ACIT, New Delhi V. M/s Adroit Financial Services (P) Ltd., Delhi

ITA 2918/DEL/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0012 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-04-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 10-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R R KUMAR
• Keywords: Gift; Business income; Capital receipt
• Section: 148; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A , NEW DELHI BEFORE SH. N. K. SAINI , AM AND SH. A. T. VARKEY , JM ITA NO. 2918 /DEL/201 3 : ASSTT. YEAR : 2005 - 06 ASSISTANT COMMISSIO NER OF INCOME TAX, CIRCLE 1(1), NEW DELHI - 1100 02 VS M/S ADROIT FINANCIAL SERVICES (P) LTD., 13, PARMESH CORPORATE TOWER, 6 TH FLOOR, COMMERCIAL COMPLEX, KARKARDOMA, DELHI - 92 (APPELLANT) (RESPONDENT) PAN NO. AABCA1156D ASSESSEE BY : SH . RAJESH JAIN , CA REVENUE BY : SH . B. R. R. KUMAR, SR. DR DATE OF HEARIN G : 22 . 04 .2015 DATE O F PRONOUNCEMENT : 06 .05 .2015 ORDER PER N.K . SAINI , A.M. THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORDER DATED 28.02.2013 OF THE L D. CIT(A) - I V , NEW DELHI . 2 . THE ONLY EFFECTIVE GROUND RAISED IN THIS APPEAL READ AS UNDER: 1. WHETHER THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS. 20,00,000/ - ON ACCOUNT OF SHARE CAPITAL RECEIPTS IGNORING THE FACT THAT T HE ASSESSEE FAILED TO ESTABLISH THE IDENTITY, CREDIT WORTHINESS AND ITA NO.2918 /DE L/201 3 ADROIT FINANCIAL SERVICES P. LTD. 2 GENUINENESS OF THE TRANSACTION DESPITE ADEQUATE OPPORTUNITY. 3 . FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE WAS ENGA GED IN THE BUSINESS OF FINANCE , SHARE BROKING AND MANAGEMENT CONS ULTANCY SERVICES. THE ASSESSEE FILED THE RETURN OF INCOME ON 29.10.2005 DECLARING AN INCOME OF RS. 3,95,03,633/ - . SUBSEQUENTLY, THE AO RECEIVED INFORMATION FROM INVESTIGATION WING THAT THE ASSESSEE HAD RECEIVED ACCOMMODATION ENTRY OF RS. 20,00,000/ - . HE, T HEREFORE, ISSUED NOTICE U/S 148 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) ON 30.03.2011 AFTER RECORDING THE REASONS. IN RESPONSE THE ASSESSEE SUBMITTED THAT THE ORIGINAL RETURN FURNISHED U/S 139(1) OF THE ACT MAY BE TREATED AS THE RE TURN FILED IN RESPONSE TO THE NOTICE ISSUED U/S 148 OF THE ACT. THE AO MADE THE ADDITION OF RS. 20,00,000/ - U/S 68 OF THE ACT BY OBSERVING THAT THE SHARE CAPITAL OF RS. 20,00,000/ - INTRODUCED/RECEIVED DURING THE YEAR ALLEGEDLY FROM M/S D.N. KANSAL SECURITI ES PVT. LTD. WAS BOGUS. 4 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT THE AMOUNT ADDED BY THE AO WAS NOT AT ALL A SHARE APPLICATION MONEY OR CASH CREDIT BECAUSE IT WAS A BUSINESS RECEIPT ON ACCOUNT OF REGULAR ITA NO.2918 /DE L/201 3 ADROIT FINANCIAL SERVICES P. LTD. 3 SHAR E TRADING BUSINESS. IT WAS FURTHER STATED THAT IF THE AO HAD ANY DOUBT REGARDING THE GENUINENESS O F THE REGULAR SHARE TRANSACTION, H E COULD HAVE ISSUED THE NOTICE U/S 133(6)/131 OF THE ACT TO THE CLIENT S TO VERIFY THE GENUINENESS OF THE TRANSACTION . IT WAS CONTENDED THAT THE AO WAS NOT CORRECT IN OBSERVING THAT THE DETAILS OF TRANSACTION WERE NOT SUBMITTED BEFORE HIM , AS CAN BE SEEN FROM THE REPLY OF THE ASSESSEE REPRODUCED BY THE AO HIMSELF IN THE ASSESSMENT ORDER ON PAGE NOS. 3 & 4 , WHICH INDICATED THAT T HE ASSESSEE HAD SUBMITTED THE COPY OF THE ACCOUNT AND CLIENT CERTIFICATE. IT WAS FURTHER CONTENDED THAT THE AO HAD BLINDLY ACTED ON THE INFORMATION RECEIVED FROM THE INVESTIGATION WING WITHOUT APPLYING HIS MIND AND WITHOUT ESTABLISHING ANYTHING ON RECORD T HAT THERE WAS ANY REC EIPT ON ACCOUNT OF SHARE APPLICATION MONEY BY THE ASSESSEE. THEREFORE, THE ADDITION MADE BY THE AO SHOULD BE DELETED. THE LD. CIT(A) ALSO REPRODUCED THE WRITTEN SUBMISSION OF THE ASSESSEE AT PAGE NOS. 5 TO 8 OF THE IMPUGNED ORDER , FOR THE COST OF REPETITION THE SAME IS NOT REPRODUCED HEREIN. 5 . THE LD. CIT(A ) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE AO AT PAGE NO. 3 OF THE ASSESSMENT ORDER MENTIONED THAT THE ASSESSEE IN ITS SUBMISSION DATED 22.11.2011 , SUBMIT TED THAT M/S D.N. ITA NO.2918 /DE L/201 3 ADROIT FINANCIAL SERVICES P. LTD. 4 KANSAL SECURITIES PVT. LTD. WAS A REGULAR CLIENT WHO EXECUTED BUSINESS IN THE STOCK MARKET THROUGH THE ASSESSEE AND DEPOSITED A SUM OF RS. 20,00,000/ - AS MARGIN MONEY THROUGH CHEQUE WHICH WAS REPAID TO HIM ALONG WITH HIS OTHER PAYMENTS , T HE DEPOSIT WAS TAKEN AS PER THE NORMAL TRADE PRACTICE AS PRESCRIBED BY NATIONAL STOCK EXCHANGE OF INDIA, THE ASSESSEE OR ANY DIRECTOR OF THE ASSESSEE COMPANY WERE NOT ASSOCIATED WITH THE SAID CLIENT OR RELATED IN ANY MAN NER AND THAT THE ASSESSEE HAD NOT TA KEN ANY BENEFIT IN SHAPE OF CAPITAL, GIFT, LOAN ETC. SO AS TO ATTRACT THE PROVISION S OF SECTION 68 OF THE ACT. THE LD. CIT(A) CATEGORICALLY STATED THAT THE ABOVE SUBMISSIONS OF THE ASSESSEE HAD NOT BEEN CONTROVERTED BY THE AO WHO PROCEED ED ON THE ASSUMPTIO N THAT I T WAS A SHARE APPLICATION MONEY. THE LD. CIT(A) WAS OF THE VIEW THAT IT WAS EXPECTED FROM THE AO THAT HE SHOULD HAVE ESTABLISHED THAT THE ASSESSEE RECEIVED ANY SHARE APPLICATION MONEY WHICH THE AO HAD NOT DONE. THEREFORE, A MERE OBSERVATION THAT TH E ASSESSEE HAD RECEIVED ACCOMMODATIO N ENTRIES THROUGH THE ROUTE OF SHARE CAPITAL WHICH WAS NOT SUPPORTED BY ANY EVIDENCE MATERIAL ON RECORD , WAS NOT A SUFFICIENT GROUND FOR MAKING THE ADDITION. THE LD. CIT(A) FURTHER OBSERVED THAT THE ASSESSEE FURNISHED CO PY OF ACCOUNT OF THE SHARE ITA NO.2918 /DE L/201 3 ADROIT FINANCIAL SERVICES P. LTD. 5 TRANSACTION DONE BY M/S D.N. KANSAL SECURITIES PVT. LTD. ON REGULAR BASIS WITH THE ASSESSEE COMPANY, COPY OF THEIR PERMANENT ACCOUNT NUMBER AND HAD ALSO SPECIFICALLY SUBMITTED THAT IT HAD NOT RECEIVED ANY SHARE APPLICATION MONEY OR LOAN OR GIFT FROM THE PARTY. THE LD. CIT(A) HELD THAT THE ADDITION MAD E BY THE AO WAS NOT SUSTAINABLE. A CCORDINGLY THE IMPUGNED ADDITION WAS DELETED , R ELIANCE WAS PLACED ON THE JUDGMENT OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS VISH AL HOLDING & CAPITAL PVT. LTD. (2011) 12 TAXMAN.COM 150. 6 . NOW THE DEPARTMENT IS IN APPEAL. THE LD. D R STRONGLY SUPPORTED THE ORDER OF THE AO AND REITERATED THE OBSERVATIONS MADE IN THE ASSESSMENT ORDER DATED 21.12.2011. IT WAS FURTHER S UBMITTED THAT T HE ISSUE MAY BE SENT BACK TO THE AO FOR VERIFICATION AS TO WHETHER THE AMOUNT RECEIVED BY THE ASSESSEE WAS ON ACCOUNT OF SHARE CAPITAL OR IT WAS RELATED TO THE BUSINESS TRANSACTION. 7 . IN HIS RIVAL SUBMISSIONS THE LD. COUNSEL FOR THE ASSESSEE REITERATED T HE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND FURTHER SUBMITTED THAT ALL THE RELEVANT DOCUMENTS WERE PRODUCED BY THE ASSESSEE BEFORE THE AO , SO THERE WAS NO NEED TO SEND THE ISSUE BACK FOR FRESH ITA NO.2918 /DE L/201 3 ADROIT FINANCIAL SERVICES P. LTD. 6 ADJUDICATION. IT WAS FURTHER STATED THAT THE ASSESSEE DID NOT RECEIVE ANY AMOUNT ON ACCOUNT OF SHARE APPLICATION MONEY FROM M/S D.N. KANSAL SECURITIES PVT. LTD. AND THAT THE DEPOSIT OF RS. 20,00,000/ - WAS RECEIVED FOR THE BUSINESS PURPOSE WHICH WAS A MARGIN MONEY AND REPAID ALONG WITH OTHER PAYMENTS. THEREFORE, THE ADDITION MADE BY THE AO WAS RIGHTLY DELETED BY THE LD. CIT(A). 8 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT APPEARS THAT THE AO WRONGLY PRESUMED THAT THE DEPOSIT OF RS. 20,00,000/ - MADE BY M/S D.N. KANSAL SECURITIES PVT. LTD. WHO WAS A REGULAR CLIENT OF THE ASSESSEE, WAS RECEIVED AS A SHARE APPLICATION MONEY. THE SAID AMOUNT WAS RECEIVED BY THE ASSESSEE IN NORMAL COURSE OF BUSINESS AS A MARGIN MONEY WHICH WAS TAKEN AS PER THE NORMAL TRADE PRACTICE PRESCRIBED BY NATIONAL STOCK EXCHANGE OF INDIA. THE LD. CIT(A) VERIFIED THE ABOVE FACTS FROM THE COPY OF ACCOUNT FURNISHED BEFORE HIM. IN THE PRESENT CASE, T HE AO HAD ALS O NOT CONTROVERTED THIS SUBMISSION OF THE A SSESSEE THAT THE AMOUNT IN QUESTION WAS RECEIVED FROM A REGULAR CLIENT WHO HAD EXECUTED BUSINESS IN THE STOCK MARKET THROUGH THE ASSESSEE. THEREFORE, THE ADDITION MADE BY THE AO WAS NOT JUSTIFIED AND THE LD. ITA NO.2918 /DE L/201 3 ADROIT FINANCIAL SERVICES P. LTD. 7 CIT(A) RIGHTLY DELETED THE SAME. WE DO NOT SEE A NY VALID GROUND TO INTERFERE WITH THE FINDINGS GIVEN BY THE LD. CIT(A) AND ACCORDINGLY DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 9 . IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSED. ( ORDER PRON OUNCED IN THE COURT ON 06 /05 / 2015) . SD/ - SD/ - (A. T. VARKEY ) ( N. K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 06 /05 /2015 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR