DCIT, New Delhi V. M/s EI-EN India (P) Ltd., New Delhi

ITA 2675/DEL/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1257 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-12-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 24-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMANA SEN
• Assessee Lawyers: V K GARG
• Keywords: Unexplained cash credit; Additional evidence; Sham transactions
• Section: 68; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B NEW DELHI) BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.2675/DEL/2011 ASSESSMENT YEAR : 2007-08 DCIT, E1-EN INDIA (P) LTD., CIRCLE-11 (1), 43-44 DSIDC, SCHEME-III, NEW DELHI. V. OKHLA INDUSTRIAL PHASE-II, NEW DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AACCG AACCG AACCG AACCG- -- -1119 1119 1119 1119- -- -K KK K APPELLANT BY : MS. SUMANA SEN, SR. DR. RESPONDENT BY : SHRI V.K. GARG, C.A. ORDER PER TS KAPOOR, AM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE OR DER OF LD CIT(A) DATED 14.3.2011. THE GROUNDS RAISED BY THE REVENUE A RE AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` .25,00,000/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` .22,47,517/- ON ACCOUNT OF DISALLOWANCE U/S 37 OF THE ACT. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND AN Y GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. ITA NO2675/DEL/2011 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS EN GAGED IN THE TRADING OF COMPUTER PARTS AND IT FILED ITS RETURN OF INCOME ON 22.10.2010 SHOWING NIL INCOME. THE CASE WAS SELECTED FO R SCRUTINY. DURING ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT COMPANY WAS INCORPORATED ON 1.4.2004 AND THERE WAS NO WORKING TILL 31.3.2006. THE ASSESSING OFFICER HAS ALSO OBSERVED THAT A SSESSEE HAD MAINLY ENTERED INTO TRANSACTIONS WITH TWO COMPANIES NA MELY M/S DATAMINI COMPUTERS LTD. AND M/S ACCETON INDIA (P) LTD . THE ASSESSING OFFICER OBSERVED THAT UP TO OCTOBER, 2006 THE ASSESSEE H AD MADE SALES OF ` .20.05 LAKHS WHEREAS THE PURCHASES WERE TO THE TUNE OF `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` .23 LAKHS APPROXIMATELY TO ADJUST AMOUNT OF RS. 25 LACS RECEIVED FROM SINGAPORE. THEREFORE, HE MADE AN ADDITION OF ` .25 LAKHS AS UN- EXPLAINED CASH CREDIT. THE ASSESSING OFFICER ALSO DISALLOW ED AN AMOUNT OF ` .22,47,517/- BEING EXPENSES OTHER THAN AUDIT FEE OF R S.22,172/- DEBITED BY THE ASSESSEE IN ITS P&L ACCOUNT. THE ASSESSING OF FICER HELD THAT ASSESSEE DID NOT CARRY ANY BUSINESS AND ASSESSEE DID NOT PRODUCE BOOKS OF ACCOUNTS AND TRANSACTIONS BETWEEN THE ASSESSEE A ND ITS ASSOCIATE COMPANIES WERE SHAM TRANSACTIONS, HE FURTHER H ELD THAT ASSESSEE HAD NOT MAINTAINED STOCK REGISTER AND ADDRESS OF BOTH THE ITA NO2675/DEL/2011 3 COMPANIES WITH WHOM TRANSACTIONS WERE CARRIED OUT AND THAT OF THE ASSESSEE WERE SAME AND, THEREFORE, ALL TRANSACTIONS WERE B OGUS. IN VIEW OF ABOVE, HE TREATED ALL EXPENDITURE EXCEPT AU DIT FEES AS BOGUS AND MADE ADDITION OF ` .22,47,517/-. 3. DISSATISFIED WITH THE ORDER, THE ASSESSEE FILED APPEAL BEFORE LD CIT(A) AND SUBMITTED AS UNDER:- I) THAT ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS OF THE APPELLANT AND DISALLOWING EXPENSES OF ` .22,47,517/- WHEREAS PROPER BOOKS OF ACCOUNTS WERE MAINTAINED AND EVEN LEDGER REMAINED WITH ASSESSING OFFI CER FOR ABOUT A MONTH. II) THAT ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITI ON OF ` .25 LAKHS U/S 68 ON ACCOUNT OF SHARE APPLICATION MONEY RECEIVED FROM EN SINGAPORE BY ALLEGING THAT MAIN MO TIVE OF THE ASSESSEE COMPANY WAS TO ADJUST UNEXPLAINED CASH CREDIT MONEY. III) THAT WHEN BOOKS OF ACCOUNTS WERE REJECTED, THE ASSESSING OFFICER SHOULD HAVE GIVEN OPPORTUNITY TO ASSESSEE TO SHO W CAUSE AS TO WHY THE ASSESSMENT SHOULD NOT BE COMPLETED TO THE BEST HIS OF JUDGMENT. IV) THAT ASSESSING OFFICER HAD REJECTED THE BOOKS OF ACCOUNT S DUE TO DISCREPANCIES MENTIONED AT PAGE 2-4 OF ASSESSMENT ORDE R AND SUBMITTED THAT THE DISCREPANCY AS MENTIONED BY ASSESSING OFFICER WERE EITHER NOT A DISCREPANCY AT ALL OR WAS VERIFIABLE FROM RECORD ITSELF. V) THAT THE FIGURE OF SALE ARRIVED AT BY ASSESSING OFFICER UP TO OCTOBER, 2006 AT ` .20.05 LAKHS WAS NOT CORRECT AND THE ACTUAL FIGURE WAS ` .18,04,863/-. ITA NO2675/DEL/2011 4 VI) THAT IT IS GENERAL PRACTICE THAT SOME TIMES GOODS ARE R ECEIVED EARLIER AS PER CHALLAN AND THE BILL IS RECEIVED LATTE R ON AND SAME IS ENTERED IN TO BOOKS OF ACCOUNTS WHEN BILL IS REC EIVED. THE ASSESSEE IN SUPPORT OF IT FILED COPY OF CHALLAN AND CONFIRMED COPIES OF ACCOUNTS OF DATAMINI TECHNOLOGY P VT. LTD. AND EN INDIA PVT. LTD. AS AN ADDITIONAL EVIDENCE. VII) THAT MANY EXPENSES CLAIMED BY THE ASSESSEE ARE ON ACCOUNT OF SALARY AND CONSULTATION CHARGES AND ARE MOSTLY PAID BY CHEQUE AND TAX AT SOURCE WAS DEDUCTED WHEREVER IS APPLICABLE AND ASSESSING OFFICER HAS NOT BROUGHT ANY ADV ERSE MATERIAL ON RECORD. 4. IT WAS ALSO CONTENDED BEFORE LD CIT(A) THAT NECESSA RY OPPORTUNITY WAS NOT PROVIDED TO ASSESSEE AND THEREFORE FRESH EVIDENCES WERE FILED. THE LD CIT(A) AFTER GETTING RE MAND REPORT FROM ASSESSING OFFICER AND AFTER GOING THROUGH THE SUBMISSIONS O F ASSESSEE DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. THE RELEVANT PORTION OF LD CIT(A)S ORDER IS REPRODUCED BELOW:- I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSION OF THE APPELLANT. ON PERUSAL OF THE DETAILS O F THIS TOTAL EXPENDITURE OF ` .22,47,517/- DISALLOWED BY THE ASSESSING OFFICER, THE EXPENSES ON SALARY IS ` .11,97,881/- MAJOR PORTION OF SALARY HAS BEEN FOUND TO BE PAID BY CHEQUE AND TDS HAS BEEN DEDUCTED AND FEW CERTIFICATES HAVE BEEN FILED WITH ASSESSING OFFICER COPY OF WHICH HAS BEEN FILED WITH ME AT PAPE R BOOK NO.71-76 ALONG WITH COPY OF LETTER DATED 21.10.2009 SUBMITTED BEFORE ASSESSING OFFICER. MANAGEMENT CONSULTANCY WAS PAID OF ` .4 LAKHS WHICH IS CONFIRMED BY THE RECIPIENT OF THESE EXPENSES AND THE BALANCE ARE MINOR EXPENDITURE ON ACCOUNT OF RUNNING THE BUSINESS. IT IS SEEN THAT THE ASSESSING OFFICER HAS MADE ITA NO2675/DEL/2011 5 SWEEPING STATEMENTS THAT NO BUSINESS WAS CONDUCTED, HOWEVE R, I FIND THAT THE ASSESSING OFFICER HAS ACCEPTED THE ENTIR E SALES AND PURCHASES AND ONLY THE ENTIRE EXPENDITURE INCURRE D HAS BEEN DISALLOWED. 5. WITH REGARD TO ADDITION U/S 68 OF THE ACT AMOUNTI NG TO ` .25 LAKHS, THE LD AR SUBMITTED BEFORE LD CIT(A) THAT THE ASSESSEE HAD STARTED BUSINESS OPERATION ONLY DURING THE YEAR AND HAD RECEIV ED SHARE APPLICATION MONEY FROM EN SINGAPORE AND IN THIS RESPE CT COPY OF SHARE APPLICATION MONEY ACCOUNT, COPY OF CONFIRMATION FRO M SINGAPORE COMPANY, COPY OF BANK ACCOUNT OF EN SINGAPORE, COPY OF DEMAND DRAFT OF ` .20 LAKHS AND REGISTRATION PROOF OF SINGAPORE COMPANY WERE ALSO FILED AND IT WAS ARGUED AND RELYING UPON THE DEC ISION OF LOVELY EXPORTS PVT. LTD. 216 CTR (SC) 195 THAT IDENTITY, C REDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS HAS BEEN PROVED AND THER EFORE THE AMOUNT OF MONEY RECEIVED CANNOT BE REGARDED AS UNDISC LOSED INCOME U/S 68 OF THE ACT. THE LD CIT(A) AFTER GOING THROUG H THE SUBMISSIONS OF LD AR DELETED THE ADDITION OF ` .25 LAKHS. THE RELEVANT PORTION OF LD CIT(A)S ORDER IS REPRODUCED BELOW:- I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AS WELL AS THE SUBMISSION OF THE APPELLANT. I FIND THAT ALL THE DOCUM ENTS STATED ABOVE I.E. CONFIRMATION, SHARE APPLICATION MONEY ACC OUNT, BANK ACCOUNT OF THE INVESTOR AND THE APPELLANTS BANK ACCO UNT HAVE BEEN FILED BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFI CER HAS NOT CONDUCTED ANY FURTHER VERIFICATION EVEN THOUGH SUFFICIENT TIME WAS AVAILABLE AND HAS WITHOUT BRINGING ANY EVIDE NCE ON RECORD PROCEEDED TO ADD THE AMOUNT U/S 68 OF THE ACT BY CONCLUDING THAT THE MAIN MOTIVE OF THE COMPANY IS TO ADJUST THE UNEXPLAINED CASH CREDIT. IN THE LIGHT OF THE PREVALE NT JUDICIAL ITA NO2675/DEL/2011 6 RULING, THE FACT THAT THE NAMES AND ADDRESS WAS AVAILAB LE WITH THE ASSESSING OFFICER FOR FURTHER ENQUIRY AND THE PAYME NTS WERE THROUGH REGULAR BANKING CHANNELS AND THE ASSESSING OFFIC ER HAS NOT BROUGHT ANY MATERIAL TO PROVE THAT THIS MONEY IS OF THE APPELLANT COMPANY, I AM OF THE VIEW THAT THE ADDITI ON U/S 68 IS UNJUSTIFIED AND DIRECTED TO BE DELETED. 6. AGGRIEVED, THE REVENUE FILED APPEAL BEFORE THIS T RIBUNAL. 7. AT THE OUTSET, THE LD DR ARGUED THAT ASSESSING OFFICE R HAD PROVED THAT NO BUSINESS WAS DONE BY THE COMPANY AND IN THIS RESPECT PAGE 2 TO 4 OF ASSESSMENT ORDER WAS READ. HE FURTHER ARG UED THAT NO BOOKS OF ACCOUNTS WERE PRODUCED BEFORE THE ASSESSING OFFI CER AND THE ASSESSING OFFICER HAS SEEN THE WHOLE TRANSACTIONS IN ITS ENT IRETY AND AFTER HOLDING THAT TRANSACTIONS WERE BOGUS AND THERE W AS NO BUSINESS UNDERTAKEN BY THE COMPANY HAD DISALLOWED ALL EXPENSES. CONTINUING HIS ARGUMENTS, HE SUBMITTED THAT LD CIT(A) ACCEPTED AD DITIONAL EVIDENCE DESPITE ASSESSING OFFICERS INSISTENCE THAT ADDITI ONAL EVIDENCES SHOULD NOT BE ACCEPTED. IN VIEW OF ABOVE, T HE LD DR SUBMITTED THAT ASSESSING OFFICER HAD RIGHTLY MADE THE AD DITION. 8. THE LD AR, ON THE OTHER HAND, ARGUED THAT ASSESSMENT WAS COMPLETED WITHOUT GIVING ANY OPPORTUNITY. HE FURTHE R ARGUED THAT ALL DOCUMENTS WERE BEFORE THE ASSESSING OFFICER AND ONLY A F EW WERE FILED BEFORE LD CIT(A) WHICH WERE AGAIN SENT TO ASSESSING OFFI CER AND ASSESSING OFFICER HAS GIVEN COMMENTS ON ADDITIONAL EVIDE NCE AND IN THIS RESPECT OUR ATTENTION WAS INVITED ON PAGES 119 TO 122 OF PAPER BOOK WHEREIN COPY OF REMAND REPORT WAS PLACED. IT WA S FURTHER ARGUED THAT LD CIT(A) AFTER GOING THROUGH THE OBJECTION OF ASSESSING OFFICER IN HIS REMAND REPORT HAD DELETED THE ADDITIONS. HE FURTH ER ARGUED THAT ITA NO2675/DEL/2011 7 BETWEEN THE LAST DATE OF HEARING AND DATE OF ORDER, THERE WAS A GAP OF TWO MONTHS AND ASSESSEE HAD REQUESTED ASSESSING OFFICER AS IF ANY OTHER DOCUMENT OR INFORMATION WAS REQUIRED BY HER BU T SHE DID NOT ASK FOR ANYTHING. HE FURTHER ARGUED THAT ASSESSEE HAD REPLI ED TO EACH QUERY OF ASSESSING OFFICER AND IN THIS RESPECT OUR ATTENT ION WAS INVITED TO PAGES 4 TO 11 OF PAPER BOOK WHEREIN EACH OBSERVATI ON OF ASSESSING OFFICER WAS REPLIED TO. 9. WITH REGARD TO ADDITION OF ` .25 LAKHS, IT WAS ARGUED THAT ASSESSEE HAD SUBMITTED ALL EVIDENCES REGARDING IDENTITY, CREDI TWORTHINESS AND GENUINENESS OF THE PARTY FROM WHOM SHARE APPLICATION M ONEY WAS RECEIVED AND MOREOVER MONEY WAS RECEIVED FROM PROPER BANKING CHANNEL AND THEREFORE THE LD CIT(A) HAS RIGHTLY DELE TED THE ADDITION. 10. IN HIS REJOINDER, THE LD DR SUBMITTED THAT ASSESSEE H AD NOT SUBMITTED ANY PROOF FOR ALLOTMENT OF SHARES. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PA RTIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT COMPANY IS A PRIVATE LIMITED COMPANY REGISTERED UNDER THE COMPANIES ACT AND IS LIABLE TO STATUTORY AUDIT UNDER COMPANIES ACT AND TAX AUDIT U/S 44AB OF THE INCOME TAX ACT, 1961. A COPY OF THE AUDITED BALANCE SHEET ALONG WITH TAX AUDIT REPORT U/S 44AB OF THE ACT IS PLACED AT PAPER BOOK PAGES 16 TO 35. THE ASSESSING OFFICER HAD MADE THE DISALLOWANCES OF ALL EXPENSES EXCLUDING AUDIT FEES OF ` .22,472/- ALLEGING THAT THE COMPANY HAD NOT DONE ANY BUSINESS AN D IT HAD BOOKED EXPENDITURE ONLY TO ADJUST SHARE APPLICATION M ONEY AMOUNTING TO ` .25 LAKHS. WE ARE NOT ABLE TO UNDERSTAND THIS PROPOSITI ON OF ASSESSING OFFICER AS SHARE APPLICATION MONEY IS NOT AN IT EM OF INCOME RATHER IT IS A LIABILITY WHICH IS SHOWN IN THE BALANCE SHEET OF THE ITA NO2675/DEL/2011 8 COMPANY AND IS NOT SHOWN IN TRADING & P&L ACCOUNT. TH EREFORE, LOGIC OF ASSESSING OFFICER IN DISALLOWING WHOLE OF THE EXPENSES IS NOT CORRECT. AS RIGHTLY OBSERVED BY THE LD CIT(A), OUT OF TOTAL EX PENDITURE OF `. 22,69,989/-, ` .13,16,265/- WAS ON ACCOUNT OF SALARY AND WAGES AND ` .4 LAKHS WAS ON ACCOUNT OF MANAGEMENT CONSULTANCY ON WHIC H TDS WAS DEDUCTED. RELEVANT CERTIFICATES ARE PLACED IN PAPER BOOK PAGE NO.60,71,73 & 75. THEREFORE, THE DISALLOWANCE OF E XPENSES BY THE ASSESSING OFFICER WITHOUT RECORDING THE FACTUAL FINDING WAS NOT JUSTIFIED AND WE DO NOT SEE ANY REASON TO INTERFERE IN THE ORD ER OF LD CIT(A) ON THIS ACCOUNT. 12. AS REGARDS ADDITION ON ACCOUNT OF SHARE APPLICATIO N MONEY OF ` .25 LAKHS WE OBSERVE THAT SHARE APPLICATION MONEY WAS R ECEIVED FROM EN SINGAPORE THROUGH PROPER BANKING CHANNEL AND MON EY HAD TRAVELED FROM SINGAPORE ACCOUNT OF EN SINGAPORE WHICH IS PLA CED AT PAPER BOOK PAGE 77 & 78. COPY OF PAY ORDER OF ` .20 LASKLHS IS PLACED AT PAGE 82 OF PAPER BOOK, SIMILARLY, COPY OF CONFIRMATION OF SI NGAPORE COMPANY REGARDING INVESTMENT OF ` .25 LAKHS IN THE ASSESSEE COMPANY IS PLACED AT PAPER BOOK PAGE 61. THEREFORE, KEEPING IN VIEW A LL THESE FACTS AND CIRCUMSTANCES WE DO NOT FIND ANYTHING TO INTERFERE IN THE ORDER OF LD CIT(A). 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. 14. ORDER PRONOUNCED IN THE OPEN COURT ON 15TH DAY OF FEBRUARY, 2013. SD/- SD/- (U.B.S. BEDI) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER ITA NO2675/DEL/2011 9 DT. 15.2.2013. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING 10.12.2012 DATE OF DICTATION 12.2.2013 DATE OF TYPING 13.2.2013 DATE OF ORDER SIGNED BY 15.2.2013 BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET 15.2.2013 & SENT TO THE BENCH CONCERNED.