Pr. Commissioner Of Income Tax, Udaipur v. M/S Esspal International Pvt. Ltd., B

HIGH COURT OF JUDICATURE FOR RAJASTHAN ATJODHPUR D.B. Income Tax Appeal No. 25/2024 Pr. Commissioner Of Income Tax, Udaipur ----Appellant Versus M/s Esspal International Pvt. Ltd., B-159, Shastri Nagar, Bhilwara311001 ----Respondent HON'BLE MR. JUSTICE SHREE CHANDRASHEKHAR HON'BLE MR. JUSTICE KULDEEP MATHUR Order 03/09/2024 Per, Shree Chandrashekhar, J. In this Income Tax Appeal, a challenge has been laid to theorder dated 3[rd] January 2024 passed by the Income Tax AppellateTribunal, Jodhpur Bench, Jodhpur. 2.This Income Tax Appeal has been filed under section 260-Aof the Income Tax Act, 1961 and the following substantial questions of law have been framed:- “(i) Whether on the facts and in the circumstances of thecase and in law, the ld. ITAT was justified in upholding thedecision of CIT (A) who had deleted the addition made bythe AO on account accommodation entries after detailedexamination and verification of facts and law? (ii) Whether on the facts and in the circumstances of thecase and in law, the ld. ITAT was justified upholding thedecision of in ignoring the fact that all the transactions whichwere made by the Accommodation Entries providers towhich the assessee was one of the beneficiaries were shamtransactions and used as a colorable device and generation of documentary evidence for converting unaccounted moneyinto tax exempt income? (iii) Whether on the facts and in the circumstances of thecase and in law, the ld. ITAT was justified in dismissing theappeal of Revenue in not considering the issue on meritespecially when Shri Shirish Chandrakant Shah in hisstatement recorded under section 132(4) of the Act dated11.06.2013, in reply to question no.5, he had clearly statedthat till 31.03.2012 he had provided one-timeaccommodation entries aggregating to Rs.15,00,04,53,100/-to various beneficiaries which were identified by him asAnnexure to his statement?” 3.The appellant-Principal Commissioner of Income Tax has pleaded that the overall tax effect involved in this case isRs.92,25,000/- which is below the prescribed monetary limit forfiling further appeal before the High Court under section 260-A ofthe Income Tax Act, 1961; vide Circular No.5/2024 dated 15[th]March 2024. Notwithstanding that, the present Income Tax Appealhas been filed in view of para no.3.1(h) of the said Circular whichprovides for filing of the appeal where the case involves organizedtax evasion including cases of bogus capital gain/loss throughpenny stocks and cases of accommodation entries. 4.The case set up by the Income Tax Department is that on 9[th]April 2013 a search was conducted at the residence and offices ofShirish Chandrakant Shah and also at the residences of hisemployees and associates and it was detected that he wasengaged in providing accommodation entries of share capital,share premium, share application money, unsecured loans, longterm capital gains, short term capital gains etc. in lieu of cashreceived by him. Accordingly, a notice under section 148 of theIncome Tax Act, 1961 was issued to him on 10[th] November 2014for initiating the reassessment proceedings on the ground ofescapement of income to the tune of Rs.2,90,00,000/-. On completion of the assessment under section 143(3) read withSection 147 of the Income Tax Act, 1961, the total incomeassessed was Rs.3,75,06,610/- by making additions on account ofbogus share application money and commission for bogusaccommodation entries. 5.The assessment order dated 22[nd] March 2016 passed undersection 143(3)/147 of the Income Tax Act, 1961 was challengedby the respondent by filing Appeal No.119/2016-17 which wasallowed by an order dated 15[th] March 2018. This appellate orderwas put to challenge by the Income Tax Department by filingI.T.A. No.288/Jodh/2018. completion of the assessment under section 143(3) read withSection 147 of the Income Tax Act, 1961, the total incomeassessed was Rs.3,75,06,610/- by making additions on account ofbogus share application money and commission for bogusaccommodation entries. 5.The assessment order dated 22[nd] March 2016 passed undersection 143(3)/147 of the Income Tax Act, 1961 was challengedby the respondent by filing Appeal No.119/2016-17 which wasallowed by an order dated 15[th] March 2018. This appellate orderwas put to challenge by the Income Tax Department by filingI.T.A. No.288/Jodh/2018. 6.In the background of the aforementioned facts, Mr. K.K.Bissa, the learned standing counsel submits that the findingsrecorded by the Tribunal are ex-facie erroneous and contrary tothe materials on record. The learned counsel for the appellantsubmits that on examination of the soft data seized andimpounded in course of the search proceeding, it was detectedthat Shirish Chandrakant Shah had provided one-time entry ofRs.3,00,00,000/- to the assessee-company through a brokernamed Hiren Shah and such transaction was not genuine. 7.After having considered the materials on record, we are ofthe opinion that the Tribunal has rendered the findings on thebasis of the materials on record. The Tribunal held as under:- “……………………………………………………………………………………………………………………………………………………………………………………… 12. From the record, it is evident that the appellant hasfurnished each and every document required for provingthe identity, creditworthiness of the share applicants andgenuineness of the transactions whereas the AO or theDR has not been able to brought on record any evidenceto show that cash was paid by the appellant company toShri Shirish Chandrakant Shah or any other person forfurnished each and every document required for provingthe identity, creditworthiness of the share applicants andgenuineness of the transactions whereas the AO or theDR has not been able to brought on record any evidenceto show that cash was paid by the appellant company toShri Shirish Chandrakant Shah or any other person for obtaining accommodation entries from M/s GaneshSpinners Ltd., M/s Emplis Projects Ltd., M/s Specialitypapers Ltd., M/s Dhanus Technologies Ltd. And M/sSanguine Media Ltd. in the form of share applicationmoney of 3,00,00,000/- either in the assessmentproceeding or remand furnished before the CIT(A) orbefore us. On similar facts, the Ld. CIT (A) has rightlyrelied on the decision delivered by the ITAT Jodhpur videits order dated 08.02.2018 in the case of M/s PSMRealmart Pvt. Ltd. (ITA No.321/Jodh/2017) on and theCoordinate bench of ITAT Delhi in the case of CIT vs.Nishit Fincop. P.Ltd. (ITA No.15/Del./2010) where theaddition made u/s 68 has been deleted. The ld. CIT(A)further relied upon the decision of Jurisdictional ITAT inthe case of PSL Relmart and decision of Supreme Courtin the case of Andman Taubar Industries (Civil AppealNo.4228 order dated 02.09.2015) while deleting theaddition of Rs.3,00,00,000/- made by the AO u/s 68 ishereby deleted. …………………………………………………………………………………………………………………………………………………………………………………………14. That the Ld. CIT(A) on a very detailed examinationwas satisfied about identity, creditworthiness andgenuineness of the investor companies and held that theassessee had discharged the primary onus to prove theiridentity, creditworthiness, and genuineness. We,therefore, concur with the finding of the Ld. CIT(A) thatthe AO has made an addition under section 68 of the Actwithout any basis. In our view, the CIT(A) has analyzedthe transaction with each share holder and assignedreasons as to why share capital have to be treated asgenuine and has rightly deleted the addition. There is noreason to interfere in this finding of fact particularly sincenothing has been shown by the department to concludethat the finding of fact was perverse in any mannerwhatsoever. In view of that matter, we hold that theimpugned order it did not suffer from any legal infirmityor perversity to the facts on record.” 8.In “Pankaj Bhargava and Anr. vs. Mohinder Nath and Anr.” AIR 1991 SC 1233, the Hon’ble Supreme Court held that if aquestion of law has been settled by the highest Court of thecountry that question, however important and difficult it may havebeen regarded in the past and however large may be its effect onany of the parties, would not be regarded as substantial questionof law. The expression ‘substantial question of law’ has been explained by the Hon’ble Supreme Court in “Sir Chunilal V. Mehtaand sons Ltd. Vs. Century Spinning and Manufacturing Co. Ltd.”AIR 1962 SC 1314 wherein the Hon’ble Supreme Court held thatthe proper test for determining whether a question of law raised inthe case is substantial would be to find out whether it directly andsubstantially affects the rights of the parties and if so whether it iseither an open question or is not free from difficulty or calls fordiscussion of alternative views. 9.Applying the aforesaid test, we find that the question soughtto be raised in this Income Tax Appeal is not even a question oflaw. The ground taken by the appellant that the findings recordedby the Tribunal are contrary to records seems to have been raisedjust for the sake of creating a ground; nothing has been shown tothis Court on this point. The findings recorded by the appellateAuthority and the Tribunal are in consonance with the law ofevidence and the Income Tax Act, in particular. On a glance atmaterials on record, we find that the Assessing Officer assessedM/s Esspal International Pvt. Ltd. under section 143(3) of theIncome Tax Act, 1961 only on the basis of the statement given byShirish Chandrakant Shah; though he has recorded that theassessment order is being passed after considering the “totality ofthe facts and circumstances the case”. 10.The Assessing Officer held as under:- “………………………………………………………………………………………………………………………………………………………………………………………5.Thus, it is clear from above discussion that M/s.Esspal International Pvt. Ltd. Has receivedaccommodation entries of ₹3.00 crores from Shri ShirishChandrakant Shah.6.In view of the above, it is crystal clear that thetranscations made with the concerns owned or operatedby Shirish Chandrakant Shah are not genuine and there are only paper transaction took place instead of actualtransactions. Although the transactions are completedthrough banking channel after getting commission incase. Therefore, share application money of₹3,00,00,000/- shown by the assessee is treated asdiversion of profits to evade the tax liabilities. Therefore,the amount of ₹3,00,00,000/- is added to the totalincome of the assessee. Penalty proceedings u/s.271(1)(c) are initiated for concealing income by furnishinginaccurate particulars of income. -Addition: ₹3,00,00,000/ are only paper transaction took place instead of actualtransactions. Although the transactions are completedthrough banking channel after getting commission incase. Therefore, share application money of₹3,00,00,000/- shown by the assessee is treated asdiversion of profits to evade the tax liabilities. Therefore,the amount of ₹3,00,00,000/- is added to the totalincome of the assessee. Penalty proceedings u/s.271(1)(c) are initiated for concealing income by furnishinginaccurate particulars of income. -Addition: ₹3,00,00,000/ 7.Shirish Chandrakan Shah in his statement hasadmitted that “rate of commission varying between 2.5%to 5% on the total benefits provided to the beneficiariesin form of LTCG, STCG, Sharge Application Money orunsecured loans. Therefore, on the basis of admission byShirish Chandrakant Shah, commission of @2.50% forbogus accommodation entries of ₹3,00,00,000/- whichamounts to ₹7,50,000/- is added to the total income ofthe assessee being undisclosed income. Penaltyproceedings u/s.271(1)(c) are initiated for concealingincome by furnishing inaccurate particulars of income. -Addition: ₹7,50,000/ 8.Subject to the above remarks and after consideringthe totality of the fact and circumstances of the case, thesubmissions of the assessee and the material availableon the record the total income of the assessee iscomputed as under :- Assessed u/s.143(3) of the Income Tax Act, 1961 attotal income of ₹3,57,56,610/-. Demand Notice, Challan& other forms are also hereby issued as per ITNS-150which is forming part of this assessment order. PenaltyNotice u/s.271(1)(c) of the Income Tax Act, 1961 isbeing issued separately for concealing income byfurnishing inaccurate particulars of income.” 11.Now it is a matter of record that Shirish Chandrakant Shahhad retracted his statements given before the Assessing Officer.Even otherwise, an admission by the assessee cannot be said to be a conclusive piece of evidence. The admission of the assesseein absence of any corroborative evidence to strengthen the case ofthe Revenue cannot be made the basis for any addition.Therefore, the substantial questions of law framed by theappellant pertained to an open issue which stands concluded bythe decision of the Hon’ble Supreme Court; one such decision wasrendered in “M/s Pullangode Rubber Produce Co. Ltd. v. State ofKerala And Another” (1973) 19 ITR 18. 12.Therefore, we hold that no substantial question of law arisesbetween the parties and while so, the present Income Tax Appealis not maintainable. 13.For the foregoing reasons, D.B. Income Tax AppealNo.25/2024 is dismissed. (KULDEEP MATHUR),J 16-KshamaD/- (SHREE CHANDRASHEKHAR),J