ITO, New Delhi V. M/s Ace Sporting & Fitness (P) Ltd., Ghaziabad

ITA 3702/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61772 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 14-06-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 02-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS ANUSHA KHURANA
• Keywords: Opportunity of being heard; Additional evidence; Accommodation entries
• Section: 68; 6; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A NEW DELHI DELHI BENCH : A NEW DELHI DELHI BENCH : A NEW DELHI DELHI BENCH : A NEW DELHI BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER I.T.A NO. 3702/DEL/11 ASSTT. YEAR 2007-08 ITO, COY. WARD1(2) ROOM NO. 398-B, C.R. BUILDING, I.P. ESTATE, NEW DELHI. VS. M/S. ACE SPORTING & FITNESS (P) LTD. C/O SH. P.M. PARVATIYAR, C-6, RAJ RESIDENCY, KAUSHAMBI, GHAZIABAD (UP)- 201010 AAFCA6948P (APPELLANT) (RESPONDENT) APPELLANT BY: MRS. ANUSHA KHURANA, SR. DR RESPONDENT BY: CA SHRI VIJAY GUPTA DATE OF HEARING : 14-06-2012 DATE OF PRONOUNCEMENT : 07-2012 ORDER PER K.G. BANSAL, AM: THE ONLY SUBSTANTIVE GROUND TAKEN BY THE REVENUE IN THIS APPEAL IS TO THE EFFECT THAT THE LD. CIT(A) ERRED ON FACTS AN D IN LAW IN DELETING THE ADDITION OF ` 32,82,800/- MADE BY THE AO ON ACCOUNT OF SHARE APPLICATION MONEY IGNORING THAT COMPLETE COPIES OF FOREIGN INWA RD REMITTANCE CERTIFICATES (FIRCS) WERE NOT FURNISHED BY THE ASSE SSEE AND THE COPIES ITA NO. 3702/DEL/11 2 WHICH WERE FURNISHED INDICATED THAT THE REMITTANCE WAS TO MEET EXPORT BILL. 2. THE BRIEF FACTS ARE THAT THE RETURN DECLARING NI L INCOME WAS FILED ON 31.10.2007. THE RETURN WAS PROCESSED U/S 143(1) ON 10.10.2008. THEREAFTER A NOTICE U/S 143(2) WAS ISSUED ON 16.9. 2008 AND SERVED ON THE ASSESSEE WITHIN THE PRESCRIBED TIME MENTIONED IN SE CTION 143(2). SUBSEQUENTLY OTHER NOTICES WERE ALSO ISSUED. 2.1 COMING TO THE ISSUE AT HAND, IT WAS FOUND THAT DR. ATUL PARVATIYAR MADE CONTRIBUTION OF ` 32,82,800/- AS SHARE APPLICA TION MONEY. THE ASSESSEE WAS GRANTED A NUMBER OF OPPORTUNITIES TO P ROVE THE GENUINENESS OF THE CONTRIBUTION AS UNDERSTOOD U/S 68 OF THE ACT . HOWEVER, IT APPEARS THAT NO COMPLIANCE WHATSOEVER WAS MADE BY THE ASSES SEE WHICH LED TO PASSING OF THE ORDER U/S 144 OF THE ACT. IN THIS AS SESSMENT, ADDITION WAS MADE INTERALIA ON ACCOUNT OF THE CAPITAL CONTRIBUTI ON BY DR. ATUL PARVATIYAR. 2.2 THE MATTER WAS AGITATED BEFORE THE CIT(A) IV, NEW DELHI. VARIOUS SUBMISSIONS WERE MADE BEFORE HIM. ASSESSEE ALSO FIL ED ADDITIONAL EVIDENCE, WHICH WAS ENTERTAINED UNDER RULE 46A OF T HE IT RULES 1962. THE EVIDENCE WAS FORWARDED TO THE AO AND HIS REMAND REP ORT WAS OBTAINED. AFTER CONSIDERING THE ASSESSMENT ORDER, THE EVIDENC E, THE REMAND REPORT AND SUBMISSIONS OF THE ASSESSEE, LD. CIT(A) CAME TO THE CONCLUSION THAT ITA NO. 3702/DEL/11 3 THERE WAS NO JUSTIFICATION FOR MAKING THE IMPUGNED ADDITION. IT HAS BEEN MENTIONED THAT THE CONTRIBUTION HAS BEEN MADE BY TH E DIRECTOR OF THE ASSESSEE COMPANY AND ANOTHER INVESTMENT OF ` 2,20,0 00/- HAS BEEN MADE BY M/S. ICRM INDIA LTD., IN WHICH ITS DIRECTOR IS A DIRECTOR. THE COMPANY HAS PROVIDED ITS PAN AND THE DESIGNATION OF THE JUR ISDICTIONAL ASSESSMENT OFFICER. ACKNOWLEDGEMENT OF THE RETURN HAS ALSO BEE N FILED. HE HAS TAKEN INTO ACCOUNT THE DECISION OF HONBLE RAJASTHAN, HIG H COURT IN THE CASE OF CIT VS. BHAWANI OIL MILLS (P) LTD. (2011) 239 CTR 4 45.FINALLY, AS MENTIONED EARLIER, THE ADDITION HAS BEEN DELETED. 2.3 AGGRIEVED BY THIS ORDER, THE REVENUE IS IN APPE AL BEFORE US. 3. BEFORE US, THE LD. SR. DR SUBMITTED THAT THE LD . CIT(A) HAS NOT FURNISHED ANY POSITIVE FINDING THAT THE CAPITAL CON TRIBUTION BY DR. ATUL PARVATIYAR WAS GENUINE. HE HAS ONLY FOUND FAULT THA T THE AO FOR NO APPARENT REASON AS NO DETAIL WAS FILED BEFORE THE A O. THEREFORE, IT IS AGITATED THAT EITHER THE ORDER OF THE AO MAY BE RES TORED OR IN THE ALTERNATIVE THE MATTER MAY BE RESTORED TO THE FILE OF THE LD. CIT(A) FOR FURNISHING POSITIVE FINDING AFTER HEARING BOTH THE PARTIES. 3.1 IN REPLY, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT FIRCS WERE FILED WHICH SHOW THAT TWO DIRECT REMITTANCES WERE M ADE AND THE THIRD BANK CERTIFICATE SHOWED THAT THE MONEY WAS PAID TO NAUTILUS INTERNATIONAL ON BEHALF OF THE ASSESSEE COMPANY. THE DIRECTOR IS A KNOWN PERSON AND ITA NO. 3702/DEL/11 4 THERE CANNOT BE ANY DOUBT ABOUT HIS IDENTITY. THE M ONEY HAS BEEN DIRECTLY TRANSFERRED FROM HIS FOREIGN BANK ACCOUNT. THEREFORE, THERE CANNOT BE ANY DOUBT ABOUT HIS CAPACITY TO MAKE INVESTMENT AND GENUINENESS OF THE TRANSACTION. 3.2 IN THE COURSE OF HEARING, THE ASSESSEE ALSO MOV ED AN APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE, HOWEVER, THE RECO RD MAINTAINED BY THE TRIBUNAL DOES NOT SHOW THE DATE ON WHICH SUCH ADDIT IONAL EVIDENCE WAS FILED. NO SUBMISSION HAS BEEN MADE BEFORE US REGARD ING ADMISSION OF THE APPLICATION, THEREFORE, THE EVIDENCE IS NOT ADMITTE D. 4. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUB MISSIONS MADE BY THE ASSESSEE. THE CONTRIBUTION OF ` 30,62,800/- HAS BEEN EXPLAINED BY THE ASSESSEE AS UNDER:- A) `1,00,000/- TO O.P. KHAITAN AND COMPANY FOR FEES RELATING TO INCORPORATION OF ACE SPORTING & FITNESS PVT. LTD. B) DIRECT REMITTANCE TO THE BANK ACCOUNT OF ACE SPO RTING & FITNESS PVT. LTD. ON 19.10.2006 FOR USD 10,000/- EQ UIVALENT OF NIR 4,53,050 (BANK CERTIFIED COPY OF FIRC ALREADY SUBMITTED TO ITO). C) DIRECT REMITTANCE TO THE BANK ACCOUNT OF ACE SPO RTING & FITNESS PVT. LTD. ON 19.10.2006 FOR USD 23,945, EQU IVALENT OF NIR 10,86,180/- (BANK CERTIFIED COPY OF FIRC IS ALR EADY SUBMITTED TO ITO). D) USD 31,102.71 (EQUIVALENT TO NIR 14,23,570/-) PA ID ON 27.09.2006 ON BEHALF OF THE COMPANY DIRECTLY TO NAU TILUS INTERNATIONAL, THE ORIGINAL MANUFACTURER AND SHIPPE R OF GOODS PURCHASED BY ACE SPORTING & FITNESS PVT. LTD., AS P AYMENT FOR SHIPPING (FREIGHT AND IN TRANSIT WAREHOUSING IN SIN GAPORE) ITA NO. 3702/DEL/11 5 4.1 FURTHER THE CONTRIBUTION OF ` 2,20,000/- BY ICR M INDIA (P) LTD. HAS BEEN EXPLAINED AS UNDER :- WITH REGARD TO M/S ICRM INDIA (P) LTD., IT WAS OBS ERVED THAT ONE OF THE DIRECTORS WAS SHRI ATUAL PARVATIYAR WHO WAS ALS O A DIRECTOR IN THE ASSESSEE COMPANY. THEY WERE ASSESSED TO TAX IN WARD 11(3), NEW DELHI AND HAD THE PAN AS AAC18539F. M/S. ICRM H AS CONFIRMED THE INVESTMENT OF ` 220000/- AS SHARE APPLICATION M ONEY ON 03.10.2006 VIDE CHEQUE NO. 118814 DRAWN UPON ICICI BANK IN FAVOUR OF THE ASSESSEE. A COPY OF THE RETURN ACKNOW LEDGMENT FORM WAS ALSO ENCLOSED. THE QUESTION BEFORE US IS WHETHER THE IMPUGNED CON TRIBUTIONS HAVE BEEN SATISFACTORILY EXPLAINED BY THE ASSESSEE U/S 6 8 OR NOT ? 4.2 BEFORE PROCEEDING FURTHER WE REFER TO THE DECIS ION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NOVA PROMOTORS AN D FINLEASE (P) LTD. (2012) 342 ITR 169, RELIED UPON BY THE LD. SR. DR.. IN THAT CASE INFORMATION ABOUT ACCOMMODATION ENTRIES BY WAY OF C APITAL CONTRIBUTION WAS RECEIVED BY THE AO FROM THE INVESTIGATION WING. THE AO SOUGHT TO VERIFY THE CONTRIBUTION BY ISSUING SUMMONS TO THE A PPLICANTS. HOWEVER SUCH SUMMONS WERE NOT COMPLIED WITH. WHEN THE ASSES SEE WAS CONFRONTED WITH THESE FACTS, EVIDENCE WAS FILED BEL ATEDLY IN SUPPORT OF THE CONTRIBUTION. THE HONBLE COURT WHILE DISTINGUISHIN G THE FACTS FROM THE FACTS OF THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD ., (2008) 216 CTR 195 (SC), MENTIONED THAT THERE WERE CREDITS IN THE BOOK S OF THE ASSESSEE AND, THEREFORE, THE ONUS WAS ON THE ASSESSEE TO DISCHARG E, WHICH CONSISTS OF PROVING THE IDENTITY OF THE CONTRIBUTION, HIS CREDI TWORTHINESS AND GENUINENESS OF THE TRANSACTIONS. IN THIS CASE, THER E WAS A SPECIFIC INFORMATION THAT THE ENTRIES WERE IN THE NATURE OF ACCOMMODATION ENTRIES. ITA NO. 3702/DEL/11 6 THE CONTRIBUTORS DID NOT RESPOND TO THE SUMMONS ISS UED BY THE AO FOR VERIFICATION OF THE CONTRIBUTIONS. EVIDENCES WERE B ELATEDLY FILED TO THWART THE INQUIRY INTO TRUTHFULNESS OF THE CONTRIBUTIONS. IN SUCH CIRCUMSTANCES, IT WAS NOT FOR THE AO TO PROVE THAT THE MONEY FLOWED F ROM THE ASSESSEE IN THE FORM OF CONTRIBUTIONS IN THE NAME OF THIRD PART IES. IT WILL BE SEEN FROM THE ADDITIONS THAT THE FACTS ARE DISTINGUISHABLE IN AS MUCH AS THE CONTRIBUTIONS FLOWED FROM THE DIRECTORS OF THE ASSE SSEE COMPANY AND OTHER LTD. COMPANY IN WHICH THE SAME DIRECTOR IS AL SO A DIRECTOR. THUS, THE RATIO OF THIS CASE IS NOT APPLICABLE TO THE FACTS A T HAND. WITH THESE REMARKS, WE PROCEED TO DEAL WITH EACH CONTRIBUTION SEPARATELY. 4.3 THE FIRST CONTRIBUTION OF ` 1 LAC HAS BEEN STAT ED TO BE MADE BY INITIAL SUBSCRIBERS SHRI DEEPAK GOEL - ` 99,900/- AND MS. S UPARNA SCHAR ` 100/-. THESE SHARES WERE TRANSFERRED IN THE NAMES OF DR. A TUL PARVATIYAR AND MR. P.M. PARVATIYAR. CONFIRMATIONS FROM MR. DEEPAK GOEL AND DR. ATUL PARVATIYAR WERE STATED TO HAVE BEEN FURNISHED. THEI R ADDRESSES WERE ALSO FILED. FROM THE PAPER BOOK, WE FIND THAT SHRI P.M. PARVATIYAR HAS CONFIRMED THAT HE HOLDS 100 EQUITY SHARES OF 10 EAC H WITH AGGREGATE FACE VALUE OF ` 1000/- IN THE ASSESSMENT COMPANY. CONFI RMATION FROM DR. ATUAL PARVATIYAR ALSO STATES THAT HE HOLDS 9900 E QUITY SHARES OF 10 EACH WITH AGGREGATED FACE VALUE OF ` 99,000/- IN THE ASS ESSEE COMPANY. HOWEVER NO CONFIRMATION LETTER FROM SHRI DEEPAK GOE L AND M/S. SUPARNA SCHAR HAS BEEN PLACED IN THE PAPER BOOK. THE AO HAS NOT REFERRED TO ANY SUCH CONFIRMATION LETTERS. THE LD. CIT(A) HAS NOT MENTIONED ABOUT SUCH ITA NO. 3702/DEL/11 7 CONFIRMATIONS EITHER. IN SUCH CIRCUMSTANCES IT CAN ONLY BE INFERRED THAT THERE IS NO EVIDENCE ON RECORD REGARDING AFORESAID CAPITAL CONTRIBUTION OF ` 1 LACS. IN SUCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE AO RIGHTLY MADE THE ADDITION OF THIS AMOUNT. THUS THE DECISION OF LD. CIT(A) IS REVERSED ON THIS POINT AND THAT OF THE AO IS RESTOR ED. 4.4 THE SECOND AMOUNT OF USD 10,000/- EQUIVALENT TO ` 4,53,050/- IS SUPPORTED BY FIRC, PLACED IN THE PAPER BOOK ON PAG E NO. 5. IT IS SEEN THAT STATE BANK OF INDIA HAS CERTIFIED REMITTANCE OF USD 10,000/- ON 18.10.2006, EQUIVALENT TO INDIAN ` 4,53,050/- FAVOU RING THE ASSESSEE COMPANY, THE PURPOSE OF THE REMITTANCE IS STATED TO MEET EXPORT BILLS. HOWEVER THE DIRECTOR HAS CONFIRMED THAT THIS MONEY WAS MEANT TO BE CAPITAL CONTRIBUTION. WE ARE OF THE VIEW THAT THE PURPOSE MENTIONED IN FIRC DOES NOT MAKE ANY DIFFERENCE TO THE SITUATION AS THE MONEY HAS BEEN ACCOUNTED FOR IN THE BOOKS OF THE ASSESSEE COMPANY AS CAPITAL CONTRIBUTION. THE SAME HAS ALSO BEEN CONFIRMED BY T HE DIRECTOR. IT IS POSSIBLE THAT THE ASSESSEE COMPANY MIGHT HAVE UTILI ZED THIS MONEY FOR IMPORTING GOODS. IN ANY CASE THE CONTRIBUTION STAND S CONFIRMED AND, THEREFORE, WITHOUT GOING INTO DETAILS OF VARIOUS CA SES, THE ADDITION COULD NOT HAVE BEEN MADE BY LOOKING AT THE FACTS OF THE C ASE. THUS THIS ADDITION IS DELETED. 4.5 THE SECOND CONTRIBUTION OF USD 23,945 HAS ALSO BEEN CONFIRMED BY ITA NO. 3702/DEL/11 8 STATE BANK OF INDIA IN FIRC DATED 5.7.2007. THIS AM OUNT IS EQUIVALENT TO INDIAN ` 10,86,180/-. THE PURPOSE IS AGAIN STATED T O MEET EXPORT BILLS. THE FACTS ARE SIMILAR TO THE FACTS REGARDING THE FIRST REMITTANCE OF USD 10,000/- DISCUSSED IN PARA NO. 4.4 (SUPRA). THEREF ORE, RELYING ON THE DISCUSSION IN THAT PARAGRAPH IT IS HELD THAT THERE WAS NO JUSTIFICATION TO MAKE THIS ADDITION ALSO. 4.6 THE THIRD CONTRIBUTION OF US DOLLAR 31,1 02.71 IS STATED TO BE PAYMENT TO NAUTILUS INTERNATIONAL SA. IT IS FURTHER SUBMITTED THAT THE PAYMENT IS MADE ON BEHALF OF THE ASSESSEE COMPANY F OR PURCHASE OF GOODS, FOR WHICH CREDIT WAS GIVEN TO THE DIRECTOR I N THE CAPITAL ACCOUNT. THIS IS SUPPORTED BY THE TRANSFER MONEY MEMO PLACED ON PAGE NO. 7 OF THE PAPER BOOK, WHICH SHOWS THAT DR. ATUL PARVATIYA R TRANSFERRED A SUM OF USD 31,102.71 TO M/S. NAUTILUS INTERNATIONAL SA ON 27.9.2006. THIS MEMO DOES NOT CONTAIN ANY NARRATION TO COME TO A CONCLUS ION THAT THE TRANSFER WAS FOR THE PURPOSE OF GIVING CREDIT TO THE DIRECTO R IN THE CAPITAL ACCOUNT. THE DIRECTOR COULD HAVE MADE PAYMENT TO M/S. NAUTIL US INTERNATIONAL SA FOR ANY OTHER REASON ALSO. THE MONEY HAS NOT FLOWN DIRECTLY TO THE COFFERS OF THE ASSESSEE COMPANY. THUS, THE FACTS DO NOT EST ABLISH THAT THE PAYMENT WAS MADE ON BEHALF OF THE ASSESSEE COMPANY. IN THIS VIEW OF THE MATTER, WE THINK IT FIT TO RESTORE THE MATTER TO TH E FILE OF THE LD. CIT(A) TO ASCERTAIN WHETHER THE ASSESSEE COMPANY ACTUALLY REC EIVED ANY GOODS FROM M/S. NAUTILUS INTERNATIONAL SA OF THE VALUE OF USD 31,102.71.ONLY THEN IT CAN BE CONCLUDED THAT THE PAYMENT WAS MADE BY THE DIRECTOR ON ITA NO. 3702/DEL/11 9 BEHALF OF THE ASSESSEE COMPANY. NEEDLESS TO SAY THA T BOTH THE PARTIES WILL BE GIVEN ADEQUATE OPPORTUNITY OF BEING HEARD. 4.7 LASTLY THE CONTRIBUTION OF ` 2,20,000/- I S STATED TO HAVE BEEN RECEIVED FROM M/S. ICRM INDIA (P) LTD. DR. ATUL PAR VATIYAR IS ALSO A DIRECTOR IN THIS COMPANY. THE ADDRESS, PAN AND THE DESIGNATI ON OF THE AO HAVE BEEN PROVIDED. THE COMPANY HAS ALSO CONFIRMED THE C ONTRIBUTION, WHICH IS PAID BY CHEQUE NO. 118814 DRAWN ON ICICI BANK IN FA VOUR OF THE ASSESSEE. COPY OF THE ACKNOWLEDGEMENT OF THE RETURN OF INCOME HAS ALSO BEEN FILED. HAVING SEEN THESE FACTS, IT IS CLEAR THAT THE ASSES SEE HAS DISCHARGED THE INITIAL BURDEN CAST ON IT TO PROVE GENUINENESS OF T HE CONTRIBUTION. NO FURTHER ADVERSE MATERIAL HAS BEEN BROUGHT ON RECORD BY THE AO. IN THESE CIRCUMSTANCES, THE LD. CIT(A) RIGHTLY DELETED THIS ADDITION. 4.8 THE RESULT OF THE AFORESAID DISCUSSION IS THAT CONTRIBUTION OF ` 1 LACS IS HELD TO BE NOT PROVED AND THE MATTER REGARDING C ONTRIBUTION OF USD31,102.71 (` 14,23,570/-) IS RESTORED TO THE FIL E OF THE LD. CIT(A) FOR FRESH ADJUDICATION AFTER HEARING BOTH THE PARTIES. 5. IN THE RESULT, THE APPEAL IS TREATED AS PARTLY A LLOWED FOR STATISTICAL PURPOSE, AS DISCUSSED ABOVE. SD/- SD/- [U.B.S. BEDI] [K.G. BANSAL] JUDICIAL MEMBER ACCOUNTANT MEMBER VEENA ITA NO. 3702/DEL/11 10 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT