ITO, New Delhi V. M/s Tubecon (India) Pvt. Ltd., New Delhi

ITA 3299/DEL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97448 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 03-08-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 21-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P CHANDREKAR
• Keywords: Unexplained cash credit; Rectification of order; Accommodation entries; Onus to prove
• Section: 143(3); 131; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: H NEW DELHI BEFORE SHRI G.C. GUPTA, VICE PRESIDENT & SHRI J.S. REDDY, ACCOUNTANT MEMBER I.T.A .NO. 3299/DEL/2011 (ASSESSMENT YEAR - 2003 - 04 ) ITO, WARD 16(4), ROOM NO.143, C.R. BUILDING, NEW DELHI. VS TUBECON (INDIA) PVT. LTD., AG - 154A, SHALIMAR BAGH, NEW DELHI. AABCT4738L APPELLANT BY SHRI J.P. CHANDREKAR, SR. DR RESPONDENT BY SHRI SATISH AGGARWAL, CA ORDER PER J. SUDHAKAR REDDY, ACCOUNTANT MEMBER THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE FOR ASSESSMENT YEAR 2003 - 04 AGAINST THE ORDER PASSED BY THE LD. CIT(A) DATED 25.04.2011 ON THE FOLLOWING GROUNDS: 1 . THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW BY DELETING ADDITION OF RS. 20,75,000/ - ON ACCOUNT OF UNEXPLAINED RECEIPTS OF SHARE APPLICATION MONEY AND RS. 2,07,500/ - ON ACCOUNT OF COMMISSION PAYMENTS TO THE PROVIDERS OF ACCOMMO DATION ENTRIES BY NOT DECIDING ENTIRELY ON MERITS, THE CONTENTIONS OF THE AO IN THE ASSESSMENT ORDER AND BY IGNORING THAT: ( I ) THE CREDITWORTHINESS OF THE SHARE APPLICANTS TO ADVANCE THE SHARE APPLICATION MONEY HAS NOT BEEN SATISFACTORILY ESTABLISHED EITHER DURING THE ASSESSMENT PROCEEDINGS OR DURING THE APPELLATE PROCEEDINGS. ( II ) SUMMONS U/S 131 SENT TO THE SHARE APPLICANTS DID NOT EVOKE ANY RESPONSE IN MOST OF THE CASES EVEN THOUGH THE DATE OF HEARING 03.08.2015 DATE OF PRONOUNCEMENT ITA NO. 3299/DEL/11 A.Y. 2003 - 04 TUBECON (INDIA) PVT.LTD. 2 SUMMONS WERE SENT AT THEIR ADDRESSES AS FURNISHED BY THE ASSESSEE COMPANY. ( III ) STATEMENTS RECORDED BY THE AO IN CASES OF SHARE APPLICANTS WHERE THE ASSESSEE WAS ABLE TO PRODUCE THE INDIVIDUAL SHARE APPLICANTS OR PRINCIPAL OFFICERS OF THE SHARE APPLICANT COMPANIES CLEARLY SHOWED THAT THEY DID NOT HAVE THE CREDITWORTHINESS TO ADVANCE T HE SHARE APPLICATION MONEY. ( IV ) AS PER THE FINDINGS OF THE INVESTIGATION WING OF THE DEPARTMENT, THE SHARE APPLICANTS WHO PAID SHARE APPLICATION MONEY TO THE ASSESSEE HAVE BEEN ESTABLISHED TO BE PROVIDERS OF ACCOMMODATION ENTRIES. ( V ) AS PER FINDINGS OF THE INVEST IGATION WING, THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE WAS IN THE NATURE OF ACCOMMODATION ENTRIES WHICH THE ASSESSEE HAD TAKEN AFTER PAYING UNACCOUNTED CASH TO THE ACCOMMODATION ENTRY PROVIDERS. 2. THE APPELLANT CRAVES LEAVE FOR RESERVING THE R IGHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUNDS OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF APPEAL. 2. THE FACTUAL MATRIX OF THE APPEAL UNDER CONSIDERATION ARE AS UNDER: RETURN OF INCOME WAS FILED ON 06.02.2004 DECLARING INCOME OF RS. 13,218/ - WHICH WAS PROCESSED U/S 143(1) OF I.T. ACT. THE AO RECEIVED INFORMATION FROM THE INVESTIGATION WING OF THE DEPARTMENT, THAT THE COMPANIES/PERSONS WHICH CONTRIBUTED TOWARDS SHARE APPLICATION MONEY/SHARE CAPITAL WERE INVOLVED IN PROVIDING ACCOMMOD ATION ENTRIES. IN VIEW OF THE SPECIFIC INFORMATION, THE AO INITIATED ACTION U/S 148 AND COMPLETED THE ASSESSMENT ON 30.12.2010 DETERMINING THE TOTAL INCOME AT RS. 52,65,718/ - (WHICH WAS SUBSEQUENTLY REDUCED TO RS. 22,69,282/ - VIDE RECTIFICATION ORDER PASS ED U/S 154/143(3) DATED 24/01/2011 IN WHICH SHARE APPLICATION MONEY WAS TAKEN AT RS. 20,75,000/ - ) DISBELIEVING THE SHARE APPLICATION MONEY/SHARE CAPITAL OF RS. 20,75,000/ - . THE ASSESSING OFFICER HAD WITHOUT PROVIDING ANY OPPORTUNITY TO CROSS EXAMINE THE ALLEGED ENTRY OPERATOR MADE THE ASSESSMENT U/S 143(3) /147 OF THE ACT. THAT THE LD. ASSESSING OFFICER HAS GROSSLY ERRED IN MAKING AN ADDITION OF RS. 4,77,500/ - [WHICH WAS REDUCED TO RS. 2,07,500/ - VIDE ORDER DATED 24/01/2011 PASSED U/S 154/143(3)] U/S 68 BEING THE ALLEGED 10% COMMISSION ASSUMED TO HAVE BEEN PAID FOR OBTAINING THE ITA NO. 3299/DEL/11 A.Y. 2003 - 04 TUBECON (INDIA) PVT.LTD. 3 ACCOMMODATION ENTRIES ON CONJECTURES AND SURMISES AND WIT HOUT ANY BASIS OR JUSTIFICATION. 3. THE LD. CIT(A) DELETED THE ADDITION MADE BY THE AO ON THE GROUND THAT THE ASSESSEE HAD PROVIDED ALL THE NECESSARY DETAILS , INCLUDING CONFIRMATION LETTERS, SHARE APPLICATION FORMS, WARD/CIRCLE WHERE THE SHARE APPLICANT S/INVEST ING COMPANIES WERE ASSESSED, AND THUS HAVE DISCHARGED THE BURDEN OF PROOF THAT LAY ON THE ASSESSEE. THE CIT(A) FURTHER OBSERVED THAT THE AO HAD MADE ENQUIRIES BY ISSUING SUMMONS U/S 131 TO THE SHARE APPLICANTS AND THAT ALL THE SHARE APPLICANTS HAVE REPLIED TO THE SUMMONS AND THE AO HAD RECORDED STATEMENTS FROM SOME SHARE APPLICANTS ALSO. THE LD. CIT(A) THEREFORE, DELETED THE ADDITIONS AS NOTHING ADVERSE WAS FOUND BY THE A.O . HENCE, THE PRESENT APPEAL. 4. AFTER HEARING RIVAL SUBMISSIONS AND CONSIDERING THE PAPERS ON RECORD AND ORDERS OF THE AUTHORITIES BELOW, WE HOLD AS FOLLOWS. 5. THE FIRST APPELLATE AUTHORITY HAS HELD THAT THE ASSESSEE FILED ALL NECESSARY DETAILS, INCLUDING THE ASSESSMENT DETAILS OF THE SHARE APPLICANTS/INVESTMENT COMPANIE S BEFORE THE A.O. THE AMOUNTS ARE STATED TO HAVE BEEN RECEIVED THROUGH BANKING CHANNELS. THE A.O. ISSUED SUMMONS U/S 131 OF THE ACT TO THE SHARE APPLICANTS AND STATEMENTS WERE RECORDED FROM THE FOLLOWING PERSONS. 1 ) SHRI SHIV LAL, PROP: M/S GLOBAL CAPITAL C ONSULTANCY. 2 ) SHRI VINOD GARG, DIRECTOR OF M/S SPARRO MARKETING PVT. LTD. 3 ) SHRI UMESH GUPTA, DIRECTOR OF M/S UMESH SECURITIES P. LTD. 4 ) SHRI SHIV LAL, DIRECTOR OF M/S IBEX INFOTECH P. LTD. 5 ) SHRI MALIK, DIRECTOR OF M/S SHIMMER MARKETING P. LTD. ALL THESE PERSONS HAVE CONFIRMED THE TRAN SACTIONS IN THEIR STATEMENTS BEFORE THE A.O. ITA NO. 3299/DEL/11 A.Y. 2003 - 04 TUBECON (INDIA) PVT.LTD. 4 6. THE LEGAL POSITION ENUNCIATED BY THE JURISDICTIONAL HIGH COURT IS AS FOLLOWS. A) IN THE CASE OF CIT VS. GANGESHWARI METAL P.LTD. IN ITA NO.597/2012 JUDGEMENT DT. 21.1.2013, THE HON' BLE HIGH COURT AFTER CONSIDERING THE DECISIONS IN THE CASE OF NOVA PROMOTERS AND FINLEASE PVT.LTD. 342 ITR 169 AND JDUGEMENT IN THE CASE OF CIT VS. LOVELY EXPORTS 319 ITR (SAT.5)(S.C.) HELD AS FOLLOWS. 'AS CAN BE SEEN FROM THE ABOVE EXTRACT, TWO TYPES OF CASES HAVE BEEN INDICATED. ONE IN WHICH THE ASSESSING OFFICER CARRIES OUT THE EXERCISE WHICH IS REQUIRED IN LAW AND THE OTHER IN WHICH THE ASSESSING OFFICER (SITS BACK WITH FOLDED HANDS' TILL THE ASSESSEE EXHAUSTS ALL THE EVIDENCE OR MATERIAL IN HIS POSSES SION AND THEN COMES FORWARD TO MERELY REJECT THE SAME ON THE PRESUMPTIONS. THE PRESENT CASE FALLS IN THE LATTER CATEGORY. HERE THE ASSESSING OFFICER AFTER NOTING THE FACTS, MERELY REJECTED THE SAME. THIS WOULD BE APPARENT FROM THE OBSERVATIONS OF THE ASSES SING OFFICER IN THE ASSESSMENT ORDER TO THE FOLLOWING EFFECT - 'INVESTIGATION MADE BY THE INVESTIGATION WING OF THE DEPARTMENT CLEARLY SHOWED THAT THIS WAS NOTHING BUT A SHAM TRANSACTION OF ACCOMMODATION ENTRY. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY T HE SAID AMOUNT OF RS.L,11,50,000/ - MAY NOT BE ADDED TO ITS INCOME. IN RESPONSE, THE ASSESSEE HAS SUBMITTED THAT THERE IS NO SUCH CREDIT IN THE BOOKS OF THE ASSESSEE. RATHER, THE ASSESSEE COMPANY HAS RECEIVED THE SHARE APPLICATION MONEY FOR ALLOTMENT OF ITS SHARE. IT WAS STATED THAT THE ACTUAL AMOUNT RECEIVED WAS RS. 55, 50, 000/ - AND NOT RS.L,11,50,000/ - AS MENTIONED IN THE NOTICE. THE ASSESSEE HAS FURNISHED DETAILS OF SUCH RECEIPTS AND THE CONTENTION OF THE ASSESSEE IN RESPECT OF THE AMOUNT IS FOUND CORREC T. AS SUCH THE UNEXPLAINED AMOUNT IS TO BE TAKEN AT RS.55,50,000/ - . THE ASSESSEE HAS FURTHER TRIES TO EXPLAIN THE SOURCE OF THIS AMOUNT OF RS.55,50,000/ - BY FURNISHING COPIES OF SHARE APPLICATION ITA NO. 3299/DEL/11 A.Y. 2003 - 04 TUBECON (INDIA) PVT.LTD. 5 MONEY, BALANCE4 SHEET, ETC. OF THE PARTIES MENTIONED ABOVE A ND ASSERTED THAT THE QUESTION OF ADDITION IN THE INCOME OF THE ASSESSEE DOES NOT ARISE. THIS EXPLANATION OF THE ASSESSEE HAS BEEN DULY CONSIDERED AND FOUND NOT ACCEPTABLE. THIS ENTRY REMAINS UNEXPLAINED IN THE HANDS OF THE ASSESSEE AS HAS BEEN ARRIVED BY T HE INVESTIGATION WING OF THE DEPARTMENT. AS SUCH ENTRIES OF RS. 55, 50, 000/ - RECEIVED BY THE ASSESSEE ARE TREATED AS AN UNEXPLAINED CASH CREDIT IN THE HANDS OF THE ASSESSEE AND ADDED TO ITS INCOME. SINCE I AM SATISFIED THAT THE ASSESSEE HAS FURNISHED INAC CURATE PARTICULARS OF ITS INCOME, PENALTY PROCEEDINGS UNDER SECTION 271(1)(C ) ARE BEING INITIATED SEPARATELY. ' THE FACTS OF NOVA PROMOTERS AND FINLEASE (P) LTD. (SUPRA) FALL IN THE FORMER CATEGORY AND THAT IS WHY THIS COURT DECIDED IN FAVOUR OF THE REVE NUE IN THAT CASE. HOWEVER, THE FACTS OF THE PRESENT CASE ARE CLEARLY DISTINGUISHABLE AND FALL IN THE SECOND CATEGORY AND ARE MORE IN LINE WITH FACTS OF LOVELY EXPORTS (P) LTD. (SUPRA). THERE WAS A CLEAR LACK OF INQUIRY ON THE PART OF THE ASSESSING OFFICER ONCE THE ASSESSEE HAD FURNISHED ALL THE MATERIAL WHICH WE HAVE ALREADY REFERRED TO ABOVE. IN SUCH AN EVENTUALITY NO ADDITION CAN BE MADE UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. CONSEQUENTLY, THE QUESTION IS ANSWERED IN THE NEGATIVE. THE DECISION OF THE TRIBUNAL IS CORRECT IN LAW. ' B) IN THE CASE OF FINLEASE PVT.LTD. 342 ITR 169 (SUPRA) IN ITA 232/2012 JUDGEMENT DT. 22.11.2012 AT PARA 6 TO 8, IT IS HELD AS FOLLOWS. 6. THIS CO URT HAS CONSIDERED THE SUBMISSIONS OF THE PARTIES. IN THIS CASE THE DISCUSSION BY THE COMMISSIONER OF INCOME TAX (APPEALS) WOULD REVEAL THAT THE ASSESSEE HAS FILED DOCUMENTS INCLUDING CERTIFIED COPIES ISSUED BY THE ROC IN RELATION TO THE SHARE APPLICATION, AFFIDAVITS FOR THE DIRECTORS, FORM 2 FILED WITH THE ROC BY SUCH APPLICANTS CONFIRMATIONS BY THE APPLICANT FOR COMPANY'S SHARES, CERTIFICATES BY AUDITORS ETC. UNFORTUNATELY, THE ASSESSING OFFICER CHOSE ITA NO. 3299/DEL/11 A.Y. 2003 - 04 TUBECON (INDIA) PVT.LTD. 6 TO BASE HIMSELF MERELY ON THE GENERAL INFERENCE TO BE DRAWN FROM THE READING OF THE INVESTIGATION REPORT AND THE STATEMENT OF MR.MAHES GARG. TO ELEVATE THE INFERENCE WHICH CAN BE DRAWN ON THE BASIS OF READING OF SUCH MATERIAL INTO JUDICIAL CONCLUSIONS WOULD BE IMPROPER, MORE SO WHEN THE ASSESSEE PRODUCED MATE RIAL. THE LEAST THAT THE ASSESSING OFFICER OUGHT TO HAVE DONE WAS TO ENQUIRE INTO THE MATTER BY, IF NECESSARY, INVOKING HIS POWERS UNDER SECTION 131 SUMMONING THE SHARE APPLICANTS OR DIRECTORS. NO EFFORT WAS MADE IN THAT REGARD. IN THE ABSENCE OF ANY SUCH FINDING THAT THE MATERIAL DISCLOSED WAS UNTRUSTWORTHY OR LACKED CREDIBILITY THE ASSESSING OFFICER MERELY CONCLUDED ON THE BASIS OF ENQUIRY REPORT, WHICH COLLECTED CERTAIN FACTS AND THE STATEMENTS OF MR. MAHESH GARG THAT THE INCOME SOUGHT TO BE ADDED FELL W ITHIN THE DESCRIPTION OF S. 68 OF THE INCOME TAX ACT, 1961. 7. HAVING REGARD TO THE ENTIRETY OF FACTS AND CIRCUMSTANCES, THE COURT IS SATISFIED THAT THE FINDING OF THE TRIBUNAL IN THIS CASE ACCORDS WITH THE RATIO OF THE DECISION OF THE SUPREME COURT IN LO VELY EXPORTS (SUPRA). 8. THE DECISION IN THIS CASE IS BASED ON THE PECULIAR FACTS WHICH ATTRACT THE RATIO OF LOVELY EXPORTS (SUPRA). WHERE THE ASSESSEE ADDUCES EVIDENCE IN SUPPORT OF THE SHARE APPLICATION MONIES, IT IS OPEN TO THE ASSESSING OFFICER TO EXA MINE IT AND REJECT IT ON TENABLE GROUNDS. IN CASE HE WISHES TO RELY ON THE REPORT OF THE INVESTIGATION AUTHORITIES, SOME MEANINGFUL ENQUIRY OUGHT TO BE CONDUCTED BY HIM TO ESTABLISH A LINK BETWEEN THE ASSESSEE AND THE ALLEGED HAWALA OPERATORS, SUCH A LINK WAS SHOWN TO BE PRESENT IN THE CASE OF NOVA PROMOTERS & FINLEASE (P) LTD. (SUPRA) RELIED UPON BY THE REVENUE. WE ARE THEREFORE NOT TO BE UNDERSTOOD TO CONVEY THAT IN ALL CASES OF SHARE CAPITAL ADDED UNDER SECTION 68, THE RATIO OF LOVELY EXPORTS (SUPRA) IS ATTRACTED, IRRESPECTIVE OF THE FACTS, EVIDENCE AND MATERIAL.' 7 . APPLYING THE PROPOSITIONS LAID HEREINABOVE TO THE FACTS OF THE CASE, WE HAVE TO CONCLUDE THAT THE ASSESSEE HAD DISCHARGED THE ONUS THAT LAY ON IT U/S ITA NO. 3299/DEL/11 A.Y. 2003 - 04 TUBECON (INDIA) PVT.LTD. 7 68 OF THE ACT. THE A.O. HAS NOT BROUG HT ON RECORD ANY ADVERSE MATERIAL TO DISPROVE THE CLAIM OF THE ASSESSEE. THE FACTUAL FINDING OF THE LD.CIT(A) COULD NOT BE CONTROVERTED BY THE LD.D.R. 8. UNDER THESE CIRCUMSTANCES WE UPHOLD THE ORDER OF THE FIRST APPELLATE AUTHORITY AND DISMISS THIS GROUND OF THE REVENUE. 9. COMING TO THE ADDITION ON ACCOUNT OF COMMISSION, THIS IS CONSEQUENTIAL IN NATURE AND IN VIEW OF OUR FINDING IN DELETING THE ADDITION U/S 68 OF THE ACT, THIS ADDITION IS ALSO DELETED. 10. IN THE RESULT THE APPEAL IS DISMISSED. T HE ORDER IS PRO NOUNCED IN THE OPEN COURT ON 08 TH OCTOBER, 2015. SD/ - SD/ - ( G.C. GUPTA ) ( J.S UDHAKAR REDDY ) VICE PRESIDENT ACCOUNTANT MEMBER DATED: THE 08 TH OCTOBER, 2015 *MANGA ITA NO. 3299/DEL/11 A.Y. 2003 - 04 TUBECON (INDIA) PVT.LTD. 8 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR , ITAT ASSISTANT REGISTRAR ITAT NEW DELHI