ITO, New Delhi V. M/s Innovative Pet Containers Ltd., New Delhi

ITA 1451/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0617 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 20-12-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 05-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Assessee Lawyers: R K KAPOOR
• Keywords: Accommodation entries
• Section: 68; 148

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C NEW DELHI) BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI K.G . BANSAL, ACCOUNTANT MEMBER ITA. NO.1451/D/2010 ASSESSMENT YEAR : 2002-03 INCOME TAX OFFICER, VS. M/S INNOVATIVE PE T CON- WARD-11(4), TAINERS LTD., 1110, 11 TH NEW DELHI FLOOR, CHIRANJIV TOWER, 43, NEHRU PLACE, N.D.-19 PAN NO.AAACI 5828F (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. MONA MOHANTY, SR. DR RESPONDENT BY: S/SHRI PRADEEP DINODIA & R.K. KAPOOR, FCA ORDER PER K.G. BANSAL: AM: THIS APPEAL OF THE REVENUE EMANATES FROM THE ORDER OF CIT(A)-XIII, NEW DELHI, PASSED ON 12.03.2010 IN APP EAL NO.101/09-10, PERTAINING TO ASSESSMENT YEAR 2002-03 . FOUR GROUNDS HAVE BEEN TAKEN IN THE APPEAL, THE SUM AND SUBSTANCE OF WHICH IS CONTAINED IN GROUND NO.2, WHI CH IS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF `4 0 LACS MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVI SIONS CONTAINED IN SECTION 68 OF THE ACT. 1451-2010 2 2 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FIL ED ITS RETURN ON 29.12.2002 DECLARING LOSS OF `4,900/-. T HIS RETURN WAS PROCESSED U/S 143(1) ON 13.01.2003. THEREAFTER , INFORMATION WAS RECEIVED FROM THE INVESTIGATING WIN G THAT THE ASSESSEE RECEIVED ENTRIES FROM SIX COMPANIES, AGGREGATING TO `40 LACS, AS SHARE CAPITAL, WHICH AR E MERELY ACCOMMODATION ENTRIES. THUS, THE ASSESSEE INTRODUC ED ITS OWN UNACCOUNTED MONEY IN THE GARB OF SHARE CAPITAL. IN PURSUANCE OF THIS INFORMATION, THE REASONS WERE REC ORDED FOR INITIATING PROCEEDINGS U/S 147. A NOTICE U/S 148 W AS ISSUED ON 07.03.2007. THE REASONS WERE CONVEYED TO THE AS SESSEE FACILITATING THE FILING OF THE OBJECTIONS, IF ANY, IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GK N DRIVE SHAFT LIMITED VS. CIT 259 ITR 19. AT THIS STATE, I T WILL BE APPROPRIATE TO MENTION THE DETAILS OF THE MONEY REC EIVED AS SHARE CAPITAL: NAME OF THE ASSESSEE/ BENEFICIARIES NAME OF THE OPERATOR OPERATORS A/C NO. & BANK DATE OF ENTRY AMOUNT (IN `) M/S INNOVATIVE LTD. M/S FAIR N SQUARE EXPORTS LTD. A/C NO. 2785, VIJAYA BANK, RAM NAGAR, KAROL BAGH, NEW DELHI. 25-09-2001 5,00,500/- -DO- M/S ETHNIC CREATION PVT. LIMITED A/C NO.2834, VIJAYA BANK, RAM NAGAR, KAROL BAGH, N.D. 09-10-2001 5,00,500/- -DO- M/S ARUN FINVEST PVT. LTD. A/C NO.3371, STATE BANK OF MYSORE, KAROL BAGH, N.D. 12-10-2001 6,00,600/- -DO- M/S MELODE ELECTRONICS PVT. LTD. A/C NO.3332, JAI LAXMI CO-OPER. BANK, FATEHPURI, DELHI 17-10-2001 4,00,600/- -DO- M/SRAJ A/C NO.3334, JAI 17-10-2001 5,0 0,750/- 1451-2010 3 3 SHREE MARKETING & SERVICES LTD. LAXMI CO-OP. BANK, FATEHPURI, DELHI. -DO- M/S SHASHI SALES & MARKETING A/C NO.12234, BANK OF PUNJAB, CONNAUGHT PLACE, NEW DELHI 25-09-2001 10,00,800/- -DO- -DO- -DO- 12-10-2001 5,0 0,000/- THE ASSESSMENT PROCEEDINGS WERE INITIATED BY ISSUING STATUTORY NOTICES AND THE ASSESSEE WAS REQU IRED TO EXPLAIN THE NATURE AND THE SOURCE OF ENTRIES. VARI OUS DETAILS WERE FILED, WHICH HAVE BEEN MENTIONED IN THE ASSESS MENT ORDER. THE ASSESSING OFFICER CONSIDERED THE DETAIL S BUT HE WAS NOT SATISFIED ABOUT THE EXPLANATION OF THE ASSE SSEE IN RESPECT OF NATURE AND SOURCE OF THE MONEY RECEIVED. IN THE ASSESSMENT ORDER, IT HAS BEEN MENTIONED THAT THE AS SESSEE HAS FILED COPIES OF I.T. RETURN, BALANCE SHEET AND PROFIT AND LOSS ACCOUNT, AFFIDAVIT, PAN NUMBER, RESOLUTIONS, U NDATED CONFIRMATIONS AND MASTER DATA FROM THE REGISTRAR OF COMPANIES FOR PROVING IDENTITY, CREDITWORTHINESS AN D GENUINENESS. HOWEVER, NO OTHER EXPLANATION HAS BEE N OFFERED ABOUT THE NATURE OF THE RECEIPTS. IN VIEW THEREOF, THE AMOUNT WAS BROUGHT TO TAX U/S 68 OF THE ACT. SINCE THE ENTRIES WERE HELD TO BE ACCOMMODATION ENTRIES, A FU RTHER SUM OF `10,000/- WAS ADDED AS PAYMENT OF COMMISSION TO THE CONTRIBUTING COMPANIES, COMPUTED AT THE RATE OF 0.2% OF THE AGGREGATE AMOUNT OF THE CONTRIBUTION. THUS, TH E TOTAL INCOME OF THE ASSESSEE WAS COMPUTED AT `40,05,100/- . 1451-2010 4 4 3. AGGRIEVED BY THIS ORDER, THE ASSESSEE MOVED AN APPEAL BEFORE THE CIT(A). VARIOUS EXPLANATIONS WER E FURNISHED IN RESPECT OF THE ENTRIES, AND IT WAS ARG UED THAT PROVISIONS OF SECTION 68 CANNOT BE INVOKED IN THIS CASE AS SHARE APPLICATION MONEY HAS BEEN RECEIVED FROM VARI OUS CORPORATE ENTITIES. THE LEARNED CIT(A) CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE HIM. HE DE LETED THE ADDITION MADE BY THE ASSESSING OFFICER AND IT H AS BEEN MENTIONED THAT VARIOUS JUDGMENTS CITED BY THE ASSES SING OFFICER WERE IN RESPECT OF UNSECURED LOANS ETC. TH E RATIO OF THESE CASES IS NOT APPLICABLE TO THE FACTS OF THE C ASE. THE ISSUE REGARDING RECEIPT OF SHARE APPLICATION MONEY IS COVERED BY THE DECISION OF HONBLE SUPREME COURT LO VELY EXPORTS PRIVATE LIMITED. THE ASSESSEE HAS FILED VA RIOUS DOCUMENTS TO ESTABLISH THE IDENTITY OF THE CONTRIBU TORS, INCLUDING GENUINENESS OF THE TRANSACTIONS. FOR THE SAKE OF READY REFERENCE, RELEVANT PORTION OF PARAGRAPH 4 OF HIS ORDER IS REPRODUCED BELOW:- THE ASSESSING OFFICER ASKED THE APPELLANT COMPANY TO PROVE CREDIT WORTHINESS AND GENUINENESS OF THE PERSONS CONTRIBUTING SHARE APPLICATION MONEY TO THE APPELLA NT COMPANY, ON THE BASIS OF VARIOUS JUDICIAL PRONOUNCEMEN TS CITED BY HIM IN THE ASSESSMENT ORDER. DURING THE APPEL LATE PROCEEDINGS, THE AUTHORIZED REPRESENTATIVE OF THE APP ELLANT COMPANY, BROUGHT TO MY NOTICE THE RELEVANT PAGES OF THE PAPER BOOK WHEREIN THE RELEVANT CONFIRMATION OF THE RESPECTIVE SHARE APPLICANTS ALONG WITH COPY OF INCOME TAX RETURNS, PAN CARDS, ELECTION CARD, ETC. ARE AVAILABLE AND CONTENDED THAT THE APPELLANT HAS ESTABLISHED THE IDENTIFICATION OF THE VARIOUS SHARE APPLICANTS, INCLUD ING GENUINENESS OF THE TRANSACTION. THE APPELLANT ALSO REL IED ON THE JUDICIAL PRECEDENTS OF HONBLE SUPREME COURT IN THE 1451-2010 5 5 CASE OF CIT VS. LOVELY EXPORTS LTD., JUDGMENTS OF HONB LE DELHI HIGH COURTS IN THE CASE OF M/S DIVINE LEASING & FINANCE LIMITED 299 ITR 268, JUDGMENT OF BHAVSHAKTI STEEL MINES (P) LTD. DATED 16 TH DECEMBER, 2008 AND JUDGMENT OF GANGOUR INVESTMENT LIMITED DATED 30 TH JANUARY, 2009, 18 DTR 242 AND ARGUED THAT THE APPELLANT HAS DISCHARGED ITS ONUS BY FILING THE CONFIRMATION OF THE RESPECTIVE APP LICANT BY GIVING CONFIRMATION, PAN CARDS, ADDRESSES, ELECTION IDENTITY CARDS, COPY OF BANK ACCOUNTS, AND THEREFORE, FOLLOWING THE RATION OF HOBBLE SUPREME COURT AND H ONBLE DELHI HIGH COURT ADDITION MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT, RELYING ON VARIOUS JUDGMENTS CITED IN THE ASSESSMENT ORDER, IS UNJUSTIFIED AND SHOULD BE DELETED. THE APPELLANT ALSO STRESSED THAT THE JUDGMENT CITED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER ARE RELEVANT ONLY IN THE CONTEXT OF UNSECURED LOANS ETC., AND THE SAID RATIO CANNOT BE APPLIED FOR SHARE APPLICATION MONEY RECEIV ED BY THE APPELLANT COMPANY FOR ALLOTMENT OF SHARES. AS PE R VARIOUS DOCUMENTS PLACED ON RECORD AND PRINCIPLE LAI D DOWN BY THE SUPREME COURT IN THE CASE OF M/S LOVELY EXPORTS PVT. LTD. THE ADDITION A/C OF SHARE CAPITAL C ANNOT BE SUSTAINED. THEREFORE, THE ADDITION OF `40 LACS MADE B Y THE ASSESSING OFFICER U/S 68 OF THE ACT, ON ACCOUNT OF SHARE APPLICATION MONEY IS DELETED AND THIS GROUND OF APPEA L IS ALLOWED. HOWEVER, ASSESSING OFFICER IS FREE TO TAKE APPROPRIATE ACTION MAY BE PERMISSIBLE UNDER THE LAW I N THE CASE OF VARIOUS SHARE HOLDER IF DEEM FIT. 4. BEFORE US, THE LEARNED DR DREW OUR ATTE NTION TOWARDS THE FINDINGS OF ASSESSMENT ORDER. IT IS SU BMITTED THAT ALL THE CONTRIBUTORS ARE CORPORATE ENTITIES. THE ASSESSEE DID NOT PRODUCE ANY AUTHORIZED PERSON FROM ANY OF T HE COMPANIES BEFORE THE ASSESSING OFFICER FOR VERIFICA TION OF THE CONTRIBUTIONS MADE BY THEM. ALTHOUGH THE IDENTITY OF A CORPORATE ENTITY STANDS ESTABLISHED BECAUSE OF ITS INCORPORATION, THE CREDITWORTHINESS OF THE CONTRIBU TORS AND GENUINENESS OF THE TRANSACTIONS HAVE BEEN PROVED. IN REPLY, THE LEARNED COUNSEL FOR THE ASSESSEE HEAVILY RELIED ON THE 1451-2010 6 6 ORDER OF THE LEARNED CIT(A). IT IS SUBMITTED THAT THE CONTRIBUTORS ARE EXISTING TAX PAYERS. THE SHARE AP PLICATION MONEY RECEIVED BY WAY OF CHEQUE. THE DATA IN REGARD TO THESE COMPANIES IS ALSO AVAILABLE FROM THE RECORD O F ROC, WHICH IS IN PUBLIC DOMAIN. APART FROM THE DECISION IN THE CASE OF LOVELY EXPORTS PRIVATE LIMITED, RELIANCE HA S ALSO BEEN PLACED ON THE DECISION OF HONBLE DELHI HIGH C OURT IN THE CASE OF SARTHAK SECURITIES COMPANY (P) LTD. VS. ITO, 2010-TIOL-726-HC-DEL-IT DATED 18.10.2010, A COPY OF WHICH HAS BEEN PLACED ON RECORD. 5. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. IT IS AN ADMITTED FACT THAT ALL THE CONTRIBUTORS ARE CORPORATE ENTITIES. THEY ARE ASSESSED TO TAX. MONEYS HAVE BEEN RECEIVED BY WAY OF CHEQUES. THE IDENTITY OF THE CONTRIBUTORS HAS NOT BEEN DISPUTED IN ANY MANNER BY THE LEARNED DR ALSO. THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PRIVATE LIMITED IS THAT WHERE THE IDENTITY OF THE CONTRIBUTOR HAS B EEN PROVED AND HE ADMITS THAT HE HAS MADE THE CONTRIBUTION, NO ADDITION CAN BE MADE IN THE HANDS OF THE RECIPIENT COMPANY. IF THE CONTRIBUTION IS FOUND TO BE BOGUS, THE SAME CAN BE TAXED IN THE HANDS OF THE CONTRIBUTOR. THE IDENTIT Y OF THE CONTRIBUTORS HAS BEEN PROVED AND THE FACTUM OF CONT RIBUTION BY THEM HAS ALSO BEEN PROVED. THEREFORE, THE AMOUN T CANNOT BE BROUGHT TO TAX IN THE HANDS OF THE ASSESS EE COMPANY. THE DECISION IN THE CASE OF SARTHAK SECUR ITIES 1451-2010 7 7 COMPANY (P) LTD. DEALS PRIMARILY WITH INVOCATION OF THE PROVISION CONTAINED IN SECTION 147. IN PARAGRAPH N O.23, THE HONBLE COURT MENTIONED THAT THE ASSESSING OFFICER WAS AWARE OF FOUR COMPANIES WITH WHOM THE ASSESSEE HAD ENTERED INTO TRANSACTIONS. THERE WAS NO INFORMATIO N THAT THE COMPANIES WERE FICTITIOUS. THE INFORMATION WAS THA T THESE COMPANIES WERE USED AS A CONDUIT, BUT THERE EXISTEN CE HAS NOT BEEN DISPUTED. IN SUCH SITUATION, THE PRINCIPL E LAID DOWN IN LOVELY EXPORTS PRIVATE LIMITED GETS SQUARELY ATT RACTED. THEREFORE, IT HAS BEEN HELD THAT IT WAS NOT PROPER TO REQUIRE THE ASSESSEE TO GO THROUGH THE ENTIRE GAMUT OF THE PROCEEDINGS. IT CAN BE SEEN FROM THE JUDGMENT THAT THE HONBLE DELHI HIGH COURT HAS FOLLOWED THE PRINCIPLE LAID DOWN IN THE CASE OF LOVELY EXPORTS PRIVATE LIMITED EVEN WHILE TESTING THE REASONS RECORDED FOR THE PURPOSE OF INI TIATING PROCEEDINGS U/S 147. IN THE LIGHT OF THE DECISION OF THE APEX COURT, IT IS HELD THAT THE LEARNED CIT(A) WAS RIGHT IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER WHILE GR ANTING HIM LIBERTY TO TAKE APPROPRIATE ACTION, AS PERMISSI BLE UNDER THE LAW, IN THE CASE OF VARIOUS CONTRIBUTORS, IF DE EMED FIT. ACCORDINGLY, HIS FINDINGS ARE UPHELD. 6. IN RESULT, THE APPEAL IS DISMISSED. THIS ORDER WAS PRONOUNCED IN OPEN COURT ON 14.01.20 11. SD/- SD/- ( A.D. JAIN ) ( K.G. BANSAL ) JUDICIAL MEMBER ACCOUNTANT ME MBER DT.14.01.2011. NS 1451-2010 8 8 COPY FORWARDED TO:- 1. INCOME TAX OFFICER, WARD 11-(4), NEW DELHI. 2. M/S INNOVATIVE PET CONTAINERS LTD., 1110, 11 TH FLOOR, CHIRANJEEV TOWER, 43, NEHRU PLACE, NEW DELHI-19 3. THE CIT 4. THE CIT (A), NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY BY ORDER (ITAT, NEW DELHI).