TMI Blog2015 (1) TMI 1119X X X X Extracts X X X X X X X X Extracts X X X X ..... Considering the totality of these facts and the logical consequences of the order of the Settlement Commission as well as of Additional CIT under Section 144A, we have no hesitation to hold that the addition under Section 68 cannot be made in the case of the conduit companies. Therefore, we delete the addition made under Section 68 in the case of all the nine companies, which are admittedly conduit companies of Shri S.K. Gupta. Decided in favour of assessee. - ITA No.3477/Del/2013, ITA No.3478/Del/2013, ITA No. 3480/Del/2013, ITA No. 3481/Del/2013, ITA No. 3482/Del/2013, ITA No. 3483/Del/2013, ITA No.3484/Del/2013, ITA No.3485/Del/2013, ITA No. 3621/Del/2013 - - - Dated:- 28-1-2015 - G. D. Agrawal (Vice President) And Chandra Mohan Garg (Judicial Member) For the Appellants : R. S. Singhvi, Satyajeet Goel For the Respondent : Gunjan Prashad ORDER G. D. Agrawal (Vice President) These appeals by different assessees are directed against the order of learned CIT(A)-XXXIII dated 20.3.2013 and 18.3.2013 for the AY 2008-09. 2. In all these appeals, various grounds have been raised. However, they are all against the confirmation of addition under Section 68 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s used to be received and deposited in these proprietary bank accounts. From these bank accounts, cheques used to be issued to intermediate companies numbering thirty one and two individuals. From these intermediates, cheques of accommodation entries used to be issued to the beneficiaries/customers. For these accommodation entries, the applicant was paid commission/brokerage/premium by the beneficiaries out of which he would pay/part with substantial amounts to the mediators/facilitators i.e. the persons who would bring the beneficiaries/customers to him. 4. He submitted that the conclusion of the Settlement Commission is at paragraph 26 27 of its order which read as under:- 26. The facts on record are considered. It is observed that various documents impounded and extracts taken from the impounded laptop are enclosed by the applicant in paper books of five volumes with about 1200 pages. It is further observed that the paper books give complete details as to how and when cash was received from the mediators, the cash was deposited in the bank accounts of intermediatories and cheques were issued to the beneficiaries of almost the same amounts. It is seen from the reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies is given which is reproduced for ready reference:- 4.6 There are 32 companies and two individuals which were used as conduits/routes from where the cheques used to be given to the beneficiaries. These 32 companies/two individuals were merely conduits and were used by the applicant in a bid to give legitimacy/credibility to the transaction. The names of these 32 companies and two individuals are as under: S.No. Name of Companies 1 AGM Holding Ltd. 2 Advantage Software Pvt Ltd 3 Anila Industries Ltd 4 Anjali Gupta 5 Belief Chits Pvt.Ltd. 6 Beriwal Investments Chits Funds 7 Central Gum Chemical Industries 8 Champ Finvest Pvt Ltd 9 Chander Prabhu Financial Services Ltd 10 Cubic Commercial Resources 11 Dhamaka Trading C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t proceedings of the intermediary companies, which included the assessee company, the Assessing Officer viz., ACIT, Central Circle-22, New Delhi sought for the direction of the Additional Commissioner of Income Tax under Section 144A of the Income-tax Act. At page 1 2 of the order, the Additional Commissioner gave the list of the companies controlled by Shri S.K. Gupta which included all the nine companies under consideration. The Additional Commissioner held as under:- 12. In view of these facts, it is clear that cash has been received by Sh. S.K. Gupta and routed through various entities to be passed on ultimately to the beneficiaries in the form of cheques. In such a scenario when it is clear that these other entities are mere conduit for converting cash to cheque, it would be appropriate to tax these transactions in the hands of beneficiaries and also in the hands of Sh. S.K. Gupta. The justification for bringing to tax the cash received (As per laptop) in the hands of Sh. S.K. gupta (Individual) would be that he has not been able to produce these persons before the department to own up this cash and as such remains unexplained cash as held in the order u/s 143(3) for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dilute the case of the department against beneficiaries. Additions made in the case of conduit entities shall confuse the stand of the department and shall jeopardize the efforts of the department to bring to tax these transactions in the hands of beneficiaries and Sh. S.K. Gupta. This shall also lead to frivolous litigation, of no significance, once we have brought these transactions to tax as its two legs, firstly, in the case of Sh. S.K. Gupta and secondly in the cases of beneficiaries. 15. In view of foregoing discussion, it would be in the best interest of revenue to tax these transactions in the hands of beneficiaries (para 13) and also Sh. S.K. Gupta (individual- Sr.No.1-4, as discussed in para 12), without making any additions on this account in the hands of conduit entities (Sr.No.5 to 41 as discussed in para 11 14). These directions are issued accordingly u/s 144A of the Income Tax Act 1961. These are composite directions u/s 144A of the Act with respect to all the entities referred to by the Assessing Officer vide his office letter No.261 dated 7.12.2011. 7. Thus, the Additional CIT under Section 144A issued direction for not making of any addition in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant company is used as conduit for routing the entries. However, before settlement commission, entire facts that the appellant company is maintaining its books of account on the basis of such entries might not be available. Hon ble settlement commission has not given any comments for credit in the books of accounts of the appellant company which is not changed after admission that it as a conduit company. Therefore, in no way, the order of settlement commission support the in applicability of section 68 in appellant s case, as the order of hon ble settlement commission has only quantified same commission income in the hands of Sh. S.K. Gupta. 9. The learned counsel pointed out that before the Settlement Commission, all the facts were placed. The Settlement Commission has recorded all the facts and also given the list of companies which were used by Shri S.K. Gupta as conduits. The Settlement Commission has also discussed the modus-operandi how Shri S.K. Gupta was providing accommodation entries by utilizing the conduit companies. He further submitted that the order of the Settlement Commission is binding upon the Revenue authorities. In support of this contention, he relied u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... que books etc. Sh. S.K. Gupta has also roped in his own relatives for operation of various bank accounts and for filing the income tax returns. It was seen that Sh. S.K. Gupta was controlling more than 35 companies from a small office premises without sufficient infrastructure or employees to carry out meaningful business activity in so many companies. Further, from the perusal of ledger accounts maintained in one of the laptops impounded during survey, it is noticed that a large amount of cash is deposited and cheques are issued on the same day/within few days to various parties from the accounts of the company controlled by him. As per enquiries carried out by the Investigation wing the assessee was found to have been using the bank accounts opened in different banks to route the entries through two to four accounts to vie the color of genuineness to these transactions. 13. Thus, the Assessing Officer himself has recorded the finding that the assessee company is one of the group concerns of S.K. Gupta group and Shri S.K. Gupta admitted that he had been providing accommodation entries to various persons through a large number of concerns effectively controlled by him. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whom cheques for accommodation entries were issued almost of the similar amount. The order of the Settlement Commission has become final because the Revenue has not challenged the order of the Settlement Commission before the Hon'ble Jurisdictional High Court. 14. That Hon'ble Jurisdictional High Court has considered the binding nature of the decision of the Settlement Commission in the case of Omaxe Ltd. Anr. (supra) and held as under:- Orders of Settlement Commission are final and conclusive as to matters stated therein. The matters necessarily could comprehend disputed questions, items or heads of income, disallowance, etc. or variants of it, but always with reference to a particular assessment year. In this case, the Settlement Commission was seized of asst. yr. 2006-07. Whilst exercising its authority over the application, the Commission concededly exercised the vast plenitude of its power or jurisdiction. The petitioner had made a disclosure in its application as it was duty-bound to. What is in controversy today is that the subsequent event of search and seizure operation conducted in the premises of M and the contention of the Revenue have thrown li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the group companies which has been mentioned by the Additional CIT in paragraph 2 of his order under Section 144A. After considering all the facts, the Additional Commissioner held it would be in the best interest of revenue to tax these transactions in the hands of beneficiaries and also Sh. S.K. Gupta, individual without making any additions on this account in the hands of conduit entities . We may point out that the direction of the Additional CIT is for various years running from AY 2004-05 to 2007-08. However, the ratio of the said direction would continue to be applicable for AY 2008-09 also because the facts remain the same. The Additional CIT has discussed in detail that when the Revenue is taking action in the hands of the beneficiaries, if the addition is made in the case of conduit entities, it will dilute the case of the Department against the beneficiaries. The order of the Additional CIT under Section 144A is binding on the Assessing Officer which is evident from Section 144A which reads as under:- 144A. A Joint Commissioner may, on his own motion or on a reference being made to him by the Assessing Officer or on the application of an assessee, ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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