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2013 Supreme(Del) 1590
IN THE HIGH COURT OF DELHI AT NEW DELHI
SANJIV KHANNA and SANJEEV SACHDEVA, JJ.
COMMISSIONER OF INCOME TAX-II – Appellant
Versus
MAF ACADEMY P. LTD. – Respondent
ITA 341/2012
Decided On : 28th November, 2013
Mr. N.P. Sahni with Mr. Ruchesh Sinha, Advocates.
Dr. Rakesh Gupta with Ms. Rani Kiyala and Mr. Rishabh Kapoor, Advocates.
The onus is on the assessee to prove the identity, creditworthiness and genuineness of the transaction. Mere production of incorporation details, PAN Nos. or assessment particulars does not establish the identity of a person.
Headnote:
Whether on the facts and circumstances of case, the Income Tax Appellate Tribunal was correct in law in deleting the addition of Rs. 3,43,00,000/- u/s 68 of the Income Tax Act, 1961 holding the same to be camouflage transactions / accommodation entries?
Fact of the Case:
The Assessee, a private limited company, received share capital including premium of Rs. 4,35,00,000/- during the year. Out of the said amount only Rs.92,00,000/- had been received from the four Directors/their family members of the Assessee company and the remaining amount had been received from the parties mentioned in the reasons recorded for reopening or from related parties. The Assessing Officer, vide his assessment order dated 29.12.2009, assessed the income at Rs.3,49,86,000/-. Aggrieved by the assessment order, the Assessee filed an appeal against the said assessment order. The Commissioner of Income Tax (Appeals) allowed the appeal filed by the Assessee and deleted the addition of Rs.3,43,00,000/- made by the Assessing Officer.
Finding of the Court:
The ITAT erred in deleting the addition of Rs. 3,43,00,000/- made by the Assessing Officer under Section 68 of the Act. The Assessee failed to discharge the onus of establishing the identity, creditworthiness of the share applicants and the genuineness of the transaction.
Issues: Whether the Assessee had discharged the onus of establishing the identity, creditworthiness of the share applicants and the genuineness of the transaction.
Ratio Decidendi: The onus is on the assessee to prove the identity, creditworthiness and genuineness of the transaction. Mere production of incorporation details, PAN Nos. or assessment particulars does not establish the identity of a person. The identification of a person includes the place of work, the staff and the fact that it was actually carrying on business and further recognition of the said company/individual in the eyes of public. PAN Numbers are allotted on the basis of applications without actual de facto verification of the identity or ascertainment of the active nature of business activity. PAN Number is allotted as a facility to revenue to keep track of transactions. The PAN Number cannot be blindly and without consideration of surrounding circumstances treated as sufficiently disclosing the identity of the individual.
Final Decision: The appeal filed by the Revenue is allowed. The order of the ITAT is set aside and the order of the Assessing Officer is restored.
SANJEEV SACHDEVA, J.
1. This is an appeal under Section 260A(1) of the Income Tax Act, 1961 (for short “the Act”) filed by the Revenue against the order of the Income Tax Appellate Tribunal dated 14.10.2011 in ITA No.3650/DEL/2011 for the Assessment Year 2002-03.
2. Vide order dated 07.11.2012, the following substantial question of law was framed:-
“Whether on the facts and circumstances of case, the Income Tax Appellate Tribunal was correct in law in deleting the addition of Rs. 3,43,00,000/- u/s 68 of the Income Tax Act, 1961 holding the same to be camouflage transactions / accommodation entries?
3. The Assessee had filed the return for the Assessment Year 2002-03 declaring nil income. The return was processed under Section 143(1) of the Income Tax Act.
4. On the basis of the information received from the Investigation Wing of the Income Tax Department, notice under Section 148 was issued to the Assessee. The proceedings were sought to be opened on the basis of the information unearthed by the Investigation Wing of the Income Tax Department, wherein it came to their knowledge that a huge money laundering racket was being run by a few persons and bogus accommodation entries were being provided. As per the information of the Investigation Wing, accommodation entries were being provided in lieu of payment in cash of equivalent amount plus commission being paid thereon to the entry operators. The Investigation Wing during the investigation came across names of various individuals, who were operating as entry providers and also various parties, who were taking such accommodation entries. The name of the Assessee also figured as one of the parties involved in taking such accommodation entries.
5. In response to the notice under Section 148, the Assessee issued a letter dated 06.04.2009 submitting that the return filed on 30.09.2002 may be treated as the return filed in response to the notice under Section 148. The Assessee filed the said letter also inquiring about the reasons for reopening of the case. The reasons for reopening of the case were duly provided to the Assessee vide letter dated 12.10.2009 and the same are as under:-
“The Investigation wing of the Income Tax Department had unearthed a huge money laundering mechanism wherein it was established that bogus accommodation entries were being provided. These accommodation entries are received in lieu of payment of cash of equivalent amount plus commission thereon to the entry operator. For obvious reasons, these cash transactions are not routed through the books of account of the Assessee. In this case, information has been received from Directorate of Income Tax, (Investigation), New Delhi that during the relevant assessment year, this Assessee had received the following cheque amount(s) in the nature of accommodation entry:
Table:
VALUE OF
ENTRY TAKEN INSTRUMENT
No. BY
WHICH ENTRY TAKEN DATE OF
ENTRY
TAKEN NAME OF
ACCOUNT
HOLDER OF
ENTRY GIVING
ACCOUNT BANK FROM WHICH
ENTRY GIVING
BRANCH OF
ENTRY GIVING
BANK A/c No. OF ENTRY GIVING
ACCOUNT
500500 17296 23-Apr-01 AJAY BANSAL INNOVATIVE WAZIRPUR 819
500500 19097 15-Apr-01 JAGDISH PARSHAD INNOVATIVE WAZIRPUR 1100882
500500 19757 18-Apr-01 SATISH KUMAR SHARMA INNOVATIVE WAZIRPUR 56
500500 20066 15-Apr-01 NARENDER KUMAR GUPTA INNOVATIVE WAZIRPUR 809
500500 20118 15-Apr-01 MANOJ KUMAR BATRA INNOVATIVE WAZIRPUR 868
500500 33821 12-Apr-01 TECHNOCOM ASSOCIATES P LTD. INNOVATIVE WAZIRPUR 220
500500 495827 21-May 01 KANODIA AGENCY OBC MINTO ROAD 18
600000 496264 03-Oct-01 AJAY BANSAL OBC MINTO ROAD 53
900000 496288 17-Sep-01 SUBHASH GUPTA OBC MINTO ROAD 56
900000 496334 17-Sep-01 NARINDER KUMAR GUPTA OBC MINTO ROAD 63
600000 496876 16-Oct-01 REKHA GARG OBC MINTO ROAD 88
500500 692028 15-Apr-01 GEXICLE AD MEDIA IND BANK RP BAGH 5040
500000 790569 12-Jun-01 VIJAY KUMAR KVB KAROL BAGH SB 5385
500300 12-Apr-01 CHINTPURNI CREDITS SBP DG 50058
500300 12-Apr-01 CHINTPURNI CREDITS SBP DG 50058
500300 23-Apr-01 SANTOSH KUMAR CHAUDHAR
