DCIT, New Delhi V. M/s. Global Build Well (India) Ltd, New Delhi

ITA 4210/DEL/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58531 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-01-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 10-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALIL MISHRA
• Assessee Lawyers: SHR
• Keywords: Onus to prove
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI A.N. PAHUJA ITA NO. 4210/DEL/2010 ASSTT. YR: 2003-04 DCIT, CIRCLE 12(1), VS. M/S GLOBAL BUILDWELL (IN DIA) LTD., NEW DELHI. 31/115, EAST PATEL NAGAR, NEW DELHI. PAN/GIR NO. AABCG9219R (APPELLANT) ( RESPONDENT ) APPELLANT BY : SHRI SALIL MISHRA SR. DR RESPONDENT BY : SHRI SALIL AGARWAL ADV. SHRI RAVI PRATAP MALL ADV. & SHRI SHAILESH GUPTA CA O R D E R PER R.P. TOLANI, J.M : THIS IS REVENUES APPEAL AGAINST CIT(A)S ORDER DAT ED 8-6-2010 RELATING TO A.Y. 2003-04. FOLLOWING GROUNDS ARE RAI SED: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER OF THE CIT(A) IS WRONG, PERVERSE, ILLEGAL AND AGAINST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASIDE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 1,20,00,000/- MADE BY THE AO ON ACCOUNT OF INCOME F ROM UNDISCLOSED SOURCES U/S 68 OF THE IT ACT 1961. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 2,40,000/- MADE BY THE AO ON ACCOUNT OF UNEXPLAINED EXPENDITUR E. 2. BRIEF FACTS ARE: THE ASSESSEE COMPANY IN THIS YE AR RECEIVED AN AMOUNT OF RS. 1,20,00,000/- BY WAY OF SHARE CAPITAL. THE A SSESSEES RETURN 2 ORIGINALLY WAS ACCEPTED U/S 143(1). SUBSEQUENTLY, O N AN INFORMATION PASSED ON BY THE INVESTIGATION WING TO THE AO ALLEGING THA T THE ANTECEDENTS OF SHARE APPLICANTS WAS DOUBTFUL, ASSESSMENT WAS REOPE NED. DURING THE COURSE OF REASSESSMENT, ASSESSEE ON REQUISITION OF AO, SUB MITTED COPIES OF THE FOLLOWING DOCUMENTS IN SUPPORT OF SHARE APPLICANTS : I) CONFIRMATION OF PAYMENTS, WHICH WERE MADE BY CHEUQE S, GIVING DETAILS OF CHEQUES. II) COPY OF THE BANK ACCOUNTS OF THE SHARE APPLICANTS. III) COPIES OF APPLICATION FOR ALLOTMENT OF SHARES. IV) COPIES OF ANNUAL ACCOUNTS OF THE SHARE APPLICANT. V) COPIES OF THE RETURN OF INCOME OF THE SHARE APPLICA NTS. VI) AFFIDAVIT OF SHARE APPLICANTS. 2.1. AO, HOWEVER, ENQUIRED FURTHER IN THESE SHARE APPLICANTS AND WAS OF THE VIEW THAT THE AMOUNT WAS GIVEN BY SHARE APPLICA NTS BY TRANSFER OF MONEY FROM ONE COMPANY TO ANOTHER, THE DETAILS OF TRAIL A RE LISTED IN HIS ORDER. ACCORDING TO AO, ASSESSEE COULD NOT PRODUCE THESE P ERSONS DESPITE VARIOUS OPPORTUNITIES. THE AFFIDAVITS FILED BY ASSESSEE, AC CORDING TO AO WERE NOT SUFFICIENT TO ESTABLISH THEIR EXISTENCE AND IN THE ABSENCE OF THEIR ATTENDANCE IT WAS HELD THAT THEIR IDENTITY WAS NOT ESTABLISHED BE YOND DOUBT. ON THE ISSUE OF GENUINENESS, AO THOUGH ADMITTED THAT THE MONEY R OUTED THROUGH BANK ACCOUNTS BUT THE LONG TRAIL OF TRANSFER OF MONEY F ROM ONE ACCOUNT TO ANOTHER AND DEPOSIT OF CASH IMMEDIATELY IN ORIGINAL BANK AC COUNT, INDICATED THAT THE MONEY ORIGINATED FROM ONE MOHAN ENTERPRISES LTD., W HICH WAS CONTROLLED BY ONE SHRI SANJAY MOHAN AGARWAL. ACCORDING TO AO, DUE TO THESE FACTORS THE GENUINENESS OF THE TRANSACTION WAS ALSO QUESTIO NABLE. 2.2. ON THE ISSUE OF CREDITWORTHINESS ALSO, IT WAS HELD THAT STATEMENTS OF AUDITED ACCOUNTS OF THE SHARE APPLICANTS, FILED BY ASSESSEE, WERE ONLY INSTRUMENT OF WINDOW DRESSING AND NOT CREDIBLE. TH E ABOVE SHARE 3 APPLICATION MONEY WAS ADDED ACCORDINGLY AS UNEXPLA INED CASH CREDITS U/S 68. 2.3. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL BEF ORE THE CIT(A), WHEREIN IT REITERATED ITS SUBMISSIONS AND RELIED ON FOLLOW ING JUDGMENTS - CIT VS. STELLER INVESTMENT LTD. (1991) 192 ITR 287 (DEL.) - CIT VS. DIVINE LEASING & FINANCE LTD. ORDER DATED 2 1-1-08 BY THE SUPREME COURT IN APPEAL NO. CC 375/2008. - CIT VS. GENERAL EXPORT CREDIT LTD. ORDER DATED 10-3 -2008 OF THE SUPREME COURT IN CC NO. 21349/2007. - CIT VS. LOVELY EXPORTS (P) LTD. ORDER DATED 1-1-200 8 OF THE SUPREME COURT IN CC 11993/2007 - CIT VS. M/S PONDY METAL & ROLLING MILLS (P) LTD. OR DER OF SUPREME COURT DATED 8-1-2008 IN CC 12860/2007. - CIT VS. KOLKATA VS. SHIPRA RETAILERS (P) LTD. OF SU PREME COURT DATED 21-1-08 IN CC NO. 451`/2008. 2.4. BEFORE CIT(A), THE ASSESSEE PLEADED THAT SEC. 68 CONTEMPLATES DISCHARGE OF PRIMA FACIE BURDEN IN RESPECT OF THE IDENTITY OF THE SHARE APPLICANTS, GENUINENESS OF TRANSACTION AND THEIR CR EDITWORTHINESS. ALL THE THREE INGREDIENTS WERE AMPLY FULFILLED BY THE ASSES SEE BY WAY OF FILING OF RELEVANT DOCUMENTS. CIT(A) RELYING ON THE JUDGMENTS OF HONBLE DELHI HIGH COURT IN THE CASE OF VALUE CAPITAL SERVICES 307 ITR 364; CIT VS. DWEARKADHISH FINANCIAL SERVICES 330 ITR 298; AND LO VELY EXPORTS (SUPRA) DELETED THE ADDITION BY FOLLOWING OBSERVATIONS: RELYING ON THE VARIOUS DOCUMENTS PLACED ON RECORD AND THE PRINCIPLE LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF M/S LOVELY EXPORT PVT. LTD. WHICH IS DIRECTLY ON THE ISSUE OF SHARE CAPITAL AND IN VIEW OF THE DECISIONS CITED AB OVE THE ADDITION ON ACCOUNT OF SHARE CAPITAL CANNOT BE SUST AINED. THE AO HAS NO WHERE PROVED THAT DOCUMENTS IN SUPPORT OF THE IDENTITY OF THE PARTIES HAVE NOT BEEN PLACED ON REC ORD OR THEY WERE FORGED DOCUMENTS. THE AO ALSO HAS NOT BROUGHT ANY EVIDENCE ON RECORD REGARDING THE FACTS THAT THE SHA RE APPLICANTS 4 WERE NOT CREDITWORTHY OR GENUINE, DESPITE THE FACT THAT THEIR PAN AND COPIES OF I.T. RETURN WERE SUBMITTED BY THE APPELLANT. AFTER CONSIDERING THE FACTS ON RECORD JUDICIAL PRON OUNCEMENTS OF THE JURISDICTIONAL HIGH COURT AND HONBLE SUPREM E COURT IT CAN BE CONCLUDED THAT THE APPELLANT HAS UNDOUBTEDLY PROVED THE IDENTITY OF THE SHARE APPLICANT. ONCE THE IDENTITY OF THESE SHARE APPLICANTS IS PROVED, NO ADDITION CAN BE MADE IN TH E HANDS OF THE APPELLANT EVEN IF THE SHARE APPLICANTS HAVE BEE N FOUND TO BE PERSONS OF NO MEANS UNTIL AND UNLESS IT IS OTHERWIS E PROVED BY THE REVENUE. THE REVENUE COULD NOT PROVE THAT THE M ONEY RECEIVED BY THE APPELLANT IN THE FORM OF SHARE APPL ICATION MONEY HAS COME FROM ITS OWN SOURCES. IN VIEW OF THE DISCUSSION MADE ABOVE THE ADDITION O F RS. 1.20 CRORES IS DELETED. HOWEVER, THE AO IS FREE TO TAKE APPROPRIATE ACTION AS MAY BE PERMISSIBLE UNDER THE LAW IN THE CASE OF VARIOUS SHARE HOLDERS ALLEGED TO BE ENTRY P ROVIDERS. AGGRIEVED, REVENUE IS BEFORE US. 3. LEARNED DR RELIED ON THE ORDER OF AO. 4. LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, CONTENDS THAT THE BURDEN AS SET OUT BY SEC. 68 OF THE I.T. ACT WAS DU LY DISCHARGED BY THE ASSESSEE AS UNDER: (I) IDENTITY : IDENTITY WAS PROVED BY WAY OF THE INCOME-TAX RETU RNS; AUDITED STATEMENTS AND THE BANK ACCOUNTS OF THE SHA RE APPLICANTS. THE COMPANY IS A SEPARATE LEGAL ENTITY THAN SHARE H OLDERS AND IT CANNOT ASK THE SHAREHOLDERS TO DEMONSTRATE THE SOUR CE OF THE SOURCE OF THEIR SHARE APPLICATION MONIES. AO FROM HIS SIDE HAS HIMSELF ACCEPTED THAT THE MONEY CAME TO ASSESSEES BANK ACC OUNT BY TRANSFER FROM SEVERAL BANK ACCOUNTS. THIS ADMISSION COUPLED WITH THE FACT THAT ASSESSEE PRODUCED ANNUAL ACCOUNTS, IN COME-TAX RETURNS, PAN NUMBERS AND CONFIRMATIONS OF THE SHARE APPLICANTS, DISCHARGED THE BURDEN CAST ON THE ASSESSEE. (II) CREDITWORTHINESS : THE ASSESSEE HAS RECEIVED THE SHARE APPLICATION MONEY FROM THE EXISTING BANK ACCOUNTS OF THE SHARE APPLICANTS, WHO IN TURN RECEIVED THE MONEY FROM OTHER COMPANIES . THE MONEY 5 TRAIL ITSELF DEMONSTRATES THAT THE SHARE APPLICANTS RECEIVED THE MONEY BY WAY OF BANKING CHANNEL FROM OTHER COMPANIE S; THEY DEPOSITED THE MONEY IN THEIR BANK ACCOUNTS, IT WAS BEYOND THE PROWESS OF THE ASSESSEE TO DISCOVER THE SOURCE OF APPLICANTS SOURCE. THEREFORE, ADVERSE INFERENCE DRAWN BY THE A O ON THESE FACTS IS UNCALLED FOR. THE ASSESSEES BURDEN TO PRO VE THE CREDITWORTHINESS IS DULY DISCHARGED. (III) GENUINENESS OF THE TRANSACTION : ASSESSEE HAS FILED COPIES OF THE BANK ACCOUNTS OF THE SHARE APPLICANTS. THE SHARE A PPLICATIONS, ALLOTMENTS AND CONFIRMATIONS HAVE BEEN FILED. ALL T HESE EVIDENCES CLEARLY DEMONSTRATE THE GENUINENESS OF THE TRANSACT ION. 4.1. AO ON THE BASIS OF SURMISES AND SUSPICION HAS HELD THAT ASSESSEE HAS NOT DISCHARGED THE BURDEN, WHICH IS NOT TENABLE. CI T(A) RELYING ON VARIOUS JUDGMENTS HAS HELD THAT THE BURDEN AS CONTEMPLATED BY SEC. 68 IS DULY DISCHARGED BY THE ASSESSEE AND THE ADDITION HAS BEE N DELETED. RELIANCE IS PLACED ON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DWARKADHISH INVESTMENT P. LTD. & ANR. (2011) 330 IT R 298, HOLDING AS UNDER: IN OUR OPINION, AS SECTION 68 OF ACT, 1961 HAS BEE N INTERPRETED AS RECENTLY AS 2008 BY A DIVISION BENCH OF THIS COU RT IN CIT V. DIVINE LEASING AND FINANCE LTD. (2008) 299 ITR 268 AFTER CONSIDERING ALL THE RELEVANT JUDGMENTS, WE DO NOT H AVE TO RECONSIDER ALL THE JUDGMENTS REFERRED TO BY MR. SAH NI WHICH ARE PRIOR IN DATE AND TIME TO THE AFORESAID JUDGMENT. I N FACT, A SPECIAL LEAVE PETITION FILED AGAINST THE SAID DIVIS ION BENCH JUDGMENT WAS DISMISSED BY THE SUPREME COURT BY WAY OF A SPEAKING ORDER IN CIT V. LOVELY EXPORTS P. LTD. (20 08) 216 CTR 195 (SC); (2009) 319 ITR (ST.)5, THE SUPREME CO URT IN LOVELY EXPORTS (P) LTD. (2009) 319 ITR (ST.) 5, HAS HELD AS UNDER: 2. CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER SECTION 68 OF INCOME- TAX ACT, 1961? WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE 6 SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE-COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE ASSESSING OFFICER THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT. CONSEQUENTLY, THE DOCTRINE OF MERGER WOULD APPLY AN D THE JUDGMENT OF THE SUPREME COURT IN LOVELY EXPORTS P L TD. (2009) 319 ITR (ST.) 5 WOULD COVER THE FIELD WITH R EGARD TO INTERPRETATION OF SECTION 68 OF THE ACT, 1961. IN ANY MATTER, THE ONUS OF PROOF IS NOT A STATIC ON E. THOUGH IN SECTION 68 PROCEEDINGS, THE INITIAL BURDEN OF PROOF LIES ON THE ASSESSEE YET ONCE HE PROVES THE IDENTITY OF THE CRE DITORS/ SHARE APPLICANTS BY EITHER FURNISHING THEIR PAN NUMBER OR INCOME-TAX ASSESSMENT NUMBER AND SHOWS THE GENUINENESS OF TRAN SACTION BY SHOWING MONEY IN HIS BOOKS EITHER BY ACCOUNT PAY EE CHEQUE OR BY DRAFT OR BY ANY OTHER MODE, THEN THE ONUS OF PROOF WOULD SHIFT TO THE REVENUE. JUST BECAUSE THE CREDITORS/ S HARE APPLICANTS COULD NOT BE FOUND AT THE ADDRESS GIVEN, IT WOULD N OT GIVE THE REVENUE THE RIGHT TO INVOKE SECTION 68. ONE MUST NO T LOSE SIGHT OF THE FACT THAT IT IS THE REVENUE WHICH HAS ALL TH E POWER AND WHEREWITHAL TO TRACE ANY PERSON. MOREOVER, IT IS SE TTLED LAW THAT THE ASSESSEE NEED NOT TO PROVE THE SOURCE OF SOURCE . 4.2. FURTHER RELIANCE IS PLACED ON HONBLE DELHI HI GH COURT JUDGMENT IN THE CASE OF OASIS HOSPITALITIES P. LTD. (2011) 333 ITR 119. 5. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE RELEVANT MATERIAL AVAILABLE ON RECORD. IN OUR CONSIDERED VIE W THE ASSESSEE BY PRODUCING THE ABOVE EVIDENCES, HAS DISCHARGED THE I NITIAL ONUS CAST ON IT FOR PROVING THE SHARE APPLICATION MONIES IN TERMS OF SE CTION 68. THE IDENTITY OF THE SHARE APPLICANTS HAS BEEN DEMONSTRATED BY THE A SSESSEE. THE BURDEN OF PROVING THE GENUINENESS OF THE TRANSACTION IS DISCH ARGED, BY SHOWING THAT THE MONEY FROM BANK ACCOUNTS CAME TO ASSESSEES ACCOUNT . THE CREDITWORTHINESS 7 IS PROVED BY THE ASSESSEE BY WAY OF AUDITORS STATE MENT, COPIES OF INCOME- TAX RETURNS AND CONFIRMATIONS. SECTION 68 LAYS DOWN INITIAL BURDEN AND DOES NOT CONTEMPLATE INFALLIBLE BURDEN ON THE ASSESSEE T O PROVE THE SOURCE OF SOURCE OF THE SHARE APPLICANTS AND EVERY BIT OF TRA NSACTION WHICH MAY BE PERCEIVED BY THE AO. THE NATURE OF BURDEN IS INITIA L IN NATURE, WHICH, IN OUR CONSIDERED OPINION, HAS BEEN DISCHARGED BY THE ASSE SSEE. IN VIEW OF THESE CIRCUMSTANCES WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) DELETING THESE ADDITIONS. WE UPHOLD THE SAME. 6. APROPOS SECOND GROUND, THE ADDITION OF RS. 2, 40,000/- HAS BEEN MADE BY THE AO ON ACCOUNT OF ESTIMATED COMMISSION W HICH MIGHT HAVE BEEN PAID @ 2% ON 1,20,00,000/-. IN OUR VIEW THE AD DITION IS PURELY A GUESS WORK. BESIDES, WE HAVE ALREADY UPHELD THE ORDER OF CIT(A), DELETING THE ADDITION, IN VIEW THEREOF, THIS GROUND OF REVENUE I S ALSO DISMISSED. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED. PRONOUNCED IN OPEN COURT ON 25-01-2012. SD/- SD/- ( A.N. PAHUJA ) ( R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25-01-2012. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR 8