Integrated Database & Research Centre Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 1679/DEL/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6570 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC 1
• Next Hearing Date: 24-10-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 25-03-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K JAIN
• Assessee Lawyers: SUBODH GUPTA
• Keywords: Fair market value
• Section: 133(6); 131; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-1, NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER ITA NO.1679/DEL/2015 ASSESSMENT YEAR : 2004-05 INTEGRATED DATABASE & RESEARCH CENTRE PVT. LTD., F 13, 2 ND FLOOR, VIJAY CHOWK, LAXMI NAGAR, NEW DELHI VS. ITO, WARD 11(4), NEW DELHI PAN : AAACI 2994 Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUBODH GUPTA, CA RESPONDENT BY : SHRI S. K. JAIN, SR. DR DATE OF HEARING : 24-10-2016 DATE OF PRONOUNCEMENT : 01-12-2016 O R D E R PER S.V. MEHROTRA, A.M : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 23.01.2015 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-4, NEW DELHI, U/S 143(3)/147 OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) RELATING TO A.Y. 2004-05. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA D FILED RETURN OF INCOME DECLARING INCOME OF RS.9,490/-. SUBSEQUENTLY, THE ASSESSING OFFICER RECEIVED INFORMATION FROM THE OFFICE OF DIT(INV.) T HAT THE ASSESSEE COMPANY HAD INTRODUCED UNACCOUNTED MONEY IN ITS BOOKS WITHO UT PAYING TAX WITH THE HELP OF ENTRY OPERATORS. IT WAS INFORMED THAT ASSE SSEE COMPANY HAD 2 ITA NO.1679/DEL/2015 RECEIVED RS.3,00,000/- FROM M/S BASANT AGENCIES PVT . LTD. AND RS.4,00,000/- FROM M/S RIGHT CHOICE CONSTRUCTION PV T. LTD.. ACCORDINGLY, ASSESSMENT WAS REOPENED U/S 148 OF THE ACT. IN THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS INFORMED BY THE ASSESSEE COMPAN Y THAT IT HAD ALLOTTED 400 EQUITY SHARES OF FACE-VALUE OF RS.100/- AT A PR EMIUM OF RS.900/- TO M/S RIGHT CHOICE CONSTRUCTION PVT. LTD. AND 300 SHARES OF FACE-VALUE OF RS.100/- AT A PREMIUM OF RS.900/- TO M/S BASANT AGE NCIES PVT. LTD.. THE ASSESSING OFFICER HAD ISSUED SUMMONS U/S 131 OF THE ACT TO M/S RIGHT CHOICE CONSTRUCTION PVT. LTD. AND M/S BASANT AGENCI ES PVT. LTD. TO PRODUCE/ FURNISH DOCUMENTS IN RESPECT OF IDENTIFICA TION, COPY OF BANK STATEMENT AND DOCUMENTARY EVIDENCE OF SOURCE OF INV ESTMENT. SINCE BOTH THE PARTIES DID NOT COMPLY WITH THE REQUIREMENTS OF SUMMONS ISSUED U/S 131, THE ASSESSING OFFICER CONCLUDED THAT THE IDENT ITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS WERE NOT PROVED AND ADDED THE AMOUNT OF RS.7,00,000/- ON ACCOUNT OF UNDISCLOSED CASH CREDIT . THE ASSESSEE COMPANY FILED AN APPEAL BEFORE THE LD. CIT(A), WHO DISMISSE D THE ASSESSEES APPEAL. THEREAFTER, ASSESSEE PREFERRED AN APPEAL BEFORE THE ITAT, WHO SET-ASIDE THE MATTER BACK TO THE FILE OF ASSESSING OFFICER WITH D IRECTION TO EXAMINE AS TO WHETHER THE ASSESSEE COULD RECEIVE SHARE PREMIUM OF RS.900/- PER SHARE AGAINST FACE-VALUE OF RS.100/- PER SHARE. THE ITAT ALSO DIRECTED TO MAKE NECESSARY ENQUIRIES FROM ROC IN THIS REGARD. IN TH E BACKDROP OF THESE FACTS, 3 ITA NO.1679/DEL/2015 THE ASSESSING OFFICER STARTED FRESH ASSESSMENT PROC EEDINGS AND SIMULTANEOUSLY REQUESTED THE OFFICE OF ROC, VIDE LE TTER DATED 27.02.2012, AS TO WHETHER THE ASSESSEE COULD RECEIVE SHARE PREMIUM OF RS.900/- PER SHARE AGAINST FACE-VALUE OF RS.100/- PER SHARE ON THE BAS IS OF THE FINANCIAL STATEMENT OF THE ASSESSEE COMPANY FOR ASSESSMENT YE ARS 2002-03 AND 2003-04. OFFICE OF THE ROC DID NOT GIVE ANY INFORM ATION POINTING OUT THAT IT WAS NOT TO CARRY OUT ANY ANALYSIS. IT WAS, FURT HER, POINTED OUT BY ROC THAT AS PER MINISTRY CIRCULAR NO.3/46/11-CL-2 DATED 13.0 7.2011 THE MATTER WAS REFERRED TO REGIONAL DIRECTOR (NR) MINISTRY OF CORP ORATE AFFAIRS, NOIDA. IN THE MEANTIME, THE ASSESSEE COMPANY FURNISHED CONFIR MATION OF M/S BASANT AGENCIES PVT. LTD. AND M/S RIGHT CHOICE CONSTRUCTIO N PVT. LTD. BUT EXPRESSED ITS INABILITY IN FURNISHING BANK STATEMEN T FOR THE RELEVANT ASSESSMENT YEAR. THEREFORE, THE ASSESSING OFFICER DEPUTED INSPECTOR TO CONDUCT NECESSARY ENQUIRY ABOUT THE PHYSICAL PRESEN CE OF THE COMPANIES M/S BASANT AGENCIES PVT. LTD. AND M/S RIGHT CHOICE CONSTRUCTION PVT. LTD. AT 8/94, SECTOR-15, ROHINI, DELHI. THE ASSESSING O FFICER HAS REPRODUCED THE INSPECTORS REPORT WHEREIN HE, INTER-ALIA, STATED THAT RESIDENT LAND-LADY DID TELL THAT THE ACCOMMODATION WAS RESIDENTIAL FLATS A ND NO COMMERCIAL ACTIVITY WAS BEING CARRIED OUT FROM THERE AND SHE HAD NEVER HEARD THE NAMES OF M/S BASANT AGENCIES PVT. LTD. AND M/S RIGHT CHOICE CONS TRUCTION PVT. LTD.. 4 ITA NO.1679/DEL/2015 UNDER THESE CIRCUMSTANCES, THE ASSESSING OFFICER RE QUIRED THE ASSESSEE TO FURNISH/EXPLAIN THE FOLLOWING DETAILS :- 1. PLEASE PRODUCE DIRECTOR OF M/S RIGHT CHOICE CON STRUCTIONS PVT. LTD. AND M/S BASANT AGENCY PVT. LTD. ALONGWITH THEIR PERMANE NT ACCOUNT NUMBER. 2. ITRS FILED BY THEM ALONGWITH COMPUTATION OF INCO ME FOR THE A.Y. 2004-05. 3. PROOF OF SHARE ALLOTTED TO THEM BY YOU AND SAME IS REFLECTED BY THEM IN THEIR BALANCE SHEET AS INVESTMENT. 3. THE ASSESSEE COMPANY IN ITS REPLY EXPRESSED ITS INABILITY TO PRODUCE THE DIRECTORS OF BOTH THE COMPANIES AS IT HAD NO IN FORMATION OF WHERE ABOUT OF THE DIRECTORS. THE ASSESSEE ALSO RELIED ON THE DECISION IN THE CASE OF M/S LOVELY EXPORTS LTD. AND DEVINE LEASING & FINANCE LT D., FOR THE PROPOSITION THAT SHARE APPLICATION MONEY COULD NOT BE TREATED A S UNDISCLOSED INCOME IN THE HANDS OF ASSESSEE-COMPANY. IN THE BACKDROP OF THESE FACTS, THE ASSESSING OFFICER CONFIRMED THE ADDITION OF RS.7,00 ,000/- RELYING ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS. HIMALAYA INTERNATIONAL LTD.. HE ALSO RELIED ON THE DECISION IN THE CASES OF CIT VS. RATHOD, 212 ITR 390 (RAJ) AND ROSHAN DI HATTI VS. C IT, 107 ITR 938. HE OBSERVED THAT THE ONUS WAS ON THE ASSESSEE COMPANY TO SUBSTANTIATE ITS CLAIM OF ACTIVITY OF BUSINESS OF BEING CARRIED OUT BY THE SE COMPANIES VIZ. M/S BASANT AGENCIES PVT. LTD. AND M/S RIGHT CHOICE CONS TRUCTION PVT. LTD.. THE LD. CIT(A) DISMISSED THE ASSESSEES APPEAL FOR THE FOLLOWING REASONS :- 5 ITA NO.1679/DEL/2015 (A) INSPITE OF CORRESPONDENCE DONE WITH MINISTRY OF CORPORATE AFFAIRS AS NOTED IN PARA 5.2 OF HIS ORDER, NO CLARI FICATION COULD BE OBTAINED. (B) HE POINTED OUT THAT ABSENCE OF THIS INFORMATION IN ITSELF COULD NOT BE CONSIDERED AS A HURDLE IN DECIDING THE ISSUE ON THE BASIS OF WELL-SETTLED CONDITIONS LAIDOUT THROUGH SEVERAL JUD ICIAL DECISIONS FOR DECIDING CASH CREDIT U/S 68 OF THE ACT. HE POINTED OUT THAT THIS WAS AN ADDITIONAL INFORMATION DIRECTED BY TRIBUNAL FOR EXA MINING THE BONA- FIDE OF THE TRANSACTION AND NOT AS THE EXCLUSIVE LE GAL YARDSTICK TO EXPLAIN CASH CREDIT U/S 68 OF THE ACT. (C) APART FROM THE INSPECTORS REPORT IN THE FIRST ROUND AS WELL AS IN THE SECOND ROUND POINTING OUT THAT NO SUCH PARTY WA S THERE AT THE GIVEN ADDRESS, THE LD. CIT(A) HAD ISSUED SUMMONS U/ S 131 AT THE ADDRESS FURNISHED BY THE ASSESSEE. HOWEVER, THE LE TTER TO M/S RIGHT CHOICE CONSTRUCTION PVT. LTD., 890 TANDON MARKET, K UCHA KABILA ATTAR, CHANDNI CHOWK, DELHI-6 CAME BACK WITH THE RE MARK NO SUCH FIRM, WHILE THE SUMMON TO M/S BASANT AGENCIES PVT. LTD. WAS RETURNED WITH THE REMARKS LEFT. (D) THE DIRECTORS OF COMPANIES WERE NOT PRODUCED. THE ASSESSEE PLEADED THAT BOTH THE CASH CREDITORS HAD SOLD OUT T HE INVESTMENTS IN THE ASSESSEE COMPANY AND SUBMITTED THAT AS BOTH THE SE COMPANIES WERE IN THE PROCESS OF BEING STRUCK OFF FROM MOCA R ECORDS, THE CASE MAY BE DECIDED ON THE BASIS OF AVAILABLE EVIDENCES. (E) THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMEN T PROCEEDINGS HAD CARRIED OUT ENQUIRY FROM THE BANKS AND ASCERTAI NED THAT THE AFORESAID TWO COMPANIES BEFORE ISSUING CHEQUE TO TH E ASSESSEE 6 ITA NO.1679/DEL/2015 COMPANY FOR SHARE APPLICATION MONEY HAD RECEIVED TH E EQUIVALENT AMOUNTS IN CASH ON THE SAME DAY OR JUST A DAY OR TW O PRIOR TO THAT. HE POINTED OUT THAT THE ENQUIRY WITH THE CASH CREDITOR S U/S 133(6) COULD HAVE ELICITED FURTHER INFORMATION ABOUT THE SOURCE OF SUCH CASH CREDIT, HOWEVER, IN THE ABSENCE OF THE ASSESSEE PRODUCING T HE CONCERNED DIRECTORS OF THE CASH CREDITORS, THE ENQUIRY COULD NOT FURTHER PROCEEDS. (F) INVESTIGATION WING HAD CARRIED OUT INVESTIGATIO N OF CERTAIN PERSONS, WHO WERE FOUND TO BE PROVIDING ACCOMMODATI ON ENTRIES IN THE FORM OF CHEQUES ON RECEIPT OF CASH THROUGH VARI OUS COMPANIES THROUGH WHICH CHEQUE AMOUNT WAS GIVEN TO THE ULTIMA TE BENEFICIARY. (G) THE ASSESSEES COMPANY NAME WAS FOUND IN THE LI ST OF SUCH COMPANIES AND THE AMOUNT OF RECEIPT OF SUCH CASH CR EDIT ALONG WITH DATE AND NAME OF SHARE APPLICANTS ALSO DULY TALLIED . (H) THE ASSESSEES CASE WAS HELD TO BE COVERED BY T HE DECISION IN THE CASE OF NOVA FINLEASE AND PROMOTERS (P) LTD., 3 42 ITR 169 (DELHI-HC) AS BY CARRYING OUT ENQUIRY AT THE ADDRES SES FURNISHED BY THE ASSESSEE AND ON FINDING NO SUCH CASH CREDITORS AT SUCH ADDRESSES, THE ASSESSING OFFICER HAD DISCHARGED THE ONUS, WHIC H STANDS SHIFTED TO THE ASSESSEE. 4. LD. COUNSEL FOR THE ASSESSEE REFERRED TO PAGE 12 7 128 OF PAPER BOOK AND POINTED OUT THAT SHARE PREMIUM WAS RECEIVED FRO M 9 COMPANIES AND THE SAME WAS ACCEPTED IN THE CASE OF 7 COMPANIES. LD. COUNSEL POINTED OUT THAT SECTION 56(VIIB) HAS BEEN INSERTED W.E.F. 01.04.201 3 WHEREIN IT HAS BEEN LAID DOWN THAT IF CONSIDERATION FOR ISSUE OF SHARES EXCE EDS THE FACE-VALUE OF SUCH 7 ITA NO.1679/DEL/2015 SHARES THE AGGREGATE CONSIDERATION RECEIVED AS EXCE EDS THE FAIR MARKET VALUE OF THE SHARES WOULD BE TREATED AS INCOME. LD. COUN SEL FURTHER REFERRED TO PAGE 4 OF THE PAPER BOOK WHEREIN THE SUBMISSIONS MA DE BEFORE LD. CIT(A) ARE CONTAINED AND POINTED OUT THAT AS PER SECTION 7 8 OF THE COMPANIES ACT, 1956, SHARES COULD BE ISSUED AT PREMIUM BY COMPANY. LD. COUNSEL FURTHER REFERRED TO PAGE 133 134 OF PAPER BOOK WHEREIN TH E BALANCE-SHEET AND PROFIT & LOSS ACCOUNT OF M/S RIGHT CHOICE CONSTRUCT ION PVT. LTD. FOR ASSESSMENT YEAR 2002-03 IS CONTAINED. HE ALSO REFE RRED TO PAGE 137 138 OF PAPER BOOK WHEREIN THE BALANCE-SHEET AND PROFIT & LOSS ACCOUNT FOR ASSESSMENT YEAR 2002-03 OF M/S BASANT AGENCIES PVT. LTD. IS CONTAINED. LD. COUNSEL REFERRED TO PAGE 76 OF PAPER BOOK WHERE IN THE ANNUAL REPORT FILED BEFORE ROC IS CONTAINED AND LIST OF SHARE-HOL DERS AS ON 25.09.2005 AT PAGE 82 IS CONTAINED. HE POINTED OUT THAT BOTH THE SHARE-HOLDER COMPANIES VIZ. M/S BASANT AGENCIES PVT. LTD. AND M/S RIGHT CH OICE CONSTRUCTION PVT. LTD. HAVE TRANSFERRED THE SHARES IN FAVOUR OF SIL V ERLINE AGRO INDUSTRIES LIMITED AND AARTHIK FINANCE & LEASING PVT. LTD.. L D. COUNSEL POINTED OUT THAT NOTICE WAS ISSUED U/S 148 IN MARCH 2007 BY WHI CH DATE BOTH THE SHARE- HOLDERS HAD ALREADY TRANSFERRED THEIR SHARES. THER EFORE, IT WAS DIFFICULT TO LOCATE THEM. 5. LD. DR REFERRED TO ASSESSMENT ORDER AND POINTED THAT IT WAS CLEARLY NOTED BY THE ASSESSING OFFICER THAT THE ADDRESS OF BOTH THE COMPANIES WAS 8 ITA NO.1679/DEL/2015 FAKE AS WAS CORROBORATED BY THE STATEMENT OF LAND-L ADY. NO BANK ACCOUNT WAS PRODUCED BY ASSESSEE AND THE DIRECTORS WERE NOT PRODUCED. HE RELIED UPON THE FINDINGS OF LD. CIT(A) NOTED EARLIER. 6. LD. COUNSEL IN THE REJOINDER SUBMITTED THAT DATE OF INSPECTORS VISIT WAS 11 TH JUNE, 2013 AND AS PER THE DETAILS OF BOTH THE COMP ANIES ON MOCA THEY ARE UNDER PROCESS OF BEING STRUCK OFF AS IT EV IDENT FROM PAGE 41 42 OF THE PAPER BOOK. HE SUBMITTED THAT THERE IS NO REST RICTION OF RESIDENTIAL PREMISES BEING USED AS COMPANY REGISTERED OFFICE AD DRESS. 7. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND HAVE PERUSED THE RECORD OF THE CASE. THIS IS THE SECOND ROUND OF PROCEEDINGS IN WHICH ASSESSEE WAS PROVIDED OPPORTUNITY TO AGAIN SU BSTANTIATE ITS CLAIM OF ITS SHARES BEING ACQUIRED BY M/S BASANT AGENCIES PV T. LTD. AND M/S RIGHT CHOICE CONSTRUCTION PVT. LTD. AT A PREMIUM OF RS.90 0/- EACH. IN THE SECOND ROUND OF PROCEEDINGS, THE ASSESSEE HAS TAKEN A PLEA THAT ON ACCOUNT OF CONSIDERABLE TIME GAP AND ON ACCOUNT OF BOTH THE CO MPANIES BEING UNDER THE PROCESS OF BEING STRUCK OFF BY ROC, ASSESSEE WAS NO T IN A POSITION TO PRODUCE THE DIRECTORS OF BOTH THE COMPANIES TO ESTA BLISH THE SOURCE OF AVAILABILITY OF CASH WITH THESE TWO COMPANIES WHICH WAS UTILIZED TO ACQUIRE THE SHARES OF ASSESSEE COMPANY AT PREMIUM. THE TRI BUNAL IN FIRST ROUND OF PROCEEDINGS HAD ALSO POINTED OUT THAT INFORMATION C OULD BE OBTAINED FROM ROC IN THIS REGARD WHICH HAS ELABORATELY BEEN CONSI DERED BY LD. CIT(A) IN 9 ITA NO.1679/DEL/2015 HIS ORDER AS TO HOW THE SAME COULD NOT BE MADE AVAI LABLE TO THE DEPARTMENT. AT PAGE 132 OF PAPER BOOK, THE COPY OF RETURN OF M/ S RIGHT CHOICE CONSTRUCTION PVT. LTD. IS CONTAINED WHEREIN COPY OF RETURN OF INCOME IS AVAILABLE FOR ASSESSMENT YEAR 2002-03. THE RETURNE D INCOME SHOWN IS AT RS.6,033/-. AS REGARDS M/S BASANT AGENCIES PVT. LT D. THE COPY OF RETURN OF INCOME FOR ASSESSMENT YEAR 2002-03 IS CONTAINED AT PAGE 136 OF PAPER BOOK WHEREIN RETURNED INCOME HAS BEEN SHOWN AT RS.6,070/ -. THIS CLEARLY SHOWS THAT BOTH THE COMPANIES HAD MEAGER INCOMES TO THEIR CREDIT. AS PER THE BALANCE SHEET OF M/S RIGHT CHOICE CONSTRUCTION PVT. LTD. THE RESERVE AND SURPLUS WAS AT RS.4081.18 AND IN THE CASE OF M/S BA SANT AGENCIES PVT. LTD. THE RESERVE AND SURPLUS WAS AT RS.14,359/-. APART FROM THAT THERE ARE UNSECURED LOANS AND CURRENT LIABILITIES AND, HENCE, IT IS EVIDENT THAT THE NET WORTH WAS NOT SUFFICIENT TO ACQUIRE SHARES AT SUCH HIGH PREMIUM FOR NO REASON OR PURPOSE BEING DEMONSTRATED. IT IS WELL-S ETTLED LAW THAT ONUS OF SUBSTANTIATING THE FACTS, AS ALLEGED BY ASSESSEE, S QUARELY LIES ON ASSESSEE AND NOT ON ASSESSING OFFICER. IT WAS FOR THE ASSESSEE TO SUBSTANTIATE ITS CLAIM THAT THE SHARES WERE WORTH SO MUCH THAT IT COULD FE TCH PREMIUM OF RS.900/-. MOREOVER, IT WAS FOR THE ASSESSEE TO ESTABLISH THAT THE TWO COMPANIES HAD SUFFICIENT NET WORTH TO ACQUIRE SHARES. SINCE ASSE SSEE HAS FAILED ON ALL FOURS, THEREFORE, MERE FILING OF CONFIRMATION FROM THESE T WO PARTIES WAS OF LITTLE SIGNIFICANCE. 10 ITA NO.1679/DEL/2015 8. LD. COUNSEL HAS SUBMITTED THAT SHARES WERE ISSUE D AT PREMIUM TO OTHER CONCERNS ALSO FOR WHICH ASSESSING OFFICER HAD NOT M ADE ANY ADDITION. IN THIS REGARD, I MAY POINT OUT THAT IN THE SECOND ROU ND OF PROCEEDINGS TRIBUNAL HAS TO EXAMINE THE ISSUE IN THE LIGHT OF OBSERVATIO NS MADE IN FIRST ROUND OF PROCEEDINGS. MOREOVER, IT IS NOT NECESSARY THAT BE CAUSE ASSESSING OFFICER ACCEPTED THE CREDIT WORTHINESS IN CASE OF OTHER SHA REHOLDER-COMPANIES, HE SHOULD HAVE ACCEPTED IN CASE OF THE TWO IMPUGNED SH AREHOLDERS ALSO. I, THEREFORE, DO NOT FIND ANY FORCE IN THIS SUBMISSION OF ASSESSEE. 9. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 01 ST DAY OF DECEMBER, 2016. SD/- SD/- (SUDHANSHU SRIVASTAVA) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 01-12-2016. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT; 2) THE RESPONDENT; 3) THE CIT; 4) THE CIT(A)-, NEW DELHI; 5) THE DR, I.T.A.T., NEW DELHI; BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI