ITO, New Delhi V. M/s. Growth Engine (P) Ltd, New Delhi

ITA 3760/DEL/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5674 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-02-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 04-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Keywords: Unexplained cash credit; Income from undisclosed sources
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH : C NEW DELHI) BEFORE SHRI D.R. SINGH, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER I.T.A. NO.3760/DEL./2009 (ASSESSMENT YEAR : 2005-06) ITO, WARD 12(2), VS. M/S GROWTH ENGINE (P) LTD., NEW DELHI. E-61, 1 ST FLOOR KIRTI NAGAR, NEW DELHI. (PAN AABCG7725N) (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : MS. MONA MOHANTY, SR.DR ORDER PER K.D. RANJAN, AM THIS APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 200 5-06 ARISES OUT OF ORDER OF THE LD. COMMISSIONER OF INCOME-TAX(APPEALS)-XV, NEW DELHI. 2. THE ONLY ISSUE FOR CONSIDERATION RELATES TO DELE TING THE ADDITION OF RS.10 LAKH ON ACCOUNT OF SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE FORM M/S CLS CONSTRUCTION PVT. LTD. AS UNEXPLAINED CASH CREDIT DURING THE YEA R. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT RETURN OF INCOME FILED ON 17.8.2005 WAS PR OCESSED U/S 143(1) AND THEREAFTER NOTICE U/S 143(2) DATED 30.10.2006 WAS ISSUED. FRO M THE ASSESSMENT ORDER, IT IS SEEN THAT THE AO RECEIVED INFORMATION FROM DIT(INV.), UNIT 1, NEW DELHI THAT M/S CLS CONSTRUCTION PVT. LTD. WAS AN ENTRY OPERATOR AND TH E ASSESSEE WAS A BENEFICIARY. ACCORDINGLY, THE ASSESSEE WAS ASKED TO EXPLAIN AS T O HOW THE AMOUNT OF RS10 LAKH SHOULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE U/S 68 O F THE ACT. THE ASSESSEE FILED AFFIDAVIT FORM SHRI VIJAY KUMAR, DIRECTOR OF M/S CLS CONSTRUC TION PVT. LTD., CONFIRMING THE AMOUNT GIVEN BY IT TO THE ASSESSEE. HOWEVER, THE A O WAS NOT CONVINCED WITH THE REPLY FILED BY THE DIRECTOR OF M/S CLS CONSTRUCTION PVT. LTD. ON THE GROUND THAT ASSESSEE HAD NOT FURNISHED ANY DOCUMENTARY EVIDENCE TO SUPPORT T HE SOURCE OF AMOUNT GIVEN BY M/S ITA NO.3760/DEL./2009 (A.Y. : 2005-06) 2 CLS CONSTRUCTION PVT. LTD. HE ACCORDINGLY RELYING ON VARIOUS DECISIONS ADDED THE AMOUNT U/S 68 OF THE ACT. 3. ON APPEAL, IT WAS SUBMITTED THAT THE ASSESSEE HA D RECEIVED RS.10 LAKH THROUGH CHEQUE ISSUED BY M/S CLS CONSTRUCTION PVT. LTD. TOW ARDS ALLOTMENT OF SHARE OF THE ASSESSEE COMPANY. THE CONFIRMED COPY OF ACCOUNT AN D COPY OF INCOME-TAX RETURN OF M/S CLS CONSTRUCTION PVT. LTD. WERE FILED BEFORE THE AO . M/S CLS CONSTRUCTION PVT. LTD. HAD CONFIRMED ITS INVESTMENT WITH THE ASSESSEE. HE NCE, IT WAS PLEADED THAT ASSESSEE HAD DULY DISCHARGED THE ONUS OF ESTABLISHING THE IDENTI TY OF THE APPLICANT. THEREFORE, IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF CIT VS. LOVELY EXPORTS PVT. LTD., 216 CTR 195 AND CIT VS. DIVINE LASING FINANCE LTD., 299 ITR 268 (DEL.), IT HAS BEEN CONTENDED THAT THE AO COULD NOT HAVE HELD THE AMOUNT OF SHARE APPLICATION MONEY AS ASSESSEES UNDISCLOSED INCOME U/S 68 OF THE ACT. 4. THE CIT(A) EXAMINED THE CONTENTION OF THE ASSESS EE AND ALSO GONE THOUGH THE EVIDENCE FILED BEFORE HIM. HE NOTED THAT AS PER TH E BANK STATEMENT OF M/S CLS CONSTRUCTION PVT. LTD. WITH CORPORATION BANK, KAROL BAGH, NEW DELHI, AN AMOUNT OF RS.5 LAKH EACH WAS REMITTED ON 28.8.2004 AND 6.12.2 004. IN THE RETURN OF ALLOTMENT OF SHARES SUBMITTED TO ROC, THE ASSESSEE HAD DISCLOSED ALLOTMENT OF SHARES TO M/S CLS CONSTRUCTION PVT. LTD. ON 15.1.2005. THE CIT(A) FU RTHER NOTED THAT THE AO HAD MADE THE ADDITION MERELY ON THE BASIS OF INFORMATION RECEIVE D FROM DIT(INV.). HE ALSO NOTED THAT FORM THE LETTER OF ASSESSEE DATED 18.12.2007, IT WA S ESTABLISHED THAT THE SPECIFIC INFORMATION, SUPPORTING THE RECORDS AND THE DOCUMEN TS ON THE BASIS OF WHICH PRIME FACIE VIEW WAS TAKEN BY THE DIT(INV.) TO LABEL THE REMITT ANCE FORM M/S CLS CONSTRUCTION PVT. LTD., AS ACCOMMODATION ENTRY WERE NOT PROVIDED TO T HE ASSESSEE IN SPITE OF SPECIFIC REQUEST MADE TO THAT EFFECT. SINCE THE CHARGE OF R ECEIVING ITS UNACCOUNTED INCOME BY SHARE APPLICATION MONEY NOT HAVING BEEN SUBSTANTIAT ED IN ANY MANNER EITHER THROUGH DOCUMENT OR BY THE STATEMENTS, THE CIT(A) CAME TO T HE CONCLUSION THAT THE ADDITION U/S 68 OF THE ACT WAS NOT WARRANTED MERELY ON THE RECEI PT OF INFORMATION FORM DIT(INV.) WITHOUT PUTTING ACROSS TO THE ASSESSEE THE DOCUMENT S, REPORT AND RECORDS WHICH WOULD SUBSTANTIATE THE IMPUTATION OF THE CHARGE. THE CIT (A) ALSO NOTED THAT SHRI VIJAY KUMAR, DIRECTOR OF M/S CLS CONSTRUCTION PVT. LTD. HAS CON FIRMED TO HAVE INVESTED A SUM OR ITA NO.3760/DEL./2009 (A.Y. : 2005-06) 3 RS.10 LAKH VIDE CHEQUE NO.373953 DATED 28.2.2004 AN D CHEQUE NO.373958 DATED 6.10.2004 FOR PURCHASE OF SHARES. M/S CLS CONSTRUC TION PVT. LTD. IS ALSO ASSESSED TO TAX WITH WARD (3(2), NEW DELHI. HE ACCORDINGLY CAME TO THE CONCLUSION THAT THE CONTENTS OF THE AFFIDAVIT WERE IN CONSONANCE WITH THE FACTS OF THE RECORD AS REGARDS INVESTMENT BY M/S CLS CONSTRUCTION PVT. LTD. WITH THE ASSESSEE. HE, THEREFORE, DELETED THE ADDITION RELYING ON SEVERAL DECISION INCLUDING THE DECISION IN THE C ASE OF THE HONBLE SUPREME COURT IN THE CASE OF M/S LOVELY EXPORTS (SUPRA). 5. BEFORE US, NONE APPEARED ON BEHALF OF THE ASSESS EE. HAVING REGARDING THE ISSUE INVOLVED, WE DECIDE THE ISSUE ON MERITS AFTER HEARI NG THE LD.SR.DR. 6. WE HAVE HEARD LD.SR.DR. IT HAS BEEN SUBMITTED T HAT ADDITION HAS BEEN MADE ON THE BASIS OF INFORMATION RECEIVED FROM DIT(INV.) TH AT M/S CLS CONSTRUCTION PVT. LTD. WAS AN ENTRY PROVIDER AND THE ASSESSEE WAS ONLY A B ENEFICIARY. FROM THE FACTS STATED ABOVE, IT IS CLEAR THAT THE AO HAD NOT BROUGHT ANY MATERIAL ON RECORD TO REVERT THE CONTENTION OF THE ASSESSEE THAT AMOUNT OF RS.10 LAK H DEPOSITED WITH THE COMPANY TOWARDS SHARE APPLICATION MONEY HAD COME FROM THE COFFERS O F THE ASSESSEE. THE AO HAS NOT AT ALL ESTABLISHED THE NEXUS BETWEEN THE INFORMATION R ECEIVED AND INVESTMENT MADE IN ASSESSEE COMPANY. NO OTHER MATERIAL HAS BEEN BROUG HT ON RECORD TO PROVE THAT MONEY HAD FLOWN FORM THE ASSESSEE COMPANY TO M/S CLS CONS TRUCTION PVT. LTD. AND THEN TO ASSESSEE COMPANY IN FORM OF SHARE APPLICATION MONEY . MOREOVER, THE ASSESSEE HAD NOT BEEN GIVEN ANY OPPORTUNITY WITH REFERENCE TO THE DO CUMENTS IN POSSESSION OF THE DEPARTMENT INDICATING THAT THE AMOUNT OF RS.10 LAK H REPRESENTS THE UNDISCLOSED INCOME OF THE ASSESSEE. IN FACT, NO NEXUS HAS BEEN PROVED BETWEEN THE INFORMATION RECEIVED AND THE INVESTMENT IN SHARE APPLICATION MONEY. RATHER, M/S CLS CONSTRUCTION PVT. LTD. IN THE AFFIDAVIT HAVE ADMITTED TO HAVE INVESTED IN SHA RES OF THE ASSESSEE COMPANY. UNDER THESE CIRCUMSTANCES, IN VIEW OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF M/S LOVELY EXPORTS (SUPRA), ADDITION CANNOT BE MADE IN THE HANDS OF THE ASSESSEE WHEN THE INVESTOR HAS HIMSELF ADMITTED TO HAVE MADE INVESTME NT IN THE SHARES OF THE ASSESSEE COMPANY. THE AO, IF WAS NOT SATISFIED THAT THE SO URCE OF INVESTMENT WAS NOT EXPLAINED BY M/S CLS CONSTRUCTION PVT. LTD., HE COULD HAVE IN ITIATED ACTION IN THE HANDS OF THE M/S ITA NO.3760/DEL./2009 (A.Y. : 2005-06) 4 CLS CONSTRUCTION PVT. LTD. AND NOT IN THE CASE OF T HE ASSESSEE. IN VIEW OF ABOVE DISCUSSION, IN OUR CONSIDERED OPINION, THE CIT(A) W AS JUSTIFIED IN DELETING THE ADDITION. HENCE, NO INTERFERENCE IS CALLED FOR. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. 9. ORDER PRONOUNCED IN OPEN COURT ON CONCLUSION OF HEARING ON 11.02.2010. SD/- SD/- (D.R. SINGH) (K.D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: FEB. 11, 2010. *SKB* COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A)-XV, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. AR/ITAT