has followed due procedure for reopening of the assessment as laid down by the law i.e., recording of reasons, issue of notice within the prescribed time, providing copy of the reasons to the assessee and replying to the assessee’s objections to the reopening of the assessment.
3.1. So far as the merit of the case is concerned, he deleted the addition of Rs.17,32,00,000/- made by the A.O. under section 68 of the I.T. Act, 1961. He noted that the assessee has filed the documents/details of the transaction, copy of return of income for the A.Y. 2010-11 of the applicants, copy of their audited accounts containing the name of the assessee in the Schedule to the audited balance-sheet, confirmation of 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 Rs.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 Assessment Orders for AY 2Q-10-11, passed u/s 143(3) by the jurisdictional AOs of the applicants.
6.6.3. The share applicants are Income Tax assessees and their orders u/s 143 (3) or u/s 153A/153C have been passed. Thus their existence is established and there is no doubt about their existence. One important aspect of the case is that Sh. Deepak Tyagi, S/o Sh. Suresh Chand Tyagi, Director of 6 Companies had appeared before the AO on 30.06.2014 in response to the above said summons. The AO recorded his statement on 30.06.2014 wherein he had confirmed that the above companies had made investment in the shares of the appellant. This fact is missing in the assessment order.
6.6.4. The other documents filed by the appellant, in support of the arguments, have also been examined and it was found that:-
