Case Law Details
Hillman Properties Pvt. Ltd. Vs ITO (ITAT Delhi)
Merely showing that transactions were carried out through Banking channel in the facts and circumstances of the case is not sufficient to prove the genuineness of the transaction in the matter. Courts and Tribunals have to Judge the evidence before them by applying the test of human probability. If the said test is applied in this matter, it is clearly established that assessee failed to prove identity of the accommodation entry providers, their creditworthiness and genuine of the transaction in the matter. We, therefore, do not find any justification to interfere with the Orders of the authorities below in making the addition of Rs. 50 lakhs.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal by Assessee has been directed against the Order of the Ld. CIT(A)-XXVII, New Delhi, Dated 29.08.20 14, for the A.Y. 200 1-2002.
2. Briefly the facts of the case are that information was gathered from DIT (Inv), New Delhi that the assessee company had received accommodation entries of Rs.25,00,000/-. Since the amount was not reflected in the balance sheet filed by the assessee along with the original-return, action under section 147 of I.T. Act, 1961 was taken. Notice under section 148 of I.T. Act, 1961 was issued and served upon the assessee. The assessee filed letter stating that the return filed earlier under section 139(1) may be treated as return filed under section 148 of the I.T. Act. The A.O. issued statutory notices for completion of the assessment. Reasons for reopening of the assessment were also provided to assessee. The assessee filed written submission objecting the re-assessment proceedings which were disposed off separately by passing speaking order. The assessee stated that the A.O. has failed to give any details about the information and documents which have been relied upon by the A.O. at assessment stage. However, the A.O. noted that for initiation of action under section 148 have been conveyed to the assessee and hence, the allegation of the assessee are incorrect. The assessee was asked to produce the principal officer of the following company from whom the accommodation entries were taken :-
1. Arun Finvest Pvt. Ltd., Rs. 15 lakhs on 17.03.200 1.
2. Polo Leasing & Finance P. Ltd., Rs. 10 lakhs on 03.2001.
2.1. The assessee did not file any reply on the date fixed. Bank statements of above said companies were called for under section 133(6) of the I.T. Act, 1961 for the financial year under appeal, which were placed on record. The Bank statements of the assessee was also received in response to notice u/s 133(6). On going through the Bank statement of the assessee with Bank of America DLF Centre Sansad Marg New Delhi, it was noticed that the assessee received following entries from entry providers.
| 17.10.2000 | 5,00,000/- |
| 30.10.2000 | 38,50,000/- |
| 02.11.2000 | 41,00,000/- |
| 17.03.2001 | 25,00,000/- |
| 17.03.2001 | 15,00,000/- |
| 17.03.2001 | 10,00,000/- |
| Rs. 1,34,50,000/- | |
| Less cash withdrawal | Rs. 3,20,000/- |
| Rs. 1,31,30,000/- |
2.2. The modus operandi of the transaction was that the assessee company had paid cash to the entry providers and received cheques or pay order against the said cash paid. This method has been proved from the transactions appeared in the Bank Accounts of the companies M/s Arun Finvest Pvt Ltd. and M/s Polo Leasing & Finance P.Ltd. The A.O. further noted that in Bank Account No. CA 598 maintained with M/s Federal Bank Ltd., Karol Bagh New Delhi, of M/s Polo Leasing & Finance (P) Ltd., cash of Rs. 10,00,000/- was deposited in Bank Account No. CA 567 on 17.03.2001 which was transferred to Bank Account No. 598 of the same company. From Bank Account 598 the said amount of Rs. 10,00,000/- was transferred to the assessee company’s Account vide cheque no 916291 of 17.03.2001. Similarly, in the case of other company M/s Arun Finvest Pvt Ltd., cash of Rs.15,00,000/- (Rs.8,00,000/- and Rs.7,00,000/-) was deposited in Account No. 2852 on 17.03.200 1 from where the amount in question was transferred to Account No. CA 2813 of M/s M/s Arun Finvest Pvt Ltd. on same day 17.03.2001. The amount of Rs. 15 lakhs was transferred on 17.03.2001 to the account of assessee company by cheque No.169334. From the facts stated above, it is proved that the whole amount of Rs. 1,31,30,000/- deposited in Bank Account with Bank of America, is assessee’s own money which is routed through different persons who were entry providers. Show cause notice was issued to assessee as to why the total deposit of Rs. 1,31,30,000/- in exchange of cash payment should not be treated as unexplained and undisclosed income of assessee. The assessee did not appear on the date fixed nor any written submissions have been filed. The A.O. noted that from the information received from the DIT (Inv.), it was noticed that the Directors of the above accommodation entry provider Companies had admitted before Investigation Wing that the said companies were utilised for providing accommodation entries. The A.O. in view of the above facts and looking to the noncooperation of the assessee, added the amount under section 68 of the I.T. Act, 1961. As per the balance-sheet of the assessee, the share application money at Rs.58,97,200/- was pending for allotment on 31.03.2000. During the year under assessment the assessee allotted shares for Rs.20 lakhs and Rs.30,72,200/- was still pending as share application money. It means the balance amount of Rs.8,25,000/- was refunded to the investors during the relevant A.Y. 2001 -2002. From the Bank Account of the assessee, no such entry of Rs.8,25,000/- is appeared. It was, therefore, noted that the assessee has refunded the amount in cash, the source of which is not explained. The A.O, therefore, made further addition of Rs.8,25,000/- on account of unexplained refund of share application money. The assessee challenged the reopening of the assessment as well as addition before the Ld. CIT(A) who has allowed the appeal of the assessee partly. Therefore, we would be dealing with the issues involved in the present appeal. It may also be noted here that assessee filed additional evidences before the Ld. CIT(A), on which, comments of the A.O. have been called for.
3. As regards Ground No.1 regarding initiation of re-assessment proceedings, assessee submitted before the Ld. CIT(A) that the reasons recorded are only unsubstantiated allegations and, therefore, cannot be construed as reasons leading to the bonafide belief adequate for reopening of the assessment. The reasons recorded by the A.O. for reopening of the assessment was also submitted by assessee and the same are recorded in the impugned order as under:
“An information regarding entry operators and their beneficiaries was received from DIT(Inv.)-l, New Delhi vide Dy. No. 1399 dated 2.3.2006 and DIT (Inv.) 2006-07/A.E./1 536 dated 5.2.2007 which reflected that the assessee maintained an account with Bank of America and received accommodation entries as per details given below :
| Beneficiary Name | Beneficiary Bank name | Value of entry taken | Instrument by which entry taken | Date on entry taken | Name of the account holder of entry giving Account | Bank from which entry given | Branch of entry giving Bank | Account of the entry giving account |
| M/s Hillman Properties P. Ltd. | Bank of America | 15,00.00 | 169334 | 17.03.200 1 | Arun Finvest Pvt. Ltd. | KVB | Karol Bagh | CA-2813 |
| M/s Hillman Properties P. Ltd. | Bank of America | 10,00,000 | 916291 | 17.3.2001 | Polo Leasing and finance Pvt. Ltd. | Fedral | Karol Bagh ‘ | 598 |
The above mentioned amount of Rs.25,00,000/- were credited in the said account of the assessee. The report received from the DIT (Inv.) revealed that the enquiries were initiated to probe into some Bank account which were used to issue cheques to entry seekers or beneficiaries against cash paid by them to the entry operators. The assessee company has received entry from Ms Arun Finvest Pvt. Ltd. and M/s Polo Leasing and Finance Pvt. Ltd. and these companies were utilizing for providing accommodation entry by Sh. Ashok Kumar Gupta. Sh. Baldev RajK Mukesh Gupta, Sunder Pal Singh and Rajan Jaiswal has operated number of Bank accounts.
The Balance Sheet filed along with the return of income shows that there is increase in authorized capital of Rs. 10,00,000/- as compared to immediate preceding year. During the year under consideration, assessee has also made the investment in a new property of Rs.46,95,000/-. The information sent by the Investigation Wing suggest that there is transaction of Rs.25,00,000/- as mentioned above, is accommodation entry only. Accordingly the amount of Rs.25,00,000/- is escaped income and taxable under deeming provisions of the Income-tax Act. Hence, in view of the information received from the Investigation Wing and perusal of the Balance Sheet suggest the Rs.25,00,000/- is the undisclosed income of the above assessee for A. Y. 2001- 02.
On the basis of the information sent by the Investigation wing and accompanying documents, I am satisfied that this transaction of Rs. 25,00,000/- as mentioned above, is accommodation entry only. Accordingly, the amount of Rs.25,00,000/- is unaccounted money belonging to the assessee which has been utilized for the entry and represents income escaping assessment. Accordingly. I have reasons to believe Rs. 25.00.000/- has escaped assessment and the escapement has been on account of failure on part of assessee to truly and fully disclose all material fact therefore it is a fit case for initiation of proceedings u/s 147 of the IT Act. ”
3.1. The Ld. CIT(A) referring to the above reasons noted that A.O. had specific information regarding accommodation entries received by assessee including the Bank account number, instrument number and the same was found credited in assessee’s Bank account with Bank of America. The reasons recorded specifically states that there was failure on the part of assessee to fully disclose all material facts in return of income filed by them and, therefore, the initiation of 147 proceedings have been done properly after verifying the information received from Investigation Wing with return of income specially with the balance-sheet filed by the assessee. Therefore, the assessee’s claim that reasons recorded are only unsubstantiated allegations and cannot be construed as reasons to believe is not acceptable. The Ld. CIT(A) also distinguished the Judgment relied upon by assessee and noted that in the case of assessee A.O. had recorded proper reasons for reopening of the assessment and, therefore, decisions cited by assessee are distinguishable. The Ld. CIT(A) referred to Judgment of Hon’ble Delhi High Court in the case of M/s. A.G. Holdings Pvt. Ltd., 352 ITR 364 and reproduced the same in the impugned order and noted that facts are identical as in the case of the assessee as the return of income was only processed under section 143(1) and notice under section 148 was also issued after 04 years. The Ld. CIT(A) also noted that in the case of assessee sufficient material is available on record which are adequate enough to form the belief that income chargeable to tax has escaped assessment on account of assessee’s failure to furnish full and true particulars in the return of income filed by assessee. The Ld. CIT(A) also relied upon Judgment of Hon’ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd., 291 ITR 500 in which similarly reopening was held to be valid where return was only processed under section 143(1)(a) of the I.T. Act. The Ld. CIT(A) also relied upon Judgment of Hon’ble Supreme Court in the case of Purushottam Das Bangur 224 ITR 362 (SC) wherein it was held that “based on information received from investigation wing, the Assessing Officer can without any further investigation form the belief that income chargeable to tax had escaped assessment.” In the present case, the information received by the Assessing Officer from investigation wing was specific that accommodation entries were received by the assessee and the information mentioned the Bank Account no, instrument no. etc of the accommodation entries. The information further mentions that the amounts were found credited in assessee’s Bank account with Bank of America. Therefore, the Assessing Officer has correctly initiated the re-assessment proceedings in the matter. The Ld. CIT(A), accordingly, upheld the initiation of the re-assessment proceedings in the matter and rejected this ground of appeal of assessee.
4. The Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that it was only borrowed satisfaction based on information received from Investigation Wing and that A.O. has not applied his mind to the information received from Investigation Wing. The reopening of the assessment is invalid and bad in law. He has relied upon Judgment of Hon’ble Delhi High Court in the cases of Pr. CIT-4 vs., G & G Pharma India Ltd., 2015 (10) TMI 754 (Del.); Pr. CIT-6 , M/s. N.C. Cables Ltd., 2017 (1) TMI 1036 (Del.); Pr. CIT vs. Meenakshi Overseas Pvt. Ltd., 2017 (5) TMI 1428 (Del.) (HC) and Pr. CIT-5 vs., Jatin Investment Pvt. Ltd., 2017 (2) TMI 342 (Del.) (HC).
5. On the other hand, Ld. D.R. relied upon the Orders of the authorities below and submitted that assessee had not discharged the onus lay upon it to explain the issue. It was a private transaction and no details were submitted by assessee for verification of the transaction. The A.O. received specific information from Investigation Wing that assessee has received accommodation entries which were credited in the accounts of assessee which were further received from the above parties and in their accounts cash have been found deposited. Therefore, reopening of the assessment is justified in the matter. The Ld. D.R. relied upon the following decisions.
5.1. Judgment of Hon’ble Gujarat High Court in the case of Yogendrakumar Gupta vs., ITO [2014] 366 ITR 86 [Guj.] in which it was held as under :
“Where subsequent to completion of original assessment. Assessing Officer, on basis of search carried out in case of another person, came to know that loan transactions of assessee with a finance company were bogus as said company was engaged in providing accommodation entries, it being a fresh information, he was justified in initiating reassessment proceeding in case of assessee.”
5.2. Judgment of Hon’ble Supreme Court in the case of ACIT vs., Rajesh Jhaveri Stock Brokers (P.) Ltd., [2007] 291 ITR 500 [SC] in which it was held as under :
“Where Hon’ble Supreme Court held that so long as the conditions of section 147 are fulfilled, the Assessing Officer is free to initiate proceedings under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment, proceedings, even when intimation under section 143(1) has been issued. ADANI EXPORTS v. DCIT [1999] 240 ITR 224 (Guj) was distinguished.”
5.3. Judgment of Hon’ble Delhi High Court in the case of A.G. Holdings Pvt. Ltd., vs. ITO 21 taxmann.com 34 [Del.] [HC] in which it was held as under :
“Where held that there is no requirement of law that reasons recorded for initiating reassessment procedure, should also accompany notice issued under section 148.”
6. We have considered the rival submissions. In this case the A.O. has received specific information from Investigation Wing that assessee has received accommodation entries from two parties, the details of the same are mentioned in the reasons which have not been disputed by the assessee as well. The report received from the DIT (Inv.) Wing further reveals that enquiries were initiated to probe into some Bank account which were used to issue cheques to entry seeker or beneficiary against cash paid by them to the entry operator. The A.O. has specifically recorded the fact in the assessment order that initially in different account of the Investors, the cash have been deposited from where the amount have been transferred to the another accounts of Investors and then transferred to assessee. These informations are specific to show that against the cash, entry have been provided to the assessee by entry providers. The assessee failed to produce any evidence before the authorities below. Therefore, it is a fit case of escapement of income on account of failure on the part of assessee to disclose fully and truly all material facts. Therefore, reopening of the assessment is wholly justified in the matter. The objections of the assessee have been separately disposed of by the A.O. in which no infirmity have been pointed out by the assessee. At the stage of recording of the reasons for reopening of the assessment, all relevant facts leading to belief are justified. However, the sufficiency of those material is not necessary. Ultimately, on making further enquiry into the matter, it is specifically found that cash were deposited in the Bank accounts of entry providers from where the amounts in question have been transferred to the account of the assessee. Therefore, there is escapement of income chargeable to tax on account of assessee’s failure to furnish full and true particulars. Since in this case return was only processed under section 143(1), therefore, A.O. was justified in reopening of the assessment on bringing the material on record that there was an escapement of income from assessment in the matter. No infirmity have been pointed-out in the Orders of the authorities below for initiation of re-assessment proceedings in the matter. Considering the facts of the case and material on record, we do not find any justification to interfere with the Order of the Ld. CIT(A) in upholding the initiation of re-assessment proceedings in the matter. Ground No.1 of appeal of Assessee is accordingly dismissed.
7. On Ground Nos. 2 and 3, assessee challenged the addition of Rs.50 lakhs under section 68 of the I.T. Act, 1961.
8. The A.O. made addition of Rs.1,31,30,000/- under section 68 of the I.T. Act in respect of several entries provided by the entry providers which were not explained by the assessee, which were entered into the Bank account of the assessee.
9. The assessee submitted additional evidences before Ld. CIT(A) explaining various credits appearing in their Bank account with Bank of America, details of same are noted at page-19 of the impugned order. The Ld. CIT(A) noted from these details that documentary evidences submitted regarding the sale of shares of BLS Polymers Ltd., to M/s. Suma Finance & Investment Ltd., Arun Finvest (P) Ltd. and Polo Leasing & Finance (P) Ltd. are letters issued in assessee’s ‘letter head’ to the Directors of the above 03 companies requesting them to accept share certificates and requesting them to issue acknowledgment of receiving share certificates to the assessee. The Ld. CIT(A) also noted that there is no PANs, Bank statements or Income-tax particulars of the above three accommodation providers, namely Suma Finance & Investment Ltd., Arun Finvest (P) Ltd. and Polo Leasing & Finance (P) Ltd. in the additional evidence submitted by the assessee. The computation statement of income of the assessee filed along with the additional evidence indicates that shares worth Rs.54,25,000/- were sold at the book value and the assessee had no capital gain from this transaction. Moreover, the additional evidence indicates that money received as accommodation entries were immediately transferred to assessee’s sister concern M/s Shiv Cable & Wire Industries on the same date, i.e., 17.3.200 1 and, therefore, it appears that the assessee being an investment company had only acted as conduit for transferring the accommodation entries to its sister concern. This explains the assessee’s reluctance to furnish proper evidence at appellate stage. The assessee also failed to produce any of the Directors of these 03 accommodation entry provider companies. The A.O. objected to the additional evidence in the remand report. The Ld. CIT(A) noted that during appellate proceedings Counsel for Assessee agreed to produce BLS Polymers Ltd., and M/s. Shiv Cable & Wire Industries for cross-examination. However, the assessee was not prepared to produce the 03 accommodation entry providers namely Suma Finance & Investment Ltd., Arun Finvest (P) Ltd. and Polo Leasing & Finance (P) Ltd., during appellate proceedings. The Ld. CIT(A) considering the material on record, deleted the addition of Rs.8 1,33,000/- leaving addition of Rs.50 lakhs which is under consideration in respect of the above 03 accommodation entry provider companies because the assessee did not produce adequate evidence even at the appellate proceedings. The assessee did not produce any of the Directors of these 03 companies to verify the transaction and to further verify about cash deposited in their Bank accounts on the same day when entry was provided to the assessee. The Ld. CIT(A), therefore, noted that assessee refused to provide any PAN and other details of these accommodation entry provider companies and refused to prove genuineness of the sale of shares to the above 03 accommodation entry providers even during appellate proceedings. None of the Directors were produced for examination even at the remand proceedings despite A.O. issued summons to them to appear and get the transactions verified. Counsel for Assessee has shown inability to produce any of the Directors or responsible person of these 03 companies for production and examination before A.O. as well as before Ld. CIT(A). The Ld. CIT(A), therefore, noted that despite there was no additional evidences, assessee did not furnish adequate evidence in respect of these 03 parties and has failed to get the transactions verified. The Ld. CIT(A) relied upon decision of Hon’ble Delhi High Court in the case of M/s. Titan Securities 215 Taxman 164 (Del.) in which on the similar circumstances, addition have been confirmed. The Ld. CIT(A) in the absence of any reliable evidence in respect of these 03 accommodation entry providers namely Suma Finance & Investment Ltd., Arun Finvest (P) Ltd. and Polo Leasing & Finance (P) Ltd., confirmed the addition of Rs.50 lakhs.
10. Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that assessee filed confirmations and amounts have been received through Banking channel, therefore, addition should not have been confirmed. He has further submitted that assessee has sold the shares at face value [PB-24] and referred to PB-20 on the proposition that assessee made a request to the A.O. to provide copies of the statements which were adverse in nature so that assessee could make proper reply on the same. Therefore, no addition could be made.
11. On the other hand, Ld. D.R. relied upon the Orders of the authorities below and submitted that these were private transactions and were not listed on any stock exchange. No adequate evidence were furnished. Assessee did not furnish PAN and Bank statements to substantiate genuine transaction. The assessee or other parties did not earn any income and have NIL income only. No business activity have been conducted by them. Therefore, preponderance of probability shows that these were bogus accommodation transactions. The Ld. D.R. relied upon the following decisions :
| 1. | CIT vs., Nipun Builders & Developers (P.) Ltd., 350 ITR 407 (Del.) (HC). |
| 2. | CIT vs., N.R. Portfolio Pvt. Ltd., 29 taxmann.com 291 (Del.) (HC). |
| 3. | CIT vs., Focus Exports (P.) Ltd., [2015] 228 Taxman 88 (Del.) (HC). |
| 4. | CIT vs., Neelkanth Ispat Udyog Pvt. Ltd., [2013] 81 DTR 214 (Del.) (HC). |
| 5. | CIT vs., N. Tarika Investment Pvt. Ltd., 40 taxmann.com 225 (Patna) (HC). |
| 6. | CIT vs., Titan Securities Ltd., 32 Taxman 306 (Del.) (HC). |
| 7. | PCIT vs., Vikram Singh Order of Hon’ble Delhi High Court Dated 25.08.20 17. |
12. We have considered the rival submissions. The finding of fact recorded by the authorities below have not been disputed by the Learned Counsel for the Assessee. The A.O. has specifically given a finding of fact that the above accommodation entry provider companies have initially deposited cash in their Bank accounts and from where the funds were transferred to another Bank account through the Banking channel and then, a cheque have been given to the assessee. The cash have been deposited on the same day when transaction was conducted with the assessee. The assessee did not provide PAN of these 03 accommodation entry providers along with their Bank statements. The A.O. gathered information from the Banks on the basis of entries called under section 133(6) of the I.T. Act. The A.O. had specific information from DIT (Inv.) that assessee has received accommodation entries from 02 parties. However, later on, it was found that these are good in number and ultimately, addition was made on 03 accommodation entry providers. The Ld. CIT(A) in his findings has specifically noted that despite entertaining the additional evidences, assessee did not furnish any adequate/evidence while filing additional evidences in respect of these 03 parties. The assessee failed to produce necessary details of these 03 accommodation entry providers and also shown inability to produce any of the Directors or responsible person of these 03 accommodation entry providers for examination before A.O. Therefore, in the absence of any adequate evidence and that assessee did not produce any of the responsible person or Directors of these 03 accommodation entry providers, the authorities below were justified in taking an adverse inference against these parties, particularly, when similar amount of cash was found deposited in their Bank accounts prior to giving cheque to the assessee. Therefore, even if some statements have been recorded by Investigation Wing and copies thereof have not been provided to assessee, but, there was sufficient material available on record to show that these were bogus transactions because assessee received accommodation entries from these 03 parties. Burden is upon assessee to prove the identity of the parties, their creditworthiness and genuineness of the transaction in the matter. It may also be noted here that the above burden upon assessee have not been discharged by assessee by any adequate evidence. Further, the balance-sheet of the assessee company is filed which shows that assessee has NIL income, NIL expenditure and only carry forward losses have been shown. Return is filed at NIL income. No business activities have been carried out by the assessee. It is, therefore, difficult to believe that when assessee did nothing in assessment year under appeal as well as in preceding assessment year, how the assessee has been able to sell the shares to such parties who have made cash deposits in their Bank account before giving cheque to the assessee. Therefore, the circumstances clearly show that these were bogus entries received by the assessee in the name of sale of shares. How the investors would show faith in assessee when assessee has no worth at all ? The Ld. CIT(A) has also specifically found on record that the money received as accommodation entries were immediately transferred to assessee’s sister concern M/s. Shiv Cable & Wire Industries on the same day on 17.03.2001. It will strengthen the finding of fact recorded by the authorities below that assessee had been acting as a conduit for transferring the accommodation entries to its sister concern. These facts clearly show that assessee has received its own cash money through the transactions carried out through various accommodation entry providers. Therefore, these were arranged affairs of the assessee company only to provide further accommodation entries to the sister concern. The decisions relied upon by the Ld. D.R. squarely apply to the facts and circumstances of the case. Merely showing that transactions were carried out through Banking channel in the facts and circumstances of the case is not sufficient to prove the genuineness of the transaction in the matter. The Hon’ble Supreme Court in the case of CIT, West Bengal-II vs., Durga Prasad More [1971] 82 ITR 540 [SC] and Smt. Sumati Dayal vs., CIT, Bangalore [1995] 214 ITR 801 [SC] have held that “Courts and Tribunals have to Judge the evidence before them by applying the test of human probability.” If the said test is applied in this matter, it is clearly established that assessee failed to prove identity of the accommodation entry providers, their creditworthiness and genuine of the transaction in the matter. We, therefore, do not find any justification to interfere with the Orders of the authorities below in making the addition of Rs.50 lakhs. Both these grounds of appeals of the Assessee are dismissed. No other point is argued or pressed.
13. In the result, appeal of Assessee dismissed.
