ITO, New Delhi V. M/s. Royal Finvest Pvt. Ltd., New Delhi

ITA 1060/DEL/2010

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4850 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 04-07-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 10-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Share purchase agreement; Question of law
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 1060/DEL/2010 AY: 20 06-07 INCOME TAX OFFICER, WARD -15(4), ROOM NO. 223, C.R. BUILDING, I.P. ESTATE, NEW DELHI. VS ROYAL FINVEST PVT. LTD., 487/95, PEERA GARHI, ROHTAK ROAD, NEW DELHI-110087 (PAN: AAACR6437M) APPELLANT BY: SHRI ATIQ AHMAD, SR. DR RESPONDENT BY : NONE DATE OF HEARING 04.07.2017 DATE OF PRONOUNCEMENT ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE LD. CIT(A)-XVIII, NEW DELHI DATED 24.12.2009 AND PERTAINS TO ASSESSMENT YEAR 2006-07. 2. BRIEF FACTS OF THE CASE ARE THAT THE RETURN WAS FILED DECLARING TAXABLE INCOME OF RS. 1,05,441/- AFTER INITIALLY PR OCESSING THE APPEALS U/S 143(1) OF THE INCOME TAX ACT, 1961 (HER EINAFTER REFERRED TO AS THE ACT). THE CASE WAS SUBSEQUENTLY SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, THE I.T.A. NO. 1060/DEL/2010 ASSESSMENT YEAR :2006-07 2 ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD RE CEIVED SHARE APPLICATION MONEY AMOUNTING TO RS. 85 LAKH AS UNDER :- 1 SI. NO. PARTY NAME PAN [CHEQUE/DDNO AMOUNT 1. M/S CHANGIA STEEL PVT LTD. AABCC0706 H DD NO.094059 DATED 20.06.2005 4,00,0007- 2. DIVISION TRADING PVT. LTD AABCD2582Q DD NO.094062DATED 20.06.2005 5,00,0007- 3. GARG FINVEST PVF. LTD AMCG3754E DD NO. 093807 DATED 11,05,2005 7,00,000/- 4 GARG INFINE PVT. LTD MACG4449G DD NO.093806 AND DD NO.094060 DATED 14.02,2006 TOTAL 11,00,0007- 5. KESARI INDUSTRIAL LAB PVT, LTD. AAACK8837C FDD NO. 093959 DATED* 07.06.2005AND DD NO.859976 DATED 14.02.2006 13,00,0007- 6, KESARI LAB ELECTRONICS PVT LTD. AACCK3115F 093676 DATED DD NO.093958 DATED 07.06.2005 10,00,0007- 7. MEGHDOOT EXPRESS PVF. LTD. MACM8555F DD NO.094061 DATED 20.06.2005 DD NO.859978 DATED 14.02.2006 13,00,0007- 8. NISNANT RNVEST PVT. LTD. AMCF\J2824IM DD NO. 874920 DATED 03.06,2005 DD NO,371462 DATED MO.02.2006 __ J 12,00,0007- 9. SEKHAWANTI FINVEST PVT. LTD. AABCS5S86Q DD NO.371461 DATED 10.02.2006 6,00,0007- 10 V.R. TRADERS PVT. LTD. AABCV6114A DD NO. 874921 DATED 03.06,200503.06.2005 4,00,0007- 3. THE ASSESSING OFFICER ISSUED NOTICES TO ALL THE SHARE APPLICANTS AT THE ADDRESSES PROVIDED BY THE ASSESSE E. HOWEVER, ALL THE SAID NOTICES WERE RECEIVED BACK IN THE INCO ME TAX OFFICE. SUBSEQUENTLY, THE ASSESSEE WAS ASKED TO FURNISH REP LY TO A I.T.A. NO. 1060/DEL/2010 ASSESSMENT YEAR :2006-07 3 DETAILED QUESTIONNAIRE AND ALSO TO PROVE THE GENUIN ENESS, IDENTITY AND CREDITWORTHINESS OF THE SHARE APPLICATION MONEY TRANSACTION. THE ASSESSING OFFICER WAS DIRECTED TO PRODUCE THE M ANAGING DIRECTOR OF THE COMPANIES WHO HAD GIVEN THE SHARE A PPLICATION MONEY. THE ASSESSEE IN RESPONSE SUBMITTED COPIES O F ITRS, COPIES OF BALANCE SHEETS OF THE SHARE APPLICANTS. HOWEVER, THE ASSESSING OFFICER PROCEEDED TO ADD THE AMOUNT OF RS . 85 LAKH AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. FURTHER , THE ASSESSING OFFICER ALSO MADE AN ADDITION OF RS. 13.5 0 LAKH BEING CASH DEPOSITS IN THE BANK ACCOUNT OF THE ASSESSEE C OMPANY WITH BANK OF INDIA. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE LD. CIT(A) WHO DELETED BOTH THE ADDITIONS AND NOW, THE DEPARTMENT HAS APPROACHED THE ITAT AND HAS CHALLENGED THE DELE TION OF RS. 85 LAKH DELETED BY THE LD. CIT(A). THE GROUNDS OF A PPEAL READ AS UNDER:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS. 85,00.000/- MADE ON ACCOUNT OF SHARE APPLICATION MONEY U/S 68 O F THE INCOME TAX ACT. 1961. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW. THE LD. C1T(A) ERRED IN IGNORING THE FACT T HAT THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (P) LTD. 216 CTR 199(SC) CANNOT BE EXTENDED TO A SITUAT ION WHERE I.T.A. NO. 1060/DEL/2010 ASSESSMENT YEAR :2006-07 4 A MECHANISM HAS BEEN FORMED TO INTRODUCE UNACCOUNTE D MONEY IN THE BOOKS OF ACCOUNTS WITH THE HELP OF ACCOMMODATION ENTRY PROVIDERS, WHICH HAS BEEN EXPOS ED BY DEEP AND DETAILED INVESTIGATION CARRIED OUT BY THE INVESTIGATION WING OF THE DEPARTMENT. 3. THAT THE C1T(A) HAS ERRED IN APPLYING THE JUDGM ENT OF THE HONBLE SUPREME COURT IN THE CASE OF M/S LOVELY EXP ORTS (P) LTD. 216 CTR 199 (SC) WHICH IS NOT APPLICABLE WHERE THE SHARE APPLICATION IS NOT RECEIVED IN A PUBLIC ISSUE. 4. THE APPELLANT CRAVES TO BE ALLOWED TO ADD, DELE TE OR AMEND ANY OTHER GROUNDS OF APPEAL. 5. LD. SR. DR APPEARING FOR THE DEPARTMENT PLACED R ELIANCE ON THE ORDER OF THE ASSESSING OFFICER AND VEHEMENTLY A RGUED THAT THE ASSESSEE HAD ONLY FILED COPIES OF THE ITRS AND THE BALANCE SHEETS OF THE SHARE APPLICANTS BUT HAD FAILED TO PRODUCE T HE MANAGING DIRECTORS EVEN AFTER BEING SPECIFICALLY DIRECTED BY THE ASSESSING OFFICER. HE FURTHER SUBMITTED THAT BY MERELY FILIN G THE CONFIRMATORY LETTERS AND THE RELEVANT PARTICULARS, THE ASSESSEE HAD NOT DISCHARGED THE ONUS. 6. NONE APPEARED FOR THE ASSESSEE. 7. WE HAVE HEARD THE LD. SR. DR AND HAVE ALSO PERUS ED THE RECORDS. WE FIND FROM THE ORDER OF THE LD. CIT(A) THAT LD. CIT(A) HAS GIVEN A FINDING THAT THE SHARE APPLICATION MONE Y WAS RECEIVED THROUGH DEMAND DRAFT AND THE RELEVANT DETA ILS REGARDING THE SAME WERE FURNISHED DURING THE COURSE OF ASSESS MENT I.T.A. NO. 1060/DEL/2010 ASSESSMENT YEAR :2006-07 5 PROCEEDINGS. LD. CIT(A) HAS ALSO NOTED THAT THE AS SESSEE HAD FILED THE PAN NOS. OF THE SHARE APPLICANTS ALONG WI TH THE COPY OF ITRS, AUDITED BALANCE SHEETS, MEMORANDUM AND ARTICL ES OF ASSOCIATION AND ALSO A COPY OF THE APPLICANT COMPAN IES MUSTER. HE HAS ALSO NOTED THAT THE ASSESSEE HAD PRODUCED CO PIES OF SHARE CERTIFICATES ISSUED TO THE INVESTOR COMPANIES AS WE LL AS COPIES OF FORM NO. 2 FILED WITH THE REGISTRAR OF COMPANIES. LD. CIT(A) NOTED THAT THE MANAGING DIRECTORS AND THE BANK STAT EMENTS OF THE INVESTOR COMPANIES COULD NOT BE PRODUCED BY THE ASSESSEE. THEREAFTER, THE LD. CIT(A) HAS ADJUDICATED THE ISSU E IN PARA 6 OF THE IMPUGNED ORDER WHICH IS BEING REPRODUCED HEREIN UNDER FOR A READY REFERENCE:- 6. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AS WELL AS THE SUBMISSIONS MADE BY THE ID. AR. FROM TH E FACTS AS DISCUSSED ABOVE, I FIND THAT THE APPELLANT HAS F URNISHED ALL RELEVANT DOCUMENTS IN SUPPORT OF ITS CLAIM OF H AVING RECEIVED THE SHARE APPLICATION MONEY FROM THE 10 COMPANIES. IT IS ESTABLISHED JUDICIAL POSITION THAT IN THE MATTER OF CASH CREDIT, THE INITIAL ONUS LIES ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTION ALONG WITH THE IDENTITY OF THE LENDER/INVESTOR AND HIS CREDITWORTH INESS. HAVING DONE SO, THE APPELLANT IN THE INSTANT CASE H AS DISCHARGED THE ONUS CAST UPON IT. BEYOND THIS, FOR THE CHARGE OF UNEXPLAINED CASH CREDIT TO STICK, THE ONU S LIES ON THE AO TO DISPROVE THE CLAIM OF THE ASSESSEE BY EST ABLISHING THAT THE EVIDENCE FILED BY THE ASSESSEE WAS FALSE A ND BY BRINGING NEW MATERIAL ON RECORD, WHICH I FIND THE A O HAS FAILED TO DO IN THIS CASE. FURTHER, I FIND THAT THE APEX COURT I.T.A. NO. 1060/DEL/2010 ASSESSMENT YEAR :2006-07 6 IN CIT V LOVELY EXPORTS (P) LTD. (2008) 216 CTR 195 HELD THAT THE EVEN IF THE SHARE APPLICATION MONEY RECEIV ED BY THE APPELLANT COMPANY IS FROM ALLEGED BOGUS SHAREHOLDER , WHOSE IDENTITY IS PRODUCED BY THE APPELLANT COMPANY , THE REVENUE CAN ALWAYS PROCEED AGAINST SUCH SHAREHOLDER S AND IF NECESSARY REOPEN THEIR INDIVIDUAL ASSESSMEN T. FOLLOWING THE AFORESAID DECISION, THE HON'BLE MUMBA I HIGH COURT IN THE RECENT JUDGEMENT IN THE CASE OF CIT V CREATIVE WORLD TELIFILMS LTD. (ORDER DATED 12.10.2009 IN ITA (L) NO. 2182 OF 2009) HAS HELD AS UNDER: ' THE QUESTION SOUGHT TO BE RAISED IN THE APPEAL WAS ALSO RAISED BEFORE THE TRIBUNAL AND THE TRIBUNAL WA S PLEASED TO FOLLOW THE JUDGEMENT OF THE APEX COURT I N THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD. REPORTED IN (2008) 216 CTR 195 (SC) WHEREIN THE APEX COURT OBSERVED TH AT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE ASSESSING OFFICER, THE N THE DEPARTMENT CAN ALWAYS PROCEED AGAINST THEM AND IF NECESSARY REOPEN THEIR INDIVIDUAL ASSESSMENTS. IN T HE CASE IN HAND, IT IS NOT DISPUTED THAT THE ASSESSEE HAS GIVEN THE DETAILS OF NAME AND ADDRESS OF THE SHAREHOLDERS, THEIR PA/GIR NUMBER AND HAD ALSO GIVE N THE CHEQUE NUMBER, NAME OF THE BANK. IT WAS EXPECTE D ON THE PART OF THE ASSESSING OFFICER TO MAKE PROPER INVESTIGATION AND REACH THE SHAREHOLDERS. THE ASSES SING OFFICER DID NOTHING EXCEPT ISSUING SUMMONS WHICH WA S ULTIMATELY RETURNED BACK WITH AN ENDORSEMENT 'NOT TENABLE'. IN OUR CONSIDERED VIEW, THE ASSESSING OFF ICER OUGHT TO HAVE FOUND OUT THEIR DETAILS THROUGH PAN C ARD, BANK ACCOUNT DETAILS OR FROM THEIR BANKERS SO AS TO REACH THE SHAREHOLDERS SINCE ALL THE RELEVANT MATERIAL DE TAILS AND PARTICULARS WERE GIVEN BY THE ASSESSEE TO THE ASSESSING OFFICER. IN THE ABOVE CIRCUMSTANCES, THE VIEW TAKEN BY THE TRIBUNAL CANNOT BE FAULTED. NO SUBSTAN TIAL QUESTION OF LAW IS INVOLVED IN THE APPEAL. IN THE R ESULT, THE APPEAL IS DISMISSED IN LIMINE WITH NO ORDER AS TO C OSTS. ' SIMILAR DECISION HAS ALSO BEEN TAKEN BY THE HON'BLE CHATISGARH HIGH COURT IN ACIT VS VENKATESHWAR ISPAT PVT. LTD. (2009) 319 ITR 393. IN VIEW OF THE FACTUAL AND LEGAL I.T.A. NO. 1060/DEL/2010 ASSESSMENT YEAR :2006-07 7 POSITION AS DISCUSSED ABOVE AND RESPECTFULLY FOLLOW ING THE AFORECITED DECISION OF THE HON'BLE APEX COURT AND H IGH COURTS, I AM OF THE OPINION THAT THE ADDITION OF RS . 85,00,000/- MADE BY THE AO U/S 68 CANNOT BE SUSTAIN ED. THE SAME IS, THEREFORE, DELETED. 8. A PERUSAL OF THE ABOVE REVEALS THAT THE LD. CIT( A) HAS ACCEPTED THE ASSESSEE AS HAVING DISCHARGED THE INIT IAL ONUS AFTER DUE CONSIDERATION OF THE FACTS AS WELL AS THE ESTAB LISHED JUDICIAL PRECEDENTS. THE LD. CIT(A) HAS FOLLOWED THE RATIO OF THE JUDGMENT OF THE HON'BLE APEX COURT IN CIT VS LOVELY EXPORTS PVT. LTD. REPORTED IN 216 CTR 195 WHICH WE FIND HAS BEEN CORR ECTLY RELIED UPON. WE AGREE WITH THE ADJUDICATION OF THE LD. CI T(A) THAT ONCE THE INITIAL ONUS CAST UPON BY THE ASSESSEE REGARDIN G THE GENUINENESS, CREDITWORTHINESS AND IDENTITY HAS BEEN DISCHARGED BY THE ASSESSEE, THE ONUS SHIFTS TO THE DEPARTMENT TO DISPROVE THE CLAIM OF THE ASSESSEE BY COGENT EVIDENCE TO THE CON TRARY. THEREFORE, WE FIND NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) AND RESPECTFULLY FOLLOWING THE RATIO OF THE LD. APEX CORUT IN THE CASE OF CIT VS LOVELY EXPORTS (SUPRA), WE UPHOLD THE ORDERS OF THE LD. CIT(A) AND DISMISS THE GROUNDS RA ISED BY THE DEPARTMENT. 9. IN THE RESULT, THE APPEAL OF THE DEPARTMENT STAN DS DISMISSED. I.T.A. NO. 1060/DEL/2010 ASSESSMENT YEAR :2006-07 8 ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST, 2017. SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA) PRESIDENT JUDICIAL MEMBER DT. 30 TH AUGUST 2017 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR