Dholadhar Investments Pvt Ltd, v. ITO ward 10 (3),

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B : NEW DELHI) SHRI G.E. VEERABHADRAPPA VICE PRESIDENT AND SHRI R.P. TOLANI JUDICIAL MEMBER ITA NOS.3179 & 3180/DEL./2007 (ASSESSMENT YEARS : 1998-99 & 1999-2000) M/S. DHOLADHAR INVESTMENTS PVT. LTD. VS. ITO WA RD 10 (3) C 11 CONNAUGHT PLACE 1 ST FLOOR NEW DELHI. NEW DELHI 110 001. (PAN : AAACD3573A) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAKESH K. SEHGAL CA REVENUE BY : SHRI N.K. CHAND DR ORDER PER R.P. TOLANI JUDICIAL MEMBER : THESE APPEALS ARE FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT (APPEALS) FOR THE ASSESSMENT YEARS 1998-99 AND 1999 -2000. 2. COMMON GROUNDS ARE RAISED. GROUNDS RELATING TO VALIDITY OF REOPENING AND PROCEEDINGS U/S 147 AND 148 IN BOTH T HE YEARS ARE NOT PRESSED HENCE DISMISSED. THE REMAINING COMMON GRO UNDS ARE AS UNDER : 3. THE ADDITION (RS.4 99 325/- IN ASSESSMENT YEAR 1998-99 AND RS.14 05 331/- IN ASSESSMENT YEAR 1999-2000) ON ACCOUNT OF UNEXPLAINED ENTRIES MADE BY THE ASSESSING OFFICE R U/S 68 OF THE INCOME TAX ACT AND CONFIRMATION OF THE SAME BY THE COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO FACTS AND LAW. THEREFORE THE ADDITION IS LIABLE TO BE DELET ED. 4. THE ADDITION (RS.2 496/- IN A.Y. 1998-99 AND RS. 7 021/- ITA NOS.3179 & 3180/DEL./2007 2 IN A.Y. 1999-2000) ON ACCOUNT OF COMMISSION MADE BY THE ASSESSING OFFICER AND CONFIRMATION OF THE SAME BY T HE COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO FACTS AND LAW AND THEREFORE THE ADDITION IS LIABLE TO BE DE LETED. 3. BRIEF FACTS ARE THAT THE ASSESSEE COMPANY IS PUR PORTEDLY RECEIVING INCOME FROM BUSINESS OF SHARES IT IS NEITHER A SHA RE-BROKER NOR MEMBER OF ANY STOCK EXCHANGE. ASSESSING OFFICER RECEIVED INF ORMATION FROM INVESTIGATION WING THAT ASSESSEE WAS ONE OF THE BEN EFICIARIES OF PAYMENT OF ONE SHRI SATISH KUMAR GOEL PROPRIETOR OF R.K. AGGA RWAL & COMPANY WHO WAS GIVING BOGUS ENTRIES FOR CAPITAL GAIN CLAIMS OF LONG TERM CLAIMS ON SALE/PURCHASE OF SHARES. THE SAID SHRI SATISH KUMA R GOEL DEPOSED ON OATH THAT ENTRIES WERE GIVEN TO VARIOUS PERSONS BY RECEI VING CASH AND RETURNING SAME BY EQUIVALENT AMOUNT OF DD/CHEQUE WITH SOME CO NSIDERATION OF COMMISSION HE CONCEDED THAT THE TRANSACTIONS ARE O NLY ON PAPER WITHOUT ACTUAL SALE/PURCHASE. BASED ON THIS INFORMATION RE CEIVED BY A.O. FROM INVESTIGATION WING NOTICE U/S 148 WAS ISSUED ON TH E ASSESSEE. IT WAS REPLIED THAT ORIGINAL RETURNS FILED BY THE ASSESSEE SHOULD BE TREATED AS RETURN IN RESPONSE TO NOTICE U/S 148. AFTER HEARING THE ASSE SSEE A.O. MADE THE ADDITION IN ASSESSMENT YEAR 1998-99 BY FOLLOWING OB SERVATIONS : BUT SHRI SATISH KUMAR BEFORE DD(INV.) GURGAON ADMITTED IN HIS STATEMENT THAT THE CHEQUES ISSUED B Y HIM WERE AGAINST SALE OF SHARES AND ACTUALLY THERE WAS NO SA LE OF SHARES BECAUSE ACCORDING TO HIM ALL THE BILLS ISSUED BY H IM FOR SALE OF SHARE WERE BOGUS. THIS MEANS THAT THERE WILL BE NO ACTUAL TRANSACTION IN WHICH PARTY INTENDING TO TAKE BILL I NTO PAY IN CASH ITA NOS.3179 & 3180/DEL./2007 3 AND HE ISSUED CHEQUES/DRAFTS SHOWING AS IF THIS AMO UNT IS FROM THE SALE OF SHARES. FOR THIS IS GET A COMMISSION % TO 1/5% OF THE TOTAL TRANSACTIONS. IN CONTRAST TO THE STATEME NT THE CONTENTION OF THE ASSESSEE COMPANY HAS NO MEANING W HEN THERE ALL THE TRANSACTIONS ARE BOGUS AND HE WAS NOT A BRO KER OF ANY STOCK EXCHANGE. IN THE ABSENCE OF ACCOUNTS AS RECORDED BY THE ASSE SSEE COMPANY AND IN THE LIGHT OF THE STATEMENT GIVEN BY SATISH GOEL CA THE BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY A RE HEREBY REJECTED UNDER SECTION 145(3). SINCE THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF THESE ENTRIES AMOUNTING TO RS.499325/- TAKEN BY PAYMENT O F CASH AND PAYING @ % COMMISSION OF TRANSACTION TO SHRI SATIS H GOEL. IT UNEXPLAINED CASH CREDITS U/S 68 OF THE INCOME TA X ACT 1961 AND THE SAME IS TREATED AS INCOME OF THE A.Y. 1998- 99 WHO HAS TAKEN TO THESE ENTRIES BY PAYING % COMMISSION. HE NCE AN ADDITION IS MADE TO THE RETURN INCOME OF THE ASSESS EE AND FURTHER ADDITION OF RS.2496/- ON ACCOUNT OF COMMISS ION FOR THESE ENTRIES. 4. SIMILAR ADDITIONS WERE MADE IN ASSESSMENT YEAR 1 999-2000. 5. AGGRIEVED THE ASSESSEE PREFERRED FIRST APPEAL. CIT (A) REJECTED THE SO-CALLED BOOKS OF ACCOUNT MAINTAINED BY THE ASSESS EE APPLYING SECTION 145(3) BY FOLLOWING OBSERVATIONS :- 5.3 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE LEARNED AR OF THE APPELLANT. QUITE TRUE THE APPELLANT REFE RRED TO THE PROVISIONS OF SECTION 145 (3) WHICH LAID CERTAIN CR ITERIAS ON THE BASIS OF WHICH THE AO CAN REJECT THE BOOKS OF ACCOU NTS. AS ADMITTED BY THE APPELLANT ITSELF ONE OF THE CRITER IAS IS THE THE CORRECTNESS OF THE ACCOUNTS OF THE ASSESSEE'. IN VI EW OF THE STATEMENT GIVEN BY SH. SATISH GOEL PROP. M/S R.K. A GGARWAL & COMPANY I HOLD THAT THE APPELLANT HAS NOT CORRECTL Y FILED ITS RETURN OF INCOME AND ACCORDINGLY LIABLE FOR REJECT ION AS PER SECTION 145(3) OF THE ACT. OTHERWISE ALSO THE DISC USSIONS MADE ITA NOS.3179 & 3180/DEL./2007 4 BY THE AO IN THE BODY OF THIS ASSESSMENT ORDER IS Q UITE CLEAR AND POINTS TOWARDS THE FACT OF INCORRECT INCOME FIL ED BY THE APPELLANT. IT IS A FACT THAT M/S. R.K. AGGARWAL & COMPANY IS NOT REGISTERED WITH EITHER DELHI STOCK EXCHANGE OR UP STOCK EXCHANGE AND THIS FACT PROVES CONCLUSIVELY THAT THE STATEMENT GIVEN BY SH. SATISH GOEL ABOUT GIVING OF ACCOMMODAT ION ENTRIES FROM A/C NO.3097 OF CORPORATION BANK KAROL BAGH NEW DELHI IS TRUE AND HENCE STATEMENT OF THE THIRD PARTY I.E. OF SH. SATISH GOEL PROP. M/S R.K. AGGARWAL & COMPANY I S ADEQUATELY CORROBORATED BY THIS COHERENT EVIDENCE. IN VIEW OF THIS THE REJECTION OF BOOKS OF ACCOUNTS ARE HELD T O BE IN ORDER. THIS GROUND OF APPEAL IS ALSO TAKEN AS REJECTED. 6. APROPOS MERITS CIT (A) UPHELD THE ADDITIONS MAD E BY THE A.O. BY FOLLOWING OBSERVATIONS : 6.2 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE AR OF THE APPELLANT AND THE REASONS ON THE BASIS OF WHICH TH E AO MADE THE ADDITION. THE MATTER HAS BEEN DISCUSSED IN DETA IL IN PRE- PAGES AND IT HAS CLEARLY BEEN BROUGHT OUT THAT SH. SATISH GOEL PROP. M/S R.K. AGGARWAL & COMPANY HAD ADMITTED THE BOGUS ENTRIES RELATING TO BOGUS CAPITAL GAINS GIVEN TO VA RIOUS PARTIES THROUGH BANK ACCOUNT NO.3097 CORPORATION BANK KAR OL BAGH NEW DELHI. THE APPELLANT 'RECEIVED AN AMOUNT OF RS. 3 LAKHS AND 1 99 325/- THROUGH CHEQUE/DRAFT NO.445181 AND 4 45188 RESPECTIVELY FROM AN ENTITY/PERSON WHO WAS NOT REGI STERED WITH THE STOCK EXCHANGES AT DELHI AND UP THOUGH THE PUR CHASE BILL/SALE BILL SHOWED' M/S R.K. AGGARWAL & COMPANY AS MEMBER OF UP STOCK EXCHANGE. THE LEARNED AR REFERRE D TO THE STATEMENT OF SH. SATISH GOEL AND OPINED THAT THE ST ATEMENT OF SH. SATISH GAEL HAS TO BE TAKEN INTO CONSIDERATION IN FULL AND THE AO SHOULD NOT TAKE INTO ACCOUNT ONLY THAT PORTION O F THE STATEMENT WHICH IS BENEFICIAL TO THE DEPARTMENT. I FAIL TO UNDERSTAND THE AR'S CONTENTIONS AS TO HOW THE AO HA S REFERRED TO ONLY THAT PART OF THE STATEMENT OF SH. SATISH GO EL WHICH IS BENEFICIAL TO THE DEPARTMENT. IN THE FIRST PART AS REPRODUCED BEFORE BY THE AR IT IS CLEAR THAT THE SO CALLED BR OKER M/S R.K. AGGARWAL & COMPANY ISSUED BROKER NOTES WHICH ARE BO GUS AS M/S R.K. AGGARWAL & COMPANY NEVER DEALT IN ANY GENU INE PURCHASE AND SALE OF SHARES ON BEHALF OF THE APPELL ANT COMPANY. ITA NOS.3179 & 3180/DEL./2007 5 THE LEARNED AR ALSO FAILED TO NOTE THAT SH. SATISH GOEL SPECIFICALLY MENTIONED ABOUT THE FACT OF ISSUE OF C HEQUES AGAINST BOGUS CAPITAL GAINS THROUGH BANK ACCOUNT NO . 3097 OF CORPORATION BANK KAROL BAGH NEW DELHI AND FOR WHIC H HE USED TO RECEIVE EQUIVALENT AMOUNT IN CASH. BY REFLE CTING AN AMOUNT OF RS.6 24 198.05 THE APPELLANT HAS TRIED T O SHOW THE GENUINENESS OF THE TRANSACTIONS WHERE AS ACTUALLY THE APPELLANT NEVER INDULGED IN GENUINE SALES/PURCHASE OF SHARES AND SECURITIES THROUGH M/S. R.K.AGGARWAL AND COMPANY. I N FACT THE PAYMENT OF DIFFERENCE AMOUNT OF RS.4 99 325/- WITHO UT PAYING THE PURCHASE PRICE COUPLED WITH THE FACTS NARRATED BY SHE SATISH GOEL SHOWS THAT THE TRANSACTIONS IS NOT GENUINE AND THE APPELLANT HAS RESORTED TO ACCOMMODATION ENTRIES THR OUGH SH. SATISH GOEL PROP. M/S R.K. AGGARWAL & COMPANY. IN V IEW OF THESE CIRCUMSTANCES I HOLD THAT THE AO HAS RIGHTLY MADE THE ADDITION U/S 68 OF THE ACT AS THESE CREDITS APPEARE D WHICH ARE UNEXPLAINED CREDITS IN THE BOOKS OF ACCOUNTS. 6.3 GROUND NO.5.- THE ADDITION OF RS.2 496/- ON ACC OUNT OF COMMISSION MADE BY THE A.O. IS CONTRARY TO FACTS AN D LAW AND THEREFORE THE ADDITION IS LIABLE TO BE DELETED. 6.4 AS PER THE LEARNED AR THIS GROUND IS RELATING T O % COMMISSION AS ALLEGEDLY CLAIMED TO BE RECEIVED BY S H. SATISH KUMAR IN HIS STATEMENT RECORDED WITH THE DEPARTMENT WHICH WAS THE BASIS FOR INITIATING REASSESSMENT PROCEEDIN GS AGAINST THE APPELLANT COMPANY. THIS ADDITION IS LIABLE TO BE DELETED IN VIEW OF THE ARGUMENTS IN GROUND NO.4 AND ON ACCOUNT OF DELETION OF THE ADDITION OF RS.4 99 325/- WHICH HAS BEEN ELABORATELY ARGUED IN GROUND NO.4. THE AMOUNT OF RS .2 496/- IS A CONSEQUENT ADDITION AND THEREFORE IS LIABLE TO B E DELETED. 6.5 THE ARGUMENTS HAVE BEEN CONSIDERED. THERE IS N O DENYING THE FACT THAT SH. SATISH GOEL HAS RECEIVED THE COMMISSION FOR PROVIDING ACCOMMODATION ENTRIES TO V ARIOUS PERSONS. AS CHEQUES HAD BEEN PROVIDED/ISSUED TO VA RIOUS PARTIES IN LIEU OF THE EQUIVALENT AMOUNT OF CASH RE CEIVED FROM THESE PARTIES IT IS QUITE OBVIOUS THAT THE COMMISS ION IS ALSO PAID IN CASH - THE SOURCE OF WHICH IS NOT THE BOOKS OF A CCOUNTS. ACCORDINGLY THE AO HAS RIGHTLY MADE THE ADDITION. THIS GROUND OF APPEAL IS REJECTED. ITA NOS.3179 & 3180/DEL./2007 6 7. SIMILAR ADDITIONS ARE UPHELD IN ASSESSMENT YEAR 1999-2000. AGGRIEVED ASSESSEE IS BEFORE US IN BOTH THE YEARS. 8. LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE FACTS AND CONTENDS THAT THE ONLY EVIDENCE AGAINST THE ASSESSEE IS THE STATE MENT OF SHRI SATISH KUMAR GOEL WHICH IS TAKEN BEHIND THE BACK AND THE NAME OF THE ASSESSEE NOWHERE APPEARS IN THE STATEMENT. THE ASSESSEE HAVING RECE IVED THE PAYMENTS ON THE DIFFERENCE OF SALE AND PURCHASE PRICE OF SHARES BY CHEQUE COULD NOT BE ADDED U/S 68 AS THE IDENTITY OF THE PAYER GENUINEN ESS OF TRANSACTION BY WAY OF CONTRACT NOTES AND PAYMENT OF CHEQUE ARE ESTABLI SHED. FURTHER THE CREDITWORTHINESS OF R.K. AGGARWAL & COMPANY IS ALSO ESTABLISHED INASMUCH AS THE BANK ACCOUNT HAS NOT BEEN DENIED BY HIM. IT WAS FURTHER PLEADED THAT THE ASSESSEE IN ITS PROFIT AND LOSS AC COUNT HAS SHOWN A LOSS OF RS.3 48 440/- IN A.Y. 1998-99 AND RS.1 69 553/- IN A.Y. 1999-2000 FROM OTHER BROKERS SAME SHOULD BE ALLOWED. 8.1 APROPOS COMMISSION IT WAS CONTENDED THAT THERE IS NO EVIDENCE ON RECORD TO ESTABLISH THAT COMMISSION WAS PAID BY ASS ESSEE THEREFORE THIS ADDITION MAY ALSO BE DELETED. 9. LEARNED DR SUPPORTED THE ORDERS OF LOWER AUTHORI TIES. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON ITA NOS.3179 & 3180/DEL./2007 7 RECORD. THE FACT THAT SHRI SATISH KUMAR GOEL PROP RIETOR OF R.K. AGGARWAL & COMPANY BEING AN ENTRY OPERATOR IS UNDISPUTED. I N HIS STATEMENT DATED 14.2.2000 HE HAD UNEQUIVOCALLY ACCEPTED THAT HE IN DULGED IN PROVIDING BOGUS CONTRACT NOTES IN ACCOMMODATION ENTRIES OF SA LE/PURCHASE OF SHARES FOR A COMMISSION HE WAS NEITHER MANAGING BOOKS OF ACCOUNTS NOR THE SERVICE CHARGES ETC. CHARGED IN THE CONTRACT NOTES WERE BEING PAID TO ANY GOVERNMENT AGENCIES. THE BANK ACCOUNT WAS OPERATED AS A FACILITY FOR CARRYING ON SUCH BOGUS OPERATIONS AND ALL THE DEPOS ITS IN THE BANK ACCOUNT OF R.K. AGGARWAL & COMPANY WERE CASH AMOUNTS GIVEN BY PARTIES FOR ONWARD RETURN THEREFORE THE FACT THAT THESE CONTR ACT NOTES AND THE BUSINESS DEALINGS OF R.K. AGGARWAL & COMPANY WERE BOGUS REM AIN UNDISPUTED FACT ON RECORD. 11. APROPOS ASSESSEES CONTENTION ABOUT GENUINENESS OF CHEQUES RECEIVED BY HIM FROM SHRI SATISH KUMAR GOEL WE ARE UNABLE T O SEE ANY MERIT IN THIS ARGUMENT. LEARNED COUNSEL HAS ACCEPTED THE FACT TH AT THERE WAS NEVER ANY ACTUAL DELIVERY OF SHARES ON PURCHASE OR SALE AND T HE CHEQUE AMOUNTS REPRESENTED DIFFERENCE OF PROFIT ON ACCOUNT OF SALE AND PURCHASE OF SHARES BY THE ASSESSEE FROM HIM. IN VIEW OF THESE FACTS WE ARE UNABLE TO ACCEPT THE GENUINENESS OF CONTRACT NOTES. THEREFORE WE SEE N O INFIRMITY IN THE ORDERS OF LOWER AUTHORITIES IN MAKING ABOVE ADDITIONS. 12. AS FAR AS PAYMENT OF COMMISSION IS CONCERNED T HE STATEMENT OF SHRI ITA NOS.3179 & 3180/DEL./2007 8 SATISH KUMAR GOEL CLEARLY IMPLICATES THE ASSESSEE T HAT HE WAS TO CHARGE COMMISSION IN FACILITATING THESE BOGUS TRANSACTIONS . THEREFORE THE ESTIMATE OF COMMISSION AS MADE BY LOWER AUTHORITIES CANNOT B E FOUND FAULT WITH AS THE SAME FITS INTO THE SCHEME OF BOGUS TRANSACTIONS . AS HELD BY HON'BLE SUPREME COURT IN THE CASE OF SUMATI DAYAL VS CIT (1 995) 214 ITR 801 (SC) THE TRANSACTIONS ARE TO BE VIEWED ON THE BASI S OF SURROUNDING CIRCUMSTANCES AND HUMAN CONDUCT WHICH ARE AGAINST THE ASSESSEE. THEREFORE THE ADDITIONS ON ACCOUNT OF COMMISSION A RE ALSO UPHELD. 13. APROPOS ASSESSEES ARGUMENT THAT ASSESSEE HAS S UFFERED LOSSES ON ACCOUNT OF SHARES ALSO IS DEVOID OF ANY MERIT INASM UCH AS WHAT A.O. HAS DONE IS ADOPTING THE ASSESSEES PROCESSED INCOME U/ S 143(1)(A) AND ADDING THE CHEQUE RECEIVED ON ACCOUNT OF BOGUS TRANSACTION S. THIS CLEARLY INDICATES THAT ASSESSEES OTHER CLAIMS HAVE BEEN ACCEPTED AND WHILE DOING SO A.O. HAS BEEN MORE THAN REASONABLE TO ASSESSEE. WE SEE NO REASON TO INTERFERE IN THE ORDERS OF LOWER AUTHORITIES ON THIS ISSUE ALSO. 14. IN THE RESULT BOTH THE ASSESSEES APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 9 TH DAY OF APRIL 2010. SD/- SD/- (G.E. VEERABHADRAPPA) (R.P. TOLANI) VICE PRESIDENT JUDICIAL MEM BER DATED THE 9 TH DAY OF APRIL 2010 TS ITA NOS.3179 & 3180/DEL./2007 9 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A)-XIII NEW DELHI. 5.CIT(ITAT) NEW DELHI. AR ITAT NEW DELHI.