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From the Courts »
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 M.K.Overseas Pvt. Ltd. Vs. Pr.Commissioner Of Income Tax-06
 Arshia Ahmed Qureshi Vs. Pr. Commissioner Of Income Tax-21

M/s Omni Farms Pvt.Ltd., 308, Arunachal Building, 19, Barakhamba Road, New Delhi 110 001. Vs. Deputy Commissioner of Income Tax (HQ), Circle-III, Central Circle-
January, 30th 2015
               IN THE INCOME TAX APPELLATE TRIBUNAL
                                 `E' : NEW DELHI
                     DELHI BENCH `E

           BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND
                                GARG, JUDICIAL MEMBER
            SHRI CHANDRA MOHAN GARG,

                             No.3477/Del/2013
                         ITA No.
                                         2008-09
                       Assessment Year : 2008-


M/s Omni Farms Pvt.Ltd.,       Vs.   Deputy Commissioner of
308, Arunachal Building,             Income Tax (HQ),
19, Barakhamba Road,                         Circle-III,
                                     Central Circle-
New Delhi ­ 110 001.                 New Delhi.
PAN : AAACO5916C.
     (Appellant)                        (Respondent)

                             No.3478/Del/2013
                         ITA No.3478/Del/2013
                                         2008-09
                       Assessment Year : 2008-


M/s Passion Chits Pvt.Ltd.,    Vs.   Deputy Commissioner of
308, Arunachal Building,             Income Tax (HQ),
19, Barakhamba Road,                         Circle-III,
                                     Central Circle-
New Delhi ­ 110 001.                 New Delhi.
PAN : AADCP2322A.
     (Appellant)                        (Respondent)

                             No.3480/Del/2013
                         ITA No.3480/Del/2013
                                         2008-09
                       Assessment Year : 2008-


M/s Katson Hotel &             Vs.   Deputy Commissioner of
Developers Pvt.Ltd,                  Income Tax (HQ),
Formerly known as Falcon                     Circle-III,
                                     Central Circle-
Freight Pvt.Ltd.,                    New Delhi.
308, Arunachal Building,
19, Barakhamba Road,
New Delhi ­ 110 001.
PAN : AAACF9273F.
     (Appellant)                        (Respondent)
                                    2                        ITA-3477/D/2013 &
                                                                       8 others


                            No.3481/Del/2013
                        ITA No.3481/Del/2013
                                        2008-09
                      Assessment Year : 2008-


M/s Beriwal Investment &      Vs.       Deputy Commissioner of
Chit Fund Pvt.Ltd.,                                  (HQ),
                                        Income Tax (HQ),
308, Arunachal Building,                        Circle-III,
                                        Central Circle-
19, Barakhamba Road,                    New Delhi.
New Delhi ­ 110 001.
PAN : AAACB4878J.
     (Appellant)                           (Respondent)

                            No.3482/Del/2013
                        ITA No.3482/Del/2013
                                        2008-09
                      Assessment Year : 2008-


M/s Champ Finvest Pvt.Ltd.,   Vs.               Commissioner of
                                        Deputy Commissioner
308, Arunachal Building,                Income Tax (HQ),
19, Barakhamba Road,                            Circle-III,
                                        Central Circle-
New Delhi ­ 110 001.                    New Delhi.
PAN : AAACC5063G.
     (Appellant)                           (Respondent)

                            No.3483/Del/2013
                        ITA No.3483/Del/2013
                                        2008-09
                      Assessment Year : 2008-


M/s Cubic Commercial          Vs.       Deputy Commissioner of
Resources Ltd.,                         Income Tax (HQ),
308, Arunachal Building,                        Circle-III,
                                        Central Circle-
19, Barakhamba Road,                    New Delhi.
                 001.
New Delhi ­ 110 001.
PAN : AACCC2416R.
     (Appellant)                           (Respondent)

                            No.3484/Del/2013
                        ITA No.3484/Del/2013
                                        2008-09
                      Assessment Year : 2008-

M/s Vijay Conductors India    Vs.       Deputy Commissioner of
Pvt.Ltd.,                               Income Tax (HQ),
308, Arunachal Building,                        Circle-III,
                                        Central Circle-
19, Barakhamba Road,                    New Delhi.
New Delhi ­ 110 001.
PAN : AAACV2913J.
     (Appellant)                           (Respondent)
                                     3                       ITA-3477/D/2013 &
                                                                       8 others


                             No.3485/Del/2013
                         ITA No.3485/Del/2013
                                         2008-09
                       Assessment Year : 2008-


M/s Vishrut Marketing          Vs.       Deputy Commissioner of
Pvt.Ltd.,                                Income Tax (HQ),
308, Arunachal Building,                         Circle-III,
                                         Central Circle-
19, Barakhamba Road,                     New Delhi.
New Delhi ­ 110 001.
PAN : AABCV4875C.
     (Appellant)                            (Respondent)

                             No.3621/Del/2013
                         ITA No.3621/Del/2013
                                         2008-09
                       Assessment Year : 2008-


M/s Namrata Marketing          Vs.       Deputy Commissioner of
Pvt.Ltd.,                                Income Tax (HQ),
308, Arunachal Building,                         Circle-III,
                                         Central Circle-
19, Barakhamba Road,                     New Delhi.
New Delhi ­ 110 001.
PAN : AAACN2450L.

     (Appellant)                            (Respondent)

              Appellants by     :    Shri R.S. Singhvi and
                                     Shri Satyajeet Goel, CAs.
              Respondent by     :    Shri Gunjan Prashad, CIT-DR.

                                ORDER

PER G.D. AGRAWAL, VP :
      These appeals by different assessees are directed against the
order of learned CIT(A)-XXXIII dated 20.3.2013 and 18.3.2013 for the
AY 2008-09.


2.    In all these appeals, various grounds have been raised.
However, they are all against the confirmation of addition under
Section 68 of the Income-tax Act, 1961 as under:-
                                    4                          ITA-3477/D/2013 &
                                                                         8 others


     Name                                                Addition
1.   M/s Omni Farms Pvt.Ltd.                             `2,11,80,616/-
2.   M/s Passion Chits Pvt.Ltd.                          `40,09,850/-
3.   M/s Beriwal Investment & Chit Fund Pvt.Ltd.         `7,88,73,170/-
4.   M/s Champ Finvest Pvt.Ltd.                          `6,82,34,143/-
5.   M/s Cubic Commercial Resources Ltd.                 `4,38,40,592/-
6.   M/s Vijay Conductors India Pvt.Ltd.                 `16,23,103/-
7.   M/s Vishrut Marketing Pvt.Ltd.                      `5,04,06,893/-
8.   M/s Namrata Marketing Pvt.Ltd.                      `10,82,91,085/-
9.   M/s Katson Hotel & Developers Pvt.Ltd.              `41,06,374/-


3.   At the time of hearing before us, it is stated by the learned
counsel that one Shri S.K. Gupta was carrying on the business of
providing accommodation entries.             He controlled a number of
proprietary concerns, companies and bank accounts at various places.
A survey under Section 133A of the Income-tax Act, 1961 was
conducted at the office premises of Shri S.K. Gupta and the
companies/concerns controlled by him on 20th November, 2007.
During the course of survey, several documents, papers, laptops
containing accounts of several parties including cash book, bank
books, ledger accounts and some cheque books were impounded. Shri
S.K. Gupta filed application before the Settlement Commission and the
Settlement Commission, vide order dated 28th December, 2010,
accepted   that   he   was   carrying   on    the   business   of   providing
accommodation entries on which commission/brokerage was being
received by him. The statement of facts as recorded in paragraph 4.1
of the order of the Settlement Commission read as under:-


      "4.1 The applicant submitted that he controlled a
      number of proprietorship concerns, companies and
      bank accounts at various places. He had opened a
                                   5                         ITA-3477/D/2013 &
                                                                       8 others





       number of proprietorship bank accounts in benami
       names.       Cash from customers/beneficiaries of
       accommodation entries used to be received and
       deposited in these proprietary bank accounts. From
       these bank accounts, cheques used to be issued to
       intermediate companies numbering thirty one and two
       individuals.   From these intermediates, cheques of
       accommodation entries used to be issued to the
       beneficiaries/customers.    For these accommodation
       entries,       the       applicant      was        paid
       commission/brokerage/premium by the beneficiaries
       out of which he would pay/part with substantial
       amounts to the mediators/facilitators i.e. the persons
       who would bring the beneficiaries/customers to him."

4.    He submitted that the conclusion of the Settlement Commission
is at paragraph 26 & 27 of its order which read as under:-


       "26. The facts on record are considered. It is observed
       that various documents impounded and extracts taken
       from the impounded laptop are enclosed by the
       applicant in paper books of five volumes with about
       1200 pages. It is 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. It is seen from the reasons recorded by the
       A.O. for issue of notice under section 148 for the A.Y.
       2006-07 (the facts are same for A.Y. 2008-09 which is
       under consideration) that the A.O. has stated that the
       applicant has provided accommodation entry and
       charged premium varying from 4% to 8%.              After
       discussing various facts, the A.O. has stated that the
       applicant has been providing the accommodation
       entries to different parties by issuing the cheques after
       obtaining the cash and the amount of premium charged
       on giving such entry has not been reflected as income
       by the applicant. It is further seen that the applicant
       has given list of mediators and beneficiaries with
       address and telephone numbers. It is noted that the
       CIT in Rule 9 report or during the hearing has not
       produced any material/evidence to rebut the
                                    6                        ITA-3477/D/2013 &
                                                                       8 others


       presumption u/s. 292C in respect of correctness of the
       material impounded during the survey. 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. Thus, we do not agree
       with the CIT's contentions that there are no
       evidence/material brought out by the applicant to prove
       that he was an entry provider and that he had
       deposited his own cash which was used to issue
       cheques to the beneficiaries. The reasons recorded for
       issue of notice u/s 148 clearly state that the applicant is
       an entry provider. 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.

       27. After examining the facts of the case, we are of the
       considered view that the applicant is an entry provider.
       Therefore, in his case, only, the amount of
       premium/commission received by the applicant after
       reducing expenses incurred will be his additional
       income."

5.   The learned counsel for the assessee further pointed out that in
the order of the Settlement Commission, there is the list of the
concerns which were being controlled by Shri S.K. Gupta. At paragraph
4.6, the list of such companies is given which is reproduced for ready
reference:-


       4.6 There are 32 companies and two individuals which
       were used as conduits/routes from where the cheques
       used to be given to the beneficiaries.        These 32
       companies/two individuals were merely conduits and
       were used by the applicant in a bid to give
       legitimacy/credibility to the transaction. The names of
       these 32 companies and two individuals are as under:
                                              7   ITA-3477/D/2013 &
                                                            8 others




S.No.   Name of Companies
1       AGM Holding Ltd.
2       Advantage Software Pvt Ltd
3       Anila Industries Ltd
4       Anjali Gupta
5       Belief Chits Pvt.Ltd.
6       Beriwal Investments & Chits Funds
7       Central Gum & Chemical Industries
8       Champ Finvest Pvt Ltd
9       Chander Prabhu Financial Services Ltd
10      Cubic Commercial Resources
11      Dhamaka Trading & Constructions
12      Falcon Freight (P) Ltd
13      Galaxy Mines & Stones Pvt.Ltd.
14      Giriasho Company Pvt Ltd
15      IDS Investment Pvt.Ltd.
16      KSA Chits (P) Ltd
17      Mitsu Securities Management (P) Ltd
18      Namrata Marketing Pvt Ltd
19      New Star Information System (I) Ltd
20      Omni Farms Pvt Ltd
21      Optimum Credits Ltd
22      Passion Chits Co Pvt Ltd
23      Rapid Packaging Ltd
24      SJ Securities Pvt Ltd
25      SK Gupta
26      Safe N Secure Hygiene Products Pvt Ltd
27      Shikhar Fincap Pvt Ltd
28      Sino Credits & Leasing Ltd
29      VA Foods Pvt Ltd
30      Vasudeva Farms Pvt ltd
31      Viagra Trading Co.Pvt.Ltd.
32      Vijay Conductors Pvt Ltd
33      Visrut Marketing Pvt Ltd
34      Zenith Estates Ltd.
                                       8                        ITA-3477/D/2013 &
                                                                          8 others


6.    He pointed out that the names of all the nine companies under
appeal is in the list of 34 entities which were controlled by Shri S.K.
Gupta and used as conduit/route for issue of cheque to the
beneficiaries.     He pointed out that all the nine companies under
consideration are in such list as item Nos.6, 8, 10, 12, 18, 20, 22, 32 &
33. He stated that this order of the Settlement Commission has been
accepted by the Revenue as it has not been challenged by the
Revenue before the Hon'ble High Court. He referred to the order of the
Assessing Officer wherein he has given effect to the order of the
Settlement Commission and pointed out that after the order of the
Settlement Commission, the Assessing Officer determined the income
of Shri S.K. Gupta without making any addition for unexplained cash
credit.    He further pointed out that during the course of assessment
proceedings of the intermediary companies, which included the
assessee company, the Assessing Officer viz., ACIT, Central Circle-22,
New Delhi sought for the direction of the Additional Commissioner of
Income Tax under Section 144A of the Income-tax Act. At page 1 & 2
of the order, the Additional Commissioner gave the list of the
companies controlled by Shri S.K. Gupta which included all the nine
companies under consideration. The Additional Commissioner held as
under:-


          "12. In view of these facts, it is clear that cash has been
          received by Sh. S.K. Gupta and routed through various
          entities to be passed on ultimately to the beneficiaries
          in the form of cheques. In such a scenario when it is
          clear that these other entities are mere conduit for
          converting cash to cheque, it would be appropriate to
          tax these transactions in the hands of beneficiaries and
          also in the hands of Sh. S.K. Gupta. The justification for
          bringing to tax the cash received (As per laptop) in the
          hands of Sh. S.K. gupta (Individual) would be that he
          has not been able to produce these persons before the
          department to own up this cash and as such remains
                             9                       ITA-3477/D/2013 &
                                                               8 others


unexplained cash as held in the order u/s 143(3) for the
assessment year 2008-09. In the absence of owning up
of cash by mediators/beneficiary, it is not possible to
allow assessee the benefit of argument that the cash
belongs to beneficiary and once the department is
taking action against beneficiaries, no action can be
taken in the hands of the Sh. S.K. Gupta. It is clear that
cash has been received by S.K. Gupta in different years
under      consideration     and      none      of     the
mediators/beneficiary have come forward to own this
cash. As to the case laws cited by assessee, they are
not directly applicable to the facts of the case and are
distinguishable. None of the cases cited by assessee
deal with a clear evidence impounded during the course
of survey operation u/s 133A, detailing receipt f cash on
a day to day basis. The receipt of cash is not a
conjecture or figment of imagination on the part of
Assessing Officer. In view of this, it shall be most
appropriate that cash is brought to tax in the hands of
Sh. S.K. Gupta.

Addition has also been made on account of premium
income received by assessee on account of these
transactions for AY 2008-09. Assessee's contention
that he should be allowed certain expenditure from the
premium received by it, also cannot be entertained as
assessee has brought nothing on record to prove that
expenses were paid to other persons and neither there
is anything on record to show that these other persons
have acknowledged this income in this regard.

Certain additions were made u/s 68 for credit entries
appearing in bank account of assessee in AY 2008-09.
The AO may decide the issue on merit after examining
the material produced before him. This issue does not
seem to arise from impounded documents.

13. The Assessing Officer has informed that
information pertaining to beneficiaries has been passed
on to the concerned Assessing Officer. He should
ensure that there is no deficiency in this regard. On the
basis of modus operandi and material impounded, it is
clear that there is a very strong case to bring to tax the
accommodation entries obtained by beneficiaries. The
                                   10                         ITA-3477/D/2013 &
                                                                        8 others


       information with    relevant  records         should     be
       communicated to the concerned AOs.

       14. To tax the cash received by S.K. Gupta in the
       hands of conduit companies also, wherein the same
       finds reflection as credit entries in bank accounts, would
       make the stand of the department ambiguous vis-a-vis
       beneficiaries. It will dilute the case of the department
       against beneficiaries. Additions made in the case of
       conduit entities shall confuse the stand of the
       department and shall jeopardize the efforts of the
       department to bring to tax these transactions in the
       hands of beneficiaries and Sh. S.K. Gupta. This shall
       also lead to frivolous litigation, of no significance, once
       we have brought these transactions to tax as its two
       legs, firstly, in the case of Sh. S.K. Gupta and secondly
       in the cases of beneficiaries.

       15. In view of foregoing discussion, it would be in the
       best interest of revenue to tax these transactions in the
       hands of beneficiaries (para 13) and also Sh. S.K. Gupta
       (individual- Sr.No.1-4, as discussed in para 12), without
       making any additions on this account in the hands of
       conduit entities (Sr.No.5 to 41 ­ as discussed in para 11
       & 14). These directions are issued accordingly u/s 144A
       of the Income Tax Act 1961. These are composite
       directions u/s 144A of the Act with respect to all the
       entities referred to by the Assessing Officer vide his
       office letter No.261 dated 7.12.2011."

7.   Thus, the Additional CIT under Section 144A issued direction for
not making of any addition in the case of conduit entities i.e.
companies which were being controlled by Shri S.K. Gupta and were
utilized for issuing cheques to the beneficiaries after depositing the
cash received from the beneficiaries. He stated that the direction of
Additional CIT under Section 144A is binding upon the Assessing
Officer. He also referred to the assessment order passed in the case of
one of the beneficiaries i.e. M/s Beriwal Investments & Chit Funds Ltd.
and pointed out that the Assessing Officer as per the direction of the
Additional CIT did not make any addition under Section 68.                  He
                                    11                        ITA-3477/D/2013 &
                                                                        8 others


submitted that the order of the Additional CIT under Section 144A is
dated 23rd December, 2011 while the assessment under consideration
has been completed on 27th December, 2010 which was before the
direction of the Additional CIT under Section 144A. Even the order of
the Settlement Commission was passed on 28th December, 2010.
Thus, the Assessing Officer, while passing the assessment order for the
year under consideration, did not have the benefit of either the order
of the Settlement Commission or the order of the Additional CIT passed
under Section 144A. He, therefore, submitted that when the Revenue
has accepted the order of the Settlement Commission as well as the
order of the Additional CIT under Section 144A that Shri S.K. Gupta was
only entry provider, who, after the receipt of cash from the
beneficiaries, deposited the cash in various group entities and issued
the cheque, there is no justification for treating the cash deposit in the
bank account of the intermediary companies as unexplained cash
credit under Section 68.


8.    The learned counsel further submitted that the CIT(A) did not
accept the assessee's contention on the ground that all the facts may
not be available with the Settlement Commission. The relevant finding
of learned CIT(A) in this regard, which is similar in all the cases before
us, at page 24 of his order in the case of Omni Farms Pvt.Ltd. reads as
under:-


       "Second main argument of Ld. AR in support of proving
       itself as conduit, the ld. AR is relying on the order of the
       settlement commission. I have perused the order of
       Hon'ble settlement commission.                The hon'ble
       settlement commission has quantified the income of Sh.
       S.K. Gupta as some percentage of total turnovers. Of
       course, in its order, hon'ble commission has mentioned
       that various companies including appellant company is
       used as conduit for routing the entries. However,
                                      12                       ITA-3477/D/2013 &
                                                                         8 others


          before settlement commission, entire facts that the
          appellant company is maintaining its books of account
          on the basis of such entries might not be available.
          Hon'ble settlement commission has not given any
          comments for credit in the books of accounts of the
          appellant company which is not changed after
          admission that it as a conduit company. Therefore, in
          no way, the order of settlement commission support the
          in applicability of section 68 in appellant's case, as the
          order of hon'ble settlement commission has only
          quantified same commission income in the hands of Sh.
          S.K. Gupta."

9.    The learned counsel pointed out that before the Settlement
Commission, all the facts were placed.        The Settlement Commission
has recorded all the facts and also given the list of companies which
were used by Shri S.K. Gupta as conduits. The Settlement Commission
has also discussed the modus-operandi how Shri S.K. Gupta was
providing accommodation entries by utilizing the conduit companies.
He further submitted that the order of the Settlement Commission is
binding upon the Revenue authorities. In support of this contention, he
relied upon the decision of Hon'ble Jurisdictional High Court in the case
of Omaxe Ltd. & Anr. Vs. DCIT & Anr. ­ [2014] 105 DTR 1 (Del). He,
therefore, submitted that the addition under Section 68 made by the
Assessing Officer and sustained by the learned CIT(A) in the case of all
the companies may be deleted.





10.   Learned DR, on the other hand, relied upon the orders of
authorities below and stated that all the arguments of the learned
counsel for the assessee have already been considered by the learned
CIT(A).     He has also considered the decision of the Settlement
Commission which is in the case of Shri S.K. Gupta and not in the case
of the assessee. He, therefore, submitted that the order of the learned
CIT(A) in all these appeals should be sustained.
                                   13                      ITA-3477/D/2013 &
                                                                     8 others




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, 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.
                                   14                      ITA-3477/D/2013 &
                                                                     8 others



       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 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
                                     15                    ITA-3477/D/2013 &
                                                                     8 others


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 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,
                                   16                      ITA-3477/D/2013 &
                                                                     8 others


       items or heads of income, 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 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
                                   17                        ITA-3477/D/2013 &
                                                                       8 others


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 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
Assessing Officer which is evident from Section 144A which reads as
under:-
                                   18                       ITA-3477/D/2013 &
                                                                      8 others




       "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)


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
                                    19                         ITA-3477/D/2013 &
                                                                         8 others


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.
       Decision pronounced in the open Court on 28th January, 2015.


                   Sd/-                                 Sd/-
                      GARG)
      (CHANDRA MOHAN GARG)                            AGRAWAL)
                                                          WAL)
                                                (G.D. AGRAWAL
         JUDICIAL MEMBER                        VICE PRESIDENT

Dated : 28.01.2015
VK.

Copy forwarded to: -

1.     Appellant    : M/s Omni Farms Pvt.Ltd. & 8 others,
                      308, Arunachal Building,
                      19, Barakhamba Road, New Delhi ­ 110 001.


2.                                             Income Tax (HQ),
       Respondent : Deputy Commissioner of Income
                            Circle-III, New Delhi.
                    Central Circle-
3.     CIT
4.     CIT(A)
5.     DR, ITAT

                               Assistant Registrar

 
 
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