M/s. Rathi Ceramics Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 4540/DEL/2014

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5661 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 19-06-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 19-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Assessee Lawyers: ASHISH GOEL
• Keywords: Reopening of assessment; Question of law; Tangible material; Accommodation entries
• Section: 147; 131; 148; 143(3); 133(6)

Judgement Text

1 | P A G E IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: F, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 4540/DE!/2014 AY: 2005-06 M/S RATHI CERAMICS PVT. LTD. 26/A, SADHANA ENCLAVE, NEW DELHI 17 (PAN : AAACR 4592F) (APPALLANT) VS. INCOME TAX OFFICER, WARD 15(3), NEW DELHI (RESPONDENT) (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. ASHISH GOEL, CA REVENUE BY : SH. SURENDER PAL, SR. DR. ORDER PER H.S. SIDHU, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE LD. CIT(A) DATED 12.06.2014 RELATING TO ASSESSMENT YEAR 2005-06 ON THE FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS)-XVIII, NEW DELH I [BRIEFLY THE CIT(A)] HAS ERRED IN UPHOLDING THE REOP ENING OF ASSESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT, 1961 (BRIEFLY THE ACT). 2 | P A G E 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN NOT APPRECIATING THAT THE PROVISO TO SECTION 147 OF THE ACT WAS APPLICABLE. SUBSEQUENT TO ORIGINA L ASSESSMENT U/S 143(3), ASSESSMENT WAS REOPENED IN M AY 2009 ALLEGEDLY FOR THE REASON THAT THAT THE ASSESSEE HAS RECEIVED ACCOMMODATION ENTRIES. HAVING MADE THE ASSESS MENT U/S 147/ 143(3), SECOND NOTICE U/S 148 OF THE ACT HAS BEEN ISSUED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF ASSESSMENT YEAR, THOUGH THERE WAS NO FAILURE ON THE PA RT OF THE ASSESSES TO DISCLOSE FULLY AND TRULY MATERIAL FA CTS NECESSARY FOR THE ASSESSMENT. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN NOT APPRECIATING THAT THERE WAS N O APPLICATION OF MIND TO THE ALLEGED INFORMATION RECEI VED FROM INVESTING WING THAT THE ASSESSEE WAS AMONGST THE BENEFICIARIES OF THE BOGUS ACCOMMODATION ENTRIES. THE RE WAS NO TANGIBLE MATERIAL TO REOPEN THE ASSESSMENT. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN NOT APPRECIATING THAT REOPENING O F ASSESSMENT ON SECOND OCCASION WAS NOTHING BUT A CHA NGE OF OPINION. 3 | P A G E 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN UPHOLDING THE ASSESSMENT AT TOT AL INCOME OF RS.50,38,750/-, AS AGAINST RETURNED INCOME OF RS. 1250/-. THE APPELLANT DENIES ITS LIABILITY TO BE ASSESSED A T INCOME OF RS.50,38,750/-. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE C OMPANY FILED ITS RETURN OF INCOME ORIGINALLY ON 29.10.2005. THE SAID RE TURN WAS TAKEN UP FOR SCRUTINY AND ASSESSMENT ORDER UNDER SECTION 1 43(3) OF THE INCOME TAX ACT, 1961 (IN SHORT ACT) WAS PASSED ON 2 7.12.2007. THEREAFTER THE ASSESSMENT WAS REOPENED UNDER SECTION 147 OF THE ACT ON THE BASIS OF A REPORT RECEIVED FROM INVESTIGATION WI NG REGARDING SHARE CAPITAL OF RS.50,00,000/- BEING RECEIVED FROM THE TWO COMPANIES OF MR. TARUN GOYAL. THE RE-ASSESSMENT WAS F RAMED BY MAKING ADDITION OF RS.50,37,500/- WHICH INCLUDED RS .37,500/- ON ACCOUNT OF COMMISSION IN RECEIVING THE ABOVE ENTRIES OF RS.50,00,000/- AND REASSESSMENT WAS COMPLETED AT RS. 50,38,750/- U/S. 147/144 OF THE I.T. ACT, 1961 VIDE ORDER DATED 01. 03.2013. AGGRIEVED BY THE ORDER OF THE A.O, ASSESSEE FILED APP EAL BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 12.06.2014 DISMISSED THE APPEAL OF THE ASSESSEE. AGAINST THE IMPUGNED ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 4 | P A G E 3. AT THE THRESHOLD, THE LD. AR OF THE ASSESSEE DID NOT PRESS THE GROUND NO. 1 TO 4, HENCE, THE SAME ARE DISMISSED AS SUCH. WITH REGARD TO GROUND NO. 5 & 6, IT WAS CONTENDED BY THE LD. AR THAT THE ADDITION IN THIS CASE HAS BEEN MADE ON ACCOUNT OF T HE SHARE CAPITAL RECEIVED FROM FOLLOWING TWO COMPANIES. M/S GEEFCEE FINANCE LIMITED RS. 45,00,000/- M/S MAHA NIVESH INDIA LIMITED RS.5,00,000/- 3.1 IT WAS FURTHER SUBMITTED THAT THE ISSUE OF THE SH ARE CAPITAL FROM THESE TWO COMPANIES HAVE BEEN SUBJECT MATTER OF APPE AL BEFORE THE COORDINATE BENCH OF THE ITAT. THE ITAT ON SIMILAR ISS UE RELATING TO SAME INVESTOR PARTY AND SIMILAR SETS OF ALLEGATIONS I N THE CASE OF ITO VS. M/S VIVSUN PROPERTIES PVT. LTD. ITA NO. 4786/DEL/2011 DATED 01.03.2016 HAS DELETED THE ADDITIONS ON THE GROUND THAT ASSESSE E HAS DISCHARGED ITS ONUS OF PROVIDING THE BASIC DETAILS WH ICH WERE REQUIRED FOR VERIFICATIONS TO FULFILL THE CONDITIONS VIZ. IDEN TITY AND CREDIT WORTHINESS OF THE INVESTOR AND GENUINENESS OF THE TRAN SACTIONS. IT WAS FURTHER SUBMITTED THAT IN THE PRESENT CASE ALSO AS SESSEE HAS SUBMITTED ALL THE DETAILS RELATED TO THE SHARE APPLIC ATIONS RECEIVED FROM THESE TWO ALLEGED COMPANIES TO DISCHARGE ITS ON US OF PROVIDING THE BASIC DETAILS WHICH WERE REQUIRED FOR VERIFICATION S TO FULFILL THE CONDITIONS VIZ. IDENTITY OF THE CREDITOR, CREDIT WORT HINESS OF THE CREDITOR 5 | P A G E AND GENUINENESS OF THE TRANSACTIONS. IT IS ALSO MEN TIONED THAT THAT THE CASE OF THE ASSESSEE HAS ALREADY BEEN ASSESSED T HRICE AND ALL THE DETAILS WERE BEFORE THE AO DURING ALL THE THREE PROCEED INGS. LT WAS FURTHER CONTENDED THAT THE AO IN THE ASSESSMENT ORDER HAS SIMPLY MADE A REFERENCE TO THE REPORT OF THE INVESTIGATION WI NG WITHOUT POINTING OUT HOW IT IS RELATED TO THE ASSESSEE. THE AO HAS NOT CARRIED OUT ANY INQUIRY BY EXERCISING POWERS GIVEN UNDER SECTI ON 133(6) OR 131(1) OF THE ACT. IN SUPPORT OF HIS CONTENTION, TH E LD. AR PLACED RELIANCE ON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. LAXMAN INDUSTRIAL RESOURCES PVT. LTD. I N ITA NO. 169/2017 DATED 14.03.2017. FURTHER RELIANCE WAS ALSO PL ACED ON THE FOLLOWING JUDGMENTS: (I) RAJASTHAN HIGH COURT IN THE CASE OF CIT V. JALAN HARD COKE LTD. IN ITA NO. 419/2008 DATED 31.07.2017. THE SLP FIL ED BY REVENUE IN THIS CASE BEFORE THE APEX COURT HAS AL SO BEEN DISMISSED IN SLP (CIVIL) DIARY NO. 16078/2018 DATE D 15.05.2018 (II) BOMBAY HIGH COURT IN THE CASE OF PR. CIT V. PARADISE INLAND SHIPPING PVT. LTD. IN ITA NO. 66 OF 2016 DATED 10.04.2017. THE SLP FILED BY REVENUE IN THIS CASE BEF ORE THE APEX COURT HAS ALSO BEEN DISMISSED IN SLP (CIVIL) DIARY 6 | P A G E NO. 12644/2018 DATED 23.04.2018 (III) RAJASTHAN HIGH COURT IN THE CASE OF CIT V. ARL INFRATE CH LTD. [2017] 394 ITR 383 (IV) DELHI HIGH COURT IN THE CASE OF CIT V. RUSSIAN TECHN OLOGY CENTRE (P.) LTD. IN ITA NOS. 547/2013 DATED 15.12.2016 (V) ITAT DELHI IN THE CASE OF ITO V. SOFTLINE CREATIONS (P.) LTD. IN ITA NO. 744/DEL/2012 DATED 10.02.2015, WHICH HAS B EEN UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN ITA NO. 504 OF 2016 DATED 31.08.2016 (VI) DELHI HIGH COURT IN THE CASE OF CIT V. FAIR FINVEST LT D [2013] 357 ITR 146 (VII) DELHI HIGH COURT IN THE CASE OF CIT V. GANGESHWARI ME TAL PVT. LTD. [2013] 214 TAXMAN 423 4. IN REPLY THE LD. DR SUPPORTED THE ORDER OF THE LD. CI T(A). IT WAS SUBMITTED THAT THE ISSUE IS COVERED IN FAVOR OF THE REVENUE BY THE ORDERS PASSED BY THE VARIOUS AUTHORITIES INCLUDING THE RECENT JUDGMENT IN THE CASE OF PR. CIT NDR PROMOTERS PVT. LTD. ITA 49/201 8 VIDE DATED 17.01.2019. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D THE 7 | P A G E RELEVANT RECORDS, ESPECIALLY THE IMPUGNED ORDER AS WELL AS THE PAPER BOOK CONTAINING PAGES 1-110 IN WHICH ASSESSEE HAS A TTACHED THE RECORDS OF THE ASSESSMENT AND SUBMISSIONS MADE BEFORE THE LD. CIT(A). ON GOING THROUGH THE SAME WE NOTE THAT AS SESSEE HAS RECEIVED SHARE CAPITAL OF RS.45 LAKHS FROM GEEFCEE FIN ANCE LTD. AND RS. 5 LAKHS FROM MAHANIVESH (INDIA) LTD. IT HAS FILED CONFIRMATION, BANK FINANCIAL STOCK STATEMENT, ITR AND AUDITED FIN ANCIAL STOCK STATEMENT OF BOTH THESE COMPANIES. THE ASSESSMENT T HEREAFTER WAS COMPLETED UNDER SECTION 143(3) OF THE ACT BY THE AO VIDE ORDER DATED 27.12.2007 MEANING THEREBY THE AO HAS ACCEPTED THE C ONTENTION OF THE ASSESSEE. THEREAFTER THE ASSESSMENT WAS REOPENED B Y ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT. AFTER REOPENING OF ASSESSMENT THE AO HAS NOT MADE ANY FURTHER INQUIRY. IN FACT, IN T HE ASSESSMENT ORDER AFTER MAKING A REFERENCE TO THE REPORT RECEIVED FROM INVESTIGATION WING, THE AO HAS NOT STATED ANYTHING PARTICULAR TO THE ASSESSEE. THE AO HAS ALSO NOT COMMENTED ADVERSELY O N ANY OF THE DOCUMENT AVAILABLE ON RECORD REGARDING THESE TWO COMP ANIES. IN VIEW OF THESE FACTS, THE DOCUMENT SUBMITTED BY THE ASSES SEE WERE NOT REBUTTED BY THE AO. IT IS NOTED THAT THE RELIANCE PLA CED BY THE AR ON THE VARIOUS JUDGMENTS SUPPORTS THE CASE OF THE ASSESS EE WHEREBY IT HAS BEEN HELD THAT IN THE ABSENCE OF ANY INQUIRY MAD E BY THE AO THE 8 | P A G E ADDITION ON THIS ACCOUNT CANT BE SUSTAINED. THE RE LIANCE PLACED BY THE LD. DR ON THE JUDGMENT IN THE CASE OF NDR PROMOTERS PVT . LTD. HAS ALSO TAKEN NOTE OF THIS DISTINCTION IN PARA 13 WHICH READS AS UNDER: AS WE PERCEIVE, THERE ARE TWO SETS OF JUDGMENTS AND CASES, BUT THESE JUDGMENTS AND CASES PROCEED ON THEI R OWN FACTS. IN ONE SET OF CASES, THE ASSESSEE PRODUCED NE CESSARY DOCUMENTS/EVIDENCE TO SHOW AND ESTABLISH IDENTITY O F THE SHAREHOLDERS, BANK ACCOUNT FROM WHICH PAYMENT WAS MA DE, THE FACT THAT PAYMENTS WERE RECEIVED THOROUGH BANKING CHANNELS, FILED NECESSARY AFFIDAVITS OF THE SHAREHOLD ERS OR CONFIRMATIONS OF THE DIRECTORS OF THE SHAREHOLDER COMPANIES, BUT THEREAFTER NO FURTHER INQUIRIES WERE CONDUCTED. THE SECOND SET OF CASES ARE THOSE WHERE TH ERE WAS EVIDENCE AND MATERIAL TO SHOW THAT THE SHAREHOLD ER COMPANY WAS ONLY A PAPER COMPANY HAVING NO SOURCE OF INCOME, BUT HAD MADE SUBSTANTIAL AND HUGE INVESTMEN TS IN THE FORM OF SHARE APPLICATION MONEY. THE ASSESSING OF FICER HAS REFERRED TO THE BANK STATEMENT, FINANCIAL POSITI ON OF THE RECIPIENT AND BENEFICIARY ASSESSEE AND SURROUNDING CIRCUMSTANCES. THE PRIMARY REQUIREMENTS, WHICH SHOULD B E 9 | P A G E SATISFIED IN SUCH CASES IS, IDENTIFICATION OF THE CREDITORS/SHAREHOLDER, CREDITWORTHINESS OF CREDITORS/SHAREHOLDER AND GENUINENESS OF THE TRANSACTION . THESE THREE REQUIREMENTS HAVE TO BE TESTED NOT SUPERFICIALLY BUT IN DEPTH HAVING REGARD TO THE HUMAN PROBABILITIES AND NORMAL COURSE OF HUMAN CONDUCT. 5.1 WE FURTHER NOTE THAT IN THE ABOVE ORDER RELIED UPON BY THE LD. DR, IT HAS BEEN STATED THAT THE SAID CASE FALLS IN THE CATEGORY WHERE THE AO HAS NOT KEPT QUIET AND HAS MADE INQUIRIES. AS AGAINST THIS THE PRESENT CASE FALLS IN THE OTHER CATEGORY AS THE ASSESS MENT ORDER IS SILENT ABOUT THE DOCUMENTS AVAILABLE ON RECORD IN S UPPORT OF THE SHARE CAPITAL RECEIVED BY THE APPELLANT COMPANY. WE FIND T HAT THERE IS NO ADVERSE OBSERVATIONS OR COMMENT ABOUT THE DOCUMENT AV AILABLE ON RECORD AND SUBMITTED BY THE ASSESSEE IN SUPPORT OF TH E SHARE CAPITAL RECEIVED BY IT IN THE ORIGINAL ASSESSMENT PROCEEDINGS ON THE BASIS OF WHICH ASSESSMENT ORDER DATED 27.12.2007 WAS PASSED UN DER SECTION 143(3) OF THE ACT. THE AO HAVING GOT THE INFORMATIO N FROM THE INVESTIGATION WING, THE LEAST HE COULD DO TO MAKE I NQUIRY FROM THE SHAREHOLDERS, THE DETAILS OF WHICH WERE ALREADY ON TH E RECORD. IN THE CASE OF CIT VS. FAIR FINVEST PVT. LTD. A SIMILAR ISSUE HAS ARISEN. IN THE 10 | P A G E CASE OF CIT VS FAIR FINVEST LTD 357 ITR 146 (DEL.) TH E HONBLE JURISDICTIONAL HIGH COURT HAS HELD AS UNDER:- 6. THIS COURT HAS CONSIDERED THE SUBMISSIONS OF THE PARTIES. IN THIS CASE THE DISCUSSION BY THE CIT(APPEALS) WO ULD REVEAL THAT THE ASSESSEE HAS FILED DOCUMENTS INCLUDI NG CERTIFIED COPIES ISSUED BY THE REGISTRAR OF COMPANIES I N RELATION TO THE SHARE APPLICATION, AFFIDAVITS OF THE DIRECTORS, FORM 2 FILED WITH THE ROC BY SUCH APPLICANTS CONFIRM ATIONS BY THE APPLICANT FOR COMPANYS SHARES, CERTIFICATES B Y AUDITORS ETC. UNFORTUNATELY, THE ASSESSING OFFICER CH OSE TO BASE HIMSELF MERELY ON THE GENERAL INFERENCE TO BE DRAW N FROM THE READING OF THE INVESTIGATION REPORT AND THE STATEMENT OF MR. MAHESH GARG. TO ELEVATE THE INFERENC E WHICH CAN BE DRAWN ON THE BASIS OF READING OF SUCH MA TERIAL INTO JUDICIAL CONCLUSIONS WOULD BE IMPROPER, MORE SO WHEN THE ASSESSEE PRODUCED MATERIAL. THE LEAST THAT THE ASSESSING OFFICER OUGHT TO HAVE DONE WAS TO ENQUIRE IN TO THE MATTER BY, IF NECESSARY, INVOKING HIS POWERS UNDER SECTION 131 SUMMONING THE SHARE APPLICANTS OR DIRECTORS . 11 | P A G E NO EFFORT WAS MADE IN THAT REGARD. IN THE ABSENCE OF A NY SUCH FINDING THAT THE MATERIAL DISCLOSED WAS UNTRUSTW ORTHY OR LACKED CREDIBILITY THE ASSESSING OFFICER MERELY CONCL UDED ON THE BASIS OF ENQUIRY REPORT, WHICH COLLECTED CERTAIN FACTS AND THE STATEMENTS OF MR. MAHESH GARG THAT THE INCOM E SOUGHT TO BE ADDED FELL WITHIN THE DESCRIPTION OF SE CTION 68. 7. HAVING REGARD TO THE ENTIRETY OF FACTS AND CIRCUMSTANCES, THE COURT IS SATISFIED THAT THE FINDIN G OF THE TRIBUNAL IN THIS CASE ACCORDS WITH THE RATIO OF THE DE CISION OF THE SUPREME COURT IN LOVELY EXPORTS (SUPRA). 8. THE DECISION IN THIS CASE IS BASED ON THE PECULIAR FACTS WHICH ATTRACT THE RATIO OF LOVELY EXPORTS (SUPRA). WHERE THE ASSESSEE ADDUCES EVIDENCE IN SUPPORT OF THE SHARE APPLICATION MONIES, IT IS OPEN TO THE ASSESSING OFF ICER TO EXAMINE IT AND REJECT IT ON TENABLE GROUNDS. IN CASE HE WISHES TO RELY ON THE REPORT OF THE INVESTIGATION AUT HORITIES, SOME MEANINGFUL ENQUIRY OUGHT TO BE CONDUCTED BY HIM T O ESTABLISH A LINK BETWEEN THE ASSESSEE AND THE ALLEGE D HAWALA OPERATORS; SUCH A LINK WAS SHOWN TO BE PRESENT IN THE CASE OF NOVA PROMOTERS & FINLEASE (P) LTD. (SUPRA) RELIED UPON BY THE REVENUE. WE ARE THEREFORE NOT TO BE UNDERSTOOD TO CONVEY THAT IN ALL CASES OF SHARE CAP ITAL ADDED UNDER SECTION 68, THE RATIO OF LOVELY EXPORTS (SU PRA) IS ATTRACTED, IRRESPECTIVE OF THE FACTS, EVIDENCE AND MATERIAL. NO SUBSTANTIAL QUESTION OF LAW ARISES. THE APPEAL 12 | P A G E IS ACCORDINGLY DISMISSED. 6. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES O F THE CASE AND RESPECTFULLY FOLLOWING THE PRECEDENT AS AFORESAID, WE DELETE THE ADDITION IN DISPUTE AND ALLOW THE GROUNDS RAISED BY THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED ON 04.02.2019. SD/- SD/- (L.P. SAHU) (H.S. SIDHU) ACCOUNTANT MEMBER JUDI CIAL MEMBER DT. 04-02-2019 SR BHATNAGAR COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER, AS SISTANT REGISTRAR ITAT DELHI BENCHES