HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 577 / 2011 Commissioner of Income Tax-I, New Central Revenue Building, Statue Circle, Jaipur (Raj) Appellant Versus M/s Prestige City Developers P. Ltd., ISF, Kamal Complex, M.I. Road, JaipurRespondent For Appellant(s) : Mr. Anuroop Singhi with Mr. Aditya Vijay For Respondent(s) : Mr. Sanjay Jhanwar with Ms. Archana HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH Judgment 04/09/2017 1. By way of this appeal, appellant has assailed judgment and order of Tribunal whereby Tribunal has dismissed appeal of department and cross objection of assessee was partly allowed for statistical purposes. 2. This court while admitting appeal on 19.10.2011 framed following substantial question of law:- i. Whether tribunal was justified in deleting addition of Rs.7,59,67,000/- which was made by Assessing Officer on account of bogus payment shown by assessee to M/s. Mrigiya Electronics Industries Private Limited for purchasing land of Rs.4,35,60,000/- for Rs.11,95,27,000/- without any justification for same. ii. Whether tribunal was justified in deleting addition of Rs.15,19,340/- (Downloaded on 01/08/2019 at 11:52:39 AM) being commission paid by it to M/s. Mrigiya Electronics Industries Private Limited for giving accommodation entries, when it was deposed by it s Director that company was involved in providing accommodation entries after charging commission for same? 3. facts of case are that appellant is engaged in real estate business and has launched residential scheme at Jodhpur. During year land was purchased from various persons for its real estate projects. As per AO value of land purchased as per registered sale deed comes to Rs.43560000/- but appellant has claimed cost of land in its books of accounts at Rs.119527000/-. It was stated that difference of these two amounts was paid to one M/s. Mrigiya Electronics Inds. Pvt. Ltd. as cost of consolidation. Copies of agreements between M/s. Mrigiya Electronics Pvt. Ltd. and land owner as well as between appellant and M/s. Mrigiya Electronics Inds. Pvt. Ltd. were produced. inference drawn from agreement is that M/s. Mirgya first entered into agreement for purchase of land from 12 owners and then immediately selling same to appellant for Rs.119527000/-. payments were made to land owners by M/s. Mrigiya Electronics Inds. Pvt. Ltd. in cash at time of agreement. Total such cash payments of Rs.61 lacs were made as advance against total consideration of Rs.43560000/-. 4. Counsel for appellant Mr. Singhi has taken us to order of AO wherein AO observed as under:- S.N Khasra Area (in Names of recorded Dt. of Price Earnest Total price o. No. bigha) owners of land agreement payable by money payable by (Downloaded on 01/08/2019 at 11:52:39 AM) between first party paid by second first party (M/s. First party, party (M/s. (M/s. Mrigiya (M/s. Prestige Mrigiya Electronics Mrigiya City Eelectornic Industries Electronics Developers s P. Ltd.) to Industries P. Ltd) to Industries recorded P. Ltd) to first party P. Ltd.) and owners recorded (M/s. recorded owners Mrigiya owners Electronics Industries P Ltd.) @ Rs.8.90 lacs per bigha 1 2 3 4 5 6 7 8 1 141 15.45 Smt. Rita Goyal 5.4.06 5425000 500000 13750500 2 141/1 21.35 Smt. Sangeeta Agarwal 6.4.06 7475000 700000 19001500 3 141/2 21.35 Smt. Narmada Modi 7.4.06 7475000 700000 19001500 4 141/3 15.20 Smt. Shobha Modi 7.4.06 5325000 700000 13528000 5 178 8 Smt. Manju Vyas 7.4.06 2000000 500000 7120000 6 178 8.20 Smt. Dhiraj Kanwar 5.4.06 2050000 500000 7298000 7 178 8 Smt. Ashu Chaudhary 6.4.06 2000000 500000 7120000 8 179/1 9.80 Smt. Anita Gupta 5.4.06 2450000 500000 8722000 9 179/2 9.80 Smt. Kavita Goyal 5.4.06 2450000 300000 8722000 1 184 8.85 Smt. 7.4.06 2225000 500000 7876500 8. On preliminary study of audit report of M/s. Mrigiya Electronics Industries P Ltd. it was noticed that audit report does not show any activity of land purchased or sale. Neither any profit on account of this activity was reflected in final accounts. M/s. Mrigiya Electronics Industries P Ltd. showing business of only sale and purchase of shares. Only Nil income has been shown and loss of Rs.12,218.73 is reflected in P& L a/c. Audit report & ITR-V of M/s. Mrigiya Electronics Industries P Ltd. is annexed with this order as Annexure-A. 4.1. Taking into consideration above factual position AO held as under:- (Downloaded on 01/08/2019 at 11:52:39 AM) 16. assessee has claimed expenditure under various heads. These expenditures have been charged to project work in progress. During course of examination of books of accounts it was noticed that assessee has claimed under mentioned payments: (i) Commission has been paid to Smt. Nirmala Kedia at Rs. 2,35,000/-, to Smt. Shashi Kedia at Rs.2,65,000/- and Sh. Surendra Kedia at Rs.1,45,000/-. assessee was asked to file justification of these expenses as these are payments to related parties u/s 40(a)(2)(b). vide reply dated 30.12.2009, assessee has filed bills of these persons. These bills show that sales commission against sales of plot have been paid by assessee to these persons for attracting investment. commission has been paid @ 2.35% to Nirmala Kedia, @ 2.65% to Shashi Kedia and @ 2.90% to Surendra Kedia. interesting feature of this expenditure is that investment has been shown in name of M/s Vaishnavi Home Entertainemtn P Ltd, Tuticorin Traxim P Ltd and Alishan Estate, & Wrack Electronics P Ltd, New Delhi. names of these companies do not appear in list of persons from whom advance have been received for booking of plot. Rather these companies have introduced share application money/share capital/unsecured lions as per details filed by assessee. claim of this expenditure is therefore disallowed being bogus and without any justification. This works out to Rs.6,45,000/-. Penalty proceedings u/s 271(1)(c) r.w 274 of Income-tax Act for concealment and furnishing of inaccurate particulars are initiated separately. (ii) assessee has also claimed capital expenditure of Rs. 168600/- as revenue expenditure. capital expenditure pertains to fees paid to Registrar of Companies for increasing authorized capital of company. This fact was brought to notice of assessee vide order sheet entry dated 29.12.2009. No satisfactory reply has been filed. It is therefore, disallowed from revenue expenses claimed by assessee. Penalty proceedings u/s271(1)(c) r.w 274 of Income-tax Act for concealment and furnishing of inaccurate particulars are initiated separately. (iii) assessee was asked to file justification of expenses of Rs.1,25,000/- claimed in name of one Smt. Sangeeta Thakur. No reply has been (Downloaded on 01/08/2019 at 11:52:39 AM) filed in response to specific query dated 29.12.2009. this expenses is disallowed on both counts of allowability as well as u/s 40(a)(ia). Penalty proceedings u/s 271(1)(c) r.w 274 of Income-tax Act for concealment and furnishing of inaccurate particulars are initiated separately. (iv) assessee has booked various expenses of contractual nature, vide order sheet entry dated 29.12.2009, assessee was asked to show cause why same should not disallowed u/s40a(ia). In response thereto assessee has only filed copy of bills of these expenses rather than giving any reason for non deduction of TDS. These expenses are hereby disallowed u/s40a(ia). Surveying & BLG 89809 consultation exp Construction Office renovation Ghanshyam 180335 Jangid Advertisement Kalarthi 134549 Site office Kaluram Sonel 55230 Advertisement Kushal Global 24750 Ltd Supervision over Sudesh Purohit 69317 contractors @ 2% Advertisement Vikalp Events & 77000 Promotion Advertisement Vyas 22448 Enterprises CD Presentation Sandeep Yadav 75000 Total 728438 Subject to remarks above, value of project work in progress as on 31.3.2007 declared by assessee is re-calculated under: Description Value shoen Disallowance Value by as per calculated as assessee discussion per (Downloaded on 01/08/2019 at 11:52:39 AM) above assessment order Land 122689030 75967000 46722030 Site 16068778 953438 15115340 development expenses Preliminary & 7355345 813600 6541745 preoperative expenses Total 68379115 Subject to remarks above, total income of assessee is computed is as under: Income shown Nil Unrecorded 1519340 expenditure as per para 14 Unrecorded 6100000 expenditure as per para 15 Total Income 7619340 4.2 He further contended that CIT(A) while considering matter has not considered facts in true spirit and has wrongly partly allowed appeal of assessee and tribunal has committed serious error in dismissing appeal of department. 4.3 He has relied upon decision of Calcutta High Court in CIT vs. Precision Finance Pvt. Ltd. (1994) 208 ITR 465 wherein it has been held as under:- In course of assessment proceedings for assessment years 1978-79 and 1979-80, AO (Downloaded on 01/08/2019 at 11:52:39 AM) found various cash credits in books of assessee. Enquiries were conducted through inspector on different dates and it was found that either files did not exist as per details given by assessee or records did not tally with facts mentioned by assessee. Apart from having enquiries made by inspectors several letters also issued to assessee between January 16, 1982, and February 24, 1986 bringing to its notice that loans could not be verified and adequate proof was required. assessee had not responded. Hence, tribunal was not justified in law in deleting addition of Rs.5,64,631/- and Rs.4,84,205 as unexplained credits and interest thereon for assessment years 1978-79 and 1979-80, respectively. 4.4 He also relied upon decision of Supreme Court in Vijay Kumar Talwar vs. CIT (2011) 330 ITR 1 (SC) wherein Supreme Court held as under:- 21. finding of fact may give rise to substantial question of law, inter alia, in event findings are based on no evidence and/or while arriving at said finding, relevant admissible evidence has not been (2006) 5 SCC 545 taken into consideration or inadmissible evidence has been taken into consideration or legal principles have not been applied in appreciating evidence, or when evidence has been misread. (See: Madan Lal Vs. Mst. Gopi & Anr.4; Narendra Gopal Vidyarthi Vs. Rajat Vidyarthi5; Commissioner of Customs (Preventive) Vs. Vijay Dasharath Patel6; Metroark Ltd. Vs. Commissioner of Central Excise, Calcutta7; West Bengal Electricity Regulatory Commission Vs. CESC Ltd.8) (2002) 8 SCC 715. 4.5 He has also relied upon decision of Bombay High Court in CIT vs Shah Construction Co. Ltd. (1998) 230 ITR 51 (Bom) wherein it has been held as under:- (Downloaded on 01/08/2019 at 11:52:39 AM) So far as assessee was concerned, amount of Rs.2,81,331/- was receivable service charges from Builders International (India) Ltd. in previous year relevant to assessment year 1980-81. There was no reason to hold that it was not includible in assessee s income. service charges amounting to Rs.2,81,331/- had accrued to assessee and was assessable in its hands. 6. As against this, Mr. Jhanwar, counsel for respondent has taken us to order of CIT(A) wherein it has been held as under:- Regarding AO's finding that M/s Mrigiya Electronics Inds. Pvt. Ltd. Was not genuine entity, statemtns ofthe director of M/s Mrigiya Electronics Inds. Pvt. Ltd. Were recorded in December, 2006 wherein he has admitted that he was involved in providing accommodation entries in respect of shares. statement was subsequently retracted by Shri Pramod Sharma, director of M/s Mrigiya Electronics Inds. Pvt. Ltd.. AO in case of M/s Mrigiya Electronics Inds. Pvt. Ltd. Has made addition of Rs.75967000/- as he obtained this information from M/s Mrigiya Electronics Inds. Pvt. Ltd.'s bank account. Thus payments made by appellant to M/s Mrigiya Electronics Inds Pvt. Ltd. Through banking channel are supported by bank account. There is no finding of AO that this amount was withdrawn in cash by M/s Mrigiya Electronics Inds. Pvt. Ltd. And money has come back to appellant. Copy of bank account of M/s Mrigiya Electronics Inds. Pvt. Ltd. Was filed by appellant before AO. M/s Mrigiya Electronics Inds. Pvt. Ltd.'s confirmation was filed by appellant. addition is not base on any admission given by Shri Pramod sharma regarding transactions with appellant company and, therefore, general confession cannot be made basis for making any addition in case of assessee. As transaction between appellant and M/s Mrigiya Electronics Inds. Pvt. Ltd. Is supproted by bank statement, agreement and price paid found to be reasonable, taking adverse view on genuineness of M/s Mrigiya Electronics Inds. (Downloaded on 01/08/2019 at 11:52:39 AM) Pvt. Ltd. On basis of some enquiry against it in some other case that too for different assessment year will not be justified. AO in Show Cause Notice informed appellant that Sri Pramod Kumar Sharma, Director M/s Mrigya in his statement on oath on 16.12.2006 before DDIT (Inv.) Kolkata has stated that he got cash equivalent amount ffrom companies and out specific transaction related tothe appellant's business. Nor there is any finding that cash of equivalent amount was returned to appellant. To prove accommodation entry it is required to prove that cash has come back toparty against cheque issued by him. Further there should be direct nexus between conclusions of fact arrived at by AO and primary facts upon which conclusion is based. Conclusion should be reached on appreciation of number of facts and by assessing cumulative effect of all facts as whole. 6.1 He has also taken us to observation made by tribunal in para no.18, 21 to 25 which reads as under:- 18. AO analyzed transaction of purchase of land by M/s Mrigiya Electronics Inds. Pvt. Ltd. From 12 recorded owners and its subsequent sale to M/s Prestige City Developers Pvt. Ltd. i.e. assessee. AO made addition off Rs. 75967000/- in hands of M/s Mrigiya Electronics Inds. Pvt. Ltd. Being profit on sale of land. Once department has taxed at Rs.7,59,67,000/- in hands of M/s Mrigiya Electronics Inds. Pvt. Ltd. Further, disallowance of said sum in hands of assessee is not justified. 21. "The total consideration paid by assessee company to acquire 134.3 bighas of land as per submission of AR is Rs. 119527000/- which includes Rs.75967000/- paid to M/s Mrigiya Electronics Inds. Pvt. Ltd. And balance to land owners direclty. AO has considered direct such payment of Rs. 43560000/- only and transactions between assessee and M/s Mrigiya Electronics Inds. Pvt. Ltd. Were considered sham. AO has come to this conclusion mainly on account of M/s Mrigiya Electronics Inds. Pvt. Ltd. Found to be involved in issuing accommodation entries (Downloaded on 01/08/2019 at 11:52:39 AM) without actual dealing in shares in earlier year. Also that Director of M/s Mrigiya Electronics Inds. Pvt. Ltd. Could not be produced before AO for examination and no books of accounts M/s Mrigiya Electronics Inds. Pvt. Ltd. Were produced. AO also doubted genuineness of transactions wherein on investment of Rs.61 lacs within month no one can earn profit of Rs. 75967000/-. AR has tried to explain that AO's observation while doubting this transaction is not correct. M/s Mrigiya Electronics Inds. Pvt. Ltd. Paid advance of Rs. 61 lacs to 12 land owners but amount was only advance and total consideration paid to land owners was Rs.43560000/-. AR by giving chart has tried to explain that land owners have earned profit of 100% to 200% within span of 8 months. While selling land at Rs. 43560000/- including payment of Rsm. 75967000/- made to M/s Mrigiya Electronics Inds. Pvt. Ltd., rate per bigha land comes to Rs.8,90,000/-. When this is compared with rate given by M/s Mrigiya Electronics Inds. Pvt. Ltd. To M/s Nikhar Builders for 1.85 bighas of land. (Rs. 16.54 lacs per bigha) rate given to M/s Mrigiya Electronics Inds. Pvt. Ltd. Does not appear to be abnormal. Both transactions took place almost at same time and transactions are also related to same area. However, rate paid by M/s Mrigiya Electronics Inds. Pvt. Ltd. To M/s Nikar Builders was on higher side because land under consideration is strip of land which connects project with National Highway. As understandably this strip of land was very crucial for project. assessee was more than ready to acquire it and, therefore, rate paid by Ms Mrigiya Electronics Inds. Pvt. Ltd. For acquired strip of land was higher. explanation offered by AR appears to be acceptable that viability of project got boost by acquiring strip of land. map submitted by AR shows that large number of other real estate projects came up during that period in that area and, therefore, available land was scaree. Due to competition and limited availability of land, prices of land at that time may be higher. In any case, AO has also not given any comparable case which shows that rates given by assessee were on higher side. payments made by assessee to acquire land under consideration are supported by valid (Downloaded on 01/08/2019 at 11:52:39 AM) agreement, sale deed and copies of bank accounts. Under facts and circumstances and in absence of any evidence contraty. It cannot be said that payments made by assessee through bank to M/s Mrigiya Electronics Inds. Pvt. Ltd. And land owners were more than actual payment or more than market price. Because of value added by M/s Mrigya by consolidating land of 12 different owners to make it worth developing township and also by adding strip of land to said chunk of land M/s Mrigya was entitled to earn profit. This argument of AR appears to be convincing. 22. As evident from chart prepared by AR, Mrigya paid rates to recorded owners almost one and half time more than DLC rates. Anybody can charge rate more than DLC rates and can get property registered at value much more than DLC value. Within short span of time profit may be earned many fold as profit depends on several factors. Unless it is established that rate claimed was abnormally higher as compared to similar deals registered during almost same time, value shown by assessee which is supported by Bank a/c cannot be denied. As value shown in sale deed registered is more than DLC rates, registering authority is under obligation to register deed. In such cases value at which property has been registered may not necessarily be correct value paid by purchaser and real consideration may be more than what is appearing in sale deed. When payment is supported by bank account and other agreements, evidences cannot to ignored simply for reason that actual consideration cannot be more than what is appearing in deed. 23. Regarding AO's finding that M/s Mrigiya Electronics Inds. Pvt. Ltd. Was not genuine entity, statements of director of M/s Mrigiya Electronics Inds. Pvt. Ltd. Were recorded in December, 2006 wherein he has admitted that he was involved in providing accommodation entries in respect of shares. statements were subsequently retracted by Shri Pramod Sharma, director of M/s Mrigiya Electronics Inds. Pvt. Ltd has made addition of Rs. 75967000/- as he obtained this information form M/s Mrigiya Electronics Inds. Pvt. Ltd.'s bank account. Thus payments made by (Downloaded on 01/08/2019 at 11:52:39 AM) assessee to M/s Mrigiya Electronics Inds. Pvt. Ltd. Through banking channel are supported by bank account. There is no finding of AO that this amount was withdrawn in cash by M/s Mrigiya Electronics Inds. Pvt. Ltd. And money has come back to assessee. Copy of bank amount of M/s Mrigiya Electronics Inds. Pvt. Ltd. Was filed by assessee before AO. M/s Mrigiya Electronics Inds. Pvt. Ltd.'s confirmation was filled by assessee. addition is not based on any admission given by Shri Pramod Sharma regarding transactions with assessee company and, therefore, general confession cannot be made basis of making any addition in case of assessee. As transaction between assessee and M/s Mrigiya Electronics Inds. Pvt. Ltd. Is supported by bank statement, agreement and price paid found to be reasonable, taking adverse view on genuineness of M/s Mrigiya Electronics Inds. Pvt. Ltd. On basis of some enquiry against it in some other case that too for different assessment year will not justified. AO in Show Cause Notice informed appellant that Sri Pramod Kumar Sharma, Director M/s Mrigya in his statement on oath on 16/12/2006 before DDIT (Inv.) Kolkata has stated that he got cash equivalent amount from companies and agaisnt same cheque has been issued. However AO failed to point out specific transaction related to assessee's business. Nor there is any finding that cash of equivalent amount was returned to assessee. To prove accommodation entry it is required to prove that cash has come back to party against cheque issued by him. Further there should be direct nexus between conclusions of fact arrived at by AO and primary facts upon which conclusion is based. Conclusion should be reached on appreciation of number of facts and by assessing cumulative effect of all facts as whole. 24. In present case except statement of Shri Sharma (Which was subsequently retracted) there is no evidence which can conclusively prove that amount given by assessee to M/s Mrigya was not real payment but accommodation entry. consideration paid by assessee for purchase of land is comparable and appears to be reasonable and, therefore, reduction made by AO in consideration shown by appellant is not justified. AO is therefore, directed to (Downloaded on 01/08/2019 at 11:52:39 AM) accept consideration as declared by assessee. grounds of appeal are decided in favour of assessee" 25. above finding of ld. CIT(A) neither could be controverted nor any material was brought on record to hold otherwise. ld. CIT(A) has taken each and every objection of AO and then concluded that explanation of assessee was acceptable. contention of AO that by merely investing Rs.61,00,000/- no one can earn such huge profit of Rs.7 crores or so has been considered by ld. CIT(A) and found that investment of Rs.61,00,000/- was given as advance and not full consideration. Therefore, on investment of Rs.61,00,000/-, earning of Rs.7 crores or so is not correct. In fact real amount was invested in land was Rs.4,35,60,000/- and purchaser M/s MEIPL was going to develop th land relating to 12 partners. Therefore, land in pieces was brought by assessee company. It is not case of department that in lieu of cheques any cash was withdrawn from bank and same has been returned to assessee. general statement recorded of Director that he is dealing in accommodation entry on account of shares cannot make company in-genuine or bogus. Thereafter statement given was retracted also. Even otherwise this is land transaction and not share transaction. Therefore also ld. CIT(A) was justified in holding that M/s. MEIPL was genuine firm and not accommodation entry provider. fact that rate on which registry was made was 11/2 time more than DLC rate. Therefore, this is also not case of department that registry has been made on understated value. All these facts were examined by ld. CIT(A) and thereafter ld. CIT(A) has concluded that AO was not justified in not accepting explanation of assessee. Detailed reasons given by ld. CIT(A) have been reproduced somewhere above in order which remained uncontroverted. In view of above facts and circumstances, we confirm finding of ld. CIT(A) in this respect. 6.2 He contended that in view of decision of Supreme Court in Jiyajeerao Cotton Mills Ltd. vs. CIT and Excess Profits, Tax (Downloaded on 01/08/2019 at 11:52:39 AM) Bombay (1958) 341 ITR 888 (SC) wherein Supreme Court held as under:- 4. At very outset, question calls for answer, does any question of law arise on order of Tirbunal ? It is only if it does, that decision of Tribunal will be open to consideration by court under section 66 of Act. Stating same proposition in different form, if that decision is one of fact turning on appreciation of evidence, this court would not interfere with it in appeal under article 136 of Constitution. Now, point in dispute in these proceedings is whether sum of Rs. 27,30,094 received by appellant as profits in 1942-1943 is taxable under Act, and that, in turn, depends on whether forward contracts which resulted in these profits were made at Gwalior as contended by appellant or at Bombay as held by Tribunal. That would clearly be question of fact, and decision of Tribunal thereon would not be liable to be challenged in these proceedings. Counsel for appellant does not dispute this position, but he contents that finding of Tribunal even on question of fact would be erroneous in law, if there is no evidence whatsoever to support it or if it is perverse. This question was quite recently considered by this court in Meenakshi Mills v. Commissioner of Income- tax, and law was thus stated : "The position that emerges on authorities may thus be summed up : (1) When point for determination is pure question of law such as construction of statute or document of title, decision of Tribunal is open to reference to court under section 66(1). (2) When point for determination is mixed question of law and fact, while finding of Tribunal on facts found is final in decision as to legal effect of that finding is question of law which can be reviewed by court. (3) finding on question of fact is open to attack under section 66(1) as erroneous in law when there is no evidence to support or if it is perverse. (Downloaded on 01/08/2019 at 11:52:39 AM) (4) When finding is one of fact, fact that it is itself inference from other basic facts will not alter its character as one of facts." 16. We have considered all contentions urged on behalf of appellant at some length. We would like to make it clear that we are not sitting here as court of appeal on facts. We have examined record only with view to see whether there is any misdirection or non-direction, such as is likely to have affected result, and we have come to conclusion that there is none, and that finding of Tribunal is not therefore open to attack. 6.3 He has also relied upon decision of this court in ITA No.476/2009 (CIT vs. M/s. Riverside Farma (P) Ltd.) decided on 1.8.2017 wherein it has been held as under:- 3. On 25.04.2017, when matter was argued, we were of opinion that issue is covered by decision of Supreme Court in case of Jiyajeerao Cotton Mills. Ltd. vs. Commissioner of Income tax and Excess Profits Tax Bombay (1958) 34 ITR 888 (SC) wherein it has been held as under:- 10. It was next contended that if there had been transfer of profits by Jwaladutt Kishanprasad from Cotton Agents Ltd., to J. R. Pillani, Gwalior, that must appear in accounts of latter, that those accounts were with Income-tax Commissioner and under control of Department and had been withheld, and that Tribunal did not advert to this circumstance. This argument lacks substance. Let us presume that entries in those accounts would show that dealings took place as contended for by appellant. But if arrangement of appellant with Jwaladutt Kishanprasad was as deposed to by J. R. Pillani, accounts of Gwalior firm would have been maintained conformably to that arrangement. By itself, therefore, it would mean little. In this connection, it should be stated according to Pillani branch at Gwalior was really run by employees of Birlas, statement which was accepted by Appellate Assistant Commissioner. (Downloaded on 01/08/2019 at 11:52:39 AM) 11. We have so far dealt with criticisms leveled by appellant against evidence, direct and positive, in support of finding of Tribunal that contracts were concluded at Bombay. But to view matter in its proper perspective, we must look at picture at other end, and consider evidence adduced to prove that agreements were made in Gwalior. Now, facts found by Incometax authorities are these : three brokers in whose names contracts stood were, having regard to their means, not likely to have been thought of for contracts of magnitude which we have. They had not done business in cotton futures prior to present contracts nor subsequent thereto. They had no bank accounts and large amounts to tune of Rs. 30 lakhs are supposed to have been paid to them in cash by J. R. Pillani, Gwalior, and turned over by them in cash to appellant. They produced no accounts for their dealings and ankdas produced by them at late stage were found to have been freshly written up. When Durgaprasad Mandalia, manager of appellant, was asked as to what securities he held as cover in respect of huge transactions he entered into with men of such means, he answered that they were men of character. Sagarmal Dingliwala, manager of J. R. Pillani, Gwalior, at relevant period, was asked same question, and he replied that "this business was of Jiyajeerao Cotton Mills, Ltd." appellant had, in fact, genuine transactions with Cotton Agents Ltd., Gwalior, on large scale, and when Durgaprasad Mandalia was asked why he did not put these transaction through them, he had to answer to give. And he was likewise unable to explain why he did not directly deal with J. R. Pillani, Gwalior. It was suggested by learned Solicitor-General that if object of appellant in setting up contracts in Gwalior was to throw veil over its contracts with Jwaladutt Kishanprasad, that could not effectively be achieved by putting them in name of J. R. Pillani, Gwalior, which was branch of firm, as veil would have been too thin to concern true face of contracts, and that is why brokers were though of. We think there is considerable force in this. Then again, Durgaprasad Mandalia was asked why he did not place orders directly with Cotton Agents Ltd., Bombay, or J. R. Pillani, Bombay, and he said that policy of appellant was (Downloaded on 01/08/2019 at 11:52:39 AM) not to do any business in British India. Mr. Kolah argues that there is nothing wrong in business being done in such way as to escape taxation. No exception can be taken to that statement. Every person is entitled so to arrange his affairs as to avoid taxation but arrangement must be real and genuine and not sham or makebelieve, and question now under consideration is whether contracts with brokers were genuine. 12. Turning next to accounts produced by appellant, it is seen that transactions of three brokers were entered in Kherij Khata, which is said to have been maintained for parties for whom there are small dealings and whose accounts are cleared up in short time. But then, these transactions are not small transactions, nor were they close in short time. Though dealings went on for several months and there were several settlements, it was not until 15th March, 1943, that payments are alleged to have been made to them. In absence of regular ledgers in names of these parties and having regards to fact that entries in Kherij Khatas were journal entries, Income-tax authorities were not prepared to attach any value to them. 13. Mr. Kolah argued that contracts between appellant and three brokers expressly recite that they are as between principals and principals, that there were clauses therein providing for delivery and payment at Gwalior and that there was no reason for not accepting them as correct. But it is pointed out by Income-tax authorities that contracts provide for business being done in accordance with rules and bye-laws of East India Cotton Association, Bombay, that according to bye-law No. 44-A of that Association "every contract made subject to these bye-laws shall take effect as contract wholly made in Bombay", and that further under rules, delivery of goods must take place in Bombay. In view of this, Income-tax Officer was of opinion that contracts in question had been got up for purpose of supporting present version of appellant. 14. Mr. Kolah also contended that evidence of Birlas would have been material in deciding whether they settled contracts at Bombay (Downloaded on 01/08/2019 at 11:52:39 AM) as contended for by Department and that though order of remand stated that their evidence should be taken, that had not been done and that was serious irregularity. portion of order of remand relevant for present purpose is as follows : "The managing director of assessee company or rather person responsible for ordering these transactions on behalf of assessee company should also be similarly examined." 15. Now, obvious intention behind this order, read as whole, was that persons connected with several links in chain of contracts and series of payments concerned in these transaction should be examined with view to elucidate true position, and managing director was mentioned as person who was likely to have entered into these transactions. Durgaprasad Mandalia was manager of appellant company, and he gave evidence that he put present transactions through brokers, and that has been considered. If Birlas wanted themselves to give evidence, there was nothing to prevent them from doing so, and indeed, no complaint was made in court below that their evidence had not been taken. There is no substance in this contention. 5. However, counsel for appellant has relied on judgment rendered by Delhi High Court in case of Commissioner of Income Tax Vs. Vipin Batra reported in (2007)293ITR 389 (Delhi) wherein High Court has observed as under:- 10. In Raymond Woollen Mills Ltd. v. Income- tax Officer and Ors. , Supreme Court held that what is required to be seen in case such as this is whether prima facie there was some material before Assessing Officer on basis of which he could reopen case of assessed. sufficiency or correctness of material is not to be considered because it is open to assessed to prove that facts assumed by Assessing Officer in notice were erroneous. 11. Much earlier, in Phool Chand Bajrang Lal and Anr. v. Income-tax Officer and Anr. , Supreme Court reviewed entire case law and concluded that: (a)There must be some specific, reliable and relevant information available with Assessing Officer. (b) Assessing Officer must have reasons, which he (Downloaded on 01/08/2019 at 11:52:39 AM) must record, that income has escaped assessment. (c) case should not be one of mere change of opinion by Assessing Officer or drawing of different inference from same facts but that those reasons must be based on facts which have subsequently come into possession of Assessing Officer. (d) sufficiency of reasons for forming belief is not for Court to judge although assessed can contend that belief was not bona fide or was based on vague, irrelevant and non-specific information or that material did not have any rational connection or live link for formation of requisite belief. This is what Supreme Court said: From combined review of judgments of this Court, it follows that Income-tax Officer acquires jurisdiction to reopen assessment under Section 147(a) read with Section 148 of Income-tax Act, 1961, only if on basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons, which he must record, to believe that, by reason of omission or failure on part of assessed to make true and full disclosure of all material facts necessary for his assessment during concluded assessment proceedings, any part of his income, profits or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts had come to light which were not previously disclosed or some information with regard to facts previously disclosed comes into his possession which tends to expose untruthfulness of those facts. In such situations, it is not case of mere change of opinion or drawing of different inference from same facts as were earlier available but acting on fresh information. Since belief is that of Income-tax Officer, sufficiency of reasons for forming belief is not for court to judge but it is open to assessed to establish that there in fact existed no belief or that belief was not at all bona fide one or was based on vague, irrelevant and non-specific information. To that limited extend, court may look into conclusion arrived at by Income-tax Officer and examine whether there was any material available on record from which requisite belief could be formed by Income- tax Officer and further whether that material (Downloaded on 01/08/2019 at 11:52:39 AM) had any rational connection or live link for formation of requisite belief. 12. This Court also had occasion to deal with issue of reopening completed assessment in United Electrical Co. P. Ltd. v. Commissioner of Income-tax and Ors. (2002) 258 ITR 317. This decision has been relied upon by Tribunal but we find that it is clearly distinguishable because in that case Division Bench came to conclusion that statement on basis of which reopening was sought was too general and it did not mention any name, much less name of assessed. It was, therefore, held that there was no information on record which could provide foundation for Assessing Officer's belief that assessed's transaction was not genuine and that this income had escaped assessment on that account. 6. Counsel for respondent has relied upon decision of Punjab and Haryana High Court in case of Commissioner of Income Tax Vs. Anupam Kapoor reported in (2008) 299ITR 0179 as well as judgment of Supreme Court confirming decision rendered by Allahabad High Court in case of Commissioner of Income Tax (Central) Kanpur Vs. Dilbagh Rai Arora arising out of judgment and order dated 15.09.2010 in ITA No.125/2009. 6.4 decision of Allahabad High Court in CIT vs. Smt. Nirmal Arora which has been confirmed by Supreme Court and contended that view taken by tribunal is required to be approved. 7. We have heard counsel for parties. 8. question which has been posed for our consideration is whether tribunal is justified in deleting additions which was made by AO as well as CIT(A) being commission paid by it to M/s. Mrigiya Electronics Industries Pvt. Ltd. for giving accommodation entries was justified when company was (Downloaded on 01/08/2019 at 11:52:39 AM) involved in providing accommodation entries after charging commission for same. 9. In view of observations that price of land was paid with other entry in bank and there is nothing to show that cash receipt was shown by assessee. 10. In that view of matter, we are in complete agreement with view taken by CIT(A) and Tribunal. No case is made out for interference. issues are answered in favour of assessee and against department. 11. appeal stands dismissed. (INDERJEET SINGH),J. (K.S. JHAVERI),J. Brijesh 32. (Downloaded on 01/08/2019 at 11:52:39 AM) Powered by TCPDF Commissioner of Income-tax-I, Jaipur v. Prestige City Developers P. Ltd