ITO, New Delhi V. M/s. Evershed Services (P) Ltd., New Delhi

ITA 1579/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3922 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 09-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VED JAINRANO JAINV MOHAN
• Keywords: Unexplained cash credit; Share purchase agreement; Principle of natural justice; Accommodation entries
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH : B NEW DELHI) (DELHI BENCH : B NEW DELHI) (DELHI BENCH : B NEW DELHI) (DELHI BENCH : B NEW DELHI) BEFORE SHRI A.D. JAIN , JUDICIAL MEMBER AND BEFORE SHRI A.D. JAIN , JUDICIAL MEMBER AND BEFORE SHRI A.D. JAIN , JUDICIAL MEMBER AND BEFORE SHRI A.D. JAIN , JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO.1579/DEL./2010 I.T.A. NO.1579/DEL./2010 I.T.A. NO.1579/DEL./2010 I.T.A. NO.1579/DEL./2010 (ASSESSMENT YEAR : 2006 (ASSESSMENT YEAR : 2006 (ASSESSMENT YEAR : 2006 (ASSESSMENT YEAR : 2006- -- -07) 07) 07) 07) ITO, WARD 11(2), ITO, WARD 11(2), ITO, WARD 11(2), ITO, WARD 11(2), VS. VS. VS. VS. EVERSHED SERVICES (P) LTD., EVERSHED SERVICES (P) LTD., EVERSHED SERVICES (P) LTD., EVERSHED SERVICES (P) LTD., NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. BA/9A, JANAKPURI, PHASE I, BA/9A, JANAKPURI, PHASE I, BA/9A, JANAKPURI, PHASE I, BA/9A, JANAKPURI, PHASE I, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (PAN/GIR NO.AABCE1348M) (PAN/GIR NO.AABCE1348M) (PAN/GIR NO.AABCE1348M) (PAN/GIR NO.AABCE1348M) (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. VED JAIN/RANO JAIN/V. MOHAN ASSESSEE BY : SH. VED JAIN/RANO JAIN/V. MOHAN ASSESSEE BY : SH. VED JAIN/RANO JAIN/V. MOHAN ASSESSEE BY : SH. VED JAIN/RANO JAIN/V. MOHAN REVENUE BY : MS. Y. KAKKAR, SR.DR REVENUE BY : MS. Y. KAKKAR, SR.DR REVENUE BY : MS. Y. KAKKAR, SR.DR REVENUE BY : MS. Y. KAKKAR, SR.DR ORDER ORDER ORDER ORDER PER A.D. JAIN, JM PER A.D. JAIN, JM PER A.D. JAIN, JM PER A.D. JAIN, JM THIS IS DEPARTMENTS APPEAL FOR AY 2006-07. THE SOL E ISSUE CONCERNING THE APPEAL IS AGAINST THE DELETION OF THE ADDITION OF `20 LAKHS MADE ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 OF THE I.T. ACT. 2. THE ASSESSEE IS A PRIVATE LIMITED COMPANY INCORPOR ATED AS PER THE CERTIFICATE OF THE REGISTRAR OF COMPANIES. IN THE YEAR U NDER CONSIDERATION, THE ASSESSEE RECEIVED THE FOLLOWING SHARE CAPITAL: 1. ETHNIC CREATIONS PVT. `10 LACS 2. FLAIR N. SQUARE EXPORTS PVT. LTD. `5 LACS 3. MAESTRO MARKETING & ADVERTISING PVT. LTD. ` 5 LACS 3. WHILE MAKING THE ADDITION OF THE ABOVE AMOUNTS, THE A O OBSERVED THAT SHRI MUKESH GUPTA, DIRECTOR OF THE ABOVE CREDITOR COMPA NIES, IN A STATEMENT RECORDED BY THE INV. WING OF THE INCOME TAX DEPARTMENT IN HIS OWN CASE HAD DENIED THE INVESTMENT IN SPITE OF THE FACT THAT THE PAYMENT HAD BEEN RECEIVED BY THE ASSESSEE THROUGH ACCOUNT PAYEE CHEQUES ; AND THAT DESPITE HAVING ASKED TO DO SO, THE ASSESSEE REMAINED UNABLE TO PRODUCE THE CREDITOR PARTIES BEFORE THE AO. 3. BY VIRTUE OF THE IMPUGNED ORDER, THE CIT(A) DELETED THE ADDITION. 4. AGGRIEVED, THE DEPARTMENT IS IN APPEAL. I.T.A. NO.1579/DEL./2010 (A.Y. : 2006-07) 2 5. CHALLENGING THE IMPUGNED ORDER, THE LD.DR HAS CONTE NDED THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF 20 LACS, CORRECTLY MADE BY THE AO ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 OF THE AC T; THAT WHILE DOING SO, THE CIT(A) HAS IGNORED THAT SHRI MUKESH GUPTA, IN HIS S TATEMENT RECORDED ON OATH, HAD STATED THAT THE CREDITOR COMPANIES WERE ENGAGED IN THE ACTIVITIES OF GIVING ACCOMMODATION ENTRIES IN LIEU OF THE CASH GI VEN BY THE BENEFICIARIES; THAT EVEN THOUGH THE AO SPECIFICALLY REQ UESTED THE ASSESSEE TO PRODUCE ITS SHAREHOLDERS, THE SAID REQUIREMENT WAS NOT COMPLIED WITH; AND THAT THE CIT(A) HAS GONE WRONG IN APPLYING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PVT. LTD. , 216 CTR 195(SC). 6. ON THE OTHER HAND, LD.COUNSEL FOR THE ASSESSEE HAS STRONGLY RELIED ON THE IMPUGNED ORDER. IT HAS BEEN SUBMITTED THAT THE CIT(A) HAS CORRECTLY DELETED THE ADDITION WRONGLY MADE; THAT THE ASSESSEE HAD DULY FILED BEFORE THE AO, COPIES OF CONFIRMATION AND ACKNOWLEDGMENT OF L ATEST RETURN FILED BY THE ASSESSEE COMPANY; THAT ALL THE THREE SHARE APPLICANTS WERE PRIVATE LIMITED COMPANIES, REGULARLY ASSESSED TO TAX; THAT HOWEV ER, THE AO DID NOT, FOR REASONS BEST KNOWN TO HIM, DEEM IT FIT TO MAKE ANY ENQUIRY WHATSOEVER IN THE CASES OF THOSE COMPANIES; AND THAT FURTHER, THE STATEME NT OF SHRI MUKESH GUPTA WAS RECORDED MUCH BEFORE THE CASE OF THE ASSESSE E COMPANY. 7. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATER IAL ON RECORD. IT IS SEEN THAT BEFORE THE AO, THE ASSESSEE HAD DULY SUBMI TTED COPIES OF CONFIRMATIONS AND ACKNOWLEDGMENT OF THE LATEST RETURN FIL ED BY THE ASSESSEE COMPANY. ALL OF THE THREE APPLICANTS WERE PRIVATE LIMI TED COMPANIES. THIS FACT WAS AVAILABLE FROM CERTIFICATES OF THEIR INCORPORA TION. ALL THESE COMPANIES WERE REGULAR ASSESSEES, HAVING PANS. ALL OF THESE COMPANIES HAD FILED THEIR AUDITED FINANCIAL STATEMENTS. THE SHARE APP LICATION MONEY CONTRIBUTED TO THE ASSESSEE COMPANY, HAD COME BY WAY OF BANK DRAFTS OR ACCOUNT PAYEE CHEQUES. THESE FACTS WERE CONFIRMED BY THE SHARE APPLICANTS IN THEIR CONFIRMATIONS. THE BANK STATEMENT OF THE CREDITO R COMPANIES WERE ALSO FILED BY THE ASSESSEE BEFORE THE AO. THE SHARE ALLOTMENT WITH ROC WAS, TOO, EVIDENCED BY FORM NO.2, WHICH WAS ALSO FILED. NOT ONLY THIS, THE SHARE CERTIFICATES IN THE ASSESSEE COMPANY, AS HELD BY THE CR EDITOR/SHARE APPLICANT COMPANIES, WERE ALSO FILED BY THE ASSESSEE. I.T.A. NO.1579/DEL./2010 (A.Y. : 2006-07) 3 8. ALL THESE FACTS WERE DULY TAKEN INTO CONSIDERATION BY THE CIT(A) WHILE CORRECTLY DELETING THE ADDITION WRONGLY MADE. IN CIT VS. LOVELY EXPORT PVT. LTD., 216 CTR 195 (SC), IT HAS BEEN HELD THAT IF THE SH ARE APPLICATION MONEY IS RECEIVED FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR IND IVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. IN THE PRESENT CASE, AS DISCU SSED HEREINBEFORE, THE DETAILS OF ALL THE THREE SHARE APPLICANTS OF THE ASSESSE E WERE DULY FURNISHED BY THE ASSESSEE BEFORE THE AO. HOWEVER, NO ENQUIRY W AS MADE BY THE AO IN THE CASE OF THE SHARE APPLICANT COMPANIES. THEREFORE, LOVELY EXPORTS PVT. LTD. (SUPRA) IS SQUARELY APPLICABLE AND IT HAS BEEN R IGHTLY APPLIED BY THE CIT(A). MOREOVER, UNDISPUTEDLY, AS CONTENDED BY THE L D.COUNSEL FOR THE ASSESSEE, THE STATEMENT OF SHRI MUKESH GUPTA, DIRECTOR OF THE SHARE APPLICANT COMPANIES WAS RECORDED ON OATH ON 16.1.2004, IN THE C ASES OF THOSE COMPANIES, AT THE BACK OF THE ASSESSEE, WHEREAS, THE CA SE OF THE ASSESSEE PERTAINS TO ASSESSMENT YEAR 2006-07 I.E., FOR THE PERIO D FROM 1.4.05 TO 31.3.06. THE TRANSACTIONS UNDER CONSIDERATION, THUS, P ERTAIN TO A PERIOD POST RECORDING OF SUCH STATEMENT. NOT ONLY THIS, SHRI MUKESH GUPTA WAS NOT ALLOWED TO BE CROSS-EXAMINED IN SPITE OF THE FACT THAT THE ASSESSEE MADE A SPECIFIC REQUEST IN THIS REGARD TO THE AO. THE BASIC P RINCIPLE OF NATURAL JUSTICE, I.E., AUDI ALTEREM PARTEM, WAS, THEREFORE, FLO UTED IN THIS CASE, CAUSING DETRIMENT TO THE ASSESSEE. IT IS SETTLED LAW THAT NONE CAN BE CONDEMNED UNHEARD. 9. IN VIEW OF THE ABOVE DISCUSSION, FINDING NO ERROR WHATSOEVER WITH THE ORDER OF THE CIT(A), THE SAME IS HEREBY CONFIRMED. T HE GRIEVANCE SOUGHT TO BE RAISED BY THE DEPARTMENT BY WAY OF GROUNDS OF APPEA L TAKEN, IS, HENCE, REJECTED. 10. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 24.05.2010. SD/- SD/- (SHAMIM YAHYA) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 24/05/2011. SKB I.T.A. NO.1579/DEL./2010 (A.Y. : 2006-07) 4 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A)-XIII, NEW DELHI. 5. DR, ITAT DEPUTY REGISTRAR, ITAT, DELHI BENCHES