Rahul Singhal Securities Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 1619/DEL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2895 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 06-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 19-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Share purchase agreement; Opportunity of being heard; Additional evidence
• Section: 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.1619/DEL/2013 ASSESSMENT YEAR : 2009-10 RAHUL SINGHAL SECURITIES PVT. LTD., 169, KOHAT ENCLAVE, PITAMPURA, NEW DELHI. VS. DCIT, CIRCLE- 15(1), NEW DELHI. PAN : AADCR7998G (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUNIL KUMAR, FCA DEPARTMENT BY : SHRI ATIQ AHMAD, SR.DR DATE OF HEARING : 27-12-2017 DATE OF PRONOUNCEMENT : 27-12-2017 O R D E R PER R. K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 02.01.2013 OF THE CIT(A)-XVIII, NEW DELHI RELATING TO ASSESSMENT YEAR 2009-10. 2. ALTHOUGH A NUMBER OF GROUNDS HAVE BEEN RAISED BY THE ASSESSEE, THEY ALL RELATE TO THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE ADDITION OF RS.95,00,000/- MADE BY THE ASSESSING OFFICER U/S 68 OF THE I.T. AC T ON ACCOUNT OF SHARE CAPITAL. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A PRIVATE LIMITED COMPANY AND IS ENGAGED IN THE BUSINESS OF TRADING I N SHARES. IT FILED ITS RETURN 2 ITA NO.1619/DEL/2013 OF INCOME ON 29.09.2009 DECLARING LOSS OF RS.66,22, 866/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSER VED THAT THE ASSESSEE DURING THE YEAR HAS ISSUED FRESH SHARE CAPITAL. ON BEING QUESTIONED BY THE ASSESSING OFFICER, THE ASSESSEE FURNISHED THE NAMES AND ADDRE SSES OF THE PARTIES FROM WHOM SHARE CAPITAL AS WELL AS SHARE PREMIUM WAS REC EIVED FROM TIME TO TIME. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS RECEIVED THE FOLLOWI NG AMOUNTS FROM THE THREE PARTIES WHICH ARE AS UNDER :- NAME OF THE PARTY SHARE CAPITAL SHARE PREMIUM THAR STEEL PVT. LTD. 6,00,000 24,00,000 ARI ES CRAFT LTD. 10,00,000 40,00,000 MAA TALUKA BUILDCON P. LTD. 3,00,000 12,00,000 4. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURN ISH THE LEDGER ACCOUNT OF THE ABOVE THREE PARTIES. HE ALSO ASKED THE ASSESSE E TO PRODUCE THE ABOVE PARTIES ALONG WITH THEIR BOOKS OF ACCOUNTS TO SUPPORT THE S HARE APPLICATION MONEY AND THE SOURCE OF THE SAME AND THE SHARE CERTIFICATE IS SUED TO THEM. THE ASSESSEE FAILED TO PRODUCE THE ABOVE SHAREHOLDERS AND FILE T HE NECESSARY DOCUMENTS AS CALLED FOR BY THE ASSESSING OFFICER TO PROVE THEIR IDENTITY AND CREDITWORTHINESS. THE ASSESSING OFFICER CALLED FOR INFORMATION U/S 13 3(6) FROM THE SAID SHAREHOLDERS IN ORDER TO CROSS-EXAMINE THEIR GENUIN ENESS AND CREDITWORTHINESS. HOWEVER, THE NOTICES ISSUED TO THE M/S THAR STEEL P VT. LTD. AND M/S MAA TALUKA 3 ITA NO.1619/DEL/2013 BUILDCON PVT. LTD. WERE RECEIVED BACK UNSERVED BY T HE POSTAL AUTHORITIES WITH THE REMARKS EITHER NO SUCH PERSON OR LEFT WITHOU T ADDRESS. SO FAR AS ARIES CRAFT LTD. IS CONCERNED, THE ASSESSING OFFICER OBSE RVED THAT NEITHER THE NOTICE HAS BEEN RECEIVED BACK UNSERVED NOR THE SAME HAS BE EN COMPLIED WITH. HE, THEREFORE, HELD THAT THE IDENTITY AS WELL AS GENUIN ENESS AND CREDITWORTHINESS OF THE SHARE APPLICANTS REMAINED UNVERIFIED AND THE AS SESSEE HAD NOT MADE ANY EFFORTS TO PROVE ITS CLAIM. HE OBSERVED THAT IT IS NOT THE DUTY OF THE ASSESSING OFFICER TO RUN FROM PILLAR TO POST TO GATHER EVIDEN CE IN SUPPORT OF THE CLAIM OF THE ASSESSEE BUT IT IS THE ASSESSEES DUTY TO FURNI SH THE DOCUMENTARY EVIDENCES TO THE SATISFACTION OF THE ASSESSING OFFICER. SINCE T HE ASSESSEE IN THE INSTANT CASE FAILED TO DISCHARGE THE ONUS CAST ON IT, THE ASSESS ING OFFICER MADE ADDITION OF RS.95,00,000/- TO THE TOTAL INCOME OF THE ASSESSEE U/S 68 OF THE I.T. ACT. 5. BEFORE THE LD. CIT(A), THE ASSESSEE FILED CERTAI N ADDITIONAL EVIDENCES TO SUPPORT THE IDENTITY AND CREDITWORTHINESS OF THE SU BSCRIBERS. VARIOUS DECISIONS WERE ALSO BROUGHT TO THE NOTICE OF THE LD. CIT(A) T O THE PROPOSITION THAT THE ADDITION MADE BY THE ASSESSING OFFICER IS UNCALLED FOR WHEN THE ASSESSEE HAD FILED VARIOUS DETAILS SUCH AS PAN, BANK A/C, AUDITE D ACCOUNTS ETC. SINCE THE ASSESSEE DID NOT MOVE AN APPLICATION UNDER RULE 46A FOR ADMISSION OF ADDITIONAL EVIDENCE, LD. CIT(A) DID NOT ACCEPT THE ADDITIONAL EVIDENCES FILED BEFORE HER. SHE FURTHER NOTED THAT THE DOCUMENTS F ILED BY THE ASSESSEE SHOW THAT 4 ITA NO.1619/DEL/2013 THE COMPANIES ARE MERE PAPER COMPANIES CREATED FOR ROUTING UNACCOUNTED MONEY INTO THE BOOKS OF ACCOUNT. RELYING ON VARIOU S DECISIONS, SHE HELD THAT THE ASSESSEE, IN THE INSTANT CASE, DID NOT OFFER AN Y CREDIBLE EXPLANATION ABOUT THE AMOUNTS CREDITED IN ITS BOOKS. THEREFORE, THE RECE IPT OF RS.95,00,000/- CANNOT BE TREATED AS EXPLAINED. SHE ACCORDINGLY UPHELD TH E ADDITION MADE BY THE ASSESSING OFFICER. 6. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 7. LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE PA PER BOOK SUBMITTED THAT THE ASSESSEE HAS FILED NECESSARY DOCUMENTARY EVIDEN CES TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THE SHARE APPLICANTS AND TH E GENUINENESS OF THE TRANSACTIONS. RELYING ON VARIOUS DECISIONS, HE SUB MITTED THAT WHEN THE ASSESSEE HAS FILED THE NECESSARY DOCUMENTS BY GIVING THE PAN DETAILS, BANK DETAILS, SHARE APPLICANTS AND AFFIDAVITS OF DIRECTORS OF THE SHARE APPLICANT COMPANY, THE SHARE APPLICATION MONEY CANNOT BE CONSIDERED AS UNEXPLAIN ED CASH CREDIT IN THE HANDS OF THE ASSESSEE. HE RELIED ON THE FOLLOWING DECISI ONS :- (A) CIT VS. LOVELY EXPORTS (P) LTD. [2009] 319 ITR (ST) 5 (SC). (B) CIT VS. FAIR FINVEST PVT. LTD. [2013] 357 ITR 146 (DELHI). (C) PR.CIT VS. N.C. CABLES LTD. [2017] 391 ITR 11 (DELHI). (D) CIT VS. DIVINE LEASING AND FINANCE LTD. [2008] 299 ITR 268 (DELHI). (E) CIT VS. GAGANDEEP INFRASTRUCTURE PVT. LTD. [20 17] 394 ITR 380 (BOM). 5 ITA NO.1619/DEL/2013 (F) CIT VS. ORCHID INDUSTRIES PVT. LTD. [2017] ITA NO.1433 OF 2014 (BOM). 8. LD. DR ON THE OTHER HAND WHILE SUPPORTING THE OR DER OF THE LD. CIT(A) SUBMITTED THAT THE ASSESSEE HAS NOT PRODUCED THE SH ARE APPLICANTS DESPITE BEING ASKED FOR BY THE ASSESSING OFFICER. THE NOTICES IS SUED U/S 133(6) REMAINED UNCOMPLIED WITH. EVEN THE POSTAL AUTHORITIES HAD R ETURNED THE LETTERS ISSUED BY THE ASSESSING OFFICER WITH THE REMARKS NO SUCH PER SON OR LEFT WITHOUT ADDRESS. FURTHER, THE LD. CIT(A) HAS GIVEN A FIND ING THAT THESE COMPANIES ARE MERE PAPER COMPANIES CREATED TO ROUTING THE UNACCOU NTED MONEY. THEREFORE, MERELY BY FURNISHING CERTAIN DOCUMENTS THE ASSESSEE CANNOT ABSOLVE ITSELF FROM THE ONUS CAST ON IT. HE ACCORDINGLY SUBMITTED THAT THE ORDER PASSED BY THE LD. CIT(A) BE UPHELD AND THE APPEAL FILED BY THE ASSESS EE BE DISMISSED. 9. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE LD. CIT (A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSEE, DURING THE IMPUGN ED ASSESSMENT YEAR, HAS RECEIVED FRESH SHARE CAPITAL OF RS.19,00,000/- AND SHARE PREMIUM OF RS.76,00,000/- FROM THE THREE COMPANIES, THE DETAIL S OF WHICH ARE ALREADY GIVEN IN THE PRECEDING PARAGRAPHS. WE FIND THE ASSESSING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, HAD SPECIFICALLY ASKED T HE ASSESSEE TO PRODUCE THE 6 ITA NO.1619/DEL/2013 ABOVE THREE PARTIES AND CERTAIN OTHER DETAILS WHICH THE ASSESSEE FAILED TO DO. EVEN THE NOTICES ISSUED U/S 133(6) WERE RETURNED UN SERVED BY THE POSTAL AUTHORITIES WITH THE REMARK NO SUCH PERSON OR LE FT WITHOUT ADDRESS IN TWO CASES AND IN ANOTHER CASE THERE WAS NO COMPLIANCE F ROM THE SAID PARTY. UNDER THESE CIRCUMSTANCES, THE VERY IDENTITY OF THE SHARE APPLICANT COMPANIES ARE DOUBTFUL. THE VARIOUS DECISIONS RELIED ON BY THE L D. COUNSEL FOR THE ASSESSEE, IN OUR OPINION, CANNOT BE ACCEPTED AS A PRECEDENT TO A CCEPT THE IDENTITY OF THE THREE SHAREHOLDER COMPANIES ESPECIALLY WHEN THE ASSESSEE HAS NOT TAKEN ANY STEPS TO PRODUCE THE DIRECTORS OF THE ABOVE COMPANIES BEFORE THE ASSESSING OFFICER. HOWEVER, CONSIDERING THE TOTALITY OF THE FACTS OF T HE CASE AND IN THE INTEREST OF JUSTICE, WE DEEM IT PROPER TO RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GIVE ONE MORE OPPORTUNI TY TO THE ASSESSEE TO SUBSTANTIATE WITH EVIDENCE TO HIS SATISFACTION REGA RDING THE IDENTITY AND CREDITWORTHINESS OF THE THREE COMPANIES AND THE GEN UINENESS OF THE TRANSACTIONS. THE ASSESSEE IS HEREBY DIRECTED TO PRODUCE THE DIRE CTORS OF THE ABOVE THREE COMPANIES BEFORE THE ASSESSING OFFICER FOR ESTABLIS HING THE IDENTITY AND CREDITWORTHINESS OF THESE COMPANIES AND GENUINENESS OF THE TRANSACTIONS. THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. WE HOLD AND DIRECT 7 ITA NO.1619/DEL/2013 ACCORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE AR E ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME HEA RING ITSELF I.E. ON THIS 27 TH DAY OF DECEMBER, 2017. SD/- SD/- (SUCHITRA KAMBLE) (R. K. P ANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 27-12-2017. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI