M/s Goli Finance Ltd., New Delhi V. DCIT, New Delhi

ITA 3789/DEL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6804 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 05-05-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 13-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VASANTHAN
• Keywords: Unexplained cash credit; Bogus Share capital; Accommodation entries
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C NEW DELHI) BEFORE SHRI I.C. SUDHIR AND SHRI PRASHANT MAHARISHI ITA NO. 3789 /DEL/201 3 ASSESSMENT YEAR: 200 6 - 0 7 M/S. GOLI FINANCE LTD., VS. DEPUTY CIT, WZ - 386, RAM CHOWK , COMPANY CIRCLE - 12(1), SADH NAGAR, PALAM COLONY, NEW DELHI. NEW DELHI - 1100 45 (PAN: A AACG1962A ) (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI P.C. YADAV , A DV. DEPARTM ENT BY: S HRI T . VASANTHAN , SR. DR DATE OF HEARING : 0 5 . 0 5 .201 6 DATE OF PRONOUNCEMENT: 2 6 : 0 7 .201 6 ORDER PER I.C. SUDHIR : JUDICIAL MEMBER THE ASSESSEE HAS IMPUGNED FIRST APPELLATE ORDER ON THE FOLLOWI NG GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(APPEALS) HAS PASSED THE ORDER ARBITRARILY AND WITHOUT LEAST VERIFICATION AND APPRECIATING OF FACTS. 2. THE APPELLANT PRAYS THAT THE ADDITION OF RS.16,11,500 MADE IN RESP ECT OF UNEXPLAINED CASH CREDIT UNDER SEC. 68 OF THE ACT BE DELETED. 2. HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY THE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIAL AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON. 2 3. THE FACTS IN BRI EF ARE THAT ASSESSEE A COMPANY IS ENGAGED IN THE BUSINESS OF LEASING, FINANCE AND HIRE PURCHASE. THE ASSESSEE BEING A NON - BANKING FINANCE COMPANY IS BOUND TO FOLLOW MANDATORY GUIDELINES ISSUED BY RBI REGARDING THE CLASSIFICATION OF ASSETS, RECOGNITION OF I NCOME AND NORMS FOR MAKING PROVISIONS. THE ASSESSEE CONTENDED THAT AS PER GUIDELINES ISSUED BY RBI, INCOME PERTAINING TO NON - PERFORMING ASSETS SHOULD NOT BE CONSIDERED AS INCOME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER RAISED QUE RY ABOUT THE RECEIPT OF SHARE APPLICATION MONEY FROM THE SUBSCRIBERS. IN COMPLIANCE OF DIRECTIONS BY THE ASSESSING OFFICER, THE ASSESSEE PRODUCED SOME SHARE APPLICANTS WHO ACCEPTED THE ADVANCEMENT OF MONEY . THE ASSESSING OFFICER WAS, HOWEVER, NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND MADE THE ADDITION OF RS.16,11,500 UNDER SEC. 68 OF THE ACT ON ACCOUNT OF UNEXPLAINED CASH CREDITS. LEARNED CIT(APPEALS) HAS UPHELD THE SAME. 4. IN SUPPORT OF THE GROUND, THE LEARNED AR SUBMITTED THAT THE ASSESSE E COMPANY IS DULY REGISTERED WITH RESERVE BANK OF INDIA AS A NON - BANKING FINANCIAL COMPANY AND IS AUTHORIZED TO ACCEPT CASH FROM PUBLIC AT LARGE. THE TRANSACTION IN QUESTION IS PURE AND SIMPLE CASE OF RECEIPT OF SHARE APPLICATION MONEY DURING THE NORMAL CO URSE OF BUSINESS. THERE IS NO MATERIAL ON RECORD 3 EVEN TO ASSUME THAT ANY DUBIOUS METHOD ARE APPLIED FOR INJECTING UNACCOUNTED MONEY IN THE FORM OF THE SHARE CAPITAL IN THE COMPANY. IT IS NOT THE CASE OF THE AUTHORITIES BELOW THAT ASSESSEE HAS RECEIVED BOGU S ACCOMMODATION ENTRIES IN THE GARB OF SHARE APPLICATION MONEY. THE LEARNED AR SUBMITTED THAT THE ASSESSEE HAD RECEIVED AN AMOUNT OF RS.30,03,500 FROM THE SHARE APPLICANT S TOWARDS SHARE APPLICATION MONEY O UT OF WHICH AN AMOUNT OF RS.8,27,500 WAS RECEIVED I N CASH AND REST OF THE AMOUNT OF RS.21,76,000 WAS RECEIVED VIA BANKING CHANNEL. OUT OF THE AMOUNT OF RS.21,76,000, THE ASSESSING OFFICER DOUBTED THE CREDIT OF RS.7,84,000 AND ADDED THE SAME UNDER SEC. 68 ON THE GROUND THAT BEFORE THE ISSUANCE OF CHEQUE FRO M THESE ACCOUNTS, CASH WAS DEPOSITED IN THESE ACCOUNTS. THE LEARNED AR SUBMITTED THAT AGAINST THE RECEIPT OF SHARE APPLICATION MONEY IN CASH, THE ASSESSEE HAD FILED AFFIDAVITS AND FAN OF THE PARTIES, DETAILS OF WHICH HAVE BEEN MADE AVAILABLE AT PAGE NO. 57 OF THE PAPER BOOK. ALL THE PERSONS WHO HAD APPLIED IN CASH HAD CONFIRMED IN THEIR AFFIDAVITS THAT THEY HAD RECEIVED THE MONEY BACK FROM THE ASSESSEE UPON CANCELLATION OF THEIR APPLICATIONS FOR ALLOTMENT OF SHARES. THE MONEY RECEIVED WAS THUS REFUNDED TO T HEM IN THE NEXT FINANCIAL YEAR AND THE DATE OF REFUNDING OF MONEY HAS BEEN MENTIONED AT PAGE NO. 57 OF THE PAPER BOOK. HE POINTED OUT THAT THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ON 16.11.2007 AND THE ASSESSEE 4 HAD REFUNDED THE ENTIRE SHARE APPL ICATION MONEY BEFORE THIS DATE. HE SUBMITTED THAT THOUGH THE ASSESSEE HAD REFUNDED THE MONEY IN NEXT FINANCIAL YEAR YET THE MONEY WAS REFUNDED BEFORE THE COMMENCEMENT OF ASSESSMENT PROCEEDINGS OF THE IMPUGNED YEAR. HE SUBMITTED THAT THE ASSESSING OFFICER H AD NOT BROUGHT ANY MATERIAL ON RECORD TO ESTABLISH THAT THE DOCUMENTARY EVIDENCES SUBMITTED BY THE ASSESSEE VIS - - VIS REFUND OF SHARE APPLICATION MONEY ARE FALSE. THE ASSESSING OFFICER VERY CONVENIENTLY IGNORED THE AFFIDAVITS OF THE PARTIES AND ALSO THEIR STATEMENTS WHILE MAKING THE ADDITION EVEN IN THE NEXT ASSESSMENT YEAR NO ADVERSE INFERENCE VIS - - VIS REPAYMENT OF THE MONEY TO THE SHARE APPLICANTS HAS BEEN MADE BY THE ASSESSING OFFICER. 4.1 SO FAR AS SECOND CATEGORY OF PERSONS WHO HAD PAID THE AMOUNT B Y CHEQUE AGAINST THE SHARE APPLICATION MONEY, ARE CONCERNED, THEIR DETAILS HAVE BEEN MADE AVAILABLE AS PAGE NO. 20 OF THE PAPER BOOK. IN SUPPORT OF PAYMENT MADE BY THESE PERSONS, THE ASSESSEE HAD FURNISHED AFFIDAVITS OF THOSE PARTIES, THEIR INCOME - TAX RETU RNS AND BANK STATEMENTS. THE ASSESSEE HAD ALSO ALLOTTED SHARES TO THESE PERSONS AND THEY WERE THE OWNERS OF THE SHARES. THE AUTHORITIES BELOW HAVE DENIED THE CLAIM OF THE ASSESSEE REGARDING THESE SHARE APPLICANTS ON THE BASIS THAT THE CASH WAS DEPOSITED IN THEIR RESPECTIVE ACCOUNTS IMMEDIATELY BEFORE THE RECEIPTS OF SHARE APPLICATION MONEY. 5 LEARNED AR IN THIS REGARD PLACED RELIANCE ON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF CIT VS. KAMDHENU STEELS & ALLOYS LTD. (2014) 361 ITR 220 (DEL.) TO SUPPORT HIS CONTENTION THAT MERE SUSPICION CANNOT BE A BASIS TO MAKE ADDITION OF SHARE APPLICATION MONEY AND IN SUCH CASES THE ASSESSING OFFICER OUGHT TO HAVE EXAMINED THE SOURCE IN THE ASSESSMENT OF RESPECTIVE SHARE SUBSCRIBERS AND NOT I N THE CASE OF A COMPANY. HE ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS: I) CIT VS. VIRANDVAN FARMS (P) LTD. ITA NO. 71/2015 AND ORS. ORDER DATED 12.8.2015 (DEL.); II) CIT VS. RAKAM MONEY MATTERS PVT. LTD. ITA NO. 7778/2015 (DELHI) ORDER DAT ED 13.10.2015; III) CIT VS. SHIV DHOOTI PEARLS & INVESTMENT LTD. ITA NO. 429/2003 ORDER DATED 21.12.2015 (DELHI HIGH COURT) IV) OSWAL PUMPS PVT. LTD.. VS. ITO ITA NO.1480/DEL/2013 (A.Y. 2004 - 05) ORDER DATED 31.3.2015; 4. 2 THE LEARNED SENIOR DR O N THE OTHER HAND PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT THE SHARE APPLICATION MONEY HAS BEEN DELIBERATELY HAS BEEN KEPT BELOW RS20,000 PER SHARE APPLICANT. HE SUBMITTED THAT IT DOES NOT MATTER THAT THE MONEY WAS LATER ON RETURNED WELL BEFORE ISSUANCE OF NOTICE UNDER SEC. 143(2) OF THE ACT BY THE SHARE APPLICANT. THE ASSESSEE WAS ASKED BY THE ASSESSING OFFICER TO PRODUCE SHARE APPLICANT TO PROVE THEIR CREDITWORTHINESS. HE SUBMITTED THAT THE CASE 6 LAWS RELIED UPON BY THE LEAR NED AR HAVING DISTINGUISHABLE FACTS ARE NOT HELPFUL TO THE ASSESSEE. THE LEARNED SENIOR DR CONTENDED THAT MOST OF SHARE APPLICANTS ARE NOT ASSESSED TO TAX AND THEY ARE HAVING MEAGER INCOME. HE SUBMITTED THAT OUT OF 19 SHARE APPLICANTS, ONLY IN SEVEN CASES, INCOME - TAX RETURNS WERE GIVEN. HE SUBMITTED FURTHER THAT IDENTICAL AMOUNT WAS DEPOSITED IN THE ACCOUNTS OF SHARE APPLICATION BEFORE ISSUANCE OF CHEQUES BY THEM TO THE ASSESSEE. HE PLACED RELIANCE ON THE FOLLOWING DECISIONS: I) CIT V. P. MOHANAKALA [2007 ] - 291 ITR 278 (SC) ; II) CIT VS. NAVODAYA CASTLES PVT. LTD. ; 367 ITR 306 - (DEL.) ; & III) CIT VS. EMPIRE BUILDTECH P. LTD. (2014) - 366 ITR 110 (DEL.). 4. 3 HE FURTHER SUBMITTED THAT THE ITAT BEING A LAST FACTS FINDING AUTHORITY CAN ALWAYS REFER THE M ATTER TO THE ASSESSING OFFICER TO CONDUCT FURTHER INQUIRY IF IT IS SO REQUIRED. 5. HAVING GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW, MATERIAL AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON, WE ARE OF THE VIEW THAT PRIMARY ONUS ALWAYS LIE UPON THE ASSESSEE TO ESTABLISH GENUINENESS OF ITS CLAIM. IT CAN BE DISCHARGED BY FURNISHING NECESSARY INFORMATION SUPPORTED WITH EVIDENCE ABOUT THE CLAIM I.E. SHARE APPLICANTS IN THE PRESENT CASE. IN THE 7 PRESENT CASE, THE ASSESSEE HAD FURNISHED DETAILS OF THE SHARE APPLICANTS SUPPORTED WITH SOME EVIDENCE . THE S E ARE TWO CA T EGORIES OF THE SHARE APPLICANTS IN THE PRESENT CASE. THE FIRST CATEGORY WAS OF THOSE SHARE APPLICANTS WHO HAD PAID SHARE APPLICATION MONEY IN CASH AND THE SECOND CATEGORY OF THE SHARE APPLICA NTS WAS THOSE PAID SHARE APPLICANT MONEY THROUGH CHEQUE. IN THE FIRST CATEGORY OF SHARE APPLICATION, THE ASSESSEE HAD FURNISHED THEIR DETAILS AND CONFIRMATIONS BY THEIR AFFIDAVIT AND IN CASE OF SOME PARTIES THEIR PANS WERE ALSO FURNISHED. BESIDES, IT WAS A LSO EXPLAINED THAT THEY HAD RECEIVED THEIR MONEY BACK FROM THE ASSESSEE UPON CANCELATION OF THEIR APPLICATION FOR ALLOTMENT OF SHARES. THIS REFUND OF MONEY TO THEM WAS MADE IN THE NEXT FINANCIAL YEAR AND THE SAME HAS BEEN ACCEPTED BY THE ASSESSING OFFICER IN THE ASSESSMENT OF THE NEXT YEAR. IT IS ALSO AN IMPORTANT ASPECT OF THIS CATEGORY OF SHARE APPLICANTS THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THEY HAD APPEARED BEFORE THE ASSESSING OFFICER AND HAD CONFIRMED OF PAYING AND RECEIVING BACK THEIR RE SPECTIVE SHARE APPLICATION MONEY FROM THE ASSESSEE. WE ARE THUS OF THE VIEW THAT THE ASSESSEE HAD DISCHARGED ITS PRIMARY ONUS TO ESTABLISH GENUINENESS OF THIS CATEGORY OF THE SHARE APPLICANTS. THEREAFTER, THE ONUS WAS SHIFTED UPON THE ASSESSING OFFICER TO DISLODGE THE CLAIM OF THE ASSESSEE BY DISPROVING THOSE EVIDENCES AND SUBMISSIONS MADE BY THE ASSESSEE DISCUSSED ABOVE. IN 8 ABSENCE OF CONDUCTING SUCH EXERCISE BY THE ASSESSING OFFICER, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION OF RS.8,2 7,500 RECEIVED IN CASH. THE ASSESSING OFFICER IS THUS DIRECTED TO DELETE THIS ADDITION MADE UNDER SEC. 68 OF THE ACT. 5.1 THE SECOND CATEGORY OF THE SAID SHARE APPLICANTS ARE THOSE WHO HAD PAID THE SHARE APPLICATION MONEY THROUGH CHEQUES. THEIR DETAILS W ERE ALSO FURNISHED BY THE ASSESSEE TO THE ASSESSING OFFICER SUPPORTED WITH THEIR AFFIDAVITS, INCOME - TAX RETURNS AND BANK STATEMENTS. BESIDES, IT WAS ALSO SUBMITTED THAT ASSESSEE HAD ALLOTTED SHARES TO THESE APPLICANTS. THUS, WE FIND THAT THE ASSESSEE HAD D ISCHARGED ITS PRIMARY ONUS BY FURNISHING THE ABOVE EVIDENCES AND SUBMISSIONS THAT SHARES WERE ALLOTTED BY THE ASSESSEE TO THEM. THE ONUS THEREAFTER WAS SHIFTED UPON THE ASSESSING OFFICER TO REBUT THOSE EVIDENCES AND SUBMISSIONS OF THE ASSESSEE TO JUSTIFY T HE ADDITION OF RS.7,84,000 MADE BY THE ASSESSING OFFICER ON THIS ACCOUNT . M ERELY ON THE BASIS THAT CASH WAS DEPOSITED IN THEIR ACCOUNT IMMEDIATELY BEFORE ISSUANCE OF SHARE APPLICATION MONEY BY THEM FROM THEIR RESPECTIVE BANK ACCOUNT A N ADDITION UNDER SECTI ON 68 OF THE ACT CANNOT BE MADE ON THE BASIS OF MERE SUSPICION THAT IT WAS THE UNACCOUNTED MONEY OF THE ASSESSEE WHICH WAS DEPOSITED IN THE BANK ACCOUNT OF THOSE SHARE APPLICANTS WHICH WAS ISSUED BY 9 THEM THROUGH CHEQUE S TO THE ASSESSEE. THE ASSESSING OFFIC ER OUGHT TO HAVE EXAMINED THE SOURCE OF MONEY OF THOSE SHARES SUBSCRIBERS. WE THUS FIND THAT THE ASSESSING OFFICER IN THIS REGARD ALSO HAS FAILED TO DISCHARGE HIS ONUS TO JUSTIFY THE ABOVE ADDITION OF SHARE APPLICATION MONEY PAID THROUGH CHEQUES. THE ASSES SING OFFICER IS THUS DIRECTED TO DELETE THE ADDITION OF RS.7,84,000. IN TOTAL, THE ADDITION OF RS.16,11,500 (RS.8,27,500 + RS.7,84,000) IS DIRECTED TO BE DELETED. THE GROUND IS ACCORDINGLY ALLOWED. 6. IN RESULT, THE APPEAL IS ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON 26 . 0 7 . 201 6 S D/ - SD/ - ( P RASHANT MAHARISHI ) ( I.C. S UDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 26 / 0 7 /201 6 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR 10 DATE DRAFT DICTATED DIRECTLY ON COMPUTER 2 6 . 0 7 .201 6 DRAFT PLACED BEFORE AUTHOR 26 . 0 7 .2016 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSS ED/APPROVED BY SECOND MEMBER. 26 .07 .2016 APPROVED DRAFT COMES TO THE SR.PS/PS 26 . 0 7 .2016 KEPT FOR PRONOUNCEMENT ON 26 .0 7 .2016 FILE SENT TO THE BENCH CLERK 26 . 0 7 .2016 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.