ITO, New Delhi V. M/s Myna Electronics Pvt. Ltd., New Delhi

ITA 4558/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3426 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 22-06-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 03-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRENDRA KUMAR
• Keywords: Accommodation entries
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E : NEW DELHI BEFORE SHRI C.L.SETHI, JM AND SHRI R.C.SHARMA, AM ITA NO.4558/DEL/2009 ASSESSMENT YEAR : 2001-02 INCOME TAX OFFICER, WARD-5(4), NEW DELHI. VS. M/S MYNA ELECTRONICS PVT.LTD., (NOW KNOWN AS M/S ULTRA LIGHTING LIMITED), A-83, G.T.KARNAL ROAD, INDUSTRIAL AREA, AZADPUR, DELHI 110 033. PAN NO.AAACM1049C. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AMRENDRA KUMAR, SR.DR. RESPONDENT BY : SHRI ANIL SHARMA, ADVOCATE. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 16.9.2009 FOR THE AY 2001-02, IN THE MATTER OF ASSE SSMENT FRAMED U/S 147/143(3) OF THE IT ACT. 2. THE REVENUE IS AGGRIEVED FOR DELETION OF ADDITIO N OF RS.9 LAKHS MADE U/S 68 OF THE ACT, IN RESPECT OF SHARE APPLICATION MONE Y RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT AO WAS IN RECEIPT OF REPORT FROM THE ADI SECTI ON OF THE DEPARTMENT TO THE EFFECT THAT ASSESSEE WAS IN RECEIPT OF RS.9 LAKHS F ROM THE COMPANIES ENGAGED IN BOGUS ACCOMMODATION ENTRIES. ON THE BASIS OF THIS INFORMATION, ASSESSMENT WAS REOPENED. IN THE ASSESSMENT ORDER SO FRAMED, THE A O OBSERVED THAT ASSESSEE HAD SHOWN RECEIPT OF SHARE APPLICATION MONEY AND RECEIV ED SHARES DURING THE YEAR. VIDE LETTER DATED 12.12.2008, THE ASSESSEE HAD SUBM ITTED CERTAIN DETAILS OF THE ITA-4558/DEL/2009 2 SHARE APPLICATION MONEY RECEIVED BY IT DURING THE Y EAR. THE AO STATED THAT BESIDES THESE COMPANIES, THERE WERE TWO MORE ONE IS INDIVIDUAL AND ANOTHER IS COMPANY, NAMELY SHRI NARENDER KUMAR GUPTA (RS.4,00, 000) AND M/S CHINTPURINI CREDITS (RS.5,00,000), WHO ALSO HAD ALLEGEDLY ADVAN CED SUMS OF RS.9,00,000/- AS SHARE APPLICATION MONEY TO THE ASSESSEE COMPANY DUR ING THE PERIOD UNDER CONSIDERATION. IN REPLY, THE ASSESSEE COMPANY FILE D CONFIRMATION FROM THE PARTIES WHO HAD ALSO QUOTED THE PAN NUMBER IN THE CONFIRMAT IONS AND SUCH IDENTITY AND GENUINENESS WAS PROVED. THE AO FURTHER STATED THAT APART FROM THIS, THE ASSESSEE COMPANY DID NOT PRODUCE ANY OTHER EVIDENCE TO PROVE ITS CONTENTION. THE AO FURTHER OBSERVED THAT VIDE LETTER DATED NIL, THE AS SESSEES AR FILED BANK ACCOUNT STATEMENT AND COPIES OF THE ITR OF THE COMPANIES, I NDIVIDUALS WHO HAD ALLEGEDLY GIVEN SHARE APPLICATION MONEY TO IT DURING THE YEAR . AFTER HAVING THE FOLLOWING OBSERVATION, AMOUNT WAS ADDED TO THE ASSESSEES INC OME U/S 68 OF THE ACT:- IN THE CASE AT HAND, THE ASSESSEE HAS SUBMITTED TH E COPIES OF THE ITRS AS WELL AS BANK ACCOUNT STATEMENTS IN THESE CA SES, FROM WHOM IT HAS RECEIVED THE SO CALLED SHARE APPLICATION MO NEY. BUT PERUSAL OF THE SAME REVEALS THAT THESE DO NOT HELP THE ASSE SSEES CASE. THE TRANSACTIONS IN THE BANK ACCOUNT STATEMENT IN THESE CASES SHOWS THAT THEY HAVE MEAGER BALANCES AND USUALLY THERE IS A CR EDIT ENTRY FOLLOWED IMMEDIATELY BY A DEBIT ENTRY OF ALMOST THE SAME VALUE, EXCEPT A SMALL AMOUNT DEDUCTED IN A FEW CASES, PERH APS AS COMMISSION CHARGED FOR THE ENTRY PROVIDED. FOR EXA MPLE, IN ALL THE CASES WHERE THE ASSESSEE HAS SUBMITTED COPIES OF TH E BANK ACCOUNT STATEMENTS OF SUCH PERSONS, THE ACCOUNT HAS A VERY SMALL CREDIT BALANCE AVAILABLE. THEN, THERE IS A CREDIT ENTRY T HROUGH A CHEQUE AND IMMEDIATELY, THE SAME IS TRANSFERRED TO THE ACCOUNT OF MY ASSESSEE, M/S MYNA ELECTRONICS PVT.LTD., AND THE REMAINING BA LANCE REMAINING IN THAT PERSONS ACCOUNT IS AGAIN A VERY MINISCULE AMOUNT, USUALLY IN HUNDREDS OR THOUSANDS. THIS DEFINITELY CASTS A SER IOUS DOUBT AS REGARDS THE POSSIBILITY OF SUCH COMPANIES HAVING TH E SOURCE OF WORTH OF INVESTING LARGE SUMS IN OTHER COMPANIES. AS SUC H, THIS FACTOR ALONE IS SUFFICIENT TO PROVE THE ALLEGATION THAT TH E TRANSACTION IS NOT GENUINE. 4. BY THE IMPUGNED ORDER, CIT(A) DELETED THE ADDITI ON AFTER RECORDING DETAILED FINDING AT PARA 3.3 AND 3.4, WHEREIN HE HAS APPLIED THE PROPOSITION OF LAW AS LAID ITA-4558/DEL/2009 3 DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF LO VELY EXPORTS 299 ITR 268, ORISSA CORPORATION 159 ITR 78 AND GUJARAT HEAVY C HEMICALS 256 ITR 795 (SC). FOLLOWING WAS THE OBSERVATION AND FINDING OF THE CIT(A) :- 3.3 WHEN THE FACTS OF THE PRESENT CASE ARE ANALYZE D IN THE LIGHT OF THESE DECISIONS, IT WILL BE SEEN THAT THE RATIO LAI D DOWN BY THE HONBLE COURTS SQUARELY COVERS THE APPELLANTS CASE . IN THE CASE OF THE APPELLANT, THOUGH THE AO REFERS TO AN ENQUIRY C ONDUCTED BY THE INVESTIGATION WING OF THE DEPARTMENT, NO ATTEMPT IS MADE BY HIM TO ESTABLISH THE FACT THAT THE MONEY IN QUESTION HAS O RIGINATED FROM THE COFFERS OF THE ASSESSEE COMPANY. MERELY CASTING A SHADOW OF DOUBT IS NOT SUFFICIENT TO CHARGE THE ASSESSEE WITH THE T AX LIABILITY WITHOUT COLLECTING POSITIVE EVIDENCES TO CONVERT THE DOUBTS INTO A REAL ACT OF TAX EVASION. 3.4 IN VIEW OF THE ABOVE FACT-SITUATION THE ADDITIO N OF RS.9,09,000/- MADE ON ACCOUNT OF SHARE APPLICATION MONEY AND ALLEGED PAYMENT OF COMMISSION THEREON IS NOT SUSTAI NABLE, AS NO CREDIBLE EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE AO TO SUGGEST THAT THE MONEY IN QUESTION HAS ORIGINATED FROM/PAID BY THE ASSESSEE COMPANY. ACCORDINGLY, THE SUBJECT ADDITION IS HERE BY DELETED. AGGRIEVED BY THE ABOVE ORDER OF CIT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE US. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFU LLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT IN RESPECT OF SHARE APPLICATION MONEY RECEIVED, THE ASSESSEE HAS FURNISHED CONFIRMATION, PAN, COMPANY REGISTRATION CERTIFICATE ETC. BEFORE THE AO. HOWEVER, THE AO HE LD THAT IDENTITY AND CREDITWORTHINESS OF THE ASSESSEE IS NOT SUFFICIENT TO HOLD THE TRANSACTION AS GENUINE. HOWEVER, THE CIT(A) APPLIED THE PROPOSITION OF LAW LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS AND AFT ER RECORDED A FINDING TO THE EFFECT THAT NO CREDIBLE EVIDENCE HAS BEEN BROUGHT O N RECORD BY THE AO TO SUGGEST THAT MONEY HAD ORIGINATED FROM/PAID BY THE ASSESSEE COMPANY. WITH RESPECT TO AMOUNT RECEIVED ON ACCOUNT OF SHARE CAPITAL, ONCE T HE ASSESSEE HAS FURNISHED ALL THESE DETAILS BEFORE THE AO, THE PROPOSITION OF LAW LAID DOWN IN THE CASE OF LOVELY ITA-4558/DEL/2009 4 EXPORTS AND DIVINE LEASING & FINANCE AND THE OBSERV ATION MADE BY THE HON'BLE SUPREME COURT WHILE REJECTING THEIR SLP WILL BE APP LICABLE AND, NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE COMPANY. AS P ER SECTION 35 OF THE COMPANIES ACT, IF A CERTIFICATE OF INCORPORATION IS GIVEN BY THE REGISTRAR IN RESPECT OF ANY ASSOCIATION, WHICH SHALL BE CONCLUSIVE EVIDE NCE THAT ALL REQUIREMENTS OF COMPANIES ACT HAVE BEEN COMPLIED WITH IN RESPECT OF REGISTRATION AND MATTERS PRECEDENT AND INCIDENTAL THERETO AND THAT THE ASSOC IATION IS A COMPANY AUTHORIZED TO BE REGISTERED AND DULY REGISTERED UNDER THE COMP ANIES ACT. IN THE INSTANT CASE BEFORE US, WE FOUND THAT CERTIFICATE OF INCORPORATI ON ISSUED BY THE REGISTRAR OF COMPANIES HAS BEEN PRODUCED AND IT IS ALSO NOTICED THAT COPIES OF INCOME TAX RETURNS FOR RELEVANT ASSESSMENT YEAR FILED BEFORE I NCOME TAX AUTHORITIES WERE PRODUCED, CLEARLY INDICATE THAT ASSESSEE HAS PROVED THE IDENTITY OF THE SHARE APPLICANTS AND UNDER THESE CIRCUMSTANCES, THE FINDI NG OF CIT(A) ON THIS ISSUE BEING IN CONSONANCE WITH THE DECISION OF THE HON'BL E SUPREME COURT IN THE CASE OF LOVELY EXPORTS, REFERRED TO SUPRA, IS FOUND TO BE I N ORDER AND IS UPHELD. IN VIEW OF THE PROPOSITION OF HON'BLE SUPREME COURT IN THE CAS E OF LOVELY EXPORTS (SUPRA), THE REVENUE SHALL HAVE THE LIBERTY TO INITIATE PROC EEDINGS IN ACCORDANCE WITH LAW IN CASE OF SHARE APPLICANTS IF THEY DOUBT THE SHARE APPLICANTS AND THE LENDERS. ACCORDINGLY, THE DECISION OF CIT(A) FOR DELETING AD DITION MADE ON ACCOUNT OF SHARE CAPITAL IS BEING UPHELD. 6. RECENTLY, HON'BLE DELHI HIGH COURT IN THE CASE O F INTEX TECHNOLOGY INDIA LTD., ITA NO.1239/2009 AND NARENDER BANSAL, ITA NO. 1245/2009 VIDE ORDER DATED 28.4.2010, CONFIRMED THE ACTION OF THE CIT(A) AND THE TRIBUNAL WHEREIN BY APPLYING THE VERDICT OF HON'BLE SUPREME COURT IN TH E CASE OF LOVELY EXPORTS, ADDITION ON ACCOUNT OF SHARE CAPITAL WAS DELETED. HON'BLE PUNJAB & HARYANA HIGH COURT VIDE ITS ORDER DATED 30.3.2010 IN CASE OF SHR EE DADU AUTO (P) LTD., ITA NO.704 OF 2009, DISMISSED THE APPEAL OF THE REVENUE ON SIMILAR GROUND BY OBSERVING THAT VIEW OF HON'BLE SUPREME COURT IN VAR IOUS JUDGMENTS LIKE LOVELY EXPORTS 216 CTR 195, DIVINE LEASING & FINANCE ( 2008) TIOL 118-SC (IT), IS ITA-4558/DEL/2009 5 ABSOLUTELY CLEAR AND IT WAS HELD THAT PROPER COURSE FOR THE AO COULD HAVE BEEN TO REOPEN THE ASSESSMENT OF THE SHARE APPLICANTS/SHARE HOLDERS RATHER THAN MAKING ADDITION AGAINST THE ASSESSEE COMPANY. HONBLE HIG H COURT OF KARNATAKA AT BANGALORE VIDE THEIR ORDER DATED 2.3.2010 IN CASE O F ARUNANANDA TEXTILES PVT.LTD., ITA NO.1515 OF 2005 WHILE CONFIRMING THE DELETION O F ADDITION MADE ON ACCOUNT OF SHARE CAPITAL HELD AS UNDER:- THE QUESTION RAISED IN THIS APPEAL ARE SQUARELY CO VERED BY SEVERAL JUDGMENTS OF THE SUPREME COURT AND ALSO THE JUDGMEN T OF THIS COURT PASSED IN ASK BROTHERS LTD. VS. COMMISSIONER OF INC OME TAX WHEREIN THIS COURT FOLLOWING THE JUDGMENTS OF THE S UPREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. LOVELY E XPORTS (P) LTD. REPORTED IN (2008) 216 CTR (SC) 195 AND ALSO IN THE CASE OF COMMISSIONER OF INCOME TAX VS. STELLER INVESTMENT L TD. REPORTED IN (2001) 251 ITR 263 (SC) HAS RULED THAT IT IS NOT FO R THE ASSESSEE TO PLACE MATERIAL BEFORE THE ASSESSING OFFICER IN REGA RD TO CREDITWORTHINESS OF THE SHARE HOLDERS. IF THE COMP ANY HAS GIVEN THE ADDRESSES OF THE SHARE HOLDERS AND THEIR IDENTITY I S NOT IN DISPUTE, WHERE THEY WERE CAPABLE OF INVESTING, THE ASSESSING OFFICER SHALL INVESTIGATE. IT IS NOT FOR THE ASSESSEE COMPANY TO ESTABLISH BUT IT IS FOR THE DEPARTMENT TO ENQUIRE WITH THE INVESTORS AB OUT THEIR CAPACITY TO INVEST THE AMOUNT IN THE SHARES. THEREFORE, WE ARE OF THE VIEW THAT THE SUBSTANTIAL QUESTIONS OF LAW FRAMED IN THI S APPEAL ARE TO BE ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE A SSESSEE. ACCORDINGLY THIS APPEAL IS DISMISSED. 7. HON'BLE DELHI HIGH COURT VIDE THEIR ORDER DATED 5.4.2010 IN CASE OF SUNTECH VISION LTD., ITA NO.463/2010 UPHELD THE DEL ETION OF ADDITION ON ACCOUNT OF SHARE CAPITAL/SHARE APPLICATION MONEY UNDER SIMI LAR FACTS AND CIRCUMSTANCES. HON'BLE DELHI HIGH COURT IN THE CASE OF VV INDUSTRI AL PROCESSORS PVT.LTD., ITA NO.145/2010 VIDE THEIR ORDER DATED 25.2.2010 CONFIR MED THE ACTION OF THE TRIBUNAL FOR DELETING THE ADDITION ON ACCOUNT OF SHARE CAPIT AL BY OBSERVING THAT THE IDENTITY OF THE SUBSCRIBERS WAS ESTABLISHED AND THEY HAVE AL SO CONFIRMED OF HAVING MADE THE PAYMENTS. HON'BLE DELHI HIGH COURT IN THE CASE OF JAI MAA BHAWANI OVERSEAS PVT.LTD., 378/2010, VIDE ORDER DATED 30.4.2010 CONF IRMED THE ACTION OF THE TRIBUNAL FOR DELETING SIMILAR ADDITION ON ACCOUNT O F SHARE CAPITAL, WHEREIN BY ITA-4558/DEL/2009 6 FOLLOWING THE DECISION IN THE CASE OF DIVINE LEASIN G & FINANCE (SUPRA) AND LOVELY EXPORTS (SUPRA), SIMILAR ADDITIONS WERE DELETED BY THE CIT(A) AND THE SAME WAS CONFIRMED BY THE TRIBUNAL. 8. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) INSOFAR AS IT RELATES TO DELETI ON OF ADDITION ON ACCOUNT OF SHARE CAPITAL. FURTHERMORE, THE LEARNED DR COULD NOT CON TROVERT THE FINDING RECORDED BY CIT(A) WITH REGARD TO SHARE CAPITAL/SHARE APPLICATI ON MONEY. NO GROUND HAS ALSO BEEN TAKEN BY THE DEPARTMENT TO ALLEGE THAT ANY ADD ITIONAL EVIDENCE WAS ACCEPTED BY CIT(A) FOR DELETING THE ADDITION ON ACCOUNT OF S HARE CAPITAL, FOR WHICH OPPORTUNITY WAS NOT AFFORDED TO THE AO. WE THEREFO RE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDING OF CIT(A) FOR DELETING ADD ITION ON ACCOUNT OF SHARE CAPITAL AND ALLEGED COMMISSION FOR OBTAINING THE SAME. ACC ORDINGLY, THIS PART OF CIT(A)S ORDER IS UPHELD. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 30 TH JULY, 2010. SD/- SD/- (C.L.SETHI) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 30.07.2010. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR ITA-4558/DEL/2009 7