M/s. M A Projects Pvt. Ltd., Delhi V. DCIT, New Delhi

ITA 402/DEL/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5804 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 20-01-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S K GUPTA
• Keywords: Source of fund; Sham transactions
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI D BEN CH, NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER, AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER, ITA NO. 402/DEL/2015 [ASSESSMENT YEAR: 2011-12] M/S M.A. PROJECTS PVT. LTD. BA-17A,DDA FLATS, ASHOK VIHAR, PHASE-I, DELHI-110052 DCIT, CENTRAL CIRCLE-03, NEW DELHI PAN - AAECM2372E APPELLANT RESPONDENT ASSESSEE BY SHRI S. K. GUPTA REVENUE BY MS. RINKU SINGH - DR DATE OF HEARING 06 /08 /2019 DATE OF PRONOUNCEMENT 09 /08 /2019 ORDER PER T. S. KAPOOR, ACCOUNTANT MEMBER, THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-II, DATED 03/11/2014. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE REPRODUCED BELOW:- 1. THE LD. CIT(A)-II BOTH ON FACTS AND IN LAW AND AL SO IN THE CIRCUMSTANCES OF THE CASE HAS ERRED IN CONFIRMING THE ADDITION OF RS .50,00,000/- U/S 68 OF THE I.T. ACT ON ACCOUNT OF ACCEPTANCE OF SHARE APPLICATION MONEY FROM M/S INDLON HOSIERY PVT. LTD. BASED ON THE CONJECTURE AND SURMISES IGNORING THE FACT THAT THERE WAS NO ADVERSE MATERIAL BEFORE THE AO TO DOUBT THE IDENTIT Y AND CREDITWORTHINESS OF THE ABOVE SHARE APPLICANT. 2. AT THE OUTSET, THE LD. AR SUBMITTED THAT THE ASSESS EE IS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF REAL ESTATE AND D URING THE YEAR UNDER 2 ITA NO.4 02/DEL/2015 CONSIDERATION, IT HAD RECEIVED SHARE APPLICATION MO NEY AMOUNTING TO RS.50 LAKHS FROM M/S INDLON HOSIERY (P.) LTD. AND THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS RAISED A QUERY REGARD ING IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE INVESTOR AN D THEREFORE INVESTOR COMPANY WAS ISSUED NOTICE U/S 133(6) OF THE ACT AND WAS REQUIRED TO FURNISH VARIOUS DOCUMENTS/INFORMATION. THE LD. AR S UBMITTED THAT IN RESPECT TO THE NOTICE U/S 133(6), THE INVESTOR COMP ANY HAD SUBMITTED A COPY OF AUDITED BALANCE SHEET, COPY OF INCOME TAX R ETURN ALONG WITH COPY OF PAN NUMBER AND NAME AND ADDRESSES OF ITS DIRECTO RS. IT WAS SUBMITTED THAT THE ASSESSING OFFICER WANTED THE ASS ESSEE TO EXPLAIN THE SOURCE OF INVESTMENT BY THE INVESTER COMPANY AND TO WHICH THE ASSESSEE HAD FILED COMPLETE REPLY AND IN THIS RESPE CT OUR ATTENTION WAS INVITED TO COPY OF ASSESSMENT ORDER WHERE THE REPLY GIVEN BY ASSESSEE COMPANY WAS REPRODUCED BY THE ASSESSING OFFICER. TH E LD. AR SUBMITTED THAT THE ASSESSEE HAD FILED ALL THE RELEV ANT DOCUMENTS WHICH PROVED THE IDENTITY, CREDITWORTHINESS AND GENUINENE SS OF THE TRANSACTIONS BUT THE ASSESSING OFFICER DID NOT AGREE WITH THE CO NTENTIONS OF THE ASSESSEE. THE LD. AR IN THIS RESPECT SUBMITTED THAT THE CASE LAWS RELIED ON BY THE ASSESSING OFFICER ARE NOT APPLICABLE TO T HE FACTS AND CIRCUMSTANCES OF THE CASE. THE LD. AR ALSO TRIED TO DISTINGUISH THE FACTS OF THE CASE LAW IN THE CASE OF NRA IRON PVT. LTD. D ECIDED BY THE HONBLE SUPREME COURT AND FILED A CHART DISTINGUISHING THE FACTS OF THE PRESENT 3 ITA NO.4 02/DEL/2015 CASE. THE LD. AR ALSO TOOK US TO COPY OF THE AUDITE D ACCOUNTS OF THE INVESTOR COMPANY PLACED AT PAPER BOOK PAGE 9 TO 13 AND ARGUED THAT INVESTOR COMPANY HAD SUFFICIENT FUNDS OF ITS OWN AN D HAD MADE THE INVESTMENT IN DUE COURSE OF ITS BUSINESS THEREFORE, IT WAS PRAYED THAT THE APPEAL FILED BY THE ASSESSEE ALLOWED. 3. THE LD. DR ON THE OTHER HAND, HEAVILY PLACED HER RELIANCE ON THE ORDER OF THE AUTHORITIES BELOW AND ALSO RELIED ON A NUMBER OF CASE LAWS AND FILED WRITTEN SYNOPSIS. THE LD. DR SPECIFICALLY RELIED ON THE CASE OF HONBLE SUPREME COURT IN THE CASE OF PCIT VS NRA IR ON P. LTD AND IT WAS ARGUED THAT THE TRANSACTIONS WAS NOT GENUINE AN D THE ASSESSEE IS REQUIRED TO PROVE ALL THE INGREDIENTS SUCH AS IDENT ITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS AND WHICH HE HA S FAILED AS THE AUDITED ACCOUNTS OF THE INVEST COMPANY ITSELF DO NO T WARRANT SUCH INVESTMENT AND THAT TOO A HUGE PREMIUM. 4. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ASSESSE E HAS RECEIVED SHARE APPLICATION MONEY FROM ONE OF M/S INDLON HOSIERY PV T. LTD. A COPY OF AUDITED ACCOUNTS FOR FINANCIAL YEAR 2010-11 IS PLAC ED AT PAPER BOOK PAGE 9 TO 13. ON EXAMINATION OF BALANCE SHEET, WE OBSER VE THAT THE MAJOR SOURCE OF FUNDS OF THE INVESTOR COMPANY IS RESERVES AND SURPLUS WHICH ITSELF ARE ON ACCOUNT OF SHARE PREMIUM. THE EXAMINA TION OF PROFIT & LOSS 4 ITA NO.4 02/DEL/2015 ACCOUNT OF THE INVESTOR COMPANY REVEALS THAT TURNOV ER OF THE ASSESSEE WAS ONLY RS.8,81,675/- AND NET PROFIT WAS ONLY RS.9 5,000/-. WE FURTHER OBSERVE FROM THE BALANCE SHEET OF THE INVESTOR COMP ANY THAT MOST OF THE FUNDS ARE LOCKED UP IN, INVESTMENT AND LOANS AND AD VANCES. THE FUNDS LOCKED UP IN INVESTMENT ARE RS.89 LAKHS WHEREAS FUN DS LOCKED UP IN LOANS AND ADVANCES ARE TO THE EXTENT OF RS.2,56,45, 000/-. TURNOVER OF THE ASSESSEE COMPANY IS QUITE LOW AS COMPARED TO TH E FUNDS OF THE COMPANY WHICH CLEARLY DEMONSTRATES THAT THE INVESTO R COMPANY IS INDULGING INTO SHAM TRANSACTIONS. FURTHER WE FIND T HAT THE INVESTOR COMPANY HAS INVESTED IN THE SHARE CAPITAL OF THE AS SESSEE COMPANY AT A PREMIUM OF RS.90 PER SHARE. THE SHARE APPLICATION M ONEY FOR A SHARE OF RS.10 HAS BEEN RECEIVED BY THE ASSESSEE @ RS.100 PE R SHARE. THE EXAMINATION OF THE AUDITED ACCOUNTS OF THE INVESTEE COMPANY DEMONSTRATES THAT ASSESSEE HAD NOT CARRIED OUT ANY SIGNIFICANT ACTIVITIES. THE EXAMINATION OF BALANCE SHEET OF INVESTEE COMPAN Y REVEALS THAT THE FUNDS OF THE COMPANY ARE IN THE FORM OF RESERVES AN D SURPLUS AND SHARE APPLICATION MONEY AND APPLICATION OF FUNDS IS IN LO ANS AND ADVANCES. THE FINANCIALS OF THE INVESTEE COMPANY DOES NOT WAR RANT THAT IT DESERVES SHARE PREMIUM OF RS.90 PER SHARE, THEREFORE, ALL TH ESE FACTS PROVE THAT THE TRANSACTIONS OF SHARE APPLICATION MONEY IS NOT A GENUINE TRANSACTION. THE HONBLE APEX COURT IN THE CASE OF PCIT VS NRA I RON & STEEL PVT. LTD. VIDE ITS ORDER DATED 05/03/2019 HAS HELD THAT THE PRACTICE OF 5 ITA NO.4 02/DEL/2015 CONVERSION OF UNACCOUNTED MONEY THROUGH CLOAK OF SH ARE CAPITAL/PREMIUM MUST BE SUBJECTED TO CAREFUL SCRUTI NY ESPECIALLY IN PRIVATE PLACEMENT OF SHARES. FILING PRIMARY EVIDENC E IS NOT SUFFICIENT AND THE ONUS TO ESTABLISH CREDITWORTHINESS OF THE INVES TOR COMPANIES IS ON THE ASSESSEE. THE HONBLE COURT HAS HELD THAT THE A SSESSEE IS UNDER LEGAL OBLIGATION TO PROVE THE RECEIPT OF SHARE CAPI TAL/PREMIUM TO THE SATISFACTION OF THE ASSESSING OFFICER, FAILURE OF W HICH, WOULD JUSTIFY ADDITION OF THE SAID AMOUNT TO THE INCOME OF THE AS SESSEE. IN THE PRESENT CASE, THOUGH THE ASSESSEE HAS RECEIVED AN AMOUNT TH ROUGH BANKING CHANNEL BUT THE ANALYSIS OF THE FINANCIAL STATEMENT S OF INVESTOR COMPANY DO NOT WARRANT ANY JUSTIFICATION FOR HAVING INVESTE D IN THE INVESTEE COMPANY AT A HUGE PREMIUM OF RS.90 PER SHARE, SPECI FICALLY KEEPING IN VIEW THE FACT THAT INVESTEE COMPANY IS ALSO NOT ENG AGED IN SIGNIFICANT ACTIVITIES. THEREFORE, IN VIEW OF THE FACTS AND CIR CUMSTANCES, THE APPEAL OF THE ASSESSEE IS DISMISSED. 5. FINALLY, THE APPEAL FILED BY THE ASSESSEE IS DIS MISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 09/08/ 2019. SD/- SD/- [BHAVNESH SAINI] [T.S. KAPOOR] JUDICIAL MEMBER ACCOUNTANT MEMBER DELHI; DATED: 09/08/2019. F{X~{T? F{X~{T? F{X~{T? F{X~{T? FA FA FA FA P.S P.SP.S P.S 6 ITA NO.4 02/DEL/2015 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI