DCIT, New Delhi V. M/s. Okara Agro Industries Ltd., New Delhi

ITA 3940/DEL/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9284 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 1997-1998
• Appeal Filed On: 12-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Keywords: Unexplained cash credit; Revision of order; Depreciation; Income from undisclosed sources; Question of law; Corroborative evidences; Onus to prove; Set aside
• Section: 271(1)(c); 143(3); 142(1); 250; 68; 10

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO. 3940/DEL/2015 ASSESSMENT YEAR: 1997-98 DCIT, CIRCLE 19(1), VS. OKARA AGRO INDUSTRIE S LTD. ROOM NO. 221, 803, VIKRAM TOWER, C.R. BUILDING, RAJINDER PLACE, I.P. ESTATE, NEW DELHI NEW DELHI (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI S.S. RANA, CIT(DR) ASSESSEE BY : NONE ORDER PER H.S. SIDHU, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 06.10.2017 OF THE LD. CIT(A)-2, NEW DELHI PERTAININ G TO ASSESSMENT YEAR 1997-98 ON THE FOLLOWING GROUNDS:- 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.5,23,42,50 0/- ON ACCOUNT OF SHARE / EQUITY CAPITAL WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS FAILED TO PRODUCE EVIDENCE. 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.21, 80,11,355/- ON ACCOUNT OF UNSECURED LOANS WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS FAILED TO PRODUCE EVIDENCE. 2 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CLT(A) HAS ERRED IN DELETING THE ADDITION OF RS.9,4 5,25,367/- ON ACCOUNT OF SUNDRY CREDITORS BEING THE INVESTOR FUND COLLECTED THROUGH SUGAM SCHEME WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS FAILED TO PRODUCE EVIDENCE. 4. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.LL, 20,17,167/- ON ACCOUNT OF FIXED ASSETS WITHOUT APPRECIATING THE FA CT THAT THE ASSESSEE HAS FAILED TO PRODUCE EVIDENCE. 5. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.L,0 0,000/- ON ACCOUNT OF VEHICLE RUNNING AND MAINTENANCE EXPENSES WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS FAILED TO PRODUCE EVIDENCE. 6. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN DELETING THE 1/5TH ADDITION OF RS.44,888/- OUT OF CAR DEPRECIATION OF RS.2,24,440/- DUE TO PERSONA L USE BY DIRECTORS WITHOUT APPRECIATING THE FACT THAT THE AS SESSEE HAS FAILED TO PRODUCE EVIDENCE. 7. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FR ESH GROUND(S) OF APPEAL AND/OR DELETE OR AMEND ANY OF THE GROUND( S) OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ORIGINA L ASSESSMENT IN THIS CASE WAS COMPLETED U/S. 143(3) (IN SHORT ACT) ON 2 7.3.2000 ON TOTAL INCOME OF RS. 55,73,77,005/-. NO APPEAL AGAINST THI S ORDER WAS FILED BY THE ASSESSEE COMPANY. LATER ON, THE LD. CIT(A)-II, DELHI, NEW DELHI WHILE EXAMINING THE POSSIBILITIES OF RECOVERY OF DE MAND IN THIS CASE FOR THE AY 1997-9 AND EARLIER YEARS NOTED THAT THE ORDE R PASSED U/S. 143(3) 3 OF THE ACT ON 27.3.2000 FOR AY 1997-98 ON TOTAL INC OME OF RS. 55,73,77,005/- CREATING A DEMAND OF RS. 39.96 CRORE S AND PENALTY ORDER U/S. 271(1)9C) PASSED ON 28.9.2000 LEVYING PENALTY OF RS. 23.84 CRORES NEEDS REVIEW. THE ASSESSMENT WAS, THEREFORE, SET A SIDE BY THE LD. CIT, DELHI-II, NEW DELHI VIDE HER ORDER PASSED U/S. 264 OF THE I.T. ACT ON 15.3.2001 IN RESPECT OF ASSESSMENT ORDER U/S. 143(3 ) OF THE ACT AND PENALTY ORDER U/S 271(1)(C) OF THE ACT WITH THE DIR ECTION TO AO TO REFRAME THE ASSESSMENT AFTER GIVING DUE OPPORTUNITIES TO TH E ASSESSEE AND AFTER COLLECTING FULL FACTS FROM CRIME BRANCH AUTHORITIE S AS ALSO TAKING NOTE OF JUDICIAL PRONOUNCEMENT IF RECEIVED BY THEM. IN ORD ER TO GIVE OPPORTUNITIES OF BEING HEARD TO THE ASSESSEE A LETT ER DATED 22.1.2002 ALONGWITH NOTICES U/S. 143(2) AND 142(1) OF THE I.T . ACT, WERE SENT TO THE ASSESSEE COMPANY AND ALSO ON VARIOUS OCCASIONS AND IN RESPONSE TO THE SAME A LETTER DATED 7.2.2002 A LETTER RECEIVED FROM SH. NARINDER JIT SINGH THROUGH REGISTERED POST WHEREIN HE HAS SUBMIT TED THAT HE HAS BEEN IN JUDICIAL CUSTODY IN TIHAR JAIL IN VARIOUS CASES OF ECONOMIC OFFENCES SINCE 29.6.1998 AND THAT ALL RECORDS PERTAINING TO BOOKS OF ACCOUNTS, BALANCE SHEET, PROFIT AND LOSS ACCOUNT, BANK ACCOUNT ETC. W ERE SEIZED BY THE CRIME BRANCH AND ARE PRESENTLY UNDER THE DIRECT CUS TODY OF THE HONBLE DELHI HIGH COURT AND HENCE HE IS UNABLE TO FURNISH ANY DETAIL OR EVIDENCE IN SUPPORT OF HIS CONTENTION AT THIS POINT OF TIME. AFTER PERUSING THE SAME, THE AO OBSERVED THAT OUT OF THREE DIRECTORS O F THE COY. THE TWO DIRECTORS NAMELY SH. INDERJIT SAHNI AND SH. JAGDEEP SINGH SAHNI HAD EXPIRED IN MARCH AND AUGUST, 1998 RESPECTIVELY AND THE 3 RD DIRECTOR SH. 4 NARINDER SINGH SAHNI IS IN JUDICIAL CUSTODY SINCE J UNE, 1998. IN CASE SH. NARINDERJIT SINGH, EX-DIRECTOR OF THE COMPANY IS UN ABLE TO ATTEND THE ASSESSMENT PROCEEDINGS, THE COMPANY SHOULD DEPUTE A N AUTHORIZED REPRESENTATIVE ON ITS BEHALF LIKE SH. SANJEEV WADHE RA, CA WHO HAD ATTENDED THE ASSESSMENT PROCEEDINGS EARLIER FOR AY 1996-97. THE ASSESSMENT PROCEEDINGS FOR THE YEAR UNDER CONSIDERA TION CANNOT BE WITHDRAWN AS REQUESTED BY SH. NARINDER JIT SINGH EX DIRECTOR OF THE COMPANY IN HIS ABOVE REFERRED LETTER DATED 2.2.2002 . AO NOTED THAT SINCE THE ASSESSEE COMPANY HAS FAILED TO ATTEND THE ASSES SMENT PROCEEDINGS WITH DETAILS / INFORMATION TO BE FILED IN SUPPORT O F ITS CONTENTION, NO INFORMATION / DETAIL WAS COLLECTED FROM THE CRIME B RANCH AS IN THE ABSENCE OF ASSESSEE COMPANYS DETAILS, IT IS DIFFIC ULT TO CORRELATE INFORMATION AVAILABLE WITH THE CRIME BRANCH AND PAS S THE ASSESSMENT ORDER AS PER ACCOUNTING PRINCIPLES AND MAKE ADDITIO NS ONLY AFTER PROPER VERIFICATION. HENCE, AO HAS NO ALTERNATIVE EXCEPT TO COMPLETE THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION ON THE SAME FIGURE AS COMPLETED ON 27.3.2000 AT RS. 55,73,77,005/-. THERE FORE, ASSESSMENT WAS MADE AT RS. 55,73,77,005/- WHEREIN VARIOUS AD DITIONS HAVE BEEN MADE VIDE ORDER DATED 22/3/2002 PASSED U/S. 264/143 (3) OF THE ACT. AGAINST THE ASSESSMENT ORDER DATED 22.3.2002, ASSES SEE APPEALED BEFORE THE LD. CIT(A) WHO VIDE HIS IMPUGNED ORDER DATED 17 .3.2015 HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED WITH THE IMPUGNED ORDER THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5 3. LEARNED CIT(DR) RELIED UPON THE ORDER OF THE AO AND IN SUPPORT OF HIS CLAIM HE FILED THE WRITTEN SUBMISSIONS, WHICH READ AS UNDER:- 1. A COPY OF ORDER U/S 264 DATED 15.03.2001 & ORDER U/S 143(3) DATED 27.03.2000 IS ENCLOSED. 2. LD CIT(A) WAS NOT JUSTIFIED IN DELETING ADDITION S TO EQUITY, UNSECURED LOANS AND SUNDRY CREDITORS OF RS. 5,23,42,500/-, RS21,80,11,355/- & RS. 9,45,25,367/: (I) SHE DELETED THE ADDITIONS ONLY ON THE GROUND TH AT THERE WAS NO DOUBT ABOUT EXISTENCE OF DEPOSITORS. (II) THE ASSESSEE HAS FAILED TO DISCHARGE ONUS REGARDING IDENTITY OF INVESTORS, THEIR CREDIT WORTH INESS AND GENUINENESS OF THE TRANSACTIONS (III) IN THE ABSENCE OF ANY DETAILS OR DOCUMENTARY EVIDENCE REGARDING ADDITIONS TO EQUITY, UNSECURED L OANS AND SUNDRY CREDITORS, LD CIT(A) WAS NOT JUSTIFIED I N DELETING THE ADDITIONS 1. PCIT VS NRA IRON & STEEL (P.L LTD. [20191 103 TAXMANN.COM 48 (SCL (COPY ENCLOSED) WHERE HON'BLE SUPREME COURT REVERSE ORDER OF LOWER AUTHORITIES HOLDING THAT WHERE THERE WAS FAILURE O F ASSESSEE TO ESTABLISH CREDIT WORTHINESS OF INVESTOR COMPANIES, ASSESSING OFFICER WAS JUSTIFIED IN PASS ING 6 ASSESSMENT ORDER MAKING ADDITIONS UNDER SECTION 68 FOR SHARE CAPITAL 1 PREMIUM RECEIVED BY ASSESSEE COMPANY. MERELY BECAUSE ASSESSEE COMPANY HAD FILED ALL PRIMARY EVIDENCE, IT COULD NOT BE SAID THAT ONU S ON ASSESSEE TO ESTABLISH CREDIT WORTHINESS OF INVESTOR COMPANIES STOOD DISCHARGED 2. PCIT VS NOR PROMOTERS PVT LTD (2019-TIOL-172-HC- DEL-ITL WHERE HON'BLE DELHI HIGH COURT HELD THAT A CASE INVOLVING MAKE-BELIEVE PAPERWORK TO CAMOUFLAGE THE BOGUS NATURE OF THE TRANSACTIONS IS TO BE TREATED A S UNEXPLAINED CREDIT U/S 68 3. ITO VS SYNERGY FINLEASE PVT. LTD (ITA NO.4778IDEI/2013) WHERE HON'BLE ITAT DELHI HELD THAT WHERE INVESTOR O F SHARE APPLICATION MONEY HAD NOMINAL INCOME AND CHEQUES AHD BEEN RECEIVED JUST BEFORE ISSUE OF CHEQ UES FOR SHARE APPLICATION MONEY, CREDITWORTHINESS WAS N OT PROVED AND ADDITION U/S. 68 WAS SUSTAINED. 4. CIT VS MAF ACADEMY (P.) LTD (361 ITR 258) (COPY ENCLOSED) 7 WHERE HON'BLE DELHI HIGH COURT HELD THAT WHERE ASSESSEE, A PRIVATE LIMITED COMPANY, SOLD ITS SHARE S TO UNRELATED PARTIES AT A HUGE PREMIUM AND THEREUPON WITHIN SHORT SPAN OF TIME THOSE SHARES WERE PURCHAS ED BACK EVEN AT A LOSS, SHARE TRANSACTIONS IN QUESTIO N WERE TO BE REGARDED AS BOGUS AND, THUS, AMOUNT RECEIVED FROM SAID TRANSACTIONS WAS TO BE ADDED TO ASSESEE'S TAXABLE INCOME UNDER SECTION 68 IT WAS H ELD AS FOLLOWS: '53. IN CONTRAST TO THE ABOVE JUDGMENTS, IN THE PRE SENT CASE, THE ASSESSEE IS A PRIVATE LIMITED COMPANY AN D IN THE FACTUAL MATRIX, WE HAVE HELD THAT THE ASSESSEE HAS NOT BEEN ABLE TO DISCHARGE THE INITIAL ONUS AND HA S NOT BEEN ABLE TO ESTABLISH THE IDENTITY, CREDITWORTHINE SS OF THE SHARE APPLICANTS AND THE GENUINENESS OF THE TRANSACTION. THOUGH, IN OUR CONSIDERED OPINION, NON E OF THE ABOVE JUDGMENTS, REFERRED TO BY THE ASSESSEE RESPONDENT, ARE APPLICABLE IN THE FACTS OF THE PRES ENT CASE AND IN VIEW OF THE FINDINGS RECORDED BY US HEREINABOVE. 54. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT T HE ASSESSEE HAS NOT DISCHARGED THE ONUS SATISFACTORILY AND 8 THE ADDITIONS MADE BY THE ASSESSING OFFICER WERE JUSTIFIED AND SUSTAINABLE. 5. CIT VS NAVODAYA CASTLE PVT LTD [2014] 3671TR 306 (DEL) (COPY ENCLOSED) WHERE HON'BLE DELHI HIGH COURT ACCEPTED THAT SINCE THE ASSESSEE WAS UNABLE TO PRODUCE THE DIRECTORS AND TH E PRINCIPAL OFFICERS OF THE SIX SHAREHOLDER COMPANIES AND ALSO THAT AS PER THE INFORMATION AND DETAILS COLLEC TED BY THE ASSESSING OFFICER FROM THE CONCERNED BANK, THE ASSESSING OFFICER HAD OBSERVED THAT THERE WERE GENU INE CONCERNS ABOUT IDENTITY, CREDITWORTHINESS OF SHAREHOLDERS AS WELL AS GENUINENESS OF THE TRANSACT IONS. '20. NOW, WHEN WE GO TO THE ORDER OF THE TRIBUNAL I N THE PRESENT CASE, WE NOTICE THAT THE TRIBUNAL HAS M ERELY REPRODUCED THE ORDER OF THE COMMISSIONER OF INCOME- TAX (APPEALS) AND UPHELD THE DELETION OF THE ADDITI ON. IN FACT, THEY SUBSTANTIALLY RELIED UPON AND QUOTED THE DECISION OF ITS CO-ORDINATE BENCH IN THE CASE OF MA F ACADEMY P. LTD., A DECISION WHICH HAS BEEN OVERTURN ED BY THE DELHI HIGH COURT, VIDE ITS JUDGMENT IN CIT V . MAF ACADEMY P. LTD. [2014] 206 DLT 277 ; [2014] 36 ITR 258 (DELHI)). IN THE IMPUGNED ORDER IT IS ACCEPTED THAT THE ASSESSEE WAS UNABLE TO PRODUCE DIRECTORS AND 9 PRINCIPAL OFFICERS OF THE SIX SHAREHOLDER COMPANIES AND ALSO THE FACT THAT AS PER THE INFORMATION AND DETAI LS COLLECTED BY THE ASSESSING OFFICER FROM THE CONCERN ED BANK, THE ASSESSING OFFICER HAS OBSERVED THAT THERE WERE GENUINE CONCERNS ABOUT IDENTITY, CREDITWORTHIN ESS OF SHAREHOLDERS AS WELL AS GENUINENESS OF THE TRANSACTIONS. 21. IN VIEW OF THE AFORESAID DISCUSSION, WE FEEL TH AT THE MATTER REQUIRES AN ORDER OF REMIT TO THE TRIBUNAL F OR FRESH ADJUDICATION KEEPING IN VIEW THE AFORESAID CA SE LAW.' NAVODAYA CASTLE PVT LTD VS CIT (2015-TIOL-314-SC-IT ) (COPY ENCLOSED) SLP OF ASSESSEE DISMISSED BY HON'BLE SUPREME COURT 6. PRATHAM TELECOM INDIA PVT LTD VS DC IT (2018- TIOL-1983-HC-MUM-IT) (COPY ENCLOSED) WHERE HON'BLE BOMBAY HIGH COURT HELD THAT MERE PRODUCTION OF PAN NUMBERS & BANK STATEMENTS IS SUFFICIENT ENOUGH TO DISCHARGE THE BURDEN ON TAXPAY ER TO ESCAPE THE REALMS OF SECTION 68 10 7. CIT VS NIPUN BUILDERS & DEVELOPERS (P.) LTD (30 TAXMANN.COM 292, 214 TAXMAN 429, 350 ITR 407, 256 CTR 34) (COPY ENCLOSED) WHERE HON'BLE DELHI HIGH COURT HELD THAT WHERE ASSESSEE FAILED TO PROVE IDENTITY AND CAPACITY OF SUBSCRIBER COMPANIES TO PAY SHARE APPLICATION MONEY , AMOUNT SO RECEIVED WAS LIABLE TO BE TAXED UNDER SEC TION 68. IT WAS HELD AS FOLLOWS: '12. A PERUSAL OF THE ORDER OF THE TRIBUNAL SHOWS T HAT IT HAS GONE ON THE BASIS OF THE DOCUMENTS SUBMITTED B Y THE ASSESSEE BEFORE THE AO AND HAS HELD THAT IN THE LIGHT OF THOSE DOCUMENTS, IT CAN BE SAID THAT THE ASSESSEE HAS ESTABLISHED THE IDENTITY OF THE PARTIE S. IT HAS FURTHER BEEN OBSERVED THAT THE REPORT OF THE INVESTIGATION WING CANNOT CONCLUSIVELY PROVE THAT T HE ASSESSEE'S OWN MONIES WERE BROUGHT BACK IN THE FOR M OF SHARE APPLICATION MONEY. AS NOTED IN THE EARLIER PARAGRAPH, IT IS NOT THE BURDEN OF THE A 0 TO PROV E THAT CONNECTION. THERE HAS BEEN NO EXAMINATION BY THE TRIBUNAL OF THE ASSESSMENT PROCEEDINGS IN ANY DETA IL IN ORDER TO DEMONSTRATE THAT THE ASSESSEE HAS DISCHAR GED ITS ONUS TO PROVE NOT ONLY THE IDENTITY OF THE SHAR E APPLICANTS, BUT ALSO THEIR CREDITWORTHINESS AND TH E 11 GENUINENESS OF THE TRANSACTIONS. NO ATTEMPT WAS MAD E BY. THE TRIBUNAL TO SCRATCH THE SURFACE AND PROBE THE DOCUMENTARY EVIDENCE IN SOME DEPTH, IN THE LIGHT OF THE CONDUCT OF THE ASSESSEE AND OTHER SURROUNDING CIRCUMSTANCES IN ORDER TO SEE WHETHER THE ASSESSEE HAS DISCHARGED ITS ONUS UNDER SECTION 68. WITH RESPECT, IT APPEARS TO US THAT THERE HAS ONLY BEEN A MECHANICAL REFERENCE TO THE CASE-LAW ON THE SUBJECT WITHOUT AN Y SERIOUS APPRAISAL OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 13. WE, THEREFORE, ANSWER THE SUBSTANTIAL QUESTION OF LAW FRAMED BY US IN THE NEGATIVE, IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. THE APPEAL OF THE REVENUE IS ALLOWED WITH NO ORDER AS TO COSTS.' 8. CIT VS NOVA PROMOTERS & FINLEASE (P) LTD (18 TAXMANN.COM 217, 206 TAXMAN 207, 342 ITR 169, 252 CTR 187) (COPY ENCLOSED) WHERE HON'BLE DELHI HIGH COURT HELD THAT AMOUNT RECEIVED BY ASSESSEE FROM ACCOMMODATION ENTRY PROVIDERS IN GARB OF SHARE APPLICATION MONEY, WAS T O BE ADDED TO ITS TAXABLE INCOME UNDER SECTION 68. IT WA S HELD AS FOLLOWS: 12 '41. IN THE CASE BEFORE US, NOT ONLY DID THE MATERI AL BEFORE THE ASSESSING OFFICER SHOW THE LINK BETWEEN THE ENTRY PROVIDERS AND THE ASSESSEE-COMPANY, BUT THE ASSESSING OFFICER HAD ALSO PROVIDED THE STATEMENTS OF MUKESH GUPTA AND COMPLIANCE WITH THE RULES OF NATUR AL JUSTICE. OUT OF E 22 COMPANIES WHOSE NAMES FIGURES IN THE INFORMATION GIVEN BY THEM TO THE INVESTIGATION WING. 15 COMPANIES HAD PROVIDED THE SO-CALLED 'SHARE SUBSCRIPTION MONIES' TO THE ASSESSEE. THERE WAS THU S SPECIFIC INVOLVEMENT OF THE ASSESSEE-COMPANY IN THE MODUS OPERANDI FOLLOWED BY MUKESH GUPTA AND RAJAN JASSAL. THUS, ON CRUCIAL FACTUAL ASPECTS THE PRESEN T CASE STANDS ON A COMPLETELY DIFFERENT FOOTING FROM THE CASE OF OASIS HOSPITALITIES (P) LTD. (SUPRA). 42. IN THE LIGHT OF THE ABOVE DISCUSSION, WE ARE UN ABLE TO UPHOLD THE ORDER OF THE CONFIRMING THE DELETION OF THE ADDITION OF RS. 1,18,50,000 MADE UNDER SECTION 68 O F THE AS WELL AS THE CONSEQUENTIAL ADDITION OF RS. 2,96,250. WE ACCORDINGLY ANSWER THE SUBSTANTIAL QUESTIONS OF LAW IN THE NEGATIVE AND IN FAVOUR OF T HE DEPARTMENT. THE ASSESSEE SHALL PAY COSTS WHICH WE ASSESS AT RS. 30,000/-.' 13 9. CIT VS ULTRA MODERN EXPORTS (P.) LTD (40 TAXMANN.COM 458, 220 TAXMAN 165) (COPY ENCLOSED) WHERE HON'BLE DELHI HIGH COURT HELD THAT WHERE IN O RDER TO ASCERTAIN GENUINENESS OF ASSESSEE'S CLAIM RELATI NG TO RECEIPT OF SHARE APPLICATION MONEY, ASSESSING OFFIC ER SENT NOTICES TO SHARE APPLICANTS WHICH RETURNED UNSERVED, HOWEVER, ASSESSEE STILL MANAGED TO SECURE DOCUMENTS SUCH AS THEIR INCOME TAX RETURNS AS WELL AS BANK ACCOUNT PARTICULARS, IN SUCH CIRCUMSTANCES, ASSESSING OFFICER WAS JUSTIFIED IN DRAWING ADVERSE INFERENCE AND ADDING AMOUNT IN QUESTION TO ASSESSEE 'S TAXABLE INCOME UNDER SECTION 68. IT WAS HELD AS FOL LOWS: '9. AS NOTICED PREVIOUSLY, THE CIT (A) WAS OF THE O PINION THAT THE ASSESSEE HAD DISCHARGED THE BASIC ONUS WHI CH WAS CAST UPON IT AFTER CONSIDERING THE RULING IN LO VELY EXPORTS (P.) LTD. 'S CASE (SUPRA). THE MATERIAL AND THE RECORDS IN THIS CASE SHOW THAT NOTICE ISSUED TO THE 5 OF THE SHARE APPLICANTS WERE RETURNED UNSERVED. THE PARTICULARS OF RETURNS MADE AVAILABLE BY THE ASSESS EE AND TAKEN INTO CONSIDERATION IN PARAGRAPH 3.4 BY TH E AO IN THIS CASE WOULD SHOW THAT THE SAID PARTIES/APPLI CANTS HAD DISCLOSED VERY MEAGER INCOME. THE AO ALSO NOTIC ED THAT BEFORE ISSUING CHEQUES TO THE ASSESSEE; HUGE 14 AMOUNTS WERE TRANSFERRED IN THE ACCOUNTS OF SAID SH ARE APPLICANTS. THIS DISCUSSION ITSELF WOULD REVEAL THA T EVEN THOUGH THE SHARE APPLICANTS COULD NOT BE ACCESSED THROUGH NOTICES, THE ASSESSEE WAS IN A POSITION TO OBTAIN DOCUMENTS FROM THEM. WHILE THERE CAN BE NO DOUBT THAT IN LOVELY EXPORTS (P) LTD. (SUPRA), THE COURT INDICATED THE RULE OF 'SHIFTING ONUS' I.E. THE RESPONSIBILITY OF THE REVENUE TO PROVE THAT SECTION 68 COULD BE INVOKED ONCE THE BASIC BURDEN STOOD DISCHARGED BY FURNISHING RELEVANT AND MATERIAL PARTICULARS, AT THE SAME TIME, THAT JUDGMENT CANNOT BE SAID TO LIMIT THE INFERENCES THAT CAN BE LOGICALLY AND LEGITIMATELY DRAWN BY THE REVENUE IN THE NATURAL CO URSE OF ASSESSMENT PROCEEDINGS. THE INFORMATION THAT ASSESSEE FURNISHES WOULD HAVE TO BE CREDIBLE AND AT THE SAME TIME VERIFIABLE. IN THIS CASE, 5 SHARE APPLICA NTS COULD NOT BE SERVED AS THE NOTICES WERE RETURNED UNSERVED. IN THE BACKDROP OF THIS CIRCUMSTANCE, THE ASSESSEE'S ABILITY TO SECURE DOCUMENTS SUCH AS INCO ME TAX RETURNS OF THE SHARE APPLICANTS AS WELL AS BANK ACCOUNT PARTICULARS WOULD ITSELF GIVE RISE TO A CIRCUMSTANCE WHICH THE AO IN THIS CASE PROCEEDED TO DRAW INFERENCES FROM. HAVING REGARD TO THE TOTALITY OF THE FACTS, I.E., THAT THE ASSESSEE COMMENCED ITS 15 BUSINESS AND IMMEDIATELY SOUGHT TO INFUSE SHARE CAP ITAL AT A PREMIUM RANGING BETWEEN RS. 90-190 PER SHARE AND WAS ABLE TO GAMER A COLOSSAL AMOUNT OF RS. 4.34 CRORES, THIS COURT IS OF THE OPINION THAT THE CIT (APPEALS) AND THE ITA T FELL INTO ERROR IN HOLDING THAT AO COULD NOT HAVE ADDED BACK THE SAID AMOUNT UNDER SECTION 68. THE QUESTION OF LAW CONSEQUENTLY IS ANSWERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE.' 10. CIT VS N R PORTFOLIO PVT LTD [2014] 42 TAXMANN.COM 339 (DELHI)/[2014] 222 TAXMAN 157 (DELHI)(MAG)/[2014] 264 CTR 258 (DELHI) (COPY ENCLOSED) WHERE HON'BLE DELHI HIGH COURT HELD THAT IF AO DOUB TS THE DOCUMENTS PRODUCED BY ASSESSEE, THE ONUS SHIFTS ON ASSESSEE TO FURTHER SUBSTANTIATE THE FACTS OR PRODU CE THE SHARE APPLICANT IN PROCEEDING. IT WAS HELD AS FOLLOWS: '30. WHAT WE PERCEIVE AND REGARD AS CORRECT POSITIO N OF LAW IS THAT THE COURT OR TRIBUNAL SHOULD BE CONVINC ED ABOUT THE IDENTITY, CREDITWORTHINESS AND GENUINENES S OF THE TRANSACTION. THE ONUS TO PROVE THE THREE FACTUM IS ON THE ASSESSEE AS THE FACTS ARE WITHIN THE ASSESSE E'S 16 KNOWLEDGE. MERE PRODUCTION OF INCORPORATION DETAILS , PAN NOS. OR THE FACT THAT THIRD PERSONS OR COMPANY HAD FILED INCOME TAX DETAILS IN CASE OF A PRIVATE LIMIT ED COMPANY MAY NOT BE SUFFICIENT WHEN SURROUNDING AND ATTENDING FACTS PREDICATE A COVER UP. THESE FACTS INDICATE AND REFLECT PROPER PAPER WORK OR DOCUMENTA TION BUT GENUINENESS, CREDITWORTHINESS, IDENTITY ARE DEE PER AND OBTRUSIVE. COMPANIES NO DOUBT ARE ARTIFICIAL OR JURISTIC PERSONS BUT THEY ARE SOULLESS AND ARE DEPE NDENT UPON THE INDIVIDUALS BEHIND THEM WHO RUN AND MANAGE THE SAID COMPANIES. IT IS THE PERSONS BEHIND THE COMPANY WHO TAKE THE DECISIONS, CONTROLS AND MANAGE THEM.' 10 PCIT VS BIKRAM SINGH [201D 85 TAXMANN.COM 104 (DELHI)/[201D 250 TAXMAN 273 (DELHI)/[201D 399 ITR 407 (DELHI) (COPY ENCLOSED) WHERE HON'BLE DELHI HIGH COURT HELD THAT EVEN IF A TRANSACTION OF LOAN IS MADE THROUGH CHEQUE, IT CANN OT BE PRESUMED TO BE GENUINE IN THE ABSENCE OF ANY AGREEMENT, SECURITY AND INTEREST PAYMENT. MERE SUBMISSION OF PAN CARD OF CREDITOR DOES NOT ESTABLI SH THE AUTHENTICITY OF A HUGE LOAN TRANSACTION PARTICU LARLY WHEN THE ITR DOES NOT INSPIRE SUCH CONFIDENCE. MERE 17 SUBMISSION OF 10 PROOF AND THE FACT THAT THE LOAN TRANSACTIONS WERE THROUGH THE BANKING CHANNEL, DOES NOT ESTABLISH THE GENUINENESS OF TRANSACTIONS. LOAN ENTRIES ARE GENERALLY MASKED TO PUMP IN BLACK MONEY INTO BANKING CHANNELS AND SUCH PRACTICES CONTINUE T O PLAGUE INDIAN ECONOMY. 4. I N THIS CASE, NOTICE OF HEARING TO THE ASSESSEE WAS SENT BY THE REGISTERED AD POST, IN SPITE OF THE SAME, ASSESSEE, NOR ITS AUTHORIZED REPRESENTATIVE APPEARED TO PROSECUTE THE MATTER IN DISPUTE, NOR FILED ANY APPLICATION FOR ADJOURNMENT. KEEPING IN VIEW THE F ACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND THE ISSUE INVOLVED IN THE P RESENT APPEAL, WE ARE OF THE VIEW THAT NO USEFUL PURPOSE WOULD BE SERVED TO ISSUE NOTICE AGAIN AND AGAIN TO THE ASSESSEE, THEREFORE, WE ARE DECIDING THE PRESENT APPEAL EXPARTE QUA ASSESSEE, AFTER HEARING THE LD. DR AND PERUSING THE RECORDS. 5. WE HAVE HEARD THE LD. DR AND PERUSED THE RECORDS ESPECIALLY THE IMPUGNED ORDER AND THE WRITTEN SUBMISSION FILED BY THE LD. CIT(DR). WE FIND THAT THE JUDICIAL DECISIONS RELIED UPON BY THE LD. CIT(DR) HAVE BEEN DULY CONSIDERED. IN OUR CONSIDERED VIEW, WE DO NOT FIND ANY PARITY IN THE FACTS OF THE DECISIONS RELIED UPON WITH THE PECULIAR FACTS OF TH E CASE IN HAND. HOWEVER, WE FIND THAT LD. CIT(A) HAS ELABORATELY DISCUSSED THE GROUNDS NO. 1 TO 4 VIDE PARA NO. 7.1 TO 7.3 AT PAGE NO. 4-5 OF THE IMPUGNED ORDER. FOR THE SAKE OF CLARITY, WE ARE REPRODUCING HEREWITH THE RELEVAN T FINDINGS OF THE LD. CIT(A) AS UNDER:- 18 7.1. THE 1 ST AND 2ND ADDITION IS ON ACCOUNT OF ADDITION TO EQUI TY & TO UNSECURED LOANS & SUNDRY CREDITORS AMOUNTING TO RS.5,23,42,500/- & RS.21,80,11,355/- & RS.9,4525,3 67/-. THE CIT ON THIS ISSUE IN THE ORDER U/S. 264 HAD STA TED AS UNDER:- IN THE LIGHT OF THE STATUS REPORT OF THE CRIME BR ANCH DELHI POLICE THE ASSESSMENT FRAMED FOR AY 1997-98 WHERE SUBSTANTIALLY LARGE ADDITIONS HAVE BEEN MADE ON ACC OUNT OF ADDITIONS TO SHARE EQUITY CAPITAL, ADDITIONS AS UNS ECURED LOANS, ADDITIONS ON ACCOUNT OF NON-CONFIRMATION OF SUNDRY CREDITORS AND ALSO ON ACCOUNT OF ADDITION TO THE FI XED ASSETS ON ACCOUNT OF NO SUPPORTING EVIDENCE HAVING BEEN FI LED: APPEARS TO BE ERRONEOUS. THE ASSESSMENT IS ALSO ERR ONEOUS AS BOTH THE CREDITS AND DEBITS HAVE BEEN ADDED SIMULTA NEOUSLY. THIS HAS RESULTED INTO DOUBLE ADDITIONS, EVEN IF ME RITS OF THE ADDITION IS NOT CONSIDERED IT IS ERRONEOUS TO MAKE ADDITION IN RESPECT OF BOTH THE DEBIT AND THE SIDE. IN THE LIGH T OF THE FACT THAT 1500 INVESTORS HAVE FILED FIR'S & LAW SUITS CL AIMING ABOUT RS.15 CRORES AS PAID BY THEM. THE ADDITIONS MADE ON ACCOUNT OF CREDITORS, ADDITION ON ACCOUNT OF THE SHARE EQUI TY CAPITAL AND ADDITION ON ACCOUNT OF THE UNSECURED LOANS, ON THE GROUNDS THAT CONFIRMATION AND SUPPORTING EVIDENCE W ERE NOT FILED, DOES NOT APPEAR TO BE JUSTIFIED CRIME BRANCH STATUS REPORT CLEARLY ESTABLISHES THAT THE ASSESSEE HAD CO LLECTED FUNDS FROM PUBLIC AT LARGE AND HAD NOT REPAID THEM AND THEREFORE, LAW SUITS HAVE BEEN FILED BY THE INVESTO RS. IN THE LIGHT OF THIS THE ADDITION ON THIS SCORE IS APPAREN TLY WRONG ON FACTS. THERE IS AN APPEAL FILED AGAINST THIS ORDER AS THE RE WAS NO BUSINESS CARRIED ON BY THE ASSESSEE COMPANY AFTER J UNE, 1998 AS THE ONLY SURVIVING DIRECTOR OF THE COMPANY WAS IN JAIL. 19 IN VIEW OF THIS THE ASSESSING OFFICER WAS LEFT WITH NO ALTERNATIVE BUT TO PASS AN EX-PARTE PENALTY ORDER I MPOSING THE PENALTY OF RS.23,84,OO,510/- AS OTHERWISE THE PENAL TY ACTION WOULD HAVE GOT BARRED BY LIMITATION OF TIME. THE PENALTY ORDER DATED 28.09.2010 SUFFERS FROM THE SAME FLAW AS THOSE POINTED OUT FOR ASSESSMENT ORDER U/S 143(3) FOR THIS YEAR. THE PENALTY ORDER WAS ALSO NOT SERVED AS THE SAME IS RETURNED BACK WITH THE REMARKS BY THE POSTAL AUT HORITIES THAT THE 'ASSESSEE LEFT WITHOUT ADDRESS. ' OBJECTIVE EXAMINATION OF THE ABOVE FACTS CLEARLY BR INGS OUT THAT BOTH THE ORDERS U/S 143(3) PASSED ON 27.03.200 0 AND THE PENALTY ORDER U/S 271(1)(C) PASSED ON 28.09.200 0 ARE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE BEING WRONG ON FACTS WHICH IS ESTABLISHED BY THE NUMBER O F LAW SUITS FILED BY THE INVESTORS CLAIMING THEIR MONEY I S BACK AND HENCE THE MONEY BROUGHT IN THE BOOKS OF THE COMPANY AS SHARE CAPITAL AND LOANS WAS NOT NECESSARILY AND ENT IRELY ASSESSEE'S OWN INCOME FROM UNDISCLOSED SOURCES WHIC H COULD BE TAXED U/S 68 OF THE I. T. ACT, 1961. IN ANY CASE THE ADDITION IN RESPECT OF BOTH THE CREDIT AND DEBIT IN OBVIOUSLY INCORRECT AND AGAINST ESTABLISHED PRINCIPLES OF ACC OUNTING. UNDER THE CIRCUMSTANCES, IT IS CLEAR THAT THE AO NE EDS TO CO- RELATE INFORMATION AVAILABLE WITH THE CRIME BRANCH AND PASS THE ASSESSMENT ORDER AS PER ACCOUNTING PRINCIPLES A ND MAKE ADDITIONS ONLY AFTER PROPER VERIFICATION. THE ASSES SMENT NEEDS TO BE SET ASIDE UNDER SECTION 264 OF THE I. T. ACT, 1961 AS ERRONEOUS ORDER WOULD NOT BE IMPLACABLE AND WOULD H INDER COLLECTION. IN ANY CASE THE ASSESSEE'S PROPERTIES S TAND ATTACHED AGAINST THE EARLIER YEARS DEMANDS OF THE A SSESSEE WHICH ARE SUBSTANTIAL AND THEREFORE, THE INTEREST O F THE REVENUE IS NOT LOST EVEN WHEN THE ASSESSMENT ORDER AND 20 PENALTY ORDERS FOR AY 1997-98 ARE CANCELLED WITH TH E DIRECTION TO REFRAME THE SAME AS PER LAW. AO TO REFRAME THE ASSESSMENT AFTER GIVING DUE OPPORTUNITY TO THE ASSE SSEE AND AFTER COLLECTING FULL FACTS FROM CRIME BRANCH AUTHO RITIES AS ALSO TAKING NOTE OF JUDICIAL PRONOUNCEMENT IF RECEIVED B Y THEN. 7.2. IN VIEW THEREOF THE ADDITION DOES NOT STAND AS THERE IS NO DOUBT THAT THERE WERE DEPOSITORS. THE FACTS ARE THAT THE APPELLANT HAD COLLECTED FUNDS AND HAD NOT REPAID THEM. FURTHER TH ERE WERE INVESTORS WHO HAD FILED LAW SUITS AGAINST THE APPEL LANT FOR RECOVERY OF THEIR MONEY. THEREFORE, THE EXISTENCE OF THE DEP OSITORS CANNOT BE DOUBTED. THE ADDITION ON ALL THREE ACCOUNTS IS THER EFORE DELETED. THE GROUNDS OF APPEAL ARE RULED IN FAVOUR OF THE AP PELLANT. 7.3 THE AO HAS ADDED THE COST OF ALL ASSETS PURCHA SED STATING LACK OF EVIDENCE. HOWEVER, FOR BUSINESS PURPOSES AS SETS WOULD HAVE BEEN PURCHASED. I DONT FIND ANY BASIS TO SUSTAIN T HIS ADDITION MADE BY THE AO. THE ADDITION OF RS. 11,20,17,167/- IS TH EREFORE DELETED. 5.1 AFTER PERUSING THE AFORESAID FINDINGS OF THE LD . CIT(A), WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO INFIRMITY IN THE A FORESAID FINDING OF THE LD. CIT(A), HENCE, WE UPHOLD THE SAME AND ACCORDING LY REJECT THE GROUND NO. 1 TO 4 RAISED BY THE REVENUE. 5.2 AS REGARDS GROUND NO. 5 & 6 ARE CONCERNED, WE F IND THAT OOUT OF CAR RUNNING AND MAINTENANCE EXPENSES OF RS.1,OO,OOO/- W AS ALLOWED ON ACCOUNT OF PERSONAL USE BY DIRECTORS. OUT OF CAR DE PRECIATION OF RS.2,24,440/-, 1/5TH WAS DISALLOWED ON ACCOUNT OF P ERSONAL USE BY DIRECTORS. IN THE CASE OF A COMPANY DISALLOWANCE ON ACCOUNT OF PERSONAL USE OF VEHICLE CANNOT BE MADE. HENCE, THE ADDITION WAS RIGHTLY DELETED BY THE LD. CIT(A), WHICH DOES NOT NEED ANY INTERFERENC E ON OUR PART, 21 THEREFORE, WE UPHOLD THE ACTION OF THE LD. CIT(A) O N THE ISSUES IN DISPUTE AND REJECT THE GROUND NO. 5 & 6 RAISED BY THE REVEN UE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS D ISMISSED. ORDER PRONOUNCED ON 08/07/2019. SD/- SD/- (B.R.R. KUMAR) [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMB ER DATED:08/07/2019 *SR BHATNAGAR* COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR