M/s Mahalaxmi Crafts & Tissues (P) Ltd., Muzaffarnagar V. ACIT, Muzaffarnagar

ITA 3456/DEL/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 5089 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 31-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus Share capital; Opportunity of being heard; Source of fund; Additional evidence
• Section: 271(1)(c); 40A(3); 115JB; 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA NOS.3456/DEL/2017 & 7644/DEL/2018 ASSESSMENT YEAR: 2012-13 MAHALAXMI CRAFTS & TISSUES (P) LTD., JANSATH ROAD, MUZAFFARNAGAR. PAN: AADCM1213B VS ACIT, CIRCLE-1, MUZAFFARNAGAR. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.S. SINGHVI, CA & SHRI SATYAJEET GOEL, CA REVENUE BY : MS RAKHI VIMAL, SR. DR DATE OF HEARING : 19.11.2019 DATE OF PRONOUNCEMENT : 25.11.2019 ORDER PER R.K. PANDA, AM: ITA NO.3456/DEL/2017 FILED BY THE ASSESSEE IS DIREC TED AGAINST THE ORDER DATED 26 TH MARCH, 2017 OF THE CIT(A), MUZAFFARNAGAR, RELATING TO ASSESSMENT YEAR 2012-13. ITA NO.7644/DEL/2018 FILED BY THE ASSESSEE IS DIREC TED AGAINST THE ORDER DATED 28 TH SEPTEMBER, 2018 OF THE CIT(A), MUZAFFARNAGAR, RELAT ING TO ASSESSMENT YEAR 2012-13 WHEREIN THE ASSESSEE HAS CHALLENGED THE PENALTY LEV IED U/S 271(1)(C) OF THE IT ACT. FOR THE SAKE OF CONVENIENCE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NO.3456/DEL/2017 ITA NO.7644/DEL/2018 2 ITA NO.3456/DEL/2017 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: - 1. THE LD COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN SUSTAINING ADDITION OF RS 3,00,00,000/- CREDITED IN THE BOOKS OF ASSESSEE AS SHARE APPLICATION MONEY. OBSERVATIONS MADE, INFERENCES DRAWN AND FIND INGS RECORDED ARE AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD COMMISSIONER OF INCOME TAX (APPEALS) HAS FA ILED TO APPRECIATE THE FACTS AND CIRCUMSTANCES OF THE CASE WHILE SUSTA INING THE DISALLOWANCE OF RS 27,072/- U/S 40A(3) OF THE INCOME TAX ACT, 1961. 3. THAT THE LD COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED ON FACTS AND LAW IN SUSTAINING ADDITION OF RS 2,83,160/- ALLEGED TO BE INTEREST INCOME OF THIS YEAR. 3. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, DI D NOT PRESS GROUND OF APPEAL NO. 2 ON ACCOUNT OF SMALLNESS OF THE AMOUNT FOR WHI CH THE LD. DR HAS NO OBJECTION. ACCORDINGLY, GROUND NO.2 IS DISMISSED. 4. SO FAR AS GROUND NO.1 IS CONCERNED, THE SAME RELATE S TO THE ORDER OF THE CIT(A) IN SUSTAINING THE ADDITION OF RS.3 CRORES MA DE BY THE ASSESSING OFFICER U/S 68 OF THE IT ACT BEING SHARE APPLICATION MONEY RECEIVE D BY THE ASSESSEE. 5. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF CRAFT PAPER. IT FILED ITS RETURN OF INCOME ON 27.09.2012 DECLARING THE TOTAL INCOME AT RS.17,07,650/-. HOWEVER, TAX WAS PAID U/S 115JB ON BOOK PROFIT OF RS.36,83,044/-. D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THERE IS INCREASE IN SHARE CAPITAL AND SHARE PREMIUM AGGREGATING TO RS.3 CRORES WHICH IS D EPICTED IN SCHEDULE-1 TO THE BALANCE SHEET. THE ASSESSEE, DURING THE IMPUGNED A SSESSMENT YEAR, HAS ISSUED 3 LAKH ITA NO.3456/DEL/2017 ITA NO.7644/DEL/2018 3 SHARES OF FACE VALUE OF RS.10/- AT A PREMIUM OF RS. 90/-. HE, THEREFORE, ASKED THE ASSESSEE TO PROVE THE IDENTITY, GENUINENESS AND CRE DIT WORTHINESS OF THE SHAREHOLDERS FROM WHOM SUCH MONEY HAS BEEN RECEIVED ON THIS ACCO UNT. FROM THE DETAILS FILED BY THE ASSESSEE, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS ISSUED 3 LAKHS SHARES TO THE FOLLOWING ENTITIES:- S. NO. NAME OF THE SHAREHOLDER NO. OF SHARES ALLOTTED TOTAL AMOUNT RECEIVED INCLUDING PREMIUM 1. M/S RAM ALLOYS CASTING PVT. LTD. 65000 6500000 2. M/S AUXIN IMPEX PVT. LTD. 57000 5700000 3. M/S VIBGYOR CONTRACTORS PVT. LTD. 33000 3300000 4. M/S SWAMI ADVERTISING PVT. LTD. 15000 1500000 5. M/S B.G. FREIGHT SHOPPE INDIA PVT. LTD. 30000 300000 6. M/S ALL TIME BUILDTECH PVT. LTD. 30000 3000000 7. M/S ALL TIME SOFTECH PVT. LTD. 70000 7000000 TOTAL 300000 30000000 6. THE ASSESSEE FILED PHOTO COPIES OF SHARE APPLICATIO N FORM, PHOTO COPIES OF OTHER DOCUMENTS LIKE INCOME-TAX RETURN ACKNOWLEDGEM ENT, BANK STATEMENT, PAN CARD, ETC. HOWEVER, NO CONFIRMATION IN ORIGINAL OR PHOTO COPY FORM WAS FILED. IN ORDER TO VERIFY THE IDENTITY, GENUINENESS AND CREDIT WORTHIN ESS OF THE SAID TRANSACTION AS WELL AS THAT OF ALLEGED INVESTORS, THE ASSESSING OFFICER IS SUED NOTICE U/S 133(6) IN THE ADDRESS GIVEN ON THE SAID DOCUMENTS. HE NOTED THAT IN SOME OF THE CASES, THE NOTICES WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES WITH TH E REMARKS LEFT OR WRONG ADDRESS. IN CERTAIN CASES, THERE WAS NO RESPONSE FROM THE IN VESTOR COMPANIES. THE ASSESSING OFFICER, THEREFORE, ASKED THE ASSESSEE TO PRODUCE T HE ABOVE ENTITIES WITH PROPER EVIDENCE. HOWEVER, DUE TO NON-COMPLIANCE FROM THE SIDE OF THE ASSESSEE TO ITA NO.3456/DEL/2017 ITA NO.7644/DEL/2018 4 SUBSTANTIATE WITH EVIDENCE TO HIS SATISFACTION REGA RDING THE IDENTITY AND CREDIT WORTHINESS OF THE INVESTOR COMPANIES AND THE GENUIN ENESS OF THE TRANSACTIONS, THE ASSESSING OFFICER, RELYING ON VARIOUS DECISIONS MAD E ADDITION OF RS.3 CRORES TO THE TOTAL INCOME OF THE ASSESSEE U/S 68 OF THE ACT. 7. BEFORE THE CIT(A), THE ASSESSEE FILED AN APPLICATIO N UNDER RULE 46A OF THE IT ACT FOR ADMISSION OF CERTAIN ADDITIONAL EVIDENCES S UCH AS ACKNOWLEDGEMENT OF ITR FOR THE YEAR UNDER CONSIDERATION, COPY OF PAN CARD, JUR ISDICTION OF THE ASSESSING OFFICER UNDER THE IT DEPARTMENT, COPY OF THE MASTER DATA AV AILABLE AT THE REGISTRAR OF COMPANIES, CONFIRMATIONS OF SHARE APPLICANTS, PHOTO COPY OF CERTIFICATE OF SHARE AS OBTAINED FROM THE SHARE APPLICANT, BOARD RESOLUTION OF THE SHARE APPLICANT ALONG WITH CONFIRMATION, MEMORANDUM & ARTICLES OF ASSOCIATION OF THE SHARE APPLICANT COMPANY AND BALANCE SHEET & PROFIT & LOSS ACCOUNT O F THE SHARE APPLICANT COMPANY. 8. THE LD.CIT(A) ADMITTED THE ADDITIONAL EVIDENCES AND CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER. AFTER CONSIDERI NG THE REMAND REPORT OF THE ASSESSING OFFICER AND REJOINDER OF THE ASSESSEE TO SUCH REMAND REPORT, THE LD.CIT(A) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICE R U/S 68 OF THE ACT IN RESPECT OF THE SHARE APPLICATION MONEY AND SHARE PREMIUM. 9. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL. ITA NO.3456/DEL/2017 ITA NO.7644/DEL/2018 5 10. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SU BMITTED THAT THE ASSESSEE HAS DISCHARGED THE ONUS CAST ON IT BY PRODUCING ALL THE RELEVANT DOCUMENTS BEFORE THE LOWER AUTHORITIES. HE SUBMITTED THAT ALL THE SHARE APPLICANT COMPANIES HAVE IN THEIR BALANCE SHEET SUFFICIENT FUNDS IN SHAPE OF SHARE CA PITAL AND FREE RESERVES. THEREFORE, MERELY BECAUSE THE INCOME OF THESE CONCERNS ARE VER Y LOW, THE SAME CANNOT BE A GROUND TO DISBELIEVE THE INVESTMENTS MADE BY THEM E SPECIALLY WHEN THE ASSESSEE HAS DISCHARGED ITS ONUS BY PRODUCING THE RELEVANT MATER IAL TO SUBSTANTIATE THE IDENTITY AND CREDIT WORTHINESS OF THE INVESTOR COMPANIES AND THE GENUINENESS OF THE TRANSACTIONS. REFERRING TO THE PROVISIONS OF SECTION 68, HE SUBMI TTED THAT THE ONUS ON THE ASSESSEE TO PROVE THE SOURCE OF THE SOURCE IS ONLY AFTER THE AM ENDMENT. HOWEVER, SINCE THE IMPUGNED ASSESSMENT YEAR IS 2012-13, THEREFORE, THE AMENDMENT OF THE PROVISIONS OF SECTION 68 IS NOT APPLICABLE AND THE ONUS LIES WITH THE ASSESSING OFFICER TO DISPROVE THE INGREDIENTS OF SECTION 68 WHEN THE ASSESSEE HAS FILED ALL THE NECESSARY DETAILS SUBSTANTIATING THE IDENTITY AND CREDIT WORTHINESS O F THE INVESTOR COMPANIES AND GENUINENESS OF THE TRANSACTION. HE SUBMITTED THAT I N THE CASE OF THE ASSESSEE ALL THE INVESTOR COMPANIES ARE DELHI BASED COMPANIES AND TH ESE ARE NOT KOLKATA BASED COMPANIES OR ENTRY PROVIDING COMPANIES. 10.1 RELYING ON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF PCIT VS. GOODVIEW TRADING (P) LTD., REPORTED IN 77 TAXMA N.COM 204, HE SUBMITTED THAT THE HON'BLE HIGH COURT IN THE SAID DECISION HAS HELD TH AT WHERE THE CIT(A), AFTER ANALYZING THE NET WORTH OF THE SHARE APPLICANT COMP ANIES HAS NOTICED THAT THEY ITA NO.3456/DEL/2017 ITA NO.7644/DEL/2018 6 POSSESSED SUBSTANTIAL AMOUNTS TO INVEST IN ASSESSEE COMPANY, NO ADDITION COULD BE MADE U/S 68 OF THE ACT. 10.2 REFERRING TO THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. COMPUTER HOME INFORMATION PLUS PVT. LTD, VIDE I TA NO.5680/DEL/2016, ORDER DATED 24 TH MAY, 2019, HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISIO N HAS HELD THAT WHEN THE TRANSACTIONS ARE DONE THROUGH PROPER BANKI NG CHANNEL AND THE SOURCE OF FUNDS ARE CLEARLY ESTABLISHED FROM THE BANK STATEME NT OF THE LENDER COMPANIES, MERELY BECAUSE THEIR INCOME IS MEAGER CANNOT BE A GROUND T O MAKE THE ADDITION U/S 68 OF THE ACT. 10.3 REFERRING TO VARIOUS PAGES OF THE PAPER BOOK, HE SU BMITTED THAT SINCE THE ASSESSEE, IN THE INSTANT CASE, HAS FILED ALL THE RE LEVANT DETAILS SUBSTANTIATING THE IDENTITY AND CREDIT WORTHINESS OF THE INVESTOR COMPANIES AND THE GENUINENESS OF THE TRANSACTION, THEREFORE, IN VIEW OF THE DECISIONS CI TED ABOVE AND IN THE LIGHT OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F LOVELY EXPORTS, REPORTED IN 319 ITR 005, THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) IS NOT JUSTIFIED. 11. IN HIS ALTERNATE CONTENTION, THE LD. COUNSEL, REFER RING TO THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF MANNAT HOSPITALITY (P) LTD. VS. ITO, VIDE ITA NO.7348/DEL/2018, ORDER DATED 7 TH JUNE, 2019, FOR ASSESSMENT YEAR 2009-10, SUBMITTED THAT UNDER IDENTICAL CIRCUMSTANCES, THE T RIBUNAL HAS RESTORED THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO D ECIDE THE ISSUE AFRESH IN THE LIGHT OF ITA NO.3456/DEL/2017 ITA NO.7644/DEL/2018 7 THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA SE OF PCIT VS. NRA IRON AND STEEL PVT. LTD, ORDER DATED 05.03.2019 AND THE DECISION OF THE HON'BLE DELHI HIGH COURT I N THE CASE PCIT VS. NDR PROMOTERS PVT. LTD, 2019-TIOL -172-HC-DEL-IT. REFERRING TO THE STANDARD OPERATING PROCEDURE ISSUED BY THE CBDT , FOR DECIDING ISSUES INVOLVING ADDITION U/S 68, HE SUBMITTED THAT THE SAID STANDAR D OPERATING PROCEDURE WAS ISSUED BY THE CBDT AFTER THE ORDER OF THE CIT(A). HE ACCORDI NGLY SUBMITTED THAT THE ISSUE MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER WI TH A DIRECTION TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE WITH EV IDENCE TO THE SATISFACTION OF THE ASSESSING OFFICER REGARDING THE IDENTITY AND CREDIT WORTHINESS OF THE INVESTOR COMPANIES AND THE GENUINENESS OF THE TRANSACTION. 12. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPORTED T HE ORDER OF THE ASSESSING OFFICER AND THE CIT(A) AND SUBMITTED THAT THE ADDIT ION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) SHOULD BE UPHELD AND TH E MATTER NEED NOT BE RESTORED TO THE FILE OF THE ASSESSING OFFICER. SHE SUBMITTED T HAT THE ASSESSEE WAS GIVEN AMPLE OPPORTUNITIES BY THE ASSESSING OFFICER AS WELL AS B Y THE CIT(A). THE LD.CIT(A) HAS CALLED FOR THREE REMAND REPORTS FROM THE ASSESSING OFFICER. SO FAR AS THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE REGARDING THE STAN DARD OPERATING PROCEDURE IS CONCERNED, SHE SUBMITTED THAT NONE OF THE ACTIONS O F THE ASSESSING OFFICER CAN BE SAID TO BE INCONSISTENT WITH THAT OF THE STANDARD OPERAT ING PROCEDURE. SHE SUBMITTED THAT A PERUSAL OF THE INCOME-TAX RETURNS FILED BY THE INVE STOR COMPANIES SHOW THAT THEY HAVE RETURNED VERY MEAGER INCOME. THE NOTICES ISSUED U/ S 133(6) BY THE ASSESSING OFFICER ITA NO.3456/DEL/2017 ITA NO.7644/DEL/2018 8 WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES WI TH THE REMARKS: WRONG ADDRESS OR LEFT OR INSUFFICIENT ADDRESS SPEAK VOLUMES. TH E INSPECTOR WHO WAS DEPUTED TO VISIT SOME OF THE INVESTOR COMPANIES HAS REPORTED THAT TH ESE ARE MERELY PAPER COMPANIES. THEREFORE, THIS MATTER SHOULD BE DECIDED HERE ITSEL F AND THERE IS NO NEED FOR RESTORING THE MATTER TO THE LOWER AUTHORITIES. REFERRING TO THE FOLLOWING DECISIONS, SHE SUBMITTED THAT WHEN THE ONUS TO ESTABLISH THE IDENTITY AND CR EDIT WORTHINESS OF THE INVESTOR COMPANIES AND GENUINENESS OF THE TRANSACTIONS IS ON THE ASSESSEE AND THE ASSESSEE HAS MISERABLY FAILED TO PROVE THE SAME, THE ADDITION MA DE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) SHOULD BE UPHELD:- I) PCIT VS. NRA IRON & STEEL PVT. LTD. (SC) DATED 05.0 3.2019; II) PCIT VS. NDR PROMOTERS PVT. LTD. (2019-TIOL-172-HC- DEL-IT); III) CIT VS. MAF ACADEMY (P) LTD., 361 ITR 258; IV) CIT VS. NAVODAYA CASTLE PVT. LTD. (2014) 367 ITR 30 6 (DEL); V) NAVODAYA CASTLE PVT. LTD. VS. CIT (2015-TIOL-314-SC -IT; VI) KONARK STRUCTURAL ENGINEERING (P) LTD. VS. DCIT (20 18) 96 TAXMANN.COM 255 (SC); VII) KONARK STRUCTURAL ENGINEERING (P) LTD. VS. DCIT (20 18) 90 TAXMANN.COM 56 (BOMBAY); VIII) PRATHAM TELECOM INDIA PVT. LTD. VS. DCIT (2018-TIOL -1983-HC-MUM-IT) IX) CIT VS. NIPUN BUILDERS & DEVELOPERS (P) LTD., 30 TA XMANN.COM 292; X) CIT VS. NOVA PROMOTERS & FINLEASE (P) LTD., 18 TAXM ANN.COM 217; XI) CIT VS. NR PORTFOLIO PVT. LTD. (2014) 42 TAXMANN.CO M 339 (DELHI); ITA NO.3456/DEL/2017 ITA NO.7644/DEL/2018 9 XII) CIT VS. EMPIRE BUILTECH (P) LTD., 366 ITR 110; XIII) PCIT VS. BIKRAM SINGH (2017) 85 TAXMANN.COM 104 (DE L); & XIV) ITO (E) VS. M/S SYNERGY FINLEASE PVT. LTD., ITA NO. 4778/DEL/2013, ORDER DATED 08.03.2019. 13. SHE ALSO RELIED ON THE DECISION OF THE HON'BLE DELH I HIGH COURT IN THE CASE OF CIT VS. TITAN SECURITIES LTD., VIDE ITA 263/2012, O RDER DATED 28 TH FEBRUARY, 2013. 13.1 WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSING OFFICER, IN THE INSTANT CASE, MADE AD DITION OF RS.3 CRORES U/S 68 OF THE IT ACT BEING THE AMOUNT RECEIVED BY THE ASSESSEE ON AC COUNT OF ISSUE OF 3 LAKHS SHARE OF RS.10/- EACH AT A PREMIUM OF RS.90/- ON THE GROUND THAT THE ASSESSEE COULD NOT FULFILL THE INGREDIENTS OF SECTION U/S 68 OF THE IT ACT, 19 61 BY PROVING THE IDENTITY AND THE CREDIT WORTHINESS OF THE INVESTOR COMPANIES AND TH E GENUINENESS OF THE TRANSACTION. WE FIND THE LD.CIT(A), AFTER CONSIDERING THE THREE REMAND REPORTS FROM THE ASSESSING OFFICER AND THE REJOINDER OF THE ASSESSEE TO SUCH R EMAND REPORT, CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT. I T IS THE SUBMISSION OF THE LD. COUNSEL THAT THE ASSESSEE HAS PROVED THE IDENTITY AND CREDI T WORTHINESS OF THE INVESTOR COMPANIES AND THE GENUINENESS OF THE TRANSACTION BY PROVIDING ALL THE RELEVANT DATA. IT IS HIS SUBMISSION THAT MERELY BECAUSE THE INVESTOR COMPANIES ARE SHOWING MEAGER INCOME IN THEIR RETURN OF INCOME, THE SAME CANNOT B E A GROUND FOR MAKING THE ADDITION U/S 68 OF THE ACT SO LONG AS THE INVESTOR COMPANIES POSSESSED SUFFICIENT FUNDS IN THEIR ITA NO.3456/DEL/2017 ITA NO.7644/DEL/2018 10 BALANCE SHEET. IT IS ALSO HIS ALTERNATE CONTENTION THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO G IVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE HIS CASE WITH EVIDENCE TO HIS SATISFACTION IN THE LIGHT OF THE RECENT DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF NRA IRON & STEEL PVT. LTD. (SUPRA) AND THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF NDR PROMOTERS PVT. LTD. (SUPRA). 14. WE FIND, SUBSEQUENT TO THE ORDER OF THE CIT(A) DECI SION ON THE ISSUES OF BOGUS SHARE CAPITAL AND SHARE PREMIUM WERE DECIDED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. NDR PROMOTERS AND BY THE HON'BLE SU PREME COURT IN THE CASE OF CIT VS. NRA IRON & STEEL PVT. LTD. NEITHER THE ASSESSE E NOR THE ASSESSING OFFICER OR THE CIT(A) HAD THE BENEFIT OF THE VARIOUS OBSERVATIONS OF THE HON'BLE APEX COURT AND THE HON'BLE DELHI HIGH COURT IN THE CASES CITED (SUPRA) REGARDING TAXABILITY OF SUCH SHARE CAPITAL AND SHARE PREMIUM RECEIVED IN THE HANDS OF THE ASSESSEE. FURTHER, IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE WAS NOT PROVIDED WI TH ANY ADVERSE MATERIAL WHICH HAS BEEN USED BY THE ASSESSING OFFICER WHILE FRAMING TH E ASSESSMENT A STATEMENT MADE BY THE LD. COUNSEL FOR THE ASSESSEE AND NOT CONTROVERT ED BY THE LD. DR. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND IN THE INTERE ST OF JUSTICE, WE DEEM IT PROPER TO RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFF ICER WITH A DIRECTION TO GRANT ONE FINAL OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE WITH EV IDENCE TO HIS SATISFACTION REGARDING THE IDENTITY AND CREDIT WORTHINESS OF THE SHARE APP LICANTS AND THE GENUINENESS OF THE TRANSACTIONS. THE ASSESSING OFFICER, IF FEELS NECE SSARY, MAY SUMMON THE DIRECTORS OF THE INVESTOR COMPANIES OR ASK THE ASSESSEE TO PRODU CE THE DIRECTORS OF THE INVESTOR ITA NO.3456/DEL/2017 ITA NO.7644/DEL/2018 11 COMPANIES. THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AS PER FACT AND LAW, AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. FURTHER, WHILE DOING SO, THE ASSESSING OFFICER SHALL KEEP IN MIND THE DECISION O F THE HON'BLE SUPREME COURT IN THE CASE OF NRA IRON & STEEL PVT. LTD. (SUPRA) AND THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF NDR PROMOTERS PVT. LTD. THE G ROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 15. SO FAR AS GROUND NO.3 IS CONCERNED, THE SAME RELATE S TO THE ORDER OF THE CIT(A) IN SUSTAINING THE ADDITION OF RS.2,83,160/- ALLEGED TO BE INTEREST INCOME FOR THIS YEAR. 16. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED FROM ITS DETAILS TH AT THE ASSESSEE COMPANY HAS EARNED INTEREST INCOME OF RS.3,03,754/-. HOWEVER, IN THE PROFIT & LOSS ACCOUNT, INTEREST INCOME OF RS.20,594/- WAS DECLARED. ON BE ING ASKED BY THE ASSESSING OFFICER, IT WAS SUBMITTED THAT THE SAID EXTRA INCOM E WAS BOOKED IN THE SUBSEQUENT YEAR. HOWEVER, IN ABSENCE OF ANY EVIDENCE FURNISHE D TO THIS EFFECT AND CONSIDERING THE FACT THAT IN THE 26AS FORM THE SAID INTEREST INCOME HAS BEEN CREDITED IN THE ACCOUNT OF THE ASSESSEE IN THIS FISCAL YEAR, THE ASSESSING OFF ICER MADE ADDITION OF RS.2,83,160/- BEING THE DIFFERENCE BETWEEN THE AMOUNT REFLECTED I N THE 26AS AND THE AMOUNT DECLARED BY THE ASSESSEE. IN APPEAL, THE LD.CIT(A ) UPHELD THE ACTION OF THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE COULD NOT S UBSTANTIATE THE SAME BY PRODUCING ITA NO.3456/DEL/2017 ITA NO.7644/DEL/2018 12 NECESSARY EVIDENCE AND CO-RELATING THE SAME WITH TH E METHOD OF ACCOUNTING FOLLOWED BY IT I.E., CASH OR MERCANTILE. 17. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE THE TRIBUNAL. 18. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS DECLARED THE INCOME ON RECEIPT BASIS AND IN THE SUBSEQUENT YEAR THE SAME INCOME HAS BEEN OFFERED TO TAX. HE SUBMITTED THAT THE SAME INCOME CANNOT B E TAXED TWICE I.E., ONCE IN THIS YEAR AND AGAIN IN THE SUBSEQUENT YEAR AND, THEREFORE, NE CESSARY SET OFF SHOULD BE GIVEN AND IN CASE THE INTEREST INCOME IS ADDED DURING THIS YE AR, THE SAME SHOULD BE DIRECTED TO BE DELETED IN THE SUBSEQUENT YEAR WHEN THE ASSESSEE HA S OFFERED THE SAME. 19. THE LD. DR, ON THE OTHER HAND, HEAVILY RELIED ON TH E ORDER OF THE CIT(A). 20. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THE ASSES SING OFFICER MADE ADDITION OF RS.2,83,160/- BEING THE DIFFERENCE BETWEEN THE INTE REST INCOME AS PER 26AS AND THE INTEREST INCOME DECLARED BY THE ASSESSEE. THE CIT( A) UPHELD THE ACTION OF THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE C OULD NOT SUBSTANTIATE BY PRODUCING NECESSARY EVIDENCE THAT THE BALANCE INTEREST HAS BE EN OFFERED TO TAX IN THE SUBSEQUENT YEAR AFTER THE SAME WAS CREDITED IN THE BANK ACCOUN T OF THE ASSESSEE. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE INTEREST INCOME HAS BEEN SHOWN ON RECEIPT BASIS AND SINCE THE ASSESSEE HAS OFFERED THE SAME TO TAX IN THE SUBSEQUENT YEAR, NO ADDITION IS CALLED FOR DURING THIS YEAR. WE FIND SOME FORCE IN THE ARGUMENT OF ITA NO.3456/DEL/2017 ITA NO.7644/DEL/2018 13 THE LD. COUNSEL THAT AN INCOME CANNOT BE TAXED TWIC E. HOWEVER, IT IS A MATER OF RECORD THAT THE ASSESSEE HAS NOT SUBSTANTIATED BY PRODUCIN G NECESSARY EVIDENCE EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE CIT(A) THAT THE BALANCE INTEREST HAS BEEN OFFERED TO TAX IN THE SUBSEQUENT YEAR. CONSIDERING THE TOTALI TY OF THE FACTS OF THE CASE AND IN THE INTEREST OF JUSTICE, WE DEEM IT PROPER TO RESTORE T HE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GIVE ONE MORE OPPORTUNI TY TO THE ASSESSEE TO SUBSTANTIATE ITS CASE AND DECIDE THE ISSUE AS PER FACT AND LAW. WE HOLD AND DIRECT ACCORDINGLY. GROUND NO.3 IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSE S. ITA NO.7644/DEL/2018 21. THE ASSESSEE IN ITS GROUNDS OF APPEAL HAS CHALLENGE D THE ORDER OF THE CIT(A) IN CONFIRMING THE PENALTY OF RS.98,34,200/- LEVIED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE IT ACT. 22. AFTER HEARING BOTH THE SIDES, WE FIND THE QUANTUM A PPEAL HAS BEEN RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDIC ATION. THEREFORE, THE PENALTY SO LEVIED BY THE ASSESSING OFFICER AND UPHELD BY THE C IT(A) HAS NO LEGS TO STAND. ACCORDINGLY, THE PENALTY LEVIED BY THE ASSESSING OF FICER AND SUSTAINED BY THE CIT(A) IS CANCELLED. HOWEVER, THE ASSESSING OFFICER IS AT LIBERTY TO INITIATE FRESH PENALTY PROCEEDINGS AND LEVY PENALTY U/S 271(1)(C) OF THE I T ACT, IF SO REQUIRED, AFTER COMPLETION OF THE ASSESSMENT. THE GROUNDS RAISED B Y THE ASSESSEE ARE ACCORDINGLY ALLOWED. ITA NO.3456/DEL/2017 ITA NO.7644/DEL/2018 14 23. IN THE RESULT, THE APPEAL IN ITA NO.3456/ DEL/2017 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND ITA NO.7644/DEL/2018 IS AL LOWED. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 2 5.11.2019. SD/- SD/- (K. NARASIMHA CHARY) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMFBER DATED: 25 TH NOVEMBER, 2019 DK COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI