M/s. Mithila Credit Services Ltd., New Delhi V. ITO, New Delhi

ITA 1078/DEL/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6356 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 03-03-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 25-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Assessee Lawyers: ASHWANI TANEJA
• Keywords: Unexplained cash credit; Search and seizure; Principle of natural justice; Additional evidence; Tangible material; Difference of opinion; Corroborative evidences; Accommodation entries; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 147; 131; 68; 148

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C : NEW DELHI BEFORE SHRI B.C.MEENA , ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 1078 /DEL/2013 (ASSESSMENT YEAR: 2002 - 03 ) MITHILA CREDIT SERVICES LTD.C/O. M/S. RRA TAXINDIA, D - 28, SOUTH EXTENSION, PART - 1, NEW DELHI PAN: AAACM5532G VS. ITO WARD - 6(4) NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY : ASHWANI TANEJA, ADV. RESPONDENT BY: SATPAL SINGH, SR. DR O R D E R PER A. T. VARKEY , JUDICIAL MEMBER THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT(A) - IX , NEW DELHI DATED 14.01.2013 FOR THE ASSESSMENT YEAR 2002 - 03 . 2. THE GROUNDS OF APPEAL ARE AS FOLLOWS: - 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD ASSESSING OFFICER IN FRAMING THE IMPUGNED ASSESSMENT ORDER WITHOUT ASSUMING JURISDICTION AS PER LAW AND WITHOUT SERVING THE MANDATORY NOTICE U/S 148 OF THE INCOME TAX ACT, 1961. 2. THAT HAVING R EGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD A.O. FRAMING THE IMPUGNED ASSESSMENT ORDER WITHOUT COMPLYING WITH MANDATORY CONDITIONS AS ENVISAGED U/S 147 TO 151 OF THE INCOME TAX AC T, 1961. 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE LD A.O. IN MAKING AGGREGATE ADDITION OF RS. 4,00,000/ - ON ACCOUNT OF SHARE APPLICATION MONEY RECEIVED FRO M M/S. WINSOME PORTFOLIO (P) LTD. AND M/S. WEAL IRON AND STEEL CO. (P) LTD. U/S 68 OF INCOME TAX ACT, 1961. 4. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTION OF LD CIT(A) IN CONFIRMING THE ACTION OF LD ASSESSING OFFICER IN MAKING THE IMPUGNED ADDITION AND FRAMING THE IMPUGNED ASSESSMENT ORDER IS CONTRARY TO LAW AND FACTS, VOID AB INITIO , BEYOND JURISDICTION, AND WITHOUT GIVING ADEQUATE OPPORTUNITY OF HEARING, BY RECORDING INCORRECT FACTS AND FINDING AND THE SAME IS NOT SUSTAINABLE ON VARIOUS LE GAL AND FACTUAL GROUNDS. PAGE NO. 2 5. THAT THE APPELLANT CRAVES THE LEAVE TO ADD, MODIFY, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING AND ALL THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. 3 . BRIEF FACTS AND BACKGROUND OF THE CASE A S STATED BY THE LD CIT(A) IS AS FOLLOWS. DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT CARRIED ON THE FINANCING BUSINESS. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2002 - 03 WAS FILED ON 5.07.2002 DECLARING NIL INCOME. THE CASE WAS SELECTED FOR SCRUT INY. THE ASSESSMENT WAS COMPLETED U/S 147/143(3) VIDE ORDER DATED 28.03.2007 BY THE A.O. AT NIL INCOME BY MAKING THE FOLLOWING ADDITIONS: - U/S 68 RS. 4,00,000/ - COMMISSION RS. 8,000/ - 4 . AGGRIEVED BY THE ABOVE ADDITION, THE APPELLANT FILED AN APPEAL BEFORE THE LD CIT(A), WHO WAS PLEASED TO DISMISS THE SAME. AGGRIEVED BY THE SAID ORDER OF THE LD CIT(A) THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE US. 5 . APROPOS VALID ITY OF THE REOPENING U/S 148 READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961(H EREIN AFTER THE ACT). 6 . THE LD AR, SHRI ASHWANI TANEJA SUBMITTED THAT THE CASE OF THE ASSESSEE HAS BEEN REOPENED ON THE BASIS OF CERTAIN PURPORTED INVESTIGATIONS WHICH WERE CARRIED O UT BY THE DIRECTORATE OF INCOME TAX IN RESPECT OF BOGUS / ACCOMMODATION ENTRIES PROVIDED BY CERTAIN INDIVIDUAL/ COMPANIES TO THE ASSESSEE IN THE GUISE OF SHARE APPLICANT MONEY . THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING THE CASE IS AS FOLLOWS: - THE CASE HAS BEEN RE - OPENED ON THE BASIS OF CERTAIN INVESTIGATIONS WERE CARRIED OUT BY THE DIRECTOR OF INCOME TAX, UNIT V, JHANDEWALAN, NEW DELHI IN RESPECT OF THE BOGUS/ ACCOMMODATION ENTRIES PROVIDED BY CERTAIN INDIVIDUALS/ COMPANIES. THE NAME OF THE AS SESSEE FIGURES AS NE OF THE BENEFICIARIES OF THESE ALLEGED BOGUS TRANSACTIONS GIVEN BY THE DIRECTORATE AFTER MAKING THE NECESSARY ENQUIRIES. THE AMOUNT INVOLVED IS RS. 4,00,000/ - WHICH HAS BEEN RECEIVED FROM THE FOLLOWING PARTIES: - I) M/S WEAL IRON & STEEL CO. (P) LTD. II) M/S. WINSOSE PORTFOLIO (P) LTD. 7 . THE LD AR SUBMITTED THAT ON THE BASIS OF THE ABOVE VAGUE REASON ING THE REOPENING OF THE ASSESSMENT HAVE BEEN DONE , WHICH ACCORDING TO HIM IS NOT IN CONSONANCE WITH THE LAW ; AND THE SAID REASONS DO ES NOT IN ANY MANNER REVEALS THAT THE SAID TRANSACTIONS IS AN ACCOMMODATION ENTRY. THE LD AR TOOK PAINS TO CONVINCE US THAT THERE IS NO MENTION OF ANY MATERIAL WHAT SO EVE R ON THE BASIS OF WHICH THE ASSESSING OFFICER HAS MADE SUCH A SERIOUS ALLEGATION AND RE ACHED AT A PRE - DETERMINED CONCLUSION TO REOPEN THE ASSESSMENT WITHOUT ANY TANGIBLE MATERIAL. SO ACCORDING TO PAGE NO. 3 THE LD AR , THE REASONS ARE ABSOLUTELY VAGUE AND WITHOUT MATERIAL OR BASIS TO SUPPORT ITS AUTHENTICITY. THE LD AR STATED THAT THEREFORE THERE IS NO CAUSE AND EFFECT RELATIONSHIP ESTABLISHED IN THESE REASONS RECORDED BY THE ASSESSING OFFICER , TO REOPEN THE ASSESSMENT ; AND THE LD AR STATED THAT THERE MUST BE CAUSE AND EFFECT RELATIONSHIP BETWEEN MATERIAL WHICH HAS COME IN HIS POSSESSION AND FOR FORMATI ON OF HIS BELIE F AND REASONS THUS RECORDED MUST BRING OUT THE NEXUS AND RELATIONSHIP TO COME TO THE SAID CONCLUSION THAT INCOME HAS ESCAPED ASSESSMENT IN ORDER TO REOPEN THE CASE. THEREFORE , ACCORDING TO THE LD AR ASHWANI TANEJA , S INCE THESE INGREDIENTS ARE MISSING REASSESSMENT ORDER IS NOTHING BUT A NULLITY. THE LD AR STATED THAT THERE SHOULD BE MATERIAL WHICH HAS A LIVE NEXUS FOR FORMATION OF BELIEF AND THE REASONS TO REOPEN CANNOT BE BASED ON A MERE GOSSIP OR RUMOUR. THE LD AR EMPHASIZED THAT THERE SHO ULD BE DEFINITE MATERIAL BEFORE HIM, BASED ON WHICH ONLY THE ASSESSING OFFICER CAN BASE HIS REASONS TO REOPEN, AND THAT REASON SHOULD FORM THE FOUNDATION FOR REOPENING ; AND NOT THAT WHATEVER ANY AGENCY FORWARDS TO THE ASSESSING OFFICER , HE SIMPLY REPRODUCE S THE SAME AND JUMPS INTO CONCLUSION THAT INCOME HAS ESCAPED ASSESSMENT ; AND THE FORMATIONS OF REASON MUST BE INDEPENDENTLY TAKEN BY THE ASSESSING OFFICER AFTER EVALUATING THE MATERIAL SUPPLIED TO IT ; AND THIS EXERCISE BY THE ASSESSING OFFICER CANNOT BE AN IDLE FORMALITY OR A PROCEEDING IN PRETENCE. ON M ERITS , THE LD AR CONTENDED THAT THE TWO COMPANIES HAVE IN FACT APPLIED FOR THE SHARE AND IT WAS A GENUINE TRANSACTIONS AND IT WAS NOT ACCOMMODATION ENTRIES ; AND FURTHER CONTENDED THAT IF THE DEPARTMENT HAD ANY CONCRETE INFORMATION/ MATERIAL AGAINST THE ASSESSEE , THEN , IT SHOULD HAVE BEEN PROVIDED TO IT , WHICH HAS NOT BEEN DONE IN THIS CASE AND THEREFORE THERE IS CLEAR VIOLATION OF NATURAL JUSTICE. THE LD AR CONTENDED THAT MERELY ON THE BASIS OF SUSPICION , TH E CASE CANNOT BE REOPEN ED AND THE LD AR STATED THAT THERE SHOULD BE SOME MATERIAL ON WHICH THE ASSESSING OFFICER CAN COME TO A CONCLUSION THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT AND THAT WAS ALSO BECAUSE OF NON - DISCLOSURE OF MATERIAL FACTS B Y THE ASSESSEE DURING THE ORIGINAL ASSESSMENT AND THEREFORE THE RE - OPENING OF THE CASE IS BAD IN LAW AND THEREFORE NEED TO BE SET - ASIDE. 8 . ON THE OTHER HAND LD D R CONTENDED THAT DURING THE COURSE OF ASSESSMENT PROCEEDING , THE ASSESSEE WAS INFORMED ABOUT THE INFORMATION RECEIVED FROM THE DIRECTORATE OF INCOME TAX (INV) AND WAS PROVIDED WITH ADEQUATE OPPORTUNITY TO SUBSTANTIATE ITS CLAIM OF INCOME DECLARED AND ASKED TO SUBSTANTIATE ITS CLAIM OF SHARE CAPITAL RECEIVED FROM TH E ABOVE STATED TWO COMPANIES WITH RELEVANT SUPPORTING EVIDENCES AND ASKED TO DISCHARGE ITS ONUS U/S 68 OF THE ACT. INSPITE GRANTING SEVERAL OPPORTUNITIES, THE ASSESSEE FAILED TO DO SO. SO THE ASSESSING OFFICER MADE ENQUIRIES WITH THE BANKERS ABOUT THE PURP ORTED SHARE APPLICANTS, WHICH REVEALED THAT DURING THE STATED FINANCIAL YEAR, THERE WERE HUGE DEPOSITS OF CASH IN THEIR RESPECT IVE BANK PAGE NO. 4 ACCOUNTS. ON FURTHER VERIFICATION TO TRACE THE LINK OF MONEY TRANSFERRED TO THE ACCOUNT OF THE ASSESSEE IN THE GARB OF SHARE APPLICATION, IT WAS FOUND THAT THESE PARTIES IN TURN HAD RECEIVED MONEY FROM A FIRM M/S. GUPTA & GUPTA, WHO HAD DEPOSITED CASH IN I TS BANK ACCOUNT PRIOR TO ISSUING CHEQUE TO THESE TWO PARTIES. IN FACT , THE ASSESSING OFFICER HAD ISSUED SUMMONS TO M/S GUPTA & GUPTA, TO VERIFY THE VERACITY OF CLAIM WHICH WERE RECEIVED BACK UNS ERVED FROM THE POSTAL AUTHORITIES WITH THE REMARK THAT NO SUCH FIRM EXISTS IN THIS ADDRESS. AND ACCORDING TO THE LD DR, THE ASSESSEE HAD FAILED TO EVEN PRODUCE THE PARTIES FOR VERIFICATION OF CLAIM OF ASSESSEE. THUS ACCORDING TO LD DR, AFTER SERVING THE NOTICE ON 28.03.2007, AND AFTER PROVIDING THE REQUISITE OPPORTUN ITY TO ASSESSEE TO SUBMIT ALL THE DESIRED EVIDENCE IN ITS FAVOR , THE ASSESSMENT WAS FINALIZED ON 30.11.2007. THE LD DR SUBMITTED THAT THE FACT OF GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE CLAIMED SHARE APPLICANTS WAS IN SERIOUS DOUBT. 9 . IT WAS FURTHER SUBMITTED BY THE LD DR THAT T HE ASSESSEE HAD IN FACT SUBMITTED A COPY OF THE ACKNOWLEDGEMENT OF FILLING RETURN OF INCOME OF THE TWO COMPANIES FOR THE ASSESSMENT YEAR 2001 - 02 ONLY AND NOT OF ASSESSMENT YEAR 2002 - 03. EVEN IN THAT YEAR, THESE C OMPANIES HAD DECLARED LOSS FOR THE SAID YEAR. THE ENTRIES IN THEIR RESPECTIVE BANK ACCOUNTS SHOWS HUGE AMOUNT OF CASH DEPOSITS/ TRANSFER OF FUNDS AND IMMEDIATE ISSUE OF CHEQUE/ PAY ORDER OF ALMOST IDENTICAL AMOUNT. THE SUMMONS ISSUED TO THE PARTY FROM WHOM THESE TWO COMPANIES HAD ALLEGEDLY RECEIVED MONEY IN ITS BANK ACCOUNT BEFORE CLAIM ING INVESTMENT IN SHARE CAPITAL OF THE ASSESSEE COMPANY DURING PREVIOUS YEAR, WAS NOT FOUND AT THE FURNISHED ADDRESS. THE ASSESSEE DID NOT EVEN PRODUCE THE SAID PERSONS DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS FOR NECESSARY VERIFICATION. ACCORDING TO THE LD DR, BOTH THESE APPLICANTS HAVE THE SAME ADDRESS, ACCOUNT IN THE SAME BANK, SIMILAR KIND OF TRANSACTION IN THE BANK ACCOUNT, SAME DATE OF FILING RETURN OF INCOME FOR THE ASSESSMENT YEAR 2001 - 02, ALMOST IDENTICAL INCOME, APPLIED FOR IDENTICAL NUMBER OF SHARES ON THE SAME DATE , WHICH ACCORDING TO HIM CAST SERIOUS DOUBTS ABOUT THE WHOLE TRANSACTION . THEREFORE ACCORDING TO THE LD DR T HE ASSESSEE HAS MISERABLY FAILED TO DISCHAR GE ITS ONUS U/S 68 OF THE ACT AND WANTED TO WRIGGLE OUT FROM THE MAIN ISSUE OF RECEIVING ACCOMMODATION ENTRIES, WHICH IS CLEARLY ESTABLISHED BY WAY OF EVIDENCES/ DETAILS COLLECTED DURING THE ASSESSMENT PROCEEDINGS WHICH CORROBORATED THE INFORMATION RECEIVE D FROM THE INVESTIGATION WING. THE LD DR RELIED UPON THE ORDER OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF AGR INVESTMENT LTD. VS. ADDITIONAL COMMISSIONER OF INCOME - TAX AND ANOTHER (2011) 333 ITR 146 IN WHICH IT HAS BEEN HELD THAT DISMISSING THE PETITION, THAT THE TRANSACTIONS INVOLVING RS. 27 LAKHS CONSTITUTED FRESH INFORMATION IN RESPECT OF THE ASSESSEE AS A BENEFICIARY OF BOGUS ACCOMMODATION ENTRIES PROVIDED TO IT AND REPRESENTED UNDISCLOSED INCOME. THERE WAS SPECIFIC INFORMATION RECEIVED F ROM THE OFFICE OF THE DIRECTORATE OF PAGE NO. 5 INVESTIGATION AS REGARDS THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH A NUMBER OF CONCERNS WHICH HAD MADE ACCOMMODATION ENTRIES AND THEY WERE NOT GENUINE TRANSACTIONS. IT WAS NEITHER A CHANGE OF OPINION NOR DID IT CONVEY A PARTICULAR INTERPRETATION OF A SPECIFIC PROVISION WHICH WAS DONE IN A PARTICULAR MANNER IN THE ORIGINAL ASSESSMENT AND SOUGHT TO BE DONE IN A DIFFERENT MANNER IN THE PROCEEDINGS UNDER SECTION 147 OF THE ACT. THE REASON TO BELIEVE HAD BEEN APPROPR IATELY UNDERSTOOD BY THE ASSESSING OFFICER AND THERE WAS MATERIAL ON THE BASIS OF WHICH THE NOTICE WAS ISSUED. IN EXERCISE OF THE JURISDICTION UNDER ARTICLE 226 OF THE CONSTITU TION, THE SUFFICIENCY OF REASONS FOR FORMATION OF THE BELIEF COULD NOT BE CONSID ERED. IT WAS OPEN TO THE ASSESSEE TO PARTICIPATE IN THE REASSESSMENT PROCEEDINGS AND PUT FORTH ITS STAND IN DETAIL TO SATISFY THE ASSESSING OFFICER THAT THERE WAS NO ESCAPEMENT OF TAXABLE INCOME. 10 . IN THE LIGHT OF THE SAID DECISION OF THE JURISDICTIONAL HIGH COURT THE LD DR, PRAYS THAT THE LD CIT(A) HAS RIGHTLY UPHELD THE REOPENING OF THE ASSESSMENT AND IT MAY NOT BE INTERFERED WITH. 11 . WE HAVE HEARD BOTH THE PARTIES. THE ASSESSING OFFICER HAS REFE RRED TO THE INFORMATION WHICH HE RECEIVED FROM DIRECTORATE OF INVESTIGATION AND AS REGARDS THE TRANSACTION S ENTERED INTO BY THE ASSESSEE WITH CONCERNS WHICH HAD MADE ACCOMMODATION ENTRIES AND THAT THEY WERE NOT GENUINE TRANSACTION. THE REASON TO BELIEVE HA S BEEN PROPERLY STATED BY THE ASSESSING OFFICER AND THERE WAS MATERIAL BASIS ON WHICH THE NOTICE WAS ISSUED. THEREFORE WE FIND THAT THERE WAS PRIMA - FACIE EVIDENCE BEFORE THE ASSESSING OFFICER TO BELIEVE THAT INCOME H AS ESCAPED ASSESSMENT . THEREFORE WE DO N OT AGREE WITH THE ASSESSEE THAT THERE WAS NO BASIS TO ISSUE NOTICE U/S 148 AND WE ARE INCLINED TO UPHOLD THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESULTANTLY THIS GROUND OF THE ASSESSEE FAILS AND THEREFORE IT IS DISMISSED. 12 . APROPOS CONFIRMATION OF THE ADDITION OF RS. 4,00,000/ - ON ACCOUNT OF SHARE APPLICATION MONEY RECEIVED FROM M/S. WINSOME PORTFOLIO (P) LTD. AND M/S. WEAL IRON AND STEEL CO. (P) U/S 68 OF THE ACT. 13 . SINCE WE HAVE INCLUDED THE ARGUMENT S OF BOTH SIDES ON MERITS OF THE CASE TOO IN PARA 7, 8 (SUPRA) WE ARE NOT REPEATING THE SAME IN ORDER TO AVOID REPETITION. WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSED THE RECORDS CAREFULLY AND HAVE GONE THROUGH THE CASE LAWS CITED BEFORE US. 14 . WE FIND THAT IN THE ASSESSMENT ORDER THE ASSESSING OFF ICER HAS HELD AS FOLLOWS: - IN THIS CASE IT IS OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS RECEIVED RS. 2,00,000/ - FROM M/S WINSOME PORTFOLIO (P) LTD. AND RS. 2,00,000/ - FROM M/S. WEAL IRON & STEEL CO. (P) LTD., AS SHARE APPLICATION MONEY. THESE PARTIES IN TURN HAVE RECEIVED THE AMOUNTS FROM A FIRM M/S GUPTA & GUPTA WHO HAS DEPOSITED THE CASH IN ITS ACCOUNT IMMEDIATELY PRIOR TO ISSUING CHEQUES TO THESE TWO CONCERNS. IT IS CLEAR THAT THE ACCOUNTS OF M/S. GUPTA & GUPTA AND THESE TWO CON CERNS HAVE BEEN USED TO CHANNEL THE UNACCOUNTED CASH OF THE ASSESSEE COMPANY WHICH HAS BEEN INTRODUCED IN THE BOOKS OF THE ASSESSEE IN THE GARB OF SHARE APPLICATION MONEY. PAGE NO. 6 15 . WE FIND THAT FOR FASTENING OF THE SAID LIABILITY ON ASSESSEE , THE ASSESSING OFFICER HAS STATED ABOUT THE ROLE OF ONE M/S GUPTA & GUPTA , THE FIRM WHICH WAS SUPPOSED TO HAVE FACILITATED THE BOGUS ENTRIES TO THE SHARE APPLICANT. . THE ASSESSING OFFICER HAS STATED THE FOLLOWING IN HIS REMAND REPORT : - WITHOUT PREJUDIC E TO THE ABOVE, IT IS SUBMITTED THAT THE FACT OF GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE CLAIMED SHARE APPLICANTS IS IN SERIOUS DOUBT. THE ASSESSEE HAD SUBMITTED A COPY OF THE ACKNOWLEDGEMENT OF FILING RETURN OF INCOME OF THE TWO PERSONS FOR THE ASSESSMENT YEAR 2001 - 02 ONLY AND NOT OF ASSESSMENT YEAR 2002 - 03. EVEN IN THAT YEAR, THESE PERSONS HAD DECLARED LOSS FOR THE SAID YEAR. THE ENTRIES IN THEIR RESPECTIVE BANK ACCOUNTS SHOWS HUGE AMOUNT OF CASH DEPOSITS/ TRANSFER OF FUNDS AND IMMEDIAT E ISSUE OF CHEQUE/ PAY ORDER OF ALMOST IDENTICAL AMOUNT. (COPIES ENCLOSED FOR KIND REFERENCE). THE SUMMONS ISSUED TO THE PART FROM WHOM THESE TWO PERSONS HAD ALLEGEDLY RECEIVED MONEY IN THEIR BANK ACCOUNT BEFORE CLAIMED INVESTMENT IN SHARE CAPITAL OF THE A SSESSEE COMPANY DURING PREVIOUS YEAR, WAS NOT FOUND AT THE GIVEN ADDRESS. THE ASSESSEE DID NOT EVEN PRODUCED THE SAID PERSONS DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR NECESSARY VERIFICATION. BOTH THESE APPLICANTS HAVE THE SAME ADDRESS, ACCOUNT IN TH E SAME BANK, SIMILAR KIND OF TRANSACTION IN THE BANK ACCOUNT, SAME DATE OF FILING RETURN OF INCOME FOR THE ASSESSMENT YEAR 2001 - 02, ALMOST IDENTICAL INCOME, APPLIED FOR IDENTICAL NUMBER OF SHARES ON THE SAME DATE. IN VIEW OF THE ABOVE, IT IS SUBMITTED THA T THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS U/S 68 OF THE IT ACT, 1961, AND WISH TO ESCAPE FROM THE MAIN ISSUE OF RECEIVING ACCOMMODATION ENTRIES, WHICH IS CLEARLY ESTABLISHED BY WAY OF EVIDENCES/ DETAILS COLLECTED DURING THE ASSESSMENT PROCEEDINGS WHI CH CORROBORATED WITH THE INFORMATION RECEIVED FROM THE INVESTIGATION WING. HENCE IT IS REQUESTED THAT THE SUBMISSION OF THE ASSESSEE FOR ACCEPTANCE OF ADDITIONAL EVIDENCES AT THIS STAGE MAY PLEASE BE REJECTED, AND THE ISSUE MAY KINDLY BE DECIDED ON THE BAS IS OF DETAILS/ EVIDENCE AVAILABLE ON RECORD. 16 . A PERUS AL OF THE SAME WILL REVEAL THAT ASSESSING OFFICER HAS MADE THE ALLEGATIONS I N A VAGUE MANNER. HE OUGHT TO HAVE STATED CLEAR LY THE DATE WHEN THE CASH WAS SUPPOSED TO HAVE BEEN DEPOSITED IN M/S GUPTA & GUPTA ACCOUNT AND HOW MUCH AMOUNT WAS IT AND STATED THE DATE ON WHICH M/S GUPTA & GUPTA ISSUED THE CHEQUE AND AMOUNT TO M/S WINSOME & WINSOME AND THE OTHER SHARE APPLICANT AND THEN THE DATE OF ISSUE OF CHEQUE FOR ISSUANCE OF SHARES AS SHARE APPLICATION AM OUNT . RATHER THAN DOING TH E SAID EXERCISE AND RECORDING THE SAME IN THE ASSESSMENT ORDER, ASSESSING OFFICER HAS DESCRIBED THE MODUS OPERANDI OF ENTRY CREDITORS. WITHOUT THE DETAILS STATED ABOVE, THE CHAIN OF FACTS NEEDED TO LINK EVEN M/S. GUPTA & GUPTA TO THE SHARE - APPLICANTS FAILS AND HAS NOT BEEN ESTABLISHED AS A MATTER OF FACT . NEEDLESS TO SAY ABOUT THE FAILURE OF ASSESSING OFFICER, TO BRING OR ADDUCE ANY EVIDENCE TO LINK M/S. GUPTA & GUPTA TO ASSESSEE NEED TO TAKEN IN THIS BACKGROUND. IN THE SAID CIRCUM STANCES WE ARE UNABLE TO HOLD AS A MATTER OF FACT WHETHER THE SAID TRANSACTION HAS REALLY TAKEN PLACE OR NOT BETWEEN THE ASSESSEE AND M/S GUPTA & GUPTA WHICH IS NOT EMERGING FROM THE ASSESSMENT ORDER OR REMAND REPORT OR THE IMPUGNED CIT (A) ORDER. IN THE A BSENCE OF THESE CRUCIAL EVIDENCES, WE FIND THAT THE ASSESSEE HAS PAGE NO. 7 PRODUCED THE FOLLOWING DOCUMENTS TO PROVE THE IDENTIFY , GENUINENESS AND CREDIT WORTHINESS OF THE SHARE APPLICANTS : (I) COPY OF CONFIRMATION (II) SHARE APPLICATION FORMS (III) INCOME TAX PARTICULARS OF THE SHARE APPLICANT (IV) COPY OF RESOLUTION PASSED IN CASE OF M/S WINSOME PORTFOLIO (V) COPY OF PAN LETTER OF M/S WINSOME PORTFOLIO P. LTD. (VI) COPY OF AFFIDAVIT OF DIRECTOR OF M/S WED IRON & STEEL CO. P. LTD. (VII) COPY OF ASS ESSMENT ORDER OF M/S WED IRON & STEEL (VIII) INCOME TAX RETURNED M/S WED IRON & STEEL. 17 . HERE WE NEED TO POINT OUT THAT THE LD CIT(A) RECORDS THAT THE RESOLUTION OF M/S. WINSOME WHICH IS PLACED IN PAGE 12 OF PAPER BOOK AS NON ADMISSIBLE BECAUSE IT WAS UNDATED, NO REFERENCE NUMBER WAS THERE NOR WAS THERE ANY RESOLUTION NUMBER. HOWEVER ON A PERUSAL OF THE SAID RESOLUTION , WE FIND IN THE BODY OF THE RESOLUTION IT IS SPECIFICALLY STATED THAT THE MEETING WAS HELD ON 22.08.2009 AT 03.30 PM AT THERE REGISTERE D OFFICE. COMING TO THE NEXT OBSERVATION OF AO AND CIT(A) IN RESPECT TO ABSENCE OF THE RESOLUTION NUMBER , WE WOULD LIKE TO POINT OUT THAT THERE IS NO REQUIREMENT UNDER THE COMPANIES ACT, THAT A RESOLUTION OF A COMPANY SHOULD BE NUMBERED. IN CASE THE ASSESS ING OFFICER, HAD ANY DOUBTS ABOUT THE VERACITY OF THE SAID DOCUMENT HE SHOULD HAVE EXERCISED HIS POWERS U/S 131 AND SUMMONED THE MINUTES BOOK MAINTAINED BY THE COMPANY AND CROSS - CHECKED THE GENUINITY OF THE DOCUMENT. AND IN THIS CASE ASSESSING OFFICER HAS NOT CARED TO DO SO. HERE WE FIND THAT THE ASSESSING OFFICER HAS RECORDED ALL HIS DOUBTS & SUSPICION IN TO THE ASSESSMENT ORDER AND IN THE REMAND REPORT TO DISCARD/DISCREDIT THE SAID RESOLUTION CANNOT BE COUNTENANCED IN THE ABSENCE OF PROPER ENQUIRY. 18 . IT MAY BE REMEMBERED THAT EVEN IF THE REOPENING IS SUSTAINED, THE PRIMARY BURDEN THAT INCOME HAS ESCAPED ASSESSMENT IS ON THE SHOULDER OF THE ASSESSING OFFICER AND AFTER DISCHARGING THIS BURDEN ONLY, THE ONUS SHIFTS TO THE SHOULDER OF THE ASSESSEE. WE FIND THAT NOTHING HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO SUBSTANTIATE HIS SERIOUS ALLEGATION THAT THESE TWO ENTRIES ARE ACCOMMODATION ENTRIES WHICH WAS THE SOLE GROUND AND BASIS FOR REOPENING. RELIANCE IS PLACED ON CIT VS. PRADEEP KUMAR GUPTA(D ELHI) 303ITR95 (DELHI), IN WHICH IT WAS HELD THAT WHEN SECTION 147 AND 148 OF THE ACT WAS RESORTED TO, THE AO MUST FIRST DISCHARGE THE BURDEN OF SHOWING THAT INCOME HAD ESCAPED ASSESSMENT. AND IT WAS ONLY THEREAFTER THAT THE ASSESSEE HAD TO PROVIDE ALL TH E ANSWERS. HOWEVER IN THE INSTANT CASE, THE ASSESSEE HAD PRODUCED THE AFORESA ID DOCUMENTS BEFORE THE AUTHORITI ES BELOW AND BY DOING SO, THE ASSESSEE HAS DISCHARGED THE OBLIGATION TO EXPLAIN THE TRANSACTION WITH IT ; AND PAGE NO. 8 THEREAFTER , IF THE ASSESSING OFFICER WAS STILL NOT SATISFIED WITH THE AFORESAID DOCUMENTS & EXPLANATION OF THE ASSESSEE, HE SHOULD HAVE RESORTED TO SECTION 131 AND OTHER PROVISIONS IN THE ACT TO INVESTIGATE AND CHECK THE VERACITY OF THE DOCUMENTS; AND IN THE ABSENCE OF IT , WE ARE AFRAID WE C ANNOT UPHOLD THE ORDER IMPUGNED BEFORE US. 19 . IT MAY BE NOTED THAT A CLOUD OF SUSPICION AND DOUBTS CAN BE RAISED BY STATING THAT LOT OF CASH WAS DEPOSITED IN THE ACCOUNTS OF M/S GUPTA AND GUPTA AND IMMEDIATELY THEREAFTER CHEQUE TRANSACTION COULD BE EVIDENT FROM THE SIDE OF M/S GUPTA AND GUPTA TO SOME OTHER PERSON/ LEGAL E NTITY. HOWEVER, IT MAY BE TAKEN NOTE THAT A JUDICIALLY TRAINED MIND WILL SEARCH FROM THE SAID CLOUD BROUGHT BEFORE IT, RELEVANT ADMISSIBLE EVIDENCES IF ANY FROM THE RECORDS BEFORE IT, TO SEE WHETHER THE SAID EVIDENCE SUPPORT THE TRANSACTION AS ALLEGED BY T HE AO WHICH IS UNDER CONSIDERATION BEFORE IT, AND NOT GET SWAYED BY OTHER IRRELEVANT MATERIALS WHICH COMES ON RECORD. HERE WE FIND IN THE CASE OF CIT VS. RAM NARAIN GOEL 224 ITR 180 PUNJAB AND HARYANA HIGH COURT OBSERVED THAT SUSPICION HOWSOEVER CANNOT TAK E THE PLACE OF EVIDENCE OR PROOF. 20. IN THE CASE OF CIT VS. GANGESHWARI METAL P.LTD. IN ITA NO. 597J2012 JUDGEMENT D ATED 21.1.2013, THE HON'BLE HIGH COURT AFTER CONSIDERING THE DECISIONS IN THE CASE OF NOVA PROMOTERS AND FINLEASE PVT. LTD. 342 ITR 169 A ND JUDGEMENT IN THE CASE OF CIT VS. LOVELY EXPORTS 319 ITR (SAT 5)(5. C) HELD AS FOLLOWS : - AS CAN BE SEEN FROM THE ABOVE EXTRACT, TWO TYPES OF CASES HAVE BEEN INDICATED. ONE IN WHICH THE ASSESSING OFFICER CARRIES OUT THE EXERCISE WHICH IS REQUIRED IN LAW AND THE OTHER IN WHICH THE ASSESSING OFFICER 'SITS BACK WITH FOLDED HANDS' TILL THE ASSESSEE EXHAUSTS ALL THE EVIDENCE OR MATERIAL IN HIS POSSESSION AND THEN COMES FORWARD TO MERELY REJECT THE SAME ON THE PRESUMPTIONS. THE PRESENT CASE FALLS IN THE LATTER CATEGORY. HERE THE ASSESSING OFFICER AFTER NOTING THE FACTS, MERELY REJECTED THE SAME. THIS WOULD BE APPARENT FROM THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER TO THE FOLLOWING EFFECT: - ''INVESTIGATION MADE BY THE INVESTIGATION WING OF THE DEPARTMENT CLEARLY SHOWED THAT THIS WAS NOTHING BUT A SHAM TRANSACTION OF ACCOMMODATI ON ENTRY. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE SAID AMOUNT OF RS.1,11,50,000/ - MAY NOT BE ADDED TO ITS INCOME. IN RESPONSE, THE ASSESSEE HAS SUBMITTED THAT THERE IS NO SUCH CREDIT IN THE BOOKS OF THE ASSESSEE. RATHER, THE ASSESSEE COMPANY HAS RE CEIVED THE SHARE APPLICATION MONEY FOR ALLOTMENT OF ITS SHARE. IT WAS STATED THAT THE ACTUAL AMOUNT RECEIVED WAS RS.55,50,000/ - AND NOT RS.1,11,50,000/ - AS MENTIONED IN THE NOTICE. THE ASSESSEE HAS FURNISHED DETAILS OF SUCH RECEIPTS AND THE CONTENTION OF T HE ASSESSEE IN RESPECT OF THE AMOUNT IS FOUND CORRECT. AS SUCH THE UNEXPLAINED AMOUNT IS TO BE TAKEN AT RS.55,50,000/ - . THE ASSESSEE HAS FURTHER TRIES TO EXPLAIN THE SOURCE OF THIS AMOUNT OF RS.55,50,000/ - BY FURNISHING COPIES OF SHARE APPLICATION MONEY, B ALANCE4 SHEET ETC. OF THE PARTIES MENTIONED ABOVE AND ASSERTED THAT THE QUESTION OF ADDITION IN THE INCOME OF THE ASSESSEE DOES NOT ARISE. THIS EXPLANATION OF THE ASSESSEE HAS BEEN DULY CONSIDERED AND FOUND NOT ACCEPTABLE. THIS ENTRY REMAINS UNEXPLAINED IN THE HANDS OF THE ASSESSEE PAGE NO. 9 AS HAS BEEN ARRIVED BY THE INVESTIGATION WING OF THE DEPARTMENT. AS SUCH ENTRIES OF RS.5~50/000/ - RECEIVED BY THE ASSESSEE ARE TREATED AS AN UNEXPLAINED CASH CREDIT IN THE HANDS OF THE ASSESSEE AND ADDED TO ITS INCOME. SINCE I AM SATISFIED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME/ PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) ARE BEING INITIATED SEPARATELY. THE FACTS OF NOVA PROMOTERS AND FINLEASE (P) LTD. (SUPRA) FALL IN THE FORMER CATEGORY AND THAT IS W HY THIS COURT DECIDED IN FAVOUR OF THE REVENUE IN THAT CASE. HOWEVER, THE FACTS OF THE PRESENT CASE ARE CLEARLY DISTINGUISHABLE AND FALL IN THE SECOND CATEGORY AND ARE MORE IN LINE WITH FACTS OF LOVELY EXPORTS (P) LTD. (SUPRA). THERE WAS A CLEAR LACK OF IN QUIRY ON THE PART OF THE ASSESSING OFFICER ONCE THE ASSESSEE HAD FURNISHED ALL THE MATERIAL WHICH WE HAVE ALREADY REFERRED TO ABOVE. IN SUCH AN EVENTUALITY NO ADDITION CAN BE MADE UNDER SECTION 68 OF THE INCOME TAX ACT 1961. CONSEQUENTLY, THE QUESTION IS ANSWERED IN THE NEGATIVE. THE DECISION OF THE TRIBUNAL IS CORRECT IN LAW 21 . THE CASE ON HAND CLEARLY FALLS IN THE CATEGORY WHERE THERE IS LACK OF ENQUIRY ON THE PART OF THE A. O. AS IN THE CASE OF GANJESHWARI METALS (SUPRA). B) IN THE CASE OF FINLEASE PVT LTD. 342 ITR 169 (SUPRA) IN ITA 232/2012 JUDGEMENT DT. 22.11.2012 AT PARA 6 TO 8/ IT WAS HELD AS FOLLOWS. '6. THIS COURT HAS CONSIDERED THE SUBMISSIONS OF THE PARTIES. IN THIS CASE THE DISCUSSION BY THE COMMISSIONER OF INCO ME TAX (APPEALS) WOULD REVEAL THAT THE ASSESSEE HAS FILED DOCUMENTS INCLUDING CERTIFIED COPIES ISSUED BY THE ROC IN RELATION TO THE SHARE APPLICATION AFFIDAVITS OF THE DIRECTORS, FORM 2 FILED WITH THE ROC BY SUCH APPLICANTS CONFIRMATIONS BY THE APPLICANT F OR COMPANY'S SHARES, CERTIFICATES BY AUDITORS ETC. UNFORTUNATELY, THE ASSESSING OFFICER CHOSE TO BASE HIMSELF MERELY ON THE GENERAL INFERENCE TO BE DRAWN FROM THE READING OF THE INVESTIGATION REPORT AND THE STATEMENT OF MR. MAHES GARG. TO ELEVATE THE INFERENCE WHICH CAN BE DRAWN ON THE BASIS OF READING OF SUCH MATERIAL INTO JUDICIAL CONCLUSIONS WOULD BE IMPROPER, MORE SO WHEN THE ASSESSEE PRODUCED MATERIAL. THE LEAST THAT THE ASSESSING OFFICER OUGHT TO HAVE DONE WAS TO ENQUIR E INTO THE MATTER BY, IF NECESSARY, INVOKING HIS POWERS UNDER SECTION 131 SUMMONING THE SHARE APPLICANTS OR DIRECTORS. NO EFFORT WAS MADE IN THAT REGARD. IN THE ABSENCE OF ANY SUCH FINDING THAT THE MATERIAL DISCLOSED WAS UNTRUSTWORTHY OR LACKED CREDIBILITY THE ASSESSING OFFICER MERELY CONCLUDED ON THE BASIS OF ENQUIRY REPORT, WHICH COLLECTED CERTAIN FACTS AND THE STATEMENTS OF MR.MAHESH GARG THAT THE INCOME SOUGHT TO BE ADDED FELL WITHIN THE DESCRIPTION OFS.68 OF THE INCOME TAX ACT 1961. HAVING REGARD TO THE ENTIRETY OF FACTS AND CIRCUMSTANCES, THE COURT IS SATISFIED THAT THE FINDING OF THE TRIBUNAL IN THIS CASE ACCORDS WITH THE RATIO OF THE DECISION OF THE SUPREME COURT IN LOVELY EXPORTS (SUPRA). THE DECISION IN THIS CASE IS BASED ON THE PECULIAR FACTS WHICH ATTRACT THE RATIO OF LOVELY EXPORTS (SUPRA). WHERE THE ASSESSEE ADDUCES EVIDENCE IN SUPPORT OF THE SHARE APPLICATION MONIES, IT IS OPEN TO THE ASSESSING OFFICER TO EXAMINE IT AND REJECT IT ON TENABLE GROUNDS. IN CASE HE WISHES TO RELY ON THE REPORT O F THE INVESTIGATION AUTHORITIES, SOME MEANINGFUL ENQUIRY OUGHT TO BE CONDUCTED BY HIM TO ESTABLISH A LINK BETWEEN THE ASSESSEE AND THE ALLEGED HAWALA OPERATORS, SUCH A LINK WAS SHOWN TO BE PRESENT IN THE CASE OF NOVA PROMOTERS & FINLEASE (P) LTD. (SUPRA) R ELIED UPON BY THE REVENUE. WE ARE THEREFORE NOT TO BE UNDERSTOOD TO CONVEY THAT IN ALL CASES OF SHARE CAPITAL ADDED UNDER SECTION 68, PAGE NO. 10 THE RATIO OF LOVELY EXPORTS (SUPRA) IS ATTRACTED, IRRESPECTIVE OF THE FACTS, EVIDENCE AND MATERIAL. ' 22 . APPLYING THE PROPOSITIONS LAID DOWN IN THESE CASE LAWS TO THE FACTS OF THIS CASE, WE ARE NOT INCLINED TO UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND THEREFORE WE SET - ASIDE THE IMPUGNED ORDER . THE ARGUMENTS OF THE LD. DR AS TO THE D ATE OF EXECUTION OF AFFIDAVIT, CONFIRMATION LETTER S ETC. ARE NO DOUBT CIRCUMSTANCES TO BE CONSIDERED. BUT, IN THE ABSENCE OF ANY INVESTIGATION, MUCH LESS GATHERING OF EVIDENCE BY THE ASSESSING OFFICER, WE HOLD THAT AN ADDITION CANNOT BE SUSTAINED MERELY BA SED ON INF ERENCES DRAWN BY CIRCUMSTANCE. 23 . IN THE RESULT THE APPEAL IS ALLOWED AND THE IMPUGNED ORDER OF THE LD CIT(A) IS SET ASIDE. ORDER PRONOUNCED IN THE OPEN COURT ON 23 . 05 .2014. - SD/ - - SD/ - ( B.C.MEENA ) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 23 / 05 / 2014 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI