Ksa Chits Pvt. Ltd.,, New Delhi vs Assessee

I.T.A.No.4647/Del/2013 A.Y. : 2008-09 M/s KSA Chits Pvt. Ltd., Dy. Commissioner of Income 308, Arunachal Bldg., VS. Tax, Central Circle-22, 19, Barakhamba Road, E-2 Block, Jhandewalan, New Delhi - 110 001 New Delhi - 110 005 (PAN: AADCK0699K) (APPELLANT) (RESPONDENT)

Assessee by : Sh. Gautam Jain, CA & Piyush Kr. Kamal, Adv. Department by : Sh. Gautam Dudeja, Sr. DR.

Date of Hearing : 17-03-2015 Date of Order : 20-03-2015 ORDER

PER H.S. SIDHU : JM Assessee has filed the present appeal against the impugned order dated 20/3/2013 passed by the Ld. Commissioner of Income Tax (Appeals)-XXXIII, New Delhi on the following grounds:-

"1. That the order or the ld. CIT (A) dated 20.03.2013 is bad in law and on facts.

2(a). That on the facts and in the circumstances of the case the ld. CIT(A) is not justified in confirming the addition of Rs. 2,48,65,600/- made u/s 68 of the Income-tax Act, 1961 representing deposits in appellant's bank accounts received from various

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intermediaries operated by Sh. SK Gupta to provide accommodation entries to various beneficiaries against cash received from them.

2(b) That the appellant company being one of 32 conduit companies operated by Shri S.K. Gupta to provide bogus capital to the beneficiaries against cash received from them, the addition made by the Ld. AO and sustained by the Ld. CIT(A) is unjustified and uncalled for, as the laptop impounded during the survey u/s. 133A conducted on 20.11.2007 at the business premises of Sh. SK Gupta contained complete details of intermediaries, beneficiaries, cash received and cheque issued etc. which are presumed to be correct u/s. 292C of the I.T. Act.

2(c) That the Ld. CIT(A) has erred in law by failing to appreciate the fact that the complete list of beneficiaries found in the seized records and available with the Department were filed during the course of assessment proceedings. The Ld. CIT(A) has wrongly observed that the list of beneficiaries did not exist.

2(d). That the Id. CIT (A) has ignored the judgment of the jurisdictional High Court and the Tribunals squarely on the issue even though the same were cited and form part of the written statements reproduced by the Id, CIT(A) in the assessment order.

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2(e). That the Id. CIT (A) has erred in ignoring the settled legal principle that tile same amount cannot be taxed doubly unless the loss or profit and the nature of the same changes. In the case of the appellant the amount received by it has been taxed and the same amount has admittedly been taxed in the hands of the beneficiaries who were the actual real owners of the said sum.

2(f). That the Id, CIT (A) has erred in law and on facts in making the addition on conjectures and surmises and for reasons unwarranted in law. The Ld. CIT(A) has stated the addition should be made in the hands of the appellant company so that the beneficiaries should not be able to state that the money does not belong to them.

2(g) That the Ld. CIT(A) has erred in ignoring the fact that income can be taxed only if the Act so provides and the taxability of income cannot be determined on the basis of the subjective feeling and the attitude of the appellate authority.

3. That the Ld. CIT (A) has further erred in not accepting the findings given in the order u/s. 245D(4) dated 22.6.2012 passed by Hon'ble Settlement Commission in the case of Shri S.K. Gupta as well as directions of the Addl. CIT u/s 144A dated 23.11.2011 for A.Y.2004-05

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directing the Ld. AO not to make addition in the hands of conduit companies including appellant company.

4. That the CIT(A) has erred in issuing enhancement notice u/s. 251(2) and directing the AO to enhance income by Rs. 3,49,450/- without appreciating the appellant's reply dated 14.3.2013 filed in response to the enhancement notice.

5. That the Ld. CIT(A) has erred in not allowing relief on the following issues raised as additional ground having effect of income being taxed twice.

a) Rs. 2,41,57,800/- twice added in the hands of the appellant as well as in the hands of the various other conduit companies from whom the amounts were received through account payee cheques details which are given in the paper book.

b) Cash deposited into bank account out of the cash available with the company.

6. That the appellant craves leave to add, alter, amend, substitute, delete and modify any or all the grounds of appeal, which are without prejudice to one another, before or at the time of hearing of the appeal."

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2. The facts narrated by the Revenue authorities are not disputed by both the parties, therefore, need not to be repeated here for the sake of convenience.

3. At the time of hearing Shri Rupesh Jain, CA/ Authorised Representative stated the issue in dispute has already been decided in favor of the assessee by the ITAT, 'E' Bench, New Delhi in the case of M/s Omni Farms Pvt. Ltd. & Anr. vs. DCIT vide Order dated 28.1.2015 passed in ITA No. 3477/Del/2013 (A.Y. 2008-09) & Others. Therefore, he requested that the present appeal filed by the Assessee may be allowed in the same terms.

4. On the contrary, Shri Gaurav Dudeja, Sr. Departmental Representative relied upon the impugned order passed by the Ld. CIT(A).

5. We have heard both the parties and perused the relevant

records, especially the orders passed by the Revenue Authorities

and we are of the view that there is a force in the Statement made

by the Ld. Counsel for the Assessee regarding the similar issue in

dispute has been decided in favor of the assessee by the ITAT, 'E'

Bench, New Delhi in the case of M/s Omni Farms Pvt. Ltd. & Anr. vs.

DCIT vide Order dated 28.1.2015 passed in ITA No. 3477/Del/2013

(A.Y. 2008-09) & Others. We have also perused the assessment

order, especially the Annexure-A in which there are 27 companies

and assessee company name is at Serial No. 14 of the said

Annexure-A. For the sake of convenience, the contents of Annexure-

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A attached by the AO alongwith his assessment order, which is

reproduced as under:-

S.No. Name of Company Unexplained Prorata deposits in the Disallowance Bank (in Rs.) (on protective (C) basis)

1. AGM Holding Ltd. 627019448 95544190

2. Advantage Software 361243 117652 Pvt. Ltd.

3. Anda Industries 1501200 468162 Limited.

4. Anjali Gupta 18725676 5839757

5. Beliefs Chits Pvt. Ltd. 6709024 2092265

6. Beriwal Investments & 78873170 24597249 Chit Funds Ltd.

7. Central Gum & 241766963 75397022 Chemical Industries Ltd.

8. Champ Finvest Pvt. 68234143 21279381 Ltd.

9. Chanderprabhu 3850781 1200898 Finance & Securities Limited.

10. Cubic Commercial 43840592 13672050 Resources Limited

11. Dhamaka Trading & 27946937 8715483 Construction Pvt. Ltd.

12. Falcon Freight (P) Ltd. 4106374 1280607

13. Giriasho Company Pvt. 15623553 4872334 Ltd.

14. KSA Chits (P) Ltd. 24865600 7754543

15. Namrata Marketing 108251085 33758994 Pvt. Ltd.

16. Omini Farms Pvt. Ltd. 21118716 6586046

17. Optimum Credits 46579934 14526337 Limited

18. Passion Chits Co. Pvt. 4009850 1250505 Ltd.

19. Rapid Packaging 11491500 3583719 Limited

20. SJ Securities Pvt. Ltd. 54572124 17074902

21. Sino Credits & Leasing 902726445 281522692

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Ltd.

22. VA Foods Pvt. Ltd. 17013266 5305727

23. Vasudeva Farms Pvt. 101662000 31704134 Ltd.

24. Viagra Trading Co. Pvt. 14415117 4495473 Ltd.

25. Vijay Conductors 1623103 506178 (India) Ltd.

26. Vishrut Marketing (P) 50406893 15719806 Ltd.

27. Zenith Estates Ltd. 889097 277272 Grand Total A = 2498363834 B=779135381 · Total unexplained deposits in bank a/c of all group concerns (A) : 249,83,63,834

· Total unexplained cash deposits Already taxed in the hands of Sh. SK Gupta (B) : 77,91,35,381

· Total unexplained deposits in bank a/c of assessee (C) : 2,48,65,600

· Pro-rata disallowance (on protective Basis C x B = 77,54,543 A 5.1 After perusing the above mentioned Annexure-A, we find that the name of the assessee company is at Serial No. 14. After going through the order dated 28.1.2015 passed by the ITAT 'E' Bench in ITA No. 3477/Del/2013 (A.Y. 2008-09) M/s Omni Farms Pvt. Ltd. is at Serial No. 16; M/s Passion Chits Pvt. Ltd. vs. DCIT who filed ITA No. 3478/Del/2013 (A.Y. 2008-09) is at Serial No. 18; M/s Katson Hotel and Developers Pvt. Ltd. (formerly known as Falcon Freight Pvt. Ltd.) vs. DCIT who filed ITA No. 3480Del/2013 is at Serial No. 12; M/s Beriwal Investment & Chit Fund Pvt. Ltd. vs. DCIT who filed ITA No. 3481/Del/2013 is at Serial No. 6; M/s Champ Finvest Pvt. Ltd. vs. DCIT who filed ITA No. 3482/Del/2013 is at Serial No. 8; M/s Cubic Commercial Resources Ltd. vs. DCIT who filed ITA No.

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3483/Del/2013 is at Serial No. 10; M/s Vijay Conductors India Pvt.

Ltd. vs. DCIT who filed ITA No. 3484/Del/2013 is at Serial no. 25; M/s Vishrut Marketing Pvt. Ltd. vs. DCIT who filed ITA No. 3485/Del/2013 is at Serial No. 26 and M/s Namrata Marketing Pvt. Ltd. vs. DCIT who filed ITA No. 3621/Del/2013 is at Serial No. 15. We find that the issues involved in the aforesaid appeals are similar to that of the issue involved in the present appeal and same has been decided in favor of the assessee and the additions were deleted. For the sake of convenience, relevant paragraphs of the ITAT's order dated 28.1.2015 passed by 'E' Bench, New Delhi in the case of M/s Omni Farms Pvt. Ltd. & Anr. vs. DCIT in ITA No. 3477/Del/2013 (A.Y. 2008-09) & Others are reproduced hereunder:-

"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,

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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 10 ITA NO. 4647/Del/2013

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 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 11 ITA NO. 4647/Del/2013

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, items or heads of income, 12 ITA NO. 4647/Del/2013

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

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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 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 14 ITA NO. 4647/Del/2013

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

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Assessing Officer which is evident from Section 144A which reads as under:-

"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)

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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 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."

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6. Keeping in view of the aforesaid Tribunal's decision rendered by the ITAT 'E' Bench, New Delhi in the case of M/s Omni Farms Pvt. Ltd. & Anr. vs. DCIT vide Order dated 28.1.2015 passed in ITA No. 3477/Del/2013 (A.Y. 2008-09) & Others, we find that the issues decided by the Tribunal as aforesaid are similar to issues involved in the present case, which has been decided in favor of the assessee, therefore, respectfully following the aforesaid Tribunal's decision dated 28.1.2015, we allow the present appeal of the Assessee on the same terms and cancel the impugned order and delete the addition in dispute by accepting the Appeal filed by the Assessee.

7. In the result, the appeal of the Assessee is allowed.

Order pronounced in the Open Court on 20/03/2015.

Sd/- Sd/- [B.C. MEENA] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER

Date 20/03/2015 "SRBHATNAGAR"

Copy forwarded to: - 1. Appellant - 2. Respondent - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY By Order,

Assistant Registrar, ITAT, Delhi Benches

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