TaxTMI 
TaxTMI 
2015 (1) TMI 1119
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....e all against the confirmation of addition under Section 68 of the Income-tax Act, 1961 as under:- Name Addition 1. M/s Omni Farms Pvt. Ltd. Rs. 2,11,80,616/- 2. M/s Passion Chits Pvt. Ltd. Rs. 40,09,850/- 3. M/s Beriwal Investment & Chit Fund Pvt. Ltd. Rs. 7,88,73,170/- 4. M/s Champ Finvest Pvt. Ltd. Rs. 6,82,34,143/- 5. M/s Cubic Commercial Resources Ltd. Rs. 4,38,40,592/- 6. M/s Vijay Conductors India Pvt.Ltd. Rs. 16,23,103/- 7. M/s Vishrut Marketing Pvt.Ltd. Rs. 5,04,06,893/- 8. M/s Namrata Marketing Pvt.Ltd. Rs. 10,82,91,085/- 9. M/s Katson Hotel & Developers Pvt.Ltd. Rs. 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 c....
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....he 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 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....
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....t 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 contr....
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....essee 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 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,....
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....it 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, 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....
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.... 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 b....
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....nly 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 h....
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....risdictional High Court has held that even if some material has been 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....