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TMI Blog2017 (11) TMI 576X X X X Extracts X X X X X X X X Extracts X X X X ..... ,19,340/-being commission paid by it to M/s. Mrigiya Electronics Industries Private Limited for giving accommodation entries, when it was deposed by it's Director that the company was involved in providing accommodation entries after charging commission for the same?" 3. The facts of the case are that the appellant is engaged in real estate business and has launched residential scheme at Jodhpur. During the year the land was purchased from various persons for its real estate projects. As per the AO value of land purchased as per registered sale deed comes to Rs. 43560000/- but the appellant has claimed cost of land in its books of accounts at Rs. 119527000/-. It was stated that difference of these two amounts was paid to one M/s. Mrigiya Electronics Inds. Pvt. Ltd. as cost of consolidation. Copies of agreements between M/s. Mrigiya Electronics Pvt. Ltd. and the land owner as well as between the appellant and M/s. Mrigiya Electronics Inds. Pvt. Ltd. were produced. The inference drawn from agreement is that M/s. Mirgya first entered into agreement for purchase of land from 12 owners and then immediately selling the same to the appellant for Rs. 119527000/-. The payments were made to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect work in progress. During the course of examination of books of accounts it was noticed that the assessee has claimed the under mentioned payments: (i) Commission has been paid to Smt. Nirmala Kedia at Rs. 2,35,000/-, to Smt. Shashi Kedia at Rs. 2,65,000/- and Sh. Surendra Kedia at Rs. 1,45,000/-. The assessee was asked to file the justification of these expenses as these are payments to related parties u/s 40(a)(2)(b). vide reply dated 30.12.2009, the assessee has filed bills of these persons. These bills show that sales commission against sales of plot have been paid by the assessee to these persons for attracting investment. The commission has been paid @ 2.35% to Nirmala Kedia, @ 2.65% to Shashi Kedia and @ 2.90% to Surendra Kedia. The interesting feature of this expenditure is that the investment has been shown in the name of M/s Vaishnavi Home Entertainemtn P Ltd, Tuticorin Traxim P Ltd and Alishan Estate, & Wrack Electronics P Ltd, New Delhi. The names of these companies do not appear in the list of persons from whom advance have been received for booking of plot. Rather these companies have introduced share application money/share capital/unsecured lions as per the det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order Land 122689030 75967000 46722030 Site development expenses 16068778 953438 15115340 Preliminary & preoperative expenses 7355345 813600 6541745 Total 68379115 Subject to the remarks above, the total income of the assessee is computed is as under: Income shown Nil Unrecorded expenditure as per para 14 1519340 Unrecorded expenditure as per para 15 6100000 Total Income 7619340 4.2 He further contended that CIT(A) while considering the matter has not considered the facts in true spirit and has wrongly partly allowed the appeal of the assessee and the tribunal has committed serious error in dismissing the appeal of the department. 4.3 He has relied upon the decision of Calcutta High Court in CIT vs. Precision Finance Pvt. Ltd. (1994) 208 ITR 465 wherein it has been held as under:- "In the course of assessment proceedings for the assessment years 1978-79 and 1979-80, the AO found various cash credits in the books of the assessee. Enquiries were conducted through the inspector on different dates and it was found that either the files did not exist as per details given by the assessee or the records did not tally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was subsequently retracted by Shri Pramod Sharma, director of M/s Mrigiya Electronics Inds. Pvt. Ltd.. The AO in the case of M/s Mrigiya Electronics Inds. Pvt. Ltd. Has made addition of Rs. 75967000/- as he obtained this information from M/s Mrigiya Electronics Inds. Pvt. Ltd.'s bank account. Thus the payments made by the appellant to M/s Mrigiya Electronics Inds Pvt. Ltd. Through banking channel are supported by bank account. There is no finding of the AO that this amount was withdrawn in cash by M/s Mrigiya Electronics Inds. Pvt. Ltd. And money has come back to the appellant. Copy of bank account of M/s Mrigiya Electronics Inds. Pvt. Ltd. Was filed by the appellant before AO. M/s Mrigiya Electronics Inds. Pvt. Ltd.'s confirmation was filed by the appellant. The addition is not base on any admission given by Shri Pramod sharma regarding transactions with the appellant company and, therefore, a general confession cannot be made basis for making any addition in the case of the assessee. As the transaction between appellant and M/s Mrigiya Electronics Inds. Pvt. Ltd. Is supproted by bank statement, agreement and the price paid found to be reasonable, taking an adverse view on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nics Inds. Pvt. Ltd. Were produced. The AO also doubted the genuineness of transactions wherein on investment of Rs. 61 lacs within a month no one can earn profit of Rs. 75967000/-. The AR has tried to explain that AO's observation while doubting this transaction is not correct. M/s Mrigiya Electronics Inds. Pvt. Ltd. Paid advance of Rs. 61 lacs to 12 land owners but the amount was only an advance and the total consideration paid to the land owners was Rs. 43560000/-. The AR by giving a chart has tried to explain that the land owners have earned profit of 100% to 200% within span of 8 months. While selling land at Rs. 43560000/- including payment of Rsm. 75967000/- made to M/s Mrigiya Electronics Inds. Pvt. Ltd., the rate per bigha land comes to Rs. 8,90,000/-. When this is compared with the rate given by M/s Mrigiya Electronics Inds. Pvt. Ltd. To M/s Nikhar Builders for 1.85 bighas of land. (Rs. 16.54 lacs per bigha) the rate given to M/s Mrigiya Electronics Inds. Pvt. Ltd. Does not appear to be abnormal. Both the transactions took place almost at the same time and the transactions are also related to the same area. However, the rate paid by M/s Mrigiya Electronics Inds. Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by the purchaser and the real consideration may be more than what is appearing in sale deed. When payment is supported by bank account and other agreements, evidences cannot to ignored simply for the reason that actual consideration cannot be more than what is appearing in the deed. 23. Regarding AO's finding that M/s Mrigiya Electronics Inds. Pvt. Ltd. Was not a genuine entity, statements of the director of M/s Mrigiya Electronics Inds. Pvt. Ltd. Were recorded in December, 2006 wherein he has admitted that he was involved in providing accommodation entries in respect of shares. The statements were subsequently retracted by Shri Pramod Sharma, director of M/s Mrigiya Electronics Inds. Pvt. Ltd has made addition of Rs. 75967000/- as he obtained this information form M/s Mrigiya Electronics Inds. Pvt. Ltd.'s bank account. Thus the payments made by the assessee to M/s Mrigiya Electronics Inds. Pvt. Ltd. Through banking channel are supported by bank account. There is no finding of the AO that this amount was withdrawn in cash by M/s Mrigiya Electronics Inds. Pvt. Ltd. And money has come back to the assessee. Copy of bank amount of M/s Mrigiya Electronics Inds. Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was acceptable. The contention of the AO that by merely investing Rs. 61,00,000/- no one can earn such a huge profit of Rs. 7 crores or so has been considered by the ld. CIT(A) and found that the investment of Rs. 61,00,000/- was given as advance and not the full consideration. Therefore, on investment of Rs. 61,00,000/-, earning of Rs. 7 crores or so is not correct. In fact the real amount was invested in land was Rs. 4,35,60,000/- and purchaser M/s MEIPL was going to develop th land relating to 12 partners. Therefore, the land in pieces was brought by assessee company. It is not a case of the department that in lieu of cheques any cash was withdrawn from the bank and the same has been returned to the assessee. The general statement recorded of the Director that he is dealing in accommodation entry on account of shares cannot make a company in-genuine or bogus. Thereafter the statement given was retracted also. Even otherwise this is a land transaction and not share transaction. Therefore also ld. CIT(A) was justified in holding that M/s. MEIPL was a genuine firm and not an accommodation entry provider. The fact that the rate on which registry was made was 11/2 time m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal on the facts found is final in decision as to the legal effect of that finding is a question of law which can be reviewed by the court. (3) A finding on a question of fact is open to attack under section 66(1) as erroneous in law when there is no evidence to support or if it is perverse. (4) When the finding is one of fact, the fact that it is itself an inference from other basic facts will not alter its character as one of facts." 16. We have considered all the contentions urged on behalf of the appellant at some length. We would like to make it clear that we are not sitting here as a court of appeal on facts. We have examined the record only with a view to see whether there is any misdirection or non-direction, such as is likely to have affected the result, and we have come to the conclusion that there is none, and that the finding of the Tribunal is not therefore open to attack." 6.3 He has also relied upon the decision of this court in ITA No.476/2009 (CIT vs. M/s. Riverside Farma (P) Ltd.) decided on 1.8.2017 wherein it has been held as under:- "3. On 25.04.2017, when the matter was argued, we were of the opinion that the issue is covered by the decision of Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey were men of character. Sagarmal Dingliwala, the manager of J. R. Pillani, Gwalior, at the relevant period, was asked the same question, and he replied that "this business was of Jiyajeerao Cotton Mills, Ltd." The appellant had, in fact, genuine transactions with Cotton Agents Ltd., Gwalior, on a large scale, and when Durgaprasad Mandalia was asked why he did not put these transaction through them, he had to answer to give. And he was likewise unable to explain why he did not directly deal with J. R. Pillani, Gwalior. It was suggested by the learned Solicitor-General that if the object of the appellant in setting up contracts in Gwalior was to throw a veil over its contracts with Jwaladutt Kishanprasad, that could not effectively be achieved by putting them in the name of J. R. Pillani, Gwalior, which was a branch of the firm, as the veil would have been too thin to concern the true face of the contracts, and that is why the brokers were though of. We think there is considerable force in this. Then again, Durgaprasad Mandalia was asked why he did not place the orders directly with Cotton Agents Ltd., Bombay, or J. R. Pillani, Bombay, and he said that the policy of the appellant w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one and that was a serious irregularity. The portion of the order of remand relevant for the present purpose is as follows : "The managing director of the assessee company or rather the person responsible for ordering these transactions on behalf of the assessee company should also be similarly examined." 15. Now, the obvious intention behind this order, read as a whole, was that persons connected with the several links in the chain of contracts and series of payments concerned in these transaction should be examined with a view to elucidate the true position, and the managing director was mentioned as the person who was likely to have entered into these transactions. Durgaprasad Mandalia was the manager of the appellant company, and he gave evidence that he put the present transactions through the brokers, and that has been considered. If Birlas wanted themselves to give evidence, there was nothing to prevent them from doing so, and indeed, no complaint was made in the court below that their evidence had not been taken. There is no substance in this contention. 5. However, counsel for the appellant has relied on the judgment rendered by the Delhi High Court in the case of Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief is not for the court to judge but it is open to an assessed to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extend, the court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income- tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief. 12. This Court also had occasion to deal with the issue of reopening a completed assessment in United Electrical Co. P. Ltd. v. Commissioner of Income-tax and Ors. (2002) 258 ITR 317. This decision has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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