JCIT, New Delhi V. M/s Vishal Pipes Ltd., New Delhi

ITA 2834/DEL/2011

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4792 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 22-05-2017
• Assessment Year: 2000-2001
• Appeal Filed On: 01-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN GOTRU
• Keywords: Share purchase agreement; Additional evidence; Accommodation entries
• Section: 143(3); 147; 148; 68

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D : NEW DELHI BEFORE SHRI H.S.SIDHU , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 2834/DEL/2011 (ASSESSMENT YEAR: 2000 - 01 ) JCIT, CIRCLE - 17(1), NEW DELHI VS. VISHAL PIPES LTD, 2774, GALI PEEPAL MAHADEV, HAUZ QUAZI, NEW DELHI PAN:AAACV3101G (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SHRAVAN GOTRU, SR. DR ASSESSEE BY: NONE DATE OF HEARING 21/8 / 2017 DATE OF PRONOUNCEMENT 22 / 08 / 2017 O R D E R PER PRASHANT MAHARISHI, A. M. 1. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD CIT ( A) - XIX, NEW DELHI DATED 21.03.2011 FOR THE AY 2000 - 2001. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT( A) HAS ERRED IN DELEING THE ADDITION OF RS. 1770350/ - U/S 68 ON ACCOUNT OF UNEXPLAINED RECEIPT OF UNSECURED LOANS, IGNORING THAT THE AO HAD CORRECTLY TREATED THE TRANSACTIONS AS ACCOMMODATION ENTRIES AS IDENTITY AND CREDITWORTHINESS FOR THE LOAN CREDITORS AND THE GENUINENESS OF THE TRANSACTIONS COULD NOT BE ESTABLISHED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS IN SPITE OF ADEQUATE OPPORTUNITY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN DELETING ADDITION OF RS. 3350000/ - U/S 68 ON ACCOUNT OF UNEXPLAINED RECEIPTS OF SHARE APPLICATION MONEY, IGNORING THAT THE AO HAD CORRECTLY TREATED THE TRANSACTIONS AS ACCOMMODATION ENTRIES AS THE IDENTIFY AND CREDITWORTHINESS OF THE SHARE APPLICANTS AND THE GENUINENESS OF THE TRA NSACTIONS COULD NOT BE ESTABLISHED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS IN SPITE OF ADEQUATE OPPORTUNITY. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 128010/ - ON ACCOUNT OF COMM ISSION PAID BY THE ASSESSEE OUT OF UNDISCLOSED SOURCES TO BE ACCOMMODATION ENTRY PROVIDERS FOR PROVIDING THE SAID ACCOMMODATION ENTRIES. PAGE 2 OF 6 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD CIT(A) HAS ERRED IN ADMITTING ADDITIONAL EVIDENCES IN SPITE OF THE FACT THAT THE CONDITIONS LAID DOWN UNDER RULE 46A FOR ADMISSION OF ADDITIONAL EVIDENCE ARE NOT SATISFIED IN THE CASE. 5. ON THE FA CTS AND IN THE CIRCUMSTANCES OF THE CA S E, THE LD CIT(A) HAS ERRED BY NOT ACCORDING DUE IMPORTANCE TO THE FINDINGS BY THE INVESTIGATING WING WHICH HAVE BEEN ARRIVED AT AFTER IN DEPTH ENQUIRIES AND INVESTIGATION AND WHICH HAS BEEN RELIED UPON BY THE AO TO TH E REQUIRED EXTENT. 3. THE ASSESSEE IS A COMPANY WHO FILED ITS RETURN OF INCOME AND WHICH WAS PROCESSED U/S 143(1)(A) ON 04.03.2002. SUBSEQUENTLY, AS THE ASSESSMENT WAS REOPENED BASED ON THE INFORMATION RECEIVED FROM INVESTIGATION WING OF INCOME TAX DEPARTM ENT ON 13.03.2007 , NOTICE U/S 148 OF THE ACT WAS DULY SERVED ON 17.03.2007. IN RESPONSE TO THE NOTICE, THE ASSESSEE SUBMITTED A LETTER THAT ORIGINAL RETURN OF INCOME FILED ON 29.11.2000 MAY BE TREATED AS RETURN FILED IN RESPONSE TO THE ABOVE NOTICE. DURING THE COURSE OF INVESTIGATION, IT WAS FOUND THAT THE ASSESSEE IN THE NAME OF SEVERAL PARTIES RECEIVED CERTAIN CHEQUES AND FURTHER HUGE SHARE APPLICATION MONEY WAS ISSUED IN THE NAME OF SEVERAL PERSONS. THE ASSESSEE DID NOT FILE ANY CONFIRMATION AS WELL AS ANY INFORMATION WITH RESPECT TO DETAILS WITH RESPECT TO THOSE PERSONS. BEFORE THE AO, ONLY LEDGER ACCOUNTS OF UNSECURED CREDITORS WERE FILED ALONG WITH COP I ES OF THE SHARE CERTIFIC ATE. THEREFORE, THE LD AO MADE THE ADDITION OF RS. 51235 0 0/ - TO THE TOTAL INCOME OF THE ASSESSEE AND ALSO ADDED RS. 128010/ - AS 2.5 % OF THE COMMISSION FOR OBTAINING ACCOMMODATION ENTRY . SUBSEQUENTLY, THE TOTAL ADDITION OF RS. 5248360/ - WAS MADE VI DE ORDER DATED 20.12.2007 U/S 143(3) READ WITH SECTION 147 OF THE ACT. THE ASSESSEE AGGRIEVED WITH THE ORDER OF THE AO PREFERRED APPEAL BEFORE THE LD CIT ( A), WHO DELETED THE ADDITION OF RS. 5120350/ - AS WELL AS RS. 128010/ - . THEREFORE, THE REVENUE IS IN APPEAL BEF ORE US. 4. WE HAVE HEARD THE LD DR . DESPITE NOTICE NONE APPEARED ON BEHALF OF THE ASSESSEE, HOWEVER A PAPER BOOK FILED BY ASSESSEE IS PERUSED AND THE MATTER IS HEARD ON MERITS OF THE CASE BASED ON AVAILABLE RECORDS. 5. THE FIRST GROUND OF APPEAL IS WITH RESPE CT TO DELETION OF ADDITION OF RS. 1770350 / - U/S 68 OF THE ACT OF UNSECURED LOANS. THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THAT DURING THE FINANCIAL YEAR 1999 2000 THE ASSESSEE COMPANY HAS RECEIVED A SUM OF RS. 1 LAKH ON 12/11/1999 AND RS. 1 LAKH 19/01/2001. THESE AMOUNTS WERE RECEIVED AS UNSECURED LOAN FROM KG FININVEST PRIVATE LIMITED AND THESE ARE THE REGULAR LOAN ACCOUNTS ON PAGE 3 OF 6 WHICH INTEREST ARE ALSO PAID AFTER DEDUCTING TAXES AT SOURCE. IT WAS FURTHER SUBMITTED THAT LOAN AMOUNT WA S STILL OUTSTANDING TILL 31 ST OF MARCH 2004 AND IT WAS CLAIMED BY THE ASSESSEE THAT IT IS A GENUINE LOAN. FURTHER WITH RESPECT TO A SUM OF RS. 1 LAKH WHICH WAS RECEIVED ON 3 2000 FROM SH. MATHENY REGULAR BABY GIRL AGAINST THE SHARE CAPITAL AND STATED THAT IT WAS A GENUINE LOAN. WITH RESP ECT TO THE KG FININVEST LIMITED, ASSESSEE SUBMITTED THE ADDRESS AND PERMANENT ACCOUNT NUMBER OF THAT PARTY. FOR THE PURPOSE OF UNSECURED LOANS, THE ASSESSEE FILED COPIES OF THE CONFIRMATION LETTER, INCOME TAX RETURN OF THE L ENDERS AND PAN OF THE LENDERS. THE LD CIT ( A) HAS DELETED THE ABOVE ADDITION DESPITE KNOWING THE FACT THAT THE INFORMATION IS RECEIVED FROM THE INVESTIGATION WING THAT THE ASSESSEE HAS OBTAINED ACCOMMODATION ENTRY. FURTHER, DURING THE REMAND PROCEEDINGS TH E LD AO HAS OBJECTED THAT THE ASSESSEE HAS NOT FILED ANY DETAILS WITH RESPECT TO THOSE CREDITORS/ LENDERS AND THEREFORE LD AO HAS STATED THAT ADEQUATE OPPORTUNITY WAS GIVEN BY HIM TO THE ASSESSEE TO PRODUCE THE NECESSARY DETAILS BUT IT WAS NEVER PRODUCED . DESPITE THIS FACT, THE LD CIT (A) HAS ENTERTAINED THOSE EVIDENCES AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE DELETING THE ADDITION. COMING TO THE DETAILS FURNISHED BY THE ASSESSEE, A T THE MOST THE INFORMATION PROVIDED BY THE ASSESSEE CAN BE SAID TO SATISFY THE REQUIREMENT OF IDENTITY OF THOSE LENDERS BUT NOT, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS. FURTHER, THERE IS NO INFORMATION AVAILABLE IN THE ORDER OF THE LD. CIT A, THAT HOW HE MET WITH THE REASONS OF THE ASSESSING OFFICER IN MAK ING ABOVE ADDITION THAT ASSESSEE HAS OBTAINED ALL THESE CASH CREDITS FROM ENTRY OPERATORS. IT IS APPARENT THAT ADDRESS OF KG FININVEST LIMITED GIVEN AT PAGE NO. 165 AND AT PAGE NO. 111 ARE DIFFERENT THE LD. CIT APPEAL HAS TREATED THE ABOVE ADDITION UNDER S ECTION 68 OF THE ACT NOT WITH THE VIEW THAT THE PERSONS IN WHOSE NAME THE AMOUNT IS CREDITED ARE ENTRY OPERATORS. IN VIEW OF THIS WE SET ASIDE THE ISSUE BACK TO THE FILE OF LD CIT(A) TO VERIFY THE CREDITWORTHINESS AND GENUINENESS OF THE THOSE UNSECURED LOANS. NEEDLESS TO SAY THAT THE LD CIT(A) HAS NOT BEEN GIVEN ANY OPPORTUNITY TO THE LD AO DURING THE APPELLATE PROCEEDINGS, SO, NOW WILL PROVIDE A DEQUATE OPPORTUNITY TO LD AO AS WELL AS THE ASSESSEE TO ADDUCE THE NECESSARY INFORMATION BEFORE DECIDING THE ISSUE. IN THE RESULT GROUND NO. 1 OF THE APPEAL OF THE REVENUE IS ALLOWED WITH ABOVE DIRECTION. PAGE 4 OF 6 6. THE SECOND GROUND OF APPEAL IS WITH RESPECT TO THE ADDITI ON ON ACCOUNT OF SHARE APPLICATION MONEY OF RS. 3350000/ - . IT IS APPARENT THAT THE ASSESSEE COMPANY HAS ISSUED SHARE TO 38 PERSONS DURING THE YEAR. THE NAME SUGGESTS THAT THE ASSESSEE COMPANY IS A LIMITED COMPANY AND THEREFORE THE FIRST QUESTION T HAT ARISES IS THAT AT THE TIME OF ISSUE OF SHARES HOW THESE COMPANY CAME TO KNOW ABOUT ALL THESE 38 SHARE AL LOTT EES AND IT IS ALSO NOT KNOWN THAT HOW THE COMPANY APPROACHED THESE 38 ALLOTEES. IT IS ALSO NOT ASCERTAINED THAT WHETHER THESE PERSONS ARE RELATE D TO THE DIRECTORS OR NOT. THIS FACT IS REQUIRED TO BE NOTED, AND EXAMINED WITH RESPECT TO THE ALLEGATION OF THE REVENUE THAT ASSESSEE HAS OBTAINED SHARE CAPITAL FROM ENTRY OPERATORS. FURTHER LD CIT (A ) HAS NOT FOUND ANY EVIDENCE THAT THIS COMPANY HAS ISSU ED ANY ADVERTISEMENT OF THE SHARES TO BE ISSUED. THIS FACT ARE NOW COMING OUT FROM THE ORDER OF THE LD AO AS WELL AS THE LD CIT(A). WITH RESPECT TO SHARE ALLOTEES ALLEGATION OF THE AO IS THAT THESE ARE ENTRY PROVIDERS. THE NAMES AND ADDRESS OF THE PARTIES ARE PROVIDED AT PAGE NO. 361 TO 367 OF THE PAPER BOOK. THE ASSESSEE HAS SUBMITTED INFORMATION ABOUT THOSE SHARES APPLICANT IN THE FORM OF SHARES APPLICATION FORM, SHARE CERTIFICATE ISSUED TO THEM, THEIR INCOME TAX RETURN, THERE CONFIRMATION AND PHOTOCOPY OF THE CHEQUES RECEIVED FOR THE PURPOSE OF SHARE APPLICATION. MOST OF THE SHARES APPLICANTS HAVE SHOWN VERY MEAGER INCOME IN THE RETURN OF INCOME AND FURTHER THEIR SOURCE OF INCOME ARE ALSO SHOWN AS MISCELLANEOUS INCOME ETC. MANY OF THE SHAREHOLDERS ARE AL SO SERVICE PEOPLE WHO IS INCOME IS VERY LOW. MOST OF THE PERSONS IN WHOSE NAME THE SOURCE OF INCOME IS SHOWN AS BUSINESS DID NOT HAVE ANY PROFIT AND LOSS ACCOUNT ETC. ALL THE CONFIRMATION IS ARE ALSO STATED TO BE ISSUED IN SINGLE HANDWRITING. FURTHER, MERE LY PRODUCING THE CONFIRMATION OF THOSE ACCOUNTS AS WELL AS OF THOSE PARTIES DO NOT JUSTIFY THE CREDITWORTHINESS AND GENUINENESS OF THOSE TRANSACTIONS. IT IS REQUIRED TO BE NOTED THAT IN CASE OF ENTRY OPERATORS THE AMOUNT IS ALWAYS TAKEN FROM THE PERSONS WE RE FILING THE RETURN OF INCOME AND ARE ALSO HAVING THE PERMANENT ACCOUNT NUMBER TO SHOW THE FAADE OF GENUINENESS AND CREDITWORTHINESS OF THOSE DEPOSITORS. THE LD. CIT APPEAL HAS ACCEPTED THESE EVIDENCES AND HELD THAT THEY SATISFY THE REQUIREMENT OF SECTIO N 68 OF THE ACT. WE ONLY AGREE WITH THE FINDING OF THE LD. CIT APPEAL THAT THIS DOCUMENT ONLY JUSTIFY OR ESTABLISHES THE IDENTITY OF THOSE PERSONS. MUCH MORE IS REQUIRED TO BE ESTABLISHED BY THE ASSESSEE TO SHOW THE PAGE 5 OF 6 CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION WHERE REVENUE HAS SPECIFICALLY STATED THAT THESE ARE ENTRY OPERATORS FROM WHOM SUCH SHARE CAPITAL SUMS HAVE BEEN RECEIVED. FURTHERMORE , THE DETAILS WERE PRODUCED BEFORE THE LD. CIT A , AND LD. AO HAS OBJECTED IN HIS REMAND REPORT THAT ADEQUATE O PPORTUNITY WAS GIVEN TO THE ASSESSEE TO PRODUCE ALL THESE DETAILS BEFORE HIM. HOWEVER ASSESSEE FAILED TO PRODUCE THEM AND BEFORE CIT APPEAL AND BEFORE US. THE PAPER BOOK CONTAINING 673 PAGES IS FURNISHED. THEREFORE, IT IS APPARENT THAT THE ASSESSEE WOULD N OT LIKE TO PRODUCE THESE DETAILS BEFORE THE ASSESSING OFFICER TO AVOID FURTHER PROBE AND SCRUTINY BY THE LD. ASSESSING OFFICER BUT BEFORE THE APPELLATE AUTHORITY ONLY. SUCH AN ATTITUDE CANNOT BE ACCEPTED AT THIS LEVEL. IN VIEW OF THIS, WE SET ASIDE THE WHO LE ISSUE BACK TO THE FILE OF THE LD. ASSESSING OFFICER WITH A DIRECTION TO THE ASSESSEE TO ESTABLISH THE IDENTITY, CREDITWORTHINESS OF THE DEPOSITORS, SHARE APPLICANTS AS WELL AS TO ESTABLISH THE GENUINENESS OF THE TRANSACTION BY PRODUCING THESE DETAILS PR ODUCED BEFORE US. THE LD. ASSESSING OFFICER MAY NOT STOP BY MERELY EXAMINING THESE DETAILS BUT TO FURTHER PROBE THE PERSONS WHO HAVE INVESTED IN THE SHARE CAPITAL AS WELL AS LOAN TO THE COMPANY. THE ASSESSEE IS FURTHER DIRECTED THAT IF THE ASSESSING OFFICE R FURTHER DESIRES, TO EXAMINE THOSE PERSON THEN TO PRODUCE THEM BEFORE THE ASSESSING OFFICER. NEEDLESS TO SAY, THAT LD. ASSESSING OFFICER WILL PROVIDE PROPER OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIO NS OF THE LOAN AS WELL AS SHARE CAPITAL. IN THE RESULT GROUND NO. 2 OF THE APPEAL OF THE REVENUE IS ALLOWED WITH THE ABOUT DIRECTION. 7. THE GROUND NO. 3 OF THE APPEAL OF THE REVENUE IS WITH RESPECT TO THE ADDITION OF RS. 1 282010/ ON ACCOUNT OF COMMISSION PAID BY THE ASSESSEE OUT OF UNDISCLOSED INCOME TO THE ACCOMMODATION ENTRY PROVIDERS FOR PROVIDING THE SAID ACCOMMODATION ENTRIES OF UNSECURED LOAN AS WELL AS SHARE CAPITAL. AS THE ABOVE ADDITION RELATES TO GROUND NO. 1 AND GROUND NO. 2 OF THE APPEAL OF TH E REVENUE AND BOTH THE GROUNDS ARE BEEN SET ASIDE TO THE FILE OF THE ASSESSING OFFICER, HE MAY EXAMINE GROUND NO. 1 AND GROUND NO. 2 OF THIS APPEAL AND THEN AFTER DECIDE GROUND NO. 3 ABOUT THE ADDITION OF COMMISSION PAID FOR ACCOMMODATION ENTRIES. IN THE R ESULT GROUND NO. 3 OF THE APPEAL OF THE REVENUE IS PREMATURE AND HENCE DISMISSED. 8. GROUND NO. 4 OF THE APPEAL OF THE REVENUE IS WITH RESPECT TO THE ADMISSION OF ADDITIONAL EVIDENCE BY THE LD. CIT A, IN VIOLATION OF RULE 46A OF THE ACT. PAGE 6 OF 6 WE HAVE DEALT WITH THE ISSUE WHILE DEALING WITH GROUND NO. 1 AND 2 OF THE APPEAL OF THE REVENUE. IN ADD ITION, AS WE HAVE ALREADY SET ASIDE THE GROUND NO. 1 AND GROUND NO. 2 OF THE APPEAL OF THE REVENUE THIS GROUND DOES NOT SURVIVE HENCE DISMISSED. 9. GROUND NO. 5 OF THE APPEAL OF THE REVENUE IS VAGUE AND MERELY SAYING THAT LD. CIT A, HAS NOT RECORDED DUE IMPO RTANCE TO THE FINDING BY THE INVESTIGATION WING WITH RESPECT TO THE ABOUT TO ADDITION. NO SPECIFIC ARGUMENTS WERE ADVANCED BEFORE US. HENCE, WE DISMISS GROUND NO. 5 OF THE APPEAL OF THE REVENUE. 10. IN THE RESULT APPEAL OF THE REVENUE IS PARTLY ALLOWED WITH AB OVE DIRECTION FOR STATISTICAL PURPOSES. 11. ORDER PRO NOUNCED IN THE OPEN COURT ON 2 2 / 0 8 / 2017 . - S D / - - S D / - ( H.S.SIDHU ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 2 / 0 8 / 2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI