AAA Teleshopping Pvt. Ltd Vs ACIT (ITAT Delhi)
Introduction: The case of AAA Teleshopping Pvt. Ltd. vs. ACIT (ITAT Delhi) revolves around the addition made under section 69C of the Income Tax Act, 1961 for the Assessment Year 2011-12. The appeal filed by the assessee challenges the order of the Commissioner of Income Tax (Appeals)-I, New Delhi, dated 14.10.2019.
Detailed Analysis: In this appeal, the primary contention of the assessee is that the Assessing Officer (AO) erred in making an addition under section 69C of the Income Tax Act, and the Commissioner of Income Tax (Appeals) was unjustified in upholding the same.
The crux of the matter lies in the assertion that the purchases made by the assessee cannot be considered bogus. The assessee argues that these purchases were supported by bills, payments were made through account payee cheques or banking channels, and the suppliers confirmed the transactions. Furthermore, there was no concrete evidence to prove that the purchase consideration paid to the seller companies had come back to the assessee in cash. The sales stemming from these purchases had been accepted by the Department, and the supplier had accounted for the purchases and paid the requisite taxes.
In contrast, the Department contended that the purchases made by the assessee were from dummy companies controlled by certain individuals, who admitted to using these companies for providing accommodation entries. The AO, after considering the evidence, concluded that the purchases were not genuine and made an addition under section 69C of the Act.
The case also involved a detailed examination of the legality of the re-assessment proceedings, including the issuance of notices and the appellant’s right to cross-examine witnesses. The AO maintained that the appellant had been given all the statements recorded during the search, bank statements of the parties, and other relevant evidence for their defense.
The CIT(A) considered the information received from the Asst Director of Income Tax, which highlighted the involvement of the appellant in receiving accommodation entries in the form of bogus purchases from dummy companies. In light of the evidence and findings, the CIT(A) upheld the AO’s decision to add the disputed amounts to the assessee’s income under section 69C of the IT Act.
Conclusion: After careful consideration of the submissions, it is evident that the AO, supported by the CIT(A), rightly concluded that the appellant had engaged in bogus purchases from dummy companies, controlled by individuals who admitted to providing accommodation entries. As such, the addition under section 69C was upheld. The appeal of the assessee was subsequently dismissed.
This case highlights the importance of thorough documentation and transparency in financial transactions to avoid potential tax-related complications and underscores the need for taxpayers to adhere to the legal and procedural requirements during tax assessments.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-I, New Delhi dated 14.10.2019 for Assessment Year 2011-12.
2. In this appeal, the assessee has raised as many as 13 grounds of appeal but sole grievance of assessee is that the AO has erred in making addition under section 69C of the Income-tax Act, 1961 (for short ‘the Act’) and the learned CIT(A) was also not correct and justified in upholding the same.
3. When the appeal was called for hearing neither the assessee nor any authorised representative or Counsel appeared nor any adjournment application has been filed despite due service of notice. Therefore, we proceed to decide the appeal ex parte qua assessee after hearing the arguments of learned Sr. D.R. on behalf of the Department.
4. From the grounds raised by the assessee as well as submissions raised before learned CIT(A) noted in para 6 of first appellate order, we note that the AO made addition by observing that Shri Himanshu Verma and Shri Anjani Kumar had admitted on oath that they were using companies for providing accommodation entries and the impugned purchase was not genuine. The AO after observing our factual position made addition in the hands of the assessee under section 69 of the Act by recording the finding that the entire money received back by the assessee from such companies amounting to Rs.21,89,190/- requires to be added to the income of the assessee under section 69C of the Act. Before the authorities below, assessee submitted that the purchases cannot be treated as bogus if they are duly supported by the bills, payments have been made by account payee cheque or through banking channel, the supplier/seller has confirmed the transactions, there was no evidence to show that the purchase consideration paid to seller companies has come back to the assessee in cash, the sales out of purchases have been accepted by the Department and the supplier/seller has accounted for the purchases made by the assessee had also paid due taxes thereon. The learned AR thus submitted that the AO was not correct and justified in making baseless addition in the hands of the assessee without bringing on record any adverse positive material or evidence against the assessee to show that the amount transferred by the assessee through banking channel against the impugned purchases was received back by the assessee from the sellers, therefore, addition may kindly be deleted.
5. Controverting aforesaid submissions of assessee, the learned Sr. DR vehemently supported the order of the authorities below and submitted that the AO has rightly made addition under section 69C of the Act as the assessee made impugned purchases from two dummy companies viz., Ridhi Sidhi Clothing Co. Pvt. Ltd. and Shri Hari Clothing Co. Pvt. Ltd., which were controlled by Shri Himanshu Verma. He further submitted that the AO has categorically noted that Shri Himanshu Verma and his associate Shri Anjani Kumar in their statements has admitted on oath that they were controlling and using said companies for providing accommodation entries. Learned Sr. DR, further drawing our attention towards relevant para of appellate order, submitted that the learned CIT(A) after considering the basis taken by the AO and material available on record, rightly upheld the findings of the AO that since Shri Himanshu Verma and Shri Anjani Kumar had admitted on oath that they were using said two companies for providing accommodation entries. The Ld. senior DR thus submitted that the AO had rightly held that the purchases made by the assessee during F.Y. 2010-11 from the said two companies controlled by Shri Verma were not genuine purchase. Learned Sr. D.R. submitted that in the present case, it is clearly established by the AO that the appellant has taken accommodation entry in the form of bogus purchases from two dummy companies, therefore, he rightly made addition of Rs.21,89,190/- u/s 69C of the Act treating the impugned purchases as bogus and unexplained expenditure and also rightly upheld the addition of Rs.21,890/- on account of commission for arranging accommodation entries or bogus purchases. The learned Sr. DR submitted that the orders of AO as well as learned CIT(A) may kindly be upheld dismissing the appeal of assessee.
6. On careful consideration of the submissions, we note that the Learned CIT(A) upheld the addition of Rs.21,89,190/- on account of bogus purchases and second addition of Rs.21,890/- on account of commission received by the assessee for arranging accommodation entries with following observations and findings:
“7.1 In the present case, the AO had received information from the Asst Director of Income Tax (Inv.), Unit 6(3), New Delhi vide letter dated 18.09.2017 that a search operation was conducted in Himanshu Verma Group of concerns and it was found that Sh. Himanshu Verma was engaged in the business of providing accommodation entries by providing cheques/PO/DD in lieu of cash to a large number of beneficiary companies through various paper and dummy companies floated and controlled by them. As per the information received from the ADIT(Inv) Unit-6(3), New Delhi, one of such concerns was the appellant company which had received Rs, 21,89.190/- from the following two companies as bogus purchase during the previous year relevant to A.Y. 2011-12 as given hereunder:
