M/s. Ridhi Sidhi Shares (P) Ltd., Pune V. DCIT, New Delhi

ITA 1299/DEL/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2749 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 09-03-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Principle of natural justice; Onus to prove
• Section: 250; 68; 6

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH G, NEW DELHI BEFORE : SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO. 1299/DEL/2016 ASSESSMENT YEAR: 2012-13 RIDHI SIDHI SHARES (P) LTD., ARYAMAN GROUP, 302A & B, 3 RD FLOOR, CITY BAY, DHOLE PATIL ROAD, PUNE. PAN- AADCR6447A. (APPELLANT) VS. DCIT, CENTRAL CIRCLE - 31, NEW DELHI. (RESPONDENT) APPELLANT BY NONE RESPONDENT BY SH. N.K. BANSAL, SR. DR ORDER PER B.R.R. KUMAR, A.M.: FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL : 1) FOR THAT THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) IS, DISPUTED, ARBITRARY AND BAD IN LAW. 2) FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 1,75,00,000/- AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT ON ACCOUNT OF SHARE APPLICATION MONEY IN THE NAME OF SKY LUX CITY SCAPES (P) LTD. 3) FOR THAT THE ASSESSING OFFICER FAILED TO APPREC IATE THE FACT THAT THE ASSESSEE SUBMITTED ALL THE RELEVANT DETAILS IN THE FORM OF CONFIRMATIONS, BANK STATEMENTS & FINANCIAL STATEMENTS OF M/S SKY L UX CITYSCAPES PRIVATE LIMITED FOR VERIFICATION OF THE ASSESSING O FFICER. DATE OF HEARING 12.06.2019 DATE OF PRONOUNCEMENT 12 .06.2019 ITA NO. 1299/DEL/2016 2 4) FURTHER THE ASSESSING OFFICER FAILED TO APPRECI ATE THE FACT THAT SHARE APPLICATION MONEY WERE ALL RECEIVED FROM CORP ORATE ENTITY BY ACCOUNT PAYEE CHEQUES WHICH PROVES THE IDENTITY, CR EDIT WORTHINESS AND GENUINENESS OF THE AMOUNT SO RECEIVED. 5) FOR THAT THE APPELLANT CRAVES, LEAVE TO AMEND, ADD OR DELETE ANY OF THE GROUND(S) MENTIONED ABOVE AT ANY TIME BEFORE TH E FINAL HEARING OF THE APPEAL. DURING THE HEARING BEFORE US, NO ONE APPEARED NOR ANY LETTER OF ADJOURNMENT WAS FILED ON BEHALF OF THE ASSESSEE. FR OM THE RECORDS, IT IS SEEN THAT THE CASE HAS BEEN FILED 09.03.2016 AND REGULAR ADJOURNMENTS HAVE BEEN GIVEN ON VARIOUS OCCASIONS. A NOTICE HAS BEEN ISSUE D TO THE ASSESSEE BY THE TRIBUNAL ON 29.04.2019 BY RPAD INTIMATING THE DATE OF HEARING ON 12.06.2019. ON THE DESIGNATED DATE NOBODY APPEARED ON BEHALF OF THE ASSESSEE. HENCE, THE MATTER IS BEING ADJUDICATED BA SED ON THE MATERIALS AVAILABLE ON RECORD. THE LD. DR RELIED ON THE ORDER OF THE LD. CIT(A) A ND FILED HIS ARGUMENTS IN THE FORM OF WRITTEN SUBMISSIONS BEFORE US WHICH ARE AS UNDER : 1. THE ASSESSEE RECEIVED RS. 4,50,00,000 AS SHARE APP LICATION MONEY. NO DETAILS WERE FILED BEFORE THE AO, HENCE ENTIRE AMOUNT WAS ADDED BACK U/S 68 O F IT ACT. 2. THE LD CIT(A) ALLOWED RELIEF OF RS. 2.75 CR SINCE IT WAS RECEIVED IN EARLIER YEARS. 3. ADDITION OF RS 1.75 CR WAS CONFIRMED SINCE THE ASS ESSEE HAS FILED TO FILE COPY OF ITR AS WELL AS AFFIDAVIT OF THE PERSON FROM WHOM THIS AMOUNT WAS R ECEIVED. SINCE THE ASSESSEE HAS NOT DISCHARGED ITS ONUS, THE AMOUNT HAS RIGHTLY BEEN AD DED IN THE HANDS OF THE ASSESSEE. IN THE ABOVE CASE, IT IS HUMBLY SUBMITTED THAT THE FOLLOWING DECISIONS MAY KINDLY BE CONSIDERED WITH REGARD TO ADDITION MADE U/S 68 OF I.T. ACT: 1. PCIT VS NDR PROMOTERS PVT LTD I2019-TIQL-172-HC- DEL-IT) ITA NO. 1299/DEL/2016 3 WHERE HONBLE DELHI HIGH COURT HELD THAT A CASE INV OLVING MAKE-BELIEVE PAPERWORK TO CAMOUFLAGE THE BOGUS NATURE OF THE TRANSACTIONS IS TO BE TREATED AS UNEXPLAINED CREDIT U/S 68 2 PCIT VS BIKRAM SINGH 120171 85 TAXMANN.COM 104 (D ELHI)/R2017L 250 TAXMAN 273 (DELHI)/R2017L 399 ITR 407 (DELHI) (COPY ENCLOSED) WHERE HONBLE DELHI HIGH COURT HELD THAT EVEN IF A TRANSACTION OF LOAN IS MADE THROUGH CHEQUE, IT CANNOT BE PRESUMED TO BE GENUINE IN THE ABSENCE OF ANY AGREEMENT, SECURITY AND INTEREST PAYMENT. MERE SUBMISSION OF PAN CARD OF CREDITOR DO ES NOT ESTABLISH THE AUTHENTICITY OF A HUGE LOAN TRANSACTION PARTICULARLY WHEN THE ITR DOES NOT INSPIRE SUCH CONFIDENCE. MERE SUBMISSION OF ID PROOF AND THE FACT THAT THE LOAN TRANSACTIONS WE RE THROUGH THE BANKING CHANNEL, DOES NOT ESTABLISH THE GENUINENESS OF TRANSACTIONS. LOAN ENT RIES ARE GENERALLY MASKED TO PUMP IN BLACK MONEY INTO BANKING CHANNELS AND SUCH PRACTICES CONT INUE TO PLAGUE INDIAN ECONOMY 3- CIT VS MAF ACADEMY (P.) LTD (361 ITR 258) (COPY ENCLOSED) WHERE HONBLE DELHI HIGH COURT HELD THAT WHERE ASSE SSEE, A PRIVATE LIMITED COMPANY, SOLD ITS SHARES TO UNRELATED PARTIES AT A HUGE PREMIUM AND T HEREUPON WITHIN SHORT SPAN OF TIME THOSE SHARES WERE PURCHASED BACK EVEN AT A LOSS, SHARE TR ANSACTIONS IN QUESTION WERE TO BE REGARDED AS BOGUS AND, THUS, AMOUNT RECEIVED FROM SAID TRANSACT IONS WAS TO BE ADDED TO ASSESEE'S TAXABLE INCOME UNDER SECTION 68 IT WAS HELD AS FOLLOWS: 53. IN CONTRAST TO THE ABOVE JUDGMENTS, IN THE PRE SENT CASE , THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND IN THE FACTUAL MATRIX, WE HAVE HELD THAT THE AS SESSEE HAS NOT BEEN ABLE TO DISCHARGE THE INITIAL O NUS AND HAS NOT BEEN ABLE TO ESTABLISH THE IDENTITY, CR EDITWORTHINESS OF THE SHARE APPLICANTS AND THE GENUINENESS OF THE TRANSACTION. THOUGH, IN OUR CONS IDERED OPINION, NONE OF THE ABOVE JUDGMENTS, REFERRED TO BY THE ASSESSEE RESPONDENT, ARE APPLICA BLE IN THE FACTS OF THE PRESENT CASE AND IN VIEW OF THE FINDINGS RECORDED BY US HEREINABOVE. 54. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT T HE ASSESSEE HAS NOT DISCHARGED THE ONUS SATISFACTOR ILY AND THE ADDITIONS MADE BY THE ASSESSING OFFICER WER E JUSTIFIED AND SUSTAINABLE. 4. CIT VS NAVODAVA CASTLE PVT LTD T20141 367 ITR 306 ( DEL) (COPY ENCLOSED) WHERE HONBLE DELHI HIGH COURT ACCEPTED THAT SINCE THE ASSESSEE WAS UNABLE TO PRODUCE THE DIRECTORS AND THE PRINCIPAL OFFICERS OF THE SIX SHA REHOLDER COMPANIES AND ALSO THAT AS PER THE INFORMATION AND DETAILS COLLECTED BY THE ASSESSING OFFICER FROM THE CONCERNED BANK, THE ASSESSING OFFICER HAD OBSERVED THAT THERE WERE GENUINE CONCER NS ABOUT IDENTITY, CREDITWORTHINESS OF SHAREHOLDERS AS WELL AS GENUINENESS OF THE TRANSACT IONS. '20. NOW, WHEN WE GO TO THE ORDER OF THE TRIBUNAL I N THE PRESENT CASE, WE NOTICE THAT THE TRIBUNAL HAS MERELY REPRODUCED THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND UPHELD THE DELETION OF THE ADDITION. IN FACT, THEY SUBSTANTIALLY RELIED UP ON AND QUOTED THE DECISION OF ITS CO-ORDINATE BENCH IN THE CASE OF MAF ACADEMY P. LTD., A DECISION WHICH HA S BEEN OVERTURNED BY THE DELHI HIGH COURT, VIDE ITS JUDGMENT IN CIT V. MAF ACADEMY P. LTD. [201 4] 206 DLT 277 ; [2014] 361 ITR 258 (DELHI)). IN THE IMPUGNED ORDER IT IS ACCEPTED THAT THE ASSESSEE WAS UNABLE TO PRODUCE DIRECTORS AND PRINCIPAL OFFICERS OF THE SIX SHAREHOLDER COMPANIES AND ALSO THE FACT THAT AS PER THE INFORMATION AND ITA NO. 1299/DEL/2016 4 DETAILS COLLECTED BY THE ASSESSING OFFICER FROM THE CONCERNED BANK, THE ASSESSING OFFICER HAS OBSERVED THAT THERE WERE GENUINE CONCERNS ABOUT IDENTITY, CR EDITWORTHINESS OF SHAREHOLDERS AS WELL AS GENUINENE SS OF THE TRANSACTIONS. 21. IN VIEW OF THE AFORESAID DISCUSSION, WE FEEL TH AT THE MATTER REQUIRES AN ORDER OF REMIT TO THE TRIBUNAL FOR FRESH ADJUDICATION KEEPING IN VIEW THE AFORESAID CASE LAW.' NAVODAVA CASTLE PVT LTD VS CIT (2015-TIQL-314-SC-IT ) (COPY ENCLOSED) SLP OF ASSESSEE DISMISSED BY HONBIE SUPREME COURT 5. PRATHAM TELECOM INDIA PVT LTD VS DCIT (2018-TIQL-19 83-HC-MUM-IT) (COPY ENCLOSED) WHERE HONBIE BOMBAY HIGH COURT HELD THAT MERE PROD UCTION OF PAN NUMBERS & BANK STATEMENTS IS SUFFICIENT ENOUGH TO DISCHARGE THE BU RDEN ON TAXPAYER TO ESCAPE THE REALMS OF SECTION 68 6 CIT VS NIPUN BUILDERS & DEVELOPERS (P.) LTD (30 T AXMANN.COM 292, 214 TAXMAN 429. 350 ITR 407, 256 CTR 34) (COPY ENCLOSED) WHERE HONBIE DELHI HIGH COURT HELD THAT WHERE ASSE SSEE FAILED TO PROVE IDENTITY AND CAPACITY OF SUBSCRIBER COMPANIES TO PAY SHARE APPLI CATION MONEY, AMOUNT SO RECEIVED WAS LIABLE TO BE TAXED UNDER SECTION 68. IT WAS HELD AS FOLLOWS: 12. A PERUSAL OF THE ORDER OF THE TRIBUNAL SHOWS T HAT IT HAS GONE ON THE BASIS OF THE DOCUMENTS SUBMITTED BY THE ASSESSEE BEFORE THE AO AND HAS HEL D THAT IN THE LIGHT OF THOSE DOCUMENTS, IT CAN BE SAID THAT THE ASSESSEE HAS ESTABLISHED THE IDENTITY OF THE PARTIES. IT HAS FURTHER BEEN OBSERVED THAT THE REPORT OF THE INVESTIGATION WING CANNOT CONCLUSIVEL Y PROVE THAT THE ASSESSEE'S OWN MONIES WERE BROUGHT BACK IN THE FORM OF SHARE APPLICATION MONEY . AS NOTED IN THE EARLIER PARAGRAPH, IT IS NOT THE BURDEN OF THE AO TO PROVE THAT CONNECTION. THERE HA S BEEN NO EXAMINATION BY THE TRIBUNAL OF THE ASSESSMENT PROCEEDINGS IN ANY DETAIL IN ORDER TO DE MONSTRATE THAT THE ASSESSEE HAS DISCHARGED ITS ONUS TO PROVE NOT ONLY THE IDENTITY OF THE SHARE AP PLICANTS, BUT ALSO THEIR CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTIONS. NO ATTEMPT WAS MAD E BY THE TRIBUNAL TO SCRATCH THE SURFACE AND PROBE THE DOCUMENTARY EVIDENCE IN SOME DEPTH, IN TH E LIGHT OF THE CONDUCT OF THE ASSESSEE AND OTHER SURROUNDING CIRCUMSTANCES IN ORDER TO SEE WHETHER T HE ASSESSEE HAS DISCHARGED ITS ONUS UNDER SECTION 68. WITH RESPECT, IT APPEARS TO US THAT THER E HAS ONLY BEEN A MECHANICAL REFERENCE TO THE CASE- LAW ON THE SUBJECT WITHOUT ANY SERIOUS APPRAISAL OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 13. WE. THEREFORE, ANSWER THE SUBSTANTIAL QUESTION O F LAW FRAMED BY US IN THE NEGATIVE, IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. THE APPEAL OF THE REVENUE IS ALLOWED WITH NO ORDER AS TO COSTS. ITA NO. 1299/DEL/2016 5 7. CIT VS NOVA PROMOTERS & FINLEASE (P) LTD (18 TAX MANN.COM 217, 206 TAXMAN 207. 342 ITR 169. 252 CTR 187) (COPY ENCLOSED) WHERE HONBIE DELHI HIGH COURT HELD THAT AMOUNT REC EIVED BY ASSESSEE FROM ACCOMMODATION ENTRY PROVIDERS IN GARB OF SHARE APPLICATION MONEY, WAS TO BE ADDED TO ITS TAXABLE INCOME UNDER SECTION 68. IT WAS HELD AS FOLLOWS: 41. IN THE CASE BEFORE US, NOT ONLY DID THE MATERIAL BE FORE THE ASSESSING OFFICER SHOW THE LINK BETWEEN THE ENTRY PROVIDERS AND THE ASSESSEE-COMPANY, BUT T HE ASSESSING OFFICER HAD ALSO PROVIDED THE STATEMENTS OF MUKESH GUPTA AND RAJAN JASSAL TO THE A SSESSEE IN COMPLIANCE WITH THE RULES OF NATURAL JUSTICE. OUT OF THE 22 COMPANIES WHOSE NAMES FIGURE D IN THE INFORMATION GIVEN BY THEM TO THE INVESTIGATION WING, 15 COMPANIES HAD PROVIDED THE S O-CALLED 'SHARE SUBSCRIPTION MONIES' TO THE ASSESSEE. THERE WAS THUS SPECIFIC INVOLVEMENT OF TH E ASSESSEE-COMPANY IN THE MODUS OPERANDI FOLLOWED BY MUKESH GUPTA AND RAJAN JASSAL. THUS, ON CRUCIAL F ACTUAL ASPECTS THE PRESENT CASE STANDS ON A COMPLETELY DIFFERENT FOOTING FROM THE CASE OF OASIS HOSPITALITIES (P.) LTD. (SUPRA). 42. IN THE LIGHT OF THE ABOVE DISCUSSION, WE ARE UNABLE TO UPHOLD THE ORDER OF THE TRIBUNAL CONFIRMING THE DELETION OF THE ADDITION OF RS. 1,18,50,000 MAD E UNDER SECTION 68 OF THE ACT AS WELL AS THE CONSEQUENTIAL ADDITION OF RS. 2,96,250. I/VE ACCORDINGLY ANSWER THE SUBSTANTIAL QUESTIONS OF LAW IN THE NEGATIVE AND IN FAVOUR OF THE DEPARTMENT. THE ASSES SEE SHALL PAY COSTS WHICH WE ASSESS AT RS. 30,000/- .' 8 CIT VS N R PORTFOLIO PVT LTD R2014L 42 TAXMANN.CO M 339 (DELHI)/R2014L 222 TAXMAN 157 (DELHIHMAG)/R20141 264 CTR 258 (DELHI) (COPY ENCLOS ED) WHERE HONBLE DELHI HIGH COURT HELD THAT IF AO DOUB TS THE DOCUMENTS PRODUCED BY ASSESSEE, THE ONUS SHIFTS ON ASSESSEE TO FURTHER SUBSTANTIATE THE FACTS OR PRODUCE THE SHARE APPLICANT IN PROCEEDING. IT WAS HELD AS FOLLOWS: 30. WHAT WE PERCEIVE AND REGARD AS CORRECT POSITION OF LAW IS THAT THE COURT OR TRIBUNAL SHOULD BE CONVINCED ABOUT THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. THE ONUS TO PROVE T HE THREE FACTUM IS ON THE ASSESSEE AS THE FACTS ARE WI THIN THE ASSESSEE'S KNOWLEDGE. MERE PRODUCTION OF INCORPORATION DETAILS, PAN NOS. OR THE FACT THAT TH IRD PERSONS OR COMPANY HAD FILED INCOME TAX DETAILS IN CASE OF A PRIVATE LIMITED COMPANY MAY NOT BE SUF FICIENT WHEN SURROUNDING AND ATTENDING FACTS PREDICATE A COVER UP. THESE FACTS INDICATE AND REFL ECT PROPER PAPER WORK OR DOCUMENTATION BUT GENUINENESS, CREDITWORTHINESS, IDENTITY ARE DEEPER AND OBTRUSIVE. COMPANIES NO DOUBT ARE ARTIFICIAL OR JURISTIC PERSONS BUT THEY ARE SOULLESS AND ARE DEPE NDENT UPON THE INDIVIDUALS BEHIND THEM WHO RUN AND MANAGE THE SAID COMPANIES. IT IS THE PERSONS BEHIND THE COMPANY WHO TAKE THE DECISIONS, CONTROLS AND MANAGE THEM. HE ALSO RELIED ON THE JUDGMENT OF JURISDICTIONAL HI GH COURT IN THE CASE OF NDR PROMOTERS PVT. LTD. AND ALSO THE JUDGMENT OF HONBL E SUPREME COURT IN THE CASE OF NRA IRON AND STEEL PVT. LTD. ITA NO. 1299/DEL/2016 6 HAVING GONE THROUGH THE FACTS OF THE CASE, WE FIND THAT EVEN BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAS NOT FURNISHED T HE REQUISITE DETAILS NOR DISCHARGED THE PRIMARY ONUS OF PROVING THE SOURCE. EVEN BEFORE THE LD. CIT(A), THE BASIC DOCUMENTARY EVIDENCE TO PROVE IDENTITY, G ENUINENESS AND CREDITWORTHINESS OF THE AMOUNT RECEIVED HAVE NOT BE EN FILED. IT IS ALSO OBSERVED THAT THE ASSESSEE HAS GROSSLY FAILED TO PR OVE THE SOURCE OF AMOUNT RECEIVED. KEEPING IN VIEW THE JUDGMENT OF THE HONB LE SUPREME COURT IN THE CASE OF NRS IRON AND STEEL PVT.LTD, IN CIVIL APPEAL NO.29855 /2019 , WE HERE BY DECLINE TO INTERFERE IN THE ORDER OF THE LD. CIT(A) . AS A RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (H.S. SIDHU) (B.R.R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 12.06.2019 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI