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2016 (2) TMI 1075 - ITAT DELHI

2016 (2) TMI 1075 - ITAT DELHI - TMI - Addition made u/s 68 - Accommodation entries - Addition made in the case of the conduit companies - Held that:- We respectfully following the decision in the case of M/s Omni Farms Pvt. Ltd. (2015 (1) TMI 1119 - ITAT DELHI) delete the addition made u/s 68 wherein held that there is an order of the Settlement Commission as well as the ACIT u/s 144A holding that Shri S.K. Gupta was providing accommodation entries, he used various companies as conduit for prov .....

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ri S.K. Gupta. - Decided in favour of assessee - ITA No. 3575/Del/2013 - Dated:- 2-2-2016 - Shri S. V. Mehrotra , Accountant Member And Ms. Suchitra Kamble, Judicial Member For the Appellant : Shri V. Raja Kumar Adv For the Respondent : Shri Amrit Lal Sr. DR ORDER Per S. V. Mehrotra, A. M This is assessee s appeal against the order dated 20.03.2013, passed by the ld. CIT(A)-XXXIII, New Delhi in appeal no. 393/10-11/365, relating to A.Y. 2008-09. The assessee has taken following grounds: That on .....

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ot appearing in the seized material, though this had been clearly demonstrated through bank particulars themselves; 3) Not appreciating that the assessee company was only a conduit for funds transfer and hence, the credits in the assessee's books could not have been treated as its income under section 68 of the Income-tax Act, 1961; 4) Not appreciating the complete import of the proceedings in Shri S.K. Gupta's case, ignoring that such evidence is deemed to be correct as per Section 292( .....

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be made in the hands of the assessee, since it was only a conduit company; 8) Not appreciating that in the preceding as well as subsequent years, on identical facts, the returned income of the assessee has been accepted after detailed scrutiny; 9) Enhancing the income by ₹ 77,50,000/- without appreciating the assessee's reply dated 1 4.03.2013; 10) Not allowing relief in respect of: a) RS.2,23,25,000/- taxed twice both in the hands of the appellant as well as in the hands of the vario .....

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ds of appeal, which are without prejudice to one another, before or at the time of hearing of the appeal. 2. Brief facts of the case are that a survey operation was conducted in the S.K. Gupta group of cases on 20.11.2007 at 308, Arunachal Building, 19, Barakhamba Road, New Delhi-110001 and 1007-1008, Arunachal Building, 19, Barakhamba Road, New Delhi-110001. The AO observed that the assessee company was one of the group concerns of S.K. Gupta group. During the course of survey proceedings and a .....

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aintaining following bank accounts during the FY 2007-08 showing total deposits as under: S. No. Name of the Bank Account no. Deposits Deposits from Group concerns 1 Axis Bank (Defence Colony) 357010200002813 9,10,000 2,50,000-(Giriashe Co.) 65,00,000-(Namrata Mar) 10,00,000- (Simo Credits business) 2 Syndicate Bank (Barakhamba Road) 90361010006747 3,22,81,937 3 Bank of Baroda 13830200000336 12,55,000 Grand Total 3,44,46,937 77,50,000 3. The AO determined the total income at ₹ 2,79,57,660/ .....

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in the cases of Vijay Conductors India Pvt. Ltd. (ITA 683/2015), Namrata Marketing Pvt. Ltd. (ITA 684/2015), Vishrut Marketing Pvt. Ltd. (ITA 685/2015) and Beriwal Investment & Chit Fund Pvt. Ltd. (ITA 686/2015), which group concerns were before the ITAT also. He further pointed out that in the case of M/s KSA Chits Pvt. Ltd. Vs. DCIT (ITA no. 4647/Del/2013- order dated 20.3.2015), the Tribunal has followed the decision in the case of M/s Omni Farms Pvt. Ltd. Vs. DCIT (ITA no. 3477/Del/2013 .....

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t Commission contained at paras 26 & 27 which is reproduced hereunder: 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 .....

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various facts, the A:a. has stated that the applicant has been providing the accommodation entries to different parties by issuing the cheques after obtaining the cash and the amount of premium charged on giving such entry has not been reflected as income 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 ClT in Rule 9 report or during the hearing •has not produced any material/eviden .....

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re are one 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.D. that the beneficiaries disclosed RS.l06.33 crores against the cheques received by them from the applicant, further strengthen applicant's case that he was on .....

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sion has been accepted by the revenue as it has not been challenged by the revenue before the Hon ble High Court. The order of Settlement Commission has been given effect to by the AO after obtaining direction of the addl. Commissioner u/s 144A. The directions of the Addl. Commissioner were 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 .....

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order u/s 143(3) for the assessment year 2008-09. In the absence of owning up of cash by mediators/beneficiary, it is not possible to allow assessee the benefit of argument that the cash belongs to beneficiary and once the department is taking action against- beneficiaries, no action can be taken in the hands of the S .K. Gupta. It is clear that cash has been received by S.K. Gupta in different years under consideration . and none of the creditors / beneficiary have come forward to own this cash .....

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l; Gupta. Addition has also been made on account of premium income received by assessee on account of these transactions for AY 2008-09. Assessee's contention that he should be allowed certain expenditure from the premium received by it, also cannot be entertained as assessee has brought nothing on record to prove that expenses were paid to other persons and neither there is anything on record to show that these other persons have acknowledged this income in this regard. Certain additions we .....

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r 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 SK. 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 t .....

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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 .....

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of M/s Omni Farms Pvt. Ltd., the Assessing Officer, at paragraph 2, has recorded the following finding:- "2. A survey operation was conducted in the 5 K Gupta group of cases on 20/11/2007 at 308, Arunachal Building, 19, Barakhamba Road, New Delhi - 110001 . and 1007-1008, Arunachal Building, 19, Barakhamba Road, New Delhi - 110001. The assessee company is one of the group concerns of 5 K Gupta Group.• During the course of survey proceedings Enid assessment proceedings, Sh SK Gupta edm .....

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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./( 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 .....

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e been using the bank accounts opened indifferent 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. The Settlement .Commi .....

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the cash was deposited in the bank accounts of intermediatries and cheques were issued to the beneficiaries of almost the same amounts'. Thus, after examining the facts, the Settlement Commission has recorded the finding that the cash deposited in the bank account of the intermediary companies was the cash received from mediators on behalf of the beneficiaries who wanted to avail the accommodation entries. It is further observed by the Settlement Commission "It is further noted that th .....

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gthen applicant's case that he was only entry provider arid cash deposited in the bank accounts for issuing cheques are not his money but moneys . of the beneficiaries to whom cheques were issued'. Thus, the Settlement Commission has recorded the clear cut finding that Shrl S.K. Gupta was only entry provider and for the purpose of providing entries, he utilized. the various group companies which included the companies under appeal before us. He used to receive the cash from the beneficia .....

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ilar 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 "mette .....

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troversy 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 light On material that had been suppressed from the Commission. If such is the case, it would be only logical that the Commission itself should be approached for a declaration that its order of 17h March, 2008 is a nullity. Allowing any other authority, even by way of a notice under s. 153C, would be to permit multiple jurisdictions which can .....

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ion. Admittedly, the order of the Settlement Commission in the case of Shri S.K. Gupta is for AY 2008 09 and all the appeals under consideration before us are for AY 2008-09. The C1T(A) denied to follow the order of the Settlement Commission remarking that all the relevant facts might not have been produced before the Settlement Commission. However, learned CIT(A) has not pointed out any specific facts which were not placed before the Settlement Commission. On the other hand, reading of the orde .....

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has not been pointed out by the Revenue that it 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 .....

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es". 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 .....

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it is necessary or expedient so to do, he may issue such directions as he thinks fit for the guidance of the Assessing Officer to enable him to complete the assessment and such directions shall be binding on the Assessing Officer: Provided that no directions which are prejudicial to the assessee shall be issued before an opportunity is given to the assessee to be heard. Explanation. - For the purposes of this section no direction. as to the lines on which an investigation connected with the asse .....

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