Income Tax Appellate Tribunal - Delhi
Quartz Commercial Pvt. Ltd., Delhi vs Ito, New Delhi on 31 July, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'SMC' NEW DELHI
BEFORE SHRI R.K.PANDA, ACCOUNTANT MEMBER
ITA No. 381/Del/2017
ASSESSMENT YEAR: 2007-08
Quartz Commercial P.Ltd. vs ITO, Ward 20(3)
Flat No.10, C-1/2 C.R.bldg.
Model Town IP Estate
Delhi 110 009 New Delhi 110 002
PAN: AAACQ 0081 E
(Appellant) (Respondent)
Appellant by Sh. Praveen Kumar, Manager.
Respondent by Ms. Bedobani, Sr.DR
Date of Hearing 08.05.2017
Date of Pronouncement 31.07.2017
ORDER
This appeal filed by the assessee is directed against the order dated 07.11.2016 of the ld.CIT(A)-16, New Delhi relating to Assessment Year (A.Y.) 2007-08.
2. Although, a number of grounds have been raised by the assessee in the grounds of appeal, they all relate to the order of the ld.CIT(A) in confirming the addition of Rs.7,85,000/- made by the Assessing Officer (A.O.) on account of commission for arranging bogus share capital.
3. This is the second round of litigation. Facts of the case, in brief, are that the assessee is a company. In this case Assessing Officer noted that assessee ITA no. 381/Del/2017 A.Y. 2007-08 Quartz Commercial P.Ltd.
has routed the share application money of Rs.15,70,00,000/- within assessee's group companies on the same day. Assessee had shown to have received share application money along with share premium of Rs.190 on each share totalling to Rs.4,00,00,000/- from M/s Platinum Agencies Pvt. Ltd., Rs.4,00,00,000/- from M/s Radium Consultancy Services (P) Ltd. and Rs.4,00,00,000/- from M/s Laurels Properties (P) Ltd. on 28.3.2007 and the same was shown as invested as share application money in M/s Radium Consultancy Services (P) Ltd; M/s Platinum Agencies (P) Ltd. and M/s Laurels Properties (P) Ltd. on the same day and the same amount. A.O. further observed that assessee has shown share application money received from M/s Laurel P. Ltd. amounting to Rs.3,70,00,000/- and again the same was shown as invested in M/s Radium Consultancy P.Ltd. on 21.3.2007 i.e. on the same day and the same amount. The assessee has shown to have received share application money from group company and same day same amount was again invested in assessee's group company in the shape of share application money. Furthermore, Assessing Officer observed that assessee has also shown sale of shares of Rs. 4,00,000/-, but the same was not reflected in the bank . The Assessing Officer observed that assessee company was part of a group of nearly 150 entities comprising of various private limited companies and proprietorship concerns. A.O. observed that the entries of Rs.15,70,00,000/- were rotated in the shape of share application money. He further observed that assessee company was running 2 ITA no. 381/Del/2017 A.Y. 2007-08 Quartz Commercial P.Ltd.
from a common address in Darya Ganj from where many other companies are also being run. He further observed that the address is being used just as a post office to receive the correspondence. A.O. observed that the assessee company was an entry operator which was providing accommodation entries on commission basis. He further observed that in such business assessee, received commission in cash which was not reflected in the books of accounts. He opined that assessee company must have charged commission of 0.5% on the total turnover during the year. Therefore, A.O. held that Rs.7,87,000/- was to be added to the assessee's income.
4. In appeal the Ld. CIT(A) upheld the disallowance made by the A.O. On further appeal by the assessee the Tribunal restored the matter to the file of the A.O. with a direction to examine assessee's books of accounts and give a finding thereof by observing as under.
"7. We have heard the rival contentions and perused the records. We find that the Ld. Counsel for the assessee submitted that assessee has maintained proper books of accounts, no discrepancy has been found by the Assessing Officer and no addition has been made except for this addition. Ld. Counsel of the assessee further submitted that there is no provision for notional income in the Income Tax Act. He further submitted that there was no evidence of assessee being involved in any accommodation entry business. Hence, ld. Counsel of the assessee has argued that the addition should be deleted. 7.1 On the other hand, Ld. Departmental Representative submitted that there is no evidence that books of accounts were accepted by the 3 ITA no. 381/Del/2017 A.Y. 2007-08 Quartz Commercial P.Ltd.
Assessing Officer. He submitted that the shares have been transacted of the face value of Rs.10/- at Rs. 190/-. He pleaded that the order of the authorities below in this case needs to be accepted. 7.2 We have carefully considered the submissions and perused the records. We find that in this case a show cause notice was given to the assessee. We find that the Assessing Officer has asked the assessee to furnish the reply with supporting documentary evidence and also complete books of accounts along with complete bills, .vouchers and also bank statements in, support of the assessee's claim. However, thereafter in the assessment order there is no mention about the aforesaid requisition made by the Assessing Officer . Under the circumstances we find that it remains to be verified' whether the assessee has maintained proper books of accounts or not. Hence, the submissions of the assessee that the additions were not warranted as the assessee has maintained proper books of accounts, needs to be verified. In our considered opinion, the interest of justice will be served, if the matter is remitted to the file of the Assessing Officer. The Assessing Officer is directed to examine the assessee's books of accounts and give a finding thereon.
8. In the result, the appeal filed by the assessee stands allowed for statistical purposes."
5. Subsequently the A.O. asked the assessee to produce books of accounts which were produced and duly examined by the A.O. The A.O. noted that the assessee did not have any operational income and expenses debited as ROC fee, audit fee etc. which were claimed as loss. The bank accounts maintained with Karnataka Bank Ltd revealed that after 1.4.2006 there were 4 ITA no. 381/Del/2017 A.Y. 2007-08 Quartz Commercial P.Ltd.
entries in respect of share application money on 21.3.2007 which was immediately transferred to another company as share application money. He observed that there is increase in share capital of Rs.39,25,000/- besides share premium of Rs.15,30,75,000/- (being Rs.390 per share). Treating this as a sham transaction as discussed in the original assessment order the A.O. observed that the assessee is engaged in providing accommodation entries to various group companies. He was of the opinion that the assessee is charging commission for arranging such bogus share transactions and commission is charged between 0.5% to 2%. To be most conservative 0.5% of the total entries operated by the assessee was taken by the A.O. as income for the year. Accordingly, the A.O. made an addition of Rs.7,85,000/-. A.O. as
6. In appeal the Ld. CIT(A) confirmed the addition made by the A.O. by observing as under :
"I have considered all facts and circumstances of the case. As has been mentioned by the A.O. in his order dt. 13.2.2014, it is a fact that the Hon'ble ITAT had set aside the case to the file of A.O. to examine the books of accounts maintained by the appellant. I am to give a finding thereon. In his order u/s 143(3)/254 dated 13.2.2014 the A.O. has mentioned categorically that books were produced and were examined. It is further mentioned by the A.O. that the perusal of the bank account which is also part of the books of accounts maintained by the appellant. It is noted that the receipt and transfer of share application money on the same date i.e. 21.3.2007. The A.O. stated that there increase in share 5 ITA no. 381/Del/2017 A.Y. 2007-08 Quartz Commercial P.Ltd.
capital of Rs.39,25,000/- and share premium of Rs.15,30,25,000/-. All these information was gathered by the A.O. from the examination of books of accounts of the appellant which included bank accounts. Thereafter the A.O. has brought to tax only 0.5% of the commission which comes to Rs.7,85,000/-. To my mind, the A.O. has given his findings on the basis of examination of books of accounts and to that extent the appellant should not have any grievance. The action of the A.O. is confirmed.
7. Aggrieved with such order of the Ld. CIT(A) the assessee is in appeal before us.
8. The learned counsel for the assessee referring to the copies of the assessment order in case of M/s Laurels Properties (P) Ltd. and M/s Radium Consultancy Services (P) Ltd. which are passed u/s 143(3) submitted that huge share premium was also accepted in those cases.
8.1. Referring to the decision of Hon'ble Calcutta High Court in the case of CIT vs. M/s Dataware Pvt.Ltd. judgement dated 21st September, 2011, he submitted that the Hon'ble High Court in the said the decision has upheld the order of the Tribunal wherein the Tribunal has allowed the appeal of the assessee by deleting the addition made by the A.O. under section 68 of the Act on account of unexplained cash credit being bogus share capital. He accordingly submitted that the addition sustained by the Ld. CIT(A) should be deleted.
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ITA no. 381/Del/2017 A.Y. 2007-08 Quartz Commercial P.Ltd.
9. The Ld.DR on the other hand heavily relied on the order of the Ld. CIT(A). He submitted that the assessee is an accommodation entry provider. The assessee does not have any business and it has received share application with the huge premium and invested the same again in share application money. This is nothing but the work of an entry provider. Therefore, the Ld. CIT(A) was fully justified in sustaining the addition made by the A.O.
10. I have considered rival arguments made by both the sides, perused the orders of the Ld. CIT(A) and the A.O. and the paper book filed on behalf of the assessee. I have also considered the various decisions cited before me. As mentioned earlier the assessee has not carried on any business activities during the year and has received share application money with a huge premium which has been invested again on the same date as share application money in various companies. This otherwise indicates that the assessee is doing only the business of entry operations. Therefore, the Ld. CIT(A) in my opinion is fully justified in bringing to tax the commission which is prevalent in this type of business. The decision of Hon'ble Supreme Court in the case of Sumati Dayal vs. CIT reported in 214 ITR 801 and CIT vs. Durga Prasad More reported in 82 ITR 540 fully supports the case of the Revenue. In this view of the matter and in view of the detailed discussion by the CIT(A) on this issue, I do not find any infirmity in the order of the Ld. CIT(A) sustaining the addition of Rs.7,85,000/- made by 7 ITA no. 381/Del/2017 A.Y. 2007-08 Quartz Commercial P.Ltd.
the A.O. Accordingly, I uphold the same. The grounds raised by the assessee are accordingly dismissed.
11. In the result the appeal filed by the assessee is dismissed.
Pronounced in the open court on 31.07.2017.
Sd/-
(RK PANDA) ACCOUNTANT MEMBER * Manga/Sujeet Manga/Sujeet Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT //True Copy// ASSISTANT REGISTRAR ITAT, NEW DELHI 8