Blossom Impex Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 1487/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3732 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 25-05-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 25-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BANITA DEVI
• Assessee Lawyers: K P GARG
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 40A(3); 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH A DELHI ] BEFORE SHRI R. P. TOLANI, JM AND SHRI K. D. RANJ AN, AM I. T. APPEAL NO. 1487 (DEL) OF 2011. ASSESSMENT YEAR : 2007-08. M/S. BLOSSOM IMPEX PVT. LTD., THE ASSESS ING OFFICER, B 97, ALL HEAVEN BUILDING, VS. W A R D : 3 (1), WAZIRPUR INDL. AREA, N E W D E L H I. D E L H I - 110 052. PAN / GIR NO. AAC CB 8517 C. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI K. P. GARG, C. A.; & SHRI VIN EET GARG, ADV.; DEPARTMENT BY : MS. BANITA DEVI, SR. D. R. O R D E R. PER K. D. RANJAN, AM : THIS APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 200 7-08 ARISES OUT OF ORDER OF THE LD. CIT (APPEALS)VI, NEW DELHI. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS FOLLOWS :- 1. THE LD. CIT (APPEALS) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ADDITION OF RS.2,10,000/- OUT OF THE TOTAL IMPUGNED ADDITION OF RS.2,50,000/- MADE BY THE LD. AO ON ACCOUNT OF ALLEGED UNEXPLAINED CAS H CREDIT UNDER SECTION 68 ON ACCOUNT OF SHARE CAPITAL FROM THE INDIVIDUALS, MERE LY BECAUSE THE APPLICANTS DID NOT RESPOND TO NOTICES ALLEGEDLY ISSUED BY THE AO U NDER SECTION 133(6) AND THAT THEIR INCOME WAS LESS THAN RS.1,00,000/- PER ANNUM AND THAT THE AMOUNT WAS RECEIVED IN CASH; 2 I. T. APPEAL NO. 1487 (DEL) OF 2011. 2. THE LD. CIT (APPEALS) HAS ERRED IN LAW AND ON F ACTS IN UPHOLDING THE ADDITION OF RS.40,000/- OUT OF THE TOTAL IMPUGNED A DDITION OF RS.70,000/- MADE BY THE LD. AO ON ACCOUNT OF ALLEGED PAYMENT IN CASH FO R PURCHASES, BEING 20 PER CENT OF SUCH CASH PURCHASES UNDER SECTION 40-A(3); 3. THE LD. CIT (APPEALS) HAS ERRED IN LAW AND ON F ACTS IN TREATING THE GOA-1 AND 2 AS GENERAL CHALLENGING THE IMPUGNED ORD ER AS CONTRARY TO LAW, EQUITY AND JUSTICE AND FACTS AND MATERIAL ON RECORD , BASED ON CONJECTURES AND SURMISES PASSED WITHOUT GRANTING PROPER OPPORTUNITY TO DEFEND. AS SUCH AGAINST THE PRINCIPLES OF NATURAL JUSTICE, AS THE ENTIRE I NVESTIGATION WAS CARRIED OUT BY THE LD. ASSESSING OFFICER BEHIND THE BACK OF THE ASSESS EE. 3. THE FIRST ISSUE FOR CONSIDERATION RELATES TO UPH OLDING THE ADDITION OF RS.2,10,000/- OUT OF TOTAL ADDITION OF RS.2,50,000/- MADE UNDER SECTION 68 ON ACCOUNT OF SHARE CAPITAL RECEIVED FROM FIVE INDIVIDUALS. THE FACTS OF THE CASE RELATING T O THIS GROUND ARE THAT THE ASSESSEE RECEIVED SHARE APPLICATION MONEY OF RS.83,00,000/- DURING THE RELE VANT PREVIOUS YEAR, OUT OF WHICH SHARE APPLICATION OF RS.2,50,000/- FROM SIX PARTIES WAS R ECEIVED IN CASH. THE ASSESSING OFFICER NOTED THAT OUT OF SIX PERSONS, FIVE PERSONS WERE NOT ASSE SSED TO TAX AND THEIR TOTAL INCOME DURING THE YEAR AS WELL AS EARLIER YEAR WAS LESS THAN RS.1,00, 000/-. THE AO ISSUED NOTICE TO ALL THE PARTIES TO CONFIRM THE INVESTMENTS MADE BY THEM AND THE SOURCE OF PURPORTED INVESTMENT. NONE OF THE PARTY RESPONDED TO NOTICE UNDER SECTION 133(6) OF T HE ACT. THE ASSESSING OFFICER, THEREFORE, HELD THAT THE GENUINENESS OF SHARE APPLICATION MONEY AND CREDITWORTHINESS OF SHARE APPLICANTS WAS NOT PROVED. HE ADDED THE AMOUNT OF RS.2,50,000/-. 4. BEFORE THE LD. CIT (APPEALS) IT WAS SUBMITTED TH AT ALL THE SUBSCRIBERS WERE IDENTIFIABLE AS THEY WERE INCOME-TAX ASSESSEES. THEIR FULL PARTICU LARS WITH COMPLETE ADDRESS, COPY OF PAN AND CONFIRMATION OF ALL THE SUBSCRIBERS WERE FURNISHED. THE ASSESSEE HAD PROVED THE IDENTITY AND CREDITWORTHINESS OF THE SHARE HOLDERS. IT WAS SUBM ITTED THAT ONCE IDENTITY OF SHARE HOLDERS HAS BEEN ESTABLISHED, NO ADDITION COULD BE MADE IN THE HANDS OF THE ASSESSEE IN VIEW OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD. THE LD. CIT (APPEALS), HOWEVER, OBSERVED THAT OUT OF SIX PERSONS, FIVE PER SONS DID NOT HAVE ANY PERMANENT ACCOUNT NUMBER. THE AO ISSUED UNDER SECTION 133(6) TO THES E PARTIES FOR MAKING NECESSARY VERIFICATIONS. HOWEVER, NONE OF THE PARTIES RESPONDED. NO DOCUM ENTARY EVIDENCE WAS FILED BEFORE THE LD. CIT 3 I. T. APPEAL NO. 1487 (DEL) OF 2011. (A) TO SUBSTANTIATE ITS CONTENTION THAT ALL THE SUB SCRIBERS WERE INCOME-TAX ASSESSEES. SINCE THE IDENTITY OF SHRI RAMESH KHURANA, RAJIV DANG, NAVEEN GULATI AND ASHWANI KHURANA WAS NOT ESTABLISHED, SHE UPHELD THE ADDITION OF RS.37,500/- ; RS.43,000/-; RS.47,500/-; RS.37,000/- AND RS.45,000/- TOTALING TO RS.2,10,000/-. HOWEVER, SH E DELETED THE ADDITION IN RESPECT OF SHRI SACHIN KHURANA, WHOSE PAN WAS GIVEN. 5. BEFORE US THE LD. AR OF THE ASSESSEE SUBMITTED T HAT ALL THE SHARE HOLDERS ARE ASSESSED TO TAX. THEY HAVE BEEN ALLOTTED SHARES. THE ASSESSEE FILED DETAILS OF SHARE APPLICATION MONEY RECEIVED AND SHARES ALLOTTED BEFORE THE AO ON 18 TH DECEMBER, 2009, THE DAY ON WHICH ASSESSMENT ORDER WAS PASSED. SINCE ALL THE SHARE APPLICANTS A RE ASSESSED TO TAX, THE AO WAS NOT JUSTIFIED TO MAKE ADDITION IN THE HANDS OF THE ASSESSEE. RELIANC E HAS BEEN PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS. (SUPRA ). ON THE OTHER HAND THE LD. SR. DR SUBMITTED THAT THE DETAILS CONTAINING PAN WAS FILE D ON 18/12/2009, THE DAY ON WHICH ASSESSMENT WAS COMPLETED. SINCE THE ASSESSING OFFICER WAS NOT HAVING THIS INFORMATION, SHE REQUESTED THAT THE MATTER MAY BE SENT BACK TO THE ASSESSING OFFICE R WITH THE DIRECTIONS TO EXAMINE THE CASE OF THE ASSESSEE IN THE LIGHT OF JUDICIAL PRONOUNCEMENTS. 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAD FILED THE DETAILS PANS, SHARE APPLICAT ION MONEY RECEIVED AND THE SHARE ALLOTTED ON 18/12/2009 THE DATE ON WHICH ASSESSMENT WAS COMPLET ED. IT APPEARS THAT THESE DETAILS WERE NOT CONSIDERED BY THE ASSESSING OFFICER WHILE COMPLETIN G ASSESSMENT. IT COULD BE CASE WHERE THESE DETAILS WERE FILED POST ASSESSMENT ON THE SAME DATE . THEREFORE, WE FEEL IT PROPER TO SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH TH E DIRECTION TO RE-EXAMINE THE ISSUE OF SHARE APPLICATION MONEY RECEIVED IN THE LIGHT OF JUDICIAL PRONOUNCEMENTS. THE ASSESSING OFFICER WILL PROVIDE PROPER OPPORTUNITY OF BEING HEARD TO THE AS SESSEE. 7.1 THE NEXT ISSUE FOR CONSIDERATION RELATES TO UPH OLDING THE ADDITION OF RS.40,000/- OUT OF ADDITION OF RS.70,000/- MADE U/S. 40A(3) OF THE ACT . THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE PURCHASED AND SOLD SHARES THROUGH M/S. AKS INTERNATIONAL LTD. FROM THE COPY OF 4 I. T. APPEAL NO. 1487 (DEL) OF 2011. ACCOUNT OF M/S. AKS INTERNATIONAL, THE AO NOTED THA T THE ASSESSEE HAD MADE PAYMENT OF RS.2,00,000/- AND RS.1,50,000/- ON 3/4/2006 AND 7/4 /2006 RESPECTIVELY IN CASH. THE PAYMENT WAS MADE FOR PURCHASE OF SHARES OF RS.8,10,000/- ON 5/5/2006 FROM THIS PARTY. SINCE THE ASSESSEE MADE PAYMENT OF RS.3,50,000/- IN CASH AND WAS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF SHARES, HE DID NOT ALLOW 1/5 TH OF PAYMENT MADE IN CASH UNDER SECTION 40A(3) OF TH E ACT. THE ASSESSING OFFICER DISALLOWED 70,000/- UND ER SECTION 40A(3) OF THE ACT. 7.2 ON APPEAL BEFORE CIT(A), IT WAS SUBMITTED THAT THE ASSESSEE MADE ADVANCE PAYMENT OF RS.2,00,000/- IN CASH WITH SHARE BROKER HAVING REG ULAR DEALINGS OF BOTH PURCHASE AND SALE. THE AMOUNT OF RS.2,00,000/- WAS MADE AS ADVANCE IN NORM AL COURSE OF BUSINESS. AT THE MOST IT COULD HIT PROVISIONS OF SECTION 269S BUT NOT SECT ION 40A(3) ALBEIT IT COULD BE DEEM TO HAVE BEEN ADJUSTED SUBSEQUENTLY IN TRANSACTIONS FOR PURCHAS E AND SALE BOTH THROUGH JOURNAL ENTRIES. IN THE ACCOUNT THERE IS NO DISTINCTION BETWEEN THE PAYMENT MADE FOR INVESTMENTS AND MADE FOR TRADING ACCOUNT. IN ANY CASE THE IMMEDIATE FIRST ENTRY OF SUBSCRIPTION TO SHARE CAPITAL FOR RUDAWAL IS AT RS.8,10,000/-. THE REST OF THE TRANSACTIONS ARE EI THER FOR SALE OR FOR RECEIPT AND PAYMENT BY CHEQUE. ANY ADVANCE OR PART PAYMENT COULD NOT BE C ONSIDERED AS ENTIRE PAYMENT FOR SINGLE TRANSACTION OF PURCHASE. THE SECOND ENTRY OF RS.1, 50,000/- ON 7/04/2010 HAS BEEN INCLUDED BY THE AO UNDER MISTAKEN READING OF CASH BOOK. IT IS A CASH WITHDRAWAL FROM BANK AND NOT A CASH PAYMENT TO ANY CREDITOR. THE LD. CIT (APPEALS) ON CONSIDERATION OF ABOVE FACTS, OBSERVED THAT THE AO HAS TAKEN THE AMOUNT OF RS.1,50,000/- WRONGL Y AS CASH PAYMENT WHEREAS IT WAS A CASH WITHDRAWAL FROM THE BANK. AS REGARDS CASH PAYMENT OF RS.2,-00,000/- IT HAS BEEN SUBMITTED THAT THE ASSESSEE HAD MADE PAYMENT FOR PURCHASE OF SHARE S. HENCE THE SAME FELL WITHIN THE AMBIT OF SECTION 40A(3) OF THE ACT. SHE ACCORDINGLY UPHELD THE ADDITION OF RS.40,000/- IN RESPECT OF CASH PAYMENT OF RS.2,00,000/-. 8. BEFORE US LD AR OF THE ASSESSEE SUBMITTED THE A SSESSEE WAS HAVING RUNNING ACCOUNT WITH AKS INT. LTD, THE BROKER OF THE ASSESSEE AND PAYMEN T OF RS.2,00,000/- WAS MADE THEM FOR PURCHASE OF SHARES. HENCE, THE PAYMENT WAS MADE DU E TO BUSINESS EXPEDIENCY. ADVANCE PAYMENT MADE FOR PURCHASE OF SHARES COULD NOT BE CO NSIDERED FOR DISALLOWANCE UNDER SECTION 5 I. T. APPEAL NO. 1487 (DEL) OF 2011. 40A(3) OF THE ACT. THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE ITAT IN THE CASE OF SARAL MOTORS & GENERAL FINANCE LTD. HE FURTHER SUBMITTED THAT THE PAYMENT MADE FOR INVESTMENTS HELD AS MOVABLE ASSETS CANNOT BE COVERED UNDER SECT ION40A(3) OF THE ACT. ON THE OTHER HAND, THE LD. SR. DR SUPPORTED THE ORDER OF THE LD. CIT ( APPEALS). 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH MATERIAL AVAILABLE ON RECORD. IN THE CASE BEFORE US THAT THE ASSESSEE HAD MADE ADVANCE P AYMENT DUE TO BUSINESS EXPEDIENCY TO M/S. AKS INTERNATIONAL LTD., THROUGH WHOM THE ASSESSEE W AS MAKING PURCHASE AND SALE OF SHARES. THE AMOUNT OF RS.2,00,000/- WAS NOT PAID AGAINST PU RCHASE OF PARTICULAR SHARE. THE ASSESSEE HAD MADE PAYMENT IN ADVANCE. WE HAVE GONE THROUGH COPY OF ACCOUNT OF M/S. AKS INTERNATIONAL LTD. IN THE BOOKS OF ASSESSEE. CASH OF RS.2,00,000 /- WAS MADE ON 3 RD APRIL, 2006. THE ASSESSEE PURCHASED SHARES OF RUDWAL LTD. WORTH RS.8,10,000/- . THE ASSESSEE ISSUED CHEQUES FOR RS.5 LAKHS ON 6/05/2006 AND ANOTHER CHEQUE OF RS.8 LAKHS ON 8/5/2006. THE ASSESSEE AGAIN ISSUED CHEQUES ON VARIOUS DATES IN THE MONTH OF MAY. NO P URCHASES WERE MADE. THEREFORE, THE PAYMENT OF RS.2,00,000/- IS NOT LINKED WITH ANY OF THE PURCHASES MADE BY THE ASSESSEE SO AS TO ATTRACT THE PROVISIONS OF SECTION 40A(3) OF THE ACT . THEREFORE, IN OUR CONSIDERED OPINION, THE LD. CIT (APPEALS) WAS NOT JUSTIFIED IN UPHOLDING THE AD DITION OF RS.40,000/- ON ACCOUNT OF PAYMENT MADE IN ADVANCE ON 3 RD APRIL, 2006. WE, THEREFORE, DECIDE THIS ISSUE IN F AVOUR OF THE ASSESSEE. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 10 TH JUNE, 2011. SD/- SD/- [ R. P. TOLANI ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER 6 I. T. APPEAL NO. 1487 (DEL) OF 2011. DATED : 10 TH JUNE, 2011. *MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT.