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Seema Jain Vs. Assistant Commissioner Of Income Tax Circle- 59(1), New Delhi
July, 27th 2018

Subject: Income from house property and income from other sources.

Referred Sections:
Section 260-A of the Income Tax,
Section 131 of the Act.

 

43
*    IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                   Date of Decision: 11th July, 2018
+                ITA 723/2018 & CM No.26947/2018

     SEEMA JAIN                                      ..... Appellant
                       Through:     Mr. P. Roy Chaudhuri, Advocate

                       versus

     ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE- 59(1),
     NEW DELHI                              ..... Respondent
                  Through: Mr. Raghvendra Singh, Advocate

     CORAM:
     HON'BLE MR. JUSTICE SANJIV KHANNA
     HON'BLE MR. JUSTICE CHANDER SHEKHAR

     SANJIV KHANNA, J. (ORAL):

           This appeal by Seema Jain under Section 260-A of the Income
     Tax, 1961 (Act), arises from order dated 17th May, 2018 passed by the
     Income Tax Appellate Tribunal (,,Tribunal') in ITA No.6709/Del/2017
     and relates to Assessment Year (,,AY) 2014-2015.

     2.    Tribunal in the impugned order has affirmed addition of Rs.
     1,00,00,000/- made by the Assessing Officer (,,AO), which was also
     upheld in the first appeal by the Commissioner of Income
     Tax(Appeals) ('CIT(A)') .

     3.    Findings' being primarily factual, learned counsel has
     challenged them as perverse. In particular, it was submitted that the



     ITA No.723/2018                                 Page 1 of 8
Tribunal has overlooked the most vital and important fact that the
appellant had repaid loan of Rs. 1,00,00,000/- to M/s. Pediment Tie-
up Pvt. Ltd. (,,PTPL), prior to initiation of the assessment
proceedings. Further, the loan was taken and repaid through banking
channels and receipt and repayment of loan was established. AO of
M/s PTPL has accepted the loan transaction as no corresponding
addition was made in the hands of M/s PTPL.

4.    Appellant, an individual, for the assessment year 2014-15 had
filed return declaring income of Rs.71,91,070/- from salary, income
from house property and income from other sources.

5.    Appellant as per books of accounts, had taken loan of
Rs.1,00,00,000/- from M/s PTPL on 27th September, 2013. The
appellant, as per books of account had repaid this loan to M/s PTPL,
without interest, after one year on 23rd September 2014.

6.    Issue and dispute relates to addition of Rs.1,00,00,000/- made
under Section 68 of the Act. Section 68 can be invoked by the AO to
make addition when any sum is found credited in the books of the
assessee for the previous year, and the assessee offers no explanation
of the source thereof or the explanation offered is not satisfactory.
Satisfaction as to the "source" is normally ascertained by the assessee
establishing and discharging the onus as to the identity of the payer,
capacity or creditworthiness of the payer and genuineness of the
transaction.

7.     Tribunal in the impugned order has recorded and referred to
several facts, which were compelling and would establish that the loan


ITA No.723/2018                                  Page 2 of 8
of Rs.1,00,00,000/- from M/s PTPL was a facade and bogus
transaction. It was a pretence and subterfuge adopted to circulate
unaccounted money. Argument that the stated loan of Rs.
1,00,00,000/-     was refunded on 23rd September 2014 and other
submissions were duly noted and examined by the Tribunal, but
rejected and spurned for sound and good reasons relating to
creditworthiness of the payer, genuineness of the transaction and to an
extent on the dubious identity of M/s PTPL. Tribunal has held that
receipt and repayment of Rs. 1,00,00,000 would not in the factual
context satisfy the threefold test, for the transactions were make belief
and deceptive for the following reasons and grounds:-






      1)     M/s PTPL did not have tangible or intangible fixed
      assets. As per balance sheet relied by the appellant, M/s PTPL
      had "current assets" and total liability of Rs. 19.35 crores,
      consisting of share capital of Rs.48 lacs, share premium of
      Rs.18.45 lacs and "current liabilities" of Rs.42 lacs. (It is
      therefore apparent that "current assets" comprised of loans
      "extended" to third parties.)

      2)     For the AY 2014-15 M/s PTPL in the Income Tax Return
      had declared income of Rs. 10,336/-. In the succeeding AY
      2015-16, M/s PTPL had meagre income of Rs. 4,660/-.

      3)     Appellant had failed to file copy of Profit and Loss
      Account of M/s. PTPL for the assessment 2014-15. Authorised
      representative of the appellant had expressed helplessness in
      doing the same before the Tribunal. Thus, the nature and



ITA No.723/2018                                   Page 3 of 8
      character of "business" activities of M/s PTPL could not be
      examined, verified and ascertained.

      4)     Given the earning/income profile of a few thousand
      rupees, combined with failure to produce profit and loss
      account for the year, issue of shares at a premium of Rs.18.45
      crores against paid up capital of Rs.48 lacs had casts doubt on
      the creditworthiness. It was incomprehensible that a company
      earning a few thousand rupees would command a premium of
      roughly 38 times the face value. These indicate that M/s PTPL
      was a shell and paper company.

      5)     Directors of M/s PTPL had failed to appear before the
      AO in-spite of summons under Section 131 of the Act.

8.    M/s PTPL had two directors, namely, Dipak Singh and Brij
Mohan SA. Dipak Singh was a director in 16 companies and Brij
Mohan SA was a director in 12 companies. (Tribunal recorded that
Dipak Singh may be a director in other companies as well.) Fifteen
companies were functioning from a common one room address- 2A,
Ganesh Chandra Avenue Commerce House, 7th Floor, Room No.1,
Kolkata, W.B- 700013.

9.    Dy.    Director   of   Income-tax     (Investigation)     (hereafter,
'DDIT(Investigation)' ), Kolkata in his report on the business activities
of M/s PTPL, had ascertained that the company was providing
accommodation entries.




ITA No.723/2018                                   Page 4 of 8
10.   Appellant, in her statement under Section 131, could not give
the exact purpose for which the loan was taken. She replied that the
finances were managed by her husband and she had no idea about
them. On being questioned whether she operated her bank account or
had any ATM card/debit card and credit card, she had replied in
negative. Therefore, the appellant had absolutely no idea of any loan
taken from M/s. PTPL, one of the 24 parties appearing in her balance
sheet from whom loan was taken.

11.   Tribunal had noted that there was no evidence or document to
show that the appellant, who was in Delhi, came in contact with M/s
PTPL, a Kolkata based company for obtaining loan.

12.   Loan of Rs.1,00,00,000/- was allegedly repaid after nearly one
year without any interest. It was not the case of the appellant that she
had personal or business relationship with M/s PTPL or its directors.

13.   Though not urged before us, the assessee before the Tribunal
had submitted that the AO had relied upon statement of Rajendra
Bubna recorded under Section 131 of the Act by the DIT
(Investigation), Kolkota to the effect that Dipak Singh was a name
lender and dummy director.       Rajendra Bubna would control and
manage several companies which were paper and shell companies.
Rajendra Bubna had described in detail how funds/ cash / money was
rooted through a complex web of paper companies to finally reach the
beneficiaries.    M/s.PTPL did not figure in the list of dubious
companies mentioned by Rajendra Bubna, albeit, Tribunal, observed
that this would not make any difference as Dipak Singh was certainly



ITA No.723/2018                                   Page 5 of 8
a director of PTPL and had signed the income-tax returns.
Accordingly, the appellant had argued before the Tribunal that the AO
should have summoned and permitted cross-examination of Rajendra
Babua. AO had rejected the contention due to paucity of time.
Tribunal on the said aspect observed that the matter could not be
decided in favour of the assessee for this reason alone as there was
enough material to implicate and hold that the appellant had obtained
accommodation entry of Rs.1,00,00,000/- from M/s. PTPL. AO had
carried out investigation by issuing summons to director of M/s. PTPL
to appear in person, but there was non compliance and failure. AO
had recorded statement of the appellant under Section 131 of the Act
which was ambiguous and had corroborated and affirmed clandestine
nature of the transaction. Lest there be any doubt or debate, we would
quote paragraphs 27 and 28 of the order passed by the Tribunal:

      "27. The matter does not stop here. Having so much
      material to implicate the assessee for having obtained an
      accommodation entry of Rs.1 crore from PTU, the AO
      carried out further investigation by issuing summons u/s
      131 of the Act to the directors of PTU requiring their
      appearance in person. Unfortunately, no compliance was
      made. Thereafter, the Assessing Officer recorded
      statement of the assessee u/s 131 of the Act, whose
      relevant parts have been reproduced on pages 6 and 7 of
      the assessment order. In response to question no. 7 about
      the assessee having outstanding loans from around 24
      parties and requiring to give: "the exact purpose for
      which you have taken these loans", she simply replied
      that the finances were managed by her husband and she
      had no idea of it. On a question as to whether she
      operated her account or had any ATM card/debit and
      credit card, she answered in negative. Her statement







ITA No.723/2018                                 Page 6 of 8
      amply shows that she had absolutely no idea about any
      loan taken from PTU, which is one of the 24 parties
      appearing in her balance sheet.

      28. When a final show cause notice was issued
      requiring the assessee to explain as to why a sum of Rs.l
      crore received from PTU be not added to the income as it
      was a bogus loan received from a paper company, the
      assessee required cross-examination of Shri Rajendra
      Bubna and stated that name of PTU was not appearing in
      the statement of Shri Rajendra Bubna. In our considered
      opinion, the Assessing Officer has rightly rejected the
      assessee's contentions on the ground that Shri Rajendra
      Bubna was confronted with only a sample of companies
      and was asked to confirm if he used these companies to
      provide accommodation entries, which was answered by
      him in positive. We have noticed above that though name
      of the assessee company was not appearing in the list of
      16 companies given on pages 3 and 4 of the assessment
      order having Shri Dipak Singh as a director, but, the fact
      of his being a director has been proved from his signing
      the return of income for the year under consideration in
      the capacity of director. This shows that all the lists
      referred to in the assessment order are inclusive and the
      assessee cannot gain any mileage from the fact that name
      of PTU is not specifically depicted therein. "

14.   In view of the aforesaid factual background, the Tribunal was
right and justified in relying on the judgments of the Supreme Court
in CIT v. Durga Prasad More, (1971) 82 ITR 540 (SC) and Sumati
Dayal v. CIT, (1995) 214 ITR 801 (SC), to reject mere paper work
and look at the reality behind a facade created to hoodwink and
deceive. Merely because the transaction was squared in the next




ITA No.723/2018                                 Page 7 of 8
financial year would not establish that the transaction was genuine
and not bogus.
15.   In view of the aforesaid position, we are not inclined to issue
notice. Appeal is dismissed, without any order as to costs. Pending
application is also dismissed.



                                              SANJIV KHANNA, J



                                         CHANDER SHEKHAR, J
JULY 11, 2018/tp




ITA No.723/2018                                Page 8 of 8

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