Copore Industries Pvt Ltd, New Delhi V. ACIT Circle-6(2), New Delhi

ITA 340/DEL/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 0870 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Appeal Filed On: 20-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAGDISH SINGH
• Keywords: Source of fund; Tangible material; Valuation report; Onus to prove; Bogus
• Section: 68; 133(6); 22; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SH. H. S. SIDHU, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 340/DEL/2020 : ASSTT. YEAR : 2016-17 COPORE INDUSTRIES PVT. LTD., C-44, WEST JYOTI NAGAR, NORTH WEST DELHI, NEW DELHI VS A CIT, CIRCLE-6(2), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAHCA0578R ASSESSEE BY : SH. SURESH K. GUPTA, CA REVENUE BY : SH. JAGDISH SINGH, SR. DR DATE OF HEAR ING: 24 . 1 1 .20 20 DATE OF PRONOUNCEMENT: 22 .12 .20 20 ORDER PER DR. B.R.R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-16, NEW DELHI, DATED 12 .12.2019. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESS EE: 1. THE LD. CIT (A) HAS ERRED BOTH IN LAW AND CIRCUMSTANCES OF THE CASES IN UPHOLDING THE ADDITIO N OF RS.1,80,00,000/- U/S 68 OF THE IT ACT HOLDING THE ACCEPTANCE OF SHARE CAPITAL AS UNEXPLAINED CASH CRE DIT IGNORING THE FACT THAT THE ASSESSEE HAS DISCHARGED ITS INITIAL ONUS U/S 68 OF THE IT ACT EXPLAINING NATURE AND SOURCE OF THE CREDITS AND SOURCE OF THE SOURCE BY FILING REQUISITE DOCUMENTS PROVING IDENTITY AND CREDITWORT HINESS OF THE SHAREHOLDER AND THE ULTIMATE SOURCE AND ALSO TO ESTABLISH GENUINENESS OF THE TRANSACTION DURING ASSESSMENT PROCEEDINGS. 2. THE LD. CIT (A) HAS ERRED BOTH IN LAW AND CIRCUMSTANCES OF THE CASES IN UPHOLDING ACTION OF T HE AO, IN MAKING ADDITION U/S 68 OF THE IT ACT OF ITA NO. 340/DEL/2020 COPORE INDUSTRIES PVT. LTD. 2 RS.1,80,00,000/- IS ERRONEOUS AS THE EVIDENCES FILE D BY THE APPELLANT IN SUPPORT OF CASH CREDIT OF RS.1,80,00,000/- HAVE BEEN REJECTED BY THE AO WITHO UT CONDUCTING ANY ENQUIRY THEREON IN DISCHARGE OF ONUS SHIFTING ON THE REVENUE AFTER THE INITIAL ONUS DISC HARGED BY THE APPELLANT. 3. THE ASSESSEE FILED THE RETURN OF INCOME DECLARIN G AN INCOME OF RS.47,12,400/- ON 30.09.2016. THE AO FOUND THAT THE ASSESSEE COMPANY HAS RECEIVED SHARE CAPITAL AND SHARE PREMIUM OF RS. 1,80,00,000/-. THESE AMOUNTS HAVE BEEN RECEIVED FROM ONE SH. NITIN GUPTA WHO IS ALSO THE DIRECTOR OF THE COMPANY. THE ASSESSEE COMPANY WAS AS KED TO PROVE CREDITWORTHINESS AND GENUINENESS OF THE SHARE CAPIT AL RECEIVED. BEFORE THE AO, THE ASSESSEE FILED CONFIRMATION FROM THE SHARE HOLDER, E-FILED ITRV OF SHAREHOLDER FOR A.Y. 2016-17, RELEVANT PERIOD BANK STATEMENT, SHARE APPLICATION FORM, DETAIL OF SHARE APPLICATION MONEY AND VALUATION OF SHARES AS PER RULE 11UA OF IT RULES, 1962. 4. THE AO BASED ON THE DETAILS FILED BY THE ASSESSE E OBSERVED THAT SH. NITIN GUPTA WHO WAS THE RECIPIENTS OF THE SHARES HA S IN TURN RECEIVED UNSECURED LOAN FROM ONE ENTITY NAMELY, RIDHI SIDHI ENTERPRISES (HEREINAFTER CALLED RSE) WHICH WAS UTILIZED FOR P URCHASE OF THE SHARES FROM THE ASSESSEE COMPANY. 5. IN ORDER TO PROVE THE GENUINENESS OF THE LOAN RE CEIVED FROM RSE, THE ASSESSEE HAS FURTHER SUBMITTED CONFIRMATION OF ACCOUNT OF RIDDHI SIDDHI ENTERPRISES, CONFIRMATION BETWEEN SHAREHOLDE R AND RSE, E-FILED ITR-V FOR A.Y. 2016-17 OF RSE ALONGWITH COMPUTATION OF INCOME, AUDITED FINANCIAL STATEMENT OF RSE AS ON 31.03.2016, RELEVA NT PERIOD BANK STATEMENT OF RSE, E-FILED ITR-V FOR A.Y. 2015-16 OF RSE ALONGWITH COMPUTATION OF INCOME AND AUDITED FINANCIAL STATEME NTS OF RSE AS ON 31.03.2016. ITA NO. 340/DEL/2020 COPORE INDUSTRIES PVT. LTD. 3 6. NOT SATISFIED WITH THE DETAILS FILED, THE AO MAD E ADDITION U/S 68 OF THE AMOUNTS RECEIVED BY THE COMPANY FROM THE DIRECTO R. THE REASONS GIVEN BY THE AO WHILE MAKING THE ADDITION ARE AS UN DER: 1. THE ASSESSEE FAILED TO DISCHARGE THE ONUS OF PROVIN G CREDITWORTHINESS AND GENUINENESS OF THE SHARE CAPIT AL RECEIVED FROM SH. NITIN GUPTA. 2. SH. NITIN GUPTA MAINLY RECEIVED FUNDS FROM RSE AND TRANSFERRED THE ASSESSEE COMPANY. 3. THE BANK STATEMENT OF SH. NITIN GUPTA SHOWS SEVERAL HIGH VALUE TRANSACTIONS WHICH WERE IMMEDIATELY TRANSFERRED THR OUGH NITIN GUPTAS ACCOUNT TO SEVERAL OTHER ENTITIES. 4. THE RETURN OF INCOME OF SH. NITIN GUPTA IS ONLY RS. 2,76,970/-. 5. THE RETURN OF INCOME OF RSE IS ONLY RS.5,89,880/-. 6. RSE HAS GOT NO RESERVES & SURPLUS 7. THE AO PLACED RELIANCE ON THE JUDGMENTS IN THE CASE OF CIT VS P. MOHANAKALA 161 TAXMAN 169 (SC) AND SUMATI DAYAL VS C IT 80 TAXMAN 89 (SC). 7. THE MATTER FURTHER TRAVELLED TO THE LD. CIT (A) WHO HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER HOLDING THAT THE DETAILS WERE NOT VERY CONVINCING AND THE LOANS DISBURSED TO THE SHAREHOLDER DIRECTOR, SH. NITIN GUPTA WERE PRECEDED BY TRANSFER OF FUNDS INTO THE ACCOUNT OF RSE A DAY BEFORE DISBURSAL OF LOANS. THE LD. CIT (A ) ALSO HELD THAT THE ASSESSEE WAS UNABLE TO ESTABLISH THE TRANSFER OF FU NDS ON ACCOUNT OF SALE PROCEEDS WHICH WERE GIVEN AS LOAN TO SH. NITIN GUPT A. 8. BEFORE US DURING THE HEARING, THE LD. AR HAS REL IED ON THE DOCUMENTS FILED BEFORE THE AUTHORITIES BELOW. THE LD. DR SUPPO RTED THE ORDERS OF THE REVENUE AUTHORITIES. 9. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERU SED THE MATERIAL AVAILABLE ON RECORD. ITA NO. 340/DEL/2020 COPORE INDUSTRIES PVT. LTD. 4 10. THE CORRECTNESS OF THE FINDINGS OF THE AO HAS B EEN EXAMINED BASED ON RECORDS. 1. THE ASSESSEE FAILED TO DISCHARGE THE ONUS OF PROVIN G CREDITWORTHINESS AND GENUINENESS OF THE SHARE CAPITAL RECEIVED FROM SH. NITIN GUPTA . THE ASSESSEE HAS SUBMITTED ALL THE DOCUMENTARY EVID ENCES ALONGWITH VALUATION REPORT OF SHARES UNDER RULE 11U A. HENCE, IT CANNOT BE SAID THAT THE ASSESSEE FAILED TO DISCHARGE THE O NUS. 2. SH. NITIN GUPTA MAINLY RECEIVED FUNDS FROM RSE AND TRANSFERRED THE ASSESSEE COMPANY. FACT UNDISPUTED. THE AO COULD NOT MAKE A CASE FOR A DDITION U/S 68 BY BRINGING ANY COLLUSIVE ARRANGEMENT BETWEEN SH. NITI N GUPTA AND RSE. 3. THE BANK STATEMENT OF SH. NITIN GUPTA SHOWS SEVERAL HIGH VALUE TRANSACTIONS FOR CERTAIN ENTITIES WHICH WERE IMMEDI ATELY TRANSFERRED THROUGH NITIN GUPTAS ACCOUNT TO SEVERAL OTHER ENTI TIES. FACT DISPUTED. ALL THE AMOUNTS RECEIVED BY SH. NITI N GUPTA HAVE BEEN GIVEN TO THE ASSESSEE COMPANY ONLY THERE WERE NO EV IDENCE OF TRANSFER OF FUNDS FROM THE ACCOUNT OF SH. NITIN GUPTA TO OTH ER ENTITIES OR USE OF THIS ACCOUNT TO TRANSFER FUNDS TO OTHER ACCOUNT AS PER THE BANK STATEMENT. 4. THE RETURN OF INCOME OF SH. NITIN GUPTA IS ONLY RS. 2,76,970/- FACT ON RECORD. HOWEVER, CANNOT BE THE SOLE REASON FOR MAKING ADDITION U/S 68 WHEN THE SOURCES HAVE BEEN PROVED T O BE OF LOAN RECEIVED. 5. THE RETURN OF INCOME OF RSE IS ONLY RS.5,89,880/-. FACT ON RECORD. HOWEVER, CANNOT BE THE SOLE REASON FOR MAKING ADDITION U/S 68 WHEN THE SOURCES HAVE BEEN PROVED T O BE OF SALE RECEIPTS. 6. RSE HAS GOT NO RESERVES & SURPLUS ITA NO. 340/DEL/2020 COPORE INDUSTRIES PVT. LTD. 5 RSE IS A FIRM. HENCE, RESERVES & SURPLUS ARE NOT TO BE REFLECTED IN THE BALANCE SHEET RATHER PROFITS OF THE YEAR ARE TAKEN INTO CAPITAL ACCOUNT. HENCE, THE AOS CONTENTION THAT SINCE RSE HAS NO RE SERVES & SURPLUS, THE TRANSACTIONS ARE SHAM CANNOT BE HELD TO BE CORR ECT. WE FIND FROM THE BANK STATEMENT THAT THE ASSESSEE AND RSE HAS AL SO GOT REGULAR BUSINESS TRANSACTION THROUGHOUT THE YEAR TO THE TUN E OF RS.49.95 CRORES ON ACCOUNT OF SALE OF GOODS. THE TOTAL CAPIT AL OF THE PARTNERS AND RSE IS RS.22.37 LACS WITH CASH AT BANK OF RS.1. 42 CRORES AS ON 31.03.2016. IT WAS ALSO PROVED FROM THE BANK STATEM ENT THAT THE LOANS GIVEN TO SH. NITIN GUPTA WAS OUT OF SALE PROC EEDS RECEIVED FROM VARIOUS ENTITIES AS CAN BE SEEN FROM TABLE BELOW: DATE UNSECURED LOAN REMITTED SOURCE OF FUNDS AMOUNT OF SOURCE FUNDS RECEIVED 17.02.2016 15,00,000 SHRI PASHUPATI ENTERPRISES (DEBTORS) 14,00,000 18.02.2016 9,00,000 NISHI WIRES AND CABLES (DEBTORS) 30,00,000 18.02.2016 5,00,000 19.02.2016 14,00,000 19.02.2016 10,00,000 PLAZA WIRES PVT. LTD. (DEBTORS) 16,35,837 16,00,000 19.02.2016 10,00,000 20.02.2016 12,00,000 22,02.2016 4,00,000 A V INFRAPROJECT (DEBTORS) 14,35,413 22.02.2016 24,00,000 SHRI PASHUPATI ENTERPRISES (DEBTORS) 50,00,000 22.02.2016 21,00,000 23.02.2016 5,00,000 24.02.2016 12,00,000 BRIGHT METALS PVT. LTD. (DEBTORS) 15,00,000 24.02.2016 9,00,000 ARNAV ARMOURED CABLES (DEBTORS) 6,00,000 26.02.2016 8,00,000 PLAZA WIRES PVT. LTD. (DEBTORS) 18,55,350 07.03.2016 22,00,000 KM ENTERPRISES (DEBTORS) 36,85,000 11. FROM THE ABOVE, IT CAN BE SAID THE ASSESSEE HAS GIVEN THE COMPLETE DETAILS OF THE SOURCES OF FUNDS I.E. SH. NITIN GUPT A AND ALSO THE SOURCES OF FUNDS TO SH. NITIN GUPTA WHICH SIGNIFIES THAT THE A SSESSEE HAS DISCHARGED THE ONUS TO PROVE THE AMOUNTS RECEIVED ARE GENUINE BY SUBMITTING THE DETAILS OF THE SHAREHOLDERS AND ALSO BY SUBMITTING THE DETAILS OF THE LOANS RECEIVED BY THE SHAREHOLDER WHO IN TURN PURCHASE TH E SHARES OF THE ASSESSEE COMPANY. ITA NO. 340/DEL/2020 COPORE INDUSTRIES PVT. LTD. 6 12. NOW, HAVING GONE THROUGH THE DISCHARGE OF ONUS BY THE ASSESSEE, WE HAVE ALSO TRIED TO EXAMINE HOW THE REVENUE DISPR OVED THE CLAIM OF THE ASSESSEE. THE REVENUE MAINLY HELD THAT SH. NITIN GU PTA AND RSE ARE LOW TAXPAYERS AND HENCE THE GENUINENESS OF THE TRANSACT ION CANNOT BE ACCEPTED. OTHER THAN THIS THEORETICAL PREPOSITION, WE FIND THAT THE REVENUE HAS NOT BROUGHT ANY TANGIBLE MATERIAL TO PROVE THAT THE TRANSACTIONS ARE BOGUS OR FAKE OR IN THE NATURE OF ANY ACCOMMODATION ENTRY OPERATION. THUS, REVENUE ABSOLUTELY FAILED TO REBUT THE CONTEN TIONS OF THE ASSESSEE BY BRINGING ON RECORD ANY PRIMARY, SECONDARY OR TER TIARY ENQUIRY OR EVIDENCES EITHER BY THE WAY OF INVESTIGATION, INFOR MATION COLLECTED U/S 133(6) OR STATEMENTS RECORDED U/S 131. THE RELIANCE PLACE BY THE AO ON THE JUDGMENTS IN THE CASE OF CIT VS P. MOHANAKALA 1 61 TAXMAN 169 (SC) AND SUMATI DAYAL VS CIT 80 TAXMAN 89 (SC) FOUND TO B E NOT APPLICABLE TO THE INSTANT CASE AS THE EXPLANATION OF THE ASSESSEE IN THE INSTANT CASE IS BASED ON TANGIBLE EVIDENCES. HENCE, THE ADDITION MA DE BY THE AO CANNOT BE SUSTAINED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22/12/2020. SD/- SD/- (H. S. SIDHU) (DR. B . R. R. KUMAR) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED: 22/12/2020 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR