ITO, New Delhi V. M/s Fair Finvest Ltd., New Delhi

ITA 1795/DEL/2011

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7071 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-10-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 13-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: D K JAIN
• Keywords: Accommodation entries
• Section: 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : B : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO.1795/DEL/2011 ASSESSMENT YEAR : 2002-03 ITO, WARD 11 (2), ROOM NO.321, CR BUILDING, NEW DELHI. VS. FAIR FINVEST LTD., 212, JAINA TOWER-I, DISTRICT CENTRE, JANAK PURI, NEW DELHI. PAN : AAAF0324M (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI D.K. JAIN, CA REVENUE BY : SHRI ROHIT GARG, CA ORDER PER I.P. BANSAL, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIRECT ED AGAINST THE ORDER PASSED BY THE CIT (A) DATED 7 TH FEBRUARY, 2011 FOR ASSESSMENT YEAR 2002-03. THE GROUNDS OF APPEAL READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, TH E CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.45,00,000 /- ON ACCOUNT OF SHARE APPLICATION MONEY UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. 2. THE CIT (A) HAS ERRED IN IGNORING THE FINDINGS U/ S 68 RECORDED BY THE A.O. IN THE ASSESSMENT ORDER WITH RESPE CT TO THE CREDIT WORTHINESS AND IDENTITY OF CREDITORS AND GENUIN ENESS OF THE TRANSACTIONS. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND A NY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. ITA NO.1795/DEL/2011 2 2. THE RETURN DECLARING AN INCOME OF ` 4,25,942/- W AS FILED BY THE ASSESSEE ON 30 TH OCTOBER, 2002 WHICH WAS PROCESSED. UPON RECEIPT OF AN INFORMATION FROM THE INVESTIGATION WING OF DELHI, THE RE-ASSESSMENT PROCEEDINGS WERE INITIATED VIDE NOTICE ISSUED U/S 148 D ATED 26 TH MARCH, 2009. THE INFORMATION REVEALED THAT THE ASSESSEE HAD R ECEIVED ACCOMMODATION ENTRIES FROM THE ENTRY OPERATORS AFTER PAYING UNACCOUNTED CASH. THE INFORMATION REVEALED THAT THE FOLLOWING AMOUNTS WERE RECEIVED BY THE ASSESSEE AS ACCOMMODATION EN TRIES FROM ENTRY OPERATORS:- RS.7,50,000/- VIDE INSTRUMENT NO.496801 DATED 24.09.2 001 FROM M/S KULDEEP TEXTILE P. LTD., RS.7,00,000/- VIDE INSTRUMENT NO.916297 DATED 25.07.2001 FROM M/S POLO LEASING & F INANCE P. LTD., RS.8,00,000/- FROM M/S ROYAL CREDITS P. LTD., RS .7,50,000/- FROM M/S RAHUL FINLEASE P. LTD., RS.7,50,000/- FROM SPARROW MARKETING P. LTD., RS.5,00,500/- VIDE INSTRUMENT NO.545 437 DATED 12.07.2001 FROM M/S TASHI CONTRACTORS P. LTD., RS.5,00,000/- FROM M/S TECHNOCOM ASSOCIATES P. LTD. A ND RS.7,51,125/- FROM THE BANK ACCOUNTS OF M/S VISHNU KU MAR JAIN. 3. THE TOTAL OF THESE ENTRIES AS MENTIONED IN THE ASSESSME NT ORDER IS ` 55,01,125/-. THE ASSESSEE WAS REQUIRED TO EXPLAIN T HE AFOREMENTIONED ENTRIES AND IT WAS SUBMITTED THAT THE A FOREMENTIONED AMOUNTS WERE RECEIVED ON ACCOUNT OF SHARE APPLICATION MONEY FOR ALLOTMENT OF SHARES OF THE ASSESSEE COMPANY AND THE ASSESSEE HAD ALSO SUBMITTED DOCUMENTARY EVIDENCE TO SUPPORT SUCH CON TENTION WHICH INTER ALIA INCLUDED COPIES OF AFFIDAVITS FROM D IRECTORS OF THOSE COMPANIES, AUDITED CERTIFICATES, COPY OF BANK STATEMEN TS, ETC. AND IT WAS CLAIMED THAT IDENTITY HAS BEEN ESTABLISHED BY SHOWIN G THE EXISTENCE OF THE SHARE APPLICANTS, THEREFORE, FURTHER INQUIRY IS NOT NECESSARY. THE ASSESSEE WAS SUPPLIED WITH THE COPY OF STATE MENTS ON THE BASIS OF WHICH THE INVESTIGATION WING HAS SENT THE I NFORMATION. THE ASSESSEE ALSO DEMANDED CROSS EXAMINATION OF THOSE CONCE RNED PERSONS THAT WAS DENIED ON THE GROUND THAT THE ASSESSEE IT SELF HAD EXPRESSED ITS INABILITY TO PRODUCE ITS OWN SHAREHOLDERS F OR EXAMINATION ITA NO.1795/DEL/2011 3 AND THE ASSESSEE CAN INSIST ON SUCH CROSS EXAMINATION ONLY A FTER DISCHARGING THE ONUS WHICH IS PLACED UPON IT IN THE LI GHT OF THE STATEMENTS MADE BY SHRI MAHESH GARG. IT IS FURTHER REC ORDED IN THE ASSESSMENT ORDER THAT THE SHARE APPLICANTS CARRIED NO OTH ER ACTIVITY BESIDES PROVIDING THE ACCOMMODATION ENTRIES AND FROM T HE MODUS OPERANDI ADOPTED BY THEM, IT IS CLEAR THAT THE TRANSA CTIONS WERE NOT GENUINE. CONSIDERING THE EXPLANATION SUBMITTED BY TH E ASSESSEE UNSATISFACTORY, LD. ASSESSING OFFICER HAS APPLIED THE PROV ISIONS OF SECTION 68 AND MADE THE ADDITION OF ` 55,01,125/-. THE AFOREMENTIONED ADDITION WAS AGITATED IN AN APPEAL FI LED BEFORE THE CIT (A). THE ASSESSEE ALSO CHALLENGED THE VALIDITY OF RE-ASSE SSMENT PROCEEDINGS. IT WAS POINTED OUT THAT OUT OF ` 55,01, 125/-, THE SHARE APPLICATION RECEIVED BY THE ASSESSEE IS TO THE TUNE OF ` 45 LAC WHICH IS RECEIVED FROM SEVEN PRIVATE LIMITED COMPANIES THE DET AILS OF WHICH ARE AS UNDER:- S.NO. NAME OF INVESTOR COMPANIES AMOUNT (RS.) 1. M/S TASHI CONTRACTORS (P) LTD. 5,00,000 2. M/S POLO LEASING & FINANCE (P) LTD. 7,00,000 3. M/S ROYAL CREDITS (P) LTD. 8,00,000 4. M/S KULDEEP TEXTILE (P) LTD. 7,50,000 5. M/S SPARROW MARKETING (P) LTD. 7,50,000 6. M/S TECHNOOM ASSOCIATES (P) LTD. 5,00,000 7. M/S RAHUL FINLEASE (P) LTD. 5,00,000 4500000 4. SO AS IT RELATES TO THE BALANCE AMOUNT OF ` 7,51,1 25/-, IT WAS SUBMITTED THAT THE SAID AMOUNT IS AGAINST THE NAME OF S HRI VISHNU KUMAR JAIN WHICH IS ERRONEOUSLY INCLUDED IN THE LIST SU PPLIED BY THE ASSESSING OFFICER. LEARNED CIT (A) HAS ALSO CALLED FOR REMAND REPORT FROM THE ASSESSING OFFICER AND AFTER CONSIDERING ALL THE SE SUBMISSIONS, LEARNED CIT (A) HAS COME TO THE CONCLUSION THAT THE SH ARE APPLICATION ITA NO.1795/DEL/2011 4 MONEY RECEIVED BY THE ASSESSEE FROM SEVEN COMPANIES IS ONL Y ` 45 LAC AND THE OTHER AMOUNT OF ` 7,51,125/- RECEIVED BY TH E ASSESSEE ON 7 TH SEPTEMBER, 2001 IS FROM SHRI VISHNU KUMAR JAIN AND AF TER EXAMINING THIS FACT FROM THE ENTRIES IN THE BANK ACCOUNT, IT WA S FOUND THAT NO SUCH MONEY WAS RECEIVED BY THE ASSESSEE AT ANY TIME DURIN G THE FINANCIAL YEAR FROM SHRI VISHNU KUMAR JAIN. THEREFOR E, HE HELD THAT THE ISSUE TO BE DECIDED WAS ONLY WITH RESPECT TO A SUM OF ` 45 LAC AND NOT ` 55,01,125/-. THE REVENUE HAS ALSO AGITATED THE ADD ITION MADE WITH RESPECT TO THE SHARE APPLICATION MONEY AND ITS GROUNDS OF APPEAL IS RESTRICTED TO A SUM OF ` 45 LAC. LEARNED CIT (A) HAS FURTHER FOUND THAT TO SUPPORT THE GENUINENESS OF THE SHARE APPLICATION MON EY THE ASSESSEE HAS SUBMITTED THE FOLLOWING DOCUMENTARY EVIDENCE :- A. COPY OF SHARE APPLICATION FORM B. CONFIRMATION OF SHARE CAPITAL CONTRIBUTION FROM T HE ABOVE SHAREHOLDERS, GIVING COPIES OF THE CHEQUES AND BANK ACC OUNTS THROUGH WHICH THE SHARE APPLICATION HAS BEEN MADE. C. PAN DETAILS AND ASSESSING OFFICERS JURISDICTION OF THE SHAREHOLDERS. D. IT RETURN COPIES OF THE SHAREHOLDERS. E. COPY OF RESOLUTION PASSED BY BOARD OF SHARE APPLICAN T COMPANIES IN RESPECT OF AUTHORIZATION TO INVEST IN SHAR ES IN THE APPELLANT COMPANY. F. COPY OF BANK STATEMENTS OF THE SHARE APPLICANT COMP ANIES & ALSO OF THE APPELLANT EVIDENCING THE SHARE APPLICATIO N MONEY TRANSFER THROUGH BANKING CHANNELS. G. CERTIFICATE OF INCORPORATION OF SHAREHOLDER COMPA NIES. H. MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE SHAREH OLDER COMPANIES AS WELL AS THEIR BALANCE SHEET. I. CERTIFICATE FROM THE AUDITOR OF SHARE APPLICANTS C ERTIFYING THAT THEIR COMPANY HAS INVESTED IN SHARE OF ASSESSEE COMPANY. ITA NO.1795/DEL/2011 5 J. CONFIRMATION & AFFIDAVIT OF THE THEN DIRECTORS O F SHARE APPLICANT COMPANIES TO THE EFFECT THAT AS PER COMPANY S RECORDS INVESTMENT HAD BEEN MADE DURING FY 2001-02. K. AFFIDAVIT FILED DURING THE APPELLATE PROCEEDINGS FROM THE PRESENT DIRECTORS OF THE SHARE APPLICANT COMPANIES WITH RESPECT TO CONFIRMING THE SHARE APPLICATION MADE AND THE FACT OF SHARE BEING ALLOTTED. L. FORM OF ANNUAL RETURN IN FORM 2-B FILED WITH ROC (FILED DURING APPELLATE PROCEEDINGS, WHERE 4,50,000/- SHARES HAVE BE EN ALLOTTED TO THE 7 COMPANIES REFERRED TO ABOVE). 5. AFTER REFERRING TO THE AFOREMENTIONED EVIDENCE P LACED BY THE ASSESSEE ON RECORD AND REFERRING TO THE FOLLOWING JUDIC IAL PRONOUNCEMENTS, LEARNED CIT (A) HAS DELETED THE ADDIT ION ON THE GROUND THAT INITIAL ONUS LAID UPON THE ASSESSEE WAS DULY DISCHARGED AND NO ADDITION COULD BE SUSTAINED IN VIEW OF THE EVI DENCE PLACED BY THE ASSESSEE ON RECORD:- CIT VS. LOVELY EXPORT (P) LTD. (SC); CIT VS. STELLAR INVESTMENT LTD. 251 ITR 263 (SC); DCIT VS. GSV INVESTMENT (P) LTD. 146 ITD 36 (ITAT); CIT VS. ASHWANI GUPTA 2010 ITA NO.1264/2008 (DELHI H IGH COURT) ITO VS. ORBITAL COMMUNICATION (P) LTD. (2010) 38 SOT 6 DELHI (URO); SHREE BARKHA SYNTHETIC LTD. VS. ACIT (2006) 155 TAXMAN 286 (RAJ HIGH COURT); & CIT VS. VICTOR ELECTRODES LTD. (2010) 329 ITR 271 (DEL HI). 6. AGAINST THESE FINDINGS OF LEARNED CIT (A) THE REVEN UE IS AGGRIEVED, HENCE, IN APPEAL. 7. AFTER NARRATING THE FACTS AND RELYING UPON THE ASSE SSMENT ORDER, IT WAS THE SUBMISSION OF THE LEARNED DR THAT THE ASSESSING OFFICER WAS ITA NO.1795/DEL/2011 6 RIGHT IN MAKING THE ADDITION AND LEARNED CIT (A) HA S WRONGLY DELETED THE SAME. 8. ON THE OTHER HAND, REFERRING TO THE DOCUMENTARY EVIDENCE THE COPIES OF WHICH HAVE BEEN PLACED ON RECORD, IT IS THE CASE OF THE LEARNED AR THAT ADEQUATE EVIDENCE WAS FURNISHED BEFOR E THE ASSESSING OFFICER AS WELL AS THE CIT (A) ACCORDING TO WHICH ALL THE THREE INGREDIENTS OF CASH CREDITS WERE FULFILLED AND, THEREF ORE, LEARNED CIT (A) WAS RIGHT IN DELETING THE ADDITION AS HE HAS FOUND THA T THE INITIAL ONUS LAID UPON THE ASSESSEE WAS DISCHARGED. HE SUBMITTED THAT NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO SU GGEST THAT THE EVIDENCE SUBMITTED BY THE ASSESSEE TO PROVE THE GENU INENESS OF SHARE APPLICATION MONEY WAS EITHER FALSE OR NOT CORREC T. THEREFORE, HE SUBMITTED THAT LEARNED CIT (A) HAS RIGHTLY DELETED TH E ADDITION AND HIS ORDER SHOULD BE UPHELD. 9. IT MAY BE MENTIONED HERE THAT AFTER GOING THROUG H THE FACTS OF THE CASE, IT WAS FOUND THAT THE ASSESSEE HAS ISSUED AFOREMEN TIONED SHARES ON THE FACE VALUE OF 10 AND NO PREMIUM HAS BEEN CHARGED. IT WAS STATED BY LD. COUNSEL OF THE ASSESSEE THAT EVEN FRESH A FFIDAVITS OF ALL THE SHARE APPLICANTS WERE FILED. IT WAS OBSERVED F ROM THE RECORD THAT FRESH AFFIDAVIT IN RESPECT OF SHARES ALLOTTED TO M /S ROYAL CREDITS (P) LTD. WAS NOT PLACED ON RECORD. THE LEARNED AR WAS RE QUESTED TO FURNISH THE SAME ON RECORD. THE LEARNED AR WAS ALSO DIR ECTED TO SUBMIT THE CERTIFICATE FROM THE DIRECTOR OF THE ASSESSEE COMPANY TO SHOW THE LATEST POSITION OF THE SHARES WHICH HAVE BEEN A LLOTTED TO THE AFOREMENTIONED SHARE APPLICANTS. ACCORDINGLY, THE LE ARNED AR HAS FURNISHED THE AFFIDAVIT OF THE DIRECTOR OF M/S ROYAL CREDITS (P) LTD. IN WHICH IT HAS BEEN STATED THAT THEY HAD APPLIED FOR 80 ,000 SHARES AND HAD PROVIDED SHARE APPLICATION MONEY OF ` 8 LAC ON 4 TH AUGUST, 2001 THROUGH CHEQUE/DD/P.O NO.011357 FROM THE CURRENT AC COUNT MAINTAINED BY THE SAID CONCERN WITH THE STATE BANK O F PATIALA, DARYA ITA NO.1795/DEL/2011 7 GANJ, NEW DELHI. THE SAID AFFIDAVIT IS NOTARIZED ON 7 TH AUGUST, 2010. THE LEARNED AR HAS ALSO FILED CERTIFICATE DATED 24 TH OCTOBER, 2011 GIVEN BY THE DIRECTOR OF THE ASSESSEE COMPANY IN WHICH IT HAS BEEN CERTIFIED THAT THE AFOREMENTIONED SEVEN SHARE APPLICANTS ARE HOL DING THE SHARES TILL DATE I.E., AS ON 24 TH OCTOBER, 2011. A COPY OF THE SAID CERTIFICATE AND AFFIDAVIT WAS ALSO GIVEN TO THE LEARNED DR. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS I N THE LIGHT OF THE MATERIAL PLACED BEFORE US. IT HAS ALREADY BEEN MENTIONED THAT THE SHARES ARE NOT ISSUED AT PREMIUM. THE EVIDENCE RELATIN G TO ALL THE SHARE APPLICANTS WAS FILED BEFORE THE ASSESSING OFFICER TH E DETAILS OF SUCH EVIDENCE HAVE ALREADY BEEN DESCRIBED IN THE ABOV E PART OF THIS ORDER. APART FROM THAT THE ASSESSEE HAD ALSO FILED RECE NT AFFIDAVITS OF ALL THE SHARE APPLICANTS. THOSE SHARES CONTINUE TO BE H ELD BY THOSE SHARE APPLICANTS TILL DATE. KEEPING IN VIEW ALL THESE FACTS AND THE EVIDENCE FILED BY THE ASSESSEE ON RECORD, WE FIND NO IN FIRMITY IN THE ORDER OF THE CIT (A) VIDE WHICH THE AFOREMENTIONED ADDITION HAS BEEN DELETED. WE DECLINE TO INTERFERE. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 28.10.20 11. SD/- SD/- [SHAMIM YAHYA] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 28.10.2011. DK ITA NO.1795/DEL/2011 8 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES