Dhara Motor Finance Ltd., Uttar Pradesh V. DCIT, Najibabad

ITA 2442/DEL/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0084 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 24-04-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Assessee Lawyers: CHANDER MEHRA
• Keywords: Unexplained cash credit; Search and seizure; Principle of natural justice; Source of fund; Difference of opinion; Change of opinion
• Section: 195; 68; 154

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH B, NEW DELHI BEFORE : SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 2442/DEL/2017 ASSESSMENT YEAR: 2013-14 DHARA MOTOR FINANCE LTD., CIVIL LINES, BIJNOR (U.P.). (PAN-AABCD8486H) (APPELLANT) VS. DY. C.I.T., NAJIBABAD. (RESPONDENT) APPELLANT BY SH. CHANDER MEHRA, C.A. RESPONDENT BY MS. ASHIMA NEB, SR. DR ORDER PER L.P. SAHU, A.M.: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LD. CIT(A), MURADABAD DATED 28.02.2017 FOR THE ASSESSMENT YEAR 2013-14 ON THE FOLLOWING GROUNDS : 1. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE LD. ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDIT ION OF RS. 8,55,000/- ON ACCOUNT OF SHARE CAPITAL/SHARE PREMIUM WRONGLY TREA TING THE SAME AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT AND THE LD. CIT(A) UNLAWFULLY DIRECTED THE ASSESSING OFFICER TO ENHANCE SUCH ADDI TION BY RS. 26,42,500/- AGGREGATING TOTAL DISALLOWANCE U/S 68 OF RS. 34,97, 500/- WHICH IS LIABLE TO BE STRUCK DOWN IN THIS FORUM. 2. FOR THAT THE LD. CIT(A) OUGHT TO HAVE CONSIDERED T HE APPELLANT COMPANYS SUBMISSION IN PROPER PERSPECTIVE AS IT HA D DISCHARGED ITS ONUS DATE OF HEARING 18.03.2019 DATE OF PRONOUNCEMENT 24.05.2019 ITA NO. 2442/DEL/2017 2 BY FURNISHING ALL RELEVANT DOCUMENTS IN CONNECTION WITH SHARE CAPITAL RAISED AND ALSO PROVED THE IDENTITY, CREDIT WORTHIN ESS OF THE SHARE APPLICANTS AND GENUINENESS OF TRANSACTION, BEYOND D OUBT. 3. FOR THAT THE ISSUE RELATING TO THE RAISING OF SHA RE CAPITAL IS CONCLUDED IN FAVOUR OF THE ASSESSEE BY THE JUDGEMEN T OF THE HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORT (P) LTD. 216 CTR 195 HOLDING THAT ADDITION ON ACCOUNT OF SHARE CAPITAL CANNOT BE MADE IN THE HANDS OF THE RECIPIENT COMPANY. 4. FOR THAT THE REASONING GIVEN BY THE CIT(A) FOR ENH ANCEMENT OF ADDITION MADE BY THE ASSESSING OFFICER IS MOTIVATED AND HER ACTION IS OUT OF MERE SUSPICION AND NOT BASED ON RECORDS. 5. FOR THAT THE HONBLE CIT(A) COULD NOT BRING ON RECO RD ANY NEXUS BETWEEN CASH DEPOSITED IN SHARE APPLICANTS ACCOUNT ROUTED THROUGH THEIR ACCOUNT TO THE APPELLANT AND THE FINDINGS OF THE CI T(A) WERE PERVERSE FINDINGS INASMUCH AS THOSE CREDITS OR DEPOSIT AMOUN TS WERE REFLECTED IN INCOME TAX RETURN OF THE SHARE APPLICANTS AND ACCEPT ED BY THE AUTHORITY WITHOUT ANY QUESTION AND THEREFORE THE ADDITION MAD E BY THE BELOW AUTHORITIES ARE BASELESS AND DEVOID OF ANY MERIT AN D LIABLE TO BE DELETED AT THIS FORUM. 6. THAT THE APPELLANT COMPANY HAS FULFILLED ITS OBLIG ATIONS TO EXPLAIN THE SOURCE OF SHARE CAPITAL AND PREMIUM AND THEREFO RE, IF THE AUTHORITY BELOW REGARDS THE SHARE CAPITAL/PREMIUM AS BOGUS, T HEY HAVE TO ASSESS THE SHARE HOLDERS BUT CANNOT ASSESS THE SAME AS THE SHARE ISSUING COMPANYS UNEXPLAINED CASH CREDIT. 7. FOR THAT THE SHARE PREMIUM RECEIPT IN QUESTION CAN NOT BE ASSESSED AS UNEXPLAINED CASH CREDIT AS THE IDENTITY OF THE SHARE APPLICANT, GENUINENESS OF THE TRANSACTION AND CAPACITY OF THE SUBSCRIBER ARE NOT DISPUTED. 8. FOR THAT AT THE ASSESSMENT STAGE THE ASSESSING OFF ICER HAS CONDUCTED ENQUIRY INTO THE TAXABILITY OF SHARE CAPI TAL RECEIPT U/S 68 AND AFTER THE DUE APPLICATION OF MIND BEING SATISFIED A BOUT THE SOURCE SUBSTANTIALLY ACCEPTED THE SAME, THE CIT(A) IS NOT ENTITLED TO ENHANCE THE DISALLOWANCE ON MERE CHANGE OF OPINION. ITA NO. 2442/DEL/2017 3 9. FOR THAT THE HONBLE JURISDICTIONAL DELHI HIGH COU RT IN THE CASE OF CIT VS. VRINDAVAN FARM PVT. LTD. HELD THAT IF THE IDENTITY AND OTHER DETAILS OF SHARE APPLICANTS ARE AVAILABLE, THE SHAR E APPLICATION MONEY CANNOT BE TREATED AS UNDISCLOSED INCOME IN THE HAND S OF THE COMPANY, THE ADDITION, IF AT ALL, COULD BE MADE IN THE HANDS OF THE APPLICANT IF THEIR CREDIT WORTHINESS COULD NOT BE PROVED. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED RETURN ON 11.09.2013 DECLARING TOTAL INCOME AT RS.50,60,810/- . THE CASE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES WERE ISSUED. THE ASSESSEE IS A CLOSELY HELD DOMESTIC COMPANY ENGAGED IN THE BUSINESS OF FINANCI NG. ON PERUSAL OF BALANCE SHEET, THE ASSESSING OFFICER NOTED THAT THERE IS IN CREASE OF RS.3 CRORES IN SHARE CAPITAL AND RS.15 LAKHS IN SHARE PREMIUM DURING THE YEAR. THE ASSESSEE WAS REQUIRED TO FURNISH COMPLETE DETAILS OF ALLOTTEES O F SHARES AND TO PROVE THE IDENTITY AND CREDITWORTHINESS AND GENUINENESS OF TH E TRANSACTIONS. THE ASSESSEE FURNISHED THE DETAILS OF THE ALLOTTEES OF SHARES. TOTAL INVESTORS WERE 70 OUT OF WHICH ONLY 23 WERE PRODUCED FOR STATEMENT ON OATH AND REGARDING REMAINING ALLOTTEES IT WAS STATED THAT THEY WERE UN ABLE TO ATTEND THE OFFICE FOR STATEMENTS ON OATH BECAUSE OF UNAVOIDABLE CIRCUMSTA NCES AND THEREFORE, HE PRODUCED THEIR AFFIDAVITS WHEREIN THE ALLOTTEES HAD STATED TO HAVE INVESTED IN ASSESSEES COMPANY ALONG WITH OTHER FACTS OF THEIR SOURCE OF INCOME. IN RESPECT OF OTHER ALLOTTEES WHO COULD NOT BE PRODUCE D BY THE ASSESSEE, THE INSPECTOR WAS DIRECTED TO VERIFY THE CONTENTS OF EA CH AFFIDAVIT BY MEETING ALL SUCH ALLOTTEES SEPARATELY. THE ASSESSING OFFICER ON THE REPORT OF INSPECTOR OBSERVED AS UNDER : SHRI RATAN PRAKASH SUBMITTED HIS REPORTS WHICH ARE ON RECORD IN RESPECT OF EACH NON-PRODUCED ALLOTTEES BY PHYSICALLY SEEING THEIR LIVING STANDARDS & SOURCES OF INCOME AS MOST OF THE NON-PRODUCED ALL OTTEES HAD CLAIMED ITA NO. 2442/DEL/2017 4 THAT THEY HAD INVESTED MONEY IN THE FORM OF SHARE A PPLICATION MONEY & PREMIUM IN THE ASSESSEE COMPANY BY INCOME FROM AGRI CULTURE & SALE OF MILK. OUT OF FORTY SEVEN PERSONS WHOM SHRI RATAN PRAKASH VISITED IN ORDER TO ESTIMATE FINANCIAL CAPACITY, HE NAMED EIGHT PERSONS WHOSE LENDING CAPACITY WAS NOT FULLY PROVED KEEPING IN VIEW INCOM E GENERATING CAPACITY OF THE ASSETS THE POSSESSED: 3. THE ASSESSEE COMPANY WAS PROVIDED OPPORTUNITY TO PUT HIS SIDE IN RESPECT OF THE CAPACITY OF THE FOLLOWING 8 PERSONS : S.NO NAME AMT. NOT FOUND PROPER AS PER ITI'S REPORT 1 SMT. KUSUM DEVI 1,77,500/ - 2 SMT. LEELAVATI 1,77,500/ - 3. KUMARI SWATI 70,000/ - 4 KUMARI SHILPI CHAUDHARY 27500/ - 5. SHRI ARVIND KUMAR 72500/ - 6. SMT. JAGWATI DEVI 1,77,500/ - 7. SMT. USHA KHANNA 1,25,000/ - 8. KUMARI DIPTY CHAUDHARY 27,500/ - 4. THE ASSESSEE SUBMITTED REPLY VIDE LETTER DATED 1 6.10.2015. FROM THE REPLY SUBMITTED BY THE ASSESSEE, THE ASSESSING OFFI CER NOTICED THAT THERE WAS CONTRADICTION IN THE REPLY OF ASSESSEE AND REPORT O F THE INCOME-TAX INSPECTOR. THE ASSESSING OFFICER NOTICED THAT THE FINANCIAL CA PACITY OF THE ABOVE NOTED EIGHT ALLOTTEES WAS NOT PROVED. ACCORDINGLY, THE AS SESSING OFFICER ADDED RS.8,55,000/- IN THE INCOME OF THE ASSESSEE. 5. IN APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE MA DE DETAILED WRITTEN SUBMISSIONS AND RELIED ON MANY CASE LAWS. THE LD. C IT(A) AFTER CONSIDERING ALL ITA NO. 2442/DEL/2017 5 THE FACTS, EXAMINING THE CAPACITY OF ABOVE EIGHT AL LOTTEES HIMSELF AND BY GIVING OPPORTUNITY TO THE ASSESSEE, FURTHER ENHANCED THE A DDITION BY RS.26,42,500/- AND DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE IMPUGNED ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 6. THE LD. AR OF THE ASSESSEE, REITERATING THE WRIT TEN SUBMISSIONS MADE BEFORE THE LD. CIT(A), FILED A PAPER BOOK CONTAININ G 101 PAGES AND A WRITTEN SYNOPSIS WHICH READS AS UNDER : 1. THE APPELLANT IS A PUBLIC LIMITED COMPANY IN WHI CH PUBLIC ARE NOT INTERESTED. THE EQUITY IS HELD BY FRIENDS AND RELATI VES OF THE DIRECTORS. 2. THE ASSESSEE COMPANY ISSUED 300000 EQUITY SHARES OF RS.100/- EACH AT A PREMIUM OF RS 51- PER SHARE TO SEVENTY PE RSONS, THUS COLLECTED RS. 3,00,00,000/- AS SHARE CAPITAL AND RS.15,00,000 /- AS PREMIUM DURING THE FINANCIAL YEAR 2011 -12. 3. THE ASSESSEE SUBMITTED THE ENTIRE LIST OF SEVENT Y PERSONS WHO WERE ISSUED SHARES AND ALSO SUBMITTED ALL OTHER DOCUMENT S AS AND WHEN WAS ASKED TO DO SO. 4. THE AO ASKED THE ASSESSEE COMPANY TO PRODUCE ALL THE SEVENTY INVESTORS FOR HIS VERIFICATION, FOR THE FINANCIAL C APACITY, IDENTITY AND GENUINENESS OF THE TRANSACTIONS. 5. THE ASSESSEE COMPANY COULD PRODUCE ONLY TWENTY T HREE INVESTORS FOR STATEMENT ON OATH AND SUBMITTED AFFIDAVITS OF R EST OF THE INVESTORS, WHO HAD CONFIRMED OF HAVING INVESTED WITH THE COMPA NY FOR PURCHASE OF SHARES AT A PREMIUM. 6. THE AO AUTHORISED HIS INSPECTOR TO MEET ALL THE REMAINING INVESTORS AND TO VERIFY THEIR FINANCIAL CAPACITY AS THEY HAD INFORMED OF INVESTING FROM THEIR AGRICULTURE AND SALE OF MILK INCOME. 7. THE ITI NAMED EIGHT PERSONS WHOSE LENDING CAPACIT Y WAS NOT FULLY PROVED KEEPING IN VIEW INCOME GENERATING CAPACITY O F THE ASSETS THEY ITA NO. 2442/DEL/2017 6 POSSESSED AND RECOMMENDED RS.8,55,000/- TO BE ADDED BACK OUT OF RS.32,55,000/- 8. THE REPORT OF THE ITI WAS SHOWN TO THE REPRESENTA TIVE OF THE ASSESSEE WHO IN REPLY RELIED UPON THE AFFIDAVITS OF THE INVESTORS WHICH WERE SUBMITTED DURING THE ASSESSMENT PROCEEDINGS, H OWEVER, REQUESTED FOR COPY OF REPORT TO STUDY THE SAME FOR APPEAL PUR POSES. 9. THE ITI RECOMMENDED RS.8,55,000/- OUT OF RS.32,55 ,000/- SO INVESTED BY EIGHT PERSONS TO BE ADDED BACK TO THE I NCOME OF THE ASSESSEE AS HE THOUGHT THE AMOUNT OF RS.8,55,000/- TO BE BEYOND THEIR CAPACITY TO INVEST IN THE SHARE PURCHASE ACCOUNT. 10. THE ASSESSEE COMPANY PREFERRED AN APPEAL BEFORE THE CIT(A) WHO AFTER DISCUSSING THE INDIVIDUAL CAPACITY OF EACH OF THE INVESTOR ENHANCED THE ADDITIONS BY RS.22,27,500/-.THUS THE TOTAL ADDIT ION TO THE INCOME OF THE ASSESSEE BECAME RS.30,82,500/-. (8,55,000/- + R S.22,27,500/-) THE GROUND NO ONE OF FORM 36 STATES RS.855000/- + RS. 2 642500/-WHICH HAS BEEN RECTIFIED BY AN APPLICATION U/S 154 OF THE IT A CT,1961. 11. THE LD CIT(A) IN HER ORDER VIDE PARA THREE PAGE 1 7 OF THE PAPER BOOK IS SUBJECT TO VERIFICATION IN THE CASE OF LEEL AWATI, INVESTOR, WHICH THE AO HAS NOT DONE. EVEN THE AMOUNT OF RS.845000/- STA TED IN HER ORDER IS WRONG AS THE TOTAL AMOUNT DEPOSITED IS RS. 5,77,500 /- AND RS.27,500/- HAVE BEEN ACCEPTED BY THE CIT(A). THE BALANCE AMOUNT STANDS AS RS.5,00,000/- AND NOT RS.8,45,000/-, HOWEVER, THE A MOUNT TO BE ADDED IS CONDITIONAL. 12. IN THE CASE OF INVESTOR, SMT JAGWATI DEVI THE LF CIT(A) IN HER ORDER ON PAGE 21 - 22 OF THE PAPER BOOK, LAST PARA OF PAG E 21 TO FIRST PARA PAGE 22, HAS DIRECTED THE AO TO MODIFY THE ADDITION ACCO RDINGLY AFTER TAKING INTO ACCOUNT OF APPELLANTS EXPLANATION OF LETTER D ATED 16TH FEBRUARY,2017. THE AO HAS FAILED TO DO SO. LIST OF EIGHT INVESTORS IS ANNEXED BEING RS.32,55,0 00/-. THE ORDER OF THE AO AND THE APPEAL ORDER OF LD CIT(A) ARE AGAINST THE NATURAL JUSTICE AND NEEDS TO BE QUASHED. FROM THE L IST OF INVESTORS, IT MAY BE SEEN THAT EVEN THE PETTY AMOUNTS OF RS.50,000/- IN THE CASE OF SHILPY CHAUDHARY AND DIPTY CHAUDHARY HAVE BEEN CONFIRMED B Y THE LD CIT(A), THE SAME CANNOT BE RULED OUT OF THEIR PAST SAVINGS. ITA NO. 2442/DEL/2017 7 CASE LAWS IN SUPPORT: 1. ASSISSTANT COMMISSIONER OF INCOME TAX VS GURNAM S INGH ITAT DELHI TRIBUNAL ( C ) I.T.A NO. 616/DEL/2012 SECOND LAST LINE OF PAGE ONE OF THE ORDER AO MADE ADDITION ON BASIS OF INQUIRY REPORT WHICH HAD MOT BEEN SUPPLIED TO ASSES SEE - ESTIMATION MADE BY AO ON COST OF 50 WRIST WATCHES FOUND DURING SEARCH AND SEIZURE WAS ON ASSUMPTION AND PRESUMPTION BASIS AND WITHOUT SUPPORTING ANY EVIDENCE AND HENCE SAME WAS NOT SUSTAINABLE IN EYES OF LAW. 2.SIMILARLY IN THE CASE LAW ATUL KUMAR KHANDELWAL VS COMMISSIONER OF INCOME TAX ITAT DELHI TRIBUNAL (SMC-2 ) ITA NO. 871/DEL/2016 SECOND LAST LINE OF THE ORDER OF PAGE ONE THUS ADD ITION WAS MADE ON BASIS OF STATEMENT COLLECTED AT BACK OF ASSESSEE AN D RIGHT OF CROSS EXAMINATION WAS NOT PROVIDED TO HIM- HENCE PRECEDEN TS .ADDITIONS MADE BY AO AND CONFIRMED BY CIT(A) WERE DELETED. COPIES OF ORDERS ANNEXED. IN THE ABOVE , THE ASSESSEE REQUESTS FOR JUSTICE AS ITO DID NOT GIVE THE REPORT OF ITI, SIMILARLY CIT(A) ADDED ON ASSUMPTIONS OF CASH DEPOSITED, THUS TO QUASH THE ORDERS OF LOWER AUTHORITIES AND R ETURN INCOME BE ACCEPTED. 7. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE R OF THE AUTHORITIES BELOW. SHE ALSO RELIED ON THE JUDGMENT OF HONBLE A PEX COURT IN THE CASE OF PCIT VS. NRA IRON & STEEL PVT. LTD. 412 ITR 161 (SC ). SHE SUBMITTED THAT THE CASE IS SQUARELY COVERED BY THE ABOVE DECISION OF S UPREME COURT. SHE ALSO SUBMITTED THAT THE FINANCIAL CAPACITY OF THE SHARE APPLICATION HAS NOT BEEN PROVED BY THE ASSESSEE. THE CASE LAWS SUBMITTED BY THE ASSESSEE ARE NOT APPLICABLE ONCE THE ISSUE UNDER CONSIDERATION HAS A TTAINED FINALITY BY THE DECISION OF HONBLE SUPREME COURT. ITA NO. 2442/DEL/2017 8 8. AFTER HEARING BOTH THE SIDES AND PERUSING THE EN TIRE MATERIALS AVAILABLE ON RECORD AND CASE LAWS CITED BY BOTH THE SIDES, WE OBSERVE THAT THE LD. CIT(A) HAS DEALT THIS ISSUE IN DETAIL IN HIS ORDER. IN THE INCOME-TAX INSPECTORS REPORT, HE HAS STATED THAT THE CAPACITY OF EIGHT PERSONS, A S NOTED ABOVE, WAS NOT FULLY PROVED. THE LD. CIT(A) HAS ALSO EXAMINED THE FINANC IAL CAPACITIES OF ABOVE EIGHT PERSONS AND HAS FOUND THAT THEY HAD NO FINANC IAL CAPACITY TO INVEST IN SHARES AND THAT THE CASE DEPOSIT WAS ALSO FOUND PRE CEDING TO ISSUE OF CHEQUES IN THEIR BANK ACCOUNTS. ALL OF THEM WERE ALSO FOUND HAVING NO SOUND SOURCES OF INCOME. THE AFFIDAVITS FILED BY THE ASSESSEE IN RES PECT OF ABOVE 8 PERSONS ARE NOT SUPPORTED BY ANY OTHER MATERIAL SO AS TO PLACE RELIANCE THEREON. THE CASE LAW IN THE CASE OF NRA IRON & STEEL PVT. LTD. (SUPR A) RELIED BY THE LD. DR IS FOUND SQUARELY APPLICABLE TO THE PRESENT CASE, AGAI NST WHICH THE DECISIONS RELIED BY ASSESSEE DO NOT RENDER ANY HELP TO THE AS SESSEE. THEREFORE, RESPECTFULLY FOLLOWING THE DECISIONS OF HONBLE SUP REME COURT, AS RELIED BY THE LD. DR, WE DO NOT FIND ANY JUSTIFICATION TO INTERFE RE WITH THE ORDER OF THE LD. CIT(A). ACCORDINGLY, THE APPEAL OF THE ASSESSEE DES ERVES TO BE DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.05.2019. SD/- SD/- (AMIT SHUKLA) (L.P. S AHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 24.05.2019 *AKS*