IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `F' NEW DELHI
BEFORE SHRI B. C. MEENA, ACCOUNTANT MEMBER
AND
SHRI C. M. GARG, JUDICIAL MEMBER
I.T.A .No.-5881/Del/2011
(ASSESSMENT YEAR-2008-09)
Shri Rakesh Arora, Vs. DCIT
1/1/41, Sabzimandi Clock Tower, Central Circle-20
Kamla Nagar, New Delhi.
Delhi-110007.
PAN:AAJPA7365B
(APPELLANT) (RESPONDENT)
Assessee by:-Sh. Gautam Jain, CA.
Revenue by:-Sh. Vikram Sahay, Sr. DR
Date of Hearing: 17.02.2015
Order Pronounced on: 20.03.2015
ORDER
PER C. M. GARG, JM.
This appeal has been has been preferred by the assessee against the order
of CIT (Appeals)-XXXI- New Delhi, vide dated 30.11.2011 in Appeal
No.172/2010-11 for Assessment Year 2008-09.
2. The assessee has raised following grounds in this appeal:
"1. That the Ld CIT(A) has erred in law while confirming
the addition to the extent of Rs.25,54,150/- out of the
total addition of Rs.50,13,750/- made by the ld. AO u/s
69 of the Income Tax Act, 1961 in the hands of
assessee under the contention that the accounts to
which the money is credited are the alleged benami
accounts of the assessee, without considering the
evidences filed during assessment proceedings and
once again referred during appellate proceedings, and
I.T.A .No.-5881/Del/2011 2
therefore, addition confirmed to the extent of
Rs.25,54,150/- may please be deleted.
2. That the Ld CIT(A) has erred in law and on facts while
confirming the addition made by the Ld AO, where
such addition is made under predetermined mind set
about material & documents seized during the course
of search proceedings relevant to AY 2001-2002 to AY
2007-08 and not the period under consideration i.e.
2008-09, and as such addition confirmed to the extent
of Rs.25,54,150/- on the basis of such evidences may
please be deleted."
3. Briefly stated the facts giving rise to this appeal are that the assessee filed
his return of income on 23.10.2008 at an income of Rs.4,21,310/-.
Subsequently, the case was selected for scrutiny and a notice u/s 143(2) of the
Income Tax Act 1961 (for short the Act) was issued on 15.4.2009 and another
notice u/s 143(1) of the Act was issued on 16.12.2010 and 24.12.2010
respectively. During the course of assessment proceedings the AO noticed
unexplained cash deposits in the bank account of the assessee amounting to
Rs.50,13,750/- and the AO made addition u/s 69 of the Act. Being aggrieved by
the above assessment order the assessee preferred an appeal before ld. CIT(A)
which was partly allowed, deleting the part of addition and another part of
addition made by the AO u/s 69 of the Act amounting to Rs. 25,54,150/- was
confirmed. The ld. CIT(A) allowed relief to the assessee to the extent of
24,59,600/- and directed the AO to follow the order of the Settlement
Commission with regard to the assessablity of above amount in the hands of
Shri Rakesh Arora, and Shri Rajesh Kumar Arora.
I.T.A .No.-5881/Del/2011 3
4. Now the assessee Shri Rakesh Kumar Arora is before this Tribunal with
the grounds as reproduced hereinabove.
5. We have heard arguments of both the sides and carefully perused the
relevant material placed on record before us. The ld. counsel for the assessee
submitted that the CIT(A) has erred in law while confirming the addition to the
extent of Rs.25,54,150/- made by the AO u/s 69 of the Act in hands of the
assessee under the contention that the account to which the money is credited is
alleged benami account of the assessee, without considering the evidences filed
during the assessment proceedings and again referred during appellate
proceedings. The ld. counsel for the assessee vehemently contended that the ld.
CIT(A) was not justified in confirming the addition where such addition is made
under predetermined mind set about material and document seized during the
course of search proceeding relevant to AY 2001-02 to 2007-08 and not
relevant to the period under consideration i.e. AY 2008-09 and therefore, such
addition may please be deleted.
6. Replying to the above the ld. DR supported the orders of the authorities
below and submitted that the ld. CIT(A) was right in directing the AO to delete
addition of Rs.24,59,600/- and in directing the AO to follow the order of the
Income Tax Settlement Commission. Supporting the orders of the authorities
below, the ld. DR further contended that the ld. CIT(A) was quite justified in
confirming the addition of Rs. 25,54,150/-. The ld. DR further drawn our
I.T.A .No.-5881/Del/2011 4
attention in Para 3.7 of the assessment order and submitted that the AO has
made it clear that his conclusion a subject to the decision of Income Tax
Settlement Commission , and if, Income Tax Settlement Commission takes a
decision otherwise and such unexplained income is divided in the hands of three
persons therefore, the AO also kept a space for consideration of prospective
order of the Settlement Commission and approach and action of the AO is quite
justified.
7. On careful consideration of above submissions and contention of both the
parties we are of the considered view that in Para 3.7 at page 8 of the
assessment order the AO has made it clear that since the assessee Shri Rakesh
Kumar Arora has owned the deposits and bank account as his benami during
search and before Income Tax Settlement Commission, the addition is made in
the case of assessee Shri Rakesh Arora. The AO further held that if
subsequently, Income Tax Settlement Commission takes a decision otherwise
and such unexplained income is dvided in the hands of Shri Virendra Kumar
Arora, Shri Rajesh Kumar Arora and Shri Rakesh Kumar Arora i.e. assessee of
the present case, then its effect will be given in the assessment. Hence, it is
clear that the AO made addition subject to the prospective order of the
Settlement Commission.
8. From careful perusal of the impugned order, we note that the CIT(A)
deleted the part addition of Rs.24,59,600/- in respect of bank account and in the
I.T.A .No.-5881/Del/2011 5
name of M/s Samar Organics Pvt. Ltd. with following observations and
conclusion:
"6. (i) In respect of M/s Samar Organics Pvt. Ltd. on the
basis of the details filed by appellant, it is observed that the
company is an existing entity duly registered with the ROC. Same
is also evident from the details filed during the assessment
proceedings and now before me. It is observed that being a
corporate entity, bank account could be operated in the name of
M/s Samar Organics Pvt. Ltd. after giving evidence of the
existence of the company and other related documents. As such,
the AO was not correct in making the addition in the hands of
appellant relying merely on the report of the Inspector and
Statement of Shri Ashok Aggarwal who is not directly related to
the company M/s Samar Organics Pvt. Ltd. This company is a
separate legal entity having PAN No. AABCS9325E. If the cash
deposit was not explainable, it should have been assessed in the
company's hand. If we look at the chart at para 4.3 it is seen that
this company has an account with PNB Rajender Nagar New
Delhi and a separate address B-1/13 Ph-II Ashok Vihar Delhi-
52, where as all other non corporate entities in the same chart
have their accounts in State Bank of Mysore, Pankha Road,
Janakpuri with same address. Without lifting the corporate veil
and establishing the facts beyond doubt, the AO was not justified
in holding the company as benami entity of the appellant. In
view of above findings, it is not justified to make any addition in
the hands of the appellant in respect of bank accounts operated
by the said company M/s Samar Organics Pvt. Ltd. As such to
that extent the ground of appeals are disposed of in favour of the
appellant and the cash credits of Rs.24,59,600/- assessed in its
hands are deleted."
9. From further reading of the impugned order we also note that the CIT(A)
confirmed the remaining part of impugned deposits in the hands of assessee and
also directed the AO to follow the order of the settlement commission in respect
I.T.A .No.-5881/Del/2011 6
of other alleged 10 accounts (other than account of M/s Samar Organics Pvt.
Ltd.). The relevant operative part of impugned order read thus:
"Therefore the peak calculation of Rs.4,95,000/- in the Para 5.16
is without basis and cannot be verified. In view of above facts it
is concluded that the appellant is in some way having a relation
with the bank accounts operated in the names of these entities. I
therefore confirm the addition of Rs.25,54,150/-. The AO was not
sure while making the assessment as to whether the addition
should have been made in the hands of the appellant. The AO in
Para 3.7 of the assessment order mentioned that "if
subsequently, Hon'ble Income Tax Settlement Commission takes
a decision otherwise and such unexplained income is divided in
the hands Sh. Virendra Kumar Arora, Shri Rajesh Kumar Arora
and Sh. Rakesh Kumar Arora, its effect will be given in this
assessment." In view of above, I am of the view of that in respect
of the above addition of Rs.24,59,600/- duly confirmed by me in
respect of the alleged accounts (other than M/s Samar Organics
Pvt. Ltd.), the AO is directed to follow the order of the Hon'ble
Income Tax Settlement Commission with regard to assessability
of above amount in the hands of Sh. Rakesh Arora, Virendra
Kumar Rora and Rajesh Kumar Arora."
10. On careful consideration of assessment order as well as of the impugned
order we note that the AO has not made any logical enquiry and made addition
of entire amount to order of settlement commission and during first appellate
proceedings the CIT(A) deleted the part addition of Rs.24,59,600/- in respect to
M/s Samar Organics Pvt. Ltd. and since there is no appeal by the department
about this part relief, therefore, it can be safely presumed that this deletion has
been accepted by the Revenue. We further observe that the ld. counsel of the
assessee is mainly harping on the contention that even additions made by the
AO and confirmed by the CIT(A) subject to order of the Settlement
Commission has been found not to be sustainable by the Settlement
I.T.A .No.-5881/Del/2011 7
Commission vide order dated 20.10.2014 which was passed after the assessment
order dated 28/12/2010 and impugned order of the CIT(A) dated 30.11.2011.
11. The relevant operative part of the order of the Settlement Commission
reads at internal page 16 & 17 as follows:
"1. Sanjeev Mehindru He is the proprietor of M/s
Lakshmi Narayan Corporation and M/s Lakshmi Narayan
Corporation and M/s Mahalaxmi Thinners & Chemicals
appearing at Sl. No. 4 & & of the 16 entities listed at issues
no 1. The assessing officer summoned the said person u/s
131 IT Act and the has acknowledged the ownership of the
bank accounts operated by him on behalf of his
proprietorship concerns namely; M/s Mahalaxmi Thinners
& Chemicals. It has been reported by the CIT that the said
person is filing regular return of income and notice under
section 148 has been also issued for assessment year 2007-
08 on 30.03.2014 is also reported that the transaction with
Rakesh Arora were joint business transaction for purchase
and sale. (Para 9 (9.1)(1) at pages 29-30 of this Synopsis)."
2. Manish Mehindru He is a proprietor of M/s Punjab
Solvent & Chemicals & M/s Amrita Thinners & Chemicals
& M/s Shree Ganesh enterprises and M/s Hari Om
Chemicals Sl. No. 1,2,5,2 and 16 of the 16 entities. The
assessing officer summoned the said person u/s 131 of IT
Act and he has acknowledged the ownership of the bank
account operated by him on behalf of his proprietorship
concerns Punjab Solvent & Chemicals, Amrita Thinners &
Chemicals, Shree Ganesh Enterprises and Hari Om
Chemicals. It has been reported by the CIT that the said
person is filling regular return of income and notice under
section 148 has also been issued for assessment year 2007-
08 on 20.3.2014 it is also reported that the transaction
which is Rakesh Arora were joint business transaction for
purchase and sale. (Para 9 (9.1)(2) at page 30 of this
Synopsis).
3. Harish Kumar Mahindru He is a proprietor M/s.
Mahaveer Chemicals, Sunshine paints and Chemicals, Shri
I.T.A .No.-5881/Del/2011 8
Ram Enterprises (Sl. No.9, 11 & 13 of the page 16 entities)
The assessing officer summoned the said person u/s 131 of
IT Act and he has acknowledged the ownership of the bank
account operated by him on behalf of his proprietorship
concerns Mahaveer Chemicals, Sunshine Paints and
Chemicals, Shri Ram Enterprises. It has been reported by
the CIT that the said persons is filling regular return of
income and notice under section 148 has also been issued
for assessment year 2007-08 on 20.3.2014 it is also
reported that the transaction which is Rekesh Arora were
joint business transaction for purchase and sale. (Para 9
(9.1)(3) at page 30 of this Synopsis).
4. Girdhari Lal Swami He is the proprietor of M/s.
Devta Chemicals Company (No.3 of the 16 entities). The
assessing officer summoned the said person u/s. 131 of IT
Act and he has acknowledged the ownership of the bank
account operated by him on behalf of his proprietorship
concerns Devta Chemicals Company. It has been reported
to CIT that the said persons is filling regular returns and
notice under section 148 has also been issued for
assessment year 2007-08 on 20.3.2014 it is also reported
that the transaction which is Rakesh Arora were joint
business transaction for purchase and sale. (Para 9 (9.1)(6)
at page 30 of this Synopsis).
12. The ld. counsel further submitted that the impugned additions in regard to
all 11 entities including M/s Samar Organics Pvt. Ltd. have been found to be
unsustainable by the Settlement Commission hence no addition can be made in
the hands of the assessee. The ld. DR fairly accepted that the addition was made
by the AO and upheld by CIT(A) was subject to order of the Settlement
Commission and the Settlement Commission has held that no addition can be
made in respect of alleged benami accounts.
13. On careful consideration of above submissions we are inclined to hold
that the addition made by the AO and partly confirmed by the CIT(A) in respect
I.T.A .No.-5881/Del/2011 9
of 10 entities amounting to Rs.25,54,150/- was subject to decision of the
Settlement Commission and when the Settlement Commission has held that no
addition can be made then impugned addition in the hands of assessee is not
warranted and deserve to be deleted. We order accordingly. Hence, both the
grounds raised by the assessee are allowed.
14. In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on 20/03/2015.
Sd/- Sd/-
(B. C. MEENA ) (C. M. GARG)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 20/03/2015
*AK VERMA*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
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