M/s. Civitech Housing India (P) Ltd., Delhi V. ACIT, New Delhi

ITA 1236/DEL/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0003 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 05-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K JAISWAL
• Keywords: Unexplained cash credit; Share purchase agreement; Opportunity of being heard; Principle of natural justice; Accommodation entries
• Section: 143(3); 133A; 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B , NEW DELHI BEFORE SH. N. K. SAINI , AM AND SH. C. M. GARG , JM ITA NO. 1236/DEL/2013 : ASSTT. YEAR : 2009 - 10 M/S CIVITECH HOUSING INDIA (P) LTD., 65, SHRESTHA VIHAR, DELHI - 110092 VS ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 3 , NEW DELHI (APPELLANT) (RESPONDENT) PAN NO.AA BCC1465B ASSESSEE BY : SH. SANJAY KUMAR , CA & AKA RSH GARG, ADV . REVENUE BY : SH . K. K. JAISWAL, SR. DR DATE OF HEARING : 11 . 05 .2015 DATE O F PRONOUNCEMENT : 18 .05 .2015 ORDER PER N.K. SAINI, A.M. THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 01.02.2013 OF THE L D. CIT(A) - I I , NEW DE LHI . 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE ADDITION OF RS. 95,00,000/ - ON ACCOUNT OF SHARE CAPITAL ISSUED TO FOLLOWING FOUR COMPANIES: S. NO. PARTICULARS AMOUNT 1. NAKODAJI BUILDWELL LTD. 35,00,000 2. SHOVELLER INFRACON LTD. 15,00,000 3. CHINTU PRESS AND PRAKASHAN (P) LTD. 30,00,000 4. SHIVALIK MYCO FOODS AND INDUSTRIESLTD 15,00,000 TOTAL RS. 95,00,000 ITA NO. 1236 /DEL/2013 CIVITECH HOUSING INDI (P) LTD. 2 AS UNEXPLAINED CASH CREDIT UNDER SECTION 68. 2. THAT T HE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE ADDITION OF RS. 47,500/ - ON ACCOUNT OF SUMS PRESUMED TO HAVE BEEN PAID AS COMMISSION FOR ARRANGING SHARE CAPITAL. 3. BECAUSE THE ORDER APPEALED AGAINST IS CONTRARY TO THE FACTS, LAW AND PRI NCIPLES OF NATURAL JUSTICE. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE WAS CARRYING BUSINESS ACTIVITIES OF CONSTRUCTION OF FLATTED HOUSE AND SAL E & PURCHASE OF PLOTS. A SURVEY U/S 133A OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS CONDUCTED ON 12.10.2009. THE ASSESSEE FILED THE RETURN OF INCOME ON 07.09.2009 DECLARING AN INCOME OF RS. 38,50,790/ - . THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAD RECEIVED SHARE APPLICATION MONEY AMOUNTING TO R S.1,15,00,000/ - COMPRISING OF RS.57,500/ - SHARES @ RS. 10 AMOUNTING TO RS.5,75,000/ - AND SHARE PREMIUM AMOUNTING TO RS. 1,09,25,000/ - . THESE SHARES WERE ALLOTTED ON 31.03.2009 AMONGST FIVE PARTIES AS PER THE FOLLOWING DETAILS: S. NO NAME OF THE PARTY NO. OF SHARES SHARE AMOUNT PREMIUM AMOUNT TOTAL 1. NAKODAJI BUILDWELL LTD. 17,500 1,75,000 33,25,000 35,00,000 2. SHOVELLER INFRACON LTD. 7,500 75,000 14,25,000 15,00,000 ITA NO. 1236 /DEL/2013 CIVITECH HOUSING INDI (P) LTD. 3 3. CHINTU PRESS AND PRAKASHAN P. LTD 15,000 1,50,000 28,50,000 30,00,000 4. MEDISPHER E MARKETING LTD. 10,000 1,00,000 19,00,000 20,00,000 5. SHIVALIK MYCO FOODS AND IND LTD. 7,500 75,000 14,25,000 15,00,000 TOTAL 57,500 5,75,000 1,09,25,000 1,15,00,000 4. THE AO ACCEPTED THE SHARE APPLICATION MONEY BY MEDISPHERE MARKETING LTD. SINCE INVESTMENT WAS MADE BY IT IN THE EARLIER YEARS ALSO, THE BANK STATEMENT REFLECTED A REGULAR BUSINESS ACTIVITY AND IT HAD SUFFICIENT FUNDS AVAILABLE AS PER ITS BALANCE SHEET TO MAKE THE INVESTMENT. WITH RESPECT TO THE OTHERS, THE AO WAS NOT SATISFIED WITH T HE COPIES OF SHARE CERTIFICATE, BALANCE SHEET AND ACKNOWLEDGMENT OF THE RETURN OF INCOME FILED IN THOSE CASES. HE, THEREFORE, DIRECTED THE ASSESSEE TO PRODUCE THE AUTHORIZED SIGNATORY/DIRECTOR OF THOSE COMPANIES, SO THAT THE IDENTITY AND CREDIT WORTHINESS OF THE PARTIES AND THE GENUINENESS OF THE TRANSACTION COULD BE ESTABLISHED. IN RESPONSE, THE ASSESSEE STATED THAT IT WAS TRYING TO CONTACT THE PARTIES AND THAT THE AO MAY HIMSELF EXERCISE HIS POWER AND ENSURE THEIR COMPLIANCE. THE AO POINTED OUT THAT THE S UMMONS ISSUED TO THOSE PARTIES REMAINED UNCOMPLIED AND THE INQUIRY BY THE INSPECTOR REVEALED THAT NONE OF THE ITA NO. 1236 /DEL/2013 CIVITECH HOUSING INDI (P) LTD. 4 PARTIES WAS IN EXISTENCE ON THE ADDRESS PROVIDED BY THE ASSESSEE. THE AO TREATED THE AMOUNT OF RS. 95,00,000/ - REFLECTED AS SHARE APPLICATION MONE Y FROM THOSE PARTIES AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT AND MADE THE ADDITION. HE ALSO ADDED RS. 47,500/ - BEING 0.5% OF THE ENTRY AMOUNT PAID AS PER NORMAL PRACTICE TO THE ENTRY PROVIDERS , AS COMMISSION FOR LENDING THEIR NAMES. 5 . BEING AGGRI EVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT ALL THE RELEVANT DOCUMENTARY EVIDENCES HAD BEEN FURNISHED TO THE AO AND THAT THE SUMMONS ISSUED BY THE AO HAD BEEN SERVED AND RESPONDED. IT WAS FURTHER STATED THA T IDENTITY OF THE PA RTIES WAS ESTABLISHED BY THEIR PAN AND THAT THE FUNDS HAD BEEN RECEIVED THROUGH BANKING CHANNEL. IT WAS FURTHER STATED THAT THE REPORT OF THE INSPECTOR WAS NOT PROVIDED TO THE ASSESSEE. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: CIT VS STELLAR IN VESTMENT LTD. 192 ITR 287 (DEL) CIT VS VALUE CAPITAL SERVICES P LTD. 307 ITR 334 (DEL) CIT VS KAMDHENU STEEL & ALLOYS LTD. (ITA 972/2009 - DELHI) 6 . THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT ALL THE PARTIES WERE RELATED HAVING ITA NO. 1236 /DEL/2013 CIVITECH HOUSING INDI (P) LTD. 5 THEIR BANK ACCOUNT IN KOTAK MAHINDRA BANK, PREET VIHAR. HE FURTHER OBSERVED THAT THE ASSESSEE WAS SPECIFICALLY DIRECTED BY THE AO TO PRODUCE THE PRINCIPAL OFFICERS OF THOSE COMPANIES IN SUPPORT OF ITS CLAIM THAT THEY WERE CONTRIBUTORS OF ITS SHARE C APITAL, BUT THE ASSESSEE CALLOUSLY DEFLECTED ITS OBLIGATION BY STATING THAT THE AO MAY EXERCISE HIS JURISDICTION. HE FURTHER OBSERVED THAT MERE FILING OF THE AFFIDAVIT/CONFIRMATION, COPY OF ACKNOWLEDGMENT OF THE RETURN OF INCOME, FINANCIAL STATEMENT AND BA NK STATEMENT OF THE PARTIES DOES NOT PUT A STAMP OF GENUINENESS OF THE TRANSACTION. THE LD. CIT(A) CONFIRMED THE ADDITION OF RS. 95,00,000/ - MADE BY THE AO ON ACCOUNT OF UNEXPLAINED CASH CREDIT AND RS. 47,500/ - AS COMMISSION PAID TO ACCOMMODATION ENTRY PRO VIDERS . 7 . NOW THE ASSESSEE IS IN APPEAL. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE AO HIMSELF ADMITTED IN HIS LETTER DATED 25.10.2013 THAT THE ASSESSEE HAS NO CONNECTION WITH MAMRAM GROUP ON THE BASIS OF WHICH THE ADDITION WAS MADE IN THE HANDS OF THE ASSESSEE. COPY OF THE SAID LETTER DATED 25.10.2013 WAS FURNISHED WHICH IS PLACED ON RECORD. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE FURNISHED ALL THE RELEVANT DOCUMENTS TO PROVE THE CREDIT ITA NO. 1236 /DEL/2013 CIVITECH HOUSING INDI (P) LTD. 6 WORTHINESS OF THE PARTIES AND THE GENUINENESS OF THE TRANSACTION BY FURNISHING THE AFFIDAVIT , SHARE APPLICATION FORM S , BANK STATEMENT S, SHARE ALLOTMENT ADVICE, ANNUAL ACCOUNTS OF THE PARTIES, THEIR ACKNOWLEDGMENT FOR FILING INCOME TAX RET URNS. FOR THE AFORESAID CONTENTION, A REFERENCE WAS MADE TO PAGE NOS. 18 TO 93 OF THE ASSESSEE S COMPILATION. IT WAS STATED THAT THE ASSESSEE DISCHARGE THE ONUS CAST UPON IT, THEREFORE, THE ADDITION MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) WAS NOT JU STIFIED. 8 . IN HIS RIVAL SUBMISSIONS THE LD. DR STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE AO SPECIFICALLY ASKED THE ASSESSEE TO PRODUCE THE PRINCIPAL OFFICERS OF THE COMPANIES TO PROVE THE CREDIT WORTHINESS AS WELL AS GENUINENESS OF THE TRANSACTION BUT THE ASSESSEE FAILED TO DO SO , THEREFORE, THE ADDITION WAS RIGHTLY MADE BY THE AO AND THE LD. CIT(A) WAS JUSTIFIED IN SUSTAINING THE SAME . 9 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT APPEARS THAT THE AO MADE THE IMPUGNED ADDITION BY PRESUMING THAT THE AMOUNT IN QUESTION WAS ON ACCOUNT OF ACCOMMODATION ENTR IES FROM THE ITA NO. 1236 /DEL/2013 CIVITECH HOUSING INDI (P) LTD. 7 COMPANIES OF MAMRAM GROUP. THE RELEVANT OBSE RVATIONS OF THE AO AT PAGE NO. 7 OF THE ASSESSMENT ORDER DATED 26.12.2011 READ AS UNDER: IT IS A FACT ON RECORD THAT ALL THE COMPANIES FROM WHOM THE SHARE APPLICATION MONEY HAS BEEN CLAIMED TO HAVE BEEN RECEIVED ARE NOT ONLY BOGUS/PAPER COMPANIES BUT ALS O THE SHARE APPLICATION MONEY/SHARE PREMIUM/SHARE CAPITAL GIVEN BY THEM IS IN FACT ASSESSEE S OWN ACCOUNTED INCOME INTRODUCED IN THE REGULAR BOOKS OF ACCOUNTS OF DIF FERENT GROUP COMPANIES OF MAMRAM GROUP THROUGH ACCOMMODATION ENTRIES BY THESE REFERRED PAPE R/BOGUS COMPANIES. THE LIABILITIES OUTSTANDING AGAINST THEM ARE ONLY ON PAPER AND NO SUCH ACTUAL LIABILITY/SHARE HOLDING EXISTS. THE AMOUNT RECEIVED FROM THEM IS THE PARTY S OWN MONEY WHICH HAS BEEN GIVEN THE SHAPE OF SHARE CAPITAL/SHARE APPLICATION MONEY AND SHARE PREMIUM ETC. 10 . LATER ON, THE AO HIMSELF VIDE LETTER DATED 25.10.2013 ADMITTED THA T DUE TO INADVERTENT MISTAKE, REFERENCE WAS MADE TO MAMRAM GROUP AND THE ASSESSEE HAD NO CONNECTION WITH THE SAID GROUP. IN THIS REGARD THE AO IN HIS LETTER DA TED 25.10.2013 STATED AS UNDER: WITH REFERENCE TO YOUR LETTER NO. NIL DATED 14.10.2013 ON THE SUBJECT CITED ABOVE. ASSESSMENT FOR THE YEAR WAS FRAMED U/S 143(3) VIDE ORDER DATED 26.12.2011, WHERE IN AT PAGE NO. 7 ITA NO. 1236 /DEL/2013 CIVITECH HOUSING INDI (P) LTD. 8 REFERENCE WAS MADE TO MAMRAM GROUP . T HIS IS TO CLARIFY THAT REFERENCE WAS MADE DUE TO INADVERTENT MISTAKE. THE ASSESSEE HAS NO CONNECTION WITH THIS MAMRAM GROUP. 11 . FROM THE ABOVE NARRATED FACTS IT IS CLEAR THAT THE IMPUGNED ADDITION WAS MADE BY THE AO UNDER WRONG IMPRESSION THAT THE SHAR E APPLICATIONS BELONGED TO MAMRAM GROUP AND THE AMOUNT RECEIVED BY THE ASSESSEE WAS THROUGH ACCOMMODATION ENTRY. HOWEVER, HE HIMSELF ADMITTED THAT THE SAID REFERENCE WAS MADE DUE TO INADVERTENT MISTAKE. IN THE PRESENT CASE, IT APPEARS THAT THE ASSESSEE FUR NISHED ANNUAL ACCOUNTS OF THE PARTIES IN SUPPORT OF ITS CLAIM THAT THE APPLICATION MONEY WAS DEPOSITED BY THOSE PARTIES. HOWEVER, NEITHER THE AO NOR THE LD. CIT(A) HAD DISCUSSED ABOUT THOSE DOCUMENTS. IT IS ALSO NOTICED THAT THE SUMMONS ISSUED BY THE AO WE RE REPLIED BY THE PARTIES WHICH IS EVIDENT FROM THE COPIES OF REPLIES, WHICH ARE PLACED AT PAGE NOS. 33 - 35, 54 - 55, 76 - 78 AND 95 - 96 OF THE ASSESSEE S PAPER BOOK, SO IT CANNOT BE SAID THAT THE PARTIES DID NOT RESPOND TO THE NOTICE U/S 131 OF THE ACT. HOWEVER , IT IS NOT CLEAR AS TO WHETHER THE AO MADE FURTHER INQUIRIES FROM THE SAID PARTIES OR NOT . WE, THEREFORE, BY CONSIDERING THE TOTALITY OF THE FACT DEEM IT APPROPRIATE TO SET ASIDE THE IMPUGNED ORDER AND REMAND THE ISSUE BACK TO THE FILE OF THE AO TO BE ITA NO. 1236 /DEL/2013 CIVITECH HOUSING INDI (P) LTD. 9 ADJ UDICATED IN ACCORDANCE WITH LAW AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE AO SHOULD VERIFY FROM THE DOCUMENTS FURNISHED BY THE ASSESSEE, AS TO WHETHER THE RELEVANT COMPANIES HAD SHOWN INVESTMENT IN THE ASSESSEE COMP ANY. THE ASSESSEE IS ALSO FREE TO ADDUCE ANY EVIDENCE IN SUPPORT OF ITS CLAIM. 12 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ( ORDER PRON OUNCED IN THE COURT ON 18 /05 / 2015) . SD/ - SD/ - (C. M. GARG ) ( N. K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18 /05 /2015 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR