ITO, New Delhi V. M/s. Meghna towers Pvt. Ltd, New Delhi

ITA 1942/DEL/2010

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7510 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 28-07-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 29-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AND CROSS OBJECTION
• Keywords: Accommodation entries
• Section: 133(6); 68

Judgement Text

ITA NO. 1942/DEL/2010 AND CO NO. 76/DEL/2011 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E: NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI ANADI N MISHRA, ACCOUNTANT MEMBER ITA NO.:- 1942/DEL/2010 ASSESSMENT YEAR: 2005-06 INCOME TAX OFFICER, WARD-6 (3), NEW DELHI. VS. M/S. MEGHNA TO WERS PVT. LTD. 1117/12, NAIWALA , KAROL BAGH, NEW DELHI 110 005 (APPELLANT) (RESPONDENT) CO NO. 76/DEL/2011 (IN ITA NO.:- 1942/DEL/2010) ASSESSMENT YEAR: 2005-06 M/S. MEGHNA TOWERS PVT. LTD. 1117/12, NAIWALA , KAROL BAGH, NEW DELHI 110 005 PAN AAACM9853G VS. ITO WARD-6(3), ROOM NO. 185, C.R. BUILDING, I.P. ESTATE, NEW DELHI 110 002. (APPELLANT) (RESPONDENT) O R D E R PER ANADI N MISHRA, A.M. THIS APPEAL FILED BY THE REVENUE AND THE CROSS OBJE CTION BY ASSESSEE DIRECTED AGAINST THE ORDER OF LD.CIT (APPEALS) NEW DELHI D T. 26.2.2010 FOR THE ASSESSMENT DEPARTMENT BY : SHRI UMESH KUMAR DUBEY, SR. DR ASSESSEE BY: SHRI KAPIL GOEL, ADV. DATE OF HEARING 28 /07 /2016 DATE OF PRONOUNCEMEN T 04/08 /2016 ITA NO. 1942/DEL/2010 AND CO NO. 76/DEL/2011 2 YEAR 2005-06 ON THE FOLLOWING GROUNDS :- 1. THE ORDER OF THE LEARNED CIT (APPEALS) IS ERRONEOU S AND CONTRARY TO FACTS AND LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 99,00,000/- MADE BY THE AO U/S 68 OF THE I.T. ACT BEING THE BOGUS/UN EXPLAINED SHARE CAPITAL ROUTED THROUGH ENTRY OPERATORS. 2.1THE LD. CIT(A) IGNORED THE FACT THAT THE ASSESSE E DID NOT DISCHARGE THE ONUS OF PROVING THE CREDITWORTHINESS OF THE CR EDITORS AND GENUINENESS OF THE TRANSACTIONS. 2.2THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FAC T THAT THE ASSESSEE IS INVOLVED IN THE RACKET OF OBTAINING ACCOMMODAT ION ENTRIES AND THE RATIO OF HONBLE APEX COURTS JUDGEMENT IN THE CASE OF M/S. DIVINE LEASING & FINANCE AND IN THE CASE OF M/S. LOVELY EXPORT PVT. LTD. IS NOT APPLICABLE TO THE CASE OF THE ASSESSEE. 3. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, OR AME ND ANY GROUNDS OF APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. 2. THE ONLY ISSUE INVOLVED IN APPEAL FILED BY REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS THE ADDITION OF RS. 99,00, 000/- MADE BY THE LD. AO U/S 68 OF THE I.T. ACT, WHICH WAS DELETED BY THE LD. CIT(A ) VIDE ORDER DATED 26.2.2010. FOR THE SAKE OF CONVENIENCE THE GROUNDS OF APPEAL I N THE APPEAL FILED BY REVENUE AND THE GROUNDS OF APPEAL FILED BY THE ASSESSEE I N CROSS OBJECTION ARE TAKEN UP TOGETHER. 3. THE INVESTIGATION WING OF INCOME TAX DEPAR TMENT INTIMATED THE LD. AO THAT CERTAIN PERSONS WERE ENGAGED IN PROVIDING ACCOMMODA TION ENTRIES TO VARIOUS PERSONS. THE INVESTIGATION WING RECORDED THE STATEM ENTS OF SUCH PERSONS ALLEGEDLY PROVIDING ACCOMMODATION ENTRIES ON VARIOUS DATES AN D COPIES OF SUCH STATEMENTS WERE FORWARDED TO THE LD. AO. THE PERSONS ALLEGEDLY ENGAGED IN PROVIDING ITA NO. 1942/DEL/2010 AND CO NO. 76/DEL/2011 3 ACCOMMODATION ENTRIES INCLUDED ABO INVESTMENTS PVT. LTD., AGGREGATE FIN. & INVES. PVT. LTD. SHUBHAM ELECTRICALS PVT. LTD., FIN WIZ CAPITAL SERVICES P. LTD. FUSSY FINN. SERVICES PVT. LTD., HARE RAMA RESTAURANTS PVT . LTD. STATEMENT OF THESE PERSONS WHO ADMITTED ON OATH BEFORE INVESTIGATION W ING OF INCOME TAX DEPARTMENT THAT THEY HAD PROVIDED THE ACCOMMODATION ENTRIES WE RE FORWARDED TO THE LD. AO IN WHICH THEY HAD CATEGORICALLY ADMITTED THAT THEY WER E INSTRUMENTAL IN PROVIDING ACCOMMODATION ENTRIES. THE ASSESSEE RECEIVED AN AMO UNT OF RS. 99,00,000/-FROM THE AFORESAID PERSONS (HEREINAFTER REFERRED TO AS A LLEGED ENTRY PROVIDERS) WHICH INCLUDED RS. 4,95,000/- AS SHARE CAPITAL AND RS. 9 4,05,000/- AS SHARE PREMIUM. DURING ASSESSMENT PROCEEDINGS THE ASSESSEE IN SUPPO RT OF ITS CLAIM OF GENUINENESS OF THE AFORESAID AMOUNTS RECEIVED TOWARDS SHARE CAP ITAL AND SHARE PREMIUM, PROVIDED CERTAIN DOCUMENTS WHICH HAVE BEEN LISTED I N PARAGRAPH NO. 5.0 OF ORDER DATED 26.2.2010 OF LD. CIT(A). DURING ASSESSMENT PR OCEEDINGS, THE LD. AO VIDE ORDER SHEET ENTRY DATED 10.12.2007 ASKED THE ASSESS EE TO PRODUCE THE DIRECTORS OF THE AFORESAID ALLEGED ENTRY OPERATORS. HOWEVER THE ASSESSEE FAILED TO PRODUCE THEM BEFORE THE LD. AO. ALSO, DURING ASSESSMENT PRO CEEDINGS THE ASSESSEE COMPANY ALSO FILED LETTER DATED NIL BEFORE THE AO R EQUESTING TO MAKE AVAILABLE THE MATERIAL / STATEMENT SO THAT THE TRUE STATE OF AFFA IRS COULD BE BROUGHT TO NOTICE OF AO. BUT THE LD. AO DID NOT PROVIDE SUCH MATERIALS / STATEMENT TO THE ASSESSEE COMPANY. THE LD. AO MADE AN ADDITION OF THE AFORES AID AMOUNT OF RS. 99,00,000/- TAKING ADVERSE VIEW OF THE FACT THAT THE ASSESEE CO MPANY FAILED TO PRODUCE THE DIRECTORS OF ALLEGED ENTRY OPERATORS. THE ASSESSEE FILED AN APPEAL BEFORE LD. CIT(A) IN WHICH, INTERALIA, THE FOLLOWING GROUNDS WERE ALS O RAISED :- ITA NO. 1942/DEL/2010 AND CO NO. 76/DEL/2011 4 4.(I) THE ASSESSING OFFICER HAD ERRED IN RELYING ON THE STATEMENTS OF ALLEGED ENTRY OPERATORS WHICH HAD BEEN RECORDED AT THE BACK OF THE APPELLANT WITHOUT PROVIDING AN OPPORTUNITY OF EXPLA NATION TO HIM TO BRING OUT THE TRUE STATE OF AFFAIRS. (II) THE ASSESSING OFFICER HAD ERRED IN NOT MAKIN G AVAILABLE THE SAID ENTRY OPERATORS FOR HIS CROSS EXAMINATION. (III) THE ASSESSING OFFICER HAD ERRED IN OVERLOOK ING THE STATUTORY PROVISIONS OF SECTION 143(2) OF THE INCOME TAX ACT ACCORDING TO WHICH THE ADVERSE MATERIAL COLLECTED BY THE ASSESSING OFF ICER AT THE BACK OF THE ASSESSEE HAD TO BE CONFRONTED TO THE APPELLANT FOR HIS EXPLANATION. 3.1. ON PERUSAL OF THE APPELLATE ORDER DATED 26 .2.2010 PASSED BY LD. CIT(A) WE FIND THAT THE AFORESAID GROUNDS TAKEN BY THE ASSESS EE COMPANY IN APPEAL BEFORE LD. CIT(A) HAVE NOT BEEN ADJUDICATED BY HER. REVENUE AS WELL AS ASSESSEE COMPANY ARE AGGRIEVED BY THE ORDER OF LD. CIT(A). ON ONE HAND R EVENUE HAS FILED APPEAL AGAINST THE DIRECTION OF THE LD. CIT(A) TO DELETE THE ADDIT ION OF RS. 99,00,000/- ; ON THE OTHER HAND THE ASSESSEE COMPANY HAS FILED CROSS OBJ ECTION AGAINST FAILURE OF THE LD. CIT(A) IN GIVING A DECISION ON THE GROUNDS MENTIONE D ABOVE. 4. IN THE COURSE OF HEARING BEFORE US WE HAV E HEARD BOTH SIDES AND HAVE ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. LD. DR VE HEMENTLY CONTENDED THAT THE APPELLANT COMPANY SHOULD HAVE PRODUCED DIRECTORS O F ALLEGED ENTRY OPERATORS BEFORE THE LD. AO AND THE LD. AO WAS JUSTIFIED IN TAKING A N ADVERSE VIEW SINCE THE ASSESSEE COMPANY FAILED TO PRODUCE THEM BEFORE THE LD. AO. H E FURTHER CONTENDED THAT THE LD. CIT(A) SHOULD HAVE UPHELD THE ADDITION OR SHOUL D HAVE ATLEAST DIRECTED THE ASSESSEE COMPANY TO PRODUCE THE DIRECTORS OF THE AL LEGED ENTRY OPERATORS BEFORE THE LD. AO. LD. DR ALSO CITED CASE LAWS ON MERITS OF TH E ADDITION. IN REPLY, LD. AR OF THE ITA NO. 1942/DEL/2010 AND CO NO. 76/DEL/2011 5 ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A) AND ALSO CITED NUMEROUS DECISIONS TO SUPPORT THE ORDER OF LD. CIT(A). 5. THE CENTRAL ISSUE IS WHETHER THE AMOUNT OF RS. 99,00,000/- RECEIVED BY THE ASSESSEE WAS GENUINE SUBSCRIPTION OF SHARE CAPITAL AND SHARE PREMIUM OF THE ASSESEE COMPANY OR THESE WERE ONLY ACCOMMODATION EN TRIES. WHETHER IT WAS GENUINE OR NOT WILL DEPEND ON FACTS SPECIFIC TO THI S CASE. HOWEVER, WE FIND THAT BOTH THE LOWER AUTHORITIES, THE LD. AO AND THE LD. CIT(A ) HAVE TAKEN A VIEW WITHOUT ALLOWING FULL FACTS TO EMERGE. THE ASSESSEE COMPANY FAILED TO PRODUCE THE DIRECTORS OF THE ENTRY OPERATORS BEFORE THE LD. AO. IT IS OBV IOUS THAT THE LD. AO WANTED TO EXAMINE THE DIRECTORS OF ALLEGED ENTRY OPERATORS AN D WISHED TO CARRY THE INVESTIGATION FURTHER IN ORDER TO BRING MORE FACTS ON RECORD. THE FAILURE OF THE ASSESSEE COMPANY TO PRODUCE THE DIRECTORS BEFORE TH E LD. AO RESULTED IN DENIAL OF OPPORTUNITY TO THE LD. AO TO MAKE FURTHER FACTS EME RGE. ON THE OTHER HAND THE LD. AO ALSO FAILED TO PROVIDE THE MATERIAL IN HIS POSSE SSION WHICH HAVE BEEN USED AGAINST THE ASSESSEE IN MAKING THE ADDITION. SUCH MATERIALS INCLUDED RELEVANT PORTIONS OF THE STATEMENTS OF ALLEGED ENTRY OPERATORS RECORDED ON O ATH BY INVESTIGATION WING WHICH WAS FORWARDED TO THE LD. AO. MOREOVER, THERE ARE A LSO CONFLICTING EVIDENCES WHICH HAVE NOT BEEN RECONCILED BY THE LOWER AUTHORITIES. ON ONE HAND THE ALLEGED ENTRY OPERATORS HAVE STATED AN OATH BEFORE INVESTIGATION WING OF INCOME TAX DEPARTMENT THAT THEY HAVE PROVIDED ACCOMMODATION ENTRIES. ON T HE OTHER HAND DURING ASSESSMENT PROCEEDINGS THEY HAVE GIVEN CONFIRMATION IN FAVOUR OF THE ASSESSEE AND HAVE ALSO RESPONDED IN SUPPORT OF THE ASSESSEE IN R ESPONSE TO LETTER OF THE LD. AO SEEKING INFORMATION U/S 133(6) OF I.T. ACT. WHEN SO MEBODY PROVIDES CONTRADICTORY ITA NO. 1942/DEL/2010 AND CO NO. 76/DEL/2011 6 EVIDENCES AT TWO DIFFERENT TIMES OR BEFORE TWO DIF FERENT AUTHORITIES, AS THE ALLEGED ENTRY OPERATORS HAVE DONE , IT WAS APPROPRIATE TO S UBJECT THE ALLEGED ENTRY OPERATORS TO FURTHER EXAMINATION / CROSS-EXAMINATION IF EITHE R SIDE (WHETHER REVENUE OR ASSESSEE) WISHED TO EXAMINE / CROSS-EXAMINE. WHILE LD. AO HAS RELIED ON THE EVIDENCE AGAINST THE ASSESSEE AND WHILE THE LD. CIT (A) HAS RELIED ON THE EVIDENCE IN FAVOUR OF THE ASSESSEE NEITHER OF THE TWO LOWER AUT HORITIES HAS EXPLAINED WHY THE EVIDENCE ON THE OTHER SIDE WAS OVERLOOKED. AS THE I TAT IS A FINAL FACT FINDING AUTHORITY WE FEEL THAT ALL RELEVANT FACTS SHOULD BE ALLOWED TO EMERGE BEFORE THE ISSUE IS DECIDED ON MERITS. WE ALSO FEEL THAT BOTH SIDES, REVENUE AS WELL AS ASSESSEE SHOULD HAVE GOT ADEQUATE OPPORTUNITY TO BRING RELEV ANT FACTS ON RECORD. IF EITHER OF THE TWO SIDES HAS NOT GOT REASONABLE OPPORTUNITY FO R THIS PURPOSE IT WILL BE APPROPRIATE TO CAUSE SUCH OPPORTUNITIES TO BE PROVI DED. AS WE HAVE ALREADY NOTICED NEITHER REVENUE NOR THE ASSESSEE HAS RECEIVED FULL OPPORTUNITY TO MAKE RELEVANT FACTS EMERGE. PERUSAL OF GROUND 2.2 OF APPEAL FILE D BY REVENUE SHOWS THAT ASSESEE IS ONE AMONG MANY PERSONS WHO MAY HAVE ATTEMPTED TO BENEFIT FROM THE ALLEGED RACKETEERING. WHEN INVESTIGATION WING OF INCOME TAX DEPARTMENT HAS BUSTED THE RACKET OF BOGUS ACCOMMODATION ENTRIES ; AND WHEN TH E ALLEGED ENTRY OPERATORS HAVE ADMITTED ON OATH THAT THEY RAN THIS RACKET ; AND WH EN NAME OF THE ASSESEE IS DISCOVERED AS ONE OF THE BENEFICIARIES OF THE ALLEG ED RACKET ; AND WHEN AMOUNTS ARE ACTUALLY FOUND IN THE BOOKS OF ASSESSEE TO BE CRED ITED IN THE NAME OF ALLEGED ENTRY OPERATORS ; BURDEN WAS ON THE ASSESSEE TO PROVE THA T IT WAS NOT A BENEFICIARY OF THE RACKET. WE ALSO HAVE CONSIDERED WITH REVERENCE THE FOLLOWING OBSERVATIONS OF HONBLE JURISDICTIONAL HIGH COURT, IN THE CASE OF CIT VS. N .R. PORTFOLIO (P) LTD. (DELHI) (2013) 214 TAXMANN.COM 291 (DELHI) :- ITA NO. 1942/DEL/2010 AND CO NO. 76/DEL/2011 7 8. THIS COURT IS CONSCIOUS OF A VIEW TAKEN IN SOM E OF THE PREVIOUS DECISIONS THAT THE ASSESSEE CANNOT BE FAULTED IF THE SHARE AP PLICANTS DO NOT RESPOND TO SUMMONS, AND THAT THE STATE OR REVENUE AUTHORITIES HAVE THE WHEREWITHAL TO COMPEL ANYONE TO ATTEND LEGAL PROCEEDINGS. HOWEVER, THAT IS MERELY ONE ASPECT. AN ASSESSEES DUTY TO ESTABLISH THAT THE AM OUNTS WHICH THE AO PROPOSES TO ADD BACK, UNDER SECTION 68 ARE PROPERLY SOURCED, DOES NOT CEASE BY MERELY FURNISHING THE NAMES, ADDRESSES AND PAN P ARTICULARS, OR RELYING ON ENTRIES IN A REGISTRAR OF COMPANIES WEBSITE. ONE MU ST REMEMBER THAT IN ALL SUCH CASES, MORE OFTEN THAN NOT, THE COMPANY IS A P RIVATE ONE, AND SHARE APPLICANTS ARE KNOWN TO IT, SINCE THEY ARE ISSUED O N PRIVATE PLACEMENT, OR EVEN REQUEST BASIS . IF THE ASSESSEE HAS ACCESS TO THE SHARE APPLICANTS PAN PARTICULARS, OR BANK ACCOUNT STATEMENT, SURELY ITS RELATIONSHIP IS CLOSER THAN ARMS LENGTH. ITS REQUEST TO SUCH CONCERNS TO PARTI CIPATE IN INCOME TAX PROCEEDINGS, WOULD, VIEWED FROM A PRAGMATIC PERSPEC TIVE, BE QUITE STRONG, BECAUSE THE NEXT POSSIBLE STEP OF THE TAX ADMINISTR ATORS COULD WELL BE RE- OPENING OF SUCH INVESTORS PROCEEDINGS. 6. IN VIEW OF THE FOREGOING WE SET ASIDE THE O RDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE LD. ASSESSING OFFICE R TO COMPLETE THE ASSESSMENT DE NOVO WITH THE DIRECTION TO THE LD. ASSESSING OFFICE R TO PROVIDE COPIES OF WHATEVER ADVERSE MATERIAL THE LD. AO HAS IN HIS POSSESSION, WHICH WERE USED OR ARE PROPOSED TO BE USED AGAINST THE ASSESSEE. THE LD. ASSESSING OFFICER WILL BE FREE TO CARRY OUT FURTHER INQUIRIES AS PER LAW ; AND THE ASSESEE WILL BE FREE TO SUBMIT / PRODUCE FURTHER MATERIALS / EVIDENCES BEFORE THE ASSESSING OFFICER. 6.1. WE WISH TO CLARIFY THAT WE ARE NOT EXPRES SING ANY OPINION ON THE MERITS OF THE ADDITION AT PRESENT. BOTH SIDES, THE LD. DR AS WELL AS THE LD. AR OF THE ASSESSEE HAD CITED NUMEROUS CASE LAWS ON MERITS OF THE ADDIT ION IN SUPPORT OF THEIR RESPECTIVE CONTENTIONS. HOWEVER IN ABSENCE OF ALL RELEVANT FAC TS WHICH ARE YET TO EMERGE WE REFRAIN FROM EXPRESSING AN OPINION ON THE MERITS OF THE ADDITION. ITA NO. 1942/DEL/2010 AND CO NO. 76/DEL/2011 8 7. IN THE RESULT THE APPEAL FILED BY REVENUE AS WELL AS THE CROSS OBJECTION ARE ALLOWED FOR STATISTICAL PURPOSES. SD/- SD/- (H.S. SIDHU) (ANADI N MISHRA) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED: 4 TH AUGUST, 2016. * VEENA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGI STRAR