ITO, New Delhi V. M/s. Globus Securities & Finance Pvt. Ltd., New Delhi

ITA 3593/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53089 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 30-05-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 27-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus Share capital; Accommodation entries
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C DELHI BEFORE SHRI C.L. SETHI AND SHRI K.G. BANSAL ITA NO. 3593(DEL)/2010 ASSESSMENT YEAR: 2006-07 INCOME-TAX OFFICER, GL OBUS SECURITIES & FINANCE WARD 12(2), NEW DELHI. VS. PVT. LTD ., 201, RAM VIHAR, NEW DELHI. PAN: AAACG3346G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SALIL MISHRA, DR RESPONDENT B Y : SHRI KAPIL GOEL, ADVOCATE DATE OF HEA RING : 18.10.2011 DATE OF PRO NOUNCEMENT : 04.11.2011 ORDER PER K.G. BANSAL : AM THE ONLY SUBSTANTIVE GROUND TAKEN BY THE REVENUE IS THAT THE LD. CIT(APPEALS) ERRED IN DELETING THE ADDITION OF RS. 51.10 LAKH MADE BY THE AO ON ACCOUNT OF BOGUS SHARE CAPITAL AND PREMIUM BY INVOKING THE PROVISION CONTAINED IN SECTION 68 OF THE INCOME-TA X ACT, 1961 (THE ACT FOR SHORT). IT IS MENTIONED THAT THE ASSESSEE FAILE D TO ESTABLISH CREDITWORTHINESS OF THE CONTRIBUTORS AND GENUINENE SS OF THE TRANSACTIONS AND, THUS, FAILED TO DISCHARGE THE BURDEN CAST ON IT. ITA NO. 3593(DEL)/2010 2 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 22.11.2006 DECLARING TOTAL INCOME OF RS. 71, 910/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. THEREAFTER, THE NOTICE U/S 143(2) WAS ISSUED ON 5.10.2007. IN THE COURSE OF ASSESSMEN T, IT WAS FOUND THAT THE ASSESSEE-COMPANY WAS INCORPORATED ON 26.7.1993 WI TH A VIEW TO TRADE IN SHARES AND DERIVATIVES. IN THE YEAR UNDER CONSIDE RATION, THE SHARE CAPITAL WAS INCREASED BY RS. 9.22 LAKH BY ISSUING FRESH S HARES TO SIX PERSONS. IT ALSO RECEIVED SHARE PREMIUM AMOUNTING TO RS. 41. 88 LAKH FROM THESE PERSONS. THUS, FRESH CAPITAL RAISED IN THIS YE AR AMOUNTED TO RS. 51.10 LAKH. THE DETAILS OF CONTRIBUTORS ARE AS UNDER: - S. NO. NAME OF THE PARTY AMOUNT (RS.) (I) M/S INTER STELLAR EXPORTS PVT. LTD. 9,35,000/- (II) M/S PARIVARTAN CAPITAL & FINANCIAL SECURITIES PVT. LTD. 9,75,000/- (III) M/S SOBER ASSOCIATES PVT. LTD. 7,00,000/- (IV) M/S RITIKA FINANCE & INVESTMENTS PVT. LTD. 10,00,000/- (V) M/S VICTORIA ADVERTISING PVT. LTD. 9,00,000/- (VI) M/S SHRI NIWAS LEASING & FINANCE LTD. 6,00,00 0/- TOTAL: 51,10,000/- 2.1 THE ASSESSEE WAS REQUIRED TO PRODUCE NECESSA RY EVIDENCE TO ESTABLISH GENUINENESS OF THE CREDITS AGGREGATI NG TO RS. 51.10 LAKH MADE IN THE BOOKS OF ACCOUNT IN THE NAMES OF AFORESA ID PERSONS. THE ASSESSEE FILED COPIES OF CONFIRMATION LETTER, BANK STATEME NT, BALANCE-SHEET AND ITA NO. 3593(DEL)/2010 3 INCOME-TAX RETURN. IT APPEARS THAT THE AO ALSO RECEIVED INFORMATION FROM THE INVESTIGATION WING IN RESPECT OF PERSONS WHO WERE ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES BY W AY OF SHARE CAPITAL. ON COMPARISON OF INFORMATION AND INFORMATION ABOUT CONTRIBUTORS FURNISHED BY THE ASSESSEE, IT WAS FOUND THAT PARIVARTAN C APITAL & FINANCIAL SERVICES PVT. LTD., SOBER ASSOCIATES PVT. LTD., VICTORIA A DVERTISING PVT. LTD. & SHRI NIWAS LEASING & FINANCE LTD. WERE COMMON. IN VIEW OF THIS, THE ASSESSEE WAS FURTHER REQUIRED TO PRODUCE THE R EPRESENTATIVES OF THE CONTRIBUTORS ALONG WITH RECORDS TO SHOW WHETHER THEY HAD REALLY MADE THE INVESTMENTS. HOWEVER, THE SCHEDULE OF INVE STMENT COULD NOT BE FILED FROM ANY OF THE CONTRIBUTORS. THE BANK ACCOUNTS OF THE CONTRIBUTORS WERE ALSO EXAMINED. IT WAS FOUND THAT THE ACCOUNT OF INTER STELLAR EXPORTS PVT. LTD. SHOWED DEBIT BALANCE AND THEREAFTER A SUM OF RS. 9.35 LAKH WAS TRANSFERRED TO THIS ACCOUNT. THE ACCOUNT OF SOBER ASSOCIATES PVT. LTD. ALSO SHOWED DEBIT BALANCE AND A DEPOSIT OF RS. 8,7 9,918/- WAS MADE. THE ACCOUNT OF RITIKA FINANCE & INVESTMENTS PVT. LTD. ALSO HAD TWO CREDITS OF RS. 5.00 LAKH EACH ON 11.04.2005 AND 25.04.2005. ACCORDING TO THE AO, THE PATTERN OF DEBIT BALANCES, CREDITS AND SUBS EQUENT CONTRIBUTIONS SHOW THAT THESE PERSONS WERE MERELY NAME LENDERS. THUS, IT WAS HELD THAT THE ASSESSEE USED ITS OWN MONEY FOR MAKING CREDITS IN THE BOOKS BY SHOWING ITA NO. 3593(DEL)/2010 4 THEM AS CAPITAL CONTRIBUTIONS. THUS, ADDITION OF RS. 51.10 LAKH WAS MADE TO THE INCOME RETURNED BY THE ASSESSEE. 2.2 IN THE COURSE OF PROCEEDINGS BEFORE THE FIRS T APPELLATE AUTHORITY, IT WAS SUBMITTED THAT THE ASSESSEE HAD FILED COPIE S OF CONFIRMATION, BANK STATEMENT, BALANCE-SHEET AND INCOME-TAX RETURN OF THE CONTRIBUTORS, WHO WERE ALLOTTED SHARES. THE AO NEVER DOUBTED THE EXISTENCE OR IDENTITY OF THE CONTRIBUTORS. HE ONLY DOUBTED THE SOURCE O F THEIR FUNDS FOR MAKING THE CONTRIBUTIONS. HOWEVER, HE DID NOT ISSUE SU MMONS TO THEM DESPITE SPECIFIC REQUEST IN THIS BEHALF. THE DOCUMENTS SUBMITTED BY THE ASSESSEE WERE ALSO NOT DOUBTED. IN THE LIGHT OF THESE FACTS, IT WAS ARGUED THAT NO ADDITION COULD BE MADE IN ITS HANDS, IN VIEW OF TH E DECISION OF THE APEX COURT IN THE CASE OF LOVELY EXPORTS (P) LTD., 216 CTR 195. AFTER CONSIDERING THE SUBMISSIONS AND THE ASSESSMENT ORDER, IT HAS BEEN MENTIONED THAT THE ASSESSEE FURNISHED NAME, ADDR ESS AND PAN DETAILS OF THE CONTRIBUTORS. IT ALSO FILED COPIES OF CON FIRMATION, INCOME-TAX RETURN, BALANCE-SHEET, BANK STATEMENT AND SHARE APPLICA TION FORM. THESE EVIDENCES ESTABLISH THE IDENTITY OF THE APPLICANTS . ONCE THE IDENTITY IS ESTABLISHED, NOTHING FURTHER IS REQUIRED TO BE DO NE BY THE ASSESSEE IN VIEW ITA NO. 3593(DEL)/2010 5 OF THE DECISION IN THE CASE OF LOVELY EXPORTS ( P) LTD. THEREFORE, THE ADDITION MADE BY THE AO HAS BEEN DELETED. 3. BEFORE US, THE LD. DR SUBMITTED THAT THE SHARES OF THE FACE VALUE OF RS. 10/- HAVE BEEN ISSUED AT RS. 50/- PER SHA RE AND, THUS, PREMIUM OF RS. 40/- PER SHARE HAS BEEN CHARGED. THERE ARE MATCHING DEPOSITS IN THE BANK ACCOUNT OF THE CONTRIBUTORS. THE RELEVANT S CHEDULES OF THE BALANCE- SHEET OF THE CONTRIBUTORS, CONTAINING THE DETAI LS OF INVESTMENTS, HAVE NOT BEEN FILED. THE ASSESSEE HAD NOT CHARGED PREMIUM IN ANY EARLIER YEAR. THUS, IT IS ARGUED THAT THE CREDITWORTHINESS OF THE CONTRIBUTORS AND GENUINENESS OF THE TRANSACTIONS HAVE NOT BEEN E STABLISHED. 3.1 IN REPLY, THE LD. COUNSEL FOR THE ASSESSE E RELIED ON THE EVIDENCE PLACED IN THE PAPER BOOK AT PAGE NOS. 10 TO 49. THIS HAS ALREADY BEEN DESCRIBED BY US WHILE SUMMARIZING THE ASSESSMENT ORDER AND THE IMPUGNED ORDER. 4. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. WE FIND THAT THE ASSESSEE HAD FILED SU FFICIENT EVIDENCE IN THE FORM OF NAME, ADDRESS AND PAN DETAILS OF THE CONT RIBUTORS. FURTHER, ITA NO. 3593(DEL)/2010 6 COPIES OF CONFIRMATION, INCOME-TAX RETURN, BANK S TATEMENT, SHARE APPLICATION FORM AND BALANCE-SHEET HAVE ALSO BEE N FILED. THESE DETAILS ESTABLISH THE IDENTITY OF THE CONTRIBUTORS. THIS, IN FACT, HAS NOT BEEN DOUBTED BY THE AO ALSO. HE HAS RELIED ON INFORMA TION RECEIVED FROM INVESTIGATION WING, WHICH LISTED FOUR OF THE CON TRIBUTORS AS PERSONS WHO WERE INDULGING IN FURNISHING ACCOMMODATION ENTRIE S. THIS POINT HAS NOT BEEN EXAMINED IN DETAILS BY MAKING ANY FURTHER E NQUIRY. HE HAS ALSO NOTED THAT THERE ARE MATCHING CREDITS IN THE CAS E OF INTER STELLAR EXPORTS PVT. LTD., SOBER ASSOCIATES PVT. LTD. AND RITIKA FINANCE & INVESTMENTS PVT. LTD. HOWEVER, FURTHER ENQUIRY HAS NOT BEE N MADE IN THE CASE OF THE CONTRIBUTORS TO ESTABLISH IN ANY MANNER THAT THE SOURCE OF THE CREDITS WAS THE ASSESSEE. IT HAS ALSO BEEN FOUND THAT SHARE S WERE ISSUED IN THE IMMEDIATELY PRECEDING YEAR AND NO PREMIUM WAS CHARGED. THIS DOES NOT LEAD TO THE INFERENCE THAT THE AMOUNT OF PREMIUM RECEIVED IN THIS YEAR IS BOGUS OR THAT SUCH AMOUNT FLOWED FROM THE COFFERS OF THE ASSESSEE. THEREFORE, WE ARE OF THE VIEW THAT THE ENQUIRIES DO NOT ESTABLISH THAT SOURCE OF THE CONTRIBUTION WAS THE ASSESSEE. O N THE OTHER HAND, THE IDENTITIES OF THE CONTRIBUTORS HAVE BEEN ESTABLISH ED. IN THE LIGHT OF THE DECISION IN THE CASE OF LOVELY EXPORTS (P) LTD. ( SUPRA), THE ASSESSEE WAS NOT REQUIRED TO BRING ANYTHING FURTHER THAN EST ABLISHING THE IDENTITY. ITA NO. 3593(DEL)/2010 7 THEREAFTER, IF ANY DOUBT PERSISTED, THE ACTION L IED IN THE CASE OF THE CONTRIBUTORS. ACCORDINGLY, IT IS HELD THAT THE L D. CIT(APPEALS) WAS RIGHT IN DELETING THE ADDITION. 5. IN THE RESULT, THE APPEAL IS DISMISSED. SD/- SD/- (C.L. SETHI) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA COPY OF THE ORDER FORWARDED TO:- (I) GLOBUS SECURITIES & FINANCE PVT. LTD., NEW DELHI. (II) ITO, WARD 12(2), NEW DELHI. (III) CIT (IV) CIT(A) (V) THE DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR.