Case Law Details
Sumo Advertises Pvt. Ltd. Vs ACIT (ITAT Delhi)
A perusal of the assessment order reveals that during the course of the assessment proceedings, the Id. AO asked the appellant to establish the credits appearing in its books of account. However, no details were filed by the latter. As per the provisions of section 68, the onus was on the appellant to establish the identify and credit worthiness of the creditors and the genuineness of the transaction. However, the said onus was not discharged by the appellant. Based upon the statement of Sh. V.K. Jain, who controlled the companies which allegedly gave credits to the appellant, wherein he stated that he had provided accommodation entries to various entities through such conduit companies, Id. AO held such cash credits as bogus.
Further inquiries were conducted by Id. AO during the remand proceedings and notices u/s 133(6) were issued to all the four companies from whom the appellant has shown to have taken credits. However, all such notices were returned undelivered by the postal authorities. Therefore, Id. AO concluded in para 2.4 of the remand report that this confirms the finding recorded in the assessment order that all these creditors are nothing but entities used for providing accommodation entries. Ld. AR has filed various documents like ITR, financial statements etc. of the creditors, however, it is a well known fact that such paper formalities of filing required statutory returns with various agencies, getting the accounts audited, routing the funds through banking channels, preparation of other documents/papers like share application forms etc. are done to give a colour of genuineness to the whole transaction and therefore, this by itself cannot justify or prove the genuineness of the cash credits when the transaction is considered in totality.
As per the rejoinder, Id. AR argued that the companies with whom the appellant dealt with were shell companies and therefore, relying upon various case laws, he contended that no addition u/s 68 be made in the case of shell/conduit companies. This argument of Id. AR is devoid of any merits as the addition u/s 68 has not been made in the case of the conduit companies but in the hands of the appellant which allegedly took credits from such conduit companies. Therefore, reliance upon said decisions by Id. AR is not well placed. On the contrary, since admittedly credits were taken from conduit/shell companies, the action of the Id. AO is very much as per law as the appellant had failed to establish the credits appearing in its books of account. In the case of Commissioner of Income-tax v. UP Bone Mills India Ltd. (333 ITR 119), it has been held by Hon’ble Delhi High Court that the initial burden is upon the assessee to explain the nature and source of the cash credits received by it. In order to discharge this burden, the assessee is required to prove(i) the identity of the creditors, (ii) the genuineness of the transaction, and (iii) the creditworthiness of the creditors.
Revenue submitted that AO have rightly made addition as the assessee grossly failed to explain and furnished details as called for during the assessment proceedings.
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