M/s. Jyoti Estate Pvt. Ltd, New Delhi V. ITO, New Delhi

CO 32/DEL/2010

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6395 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 01-08-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 08-02-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Assessee Lawyers: ASHWA NI TANEJA M M BHASIN
• Keywords: Unexplained cash credit; Accommodation entries; Assessment record
• Section: 147; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D DELHI) BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VICE PRESIDENT AND SHRI A.D. JAIN, JUDICIAL MEMBER ITANO. 4603(DEL)2009 ASSESSMENT YEAR: 2002-03 INCOME TAX OFFICER, M/S. JYOTI ESTATE PVT. LT D., WARD 4(2), NEW DELHI. V. 348 DOUBLE ST OREY, NEW RAJINDER NAGAR, NEW DELHI. C.O. NO . 32(DEL)2010 (IN ITANO. 4603(DEL)2009) ASSESSMENT YEAR: 2002-03 M/S. JYOTI ESTATE PVT. LTD., INCOME TAX OFFICER, 348 DOUBLE STOREY, NEW RAJINDER V. WARD 4(2) , NEW DELHI NAGAR, NEW DELHI. (APPELLANT) (RESPONDENT) DEPARTMENT BY: MS. Y. KAKKAR, SR. DR ASSESSEE BY: S/SHRI ASHWA NI TANEJA, M.M. BHASIN & TARUN KUMAR ORDER PER A.D. JAIN, J.M . THIS IS DEPARTMENTS APPEAL AND ASSESSEES CROSS OB JECTIONS BOTH AGAINST THE ORDER DATED 01.10.2009, PASSED BY THE L EARNED COMMISSIONER OF INCOME TAX(APPEALS), VII, NEW DELHI. THE DEPARTME NT HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL:- ITA 4603 & CO 32 2 1. THE ORDER OF THE LEARNED CIT(APPEALS) IS ERRONE OUS AND CONTRARY TO FACTS AND LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF ` 25,00,000/- MADE U/S 68 BEING THE UNEXPLAINED CASH CREDIT. 2.1 LD. CIT(A) HAS IGNORED THE FACT THAT THE ASSES SEE DID NOT DISCHARGE THE ONUS OF PROVING THE CREDIT-WORTHINESS OF CREDITORS AND GENUINENESS OF THE TRANSACTIONS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` 50,000/- BEING THE COMMISSION PAID FOR OBTAINING ACCOMMODATION ENTRIES . 2. THE ASSESSEE HAS TAKEN THE FOLLOWING CROSS OBJEC TIONS:- 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT QUASHIN G THE ASSESSMENT ORDER ON THE GROUND THAT IMPUGNED ASSESSMENT ORDER WAS ILLEGAL ALSO FOR THE REASON THAT REOPENING OF THE CASE U/S 147 W AS ALSO BAD IN LAW AND THE SAME WAS PASSED WITHOUT COMPLYING WITH THE MANDATORY CONDITIONS AS PRESCRIBED UNDER SECTION 147 TO 151 O F THE INCOME TAX ACT, 1961 AND THE REASONS RECORDED WERE ALSO INVALI D AND NO APPROVAL U/S 151 WAS NOT OBTAINED BY THE ASSESSING OFFICER. 2. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTION OF THE LD. CIT(A) IN NOT QUASHING THE ASSESSMENT ORDER PASSED BY THE LD. AO AND THE SAME OUGHT TO HAVE BEEN QUASHED BY THE LD. CIT( A). 3. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSES SEE HAS STATED AT THE BAR THAT HE SEEKS TO WITHDRAW THE CROSS OBJECTIONS. T HE CROSS OBJECTIONS OF THE ASSESSEE ARE, THUS, DISMISSED AS WITHDRAWN. 4. APROPOS THE DEPARTMENTS APPEAL, GROUND NO.1 IS GENERAL. ITA 4603 & CO 32 3 5. REGARDING GROUND NO.2, THE AO OBSERVED THAT THE ASSESSEE HAD RECEIVED SHARE CAPITAL OF ` 25,00,000/- DURING THE YEAR UNDER CONSIDERATION, FROM 18 PARTIES. SUMMONS WERE ISSUED TO ALL THE P ARTIES AND THREE NOTICES WERE RECEIVED BACK UNSERVED. THE OTHER PARTIES NE ITHER ATTENDED BEFORE THE AO, NOR ANY REPLY WAS FILED. THE ASSESSEE WAS ASK ED TO PRODUCE THE PARTIES. HOWEVER, THE ASSESSEE DID NOT DO SO. THE ASSESS EE, HOWEVER, FILED DETAILS OF THE AMOUNTS RECEIVED THROUGH CHEQUES FROM BANKS. THE AO CALLED FOR DETAILS FROM THE BANK. FROM THE BANK STATEMENTS, IT WAS OBSERVED THAT THE AMOUNTS HAD BEEN CREDITED IN THE BANK ON THE SAME D ATE. WHILE MAKING THE ADDITION OF ` 25,00,000/- AS THE ASSESSEES UNACCOUNTED MONEY ROU TED THROUGH BANK ACCOUNT EXISTING IN THE NAMES OF THE A LLEGED CREDITOR PARTY AND A COMMISSION OF 2%, AMOUNTING TO ` 50,000/- , THE AO OBSERVED THAT SIMPLY FURNISHING THE ADDRESSES OF THE PARTIES AND RETURN OF INCOME, ETC., WAS NOT ENOUGH SINCE THIS DID NOT FACILITATE CROSS VERIFIC ATION; THAT AT BEST, THESE WERE ONLY PERIPHERAL DOCUMENTS; THAT THE SUMMONS ISSUED TO THE PARTIES REMAINED UNCOMPLIED WITH; THAT THE PARTIES HAD NEITHER BEEN PRODUCED, NOR ANY SUBSTANTIVE EVIDENCE HAD BEEN PRODUCED TO ESTABLISH THE IDENTITY AND CAPACITY OF THE CREDITORS BEYOND DOUBT; THAT THE AS SESSEE COMPANY HAD BEEN GIVEN MANY OPPORTUNITIES TO PRODUCE THE PARTIES, BU T IT HAD NOT AVAILED OF ITA 4603 & CO 32 4 SUCH OPPORTUNITIES; THAT EVEN CONFIRMATIONS FROM TH E PARTIES HAD NOT BEEN FILED; THAT THE ASSESSEE COMPANY WAS A PRIVATE LIMI TED COMPANY; THAT IN THE CASES OF PRIVATE LIMITED COMPANIES, THERE IS A CLOS E AND PROXIMATE RELATIONSHIP BETWEEN THE PROMOTERS/DIRECTORS AND TH E SHAREHOLDERS; THAT IN THE ASSESSEES CASE, OUT OF THE TOTAL SHARE CAPITAL OF ` 75,00,000/-, THE ALLEGED SHARE CAPITAL WAS OF ` 25,00,000/-; THAT CLOSELY HELD COMPANIES ARE PERMIT TED TO ACCEPT THE SUBSCRIPTIONS OF SHARE CAPITAL OR DEP OSITS ONLY FROM FRIENDS OR RELATIVES OF THE PROMOTERS/DIRECTORS AND SUCH COMPA NIES ARE NOT ALLOWED TO ACCEPT SUBSCRIPTIONS OR DEPOSITS FROM THE GENERAL P UBLIC; THAT AS SUCH, THERE OUGHT TO HAVE BEEN NO DIFFICULTY FOR THE ASSESSEE T O PRODUCE SOMEBODY FROM THE SAID PARTIES, HAD THE WHOLE APPARATUS NOT BEEN MERELY A CONDUIT TO PLOUGH BACK THE UNACCOUNTED MONEY OF THE ASSESSEE C OMPANY IN THE GARB OF SHARE CAPITAL; THAT IT WAS NECESSARY TO EXAMINE AS TO HOW THE SO CALLED INVESTORS CAME TO KNOW OF THE REQUIREMENTS OF FUNDS BY THE ASSESSEE COMPANY IN THE ABSENCE OF A PUBLIC ISSUE OR ANY ADV ERTISEMENT BY THE ASSESSEE COMPANY; THAT MERE PAYMENT BY ACCOUNT PAYE E CHEQUES IS NOT SACROSANCT, NOR CAN IT MAKE A NON-GENUINE TRANSACTI ON GENUINE; THAT FROM THE COPIES OF THE RELEVANT BANK ACCOUNT, IT WAS SEEN TH AT THERE WAS A UNIFORM PATTERN OF TRANSACTIONS INASMUCH AS INVARIABLY, THE ISSUE OF CHEQUES WAS IMMEDIATELY PRECEDED BY THE DEPOSITS OR EQUIVALENT AMOUNTS IN THE ACCOUNT ITA 4603 & CO 32 5 EITHER IN CASH OR THROUGH CHEQUE/TRANSFER ENTRIES; THAT UNLESS THE IDENTITY AND CREDIT-WORTHINESS OF THE ENTITY AND THE TRANSACTION S REPRESENTED BY THE ENTRIES IN THE BANK WERE CO-RELATED WITH THE SO CALLED BUS INESS ACTIVITY AND THE BOOKS OF ACCOUNT OF THE ENTITY, THE PATTERN AND FRE QUENCY OF DEPOSITS AND WITHDRAWALS AT SHORT INTERVALS LENT FURTHER CREDENC E TO THE FACT OF THE ACCOUNT HAVING BEEN USED ONLY FOR THE PURPOSE OF PROVIDING ACCOMMODATION ENTRIES; THAT THE ASSESSEE HAD FAILED TO DISCHARGE ITS ONUS OF PROVING THE IDENTITY AND CREDIT-WORTHINESS OF THE CONCERNED PARTIES AND THE GENUINENESS OF THE TRANSACTIONS IN TERMS OF THE PROVISIONS OF SECTION 68 OF THE I.T. ACT; THAT THE AMOUNT OF ` 25,00,000/- ALLEGEDLY RECEIVED FROM THE SAID PARTIE S REPRESENTED THE ASSESSEES OWN UNACCOUNTED MONEY AND THE ALLEGE D TRANSACTION WAS ONLY A CAMOUFLAGE; THAT THE INVESTIGATION WING OF THE DE PARTMENT HAD FOUND THAT SOME GROUP COMPANIES INDULGED IN THE BUSINESS OF PR OVIDING ACCOMMODATION ENTRIES, WHERE THE PARTIES DEPOSITED CASH IN AN ACCOUNT OF A COMPANY BELONGING TO THE SAME GROUP AND AGAIN THIS AMOUNT WAS TRANSFERRED TO THE ACCOUNT OF ANOTHER COMPANY WITHIN THE SAME G ROUP ON THE SAME DAY, WHO ISSUED CHEQUES/POS, DDS ON THE SAME DAY TO THE BENEFICIARY COMPANY, WHO SHOWED IT AS SHARE APPLICATION MONEY; AND THAT THE CASE OF THE ASSESSEE COMPANY FELL WITHIN THE CASES OF PROVIDING OF ACCOM MODATION ENTRIES. ITA 4603 & CO 32 6 6. BY VIRTUE OF THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE ADDITION MADE BY THE AO. 7. AGGRIEVED, THE DEPARTMENT IS IN APPEAL. 8. CHALLENGING THE IMPUGNED ORDER, THE LD. DR HAS C ONTENDED THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` 25,00,000/- MADE U/S 68 OF THE I.T. ACT, AS UNEXPLAINED CASH CREDIT AND THE ADDITI ON OF ` 50,000/-, AS COMMISSION PAID FOR OBTAINING THE ACCOMMODATION ENT RY; THAT WHILE DOING SO, THE LD. CIT(A) HAS ERRED IN NOT TAKING INTO ACC OUNT THE FACT THAT THE ASSESSEE COMPANY HAD MISERABLY FAILED TO DISCHARGE ITS ONUS OF PROVING THE CREDIT-WORTHINESS OF THE CREDITORS AND THE GENUINEN ESS OF THE TRANSACTIONS; THAT THE LD. CIT(A) HAS ALSO FAILED TO CONSIDER TH AT IN THE PRESENT CASE, DESPITE BEING PROVIDED SUFFICIENT OPPORTUNITIES, TH E ASSESSEE COMPANY DID NOT PRODUCE THE ALLEGED SHARE APPLICANTS BEFORE THE AO; AND THAT NOT EVEN CONFIRMATIONS FROM THE SAID PARTIES WERE FILED BEFO RE THE AO BY THE ASSESSEE COMPANY. 9. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE, HAS STRONGLY SUPPORTED THE IMPUGNED ORDER. IT HAS BEEN CONTENDE D THAT THE ADDITION HAS BEEN CORRECTLY DELETED BY THE LD. CIT(A), SINCE THE SAME HAD BEEN MADE MERELY ON THE BASIS OF CONJECTURES, SURMISES AND AS SUMPTIONS, IN THE ABSENCE OF ANY ADVERSE MATERIAL WHATSOEVER AGAINST THE ASSE SSEE COMPANY; AND THAT IT ITA 4603 & CO 32 7 REMAINS A FACT THAT THE SHARES HAD ACTUALLY BEEN IS SUED NOT AT A PREMIUM, BUT AT PAR. 10. RELIANCE HAS BEEN PLACED ON THE FOLLOWING CASE- LAWS:- 1. CIT V. OASIS HOSPITALITIES(P)LTD., 238 CTR 402(DE L); 2. CIT V. CREATIVE WORLD TELEFILMS LTD., 333 ITR 100 (BOM); 3. CIT V. WINSTRAL PETROCHEMICALS (P)LTD., 330 ITR 6 03(DEL); 4. ITO V. MORE CREDIT SECURITIES LTD., ITA NO.246(DE L)2010; 5. CIT V. DWARKADHISH INVESTMENT (P)LTD., 330 ITR 29 8(DEL);& 6. CIT V. GOURDIN HERBALS INDIA LTD., ITA NO. 665/20 09(DEL). 11. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE AS SESSEE HAD FILED BEFORE THE AO, COMPLETE DETAILS OF THE SHARE APPLICANTS, G IVING THEIR NAMES AND ADDRESSES, DETAILS OF INCOME TAX ASSESSMENT, ACKNOW LEDGEMENT OF INCOME TAX RETURNS, PARTICULARS OF PAN AND DETAILS OF THEI R BANK ACCOUNTS, MENTIONING THE RESPECTIVE BANK ACCOUNT NUMBERS, NAM ES OF THE BANKS AND THEIR BRANCHES AND THE DETAILS OF THE CHEQUES THROU GH WHICH THE SHARE APPLICATION MONEY HAD BEEN PAID BY THE SHARE APPLIC ANTS. THE INITIAL BURDEN CAST ON THE ASSESSEE U/S 68 OF THE ACT WAS THUS DUL Y DISCHARGED. THE IDENTITY OF THE SHAREHOLDERS STOOD ESTABLISHED. T HE FACTUM OF THE SHAREHOLDERS HAVING INVESTED MONEY IN THE PURCHASE OF SHARES ALSO STOOD PROVED. PER CONTRA, THE AO COULD NOT POINT OUT ANY DISCREPANCY IN THE COPIOUS EVIDENCE FILED BY THE ASSESSEE. NO EVIDEN CE IN CONTRA-DISTINCTION ITA 4603 & CO 32 8 HAD BEEN BROUGHT ON RECORD BY THE AO. THE DOCUMEN TS FILED BY THE ASSESSEE HAVE NOT BEEN STATED, IN THE ASSESSMENT OR DER, AS HAVING BEEN EVEN ATTEMPTED TO BE VERIFIED. NO INDEPENDENT ENQUIRY O R VERIFICATION IN THIS REGARD WAS CARRIED OUT. MOREOVER, AS RIGHTLY OBSE RVED BY THE LD. CIT(A), IT IS NOT EVINCIBLE FROM THE ASSESSMENT ORDER AS TO W HAT WAS THE DESIRED DOCUMENTARY EVIDENCE REQUIRED TO BE FILED BY THE A SSESSEE IN SUPPORT OF ITS CLAIM. THE ASSESSMENT RECORDS OF THE SHARE APPLIC ANTS WERE NOT VERIFIED, EVEN THOUGH THE NAMES OF THE SHARE APPLICANTS DID EXIST ON THE FILE OF THE INCOME TAX DEPARTMENT AND THEIR INCOME TAX DETAILS HAD BEEN FURNISHED BY THE ASSESSEE TO THE AO. NO STEPS WERE TAKEN TO GET THE ASSESSMENT RECORDS OF THE SHARE APPLICANTS EXAMINED BY THE RESPECTIVE AOS HAVING JURISDICTION OVER THEM. 12. IN CIT V. OASIS HOSPITALITIES(P)LTD.(SUPRA), IT HAS BEEN HELD, INTER ALIA, THAT THOUGH THE SHARE APPLICANTS WERE NOT PR ODUCED BEFORE THE AO, AND THE AO HAD FILED COPIES OF PAN, ACKNOWLEDGEMENTS OF RETURNS OF THE SHARE APPLICANTS AND THEIR BANK ACCOUNT STATEMENTS OF THE RELEVANT PERIOD WHEN THE CHEQUES WERE CLEARED, THE PRIMARY ONUS STOOD DISCHA RGED BY THE ASSESSEE. 13. IN CIT V. CREATIVE WORLD TELEFILMS LTD.(SUPRA ), IT HAS BEEN HELD, FOLLOWING CIT V. LOVELY EXPORTS P. LTD., 216 CTR 195 (SC), THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED ITA 4603 & CO 32 9 BOGUS SHARE-HOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THE DEPARTMENT MUST ALWAYS PROCEED AGAINST THEM AND IF NECESSARY, REOPEN THE INDIVIDUAL ASSESSMENTS; THAT IN THAT CASE, THE ASSESSEE HAD GI VEN THE DETAILS OF NAMES AND ADDRESSES OF THE SHAREHOLDERS, THEIR PAN/GIR NO S. AND HAD ALSO GIVEN CHEQUE NUMBER AND NAME OF THE BANK AND IT WAS EXPEC TED OF THE AO TO MAKE PROPER INVESTIGATION AND REACH THE SHAREHOLDERS; TH AT THE AO HAD NOT DONE ANYTHING EXCEPT ISSUING SUMMONS, WHICH WERE RETURNE D WITH AN ENDORSEMENT NOT TRACEABLE; AND THAT THE AO OUGHT TO HAVE FOUN D OUT THEIR DETAILS THROUGH PAN CARDS AND BANK ACCOUNT DETAILS, OR FROM THEIR BANKS, SO AS TO REACH THE SHAREHOLDERS, SINCE ALL THE RELEVANT MATE RIAL DETAILS AND PARTICULARS HAD BEEN GIVEN BY THE ASSESSEE TO THE AO. THE VIE W TAKEN BY THE TRIBUNAL BY FOLLOWING LOVELY EXPORTS(SUPRA), WAS UPHELD. 14. IN CIT V. WINSTRAL PETROCHEMICALS (P)LTD.(SUP RA), IT WAS, INTER ALIA, HELD THAT MERELY BECAUSE THE SHARE APPLICANTS DID N OT RESPOND TO THE NOTICES SENT TO THEM, THE AO WAS NOT JUSTIFIED IN ADDING TH E AMOUNT OF SHARE APPLICATION MONEY TO THE INCOME OF THE ASSESSEE. LOVELY EXPORTS (SUPRA) WAS RELIED ON. 15. IN ITO V. MORE CREDIT SECURITIES LTD., (SUPRA ), IT WAS HELD THAT THE ASSESSEE HAD PROVIDED ALL THE NECESSARY DETAILS FOR ESTABLISHING THE IDENTITY OF THE PARTIES AND SO, ADDITION OF SHARE APPLICATION M ONEY AS UNEXPLAINED CASH ITA 4603 & CO 32 10 CREDIT IN THE HANDS OF THE ASSESSEE COULD NOT BE SU STAINED. LOVELY EXPORTS(SUPRA) WAS FOLLOWED. 16. IN CIT V. DWARKADHISH INVESTMENT (P)LTD.(SUPR A), IT WAS, INTER ALIA, HELD THAT JUST BECAUSE THE CREDITORS/SHARE APPLICAN TS COULD NOT BE FOUND AT THE ADDRESS GIVEN, IT WOULD NOT GIVE THE REVENUE THE RI GHT TO INVOKE SECTION 68 OF THE ACT; AND THAT IT IS THE REVENUE WHICH HAS AL L THE POWER AND WHEREWITHAL TO TRACE ANY PERSON. 17. IN CIT V. GOURDIN HERBALS INDIA LTD.(SUPRA), IT WAS HELD THAT THE TRIBUNAL HAD RIGHTLY, FOLLOWING LOVELY EXPORTS(SU PRA), HELD THAT THE ASSESSEE HAD DISCHARGED ITS ONUS AND IT WAS FOR THE DEPARTMENT TO TAKE ACTION AGAINST THE CREDITOR COMPANIES, SINCE THE ASSESSEE COMPANY HAD PRODUCED COPIES OF BANK ACCOUNTS OF THE CREDITOR COMPANY, TH EIR CERTIFICATE OF INCORPORATION AND ALSO INCOME TAX RETURNS FILED BY THEM BEFORE THE AO; AND THAT FROM THESE DOCUMENTS, THE IDENTITY AND GENUINE NESS OF THE COMPANY STOOD CLEARLY ESTABLISHED. 18. FROM THE ABOVE, IT IS EVIDENT THAT THE LD. CIT( A) HAS NOT COMMITTED ANY ERROR WHATSOEVER IN DELETING THE ADDITION MADE BY THE AO. THE ORDER OF THE CIT(A) IS THUS CONFIRMED, REJECTING THE GRIEVAN CE SOUGHT TO BE RAISED BY THE DEPARTMENT, SUCH GRIEVANCE, TO OUR MIND, NOT HA VING ANY FORCE. ITA 4603 & CO 32 11 19. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED, WHEREAS THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISM ISSED, AS WITHDRAWN. ORDER PRONOUNCED IN THE OPEN COURT ON 12..08.2011. SD/- SD/- (G.E. VEERABHADRAPPA) (A.D. JAIN) VICE PRESIDENT JUDICIAL MEMBER DATED: 12 .08.2011 *RM COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR