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Judgment
PER MANISH AGARWAL, A.M.:
The present appeal is filed by assessee against the order dated 12.09.2019 passed by Ld. Commissioner of Income Tax (A)-2, New Delhi [“Ld. CIT(A)”] in Appeal No. 10262/18-19 u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 19.12.2018 passed u/s 147 r.w.s. 143(3) of the Act pertaining to Assessment Year 2011-12.
Brief facts of the case are that assessee is a company engaged in the business of real estate development and filed its return of income on 30.09.2011 declaring total business loss of INR 75,080/-. The AO observed that that assessee company had received funds from Shri Sharad Darak and M/s Jayant Securities & Finance Ltd. which were identified as the accommodation entry provider and therefore, proceedings u/s 147 were initiated by recording the reasons in the case of the assessee and notice u/s 148 was issued to the assessee. It is observed by the AO that the assessee has received loans from various entities totaling to INR 6,95,50,000/- for which the assessee has failed to establish the creditworthiness more particularly, the notices issued u/s 133(6) of the Act remained unanswered therefore, the AO was of the opinion that the said amounts are unexplained credit and made the addition u/s 68 of the Act.
Against the said order, assessee filed an appeal before ld. CIT(A) who vide order dated 12.09.2019, partly allowed the appeal of the assessee wherein the assessee has challenged the validity of the re-opening of the assessment as well as the merits of the additions.
Aggrieved by the order of ld. CIT(A), assessee is in appeal before the Tribunal by taking various grounds of appeal mentioned in the appeal memo.
Ground of appeal Nos. 1 & 2 raised by the assessee are general in nature hence, not adjudicated.
Grund of appeal Nos. 4 & 5 of the assessee are with respect to the re-opening of the assessment.
Before us, ld.AR for the assessee submits that re-assessment proceedings have been initiated, based on the report of the Investigation Wing without independent application of mind and thus the satisfaction recorded of escapement of income is borrowed satisfaction. He, therefore, prayed that the proceedings initiate u/s 147 of the Act should be held as invalid and the consequent reassessment order passed be quashed. In this regard reliance is placed on the following judicial pronouncements:-
➤ Filco Trade Centre (P.) Ltd. v. Deputy Commissioner of Income-tax, October 29, 2024, [2024] 169 taxmann.com 401 (Gujarat);
➤ Reena Jain v. Income-tax Officer [Assessment Year 2015-16] JANUARY 9, 2024, [2024] 159 taxmann.com 1489 (Kolkata -Trib.);
➤ Principal Commissioner of Income-tax vs. G&G Pharma Ltd. [2017] 81 taxmann.com 109 (Delhi);
➤ Principal Commissioner of Income-tax-6 vs. Meenakshi Overseas (P.) Ltd [2017] 82 taxmann.com 300 (Delhi HC);
➤ Principal Commissioner of Income-tax vs. RMG Polyvinyl (I) Ltd.
[2017]83 taxmann.com 348 (Delhi HC);
➤ M/s V.S. Capital Services Pvt Ltd. vs. ITO, Ward 17(1), ITA No. 6162/Del/2012 (Delhi Trib.)
➤ G.K. Consultants Limited, vs Income Tax Officer, ITA No. 1502/Del/2013 (Delhi Trib.)
➤ Nu Power Renewables Pvt. Ltd. V/s DCT [2018] 94 taxmann.com 29 (Bombay HC)
➤ PCIT V/s Shodiman Investments Pvt. Ltd. [2018] 93 taxmann.com 153 (Bombay HC)
➤ Shri Chunnilal Prajapati v. Income-tax Officer-II, ITA Nos.290 TO 293/LUC/2010 (Lucknow Trib.)
➤ M/s Surbhi Minchem Pvt. Ltd. Vs. The Income Tax Officer, I.T.A. Nos. 102 & 103/JODH/2014, (Jhodpur Trib.)
On the other hand, ld. Sr. DR for the Revenue vehemently supported the orders of the lower authorities and submits that the information was available with the AO that assessee has received accommodation entries and therefore, has rightly invoked the provisions of section 147 of the Act and requested for the confirmation of the same.
Heard the contentions of both parties at length and perused the material available on record. It is observed that AO has received information from the investigation Wing as per which the assessee has received accommodation entries from the shell / bogus companies and therefore, has recorded the reason to believe of escapement of income. Once the information is received which constitutes material and separate satisfaction of escapement of income was recorded after due analysis of the information so received with the financials of the assessee, it cannot be said that re-opening of assessment is bad in law. Ld. CIT(A) has discussed this issue and had decided the same against the assessee by making following observations:-
6.11“In this case, there was concrete information investigation wing about the appellant being a beneficiary of accommodation entries in the form of loan from shell company through Ms. Ritu Porwal. The shell company- Jayant Security and Finance Ltd is controlled by Sarad Darak an accommodation entry provider. Reopening was done after verification of information and application of mind by the AO. The AO has addressed this issue properly and explained that a specific information and material was received from Investigation wing which was verified by preliminary enquiry by the AO. After recording satisfaction, the proceedings u/s 147 was initiated. It cannot be said that re-opening was based on borrowed satisfaction.
6.12It may be noted that the information received from Investigation wing about accommodation entry received by the appellant from shell companies, is a tangible material for formation of belief that income has escaped assessment. The accommodation entry business needs no introduction and the same has been unearthed due to concerted efforts of Investigation wing, SEBI and BSE. The Investigation wing analysed the information in post-search stage and forwarded the information to the AO. The AO has further verified it from the records. After recording reasons he has started the proceedings.
6.13This has been justified by several decisions of the Supreme Court:-
Phool Chand Bajrang Lal Vs. ITO [1993] 203 ITR 456(SC)-"...the assessee had not disclosed the material facts truly and fully and therefore income chargeable to tax had escaped assessment. He, therefore, correctly invoked the provisions of Sections 147(a) and 148 of the Act."
ITO vs Lakhmani Mewal Das 1976 AIR 1753(SC)-"Once there exist reasonable grounds for the Income-tax Officer to form the above belief, that would be sufficient to clothe him with jurisdiction to issue notice. Whether the grounds are adequate or not is not a matter for the court to investigate. The sufficiency of grounds which induce the Income-tax Officer to act is, therefore, not a justiciable issue."
Raymond woollen Mills Ltd vs ITO and ors 236 ITR 34 (SC): "we have only to see whether there was prima facie some material on the basis of which the Department could reopen the case."
6.14The decisions of Supreme Court clearly held that there should be prima-facie material for re-opening the assessment and that sufficiency of the material is not an issue to be considered or challenged at this stage. In view of these facts and judicial pronouncements, the grounds are ruled against the appellant.”
Before us, ld.AR has reiterated the same arguments as were made before the AO thus, we find no error in the order of ld. CIT(A) in confirming the action u/s 147 of the Act which is hereby, upheld. Accordingly, Ground of appeal Nos. 4 & 5 raised by the assessee are hereby dismissed.
Ground of appeal Nos. 3 & 6 to 10 raised by the assessee are with respect to the confirmation of addition of INR 6,95,50,000/- made u/s 68 of the Act.
Brief facts giving rise to these grounds of appeal are that the assessee has received loans of INR 6,95,50,000/- from 05 individuals out of which a sum of INR 1.43 crores was received from Smt. Ritu Porwal. The AO alleged that these creditors who had provided the loans to the assessee have received the funds from the shell company namely Jayant Securities & Finance Ltd., controlled and managed by Shri Sharad Darak, an entry provider. The AO further observed that the notice issued u/s 133(6) of the Act issued to the lenders remained unanswered. The assessee though had filed confirmations, ITRs of the lenders however, they are not commensurate with the loans given therefore, their creditworthiness was not proved and thus the AO held the said credits as unexplained u/s 68 of the Act and made the addition.
Before us, ld.AR for the assessee submits that the assessee has filed confirmations, ITRs and statements of affairs of all the lenders and thus, their identity has been proved. Further, the assessee has filed copy of the Financial statements their bank statements and loans were repaid thus the genuineness of transactions has established. With respect to the creditworthiness, the assessee has provided their statements of affairs and since no cash was deposited in their bank accounts and sufficient funds were available when the funds were transferred to the assessee, their creditworthiness has been proved. Ld. AR submits that source of source is not required to be established as it has come to the statutes by Finance Act, 2022 w.e.f. 2023-24 and onwards and therefore, requested for the deletion of the addition so made/upheld.
Reliance is placed on the following judgements:-
Commissioner of Income tax vs. Gajanan Champalal Bajaj (HUF), [2007] 164 Тахтап 532 (Bombay)/ [2008] 304 ITR 163 (Bombay) [13-04-2007];
Commissioner of Income tax vs. Sobhrajmal, [2014] 51 taxmann.com 506 (Rajasthan)/[2015] 228 Taxman 308 (Rajasthan) [17-09-2014]; and
Principal Commissioner of Income-tax, Central vs. Onehub (Chennai) (P.) Ltd., [2024] 169 taxmann.com 475 (Delhi)/[2025] 302 Taxman 497 (Delhi)[12-12-2024. Such citation is marked as Annexure M on pg. no. 194 to 197.
Principal Commissioner of Income-tax vs. Rachna Finlease (P.) Ltd. [2024] 158 taxmann.com 430 (Gujarat)[04-12-2023]
Principal Commissioner of Income Tax vs. Surya Agrotech Infrastructure Ltd, such citation is marked as Annexure O on pg no. 205 to 210.
Ld.AR further submits that in the case of loans taken from Smt. Ritu Porwal, she had opted for Vivad Se Vishwas Scheme (VSVS) and paid the taxes on the funds related to the said loans and therefore it is double addition and therefore, requested to delete the same.
On the other hand, ld. Sr. DR for the Revenue Ld.AR placed vehemently supported the orders of t lower authorities and requested for the confirmations of the same.
Heard the contentions of both the parties and perused the material available on record. At the outset, it is observed that the assessee has filed all the plausible evidences to prove the identity and genuineness of the transactions and tries to establish the creditworthiness of all the lender. It appears that these details had not been examined properly and solely for the reason that loan creditors had not responded in response to the notices issued u/s 133(6), additions have been made.
Considering the entirety of the facts and circumstances of the case, we set aside the issue to the file of AO to examine the evidence filed by the assessee to establish the creditworthiness of the lenders and decide the same in accordance with law.
With respect to the loan taken of INR 1,43,00,000/- from Smt. Ritu Porwal, claim of the assessee was that she had opted for VSVS Scheme and declared the said loan under the VSVS scheme. The AO is thus, directed to examine the contention of the assessee and if it is found that the lender has already declared the said sum and paid the tax thereon, no separate addition is required to be made. With these directions, Grounds of appeal Nos. 3, 6 to 10 raised by the assessee are allowed for statistical purposes.
In the result, appeal of the assessee is partly allowed.