ACIT, Meerut V. M/s. Avnit Hire Purchase General Finance (P) Ltd, Meerut

ITA 3900/DEL/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52955 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 16-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS ANUSHA KHURANA
• Assessee Lawyers: O P SAPRA
• Keywords: Gift
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A DELHI BEFORE SHRI I.P. BANSAL AND SHRI K.G. BANSAL ITA NO. 3900(DEL)/2009 ASSESSMENT YEAR: 2006-07 ASSISTANT COMMISSIONER OF M/S AVNIT HIRE PURCHASE & INCOME-TAX, CIRCLE 2, MEERUT. VS. GENERA L FINANCE (P) LTD., 15, SHASTRI CHOWK, BEGUM PUL, MEERUT. PAN: AABCA1787G (APPELLANT) (RESPON DENT) APPELLANT BY : MRS. ANUSHA KHURANA, SR. D R RESPONDENT BY: SHR I O.P. SAPRA, ADVOCATE DATE OF HEARING : 19.09.2011 DATE OF PRONOUNCEMENT: 30.09.2011. ORDER PER K.G. BANSAL : AM IN THIS APPEAL, THE REVENUE HAS TAKEN UP TWO S UBSTANTIVE GROUNDS REGARDING THE DELETION OF ADDITION OF TWO SUMS OF RS. 36,21,000/- AND RS. 2,25,000/-, MADE BY THE AO IN RESPECT OF SHARE AP PLICATION MONEY AND CASH CREDITS RESPECTIVELY. 2. BRIEFLY, THE BACKGROUND FACTS ARE THAT THE A SSESSEE-COMPANY FILED ITS RETURN ON 29.11.2006 DECLARING LOSS OF RS. 2, 27,158/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961 (THE ACT FOR SHORT) AND THEREAFTER IT WAS PICKED UP FOR SCRUTINY BY ISS UING NOTICE U/S 143(2) ON ITA NO. 3900(DEL)/2009 2 12.10.2007. AFTER HEARING THE CASE, THE AO MADE TWO ADDITIONS, MENTIONED ABOVE, AND COMPUTED THE INCOME OF THIS YE AR AT RS. 40,85,605/-. AFTER ALLOWING THE CLAIM OF UNABSORBED DEPRECIA TION AND BROUGHT FORWARD LOSS OF RS. 4,30,413/-, THE TOTAL INCOME WAS COMP UTED AT RS. 36,55,192/-. 3. IN REGARD TO THE ADDITION ON ACCOUNT OF SHARE APPLICATION MONEY, IT IS MENTIONED THAT TWO SUMS OF RS. 36,01,000/- AND RS. 20,000/- WERE RECEIVED FROM SHRI SURJEET SINGH GOLDY AND M/S JAI BHAWANI POLYMERS RESPECTIVELY. IT WAS SUBMITTED THAT IN THE YEAR UNDER CONSID ERATION, THE ASSESSEE RECEIVED A SUM OF RS. 39.71 LAKH AS SHARE APPLIC ATION MONEY FROM FOUR PERSONS, OUT OF WHICH A SUM OF RS. 36.01 LAKH WAS RECEIVED FROM SHRI SURJEET SINGH GOLDY, MANAGING DIRECTOR. HIS RESI DENTIAL AND BUSINESS PREMISES WERE SEARCHED ON 23.12.2002. THEREAFTE R, HE DECLARED A SUM OF RS. 63.56 LAKH AS UNDISCLOSED INCOME WHICH WAS A SSESSED BY HIS ASSESSING OFFICER. THE SHARE APPLICATION MONEY W AS DEPOSITED OUT OF THIS AMOUNT. THE AO FURTHER MADE ENQUIRY ABOUT HIS WEA LTH-TAX ASSESSMENT TO SHOW THAT HE HAD THIS CASH AVAILABLE IN HAND. NO COMPLIANCE WAS MADE IN RESPECT OF THIS QUERY. AFTER CONSIDERING VARIOUS FACTS, THE AO MADE ADDITION OF RS. 36,21,000/- BY INVOKING THE PROVIS ION CONTAINED IN SECTION 68 OF THE ACT. ITA NO. 3900(DEL)/2009 3 3.1 BEFORE THE FIRST APPELLATE AUTHORITY, IT WA S SUBMITTED THAT BOTH THE CONTRIBUTORS HAVE CONFIRMED THE CONTRIBUTIONS. B OTH ARE ASSESSED TO TAX, THEREFORE, THEIR EXISTENCE IS NOT IN DOUBT. THE MANAGING DIRECTOR HAS BEEN ASSESSED AT UNDISCLOSED INCOME OF RS. 81,74,500/- IN THE ASSESSMENT OF THE BLOCK PERIOD. IN THIS ASSESSMENT, AN ADDITION O F RS. 58.00 LAKH WAS MADE BY THE AO. THIS SHOWS THAT HE IS A MAN OF MEAN S. A SUM OF RS. 20,000/- WAS ALSO RECEIVED FROM M/S JAI BHAWANI POLYMERS, WHOSE PROPRIETOR IS ASSESSED TO TAX. CONFIRMATION CERTIFICATE FROM BOTH THE PARTIES ARE ENCLOSED FOR PERUSAL. IN VIEW OF THESE FACTS, IT WAS ARGUED THAT NO ADDITION COULD HAVE BEEN MADE TO THE INCOME OF THE ASSESSEE. THE LD. CIT(APPEALS) CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE HIM. IT HAS BEEN HELD THAT ONCE THE IDENTIT Y OF THE CONTRIBUTOR HAS BEEN ESTABLISHED, NO ADDITION CAN BE MADE IN TH E HANDS OF THE COMPANY IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD., 216 CTR 195. ACCORDINGL Y, THE ADDITION HAS BEEN DELETED. 3.2 BEFORE US, THE LD. COUNSEL REFERRED TO THE F ACTS REGARDING SEARCH AND SURRENDER IN THE CASE OF SURJEET SINGH GOLDY. IT IS EMPHASIZED THAT NOT ITA NO. 3900(DEL)/2009 4 ONLY HE IS AN IDENTIFIED PERSON AND MANAGING DIRE CTOR OF THE COMPANY, THE CONTRIBUTION MADE TO THE COMPANY HAS BEEN ASSESSED AS INCOME IN HIS HAND. CONFIRMATION HAS ALSO BEEN FILED FROM M/S JAI BHA WANI POLYMERS. THEREFORE, THIS PERSON IS ALSO AN IDENTIFIED PERS ON. ON THESE FACTS, NO ADDITION CAN BE MADE IN THE CASE OF THE ASSESSEE . IN REPLY, THE LD. DR RELIED ON THE ORDER OF THE AO. 3.3 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE FACTS ARE THAT THE ASSESSEE-COMP ANY INTER-ALIA RECEIVED CAPITAL CONTRIBUTION FROM SURJEET SINGH GOLDY AND M/S JAI BHAWANI POLYMERS. THE FIRST NAMED PERSON IS MANAGING DIRE CTOR OF THE COMPANY, WHO WAS SEARCHED BY THE INCOME-TAX DEPARTMENT. C ONSEQUENTLY, HE OFFERED A SUM OF RS. 63.56 LAKH AS UNDISCLOSED INCOME OF THE BLOCK PERIOD. HE WAS ASSESSED AT RS. 81,74,500/- BY THE SAME ASSESSING OFFICER AS THE COMPANY AND THE MANAGING DIRECTOR FALL UNDER ONE ASSESSING OFFICER. SIMILARLY, IN THE CASE OF M/S JAI BHAWANI POLYME RS, A SUM OF RS. 20,000/- WAS RECEIVED. THIS PERSON IS ALSO ASSESSED TO T AX AND CONFIRMATION HAS BEEN FILED. IN THE CASE OF LOVELY EXPORTS (P) L TD. (SUPRA), IT HAS BEEN HELD THAT ONCE A CONTRIBUTOR HAS BEEN IDENTIFIED, NO ADDITION CAN BE MADE IN THE CASE OF THE COMPANY RECEIVING SHARE APPLICATION MONEY AND IF THE ITA NO. 3900(DEL)/2009 5 CONTRIBUTION IS FOUND TO BE BOGUS, THE SAME CANE BE ASSESSED IN THE HANDS OF THE CONTRIBUTOR. THIS IS NOT THE OBITER DICT A OF THE DECISION AS ALLEGED IN GROUND NO. 3 BUT IT IS THE RATIO OF THE DEC ISION. THE REVENUE HAS ALREADY ASSESSED THIS AMOUNT IN THE HANDS OF THE MANAGING D IRECTOR. THEREFORE, CONTRIBUTION FROM HIM IS NOT ASSESSABLE IN THE HAN DS OF THE ASSESSEE- COMPANY. FURTHER, M/S JAI BHAWANI POLYMERS HAS BE EN IDENTIFIED AS CONFIRMATION HAS BEEN FILED SHOWING HIS PAN. TH EREFORE, IN THE LIGHT OF AFORESAID DECISION, THIS AMOUNT CAN ALSO NOT BE TAXED IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, GROUND NOS. 1 AND 3 ARE DISMISSED. 4. IN REGARD TO ADDITION OF RS. 2,25,000/-, IT IS MENTIONED IN THE ASSESSMENT ORDER THAT THE ASSESSEE FAILED TO FIL E CONFIRMATION LETTERS FROM SANJAY SINGH, AKASH JAIN AND TAJINDER SINGH, IN WHOSE ACCOUNTS CREDITS OF RS. 1.00 LAKH, RS. 50,000/- AND RS. 75,000/- AP PEAR. THEREFORE, THE AMOUNT OF RS. 2,25,000/- WAS ADDED TO THE INCOME . BEFORE THE FIRST APPELLATE AUTHORITY, IT WAS SUBMITTED THAT LOANS FROM THESE PARTIES WERE RECEIVED IN EARLIER YEARS, WHICH WERE PAID IN THIS YEAR. THUS, THERE IS NO CREDIT IN THE BOOKS OF ACCOUNT OF THE ASSESS EE FOR THIS YEAR. CONFIRMATION LETTERS WERE ALSO FILED SHOWING TH AT THESE WERE BROUGHT FORWARD AMOUNTS AND THE ACCOUNTS WERE SQUARED UP IN THIS YEAR BY MAKING ITA NO. 3900(DEL)/2009 6 PAYMENTS TO THEM. THE LD. CIT(APPEALS) DELETED THE ADDITION BY MENTIONING THAT THE ENTRIES IN THE BOOKS ARE IN T HE NATURE OF DEBIT AND NOT CREDIT, THEREFORE, THE PROVISION CONTAINED IN SECT ION 68 IS NOT APPLICABLE. 4.1 BEFORE US, THE LD. COUNSEL MENTIONED THAT ONLY CREDITS IN THE BOOKS CAN BE MADE SUBJECT MATTER OF ASSESSMENT U/S 68 . ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDER OF THE LD. CIT(APPE ALS). 4.2 WE HAVE CONSIDERED THE FACTS OF THE CASE. I T DOES APPEAR TO US THAT CONFIRMED ACCOUNTS FROM THESE PARTIES WERE NO T FILED BEFORE THE AO. THESE WERE FILED FOR THE FIRST TIME BEFORE THE L D. CIT(APPEALS). HOWEVER, IT ALSO REMAINS A FACT THAT THE AO HAS NOT BROUGH T ANY MATERIAL ON RECORD TO SHOW THAT THERE WERE CREDITS IN THESE ACCOUNT S IN THIS YEAR. IN THESE CIRCUMSTANCES, THE LD. CIT(APPEALS) ONLY GOT THE ISSUE CLARIFIED BY OBTAINING CONFIRMATION LETTERS. THE CASE OF RAM LAL AGRAWAL VS. CIT, (2006) 280 ITR 547 (ALL.) DEALS WITH CREDITS BY WAY OF GIFTS. IT DOES NOT DEAL WITH THE DEBIT ENTRY IN THE BOOKS OF ACCOUNT . THEREFORE, THE RATIO OF THIS CASE IS NOT APPLICABLE AND RELIANCE ON THIS DECISION IN GROUND NO. 4 IS MISPLACED. WE AGREE WITH THE LD. CIT(APPEALS) THAT ONLY CREDIT ENTRY CAN BE ADDED U/S 68 IF SATISFACTORY EXPLANATI ON IN REGARD THERETO HAS NOT ITA NO. 3900(DEL)/2009 7 BEEN FURNISHED. THE DEBIT ENTRY CANNOT BE MADE T HE SUBJECT MATTER OF ADDITION U/S 68 OF THE ACT. THEREFORE, LOOKING TO THE FACT THAT THESE ARE DEBIT ENTRIES, IT IS HELD THAT NO ADDITION COULD H AVE BEEN MADE. ACCORDINGLY, GROUND NOS. 2 AND 4 ARE DISMISSED. 5. IN THE RESULT, THE APPEAL IS DISMISSED. SD/- SD/- (I.P. BANSAL) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA COPY OF THE ORDER FORWARDED TO:- M/S AVNIT HIRE PURCHASE & GENERAL FINANCE (P) LTD., MEERUT. ACIT, CIRCLE-2, MEERUT. CIT(A) CIT THE DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR.