Goel Die Cast Ltd, V. ACIT circle,

ITA 216/DEL/2008

• Counselvise Citation: 21620114 RSA 2008
• Duration Of Justice: 4 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 23-01-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 23-01-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIS GILL
• Assessee Lawyers: ASHWANI TANEJA SHRI TARUN
• Keywords: Bogus Share capital; Depreciation; Share purchase agreement; Opportunity of cross examination; Accommodation entries; Assessment record
• Section: 133(6); 195; 131; 68; 154

Judgement Text

ITA NO. 216/DEL/2008 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NO.216/DEL/2008 ASSTT. YEAR: 2004-05 M/S GOEL DIE CAST LTD., VS ASSTT.COMMIS SIONER OF INCOME TAX, VILLAGE SANKHOL, CIRCLE ROHTAK, ROHTAK. DELHI ROHTAK ROAD, BAHADARGARH, HARYANA. (PAN NO. AAACG5344G) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI ASHWANI TANEJA, SHRI TARUN RESPONDENT BY: SHRI R.I.S. GILL, CIT(DR) O R D E R PER G.D. AGRAWAL, VICE PRESIDENT IN THIS APPEAL FILED BY THE ASSESSEE, FOLLOWING GR OUNDS WERE RAISED: 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTA NCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN C ONFIRMING THE ACTION OF LD. AO IN MAKING AN AGGREGATE ADDITION OF RS.1,38,00,000/- ON ACCOUNT OF SHARE CAPITAL RECEI VED FROM 13 PARTIES AS MENTIONED IN PAGE 42-43 THE ASSESSMENT O RDER UNDER SECTION 68 OF THE ACT. 2. THAT IN ANY CASE AND IN VIEW OF THE MATTER ACTI ON OF THE LD. CIT(A) IN CONFIRMING THE ACTION OF LD. AO IN MAKING ADDITION OF RS. 1,38,00,000/- ON ACCOUNT OF SHARE CAPITAL RECEI VED U/S 68 THAT TOO BY RECORDING INCORRECT FACTS AND FINDINGS AND W ITHOUT CONFRONTING THE ENTIRE ADVERSE MATERIAL USED AGAINS T THE ASSESSEE AND WITHOUT PROVIDING THE OPPORTUNITY OF CROSS EXAM INAI8TONN AND WITHOUT GRANTING ADEQUATE OPPORTUNITY OF HEARIN G IS ILLEGAL, ITA NO. 216/DEL/2008 2 UNJUSTIFIED, AND CONTRARY TO LAW AND FACTS, BEYOND JURISDICTION AND DESERVES TO BE QUASHED. 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN MAKING ENHANCEMENT TO THE ASSESSED INCOME BY AGGREGATE AMOUNT OF RS. 9 4,00,000/- BY MAKING FURTHER ADDITION ON ACCOUNT OF SHARE CAPI TAL RECEIVED FROM THE FOLLOWING PARTIES:- M/S SNG FINCAP LTD. 10,00,000/- M/S BANKEY BIHARI CORPORATION LTD. 8,00,000/- M/S SAAR ENTERPRISES (P) LTD. 6,00, 000/- M/S KALYAN EXTRACTION LTD. 15,00,000/- M/S EMEC TOURS & TRAVELS (P) LTD. 5,00 ,000/- M/S SUNRISE DEVELOPERS (P) LTD. 10,00,000/- M/S SACHDEVA FINANCIAL SERVICES (P) LTD. 5,00,000/- M/S BLOSSOM ADVERTISERS (P) LTD. 10,00,0 00/- M/S KVK MULTI FACT PROJECTS LTD. 25,00,000/- RS. 94,00,000/- 4. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTION OF LD. CIT(A) IN MAKING ADDITION BY WAY OF ENHANCEMENT OF INCOME THAT TOO WITHOUT GIVING SHOW CAUSE NOTICE AS PER LAW AND WITHOUT GIVING ADEQUATE OPPORTUNITY OF HEARING AND WITHOUT PROVIDING OPPORTUNITY OF CROSS EXAMINATION AND WITHOUT CONFRO NTING THE ENTIRE ADVERSE MATERIAL USED AGAINST THE ASSESSEE A ND BY RECORDING INCORRECT FACTS AND FINDINGS IS CONTRARY TO LAW AND FACTS, BEYOND JURISDICTION AND DESERVES TO BE QUASH ED. 5. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER ACTION OF LD. CIT(A) IN NOT QUASHING THE ASSESSMENT ORDER BEING B EYOND JURISDICTION AND VOID AB INITIO, ILLEGAL, UNJUSTIFI ED AND CONTRARY TO LAW AND FACTS AND BAD IN LAW. 6. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTAN CES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN C ONFIRMING THE ACTION OF LD. AO IN CHARGING THE INTEREST U/S 234B. ITA NO. 216/DEL/2008 3 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A LIMITED COMPANY WHICH FILED A RETURN ON 31.5.2004 DECLARING TOTAL INCOME OF RS. 30,856. FROM THE PERUSAL OF THE BALANCE SHEET OF THE COMPANY AS ON 3 1.3.2004, THE AO NOTICED THAT THERE WAS AN INCREASE IN THE SHARE CAPITAL DUR ING THE FINANCIAL YEAR 2003- 04 BY RS. 2,82,00,000/-. HE ASKED THE ASSESSEE TO PROVE THE RECEIPT OF SHARE CAPITAL. AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE, THE AO MADE THE ADDITION OF RS. 1,38,00,000 U/S 68 OF THE INCOME TA X ACT FOR UNEXPLAINED SHARE CAPITAL. ON APPEAL, THE CIT(A) VIDE HIS ORDE R DATED 28 TH NOVEMBER, 2007 NOT ONLY CONFIRMED THE ADDITION BUT HE ENHANCE D THE ADDITION BY A SUM OF RS. 94,00,000/-. AGAINST THE ORDER OF THE CIT(A ), THE ASSESSEE FILED THE APPEAL BEFORE THE ITAT VIDE ITA NO.216/DEL/2008. B EFORE THE APPEAL COULD BE TAKEN UP FOR HEARING BY THE ITAT, THE CIT(A), VI DE HIS ORDER DATED 22 ND JANUARY 2009 PASSED U/S 154 OF THE I.T. ACT, DELETE D THE ADDITION AS WELL AS ENHANCEMENT MADE BY HIM IN THE ORIGINAL ORDER. 3. THE REVENUE, AGGRIEVED WITH THE ORDER OF THE CIT (A) PASSED U/S 154, FILED APPEAL BEFORE THE ITAT VIDE ITA NO. 1247/D/20 09. 4. THE ITAT, VIDE ORDER DATED 16.2.2009 IN ITA NO. 216/D/2008, DISMISSED THE ASSESSEES APPEAL AS INFRUCTUOUS, BEC AUSE IN THE ORDER PASSED U/S 154, THE CIT(A) HAD ALREADY ALLOWED THE APPEAL OF THE ASSESSEE. THE REVENUES APPEAL, AGAINST THE ORDER PASSED U/S 154 BY THE CIT(A), WAS ITA NO. 216/DEL/2008 4 DISPOSED OF BY THE ITAT ON 29.1.2010 VIDE ITA NO. 1 247/D/2009 IN WHICH THE ITAT ALLOWED THE REVENUES APPEAL. THEREAFTER, THE ASSESSEE HAS FILED A MISCELLANEOUS APPLICATION IN ITA NO. 216/D/2008 AND THE ITAT VIDE ORDER DATED 25.2.2011 IN MA NO. 122/DEL/2010 RECALLED ITS ORDER DATED 16.2.2009. ACCORDINGLY, THE APPEAL IN ITA NO. 216/DEL/2008 WAS FIXED FOR HEARING BEFORE US. 5. AT THE TIME OF HEARING BEFORE US, IT IS STATED B Y THE LEARNED COUNSEL THAT THE ASSESSEE HAS FURNISHED THE CONFIRMATION O F ALL THE SHAREHOLDERS, THEIR PERMANENT ACCOUNT NOS., SHARE APPLICATION FORM, THE IR BANK ACCOUNT ETC. BEFORE THE AO. THE AO MADE VERIFICATION FROM THE C ONCERNED AO AND ALSO FROM THE BANKS AND THE SHAREHOLDER. THUS, THE IDEN TITY OF THE SHAREHOLDER, CREDITWORTHINESS OF THE SHAREHOLDER AS WELL AS GENU INENESS OF THE TRANSACTION IS PROVED AND THE ONUS WHICH LAY UPON THE ASSESSEE U/S 68 OF THE I.T. ACT IS DULY DISCHARGED. IN SUPPORT OF HIS CONTENTIONS, HE RELIED UPON THE FOLLOWING DECISIONS:- I) CIT VS LOVELY EXPORT P. LTD. 216 CTR 195 (SC) II) CIT VS OASIS HOSPITALITIES (P) LTD. 2010 (DHC) 51 D TR 74, 238 CTR 402 III) CIT VS DWARKADHISH INVESTMENTS(P) LTD. 2010 (DHC) 330 ITR 298 ITA NO. 216/DEL/2008 5 IV) CIT VS WINSTRAL PETROCHEMICALS (P) LTD. 2011 (DHC) 330 ITR 603 V) CIT VS ELECTRO POLYCHEMP LTD. 2008 MADRAS HC 294 IT R 661 & SLP DISMISSED BY HONBLE SC VI) JAYA SECURITIES LTD. VS CIT 2008 ALL(HC) 166 TAXMAN N 7 & SLP HAS BEEN DISMISSED BY THE HONBLE SC VII) ITO VS M/S GOEL SONS GOLDEN ESTATES PVT. LTD. ITA N O. 4152(DEL)/2010 ORDER DATED 05.08.2011 VIII) M/S MADHURI INVESTMENTS PVT. LTD. VS ACIT ITA NO. 1 10/2004 ORDER DATED 18.01.2006 6. THE LD. DR, ON THE OTHER HAND, STATED THAT IN TH IS CASE, NOT ONLY THE CREDITWORTHINESS OF THE CREDITOR WAS DOUBTED BUT TH E IDENTITY OF THE CREDITOR, I.E. SHAREHOLDER, AS WELL AS GENUINENESS OF THE TRA NSACTION WAS ALSO DOUBTED. THAT THE DECISION OF HONBLE APEX COURT IN THE CASE OF LOVELY EXPORT WOULD BE APPLICABLE WHERE THE IDENTITY OF THE SHAREHOLDER AND THE GENUINENESS OF THE TRANSACTION IS ESTABLISHED BUT THE CREDITWORTHI NESS OF THE SHAREHOLDER IS DOUBTFUL. IN SUCH CIRCUMSTANCES, THE HONBLE APEX COURT HAS DIRECTED TO TAKE APPROPRIATE ACTION IN THE CASE OF THE SHAREHOL DER. HOWEVER, SINCE IN THE ASSESSEES CASE, EVEN THE IDENTITY OF THE SHAREHOLD ER IS NOT ESTABLISHED, THE DECISION OF HONBLE APEX COURT IN THE CASE OF LOVEL Y EXPORT WOULD NOT BE APPLICABLE. HE FURTHER STATED THAT ALL THE SUBSEQU ENT DECISIONS RELIED UPON BY THE LD. COUNSEL ARE BASED UPON THE DECISION OF THE HONBLE APEX COURT IN THE ITA NO. 216/DEL/2008 6 CASE OF LOVELY EXPORT. THEREFORE, ALL THESE DECISI ONS WOULD BE APPLICABLE ONLY WHEN THE ASSESSEE IS ABLE TO ESTABLISH THE IDE NTITY OF THE CREDITOR AS WELL AS THE GENUINENESS OF THE TRANSACTION. HE FURTHER SUBMITTED THAT THE ORDER OF THE CIT(A) SHOULD BE SUSTAINED AND THE APPEAL OF TH E ASSESSEE SHOULD BE DISMISSED. 7. IN THE REJOINDER, LD. COUNSEL FOR THE ASSESSEE H AS STATED THAT IDENTICAL ISSUE IS EXAMINED BY THE ITAT IN ASSESSEES OWN CAS E FOR ASSTT. YEAR 2003- 04 VIDE ITA NO. 1246/D/2009 AND THE ADDITION MADE F OR THE UNEXPLAINED SHARE CAPITAL WAS DELETED. HE ALSO REFERRED TO THE ASSESSMENT ORDER AND STATED THAT IF ONLY THE ASSESSMENT ORDER IS READ, I T WILL PROVE THAT THE IDENTITY OF EACH AND EVERY SHAREHOLDER WAS ESTABLISHED. AT PAGE 2 OF THE ASSESSMENT ORDER, THE AO HAS GIVEN THE DETAILS OF SHARE CAPITA L FURNISHED BY THE ASSESSEE WHICH SHOWS COMPLETE ADDRESS OF THE SHAREHOLDER, TH EIR PERMANENT ACCOUNT NUMBER AS WELL AS THE WARD WHERE THEY ARE ASSESSED. THEREAFTER, THE AO HAS DISCUSSED THE CASE OF EACH AND EVERY SHAREHOLDE R FROM WHICH IT WOULD BE EVIDENT THAT THE AO MADE VERIFICATION FROM THE SHAR EHOLDER U/S 133(6) OF THE I.T. ACT. THE SHAREHOLDER REPLIED AFFIRMING THE IN VESTMENT MADE BY THEM IN THE SHARE CAPITAL OF THE ASSESSEE COMPANY. THEY AL SO FURNISHED THE COPY OF SHARE APPLICATION FORMS, ALLOTMENT LETTER AND THE C OPY OF BALANCE SHEET, PROFIT AND LOSS ACCOUNT FOR THE ASSTT. YEAR 2004-05. THE AO OF THE ASSESSEE ALSO ITA NO. 216/DEL/2008 7 HAD WRITTEN A LETTER TO THE AO OF THE SHAREHOLDER. THERE ALSO POSITIVE REPLY WAS RECEIVED. HE ALSO MADE VERIFICATION FROM THE B ANK. THUS, WHEN ALL THE SHAREHOLDERS ARE ASSESSED TO TAX, THEY HAVE AFFIRME D INVESTMENT IN SHARE CAPITAL, THE AMOUNT HAS BEEN RECEIVED BY CHEQUE AND IN THE BALANCE SHEET OF THE SHAREHOLDER, THE INVESTMENT IN THE ASSESSEES C OMPANY IS DULY DISCLOSED, THERE IS NO JUSTIFICATION AT ALL TO HOLD THAT THE A SSESSEE IS UNABLE TO ESTABLISH THE IDENTITY OF THE SHAREHOLDER AND THE GENUINENESS OF THE TRANSACTION. THE ASSESSEE HAS DULY ESTABLISHED THE IDENTITY OF THE S HAREHOLDER AS WELL AS THE GENUINENESS OF THE TRANSACTION. THAT AFTER THE DEC ISION OF THE HONBLE APEX COURT IN THE CASE OF LOVELY EXPORT (SUPRA), THE ASS ESSEE IS NOT REQUIRED TO ESTABLISH THE CREDITWORTHINESS OF THE SHAREHOLDER. HOWEVER, IN THIS CASE, THE ASSESSEE HAS ESTABLISHED EVEN THE CREDITWORTHINESS OF THE SHAREHOLDER. 8. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATTER PLACED BEFORE US. AT PAGE 2 OF THE ASSESSMENT ORDER, THE AO HAS GIVEN THE DETAILS OF SHARE CAPITAL ALLOTTED DURING THE YEAR UNDER CONSIDERATION. THE SAME IS REPRODUCED BELOW:- ITA NO. 216/DEL/2008 8 DETAILS OF SHARE CPAITAL ALLOTMENT DURING THE YEAR S.NO. NAME OF THE PARTY NO. OF SHARES PAN WARD/ITO 1. M/S TEK HIRE PURCHASE & LEASING CO. PVT. LTD. 15000 AACCT61091 ITO RISHIKESH 2. M/S SNG FINCAP LTD., NEW DELHI 10000 AACCS3009A 7(1) DELHI 3. M/S ASHWANI FINMIN SERVICES PVT. LTD., NEW DELHI 10000 AAECA5417G 2(2) DELHI 4. M/S MINIMAX FINVEST P. LTD.,, NEW DELHI 10000 AAACM6963F 6(4) DELHI 5. M/S QUARTEX COMMERCIAL P. LTD., NEW DELHI 10000 AAAC90081E 14(4) DELHI 6. M/S ROYAL TRADERS LTD. 10000 AAACR552IN 15((4) D ELHI 7. M/S BANKEY BIHARI CORPORATION LTD., DELHI 8000 AABCBB8230D 2(3) DELHI 8. M/S SAAR ENTERPRISES P. LTD., NEW DELHI 6000 AAFGS3212C 7(1) DELHI 9. M/S GUPTA IMPEX PVT. LTD., NEW DELHI 5000 AAACG02690 12(3) DELHI 10. M/S KALYAN EXTRACTION LTD., NEW DELHI 15000 AABCK5045R 5(1)DELHI 11. M/S KYLESONS FINANCIALS LTD., NEW DELHI 5000 AAACK5254H 5(3) DELHI 12. M/S EMEC TOURS & TRAVELS PVT. LTD., NEW DELHI 5000 AAACF1368F 11(1) DELHI 13. M/S SUNRISE DEVELOPERS P. LTD. 10000 AAACS2010H 9(3) DELHI 14. M/S AKULK WOOLENS LTD. 3000 AADCA2560R 1(3) D ELHI 15. M/S JAY DEE SECURITIES & FINANCES LTD., NEW DELHI 5000 AAACJ2050M 4(2) DELHI 16. M/S SACHDEVA FINANCIAL SERVICES PVT. LTD. 5000 AABCS8936R 7(1) DELHI 17. M/S BEETAL PLANTATION PVT. LTD. 20000 AAACB4662J 2(4) DELHI 18. M/S XYLOPHONE COMMERCIAL P. LTD., NEW DELHI 10000 AAACX0009K 18(4) DELHI ITA NO. 216/DEL/2008 9 19. M/S BLOSSOM ADVERTISERS P. LTD., NEW DELHI 10000 AABCB5113B 3(1) DELHI 20. M/S KVK MULTI FACT PROJECTS LTD., NEW DELHI 25000 AABCK9270G 5(1) DELHI 21. M/S SVAM ONLINE COM LTD., NEW DELHI 30000 AAHCS5119G 7(4) DELHI 22. M/S PREPAID LEGAL SERVICES INDIA LTD., NEW DELHI 5000 AACCP5821F 14(3) DELHI 23. M/S CLASSIC GLOBAL FINANCE & CAPITAL LTD. 30000 AACCC0344E RANGE VII LUDHIANA 24. M/S MEWAT ZINC LTD. 20000 AAACM6502E 6(4) DELHI 8.1 FROM THE ABOVE, IT IS EVIDENT THAT THE NAMES AN D ADDRESSES OF THE SHAREHOLDERS, NUMBER OF SHARES ALLOTTED, THEIR PERM ANENT ACCOUNT NOS. AND THE AO WITH WHOM THEY ARE ASSESSED WERE AVAILABLE W ITH THE AO. THE DETAILS FURNISHED BY THE ASSESSEE AND THE INQUIRIES CONDUCTED BY THE AO ARE MENTIONED IN DETAIL IN RESPECT OF EACH AND EVERY SH AREHOLDER WHICH IS RUNNING FROM PAGE NO. 3 TO 30 OF THE ASSESSMENT ORD ER. HOWEVER, FOR THE SAKE OF BREVITY, WE WILL MENTION THE DETAILS NARRAT ED BY THE AO IN RESPECT OF FIRST SHAREHOLDER I.E. M/S TEK HIRE PURCHASE & LEAS ING CO. PVT. LTD. IT IS ADMITTED BY BOTH THE PARTIES THAT THE FACTS RELATIN G TO ALL THE SHAREHOLDERS ARE MORE OR LESS SIMILAR:- 1. M/S TEK HIRE PURCHASE & LEASING PVT. LTD. THIS PARTY HAS PAN NUMBER UNDER THE JURISDICTION O F ITO RISHIKESH AND HAS APPLIED BY MAKING PAYMENT THR OUGH DDNO. 659/20.01.2004 & DD NO. 659525/17.01.2004 DRA WN ON INDIAN OVERSEAS BANK, RISHIKESH. IN RESPONSE TO LETTER SENT ON 19 TH JUNE U/S 133(6) OF THE INCOME TAX ACT, 1961, THE PARTY REPLIED VIDE LETTER DATED 10.7.2006. THOUGH THE PARTY IS ITA NO. 216/DEL/2008 10 HAVING ITS REGISTERED OFFICE AT RISHIKESH, BUT THIS LETTER HAS BEEN SENT BY THE PARTY FROM DELHI, AS IS CLEAR FROM THE RECEIPT OF THE COURIER AGENCY. THE CONTENTS OF THE LETTER ARE REVEALING: TEK HIRE PURCHASE & LEASING CO. PRIVATE LIMITED REGD. OFFICE: INDERLOK HOTEL, RAILWAY ROAD, RISHI KESH DATED: 10.07.2006 BEFORE, THE ASSTT. COMMISSIONER OF INCOME TAX, ROOM NO. 212, ROHTAK CIRCLE SUB: INFORMATION U/S 133(6) OF THE INCOME TAX ACT, 1961 RESPECTED SIR, PLEASE REFER TO LETTER NO. ACIT/RTK CIRCLE/GOEL/DIE /2004- 2005/&/2006-07/3335 DATED 19.6.2006 ISSUED BY YOUR OFFICE. AS DESIRED BY YOUR GOODSELF, PLEASE FIND ENCLOSED HERE WITH FOLLOWING PAPERS/DOCUMENTS/INFORMATION: 1. SHARE APPLICATION FORMS(2) 2. ALLOTMENT LETTER 3. COPY OF BALANCE SHEET AND PROFIT & LOSS ACCOUNT FOR THE ASSESSMENT YEAR 2004-2005. WE HOPE THAT YOUR GOOD SELF SHALL FIND THE ABOVE IN ORDER. WE SHALL BE WILING TO PROVIDE ANY FURTHER INFORMATION/DOCUME NTS AS MAY BE DESIRED BY YOUR GOODSELF FOR EXPEDITIOUS DISPOSAL O F THE MATTER. THANKING YOU SD/- YOURS FAITHFULLY, FOR TEK HIRE PURCHASE & LEASING CO. PVT. LTD. DIRECTOR. ITA NO. 216/DEL/2008 11 THE ABOVE REPLY SHOWS THAT THE PARTY DID NOT SEND C OPY OF SHARE CERTIFICATES ISSUED TO THEM BY GOEL DIE CAST LTD. EITHER PARTY DID NOT SEND COPY OF THE SHARE CERTIFICATES DELIBERATEL Y OR IT DID NOT HAVE IN ITS POSSESSION COPY OF SHARE CERTIFICATES A T LEAST UP TO 10.07.2006. THE COPY OF ALLOTMENT LETTER SENT BY M/S TEK HIRE P URCHASE & LEASING CO. PRIVATE LTD., WHICH IS SIMILAR IN CASE OF ALL THE PARTIES, ALSO REFLECTS INTERESTING THINGS. GOEL DIE-CAST LTD. WORKS & REGD. OFFICE: 4 TH KM. STONE, DELHI-ROHTAK ROAD, VILLAGE SANKHOL, BAHADURGARH-124507 REF. NO... DATE. TO M/S TEK HIRE PURCHASE & LEASING CO. PVT. LTD. INDERLOK HOTEL, RAILWAY ROAD, RISHIKESH. SUB: ALLOTMENT LETTER DEAR SIR, WE WOULD LIKE TO THANK YOU FOR YOUR INTEREST IN OUR COMPANY AND WE WOULD LIKE TO INFORM YOU THAT THE COMPANY HA S ALLOTTED 15000 (FIFTEEN THOUSAND ONLY) FULLY PAID UP EQUITY SHARES OF RS.100/- EACH AT PAR ON 15.3.2004. THE DETAILS ARE AS UNDER:- REGD. FOLIO CERTIFICATE DISTINCTIVE NO. OF NO. NO. FROM TO SHARES 121 171 311869 316868 5000 121 178 316869 321868 5000 121 179 321869 326868 5000 ITA NO. 216/DEL/2008 12 ORIGINAL SHARE CERTIFICATE WILL BE SENT SHORTLY. K INDLY ACKNOWLEDGE THE SAME. THANKING YOU, YOURS FAITHFULLY, FOR GOEL DIE CAST LTD. SD/- (DIRECTOR) SIMILAR LETTERS HAVE BEEN SENT TO ALL THE SHARE ALL OTTEES BY THE ASSESSEE. HOWEVER, NO DATE HAS BEEN MENTIONED ON W HICH THIS LETTER IS PURPORTEDLY WRITTEN. THE REFERENCE IS TO 15 TH OF MARCH, WHEN SHARES HAVE BEEN ALLOTTED. IT FURTHER SAYS THAT ORIGINAL SHARE CERTIFICATE WILL BE SENT SHORTLY. THAT MEANS, NO SHARE CERTIFICATE WAS SENT ON 15.3.2004 BY THE ASSESSEE COMPANY TO ANY OF THE SO- CALLED SHAREHOLDERS. 1.2 A LETTER DATED 1 ST NOVEMBER, 2006 WAS WRITTEN TO THE ASSESSING OFFICER OF THIS PARTY AT RISHIKESH TO FIND OUT ABOU T ITS ASSESSMENT RECORDS. THEREAFTER, COMMISSION U/S 131(1)(D) OF T HE INCOME TAX ACT, 1961 WAS ISSUED TO THE ITO, WARD-1, RISHIK ESH, HAVING JURISDICTION OVER THIS PARTY AND FOLLOWING INFORMAT ION WAS CALLED. IT IS MENTIONED HERE THAT SAME INFORMATION WAS CALLED FROM THE OTHER PARTIES ALSO. .. I) HOW DID M/S TEK HIRE PURCHASE & LEASING COMPANY PVT . LIMITED CAME TO KNOW THAT M/S GOEL DIE CAST LTD. HA S INVITED FOR APPLICATION FOR SHARES? II) HOW DID M/S TEK HIRE PURCHASE & LEASING CO. PVT. LT D. APPROACH M/S GOEL DIE CAST LTD.? III) PROOF REGARDING SENDING OF THE APPLICATION FOR SHAR ES TO M/S GOEL DIE CAST LTD. I.E. TO SUBMIT COPY OF THE DISPA TCH REGISTER/COPY OF PROOF OF DISPATCH BY POSTAL AUTHOR ITY/COURIER RECEIPT. IV) WHAT WAS THE MODE BY WHICH M/S TEK HIRE PURCHASE & LEASING COMPANY PVT. LTD. RECEIVED THE INFORMATION FROM M/S GOEL DIE CAST LTD. THAT YOU HAVE BEEN ALLOTTED SHARES. ITA NO. 216/DEL/2008 13 V) DATE ON WHICH M/S TEK HIRE PURCHASE & LEASING PVT. LIMITED HAVE RECEIVED SHARE CERTIFICATES. VI) TO PRODUCE COPY OF SHARE CERTIFICATE VII) IN CASE THE SHARES HAVE BEEN TRANSFERRED BY M/S TEK HIRE PURCHASE & LEASING CO. PVT. LTD., TO SUBMIT COPY OF TRANSFER DEED. VIII) COPY OF BANK ACCOUNT THROUGH WHICH PAYMENT FOR APPLICATION MONEY TO THE COMPANY HAS BEEN MADE BY M /S TEK HIRE PURCHASE & LEASING CO. PVT. LTD.. THE REPLY SUBMITTED BY THIS PARTY IN RESPONSE TO SU MMONS ISSUED U/S 131 BY ITO, WARD-1, RISHIKESH IS AS UNDER:- .. 1. DIRECTOR OF M/S GOEL DIE CAST LTD. APPROACHED OUR C OMPANY THROUGH COMMON FRIENDS FOR PRIVATE PLACEMENT OF EQU ITY SHARES FOR THEIR BUSINESS PURPOSES. 2. ON INVITATION OUR COMPANY APPLIED FOR EQUITY SHARES IN AFORESAID COMPANY. COPIES OF APPLICATION ENCLOSED. 3. APPLICATIONS WERE SUBMITTED BY HAND. 4. THE COMPANY RECEIVED THE INFORMATION REGARDING ALLO TMENT OF SHARES THROUGH ALLOTMENT LETTER ISSUED BY GOEL DIE CAST LTD. THE COPY OF THE SAME IS ENCLOSED HEREWITH. 5. THE SHARE CERTIFICATES WERE RECEIVED ON 18 TH MARCH, 2004. COPIES OF SHARE CERTIFICATE ARE ENCLOSED. 6. THE COMPANY HAS NOT TRANSFERRED THESE CERTIFICATES. 7. COPY OF BANK ACCOUNT AS REQUIRED BY YOUR GOODSELF I S ENCLOSED HEREWITH. THIS REPLY SUBMITTED BY THE PARTY REFLECTS THAT THE PARTY HAVING ITS OFFICE AT RISHIKESH, UTTARANCHAL, SENT A PERSON TO BAHADURGARH, ROHTAK FOR SUBMITTING APPLICATION BY HAND, INSTEAD OF SENDING IT BY POST. THE PARTY HAS GIVEN COPY OF SHARE CERTIFICAT E PURPORTEDLY ISSUED ON 15 TH MARCH, 2004 AND PURPORTEDLY RECEIVED BY THE PARTY ON 18 TH OF MARCH. THAT MEANS, WHEN LETTER WAS ISSUED ON 19.6.2006 FOR COPY OF SHARE CERTIFICATE, THE PARTY WAS HAVING THE SHARE CERTIFICATE IN ITS POSSESSION. HOWEVER, THER E IS NO EXPLANATION AS TO WHY THE COPY OF SHARE CERTIFICATE WAS NOT SENT EARLIER IN RESPONSE TO LETTER DT. 19.6.2006. THIS PARTY HAS ALSO SUBMITTED ITS BALANCE SHEET. IT SHOWS THAT DURING THE YEAR IT SOLD ITS ITA NO. 216/DEL/2008 14 BUILDING AND THERE WAS NO IMMOVABLE PROPERTY WITH T HE COMPANY AS AT 31.3.2004. THE SCHEDULE OF CURRENT LIABILITI ES AND PROVISIONS AND EXPENDITURE ON ADMINISTRATION AND GENERAL OVERH EADS ARE AS UNDER:- CURRENT LIABILITIES & PROVISIONS AS ON 31.03.2004 SHRI SATGURU DEVIJI 5.25 GANGES RESORTS LTD. - PROVISION FOR NPA - PROVISION FOR TAXATION 13550/- DEFERRED TAX LIABILITY 4413 /- AUDIT FEE PAYABLE 13800/- DIRECTOR SALARY PAYABLE 30000/- IT IS INTERESTING THAT THERE ARE NO SUNDRY CREDITO RS IN THE CURRENT LIABILITIES . EXPENDITURE ON ADMN. & GENERAL OVERHEAD AS AT 31.03.2004 SALARY TO STAFF 45,600 PRINTING & STATIONARY 1246 RENT 7744 WATER TAX - AUDIT FEES 13800 MISC. EXPENSES 727 PRELIMINARY EXPENS W/OFF 1450 BANK CHARGES 6055 ROC FEE EXPENSE 1500 WILL A NORMAL PARTY HAVING SUCH TYPE OF EXPENSES HA VE THE CAPACITY TO INVEST HUGE SUMS IN SHARES. FROM THE COPY OF BALAN CE SHEET IT IS SEEN THAT THE FUNDS AVAILABLE WITH THE PARTY ARE RS.29,2 0,655/-. OUT OF THESE TOTAL FUNDS AVAILABLE WITH THE PARTY, THE PAR TY HAS INVESTED IN FOLLOWING SHARES:- GOEL DIE CAST LTD. 15,00,000/- GYAN DEEPA TRADE PVT. LTD. 10,00,000/- PARSHVANATH SHARE BROKING PVT. LTD. 4,25,000/- TOTAL 29,25,000/- ITA NO. 216/DEL/2008 15 THERE IS CLEAR MISMATCH. THE PARTY HAS TALLIED ITS BALANCE SHEET BY THE ABOVE MENTIONED ITEMS IN CURRENT LIABILITIES . IT SHOWS THAT THE PARTY IN REALITY DID NOT HAVE FUNDS TO SUPPORT THESE INVESTMENTS. THESE ARE LONG TERM INVESTMENTS. WHE RE IS THE DAY TO DAY EARNING TO SUPPORT THE SURVIVAL OF COMPANY. IT CREATES DOUBTS THAT THE COMPANY IS NOT A REAL COMPANY BUT I S BEING USED TO GIVE ACCOMMODATION ENTRIES. FURTHER, THE PARTY HAS SUBMITTED ITS COPY OF BANK ACCOUNTS FOR THE PERIOD 1/11/2003 TO 27/3/2004. THE COMPANY HAS SHOWN TO HAVE SOLD BUILDING DURING THE YEAR. THE SALE IS SHOWN AT RS.248367.50 IN THE SCHEDULE O F FIXED ASSETS PREPARED ACCORDING TO COMPANIES ACT (131992.75 AS P ER SCHEDULE OF DEPRECIATION ACCORDING TO INCOME TAX AC T, 1961). HOWEVER, NEITHER OF THESE AMOUNTS FINDS PLACE IN TH E BANK ACCOUNT SUBMITTED BY THE PARTY. THE CASH AND BANK AS AT 31.3.2004 IS SHOWN AT RS.7105.50. THE COPY OF BANK ACCOUNT SHOWS THE CLOSING BALANCE AT RS.4010/-. THUS THE T OTAL CASH IN HAND IS RS.3095.50. THEN WHERE ARE THE FUNDS RECEI VED FROM THE SALE OF BUILDING. IN THE BANK ACCOUNT, THE TOTAL O F DEBITS IS RS.26,30,390/- AND TOTAL OF CREDITS IS RS.26,34,400 /-. IT CAN HAPPEN ONLY IN RARE CASES IF IT IS A NORMAL CASE. FURTHER CREDITS IN THE BANK ACCOUNTS ARE MATCHED WITH SIMILAR AMOUN TS WITH DEBITS ON THE SAME DATES. THERE ARE SIX BIG DEBITS AND SIX CREDITS. ANOTHER LETTER HAS BEEN RECEIVED FROM THE PARTY ON 5.12.2006. IT REPEATS THE SAME INFORMATION RECEIVED THROUGH COMMI SSION. HOWEVER, ANOTHER INTERESTED FEATURE WAS REFLECTED. THE LETTER HAS COME THROUGH COURIER. THE COURIER SHOWS THE ORIGIN OF LETTER AT KAROL BAGH, NEW DELHI AND DESTINATION ROHTAK, THOUG H THE ENVELOPE SAYS THAT THE LETTER IS PURPORTEDLY SENT F ROM RISHIKESH. THESE CIRCUMSTANCES DISCUSSED ABOVE CLEARLY POINT T OWARDS THE UNDENIABLE CONCLUSION THAT THE PARTY DOES NOT HAVE CREDITWORTHINESS, BUT HAS BEEN USED BY THE ASSESSEE TO TAKE ACCOMMODATION ENTRIES TO ROUTE ITS OWN MONEY AS SHA RE CAPITAL. 8.2 FROM THE ABOVE, IT IS EVIDENT THAT THE AO CALLE D FOR THE INFORMATION U/S 133(6) FROM THE SHAREHOLDER NAMELY M/S TEK HIRE PUR CHASE LEASING PVT. ITA NO. 216/DEL/2008 16 LTD. IN REPLY, THEY FURNISHED A COPY OF SHARE APPLI CATION FORM, ALLOTMENT LETTER, COPY OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT FOR ASSTT. YEAR 2004-05. THE AO ALSO ISSUED SUMMONS U/S 131(1)(D) TO THE AO OF M/S TEK HIRE PURCHASE, IN RESPONSE TO WHICH ALSO THE AO OF M/S TEK HIRE PURCHASE SUPPLIED THE INFORMATION AS ASKED FOR. THE AO VERI FIED THE BALANCE SHEET AND FOUND THAT THE BALANCE SHEET OF M/S TEK HIRE PU RCHASE SHOWS AVAILABILITY OF FUNDS OF RS. 29,20,655/- , OUT OF W HICH A SUM OF RS. 15 LAKH WAS INVESTED AS SHARE CAPITAL IN THE ASSESSEE COMPA NY. THE AO DOUBTED THE GENUINENESS OF THE COMPANY ON THE GROUND THAT ITS E ARNING IS MEAGER TO SUPPORT THE SURVIVAL OF THE COMPANY. HOWEVER, THE Q UESTION IS NOT WHETHER THE COMPANY WILL SURVIVE IN THE LONG RUN OR NOT. T HE QUESTION IS WHETHER THE COMPANY WAS EXISTING ON THE DAY ON WHICH IT INVESTE D IN THE SHARE CAPITAL OF THE ASSESSEE COMPANY. IT IS UNDISPUTED THAT M/S TA KE HIRE PURCHASE & LEASING CO. PVT. LTD. WAS EXISTING COMPANY DURING T HE FINANCIAL YEAR 2003- 04. IT FURNISHED ITS RETURN OF INCOME FOR AY 2004- 05. FROM THE TOTALITY OF THESE FACTS, WE ARE UNABLE TO AGREE WITH THE AO OR LEARNED DR THAT THE IDENTITY OF THE SHAREHOLDER I.E. M/S TAKE HIRE PURC HASE & LEASING WAS NOT ESTABLISHED. WE ALSO DO NOT FIND ANY JUSTIFICATION FOR DOUBTING THE GENUINENESS OF THE TRANSACTION. THE SHAREHOLDER HA S AFFIRMED THE INVESTMENT IN THE ASSESSEE COMPANY. IT PRODUCED SHARE APPLICA TION FORM, ALLOTMENT ITA NO. 216/DEL/2008 17 LETTER, BALANCE SHEET AND ALSO THE COPY OF BANK ACC OUNTS. ALL THESE DOCUMENTS PROVE THE GENUINENESS OF THE TRANSACTION. THE REVENUE, ON THE OTHER HAND, DOUBTED THE GENUINENESS OF THE TRANSACT ION ON THE BASIS OF SUSPICION OR IRRELEVANT ISSUES. ON THE TOTALITY OF THESE FACTS, THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS LOVELY EXP ORT (P) LTD. 216 CTR 195 AND THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS OASIS HOSPITALITIES (P) LTD. 2010 (DHC) 51 DTR 7 4, 238 CTR 402; CIT VS DWARKADHISH INVESTMENTS(P) LTD. 2010 (DHC) 330 I TR 298; AND CIT VS WINSTRAL PETROCHEMICALS (P) LTD. 2011 (DHC) 330 ITR 603; WOULD BE SQUARELY APPLICABLE. THE C BENCH OF THE ITAT, NE W DELHI, IN ASSESSEES OWN CASE FOR AY 2003-04 VIDE ITA NO. 1246/D/2009 AL SO DECIDED IDENTICAL ISSUE ON IDENTICAL SET OF FACTS IN FAVOUR OF THE AS SESSEE. THEREFORE, THE DECISION OF ITAT IN ASSESSEES OWN CASE FOR AY 2003 -04 WOULD ALSO BE SQUARELY APPLICABLE TO THE YEAR UNDER APPEAL. THE FACTS IN THE CASE OF ALL THE OTHER SHAREHOLDERS ARE MORE OR LESS IDENTICAL TO TH E FACTS IN THE CASE OF M/S HIRE PURCHASE & LEASING LTD. DISCUSSED ABOVE. IN T HE CASE OF ALL THE SHAREHOLDERS, THE ASSESSEE HAS FURNISHED THE NAMES AND ADDRESSES OF THE SHAREHOLDERS, THEIR PAN NO. AND THE WARD WITH WHOM THEY ARE ASSESSED. THE AO MADE DIRECT INQUIRY FROM THE SHAREHOLDERS AN D EACH ONE OF THEM HAVE AFFIRMED THE AMOUNT INVESTED IN THE SHARE CAPI TAL OF THE ASSESSEE ITA NO. 216/DEL/2008 18 COMPANY. THE AO MADE VERIFICATION FROM THE AO OF T HE SHAREHOLDERS FROM WHERE ALSO, IT IS AFFIRMED THAT THE SAID SHAREHOLDE RS HAVE INVESTED THE MONEY IN THE SHARE CAPITAL OF THE ASSESSEE COMPANY. THE PROFIT & LOSS ACCOUNT AND BALANCE SHEET OF THE SHAREHOLDERS ARE PRODUCED, BAN K ACCOUNTS ARE ALSO PRODUCED. IN VIEW OF THESE FACTS, WE HOLD THAT THE ASSESSEE HAS DULY DISCHARGED THE BURDEN OF PROVING THE SHARE CAPITAL WHICH LAY UPON IT. ON THESE FACTS, THE DECISION OF HONBLE APEX COURT IN THE CASE OF LOVELY EXPORT, THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS OASIS HOSPITALITIES (P) LTD. 2010 (DHC); CIT VS DWARKADHISH INVESTMENTS(P) LTD. 2010 AND CIT VS WINSTRAL PETROC HEMICALS (P) LTD. 2011 (DHC) 330 ITR 603 AND THE DECISION OF THE ITAT IN A SSESSEES OWN CASE FOR AY 2003-04 WOULD BE SQUARELY APPLICABLE. RESPECTFU LLY FOLLOWING THE SAME, WE DELETE THE ADDITION OF RS. 1,38,00,000 MAD E BY THE AO ON ACCOUNT OF UNEXPLAINED SHARE CAPITAL U/S 68 OF THE IT ACT. WE ALSO DELETE THE ENHANCEMENT OF RS. 94,00,000 MADE BY THE CIT(A) FOR UNEXPLAINED SHARE CAPITAL. 9. THE ONLY OTHER GROUND IS WITH REGARD TO CHARGING OF INTEREST U/S 234B. THE SAME IS CONSEQUENTIAL. THE AO IS DIRECTED TO R ECOMPUTE THE INTEREST, IF ANY, AFTER GIVING EFFECT TO OUR ORDER. 10. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED AS ABOVE. ITA NO. 216/DEL/2008 19 ORDER PRONOUNCED IN THE OPEN COURT ON 31.1.2012. SD/- SD/- ( A.D. JAIN ) ( G.D. AGRAWAL ) JUDICIAL MEMBER VICE PRESIDENT DT. 31ST JANUARY 2012 GS COPY FORWARDED TO:- 1. M/S GOEL DIE CAST LTD., HARYANA 2. ACIT, CIRCLE ROHTAK 3. CIT(A), ROHTAK 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR