Deepraj Investments Ltd., New Delhi V. DCIT, New Delhi

ITA 1440/DEL/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1742 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-02-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 11-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARVINDER KAUR
• Keywords: Unexplained cash credit; Share purchase agreement; Difference of opinion; Accommodation entries; Change of opinion; Reassessment proceedings
• Section: 143(3); 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : B : NEW DELHI BEFORE SMT. DIVA SINGH , JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO . 1440 /DEL/201 3 ASSESSMENT YEAR: 2004 - 05 SAFFRON INVESTMENTS LTD. VS. DY. COMMISSIONER OF (NOW MERGED WITH DEEPRAJ INCOME TAX, CIRCLE 7(1), INVESTMENTS LTD. ) 3 - B VANDHNA, NEW DELHI 11 TOLSTOY MARG, NEW DELHI (PAN: AAACD0146P ) (APPELLANT) (RESPONDENT) APPELLANT BY : SH. VED JAIN, CA RESPONDENT BY : SMT. PARVINDER KAUR, SR. DR DATE OF HEARING: 01.07.2015 DATE OF PRONOUNCEMENT: 12.08.2015 ORDER PER INTURI RAMA RAO, A.M. : THIS IS AN APPEAL FILED BY THE ASSESSEE COMPANY FOR THE ASSESSMENT YEAR 2004 - 05 AGAINST THE ORDER OF CIT(A), DATED 21.01.2013, RAISING THE FOLLOWING GROUNDS OF APPEAL: I. THAT THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S 147 OF THE INCOME TAX ACT, 1961 BY LEARNED ASSESSING OFFICER AND UPHOLDED BY THE CIT(APPEALS) IS CONTRARY TO LAW AND FACTS OF THE CASE AS SUCH DESERVES TO BE QUASHED. II. THAT THE CONSIDERATION IN RESPECT OF SALE OF SHARES RECEIVED FROM M/S S.J. CAPITAL LTD, A REGD., SHARE DEALER HAVING BEEN ELABORATELY CONSIDERED IN THE O RIGINAL ASSESEEMENT PROCEEDINGS AS EVIDENT FROM THE ORIGINAL ASSESSMENT ORDER ITSELF, THE RE - OPENING OF ASSESSMENT BY ISSUANCE OF NOTICE U/S 148 OF THE ACT IS BAD IN LAW AND CHANGE OF OPINION BY THE LEARNED LOWER AUTHORITIES. 2 III. THAT ON FACTS AND CIRCUMSTANC ES OF THE CASE AND IN LAW, THE LEARNED ASSESSING OFFICER ERRED IN MAKING THE ALLEGED ADDITION OF RS.7,50,000/ - IN RESPECT OF 'SALE OF SHARES' UNDER SECTION 68 OF THE ACT AS NO INCOME CHARGEABLE TO TAX HAS ESCAPED WITHIN THE MEANING OF SECTION 147 OF THE AC T IN AS MUCH AS THE DEDUCTION IN RESPECT OF COST OF SHARES HAVING NOT BEEN CONSIDERED AGAINST THE AFORESAID ALLEGED ADDITION. IV. THAT THE LEARNED LOWER AUTHORITIES SERIOUSLY ERRED IN HOLDING THAT THE ASSESSEE FAILED TO OFFER EXPLANATION ABOUT THE NATURE AND SOURCE OF AFORESAID SUM FOUND CREDITED IN THE BOOKS OF THE ASSESSEE, IS CONTRARY TO THE FACTS OF THE CASE AS THE AFORESAID SUM RECEIVED IN CONSIDERATION OF SALE OF SHARES AS MENTIONED IN THE ASSESSMENT ORDER. THE ASSESSEE HAVING PROVED OF THE NATURE, SOURC E AND IDENTITY OF THE SHARE BROKING COMPANY MAKING THE PAYMENT IN RESPECT OF SALE OF SAID SHARES, THE ALLEGED ADDITION IN THE CASE OF THE ASSESSEE UNDER SECTION 68 OF THE ACT, IS WHOLLY UNWARRANTED AND UNCALLED FOR AS THE PROVISION OF AFORESAID SECTION IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE. V. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE AFORESAID SHARE BROKING COMPANY BEING A SEPARATE LEGAL ENTITY CREATED BY THE STATUTE AS ALSO REGISTERED WITH SECURITIES & EXCHANGE BOARD OF INDIA (SEBI) , THE MAKING OF ALLEGED ADDITION OF RS.7,50,000/ - UNDER SECTION 68 OF THE ACT IN THE CASE OF THE APPELLANT, IS ILLEGAL, WHOLLY ARBITRARY, UNJUSTIFIED AND AGAINST THE PROVISION OF SECTION 68 OF THE ACT AS NO CASH CREDIT WAS FOUND IN THE BOOKS OF THE APPELLA NT. VI. THAT THE AFORESAID CASH CREDIT HAVING NOT BEEN FOUND IN THE BOOKS OF ACCOUNTS OF THE APPELLANT, THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER IS CONTRARY TO THE SPIRIT AND ESSENCE OF THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXP ORTS PVT. LTD VS. CIT WHEREIN THE HON'BLE COURT HAS DIRECTED FOR MAKING THE ADDITION IN THE CASE OF BOGUS SHAREHOLDERS VIZ., CASH CREDITORS. VII. THAT THE LEARNED CIT(APPEALS) FAILED TO APPRECIATE THAT OUT OF AFORESAID SUM OF RS.7,50,000/ - A SUM OF RS. 3,14,40 4/ - ALREADY SHOWN AS INCOME BY THE APPELLANT IN ITS P & L A/C AS 'SALE OF SHARES' THUS ADDING THE AMOUNT TO THE AFORESAID EXTENT IS TANTAMOUNT DOUBLE TAXATION OF SAID INCOME. VIII. THAT THE OBSERVATION BY THE LEARNED CIT(APPEALS) IN PARA 3.3 OF THE CIT(APPEALS) ORDER IS INCORRECT APPRECIATION OF THE FACTS AS THE LOSS ON SALE OF SHARES HAD DULY BEEN ALLOWED BY THE LEARNED ASSESSING OFFICER AS 'CAPITAL LOSS' AS AGAINST THE BUSINESS LOSS CLAIMED BY THE APPELLANT AND ALLOWED TO BE CARRIED FORWARD AS EVIDENT FROM THE ORIGINAL ORDER ITSELF. IX. THAT CHARGE OF INTEREST UNDER SECTION 2348 OF THE ACT IS CONTRARY TO LAW AND FACTS OF THE CASE. 3 X. THAT THE APPELLANT CRAVE LEAVE TO ADD, AMEND OR VARY ANY GROUND OF APPEAL BEFORE OR AT THE TIME OF HEARING, IF SO REQUIRED. 2. THE B RIEF FACTS OF THE CASE ARE THAT THE APPELLANT IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF DEALING IN SHARES/SECURITIES. FOR THE ASSESSMENT YEAR 2004 - 05, ORIGINAL RETURN OF INCOME WAS FILED ON 13 TH SEPTEMBER, 2004 DISCLOSING A TOTAL LOSS OF RS. 1,58,39,410/ - . AGAINST THIS RETURN OF INCOME, THE ORIGINAL ASSESSMENT WAS COMPLETED VIDE ORDER DATED 31 ST AUGUST, 2006 PASSED UNDER SECTION 143(3) OF THE INCOME - TAX ACT, 1961 (FOR SHORT THE ACT ) AT A TOTAL INCOME OF RS. 2,90,590/ - . WHILE DOING SO, THE ASSESSING OFFICER DISALLOWED THE LOSSES INCURRED ON SALE OF INVESTMENT OF RS. 1,61,28,946/ - . AGAINST THIS ASSESSMENT ORDER, APPEAL S FILED BEFORE THE CIT(A) AS WELL AS BEFO RE THE TRIBUNAL WERE DISMISSED. WHILE T HE MATTER STOOD THUS, A NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED ON 30 TH MARCH, 2010 BASED ON THE INFORMATION RECEIVED FORM INVESTIGATION WING OF THE DEPARTMENT TH AT THE APPELLANT IS A BENEFICIARY OF ACCOMMODATION ENTRIES OF RS. 7,50,000/ - IN THE FOR M OF SALE OF SHARES FROM M/S S.J. CAPITAL LTD. SUBSEQUENTLY, THE ASSESSMENT WAS COMPLETED VIDE ORDER DATED 29 TH OCTOBER, 2010 PASS ED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT MAKING ADDITION OF RS. 7,50,000/ - AS UNEXPLAINED CASH CREDIT. ON APPE AL BEFORE LD. CIT(A), THE SAME WAS DISMISSED VIDE PARA 3.3 (PAGES 4&5) , WHICH IS REPRODUCED BELOW: 3.3. AFTER GOING THROUGH THE OBSERVATIONS OF THE AO AND HIS SUBMISSIONS OF THE AR OF THE APPELLANT AS WELL AS THE EARLIER ASSESSMENT ORDER REFERRED BY THE AR OF THE APPELLANT, IT IS OBSERVED THAT EVEN ON THE EARLIER ACCORD WHEN THE ASSESSMENT WAS COMPLETED U/S 143(3), VIDE LETTER DATED 31 - 08 - 2006, THE ASSESSEE WAS NOT FOUND TO BE AS BONA FIDE ASSESSEE WITH REGARD 4 TO ITS TRANSACTIONS OF SHARES. THE LOSS ON A CCOUNT OF SALE OF SHARES HAD BEEN REPORTED AND THE SALE HAD BEEN DISALLOWED BY THE ASSESSING OFFICER. EVEN ON THE MERITS OF THE CASE, THE APPELLANT HAS NEVER PROVIDED DETAILS OF THE SHARES SOLD, WHETHER THE SAME WERE ACCOUNTED FOR IN THE BALANCE SHEET EARL IER, WHETHER ANY SHARE CERTIFICATES WERE DELIVERED ETC. THIS REALLY INDICATED THAT THE ASSESSEE DOES NOT HAVE ANY SPECIFIC EVIDENCE TO PROVE THAT THERE WAS ACTUALLY ANY, SALE OF SHARES. SINCE, THESE TRANSACTIONS HAD ALSO NOT SUPPORTED BY ANY STOCK MARKET A ND CAN ONLY HAVE A PRIVATELY ARRANGED SALE, THE ONUS WOULD .ON THE APPELLANT TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS. CONSIDERING THE TOTALITY OF THE CIRCUMSTANCES INCLUDING THE FACT THAT THE PARTY TO WHOM SHARES HAD BEEN SOLD ARE KNOWN FOR PROVID ING ACCOMMODATION PARTIES AND ALSO THAT THE APPELLANT COULD NOT PROVE THE GENUINENESS OF THE TRANSACTIONS COULD NOT BE ESTABLISHED. ACCORDINGLY, I DO NOT FIND ANY REASON TO INTERFERE THE FINDINGS OF THE ASSESSING OFFICER AND THIS ADDITION OF RS. 7,50,000/ - IS THEREFORE, UPHELD. THESE GROUNDS OF THE APPEAL ARE D ISMISSED. 3. BEING AGGRIEVED BY THE ABOVE ORDER, THE APPELLANT IS BEFORE US WITH THE PRESENT APPEAL. 4. IT WAS CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE REASSESSMENT PROCEEDINGS ARE NOT VALID IN LAW BECAUSE THE ISSUE OF SALE OF INVESTMENTS WAS CONSIDERED BY THE ASSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMENT AND THEREFORE THE REASSESSMENT PROCEEDINGS WERE NOT VALID IN LAW. WITHOUT PREJUDICE TO THIS GROUND, HE FURTHER SUBMITTED THAT THE TRANSACTIONS OF SALE OF SHARES WERE MADE THROUGH M/S S.J. CAPITAL LTD. AND THE SALE PROCEEDS HAVE BEEN RECEIVED FROM THE SAID COMPANY THROUGH CHEQUES. THE SHARES OF M/S RATHI ALLOYS & STEEL LTD. WHICH WERE SOLD TO THE M/S S.J. CAPITAL LTD . WERE BROUGHT IN THE EARLIER YEARS SHOWN AS AN INVESTMENT. THEREFORE, HE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE APPELLANT BY THE DECISION OF THE HON BLE DELHI HIGH IN THE CASE OF CIT VS. M.S. PORTFOLIO PVT. LTD., ITA NO. 15 OF 2014, 5 DATED 25.08.2014 . EVEN IN THE FOLLOWING DECISIONS OF ITAT AND HON BLE ALLAHABAD HIGH COURT , THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE: I. ITO VS. JATIN INVESTMENT PVT. LTD., ITA NO. 4325 & 4326/DEL/2009, DT. 27.05.2015 (TRIB.) II. ITAT GO ODWILL CRESEC PVT. LTD. , ITA NO. 4151/DEL/2010, DT. 25.01.2012 (TRIB.) III. ITO, WARD 11(1) VS. M/S EMPEROR INTERNATIONAL LTD., ITA NO. 2038/DEL/2009 & CO NO. 152/DEL/2012, DT. 17 TH JULY, 2014 (TRIB.) IV. CIT VS. SH. UDIT NARAIN AGGARWAL, ITA NO. 560 OF 2009, DT. 12.12.2012 (ALD.) V. CIT VS. SUDEEP GOENKA, ITA NO. 468 OF 2009, DT. 03.01.2013 (ALD.) VI. CIT VS. ANIRUDH NARIAN AGGARWAL, ITA NO. 195 OF 2010, DT. 16.01.2013. 5. ON THE OTHER HAND, LEARNED DR PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AT THE FIRST INSTANCE, WE SHALL DEAL WITH THE PRELIMINARY GROUND CHALLENGING THE VALIDITY OF REASSESSMENT NOTICE ISSUED UNDER SECTION 148 OF THE ACT. THE OBJECTION RAISED BY THE APPELLANT IS THAT THE ISSUE OF SALE OF SHARES WAS CONSIDERED AT THE TIME OF FRAMING THE ORIGINAL ASSESSMENT. THEREFORE, IT AMOUNTS TO CHANGE OF OPINION ON WHICH GROUND THE REASSESSMENT CANNOT BE IN ITIATED. W E CANNOT ACCEPT THE SUBMISSIONS OF THE APPELLANT IN THIS REGARD. THE INFORMATION RECEIVED BY THE ASSESSING OFFICER FROM THE INVESTIGATION WING THAT THE APPELLANT IS A BENEFICIA RY OF ACCOMMODATION ENTRIES OF M/S S.J. CAPITAL LTD. CONSTITUTES REASO N TO BELIEF THAT THE INCOME GOT ESCAPED ASSESSMENT. THEREFORE, THE REASSESSMENT ARE VALID IN LAW AND IN THE IDENTICAL FACTS, THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF RAJAT EXPORTS IMPORTS 6 INDIA PVT. LTD. VS. ITO, [2012], 341 ITR 135 (DEL.) HEL D THAT THE REASSESSMENT PROCEEDINGS ARE VALID IN LAW. 7. NOW, C OMING TO THE MERITS OF THE ADDITIONS, WE ARE OF THE CONSIDERED OPINION THAT THE APPELLANT HAD NOT PRODUCED ANY EVIDENCE IN SUPPORT OF THE TRANSACTIONS OF SALE OF SHARES EITHER BEFORE THE ASSES SING OFFICER OR BEFORE THE CIT(A). IN FACT, THE LEARNED CIT(A) HAS GIVEN THE FINDING THAT THE APPELLANT HAD NOT PRODUCED THE BILLS AND CONTRACT NOTES ISSUED BY M/S S.J. CAPITAL LTD. THEREFORE, THE CASE LAWS RELIED BY THE LEARNED AUTHORIZED REPRESENTATIVE A RE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. VISHAL HOL DINGS AND CAPITAL PVT. LTD., 20 0 TAXMAN 186 IS BASED ON THE BILLS AND CONTRACT NOTES PRODUCED . THEREFORE, THE RA TIO OF THE ABOVE DECISION IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THE ABSENCE OF SUCH EVIDENCES, THE ASSESSING OFFICER HAD NO OPTION B U T TO BELIEF THE INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPA RTMENT THAT IT WAS ONLY AN ACCOMM ODATION ENTRY. THE CONTENTION ADVANCED ON BEHALF OF THE APPELLANT THAT THERE WERE NO CREDITS APPEARING IN THE BOOKS OF ACCOUNT ATTRACTING PROVISIONS OF SECTION 68 OF THE ACT IS ALSO NOT ACCEPTABLE FOR THE SIMPLE REASON THAT IT WAS SHOWN IN THE BOOKS OF ACC OUNT THAT T HE MONEY OF RS. 7.5 LAKHS HAVE BEEN RECEIVED FROM M/S . S.J. CAPITAL LTD. WHETHER IT REPRESENTS S ALES PROCEEDS ON ACCOUNT OF SALE OF SHARES OF M/S RATHI ALLOYS & STEELS LTD. OR ARE MERE BOOK ENTRIES NEEDS TO BE FOUND OUT , W ITH REFERENCE TO THE E VIDENCE ADDUCED IN THIS REGARD. THEREFORE, TO MEET THE ENDS OF JUSTICE, WE 7 RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION THAT THE HE SHALL MAKE DE NOVO ASSESSMENT AFTER AFFORDING DUE OPPORTUNITY TO THE APPELLANT OF BEING H EARD. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 1 2 T H A U G U S T , 2015. S D / - S D / - ( DIVA SINGH ) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 2 T H A U G U S T , 2015. RK/ - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI