ITO, New Delhi V. M/s. Kshemya Investment Pvt. Ltd., New Delhi

ITA 4321/DEL/2010

• Counselvise Citation: 432120114 RSA 2010
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 28-09-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 21-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Assessee Lawyers: ROHIT GARG ARS
• Keywords: Accommodation entries; Reassessment proceedings
• Section: 69C; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH 'D' BEFORE SHRI C.L.SETHI,JM & SHRI A N PAHUJA,AM BEFORE SHRI C.L.SETHI,JM & SHRI A N PAHUJA,AM BEFORE SHRI C.L.SETHI,JM & SHRI A N PAHUJA,AM BEFORE SHRI C.L.SETHI,JM & SHRI A N PAHUJA,AM ITA NO.4321/DEL/2010 (ASSESSMENT YEAR:-2002-03) INCOME TAX OFFICER, WARD 5(3), NEW DELHI V/S M/S. KSHEMYA INVESTMENT PVT. LTD., E- 113, KALKA JI, NEW DELHI- 19 PAN: AABCK 4735G AABCK 4735G AABCK 4735G AABCK 4735G [APPELLANT] [RESPONDENT] ASSESSEE BY :- S/SHRI AJAY VOHRA & ROHIT GARG, ARS REVENUE BY:- MS. Y. KAKKAR, DR DATE OF HEARING 28-09-2011 DATE OF PRONOUNCEMENT 30-09-2011 O R D E R O R D E R O R D E R O R D E R A N PAHUJA: A N PAHUJA: A N PAHUJA: A N PAHUJA: THIS APPEAL FILED ON 21.9.2010 BY THE REVENUE AGAINST AN ORDER DATED 09-08-2010 OF THE LD. CIT(AP PEALS)- VIII, NEW DELHI, FOR THE ASSESSMENT YEAR 2002-03, RAISES THE FOLLOWING GROUNDS:- 1 THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS AND CONTRARY TO FACTS AND LAW. 2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF `30,00 ,507/- MADE BY THE A.O. U/S 69C OF THE INCOME-TAX ACT BEIN G THE OWN CASH INTRODUCED IN THE GARB OF SHARE APPLIC ATION MONEY AND `30,000/- BEING THE UNACCOUNTED CASH PAID FOR OBTAINING THE ACCOMMODATION ENTRIES. 2.1 THE LEARNED CIT(A) IGNORED THE FACTS THAT THE ASSESSEE FAILED EXPLAIN THE CREDIT WORTHINESS OF THE CREDITO RS AND GENUINENESS OF THE TRANSACTIONS AND ALSO THE FACTS THAT THE ASSESSEE HAD GOT ACCOMMODATION ENTRIES FROM ENT RY OPERATORS. ITA NO.4321 /DEL/2010 2 2 3 ON THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE ASSESSMENT WAS REOPENED AFTER FOLLOWING THE DUE PROCEDURE LAID DOWN BY THE LAW. 3.1 THE LEARNED CIT(A) IGNORED THE FACT THAT THE C ASE OF THE ASSESSEE WAS REOPENED AFTER FOLLOWING THE DUE PROCEDURE LAID DOWN BY THE LAW. THE APPELLANT PRAYS FOR LEAVE TO ADD, AMEND, MODIFY OR ALTER ANY GROUNDS OF APPEAL RAISED ABOVE AT THE TIM E OF HEARING OF THE APPEAL. 2. ADVERTING FIRST TO GROUND NOS. 2 AND 2.1 IN THE APPEAL, FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLA RING NIL INCOME FILED ON 29 TH OCTOBER, 2002 BY THE ASSESSEE WAS PROCESSED U/S 1 43(1) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT). SUBSEQUENTLY, THE ASSESSING OFFICER (A.O. IN SHORT) RECEIVED INFORMATION FROM DIT (INVESTIGATION) THAT THE ASSESSEE RECEIVED FOLLOWING AMOUNTS AFTER PAYMENT OF UNACCOUNTED CASH TO M/S MKM FINANC E (P) LTD. 2.1 ACCORDING TO THE AO, THE AMOUNTS WERE IN THE N ATURE OF ACCOMMODATION ENTRY AND CONSEQUENTLY, AFTER RECORDI NG REASONS IN WRITING, THE AO REOPENED THE ASSESSMENT U/S 147 OF THE ACT WITH THE ISSUE OF A NOTICE U/S 148 OF THE ACT. IN RESPONSE , SHRI S.S. WALIA, LIQUIDATOR OF THE ASSESSEE-COMPANY ATTENDED AND FUR NISHED NECESSARY DETAILS. THE PRELIMINARY OBJECTION OF THE ASSESSEE IN RELATION TO REOPENING OF THE ASSESSMENT WAS DISPOSED OF BY THE AO WHILE REFERRING NAME AMOUNT OF ENTRY TAKEN[IN `] INSTT. NO./DATE BANK FROM WHOM ENTRY TAKEN KSHEMYA INVESTMENT LTD. AABCK 6785BG `5,02,045 `5,00,000 `4,80,720 `1,02,742 `7,40,000 2,75,000 4,00,000 215414 DT.2.11.01 743406 DT. 22.5.01 762485 DT.11.10.01 774082 DT.11.10.01 768427 DT.11.9.01 768436 DT. 14.0.01 773218 DT.22.9.01 STANCHART, NEW DELHI MKM FINSEC (P) LTD. ``30,00,507 ITA NO.4321 /DEL/2010 3 3 TO A DECISION OF HONBLE HIGH COURT IN THE CASE OF MIDHANA FRUIT AND VEGETABLES PRODUCTS (INDIA) LTD. VS. CIT (1994) 208 ITR 266 (DELHI). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE AO BROUGHT TO TAX AN AMOUNT OF `30,00,507/- IN TERMS OF PROVISION OF SECTION 69C OF THE ACT BESIDES ADDING AN AMOUNT OF `30,000/- ON AC COUNT OF PAYMENT @1% ON ACCOUNT OF COMMISSION FOR THE AFORESAID ENTR IES. 3. ON APPEAL, THE LEARNED CIT(A) CONCLUDED THAT TH E REASSESSMENT PROCEEDINGS WERE INITIATED WITHOUT ANY INDEPENDENT APPLICATION OF MIND ON THE PART OF THE AO AND IN VIOLATION OF DIRECTIONS OF THE HONBLE APEX COURT IN THE CASE OF G.K.N. DRI VESHAFTS (INDIA) LTD. VS. INCOME TAX OFFICER, 259 ITR 19 (SUPREME COURT). ON MERITS, THE LEARNED CIT(A) CONCLUDED AS UNDER:- 4.3 THE FINDINGS RECORDED BY THE LD. AO AND THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT COMPANY REGARDING ADDITION OF RS.3000507 HAVE BEEN CAREFULL Y CONSIDERED. ON CONSIDERATION, I FIND THAT THE LD AO HAS MADE ADDITION OF THE AMOUNT IN QUESTION HOLDING THA T THE SAME REPRESENTED SHARE APPLICATION MONEY RECEIVED B Y THE APPELLANT COMPANY FROM M/S MKM FINSEC LTD. HOWEVER, A PERUSAL OF BALANCE SHEET OF THE APPELLANT COMPANY F OR THE FY 2001-02 CLEARLY REVEALS THAT NO SHARE APPLICATIO N MONEY WAS RECEIVED BY THE APPELLANT COMPANY DURING THE YE AR UNDER CONSIDERATION. AS PER THE BALANCE SHEET, THE APPELLANT COMPANY HAD SHARE CAPITAL OF RS.2475000 A S ON 31-3-2001 AND THERE WAS NO INCREASE IN THE SHARE CA PITAL DURING THE FY 2001-02 AS THE SAME HAD REMAINED AT RS.2475000 ONLY. FURTHER, THE BALANCE SHEET ALSO SU GGESTS THAT NO SHARE APPLICATION MONEY WAS EITHER RECEIVED DURING THE YEAR UNDER CONSIDERATION NOR ANYTHING WAS SHOWN AS SHARE APPLICATION MONEY PENDING ALLOTMENT AT THE EN D OF THE FY 2000-01. THEREFORE, THE FINDING RECORDED BY THE LD. AO IS FACTUALLY INCORRECT. 4.4 A PERUSAL OF DETAILS FILED BEFORE ME SUGGESTS T HAT M/S MKM FINSEC PVT. LTD HAD PURCHASED SHARES OF RS.1095 4067 ON BEHALF OF THE APPELLANT COMPANY AND SOLD THE SAM E FOR RS.14946044 AND THE PROFIT OF RS.3991977 WAS PAID T O THE APPELLANT COMPANY DURING THE FY UNDER CONSIDERATION WHICH WAS FORMING PART OF THE TOTAL PAYMENTS MADE B Y M/S MKM FINSEC LTD TO THE APPELLANT COMPANY. HOWEVER, T HE AO HAS BROUGHT TO TAX ONLY THE SUM OF RS.3000507 AND T HE ITA NO.4321 /DEL/2010 4 4 BALANCE HAS BEEN ACCEPTED BY HIM. IN MY OPINION, TH IS ACTION OF THE AO IS CONTRADICTORY AND SELF DEFEATIN G. FURTHER, I ALSO FIND MERIT IN THE ARGUMENTS OF THE LD. COUNSEL THAT THE AMOUNT OF RS.3000507 WAS INCLUDED IN THE CAPITAL GAINS OF RS.4466035.81 CREDITED TO THE P& L A/C AND, THEREFORE, TAXING THE SAME AGAIN WOULD DOUBTLE SS AMOUNT TO DOUBLE TAXATION OF THE SAME AMOUNT WHICH IS NOT PERMISSIBLE AS PER LAW. A PERUSAL OF THE DOCUMENTS PLACED BEFORE ME CLEARLY SUGGESTS THAT THIS FACT WAS BROUG HT TO THE NOTICE OF THE AO IN AN ELABORATE MANNER VIDE APPELL ANT'S LETTER DATED 24-12-09. AS PER THE SAID LETTER, APAR T FROM OTHER THINGS, THE FOLLOWING FACTS WERE CLEARLY BROU GHT TO HIS NOTICE- 'IT MAY ALSO BE PERTINENT TO MENTION HERE THAT DURI NG THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD ENTERED INTO TRANSACTIONS OF PURCHASE AND SALE OF SHARES THROUGH MKM FINSEC PVT. LTD. THE ASSESSEE HAD EARNED SHORT TERM CAPITAL GAIN OF RS.4466035.81, WHICH WAS SHOWN AS PART OF G AIN ON SALE OF SECURITIES IN THE AUDITED FINANCIAL STATEME NTS. THE ENTIRE GAIN WAS DECLARED AS 'SHORT TERM CAPITAL IN THE RETURN OR INCOME FILED ON 29.10.2002 VIDE ACKNOWLEDGEMENT NO. 0256. THE TRANSACTIONS SO ENTERED INTO BY THE ASSES SEE ARE DULY SUPPORTED BY THE FOLLOWING DOCUMENTS: (A) COPY OF ACCOUNT REGARDING PURCHASE AND SALE OF SHARES/SECURITIES WITH M/S MKM FINSEC PVT. LTD REG. OFFICE: 301, DHAKA CHAMBERS, 2068/39, NAIWALA KAROL BAGH, N EW DELHI-1L0005 FOR THE PERIOD FROM 01.4.2001 TO 31.3. 2002 DULY EXPLAINED DEBIT/CREDIT ENTRIES. (B) PHOTOCOPY OF SALE/PURCHASE BILLS OF MKM FINSEC PVT. LTD CONTAINING PARTICULARS OF THE SHARES PURCHASES/SOLD , INCLUDING THE DISTINCTIVE NUMBER OF SHARES, THE PRI CE OF AND OTHER DETAILS; (C) PHOTOCOPY OF CONTRACT NOTES AND DELIVERY RECEIP TS FOR PURCHASE AS WELL AS SALE OF SHARES; (D) PHOTOCOPY OF STATEMENT OF CURRENT ACCOUNT NO.52205032121 WITH STANDARD CHARTERED BANK, NEW DE LHI AND CURRENT A/C NO. 707 WITH CENTRAL BANK OF INDIA, BARAKHAMBA ROAD, NEW DELHI. THE AFORESAID PURCHASE AND SALE OF SHARES WAS, IT I S SUBMITTED DULY AND FULLY RECORDED IN THE REGULAR BO OKS OF ACCOUNT OF THE ASSESSEE COMPANY AND ALSO THE SAID B ROKER, M/S MKM FINSEC (P) LTD, AS IS EVIDENT FROM THE CONT RACT NOTES, DELIVERY RECEIPTS AND BILLS RECEIVED FROM TH E BROKER. ITA NO.4321 /DEL/2010 5 5 THE DOCUMENTARY EVIDENCES PLACED ON RECORD, THUS, C LEARLY ESTABLISH THAT THE GAINS DECLARED BY THE ASSESSEE A RE GENUINE. WITHOUT PREJUDICE TO THE AFORESAID LEGAL CONTENTION , THE APPELLANT IS PLACING ON RECORD THE FOLLOWING DETAILS/DOCUMENTS RELATING TO THE TRANSACTIONS WITH MKM FINSEC (P) LTD; (A) DETAILS OF PURCHASE AND SALE OF SHARES/SECURITI ES; (B) PHOTOCOPY OF SALE/PURCHASE BILLS OF M/S MKM FIN SEC PVT. LTD CONTAINING PARTICULARS OF THE SHARES PURCHASES/ SOLD, INCLUDING THE DISTINCTIVE NUMBER OF SHARES, THE PRI CE AND OTHER DETAILS; ( C) PHOTOCOPY OF CONTRACT NOTES AND DELIVERY RECEI PTS FOR PURCHASES AS WELL AS SALE OF SHARES; (D) PHOTOCOPY OF BANK STATEMENT WITH STANDARD CHART ERED BANK AND CENTRAL BANK OF INDIA. ON PERUSAL OF THE AFORESAID, IT WILL THUS, BE KINDL Y APPRECIATED THAT THE ENTIRE TRANSACTIONS OF PURCHAS E/SALE OF SHARES/SECURITIES ENTERED INTO BY THE ASSESSEE WITH M/S MKM FINSEC (P) LTD IS CORROBORATED BY DOCUMENTARY EVIDENCE AND THERE IS NOTHING TO DOUBT THE VERACITY/GENUINENESS OF THE SAID TRANSACTIONS. THE ALLEGATION THAT THE ASSESSEE ONLY RECEIVED ACCOMMOD ATION ENTRY FROM THE SAID CONCERN IS, THUS, PATENTLY ERRO NEOUS AND WITHOUT ANY BASIS. THUS, EVEN ON MERITS, THERE IS IT IS SUBMITTED, NO WARRANT TO DRAW ANY ADVERSE INFERENCE ABOUT THE AFORESAID TRANSACTIONS OF PURCHASE AND SALE OF SHARES WITH M/ S MKM FINSEC (P) LTD. THE ALLEGATION OF PAYMENT OF UNACCO UNTED CASH IS TOTALLY BASELESS AND IS VEHEMENTLY DENIED'. 4.5 IN VIEW OF THE ABOVE, I FIND THAT EVEN ON MER ITS, THE ACTION OF THE AO IS NOT SUSTAINABLE. IT SEEMS THAT THE AO WAS DETERMINED TO GO BY THE REPORT OF THE INVESTIGA TION WING IN A MECHANICAL MANNER AND, THEREFORE ONLY, HE IGNORED ALL THE WRITTEN SUBMISSIONS, EVIDENCES AND EVEN THE AUDIT REPORT AND PROFIT AND LOSS ACCOUNT AND BA LANCE SHEET PLACED BEFORE HIM IN THE COURSE OF ASSESSMENT PROCEEDINGS AND BROUGHT TO TAX THE AMOUNT OF RS.300 0507 BY HOLDING THAT THE SAME WAS SHOWN BY THE APPELLANT COMPANY AS SHARE APPLICATION MONEY. ITA NO.4321 /DEL/2010 6 6 4.. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF LEARNED CIT(A) FOR DELETING ADDITION OF `30,00,507/- AND `30,000/-.THE LEARNED DR SUPPORTED THE ORDER OF TH E AO WHILE THE LEARNED AR ON BEHALF OF THE ASSESSEE RELIED UPON TH E FINDINGS OF LEARNED CIT(A) IN THE IMPUGNED ORDER. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY AND AS POINTED OUT BY THE L D. CIT(A), M/S MKM FINSEC PVT. LTD PURCHASED SHARES OF `.1,09,54,067/ - ON BEHALF OF THE ASSESSEE COMPANY AND SOLD THE SAME FOR `1,49,46,044 /- AS A RESULT, PROFIT OF `39,91,977 WAS PAID TO THE ASSESSEE COMPA NY DURING THE YEAR UNDER CONSIDERATION . THE AMOUNT OF `30,00,507 FORMED PART OF SHORT TERM CAPITAL GAIN OF `.4466035.81 ON SALE OF SECURI TIES, IN THE AUDITED FINANCIAL STATEMENTS AND SHOWN IN THE P&L A/C. AS POINTED OUT BY THE LEARNED CIT(A), ALL THE NECESSARY DETAILS INCLUDING SUMMARY OF ACCOUNT OF THE TRANSACTIONS WITH M/S MKM FINSEC PVT. LTD. , PURCHASE AND SALE INVOICES ,COPIES OF CONTRACT NOTES AND DELIVERY REC EIPTS AS ALSO A COPY OF BANK STATEMENTS, WERE SUBMITTED BEFORE THE AO. HOWEVER, THE AO IGNORED THESE DOCUMENTS, EVIDENCING TRANSACTIONS OF PURCHASE AND SALE OF SECURITIES THROUGH M/S MKM FINSEC PVT. LTD. . SINCE ALL THE AFORESAID TRANSACTIONS WERE FOUND RECORDED IN THE R EGULAR BOOKS OF THE ASSESSEE-COMPANY AND WERE CORROBORATED BY DOCUMENTA RY EVIDENCE IN THE FORM OF SALE AND PURCHASE BILLS ISSUED BY M/S M KM FINSEC PVT. LTD., CONTRACT NOTES & DELIVERY RECEIPTS AND THE RELEVANT BANK ACCOUNT WHILE THE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL CONTROVERTING THE AFORESAID FINDINGS OF FACTS RECORDED BY THE LEARNED CIT(A) SO AS TO UNABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER, W E ARE NOT INCLINED TO INTERFERE . THEREFORE, GROUND NOS. 2 AND 2.1 IN TH E APPEAL ARE DISMISSED. 6. SINCE WE HAVE REJECTED THE GROUNDS RELATING TO MERITS OF THE ADDITIONS, AS A COROLLARY, GROUND NOS.3 & 3.1 RELATING TO REOPENING OF THE ASSESSMENT BECOME ACADEMIC IN NATURE AND AR E, THEREFORE, TREATED AS INFRUCTUOUS. ITA NO.4321 /DEL/2010 7 7 7. GROUND NO.1 IN THE APPEAL BEING GENERAL IN NAT URE NOR ANY SUBMISSIONS HAVING BEEN MADE BEFORE US ON THIS GROU ND, DOES NOT REQUIRE SEPARATE ADJUDICATION WHILE NO ADDITIONAL G ROUND HAS BEEN RAISED BEFORE US IN TERMS OF GROUND NO.4 IN THE APP EAL, ACCORDINGLY, THIS GROUND IS DISMISSED. 8. IN RESULT, THE APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN OPEN COURT SD/- SD/- (C.L.SETHI) (C.L.SETHI) (C.L.SETHI) (C.L.SETHI) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER (A N PAHUJA) (A N PAHUJA) (A N PAHUJA) (A N PAHUJA) ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER NS COPY OF THE ORDER FORWARDED TO: 1. M/S. KSHEMYA INVESTMENT LIMITED E-113, KALKAJI, NEW DELHI-19 2. INCOME TAX OFFICER, WARD 5(3), NEW DELHI 3. CIT CONCERNED 4. CIT(A)-VIII, NEW DELHI 5. DR, ITAT, DELHI BENCH-D, NEW DELHI 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, NEW DELHI