Delhi High Court
Quartz Commecial Pvt Ltd vs Income Tax Officer Ward 20(3) on 21 January, 2025
Author: Vibhu Bakhru
Bench: Tushar Rao Gedela, Vibhu Bakhru
$~49
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 21.01.2025
+ ITA 10/2025 & CM APPL. 3693-95/2025
QUARTZ COMMECIAL PVT LTD .....Appellant
Through: Mr Bhupesh Narula, Ms Rinku
Narula, Ms Poonam Nagpal, Mr
Anugrah Ekka and Mr Kanishk
Taneja, Advocates.
versus
INCOME TAX OFFICER WARD 20(3) .....Respondent
Through: Mr Sunil Aggarwal, SSC, Mr
Shivansh B Pandya, Mr Viplav
Acharya, JSCs and Mr Utkarsh
Tiwari, Advocate.
CORAM:
HON’BLE THE ACTING CHIEF JUSTICE
HON’BLE MR. JUSTICE TUSHAR RAO GEDELAVIBHU BAKHRU, ACJ. (ORAL)
1. The appellant (hereafter the Assessee) has filed the present appeal
under Section 260A of the Income Tax Act, 1961 (hereafter the Act), inter
alia, praying as under: –
“a) Allow the present Appeal under Section 260A of
the Income Tax Act 1961, for setting aside the Order
dated 13/02/2014 of AO, in view of Order dated
09/02/2018 and 31/03/2022 passed by this Hon’ble
High Court;
b) And or alternately, remand back the same for fresh
decision in accordance with law laid down by the
Hon’ble Courts, in the interest of natural justice and the
grounds in the present appeal may please beSignature Not Verified
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considered by the Assessing Officer for AY 2007-08,
and in view of the Judgment passed by this Hon’b1e
Court in PR. Commissioner of Income Tax (Central)
Vs M/S Forum Sales Pvt. Ltd. in ITA 862/2019 And
ITA 863/2019, decided on 1/03/2024;”
2. The Assessee is aggrieved by the information received pursuant to
application under Right to Information Act, 2015, whereby the Assessee
became aware that the Assessing Officer (AO) had not resumed proceedings
in respect of AY 2007-08. According to the Assessee, the AO was required
to examine the Assessee’s books and decide afresh. The said assumption is
premised on the basis that this court had remanded the matter to the AO by
an order dated 9.02.2018 in ITA No.155/2018 captioned Quartz Commercial
Private Limited v. Income Tax Officer in respect of AY 2007-08. The
Revenue disputes that the matter was remanded to the AO in terms of the
aforesaid order dated 09.02.2018. According to the Revenue the said order
dismissed the Assesses appeal.
3. After some arguments, it is clear that the Assessee seeks to impugn an
order dated 31.07.2017 (hereafter the impugned order) passed by the learned
Income Tax Appellate Tribunal (hereafter the ITAT) in ITA
No.381/Del/2017 in respect of the Assessment Year (AY) 2007-08
captioned Quartz Commercial P. Ltd. v. ITO. In terms of the said order, the
Assessee’s Appeal (No.64/2016-17 for AY 2007-08) filed against the order
dated 07.11.2016 passed by the Commissioner of Income Tax (Appeals)
[hereafter the CIT(A)] under Section 250(6) of the Act, was dismissed.
4. The Assessee had appealed the said impugned order dated 31.07.2017
passed by the learned ITAT under Section 260A of the Act before this court
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in ITA No.155/2018 captioned Quartz Commercial Private Limited v.
Income Tax Officer. The said appeal was dismissed by an order dated
09.02.2018. This court held that since all the authorities had given
concurrent finding, no question of law arose.
5. Thereafter, the Assessee again approached the Assessing Officer
(AO) on the assumption that the matter had been remanded to the AO for
consideration. However, a plain reading of the order dated 09.02.2018
indicates that this court had not remanded the matter to the AO. This court
merely noted the passage from the order passed by the learned ITAT in the
first round of proceedings, being an order dated 01.03.2013 passed by the
learned ITAT in ITA No. 1405/Del/2011, whereby the AO was directed to
examine the Assessee’s books of account and give a finding thereon.
However, there is no ambiguity in the operative part of the said order dated
09.02.2018. The said order is reproduced below:
“The assessee’s appeal under Section 260-A of the Income
Tax Act, 1961 complains that the lower authorities concurrently
fell into error in not noticing that the amounts brought to tax
(₹7,87,000) was entirely based on surmise and conjecture.
The AO in this case rejected the finding that the assessee
had routed the share application money to the tune of
₹15,70,00,000/- within certain group companies the same day.
The assessee received share application money with share
application premium of ₹390 per share of M/s. Platinum Agency
Pvt. Ltd. as well as M/s. Radium Consultancy Pvt. Ltd., and from
the third entity, i.e. M/s. Laurels Properties Pvt. Ltd., but on
28.03.2007. These were shown as invested share money, in those
very companies on behalf of the foreign entities. The amounts
too were received on rotational basis. This business model
adopted by the assessee was brought to tax by application ofSignature Not Verified
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commission of 0.5% on the total turnover during the year,
resulting in an addition of ₹7,87,000/-
The CIT(A) upheld the AO’s finding ; the ITAT concurrently
held as follows:-
“7.2 We have carefully considered the submissions
and perused the records. We find that in this case a
show cause notice was given to the assessee. We find
that the Assessing Officer has asked the assessee to
furnish the reply with supporting documentary
evidence and also complete books of accounts along
with complete bills and vouchers and also bank
statements in support of the assessee’s claim.
However, thereafter in the assessment order there is
no mention about the aforesaid requisition made by
the Assessing Officer. Under the circumstances, we
find that it remains to be verified whether the assessee
has maintained proper books of accounts or not.
Hence, the submissions of the assessee that the
additions were not warranted as the assessee has
maintained proper books of accounts, needs to be
verified. In our considered opinion, the interest of
justice will be served, if the matter is remitted to the
file of the Assessing Officer. The Assessing Officer is
directed to examine the assessee’s books of accounts
and give a finding thereon.”
We have heard the counsels and also considered the
submissions. We are of the opinion that since all the authorities
have concurrently given the finding, no question of law arises.
Therefore the appeal is dismissed.
[ emphasis added ]
6. Paragraph no. 7.2 of the learned ITAT’s order as extracted by this
court in its order dated 09.02.2018 is an extract from an order dated
01.03.2013 passed by the learned ITAT in ITA No.1405/Del/2011 – the first
round of proceedings – and not the learned ITAT’s order which was
impugned in ITA No. 155/2018.
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7. The Assessee had filed its return of income for AY 2007-08 on
14.11.2007 declaring a loss of ₹2,064/-. The said return was picked up for
scrutiny and the proceedings culminated in an assessment order dated
30.12.2009 whereby the AO made an addition of ₹7,87,000/-. The said
addition was based on the conclusion that the Assessee was an
accommodation entry provider and had received commission in cash, which
the AO had assessed to be 0.5% of the turnover.
8. The Assessee appealed the said decision before the learned CIT(A).
However, the same was rejected by an order dated 29.12.2010. The Assessee
appealed the decision of the learned CIT(A) dismissing its appeal before the
learned ITAT (being ITA No.1405/Del/2011), which was disposed of by an
order dated 01.03.2013 remanding the matter to the AO “to examine the
assessee’s books of accounts and give a finding thereon”.
9. Pursuant to the said order passed by the learned ITAT, the AO had
directed the Assessee to produce the books of account and had duly
examined the same. The AO after examining the books of account, once
again confirmed the addition of ₹7,87,000/- by an assessment order dated
13.02.2014.
10. The Assessee appealed the assessment order dated 13.02.2014 before
the learned CIT(A). And, the learned CIT(A) had confirmed the decision of
the AO in terms of the order dated 07.11.2016 in Appeal No.64/2016-17.
The Assessee appealed the said decision of the learned CIT(A) before the
learned ITAT. The learned ITAT dismissed the said appeal (ITA
No.381/Del/2017) by an order dated 31.07.2017.
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11. As noted above, the Assessee’s appeal against the said decision was
dismissed by this court by an order dated 09.02.2018. As noted above, this
court had held that in view of the concurrent findings, no question of law
arose. However, it appears that an incorrect passage from the decision of the
learned ITAT was recorded in the order dated 09.02.2018 passed by this
court in in ITA No.155/2018. Instead of recording the passage from the
impugned order dated 31.07.2017 passed by the learned ITAT, an extract
from the order dated 01.03.2013 passed by the learned ITAT, which was
also reproduced in the learned ITAT’s order dated 31.07.2017 (which was
impugned in the said appeal) was erroneously reproduced by this court in its
order.
12. The relevant extract of the impugned order dated 31.07.2017 is set out
below: –
“4. In appeal the Ld. CIT(A) upheld the disallowance made by
the A.O. On further appeal by the assessee the Tribunal restored
the matter to the file of the A.O. with a direction to examine
assessee’s books of accounts and give a finding thereof by
observing as under.
“7. We have heard the rival contentions and perused
the records. We find that the Ld. Counsel for the
assessee submitted that assessee has maintained
proper books of accounts, no discrepancy has been
found by the Assessing Officer and no addition has
been made except for this addition. Ld. Counsel of the
assessee further submitted that there is no provision
for notional income in the Income Tax Act. He further
submitted that there was no evidence of assessee being
involved in any accommodation entry business. Hence,
ld. Counsel of the assessee has argued that the
addition should deleted.
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7.1 On the other hand, Ld. Department Representative
submitted that there is no evidence that books of
accounts were accepted by the Assessing Officer. He
submitted that the shares have been transacted of the
face value of Rs.10/- at Rs. 190/-. He pleaded that the
order of the authorities below in this case needs to be
accepted.
7.2 We have carefully considered the submissions and
perused the records. We find that in this case a show
cause notice was given to the assessee. We find that
the Assessing Officer has asked the assessee to furnish
the reply with supporting documentary evidence and
also complete books of accounts along with complete
bills, vouchers and also bank statements in, support of
the assessee’s claim. However. thereafter in the
assessment order there is no mention about the
aforesaid requisition made by the Assessing Officer.
Under the circumstances we find that it remains to be
verified whether the assessee has maintained proper
books of accounts or not. Hence. The submissions of
the assessee that the additions were not warranted as
the assessee has maintained proper books of accounts,
needs to be verified. In our considered opinion, the
interest of justice will be served, if the matter is
remitted to the file of the Assessing Officer. The
Assessing Officer is directed to examine the assessee’s
books of accounts and give a finding thereon.
8. In the result, the appeal filed by the assessee stands
allowed for statistical purposes.”
5. Subsequently the A.O. asked the assessee to produce books of
accounts which were produced and duly examined by the A.O.
The A.O. noted that the assessee did not have any operational
income and expenses debited as ROC fee, audit fee etc. which
were claimed as loss. The bank accounts maintained with
Karnataka Bank Ltd revealed that after 1.4.2006 there were
entries m respect of share application money on 21.3.2007 which
was immediately transferred to another company as share
application money. He observed that there is increase in share
capital of Rs.39,25,000/- besides share premium of
Rs.15,30,75,000/- (being Rs.390 per share). Treating this as a
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sham transaction as discussed in the original assessment order the
A.O. observed that the assessee is engaged in providing
accommodation entries to various group companies. He was of
the opinion that the assessee is charging commission for
arranging such bogus share transactions and commission is
charged between 0.5% to 2%. To be most conservative 0.5% of
the total entries operated by the assessee was taken by the A.O.
as income for the year. Accordingly, the A.O. made an addition
of Rs.7,85,000/-.
6. In appeal the Ld. CIT(A) confirmed the addition made by the
A.O. by observing as under :
“I have considered all facts and circumstances of the
case. As has been mentioned by the A.O. in his order
dt. 13.2.2014, it is a fact that the Hon’ble ITAT had set
aside the case to the file of A.O. to examine the books
of accounts maintained by the appellant. I am to give a
finding thereon. In his order u/s 143(3)/254 dated
13.2.2014 the A.O. has mentioned categorically that
books were produced and were examined. It is further
mentioned by the A. O. that the perusal of the bank
account which is also part of the books of accounts
maintained by the appellant. It is noted that the receipt
and transfer of share application money on the same
date i.e. 21.03.2007. The A. O. stated that there
increase in share capital of Rs.39,25,000/- and share
premium of Rs.15,30,25,000/-. All these information
was gathered by the A. O. from the examination of
books of accounts of the appellant which included
bank accounts. Thereafter the A. O. has brought to tax
only 0.5% of the commission which comes to
Rs.7,85,000/-. To my mind, the A.O. has given his
findings on the basis of examination of books of
accounts and to that extent the appellant should not
have any grievance. The action of the A. O. is
confirmed.”
7. Aggrieved with such order of the Ld. CIT(A) the assessee is in
appeal before us.
8. The learned counsel for the assessee referring to the copies of
the assessment order in case of M/s Laurels Properties (P) Ltd.
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and M/s Radium Consultancy Services (P) Ltd. which are passed
u/s 143(3) submitted that huge share premium was also accepted
in those cases.
8.1. Referring to the decision of Hon’ble Calcutta High Court in
the case of CIT vs. M/s Data ware Pvt. Ltd. judgement dated 21st
September, 2011, he submitted that the Hon’ble High Court in the
said the decision has upheld the order of the Tribunal wherein the
Tribunal has allowed the appeal of the assessee by deleting the
addition made by the A.O. under section 68 of the Act on
account of unexplained cash credit being bogus share capital. He
accordingly submitted that the addition sustained by the Ld.
CIT(A) should be deleted.
9. The Ld.DR on the other hand heavily relied on the order of the
Ld. CTT(A). He submitted that the assessee is an accommodation
entry provider. The assessee does not have any business and it
has received share application with the huge premium and
invested the same again in share application money. This is
nothing but the work of an entry provider. Therefore, the LD.
CIT(A) was fully justified in sustaining the addition made by the
A.O.
10. I have considered rival arguments made by both the sides,
perused the orders of the Ld. CIT(A) and the A.O. and the paper
book filed on behalf of the assessee. I have also considered the
various decisions cited before me. As mentioned earlier the
assessee has not carried on any business activities during the year
and has received share application money with a huge premium
which has been invested again on the same date as share
application money in various companies. This otherwise
indicates that the assessee is doing only the business of entry
operations. Therefore, the Ld. CIT(A) in my opinion is fully
justified in bringing to tax the commission which is prevalent in
this type of business. The decision of Hon’ble Supreme Court in
the case of Sumati Dayal vs. CIT reported in 214 ITR 80 l and
CIT vs. Durga Prasad More reported in 82 ITR 540 fully
supports the case of the Revenue. In this view of the matter and
in view of the detailed discussion by the CIT(A) on this issue, I
do not find any infirmity in of Rs.7,85,000/- made by the A.O.
Accordingly, I uphold the same. The grounds raised by the
assessee are accordingly dismissed.”
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13. It is apparent from the above that both, the learned CIT(A) and the
learned ITAT had concurrently upheld the decision made by the AO. In
view of these concurrent findings, this court had dismissed the Assessee’s
appeal holding that no question of law arises.
14. Since, the Assessee’s appeal against the impugned order dated
31.07.2017 passed by the learned ITAT was dismissed, the question of any
further proceedings before the AO did not arise. The issue sought to be
raised in this appeal stood concluded with the dismissal of the appellant’s
appeal (in ITA No.155/2018 captioned Quartz Commercial Private Limited
v. Income Tax Officer) by the order dated 9.02.2018 passed by this court.
15. In view of the above, the present appeal is misconceived. The same is,
accordingly, dismissed. All pending applications are also disposed of.
VIBHU BAKHRU, ACJ
TUSHAR RAO GEDELA, J
JANUARY 21, 2025
M
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