ITO, New Delhi V. M/s. Cintec Steel Pvt. Ltd., New Delhi

ITA 4455/DEL/2016

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3710 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2021
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 17-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AGAINST DATED PASSED
• Keywords: Unexplained cash credit; Share purchase agreement; Source of fund; Tangible material
• Section: 133(6); 251; 13; 131; 68

Judgement Text

1 ITA NO. 4455/DEL/2016 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A. NO. 4455/DEL/20 16 (A.Y 2012-13) (THROUGH VIDEO CON FERENCING) ITO WARD-6(2), ROOM NO. 380C C. R. BUILDING, NEW DELHI (APPELLANT) VS CINTEC STEEL PVT. LTD. A-116, GROUP INDUSTRIAL AREA, WAZIRPUR NEW DELHI AACCC8361K (RESPONDENT) ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE REVENUE AGAINST ORDER DATED 31/05/2016 PASSED BY CIT(A), 2, NEW DELHI FOR ASSESSMENT YEAR 2012-13. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1,98,50,000/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 OF THE I.T. ACT, 1961, IGNORING THE FACT THAT THE ASSESSEE HAD FAILED TO DISCHARGE ITS ONUS OF ES TABLISHING THE GENUINENESS AND CREDITWORTHINESS OF SOURCE OF FUNDS RECEIVED. APPELLANT BY SH. T. M. SHIVAKUMAR ADV RESPONDENT BY DR. MANINDER KAUR, SR. DR DATE OF HEARING 08.09.2021 DATE OF PRONOUNCEMENT 12 .10.2021 2 ITA NO. 4455/DEL/2016 3. THE ASSESSEE FILED E-RETURN DATED 26/9/2012 DECLARI NG INCOME OF RS.2, 35,290/-. THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF JOB OF WORK OF STAINLESS STEEL CIRCLE AND SHEETS. THE ASSESSING OFFICER OBSERVED THAT FROM THE BALANCE-SHEET OF THE ASSESSEE, IT REVEALS THAT THE ASSESSEE COMPANY HAS RECEIVED SHARE APPLICATION MONEY DURING THE YEAR AM OUNTING TO RS.1,98,50,000/- AND RS. 15, 00,000/- RECEIVED IN T HE PREVIOUS YEARS AS WELL AS RS. 3,00,000/- WAS UN-ALLOTTED SHARE APPLICATION MONEY TO THE SHARE APPLICANTS MENTIONED IN THE ASSESSMENT ORDER. THE ASSESSEE FILED DETAILS AND REPLY BEFORE THE ASSESSING OFFICER. AFTER GOING THR OUGH THE DETAILS AND REPLY THE ASSESSING OFFICER MADE ADDITION OF RS.1,98,50,000/- TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED CREDIT U/S 68 OF THE INCOME TAX ACT, 1961. 4. BEING AGGRIEVED BY THE PENALTY ORDER, THE ASSESS EE FILED APPEAL BEFORE THE CIT(A). THE CIT (A) ALLOWED THE APPEAL OF THE ASSE SSEE. 5. THE LD. DR SUBMITTED THAT THE CIT(A) HAS WITHOUT GOING INTO THE DETAILS FILED BEFORE THE CIT(A) HAS ALLOWED THE APPEAL OF T HE ASSESSEE THEREBY DELETING THE ADDITION. THE CIT(A) HAS OVER LOOKED THE GENUI NENESS AND CREDITWORTHINESS OF THE PARTIES AND SIMPLICITOR ACCEPTED THE CONTENT IONS OF THE ASSESSEE. FROM THE PERUSAL OF THE RECORDS, IT CAN BE SEEN THAT THE PARTIES HAVE NOT ATTENDED/RESPOND TO THE NOTICE ISSUED U/S 133(6). THUS, THE CIT(A) WAS NOT RIGHT IN ALLOWING THE APPEAL OF THE ASSESSEE. 6. THE LD. AR SUBMITTED THAT THIS IS NOT A CASE WHE RE ANY REPORT HAS BEEN RECEIVED FROM INVESTIGATION WING OF THE DEPART MENT OR ANY SUCH AGENCIES. NO CASH HAS BEEN DEPOSITED IN THE SHARE A PPLICANTS BANK ACCOUNTS. ALL PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNEL S. MOST OF THE SHARE APPLICANTS ARE VERY MUCH ASSESSED TO TAX IN DELHI J URISDICTION ITSELF. THEY HAD SUFFICIENT BANK BALANCES WHEN THE PAYMENTS WAS MADE TO THE ASSESSEE. THE 3 ITA NO. 4455/DEL/2016 ADDITION HAS BEEN MADE ONLY ON THE BASIS OF CONJECT URES AND SURMISES. EVEN THOUGH THE ASSESSING OFFICER DISCUSSED SHARE CAPITA L RECEIVED FROM 17 PARTIES IN HIS ORDER, THE ADDITION U/S 68 HAS BEEN MADE ONL Y IN RESPECT OF SHARE CAPITAL RECEIVED DURING THE YEAR FROM 12 PARTIES. THE LIST OF THE SAID 12 PARTIES AN D THE SHARE CAPITAL RECEIVED FROM THEM IS MENTIONED A T PAGE-3 OF ORDER OF CIT(A). ON THE DIRECTIONS OF THE ASSESSING OFFICER, IN DISC HARGE OF ITS PRIMARY ONUS, THE ASSESSEE HAD SUBMITTED THE (I) COPY OF ACKNOWLEDGME NT OF THE RETURN OF INCOME FILED BY THE PARTY FOR A.Y.2012-13; (II) PAR TYS BANK ACCOUNT STATEMENT EVIDENCING THE PAYMENT THROUGH BANKING CHANNEL AND (III) CONFIRMED COPY OF ACCOUNT OF THE PARTIES (CONFIRMATIONS). THE ASSESSI NG OFFICER ISSUED NOTICES U/S 133(6) OF THE ACT TO ALL THE SHARE APPLICANTS AND I NDEPENDENTLY OBTAINED THE CONFIRMATIONS FROM THEM ALONG WITH ITR COPIES AND B ANK STATEMENTS, SHARE CERTIFICATES ETC DIRECTLY FROM THE SHARE APPLICANTS , WHICH IS MENTIONED AT FIRST AND SECOND PARA ON PAGE - 3 OF ASSESSMENT ORD ER. THE ASSESSING OFFICER ALSO OBTAINED COPIES OF BANK STATEMENT OF ALL THE S HARE APPLICANTS AGAIN FROM THE RESPECTIVE BANKS BY ISSUING NOTICES U/S 133(6) OF THE ACT AND CROSS-VERIFIED THE SAME. IN SPITE OF THE FACT THAT THE ASSESSEE HA D DISCHARGED ITS ONUS OF ESTABLISHING THE IDENTITY, CREDITWORTHINESS AND GEN UINENESS OF THE CREDITS AS REQUIRED U/S 68 OF THE ACT, THE ASSESSING OFFICER D IRECTED AND THE ASSESSEE ON 13.03.2015 TO PRODUCE THE PRINCIPAL OFFICERS / DIRE CTORS OF THE SHARE APPLICANTS ON 20.03.2015 AND STATED THAT IN CASE OF FAILURE, H E WOULD TREAT THE AMOUNT AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. ON THE F AILURE OF THE ASSESSEE TO COMPLY WITH HIS DIRECTION THE ASSESSING OFFICER PAS SED THE ASST ORDER ON 24.03,2015. THE ASSESSING OFFICER HAS ANNEXED SIX R EPORTS OF THE WARD INSPECTOR TO THE ASSESSMENT ORDER WHO IS SUPPOSED T O HAVE CONDUCTED ENQUIRY ON THE EXISTENCE OF THE SHARE APPLICANTS (SIX) AT C ERTAIN ADDRESSES (ON 5.03.2015 AND 23.03.2015) AND HAD FOUND THEM EITHER NOT IN EXISTENCE AT THE GIVEN ADDRESSES OR THAT THE PREMISES WERE LOCKED. T HE LD. AR SUBMITTED THAT THE INSPECTOR HAD TRIED TO LOCATE THE ENTITIES AT T HEIR OLD ADDRESSES OR IN THEIR FORMER NAMES IGNORING THE CURRENT NAMES AND THE ADDRESSES FURNIS HED DURING THE ASSESSMENT PROCEEDINGS DULY NOTED IN THE BEGINN ING OF THIRD PARA FROM TOP 4 ITA NO. 4455/DEL/2016 OF PAGE 13 OF THE ASSESSMENT ORDER. FURTHER, THE LA ST OF THE ENQUIRY BY INSPECTOR WAS CONDUCTED BY THE INSPECTOR ON 23.05.2 015 AND THE ASSESSMENT ORDER WAS PASSED ON THE NEXT DAY ON 24.03.2015 WITH OUT ANY FURTHER ACTION. THE ASSESSMENT ORDER IS FULL OF VAGUE PRESUMPTIONS AND CONCLUSIONS MADE WITHOUT ANY BASIS. THIS IS NOT A CASE WHERE ANY REP ORT HAS BEEN RECEIVED FROM INVESTIGATION WING OF THE DEPARTMENT OR ANY SU CH AGENCIES. NO CASH HAS BEEN DEPOSITED IN THE SHARE APPLICANTS BANK AC COUNTS. ALL PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNELS. MOST OF THE SHA RE APPLICANTS ARE VERY MUCH ASSESSED TO TAX IN DELHI JURISDICTION ITSELF. THEY HAD SUFFICIENT BANK BALANCES WHEN THE PAYMENTS WERE MADE TO THE ASSESSE E. THE ADDITION HAS BEEN MADE ONLY ON THE BASIS OF CONJECTURES AND SURMISES. THE ASSESSING OFFICER IGNORED THAT THE ASSESSEE HAD DULY DISCHARGED ITS O NUS OF ESTABLISHING THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE C REDITS AS REQUIRED U/S 68 OF THE ACT. HE HAS ALSO IGNORED THE FACT THAT HE HIMSE LF GOT THE SAME CROSS-VERIFIED AND GOT CONFIRMATIONS DIRECTLY FROM THE PARTIES AS WELL AS THE BANKS BY ISSUE OF NOTICES U/S 133(6) OF THE ACT. THE ASSESSING OFFICE R IN THE ORDER ON PAGE 13 IN THE BEGINNING OF THIRD PARA FROM TOP MENTIONED THAT HE HAD ISSUED SUMMONS U/S 131 OF THE ACT TO THE SHARE APPLICANTS AND THAT NO ONE HAD ATTENDED HIS OFFICE IN RESPONSE TO THEM. IT IS NOT KNOWN WHY HE DID NOT PURSUE THE SAME AS THE ENTIRE SHARE APPLICANT COMPANIES WERE ASSESSED TO TAX IN DELHI JURISDICTION AND THE ASSESSING OFFICER HAD ALL THE INCOME TAX PA RTICULARS OF THE PARTIES. AGGRIEVED BY THE ASSESSMENT ORDER, AN APPEAL WAS FI LED BEFORE CIT(A) WHO AFTER EXAMINED ALL THE ISSUES INVOLVED AND DELETED THE AD DITION IN A SPEAKING ORDER DATED 31.5.2016. THE MAIN REASONS FOR DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ARE MENTIONED AT PARA 3.2 ON PAGE -12 OF THE ORDER OF CIT(A). THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER HAS NOT FOUND ANY ADVERSE MATERIAL THAT COULD HAVE DISCHARGED THE ONUS CAST U PON HIM UNDER LAW AFTER THE ASSESSEE DISCHARGED ITS PRIMARY ONUS BY FURNISH ING ALL THE REQUIRED DOCUMENTS TO PROVE THE IDENTITY, CREDITWORTHINESS A ND GENUINENESS OF CREDITS. HE GOT ALL EVIDENCES OF THE ASSESSEE CROSS-VERIFIED DIRECTLY FROM THE SHARE APPLICANTS AS WELL AS FROM THE BANKERS BY ISSUING N OTICES U/S 133(6) OF 5 ITA NO. 4455/DEL/2016 THE ACT. HE HAD RECEIVED REPLIES FROM ALL THE SHARE APPLICANTS / SHAREHOLDERS AND HAD NOT FOUND ANYTHING TO REJECT EVIDENCES FILE D BY THE ASSESSEE. IN SPITE OF THAT, HE DIRECTED THE ASSESSEE TO PRODUCE THE DIREC TOR / PRINCIPAL OFFICERS OF THE SHARE APPLICANTS AND ON THE FAILURE TO DO SO, FINAL ISED THE ASST ORDER BY MAKING ADDITION U/S 68 OF THE ACT WHICH IS AGAINST ESTABLI SHED PRINCIPLES OF LAW. THE LD. AR SUBMITTED THAT REVENUES APPEAL IS DEVOID OF ANY MERIT AS THE ORDER OF CIT(A) IS WELL REASONED AND TAKES INTO ACCOUNT THE PRINCIPLES OF LAW AS PRONOUNCED BY THE HONBLE SUPREME COURT AS WELL AS BY THE JURISDICTIONAL HIGH COURT OF DELHI AND THE JURISDICTIONAL BENCH OF TRIB UNAL. THE LD. AR RELIED UPON THE RATIO OF THE DECISIONS OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN INCOME TAX OFFICER WARD 5(1) NEW DELHI VS. M/S BLISSWOOD G REEN INFRASTRUCTURE AND DEVELOPERS PVT. LTD. ITA NO. 5120/DEL/2016 DATED 15 .02.2019 WHERE IN AFTER CONSIDERING THE RATIO OF THE DECISIONS OF THE HIGH COURTS INCLUDING THAT OF THE JURISDICTIONAL HIGH COURT, THE REVENUES APPEAL ON SIMILAR FACTS HAS BEEN DISMISSED. THE LD. AR ALSO RELIES UPON THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN SHRI SHYAM SUNDER INFRASTRUCTURE ( P) LTD. VS. ITO WARD 8(3) NEW DELHI DATED 19.5.2021 IN ITA NO.2106/DEL/2013 W HERE IT HAS BEEN HELD THAT THE REVENUE CANNOT DRAW ADVERSE INFERENCE ON N ONPRODUCTION OF DIRECTORS OF THE INVESTOR COMPANIES WHEN ALL THE DOCUMENTARY EVIDENCE HAVE BEEN DULY SUBMITTED DISCHARGING THE INITIAL ONUS AND THE ASSE SSING OFFICER DID NOT DO ANYTHING TO BRING TANGIBLE ADVERSE EVIDENCE ON RECO RD. FOR THE PROPOSITION THAT THE INITIAL BURDEN OF THE ASSESSEE GETS DISCHARGED ON FURNISHING THE ITR COPIES, BANK STATEMENTS AND CONFIRMATIONS FROM THE PARTIES: A. CIT V. STELLER INVESTMENT LTD. (2001) 251 ITR 263 (SC); B. CIT V. DIVINE LEASING & FINANCE LTD. (2007) 158 TA XMAN 440 (DEL.) C. CIT VS. KAMDHENU STEEL AND ALLOYS LTD., & ORS. 361 ITR 220 (DEL.) D. CIT VS. LOVELY EXPORTS (P) LTD. [2008] 299 ITR 268 (SC); FOR THE PROPOSITION THAT THAT NON-COMPLIANCE TO THE SUMMONS U/S 131 BY THE CREDITOR CANNOT BE HELD AGAINST THE ASSESSEE AS IT IS FOR THE AO TO TAKE NECESSARY ACTION FOR NON- COMPLIANCE THE APPELLANT RELIES UPON THE RATIO OF THE 6 ITA NO. 4455/DEL/2016 FOLLOWING: A. CIT VS. KAMDHENU STEEL AND ALLOYS LTD., & ORS. 361 ITR 220 (DEL.). B. CIT VS. ORISSA CORPORATION PVT. LTD. (3986) 159 IT R 78 (SC) FOR THE PROPOSITION THAT MERE NON-PRODUCTION OF DIR ECTORS / PRINCIPAL OFFICERS OF THE SHARE APPLICANT COMPANIES WITHOUT ANYTHING MORE AND WHERE ALL RELEVANT DOCUMENTS ARE PLACED ON RECORDS WHICH REMAINED UNCO NTROVERTED SPECIFICALLY, CANNOT JUSTIFY ADVERSE INFERENCE U/S 68 OF THE ACT, THE LD. AR RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX - V VS. NIPUN AUTO PVT. LTD (DELHI HIGH COURT I N ITA 225/2013 DATED 30.4.2013). FOR THE PROPOSITION THAT THE ASSESSING OFFICER CANNOT SHIFT THE ONUS BACK ONTO THE ASSESSEE COMPANY WITHOUT THE ASS ESSING OFFICER PRODUCING ANY TANGIBLE MATERIAL TO DOUBT THE VERACITY OF THE DOCUMENTS FURNISHED BY THE ASSESSEE THE DECISION OF THE HONBLE DELHI HIGH COU RT IN COMMISSIONER OF INCOME TAX - V VS NIPUN AUTO PVT. LTD (DELHI HIGH C OURT IN IT A 225/2013 DATED30.4.2013) WAS RELIED UPON BY THE LD. AR. FOR THE PROPOSITION THAT REVENUE CANNOT REJECT THE CLAIM OF THE CREDITWORTHI NESS ON THE BASIS OF THE LOW INCOME REFLECTED IN THEIR RETURN OF INCOME THE DECI SION IN CASE OF CIT VS. VRINDAVAN FARMS PVT. LTD., ETC. ITA.NO.71 OF 2015 D ATED 12TH AUGUST, 2015 (DEL.) WAS RELIED UPON BY THE LD. AR. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RELEVANT MATERIALS AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT I N ASSESSMENT ORDER, THE ASSESSING OFFICER HAS CATEGORICALLY STATED THAT THE DIRECTORS OR PERSONS RELATED TO SHARE APPLICANT WERE NEVER PRODUCED BEFORE THE A SSESSING OFFICER DESPITE GIVING NOTICE UNDER SECTION 133(6) OF THE ACT. BUT THE CIT(A) IN PARA 3.2 (K) MENTIONED THE CORRECT NAMES AND ADDRESSES WHICH WAS NOT GIVEN TO THE ASSESSING OFFICER BY THE ASSESSEE AT THE INITIAL ST AGES OF THE ASSESSMENT PROCEEDINGS BUT AT THE END PERIOD OF THE ASSESSMENT PROCEEDINGS. THE PARTIES WITH CORRECT ADDRESS WERE NEVER INSPECTED BY THE AS SESSING OFFICER. THE CIT(A) WITHOUT VERIFYING THE ACTUAL EXISTENCE OF THE SHARE APPLICANT PARTIES AT THOSE 7 ITA NO. 4455/DEL/2016 ADDRESSES, SIMPLICITOR ACCEPTED THE CONTENTIONS OF THE ASSESSEE, WHICH IS NOT JUST AND PROPER. THEREFORE, WE ARE OF THE VIEW THAT THE MATTER NEEDS TO BE ADJUDICATED AFTER TAKING COGNIZANCE OF THE NEW ADDR ESSES OF THE SHARE APPLICANTS PROVIDED BY THE ASSESSEE BY ISSUING FRES H NOTICE UNDER SECTION 133(6) TO THOSE PARTIES. AND THEREAFTER, TAKE COGNI ZANCE OF THE RELEVANT MATERIAL AND ADJUDICATE THE MATTER. THUS, THE MATTER IS REMA NDED BACK TO THE FILE OF THE ASSESSING OFFICER FOR PROPER ADJUDICATION AFTER ISS UING FRESH NOTICE UNDER SECTION 133(6) TO THOSE SHARE APPLICANT PARTIES AND THEREAFTER, ADJUDICATE THE ISSUE A FRESH AS PER THE DUE PROCESS OF LAW. NEEDLE SS TO SAY, THE ASSESSEE BE GIVEN OPPORTUNITY OF FOLLOWING PRINCIPLES OF NATURA L JUSTICE. 8. IN RESULT, THE APPEAL OF THE REVENUE IS PARTLY A LLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF OCTOBER, 2021 SD/- SD/- (N. K. BILLAIYA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 12/10/2021 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 8 ITA NO. 4455/DEL/2016