Income Tax Appellate Tribunal - Delhi
Centenary Software Pvt. Ltd., New Delhi vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "SMC" NEW DELHI
BEFORE SHRI R.P. TOLANI : JUDICIAL MEMBER
ITA Nos. 3034, 3035, 3036 & 3037/Del/2012
A.Yrs: 2001-02, 2002-03, 2003-04 & 2004-05
M/s Centenary Software Pvt. Ltd. Vs. ACIT Central Circle-9,
H-108, IInd Floor, New Asiatic Building, New Delhi.
Connaught Place, New Delhi-110001.
PAN: AACCC 0793 M
( Appellant ) ( Respondent )
Appellant by : Shri K. Sampath Adv.
Respondent by : Shri Sukhveer Choudhary Sr. DR
ORDER
This is a group of four appeals, filed by the assessee against separate orders of CIT(A) relating to A.Y. 2001-02, 2002-03, 2003-04 & 2004-05. All the appeals are heard together and disposed of by a consolidated order for the sake of convenience.
2. Admittedly, these appeals were filed on 15-6-2012 as against last date of filing the appeal being 10-5-2012. Assessee has filed application for condonation of delay contending that father of concerned director Shri S.K. Gupta was critically ill and expired on 22-4-2012. In these circumstances, the assessee was prevented by sufficient cause from filing the appeals.
3. Ld. DR is heard.
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4. I have heard rival contentions. In my considered opinion, in the above facts and circumstances the assessee's plea for delay in filing the appeals deserves to be accepted. Accordingly, the delay in filing the appeals is condoned.
5. Following common grounds are raised:
The CIT(A) erred in confirming the order of assessing officer passed u/s 143(3) estimating the undisclosed income without there being any material as against the returned income as under:
Asstt. Yr. Returned Assessed
Income income
2001-02 Rs. 6,233/- Rs. 44,569/-
2002-03 Rs.12,368/- Rs. 23,727/-
2003-04 Rs. 2,438/- Rs. 46,020/-
2004-05 Rs.18,669/- Rs. 58,956/-
6. Brief facts are: On 12-12-2006, search and seizure operations were carried out at business and residential premises of one Shri S.K. Gupta along with various concerns operated by him and his family members. From the assessment order it emerges that Investigation Wing of Income-tax department gathered the information that one Shri S.K. Gupta, chartered accountant by profession, was running various dubious companies and other entities from the premises of "Trump and Gates", situated at H-108, 2nd Floor, New Asiatic Building, Connaught Place, New Delhi and also from his 3 C.A. firm M/s Gupta & Rakesh Associates at 231, Gulmohar Enclave, New Delhi. As many as 33 such dubious companies which are list4ed in assessing officer's order were alleged to be operated by Shri S.K. Gupta, which were utilized for issuing accommodation entries to other persons.
6.1. The assessee filed returns of income u/s 153A consequent to search, accepting the undisclosed income as mentioned in the above returned figures along with the audited accounts.
6.2. During the course of search proceedings, Shri S.K. Gupta had admitted in his own statement that dummy bills were issued by various dubious entities or concerns to others for a consideration. Assessing officer asked the documentary evidence in respect of software development as well as details of persons who studied the cites on respective dates as claimed in the audit statement. No such documentary evidence was produced. 6.3. The assessing officer made detailed observations and in essence held as under:
(i) The assessee failed to provide any documentary evidence in respect of its accounts, receipts and expenses.
(ii) The assessee had thus failed to substantiate its return and undisclosed income mentioned therein.
(iii) There were various discrepancies relevant to accommodation entries business in respect of entries provided and the expenses 4 claimed. The assessee's business was treated as sham and undisclosed income was computed @ 2% net income on dummy sale and turn over and investment relying on assessee's statement, prevalent market condition and the inconsistencies in the books of account.
6.4. According to assessing officer, the assessee estimated his income @ 0.5% on the accommodation turn over 2% was the reasonable estimate of income from accommodation turnover, which the assessee has earned from indulging in these accommodation entries. Accordingly, the additions were made.
6.5. Aggrieved, assessee preferred first appeal before the CIT(A), where written submissions were filed, same were forwarded to assessing officer for his comments. The report submitted by assessing officer was supplied to the assessee and his rejoinder was sought. CIT(A), however, upheld the order of assessing officer and dismissed the assessee's appeals by following observations: CIT(A)'s observations for A.Y. 2001-02 are reproduced, which are common in all the years, except the estimated income figures:
"2.3.3. The appellant, in his rejoinder, has also raised the issue of non-allowance of credit of income surrendered in various hands including in the hands of the appellant company by Shri S.K. Gupta. In this regard, the AO has observed that the appellant had failed to correlate its surrendered income, in different A.Yrs with the actual figures of the business. This observation of the AO has not been controverted by the 5 appellant with substantiating evidences. Furthermore, I have perused the statements as extracted by the AO in the assessment order. No surrender was made in the hands of the appellant company for the Assessment year under consideration in this appeal. Therefore, the above contention is misplaced and is therefore rejected as such.
2.3.4. The other contention of the appellant is that no expenses have been allowed out of the additions made on account of commission earned for providing accommodation entries which is not justified. Suffice it to say that the AO has estimated and applied a net rate of 2% and therefore there was no reason to allow any expenses out of it. This contention is also, therefore, rejected.
2.3.5. Taking into consideration the totality of facts and circumstances of the case as discussed hereinabove, it is held that the addition made by the AO on account of net income earned from accommodation entry business to the tune of Rs. 44,569/- is justified and is, therefore, confirmed. Since the AO has given a categorical finding that the appellant had only indulged in accommodation entries business and had not done any genuine business and rejected the book results on that ground, the net profit shown in the return has lost its relevance and should not be given any credence. The AO is, therefore, directed o recomputed the total income accordingly. This disposes off all the grounds of appeal taken by the appellant against the impugned assessment order."
Aggrieved assessee is before ITAT.
7. Ld. Counsel for the assessee contends that the income of the assessee has been estimated @ 2% of the turn over whereas in his statement Shri S.K. Gupta had contended that the prevalent income on accommodation entry transactions was between 0.25% to 0.5%. This statement was on oath 6 and without giving any material the assessing officer has estimated the same @ 2%. Besides, while framing the assessment the assessing officer has made the addition on the same turn over qua which the assessee has offered income already in the P&L A/c. Thus, to this extent there is double addition.
8. Ld. DR, on the other hand, vehemently contends that there is no merit in the appeals of the assessee inasmuch as:
(i) In the P&L A/c filed along with the return, the assessee has shown the income claiming it to be a regular business whereas the fact remains that assessee was not engaged in any actual business at all, therefore, the returned income constitutes the assessee's own offer on the basis of its method.
(ii) On the basis of evidence, statement and other record, assessing officer came to the conclusion that the assessee was engaged in accommodation entries and from the verifiable turn over figure an estimate of 2% has been made, which is a faire estimate, as no arbitrariness has been demonstrated.
(iii) The assessee's account remained engaged in nepharious activities of providing accommodation entries on one hand and claims to be assessed at his desired rate of profit on the other hand.
(iv) Neither before the assessing officer nor before the CIT(A) nor before the ITAT, the assessee has filed any evidence to substantiate its income.
(v) When the income is estimated by assessing officer in the absence of assessee's substantiation, the same should generally be not interfered with, unless the assessee demonstrates arbitrariness in 7 arriving at the estimate. In this case the assessing officer has arrived at fair and reasonable method and estimate by adopting 2% profit on the accommodation entries operated by the assessee.
Assessing officer and CIT(A) have given detailed reasons in support of their observations, findings and conclusions. The same are relied on.
9. I have heard rival contentions and perused the material available on record. As the facts emerge, the assessee has filed his returns of income u/s 153A on the basis of audited statements which are found to be bogus and unreliable. Therefore, the income offered by the assessee in such returns becomes assessee's own offer. Apropos assessee's business, it has not been disputed that the assessee was actually engaged in providing accommodation entries and not in real business transactions. The findings of assessing officer and CIT(A) that assessee could not substantiate his claim about accommodation entries and assessment of profit @ 0.5%. Assessee has not been able to substantiate the rate of income from accommodation entries except making a general assertion that the profit charged on accommodation entries transactions is generally 0.5%.
9.1. The providing of accommodation entries amounts to running a parallel economy and is a sort of money laundering, which is against public policy. Therefore, assessee in any case cannot get any deduction for any 8 estimated expenses in this behalf. Since assessee could not substantiate the rate of providing accommodation entries, the assessing officer is well within his rights to estimate the income of the assessee. This estimate in ordinary circumstances cannot be interfered with unless the assessee makes out a case of arbitrariness and unreasonable estimate, which has not been established. In my considered view, the estimate as arrived at by assessing officer @ 2% and confirmed by CIT(A) is reasonable and cannot be called arbitrary. Therefore, the same is upheld.
9.2. Since the assessee offered his income in return and thereafter assessing officer made his estimate, based on accommodation transaction, it cannot be assumed that this amounts to double addition of income.
10. In the result, all the appeals filed by the assessee are dismissed. Order pronounced in open court on 30-08-2013.
Sd/-
( R.P. TOLANI ) JUDICIAL MEMBER Dated: 30th August 2013.
MP Copy to :
1. Assessee
2. AO
3. CIT
4. CIT(A)
5. DR 9