Champ Finvest Pvt. Ltd., New Delhi vs Assessee

M/s Katson Hotel & Vs. Deputy Commissioner of Developers Pvt.Ltd, Income Tax (HQ), Formerly known as Falcon Central Circle- Circle-III, Freight Pvt.Ltd., New Delhi. 308, Arunachal Building, 19, Barakhamba Road, New Delhi - 110 001. PAN : AAACF9273F. (Appellant) (Respondent) 2 ITA-3477/D/2013 & 8 others

ITA No.3481/Del/2013 No.3481/Del/2013 Assessment Year : 2008- 2008-09

M/s Beriwal Investment & Vs. Deputy Commissioner of Chit Fund Pvt.Ltd., Income Tax (HQ), (HQ), 308, Arunachal Building, Central Circle- Circle-III, 19, Barakhamba Road, New Delhi. New Delhi - 110 001. PAN : AAACB4878J. (Appellant) (Respondent)

ITA No.3482/Del/2013 No.3482/Del/2013 Assessment Year : 2008- 2008-09

M/s Champ Finvest Pvt.Ltd., Vs. Deputy Commissioner Commissioner of 308, Arunachal Building, Income Tax (HQ), 19, Barakhamba Road, Central Circle- Circle-III, New Delhi - 110 001. New Delhi. PAN : AAACC5063G. (Appellant) (Respondent)

ITA No.3483/Del/2013 No.3483/Del/2013 Assessment Year : 2008- 2008-09

M/s Cubic Commercial Vs. Deputy Commissioner of Resources Ltd., Income Tax (HQ), 308, Arunachal Building, Central Circle- Circle-III, 19, Barakhamba Road, New Delhi. New Delhi - 110 001. 001. PAN : AACCC2416R. (Appellant) (Respondent)

ITA No.3484/Del/2013 No.3484/Del/2013 Assessment Year : 2008- 2008-09

M/s Vijay Conductors India Vs. Deputy Commissioner of Pvt.Ltd., Income Tax (HQ), 308, Arunachal Building, Central Circle- Circle-III, 19, Barakhamba Road, New Delhi. New Delhi - 110 001. PAN : AAACV2913J. (Appellant) (Respondent) 3 ITA-3477/D/2013 & 8 others

ITA No.3485/Del/2013 No.3485/Del/2013 Assessment Year : 2008- 2008-09

M/s Vishrut Marketing Vs. Deputy Commissioner of Pvt.Ltd., Income Tax (HQ), 308, Arunachal Building, Central Circle- Circle-III, 19, Barakhamba Road, New Delhi. New Delhi - 110 001. PAN : AABCV4875C. (Appellant) (Respondent)

ITA No.3621/Del/2013 No.3621/Del/2013 Assessment Year : 2008- 2008-09

M/s Namrata Marketing Vs. Deputy Commissioner of Pvt.Ltd., Income Tax (HQ), 308, Arunachal Building, Central Circle- Circle-III, 19, Barakhamba Road, New Delhi. New Delhi - 110 001. PAN : AAACN2450L.

(Appellant) (Respondent)

Appellants by : Shri R.S. Singhvi and Shri Satyajeet Goel, CAs. Respondent by : Shri Gunjan Prashad, CIT-DR.

ORDER

PER G.D. AGRAWAL, VP :

These appeals by different assessees are directed against the order of learned CIT(A)-XXXIII dated 20.3.2013 and 18.3.2013 for the AY 2008-09.

2. In all these appeals, various grounds have been raised. However, they are all against the confirmation of addition under Section 68 of the Income-tax Act, 1961 as under:-

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Name Addition

1. M/s Omni Farms Pvt.Ltd. `2,11,80,616/-

2. M/s Passion Chits Pvt.Ltd. `40,09,850/-

3. M/s Beriwal Investment & Chit Fund Pvt.Ltd. `7,88,73,170/-

4. M/s Champ Finvest Pvt.Ltd. `6,82,34,143/-

5. M/s Cubic Commercial Resources Ltd. `4,38,40,592/-

6. M/s Vijay Conductors India Pvt.Ltd. `16,23,103/-

7. M/s Vishrut Marketing Pvt.Ltd. `5,04,06,893/-

8. M/s Namrata Marketing Pvt.Ltd. `10,82,91,085/-

9. M/s Katson Hotel & Developers Pvt.Ltd. `41,06,374/-

3. At the time of hearing before us, it is stated by the learned counsel that one Shri S.K. Gupta was carrying on the business of providing accommodation entries. He controlled a number of proprietary concerns, companies and bank accounts at various places. A survey under Section 133A of the Income-tax Act, 1961 was conducted at the office premises of Shri S.K. Gupta and the companies/concerns controlled by him on 20th November, 2007. During the course of survey, several documents, papers, laptops containing accounts of several parties including cash book, bank books, ledger accounts and some cheque books were impounded. Shri S.K. Gupta filed application before the Settlement Commission and the Settlement Commission, vide order dated 28th December, 2010, accepted that he was carrying on the business of providing accommodation entries on which commission/brokerage was being received by him. The statement of facts as recorded in paragraph 4.1 of the order of the Settlement Commission read as under:-

"4.1 The applicant submitted that he controlled a number of proprietorship concerns, companies and bank accounts at various places. He had opened a 5 ITA-3477/D/2013 & 8 others

number of proprietorship bank accounts in benami names. Cash from customers/beneficiaries of accommodation entries used to be received and deposited in these proprietary bank accounts. From these bank accounts, cheques used to be issued to intermediate companies numbering thirty one and two individuals. From these intermediates, cheques of accommodation entries used to be issued to the beneficiaries/customers. For these accommodation entries, the applicant was paid commission/brokerage/premium by the beneficiaries out of which he would pay/part with substantial amounts to the mediators/facilitators i.e. the persons who would bring the beneficiaries/customers to him."

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 and when cash was received from the mediators, the cash was deposited in the bank accounts of intermediatories and cheques were issued to the beneficiaries of almost the same amounts. It is seen from the reasons recorded by the A.O. for issue of notice under section 148 for the A.Y. 2006-07 (the facts are same for A.Y. 2008-09 which is under consideration) that the A.O. has stated that the applicant has provided accommodation entry and charged premium varying from 4% to 8%. After discussing various facts, the A.O. 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 CIT in Rule 9 report or during the hearing has not produced any material/evidence to rebut the 6 ITA-3477/D/2013 & 8 others

presumption u/s. 292C in respect of correctness of the material impounded during the survey. It is further noted that there are overwhelming evidence in the impounded material as enclosed by the applicant in the paper book which show that the applicant is only entry provider and he had issued cheques after receiving cash from mediators and deposited the same in the bank account controlled by him. Thus, we do not agree with the CIT's contentions that there are no 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.O. that the beneficiaries disclosed Rs.106.33 crores against the cheques received by them from the applicant, further strengthen applicant's case that he was only entry provider and cash deposited in the bank accounts for issuing cheques are not his money but moneys of the beneficiaries to whom cheques were issued.

27. After examining the facts of the case, we are of the considered view that the applicant is an entry provider. Therefore, in his case, only, the amount of premium/commission received by the applicant after reducing expenses incurred will be his additional income."

5. The learned counsel for the assessee further pointed out that in the order of the Settlement Commission, there is the list of the concerns which were being controlled by Shri S.K. Gupta. At paragraph 4.6, the list of such companies is given which is reproduced for ready reference:-

4.6 There are 32 companies and two individuals which were used as conduits/routes from where the cheques used to be given to the beneficiaries. These 32 companies/two individuals were merely conduits and were used by the applicant in a bid to give legitimacy/credibility to the transaction. The names of these 32 companies and two individuals are as under:

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S.No. Name of Companies 1 AGM Holding Ltd.

2 Advantage Software Pvt Ltd 3 Anila Industries Ltd 4 Anjali Gupta 5 Belief Chits Pvt.Ltd.

6 Beriwal Investments & Chits Funds 7 Central Gum & Chemical Industries 8 Champ Finvest Pvt Ltd 9 Chander Prabhu Financial Services Ltd 10 Cubic Commercial Resources 11 Dhamaka Trading & Constructions 12 Falcon Freight (P) Ltd 13 Galaxy Mines & Stones Pvt.Ltd.

14 Giriasho Company Pvt Ltd 15 IDS Investment Pvt.Ltd.

16 KSA Chits (P) Ltd 17 Mitsu Securities Management (P) Ltd 18 Namrata Marketing Pvt Ltd 19 New Star Information System (I) Ltd 20 Omni Farms Pvt Ltd 21 Optimum Credits Ltd 22 Passion Chits Co Pvt Ltd 23 Rapid Packaging Ltd 24 SJ Securities Pvt Ltd 25 SK Gupta 26 Safe N Secure Hygiene Products Pvt Ltd 27 Shikhar Fincap Pvt Ltd 28 Sino Credits & Leasing Ltd 29 VA Foods Pvt Ltd 30 Vasudeva Farms Pvt ltd 31 Viagra Trading Co.Pvt.Ltd.

32 Vijay Conductors Pvt Ltd 33 Visrut Marketing Pvt Ltd 34 Zenith Estates Ltd.

8 ITA-3477/D/2013 & 8 others

6. He pointed out that the names of all the nine companies under appeal is in the list of 34 entities which were controlled by Shri S.K. Gupta and used as conduit/route for issue of cheque to the beneficiaries. He pointed out that all the nine companies under consideration are in such list as item Nos.6, 8, 10, 12, 18, 20, 22, 32 &

33. He stated that this order of the Settlement Commission has been accepted by the Revenue as it has not been challenged by the Revenue before the Hon'ble High Court. He referred to the order of the Assessing Officer wherein he has given effect to the order of the Settlement Commission and pointed out that after the order of the Settlement Commission, the Assessing Officer determined the income of Shri S.K. Gupta without making any addition for unexplained cash credit. He further pointed out that during the course of assessment proceedings of the intermediary companies, which included the assessee company, the Assessing Officer viz., ACIT, Central Circle-22, New Delhi sought for the direction of the Additional Commissioner of Income Tax under Section 144A of the Income-tax Act. At page 1 & 2 of the order, the Additional Commissioner gave the list of the companies controlled by Shri S.K. Gupta which included all the nine companies under consideration. The Additional Commissioner held 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. In such a scenario when it is clear that these other entities are mere conduit for converting cash to cheque, it would be appropriate to tax these transactions in the hands of beneficiaries and also in the hands of Sh. S.K. Gupta. The justification for bringing to tax the cash received (As per laptop) in the hands of Sh. S.K. gupta (Individual) would be that he has not been able to produce these persons before the department to own up this cash and as such remains 9 ITA-3477/D/2013 & 8 others

unexplained cash as held in the 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 Sh. S.K. Gupta. It is clear that cash has been received by S.K. Gupta in different years under consideration and none of the mediators/beneficiary have come forward to own this cash. As to the case laws cited by assessee, they are not directly applicable to the facts of the case and are distinguishable. None of the cases cited by assessee deal with a clear evidence impounded during the course of survey operation u/s 133A, detailing receipt f cash on a day to day basis. The receipt of cash is not a conjecture or figment of imagination on the part of Assessing Officer. In view of this, it shall be most appropriate that cash is brought to tax in the hands of Sh. S.K. 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 were made u/s 68 for credit entries appearing in bank account of assessee in AY 2008-09. The AO may decide the issue on merit after examining the material produced before him. This issue does not seem to arise from impounded documents.

13. The Assessing Officer has informed that information pertaining to beneficiaries has been passed on to the concerned Assessing Officer. He should ensure that there is no deficiency in this regard. On the basis of modus operandi and material impounded, it is clear that there is a very strong case to bring to tax the accommodation entries obtained by beneficiaries. The 10 ITA-3477/D/2013 & 8 others

information with relevant records should be communicated to the concerned AOs.

14. To tax the cash received by S.K. 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 the case of conduit entities shall confuse the stand of the department and shall jeopardize the efforts of the department to bring to tax these transactions in the hands of beneficiaries and Sh. S.K. Gupta. This shall also lead to frivolous litigation, of no significance, once we have brought these transactions to tax as its two legs, firstly, in the case of Sh. S.K. Gupta and secondly in the cases of beneficiaries.

15. In view of foregoing discussion, it would be in the best interest of 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 No.261 dated 7.12.2011."

7. Thus, the Additional CIT under Section 144A issued direction for not making of any addition in the case of conduit entities i.e. companies which were being controlled by Shri S.K. Gupta and were utilized for issuing cheques to the beneficiaries after depositing the cash received from the beneficiaries. He stated that the direction of Additional CIT under Section 144A is binding upon the Assessing Officer. He also referred to the assessment order passed in the case of one of the beneficiaries i.e. M/s Beriwal Investments & Chit Funds Ltd. and pointed out that the Assessing Officer as per the direction of the Additional CIT did not make any addition under Section 68. He 11 ITA-3477/D/2013 & 8 others

submitted that the order of the Additional CIT under Section 144A is dated 23rd December, 2011 while the assessment under consideration has been completed on 27th December, 2010 which was before the direction of the Additional CIT under Section 144A. Even the order of the Settlement Commission was passed on 28th December, 2010. Thus, the Assessing Officer, while passing the assessment order for the year under consideration, did not have the benefit of either the order of the Settlement Commission or the order of the Additional CIT passed under Section 144A. He, therefore, submitted that when the Revenue has accepted the order of the Settlement Commission as well as the order of the Additional CIT under Section 144A that Shri S.K. Gupta was only entry provider, who, after the receipt of cash from the beneficiaries, deposited the cash in various group entities and issued the cheque, there is no justification for treating the cash deposit in the bank account of the intermediary companies as unexplained cash credit under Section 68.

8. The learned counsel further submitted that the CIT(A) did not accept the assessee's contention on the ground that all the facts may not be available with the Settlement Commission. The relevant finding of learned CIT(A) in this regard, which is similar in all the cases before us, at page 24 of his order in the case of Omni Farms Pvt.Ltd. reads as under:-

"Second main argument of Ld. AR in support of proving itself as conduit, the ld. AR is relying on the order of the settlement commission. I have perused the order of Hon'ble settlement commission. The hon'ble settlement commission has quantified the income of Sh. S.K. Gupta as some percentage of total turnovers. Of course, in its order, hon'ble commission has mentioned that various companies including appellant company is used as conduit for routing the entries. However, 12 ITA-3477/D/2013 & 8 others

before settlement commission, entire facts that the appellant company is maintaining its books of account on the basis of such entries might not be available. Hon'ble settlement commission has not given any comments for credit in the books of accounts of the appellant company which is not changed after admission that it as a conduit company. Therefore, in no way, the order of settlement commission support the in applicability of section 68 in appellant's case, as the order of hon'ble settlement commission has only quantified same commission income in the hands of Sh. S.K. Gupta."

9. The learned counsel pointed out that before the Settlement Commission, all the facts were placed. The Settlement Commission has recorded all the facts and also given the list of companies which were used by Shri S.K. Gupta as conduits. The Settlement Commission has also discussed the modus-operandi how Shri S.K. Gupta was providing accommodation entries by utilizing the conduit companies. He further submitted that the order of the Settlement Commission is binding upon the Revenue authorities. In support of this contention, he relied upon the decision of Hon'ble Jurisdictional High Court in the case of Omaxe Ltd. & Anr. Vs. DCIT & Anr. - [2014] 105 DTR 1 (Del). He, therefore, submitted that the addition under Section 68 made by the Assessing Officer and sustained by the learned CIT(A) in the case of all the companies may be deleted.

10. Learned DR, on the other hand, relied upon the orders of authorities below and stated that all the arguments of the learned counsel for the assessee have already been considered by the learned CIT(A). He has also considered the decision of the Settlement Commission which is in the case of Shri S.K. Gupta and not in the case of the assessee. He, therefore, submitted that the order of the learned CIT(A) in all these appeals should be sustained.

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11. We have carefully considered the arguments of both the sides and perused relevant material placed before us. The facts in the case of all the companies are similar. Therefore, they are being taken up together for adjudication. For the sake of brevity, we shall discuss the facts in the case of M/s Omni Farms Pvt.Ltd. instead of all the nine companies.

12. In the case 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 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 assessee company is one of the group concerns of S K Gupta Group. During the course of survey proceedings and assessment proceedings, Sh SK Gupta admitted that he had been providing accommodation entries to various persons through a large no. of concerns effectively controlled by him. Further, it was seen that Sh. S.K. Gupta operates a number of accounts in the same bank/branch or in different branches in the names of companies/firms/proprietary concerns and individuals. For the operation of these bank accounts, persons who are filing income tax returns are roped in. Like any other business it does require man power according to the scale of 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.K. 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 office premises without sufficient infrastructure or employees to carry out meaningful business activity in so many companies.

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Further, from the perusal of ledger accounts maintained in one of the laptops impounded during survey, it is noticed that a large amount of cash is deposited and cheques are issued on the same day/within few days to various parties from the accounts of the company controlled by him. As per enquiries carried out by the Investigation wing the assessee was found to have been using the bank accounts opened in different 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 Commission also has recorded the similar finding that Shri S.K. Gupta was providing entries to various beneficiaries by using various firms/companies. Admittedly, the companies under appeal before us are the part of companies which were utilized by Shri S.K. Gupta for providing accommodation entries. In paragraph 26, the Settlement Commission has recorded the finding "It is further observed that the paper books give complete details as to how and when cash was received from the mediators, the cash was deposited in the bank accounts of intermediatories 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 there are overwhelming evidence in the impounded material as enclosed by the applicant in the paper book which show that the applicant is only entry 15 ITA-3477/D/2013 & 8 others

provider and he had issued cheques after receiving cash from mediators and deposited the same in the bank account controlled by him". Thereafter, the Settlement Commission noted "Further, the report of the A.O. that the beneficiaries disclosed Rs.106.33 crores against the cheques received by them from the applicant, further strengthen applicant's case that he was only entry provider and 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 Shri 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 beneficiaries who wanted to avail the accommodation entries and after depositing the same in the bank account of various companies, he issued the cheques to the beneficiaries. In view of this finding, the cash deposited in the bank account of various companies which were the conduit companies cannot be said to be unexplained cash credit because the source of cash is from the beneficiary who wanted to avail the accommodation entry and to whom cheques for accommodation entries were issued almost of the similar 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 "matters"

necessarily could comprehend disputed questions, 16 ITA-3477/D/2013 & 8 others

items or heads of income, disallowance, etc. or variants of it, but always with reference to a particular assessment year. In this case, the Settlement Commission was seized of asst. yr. 2006-07. Whilst exercising its authority over the application, the Commission concededly exercised the vast plenitude of its power or jurisdiction. The petitioner had made a disclosure in its application - as it was duty-bound to. What is in controversy 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 17th 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 result in chaos. After all non-disclosure or suppression of information in respect of what is required to be revealed to the concerned authorities is akin to fraud and if it has a material bearing on the outcome of the assessment, it would most certainly be misrepresentation."

15. Thus, Hon'ble Jurisdictional High Court has held that the order of the Settlement Commission is final and conclusive as to the matter stated therein for the assessment year decided by the Settlement Commission. 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 CIT(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 order of the Settlement Commission shows that all the relevant material including the seized material were duly considered by the Settlement Commission. Moreover, Hon'ble Jurisdictional High Court has held that even if some material has been 17 ITA-3477/D/2013 & 8 others

suppressed from the Settlement Commission, the only course available to the Revenue is to approach the Settlement Commission for declaring its order as nullity. In the case under appeal before us, the order of the Settlement Commission is of 2010. It 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 Assessing Officer had asked for the specific direction of the Additional CIT in respect of the group companies which has been mentioned by the Additional CIT in paragraph 2 of his order under Section 144A. After considering all the facts, the Additional Commissioner held "it would be in the best interest of revenue to tax these transactions in the hands of beneficiaries and also Sh. S.K. Gupta, individual without making any additions on this account in the hands of conduit entities". 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 order of the Additional CIT under Section 144A is binding on the Assessing Officer which is evident from Section 144A which reads as under:-

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"144A. A Joint Commissioner may, on his own motion or on a reference being made to him by the Assessing Officer or on the application of an assessee, call for and examine the record of any proceeding in which an assessment is pending and, if he considers that, having regard to the nature of the case or the amount involved or for any other reason, 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 assessment should be made, shall be deemed to be a direction prejudicial to the assessee."

(emphasis by underlining supplied by us)

17. Thus, there is an order of the Settlement Commission as well as the Additional Commissioner of Income Tax under Section 144A holding that Shri S.K. Gupta was providing accommodation entries, he used various companies as conduit for providing the accommodation entries, cash was received through mediators from the persons who wanted to avail the accommodation entries, such cash was deposited in the bank account of the conduit companies and thereafter, cheque of the similar amount was being issued to the beneficiaries (i.e. the person who wanted to avail the accommodation entry) within a day or so. The Assessing Officer himself in the assessment order has accepted these facts. Considering the totality of these facts and the logical consequences of the order of the Settlement Commission as well as of Additional CIT under Section 144A, we have no hesitation to 19 ITA-3477/D/2013 & 8 others

hold that the addition under Section 68 cannot be made in the case of the conduit companies. Therefore, we delete the addition made under Section 68 in the case of all the nine companies, which are admittedly conduit companies of Shri S.K. Gupta.

18. In the result, all the appeals of the assessees are allowed.

Decision pronounced in the open Court on 28th January, 2015.

Sd/- Sd/- (CHANDRA MOHAN GARG) GARG) (G.D. AGRAWAL AGRAWAL) WAL) JUDICIAL MEMBER VICE PRESIDENT

Dated : 28.01.2015 VK.

Copy forwarded to: -

1. Appellant : M/s Omni Farms Pvt.Ltd. & 8 others, 308, Arunachal Building, 19, Barakhamba Road, New Delhi - 110 001.

2. Respondent : Deputy Commissioner of Income Income Tax (HQ), Central Circle-

Circle-III, New Delhi.

3. CIT

4. CIT(A)

5. DR, ITAT

Assistant Registrar