ACIT, CIRCLE- 26(1), NEW DELHI V. VENUS REALTORS PVT. LTD., NEW DELHI

ITA 4452/DEL/2017

AI Insights

The case involves an appeal by the Revenue against the order of the CIT(A) which had deleted the additions made by the AO on account of share capital, share premium, and unexplained commission. The AO had initially made these additions during reassessment proceedings under sections 143(3)/147/148 of the Income Tax Act, 1961, claiming that the amounts were bogus and failed the tests of identity, creditworthiness, and genuineness of the transactions. The CIT(A) found that the AO had not adequately substantiated these claims and that the legal requirements for reopening the assessment were not met, particularly noting the absence of a notice under section 143(2) after the filing of the return in response to the notice under section 148.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 23687 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2007-2008
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAHIL KUMAR BANSAL
• Assessee Lawyers: SUDESH GARG
• Keywords: Reassessment proceedings; Onus to prove; Accommodation entries; Wrong claim; Assessment record; Bogus
• Section: 147; 148; 143(3); 143(2); 133(6); 69C; 153C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G’: NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.4452/Del/2017 (ASSESSMENT YEAR 2007-08) ACIT, Circle-26(1), New Delhi. Vs. M/s Venus Realtors (Pvt.) Ltd., B-37, Basement Soami Nagar South, Panchsheel Park, Main Road, New Delhi. PAN-AABCV6475G (Appellant) (Respondent) Assessee by Shri Sudesh Garg, Adv. Department by Shri Sahil Kumar Bansal, Sr. DR Date of Hearing 11/02/2025 Date of Pronouncement 27/02/2025 ORDER PER MANISH AGARWAL, AM: This is appeal filed by the Revenue against the order of Learned Commissioner of Income Tax (Appeals)-13, New Delhi (‘the Ld. CIT(A)’ for short), dated 23/02/2017 for Assessment Year 2007-08. 2. The Revenue has challenged appellate order on the following grounds of appeal:- “I) \"On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 2,00,00,000/- made on account of share capital and share premium received ignoring the facts that the amount shown received is a bogus claim as it has failed the test identity, creditworthiness and genuineness of the transaction. 2 ITA No.4452/DEL/2017 ACIT vs. M/s Venus Realtors Pvt. Ltd. II) On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 7,00,000/- made on account of unexplained u/s 69 of the Income Tax Act, 1961 ignoring the facts that the amount being spent from undisclosed sources being given infuse such funds in grab of share application money in respect of non family members of the assessee i.e. excluding the Company's directors and their family member. III) \"The appellant craves, leave or reserving the right to amend modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.\" 3. During the course of hearing, the Revenue requested for the revision of the grounds as grounds taken in original appeal. As the CIT(A) has allowed the appeal of the assessee on legal grounds also which was not taken up in the grounds of appeal filed along with appeal memo filed on 04.07.2017. Thereafter, the Revenue vide letter dated 04.04.2024 has filed Revised Form-36, however, no ground was taken on the legal issues and the revised/additional grounds of appeal has taken by the Revenue as under: “1. The impugned order of the CIT (A) is bad in Law as well as facts of the case. 2. \"Whether on the facts and circumstances of the case the CIT(A) has erred in deleting the addition of Rs.2,00,00,000/- made on account of share capital and share premium received ignoring the facts that the amount shown received is a bogus claim as it has failed the test of identity, creditworthiness and genuineness of the transaction.\" 3. \"Whether on the facts and circumstances of the case the CIT(A) has erred in deleting the addition of Rs. 7,00,000/- made on account of unexplained u/s 69 of the 1.T. Act, 1961 ignoring the facts that the amount being spent from undisclosed sources being given infuse such funds in grab of share application money in respect of nonfamily members of the assessee i.e. excluding the company's directors and their family members.\" 3 ITA No.4452/DEL/2017 ACIT vs. M/s Venus Realtors Pvt. Ltd. 4. The appellant craves, leave or reserving the right to amend, modify, add or forego, alter or modify any ground(s) of appeal at any time before or during the hearing of this appeal.” Thus, we have proceeded with the revised grounds filed by the Revenue vide Form No.36 dated 04/04/2024. 4. Brief facts of the case are that assessee is a company and the return of income was filed on 30/10/2007 at a total income of Rs.7,33,924/- and the assessment was completed u/s 143(3) accepting the income declared by the assessee. Thereafter, proceedings were initiated u/s 147 and notice u/s 148 of the Act was issued on 24/03/2014. The reassessment order was passed u/s 143(3)/147/148 of the Act at total income of Rs.2,14,33,920/- by making additions on account of share application premium of Rs. 2,00,00,000/- and on account of commission on such accommodation entries of Rs.7,00,000/-. 5. In first appeal, the Ld. CIT(A) vide order dated 23/02/2017 has deleted the additions made on meirts and also allowed the appeal of the assessee on legal issues of reopening the assessment u/s 147 of the Act and further by holding that no notice u/s 143(2) was served upon the assessee after filing the return of income. 6. As observed above, before us, Revenue has not challenged the appellate order wherein the Ld. CIT(A) has allowed the grounds of appeal of the assessee challenging the reopening of the assessment and also validity of the assessment order on the ground that notice 4 ITA No.4452/DEL/2017 ACIT vs. M/s Venus Realtors Pvt. Ltd. u/s 143(2) was not served upon the assessee when the return of income in response to notice u/s 148 was filed. However, the Revenue has challenged the deletion of the additions made on merits. 7. During the course of hearing, the Ld. Sr. DR vehemently supported the orders of AO and stated that the during course of re- assessment proceedings, the AO has issues summons to all the parties from whom share application money was received. Besides the Inspector was deputed for making separate and independent enquiry and his inspection report is reproduced at page 12 of the assessment order. AO observed that either the company is not existed at the given address or the address provided is wrong. This report was confronted to the assessee and assessee was asked to produce the direction and also other material to substantiate the share capital and premium received during the received. The assessee has not substantially explain the same and has failed to discharge onus of providing the identity and creditworthiness of the parties. Thus, under these circumstances, the Ld. Sr. DR submit that the AO has rightly made the addition of the share capital treating it as unexplained. The Ld. Sr. DR further submit that the Ld. CIT(A) has not appreciated these facts and deleted the additions which deserves to be reversed and order of the AO needs to be confirmed. 8. On the other hand, the Ld. AR of the assessee submits that the Revenue has not challenged the appellate order on legal issues and as such the order of the CIT(A) allowing the appeal of the assessee on 5 ITA No.4452/DEL/2017 ACIT vs. M/s Venus Realtors Pvt. Ltd. legal issues remained accepted by the Department. Ld. AR further submit that in the case of the assessee during the course of original assessment proceedings carried out u/s 143(3) of the Act, all the evidences with respect to the share application capital and premium received during the year were explained and there was no fresh material available for making such addition. He further submits that the Ld. CIT(A) has considered all the facts before deleting the addition on merits and he vehemently supported the orders of the Ld. CIT(A) on this grounds. 9. We have heard the rival submissions and perused the materials available on record. It is admitted position that despite of an opportunity provided to the Revenue for filing the revised grounds still the Revenue has not challenged the appellate order where the assessee was allowed the relief on legal issue, thus, the order of Ld. CIT(A) to this extent remained unchallenged. 10. With regard to the merits of the issues, we find that the Ld. CIT(A) has passed a detailed order wherein para 7 to 8 of the order while deleting the additions made, he observed as under: “7. I have considered the findings given by the AO as well as the submissions made by the appellant. The appellant has contested the additions made by the AO on account of share capital and share premium u/s 68 of the I.T. Act on both legal grounds as well as on merit. The appellant has substantively raised the issues as below which are all in the context of addition of Rs. 2,00,00,000/- and has claimed that each one of them is a good enough ground to delete the addition or quash the order:- 6 ITA No.4452/DEL/2017 ACIT vs. M/s Venus Realtors Pvt. Ltd. i) Non-application of mind by the AO by taking mechanical action on the basis of information received from the investigation wing, ii) Issue of notice u/s 148 of the I.T. Act beyond 4 years without pointing out any failure on the part of the appellant to disclose its income fully and truly when the issue was examined by the AO in the assessment completed u/s 143(3) of the I.T. Act, iii) Non-service of notice u/s 143(2) of the I.T. Act after filing the return of income and before completion of assessment u/s 143(3) of the I.T. Act, iv) Taxing the share capital, share premium and commission even when evidence regarding genuineness of the share capital/premium and also identity as well as creditworthiness of the subscribers were filed. 7.1 All the issues are connected and resulting into addition u/s 68 of the I.T. Act, hence taken up together. From the assessment order it is clear that the assessment was reopened on the basis of information received from Investigation wing. It has been submitted by the appellant that there is no application of mind on the part of the assessing officer before issue of notice u/s 148 of the Act as can be seen from the reasons recorded. It has also been submitted by the appellant that the initiation of re-assessment proceedings is barred by limitation because the notice has been issued beyond 4 years from the end of the relevant assessment year, as the issue on which notice was issued had been specifically examined by the AO during the assessment proceedings u/s 143(3) of the Act. The case of the appellant is indisputably covered by the proviso to section 147 of the Act according to which, where an assessment under section 143(3) or 147 has been made for the relevant assessment year, no action shall be taken under section 147 after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139, or in response to a notice issued under sub-section (1) of section 142 or section 148, or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. In the case of the appellant, the assessment was completed u/s 143(3) of the I.T. Act and the issue had apparently been examined, hence it is correct that no action could be taken by the AO beyond four years from the end of the relevant assessment year, unless there was 7 ITA No.4452/DEL/2017 ACIT vs. M/s Venus Realtors Pvt. Ltd. a failure on the part of the appellant to disclose fully and truly all material facts necessary for the assessment. No such failure has been pointed out by the AO. All the companies which invested in the appellant company were duly verified by the AO in the original assessment proceedings u/s 143(3). In the reasons recorded, the AO has not given any finding that there was any failure on the part of the appellant to disclose fully and truly all material facts necessary for assessment. The AO has apparently rejected this contention of the appellant on account of explanation 1 to section 147 of the Act that production of books of account and other documents does not amount to full and true disclosure of all material facts necessary for assessment, but this is not justifiable in view of the fact that the issue had been examined in the original proceedings by issue of notices u/s 133(6) to the share applicant companies. From the reasons recorded it can be seen that the AO has mentioned only the enquiries conducted by the Investigation Wing, resulting in unearthing the accommodation entry racket operated by Sh. Surender K. Jain. There does not seem to be any independent application of mind on the part of the AO. It remains a fact that the issue had been examined earlier by the AO in the scrutiny assessment. In view of the facts brought out by the appellant, the case laws cited and submissions made, it appears that the case is covered by the proviso to section 147 of the Act and is not excluded by Explanation 1 to section 147 as held by the AO. 7.2. As regards non-service of notice u/s 143(2) of the Act, the appellant has submitted that it filed a letter dated 02.09.2014 that the return filed on 30.10.2007 may be treated as return filed in compliance to notice u/s 148 of the Act. It has been submitted that for completion of assessment u/s 143(3) of the Act, a notice u/s 143(2) has to be served on the assessee after filing return of income. But no notice u/s 143(2) was served on the appellant after it filed the return of income and before completion of assessment. Hence the assessment completed u/s 143(3) on 17.03.2015 is bad in law and requires to be quashed. In view of the submissions made by the appellant, report of the AO was called for on the issue of non-service of notice u/s 143(2). The AO submitted that the notice u/s 143(2) was issued on 11.09.2014 fixing the hearing for 19.09.2014 at 11.50 AM and filed copy of same. In response to the report of the AO, the appellant submitted a rejoinder after inspecting the assessment records and taking copies of the same. It was reiterated that the notice dated 11.09.2014 8 ITA No.4452/DEL/2017 ACIT vs. M/s Venus Realtors Pvt. Ltd. was never served on the appellant. It was also pointed out that from the copy of notice it can be seen that there is no evidence of its dispatch, speed post number or the signature of the recipient, whereas in all other notices sent by the AO, there were dispatch number and speed post numbers or signature of the recipient. Even the AO in his report did not claim service of the notice u/s 143(2). This makes the case of the appellant that notice u/s 143(2) was not served on him convincing and compelling. Law on maintainability of re-assessment order when notice u/s 143(2) is not served is very clear and the appellant has mentioned a number of rulings of the jurisdictional High Court also on the proposition that in such a situation, the re-assessment order deserves to be quashed. 7.3. As regards the issue on merits, the AO has himself mentioned in the order that details like copy of accounts, income tax particulars, bank statement and balance sheet of all the companies from whom share capital and share premium was received were filed during the course of assessment proceedings. The AO has primarily made additions for the reason that the directors of the said companies were not produced although opportunity was provided. The AO has cited a number of case laws to support his contention. The AO has, however, not mentioned any of the alleged evidence found or seized during the course of search in the case of S.K. Jain even though he had re-opened the assessment for that reason. In absence of the same the AO's case is primarily built on the non-appearance of the directors of the investing companies. It is also noted that the details regarding share capital and share premium received were furnished during the course of the original assessment which was completed u/s 143(3) of the Act, on 15.12.2009, accepting the sources of share capital introduced. Even during the course of reassessment proceedings, the appellant filed all the necessary details to discharge its onus to prove genuineness of share capital and share premium received. In the instant case the said onus enjoined upon the appellant company stands discharged in as much as the identity and creditworthiness of the investors stands proved and the genuineness of the transactions stands evidenced by the confirmations and the bank accounts which have been filed before the AO, which has been acknowledged in the assessment order. 7.4. It was also submitted by the appellant that reliance has sought to be drawn by the AO on circumstantial evidence and the test of human probabilities. In this connection it is submitted by the appellant that both 9 ITA No.4452/DEL/2017 ACIT vs. M/s Venus Realtors Pvt. Ltd. these issues, viz. the test of human probabilities and reliance on circumstantial evidence would come into play only when the basic test of direct and factual evidence fails. It is submitted that the copies of bank statements, income tax returns, PAN, complete annual accounts with schedules in respect of all the subscribers to the share capital of the appellant company, were filed during the course of the scrutiny assessment. It is also pointed out that verification was made by the AO at the time of original assessment under the provisions of section 133(6) of the Act, and compliance was duly made by the subscribers. In view of the above, it was submitted by the appellant that no adverse inference was required to be drawn as to the genuineness, existence and creditworthiness of the companies on the ground that the subscribers have not been produced. 7.5. It has also been submitted by the appellant that no evidence to suggest that the appellant had obtained accommodation entries from the companies owned and operated by Sh. S.K. Jain, was made available to the appellant or even mentioned in the assessment order. The appellant has further claimed that some of the investing companies were assessed u/s 143(3) read with 153C after the search in the case of S.K. Jain and their returns of income were accepted. As regards the report of the office Inspector pointing out that either the subscriber companies were not available at the address provided or the address was incomplete, the appellant has submitted that the report of the Inspector was never made available to the appellant nor was it enclosed with the assessment order. No causal connection between the capital introduced and income earned by the appellant can be said to have been established. After taking into consideration the facts of the case, and the judicial pronouncements regarding applicability of proviso to section 147 of the act, non-service of notice u/s 143(2), and the fact that sufficient evidence has been filed by the appellant to prove the genuineness of share capital and share premium received, the addition made u/s 68 of the I.T. Act cannot be sustained. The addition made by the AO u/s 68 of the Act stands deleted, and the appellant gets relief of Rs.2,00,00,000/-. 8. At Ground of appeal no 7, the appellant has disputed the addition of Rs.7,00,000/- for alleged commission paid for obtaining accommodation entries. The addition has been made on the presumption that accommodation entry operators charge commission upto 3.5% of the transaction. The AO held2007-08 that the appellant has taken accommodation entry of Rs.2,00,00,000/- and paid commission of 10 ITA No.4452/DEL/2017 ACIT vs. M/s Venus Realtors Pvt. Ltd. Rs.7,00,000/- (i.e. @ 3.5% of Rs.2,00,00,000/-) and added this sum to the total income u/s 69C of the Act. The appellant has pointed out that the addition has been made on mere presumption and there is no evidence of receiving accommodation entry, leave alone making payment of commission. The AO has also not brought anything on record to suggest that commission has been paid. While disposing of the preceding grounds of appeal, addition made u/s 68 of the I.T. Act for the amount of Rs.2,00,00,000/- has been deleted. Hence the addition on account of commission payment is consequential, and is also deleted. The appellant gets a relief of Rs.7,00,000/- on this account.” 11. During the course of hearing, the Department has not confronted the findings of the Ld. CIT(A) by providing any contrary material. In view of these facts, we find no error in the details filed during the course of original assessment proceedings. Accordingly, we find no error in the order of the Ld. CIT(A) which is hereby upheld. 12. In the result, the appeal of the Revenue is dismissed. Order pronounced on 27/02/2025. Sd/- Sd/- (ANUBHAV SHARMA) (MANISH AGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 27/02/2025 PK/Sr. Ps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW, DELHI "