ACIT, New Delhi V. M/s. Gulshan Polyols Ltd., New Delhi

ITA 1644/DEL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82075 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 15-10-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 09-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Assessee Lawyers: MOHMMAD SHAHID
• Keywords: Unexplained cash credit; Reasonable cause; Accommodation entries
• Section: 68; 148

Judgement Text

ITA NO.1644/DEL/2012 ASSTT.YEAR: 2003-04 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES C NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER ITA NO. 1644/DEL/2012 ASSTT.YEAR: 2003-04 ACIT, VS GULSHAN POLYOLS LTD., CIRCLE-12(1), G -81, PREET VIHAR, NEW DELHI. NEW DELHI-110092 (PAN: AABCG3954F) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SATPAL SINGH, SR. DR RESPONDENT BY: SHRI MOHMMAD SHAHID, CA O R D E R PER CHANDRAMOHAN GARG, J.M. THIS APPEAL OF THE REVENUE HAS BEEN DIRECTED AGAIN ST THE ORDER OF THE CIT(A)-XV, NEW DELHI DATED 31.1.2012 IN APPEAL NO.2 43/10-11/CIT(A)-XV FOR AY 2003-04. 2. THE REVENUE HAS RAISED ONLY ONE GROUND IN THIS A PPEAL WHICH READS AS UNDER:- 1. WHETHER LD. CIT(A) WAS CORRECT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN DELETING TH E ADDITION/DISALLOWANCE OF RS.25,00,000/- MADE BY THE AO ON ACCOUNT OF SHARE CAPITAL/SHARE APPLICATION MONEY. ITA NO.1644/DEL/2012 ASSTT.YEAR: 2003-04 2 3. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL ARE THAT INFORMATION WAS RECEIVED FROM THE INVESTIGATION WING THAT THE ASSES SEE HAS TAKEN ACCOMMODATION ENTRIES FROM CERTAIN ENTRY OPERATORS AND HAS INTRODUCED RS.25 LAKH IN THE GARB OF SHARE CAPITAL FROM THREE DIFFER ENT CORPORATE ENTITIES. THE AO ISSUED NOTICE U/S 148 OF THE ACT FOR REOPENING OF A SSESSMENT ON 22.3.2010 AND OBJECTIONS OF THE ASSESSEE AGAINST THE SAID NOTICE WERE DISMISSED BY THE AOS ORDER DATED 24.12.2010. SUBSEQUENTLY, THE AO PROCE EDED TO FRAME REASSESSMENT AND THE AO MADE ADDITION OF RS.25 LAKH TO THE INCOME OF THE ASSESSEE, TREATING THE SHARE APPLICATION MONEY AS U NEXPLAINED CREDIT U/S 68 OF THE INCOME TAX ACT, 1961. THE AGGRIEVED ASSESSEE P REFERRED AN APPEAL BEFORE THE CIT(A) WHICH WAS ALLOWED BY PASSING THE IMPUGNE D ORDER. NOW, THE AGGRIEVED REVENUE IS BEFORE THIS TRIBUNAL WITH THE SOLE GROUND AS REPRODUCED HEREINABOVE. 4. APROPOS THE ONLY GROUND RAISED BY THE REVENUE, W E HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CAREFULLY PERUSED THE RELEVAN T MATERIAL PLACED ON RECORD INCLUDING REASSESSMENT ORDER, IMPUGNED ORDER OF THE CIT(A), PAPER BOOK FILED BY THE ASSESSEE SPREAD OVER 87 PAGES AND RATIO OF T HE DECISIONS RELIED BY BOTH THE PARTIES. LD. DR SUBMITTED THAT THE AO REOPENED THE ASSESSMENT BY WAY OF ISSUING NOTICE U/S 148 OF THE ACT AND OBJECTIONS TO THE REOPENING OF THE ASSESSEE WERE FOUND UNSUSTAINABLE. THE DR FURTHER CONTENDED THAT THE AO RIGHTLY OBSERVED THAT THE ENTRY OPERATORS HAVE ALREADY GIVE N STATEMENT UNDER OATH TO THE ITA NO.1644/DEL/2012 ASSTT.YEAR: 2003-04 3 INCOME TAX AUTHORITIES THAT THEY ARE ENTRY PROVIDER S AND HAVE RECEIVED CASH FROM THE BENEFICIARIES BEFORE ISSUING CHEQUES TO THE RES PECTIVE ENTITIES, THEREFORE, THE AO WAS RIGHT IN MAKING ADDITION OF RS.25 LAKH TO TH E INCOME OF THE ASSESSEE, TREATING THE AMOUNT RECEIVED IN THE GARB OF SHARE C APITAL AS UNEXPLAINED CREDIT U/S 68 OF THE ACT. THE DR FURTHER CONTENDED THAT T HE CIT(A) WAS NOT JUSTIFIED IN DELETING THE IMPUGNED ADDITION WITHOUT ANY JUSTI FIED AND REASONABLE CAUSE. THE DR VEHEMENTLY CONTENDED THAT THE CIT(A) GROSSLY ERRED IN HOLDING THAT THE TRANSACTION REGARDING SHARE APPLICATION MONEY RECEI VED BY THE ASSESSEE WAS A GENUINE TRANSACTION AND THE SAME WAS NOT ACCOMMODAT ION ENTRY. THE DR FINALLY PRAYED THAT THE IMPUGNED ORDER MAY BE SET A SIDE BY RESTORING THAT OF THE AO. 5. REPLYING TO THE ABOVE, LD. COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED THAT WHEN THE ASSESSEE HAS DISCHARGED ITS INITIAL O NUS OF ESTABLISHING THE BONA FIDES OF TRANSACTION BY WAY OF SUBMITTING IDENTITY OF THE SUBSCRIBERS, THEIR ADDRESSES, PAN NOS., ASSESSMENT PARTICULARS ETC. AN D WHEN THE ASSESSEE HAS DISCHARGED THE INITIAL ONUS TO ESTABLISH THE BONAFI DES OF THE TRANSACTION, THEN THE AO WAS NOT JUSTIFIED IN IGNORING VARIOUS EVIDENCES SUBMITTED BY THE ASSESSEE. LD. COUNSEL FURTHER CONTENDED THAT THE AO KEPT ASID E ALL RELEVANT EVIDENCE DETAILS AND EXPLANATION OF THE ASSESSEE AND SIMPLY RELIED ON THE STATEMENT OF THE SO-CALLED ENTRY PROVIDERS RECORDED BY THE INVESTIGA TION WING OF THE DEPARTMENT ON THE BACK OF THE ASSESSEE AND THE ASSESSEE WAS NO T PROVIDED DUE OPPORTUNITY ITA NO.1644/DEL/2012 ASSTT.YEAR: 2003-04 4 OF CROSS-EXAMINING THESE SO-CALLED ENTRY PROVIDERS. LD. COUNSEL VEHEMENTLY CONTENDED THAT THE AO TOOK A HYPER TECHNICAL APPROA CH IN REJECTING THE EVIDENCE AND EXPLANATION OF THE ASSESSEE AT THE THRESHOLD WI THOUT ANY EXAMINATION AND VERIFICATION AND THE AO WAS ALSO NOT JUSTIFIED IN M AKING THE ADDITION SIMPLY RELYING ON THE STATEMENT OF THE SO-CALLED ENTRY PRO VIDERS RECORDED BY THE INVESTIGATION WING ON THE BACK OF THE ASSESSEE. 6. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSION AND FACTUAL MATRIX OF THE CASE, WE OBSERVE THAT THE CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE BY FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS DIVINE LEASING & FINANCE LTD. (CC375/2008 DATED 21.1.08) . THE RELEVANT OPERATIVE PART OF THE IMPUGNED ORDER READS AS UNDER:- 7.10 HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. PRADEEP GUPTA 207 CTR 115, WHICH HAS ALSO BEEN RELI ED UPON BY THE DELHI ITAT IN THE RECENT JUDGEMENT IN THE CA SE OF BABITA GUPTA ITA NO. 2897/06, WHEREIN IT IS HELD TH AT IN THE FACTS OF THE CASE BEFORE US IT MAY BE SEEN THAT FRO M THE VERY BEGINNING LD AD HAD SHIFTED ENTIRE BURDEN UPON THE ASSESSEE AND NO MATERIAL WAS BROUGHT BY HIM TO PROVE HIS ALL EGATION THAT THE IMPUGNED AMOUNT REPRESENTED ASSESSEE COMPA NY'S UNDISCLOSED INCOME. THEREFORE, ON THIS GROUND ALONE THE ENTIRE ADDITION DESERVES TO BE DELETED AND MAY KINDLY BE H ELD SO. 7.11 IN VIEW OF THE FACTUAL POSITION AS WELL AS THE JUDICIAL PRONOUNCEMENT ON THE SUBJECT, DISCUSSED ABOVE, I AM OF THE CONSIDERED VIEW THAT THE APPELLANT HAS DISCHARGED T HE INITIAL ONUS OF ESTABLISHING THE BONA-FIDES OF THE TRANSACT IONS AND THE AO WAS NOT JUSTIFIED IN IGNORING VARIOUS EVIDENCES PROVIDED TO HIM BY THE APPELLANT. NOTHING ADVERSE HAS BEEN BROU GHT ON RECORD BY THE AO TO ESTABLISH THAT THE AMOUNT OF SH ARE APPLICATION MONEY OF RS. 25,00,000 LACS RECEIVED BY THE ITA NO.1644/DEL/2012 ASSTT.YEAR: 2003-04 5 APPELLANT FROM THE SAID PARTIES REPRESENTS ITS OWN UNDISCLOSED INCOME. IF THERE WAS DOUBT ABOUT THE SOURCE OF INVESTMENT O F THE SAID COMPANY, THEN ADDITIONS SHOULD HAVE BEEN MADE IN TH E CASE OF INVESTOR COMPANY AND NOT IN THE HANDS OF THE APPELL ANT COMPANY. THE APPELLANT HAS RELIED UPON THE DECISION OF HON'BLE SUPREME COURT IN CIT VS DIVINE LEASING & FINANCE LTD. (CC 375/2008) DATED 21/01/2008 WHEREIN IT WAS HELD - 'WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FO R THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEI VED BY THE ASSESSEE-COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, W HOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT, IS FREE TO PROCEED TO RE-OPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. 7.12 RELIANCE IN THIS REGARD IS ALSO PLACED ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. PON DY METAL AND ROLLING MILL PVT LTD (DELHI)(ITA NO. 788/2006) DATED 19.02.2007, WHEREIN THE HON'BLE COURT CONCURRED WIT H THE FINDINGS OF THE APPELLATE TRIBUNAL, DELHI BENCH IF' THAT ONCE THE IDENTITY OF THE INVESTOR HAS BEEN MANIFEST AND IS PROVED, THE INVESTMENT CANNOT BE SAID TO BE THE UNDISCLOSED INC OME OF THE ASSESSEE. AT BEST, THE AMOUNT COULD BE ADDED IN THE HANDS OF THE INVESTOR BUT IT CERTAINLY COULD NOT BE TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE. THE APPEAL FILED AGAINST TH E SAID DECISION, WAS DISMISSED BY THE HON'BLE SUPREME COUR T IN C.C. 12860/2007 DATED 08/01/2008. 8.13 IN THE LIGHT OF THE ABOVE DISCUSSION, I AM INC LINED TO AGREE WITH THE ARGUMENTS AND EVIDENCES PROVIDED BY THE AP PELLANT TO SUBSTANTIATE THAT THE TRANSACTION REGARDING SHARE A PPLICATION MONEY RECEIVED BY IT WAS GENUINE TRANSACTIONS AND T HE SAME WAS NOT ACCOMMODATION ENTRY. I ALSO DO NOT FIND ANY EVIDENCE COLLECTED BY THE AO WHICH COULD PROVE OTHERWISE. AC CORDINGLY, THE AO WAS NOT JUSTIFIED IN TREATING THE AMOUNT OF SHARE APPLICATION MONEY RECEIVED BY THE APPELLANT AS ITS UNDISCLOSED INCOME. IN VIEW OF OUR AFORESAID DISCUSSION, I DELETE THE A DDITION OF 25,00,000, MADE BY THE AO UNDER SECTION 68 OF THE I NCOME TAX ACT, 1961. ITA NO.1644/DEL/2012 ASSTT.YEAR: 2003-04 6 7. IN VIEW OF ABOVE, WE ARE INCLINED TO HOLD THAT T HE AO WAS NOT JUSTIFIED IN REJECTING THE EVIDENCE AND DETAILS SUBMITTED BY THE ASSESSEE WITHOUT ANY FURTHER VERIFICATION AND EXAMINATION OF THE SAME. WE ALSO OBSERVE THAT THE AO MADE ADDITION BY ACCEPTING THE STATEMENT OF THE ALLEGED ENTRY PROVIDERS RECORDED BY THE INVESTIGATION WING ACCEPTING THE SAME AS GOSPEL TRUTH WITHOUT AFFORDING OPPORTUNITY OF CROSS-EXAMINATION TO THE ASSESSEE. AT THIS JUNCTURE, WE RESPECTFULLY TAKE GUIDANCE FROM THE DECISION OF HON BLE APEX COURT IN THE CASE OF CIT VS DIVINE LEASING AND FINANCE LTD. (SUPRA) W HEREIN DISMISSING THE SPECIAL WRIT PETITION OF THE DEPARTMENT, THEIR LORD SHIPS HELD THAT IF SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPA NY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENT IN AC CORDANCE WITH LAW. UNDER THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE IN AGREEMENT WITH THE CONCLUSION OF THE CIT(A) THAT ONCE THE IDENTITY OF THE INVESTOR HAS BEEN MANIFESTED AND PROVED BY THE ASSESSEE BY SUBMITTING THEIR NAMES, ADDRESSES, PAN NOS. AND OTHER RELEVANT DETAILS, THEN THE CAPIT AL RECEIPT OF SHARE APPLICATION MONEY CANNOT BE SAID TO BE THE UNDISCLOSED INCOME O F THE ASSESSEE AND ADDITION U/S 68 OF THE ACT IS NOT SUSTAINABLE. HOWEVER, THE AO IS FREE TO PROCEED TO REOPEN THE INDIVIDUAL ASSESSMENTS OF THE RESPECTIVE PERSONS WHO PROVIDED SHARE CAPITAL MONEY. ITA NO.1644/DEL/2012 ASSTT.YEAR: 2003-04 7 8. ACCORDINGLY, WE HOLD THAT THERE IS NO AMBIGUITY, PERVERSITY OR ANY OTHER VALID REASON TO INTERFERE WITH THE IMPUGNED ORDER A ND WE UPHOLD THE SAME. 9. IN THE RESULT, SOLE GROUND OF THE REVENUE BEING DEVOID OF MERITS IS DISMISSED AND RESULTANTLY, THE APPEAL OF THE REVENU E IS ALSO DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.11.2014. SD/- SD/- (G.D. AGRAWAL) (CHANDRAMOHAN GARG) VICE PRESIDENT JUDICIAL MEMBER DT. 28TH NOVEMBER, 2014 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. C.I.T. 5. DR BY ORDER ASSTT.REGISTRAR