ITO, New Delhi V. M/s. B.R. Footwear Pvt. Ltd, New Delhi

ITA 2990/DEL/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0736 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-01-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 26-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS ANUSHA KHURANA
• Keywords: Unexplained cash credit; Reassessment proceedings
• Section: 195; 131; 68

Judgement Text

ITA NO. 2990/DEL/2009 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 2990/DEL/2009 A.Y. : 2004-05 INCOME TAX OFFICER, WARD 2(3), ROOM NO. 389-A, CENTRAL REVENUE BUILDING, I.P. ESTATE, NEW DELHI VS. M/S B.R. FOOTWEAR PVT. LTD., F011, UDYOG NAGAR, PEERGARHI CHOWK, DELHI 110 041 (PAN/GIR NO. : AACCB6935A) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. VED JAIN, CA DEPARTMENT BY : MRS. ANUSHA KHURANA, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 30.3.2 009 PERTAINING TO ASSESSMENT YEAR 2004-05. 2. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOM E TAX (APPEALS) ERRED IN DELETING THE ADDITION OF ` 20,00 ,000/- MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT ON ACCOUNT OF ADDITION TO SHARE APPLICATION MONEY AS UNEXPLAINED CASH CREDITS AND ` 20,000/- ON ACCOUNT OF COMMISSION PAID FROM UNDISCLOSED SOURCES . 3. THE ASSESSING OFFICER IN THIS CASE NOTED THAT R EPORT FROM DIT (INV.) WAS RECEIVED BY HIM PERTAINING TO BOGUS ENTR Y RACKET. ENQUIRIES BY THE INVESTIGATION WING REVEAL THAT MANY OF THESE BOGUS COMPANIES HAD GIVEN BOGUS ENTRIES AMONG OTHERS THROUGH THE AS SESSEE M/S B.R. ITA NO. 2990/DEL/2009 2 FOOTWEAR PVT. LTD. DURING THE ASSESSMENT YEAR 2004-05. ASSESSEE WAS ASKED TO FURNISH THE DETAILS IN THIS REGARD. BES IDES NOTICES U/S 131 WERE ISSUED TO THE PARTIES TO VERIFY THE GENUINENE SS AND TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS. HOWEVER, A LL THE NOTICES SENT IN THE NAME OF THE PARTIES WERE RECEIVED UN-SERVED. ASSESSEE WAS REQUESTED TO FURNISH THE LATEST ADDRESS OF THESE P ERSONS AND ALSO REQUESTED TO PRODUCE THE DIRECTORS OF THESE COMPANIE S. THE ASSESSEE RESPONDED THAT ASSESSEE HAD FILED THE CON FIRMATION FROM THE PARTIES WHO HAS ALSO QUOTED THEIR PAN AND THEIR CONF IRMATIONS. ASSESSING OFFICER PROCEEDED TO HOLD THAT THESE ARE ALL BOGUS ENTRIES AND MADE ADDITION OF ` 20 LAKHS IN THIS REGARD. H E FURTHER OBSERVED THAT COMMISSION HAVE BEEN PAID BY THE ASSESSEE COMPAN Y TO THE ENTRY OPERATOR AND THIS WAS TAKEN AS 1% OF THE AMOUN T DUE AND HENCE FURTHER ADDITION OF ` 20,000/- WAS MADE. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) IN THIS REGARD LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE ISSUE ELABORATELY AND HELD AS UNDER: - 14. I HAVE CONSIDERED THE VARIOUS CONTENTIONS RAI SED BY THE A.R. AND THE OBSERVATIONS MADE BY THE ASSESSING OFFICER. THE APPELLANT COMPANY WAS INCORPORATED ON 19.8.2003 AND FOR THE A.Y. 2004-05, IT HAD FILED A RETURN OF INCOME DECLARING A LOSS OF ` 5,47,924/-. IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2004-05, IT HAD SHOWN TO HAVE RECEIVED AN AMOUNT OF ` 20 LACS TOWARDS SHARE APPLICATION MONEY FROM FOUR COMPANIES NAMELY; M/S ETHNIC CREATIONS (P) LTD. (` 5,00,000/-) , M/S M.V. MARKETING (P) LTD. (` 5LACS), M/S PARAS ITA NO. 2990/DEL/2009 3 INFOTECH (P) LTD. (` 5 LACS) AND M/S RABIK EXPORTS ( P) LTD. (` 5 LACS). ALL THESE SHARE APPLICANTS WERE A LLOTTED 10,000 SHARE EACH OF THE APPELLANT COMPANY ON 5.3.2004 AND THE RESPECTIVE AMOUNTS WERE TRANSFERRED TO ITS SHARE CAPITAL ACCOUNT. DURING TH E COURSE OF REASSESSMENT PROCEEDINGS, THE ASSESSEE HAS FURNISHED THE FOLLOWING DETAILS:- I) COPY OF LEDGER A/C OF SHARE APPLICATION MONEY IN THE BOOKS OF THE ASSESSEE. II) COPY OF THE BANK STATEMENTS ALONGWITH THE COPIES 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 ACCOUNT. V) COPY OF ANNUAL RETURN FILED WITH REGISTRAR OF COMPANIES WHICH INCLUDED LIST OF SHARE SHARES HOLDERS, OLD AS 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 FILED AND REGISTERED WITH ROC. 15. IN RESPECT OF THE IDENTITY AND CREDITWORTHINESS OF THE SHARE APPLICANTS THE FOLLOWING DOCUMENTS PERTAINING TO THEM WERE FURNISHED: I) CONFIRMATION II) ACKNOWLEDGEMENT OF FILING OF RETURN OF INCOME. ITA NO. 2990/DEL/2009 4 III) BALANCE SHEET AND PROFIT AND LOSS ACCOUNT. 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 MEETING OF THE RESPECTIVE COMPANIES. 16. IT IS CLEAR FROM A PERUSAL OF THE ABOVE DOCUMEN TS THAT THE APPELLANT HAS DISCHARGED ITS PRIMARY ONUS OF PRO VING THE IDENTITY AND CREDITWORTHINESS OF THE SHARE APPLICAN TS AND THE GENUINENESS OF THE TRANSACTIONS. THEREAFTER, IT WAS THE DUTY OF THE ASSESSING OFFICER TO MAKE FURTHER INQUI RIES. HE HAS MERELY BASED HIS CONCLUSION ON THE RETURN OF T HE SUMMONS SENT TO THESE PARTIES AND HE HAS NOT CHOSEN T O ASK FOR THE CHANGED ADDRESSES OF THESE PARTIES NOR HE HAS MADE ANY REFERENCE TO THE INCOME TAX RECORDS OF THES E PARTIES WHOSE PARTICULARS WERE FURNISHED BY THE ASS ESSEE. THE HONBLE SUPREME COURT IN THE CASE OF C.I.T. VS. ORISSA CORPORATION (P) LTD. HAS HELD THAT IN CASE THE CREDI TOR DOES NOT APPEAR IN RESPONSE TO THE SUMMONS ISSUED U/S 131 , NO ADVERSE INFERENCE CAN BE DRAWN AGAINST THE ASSESSE E. IN THE INSTANT CASE, THE ASSESSING OFFICER HAS NOT E VEN SERVED THE SUMMONS ON THE SHARE APPLICANTS AT THEIR CURRENT ADDRESSES AND TOOK ADVERSE VIEW ON THEIR NON-ATTEND ANCE. THE ASSESSING OFFICER HAS ALSO NOT BROUGHT ON RECORD THE MATERIAL EVIDENCE GATHERED BY THE INV. WING TO SUPPO RT HIS CONCLUSION THAT THE ASSESSEE HAD RECEIVED THESE ENT RIES BY ITA NO. 2990/DEL/2009 5 MAKING CASH PAYMENTS TO THE ALLEGED ENTRY PROVIDERS. HE HAS NEITHER CONFRONTED THE ASSESSEE WITH ANY EVIDEN CE IN FAVOUR OF HIS CONCLUSION NOR ALLOWED AN OPPORTUNIT Y TO THE ASSESSEE TO CROSS EXAMINE ANY WITNESSES ON WHOSE STATEMENTS THE INV. WING HAS BASED ITS REPORT. TH E ASSESSING OFFICER HAS ALSO NOT MADE ANY FURTHER IN QUIRIES TO GATHER / BRING ON RECORD ANY MATERIAL TO CONTROVERT OR DISPROVE THE CONTENTIONS OF THE ASSESSEE REGARDING THE GENUINENESS OF THE SHARE APPLICATION MONEY RECEIVED BY IT, SUPPORTED BY NECESSARY DOCUMENTARY EVIDENCE. THERE FORE, IN VIEW OF THE JUDICIAL PRONOUNCEMENT OF THE APEX C OURT IN THE CASE OF M/S DIVINE LEASING AND FINANCE LTD. AND M/ S LOVELY EXPORTS (P) LTD., THE ADDITION IN RESPECT OF THE SHARE APPLICATION MONEY CANNOT BE SUSTAINED, IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, IN THE HANDS OF THE APPELLANT COMPANY. HOWEVER, AS THE APEX COURT HAS OBSERVED IN THE CASE OF M/S LOVELY EXPORTS (P) LTD., THE SHARE APPLICANTS CAN BE PROCEEDED AGAINST IN RESPEC T OF THEIR SOURCES FOR THE INVESTMENT MADE BY THEM. THER EFORE, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE AD DITION OF ` 20 LACS MADE U/S 68 OF THE ACT TOWARDS UNDISCLOSED C ASH CREDITS FROM THE TOTAL INCOME OF THE APPELLANT. FR O THE SAME REASONS, THE ADDITION OF ` 20,000/- MADE TOWARD S ALLEGED COMMISSION PAYMENT FROM UNDISCLOSED SOURCES IS ALSO TO BE DELETED. 5. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEF ORE US. ITA NO. 2990/DEL/2009 6 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND THAT ASSESSEE HAS PRODUCED ALL THE RELEVANT D OCUMENTS PERTAINING TO THE IDENTITY OF SHARE HOLDERS. THE HONBLE APE X COURT IN THE CASE OF CIT VS. LOVELY EXPORTS 216 CTR 195 HAS HELD THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPAN Y FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AS SESSING OFFICER, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEI R INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT B E REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE. 7. RESPECTFULLY FOLLOWING THE PRECEDENT FROM THE HON BLE APEX COURT DECISION AS ABOVE, WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND ACCORDINGLY, WE UPHOLD THE SAME. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENU E STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10/01/2011 UP ON CONCLUSION OF HEARING. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - [R.P. TOLANI] [R.P. TOLANI] [R.P. TOLANI] [R.P. TOLANI] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 10/01/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES