DCIT, New Delhi V. M/s. Venus Overseas Pvt. Ltd., New Delhi

ITA 276/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7056 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2006-2007
• Appeal Filed On: 13-01-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MEETA SINGH
• Keywords: Search and seizure; Share purchase agreement; Source of fund
• Section: 133(6); 68; 132; 15; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI P. M. JAGTAP, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NOS.276 TO 278 & 280/DEL/2015 ASSESSMENT YEARS : 2006-07 TO 2008-09 & 2010-11 DCIT, CENTRAL CIRCLE- 31, NEW DELHI. VS. VENUS OVERSEAS PVT. LTD., 112, DDA HOG MARKET, RAJENDRA PALACE, NEW DELHI. PAN : AAACV0872E (APPELLANT) (RESPONDENT) DEPARTMENT BY : SMT. MEETA SINGH, CIT-DR ASSESSEE BY : NONE DATE OF HEARING : 11-07-2018 DATE OF PRONOUNCEMENT : 13-07-2018 O R D E R PER P. M. JAGTAP, AM : THESE FOUR APPEALS ARE PREFERRED BY THE REVENUE AGA INST A COMMON ORDER OF LD. CIT(A)- XXXIII, NEW DELHI DATED 29.09.2014 A ND THE SOLITARY COMMON ISSUE INVOLVED THEREIN RELATES TO THE DELETION BY T HE LD. CIT(A) OF THE ADDITIONS MADE BY THE ASSESSING OFFICER U/S 68 BY TREATING TH E SHARE CAPITAL AND SHARE PREMIUM AMOUNTS RECEIVED BY THE ASSESSEE AS UNEXPLA INED IN ALL THE FOUR YEARS UNDER CONSIDERATION AS UNDER :- (I) A.Y. 2006-07 - RS.5,66,80,000/- (II) A.Y. 2007-08 - RS.2,49,50,000/- 2 ITA NOS.276 TO 278 & 280/DEL/2015 (III) A.Y. 2008-09 - RS.4,00,50,560/- (IV) A.Y. 2010-11 - RS.32,62,40,000/- 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF SHARES. A SEARCH AND SEIZURE ACTION U/S 132 WAS CONDUCTED IN THE CASE OF M/S AAKRITI HOTELS PVT . LTD.. DURING THE COURSE OF THE SAID ACTION, CERTAIN DOCUMENTS BELONGING TO THE ASSESSEE COMPANY WERE FOUND AND SEIZED. CONSEQUENTLY, THE NOTICES U/S 15 3C WERE ISSUED BY THE ASSESSING OFFICER TO THE ASSESSEE ON 20.09.2013, IN RESPONSE TO WHICH THE RETURNS OF INCOME FOR THE YEARS UNDER CONSIDERATION WERE FILED BY THE ASSESSEE DECLARING THE SAME INCOME AS WAS DECLARED IN THE RE TURNS ORIGINALLY FILED U/S 139 OF THE ACT. DURING THE YEARS UNDER CONSIDERATION, THE ASSESSEE COMPANY HAD RECEIVED SUBSTANTIAL AMOUNT ON ACCOUNT OF SHARE CAP ITAL INCLUDING HUGE SHARE PREMIUM. IN ORDER TO VERIFY THE SAME, NOTICES U/S 133(6) WERE ISSUED BY THE ASSESSING OFFICER TO THE VARIOUS SHARE-HOLDERS AT T HE ADDRESS GIVEN IN THE SHARE APPLICATIONS ASKING THEM TO SUBMIT COPIES OF THEIR AUDITED FINANCIAL STATEMENTS, SOURCE OF INVESTMENTS MADE IN THE ASSESSEE COMPANY, DETAILS OF BUSINESS ACTIVITIES, REASON FOR INVESTING IN ASSESSEE COMPAN Y WITH HUGE PREMIUM, COPY OF BANK ACCOUNT, ETC.. THE SAID NOTICES, HOWEVER, WER E RETURNED BACK BY THE POSTAL AUTHORITIES UNSERVED. THE ASSESSEE, THEREFORE, WAS CALLED UPON BY THE ASSESSING OFFICER TO PRODUCE ALL THE DIRECTORS/MAIN CONTROLLI NG PERSONS OF THE INVESTOR 3 ITA NOS.276 TO 278 & 280/DEL/2015 COMPANIES FOR PERSONAL EXAMINATION. IN-SPITE OF SU FFICIENT OPPORTUNITY, THE ASSESSEE HOWEVER FAILED TO PRODUCE THEM. NEVERTHEL ESS, THE ASSESSEE FILED THE COPIES OF THEIR FINANCIAL STATEMENTS ALONG WITH COP IES OF IT RETURNS ACKNOWLEDGEMENT. ON PERUSAL OF THE SAID DOCUMENTS, THE FOLLOWING FACTUAL ASPECTS WERE NOTED BY THE ASSESSING OFFICER :- (I) ALTHOUGH INVESTOR COMPANIES WERE SHOWING MEAGE R PROFIT. (II) THEIR BANK STATEMENTS REFLECTED ONLY THE TRANS ACTIONS OF RECEIPT OF MONEY FROM VARIOUS PARTIES AND TRANSFER OF THE SAME TO VARIOUS PARTIES. (III) THE INVESTOR COMPANIES WERE BASED AT KOLKATA AND GUWAHATI. (IV) THE INVESTOR COMPANIES WERE NOT ENGAGED IN ANY MAJOR BUSINESS ACTIVITIES AND WERE NOT HAVING ANY REGULAR OR LEGIT IMATE INCOME TO EXPLAIN THEIR INVESTMENTS. 3. KEEPING IN VIEW THE ABOVE FACTUAL ASPECTS AND TH E FAILURE OF THE ASSESSEE TO PRODUCE THE CONCERNED PARTIES FOR VERIFICATION, THE ASSESSING OFFICER HELD THAT THE TRANSACTIONS INVOLVING RECEIPT OF SHARE CAPITAL AND SHARE PREMIUM AMOUNTS BY THE ASSESSEE FROM THE SAID PARTIES WERE ACCOMMOD ATION ENTRIES AND ACCORDINGLY TREATING THE SAME AS UNEXPLAINED CASH C REDITS, THE ADDITIONS U/S 68 WERE MADE BY THE ASSESSING OFFICER IN ALL THE FOUR YEARS UNDER CONSIDERATION AS UNDER :- (I) A.Y. 2006-07 - RS.5,66,80,000/- (II) A.Y. 2007-08 - RS.2,49,50,000/- 4 ITA NOS.276 TO 278 & 280/DEL/2015 (III) A.Y. 2008-09 - RS.4,00,50,560/- (IV) A.Y. 2010-11 - RS.32,62,40,000/- 4. THE ADDITIONS MADE BY THE ASSESSING OFFICER U/S 68 BY TREATING THE SHARE CAPITAL AND SHARE PREMIUM AMOUNTS AS UNEXPLAINED CA SH CREDITS IN ALL THE FOUR YEARS UNDER CONSIDERATION WERE CHALLENGED BY THE AS SESSEE IN THE APPEALS FILED BEFORE THE LD. CIT(A) AND AFTER CONSIDERING THE SUB MISSIONS MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECOR D, LD. CIT(A) DELETED THE SAME ENTIRELY FOR THE FOLLOWING REASONS GIVEN IN PARAGRA PH NO.5.4 OF HIS IMPUGNED ORDER :- 5.4 FINAL DECISION:- I HAVE CONSIDERED ALL THE BASIS OF ADDITION AND ARG UMENTS OF LD. AR. DURING THE ASSESSMENT PROCEEDINGS, THE APPELLANT HAS SUBMI TTED EVIDENCES SUCH AS SHARE APPLICATION FORM, ITR, SHARE CERTIFICATE, ITR OF SH ARE INVESTOR COMPANIES, FORM NO. 2 FILED BY THESE SHARE INVESTOR COMPANIES BEFORE MINI STRY OF CORPORATE AFFAIRS, BANK STATEMENTS AND OTHER DOCUMENTS TO PROVE THE GENUINE NESS OF SHARE TRANSACTIONS IN THE NAME OF SHARE INVESTOR COMPANIES. ALL THESE SHARE I NVESTORS ARE COMPANY INCORPORATED WITH UNDER COMPANIES ACT. THE APPELLAN T HAS GIVEN CURRENT ADDRESS OF THESE SHARE HOLDER COMPANIES. THE ASSESSING OFFICER HAS ISSUED NOTICES U/S 133(6) TO THESE SHARE HOLDER COMPANIES AT THE OLD ADDRESS MENTIONED IN SHARE APP LICATION FORM WHICH HAVE COME BACK UNSERVED BECAUSE OF OBVIOUS REASON THAT THE CU RRENT ADDRESSES OF THESE COMPANIES ARE DIFFERENT FROM THE EARLIER ADDRESS ON WHICH NOTICE U/S 133(6) WERE ISSUED. I HAVE PERUSED THE RECORD, THE ADDRESSES ON WHICH NOTICES U/S 133(6) WERE ISSUED ARE AT OLD ADDRESS AND NOT AT THE CURRENT AD DRESS PROVIDED BY THE APPELLANT & MENTIONED BY THE ASSESSING OFFICER IN PARA 2 OF THE ORDER. SUBSEQUENTLY, ALL THESE SHARE HOLDER COMPANIES HAVE FILED ALL THE REQUIRED EVIDENCES U/S 133(6) BEFORE THE ASSESSING OFFICER. THESE DETAILS ARE GIVEN ON THE LETTER HEAD OF THE SHAREHOLDER COMPANIES BEARING THE SAME ADDRESS AS GIVEN BY THE APPELLANT. THE ASSESSING OFFICER HAS COMMENTED THAT THESE INFORMATIONS HAVE BEEN FURNISHED IN CONNIVANCE OF THE APPELLANT. THE ASSES SING OFFICER HAS NOT ISSUED ANY NOTICE OR MADE ANY ENQUIRY ON THE ADDRESS PROVIDED BY THE APPELLANT BEFORE REACHING SUCH CONCLUSION. DECLARATION OF SMALL PROFIT BY THE SHARE HOLDING CO MPANIES RELIED BY THE ASSESSING OFFICER TO PROVE NON GENUINENESS OF THE T RANSACTION IS ALSO NOT CONVINCING AS 5 ITA NOS.276 TO 278 & 280/DEL/2015 THESE SHARE INVESTMENTS ARE REFLECTED IN THE BALANC E SHEET WHICH EXPLAINS THE SOURCE, & THESE BALANCE SHEET HAVE BEEN FILED WITH THE INCO ME TAX DEPARTMENT. LD. ASSESSING OFFICER INSTEAD OF MAKING ENQUIRY ON THE CURRENT ADDRESS OF SHAREHOLDER GIVEN BY THE APPELLANT TO FIND IDENTITY OF SUCH SHAREHOLDER & DOCUMENTS SUBMITTED BY THE SHAREHOLDERS IN RESPONSE TO NOTICE U/S 133(6), ASKED TO PRODUCE DIRECTORS OF THESE SHAREHOLDER COMPANIES. IN MY VIE W, ONCE THE APPELLANT HAS FILED ALL DOCUMENTS IN SUPPORT OF SHARE CAPITAL AND NEW ADDRE SS OF THE SHARE HOLDER COMPANIES, ONUS WAS LYING ON THE ASSESSING OFFICER TO DISPROVE THE SAME. WITHOUT DISPROVING THESE EVIDENCES ONUS WILL NOT SHIFT BACK TO THE APPELLANT. UNDER THESE CIRCUMSTANCES, EVEN THE DECISION OF HON'BLE HIGH CO URT OF DELHI IN THE CASE OF N.R. PORTFOLIO PVT. LTD., WILL NOT HELP THE CASE, AS IN THAT CASE, THE ASSESSING OFFICER HAS MADE ENQUIRY TO DISPROVE APPARENTLY THE EVIDENCES F ILED BY THE ASSESSEE, THEN THE DECISION WAS GIVEN THAT THE ONUS WAS SHIFTED BACK O N THE ASSESSEE TO PRODUCE DIRECTORS. IN PRESENT FACTS & CIRCUMSTANCES OF THE CASE, THE D ECISION RELIED BY THE LD. AR NAMELY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF STELLER FINANCE LTD AND DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE O F NIPUAN AUTO (P) LTD CITED SUPRA APPEARS TO BE MORE APPLICABLE THAT THE APPELLANT HA S DISCHARGED ONUS CAST UPON IT U/S 68 TO PROVE THE SHARE CAPITAL. CONSIDERING ENTIRE F ACTS & CIRCUMSTANCES OF THE CASE, IN MY VIEW THE APPELLANT HAS DISCHARGED ITS ONUS TO PR OVE THE SHARE CAPITAL INTRODUCED. ACCORDINGLY, I DELETE THE ADDITION MADE U/S 68 IN R ESPECT OF SHARE CAPITAL ADDED FOR ALL THE ASSESSMENT YEARS. THESE GROUNDS OF APPEAL ARE A LLOWED. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVEN UE HAS PREFERRED THESE APPEALS BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING FIXED IN THIS CASE ON 11. 07.2018, NONE HAS APPEARED ON BEHALF OF THE ASSESSEE NOR ANY APPLICAT ION SEEKING ADJOURNMENT HAS BEEN FILED. THERE WAS A SIMILAR NON-COMPLIANCE ON THE PART OF THE ASSESSEE WHEN THESE APPEALS WERE EARLIER FIXED FOR HEARING B EFORE THE TRIBUNAL ON 07.02.2018 AND 03.05.2018. THESE APPEALS OF THE RE VENUE ARE, THEREFORE, BEING DISPOSED OF EX-PARTE QUA THE RESPONDENT-ASSESSEE AFTER HEARING THE ARGU MENTS OF THE LD. DR AND PERUSING THE RELEVANT MATERIAL AVAIL ABLE ON RECORD. 6 ITA NOS.276 TO 278 & 280/DEL/2015 6. THE LD. DR HAS SUBMITTED THAT THE NOTICES ISSUED BY THE ASSESSING OFFICER U/S 133(6) TO THE INVESTOR COMPANIES WERE RETURNED BACK BY THE POSTAL AUTHORITIES UNSERVED AND EVEN THE ASSESSEE HAD FAIL ED TO PRODUCE THE SAID PARTIES FOR EXAMINATION OF THE ASSESSING OFFICER IN-SPITE O F SPECIFIC AND SUFFICIENT OPPORTUNITY GIVEN DURING THE COURSE OF ASSESSMENT P ROCEEDINGS. SHE HAS CONTENDED THAT THE LD. CIT(A), HOWEVER, BRUSHED-ASI DE THIS VITAL ASPECT BY SIMPLY ACCEPTING THE SUBMISSION OF THE ASSESSEE THA T THERE WAS A CHANGE IN THE ADDRESS OF THE INVESTOR COMPANIES AND THE NOTICES U /S 133(6) WERE WRONGLY ISSUED BY THE ASSESSING OFFICER AT THE OLD ADDRESS. SHE HAS CONTENDED THAT IF THE NOTICES U/S 133(6) WERE ISSUED BY THE ASSESSING OFF ICER AT THE OLD ADDRESS AS CLAIMED BY THE ASSESSEE BEFORE THE LD. CIT(A), THE LD. CIT(A) OUGHT TO HAVE GIVEN AN OPPORTUNITY TO THE ASSESSING OFFICER TO MA KE THE NECESSARY ENQUIRY/VERIFICATION AT THE NEW ADDRESS OR HE HIMSE LF HAVING COTERMINOUS POWER WITH THAT OF THE ASSESSING OFFICER SHOULD HAVE MADE SUCH VERIFICATION OR ENQUIRY, WHICH IS VITAL. SHE HAS CONTENDED THAT TH ERE WERE CERTAIN OTHER ADVERSE FINDINGS OR OBSERVATIONS SPECIFICALLY RECORDED BY T HE ASSESSING OFFICER BY POINTING OUT THE NATURE OF TRANSACTIONS REFLECTED I N THE BANK ACCOUNTS OF THE INVESTOR COMPANIES, THE LACK OF ANY REGULAR OR LEGI TIMATE SOURCES OF INCOME, MEAGER PROFIT SHOWN BY THEM ETC. WHICH CLEARLY DEMO NSTRATED THAT THE INVESTOR COMPANIES WERE A SORT OF SHELL COMPANIES. SHE HAS CONTENDED THAT NEITHER THE ASSESSEE COMPANY NOR THE INVESTOR COMPANIES COULD J USTIFY THE HUGE AMOUNT OF 7 ITA NOS.276 TO 278 & 280/DEL/2015 SHARE PREMIUM IN-SPITE OF SUFFICIENT AND SPECIFIC O PPORTUNITY AFFORDED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS. SHE HAS CONTENDED THAT ALL THESE VITAL ASPECTS, HOWEVER, WE RE COMPLETELY OVERLOOKED BY THE LD. CIT(A) AND ADDITIONS MADE BY THE ASSESSING OFFICER U/S 68 IN ALL THE FOUR YEARS UNDER CONSIDERATION WERE DELETED BY HIM BY OB SERVING THAT THE DOCUMENTARY EVIDENCE FILED BY THE ASSESSEE WAS NOT DISPROVED BY THE ASSESSING OFFICER AND WITHOUT DISPROVING THE SAID EVIDENCE, O NUS WOULD NOT SHIFT BACK TO THE ASSESSEE. SHE HAS CONTENDED THAT THE DOCUMENTA RY EVIDENCE FILED BY THE ASSESSEE WAS SPECIFICALLY DISPROVED BY THE ASSESSIN G OFFICER BY RECORDING HIS ADVERSE FINDINGS AND OBSERVATIONS, BUT THE LD. CIT( A) HAS FAILED TO APPRECIATE THE SAME. SHE HAS CONTENDED THAT THE MATTER SHOULD , THEREFORE, GO BACK TO THE ASSESSING OFFICER FOR GIVING HIM AN OPPORTUNITY TO EXAMINE AND VERIFY THE SHARE CAPITAL AND SHARE PREMIUM AMOUNTS IN QUESTION. 7. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E AS WELL AS THE MATERIAL AVAILABLE ON RECORD INCLUDING THE RESPECTIVE ORDERS OF THE AUTHORITIES BELOW, WE FIND MERIT IN THE CONTENTION OF THE LD. DR. IT IS OBSERVED THAT CERTAIN ADVERSE FINDINGS AND OBSERVATIONS WERE SPECIFICALLY RECORDE D BY THE ASSESSING OFFICER AFTER PERUSING THE DOCUMENTARY EVIDENCE FILED BY TH E ASSESSEE COMPANY IN SUPPORT OF ITS CASE BUT THE SAME APPEAR TO HAVE NOT APPRECIATED BY THE LD. CIT(A) IN THE RIGHT PERSPECTIVE WHILE DELETING THE ADDITION MADE U/S 68. IN THE CONCLUSION DRAWN BY THE LD. CIT(A) VIDE HIS IMPUGNE D ORDERS, THERE IS NO 8 ITA NOS.276 TO 278 & 280/DEL/2015 DISCUSSION ABOUT SUCH ADVERSE FINDINGS AND OBSERVAT IONS RECORDED BY THE ASSESSING OFFICER NOR THERE IS ANYTHING TO SHOW THA T ANY EXPLANATION WAS OFFERED BY THE ASSESSEE IN RESPECT THEREOF WHICH WA S FOUND TO BE SATISFACTORY BY THE LD. CIT(A). THERE WAS NO EXPLANATION OFFERED E ITHER BY THE INVESTMENT COMPANIES OR EVEN BY THE ASSESSEE IN RESPECT OF HUG E SHARE PREMIUM AMOUNT AND THIS ASPECT WAS COMPLETELY IGNORED BY LD. CIT(A ) WHILE ACCEPTING THE SHARE CAPITAL AND PREMIUM AS GENUINE. IT IS ALSO PERTINE NT TO NOTE HERE THAT THE NOTICES U/S 133(6) ISSUED BY THE ASSESSING OFFICER TO THE I NVESTOR COMPANIES HAD COME BACK UNDELIVERED FROM THE POSTAL AUTHORITIES AND EV EN THE ASSESSEE HAD FAILED TO PRODUCE THE SAID PARTIES FOR VERIFICATION BEFORE TH E ASSESSING OFFICER IN-SPITE OF SPECIFIC AND SUFFICIENT OPPORTUNITY AFFORDED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. UNDER THESE CIRCUMSTANCES, WHEN IT WA S NOTED BY THE LD. CIT(A) THAT THERE WAS A CHANGE IN THE ADDRESS OF THE INVES TOR COMPANIES AND NOTICES U/S 133(6) WERE ISSUED BY THE ASSESSING OFFICER TO THE OLD ADDRESS, HE SHOULD HAVE GIVEN AN OPPORTUNITY TO THE ASSESSING OFFICER TO MA KE THE NECESSARY ENQUIRY/VERIFICATION AT THE NEW ADDRESS OR SHOULD H AVE DONE THE SAME HIMSELF AS THIS ASPECT WAS VITAL FOR DECIDING THE ISSUE. SINC E THE LD. CIT(A) HAS FAILED TO DO THE SAME, WE CONSIDER IT FAIR AND PROPER AND IN THE INTEREST OF JUSTICE TO SET-ASIDE THESE IMPUGNED ORDER ON THIS ISSUE AND RESTORE THE MATTERS TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THE ISSUE RELATING T O ADDITIONS U/S 68 ON ACCOUNT OF SHARE CAPITAL AND SHARE PREMIUM AMOUNTS RECEIVED BY THE ASSESSEE DURING THE 9 ITA NOS.276 TO 278 & 280/DEL/2015 YEAR UNDER CONSIDERATION AFRESH. NEEDLESS TO OBSER VE THAT THE ASSESSING OFFICER SHALL OFFER PROPER AND SUFFICIENT OPPORTUNITY TO TH E ASSESSEE BEFORE DECIDING THE ISSUE AFRESH ON MERIT IN ACCORDANCE WITH LAW. 8. IN THE RESULT, ALL THE FOUR APPEALS OF THE REVEN UE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF JULY, 2018. SD/- SD/- (SUCHITRA KAMBLE) (P. M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 13-07-2018. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI