M/s MAF Academy P. Ltd., New Delhi V. ITO, New Delhi

CO 317/DEL/2011

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6581 (ITAT-DELHI)
• Duration Of Justice: 1 month(s) 7 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 28-09-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 07-09-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RA J TANDON
• Assessee Lawyers: TARUN S
• Keywords: Accommodation entries; Onus to prove; Sham transactions
• Section: 69C; 131; 68; 148

Judgement Text

ITA NO. 3650/DEL/2011 AND CO NO. 317/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 3650/DEL/2011 A.Y. : 2002-03 INCOME TAX OFFICER, WARD 6(1), NEW DELHI ROOM NO. 418A, CR BUILDING, NEW DELHI VS. M/S MAF ACADEMY P. LTD., D-11, ABDUL FAZAL ENCLAVE, JAMIA NAGAR, NEW DELHI 110 025 (PAN/GIR NO. : AADCM1107C) AND C.O. NO. 317/DEL/2011 (IN ITA NO. 3650/DEL /2011) A.Y. 2002-03 M/S MAF ACADEMY P LTD., VS. INCOME TAX OFFICER, C/O RRA TAXINDIA, WARD 6(1), NEW DELHI D-28, SOUTH EXTENSION, PART-I, NEW DELHI 110 049 (PAN/GIR NO. : AADCM1107C) (APPELLANT (APPELLANT (APPELLANT (APPELLANT S SS S ) )) ) (RESPONDENT (RESPONDENT (RESPONDENT (RESPONDENT S SS S ) )) ) ASSEESSEE BY : S /SH. ASHWANI TANEJA, KAILASH MITTAL AND TARUN, ADVOCATES. DEPARTMENT BY : SH. R AJ TANDON, C.I.T.(D.R.) ORDER ORDER ORDER ORDER THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY TH E ASSESSEE EMANATE OUT OF THE LD. COMMISSIONER OF INCOME TAX (AP PEALS)S ORDER DATED 14.3.2011 AND PERTAINS TO ASSESSMENT YEAR 2002-03. ITA NO. 3650/DEL/2011 AND CO NO. 317/DEL/2011 2 REVENUE REVENUE REVENUE REVENUES S S S APPEAL (ITA NO. APPEAL (ITA NO. APPEAL (ITA NO. APPEAL (ITA NO. 3650 3650 3650 3650) ) ) ) 2. THE GROUNDS RAISED READ AS UNDER:- 1. THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS & CONTRARY TO FACTS & LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION MADE ON AC COUNT OF UNEXPLAINED INCOME OF U/S 68 OF THE ACT OF ` 3,43,00 ,000/- IGNORING :- A) THE FINDINGS & INVESTIGATIONS MADE BY THE INVESTIGATION WING OF THE DEPARTMENT AND THE ASSESSING OFFICER AS MENTIONED IN THE ASSESSMENT ORDER. B) THE ASSESSEE IS A PRIVATE LTD. COMPANY. NEITHER IT CAN MAKE PUBLIC ISSUE OF THE SHARES NOR IT HAD COME OUT WITH ANY ADVERTISEMENT ABOUT ISSUE OF SHARE CAPITAL. IT FAILED TO EXPLAIN AS TO HOW THEN IT WAS ABLE TO ALLEGEDLY RECEIVE SUCH A HUGE AMOUNT OF CAPITAL, INCLUDING PREMIUM IN A VERY SHORT SPAN OF PERIOD, FROM SO MANY PARTIES. C) ALL THE SHARE WHICH WERE ALLEGEDLY ALLOTTED TO OU TSIDE PARTIES WERE BOUGHT BACK BY THE DIRECTORS AND THEIR FAMILY MEMBER AT A HUGE DISCOUNT AFTER VERY SHORT SPAN OF TIME. D) THE DICTUM GIVEN BY THE HON'BLE SUPREME COURT IN CIT VS DURGA PRASAD MORE 82 ITR 540 & SUMATI DAYAL V S CIT 214 ITR 801 IN WHICH APEX COURT HAS LAID DOWN THE PROPOSITION THAT THE COURTS & TRIBUNALS SHOULD SEE THE PREPONDERANCE OF PROBABILITIES WHILE CONSIDERING THE EVIDENCE FURNISHED BY THE ASSESSEE. E) THAT IN THE CASE OF ITA WARD 6(3) VS MAYANK CONTAINERS P. LTD IN ITA NO. 2283/DEL/09/ DATED 11.08.2009 THE HON'BLE IT AT WHILE REFERRING TO THE DECISIONS OF LOVELY EXPORTS (SUPRA) AND DIVINE LEASING & FINANCE (SUPRA) HAS HELD THAT 'IN OUR VIEW, ITA NO. 3650/DEL/2011 AND CO NO. 317/DEL/2011 3 HON'BLE DELHI HIGH COURT AND HON'BLE SUPREME COURT WHILE RENDERING JUDGMENTS IN THE ABOVE CASE WERE NOT DEALING WITH THE CASE OF HAWALA OPERATORS AND BOGUS ENTRY PROVIDERS.' F) THAT THE A.O. IS DUTY BOUND U/S 68 TO ENQUIRE INTO THE CREDITWORTHINESS, IDENTITY OF THE CREDITORS & GENUINENESS OF THE TRANSACTIONS. THE CIT(A) HAS ERRED IN IGNORING SUCH FINDINGS RECORDED BY THE A.A. IN THE ASSESSMENT ORDER. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, T HE LEARNED CIT(A) HAS ERRED IN HOLDING THAT ADDITION U/ S 68 CANNOT BE MADE IN THE HANDS OF THE ASSESSEE COMPANY. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, T HE LEARNED CIT(A) HAS ERRED IN DELETING ADDITION MADE U /S 69C OF ` 6,86,000/-. 5. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, OR A MEND ANY GROUNDS OF THE APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. 3. IN THIS CASE ASSESSEE COMPANY FILED ITS RETURN OF INCO ME ON 30.9.2002 DECLARING NIL INCOME. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WING OF THE DEPARTMENT, NOTICE U/ S 148 WAS ISSUED ON 26.3.2009 FOR REOPENING OF THE ASSESSMENT. 3.1 IN ORDER TO VERIFY THE GENUINENESS OF THE TRANSACT IONS, IDENTITY AND CREDITWORTHINESS OF THE PARTIES WHO SUBSCRIBED TO SHARE CAPITAL OF THE ASSESSEE COMPANY, THE ID. AO ASKED THE ASSESSEE TO FILE NEC ESSARY DETAILS, IN RESPECT OF THE PARTIES WHOSE NAME APPEARED IN THE R EASONS RECORDED. THE A.R. FILED CONFIRMATIONS IN THE FORM OF AFFIDAVITS IN RESPECT OF 18 PARTIES FROM WHOM A SUM OF ` 1,50,00,000/- WAS RECEIVED AS SHARE CAP ITAL. IN ORDER TO VERIFY THE FINDING OF THE INVESTIGATION WING, THE ID . AO ISSUED SUMMONS U/S 131 TO FOLLOWING 9 PARTIES (OUT OF THE TOTAL 18 PART IES) AT THE ADDRESSES GIVEN ITA NO. 3650/DEL/2011 AND CO NO. 317/DEL/2011 4 IN THE AFFIDAVITS FILED BY THE ASSESSEE. AN INFORMATION WAS RECEIVED BY THE ID. AO THAT THESE PARTIES BELONGED TO MAHESH GARG WHO WAS A N ACCOMMODATION ENTRY PROVIDER: 1. SHRI VIJAY KUMAR 2. M/S. CHINTPURNI CREDITS AND LEASING (P) LTD. 3. SHRI NARINDER KR. GUPTA 4. SHRI SUBHASH CHAND GUPTA 5. SHRI MANISH KR. AGGARWAL 6. SMT. REKHA GARG 7. SHRI AJAY BANSAL 8. SHRI SATISH KUMAR SHARMA 9. SHRI KESHO RAM GUPTA 3.1.1 AS THE SUMMONS ISSUED TO THE ABOVE PARTIES WERE R ECEIVED BACK UNSERVED, THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY ADVER SE INFERENCE MAY NOT BE DRAWN AND WAS REQUIRED TO FURNISH DETAILS A BOUT THE REMAINING PARTIES WHO CONTRIBUTED TO SHARE CAPITAL BUT FOR WHI CH NO DETAILS WERE FILED BY THE ASSESSEE. IN RESPONSE, THE ASSESSEE FURTHER FILED DET AILS IN RESPECT OF REMAINING PARTIES WHICH CONTRIBUTED TO THE SHARE CAPI TAL OF THE ASSESSEE COMPANY. IN ALL, THE ASSESSEE RECEIVED SHARE CAPITAL OF ` 4,35,00,000/- DURING THE YEAR WHICH INCLUDE AN AMOUNT OF ` 92,00, 000/- RECEIVED FROM THE FOUR DIRECTORS / THEIR FAMILY MEMBERS, AND THE BALAN CE AMOUNT OF ` 3,43,00,000/- WAS RECEIVED FROM OTHER THAN DIRECTORS OF THE ASSESSEE COMPANY. 3.1.2 THE ASSESSING OFFICER ALSO ISSUED SUMMONS U/S 131 TO T HE FOLLOWING PARTIES THROUGH INSPECTOR OF THE WARD IN ORDER TO VERIFY THE GENUINENESS OF ITA NO. 3650/DEL/2011 AND CO NO. 317/DEL/2011 5 THE TRANSACTIONS BUT NONE OF THE PARTIES WAS FOUND AVA ILABLE AT THE ADDRESSES GIVEN BY THE ASSESSEE:- 1. SHRI SANTOSH KUMAR CHOUDHRY 2. SMT. SIMLA DEVI 3. SHRI CHETAN PARKASH 4. SHRI SURESH PARKASH 5. SHRI VASUDEV 6. SHRI JAGDISH PD. GUPTA 7. SHRI VINODI LAL 8. SHRI SHYAM LAL 3.1.3 THE LD. AO THEREFORE ASKED THE AR OF THE ASSESSEE COMPANY TO PRODUCE THESE PARTIES BUT ON THE DATE FIXED FOR HEARI NG, AR OF THE ASSESSEE APPEARED AND EXPRESSED THAT IT WAS NOT POSSIBLE FOR THEM TO PRODUCE THE ABOVE PARTIES. AS THE ASSESSEE COULD NOT PRODUCED THE PAR TIES AND THE PARTIES WERE ALSO NOT FOUND AT THE GIVEN ADDRESSES, THE LD. AO DID NOT BELIEVE THE EVIDENCES FILED BY THE ASSESSEE TO SUBSTANTIATE THE SH ARE CAPITAL RECEIVED AND MADE THE ADDITION U/S 68 OF THE ACT, RE LYING ON THE FOLLOWING JUDGEMENTS:- 1. C.I.T. VS. DURGA PRASAD MORE (1971) 82 ITR 540 ( SC) 2. ITO VS. K. JAYARAMAN (1987) 168 ITR 757 (MAD) 3.2 THE ASSESSING OFFICER ALSO VERIFIED THE BANK STATEM ENTS FILED BY THE ASSESSEE IN RESPECT OF THE SHAREHOLDERS TO WHOM SHARES WERE ISSUED AND FOUND THAT CASH WAS DEPOSITED BEFORE ISSUANCE OF CHEQUE S IN THE BANK ACCOUNTS OF SHRI MANISH KUMAR AGGARWAL, VINOD GARG, S HRI RAJEEV KR. AGGARWAL, SATISH KUMAR SHARMA AND SHRI NARINDER GUPT A. ITA NO. 3650/DEL/2011 AND CO NO. 317/DEL/2011 6 3.3 THE ASSESSING OFFICER HAS FURTHER OBSERVED THAT THE SHARES ALLOTTED TO THE ABOVE PARTIES WERE BOUGHT BACK AT A PRICE OF ` 35/-. THUS, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EVIDENCES F URNISHED BY THE ASSESSEE, NATURE OF ENTRIES FOUND RECORDED IN THE BANK STATEMENTS OF THE PARTIES, NON-AVAILABILITY OF THE PARTIES AT THE ADDR ESSES MENTIONED IN THE AFFIDAVITS FURNISHED BY THE ASSESSEE AND THE CONFIRMING GIVEN THROUGH THE AFFIDAVITS FILED BY THESE PARTIES. THE ASSESSING OFFICER CONCLUDED AS UNDER:- 'IN VIEW OF THE ABOVE FACTS, I AM SATISFIED THAT THE A MOUNT OF ` 3,43,00,000/- (` 4,35,00,000 - ` 92,00,000/-) ALLE GEDLY RECEIVED FROM VARIOUS PERSONS WAS NEVER RECEIVED AS SHARE CAPITAL. IT WAS A CAMOUFLAGED TRANSACTION TO AVAIL THE BENEFIT OF FA VOURABLE JUDICIAL PRONOUNCEMENT ON SHARE CAPITAL. IT IS RESPECT FULLY SUBMITTED THAT FACTS OF THE CASE IN HAND ARE ENTIRELY ON DIFFERENT FOOTING AND NEEDS TO BE EXAMINED ACCORDINGLY. THUS, KEEPING IN VIEW THE TOTALITY OF THE FACTS, THE AMOUNT OF ` 3,43,00,000/- IS ADDED. THE ASSESSING OFFICER FURTHER MADE AN ADDITION OF ` 6 ,86,000/- BEING COMMISSION PAID BY THE ASSESSEE FOR TAKING ACCOMMODATION ENTRY. 4. AGAINST THE ABOVE ORDER THE ASSESSEE APPEALED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). LD. COMMISSIONER OF INCOME TAX (APPEALS) NOTED THAT ASSESSEE HAS FURNISHED VOLUMINOUS EVI DENCES TO JUSTIFY THE IDENTITY, CREDITWORTHINESS OF THE PARTIES AND GENU INENESS OF THE TRANSACTIONS. HE FURTHER OBSERVED THAT IT APPEARS TH AT NO VERIFICATION WAS CARRIED OUT BY THE ASSESSING OFFICER TO CONTROVERT THE EVIDENCES FILED BY THE ASSESSEE FROM THE INCOME TAX RECORDS OF THE CONCERNED PA RTIES. LD. COMMISSIONER OF INCOME TAX (APPEALS) FURTHER OBSERVED T HAT ASSESSING OFFICER INSISTED FOR THE PRODUCTION OF THE PARTIES BE FORE HIM BY THE ASSESSEE BUT HE DID NOT MAKE ANY INDEPENDENT EFFORT TO ENFORCE THE APPEARANCE OF ITA NO. 3650/DEL/2011 AND CO NO. 317/DEL/2011 7 SUCH PARTIES. NO FURTHER EVIDENCE WAS BROUGHT ON REC ORD TO ESTABLISH THAT THE DOCUMENTS FIELD BY THE ASSESSEE WERE FALSE OR THE TRA NSACTIONS ENTERED NOT BY THE ASSESSEE WERE SHAM TRANSACTIONS. THE ASSESSING OFFICER HAS NOT MADE ANY EFFORT TO CALL SHRI MAHESH GARG TO RECORD H IS STATEMENT TO VERIFY THE FACTS AS TO WHAT HE STATED BEFORE THE INVESTIGATIO N WING WAS CORRECT AND APPLICABLE IN THE ASSESSEES CASE. LD. COMMISSIONER OF IN COME TAX (APPEALS) OBSERVED THAT NO CROSS EXAMINATION WAS GRANTED BY THE ASSESSING OFFICER TO THE ASSESSEE BEFORE MAKING THE ADDITIONS. H E FURTHER OBSERVED THAT NOTHING HAS BEEN BROUGHT ON RECORD TO ESTABLISH THAT THE ENTRIES APPEARING IN THE ASSESSEES BOOKS RESULTED FROM THE ASSESSEE S OWN CASH AND WERE THUS ACCOMMODATION ENTRIES. LD. COMMISSIONER OF INCOME TAX (APPEALS) PROCEEDED TO HOLD THAT ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION OF ` 3,43,00,000/- U/S 68 OF THE IT ACT. LD. COMMISSIONER OF INCOME TAX (APPEALS). LD. COMMISSIONER OF INCOME T AX (APPEALS) FURTHER NOTED THAT SINCE THE ADDITION OF ` 3,43,00,000/- U/S 68 HAS BEEN DELETED, THERE REMAINS NO BASIS FOR SUSTAINING THE ADDITION OF ` 6,86,000/- U/S 69C. HE THEREFORE, DIRECTED THE SAME BE DELETED. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPE AL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTION IN LIGHT OF T HE MATERIAL PRODUCED AND PRECEDENTS RELIED UPON. WE FIND THAT ASSESSEE HAS SU BMITTED THE FOLLOWING DOCUMENTS BEFORE THE ASSESSING OFFICER, IN SUP PORT OF THE SHARE APPLICATION MONEY :- (I) COPIES OF SHARE APPLICATIO N FORM; (II) AFFIDAVITS OF SHARE HOLDERS; (III) COPY OF AUDITED BALANCE SHEET; (I V) COPIES OF ASSESSMENT ORDERS; (V) COPIES OF THE BANKS STATEMENTS; (VI) COPIES O F ITR/WTR AND (VII) COPY OF PAN. 6.1 THUS, WE AGREE WITH THE FINDING OF THE LD. COMMI SSIONER OF INCOME TAX (APPEALS) THAT ASSESSEE HAS FURNISHED SUFFICIENT EVIDENCES TO JUSTIFY THE IDENTITY, CREDITWORTHINESS OF THE PARTIES AND GENUINEN ESS OF THE TRANSACTIONS. WE FIND NO VERIFICATION WAS CARRIED OUT BY THE ASSESSIN G OFFICER TO ITA NO. 3650/DEL/2011 AND CO NO. 317/DEL/2011 8 CONTROVERT THE EVIDENCES FILED BY THE ASSESSEE FROM THE INCOME TAX RECORDS OF THE CONCERNED PARTIES. ASSESSING OFFICER INSISTED FOR THE PRODUCTION OF THE PARTIES BEFORE HIM BY THE ASSESSEE BUT HE DID NOT MAKE A NY INDEPENDENT EFFORT TO ENFORCE THE APPEARANCE OF SUCH PARTIES. WE AGREE WITH THE FINDING OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) THAT N O EVIDENCE WAS BROUGHT ON RECORD TO ESTABLISH THAT THE DOCUMENTS FILE D BY THE ASSESSEE WERE FALSE OR THE TRANSACTIONS ENTERED INTO BY THE ASSE SSEE WERE SHAM TRANSACTIONS. WE FURTHER AGREE WITH THE LD. COMMISSIONE R OF INCOME TAX (APPEALS)S THAT NO CROSS EXAMINATION WAS GRANTED BY TH E ASSESSING OFFICER TO THE ASSESSEE BEFORE MAKING THE ADDITIONS. WE ALSO FI ND THAT NOTHING HAS BEEN BROUGHT ON RECORD TO ESTABLISH THAT THE ENTRIE S APPEARING IN THE ASSESSEES BOOKS RESULTED FROM THE ASSESSEES OWN CASH AND WERE THUS ACCOMMODATION ENTRIES. 6.2 IN THIS REGARD, WE REFER TO THE DECISION OF THE H ONBLE APEX COURT DELIVERED IN THE CASE OF CIT VS. LOVELY EXPORTS 216 C TR 195. IN THIS CASE IT WAS HELD THAT IF THE SHARE APPLICATION MONEY IS RECEIV ED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES AR E GIVEN TO THE ASSESSING OFFICER, THEN THE DEPARTMENT IS FREE TO PROCEE D TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CA NNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE. 6.3 WE FURTHER PLACE RELIANCE UPON THE DECISION OF T HE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF C.I.T. VS. DW ARKADHISH INVESTMENT P LTD. IN ITA NO. 911/2010 VIDE ORDER DATED 02.8.201 0. THE RELEVANT PARAS OF THIS JUDGEMENT OF HONBLE DELHI HIGH COURT I.E. PARA NO. 6, 7 & 8 ARE REPRODUCED HEREIN BELOW:- 6. IN OUR OPINION, AS SECTION 68 OF THE ACT, 1961 H AS BEEN INTERPRETED AS RECENTLY AS 2008 BY A DIVISION BENCH OF THIS COURT IN DIVINE LEASING AND FINANCE LTD. (SUPRA) AFTER CON SIDERING ALL THE RELEVANT JUDGEMENTS, WE DO NOT HAVE TO RECONSIDE R ALL THE ITA NO. 3650/DEL/2011 AND CO NO. 317/DEL/2011 9 JUDGEMENTS REFERRED TO BY MR. SAHNI WHICH ARE PRIOR IN DATE AND TIME TO THE AFORESAID JUDGEMENT. IN FACT, A SPECIAL LEAVE PETITION FILED AGAINST THE SAID DIVISION BENCH JUDGEMENT WAS DIS MISSED BY THE SUPREME COURT BY WAY OF SPEAKING ORDER IN C.I .T. VS. LOVELY EXPORTS (P) LTD. 216 CTR 195 (SC). THE SUPRE ME COURT IN LOVELY EXPORTS PVT. LTD. (SUPRA) HAS HELD AS UNDER:- CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER SECTION 68 OF THE INCOME TA X ACT, 1961. WE FIND NO MERIT IN THIS SPECIAL LEAVE P ETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MO NEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE ASSESSING OFFICER, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGEMENT. 7. CONSEQUENTLY, THE DOCTRINE OF MERGER WOULD APPLY AND THE JUDGEMENT OF THE SUPREME COURT IN LOVELY EXPORTS (P) LTD. (SUPRA) WOULD COVER THE FIELD WITH REGARD TO INTERP RETATION OF SECTION 68 OF THE ACT. 8. IN ANY MANNER, THE ONUS OF PROOF IS NOT A STATIC ON E. THOUGH IN SECTION 68 PROCEEDINGS, THE INITIAL BURDEN OF PROOF L IES ON THE ASSESSEE YET ONCE HE PROVES THE IDENTITY OF THE CREDITOR S/ SHARE APPLICANTS BY EITHER FURNISHING THEIR PAN NUMBER OR INCOME TAX ASSESSMENT NUMBER AND SHOWS THE GENUINENESS OF TRANSACTIO N BY SHOWING MONEY / HIS BOOKS EITHER BY ACCOUNT PAYEE C HEQUE OR BY DRAFT OR BY ANY OTHER MODE, THEN THE ONUS OF PRO OF WOULD SHIFT TO THE REVENUE. JUST BECAUSE THE CREDITORS /SHA RE APPLICANTS COULD NOT BE FOUND AT THE ADDRESS GIVEN, IT WOULD NOT ITA NO. 3650/DEL/2011 AND CO NO. 317/DEL/2011 10 GIVE THE REVENUE THE RIGHT TO INVOKE SECTION 68. O NE MUST NOT LOSE SIGHT OF THE FACT THAT IT IS THE REVENUE WHICH HA S ALL THE POWER AND WHEREWITHAL TO TRACE ANY PERSON. MOREOVE R, IT IS SETTLED LAW THAT THE ASSESSEE NEED NOT TO PROVE THE SOUR CE OF SOURCE. 6.4 WE ALSO PLACE RELIANCE UPON THE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF C.I.T. VS. OASIS HOSPITALITIES P LTD. 33 ITR 119 AS UNDER:- 27. THE ORDER OF ASSESSING OFFICER WOULD REVEAL THAT IT HAD RECEIVED AN INFORMATION FROM THE INVESTIGATION WING WHICH HAD MADE VARIOUS ENQUIRIES / INVESTIGATIONS ON THE BASIS OF WHICH IT WAS FOUND THAT THESE SIX INVESTORS BELONG TO O NE MAHESH GARG GROUP WHO WERE NOT CARRYING ON ANY REAL BUSINESS ACTIVITY AND WERE RATHER ENGAGED IN THE BUSINE SS OF PROVIDING ACCOMMODATIONS ENTRIES. THEY WERE, THUS, ENTRY OPERATORS OF WHICH THE APPELLANT WAS THE BENEFI CIARY. ACCORDING TO THE ASSESSING OFFICER, THE MODUS OPERANDI INVOLVED IN SUCH TYPE OF ACTIVITY WAS LIKE THIS: AN EN TRY OPERATOR OPERATES A NUMBER OF ACCOUNTS IN THE SAME BANK/BRANCH OR IN DIFFERENT BRANCHES IN THE NAME OF COMPANIES, FIRMS, PROPRIETARY CONCERNS AND INDIVIDUALS AND FOR THE OPERATION OF THESE BANK ACCOUNTS, FILING INCO ME TAX RETURNS ETC. PERSONS ARE HIRED. MOST OF THESE PERSONS W ORK ON PART-TIME BASIS AND ARE CALLED UPON TO SIGN DOCUMEN TS, CHEQUE BOOKS, ETC. WHENEVER REQUIRED. WHENEVER ANY BENEFICIARY IS INTERESTED IN TAKING AN ENTRY, HE WOUL D APPROACH THE ENTRY OPERATOR AND HANDOVER THE CASH ALONGWITH COMMISSION AND TAKE CHEQUES, DEMAND DRAFT, POSTAL ORDER. THE CASH IS DEPOSITED BY THE ENTRY OPER ATOR IN A BANK ACCOUNT EITHER IN HIS NAME OR IN THE NAME OF RELATIVE/ FRIENDS OR OTHER PERSON HIRED BY HIM FOR TH E ITA NO. 3650/DEL/2011 AND CO NO. 317/DEL/2011 11 PURPOSES OF OPENING THE BANK ACCOUNT. AFTER THE DEPO SIT OF CASH WHEN THERE IS SUFFICIENT BALANCE, THE ENTRY OPERA TOR ISSUES DEMAND DRAFT, POSTAL ORDERS, CHEQUES IN THE NAME O F BENEFICIARY. MOST OF THESE CONCERNS / INDIVIDUALS ALSO HAVE OBTAINED PAN FROM THE DEPARTMENT AND ARE FILING IN COME TAX RETURNS, BUT WHAT IS SHOWN IN THE RETURN IS NOT AC TUAL STATE OF AFFAIRS. 28. THE APPELLANT FILED COPIES OF PAN, ACKNOWLEDGEME NT OF FILING OF INCOME TAX RETURNS OF THE COMPANIES, THEIR BANK ACCOUNT STATEMENTS FOR THE RELEVANT PERIOD, I.E. FOR THE PERIOD WHEN THE CHEQUES WERE CLEARED. HOWEVER, TH E PARTIES WERE NOT PRODUCED IN SPITE OF SPECIFIC DIRECTI ON OF THE ASSESSING OFFICER INSTEAD OF TAKING OPPORTUNITIES I N THIS BEHALF. SINCE THE SOCALLED DIRECTORS OF THESE COMPANIES WERE NOT PRODUCED ON THIS GROUND COUPLED WI TH THE OUTCOME OF THE DETAILED INQUIRY MADE BY THE INVESTIGATION WING OF THE DEPARTMENT, THE ASSESSING OFFI CER MADE THE ADDITION. THIS ADDITION COULD NOT BE SUSTAI NED AS THE PRIMARY ONUS WAS DISCHARGED BY THE APPELLANT BY PRODUCING PAN NUMBER, BANK ACCOUNT, COPIES OF INCOME TAX RETURNS OF THE SHARE APPLICANTS, ETC. WE ALSO FIN D THAT THE ASSESSING OFFICER WAS INFLUENCED BY THE INFORMATION RECEIVED BY THE INVESTIGATING WING AND ON THAT BASIS GENERALLY MODUS OPERANDI BY SUCH ENTRY OPERATORS IS DISCUSSED IN DETAIL. HOWEVER, WHETHER SUCH MODUS OPERANDI EXISTED IN THE PRESENT CASE OR NOT WAS NOT INVESTIGATED BY THE ASSESSING OFFICER. THE APPELLANT WAS NOT CONFRONTED WIT THE INVESTIGATION CARRIED OUT BY THE INVESTIGATION WING OR WAS GIVEN AN OPPORTUNITY TO CRO SS ITA NO. 3650/DEL/2011 AND CO NO. 317/DEL/2011 12 EXAMINE THE PERSONS WHOSE STATEMENTS WERE RECORDED BY THE INVESTIGATION WING. 29. AS REGARDS DISCREPANCIES FOUND BY THE ASSESSING OFFICER IN THE BANK STATEMENT, SUFFICE IS TO MENTION THAT THE BAN K STATEMENTS THAT WERE FILED BY THE APPELLANT WERE PR OVIDED BY THE SHARE HOLDERS AND WERE COMPUTER PRINTED ON TH E BANK STATIONERY. THE SAME WERE FILED BY THE APPELLA NT DURING THE ASSESSMENT PROCEEDING WITHOUT ANY SUSPICION O F THEIR BEING INCORRECT. DURING THE ASSESSMENT PROCEEDI NGS, THE APPELLANT WAS NEVER CONFRONTED BY THE ASSESSING OFFICER THAT THERE ARE DISCREPANCIES BETWEEN THE BAN K STATEMENTS FILED AND THE STATEMENTS DIRECTLY CALLED BY THE ASSESSING OFFICER . HOWEVER, EVEN AFTER CONSIDERING TH E ALLEGED DISCREPANCIES, IT DOES NOT FOLLOW THAT THE AMO UNT OF SHARE CAPITAL WAS THE UNDISCLOSED INCOME OF THE APPELLA NT. EVEN THE CORRECT BANK STATEMENTS AS CLAIMED BY THE ASSESSING OFFICER REVEAL THAT THE APPELLANT HAS RECEIVE D CHEQUES FROM THE SHAREHOLDERS. IN THIS BACKDROP, THE FOLLOWING OBSERVATIONS OF THE COURT IN THE CASE OF C.I .T. VS. K.C. FIBRES LTD. 92010) 187 TAXMAN 53 (DEL) ARE REPRODUCED: IT IS STRANGE THAT WHEN THE ASSESSING OFFICER IS QUESTIONING THE BONA FIDES OF M/S DIAMOND PROTEIN LTD. FOR COLLECTING MONEY TO SUBSCRIBE TO THE SHARE T O THE CAPITAL OF THE APPELLANT, BUT IT IS THE APPELLAN T WHO IS FASTENED WITH THE LIABILITY. THE ASSESSING OFFICER DID D NOT QUESTION M/S DIAMOND PROTEIN LTD. IN THIS BEHALF. INSOFAR AS ASSESSING OFFICER IS CONCERNED, IT IS NOT DISPUTED THAT MONEY WAS PAID TO ITS TOWARDS THE AFORESAID SHARE APPLICATION MONEY, ITA NO. 3650/DEL/2011 AND CO NO. 317/DEL/2011 13 BY MEANS OF CHEQUES. IT IS NOT FOR THE ASSESSING OFFICER TO PROBE AS TO THE SOURCE FROM WHERE M/S DIAMOND PROTEIN LTD. COLLECTED THE AFORESAID MONEY. IT WAS FOR THE ASSESSING OFFICER, IN THESE CIRCUMSTANCES TO INQUIRE INTO THE AFFAIRS OF M/S DIAMOND PROTEIN LTD. WHICH IS AN INDEPENDENT COMPANY INASMUCH AS NO FINDING IS ARRIVED AT BY THE ASSESSING OFFICER THAT THE TWO COMPANIES ARE UMBRELLA COMPANIES OR HAVE ANY RELATIONSHIP WITH EACH OTHER. 30. WE ARE, THEREFORE, OF THE OPINION, THAT THERE I S NO MERIT IN THESE TWO APPEALS, WHICH ARE ACCORDINGLY DISMISSED AT TH E ADMISSION STAGE ITSELF. 7. IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND PR ECEDENTS, WE UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TA X (APPEALS) DIRECTING THAT THE ADDITION OF ` 3,43,00,000/- IS LIABLE TO B E DELETED. SINCE THE ADDITION OF ` 3,43,00,000/- U/S. 68 HAS BEEN DELETED , WE AGREE THAT THE THERE IS NO BASIS FOR SUSTAINING THE ADDITION OF ` 6,86, 000/- U/S 69C, THE SAME IS ALSO DIRECTED TO BE DELETED. HENCE, WE UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND DECIDE THE ISS UE IN FAVOUR OF THE ASSESSEE. HENCE, THE REVENUES APPEAL STANDS DISMISSED. ASSESSEES CROSS OBJECTION NO. ASSESSEES CROSS OBJECTION NO. ASSESSEES CROSS OBJECTION NO. ASSESSEES CROSS OBJECTION NO. ( (( (317 317 317 317) )) ) 8. IN THE CROSS OBJECTION THE ASSESSEE HAS CHALLENGED THE REASSESSMENT PROCEEDING AND APPEALED THAT REOPENING IS BAD IN LAW AND BEYOND THE JURISDICTION OF THE ASSESSING OFFICER . 9. WE FIND THAT WE HAVE ALREADY DECIDED THE ISSUE ON MERITS AND UPHELD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPE ALS), THEREFORE, THE ITA NO. 3650/DEL/2011 AND CO NO. 317/DEL/2011 14 ISSUE OF REOPENING HAS BECOME ACADEMIC AND HENCE, INF RUCTUOUS. HENCE, THE ASSESSEES C.O. STANDS DISMISSED AS INFRUCTUOUS. 10. IN THE RESULT, APPEAL FILED BY THE REVENUE STAND S DISMISSED AND CROSS OBJECTION FILED BY THE ASSESSEE STANDS DISMISSED AS INFRUCT UOUS. ORDER PRONOUNCED IN THE OPEN COURT ON 14/10/2011. SD/- SD/- [ [[ [R.P. TOLANI R.P. TOLANI R.P. TOLANI R.P. TOLANI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 14/10/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES