Vijaya Devi Malu vs ACIT

PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER :

This appeal is filed by the assessee against the order of Ld. Commissioner of Income Tax (Appeals)-30, New Delhi (hereinafter referred to ‘ld. CIT(A)’) dated 06.05.2022 for AY 2015-16.

Brief facts of the case are, a search and seizure action u/s 132 of the Income Tax Act, 1961 (in short ‘Act’) was conducted on 09.10.2014 at various business and residential premises of M/s Kuber Group of Companies including premise of assessee at 12 Westend Greens, Near Rajokri, New Delhi. The case of the assessee was centralized with Central Circle 31 from Central Circle 28 vide order dated 15.07.2016 u/s 127 of the Act.

Assessee filed her original return of income declaring income of Rs.35,54,490/- on 30.03.2016. The case of the assessee was selected for scrutiny under CASS. Notices u/s 143(2) was issued on 10.08.2016 and another notice u/s 143(2) of the Act was issued on 19.09.2016. Notice u/s 142(1) along with questionnaire was issued on 10.10.2016. In response AR of the assessee attended the proceedings in compliance to the above notices from time to time.

The Assessing Officer observed that during search and post-search proceedings details relating to companies giving accommodation entries of share application money, share premium, share capital and unsecured loans came to light. During the search and seizure proceedings a statement recorded u/s 132(4) of the Act on 09.10.2014, further statement was recorded on oath on 15.12.2014 from Late Sh. Mul Chand Malu in which he offered to declare undisclosed income of Rs.100cr of the Kuber Group of Companies and their Directors under specific head of share capital/share premium/capital formation out of total undisclosed income of Rs.150crores. The Assessing Officer reproduced the relevant statement in his order.

The Assessing Officer reproduced the relevant declaration made by Late Sh. Mul Chand Malu on 12.10.2014 wherein in reply to question No.64 he has offered to declare Rs.150crores in the return of income of himself, family members and group companies covered u/s 153A/153C of the Act as under:-

Another statement was recorded on oath from Late Sh. Mul Chand Malu on oath u/s 131 of the Act on 02.01.2015 wherein he reaffirmed the declaration of undisclosed income of Rs.150crores.

The Assessing Officer observed that during post-search investigation, assessee group was asked to furnish details of share application money, share premium, share capital and unsecured loans received from companies and notices providing accommodation entries and entries in the books of account of various Kuber Group of Companies. Further, summons were issued u/s 131 of the Act to various accommodation entry providers seeking the details as mentioned at para 5.1 of the assessment order. However, there were no replies nor anyone appeared on behalf of the entry providers.

The Assessing Officer observed that assessee has received unsecured loans from Hallow Securities Pvt. Ltd. (HSPL) to the extent of Rs.3.5 crores, however in the table the Assessing Officer has mentioned as under:

Further, assessee was asked to submit relevant evidence to prove the unsecured loan and to prove the identity genuineness and creditworthiness of the transaction. Further assessee was asked to provide full name, address, PAN, amount of loan/deposits taken and copy of bank statement of the creditors from which the payment was received. Further, asked why the above said amounts are not be added u/s 68 of the Act. In response assessee has not filed any reply.

During assessment proceedings, Assessing Officer issued commissions u/s 131(1d) of the Act to the Investigation Directorate, Kolkata. As per the information received from the Investigation Wing Kolkata, it was noticed that HSPL is one of the jamakharchi Companies used in providing accommodation entries by Mr. Vikas Kumar Agarwal. It was informed that Mr. Vikas Kumar Agarwal is a Director of the above Company and the return was also digitally signed by him. It was further informed that HSPL is not physically existing at its address. Further, information was submitted wherein statements of Mr. Vikas Kumar Agarwal were recorded during the previous inquiries/surveys/searches etc., in which he admitted to the fact that he is in the business of providing accommodation entries through various papers/jamakharchi Companies. The details of the statement were enclosed as Annexure B. The Assessing Officer relied on the above investigation report from the Investigation Wing of Kolkata and further, observed that the address given in the return of income of HSPL which is also used by other paper/jamakharchi Companies controlled by Mr. Vikas Kumar Agarwal. Those Companies were admitted by Mr. Vikas Kumar Agarwal to have been registered solely for the purpose of providing accommodation entries and do not have any other business.

The above informations were confronted to the assessee and asked to produce Director/key person who is involved in managing the affairs of the HSPL along with all relevant details. In compliance the assessee furnished ledger account, bank statement, ITR acknowledgment and annual financial statements of the lender. Data of the Companies downloaded from the MCA website was also furnished. The Assessing Officer observed that none of the Directors were produced for examination by the assessee during the assessment proceedings even though specific requirement for the same was communicated to the assessee. The Assessing Officer heavily relied on the comprehensive information received from Investigation Wing of Kolkata. He came to the conclusion that HSPL is one of jamakharchi Companies and accordingly, he came to the conclusion that assessee has received accommodation entries from the above said Company.

Further, the Assessing Officer observed that Kuber Group is shown to have taken share application money/capital/premium/unsecured loans from the paper/jamakharchi Companies. As per the information gathered, the addresses are normally used by the entry operators and not actual business is drawn on these addresses. The fact that the above said Company was paper Company and found only for the purposes of providing accommodation entries and no actual working was established further to strengthen the claim of the assessee. Accordingly, he observed that Promoter of Kuber Group Sh. Mul Chand Malu in repeated occasions agreed to disclose the undisclosed income of capital formation/share capital/share premium/unsecured loan in the Kuber Group of Entities. In the light of the above observations, he proceeded to treat the unsecured loans received by the assessee as unexplained credit and added the same u/s 68 of the Act.

Aggrieved with the above order, assessee preferred an appeal before CIT(A) 30 New Delhi. Assessee has raised several grounds of appeal objecting to initiation of proceedings u/s 153A/143(3) and additions made u/s 68 of the Act. Further, the assessee has raised additional grounds of appeal. The Ld. CIT(A) admitted the additional grounds of appeal raised by the assessee. The assessee also filed a written submission which is reproduced at Page 15-26 of the impugned order. Based on the additional ground and information submitted by the assessee a remand report was called from the Assessing Officer. In remand report, the Assessing Officer relied on the statement of Sh. Mul Chand Malu taken during the search proceedings and also submitted that during assessment proceedings the assessee was confronted to substantiate the entries recorded in their books and also was asked to produce the Directors/key persons who are involved in managing the affairs of the Companies to prove the genuineness of the capital received along with documentary evidences and also asked to explain why the fund credited in the books of account of Companies in the form of share capital not to be treated as unexplained credits and charged income tax. In response assessee furnished the relevant details of the HSPL and also data downloaded from MCA website. He submitted that none of the Directors produced for examination by the assessee Company during assessment proceedings even when specific requirement for the same was communicated to the assessee.

In response to remand report, it was submitted that no particular/specific observation made by the Assessing Officer in the remand report and further, the Assessing Officer has not provided cross-examination of persons, whose statements were relied upon by the Assessing Officer, were never provided to the assessee in spite of specific request. It was submitted that the Assessing Officer placed reliance solely on the unverified/unrectified/unsubstantiated statement of Sh. Mul Chand Malu, who was neither Director nor the employee in the appellant entity. It was further reiterated that the statement recorded from Mr. Vikas Kumar Agarwal were recorded much before the search of the assessee and the statements was recorded on 09.12.2013 and signed on 09.01.2014 which is much before the search conducted in the case of assessee. The statement recorded in connection with certain other matters is modus operandi etc., have no bearing on the assessment of the assessee and it was contested that the report of the DDIT (Investigation) Kolkata is not a valid document to rely upon. In this regard, several decision of the Hon’ble Supreme Court and High Courts are relied upon.

Further, it was submitted that Sh. Mul Chand Malu was expired on 10.04.2017. It was submitted that Late Sh. Mul Chand Malu whose statement was relied upon by the Assessing Officer which was recorded on 15.12.2014 and 02.01.2015, Late Sh. Mul Chand Malu was neither a Director nor an employee in the appellant entity. Further, it was submitted that during the assessment proceedings assessee has submitted all the relevant documents relating to the transactions as under:-

It was submitted that the assessee has already discharge onus on her and Assessing Officer not brought on record any material available against the assessee nor there is any incriminating material other than relying on the statement recorded during the proceedings in the case of Sh. Vikas Kumar Agarwal prior to the search.

Ld. CIT(A) issued a show cause notice to the assessee for enhancement in order to increase the income of the assessee towards payment of commission for taking accommodation entries. In response assessee submitted that it has already submitted the relevant information to prove the genuineness of the transactions.

After considering the submissions of the assessee Ld. CIT(A) reiterated the findings of the Assessing Officer and also observed that assessee has not provided any detail to verify the identity, creditworthiness and genuineness of the transactions and proceeded to sustain the additions made by the Assessing Officer and also enhancement of Rs.7,00,000/-, 2% of commission towards payment of accommodation entry to the providers.

Aggrieved with the above order assessee is in appeal before us raising following grounds of appeal:

At the time of hearing, Ld. AR submitted that, a search was conducted in the Kuber Group and in the premises of the assessee on 09.10.2014 and he brought to our notice detailed observation of the Assessing Officer and he brought to our notice Page 69 of the assessment order and submitted that the Assessing Officer has heavily relied on the statement given by Sh. Mul Chand Malu and report from Investigation Wing Kolkata against the commission received u/s 131 of the Act and further on the basis of assessee could not produce the Directors of the HSPL. He further submitted that the report received from Kolkata Wing which was recorded from Mr. Vikas Kumar Agarwal which was recorded prior to the search conducted in the case of assessee and it has no relevance to the assessee. He brought to our notice Page 32 of the paper book which is investigation report placed on record and he submitted that as per the report, out of 27 companies, 9 companies are such companies which are used for routing and providing accommodation entries to beneficiaries. The Director/key persons of the above Companies have admitted the fact on oath during the previous inquiries/surveys/searches etc., available with the database of the department. The details of the relevant companies names reproduced in the report which does not contain the name of the Company HSPL, further he brought to our notice statement of Mr. Vikas Kumar Agarwal, Devesh Upadhyaya and Praveen Kumar Agarwal and the same were also enclosed in the paper book. The details of the companies controlled by the above said entry providers were also listed and it does not contain the name of HSPL. Further, he brought to our notice the date of statements recorded was on 09.12.2013 whereas the date of search in the case of assessee is 09.10.2014. In none of the statement recorded by them contained the name of the HSPL. He brought to our notice various details submitted by the Kolkata Wing, it is placed at page 35 to 50 of the paper book, and none of the names listed by the Kolkata Wing contain the name of HSPL. Further, he brought to our notice Page 134 to 139 of the paper book various details submitted by the assessee before the Assessing Officer relating to HSPL including confirmation of the balance outstanding, bank statement, return of income. Further, he brought to our notice Company Master data which is placed at Page 145 of the paper book in which details of Directors were given. As per the details Mr. Vikas Kumar Agarwal was admitted as a Director only from 21.05.2016, Abhijeet Agarwal was admitted from 04.06.2016. He submitted that the statement recorded from these people were prior to the date of search in the case of assessee as well as the date of appointment as Director, Mr. Vikas Kumar Agarwal whose statements was relied upon. Further, he submitted that financial statement and ROI of HSPL were also submitted, as for which the identity is proved, capacity also proved, he brought to our notice the balance sheet at page 151 of the paper book wherein they have several funds at their control to lend unsecured loans. Further, he brought to our notice Coordinate Bench decision in the case of Vikas Malu ITA 1406/Del/2022 dated 21.03.2025, wherein the Hon’ble Bench has observed while making the impugned addition, Assessing Officer has relied upon the inquiries conducted by the Investigation Wing of Kolkata and did not conduct any independent inquiries of his own. A statement of Sh. Mul Chand Malu is difficult to be accepted, considering the decisions in the case of Kuber Khadyan Pvt. Ltd. ITA No.4423/Del/2018 and Kuber Khanpaan Udhyog Pvt. Ltd. ITA No.580/Del/2019. Accordingly, he submitted that ITAT deleted the addition made by the Assessing Officer, further he objected to the additions sustained by Ld. CIT(A) and also enhanced the commission at the rate of 2%.

On the other hand, Ld. DR brought to our notice detailed findings of the Assessing Officer and also brought to our notice Page 53 and 54 of the first appellate order. He heavily relied on the detailed findings of the lower authorities. Ld. DR further relied on the decision in the case of Nova Promoters & Finlease Pvt. Ltd. (2012) 342 ITR 169 Delhi.

She submitted that in the above decision the Hon’ble High Court, has given the detailed findings on the paper companies. She also relied on the decision of Hon’ble Supreme Court in the case of PCIT Vs. NRA Iron & Steel Pvt. Ltd. 412 ITR 161 SC. Further, she submitted that the reliance on the decision of Fair Finvest (Supra) by the assessee is misplaced and further with regard to not providing the cross-examination to the assessee at this stage cannot be allowed and further she submitted that the same was not raised before Assessing Officer, not mandatory that assessee should be given opportunity for cross-examination.

Considered the rival submissions and material placed on record, we observed that search was conducted in the case of Kuber Group of Companies and premises of the assessee and during the search proceedings Late Sh. Mul Chand Malu has accepted to surrender Rs.150 crores in the form of accommodation entries and share capital/share premium/unsecured loans to the extent of Rs.100crores and other assets including jewellery. It is fact on record that there was no incriminating material found during the search and Assessing Officer has heavily relied on the statement given by Sh. Mul Chand Malu. Apart from that during post-search proceedings he observed that assessee has taken unsecured loan from HSPL of Rs.3.5crores. Even though assessee has provided supporting evidences like confirmation letter, financial statement details, bank statements of HSPL during assessment proceedings, however in order to verify the genuineness of the transaction, the Assessing Officer issued commission u/s 131 of the Act to the Investigation Wing Kolkata seeking for a report of HSPL. As per the report submitted by them, they have observed that HSPL was found to be existing in the address in which other companies were existed who were found to be providing accommodation entries, these were controlled by Sh. Vikas Kumar Agarwal. Since, these companies were controlled and managed by the accommodation providers at Kolkata, they presumed that since the HSPL is also existed in the same address, the HSPL also presumed to be providing accommodation entries. They further provided statements recorded from the accommodation providers during the search conducted in their premises as per which they agreed to have provided accommodation entries through various companies controlled by them and also they have provided list of companies through which they were provided accommodation entries. It is fact on record that first of all the statement was recorded prior to search conducted in the case of assessee and nowhere in the statement of the accommodation providers mentioned the name of the HSPL and neither it contains anywhere in the list of companies provided by them as accommodation entry providers.

Further, we observed that the Assessing Officer has completed the assessment heavily relying on the statement of Late Sh. Mul Chand Malu and findings of Investigation Wing, other than that he has not carried on any independent inquiry by himself. We observed that nowhere in the report submitted by the Investigation Wing contains the details of HSPL merely because HSPL was existed in the premises wherein other companies were existed who were also providing accommodation entries. Since there was no specific finding on involvement of HSPL as accommodation providers the Assessing Officer cannot come to the conclusion that HSPL is an accommodation entry providers.

Further, it is brought to our notice that Sh. Vikas Kumar Agarwal is a Director in HSPL from 21.05.2016 that is much after the search conducted in the case of the assessee as well as the statement recorded from him. Therefore, in our considered view, the Assessing Officer has relied on same material which does not confirms that HSPL is involved in accommodation entry provider.

Further, we observed that Coordinate Bench in the case of Vikas Malu ITA 1406/Del/2022 dated 21.03.2025, after detailed verification of group cases in particular in the case of Vikas Malu held as under:-

Respectfully, following the above decision, we are inclined to delete the additions sustained by the Ld. CIT(A) and also enhancement made by the him.

In the result, appeal filed by the assessee is allowed.

Order pronounced in the open court on this day of 02 March, 2026.