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TMI Blog2015 (1) TMI 1119X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 68 of the Income-tax Act, 1961 as under:- Name Addition 1. M/s Omni Farms Pvt. Ltd. Rs. 2,11,80,616/- 2. M/s Passion Chits Pvt. Ltd. Rs. 40,09,850/- 3. M/s Beriwal Investment & Chit Fund Pvt. Ltd. Rs. 7,88,73,170/- 4. M/s Champ Finvest Pvt. Ltd. Rs. 6,82,34,143/- 5. M/s Cubic Commercial Resources Ltd. Rs. 4,38,40,592/- 6. M/s Vijay Conductors India Pvt.Ltd. Rs. 16,23,103/- 7. M/s Vishrut Marketing Pvt.Ltd. Rs. 5,04,06,893/- 8. M/s Namrata Marketing Pvt.Ltd. Rs. 10,82,91,085/- 9. M/s Katson Hotel & Developers Pvt.Ltd. Rs. 41,06,374/- 3. At the time of hearing before us, it is stated by the learned counsel that one Shri S.K. Gupta was carrying on the business of providing accommodation entries. He controlled a number of proprietary concerns, companies and bank accounts at various places. A survey under Section 133A of the Income-tax Act, 1961 was conducted at the office premises of Shri S.K. Gupta and the companies/concerns controlled by him on 20th November, 2007. During the course of survey, several documents, papers, laptops containing accounts of several parties including cash book, bank books, ledger accounts and some cheque boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the applicant. It is further seen that the applicant has given list of mediators and beneficiaries with address and telephone numbers. It is noted that the CIT in Rule 9 report or during the hearing has not produced any material/evidence to rebut the presumption u/s. 292C in respect of correctness of the material impounded during the survey. It is further noted that there are overwhelming evidence in the impounded material as enclosed by the applicant in the paper book which show that the applicant is only entry provider and he had issued cheques after receiving cash from mediators and deposited the same in the bank account controlled by him. Thus, we do not agree with the CIT's contentions that there are no evidence/material brought out by the applicant to prove that he was an entry provider and that he had deposited his own cash which was used to issue cheques to the beneficiaries. The reasons recorded for issue of notice u/s 148 clearly state that the applicant is an entry provider. Further, the report of the A.O. that the beneficiaries disclosed Rs. 106.33 crores against the cheques received by them from the applicant, further strengthen applicant's case that he was only e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... item Nos.6, 8, 10, 12, 18, 20, 22, 32 & 33. He stated that this order of the Settlement Commission has been accepted by the Revenue as it has not been challenged by the Revenue before the Hon'ble High Court. He referred to the order of the Assessing Officer wherein he has given effect to the order of the Settlement Commission and pointed out that after the order of the Settlement Commission, the Assessing Officer determined the income of Shri S.K. Gupta without making any addition for unexplained cash credit. He further pointed out that during the course of assessment 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 ultimatel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer. He should ensure that there is no deficiency in this regard. On the basis of modus operandi and material impounded, it is clear that there is a very strong case to bring to tax the accommodation entries obtained by beneficiaries. The information with relevant records should be communicated to the concerned AOs. 14. To tax the cash received by S.K. Gupta in the hands of conduit companies also, wherein the same finds reflection as credit entries in bank accounts, would make the stand of the department ambiguous vis-a-vis beneficiaries. It will 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this regard, which is similar in all the cases before us, at page 24 of his order in the case of Omni Farms Pvt.Ltd. reads as under:- "Second main argument of Ld. AR in support of proving itself as conduit, the ld. AR is relying on the order of the settlement commission. I have perused the order of Hon'ble settlement commission. The hon'ble settlement commission has quantified the income of Sh. S.K. Gupta as some percentage of total turnovers. Of course, in its order, hon'ble commission has mentioned that various companies including appellant 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in different branches in the names of companies/firms/proprietary concerns and individuals. For the operation of these bank accounts, persons who are filing income tax returns are roped in. Like any other business it does require man power according to the scale of operations. Except for two or three persons who are required regularly to visit banks and do other work like collection of cash etc. most of the other persons involved are on part time basis. The part time employees are called as and when required to sign documents, cheque 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 carr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich included the companies under appeal before us. He used to receive the cash from the beneficiaries who wanted to avail the accommodation entries and after depositing the same in the bank account of various companies, he issued the cheques to the beneficiaries. In view of this finding, the cash deposited in the bank account of various companies which were the conduit companies cannot be said to be unexplained cash credit because the source of cash is from the beneficiary who wanted to avail the accommodation entry and to 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, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has approached the Settlement Commission for declaring its order as nullity. Therefore, respectfully following the decision of Hon'ble Jurisdictional High Court, in our opinion, the order of the Settlement Commission is binding on the Income Tax Department and all the logical consequences of the said order are to be given effect to. 16. We also find that the Additional CIT has issued direction under Section 144A in this regard. The Assessing Officer had asked for the specific direction of the Additional CIT 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 di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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