ITO, New Delhi V. M/s. Focus Exports (P) Ltd., New Delhi

ITA 423/DEL/2010

• Counselvise Citation: 42320114 RSA 2010
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 29-08-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 29-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Accommodation entries; Reassessment proceedings
• Section: 147; 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH B DELHI ] BEFORE SHRI R. P. TOLANI, JM AND SHRI K. D. RANJ AN, AM I. T. APPEAL NOS. 423 & 424 (DEL) OF 2010. ASSESSMENT YEARS : 2001-02 & 2002-03. THE INCOME-TAX OFFICER, M/ S. FOCUS EXPORTS (P) LTD., W A R D : 11 (3), VS. 84 , MBLOCK, COMNMERCIAL COMPLEX, N E W D E L H I. GREATER KAILASH, P A R T : II, N E W D E L H I 110 048. PAN / GIR N O. AAA CF 5666 Q. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI K. SAMPATH, ADV.; DEPARTMENT BY : SHRI ROHIT GARG, SR. D. R. O R D E R. PER K. D. RANJAN, AM : THESE APPEALS BY THE REVENUE FOR ASSESSMENT YEARS 2001-02 AND 2002-03 ARISE OUT OF ORDER OF THE LD. CIT (APPEALS)XIII, NEW DELHI. 2. THE COMMON GROUNDS OF APPEAL [EXCEPT FOR THE AMO UNTS] RAISED BY THE REVENUE READ AS FOLLOWS :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE ORDER OF THE LD. CIT (APPEALS) IS WRONG, PERVERSE, ILLEGAL AND AGAIN ST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASIDE; 2. ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE ADDITION MADE UNDER SECTI ON 68 OF THE I. T. ACT, 1961 AMOUNTING TO RS.15,50,200 / RS.55,66,995/-; 2 I. T. APPEAL NOS. 423 & 424 (DEL) OF 2010. 3. ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE CIT (APPEALS) HAS ERRED IN APPLYING THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF M/S. LOVELY EXPORTS PVT. LTD. TO THE FACTS OF THE CASE WHEREAS IN THAT CASE NO FINDING HAD BEEN REACHED BY ANY AUTHORITY THAT THE SHARE APPLICATION TRANSACTIONS WERE SHAM AND A COVER FOR ACCOMMODATION ENTRIES RECEIVED BY THE ASS ESSEE I.E. A GARB UNDER WHICH THE MONEY OF THE BENEFICIARY ASSESSEE COMPANY IS IN TRODUCED IN THE FORM OF SHARE APPLICATION FROM THE ENTRY PROVIDER; 4. ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE CIT (APPEALS) HAS ERRED IN NOT CONSIDERING THE FACT THAT INVESTIGATIONS REV EALED REGULAR CASH DEPOSITS IN THE BANK ACCOUNTS OF SOME OF THE ALLEGED SHARE APPL ICANTS FOLLOWED BY IMMEDIATE TRANSFER ENTRIES OR VICE VERSA CORROBORATING THE FI NDINGS OF THE DIRECTORATE OF INVESTIGATION. 3. THE ONLY ISSUE, WHICH IS COMMON IN BOTH THE APPE ALS FOR CONSIDERATION RELATES TO ADDITION MADE UNDER SECTION 68 IN RESPECT OF SHARE APPLICATI ON MONEY RECEIVED BY THE ASSESSEE. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT ASSESSMENT WAS REOPENED UNDER SECTION 147 OF THE ACT ON THE BASIS OF INFORMATION RECEIVED FROM DIT [INVESTIGATI ON] THAT THE ASSESSEE HAD RECEIVED ACCOMMODATION ENTRY OF RS.5,00,000/- VIDE CHEQUE NO .431792 DATED 15/02/2001 FROM M/S. ARUN FINVEST P. LTD. DURING THE COURSE OF REASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF T RANSACTIONS. THE QUERY RAISED REMAINED UN- COMPLIED WITH. THE AO PASSED EX-PARTE ORDER MAKING ADDITION OF RS.15,50,200/- IN ASSESSMENT YEAR 2001-02. 4. SIMILARLY IN ASSESSMENT YEAR 2002-03 THE ASSESSE E RECEIVED ACCOMMODATION ENTRY OF RS.5,00,000/- VIDE CHEQUE NO. 868731 DATED 7/03/200 2 FROM M/S. TASHI CONTRACTOR P. LTD. AND RS.5,00,000/- VIDE CHEQUE NO. 1266 DATED 7/03/2 002 FROM M/S. BALDEV HARISH ELECTRICALS. THE ASSESSING OFFICER COMPLETED ASSESSMENT UNDER SE CTION 144 MAKING THE ADDITION OF RS.54,66,995/- ON ACCOUNT OF SHARE CAPITAL RAISED. 5. ON APPEAL IT WAS SUBMITTED THAT THE ASSESSEE FIL ED CONFIRMATIONS OF RESPECTIVE SHARE APPLICANTS ALONG WITH COPY OF INCOME-TAX RETURN, PA N CARD ETC. IT WAS, THEREFORE, SUBMITTED THAT THE IDENTITY OF SHARE APPLICANTS WAS PROVED. RELIA NCE WAS PLACED ON THE DECISION OF HONBLE 3 I. T. APPEAL NOS. 423 & 424 (DEL) OF 2010. SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS P. LTD. 216 CTR 195 (SC) IN SUPPORT OF HIS CONTENTION THAT WHERE IDENTITY OF SHARE APPLICA NT IS PROVED, ADDITION CANNOT BE MADE IN THE HANDS OF THE COMPANY. THE LD. CIT (APPEALS) ON CON SIDERATION OF SUBMISSIONS MADE BY THE ASSESSEE OBSERVED THAT RESPECTIVE SHARE APPLICANTS HAVE GIVEN CONFIRMATION, PAN CARDS, ADDRESS, ELECTION IDENTITY CARDS, COPY OF BANK ACCOUNTS AND, THEREFORE, IDENTITY OF THE SHARE APPLICANTS WAS PROVED. HE FURTHER NOTED THAT THE JUDGEMENT CITED BY THE AO IN THE ASSESSMENT ORDER WERE RELEVANT ONLY IN THE CONTEXT OF UN-SECURED LOANS AN D THE SAID RATIO COULD NOT BE APPLIED FOR SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE FOR ALLO TMENT OF SHARES. THE LD. CIT (APPEALS) RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS P. LTD. (SUPRA) DELETED THE ADDITION MADE IN BOTH THE ASSES SMENT YEARS. 6. BEFORE US THE LD. SR. DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUBMITTED THAT IDENTITY OF SHARE APPLICANTS HAD BEEN PROVED AND, THEREFORE, ADDITION CANNOT BE MADE IN THE HANDS OF THE ASSESSEE. HE PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CI T VS. LOVELY EXPORTS P. LTD. (SUPRA) AND LATEST DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ROCKFORD METAL & MINERALS LTD. 198 TAXMAN 497 (DEL). 7. WE HAVE HEARD BOTH THE PARTIES. IN THIS CASE TH E ASSESSEE HAD FILED COPY OF PAN NUMBER, BANK STATEMENT, CONFIRMATION FROM THE SHARE APPLICA NTS. THEREFORE, THE IDENTITY OF SHARE APPLICANTS IN BOTH THE YEARS STANDS PROVED. HONBL E SUPREME COURT IN THE CASE OF LOVELY EXPORTS (SUPRA) HAS HELD THAT WHERE IDENTITY OF THE SHARE APPLICANTS IS ESTABLISHED, ADDITION CANNOT BE MADE IN THE HANDS OF COMPANY. SIMILAR VIE W HAS BEEN TAKEN BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ROCKFORD METAL & MINER ALS LTD (SUPRA). RESPECTFULLY FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CI T VS. LOVELY EXPORTS P. LTD. (SUPRA) AND HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ROC KFORD METAL & MINERALS LTD (SUPRA) IT IS HELD THAT THE AO WAS NOT JUSTIFIED IN MAKING ADDITI ON IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (APPEALS) DELETING THE ADDITION MADE ON ACCOUNT OF SHARE APPLICATION MONEY. 4 I. T. APPEAL NOS. 423 & 424 (DEL) OF 2010. 8. IN THE RESULT, BOTH THE APPEALS FILED BY THE REV ENUE ARE DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 09 TH SEPTEMBER, 2011. SD/- SD/- [ R. P. TOLANI ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 09 TH SEPTEMBER, 2011. *MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT.