M/s Nishitika Investment & Finance Pvt. Ltd., New Delhi V. ITO, New Delhi

CO 417/DEL/2010

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6615 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 18-11-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 15-11-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 29-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Keywords: Unexplained cash credit; Accommodation entries; Onus to prove
• Section: 133(6); 68

Judgement Text

ITA NO. 5022/DEL/2010 & CO NO. 417/DEL/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 5022/DEL/2010 A.Y. : 2002-03 INCOME TAX OFFICER, WARD-13(3), ROOM NO. 338, C.R. BUILDING, NEW DELHI VS. M/S NISHITIKA INVESTMENT & FINANCE (P) LTD., 1117/2, 3 RD FLOOR, NAIWALA, KAROL BAGH, NEW DELHI 5 (PAN/GIR NO. : AAACN2026L) AND C.O. NO. 417/DEL/2010 (IN ITA NO. 5022 /DEL/2010) A.Y. 2002-03 M/S NISHITIKA INVESTMENT & VS. INCOME TAX OFFICER, FINANCE (P) LTD., WARD-13(3), ROOM NO. 338, 1117/2, 3 RD FLOOR, NAIWALA, KAROL BAGH, C.R. BUILDING, NEW DELHI 5 NEW DELHI (PAN/GIR NO. : AAACN2026L) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. KAPIL GOEL, ADVOCATE DEPARTMENT BY : SH. R.S. NEGI, SR. D.R. ORDER ORDER ORDER ORDER PER PER PER PER SHAMIM YAHYA : AM SHAMIM YAHYA : AM SHAMIM YAHYA : AM SHAMIM YAHYA : AM THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY T HE ASSESSEE EMANATE OUT OF ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) DATED 09.8.2010 AND PERTAIN TO ASSESSMENT YEAR 200 2-03. REVENUES APPEAL ITA NO. 5022/DEL/2010 & CO NO. 417/DEL/2010 2 2. THE GROUNDS RAISED READ AS UNDER:- (I) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF ` 20,66,400/ - MADE BY THE AO U/S. 68 OF THE ACT ON ACCOUNT OF SHARE APPLICATION MON EY. (II) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) ERRED IN IGNORING THE FACT THAT THE ASSESSEE FAI LED TO PRODUCE DIRECTORS/AUTHORIZED REPRESENTATIVE OF THE ALLEGED APPL ICANTS EVEN AFTER SPECIFICALLY BEING ASKED TO DO SO BY THE AO ON FOUR O CCASIONS AND, THUS FAILED TO DISCHARGE ITS ONUS TO ESTABLISH THE IDENTITY AN D CREDITWORTHINESS OF THE SHARE APPLICANTS AND THE GENUINE NESS OF TRANSACTION. (III) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN RELYING UPON THE SUPREME COURT DECISI ON GIVEN IN THE CASE OF C.I.T. VS. LOVELY EXPORT P. LTD. 299 ITR 268( SC). IN THE CASE OF LOVELY EXPORTS P. LTD., THE AO DID NOT ASK THE ASSESSEE TO PRODUCE ANY OF THE INVESTOR SHAREHOLDERS FOR CROSS EXAMINATION. H OWEVER, IN THE INSTANT CASE, THE ASSESSEE WAS SPECIFICALLY ASKED AND GIVEN FOUR OPPORTUNITIES TO PRODUCE THE DIRECTORS/AUTHORIZED REPRES ENTATIVE OF THE INVESTING COMPANIES FOR PROVING THEIR GENUINENESS, I DENTITY AND CREDITWORTHINESS, BUT YET NONE COULD BE PRODUCED BEFORE THE AO BY THE TAXPAYER. THUS THE FACTS OF THIS CASE ARE DISTINGUISHAB LE FROM THE SUPREME COURT DECISION CITED ABOVE WHICH THE LEARNED CIT(A) OVERLOOKED . (IV) THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FR ESH GROUNDS OF APPEAL AND/OR DELETE OR AMEND ANY OF THE GROUNDS OF APPEAL. 3. IN THIS CASE ASSESSING OFFICER NOTED THAT ASSES SEE HAS RECEIVED ` 20,16,000/- AS SHARE CAPITAL FROM SEVERAL PARTIES. ASSESSING OFFICER OBSERVED THAT MOST OF THE PARTIES HAVE BEEN SUBJECT OF CERTAIN INQUIRIES AND INVESTIGATION BY THE INVESTIGATION WI NG WHEREIN IT HAS BEEN FOUND THAT THEY ARE CORPORATE ENTITIES IN NAME ONLY AS THEY ARE ITA NO. 5022/DEL/2010 & CO NO. 417/DEL/2010 3 NOT ENGAGED IN ANY ACTUAL BUSINESS ACTIVITIES. A SSESSING OFFICER FURTHER OBSERVED THAT THEY WERE ENTRY OPERATORS. COMING TO THE FACTS OF THE CASE, ASSESSING OFFICER NOTED THAT NOTICE U /S 133(6) OF THE ACT WERE SENT TO THE SHARE APPLICANTS. MOST OF THE NOT ICES RECEIVED BACK WITH THE POSTAL REMARKS SUCH AS LEFT WITHOUT ADDRE SS, NO SUCH PERSON. IN VIEW OF THIS FACT, ASSESSING OFFICER OPINED THAT SIMPLY FURNISHING THE PAN OR ASSESSMENT PARTICULARS IS NOT ENOUGH. ASSESSING OFFICER ALSO OPINED THAT MERE PAYMENT BY ACCOUNT PAY EE CHEQUE IS NOT SACROSANCT NOR CAN IT MAKE A NON-GENUINE TRANS ACTION GENUINE. ASSESSING OFFICER CONCLUDED THAT THE TOTAL AMOUNT O F ` 20,16,000/- ALLEGEDLY RECEIVED FROM THE SAID PARTIES REPRESENTS THE ASSESSEES OWN UNACCOUNTED MONEY WHICH HAS SOUGHT TO BE INTRODUCED INTO ITS BUSINESS IN THE GARB OF SHARE APPLICATION MONEY. ASSESSING OFFICER ADDED ` 20,16,000/- AS INCOME U/S 68 OF THE IT ACT. 3.1 ASSESSING OFFICER FURTHER ADDED 2.5% OF THE AB OVE SUM AMOUNTING TO ` 50,400/- TO THE INCOME OF THE ASSESSEE AS COMMISSION PAID TO THE ENTRY OPERATORS OUT OF THE UNDISCLOSED INCOME. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) ELABORATELY CONSIDERED THE SUBMISSIONS AN D HELD AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE AUTHOR IZED REPRESENTATIVE OF THE APPELLANT COMPANY. AFTER GOING THROUGH THE FACTS OF THE CASE AND ESPECIALLY AFTER LOOKING INTO THE EVIDENCES FILED BEFORE THE ASSESSING OFFICER, I AM OF CONSIDER ED VIEW THAT THE ASSESSING OFFICER HAS DEFINITELY OVERLOOKED THE RAT IOS OF THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD. (SUPRA) WHEREIN THE HON'BLE ITA NO. 5022/DEL/2010 & CO NO. 417/DEL/2010 4 APEX COURT, WHILE ANSWERING THE QUESTION THAT 'CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME U/S 68 OF IT ACT, 1961' HELD THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDER S WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FRE E TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN A CCORDANCE WITH LAW.' THE APPELLANT COMPANY HAS RECEIVED TOTAL AMOUNT OF ` 20,16,000/- AS SHARE APPLICATION MONEY FROM MS. MANJU GUPTA, SH. PRAMOD KUMAR, M/S V.S. CAPITAL SERVICES P. LTD., M/S INGRAIN SECURITIES P. LTD., M/S HARSH FINCAP P. LTD., M/S JATI N INVESTMENT P. LTD., MR. SACHIN, M/S BPO FINANCE AND INVESTMENT LTD. , M/S FUSSY FINANCIAL SERVICES P. LTD., SH. MUKESH GUPTA, SH. SAN JAY, SH. BALVINDER SINGH AND MS. PALLAVI NEGI THROUGH BANKING CHANNELS AND AS PER THE PAPER BOOK FILED ALL THESE PERSONS E XCEPT SH. BALVINDER SINGH, ARE HAVING PAN. THE APPELLANT FILED COPY OF RETURN OF INCOME FOR ASSESSMENT YEAR 2001-02 IN CAS E OF SH. BALVINDER SINGH WHICH HAD BEEN FILED IN WARD 26(2), NEW DELHI. THE BANK DETAILS OF SH. BALVINDER SINGH ALSO DO NOT SUGGEST ANY CASH DEPOSIT BEFORE ISSUE OF CHEQUE TO THE APPELLAN T COMPANY AND HENCE, THE ABOVE DOCUMENTS ESTABLISHED THE IDEN TITY OF THESE ENTITIES/PERSONS. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS TOO, THE ASSESSING OFFICER COULD NOWHER E PROVE WITH CERTAINTY THAT ABOVE MENTIONED ENTITIES ARE THE ENT RY PROVIDERS AND THAT THE TRANSACTIONS ENTERED BY THE APPELLANT COMPANY WITH THEM IS BOGUS. THE ARGUMENTS OF THE LD. AR, AS MENTIO NED EARLIER, IS THAT VARIOUS DOCUMENTS LED BEFORE THE AS SESSING OFFICER SUPPORTED THE IDENTITY OF THE INVESTORS/SHARE APPLI CANTS WHICH PROVED THAT THE SHARE APPLICATION TRANSACTIONS ENTE RED BY IT WITH ITA NO. 5022/DEL/2010 & CO NO. 417/DEL/2010 5 THE SAID INVESTORS ARE GENUINE TRANSACTIONS. AFTER CONSIDERING THE VARIOUS JUDGMENTS OF JURISDICTIONAL HIGH COURT AS WEL L AS OF HON'BLE SUPREME COURT, I AM OF THE VIEW THAT NO ADDI TION ON ACCOUNT OF SHARE APPLICATION MONEY CAN BE MADE IN THE HANDS OF THE APPELLANT COMPANY. THE ASSESSING OFFICER HAS NOT EFFECTED ANY ENQUIRIES TO BRING OUT ANY FACT WHICH COULD SUG GEST THAT THESE PARTIES HAVE GIVEN ACCOMMODATION ENTRIES TO TH E APPELLANT AND THAT THE MONEY RECEIVED FROM THESE PARTIES IS APP ELLANT'S OWN UNDISCLOSED WHICH HAD BEEN ROUTED BACK TO IT IN THE GUISE OF SHARE APPLICATION MONEY. EVEN APPELLANT HAS NOT BEEN PROVIDED WITH AN OPPORTUNITY TO CROSS-EXAMINE THE SO-CALLED E NTRY PROVIDERS AND THE FACT IS THAT THE ASSESSING OFFICE R HAS SIMPLY RELIED UPON THE INFORMATION PROVIDED BY THE INVESTI GATION WING OF THE DEPARTMENT WITH NO CONCRETE EFFORTS MADE INDEPEND ENTLY TO VERIFY THE FACTS STATED THEREIN. ON THE CONTRARY, T HE APPELLANT HAS FILED COPIES OF SHARE APPLICATION FORMS WHICH CONTA INED NAMES, ADDRESSES, PAN, BANK DETAILS AND CONFIRMATIONS OF TH E INVESTORS AND HENCE, IN VIEW OF VARIOUS JUDICIAL PRONOUNCEMENT S, NO ADDITION CAN BE MADE IN APPELLANT'S HAND. IN THE CA SE OF ADDL. CIT VS. HANUMAN PD. AGGARWAL 151 ITR 151 (PATNA) IT WAS H ELD THAT ASSESSEE HAVING FURNISHED THE CORRECT NAME AND ADDR ESS OF THE CREDITOR, HAVING CONFIRMATORY LETTER FROM THE CREDITO R AND ALL MATERIALS SHOW PRIMA FACIE NOT ONLY IDENTITY OF THE C REDITOR BUT ALSO THE GENUINENESS OF THE TRANSACTION, NO ADVERSE INFERENCE CAN BE DRAWN. REFERENCE CAN ALSO BE MADE TO THE JUDGEMENT OF HON'BLE APEX COURT IN THE CASE OF STELLER INVESTMEN T LTD. (2001) 251 ITR 263 (SC), WHEREIN IT WAS HELD THAT EVEN IF THE SUBSCRIBERS TO THE INCREASED SHARE CAPITAL OF ASSESSEE COMPANY W ERE NOT ITA NO. 5022/DEL/2010 & CO NO. 417/DEL/2010 6 GENUINE, THE AMOUNT COULD NOT BE REGARDED AS UNDISC LOSED INCOME OF THE ASSESSEE COMPANY. THE ABOVE VIEW POINT OF THE HON'BLE APEX COURT HAS ALSO BEEN EXPRESSED BY JURIS DICTIONAL DELHI HIGH COURT IN THE CASE OF DIVINE LEASING & FINAN CE LTD. (2008) 299 ITR 268 (DEL.), A-ONE HOUSING COMPLEX LTD . VS. ITO 110 ITD 361 (DEL.), CIT VS. VALUE CAPITAL SERVICE PVT . LTD. 307 ITR 334 (DEL.) AND CIT VS. GENERAL EXPORTS AND CREDITS LTD. (2008) 299 ITR 268 (DEL.). THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. DIVINE LEASING & FINANCE LTD. (SUPRA) HAS LAI D DOWN THE LAW ON THE SUBJECT AS TO WHAT IS THE EXTENT OF THE BURDEN THAT LIES ON THE ASSESSEE TO PROVE THE CASH CREDIT IN THE SHA PE OF SHARE CAPITAL. THE HON'BLE COURT HELD THAT 'IF THE RELEVA NT DETAILS OF THE ADDRESS OR PAN, IDENTITY OF THE CREDITOR / SUBSCRIBE R ARE FURNISHED TO THE DEPARTMENT ALONGWITH THE COPIES OF SHARE HOLD ER'S REGISTER, SHARE APPLICATION MONEY FORMS, SHARE TRANS FER REGISTER, ETC., IT WOULD CONSTITUTE ACCEPTABLE PROOF OR ACCEP TABLE EXPLANATION BY THE ASSESSEE. THE DEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWING AN ADVERSE INFERENCE ONLY BECA USE THE CREDITORS / SUBSCRIBERS FAILS OR NEGLECTS TO RESPON D TO ITS NOTICES. THE ONUS WOULD NOT STAND DISCHARGED IF THE CREDITOR /SUBSCRIBER DENIES OR REPUDIATES THE TRANSACTION SET UP BY THE ASSESSEE NOR SHOULD THE AO TAKE SUCH REPUDIATION AT FACE VALUE A ND CONSTRUE IT, WITHOUT MORE AGAINST THE ASSESSEE.' THE DEPARTMEN T FILED AN SLP AGAINST THE DECISION OF DELHI HIGH COURT IN THE C ASE OF DIVINE LEASING AND FINANCE LTD. (SUPRA) WHERE THE APEX COUR T, WHILE DISMISSING THE APPEAL FILED BY THE DEPARTMENT HELD AS FOLLOWS:- 'WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS ITA NO. 5022/DEL/2010 & CO NO. 417/DEL/2010 7 RECEIVED BY THE ASSESSEECOMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO RE-OPEN THEIR INDIVI DUAL ASSESSMENTS IN ACCORDANCE WITH LAW. ' DELHI HIGH COURT IN THE CASE OF CIT VS. M/S PONDY MET AL AND ROLLING MILL PVT. LTD. (ITA NO. 788/2006) DATED 19.02.2007 HAS CO NCURRED WITH THE FINDINGS OF THE APPELLATE TRIBUNAL, DELHI BENCH 'F', NEW DELHI THAT ONCE THE IDENTITY OF THE INVESTOR HAS BEEN MANIFEST AND IS PROVED, THE INVESTMENT CANNOT BE SAID TO BE THE UNDISCLOSED INC OME OF THE ASSESSEE. AT BEST, THE AMOUNT COULD BE ADDED IN THE HANDS OF THE INVESTOR BUT IT CERTAINLY COULD NOT BE TREATED AS U NDISCLOSED INCOME OF THE ASSESSEE. THE APPEAL FILED AGAINST THE SAID DEC ISION, WAS DISMISSED BY THE HON'BLE SUPREME COURT IN C.C. 12860/2007 DATE D 08/01/2008. AS NO ADVERSE/INCRIMINATING MATERIAL HAS BEEN GATHERED B Y THE ASSESSING OFFICER DURING THE COURSE OF THE ASSESSMENT PROCEEDI NGS HENCE, I DO NOT SEE ANY JUSTIFICATION ON THE PART OF THE ASSESS ING OFFICER TO MAKE ANY ADDITION ON ACCOUNT OF SHARE APPLICATION MONEY RECEIVED FROM DIFFERENT PARTIES ESPECIALLY WHEN THE ASSESSING OFF ICER HAS BEEN PROVIDED WITH PAN AND OTHER DOCUMENTARY EVIDENCES T O PROVE THE IDENTITY OF THE SHARE SUBSCRIBERS. IN VIEW OF ABOVE , IT IS CLEAR THAT THE APPELLANT HAS DISCHARGED THE INITIAL ONUS OF ESTABL ISHING THE IDENTITY OF THE SUBSCRIBERS AND THE BONA FIDES OF THE TRANSACTI ONS HENCE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN IGNORING VARIO US EVIDENCES PROVIDED TO HIM BY THE APPELLANT. NOTHING ADVERSE HAS BEEN B ROUGHT ON RECORD BY THE ASSESSING OFFICER TO ESTABLISH THAT THE AMOUN T OF SHARE APPLICATION MONEY RECEIVED BY THE APPELLANT FROM THE ABOVE MENTIONED DIFFERENT PERSONS REPRESENTS ITS OWN UNDIS CLOSED INCOME. IN ITA NO. 5022/DEL/2010 & CO NO. 417/DEL/2010 8 VIEW OF AFORESAID DISCUSSION, I DIRECT THE ASSESSIN G OFFICER TO DELETE THE ADDITION OF ` 20,16,000/- MADE U/S 68 OF THE ACT. AS THE ASSESSING OFFICER HAS BEEN DIRECTED TO DELET E THE ADDITION OF ` 20,16,000/- MADE ON ACCOUNT OF 'UNEXPLAINED CASH CRE DITS' U/S 68 IN PRE-PAGES OF THIS ORDER, THERE REMAINS NO JUSTIFICAT ION FOR MAKING AND SUSTAINING AN ADDITION OF ` 50,400/- ON ACCOUNT OF COMMISSION PAID TO THE PERSONS FROM WHOM THE APPELLANT HAD BEEN ALLEGE D TO HAVE RECEIVED SHARE APPLICATION MONEY. THE ASSESSING OF FICER IS DIRECTED TO DELETE THE ADDITION OF ` 50,400/- ACCORDINGLY. 5. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEA L BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE NOTE THAT IN THIS CASE ASSESSEE HAS PROVIDED THE FOLLOWING DURING THE ASSE SSMENT PROCEEDINGS WITH REGARD TO THE SHARE APPLICATION MO NEY. :- A) SHARE APPLICATION FORM RECEIVED FROM THE SHARE HO LDERS CONTAINING THE COMPLETE DETAILS OF APPLICANT'S WHICH INCLUDES, NAME OF THE APPLICANTS, ADDRESS, PAN, ASSESSMENT PART ICULARS, NOS. OF SHARES APPLIED, MODE OF PAYMENTS OF SHARE AP PLICATION MONEY, DETAILS OF BANK OF SHARE HOLDERS, BRANCH, CHE QUE NO., DATE AND OCCUPATION OF APPLICANTS. B) CONFIRMATION FROM SHARE SHARE-HOLDERS CONTAINING THE COMPLETE DETAILS OF AMOUNT INVESTED, CHEQUE NUMBER, DATE, BANK PARTICULARS, PAN AND INCOME-TAX PARTICULARS. C) COPY OF PAN CARD OF SHARE HOLDERS. ITA NO. 5022/DEL/2010 & CO NO. 417/DEL/2010 9 D) COPY OF ACKNOWLEDGEMENT OF INCOME-TAX RETURN FILE D E) COMPUTATION OF TOTAL INCOME F) BOARD RESOLUTION. G) COPY OF BANK STATEMENT OF SHARE HOLDERS REFLECTI NG THE TRANSACTION. H) COMPANY MASTER DETAILS AS APPEARING ON ROC WEBSITE I) DETAILS OF SHARE ALLOTTED SUCH AS DISTINCTIVE NOS . ETC. J) RESIDENCE PROOF IN CASE OF INDIVIDUALS. K) WEALTH TAX RETURNS IN CASE OF INDIVIDUALS. L) COPIES OF PAN DETAILS AS APPEARING ON DEPARTMENT 'S OFFICIAL WEBSITE. M) ORIGINAL AFFIDAVIT DULY SWORN ON OATH AND NOTARIZ ED BY NOTARY PUBLIC, DELHI CONFIRMING THE INVESTMENT. N) FURTHER THESE INCORPORATED BODIES AND NATURAL IND IVIDUALS HAVE ALSO DIRECTLY AND THROUGH THE APPELLANT COMPANY PROV IDED THE REQUIRED DETAILS ALONG WITH THEIR RESPECTIVE AFFIDA VITS DULY ATTESTED ON OATH CONFIRMING THEIR SUBSCRIPTION TO TH E SHARE CAPITAL OF THE APPELLANT COMPANY. 7. FROM THE ABOVE, WE FIND THAT ASSESSEE HAS PROVIDED ALL THE NECESSARY DETAILS REQUIRED FOR ESTABLISHING THE IDE NTITY OF THE PARTIES. UNDER THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINI ON, THE IDENTITY OF THE PARTIES ARE ESTABLISHED AND ADDITION OF ` 20,16 ,000/- OF SHARE APPLICATION MONEY AS UNEXPLAINED CASH CREDIT CANNOT BE SUSTAINED IN THE HANDS OF THE ASSESSEE. IN OUR CONSIDERED OPIN ION, LD. ITA NO. 5022/DEL/2010 & CO NO. 417/DEL/2010 10 COMMISSIONER OF INCOME TAX (APPEALS) HAS PASSED A RE ASONABLE ORDER WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART. 7.1 ON COMING TO THE ABOVE CONCLUSION, WE PLACE RELI ANCE TO THE DECISION OF THE HONBLE APEX COURT DELIVERED IN THE CASE OF CIT VS. LOVELY EXPORTS 216 CTR 195. IN THIS CASE IT WAS HE LD THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPAN Y FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AS SESSING OFFICER, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEI R INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT B E REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE. 7.2 WE FURTHER PLACE RELIANCE UPON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF C.I.T. VS. DWARKADHISH INVESTMENT P LTD. IN ITA NO. 911/2010 VIDE ORDER DA TED 02.8.2010. THE RELEVANT PARAS OF THIS JUDGEMENT OF HONBLE DELHI H IGH COURT I.E. PARA NO. 6, 7 & 8 ARE REPRODUCED HEREIN BELOW:- 6. IN OUR OPINION, AS SECTION 68 OF THE ACT, 1961 HAS BEEN INTERPRETED AS RECENTLY AS 2008 BY A DIVISION BENCH OF THIS COURT IN DIVINE LEASING AND FINANCE LTD. (SUPRA) AFTE R CONSIDERING ALL THE RELEVANT JUDGEMENTS, WE DO NOT HAVE TO RECONSIDER ALL THE JUDGEMENTS REFERRED TO BY MR. SAH NI WHICH ARE PRIOR IN DATE AND TIME TO THE AFORESAID JUDGEMENT. IN FACT, A SPECIAL LEAVE PETITION FILED A GAINST THE SAID DIVISION BENCH JUDGEMENT WAS DISMISSED BY THE SUPREME COURT BY WAY OF SPEAKING ORDER IN C.I.T. VS . LOVELY EXPORTS (P) LTD. 216 CTR 195 (SC). THE SUPREME COUR T IN LOVELY EXPORTS PVT. LTD. (SUPRA) HAS HELD AS UNDER:- ITA NO. 5022/DEL/2010 & CO NO. 417/DEL/2010 11 CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. WE FIND NO MERIT IN THIS SPECIAL LE AVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY 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 ONE. THOUGH IN SECTION 68 PROCEEDINGS, THE INITIAL BURDE N OF PROOF LIES ON THE ASSESSEE YET ONCE HE PROVES THE IDENTIT Y OF THE CREDITORS/ SHARE APPLICANTS BY EITHER FURNISHING T HEIR PAN NUMBER OR INCOME TAX ASSESSMENT NUMBER AND SHOWS THE GENUINENESS OF TRANSACTION BY SHOWING MONEY / HIS B OOKS EITHER BY ACCOUNT PAYEE CHEQUE OR BY DRAFT OR BY A NY OTHER MODE, THEN THE ONUS OF PROOF WOULD SHIFT TO THE REVE NUE. JUST BECAUSE THE CREDITORS /SHARE APPLICANTS COULD NOT BE ITA NO. 5022/DEL/2010 & CO NO. 417/DEL/2010 12 FOUND AT THE ADDRESS GIVEN, IT WOULD NOT GIVE THE R EVENUE THE RIGHT TO INVOKE SECTION 68. ONE MUST NOT LOSE SIGHT OF THE FACT THAT IT IS THE REVENUE WHICH HAS ALL THE P OWER AND WHEREWITHAL TO TRACE ANY PERSON. MOREOVER, IT IS SETTLED LAW THAT THE ASSESSEE NEED NOT TO PROVE THE SOURCE OF SOURCE. 7.3 WE ALSO PLACE RELIANCE UPON THE JURISDICTIONA L HIGH COURT DECISION IN THE CASE OF C.I.T. VS. OASIS HOSPITALIT IES P LTD. 33 ITR 119 AS UNDER:- 27. THE ORDER OF ASSESSING OFFICER WOULD REVEAL T HAT IT HAD RECEIVED AN INFORMATION FROM THE INVESTIGATION WING WHICH HAD MADE VARIOUS ENQUIRIES / INVESTIGATIONS O N THE BASIS OF WHICH IT WAS FOUND THAT THESE SIX INVE STORS BELONG TO ONE MAHESH GARG GROUP WHO WERE NOT CARRYING ON ANY REAL BUSINESS ACTIVITY AND WERE RAT HER ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATIONS ENTRIES. THEY WERE, THUS, ENTRY OPERATORS OF WHICH THE APPELLANT WAS THE BENEFICIARY. ACCORDING TO THE ASSESSING OFFICER, THE MODUS OPERANDI INVOLVED IN SUCH TYPE OF ACTIVITY WAS LIKE THIS: AN ENTRY OPERA TOR OPERATES A NUMBER OF ACCOUNTS IN THE SAME BANK/BRANCH OR IN DIFFERENT BRANCHES IN THE NAME OF COMPANIES, FIRMS, PROPRIETARY CONCERNS AND INDIVIDUA LS AND FOR THE OPERATION OF THESE BANK ACCOUNTS, FILIN G INCOME TAX RETURNS ETC. PERSONS ARE HIRED. MOST OF THESE PERSONS WORK ON PART-TIME BASIS AND ARE CALLE D ITA NO. 5022/DEL/2010 & CO NO. 417/DEL/2010 13 UPON TO SIGN DOCUMENTS, CHEQUE BOOKS, ETC. WHENEVER REQUIRED. WHENEVER ANY BENEFICIARY IS INTERESTED IN TAKING AN ENTRY, HE WOULD APPROACH TH E ENTRY OPERATOR AND HANDOVER THE CASH ALONGWITH COMMISSION AND TAKE CHEQUES, DEMAND DRAFT, POSTAL ORDER. THE CASH IS DEPOSITED BY THE ENTRY OPERATO R IN A BANK ACCOUNT EITHER IN HIS NAME OR IN THE NAME OF RELATIVE/ FRIENDS OR OTHER PERSON HIRED BY HIM FOR THE PURPOSES OF OPENING THE BANK ACCOUNT. AFTER THE DEPOSIT OF CASH WHEN THERE IS SUFFICIENT BALANCE, T HE ENTRY OPERATOR ISSUES DEMAND DRAFT, POSTAL ORDERS, CHEQUES IN THE NAME OF BENEFICIARY. MOST OF THESE CONCERNS / INDIVIDUALS ALSO HAVE OBTAINED PAN FROM THE DEPARTMENT AND ARE FILING INCOME TAX RETURNS, BUT WHAT IS SHOWN IN THE RETURN IS NOT ACTUAL STATE OF AFFAIRS. 28. THE APPELLANT FILED COPIES OF PAN, ACKNOWLEDGEMEN T 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, THE PARTIES WERE NOT PRODUCED IN SPITE OF SPECIFIC DIRECTION OF THE ASSESSING OFFICER INSTEA D OF TAKING OPPORTUNITIES IN THIS BEHALF. SINCE THE S OCALLED DIRECTORS OF THESE COMPANIES WERE NOT PRODUCED ON THIS GROUND COUPLED WITH THE OUTCOME OF THE DETAILED INQUIRY MADE BY THE INVESTIGATION WING OF THE DEPARTMENT, THE ASSESSING OFFICER MADE THE ADDITION . THIS ADDITION COULD NOT BE SUSTAINED AS THE PRIMARY ITA NO. 5022/DEL/2010 & CO NO. 417/DEL/2010 14 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 WITH THE INVESTIGATION CARRIED OUT BY THE INVESTIGATION WING NOR WAS GIVEN AN OPPORTUNITY TO CROSS 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 MENTI ON THAT THE BANK STATEMENTS THAT WERE FILED BY THE APPELLANT WERE PROVIDED BY THE SHARE HOLDERS AND WERE COMPUTER PRINTED ON THE BANK STATIONERY. THE SAME WERE FILED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDING WITHOUT ANY SUSPICION OF THEI R BEING INCORRECT. DURING THE ASSESSMENT PROCEEDINGS, THE APPELLANT WAS NEVER CONFRONTED BY THE ASSESSING OFFICER THAT THERE ARE DISCREPANCIES BETWEEN THE B ANK STATEMENTS FILED AND THE STATEMENTS DIRECTLY CALLED BY THE ASSESSING OFFICER . HOWEVER, EVEN AFTER CONSIDERING THE ALLEGED DISCREPANCIES, IT DOES NOT FOLLOW THAT THE AMOUNT OF SHARE CAPITAL WAS THE UNDISCLOSED INCOME OF THE APPELLANT. EVEN THE ITA NO. 5022/DEL/2010 & CO NO. 417/DEL/2010 15 CORRECT BANK STATEMENTS AS CLAIMED BY THE ASSESSING OFFICER REVEAL THAT THE APPELLANT HAS RECEIVED CHE QUES FROM THE SHAREHOLDERS. IN THIS BACKDROP, THE FOLLOW ING 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 I S QUESTIONING THE BONA FIDES OF M/S DIAMOND PROTEIN LTD. FOR COLLECTING MONEY TO SUBSCRIBE TO THE SHARE TO THE CAPITAL OF THE APPELLANT, BUT IT I S THE APPELLANT 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, BY MEANS OF CHEQUES. IT IS NOT FOR THE ASSESSING OFFICER TO PROBE AS T O 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. ITA NO. 5022/DEL/2010 & CO NO. 417/DEL/2010 16 30. WE ARE, THEREFORE, OF THE OPINION, THAT THERE I S NO MERIT IN THESE TWO APPEALS, WHICH ARE ACCORDINGLY DISMISSED AT THE ADMISSION STAGE ITSELF. 8. FROM THE ABOVE DECISIONS OF THE HONBLE JURISDIC TIONAL HIGH COURT, IT IS SEEN THAT IT HAS BEEN HELD BY THE HON BLE HIGH COURT THAT ONCE THE ASSESSEE PROVED THE IDENTITY OF THE CREDIT ORS/ SHARE APPLICANTS BY EITHER FURNISHING THEIR PAN NUMBER OR INCOME TAX ASSESSMENT NUMBER AND SHOWS THE GENUINENESS OF TRAN SACTION BY SHOWING MONEY / HIS BOOKS EITHER BY ACCOUNT PAYEE CH EQUE OR BY DRAFT OR BY ANY OTHER MODE, THEN THE ONUS OF PROOF WOULD SHIFT TO THE REVENUE. IN THE PRESENT CASE, ASSESSEE HAS DISCHARG ED THE ONUS TO PROVE THE IDENTITY OF THE SHARE APPLICANTS. 8.1 IN THE BACKGROUND OF THE AFORESAID DISCUSSION A ND PRECEDENTS, WE DO NOT FIND ANY INFIRMITY OR ILLEGALITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). ACCORDINGLY, WE UPHOLD THE SAME. HENCE, THE APPEAL FILED BY THE REVENUE STAN DS DISMISSED. ASSESSEES CROSS OBJECTION: ASSESSEES CROSS OBJECTION: ASSESSEES CROSS OBJECTION: ASSESSEES CROSS OBJECTION:- -- - 9. IN THE CROSS OBJECTION ASSESSEE HAS AGITATED AG AINST THE VALIDITY OF THE REOPENING IN THIS CASE. WE FIND THAT WE H AVE ALREADY DISMISSED THE REVENUES APPEAL ON THE MERITS OF THE CASE. HENCE, THE CROSS ITA NO. 5022/DEL/2010 & CO NO. 417/DEL/2010 17 OBJECTION FILED BY THE ASSESSEE HAS BECOME INFRUCTUOU S. ACCORDINGLY, THE SAME IS DISMISSED AS INFRUCTUOUS. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED AND CROSS OBJECTION FILED BY THE ASSESSEE ALSO STAN DS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/11/2011. SD/- SD/- [ [[ [A.D. JAIN A.D. JAIN A.D. JAIN A.D. JAIN] ]] ] [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 18/11/2011 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