TMI Blog2018 (3) TMI 661X X X X Extracts X X X X X X X X Extracts X X X X ..... accommodation entries was also determined and the return of assessee was also collected by the assessee and recorded in the reasons, we are of the view that there is no infirmity committed by the AO in reopening the case of the assessee. On merits as referring to assessee's contention of cheating on the assessee by Sh. Pradeep Jindal and the bankers in view of the facts and circumstances of the case, all the appeals are set aside back to the file of the Ld. assessing officer with a direction to the assessee to first prove before the AO that there is a cheating on the assessee by Sh. Pradeep Jindal and the bankers. The assessee also is directed to produce the minutes book of the company to show the resolution of that particular date that it does not exist in the minutes book. Unless the assessee comes out with the clean hands before the Ld. assessing officer it cannot escape the taxation of the whole amount. Thereafter the Ld. assessing officer is directed to make complete examination of the bank accounts by obtaining necessary information from the bankers by issue of summons under section 131 of the Income Tax Act and identify the beneficiaries with proper documentation and evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s raised the following grounds of appeal in ITA No. 1813/Del/2013 for the Assessment Year 2001-02: 1. The ld CIT(A) has erred in law and on facts in restricting the addition at ₹ 741059/- as against the original addition made by the assessing officer at ₹ 20325753/- merely observing that the assessee company had nothing to do with the said account and it was misused by one of its Directors namely Sh. Pradeep Jindal. 2. The ld CIT(A) has erred in law and facts in not appreciating the fact there was nothing on record to absolve the assessee of its responsibility with respect to the said bank account. 3. The ld CIT(A) has erred in law and on facts in deleting the addition of ₹ 203257/- made on account of commission !1% of above addition on the ground that addition made by the Assessing Officer was on assumption basis. 5. The Assessee has raised the following grounds of appeal in ITA No. 2116/Del/2013 for the Assessment Year 2000-01: 1. In sustaining addition of ₹ 940000/- u/s 68 of the Income Tax Act, 1961. 6. The Assessee has raised the following grounds of appeal in ITA No. 2115/Del/2013 for the Assessment Year 2001-02: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of the assessee company with state bank of India Shakti Nagar and copy of the statement of Sh. Pradeep Jindal, who was at that time director of the assessee company. 10. During the course of reassessment proceedings the assessee was asked to explain the large amount of deposit in the bank account, which was not reflected in the books of accounts of the assessee company. The assessee was further provided the copy of the bank account No. 43145 with state bank of India Shakti Nagar/Delhi for explanation. The Ld. assessing officer asked the assessee to explain all debit and credit entries appearing in the above state bank account. In response to this the Ld. authorized representative filed a letter dated 26/11/2007 stating that Mr Pradeep Jindal who was Director of the assessee company had operated the impugned account with state bank of India, Shakti Nagar Branch, New Delhi and the details of the beneficiaries as well as the details of other transactions in the aforesaid account be obtained from him. It was further stated that the assessee company is ignorant of all this transaction, it is neither the beneficiary nor instrumental in arranging these entries or transactions. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts, it was noted by the Ld. assessing officer that the pattern of the transactions reflected in the bank account shows that the bank account existing in the name of the assessee company was being used for providing accommodation entries. The Ld. AO further held that the assessing officers of the alleged beneficiaries stood also informed about the transactions in those cases. The commission income at the rate of 1% of the accommodation entry was added on substantive basis in the hands of the assessee of rupees 254930/ . 12. Assessee, aggrieved with the order of the Ld. assessing officer, preferred an appeal before the Ld. CIT (A) who vide order dated 31/1/2013 deleted the addition of ₹ 24553000/ as above sum was added in the hands of the beneficiaries and also accepting the contention of the assessee that Sh. Pradeep Jindal the director of the appellant company had operated the bank account in the name of the company and he has also acknowledged the receipt of the commission. For the balance sum of ₹ 940,000/-wherein the accommodation entry of ₹ 4 Lacs and ₹ 540000/- was provided to the 2 parties who could not be traced whether the substantive additions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 147 of the act and further completion of assessment under section 143 (3)/147 of the act was without satisfying the statutory precondition is envisaged in the aforesaid section and was without jurisdiction and was liable to be quashed as such. 16. The Ld. authorized representative submitted that the above ground is purely legal in nature and requires no further investigation of the fact. Therefore, in view of decision of the Hon ble Supreme Court in case of National Thermal Power Company Ltd versus CIT 229 ITR 383 as well as M/s Jute Corporation Of India Ltd versus CIT 187 ITR 688 the above additional ground may be admitted and adjudicated. 17. The Ld. departmental representative vehemently objected to the above additional ground and stated that this ground is not taken before the lower authorities and therefore it cannot be admitted now. 18. We have carefully considered the rival contention and perused the application for the admission of additional ground filed by the assessee. Admittedly, the additional ground raised by the assessee is purely legal in nature and therefore it can be raised at any time during the course of appellate proceedings. It is also not shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee however, in the present case of the assessee the company itself is an entry operator, which has been confirmed by the Director of the company itself. With respect to the decision of Sabh Infrastructure the statement of third party was taken who has stated he operates certain companies who have given accommodation entry to that assessee. However, in the present case the Director himself has confessed then there is no reason that reopening can be held to be invalid. Even in the present case, assessee himself has confirmed at all the stages that account of the assessee was used for providing accommodation entries. Hence, in this case there is no reason to say that the reasons recorded by the Assessing Officer are invalid. 21. On the merits, Ld DR submitted that assessee has opened a bank account through its Director who has operated that particular account and carried out the business of giving accommodation entries to the various parties by charging the commission. The assessee has failed to show that the bank account opened is not in the name of the company. Assessee has not made any complaint either against the bank manager or against the Shri Pradeep Jindal, whom asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the coordinate bench in case of Raj Kumar Jain Vs. ACIT 50 ITD 1 to further support his claim. In the end, he submitted that the appeal of the revenue deserves to be dismissed and appeal of the assessee needs to be allowed. 24. We have carefully considered the rival contentions and perused the orders of the lower authorities. The first issue that requires to be decided by us on the additional ground raised by the assessee against reopening of the assessment. In the present case the ld Assessing Officer has reopened the case of the assessee by issue of notice u/s 148 of the Income Tax Act. Basis of the reopening was the enquiry made by the Director of Investigation on various persons who were indulged in providing accommodation entries etc. Those persons have also provided the names of the companies to whom such accommodation entries were provided. It was noted by the ld Assessing Officer that assessee company was engaged by an entry operator who is introducing unaccounted in the bank account of the assessee and further from that particular bank account giving accommodation entries to various parties. From 01.04.1999 to 31.03.2000 such accommodation entries are equivalen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee, return of the assessee and statement of the director of the assessee company. In view of this reliance on the above decision is misplaced for the reason that in that particular case reopening was held to be invalid because the ld AO has merely reproduced the Investigation Wing s Report in the reasons record without establishing link between tangible material and formation of belief. Further, the reliance placed on the decision of the Hon'ble Delhi High Court in case of Sabh Infrastructure Ltd Vs. ACIT is also misplaced for the reason that in that particular case the ld Assessing Officer did not mention that what facts have been assessee failed to disclose. Further, in that particular case the reason for reopening contain the name of very same five companies, which were initially disclosed by the petitioner in the original assessment proceedings. In that particular case the assessment u/s 143(3) of the Act was passed on 20.12.2010 wherein, the complete details about the above five companies were disclosed by the assessee. In the present case, there is no assessment u/s 143(3) of the Act but assessee s return was merely processed u/s 143(1) of the Act. Further, in case of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n on the substantive basis in the hands of the assessee. 27. For AY 2000-01, The ld CIT(A) after obtaining the remand report of the assessee held that out of sum of ₹ 25493000/- the ld Assessing Officer has submitted that in case of the five parties out of the several beneficiaries the addition have been substantially made amounting to ₹ 9632760/- in the hands of the five parties as mentioned in para No. 3.1 of the order of the ld CIT(A). The ld AO did not mention anything whether in case of two parties the addition is made or not on substantive basis. However, the ld CIT(A) as per the letter of the appellant dated 16.02.2010 mentioned in para No. 3.2 of the order that in case of the other two parties the substantial addition of ₹ 60 lacs and ₹ 1 crore respectively have been made. The ld CIT(A) has mentioned that ld AO has not confirmed the above facts. Subsequently, the ld AO vide letter dated 04.02.2010 confirmed the above facts. In view of this it was found by ld CIT(A) that in case of seven parties the addition of ₹ 25632760/- as tabulated in para No. 3.2 of his order have been made substantially. 28. Coming to the ground No. 1 of the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 only when Shri Pradeep Jindal was the director of the company. I have verified the bank pass book with SBI, Shakti Nagar branch and it is a typical accommodation entry case pass book with immediate debit of amount equivalent to the amount of credit in the account as mentioned by the AO in the assessment order for A. Y. 2000-01. The real beneficiaries in this case are the recipients of accommodation entries and the actual addition should be in their names only. It is not clear from the assessment records whether any addition was made in the hands of the four beneficiaries mentioned, above though their AOs their AOs have been intimated about these transactions. Further, it is also not clear whether any addition have been made in the hands of Shri Pradeep Jindal, the director of the company till 27.09.2000 who was the real accommodation provider. However, in this case the AO had made the addition because the bank account was in the name of the appellant company and one of its directors operated this bank account. Therefore, I am of the view that the addition of peak credit as on 17.07.2000 of ₹ 7,41,059/- is justified on the facts in this case, instead of ₹ 2,03,25,753/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 40 Lacs, he upheld the addition to the extent of ₹ 36 Lacs holding that that as the bank account is stated in the name of the assessee company the appellant cannot claim total ignorance about the deposits in those accounts. He further rejected the contention of the assessee that the appellant cannot state that the next director was operating the amount and no one in the company was aware of this facts. However he collected the amount of ₹ 40 Lacs to ₹ 36.40 Lacs and confirmed the addition of ₹ 36 Lacs in the hands of the assessee on substantive basis. Therefore assessee is in appeal before us. 35. We have carefully considered the rival contentions and also per used the orders of the lower authorities for all the 3 years in a wholistic manner. Apparently the facts that emerge are that one Sh. Pradeep general along with other directors of the assessee company were directors in the company up to 27/09/2000. Subsequently the shares were transferred from the original shareholders of this company to the present shareholders. Consequently the directors also changed w.e.f. that date. Therefore the present directors when buying the shares of that company appar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to certain date and therefore the company is responsible only up to that date to the peak balance in the bank account and confirmed the addition and consequently deleted the balance addition. Further for assessment year 2002 03 the Ld. CIT(A) confirmed the whole addition as assessee was having the bank account and the money was deposited in its bank account. In all the three cases, the Ld. CIT(A) has deleted the addition of commission income. Neither the assessing officer conducted any inquiry with respect to who were the beneficiaries of this whole transaction, nor the appellate authorities of the income tax Department while deleting the addition even attempted to find out the true nature of the transactions and go behind the real beneficiaries. At this moment it is also necessary to see what kind of investigation the investigation wing of the income tax Department has done. The investigation Department has merely identified the bank account and searched the parties, obtained the confession of Shri Pradeep Jindal who conveniently gave a statement as an entry operator and confessed receiving the commission income. After that, nothing was done, as it is apparent before us. The inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the respective companies. In the confirmation, no accounts were provided for. These are the modus operandi of these accommodation entry providers and after carrying on business for sometime the companies were sold by transferring the shares in the name of some other persons. It is apparent that even after sale of these companies the bank account in the name of those companies were kept by the entry operators in control with them and from the same account the accommodation entries are provided. The income tax Department was always provided with complete information about these loans or share capital stating the name, address, permanent account number and confirmation of the lender on the letterhead of these companies. Income tax return copies Page | 21 were also provided to give the color of entries from recorded transaction in the books of entry provider. But the entries are never recorded in the books of accounts. Therefore most of the times these entries have gone untaxed either in the hands of the beneficiary or in the hands of the entry operators. The above modus operandi of the entry operators shows that at what level the enquiry should have been conducted by the assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount. This can be proved only by obtaining the copy of account opening form and complete details submitted to the banker. The assessee does not want to make any effort to bring that material on record. In fact assessee also does not deny that Mr. Pradeep Jindal was the director of the company. It is also not mentioned by the assessee that how assessee had entered into the commercial dealing with that gentleman by purchasing the shares of the company as well as taking over the company owned by the gentleman therefore it is apparent that assessee/directors know Mr Pradeep Jindal Further, even if the version of the assessee company is believed since 2007 to 2018 the assessee has not taken any steps against Mr. Pradeep Jindal or the bank. Such inactiveness on the part of the assessee also speaks loud. Further, regarding the issue of summons u/s 131 to Mr. Pradeep Jindal as well as his cross examination pleas also fails for the simple reason that in the present case a company is asking the cross examination one of its own director when it should have produced such director on its own before the Assessing Officer. Therefore, instead of discharging its own onus the assessee is throwing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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