ITO, New Delhi V. M/s Eclear Leasing & Finance Pvt. Ltd., New Delhi

ITA 2293/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1253 (ITAT-DELHI)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2009
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 16-11-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 27-05-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MRS PRATIMA KAUSHIK
• Keywords: Gift; Income from undisclosed sources; Share purchase agreement; Opportunity of being heard; Accommodation entries; Set aside
• Section: 143(1); 147; 131; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C : NEW DELHI BEFORE SHRI C.L.SETHI AND SHRI K.D.RANJAN ITA NOS. 2292 & 2293/DEL/2009 ASSESSMENT YEARS : 2003-04 & 2004-05 I.T.O.WARD 11(1) NEW DELHI. VS. M/S ECLEAR LEASING & FINANCE PVT. LTD., 5/83, DDA FLATS, MADANGIR, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : MRS. PRATIMA KAUSHIK, SR. D.R. RESPONDENT BY : SHRI RANJAN CHOPRA, A.R. ORDER PER RANJAN, AM : THESE APPEALS BY THE ASSESSEE FOR ASSESSMENT YEARS 2003-04 AND 2004-05 ARISE OUT OF SEPARATE ORDERS OF CIT(A)-XIII, NEW DE LHI. THESE APPEALS WERE HEARD TOGETHER AND FOR THE SAKE OF CONVENIENCE ARE DISPOS ED OF BY THIS COMMON ORDER. ITA NO.2292/DEL/2009: 2. THE FIRST ISSUE FOR CONSIDERATION RELATES TO DEL ETING THE ADDITION OF RS.7,90,934/- MADE UNDER SECTION 68 OF THE INCOME-T AX ACT, 1961. THE FACTS STATED IN BRIEF ARE THAT RETURN OF INCOME DECLARING INCOME OF RS.10,180/- WAS FILED ON 2/12/2003 WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 04/2/2004. LATER ON, AN INFORMATION WAS RECEIVED FROM INVESTIG ATION WING OF THE DEPARTMENT THAT ASSESSEE WAS INDULGING IN RECEIVING THE ACCOMM ODATION ENTRIES AFTER PAYING ITS UNACCOUNTED CASH. THE ASSESSING OFFICER REOPENE D ASSESSMENT UNDER SEC. 147 BY ISSUE OF NOTICE UNDER SEC. 148. IN RESPONSE TO NOTICE ISSUED UNDER SECTION 148, THE ASSESSEE SUBMITTED THAT RETURN FILED ON 02/12/2003 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE UNDER SEC. 148 OF THE ACT. THE ASSESSING OFFICER IS SUED DETAILED QUESTIONNAIRE AND 2 EXAMINED THE MATTER IN THE LIGHT OF INFORMATION REC EIVED. THE ASSESSEE FURNISHED THE COPY OF BANK STATEMENT AND ALSO STATED THAT THE ASSESSEE-COMPANY HAD RECEIVED PAYMENTS OF RS.4,94,750/- FROM M/S S.J.CAPITALS LTD . ON ACCOUNT OF SALE OF SHARES; RS.2,76,184/- FROM M/S MKM FINSEC PVT. LTD.; AND RS .20,00/- FROM KUMAR FINCAP P. LTD.. THE ASSESSING OFFICER NOTED THAT AB OVE PARTIES WERE APPEARING IN THE ACCOMMODATION ENTRIES LIST SUPPLIED BY THE INVE STIGATION WING. THE ASSESSEE ALSO FILED THE CONFIRMATION FROM THE PARTIES. IN OR DER TO ASCERTAIN THE GENUINENESS OF TRANSACTION, THE ASSESSEE WAS ASKED TO PRODUCE THE THREE PARTIES WITH THEIR BOOKS OF ACCOUNTS, CONFIRMATIONS AND THEIR BANK STA TEMENT BUT THE PARTIES WERE NOT PRODUCED. THE CASE WAS ADJOURNED FOR FURNISHING THE BOOKS OF ACCOUNTS BUT THE ASSESSEE REMAINED SILENT ON PERSONAL DEPOSITIONS OF THE ABOVE-NAMED PARTIES. SINCE THE ASSESSEE-COMPANY DID NOT FILE DETAILS OF PURCHASE OR BOOKS OF ACCOUNTS OR THE PARTIES, FURTHER TIME WAS ALLOWED BY THE ASS ESSING OFFICER. BUT, THE ASSESSEE DID NOT APPEAR ON 27-12-2007. THE ASSESSIN G OFFICER, AFTER DISCUSSING THE MODES OPERANDI OF ENTRY OPERATORS, TREATED THE AMOU NT RECEIVED ON ACCOUNT OF SHARES AS INTRODUCED BY THE ASSESSEE FROM HIS OWN S OURCES WHICH HAD BEEN CREDITED IN THE FORM OF SALE OF SHARES. HE ADDED TH E AMOUNT OF RS.7,90,934/- UNDER SEC. 68 OF THE ACT. THE ASSESSING OFFICER ALSO ADDE D 2% OF RS.15,818/- AS COMMISSION ALLEGED TO HAVE BEEN PAID TO ENTRY OPERA TORS. THE ADDITION OF RS. 15,818/- HAS BEEN CHALLENGED IN GROUND NO.2 BY THE REVENUE. 3. ON APPEAL, IT WAS SUBMITTED THAT THE ASSESSEE HA D DULY DISCHARGED THE PRIMARY ONUS WITH REGARD TO THE IDENTITY OF THE PUR CHASE OF SHARES BY PROVIDING THE NAMES AND ADDRESSES AND CONFIRMATIONS WHICH HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER. IN HIS REMAND REPORT DATED 16/10 /2008, THE ASSESSING OFFICER HAD ADDED THE AMOUNT ON THE GROUND THAT THE PARTIES TO WHOM SHARES WERE SOLD WERE NOT PRODUCED. SINCE THE ASSESSEE HAS ESTABLISH ED THE IDENTITY AND GENUINENESS OF TRANSACTION THROUGH CONFIRMATION, COPIES OF INCO ME TAX RETURNS ETC., IT WAS PLEADED THAT THE AMOUNT WOULD NOT BE ADDED UNDER SE C 68 OF THE ACT. THE LD. CIT(A) WAS ALSO OF THE VIEW THAT THE ASSESSEE HAD D ISCHARGED INITIAL ONUS BY FILING 3 THE CONFIRMATIONS, INCOME TAX RETURNS AND DETAILS O F BANK STATEMENT. THE ASSESSING OFFICER HAD NOT DISPUTED THE DOCUMENTS IN THE REMAN D REPORT. IT WAS ALSO OBSERVED THAT EXISTENCE OF SHARES, THEIR VALUATION OR THEIR TRANSFER HAD NOT BEEN DISPUTED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER HAD NO T CONFRONTED THE ASSESSEE WITH REGARD TO THE STATEMENT OF SHRI MAHESH BATRA WHICH WAS RELIED UPON BY THE ASSESSING OFFICER. THE LD. CIT(A) RELYING ON VARIOU S DECISIONS HELD THAT SINCE IDENTITY, THE CREDITWORTHINESS AND GENUINENESS OF T RANSACTIONS HAD NOT BEEN CONFRONTED BY THE ASSESSING OFFICER ON THE BASIS OF DOCUMENTS AND EVIDENCES PRODUCED BY THE ASSESSEE, ADDITION MADE UNDER SEC. 68 WAS NOT JUSTIFIED. SINCE, HE HAD DELETED THE ADDITION MADE UNDER SEC.68, THE COM MISSION RELATING TO THE SAME WAS ALSO DELETED. 4. BEFORE US, THE LD. SR. D.R. SUBMITTED THAT THE L D. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. ON THE OTHER HAND, THE LD. A .R. OF THE ASSESSEE SUPPORTING THE ORDER OF THE LD. CIT(A) SUBMITTED THAT THE INIT IAL ONUS BEING DISCHARGED, NO ADDITION COULD BE MADE. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THIS CASE, THE ASSESSING OFFICER HAD REC EIVED INFORMATION FROM INVESTIGATION WING THAT ASSESSEE WAS ENGAGED IN INT RODUCING HIS OWN MONEY THROUGH ENTRY OPERATORS. AS PER THE INFORMATION, TH E PARTY WHO HAD UNACCOUNTED MONEY AND WANTED TO INTRODUCE THE SAME IN THE BOOKS OF ACCOUNTS WITHOUT PAYING TAX APPROACHES ANOTHER PERSON AND HANDS OVER THE CA SH PLUS COMMISSION. THE CASH WAS DEPOSITED IN ENTRY OPERATORS BANK ACCOUNT EITHE R IN HIS OWN NAME OR IN THE NAME OF RELATIVES/FRIENDS OR OTHER PERSONS WHO WERE AWARE FOR THE PURPOSES OF OPENING OF BANK ACCOUNT. IN MOST OF THE BANK ACCOUN TS, THE INTRODUCER WAS THE MAIN ENTRY OPERATOR AND THE CASH DEPOSIT SLIPS AND OTHER INSTRUMENTS WERE FITTED BY HIM. THE OTHER PERSON IN WHOSE NAME ACCOUNT WAS OPE NED ONLY SIGNED THE BLANK CHEQUE AND HANDED OVER THE SAME TO THE MAIN ENTRY OPERATOR. THE ENTRY OPERATOR THEN ISSUED CHEQUES/DDS/POS IN THE NAME OF VARIOUS PERSONS FROM THE SAME 4 ACCOUNT. THE BENEFICIARY IN TURN THEN DEPOSITED THE SE INSTRUMENTS IN HIS BANK ACCOUNT. MONEY CAME TO HIM IN THE FORM OF GIFT, SH ARE APPLICATION MONEY AND SALE OF SHARES THROUGH BANKING CHANNEL. THE ASSESSING OF FICER ALSO NOTED THAT STATEMENT OF SHRI MAHESH BATRA WAS RECORDED UNDER S EC. 131 BY THE INVESTIGATION WING IN WHICH IT WAS ADMITTED BY SHRI MAHESH BATRA, DIRECTOR OF MKM FINSEC PVT.LTD. THAT HIS COMPANY WAS GIVING ACCOMMODATION ENTRIES FOR PURCHASE AND SALE OF SHARES. FROM THE MODUS OPERANDI AND THE STATEMEN T OF SHRI MAHESH BATRA, IT IS CLEAR THAT THE ASSESSEE INTRODUCED HIS OWN MONEY. H OWEVER, THE ASSESSING OFFICER HAS NOT PROVIDED THE ASSESSEE AN OPPORTUNITY TO CRO SS-EXAMINE SHRI MAHESH BATRA WHO HAD ADMITTED BEFORE THE INVESTIGATION WING THAT HIS COMPANY WAS PROVIDING ACCOMMODATION ENTRIES. IN THE CASE OF CENTURIAN INV ESTMENT AND INTERNATIONAL TRADING CO.PVT. LTD. 318 ITR AT (24) DELHI, THE I.T .A.T. HAS HELD THAT WHERE RE- ASSESSMENT PROCEEDINGS HAVE BEEN INITIATED ON THE B ASIS OF STATEMENT MADE BY ENTRY OPERATOR AND THE ASSESSEE HAD NOT BEEN GIVEN OPPORTUNITY TO CROSS-EXAMINE THE ENTRY OPERATOR, THE PRINCIPLES OF NATURAL JUSTI CE HAVE BEEN HELD TO HAVE BEEN VIOLATED. HOWEVER, THIS DEFECT WAS CURABLE BEING PR OCEDURAL IN NATURE. THE ASSESSMENT ORDER WITHOUT GIVING OPPORTUNITY TO CROS S-EXAMINE SUFFERED FROM IRREGULARITY BUT COULD NOT BE TREATED AS VOID OR IL LEGAL. IN THIS CASE, THE MATTER WAS REMANDED TO BE CONTINUED FROM THE STAGE AT WHICH IR REGULARITY HAD OCCURRED. THE FACTS OF THE CASE BEFORE US ARE IDENTICAL. THE ASSE SSEE WAS NOT GIVEN OPPORTUNITY TO CROSS-EXAMINE SHRI MAHESH BATRA. THEREFORE, AN IRRE GULARITY HAS BEEN COMMITTED AT THE STAGE OF ASSESSING OFFICER.HENCE, WE SET ASI DE THIS ISSUE TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION TO PROVIDE OPP ORTUNITY TO CROSS-EXAMINE THE DIRECTOR OF MKM FINSEC PVT. LTD. THE ASSESSING OFFI CER SHALL GIVE AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS ALS O DIRECTED TO PRODUCE THE PARTIES BEFORE THE ASSESSING OFFICER FOR VERIFICATION. SINC E WE HAVE SET ASIDE THE ISSUE RELATING TO ADDITION MADE UNDER SEC. 68, THE SECOND GROUND RAISED BY THE REVENUE IS CONSEQUENTIAL TO FIRST ISSUE. THE ASSESSING OFFI CER WILL DECIDE THE ISSUE AFRESH, AS DIRECTED ABOVE. 5 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2003-04 IS ALLOWED FOR STATISTICAL PURPOSES. 7. AS REGARDS ASSESSMENT YEAR 2004-05, THE FIRST IS SUE RELATES TO DELETING THE ADDITION OF RS. 20 LAKHS ON ACCOUNT OF SHARE APPLIC ATION MONEY AND SECOND ISSUE RELATES TO DELETING THE AMOUNT OF RS.50,000/- ON AC COUNT OF COMMISSION PAID. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE R ECEIVED SHARE CAPITAL OF RS. 25 LAKHS FROM FOUR PARTIES I.E. RS. 5 LAKHS FROM M/S R ABIK EXPORTS LTD.; RS. 12 LAKHS FROM SPARROW MARKETING PVT. LTD.; RS. 3 LAKHS FROM SALWAN DEVELOPERS AND PROMOTERS; AND RS.5 LAKHS FROM LION AUTO LTD. THE A SSESSMENT FOR ASSESSMENT YEAR 2004-05 WAS ALSO REOPENED ON THE BASIS OF INFO RMATION RECEIVED FROM INVESTIGATION WING. THE FACTS OF THE CASE UNDER CON SIDERATION ARE IDENTICAL TO THE FACTS FOR ASSESSMENT YEAR 2003-04. THE ASSESSING OF FICER ADDED THE AMOUNT OF RS. 25 LAKHS AS INCOME UNDER SEC.68 AS ASSESSEE COU LD NOT PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTION. IN THIS CASE, THE STATEMENT OF SHRI MUKESH GUPTA WAS RECORDED ON 16/1/2004 AND OF SHRI MAHESH GARG ON 22/9/2003 BY THE INVESTIGATION WING IN WHICH IT WAS ADMITTED BY BOTH THE PERSONS THAT THEY WERE GIVING ACCOMMODATION ENTRIES FOR PURCHASE AND SALE OF SHARES THROUGH VARIOUS COMPANIES FLOATED BY THEM. SINCE THE ASSESS EE-COMPANY DID NOT PRODUCE THE PARTIES FOR PERSONAL DEPOSITION AND THE FACT TH AT SHRI MUKESH GUPTA AND SHRI MAHESH GARG HAD GIVEN STATEMENT BEFORE THE INVESTIG ATION WING THAT THEY WERE PROVIDING ACCOMMODATION ENTRIES. THE ASSESSING OFFI CER TREATED THE AMOUNT OF RS. 25 LAKHS AS UNEXPLAINED AND ADDED THE SAME AS CASH CREDIT UNDER SEC.68 OF THE ACT. 8. ON APPEAL, AS IN ASSESSMENT YEAR 2003-04 SIMILAR ARGUMENTS WERE ADVANCED. THE LD. CIT(A) AFTER EXAMINING THE CONTEN TION OF THE ASSESSEE OBSERVED THAT THE ASSESSING OFFICER HAD IGNORED THE COPIES O F PAN, ROC DETAILS, BANK STATEMENT, COPY OF SHARE CERTIFICATE AND BANK ACCOU NTS PROVIDED BY THE ASSESSEE. M/S SPARROW MARKETING PVT. LTD., M/S RABIK EXPORTS LTD. AND M/S SALWAN DEVELOPERS & PROMOTERS WERE COMPANIES WHICH WERE EX ISTING IN EARLIER YEARS. 6 THEREFORE, THEIR IDENTITY COULD NOT BE DISPUTED. TH E EXISTENCE OF THESE COMPANIES COULD HAVE BEEN VERIFIED FROM THE ROC WEBSITE. HE P LACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF LO VELY EXPORT 216 CTR WHEREIN IT HAS BEEN HELD THAT WHERE IDENTITY OF PAR TIES HAD BEEN PROVIDED, THE SHARE APPLICATION MONEY HAD BEEN ESTABLISHED, THERE WAS N O CASE FOR MAKING AN ADDITION IN THE HANDS OF THE ASSESSEE. THE LD. CIT(A) DELETE D THE ADDITION OF RS. 20 LAKHS. HOWEVER, HE UPHELD THE ADDITION OF RS. 5 LAKHS IN R ESPECT OF M/S LION AUTO LTD. IN RESPECT OF THIS CASE THE CONTENTION OF THE ASSESSEE WAS THAT THE AMOUNT OF RS.25 LAKHS WAS EARLIER ADVANCED TO M/S SGN LTD. AS ADVAN CE TOWARDS PURCHASE OF PROPERTY AND SUBSEQUENTLY ON 31/7/2003 AN AMOUNT OF RS. 5 LAKHS WAS PAID BACK BY M/S LION AUTO PVT. LTD.ON BEHALF OF SGN LTD. ON THEIR DIRECTIONS. SINCE THE ASSESSEE COULD NOT PROVIDE COPY OF AGREEMENT TO JUS TIFY THE EARLIER YEARS ADVANCE, THE CONTENTION OF THE ASSESSEE WAS REJECTED AND ADD ITION OF RS. 5 LAKHS WAS UPHELD. THE LD. CIT(A) HAS ALSO DELETED THE ADDITION OF RS. 50,000/- ON THE GROUND THAT ASSESSING OFFICER HAD NOT PROVIDED ADEQUATE OPPORTU NITY TO THE ASSESSEE. THE ASSESSEE WAS NOT CONFRONTED AND, THEREFORE, IT WOUL D NOT BE FAIR TO ARRIVE AT A CONCLUSION THAT UNACCOUNTED INCOME BY ASSESSEE RECE IVED THROUGH ENTRY OPERATORS. HE, THEREFORE, DELETED THE ADDITION OF RS.50,000/- MADE ON ACCOUNT OF ALLEGED COMMISSION PAID BY THE ASSESSEE TO ENTRY OPERATORS. 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THIS CASE AS IN ASSESSMENT YEAR 2003-04, THE ASSESSING OFFICER HAS NOT PROVIDED OPPORTUNITY TO CROSS-EXAMINE, SHRI MUKESH GUPTA AND SHRI MAHESH GARG WHO HAD STATED THAT THEY HAD PROVIDED ACCOMMOD ATION ENTRIES. THEREFORE, WE FEEL IT PROPER TO SET ASIDE THE ISSUE TO THE FILE O F ASSESSING OFFICER WITH THE DIRECTION TO PROVIDE OPPORTUNITY TO THE ASSESSEE TO PROVE THEIR CASE. HE WOULD PROVIDE THE OPPORTUNITY TO THE ASSESSEE TO CROSS-EX AMINE SHRI MUKESH GUPTA AND SHRI MAHESH GARG WHO HAVE DEPOSED BEFORE THE INVEST IGATION WING THAT BOTH WERE ENGAGED IN GIVING ACCOMMODATION ENTRIES. THE ASSESS ING OFFICER AFTER PROVIDING THE OPPORTUNITY TO ASSESSEE WILL DECIDE THE ISSUE O N MERITS. THE ASSESSEE IS ALSO 7 DIRECTED TO CO-OPERATE WITH THE ASSESSING OFFICER I N PRODUCING THE PARTIES AND NECESSARY EVIDENCE TO BE PRODUCED IN SUPPORT OF HIS CASE. WE ACCORDINGLY, SET ASIDE THE ISSUE TO THE FILE OF ASSESSING OFFICER WI TH THE ABOVE DIRECTIONS. 10. IN THE RESULT, APPEAL BY THE REVENUE FOR ASSESS MENT YEAR 2004-05 IS ALLOWED FOR STATISTICAL PURPOSES. 11. TO SUM UP, APPEALS FILED BY THE REVENUE FOR ASS ESSMENT YEARS 2003-04 AND 2004-05 ARE ALLOWED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 27TH NOV EMBER, 2009. SD/- (C.L.SETHI) SD/- (K.D.RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27.11.2009. PSP COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR