ITO, New Delhi V. M/s Camphor Portfolio (P) Ltd., New Delhi

ITA 2929/DEL/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 6704 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-10-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 11-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AROOP KUMAR SINGH
• Keywords: Unexplained cash credit; Additional evidence; Set aside
• Section: 205; 195; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER I.T.A NO. 2929/DEL/10 ASSTT. YEAR 2005-06 ITO, WARD-3(2), ROOM NO. 385 A 3 RD FLOOR, C.R. BUILDING, NEW DELHI. VS. CAMPHOR PORTFOLIO (P) LTD. C/O CORPORATE PROFESSIONALS, D-28, SOUTH EXTENSION PART-1, NEW DELHI. CO. NO. 201/DEL/10 ASSTT. YEAR 2005-06 CAMPHOR PORTFOLIO (P) LTD. C/O CORPORATE PROFESSIONALS, D-28, SOUTH EXTENSION PART-1, NEW DELHI. VS. ITO, WARD-3(2), ROOM NO. 385 A 3 RD FLOOR, C.R. BUILDING, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI AROOP KUMAR SINGH, SR. DR RESPONDENT BY: SH. ASHWANI TANEJA, ADVOCATE ITA NO. 2929/DEL/10 ASSTT. YEAR 2005-06 CO. NO. 201/DEL/10 ASSTT. YEAR 2005-06 2 ORDER PER RAJPAL YADAV, JM: THE PRESENT APPEAL IS DIRECTED AT THE INSTANCE OF REVENUE AGAINST THE ORDER OF LD. CIT(A) DATED 31 ST MARCH, 2010 PASSED FOR ASSTT. YEAR 2005-06. ON RECEIPT OF NOTICE IN THE REVENUES APPE AL ASSESSEE HAS FILED CROSS OBJECTION BEARING NO. 201/D/10. IN REVENUES APPEAL THE SOLITARY GRIEVANCE IS THAT LD. CIT(A) HAS ERRED IN DELETING ADDITION OF ` 2,78,90,000/-. 2. IN THE CROSS OBJECTION ASSESSEE IS IMPUGNING CO NFIRMATION OF ADDITION OF ` 1 LAC AS WELL AS ADHOC DISALLOWANCE OF ` 9,494/-. THE GROUND OF APPEAL TAKEN BY THE REVENUE IN ITS APPEAL IS INTERCONNECTED WITH GROUND NO. 1 TAKEN BY THE ASSESSEE IN THE CROS S OBJECTION. THEREFORE, WE DISPOSE OFF BOTH THESE GROUNDS TOGETH ER. 3. THE BRIEF FACTS ARE THAT ASSESSEE HAS FILED ITS RETURN OF INCOME ON 23 RD MARCH, 2006 DECLARING AN INCOME OF ` 1280/-. THE ASSESSEE WAS ENGAGED IN SALE AND PURCHASE OF SHARES AT THE RELEV ANT TIME. ON SCRUTINY OF THE ACCOUNTS LD. AO FOUND SHARE APPLICATION MONE Y / SHARE PREMIUM RECEIVED BY THE ASSESSEE. ITA NO. 2929/DEL/10 ASSTT. YEAR 2005-06 CO. NO. 201/DEL/10 ASSTT. YEAR 2005-06 3 S.NO. NAME AMOUNT(IN RS.) DESCRIPTION 1. DAZZLING FINANCIAL SERVICES P. LTD. 1,00,000 SHARE APPLICATION MONEY 2. PRABHARAM IMPEX & TRADERS P. LTD. 10,00,000 SHARE APPLICATION MONEY 3. RCI INDUSTRIES & TECHNOLOGIES LTD. 1,45,30,000 SHARE APPLICATION MONEY 4. VALUE PORTFOLIO P. LTD. 5,00,000 SHARE APP LICATION MONEY 5. METAL ROD LTD. 11,15,000 SHARE CAPITAL 6. METAL ROD LTD. 1,00,35,000 SHARE PREMIUM 4. THE AO FURTHER FOUND CREDIT ENTRIES OF ` 3 LACS AGAINST THE NAME OF SHRI MAHESH KUMAR (HUF) AND OF ` 2 LACS AGAINST THE NAME OF SHRI MAYA RAM (HUF). IN ORDER TO PROVE THE IDENTITIES O F THE SHARE APPLICATION ASSESSEE HAS FILED ALL THE RELEVANT DOC UMENTS I.E. CONFIRMATION, PAN NO., COPIES OF THE BANK STATEMENT , ETC. ON THE ASKING OF THE AO ASSESSEE HAS PRODUCED ONE SHRI RAJIV GUPT A WHO WAS STATED TO BE THE MANAGING DIRECTOR OF THE FOUR APPLICANT C OMPANIES. HIS STATEMENT WAS RECORDED BY THE AO BUT IT WAS LEFT IN THE MID WAY. THE AO MADE THE ADDITION ON THE GROUND THAT ASSESSEE FAILE D TO DISCHARGE THE ONUS PUT UPON IT BY SECTION 68 OF THE INCOME TAX AC T. ITA NO. 2929/DEL/10 ASSTT. YEAR 2005-06 CO. NO. 201/DEL/10 ASSTT. YEAR 2005-06 4 5. DISSATISFIED WITH THE ACTION OF AO ASSESSEE CARR IED THE MATTER IN APPEAL. IT HAS FILED DETAILED WRITTEN SUBMISSION AL ONGWITH THE MATERIAL SUBMITTED BEFORE THE AO. IT HAS ALSO PRAYED FOR PER MISSION TO LEAD ADDITIONAL ADDITION ON THE GROUND THAT AO DID NOT C ONDUCT THE PROPER INQUIRY. LD. CIT(A) HAS PERMITTED THE ASSESSEE TO L EAD ADDITIONAL EVIDENCE AND THEREAFTER CALLED FOR A REMAND REPORT FROM THE AO. IT EMERGES OUT THAT SUCH REMAND REPORT WAS CALLED TWIC E BECAUSE IN THE FIRST OCCASION, LD. AO INSTEAD OF EXAMINING THE EVI DENCE ON MERIT, CONTENDED THAT ASSESSEE BE NOT PERMITTED TO ADDUCE ADDITIONAL EVIDENCE. LD. CIT(A) REJECTED THIS CONTENTION OF AO ON THE GROUND THAT HE DID NOT PROPERLY VERIFY THE DOCUMENTS SUBMITTED BY THE ASSESSEE AND DID NOT EXAMINE THE ALLEGED SHRI RAJIV GUPTA. HIS S TATEMENT WAS LEFT IN THE MID WAY. IN THE OPINION OF LD. CIT(A) THE EVIDE NCE SOUGHT TO BE SUBMITTED BY THE ASSESSEE IS A NECESSARY EVIDENCE FOR THE JUST DECISION OF THE APPEAL. THEREFORE LD. CIT(A) TOOK IT ON THE RECORD BY EXERCISING HIS POWERS AVAILABLE IN SUB CLAUSE 4 OF RULE 46A OF THE INCOME TAX RULES 1962. THE OBJECTION OF THE AO WAS THAT CASE O F THE ASSESSEE DOES NOT FALL WITHIN THE EXCEPTION SUB RULE 1 OF R ULE 46A. IN THE REMAND REPORT ON MERIT LD. AO HAS ACCEPTED THAT ASSESSEE HAS ESTABLISHED THE IDENTITY AND GENUINENESS OF THE TRANSACTION . THE A O ALSO DID NOT DISPUTE THE CREDITWORTHINESS OF THE SHARE APPLICANTS. HIS A REA OF GRIEVANCE IS THAT ITA NO. 2929/DEL/10 ASSTT. YEAR 2005-06 CO. NO. 201/DEL/10 ASSTT. YEAR 2005-06 5 THIS ADDITIONAL EVIDENCE SHOULD NOT BE ENTERTAINED. LD. CIT(A) HAS GONE THROUGH ALL THESE CONTENTIONS AND AFTER REFERRING A LARGE NUMBER OF DECISIONS NAMELY CIT VS. DIVINE LEASING& FINANCE LT D. REPORTED IN 299 ITR 268, LOVELY EXPORTS REPORTED IN 216 CTR 195 AND OTHERS, DELETED THE ADDITIONS. 6. LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET DREW OUR ATTENTION TOWARDS THE REMAND REPORT OF THE AO SUBMITTED VIDE LETTER DATED 4 TH MARCH, 2010. HE POINTED OUT THAT IN THIS REMAND REP ORT AO DID NOT DISPUTE ABOUT THE IDENTITY OF THE FOUR SHARE APPLIC ANTS. HE ALSO DID NOT DISPUTE ABOUT THE GENUINENESS OF THE TRANSACTION. H IS AREA OF GRIEVANCE IS THAT WHY SHARE APPLICANT HAS PAID A PREMIUM OF ` 90/- PER SHARE AND HE OPPOSED THE PERMISSION TO LEAD ADDITIONAL EVIDEN CE BEFORE THE LD. CIT(A). LD. DR ON THE OTHER HAND CONTENDED THAT NO DOUBT AO HAS ACCEPTED THE ISSUE ON MERIT BUT ASSESSEE WAS GIVEN SUFFICIENT OPPORTUNITY DURING THE ASSESSMENT PROCEEDINGS AND I T SHOULD HAVE FILED THE NECESSARY EVIDENCE IN THE ASSTT. PROCEEDINGS IT SELF. THE LD. CIT(A) OUGHT TO HAVE NOT ENTERTAIN THE ADDITIONAL EVIDENCE . 7. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. SUB RULE 4 OF RULE 46A EMPOWE RS TO LD. CIT(A) FOR ITA NO. 2929/DEL/10 ASSTT. YEAR 2005-06 CO. NO. 201/DEL/10 ASSTT. YEAR 2005-06 6 ENTERTAINMENT OF ADDITIONAL EVIDENCE EVEN IF RESTRI CTIONS PUT BY SUB RULE ONE OF RULE 46A FOR ENTERTAINING SUCH EVIDENCE ARE AVAILABLE. ACCORDING TO SUB RULE 4, IF LD FIRST APPELLATE AUTHORITY FEE LS THAT FOR THE JUST DECISION OF THE APPEAL OR FOR ANY SUBSTANTIAL CAUSE SUCH EVIDENCE IS ESSENTIAL, THEN HE CAN ENTERTAIN THE ADDITIONAL EVI DENCE. IN THE PRESENT CASE WHILE CONSIDERING THE ISSUE LD. FIRST APPELLAT E AUTHORITY FELT THAT THE EVIDENCE PRODUCED BY THE ASSESSEE WAS NOT INVESTIGA TED BY THE AO PROPERLY. HE, THEREFORE, CALLED FOR A REMAND REPORT AND SEND THE RELEVANT MATERIAL FOR INVESTIGATION TO THE AO. ON INVESTIGAT ION AO WAS SATISFIED WITH REGARD TO THE IDENTITY OF THE SHARE APPLICANTS , EXCEPT M/S. DAZZLING FINANCIAL SERVICES PVT. LTD. HE DID NOT DOUBT ABOUT THEIR CREDITWORTHINESS ALSO. IF THAT BE SO THEN THERE CAN NOT BE ANY ADDIT ION IN THE HANDS OF ASSESSEE IN VIEW OF THE VARIOUS AUTHORITATIVE PRON OUNCEMENTS OF HONBLE DELHI HIGH COURT AS WELL AS OF HONBLE SUPR EME COURT. A REFERENCE CAN BE MADE TO THE LATEST DECISION OF HON BLE DELHI HIGH COURT RENDERED IN ITA NO. 911 OF 2010 AND 913 OF 2010 IN THE CASE OF CIT VS. DWARKADHISH INVESTMENT. THIS DECISION HAS BEEN DELI VERED ON 2 ND AUGUST, 2010. COPY OF THIS DECISION HAS BEEN PLACED ON PAGES 1 TO 14 OF THE PAPER BOOK, BY THE LD. COUNSEL FOR THE ASSESSEE . IN THIS DECISION HONBLE COURT HAS CONSIDERED THE VARIOUS OTHER DECI SIONS NAMELY CIT VS. DIVINE LEASING 299 ITR 268, CIT VS. RATHI FINLE ASE LTD., 215 CTR ITA NO. 2929/DEL/10 ASSTT. YEAR 2005-06 CO. NO. 201/DEL/10 ASSTT. YEAR 2005-06 7 167 (MP), CIT VS. KUNDAN INVESTMENT 263 ITR 626 (CA LCUTTA), CIT VS. SOPHIA FINANCE LTD. 205 ITR 98. THUS, IN THE LIGHT OF VARIOUS AUTHORITATIVE PRONOUNCEMENTS, IF WE EXAMINE THE FAC TS OF THE PRESENT CASE THEN IT WOULD REVEAL THAT ASSESSEE HAS ESTABLI SHED THE IDENTITY OF THE SHARE APPLICANTS AND HAS ALSO ESTABLISHED GENU INENESS OF THE TRANSACTION. THE ADDITION IN SUCH SITUATION IN ITS HANDS ON ACCOUNT OF UNEXPLAINED CASH CREDIT CANNOT BE MADE. LD. FIRST A PPELLATE AUTHORITY HAS DISCUSSED THE ISSUE IN DETAIL AND REPRODUCED TH E WRITTEN SUBMISSIONS FILED BY THE ASSESSEE FROM PAGES NO. 3 TO 14 WHEREIN ASSESSEE HAS QUOTED THE RATIO LAID DOWN IN DIFFEREN T CASE LAW, NOTICE BY US IN THE PRECEDING PARAGRAPHS. 8. AS FAR AS THE DELETION OF ` 5 LAC IS CONCERNED THE ASSESSEE HAS FILED CONFIRMATION FROM SHRI MAHESH KUMAR HUF AND M AYA RAM HUF IT HAS FILED THEIR INCOME TAX RETURN AND THEIR PAN NUM BER. THE AO DID NOT MAKE ANY COMMENTS ON THESE DETAILS. LD. CIT(A) AFTE R CONSIDERING THESE ASPECTS DELETED THE ADDITION. 9. AS FAR AS THE ADDITION DISPUTED BY THE ASSESSEE IN THE CROSS OBJECTION IS CONCERNED, WE FIND THAT LD. FIRST APPE LLATE AUTHORITY HAS RECORDED A FINDING THAT ASSESSEE FAILED TO PRODUCE CONFIRMATION FROM ITA NO. 2929/DEL/10 ASSTT. YEAR 2005-06 CO. NO. 201/DEL/10 ASSTT. YEAR 2005-06 8 M/S. DAZZLING FINANCIAL SERVICES. LD. CIT(A) FURTHE R OBSERVED THAT ASSESSEE FAILED TO PROVE THE IDENTITY OF THIS CONCE RN AS WELL AS GENUINENESS OF THE TRANSACTION. BEFORE US IT WAS CO NTENDED BY THE LD. COUNSEL THAT NOW THESE DETAILS ARE AVAILABLE WITH THE ASSESSEE, IF THE ISSUE CAN BE REMANDED THEN IT WILL PRODUCE ALL THES E DETAILS. HOWEVER WE DO NOT SEE ANY REASON TO SET ASIDE THE ISSUE TO THE FILE OF AO BECAUSE, IN THE PAPER BOOK ASSESSEE HAS NOWHERE PLACED SUCH CON FIRMATION FOR OUR PERUSAL OR ANY OTHER EVIDENCE. TAKING INTO CONSIDER ATION ALL THE FACTS AND CIRCUMSTANCES AND THE DETAIL FINDING OF LD. CIT(A) COUPLED WITH THE REMAND REPORT FILED BY THE AO WE DO NOT SEE ANY REA SON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. IN THE RESU LT APPEAL OF THE REVENUE IS DISMISSED AND GROUND NO. 1 TAKEN BY THE ASSESSEE IN THE CROSS OBJECTION IS ALSO REJECTED. 10. IN THE CROSS OBJECTION ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF ` 9,494/- WHICH HAS BEEN DISALLOWED BY THE AO ON ADH OC BASIS. THE AO HAS NOT MADE ELABORATE DISCUSSION ON THIS ISSUE. HE JUST RECORDED THREE LINES IN PARAGRAPH 15. IN THESE THREE LINES N EITHER IT IS AVAILABLE, HOW MUCH EXPENSES HAVE BEEN CLAIMED BY THE ASSESSEE AND WHAT IS THE NATURE OF EXPENSES. HE DISALLOWED 20% OF THE EX PENSES CLAIMED BY ASSESSEE ON THE GROUND THAT ASSESSEE FAILED TO PROD UCE COMPLETE ITA NO. 2929/DEL/10 ASSTT. YEAR 2005-06 CO. NO. 201/DEL/10 ASSTT. YEAR 2005-06 9 DETAILS. APPEAL TO THE LD. CIT(A) DID NOT BRING AN Y RELIEF. THERE IS NO IMPROVEMENT IN THE CASE OF ASSESSEE OR THAT OF AO E VEN BEFORE US. THE ASSESSEE COULD NOT DEMONSTRATE BEFORE US ABOUT THE GENUINENESS OF ALL THE EXPENSES. THE ASSESSEE FAILED TO SUBMIT THE REQ UISITE DETAILS BEFORE THE AO. THEREFORE, HE DISALLOWED SOME OF THE EXPEN SES. THE ASSESSEE HAS NOT PLACED ON RECORD ANY DETAILS BEFORE US ALSO . THEREFORE WE ALSO DO NOT SEE ANY REASON TO INTERFERE IN THE FINDING O F AO. THIS GROUND TAKEN IN CROSS OBJECTION IS ALSO REJECTED. 11. IN THE RESULT APPEAL AS WELL AS CROSS OBJECTION ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.11.2010. SD/- [K.G. BANSAL] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 26.11.2010 VEENA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT