ITO, New Delhi V. M/s. Mercury Fabrics Creationsw (P) Ltd., New Delhi

ITA 4154/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53196 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 15-11-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 08-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Assessee Lawyers: DR RAKESH GUPTA
• Keywords: Unexplained cash credit; Share purchase agreement; Additional evidence; Assessment record
• Section: 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E DELHI) BEFORE SHRI A.D. JAIN AND SHRI SHAMIM YAHYA ITA NO. 4154(DEL)2010 ASSESSMENT YEAR: 2007-08 INCOME TAX OFFICER, M/S. MERCURY FAB RICS CREATION (P)LTD., WARD 6(4), NEW DELHI. V. D-58, OKHLA INDL.ARE A,PHASE 1, N.DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI R.S. NEGI, SR. DR RESPONDENT BY: DR. RAKESH GUPTA, A DVOCATE ORDER PER A.D. JAIN, J.M . THIS IS DEPARTMENTS APPEAL FOR THE ASSESSMENT YEAR 2007-08. THE GROUNDS TAKEN BY THE DEPARTMENT ARE AS UNDER:- 1. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AND CO NTRARY TO THE FACTS AND LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` 90,00,000/- MADE BY THE ASSESSING OFFICER U/S 68 OF THE I.T. ACT BEING THE UNEXPLAINED CASH CREDITS. 2.1 THE LD. CIT(A) ERRED IN APPRECIATING THE FACTS THAT THE ASSESSEE DID NOT DISCHARGE THE ONUS OF PROVING THE CREDIT-WO RTHINESS OF THE CREDITORS AND GENUINENESS OF THE TRANSACTIONS. TH E LD. CIT(A) ERRED IN LAW BY ACCEPTING ADDITIONAL EVIDENCE/DOCUMENTS I N VIOLATION OF THE ITA 4154(DEL)2010 2 PROVISION OF RULE 46A OF THE I.T. RULES WITHOUT OBT AINING ANY REPORT FROM THE ASSESSING OFFICER. 2. THE FACTS ARE THAT DURING THE YEAR, THE ASSESSEE CLAIMED TO HAVE RECEIVED SHARE CAPITAL OF ` 15,00,000/- AND SHARE PREMIUM OF ` 75,00,000/- FROM SIX PERSONS, I.E., M/S. GANGA INFIN (P)LTD., K .R. FINCAP PVT. LTD., BIC CONSULTANTS PVT. LTD., KESARI LAB (ELECTRONICS)PVT. LTD., DREAMLAND SOLUTION PVT. LTD. AND SHRINIWAS LEASING & FINANCE LTD. SU BSEQUENT TO ISSUANCE OF NOTICE U/S 133(6) OF THE I.T. ACT TO THESE PARTIES BY THE AO, THE ASSESSEE WAS ASKED TO PRODUCE THE PRINCIPAL OFFICERS/DIRECTORS O F THESE COMPANIES FOR VERIFICATION OF THE CLAIM. IT WAS OBSERVED THAT TH OUGH THE CONFIRMATORY LETTERS WERE RECEIVED FROM THE PARTIES, THEY HAD FI LED A COPY OF THEIR RETURN FOR ASSESSMENT YEAR 2005-06 ONLY; THAT EVEN IN THAT YEAR, THESE PERSONS HAD DECLARED ONLY MARGINAL INCOMES; THAT IT WAS NOTICED FROM THE COPY OF BANK ACCOUNT FILED THAT THERE WERE CREDIT ENTRIES OF IDE NTICAL AMOUNTS WHICH IS BEFORE THE DATE OF THE ALLEGED INVESTMENT IN SHARE CAPITAL OF THE ASSESSEE. THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE SHARE APPLICANTS WERE COMPANIES REGISTERED WITH THE ROC, HAVING PAN AND A SSESSED TO INCOME TAX; AND THAT IT WAS UNABLE TO PRODUCE THE DIRECTOR S OF THESE COMPANIES. IT WAS IN THESE FACTS THAT THE AO APPLIED THE PROVISIO NS OF SECTION 68 OF THE I.T. ACT, HELD THE CLAIM OF THE ASSESSEE TO BE UNVERIFIE D. IT WAS HELD THAT THE ITA 4154(DEL)2010 3 INGREDIENTS OF SECTION 68 OF THE ACT HAD NOT BEEN E STABLISHED BY THE ASSESSEE. AS SUCH, THE AO TREATED THE ENTIRE AMOUNT OF ` 90,00,000/- AS UNEXPLAINED CASH CREDITS U/S 68 OF THE ACT. 3. BY VIRTUE OF THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE ADDITION OF ` 90,00,000/- MADE BY THE AO. 4. THE LD. DR HAS CONTENDED BEFORE US THAT THE LD. CIT(A) HAS ERRED IN APPLYING THE DECISION OF THE HONBLE SUPREME COURT IN LOVELY EXPORTS, 216 CTR 195(SC); THAT IN THAT CASE, THE ISSUE WAS A PUBLIC ISSUE, WHEREAS IT IS NOT THE CASE HEREIN; THAT HERE, THE ONUS ON THE ASSESSEE IS STRICTER THAN THAT IN LOVELY EXPORTS (SUPRA); THAT THIS ONUS HAD NOT BEEN DISCHARGED; THAT THE DELHI BENCH OF THE TRIBUNAL, VIDE ITS ORDER DATED 3 1.3.11, IN THE CASE OF SHELLY MARKETING PVT. LTD., NEW DELHI V. ACIT, CIR . 23(1), NEW DELHI IN ITA NO. 69(DEL)2010, FOR ASSESSMENT YEAR 2001-02 (C OPY PLACED ON RECORD) HAS HELD IN FAVOUR OF THE DEPARTMENT. IT HAS FURT HER BEEN SUBMITTED THAT THE LD. CIT(A) ERRED IN ACCEPTING THE ADDITIONAL EVIDEN CE IN VIOLATION OF THE PROVISIONS OF RULE 46 A OF THE I.T. RULES WITHOUT O BTAINING ANY REPORT FROM THE AO. 5. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE HAS SUBMITTED THAT THE ORDER PASSED BY THE LD. CIT(A) IS VERY MUC H IN ACCORDANCE WITH LAW AND DOES NOT REQUIRE ANY INTERFERENCE AT OUR HANDS; THAT THE LD. CIT(A) HAD ITA 4154(DEL)2010 4 NOT ADMITTED ANY ADDITIONAL EVIDENCE AND THEREFORE, THERE IS NO VIOLATION OF RULE 46A OF THE I.T. RULES. REFERRING TO THE DOCU MENTS FILED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW, COPIES WHERE OF HAVE BEEN FILED BEFORE US IN THE PAPER BOOK FILED BY THE ASSESSEE (APB F OR SHORT), THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT IN THE AUDITED BALANCE SHEET, THERE IS INCREASE IN THE SHARE CAPITAL OF ` 15,00,000/- AND SHARE PREMIUM OF ` 75,00,000/-; THAT IN THE LETTER ADDRESSED BY THE AS SESSEE TO THE AO EXPLAINING ABOUT THE SHARE CAPITAL AND SHARE PREMIUM, THE ASSE SSEE HAD GIVEN ALL DETAILS AND HAD ENCLOSED RETURN OF ALLOTMENT FILED WITH ROC ALONG WITH VARIOUS EVIDENCES ESTABLISHING THE IDENTITY OF THE SHAREHOL DERS; THAT THE DETAILS OF SHAREHOLDER COMPANIES HAD BEEN FILED, DISCLOSING TH E COMPLETE ADDRESSES AND VARIOUS EVIDENCES WERE FURNISHED SHOWING THAT THE A MOUNTS HAD BEEN FURNISHED SHOWING THAT THE AMOUNTS HAD BEEN RECEIVE D BY CHEQUES AND THAT THE SHAREHOLDER COMPANIES WERE ASSESSED TO TAX; THA T COPIES OF SHARE APPLICANTS, CONFIRMATIONS, AFFIDAVITS, BANK STATEME NTS AND ACKNOWLEDGEMENT OF THE RETURN OF THE SHAREHOLDER COMPANIES, WHICH W ERE ASSESSED TO TAX, WERE FILED REGARDING THE AMOUNT OF ` 15,00,000/- QUA M/S. GANGA INFIN (P)LTD.; THAT THE EVIDENCES WITH REGARD TO K.R. FINCAP PVT. LTD.( ` 12,00,000/-), BIC CONSULTANTS PVT. LTD.( ` 18,00,000/-), KESARI LAB (ELECTRONICS)PVT. LTD.( ` ITA 4154(DEL)2010 5 18,00,000), DREAMLAND SOLUTION PVT. LTD.( ` 12,00,000 ) AND SHRINIWAS LEASING & FINANCE LTD.( ` 15,00,000) WERE FILED; THAT THE RETURN OF ALLOTMENT FILED BEFORE THE ROC WAS FILED; THAT THE FULL EXPLA NATION REGARDING SHARE CAPITAL WAS FILED BEFORE THE AO, EXPLAINING THAT TH E SIX SHAREHOLDER COMPANIES HAD ALREADY SENT CONFIRMATIONS DIRECTLY T O THE AO; THAT COPY OF TIN OBTAINED FROM INTERNET TO PROVE THAT THE SHAREH OLDER COMPANIES EXISTED ON THE DEPARTMENTS ASSESSMENT RECORDS, WAS ALSO FI LED; THAT THE AO ISSUED NOTICES U/S 133(6) TO THE SHAREHOLDER COMPANIES; TH AT M/S. K.R. FINCAP PVT. LTD., ALONG WITH ITS REPLY, ENCLOSED COPY OF BANK S TATEMENT, SHARE APPLICATION FORM, SHARE CERTIFICATE AND DETAILS OF THE DIRECTOR ; THAT THE OTHER SHAREHOLDER COMPANIES ALSO FILED SIMILAR EVIDENCES BEFORE THE A O; THAT HOWEVER, THE AO OBSERVED THAT THE RETURN OF INCOME OF ALL SHAREHOLD ER COMPANIES SHOWED ONLY MARGINAL INCOME AND THAT TOO, FOR ASSESSMENT YEAR 2 005-06; THAT THE AO ALSO OBSERVED THAT THE BANK ACCOUNTS OF THE SHAREHOLDER COMPANIES PROVED THAT CREDIT ENTRIES OF THE IDENTICAL AMOUNTS WERE APPEAR ING IN THE BANK ACCOUNTS OF THE SHAREHOLDER COMPANIES; THAT THE AO HAS ALSO OBSERVED THAT THE ASSESSEE WAS ASKED TO PRODUCE THE DIRECTORS OF THE SHAREHOLDER COMPANIES, WHICH THE ASSESSEE DID NOT DO; THAT ALL THESE OBSER VATIONS OF THE AO HAVE BEEN DULY MET BY THE LD. CIT(A); THAT THE ASSESSEE HAS DULY DISCHARGED ITS ONUS U/S 68 OF THE ACT BY PROVIDING ALL THE NECESSA RY COMPLETE EVIDENCES ITA 4154(DEL)2010 6 BEFORE THE AO; THAT THE AO EXERCISED HIS POWERS U/S 133(6) OF THE ACT AND ALL REQUISITE INFORMATION WAS CALLED FOR, WHICH WAS COMPLIED WITH; THAT THERE WAS NO EVIDENCE BROUGHT ON RECORD BY THE AO THAT TH E ASSESSEE WAS IN ANY WAY INVOLVED IN THE MONEY LAUNDERING OPERATION AND ACCOMMODATION ENTRY OF SHRI MAHESH GARG; THAT NOTHING IN THIS REGARD WA S MADE AVAILABLE TO THE ASSESSEE; AND THAT THEREFORE, THE LD. CIT(A) CANNOT IN ANY MANNER BE SAID TO HAVE ERRED IN DELETING THE ADDITION WRONGLY MADE. 6. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE M ATERIAL ON RECORD. WE FIND THAT THERE IS NO VIOLATION OF RULE 46A OF T HE I.T. RULES. BEFORE THE AO, THE ASSESSEE HAD CATEGORICALLY SUBMITTED ALL T HE EVIDENCES REQUIRED U/S 68 OF THE ACT. APB 1 TO 15 IS A COPY OF THE AUDITE D BALANCE SHEET. THIS BALANCE SHEET (AT APB 6&8) SHOWS THERE IS INCREASE IN THE SHARE CAPITAL OF ` 15,00,000/- AND SHARE PREMIUM OF ` 75,00,000/-. AT APB 16 IS A LETTER ADDRESSED BY THE ASSESSEE TO THE AO. IN THIS LETTE R, THE ASSESSEE HAS EXPLAINED ABOUT THE SHARE CAPITAL AND SHARE PREMIUM . THE RETURN OF ALLOTMENT FILED WITH ROC ALONG WITH COMPLETE EVIDEN CE REGARDING THE IDENTITY OF THE SHAREHOLDER COMPANIES WERE ALSO FIL ED. APB 17 CONTAINS DETAILS OF THE SHAREHOLDER COMPANIES, GIVING COMPL ETE ADDRESSES. THE EVIDENCE SHOWING THAT THE AMOUNT HAD BEEN RECEIVED BY CHEQUES AND THAT THE SHAREHOLDER COMPANIES ARE ASSESSED TO TAX, WAS ALSO FILED. APB 18 TO 22 ARE ITA 4154(DEL)2010 7 THE COPIES OF SHARE APPLICATION, CONFIRMATION, AFFI DAVIT, BANK STATEMENTS AND ACKNOWLEDGEMENT OF RETURN OF THE SHAREHOLDER COMPAN IES. APB 23 TO 27 IS THE EVIDENCE REGARDING M/S. K.R. FINCAP PVT. LTD. APB 28 TO 32 CONTAIN THE EVIDENCE PERTAINING TO BIC CONSULTANTS PVT. LTD . APB 33 TO 37 IS THE EVIDENCE REGARDING KESARI LAB (ELECTRONICS)PVT. LTD . APB 38 TO 42 COMPRISE EVIDENCE PERTAINING TO DREAMLAND SOLUTION PVT. LTD. APB 43 TO 47 CONTAIN THE EVIDENCE OF SHRINIWAS LEASING & FINANCE LTD. AP B 48 TO 52 IS A COPY OF FORM NO.2, I.E., THE RETURN OF ALLOTMENT FILED BEFO RE THE ROC. APB 53 TO 54 IS THE ASSESSEES SUBMISSIONS BEFORE THE AO, WHEREI N EXPLANATION ABOUT THE SHARE CAPITAL HAS BEEN GIVEN, STATING THAT ALL THE SIX SHAREHOLDER COMPANIES HAD ALREADY SENT CONFIRMATIONS DIRECTLY TO THE AO. APB 55 TO 60 IS A COPY OF TIN OBTAINED FROM INTERNET, SHOWING THE NAMES OF SHAREHOLDER COMPANIES EXISTED ON THE DEPARTMENTAL RECORD. APB 63 TO 68 ARE COPIES OF NOTICES ISSUED BY THE AO TO THE SHAREHOLDER COMPANIES U/S 1 33(6) OF THE ACT. APB 69 TO 73 IS A REPLY FILED BY M/S. K.R. FINCAP PVT. LTD. BEFORE THE AO, GIVING COPY OF BANK STATEMENT, SHARE APPLICATION FORM, SHA RE CERTIFICATE AND DETAILS OF THE DIRECTOR. LIKEWISE, COPIES OF EVIDENCES FI LED BY THE REST OF THE COMPANIES ARE ALSO CONTAINED IN THE ASSESSEES PAPE R BOOK. 7. IT IS THUS SEEN THAT THE ASSESSEE HAS FURNISHED ALL DETAILS REQUIRED U/S 68 OF THE ACT BEFORE THE AO, PERTAINING TO THE SHAREHO LDER COMPANIES. THESE ITA 4154(DEL)2010 8 DETAILS INCLUDE THE NAMES, ADDRESSES, PANS, AMOUNT INVESTED, CHEQUE/BANK PARTICULARS, SHARE APPLICATION FORMS, CONFIRMATIONS , AFFIDAVITS, BANK STATEMENTS AND ACKNOWLEDGEMENTS OF FILING RETURN OF INCOME. FURTHER, THE ASSESSEE ALSO FILED COPY OF RETURN FOR ALLOTMENT OF SUCH SHARES WITH ROC. THE LD. CIT(A) TOOK THE FACTUM OF THE ASSESSEE HAVI NG FILED ALL THESE DETAILS AND EVIDENCES BEFORE THE AO UNDER CONSIDERATION AND IT WAS ON THIS BASIS THAT SHE RIGHTLY OBSERVED THAT THE ASSESSEE HAD DIS CHARGED ITS PRELIMINARY ONUS U/S 68 OF THE ACT. 8. THE LD. CIT(A), THEREFORE, RIGHTLY APPLIED THE D ECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (SUPR A). THEREIN, IT HAS BEEN HELD THAT WHERE THE ASSESSEE HAS RECEIVED SHAR E APPLICATION MONEY FROM ALLEGED BOGUS SHAREHOLDERS AND THE DETAILS OF SUCH SHAREHOLDERS ARE FILED BEFORE THE AO, THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW; AND THAT IT IS FOR THE DEPARTMENT TO SHOW THAT THE INVESTMENT MADE BY THE APPLICANTS FOR SHARE CAPITAL ACTUALLY EMANATED FROM THE COFFERS OF THE ASSESSEE COMPANY. 9. APROPOS SHELLY MARKETING PVT. LTD.(SUPRA), REL IED ON BY THE DEPARTMENT, THE SAME IS NOT APPLICABLE TO THE PRES ENT CASE, ON FACTS. THEREIN, THE IDENTITY OF THE INVESTOR HAD NOT BEEN ESTABLISHED. IT IS NOT SO HERE. THE ASSESSEE HAS PROVIDED ALL POSSIBLE EVID ENCE. IN THE PROCEEDINGS ITA 4154(DEL)2010 9 U/S 133(6) OF THE ACT THE INVESTOR COMPANIES/SHAREH OLDERS HAD ALSO SUPPLIED ALL INFORMATION. THEREFORE, LOVELY EXPORTS (SUP RA) IS SQUARELY APPLICABLE AND HAS RIGHTLY APPLIED BY THE LD. CIT(A). 10. IN VIEW OF ABOVE, FINDING NO MERIT THEREIN, THE GRIEVANCE SOUGHT TO BE RAISED BY THE DEPARTMENT IS REJECTED. 11. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.11.2011. SD/- SD/- (SHAMIM YAHYA) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 18.11.2011 *RM COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR