IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "D" NEW DELHI
BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER
AND
SHRI H.S. SIDHU: JUDICIAL MEMBER
ITA no. 3966/Del/2010
Asstt. Yr: 2006-07
Jagrati Traders Pvt. Ltd., Vs. Income-tax Officer,
A-231, 2nd Floor, Derawal Nagar, Ward 4(1), New Delhi.
Delhi.
PAN: AAACJ 0442 N
( Appellant ) (Respondent)
Appellant by : Shri K.R. Manjani Adv.
Respondent by : Shri Gaurav Dudeja Sr. DR
Date of hearing : 26/06/2015.
Date of order : 19/08/2015.
ORDER
PER S.V. MEHROTRA, A.M..:
This appeal has been preferred by the assessee against the CIT(A)-VII, New
Delhi's order dated 6-5-2010 in appeal no. 161/08-09, relating to asstt. Year 2006-
07. Following grounds are raised:
"1. That on the facts and on the circumstances of the case ,
the learned CIT(Appeals) has not considered the facts of the
case and legal Judgments of Jurisdictional Courts, ITAT and
Supreme Court and other different courts of law as cited in the
appeal while deciding the matter Of addition of income on
estimation/guess work basis merely on surmises and
conjectures.
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2. That on the facts and in circumstances of the case the
learned CIT(A.) has erred in law and on facts by upholding the
finding of the AO regarding the Nature of business of the
assessee without any cogent evidences.
3. That learned CIT(A) has erred on the fact and on law and
in circumstances of the case wherein he has not considered the
submissions of the assessee filed during the course of
proceedings .
4. That the learned CIT(A) has erred on the facts and on law
wherein upholding the claim of the AO without going into the
fact that the) order of AO had been passed without confronting
any material to the assessee which itself is against the Principle
of Natural Justice.
5. That the CIT(A) erred on facts and circumstances of the
case wherein without any substance in his logic for estimating
the income 'of the assessee he proceeded to estimate merely on
conjecture and surmises.
6. That the CIT(A) erred on facts and circumstances of the
case wherein he did not find or identified any single transaction
effectively carried out by the assessee and without proving the
same to be as sham transaction wherein the AO and CIT(A)
harbored a supernatural belief that in transferring the funds on
account of sale and purchase the assessee must be earning some
sort of commission income which is illegal and baseless merely
on presumption.
7. That the appellant craves the indulgence of this Hon'ble
appellant authority to amend any/all grounds of appeal either
before or at the time of hearing of this appeal."
2. Brief facts of the cases are that in the relevant assessment year the
assessee company as engaged in the purchase and sale of shares (trading) as
well as investment in shares besides finance and advances. The assessee had
filed its return of income, declaring loss of Rs. 1007/-. The AO noticed that
the assessee company had dealt in the following shares:
i. BVanzo Papers,
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ii. Explore Computers;
iii. Bolt Synthetics;
iv. Datta Finance & Trading;
v. Deplomat International
vi. Elent Steels
vii. Makesr Agencies
viii. Zig Zag Exports
ix. S.S.A. Credits,
x. Rose Alloys,
xi. Commitment Financial Services etc.
2.1. He observed that none of these alleged companies had mentioned the
words "Ltd." or "Pvt. Ltd.". He observed that all these were, in any case,
unlisted companies and, therefore, no person would invest in ordinary course
and deal with these companies. He further noted that in all the cases the
purchases as well as sales had been made @ 10/- per share. Being doubtful
about the credence of purchase and sales, he issued notices u/s 133(6) to the
following concerns with which the assessee claimed to have business
transactions:
(i) M/s Joy Commercial Pvt. Ltd.
(ii) M/s Glory Commercial Pvt. Ltd.
(iii) M/s A.K. Kumar & Company
(iv) M/s Jumbo Consultants Pvt. Ltd.
(v) M/s Thunder Exports Pvt. Ltd.
(vi) M/s Guard Commercial Pvt. Ltd.
2.2. The AO has noted that no response was received from M/s Joy
Commercial Pvt. Ltd. and /s Glory Commercial Pvt. Ltd. and in case of other
four, the notices issued u/s 133(6) returned unserved. After considering all
these aspects, the AO concluded that assessee was an entry operator, inter
alia, observing as under:
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"The actual position is that the assessee M/s Jagrati Traders Pvt.
Ltd. is a part of the Vikas Holding Pvt. Ltd. group being run by
Ajay Kumar and Pradeep Kumar and these two persons are
running more than 30 bank accounts of various concerns
including the assessee company. The entire group has been
subject of certain inquiries and investigation by the
investigation Wing wherein it has been found that they are not
carrying on any actual business. They have been found to be
engaged in the activity of providing accommodation entries.
The person/ party who provides such entry is known as Entry
Operator and the person/ party taking such entry is called
beneficiary."
earning through commission. He, accordingly, made addition of Rs.
5,33,370/-, inter alia, observing as under:
"The total credits in the bank accounts of the assessee company
(as per the bank book for Bank of India account maintained by
the assessee) less the opening balance for the relevant period
works out to Rs. 2,13,34,810/- (2,16,70,532- 3,35,722). Taking
the average of the commission rates as 2.5%, a sum of Rs.
5,33,370/- (i.e. 2.5% of Rs. 2,13,34,810/-) is also added to the
income of the assessee as the commission paid to the entry
operators. The total commission income of the assessee from
this activity of giving `adjustment entries' thus works out to Rs.
5,33,370/-."
2.3. Accordingly, the total income was determined at Rs. 5,32,363/-.
2.4. Before ld. CIT(A), the assessee had filed following documents:
i) Detail of sale of shares to various parties during the year under
consideration.
ii) Copy of the statement for the year under consideration relating to
the bank account of the appellant with Bank of India, Ansari Road,
Delhi; and
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iii) Confirmation of accounts from the parties to whom the shares have
been claimed to have been sold during the year under
consideration."
2.5. The AO submitted its remand report, which has been reproduced in
para 5.1 of the CIT(A)'s order. The said remand report was provide to
assessee. The assessee's rejoinder has been reproduced in para 5.2 of
CIT(A)'s order.
2.6. After considering the reply, the ld. CIT(A) determined the
commission/ brokerage @ 1.5% on the total bank entries of Rs.
2,13,34,810/-, which came to Rs. 3,20,022/-.
3. Ld. counsel for the assessee submitted that the CIT(A) has not
considered the detailed reply filed by the assessee. He prayed that the matter
may be restored back to the file of AO for de novo consideration.
4. Ld. DR relied on the order of CIT(A).
5. We have considered rival submissions and perused the material
available on record. We find that the observations made by the AO in the
remand report were replied by assessee. However, they have not been
considered by ld. CIT(A). We have examined the case of M/s Joy
Commercial Pvt. Ltd. (supra), wherein AO in the remand report, inter alia,
observed that, "a perusal of the details filed revealed that the bank statement
for only a part of the year was filed and not the statement for the full year as
specifically asked for in the summons issued".
5.1. In the reply filed by assessee, the assessee has categorically stated
that, "AO never requisite the parties to whom he summoned to submit the
copies of the bank statement for full year. He had merely asked the parties to
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show him the bank statement for financial year 2005-06, which had been
duly perused by him during the course of attendance of the summoned
parties wherein he asked from the party the relevant part of the copy of the
bank statement wherein transaction had taken place with the assessee. He
also perused the books of account and bills and vouchers which had been
produced before him, but the AO had observed contrary to the same".
These submissions, contradicting the stand of AO, have not been considered
by ld. CIT(A).
5.2. Similar is the position in regard to other parties which we do not
propose to go into detail. Considering the contradictions in the finding
regarding production of evidence before AO, we consider it in the interest of
justice that the order passed by ld. CIT(A) be set aside and the matter be
restored to the file of AO for de novo consideration after affording
reasonable opportunity of being heard to the assessee. We direct
accordingly.
6. In the result, assessee's appeal is allowed for statistical purposes only.
Order pronounced in open court on 19/08/2015..
Sd/- Sd/-
(H.S. SIDHU) (S.V. MEHROTRA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 19/08/2015.
*MP*
Copy of order to:
1. Assessee
2. AO
3. CIT
4. CIT(A)
5. DR, ITAT, New Delhi.
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-+ Date
Initial
1. Draft dictated on -07.2015 PS
2. Draft placed before author .07.2015 PS
3. Draft proposed & placed before the second JM/AM
member
4. Draft discussed/approved by Second JM/AM
Member.
5. Approved Draft comes to the Sr.PS/PS PS/PS
6. Kept for pronouncement on PS
7. File sent to the Bench Clerk PS
8. Date on which file goes to the AR
9. Date on which file goes to the Head Clerk.
10. Date of dispatch of Order.
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