ITO Ward-17 (3), New Delhi V. Vikas Portfolio (P) Ltd, New Delhi

ITA 2276/DEL/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2299 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 17-11-2009
• Assessment Year: 1999-2000
• Appeal Filed On: 11-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BK GUPTA
• Keywords: Income from undisclosed sources; Bonafide belief; Corroborative evidences; Accommodation entries; Reason to believe; Reassessment proceedings; Set aside
• Section: 133(6); 143(1); 251; 143(2); 192; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H, NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER & SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 2276/DEL/2008 ASSESSMENT YEAR: 1999-2000 ITO, VS. M/S VIKAS PORTFOLIO P. LTD., WARD 17(3), 2758/248, TRI NAGAR, DELHI. NEW DELHI. PAN NO. AABCV3865A (APPELLANT) (RESPONDENT) & CROSS OBJECTION NO. 54/DEL/09 ASSESSMENT YEAR: 1999-2000 M/S VIKAS PORTFOLIO P. LTD., VS. INCOME TAX OFFICE R, 2758/248, TRI NAGAR, DELHI. WARD 17(3), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. B.K. GUPTA, SR. DR RESPONDENT BY : SH. AMOL SINHA, ADV. ORDER PER I.P. BANSAL, J.M. THE APPEAL IS FILED BY THE REVENUE AND CROSS OBJE CTION BY THE ASSESSEE. BOTH ARE DIRECTED AGAINST ORDER OF CIT(A ) DATED 13.03.08 FOR A.Y. 1999-2000. 2. GROUNDS OF APPEAL READ AS UNDER : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 10,00,000 /- MADE BY THE AO ON ACCOUNT OF INCOME FROM UNDISCLOSED SOURCES. ITA NO. 2276/D/08 & CO NO. 54/DEL/09 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 20,000/- MADE BY THE AO ON ACCOUNT OF COMMISSION PAID. GROUNDS OF CROSS OBJECTION READ AS UNDER : - ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD . CIT(A) OUGHT TO HAVE HELD THAT LD. AO HAS ERRED IN ARBITRARILY REOP ENING THE ASSESSMENT U/S 147 OF THE ACT, WHICH IS WITHOUT JUR ISDICTION, CONTRARY TO THE FACTS AND PROVISIONS OF LAW AND WITHOUT THER E BEING ANY REASONS TO BELIEVE HENCE LIABLE TO BE QUASHED AS VO ID. 3. THE RETURN IN THE PRESENT CASE IS FILED AT NIL O N 10.12.1999, WHICH WAS PROCESSED U/S 143(1). AN INFORMATION WAS RECEI VED BY THE AO OF THE ASSESSEE FROM DIT INVESTIGATION, NEW DELHI VIDE LET TER DATED 03.03.06 THAT THE COMPANY HAD RECEIVED ACCOMMODATION ENTRIES, ENT RY OF RS. 3,00,900/- ON 16 TH MAY, 1998 FROM M/S SUMA FINANCE LTD. THROUGH CORPO RATION BANK, KAROL BAGH, NEW DELHI, WHICH ACCORDING TO REVENUE W AS IN THE NATURE OF ACCOMMODATION ENTRY AND WAS ASSESSEES UNACCOUNTED MONEY WHICH WAS SHOWN IN THE BOOKS OF ACCOUNT AS A RECEIPT FROM VAR IOUS PARTIES. IT IS IN THE CIRCUMSTANCES THE AO AFTER OBTAINING APPROVAL OF AD DL. CIT, RANGE-XVII, NEW DELHI VIDE LETTER DATED 17.03.06 REOPENED THE A SSESSMENT U/S 147 OF THE INCOME TAX ACT, 1961. ACCORDINGLY NOTICE U/S 1 48 WAS ISSUED ON 20.03.06, IN RESPONSE TO WHICH THE ASSESSEE FILED T HE RETURN OF INCOME. THEREAFTER THE STATUTORY NOTICES WERE ISSUED FOR SC RUTINY ASSESSMENT AND RESULTANTLY IMPUGNED ASSESSMENT HAS BEEN FRAMED AT AN INCOME OF RS. 10,20,536/- WHEREBY MAKING AN ADDITION OF RS. 10 LA KH BEING SHARE APPLICATION MONEY RECEIVED FROM THREE PARTIES AND R S. 20,000/- ON ACCOUNT OF COMMISSION FOR OBTAINING THAT SHARE APPLICATION MONEY. THE DETAIL OF SHARE APPLICATION MONEY AND NAME OF THE PARTIES IS AS UNDER: - ITA NO. 2276/D/08 & CO NO. 54/DEL/09 3 1) M/S SUMA FINANCE INVESTMENT LTD. (NEW NAME MODE RATE CREDIT CORPORATION LTD.) RS. 3 LAKH 2) M/S SHRESTH COMMERCIAL PVT. LTD. RS. 4 LAKH 3) VICTORY SHARE & STOCK BROKERS LTD. RS. 3 LAKH TOTAL RS. 10 LAKH 4. THE ASSESSEE WAS REQUIRED TO FILE CONFIRMATION A ND OTHER DETAILS TO PROVE THE GENUINESS OF THE SHARE APPLICATION MONEY RECEIVED FROM THESE 3 PARTIES. IN RESPONSE, IT WAS SUBMITTED THAT THE AS SESSEE HAD ALREADY SUBMITTED THE COPY OF BANK STATEMENT ALONG WITH NAR RATION OF BANK STATEMENT AND ALL THE PERSONS, AS INFORMED, ARE RES IDING AT THE PLACES AS INTIMATED TO THE DEPARTMENT DURING THE ASSESSMENT P ROCEEDINGS. IT IS BEYOND THE CONTROL OF THE ASSESSEE TO PRODUCE THOSE PERSONS HOWEVER, REVENUE HAS UNFETTERED RIGHTS TO CALL UPON THEM UND ER THE PROVISIONS OF INCOME TAX ACT. THUS, IT WAS SUBMITTED THAT INITIA TION OF REASSESSMENT PROCEEDING WAS NOT CALLED FOR. 5. THE AO OBSERVED FROM THE BANK STATEMENTS FILED B Y THE ASSESSEE THAT CASH AMOUNTING TO RS. 2,50,000/-, RS. 5,70,000 /- & RS. 1,50,000/- WAS DEPOSITED ON 15 TH MAY, 1998, 16 TH MAY, 1998 & 16 TH MAY, 1998 RESPECTIVELY IN BANK ACCOUNT NO. 3097 OF M/S R.K. AGGARWAL & CO. , WHICH WAS TRANSFERRED TO M/S SUMA FINANCE INVESTMENT LTD. ON THE SAME DAY AND A CHEQUE OF RS. 3 LAKH WAS ISSUED TO THE ASSESSEE. 6. SIMILARLY, IT WAS FOUND BY THE AO THAT IN THE BA NK ACCOUNT OF M/S VICTORY PORTFOLIO LTD. A SUM OF RS. 2 LAKH WAS DEPO SITED IN CASH ON 18 TH ITA NO. 2276/D/08 & CO NO. 54/DEL/09 4 MAY, 1998 AND IT WAS TRANSFERRED TO BANK ACCOUNT OF M/S VICTORY SHARE & BROKERS LTD. AND ON THE SAME DAY A CHEQUE WAS ISSUE D TO THE ASSESSEE. 7. SIMILARLY, IT WAS FOUND BY THE AO THAT RS. 4 LAK H WAS DEPOSITED BY CLEARING ON 19 TH MAY, 1998 IN THE ACCOUNT OF M/S SRESTH COMMERCIAL PVT. LTD. AND ON THE SAME DAY CHEQUE WAS ISSUED TO THE A SSESSEE AND OPENING BALANCE IN THAT ACCOUNT WAS ONLY A SUM OF RS. 5,716 /- ONLY. 8. TAKING CLUE FROM THESE FACTS, LD. AO OBSERVED TH AT ASSESSEE WAS NOT ABLE TO PRODUCE THESE PARTIES FOR VERIFICATION EVEN AFTER GIVING THE SUFFICIENT OPPORTUNITY AND, THEREFORE, THERE IS NO ALTERNATIVE WITH HIM EXCEPT TO CONSIDER THE SAID AMOUNT AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES. A SUM OF RS. 20,000/- BEING 2% OF RS. 10 LAKH WAS FURTHER ADDED TO THE SAID AMOUNT OF RS. 10 LAKH ON ACCOUNT OF COM MISSION PAID FOR OBTAINING THE AMOUNT OF RS. 10 LAKH. 9. BEFORE CIT(A) APART FROM AGITATING THE INITIATIO N OF REASSESSMENT PROCEEDINGS, ADDITIONS ON MERIT WERE ALSO CHALLENGE D. IT WAS SUBMITTED THAT THE RETURN OF INCOME WAS FILED WITH THE AUDITED BAL ANCE SHEET, PROFIT AND LOSS ACCOUNT, AUDIT REPORT ETC. AND THE NATURE OF B USINESS WAS TRADING IN SHARE AND PROPERTY. THE ASSESSEE IS REGULARLY ASSE SSED TO INCOME TAX AND IS KEEPING PROPER BOOKS OF ACCOUNT. A SUM OF RS. 1 0 LAKH WAS RECEIVED AT SHARE APPLICATION MONEY DURING THE YEAR. THE INCOM E WAS ASSESSED U/S 143(1) OF THE ACT AND THUS, THE ASSESSMENT GOT FINA LITY ON 31.03.02 AFTER THE LAPSE OF TWO YEARS FROM THE END OF THE ASSESSMENT Y EAR IN WHICH THE RETURN WAS FILED. ALL THE FACTS INCLUDING ASSESSEE HAVING RECEIVED FRESH SHARE ITA NO. 2276/D/08 & CO NO. 54/DEL/09 5 CAPITAL OF RS. 10 LAKH WAS SUBMITTED AND IS FOUND P LACE ON RECORD AND THUS, HAD ATTAINED FINALITY DUE TO APPLICATION OF MIND BY THE AO. THE ASSESSMENT WAS REOPENED ON THE GROUND THAT INFORMATION WAS REC EIVED BY THE DEPARTMENT THAT SHARE APPLICATION MONEY RECEIVED FR OM SUMA FINANCE INVESTMENT LTD. WAS AN ACCOMMODATION ENTRY. FOR TH IS REASON AO OBTAINED THE APPROVAL OF ADDL. CIT WHICH HE GRANTED BY WRITI NG OF YES I AM SATISFIED. IT WAS SUBMITTED THAT REASSESSMENT PRO CEEDINGS IS NOT VALID AS THE SAME HAS BEEN EXERCISED ON THE BASIS OF CONJUNC TURES, UNSPECIFIC AND VAGUE INFORMATION IN AS MUCH AS THE INFORMATION IS REASONED TO SUSPECT FOR MAKING ROVING ENQUIRIES, WHICH UNDER LAW IS NOT PERMISSIBLE. REFERENCE WAS MADE TO SEVERAL DECISIONS TO CONTEND THAT REASS ESSMENT PROCEEDINGS WERE INVALID. 10. THE REPORT OF INVESTIGATION OFFICER WAS NOT MAD E AVAILABLE. REFERENCE WAS MADE TO THE ASSESSMENT ORDER OF SUMA FINANCE & INVESTMENT LTD. TO SHOW THAT SHARE CAPITAL TRANSACT ION OF THE ASASESSEE WITH THAT CONCERN WAS ACCEPTED AS GENUINE. IT WAS SUBMI TTED THAT AO AND ADDL. CIT COULD HAVE VERIFIED THAT FACT FROM THE FILE OF THE SAID CASE AND THUS, IT WAS SUBMITTED THAT REASSESSMENT PROCEEDINGS HAVE WR ONGLY BEEN INITIATED AND SHOULD BE QUASHED. 11. LD. CIT(A) HAS UPHELD THE INITIATION OF REASSES SMENT PROCEEDINGS BY CITING VARIOUS DECISIONS BY HOLDING THAT REASON TO BELIEF CANNOT BE EQUATED WITH THE REASONS TO SUSPECT. HE OBSERVED THAT IT IS NOT NECESSARY THAT THERE SHOULD BE AMPLE EVIDENCE ON RECORD TO ESTABLI SH THE ACTUAL ESCAPEMENT OF INCOME SO AS TO FORM A REASONABLE BEL IEF. ACCORDING TO LD. ITA NO. 2276/D/08 & CO NO. 54/DEL/09 6 CIT(A) THERE HAS TO BE SOME MATERIAL ON RECORD ON T HE BASIS OF WHICH THE AO COULD FORM A BONAFIDE BELIEF THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT AND AFTER GOING THROUGH THE REAS ONS RECORDED BY AO, IT IS OBSERVED BY HIM THAT AO COULD NOT JUST IGNORE SERIOUS ALLEGATIONS ABOUT THE POSSIBLE ESCAPEMENT OF INCOME AND THUS, HE HAS UPHELD THE REASSESSMENT PROCEEDINGS. 12. ON MERITS IT WAS SUBMITTED THAT FOLLOWING INFOR MATION WERE SUBMITTED BEFORE AO WITH REGARD TO EACH PARTY: - REG: IDENTITY OF THE SHAREHOLDERS: VICTORY SHARE & STOCK BROKERS LTD COMPANY IDENTIFICATION NUMBER (CIN NO.U74899DL1995P LC065264), ALLOTTED BY REGISTRAR OF COMPANIES PAN NO. AAACV3599A BANK ACCOUNT NUMBER 002467, OBC AZADPUR, DELHI (IDE NTITY ESTABLISHED BEFORE THE BANK AND THE INTRODUCER) THE INVESTOR CONFIRMED THE SHARE TRANSACTION IN RES PONSE TO ENQUIRY U/S. 133(6) BEHIND THE BACK OF APPELLANT. SUMA FINANCE & INVESTMENT LTD COMPANY IDENTIFICATION NUMBER (CIN NO. U99999WB2005 PLC 102803), ALLOTTED BY REGISTRAR OF COMPANIES PAN NO. AAACSO3O9 P BANK ACCOUNT NUMBER CA /01/002919, CORPORATION BANK , ARYA SAMAJ ROAD, NEW DELHI. (IDENTITY ESTABLISHED BEFORE THE BANK AN D THE INTRODUCER) THE INVESTOR CONFIRMED THE SHARE TRANSACTION IN RES PONSE TO ENQUIRY U/S133(6) BEHIND THE BACK OF APPELLANT. SHRESTH COMMERCIALS P. LTD CIN NUMBER U74899DL1992PTC047741 ALLOTTED BY REGIST RAR OF COMPANIES. PAN NUMBER AAACS 1803 Q, BANK ACCOUNT NU MBER 091459 WITH BANK OF BARODA, SAADAR BAZAR, DELHI. (IDENTITY ESTABLISHED BEFORE THE BANK AND THE INTRO DUCER). THE INVESTOR CONFIRMED THE SHARE TRANSACTION IN RES PONSE TO ENQUIRY U/S. 133(6) BEHIND THE BACK OF APPELLANT. ITA NO. 2276/D/08 & CO NO. 54/DEL/09 7 REG: CREDITWORTHINESS OF THE INVESTOR VICTORY SHARE & STOCK BROKERS LTD REGULARLY ASSESSED TO TAX WITH PAN NO. AAACV3599A AS PER BANK STATEMENT, NO CASH FORMS THE SUB-SOURCE OF INVESTMENT AS PER AUDITED BALANCE SHEET AS ON 31.03.1998, THE NET WORTH STOOD AT MORE THAN RS. 50 LACS. AS PER AUDITED BALANCE SHEET INVESTOR ENGAGED IN SH ARE TRADING BUSINESS WITH HIGH SALES TURNOVER WITH BUSINESS ASSETS LIKE SUNDRY DEBTORS, STOCK- IN-HAND, FIXED ASSETS AND COMMERCIAL CREDIT WORTHIN ESS FOR ITEMS LIKE SUNDRY CREDITORS IN THE BALANCE SHEET AND EXPENDITU RE ITEMS LIKE SALARY TO EMPLOYEES IN PROFIT AND LOSS ACCOUNT. THE CERTIFICATE FROM ROC, MINISTRY OF CORPORATE AFF AIRS, GOVT. OF INDIA STATES INVESTOR COMPANY IS ACTIVE COMPANY THEREBY M AINTAINING PROPER BOOKS OF ACCOUNTS WITH OTHER CORPORATE INFRASTRUCTU RE. THE INVESTOR CONFIRMED THE SHARE TRANSACTION IN RES PONSE TO ENQUIRY U/S. 133(6) BEHIND THE BACK OF APPELLANT EXPLAINING THE SOURCE OF INVESTMENT AS PER BANK ACCOUNT. SUMA FINANCE & INVESTMENT LTD REGULARLY ASSESSED TO TAX WITH PAN NO. AAACSO3O9 P. AS PER BANK STATEMENT, NO CASH FORMS THE SUB-SOURCE OF INVESTMENT AS PER AUDITED BALANCE SHEET AS ON 31.03.1998, THE NET WORTH STOOD AT MORE THAN RS. 6 CRORES. AS PER AUDITED BALANCE SHEET INVESTOR ENGAGED IN TR ADING BUSINESS WITH HIGH SALES TURNOVER WITH BUSINESS ASSETS LIKE SUNDR Y DEBTORS, STOCK-IN- HAND, FIXED ASSETS AND COMMERCIAL CREDIT WORTHINESS FOR ITEMS LIKE SUNDRY CREDITORS IN THE BALANCE SHEET AND EXPENDITU RE ITEMS LIKE SALARY TO EMPLOYEES IN PROFIT AND LOSS ACCOUNT. THE CERTIFICATE FROM ROC, MINISTRY OF CORPORATE AFF AIRS, GOVT. OF INDIA STATES INVESTOR COMPANY IS ACTIVE COMPANY THEREBY M AINTAINING PROPER BOOKS OF ACCOUNTS WITH OTHER CORPORATE INFRASTRUCTU RE. THE INVESTOR CONFIRMED THE SHARE TRANSACTION IN RES PONSE TO ENQUIRY U/S. 133(6) BEHIND THE BACK OF APPELLANT EXPLAINING THE SOURCE OF INVESTMENT AS PER BANK ACCOUNT. SHRESTH COMMERCIALS PVT. LTD REGULARLY ASSESSED TO TAX WITH PAN NO. AAACS 1803 Q AS PER BANK STATEMENT, NO CASH FORMS THE SUB-SOURCE OF INVESTMENT AS PER AUDITED BALANCE SHEET AS ON 31.03.1998, THE NET WORTH STOOD AT MORE THAN RS. 50 LACS. AS PER AUDITED BALANCE SHEET INVESTOR ENGAGED IN FI NANCIAL SERVICES BUSINESS WITH BUSINESS ASSETS LIKE SUNDRY DEBTORS, STOCK-IN- HAND, FIXED ASSETS AND COMMERCIAL CREDIT WORTHINESS FOR ITEMS LIKE SUNDRY CREDITORS IN THE BALANCE ITA NO. 2276/D/08 & CO NO. 54/DEL/09 8 SHEET AND EXPENDITURE ITEMS LIKE SALARY TO EMPLOYEE S IN PROFIT AND LOSS ACCOUNT. THE CERTIFICATE FROM ROC, MINISTRY OF CORPORATE AFF AIRS, GOVT. OF INDIA STATES INVESTOR COMPANY IS ACTIVE COMPANY THEREBY M AINTAINING PROPER BOOKS OF ACCOUNTS WITH OTHER CORPORATE INFRASTRUCTU RE. THE INVESTOR CONFIRMED THE SHARE TRANSACTION IN RES PONSE TO ENQUIRY U/S. 133(6) BEHIND THE BACK OF APPELLANT EXPLAINING THE SOURCE OF INVESTMENT AS PER BANK ACCOUNT. REG: GENUINENESS OF TRANSACTION VICTORY SHARE & STOCK BROKERS LTD TRANSACTION A NORMAL BUSINESS TRANSACTION OF INVEST OR AS INVESTOR REGULAR INVESTOR IN SHARES AS INVESTMENTS OF RS. 7.50 LACS (3 1 .03.1998) AND SHARES SALES INCOME OF RS.79.82 LACS. TRANSACTION THROUGH ACCOUNT PAYEE CHEQUE COPY OF SHARE APPLICATION FORM, BOARD RESOLUTION FO R INVESTMENT, CONFIRMATION OF TRANSACTION (DURING REASSESSMENT PR OCEEDINGS) FROM DIRECTOR CONFIRMING INVESTMENT, EXPLAINING UNIQUE IDENTITY & SOURCE AVAILABLE. SUMA FINANCE & INVESTMENT LTD TRANSACTION A NORMAL BUSINESS TRANSACTION OF INVEST OR AS INVESTOR REGULAR INVESTOR IN SHARES AS INVESTMENTS OF RS. 26 LACS (3 1.03.1998) AND DIVIDEND & DEBENTURE INTEREST INCOME IN P&L ACCOUNT. TRANSACTION THROUGH ACCOUNT PAYEE CHEQUE COPY OF SHARE APPLICATION FORM, BOARD RESOLUTION FO R INVESTMENT, CONFIRMATION OF TRANSACTION (DURING REASSESSMENT PR OCEEDINGS) FROM DIRECTOR CONFIRMING INVESTMENT, EXPLAINING UNIQUE IDENTITY & SOURCE AVAILABLE. SHARE CAPITAL HELD AS GENUINENESS IN THE REASSESSME NT PROCEEDINGS OF THE INVESTOR. SHRESTH COMMERCIALS PVT. LTD TRANSACTION A NORMAL BUSINESS TRANSACTION OF INVEST OR AS INVESTOR REGULAR INVESTOR IN SHARES AS INVESTMENTS OF RS. 59.40 LACS (31.03.1998) AND DIVIDEND INCOME IN P&L ACCOUNT. TRANSACTION THROUGH ACCOUNT PAYEE CHEQUE. COPY OF SHARE APPLICATION FORM, BOARD RESOLUTION FO R INVESTMENT, CONFIRMATION OF TRANSACTION (DURING REASSESSMENT PR OCEEDINGS) FROM DIRECTOR CONFIRMING INVESTMENT, EXPLAINING UNIQUE IDENTITY & SOURCE AVAILABLE. 13. REFERRING TO THE ABOVE INFORMATION IT WAS SUBMI TTED THAT THE ASSESSEE HAS BEEN ABLE TO PROVE ALL THE THREE NECES SARY ELEMENTS I.E. ITA NO. 2276/D/08 & CO NO. 54/DEL/09 9 1) IDENTITY, 2) CREDIT WORTHINESS, 3) GENUINESS OF THE TRANSACTION. IT WAS SUBMITTED THAT THERE IS NOTHING ON RECORD TO ESTABLISH THAT THE ASSESSEE AND INVESTORS WERE ASSOCIATE AND ITS DIREC TORS WERE RELATED. IT WAS SUBMITTED THAT FROM THE BANK STATEMENTS OF INVE STORS, IT CAN BE SEEN THAT THERE ARE NUMEROUS TRANSACTIONS AND IT IS NOT THE STAND OF AO THAT CREDITS IN THE BANK STATEMENTS OF INVESTORS HAS DIR ECT/INDIRECT NEXUS WITH THE ASSESSEE. THE INVESTOR COMPANY HAD CONFIRMED THE S HARE CAPITAL TRANSACTION IN RESPONSE TO ENQUIRY MADE BY AO U/S 1 33(C) IDENTIFYING THEIR INCOME TAX PARTICULARS AND EXPLAINING THE SOURCE AS PER THEIR BANK STATEMENTS. IT WAS SUBMITTED THAT THERE IS NO CASH DEPOSIT IN THE ACCOUNT OF THE INVESTOR AND REGARDING SUB SOURCE IN WHICH THE CASH WAS DEPOSITED BEING SOURCE OF CREDIT IN THE INVESTORS ACCOUNT, IT WAS SUBMITTED THAT WHERE THE SHARE CAPITAL TRANSACTIONS CONFIRMED BY THE INV ESTOR COMPANIES IN INDEPENDENT ENQUIRY U/S 133(6) HELD BEHIND THE BACK OF THE ASSESSEE, EXPLAINING THEIR IDENTITY (RCCIN & PAN NO.), CREDIT WORTHINESS (THROUGH THEIR BANK ACCOUNT & INCOME TAX ASSESSMENT) AND GEN UINENESS OF THE TRANSACTION, THEREFORE, NO ADDITION COULD BE MADE A S PER WELL ESTABLISH LAW LAID DOWN BY THE VARIOUS COURTS. 14. IT WAS SUBMITTED THAT THE AO HAS GOT DONE SOME ENQUIRY THROUGH INSPECTOR AT THE BACK OF THE ASSESSEE WHICH IS DISC USSED AT PAGE NO. 50 OF THE PAPER BOOK AND IT SHOULD BE APPRECIATED THAT WH EN ALL THE TRANSACTIONS WERE CONFIRMED INDEPENDENTLY BY THE INVESTOR COMPAN IES THEN NO ADVERSE INFERENCE WAS REQUIRED TO BE DRAWN ON THE BASIS OF INSPECTORS REPORT. ITA NO. 2276/D/08 & CO NO. 54/DEL/09 10 HENCE IT WAS SUBMITTED THAT ADDITION WAS NOT CALLED FOR IN VIEW OF DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF STELLER INV ESTMENT LTD., 192 ITR 287, WHICH WAS AFFIRMED BY HONBLE SUPREME COURT IN 251 ITR 263. IT IS IN THIS MANNER THE ADDITION WAS AGITATED IN RESPECT OF SHARE APPLICATION MONEY AND COMMISSION THEREON. ON THESE SUBMISSIONS LD. C IT(A) HAS CONCLUDED THAT ASSESSEE HAS PROVED IDENTITY, CREDIT WORTHINES S AND GENUINENESS OF THE TRANSACTION. ALL THE INFORMATION WAS CALLED FOR BY THE AO U/S 133(6) OF THE ACT FROM THE INVESTOR COMPANIES AND IT WAS DULY FUR NISHED BY THE CONCERNED PARTIES AND, THEREFORE, HE FOLLOWING THE DECISION I N THE CASE OF STELLER INVESTMENT LTD. (SUPRA) DELETED THE ADDITION MADE O N ACCOUNT OF SHARE APPLICATION MONEY AND THE COMMISSION THEREON AGAINS T WHICH THE REVENUE IS AGGRIEVED AND HENCE FILED THE ABOVE APPEAL. THE ASSESSEE IN ITS CROSS OBJECTION IS AGGRIEVED BY THE DECISION OF LD. CIT(A ) VIDE WHICH REASSESSMENT PROCEEDINGS HAVE BEEN HELD VALID. 15. ARGUING THE CROSS OBJECTION, LD. AR SUBMITTED T HAT HIS SUBMISSIONS MADE BEFORE CIT(A) IN THIS RESPECT SHOULD BE CONSID ERED WHILE DECIDING THE VALIDITY OR OTHERWISE OF REASSESSMENT PROCEEDINGS A ND THE MATER MAY BE DECIDED ACCORDINGLY. 16. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER O F CIT(A) TO CONTEND THAT REASSESSMENT PROCEEDINGS HAVE VALIDLY BEEN INI TIATED. 17. ARGUING THE APPEAL OF THE REVENUE, ON MERITS, I T WAS CONTENDED BY LD. DR THAT AS PER INFORMATION RECEIVED BY THE DEPARTME NT, THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE FROM SUM A FINANCE ITA NO. 2276/D/08 & CO NO. 54/DEL/09 11 INVESTMENT LTD. WAS ONLY IN THE NATURE OF ACCOMMODA TION ENTRY. REFERRING TO THE OBSERVATIONS OF AO IN THE ASSESSMENT ORDER T HAT BEFORE ISSUING THE CHEQUE TO THE ASSESSEE IN THE BANK ACCOUNTS OF ALL THE THREE CONCERNS THERE WERE CASH DEPOSITS. THUS, IT WAS PLEADED BY LD. DR THAT NEITHER THE IDENTITY NOR THE CREDIT WORTHINESS OR GENUINENSS OF TRANSACT ION WAS PROVE BY THE ASSESSEE WITH RESPECT TO SHARE APPLICATION MONEY RE CEIVED FROM THREE PARTIES. IT WAS SUBMITTED THAT ACCORDING TO THE DE CISION OF HONBLE DELHI HIGH COURT IN THE CASE OF BHAV SHAKTI STEEL MINES P VT. LTD. VS. CIT (2008- TIOL-669-HC-DELHI-IT) (ORDER DATED 16.12.08 IN ITA NO. 1174/2007) A COPY WAS PLACED ON RECORD AND IT WAS SUBMITTED THAT UNLESS ALL THE THREE REQUIREMENTS ARE PROVED, SHARE APPLICATION MONEY CO ULD NOT BE CONSIDERED TO BE GENUINE. IT WAS VEHEMENTLY PLEADED BY LD. DR THAT ADDITION HAS WRONGLY BEEN DELETED BY CIT(A), THEREFORE, ORDER OF CIT(A) SHOULD BE SET ASIDE AND THAT OF AO BE RESTORED. 18. REFERRING TO THE EVIDENCE SUBMITTED FOR EACH SH ARE APPLICANT, IT WAS SUBMITTED BY LD. AR THAT LD. CIT(A) AFTER PROPERLY APPRECIATING THE FACTS AVAILABLE ON RECORD, HAS RIGHTLY DELETED THE ADDITI ON AND HIS ORDER IN THIS REGARD SHOULD BE UPHELD. 19. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS IN THE LIGHT OF MATERIAL PLACED BEFORE US. RE-ASSESSMENT PROCEEDIN GS IN THE PRESENT CASE WERE INITIATED FOR THE REASON THAT SHARE APPLICATIO N MONEY RECEIVED BY THE ASSESSEE FROM M/S SUMA FINANCE INVESTMENT LTD. AMOU NTING TO RS. 3 LAKH WAS IN THE NATURE OF ACCOMMODATION ENTRY AND WAS AS SESSEES UNACCOUNTED MONEY, THEREFORE, INCOME TO THAT EXTENT HAS ESCAPED ITA NO. 2276/D/08 & CO NO. 54/DEL/09 12 ASSESSMENT. DURING THE COURSE OF REASSESSMENT PROC EEDINGS IT WAS FOUND THAT THERE WERE TWO OTHER CONCERNS FROM WHOM THE AS SESSEE HAD RECEIVED SHARE APPLICATION MONEY. THE TOTAL SHARE APPLICATI ON MONEY CONSIDERED TO BE UNEXPLAINED IS AGGREGATED SUM OF RS. 10 LAKH AS DETAILED IN PARA 3 OF THIS ORDER. THE ASSESSEE WAS REQUIRED TO FURNISH E VIDENCE TO SUBSTANTIATE THAT, IN FACT, THE ASSESSEE HAD RECEIVED SHARE APPL ICATION MONEY FROM THESE THREE CONCERNS. IT HAS BEEN RECORDED IN THE ORDER OF CIT(A) THAT ASSESSEE HAD SUBMITTED VARIOUS DOCUMENTARY EVIDENCE AND THE DETAIL OF SUCH EVIDENCE IS ALSO FOUND PLACE IN THE ORDER OF CIT(A) AND IS ALSO MENTIONED IN PARA 10 OF THIS ORDER. IN RESPECT OF IDENTITY RELA TING TO VICTORY SHARE & STOCK BROKERS THE ASSESSEE HAD PROVIDED CIN NUMBER, PAN N UMBER, BANK ACCOUNT NUMBER, BRANCH WHERE THE SAID ENTITY WAS MA INTAINING THE ACCOUNT I.E. OBC, AZADPUR, DELHI. THE SAID PARTY ALSO HAD CONFIRMED THE AMOUNT IN RESPONSE TO ENQUIRY CONDUCTED BY THE AO U/S 133(6) WHICH IS STATED TO BE BEHIND BACK OF THE ASSESSEE. SIMILAR EVIDENCES TO PROVE THE IDENTITY WERE ALSO FILED WITH RESPECT TO OTHER TWO SHARE APPLICAN TS NAMELY M/S SUMA FINANCE INVESTMENT LTD AND SRESTH COMMERCIAL PVT. L TD. REGARDING CREDIT WORTHINESS IT WAS SUBMITTED THAT AS PER BALANCE SHE ET AS ON 31.3.1998 IN THE CASE OF VICTORY SHARE & STOCK BROKERS LTD. THE NET WORTH WAS MORE THAN RS. 50 LAKH. AS PER AUDITED BALANCE SHEET OF THAT PARTY SHARE TRADING BUSINESS WAS DONE WITH HIGH TURNOVER. THE CERTIFIC ATE FROM ROC, MINISTRY OF CORPORATE AFFAIRS, GOVERNMENT OF INDIA, STATUS O F THE INVESTOR CO. IS ACTIVE COMPANY THEREBY MAINTAINING PROPER BOOKS OF ACCOUNT WITH OTHER CORPORATE INFRASTRUCTURE AND IT WAS SUBMITTED THAT THE TRANSACTION WAS ALSO GENUINE AS IT WAS NORMAL BUSINESS OF THAT CONCERN T O INVEST IN THE SHARES AND ITS INVESTMENT IN SHARES WAS RS. 7,50,000/- DUR ING THE F.Y. 1997-98 ITA NO. 2276/D/08 & CO NO. 54/DEL/09 13 AND SALE OF SHARES WERE TO THE TUNE OF RS. 79.82 LA KHS. IT WAS SUBMITTED THAT TRANSACTIONS WERE THROUGH ACCOUNT PAYEE CHEQUE S. 20. SIMILARLY WITH RESPECT TO CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTION WITH SUMA FINANCE & INVESTMENT CO. LTD. IT WAS SUBMITTED THAT AS PER AUDITED BALANCE SHEET THE NET WORTH OF THE C OMPANY AS ON 31.3.1998 STOOD AT MORE THAN RS. 6 CRORE. IT WAS HAVING HIGH SALE TURNOVER AND BUSINESS ASSETS LIKE SUNDRY DEBTORS, STOCK IN HAND, FIXED ASSETS AND AS PER CERTIFICATE OF ROC IT IS AN ACTIVE COMPANY. THE PA YMENTS WERE RECEIVED THROUGH ACCOUNT PAYEE CHEQUES. THE BUSINESS ACTIVI TY OF THE SAID CONCERN WAS INVESTMENT IN SHARES AND ITS INVESTMENT IN SHAR ES WAS RS. 26 LAKH IN FY 1997-98 AND SUPPORTING EVIDENCE IN THE SHAPE OF COPY OF SHARE APPLICATION FORM, BOARD RESOLUTION FROM INVESTMENT, CONFIRMATION OF TRANSACTION ETC. WERE ALSO FILED. 21. IN RESPECT OF SRESTH COMMERCIAL P. LTD. IT WAS SUBMITTED THAT SHARE APPLICATION SUBMITTED BY THEM WAS IN THE NORMAL BUS INESS COURSE BEING INVESTOR AND INVESTMENT IN SHARE IN F.Y. 1997-98 WA S TO THE TUNE OF RS. 59.40 LAKHS AND THE SAID CONCERN HAS DIVIDEND INCOM E IN PROFIT AND LOSS ACCOUNT. IT WAS SUBMITTED THAT AS PER AUDITED BALA NCE SHEET AS ON 31.3.1998 THE NET WORTH OF THE SAID COMPANY STOOD M ORE THAN 50 LAKH. THAT PARTY IS ENGAGED IN THE FINANCIAL SERVICES BUSINESS AND ACCORDING TO THE CERTIFICATE OF ROC STATUS OF THE COMPANY WAS ACTIVE AND AS PER ENQUIRIES MADE BY AO U/S 133(6) THE TRANSACTION WAS CONFIRMED . ITA NO. 2276/D/08 & CO NO. 54/DEL/09 14 22. THE EXISTENCE OF THESE EVIDENCE ON RECORD CANNO T BE DISPUTED AS ALL THESE DOCUMENTARY EVIDENCE FORM PART OF THE PAPER B OOK FILED BEFORE US. HERE IT CAN BE MENTIONED THAT THE REASON FOR WHICH THE REASSESSMENT PROCEEDINGS WERE INITIATED WAS M/S SUMA FINANCE INV ESTMENT LTD. AT PAGES 72 TO 77 ASSESSMENT ORDER OF M/S SUMA FINANCE & INVESTMENT LTD. HAS BEEN PLACED WHICH IS AN ORDER DATED 26.12.2006 PASSED U/S 143(3)/147 OF I.T. ACT, 1961 FOR A.Y. 1999-2000. IN THAT CASE RETURN OF INCOME WAS FILED AT AN INCOME OF RS. 1,16,910/- ON 31.12.1999 WHICH IS ASSESSED AT A SUM OF RS. 3,06,085/-. IT IS RECORDED IN THAT ORDER TH AT THE SAID COMPANY HAD RAISED FUNDS MAINLY BY WAY OF SALE OF STOCKS OF RS. 2.76 CRORE AND ADDITION TO SHARE CAPITAL WAS A SUM OF RS. 49.75 LAKH AND IN TEREST EARNED WAS 52.16 LAKHS. IF IT IS SO THEN THE EXISTENCE OF M/S SUMA FINANCE & INVESTMENT LTD. AND THE GENUINENESS OF ITS TRANSACTION WITH THE ASS ESSEE COULD NOT BE DENIED UNLESS DIRECT EVIDENCE IS FOUND BY THE DEPAR TMENT THAT THE MONEY CONTRIBUTED BY SUMA FINANCE INVESTMENT LTD. AS SHAR E APPLICATION TO THE ASSESSEE WAS THE MONEY ACTUALLY BELONG TO ASSESSEE. 23. IN RESPECT OF OTHER SHARE APPLICANTS, ASSESSEE HAS PLACED ON RECORD AMPLE EVIDENCE TO PROVE THE EXISTENCE OF THOSE CONC ERNS AND CREDIT WORTHINESS OF THOSE CONCERNS AS PER DOCUMENTS DISCU SSED IN THE ABOVE PART OF THIS ORDER. KEEPING IN VIEW ALL THESE EVID ENCES WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) WHEREBY IT HAS BEEN HELD THAT A SSESSEE HAS PROVED THE IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTION AND ALL THE REQUIREMENTS OF LAW HAVE BEEN FULFILLED AND SUCH VI EW OF LD. CIT(A) IS NOW SUPPORTED BY THE LATEST DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD., 216 CTR 195. ITA NO. 2276/D/08 & CO NO. 54/DEL/09 15 24. SO FAR AS IT RELATES TO THE RELIANCE PLACED BY LD. DR ON THE DECISION IN THE CASE OF M/S BHAV SHAKTI STEEL MINES PVT. LTD. V S. CIT (SUPRA), IT MAY BE OBSERVED THAT THE SAID CASE RATHER FAVOURS THE CASE OF THE ASSESSEE. IN THAT CASE THE ASSESSEE WAS A PRIVATE LIMITED COMPAN Y WHO RECEIVED THE SHARE APPLICATION MONEY IN CASH. THEREFORE, IT WAS OBSERVED BY THE TRIBUNAL THAT A HEAVY DUTY IS CAST TO ESTABLISH NOT ONLY THE IDENTITY OF SHARE APPLICANT BUT ALSO THE CREDIT WORTHINESS OF THE SHA RE APPLICANTS AND THE GENUINENESS OF THE TRANSACTION. IT WAS FOUND BY TH E TRIBUNAL THAT THE ASSESSEE HAD ONLY ESTABLISH THE IDENTITY OF THE SHA RE APPLICANT BY PRODUCING THE PAN CARD NUMBER ETC. NO INVESTIGATION WHATSOEV ER WAS DONE EITHER BY AO OR CIT(A). IT WAS OBSERVED THAT ASSESSEE HAD FI LED THE BANK STATEMENTS OF SOME OF THE PERSONS AND THERE WAS NO FINDING BY THE CIT(A) THAT IN THOSE BANK ACCOUNTS EQUIVALENT OR MORE AMOUNT WAS EXISTIN G AND THE MATTER WAS RESTORED BACK TO THE FILE OF AO FOR EXAMINATION OF THE APPLICANTS. THE SAID ORDER OF THE TRIBUNAL WAS REVERSED BY HONBLE HIGH COURT AND AFTER REFERRING TO THE AFOREMENTIONED DECISION OF HONBLE APEX COUR T IN THE CASE OF CIT VS. LOVELY EXPORTS P. LTD. (SUPRA) IT WAS OBSERVED THAT ALL THE DETAILS WERE CONSIDERED BY CIT(A) AND THESE DETAILS WERE FILED I N RESPECT OF EACH OF THE SHAREHOLDER AND CIT(A) HAD CONCLUDED THAT ASSESSEE HAD PROVED IDENTITY AND CREDIT WORTHINESS OF THE SHAREHOLDERS AND ALSO THE GENUINENESS OF THE TRANSACTION AND THUS, THE ORDER OF THE TRIBUNAL RES TORING THE ISSUE TO THE FILE OF AO WAS REVERSED AND ASSESSEES APPEAL WAS ALLOWE D. IN THE PRESENT CASE WE HAVE ALREADY FOUND THAT THERE IS AMPLE EVID ENCE ON RECORD TO PROVE ALL THE THREE INGREDIENTS TO PROVE THE SHARE APPLICATION MONEY AND ITA NO. 2276/D/08 & CO NO. 54/DEL/09 16 HENCE THE DECISION RELIED UPON BY LD. DR DOES NOT S UPPORT THE CASE OF REVENUE. 25. SO FAR AS IT RELATES TO CROSS OBJECTION FILED B Y THE ASSESSEE, IT MAY BE MENTIONED THAT ORIGINAL ASSESSMENT WAS FRAMED U/S 1 43(1) OF THE ACT AND THE ASSESSMENT HAS BEEN REOPENED UPON RECEIPT OF IN FORMATION FROM INVESTIGATION WING AS IT HAS BEEN RECORDED IN THE R EASONS. THUS, APPROVAL OF ADDL. CIT WAS ALSO TAKEN. THE VALIDITY OF REASS ESSMENT PROCEEDINGS HAS BEEN CHALLENGED ON THE GROUND THAT THE FRESH SHARE CAPITAL WAS DULY DISCLOSED IN THE RETURN OF INCOME AS PER AUDITED BA LANCE SHEET ENCLOSED WITH THE RETURN AND AS THE TIME OF ISSUE OF NOTICE U/S 143(2) HAD EXPIRED, THEREFORE, NO VALID NOTICE U/S 148 COULD BE ISSUED. LD. CIT(A) HAS REJECTED SUCH CONTENTION OF THE ASSESSEE ON THE GROUND THAT ACCORDING TO WELL ESTABLISH PRINCIPLE OF LAW AO SHOULD HAVE THE MATER IAL ON THE BASIS OF WHICH HE COULD FORM A BONAFIDE BELIEF THAT THE INCOME ASS ESSABLE TO TAX HAS ESCAPED ASSESSMENT AND REFERRING TO THE VARIOUS DEC ISIONS LD. CIT(A) HAS OBSERVED THAT REASONS TO BELIEF CANNOT BE EQUATED WITH THE REASON TO SUSPECT. IT IS EQUALLY NOT NECESSARY THAT THERE S HOULD BE AMPLE EVIDENCE ON RECORD TO ESTABLISH THE ACTUAL ESCAPEMENT OF INC OME SO AS TO FORM A REASONABLE BELIEF THAT THE INCOME HAS ESCAPED ASSES SMENT. THE BELIEF FALLS BETWEEN THE SUSPICION AND CONCLUSIVE FINDING BASED ON EVIDENCE AND IT HAS TO BE CONSIDERED TO WHETHER THE FACTS AND CIRCU MSTANCES JUSTIFY THE FORMATION OF BELIEF IN THE CONTRACT OF SUSPICION. FOR THAT PURPOSE THERE HAS TO BE SOME MATERIAL ON RECORD ON THE BASIS OF WHICH THE AO SHOULD FORM A BONAFIDE BELIEF THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. LD. CIT OBSERVED THAT HE HAS GONE THROUGH THE REASO NS RECORDED BY AO. ITA NO. 2276/D/08 & CO NO. 54/DEL/09 17 THE AO COULD NOT IGNORE SERIOUS ALLEGATIONS ABOUT P OSSIBLE ESCAPEMENT OF INCOME AND THE REASONS WERE SUFFICIENT TO FORM SOME BELIEF ABOUT THE ESCAPEMENT OF INCOME. ON ISSUANCE OF NOTICE U/S 14 8 IS JUST TO UNABLE THE AO TO INVESTIGATE THE MATTER TO FIND OUT WHETHER TH E ALLEGATIONS ARE TRUE OR NOT AND IF THE SAME ARE NOT FOUND TO BE TRUE, NO AD DITION WILL BE MADE IN THE HANDS OF THE ASSESSEE AND THUS, LD. CIT(A) HAS UPHE LD THE VALIDITY OF REASSESSMENT PROCEEDINGS. 26. IT HAS ALREADY BEEN POINTED OUT THAT LD. AR OF THE ASSESSEE HAS RELIED UPON THE CONTENTIONS RAISED BEFORE CIT(A). ON THE OTHER HAND, LD. DR HAS RELIED ON THE ORDER OF CIT(A). 27. AFTER CONSIDERING THE SUBMISSION OF BOTH THE PA RTIES, AS THERE WAS MATERIAL BEFORE AO TO FORM A REASON TO BELIEVE REGA RDING ESCAPEMENT OF INCOME BY THE ASSESSEE, WE DECLINE TO INTERFERE IN THE FINDINGS OF LD. CIT(A) VIDE WHICH REASSESSMENT PROCEEDINGS HAVE BEEN HELD VALID. THEREFORE, WE DISMISS THE CROSS OBJECTION FILED BY THE ASSESSEE. 28. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE BOTH ARE DISMISSED IN THE MANNER AF ORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 04.12.09 (SHAMIM YAHYA) (I.P. BANSAL ) ACCOUNTANT MEMBER JU DICIAL MEMBER DATED: *KAVITA CHOPRA ITA NO. 2276/D/08 & CO NO. 54/DEL/09 18 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR