CIT V. AAPKI MARKETTING PVT LTD

ITA/391/2012

AI Insights

The case involves an appeal by the Revenue against the tribunal's decision which directed the Assessing Officer to verify the squaring of accounts during the year and if found correct, no addition was called for regarding unexplained investments. The Revenue contended that such directions could restrain the Assessing Officer from investigating potential money laundering and the authenticity of the transactions. The High Court agreed with the Revenue, emphasizing that the Assessing Officer should have the freedom to investigate and make necessary additions if the investments are found to be bogus or not genuine.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 720294 (HC-DELHI)
• Appeal Type: Others
• Pronouncement Date: 28-10-2013
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: NEMO
• Assessee Lawyers: ROHIT MADAN
• Keywords: Assessment Year 2007-08; Income Tax; Money laundering; Share Application Money; Unexplained investment
• Section: 68; 69

Judgement Text

"< $-21. *IN THE HIGH COURT OF DELHI AT NEW DELHI + INCOME TAX APPEAL NO. 391/2012 GIT Appellant Through Mr. Rohit Madan, Advocate. Versus AAPKIMARKETTING PVT LTD Respondent Through Nemo. CORAM: HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE SANJEEV SACHDEVA SANJIV KHANNA, J. (ORAL): This appeal by the Revenue, which relates to Assessment Year 2007-08, raises a substantial question of law:- \"Whether the Tribunal was justified in giving directions in paragraph 20 of their order dated 02.03.2012 while passing an order ofremand?\" 2. The respondent-assessee in the return on 15\"^ November, 2007 declared income of Rs. 14,144/-. In the regular scrutiny assessment, ITANo. 391/2012 Page 1of 5 Digitally Signed By:AMULYA Signature Not Verified substantial addition of Rs. 1,08,60,000/- was made under Section 68 of the Income Tax Act, 1961 (Act for short) on account of share application money. It is apparent that there was substantial addition of Rs.81,40,000/- for similar reasons in the Assessment Year 2006-07 (see the impugned order ofthe tribunal dated 2\"^ March, 2012, which relates to Assessment Years 2006-07 and 2007-08). Suffice it is to notice that we are not concerned with the addition of Rs. 1,08,60,000/-, as the said addition has been upheld by the tribunal. Similar findings have been recorded by the tribunal in respect of Assessment Year 2006-07. Thus, additions of Rs.81,40,000/- andRs.1,08,60,000/- in the Assessment Years 2006-07 and 2007-08 have been confirmed. 3. The question raised in the present appeal relates to the findings recorded by the Assessing Officer after the respondent-assessee was called upon to explain investments fi:om the receipt of share application money. The Assessing Officer noticed that the assessee had made investment in some companies, which were shown partly in cash and partly by cheque. The Assessing Officer has given details of investments, which were made by the petitioner in cash. He has recorded that Rs.26 lacs invested by cheques was in real estate companies. Total amount for which cheques were issued was Rs. 1,08,05,000/- and total investment in cash was Rs.1,05,00,000/- making a total of Rs.2,13,05,000/-. No explanation was offered onthe ITA No.391/2012 Page 2 of 5 nature of these cheques. The Assessing Officer thereafter made a separate addition of Rs.2,13,05,000/- on account of unexplained investment under Section 69 ofthe Act. 4. Commissioner of Income Tax (Appeals) deleted the said addition under Section 69 after recording that the investment had been squared up and had not been shown as investment on the last date of the assessment year. He, however, recorded thatmore importantly the source .of making the investment was not made subject matter or point of dispute in the assessment order. To this extent, the order of the Commissioner (Appeals) is incorrect as the tribunal has upheld the order of the Assessing Officer making addition on account of share application money. The Commissioner (Appeals) order deleting addition in respect of the share application money has been set aside and order ofthe Assessing Officer restored. 5. In the impugned order passed by the tribunal dated 2\"^* March, 2012, they have referred to the addition made by the Assessing Officer • under Section 69 of the Act and the order of the Commissioner (Appeals) andthereafter given the following directions \"20. As regards ground No. 2, the AO will verify the fact regarding squaring of account during the year and if the same is found to be correct no addition is called for: In the result this ground is allowed for statistical purposes.\" 6. Learned counsel for the.appellant is right in his submission that ITA No. 391/2012 Page 3 of 5 the aforesaid observations while issuing an order of remand would put fetters and restraint the Assessing Officer even if he finds that the investment entries were bogus and not genuine. This is not a straight forward and simple case but nioney laundering may be involved. There may be third party players who may be the real beneficiaries of the transactions including additiontowards share applicationmoney. It is submitted that the respondent assessee does not appear to be indulging in genuine transactions or was probably being used as a conduit. These are all issues and aspects, which can be examined by the Assessing Officer. We, therefore, feel that the tribunal should not have tied or put fetters onthe discretion of the Assessing Officer. We clarify thatthe Assessing Officer while examining the said question on remand shall take into consideration all the facts and circumstances and it will be open to the Assessing Officer to consider whether any addition on this account is required to be made and the respondent- assessee will be also entitied to show that no addition is justified and Section 69 should not be invoked. The effect of the addition made by the tribunal will be also examined by the Assessing Officer and it will be open to the assessee to contend and show that in view ofthe said enhancement, no separate addition is required or can be justified. We fiirther clarify that the Assessing Officer can also examine that if Section 69 is not applicable, whether any addition can ITA No. 391/2012 Page 4of5 be justified and can be made under any other provision ofthe Act. The question of law is accordingly answered in favour of the revenue and against the assessee. The appeal is disposed of SANJIV KHANNA, J. SANJEEV SACHDEVA, J OCTOBER 28, 2013 VKR/NA ITA No. 391/2012 Page 5of5 "