M/s. GDA Finvest & Trade Pvt. Ltd., New Delhi V. DCIT, New Delhi

CO 218/DEL/2013

• Counselvise Citation: [2014] 123 COUNSELVISE.COM (IT) 0021 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 10-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 11-09-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 25-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUNIL BAJPAI
• Keywords: Search and seizure; Accommodation entries
• Section: 153A; 14A; 68; 132; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C : NEW DELHI) BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.3353/DEL./2013 (ASSESSMENT YEAR : 2005-06) DCIT, CENTRAL CIRCLE 13, VS. M/S. GDA FINVEST & TR ADE PVT.LTD., NEW DELHI. DELHI ROHTAK ROAD, ASSAM TIMBER MARKET, SWARNA PARK, MUNDKA, NEW DELHI. (PAN : AAACG4200D) CO NO.218/DEL/2013 (IN ITA NO.3353/DEL./2013) (ASSESSMENT YEAR : 2005-06) M/S. GDA FINVEST & TRADE PVT.LTD., VS. DCIT, CENTRA L CIRCLE 13, DELHI ROHTAK ROAD, NEW DELHI. ASSAM TIMBER MARKET, SWARNA PARK, MUNDKA, NEW DELHI. (PAN : AAACG4200D) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VED JAIN, ADVOCATE & SMT. RANO J AIN, ADVOCATE REVENUE BY : SHRI SUNIL BAJPAI, CIT ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THE APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE CIT (APPEAL S)-I, NEW DELHI DATED 08.03.2013 FOR THE ASSESSMENT YEAR 2005-06. ITA NO.3353/DEL./2013) CO NO.218/DEL/2013 2 2. THE REVENUE IN ITA NO.3353/DEL/2013 HAS TAKEN TH E FOLLOWING GROUNDS OF APPEAL :- 1. THE ORDER OF THE LD. CIT (APPEALS) IS NOT CORR ECT IN LAW AND FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS .9,00,000/- MADE BY A.O. ON ACCOUNT OF UNEXPLAINED SHARE CAPITA L RECEIVED BY THE ASSESSEE COMPANY WITHOUT APPRECIATI NG THE ACT THAT THE CREDITWORTHINESS OF INVESTORS AND GENU INENESS OF TRANSACTION COULD NOT BE PROVED BY ASSESSEE. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND ANY/AL L THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HE ARING OF THE APPEAL. THE ONLY EFFECTIVE GROUND IN THE REVENUES APPEAL I S AGAINST DELETING THE ADDITION OF RS.9 LACS OUT OF THE ADDITION OF RS.30 LACS MADE BY THE AO ON ACCOUNT OF THE SHARE CAPITAL RECEIVED BY THE COMPAN Y DURING THE YEAR. 3. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION AND THE GROUNDS OF CROSS OBJECTION ARE AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] UNDER SECTION 153A/143(3) IS BAD BOTH IN THE EYE OF LAW AND ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE PROCEEDINGS INITIATED UNDER SECTION 153A ARE BAD IN LAW AS NO VALID SEARCH WAS CARRIED ON THE ASSESSEE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN REJECT ING THE CONTENTION OF ASSESSEE THAT THE PROCEEDINGS INITIAT ED UNDER SECTION 153A AGAINST THE APPELLANT ARE IN VIOLATION OF THE ITA NO.3353/DEL./2013) CO NO.218/DEL/2013 3 STATUTORY CONDITIONS AND PROCEDURE PRESCRIBED UNDER THE LAW AND AS SUCH THE SAME IS BAD IN LAW AND LIKELY TO BE QUASHED. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN REJECT ING THE CONTENTION OF ASSESSEE THAT THE NOTICE ISSUED UNDER SECTION 153A BY THE AO IS IN VIOLATION OF THE PROVISIONS OF THE ACT AND AS SUCH THE ASSESSMENT FRAMED IN CONSEQUENCE TH EREOF IS BAD. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN REJECT ING THE CONTENTION OF ASSESSEE THAT THE ASSESSMENT FRAMED U NDER SECTION 153A/143(3) BEING AGAINST THE STATUTORY PRO VISIONS OF THE ACT AND THE PROCEDURE PRESCRIBED UNDER THE LAW, IS BAD AND THE SAME IS LIABLE TO BE QUASHED. 6(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIR MING THE VARIOUS ADDITIONS BY INDULGING IN SURMISES AND CONJ ECTURE WITHOUT ANY ADVERSE MATERIAL BEING FOUND DURING THE COURSE OF THE SEARCH. (II) THAT THE ASSESSMENT FRAMED IS AGAINST THE SPIR IT OF SECTION 153A OF THE ACT WHEREBY THE REASSESSMENT IS TO BE CONFINED TO THE ADDITIONS AND DISALLOWANCES CONSEQU ENT TO THE MATERIAL FOUND DURING THE COURSE OF THE SEARCH AND DOES NOT GIVE POWER TO THE AO TO REAPPRAISE THE ALREADY SETT LED ISSUES AND ASSESSMENT. 7(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIR MING THE ADDITION TO THE EXTENT OF RS.21,00,000/- ON ACCOUNT OF SHARE APPLICATION MONEY. (II) THAT THE ADDITION HAS BEEN CONFIRMED DESPITE T HE ASSESSEE BRINGING ALL MATERIAL AND EVIDENCES ON REC ORD TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINES S OF THE SHAREHOLDER. (III) THAT THE ADDITION HAS BEEN CONFIRMED WITHOUT BRINGING ANY ADVERSE MATERIAL ON RECORD. ITA NO.3353/DEL./2013) CO NO.218/DEL/2013 4 8(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIR MING THE DISALLOWANCE OF AN AMOUNT OF RS.18,645/- MADE BY AO BY INVOKING THE PROVISIONS OF RULE 8D UNDER SECTION 14 A OF THE ACT. (II) THAT THE DISALLOWANCE HAS BEEN MADE WITHOUT TH ERE BEING ANY SUCH EXPENSES BEING INCURRED BY THE ASSES SEE. (III) THAT THE ABOVE SAID DISALLOWANCE HAS BEEN MAD E IGNORING THE EXPLANATION OF THE ASSESSEE THAT NO EX PENDITURE HAS BEEN INCURRED IN EARNING TAX FREE INCOME. (IV) THAT THE ABOVE DISALLOWANCE HAS BEEN CONFIRMED DESPITE THE FACT THAT RULE 8D IS NOT APPLICABLE IN THE RELEVANT ASSESSMENT YEAR. 9. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIR MING THE DISALLOWANCE OF AN AMOUNT OF RS.14,382/- ON ACCOUNT OF DEFERRED REVENUE EXPENSES. 10. THAT THE RESPONDENT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL. 4. DURING THE COURSE OF THE HEARING, THE LD. AR FOR THE ASSESSEE HAS NOT RAISED AND ARGUED ON THE LEGAL AND GENERAL GROU NDS OF CROSS OBJECTION NOS.1 TO 6 AND 9 AND 10, HENCE THE SAME ARE DISMISS ED AS NOT PRESSED. 5. GROUND NO.2 IN THE REVENUE APPEAL AND GROUND NO. 7 OF THE CROSS OBJECTION ARE ON THE ISSUE OF ADDITION OF RS.30 LAK H MADE BY THE AO AND THE RELIEF OF RS.9 LACS WAS ALLOWED BY THE CIT(A) A ND CONFIRMED THE ADDITION OF RS.21 LACS. 6. THE BRIEF FACTS TO THE PRESENT CONTROVERSY ARE T HAT A SEARCH AND SEIZURE OPERATION UNDER SECTION 132 OF THE INCOME-T AX ACT, 1961 WAS ITA NO.3353/DEL./2013) CO NO.218/DEL/2013 5 CARRIED OUT IN THE SWASTIK PIPE GROUP OF COMPANIES ON 28 TH AUGUST, 2008, WHICH INCLUDED THE ASSESSEE COMPANY AS WELL. IN THE COURSE OF THE PROCEEDINGS INITIATED UNDER SECTION 153A, THE ASSES SING OFFICER NOTED FROM THE BALANCE SHEET THAT ASSESSEE COMPANY HAS RE CEIVED SHARE CAPITAL FROM THE FOLLOWING COMPANIES :- S. NO. NAME OF INVESTOR AMOUNT-RS. 1. A.C. STEELS & HOLDINGS PVT. LTD. 5,00,000/- 2. GREWAL STEELS & HOLDINGS PVT. LTD. 10,00,000/- 3. SUMIT CREDIT CO. PVT. LTD. 5,00,000/- 4. PRIME VYAPAR PVT. LTD. 5,00,000/- 5. M/S SOFED COMTRDE PVT. LTD. 5,00,000/- TOTAL 30,00,000/- 7. THE AO FURTHER NOTED THAT ALL THE INVESTOR COMPA NIES ARE KOLKATA BASED COMPANIES AND HE SUSPECTED THAT THE SHARE CAP ITAL RECEIVED WAS ACCOMMODATION ENTRIES. HE FURTHER NOTED THAT THE F AMILY MEMBERS OF THE DIRECTORS OF THE COMPANY HAVE PURCHASED THESE SHARE S LATER ON IN THE YEAR 2006 AT 30% OF THE VALUE AT WHICH THESE SHARES WERE ISSUED. THE ASSESSING OFFICER ACCORDINGLY CARRIED OUT THE INVES TIGATION. AN INSPECTOR WAS DEPUTED TO FIND OUT THE WHEREABOUTS OF THESE CO MPANIES. BASED ON THE REPORT OF THE INSPECTOR, THE ASSESSING OFFICER HELD THAT THE SHARE CAPITAL RECEIVED BY THE ASSESSEE COMPANY IS NOT GEN UINE AND HE ACCORDINGLY MADE THE ADDITION OF RS.30 LACS AS UNEX PLAINED CREDIT UNDER SECTION 68 OF THE ACT. ITA NO.3353/DEL./2013) CO NO.218/DEL/2013 6 8. THE ASSESSING OFFICER FURTHER MADE AN ADDITION O F RS.18,645/- UNDER SECTION 14A OF THE INCOME TAX ACT BY INVOKING PROVISIONS OF RULE 8D. 9. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CAME IN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER EXAM INING THE FACTS OF THE CASE, UPHELD THE ADDITION OF THE ASSESSING OFFICER ABOUT THE NON- GENUINENESS OF THE SHARE CAPITAL OF THE COMPANY. H OWEVER, HE WAS OF THE VIEW THAT THE FAMILY MEMBERS OF THE DIRECTORS OF TH E ASSESSEE COMPANY HAS PURCHASED THESE SHARES AFTER PAYING 30% OF THE VALUE OF THESE SHARES I.E. RS.9 LACS AND HENCE THE ADDITION SHOULD BE RES TRICTED TO RS.21 LACS AND NOT RS.30 LACS AS MADE BY THE ASSESSING OFFICER. A CCORDINGLY HE GAVE A RELIEF OF RS.9 LACS. 10. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVEN UE IS IN APPEAL AND THE ASSESSEE HAS FILED CROSS OBJECTION. 11. IT WAS CONTENDED BY THE LD. DR, THAT THE CIT(A) WAS NOT JUSTIFIED IN GIVING RELIEF OF RS.9 LACS AFTER HOLDING THAT EN TIRE SHARE CAPITAL RECEIVED BY THE ASSESSEE COMPANY DURING THE YEAR WAS NOT GEN UINE. THE PURCHASE OF THE SHARES BY THE FAMILY MEMBERS OF THE DIRECTOR S OF THE ASSESSEE COMPANY LATER ON CANNOT BE A GROUND FOR HOLDING THA T THE MONEY RECEIVED INITIALLY WAS GENUINE TO THAT EXTENT. 12. AS AGAINST THIS, THE LD. AR CONTENDED THAT THE ASSESSING OFFICER AS WELL AS CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT TH E SHARE CAPITAL RECEIVED ITA NO.3353/DEL./2013) CO NO.218/DEL/2013 7 BY THE ASSESSEE COMPANY WAS NOT GENUINE. IN THIS R EGARD HE SUBMITTED THAT THIS SHARE CAPITAL HAS BEEN RECEIVED IN THE OR DINARY COURSE AND THE ADVERSE INFERENCE DRAWN BY THE ASSESSING OFFICER IS BY MISINTERPRETING THE FACTS OF THE CASE. IT WAS SUBMITTED THAT ASSES SEE COMPANY HAS RECEIVED A SUM OF RS.20 LACS FROM THE FOLLOWING THR EE COMPANIES:- S. NO. NAME OF INVESTOR AMOUNT-RS. 1. A.C. STEELS & HOLDINGS PVT. LTD. 5,00,000/- 2. GREWAL STEELS & HOLDINGS PVT. LTD. 10,00,000/- 3. SUMIT CREDIT CO. PVT. LTD. 5,00,000/- TOTAL 20,00,000/- 12.1 THE ADVERSE INFERENCE HAS BEEN DRAWN ON THE BA SIS OF THE INSPECTOR REPORT QUOTED BY THE ASSESSING OFFICER ON PARA 4.4 AND 4.5 AS UNDER:- 4.4 THE RESULTS OF THESE INQUIRIES THE INSPECTOR O F INCOME TAX WAS RECEIVED IN THIS OFFICE VIDE LETTER DATED 2 4.10.2010. THE CONTENTS OF THE INQUIRY REPORT ARE REPRODUCED B ELOW:- AS DIRECTED BY THE ASSTT. DIRECTOR OF INCOME TAX (INV.), UNIT-III(3), KOLKATA, I WENT TO 6, CLIVE RO W ON 22.11.2010 AT 4:30 PM. I WENT TO INSPECT WERE THRE E COMPANIES VIZ. STEEL & HOLDING PVT. LTD., GREWAL ST EEL & HOLDING PVT. LTD. SUMIT CREDIT CO. LTD. EXIST AT ROOM NO.6/7 4 TH FLOOR, CLIVE ROW OR NOT. I DID NOT FIND ANY NAME PLACE OF THE ABOVE MENTIONED COMPANIES AT THE VERY PARTICULARS ADDRESS. AT THE TIME OF MY INSPECTION THE DOOR OF ROOM NO.6/7 ON 4 TH FLOOR OF 6 CLIVE ROW WAS TOTALLY CLOSED UNDER LOCK & KEY. ONL Y ONE WOODEN BOARD WAS SHOWING AS GREWAL& CO., TAX CONSULTANT, 6 CLIVE ROW 4 TH FLOOR, ROOM NO.6/7, KOLKATA PLACED ABOVE THE DOOR. ITA NO.3353/DEL./2013) CO NO.218/DEL/2013 8 4.5 THUS, THE REGISTERED OFFICE OF THESE COMPANIES BELONGS TO A TAX CONSULTANT. THE FACTS AND EVIDENCES MENTI ONED ABOVE INDICATE THAT THERE WERE NO REASONS WHY AN UNKNOWN COMPANY IN KOLKATA WOULD INVEST IN A PVT. LTD. COMP ANY AT DELHI SUCH SIGNIFICANT AMOUNTS. THE IDENTITY OF TH E CREDITORS HAS NOT BEEN ESTABLISHED FULLY. IN VIEW OF THE FAC TORS MENTIONED ABOVE, THE CREDITWORTHINESS OF M/S AC STE EL & HOLDINGS PVT. LTD. AND THE GENUINENESS OF THE TRANS ACTION ARE IN DOUBT. IN THIS CONTEXT RELIANCE IS PLACED ON TH E FOLLOWING JUDGMENTS:- . 12.2 IT WAS SUBMITTED THAT THE ABOVE REPORT IN FACT SUPPORT THE CASE OF THE ASSESSEE. IT WAS POINTED OUT THAT THE INSPECTO R HAS NOTED THAT THERE IS A WOODEN BOARD SHOWING THE NAME AS GREWAL & CO.. T HE NAME OF THE COMPANY FROM WHOM SHARE CAPITAL HAS BEEN RECEIVED I NCLUDED GREWAL STEEL & HOLDINGS PVT. LTD. THE COMMON SURNAME GR EWAL IS NOT A COINCIDENCE AND SHOWS THAT GREWAL STEEL & HOLDINGS PVT. LTD. IS OF THE SAME PERSON WHOSE NAME AS GREWAL & CO., THE WOODE N BOARD OF WHICH WAS THERE. FURTHER IT WAS POINTED OUT THAT T HE INSPECTOR HAS SIMPLY TRIED TO FIND OUT THE NAME PLATE AND HE DID NOT MAK E ANY FURTHER ENQUIRY FROM ANY NEIGHBORS OR ANY OTHER PERSON AS IS EVIDEN T FROM THE REPORT QUOTED BY THE ASSESSING OFFICER. THUS IT CANNOT BE SAID THAT THESE COMPANIES WERE NOT IN EXISTENCE AT THAT PLACE AND H ENCE ADVERSE INFERENCE DRAWN BY THE ASSESSING OFFICER IS INCORRECT. 12.3 IT WAS FURTHER SUBMITTED THAT IN THE CASE OF M /S PRIME VYAPAR PVT. LTD. THE ASSESSEE COMPANY HAS RECEIVED SHARE CAPITA L OF RS.5 LAKH. THE ITA NO.3353/DEL./2013) CO NO.218/DEL/2013 9 INSPECTOR REPORT IN THIS REGARD QUOTED BY THE ASSES SING OFFICER IN THE ASSESSMENT ORDER READS AS UNDER:- AS DIRECTED BY THE ASSTT. DIRECTOR OF INCOME TAX ( INV.) UNIT- III(3), KOLKATA, I HAD BEEN ON 24.11.2010 AT 30/1, MAHESH PAUL LINE SANTRAGACHI, HOWRAH TO INSPECT THE EXISTE NCE OF PRIME VYAPAR PVT. LTD. I WENT TO THE SAID ADDRESS BUT COULD NOT FIND ANY SIGNBOARD OR LETTER BOX OF THE SAID CO MPANY. ON LOCAL ENQUIRY IT IS REVEALED THAT THERE IS NO COMPA NY CALLED THIS NAME AT THE ADDRESS AND THERE IS ONLY A RESIDE NTIAL PLACE OF THE SAID PREMISE AND THERE WAS NAME PLATE PLACED OUTSIDE THE MAIN ENTRANCE OF THE SAID PREMISES NAMED AS, BU DDHADEB DAS 30/1, MAHESH PAUL LANE, SANTRAGACHI, HOWRAH. 12.4 AS REGARDS THE BALANCE CHEQUE OF RS.5 LAKH REC EIVED FROM SOFED COMTRADE PVT. LTD., THERE IS ABSOLUTELY NO ADVERSE MATERIAL. THERE IS NO INSPECTOR REPORT. THE ASSESSING OFFICER HAS SIMPLY STATED THAT THE GENUINENESS OF THE TRANSACTION IS IN DOUBT AS CAN B E SEEN FROM THE OBSERVATION OF THE ASSESSING OFFICER IN PARA 8.1 AN D 8.2 WHICH READ AS UNDER:- 8.1 THE ASSESSEE VIDE ITS LETTER DATED 16.11.2010 SUBMITTED THE CONFIRMATION ALONGWITH A COPY OF THE INCOME TAX RETURN ACKNOWLEDGEMENT AND AN EXTRACT OF THE BANK STATEMEN T. A PERUSAL OF THE INCOME TAX RETURN SHOWS THAT M/S SOFEDCOMTRADE PVT. LTD. HAS SHOWN A TOTAL INCOME OF RS.5,150/- ONLY DURING ASSESSMENT YEAR 2005-06. 8.2 IN VIEW OF THE FACTORS MENTIONED ABOVE, THE CREDITWORTHINESS OF M/S SOFED COMTRADE PVT. LTD. AN D THE GENUINENESS OF THE TRANSACTION ARE IN DOUBT. IN TH IS CONTEXT, IT FURTHER RELEVANT TO NOTE THE SHARES HELD BY M/S SOF ED COMTRADE PVT. LTD., WERE TRANSFERRED TO SMT. ANUPAM A BANSAL THE DAUGHTER-IN-LAW OF THE DIRECTOR OF THE A SSESSEE COMPANY SMT. GEETA DEVI AGGARWAL FOR A TOTAL CONSID ERATION ITA NO.3353/DEL./2013) CO NO.218/DEL/2013 10 OF ONLY RS.1,50,000/- ON 30.06.2006 I.E. AT 1/3 RD OF THE COST OF PURCHASE. 12.5 ON THE BASIS OF THE ABOVE SUBMISSION IT WAS SU BMITTED THAT THE FINDINGS GIVEN BY THE ASSESSING OFFICER AND THE CIT (A) THAT THE SHARE CAPITAL RECEIVED BY THE ASSESSEE IS NOT CORRECT. 12.6 AS REGARDS THE ADDITION ON ACCOUNT OF 14A IT W AS SUBMITTED THAT THE ASSESSEE COMPANY HAS MADE AN INVESTMENT OF RS.44,54 ,119/- OUT OF WHICH RS.36,50,000/- WITHIN THE GROUP COMPANY AND IN RESP ECT OF THE BALANCE INVESTMENT OF RS.8,04,119.50 THERE IS NO CHANGE IN THE INVESTMENT AS COMPARED TO THE LAST YEAR. THE ASSESSING OFFICER WA S NOT JUSTIFIED IN INVOKING PROVISIONS OF RULE 8D AND MAKING THIS ADDI TION IN THE ASSESSMENT YEAR UNDER CONSIDERATION AS RULE 8D IS A PPLICABLE FROM ASSESSMENT YEAR 2008-09 ONWARDS. 13. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED T HE MATERIAL ON RECORD. WE HAVE PERUSED THE ASSESSMENT ORDER AS WE LL AS THE CIT(A) ORDER. ON GOING THROUGH THE SAME WE NOTICE THAT TH E ISSUE IS REGARDING GENUINENESS OF THE SHARE CAPITAL OF RS.30 LACS RECE IVED BY THE ASSESSEE COMPANY DURING THE YEAR. OUT OF THIS RS.30 LAKH, R S.20 LAKH HAS BEEN RECEIVED FROM THE FOLLOWING THREE COMPANIES:- ITA NO.3353/DEL./2013) CO NO.218/DEL/2013 11 S. NO. NAME OF INVESTOR AMOUNT-RS. 1. A.C. STEELS & HOLDINGS PVT. LTD. 5,00,000/- 2. GREWAL STEELS & HOLDINGS PVT. LTD. 10,00,000/- 3. SUMIT CREDIT CO. PVT. LTD. 5,00,000/- TOTAL 20,00,000/- 13.1 THE ADDRESS OF THESE COMPANIES WAS ROOM NO.6/7 ON 4 TH FLOOR, 6 CLIVE ROAD, KOLKATA. IN THIS REGARD THE ASSESSEE HAS SUBMITTED NECESSARY DETAILS WHICH INCLUDED COPY OF THE INCOME TAX RETUR N, BALANCE SHEET, BANK STATEMENT, SHARE APPLICATION FORM, CERTIFICATE OF I NCORPORATION, MEMORANDUM & ARTICLES OF ASSOCIATION. NOTHING ADVE RSE HAS BEEN FOUND OR COMMENTED UPON BY THE ASSESSING OFFICER AB OUT THESE DOCUMENTS SUBMITTED BY THE ASSESSEE COMPANY. THE A SSESSING OFFICERS DOUBT HAS ARISEN MERELY ON THE GROUND THAT THESE AR E KOLKATA BASED COMPANIES, THE ADDRESS OF THESE COMPANIES ARE COMMO N. FOR THIS HE HAS CARRIED OUT ENQUIRY AND OBTAINED INSPECTOR REPORT W HICH HAS BEEN QUOTED IN THE ASSESSMENT ORDER. ON THE BASIS OF THIS REPO RT, THE ASSESSING OFFICER HAS DRAWN ADVERSE INFERENCE HOLDING THAT THE COMPAN IES ARE NOT IN EXISTENCE AT THE PLACE STATED. WE NOTE THAT THE AS SESSING OFFICER IS NOT CORRECT IN DRAWING SUCH ADVERSE INFERENCE ON THE BA SIS OF THIS REPORT. AS RIGHTLY POINTED OUT BY THE LD. AR THAT THE INSPECTO R HAS VISITED THIS ITA NO.3353/DEL./2013) CO NO.218/DEL/2013 12 PREMISES ON THE EVENING AT 4.30 PM. THE INSPECTOR HAS CONFIRMED THAT THERE WAS AN OFFICE WITH A NAME PLATE, AS GREWAL & CO. THE INSPECTOR HAS FURTHER STATED THAT THE REGISTERED OFFICE OF TH ESE COMPANIES BELONGS TO A TAX CONSULTANT. ON THE BASIS OF THESE FINDINGS, THE ASSESSING OFFICER HAS DRAWN ADVERSE INFERENCE AND MADE THE ADDITION. WE ARE OF THE VIEW THAT THE ASSESSING OFFICER IS NOT JUSTIFIED ON THE BASIS OF THIS INSPECTOR REPORT TO HOLD THAT THE IDENTITY OF THE SHAREHOLDER COMPAN Y HAS NOT BEEN ESTABLISHED. ON THE CONTRARY, AS RIGHTLY POINTED O UT, THE COMMON SURNAME GREWAL IS GOOD ENOUGH TO INDICATE THAT THE OFFICE OF THESE COMPANIES WERE AT THAT PREMISES. THE INSPECTOR DID NOT MAKE ANY EFFORT TO MAKE ANY FURTHER ENQUIRY ABOUT THESE COMPANIES AND ALSO ASSE SSING OFFICER DID NOT MAKE ANY EFFORT TO CARRY THE INVESTIGATION FURTHER. THE SOLE BASIS FOR MAKING ADDITION ABOUT THESE COMPANIES IS THE INSPEC TOR REPORT. NO DOUBTS HAVE BEEN RAISED BY THE ASSESSING OFFICER ABOUT THE DOCUMENTS FILED BY THE ASSESSEE COMPANY. THE INSPECTOR REPORT AS ALLE GED ABOVE CANNOT BE A BASIS FOR DISBELIEVING THE ASSESSEES VERSION. 13.2 FURTHER IN THE CASE OF SOFED COMTRADE PVT. LTD . WE NOTE THAT NO ENQUIRY WHATSOEVER HAS BEEN DONE BY THE AO. THE OB SERVATIONS MADE BY HIM ARE ONLY RAISING A DOUBT WITHOUT CARRYING OUT A NY INVESTIGATION. SURPRISINGLY WE NOTE THAT THE AO WAS HAVING DOUBT I N MIND BUT HE NEVER ISSUED ANY NOTICE OR SUMMON TO ANY OF THE DIRECTORS . IT IS NOT A CASE WHERE ANY CONFESSIONAL STATEMENT HAS BEEN RECORDED BY ANY ENTRY ITA NO.3353/DEL./2013) CO NO.218/DEL/2013 13 PROVIDER OF ACCOMMODATION ENTRY. IT IS A CASE OF A DOUBT RAISED BY THE ASSESSING OFFICER BUT SUCH DOUBT HAS NOT BEEN CONVE RTED INTO ANY EVIDENCE OR MATERIAL SO AS TO SUBSTANTIATE THE ADDI TION. WE ARE OF THE VIEW THAT THE ADDITIONS MADE BY THE AO IN RESPECT O F SHARE CAPITAL RECEIVED FROM THESE FOUR COMPANIES ARE NOT JUSTIFIE D AND ACCORDINGLY THE SAME IS DIRECTED TO BE DELETED. 13.3 AS REGARDS THE FIFTH COMPANY I.E. PRIME VYAPAR PVT. LTD. WE NOTE THAT THE INSPECTOR HAS CARRIED OUT THE ENQUIRY AND IN THIS REPORT THE INSPECTOR HAS POINTED OUT THAT ON LOCAL ENQUIRY IT IS REVEALED THAT THERE IS NO COMPANY CALLED THIS NAME AT THE ADDRESS AND THER E IS ONLY A RESIDENTIAL PLACE AT THE SAID PREMISE. THE LD. AR DURING THE C OURSE OF THE HEARING COULD NOT REBUT THIS FINDING OF THE INSPECTOR. 13.4 IN VIEW OF THIS SPECIFIC FINDING OF THE INSPEC TOR WHICH REMAINS UN- REBUTTED, WE ARE OF THE VIEW THAT ADDITION OF RS.5 LACS IN RESPECT OF THE SHARE CAPITAL RECEIVED FROM PRIME VYAPAR PVT. LTD. HAS BEEN RIGHTLY BEEN MADE BY THE ASSESSING OFFICER AND ACCORDINGLY THIS ADDITION IS CONFIRMED. THUS THE GROUND NO.2 OF REVENUE APPEAL AND GROUND NO.7 OF CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. 13.5 THE NEXT ISSUE IS REGARDING DISALLOWANCE OF RS .18,645/- MADE BY THE ASSESSING OFFICER INVOKING THE PROVISIONS OF SE CTION 14A READ WITH RULE 8D. IN THIS REGARD WE NOTICE THAT THE ASSESSM ENT YEAR UNDER CONSIDERATION IS 2005-06 AND RULE 8D IS EFFECTIVE F ROM ASSESSMENT YEAR ITA NO.3353/DEL./2013) CO NO.218/DEL/2013 14 2008-09. ACCORDINGLY THE ASSESSING OFFICER WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF RULE 8D FOR THE ASSESSMENT YEAR U NDER CONSIDERATION. WE FURTHER NOTE THAT ASSESSEES INVESTMENT IS MAINL Y IN GROUP COMPANIES. CONSIDERING THESE FACTS WE DELETE THIS ADDITION AND THIS GROUND NO. 8 OF CROSS OBJECTION IS ALLOWED. 13.6 WITH THE RESULT APPEAL OF THE REVENUE AND CROS S OBJECTION OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 10 TH DAY OF OCTOBER, 2014. SD/- SD/- (I.C. SUDHIR) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 10 TH DAY OF OCTOBER, 2014 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-I, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR/ITAT