ITO, New Delhi V. M/s. Aro Software (P) Ltd, New Delhi

ITA 2987/DEL/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3765 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-06-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 26-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SRUJANI MOHANTY
• Assessee Lawyers: RANO JAIN CAS
• Keywords: Income from undisclosed sources; Principle of natural justice; Accommodation entries
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A : NEW DELHI DELHI BENCH A : NEW DELHI DELHI BENCH A : NEW DELHI DELHI BENCH A : NEW DELHI BEFORE SHRI G.E.VEERABHADRAPPA, VICE PRESIDENT AND BEFORE SHRI G.E.VEERABHADRAPPA, VICE PRESIDENT AND BEFORE SHRI G.E.VEERABHADRAPPA, VICE PRESIDENT AND BEFORE SHRI G.E.VEERABHADRAPPA, VICE PRESIDENT AND SHRI A.D.JAIN, JUDICIAL MEMBER SHRI A.D.JAIN, JUDICIAL MEMBER SHRI A.D.JAIN, JUDICIAL MEMBER SHRI A.D.JAIN, JUDICIAL MEMBER ITA NO.2987/DEL/2009 ITA NO.2987/DEL/2009 ITA NO.2987/DEL/2009 ITA NO.2987/DEL/2009 ASSESSMENT YEAR : 2001 ASSESSMENT YEAR : 2001 ASSESSMENT YEAR : 2001 ASSESSMENT YEAR : 2001- -- -02 0202 02 INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, WARD WARD WARD WARD- -- -2(1), 2(1), 2(1), 2(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S ARO S M/S ARO S M/S ARO S M/S ARO SOFTWARE PRIVATE LIMITED, OFTWARE PRIVATE LIMITED, OFTWARE PRIVATE LIMITED, OFTWARE PRIVATE LIMITED, M MM M- -- -75, GREATER KAILASH 75, GREATER KAILASH 75, GREATER KAILASH 75, GREATER KAILASH- -- -I, I,I, I, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 048. 110 048. 110 048. 110 048. PAN NO.AADCA9950B. PAN NO.AADCA9950B. PAN NO.AADCA9950B. PAN NO.AADCA9950B. (APPELLANT) (RESPONDENT) APPELLANT BY : MS.SRUJANI MOHANTY, SR.DR. RESPONDENT BY : SHRI VED JAIN AND MS.RANO JAIN, CAS . ORDER ORDER ORDER ORDER PER A.D.JAIN, JM : PER A.D.JAIN, JM : PER A.D.JAIN, JM : PER A.D.JAIN, JM : THIS IS DEPARTMENTS APPEAL FOR AY 2001-02, TAKING THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN DELETING ADDITION OF RS.25,0 0,000/- MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT ON ACCOUNT OF INCOME FROM UNDISCLOSED SOURCES AND RS.13,000/- ON ACCOUNT OF COMMISSION PAID FROM UNDISCLOSED SOURCES IGNORING THE FACT THAT A) THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS BASED ON INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT THAT THE ASSES SEE COMPANY HAS RECEIVED BOGUS ACCOMMODATION ENTRIES FR OM VARIOUS ENTRY OPERATORS IN THE FORM OF SHARE APPLIC ATION MONEY AMOUNTING TO RS.25 LACS. B) THE AO HAS BASED THE ASSESSMENT BY RELYING UPON THE STATEMENT OF SHRI PRADEEP JINDAL, ENGAGED IN PR OVIDING ENTRIES, RECORDED BY THE INVESTIGATION WING WHO DEP OSED THAT HIS COMPANIES/FIRMS WERE NOT DOING ANY ACTUAL BUSINESS OTHER THAN GIVING ACCOMMODATION ENTRIES BY WAY OF CHEQUES/DDS/POS ON RECEIPT OF EQUIVALENT AMOUNT OF CASH PLUS COMMISSION @ 0.25% TO 0.50%. ITA-2987/DEL/2009 2 C) THE ADDITIONS WERE MADE BY THE AO IN VIEW OF THE FACT THAT SUMMONS ISSUED TO THE CREDITORS WERE EITH ER RETURNED OR REMAINED UNCOMPLIED WITH. D) THE FACTS OF THE PRESENT CASE ARE DISTINGUISHABL E TO THAT OF M/S LOVELY EXPORTS (P) LTD. RELIED UPON BY THE LD.CIT(A). 2. AS PER THE ASSESSMENT ORDER, THE ASSESSEE COMPAN Y HAD RECORDED RECEIPTS OF AMOUNTS TOTALING TO `25 LAKHS IN THE NAMES OF M/S ETISHA FINANCE & INVESTMENT PVT.LTD., M/S JAR METAL INDUSTRIES PVT.LTD., M/S REENA OIL INDUSTRIES PVT.LTD., M/S REENA PLASTI C PIPES PVT.LTD. AND M/S RELIABLE SECURITIES PVT.LTD. EACH OF THESE COM PANIES WAS SHOWN TO HAVE PAID `5 LAKHS TOWARDS SHARE APPLICATION MONEY TO THE ASSESSEE COMPANY. INFORMATION WAS RECEIVED FROM THE INVESTI GATION WING THAT THE ASSESSEE COMPANY WAS ONE AMONGST NUMEROUS BENEF ICIARIES WHO HAD TAKEN ACCOMMODATION ENTRIES FROM VARIOUS ENTRY OPERATORS. THE REPORT CONTAINED THE DETAILS OF THE AMOUNTS TAKEN B Y THE BENEFICIARIES FROM THE ENTRY OPERATORS, ALONGWITH OTHER DETAILS R EGARDING THE MODUS OPERANDI OF THE BENEFICIARIES AND THE ENTRY OPERATO RS. ONE SHRI PRADEEP JINDAL, S/O SHRI DINESH CHAND JINDAL, WAS A DIRECTOR IN MANY COMPANIES INCLUDING M/S ETISHA FINANCE & INVESTMENT PVT.LTD. AND M/S RELIABLE SECURITIES PVT.LTD. STATEMENT OF SHRI PRA DEEP JINDAL WAS RECORDED BEFORE THE INVESTIGATION WING OF THE DEPAR TMENT. THEREIN, HE HAD STATED THAT THE AFOREMENTIONED FIVE COMPANIES H AD PAID `5 LAKHS EACH TOWARDS SHARE APPLICATION MONEY TO THE ASSESSE E. HE ADMITTED THAT ALL HIS COMPANIES/FIRMS WERE ENGAGED ONLY IN P ROVIDING ENTRIES AND THAT VARIOUS AMOUNTS OF CASH WERE RECEIVED FROM VARIOUS PARTIES, WHICH WERE SHOWN AS SALE OF SHARES ROUTED THROUGH V ARIOUS ACCOUNTS AND CHEQUES/POS/DDS, WHICH WERE SUBSEQUENTLY ISSUED TO THE PARTIES ALONGWITH NECESSARY DOCUMENTS LIKE CONFIRMATIONS, A FFIDAVITS ETC., AND THAT COMMISSION ON THESE AMOUNTS AT THE RATE OF 50 PAISE FOR AN ENTRY OF `100/-, GIVEN TO THE BENEFICIARIES, WAS ALSO COL LECTED FROM THEM. THE ITA-2987/DEL/2009 3 AO RELIED ON THE CONTENTS OF THE AFORESAID STATEMEN T OF SHRI PRADEEP JINDAL, RECORDED BY THE INVESTIGATION WING OF THE D EPARTMENT. THE AO OBSERVED THAT LENGTHY EXAMINATIONS AND CROSS-EXAMIN ATIONS ARE PROCEDURES FOLLOWED IN COURTS, WHERE THERE IS NO TI ME LIMIT FOR DELIVERING THE JUDGMENTS AND THAT THE SAME ARE NOT POSSIBLE IN INCOME TAX PROCEEDINGS, WHICH ARE BARRED BY LIMITATION; AN D THAT EVEN OTHERWISE, THE STATEMENT OF SHRI PRADEEP JINDAL HAD BEEN RECORDED BY THE INVESTIGATION WING OF THE DEPARTMENT ON OATH, W ITHOUT THERE BEING ANY COERCION OR THREAT AND THERE WAS NO NEED FOR AN Y EXAMINATION OR RE-EXAMINATION OF SHRI PRADEEP JINDAL DURING THE AS SESSMENT PROCEEDINGS. OBSERVING THAT SHRI PRADEEP JINDAL HA D STATED THAT ALL THE COMPANIES IN WHICH HE WAS A DIRECTOR, INDULGED SOLE LY IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES, THE AO TREATED THE SUM OF `25 LAKHS AND `13,000/- ON ACCOUNT OF COMMISSION PAID, RECEIVED BY THE ASSESSEE TOWARDS SHARE APPLICATION MONEY AS UNEXPLA INED CASH CREDITS U/S 68 OF THE ACT AND ADDED IT TO THE TOTAL INCOME OF THE ASSESSEE. 3. BY VIRTUE OF THE IMPUGNED ORDER, THE LEARNED CIT (A) DELETED THE ADDITION MADE BY THE AO. THIS ACTION OF LEARNED CI T(A) IS WHAT BRINGS THE DEPARTMENT IN APPEAL BEFORE US. 4. CHALLENGING THE IMPUGNED ORDER, THE LEARNED DR H AS ARGUED THAT THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF `25 LAKHS MADE BY THE AO U/S 68 OF THE ACT ON ACCOUNT OF INCOME FR OM UNDISCLOSED SOURCES AND `13,000/- ON ACCOUNT OF COMMISSION PAID FROM UNDISCLOSED SOURCES; THAT WHILE DOING SO, THE LEARNED CIT(A) HA S FAILED TO CONSIDER THAT THE OBSERVATIONS OF THE AO IN THE ASSESSMENT O RDER WERE BASED ON INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT, TO THE EFFECT THAT THE ASSESSEE COMPANY HAD RECEIVED B OGUS ACCOMMODATION ENTRIES FROM VARIOUS ENTRY OPERATORS IN THE FORM OF SHARE APPLICATION MONEY AMOUNTING TO `25 LAKHS; THA T THE LEARNED ITA-2987/DEL/2009 4 CIT(A) FURTHER IGNORED THE FACT THAT THE AO HAD BAS ED HIS ASSESSMENT ON THE STATEMENT OF SHRI PRADEEP JINDAL, WHO WAS DI RECTOR IN NUMEROUS COMPANIES ENGAGED IN PROVIDING ENTRIES, WHICH STATE MENT WAS RECORDED UNDER OATH BY THE INVESTIGATION WING OF TH E DEPARTMENT; THAT THE LEARNED CIT(A) HAS FAILED TO CONSIDER THAT IN H IS SAID STATEMENT, SHRI PRADEEP JINDAL HAD CATEGORICALLY DEPOSED THAT HIS C OMPANIES/FIRMS WERE NOT DOING ANY ACTUAL BUSINESS OTHER THAN THAT OF PROVIDING ACCOMMODATION ENTRIES BY WAY OF CHEQUES/DDS/POS, ON RECEIPT OF EQUIVALENT AMOUNTS OF CASH PLUS COMMISSION AT THE R ATE OF 0.25% TO 0.50%; THAT THE LEARNED CIT(A) ALSO FAILED TO TAKE INTO CONSIDERATION THE FACT THAT THE SUMMONS ISSUED BY THE AO TO THE CREDI TORS OF THE ASSESSEE COMPANY WERE EITHER RETURNED, OR REMAINED UNCOMPLIED WITH; AND THAT THE LEARNED CIT(A) HAS ERRED IN FAILING TO CONSTRUE THAT THE FACTS OF THE PRESENT CASE ARE CLEARLY DISTINGUISHAB LE FROM THOSE OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F M/S LOVELY EXPORTS PVT.LTD., 216 CTR 195 (SC). 5. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. IT H AS BEEN CONTENDED THAT THERE IS NO ERROR WHATSOEVER IN THE WELL-REASO NED ORDER PASSED BY LEARNED CIT(A), DELETING THE ADDITION WRONGLY MADE; THAT THE ASSESSEE HAD DULY DISCHARGED ITS ONUS U/S 68 OF THE IT ACT B EFORE THE AO, IN KEEPING WITH THE DECISION OF THE HON'BLE SUPREME CO URT IN THE CASE OF M/S LOVELY EXPORTS PVT.LTD. (SUPRA); AND THAT THE AO, ON HIS PART, HAD PASSED AN ENTIRELY ARBITRARY ORDER, INASMUCH AS IT WAS ONLY THE STATEMENT OF SHRI PRADEEP JINDAL, RECORDED BY THE I NVESTIGATION WING OF THE DEPARTMENT, WHICH FORMED THE BASIS OF THE ADDIT ION, DESPITE THE FACT THAT NEITHER WAS THE SAID STATEMENT PUT TO THE ASSESSEE FOR REBUTTAL, NOR WAS THE ASSESSEE ALLOWED TO CROSS-EXA MINE SHRI PRADEEP JINDAL. ITA-2987/DEL/2009 5 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE PER USED THE MATERIAL ON RECORD. UNDISPUTEDLY, THE STATEMENT OF SHRI PRADEEP JINDAL, AS RECORDED BY THE INVESTIGATION WING OF THE DEPART MENT, FORMS THE SOLE BASIS OF THE ADDITION MADE BY THE AO. NOW, TH IS STATEMENT WAS A STATEMENT OF A THIRD PARTY. IT WAS USED AGAINST TH E ASSESSEE TO MAKE THE ADDITION AND SO, IT WAS INCUMBENT UPON THE AO T O HAVE PUT SUCH STATEMENT FOR REBUTTAL TO THE ASSESSEE. THIS, HOWE VER, WAS NOT DONE. THE ASSESSEE WAS NOT EVEN ALLOWED TO CROSS-EXAMINE SHRI PRADEEP JINDAL, REMARKABLY OBSERVING THAT THE STATEMENT WAS RECORDED UNDER OATH BY THE INVESTIGATION WING OF THE DEPARTMENT AN D EXAMINATIONS AND CROSS-EXAMINATIONS ARE TIME CONSUMING AND ARE O NLY ALLOWED IN THE COURTS, WHERE THERE IS NO TIME LIMIT FOR PASSIN G THE JUDGMENTS WHEREAS THE ORDERS IN THE INCOME TAX PROCEEDINGS AR E TIME BOUND. 7. EVIDENTLY, SUCH A COURSE WAS WRONGLY ADOPTED BY THE AO. IT IS TRITE LAW AND A PRINCIPLE OF NATURAL JUSTICE THAT A NY EVIDENCE WHICH IS SOUGHT TO BE USED AGAINST A PERSON, MUST BE PUT TO THAT PERSON, FOR REBUTTAL. NOBODY CAN BE CONDEMNED UNHEARD. IN THE PRESENT CASE, HOWEVER, THIS IS EXACTLY WHAT HAS HAPPENED. THE AD DITION WAS MADE BY USING EVIDENCE AGAINST THE ASSESSEE, AT THE BACK OF THE ASSESSEE. APROPOS THE ONUS CAST ON THE ASSESSEE, THE ASSESSEE HAD FURNISHED THE FOLLOWING DOCUMENTS BEFORE THE AO:- (I) COPY OF LEDGER A/C OF SHARE APPLICATION MONEY I N THE BOOKS OF THE ASSESSEE. (II) COPY OF THE BANK STATEMENTS ALONGWITH THE COPI ES OF CHEQUES THROUGH WHICH THE MONEY WAS RECEIVED. (III) COPY OF LEDGER A/C OF SHARE CAPITAL IN WHICH THE MONEY WAS TRANSFERRED AFTER ALLOTMENT. (IV) COPY OF BALANCE SHEET AND P & L A/C. ITA-2987/DEL/2009 6 (V) COPY OF ANNUAL RETURN FILED WITH REGISTRAR OF COMPANY WHICH INCLUDED LIST OF SHARE HOLDERS, OLD A S WELL AS NEW. (VI) COPY OF FORM NO.2 I.E. RETURN OF ALLOTMENT OF SHARES ALONGWITH THE LIST OF NEW SHARE HOLDERS WHICH WAS F ILED AND REGISTERED WITH ROC. 8. APROPOS THE IDENTITY AND CREDITWORTHINESS OF THE SHARE APPLICANTS, THE ASSESSEE HAD FILED THE FOLLOWING DO CUMENTS BEFORE THE AO:- (I) CONFIRMATION. (II) ACKNOWLEDGEMENT OF FILING OF RETURN OF INCOME. (III) BALANCE SHEET AND PROFIT & LOSS A/C. (IV) APPLICATION FOR SUBSCRIPTION OF SHARES. (V) AFFIDAVIT OF DIRECTORS. (VI) MEMORANDUM AND ARTICLES OF ASSOCIATION, AND (VII) COPY OF RESOLUTION PASSED IN THE BOARD MEETIN G OF THE RESPECTIVE COMPANIES. 9. FROM THE ABOVE, IT IS EVIDENT THAT THE ASSESSEE HAD AMPLY DISCHARGED ITS PRIMARY ONUS U/S 68 OF THE IT ACT. THE AO, HOWEVER, DID NOT MAKE ANY FURTHER ENQUIRY TO COUNTER AND DISPROV E THE CLAIM MADE BY THE ASSESSEE AND MERELY RELIED ON, AS ABOVE, THE STATEMENT OF SHRI PRADEEP JINDAL BEFORE THE INVESTIGATION WING OF THE DEPARTMENT AND THAT TOO, RECORDED IN THE YEAR 2004, WHEREAS THE AS SESSMENT PROCEEDINGS IN THE ASSESSEES CASE WERE BEING CONDU CTED BY THE AO IN 2008. 10. THEN, EVEN ON THE STATEMENT OF SHRI PRADEEP JIN DAL, NOTHING WAS DONE BY THE AO TO GATHER ANY MATERIAL TO CONTROVERT THE STAND TAKEN ITA-2987/DEL/2009 7 BY THE ASSESSEE CONCERNING THE GENUINENESS OF THE S HARE APPLICATION MONEY RECEIVED BY IT. 11. WHILE DELETING THE ADDITION AND RIGHTLY SO, THE LEARNED CIT(A) DULY TOOK INTO CONSIDERATION ALL THE ABOVE FACTS AND CIR CUMSTANCES AND IT WAS ONLY THEREAFTER THAT THE IMPUGNED ORDER WAS PAS SED, BY MAKING THE DETAILED OBSERVATIONS MADE THEREIN. 12. WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LE ARNED CIT(A), IN VIEW OF THE ABOVE DISCUSSION. THE SAID ORDER IS, T HEREFORE, UPHELD, REJECTING THE GRIEVANCE SOUGHT TO BE RAISED BY THE DEPARTMENT. 13. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 16 TH JUNE, 2011. SD/- SD/- (G.E.VEERABHADRAPPA) (G.E.VEERABHADRAPPA) (G.E.VEERABHADRAPPA) (G.E.VEERABHADRAPPA) (A.D.JAIN) (A.D.JAIN) (A.D.JAIN) (A.D.JAIN) VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATED : 16.06.2011. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR